Is innovative communication techniques needed in the annual report ? Agreeing Side Casey Lau Gloria...

Is innovative communication techniques

needed in the annual report ?

Agreeing SideCasey Lau

Gloria Ho

Hayley Cheng

Hon Pok Man

Agenda

Definition of Communication Technique

Objectives of Annual Report

Communication Problems

Recommendations

Summary

Conclusion

Definition of Communication Technique

Definition of Communication Technique

Format e.g. tables, charts, graphics

Layout e.g. comparative figure, 5-year-summary

Presentation skill e.g. grouping, high-lighting trends, summarizing, selection of content, creative visual effects.

Objectives of Annual Report

Objectives of Annual Report

Around the world, publicly traded companies publish annual financial reports in order to:

Inform and communicate objectively with shareholders, institutional investors, corporate bankers, and other potential investors about their performance, andFulfill the requirements of listing rules, and Promote their public image and allow the public to know more about them.

Objectives of Annual Report

HKSSAP 2:

“The primary objective of financial statements is to provide information that is useful to users for the purpose of assessing the financial position at a particular point in time and the performance and cash flows of an enterprise during a specified period of time and the stewardship of management during that period.”

Current Communication Problems in theAnnual Report

Information Overload

Dr. Meyer, professor of University of Flensbury

Information Overload sender provides more information than investors & readers are able to process

Information Overload

Quantitative Information Overload Size & number of information contained in annual

report waste of time

Qualitative Information Overload Complexity (e.g. use of jargons) & repetition (e.g.

Director’s Report, Segmental on hand Operations Review) of information in annual report hard to understand

Readability Problem

Findings (e.g. by Smith, Gibson, Schroeder) have consistently revealed that the annual reports are generally:At a reading ease level of difficult to very

difficult e.g. use jargonsBeyond the fluent comprehension skills of

about 90% of the adult population and 40% of the investor population.

Misunderstanding and wrong decision

Language BarrierAnnual reports are usually in English In Hong Kong, English is the second language

Use of jargons

Even though some annual reports are bilingual, since the education level of the majority of the public is not that high cause barrier to understanding.

[According to Govt’ stats, only 13% of the Hong Kong people have received tertiary education.]

Recommendations& Benefits

Recommendations2 main changes :(1) From a prospectus only

A package of : (A) Prospectus + (B) CD-Roms

(2) From scanned AR on the Internet Web-based Annual Report

New content component

New presentation technique :From narrative to visual

a tool to enhance Annual Reports’ understandability

Recommendations for CD-Rom

(A) CONTENT : From narrative disclosure of non- financial info. to visual & audio e.g. notice of AGM, directors’ report,

auditors’ report, etc.

** low reading ease, but a better predictor than financial Info.

video + power-point

Recommendations for CD-Rom

Sample of visual aids

Directors’ Report

Employees

Directors’ Bibliography

Directors’ Interest in Contract

NextPrevious

(A) CONTENT

(2) Voluntary disclosure : from prospectus to CD-Rom

Recommendations for CD-Rom

Recommendations for CD-Rom

(A) CONTENT

(3) Provides links as references

e.g. financial analyst website,

accounting-related references,

auditors’ information

hyperlink attached

(B) PRESENTATION TECHNIQUE

(1) Graphical presentation :

e.g. 5-year financial summary &

highlight

presented by animated

graphics, tables & charts in

colour

Recommendations for CD-Rom

Recommendations for CD-Rom

(1) Graphical presentation (con’t) :

Example

Benefits of CD-Rom

(1) Video + power-point : more understandable

listening VS reading

selective reading point-form & simple & shorter words

easier to absorb & more interesting within fluent comprehension

(2) Voluntary disclosure : Selective reading Less information overload in prospectus

(3) Links : As a supplementary aiding device

Benefits of CD-Rom

Benefits of CD-Rom

(4) Graphical presentation : solve language barrier problem

technical languages & terms assist unsophisticated users

comparative trend & figures displayed

summarize information focus comprehensive overview show big picture

(4) Graphical presentation : reading time more interesting cause animated &

visualized colour help highlight & reinforce

seize attention

Benefits of CD-Rom

Recommendations for AR

Remain what we have now;

having no big change, with jargon termsComply with mandatory requirements and

professional

+ a summary financial statement

- voluntary disclosure CD-Rom

Summary Financial Information Condensed Consolidated Statement of Earnings Condensed Consolidated Balance Sheet Condensed Consolidated Statement of Cash Flow

s Notes to Condensed Consolidated Financial State

ments Report of Independent Auditors and Accountants Selected Financial Data

In millions, except per share amounts 2000 1999 1998 1997 1996

Net revenue $48,782 $42,370 $39,419 $33,465 $31,613

Earnings from operations 3,889 3,688 3,399 3,405 2,926

Net earnings from continuingoperations

3,561 3,104 2,678 2,515 2,085

Net earnings per share, continuingoperations

Basic $1.80 $1.54 $1.29 $1.23 $1.02

Diluted 1.73 1.49 1.26 1.19 .99

Cash dividends declared pershare

.32 .32 .30 .26 .22

At year-end:

Assets-Continuing operations $34,009 $31,764 $28,624 $26,681 $22,934

Assets-Total 34,009 35,296 31,708 29,852 25,977

Long-term debt 3,402 1,764 2,063 3,158 2,579

Selected Financial Data

Benefits of AR

People feel more comfortable if there still a book hold on hand

Recommendations for web-based AR

Clear presentation of figures instead of copies of scanned AR Music, picturesReference links (e.g. comments from some analysts)Video clips of press conferencesInteractive design (e.g. Flash)Power searchGuided tour -> similar to MS office assistant

Benefits of web-based AR

Computer help generate more sophisticated information

More interesting to read

Selectively read the information wanted

More info. given (e.g. video clips, reference links)

Better quality of figures presentation

Summary

CD-ROM and internet help the reader analyze the meaning of the AR

Multimedia:

1. reduce information overload problem

2. Help lower-educated people

3. Promote the interest in reading AR

Summary

How the multimedia helps:

1. Use graphics, videos- understand meaning with an interest involved

2. No more words required:

reduce time to analyze the company

Summary

Why multimedia can help:

1. Evidence shows- people memorize images better than words.

2. Good relationship with the company, good images can be enhanced

Conclusion

Innovative communication technique:

improve decision making quality

Investors- more logical decision making

Multimedia- help investors understand the company better

Our decision

More innovative communication technique

should be used in the annual report!

~ The End ~

Thank You !