African Investor Relations

In many strange ways our managed corporate website and investor relations services, already is consistent with leading online IR practices of the First World. See below. Our stock exchanges in Africa are inefficient in distributing information online for free and widely. Our listed companies do not use newswire services and our brokers (too many of them) are starved of market liquidity (to generate commissions) and under-resourced.

So really its corporate Africa that’s driving its own future (or should be). This is good news and an opportunity for listed companies to build direct influence and grow brand directly – and not rely on others.

The article below, by Dominic Jones, shows how corporate websites in the First World are becoming more and more effective relative to traditional newswire and regulatory news services. African websites (that we manage) are already at that stage (relatively) because of the stage of the development of our markets (undeveloped) and because we have leap-frogged technology to use the best and most efficient tools DIRECTLY for the benefit of our clients. The only significant challenge in Africa is the absence of awareness of the grey haired CEOs that are in control of the decisions. This will change over time.

Herewith Dominic’s article which makes interesting reading. If you are interested in leading-edge online thinking then I do recommend that you sign up to his website email alerts. Dominic’s approach taking on the established monoliths in the media world is very refreshing.

Attributed to Dominic Jones, IR Web Report‘s founder and an online investor relations consultant.

STATISTICS from trackable links in company press releases suggest that even small companies’ websites are the most heavily used sources for financial disclosure information and that dissemination via PR wire services is mostly ignored by investors.

The public statistics bust the widely held misconception among investor relations professionals and securities lawyers that PR wire services are the most effective way for companies to achieve broad disclosure. They show that while PR wires distribute company releases to hundreds of different intermediaries such as a financial portals, there is little or no evidence that investors use PR wire releases.

The statistics also explode the myth that only large, widely followed companies’ websites can be used for disclosure under the US Securities and Exchange Commission’s (SEC) 2008 Regulation FD guidance, which states that postings on company websites can meet fair disclosure requirements if they meet certain standards, including that investors actually use the sites. The statistics indicate that even at small-cap companies, websites, email lists and social media accounts are the primary channels through which investors now receive investor relations information.

Disclosure dissemination practices fall behind

In the three years since the SEC issued its guidance on the use of company websites and blogs for disclosure, only a handful of companies have changed their disclosure practices to use their websites and SEC filings rather than PR wire services as the primary channel for their disclosures to investors. Those that have made changes include Google Inc., which no longer uses PR wires for its earnings releases, and small-cap BGC Partners, which uses an advisory release method to alert investors to full-text disclosures on its website.

The lack of progress towards so-called web disclosure is likely due to several contributing factors. US Stock exchanges still favor PR wire services in their rules and discourage companies from pursuing web disclosure, even though their rules do not expressly prohibit it. Nasdaq OMX owns PR wire service GlobeNewswire while NYSE Euronext offers subsidized press release services to its listed companies.

Another limiting factor is a general lack of awareness of new real-time web technologies among companies, their advisers and some web service providers. PR wire services have exploited this lack of awareness as they seek to preserve their lucrative disclosure dissemination franchises by sowing misinformation and creating doubt among cautious companies.

However, the biggest barrier to the adoption of web and social media channels for disclosure has been the widespread misconception in the industry that PR wire services are both the most effective means of disseminating disclosure information and that they meet companies’ disclosure obligations under Reg FD. Consequently, companies continue to collectively spend many millions annually on PR wire services even though SEC filings provide more certainty of compliance and many companies are in a position to replace PR wire distribution with website postings under the SEC’s 2008 guidance.

Click stats show where investors interact with company news

Now, publicly available information about investors’ use of links in news releases calls into question the effectiveness of PR wire service distribution and suggests that investors mostly access disclosure information directly from company websites, email alerts, RSS feeds and real-time messages on social media platforms.

The statistics are provided publicly by URL shortening services such as Bit.ly and Goo.gl. They enable anyone to view where investors are when they access and click on shortened links in press releases. The statistics these services provide are more reliable than the statistics that PR wire services offer to their clients because they are not affected by investors’ browser settings, non-human activity such as search bots, or by the format choices of the PR wires’ distribution sites.

Some companies use services like Bit.ly to shorten long links to webcasts and other information in their press releases so that the links don’t break when the releases are distributed in emails or posted on some websites. When investors click on these links the short link is decoded into the original long URL and a click is recorded by the shortening service. Anyone can access the click statistics for these shortened links by appending a + sign to the end of the URL.

Information recorded by the link shortening services includes referrer information, which is the location where investors viewed the release and clicked on the links. When the links are clicked on a public website such as Yahoo! Finance, the shortening service can easily track and record this information. However, if the link is clicked via a user’s email program, in one of a number of social media clients such as Tweet Deck, or if a user pastes or types the link directly into their browser, the referrer cannot be tracked and the click is recorded as a “direct” click.

