EXPERT

INDEPENDENT

NONPROFIT

ANNUAL REPORT FISCAL YEAR 2006 OUR MISSION To work for a fair, just, and safe marketplace 8 for all consumers and to empower consumers to protect themselves

ELECTRONICS FRANCHISE

CONTENTS >>

3 From the Board Chair 4 From the President 6 Content Franchises 10 12 Action 14 CU Impact by the Numbers

18 Products & Awards HEALTH & FAMILY FRANCHISE 20 Donors & Fundraising 24 Policies & Practices 25 Financials 26 Board of Directors 27 Senior Leadership Team 20

Eleanor and Ray Devereaux, who are receiving a tax advantage and supporting CU with a gift of their home. DONORS & FUNDRAISING FROM THE BOARD CHAIR

onsumers Union celebrated its 70th anniversary C in February, and that milestone caused me to reflect on CU and its early roots. Our founders conceived OUR VISION IS A of an organization that would pair a sense of realism about WORLD WHERE: how the marketplace actually is with an idealism about the way the market could—and should—be. Products and One of CU’s founding members was A. Philip Randolph, services are safe, the legendary civil rights and labor leader. Another board reliable, and affordable. member,Betty Furness, served in the Johnson administration as Special Assistant for Consumer Affairs. Today’s board members recognize the need to safeguard and continue the Consumers have the great legacy of our many distinguished predecessors. information and know-how To do justice to this legacy and to ensure that the 18-member to make good choices. board is always governed by leaders with an optimal mix of talents and expertise, we changed our election process in October 2005. Rather than being asked to vote for six Businesses treat members from a longer list of 10 to 12 candidates, you are consumers honestly, fairly, asked to vote yes or no for a slate of six nominees selected and with respect. by the board of directors. As a result, this year we’ll be adding three members to the CU board who bring new skills and energy from diverse experiences. From now on, Consumers Union is a we’ll infuse our board with new talent on a more regular basis; our bylaws now include term limits of no more than strong, powerful force in four three-year terms. making that happen. For all of us on the board, that means we must dedicate our energies diligently and consistently toward serving you, our members and subscribers, our other constituencies, and the larger community of realists and idealists interested in a fair, just, and safe marketplace.

Thanks so much for your support as we carry forward the torch of our rich heritage.

—Sharon Nelson

CONSUMERS UNION3 ANNUAL REPORT FISCAL YEAR 2006 FROM THE PRESIDENT

his was the year I achieved a new kind of free samples. It’s why many call the T success at Consumers Union®: After five years “bible” for smart shoppers. as president and more than 20 before that as chair of the board, I received the ultimate affirmation: My 28-year-old daughter At the end of fiscal year 2006, we had a record 7.4 million told me that CU was finally talking to her generation. subscriptions to our flagship publication, Consumer Reports, our Web site ConsumerReports.org®, and our She had just seen the magazine featured in a spoof on the health and finance newsletters.That number doesn’t include Comedy Central network, in which the satirist Steven the 1.5 million copies of the magazine sold on newsstands— Colbert poked fun at the value of Consumer Reports® and an 18 percent increase over last year.Nearly 1 million readers consumer reporting in his regular diatribe. After all, he said, participated in our Annual Questionnaire, a survey that helps consumers already have an entire industry dedicated to telling us gather data on everything from how often your dishwasher people what to buy; it’s called, he said proudly,“advertising.” breaks down to your overall satisfaction with your bank.

Colbert’s parody underscored the heart of CR’s mission. It’s We have 360,000 online activists who helped us pass a magazine that was born in 1936, when consumers lacked consumer-protection bills in more than 30 states on issues reliable information they could trust about the products and such as the disclosure of hospital infection rates and protection services they used in their daily lives. Not only did against identity theft. In college classrooms and doctors’ Consumer Reports take aim at ads by honestly testing offices, and on Capitol Hill, we mobilized around the issue their claims, but we’ve also refused to accept advertising or of prescription drugs, teaching our first college course on CONSUMERS UNION 4 ANNUAL REPORT FISCAL YEAR 2006 #7. Consumer Reports. Few industries have been quite so polluted by commercial interests as magazines, with too many advertorials and too much advertiser-friendly content raising serious questions about editorial objectivity. So let us all please remember this old war horse, eschewing advertising and giving us the straight scoops on our consumer culture, be it running shoes or life insurance policies.” —“50 Best Magazines,” Chicago Tribune, June 15, 2006

grassroots campaigning, bringing some of our best activists advocates, and others.And we would certainly not have the to Washington to lobby for pro-consumer legislation, and resources to achieve our ambitious goals without the support partnering with health-care professionals to disseminate of our readers and our loyal donors, especially those who credible drug information. have become members of the President’s Circle and the Leadership Circle.To all of you, I say thanks for making this Our impact echoed throughout the marketplace. In the year a hallmark one for CU—and for my daughter. spring, a bike helmet manufacturer, in conjunction with the —Jim Guest Consumer Product Safety Commission, recalled several thousand helmets just days after we alerted them to our test results of two models showing significant safety failures. Our report on potentially hazardous floor cleaners prompted one maker to put childproof caps on the product bottles. We were recognized by our peers in the journalism commu- nity for our public-service contributions, winning prestigious awards for our work on air cleaners and annuities.

None of that would be possible without a mission-driven and innovative staff of more than 500 writers, editors, engineers, accountants, computer programmers, analysts, CONSUMERS UNION5 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES

HOW WE WORK: Consumer Reports, the granddaddy of publications ... won’t CU’S FIVE FRANCHISES let companies use its name in hining examples of the “one enterprise” culture at marketing materials.” S Consumers Union are our franchises, teams of —San Francisco Chronicle, July 24, 2005 staff members who oversee five content areas: autos, electronics, finance, health and family, and home. business, editorial, and technical divisions. Tech engineers are in charge of lab testing, editorial staff members over- Franchises speak to our unity of purpose in two ways. see newsgathering and the creation of our reports, They’re responsible for creating content tailored for each of advocates spearhead public-service campaigns and work our products, so that readers get the information they need, to effect legislative and regulatory change, and business when and how they want it. Franchises also exemplify our representatives make sure we consider all possible markets one-enterprise organization in that each one includes and opportunities. Working as a team ensures that our representatives from Consumers Union’s advocacy, voice is heard wherever it can make a difference.

WE COULDN’T DO IT WITHOUT THEM MYSTERY SHOPPERS SURVEY RESEARCHERS CU’s anonymous shoppers buy the products you buy, so 2,000 people who have had knee or hip replacement have that we can test the products you use. But sprees with taught us a lot about how to deal with that painful surgery. CU mystery shoppers are unlike any other shopping trip. They might leave the store with 50 pregnancy-test kits 66,000 diners know more than we ever could about or 10 high chairs or 400 bottles of wine.They might have the food and service in 103 restaurant chains. to pull every can of paint off the shelf (or from behind And 23,000 readers have walked miles of aisles in the the counter) in search of the right manufacturing date. 54 supermarket chains we rated, to give us the low- And they might dig through the supermarket ice cream down on price, service, and cleanliness. case for so long that the manager asks them to leave. he Consumer Reports National Research Center™, CU’s 9 full-time in-house shoppers and close to 180 Twith its professional survey research staff, teams up out-of-town part-time shoppers work on multiple with our subscribers to go beyond lab tests. The Annual projects with short deadlines, to meet testing and Questionnaire is one of the largest surveys of its kind: publishing schedules. Close to 1 million subscribers participated this year, with And since our shoppers operate anonymously, they more 700,000 responses sent online. It not only covers can’t explain to curious, annoyed, or downright angry consumer experiences with services, but also measures store employees just why they need that box of laun- product reliability—how most makes and models of auto- dry detergent … no, not this one, that one. mobiles, for example, hold up on the road.

