We're considering producing an annual report for kids in addition to our regular report. Have you seen any good [or bad] examples? Would appreciate your insights on this idea.

S.C.: It's not original, of course, but it's a cute little public relations gimmick. Substantive, though? That's doubtful. I guess I'd ask why you're going this route. What's your marketing ploy that mandates a report aimed at kids? I would question whether (1) it's time well spent and (2) you perhaps have too much time on your hands. Has anyone done such a report? Not recently.

What does the annual report mean to an investor?

S.C.: The annual report should be a virtual imperative to an investor, either actual or prospective. It's a road map to how a CEO, for instance, communicates. If an investor doesn't comprehend what the boss is trying to tell the reader, perhaps those investment dollars are better spent elsewhere. I want a company to show investors such elements as the quality of management (their credentials for the position they hold), whether its management is composed strictly of members of the old-boys' club. What happened last year and how management views results. First and foremost, though, the company must be sufficiently savvy to demand the recipient become reader. If it fails at that basic test—getting you to open and read the book—you'd probably best go elsewhere.

In your opinion is management's provision of information in annual reports likely to result in users being misled rather than being better informed?

S.C.: Sadly, that's precisely what I suspect—though the records indicate little more than 1 in 10 is slippery with the truth. Among 2000 reports, 13 of 100 weren't what I consider sufficiently forthright; so far among 2001s, that's slightly improved—if, still, 11 of 100 CEOs I don't find honest. Not by my standards, that is. What, specifically, are they? When I see imprecision in the shareholder letter—"In a challenging year, we outperformed our competition," or "We're very proud of last year's accomplishments"—and turn to the income statement and learn that earnings were off, either a little or a lot...that's what I react negatively toward. There's no reward in Heaven for those who fail to tell the truth, the whole truth and nothing but the truth, so help me God. By all means position your showing, but don't treat me as if I'm stupid. Don't assume I can't flip back to the financials and catch you in a deception. Mr. (or Ms.) CEO: You tell me. Under those circumstances, which one of us is dumb—you or me? (For the record, I began monitoring honesty in annual reports among the 1988 crop. That year, I perceived 88% of CEOs as being sufficiently forthright, a high of 91% honest among '95 reports, a low of 85% among '93s.)

We're hard at work on our 2001 annual report and there's an internal debate concerning whether our CEO should be pictured in suit and tie or not. Some say no one dresses that way anymore, even in the annual report. What's the straight poop?

S.C.: First, the facts. I began monitoring, among 1998 reports, what I perceived as a potential trend: chief executives shedding their jackets—and, in some instances, their ties as well—in their annual reports to shareholders. Specifically, in conjunction with the letter to shareholders, where nine of 10 CEOs are pictured. (If off so far among 2001's to three in four.) That year, 1998, one in eight or nine (11.5%) adopted a more gentle guise. That rose a year later—among 1999 annuals—to 19.1%. One in five. Up last year to 25.9% or more than one in four. Currently? One in three, exactly (33.3%). Now, my opinion: It's probably nothing to get worked up about—simply trails the Casual Fridays trend by several years. Also, look at it this way: The board of directors of what now is NW Natural (used to be Northwest Natural Gas Co.), based in Portland, Ore., for years has posed, outdoors, sans jackets and ties. Bottom line: Trend or not, the world hasn't come to an end, and likely won't—not because CEOs are doffing their jackets and/or cravats, at least. The casual look in annual reports is but a trend. For those who advocate the more formal look, be patient—that's my advice.

What are the general methods for evaluating the effectiveness of an annual report? Are there any empirical methods as well? Thank you very much.

S.C.: Your question is answered online, I believe you'll find—under, say, "Sid's Criteria" for selecting an award-winning annual report. Have you checked that out? Empirical methods? You sound like either a student or a teacher. Check out what I do—and have done since 1983. You decide if my methods are empirical.

Which readability formulas do you use for assessing language use in annual reports? Are they the only criteria to test the text quality?

Without knowing what a company's immediate specific goals are for their annual, how would you field a general question regarding a company's return on investment for this piece of collateral? Thank you!

S.C.: If I understand your question correctly (You're most welcome!), you might begin by comparing your report to others in your industry, or in your vicinity. I'm not aware of anyone who has quantified investment in a report, but I'd assume you would (1) see what others of your acquaintance invested and (2) learn what companies overall are spending. That would entail studying results of my annual Producer Poll. (Results are disclosed in the print version of my newsletter; by subscription only, but also referenced from time to time online.)

Do you know where I can find a template for an annual report production schedule?

S.C.: Most graphic design agencies—the good ones, at least—will have such a template. I know Herring Design in Houston, for instance, has one that has been commended (by a client) to me as quite good. And I'm also aware that Chicago-based Meta-4 has such a template. Both are available via the Internet.

In your February newsletter, you zing PNC, lumping it with the likes of Enron and American General International. Isn't it true you used to have good things to say about the bank and its annual report?

S.C.: You're right. Its 1990 report (lo, those many years ago) achieved "world-class" status, scoring a bare minimum 100 points of a potential 135. Its manager of corporate and public affairs echoed PNC's current problems by observing, "1990 was a rough year for the banking industry....Wall St. became sour on bank stocks, and PNC's stock price was especially hard hit. No longer perceiving PNC as 'the darling of Wall St.,' analysts and shareholders had many unanswered questions." As today.

I thought you did extensive research that positioned the first annual report to shareholders as being published in 1823 by Baltimore Gas & Electric Co. (its name initially, Gas Light Co. of Baltimore). The Wall Street Journal on its Feb. 7, 2002, Pg. 1 takes exception: It claims the first annual report was in 1903. By U.S. Steel. Who's right?

S.C.: The Journal qualified its claim by saying "what's considered the first modern corporate annual report, 40 pages of narrative, numbers and photos." And, "Other companies were slow to follow." Be that as it may, U.S. Steel's modern-era print piece, while it flirted with a barely qualifying 100 points, never quite achieved it. Indeed, its producer retained Cato Communications to evaluate its product in depth. Best it could score was 99 points, one away from some sense of parity. Never once did I ever hear the U.S. Steel report producer lay claim to his company's print piece being the world's first. Or he would have been challenged: "Prove it!" I stick by my claim.

