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Table of content Message from the Research Team Introduction to IR Global Rankings Financial Disclosure | Overview What’s HOT for financial disclosure What’s NOT for financial disclosure Operating Information Benchmark examples for operating information Income Statement Benchmark examples for income statement Balance Sheet Benchmark examples for balance sheet Cash Flow Statement Benchmark examples for cash flow statement Guidance Benchmark examples for guidance Conference Calls Benchmark examples for conference calls Exemplary Disclosure Benchmark examples for exemplary disclosure Examples of excellent overall financial disclosure to follow
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IR GLOBAL RANKINGS R. Professor Manoelito de Ornellas, 303 - 6º Andar, São Paulo, SP - Brasil 04719-0740 | Phone: +55 (11) 3529-3707 1001 Avenue of the Americas, suite 411, New York, NY - USA 10018 | Phone: +1 (347) 797-5165 irgr@irglobalrankings.com | www.irglobalrankings.com IRGR Benchmark Study - Investor Relations Website is a publication of IR Global Rankings. The total or partial reproduction of content is prohibited without prior authorization of IR Global Rankings. The articles included in this publication involve public interest subjects and are not intended to provide legal opinions or suggest any kind of investment. For circulation inquiries, address changes, request for copies or subscription inquiries contact us.
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Message from the Research Team Dear IR Professional, It is our pleasure to present you with the IR Global Rankings Benchmark Study for Financial Disclosure, which aims to provide the key guidelines, best practices and differentials for Investor Relations worldwide.
Although it is quite complete, it is also a little bit simpler than the usual paid version. However, those who already acquired any past edition of the Benchmark Study will see that the comments are much more detailed and comprehensive.
We sincerely hope that this information will be of important use to your company and that it will help you with the ongoing task of improving your Investor Relations program.
We could not keep this powerful knowledge just to ourselves. It is our contribution to the global capital market to improve even further their relationship with its investors.
After 14 years of research, meticulous analysis and more than 5,000 evaluations, we decided to provide this report and other ones for free from now on. It is our pleasure to be a resource of reliable information to IR teams around the World.
Warmest regards, IR Global Rankings Team
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FINANCIAL DISCLOSURE
INTRODUCTION TO IR GLOBAL RANKINGS IR Global Rankings (“IRGR”) was created in 1999 and is the most complete ranking system that analyzes IR websites, online annual report, financial disclosure procedures and corporate governance practices. Our methodology is based on an extensive and detailed technical evaluation of over one hundred items and is conducted by a team of Investor Relations specialists and verified by an independent committee. The results are transparent and accessible to all participants of the ranking. Some companies choose to receive an individual feedback report with a detailed summary of the key findings and suggestions for improvements in all categories. The IRGR team is also available for individual conference calls with these participants, if desired.
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Envisioning the improvement of IR practices worldwide, the IRGR team has full capability of analyzing and implementing any changes desired by your company. As IR Global Rankings evaluates a large number of companies within various industries worldwide, participants may also choose to receive a best practices report with general key findings and best practices among the participating companies of each edition. IRGR ensures that winners are widely recognized through releases distributed to financial news broadcast agencies around the world. IR Global Rankings, supported by Arnold & Porter, KPMG, MZ Group and Sodali, is a unique, external review of any company’s communication process with analysts and investors. For more information, please visit our website www.irglobalrankings.com
FINANCIAL DISCLOSURE
CORPORATE GOVERNANCE
IR WEBSITE
ONLINE ANNUAL REPORT
OVERVIEW Many companies focus on the quality of their IR website and overlook the importance of providing high quality practices when reporting their financial information. The Financial Disclosure Procedures ranking evaluated by IR Global Ranking is aimed at identifying and rating how companies disclose their financial information in terms of what is being disclosed and how the information is generally made available to the public. The analysis conducted by IR Global Rankings is based on the quality of the information provided on each participant’s latest financial material, mainly quarterly financials, earnings releases and interim reports, within the seven categories presented on the right hand side of this page: Due to the differences of the operating natures between companies and financial institutions, there are slight variations in the weight of the scores given for each.