CU shoppers succeed in buying thousands of the prod- CU’s state-of-the-art labs tell our readers which appli- ucts that you buy each year so that we can test them ances and electronics perform well in testing, but our and report back to you, in the hopes that we’ll make readers tell us which brands fail in the real world of your next shopping trip a little easier. their homes.

CONSUMERS UNION 6 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES autos

CR’s auto engineers conduct wet-braking tests to evaluate vehicles in all conditions.

onsumer Reports’ Automotive franchise TIRE TESTING Ccontinued to expand, both on and off the track. It’s round. It’s rubber.After that, who can tell the difference? At CU’s Auto Test Center™ in East Haddam, Conn., CR’s engineers and support staff will test a record 85 vehi- We can. Consumer Reports is the only independent cles in 2006 for the monthly reports, and they conducted a source in the U.S. that publishes performance ratings for head-to-head ethanol vs. gasoline test for the October 2006 tires. Most information available to consumers comes from issue. Safety-related tests, including emergency handling and tire manufacturers and retailers. braking, headlight effectiveness, and rear blind zones, help give consumers critical insight when buying a vehicle. We run more than a dozen tire tests at CU’s Auto Test Center, including braking and cornering. Our new In addition to the Annual Auto Issue, CR’s auto experts hydroplaning facility allows our engineers to precisely produced a dozen special auto publications. We ramped up evaluate a tire’s ability to resist skimming on a pool of Web content on ConsumerReports.org,with more auto news, water. Comfort and noise are judged on bad roads built safety updates, fuel-saving information, and buying advice. just for that purpose, and over asphalt and concrete road surfaces. FUEL-ECONOMY TESTS CR’s tests have helped spark debate about how to make Sometimes we go farther afield. Snow traction might be the government’s fuel-economy estimates reflect what tested in a remote location in Vermont, and braking on ice drivers really get. To provide consumers with real-world is completed under controlled conditions at a local indoor results, Consumer Reports conducts several different ice-skating rink. tests, including separate city and highway driving loops and a 150-mile mixed-driving loop. Vehicle speeds and Consumer Reports is a critical source for ratings of atmospheric conditions are carefully monitored throughout rolling resistance and tread life. State and federal agencies the tests to ensure consistency, and fuel is measured by are considering rolling-resistance ratings for consumer use. splicing a fuel meter into the vehicle’s fuel line. We’re already there. CONSUMERS UNION7 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES

he Electronics franchise tests and reports on T cell phones, computers, digital cameras, TVs, and other devices.We also review related products and services such as Internet security software, cell-phone services, and satellite-TV providers. Here are some of the ways we’re meeting our goals of becoming more relevant, current, and competitive, especially online.

Even before we do a full Ratings report for a growing number of digital cameras and TVs, we put “First Looks” on our ConsumerReports.org Web site.That gives our readers a sense of new products weeks, even months, before the full test results are published. We’ll be adding electronics more categories in the coming year.

Working with Consumer Reports’ market research team, we’ve expanded our use of surveys to help us report on the products, services, and issues that most interest our customers.

The changes have not gone without notice. A recent col- umn in the Baltimore Sun noted that “techies disdained CR for years because it took so long to get a product through the magazine’s review cycle that it was out of date by the time it appeared. But that has changed, and CR reviews of high-tech equipment have become far more timely and accurate.”

IF A LOUDSPEAKER SINGS IN AN ISOLATED CHAMBER, IS ANYONE THERE TO LISTEN?

ELECTRONICS We are. We test all sizes of BY THE NUMBERS speakers in CU’s anechoic NUMBER OF PRODUCTS RATED chamber (shown in photo at 850 To tal models, services, and technologies left), which is lined on all four walls, the ceiling, and the floor NEWSSTAND SALES GROWTH with fiberglass wedges to 20% Rise in sales of CR’s electronics dampen sound waves and issues this year create an echo-free room. MEDIA MENTIONS, PRINT AND BROADCAST Losing the echo lets us judge 350 Includes radio and TV appearances the pure sound of the speak- er. The chamber sits on its FUN FACTOID own foundation to isolate it 32 Viewings of the movie trailer for “Corpse from the rumbling of passing Bride” for video-quality evaluation trucks or heavy construction equipment. CONSUMERS UNION 8 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES finance

he Finance franchise gears information not for cardholders. The report revealed how consumers can T toward financial sophisticates, stock traders, or protect themselves from fees, finance charges, and credit- money hobbyists, but toward typical Americans who need to card debt. We also listed the 10 most consumer-friendly make crucial decisions for now and for the future. credit cards based on an examination of 10,200 card offers.

Along with Ratings of financial products and services in both “CR Investigates: The New Threat to Your Medical Consumer Reports and Consumer Reports Money Privacy,” which appeared in the March 2006 issue of AdviserSM, in FY 2006 CR published several investigative Consumer Reports, explained how paper medical records pieces designed to help consumers avoid financial scams and are being computerized and how those computer files will manage their money wisely. Among them: be linked to a nationwide system. Once that network is established, consumers’ medical data may be available “CR Investigates Credit Cards:They Really Are Out instantaneously by computer to doctors, hospitals, in- to Get You,” published in the November 2005 issue of surers, and pharmacists. While that could provide life- Consumer Reports, outlined how credit cards have saving information to emergency-room doctors, it also become much more treacherous for users. Card issuers have paves the way for many abuses. Consider employers who imposed interest rates in excess of 30 percent on customers use the information to screen out workers who have life- whose only offense might have been a late payment to threatening diseases or philanthropic organizations that another creditor.They have also reduced the grace periods solicit contributions from the newly diagnosed. The CR during which new purchases are free of interest charges and report also told consumers what standards to demand to successfully lobbied to weaken the government’s protections ensure that their medical privacy is protected. CONSUMERS UNION9 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES & he Health & Family franchise helps consumers T make the best health, medical, and purchasing decisions by providing in-depth information from CR prod- uct testing, survey research, investigative reporting, and Ratings. We publish features and columns in the magazine, the Consumer Reports on Health® newsletter, and

family news reports at ConsumerReports.org.Also on the Web, ConsumerReports.org/health is a gateway to CR Best Buy DrugsSM, which rates the efficacy,safety,and value health of drugs in more than a dozen categories, and CR Medical GuideSM, which includes Ratings of the best treatments for more than 100 medical conditions, thousands of nutritional supplements, and virtually all over-the-counter and pre- scription drugs on the market.

IN FY 2006, WE CELEBRATED SEVERAL VICTORIES FOR THE HEALTH AND SAFETY OF CONSUMERS: ur reports on the dangers to children of Oinflatable pools, trampolines, and glass tables have drawn national attention, and we expect them to lead to voluntary standards.

Our report on dangerous floor cleaners prompted Colgate- Palmolive to agree to put childproof caps on its Fabuloso detergent bottles.

Our tests and report on furniture tip-over resulted in a high-priority effort by ASTM International to improve its voluntary standard, which, once set, is expected to form the basis of a new federal regulation.

In response to our testing for a report on bike helmets, the Consumer Product Safety Commission and the manufactur- er,Trek, recalled two bike helmet models that failed to pass government standards. We viewed that as prompt and responsible action to remove an unsafe product from store shelves and from consumers’ homes.

