A more effective annual report.

• Author: Doyle, Christopher
• Position: Last Word - Brief Article

Follow these three rules and you can't go wrong.

* Know your audience.

* Strive for clarity--in writing as well as photography.

* Make it a comprehensive business report rather than a strictly financial report.

KNOW YOUR AUDIENCE

Investors are your primary audience, not customers, not employees. Structuring your annual report to serve more than one audience dilutes your message. It's awkward to talk about profits in a report that seeks to make customers feel good about buying your products. And it's difficult to mention cost controls without making your employees worry about job security and salary increases.

Your primary audience is made up of 45- to 70-year-old individuals. Beam your message toward them (the institutional analysts already tap many other sources of information about your company). If your stock is actively traded, you can assume that about one-third of your shareholders are newcomers. They generally know only what you tell them in your report plus what stockbrokers and your press releases tell them. Your job is to make them feel comfortable owning your stock. You do this by educating them about your company. If investors feel they really understand your company, they will stick with you through thick and thin.

STRIVE FOR CLARITY

Write short sentences that get straight to the point. Tell investors exactly what you make. Many annual reports strike out on this point simply because corporate insiders assume investors already know what a company does, which is a big mistake. Studies show that less than half the shareholders of a publicly held company have even a rudimentary understanding of what that company does, much less its prospects.

Keep your writing simple. Remember, this is a communications piece to shareholders, not a registration statement or a 10-K. If you make widgets, just say you "make widgets." Don't bore stockholders by saying you "design, engineer, manufacture, extrude, apply a clearcoat finish on specially prepared ion negative substrates, market and distribute 8- to 14-inch widgets through 297 toy distributors in the U.S. and 87 abroad, chiefly in the Far East." It's overkill. Shareholders simply want to know what your widget does and why you think...