There's a great story in The Wall Street Journal about how those crooks at Enron went so far as to move secretaries and others into an empty trading room so analysts from Wall St. would see a hustling, bustling energy-trading operation. Don't you have a similar story?

S.C.: Yep. I was with a Chicago-based public relations firm years back. Among its clients was Marriott and a toy company. When a client prospect—one considering retaining the PR firm—came to visit, all the female executives were moved out of their offices to a secretary's desk, the door closed. Even the owner's elderly aunt, Tina, the bookkeeper became "secretary for a day"—so the clients would assume that behind all the closed door were executives hard at work. The cover was somewhat blown when the board room door was opened for the visitors—to reveal the executive vice president with his shirt off, stuffing envelopes, his hairy chest covered only by a sleeveless undershirt. The games companies play....

What is minimum number of days prior to the annual meeting for mailing the proxy statement and annual report?

S.C.: There are differing positions on this. Some corporate lawyers will say "21 days prior to the annual meeting," others, "30 days." My understanding is, simply, that the annual report and proxy statement should be in the stockholder's hand before a stockholder votes, either by proxy or at the annual meeting itself. So, to be safe, corporate general counsels will arbitrarily set a 21- or 30-day mailing date. What they don't advise annual report producers and their outside suppliers is that those dates are arbitrary. Capricious, even.

If you're so hot, why don't more people read your newsletter, which you claim you've published every month for going-on 19 years?

S.C.: It has, indeed, been continuously published—222 issues since September 1983, to be exact. Why don't more read it? I don't know if this answers your question, but currently it's read monthly around the world. In Japan, Australia, New Zealand, the Czech Republic, South Africa, Romania, India, Spain, Chile, Singapore, Germany, Denmark, The Netherlands, Sweden, France, Switzerland, Belgium, the United Kingdom, Israel, Mexico and Canada. Not bad for a newsletter few, to your way of thinking, read.

I am a multimedia artist exploring the possibility of companies offering their annual reports in interactive CD form. What are your thoughts on this? Are there any companies that you know of that have tried this?

S.C.: It was tried a decade ago—prior to popularity of the Internet. That doesn't mean it can't go this time around, but I'm guessing it would be a tough sell. Let me know if you enjoy any success, please.

I am a graphic designer examining the design portion of annual reports. Are there any particular design features that stand out in annual reports as bad or good in the outcome of the entire product? Looking at things like graphs, layouts, and images or photos?

S.C.: No. Good design should work throughout the book, from layouts to graphs to whatever. And it should make sense. Design should appear to be done by one person (or a team that's most definitely in sync with each other). Design for design's sake, though—that's to be avoided. One should consider (1) the client and (2) audience for the annual report. What's the company's personality? Is it in a flamboyant industry—entertainment, say, or the Internet, or operation of cruise ships? Is it solid, or does it sizzle? Are its stockholders progressive, young, worldly? Or conservative, tending to be somewhat older, perhaps a tad parochial? I don't mean to be—well, mean. But I sure hope you're new in this game. I hope this points you in the right direction.

I have a two-fold question. First, I am on the annual report team. Could you explain to me the relation between the number of colors used to print the annual (i.e., 4, 6, 8) and world-class quality? Do you have any percentages (a dispersion chart) of the Fortune 500 companies and number of colors they use? Secondly, do you have specific criteria for the evaluation of an annual? Could you share them with me?

S.C.: There is no relationship between a world-class report and the number of colors used. Having said that, I can tell you that nine of 10 companies worldwide used four or more colors in their annuals, according to my exclusive monitoring. So far among early-arriving 2001 reports, that stands at 85%; be aware, though, that companies on a fiscal-year basis tend to take the easy way out. I believe the National Investor Relations Institute (NIRI) has done a breakdown—by color and by percentage of companies. I've been monitoring this element since the 1982 crop of reports. Lows were reached with 1985 and 1991 reports, as well as 1993. Three of four printed in four or more colors. Tops? Among 1997 reports, when 93% had four or more colors. Do I have specific criteria for evaluation of an annual? Surely you jest: Mine, online, was introduced in 1983, copyrighted a year later. Fifteen copyrighted criteria on what makes an award-winning annual. You'll find it on my Major Contents Page. Good hunting!

What's the difference between an annual report, an annual review and a summary annual report? I can't find any definitions.

S.C.: An annual report follows a generally accepted format we're all familiar with. An annual review is text only, I'd say, with perhaps a table or two. The one in 20 summary reports, like as not not so identified on the report cover as truncated, doesn't contain all the material found in a regular or traditional report—financial highlights page, company description, graphs of salient accomplishments, a letter to shareholders, editorial copy concerning new products, a new approach and the like, plus a complete financial section, plus biographical data on officers and directors, a glossary of terms used, and a mission statement, for instance. That's how I would differentiate. Canada's Scotiabank produced two documents, each labeled "2001 annual report." One had, as a subhead, "Financial Review." The other? "Corporate Review." I didn't view Scotiabank's effort(s) as qualifying as an annual report—so you can see it's somewhat subject to interpretation. Andrew Corp. (as you know if you've read my newsletter) included a fact book as part of its bound annual report. What made the decision for me was that it clarified that the fact book was included as part of every annual report. So the entire material warranted description as an annual report, thus deserved a qualifying 100 points as "world-class."

Are there any type size constraints on contents of annual reports? My client insists we keep a (too) large type size because that is "what's required." I've searched on this topic to no avail. Any help would be appreciated—this year's AR is in house now. Thanks for the help.

S.C.: Type sizes are bandied about, but the only requirement I'm aware of it that the type ought to be (1) readable and (2) the equivalent of 9/11 point. You'll get lots of arguments concerning that, but the object, bottom line, is to make the type large enough for ease of readership. That's the sole requirement.

Can the letter from the President/CEO use bullet points instead of large blocks of text? I happen to think bullets are more readable than text.

S.C.: To be sure! That is, indeed! Few CEOs will go for that approach (using bullets) though I agree it's far more readable than unbroken text. Good luck.

Where could I find an example of how to write a footnote disclosure for a subsequent event?

S.C.: Have you checked the footnotes of major U.S. companies, from IBM to Wyeth to Pfizer to Tellabs to R.R. Donnelley & Sons. Co.? That's where I'd look.

