Equity Risk Premium September 2005 - Fuqua School of ...As of this writing, the equity risk premium is 2.93%. The September 2005 survey shows that the expected annual S&P 500 return

The Equity Risk Premium in September 2005: Evidence from the Global CFO Outlook Survey

John R. Graham Fuqua School of Business, Duke University, Durham, NC 27708, USA

Campbell R. Harvey*

Fuqua School of Business, Duke University, Durham, NC 27708, USA National Bureau of Economic Research, Cambridge, MA 02912, USA

ABSTRACT

We analyze the results of the September 2005 survey of U.S. Chief Financial Officers (CFOs). We present expectations of the equity risk premium measured over a 10-year horizon relative to a 10-year U.S. Treasury bond. This multi-year survey has been conducted every quarter from June 2000 to September 2005. Each quarter the survey also provides measures of cross-sectional disagreement about the risk premium, skewness, and a measure of individual uncertainty. The individual uncertainty is deduced from the 80% confidence interval that each respondent provides for his or her risk premium assessment. We also present evidence on the determinants of the long-run risk premium. Our analysis suggests there is a positive correlation between the ex ante risk premium and real interest rates as reflected in Treasury Inflation Indexed Notes. The level of the risk premium also appears to track market volatility as reflected in the VIX index.

JEL Classification: G11, G31, G12, G14

Keywords: Cost of capital, equity premium, long-term market returns, long-term equity returns, expected excess returns, disagreement, individual uncertainty, skewness, asymmetry, survey methods, risk and reward, TIPs, VIX

______________________________________________________________________________ *Corresponding author, Telephone: +1 919.660.7768, Fax: +1 919.660.8030, E-mail: [email protected].

We appreciate the comments of an anonymous referee. We appreciate the research assistance of Hai Huang and Runeet Kishore. Version September 19, 2005. This is part of a series of papers that will be posted to FEN each quarter.

Graham-Harvey: Equity risk premium in September 2005

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1. Introduction

We analyze the results of the September 2005 survey of Chief Financial Officers (CFOs)

conducted by Duke University and CFO Magazine. In particular, we poll CFOs about their long-

term expected return on the S&P 500. Given the current 10-year T-bond yield, we provide estimates

of the equity risk premium and show how the premium changes through time. We also provide

information on the disagreement over the risk premium as well as average confidence intervals.

2. Method

2.1 Design The quarterly survey of CFOs was initiated in the third quarter of 1996.1 Every quarter, Duke

University polls financial officers with a short survey on important topical issues (Graham and

Harvey, 2005). The usual response rate for the quarterly survey is 5%-8%. Starting in June of 2000, a

question on expected stock market returns was added to the survey. Fig. 1 summarizes the results

from the risk premium question.2 While the survey asks for both the one-year and ten-year expected

returns, we focus on the ten-year expected returns herein, as a proxy for the market risk premium.

The executives have the job title of CFO, Chief Accounting Officer, Treasurer, Assistant

Treasurer, Controller, Assistant Controller, or Vice President (VP), Senior VP or Executive VP of

Finance. Given that the overwhelming majority of survey respondents hold the CFO title, for

simplicity we refer to the entire group as CFOs.

2.2 Delivery and response In the early years of the survey, the surveys were faxed to executives. The delivery mechanism

was changed to the Internet starting with the December 4, 2001 survey. Among other things, we

now collect the respondents’ IP addresses (though not their identity or company) and are able

1 The surveys from 1996Q3-2004Q2 were partnered with a well-known national organization of financial executives. The 2004Q3-2004Q4 surveys were solely Duke University surveys, which used Duke mailing lists (previous survey respondents who volunteered their email addresses) and purchased email lists. The surveys from 2005Q1 to present are partnered with CFO Magazine. The sample includes both the Duke mailing lists and the CFO Magazine subscribers that meet the criteria for policy-making positions. 2 In the text and in Fig. 1, we refer to the most recent survey as 2005Q4. The table refers to the exact closing date of the survey, which was August 29, 2005.


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examine consistency of responses across different surveys. Respondents are given four business days

to fill out the survey. Usually, two-thirds of the surveys are returned within two business days.

The response rate of 5-8% could potentially lead to a non-response bias. There are four reasons

why we are not overly concerned with the response rate. First, our response rate is within the range

that is documented in many other survey studies. Second, Graham and Harvey (2001) conduct a

standard test for non-response biases (which involves comparing the results of those that fill out the

survey early to the ones that fill it out late) and find no evidence of bias. Third, Brav, Graham,

Harvey and Michaely (2005) conduct a captured sample survey at a national conference in addition

to an Internet survey. The captured survey responses (to which over two-thirds participated) are

qualitatively identical to those for the Internet survey (to which 8% responded), indicating that non-

response bias does not significantly affect their results. Fourth, Brav et al. contrast survey responses

to archival data from Compustat and find archival evidence for the universe of Compustat firms that

is consistent with the responses from the survey sample.

2.3 Data integrity

In each quarter, we trim the top two and bottom two risk premium observations. Given that we

have, on average, more than 200 responses each quarter, this implies a less than 1% trim in each of

the tails. In addition, of the over 5,300 survey observations, there was only a single observation (in

the June 2000 survey) that we consider not credible. The trimmed and untrimmed data are very

similar with the exception of the June 2000 survey.

There are two other steps that we take. First, for the purpose of some of our statistics, we require

that the expected risk premium forecast be no more than the best-case scenario and no less than the

worst-case scenario. If the ordering is violated, then the observation is deleted. Second, there are

two instances in which respondents report in decimals rather than percentages. In these cases, we

change the inputs to adhere to the survey format rather than deleting the observations.

2.4 The survey instrument and summary statistics

The expected market return questions are a subset of a larger set of questions in the quarterly

survey of CFOs. The survey usually contains between eight and ten questions. Some of the


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questions are repeated every quarter and some change through time depending on economic

conditions. The historical surveys can be accessed at http://www.cfosurvey.org. Appendix 1 shows

the risk premium question in the September 2005 survey.

While the survey is anonymous, we collect demographic information on seven firm characteristics,

including industry, sales revenue, number of employees, headquarters location, ownership (public or

private), and proportion of foreign sales.

During the past five years, we have collected 5,339 responses to the survey. Panel A of Table 1

presents the date that the survey window opened, the number of responses for each survey, the 10-

year Treasury bond rate, as well as the average and median expected excess returns. There is

relatively little time variation in the risk premium. This is confirmed in Fig. 1, which displays the

historical risk premiums contained in Table 1. The lowest premium record is 2.88% in March, 2002,

whereas the highest premium is 4.65% in September, 2000.

