The NorthStar

A Publication of NorthStar Asset Management, Inc.

4Q06

Oil prices have reached record highs. ExxonMobil is the #1 company on the Fortune 500. Its share value is near record levels and its profitability is peaking. Ironically, the very product ExxonMobil sells produces the global warming that reduces the need for gas to heat homes, thus reducing prices. In essence, the company is causing the price to drop on its own product. Because we believe there is nowhere for ExxonMobil to go but down, NorthStar is calling on investors to divest.

Climate Changes

Evidence of the climate changing abounds. It’s right in front of us, from the devastation of Hurricane Katrina to heavy snowstorms in the West, and the snow drought and unseasonably warm temperatures in the East. The Intergovernmental Panel on Climate Change (IPCC) recently released the most intensive study of climate change by 2,000 of the world's leading climate scientists. They conclude there is now little doubt that human activity is changing the face of the planet. These scientists have now linked man-made emissions of greenhouse gases to significant increases in ocean temperatures, rises in sea levels and the dramatic melting of Arctic ice over the past 35 years.

How does ExxonMobil respond to the science? As revealed in the Union of Concerned Scientists’ recent report, subtitled How ExxonMobil Uses Big Tobacco’s Tactics to Manufacture Uncertainty on Climate Science, ExxonMobil poured money into a sophisticated global warming disinformation campaign over the last ten years. In response to this report, ExxonMobil admits that greenhouse gases result, in part, from the burning of fossil fuels.

The company agrees that action must be taken. Ironically, it proposes to support research to reduce climate change uncertainties and to “pace” (read: control) policy responses to climate change. Oddly, ExxonMobil doesn’t suggest investing in alternative energies but rather it encourages “deploying existing technologies to reduce greenhouse gas emissions.”

ExxonMobil altered its public relations strategy around global warming by cutting off funding to a few key conservative organizations involved in manufacturing uncertainty about the risks of global warming. With Congress poised to impose strong regulations on greenhouse gas emissions, ExxonMobil, and other companies like it, seek to influence the debate and final outcome over who will pay—the producers of oil, the industries that use the oil, or the individual consumers.

Divestment as Shareholder Activism

During the past dozen years, NorthStar’s strategy of active shareholder engagement has created positive social change for millions of workers and their communities. Many companies we have challenged through shareholder resolutions have willingly changed policies, adopted fair practices, and addressed environmental concerns. Unfortunately, Exxon-Mobil consistently is unwilling to integrate the vast knowledge of scientists, activists and shareholders into its strategies for long-term sustainability. We believe that this may be one of the most significant times in history where social irresponsibility ultimately leads directly to financial loss.

For several years we, and other shareholder activists, have asked ExxonMobil to create a diverse board, look at excessive executive compensation practices at the company, address its environmental impact, and make employment protections broader. We believe that their inability to examine shareholder concerns will ultimately lead to financial underperformance.

ExxonMobil’s board and management are not broadening its corporate vision to become a company that supplies energy. In fact, they are fixated on continuing to sell oil. Their concept of sustainability focuses on trying to maximize the amount of energy from one drop of oil, rather than figuring out a new model to capture and profit from additional venues for energy production. Our social concerns about Exxon Mobil are obvious, and now we believe that continuing to hold ExxonMobil shares will soon violate our fiduciary responsibility to our clients.

After attending the ExxonMobil annual shareholder meeting in May 2006, our concern over Exxon Mobil’s approach to its future grew. We believe that its top executives are compensated for maintaining the status quo. We are concerned by the individual board members’ lack of experience in the energy industry. We are troubled by its non-responsiveness to numerous shareholder concerns brought before the company including excessive executive pay, lack of protections for gay and lesbian employees, environmental damage, lack of planning for sustainability, and balanced corporate governance. The increasing number of environmental and sustainability shareholder resolutions before the company reveals the growing shareholder distress over the financial viability of ExxonMobil’s practices. Additionally, ExxonMobil’s commit-ment to negative momentum has put millions of shareholder dollars into disinformation cam-paigns designed to cast doubt on the science of global warming.

We believe the management’s view of sustainability and the company’s global impact is seriously skewed. ExxonMobil is the only major oil company that calls renewable energy an “uneconomical” investment. ExxonMobil chooses to ignore the development of real alternative energy sources. Instead, it labels incremental energy conservation and maxi-mizing the energy extracted from a finite resource as “alternative technical advance-ments.” And as the company seeks access to the remaining depleted oil reserves around the globe, it risks entering politically unstable areas with potentially vast social and financial impact. We believe that the management of ExxonMobil is caught in its own oily labyrinth by not capturing the profitable and sustainable market for alternative and renewable energy sources.

Why Do We Hold Exxon Anyway?