For more than a year, we have been monitoring PR wire services for public company releases that contain links that have been shorted using the Bit.ly service. Unfortunately, very few companies shorten the URLs in disclosure releases using Bit.ly so examples are few and far between. However, in every case that we have looked at, few if any of the clicks can be tracked back to PR wire service distribution points, while company websites and direct access clicks from emails and the like are typically the most common referrers.

The finding that company controlled channels account for more click activity than PR wire service distribution holds true regardless of company size. This is an important point because it suggests that many more companies could be using web disclosure than was previously thought.

Below we provide information from three public company releases that included trackable Bit.ly links. Two are from small, lesser known companies and one involves Dow Jones Industrials constituent The Boeing Company (NYSE: BA)

Example 1:  State Auto Financial Corp

On April 28, 2011, State Auto Financial Corp (NASDAQ: STFC) issued a news released via Business Wire announcing a webcast of its upcoming annual meeting. The second paragraph of the release included a link to the webcast registration page that was shortened using Bit.ly.

According to a Google search, Business Wire distributed the release to scores of websites including the most visited finance portals such as Yahoo! Finance, MSN Money, MarketWatch, Barron’s, Reuters, Bloomberg and Morningstar.

According to Bit.ly, of the 116 clicks on the short link in STFC’s release only 3 clicks can be attributed to Business Wire distribution points, namely Yahoo! Finance (1 click), StreetInsider (1 click) and SNL.com (1 click).

STFC’s own investor relations website, which is hosted by IR website provider InvestQuest.com, generated 10 times as many clicks (34 clicks), while clicks from direct sources such as email, Twitter clients and manual browser entries generated 75 clicks, or 65% of the total. STFC provides an email alert utility on its IR website for news releases and SEC filings.

These figures appear to show that distribution of STFC’s release via Business Wire was largely a waste of time and effort and that up to 94% of the audience reacted to information received from the company’s own website or email alerts.

This suggests that STFC, which has a market-cap of $650m, is well placed to use its website and SEC filings to comply with Reg FD and to communicate its essential information to investors.

Example 2: Sonus Networks, Inc.

On June 1, 2011, Sonus Networks (NASDAQ: SONS) issued a news release via PR Newswire announcing the date for its upcoming investor day in New York City. The release advised investors that they need to pre-register to attend the event and provided a Bit.ly link to a page on the company’s website where they can do that.

According to Google, PR Newswire distributed the release to about 144 finance and news websites, including Yahoo! Finance, Reuters, Business Insider, Barron’s and dozens of smaller news outlets.

Sonus uses a website from Shareholder.com that offers an email alert utility that distributes the full-text of releases to subscribers. The company also issued a message containing the bit.ly link on Twitter, where it currently has 487 followers.

According to Bit.ly’s click stats, the short link to the investo day registration page was clicked a total of 21 times, of which only 2 clicks can be attributed to PR Newswire partner Yahoo! Finance. More than 90% of the clicks appear to be from the company’s own web channels, including 15 clicks from email alerts and Twitter messages viewed in client software, 3 clicks from the company’s IR website and 1 click from the Twitter website.

Here again, there is negligible evidence that PR wire distribution is effective, with only one of PR Newswire’s distribution points registering clicks. The company’s own web channels appear to the primary way that investors get information from Sonus.

Example 3: The Boeing Company

On December 20, 2010, The Boeing Company (NYSE: BA) announced that it was increasing production of its 777 aircraft. The release, which was distributed via PR Newswire, included a Bit.ly shortened link to a video about the 777 program. As the only link in the widely distributed release, it was very prominent.

Boeing posted the release on its website and also distributed the full-text to its email list subscribers.

According to Bit.ly, the release generated a lot of interest with a total of 1,757 clicks. Boeing’s own websites generated by far the most clicks, with a combined 917 clicks across three sites, or 52% of the total. Email and the like generated a total of 610 clicks or 35%.

PR Newswire’s own website accounted for 32 clicks or 2% while Yahoo! Finance accounted for 15 clicks or less than 1%. The bulk of the remaining clicks were made up of traffic from industry publications.

Overall, the click statistics suggest that up to 87% of people who are interested in Boeing receive their information directly from the company rather than from PR wire distribution sources.

Summary and limitations

These click statistics and others that we have reviewed provide strong evidence that PR wire distribution is not as effective or as well used as companies’ own website channels.

This has potentially important compliance implications for how companies and their legal counsel approach their disclosure dissemination practices. Reg FD places the onus on companies to ensure that any alternative channels to SEC filings they choose to use are in fact reasonably designed to result in broad, non-exclusionary distribution.

Of course, there are limitations to using click statistics. By definition they track only those instances where people actually click on a link. They cannot tell us how many times releases are read but people don’t click on the links. Nonetheless, on a relative basis it is clear that company channels are likely being read much more often than releases distributed by PR wires.

