Company annual reports are often now beautifully-produced glossy
documents which contain a vast amount of information about the company
and its activities, as well as the required financial data. But even as
the printed annual report becomes an ever-more useful source, companies
are increasingly turning to the internet to add value to their reports
’The internet is very flexible,’ says Curtis Fox, director of investor
relations at Edelman. ’You can easily make historical comparisons on a
company’s performance, as well as flicking back to competitors’ annual
reports, without having three or four documents piling up on a
It is becoming common practice for most UK listed companies to put their
annual report and results on to the web. According to Sheila Lalani,
marketing director at CGI, 56 FTSE 100 companies had a web site in 1997,
with just 25 of them posting their annual report on-line. By 1999, all
FTSE 100 companies had a web site, with more than half posting their
annual report on-line.
As the law stands, companies are required to provide their shareholders
with a summary financial statement or a full annual report and accounts
21 days before an AGM. This requirement covers the printed version only,
but as the CGI research shows, many leading companies simultaneously
post their results on-line. Furthermore, this information is available
to anyone, since it has already been released into the public
According to Guy Lane, director of College Hill, companies benefit from
this arrangement as communication with the public is enhanced. ’Most
organisations now accept that the internet is a medium for information
and communication,’ he says. ’It is widely recognised that any corporate
reputation strategy should encompass the internet.’
Presenting information on-line is cost-effective compared to printing
and mailing. It can also be easily updated, and gives added value to
shareholders by providing a level of interactivity lacking in the
Annual reports and accounts can be presented as either PDF (Portable
Document Format) files or full HTML web page files. The PDF version is
the less sophisticated of the two, consisting of little more than an
on-line facsimile of the hard copy company report. The HTML file is the
more creative option, allowing for site navigation, interactivity and
design which can be used to reflect the company’s brand values, and can
include hot links to other relevant web sites. The role of PR agencies
and design consultancies is to help the client decide which version best
suits their needs.
Chris North, design director at Fishburn Hedges, is working on a HTML
version of Centrica’s annual report with hot links to parent company
British Gas. North adds that this format allows designers to cut back on
excessive colour in order to speed up download time.
’It is important to remember that on-line reporting is a targeted
communication,’ he says, ’An on-line company report isn’t the place for
’flash’, after all, it’s not a pop magazine. However, there is a place
for video drop-ins, for example, an interview with the chairman.’
Although the design and presentation of on-line annual report and
accounts may differ from the hard copy, there are no legal implications
as long as there is consistency of information between the two.
Similarly, embargoes are not an issue, since on-line company reports are
posted at the same time as hard copies are sent out to shareholders.
The consensus of opinion is that on-line reporting is creating a fairer
system for private shareholders in particular. At the moment, companies
forward a preliminary announcement on the morning their results are
announced, as well as posting the announcement on the internet.
Simultaneous briefings are held with institutional shareholders,
enabling them to steal a lead on the private investor, who is unlikely
to see the results until the financial press appears the following day.
North of Fishburn Hedges believes the use of the internet to post
financial results is creating ’a level playing field for the private
investor’, since those with internet capability can access the
preliminary announcement on the same day as the institutional
shareholders are briefed.
The ’mad rush’ for internet shares, driven by dot.com ventures, has led
Bamber Forsyth principal, Philip Mann, to conclude that the internet is
poised to play an even bigger role in the lives of private
’Other factors include the single currency, low interest rates, and the
greater availability of on-line brokers, including Barclays and Charles
Schwab,’ he says. ’It will all make trading on-line easier for the
So has the internet sounded the death knell for the printed annual
Not according to World Investor Link, which markets public companies to
private shareholders. Last October, the company conducted a survey among
private investors. After establishing the importance of the annual
report to buying shares -74 per cent of respondents purchased shares
after reading a report - it found that 67 per cent of respondents
preferred hard copy versions to electronic versions. Respondents
typically said hard copy versions were easier to read, transportable and
could be read at leisure.
’I don’t think that the internet is going to replace hard copy annual
reports,’ says Lane of College Hill. ’Private investors are not going to
wait for 72 pages to download from the internet, it would be far too
expensive and time consuming. And the law still requires hard copies of
annual reports and accounts to be published.’
This may change if the London Stock Exchange alters the reporting
regulations when the Government’s e-commerce bill becomes law next year.
But few believe companies will be allowed to only post a full annual
report and accounts on the internet, since everyone must have access to
this information. North at Fishburn Hedges believes any changes in the
law will mirror the situation in the 1980s when summary financial
statements were first introduced, following a wave of privatisations.
