Tuesday, April 29, 2008

Amazing annual report

I've never been more impressed by an annual report than this.

The chairman and the management believes that a good annual report is one that teaches the owners of the company how to interpret the results. And boy, they did enlighten me! They mentioned that for a good analytical review of a business, the balance sheet classifications and other non-profit number indicators should not be an 'art and science' to understand - it must be easily interpreted. He did exactly that.

This forms a very very interesting reading as he goes on and tell the owners (yes, he calls the shareholders that) how to interpret their results and why they do certain things. He even explains the terms of the balance sheet for the owners, so that they know how to interpret it themselves. The managing director's statement goes on like that for 8 pages, which he explains with crystal clarity how to interpret the numbers and what it means for the business. I'm thoroughly washed with his sincerity and desire to educate owners.

Take a look at the chairman's message below.

Amazing right? It's also interesting to note that the founder and now non-executive chairman is a senior craft teacher, so perhaps he finds great satisfaction in educating owners for a win-win relationship. Why win-win? It's because while teaching others, you will also learn from your students if you keep an open mind. I think he managed to pass this philosophy to his son, the present Managing director.

Have you ever seen a consolidated balance sheet which is as easy to read as this?

I think a close fight will be from china milk. China milk's annual report is such a classic, with its own mascot talking and explaining to shareholders, that everyone should at least browse through it, regardless of whether one finds it of investing interest or not.

Of importance is that this kind of style is not only for the FY07, it goes all the way back! Their clarity and desire to educate owners are amazing. I browsed through the FY06 and was suitably impressed by it too. Here, they are trying to educate owners what higher EPS, higher ROE and NAV means to everyone. I must read all their annual reports - I do find their insights refreshing. It's akin to Berkshire's style of explaining their annual report to shareholders.

I have more to say, but I think I'll stop here, lest I'm accused of promoting this company. I have no investing interest in it (not yet anyway, though my interest and curiosity is piqued) and have no vested interest in it. I did bought long long time ago and sold for a mere $180 back in 2006 as it is one of the few stocks I bought when I started this investing business.

When I have a listed company in which I have to write the statements, you can be sure that I'll follow their style. Such is the effect of their enlightening report on me.

So here's the riddle - which company is this?


Anonymous said...

Hi LP,

Koda's AR are indeed easy to interpret. More often then not, there are so many side notes attach to each figure and I have to flip through every page to figure out what exactly the numbers really mean.

PS: Nice way of posting to encourage interaction from readers.


la papillion said...

Hi Derek,

Haha, no fun :) you guessed it already. Koda's AR is very straight forward and easy to understand, which reminds me of Buffet's narrative style. China milk's AR is also another which rates highly in clarity and simplicity for AR. As I mentioned, they even have a mascot and lots of colours to entice readers to read.

Koda wins hands down, of course :) I think I'll get spoilt if I read too many ARs from Koda, haha!

Anonymous said...

em, the image filename already told u what the company is. ;-)

Anyway I still enjoy reading your post :)

la papillion said...

Hi Hawshy,

Haha :) I know the image file name already gives the ans :)

Oh, hahah, not challenging enough right? Next time I'll show you ;P

Anonymous said...

Hi, its actually "Notes to the Financial Statements" presented as a sidebar.