As of this writing, the equity risk premium is 2.93%. The September 2005 survey shows that the

expected annual S&P 500 return is 7.13% and the implied risk premium is 2.93% (7.13-4.20). 3 The

median expected return of 7% is down from the 7.5% reported in the March 2005 survey and

unchanged from the June 2005 survey. Panel B of Table 1 presents some summary statistics that

pool all the responses. The overall average ten-year risk premium return is 3.61%.4

The cross-sectional standard deviation across the individual CFO forecasts in a quarter is a

measure of disagreement. In June 2005, the standard deviation, which represents the disagreement

among CFOs, is 2.21%. In the most recent survey, the disagreement drops marginally to 2.20%.

We also report information on the average of the CFOs’ assessments of the one in ten chance

that the market will exceed or fall below a certain level. In September of 2005, the worst case total

return drops from 2.50% to 2.26%. There are only two other surveys that have lower worst-case

returns. The best-case return also drops from 10.88% to 10.82%. There is only one other survey that

3 See, for example, Ghysels (1998), Welch (2000), Ghysels (1998), Fraser (2001), Harris and Marston (2001), Pástor and Stambaugh (2001), Fama and French (2002), Goyal and Welch (2003), Graham and Harvey (2003), and Ang and Bekaert (2005) for studies of the risk premium. 4 Using the Ibbotson Associates data from January 1926 through December 2004, the arithmetic (geometric) average return on the S&P 500 over and above the U.S. Treasury bill is 8.43% (6.47%). Fama and French (2002) study the risk premium on the S&P 500 from 1872-2000 using fundamental data. They argue that the ex ante risk premia is between 2.55% and 4.32% for 1951-2000 period. Ibbotson and Chen (2001) estimate a long-term risk premium between 4 and 6%. Also see Siegel (1999), Asness (2000), Heaton and Lucas (2000) and Jagannathan, McGratten and Scherbina (2001).


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had a lower best case return.

With information on the 10% tails, we construct a probability distribution for each respondent.

We use Davidson and Cooper’s (1976) method to recover each respondent’s probability distribution:

Variance = ([x(0.90)-x(0.10)]/2.65)2

where x(0.90) and x(0.10) represent the 90th and 10th percentiles of the respondent’s distribution.

Keefer and Bodily (1983) show that this simple approximation is the preferred method of estimating

the variance of a probability distribution of random variables, given information about the 10th and

90th percentiles. Notice that while disagreement marginally decreases from June to September 2005,

the average of individual volatilities increases from 3.17% to 3.23%.

There is also a natural measure of asymmetry in each respondent’s response. We look at the

difference between each individual’s 90% tail and the mean forecast and the mean minus the 10%

tail. Hence, if the respondent's forecast of the excess return is 6% and the tails are -8% and +11%,

then the distribution is negatively skewed with a value of -9% (=5%-14%). As with the usual

measure of skewness, we cube this quantity and standardize by dividing by the cube of the individual

standard deviation. In every quarter’s survey, there is on average negative skewness in the individual

forecasts. The skew decreased in September 2005 to -0.50 compared the June 2005 -0.25.


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Table 1Summary statistics based on the responses from the 22 CFO Outlook Surveys from June 2000 to September 2005

A. By quarter

Survey dateSurvey

for

Number of survey responses

10-year bond yield

Average risk

premium

Median risk

premium

Disagreement (standard deviation of risk premium estimates)

Average of individual standard

deviations

individuals' worst 10% market return scenario

Average of individuals' best 10% market return scenario

Skewness of risk

premium estimates

Average of individuals

' asymmetry

6-Jun-00 2000Q3 206 6.1 4.35 3.9 2.99 0.817-Sep-00 2000Q4 184 5.7 4.65 4.3 2.70 0.494-Dec-00 2001Q1 239 5.5 4.20 4.5 2.31 0.37

12-Mar-01 2001Q2 137 4.9 4.46 4.1 2.59 0.387-Jun-01 2001Q3 204 5.4 3.79 3.6 2.43 0.49

10-Sep-01 2001Q4 198 4.8 3.77 3.2 2.53 -0.114-Dec-01 2002Q1 275 4.7 3.98 3.3 2.34 0.66

11-Mar-02 2002Q2 234 5.3 2.88 2.7 2.17 3.21 3.66 12.23 0.30 -0.284-Jun-02 2002Q3 321 5.0 3.18 3.0 2.59 3.41 3.11 12.15 1.96 -0.39

16-Sep-02 2002Q4 363 3.9 4.00 4.1 2.27 3.36 3.10 12.01 1.03 -0.252-Dec-20 2003Q1 283 4.2 3.71 3.8 2.39 3.19 3.38 11.83 1.31 -0.28

19-Mar-03 2003Q2 180 3.7 3.66 3.3 2.12 3.57 1.92 11.40 0.49 -0.6016-Jun-03 2003Q3 368 3.6 3.89 4.4 2.34 3.74 2.17 12.07 0.89 -0.3318-Sep-03 2003Q4 165 4.3 3.21 3.7 1.87 2.80 3.34 10.78 -0.02 -0.4210-Dec-03 2004Q1 217 4.4 3.83 3.6 2.22 3.24 3.35 11.94 0.74 -0.4624-Mar-04 2004Q2 202 3.7 4.10 4.3 2.06 3.46 2.84 12.00 -0.03 -0.2816-Jun-04 2004Q3 177 4.8 3.04 3.3 2.28 3.06 3.11 11.20 0.96 -0.3912-Sep-04 2004Q4 177 4.3 3.24 3.3 2.32 3.13 2.70 10.98 0.64 -0.475-Dec-04 2005Q1 291 4.4 3.20 3.2 2.63 3.00 3.16 11.10 2.01 -0.36

28-Feb-05 2005Q2 275 4.3 3.19 3.2 2.47 2.99 3.23 11.16 1.49 -0.3231-May-05 2005Q3 318 4.1 2.98 2.9 2.21 3.17 2.50 10.88 0.50 -0.2529-Aug-05 2005Q4 325 4.2 2.93 2.8 2.20 3.23 2.26 10.82 0.96 -0.50

Average of quarters 243 4.59 3.65 3.57 2.37 3.24 2.92 11.50 0.74 -0.37Standard deviation 0.69 0.53 0.54 0.24 0.24 0.51 0.54 0.57 0.10

B. By individual responsesSurvey for

All 5339 3.61 3.60 2.42 3.26 2.90 11.54 0.88 -0.36 2.5 The evidence from interviews

To further explore the risk premium, we conduct brief interviews on the topic of the cost of

capital and the risk premium to understand the question that CFOs believe they are answering. We

conducted 12 interviews over the 2003-2005 period.5 We gain a number of insights from the

interviews. There is remarkable consistency in the CFOs’ views.