One of our clients wants to drastically cut the annual report budget, producing a much scaled-down, cheaper version of the report. The company is doing well and there is no reason other than cost-cutting. Do you know of any research on the impact of this type of action on a company's stock or investor perception? We need hard facts to back our recommendation not to cut costs.

S.C.: No studies, one way or another. I'm convinced it's a mistake, but if a client wants to cut costs, it's going to be hard to dissuade him (or her).

After doing a little research on the Internet you seem to be the authority on annual reports so I would like to ask you what might seem like an unusual question. Do you know where I might be able to obtain past annual reports from 1971-1982, in particular the air transportation and computer industries? I would like to obtain images of the cover design for an art project I will be undertaking. Any assistance would be appreciated.

S.C.: Only sources I can think of: San Francisco-based Annual Reports Library (online, no doubt), whose founder I thought poorly of, and New York-based Richard A. Lewis, whose Corporate Annual Reports was one of the finest. Its successor is Addison Corporate Annual Reports. You may inquire of one Nancy A. Fuller, a delight and one of my favorites. Good hunting!

Where can i find the auditors' report for Nike?

S.C.: Try Nike. It has an online website, no doubt.

I'm interested in finding out what the current trend is regarding 10-K wraps. Have you noticed more companies heading in this direction? Also, what percentage of Fortune 500 companies do 10-K wraps and does it tend to be the smaller companies that lean toward this?

S.C.: First, the facts: Last year, among 2000 reports, a record 12.5%—one of every eight—companies went the 10-K route, either in whole or in part; that is, either their report was, say, half 10-K, half good stuff. Or more likely it was a letter to shareholders, perhaps on the inside front cover, fronting the legalistic 10-K. So far, among early-arriving 2001s—many by corporations on a fiscal-year basis—the number stands at nearly 19%. Nearly one in five; the depths, to my way of thinking. Not many Fortune 500 companies go this route; it does tend to be the smaller, crummier companies. I've been monitoring this element since the 1982 crop of reports, when presence of the 10-K, in whole or in part, stood at 4.5%. The percentage has fluctuated—up some years, down some. Off, for instance, to 2.2% among '83s, a high of 8.2% among '93s, off each succeeding year to 7% among '98s. I'd like to think the reason the 10-K goes by the boards some years is because (1) a new chief executive is on board, or (2) the company has taken a lot of heat during the year and doesn't wish to incur any more stockholder (either professional or individual) ire.

We're having an argument here concerning when an annual must be sent out by a New York Stock Exchange-listed company. I quoted you as saying 90 days, but someone else said it's 120 days. Who's right?

S.C.: We'll, I've learned something new: I believed, all these years, that the NYSE requirement was 90 days after the close of a company's year, but now I'm told "the NYSE, in 2000, extended the window to 120 days"! That's said to be on the NYSE website under "Listed Company Manual," 203.01 Annual Report Requirement. The foregoing, thanks to ace producer Jerry Lucci. He said that "Most years, our annual meeting is in April, but this year our meeting is in late June." Thus, its report, no longer bound by the 90-day deadline I thought sacred, wasn't issued the end of March. Rather, in early May.

How can I find companies' annual reports on the internet for Germany and Japan? Something similar to that of FAME (Financial Analysis Made Easy) for the list of companies within an industry in the U.K.?

S.C.: I honesty don't have a clue. Perhaps a reader of this will know, in which case we'll post his or her guidance.

i am trying to write a report on arnotts biscuits and its macro environment using the political/legal force but cant get hold of anything. Would you be able to help? Give any suggestions on where to find this information. Ive already tried the arnotts web page but it is not excepting anything i type in the search engine.

S.C.: My only suggestion (actually, our executive vice president's) is that you go to the local grocery and see if you have the spelling correct. You may also find an address for the company—in which case you might consider phoning it and asking your questions. Sorry I can't be of more help. (Yours isn't the first such question I've received this spring. Must be final-exam time!)

I would like to know who were the past CEOs of TRW going back about five years. Thanks.

S.C.: Golly. I don't know. I bet, though, if you called TRW in Cleveland, their PR department would help answer your question. That, or search a Cleveland newspaper online—the Plain Dealer, for instance. That might be your best bet.

Mr. Cato, just how do you determine if an annual report is "honest"; are you an accountant? Is printing the report on recycled paper that pertinent anyway?

S.C.: Your second question, first: Is printing an annual report on recycled "that pertinent, anyway?" It is to those of us concerned about the environment. My newsletter, for instance, for 224 months (with the May issue) will have been printed on recycled paper. How do I determine if an annual report is honest? Easy: Look at the letter to shareholders; does the CEO discuss the results from the get-go, or does he or she take a page or so to address them? Also, does the up front financial highlights listing—which nearly 87 of 100 companies include in their annuals—jibe with the back-of-the-book data? If there's a discrepancy, and the CEO doesn't address it in his or her letter, that makes me nervous. When in doubt, I say: TELL THE TRUTH! Finally, am I an accountant? No. A journalist my entire lifetime—since I was 10.

I understand that you discourage anyone from investing in a company that fails to present a financial highlights listing in its annual report. Is that true? If so, why?

S.C.: Both this year and last (2001 and 2000 reports), 13 of 100 companies failed to present a financial highlights up front. Putting it more positively, 87.2 percent did so far this year vs. 87.8 percent among 2000s. I consider it a minimum for full disclosure to the reader. Guess who some of the companies were last year that omitted that to-me-obligatory element: subscriber Barnes Group, the flamboyant Diamond Technology Partners—and, would you believe, Dow Jones & Co., whose stable of course includes The Wall Street Journal. This year, the unlucky malefactors range from American Greetings to British American Tobacco to Reebok to Canada's Scotiabank.

How can i get sara lee's corp website address along with them sending me an annual report for the year ending of 2001?

I hear you advocate that companies run a special editorial section, glossary of terms and a mission statement—all three—in their annual reports. Can anyone possibly live up to your standards?

S.C.: Seven (6.7%) so far this year do: AFLAC, Alcoa, Cellpoint, ChevronTexaco, DTE Energy, East Japan Railway and Tellabs. So there.

How many people, on average, looked at companies' annual reports online?

S.C.: I have no idea. I don't believe this is monitored by companies whose annuals are online, though I may be wrong. Sorry.

Were you a big admirer of Jack Welch? Now that he's gone from General Electric, do you think they'll bring the annual report up to date?