Prompted by our award-winning report on the dangers of tanning salons,Westchester County, N.Y., passed a law bar- ring access to children younger than 16, requiring written authorization from parents for 16- and 17-year-olds, and mandating the posting of health warnings in salons. Parental- consent bills also recently passed in Rockland County and in the New York State legislature. CONSUMERS UNION 10 ANNUAL REPORT FISCAL YEAR 2006 >> CONTENT FRANCHISES home

he Home franchise evaluates more than 100 For countertops, we found that engineered stone T products as diverse as vacuum cleaners and lawn is much easier to live with than trendy granite tractors. Our Home coverage now includes design advice and proved tops at weathering the gantlet of scrapes, and tips for getting the most from contractors and other spilled nail polish, and other mishaps we replicated in home-improvement pros. our labs.

MAJOR PROJECTS FOR THE In sinks, glass proved especially tough until it finally MAGAZINE IN FY 2006 INCLUDED: shattered under our 5-pound metal test cylinder—at Air cleaners that don’t really clean. The October 2005 a drop height of 12 inches compared with just 3 inches for report expanded on our earlier findings: Some of the best- the usual vitreous china sinks. selling ionizing air cleaners do little to clean the air and can produce significant levels of ozone. Four room models HOME AND YARD INFORMATION were judged Not Recommended because of their poor IS CONSISTENTLY AMONG THE cleaning performance. MOST POPULAR ON THE CONSUMER REPORTS WEB SITE Cleaning tests included how well portable room and • In January 2006 we gave ConsumerReports.org visitors whole-house air cleaners removed fine dust and cigarette- free video reports of 10 of the most interesting new prod- smoke particles. Ozone emissions were measured using ucts at the International Builders’ Show in Orlando, Fla., the Underwriters Laboratories’ sealed-room test. largest trade show in the industry.

Bathrooms that only look expensive. The August 2005 • On ConsumerReports.org, we’ve created new mini- bathroom remodeling package provided a step-by-step sites filled with articles and features such as “Complete guide to getting a great-looking bathroom for about Lawn & Yard Guide” (covering everything from seeding and $13,000—far less than the $25,000 homeowners spend on weeding to power-equipment maintenance) and “Hurricane average for high-end bath projects. Recovery & Disasters: Consumer Guidance.” CONSUMERS UNION11 ANNUAL REPORT FISCAL YEAR 2006 >> ACTION

onsumers Union runs several financial Although Prop 79 didn’t pass, it served as the model for a and health grassroots campaigns to law passed in September 2006 to give significant drug dis- Cimprove the quality of the marketplace. Not counts to millions of Californians. And Carrington won a only do we have lobbyists and organizers who work victory of her own:Working with Prescription for Change to make a difference on behalf of consumers, but we encouraged her to write to the maker of her immune sup- have also successfully engaged thousands of motivated pressants about their high cost.The drug company put her citizen activists. The following are profiles of some of into a patients’ assistance program, which pays for the those dedicated crusaders and the campaigns they medication; now she pays only for shipping. are advancing. The Financial Privacy NowSM The Prescription for ChangeSM campaign works to safeguard campaign works to ensure consumers from identity theft safe, effective, and affordable and related threats. prescription drugs. Legislative Update Legislative Update CU helped pass many of the bills in the 25 states Maine passed the nation’s first law mandating the with security-freeze laws, which prevent anyone disclosure of all clinical trials’ results completed from checking a consumer’s credit to process new after October 2002—both good and bad. California account requests. adopted a prescription-drug discount program for the needy and uninsured modeled after a CU- DICK LAMBERT, ROSEVILLE, MINN. backed ballot initiative that engaged thousands of Dick Lambert was already an active member of his new activists in our efforts. community when he joined Consumers Union’s Financial Privacy Now campaign. Lambert contacted the DIANA CARRINGTON, AARP Minnesota office and legislators, and generated SACRAMENTO, CALIF. support for the state’s security-freeze bill through the Diana Carrington received a Roseville Citizens League Web site, which he maintains. liver transplant in 2002. Since His Internet and political skills helped to transform a bill then, she has had to take with limited protections into one of the best security- immune suppressants and other freeze laws in the nation. drugs, which can add up to sev- eral hundred dollars a month When asked why he supports Consumers Union, out of her own pocket. With a Lambert said that the issues that CU takes on are limited income, she struggled to the kinds of things most people would agree with, “no afford the medicine. matter what stripe the person is.” He appreciates that CU is trying In 2005, Carrington wrote to “Share Your Prescription to engage citizens who don’t have Drug Story” on our Web site and began working with us the time to look into issues, making to help pass an initiative in California (Proposition 79) that it feasible for them to become would lower prescription-drug costs for uninsured or more politically active. Lambert underinsured residents. says that CU is the “lead dog in this thing,” but we believe that With only a few days’ notice, Carrington agreed to speak at people like Dick Lambert are the a press conference in Sacramento, where she talked about key to making a difference for all her struggle to pay for her medications. consumers.

CONSUMERS UNION 12 ANNUAL REPORT FISCAL YEAR 2006 >> ACTION

The Stop Hospital InfectionsSM GRASSROOTS ADVOCACY campaign works to help GOES TO COLLEGE consumers find the best quality Consumers Union taught its first college class, “The Theory and Practice: Community-Applied Legislative Advocacy,” this past of care by promoting the academic year.Twelve students at Pace University, in Pleasantville, public disclosure of hospital N.Y,.learned how to plan and execute an issue-based grassroots infection rates. campaign. Combining classroom learning with field work, the students worked with CU to support legislation to lower the price of prescription drugs in New York State. Legislative Update CU was instrumental in pushing through laws in 14 of “It’s been eye-opening to see how a real-life advocacy cam- the 15 states with legislation requiring hospitals to paign is run,” said Alejandro Pedreira, who took the class as report information on patient a junior.“The skills I’ve learned will last a lifetime.” The Pace infections to the public. class now knows how to organize a press conference, lobby elected officials, create a coalition, draft op-ed pieces, and go LISA TOOLEN, door-to-door to mobilize other citizens. SUMTER, S.C. Lisa Toolen’s son, Jimmy, at left, The students’ grassroots campaign work has helped CU’s legis- was an active and healthy 15-year- lation pass in the New York State Assembly,and it may also make old before he had knee surgery in it through a special session of the Senate to be held later this 2005. The operation led to an year.Whether or not consumers see a victory,the students have antibiotic-resistant infection that played a crucial role as citizen activists. CU plans to teach the threatened his life and may leave class again during the ’06-07 academic year. him permanently disabled. Lisa Continued on page 16 Toolen attended every state public hearing in support of a proposed hospital-infection disclosure bill, telling legislators about her son and the continuing struggle to save his leg. Her visibility in print publications and on television helped educate the public about hospital-acquired infections. The bill passed this year.

HELEN HASKELL, COLUMBIA, S.C. Helen Haskell, founder of Mothers Against Medical Error (MAME), was another important advocate for Consumers Union’s Stop Hospital Infections campaign in South Carolina. Haskell became a patient-safety advocate after her 15-year-old son died from a medical error in 2000. She successfully worked for passage of the Lewis Blackman Hospital Safety Act, named for her son, in 2005. It requires the clear and prominent identification of doctors and hospital staff members and their roles.

