The annual report is the most important document a company publishes at the end of a fiscal year. In addition to the complete financial report that public companies are required by law to file with the SEC, a glossy editorial piece is presented to the shareholders and potential investors. This piece sums up the numbers and includes narratives about the company’s performance over the past year.
Corporate annual reports follow a fairly standard format. Most annual reports will contain the following sections:
Letter from the CEO or chairperson to the shareholders
This section is short, two to three pages. In plain, conversational language, it summarizes the company’s achievements over the past year as well its setbacks. It also address trends in the industry and wraps up with a positive vision for the future.
This section is usually subdivided by division or market segment, with descriptions of goals, accomplishments, initiatives, acquisitions, restructuring, market strategies, and other important business.
The financial statements provide a summary of the company’s financial position. (This is not the comprehensive financial statements filed with the SEC.) A narrative introduction should explain what the tables and figures ultimately mean for the shareholders.
Other sections can include the following:
- Financial highlights
- Auditor’s statement
- Management analysis
- Biographies of the company’s officers and directors