S.C.: By coincidence, I just penned a note to a business columnist friend, suggesting that maybe Welch's successor as CEO ought to "update the terribly dated General Electric annual report, which has stuck to the same, boring format for two decades if not longer. Same dated appearance, year after year. When Jack Welch was there, his letter satisfied—all but yours truly. But Jack's gone, cavorting with women other than his wife—and his successor inherits all the problems Jack could gloss over. Because, well—he was Jack Welch, who walked on water. Well, he doesn't any more."

I am doing research on how to create a template for an annual report. What is the required elements of an annual report and how does it look? This is part of a programatic accreditation process and will be one of the requirements. But we are trying to create a standardized annual report form with specific areas of reporting. What would these be?

Do you have any statistical information about how many firms are producing online versions or complements to their print annual reports (i.e. not just pdf files)? What is your opinion of the value of a distinct online report?

S.C.: I have no data on the subject (none exists), but just about every company puts some version of its annual report online, some more elaborate than others. And many not terribly accessible, I've found. It won't be long before every company has, in your words, "a distinct online report."

What percentage of publicly held companies are producing 10-K wraps or the equivalent? In other words, how many are forgoing the traditional report in favor of strictly bare-bones financials?

S.C.: One in five (versus one in eight a year prior) so far this year, according to my exclusive survey, conducted each year since the 1982 crop of annuals. The precise figure is 18.9% to date among 2001 reports, including those on both a fiscal- and calendar-year basis. My experience over the years is that companies on a fiscal basis don't seem to think they're held to the same high standards of bigger companies, such as those listed on the New York Stock Exchange, and on a calendar-year basis. They think, in other words, they can sneak under the radar of investors and the news media. To a degree, that's true; they do seem to get away with turning out junk. Seldom does a report from a firm on a fiscal year make my "world-class" list, scoring at least 100 of a possible 135 points. Bottom line: A great less respect is being shown the key corporate communique' this year.

I navigated through your site this morning to see if you had any articles on the subject of annual reports as an integral component of an employee communications program, especially for a company that is first going public. But I found nothing.

S.C.: All annuals should have employees in mind; I'm aware of one famous company whose employees heave the annual into the nearest receptacle, angry that stockholders are given a different message ("everything's coming up roses") than employees ("times are tough"). Start right—from the outset, tell the truth, and the very same story to all audiences. Be sure employees know there's one, and only one, message. That management doesn't talk out of both sides of its mouth. How's that for starters?

Help me to understand reading annual reports. The bottom line for the corporation when reading an annual is what? How do the corporations come up with their earnings column?

S.C.: The bottom line, as you put it, varies with the individual. Some want extensive prospects—that is, products galore in the pipeline. Others want a CEO who turns them on, whom they have confidence in. Others are concerned about depth of management. Earnings are pretty much the same from company to company (though beware of the fine print, so often present): It's just another name for profits. Since many (if not all) corporations play massive games with their numbers, check out how the news media perceives a company doing. (Sid Cato fits into that latter category. Never once, in two decades, have I unfairly attacked a good guy [or woman CEO, obviously].)

In order to assist my company in improving our annual report, I am taking a look at the different formats in which annual reports are delivered to stockholders. The trend I have seen thus far is that: (1) most larger corporations tend to provide stockholders with both an annual report and proxy statmement (with their filed 10-K incorporating their annual report by reference); (2) only about 15-20% of publicly held companies provide something referred to as a wrap-around (an annual report + a 10-K), and (3) the trend is toward providing stockholders a combination "proxy + financials". I remain unclear as to the advantages or differences in timing among these three formats, however, and I am having a dickens of a time finding any information on the types of companies doing each (or even how many companies do each). I would have thought the ASCS would have such data but they tell me they do not (and we are a member, so I think they would help readily if they had the information). Any information you could share with respect to the three formats mentioned (or others, if you wish), advantages to companies and stockholders in using the various delivery formats, and where one might find statistics concerning (or names of companies using) the various types of formats would be most helpful. Thank you. I am finding your site very informative!

S.C.: Wow! Tall order! First off, of the annuals I receive, many are accompanied by proxy material and/or the legalistic Form 10-K. I only review annuals, so I toss any extraneous material. When the 10-K is part of (bound in) the annual report, though, that's counted. Only stockholders should be sent proxy material, and since I own stock in no companies, it's sloppy for them to send me such material. Now, on to the annual itself. I've evaluated, in depth, nearly twice so many 2001 annuals as the experts say I need to review—based on studies of what's statistically valid; i.e., how many need be reviewed for a fair and honest reflection of the universe as a whole. A record 17.6% of annuals seen so far this year contain a 10-K, in whole or in part. That's half again so many as the year-earlier 12.6%. More companies this year—though I can't tell you the number and/or percentage—seem to be sending the 10-K fronted by a one-page shareholder letter. Despite which, 3.3 pages remains the average length of such letters, strangely enough. What's doubly distressing is that one in six—16.7%—is sending a truncated book without so advising on the report cover that the book is incomplete. To me, that's dirty pool to the ultimate. Don't believe this is precisely what you seek, but it's all the information I have available. Oh, yes: honesty among CEOs this year—surprise!—is at a low of 82.4%, off 4-1/2% year to year. Meaning? Nearly 18 of 100 corporate chieftains either can't be trusted or is in an advance state of denial. Can't bring himself (seldom a herself) to confront the dire realities, that is. Poor, overpaid corporate chieftains!

To save money, my company gave employees (most of whom are shareholders) and investors the option to receive a hard copy of the annual report. Otherwise, they were instructed to view the annual report online. Most did not request a hard copy. I can't help but believe this tactic is a missed opportunity to get employees on board with company strategy and to remind investors why they should continue to buy and hold our stock. Do you think very many of those employees and investors will actually go to the company's website to view the online version? Do you consider an online annual report to be very readable? What do you think are the pros and cons of giving employees and investors the chance to order a hard copy—but if they don't respond, assume they will go to the company's website to read the report?