In addition to working with Toolen and MAME, CU teamed up with South Carolina Fair Share and the South Carolina office of AARP,and other individuals with hospital- PACE students canvassing neighborhoods to garner infection experiences. support for a New York prescription-drug bill. CONSUMERS UNION13 ANNUAL REPORT FISCAL YEAR 2006 CONSUMERS UNION>>

Total number of subscriptions at the end of the 7,392,588 fiscal year, up 9.5% from a year ago.

Number of CU e-activists at the end 360,000 of FY 2006.

Number of products tested in last 3,377 12 months.

Number of awards won by 8 CU in the past year. Number of states that have passed laws requiring public disclosure of hospital-acquired infections or strong laws protecting consumers 32 against identity theft. Number of employees who work at CU’s five locations in the U.S.—Yonkers, N.Y.;East Haddam, Conn.;Washington, D.C.; Austin,Tex.; 519 San Francisco; and Richmond,Vt.

U.S. ranking in terms of average 7 monthly magazine subscriptions (2005).

Number of contacts handled by CU’s 828,196 customer relations department in FY 2006.

CU’s increase in net assets $10,605,000 in FY 2006. Average monthly newsstand copies of CR magazine sold, excluding April Auto Issue (which sold 300,000); up from an average of 110,000 65,000 in FY2003.

Number of autos reported on in response to the 2005 Annual Questionnaire, more than 1,024,000 double the number from 2002.

CONSUMERS UNION 14 ANNUAL REPORT FISCAL YEAR 2006 IMPACT BY THE NUMBERS

Approximate number of part-time “mystery shoppers” nationwide who 180 anonymously buy products for testing. Approximate number of bike helmets recalled by Trek in conjunction with the Consumer Product Safety Commission after two models failed CR’s 4,500 tests for compliance with federal standards.

Total number of donors to CU at the end 498,297 of FY 2006.

Standard & Poor’s credit rating of CU’sYonkers Industrial Development Agency bonds, reflecting A+ the organization’s strong financial position. Increase in ability to accommodate subscriber growth at ConsumerReports.org, thanks to a major overhaul of our network 300% infrastructure.

Lawsuits filed against CU in FY 2006; number of lawsuits CU has lost in its 0 70-year history. Approximate number of libraries in low-income communities that got the English and Spanish ver- sions of the Hear Us NowSM campaign’s “Consumer 10,000 Tips” booklet for Internet, cable, and phone users.

Number of stations that subscribe to “Report to Consumers” radio program and 250/85 Consumer Reports TV News® feed, respectively.

Average number of pages on ConsumerReports.org viewed every 46,500,000 month, an 18% increase over last year.

According to an American Demographics Perception Study (online survey of 1,133 adults conducted in May 2005): One publication walked away with the prize as the most trustworthy and objective media outlet for information on consumer products: Consumer Reports, cited by 43% of adults in the survey.” —AdAge.com, June 13, 2005

CONSUMERS UNION15 ANNUAL REPORT FISCAL YEAR 2006 >> ACTION

The four projects described here all has developed an Electronics Reuse & Recycling Center. receive foundation funding. For a full list It educates consumers about the growing problem of of grant funders, please see page 22. electronic waste and offers solutions for responsible disposal of electronics, providing valuable reuse and re- cycling resources. CRBESTBUYDRUGS.ORGSM

The Consumer Reports Best Buy DrugsSM campaign is NATIONAL & INTERNATIONAL IMPACT designed to give consumers bombarded by prescription- drug advertising access to unbiased, clear information about CU’s advocacy efforts have spurred Congress to the medicines they take. Our free reports on medication for 1consider a bipartisan drug-safety bill that would high cholesterol, heart disease, menopause, allergies, high make drug studies public so that consumers can blood pressure, and more help consumers lower their know more about specific drugs and their poten- prescription-drug costs. tially dangerous side effects. Our efforts have led to the strengthening of sev- Grant funds enable pharmacists in Georgia to spread the 2eral identity-theft bills to help protect consumers word about CRBestBuyDrugs.org through information from having their financial and personal information included with customers’ orders. In Minnesota, we are stolen, and to assist those who may already be vic- working with the state’s largest seniors’ federation and the tims of such crime. Our efforts in Congress will help Minnesota Medical Association to tell consumers and health- protect the laws we successfully worked to pass in care providers about the project, and we’re placing CR Best dozens of states giving consumers the right to freeze Buy Drugs posters in physicians’ waiting rooms and in access to their credit information when they may be clinics.We recently launched a grassroots effort that enlists victims of identity theft. consumers to do what drugmakers do: make marketing calls to doctors and pharmacists. Consumers download a We are working with 39 state attorneys general, CR Best Buy Drugs packet to take to those offices and 3state and local public-health officials, organiza- pharmacies and encourage health-care providers to join the tions, and individuals across the country to stop a bill push for lower drug costs. in the Senate that would undermine stronger state food-safety protections. SM GREENERCHOICES.ORG We succeeded in securing $1 billion to help con- sumers continue using their current analog TV Launched in April 2005, GreenerChoices.org helps con- 4 sets after broadcasters make the required shift to sumers make environmentally friendly product and lifestyle digital transmission of all signals in 2009. CU was also choices. Over the past year, GreenerChoices.org content instrumental in preventing the Senate from letting has continued to grow, and new subjects have been added, phone and cable companies cut consumer protections including alternative fuels, organic food, personal-care and services while they raised rates. products, and greener lawn care. The site has doubled its monthly audience to more than 110,000 and expanded Consumers Union helped organize and lead a its reach through links in Consumer Reports and at 5team of members of ConsumerReports.org, as well as through CU’s from eight countries who persuaded Codex, the Eco-labels.org public-health and environmental-labeling site. United Nations food-standards agency, to work toward international guidelines for labeling of genet- GreenerChoices.org content is shared with print ically engineered food. This year we also convinced and online media outlets, including Mother Earth News, the U.S. Food and Drug Administration to propose Earth911.org, and Grist.org. It is also featured monthly on changing its rules on animal feed to reduce mad NPR’s “Living on Earth” radio program. GreenerChoices.org cow risks.

CONSUMERS UNION 16 ANNUAL REPORT FISCAL YEAR 2006 >> ACTION

CONSUMERWEBWATCH.ORG® are framed and affected by the media’s portrayal of blacks and Hispanics.The project’s model curriculum will be avail- Consumer Reports WebWatchSM was launched in 2002 able at HearUsNow.org this fall. to improve the credibility of online content. In October 2005, it held a conference at the National Press Club in SM Washington, D.C. To a capacity crowd, WebWatch staff, WWW.PODERDELCONSUMIDOR.ORG guests, and panelists presented results from our latest poll of U.S.Web users.We discussed news and information sites, children’s sites, and financial sites, as well as Web credibility issues, prompted by the finding that more than 30 percent of Americans have either cut back or ceased using the Internet because of fears of its “dark side.”

Our Web presence is expanding. In early 2006, we intro- duced .org, a collaboration between Harvard and Oxford universities, with WebWatch serving as an unpaid special adviser. StopBadware.org seeks to expose spyware companies and their products.The effort recently received a boost when Google announced that it was going to start incorporating StopBadware.org’s information into its search results to alert users to spyware. In June 2005, WebWatch introduced HealthRatings.org to rate health Web sites. Its first set of ratings, of the top 20 most- trafficked health-information sites, prompted 8 of the 20 sites to make changes to improve future scores.

