Global Investor Relations Practice Report 2014

Global Investor Relations Practice Report 2014 Taking stock of variation in IR scope and resources GLOBAL OVERVIEW l SECTOR BENCHMARKING l REGIONAL ANALYSIS l IR SALARIES

GLOBAL INVESTOR R E L AT I O N S 2 0 1 4???????????????????? Global IR PRACTICE ASIA TEAM SIZE 3.1 One-on-one investor meetings 264 EUROPE NORTH AMERICA Budget ($ 000s) $100,000-$149,999 $415,000 217 TEAM SIZE BUDGET 3.4 IRO salary $100,000-$149,999 About this report The IR Magazine Global Investor Relations Practice Report is an annual study of the resources and practices of investor relations across the world, covering everything from IR budgets and IR team sizes to reporting lines and attendance at investor conferences. The 2014 edition is based on the responses of 1,566 separate investor relations practitioners to global surveys overseen by IR Insight, the research arm of IR Magazine. All figures in this report are in US dollars, and the market capitalizations of the companies in this report have been classified as follows: small cap under $1 bn; mid-cap $1 bn to under $5 bn; large cap $5 bn to under $30 bn; mega-cap $30 bn and over. 253 788 Team size (people) 320 IRO salary ($ 000s) 75-99.9 100-149.9 1.9 3.1 $496,000 179 630 1.6 153 $50,000-$74,999 92 372 249 One-on-one investor meetings $215,000 One-on-one investor meetings One-on-one investor meetings 2.1 IRO salary IRO salary BUDGET TEAM SIZE BUDGET 5.9 MID-CAP 100-149.9 LARGE CAP 100-149.9 MEGA-CAP What s in this report? Section 1: Global overview of IR teams and IR activity SMALL CAP Section 3: Sector focus Section 4: Special focus Section 2: R egional IR practice IR salaries IR Magazine Global Investor Relations Practice Report 2014 analysis Editor Garnet Roach Chief copy editor Kathleen Hennessy Research manager Lloyd Bevan Art & design Mariel Tabora Foulds Printed by Full Spectrum Print Media 64 Great Eastern Street, London EC2A 3QR, UK Tel: +44 20 7749 9175 www.irmagazine.com 3

Summary Respondent data: company profile Region 8% 13% North America 49% Europe Asia 30% Rest of world Market cap 13% 25% Small cap 30% Mid-cap Large cap Mega-cap 32% Sectors Communications 6% Consumer discretionary 10% Consumer staples 4% Energy 9% Financials 21% Healthcare 9% Industrials 13% Materials 10% Technology 14% Utilities 4% Executive briefing After three years of consecutive cuts to the global IR team, 2014 has seen numbers stabilize at an average of 2.7 IROs. Budgets have continued to fall, however, with cuts gaining pace slightly and the global average budget dropping down to less than $450,000. The percentage of this cash allocated to external IR has seen a marginal increase, though in real terms the global IR department has spent almost $5,000 less on outsourcing this year. Despite this further squeeze, the global IR team has managed to add a few extra one-on-one investor meetings to the calendar, bringing the average to 199 per company over the last 12 months. This increase comes from a senior management push: the C-suite added an extra four meetings to an average 96, while the number of IR-only meetings remained the same. As such, the percentage of meetings overseen by senior executives has edged closer to half of all one-on-ones globally. The time senior management spends on IR has remained largely the same over the year, however, with 45 days dedicated to investor relations and the CFO continuing to take the lead with 20 days or four business weeks devoted to IR. This is followed by 14 days from the chief executive, while other senior management members spent an average of 11 days on IR activities. These numbers largely reflect IR reporting lines, which, aside from a few percentage-point shifts, remain close to those seen in 2013. This year, two thirds of IR departments fall under the CFO s remit, while just under a quarter report to the CEO. Although the majority of IR teams report to the CFO across all market caps, research again highlights the trend for more chief executives to take responsibility for IR at smaller caps, while a higher proportion of IR departments fall under the CFO s remit as market capitalization increases. Looking at IR activities in general, the vast majority of IR departments continued to go on the road over the last year, though the number of roadshows dropped back slightly, as did the number of days spent on the road. This is despite almost half of IR teams naming roadshows as the most rewarding event in the IR calendar. Other events including site visits and investor days were also pared back over the course of the year with only investor conferences seeing a small boost. 4