First, the CFOs closely track both their company’s stock and the market. They are often called

upon internally (e.g., Board of Directors) or externally (analyst conference calls) to explain their

company’s stock price. As a result, they need to separate out the systematic and idiosyncratic

5 Three of these interviews exclusively focused on the risk premium question. Eight interviews were non-exclusive and based on surplus time available in the interviews in Brav et al. (2005) and Graham, Harvey and Rajgopal (2005). The remaining interview was conducted in 2005.


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variation in their company’s stock returns. To do this, they attempt to understand the forces that

might cause systematic variation in the market.

Second, the CFOs believe that the “risk premium” is a longer-term measure of expected excess

returns and best covered by our question on the expected excess return over the next ten years –

rather than the one-year question. Three-fourths of the interviewees use a form of the Capital Asset

Pricing Model (which is consistent with the evidence in Graham and Harvey, 2001). They use a

measure of the risk premium in their implementation of the CAPM. Often their 10-year risk

premium is supplemented so that that company’s hurdle rate exceeds their expected excess return on

the S&P 500. Also, while not specified in the question, CFOs interpret the 10-year expected market

return as the return to a buy-and-hold strategy. As a result, our survey measures the geometric rather

than arithmetic average return.

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Mea

n pr

emiu

min

%

2000Q

3

2000Q

4

2001Q

1

2001Q

2

2001Q

3

2001Q

4

2002Q

1

2002Q

2

2002Q

3

2002Q

4

2003Q

1

2003Q

2

2003Q

3

2003Q

4

2004Q

1

2004Q

2

2004Q

3

2004Q

4

2005Q

1

2005Q

2

2005Q

3

2005Q

4

Figure 1Ten-year risk premium


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2.6 Determinants of the risk premium While we document the level and a limited time-series of the long-run risk premium, statistical

inference is complicated by the fact that the forecasting horizons are overlapping. First, we have no

way of measuring the accuracy of the risk premiums as forecasts of equity returns. Second, any

inference based on regression analysis is confounded by the fact that from one quarter to the next,

there are 38 common quarters being forecasted. This naturally induces a moving-average process.

We will, however, try to characterize the time-variation in the risk premium without formal

statistical tests. Figure 2 examines the relation between the mean premium and previous one-year

returns on the S&P 500.

Figure 2

The mean premium and past one-year returns on the S&P 500 index

y = -0.0056x + 3.6413R2 = 0.0277

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

5.00

-30 -20 -10 0 10 20 30

Past 1-year S&P 500 return %

Mea

n pr

emiu

m %

The evidence suggests that there is no correlation between past returns and the level of the long-run

risk premium.

An alternative to using past-returns is to examine a measure of valuation. Figure 3 examines a

scatter of the mean premium and the price-to-earnings ratio of the S&P 500.


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Figure 3

The mean premium and the S&P 500 price-to-earnings ratio

y = -0.0013x + 3.7178R2 = 0.0003

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

5.00

15 20 25 30 35 40 45

S&P 500 Price to Earnings Ratio

10-y

ear p

rem

ium

%

Looking at the data in Figure 3, it appears that the inference is very similar, i.e. there is no relation.

However, given there are so few data points, the analysis is highly influenced by some of the

extraordinarily high price-to-earnings ratios. You need only to exclude the P/E ratios above 40 to

dramatically change the correlation.

We also examine the real yield on Treasury Inflation Indexed Notes. The risk premium is like

an expected real return on the equity market. It seems reasonable that there could be a correlation

between expected real rates of return stocks and bonds. Figure 4 examines the 10-year on the run

yield on the Treasury Inflation Indexed Notes.


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Figure 4

The mean premium and the real yield on Treasury Inflation Indexed Notes

y = 0.3165x + 2.8444R2 = 0.2756

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

5.00

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

TIPs real yield %

10-y

ear p

rem

ium

%

In this case, there is a positive correlation. Lower TIPS yields are associated with lower equity risk

premiums. The analysis is suggestive that the long-run equity premium and real interest rates move

together.

Finally, we consider the relation between volatility and the risk premium. Figure 5 shows that

over our sample there is some evidence that there is a positive correlation between market volatility

and the long-term risk premium. We use a five-day moving average of the implied volatility on the

S&P 100 index option as our volatility proxy. The correlation between the risk premium and

volatility is 0.44. If the closing day of the survey is used, the correlation is roughly the same, 0.42.

Asset pricing theory suggests that there is a positive relation between risk and return. While our

volatility proxy doesn’t match the horizon of the risk premium, the evidence, nevertheless, is

suggestive of a positive relation.


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Figure 5

The mean premium and the implied volatility on the S&P 100 index option (VIX)

2.25

2.50

2.75

3.00

3.25

3.50

3.75

4.00

4.25

4.50

4.75

5.00

2000

Q3

2000

Q4

2001

Q1

2001

Q2

2001

Q3

2001

Q4

2002

Q1

2002

Q2

2002

Q3

2002

Q4

2003

Q1

2003

Q2

2003

Q3

2003

Q4

2004

Q1

2004

Q2

2004

Q3

2004

Q4

2005

Q1

2005

Q2

2005

Q3

2005

Q4

Survey for quarter

Ten-

year

pre

miu

m %

0

5

10

15

20

25

30

35

40

Impl

ied

vola

tility

(ann

ual)

% .

Correlation=0.55

VIX

10-year premium

2.6 Other survey questions The September 2005 survey contains a number of other questions. http://www.cfosurvey.org

presents the full results of these questions. The site also presents results conditional on the

demographic characteristics. For example, one can examine the CFOs views of the risk premium

conditional on the industry in which the CFO works.

3. Conclusions

We provide a direct measure of ten-year market returns based on a multi-year survey of Chief

Financial Officers. We show that there is remarkably little time-variation. Importantly, we have a

‘measure’ of expectations. We do not claim it is the true market expectation. Nevertheless, it is a

measure that has not been studied before.

We measure more than the risk premium. Our survey allows one to track the assessment of the

10% best case and worst case risk premium outcomes as perceived by the CFOs. Our results also

reveal the disagreement among CFOs and how that changes through time.


