Saluting the best Annual Reports

by Leslie Yee, Nov 15 2005Finding excellent annual reports which bring to life what's going on in the company takes a lot of time, Leslie Yee reports. Imagine having to wade through 604 annual reports - many of them more than 100 pages long.

That task befell five professionals from Ernst & Young (E&Y), who hunkered down for two weeks to get through it. E&Y partner Eleanor Lee says it took up to an hour to read each report, and the reports were by companies with a primary listing in Singapore and a financial year-end between April 1, 2004 and March 31, 2005.

The E&Y team was helping in the screening for the Annual Report Award (ARA). Its feedback was provided to the ARA working committee, which in turn has come up with a shortlist of 71 reports. The 12-member working committee, made up of representatives from various organisations, is now going through the shortlisted reports, which represent the top 5-15 per cent of reports in their respective categories. E&Y partner Kevin Kwok, commenting on time and resources his firm put into the process, said it is "a worthy investment to honour those companies that have made the extra effort to present excellent annual reports." Working committee members will rank the annual reports individually before sitting down as a group to reach a consensus on the best. "Sometimes it's clear who the winners are, sometimes not. In such cases we will discuss and come to a consensus," says Ms Lee, a member of the ARA working committee who has been through the process before.

ARA is probably Singapore's oldest corporate award, with its roots going back to 1974. It was introduced to encourage listed companies to increase the level and quality of voluntary disclosure in their annual reports to better meet the needs of investors and other stakeholders, such as employees, creditors and the public. Mr Kwok, who chairs the ARA working committee and is a veteran of the selection process, says: "ARA first started with only a handful of companies, like Cycle & Carriage and Hume Industries, who were prepared to go beyond the minimum mandatory disclosure. Over time we've seen government-linked companies take the lead - they've done a good job setting the pace for the wider market. "What has been really dramatic over the past two or three years has been the flurry of changes in financial reporting standards, corporate governance and risk management guidelines and disclosure. These have greatly increased listed companies' transparency and disclosure." ARA appears as relevant today as when it was launched.

Tan Boen Eng, president of Institute of Certified Public Accountants of Singapore (Icpas), says: "The annual report is a key communications tool through which investors and other stakeholders obtain useful and meaningful information about a company. With investors getting more sophisticated and knowledgeable, the demand for excellent presentation of information and a wider scope of disclosure becomes even greater." Agreeing, Christine Ong, Singapore country head of UBS, says: "I believe the annual report is a company's most important and effective communications tool, not only for its shareholders and investors but also for all its major stakeholders."

Major Marketing Tool
Ms Ong says the annual report "remains the principal document for the investment audience to get its first concrete information about a company's financial standing and prospects." She also reckons the annual report is "a major marketing and branding tool" for major clients and business associates and "a very powerful communications channel" for employees and potential recruits to understand the company they work for or want to join. E&Y's Ms Lee says it is heartening to see how individual companies' annual reports have improved over the years. "An excellent annual report is one that is succinct, clear and with depth - it should bring to life what is going on in the company," she says. ARA is now under the umbrella of the Singapore Corporate Awards (SCA). Besides the ARA, the inaugural Singapore Corporate Awards also comprise the existing Best Managed Board Award as well as the Best Investor Relations and the Chief Financial Officer of the Year Awards. SCA is organised by The Business Times in collaboration with UBS and supported by the Singapore Exchange.

Other partners are: Icpas, Investment Management Association of Singapore, Securities Investors Association (Singapore), Singapore Institute of Directors and Citigate Dewe Rogerson i.MAGE. There are four categories under the ARA. In each category, awards are presented to the winner and two runners-up. Eighty-six companies will vie in the category for main board companies with market capitalisation of $500 million or more, while 359 companies will compete in the category for main board companies with a market cap of less than $500 million. There are 159 companies competing in the Sesdaq category and 101 in the newly listed category. The award for newly listed companies has been created to recognise maiden annual reports, so these companies can be encouraged to raise their standards of corporate disclosure.