November Chapter Meeting

11/10/1999 The Annual Process of the Annual Report To help determine what investors need and want in an annual report, and provide guidance on producing a cost effective report for print and web publication, we invited a buy- and sell- side analyst and professionals from top annual report design firms to talk about the issues facing investor relations professionals during each year's annual report process. The program's four-person panel consisted of: John Todd, Research Analyst, C.E. Unterberg, Towbin Stacey Fleece, Head Trader and Equity Analyst, Willow Creek Capital Management Bill Cahan, Founder, Cahan &Associates Nancy Slome, Managing Director, Interactive Media Panel moderator: Bonnie Burdett Dennis, Founder, Value Partners. The following are some highlights from the discussion: Effectiveness of the Annual Report What does the audience really need/get from the annual? Analyst Prospective John: Interested in a full-blown annual that provides more color and style about company. An annual that doesn't match the company sends out negative message. Stacey: Looks for full annual report to get more detail information on company. Designers Prospective Bill: Annual needs to present a strategic message. It is used to educate the audience about the company. Nancy: Important to think about what message the company is trying to send. It some cases 10K wrap or Summary reports send negative message. What content is required (other than fulfilling SEC rules)? John: Full disclosure is the most important thing. Providing information about company's performance during the year and outlook going forward. Look at top line and bottom line growth. Consider the annual to be an introductory document to the company. Stacey: Overall consistency of what is being said orally and written. Look for information on general market condition, and risk factors. How historical (in terms of data) do you need/want - 5 years/10years? John and Stacey both commented that five years of historical data is sufficient. Is there a preference for hard copy or online version? John: The online version allows for timely access to information. It provides the option to manipulate and print various sections of the annual. Typically the hard copy version of the annual is used as a third source. Nancy: Prefer online interactive version of annual report. Feel that it offers more than a straightforward print version. Allows company to insert added hyperlinks throughout the annual that provide detailed information through pop-up windows. Provides printable version as well as having audio files of shareholders meeting. Helping the client What are considerations for in-house vs. external report production? Bill: In some cases in-house is difficult to do. Use of an external firm lends to more objectivity. The external firm can ask questions, read analyst reports and ask challenging questions to get a better feel or understanding of company strategy. There are some companies that have an excellent in-house production, such as Nike. Nancy: External firms can provide a larger perspective on what the year is about. In-house designer tends to have a narrower view of year because they are inside the company. What are considerations for selecting a designer? Bill: Chemistry is key. The work has to be good, smart, memorable. As a designer, he/she should feel comfortable with the company and be able to ask questions of management directly. Nancy: Communication is a must. It is not necessary for designer to know company's particular industry. Designers can become knowledgeable quickly. What is the best method for developing a budget and timeline? Nancy: She's noticing that more money is being earmarked for annuals. The annual serves as a marketing tool as well as a way for individuals to judge the company. Bill: Haven't really seen a change in budgets. Agrees that annual is a marketing tool and when producing the annual, it is important to think out-of-the-box to get more value out of final product. What is the best way to manage a designer? Bill: Start with a questionnaire, remembering that no question is a stupid question. Walk through the process and communicate every step of the way. It's the designer's job to explain the process because every firm is different. Various decisions need to be made, such as will there be an account director, and whether there will be one or several designers on project. Best and Worst Annuals John: Cisco has an excellent annual, easy to read and to access information. Nancy: MCI had innovative idea last year. Provided a calculated tape of the savings in the annual production. Sun Microsystems had a newspaper as annual report with sticker stating "we are saving money". Audience member: Seagate took out two-page ad with a consolidated annual report with web address to detailed report in New York Times or Wall Street Journal. Stacey: When taking a risk like this it is important to do it well. Annual Report Survey The following independent annual report survey was conducted by Turner & Associates, an annual report design firm located in San Francisco. Summary: 766 respondents (individual investors, investment bankers, portfolio managers, buyside and sell-side analysts, employees, senior managers and media) participated in the Turner Investor Survey, ending on October 24, 1999. Results covered topics such as what criteria investors use in making investment decisions, how they follow industry trends and their preferences for corporate communications, such as annual reports and web-based information. Annual Report. The annual report proved to be the single most desired document that companies produce. Investors who responded would like companies to provide the following information and that the information be more accessible: 18.6%  Annual report 15.9%  Quarterly results 14.7%  Complete IR section of the company web site 14.5%  Downloadable spreadsheets 13.3%  Factbook with updates 11.2%  Press releases  9.1%   Analyst reports All investors indicated that the following things can frustrate them when they read annual reports: 62.9%  It isn't clear what the company does and how it might be a solid investment. 56.6%  Management isn't direct or honest about anything that might be perceived as negative. 48.2%  The writing is in "corporate speak" and it is clear that they want to confuse me. 42.0%  Companies don't go into enough detail about how they make money. 35.7%  Customer lists or testimonials are used without quantifying why they are meaningful. For more results related to how investment decisions are made, and the way that investors use the web, feel free to contact steve@turnersf.com. [ Top of Page  |  Return to Past Program Highlights ]