ESTABLISHING EFFICIENT IR COMMUNICATION PLATFORM

Alexander TolkachDirector for External Affairs

DTEK

ESTABLISHING EFFICIENT IR COMMUNICATION PLATFORM

ALEXANDER TOLKACH

DIRECTOR FOR EXTERNAL AFFAIRS

October 11

TO WHOM IT MAY CONCERN

Few people in the company know what is IR…

Everywhere nobody likes to share information, so you have to force it

Successful IR office is reporting to CEO only! It is presented on the Management and Board meetings

There is no direct system to calculate the profits of successful IR office

But what IR can not do

The company won’t get in money terms

HOW INVESTORS MAKE DECISIONS?

They rely heavily on information inflows

Direct communications from the company (82%*)

Buy-side of investment community (70%*)

Trade media (64%*)

Sell-side of investment community (53%*)

National business media (49%*)

*Percentage of respondents who ranked this type of communication in

the top 3

Source: Financial Dynamics US Investment Community Survey

WHAT DO INVESTORS WANT FROM A FOREIGN COMPANY?

Financial transparency 62% want a reconciliation to US GAAP, IFRS as a second choice

46% say it is imperative that companies provide translation into US dollars

79% believe foreign companies should report on a quarterly basis

Access to management 87% of investors want foreign companies to visit at

least once a year

Source: Financial Dynamics US Investment Community Survey

BEFORE STARTING COMMUNICATIONS

Within the Company business strategy has to be finalized and approved• The Company has to understand it’s future for next 3-5 years• Business plan must be followed

Clean up your business• Demonstrate integration• Demonstrate modernization• Demonstrate M&A targets

Limit your management in what they do!

Regular financial reporting

Unified and coordinated external communications of all the Company is a must! Especially when communicating with financial society

You need to meet the minority shareholders’ expectations and respect their rights

MAKE A POSITIVE FACE OF THE COMPANY

First impression analysts and investors form based on your public information

Positive image of the company

Media WEB Site Brand recognition

Rumors within the society

Unblured vision and consistency

Key message

A public company must send clear and commonly accepted messages

Which believes in itself!

Strong, qualified and cooperative management team

Clear and transparent public strategy of development

Proofs that the Management is capable of implementing the strategy

Ability to admit mistakes or difficulties and explain ways out of them

Understanding of the ways to increase shareholder’s value

Limitations in self-advertising

Public company under no circumstances can be involved or initiate any

action, which can be treated as advertising it’s shares

Any public address or information can be treated as attempt to advertise of

inflict your share price

Broad understanding – so be aware of provocations

There aremany examples

If the can, they will punish you

Teach everyone in the company

Monitor and record everything what you say or e-mail to third parties

Do not say anything ‘extras’ in the private conversation – it can be used and/or

recorded

Never say anything beyond already reported (all employees should know published press

releases at least)

All forecasts and forward looking statements should be limited to officially

published reports/releases

Do not say anything ‘extras’ on public, especially if media are present. No

friendship here allowed

Everything, even heard privately, by one journalist, analyst or banker can

impact the market!

Communication system

To deliver all mentioned the company must have a joint internal communications and alerting system

All information from the company, it’s branches and subsidiaries should be approved by IR office

• To avoid selective disclosure• To be cautious in forecasts• To be honest• All information should be based on consolidated US GAAP/IFRS financials, not on local reporting standards

On all the events and emergencies IR office must be informed immediately, 24/7

•All divisions should cooperate with IR to allow for fast and correct communications with investor society on all the events

Information availability

Information should be available without necessity to contact you

Intuitive, multilingual and transparent WEB Site with all distributed public information such as reports, presentations, management statements and press releases

Nice, logical and not boring IR booklet with brief figures of financial and operational results

Well structured and detailed Annual Report. Not contradicting previous reports…

Well structured, pre-analyzed and detailed IR Presentation (for 1x1 meetings)

Be Farsighted

If the question was asked and you immediately give the page number

with an answer – you’ve won!

