Integrated Business Reporting Publication_2Dec2015_FINAL

Towards Better
Business Reporting
Integrated Reporting and Value Creation

Contents
OVERVIEW
01 Foreword
02 Preface
03 Executive summary
04 Introduction
ANALYSIS / EVIDENCE
05 About our sample
06 Finding 1: Cumulative returns are consistently higher
for <IR> and SR companies
07 Finding 2: Firms which adopt <IR> or with higher <IR>
scores have significantly higher P/B ratios and lower WACCs
10 Conclusion
CASE STUDIES
11 DBS Bank Ltd
12 City Developments Limited
13 Singapore Exchange,
Maritime and Port Authority of Singapore
APPENDICES
14 Appendix A: Sample breakdown
15 Appendix B: <IR> Scoring Methodology
17 Appendix C: Multivariate regression results

Foreword
Integrated Reporting and Value Creation 1
Paul Druckman
Chief Executive Officer
International Integrated Reporting Council
Removing the price tag on corporate reporting innovation
Former US Army Chief of Staff, General Eric Shinseki, once said, “If you don’t like
change, you’re going to like irrelevance even less”. Staying relevant in an era of
great change is one of the fundamental strategic challenges of our times. Traditional
business models are being disrupted, and the megatrend of consumer empowerment,
along with technology and globalisation, is changing the relationship and discourse
between business, capital markets and society.
The information that flows from Integrated Reporting is a capital markets issue: it
communicates to providers of financial capital the fundamental investment-grade
matters that will attract (or deter) risk capital over the short, medium and long-term.
While information is, and always will be, the lifeblood of capital markets, the nature
and quality of that information must respond to broader changes in the economy and
society. The information businesses communicate must remain relevant.
Change brings with it risk. The 1,000+ businesses in the world practising Integrated
Reporting today did not know for certain when they began to express their value
creation story differently by using the International <IR> Framework that it would lead
to a significant improvement in performance, improve the quality of dialogue with
investors, attract a more dedicated investor base or reduce the cost of capital. For
them it is common sense that, in a world where 80% of the market value is accounted
for by human, natural, intellectual, social and relationship factors, we need a new
framework for communicating value creation. And it is common sense that, in a world
where the average share in the average company is held for just seven months, we
need a different framework for driving a more meaningful dialogue between boards and
investors to create the conditions for successful long-term investment.
The publication of this KPMG-National University of Singapore (NUS) study changes
the calculus of risk for a business wanting to adopt Integrated Reporting. It shows
in a compelling way that firms disclosing broader information than just financial data
outperform their peers – not just in one year, but in every year of this controlled study
from 2010 onwards. It is the first study in the world to demonstrate a correlation
between Integrated Reporting and a lower cost of capital, making business investment
more attractive. These powerful benefits help to remove the price tag on corporate
reporting innovation and should now alter the balance of decision-making in favour of
adoption of Integrated Reporting across the Asia Pacific region.
Staying relevant has never been more important. This KPMG-NUS study is powerful
evidence of the gains businesses can make from taking the first steps on the journey
towards Integrated Reporting. It is a great pleasure to be associated with its findings.

2 Integrated Reporting and Value Creation
Preface
Prof. Ho Yew Kee
Head
Department of Accounting
NUS Business School,
National University of Singapore
Ian Hong
Partner
KPMG in Singapore
Integrated Reporting has become the primary corporate report for large global firms
in some select markets, yet the practical challenges of implementing <IR> still remain
a key consideration in many others. Implementing <IR> requires significant time and
resource investments – as such, not surprisingly, only a handful of firms in Asia Pacific
have adopted <IR> practices.
While in Singapore the adoption of the <IR> framework is still in its infancy, there are
signs that early adopters are making headway. To learn more about their experiences
and rationales for adoption, we interviewed these companies to gather their views and
experiences and share them in this report.
In summary they found that IR:
• helps management align its strategic thinking with operations;
• facilitates the communication of the company’s business strategy, its business
model, and how value is created now and in the future;
• provides stakeholders with a clear and balanced view of the organisation rather than
a fragmented, one-dimensional understanding;
• helps investors look beyond short-term, historical financial performance;
• and provides them with a clearer picture of business value drivers and future
challenges;
As few studies to date have empirically demonstrated any relationship between <IR>
and value creation over the short, medium and long term, KPMG and NUS agreed to
jointly investigate and validate whether <IR> can help create and sustain tangible value
beyond the above perceived benefits. By considering the relationship between <IR>
and market performance, this study aims to establish whether firms adopting <IR>
exhibit any measurable benefits in terms of value creation.
We trust this report will be of interest and help you build the case for <IR> adoption, if
you haven’t already started down that path.