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With only 22 observations each with a 10-year horizon, it is impossible to evaluate the accuracy of

the market excess return forecasts. Even simple correlations with economic data are complicated

because of the overlapping nature of the risk premium forecasts. Our preliminary examination of the

determinants of the long-term risk premium suggests that premiums not influenced by past stock

returns. However, we present intriguing evidence that there is a positive correlation between real

interest rates and the long-run premiums. Unfortunately, further analysis requires many more years

of data.

References

Asness, C. S., 2000, Stocks vs. bonds: Explaining the equity risk premium, Financial Analysts Journal, May/June. Brav, A., J. R. Graham, C. R. Harvey, and R. Michaely, 2005, Payout policy in the 21st century, Journal of Financial Economics

77:3, 483-529. Claus, J. and J. Thomas, 2001, Equity premia as low as three percent: Evidence from analysts’ earnings forecasts for

domestic and international stock markets, Journal of Finance 56, 1629-1666. Davidson, L. B., and D. O. Cooper, 1976, A simple way of developing a probability distribution of present value, Journal of

Petroleum Technology, September, 1069-1078. Fama, E. F. and French, K. R., 2002, The equity premium, Journal of Finance 57, 637-659. Gebhardt, W. R., C. M. C. Lee, and B. Swaminathan, 2001, Toward an implied cost of capital, Journal of Accounting Research

39, 135-176. Goyal, A. and I. Welch, 2003, Predicting the risk premium, Management Science 49, 639-654. Graham, J. R. and C. R. Harvey, 2001, Theory and practice of corporate finance: Evidence from the field, Journal of

Financial Economics 60, 187-243. Graham, J. R. and C. R. Harvey, 2003, Expectations of equity risk premia, volatility and asymmetry from a corporate

finance perspective, Working paper, http://ssrn.com/abstract=292623 Graham, J. R., and C. R. Harvey, 2005, The Global CFO Outlook Survey: 1996-2005. http://www.cfosurvey.org. Graham, J. R., C. R. Harvey, and S. Rajgopal, 2005, The Economic Implications of Corporate Financial Reporting, Journal

of Accounting and Economics forthcoming Harris, R. S. and F. C. Marston, 2001, The market risk premium: Expectational estimates using analysts’ forecasts, Journal of

Applied Finance 11, 6-16. Harvey, C. R., 2001, The specification of conditional expectations, Journal of Empirical Finance 8, 573-638. Jagannathan, R., E. R. McGrattan and A. Scherbina, 2001, The declining U.S. equity premium, Quarterly Review, Federal

Reserve Bank of Mineapolis. Keefer, D. L. and S. E. Bodily, 1983, Three-point approximations for continuous random variables, Management Science 29,

5 595-609. Pástor, L. And R. Stambaugh, 2001, The equity premium and structural breaks, Journal of Finance 56, 1207-1239. Poterba, J. M. and Summers, L. H., 1995, A CEO survey of U.S. companies’ time horizons and hurdle rates, Sloan

Management Review, Fall, 43-53. Siegel, J.J., 1999, The shrinking equity premium, Journal of Portfolio Management, 10-17. Welch, I., 2000, Views of financial economists on the equity premium and other issues, Journal of Business 73 (October):

501-37. Welch, I., 2001, The equity premium consensus forecast revisited, Unpublished working paper, Cowles Foundation for

Research in Economics, Yale University, New Haven, CT. http://papers.ssrn.com/sol3/ papers.cfm?abstract_id=285169.


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Appendix A The Survey Instrument

Duke University/CFO Magazine Business Outlook Survey

Summer 2005

No individual firms are identified and only aggregate data are made public. Please respond by Sunday, August 28. If you have any questions about this survey, please contact us. 1. Are you more or less optimistic about the U.S. economy compared to last quarter?

More optimistic

Less optimistic

No change

Rate your optimism about the U.S. economy on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic.

2. Are you more or less optimistic about the financial prospects for your company compared to last quarter?

More optimistic

Less optimistic

No change

Rate your optimism about the financial prospects for your own company on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic.

3. What are the top three concerns your company faces in 2005? (rank #1, #2, #3)


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World economic stability

Availability/cost of capital

High fuel prices

High non-fuel commodity prices

Political risk

Reduced pricing power

Inflation

Increased interest rates

Increased regulation

Salaries and wages

Health care costs

Distribution problems

Increased global competition

Terrorism

U.S. dollar weakness

Other: 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? (e.g., +3%, -2%, etc.) [Leave blank if not applicable]

% Prices of your products

% Productivity (output per hour worked)

% Technology spending

% Number of domestic employees

% Number of foreign/off-shore outsourced employees

% Wages/Salaries

% Health care costs

% Capital spending

% Earnings

% Inventory

% Cash on the balance sheet

% Dividends

% Advertising/marketing

-- Select --

M&A activity

5a. Does your company pay a dividend now?

5b. Did your company pay a dividend three years ago?

Yes

No

Yes

No

5c. Rank the three most important factors that affect your company's thinking about whether to pay a dividend, and the amount to pay. (#1, #2, #3)

Long-term stability of cash flows

Amount of cash on balance sheet

Desire to jump-start stock price

Dividend tax rate


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Attracting institutional investors

Attracting retail investors

Historic level of our company’s dividend payment

Availability of profitable investment opportunities

Indicating that our firm is mature 5d. Relative to what your firm would have paid out if dividend tax rates had not fallen, how much did the 2003 reduction in dividend tax rates affect your firm’s decision to increase/initiate dividend payments?

None

A little

Moderately

Greatly 6. Some economists believe that the U.S. housing market is due for a correction. If the housing market declines, do you think the resulting effect on the economy would be big enough to harm your company's business prospects?

No

Yes, a little

Yes, moderately

Yes, greatly

7a. On a scale of 0 to 100, how do you rank the negative impact that the threat of terrorism is having on your business? (0 means no impact, 100 means maximum negative impact from threat of terrorism.)

0-100 7b. What number on this scale would indicate that the threat of terrorism is affecting your bottom line? (If your answer in 7a is greater than this number, it means that the threat of terrorism is affecting your bottom line.)

0-100 7c. What specific actions has your company taken in response to the threat of terrorism? (Check all that apply)

Reduced employee travel


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Changed mode of employee travel (e.g., less public transportation)

Increased security at facilities

Increased security for key personnel

Appointed chief security officer

Establish redundant operating systems

Establish redundant financial systems

Check backpacks/bags

Other

We have not taken specific actions 8. How important are individual (i.e., retail) investors to your company’s value or stock price?