SUMMARY Regionally, North American IR teams have traditionally operated with the highest budgets and the smallest teams, and that remains true. Asia s reverse position (where teams are well populated but operate on leaner budgets) has shifted slightly, however. While its IR departments continue to function with the smallest budgets, Europe now boasts the largest teams in the sample with an average of 3.4 IROs. Europe remains between North America and Asia in terms of budgets. Sector focus Of the 10 sectors studied in 2014, IR teams in the healthcare sector enjoy the highest average budgets and some of the most generous salaries while those in the energy sector have the biggest teams. At the other end of the scale, IR departments in the consumer discretionary sector operate with both the leanest budgets and the smallest teams, though it is those in the consumer staples sector that take home some of the smallest pay packets, regardless of cap size. The most male-heavy sectors are industrials and materials, where 60 percent of IROs are men. Three industries now have more female than male IROs: both consumer sectors employ the highest percentage of women with a male to female ratio of 46:54, while the utilities sector falls just shy of this with a 47:53 split. Only the financials sector boasts an even gender split. 1% 3% Respondent data: PERSONAL PROFILE 6% 14% 16% 24% 34% 5% 10% 5% Job title Primary role 82% Chief IRO IRO/IR manager IR analyst Senior vice president/ vice president/director of IR CEO/president/ managing director CFO/treasurer/comptroller/ finance director Other Investor relations Marketing/communications Finance Other Salary focus The average IR head received a salary boost over the past 12 months with average take-home pay (excluding bonuses) now standing at between $200,000 and $249,999 a year. IROs and other less senior members of the IR team have not fared so well, however, with the global average salary remaining in the $100,000 to $149,999 pay bracket for another year. Bonuses continue to be the norm across the investor relations profession, regardless of seniority, though both the number of IR heads receiving a bonus and the amount paid based on a percentage of base salary are higher than for IROs and IR managers. Looking at salaries and gender for the first time in two years, we see that the pay gaps found in 2012 have narrowed notably. 56% Time served in IR 23% Less than 3 years 3-5 years 6+ years 21% 5

METHODOLOGY Global IR practice survey The data in this report is taken from the annual global IR practice surveys carried out by IR Insight, the research arm of IR Magazine. Market research firm Fox Insight conducted the fieldwork and coding for these surveys. More than 1,500 different respondents have participated in this survey process, conducted electronically over the past year. Data for budget, team size, reporting structure and analyst coverage is gathered from survey responses from Q4 2013 to Q2 2014. All other data points are calculated from responses to our latest survey round, conducted during Q2 2014. IR Magazine Global Investor Relations Practice Report Thanks to the high response rate from the global IR community, we have been able to sub-segment the data within this report, splitting it by region and subsequently by market capitalization. This allows for the creation of meaningful peer groups, within which data can be compared and assessed. We have also been able to produce breakdowns of the data by market sector. Most of the data contained within this report consists of average figures of specific classifications. With the exception of median-range figures for salary, all averages used are mean averages. The majority of these figures are adjusted to lessen the influence of mistyped responses or disproportionate values. The level of adjustment necessary involves ordering the data by value and excluding the highest and lowest five percentiles from the mean calculations. For budget, team size, meetings, senior management days and analyst coverage these adjustments to the data are conducted at the sub-segmented level (regional cap size) and calculations for wider groupings are subsequently made using these pre-adjusted figures. Whenever a mean average is the result of data from a pre-set scale (for example, percentage of IR budget used for external IR services), figures are not adjusted and all values are used in the calculation. About IR Magazine Research IR Magazine is the leading voice in global investor relations. We regularly engage with the IR community and the investment community through extensive studies, surveys and detailed interviews with corporate IR professionals, investors and analysts. The results of our regular surveys of IR professionals located in every major business center across the world provide us with an unrivaled global perspective on the latest IR trends and industry best practices. Our research publications include in-depth investor perception studies, which we produce in conjunction with our highly regarded annual awards in the US, Canada, Europe, Asia and Brazil. Each year, in each of these markets, we ask thousands of buy-side analysts, sell-side analysts and portfolio managers the same question: which company has the best IR? The reports we produce uncover and explain the reasons for successful investor relations, as well as the key drivers of investor sentiment. To find out more, please visit: www.irmagazine.com/research 6

SECTION 1: Global IR practice IR reporting lines IR teams IR budgets Investor meetings Investor types Global IR Practice Report November 2012 7

Global IR PRACTICE CEO CFO 23% 66% IR Team size: 2.7 people IR budget: $441,000 External IR spend (% of total budget): 34% IR reporting lines The majority of IROs continue to report to the CFO, with this year s figure of two thirds representing a slight increase on 2013 numbers. This 3 percentage-point shift comes as the number of IR professionals answering to either the chief executive or other members of senior management drops away slightly. The trend for the CFO to have responsibility for the IR department is seen at each cap size but, as in 2013, this is less evident at small-cap companies, where 48 percent of IROs answer to the chief financial officer 20 percentage points below those at mid-cap firms, the next lowest, where 68 percent of IR professionals report to the CFO. Mega-cap companies sit slightly above mid-caps (at 69 percent), while large-cap companies see the highest number of IROs reporting to the CFO, at 76 percent. With the lowest proportion of IR professionals reporting to the CFO at smaller firms, small-cap chief executives are stepping in to take responsibility for investor relations departments (39 percent). This number drops to just under a quarter (24 percent) at mid-cap companies, then by a further 11 percentage points to 13 percent at large caps before climbing slightly again at the largest companies. In fact, mega-cap companies are the only firms to see more IROs reporting to the chief executive this year: up to 15 percent at companies with a cap size of $30 bn or over. Team size Global IR team numbers have stabilized at an average of 2.7 people after falling for three years running. As in previous years and as is to be expected global IR team sizes grow as market cap increases, climbing from an average of 1.6 at the smallest firms and growing incrementally to peak at 5.9 IROs at the average mega-cap company. Of the two cap sizes to have made additions to their IR teams (offset by the slight drop at mid-cap and large-cap companies), it is mega-cap firms that have enjoyed the biggest boost, though at a still marginal increase of 0.3 bodies, compared with the addition of just 0.1 at small caps. The losses across mid-cap and large-cap companies are also marginal, at 0.1 and 0.2, respectively. Unlike 2013, which saw each region face a reduction in team sizes in line with the global trend, this year only North America follows the global trend for no reduction and retains an average of 2.7 IROs a figure that means the region continues to operate with the leanest teams. Asian IR teams no longer boast the most heads after losing half a body during 2014. The average Asian IR team is still one IRO above counterparts in North America, though it is European IROs who are now supported by the largest number of colleagues with an average of 3.4 IROs per team, up from 3.1 last year. Backing up these findings, North American small-cap companies have the smallest average IR teams across the sample, with just 1.4 IROs, as well as the lowest average team size at every other cap size. Conversely, European mega-cap companies claim the largest average team overall at 7.8, with increases in three out of four cap sizes, while Asian teams sit somewhere in between. Team size (people) Global Small cap Mid-cap Large cap Mega-cap 2.7 1.6 1.9 3.1 5.9 8

