Newsletter publisher Sid Cato, who might be considered the Blackwell of the annual report industry, has named a Honolulu banking company to his version of the worst-dressed list.

December is an important time of year for Mr. Cato, who warns that many companies give short shrift to their annual reports. Now is the time most marketing executives begin to plan the publication of their companies' reports for distribution by the end of the first quarter.

"This is the No. 1 document a company can produce," said Mr. Cato, who has often been a harsh critic of corporate investor relations practices. "It's the key corporate communique. It indicates how the company feels about itself."

But scrimping wasn't the problem for Pacific Century Financial Corp., a $14.5 billion-asset banking company that was ranked fifth-worst on Mr. Cato's compilation of the best and worst 1998 annual reports, which appeared in the November issue of Chief Executive magazine.

Pacific Century's 102-page report was singled out for being twice as long as the average. Mr. Cato also derided as "interminable" the company's 16-page letter from the chairman, which was interspersed with photographs of employees and customers. "That showed bad judgment," he said.

Pacific Century defended its publication. "Judging from the many positive comments we've received, we'd say our 1998 annual report accomplished what it set out to do," said Lori McCarney, executive vice president of marketing for Pacific Century, in a statement.

"It communicates that Pacific Century … is entering an exciting new era and is taking the necessary steps to become a world-class financial institution," Ms. McCarney said.

Mr. Cato, who also critiques annual reports at the request of companies, offered some tips for improvement. Among his criteria are the inclusion of financial disclosures that go beyond the requirements of the Securities and Exchange Commission, biographical data on corporate officers, a forward-looking - and preferably brief - letter from the company's chairman, and evidence that top executives have been involved in planning the report.

He said he also likes flashy, four-color covers that say: "Open me. Read me."

Scott Greenberg, president of Hauppauge, N.Y.-based Curran & Connors, a firm that helps design and write annual reports, said banks should develop a clear message and use their reports to document their competitive advantages for a well-defined audience.

The annual report is the best way for a bank to convey its message because "it is the only SEC document that allows you to editorialize," Mr. Greenberg said.

Wells Fargo & Co., a $207 billion-asset San Francisco banking company, was praised for producing one of 1998's 40 best reports, though it did not make Mr. Cato's Top 10. Larry Haeg, executive vice president for corporate communications at Wells, said his company's secret is writing a report that targets employees, not investors, as the primary audience.

"We speak to them, but everyone else can listen," Mr. Haeg said. "We use the report as a way to communicate our message to the team."

In addition to the reports' print versions, companies also should come up with strategies for publishing Internet versions, said a spokesman for the National Investor Relations Institute in Vienna, Va.

However, companies, which are required to send copies of their reports to each shareholder, "have to have some way of verifying that shareholders received the report over the Internet," the spokesman said.

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