Not important

Somewhat important

Moderately important

Very important

9. On August 22, 2005 the annual yield on 10-yr treasury bonds was 4.2%. Please complete the following: a. Over the next 10 years, I expect the average annual S&P 500 return will be:

Worst Case: There is a 1-in-10 chance the actual average return will be less than:

%

Best Guess:I expect the return to be:

%

Best Case: There is a 1-in-10 chance the actual average return will be greater than:

%

b. During the next year, I expect the S&P 500 return will be:

Worst Case: There is a 1-in-10 chance the actual return will be less than:

Best Guess:I expect the return to be:

Best Case: There is a 1-in-10 chance the actual return will be greater than:


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% % % Please check one from each category that best describes your company: a. Industry

Retail/Wholesale

Mining/Construction

Manufacturing

Transportation/Energy

Communications/Media

Tech [Software/Biotech]

Banking/Finance/Insurance

Service/Consulting

Healthcare/Pharmaceutical

Other b. Sales Revenue c. Number of Employees

Less than $25 million

$25-$99 million

$100-$499 million

$500-$999 million

$1-$4.9 billion

$5-$9.9 billion

More than $10 billion

Fewer than 100

100-499

500-999

1,000-2,499

2,500-4,999

5,000-9,999

More than 10,000 d. Headquarters e. Ownership

Northeast U.S.

Mountain U.S.

Midwest U.S.

South Central U.S.

South Atlantic U.S.

Pacific U.S.

Canada

Central/Latin America

Europe

Asia

Public, NYSE

Public, NASDAQ/AMEX

Private

Government

Nonprofit

f. Foreign Sales g. Your job title (e.g., CFO, Asst. Treasurer, etc):


17

0%

1-24%

25-50%

More than 50%

Continue

© Duke University, 2005


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Appendix B September 2005 Selected Survey Results

1. Are you more or less optimistic about the U.S. economy compared to last quarter? 1 1b. Rate your optimism about the U.S. economy on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic. 2 2. Are you more or less optimistic about the financial prospects for your company compared to last quarter? 3 2b. Rate your optimism about the financial prospects for your own company on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic. 4 3. What are the top three concerns your company faces in 2005? (rank #1, #2, #3) 5 3. What are the top three concerns your company faces in 2005? OTHER SPECIFIED 6 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? (e.g., +3%, -2%, etc.) [Leave blank if not applicable] 7 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? 8 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months for: [Unweighted - Sorted] 9 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Outliers beyond 1.96 SD's deleted] 10 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months for: [Public Companies - Windsorized - Unweighted - Sorted] 11 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Public Companies - Windsorized – Revenue Weighted - Sorted] 12 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Public Companies - Windsorized – Employee Weighted - Sorted] 13 6. Some economists believe that the U.S. housing market is due for a correction. If the housing market declines, do you think the resulting effect on the economy would be big enough to harm your company's business prospects? 17 7. Negative impact of terrorism. 18 7. Negative impact of terrorism. 19 7c. What specific actions has your company taken in response to the threat of terrorism? (Check all that apply) - Base: Those that gave at least 1 response 20 7c. What specific actions has your company taken in response to the threat of terrorism? (Other Specified) 21 8. How important are individual (i.e., retail) investors to your company’s value or stock price? 22 Employee Weighted: 9. On August 22, 2005 the annual yield on 10-yr treasury bonds was 4.2%. Please complete the following: 26 Industry 27 Industry (Other specified) 28 Sales Revenue 29 Weighted Sales Revenue (Millions) 30 Number of Employees 31 Weighted Number of Employees 32 Headquarters 33 Ownership 34 Foreign Sales 35


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1 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 1. Are you more or less optimistic about the U.S. economy compared to last quarter? Number Percent 95% CI 3=More optimistic 107 28.6 % ± 4.8 % 2=No change 129 34.5 % ± 5.0 % 1=Less optimistic 138 36.9 % ± 5.1 % Total 374 100.0 % Mean = 1.92 SD = .81 Missing Cases = 0 Response Percent = 100.0 %


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2 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 1b. Rate your optimism about the U.S. economy on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic. Minimum = 20 Maximum = 100 Mean = 67.37 Median = 70 Variance (Unbiased) = 222.62 Standard Deviation (Unbiased) = 14.92 Standard Error Of The Mean = 0.80 95 Percent Confidence Interval Around The Mean = 65.81 - 68.93 99 Percent Confidence Interval Around The Mean = 65.32 - 69.42 Valid Cases = 351 Missing Cases = 23 Response Percent = 93.9%


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3 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 2. Are you more or less optimistic about the financial prospects for your company compared to last quarter? Number Percent 95% CI 3=More optimistic 192 51.5 % ± 5.2 % 2=No change 79 21.2 % ± 4.3 % 1=Less optimistic 102 27.3 % ± 4.7 % Total 373 100.0 % Mean = 2.24 SD = .85 Missing Cases = 1 Response Percent = 99.7 %


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4 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 2b. Rate your optimism about the financial prospects for your own company on a scale from 0-100, with 0 being the least optimistic and 100 being the most optimistic. Minimum = 1 Maximum = 100 Mean = 71.70 Median = 75 Variance (Unbiased) = 347.39 Standard Deviation (Unbiased) = 18.64 Standard Error Of The Mean = 0.99 95 Percent Confidence Interval Around The Mean = 69.75 - 73.65 99 Percent Confidence Interval Around The Mean = 69.14 - 74.27 Valid Cases = 351 Missing Cases = 23 Response Percent = 93.9%