Another limitation is that it is impossible to know the source of the emails and other direct sources of clicks. In addition to company email alert utilities, PR wire services also may have subscribers who received these releases via email. However, the relatively poor showing of the PR wires’ own websites in the click statistic suggests that their own channels are not widely used for company disclosure information.

Finally, while they are consistent with a number of other companies we have reviewed, these results are for a limited number of companies and may not hold true in all cases.

Next steps for companies

To comply with their regulatory obligations and best serve the information needs of their investors, companies should seek to understand what channels their investors are using.

Shortening URLs in releases using Bit.ly is the best way to do this because Bit.ly has invested heavily in systems and technologies to provide accurate statistics. PR wires’ own statistics are not reliable and are unable to track all clicks. Additionally, PR wires may be overstating traffic because they are less effective at stripping out non-human web activity, such as search bots.

Once companies have better insights into how and where investors are using their information, they can make informed judgments about moving to a web and social media disclosure dissemination system coupled with SEC filings.

This may include adopting new procedures such as relying on SEC filings for compliance, and using company owned web channels and new real-time technologies to effectively communicate information to investors in the formats they prefer and through the channels they actually use.

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Do executives of listed companies actually care about what they say to whom and when? Standards of regulation and oversight in African markets are lower than in international markets so why should listed companies in Africa care?

If they want to build a reputation with foreign investors they should. Show that they understand and regulate the dissemination of information internally. Does your company have an insider trading policy to regulate trading in your shares and information on your shares? If not, a sample policy appears below. If you do, compare it to this. Also check what your stock exchange rules say.

If this does not apply to you then think about what the policy is trying to achieve and see if there is something that can be added that is relevant to your company.

It shall be in violation of Group Policy to trade The Group Shares based on possession of Material Non-public Information.

Application of Insider Trading Policy

The Policy applies to all Directors, Management and employees of The Group who are in possession of Material Non-public Information (as defined below). In addition, the Policy applies to any person who may have Material Non-public Information of The Group, including consultants, contractors, and family members of The Group employees. These groups of people are sometimes referred to in this Policy as “Insiders”.

Any person who possesses Material Non-public Information regarding The Group is an Insider for so long as the information is not publicly known. Any such person can be an Insider from time-to-time based on his/her possession of Material Non-public Information, and would at those times be subject to this Policy.

Definition of Material Non-public Information

Material Non-public Information is information that has not been publicly released by The Group and which is material to The Group’s business. Information is material if there is a reasonable likelihood that it would be considered important by an investor when making an investment decision about The Group. The Group’s half year financial results are one example of potentially material information. Thus, if an Insider is in possession of any such financial information at or near the end of a fiscal reporting period, and prior to public announcement, they should not trade in The Group’s Shares.

If an Insider is in any doubt as to whether they are in possession of potentially material non-public information they are obliged to contact The Chief Executive Officer, who is responsible for STOCK EXCHANGE compliance for clearance prior to trading in The Group’s Shares.

While it may be difficult under this policy to determine whether particular non-public information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered potentially material. Examples of such information may include:

o Financial results

o Projections of future earnings or losses

o News of a pending or proposed merger or acquisition

o News of the disposal of a subsidiary o Impending bankruptcy or financial liquidity problems

o Gain or loss of a substantial customer or supplier

o New product announcements of a significant nature

o Significant product defects or modifications

o Significant pricing changes

o Share splits

o New equity or debt offerings

o Significant litigation exposure due to actual or threatened litigation

o Major changes in senior management.

Either positive or negative information may be material.

Trading on Material Non-public Information

Insiders are prohibited from purchasing or selling shares of The Group until the third Trading Day following the public disclosure of that information, or until the information is no longer material.

Insider Trading Liability

Any Insider, who purchases or sells The Group’s Shares based on Material Non-public Information regarding The Group, will be liable for disciplinary action and summary dismissal.

Individual Responsibility

Every director, manager, and employee has the individual responsibility to comply with this Policy. The guidelines set forth in this Policy with respect to the definition of Material Non-public Information are guidelines only, and appropriate judgment should be exercised in connection with any trade in The Group’s shares. An Insider is prohibited from purchasing or selling The Group’s shares even if he or she planned to make the transaction before learning of the Material Non-public Information and even though the Insider believes he or she may suffer an economic loss or forego an anticipated profit by waiting.

Material Non-public Information Regarding Other Companies

This Policy and the guidelines described herein also apply to Material Non-public Information relating to other companies, including The Group’s customers, vendors or suppliers. All employees should treat Material Non-public Information about The Group’s customers, vendors or suppliers with the same care as is required with respect to information related directly to The Group and should not use this Material Non-public Information to trade in the shares of The Group’s business partners.

Tipping

Insiders shall not disclose, or provide “tips” regarding Material Non-public Information concerning The Group or any of its customers, vendors or suppliers to any other person (including family members). As noted above, anyone to whom such a tip is given automatically becomes an Insider.

