The founder members of IMAS were:

About PricewaterhouseCoopers PricewaterhouseCoopers (www.pwc.com/sg) provides industry-focused assurance, tax and advisory services for public and private clients. More than 120,000 people in 144 countries connect their thinking, experience and solutions to build public trust and enhance value for clients and their stakeholders. With over 1,500 partners and staff, PricewaterhouseCoopers is a leading professional services firm in Singapore. We help organisations solve complex business issues, identify hidden value and maximise opportunities. Our industry specialisation enables us to identify trends and customise solutions to your industry sector. With in-depth local and international market knowledge, coupled with our global network, our team of experienced, multidisciplinary experts are more than equipped to support you, wherever you may be located. "PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. About Investment Management Association of Singapore The Investment Management Association of Singapore (IMAS) was formed on 22nd September 1997. The idea of an investment body was first mooted in November 1995 by the then Finance Minister Dr Richard Hu. It is a representative body of investment managers spearheading the development and growth of the industry in Singapore. By fostering high standards of professionalism and promoting exemplary practice among members, the association seeks to set the benchmark for the investment and fund management industry in Singapore. It also serves as a forum for members in discussions as well as a collective voice where representation is needed on behalf of the investment management industry, facilitating training for its members, and contributing towards investor education. The founder members of IMAS were: The Development Bank of Singapore Ltd Keppel Bank of Singapore Ltd Nomura Asset Management Singapore Ltd Overseas-Chinese Banking Corporation Ltd Overseas-Union Bank Ltd Prudential Portfolio Managers Singapore Ltd Tat Lee Bank Ltd United Overseas Bank Ltd Stock Exchange of Singapore Ltd Singapore Society of Financial Analysts About NUS Business School, National University of Singapore NUS Business School, part of the National University of Singapore, seeks to be the best business school in Asia, with a world-class reputation for high-quality education and research. The School provides a rigorous, relevant, and rewarding business education that develops business leaders for the global markets. It is one of three in Asia, and the first and only one in Singapore, ranked among the top 100 business schools in the world by The Financial Times in 2001 and 2002. The School has also been ranked among the top 3 in the Asia-Pacific since 1999 in the Asia Inc Business School Survey. Additional information may be found at www.bschool.nus.edu.sg. NUS Business School has also set up the Corporate Governance and Financial Reporting Centre (CGFRC) in January 2003. It is a not-for-profit unit funded by an initial grant from the NUS Business School, National University of Singapore. The Centre s mission is to research, disseminate and promote best practices in corporate governance and financial reporting. It is 1

one of the few centres in the world for the promotion and development of good corporate governance and better financial reporting. A hallmark of the Centre is the strong industry orientation in its activities and projects. The current and proposed portfolio of activities of the Centre includes topics such as boardroom practices, executive compensation, creative accounting, quarterly reporting and investor relations. It encourages a convergence of academics and practitioners around some of the key challenges of corporate governance and financial reporting in organisations. Being research-led and industry-oriented, the Centre is at the cutting edge of theory and practice and it helps to bridge the gap between leading academic work and the needs of practitioners. The Centre is participating in this survey as a part of the NUS Business School. Further information on the Centre can be obtained from www.cgfrc.nus.edu.sg. 2

Introduction We are delighted to present the findings of the Corporate Governance Survey of Institutional Investors 2005, a joint initiative by PricewaterhouseCoopers, Investment Management Association of Singapore and Corporate Governance & Financial Reporting Centre at NUS Business School. The survey was conducted during the period from December 2004 to January 2005. As such, the responses are primarily based on practices that existed in the year 2004. This report is part of a series of PricewaterhouseCoopers papers that originated in 1999, when it conducted its first survey on corporate governance and institutional investors. The objective of this survey was to assess the views of institutional investors in relation to corporate governance, in the light of recent developments in corporate governance in Singapore, and to the changes in the assessment of the current local corporate governance framework from the investors perspective since the first survey in 1999. The survey was also intended to be a means of gathering the views of institutional investors on the proposed revisions to the Singapore Code of Corporate Governance being considered by the Council on Corporate Disclosure and Governance. We would like to express our sincere appreciation to all participants of this survey for their valuable responses. Yeoh Oon Jin Andrew Kwek A/P Mak Yuen Teen Assurance Leader Executive Director Co-Director PricewaterhouseCoopers, Singapore Investment Management Association of Singapore Corporate Governance & Financial Reporting Centre March 2005 3

