The 10 best annual reports of 1995.

Done right, an annual report captures the soul of a company and its leaders. Done wrong, it goes down in flames and can damage a company's image.

Who needs a theme? Who cares about glossy photos, informative grids, easy-to-read letters, extensive financials disclosure, director data, and innovative design? What's the big deal about annual reports, anyway?

For one thing, the printed annual report is theone corporate document investors and analysts say they are most likely to consult before making investment decisions. And CEOs of companies worldwide are beginning to sit up and take notice.

"Our annual report is the single most important communication we produce each year," says Chevron Chairman Kenneth T. Derr, whose annuals have finished among the 10 best nine years in a row.

"It reaches stockholders, employees, financial analysts, the media, government officials, suppliers, customers, schools. The report states our plans, goals, and vision. It explains who we are, where we're going, and how we plan to get there. It holds up a mirror to the company and reflects its culture and character."

Perhaps that's why the 1995 crop of 687 annual reports analyzed--hundreds more than the 110 required for scientific sampling--is running seven times more positive than a year earlier, with each communique labored over for an average of six months. For two years running now, 50 reports have achieved "world-class" status, scoring at least 100 of a potential 135 points (see sidebar) in this competition.

In this, the 13th year of this feature, the world's 10 best reports have a great deal in common, including a reflection of CEO leadership, which provides a strong sense of who is at the helm, what the company is all about, and where the boss sees it headed. Other features they share include the fact that:

* Each is perceived as forthright, with management assuming its rightful share of responsibility for the financials.

* Each has a special section, often an interview with the CEO.

* Each includes a company description, fully explained graphs, 11-year financial data, and an up-front financial highlights page with a percentage-change column.

* Each has a highly readable letter to shareholders.

* Each has in-depth biographical data on officers, as well as directors. Nine of 10 have photographs of directors, and eight display officer photos.

* Each is attractively designed and printed in four or more colors on recycled paper.

* Each has a strongly supported--theme.

"The first place we tell Ameritech's story is in the annual report," says Richard C. Notebaert, chairman and CEO of Ameritech, which produced 1995's best report. "The challenge is to make our fast-changing, sometimes-confusing business easy to understand. As great as our past performance has been, in the annual report, we focus on our future and our strategies for growth."

St. Paul Cos. Chairman, President, and CEO Douglas W. Leatherdale agrees. "It's in our best interests to have shareholders who fully understand our strategy and the results produced. The annual report is our key communication to our owners--we want them to read it, understand it, and conclude they have made a good investment."

Such are the companies that earned their 1995 annual report wings.

FIRST (134 POINTS)

Ameritech soars to the top of the world's best list with the most points ever awarded in the 13 years of this competitions Tied for first last year, it is one of only three corporations worldwide to include, in a company-defining grid, a breakdown of operations specifically naming both customers and competitors. The grid also delineates the firm's services, "growth drivers," percentage growth in each area, and service locations. The report contains a detailed discussion of the Chicago-Based company's strategies, along with an interview with the CEO--"Questions Investors Frequently Ask" about the telecom, and his responses. All this is accomplished in a deceptively simple document with a consistent, enticing design that even manages to make the financials visually attractive.

SECOND (133 points)

In keeping with the spirit of today's Information Age, Minnesota-based St. Paul Cos. certainly delivers a report chock full of facts and figures, mostly pertaining to its fourfold "focus on tomorrow":

* Financial strength.

* Concentration on property-liability insurance.

* Markets and customers.

* Exportation of its expertise--or "how the St. Paul Cos. applies its successful customer segmentation and underwriting to markets outside the United States."

An easy-to-read fold-out matrix at the beginning of the book provides a quick reference to the insurance company's business profile, tidbits on its five businesses, 1995 highlights, and outlook. Succinct but complete biographies and close-up photos are presented of its diverse board. Key officers are pictured, as well.

THIRD (129 points)

French President Jacques Chirac coyly peeks around the cropped cover of London-based Reuters Holdings PLC's annual report, inviting readers to participate in the clever theme: "Completing the picture." Open the book to find a full-page close-up photo of Chirac accompanied by an explanatory statement: "When France resumed nuclear weapons tests on 5 September, Reuters customers had news of the explosion a good five minutes before those who relied on our competitors." Additional cropped pages likewise appear in the textual portion of the book, continuing the theme with sections on "Completing the database," "Completing the deal," and, finally, "Now you complete the picture" of how customers can "bring data together instantaneously from Reuters and its competitors." The report ladles out details of the company's three product lines (information, transaction, media) and names competitors specifically and customers generically. And, as usual, CEO Peter Job answers analysts' questions in a two-page spread.

