1. 1 How do active investors approach the Company ? The Ethos Swiss Experience Dr. Dominique Biedermann, Executive Director Ethos, 2 Place Cornavin, PO Box, CH-1211 Geneva 1 Tel. +41 (0)22 716 15 55 - Fax +41 (0)22 716 15 56 - www.ethosfund.ch DSW’s Fifth International Conference Wiesbaden - 6 December 2006

2. 2 Summary 1.Ethos: an Active Swiss Institutional Investor 2.Engagement: The Ethos Experience

3. 3 1. Ethos: An Active Swiss Institutional Investor

4. 4 Ethos l Ethos – Swiss Foundation for Sustainable Development Created in 1997 by two pension funds, currently composed of 75 institutional investors. è Objective :Promote socially responsible investments (SRI)Role of «think-tank» l Ethos Services SA Ethos Services is fully owned by the Ethos Foundation. è Objective : Offer various SRI services

5. 5 Ethos Services l Advisor of Ethos’ investment funds è Ethos – Institutional investment fund (CHF 1’100 Million) è Pictet-Ethos (CH) Swiss Sustainable Equities (CHF 170 Million) l Asset management and SRI advisory mandates (CHF 400 Million) l Shareholder meeting analyses’ services with administrative assistance for voting execution l Engagement programme to raise company awareness of sustainable development issues and good corporate governance best practice

6. 6 Ethos’ members and clients l Ethos = 75 Swiss Pension Funds members with part of their assets invested in Ethos’ funds è 400’000 beneficiaries (with families = 1 Million people out of 8 Million Swiss residents) l Ethos = 700 Million Euros invested in Swiss Equities è 0.1% of the Swiss Market Capitalisation l Ethos = Main Swiss Proxy recommendations adviser è Between 1% and 2% of the Swiss Market Capitalisation are systematically following Ethos’ voting recommendations

7. 7 Ethos’ Main Types of Action A.Swiss Companies è Exercise shareholder rights at AGMs -Systematically vote on all agenda items -Occasionally participate at AGM and speak up -Exceptionally submit shareholder resolutions è Engage in dialogue with management -Ethos Engagement-Pool è Keep in contact with SWX or other authorities è Inform the press if necessary B.Non Swiss Companies è Vote at AGMs according to ECGS’ recommendations è Participate actively at international investor groups

8. 8 2. Engagement : The Ethos Experience

9. 9 Why actively approach companies ? l Long term institutional investors è Are often “captive” investors whose only possibility is to engage in dialogue with the companies l The main objectives of engagement è Increase the value of the company for all its stakeholders in a sustainable way and to reduce the risks of dysfunction è Raise companies’ awareness of the requirements of sustainable development and corporate governance best practice and encourage improvement

10. 10 Ways to approach the companies l Basic financial and extra financial analysis è Ethos: Not necessarily through direct contact, but using the available financial and extra financial databases l Engage in a dialogue with the management è Ethos: Direct contact (alone or together with other investors) is essential

11. 11 Different Types of Engagement l Reactive or pro-active engagement è Reactive in response to an event (financial scandal, job cuts, environmental disaster…) è Pro-active for selected important issues with a long-term perspective l Individual or collective engagement è Individual shareholder è Collective forming a group with other shareholders l Targeted or transversal engagement è Targeted at one company è Transversal applicable to a group of companies

12. 12 Ethos Engagement-Pool (EEP) l Objective : To engage in dialogue with companies on the following topics: è Good corporate governance è Environmental and social responsibility l Choice of themes : Defined by the Pool members l Universe : Swiss listed companies l Implementation and communication : Ethos Services l Financing : Each Pool member’s contribution is proportional to its amount of Swiss equities under management

13. 13 EEP: Dialogue Topics 2005-2006 l Corporate governance è Individual elections of Board members è Capital required to submit shareholder resolutions at GMs è Executive remuneration è Composition of the Audit Committee è Publication of the GM minutes on the Internet l Sustainable development è Environmental and social reporting è Adoption and implementation of company principles and codes of conduct

14. 14 Individual election of board members Universe: 100 largest companies listed in Switzerland 31.12.200331.10.2006 Individual elections1678 Uncertain election mode545 Grouped elections3017

15. 15 Threshold to submit a shareholder resolution at AGM Universe: 100 largest companies listed in Switzerland 31.12.200331.10.2006 0 % - 0.1 %1215 0.11 % - 0.5 %2127 0.51 % - 1 %1918 1.01 % - 5 %2625 5.01 % - 10 %2215 25 companies proposed to amend their Articles of Association to reduce the threshold!

16. 16 Minutes of the AGM on the Web 31.12.200531.10.2006 Minutes with voting results1427 Minutes without voting results1214 Press release4338 No information3121 Universe: 100 largest companies listed in Switzerland

17. 17 20042006 Swiss Leaders811 Making Progress89 Beginners106 Environmental and social reporting 26 Companies of SMI Index

18. 18 Ethos’ participation in International Investor Groups l Enhance company awareness on climate change (Carbon Disclosure Project) l Investor rally on climate change (Institutional Investor Group for Climate Change) l Monitor internet companies’ activities in countries repressing freedom of speech (Reporters without border) l Improve assess to medicine in third world countries (Pharma Shareowner Group) l Fight against corruption in the extractive industry (Extractive Industry Transparency Initiative)