Contents Executive Summary... 5 About the Survey... 8 Survey Methodology... 8 Profile of Respondents... 8 By Industry Sector... 8 By Total Worldwide Funds Managed... 8 By Functionality... 9 Degree of Investment Responsibility... 9 Survey Findings... 11 Factors Influencing Investment Decisions... 11 Financial Results and Solvency... 11 Corporate Reporting... 12 Investor Communications... 13 Composition and Quality of the Board... 13 Other Corporate Governance Practices... 14 Perception of Corporate Governance Regime in Singapore... 15 Business Ethics and Corporate Governance... 15 Corporate Governance as an Incentive for Investment... 16 Satisfaction Level with Corporate Governance... 16 Areas of Improvements to Corporate Governance... 17 Driving Improvements in Corporate Governance... 17 Perception of Corporate Communications/Investor Relations... 18 Corporate Communications/Investor Relations... 18 Information Channels... 19 Comfort Level in Using Information Provided by Companies... 19 Information Provided by Companies... 20 Moving Forward... 20 Perception of Corporate Governance Issues... 20 Possible Enhancements in Corporate Governance in Singapore... 21 Enhancing Future Corporate Communications... 23 Enhancing Investment Decision Making... 23 Benefits to Companies for Enhancing Corporate Communications... 24 4

Executive Summary This survey was targeted at senior management and senior investment managers of local entities involved in regional institutional investment activities (collectively referred to as institutional investors) including banks, stock broking houses, asset management companies and insurance firms. This report provides an understanding of how institutional investors view corporate governance practices and disclosures in Singapore in the context of their investment decisions. This report also documents changes in institutional investors views on Singapore s corporate governance framework since the first survey in 1999. A total of 43 responses were received. The major findings are summarised below. Factors Influencing Investment Decisions Financial results and solvency was indicated by institutional investors to be the factor having the strongest influence on their investment decisions (similar to previous survey). Consistent with the previous survey, institutional investors considered cash flows level, company s earnings per share, profitability and gearing level as the key financial results and solvency factors in their decision to invest, while the company s dividend policy was perceived to be less important. Share price was the second most influential factor affecting institutional investors investment decisions. The composition and quality of the board, as well as corporate governance practices have increased significantly in their influence on institutional investors investment decisions relative to the previous survey. The influence of quality, qualifications and experience of directors on the investment decision has increased as compared to the previous survey. Consistent with the previous survey, the highest importance placed by institutional investors on corporate governance practice factors was on the extent to which related party transactions were carried out and the clarity of disclosures of such transactions. The extent and quality of disclosure in the company s financial statements was considered by institutional investors to be the most important corporate reporting factor affecting their decision to invest. Similar to the previous survey, institutional investors considered the prompt release of information about significant transactions that affect minority shareholders as being the most important investor communication factor in influencing their investment decisions. Perception of Corporate Governance Regime in Singapore The majority of institutional investors (81%) felt that the standard of business ethics and corporate governance in Singapore has continued to improve, with 35% indicating that the improvement was considerable (similar to previous survey). There is a moderate increase in the proportion of institutional investors who indicated that corporate governance is an incentive for investment in Singapore as compared to the previous survey. Consistent with the previous survey, the majority of respondents (95%) felt that improvements to the current corporate governance regime in Singapore were needed. Relative to the previous survey, there is a significant increase in the proportion of institutional investors who would like to see improved enforcement of the existing rules. 5

More than half of the institutional investors expected the Singapore Exchange to take the lead in driving improvements in corporate governance in Singapore (similar to previous survey). Perception of Corporate Communications/Investor Relations Slightly more than half (51%) of institutional investors indicated that the corporate communications/ investor relations of companies do not offer information beyond the legal disclosure requirements. The annual report was considered by institutional investors to be of the greatest importance to them in accessing information about companies. A high majority (84%) of institutional investors felt comfortable with using information provided by companies in performing forward-looking analysis. More than half of the institutional investors cited timeliness of information (56%) and relevance of information to the industry (51%) as the primary reasons for their comfort/lack of comfort with the information provided by companies. Moving Forward 86% of institutional investors agreed that the standard of corporate governance in Singapore is high amongst Asian countries. In spite of the high regard placed by institutional investors on the standard of corporate governance in Singapore, a majority of institutional investors (86%) still felt that most listed companies in Singapore could do more to strengthen corporate governance. A high proportion (81%) of institutional investors agreed with the statement that shareholders and regulatory authorities are demanding higher standards of corporate governance. 74% of the respondents felt that there is substantial diversity in the standards of corporate governance amongst companies listed in Singapore. A high majority of institutional investors agreed that companies should adopt a code of conduct/ethics for all directors, officers and employees (84%) and that there should be disclosure on the selection and appointment process of new directors to the board (79%). 70% of institutional investors felt that more information about the remuneration policy for executive directors should be disclosed by companies while 65% supported for the disclosure of the exact remuneration of each director. Most of the institutional investors (83%) agreed that certain key guidelines in the code should be made mandatory for all listed companies. A large proportion of institutional investors (82%) agreed that independent directors should be independent of both management and substantial shareholders. 63% expressed support for the remuneration committee to comprise entirely of directors who are independent from management and substantial shareholders while a 65% agreed that the audit committee should also comprise entirely of independent directors. 65% of institutional investors agreed with the appointment of a lead independent director when the chairman is not an independent director. 70% of institutional investors supported companies introducing whistle blowing arrangements as part of their corporate governance system. 6