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5 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 3. What are the top three concerns your company faces in 2005? (rank #1, #2, #3) (N=374) Mean & SD 1st 2nd 3rd 4= 5= 6= Total High non-fuel 1.71 24 19 9 0 0 0 52 commodity prices 0.74 46.2% 36.5% 17.3% 0.0% 0.0% 0.0% 100.0% 1.81 71 42 41 0 0 0 154 High fuel prices 0.83 46.1% 27.3% 26.6% 0.0% 0.0% 0.0% 100.0% 1.83 23 8 15 0 0 0 46 Other: 0.89 50.0% 17.4% 32.6% 0.0% 0.0% 0.0% 100.0% Increased 1.85 36 31 20 0 1 0 88 regulation 0.85 40.9% 35.2% 22.7% 0.0% 1.1% 0.0% 100.0% Reduced pricing 1.88 32 31 22 0 0 0 85 power 0.79 37.6% 36.5% 25.9% 0.0% 0.0% 0.0% 100.0% World economic 1.89 27 24 19 0 0 0 70 stability 0.80 38.6% 34.3% 27.1% 0.0% 0.0% 0.0% 100.0% Availability/cost 1.93 14 19 11 0 0 0 44 of capital 0.75 31.8% 43.2% 25.0% 0.0% 0.0% 0.0% 100.0% Increased global 1.99 31 26 30 0 0 0 87 competition 0.84 35.6% 29.9% 34.5% 0.0% 0.0% 0.0% 100.0% Increased interest 2.02 38 40 38 1 0 0 117 rates 0.83 32.5% 34.2% 32.5% 0.9% 0.0% 0.0% 100.0% Distribution 2.10 5 8 7 0 0 0 20 problems 0.77 25.0% 40.0% 35.0% 0.0% 0.0% 0.0% 100.0% 2.15 12 21 20 0 0 0 53 Inflation 0.76 22.6% 39.6% 37.7% 0.0% 0.0% 0.0% 100.0% 2.15 7 8 11 0 0 0 26 Political risk 0.82 26.9% 30.8% 42.3% 0.0% 0.0% 0.0% 100.0% 2.16 11 10 17 0 0 0 38 Terrorism 0.84 28.9% 26.3% 44.7% 0.0% 0.0% 0.0% 100.0% Salaries and 2.25 15 20 32 0 0 0 67 wages 0.80 22.4% 29.9% 47.8% 0.0% 0.0% 0.0% 100.0% 2.27 28 51 68 0 0 0 147 Health care costs 0.76 19.0% 34.7% 46.3% 0.0% 0.0% 0.0% 100.0% U.S. dollar 2.39 5 13 14 0 0 1 33 weakness 0.95 15.2% 39.4% 42.4% 0.0% 0.0% 3.0% 100.0%


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6 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 3. What are the top three concerns your company faces in 2005? OTHER SPECIFIED A/R turn attracting & keeping skilled employees availability of qualified employees Changing Industry Competition competition competition in usa Consumer Confidence Consumer demand consumer debt COnsumer sentiment and demand Corporate Spending Deflation economic strength of customers Growth high customer invenotry levels Housing Bubble burst Increased government regulations increasing sales & reducing expenses inertia Internal Disarray INVESTMENT RETURNS Low interest rates managing growth Market deflation Material Availability Poor Management protectionism movement Reduced Customer Base regional economic strength Retailers issues Revenue Revenue Growth Staffing Steel Prices Technological Advances technological shifts Trade Association trade deficit UK Pension regulations US dollar strengthens US Economy US manufacturing weakness We're in Ch. 11 now weak job growth weak real estate market weakening housing mkt.


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7 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? (e.g., +3%, -2%, etc.) [Leave blank if not applicable] Mean SD 95% CI Median Minimum Maximum Total Prices of your products 3.22 7.17 2.39 - 4.04 2.50 -30 60 289 Productivity (output per hour worked) 3.38 4.41 2.82 - 3.93 2.50 -5 40 242 Technology spending 8.29 27.24 5.08 - 11.51 3 -50 300 276 Number of domestic employees 5.22 25.95 2.28 - 8.15 1.50 -75 375 300 Number of foreign/off-shore outsourced employees 4.56 13.37 2.52 - 6.59 0 -30 100 166 Wages/Salaries 4.01 4.48 3.53 - 4.50 3 -5 50 332 Health care costs 9.20 6.22 8.52 - 9.88 8 -15 50 318 Capital spending 6.93 19.03 4.63 - 9.24 5 -95 150 262 Earnings 13.46 30.35 9.99 - 16.93 5.50 -50 300 294 Inventory 2.90 24.34 -0.48 - 6.27 0 -50 300 200 Dividends 6.99 30.01 1.45 - 12.52 3 -80 169 113 Cash on the balance sheet 4.98 15.77 2.67 - 7.29 0 -50 100 179 Advertising/marketing 5.03 14.48 3.11 - 6.95 2 -50 100 219


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8 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? M&A activity Number Percent 95% CI Increase 104 39.4 % ± 4.7 % No change 140 53.0 % ± 5.1 % Decrease 20 7.6 % ± 2.6 % Total 264 100.0 % Missing Cases = 110 Response Percent = 70.6 %


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9 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months for: [Unweighted - Sorted] (N=374) Mean & SD Positive Zero Negative Total 1 0 -1 0.95 318 11 3 332 Wages/Salaries 0.26 95.8% 3.3% 0.9% 100.0% 0.95 305 9 4 318 Health care costs 0.28 95.9% 2.8% 1.3% 100.0% 0.76 193 41 8 242 Productivity (output per hour worked) 0.50 79.8% 16.9% 3.3% 100.0% 0.63 229 27 42 298 Earnings 0.72 76.8% 9.1% 14.1% 100.0% 0.58 193 53 31 277 Technology spending 0.68 69.7% 19.1% 11.2% 100.0% 0.57 197 59 33 289 Prices of your products 0.69 68.2% 20.4% 11.4% 100.0% 0.55 173 64 27 264 Capital spending 0.67 65.5% 24.2% 10.2% 100.0% 0.50 127 76 17 220 Advertising/marketing 0.64 57.7% 34.5% 7.7% 100.0% 0.43 65 32 16 113 Dividends 0.73 57.5% 28.3% 14.2% 100.0% Number of foreign/off-shore outsourced 0.37 70 89 8 167 employees 0.57 41.9% 53.3% 4.8% 100.0% 0.36 70 104 6 180 Cash on the balance sheet 0.54 38.9% 57.8% 3.3% 100.0% 0.35 170 64 66 300 Number of domestic employees 0.82 56.7% 21.3% 22.0% 100.0% 0.32 104 140 20 264 M&A activity 0.61 39.4% 53.0% 7.6% 100.0% 0.12 69 87 45 201 Inventory 0.74 34.3% 43.3% 22.4% 100.0%


