Companies see value in lavish annual reports: it's time for listed companies to reduce spending on full-colour annual reports that are over 160 pages thick. Many extra copies of annual reports are sold as waste paper a year later. With reduced expenditure in the production of annual reports, companies can contribute more to charity.

AFTER the close of the financial year in March, my post box begins to fill up with annual reports from April. The post officer's bag is much heavier than usual with its extra load of thick annual reports for distribution.

I collect annual reports. I enjoy reading about the business and the financial results of the companies. Some companies spend a lot of money to produce annual reports that are collector's items. They feel that such reports will attract investors and they are also excellent public relations tools.

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Taking Keppel Corporation as an example, it has 31,112 shareholders in financial year 2008. If it is conservative, it will print at least 35,000 copies of it hefty annual report. Estimating the design and printing cost of S$3.15 per copy, the expenditure is S$110,250 and that doesn't include postage and packaging. By reducing the production cost, the savings can be used to support charitable organisations or to help keep the environment green.

This year, it is noticeable that many listed companies are putting brakes on the lavish spending on annual reports. Many send summary financial reports to their shareholders. These are normally black and white versions on 60-gramme paper with a two-colour cover. They contain the essential information such as the chairman's statement, the financials, and the notice of the coming annual general meeting.

At the end of the report, there is usually a form for shareholders to opt for the full annual report or for the shorter version. Some companies do not have a prepaid reply for this option form. They do not value their shareholders and try to discourage them from asking for the longer version. But some shareholders mail the form without postage stamps and the company has to pay extra postage dues to SingPost instead.

Compare the difference: the Keppel T&T's summary report contains 24 pages but the Keppel Corporation and Keppel Land's full annual reports contain 240 pages each--10 times as thick. How many shareholders will take the trouble to read the whole annual report? Perhaps the company should save on printing and mailing costs and distribute better dividends to shareholders instead.

Other companies send the summary report with the full report inserted as a CD-Rom. This makes sense to the younger people who are used to reading documents on their personal computers but for the older investors they use the CD as a device to scare the crows.

Printers' Fear

Many printers depend on the printing of annual reports to keep their presses running. Some fear that the move towards the use of CD-Roms and putting their reports on the Worldwide Web will reduce the print runs immensely. Printers are already losing market share to China and this move to reduce print runs for annual reports will come as an additional blow to their businesses. The reduction of copies will come gradually as the majority of listed companies still take pride in the printed copies of their reports.

Purpose

An annual report is a comprehensive document on a company's activities in the preceding financial year. Annual reports give shareholders and other interested parties useful information about the company's activities and financial performance. Most stock exchanges require companies to prepare and disclose annual reports.

The contents of annual reports include:

* Chairperson's report

* CEO's report

* Board of directors

* Mission statement

* Corporate governance statement of compliance

* Statement of directors' responsibilities

* Invitation to the company's AGM as well as financial statements including an auditor's report on the financial statements, balance sheet, income statement, cash flow statement, notes to the financial statements, and accounting policies.

In the United States, a more detailed version of the report, called Form 10-K, is submitted to the US Securities and Exchange Commission and is available to the public.

A new feature in the latest Singapore annual reports is the inclusion of 15 principles of the Code of Corporate Governance 2005. Some examples of the code are:

Principle 1: Effective board to lead and control the company

Principle 2: Strong and independent element on the board

Principle 4: Formal and transparent process for the appointment of new directors to the board

Principle 6: Board members to have complete, adequate, and timely information, and

Principle 12: Sound system of internal controls to safeguard the shareholders' investments and the company's assets.

Cost Savings

While the annual report is essential to keep shareholders informed and project the company's image, in a downturn companies may want to look at how to reduce production costs.

One way is to reduce the thickness of the paper. Some companies opt for 100-gramme paper with the idea that a thicker report is more impressive. Readers are interested in the contents of the report not the weight of the report. Moreover, a thicker report means higher distribution cost.

