Voice of the American Shareholder Quarterly Poll – Wave 4 Prepared for: National Association of

1. Voice of the American Shareholder Quarterly Poll – Wave 4 Prepared for: National Association of Investors Corporation (NAIC) Final Report November 30, 2004

2. Table of Contents Study Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Overview of Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Detailed Findings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 What Does A Typical Shareholder Look Like, and How do they behave?. . . . . . . . . . . . . . . . . . . 18 How Do Shareholders Feel about the Economy and Stock Market? . . . . . . . . . . . . . . . . . . . . . . . 28 What Do Shareholders Think are The Best and Worst Investments? . . . . . . . . . . . . . . . . . . . . . 39 How Do Shareholders Feel about Corporate Governance Issues?.. . . . . . . . . . . . . . . . . . . . . . . . 44 How Are Investment Decisions Impacted by Current Events and Plans for 2005? . . . . . . . . . . . . . 53 Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Detailed Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68

3. Study Objectives • The National Association of Investors Corporation (NAIC) commissioned Harris Interactive to conduct a series of research studies to better understand the attitudes and behaviors of American investors. This study represents the fourth wave of research conducted for NAIC. The previous waves were conducted in September 2003, January 2004 and May 2004. • By regularly reporting on these findings, NAIC expects to capture the voice of the American shareholder. • The survey questions are designed to measure a few key trends in shareholders’ portfolios and investing behavior as well as to understand shareholders’ attitudes and views towards current issues. Specifically, this wave of research focused on the following topics: • Investment profile, goals and strategy; • Views towards the economy and identification of best and worst investments; • Views toward corporate governance issues; • Sources of information investors use; and • Investment plans for 2005.

4. Overview of Methodology • Sample includes 1,110 U.S. adults aged 18 or older who currently own individual stocks or stock mutual funds. • Interviewing was conducted between November 3 and 10, 2004, immediately following the 2004 Presidential Election. • The interview averaged 10 minutes in length. • All interviewing was conducted online using the Harris Poll Online (HPOL) database consisting of several million members who have agreed to participate in survey research.

5. Executive Summary

6. Executive Summary • The overall view shareholders have about the economy and stock market could best be characterized as cautious. • The decline in confidence over the direction of the economy has continued for the third straight quarter and is at its lowest level since September 2003, when this was first measured. • The proportion of shareholders who think it is a good time to move into safer investments continues to increase and fewer think stocks are a better bargain than they were one year ago. • There has been a drop in the NAIC Investor Confidence Index to 9.3 from 10.9 in May 2004. • Many anticipate that interest rates, inflation and the national unemployment rate will increase in 2005. • Shareholders lack faith in most of the institutions whose mission it is to be effective in protecting investors. • The economy is the most often cited factor that would prompt a shareholder to make a change to their portfolio. • This cautious attitude follows knowing the outcome of the 2004 Election. • While shareholders regularly review their portfolios and indicate a readiness to react to current events, they do so cautiously and for the most part do not make drastic changes to their investment strategy. • Two in five review their portfolios monthly and most do so at least once a year. • Three-quarters indicate that their investment strategy is affected by current events. • Majorities report that they intend to not make any changes to their portfolios, a finding consistent since September 2003. • The average risk level of shareholders’ investments remains steady as having moderate risk.

7. Executive Summary • Shareholders lack trust in CEO’s and corporate management to govern themselves fairly. And, the impact the CEO can have on the stock value of a company is unclear. • Most have little or no confidence that corporations govern themselves fairly and think they (shareholders) would be more trustworthy as it relates to issues such as CEO pay. • Most also believe that CEO pay should be tied to company performance. • While two-thirds agree that the CEO can enhance the stock value of a company, majorities report that the personal appeal of a company leader is neither a positive nor negative influence on their investment decisions. • Men and women take a different approach to investing, including their strategy, information sources and reaction to current events. Men are more active, involved and willing to take risks. • Women continue to play it safer, reporting a lower overall risk level of their investments and fewer than half think it’s a good time for new investors to get into the market. • Women are far more likely to get financial information from a financial planner or family member while men rely more heavily on analyst reports and financial websites. • Men are more likely than women to report that they would make a change in response to a variety of events. • Men continue to have more confidence about the direction of the economy than women, though lower than in previous waves.

8. Executive Summary • Health care costs that shareholders bear the burden of are negatively impacting their ability to save or invest. • Majorities of investors are saving or investing less as a result of health care costs that they pay, a finding especially true for women. • The vast majority of shareholders expect the amount they pay for their health care will increase in 2005.

