Letter to Shareholders

• An annual report begins with a letter from the lead executive of the company. This letter provides commentary on the performance of the business the past year, expectations for the coming year and a discussion of key events that transpired since the issuance of the last annual report. The author, usually the CEO or President, uses the letter to shareholders to paint a picture of the complete business environment and welcome shareholders to the annual meeting.
  
  

Audited Financial Statements

• All publicly traded companies that are fully-reporting are required to have their financials audited by an independent auditing firm at least once a year. The annual report includes the income statement, balance sheet and statement of cash flows. The income statement provides sales, revenue and expense data for the company; the balance sheet provides a list of the company's assets, liabilities and shareholder's equity; and the statement of cash flows describes how cash is moving in and out of the company.
  
  

Management Discussion & Analysis

• The Management Discussion & Analysis -- or MD&A -- provides a detailed commentary on all aspects of the business. The commentary is written for informational purposes for shareholders, but also for compliance and for filing with the required regulatory agencies. The MD&A discusses the performance of individual business units, explain reasons for performance, list risk factors, executive compensation and any other item that is relevant to the business operations. The tone of the MD&A is distinctly different from the Letter to Shareholders.
  
  

Annual Meeting Information

• Publicly traded companies must also hold an annual meeting for the purpose of voting on matters that require shareholder approval. The items to be voted on at the upcoming annual meeting are usually published in the annual report along with voting directions and recommendation from the board of directors. Proposals from other shareholders are also available for review in this section. Things that usually require a shareholder vote include issuance of more shares of stock, approval of executive compensation plans or accepting the buyout offer from another company.
  
  

Certifications by Auditors & Management

• Annual reports include required documentation from the firm's auditors as well as statements executed by the executives testifying to the accuracy of the information contained in the report. The auditors attest to the completeness of the financial information provided by the company and effectiveness of the company's internal financial controls. The executive certification is required by the Sarbanes-Oxley Act of 2002. The company of the management is attesting to the validity of the financial information disseminated to the public in the annual report and that the management is aware of all information contained in the report.