Annual Report Trends 2007

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Contents:

02 AR TRENDS 2007 answers essential questions 03 How the survey was done BarnesMcInerney Capital Market Communications profile The Craib Group of Companies profile

04 06 08 10

Section 1:

First impressions Great covers: Turning heads, turning pages At-a-glance: Something to be remembered by Investment argument: Stating your case

14 16 18 22

CSR TRENDS 2007 is Craib’s first-ever look at benchmarks and best practices in sustainability/corporate social responsibility reporting, and serves as a complementary resource to AR TRENDS. For information on obtaining copies, visit www.craib.com.

Section 2:

Leadership Special report: Barron’s most respected CEOs Message to shareholders: In their own words Corporate governance: Guiding the ship forward

24 26 30 32

Section 3:

Commitment Strategy: Laying the groundwork Objectives & targets: Putting it on the scoreboard Sustainability: Preparing for the future

AR TRENDS 2007

“What are other companies doing?” “Is an annual report worth the effort and expense?” “How does my last report compare to other reports?” These are the three most common questions we’re asked at the beginning of every annual report season. This book will help answer these essential questions.

34 36 38

Section 4:

Credibility Testimonials: Let them do the talking Visuals: What you see, what you get

42 44 46

Section 5:

Performance MD&A: Making sense of it all Risk management: Keeping things under control

48 50

Section 6:

Accessibility Websites: Ready when you are

The contents of this book are protected by copyright and may not be reproduced without permission. ©

Craib Design & Communications, 2007.

To download a PDF version of this book or to obtain printed copies, visit www.barnesmcinerney.com or www.craib.com.

54

Who we surveyed

56

Credits

AR TRENDS 2007 answers essential questions: With the business environment changing so rapidly, with so many new regulations and fresh approaches – and so little time – it has become even more important to benchmark our performance. This report is intended to give annual report producers a clearer view of current standards and practices. We wanted to provide you with some insight into annual report trends in Canada and the United States so that you can formulate a framework and rationale for your own annual report. First, what are other companies doing? In the United States, most companies now issue only Form 10Ks. In fact, in 2006 only 35% of US companies that sent us a copy of their annual report sent a traditional report. The rest sent a Form 10K, a Form 10K in a glossy wrap or a summary report. In contrast, 91% of Canadian companies on the TSX/S&P and 99% of companies on the Euro 350 published reports very similar in content and production quality to the reports they’ve been issuing since we began this survey.

It can have more impact. It’s easier to use. And a printed report invites leisurely reading. As designers, writers and communication consultants we strongly believe a well written, well designed report remains at the heart of an effective investor relations program. Third, how does my last report compare to other reports? In our review of the traditional reports we received, there is striking consistency in production quality, cover treatment, use of colour, use of graphs, use of photography, number of pages, structure, thematic emphasis, use of at-a-glance and corporate objectives features and the content of the MD&A over the four years that we’ve conducted this survey. Inside this book, you’ll find benchmarks, trends, best practices, tips and guidelines with plenty of examples and illustrations. Please, enjoy.

Second, is an annual report worth the effort and expense? We have to agree with the hundreds of Canadian, American and European companies that continue to spend hundreds of hours and thousands of dollars to explain their performance and investment merit to investors. Print remains more invasive than the web.

CND US

More reports include sections devoted to CSR

Fewer reports include pages devoted to corporate governance

100%

100%

80%

80%

60%

60%

40%

40%

20%

20% 0%

0% 2005

2006

2007

Sustainability/corporate social responsibility is becoming a top-of-mind issue.

02

AR TRENDS 2007

2004

2005

2006

2007

As the corporate disasters of the 1990s recede into history, fewer companies are reporting on corporate governance.

How the survey was done: We ordered 625 reports from the TSX/S&P Composite, S&P 500 and Euro 350 indices. We selected 130 Canadian and 76 US reports to collect data on 106 items and characteristics that we believe define an annual report. Our goal is to explore how companies use traditional annual reports to inform and engage investors as effectively as possible. This is not a survey of financial disclosure, therefore we did not order or review any Form 10Ks. All of the reports that flooded into our offices were used to collect examples of best practices.

of qualified professionals dedicated to delivering all the benefits of professional investor relations to each of our clients. Craib Design & Communications and Craib Strategic Directions The Craib group of companies is a dynamic team of professional designers, strategists, researchers and writers with almost 30 years of communications experience. We have worked with a diverse range of organizations, from prominent TSX 300 companies to small, private firms. Clients entrust their communications needs to us year after year, and often our relationships with them extend well beyond the scope of our original assignment.

BarnesMcInerney Inc. Capital Market Communications Over the past 20 years, BarnesMcInerney has built a reputation as one of Canada’s leading full-service investor relations firms. This reputation has been earned by working with clients across a spectrum of industries – from their infancy as public companies to their zenith as leaders in their sectors.

Our approach is based on listening to and understanding our clients’ key business issues and communications objectives. The more we know about your goals and business, the better. Because we put effective, content-driven communication first, extensive work is done to establish a project’s direction prior to any thoughts on design.

Our success has been forged on a foundation of trust. We work closely with senior management to develop a thorough understanding of their business. This intimate knowledge of a client’s business, combined with our unmatched understanding of investor expectations, empowers us to deliver compelling solutions to the most difficult investor relations challenges.

We use the medium that best delivers the message, be it print, electronic or otherwise. Our services include design and art direction, production management, photography and illustration, website design and construction, writing and editing, capital market research, best practice guidance and perception audits. The net result is solutions that are tailored to specific needs.

We are committed to continually raising the bar for our clients. This commitment is brought to life by a team

Canadian CEOs are writing shorter letters to their investors

45% of Canadian companies use special production techniques

100%

2,500

100%

80%

2,000

80%

60%

1,500

60%

40%

1,000

40%

20%

500

20%

0%

0

Posting reports in both PDF and HTML is less common

2005

2006

2007

Although HTML is a more powerful format for the web, more companies are using only PDF for their annual reports.

0% 2004

2005

2006

2007

The length of letters by Canadian CEOs has steadily declined from 1,948 words in 2004 to 1,658 in 2007, a drop of 23%.

2005

2006

2007

The use of special production techniques such as gatefolds, tip-ins, die-cuts and spot gloss is increasing.

AR TRENDS 2007

03

Section 1:

First impressions Busy investors need a quick yet thorough explanation of your company’s performance and investment merit. On the covers and inside, outstanding annual reports effectively deliver succinct, meaningful, credible information.

In this section >> • Great covers • At-a-glance • Investment argument

04

AR TRENDS 2007

“You never get a second chance to make a first impression.” Author Unknown

AR TRENDS 2007

05

Section 1: First impressions

Great covers: Turning heads, turning pages

Gre 1

Benchmarks

Best practices

Cover contains a key message or theme

> DO use a theme or key message that is relevant and firmly backed up by the information inside the reports.