9. Profile of the typical American Shareholder • In general, the typical American shareholder’s behaviors and investment profile has remained virtually unchanged since September 2003. • Shareholders continue to hold a variety of investments such as IRAs and bonds in addition to individual stocks and stock mutual funds. • The average risk rating that shareholders report on their investments remains around 4 (moderately risky). • The majority of shareholders plan to maintain current levels of investment in individual stocks (63%) and stock mutual funds (69%), rather than increasing or decreasing these investments, over the next 6 months. • Virtually all shareholders regularly review their investment portfolios and many use a financial planner to help them do so. • Nine in ten (89%) shareholders review their portfolio at least once a year and fully two in five (42%) review their investments at least once a month. • Six in ten (60%) investors who review their portfolio report that they use a financial planner to assist them in doing so. • While the top source of financial information is one’s financial planner, analyst reports, general media sources such as newspapers, magazines and television and financial websites are ranked among the top three. • One in three (31%) shareholders choose their financial planner as the source of information they rely on most. • When looking at the top three sources, analyst reports (56%), newspapers, magazines or television (52%) and financial websites (50%) are relied upon by half or more of shareholders. • Women rely more heavily on people, including their financial planner(37% vs. 26% of men) and family members (33% vs. 13% of men), while men rely more heavily on analyst reports (62% vs. 49%) and financial websites (57% vs. 42% of women).

10. Views towards the economy and stock market • After rising between September 2003 and January 2004, confidence in the direction of the economy has declined to its lowest levels in this series of research and the percentage of shareholders who have no confidence at all had doubled. • When asked about confidence in the United States economy, 54% of shareholders indicate that they have “a fair amount” or “a great deal” of confidence that it is moving in the right direction – down from 60% in May 2004. • Women (50%) have less confidence than do men (57% a great deal/fair amount) • And, the proportion of investors who have no confidence at all in the direction the economy is moving has doubled since May (12% vs. 6% in May 2004). • The NAIC Shareholder Confidence Index has dropped slightly from 10.9 in May 2004 to 9.3 in November. • Currently the NAIC Index is 9.3, down from 19.3 in January 2004. On a scale from -100 to +100 (where zero indicates a neutral attitude towards the stock market), an Index of 9.3 shows trace levels of optimism tempered by concern about the direction of the economy, rising energy prices and anticipation of rising interest rates.

11. Views towards the economy and stock market, cont’d • While half of shareholders agree that it’s a good time to invest in the stock market, an increasing number also think it’s a good time to move money into less risky investments. • Half of stock holders (50%) agree that now “is a good time for new investors to get involved in the stock market”, a finding virtually unchanged since May 2004 (51%). • An increasing number of investors think now is the time to move from risky to safe investments (40% agree vs. 37% in May and 34% in January). • Fewer investors agree that “most stocks are a better bargain now than they were one year ago (35% vs. 41% in May 2004 and 43% in January 2004). • Shareholders do not perceive most of the people or institutions examined in the survey as being effective in protecting the average investor. Many believe that big business and government are not effective in protecting them. • The Federal Reserve is the institution most commonly mentioned as effective in protecting the average investor, though just 22% of shareholders feel this way. • More than half (53%) of shareholders think Corporate CEO’s are not effective in protecting the average investor. Many feel the same way about both Republicans (37%) and Democrats (36%) in Congress, giving them a 1 or 2 on a “7” point scale where 7 is extremely effective and “1” is not effective at all.

12. Best and Worst Investments • According to shareholders, pharmaceuticals, real estate and technology are the top three industries to invest in now and the most commonly mentioned reason for selecting a particular industry as best is that they are in a potential growth industry. • While real estate is considered the best investment (22% best investment and 39% first, second or third best), pharmaceuticals (42% top three) and technology (37% top three) round out the top three. • Being in a potential growth industry (64%) is the top reason why a particular industry is considered a good investment now. However, investors evaluate industries on their individual strengths or weaknesses. • More than half (54%) select real estate as among the top three best investments because their past performance indicates future promise. Nearly half (48% each) select pharmaceuticals and technology because they are developing new products or services. • The three worst investments shareholders believe they can make right now are travel, government and health care primarily because they believe costs in these industries are out of control. • Shareholders have paid attention to the recent financial troubles plaguing the airline industry, citing travel as the worst investment (16% worst investment and 38% among the top 3 worst investments). • Government and health care are also considered poor investments by roughly one-quarter of shareholders (27% and 23%, respectively). • Roughly half of investors feel that out of control costs is the primary reason why travel (51%), government (53%) and health care (48%) are among the worst investments they could make. • Many (45%) also believe that government is a poor investment because they are not prepared to deal with the terrorism threat.

