FOCUS - ANNUAL REPORTS: Instant results - On-line annual reports are streamlining the information process for shareholders and private investors, but it needn’t sound the death knell for traditional hard copy. By Stephanie France

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 and accounts.

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

and accounts.

’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

printed form.

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 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

private shareholder.’

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

annual report.

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.


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

looking’ statements.

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.

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