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MOF Retains Quarterly Reporting

31 Aug 2006

The Ministry of Finance ("MOF") has accepted all the recommendations of the Council on Corporate Disclosure and Governance ("CCDG"), including retaining mandatory quarterly reporting (QR) for listed companies with market capitalisation exceeding $75 million, and continuing to exempt smaller companies from mandatory QR.

2. The CCDG recommended that the market capitalisation of exempt companies be reviewed at the end of each calendar year, starting 31 December 2006, and that these companies be subject to mandatory QR if their market capitalisations exceed $75 million. The CCDG had also recommended retaining the 45-day reporting deadline for Q1, Q2 and Q3 results, and 60 days for annual results, as well as retaining a consistent format for Q1, Q2 and Q3 reports. The recommendations will take effect for Annual General Meetings held on or after 31 December 2006.

3. The CCDG, which had set up a Review Committee comprising private sector participants to review the QR requirement, had consulted the public extensively, and submitted its recommendations to the MOF on 5 June 2006. (Please see Annex A for composition of the Review Committee, Annex B for the final recommendations of the CCDG, Annex C for the letter from Chairman, CCDG to MOF, and Annex D for the MOF's reply to Chairman, CCDG).

4. In evaluating the CCDG's recommendations, MOF had carefully taken into account the costs and benefits of the current QR requirement. Feedback from the CCDG's public consultation shows that investors find QR useful in promoting greater corporate transparency and higher standards of disclosure. QR also instils a financial discipline in companies and encourages a healthy corporate culture of information dissemination to all investors in a timely manner, which is in line with sound corporate governance principles. Mandatory QR is the common practice in many leading jurisdictions such as Australia, Canada, Hong Kong, Japan and the US.

5. MOF is also aware of the costs associated with QR. Corporate respondents in their feedback to the CCDG have indicated that the relative benefits of QR vary across listed companies, depending for instance on the financial profile of the company and the industry the company is in. There are also the risks of promoting an excessively short-term orientation and increased share price volatility.

6. On balance, MOF is of the view that QR is beneficial to our capital markets, and has therefore accepted the CCDG's recommendation to retain mandatory QR for larger listed companies. This will promote good corporate governance, and enhance Singapore's reputation as a trusted centre for doing business and raising capital. However, in view of the higher relative costs for smaller companies, companies with market capitalisations of $75 million and below will continue to be exempted from the QR requirement.

7. The CCDG also recommended that the market capitalisations of these exempted companies be reviewed at the end of each calendar year, unlike the current arrangement whereby listed companies are exempted based on their market capitalisations calculated on 31 March 2003 (or based on their IPO price if they were listed after). Under this new arrangement, a company whose market capitalisation crosses the $75 million threshold, as calculated at each calendar year-end, will have a grace period of a year to prepare for QR. For instance, a company with market capitalisation exceeding $75 million on 31 December 2006 will be required to submit its first quarterly financial statement for the quarter ending 31 March 2008.

8. MOF has accepted this recommendation as this ensures that as companies grow and attract more investor attention, they will be subject to the same reporting requirements as their competitors, thereby facilitating comparison between their financial statements. Should a company's market capitalisation fall below $75 million subsequently, it will not be exempted from mandatory QR. This should not be too onerous since the company would already have the necessary reporting framework in place, and this would also assure investors and fund managers that companies will maintain consistent reporting practices and not reduce the frequency of their reporting due to fluctuations in their share price. Under exceptional circumstances, companies can seek exemptions from SGX on a case-by-case basis.

9. The relevant authorities will continue to review our corporate reporting and disclosure requirements, to ensure they keep pace with the changing business environment, international regulatory developments, and the growing sophistication of our companies, investors and shareholders.

10. The Government thanks the CCDG and its Review Committee for its diligence and well-considered recommendations.