FOURTH (127 points)

One in five corporations, mostly in North America, takes a consumer magazine approach to its annual report. One of the best of this genre is produced by Pittsburgh steeler Armco. The company's specialty is flat-rolled steels, which it defines in detail in a gatefold cover that names major competitors, both domestic and foreign, and articulates year-ahead objectives. Chairman and CEO James F. Will's two-page letter to shareholders is well-written and honest. The deck beneath the headline reads: "1995 results? Our financial people said `mixed.' Analysts assessed it `below expectations.' Shareholders asked `what happened?' How do I characterize 1995? Two words. `Growing Pains.' Let me explain." And explain Will does, recapping the company's three-step strategic plan and dealing specifically with how he plans to turn around net income a third ($29.8 million) of year-earlier profits ($77.7 million), on a 9 percent increase in net sales.

FIFTH (126 points)

The Chevron report touches all the bases, from its forward-looking theme, "New Prospects. New Perspectives," that highlights eight strategies for the future, to the "Chevron-at-a-glance" grid on the inside front cover, to the nearly three dozen captioned graphs sprinkled throughout the book. The San Francisco-based diversified petroleum company also includes detailed biographical data on both officers and directors, along with individual photographs, and a page-long glossary of both energy and financial terms. In short, for the ninth year in a row, Chevron turns in a winning entry.

SIXTH (124 points)

That was then, this is now. Or in the words of Columbus, GA-based AFLAC's annual report, "Building on the past, focused on the future." While the leading supplemental health insurance company in the U.S. and Japan had a record year that might have encouraged an expansive approach to its AR, the book does not replicate the look of the company's widely applauded, warm-and-fuzzy, slice-of-life TV commercials. Instead, it relies on substance. For example, in the letter to shareholders, President and CEO Daniel P. Amos explains the company's mission and "new five-year objective." The report is enlivened by contrasting past and present pictures. For instance, a yellowed archive photo showing an AFLAC Japan record-keeping employee hand-feeding cards into computers is juxtaposed with a color picture of her current counterpart talking on a cellular phone in the company's new "state-of-the-art data center."

SEVENTH (123 points)

ARCO Chemical Co.'s annual report is a judicious mix of information, innovation, and color, providing an excellent overview of a complex company whose chemicals are used in a broad range of consumer and industrial products. Readers learn up front about ARCO's mission, operating results, working capital, total assets, and stockholders' equity. The Newtown Square, PA-based company's diversified board is pictured above detailed biographical data (on officers, as well). An unusual--and effective--element is a spread devoted to the investor relations manager's interview with President and CEO Alan R. Hirsig and two vice presidents.

EIGHT (Three way Tie) (122 points)

Readers can easily get a handle on Bethesda, MD-based Comsat's report which boasts a catchy theme, "Making the creative connections," that is supported throughout the book in a highly readable manner. Comsat places its emphasis on the future, offering a grid that enumerates what's ahead for the diversified communications company in each of six operating areas. Nine of 11 graphs among the financials have explanatory captions, and 12-year financial data--seven years more than the SEC requires--is provided, along with five- and 10-year compounded growth rates.

Though Bartlesville, OK-based Phillips Petroleum's annual report isn't all that innovative, it contains loads of positives, including "A Look at Phillips' Worldwide Operations," complete with a recitation of market strengths and growth strategies. The theme of the report, "A future of growth in a world of opportunity," is supported by a discussion of Phillips' commitment to growth through embarking on new ventures, expanding key businesses, and "achieving excellence." Additionally, a page-long "Chairman's View" offers CEO W.W. Allen's take on how Phillips "is working to grow and prosper in a changing global marketplace."

Meanwhile, an Olympian effort by Atlanta-based Southern Co. focuses on people--its employees, to be precise. Photographs of 38 employees are sprinkled throughout the red, white, and blue book. A two-page discussion with Chairman, President, and CEO A.W. Dahlberg concentrates on the the goal of becoming "America's best diversified utility." The report also lists 10 intermediate goals--such as being the No. 1 power marketer in the Southeast by 1998--to providing the "best total return to shareholders in our industry." Let the games begin.

