FREQUENTLY ASKED QUESTIONS

KEY FACTS
SUSTAINABILITY ASSESSMENT
SELECTION AND EXCLUSIONS
LICENSING AND DJSI-BASED PRODUCTS

KEY FACTS

What is corporate sustainability?
Corporate sustainability is a business approach to create long-term shareholder value. Sustainability leaders embrace opportunities and manage risks which derive from economic, environmental and social developments. As the importance of these trends increases, a growing number of investors integrate economic, environmental and social criteria into their stock analysis and use sustainability as a proxy indicator for innovative and future-oriented management.

What is the purpose of a sustainability index?
Sustainability indexes provide objective benchmarks for the financial products that are linked to economic, environmental and social criteria. They offer both, a performance baseline as well as an investment universe, for the increasing number of mutual funds, certificates, separate accounts and other investment vehicles which are based on the concept of sustainability.

When was the DJSI launched?
The DJSI World was launched on September 8, 1999 as the world's first equity benchmark to track the financial performance of sustainability leaders on a global scale. In addition, the DJSI STOXX family was launched on October 15, 2001 to provide sustainability benchmarks for European portfolios.

How are the DJSI components selected?
The DJSI family follows a best-in-class approach comprising the sustainability leaders in the investable universe from each industry. Categorized into 58 DJSI sectors, companies are assessed in line with general and industry-specific criteria. They are compared against their peers and ranked accordingly. The leading companies are included in the DJSI. The investable stocks universe of the DJSI World consists of the 2,500 largest capitalized companies in the Dow Jones Global Index. The starting universe for the DJSI STOXX is the Dow Jones STOXX 600 Index. For the DJSI World the leading 10% are selected. The DJSI STOXX includes the leading 20%. The DJSI family is reviewed on an annual basis. Once the components are selected, they are continuously monitored throughout the year to verify the involvement in and management of critical areas.

Who uses the DJSI?
Since launch, 60 licenses have been sold to asset managers in 14 countries. They use the DJSI family as a benchmark and investment universe for a variety of financial products including mutual funds, certificates, equity baskets and separate accounts.

What is the total asset volume managed based on the DJSI?
As of December 31, 2006 the assets managed in these portfolios amount to over 5 billion USD.

What is the benefit for a company to be included in the DJSI?
Inclusion in the index leads to several, tangible and intangible benefits:

• Public recognition of being an industry leader in strategic areas covering economic, environmental and social dimensions.
• Recognition by important stakeholders such as legislators, customers and employees (e.g. leading to a better customer and employee loyalty).
• Highly visible results, both internal and external to the company, as all components are publicly announced by the index publisher and companies are entitled to use the official "Member of DJSI" label.
• Increasing financial benefit because of investments based on the index. By being a member of the DJSI, companies become eligible to be included in DJSI-based portfolios.

SUSTAINABILITY ASSESSMENT

How are companies assessed in terms of sustainability?
The DJSI family is based on a thorough sustainability assessment that covers economic, environmental and social criteria. The research starts by defining sustainability trends which SAM sees as having a growing impact on the long-term success of companies. Based on this understanding of future economic, environmental and social developments, the analysts develop a set of general and industry-specific criteria to assess companies. The analyzed companies are assigned a sustainability score and are ranked accordingly within their sector.

What are examples of sustainability trends that you take into account?
SAM's sustainability analysts identify specific challenges for the 58 DJSI sectors and subsequently select criteria that enable them to identify the leading companies in terms of economic, environmental and social issuse. Examples of sustainability trends are:

• Climate Change - Escalating demand for energy propels economic development, but threatens the Earth's climate. The 2002 flooding in Germany, the Czech Republic and Austria demonstrated the impact and disorder created by extreme climatic events. The events left many of the population and local companies with massive clean up costs and a major effort rebuilding their capacity to generate value again.
• Water - Freshwater is growing scarce amidst competing human needs. Water scarcity is also pressurizing many industries who rely on access to water for their production processes.
• Food - Intensive agricultural systems lead to increasing pressure on land, soil and biodiversity. The agriculture and food manufacturing industry are challenged to find more sustainable production methods which guarantee long-term food supply without undermining their natural capital.
• Accountability - Recent corporate scandals have strengthened civil society's demand for greater accountability and transparency from business.
• Health - Life expectancy is rising, but preventable diseases limit development in certain areas. Health challenges of preventable disease coupled with the HIV/AIDS epidemic pose not only challenges for pharmaceutical companies regarding access to drugs, but also to industries that rely on a healthy workforce and society for their productivity and success.
  