On the other hand, do not try to decrease the number of pages by reducing the font size. A readable font size is 10 points, companies that set their reports in eight points are not being friendly to the readers. Usually companies that did not perform well that year opt for small print like those used in insurance policies.

Art paper is expensive compared to woodfree paper. The colour pages with many photographs should be printed on art paper while the textual part of the report can be printed on woodfree paper. This will reduce the production cost.

With the use of digital printing, there are savings from not using colour separation films. The printing is done from computer to printing plates.

Free Reports

On the Worldwide Web, you can get free annual reports from international companies posted to you or for you to download. These multinationals want to attract investors and they are proud of their corporate image. One such site is Investor Calendar. com, http://investorcalendar.ar.wilink.com/

Singapore-listed companies have their annual reports posted at the Singapore Exchange Web site, www.cdp.com.sg. Each year, the well-produced annual reports receive the Singapore Corporate Awards. In 2008, for companies with market capitalisation of S$500 million or more Singapore Technologies Engineering Ltd received the gold award, while The Ascott Group Ltd received the silver award.

For market capitalisation of less than S$500 million, Multi-Chem Ltd received the gold award while Courts Singapore Ltd received the silver award.

RELATED ARTICLE: Selection of good annual reports

We have selected six annual reports that deserve commendation. The selection is based on design, content, photography, charts, paper, and printing quality.

No 1

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Starhub Ltd. The full colour section is printed on a light yellow background which is friendly to the eyes. The opening three pages are designed on a fold-out with a collage of dramatic photographs. The body text of the first section uses a serif font which is more readable.

The photography emphasises on happy users of the company's services. This is a pleasant report to read with sufficient corporate and financial information.

No 2

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CapitaMall Trust. The annual report has a typographic cover with some text embossed in light brown. The full colour section has an extra gold colour to give the layout a rich look. The letter to unit holders has a Chinese translation for a segment of the unit holders.

The charts are well-designed to present important information at a glance. A well-designed section gives details about the properties under the Trust's management. The expiry of rentals profile provides unit holders with a good idea about the profitability of the trust in the next few years. Most of the real estate investment trusts produce good annual reports but CapitaMall's report stands out above the others.

No 3

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Keppel Corporation Ltd. At 240 pages, this annual report is a giant in size. The advantage is that it has space for more corporate information. The theme is "Driving a Difference" and this theme is repeated through the various sections with a bright red background and dramatic photographs. There are many full-page photographs to add some vibrancy to the report. The section on the company's safety excellence programme is impressive and informative. The financials are printed on paper with a yellowish tinge. A disappointment is that there is no proxy form included for the annual general meeting. While the inside pages are well-designed, the cover design is drab. And sadly, this drab design is used for the other subsidiaries' annual reports as well. The cover must be attractive to invite readers to open the report.

No 4

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Straits Trading Company Ltd. The cover is clean with a white background like a bride at her first wedding. The colour section uses quality 105-gramme art paper which has a glossy smooth finish pleasant to the touch. Each section has a dynamic cartoon to illustrate the company's strategies.

While the information is sufficient, the design of the charts could be improved.

No 5

Parkway Holdings Ltd. The cover has a small graphic on a white background. This clean look reflects the antiseptic atmosphere of a hospital. The full-colour section injects some vibrancy to the healthcare image. There is a mix of black and white, duotone, and colour photographs on the facilities, staff, and services. Two blank pages have the required line which reads: "This page has been intentionally left blank" which is a paradox as the one-liner on the page means that the page is no longer blank.

No 6

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Frasers Commercial Trust. This company was formerly known as Allco Real Estate Investment Trust and is now in the Fraser and Neave stable. It has opted for the smaller 20.5 x 27.5 cm format that is easier to handle but it means that there is less space for corporate information.

The layout is clean with photos of its various properties. The doughnut charts of the gross revenue mix provides useful information for the investors. The font used for the body text is too fine for easy reading.