(B) POLICY AGAINST SHORT SALES

No Director, manager or employee of The Group, and no member of the immediate family or household of any such person, shall, directly or indirectly, (including through an entity in which they are beneficially interested) sell any shares of The Group that such individual does not own (a “Short Sale”).

(C) DIRECTORS AND MANAGERS TRADING POLICY

Pre-clearance of Trades

The Group has determined that all Directors, and Managers should refrain from trading in The Group’s shares, even during the Permitted Trading Window (see below), without first complying with The Group’s “pre-clearance” process. Each Director and manager should contact the office of the Chief Executive Officer, who is responsible for STOCK EXCHANGE Compliance, prior to any purchase or sale of The Group’s shares. The Group may find it necessary, from time to time, to require compliance with the pre-clearance process from certain employees, consultants and contractors other than, and in addition to, Directors and managers. The Chief Executive Officer will refer the application for pre-clearance together with a recommendation thereon to the appropriate approving authority which is:

• in the case of managers, the Chief Executive Officer himself

• in the case of Directors, the Chairman of the Board

• in the case of the Chairman, the Board of Directors

Permitted Trading Window for Directors and Managers

Directors and managers of The Group may only purchase or sell The Group’s shares during the Permitted Trading Window (subject to pre-clearance in accordance with section IX above).

The Permitted Trading Window is the period in any fiscal reporting period commencing at the close of business on the second “Trading Day” following the date of public disclosure of the financial results for a particular fiscal half year or year and continuing until one fiscal month prior to the end of the next fiscal reporting period. A “Trading Day” is defined as a day on which the Stock Exchange is open for trading. If public disclosure occurs on a Trading Day before the market closes, then the date of disclosure shall be the first Trading Day following the public disclosure.

If public disclosure occurs after the market closes on a Trading Day, the first Trading Day shall be the day following the date of public disclosure. It should be noted, however, that even during the Permitted Trading Window, any person possessing Material Non-public Information concerning The Group may not engage in any transactions in The Group’s shares until such information has been known publicly for at least two Trading Days, whether or not The Group has recommended a suspension of trading to that person. Trading in The Group’s shares during the Permitted Trading Window should not be considered a “safe harbor” (A provision in securities law that excuses liability if the attempt to comply in good faith can be demonstrated), and all Directors, managers and other persons should use good judgment at all times. Notwithstanding the Permitted Trading Window, Directors and managers may not trade in the company’s shares at any time when The Group is trading under a cautionary announcement. The safest period for trading in The Group’s shares, assuming the absence of Material Non-public Information or a Cautionary Announcement, is probably the first thirty days of the Permitted Trading Window. The purpose behind this suggested “Self-Imposed Trading Window” period is to help establish a diligent effort to avoid any improper transaction.

Notification of trades in The Group’s shares by Directors and Managers

Directors and managers are required to notify The Chief Executive Officer of all transactions in The Group’s shares undertaken by them or on their behalf. Such notification should be received no later than 24 hours after the transaction has been effected and should disclose the following information:

• date on which the transaction was effected

• nature of the transaction

• number of shares transacted and the price at which transacted

• nature and extent of the director’s or manager’s interest in the transaction. Information on transactions by Directors in The Group’s shares will be disclosed to the STOCK EXCHANGE in accordance with the STOCK EXCHANGE Listing Requirements.

Definition of Manager

For the purposes of this policy “Manager” is defined to include all manager grade staff, secretaries of directors, and all finance department staff of grade Officer (or equivalent) and above.

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It’s a common scenario in Zimbabwe for listed companies to have a nice and cozy investment analyst presentation. Then not provide the analyst presentation online or in hard copy to investors. Some companies that do make their information available online delete certain pages of the presentation before they do this. In most cases the key issues discussed in the Q and A session are not disseminated either.

From the CEO’s perspective this is a cop out – tell them everything and then go through the presentation post the event to delete the stuff that is sensitive. Mmmmm…. why not do it at the beginning of the presentation?

Are the brokers efficient at disseminating the information released at analyst presentations. No. Do brokers sell their analyst research online i.e. not make it freely available. Yes. There’s a gap in making information available efficiently to the market and it needs to be addressed.

This is bad corporate governance and is indicative of the absence of a formalised disclosure policy at Board and senior management level. It is also indicative of the absence of disclosure practices regulation in Zimbabwe’s market or at least the awareness of regulation. If the information is only good enough for some and not others, then it should not be good enough to publish at all.

Companies should identify the information that is sensitive, delete it from the presentation in advance  and draw up a list of things NOT to say at the analyst presentation and the drinks afterward. Share this list with the management team. It’s basic enough. It’s the right thing to do. It’s good corporate governance.