OPERATING INFORMATION
INCOME STATEMENT
BALANCE SHEET
CASH FLOW STATEMENT
GUIDANCE
CONFERENCE CALLS
EXEMPLARY DISCLOSURE 7
FINANCIAL DISCLOSURE
≥≥Management Discussion & Analysis for quarterly results; ≥≥Providing operating margins for each business line;
WHAT'S
HOT
≥≥Detailed financial guidance, with limited ranges. Providing guidance operating volumes is also a good initiative; ≥≥Good explanations of operating costs and the cost structure; ≥≥Presenting industry risk factors; ≥≥Market share data (change and trends); ≥≥Providing information on the key industry drivers;
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≥≥Using tables and charts to highlight non-financial information rather than having information distributed throughout the explanations; ≥≥Providing statistics (financial and non-financial) that are easy to find; ≥≥Providing a simulation model for the company’s operations; ≥≥Providing earnings presentation; ≥≥Providing all the earnings documents in one page.
≥≥ Incomplete disclosure of debt (lacking information such as maturities, average contractual terms, etc.); ≥≥Not providing a cash flow statement;
WHAT'S
NOT
≥≥Not providing a simple revenue breakdown; ≥≥Excluding information on capital expenditure; ≥≥Not disclosing the currency or accounting standard adopted;
≥≥Providing only notes to the financial statements with no other explanations of results; ≥≥Missing notices or notices published only in the local language; ≥≥Leaving for download presentations that are not final or have review comments/markups; ≥≥Not providing an earnings conference call for the quarterly results.
≥≥Not filing local and foreign statements/releases simultaneously;
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Tailored Study PLAYING IS NOT ENOUGH YOU NEED TO ANALYSE THE BEST MOVES
IRGR will conduct an evaluation of your company’s current IR website, Online Annual Report and/or Financial Disclosure Procedures using IR Global Rankings methodology and provide detailed feedback on what should be improved in terms of content, technological tools, design, navigability and responsiveness. This report will be tailored, designed with your company to fit your specific needs. Containing specific recommendations, you can choose to compare your company with 5, 10 or 15 peers, to create a complete picture of how your company compares.
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 11
FINANCIAL DISCLOSURE
NON-FINANCIAL OPERATING INFORMATION Providing non-financial operating information is very important as it can be a useful complementary tool for investors when evaluating a company’s financial results as it gives investors a better understanding of the company as a whole. When analyzing this category, we verify that each company provides the necessary information according to its respective industry. In general terms, figures such as market shares, volumes and prices should be provided.
KEY CRITERIA ADOPTED BY IRGR: ≥≥It is helpful to provide a separate section for non-financial operating information within the earnings release (Also provide the operating information in a clear and straight format using summary tables or graphs). ≥≥Provide a general view of the industry, market shares and its key dynamics and drivers. ≥≥ Provide specific company information such as sales volumes, average prices, geographical locations, number of employees and any other information that is relevant to your industry. ≥≥ A summary of key performance indicators are helpful and should be made available. Select the ratios that are most common to the sector of the company. ≥≥ Companies must also show historical data in the report for comparison purposes. 12
BENCHMARK EXAMPLES FOR NON-FINANCIAL OPERATING INFORMATION Company: Energisa www.investors.grupoenergisa.com.br Differential: This section provides a wide-range of information, which is easy to understand and up-to-date.
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FINANCIAL DISCLOSURE
Company: Fedex http://investors.fedex.com Differential: All of the non-operational history can be found in the “Statistical Book” in pdf or excel format.
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Company: Positivo http://ri.positivoinformatica.com.br Differential: Positivo discloses all operating information, including average prices and volumes.
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FINANCIAL DISCLOSURE
Company: Galp www.galpenergia.com Differential: The summary table format with key operating data and indicators is very user friendly and highly recommended.