You’d better answer questions before they are asked

• Collect the history of Q&A

• Questions you don’t like will not disappear

• All unanswered questions leave negative impression

• All available information should better be inserted in the presentation or report in advance

• Study presentations and report of the peers!

Respond to e-mails, phone calls and meeting requests

• For all investors and analysts IR is the face of the company. Those who deny them will never get a good valuation

• All unanswered questions leave negative impression

Communications should be frequent and systemized

IPO AND IF THERE IS IR-LIFE AFTERWARDS

Create contacts before IPO Maintain contacts after IPO

NDR 1x1 Investor day

Whom they really want to see

IR officerIR officerTheoretically knows everything, but from others

…Least wanted

When proposing a meeting,

good analyst want to see the one, who

really manages the money

CFOCFOHe knows what is going on, he rules the money flows

…And he is really expected

CEOCEOHe rules the strategy and they all want him

… But his time is presious

WHY BUY-SIDE IS THE MOST IMPORTANT CHALLENGE OF IR

Buy-side PM/analysts are responsible for other people's money (trillions USD). That they need to know:

• Truth

• Details

• “Pearls”

Funds care to trust and about the history of relations

They long remember the fact of fraud or deception, and therefore almost impossible to restore good relations.

They do not believe a publicly accessible records of sell-side, so they build own models

They like to provoke and test newcomers, especially in the U.S.

ESSAY TO CLASSIFY PEOPLE AT THE MEETING

In general, IR is always a balance of mathematics, analysis, and psychology. But that balance is always different.

I have devised the following classification:

• Mathematics • Explorers or stalkers

Behavioral strategy and using materials depends on the classification

In London and the U.S. people at a meeting certainly believe that they are smarter. Rare - in continental Europe.

But usually they are really clever

The history of relations is a key to growth or lower a volatility of paper!

VARIANTS TO ORGANIZE MEETINGS - PASSIVE AND ACTIVE

Passive: banks or funds go to an issuer with a proposal to meet

Active: issuer calls banks/funds and suggest to meet for an update/NDR

Active issuers are treated as smarter ones

Active companies generate more recognition and recalculating = buy

Active company is loved by sell-side, as they earn their bonus

CONDUCTING A MEETING

There are rules to be obeyed, IR world is a peculiar society…

There are familiar and unfamiliar funds – treat them accordingly

Try to stay within courtesy limits, while breaking ice and sending “trust me” messages

Time management: 45-60 minutes per meeting, at least 20 minutes spared for Q&A

Be calm, self-assured and polite. Do not react emotionally (apart from humor)

Follow up a meeting (e-mail, clarifications, database)

HARD WORK AHEAD

It is far from easy to build up a working system of information exchange and materials’ preparation

IR officer needs to know the company in deepest details of it’s operations, otherwise he is just a parrot – with appropriate disrespect

IR officer needs to invest in networking with top-management – access to first-hand information

IR needs to create handful of handouts, presentations, training programs for management, regular internal meetings, reporting scenarios…

IR officer must draft and get approved full and sophisticated scheme of information flows, approvals and reporting

•Many divisions will hate you for that and deprive you of information – it’s a long fight

IR TEAM COMPOSITION

It’s not numbers, it’s experience and devotion

IR office will not achieve goals just relying on numbers of people in it

External consultancy can be of use, but not a ultimate solution at all! If they are on a monthly payment – forget about efficiency at all

Analysis, communicative skills, visual materials

• Assemble a team, which can cover all that. But no more extra hands – excessive numbers will slow you down

Do they know you?

If analysts know the name of your IR officer,

If name of the company is known to major media,

If logo on your card is recognized on a conference,

If others start to steal from your presentations and releases,

If you have coverage coming from all-size banks:

Congratulations,

you have right IR team!

Thank You!