100%

> DON’T waste your reader’s time with platitudes. If you can’t say something truly useful, and back it up, maybe it’s best to leave the message approach to next year.

80% 60% 40% CND US

20% 0% 2004

2005

2006

2007

Most Canadian and US companies continue to use cover themes to capture the reader’s attention by delivering key messages.

06

AR TRENDS 2007

> DON’T forget your back cover! Use it to deliver meaningful information – a key message, your corporate mission or information available on your IR website.

While annual reports do not sell on newsstands, covers are critical in capturing reader interest. Good covers reflect the nature of a company’s business, performance, strengths and/or strategy. The best will distinguish your company from your peers through striking visuals, unique messages and original design.

1. Jazz Air Income Fund

2

eat covers:

The Jazz cover theme – safe, reliable, efficient and engaging – draws the reader immediately into a discussion of the company’s four fundamentals for success. Inside the report, Jazz focuses squarely on the initiatives and accomplishments that support those fundamentals. The back cover provides a succinct explanation of each concept. 2. Yum! Brands

Yum! establishes the theme of its report and its corporate focus with its cover message, “Going for greatness around the globe!” The cover imagery reflects the company’s outlook for its ongoing expansion into China. It also clearly identifies Yum!’s five main brands for easy identification of the company. 3. Canadian Tire

Canadian Tire’s cover launches the company’s investment argument – explained in detail inside – that the synergies between its five businesses will create more opportunity to build shareholder value than meets the eye. The back cover supports the argument with a map of the company’s activities and coupons similar to those used to drive traffic between the businesses. > More best practices...

BHP Billiton Home Capital IBM Primaris

3 3

AR TRENDS 2007

07

Section 1: First impressions

At-a-glance: Something to be remembered by

At 1

Benchmarks

Best practices

Companies that provide an at-a-glance

> DO use a multi-faceted approach that includes diverse elements such as charts, photos, lists, text, maps and illustrations.

100% 80% 60% 40% CND US

20% 0% 2004

2005

2006

2007

The use of an at-a-glance to provide a succinct overview of a company’s businesses showed a resurgence in 2007 after two years of declining in Canada and the United States.

08

AR TRENDS 2007

> DO consider a grid to organize information by business unit into categories – such as operations, sites, results, business climate, strategy and outlook – that will allow the reader to understand your business segments, past performance and the drivers of future performance. > DON’T bury the at-a-glance. Consider using the inside front cover and page one or a gatefold for maximum exposure.

You should never overestimate the reader’s knowledge about your company. Even with wellknown companies, there can be misunderstandings about the scope or thrust of the business. A welldone at-a-glance is a powerful tool for distilling a wealth of information on your business in an organized, highly visual manner.

1. Fortis

2

t-a-glance:

Fortis uses a gatefold for its detailed at-a-glance, which introduces the company’s vision and mission before explaining how it delivers sustainable shareholder value. The company has three businesses and provides details on its strategies, market positions and accomplishments, as well as selected financial data for each. Graphs and bullet points are used to make the information more accessible. 2. High Liner Foods

High Liner Foods has two business segments, operating in very different environments with significantly different challenges. The company uses its at-a-glance to provide segmented profiles, KPIs, market conditions and strategies, as well as a separate sidebar to outline companywide strategies and significant growth drivers. The visual backing and clean presentation make the spread accessible and engaging. 3. MDS

MDS has a dynamic at-a-glance: an activities map along with bulleted profiles and a tabular breakdown of its businesses. A standout feature is its explanation of forward-looking priorities in each of the three business segments. The layout leaves the reader with a good understanding of the basics of this complex company. > More best practices...

3

CGI Husky Energy TELUS

AR TRENDS 2007

09

Section 1: First impressions

Investment argument: Stating your case

Investment a 1

Benchmarks

Best practices

Financial highlights: Providing a succinct overview

> DO state your investment argument succinctly and with clarity. Think, “if a reader spent five minutes with this report, could he or she explain to a friend why we’re a good investment?”

100% 80%

> DO support your argument with tangible evidence of your capabilities, strengths, strategic progress and competitive advantages.

60% 40% CND US

20% 0% 2004

2005

2006

2007

Financial highlights, once an essential feature of almost every annual report, are declining in popularity.

10

AR TRENDS 2007

> DO frame your argument around solid information. Some companies stretch too far and strain credibility. Others do not develop as strong a message as they might, assuming it will be picked up through osmosis.

The annual report is a crucial opportunity for companies to state their case to potential new investors – it should not be used simply to describe past performance. A persuasive, straightforward and succinct investment argument creates a context for every other piece of information in the report.

1. PotashCorp

2

argument:

PotashCorp launches one of the most direct and thorough investment arguments by listing the seven reasons for its success in the fertilizer industry on page one of the 2007 report. The company goes on to explain the six keys to understanding its business, each colour-coded to guide the reader through the next six spreads. The section is full of subheads, graphs, tables, diagrams and bullet points to present the company’s strengths with crystal clarity. 2. CIBC

CIBC condenses a compelling argument into a compact gatefold spread inside the front cover. It balances brief descriptions of corporate information – such as a profile, vision statement, value creation benchmarks and strategic priorities – with concrete data to substantiate its investment merit: a list of the year’s accomplishments and a stock price graph. The investment argument itself rests upon the bank’s long-term sustainable performance. 3. Macquarie Power & Infrastructure Income Fund

Macquarie presents its investment argument in an at-a-glance style, providing a four-point definition of infrastructure investments along with evidence – such as details on competitive advantages – that prove each of its businesses meet the criteria. This segmented discussion is used to support the argument that Macquarie’s assets are insulated from economic cyclicality. 3

AR TRENDS 2007

11

Section 1: First impressions

Investment argument: (Cont’d)

Investment a 4

Benchmarks

31% 28% 66% 12

AR TRENDS 2007

of Canadian companies and 13% of US companies used the inside front cover spread to present an investment argument. of companies provided a mission, vision or value statement. of companies provided a corporate profile.

5

argument:

4. Inter Pipeline

The cover of Inter Pipeline’s report features a suit-clad investor and the phrase “Some would call us conventional.” Inside, the company endeavours to explain what that means and why, in fact, it’s a good thing – all in the time it takes to tie a Windsor knot. The material is written in a crisp, easy-to-comprehend tone, and as a neat visual touch, each spread has a visual demonstrating one step in tying a Windsor knot. 5. TransAlta

TransAlta states its investment case on an information-packed gatefold on the first page that supports the report’s cover theme – “ready, steady, grow.” With the use of bullet points, graphs, callouts, diagrams and photos, the three-page spread organizes a wide variety of information and allows the reader to understand the company and its growth potential in one visual presentation. 6. PrimeWest

6

PrimeWest makes the case for its long-term value creation capabilities with straightforward information on assets and policies that help mitigate the impact of the commodity market’s volatility, as well as six captioned graphs on key metrics that illustrate the company’s performance over a five-year span. > More best practices...