WORST ANNUAL REPORTS

What qualifies an annual report for the list of the world's worst? It's not simply a low or negative score. Our system works on a premise similar to the three main groups in Hell in Dante's "Divine Comedy": Annual report sins are weighted; thus, offenders receive a place on the list and their ranking based on the number and severity of their transgressions. Lack of forthrightness, little rhetorical commitment, and inadequate disclosure earn the hottest spots, followed by an inarticulate mission, dense prose, and paucity of information. Overabundance of photos of egotistical CEOs, egregious design, and confusing graphics are slightly less blameworthy. Once a company commits one of the more serious annual report sins, it is consigned to the worst list, and no amount of slick graphics or sincere writing can redeem it.

Shall we begin our descent.?

FIRST

Zenith Electronics has hit the nadir--in annual reports, that is.

The back cover of the Glenview, IL-based company's report proudly proclaims that "the quality goes in before the name goes on" its products. Too bad that is not the case with its corporate communique, which lacks an SEC-required company description, graphs, and a percentage-change column in (or as part of) the three-item financial highlights. Chairman HJ Lee's letter to shareholders fails to mention book value of $4.84 a share, the company's second lowest in five years, and stockholders' equity nearly back to the 1991 figure of $308.8 million. The letter's daffy design--it's virtually impossible to tell where it begins minimizes Zenith's fifth straight loss.

"How will we win?" is the question posed on the AR's opening spread. The answer is simple: Start by telling it like it is.

SECOND

Fruit of the Loom Chairman and CEO William Farley begins his letter to shareholders, employees, and customers with refreshing candor: "For many companies in the retail apparel industry, 1995 was a humbling year. Fruit of the Loom was no exception." He continues by listing the root of the Chicago-based company's problems and admitting a net loss of $233 million or $3.06 per share compared with net earnings of $60 million in fiscal 1994. But after disarming readers with his apparent honesty, Farley launches into an "everything's going to be fine next year" spiel that neglects to mention a $108.1 million operating loss, off from two years of substantial profits, and a 4.5 percent operating margin versus 10.2 percent a year ago. The report's theme is "An American Tradition," with the opening spread claiming that "Americans are rediscovering value--traditional, honest value." Just not in the Fruit of the Loom report.

THIRD

U S West's annual report goes both ways. One end of the book covers U S West Media Group, "one of two major groups that make up US West." Flip the book upside down, and there's the report for U S West Communications Group. Both telecoms are listed on the New York Stock Exchange. Now open the AR to the middle and rotate it 90 degrees to read the scant financial and director information on the Englewood, CO-based parent company, US West Inc. Here, the reader discovers that this is in reality "a summary annual report," which "provides an overview of the financial and operating results of US West and its two groups." It thus is one of the 36 percent of 1995 reports to abbreviate financial disclosure--without fair warning. Perhaps US West would obscure the fact that there is no mention of earnings declining year to year on a slight revenue increase. Clearly, this repeat visitor to the world's worst list just didn't get the message.

FOURTH

For the second year in the last three, New York-based NYNEX has shown negative earnings, this time a loss of $4.34 versus a year-prior $1.89. Not only that, but book value is off 31 percent, and total assets and stockholders' equity have declined, the latter 28 percent. Then there is the extraordinary item--"discontinuance of regulatory accounting principles, net of taxes"--that cost the company $2.9 billion or $6.84 a share. Does this bother Chairman and Chief Executive Ivan Seidenberg? Apparently not. His letter to shareholders begins on a determinedly upbeat note: "In 1995, NYNEX made excellent progress on the road to becoming a global provider of communications, entertainment and information products and services." The extraordinary change is merely footnoted and explained in small type at the bottom of the page. Seidenberg goes on to assure stockholders, "We're delivering on our objective of steady eamings growth..." The company's net loss, spelled out in the back of the book--a one-color combination annual report and proxy statement--was $1.8 billion, a result of writing off a slew of items in anticipation of a merger. Of course, if the company does the calculating, net rose 12.1 percent year-to-year.

FIFTH

Poor IES Industries. It's about to lose its independence, merging with a pair of fellow Midwestern public utilities. And the Iowa Utilities Board not only denied its request for a rate increase but, worse, ordered a rate reduction. However, that's no excuse for a report with a zero rating and a meaningless, seven-word theme that spills down the cover: /Customers/ Teamwork/Individuals/Ethical/Decisive/Innovative/Quality. As if that weren't bad enough, net income was off 4 percent (to its lowest in four years) on an 8 percent revenue hike, a circumstance Chairman, President, and Chief Executive Lee Liu conveniently doesn't address in his letter to shareholders.

