Responsible Investment
and Stewardship
Annual Report 2013

First State Investments operates as Colonial First
State Global Asset Management in Australia.
The entire company is collectively referred toas First State Investments in this report.

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Responsible Investment and Stewardship Annual Report 2013

Contents

Foreword2

About Us

4

Our Approach to Responsible Investment and Stewardship5

Responsible Investment and Stewardship – Our Progress

7

Goals and Outlook for 201412

Responsible Investment and Stewardship In Practice13First State Stewart

14

Direct Infrastructure

16

Global Listed Infrastructure Securities

18

Global Property Securities

20

Global Resources

22

Global Fixed Income and Credit

24

Emerging Markets Debt

26

Australian Equities Core

28

Australian Equities Growth30

Emerging Practice – Our New Frontiers

32

Case Studies

34

Industry Collaboration

36

Responsible Investment Team Contacts

37

Appendix 1 – Proxy Voting and Engagement Summary

38

Appendix 2 – Companies Subject to the Cluster Munitions Policy

39

Appendix 3 – GRIC and ESG Committees

401Foreword

Welcome to our seventh
annual Responsible Investment
and Stewardship (RI) reportfor calendar year 2013. This
report provides you with
examples of our stewardship
activities and illustrates how wecontinue to execute upon our
RI commitments across ourglobal investment business andwithin our investment teams.
We believe it’s important to share with ourclients and the industry how we are attempting
to address the many RI challenges and shadesof grey that arise in our day-to-day activities.
It is through this reporting, and that of ourpeers, that we hope our industry can move
forward together to enhance the effectivenessof RI implementation for the ultimate benefitof our clients.
In last year’s report, we shared the key
components of our revised RI strategy,
which is based on the three pillars of Quality,
Stewardship and Engagement. This approachis designed to embed RI into the core andculture of our investment business globally.
Over the year we have made good progressagainst our strategic goals. For example, wehave strengthened our governance structurewith the formation of a Global Responsible
Investment Committee, which has members
drawn from our investment, distribution,
product and business functions globally.
Engaging our senior colleagues to support
our endeavours is critical for our long-termgoal of successfully integrating RI across ourglobal business.

We have a number of investment teams, acrossa wide range of asset classes and geographies,
who each have their own unique investment
process. The common thread which exists
between them all is a commitment to achieving
the highest standards of stewardship. All ourinvestment teams seek to understand andintegrate ESG factors into their unique investment
processes to enhance the quality of theirinvestment decisions. This is not only in thelong-term interests of our clients, but also
important for the long-term sustainabilityof our business.
We have seen the development of a numberof stewardship codes emerge across the world
since the publication of the UK Stewardship
Code in 2010. Since its launch, it has enjoyedexplicit support from large international asset
owners such as CalPERS, Ontario Teachers andthe Swedish fund AP3. More recently we haveseen the emergence of a stewardship code inJapan and we expect to see a similar code inAustralia in the near future. In response to this,we decided to formalise our global position
on stewardship and, in November 2013, we
published our Global Stewardship Principles.
These Principles detail our approach tostewardship across our entire investment
business. As part of our internal discussions
in creating the Principles, we also took time
to remind ourselves as to the fundamental
purpose of our business which I believe isworth sharing:– We are managers and stewards of ourclients’ assets.
– We have responsibilities, as well as ownershiprights, in relation to the companies in which
we invest. In addition, we play a significant
role in maintaining the integrity and qualityof the markets in which we operate, andhave a responsibility to allocate capital toproductive purposes. We discharge these
responsibilities prudently.
– We aim to protect our clients’ capital and,through sound judgement and detailed
analysis, deliver the best risk-adjusted
returns for them over the long-term.
– We never allow the pursuit of personal gain
to take precedence over our clients’ interests.

2

The ownership obligations that we executeon behalf of our clients rest upon thesefundamental principles.
Research published in 2013 by the CFA Instituteshows that trust in the financial services industry
continues to be low. As a professional investor
this concerns me, because the foundations of
our industry are built on trust. I believe that ourcommitment to RI and stewardship plays animportant role in earning and maintaining ourclients’ trust in the work we do on their behalf.
Last year our firm was honoured to be invited
to join the first meeting of the Investment
Leaders Group (ILG). The ILG is a three-year
project designed to understand how investors
can realise environmental, social and economic
outcomes alongside long-term investment
returns. In June the inaugural meeting in
London took place with representatives fromour peers including; Natixis Asset Management,
Allianz Global Investors, Aviva Investors, Nordea
Life and Pension, PensionDenmark, PIMCO,
Retraites Populaires, and Zurich Investments.
Facilitated by the University of Cambridge
Programme for Sustainability Leadership (CPSL),
and hosted by HRH The Prince of Wales, the ILG
has been tasked to work together to address
what the investment industry can do to help
shift the flow of capital towards responsible,
long-term value creation, such that economic,
social and environmental sustainability isdelivered as an outcome of the investment
management process. We will report on the
progress of the group both collectively andindividually.
In 2013 we participated in a review of fiduciary
duty undertaken by the UK Law Commission asa result of the Kay review of UK Equity Markets
and Long-Term Decision Making. Although theresults of the review are yet to be published,
I believe that the concept of fiduciary dutylies at the heart of responsible asset
management. There needs to be clarity aroundthe responsibilities and duties of fiduciaries,
including investment managers who areserving the people who entrust their pensions
and savings to them. It is important that
RI practice is recognised as being wholly
consistent with the long-term interestsof savers and investors.

Responsible Investment and Stewardship Annual Report 2013

Last year we continued to focus on enhancing
the environmental, social and corporate
governance (ESG) information and resources
available to all of our investment teams. We havemade significant progress with the appointmentof two new independent ESG research providers.
This new level of research and information
enables us to more closely monitor our ESG
exposure across our business. Importantly, it
will also help to enhance the quality of theinformation that we are able to provide to
our clients on our stewardship activities.
Active engagement with companies is afundamental part of our stewardship approach.
It is critical to aid our understanding of thefinancial quality and sustainability of thecompanies in which we invest our clients’capital. During the year our investment teams
held several thousand company meetings andvoted on more than 15,000 resolutions.
Over the course of the year we have madesignificant progress to improve our RI practices
across the group. Some of these include:– strengthening our governance structure andprocesses with the introduction of a Global
Responsible Investment Committee (GRIC)
with members drawn from across our global
employee base– introducing Global Stewardship Principles
and a Cluster Munitions Policy

Further details of these and our other activities
can be found in this report along with ourpriorities for 2014 which include embedding
our stewardship principles into our productmanagement processes and completing our
ESG information management plan. We will
also continue to share our experiences throughcase studies and collaborative engagements aswell as playing a leading role in the Investment
Leaders Group.
This report provides a team by team overview
of our stewardship activities which we hope
you find useful. We value your feedback andlook forward to working together to meet
our RI challenges and opportunities in the
coming year.

