Loading the player...

What is an 'Annual Report'

An annual report is a publication that public corporations must provide annually to shareholders to describe 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. The back part of the report contains detailed financial and operational information.

BREAKING DOWN 'Annual Report'

It was not until legislation was enacted after the stock market crash of 1929 that the annual report became a regular component of corporate financial reporting. The annual report is a comprehensive report provided by public companies to disclose their corporate 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. 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. The annual report contains 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, 
  • etc.

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 attempt to understand a company's future direction by analyzing the details provided in its annual report.

Annual Report of Mutual Funds

In the case of mutual funds, an 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 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:

  • 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.
RELATED TERMS
  1. Annualized Total Return

    Annualized total return gives the yearly return of a fund calculated ...
  2. Mutual Fund

    Mutual funds combine money from many investors to invest in a ...
  3. SEC Form ARS

    SEC Form ARS is the principal document public companies use to ...
  4. SEC Form N-CSR

    SEC Form N-CSR is a form that a registered management investment ...
  5. Annual Mortgage Statement

    Annual mortgage statement is a report sent to a mortgagor by ...
  6. Earnings Call

    Earnings call is a conference call between a public company, ...
Related Articles
  1. Investing

    SEC Filings: Forms You Need To Know

    The forms companies are required to file provide a clear view of their histories and progress.
  2. Investing

    10 American Funds Mutual Funds with Long Track Records

    Learn about the performance of the mutual funds offered by Capital Group's American Funds that have the longest established track records.
  3. Investing

    The 5 Best American Funds

    Discover five of the best-performing mutual funds offered by American Funds, based on the funds' five-year average annualized returns.
  4. Investing

    High Mutual Fund Fees Can Be an Investment Drag

    Actively managed funds tend to charge more fees than index funds, but don't just assume your index funds are a bargain.
  5. Investing

    Consider These Fees When Evaluating Mutual Funds

    The best way to evaluate a mutual fund is by digging a bit deeper into the fees charged.
  6. Financial Advisor

    The Best Free Mutual Fund Research Providers

    There is no lack of information for advisors on mutual funds. Getting the right sources (at the right price) can be as easy as a few clicks away.
  7. Investing

    Proxy Season 2016: Most Wonderful Time of the Year

    Each year, public companies hold shareholder meetings where individual and institutional investors vote on the future. Here is what to watch in 2016.
RELATED FAQS
  1. Mutual funds versus money market funds

    Learn what mutual funds and money market funds are and understand the differences between each, as well as how they serve ... Read Answer >>
Trading Center