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10 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Outliers beyond 1.96 SD's deleted] Mean SD 95% CI Median Minimum Maximum Total Prices of your products 2.49 3.75 2.05 - 2.93 2.50 -10 15 281 Productivity (output per hour worked) 3.05 3.17 2.65 - 3.45 2 -5 15 239 Technology spending 5.20 10.76 3.91 - 6.49 3 -25 50 267 Number of domestic employees 3.27 10.15 2.11 - 4.43 1 -25 50 295 Number of foreign/off-shore outsourced employees 3.15 5.91 2.24 - 4.07 0 -10 25 159 Wages/Salaries 3.53 1.91 3.32 - 3.73 3 -5 15 326 Health care costs 8.81 4.38 8.32 - 9.29 8 -1 20 308 Capital spending 6.16 11.16 4.79 - 7.53 5 -30 50 255 Earnings 9.25 14.06 7.60 - 10.90 5 -25 67 279 Inventory 1.05 8.44 -0.13 - 2.24 0 -40 30 194 Dividends 4.29 13.23 1.76 - 6.82 3 -40 50 105 Cash on the balance sheet 2.64 5.90 1.76 - 3.52 0 -20 30 171 Advertising/marketing 3.83 7.16 2.87 - 4.79 2 -20 25 212


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11 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months for: [Public Companies - Windsorized - Unweighted - Sorted] (N=171) Mean & SD Positive Zero Negative Total 1 0 -1 0.98 134 3 0 137 Health care costs 0.15 97.8% 2.2% 0.0% 100.0% 0.96 142 2 2 146 Wages/Salaries 0.26 97.3% 1.4% 1.4% 100.0% 0.82 92 16 2 110 Productivity (output per hour worked) 0.43 83.6% 14.5% 1.8% 100.0% 0.66 102 12 16 130 Earnings 0.69 78.5% 9.2% 12.3% 100.0% 0.57 87 25 15 127 Technology spending 0.69 68.5% 19.7% 11.8% 100.0% 0.54 76 31 12 119 Capital spending 0.67 63.9% 26.1% 10.1% 100.0% 0.54 83 23 17 123 Prices of your products 0.72 67.5% 18.7% 13.8% 100.0% 0.53 58 29 8 95 Advertising/marketing 0.65 61.1% 30.5% 8.4% 100.0% 0.49 46 41 2 89 Cash on the balance sheet 0.54 51.7% 46.1% 2.2% 100.0% Number of foreign/off-shore outsourced 0.48 44 36 4 84 employees 0.59 52.4% 42.9% 4.8% 100.0% 0.43 55 26 14 95 Dividends 0.73 57.9% 27.4% 14.7% 100.0% 0.41 59 50 10 119 M&A activity 0.64 49.6% 42.0% 8.4% 100.0% 0.24 67 28 36 131 Number of domestic employees 0.85 51.1% 21.4% 27.5% 100.0% 0.07 27 36 21 84 Inventory 0.75 32.1% 42.9% 25.0% 100.0%


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12 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Public Companies - Windsorized - Revenue Weighted - Sorted] Mean SD 95% CI Median Minimum Maximum Earnings 12.68 16.06 12.35 - 13.00 10 -20 69.13 Dividends 5.83 20.52 5.36 - 6.30 5 -50.40 65.35 Advertising/marketing 4.76 6.51 4.61 - 4.91 3 -26.70 36.01 Capital spending 4.73 10.98 4.50 - 4.96 3 -30 54.48 Technology spending 4.67 9.70 4.47 - 4.87 3 -25 60.44 Cash on the balance sheet 3.93 5.50 3.80 - 4.07 2 -26.70 36.07 Prices of your products 2.75 4.67 2.66 - 2.85 2 -11.30 17.22 Inventory 0.39 9.46 0.16 - 0.62 0 -40.40 45.26


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13 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 4. Relative to the previous 12 months, what will be your company's PERCENTAGE CHANGE during the next 12 months? [Public Companies - Windsorized - Employee Weighted - Sorted] Mean SD 95% CI MedianMinimum Maximum Health care costs 8.13 4.24 8.05 - 8.22 8 0 21.10 Number of foreign/off-shore outsourced employees 4.01 9.19 3.81 - 4.21 1 -21.70 29.36 Wages/Salaries 3.57 3.02 3.52 - 3.62 3 -5 17.28 Productivity (output per hour worked) 3.19 2.94 3.13 - 3.25 2 -5 16.41 Number of domestic employees 1.59 6.97 1.46 - 1.73 0 -20 59.80


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17 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 6. Some economists believe that the U.S. housing market is due for a correction. If the housing market declines, do you think the resulting effect on the economy would be big enough to harm your company's business prospects? Number Percent 95% CI 1=No 119 32.2 % ± 4.9 % 2=Yes, a little 148 40.1 % ± 5.1 % 3=Yes, moderately 71 19.2 % ± 4.2 % 4=Yes, greatly 31 8.4 % ± 3.1 % Total 369 100.0 % Mean = 2.04 SD = .92 Missing Cases = 5 Response Percent = 98.7 %


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18 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 7. Negative impact of terrorism. Mean SD 95% CI Median Minimum Maximum Total 7a. On a scale of 0 to 100, how do you rank the impact that the threat of terrorism is having on your business? (0 means no impact, 100 means maximum negative impact from the threat of terrorism) 22.57 22.03 20.31 - 24.82 20 0 90 366 7b. What number on this scale would indicate that the threat of terrorism is affecting your profitability? (If your answer in a is greater than this answer, it means that the threat of terrorism is affecting your profitability) 22.77 23.55 20.33 - 25.21 10.50 0 100 358 Negative impact minus cut-off negative impact. -0.08 19.09 -2.05 - 1.90 0 -90 90 358


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19 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 7. Negative impact of terrorism. Cut-off negative impact Number Percent 90% CI Threat of terrorism is significantly affecting your bottom line. 122 33.3 % ± 4.2 % Negative impact and cut-off negative impact are equal 155 42.3 % ± 4.4 % Threat of terrorism is not significantly affecting your bottom line. 89 24.3 % ± 3.8 % Total 366 100.0 % Missing Cases = 8 Response Percent = 97.9 %


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20 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 7c. What specific actions has your company taken in response to the threat of terrorism? (Check all that apply) - Base: Those that gave at least 1 response Number Percent 95% CI Increased security at facilities 181 49.5 % ± 5.3 % We have not taken specific actions 141 38.5 % ± 5.2 % Establish redundant operating systems 100 27.3 % ± 4.8 % Establish redundant financial systems 70 19.1 % ± 4.2 % Increased security for key personnel 56 15.3 % ± 3.9 % Reduced employee travel 44 12.0 % ± 3.6 % Appointed chief security officer 33 9.0 % ± 3.2 % Other 25 6.8 % ± 2.9 % Changed mode of employee travel (e.g., less public transportation) 19 5.2 % ± 2.6 % Check backpacks/bags 16 4.4 % ± 2.4 % Total 685 Number of Cases = 366 Number of Responses = 685 Average Number Of Responses Per Case = 1.9 Number Of Cases With At Least One Response = 366 Response Percent = 100.0 %


