National Investor Survey Penn, Schoen & Berland Associates September 12, 2000

National Investor SurveyNational Investor Survey

Penn, Schoen & Berland AssociatesPenn, Schoen & Berland Associates

September 12, 2000September 12, 2000

2

Methodology•Penn, Schoen & Berland interviewed 600 investors nationally by telephone, a cross-section of all American investors

•Currently invest in stocks, bonds, mutual funds or in a retirement plan such as an IRA or 401(k)

•Make or help make the major investment decisions in their households

•Large, small, and medium-sized investors represented – 27% have portfolios less than $50,000

•Aged 25 and over

•59% say they actively manage their investment portfolio

•51% are female, 49% are male

•All interviews were conducted from Penn, Schoen & Berland’s central field facility in Denver, CO from August 30 to September 6, 2000

•Margin of error is ±4% at the 95% confidence interval

•The survey was commissioned by the American Institute of Certified Public Accountants

Investors Confident In AuditInvestors Confident In Audit

4

3%5%

91%

Credible Not credible Don't know

Nine in ten investors say annual audit of financial Nine in ten investors say annual audit of financial statements is crediblestatements is credible

How would you rate the credibility of the annual audit of financial statements of the corporations you invest in?

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Investors Trust The Audit Investors Trust The Audit Committee And The Board Committee And The Board

6

6%

23%

70%

Agree Disagree Don't know

By a margin of three to one, investors say the Audit By a margin of three to one, investors say the Audit Committee and Board should decide what services Committee and Board should decide what services

the audit firm should provide the audit firm should provide The Audit Committee and the rest of the company Board of Directors are best positioned to determine whether or not the provision of any particular service

by the audit firm is inappropriate

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7

5%

22%

73%

Agree Disagree Don't know

By a three to one margin, investors say the Audit By a three to one margin, investors say the Audit Committee and the Board generally act in the Committee and the Board generally act in the

interest of shareholdersinterest of shareholdersThe Audit Committee and the rest of the company Board of Directors

generally act in the best interests of shareholders

Penn, Schoen & Berland Associates

8

3%

12%

86%

Agree Disagree Don't know

By a seven to one margin, investors say the Audit By a seven to one margin, investors say the Audit Committee and the Board should decide which Committee and the Board should decide which

auditor to hireauditor to hireThe Audit Committee and the rest of the company Board of Directors should continue to be responsible for overseeing company financial decisions and

practices, including which auditor to hire

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Investors Reject Government Investors Reject Government InterventionIntervention

10

23%

69%

9%

Bigger role Smaller or about thesame role

Don't know

By a three to one margin, investors say regulators By a three to one margin, investors say regulators should not play a bigger role than they do now should not play a bigger role than they do now

regulating what services accounting firms provideregulating what services accounting firms provide

Should regulators play a bigger role, smaller role, or about the same role as they do now prohibiting accounting firms from offering a range of services, for example information technology consulting, to any clients they audit?

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Quality of Audit May Suffer Quality of Audit May Suffer From Prohibitions on From Prohibitions on

ConsultingConsulting

12

2%

19%

79%

Agree Disagree Don't know

By a four to one margin, investors agree that the By a four to one margin, investors agree that the more auditors know about the company, the better more auditors know about the company, the better

the auditthe auditThe more auditors know about the company, the better the audit

Penn, Schoen & Berland Associates

13

8%

33%

59%

Agree Disagree Don't know

Prohibiting consulting by audit firms will hurt the Prohibiting consulting by audit firms will hurt the quality of auditsquality of audits

If this prohibition is implemented, audit firms will know less about the companies they audit and the quality of the audit may suffer

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Investors Prefer Disclosure To Investors Prefer Disclosure To ProhibitionsProhibitions

15

2%

10%

89%

Agree Disagree Don't know

Nine in ten investors want to know if a company’s Nine in ten investors want to know if a company’s auditor also provides other servicesauditor also provides other services

It would be important for shareholders to know if a company’s auditor also provides consulting services to that company

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Investors Need New Types Of Investors Need New Types Of Investment InformationInvestment Information

17

73%

75%

76%

78%

79%

83%

87%

Measures of intangible assets, such assoftware or intellectual capital

development

Monthly or even daily financialinformation, including sales figures, cash

on hand, or product margins

Measures of the value of innovation

Corporate responsibility information,such as privacy policies or overseas

labor or environmental standards

Audited performance indicators acrossan industry sector that are consistent and

comparable

Current or forward-looking financialinformation that is reviewed by

independent auditors

Measures of the value of new servicesand products

Investors need new types of investment informationInvestors need new types of investment information

Percent Saying Necessary

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Investor DemographicsInvestor Demographics

19

27%24% 24%

6%

20%

Less than$50,000

$50,000 to$100,000

$100,000 to$500,000

$500,000+ Refused

Portfolio valuePortfolio value

For statistical purposes only, we need to know the value of your total investment portfolio. Will you please tell me which of the following best represents your total

investment portfolio, including any 401(k) or IRA accounts, but excluding any company pension for which you do not make investment decisions?

Penn, Schoen & Berland Associates

20

18%

35%

30%

14%

3%

25-34 35-49 50-64 65 and over Refused

AgeAge

Please tell me in which category you fall

Penn, Schoen & Berland Associates

21

49%51%

Men Women

GenderGender

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