Global IR PRACTICE The number of IROs who are on a rotation program continues to fall, standing at an average of just 4 percent globally, compared with 6 percent last year and 10 percent in 2012. The practice of rotating someone from a different department within the same firm for a spell in the IR department remains most popular in Asia, far more so than in either North America or Europe. After nearly doubling to 9 percent of companies on a global scale last year, a marginal 1 percentage-point increase in 2014 means that 10 percent of firms now post an IRO abroad. From a cap size perspective, having a member of the team based overseas and away from the main IR headquarters becomes more popular as companies grow in size. The figure stands at 4 percent for both small and mid-cap companies, but climbs to 10 percent for large-cap companies before jumping to almost a third (31 percent) of mega-caps. Gender of IROs Globally, there are slightly more male than female IROs this year with a 52:48 ratio a marginal shift after 2013 s even split. Indeed, large-cap companies are the only ones to remain at 50:50, as small, mid and mega-caps have all seen a shift to more men in the IR team. Mid-cap companies now have the highest proportion of male to female IROs with a 54:46 ratio, and they also show the biggest shift: a 7 percentage-point increase in the number of men in the team. Male IR professionals have increased their hold in North America, where only 45 percent of IROs are now women, while in Europe the number of female IROs has increased by 2 percentage points though more than half (51 percent) of the average team remains male. Only in Asia, where females have traditionally dominated IR roles, do they continue to rule. Even here, however, female IROs have lost some of their strength after an 8 percentage-point shift to bring more men into the team. Budget SALARY Years in IR 52% male 48% female $100,000-$149,999 6+ Bonus TYPICAL IRO PROFILE 24% Global average IR budgets (excluding salaries and annual reporting costs) continued to fall in the last 12 months, with this year s $58,000 drop topping the 2013 reduction by an extra $5,000 and reducing the total average budget to $441,000. This comes as budget cuts are made across all three regions. Looking at global figures for different cap sizes, the average department has seen a reduction in its IR budget, regardless of cap size. The amount lost at each market capitalization increases as companies grow in size, however, with a $192,000 gap between the average small-cap loss of $2,000 and the $194,000 slashed from mega-cap budgets. Mid and large cap-companies fall between the two, with global average budgets reductions of $29,000 and $70,000, respectively. Following this year s round of cuts, small-cap firms have been left with an average of $217,000, while mid-caps enjoy an average of $372,000. This climbs to $630,000 at large-cap companies and peaks at an average of $788,000 for mega-cap investor relations departments. While budget cuts are seen at each cap size, the 9