Mark Lazberger
Chief Executive Officer– enhancing the quality of ESG information
available to our investment teams– six investment teams actively collaboratingwith peers on a range of ESG engagement
programmes; and– playing a leading role in the Investment
Leaders Group formed in 2013 specificallyon long-term mandates.

3

About Us

First State Investments (known as Colonial First
State Global Asset Management in Australia)
is the consolidated asset management divisionof the Commonwealth Bank of Australia. The
Commonwealth Bank is rated AA- by Standard& Poor’s and is the largest Australian bankby market capitalisation and one of Australia’s
leading financial services providers.

We are a growing global asset managementbusiness with experience across a range ofasset classes and specialist investment sectors.
We manage USD 163 billion of assets onbehalf of institutional investors, pension funds,
wholesale distributors and platforms, financial
advisers and their clients worldwide.
We employ teams of investors who are
specialists in their respective fields and set
their own investment style. Each investment
team is structured so that managers andanalysts have a strong sense of portfolio
ownership. Incentive structures are directlyaligned to the results they deliver for clients.
Whilst each team might have its own distinct
philosophy or investment process, they share
a commitment to responsible investment
and stewardship.

Assets under stewardship
TOTAL ASSETS UNDER STEWARDSHIP

163.2

As at 31 December 2013 / USD billion
Australian Equities

22.3

Global Emerging Markets*

55.6

Global Resources

2.7

Global Equities

1.3

Property Securities

2.8

Listed Infrastructure Securities

3.6

Total equities

88.3

Fixed Income and Credit

20.1

Emerging Markets Debt

1.1

Short Term Investments

36.7

Total debt

57.9

Listed and Direct Property**

13.8

Direct Infrastructure

3.2

Total alternatives

17.0* Includes a range of Asia Pacific, global emerging market equity and worldwide equity strategies.
** Following the internalisation of management of Kiwi Income Property Fund (December 2013) and CFS Retail Property Trust Group (March 2014), together with the compulsory
acquisition of Commonwealth Property Office Fund (April 2014), these businesses will no longer be part of FSI.

4

Responsible Investment and Stewardship Annual Report 2013

Our Approach to Responsible
Investment and StewardshipWe became a signatory to the UN Principles
for Responsible Investment (PRI) in 2007
and since that time we have systematicallyand progressively improved our responsible
investment (RI) practices across our investment
teams globally.
In 2013 we reviewed our progress to dateand developed a strategy aimed at taking us
towards global leadership in RI over the coming
years. The strategy, which we described in thisreport last year, is based upon three strategicpillars of Quality, Stewardship and Engagement,
as illustrated in the diagram below.
The strategy is underpinned by a strong
governance framework and is supported by
our RI team. The RI team engage the entire
business to deliver the strategy, which isoverseen by the Global Responsible Investment
Committee (GRIC), whose role it is to monitor
and direct the responsible investment
practices across the business.

Each of our investment teams has an RI
representative who co-ordinates information
flows across their respective teams. The RI
representatives also sit on an Environmental,
Social and Governance (ESG) Committee whichplays a key governance role by representing
their teams, reporting on team progress,
contributing to thought leadership andlooking at new approaches to addressing
current and emerging ESG risks andopportunities. The ESG Committee is an
important part of ensuring that we have thehighest quality of ESG integration embedded
within our investment processes.
Responsible investment in practice
On pages 14 to 31 you will find a ‘snapshot’for each of our investment teams. While eachteam has incorporated an approach to RI
which complements their investment philosophy,
at an organisational level we are able to drawout some commonalities which are basedon our policies, particularly our Global
Stewardship Principles.
ESG integration
Each team has a process for identifying andassessing the relevance and materiality of ESG
issues for their respective asset classes. For all
active equity teams company engagement
is a key source of insights on these risks andopportunities.
These insights, coupled with the best available
third party ESG research, are assessed by therelevant company analyst and incorporated
into stock notes or reviews. Some teams assign
specific ESG scores, while others incorporate
the assessment into broader views of company
management and business quality. All active
equity teams hold regular team meetings to
discuss company assessments including on
ESG factors.

QualityHigh quality
investment practices andprocesses

Stronggovernanceframework

GlobalResponsible
Investment
Leadership

Engagement

Stewardship
Strong client focus andlong-term relationships.
Global and local
industry voice

Stronggovernanceframework

Stronggovernanceframework

Culture which supports
principles of stewardshipand responsibility.
Strong RI knowledge
and skills

5Our Approach to Responsible
Investment and Stewardship

Our fixed income teams have an assessment
process which flows into their view of a particular
security, whether through the six factor model
used by the Emerging Markets Debt Team or
the ESG score and internal credit rating usedby the Fixed Income and Credit Team.
For all teams, responsibility and accountability
for analysis and integration of ESG factors,
investee company engagement and proxyvoting rests within each team. Integrationand engagement are mutually reinforcing
with analysis driving engagement andengagement outcomes influencing theanalysis. This is why we have chosen not toseparate proxy voting, engagement or ESG
research into a specialised function.
For our Direct Infrastructure team a much
more specific approach is possible. This teamhas developed separate and detailed policies
and assessment frameworks while still adheringto the organisation-wide approach.
Company engagement
Engagement with company management isa fundamental part of our teams’ investment
processes. Through company engagement, weseek to highlight areas for potential improvement
and risk reduction, encourage improved
disclosure on ESG issues, and commend
companies that are making progress in thisarea. We have guidelines and principles forcorporate engagement, which are publicly
available on our website.
Engagement is more difficult for fixed income
investors. We have, however, effectively
engaged with counterparties and semigovernment issuers.
For Direct Infrastructure our seats on company
boards allow more direct oversight.
Given the varying nature of the asset classes wemanage, the geographies in which they operate
and the size of our holdings, each of ourinvestment teams’ engagement approaches are
tailored to individual companies and the specificissues in question.
When engagement is unsuccessful
On occasions where our engagement activities
with company management are unsuccessful,
we may escalate the issue, for example bywriting to, or meeting with, the chairpersonor lead independent director, voting against
directors who we believe are not providing