Canadian Tire GE

AR TRENDS 2007

13

Section 2:

Leadership Once you get them interested, the next challenge lies in convincing your reader to believe what you say. Readers tend to be very skeptical about the information in an annual report, so winning credibility is a challenge. Begin at the top with messages from the CEO and Chairman that are sincere.

In this section >> • Special report • Message to shareholders • Corporate governance

14

AR TRENDS 2007

“Leadership and learning are indispensable to each other.” John F. Kennedy

AR TRENDS 2007

15

Section 2: Leadership

Special report: Barron’s most respected CEOs Many CEO letters were very good, displaying one or more of the following strengths: 1. They describe the company’s business, usually in terms that allow the reader to understand how it is different from its competitors. XTO CEO Bob Simpson begins his letter with a bit of history: “About 20 years ago, our journey began with the idea of starting an energy company where we could own quality properties, work with good people and create real value together.” This is a long letter running over 20 pages, and almost every discussion is imbedded within a succinct reminder of the particular niche within the energy industry in which XTO works.

Most stakeholders in the company usually read the letter to shareholders in an annual report, even if they read little else. They are the heart of the annual report and were a special focus of our research in 2007. In our search for the best CEO letters, we turned to the March 26, 2007 issue of Barron’s* and its annual list of the 30 most respected CEOs. Barron’s defines “the world’s best corporate leaders” as those who have an “unwavering focus on delivering long-term value for shareholders.”

2. They explain their strategies and provide hard evidence that the strategies are being implemented and bearing results – or not. Wells Fargo is the most striking example of a letter focused on strategic intentions and results. Imbedded within CEO Dick Kovacevich’s letter is a single page with a list of Wells Fargo’s 10 strategies along with the specific initiatives driving those strategies. Most are supported with metrics that measure the results of the initiatives. In his discussion of the company’s strategy of offering diverse products and services, Kovacevich does not hesitate to admit that the strategy creates its own challenges: “Being so large and diverse, however also can be a disadvantage. Complexity can have a hidden cost… As Pogo in the comics used to say, ‘we have met the enemy, and they is us.’”

Barron’s most respected CEOs: Warren Buffett, Berkshire Hathaway Kenneth Chenault, American Express George David, United Technologies Charlie Ergen, EchoStar Communications Larry Fink, BlackRock

Lew Frankfort, Coach Richard Fuld, Lehman Brothers Fred Goodwin, Royal Bank of Scotland Jeffrey Immelt, General Electric Satoru Iwata, Nintendo

Steven Jobs, Apple Henning Kagermann, SAP Richard Kovacevich, Wells Fargo A.G. Lafley, Procter & Gamble Terry Leahy, Tesco

* Barron’s is a trademark of Dow Jones & Company, Inc.

16

AR TRENDS 2007

3. They explain the factors driving shareholder value, including the market conditions that underpin corporate strategy. This not only ensures the reader understands the competitive circumstances driving strategy; it allows them to understand the company’s performance as the year unfolds. The most comprehensive discussion of market circumstances driving corporate strategy is in the News Corporation letter. CEO Rupert Murdoch explains that “all of the historic constraints inherent in distribution are being swept away by digital technology. For the first time in media history, complete access to a truly global audience is within our grasp… and we are taking advantage of it.” 4. They provide third party support for their arguments. Danone CEO Franck Riboud uses a quote from Muhammad Yunus, Nobel Peace Prize laureate and president of the Grameen Bank: “With Danone we have taken a giant step. The Grameen Danone foods joint venture shows that it is possible to do business differently. Profit is no longer an end in itself, but the means to social ends.” 5. They have excellent introductions that deliver the year’s core messages and draw the readers into the body of the letter. GE CEO Jeffrey Immelt began his letter this way: “I assumed the CEO job on September 7, 2001, a fact most of you know. The week after September 11, GE’s stock was in a ‘freefall’. On September 21, GE opened at $29 and then stabilized. As the stock hit $34 during the fall, I bought 15,000 shares thinking, ‘I love the company and when will it ever be this cheap again?’ The answer turned out to be – in 2006.” Immelt obviously shares his investors’ pain, but doesn’t sugar coat the message: “This is a long-term investment. There are no short-term tricks.” John Mackey, Whole Foods Lakshmi Mittal, Arcelor Mittal Allan Moss, Macquarie Angelo Mozilo, Countrywide Financial Rupert Murdoch, News Corp.

6. They are not only written in plain English, they carry the voice of the people who signed their names at the end. Many of them carry a sense of both intimacy and urgency. These are individuals who obviously care passionately about their businesses. Because this passion is usually combined with solid evidence, the letters become extraordinarily credible. Whole Foods co-founder and CEO John Mackey tells readers that on January 1, 2007 his salary was reduced to $1 per year. He explains, “The tremendous success of Whole Foods Market has provided me with far more money than I ever dreamed I’d have and far more than is necessary for either my financial security or personal happiness. I continue to work for Whole Foods not because of the money I can make but because of the pleasure I get from leading such a great company.” 7. They make the structure of the letter’s content obvious with heads and subheads that make the letter easy to navigate and deliver core messages. The content of the letter and its organization are very important. So too is the design. We like to see letters that can be scanned. If done well, they are more likely to effectively pull the more hesitant reader into the body of the letter for a more thorough reading. Use type or graphical devices to draw out the messages in the letter. Imagine the reader looking only at those words in 16-point type and ask if he or she would get all of the key points that you would like taken away from the report. In summary, the characteristics that defined a great letter are clarity, evidence, thoroughness and voice. Of course, humour is always a bonus.

Michael O’Leary, Ryanair Holdings Franck Riboud, Group Danone Peter Rose, Expeditors International Steven Roth, Vornado Realty James Schiro, Zurich Financial

Bob Simpson, XTO Energy James Sinegal, Costco Wholesale Fred Smith, FedEx Ratan Tata, Tata Sons Jong-Yong Yun, Samsung Electronics

AR TRENDS 2007

17

Section 2: Leadership

Message to shareholders: In their own words

Message to shar 1

Benchmarks

Best practices

% of CEO messages that begin on page 1 or 2

> DO provide insight into what shareholders might expect in the coming year. This is not a forecast, but a reasonable explanation of expectations.

100% 80%

> DON’T be afraid to draw conclusions for the reader. Readers don’t have time to figure out what you are trying to say. They prefer managers who know what they are doing and why – and aren’t afraid to say so.

60% 40% CND US

20% 0% 2005

2006

2007

The CEO’s message to investors remains the essential annual report feature in establishing the foundation for all the information that follows.

18

AR TRENDS 2007

> DO deal with the bad news openly. To be credible, the CEO’s letter must be balanced. If you’ve had a bad year, don’t gloss over it. Provide some true perspective.

A good letter from the CEO should explain and place key events and results of the past year into perspective, but the bulk of the letter should focus squarely on strategy, framed within the context of the company’s strengths as well as industry trends and developments.