S.C.: Companies are devious; you may quote me. They'll do just about anything—especially the bean-counters—to avoid having to communicate, consistently, a positive message about the company, especially to "the little people" who make the company go, day after day. (As well, of course, as individual stockholders; the big investors on Wall Street are quite another matter, of course.) And increasingly, I'm convinced, the bean-counters speak the same introverted language as most CEOs. Worsening relations with small stockholders, and employees, who would I'm convinced benefit tremendously from the print piece—not only the publication itself but the positive message sent by its distribution to them—can only come back to haunt the currently regressive top management. It's the modern-day equivalent of "Let them eat cake!" Indeed, Cato says: Burn 'em all at the stake! (That same polling tactic has been used since time immemorial—"Let's see how many write in to complain when they don't get the monthly and/or quarterly publication." When few respond, management says, "See! No one really cares." When it's management that—well, just doesn't get it.") Hang in there; this, too, shall pass, one hopes and prays. Above all, never forget that few if any CEOs truly feel comfortable in a highly visible posture; most are but one generation removed from the green eye shade.

What were the annual reports for L.L. Bean from 1999 to 2001?

S.C.: What were they? I have no idea (perhaps they were motion pictures? books? songs?) Are you suggesting L.L. Bean went public in 1999? Or are you seeking its 1999, 2000 and 2001 reports? Any way, may I suggest you call the company and ask it. (Where's it headquartered? Somewhere in the U.S. Northeast, I believe, but you couldn't prove it by me.)

We are continually striving to improve our report. Which firms do you think do a good job with end-use photos? And who does a good job on director bios?

S.C.: First, of the 2001 reports analyzed to date, 43.8% have included an end-use photo—that is, have shown the product or service in use. That's off from one of every two year-earlier reports. Director bios are appearing in one in four reports this year (25.1%), up a bit from 23.1% a year ago. Among those to achieve world-class status (that is, scoring at least 100 of a potential 135 points), four in five received credit for sufficiently detailed data on the board. You can be sure all of the 10 best will have touched that base. Best in those both areas? Twenty-eight companies' reports qualified: From AFLAC to Ford to Phillips Petroleum to RLI to Tellabs. (Tellabs' is the only report so far to achieve a perfect score of 135 points.)

What's this bit about online annual reports having to remain constant?

S.C.: Believe we're answered this before. As one officer told me months back, "My attorneys have always insisted that the online AR be identical to the print AR, which also means no revisions even if the facts change at a later date. It's an archival document." I've heard nothing to contradict that position.

An "annual" report covers more than one full year, so what word could be substituted for "annual' to better reflect the report?

S.C.: You're wrong: An annual report is a report on a publicly held company's year past. (Even should some "subsequent events" be factored in.) What would you have it renamed, after more than a century-and-a-half? An "annual report and then some"?

I'm confused: Isn't an annual report supposed to be out within 90 days after the close of a company's calendar year (a month longer if its stock is listed and traded on the American Exchange)? Now I'm hearing conflicting stories—that the SEC (or is it the NYSE?) approved 120 days for everyone...also, that it's now down to 60 days. What's going on?

S.C.: One terribly knowledgeable chap is checking with his "SEC guy" on this matter. Another, an officer of his company, observed: "Several authorities are looking at this, including NYSE, NASDAQ and perhaps the SEC, and the general trend is to go shorter in elapsed time between event and disclosure. Such things are in discussions but I haven't heard final resolutions yet. The real dilemma is whether it's more important to require information that's delivered faster or information that's more complete. Accounting types argue you can have one or the other but not both. Personally, I believe investors need both and the perceived needs/convenience of accountants shouldn't be driving this bus." So even the experts aren't clear on this. Stay tuned.
Addendum: I've finally realized the SEC, when it talks about the annual report, is referring to the legalistic Form 10-K, which it indeed would like to see out, say, within a couple of months after close of a company's calendar year. The SEC to be sure is exploring that, as opposed to the current 90 days. As an SEC expert notes, this is NOT the annual report to shareholders, which the SEC doesn't set rules for—"other than the requirement that certain information must accompany or precede any proxy statement sent to shareholders." (Cato's understanding is that, technically, the stockholder is to receive the annual report to shareholders PRIOR to voting his or her proxy, which is moot anyway since few stockholders even bother.) The requirement concerning producing an annual report emanates from a company's stock exchange listing agreement—currently 120 days if NYSE-listed. That's new this year; 90 days used to be the limit for NYSE-listed companies' annuals, 120 if stock was listed and traded on the Amex. Hope this clarifies things. Bottom line: No rush to produce the annual report to shareholders—not from the SEC's standpoint. (I'm guessing that the NYSE's 120 days, rather than 90, had something to do with the September terrorist attacks, thus may return to "normal.")

Why Saralee buiscuits failed in INDIA?

S.C.: I only answer questions relating to annual reports—not biscuits and the like. Besides, I haven't a clue—didn't know Sara Lee made biscuits, let alone that they "failed in India." May I suggest you do something wild and crazy: Contact Sara Lee, Chicago based. I'm sure it has a website and would be happy to answer your question.

I am from the U.K. and in the U.K. non-public companies that have limited liability have to submit their annual report to the Companies Registrar. From their website anyone can pay a small fee of £5-6 dollars (pounds?) to download the report. Is there a similar service availble in the U.S. for incorporated companies? Also are the reports of incorporated companies publicly available? If so, whom do I contact to obtain a copy of a particular company?

I was recently asked what percentage of companies produce an "annual report" (a narrative section and financial section) as compared to companies that produce a "10-K wrap" (a narrative section and the actual 10-K wrapped by a cover). Do you have any estimate of this percentage? Most of the reports I have seen have been 10-K wraps.

S.C.: I'm sure I've answered this previously, but for the benefit of those who missed it: Among 2001 annuals, a record 17.9% (one in five or six) of reports I've received have been 10-K's, in whole or in part. Worst of all, one in six, essentially—16.5%—to produce a truncated book has not so identified it (that is, as abbreviated/insufficient) on the report cover. That 17.9%, by the way, is half again so many as the year earlier, among 2000 reports.

You supposedly monitor, via proprietary computer programs, annual report trends. Question for you, then: Can you provide me with at least two trends you see?