13. Attitudes toward Corporate Governance Issues • The consumer is king. When asked to select who has the greatest influence on the performance of a company, shareholders select consumers most frequently, followed by the Board of Directors and senior management. The CEO is considered more influential than middle management, shareholders and other employees. • One-quarter of shareholders (25%) believe that consumers have the greatest influence on the performance of a company. • Women, however, are more likely than men to view the Board as influential (24% vs. 16%). • Sadly, an overwhelming majority of shareholders have little or no confidence in corporations to govern themselves when it comes to issues such as CEO pay and many indicated that they would trust themselves instead. Further, more than 8 in ten agree that CEO pay should be tied to company performance. • Eight in ten shareholders (80%) have little or no confidence in corporations to govern themselves fairly. • When asked who they would trust with issues such as CEO pay, 59% mention shareholders. An outside auditor would be trusted by one-third of shareholders (35%) and the SEC by one-quarter (24%). Just 19% would trust the Board of Directors and even fewer (8%) would trust senior corporate management. • Nearly half of investors (49%) stronglyagree that CEO pay should be tied to company performance. Overall, 82% agree with this view.

14. Attitudes toward Corporate Governance Issues, cont’d • While many believe that a CEO can enhance the value of a company stock, in fact, the influence of a company leader on investors’ decisions to invest in their companies is not quite so clear. For the most part it’s neutral, though in select cases they can have more of a positive or negative influence. • Two-thirds (66%) agree that a CEO can enhance the stock value of a company, however the personal appeal of a company leader has a positive impact on an investment decision for just 37% of shareholders. • The majority (57%) indicate that the company leader is neither a positive nor negative influence on their decision to invest in a particular company. • Majorities of shareholders are not influenced by most of the corporate leaders examined in the survey. Only two stand out; 46% feel that Meg Whitman, CEO of Ebay has positively influenced their decision to invest in Ebay and 48% believe that Martha Stewart (48%) of Martha Stewart Omnimedia has been a negative influence on their investment decisions.

15. Impact of Current Events and Plans for 2005 • The investment strategy of most shareholders is affected by events going on in the country and abroad, most notably the economy. While men and women are equally likely to say they are affected by current events, they differ in how many would be prompted to make a change. • Three-quarters of shareholders (74%) report that their investment strategy is affected by current events, a belief equally shared by men and women (75% and 73%, respectively). • The economy (44%) is the most commonly mentioned factor that would prompt a change to an investor’s portfolio. This is true for nearly half of men (49%) as compared to 37% of women. • Other commonly mentioned events are rising energy prices (33%), and rising interest rates (31%), also more commonly mentioned by men (39% and 37%, respectively) than women (26% and 23%, respectively). • Investors anticipate that various economic indicators will increase over the next year. • The vast majority of shareholders believes that health care costs they pay (87%), and interest rates (80%) will increase in 2005. Many also believe that home values where they live (67%), inflation (66%) and the stock market (56%) will increase. Two in five (42%) think the national unemployment rate will increase. • Health care costs that shareholders pay are eating into the financial resources they have available for saving or investing. • More than half (53%) of investors who pay a portion of their health care costs are saving or investing less as a result. • This situation is even more serious for female investors – six in ten (60%) save or invest less because of health care costs that they pay (as compared to less than half (48%) of men).

16. Impact of Current Events and Plans for 2005, cont’d • Shareholders understand the impact of high energy prices. Oil at $20 a barrel is the most common “gift” shareholders would wish for this holiday season followed closely by a 20% reduction in health insurance premiums. • One in five (20%) investors would most like to have a barrel of oil that costs $20, rather than the current price of $49 a barrel. Men select this more frequently (25%) than women (14%). • Nearly one in five (20%) would most want a 20% reduction in their health care costs, a wish felt more strongly among women (19%) than men (15%). • Other areas where men and women wish for different things: women are nearly twice as likely as men (16% vs. 9%) to wish for a stable government in Iraq and are more than twice as likely (11% vs. 5%) to want a 5% interest bearing checking account.