68% felt that there should be a limit on the number of non-executive directorships in listed companies that can be held by a person in full-time employment. Most of the institutional investors wanted an emphasis on future-oriented information (74%) and detailed segmental reporting (72%) in future corporate communications. A majority of institutional investors indicated that the provision of cash flow data (74%) and risk management data (67%) by companies would help to enhance their investment decision making. Most of the institutional investors indicated improved access to new capital (70%) and increased credibility (67%) as the benefits to companies for enhancing corporate communications. 7

About the Survey Survey Methodology The survey questionnaire originated from the Corporate Governance 1999 Survey of Institutional Investors conducted by PricewaterhouseCoopers in collaboration with Singapore Exchange. Well-known corporate scandals in recent years have resulted in revisions and addons to accounting and corporate governance standards, regulations and guidelines, which have in turn re-shaped the corporate governance landscape both locally and worldwide. In light of this, the original questionnaire was revised and updated prior to it being mailed out to the respondents. The survey was administered from December 2004 to January 2005 with an option of postal or online response. The respondents had the choice of not disclosing their identity. A total of 43 responses were received. Profile of Respondents By Industry Sector Similar to the previous survey, the respondents came from a good cross-section of the financial services industry, thus providing adequate representation from each sector to give balanced views for the survey. As can be seen in Chart 1, 46% of the respondents were asset management firms, 21% were insurance companies, 19% were investment and other banks, while 5% were security dealers and brokers. The remaining 9% of the respondents were from other industry sectors such as fund management companies and finance companies. 5% Chart 1: Breakdown of survey responses* 9% 19% 21% 46% Asset management firms Insurance companies Investment and other banks Security dealers and brokers Others *Percentages are based on 43 responses. By Total Worldwide Funds Managed Chart 2 presents the total worldwide funds managed by the responding companies. 19% managed less than US$100 billion of funds, while the total amount of funds managed by 9% of the respondents is between US$101 billion to US$300 billion. 5% of the respondents managed between US$301 billion to US$600 billion of funds in total, while 4% managed more than US$600 billion worth of funds altogether. Note however, that the survey was completed by the Singapore-based representatives of these companies. 8

Chart 2: Total amount of funds managed by respondents (in USD billions)* 19% < 100 63% 9% 5% 2% 2% 101-300 301-600 601-900 901-1200 No information *Percentages are based on 43 responses. Data were obtained from websites and annual reports of companies over the period from year 2002 to 2004 and they represent the total amount of funds managed by the company worldwide. By Functionality The profile of the survey respondents is presented in Chart 3. This shows that the survey respondents came from various functionality groups and were mostly in top management or managerial positions. Chart 3: Profile of survey respondents* 19% 19% Managing Director Director - Investment Chief Financial Officer Executive Director 2% 2% 2% 2% 5% 12% Chief Executive Officer General Manager - Investment Fund Manager Chief Operating Officer President Finance Manager 7% 9% Investment Manager 7% 7% 7% Head of Research Others *Percentages are based on 43 responses. Degree of Investment Responsibility The institutional investors were also asked the extent to which they were responsible for making investment decisions for either their own organisations, their clients organisations or in making investment recommendations in reports for clients. As shown in Chart 4, 53% of the respondents indicated that they were responsible for making decisions on behalf of their own organisations (compared to 35% in previous survey) while 28% were responsible for making 9

investment decisions on behalf of their organisation s clients (compared to 35% in previous survey). Only 7% of the respondents made investment recommendations in reports for clients as compared to 19% in the previous survey. The remaining 12% of the respondents were delegated other investment responsibilities such as risk management and making investment recommendations on behalf of their organisations. Chart 4: Degree of investment responsibility of institutional investors* 12% 7% Making decisions on behalf of own organisation 53% Making investment decisions on behalf of your organisation s clients 28% Making investment recommendations in reports for clients Others *Percentages are based on 43 responses. 10

Survey Findings Factors Influencing Investment Decisions Institutional investors were asked to identify key factors which they considered to be important to their investment decisions. In order to quantify the extent to which these factors influenced their investment decisions, respondents were asked to assess the relative importance of each factor on a rating of one to five. A rating of five denotes the strongest influence, and one, the weakest. These ratings were subsequently averaged to calculate the mean scores for each factor. As shown in Chart 5, financial results and solvency was the factor having the strongest influence on investment decisions with a mean score of 4.7. This observation is similar to the previous survey. The second most influential factor as indicated by institutional investors was share price with a mean score of 3.9. The remaining factors, with mean scores ranging from 3.1 to 3.8, have about the same influence on institutional investors investment decisions compared to the previous survey. In addition to the importance of financial results and solvency factors on the investment decisions of institutional investors, it may be interesting to note that the influence of corporate governance factors has increased relative to the previous survey. In contrast, the influence of investor communications and corporate image factors on institutional investors decisions to invest has decreased compared to the previous survey. Overall, the results show that institutional investors are increasingly placing greater emphasis on financial results, solvency and corporate governance factors when evaluating which companies to invest in. Chart 5: Factors influencing investment decisions* Financial results and solvency 4.1 4.7 Share price Composition and quality of the board Corporate reporting (e.g. quarterly/annual reporting) 3.4 3.3 3.9 3.8 3.7 4 Other corporate governance practices Investor communications Corporate image *Mean scores are based on 43 responses. 3.1 3.3 3.3 3.6 3.5 3.9 Extent of influence (1 = weakest influence, 5 = strongest influence) Current survey Previous survey Financial Results and Solvency The overall importance of the influence of different types of financial results and solvency factors on the respondents investment decisions is largely similar to the previous survey. Institutional investors considered cash flow levels, company s earnings per share, profitability and gearing level as key factors in their decision to invest, while the company s dividend policy was perceived to be a less important factor. These findings are not unexpected as cash 11