6

appropriate oversight, or collaborating on
further engagement with other like-minded
investors. Ultimately we may choose to sell
down holdings in companies where we lose
confidence in the management of the businessfollowing unsuccessful attempts to engage.
Proxy voting
Proxy voting rights are an important part ofshareholder responsibility and we seek to voteon all possible resolutions at company meetings.
Prior to voting, the relevant investment manager
and analyst carefully consider each resolution,with guidance provided by our ‘Guidelines
and principles for corporate engagement on
governance, environment and social issues’.
Recommendations from a selection of
independent corporate governance research
providers are also sought. Our investment
teams retain full control over their proxy voting
decisions, however, and do not necessarily
follow the guidance provided by third party
governance research providers.
All teams have an approval and escalation
process for proxy votes and maintain records
when they vote against management oragainst the recommendations of the proxyvoting adviser.
Teams are responsible for their own voting andfrom time to time different teams may vote indifferent ways on the same issue. To manage
this while maintaining team independence
we encourage and are developing forums
where teams who are voting on the same
company can discuss any issues (while always
complying with regulatory requirements
related to collusion or takeover provisions).

Responsible Investment and Stewardship Annual Report 2013

Responsible Investment
and Stewardship – Our Progress

Four areas of focus
In 2013 we committed to building on our
existing platform so we could:– improve our data sources and analysis tools– improve our internal and external reportingand stakeholder engagement– improve our RI governance, policies andinvestment processes, and– increase our thought leadership.

1

Improve our data
sources andanalysis tools

4

2

Increase
our thought
leadership

Improve our internaland external reportingand stakeholder
engagement

3

Improve our RI
governance, policies
and investment
processes

Enhancing the quality of ourinvestment processes
We believe that the evaluation of ESG
factors and the exercising of our stewardship
responsibilities should be completely
integrated with our evaluation of financial
and business quality.
We believe that the quality of our investment
processes and decision making is improvedby our ESG integration work and that this isin the long-term interests of our clients.
During 2013 our key achievements were:
Enhancing the quality of ESG information
During 2013 we reviewed our ESG researchservice providers and conducted acomprehensive tender process. The purposeof the tender was two-fold. Firstly, it was toprovide our investment analysts with the best
available third party research and analysis of
ESG factors for investee companies andsovereign issuers. And secondly, to acquire
data for portfolio level reporting and risk
assessments, which can be used by ourportfolio managers and senior management
to better understand the ESG risks, impacts
and performance of our portfolios.
Following this process we appointed twoleading global ESG service providers;
Sustainalytics and GMI Ratings. We are currently
working on integrating these new providers into
our investment teams’ work flows including
through data platforms like Bloomberg andour proprietary research systems.
This project has resulted in the developmentof a broader ESG information management
plan that will involve the complete redesignof our intranet site.

The new site will aid investment professionals
in accessing information on all of our different
research providers, on key ESG themes andwill connect them with experts who canfurther assist them. This redesign will makerelevant and credible ESG information easier
to identify and access for use in each team’s
individual processes.
Our work in this area has the ultimate goal of
ensuring that we can provide the same level ofinternal governance over ESG performance as
we do for financial performance. Over time we
expect that this will also lead to improvements
in our client and public reporting.

2013 goals disclosed in the 2012 RI report

Progress

Establish the GRIC

Established. Chaired by our CEO with members drawn from across the business.

Review of policies and position statements

Stewardship principles and cluster munitions policy approved by the GRIC. Broader policy review
is underway.

Enhance ESG data services and IT infrastructure

A tender process was conducted and two new ESG research providers (Sustainalytics and GMI
Ratings) were appointed in November 2013.

Integrate RI into product development process

While yet to be formally integrated into the product development process, following the launchof our Worldwide Sustainability Fund, a number of thematic product ideas have been suggested
from across the group.

Contribute to Cambridge University Investment
Leaders GroupThe first meeting was held in May 2013 and we are involved in a number of initiatives stemmingfrom the programme which we believe will enhance our internal processes. We are leading aworkstream on “investment timeframes and long-term mandates”.
7Responsible Investment
and Stewardship – Our Progress

Internal reporting on RI and stewardshippractices
Our investment teams are accountable to the
GRIC for the delivery of our RI and stewardshipobligations and commitments. Investment
teams are expected to provide detail on theirapproach to integrating ESG considerations intheir investment decision-making and provide
evidence of their stewardship activities.
The teams’ reports have a strong focus on risk
identification and assessment, engagement
and stewardship. There is a rolling programmeof teams reporting to the GRIC.
Evaluating the risks from “stranded assets”
During the year the ESG Committee discussed
the emerging debate regarding the issue ofrisks associated with potential stranded carbon
intensive assets as identified in the“Unburnable Carbon 2013: Wasted Capital and
Stranded Assets” report issued by the Carbon
Tracker initiative.
To ensure that we can properly assess thepotential investment implications for ourclients, a sub group of the ESG Committee wasformed to address the issue in detail.
(See the case study on page 34 for more details)

Increasing our ESG knowledge
Over the course of 2013 we held a numberof briefings where industry experts wereinvited to present and discuss various subjects
to our staff, including investment teams.
Such briefings included:– The Australian Council of Superannuation
Investors’ (ACSI’s) Executive Manager ofInstitutional Investments and Policy, Paul
Murphy, discussed ACSI’s latest proxy voting
guidelines and engagement following therecent Board Confidence Index.
– Towers Watson and MSCI Sustainable
Investment adviser Roger Urwin presented
his views on recent and future trends in RI
and Sustainable Investment.
– Leading Australian proxy voting advisers
Ownership Matters reviewed the 2013
annual general meeting season and discussed
the Board Confidence Index results.
– The HSBC Climate Change team presented
to our London based colleagues on theirlatest research on climate risk including
their new report on water risks.
– Leading Macquarie University safety
researcher Sharron O’Neil discussed herlatest research on Australian companies
and issues with the current reportingof safety statistics.

Engaging colleagues across
our organisation
Human Resources and Culture Plan
During the year we assessed the degree towhich RI principles are embedded in ourhuman capital management processes. The
assessment was performed by our Human
Resources (HR) team who, with the supportof the GRIC, are now developing an HR and
Culture plan which covers recruitment, talentand management development, incentives
and culture.
Among a broad range of activities, someof the initiatives to be undertaken include:– ensuring our commitment to RI features on
all position descriptions and advertisements– enhancing interviewing skills training toensure that we employ people with strongalignment to our RI and stewardship principles– inclusion of RI in on-boarding and training
processes, including leadership training.