2

reholders:

1. Home Capital

The Home Capital letter to shareholders covers five pages, replacing most of the feature material. It thoroughly documents and explains the five reasons to invest in Home Capital – as promised on the report’s front cover. The joint CEO/Chair letter clearly lays out the company’s strengths in its core business, explains the company’s performance over the past year and sets hard targets for the upcoming year. 2. GE

Jeffrey Immelt of GE boldly confronts his company’s 2006 stock performance in the first paragraph of his letter. But rather than dwell on disappointments, he focuses on the company’s long-term performance and outlook, thoroughly outlining what makes GE a “reliable growth company.” Text layering and illustrations help stress key points and create visual variety to carry the reader through this uncommonly long CEO message. 3. TELUS

TELUS gives voice to its executive team through a Q&A feature, giving the President and three Executive VPs an opportunity to provide concise answers to four top-of-mind questions for the company’s investors. Photos and firstname-only signatures serve to personalize the executives, reinforcing the company message that all employees are part of the “TELUS Team.”

3

AR TRENDS 2007

19

Section 2: Leadership

Message to shareholders: (Cont’d)

Message to shar 4

Benchmarks

5% 9% 3% 4% 20

AR TRENDS 2007

published a letter from the CFO. published a Q&A – 5% of Canadian reports and 16% of US reports. published letters from other members of management. of CEO letters replaced the traditional feature material by including photos and sidebars.

4. Cameco

5

reholders:

Cameco takes an unusually visual approach to its shareholder message. Despite the somewhat flamboyant presentation, the content is solid, containing discussions of the company’s challenges, its commitment to sustainable development and its forward-looking priorities. The letter is complemented by photos, graphs, pull quotes and a financial highlights table to support the CEO’s discussion. 5. BMO

In addition to the CEO’s message, BMO publishes messages from the CFO, who provides a brief analysis of the company’s financial performance, and from the COO, who gives an overview of the year’s operational highlights. The CFO and COO messages are detailed and specific, providing solid support for the more strategic letter from the CEO. 6. Wells Fargo

A passage in Wells Fargo’s letter asks “How can we speak more conversationally in letters to our customers, so they don’t have to scratch their heads and say ‘What are they talking about?’” The company answers its own question by providing a letter that is largely jargon-free and comprehensible to the average reader – without sacrificing the quality or wealth of hard information, including a well-defined list of 10 strategic initiatives. > More best practices...

6

IBM News Corp. Procter & Gamble Verizon

AR TRENDS 2007

21

Section 2: Leadership

Corporate governance: Guiding the ship forward

Corporate go 1

Benchmarks

Best practices

% of reports with a message from the Chair of the Board

> DON’T sacrifice biographies for photographs. Having both is ideal, but biographies have more substance than photos.

100%

> DO provide a summary of changes made in the previous year and/or planned for the coming year.

80% 60%

> DO consider using a letter from the Chair to discuss Board practices, policies and composition.

40% CND US

20% 0% 2005

2006

2007

The publication of a letter from the Chair is stable in Canadian reports, but has declined in US reports.

22

AR TRENDS 2007

The intense scrutiny of corporate governance that encouraged many companies to focus their discussions of governance on improvements to their processes and structure has, unfortunately, gravitated back to boilerplate. Directors are the stewards of shareholder interests and the annual report should demonstrate their quality and depth of expertise.

1. Barclays

2

overnance:

Barclays structures its discussion of corporate governances as a Q&A signed by the Chairman of the Board. The Q&A describes the role, composition and performance of the Board. The section asks questions that every report should answer, such as “What did the Board do in 2006?” and very practical questions such as “How do you assess the performance of the Board?” The Chairman mentions that the Board must possess “the right balance of Directors and a good mix of skills and experience,” and then demonstrates that this is the case with detailed biographies of its Directors. 2. High Liner Foods

For the past several years, High Liner has focused on the implementation of improvements to the governance processes and procedures at the company, directing the reader to the company’s website for Director biographies, explanations of Board committee responsibilities and the key documents that govern governance at the company such as the corporate Code of Conduct. 3. RBC

RBC provides a lengthy and detailed list of leading governance practices, illustrating that its governance goes beyond mere compliance. The company explains the measures it has taken to attain a leadership position in governance, as well as the significance to shareholders of each measure. Readers are then directed to a website for more descriptive information on governance policies and practices. 3

> More best practices...

TELUS TransAlta

AR TRENDS 2007

23

Section 3:

Commitment Where are you going? How will you get there? Have you made any progress? And, importantly, are your operations and results sustainable? The best annual reports address these critical questions with precision, and with evidence.

In this section >> • Strategy • Objectives & targets • Sustainability

24

AR TRENDS 2007

“A goal without a plan is just a wish.” Antoine de Saint-Exupery

AR TRENDS 2007

25

Section 3: Commitment

Strategy: Laying the groundwork

1

Benchmarks

Best practices

% of reports that emphasize the company’s strategy or investment argument

> DO deal with bad news openly. To be credible, the commentary must be balanced. If you have had a bad year, don’t gloss over it.

100% 80%

> DON’T just tell, show. Provide proof that your strategy is working with statistics, examples and anecdotes. Readers will believe you if you give them evidence.

60% 40% CND US

20% 0% 2004

2005

2006

2007

In 2007, 32% of reports described the company’s products or business, while 20% focused on past performance.

26

AR TRENDS 2007

> DON’T ignore challenges or obstacles to success. Address potential concerns while emphasizing the opportunities the strategy presents.

At the heart of any annual report are your strategies for improving performance and building shareholder value. This discussion should be framed in terms of corporate strengths as well as industry trends and developments. Be specific wherever possible. The more evidence and concrete examples, the better.

1. Monsanto

Strategy: 2

Monsanto focuses on its near-term strategy and goals leading up to 2010 by identifying six major growth contributors and its expectations in each area. Each growth contributor is then explained in terms of historical performance, the company’s position and future outlook. Case studies are also provided to demonstrate the real-world impact of the company’s strategic initiatives. 2. Canadian Tire

Canadian Tire discusses its strategic initiatives by operating segment, using a variety of visual elements to create interest. The company distills a good number of growth initiatives in different segments into a single, easy-to-read spread. 3. 3i Group

3i Group ensures readers understand exactly what each pillar of its corporate strategy entails, providing a table outlining progress, key risk factors and performance in each area of the strategy. Bullet-pointed measures give an overview of the company’s progress, while graphs and a table provide quantifiable results.

3

AR TRENDS 2007

27

Section 3: Commitment

Strategy: (Cont’d)

4

Benchmarks % of annual MD&As that discuss strategy 100% 80% 60% 40% CND US

20% 0% 2004

2005

2006

2007

Although recommended by the CICA, a discussion of strategy is found in the MD&A of only 55% of Canadian reports.