SIXTH

Graphic design is but one element of what makes a good annual report. But Boise, ID-based TJ International's whacks readers over the head with a 2x4. For example, two horizontal strips of black-and-white photos of directors cropped at chest level compete for attention with a picture of a 5,000-pound elephant testing the strength of the company's furniture frame material. The page is further bisected by a thin vertical reproduction of one of the Timberstrand boards shown in the elephant picture. The letter to shareholders and the strategy section sport similar faded vertical photos of TJ wood products, echoed by the subheads in text, whose words are divided to form upside down, board-like "Ls."

To the two top officers' credit, they begin the shareholder letter by admitting, "This year's financial performance was unacceptable," and they list both their work and home phone numbers beneath their signatures. However, they carefully avoid the specifics of a $29.9 million loss--the first since 1991's $3.2 million deficit--and the lowest stockholders' equity, book value per share, and working capital in three years. Wonder if they're equally reticent over the phone...

SEVENTH

Alpharma's report scores what's known in soccer and hockey as a hat trick, but in a negative sense. The front 32 pages of the book are attractive, but the report as a whole is tainted by three problems: 1) The financials are tucked into a flap in the rear of the book (providing, of course, that the staff remembers to stuff the 10-K into the report; a notice in the back of the front part of the book informs readers that the form will be "provided without charge upon written request," just in case, we suppose, it's missing); 2) It is a summary annual port; 3) It relies on the Form 10-K to inform stockholders fully. The international pharmaceutical and animal health company with dual headquarters (Fort Lee, NJ, and Oslo, Norway) showed net income going from an "as-reported" loss of $2.4 million in 1994 to an $18.8 million gain in 1995. Only perusal of the 10-K reveals that 1995's net income actually is lower than the 1992 figure of $20.97 million.

EIGHT

Alcoa's report apparently starts on p. 9, according to its table of contents. Confused? So were we. A special report Alcoa Update, begins on the cover with "Alcoa Now," and a graph rise in shareholder value. That special report continues on to explain the Pittsburgh-based aluminum company's financial firepower, geography of growth, product mix, and corporate structure. Only then--nine pages later--does the reader come to a black and red page announcing "1995 Report Shareholders" and contents. To be sure, the report has its pluses, including 11-year financial "and other" data, a glossary of terms. and a photograph of the CEO with his foot propped atop the front bumper of an Audio automobile (its "aluminum spaceframe developed jointly by Alcoa and Audio"). But these are negated by the backward layout, lack of a grid or matrix identifying competitor and market share, and skimpy director biographies.

NINTH

Turin, Italy-based Istituto Bancario San Paolo di Torino has achieved a world record: Its annual report is 302 interminable pages long--some of them blank. Granted, annual reports of banks, savings and loans, and other financial institutions average 52.5 pages, 12 percent more than most, but this is ridiculous. Worse yet, San Paolo's overwhelming tome doesn't even contain a letter to shareholders. Thus, the first Italian entry submitted in the 13 years of this feature earns a meager 13 points of a potential 135 and a -44 percent rating.

Better luck next year. Ciao.

TENTH

Everything--sales, profits, cash flow, gross margins--came up roses for Norwalk, CT-based United States Surgical Corp. Everything, that is, save its annual report, which is nothing more than a Form 10-K with a four-page letter to shareholders stuck in front. The 10-K, of course, is the legalistic, boilerplate version of the annual report--what companies are required to file with the Securities and Exchange Commission--and not very readable, informative, communicative, or inviting. This report's -55.9 percent rating clearly indicates it's not exactly on the cutting edge.

RELATED ARTICLE: What Constitutes A Good Annual Report

After 13 years of spotlighting annual reports on these pages, it's clear the good ones contain certain essentials. For instance, text should be forthright--that is, there should be no long, slow windup before the news, even if disappointing. At the same time, a report should be informative and contain full financial disclosure.