8Responsible Investment and Stewardship Annual Report 2013

Responsible Investment
and Stewardship – Our Progress

Global Stewardship Principles
In November 2013 we published our Global
Stewardship Principles. These Principles
outline our approach to ensuring thatclients’ interests are at the core of ourinvestment processes. The Principles
include our approach to managing
conflicts of interest, monitoring andengaging with investee companies,
executing voting rights and collaboratingwith other investors. The Principles direct
how these stewardship activities will bemonitored, assured and reported on.
The Global Stewardship Principles weredeveloped and endorsed by the GRIC,
who will review them annually. Compliancewith the Principles will be subjected to anannual assurance process. The Principles
can be downloaded from our website.

Improving our governance framework
Across our organisation we have 13 investment
teams investing in a range of asset classes aroundthe world. Each team has their own uniqueinvestment process with RI practices appliedin a way which complements their investment
approach. Our Global Stewardship Principles
and RI Policies are common threads that tie
our diverse investment capabilities together.
Through collaboration and learning from eachother’s approaches, we believe our investment
teams have a competitive advantage in theirincorporation of ESG factors. Therefore we
see the diversity of approaches employed
as a key strength of our business.
This strength through diversity nonethelesscomes with its own set of challenges. In
order to maintain the highest standards
across the organisation, it was essential toestablish a strong governance frameworkand organisational culture around RI. This
governance framework was enhanced in 2013
with the formation of the GRIC and the ESG
Committee. The members of both of theseCommittees are detailed in Appendix 3.

Global Responsible Investment
Committee
The GRIC is chaired by the CEO and includes
senior leaders from across the organisation,
including the Chief Investment Officers forboth equities and fixed income & credit,
senior investment professionals, as well as
representatives from sales and distribution,
product, HR and our regional business heads.
The GRIC met twice in 2013 and approved
several important initiatives including thecreation of our Global Stewardship Principles.
The principles have been critical in making
explicit the ways in which our different teams
with their unique investment philosophies areunited by common values and standards.
The GRIC also initiated reviews on how we
can improve our practices in several key
areas including client reporting, humanresources and communications. As part ofits investment oversight function, the GRIC
received presentations from a number ofinvestment teams on their approach to RI
and stewardship and discussed strategic
issues, for example the implications for ourbusiness from the UK’s Kay Review.

ESG committee
The ESG committee reports to the GRIC
and is chaired by an associate director fromthe Direct Infrastructure team and includes
representatives from each investment team.
The ESG committee’s responsibilities include
monitoring ESG risks and opportunities,
coordinating cross-team collaborations anddriving improvements in our RI practices. During
the year the committee met four times anddelivered the following key initiatives:– oversaw the tender process which led tothe appointment of new ESG research
providers GMI and Sustainalytics,– the establishment of a stranded assets
working group (see page 34), and– the development of a reporting structure
for investment teams to use when presenting
to the GRIC.

9

Responsible Investment
and Stewardship – Our ProgressTransparency and stakeholder
engagement
We see transparency and engagement witha broad range of stakeholders as criticalto our success. In addition to this report
we also issue an annual proxy voting andengagement update, participate in various
industry initiatives, meet regularly with civilsociety and other groups and report to ourclients and the PRI on our progress.
This year we are completing the new
PRI reporting framework for the firsttime and will be making our full reportpublicly available.
Our engagement with stakeholders fromclients, to industry peers, to civil society isevolving over time and we see our participationin the Investment Leaders Group (ILG) as a key
example of this. A full list of the industry andother initiatives we participated in during 2013
can be found on page 36.
Release of the 2013 Proxy Voting
and Engagement Update
In November 2013, we published our annual
Proxy Voting and Engagement Update.
This report highlights the proxy voting
and engagement activities of our listed
equity teams.
It provides a number of examples and statistics
which we feel highlight the key focus areas andissues when our investment teams assess proxyvoting resolutions. For example we report on
how often the teams vote against company
and proxy adviser recommendations andinclude regional or sectoral breakdownsof votes against.
For the first time we also published how wevoted on all company meetings globally on ateam-by-team basis in an easy-to-use Microsoft
Excel format. The report and Excel spreadsheetwith our full proxy record can be downloaded
from the Reports section of our website.

10Responsible Investment and Stewardship Annual Report 2013

Responsible Investment
and Stewardship – Our Progress

Investment Leaders GroupThe Investment Leaders Group (ILG) is a threeyear project with the goal of helping to shift
the investment chain towards responsible,
long-term value creation, such that ESG andeconomic issues are delivered as an outcomeof the investment process alongside robust,
sustainable investment returns. We are afounder member of the ILG along with
11 other institutions from the pension fundand asset management industry.
The ILG is supported by world class academics
from the UK’s Cambridge University’s Judge
Business School and Faculty of Economics.
The premise of the ILG is that responsibility
should be at the heart of the investment
process in order to best serve the needs ofclients and beneficiaries over the long-term.
The ILG’s maxim is to lead by example.
The ILG is delivering its objectives through aseries of work streams, the first two being;
1. The Value of Responsible Investment: RI has
the capability to influence positively beyond
the investors immediate asset base into thewider economy, environment and society.
This work involves the development of
an intellectual model of how this process
works in order to strengthen its adoption
by investors.
2. Reporting Investment Impact: the goal ofthis work stream is to develop a model andmethodology for reporting on the impact ofinvestment processes on the real economy
and wider society. This will enable investors
to better assess and communicate theimpacts of their investments to clients,
beneficiaries and wider civil society.
We will report on the ILG’s progress each year
as well as how we are adopting the outcomesfrom the group into our investment practices.