17. Detailed Findings

18. What Does the Typical American Shareholder Look Like, and How Do They Behave?

19. Since May 2004, shareholders have increased the amount they have invested in stock mutual funds. Total Amount Invested in Individual Stocks and Stock Mutual Funds Q1440: You mentioned that you have the following investments. About how much do you have invested in the following…? Base: Have individual stocks or stock mutual funds

20. Shareholders have various types of investments. Types of Investments Owned Q430: Please indicate which types of investments or investment accounts you personally have. Do you currently have . . .? Base: All shareholders

21. The majority of shareholders plan to make no changes to their investments over the next six months. Plans for Investments Over The Next Six Months Q925: Again thinking about your investment portfolio, over the next six months, do you plan to increase, decrease or make no change in your investments in each of the following? Base: All shareholders

22. Men are slightly more likely to report an intention to increase their holdings in individual stocks and stock mutual funds. Plan to Increase Investments Over The Next Six Months Q925: Again thinking about your investment portfolio, over the next six months, do you plan to increase, decrease or make no change in your investments in each of the following? Base: All shareholders (n=1,110; male n=633; female n=477)

23. Shareholders characterize most of their investments as moderately risky. Risk Level of Current Investments Sept ‘03Jan ’04May ’04Nov ‘04 MEAN = 4.0 4.1 3.9 3.9 Q922: Investment risk is typically defined as a greater likelihood that your portfolio may lose value but is often associated with higher returns. On a scale from 1 to 7, in which “1” represents “not risky at all” and a “7” represents “very risky”, how would you characterize most of your investments? Base: All shareholders

24. Men continue to make riskier investments than women, with 41% of women rating their investment a 1, 2 or 3 where “1” is not risky at all. Risk Level of Investments Q922: How would you characterize most of your investments on a scale from “not risky at all” to “very risky”? Base: All shareholders

25. Virtually all shareholders review their investment portfolios and 42% do so at least once a month. Among these investors, majorities use a financial planner to help them. Frequency of Reviewing Investment Portfolio Use Financial Planner To Help Review Investment Portfolio At least monthly (NET): 42% Q915: How often do you review your investment portfolio? Base: All shareholders (n=1,110) Q920: Do you use a financial planner to help you review your investment portfolio? Base: Ever review investment portfolio (n=1,082)

26. Nearly one-third of shareholders cite their financial planners as the best source for financial information, but analyst reports rank highest when choosing the top three best sources. Sources of Financial Information Q805: Please indicate the top 2 or 3 sources of financial information you rely on when making investment decisions. Base: All shareholders (n=1,110)

27. Women tend to rely more heavily on people for financial information while men are more likely to rely on analyst reports and financial websites. Sources of Financial Information Q805: Please indicate the top 2 or 3 sources of financial information you rely on when making investment decisions? Base: All shareholders (n=1110; Male n=633; Female n=477)

28. How Do Shareholders Feel about the Economy and Stock Market?

29. Confidence in the United States’ economy continues to decline with almost half of shareholders saying they have not much or no confidence at all. Confidence in the U.S. Economy % none at all May ’04 6% Nov ’04 12% Q410: How much confidence do you have that the United States’ economy is generally moving in the right direction? Base: All shareholders

30. Since January confidence that the economy is moving in the right direction has declined for both men and women. Men, however, continue to feel slightly more confident than women. Confidence in U.S. Economy - A Great Deal/Fair Amount (Net) Total Men Women Q410: How much confidence do you have that the United States’ economy is generally moving in the right direction? Base: All shareholders

31. Consistent with findings that shareholders have less confidence in the economy and that they anticipate rising interest rates, the NAIC Index of Investor Confidence had declined slightly since May. November 2004 Component Scores for Each Item Included in NAIC Index Nov 2004 NAIC INDEX 9.3 Note: The NAIC Index was calculated based on 7 components that reflect shareholder confidence in the economy and stock market and is rated on a scale from -100 to +100 where 0 is the midpoint. A more detailed explanation of the Index is found in the Detailed Methodology.

32. Shareholders’ opinions about it being a good time for new investors to get involved in the stock market remain virtually unchanged since May 2004. “It’s a good time for new investors to get involved in the stock market.” Q601: How strongly do you agree or disagree with each of the following statements? Base: All shareholders

33. The majority of men strongly or somewhat agree that it’s a good time for new investors to get involved in the stock market while less than half of women feel the same. % Strongly/Somewhat Agree: “It’s a good time for new investors to get involved in the stock market.” Q602: How strongly do you agree or disagree with each of the following statements? Base: All shareholders

34. More shareholders are now neutral in their view about whether stocks are a better bargain than one year ago.Fully one-third of shareholders agree that most stocks are a better bargain now than they were one year ago, a slight decline from earlier waves. “Most stocks are a better bargain now than they were one year ago.” Q602: How strongly do you agree or disagree with each of the following statements? Base: All shareholders