28

AR TRENDS 2007

4. GE

Strategy: 5

Over four visually compelling spreads, GE identifies major global trends and explains its strategic plans to capitalize upon those trends. This discussion of strategies driven by immediate market conditions is integrated into the deeper discussion of longterm strategy and the company’s dedication to “Winning in the Future.” 5. IBM

IBM tracks the evolution of its strategy chronologically, showing readers how the company anticipated shifts within the industry, acted accordingly, benefited as a result and is using that success to move forward productively. A discussion that could be very complex has been made accessible through the use of numbering and graphs. 6. Inmet Mining

Inmet takes a different approach to explaining its strategy, choosing to provide this information in its reader-friendly MD&A rather than a feature section. The company explains the three key components of its strategy and describes performance within the context of those strategies. > More best practices...

Campbell Soup The Capital Group HBOS Wells Fargo

6

AR TRENDS 2007

29

Section 3: Commitment

Objectives & targets: Putting it on the scoreboard

Objectives 1

Benchmarks

Best practices

% of companies that provide dedicated corporate objectives pages or spreads

> DO illustrate the relationship between your goals and your strategies.

100%

> DON’T set goals that can’t be measured. “We will expand EBITDA margin to 20% in three years” is significantly more meaningful than “We will maximize shareholder value.”

80% 60% 40% CND US

20% 0% 2004

2005

2006

2007

It takes courage to set targets which can be used to measure performance, and fewer companies are taking the risk.

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> DON’T hide missed targets. Acknowledge the situation, explain the results, and discuss how you plan to do better next year.

The best annual reports not only describe the company’s strategic direction, they quantify it by establishing financial and operating objectives – and measure their performance against those objectives. Some companies produce detailed spreads featuring an objectives scorecard with goals, key metrics and relevant graphs.

1. CIBC

2

& targets:

CIBC not only discusses its performance against financial objectives for such metrics as EPS growth and risk, it extends the discussion to nonfinancial measures such as client relationships, the environment and governance. Their results against financial objectives are briefly explained in a “comments” column for additional context. 2. Alcan

Alcan did not use the typical scorecard format for its performance against objectives page. The company provides its targets for 2009 in the margins of the feature pages, measuring performance against those targets in the past two years. Providing a published target along with the detailed discussion of the performance lends greater meaning to the numbers. 3. PotashCorp

PotashCorp specifies the goal for each business, discusses performance within the context of its goals and establishes targets for the coming year. Icons are used to quickly identify whether a previous target was achieved, partially achieved or not achieved – made easier by the fact that the company uses hard numbers, not ambiguous statements, in its results and targets. > More best practices...

Canadian Tire Inmet Mining

3

AR TRENDS 2007

31

Section 3: Commitment

Sustainability: Preparing for the future

Sust 1

Benchmarks

36% 31% 17%

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AR TRENDS 2007

Best practices of reports discussed community investment and support. of reports discussed environmental performance. of reports discussed social performance such as health & safety, diversity, and talent attraction.

> DO speak to performance wherever possible and quantify your progress. Can you imagine a financial report without numbers? Environmental commentary, too, lacks credibility unless some specifics are provided and measurements discussed. > DO provide and explain any industry-specific sustainability metrics and detail your performance against them. > DON’T forget to mention your sustainability/CSR report if you publish one. Provide a website address and instructions on obtaining a printed copy.

More companies are voluntarily focusing on broader corporate sustainability and responsibility issues than ever before. The better reports include some sort of measurements of performance, rather than simply motherhood sentiment. They also outline corporate goals, practices and beliefs in these sections. For an in-depth discussion of sustainability issues, see this year’s CSR Trends booklet. 1. Abitibi-Consolidated

tainability: 2

Abitibi-Consolidated provides an exhaustive discussion of its initiatives in the areas of economic, social and environmental responsibility. The section is replete with graphs and quantifiable metrics that show a tangible commitment to the principles of sustainability. 2. Norsk Hydro

Norsk Hydro publishes a self-contained sustainability report within its annual report, devoting 24 pages to a substantive discussion of climate change, human rights, community involvement, working conditions and economic innovation. The section includes five-year tables of performance against economic, environmental and social metrics and an assurance report from an independent auditor. It also sets objectives and results for 2006 as well as hard targets for 2007 and 2010 in each section. 3. Entergy

Entergy puts the issue of climate change front and centre, devoting a special feature section to six articles written by outside experts. In an introductory letter, CEO Wayne Leonard stresses the importance of acknowledging climate change and working to combat it. The feature concludes with a discussion of the energy company’s policies and efforts in sustainable development. > More best practices...

CIBC PotashCorp Santos

3

AR TRENDS 2007

33

Section 4:

Credibility Sometimes it’s not enough to tell your story – you need to show it. Photographs, illustrations and third-party testimonials can give readers a refined insight into the effectiveness of your company’s operations and strategies.

In this section >> • Testimonials • Visuals

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“Honesty has a beautiful and

refreshing simplicity about it. No ulterior motives. No hidden meanings. An absence of hypocrisy, duplicity, political games, and verbal superficiality.” Charles Swindoll

AR TRENDS 2007

35

Section 4: Credibility

Testimonials: Let them do the talking

Test 1

Benchmarks

21% 7% 9%

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AR TRENDS 2007

Best practices of US reports published testimonials.

> DO ensure the choice of speakers is consistent with the theme and tone of the report.

of Canadian reports published testimonials.

> DO include case studies to illustrate the strength of your relationships with customers, suppliers, employees or communities.

of testimonials were from customers.

> DON’T put words in the speaker’s mouth. A testimonial that sounds prepared or inauthentic can do more harm than good.

The best advertisement is a satisfied customer. In the same way, a company’s capabilities or the quality of its products and services can be confirmed by a few words from a credible and relevant outside party, lending significant credibility to your investment argument.

1. MAN AG

2

timonials:

To personalize the impact of their international operations, MAN AG uses quotes from stakeholders in Mexico, Chile and China – set against full-spread photographs of the speakers. The following magazine-style spreads explain how the experiences of these individuals reflect the company’s activities in those different regions. 2. BMO

BMO eliminates the image of the “Big Bank” by publishing customer profiles on two-page spreads. One page uses quotes and case studies to show how the bank has helped a customer; the opposite page provides profiles the employees at BMO who worked with that customer. Small illustrations and captions accompany the profiles providing information about the company and its services that is relevant to the case study being discussed. 3. QUALCOMM

QUALCOMM uses a tip-in at the beginning of its report to highlight case studies from its global operations, accompanied by testimonials from employees. The phrase “Making a difference in everyday life” unites the different stories under the idea that the company’s products have a positive influence wherever they’re used, while the employee testimonials create a sense of loyalty, strength and stability. > More best practices...

3

American Express Bank of America Wells Fargo

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37

Section 4: Credibility

Visuals: What you see, what you get

1

Benchmarks

Best practices

% of annual reports with photographs

> DON’T use images as wallpaper. Every image should support the reader’s understanding of your company’s messages.

100% 80%

> DON’T use too many images. A small number of remarkable images will have more impact than a cavalcade of mediocre ones.