HEARUSNOW.ORGSM

SM Hear Us Now , CU’s telecommunications and media CU’s newest advocacy site, whose title means campaign, enjoyed several successes this year. The project “Power of the Consumer,” is an important tool for brought together grassroots and D.C.-based organizations reaching Spanish-language media and Spanish- to discuss international telecommunications issues. It also speaking consumers. It was the launch pad for worked with e-activists to send policymakers more than a campaign to get credit-reporting agencies to provide applications and information in 535,000 pieces of e-mail on issues such as keeping the Spanish. The site’s first consumer-action Internet open, coping with the transition to digital televi- campaign, promoting disclosure of sion, and fighting more media consolidation. hospital infections, started at the beginning of FY 2007. Hear Us Now also launched a very popular space for consumers to share their stories, and more than 2,500 individuals did just that. The project stepped outside the Web to reach more consumers by converting both the English and Spanish versions of our online “Consumer Tips” into a booklet that was distributed to more than 10,000 libraries in low-income communities across the country. We joined forces with three universities to develop a curriculum exploring how current policy issues

CONSUMERS UNION17 ANNUAL REPORT FISCAL YEAR 2006 >> PRODUCTS & AWARDS

CONSUMER REPORTS Subscription Products’ Circulation & Growth

CONSUMER REPORTS® CONSUMERREPORTS.ORG® magazine (includes newsstand) Web site FY 2005 > 4,196,852 FY 2005 > 1,887,000 FY 2006 > 4,292,278 FY 2006 > 2,345,000 +2.3% +24.3%

Consumer Reports Consumer Reports Consumer Reports Money AdviserSM New & Used Car on Health® newsletter Buying Kits newsletter FY 2005 > 255,154 FY 2005 > 41,946 FY 2005 > 491,385 FY 2006 > 275,414 FY 2006 > 52,960 FY 2006 > 545,718 +7.9% +26.3% +11.0%

ConsumerReports.org is one of the most effective consumer information environments available, and it is evolving in all the right directions. Across a stunning range of product categories, the site surrounds readers with supportive content for educated decision-making.” —Media Industry Newsletter’s Best of the Web Awards 2006

SHOPSMART This year we introduced A poll conducted by the Consumer Reports ShopSmart, a shopping maga- National Research Center™ validated the need for zine aimed at women aged 30 a magazine for women interested in making smart to 45. It is a unique addition purchases. Results showed that shoppers see sales- to the shopping-magazine people and advertising as the least trusted sources category because it draws for buying advice. The poll also found that a huge on Consumer Reports’ majority of the women surveyed said they rely mostly tradition of accepting no on friends and family for advice on the products they advertisements so that it can use every day. provide unbiased product reviews. Like Consumer Reports, ShopSmart deploys ShopSmart differs from Consumer Reports by pro- “mystery shoppers” to ensure that the products reviewed are viding “best of the best” lists for shoppers—ideal for identical to those that consumers buy. busy consumers who place a premium on time. CONSUMERS UNION 18 ANNUAL REPORT FISCAL YEAR 2006 >> PRODUCTS & AWARDS

onsumers Union received a number of awards Consumers Union received the U.S. Food and Drug Cfrom highly respected organizations in FY 2006, Administration Commissioner’s Special Citation. It cited including two National Press Club awards: CU “for outstanding leadership, strong commitment to consumer participation, and the unassailable integrity of its A 2006 National Press Club award for consumer journalism consumer information.” was given for “New Concerns About Ionizing Air Cleaners” and “Air Cleaners: Some Do Little Cleaning,” twinned CR CU’s animated video,“The Drugs I Need,” was honored with investigative reports on air cleaners that clean poorly and, a Grassroots Innovation Award for the use of technology in some cases, create significant levels of ozone. from the Public Affairs Council. The award recognizes the nation’s best grassroots programs and campaigns. Honorable Mention from the National Press Club for “What Salespeople Aren’t Telling You About Annuities,” in the March 2005 issue of the Consumer Reports Money Adviser.We warned consumers of the typical sales pitches agents make, explained the different types of annuities, let readers know when it’s a good idea to bail out of one they’ve already purchased and—if they still want to buy an annuity—how to ensure they are dealing with a financially sound company.

ConsumerReports.org won several awards in FY 2006. The International Academy of Digital Arts and Sciences awarded the site both a Webby, the leading international honor for Web sites, and a People’s Voice Award in the category of Guides/Ratings/Reviews.The site also received a Best of the Web Award from the Media Industry Newsletter, which pays tribute to magazine excellence online.

OTHER PRODUCT INNOVATIONS Our new ShopSmart Mobile application delivers CR’s un- biased product Ratings where consumers need them most—in the store when they’re making a buying decision. Available through all the major cell-phone carriers, ShopSmart Mobile also provides through a linked vendor the latest online and in-store prices for appliances, electronics, and home products.

We expanded our Shop Online capability significantly this year. Now ConsumerReports.org subscribers can conveniently research, comparison shop, and then link to a separate secure site where they can buy hundreds of prod- ucts online.We now cover more than 50 product categories, all in a protected, customized, ad-free environment. CONSUMERS UNION19 ANNUAL REPORT FISCAL YEAR 2006 >> DONORS & FUNDRAISING

YOUR CONTRIBUTION MAKES A DIFFERENCE

e thank the 500,000 donors who believe that WConsumer Reports is not only a trusted author- ity on consumer products and services, but is also dedicated to changing the marketplace.The $18.1 million in contributions they gave in FY 2006 allow us to address issues that affect the quality of life and safety of consumers across the country and around the world.

Donations given to the Consumer Reports Foundation go directly to underwriting our product purchasing, testing, and research, and to programs that support our mission, including public education, public safety, and .

All our donations adhere to a strict ethical code.We ensure that no commercial conflicts of interest taint our work and that the donations are from individuals only, not businesses. All donations over $10,000 are scrutinized by our Ethics Review Committee to ensure that no real or perceived con- flict of interest exists.

THE CONSUMER REPORTS FOUNDATION FAMILY OF PROGRAMS Annual Fund Donations With three circles of membership, the Annual Fund Donations program offers multiple benefits for contributors while ensuring long-term support for CU.

FRIEND’S CIRCLE ($10-$99 annual donation) • Discounts on Consumer Reports publications • Quarterly INside Consumer Reports updates

LEADERSHIP CIRCLE Silver ($100-$249), Gold ($250-$499), Platinum ($500-$999). Depending on amount of donation, both of the above, plus: • One-year subscription to ConsumerReports.org (Silver) • One-year subscription to Consumer Reports (Gold) • One-year subscription to Consumer Reports on Health or Consumer Reports Money Adviser newsletters (Platinum) CR tests dishwasher detergents by evaluating how well they get rid • Invitations to special regional presentations (Silver) and to of gunk baked onto plates. breakfast (Gold) and an afternoon reception (Platinum) with CU board members and CU president Jim Guest at our annual meeting. CONSUMERS UNION 20 ANNUAL REPORT FISCAL YEAR 2006 >> DONORS & FUNDRAISING

For a complete list of our Consumer Reports is an many donor programs, please go to www.ConsumerReports.org and click on important magazine, never more “Donate” on the home page. so than during the holidays, when For information about establishing a Smart the typical consumer will buy most Consumer Gift Annuity®, please contact Robert anything that has been awarded Drucker, associate director, planned giving, by phone prominent shelf space … Consumer (202-238-9258), by e-mail ([email protected]), or by postal mail (Consumers Union, 1101 17th St. Reports is there to yell ‘Stop!’, NW, Suite 500,Washington, DC 20036). doing the time-consuming, For information on our Legacy Society and annoying work of figuring out appreciated property, please contact Ed Pitaro, just where you are getting associate director, by phone (914-378-2647), by e-mail ([email protected]), or by postal mail (Consumer ripped off.” Reports, 101 Truman Ave.,Yonkers, NY 10703). —“Holiday Tech Taste Test,” New York Post, December 19, 2005

For information about all other donor programs, please contact Martin I. Kagan, senior director, development, by phone (914-378-2196), by e-mail ([email protected]), or by postal mail to the Yonkers address, above.