S.C.: First off, among 1998 reports, I noticed for the first time that many CEOs—all men; no women among this group—were allowing themselves to be pictured in their annual reports dressed casually. (I define "casually" as without tie and/or jacket.) Since then, casual attire in annuals has risen more than two-fold—from 11.5% up to 19.1% to 25.8% among 2000 reports. This stands currently at 28.0%—more than one in four CEOs to opt for the relaxed look. Another one, dating back to 1986 annuals, involves the Cato Positive Index: Three dozen indicators of a report's positive or negative nature, from extensive financial disclosure to biographical data on officers and directors—to honesty (which stands at a record low, 80.7%). The CPI was 4.1% among 1986 annuals. Fifteen years later, it has merely doubled—to 8.1%. I would have guessed the CPI would record a consistent, year-after-year climb, in keeping with the learning curve, but obviously I would have been wrong. Does that convince you sufficiently that I do indeed monitor annual report trends?

How important are graphs in annual reports?

S.C.: Graphs are simply another form of communication (it's like asking "How important are photographs in an annual report?"), and an attractive graphic device. But I advocate graphs be captioned—so their meaning is understandable to the reader. Know that among 1982 annual reports, 82% included graphs. The percentage declined until 1995 reports, when it rose to 85%. A year ago, the number stood at 85 of 100 reports to include graphs—off this year to four of five. Of that 80%, one in five (20.1%) is fully captioned—for the scanners among us.

A client company would like to produce fewer print versions of its annual report and direct investors instead to the website version. Given the current climate of corporate distrust and lack of honest leadership—how confident are you that the print annual will become a thing of the past? Were the SEC to permit it, what percentage of investors are comfortable or satisfied with an online-only version? Will online-only versions be perceived as yet another way that big corporations are attempting to hoodwink investors?

S.C.: No in-depth research to my knowledge has been done on the subject. But I'm convinced that, especially in the present climate (where a lot of us believe most CEOs and their underlings, given the chance, lie through their teeth), it's a serious mistake to cut back on the print report. The online annual is a fine appetizer, but it's just that—an appetizer. Nothing will replace the print piece, with its quality paper stock and graphics, its permanence. I tell groups of investors (gratis; that is, no charge to individual investors) that they ought to avoid at all costs companies that don't know enough to convert the recipient to reader; companies that go the down-and-dirty Form 10-K route, or the SAR (summary annual report) route—especially without disclosing the document's truncated nature on the report cover. Also, I'd opt out of investing in a company whose annual is only online, or one that encourages stockholders to read the online version, offering a print report to those who'll take time to write in. Which few will do, as logic tells you. Do I have research to back up my beliefs? No. None has been conducted yet, to my knowledge.

Do you see any way that IBM could have maintained its nimbleness and technological edge as it grew to a $69 billion company?

S.C.: I only deal with annual reports to shareholders of publicly held companies. But as you know if you've researched my website, and especially if you had a chance to see the print version of my newsletter, which devoted an entire page (containing large type) to the continuing high quality of the IBM report—well, then you know what I think of its annual report. From reading the report over the years, I perceived it to be an upstanding company. Can anyone keep the ball in the air indefinitely? Of course not. But I wouldn't count IBM out. It has what I would call "a proven track record."

I've been asked to measure the communications effectiveness of our annual report. What information do you have about measuring the annual report? Was it a successful communications tool? Did it serve the interest of your company well? A quick response would be great. I just found your site and my report is due tomorrow.

S.C.: Did you ever think of retaining a firm to poll recipients concerning such questions? That's what I'd do. And, in the future, I'd have a working relationship with a pollster so he or she would be on top of things, rather than your working on such an impossibly tight deadline. You may quote me. Can I recommend such a firm? No. But I'm sure there's been reference to some—in my online ASK Mr. Annual Report questions and my responses, perhaps.

What is the social responsibility of stockholders in a corporation?

S.C.: Stockholders theoretically have no responsibility, other than to invest in a company and (perhaps) collect dividends. But if just a few questioned management, demanded some supporting data for proposed action (at the annual meeting, for instance), there's a good chance management at least would think twice about what it proposed—if not actually "run scared" (as I call it) in the future. But maybe that's expecting too much of (1) stockholders and (2) the companies they invest in.

What are your top five or so CEO letters each year (most read/ most admired)?

S.C.: Surely you (1) jest or (2) haven't read my newsletter or (3) haven't heard me answer that question in speeches and/or on the pages of Chief Executive magazine. The best letters I've said often are by Warren Buffett, Jack Welch—and, now, IBM's Louis V. Gerstner, Jr. No competition. Oh, yes: previously, Alcoa's Paul O'Neill, now the country's Secretary of the Treasury.

Is it necessary to disclose compensation in an annual report for a company officer who is performing duties of a spokesperson, i.e., appearing in TV commercials, radio spots, print advertising, personal apperances etc....If so, how should this be stated?

S.C.: This is most unusual. While I'm inclined to say "no," it of course would depend on whether the officer was among the top executives from a remuneration standpoint. You really ought to consult with legal counsel—your corporate secretary, perhaps. Besides, I'm quite sure that wouldn't be required in the annual report—the proxy, maybe, but not the annual report.

You say the first annual report ever printed to shareholders was Baltimore Gas and Electric Co. I was wondering if you knew the first annual report ever printed, not necessarily to shareholders? The oldest one I located was from the State Bank of Massachusetts in 1814. (Information provided by the Harvard Business School.) Do you have records of any older than that? If so, what company was it and what year? Also, how many pages did it contain? What were the contents?

S.C.: Since I only monitor the corporate annual report to shareholders of publicly held companies, I wouldn't have a clue concerning any report prior to that of Baltimore Gas. It remains the very first report I can locate—of a company to its shareholders, that is; a publicly held corporation.

Describe the process for obtaining an "annual filing report" for a corporation in Oregon. Namely Regence BlueCross BlueShield of Oregon.

S.C.: Sorry—I haven't a clue. I only deal with publicly held companies—corporations with stockholders, their stock listed and traded on stock exchanges.

I would love the opportunity to get any questionnaires, voting, quizzes, surveys, etc., if you can send anything to me.

S.C.: Sorry, but ours is a by-subscription service. All my subscribers (see online order form) get the kind of material you seek—on a regular monthly basis. Results, currently, of my 17th annual Producer Poll, for example. I've been monitoring annuals since the 1982 crop—only person worldwide to do this. Someone has to pay for my one-of-a-kind knowledge/findings.

For our next annual report, we're considering taking a broad theme, developing it and describing how we relate as a company. For example, as an auto insurer, we might talk about trends in highway travel. Any thoughts on whether this is a good idea? Any examples?