11

Goals and Outlook for 20142014 goals
As reported last year, we had historically used
the PRI Benchmark Report as the basis for ourgoal setting. However, since the change in
the PRI’s reporting framework, benchmarking
information has not been available. For thisreason, in 2013 and 2014 we set goals basedon the achievement of specific milestones.
Should the new PRI reporting framework(which we completed for the first time in
February 2014) include a benchmarking
element, we will disclose this information in
next year’s RI Report. We will also continue
to disclose our milestone-based goals toshow the steps we are taking to improve
our RI practices.
2014 is the second year in our three-year
strategy rollout. We will continue our efforts
to implement the RI strategy by working on
the four focus areas outlined earlier. Our goals
for 2014 include:– Complete an RI policy review and update.
– Incorporate RI principles into the new product development process.
– Finalise HR and Culture plan and implement plan to agree and set short-term targets.
– Finalise and implement ESG Information management plan which will include:– Integration of ESG research services with Bloomberg, Capital IQ and proprietary research systems.
– Enhancement of intranet site to become an ESG information hub for investment professionals.
– Enhance systems and processes to better capture company engagements from across equity teams in a consistent and reliable format.
– Continue our involvement and support of the Cambridge Investment Leaders Programme. Lead workstream on investment timeframes
and long-term mandates.
– Complete a strategic review of current collaborative initiatives.

12

Responsible Investment and Stewardship Annual Report 2013

Responsible Investment
and Stewardship In PracticeInvestment teams not included in thisreport
The following investment teams are notincluded in this report:– Direct Property– Short-Term Investments (cash)– Multi-Asset Solutions; and– Real Index (fundamental indexing)
In the case of Direct Property, this is because
following the internalisation of managementof Kiwi Income Property Fund (December2013) and CFS Retail Property Trust Group(March 2014), together with the compulsory
acquisition of Commonwealth Property Office
Fund (April 2014), these businesses will nolonger be part of FSI.
For the Short-Term Investments team ESG
research and engagement is conducted by the
fixed income and credit team. This is particularly
relevant for counter-party reviews where ESG
factors form a key part of the review.
For the Multi-Asset Solutions and Real Index
teams the integration of ESG factors into theirinvestment processes is still at an early stage.
The Real Index team is represented on the ESG
Committee and is testing the new ESG research
provider’s datasets for possible use within
their process. They have also looked at thedevelopment of passive ESG themed products.
The Multi-Asset Solutions team holds the
majority of its assets through other FSI funds
and so these obligations are for the most part
carried out by the underlying fund team.
Both teams vote all proxy votes either throughthe underlying fund manager (as is the casefor Multi-Asset) or by voting in line with CGI
Glass Lewis (for Real Index).

A brief description of each team is below:

Team Snapshots

Short-Term Investments
Our Short-Term Investment team is one of thelargest managers of cash funds in Australia.
The team invests in overnight cash deposits,bank bills, negotiable certificates of deposit,
commercial paper and floating rate, corporate
and asset-back securities. They boast one of thelargest number of dedicated portfolio managers
of cash funds in Australia, with a long-term andsolid track record of outperformance.

In the following pages you will find a snapshot
for each investment team. In this year’s
snapshots we have brought the engagement
and proxy voting sections together as theproxy voting process is consistent across equity
teams and we believe the two processes arehighly related. We have also included an ‘RIand Stewardship in Practice’ case study foreach team which demonstrates the way inwhich analysis, engagement and (for equity
teams) proxy voting work together to enhance
the quality of our investment processes.

Multi-Asset Solutions
The Multi-Asset Solutions team provides
a range of services to institutional clientsaround the world in the fields of portfolio
management, asset allocation, asset/liability
management, portfolio construction and risk
management. They advise on and design
bespoke investment solutions and implement
these solutions in the form of tailored risk
managed multi-asset mandates.
Real Index investment philosophy
The Real Index Funds use a fundamental index
methodology in the construction of its portfolios.
This approach is based on the belief that markets
are not perfectly efficient and that pricing errors
can lead to a performance drag for traditional
market cap-weighted index funds.
In Real Index funds, stocks are selected andweighted using fundamental measures offirm size, including cash flow, sales, book value
and dividends. The Real Index funds aim toenhance this process by adding factors suchas quality of earnings and debt coverage. In
addition, the weights are adjusted periodicallythroughout the year rather than once per year.
The Real Index team are a small passive
investment team with many hundreds ofcompanies in their portfolios. As a result,
Real Index currently have a separate proxyvoting policy and vote in line with CGI Glass
Lewis recommendations.

Each snapshot highlights:
The investment team:– Its investment strategies and location– Its investment head and RI representative
The team’s approach to ESG integration:– Areas for development– Key Issues for 2013
– The team’s approach to integrating ESG factors– ESG integration example where an ESG issue
has influenced a buy/sell/hold decision
The team’s approach to asset stewardship:– Approach and process for engagement– ESG engagement example– Proxy voting
An example of RI & Stewardship in practice:– Example of how integration, engagement
and proxy voting combine.
Proxy Voting Statistics– Votes for and against in total and on
key issues– Votes against the recommendationof our proxy adviser or management.

13

First State Stewart> Inception Date 1988 > Location Edinburgh, Hong Kong, Singapore
Strategies
Asia Pacific ex Japan, Emerging Markets,
Frontier, Greater China, India, Latin America,
Worldwide, Sustainability (Asia, Emerging
Markets and Worldwide)
GRIC and ESG Committee Members fromFirst State Stewart
David Gait, GRIC Member
Gokce Bulut, ESG Committee Member
AREAS FOR DEVELOPMENT
We are always looking for ways to deepen
our understanding of ESG issues. We find thebest way to do this is through meetings andresearching companies. We also commission
external research by experts; some recent
examples include a Shipping report by
Sustainalytics on Industry Emissions and Steeland Aluminium Sector reports by Trucost.
KEY AREAS OF FOCUS– Tax avoidance– Executive Remuneration– Environmental externalities,
particularly in China– Energy supply chain

14

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
ESG issues are identified through a bottom-up
company research process. When we consider
the quality of management, financials andfranchise, we think about the impact ESG could
have on the business and how management isaddressing risks and opportunities. The primarysource of ESG related information is one-on-one
meetings with senior management. We areparticularly interested in companies whichembrace the underlying spirit of ESG, rather
than simply taking a compliance driven,
box-ticking approach.
How issues are assessed
The assessment of ESG issues is incorporated
as part of the bottom-up research process.
How material issues are incorporated
into investment decision making
Sustainable investment has always been
an integral part of the First State Stewart
team’s investment philosophy and stock
picking process. ESG analysis is used as aqualitative tool to assess the risks and/or
opportunities a company might face. A
company’s approach to ESG issues is often aproxy for its quality in other areas, for example,
franchise quality is impacted by operational
efficiency and the environmental efficiency
provided by its products.
We are fortunate enough to be able to makethe decision to not own a company becauseof its approach to governance or sustainability
issues, as we do not consider or reference thebenchmark when constructing portfolios.
Our sustainability strategies take the process
one step further by focusing on long-termsustainability themes as a key driver of theinvestment process. We classify potential
investment opportunities into one of three‘sustainability sectors’: sustainable goods
and services, responsible finance andrequired infrastructure.