3
Executive Summary
<IR> is increasingly valued by investors and firms alike for the clarity it provides
on the value creation process, its future-oriented perspective, and its emphasis
on measurable performance. Furthermore, <IR> is a framework that allows for the
integration of sustainability reporting (SR), and compliments existing disclosure
requirements of corporate reporting. Some even consider SR a natural precursor to
Integrated Reporting.
Guided by the International Integrated Reporting Council (IIRC), more firms have begun
to assess and address connectivity across their business and to communicate more
relevant information more clearly, without spin.
The Framework is designed around six capitals and systemically groups the drivers of
value creation into measurable flows. It is centred on determining what is material to
the firm’s ability to execute its strategy to deliver value to its stakeholders in the short,
medium and long term. This is usually reflected in a clear and concise depiction of the
firm’s business model that connects the business with value creation. These embedded
principles of materiality, stakeholder engagement and connectivity of information are to a
certain extent comparable to those found in sustainability reporting frameworks.
Our sample consists of 40 firms and 40 control firms selected from the IIRC database
and leading global and Asian sustainability indexes yielding a selection across 10
markets in Asia Pacific. The study yielded two major findings:
1. Share price returns for firms which adopt <IR> or SR are consistently higher.
By comparing the two portfolios, we found that share price performance of firms
that adopted <IR> and SR practices exceeded the control group from mid 2010
onwards.
Additional statistical analysis showed that the differences between the two portfolios
were significant and confirmed that a portfolio consisting of <IR> and SR firms
tended to yield a much higher return over time for a given level of risk.
2. Firms which adopted <IR> or with higher <IR> scores have significantly
higher Price to Book ratios (P/B) and lower Weighted Average Costs of
Capital (WACCs).
Firms were scored based on the extent to which they applied the <IR> Framework
by using the scoring methodology in accordance with the NUS <IR> Disclosure
Guidance (2014). These scores were then regressed against their P/B ratio and
WACC as proxies for value creation and risk. Our findings suggest that firms with
higher <IR> scores generally exhibit higher P/B ratios and lower WACCs. This
correlation suggests that these firms are viewed more favourably by investors and
lenders alike.
In summary, this study suggests that capital markets are likely to reward firms that adopt
the <IR> Framework. It helps firms rethink and integrate their strategies and business
models in line with stakeholder expectations. At the same time, it helps them focus on
the aspects that can materially affect their long-term ability to create value.
It also shows the value capital markets place on clear communication and
transparency, and encourages firms to tell their own value creation stories as opposed
to letting analysts make assumptions on their behalves.
Acknowledgement
KPMG and NUS would like to
acknowledge and thank the following
for their support:
• Lead Researcher:
Christian Leusder, Manager,
Sustainability and Business
Advisory Services, KPMG
• Dr. Vincent Chen
Department of Accounting,
National University of Singapore and
Department of Accounting,
National Chengchi University (Taiwan)
• Elaine Tay, Associate Director,
InSights Centre, KPMG
• Sofian Bayed
• Anh Dao
• Han Sufen

4
Introduction
Corporate reporting is a key means by which shareholders
judge how well-managed firms are. However, following a slate
of corporate reporting scandals and a fast-moving business
environment, the reliability and relevance of such reporting have
come under fire in recent years.
Increasingly, investors are finding that more disclosure does not
translate to better reporting. The information reported in annual
reports is often inadequate in helping investors properly assess
the value of a business.
Firms are, thus, challenged to reconsider how they
communicate their business models and value creation
processes. This applies all the more to listed firms, since their
ability to communicate the value creation story directly impacts
share prices. Firms that are better able to show how they
combine resources and capital to achieve business goals stand
at a competitive edge vis-a-vis their peers.
There are currently two preconditions driving changes in the
corporate reporting landscape.
First, in the short-term corporate financial reporting is often
narrowly focused on financial figures, leaving the needs of
investors with a longer-term horizon unmet. As such, these
investors have increasingly begun asking for non-financial
information in corporate reports.
Second, investors increasingly value corporate environmental,
social, and governance (ESG) performance in firms, leading the
latter to disclose more such information in their annual reports.
Such ESG reporting is guided by frameworks such as the Triple
Bottom Line approach and the Global Reporting Initiative (GRI),
which provide a guiding framework for firms to report on their
economic, social, and environmental activities.
This kind of non-financial reporting, also known as sustainability
reporting (SR), is increasingly valued for the way it complements
and enriches existing corporate reporting disclosure
requirements.
Integrated reporting – the key towards better business
Reporting
The <IR> framework consists of eight content elements and
seven guiding principles (Figure 1).
It is a concise communication about how an organisation uses
its resources (the capitals) to create value for its stakeholders
over the short, medium and long term. In essence, the
Framework conveys to the providers of financial capital how
the firm engages with its stakeholders. It identifies what can
substantively impact the firm’s strategy and its ability to deliver
results. Finally <IR> communicates in a concise manner
the connectivity of a firm’s governance, performance, and
prospects, in the context of its external environment.