PRESIDENT’S CIRCLE ($1,000+). Benefits of Platinum membership plus the CR Concierge Service: Members can call toll-free to ask about any product we’ve tested. CR will fax, e-mail, or mail our latest published reports.

Smart Consumer Gift Annuity® The Smart Consumer Gift Annuity program allows donors to support the organization as well as secure their own financial future.With a one-time donation of at least $5,000 in cash or appreciated securities (stocks, bonds, mutual- fund shares), donors are eligible for an immediate income- tax deduction for the part of the contribution considered a charitable gift. CU pays one or two annuitants a fixed amount each year for life. (The amount of annuity payments is based on age and may be partially tax-free.) Annuitants can also reduce or defer capital-gains taxes on donations of appreciated securities. Our textile experts test the effects of laundry detergents. Remember Us in Your Will Become a Legacy Leader in our Legacy Society by leaving us a bequest in your will. You can designate a specific dollar amount or a percentage of your estate to help ensure that CONSUMERS UNION21 ANNUAL REPORT FISCAL YEAR 2006 >> DONORS & FUNDRAISING

CU can meet the challenges of the future as a financially FOUNDATIONS AND GRANTORS strong organization. CLARENCE E. HELLER CHARITABLE FOUNDATION NATIONAL LIBRARY OF MEDICINE COMMONWEALTH FUND NY COMMUNITY TRUST Consumer Reports GuardianSM CORNERSTONE CAMPAIGN OPEN SOCIETY INSTITUTE The CR Guardian program allows donors to make monthly DAVID AND LUCILE PACKARD FOUNDATION OVERBROOK FOUNDATION contributions automatically by credit card. It provides an EDUCATIONAL FOUNDATION OF AMERICA THE PEW CHARITABLE TRUSTS easy way for donors to contribute and helps ensure that ENGELBERG FOUNDATION ROBERT STERLING CLARK CR has a dependable source of revenue, allowing us to FORD FOUNDATION FOUNDATION budget and plan for new test programs. FJC—A FOUNDATION OF DONOR SCHERMAN FOUNDATION ADVISED FUNDS SURDNA FOUNDATION Consumer Reports Tribute and Memorial Gifts JOHN MERCK FUND WILLIAM ZIMMERMAN FOUNDATION Tribute gifts are a way to honor someone special—in cele- JOHN S AND JAMES L KNIGHT FOUNDATION W.K. KELLOGG FOUNDATION bration of a birthday, an anniversary, a graduation, or any other important occasion. Memorial gifts, honoring people who have died, let their families know you are thinking of $5,000 AND UP them.The Consumer Reports Foundation sends a card ANONYMOUS DIANE M MCGOWAN to the honoree or family acknowledging the gift. The LAURIE CONVERSE PHILIP R NIELSEN amount of the donation is kept confidential. THERESA M DAVIS DAVID & MARIAN ROCKER MARYLOU COOPER GREEN & RICHARD A SWINGLE Donations of Retirement Plan Assets MICHAEL GREEN and Life Insurance Donors can make a contribution by naming Consumers Union as the partial or sole beneficiary of their IRA, 401(k), $1,000 - $4,999 or other qualified plan as well as a life insurance policy. ANONYMOUS RICHARD B GANNON PATRICA ADAMS ALAN GEORGE Donations of Appreciated Property JACQUELINE F ALLEN LINDA GINZEL Appreciated assets such as real estate, tangible personal SUSAN & LAUREN ANSTEAD RACHEL RICHES GORDON property, and securities can be contributed, and you can WILLIAM F BAKER JACE GREENMAN receive a significant income-tax charitable deduction with- CAROL S BEATTY JOHN & BARBARA GROGAN out recognition of capital gain.As an alternative, these assets CURTIS THOMPSON BELL JIM & PENNY GUEST can be placed in a charitable remainder trust that will pro- CHARLES L BENZON JAMES G HANKO vide a lifetime income stream based on the fair market value DENNIS L BRUCE JOHN A HANLEY of the asset. MR & MRS EVAN BUCK HERTZEL HARRISON CAROL A BURFFORD DANIEL HERSTAD It is also possible to transfer the title to your home or vaca- SCOTT CADY SHIRLEY & BARNETT HELZBERG tion property to CU while you continue to live in it, which CHIN C CHANG JIM HURST can result in a substantial charitable deduction and reduced ROBERT C CHERRINGTON DR MASAYOSHI ITOH estate taxes. DOUGLAS B CLENDANIEL MATTHEW JAPKO NANCY & JAMES DAVIS TOM JETT ALLEN & BARBARA EDELHEIT deFOREST F JURKIEWICZ AMOUNT DONORS DONALD A ELLIS JOHN KAZAROSIAN JOHN ELY DALE E KEPLINGER $500-$999 561 EDITH EVERETT DAVID & PAULA KIRSCH $250-$499 2,030 JEAN FAILING DAN KNIFONG $100-$249 24,948 SANDRA LEE FILIPPI DR VILMA L KOHN $1-$99 470,565 MR & MRS NELSON FLEISHMAN DANIEL F KREBS DAN & DONNA FRANKLIN EDDIE H KUO CONSUMERS UNION 22 ANNUAL REPORT FISCAL YEAR 2006 >> DONORS & FUNDRAISING

SMART CONSUMERS WHO ESTABLISHED CHARITABLE GIFT ANNUITIES IN FY 2006 CR RAFFLE WINNERS ETHEL ADLER FRANK H. & MARY TEALE DUPUIS LAWRENCE MOSER The CR 2005 Mystery ELLEN CAROL ALLEN CHARLES & PHOEBE FLYNN THOMAS POPE Car Raffle raised more DOLORES ANDERSON EGON E. & DOROTHY C. FRIEDMAN DONALD & CLAIRE PRINCE than $5 million for the CLAIRE AUGUST WARREN GOULD JAMES RAMLER organization. C. Garcia JOHN & HILDE BACHARACH DANIEL HAVENS PAUL RUBINFELD of Colorado won the JANE & HAROLD BROADBOOKS JAMES & MARY HESSE GAYLE SCHUMACHER $25,000 grand prize; RON & VIVIAN CAMPBELL JAMES L JOHNSON SYLVIA S. STEEGE V. Wagoner of California JEAN ANN CAPOZZI BARBARA KASTNER MARY ELLEN SPIEGELBERG won the second prize BETTY CHAFFIN DONALD & MANDY KEEFER DANIEL L. STIKA of $5,000; and P.Wasen STEPHANIE S. CLARK JOHN KEEGAN GEORGE STRAWN of Ohio and J.Musil of DUDLEY COOK MORRIS KORNBLUTH & FRANCINE JUSTA WESLEY MARIE TACKITT Wisconsin were third- ZOE ANN COOLEY JAKE & BETTY LOU LUDWICK IRA WEINER place winners, each JERRY & BAMBI CURTIS CHERYL VALDEZ & MIKE LYNN DAVID & PATRICIA WILSON receiving $1,000. JANET & WILLIAM DAVIS IRENE VARNEY MORAN JEFFREY WILSON MARIE DEVANEY DONALD MORRIS Five fourth-place winners each took home $500, and 10 fifth-place winners received $250 each.