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Company: Grupo Energisa www.investidores.grupoenergisa.com.br Differential: The Operating Statistics are excellent and extremely complete.
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FINANCIAL DISCLOSURE
Company: Tav Airports Holding www.tavyatirimciiliskileri.com Differential: Non-financial information should be easy to identify and the message needs to be clear. Tav Airports provides its Traffic Performance and Overview table, and also a graph of the Growth of the Turkish Aviation Market.
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 19
FINANCIAL DISCLOSURE
INCOME STATEMENT A comprehensive line-by-line income statement should be provided, along with a well elaborated management and discussion analysis (“MD&A”) of the results. In this category, companies that provide other details such as the breakdown of its cost structure, revenue split and margins per business segment are highlighted as we believe this kind of information provides investors with more precise details on the company’s operations and trends.
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KEY CRITERIA ADOPTED BY IRGR: ≥≥A clear statement of strategy and vision from the company should be provided. ≥≥A corporate profile detailing the history of the company, what it does, the products/services it supplies, its geographical reach and information on the sector in which it operates such as market shares versus its key competitors. ≥≥Linking users directly to outside sources (such as the SEC website to download filings) is not recommended. Companies should provide all documents on their own IR website.
BENCHMARK EXAMPLES FOR INCOME STATEMENT Company: EVRAZ http://www.evraz.com/investors Differential: EVRAZ provides a detailed comparison of the three last years and quarters in the Income Statement, Balance Sheet and Cash Flow.
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FINANCIAL DISCLOSURE
Company: China Telecom www.chinatelecom-h.com Differential: China Telecom clearly states its Income Statement Items for the quarter.
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Company: Gafisa www.gafisa.com.br Differential: Gafisa provides an extremely complete Income Statement with several details relating to Revenue.
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FINANCIAL DISCLOSURE
Company: EDP Energias do Brasil www.edpbr.com.br/ri Differential: EDP Energias do Brasil provides a detailed disclosure of its EBITDA.
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Company: Cameco Corporation http://www.cameco.com/investors Differential: The Financial Indicators Section is complete and provides fast access to the Company’s main figures, which are available in the earnings release.
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FINANCIAL DISCLOSURE
Company: Pacific Basin Shipping Limited www.pacificbasin.com Differential: Great detail is provided for each business, as well as the performance of the company itself, such as market tendencies (future opportunities and threats, for example).
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Company: CPFL Energia www.cpfl.com.br/ri Differential: The “About Shares” Section gives a detailed explanation about the Company’s shares and ADRs, providing share performance (annual and quarterly) as well as the participation in various indices. The Company also provides the average daily trading volume per quarter.
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FINANCIAL DISCLOSURE
Company: Valid www.valid.com.br Differential: Valid has a market capital section, which allows for quick comparisons.
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 29
FINANCIAL DISCLOSURE
BALANCE SHEET A comprehensive balance sheet must also be provided as it is an important tool that shows the financial health of a company since it illustrates a snapshot of the balance between what the company owns (assets), what it owes (liabilities) and the value of the business to its shareholders (shareholders’ equity). Companies should also provide comments on the main figures of its balance sheet and explain major changes and trends. Key figures would usually be net debt and working capital, although other particular accounts may be of interest to further explanations.
KEY CRITERIA ADOPTED BY IRGR: ≥≥Provide a complete and comprehensive balance sheet statement rather than a summary illustration. ≥≥Explain as detailed as possible all key accounts. If a company has debt instruments outstanding, include terms, conditions and maturities, along with the investment policy for the company’s cash position. ≥≥ Provide the working capital situation. ≥≥ If possible, discuss key balance sheet ratios such as accounts receivable and payable days in the MD&A discussions. ≥≥ When applicable, relevant information on off balance sheet items should be made available.
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BENCHMARK EXAMPLES FOR BALANCE SHEET Company: EDP Energias de Portugal www.edp.pt Differential: EDP Energias de Portugal provides a good example of how to provide investors with detailed information on outstanding debt and maturities. Besides the graph, the company presents a detailed management analysis.