Based on which criteria do you assess companies?
Companies are assessed with regard to general as well as industry-specific sustainability criteria based on sustainability trends. The criteria cover economic, environmental and social issues with a clear focus on long-term shareholder value creation. Examples include criteria on corporate governance, knowledge management, environmental performance, human rights policies etc. In total, the assessment comprises around 50 different criteria in each industry. A full list of all the general criteria including their weightings is available on the DJSI homepage. In addition, the entire general section of the questionnaire as well as the industry specific approach for the pharmaceutical sector can be downloaded.

Can you really apply the same assessment criteria across all countries? Shouldn't you have a more regional approach to sustainability?
Drivers for business success become increasingly global. This is also true for the growing impact of sustainability trends and applies especially to the big multinational companies which we analyze for the DJSI family. We believe that the world's leading companies set global standards for themselves, thereby making the assessment criteria to be relevant no matter where the company is based. The competition is global.

How do the corporate governance scandals relate to sustainability?
Corporate governance has always been an integral part of our assessment. Governance of corporations must be controlled or else abuses of power occur. Such abuses may involve corruption, insider trading, inequality in human rights and others. Should this type of behavior be allowed to become embedded in a company's culture then this will undermine the capability of the company to create value over the long-term and hence threaten its sustainability. Post the technology boom, capitalism is becoming more civil and less arrogant, which will ultimately add to its sustainability.

Which weightings do you apply to the different criteria?
The general criteria account for 50% of our analysis. The remaining 50% are allocated to industry-specific criteria. Looking at the assessment from a different angle, the criteria can also be split up into the three sustainability dimensions: Economic, environmental and social criteria each account for a third of the assessment. The analyst has the possibility to alter the weightings slightly to reflect industry characteristics - for example, in the media industry economic and social considerations are of more significance than environmental considerations.

Is the methodology continuously updated to reflect the state-of-the-art of corporate sustainability?
Yes, the methodology is updated on an annual basis. We continuously engage with a variety of stakeholders to ensure that the criteria reflect leadership and best practice in corporate sustainability. Annually, each of our sustainability analysts reviews global trends and what challenges these pose for each industry, thereby determining criteria to make the distinction between leaders and laggards. As our methodology is used as a roadmap for corporate sustainability by many businesses and stakeholders worldwide, we recognize our responsibility in ensuring that our methodology is constantly pushing and setting the next level of performance in corporate sustainability.

What information sources do you use?
Information is taken from four sources: The industry-specific questionnaire, company documents, a detailed media and stakeholder analysis, as well as direct company interaction.

How many analysts does SAM have? What is their background? How much time does SAM take to analyze a company?
SAM has a total of 20 analysts which are organized on a sector basis, thereby allowing them to understand trends and leadership behavior specific to their industries. 12 of these analysts exclusively cover large and mid cap companies and thus the stocks for the Dow Jones Sustainability Indexes (DJSI). They apply a highly systematic assessment process to all companies they cover, allowing them to assess a large number of companies without losing their objectivity. The sustainability analysts come from a variety of backgrounds, although the pre-requisite for being an analyst is an in-depth knowledge of finance as well as sustainability. SAM further bolsters its resources by employing a number of co-analysts during the period April-August when the majority of the analysis is conducted.

Is the DJSI verified by independent third parties?
Yes, the annual selection process and methodology are regularly verified by independent auditors (PricewaterhouseCoopers in 1999, 2000, 2001, 2002, 2003,2004, 2005 and 2006). The assurance report from PricewaterhouseCoopers is available on our webpage.

How transparent are you with regard to your methodology and criteria?
Transparency is essential to our business. In view of the different approaches to and views on sustainability investing, it is of paramount importance to offer our stakeholders detailed insights into our methodology and criteria. By providing this information, our clients, the assessed companies, non-governmental organizations and other interested parties can evaluate and challenge our approach. This is not only important for their own decision-making, but also results in valuable feedback to us.

On the DJSI website you will find our questionnaire, including the possibility of interacting with a version of the online questionnaire, our guidebook for both the DJSI World and DJSI STOXX indexes indicating how the rules and detailed methodology are applied. Furthermore, the webpage comprises sector overviews illustrating which companies are members of the DJSI and how they rank relative to their industry peers. In addition, benchmarking reports for the 18 market sector leaders give detailed insights into the specific opportunities and risks in each sector and the best-in-class practices that companies are implementing to meet these challenges. Finally, interested parties can download the assurance report from PricewaterhouseCoopers to read the results from their annual verification of our assessment.