Consumer Reports Money C LANGE MAJ GEN L RANDOLPH JOY WHITE Adviser or Consumer LARRY LEHRNER & SHELLEY BERKLEY MR & MRS MARK J REICHER TODD WILKINSON Reports on Health DAVID LEIWANT & AURORA DEGASPERI JANICE ROCK WILLIAM WILSON newsletter subscriptions EDWARD M LIU DAVID ROMEY AMY WOODS went to 100 sixth-place JEAN & JIM MACALEER JOHN J SATEJA BILL WOOTAN winners. DAVID E MATHERLY SCOTT & JULIE SCHLEGEL AMERICA & DAVID YOUNG DEAN & MARGARET MATTSON TOM & MIRIAM SCHULMAN JEFFREY C YU KIRK MCKUSICK & ERIC ALLMAN DAVID K SENGSTACK JONATHAN & PATRICIA MEYERS DENNIS M SESAK MRS & MR BERNHARD MUELLER HERBERT SHROOT CR SUPPORTERS WHO JOINED CAROLYN MURPHEY HAROLD SIRKIN THE LEGACY SOCIETY BY LEAVING LOIS NICKERSON ELSIE L SMITH A GENEROUS BEQUEST IN THEIR JOSEPH E NORDSIECK ROBERT SOLIMINE WILLS IN 2006 RALPH ORLANSKY MS ELISSA SOMMER HOWARD J. AMSTERDAM JOHN & VIRGINIA FORSYTH BONNA L OYER FRANK R SOUTHERS HARRY S. EXLINE DAVID M. KERNS DR CHERRI M PANCAKE EDWIN L STEWART BETTY PEARCE DR P R SUNDARESAN CR SUPPORTERS WHO LEFT MARK PETERS ROSELLER B TAPANGAN, MD GENEROUS BEQUESTS REBECCA J PHINNEY GERALD J THAIN IN THEIR WILLS IN 2005 SELMA & BUD PIERCE BILL & LISA VANDERWEIL HELEN E. BOWLES LAWRENCE T. MOSSER REY & GIMMER PLOTNICK RICHARD VIEHE, DPM EARNEST CRISCI JOHN G. MUIRHEID SONIA QUIJADA DIANA VOGEL ETHYLYN JOHNSON STANLEY OSCAR GERARD QUINN RUTH M WALKER DAVID M KERNS AUDREY H. ROBINSON ABEL D RAMIREZ EILEEN WARD WELLS MARA ANNETTE KLUG LUCILLE WILKINSON CONSUMERS UNION23 ANNUAL REPORT FISCAL YEAR 2006 >> POLICIES & PRACTICES

ecause consumer trust and transparency are at vidual gifts and gifts from foundations that are not directly Bthe core of Consumers Union’s work, we have or indirectly connected to a corporation.We do not accept always maintained rigorous policies to ensure the highest gifts from political organizations.All gifts over $10,000 must standards of integrity.These policies apply to all our work— be approved by CU’s Ethics Review Committee. from the independence of our testing, research, and report- ing to our marketing, fundraising, public education, and WHISTLEBLOWERS AND advocacy practices. THE REPORTING OF FINANCIAL WRONGDOING OUR ETHICAL GUIDELINES STATE: CU prohibits retaliation against any employee who in good • We don’t accept ads, free samples, or products or faith gives a law-enforcement official information relating to gifts of any kind. any violation of federal or state law. Employees are also • We pay our own way. encouraged to report violations of law and financial wrong- • We don’t use CU’s name or information for personal doing, and any other form of financial impropriety, and they gain or to advance personal causes. can do so anonymously. For this purpose, a hotline has • We respect our customers’ privacy. been established for direct communication to the Audit Committee of the board of directors. The following describes important policies, practices, and guidelines: NONDISCRIMINATION AND ANTI-HARASSMENT POLICY CONFLICT-OF-INTEREST GUIDELINES Consumers Union is committed to a work environ- Consumers Union’s bylaws define conflicts of interest as ment in which all individuals are treated with respect and “connections with commercial, business, manufacturing or dignity. It is the policy of Consumers Union to ensure financial enterprises that would likely affect independent equal employment opportunity without discrimination or judgment.” To protect CU’s credibility, our guidelines harassment on the basis of race, color, national origin, demand that staff members and board members rigorously religion, sex, age, disability, or any other basis covered by avoid real or potential conflicts of interest. The guidelines law. Consumers Union prohibits and will not tolerate require annual disclosures of financial interests, other any such discrimination or harassment. sources of income, patents, and other relationships with commercial and not-for-profit interests. An outside conflict- PRIVACY of-interest monitor reviews those filings at least annually. CU’s privacy policies are posted prominently in all of our subscription publications and other products, and on our NONCOMMERCIALIZATION Web sites. All of our subscription products and Web sites, Information published by Consumers Union, including including free sites, note that we may share purchasers’ our Ratings and reports, is intended solely for the benefit of names and postal addresses, and provide clear and conspicu- our subscribers and other consumers. Such information ous opt-out mechanisms.We don’t share donor information, may not be used by others in advertising or to promote a and we don’t rent or exchange e-mail addresses. We also company’s product or service. In addition, this policy pre- clearly disclose that we currently pay data brokers to cludes any commercial use of any of Consumers Union’s enhance our customer database with supplemental informa- published information in any form, or of the names of tion to assist in marketing and fundraising campaigns. Consumers Union, Consumer Reports, or of any other Information we purchase excludes Social Security numbers, Consumers Union publication or service, without our driver’s license numbers, financial account numbers, and expressed written permission. credit- and debit-card information.We have encryption prac- tices, updated annually, that safeguard customers’ informa- FUNDRAISING DONATIONS tion.We use outside security firms to ensure that our infor- Consumers Union does not accept contributions from any mation security practices are up to date.We are committed corporation or business, in any amount or form, including to notifying all affected individuals in the event of a security employer matching gifts. The organization accepts only indi- breach compromising their sensitive personal information. CONSUMERS UNION 24 ANNUAL REPORT FISCAL YEAR 2006 >> FINANCIALS

