In particular, Rittenhouse focuses on what's at the very front of most annual reports - the letter to shareholders that a company's chief executives writes - to measure the character of the firm's leadership and weigh their strategy.

If the letter clearly spells out the company's goals and objectives, as well has how it has done meeting its previous targets and addressing its problems, then the firm might be on the right track, said Rittenhouse, a former New York City investment banker and a Kenmore West High School and University at Buffalo graduate.

But if the letter is full of jargon, generalities and gobbledygook, then it could be time to look for another investment, said Rittenhouse, who has written a new self-published book called "Do Business with People You Can Trust."

She'll be talking about how she wrote the book and what investors can learn from shareholder letters today at 1:30 p.m. at the Talking Leaves Bookstore, 951 Elmwood Ave. at Bidwell Parkway.

"If you, as a reader, can't understand what the CEO is talking about, you have to wonder if the employees can," Rittenhouse said. "Do a fog check. If the fog is so thick you have to listen for the fog horn, it's probably time to move on."

Rittenhouse, who now runs her own investor relations firm in New York City, says her advice can pay off. For the last five years, Rittenhouse has done a report card for letters written by top executives at 100 of the nation's biggest companies, ranking them on a wide range of issues, such as candor and accountability.

What she found was that the 15 companies whose letters got the highest scores saw their stock prices rise by an average of 7 percent in 2000, compared with a 19 percent drop for the bottom 15. That pattern also held true in 1998 and 1999.

Yet, for many companies, annual reports have become more infomercial than informative, filled with jazzy color photos and graphics but offering investors little perspective on the company's strategy or operations, she said.

That's why many financial experts skip the shareholder letter and instead head straight for the back of the annual reports to pore over the footnotes and financial tables buried in the back. "People have been trained not to read these letters," Rittenhouse said.

But that can be a mistake, said Rittenhouse, who praised executives, like Berkshire Hathaway Chairman Warren E. Buffett and Continental Airlines chief executive Gordon Bethune for writing shareholder letters that are extremely valuable for investors. Berkshire owns The Buffalo News, and Buffett is its chairman.

"There are some CEOs who are doing this," Rittenhouse said. "My passion is to get more people to recognize the CEOs who are doing it, so more CEOs will start doing it themselves."

Not only can the shareholder letters cast light on companies with top-notch leadership, but it also can raise red flags about companies that aren't as good.

Enron is a perfect example of that, Rittenhouse said, noting that the Houston energy trader used its shareholder letter to discuss earnings in four of the five years she reviewed annual reports, but in four of those years, it talked about different variations of earnings, making it hard for investors to compare performance.

In its 2000 letter to shareholders, for example, Enron boasted of $1.3 billion in net income, but its financial statements showed that the company actually had $979 million in net income after a $326 million write-off for problems at a water company it owned.

Only once in that five-year period did Enron executives discuss the company's corporate values. "These are the kind of red flags that investors need to look at," she said.

"Information is one thing. It's the knowledge and wisdom to make use of it is what makes the difference," Rittenhouse said.

"With information overload and everything else today, I think annual reports are more important than ever," she said. "This is the chance where you get to see a glimpse of how reflective the CEO is."

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