With regards to the feedback we provide to companies, we rely on our unique global benchmarking capability. We provide companies with a benchmarking report that summarizes their corporate sustainability performance and gives them an indication of where they can improve. Furthermore, and for the first time in the history of the DJSI, we provide companies with detailed benchmarking data on every single assessment criteria free of charge thereby allowing them to fully understand where they stand relative to the best company and the industry average on a global basis.

SELECTION AND EXCLUSIONS

Which companies are included in the DJSI World?
The DJSI World comprises the leading 10% of the largest 2,500 companies in terms of corporate sustainability from each industry. Furthermore, we aim to cover 20% of the total global market cap of each industry. This target market cap rule makes sure that our sustainability benchmarks come close to the sectoral distribution of the mainstream markets.

Which companies are included in the DJSI STOXX?
The DJSI STOXX comprises the leading 20% of the Dow Jones STOXX 600 in terms of sustainability from each industry. Furthermore, we aim to cover 45% of the total market cap of each sector in the Dow Jones STOXX 600. This target market cap rule makes sure that our sustainability benchmarks come close to the sectoral distribution of the mainstream European market.

Does a company have to outperform on all three dimensions (economic, environmental and social) to become part of the DJSI?
To be among the sustainability leaders in its sector a company typically needs to have a good score, but not necessarily outperform, on all three dimensions of sustainability. Each dimension accounts for approximately one third of the total score.

How come there is a difference between the European components of the DJSI World and the components of the DJSI STOXX?
While the DJSI World selects the global sustainability leaders, the DJSI STOXX is built on a comparison of European companies. Thus, it may happen that a company is among Europe's sustainability leaders, but ranks behind its non-European competitors. In that case, the company would be a component in the DJSI STOXX, but not in the DJSI World. Vice versa, a company might be among the top 10% in the bigger global universe, but not make it into the top 20% of the smaller European universe. It would then figure among the DJSI World members, but not in the DJSI STOXX.

Are companies in the DJSI continuously monitored and if necessary excluded from the index?
Yes, based on the ongoing review process, both the Corporate Sustainability Monitoring and changes due to IPOs, spin-offs, mergers & takeovers etc. can lead to the exclusion of a company. The objective of the Corporate Sustainability Monitoring is to verify a company's involvement and management of critical areas such as illegal commercial practices, human rights abuses, workforce conflicts and large accidents. The monitoring process is based on a daily media and stakeholder analysis covering newspapers and newswires from around the world. Once a crisis situation is identified, the analysts will use a much broader selection of sources including stakeholder reports and contacts to the company to assess the severity of the crisis and the quality of crisis management. A DJSI member that gets involved in a severe crisis and does not show a proactive and transparent way of handling it, can be excluded from the index at any point in time. The DJSI index design committee is responsible for this decision.

Are certain industries excluded from the index?
No. Based on the best-in-class approach, the DJSI family comprises sustainability leaders from each industry. However, we certainly do not include a bad company, just because its peers are even worse. If the highest ranked company in a group has a corporate sustainability score which is less than one-fifth of the maximum score, then the whole sector is deleted from the DJSI universe. This did not happen in the review 2005. As a result, all sectors are currently represented in the DJSI.

However, we are aware of the fact that some of our clients do not want to invest in some industries considered to be controversial. Therefore, specialized DJSI subset indexes are available that exclude companies which generate revenues from alcohol, gambling, tobacco, armaments or firearms. We are also in a position to meet specific client demands for further exclusions by calculating customized indexes.

There are three reasons for this flexible approach to exclusions. First, there is growing market demand to apply the concept of sustainability across the entire equity market. Investors are increasingly aware of the links between sustainability and long-term performance and realize that the integration of this concept can add value to investments in all industries. The composite DJSI provides an objective benchmark for this growing number of mainstream investors. By including all industries, this index offers them the diversification they need to invest in sustainability without taking bets against certain sectors.

Second, there are very different views on the appropriate exclusion of industries. Some investors may want to exclude tobacco, some might want to keep away from armaments, a third group could seek to avoid alcohol or gambling and others want to be exposed to the entire economy. We seek to provide benchmarks to all of these investors by offering a composite index as well as various subsets that exclude certain industries. Thus, asset managers using the DJSI family can decide themselves which industry exclusions - if any - are the most appropriate to meet their client needs.