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21 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 7c. What specific actions has your company taken in response to the threat of terrorism? (Other Specified) Additional Capital Investment business resumption/disaster recovery plans cooperation with FAA & Secret Service disaster decovery planning Disaster Recovery Planning Enhanced monitoring of situation focus on commodity chain of custody greater distraction Improved business continuity plans and better visibility of employee locations during travel IMPROVED SECURITY SYSTEMS Increased logistics security Increased some insurance insurance coverage changes less travel to the middle east limit coverages more background checks offsite backups Other non specified reduced insurance risk Remove terrorism from insurannce coverages we sell where possible Require Employees to Wear Picture ID Badgets on Company Property. revised contingency plans we were destroyed and have rebuilt, saved by our redundant facilities Work on an overall business recovery plan


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22 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 8. How important are individual (i.e., retail) investors to your company’s value or stock price? Number Percent 95% CI 1=Not important 189 53.1 % ± 5.2 % 2=Somewhat important 84 23.6 % ± 4.4 % 3=Moderately important 35 9.8 % ± 3.2 % 4=Very important 48 13.5 % ± 3.6 % Total 356 100.0 % Mean = 1.84 SD = 1.07 Missing Cases = 18 Response Percent = 95.2 %


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27 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Industry Number Percent 95% CI Manufacturing 94 25.5 % ± 4.6 % Banking/Finance/Insurance 75 20.3 % ± 4.3 % Retail/Wholesale 43 11.7 % ± 3.5 % Other 39 10.6 % ± 3.3 % Service/Consulting 29 7.9 % ± 3.0 % Transportation/Energy 26 7.0 % ± 2.8 % Tech [Software/Biotech] 19 5.1 % ± 2.5 % Communications/Media 18 4.9 % ± 2.5 % Healthcare/Pharmaceutical 14 3.8 % ± 2.3 % Mining/Construction 12 3.3 % ± 2.1 % Total 369 100.0 % Missing Cases = 5 Response Percent = 98.7 %


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28 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Industry (Other specified) Agriculture Commercial Real Estate commodities Construction/Services Distribution Education education education provider Electric Utility Electric Utility Agency engineering & construction Entertainment-Theme parks foodservice Forest Products Forestry Gaming Government Government Industrial Distribution IT services life sciences Not For Profit Financial Oil and Gas private equity investing Professional Sports/Racing Publishing Quasi-governmental non-profit Real Estate Real Estate REIT Security Services semiconductors Tech - Hardware travel wholesaler Utility utility utility Waste Paper broker Wholesale Distribution


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29 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Sales Revenue Number Percent 95% CI Less than $25 million 31 8.5 % ± 3.1 % $25-$99 million 72 19.8 % ± 4.2 % $100-$499 million 110 30.2 % ± 4.8 % $500-$999 million 31 8.5 % ± 3.1 % $1-$4.9 billion 58 15.9 % ± 3.9 % $5-$9.9 billion 22 6.0 % ± 2.7 % More than $10 billion 40 11.0 % ± 3.4 % Total 364 100.0 % Missing Cases = 10 Response Percent = 97.3 %


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30 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Weighted Sales Revenue (Millions) Minimum = 25 Maximum = 11000 Mean = 2309.04 Median = 300 Variance (Unbiased) = 12910232.85 Standard Deviation (Unbiased) = 3593.08 Standard Error Of The Mean = 188.33 95 Percent Confidence Interval Around The Mean = 1939.91 - 2678.16 99 Percent Confidence Interval Around The Mean = 1824.09 - 2793.98 Skewness = 1.62 Kolmogorov-Smirnov Statistic For Normality = 6.47 Quartiles 1 = 62 2 = 300 3 = 3000 Valid Cases = 364 Missing Cases = 10 Response Percent = 97.3%


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31 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Number of Employees Number Percent 95% CI Fewer than 100 47 14.8 % ± 3.6 % 100-499 68 21.5 % ± 4.1 % 500-999 28 8.8 % ± 2.9 % 1,000-2,499 44 13.9 % ± 3.5 % 2,500-4,999 27 8.5 % ± 2.9 % 5,000-9,999 25 7.9 % ± 2.8 % Over 10,000 78 24.6 % ± 4.3 % Total 317 100.0 % Missing Cases = 57 Response Percent = 84.8 %


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32 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Weighted Number of Employees Minimum = 100 Maximum = 12000 Mean = 4251.89 Median = 1750 Variance (Unbiased) = 23557322.36 Standard Deviation (Unbiased) = 4853.59 Standard Error Of The Mean = 272.60 95 Percent Confidence Interval Around The Mean = 3717.59 - 4786.20 99 Percent Confidence Interval Around The Mean = 3549.94 - 4953.85 Skewness = 0.77 Kolmogorov-Smirnov Statistic For Normality = 5.12 Quartiles 1 = 300 2 = 1750 3 = 7500 Valid Cases = 317 Missing Cases = 57 Response Percent = 84.8%


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33 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Headquarters Number Percent 95% CI Northeast US 88 23.7 % ± 4.5 % Midwest US 86 23.2 % ± 4.5 % South Atlantic US 67 18.1 % ± 4.1 % Pacific US 53 14.3 % ± 3.8 % South Central US 52 14.0 % ± 3.7 % Mountain US 9 2.4 % ± 2.0 % Europe 9 2.4 % ± 2.0 % Central/South America 3 0.8 % ± 2.1 % Canada 3 0.8 % ± 2.1 % Asia 1 0.3 % Total 371 100.0 % Missing Cases = 3 Response Percent = 99.2 %


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34 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Ownership Number Percent 95% CI Private 176 50.7 % ± 5.2 % Public, NYSE 108 31.1 % ± 4.8 % Public, Nasdaq/AMEX 44 12.7 % ± 3.5 % Nonprofit 13 3.7 % ± 2.2 % Government 6 1.7 % ± 1.8 % Total 347 100.0 % Missing Cases = 27 Response Percent = 92.8 %


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35 Duke University/CFO Magazine Business Outlook Survey - U.S. - September 2005 Foreign Sales Number Percent 95% CI 0% 145 39.7 % ± 5.1 % 1-24% 139 38.1 % ± 5.1 % 25-50% 51 14.0 % ± 3.7 % Over 50% 30 8.2 % ± 3.0 % Total 365 100.0 % Missing Cases = 9 Response Percent = 97.6 %

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