Is innovative
communication
techniques needed in the
annual report ?
Agreeing Side
Casey Lau
Gloria Ho
Hayley Cheng
Hon Pok Man
Agenda
Definition of Communication Technique
Objectives of Annual Report
Communication Problems
Recommendations
Summary
Conclusion
Definition of
Communication
Technique
Definition of
Communication
Technique
Format e.g. tables, charts, graphics
Layout e.g. comparative figure, 5-yearsummary
Presentation skill e.g. grouping, highlighting trends, summarizing, selection
of content, creative visual effects.
Objectives of
Annual Report
Objectives of Annual
Report
Around the world, publicly traded companies
publish annual financial reports in order to:
Inform and communicate objectively with
shareholders, institutional investors,
corporate bankers, and other potential
investors about their performance, and
Fulfill the requirements of listing rules, and
Promote their public image and allow the
public to know more about them.
Objectives of Annual
Report
HKSSAP 2:
“The primary objective of financial statements
is to provide information that is useful to users
for the purpose of assessing the financial
position at a particular point in time and the
performance and cash flows of an enterprise
during a specified period of time and the
stewardship of management during that
period.”
Current
Communication
Problems in the
Annual Report
Information Overload
Dr. Meyer, professor of University of
Flensbury
Information Overload  sender
provides more information than
investors & readers are able to process
Information Overload
Quantitative Information Overload

Size & number of information contained in annual
report  waste of time
Qualitative Information Overload

Complexity (e.g. use of jargons) & repetition (e.g.
Director’s Report, Segmental on hand Operations
Review) of information in annual report  hard to
understand
Readability Problem
Findings (e.g. by Smith, Gibson,
Schroeder) have consistently revealed
that the annual reports are generally:
Misunderstanding
 At a reading ease level of difficult to very
and wrong decision
difficult e.g. use jargons
 Beyond the fluent comprehension skills of
about 90% of the adult population and 40%
of the investor population.
Language Barrier
Annual reports are usually in English

In Hong Kong, English is the second language
Use of jargons
Even though some annual reports are
bilingual, since the education level of the
majority of the public is not that high  cause
barrier to understanding.
[According to Govt’ stats, only 13% of the
Hong Kong people have received tertiary
education.]
Recommendations
& Benefits
Recommendations
2 main changes :
(1) From a prospectus only
 A package of :
(A)
Prospectus +
(B)
CD-Roms
(2) From scanned AR on the Internet
 Web-based Annual Report
Recommendations for
CD-Rom
New content component
New presentation technique :
 From narrative to visual
 a tool to enhance Annual
Reports’ understandability
Recommendations for
CD-Rom
(A) CONTENT :
From narrative disclosure of nonfinancial info. to visual & audio
e.g.
notice of AGM, directors’ report,
auditors’ report, etc.
** low reading ease, but a better
predictor than financial Info.
 video + power-point
Sample of visual aids
Directors’ Report
Employees
Directors’ Bibliography
Directors’ Interest in
Contract
Previous Next
Recommendations for
CD-Rom
(A) CONTENT
(2) Voluntary disclosure :

from prospectus to CD-Rom
Recommendations for
CD-Rom
(A) CONTENT
(3) Provides links as references
e.g. financial analyst website,
accounting-related references,
auditors’ information
 hyperlink attached
Recommendations for
CD-Rom
(B) PRESENTATION TECHNIQUE
(1) Graphical presentation :
e.g. 5-year financial summary &
highlight
 presented by animated
graphics, tables & charts in
colour
Recommendations for
CD-Rom
(1) Graphical presentation (con’t) :
Example
Benefits of CD-Rom
(1)
Video + power-point :

more understandable

listening VS reading

selective reading

point-form & simple & shorter words


easier to absorb & more interesting
within fluent comprehension
Benefits of CD-Rom
(2) Voluntary disclosure :


Selective reading
Less information overload in prospectus
(3) Links :

As a supplementary aiding device
Benefits of CD-Rom
(4)
Graphical presentation :
 solve language barrier problem



 technical languages & terms
assist unsophisticated users
comparative trend & figures
displayed



summarize information
focus comprehensive overview
show big picture
Benefits of CD-Rom
(4) Graphical presentation :
  reading time
 more interesting cause animated &
visualized
 colour help highlight & reinforce

seize attention
Recommendations for
AR
Remain what we have now;
having no big change, with jargon terms

Comply with mandatory requirements and
professional
+ a summary financial statement
- voluntary disclosure  CD-Rom
Summary Financial Information
 Condensed Consolidated Statement of Earnings
 Condensed Consolidated Balance Sheet
 Condensed Consolidated Statement of Cash
Flows
 Notes to Condensed Consolidated Financial
Statements
 Report of Independent Auditors and Accountants
 Selected Financial Data
Selected Financial Data
In millions, except per share amounts
2000
1999
1998
1997
1996
$48,782
$42,370
$39,419
$33,465
$31,613
Earnings from operations
3,889
3,688
3,399
3,405
2,926
Net earnings from continuing
operations
3,561
3,104
2,678
2,515
2,085
$1.80
$1.54
$1.29
$1.23
$1.02
1.73
1.49
1.26
1.19
.99
.32
.32
.30
.26
.22
$34,009
$31,764
$28,624
$26,681
$22,934
34,009
35,296
31,708
29,852
25,977
3,402
1,764
2,063
3,158
2,579
Net revenue
Net earnings per share, continuing
operations
Basic
Diluted
Cash dividends declared per
share
At year-end:
Assets-Continuing operations
Assets-Total
Long-term debt
Benefits of AR
People feel more comfortable if there
still a book hold on hand
Recommendations for
web-based AR
Clear presentation of figures instead of
copies of scanned AR
Music, pictures
Reference links (e.g. comments from some
analysts)
Video clips of press conferences
Interactive design (e.g. Flash)
Power search
Guided tour -> similar to MS office assistant
Benefits of web-based AR
Computer help generate more
sophisticated information
More interesting to read
Selectively read the information wanted
More info. given (e.g. video clips,
reference links)
Better quality of figures presentation
Summary
CD-ROM and internet help the reader
analyze the meaning of the AR
Multimedia:
1. reduce information overload problem
2. Help lower-educated people
3. Promote the interest in reading AR
Summary
How the multimedia helps:
1. Use graphics, videos- understand
meaning with an interest involved
2. No more words required:
reduce time to analyze the company
Summary
Why multimedia can help:
1. Evidence shows- people memorize
images better than words.
2. Good relationship with the company,
good images can be enhanced
Conclusion
Innovative communication technique:
improve decision making quality
Investors- more logical decision making
Multimedia- help investors understand
the company better
Our decision
More innovative
communication technique
should be used in the
annual report!
~ The End ~
Thank You !