1. Held in partnership with Creating Connections

2. Held in partnership with Creating Connections This document has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this document without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this document, and, to the extent permitted by law, PwC, IIRC or their licensors do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this document or for any decision based on it. Copyright 2014. All rights reserved. Permission is granted to make copies of these slides, provided that all logos, disclaimers, copyright notices and acknowledgements on the slides are retained, and each copy bears the following credit line: "Copyright 2014. All rights reserved. Used with permission of the IIRC and PwC.“ In this document, PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details. IIRC refers to the International Integrated Reporting Council. Acknowledgements of third party source materials are contained on the relevant slides.

3. Held in partnership with Creating Connections Developing good reporting – what do investors expect? Hilary Eastman Head of Global Investor Engagement, PwC

4. Held in partnership with Creating Connections Overview  Introductions  What is the typical path of a company as they move towards ?  What are the market related impacts of the move towards ?  Panel discussion – what are the benefits of companies moving towards, to themselves, their analysts and investors?

5. Held in partnership with Creating Connections What is the typical path of a company as they move towards ? Erik Roelofsen Professor of International Financial Reporting and Capital Market Communication, Rotterdam School of Management, Erasmus University

6. Held in partnership with Creating Connections The 4 major cohorts Based on our analysis of PwC benchmarking data for the FTSE100 over a 5 year period, 4 main cohorts of reporters emerged Minimalists Sustainability reporters AugmentersLeaders

7. Held in partnership with Creating Connections Minimalists Attract a lower analyst following Characteristics: Reporting quality is low on all disclosure dimensions Particularly poor on KPIs Tend to focus on financial reporting Often relatively smaller firms

8. Held in partnership with Creating Connections Sustainability reporters Higher analyst following than minimalists Attracting mainstream and specialist sustainability analysts Characteristics: Do well in sustainability and risk reporting Somewhat behind in most other areas Large firms

9. Held in partnership with Creating Connections Augmenters Slightly higher analyst following than minimalists But lower than sustainability reporters Characteristics: Reporting quality is high in all dimensions Tend to be somewhat behind on sustainability More focus on strategy and financials than sustainability reporters Tend to be large firms

10. Held in partnership with Creating Connections Leaders Attract the highest analyst following Characteristics: Very high scores on all dimensions of reporting Very strong on KPIs in particular Largest firms Only 4% of annual reports in this category (of the FTSE100 across the 3 year period)

11. Held in partnership with Creating Connections How do companies typically develop over time? Minimalist Augmenters Sustainable Leader 72% 7% 20% 1% 28% 58% 11% 3% 15% 42% 46% 29% 14% 18% 36%

12. Held in partnership with Creating Connections What are the market-related impacts of the move towards ? Jennifer Sisson Investor Engagement, PwC

13. Held in partnership with Creating Connections Voluntary non-financial disclosure and the cost of equity capital Dhaliwal et al, 2011  Based on firms initiating CSR disclosures from 1991 - 2007  Firms initiating CSR disclosures attract dedicated institutional investors and analyst coverage if they have superior social responsibility performance  Moreover, these analysts achieve lower absolute forecast errors and dispersion

14. Held in partnership with Creating Connections Haggard et al, 2008  Based on a study of firms voluntary disclosures from 1982 – 1995, looking at 2,084 ‘firm year observations’  Includes annual reports, quarterly reports and investor relations disclosures  The more effective a firm’s disclosure policy, the lower the cost of firm specific information to investors  This leads to more firm specific information being reflected in stock prices  Expanded voluntary disclosure effectively reduces stock price co-movement which is not driven by fundamental factors and reduces the incidence of stock price crashes Enhanced voluntary disclosure reduces stock price co-movement

15. Held in partnership with Creating Connections PwC’s Investment Professionals survey 2014

16. Held in partnership with Creating Connections My perception of the quality of a company’s reporting impacts my perception of the quality of its management A) 50% B) 80% C) 90% “We take a dim view of companies that report badly. It tends to be poorly governed companies that report badly, so we will be more sceptical when it comes to a capital raising or debt issuance… Companies that report better are more likely to get long term investment.” % includes all respondents who ‘agreed’ or ‘strongly agreed’ with the above statement 80%

17. Held in partnership with Creating Connections When companies present information clearly and concisely, I feel more confident in my analysis A) 45% B) 67% C) 82% “A long and rambling report can suggest a lack of management focus… Good reporting in my view shows management have good attention to detail.” % includes all respondents who ‘agreed’ or ‘strongly agreed’ with the above statement 82%

18. Held in partnership with Creating Connections A) 75% B) 87% C) 91% “If a company is stable and I am planning to hold the shares long term, then I wait for the annual report, rather than focus on the preliminary earnings announcement, as the annual report has more of a long-term perspective.” I typically review the Annual Report/10K/20F of companies that I follow % includes all respondents who ‘agreed’ or ‘strongly agreed’ with the above statement 91%

19. Held in partnership with Creating Connections Disclosures in an annual report about strategy, risks and opportunities and other value drivers can have a direct impact on a company’s cost of capital A) 35% B) 63% C) 72% “They [disclosures in an annual report about strategy, risks and opportunities and other value drivers] are important because they impact your view of management, and that impacts your decisions on whether or not you might invest… It can also impact any kind of risk premium that you want to apply, when you are thinking about long term cash generation.” 63%

20. Held in partnership with Creating Connections Panel discussion: what are the benefits of companies moving towards, for their analysts and investors? Hilary Eastman PwC Investor Engagement Martijn Bos Policy advisor reporting & audit Eumedion Rui Mota Guedes Head of European Equity Strategy MainFirst Bank AG Marietta Miemietz Co-founder and Director of Pharmaceutical Advisory Primavenue

21. Held in partnership with Creating Connections