5
Figure 1: Content Elements and Guiding Principles of <IR> Framework
Content elements Guiding principles
1) Organisational overview and external environment
2) Governance
3) Business model
4) Risks and opportunities
5) Strategy and resource allocation
6) Performance
7) Outlook
8) Basis of preparation and presentation
1) Strategic focus and future orientation
2) Connectivity
3) Stakeholder relationships
4) Materiality
5) Conciseness
6) Reliability and completeness
7) Consistency and comparability
About Our Sample
We selected 80 firms from 10 markets in Asia Pacific across a
range of industries.
• 12 firms that adopted <IR> on a voluntary basis were
identified using the IIRC database. This is significant as
<IR> involves both capital and time outlay, so the voluntary
adoption of <IR> must be based on the tangible and
measurable benefits that firms gain.
• 12 firms were included in the analysis as the control group,
selected on the basis that they are from the same industry
and country as the 12 <IR> firms, and have comparable total
assets.
• 28 firms were chosen as SR firms from the 2014 Global 100
dataset and the Channel News Asia Top 100 Sustainable
Companies.
• 28 non-SR matched-firms were chosen as a second control
group.
Appendix A illustrates the breakdown.

Finding 1:
Cumulative returns are consistently
higher for <IR> and SR companies
For our preliminary visual analysis, we hypothesised that
firms that adopt <IR> demonstrate stronger capital market
performance.
We first classified <IR> firms and SR firms as one portfolio,
constructing an equally weighted Total Shareholder Return (TSR)
index to analyse performance over time. The remaining non-
<IR> and non-SR firms were classified as the control group for
comparison. Next we analysed each group’s TSR from January
2006 to December 2013.
Figure 2 shows that in the years prior to 2010, the weighted
TSRs of the two samples were indistinguishable.
After 2010, however, one can observe an inflection point after
which the <IR> and SR group clearly and consistently exceeds
the performance of the control group. The figure shows the
investment of $1 in the respective portfolio as at 1 January 2006
and the value of that investment over time.
Subjecting the above findings to further analysis using T-tests
confirmed that the difference of this outperformance was in
fact statistically significant and in favour of the <IR> and SR
group after the inflection point. This analysis also confirmed
that prior to this point, the differences between the portfolios’
performance were indistinguishable and insignificant.
To assess the observed outperformance of the <IR> and SR
group from mid 2010 onwards, a risk-adjusted return analysis
was carried out to determine whether the significant excess
returns identified were in fact the premium for a higher risk.
This was done by dividing the annual returns by their respective
standard deviation to yield the returns per unit of risk. The
results yielded the same inflection point in mid 2010 and
revealed that for a given level of risk, the <IR> group actually
yielded higher returns (Figure 3).
Figure 2: Cumulative Share Price
Performance of Portfolios
Figure 3: Time Series of Sharpe Ratio of
Portfolios
Jan2006
$1investedin2008
0.5
1.0
2.0
2.5
1.5
3.0
Jan2007
Jan2008
Jan2009
Jan2010
Jan2012
Jan2013
Jan2014
Jan2011
–– <IR> and SR firms
–– Control group
12
Jan2007
-4
-2
0
2
6
8
4
10
Jan2008
Jan2009
Jan2010
Jan2011
Jan2013
Jan2014
Jan2012
–– <IR> and SR firms
–– Control group
Riskadjustedreturn