Global IR PRACTICE gap between budgets at one cap size and the next has narrowed across the board. The gap between small and mid-cap IR budgets stands at $155,000 (down from $182,000 last year). The largest gap remains at the next level as companies grow from mid-cap to large cap, where there is now a difference of $258,000 (though this is down by $41,000 on 2013 s figures). This year, the difference in the budgets enjoyed by the largest firms is closer to that at the smaller end of the scale. As mid-cap company budgets swelled by $155,000 more than their small-cap counterparts, mega-cap companies enjoyed average budgets of just $158,000 more than IR teams at large-cap companies, down from a gap of $282,000 last year. The gap between average budgets at small-cap companies and those at the top of the pile has also narrowed by $192,000, with mega-cap companies enjoying average budgets of $571,000 more than small-cap firms. Regionally, Asian investor relations teams at each cap size continue to operate on the tightest budgets, though the reticence of Asian mega-cap respondents to provide details of their IR departmental budgets means there is no data for this group in 2014. North American mega-cap IR teams lost the most in the sample, with average budget cuts of $406,000. The other three cap sizes in North America enjoy the highest average budgets compared with peers elsewhere, however. European mega-caps bounced back to add $300,000 to their IR budgets in 2014 and give these IR teams the most to play with across the study. This does suggest, however, that the budget drop experienced among this group in 2013 was the result of outlying data. Budget Global Small cap Mid-cap Large cap Mega-cap $441,000 $217,000 $372,000 $630,000 $788,000 External IR spend While global budgets have decreased marginally, with a more varied picture when looking at both cap sizes and regions, 34 percent of the overall average budget (excluding salaries and annual reporting costs) is now spent on external IR services. This 3 percentage-point increase from 31 percent last year continues the gradual annual increase that has seen the amount spent on outside IR grow from a quarter (25 percent) of the IR budget since 2011. In real money terms, however, the amount spent on outsourcing conference calls, perception studies or the IR website has fallen by almost $5,000 over the last 12 months to just under $150,000. The amount allocated to external investor relations services is highest at small-cap companies (36 percent), no doubt due to the smaller average team sizes and leaner budgets. This drops by 1 percentage point at mid-cap firms (35 percent), then falls just below the global average at large-cap companies, where a third of the budget (33 percent) is spent on external IR. Only at mega-caps, where larger-than-average teams tend to command far higher budgets, does the amount spent on outside IR fall more notably to 28 percent of the average budget, 6 percentage points below the global average. Because of the differences in average budgets at each cap size, however, small-cap companies still spend the least on external IR, at just over $78,000. And despite an 8 percentage-point difference between budget allocations for external IR, in real terms mega-cap companies spend $142,500 more than small caps. Once again, North America allocates the highest proportion of average budgets to external IR services to top the global average at 38 percent. This falls to 31 percent at the average European firm and just 20 percent at Asian companies, where IR service providers have traditionally been less widely used. Salaries This year the median global average salary range for an IR chief has climbed one pay bracket to $200,000- $249,999 after remaining between $150,000 and $199,999 for two years running. Median average pay for IROs remains in the $100,000-$149,999 range, however, after an increase between 2012 and 2013. IR Magazine is revisiting the issue of gender and pay this year, with some interesting results. The male/female pay disparities found in 2012 have narrowed over the past two years. For example, in 2012 we wrote that 24 percent of male IR heads earned more than $250,000, compared with just 13 percent of their female counterparts. This now stands at 29 percent and 26 percent, respectively. 10

Global IR PRACTICE IR YEAR PLANNER GLOBAL 199 One-on-one investor meetings 48% with senior management 6.8 Number of roadshows per year 16.2 Number of days spent on roadshows 7.6 Number of investor conferences 20 Number of days CFO devotes to IR 3.6 Number of site visits Research in 2012 also found that 62 percent of male and 37 percent of female IROs earned more than $100,000. These figures now stand at 66 percent and 54 percent, respectively (see Special focus: IR salaries, page 38). Investor meetings This year has seen very little change in the overall number of one-on-one meetings, with a total increase of just three, bringing the global average to 199. Similarly, the percentage of these meetings attended by senior management has remained consistent, rising only 1 percentage point to 48 percent. As in previous years, the number of one-on-ones increases as company cap size grows, with mega-cap companies attending 228 more meetings than their small-cap counterparts. When it comes to changes since last year, however, the largest firms have actually reduced meeting numbers slightly, while IR teams at small and mid-caps have worked a little harder. In fact, the smallest cap sizes added the most meetings an extra 11 during 2014, compared with seven more at mid-cap companies while mega-caps cut five, compared with an average reduction of just one meeting at large-cap companies. Looking deeper at these changes offers a varied picture of senior management-attended and IR-only meetings at different cap sizes. At small cap-companies, members of the C-suite have led the push, with IR-only meetings dropping by one. At mid-cap firms, both the IR team and senior management increased attendance (with an extra four and three meetings, respectively), while a three-meeting increase in IR-only meetings at large caps failed to offset a drop of four meetings by senior executives. At mega-cap companies, senior management attended an extra five meetings over the year, but a cut in the number of IR-only one-on-ones resulted in a lower number of meetings overall. Regionally, Asian IR teams attended the highest number of one-on-one investor meetings during 2014 with an average of 264, overtaking Europe s 249. Both regions increased activity over the last 12 months, however, as only North American IR teams cut back with an average drop of 12 meetings over the year. One-on-one meetings Small Global cap Mid-cap Large cap Megacap Total 199 92 179 253 320 With senior management 48% 65% 55% 43% 37% Senior management Looking at global averages, senior management involvement in the IR program be that taking the lead on an investor meeting or dedicating time to IR has remained largely the same as in 2013. Senior management attended 48 percent of one-on-one meetings, and devoted an average of 45 days to investor relations (the same as in 2013) with the CEO simply taking over one of these days from the CFO. As always, delving into the numbers offers up a more varied picture. In real terms, senior management involvement in one-on-one investor meetings rises with cap size (as in 2013), climbing from an average of 60 one-on-ones at small caps to 118 at mega-cap companies. Of the four cap sizes, only large-cap companies saw senior management attend fewer meetings this year (four less than in 2013), while small-cap C-suites made the biggest push, overseeing an extra 12 investor meetings. As a percentage of total meetings, however, attendance by the CEO, CFO or other senior management 11