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Trying to get hold of Nigerian capital markets information is difficult – there is just so little free information out there available on a broad, immediate and non-exclusionary basis. The market is split into two – those that can afford US$120 a year and those that can’t. The millions earned by the NSE (I tried to insert a link but the website was down) have not been ploughed back into shareholder and regulator education programmes so the typical Nigerian retail investor (and regulator) lives in fear and emotional expectation.

Trying to call a Nigerian company, look at Nigerian company disclosures or speak to Nigerians in general is  difficult. I think they all hide from the 152m other Nigerians out there so it probably makes sense. Except from an investor relations perspective. That said it’s been interesting to see that more information has been disclosed on the Nigerian Stock Exchange website after the controversy surrounding the SEC and the CEO of the NSE

We do not have these communication problems with executives in other countries.  The Nigerian inward looking attitude is unhealthy and hopefully a new spirit of transparency and improved information availability is being introduced by the NSE. It should actually be introduced by the listed companies but that’s another story.

There are over 33 million internet users in Nigeria and about 11 million shareholders. The identity of those shareholders (who are also consumers….. are ignored on purpose – they are shareholders, “a pain in the neck”, or too much hassle to deal with). On the other side of the coin, the Nigerian market is filled with millions of potential customers and millions are spent on trying to find out who these people are so that products and services can be pitched to them.

So, on the one hand Nigerian companies have 11 million shareholders whose identity they know but don’t want to know, and then another +11 million potential customers whose identity they don’t know but want to know. Not a single Nigerian listed company has embarked upon a retail shareholder strategy in order to enhance brand and corporate reputation. But they all spend thousands of dollars a month on billboards trying to get people to notice them. Their websites sit lonely and poorly populated.

This is how to sign up for Nigerian market information:-

go to www.nigerianstockexchange.com
fill the registration form by the right hand side of the site you will see unregistered click here? then pay to any of our banks and then scan and send helen evidence on hcifeacho@nigerianstockexchange.biz or call 08058800511.

Congratulations! Your request has been received and our Subscriber database has been updated. However, it may require up to 24 hours for your account to be activated and for all your credentials to be verified if  necessary. Also note that  the Exchange reserves the right to accept or turn down requests based on its investigation of your identity.

Also note that access to the system attracts these applicable fees;

Individual Investors => N 18,000 per/annum (approx US$120)
Institutional Investors => N 60,000 per/annum (approx US$300
Stock Brokers => N 45,000 per/annum (approx US$400)

Please pay to the following accounts:

Residents:
The Nigerian Stock Exchange
A/C No: 2442030000255
First Bank of Nigeria Plc.
Stock Exchange House Branch, Lagos

OR The Nigerian Stock Exchange
A/C No: 2111212310
Sterling Bank.
Broad street, Lagos

Non-Residents:
Domiciliary A/C No. USD 0153518030
CitiBank Nigeria
1, Idowu Taylor Street
Victoria Island, Lagos

Users may contact The Exchange (nse@nigerianstockexchange.biz or hcifeacho@nigerianstockexchange.biz) or call us on 234-1-2660305, 234-1-2660335 for any further clarifications.

The Exchange advises that your user name/password combination  should be kept secretly as it does not take responsibility for any leakage. The System however allows you to change your profile at will.

Thanks and enjoy your stay…

The information above is not a scam!! Its published on the Nigerian Stock Exchange Website.

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I have written about the inefficient information dissemination practices of African stock exchanges in the past.

The issue of stock exchanges not doing enough for its listed companies should be an agenda item for any listed company in most smaller African markets. The core of the problem as it relates to information dissemination relates to African stock exchange rules permitting hardcopy publication of corporate news / actions as the only dissemination medium.

In this modern day and age, hardcopy only dissemination is just not acceptable given the pervasiveness of the Internet as a communications tool. The absence of awareness at regulatory levels (and governance levels)  of the key issues surrounding information dissemination practices is also inexplicable.

There is some good news however. News that we expect to grow in significance.

I am pleased to announce the launch of www.africansens.com, a portal to promote the 100% online dissemination of corporate actions and news for listed companies in Africa. Initially our focus is on providing 100% coverage of listed companies’ corporate announcements in Zimbabwe and this will be extended to Zambia, Botswana, Kenya and Malawi.

Access to the portal is free and is RSS enabled. Users of the site can receive corporate action alerts in their email as soon as they are published online on www.africansens.com. We are currently unable to publish all the content we receive online because we are doing this for free. Users will notice however that African Is Cool clients’ corporate action material will appear online in Africansens in full or at least a link thereto will be available.

We expect www.africansens.com to grow into our largest portal and hope to offer sponsorship / advertising to organisations that want to present their brand to the investment communities interested in African listed equities. Sponsorship funds raised will be re-invested into providing information for free through www.africansens.com.

From an online investor relations perspective, this www.africansens.com initiative complements the many others that we have to get our clients’ message out to the broader investment community. We have two twitter accounts: www.Africanfinancials.com and www.africaniscool.com to complement this and our portal www.africanfinancials.com has over 22,000 annual reports viewed online every month.