7Integrated Reporting and Value Creation
<IR> Scoring Methodology and Results
Other than classifying firms as either <IR>, non-<IR>, SR or
non-SR, an <IR> score for each firm was also created using
available annual reports from 2009 onwards. Firms were scored
using the scoring methodology in the NUS <IR> Disclosure
Guidance (2014) and reflect the extent to which a firm’s annual
report aligns with the <IR> framework. Appendix C gives details
about the scoring process.
The results of the <IR> scoring procedure are shown in Figure 4
for the four different portfolios (<IR> firms, non-<IR> firms, SR
firms and non-SR firms) from 2009 to 2013.
Figure 4 shows that in 2009, the <IR> firms in our sample
have an average <IR> score of less than 50 while by 2013,
the average <IR> score for these firms had increased to 74.3
(approximately +48.6%). On the other hand, the non-<IR> firms
with an average <IR> score of 38.3 in 2009 had increased to
a mere 51.1 with a rate of increase that was much slower than
the <IR> firms (approximately +33.4%). The non-SR firms had
the lowest average <IR> score and also had the slowest rate of
increase.
Finding 2:
Firms which adopt <IR> or with higher
<IR> scores have significantly higher
P/B ratios and lower WACCs
Figure 4: Average <IR> Score Trend for the Four Portfolios
80
70
60
50
40
30
20
10
0
2009 2010 2011 2012 2013
 <IR> Firms  Non-<IR> Firms  SR Firms  Non-SR Firms
38.5 38.7
26.6
51.8
40.940.5
27.6
57.8
46.9
43.7
29.2
70
49.3
46.1
30.6
74.3
51.1
46
31.7
48.3
<IR>score

Regression Approach
Further in-depth analysis was used to measure firms’ capital
market performances against the <IR> scores. Using a
preliminary univariate regression analysis, all 80 firms were
evaluated based on their <IR> scores. Two capital market
measures (CMMs) were selected to measure value and risk.
The P/B ratio was selected as a proxy for firm value whilst the
WACC was chosen as a proxy for risk. Apart from univariate
regressions, the CMMs P/B ratio and WACC were also
subjected to multivariate regression analysis against a defined
set of control variables as well as the overall <IR>-score.
Figure 5 presents the analysis for the output of the univariate
regression analysis between P/B ratios and <IR> scores. The
analysis indicates that there is a positive relation between the
CMMs and the <IR> scores and P/B ratios, albeit a weak one.
For every 1 point increase in IR score, there is a 0.0073%
increase in P/B ratio.
A major reason for this weak positive relation is that there are
many high P/B firms in the mid-range of <IR> scores.
The univariate regression analysis between WACC and <IR>
scores shows much stronger results as the slope is more
evident and the coefficient is significantly negative. For every 1
point increase in the <IR> score, there is a 0.058% decrease in
the WACC.
Multivariate regression analyses were also carried out to account
for the observed results by including the control variables.
The control variables (Table 1) used to establish an empirical
link between the firms’ value (i.e. P/B ratio and what drives it),
were selected based on the interrelation between the firm’s
performance and its risk in relation to its performance growth.
y = -0.058x + 12.413
R² = 0.0897
Figure 5: Capital Market Measures vs <IR> Scores
P/Bratio
y = 0.0073x + 1.3901
R² = 0.0171
WACC
<IR> Scores<IR> Scores
20
0
5
10
15
20 40 60 80 100
5
4
3
2
1
0
20 40 60 80 100
y = -0.058x + 12.413
R² = 0.0897

By including metrics such as revenues, the approach
automatically accounts for other possible sources of value that
could be responsible for an increase in P/B ratio. This allows
for the analysis of <IR> effects in isolation and ensures that any
increase in explanatory power detected that is not attributable
to <IR> performance is accounted for. For a detailed overview of
the statistical analysis please refer to Appendix C.
This additional analysis using multi-variate regression confirmed
the results of the uni-variate regression analysis for P/B and
WACC, whilst taking into account other signifi cant causes
affecting these measures. It attests to the usefulness of <IR>
in providing information which can induce a lower WACC while
enabling firms to generate higher P/B ratios.
Table 1: Overview of Selected Control Metrics to Explain Value Creation
List of Control Variables
Return Risk Growth
Return on equity
Return on assets
Revenues (Sales)
Debt to equity ratio (Leverage)
Liquidity ratio
Standard deviation of returns
DELTA revenues (Sales)
x
x