Global IR PRACTICE members is higher at smaller firms. Senior executives attended 65 percent of one-on-one investor meetings at small-cap companies a figure that drops 10 percentage points by the next cap size up. This number falls again to 43 percent at large-cap companies and then reaches a cap-size low of 37 percent at the largest firms. And when it comes to the number of days senior management dedicates to IR, the biggest shift also comes from small-cap companies, where top management teams made an increased effort and added an extra six IR days to their calendars to hit an average of 45, the same as their mid-cap counterparts. This brings small-cap senior management in line with other cap sizes, after a lag of at least five days in 2013. After boasting the highest number of senior management IR days last year (47 compared with 46 at mid-caps and mega-caps and 39 at small caps), top management at large-cap firms spent the least amount of time on IR this year (44 days), while mega-cap companies topped the board with 48 days dedicated to investor relations. From a regional perspective, there is little change to the number of investor meetings conducted by senior management. North America s C-suite continues to attend the highest percentage (59 percent), compared with 45 percent in Europe and 30 percent in Asia, a drop of 3 percentage points since 2013. In real terms, however, Europe s top executives attended the highest number of meetings (112), followed by North America (90) and Asia (79). Senior management IR days Global Small cap Mid-cap Large cap Mega-cap 45 45 45 44 48 IR events Ninety-one percent of IR teams held a roadshow in 2014, reversing last year s 1 percentage-point drop. But the average team held slightly fewer roadshows (6.8 compared with seven in 2013) as well as spending less time on the road (16.2 days, down from 16.6). Other events on the IR calendar are also down over the last 12 months: site visits are down from an average of 4.1 last year to 3.6 in 2014, and the number of investor days is down by 0.2 to an average of 0.7. Only investor conferences saw a small increase from 7.3 to an average of 7.6, while the global IR team also conducted just shy of two reverse roadshows. Roadshows continue to be seen as the most rewarding event in the investor relations calendar. In fact, globally, IROs value roadshows even more, with 48 percent describing them as the most important investor event this year (up from 43 percent last year). Reverse roadshows are seen as the least important this year, receiving only 2 percent of IROs votes, followed by site visits at 10 percent and investor days and investor conferences again attracting almost equal support at 19 percent and 21 percent, respectively. Event participation Average number of investor events per year Roadshows Investor days Reverse roadshows Site visits Investor conferences 6.8 0.7 1.9 3.6 7.6 Investor types Globally, 60 percent of investors are based in North America, 28 percent in Europe and 7 percent in Asia. Other regions make up the remaining 5 percent. While there are slight changes across the board, these figures largely reflect 2013 s numbers. This is also true for investor types, though this year IR Magazine is delving a little deeper to look at how investors change as a company increases its market capitalization. Institutional investors make up the majority across each cap size, largely reflecting the global average of 61 percent, though dropping down to 55 percent at small caps and peaking at mid-cap companies where two thirds of investment comes from institutions. Other trends see both state ownership and investment from sovereign wealth funds (SWFs) though relatively low across the board increase marginally as companies grow. State ownership starts out at just 1 percent for small-cap companies, rising to 3 percent at mid-caps and then passing the global average (5 percent) to hit 8 percent at large-cap firms and peak at 11 percent at mega-cap companies. Similarly, 12

Global IR PRACTICE Most rewarding investor events GLOBAL INVESTOR/ANALYST PROFILE 5% 21% 10% 2% 19% 48% Roadshows Investor days Reverse roadshows Site visits Investor conferences Type of investor 4% 5% 2% 5% 11% State ownership Sovereign wealth funds 17% Institutional shareholders Individual shareholders Founder/founding family 61% Other investment from SWFs increases by 1 percentage point at each cap size, climbing from 1 percent at small caps to 4 percent at mega-cap firms. While individual share ownership hovers around the global average of 17 percent at companies in the mid-cap to mega-cap range, individuals account for 28 percent of investment in small-cap companies. The reverse is true when it comes to founder ownership, which largely reflects the global average (11 percent) at three out of four cap sizes, only to drop by more than half to 5 percent at mega-cap companies. Globally, there has been little change in the average number of analysts covering different market capitalizations, with the number continuing to grow as cap size increases. An average of 5.3 analysts now cover small-cap companies, climbing to 13.3 at mid-caps, 22 at large caps and a high of 29.2 at mega-cap companies. This means the largest firms have almost 24 more analysts following them than the average small-cap company. Location of investors 7% 5% North America 28% Europe 60% Asia Rest of world Number of analysts Small cap Mid-cap Large cap Mega-cap 5.3 13.3 22 29.2 13

Regional IR practice North America SECTION 2: Regional IR practice North America Executive briefing North America s story of extremes continues in 2014 with the region s IR teams enjoying the largest budgets despite the biggest cuts across the study while operating with the smallest teams. After falling in numbers for three years, however, the North American IR team has stabilized at 2.1 IROs. This remains smaller than anywhere else and, to compensate, North American IR teams have again increased outsourcing. The region s IR teams continue to hold fewer one-on-one investor meetings than peers in Europe or Asia. Despite this, North American senior management teams continue to attend a higher percentage of meetings. 14 Global IR Practice Report November 2012 14

