The new work of the annual report: is the annual report still vital to investor communications? Yes, but it needs some attention.

• Author: Segal, Leslie
• Position: Guest Column - Brief Article

AS THE FRENZIED 2001 annual report season comes to a close, a new one begins. But unlike years past, this one will be different.

The Enron debacle has highlighted a need to provide shareholders with simple, easy-to-understand information about a company's operations, its health, and its prospects for sustainable growth. As a result, the annual report is becoming a strategically oriented, forward-looking document that is written in plain English, as opposed to its historical role as a financial retrospective. Many companies are underscoring this change using pull quotes and bold descriptive subheads by the CEO and other leading company executives.

General Electric, a company leading this new trend, has gotten plaudits for adding unprecedented details about its operating segments in its 2001 report. It is worth noting that, this year, GE added personality to its results by including 18 first-person Stories about the year's strategic triumphs.

At the other extreme, some companies, citing shareholder requests, are producing reports that are shorter and easier to read. While brevity may well add to the book's effectiveness, it should contain enough financial information to warrant certification by accountants. The numbers give perspective to the editorial material and are a reason for the report's traditional credibility. A good deal of financial information can be put into a few intelligently planned pages. This has been done well by BellSouth, PPL Corp., and Sotheby's Holdings. Some companies call this abbreviated version a summary annual report."

Companies attempting simple, straightforward investor communications should adapt their best annual report to the most efficient format possible. BellSouth did this successfully. Companies with an abbreviated report should consider changing the name to "Outlook Report," dating it the same year in which it is published. Those individuals looking for more complete, detailed information can go to the company's Web site or consult the SEC's EDGAR files (where most sophisticated investors will already have gathered their information).

Many companies already provide real-time financial information using an investor relations-focused Web site. These sites complement and expand upon the information contained in the printed report. GE's interactive report, for example, provides video about its new TM2500 Power Plant on Wheels, along with additional employee stories, providing stakeholders with both choice and...