CONSUMERS UNION OF UNITED STATES, INC. Years ended May 31, 2006 and 2005

Consolidated statements of activities 2006 2005 Consolidated balance sheets 2006 2005 CHANGE IN UNRESTRICTED NET ASSETS ASSETS Revenue and support: Current assets: Subscriptions, newsstand, online, Cash $ 15,332,000 $ 10,923,000 and other sales $186,794,000 $168,003,000 Investments 142,125,000 116,987,000 Contributions 17,488,000 18,102,000 Funds held by bond trustee 3,482,000 —— Investment income, net 6,866,000 6,480,000 Subscriptions receivable, net 7,542,000 9,428,000 Net assets released from restrictions 3,371,000 3,994,000 Inventories 4,216,000 3,765,000 Other 1,172,000 64,000 Auto test inventory 2,286,000 1,716,000 Total revenue and support 215,691,000 196,643,000 Grants and other receivables 4,167,000 5,570,000 OPERATING AND OTHER EXPENSES Deferred promotion cost 24,061,000 23,508,000 Publication expenses: Prepaid expenses and other current assets 4,013,000 3,999,000 Content development 65,048,000 59,342,000 Total current assets 207,224,000 175,896,000 Production and distribution 36,716,000 30,817,000 Property and equipment, net 57,975,000 52,302,000 Total publication expenses 101,764,000 90,159,000 Deferred promotion cost—long-term 6,835,000 6,533,000 Promotion and marketing 60,532,000 49,799,000 Asset under derivative instrument 847,000 —— General and administrative 17,995,000 14,070,000 Grants receivable—long term —— 139,000 Consumer advocacy and education 13,995,000 13,056,000 Other assets 20,197,000 23,288,000 Fundraising 7,646,000 7,249,000 Total assets $293,078,000 $258,158,000 Governance 1,342,000 1,302,000 LIABILITIES AND NET ASSETS Total operating and other expenses 203,274,000 175,635,000 Current liabilities: Total operating income 12,417,000 21,008,000 Current portion of long-term debt $ —— $ 1,250,000 Unrealized gain on interest rate swap 847,000 —— Accounts payable and accrued liabilities 12,974,000 13,075,000 Loss from write-off of bond-issuance costs (807,000) —— Accrued compensation 8,753,000 7,917,000 Increase in unrestricted net assets 12,457,000 21,008,000 Unearned subscription revenue 102,012,000 93,771,000 Change in temporarily Total current liabilities 123,739,000 116,013,000 restricted net assets: Unearned subscription revenue 29,718,000 27,483,000 Grants received 868,000 6,014,000 Long-term debt 47,300,000 34,750,000 Net assets released from restrictions (3,371,000) (3,994,000) Other liabilities 4,776,000 2,972,000 Contribution of revenue-retained Total liabilities 205,533,000 181,218,000 life estate 610,000 —— Commitments and contingencies Change in value of split interest agreement 41,000 —— Net assets: Unrestricted 83,734,000 71,277,000 (Decrease) increase in temporarily restricted net assets (1,852,000) 2,020,000 Temporarily restricted 3,811,000 5,663,000 Increase in net assets 10,605,000 23,028,000 Total net assets 87,545,000 76,940,000 Net assets at beginning of year 76,940,000 53,912,000 Total liabilities and net assets $293,078,000 $258,158,000 Note:The figures that appear in the financial summary are derived from the 2006 consolidated financial Net assets at end of year $87,545,000 $76,940,000 statements that have been audited by KPMG LLP,which has issued an unqualified opinion. Our audited 2006 financial statements for Consumers Union can be seen at www.ConsumerReports.org/annualreport or can be ordered from Consumers Union, Communications Office, 101 Truman Ave.,Yonkers, N.Y. 10703.

CONSUMERS UNION 25 ANNUAL REPORT FISCAL YEAR 2006 >> BOARD OF DIRECTORS 2005-2006

SHARON L. NELSON CHAIR JOAN L. CHAMBERS FORMER ASSISTANT ATTORNEY PROFESSOR EMERITUS, COLORADO GENERAL, WASHINGTON STATE, STATE UNIVERSITY, FT. COLLINS, COLO. AND CHIEF OF THE CONSUMER PROTECTION DIVISION, WASHINGTON JOAN B. CLAYBROOK STATE ATTORNEY GENERAL’S PRESIDENT, , OFFICE, SEATTLE WASHINGTON, D.C.

JEAN ANN FOX VICE CHAIR BARBARA S. FRIEDMAN DIRECTOR OF CONSUMER SENIOR VICE PRESIDENT OF FINANCE PROTECTION, CONSUMER FEDERATION AND ADMINISTRATION, ASSOCIATION OF AMERICA, WASHINGTON, D.C. OF AMERICAN MEDICAL COLLEGES, WASHINGTON, D.C. BURNELE VENABLE POWELL SECRETARY LINDA GINZEL DEAN AND PROFESSOR OF LAW, CLINICAL PROFESSOR OF UNIVERSITY OF SOUTH CAROLINA, MANAGERIAL PSYCHOLOGY, UNIVERSITY COLUMBIA, S.C. OF CHICAGO GRADUATE SCHOOL OF BUSINESS, CHICAGO CLARENCE M. DITLOW TREASURER KAREN HEIN, M.D. EXECUTIVE DIRECTOR, CENTER FOR PHYSICIAN AND CONSULTANT, AUTO SAFETY, WASHINGTON, D.C. JACKSONVILLE, VT.

PAMELA ABRAMS PAUL HOFFMAN SENIOR VICE PRESIDENT, AUTHOR, AND MAGAZINE DOWNTOWN BOOKWORKS INC., AND INTERNET CONSULTANT, NEW YORK, N.Y. WOODSTOCK, N.Y.

ROBERT S. ADLER CAROL IZUMI PROFESSOR OF LEGAL STUDIES, ASSOCIATE DEAN FOR CLINICAL UNIVERSITY OF NORTH CAROLINA, AFFAIRS AND PROFESSOR OF CLINICAL CHAPEL HILL, N.C. LAW, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL, WILLIAM F. BAKER WASHINGTON, D.C. PRESIDENT, THIRTEEN/WNET, NEW YORK, N.Y. TERESA MORAN SCHWARTZ PROFESSOR OF LAW, EMERITUS, CHRISTINE A. BJORKLUND GEORGE WASHINGTON UNIVERSITY, CONSUMER-AFFAIRS CONSULTANT, AND CONSUMER-LAW SAN FRANCISCO CONSULTANT, WASHINGTON, D.C.

BERNARD E. BROOKS NORMAN I. SILBER To test the life of auto batteries, we put them in PRESIDENT, PROFESSOR OF CONSUMER LAW, 167˚ F water to simulate under-the-hood temperatures. BERNARD E. BROOKS NONPROFIT LAW, AND HISTORY, AND ASSOCIATES, HOFSTRA UNIVERSITY SCHOOL OF SPARTANBURG, S.C. LAW, HEMPSTEAD, N.Y. CONSUMERS UNION26 ANNUAL REPORT FISCAL YEAR 2006 >> SENIOR LEADERSHIP TEAM 2005-2006

JAMES A. GUEST PRESIDENT & CHIEF EXECUTIVE OFFICER

JOHN SATEJA SENIOR VICE PRESIDENT, INFORMATION PRODUCTS

JEFFREY A. ASHER VICE PRESIDENT & TECHNICAL DIRECTOR

MICHAEL D’ALESSANDRO VICE PRESIDENT, EXECUTIVE OPERATIONS

ELENA FALCONE SENIOR DIRECTOR, STRATEGIC PLANNING AND INFORMATION SERVICES

RICHARD B. GANNON VICE PRESIDENT & CHIEF FINANCIAL OFFICER

EILEEN B. HERSHENOV VICE PRESIDENT & GENERAL COUNSEL

GENE KIMMELMAN VICE PRESIDENT, FEDERAL AND INTERNATIONAL AFFAIRS

RICHARD LUSTIG VICE PRESIDENT, ADMINISTRATION AND HUMAN RESOURCES

KEVIN MCKEAN VICE PRESIDENT & EDITORIAL DIRECTOR

CHRIS MEYER VICE PRESIDENT, EXTERNAL AFFAIRS AND INFORMATION SERVICES

JERRY STEINBRINK VICE PRESIDENT, PUBLISHING

To evaluate the flexibility of the soles of walking shoes, we used a device to measure the amount of force it takes to bend the shoe at the ball of the foot.

Consumers Union … is entirely nonprofit and it eschews any business relationships—in particular, selling advertising in its magazines or Web sites—that could call the integrity of its vaunted product ratings into question.”

—“At Some Publishers, Nonbusiness Is Going Strong,” New York Times, August 20, 2006

CONSUMERS UNION27 ANNUAL REPORT FISCAL YEAR 2006 HOW TO REACH US TEST

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