Letter to Shareholders - Annual Report

Investment and Securities Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney Russell L. Forkey, Esq.

Letter to Shareholders: As part of our explanation of the sections contained with an annual report of most public companies, we address the "letter to shareholders" section of the report. The following discussion is designed to be generic in nature and should not be considered complete in all material respects. It is being provided for educational purposes only. Thus, it should not be relied upon as legal or investment advice. If you have any questions relative to the contents of this post, you should contact a qualified professional.

Letter to Shareholders - The letter to shareholders provides a review of the year just passed and a look ahead at the coming year. As with the highlight section of the annual report, it is designed to put the best face on the past year's results and to sooth anxieties that might be aroused by any of the financial or other information to follow it in the report. Nonetheless, it is a statement of the management's intentions and, when compared to prior years' messages, a test of management's credibility.

Although it is not an audited, formal part of the annual report, it purports to be a serious comment of the year's prior results and management's position on its plans for the company's future. An impressive letter is one that compares past predictions with actual results and explains in a candid way the disappointments as well as the successes of the company. Be wary of euphemisms and wording that is vague or qualified. Simply, when reviewing this letter, use common sense. If the letter does not appear to say anything useful, it probably doesn't. If you believe this to be the case, you have to ask yourself the question - "do I want to continue to hold stock in this company?" or "do I want to own stock in this company?"