The CCDG issues its Guide on the Operating and Financial Review (OFR)

The CCDG issues its Guide on the Operating and Financial Review ("OFR")

The Council on Corporate Disclosure and Governance (the "Council") today issued a Guide for the operating and financial review ("the OFR Guide'') for listed companies (please refer to Appendix 1 for the OFR Guide).

2. The OFR Guide is principle-based and provides guidance to listed companies for the preparation of the OFR in their annual reports. The OFR Guide also states that it is a good practice for listed companies to present their OFR in a distinct section of their annual reports. The Council recommends that adherence to the OFR Guide by listed companies would be voluntary, and that the OFR Guide be included as a practice note in the listing manual of the Singapore Exchange.

Feedback from public consultation

3. The Council conducted a public consultation on the OFR in August 2003, proposing that:-

(1) a Guide on the OFR be issued to provide guidance on the framework and contents of the OFR that listed companies include in their annual reports. Adherence to the Guide would be voluntary; and

(2) listed companies be required to present their OFR in a distinct section of the annual report. If discussions relevant to the OFR are presented in another part of the annual report, the company may include a reference in the OFR section to that information.

4. The Council received written responses from 21 respondents (please refer to Appendix 2 for the list of respondents) and consulted with representatives from various stakeholder groups (please refer to Appendix 3 for the list of persons). There was wide support expressed for the issuance of the OFR Guide. However, some listed companies cited concerns about possible increased burden and costs and the risk of disclosing commercially sensitive information.

5. The Council noted the general support for the presentation of the OFR in a distinct section of the annual report. Nevertheless, some respondents felt that companies should be given flexibility to decide how they present their OFR discussions in their annual reports.

Council's recommendations

6. The Council has carefully considered all feedback received in formulating its final OFR Guide and recommendations. The Council is of the view that the OFR Guide should aim to promote best practices in disclosure to be emulated by listed companies. The Council also considered the delicate balance between expectations of investors for improved disclosure and the impact on burden and costs for listed companies.

7. Rather than to prescribe mandatory requirements, the final OFR Guide contains principles that are fundamental to the preparation of a good OFR. Accompanying these principles are guidelines that elaborate on how the principles should be applied. The Council believes that this will provide clarity to listed companies in using the OFR Guide.

8. The Council submits the following recommendations to the Government:

(1) adherence to the OFR Guide by listed companies would be voluntary; and

(2) the OFR Guide should be included as a practice note (which is non-mandatory) in the listing manual of the Singapore Exchange.

Appendix 1: Guide for Operating and Financial Review

Appendix 2: List of Respondents

Appendix 3: List of Persons Consulted by the CCDG

MINISTRY OF FINANCE