Annual Report
An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. Typically, an annual report will contain the following sections: General corporate information Operating and financial highlights Letter to the shareholders from the CEO Narrative text, graphics, and photos Management's discussion and analysis (MD&A) Financial statements, including the balance sheet, income statement, and cash flow statement Notes to the financial statements Auditor's report Summary of financial data Accounting policies In the U.S., a more detailed version of the annual report is referred to as Form 10-K and is submitted to the U.S. Securities and Exchange Commissions (SEC). The annual report contains key information on a company's financial position that can be used to measure: A company's ability to pay its debts as they come due Whether a company made a profit or loss in its previous fiscal year A company's growth over a number of years How much earnings is retained by a company to grow its operations The proportion of operational expenses to revenue generated The annual report also determines whether the information conforms to the generally accepted accounting principles (GAAP). Information that can be found in the annual report includes: Table, chart or graph of holdings by category (e.g., type of security, industry sector, geographic region, credit quality, or maturity) Audited financial statements, including a complete or summary (top 50) list of holdings Condensed financial statements Table showing the fund’s returns for 1-, 5- and 10-year periods Management’s discussion of fund performance Management information about directors and officers, such as name, age, and tenure Remuneration or compensation paid to directors, officers and others etc. A mutual fund annual report, along with a fund's prospectus and statement of additional information, is a source of multi-year fund data and performance, which is made available to fund shareholders as well as to prospective fund investors.
What Is an Annual Report?
An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. The front part of the report often contains an impressive combination of graphics, photos, and an accompanying narrative, all of which chronicle the company's activities over the past year and may also make forecasts about the future of the company. The back part of the report contains detailed financial and operational information.
Understanding Annual Reports
Annual reports became a regulatory requirement for public companies following the stock market crash of 1929, when lawmakers mandated standardized corporate financial reporting. The intent of the required annual report is to provide public disclosure of a company's operating and financial activities over the past year. The report is typically issued to shareholders and other stakeholders who use it to evaluate the firm's financial performance and to make investment decisions.
Typically, an annual report will contain the following sections:
In the U.S., a more detailed version of the annual report is referred to as Form 10-K and is submitted to the U.S. Securities and Exchange Commissions (SEC). Companies may submit their annual reports electronically through the SEC's EDGAR database. Reporting companies must send annual reports to their shareholders when they hold annual meetings to elect directors. Under the proxy rules, reporting companies are required to post their proxy materials, including their annual reports, on their company websites.
Current and prospective investors, employees, creditors, analysts, and any other interested party will analyze a company using its annual report.
Special Considerations
The annual report contains key information on a company's financial position that can be used to measure:
The annual report also determines whether the information conforms to the generally accepted accounting principles (GAAP). This confirmation will be highlighted as an "unqualified opinion" in the auditor's report section.
Fundamental analysts also attempt to understand a company's future direction by analyzing the details provided in its annual report.
Mutual Fund Annual Reports
In the case of mutual funds, the annual report is a required document that is made available to a fund's shareholders on a fiscal year basis. It discloses certain aspects of a mutual fund's operations and financial condition. In contrast to corporate annual reports, mutual fund annual reports are best described as "plain vanilla" in terms of their presentation.
A mutual fund annual report, along with a fund's prospectus and statement of additional information, is a source of multi-year fund data and performance, which is made available to fund shareholders as well as to prospective fund investors. Unfortunately, most of the information is quantitative rather than qualitative, which addresses the mandatory accounting disclosures required of mutual funds.
All mutual funds that are registered with the SEC are required to send a full report to all shareholders every year. The report shows how well the fund fared over the fiscal year. Information that can be found in the annual report includes:
Related terms:
10-K
A 10-K is a comprehensive report filed annually by a publicly traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC). read more
SEC Form 10-Q
Learn about SEC Form 10-Q, a comprehensive report of a company's performance submitted quarterly by all public companies to the SEC. read more
Accounting
Accounting is the process of recording, summarizing, analyzing, and reporting financial transactions of a business to oversight agencies, regulators, and the IRS. read more
Electronic Data Gathering, Analysis and Retrieval (EDGAR)
EDGAR is the electronic filing system created by the Securities and Exchange Commission for corporate filings. read more
Financial Performance
Financial performance measures how well a firm uses assets from operations and generates revenues. Read how to analyze financial performance before investing. read more
Fiscal Year (FY)
A fiscal year is a one-year period of time that a company or government uses for accounting purposes and preparation of its financial statements. read more
Fundamental Analysis
Fundamental analysis is a method of measuring a stock's intrinsic value. Analysts who follow this method seek out companies priced below their real worth. read more
Generally Accepted Accounting Principles (GAAP)
GAAP is a common set of generally accepted accounting principles, standards, and procedures that public companies in the U.S. must follow when they compile their financial statements. read more
Management Discussion and Analysis (MD&A)
Management discussion and analysis (MD&A) is a section of a company's annual report in which management discusses numerous aspects of the company, both past and present. read more
Mutual Fund
A mutual fund is a type of investment vehicle consisting of a portfolio of stocks, bonds, or other securities, which is overseen by a professional money manager. read more