Contributing Editor Sid Cato's copyrighted criteria for judging the best and worst annuals--arrived at in conjunction with Chief Executive--are based on a 135-point-maximum scorecard that rewards those possessing the following characteristics:

1. Action. The cover should lure the recipient into opening the report and turning the pages. The report should use various readership-enhancing devices--an intriguing cover statement, textual callouts, boldfaced lead-ins, subbeads, and bulleted paragraphs. its layout should be open and inviting, and the descriptive table of contents should be comparable to that in every newspaper and magazine. (20 points)

2. Readability. Write clear, sprightly copy, eschewing gobbledygook. (10 points)

3. Information. Inform the reader fully through a special section, mission statement, and glossary of terms. (10 points)

4. Prospects. In a grid or matrix, identify customers and competitors and provide market position and market share, a breakdown of operations, results, and prospects. (5 points)

5. CEO Photo. Picture the company's chief executive in a candid, congenial pose, preferably leading off the letter to shareholders. (5 points)

6. Responsibility. Assume responsibility, alongside the auditors, for the financials. (points currently allocated to category 1)

7. Biographies. Present biographical data on officers and directors--more than simply their age and the year they joined the board or company. (10 points)

8. Innovation. Break new ground. Ensure the report is not run-of-the-mill. (5 points)

9. Focus. Display a discernible point of view and a clearly stated, tautly executed theme. (5 points)

10. Impression. Convey a favorable image of the organization. (10 points)

11. Disclosure. Include more financial data than what's customary or required by the Securities and Exchange Commission (five years). Supplement all graphs with succinct, understandable captions. (15 points)

12. Honesty. Rhetorical commitment is where it's at. (10 points)

13. Involvement. Exhibit CEO involvement, at a minimum, in the letter to shareholders. (10 points)

14. Articulation. Present the CEO's view of the company's present and future mission and goals. (15 points)

15. Likeability. Does the report have redeeming qualities? (5 points)

RELATED ARTICLE: The Gospel According To Jack, Warren, And Andrew

Some annual reports are a must-read by all managers, regardless of their appearance, their forthrightness, or their score in this competition. Why? Because the letter to shareholders is written by the leading lights of the business world, and executives everywhere, no matter what industry they are in, feel they can learn something from these CEOs.

GE's Jack Welch, Bershire Hathaway's Warren Buffett, and Intel's Andrew Grove are three such authors of these Bibles for management theory and practice. Welch's concept is the "letter as tutorial," addressing various challenges confronting corporations--from "breaking up" ("wrong answer" for GE) and "stretching for impossible targets" to fostering "boundaryless behavior." A classic Welchism in the commonsensical letter (which is the world's fifth easiest to read this year): "Ideas around the company quickly began to stand or fall on their merits--rather than on the altitude of their originators."

Despite running a seemingly interminable 18 pages (six times the average), Buffett's letter is a folksy primer on investing. He gives details of and explanations for Berkshire Hathaway's acquisitions. He walks readers through a proposed recapitalization. He addresses miscellaneous corporate concerns. It just takes a while for him to hit all the high points. Interestingly enough, he also personally copyrights the entire report.

Andrew Grove's letter explains his company's "four basic strategies": develop products quickly, invest in manufacturing, remove barriers to technology flow, and promote the Intel brand. Critics might say it is easy to be upbeat about an earnings increase of a healthy 54 percent that outpaced a 41 percent increase in revenues, on the strength of Intel's virtually obligatory Pentium processors, but Grove devotes equal time to the company's challenges and strategies for the future.

RELATED ARTICLE: Reports On The 'Net: More Hype Than Achievement

Two years ago, the annual report on CD-ROM debuted to decidedly mixed reviews, plagued by technical flaws and overly high expectations. The following year found a few intrepid souls venturing onto the Internet with their annual reports; unfortunately, those ARs either fell into the black hole of a well-hidden index or took way too long to download.

But these setbacks didn't stop the cyberspace mania. This year, the front cover of Boston's Bay Banks report lists its website address. The only adornment on the front cover of Chicago-based PC Quote's communique is its address on the World Wide Web. Today, virtually no self-respecting corporation omits its website address from its print product, even if it's just in back of the book. Not only that, but a host of companies have done away with their quarterly reports, putting them on-line instead to save time and money.

So is the printed annual report on its way to extinction after a mere 172 years of existence? Probably not, judging by the approach and content of those annual reports currently on the Internet. In general, after reviewing the websites of the 10 best ARs, plus dozens more chosen at random, the verdict is that there is more anticipation than ability, more hype than achievement in on-line reports.