North America Regional IR practice CEO CFO 24% 66% IR Team size: 2.1 people IR budget: $496,000 External IR spend (% of total budget): 38% IR reporting lines Two thirds (66 percent) of North America s IR teams continue to report to the CFO, as in previous years and in line with the global average. Overall in the region, the biggest shift comes as chief executives increase their oversight of the IR department by 3 percentage points to almost a quarter (24 percent), taking 1 percentage point from the CFO and 2 percentage points from other senior management members. With these figures, North America more closely mirrors global average reporting structures than either Europe or Asia. This remains largely true across each market cap. As well as reporting-oversight structures similar to the global average, each North American cap size reports to senior management across largely the same lines as last year. CFO oversight again rises more or less as cap size increases, with large-cap CFOs continuing to take the reins at the highest number of companies (80 percent). Large-cap IR teams are also least likely to report to either the CEO (11 percent) or other senior management (9 percent). There have been marginal changes in the reporting structure of different North American cap sizes, but large-cap companies are the only ones to have seen a shift of at least 5 percentage points, with the CFO taking over more responsibility from other senior management. This 5 percentage-point increase means North American large-cap CFOs are more likely to take responsibility for the IR team than CFOs at any other cap size across the three regions studied. The 11 percent of IR teams reporting to the CEO at North American large caps is also the lowest in the sample, while only North American and European mid-caps see lower levels of reporting to other senior management. Team size After falling for three years in a row, North American IR teams have stabilized, remaining at the same level as in 2013. But while the region s average team of 2.1 IROs might not have fallen over the last 12 months, North American IR professionals continue to work within the smallest teams, with one less body than their Asian counterparts and 1.3 IROs fewer than the average European team. Across each cap size, the region has the smallest average team compared with counterparts elsewhere, with North American small-cap companies again working with the smallest average team size across the sample as a whole (1.4). Despite this, North American small caps are one of two cap sizes in the region to have actually increased team size, though the 0.1 IRO added here is marginal. At the other end of the scale, mega-cap IR teams have also bolstered numbers, adding a more notable 0.8 IROs to bring teams up to an average of 4.9 bodies and widening the gap between team sizes at the smallest and largest firms. This still leaves the region s largest cap sizes almost three people below counterparts in Europe, however, where the continent s mega-cap companies boast the largest teams in the sample. Marginal cuts at mid and large caps (0.2 and 0.1 IROs, respectively), have offset the increases seen elsewhere. Team size (people) Overall Small cap Mid-cap Large cap Mega-cap 2.1 1.4 1.5 2.5 4.9 15

Regional IR practice North America The number of companies posting an IRO in a region outside North America now stands at 6 percent, below both the global average and counterparts in Europe and Asia but in line with last year s figure. The percentage of North American IROs rotating from another department within the firm has dropped from 7 percent to 4 percent, mirroring the global average. Gender of IROs Globally, more IROs are now male something that is reflected in the North American numbers. The region has seen male representation increase yet again to stand at 55 percent as a whole. Men make up the majority at three out of four cap sizes after women decreased their representation over the last 12 months. Large-cap companies are the region s exception: here the number of male IROs has dropped 1 percentage point to give an even 50:50 split. The biggest shift comes at mid-cap companies: women were in the majority in 2013, but SALARY Years in IR 55% male 45% female $100,000-$149,999 6+ 22% TYPICAL IRO PROFILE Bonus male IRO numbers have gone up 6 percentage points and now make up 51 percent of the average team, compared with 45 percent last year. Budget IR teams in North America have seen coffers cut by an average of $77,000, topping the global average reduction and bringing the region s average IR budget to $496,000 just under $500,000 for the first time since our research began in 2011. The cut of $77,000 to the region s budget (excluding salaries and annual reporting costs) is the largest of the three regions (and more than double the next highest in Asian IR departments). Yet North America continues to operate with the highest average IR budgets, topping both Europe and Asia as well as the global average. At the cap size level, only the region s small-cap companies have been spared the cuts, adding a modest $17,000 to 2014 budgets to give a total of $253,000. To put this in perspective, this figure is more than $50,000 above the nearest small-cap contenders in Europe and Asia and is only $12,000 lower than the cash allocated to the average Asian large cap. While North American mid-cap and large-cap companies both experienced cuts to their IR budget in 2014 ($31,000 and $23,000, respectively), companies in these categories continue to have more to play with than their cap size counterparts elsewhere. It is North American mega-cap companies that have had to bear the region s big losses, however. These firms faced an average $406,000 cut to the 2014 investor relations budget, leaving departments with $855,000 to spend on investor relations and losing them their biggest-budget crown to European mega-caps, which have crept back past the $1 mn mark. As a result, the gap between budgets at North America s smallest and largest cap sizes has now narrowed in real money terms. Last year, mega-cap companies had budgets that were more than $1 mn above those of their small-cap compatriots. That figure has now been cut to just over $600,000. And while the gap between the average large-cap budget and that of North America s mega-cap companies was the largest in the region last year (a difference of $470,000), large-cap budgets now sit just 16