We look forward to your feedback.

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Directors have an obligation to ensure that “material” information is made available to their shareholders. Determination of material information is clearly an area where judgment and experience are of great value. The US Supreme Court in TSC Industries Inc. v Northway Inc. the standard for materiality was stated as follows:-

“There must be a substantial likelihood that the disclosure of an omitted fact would have been viewed by the reasonable investor as having significantly altered the “total” mix of information made available”

The court further developed the following definition of materiality:

“Information is material if there is substantial likelihood that a reasonable investor would consider it important in making an investment decision.”

If the materiality decision is borderline the information should probably considered to be borderline and released using a broad means of dissemination. Decisions to release material information may be qualified by confidentiality and information may be withheld for legitimate business reasons, such as the benefit of the company or the shareholders, as long as no insider trades on that  information. Of course this does not mean a company can withhold “bad news” indefinitely because such information many not be beneficial to the company or its shareholders due to its effect on the share price!

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My business partner just spoke to a bloke in the online sales and marketing game – very different to our business but he said some meaningful things – he said the secret to making sales online was trust, likability and knowledge (knowledge in the sense that people believe you know what you are doing).  He has been struggling a little in the online health industry (a massively competitive market).  Anyway he said his experience over the last few years this was the most important thing he ever learnt – “width in inches, depth in miles”!  I thought that said it all!!!

The same thing applies to an online IR programme. Exchange the likability for transparency and you have the same principles that should form the foundation of a communication platform.  Specialise in building an online community from every aspect of your business’s interaction with investors, employees and stakeholders. Width in inches, depth in miles.

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Well run banks are profitable and may enjoy a very strong investment story given their critical role in the economy. Banks are a favourite amongst investors of all types: they are easy to understand (theoretically) brand awareness is high and they are profitable. They are also highly regulated which adds confidence to the general investing populous.

Conversely commercial banks are in a particularly strong position to benefit from an online investor and stakeholder relations function for a number of reasons:-

• Brand outreach is key because of the competitive nature of the banking industry
• Customer / stakeholder communities are large and widely spread around the World
• Communications corporate governance and reporting complements prudential governance compliance
• Market confidence is critical – a good website adds to corporate reputation. For banks “Online Corporate Reputation” or OCR is a growth area enabling differentiation from peers
• The diverse nature of banking operations provides opportunity to cross sell products and services

View BancABC’s new investor relations website here

View African banking sector annual reports here

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“New Reporting Requirements of SEC – Implications and Imperatives

www.proshareng.com Page 1

INTRODUCTION

On 24th March 2010, the Securities & Exchange Commission (SEC) issued new rules and regulations containing additional reporting and compliance requirements for public companies in Nigeria. The rules became effective immediately. Although this development was in furtherance of SEC’s powers to make subsidiary legislation, the basis for the rules are contained in an Act of the National Assembly – the Investment and Securities Act, 2007 (ISA) The basis of SEC’s rules making powers is Section 313 of the ISA which provides that the SEC may make rules and regulations for the purpose of giving effect to the provisions of the Act and reserves the powers to prescribe penalties for non-compliance with the rules. These new rules are therefore binding on all persons and authorities to whom they are stated to apply and have the force of law.

CHIEF COMPLIANCE OFFICER

Under Rule B4, every public company shall appoint a compliance officer, who, in conjunction with the Chief Financial Officer shall ensure compliance with all regulatory requirements of the SEC. Although there is no requirement to notify the SEC of the appointment of this officer, it would be prudent to do so first to provide a point of contact for the SEC on regulatory matters and second to avoid the cost and expenses that may be required in responding to summons from the SEC aimed at confirming compliance with this requirement.

There is also no provision about the qualification and background of the Compliance Officer but it would seem sensible to appoint someone already familiar with the rules and the operations of the SEC to manage this interface. This for self governing companies could be someone from the Legal Department.

Many companies especially those in the financial services sector have already publicly announced their Chief Compliance Officers and notified the SEC of these appointments.

ANNUAL REPORTS

Rules B4(1) & B4(2) stipulate that every public company shall file with the SEC annually or on other periodic basis, its audited financial statements and other returns prescribed from time to time. The SEC requires that the Annual Report Annual Report shall comply with the provisions of SAS 2 and contain disclosures on its unclaimed dividend fund covering bank balances, investments and earned income by way of notes to the audited accounts. The annual report is required to be filed no later than 90 days after the financial year end must be certified by the CEO and the CFO or anyone exercising similar functions in the company.

The auditor is also required to, in his audit report to the company, issue a statement as to the existence, adequacy and effectiveness or otherwise of the internal control system of the company.