flows, earnings, profits and gearing are generally the key indicators of a company s profitability and financial position. Chart 6: Extent to which financial results and solvency factors influence the investment decision* Cash flows Earnings per share Profits Level of gearing Dividend policy 3.4 3.3 Extent of influence (1 = weakest influence, 5 = strongest influence) 4.6 4.2 4.3 4.4 4.2 4.4 3.9 4 Current survey Previous survey *Mean scores are based on 43 responses. Corporate Reporting The extent and quality of disclosure in the company s financial statements was considered by institutional investors to be the most important corporate reporting factor in their decision to invest (mean score of 4.4). Similar to the previous survey, the quality of management s discussion and analysis of the year s results and financial position (mean score of 4.1), as well as the level of disclosure regarding the company s strategies and initiatives (mean score of 4.1) have a significant influence on their investment decision, while the level of disclosure regarding business costs and compliance with Singapore/international accounting standards were found to be of weaker influence. Contrary to the push towards quarterly reporting by regulators and policy-makers, the quarterly reporting factor was indicated by institutional investors to be of lesser importance in influencing their decisions to invest. By and large, the findings suggest that enhanced disclosures about the company in its annual reports beyond the mandatory requirements play a significant part in influencing the investment decisions of institutional investors. Chart 7: Extent to which corporate reporting factors influence the investment decision* Extent and quality of disclosure in the company s financial statements Quality of management s discussion and analysis of the year s results and financial position Level of disclosure regarding the company s strategies & initiatives Level of disclosure regarding business costs Compliance with Singapore/international GAAP in preparing the company s financial statements 4.4 4.3 4.1 4 4.1 4 3.8 3.7 3.8 3.8 Current survey Previous survey Quarterly reporting 3.3 Extent of influence (1 = weakest influence, 5 = strongest influence) *Mean scores are based on 43 responses. 12

Investor Communications Institutional investors considered the prompt release of information about significant transactions that affect minority shareholders (mean score of 4.3) as having the greatest influence on their investment decisions. In addition, institutional investors also considered the transparency of equitable treatment of shareholders (mean score of 4.2) and company s willingness to give additional information to investors/analysts/media (mean score of 4.1) as important to their investment decisions. These results are consistent with those found in the previous survey with mean scores that are almost identical. Chart 8: Extent to which investor communication factors influence the investment decision* Prompt release of information about significant transactions that affect minority shareholders 4.1 4.3 Existence of other transparency mechanisms that help ensure fair treatment to all shareholders 4 4.2 Company s willingness to give additional information to investors or to other analysts and media 4 4.1 Frequency and nature of communications with investors Frequency and availability of other information about the company which is meant to be made publicly available 3.6 3.6 3.7 3.7 Current survey Previous survey Extent of influence (1 = weakest influence, 5 = strongest influence) *Mean scores are based on 43 responses. Composition and Quality of the Board The quality, qualifications and experience of executive directors (mean score of 4.2) was considered by institutional investors to be a more influential factor in their investment decision as compared to the quality, qualifications, experience and independence of non-executive directors (mean score of 3.5). This is similar to the previous survey. Nevertheless, all of the composition and quality of the board factors have increased slightly in their influence on institutional investors decision to invest relative to the previous survey. 13

Chart 9: Extent to which the composition and quality of the board factors influence the investment decision* Quality, qualifications and experience of the executive directors 4.2 4 Quality, qualifications, experience and independence of non-executive directors Extent to which non-executive directors are seen to influence company policy Percentage of independent non-executive directors Diversity in the board of directors 2.8 3.5 3.2 3.4 3.1 3.3 3.3 Number of directorships held by independent directors 3 Length of tenure of independent directors 2.9 Previous survey Current survey Extent of influence (1 = weakest influence, 5 = strongest influence) *Mean scores are based on 43 responses. Diversity in board of directors, number of directorships held by independent directors and length of tenure of independent directors were additional factors included in this survey and they were found to have weaker influence on institutional investors investment decisions. Other Corporate Governance Practices Consistent with the previous survey, the highest importance placed by institutional investors was on the extent to which related party transactions were carried out and the clarity of disclosures of such transactions (mean score of 4.4). The existence of an internal audit function (mean score of 4) was also considered by institutional investors to have a strong influence on their investment decision. The remaining corporate governance factors were viewed to be fairly influential by institutional investors. Collectively, it may be worthy to note that there is an increase in the importance institutional investors placed on corporate governance practices compared to the previous survey. In particular, the factors with the greatest increase in influencing institutional investors investment decision are the existence of an internal audit department (mean score of 4), whether the roles of Chairman and MD/CEO are separate (mean score of 3.6) and the existence of a remuneration committee (mean score of 3.3). 14