North America Regional IR practice IR YEAR PLANNER North America 153 One-on-one investor meetings 59% with senior management 5.6 Number of roadshows per year 13.1 Number of days spent on roadshows 7.2 Number of investor conferences 19 Number of days CFO devotes to IR 3.1 Number of site visits $87,000 behind those at the biggest cap size. As what was the largest gap between one market cap size and the next has narrowed to become the smallest in North America this year, the real-money difference between average budgets at mid and large-caps has grown to $361,000 the biggest budget gap in the region. Budget Overall Small cap Mid-cap Large cap Mega-cap $496,000 $253,000 $407,000 $768,000 $855,000 External IR spend As seen last year, a cut to average IR budgets often results in an increase in the percentage spent on outsourcing, especially for time-strapped IROs working in North America s leaner teams. This year, 38 percent of the average North American IR budget is spent on external IR services, up from 35 percent in 2013 and again topping the global average and peers elsewhere. This represents an overall 13 percentage-point increase since 2011 but, with average budgets falling during that time, there is a gap of only $25,980 between the real money spent in 2011 ($162,500) and this year s $188,480. And despite the 3 percentage-point increase in money spent on outsourcing this year, in real terms North American IR departments spent more than $12,000 less in 2014. Salaries The average North American head of IR receives a median salary of $200,000-$249,999, a figure that has now remained unchanged for three years in a row. The region s IROs also continue to receive a base salary of between $150,000 and $199,999 with the two median averages reflecting global figures. Ninety-five percent of IR heads (slightly higher than in 2013) now receive a bonus, representing an average 39 percent of their salary also up on last year s numbers and the most generous in the sample. For IROs, however, the percentage taking home a bonus has dropped to 86 percent (a 7 percentage-point cut) while the amount of bonus as a percentage of base salary has fallen to 22 percent. Investor meetings After making an increased effort to boost the number of one-on-one investor meetings last year, North American IR departments have again dropped back slightly to an average of 153 (down from 165 in 2013). This 12-meeting drop comes as both IR-only one-on-ones and those meetings overseen by senior management fall slightly (by six each when figures are rounded). But a marginally larger drop in the number of IR-only meetings as small as a difference in decimal points means that as a percentage of overall meetings, senior management attendance has actually increased by 1 percentage point to 59 percent. Despite the lower number of overall one-on-one meetings, the 59 percent attended by North American senior management is higher than either Europe (45 percent) or Asia (30 percent). In real terms, the region s top executives attended an average of 90 meetings this year, placing North America between Europe (112 senior management meetings) and Asia (79). At a market cap level, only large-cap companies have scaled back one-on-one activity, holding 21 fewer investor meetings during 2014 (an average of 191). This drop is down to a reduced effort from both senior management and IROs, with 10 and 11 meetings less, respectively, this year. 17

Regional IR practice North America 18% INVESTOR/ANALYST PROFILE 3% 1% 1% 6% 1% 2% Type of investor 71% Location of investors State ownership Sovereign wealth funds Institutional shareholders Individual shareholders Founder/founding family Other Both small and mid-cap companies added a marginal number of meetings (mostly due to more senior management-led one-on-ones), but it is the region s mega-cap firms that have again forged ahead after adding an impressive 91 extra meetings in 2013. The continued effort in 2014 sees these companies add 26 more meetings (24 of which were IR-only) to bring the mega-cap total to a four-year high of 253. A historically lower number of one-on-one investor meetings held by North American companies regardless of cap size means that even after adding yet more to the calendar, the region s mega-cap IR departments remain at least 100 meetings behind counterparts in Europe or Asia. Only European small-cap companies held fewer investor meetings than their North American peers (79 and 87, respectively). One-on-one meetings Small Overall cap Mid-cap Large cap Megacap Total 153 87 151 191 253 With senior management 59% 71% 64% 57% 46% 9% North America Europe Asia Rest of world 88% Number of analysts Small cap 4.7 Mid-cap 12.3 Large cap 19.7 Mega-cap 25.6 Senior management While the actual number of meetings led by senior management increases as cap size grows starting at an average of 62 at North American small-cap companies and peaking at 116 at mega-cap firms the reverse is true as a percentage of total meetings. Small-cap senior management teams attended 71 percent of all investor meetings this year, dropping to 64 percent at mid-caps, 57 percent at large-cap firms and hitting a low of 46 percent at North American mega-caps. When it comes to the number of days spent on IR, senior management has again dedicated a little more time, with a two-day increase to an average of 44, or almost nine business weeks. While the CFO continues to lead this effort, with an average of 19 days the same as in 2013 the extra effort this year comes from the chief executive and other senior management members, who have added a day each to dedicate an average of 15 days and 10 days, respectively. 18