Before this, organisations were required by law to put a full annual
report and accounts into shareholders’ hands.
The exercise was as unnecessary as it was costly. The majority of
private shareholders were unable to understand the detailed financial
information and printing and postage costs were phenomenal. Following a
change in the law, organisations were able to send out the simplified
summary financial statements, along with return cards to request a full
North says: ’It is my belief that following the introduction of the
e-commerce bill, organisations should be allowed to roll their
preliminary announcements and summary financial statements into one
document to be sent out on the day the results are announced.
Shareholders will be informed that the full version of the annual report
and accounts are available to them on the internet. This will make the
whole process more timely and efficient.’
While the internet has made information more accessible, the quality of
information available may also be improved following changes to the UK’s
antiquated company law. Under recently-published Government proposals,
directors may be required to report on social and environmental issues
as part of a drive for greater transparency, including publishing annual
results first on company web sites. Companies may also be obliged to
publish an operating and financial review (OFR) as part of their annual
reports, including broad non-financial issues, unless directors deem
them to be irrelevant.
Rob Cameron, chairman of design and communications agency Flag, says the
company is flooded with enquiries about producing annual reports on line
for clients. He welcomes the Government’s proposals, and believes there
should be more up-to-date financial information on company web
’The drivers of change are varied, ranging from legislation to
competitive pressure, but are all pointing to increased information,
available more quickly and in the right way for different
He believes social and financial reporting will eventually be merged
into one, since damage to company’s reputation through, for example, an
environmental mishap, directly affects the bottom line.
’You can no longer say that financial information is only of interest to
the City and that environmental issues are only of interest to NGOs,’ he
But for on-line reporting to really take off in this country, the level
of access to the internet must be on a par with that in the US. ’Lots of
people thought the internet was going to change their lives, but
realistically this will not happen until the quality of access to the
internet is improved,’ says Mann.
But in the short-term at least, hard copy and on-line annual reports and
accounts will happily co-exist.
’Cinema was not phased out with the advent of television. The internet
is like new paper, it can exist alongside old paper,’ says Mann.
And no matter how overwhelming the benefits of on-line reporting,
ultimately, it will be the shareholder’s decision how they want to
receive company information.
TREADING CAREFULLY IN THE LAND OF LITIGATION
The internet is having an impact on the way the US companies present
their financial figures. A new report issued by the National Investor
Relations Institute in the US points to a dramatic increase in the
number of companies with on-line annual reports: 76 per cent of those
surveyed, up from 31 per cent in 1996.
But the US trend for ’open-lipped’ informality does not extend to the
presentation of company reports and accounts which are scrutinised to an
even greater degree than their UK equivalents before they are released
into the public domain.
’The US is a much more litigious place than the UK,’ says Chris North,
design director at Fishburn Hedges. ’It is not unknown for disgruntled
shareholders to sue a company for misrepresentation. A key difference
between the two countries is that the US process requires much more
A second, more obvious difference is that UK listed companies are
required to release half-yearly and annual results. In the US, the
Securities and Exchange Commission (SEC), the body which governs
reporting procedures, obliges companies to release quarterly results, as
well as annual results.
According to Paul Owen, director at College Hill, this makes reporting
in the US very complex. ’It is much more onerous process since US
companies are required to give greater levels of financial
This greater level of information is a boon for company watchers on the
other side of the Atlantic. ’The main US reporting document is the Form
20-F, filed with the SEC,’ explains North. ’Many UK analysts like to get
copies of the 20-F as it discloses more than a plain UK annual
For example, US reporting requires detailed descriptions of the
business, much fuller discussion of risk factors, such as political,
financial and environmental implications, plus carefully worded ’forward
The US report is a much duller proposition than its UK sister. ’They
tend to have much less of a ’corporate brochure’ feel to them,’ says
’Some 20-Fs are produced in single colour or black only.’
’We work for BG, the Transco pipeline and international gas business,
producing one document, called the annual report, but incorporating all
the 20-F requirements, such as three year, rather than two year
financial comparisons. This makes for a very long book of 112 pages with
a US slant on the language and content.’
The agency also works for Corus, formerly British Steel, for which it
produces a ’half and half’ - a UK Annual Report which gives three year
comparatives, but does not incorporate all the SEC requirements. It is
sent to UK shareholders. For US shareholders, a further 20 pages of 20-F
material is added and bound onto the UK document, giving it a new cover.