S.C.: No examples that come immediately to mind, though you might scour back issues of my Newsletter on Annual Reports. It strikes me, though, as a splendid concept. Go to it!

In the Q&A with the CEO, do you have a preference for posing the questions with a personal approach (example: "Did WE meet OUR goals?") or a more detached journalistic approach ("Did THE COMPANY meet ITS goals?")?

S.C.: I prefer the first-person pronoun, though there doubtless will be times when the CEO will say "Did we meet our goals?" Preferable, I guess, to "Did the company meet its goals?" though that won't be a black mark on you either. In other words, it's the proverbial "half a dozen of one, six of the other." Now, though, I see a different facet to your question: I'm guessing a Q&A would take the "Did the company meet its goals" approach. But I might suggest you prepare the Q&A both ways—the personal approach and the more-detached approach—and see if the CEO (or your immediate boss) has a preference. That way, you can't lose. And higher-up executives would applaud your giving them options.

What are some of the items that are required in 10-K reporting but not in the annual report.

S.C.: I honestly don't know. May I suggest you consult with your corporate secretary, and/or ask a client to ascertain the answers. Or, perhaps even better: Write/contact the SEC!

Do you think it is feasible or not for CEOs to be aware of every financil detail in a business?

S.C.: Of course not. What the toothless SEC is requiring is that chief executives take pains to assure themselves that the data they're asked to sign off on indeed has been "put through the wringer"—that is, is pure as the driven snow, as they say in Michigan, where I grew up. In other words, what the SEC hopes to accomplish is to get CEOs to envision, on their massive desks, a "The buck stops here" sign.

would u invest in Pronto, i3mobile!

S.C.: I honestly don't know. You see, I've long held that the stock market is the world's largest crap shoot, and I want nothing to do with it. My advisors have countered that it's "as fine a system as exists." Now, I wonder who you believe is right!

Do you find the majority of annual reports still include board photos? What is your opinion on annuals that use them and that don't?

S.C.: First, the numbers, which only Cato Communications, Inc., possesses (I'm the sole monitor of this $5.2 billion industry): Two in five companies (39.2%) use photos of directors in their annuals currently. That's tied, with 1997 annuals, as most in the 19 years I've monitored this aspect of annual reports. Lowest: among 1988 annuals, when but 22% (just over one in five) ran director photos. Know that more than two in three (68.2%) of those to publish photographs of directors picture them alone, which is what I recommend—an indication on the company's part of its willingness to illuminate the men (and, one hopes, women) who sit on the board. It's another positive indicator, among 36 copyrighted elements that reflect well, or poorly, on the corporation whose name is on the report cover. Know, too, that we check to see if, among those companies to picture directors, the boards are seen to exclude women or minorities. First year that was monitored, among 1993 annuals, 35% of boards were seen to be comprised solely of white-bread males. That stood at a low 11.5% among 2000 annuals (a third so many), though the current 15.3% is second lowest in the nine years this has been tracked. Aren't you glad you asked?

Does your exclusive survey on annual reports provide detail, by FYE, of the number/percentage of companies that file 10-K traditional format vs. 10-K wrap? And how does one acquire the survey?

S.C.: No—not with the precision you want, I'm afraid.

I need to know what benefits a chief executive officer (CEO) receives. This is for my business class.

S.C.: CEOs get a host of benefits, from paid-by-the-company suites (not only in the headquarters city, but in major cities elsewhere), to a limousine with driver, even for personal trips. Plus membership in any number of private clubs, the meals and/or drinks a writeoff (that is, company expense). Plus retirement benefits, deferred compensation, even, in some instances, wardrobe. Plus a completely furnished officer—or two, or three (Monsanto's CEO kept an office in Chicago, though the company was headquartered in St. Louis, for example). Retirement-planning services, and financial advisors galore. Oh, so many perks, so little time to savor them all!

Is there any correlation (scientific or otherwise) to employing a thematic approach to the development of an annual report, and its likelihood of success?

S.C.: No scientific studies exist that I'm aware of, but I'm convinced, as a professional communicator, that an annual report fronted by a carefully chosen, clearly articulated theme—supported throughout—has a better chance of being effective than a report without a theme, or with one that's weakly supported. I monitor presence of themes, and the percentage that are forcefully supported. Among 2001 reports, 68.1% of annual worldwide had a theme, of which 80.3% (four of five) were strongly supported throughout. Back among 1987 annuals, first year of monitoring this element, 27%—just over one in four—reports offered up a theme. High mark was among 2000 reports—a year ago—when 72% proffered a theme. It was not until the 1993 crop of reports that I began to monitor the percentage that I viewed as strong supported. That first year, 81% were strongly supported, but that percentage declined over the years—to the year-ago 67.9%. So there has been a substantial improvement in the past year in the percentage of themes well supported. That's encouraging. Hope this helps.

What do you believe is the biggest error committed by producers of annual report?

S.C.: Producers' biggest error may be something out of their control: They don't have sufficient clout, seldom are high up enough in the corporate hierarchy to wield real power. Another "error" that likewise may be out of the producer's control is lack of time to do a really good job, plus lack of perspective—the ability to look at one's own company and what its story is. As an outsider might. I look at hundreds upon hundreds of reports every year, in depth, and often am amazed when someone I respect turns out a simply awful product. "How could this happen?" I ask myself. Too many cooks spoiling the broth—that old cliche' comes to mind. Too often, what's needed is an independent, outside assessment, which perhaps is why companies with simply rotten reports pay me to tell them how bad their product is. Then they can show their bosses officially how awful a job the producer was forced to turn out.

Am planning my annual report unit for the next month in Consumer Economics. Could you please give me an approximate unit cost of producing annual reports for the Fortune 500 companies? Or give me a company name and how much their report cost to produce? Thank you.

S.C.: Average per-copy investment among 2001 annuals (my exclusive Producer Poll findings): $3.24 per copy. The per-copy investment among 1985 reports: $2.44.

Twice in the last week I have been challenged by corporate communications directors to come up with a solution to convert more shareholders from printed to web-version annual reports. Here in the UK, there has been little demand to forego the printed annual report. Is that your experience in the States and do you believe shareholders should be encouraged towards the digital format?

