COMMENTS ON LETTER TO SHAREHOLDERS (LTS)
What makes an annual report score 10 points in this category:
Varied Media. The worst reports have LTSes which consist of a photo of the CEO/COB, a page of text, and reproduced signature at the bottom. Investors want more: charts, tables, lists, bullets, and so on. A Q&A format is a great departure from convention, which has increased in popularity in recent years. LTSes represent the top brass & should exhibit as much forethought & planning as would go into their presentation at an investor conference.
Something Substantial to Say. In the same vein as the previous point, strong LTSes should offer unique content not found in the rest of the report. It should reflect the executive’s style and convey a sense of personal, one-to-one communication to readers.
Trends we noted this year:
Well-Balanced Tone. Traditionally, LTSes can become bogged down in corporate-speak since the notion is that a CEO has to sound smart and sophisticated. This has been replaced with a tone that is more conversational while delivering unflowered commentary for the most part. A bit of the content still can appear wordy, e.g. “We refocused our unregulated business strategy on fuel distribution and divested other business units we felt no longer offered returns commensurate with their risk,” in one top report. We know that a company’s CEO is a bright guy, and that he assumes his readers are as well, but his goal should be to build a relational bridge with readers rather than print something that most likely would never be expressed in orally.
The Future? A long-term picture is being painted more and more. While it’s good to know what will be happening ’in the years ahead,’ what’s happening in the very near future (next four quarters) is also on the top of everyone’s mind, e.g. driving down internal costs by 10-15% in 2011.