ESG integration example:
Simplo Technology
A consideration of ESG issues is part ofevery company report completed acrossthe First State Stewart team. One example
of where the thinking on ESG helped theinvestment case is Simplo Technology,
which is held across many of the First
State Stewart strategies.
Simplo Technology manufacturesand sells battery packs for computers,
handsets and electrical vehicle
battery packaging.
Simplo Technology sits in an interesting
place in the supply chain for batteries. The
company does not manufacture the cells
itself rather “packs” the batteries (so it
doesn’t have the liabilities for the cells). Its
business model is acting as a very resilient
barrier to integrated competitors. The
competitive advantage it has is flexibility:
any problems in cell manufacturing and it
can switch supplier. This position in thevalue chain alongside leading technology is
why we think its position will be sustainable.
There is also an interesting opportunity instorage especially in solar. The company has
demonstrated adaptability with its gradualmove away from being dependent on thenotebook market.

Stewardship through engagement
and proxy voting
What proportion of companies areengaged with
We do not keep a count of the number ofengagements. However, we ensure that wemeet with and engage on materially important
issues with at least the top ten holdings ofthe funds.
How issues for engagement are
identified
We engage on a wide range of issues including
strategy, governance, alignment of interests
and reputation. Engagement issues are identified
through the research process and throughalerts received from RepRisk.
We engage for two primary reasons. First,
the belief that the purchase of a share ina business comes with both rights andresponsibilities. Should one of the companies
fail to meet international best practices on theenvironment, human rights or social issues,webelieve that we have a responsibility to engage

Responsible Investment and Stewardship Annual Report 2013

with senior management to persuade them toaddress the issue, rather than to walk awayfrom the problem.
Second, ESG issues are investment issues.
Positive engagement on ESG issues becomes a
powerful tool in driving shareholder value andprotecting and enhancing the long-term valueof portfolios. Engagement takes place throughface-to-face meetings, informal emails andformal written correspondence. In order tofacilitate effective engagement the teamspend a great deal of time building relationships
with company management.
How engagement activities influence
investment/proxy voting decisions
As long-term shareholders, we are active
owners of the companies in which we invest;
and aim to vote on all resolutions at annualand extraordinary general meetings. The typesof things that we find ourselves voting against
most frequently include:– Executive remuneration packages where
there is a lack of alignment or the incentives
are too short-term;– Directors’ elections when the candidate
does not have the right character or skills
for the board, or they have not been turning
up to board meetings;– Resolutions that give the board totally
unfettered rights.
We rarely see environmental or social
issues appear on the ballot papers inemerging markets.

Stewardship in practice
DIA
DIA, a Spanish food retailer, was ‘spun out’of Carrefour in late-2011. Given the newlyempowered management team and its ‘blank
sheet’, we identified an opportunity to help

Engagement and proxy voting
examples:Engagement example – Marico
The company was asked to review its
approach to advertising deodorants (withtheir acquisition of a brand from Reckitt
Benckiser) to ensure cultural sensitivity anda shift from the chauvinistic advertisingcarried out by Reckitt. Specifically we wereconcerned that the campaign “Just Zatak
her” was particularity inappropriate givensocial tensions in India. Subsequently Marico
dropped the campaign and launched a newone with not a scantily clad woman in sight.
Voting example – United Natural Foods
The company requested that we voteagainst a shareholder proposal to eliminate
supermajority voting requirements. We
believe that supermajority voting
provisions, which include any votestandard that requires a greater thansimple majority vote, do not serve thebest interests of shareholders. A simple
majority vote is appropriate to approve
all matters presented to shareholders
and would be an improvement to thecompany’s corporate governanceprinciples, hence the vote in favour ofthe shareholder proposal and against
the board in this instance.
Voting example – Shree Cement
We raised concerns about a proposal
to increase one executive’s remuneration
by 60% and another by almost 200%.
The company has agreed to amend this
proposal at its next meeting and for boththe concerned executives remuneration
will now be limited to a 30% increase
per annum.

the company shape its approach to sustainability
reporting and to establish a lead over peers.
Our view was in part based on the factthat DIA was already well positioned froma sustainability point of view. For example,
the company operates small convenience
stores, which, unlike supermarkets, are moreimmune to the impact of internet shopping,sell primarily fresh food on discount and do
not stock cigarettes.
Following a meeting with management it wasobserved that there was a lack of awarenesswith regard to sustainability reporting;management was planning to use the Global
Reporting Initiative as a framework which
we did not regard as particularly meaningful.
As such, an engagement with the aim ofencouraging the company to develop a more
integrated approach to sustainability reporting
was initiated. There are already signs ofprogress: we were pleased to see in 2013,that it had included sustainability metrics in
its 2012 annual report. Whilst the metrics were
not perfect it was good to see them at least
being considered alongside the traditional
financial ones.
Engagement with DIA is ongoing. In particular
we are looking to influence management
to make the sustainability metrics DIAspecific and link them to management’s
key performance indicators which should
result in greater ownership behind them.

Proxy Voting Statistics
The table below shows the team’s proxy voting
statistics for calendar year 2013.
In addition to the traditional statistics on voting
decisions, we have also included the percentageof resolutions where after detailed evaluation,
the team voted against both management
and proxy adviser recommendations.

Voted against
management
and Proxy
Adviser %First State Stewart

Total
Resolutions

Voted for %Votedagainst %Voteabstained %Voted against
management %Voted
against Proxy
Adviser %

All

8654

93%

6%

0%

7%

11%

1%

Director elections

3427

96%

3%

1%

4%

14%

0%

Compensation
related resolutions(executive)
868

94%

6%

0%

6%

11%

1%

Shareholder
proposals

42%

56%

2%

39%

25%

14%

147

15

Direct Infrastructure> Inception Date 1994 > Location Sydney, Melbourne, London, Paris
Strategies
Unlisted Infrastructure

Head of Global Infrastructure
Perry Clausen

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
Relevant ESG issues will be typically identified
as part of our rigorous due diligence process.
A risk and opportunity assessment-based
approach is embedded in the responsibilities
of a number of individuals across theinfrastructure investment team to ensure abroad and continuous focus on the ESG issues.
This also facilitates a sharing of knowledge andideas across the broader group and acrossasset responsibilities. Internal staff are also
trained on ESG issue identification to ensure
appropriate ownership of ESG issues isembedded in the internal investment team.