Chart 10: Extent to which other corporate governance practices factors influence the investment decision* Extent and clarity of disclosure of related-party transactions Existence of an internal audit function Existence of codes of conduct or business ethics Whether the directors hold shares in the company 3.3 4.4 4.1 4 3.7 3.8 3.7 Level of disclosure of corporate governance practices 3.7 3.7 Whether the roles of Chairman and MD/CEO are separated 2.8 3.6 Whether the company has a remuneration committee Whether the company has a nominating committee 2.7 3.3 3.2 Previous survey Current survey Extent of influence (1 = weakest influence, 5 = strongest influence) *Mean scores are based on 43 responses. Perception of Corporate Governance Regime in Singapore Business Ethics and Corporate Governance Institutional investors were asked to indicate whether the standard of business ethics and corporate governance regime in Singapore has improved or deteriorated over the past few years. The majority (81% compared to 79% in previous survey) felt that the standard of business ethics and corporate governance in Singapore has improved, with 35% (compared to 19% in previous survey) held the view that the improvement was considerable. The remaining 19% (compared to 15% in previous survey) felt that the standard of business ethics and corporate governance in Singapore remains largely unchanged. It is heartening to learn that none of the respondents (compared to 2% in previous survey) indicated that the standard of business ethics and corporate governance in Singapore has declined. Chart 11: Standard of business ethics and corporate governance in Singapore* 19% 46% Improved a little Improved considerably Remained largely unchanged 35% *Percentages are based on 43 responses. 15

Corporate Governance as an Incentive for Investment Institutional investors were asked whether the overall standard of corporate governance was an incentive for investment in Singapore. A significant proportion (81% compared to 71% in previous survey) indicated that corporate governance is an incentive for investment in Singapore. This view was not, however, shared by 12% (compared to 19% in previous survey) of the respondents who felt that the standards of corporate governance has no overall impact on their decision to invest in Singapore. Chart 12: Corporate governance as an incentive for investment in Singapore* 7% 12% 81% It is an incentive for investment in Singapore It has no overall impact on decision to invest in Singapore Unsure *Percentages are based on 43 responses. Satisfaction Level with Corporate Governance It is noteworthy that while 81% of the respondents indicated earlier that the standards of business ethics and corporate governance in Singapore have improved over the years, almost all the respondents felt that the current corporate governance regime in Singapore needs further improvements. The majority (95% compared to 94% in previous survey) of respondents felt that improvements to the current corporate governance regime in Singapore were needed. Amongst those who indicated a need for improvement, 71% (compared to 54% in previous survey) indicated the need for some improvement, 19% (compared to 38% in previous survey) indicated the need for considerable improvement while 5% (compared to 2% in previous survey) were in favour of a complete revamp of corporate governance in Singapore. Chart 13: Satisfaction level with corporate governance in Singapore* 5% 5% 19% 71% Some improvement needed Considerable improvement needed Complete revamp needed Unsure *Percentages are based on 43 responses. 16

Areas of Improvements to Corporate Governance Those institutional investors who indicated that improvements in corporate governance in Singapore were needed were further asked which areas could be enhanced. A high majority (73% compared to 13% in previous survey) of respondents indicated that they would like to see improved enforcement of the existing rules. Amongst those respondents who indicated a need for enforcement of existing rules, 47% felt that such enforcement actions should be undertaken by the Exchange while 26% felt that the other regulators should assume this role. Close to half (47%) wanted to see improved education about the existing guidelines and rules while 37% of the respondents felt that there should be clarification and simplification of the existing guidelines and rules. 33% of the respondents also wanted more stringent guidelines and rules pertaining to corporate governance. By and large, it can be seen that the primary area of corporate governance in Singapore that institutional investors are dissatisfied with is in the enforcement of existing rules and regulations. Chart 14: Areas of improvements to corporate governance in Singapore* Improved enforcement of the existing rules by the Exchange 13% 47% Improved education about the existing guidelines and rules 19% 47% Clarification and simplification of the existing guidelines and rules 13% 37% More stringent guidelines and rules pertaining to corporate governance 33% Improved enforcement of the existing rules by other regulators 26% Others 5% 6% Current survey Previous survey *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. Driving Improvements in Corporate Governance Similar to the previous survey, more than half (56%) of the institutional investors expected the Singapore Exchange to lead in driving improvements in corporate governance in Singapore. 47% (compared to 55% in previous survey) of the respondents felt that the investment community should drive improvements in corporate governance while 42% wanted the Council on Corporate Disclosure and Governance to take the lead. The other organisations indicated by respondents included professional associations (40%), Monetary Authority of Singapore (40%), Singapore Institute of Directors (35%) and Accounting and Corporate Regulatory Authority (33%). 17