Conclusion
1
“Financial Reporting Disclosures: Investor Perspectives on Transparency, Trust, and Volume”, CPA Institute, July 2013
2
“Understanding Investors: Directions for Corporate Reporting”, ACCA, June 2013
Since the last global financial crisis investors’ confidence in corporate reporting has
eroded further. Studies by the CPA Institute1
found that investors regarded information
within corporate reports as neither reliable nor sufficient. Likewise, close to 70% of
respondents surveyed by the Association of Chartered Certified Accountants (ACCA)2
were sceptical of the information firms had provided since the financial crisis. And
while the annual report remained the most valuable source of information, almost
half of the respondents (45%) had concerns about the quality and relevance of
corporate reporting and its usefulness. Inadequate disclosures contributed to a lack of
transparency, creating a void in the trust factor and casting doubt as to the usefulness
of conventional corporate reporting as a whole.
This study provided meaningful evidence to suggest that firms which adopt <IR>
as a means to address the above gaps are associated with better capital market
performance. A higher IR score, a reflection of the extent of a company’s IR adoption,
was found to have a significant correlation with higher P/B ratios and lower WACCs.
These results are encouraging as they empirically illustrate that companies
incorporating the <IR> principles managed to create clarity and foster a better
appreciation of what they do and why they do it: A skill that investors not only
appreciate but reward. This gradual shift to better business reporting can also help
firms restore the eroded trust of stakeholders. Beyond promoting transparency and
trust, IR fundamentally changes an organisation’s thinking and operating processes. It
does so by inducing it to rethink its strategy and align it with its business model whilst
engaging its stakeholders in the process. This process is one based on communication
which also yields the added benefit of breaking down and in turn paving the way for
value creation.
While the <IR> score cannot possibly capture all these factors, it is nevertheless a
good proxy as to whether or not and to what extent a firm has undergone a change.
Conservatively, our findings might even be understating the true value-enhancing
effects of adopting the <IR> framework.
If there is one message to be taken from this study, it is that firms taking more
responsibility for their own corporate stories are rewarded accordingly. When
Investors make fewer assumptions on a company’s behalf, they will be less
inclined to price-in risks that may well already be sufficiently managed and
accounted for.

DBS Bank Ltd
DBS started its journey towards <IR> in 2012. It was the first Singapore bank and
listed South-east Asian company to participate in the IIRC pilot programme.
Prior to this, the bank had already embraced integrated thinking. Internally, strategic
priorities were structured according to its balanced scorecard and commitments to
various stakeholder groups. <IR> therefore provided a framework for DBS to report
externally what they were already doing internally.
The support of the CEO and CFO for <IR> has been crucial. Mikkel Larsen, DBS’
managing director and head of tax and accounting policy was the driving force behind
the firm’s <IR> implementation. He played a key role in communicating internally
across middle and senior management the benefits of <IR> adoption and the role <IR>
can play in articulating the bank’s value creation story. This was critical in engendering
broader organizational support.
One challenge that DBS encountered was marrying certain concepts in the <IR>
framework with how it defines and articulates its business model. For example, in the
banking context, the term ‘capitals’ almost always refers to a bank’s regulatory capital
requirements; whereas in <IR> terminology, this relates to inputs or resources used in
the business model.
The biggest challenge, however, was, quantifying the tangible success of <IR> in terms
of return on equity and price-to-book ratio, for example.
<IR> has brought about many benefits for the bank. Internally, it helped break down
silos and fostered closer collaboration amongst the various functions as they work
together to communicate the bank’s value proposition. Externally, DBS’s Annual Report
has received positive feedback from its stakeholders and was recognized as the Most
Transparent Company in the recent SIAS Investors’ Choice Awards.
Integrated reporting is a multi-year journey and DBS will continue to make progress
in enhancing their communication around value creation for their multiple stakeholder
groups.
Case Studies
In Singapore, several firms are already on their IR journeys. In this section,
they share their experiences as well as their lessons learnt. We thank them for
their contributions.

City Developments Limited
City Developments Limited (CDL) has been a firm advocate for sustainability reporting
(SR) since it voluntarily published its first dedicated report in 2008. This is part of
its long-standing commitment to the triple bottom line and to create lasting value
for stakeholders. CDL believes that SR is an effective tool to measure, improve on
and benchmark its environmental, social and governance (ESG) performance while
enhancing transparency and stakeholder engagement. In 2015, CDL is the first
property developer in Singapore to adopt the Integrated Reporting <IR> approach for
its SR.
Based on the International Integrated Reporting Council’s (IIRC) Framework, the <IR>
approach provides a holistic view on how the interrelation between CDL’s business and
ESG performance leads to value creation over the short-, medium- and long-term.
CDL’s <IR> approach comprised a materiality assessment, dialogue with key internal
and external stakeholders and subsidiaries, data collection, report writing and finally,
an independent assurance. Commitment from top management was crucial in driving
the organisation’s collaborative and planning effort. The report took about 9 months to
compile and publish.
Adapting to a new reporting approach did pose some challenges. Even with CDL’s
sustainability stewardship, new information and processes aligned with the <IR>
approach had to be further integrated.
Developing in-house capability was demanding as applying the <IR> principles called
for in-depth processing and interpretation of data and information provided by the
various business units. In addition, making the connection between ESG factors
and financial performance, and articulating a forward-looking perspective were also
challenging.
However, this experience enabled CDL to identify and close the gaps, with a view
to continuously sharpen its reporting frameworks and make stronger business and
financial sense of its ESG performance. The <IR> approach towards value creation has
helped CDL to focus on ESG issues that are material to the business, review its risk
management and identify areas for further improvement. In addition, it also inspired
CDL to focus on areas that offer opportunities for better performance and sustainable
growth.
Embarking on the <IR> approach for SR has been a worthwhile investment that has
yielded both tangible and intangible benefits for CDL.

