How to Make the Annual Report Compelling Again

Once upon a time, the annual report was the centerpiece of a company’s investor communications efforts. It was the single most important document produced by the investor relations department all year and consumed massive amounts of resources. As technology evolved and investors got more access to real-time data, the annual report began to feel irrelevant, as it seemed stale by the time the document got into the hands of investors. With the annual report becoming less important, many companies fell into the routine of producing the same format and content year-after-year, which only served to make the document even less compelling to its readers.

Then to save money and time, companies turned to 10-K wraps this past decade, especially smaller public companies. But again, this four-to-six page document that was meant to better serve investors has fallen into the same trap as the annual report did.

And that’s a missed opportunity – given that buyside investors rely heavily on the annual report to make investing choices, according to a 2013 Rivel Research survey.

Both the 10-K wrap and annual report can still be important communication tools, but companies have to think about it differently. They have to be innovative and present information in a way that’s different and more interesting than they have in the past.

Here are a couple of our favorite examples of companies that added a new and interesting element to their annual report:

  • In its first year as a public company, Two Harbors Investment Corp. included an informative Q&A piece about the state of the mortgage market with its co-chief investment officers in its 10-K wrap.
  • Agnico-Eagle Mines showcased a piece written by Tocqueville Asset Management on the bull case for owning gold-miner stocks. In other words, they had an outside party make the case for why their stock would be an ideal investment.
  • PotashCorp recreated sections of its annual report online, using the Web to provide colorful charts, maps and graphs to give a simple yet detailed overview of the company’s operations. This let the reader pick and choose what the information they want.

When thinking about your next annual report or 10-K wrap, keep these tips in mind:

  • Have a clear idea of your target audience. Is it only investors or will the report be used as a tool for communicating with customers and employees as well?
  • Get to the point fast. Assume that most people will only spend 10 minutes on the annual report and find a way to get your messages across quickly.
  • Avoid industry jargon. Speak in plain language to make it easy for an investor to understand the business.
  • Don’t use stock photographs. Liven it up with real pictures of employees and customers.
  • Keep it simple. The less clutter the better. Print what is materially important.
  • Non-financial measures are important, too. What has your company done for the community or the environment?
  • If your company is newly public, consider how the first report can set the tone for long-term vision and accountability. Make sure shareholders feel that management’s interests are closely aligned with their own.

Beyond the printed document, there are other ways to liven up an annual report in this new information age.

Video is a way to grab investors’ attention as the Web and mobile devices are changing how people consume content. Video is increasingly being watched by high-level executives and stock-research analysts, based on separate studies by IR Magazine and Forbes Insight.

What are the benefits? Video can help investors size up leadership in a more personal way, enabling a company’s executive team to build more credibility. A CEO could discuss yearly performance or future strategy. As a companion to its 2012 annual report, Stanley Black & Decker produced year-in-review videos on emerging markets, while private-equity firm Carlyle Group shot a more than two-minute YouTube short discussing the year’s accomplishments.

Additionally, the Web can help freshen up the annual report. Done the right way, an online report affords a company the opportunity to make it a personal experience for the reader.

Some things to consider:

  • Incorporate clear, easy-to-use navigation.
  • Utilize interactive charts and graphs.
  • Include a video introduction from the CEO or top executive.
  • Provide a podcast of the Chairman or CEO’s letter to shareholders.
  • Include external links to relevant corporate data.

Annual reports don’t have to be dry, boring documents. They offer investor relations personnel the opportunity to be innovative. To be creative. To be different. Who’s up for the challenge this year?