Some of our clients have held Exxon in their portfolios for many, many years. Others have inherited shares. These two situations leave investors with high capital gains taxes should they decide to sell or divest from the stock. We encourage clients to transfer such stock to non-profits as charitable gifts thus avoiding the capital gains tax.

We believe that divestment is in the best interest of our clients given that the long-term financial stability of ExxonMobil is in question. We are asking socially responsible investors and others who care about sustainability to join us in divesting from ExxonMobil. As shareholder activists, we will retain the minimal number of shares required by law to continue to engage ExxonMobil’s management on these and other issues.

Julie Goodridge addressed the shareholders of Hain Celestial at the annual shareholder meeting held in Boulder, Colorado in November 2006. At NorthStar’s urging, Hain produced an executive compensation report discussing economic disparities between the highest and lowest paid employees of the company. She spoke to shareholders about this report:

Good morning, my name is Julie Goodridge, President of NorthStar Asset Management and the beneficial owner of 25,000 shares of Hain Celestial.

I have come from Boston, MA today to bring to the attention of all shareholders an Executive Compensation Report that sheds light on the growing economic divide between our top management and our lowest paid workers here at Hain Celestial. We would like to thank Management for producing this important report.

NorthStar is an socially responsible wealth management company worried about the long term impact of excessive executive compensation on both shareholder value and employee morale. As responsible shareholders of Hain Celestial, we asked Management to collect data comparing the compensation of the highest and lowest paid workers at our company and to analyze that data over time. We were concerned that the 2004 compensation of our CEO and Chairman, Mr. Simon, at over $14 million dollars, indicated board support of corporate excess.

Our stock price has been climbing steadily of late and Company sales have grown by 1000% over the last ten years. But why has shareholder value only increased one quarter of that amount?

And why, during this time of growth does it take a Hain Celestial employee earning $7 an hour an entire year to earn what our CEO and Chairman, Mr. Simon, makes in his first hour of work every day?

We believe that Mr. Simon’s stewardship has played an important role in our company’s success. But we also believe that shareholder return and employee compensation should reflect the benefits of a job well done by all employees.

When the report was made available in July, shareholders like us were required to keep all of the content confidential. We sent out a letter to numerous shareholders advising them of this report. To date, only a handful of shareholders have received this important document.

And yet today, shareholders are being asked to vote on another expansion of stock option benefits for top executives. How can shareholders who have not read the executive compensation report possibly vote on expanding benefits? Those of us who knew of the report and had time to review it, believe that all shareholders should have this information before such an important decision.

Frankly, having reviewed the executive compensation report in detail, we believe that a board evaluation and report to shareholders of employee compensation at all levels is vital. We cannot support the release of additional shares and further dilute shareholder value blindly.

Please support us in requesting open distribution of the Executive Compensation Report and a thorough review of Hain’s compensation policies. Thank you.

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Gender Expression Protections Added to Workplace Policies at Hubbell, Inc. and FuelCell Energy

Hubbell Incorporated, a Connecticut-based electrical equipment manufacturer, and FuelCell Energy, a Connecticut-based energy company, have both agreed to a NorthStar proposal urging them to ban discrimination based on gender identity.

“Including gender identity in the company’s non-discrimination policy is the first signal a company gives employees, and potential employees, that it values all its workers equally,” said Julie Goodridge, President of Boston-based NorthStar Asset Management, Inc. The shareholder proposal asked each company to amend its written equal employment opportunity policy to explicitly prohibit discrimination based on gender identity. After each company agreed to amend its policy, NorthStar withdrew the proposals.

No federal laws exist that protect workers from discrimination based on gender identity or expression. Only eight states and 93 cities and towns prohibit gender identity discrimination. Connecticut, home to the headquarters of Hubbell and FuelCell, is one of a handful of states that does prohibit discrimination based on sexual orientation. However, the law does not explicitly protect the free expression of gender identity.

The lack of protections in the vast majority of the United States leaves many workers vulnerable to abuse. Corporations are begin-ning to fill the void by including gender identity in their non-discrimination policies. Now, nearly 25% of Fortune 500 companies have added gender identity to their non-discrimination policies, including GM, Citigroup, HP, Boeing, CostCo and Walgreens.

Over the years, NorthStar has recommended explicit protections for gay and lesbian employees at Berkshire Hathaway, Tootsie Roll, Caterpillar, Fifth Third Bancorp, and Emerson Electric. All have since amended their non-discrimination policies to include sexual orientation protections. “As investors, we believe that an open and inclusive workplace nurtures the creativity necessary to build a successful company,” said Goodridge. In 2006, NorthStar began requesting the addition of both sexual orientation and gender identity to non-discrimination policies.

Written by Margaret J. Covert
Edited by Julie N. W. Goodridge

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