60% 40% CND US

20% 0% 2004

2005

2006

2007

Most annual reports continue to use photography to explain their business or investment argument.

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> DO provide captions for photographs, illustrations and graphs. These captions should explain the information in the visual, not simply describe it.

Photos, illustrations, maps and graphs can effectively deliver facts and messages that the reader might otherwise miss if all of your information is buried in text. They can catch the eye of the reader who simply scans through annual reports or supplement your investment argument with credible evidence.

1. United Technologies

2

Visuals:

United Technologies uses full-page images of the parts that it manufactures to create instant recognition of the value of its indescribable bits of machinery and technology to the company’s customers. The images of each part are supported with descriptions of the part’s composition and application. On subsequent pages, the reader can see the parts in action, be it on an offshore oil platform in treacherous conditions or in a construction project in Dubai. 2. Thomson Pharma

Thomson Pharma uses a series of captioned diagrams to provide an example of the process a client could go through in making use of their services. The omnipresence of the computer screen in each graphic reinforces the significance of the company’s online service throughout the process. 3. Chicago Mercantile Exchange

While some companies are more difficult to illustrate than others, featuring photographs of employees and customers lend a human touch to a report. Chicago Mercantile Exchange does just that with large photographs of employees and customers, set against diverse and interesting backdrops.

3

AR TRENDS 2007

39

Section 4: Credibility

Visuals: (Cont’d)

4

Benchmarks

86% 50% 12 +

Average number of photos and illustrations in a report 35 30 25 20 15 CND

10 5

US

0 2004

2005

2006

2007

Although Canadian issuers are using fewer visuals, the few US companies that still produce annual reports have decided to sustain production values.

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AR TRENDS 2007

published graphs in the feature sections. published graphs in the MD&A. average number of graphs in a report.

4. PG&E

5

Visuals:

PG&E uses captivating photography to attract attention to a series of pressing questions, such as “Can we slow global climate change?” and “Can we build energy sustainability into our communities?” While some photos are abstract and others more literal, they all give an instant impression of the issue that is addressed by a member of management on the following page. 5. McDonald’s

McDonald’s sets simple, supportive quotes from customers against full-page black and white photographs of cheerful, wholesome situations – people enjoying time in McDonald’s restaurants – to illustrate the company’s five key drivers: people, products, places, prices and promotions. The visuals not only support the concept of the driver, they contribute to a sense of familiarity and comfort that the company is attempting to convey in the report. 6. Armtec

Armtec uses a detailed illustration alongside its at-a-glance feature to visually demonstrate the variety of ways in which its products are used. The use of this illustration creates a fuller understanding of the practical aspects of the company’s operations than a simple description of product usage would. > More best practices...

6

American Express Entergy GE McGraw-Hill WestJet

AR TRENDS 2007

41

Section 5:

Performance While the feature material in a good annual report will provide a thorough, but concise explanation of a company’s investment merit, management’s discussion and analysis along with the financial results and notes continue to represent the annual report’s raison d’être.

In this section >> • MD&A • Risk management

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“The toughest thing about success is that you’ve got to keep on being a success.” Irving Berlin

AR TRENDS 2007

43

Section 5: Performance

MD&A: Making sense of it all

1

Benchmarks

Best practices

% of reports that provide an outlook in their MD&A

> DO follow the Canadian Institute of Chartered Accountants’ MD&A Guidance on Preparation and Disclosure. You can find it at www.cica.ca under Research & Guidance.

100% 80% 60% 40% CND US

20% 0% 2004

2005

2006

2007

The regulatory and economic environments appear to be driving a trend to less discussion about future performance.

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> DO design the pages of the MD&A to encourage readers beyond the institutional investors and financial analysts to explore at least some of the information provided. This can be done by layering information, and using call-outs and graphs. > DO consider a table of contents for easier navigation.

The most thorough MD&As have adopted the guidelines issued by the Canadian Institute of Chartered Accountants, which recommends that companies discuss their vision, strategy, key performance drivers, capabilities to deliver results and risks. The best MD&As are also written in plain English, making them comprehensive and comprehensible.

1. Inmet Mining

MD&A: 2

Inmet’s MD&A is dynamic and all-encompassing with maps, photos, and full-colour charts and graphs to make the information in the section accessible to all readers. The company also integrates its discussions of strategy and objectives (including human resources and worker safety) into the MD&A, showing that these topics are intrinsically connected to financial results. 2. TELUS

TELUS opens its MD&A with an expanded table of contents, which is organized according to the CICA guidelines concerning MD&As. The section itself is easy to navigate and read, with plenty of bullet points, subheads and graphs to direct the reader to the specific information they need. 3. Agrium

Agrium’s MD&A begins on page 11 and replaces most of the information that is traditionally found in the feature pages – but you can hardly tell the difference. The MD&A comes complete with photos, maps, pull outs and layered text. It’s also written in plain English to ease comprehension. > More best practices...

BMO Canadian Tire High Liner Foods Husky Energy PotashCorp

3

AR TRENDS 2007

45

Section 5: Performance

Risk management: Keeping things under control

Risk man 1

Benchmarks

91% 47% 28%

46

AR TRENDS 2007

Best practices discussed risk in the MD&A. discussed strategies to mitigate risks. provided a sensitivity analysis.

> DO devote more discussion to those risks that are more likely to challenge your ability to achieve your established goals. > DO explain how you are addressing each risk factor mentioned. > DO look at the CICA’s Performance Resource Centre at www.cica.ca/cpr for more examples of best practices and a discussion of risk reporting.

Every company faces risks that arise from the global economy, industry trends and circumstances within the company itself. An annual report should include a discussion of those risks as well as the policies in place and measures being taken to mitigate risk.

1. PotashCorp

2

nagement:

PotashCorp provides a risk severity diagram, allowing readers to see how the company evaluates, sets priorities and responds to various types of risks, most specific to PotashCorp. The company also provides a brief description of mitigation activities in the previous year after each risk factor. 2. ITV

ITV explains the risks to its results in a table, listing the potential impact of each risk factor along with the company’s efforts to mitigate risks. The risks in this table are specific to the company, not vague industry or global risks that affect every company. 3. 3i Group

3i Group explains the company’s internal structures designed to handle risk through a diagram of the corporate risk management framework and the responsibilities of key committees. The risk factors themselves are then divided into types, with sources of additional information listed for each one as well as mitigation efforts. > More best practices...

SAS Group TD Bank

3

AR TRENDS 2007

47

Section 6:

Accessibility While a printed annual report remains the backbone of an effective IR program, the Internet has become the source to which many investors will turn for the mother lode of information on your company. A good website will not only reinforce your key messages, it will provide readers with the depth of detail that was not possible in the past.

In this section >> • Websites

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AR TRENDS 2007

“One of the Internet’s strengths is its ability to help consumers find the right needle in a digital haystack of data.” Jared Sandberg

AR TRENDS 2007

49

Section 6: Accessibility

Websites: Ready when you are

1

Benchmarks

Best practices

% of corporate websites with pages devoted to sustainability/CSR reporting

> DO provide an intuitive interface, making common links such as corporate overview, financial statements and corporate governance readily accessible.