Maritime and Port Authority of Singapore
The Maritime and Port Authority of Singapore (MPA) went beyond sustainability
reporting to incorporate the IIRC’s <IR> framework in its 2014 Annual Report. The
agency saw this as an opportunity to expand its traditional definition of stakeholders to
include its employees.
Using the Global Reporting Initiative (GRI) G4 sustainability reporting framework, MPA
identified risk areas, sieved out material issues and redefined key stakeholders. It
developed strategies, and aligned activities and KPIs with the <IR> framework. In the
process, the agency systematically addressed areas for cost savings, de-duplicated
programs and worked on the deficiencies it had identified.
Unlike previous reports which focused mostly on external stakeholders, the 2014
report gave equal emphasis on external and internal stakeholders such as employees.
The intention was to communicate the strategy map, governance structure, HR
policies and various frameworks, all in one document. Through this, MPA hoped
to achieve integrated thinking throughout the organisation and remove the silo
segregations of divisional functions.
MPA hopes to set the benchmark for the maritime industry players, by embarking on
its own <IR> journey. As a strong proponent of <IR> adoption, MPA believes that the
process helped to align its business value with the various organisational strategic
thrusts to build a “Future-Ready Maritime Singapore”.
Singapore Exchange
In 2013, Singapore Exchange (SGX) concluded from an internal study that the
Integrated Reporting <IR> framework would help enhance communications and
engagement with its various stakeholders. The framework provides a structured
approach to clearly and holistically articulate SGX’s value creation model, enabling SGX
to more effectively engage various stakeholder groups with a consistent message. By
adopting <IR>, SGX hoped that this will help promote “integrated thinking” within its
organisation and improve cross-functional collaboration and communication.
SGX drafted its FY2015 annual report using <IR> as the guiding framework, making
this its inaugural integrated report. Its areas of focus were on improving the linkages
between the various content elements, as well as additional reporting on material
information that was lacking in previous annual reports. These include the forms of
capital, material factors and priorities. Wherever appropriate, cross-references between
the relevant sections within the annual report were provided for better clarity and
context.
SGX believes that the process of <IR> is an ongoing journey and unique to each
company. It also recognises that this investment is worthwhile and rewarding.

14
A total set of 80 firms that were then analysed over a period
of 5 years, thus, yielding 400 data points for analysis. The
breakdown of these firms by industry and country is as show in
the figures below:
Figure 6: Sample Breakdown
Appendix A:
Sample breakdown
By Country By industry
IT
30%
Australia
10%
Hong Kong
5%
India
10%
Japan
15%
Malaysia
10%
Financials
25%
Consumer markets
15%
Energy
10%
Industrials
8%
Healthcare
5%
Teleco Services
5%
Utilities
2%
Thailand
5%
Taiwan
10%
Sri Lanka
5%
South Korea
15%
Singapore
15%

