January 22, 2002
For Immediate Release

Don't ignore annual reports remind securities administrators

Montral -- As Canadians mull over where to invest their money this RRSP season, Canada's securities administrators are reminding people of the value of the information in a company's financial reports.

Too often, investors fail to read and understand the annual reports of companies in which they invest. Annual reports are a valuable source of information that can help people make more informed investment decisions, said Doug Hyndman, Chair of the Canadian Securities Administrators (CSA), the umbrella organization representing the 13 provincial and territorial securities commissions.

In addition to the prospectus, the company's website and other continuous disclosure documents, the annual report enables investors to have a better understanding of the company because it refers to its current activities, future opportunities and how it is performing compared with its competitors.

The following are ten tips on how to read between the lines of an annual report (many of the tips are found in the notes section of annual reports):

  1. Compare the activities reported by the company's management with those that were outlined in the prospectus and the previous annual report. Significant changes could indicate that you should review your investment strategy.

  2. Verify whether the company's business strategy is the same as that described in the prospectus and the last annual report. If it has changed, this could affect the performance of your investments.

  3. If the annual report mentions strategic acquisitions made during the year, try to evaluate how they add value to the company and, at the same time, to your investments. Will these acquisitions have long-term effects? Will they help the company meet its objectives?

  4. Ask yourself if the investments made by the company during the year in research and development brought tangible results.

  5. Did the company's earnings during the previous year come from activities that had been announced in the previous report? Compare the projected earnings per activity type with the actual earnings generated by these activities. This will show you whether management actually followed the outlined strategies.

  6. Look to see if the company experienced profits or losses. If there are losses, verify the explanations provided and when the company anticipates turning a profit. Ask management specific questions during the annual general meeting.

  7. When analyzing the financial statements for any changes in cash flows, determine whether the company's funds were generated from daily activities or from other sources.

  8. Does the company anticipate any changes in its activities or business plan in the next year? Does the company need to make changes to adjust to its competitors? What are the key factors that will affect future performance in terms of maximizing opportunities and minimizing risk?

  9. Analyze the company's current financial situation and whether the company may have to use its cash reserves, borrow money or issue shares to solve any cash problems. What is the company planning on doing to respect its commitments?

  10. How much profit is the company going to make next year? If the products are still in the developmental stage, it is probable that losses may be generated. If, on the other hand, the company is developing markets for a product, projections may be positive.

(Adaptation of Tips for High Tech Investors from the Australian Securities & Investments Commission's Financial Tips & Safety Checks.)

For more information for investors contact your local securities regulator for a free Investor Education Kit or visit the CSA website at www.csa-acvm.ca.

Media relations contacts:

Joni Delaurier
Alberta Securities Commission

Andrew Poon
B.C. Securities Commission
1-800-373-6393 (B.C. & Alberta only)

Ainsley Cunningham
Manitoba Securities Commission
1-800-655-5244 (Manitoba only)

Suzanne Ball
N.B. Securities Administration Branch
1-866-933-2222 (N.B. only)

Frank Switzer
Ontario Securities Commission

Denis Dub
Commission des valeurs mobilires du Qubec
1-800-361-5072 (Quebec only)