Usually the first bit of text to write up when preparing an Annual Report is the management report, which let’s face it, is up to your creativity. Just make sure the important bits about the reporting period are covered, keep in mind that it should be understandable and consistent (not giving contradictive information when it comes to the rest of the Annual Report) and you should be fine. We’ve in our experience seen real work of arts in a form of a picture and very short and blunt texts. Fit somewhere between those and you’ll meet the goal of a management report. 

Things to write about include:

• Comments on the reporting period results in general, an overview of main products and services performance (more or less something you’d reply to a question “How did it go?”).
• Investments done and budgeted for the next period (users of the Annual Report are interested in how much money was spent on fixed assets and what are management’s future plans when it comes to assets as such). Note here that significant investments are also worth mentioning already in the management report, i.e. what the investment was for, how it’s going to help the business etc.
• Future expectations, plans and projects – it’s like as was with the overview of the current year only the question asked now is “What are you going to do next?” It’s about what you want to achieve and the steps you’ll take, i.e. expecting an increase in overall economy and responding to that with opening one more store in an area that’s growing in population, or changing materials used in production to comply with new regulations being introduced. By the way, an overview of new regulation affecting the company and the industry in general is always something to write about in the management report, as it’s likely to affect the performance or at least some aspects of the business. No in depth introduction is needed, just a short overview and possible implications if applicable and how the company will face them (actions taken to comply with new requirements). For an example if a new currency is being introduced in the country the company operates in, it’s more or less two or three sentences needed – stating the fact of the change, the exchange rates and that’s accounting figures are to be translated using the stated exchange rate.
• Personnel related information like number of employees, salaries and benefits paid. People are normally what make the business and as such even the government is interested in how many people you employee (needed for statistics) and what you pay as salary (again needed for statistics). Investors are always interested in how well motivated your people are (as are future employees to be honest) so disclosing those numbers is really serving not just statistic purposes, but also telling how you treat your employees. Of course it’s all industry specific in the sense that a knowledgeable reader should always keep in mind the industry average salary when making any decisions based on this piece of information. Note here that disclosing the industry average in here isn’t really something you ought to do obviously. It’s something that’s tied to presuming the readers have some basic knowledge of the industry and you not having to explain and give information on everything.
• Any other information that’s not exactly presented in the notes, but that’s also important to understanding on how’s the “health” of the company, i.e. an overview of the macro-economic environment, social affairs like donations and if applicable, also the environmental activities taken up. It’s not directly business related, but more industry specific information or things done outside the normal course of business.
• An overview of and comments on industry specific and the most important financial ratios for the reporting period. There isn’t a list of compulsory rates, but there are those that are common for most business and those that you monitor. At the end of the day you should disclose information about only those ratios you yourself as an owner or a manager monitor and none other. The fact that one company shows ROE and no ROA doesn’t mean that you should follow the same track. If it’s gross margin you monitor then it’s what you should calculate and show in the management report. Note that as with all financial information presented in numbers, prior year’ figures are always to be presented.
• And whatever more you feel is needed to comment on your business and the reporting period. It’s your business and your company so what you feel is important enough to mention is to be disclosed within the management report.

Now, not to put too much pressure on you, but the management report is the first bit most people read when they open the Annual Report. Hence it needs to be a summary of what’s described in more detail in the rest parts of the report. What you’d also want to do, depending on the targeted audience of course is to be creative and really write to the audience that reads the report when it’s released. But as I said, you’re not writing a bestseller so don’t be all stressed about it and spend too much time on it.

The key things to remember are that the report needs to be consistent with the rest of the Annual Report, understandable and informative about the whole year and beyond really.