Chart 15: Driving improvements in corporate governance in Singapore* SGX The investment community CCDG Professional associations (e.g. ICPAS etc.) MAS 42% 40% 40% 56% 51% 47% 55% SID ACRA SIAS A new government department 7% 4% 23% 23% 33% 35% Current survey Previous survey *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. SGX Singapore Exchange; CCDG Council on Corporate Disclosure and Governance; ICPAS - The Institute of Certified Public Accountants of Singapore; MAS Monetary Authority of Singapore; SID Singapore Institute of Directors; ACRA Accounting and Corporate Regulatory Authority; SIAS Securities Investors Association (Singapore). Perception of Corporate Communications/Investor Relations Corporate Communications/Investor Relations Institutional investors have considerable experience in dealing with corporate communications/investor relations of companies in their day-to-day operations of analysing and evaluating companies for investment decisions. As such, it is interesting to assess their perceptions of corporate communications/investor relations of companies. As depicted in Table 1, slightly more than half (51%) of the institutional investors indicated that corporate communications/ investor relations of companies do not offer information beyond the legal disclosure requirements. However, contrary to the above view, 28% of the respondents felt that the corporate communications/investor relations of companies offer additional information that they consider relevant or useful to analysts/investors, while an additional 14% indicated that they answer all questions put to them by analysts and shareholders, except where proprietary or sensitive information were involved. A further 7% of institutional investors felt that the corporate communications/investor relations of companies were receptive to their efforts to initiate contact and work actively with analysts and shareholders to anticipate and address their queries and concerns. Table 1: Overall experience in dealing with corporate communications/investor relations of companies They do not offer information beyond legal disclosure requirements. 51% They offer additional information to analysts/investors that they consider relevant or useful. They answer all questions put to them by analysts and shareholders, except where proprietary or sensitive information would be involved. They work actively to anticipate concerns and questions and attempt to maintain continuous dialogue with analysts and shareholders. They initiate contact with analysts and shareholders whenever new information becomes available. *Percentages are based on 43 responses. 28% 14% 5% 2% 18

Information Channels Institutional investors were asked to identify the information channels which they considered to be important to them in accessing information relevant to companies in their portfolio. Annual report (mean score of 3.9) was considered by institutional investors to be of highest importance to them in accessing information about companies. They also identified face-toface meetings (mean score of 3.8) to be the next important means of accessing information about the companies in their investment portfolio. Quarterly reports, preliminary announcements, analysts conference calls, press releases, websites and presentations at industry conferences were considered by institutional investors to be fairly important to them for accessing company information. The remaining information channels, which comprise public relations firms, advertising agencies and trade shows, were less important. Chart 16: Importance of different types of information channels in accessing information* Annual report Face-to-face meetings 3.8 3.9 Quarterly report Preliminary announcements Analysts' conference calls Press releases Websites 3.6 3.6 3.5 3.3 3.2 Presentations at industry conferences Others 3 3 Public relations firms 2.4 Trade shows Advertising agencies 2.2 2.2 Degree of importance (1 = least important, 5 = most important) *Mean scores are based on 43 responses. Comfort Level in Using Information Provided by Companies Based on their experience, institutional investors were asked to indicate how comfortable they are in using information provided by companies in undertaking forward-looking analysis. A high majority (84%) of institutional investors felt comfortable with using information provided by companies in performing forward-looking analysis, with 5% indicating that they were extremely comfortable. The remaining 16% of institutional investors felt that they were not very comfortable using information provided by companies to engage in forward-looking analysis. 19

Chart 17: Comfort level in using information provided by companies* 5% 16% 79% Extremely comfortable Fairly comfortable Not very comfortable *Percentages are based on 43 responses. Information Provided by Companies Institutional investors were further asked the reasons as to why they felt comfortable or uncomfortable with the information provided by companies. More than half of the institutional investors cited timeliness of information (56%) and relevance of information to the industry (51%) as the primary reasons for their comfort/lack of comfort with the information provided by companies. 33% of institutional investors indicated that the methodology used by the company in obtaining information was the reason for their comfort level with the information provided by companies while 30% attributed their comfort level to the relevance of the information provided to the specific company. Chart 18: Reason for comfort/lack of comfort in using information provided by companies* Timeliness of information 56% Relevance of information to the industry 51% Methodology used by company to obtain information Relevance of information to the specific company 30% 33% Others 5% *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. Moving Forward Perception of Corporate Governance Issues Institutional investors have high regard for the standard of corporate governance in Singapore. As presented in Table 2, 53% of institutional investors agreed that the standard of corporate governance in Singapore is high among Asian counties and a further 33% strongly agreed with this view. This is consistent with our earlier discussion which documented a high majority of institutional investors indicating that the standard of business ethics and corporate governance in Singapore has improved over the years. However, in spite of the high regard placed by institutional investors on the standard of corporate governance in Singapore, a majority of institutional investors (86%) still felt that most listed companies in Singapore could do more to strengthen corporate governance. Nevertheless, it is encouraging to see that more than half (54%) of the institutional investors felt that the majority of listed companies in Singapore are already taking measures to strengthen corporate governance. 20