CEO AND CFO CERTIFICATION

In a provision lifted directly from rules made pursuant to the US Sarbanes- Oxley Act, the SEC ISA in Section 60(2) now requires public companies to have its annual or other periodic reports to be filed with the SEC to be certified by the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). The provision stipulates what these officers must certify.

At a meeting between Company Secretaries of listed entities and the SEC to introduce the new rules last week, the SEC provided a template of the type of CEO/CFO certification it would like to see. These are basically drawn from the provisions of Section 60(2) of the ISA.

EARNINGS FORECAST

Section 64 of the ISA provides that a listed public company, shall within 20 working days prior to the commencement of the quarter disclose to the relevant stock exchange its quarterly earnings forecast. In addition to this requirement, the SEC has now made rules regarding the release of the quarterly earnings forecast to the stock exchange, the SEC and the investing public.

The SEC now requires that the forecast shall be in line with the company’s policy, the stock exchange listing requirement and the rules of the SEC. The stock exchange other than requiring that earnings forecasts be submitted quarterly in line with the provisions of Section 64 of the ISA has not issued a format for the forecast; neither has the SEC. This therefore provides an opportunity for a well regulated company to comply by issuing what it feels comfortable with (at least until one of the regulators issues a standard format for everyone to adopt). The forecast is now required to be certified by the CEO and the CFO or any other officer performing similar functions.

All public companies are also required to notify the stock exchange, the SEC and the investing public as soon as it is known that the forecast will not be realised.

QUARTERLY REPORT

Public companies are required under Rule B4(4) to file with the SEC and simultaneously with the stock exchange and the investing public a quarterly report prepared in accordance with SAS 30. The challenge this poses is the requirement of simultaneous filing with the stock exchange and the investing public using different fora. The most popular way of informing the investing public is through newspapers publications (and/or the internet). Ideally, one needs to give the newspapers 1 or 2 days’ notice for the publication. This therefore makes compliance with this requirement somewhat challenging when dealing with the mass market. This was pointed to the SEC at its meeting with Company Secretaries last and the body promised to review this requirement. The requirement however has an upside and it could help companies focus much more on the Investor Relations responsibilities and associated/credible platforms for disseminating such. A company can and should consider the use of the internet platforms as a bridge to delivering on this requirement.

The quarterly report is expected to contain the following: accounting policy changes, seasonality or cyclicality of operations, unusual items, changes in estimates, issuance, repurchase and repayment of debts and equity securities, dividends, business combinations, etc. This report is also subject to the CEO/CFO certification requirement.

PUBLICATION OF INTERIM FINANCIAL STATEMENTS

All public companies are now required to publish their “signed” quarterly balance sheet, income statement and cash flow statement in at least one National daily newspaper (and by definition extension the web). The accounting policies need not be published in the newspaper if they can be placed on the company’s website to which reference must be made in the newspaper publication. The publication must be signed by the CEO and the CFO as with the other periodic reports.

HALF YEARLY RETURNS

All public companies are expected to file half-yearly returns in the prescribed format with the SEC containing the following information:

· General Information

· Corporate Governance Issues

· Financial Reporting

· Unclaimed Dividends

· Audit Committee

· Undertakings by the Company Secretary, Chief Internal Auditor, Financial Controller, Managing Director, Board Chairman and the Chairman of the Audit Committee certify the reliability of the information provided.

The returns must be made to the SEC within 30 days from the end of the half-year period either in hard copy or electronic copy.

UNCLAIMED DIVIDEND

All public companies shall file with the SEC in the prescribed form a report of unclaimed dividends on a half a yearly basis.

The company shall maintain segregated accounts for unclaimed dividend funds. The unclaimed dividends must be separated from cash balances and explanatory notes must be provided in the annual reports. The names of the managers and signatories to the segregated accounts must be furnished to the SEC in the prescribed form. Particulars of the qualification and experience of the managers of the fund must also be stated.

The SEC has powers to inspect the fund on a quarterly basis.

For further information and assistance on implementing these changes, kindly contact info@proshareng.com

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We believe that listed companies have now been required by the ZSE to prepare hard copy annual reports for all shareholders. The question of cost now comes to the fore given that there are thousands of shareholders whose shareholdings are of insignificant value (penny stocks). The practical focus should be how listed companies can reduce their shareholder bases significantly to avoid the costs of preparing annual reports. There has to be some form of share buy back solution specifically to make shareholders meaningful again.

Is it all really about cost? Isn’t the annual report a marketing document too? Isn’t business tough in Zimbabwe at the moment? The fact is that no-one has information on how much it costs to prepare annual reports in  hardcopy. If you want to share this information with us we will aggregate all the data we have, without disclosing names and let you know whether this is the issue that everyone thinks it is. Tell us how many shareholders you have and the total cost of your annual report per annum here .

