How do active investors approach the Company ? The Ethos Swiss Experience

1. DSW’s Fifth International Conference Wiesbaden - 6 December 2006 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

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

3. 1.Ethos: An Active Swiss Institutional Investor

4. Ethos • Ethos – Swiss Foundation for Sustainable Development Created in 1997 by two pension funds, currently composed of75 institutional investors. • Objective :Promote socially responsible investments (SRI) Role of «think-tank» • Ethos Services SA Ethos Services is fully owned by the Ethos Foundation. • Objective : Offer various SRI services

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

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

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

8. 2.Engagement : The Ethos Experience

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

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

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

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

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

14. Individual election of board members Universe: 100 largest companies listed in Switzerland

15. Threshold to submit a shareholder resolution at AGM Universe: 100 largest companies listed in Switzerland 25 companies proposed to amend theirArticles of Association to reduce the threshold!

16. Minutes of the AGM on the Web Universe: 100 largest companies listed in Switzerland

17. Environmental and social reporting 26 Companies of SMI Index

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