100% 80%

> DO give the reader choice: offer documents in HTML and PDF, break reports down into their individual sections, and list various options for contacting IR.

60% 40% CND US

20% 0% 2005

2006

2007

Sustainability and corporate responsibility tend to be web-only discussions, although more companies are producing printed CSR reports as well.

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AR TRENDS 2007

> DON’T treat the site as a static repository for data. Keep it updated with stock numbers, press releases, industry information and other news.

A good investor relations website is not simply a bulletin board for the company’s print documents. It provides context and supplementary data while making full use of the Internet’s capabilities for interactivity, including the ability to be constantly updated.

1. Cameco

2

Websites:

Cameco’s main corporate site links to the IR site with a large callout box. Once inside the IR site, visitors are greeted with a flash banner boasting seven reasons to invest in Cameco. The site also features the “CEO’s corner” with a video Q&A with CEO Jerry Grandey and links to an archive of conference calls. Unlike most companies, Cameco posts the entire annual report in HTML. 2. Royal Dutch Shell

Shell makes good use of the Internet’s interactive capabilities to explain its activities. The site includes stories, games and an interactive short film in which a “news correspondent” is taken on a tour of Shell’s operations. Users can also click on the film to view more information about Shell’s activities. 3. Talisman

Talisman presents IR material on its home page, including four reasons to invest in Talisman. The IR site features Web-only tools, such as interactive maps, an investment calculator, feedback form and email alerts. Like Cameco, Talisman posts its entire annual report in HTML.

3

AR TRENDS 2007

51

Section 6: Accessibility

Websites: (Cont’d)

4

Benchmarks

9% 50% 39%

52

AR TRENDS 2007

published financial statements in Excel. provided a person’s name for the IR contact information. provided the PDF of the annual report broken down into sections.

Some companies direct readers to their website for additional commentary through their printed report. The print and Web version of the annual report should work in tandem to strengthen its usefulness to investors.

5 4. GE

Websites:

GE’s online annual report expands upon the printed report to give visitors an even more thorough understanding of the business. A video message from the CEO and rollover management bios are Web exclusives. Monthly investor updates provide a continual tracking of progress on strategies and goals discussed in the annual report. 5. BP

BP uses a solid navigational structure to keep the wealth of information on its IR site organized and accessible. Within the site, the company provides monthly strategy updates, as well as audio archives of presentations and quarterly conference calls. The site also features a selection of investor tools, a feedback form and the option of ordering an audio CD of the annual report. 6. BMO

Visitors to BMO’s IR site are met with the latest news and a list of upcoming events. There is also a “frequently accessed documents” page for quick retrieval of the most-searched-for information. The site is robust, providing the annual report in sections in both HTML and PDF – and as a helpful touch, lines in the financial statement become highlighted when rolled over for easy cross-referencing. > More best practices...

Kellogg’s QUALCOMM TELUS 6

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Who we surveyed: • indicates annual reports chosen as best practices

We began by ordering reports from 625 Canadian, US and European companies. Of those, we identified 206 Canadian and US reports to be included in our benchmarking analysis. We did not benchmark the European reports, but did survey 133 of them for best practices. We also surveyed all of the Canadian and US reports for best practices. Below are the 220 companies whose reports were included in our benchmarking analysis and/or identified as a best practice. • 3i Group plc Abbott Laboratories Abercrombie & Fitch Co. • Abitibi-Consolidated Inc. Aflac Incorporated AGF Management Limited • Agrium Inc. Air Products & Chemicals, Inc. Alamos Gold Inc. • Alcan Inc. Alcoa Inc. Algoma Steel Inc. Alimentation Couche-Tard Inc. AltaGas Income Trust • American Express Company Anheuser-Busch ARC Energy Trust • Armtec Infrastructure Income Fund Astral Media Inc. Aur Resources Inc. Avery Dennison Corp. Axcan Pharma Inc. • Bank of America Corp. • Bank of Montreal • Barclays plc Barrick Gold Corporation Baxter International Inc. BFI Canada Income Fund • BHP Billiton plc Blue Pearl Mining Ltd. Boeing Company Bombardier Inc. • BP plc Brookfield Properties Corporation Brown-Forman Corp. CAE Inc.

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Calfrac Well Services Ltd. • Cameco Corporation • Campbell Soup Company • Canadian Imperial Bank of Commerce Canadian National Railway Company Canadian Oil Sands Trust • Canadian Tire Corporation Limited Canadian Utilities Limited Canfor Corporation • The Capital Group Companies Catalyst Paper Corporation CCL Industries Inc. CCS Income Trust • CGI Group Inc. Chartwell Seniors Housing Real Estate Investment Trust Chevron Corp. • Chicago Mercantile Exchange Holdings Inc. Cinram International Income Fund Cisco Systems, Inc. Cominar Real Estate Investment Trust Computer Sciences Corp. Connacher Oil and Gas Limited ConocoPhillips Constellation Brands, Inc. Consumers’ Waterheater Income Fund Corus Entertainment Inc. Davis + Henderson Income Fund Deere & Co. Denison Mines Corp.

•

•

•

•

Devon Energy Corp. Dominion Resources, Inc. Dow Jones & Co. Dundee Real Estate Investment Trust Ecolab Inc. Emera Incorporated Emergis Inc. Emerson Electric Co. Energy Savings Income Fund Entergy Corp. EOG Resources, Inc. EPCOR Power LP Equifax Inc. Extendicare Real Estate Investment Trust FedEx Corporation Finning International Inc. First Data Corporation FirstService Corporation Ford Motor Company Fording Canadian Coal Trust Fortis Group Freehold Royalty Trust Freeport-McMoRan Copper & Gold Inc. Gabriel Resources Ltd. Galleon Energy Inc. General Electric Company George Weston Limited GMP Capital Trust Golden Star Resources Ltd. Great Canadian Gaming Corporation H&R Real Estate Investment Trust Harley-Davidson, Inc. HBOS plc

• High Liner Foods Incorporated Highpine Oil & Gas Limited • Home Capital Group Inc. Huntington Bancshares Inc. • Husky Energy Inc. IAMGOLD Corporation Imperial Oil Limited ING Canada Inc. • Inmet Mining Corporation InnVest Real Estate Investment Trust Integrys Energy Group, Inc. • Inter Pipeline Fund • International Business Machines Corporation • ITV plc • Jazz Air Income Fund • Johnson & Johnson JPMorgan Chase & Co. • Kellogg Co. Keyera Facilities Income Fund Keyspan Energy Corporation Kinross Gold Corporation Laboratory Corporation of America Holding Laurentian Bank Of Canada Legacy Hotels Real Estate Investment Trust Liz Claiborne, Inc. Lowe’s Cos. • Macquarie Power & Infrastructure Income Fund Magna International Inc. • MAN AG Maple Leaf Foods Inc. Marriott International, Inc. MBIA Inc. McCormick & Co. • McDonald’s Corp. • The McGraw-Hill Companies • MDS Inc. Medco Health Solutions Inc. Medtronic Inc. Merrill Lynch & Co., Inc. Metro Inc. • Monsanto Co. Mylan Laboratories Inc.