A high proportion (81%) of institutional investors agreed with the statement that shareholders and regulatory authorities are demanding higher standards of corporate governance and 65% also indicated that such high standards demanded have increased liability for directors and officers. 74% of the respondents felt that there is substantial diversity in the standards of corporate governance amongst companies listed in Singapore. Slightly more than half (56%) of the institutional investors agreed that the Singapore Exchange should adopt more stringent listing standards. 40% of institutional investors disagreed that the interests of minority investors are adequately protected in Singapore while an almost similar proportion (37%) felt otherwise. Close to half (47%) disagreed that minority investors in family-controlled listed companies are equitably treated by controlling family shareholders. Table 2: Perception of corporate governance issues* The standard of corporate governance in Singapore is high among Asian countries. Most listed companies in Singapore could be doing more to strengthen corporate governance. Shareholders and regulatory authorities are demanding higher standards of corporate governance. There is substantial diversity in the standards of corporate governance amongst companies listed in Singapore. Higher standards of corporate governance demanded by shareholders and regulatory authorities have increased liability for directors and officers. The Singapore Exchange should adopt more stringent listing standards The majority of listed companies in Singapore are taking measures to strengthen corporate governance. Foreign companies listed in Singapore have lower corporate governance standards compared to Singapore companies. Market malpractices/manipulation is not a significant problem in Singapore. The standard of corporate governance in Singapore is comparable to that of the USA and UK. Government-linked companies in Singapore have better corporate governance than other companies. The interests of minority investors are adequately protected in Singapore. Minority investors in family-controlled listed companies are equitably treated by controlling family shareholders. *Percentages and mean scores are based on 43 responses Strongly disagree Strongly agree 1 2 3 4 5 Mean scores 2% 0% 12% 53% 33% 4.1 0% 0% 14% 63% 23% 4.1 0% 5% 14% 60% 21% 4.0 0% 2% 23% 60% 14% 3.9 0% 7% 28% 42% 23% 3.8 5% 7% 33% 42% 14% 3.5 2% 5% 40% 49% 5% 3.5 0% 19% 56% 23% 2% 3.1 5% 21% 40% 33% 2% 3.1 2% 26% 37% 35% 0% 3.0 2% 19% 56% 23% 0% 3.0 7% 33% 23% 37% 0% 2.9 14% 33% 37% 12% 5% 2.6 Possible Enhancements in Corporate Governance in Singapore In light of the recent review to the Singapore Code of Corporate Governance undertaken by the Council of Corporate Disclosure and Governance (CCDG), this question was specifically designed to gather the views of institutional investors on some of the proposed revisions to the code being considered by CCDG and other possible changes. A high majority of institutional investors agreed that companies should adopt a code of conduct/ethics for all directors, officers and employees (84%) and that there should be disclosure on the selection and appointment process for new directors to the board (79%). 60% of institutional investors also felt that companies should allow nominee companies to appoint more proxies to enhance their participation at shareholder meetings. In terms of remuneration matters, 70% of institutional investors felt that more information about the remuneration policy for executive directors such as the performance measures 21