Content Elements Content ElementsDisclosure Items Disclosure Items
Organisational Overview
and External Environment
Basis of Preparation and
Presentation
Business Model
Outlook
• Mission and vision
• Principle activities
• Competitive landscape
• Macro environment
• Reporting boundary
• Materiality rule
• Preparers and internal processes
• Key inputs and outputs
• Business activities
• Outcomes
• Expected future trends
• Impact of trends
• Contingencies
• Strategic objectives
• Strategies to achieve goals
• Resource allocation
• Progress measures
• Financial capital • Intellectual capital
• Social and • Manufactured capital
relationship capital • Natural capital
• Human capital
• Risk management philosophy
• Risk and opportunity identification
• Risk and opportunity assessment
• Risk mitigation
• Board structure • Shareholders
• Compliance of CG code • Related party
• Board and executive transactions
compensation
Strategy and Resource
Allocation
Performance
Risks and Opportunities
Governance
Figure 7: Breakdown of Content Elements
Appendix B:
<IR> Scoring Methodology
To conduct the scoring exercise, we formed a team of two with
each individual doing the <IR> scoring through careful perusal of
the annual reports from our sample of firms independently. This
is to ensure that the proposed scoring methodology provides a
balanced view and mitigates any potential subjective judgment in
the scoring process. Specifically, after the scoring is completed
by the two individuals, we compare their scores to check for
consistency. If the difference in the scores from both individuals
for the same item is within a reasonable range, we take the
average of the two scores. However, if the difference is large, our
research team will review their scoring process for this particular
item together and reconcile their differences in scoring.
For each content element we derive two scores: content
disclosure score and guiding principle score. For the content
disclosure score, we score a firm based on disclosure items
specified under the NUS <IR> Disclosure Guidance (2014) to
facilitate our scoring. We score seven guiding principles (Refer to
Figure 1) under each content element because disclosure made
under each content element should be integrated with other
content elements in the annual report. We expect an exemplary
integrated report to adhere to these seven guiding principles in
its preparation. Therefore, this score will capture the quality of
content disclosure.
Source: IIRC

16
Based on the information disclosed in firms’ reports, each
disclosure item was scored from 0 to 3 (with 3 being the highest),
and then aggregated accordingly to provide a score pertaining
to each Content Element. For firms that did not produce an
integrated report, information contained in their annual review,
financial report, and sustainability report were evaluated. The
final content disclosure score is the weighted sum of scores of all
categories where weights of categories are reported.
Similarly, for each of the 7 guiding principles, a score ranging
from 0 to 3 was assigned (See Figure 1). The criteria of score
assignment were based on the extent to which disclosures follow
the spirit of each guiding principle based on IIRC (2013). The
final guiding principle score is the weighted sum of scores of all
guiding principles with the specific content element. Each guiding
principle is assumed to carry same weight for simplicity.
The scoring criteria are given in Table 2.
Weightage of eight content elements and seven
guiding principles
Weights are applied on each content element and guiding
disclosure to derive each firm’s <IR> score. The weightage
takes into consideration their relative importance. The results are
qualitatively similar when scores are equally weighted.
For the overall content element score, we allocate 80% weight to
content disclosures and 20% to guiding principles accordingly.
The provision of the 20% for guiding principles accounts for
the overall <IR> spirit. The weightage is also in line with the
NUS <IR> Disclosure Guidance (2014) report. We defended
the 80% weightage on disclosure and 20% weightage on
guiding principles on the premise that the presence of a content
disclosure should be assigned the first importance (with higher
weightage) followed by the quality of disclosure (lower weightage).
Therefore, the content element score is derived as the sum of
the content disclosure score and guiding principle score. The
maximum score for <IR> score is 100.
As there is a possibility of overlap and double counting by
incorporating guiding principles into the scoring system and
the bias of subjectivity involved in determining the weights, we
conduct a robustness check by applying varying weights between
content disclosure score and guiding principle score (e.g., 90% vs
10%, 80% vs 20% and 50% vs 50%). We find that our results are
not sensitive to the assignments of varying weights.
Table 2: Scoring Criteria
Score Content Disclosure Guiding Principles
0
Absolute non-disclosure with respect to
the particular category
Fails to meet the spirit of guiding
principles
1
Minimal disclosure within consideration guidelines
(<40%)
Minimal fulfilment of principle spirit
(<40%)
2
Follows a reasonable amount of consideration
guidelines (40-80%)
Follows principle spirit to a reasonable amount
(40-80%)
3
Most or all consideration guidelines are followed
(>80%)
Encompasses all or most of the principle spirit
(>80%)

