Note: In the context of the Special Committee's work, forward looking information includes both financial and nonfinancial information. The first leading view stated below applies to both types of forward looking information. However, the rest of this section applies only to financial forward looking information (loosely termed by users as financial projections or forecasts). Views on nonfinancial forward looking information are covered in section 13 on nonfinancial business information. Section 12 should therefore be read in conjunction with section 13 to gain a comprehensive understanding of users' needs related to forward looking information.

Leading view

Users consider forward looking information an important part of their analysis.

* Forward looking information is used to assess:

* Variability of the operation [p. 1]

* Debt service capability [p. 1]

* Additional borrowing needs [p. 1, 9]

* Management's goals, expectations, and strategies [p. 1-4, 6-8]

* Future revenues [p. 6]

* Users would welcome additional forward looking information in external financial reports, including:

* Qualitative rather than quantitative information: broad business objectives, prospects in terms of goals for return on assets, equity, and capitalization ratio [p. 8-9]

* Only some key indicators (for example, projections on revenues and new products, capex spending, and backlog information) as opposed to full forecasted financial statements [p. 6, 11].

Users do not seek management's projections or forecasts.

* Users do not seek management's forecasts or projections because:

* They are fundamentally unreliable [p. 1-3, 5, 8-9, 12-13], inherently imprecise [p. 8, 9, 12- 13], and overly optimistic [p. 2, 5, 7, 9, 13]

* They encourage management to manage earnings toward previously published projections [p. 9]

* They subject the company to additional litigation risk [p. 3, 9-10]

* Access to management's projections may represent a restriction on the investors' or creditors' future activities due to the potential for receiving insider information on public securities [p. 10].

Users prefer to make their own projections and forecasts.

* Analysts view making projections part of their jobs [p. 4-5, 9, 12]

* Analysts have a broader view of the industry than management which allows consideration of competitive pressures on projected operations [p. 4, 7]

* Analysis through development of an independent projection provides better insight into a company [p. 5, 7]

* Analysts can make alternative projections, such as "worst case" scenarios, as part of their own projections [p. 1, 9, 11].

Users do not believe auditor association with projections or forecasts to be beneficial.

* Auditor association would encumber or dampen management's degree of candor in disclosures [p. 4]

* Auditors lack the broad, industry perspective needed to express an "opinion" on a projection or forecast [p. 4]

* Auditor association with financial information should focus on "clarity", not interpretation [p. 5- 6]

* Auditor evaluations of future-oriented estimates would not be used in lieu of the analysts' own estimates [p. 5, 9, 12]

* Auditor association with projections or forecasts threatens auditor objectivity on subsequent reporting of actual financial results [p. 6, 12].

Alternative view

Some users, particularly lenders to small, private companies, seek to obtain management's projections or forecasts.

* Management's own view of the future is relevant to the lender [p. 1, 4, 7, 9-10]

* The discipline imposed on management to produce a projection or forecast is useful for both the borrower and lender [p. 8-10]

* It is useful to compare management's previous projections or forecasts to subsequent reports of actual results [p. 7, 11].

Some users who obtain management's projections or forecasts would welcome auditor association.

* Involvement of the auditor is a means of testing the reasonableness of assumptions [p. 1, 8].