25 mars 2003Jacques Saint-Pierre1 To help companies identify and communicate information about the key business activities and assets that drive shareholder value.

25 mars 2003Jacques Saint-Pierre2 Benefits of better disclosure A PricewaterhouseCoopers global survey asked institutional investors and analysts what they see as the five most important benefits of better disclosure. 1.increased management credibility 2.more long-term investors 3.greater analyst following 4.improved access to new capital 5.higher share values.

25 mars 2003Jacques Saint-Pierre3 Value Reporting Disclosure Model (VRDM) What information should a company report? The VRDM is composed of Four interrelated elements (together they provide a comprehensive picture of a company’s plans & performance) : A.Market Overview B.Value Strategy C.Managing for Value D.Value Platform

25 mars 2003Jacques Saint-Pierre4 (A) Market Overview (1/2) Management’s take on the company ’s competitive position and external environment. Discussion of industry dynamics, current and anticipated regulations, and competitive conditions helps readers better understand the environment in which a company operates and gives readers an objective context in which to judge management’s strategies to create financial value.

25 mars 2003Jacques Saint-Pierre5 (A) Market Overview (2/2) Including: Competitive Environment Regulatory Environment Macro Economic Environment

25 mars 2003Jacques Saint-Pierre6 (B) Value Strategy An explanation of the company’s strategy, including how it intends to create value. A statement of objectives helps readers understand and focus on management’s key concerns. To accomplish this, management needs to articulate its growth strategy — spell out what the company is striving to be, explain the steps being taken to achieve the objectives, and clarify how these steps will create value for shareholders.

25 mars 2003Jacques Saint-Pierre7 (C) Managing for Value (1/2) Actions taken to execute strategy & deliver on promises. A summary of the company’s performance targets and an assessment of how it’s meeting them : Financial PerformanceFinancial Performance Financial PositionFinancial Position Risk managementRisk management SegmentalSegmental

25 mars 2003Jacques Saint-Pierre8 (C) Managing for Value (2/2) Benchmarking Companies in the same industry: peer group Direct competitors Peer group with similar market capitalization Peer geographical group

25 mars 2003Jacques Saint-Pierre9 (D) Value Platform (1/4) value drivers Composed of six key value drivers that must be actively managed to optimize shareholder value. While the elements of the “Value Platform” may be difficult to quantify in financial terms, they are critical to long-term shareholder value growth.

25 mars 2003Jacques Saint-Pierre10 (D) Value Platform (2/4) Six key value drivers 1.Innovation 2.Brands 3.Customers 4.Supply Chain Efficiency 5.People 6.Reputation (Social, Environmental, Ethical)

25 mars 2003Jacques Saint-Pierre11 (C) Value Platform (3/4) value drivers Research has shown that managers place high importance on these six value drivers but that they have generally not been discussed in corporate communications to the market. Including such a discussion does not require disclosure of all internal company targets, only the most important ones that will help investors assess future performance.

25 mars 2003Jacques Saint-Pierre12 (D) Value Platform (4/4) Quantifiable targets for the “Value Platform’s” six elements should be offered initially and performance should always be discussed in terms of these targets to indicate how much progress has been made.

25 mars 2003Jacques Saint-Pierre13 Importance of Cash Flow Information to Investors Maintenance, development and closure expenditure

25 mars 2003Jacques Saint-Pierre14 Maintenance, Development and Closure Expenditure The current cash flow statement categorizes cash flows among operating, financing and investing activities. The new Value Analysis Statement as proposed by PwC for example could make use of a different classification: Maintenance, Development and Closure Maintenance, Development and Closure. These classifications enable management to communicate to investors the key activities of the business as they relate to the company’s position – Current (Maintenance) Future (Development), and Past (Closure).

25 mars 2003Jacques Saint-Pierre15 Maintenance, Development and Closure Expenditure They also serve to relate cash inflows and outflows to specific types of activities: 1.the first category encompasses cash-flows related to maintaining value (that is, recurring operations) 2.the second category includes those intended to enhance future value (research and development expenditures, brand and new product marketing, education and training,customer care); and 3.the third category comprises costs incurred in exiting an activity, typically as part of a review of the portfolio of businesses being managed (severance costs, plant closure costs and the like).

25 mars 2003Jacques Saint-Pierre16 Bibliography PriceWaterhouseCoopers ValueReporting  web site. Robert H. Hertz, Reinventing Performance Measurement, Management, and Reporting, PriceWaterhouseCoopers, September 2000.PriceWaterhouseCoopers A Face-Lift for a Tired Model,Towards ValueReporting , PriceWaterhouseCoopers, R.G.Eccles, R.H.Hertz, E.M.Keegan, D.M.H.Phillips, The Value Reporting Revolution:Moving Beyond the Earnings Game, John Wiley & Sons, Report on Continuous Disclosure, Reform Committee on continuous disclosure, Commission des valeurs mobilìères du Québec, March 1986, Jacques Saint-Pierre, Chairman of the Committee.