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Competition raises the standard

The improvement in reporting over the years has been driven by the interests of listed companies and their investors

ANNUAL REPORTS HAVE come a long way since the Best Annual Reports Awards scheme was launched 33 years ago. Originally perceived as sober records of financial performance, these reports are now considered a critical tool in communicating with shareholders, and even as a mirror of society.

'They were pretty simple documents back [when we first started the awards],' recalled Howard Gorges, judging chairman of the awards and vice-chairman of South China Brokerage. 'But time has gone by, the stock exchange has developed, capital markets have become more sophisticated, and scandals have caused people to become more concerned about standards. The funds management business has become huge, specialised and more demanding. All of these things have helped in the drive to create a higher standard of annual reports.'

As someone who reads 120 annual reports each year, Mr Gorges is qualified to say that these publications offer a unique insight into Hong Kong.

'They give you a pretty good take on what's going on in Hong Kong,' he said. 'And it's not just the corporate side. If you really want to get a feel for Hong Kong, the reports from non-profits tell you a lot about the social side.'

The overall improvement in the standard of annual reports is part of a natural evolution driven by the combined interests of listed companies and their investors.

'As the Securities and Futures Commission and the stock exchange up the standards, both for listings and for what's expected to be reported to shareholders, there's a big demand for good reporting,' Mr Gorges said. 'If a company wants to have recognition as well as put its messages over, a good report can provide the means for doing that. So it's two-way traffic.'

He said the awards, which emphasise giving shareholders an accurate picture of a company, 'warts and all', have had a positive impact on annual reports.

Modern graphic design and clear, readable text had also helped to make annual reports, if not page-turners, at least reader friendly.

As reports become longer and more complex, some institutions have even gone to the extent of publishing abridged versions along with the complete report. 'It's more expensive to do that, but we are getting to the stage where reports are getting too thick,' Mr Gorges said. 'Once the mentality takes hold that a report is too long and that shareholders are not going to read it, people will start to think more concisely.'

Companies are becoming increasingly aware of the value of competing in the Best Annual Reports Awards. 'The drive is usually coming right from top management, especially by those trying to get a prize, so there's a pretty good commitment,' Mr Gorges said.

'It's important, because companies realise the awards are something they can use for marketing. And it also helps internally, because if you are an accountant or a company secretary and you are doing a good job by producing a very good annual report, top management will react favourably. So it's sort of a virtuous circle.'

Various trends and developments over the past few years have left their mark on annual reports. One such development is corporate governance, which was reflected by some companies when the concept first exploded on the scene; over time firms have incorporated the concept into their reports, making it a standard part of the content.

'Corporate governance is a big deal now, but it might become less of a big deal,' Mr Gorges said. 'The good companies have started to produce some good ways of presenting their corporate governance, and that will start getting copied.'

Company responsibility towards the environment was another issue that was being addressed in annual reports.

Asked to predict the next major trend, Mr Gorges mentioned the growing connection between companies and the community.

'The general nexus between corporates and the community is something people are going into in different ways. If the community is being affected by the environment, companies are becoming more proactive in explaining what they are doing. Banks often want to emphasise what they do for a community. They sponsor charities or they might try to help schools, for example.'

Mr Gorges also applauded the general effort among companies for greater transparency, but added that he would like to see more steps taken in that direction.

'We think companies should pay more attention to future prospects and make their reports more future-oriented, such as where they are going and how they are going to get there.'

The awards presentation will be held at the Island Shangri-La's Atrium Room on November 13.

Quick facts

Eligibility for entry

Any company or organisation that is listed in Hong Kong, or with Hong Kong as its principal place of business, with financial reports based on international and/or Hong Kong accounting standards. The Hong Kong Management Association reserves the right to decide on eligibility.

Required materials

A completed entry form, 13 copies of the company's most recent published annual report and accounts of the company or organisation for a financial year that ended in 2005 or during 2006

Participation fees

$680 for General Category applicants; $380 for Non-profit Making and Charitable Organisations Category

Deadline for applications

July 5, 2006

Contact

Doris Ng, tel 2774 8533

Helen Li, tel 2774 8585

Website:

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