S.C.: I hate to see companies take what I view as "the easy way out"—further denigrating the print piece in favor of an online version, which to be sure has its place. I don't see overwhelming support in the States, either, for the online annual vs. the print version. I agree every company should have an online presence, but that to me doesn't obviate the print piece: They're distinctly separate media, to my way of thinking. I couldn't conceive of doing away with the print version of my monthly Newsletter on Annual Reports, for instance, instead figuring everyone would be satisfied with online material. It's somewhat comparable to a cassette of one's favorite movie, preceded by snippets from other movies. Tantalizing, but decidedly incomplete, unfulfilling.

I work for a small design/advertising agency in McLean, Virginia, outside of Washington, DC. We are looking for a list of publicly held companies in our area (VA, MD and DC), with their marketing manager's name. Currently we produce the Fannie Mae Annual Report and would like to grow that part of our business. Please advise if you know of such a resource.

S.C.: I'm unaware of such research, though I wouldn't be surprised if someone like Standard and Poor's compiled that kind of data. You might check out S&P online.

I would like to know how I could get annual reports of sportive companies subsidiaries in Europe.

S.C.: The Wall Street Journal online has a service enabling one to get annual reports of publicly held companies. Whether or not "sportive companies" in Europe are among them is another matter. But that's the best I can do.

Is the annual report simply a propaganda document used to put a desired "spin" on a company's performance? Can we question its necessity, especially with the efficient market hypothesis theory in mind?

S.C.: Sure, one can question anything and everything, "efficient market hypothesis theory" or no. The annual report has existed more than 175 years. Sure, companies put their "spin" on accomplishments, but as you know if you've spent any time perusing my website, you know the annual is far more than a propaganda piece. And if the spin isn't honest and accurate, then I (among others) take them to task. There's a reason companies for a century or so have opted to invest the time and energy and money to produce the annual report to shareholders. I'm convinced that the successful corporations are those that invest sufficient time to truly, accurately and honorably relate the company's story.

where can i find an the annual report for verizon and reebok for the year 2002?

S.C.: Probably not out yet—we're just finishing up with 2001 reports. Only companies on a fiscal-year basis would have their 2002's out. Have you thought of getting a copy (1) directly from the company or (2) online using the Wall Street Journal annual report service—have you tried that?

Is it too early to see any trends in how corporate managers are handling discussions of corporate governance and ethics issues in their annual reports? Part of their letters, separate pages, etc. What rumblings have you heard?

S.C.: Realize that annuals I'm seeing so far are from companies on a fiscal-year basis. Traditionally, they're crummy (by comparison). Also, in many instances they were produced before all the hullabaloo concerning transparency really came to the fore. So far, a few are paying lip service to transparency. Are their words, and actions, indicative of sincerity? At year's end among 2001 annual reports, honesty stood at 80.3%, lowest ever. So far among 2002s? 88%, a bit better. My assessment, though (you may quote me): I'll believe it when I see it—that corporations got religion!

I have noticed over the last year the trend to display such information as net income, return on shareholders equity, all bar charts, etc., now designed and placed on the page horizontally. Does this style psychologically express all numbers being flat or confusing to readers? I would appreciate any feedback. From the old school of Vertical Bar Charts. Cheers.

S.C.: Strangely enough, I've detected the very same trend—this, among early-arriving 2002s, produced by companies worldwide on a fiscal-year basis. Believe it or not, I tend to concur in what I understand your observation to be—that horizontal graphing, as contrasted to vertical (up-and-down) graphs, does tend to give me a negative reaction, subconsciously at least. Final authority on this, though, may rest with your psychiatrist. Let me know what he (or she, of course) says!

How do you obtain an anuual filing report for a corporation currently registered in Arizona?

S.C.: Have you called the company itself? Its corporate secretary, assuming you have good reason to request its "annual filing report" (whatever that is), I'm sure would honor your request. As a last resort, try the SEC.

For my senior economics class, we formed our own student business and sold shirts with our high school mascot on the front. I am in charge of writing the annual report for the stockholders in my class. I am confused about how to start it off and what to include. If you could please help me I would greatly appreciate it ~! THANK YOU ~!

S.C.: While we simply can't help all the college (and high school) students who request aid, my advice in this instance is: Check out my website. Study my criteria on what makes a good annual report. See what elements I advocate an annual report contain. (Hint: Begin by talking about how the company did, generally, by comparison to (1) others in its industry or (2) its aspirations or (3) its prior year.) Specifically, how many T-shirts did you prepare? How many did you sell? What are your plans to get rid of the excess, if any? Did you fall short of expectations? If so, why?

Did you do an article in CEO magazine on best annual reports this year? Seems to me I've always seen it about October and missed it this year.

S.C.: Several months ago, I recited my frustrating experience with Chief Executive, now under new management. And, since 9/11, in a new location—in New Jersey. The magazine has never informed me, one way or another, concerning my long-running annual feature. First shoe to drop was when the magazine came out with my 10 best, but not my 10 worst. "What's going on?" I emailed my editor, who initially assigned me to pick the 10 best and 10 worst each year—this, back in 1983. He apologized for not having informed me—but "I came down with pneumonia and was too weak to do anything but take to bed." Or some explanation to that effect. He explained that the editorial folk argued for inclusion of my 10 worst, but the folks on the advertising side fought against it. Advertising won out. Here's what the problem was: I named American International Group (AIG) to the list of 10 worst a few years earlier, causing the magazine to lose its advertising...which it had just won back. Meantime, the writer who picks the best and worst boards of directors—he referred to the head of the NYSE as "a celebrity director," causing said "celebrity" to cancel the NYSE's annual reception honoring the CEO of the Year. So here they are, losing the reception, but regaining AIG as an advertiser—and Cato names AIG again to the list of world's worst reports. So, from a piece sans 10 worst, it wasn't difficult to say, after 9/11, "No decision has been reached concerning your feature, Sid." When I email the new editor, she says "I'll get back to you" but doesn't. Not long ago, her male aide emailed (from New Jersey) that she no longer was receiving my newsletter, and "wants to be sure she's still on your list." Why, I inquired, in heaven's name would she want to receive my newsletter? Said male aide gushed, using several praiseworthy adjectives, the essence being how fond she is of my work. That's how things stand: no word one way or another as to status of my annual look at the world's annual reports to shareholders. (And, for what it's worth: the magazine's name is Chief Executive, not CEO Magazine.)