Multivariate regression analyses were conducted to assess the
value-enhancing effects of adopting the <IR> framework.
We observed that firstly, the correlations of P/B and WACC
with some of the control variables are significant, suggesting
the need to include these control variables in the multi-variate
regressions to mitigate the problem of omitted variables is highly
recommended. Secondly, the correlation between <IR> score
and the rest of the control variables is low, suggesting that multi-
collinearity will not affect the results and further justifying this
approach.
The results of this analysis confirmed the results of the uni-
variate regression analysis for P/B ratio which was found to
be statistically significant at the 85% confidence level with
an adjusted R2
of 38%. In addition, its beta coefficient is also
significantly positive. The same results were found for the
WACC, which yielded an adjusted R2
of 34% and a significantly
negative beta coefficient (-0.0003) at a confidence level of 99%.
The observed increase in R2
illustrates that a substantial amount
of significant causes affecting value have been identified in the
relationship between P/B Ratio / WACC with regard to the <IR>
score by applying the multivariate regressions and including the
control variables mentioned above.
Appendix C:
Multivariate regression results
Figure 8: Regression results
Variable Coefficient Std. Error t-Statistic Prob.
C 1.141534 0.425598 2.682191 0.0077
VW<IR>_SCORE 0.005051 0.003510 1.439081 0.1510
ROA 5.015745 2.080812 2.410475 0.0164
ROE 3.774215 0.930333 4.056841 0.0001
DE -0.005537 0.068779 -0.080503 0.9359
S_GROWTH -0.378051 0.297236 -1.271887 0.2042
LN_SALES -0.010163 0.040310 -0.252109 0.8011
STD -14.06064 8.232514 -1.707940 0.0885
LQ 0.093229 0.054218 1.719503 0.0864
DUM_2010 0.094241 0.194200 0.485279 0.6278
DUM_2011 -0.143262 0.184955 -0.774577 0.4391
DUM_2012 -0.132453 0.193470 -0.684618 0.4940
DUM_2013 0.003748 0.194786 0.019241 0.9847
R-squared 0.403660 Mean dependent var 1.876579
Adjusted R-squared 0.383726 S.D. dependent var 1.359008
S.E. of regression 1.066863 Akaike info criterion 3.001644
Sum squared resid 408.6129 Schwarz criterion 3.138595
Log likelihood -545.3058 Hannan-Quinn criter. 3.056031
F-statistic 20.25044 Durbin-Watson stat 1.023627
Prob(F-statistic) 0.000000
Variable Coefficient Std. Error t-Statistic Prob.
C 0.037624 0.010350 3.635172 0.0003
VW<IR>_SCORE -0.000320 8.80E-05 -3.642099 0.0003
ROA -0.010406 0.032343 -0.321734 0.7478
ROE 0.009109 0.008537 1.066980 0.2867
DE -0.008988 0.001676 -5.363157 0.0000
S_GROWTH -0.001779 0.007137 -0.249228 0.8033
LN_SALES 0.008545 0.001008 8.473801 0.0000
STD 0.611363 0.189509 3.226036 0.0014
LQ 0.002041 0.001243 1.642784 0.1013
DUM_2010 0.009579 0.004734 2.023513 0.0437
DUM_2011 0.001424 0.004577 0.311165 0.7558
DUM_2012 -0.008312 0.004730 -1.757377 0.0797
DUM_2013 -0.008900 0.004686 -1.899296 0.0583
R-squared 0.361139 Mean dependent var 0.098675
Adjusted R-squared 0.340530 S.D. dependent var 0.033192
S.E. of regression 0.026955 Akaike info criterion -4.356138
Sum squared resid 0.270278 Schwarz criterion -4.222652
Log likelihood 851.5566 Hannan-Quinn criter. -4.303197
F-statistic 17.52383 Durbin-Watson stat 0.769432
Prob(F-statistic) 0.000000
P/B: All Firms (40 x 40) [P/B]
Dependent Variable: P/B Ratio
Method: Least Squares Regression
Sample: 1400
Included observations: 372
WACC: All Firms (40 x 40) [WACC]
Dependent Variable: WACC
Method: Least Squares
Sample: 1400
Included observations: 385

The information contained herein is of a general nature and is not intended to address the circumstances of any
particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no
guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in
the future. No one should act upon such information without appropriate professional advice after a thorough
examination of the particular situation. KPMG Services Pte. Ltd and National University of Singapore accept no
responsibility for any loss which may arise from information contained in this publication. No part of this publication
may be reproduced without prior written permission of KPMG Services Pte. Ltd and National University of
Singapore. © December 2015, KPMG Services Pte. Ltd and National University of Singapore. All rights reserved.
Printed in Singapore.
CONTACT DETAILS
IAN HONG
Partner
KPMG in Singapore
KPMG Services Pte Ltd
16 Raffles Quay
#22-00 Hong Leong Building
Singapore 048581
T: +65 6213 3388
E: ihong@kpmg.com.sg
PROF. HO YEW KEE
Department of Accounting
National University of Singapore
Mochtar Riady Building, BIZ 1
15 Kent Ridge Drive
Singapore 119245
E: bizhoyk@nus.edu.sg

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