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FINANCIAL DISCLOSURE
Company: Sabesp http://site.sabesp.com.br/site Differential: Sabesp provides complete consolidated Balance Sheets on its summarized earnings release. The information is laid out so as to easily show the comparison with last year.
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Company: Oi www.oi.com.br/ri Differential: Oi provides excellent debt information reporting detailed management analysis, as well as showing its debt amortization schedule and debt breakdown.
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FINANCIAL DISCLOSURE
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 35
FINANCIAL DISCLOSURE
CASH FLOW STATEMENT The cash flow statement, which measures the movement of cash in and out of a business over a period of time is also analyzed by IR Global Rankings for the Financial Disclosure ranking. IR Global Rankings does not perform any kind of auditing to any of the financial statements provided, however, we verify if the key accounts and information are being disclosed to investors.
KEY CRITERIA ADOPTED BY IRGR: ≥≥Explain the main differences between its operating cash flow and its income statement, such as non-cash charges or differed revenues/expenses. ≥≥Discuss capital expenditures, both actual figures and trends. ≥≥Discuss future amortizations of debt and dividend payout policies, among others.
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BENCHMARK EXAMPLES FOR CASH FLOW STATEMENT Company: Eternit www.eternit.com.br/ri Differential: The Company provides very detailed Cash Flow information.
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FINANCIAL DISCLOSURE
Company: Valid www.valid.com.br Differential: Valid provides Statements of Cash Flows Accumulated for both the Company and Consolidated.
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Company: OMA http://ir.oma.aero Differential: The Company provides information about the Cash Flow and detailed information.
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FINANCIAL DISCLOSURE
Company: Gazprom ir.gazprom-neft.com Differential: Gazprom’s release provides great disclosure about the Company’s Cash Flow, divided by type of activity.
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 41
FINANCIAL DISCLOSURE
GUIDANCE Although providing earnings guidance is not legally required, most companies provide financial guidance one way or the other. We believe that not only financial guidance, but also information on trends and how they may impact a company’s business and industry should also be provided to investors. All guidance information should be formalized, easily accessible and updated in its financials/earnings releases or through its website.
KEY CRITERIA ADOPTED BY IRGR: ≥≥All guidance information should be intuitively easy to find (have a separately dedicated section on the website, for example). ≥≥All guidance information should be updated regularly. ≥≥Provide a clear guidance section in the earnings document and, if possible, go the extra mile by illustrating changes in estimates along the year and comparing to the actual results already achieved. ≥≥Besides providing specific guidance for top and bottom line items, companies should also consider providing guidance information for operating volumes, costs, long-term strategies and goals. ≥≥Providing a “simulation model” is highly recommended to help investors that are modeling the company for the first time understand the company’s growth drivers. 42
BENCHMARK EXAMPLES FOR GUIDANCE Company: Tav Airports Holding www.tavyatirimciiliskileri.com Differential: The Investment Highlights Section on Tav Airports’ website discloses information and prospects for the sector and the macroeconomic scenario in which the Company operates.
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FINANCIAL DISCLOSURE
Company: NLMK www.nlmkgroup.com Differential: NLMK is an excellent example of showing the information by quarter and semester. It is also important to highlight the introduction of what the company expects that quarter.
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Company: Cameco Corporation http://www.cameco.com/investors Differential: Growth prospects for the year are separated by segment.
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FINANCIAL DISCLOSURE
Company: Life ir.lifetechnologies.com Differential: Life provides excellent outlook information.
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CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 47
FINANCIAL DISCLOSURE
CONFERENCE CALLS AND PRESENTATIONS For this category, IR Global Ranking evaluates if there is an actual earnings call and how long after the earnings release date it occurred. In addition, users should also be able to download the earnings presentation.
KEY CRITERIA ADOPTED BY IRGR: ≥≥Updated information regarding conference call dates should always be available and investors should also have access to past conference call materials. ≥≥Provide links to the earnings conference calls, along with files of the transcripts and earnings presentations.
