Press releases
16 December 2011
AIC seeks revised company reporting regime
AIC responds to Government recommendations on narrative reporting
The Association of Investment Companies (AIC) believes that company annual reports should be fundamentally restructured. It has made radical recommendations to the Department of Business Innovation and Skills, designed to create higher-quality, user-friendly reports which better meet the needs of shareholders.
The AIC recommends splitting the annual report into two documents – a Strategic Report and a Supplementary Report. The Strategic Report would be much shorter than the current report and accounts. It would provide a high level overview of what the company does and how it has performed in the year. In many cases the AIC expects this report would be no longer than 12 pages or so - a substantial reduction from the current average size of 135 pages for the annual report of FTSE 350 companies (2011 Grant Thornton Corporate Governance Review). The Strategic Report would be distributed to shareholders, with an option to receive it electronically if preferred. All the other information from the annual report, including the corporate governance statement, remuneration information and the full financial statement would be published online as a Supplementary Report.
Ian Sayers, Director General, Association of Investment Companies (AIC) said: “Today’s annual reports are so long and detailed that investors cannot see the wood for the trees. Key information about the business is lost in pages and pages of detail. This complexity harms rather than helps market understanding. On the other hand a new approach could encourage disclosures which highlight key information which is of real use to investors.
“The Government has made some modest proposals but we think more can be done. We even suggest stripping out the financial statements from the report sent to shareholders and replacing them with a summary. This will not reduce the quality of information available – those who want the full statements will still be able to find them on-line. However, our approach would mean that the vast majority of investors with less interest in the detail will receive a report they may read and absorb, instead of a tome which does nothing but fill the recycling bin.
“This is an important debate and I hope significant reform will be seriously considered. Tinkering at the edges is unlikely to make any real impact on the quality of UK reporting. With this in mind, if the Government can’t achieve a two/thirds reduction in the length of the report sent to shareholders it should not bother with restructuring at all.”
Summary of AIC proposal
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Annual report
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Strategic Report
(default paper disclosure or
electronic at shareholders request)
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Supplementary Report
(default online disclosure or hard
copy on request)
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- Strategy and business model
- Company performance
- Principal risks and uncertainties
- KPIs
- Key financial information
- Consistency report from auditors
Details of where to obtain further information online and how to request a hard copy of Supplementary Report if required.
Also posted online alongside Supplementary Report.
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- Corporate governance statement
- All remuneration information
- Other company law disclosures
- Environmental and social information etc.
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-Ends-
Notes to Editors:
The Association of Investment Companies was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed ended investment companies, incorporating investment trusts and other closed ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 344 members and the industry has total assets of approximately £90.8 billion.
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