• •

•

• •

• • • •

• • •

National Semiconductor Corporation Neurochem Inc. Newalta Income Fund News Corporation Norbord Inc. Norsk Hydro ASA Northbridge Financial Corporation Northgate Minerals Corporation NOVA Chemicals Corporation NovaGold Resources Inc. Nucor Corp. Oilexco Incorporated Paramount Energy Trust Patheon Inc. Peabody Energy Pembina Pipeline Income Fund Pengrowth Energy Trust Petrobank Energy and Resources Ltd. PG&E Corp. Pinnacle West Capital Polo Ralph Lauren Corp. Potash Corporation of Saskatchewan Inc. Power Corporation of Canada PPL Corporation Praxair, Inc. Precision Drilling Trust Primaris Retail Real Estate Investment Trust PrimeWest Energy Trust Procter & Gamble Co. QUALCOMM Inc. Quebecor World Inc. Regions Financial Corp. Reitmans (Canada) Limited RioCan Real Estate Investment Trust Robert Half International Inc. Rogers Communications Inc. Royal Bank of Canada Royal Dutch Shell plc Santos Ltd. Saskatchewan Wheat Pool Inc. Sears Canada Inc. ShawCor Ltd.

• • • • •

• •

• •

•

Sherwin-Williams Shore Gold Inc. Silver Wheaton Corp. Sino-Forest Corporation St. Jude Medical, Inc. Stanley Works Stantec Inc. Stryker Corp. Suncor Energy Inc. Superior Plus Income Fund Synenco Energy Inc. Talisman Energy Inc. Teck Cominco Limited TELUS Corporation Thomson Corporation TimberWest Forest Corp. Toronto-Dominion Bank Torstar Corporation TransAlta Corporation Transat A.T. Inc. TransCanada Corporation Trilogy Energy Trust TSX Group Inc. Tyson Foods Inc. U.S. Bancorp Unisys Corp. United Technologies Corporation Verizon Communications Vermilion Energy Trust Vulcan Materials Co. Wachovia Corp. Walgreen Co. Wells Fargo & Co. Western Union Co. WestJet Airlines Ltd. Xerox Corp. Yamana Gold Inc. Yellow Pages Income Fund Yum! Brands, Inc.

AR TRENDS 2007

55

For further information please contact:

Craib Group of Companies

BarnesMcInerney Inc.

42 Wellington Street East, 2nd Floor Toronto, Ontario M5E 1C7 Tel. 416.363.5206 www.craib.com

120 Adelaide Street West, Suite 2200 Toronto, Ontario M5H 1T1 Tel. 416.367.5000 www.barnesmcinerney.com

Cameron Craib, President [email protected]

Ken Barnes, Managing Partner [email protected]

Elaine Wyatt, Partner Craib Strategic Directions [email protected]

John Vincic, Executive Vice President Investor Relations Division [email protected]

Kevin Ward, Creative Director [email protected]

Special thanks to our sponsors: Printed by:

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For more information: www.pietersphoto.com 416.461.6107 [email protected] Paper supplied by:

M-real Technical support by: photo • video • digital

Vistek With stores in Toronto, Calgary, Edmonton and Ottawa, Vistek is Canada’s leading retailer of traditional and digital photographic, video and presentation equipment. Their comprehensive range of services includes sales, rentals, repairs, lab services, installation and technical support to small business owners, national institutions, professional photographers, multimedia producers and the general public. For more information: www.vistek.ca 1.800.365.1777 (Toronto) [email protected]

M-real Canada is a subsidiary of M-real Corporation, one of Europe’s leading manufacturers and suppliers of fine papers, paperboard and consumer packaging solutions. With a total annual production capacity of 6.3 million tonnes, M-real is the largest producer of fine paper in Europe. This book is printed on M-real Galerie Art Silk 80 lb. Text and 100 lb. Cover – part of the company’s lineup of high quality papers that are ideally suited for annual and corporate sustainability reports. Galerie Art Silk is FSC certified and contains up to 30% recycled content. M-real supports and promotes forest certification as a good tool for proving that the wood raw material has been sourced from both PEFC and FSC sustainable-managed forests. All M-real mills have a certified chain of custody in place, meaning they know the origin of all the wood used to make their paper. For more information: www.m-real.ca 1.866.62M-REAL [email protected]

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Supporting responsible forestry Colette Mahon, Commercial Production Manager, Redwood Group, UK Redwood is one of the UK’s largest contract publishers and I have responsibility for procurement of the paper for all Redwood’s titles including magazines for BT, the telecom giant, children’s charity NSPCC, travel company Thomas Cook, retailers Marks & Spencer, Early Learning Centre, and Boots. Environmental issues are becoming more important to everyone and are now a part of the decision making process in paper choice. All our briefs assess the environmental credentials of a paper, particularly for those clients with high values in corporate social responsibility. We do our own annual environmental audit on our key paper suppliers, including M-real. It is a fundamental part of our client service offering – we don’t want rock-bottom prices at the risk of letting in a paper with what turns out to be a poor environmental record. The audit covers wood procurement, percentages of certified wood fibre in each brand, and EMAS * statements for each mill. High standards on emissions and water quality are taken as a given these days, although we are aware of continuous improvements being made.

Many of M-real’s papers are used in magazine publishing, and here Colette Mahon is shown with a selection of the customer magazines produced by Redwood, one of the UK’s largest contract publishers.

“ Environmental issues are becoming more important to everyone and are now a part of the decision making process in paper choice.”

* Eco-Management and Audit Scheme (EMAS) is a voluntary initiative designed to improve companies’ environmental performance.

Fully committed to the principles of sustainability M-real is committed to promoting sustainable development through its business activities, taking into consideration the economic, environmental and social aspects of their operations. Their objective is to ensure both their own and their business partners’ longterm business success, to contribute to the well-being of people through their products and activities, and to minimize the adverse environmental impacts of their operations. They support the principles of the UN Global Compact on human rights, labour, the environment and anti-corruption. They are committed to advancing these principles within their sphere of influence. 2006 M-real Annual Report, available at www.m-real.ca

M-real Corporation defines its commitment to Corporate Responsibility in more detail in the company’s 2006 Annual Report, available at www.m-real.ca.

With so many new regulations and fresh approaches coming into play, it’s more important than ever for a company to communicate its story clearly and effectively. Printed annual reports still remain at the heart of the best investor relations programs, and crafting a top-notch annual report means understanding current standards and practices. By staying on top of the trends, companies can stay ahead of the game.

www.craib.com www.barnesmcinerney.com