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Investor & Corporate Communications

Attracting Foreign Investors

IR Magazine Asia Summit 2003

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Attracting Foreign Investors: Today’s Comments

The US Marketplace for Greater China equities The strategic elements of investor relations established prior to

program implementation Elements of a successful international

IR program.

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1,000

1,500

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0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Foreign Holdings % Foreign Portfolio

US Investment in Foreign Equities Totals US$1.3 Trillion or 11% of Total US InvestmentsADR and Local Shares

Source: Federal Reserve

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Greater China: 48 percent of MSCI

Source: MSCI EMF Index

Greater China Makes up 48% of MSCI AC Asia ex JP

Korea28%

Taiwan18%

China9%

HK21%

Singapore11%

Malaysia7%

Philippines1%

Indonesia2%

Thailand3%

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Top US Investors in Greater China

Source: MSCI, 13 F Filings and Breakstone&Ruth

401 US institutions invested US$18.1 billion in the 170 constituents of the MSCI China, HK, TW Indexes

Size of the Institutions (Equity Assets) # of

Institutions % of Total Investment

Total Equity Assets

(US$ trillion)

Group A: Between 50 billion and 500 billion 27 45.7% 3.6

Group B: Between 10 billion and 49.9 billion 79 39.6% 1.8

Group C: Between 2 billion and 9.9 billion 97 8.8% 0.5

Group D: Between 1 billion and 1.99 billion 38 1.3% .06

Group E: Below 1 billion 160 1.6% .05

Total 401 100%

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AnalystsAnalysts

Individuals

M

E

D

I

A

C

O

M

P

A

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Y

Industry

Portfolio Managers

Salesmen

Influencers

The US Decision Makers: International Securities

1-150 1000-1200

Sell-SideInvestors – Buy Side

SalesmenTraders

InstitutionalAnalysts

PortfolioManagers

600 - 700

Asia

US, Asia, Europe

US , Europe Asia

US, Europe Asia

US US

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• Measurable objectives consistent with corporate strategies

• A clear set of operating principles

• Good disclosure practices

• A well defined, consistent information and marketing program

• Measurement and constant refinement

What It Takes

CreateA Strategic IR Program

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Build Objectives to Support the Corporate Strategy….

For example, A corporate strategy might include:

• Extensive money raising activities for product development or growth

• An active acquisition strategy that requires a strong share price

• The need to establish a global positioning to balance cash flows

• A diversified shareholder base to avoid concentration and possible takeover

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Which Translate Into Measurable IR Objectives

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• Increase institutional ownership

• Broaden sell side coverage

• Improve liquidity and trading volume

• Improve market perceptions

• Modify the retail/institutional ownership balance

• Create awareness and visibility in a new market

Bottom line the goal is to increase demand to support the share price

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• Timely, credible forecasts consistently met

• Visible financial controls

• Performance predictability

• Strive for transparency

• Identify earnings drivers and articulate milestones

• Information consistent and management available

• Long term strategic focus

• No surprises

• Effective management of expectations

• Recognize the value of brand equity

Adhere to a Core Set of Operating, Financial, Communication Practices…..

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Address Cultural Differences……..

• Return investor calls in timely manner- Address time zone issues

- Utilize U.S. IR firm- Have someone on call during U.S. market hours

• Ensure primary shareholder contact is fluent in English• Educate investor base on cultural differences• Communicate about economic and political issues in

China• Explain Chinese companies’ management structure and

the role of the CEO• Prepare management for direct US style questions

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• Compelling, demonstrable stories that promise future results

• From companies they trust to deliver

- Clear value relative to the market, competitors

- A well defined peer group

- Visible unique characteristics that differentiate

- Credible and accessible management

- Communications that speak to their financial interests

- On their expectations

• Companies with dominant positions in their markets or strong niche players

And Focus on What Investors Want

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Maintain Disclosure: Broadly Disseminate News…

• Press Release Dissemination• Use financial wires to distribute press releases

- Issue releases to U.S. investor circuit- Translate into English- Meet disclosure requirements- Automatically post press releases on Bloomberg

and major financial portal sites (i.e. Yahoo, MSN)- Monitored by news media – generate coverage

• Distribute releases via e-mail/ fax to investor lists- Current Shareholders- Target List

- Understand and get advice on new SEC, SOX disclosure requirements

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Maintain an informative Website….

Web Site• Communicate with investors 24/7 across all time zones• Keep website current• Disseminate Vital Information

- Press Releases- SEC filings- Historical financials- Management and Board of Director bios- Presentations and conference calls- Investor Contact

• Address corporate governance• Guidelines• Code of ethics• Insider transactions

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And Support Disclosure through Direct Contact

Quarterly Conference Calls• Opportunity to discuss highlights of quarterly earnings• Address company and industry trends/ concerns• Can give Revenue and/or EPS guidance• Address negatives and resolutions if they are

important • Answer all investor questions

One-on-one Meetings• Allow investors to meet management

- Develop relationships- Build shareholder confidence

• Information discussed must already be public

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Strategic Preparation Before Communicating

• Understand the US market before communicating

- Interview analysts and portfolio managers- Analyze what US media says about China- The objective is to understand how international investors view your company, how they interpret your information- And how it differs from what you know

• Assess your peer group

- Identify equity competitors or companies with similar investing characteristics who are competing for US investment dollars- Understand their investment message - Look for advantages

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Deliver a Memorable Message……

• Prepare a strong message that communicates your investment appeal

- Simple and easy to remember- Reflects your relative strengths and earnings drivers- Differentiates the company from competitors- Takes existing perceptions into consideration- Answers the question, Why buy this stock?

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And Understand Current & Prospective Investors

• Identify your current shareholders

- Understand them as you might key customers- Know investment criteria, trading patterns, valuation methods- Develop a data base for information distribution and to track investor contacts- Use information supplied by the ADR banks, purchase data bases or rely on consultants

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The Buy-side…….

How They Are Similar

• Demand management’s time

• Seek increasing shareholder value

• Always fall back on the numbers

How They Are Different

• Investment style and type

• Number of issues in portfolio

• Asset allocation

• Sector allocation

• Rate of return

• Time horizon

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And their Various Investment Styles….

• Growth – Concentrates on companies with earnings growth well above S&P.

• Value – Seeks stocks undervalued by market relative to asset value, growth rates, etc.

• GARP – Growth at a reasonable multiple

• Momentum – focuses on groups of stocks that are moving – short-term

• Technical – Follow charts and other technical analysis of market

• Index – Attempts to mirror the performance of an index

• Income – Seek dividend income better than quality bond yields –

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Facilitate Institutional Targeting to Create, Meet and Sell Your Target Universe

• Research your company

• Identify a peer group of investment comparables

• Analyze the peers for prospective investors

• Target other prospective investors

• Screen prospective investors

• Prepare a qualified list

• Arrange meetings

• Non-deal road shows

• Three to four times a year

• Follow-up

…

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• Strong investor presentation

• Fact sheet geared to the interest of the financial community

• Annual and interim reports

• White papers enhance understanding of a product or situation

• Meetings with key international reporters

• Articles in the international business or financial press

Support Contact Through Written Material & Media

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• Be prepared before you communicate

• Create the right context for telling your story

• Knowing your audience makes you an active participant in one-on-one roadshows

• Adhere to a strong, memorable message

• Follow up after the meeting is the key to success

• Continue to add new targets expand your horizons

• Make investor relations important in your company

• Get Board backing for a solid program and keep them updated

• Position yourself as the one who understands the international markets and can provide feedback

Summary