Mark Rogers, ESG Committee Chair
Niall Mills, GRIC member

How issues are assessed
The typical due diligence process associatedwith a large infrastructure investment will
involve environmental and technical advisers
assessing environment impacts and asset
condition. Additional advice may be sought
on legal liability issues or on social licenceto operate issues should they be relevantto the particular asset.

AREAS FOR DEVELOPMENT– A review of the business’s ESG policy has
been undertaken and the policy updated toincorporate a new ESG risk and opportunity
assessment framework (the Infrastructure
Sustainability Council of Australia’s IS
tool framework)

How material issues are incorporated
into investment decision making
Internal staff make the final recommendation
to the Infrastructure Investment Committee
on investments, but will take a range of advice
in forming that recommendation including
external advice on environmental and social
issues associated with an investment opportunity.

– At the investee company level, ESG key
performance indicators continue to bereset to new performance benchmarks
each year as part of the annual businessplanning cycle. This provides a ratchet
effect on ESG outcomes within each business.
KEY AREAS OF FOCUS– Investments which contain a particularly
large carbon risk have been difficult
to justify in the past year and, in the absenceof clearly defined and effectively functioning
carbon markets, difficult to price.

ESG integration examples:Long-term viability of coal-related
investments
Coal export terminals in Australia havebecome available for investment recently
and the team’s ESG integration work has
focused on the future of coal markets inthe world, the sovereign policy approachto carbon management and the credibilityof the long-term coal market.
Climate change considerations
on investment opportunity
A recent due diligence on a greenfields
investment opportunity in an existingbrownfields investment looked at sea levels,
storm surges and flood events associatedwith the asset’s location on the coast. We
looked at whether additional measures mayneed to be taken to protect the future
operation of that asset to protect it from
more frequent and severe events andsea-level rise in the future.

Stewardship through engagement
and proxy voting
What proportion of companies areengaged withWe acquire direct holdings in all infrastructurebusinesses, seeking at least one board seatat the holding company (controlling) level.
This allows direct involvement in the governanceof the business, the structure of the performance
incentive mechanisms and the creation of an
appropriate culture around each business’s
approach to ESG risks and opportunities.
How issues for engagement are identified
Issues for engagement are identified as partof our ongoing direct management of theinvestee companies at board level.
How engagements are recorded
Monthly and quarterly reporting from theinvestee company management teams
contains ESG dashboard performancemeasures and board minutes reflect ESG
resolutions from the board.
What follow up occurs after company
meetings
Due to the scale of the direct holding and the
involvement of team members at board levelon all investment companies, follow up occurs
primarily through board discussion, reportingand decision making.

16

Responsible Investment and Stewardship Annual Report 2013

How engagement activities influence
investment decisions
Our approach is to incorporate the considerationof ESG factors when making an investment
decision and actively managing investments.
We seek to ensure that appropriate policies,
management key performance indicators,
and reporting of ESG factors are embedded
into the investee company governance regimes
and are continually improved. By doing so we
influence the investment decisions of theinvestee company.

Stewardship in practice
Anglian Water
Predicted changes in weather patterns, rising
sea levels and meeting the needs of a growing
population means that Anglian Water is oneof the most exposed UK water companies tothe effects of climate change.

To mitigate against this, and to provide
sustainable water and wastewater services
to a growing population, goals have been
set by the board and the management teamto reduce both embodied1 and operational
carbon emissions. Firstly, the company has
committed to halve the embodied carbon
contained in assets built in 2015 from a 2010
baseline. Secondly, the company has committed
to reduce operational carbon by 10% in realterms by 2015 from a 2010 baseline.
With measurement and management ofcarbon now fully integrated into the deliveryof all capital schemes, the company has strong
evidence of the correlation between embodied
carbon and capital expenditure and operational
carbon and operational expenditure. The
reductions in embodied carbon throughdesign not only save costs, but also reduce
the use of irreplaceable finite materials andhelp with the provision of more sustainableassets for the future.

1 Embodied carbon is a measure of the carbon dioxide (and other greenhouse gases) emitted into the atmospherein order to produce goods and services purchased by Anglian Water.

The programme has already succeeded in
reducing embodied carbon by 39% in 2013,delivered cost savings and reduced the use offinite materials across their capital programme.
In addition to the tangible benefits delivered,
Anglian Water has also successfully aligned
the value chain, with suppliers, designers
and contractors responding to the challenge
and delivering innovative low carbon low
cost solutions
As a result of these outcomes, reducing
embodied carbon has become an integral partof our investment decision making process forother assets across the portfolio. We believethat using the knowledge and experience
gained through our close monitoring ofassets allows us to continuously improve ourinvestment process in ways which provide
tangible benefits to clients.

17

Global Listed Infrastructure Securities> Inception Date 2007 > Location Sydney, London
Strategies
Global Listed Infrastructure

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
Environmental issues are key drivers for someinfrastructure companies, specifically electricutilities, energy infrastructure and railways.
Social issues are important too as infrastructurecompanies have obligations to the communities
to which they provide essential services
and governance issues are pertinent to
all infrastructure stocks.

Head of Global Listed InfrastructurePeter Meany

ESG Committee member
Rebecca Sherlock
AREAS FOR DEVELOPMENT
We believe that the most important sourceof research is internally generated throughregular meetings with senior management
and other stakeholders including suppliers,
competitors, regulators and industry bodies.
To support the team’s existing ESG process
we use various external sources including, but
not limited to, two recently purchased service
providers, GMI and Sustainalytics. A key focus
in 2014 is to work with these providers tobetter understand the information they provide
and how it can be used for company analysis.
KEY AREAS OF FOCUS
Executive remuneration remains a concern,with some companies having incentives thatare either easy to achieve, linked to a single
financial metric and/or a limited considerationof total shareholder return. Given the nature of
infrastructure companies it is felt that it is also
important for remuneration to be linked to thesafe operation of assets.