35. The proportion of shareholders who agree that it’s a good time to move money into safer, lower risk investments has steadily increased since the beginning of the year. “It’s a good time to move money into safer, lower risk investments from higher return/higher risk investments.” Q601: How strongly do you agree or disagree with each of the following statements? Base: All shareholders

36. Men and women agree that it’s a good time to move money into safer, lower risk investments, though men have become increasingly cautious since January 2004. % Strongly/Somewhat Agree: “It’s a good time to move money into safer, lower risk investments from higher return/higher risk investments.” Q601: How strongly do you agree or disagree with each of the following statements? Base: All shareholders

37. The Federal Reserve is viewed as extremely effective in protecting the average investor, though just 22% of shareholders feel this way. Effectiveness of Institutions/ People in Protecting the Average Investor % Extremely effective (6,7) Q506: On a scale from “not effective at all” to “extremely effective,” how effective do you think each of these institutions/ people are in protecting the average investor? Base: All shareholders (n=1,110)

38. Corporate CEOs are not effective in protecting the average investor, according to 53% of shareholders. Effectiveness of Institutions/ People in Protecting the Average Investor % Not effective at all (1,2) Q506: On a scale from “not effective at all” to “extremely effective,” how effective do you think each of these institutions/ people are in protecting the average investor? Base: All shareholders (n=1,110)

39. What Do Shareholders Think are the Best and Worst Investments?

40. Real estate, pharmaceuticals and technology are among the best industries to invest in now, according to shareholders. Best Investments Q606: Thinking of the current economy, please indicate which three of the following industries you think are the best for investing now. Please indicate your first choice, second choice, and third choice. Base: All shareholders (n=1,110)

41. While being in a potential growth industry is the top cited reason making an industry a good investment, shareholders evaluate industries on their individual merits. Why Particular Industry is among Top 3 Best Investments Now Q610: What about the [answer from Q606/1] industry makes it the best industry to invest in now. Please select all that apply. Base: All Shareholders, Best/Second/Third Best Investment

42. Perhaps as a result of recent troubles facing major airlines, travel ranks as the worst industry to invest in now. Worst Investments Q616: Thinking of the current economy, please indicate which three of the following industries you think are the worst for investing now. Please indicate your first choice, second choice, and third choice. Base: All shareholders (=1,110)

43. Cost control is the top factor shareholders mention leading them to say an industry is a poor investment. The poor past performance of the travel industry is also mentioned as a reason why it is one of the worst industries to invest in now. Why Particular Industry is among Top 3 Worst Investments Now Q620: What about the [answer from Q616/1] industry makes it the worst industry to invest in now. Please select all that apply. Base: All shareholders, Worst/Second/Third Worst Investment

44. How Do Shareholders Feel about Corporate Governance Issues?

45. Shareholders perceive that consumers have the greatest influence on the performance of a company, followed by the Board of Directors, senior management, and CEOs. Greatest Influence on the Performance of a Company Q705: Who do you think has the greatest influence on the performance of a company? Base: All shareholders (n=1,110)

46. While there is agreement that consumers have the greatest influence on the performance of a company, women are more likely than men to feel that the Board of Directors can play such a key role. Greatest Influence on the Performance of a Company Q705: Who do you think has the greatest influence on the performance of a company? Base: All shareholders (n=1,110)

47. An overwhelming majority of shareholders have little confidence in corporations to fairly govern themselves. Confidence in Corporations to Fairly Govern Themselves 20% 80% 39% Q710: How much confidence do you have in corporations to fairly govern themselves with regard to issues such as CEO pay? Base: All shareholders (n=1,110)

48. Shareholders indicate that they would trust themselves to govern corporations fairly. Among those currently in charge, the Board of Directors and senior management are selected least frequently. Trusted Person to Govern Corporations Q715: Of the following, who would you trust to govern corporations with regards to issues such as CEO pay? Base: All shareholders (n=1,110)

49. Half of shareholders strongly agree (82% agree) that CEO pay should be tied to company performance. Attitudes Toward CEO’s “CEO pay should be tied to company performance.” 82% 11% Q720: Please indicate how strongly you agree or disagree with the following statements. Base: All shareholders (n=1,110)

50. However, two-thirds also agree that a CEO can enhance the stock value of a company. Attitudes Toward CEO’s “A CEO can enhance the stock value of a company.” 66% 14% Q720: Please indicate how strongly you agree or disagree with the following statements. Base: All shareholders (n=1,110)