ANNUAL REPORT & STOCKHOLDERS MEETING

Anatomy of an annual report

While most annual reports contain optional elements, all reports contain information the SEC requires.

SEC-required elements include: Auditor's report Management discussion Financial statements and notes Selected financial data

Optional elements include: Financial highlights Letter to stockholders Corporate message Report of management Board of directors and management Stockholder information

Mandatory elements

Auditors' report. This summary of the findings of an independent firm of certified public accountants shows whether the financial statements are complete, reasonable, and prepared consistent with generally accepted accounting principles (GAAP) at a set time.

Management discussion. This series of short, detailed reports discusses and analyzes the company's performance. It covers results of operations, and the adequacy of liquid and capital resources to fund operations.

Financial statements and notes. These statements provide the raw numbers for the company's financial performance and recent financial history. The SEC requires three statements — statement of earnings, statement of financial position, and statement of cash flows — all covered in this guide (the statement of stockholders' equity is not addressed here). These statements include a comprehensive set of related notes that provide explanations, additional detail, and supplementary financial information.

Mandatory elements

Selected financial data. This information summarizes a company's financial condition and performance over five years or longer. Data for making comparisons over time may include; revenue (sales) gross profit net earnings (net income) earnings per share dividends per share financial ratios such as return on equity number of shares outstanding market price per share.

Optional elements

Financial highlights. Probably the most often-read section of any annual report, these highlights give a quick summary of a company's performance. The numbers appear in a short table, usually accompanied by supporting graphs.

Letter to stockholders. This letter may be from the chairperson of the board of directors, the chief executive officer, or both. It can provide an analysis and a play-by-play review of the year's events, including any problems, issues, and successes the company had. It usually reflects the business philosophy and management style of the company's executives, and often it lays out the company's direction for the next year.

Corporate message. Some analysts, business executives, and stockholders consider this message an advertisement for the company; others find it useful. However, it almost always reflects how a company sees itself, or how it would like others to see it. Here, the company can explain itself to stockholders, using photographs, illustrations, and text. This message may cover the company's lines of business, markets, mission, management philosophy, corporate culture, and strategic direction.

Optional elements

Report of management. This letter, usually from the board chairperson and the chief financial officer, takes responsibility for the validity of the financial information in the annual report, and states that the report complies with SEC and other legal requirements. The discussion attests to the presence of internal accounting control systems that cover effectiveness of operations, reliability of financial reporting, and compliance with federal laws.

Board of directors and management. This list gives the names and position titles of the company's board of directors and top management team. Sometimes companies include photographs.

Stockholder information. This information covers the basics, the company's corporate office headquarters, the exchanges on which the company trades its stock, the location and time of the next annual stockholder's meeting, and other general stockholder service information. Stockholder information is usually in the back of the annual report.

Foundations Annual Report

Your Annual Report must include, at a minimum: Cover Page Table of Contents Letter to stockholders (Write this section last.)

Corporate Message. It almost always reflects how a company sees itself, or how it

would like others to see it. Here, the company can explain itself to stockholders, using photographs, illustrations and text. Your company's Vision and Mission statements Business Philosophy Describe your industry and markets. Company’s strategic direction What factors made the company succeed?

Foundations Annual Report

Financial Highlights. These highlights give a quick summary of a company’s performance. The numbers appear in a short table, usually accompanied by supporting graphs. Data for making comparisons may include revenue

(sales), gross profit, net earnings (net income), earnings per share, dividends per share, and market price per share.

2008 Financial Highlights

  2008 Change 2007 Change 2006 Change

Net sales $12,822 9% $11,776 8% $10,907 7%

Gross profit as a % of net sales 41.9% (2.1 pts) 44.0% (0.2 pts) 44.2% (0.7 pts)

Operating profit 1,953 5% 1,868 6% 1,766 1%

Net earnings 1,148 4% 1,103 10% 1,004 2%

Net earnings per share            

Basic 3.01 8% 2.79 10% 2.53 6%

Diluted 2.99 8% 2.76 10% 2.51 6%(b)

Cash flow (net cash provided by  operating activities, reduced by capital expenditure)(a)

806 (22%) 1,031 8% 957 24%

Dividends per share $  1.30 8% $   1.20 5% $  1.14 8%

A commitment to sustainable and dependable GROWTH(dollars in millions, except per share data)

Example from Kellogg Company 2008 Annual Report

Foundations Annual Report

Management discussion. A series of short, detailed reports that discusses and

analyzes the company’s performance. It covers results of R&D, Production, Marketing, and

the adequacy of capital resources (Finance) to fund operations. Include in these reports your analysis and comparison to your selected competitors.

Financial Statement and notes – use your Final Year Foundations Annual Reports

The SEC requires three statements – statement of earnings, statement of financial position, and statement of cash flows

Foundations Annual Report

Selected Financial Data. This information summarizes a company financial condition and performance over five years or longer Data for making comparisons may include revenue

(sales), gross profit, net earnings (net income), earnings per share, dividends per share, market price per share and key ratios.

What were your company’s “key financial objectives / ratios” How well did you perform against these objectives What actions did you take to maximize your objectives

attainment

2008 Selected Financial Data

Example from Kellogg Company 2008 Annual Report

Foundations Annual Report

Discuss what your Executive team has done to position your company for the future

Required attachments: (These pages are not included in the 8 – 12 page guideline) Brief Bio for each member of the executive team stating

their primary responsibilities Charts, graphs, etc. to support your written report (do

not include the last FastTrack Report)

Annual Stockholders Meeting

Stockholders meeting

What are you trying to accomplish? Truthfully “sell” to the Board your management

team’s effectiveness. Obtain a “vote of confidence” as a management

team and to continue your contracts. The Board has asked you to come before

them to discuss four things: 1. Your management team’s overall performance over

the past eight years

2. Andrews’ financial performance in your final year

3. Andrews’ performance compared against two of your key competitors (select two of your major rivals - Baldwin, Chester, Digby, Erie, or Ferris and prepare a competitor analysis).

4. What specific steps your management team has taken to position Andrews for future success

Points to Think About:

Who is the Audience? Board of Directors

the group of people responsible for supervising the affairs of a corporation

the board of directors generally sets broad corporate policy rather than participating in day-to-day managerial decisions

members are elected by the firm's stockholders and may or may not be stockholders themselves.

Microsoft Campbell Gap Nike

Presentation:

Introduction Team Introduction – name and functional responsibility

Content Ensure Clarity of Information

Conclusion (The Last Chance with Customer – Be Enthusiastic) Shouldn’t end abruptly… “I guess that’s it!” Summary of what the Team Presented (This takes Time and

Enthusiasm) Must ask for “Vote of Confidence”

Q & A Interaction

Speaker to Screen Synchronization – Practice Transitions

Introduction of next speaker Formal and consistent

Presentation:

Time: 20 minutes (minimum 17 minutes – maximum 22 minutes) Business Professional Time must be Proportional between Teammates Speak Loudly and Slowly => Distinctly Don’t MEMORIZE! Smile – show you are comfortable with the subject matter Be Enthusiastic !! No Distractions

Swaying Clapping Hands Mumbling

No Starting Over

Presentation:

Minimize Verbal Fillers UM, AH, You Know……, Like

No Hands in Pockets No Notes or Scripts Maintain Eye Contact with Audience – Not the Wall or Into

Space Don’t Read Screen Audience can do this faster; Explain the purpose of the slide

No Standing Behind the Podium One Person at Computer if necessary Speaker out front

Don’t cross in front of screen in formal presentation Non-speakers pay attention

Act Interested, support your team ! Don’t Act Bored