Zimbabwe is at a crossroads in its securities legislation and corporate governance – a new code will be released by the end of the year. Now is the time to start looking at using electronic shareholder communications within a framework of corporate governance and the law. The solution is to provide investor choice and there is ample evidence elsewhere on how to slowly wean ourselves off hardcopy communications.

Click here to track internet use in Zimbabwe and other countries (you will need an internet connection). Or just read the document attached herein see below.

Remember all shareholders have to be treated equally. Companies can’t only have 10 institutional shareholders and still be listed.  If companies view them as an asset then the question is how to use the relationship to better advantage. This advantage may be in corporate reputation, commercial return, brand enhancement. Each listed company will have its own story. Every company has a story. You may not think it does, but it does.

When the obligation to send hard copy communications is dropped, an alternative communications governance model has to be adopted. The Internet can be an important cog in this wheel. The fact is no one channel of communications is perfect. Directors should use whatever tools they have available to them. Hardcopy, electronic and the Internet. You can’t ask shareholders to vote on a proxy card without giving him the information to make a decision on which he is voting. The issues are complex.

In Zimbabwe, the regulatory environment has been unclear and its up to companies to adopt a new communications governance model in consultation with legislators and regulators. Fat chance. There needs to be a culture of co-operation and like minded concern. This does not exist because everyone is so apathetic.

The attached paper outlines what an alternative communications governance model might look like. Read it here online here or download it here and send me your feedback. Zimbabwe is formulating a new corporate governance code and its precisely these issues that need to be addressed.

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“Meanwhile back at the coal face where we prefer to reside, we have had some good news coming out of the companies who are taking advantage of the new and improved economic environment. Impala Platinum in SA gave an upbeat presentation on Zimplats and their forthcoming capex plans. Zimplats will be key to Impala going forwards. Angloplats also announced that they would be pressing the button on their further expansion plans suggesting that both companies are satisfied with the soon to be announced Minerals and Mining Act. Also from SA Tongaat Hullet, the sugar group, spoke of their Zim operations which they are currently rejuvenating and working with government to assist indigenous out growers (this also counts as “points” toward the Indigenisation Act). Locally Delta is investing in another new bottling line, ramping up production and expanding margins. Their year end is March and our forecast for March 2011 based on volume and margin growth puts them on 5x, which could be conservative. Innscor also reported upbeat earnings and announced an interim dividend. They too have seen an excellent few months as consumer demand has increased. Truworths, the clothes retailer, reported an excellent set of figures that puts the company on 6x June 2010 earnings. All of these businesses are coming from a low base; only one year ago the formal sector was all but finished.

Agriculturally, the tobacco floors have opened early with good prices achieved so far. The crop is expected to nearly double this year as more commercial farmers return to utilize the lands. The seed maize crop is expected to triple. With rural farmers now being paid in US dollars for their cotton, maize and tobacco, we suspect that disposable incomes in these areas could be significant, especially as the cost of living is negligible relative to the cities where rents, transport and utilities eats away discretionary spending power.

We therefore urge investors to talk to company management and the farmers to find out what they are thinking and doing and to downplay the media and the politicians. This makes the market a great buying opportunity in our view and one of the more exciting in Africa, even if the ride can occasionally be a bumpy one.”

Investors need to speak to managements? Good luck trying to get through on the phone. Even if they do they executives are BUSY. Try getting meaningful information from their websites (which have been linked below) and you will fail. Whatever your view on Zimbabwe is, as an investor, listed company directors etc. information should be readily available on websites and its not. Here are the companies mentioned:-

Zimplats - OK website up to date with the basics because its regulated by the Australian Stock Exchange. Zimbabwean’s can’t trade the share locally.

Delta Corporation – no 2008 annual report, two undated media and press release articles, no share price. A subsidiary of SAB whose website has to be one of the best I’ve seen. I believe there is information on the beer market in Zimbabwe in the SAB website

Innscor - website goes to Innscor snacks. There is no Group website. As a leader in earnings and a dividend paying company one would expect more resources applied to looking after the info needs of investors. Their subsidiary Colcom has the 2007 audited financials as the latest and what’s new from  July 2008. Colcom is also dividend paying.

Hippo Valley – has no website. A significant large employer and asset of a South African conglomerate.

Truworths - a basic website whose IR section is out of date BUT they are about to sort this out…………

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Dear African Chief Executives, your quote for the week follows:-

A 2007 quote from the SEC USA “Shareholder Choice Regarding Proxy Materials” release

“Information in electronic documents is often more easily searchable than information in paper documents. Shareholders will be better able to go directly to any section of the document that they are particularly interested in. The amendments also will permit shareholders to more easily evaluate data and transfer data using analytical tools such as spreadsheet programs. Such tools enable users to compare relevant data about several companies more easily.”

“We believe that the Internet has helped to transform the trading markets by enabling many retail investors to have ready access to company information.”

Using the Internet to communicate is common sense. Africa is far behind and it’s only up to about 1,400 CEOs to change this.

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