The company briefs below report on the progress of shareholder initiatives led or participated in by Walden, as well as other newsworthy company actions.

Glass Half-Full…

To the pessimist, a number of political developments (such as cuts to Environmental Protection Agency funding and the dimming hopes for shareholder access to the proxy) would portend greater resistance to Walden’s social, environmental and corporate governance concerns. However, this winter, Walden has continued to successfully engage companies on issues of concern to our clients.

In November, Johnson & Johnson agreed to reduce and replace packaging containing PVC, a difficult to recycle plastic that can contaminate the recyclable plastic waste stream. The company stated that its goal is to avoid PVC in consumer product packaging. IBM has agreed to report on its computer recycling in 2003 and 2004 using standardized metrics, though IBM’s future practices will be affected by the impending divestiture of its PC business.

Three Walden-led resolutions requesting that ALLTEL, Gentex, and Carlisle adopt more inclusive employment nondiscrimination policies were withdrawn after these companies added “sexual orientation” to their policies. More than 80 percent of Fortune 500 companies now include sexual orientation within their nondiscrimination policies. ExxonMobil, where Walden assisted clients in co-filing a shareholder resolution, is the remaining member of the Fortune 100 to be without an inclusive policy.

In October, Gillette took steps to declassify its board and implement annual elections of directors to increase board accountability. Walden had been advocating for this governance reform through the proxy resolution process, and the reform was supported by a majority vote of shareholders in 2003 and 2004. Last month, however, Procter & Gamble, which has a classified board structure, agreed to purchase Gillette.

Walden also continues to lead discussions with TJX Companies regarding its vendor compliance program. In the last year, the company has taken a number of positive steps, including the hiring of a full-time staff member to oversee its social compliance program.

Walden is on the steering committee of a newly formed coalition, the Social Investment Research Analyst Network (SIRAN), which involves over 30 investment firms. Walden participated in a SIRAN statement urging corporations to strengthen corporate social responsibility reporting using the standardized Global Reporting Initiative (GRI) framework. We are working with this group to encourage companies to expand annual reporting of key social, environmental, and corporate governance policies, practices, and results.

Seeing CEOs

In what an optimist might consider an indication of the increasing importance of both corporate social responsibility and responsiveness to investor concerns, a number of CEOs have recently met with Walden and other investors to discuss social, environmental, and corporate governance programs.

Timberland’s CEO, Jeffrey Swartz, attended a meeting where he discussed the company’s work with tanneries around the world to encourage strong environmental management. The company is also actively looking for ways to improve its Equal Employment Opportunity statistics, and has tied Swartz’ compensation to improvements in diversity. Timberland is held in the SmallCap Innovations portfolios offered to Walden's clients.

AIG’s CEO, Hank Greenberg, met with Walden and other SIRAN analysts in January. At this meeting, he discussed the company’s views on the recent regulatory proceedings affecting the company, employee policies, and environmental policies. We were surprised to hear that he believes that the United States should have ratified the Kyoto Protocol. AIG has also committed to issuing a corporate social responsibility report.

Wal-Mart’s Lee Scott attended a meeting convened by the Interfaith Center for Corporate Responsibility and spoke to the company’s social, environmental, and corporate governance program. He committed the company to greater transparency and engagement with stakeholders.

Fill ‘Er Up

Lest the pessimists continue to see the glass as half empty, we are pleased to report a number of additional positive advancements.

Regarding vendor standards, Jones Apparel Group has expressed its plans to develop a pilot vendor monitoring program in factories in six countries and will report on the results. The apparel industry is also working on developing a shared database allowing retailers to see the results of others’ factory labor audits. By sharing workplace compliance data, smaller retailers will be able to better watch over their supply chains, and larger retailers may be able to more efficiently allocate resources, by not overlapping another company’s auditing.

Sixteen companies held in many client portfolios or in the SmallCap Innovations portfolio are well represented on Fortune’s 100 Best Companies to Work For list, published in its January 24 edition this year. These are: Republic Bancorp (#3), J.M. Smucker (#6), Adobe Systems (#13), Cisco Systems (#27), Whole Foods Market (#30), Amgen (#33), Timberland (#38), A.G. Edwards (#56), Microsoft (#57), Procter & Gamble (#66), Medtronic (#71) Pfizer (#76), Wm. Wrigley Jr. (#77), MBNA (#89), John Wiley and Sons (#95), and FedEx (#96). Companies were commended for a broad range of reasons, including high 401(k) matching (Amgen), pleasant offices with amenities (John Wiley & Sons), an indoor track (A.G. Edwards) and child care centers (Pfizer, MBNA).

—M. Benton