used to link remuneration to performance should be disclosed by companies while 65% went further by supporting for the disclosure of the exact remuneration of each director. Most of the institutional investors (83%) agreed that certain key guidelines in the code should be made mandatory for all listed companies. 54% of institutional investors indicated that the code should contain different guidelines for companies of different sizes. Table 3: Possible enhancements in corporate governance in Singapore* Companies should adopt a code of conduct/ethics for all directors, officers and employees. The selection and appointment process of new directors to the board should be disclosed. Companies should disclose more information about the remuneration policy for executive directors (such as performance measures used to link remuneration to performance). Certain key guidelines in the Code of Corporate Governance should be made mandatory for all listed companies Independent directors should be independent of both management and substantial shareholders. Companies should introduce whistle blowing arrangements as part of their corporate governance system. Companies should disclose the exact remuneration of each director. Singapore should introduce legislation to protect whistleblowers. There should be a limit on the number of non-executive directorships in listed companies that can be held by a person in full-time employment. The board should appoint a lead independent director when the Chairman is not an independent director. The audit committee should comprise entirely of independent directors. There should be a limit on the number of non-executive directorships in listed companies that can be held by any person. Companies should allow nominee companies to appoint more proxies to enhance institutional investors participation at shareholder meetings. The remuneration committee should comprise entirely of directors who are independent from management and substantial shareholders. The Chairman of the board should be an independent director. Independent directors should make up at least one-half of the board. The Code of Corporate Governance should contain different guidelines for companies of different sizes (e.g. market capitalization, revenue etc.). The nominating committee should comprise entirely of independent directors. *Percentages and mean scores are based on 43 responses Strongly disagree Strongly agree 1 2 3 4 5 Mean scores 2% 0% 14% 49% 35% 4.1 0% 0% 21% 49% 30% 4.1 0% 5% 26% 30% 40% 4.0 2% 0% 14% 60% 23% 4.0 2% 2% 14% 56% 26% 4.0 0% 2% 28% 44% 26% 3.9 2% 2% 30% 35% 30% 3.9 0% 7% 26% 42% 26% 3.9 2% 5% 26% 42% 26% 3.8 2% 7% 26% 42% 23% 3.8 0% 12% 23% 42% 23% 3.8 2% 7% 28% 40% 23% 3.7 2% 5% 33% 37% 23% 3.7 0% 9% 28% 44% 19% 3.7 5% 7% 44% 28% 16% 3.4 0% 19% 30% 42% 9% 3.4 7% 16% 23% 42% 12% 3.3 0% 19% 44% 33% 5% 3.2 A high proportion of institutional investors (82%) agreed that independent directors should be independent of both management and substantial shareholders. Slightly more than half (51%) agreed that independent directors should make up at least one-half of the board while 19% disagreed and 30% were indifferent with such a view. 63% provided support for the remuneration committee to comprise entirely of directors who are independent from management and substantial shareholders while 65% agreed that the audit committee should also comprise entirely of independent directors. The importance of having a reasonable level 22

of board independence is further emphasised when 65% of institutional investors agreed with the appointment of a lead independent director when the chairman is not an independent director. 70% of institutional investors supported companies introducing whistle blowing arrangements as part of their corporate governance system and 68% agreed that Singapore should introduce legislation to protect whistleblowers. With respect to the multiple directorships issue, 68% felt that there should be a limit on the number of non-executive directorships in listed companies that can be held by a person in full-time employment while 63% supported a limit on the number of non-executive directorships in listed companies that can be held by any person. Enhancing Future Corporate Communications Most of the institutional investors wanted an emphasis on future-oriented information (74%) and detailed segmental reporting (72%) in future corporate communications. Other areas of enhancements in future corporate communications desired by institutional investors included benchmarking (47%), investment activities (44%) and stakeholder analysis (30%). Chart 19: Enhancing future corporate communications* Future-oriented information Detailed segmental reporting 74% 72% Benchmarking Investment activities 44% 47% Stakeholder analysis 30% *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. Enhancing Investment Decision Making A majority of institutional investors indicated that the provision of cash flow data (74%) and risk management data (67%) by companies would help to enhance their investment decision making. 63% identified market growth data and 60% identified statement of strategic goals as aiding their investment decision making if they are provided by companies in their portfolio. Some other items of moderate significance to institutional investors were earnings (58%), quality of management (53%) and cost analysis (49%). Chart 20: Enhancing investment decision making* Cash flow data 74% Risk management Market growth data Statement of strategic goals Earnings 67% 63% 60% 58% Quality of management Cost analysis 49% 53% Market shares data 42% Brand recognition value 16% Others 5% *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. 23

Benefits to Companies for Enhancing Corporate Communications Institutional investors were asked what they perceived to be the benefits attributable to companies for enhancing corporate communications. Most of the institutional investors indicated improved access to new capital (70%) and increased credibility (67%) as the benefits to companies for enhancing corporate communications. 60% felt that improving corporate communications will increase the number of long-term investors in companies while 56% perceived enhancements in corporate communications to increase the number of analysts following such companies. Chart 21: Benefits to companies for enhancing corporate communications* Improved access to new capital Increased credibility 67% 70% Increased number of long-term investors Increased analysts following 56% 60% Increased share value 40% Reduced cost of capital Increased price/earnings ratio Increased share liquidity 28% 26% 33% Reduced political or regulatory intervention Reduced share volatility Improved relations with suppliers 16% 16% 14% Others 2% *Percentages are based on 43 responses. Respondents were allowed to choose more than one option; hence the percentages do not necessarily add up to 100%. 24

PricewaterhouseCoopers 8 Cross Street, #17-00 PWC Building Singapore 048424 Telephone: 6236 3388 Facsimile: 6236 3300 Website: www.pwc.com/sg Investment Management Association of Singapore 10 Collyer Quay, #19-08 Ocean Building Singapore 049315 Telephone: 6230 9717/718/509/678 Facsimile: 6536 1360 Email: enquiries@imas.org.sg Website: www.imas.org.sg Corporate Governance & Financial Reporting Centre NUS Business School, National University of Singapore Biz 2, #04-02, 1 Business Link Singapore 117592 Telephone: 6874 7609 Facsimile: 6778 4275 Email: cgfrc@nus.edu.sg Website: www.cgfrc.nus.edu.sg