Finally, the inclusion of all industries in our composite index gives companies from all business areas a strong incentive to improve their sustainability performance. By identifying sustainability leaders on an annual basis, the DJSI creates a dynamics within each industry that calls for constant sustainability improvements. This is particularly important for highly polluting and socially sensitive industries. By selecting the best-in-class in each industry, we recognize that some companies are more responsible in managing their impacts than others and are thereby leading their peers towards a more sustainable way of doing business.

Does the DJSI include tobacco companies?
Yes, the DJSI comprises all sectors, including tobacco. As all other industries, tobacco companies face various sustainability challenges. Part of these are related to the fact that the industry produces a product that comes with health risks for the consumer. A tobacco company is expected to manage these risks through a responsible marketing strategy and by providing clear information instead of a misleading and unclear information policy that increasingly leads to litigation in some countries such as the USA.

Other challenges are linked to the tobacco production. Tobacco is a worldwide agricultural crop that faces problems similar to other crops: Agricultural practices can contribute to water scarcity, increasing loss of biodiversity and decreasing soil fertility when too intense and exploitative. Moreover, as a large part of tobacco is grown in emerging markets or developing countries and as the tobacco harvest does not require high skills, cases of unfair treatment of farm workers have come up. In addition, child labor is a well-known problem on tobacco plantations in some regions.

Companies are therefore challenged not only by the direct risk of the use of their products, but also by environmental and social issues linked to the production of the raw material for these products.

Based on this year's assessment for the DJSI, British American Tobacco PLC (BAT) is the tobacco company that best meets the described challenges and is leading its industry in terms of sustainability.

The company moved a big step forward in terms of transparency, when publishing the first social responsibility report for the industry in July 2002. The report, that is based on an intense stakeholder dialogue, clearly describes all processes that the company is implementing in order to manage social and environmental problems linked to their business. The company has also established programs to reduce child labor and has implemented sustainable agricultural practices.

Having been heavily accused of being involved in smuggling activities of their products, BAT has also cut down sales into duty-free markets - markets notorious to have a higher risk of attracting organizations involved with smuggling.

A three year investigation into involvement of smuggling of BAT executives by the British Department of Trade and Industry (DTI) was closed in Februrary 2004 with the announcement that it had found no evidence of illegal activity and that no further actions would be taken. With this positive outcome for BAT, a considerable reputational risk for the company is set aside. For news on the investigation, please see the press release of DTI.

Further information about the tobacco industry and sustainability are available in the correspondence between SAM and the UK-based anti-smoking NGO ASH. The letters as well as the questionnaire of the tobacco industry can be downloaded.

Does the DJSI include armaments companies?
Armaments companies are not excluded from the eligible universe of the DJSI and can be included in this index family, if they take a role of sustainability leadership. Like all companies in the starting universe, firms from this sector are assessed against a detailed selection of general and industry-specific criteria. In particular, the implications of business in the defense market involve a number of strategic issues, such as:

• Transparency: A leading company should be transparent on the whole value chain of its business activities (Operating, Supply Chain, Customer) on a worldwide scale. Reporting is key.
• Human Rights: Avoiding exposure to countries with bad human rights track records.
• Business Practice: Strict adherence to the multilateral regime of codes governing arms exports such as the EU Code of Conduct on Arms Exports as well as existing national codes.
• Weapons of mass destruction: Refrain from doing business in the field of weapons of mass destruction (WMD) such as biological or nuclear.

By addressing key issues in such a controversial sector and engaging with companies, SAM also aims at contributing to stronger enforcement of international codes, enhanced transparency and increased democratic control of arms exports. Moreover, by engaging with companies, SAM aims to contribute to better business practice in the sensitive field of arms exports. SAM recognizes this is a complex issue and requires ongoing monitoring. We will continue the debate and co-operation with our wider network. We will also continue offering dedicated sub-indexes excluding armaments for those investors that do not want to be exposed to this sector.

LICENSING AND DJSI-BASED PRODUCTS

How many licensees do you have?
As of December 31, 2006, we had sold over 60 licenses to asset managers in 14 countries. A list of the DJSI licensees is available on our webpage.

How can the DJSI be used?
The DJSI are used as a benchmark and universe for sustainability focused investment products, which currently comprise mutual funds, certificates, equity baskets and segregated accounts.

What are the advantages of buying a license for the DJSI?
The license is needed to use the intellectual property involved with the DJSI for any financial products. License holders receive daily, up-to-date information on the weightings and divisors of the index components (companies represented in the index), as well as notifications of major corporate actions (mergers, acquisitions etc.). The license also entitles the holder to use the DJSI brand in marketing its products.

What is the total asset volume managed on the basis of the DJSI?
In total, the assets managed in these portfolios now amount to over 5 billion USD.