However, there are a few exceptions. Ameritech, after taking first place for its print report, earns kudos for its electronic version, as well-a marked improvement from last year's disastrous effort. Its 1995 electronic report is succinct, uncluttered, and inviting. It contains several viewing options, including a "Letter to investors." On the first page of the letter, text is open and airy, not wall-to-wall dense, as it was a year earlier. Complete biographical data on directors is presented, and graphs are accompanied by explanatory captions. Words are defined via hyperlinks, meaning that when a user clicks on certain words--such as "total return," for example--the screen automatically jumps to a definition of terms or additional information.

Finding Chevron's on-line report is a little tricky, but like Ameritech's electronic version, it is worth the effort. After meandering through the Internet labyrinth for a while, a Web surfer eventually encounters the Chevron report and can review the company's eight strategies for the future and the like. Moreover, this is the only on-line report found to provide visitors with the opportunity--and necessary information--to request a copy of the print product.

Smart cross-reference, particularly for those who quickly tire of browsing through cyberspace.

RELATED ARTICLE: International Progress Report

Today's global economy and rapidly converging borders means that non-U.S. annual reports are achieving more prominence. Slowly but surely, market tastes abroad are edging toward a more shareholder-friendly annual report, including somewhat more SEC-like financial disclosure and forthrightness. Of course, problems still abound--often including the absence of a letter to shareholders, a preponderance of organizational charts, and uninviting graphic design--but international reports are making progress.

Nearly 60 international reports--including those from companies in Australia, New Zealand, Japan, Hong Kong, Poland, Pakistan, South Africa, Germany, Sweden, Finland, France, the U.K., Mexico, Spain, and the Philippines--were evaluated for our competition. Among the 50 best reports worldwide that earned at least 100 of 135 points, one (Bruncor) is from Canada, another is the U.K.'s Reuters, the No. 3 book and 49th most readable. Mexico's Vitro S.A. has the 11 th most readable report, and Switzerland's Credit Suisse the 57th. Denmark's Novo Nordisk is No. 70, Amway Asia Pacific No. 71, and Japan's TDK Corp. No. 78. Fomento Economico Mexicano, S.A. de C.V. finished 83rd.

Credit Suisse just missed the world-class, 100-point mark, but possesses some admirable features. Though many international reports are jammed to the rafters with text and overburdened by organizational charts, Credit Suisse's report provides vital information in an attractive manner, including a five-page glossary of terms and an explanation of the company's "principal services" in three columns of text.

Novo Nordisk's report likewise contains a preponderance of positive elements, earning it a runner-up 92 points. President Mads Ovlisen's letter to shareholders is one of the year's best. It barely fills a page and bears the headline: "Change, change, change, but..." The report also provides a definition of terms; delineation of the company's missions for its businesses, health care and enzymes; and a sidebar dealing with "financial risk factors, including currency, interest rate, and counterparty risks." Unfortunately, these pluses are dragged down by an obscure and unexciting theme.

On the bottom-line side, it hasn't yet become accepted among most non-U.S. reports for management to join the auditors in accepting responsibility for the financials. Only one in eight international reports (seven of 57, or 12.3 percent) assumes this stance. Worldwide, four times as many corporations--48 of 100--accept responsibility for integrity of the financials. Of course, non-U.S. companies often aren't even required to produce an annual report, let alone one that adheres to American standards. However, Sipko Huismans, CEO of the U.K.'s Courtaulds PLC, certainly earns points for his forthrightness, explaining in his letter to shareholders that he "cannot recall a year in which effort and achievements were so poorly reflected in earnings and hence in shareholders' returns."

Stockholm, Sweden-based Skandia, an insurance and financial-services concern, deserves special mention for devoting a page to a rather innovative concept: "intellectual capital." As the report explains, "a company's value consists of more than what is shown in the income statement and balance sheet. Hidden assets, consisting of employees' competence, computer systems, work processes, trademarks, customer registers (lists), and so on, are obtaining increasing importance in measuring value. For a knowledge-intensive company like Skandia, it is important that these hidden assets are highlighted and taken into account." The company's intellectual capital was openly reported for the first time in connection with the 1994 annual report. Such reporting is "designed to provide a balanced, overall perspective of the company's financial and intellectual capital."

An intriguing idea, and one that may very well catch on in the U.S.

Sid Cato, an author and former corporate officer, has been at this stand for the last 13 years monitoring the world's annual reports, now from his vantage point in Kalamazoo, Ml He is president of Cato Communications as well as editor/publisher of Sid Cato's Newsletter on Annual Reports.