Review: Sudan/Iran Divestiture

1. Iran Review:Sudan/Iran Divestiture Sudan June, 2007 gregory.w.group

2. Brief History of Divestitures • March 1, 1928 – Pioneer Fund launched; excludes tobacco and alcohol companies, “sin stocks” • 1980s – public pensions and university endowments divested companies doing business in South Africa during apartheid • 1997– Congress passed sanctions preventing US companies from doing business in the Sudan • January 27, 2006 – Illinois first state to pass Sudan Divesture Legislation (Illinois Public Act 94-79) • February 23, 2007– Federal court strikes down Illinois law • June, 2007– California, Florida and Ohio pass legislation to force their Pension Systems to divest from Sudan and Iran.

3. Statistics: Sudanese Investments • 81 US Public Pension portfolios with over $91 billion in assets believed to be exposed to Sudan1 • Northern Trust has attracted over $7 billion to Sudan-free investment vehicles • The state of Texas’ two major pension funds, which together total $132 billion, hold about $700 million in shares in companies on various Sudan watch lists 1Northern Trust 2Social Investment Organization

4. Estimates: Iranian Investments Data on the extent of Iran-linked investments is difficult to obtain. The issue develops daily. We found the following published estimates of exposures for several large State Pension Systems. Ohio: $4 billion CalPERS + CalSTRS: $2 billion to $24 billion Florida: $1 billion New York: $1 billion CalPERS officials estimate a ban on Iranian investments could cost the fund $20 million in fees and commissions and $66 million in associated transactions costs. Exposure to companies that could be affected by the bill generated $725 million in returns over the past five years.

5. State by State Activity Source: Sudan Divestment Task Force As of June 1, 2007

6. Companies Facing Divestiture • Over 160 foreign companies • Less than 10 domestic companies • Representative list of companies • Alcatel - Sudan • ENI - Iran • Gazprom - Iran • Halliburton - Iran • Indian Oil - Iran • INPEX - Iran • Lukoil - Iran (20% owned by ConocoPhillips) • Norsk Hydro - Iran • OMV - Iran • Petrobras - Iran • Repsol - Iran • Royal Dutch Shell - Iran • Schlumberger - Sudan • Siemens AG - Sudan • Statoil - Iran • Total SA - Sudan

7. Issues • Implementation • Complex, expensive, and time-consuming • Compliance issues - particularly commingled vehicles and partnerships • Legal • Constitutional challenges • Cost • Investment performance • Limits investment manager access • Fiduciary • Potentially undermines duty to seek best return for beneficiaries

8. Current Legislative Activity • Illinois public funds are working with legislators to gain relief from the more challenging elements of their divestiture legislation • Texas State Senate approved a bill forcing the State’s Pension Plans to sell or transfer any current investments tied to Sudan • Trustees of Arkansas Teacher Retirement System rejected a nonbinding resolution from legislators encouraging the divestment of Sudan-linked companies • The California Assembly passed a measure that would force the state’s pension funds to divest their holdings in Iran-linked companies despite trustee opposition • Ohio’s public pension funds will divest half of their investments in companies with links to Sudan and Iran

9. Proposed Federal Legislation: 110TH CONGRESS 1ST SESSION H. R. 2347 LIST OF PERSONS INVESTING IN IRAN ENERGY SECTOR.— (1) PUBLICATION OF LIST.—Not later than 6 months after the date of the enactment of this Act and every 6 months thereafter, the Secretary of the Treasury, in consultation with the Secretary of Energy, the Secretary of State, the Securities and Exchange Commission, and the heads of other appropriate Federal departments and agencies, shall publish in the Federal Register a list of each person, whether within or outside of the United States, that, as of the date of the publication, has an investment of more than $20,000,000 in the energy sector in Iran. The list shall include a description of the investment made by each such person, including the dollar value, intended purpose, and status of the investment, as of the date of the publication.

10. California Public Employees’ Retirement System "We are gravely concerned about terrorist activities throughout the world. But we hold pension dollars in trust, andit is our obligation to invest those dollars for the exclusive purpose of paying benefits for our members. Once we divest from a company, we lose the opportunity to constructively engage that company to bring about positive change.” Rob Feckner President of the Board of Administration CALPERS

11. Third Party Vendors • Compile socially conscious and “terror free” lists • Lists are published and purchased monthly • Investment management firms must continually purchase lists • Leading firms: • KLD Research and Analytics • Institutional Shareholder Services • Conflict Securities Advisory Group • This activity may become obsolete if H.R. 2347 passes (Iran only)

12. Divestiture Resources Sudan Divestment Task Force: www.sudandivestment.org Institutional Investment News: www.plansponsor.com Third Party Screening Tools: www.kld.com Our Weblog: http://targetdivestiture.blogspot.com

13. gregory.w.group • Independent Investment Consultants • Full Suite of Services • Employee Owned • Significant Public Fund Success • Focused on Institutional Investment Management • Founded in 1989

14. Gregory T. Weaver President 918.583.1005 office 918.810.9611 mobile gweaver@gregorywgroup.com Contact Information Douglas J. Anderson Senior Vice President 918.583.1005 office 918.810.9612 mobile danderson@gregorywgroup.com dallas office: 2911 turtle creek boulevard dallas, texas 75219 tulsa office: 15 west 6th street, suite 2901 tulsa, oklahoma 74119