LISTED COMPANIES ON SINGAPORE EXCHANGE (Quarterly reporting requirement)

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LISTED COMPANIES ON SINGAPORE EXCHANGE:

(Quarterly reporting requirement): 8.

Mr Leong Horn Kee asked the Prime Minister and Minister for Finance (a) what are the advantages and disadvantages of requiring companies listed on the Singapore Exchange to do quarterly reporting as opposed to half-yearly reporting; (b) what is the estimated additional cost per year for the listed companies to comply with the current quarterly reporting requirement; and (c) whether his Ministry will consider allowing all companies listed on the Singapore Exchange to choose whether to do quarterly or half-yearly reporting of accounts.

Mr Leong Horn Kee (Bishan-Toa Payoh): Sir, before I ask the Question, let me declare that I am a director of some listed companies. I am asking this Question on behalf of the interests of all affected companies. Question No. 8, Sir.

The Second Minister for Finance (Mr Raymond Lim Siang Keat) (for the Prime: Column: 1668

Minister and Minister for Finance): Mr Speaker, Sir, the demand for more frequent disclosure is driven by many factors. Globalisation means that market cycles are shorter, with companies now having to respond to fast-changing business conditions. Investors, understandably, would like to be continually assured that their capital is not exposed to increased risk. This is usually satisfied by the timely and continuous disclosure of material information by companies. Various corporate scandals in recent years have reinforced demands for higher standards of corporate governance and disclosure.

Investors and stock analysts want adequate, accurate and timely information on the state of companies' finances and business. A balance has to be struck between this desire for updated information and the cost to the company of producing the information.

Quarterly reporting is currently required not only in the United States, but also in the countries in our region like China, India, Malaysia and Thailand. In Singapore, to ensure that smaller companies are not unduly burdened, quarterly reporting is required only for listed companies whose market capitalisation exceeds $75 million. This covers 35% or 235 of the companies listed on the Singapore Exchange.

Quarterly reporting need not be an excessive addition to what listed companies are already doing. First, quarterly financials, unlike annual reports, do not have to be audited. Second, quarterly reports can be produced using existing accounting and reporting systems that companies already have in place for half-yearly and annual reporting. And, third, most companies already do monthly management accounts for their internal reporting purposes.

The Government is mindful that the cost of quarterly reporting is relatively

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higher for smaller companies than the larger one. This is the reason for the market capitalisation threshold of $75 million, instead of the $20 million threshold initially recommended by the Council on Corporate Disclosure and Governance.

Mr Leong Horn Kee: Sir, I would like to ask the Minister whether he is aware that even though there is quarterly reporting in the US, it has not led to any better corporate governance or better reporting disclosures in the US. In fact, there are many scandals in the US. Is he also aware that recently, a senior banker in Singapore actually said openly that quarterly reporting is not useful for our Singapore companies? Would he like to respond whether there is a need to review this policy?

Mr Raymond Lim Siang Keat: I think the Member has articulated basically the position of companies and, I think, the senior banker that he referred to was taking the company's point of view. As I said, in this particular matter, you need to balance off the cost to the company of doing this against the investors' interest in ensuring that they have timely disclosure, especially in a situation today where you have rapidly evolving markets and going for a disclosure-based regime where more information is needed.

But having said that, in response to his point of whether there will be a review, in 2003 the Minister for Finance said that there would be an assessment and review this year on whether we should extend quarterly reporting to the smaller listed companies. My Ministry has asked the Council of Corporate Disclosure and Governance (CCDG) to do so. Specifically, the CCDG has been asked to review the recent international trends and experiences on quarterly reporting, to assess the benefits and disbenefits to

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date on quarterly reporting, as experienced by our listed companies, to recommend appropriate changes, if any, and to look at the desirability and feasibility of extending quarterly reporting to the smaller companies. I have asked them also to consult the public before they make the recommendations, and they will take into account inputs such as his.