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How to read annual reports

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THIS GUIDE IS NEITHER AN OFFER TO SELL, NOR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OF INTERNATIONAL BUSINESS MACHINES CORPORATION OR ANY OTHER COMPANY.

An annual report is exactly what it sounds like - a formal report on a company's performance in the preceding year. A public company produces an annual report for its stockholders, the people and institutions who own the company.

Other interested parties, such as customers and potential investors, read this report, too. In fact, the Securities and Exchange Commission (SEC), a U.S. government agency, requires a public company to keep stockholders informed regularly on the state of its business.

An annual report is one of the most important documents a company produces and is often the first document someone consults when researching a company. It reports how the company did financially and often explains the scope of its business mission and management philosophy.

For these reasons (and because the SEC requires publication of much of the information in the annual report), companies take the development of an annual report seriously. They carefully consider its design and construction and even the paper to print it on. Today, many companies also produce Web and CD-ROM versions of their annual reports.