North America Regional IR practice Senior management IR days Overall Small cap Mid-cap Large cap Mega-cap 44 46 44 41 45 IR events As the overall number of investor one-on-ones has dropped in North America, some IR activities have been boosted. For example, the average number of investor conferences is up from 6.6 last year to 7.2 in 2014. But while the number of IR teams that go on the road is also up slightly to 92 percent, the actual number of roadshows held is down to 5.6 (a 0.6 reduction), as is the number of days actually spent on roadshows. Over the last 12 months, North American IR teams spent an average of 13.1 days on roadshows more than a day less than last year. Site visits dropped to an average of 3.1 from 3.5 last year. Only when it comes to the percentage of companies going on a roadshow do North American IR teams top peers elsewhere. Otherwise, the region holds almost half the number of roadshows offered by leaders Europe, as well as spending 8.5 days less on the road than these very active teams. Despite this, 55 percent of North American IR departments continue to see roadshows as the most rewarding investor event, more so than peers in Europe or Asia, in fact. This year s data shows that North America s IR departments held an average of 0.4 investor days and just under one (0.9) reverse roadshow in 2014. Event participation Average number of investor events per year Roadshows Investor days Reverse roadshows Site visits Investor conferences 5.6 0.4 0.9 3.1 7.2 Investor types 1% Most rewarding investor events 12% 17% 15% 5% 55% Roadshows Investor days Reverse roadshows Site visits Investor conferences of investment coming from Europe has dropped by half to 9 percent this year, while domestic investment has increased 9 percentage points to further cement its status as the main source of investment for North American firms (88 percent). This figure is higher than in either Europe or Asia while North America is the only region to increase the percentage of domestic investments. Investment from Asia has become even more marginal, standing at just 1 percent in 2014, while investment from the rest of the world has increased to 2 percent. Looking at the type of investor putting cash into North American firms, the picture remains almost identical to 2013. Only two 1 percentage-point changes are seen, with institutional investors continuing to account for more than 70 percent also topping Europe and Asia. Individual shareholders remain at 18 percent, while founders account for 6 percent of North American investor types. The number of analysts covering North American companies at each cap size is slightly lower than the global averages. The region s small caps have an average of 4.7 analysts covering them, rising to 12.3 at mid-caps, 19.7 at large caps and a high of 25.6 at mega-cap companies. So who exactly are the investors being serviced by the average 153 one-on-one meetings, 7.2 investor conferences and 13 days on the road? The percentage 19

Regional IR practice Europe SECTION 2: Regional IR practice Europe Executive briefing After facing cuts to its IR team over the last two years, Europe is the only region in 2014 to add bodies and now enjoys the largest average teams across the sample. When it comes to IR budgets, Europe continues to sit between the extremes of North America and Asia and, while cuts have been seen across the board, Europe has been spared the worst. Even after adding an extra 23 investor meetings to the IR calendar, Europe no longer holds the record for the busiest teams, though its executives attend the highest number of one-on-ones in real terms. 20

Europe Regional IR practice CEO 27% 62% IR Team size: 3.4 people IR budget: $415,000 CFO External IR spend (% of total budget): 31% IR reporting lines Almost two thirds (62 percent) of European IR teams continue to report to the CFO, a structure that has remained largely unchanged over the last three years. The last 12 months have seen a slight shift toward CEO oversight, however, with 27 percent of the continent s IR teams now coming under the CEO s remit, reversing the previous year s change. This 2 percentage-point increase comes from an equal 1 percentage-point reduction in the number of teams reporting to both the CFO and other senior management (11 percent) since 2013. While European reporting structures have changed only marginally over the course of the year, global averages have shifted away and are no longer mirrored in the region as closely as in 2013. And although the overall picture in European reporting structures is largely unchanged, at a cap size level there have been some notable shifts. European IR departments are less likely to report to the CEO as they grow in cap size, with the reverse being true when it comes to CFO responsibility. A swing at European small-cap companies means the chief financial officer no longer claims majority oversight for the IR department, however. The 7 percentage-point reduction in the number of European small-cap IR teams reporting to the CFO (now 39 percent and the lowest in the sample) means these firms are the only ones across Europe, North America or Asia where the majority of teams report to the CEO (46 percent). The remaining 15 percent report to other senior management members. CFO responsibility then jumps to two thirds at mid-cap companies (where 26 percent report to the CEO), followed by a 1 percentage-point increase in the number reporting to the CFO at large caps (with the CEO taking responsibility at 22 percent of IR teams) before peaking at mega-caps, where 74 percent of IR departments come under the CFO. Small changes have been made across reporting lines at European mid and large caps, but a more notable change has taken place at the region s mega-cap companies. After reporting that no teams in this segment fell under the responsibility of the chief executive last year, this number now stands at 14 percent after a 9 percentage-point reduction in CFO reporting and a 5 percentage-point cut in IR responsibility allocated to other senior management. Team size After falling for two years in a row, Europe is the only region to have boosted its IR numbers and, at 3.4 IROs, the continent now enjoys the largest average teams as well as topping the global average. But a look at the different cap sizes shows that not all firms have enjoyed a return to larger teams: small-cap companies have added 0.3 IROs, while the same amount has been cut from both mid-cap and large-cap IR teams. It is the region s mega-cap companies that have pushed up average European team sizes, with an increase of 1.6 IROs to an average 7.8. This boost puts the continent s mega-caps a full 2.5 bodies ahead of their nearest contenders at Asian mega-caps. The extra 1.6 IROs added to Europe s mega-cap IR teams also returns these departments to pre-2011 levels. Even though team size increases can be seen across Europe s small and mega-cap companies (as in North America), the much larger boost at the largest firms means that what was already the biggest gap in IR team numbers between mega-caps and the average small-cap 21