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BENCHMARK EXAMPLES FOR CONFERENCE CALLS Company: Oi www.oi.com.br/ri Differential: Oi’s website not only provides its quarterly earnings release results but also the presentation, the conference call audio and support spreadsheet. The Results section is featured on the website’s homepage, making access faster and easier.
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FINANCIAL DISCLOSURE
Company: Pacific Basin Shipping Limited www.pacificbasin.com Differential: Presentation of the business model of particular segments of the Company.
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Company: Eternit www.eternit.com.br/ri Differential: The information is in the same section as the financials, which makes it easier to access.
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FINANCIAL DISCLOSURE
CATEGORIES FOR
FINANCIAL DISCLOSURE OPERATING INFORMATION INCOME STATEMENT BALANCE SHEET
CASH FLOW STATEMENT GUIDANCE CONFERENCE CALLS EXEMPLARY DISCLOSURE 52
EXEMPLARY DISCLOSURE Publicly traded companies should also respect the principle of “Exemplary Disclosure”, which is the proper disclosure of financial information to all markets. IR Global Rankings evaluates that all filings are released simultaneously in terms of announcement (wires vs. IR website) and eventual gaps between disclosures in the local language and the English version. In addition, accounting principles are also taken into consideration.
KEY CRITERIA ADOPTED BY IRGR: ≥≥Ensure that press releases are uploaded on the website at the same time as they are released to the market. ≥≥If the company has shares listed in more than one stock exchange, make sure that the earnings documents are made available to all markets at the same time. ≥≥When applicable, investors should be provided with information on international financial reporting standards (IFRS) and how it impacts your company and/or sector.
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FINANCIAL DISCLOSURE
BENCHMARK EXAMPLES FOR EXEMPLARY DISCLOSURE Company: NextEra Energy http://www.investor. nexteraenergy.com Differential: All information referring to the disclosure of results is available in the same place, making access and navigation easy.
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Company: Positivo http://ri.positivoinformatica.com.br Differential: Positivo discloses its Earnings Release and Conference Call.
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FINANCIAL DISCLOSURE
Company: Amil Participações www.amilpar.com.br/ir Differential: It is very important for the company to disclose all financial information simultaneously.
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EXAMPLES OF
EXCELLENT
OVERALL FINANCIAL DISCLOSURES TO FOLLOW
THE TOP 5 GLOBAL SCORES OF THE 2012 EDITION OF THE IR GLOBAL RANKINGS FOR FINANCIAL DISCLOSURE PROCEDURES
Global Ranking Position in 2012: Company: EVRAZ Region: Europe URL: www.evraz.com
1st
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FINANCIAL DISCLOSURE
THE TOP 5 GLOBAL SCORES OF THE 2012 EDITION OF THE IR GLOBAL RANKINGS FOR FINANCIAL DISCLOSURE PROCEDURES
2nd
Global Ranking Position in 2012: Company: NextEra Energy Region: North America URL: www.nexteraenergy.com/investors
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THE TOP 5 GLOBAL SCORES OF THE 2012 EDITION OF THE IR GLOBAL RANKINGS FOR FINANCIAL DISCLOSURE PROCEDURES
3rd
Global Ranking Position in 2012: Company: EDP Energias de Portugal Region: Europe URL: www.edp.pt
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FINANCIAL DISCLOSURE
THE TOP 5 GLOBAL SCORES OF THE 2012 EDITION OF THE IR GLOBAL RANKINGS FOR FINANCIAL DISCLOSURE PROCEDURES
Global Ranking Position in 2012: Company: NLMK Region: Europe URL: www.nlmkgroup.com
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4th
THE TOP 5 GLOBAL SCORES OF THE 2012 EDITION OF THE IR GLOBAL RANKINGS FOR FINANCIAL DISCLOSURE PROCEDURES
Global Ranking Position in 2012: Company: FedEx Corp. Region: North America URL: investors.fedex.com
5th
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