How issues are assessed
Assessment of ESG factors is based on a wide
range of information, primarily the analyst’s
due diligence and then on external sourcesof information.
How material issues are incorporated
into investment decision making
ESG analysis is integrated into our investment
process through a quality ranking model. Thisconsists of 25 criteria that influence stock
returns in general and infrastructure securities
in particular. A score is assigned to eachcriterion, with ESG issues accounting for
20% of the overall quality score.
The ESG factors include independence ofthe board, executive compensation, carbon
intensity of integrated utilities and poison pills.
Board composition and alignment of interests
are deemed especially important.
We believe consideration of sustainability
issues reduces risks and improves returns.
Risk can be reduced if sustainability issues
are identified, analysed and quantified, whilea focus on sustainability helps in identifying
value-adding opportunities and avoiding
value-destroying situations.
Company engagement on ESG issues is primarily
carried out on a direct basis with company
management and indirectly via the team’s
proxy voting process.

ESG integration example:
Atlantia SpA
Italian toll road operator Atlantia SpA
announced earlier in 2013 its intention
to merge with Rome airport owner
Gemina SpA. We believe that elementsof this process, notably Atlantia’s public
disclosure that it was looking at a listedcompany, were not conducted with thebest interests of Atlantia’s shareholders
at heart. We have formally voiced our
objections to Atlantia’s board.

Stewardship through engagement
and proxy voting
How engagement activities influence
investment/proxy voting decisions
Active ownership and engagement are among
our top priorities as a fiduciary, because of ourconviction in the correlation between good
governance about the practices and strong,sustainable shareholder returns. Consequently,
we look to positively influence companies
towards ESG best-practice to ultimately
benefit clients.
We will only engage companies on material
issues to achieve specific outcomes, namely
to ensure good ESG practices and thereby
protect investor interests. In instances wheremanagement does not respond adequately
to engagement, the company’s quality
assessment is likely to be negatively impacted
and could result in divesting ownership.

Engagement and proxyvoting examples:
Atmos Energy
We voted against the short and long-term
incentives proposed since they werebased on EPS targets rather than a variety
of measures including total shareholder
return. It is believed that this kind of
remuneration can lead to behaviour bymanagement that is ultimately not in thebest long-term interests of clients.
Norfolk Southern
We voted against the reappointmentof the auditor since there has been nochange in 44 years which can compromise
independence.

18

Responsible Investment and Stewardship Annual Report 2013

Stewardship in practice
SP Ausnet
SP Ausnet is an Australian regulated utility
which has an external management structure
between itself and SPI Management Services.
We believe that this structure is not
appropriate since SPI Management Services
is a wholly owned subsidiary of one of SP
Ausnet’s largest shareholders, Singapore
Power Limited.
Whilst this structure has previously beencommon among infrastructure securities,
the externalised management structure used

by SP Ausnet has progressively been abandoned
due to the difficulty in managing inherent
conflicts of interest brought about by related
party transactions, and the structure’s poor
record of value delivery for shareholders.
We have written to the board to express
our view and have had multiple meetings
with management.
Since these meetings there have been somedevelopments with China State Grid receiving
approval to take a 19.9% stake in the company.
This will lead to a change in the board
composition and the expectation is thatinternalisation will follow.

The table below shows the team’s proxy voting
statistics for calendar year 2013.
In addition to the traditional statistics on voting
decisions, we have also included the percentageof resolutions where after detailed evaluation,
the team voted against both management
and proxy adviser’s recommendations.

Voted against
management %Voted
against Proxy
Adviser %Voted against
management
and Proxy
Adviser %Global Listed
Infrastructure

Total
Resolutions

Voted for %Votedagainst %

All

550

86%

14%

0%

13%

11%

7%

Director elections

283

89%

11%

0%

11%

13%

9%

Compensation
related resolutions(executive)
57

84%

14%

2%

16%

14%

9%

Shareholder
proposals

33%

67%

0%

33%

4%

0%

24

Vote
abstained %Proxy Voting Statistics

19

Global Property Securities> Inception Date 1994 > Location Sydney, New York, London, Singapore, Amsterdam
Strategies
Global portfolios hedged into AUD, GBP(unhedged) and USD (unhedged); Asia Pacificportfolios unhedged into GBP and USD;
Australian REITs.

Head of Global Listed Property Securities
Stephen Hayes

ESG Committee member
Joseph Daguio
AREAS FOR DEVELOPMENT– During 2014 we will be focusing on
integrating the new ESG research providers,
Sustainalytics and GMI, into the team’s
workflow.
– We have established a company
engagement log which now captures all
engagements on ESG issues and is sharedacross the team.
KEY AREAS OF FOCUS– High standards of corporate governance areconsistently important and we will maintaina disciplined and focused approach to thisissue.
– In the face of concern about climate change
and associated regulation, property companies
are designing and constructing increasingly
environmentally friendly buildings; a trend
which we believe is set to continue.

20

How ESG factors affect the team’s
investment decisions

Stewardship through engagement
and proxy voting

How relevant issues are identified
Corporate governance is a particular focus,
where boards’ independence as well asshareholder rights are of paramount importance.
We also consider any specific sustainability
initiatives implemented by the company aswell as the environmental impact of existing
assets and developments. A company’s history
as a good corporate citizen is taken into
account as well as evidence of any meaningful
contributions it might have made which
benefit society as a whole.

What proportion of companies areengaged withWe are active investors and seek to engage
with all companies that we invest in. We arefirm believers in investor rights and take aproactive stance on any issues of concern,
including ESG issues and especially withregard to corporate governance.

How issues are assessed
Material issues are incorporated into the initial
screening stage of the investment process where
an ESG rating is assigned to each company.
How material issues are incorporated
into investment decision making
A low score (in combination with low scoreson other factors) can lead to a stock being
excluded from the investment universe andineligible to be considered for inclusion within
our portfolios.
ESG factors are also considered in the Capital
Asset Pricing Model (CAPM) in the valuation
stage of the investment process. A company’s
ESG profile is included as one of the variables
used in determining its beta. This means thatthe higher the team rates a company’s ESG
profile, the more likely we are to invest in
the stock.

ESG integration example:
Australian REIT initial public
offerings (IPOs)
A recent spate of Australian REIT IPOs did
not make it through the team’s rigorous
stock screen. They did not meet therequired rating needed to be included in
the investable universe on the basis ofpoor governance and other ESG factors aswell as poor sustainability of cash flows
and the quality of their assets.

How issues for engagement are
identified
During REIT/Company meetings an agenda
item is any changes to the REIT’s/company’s
ESG performance. We will relay back views
on how the REIT/company rates versus its
peers. In abnormal circumstances where ESG
considerations are materially below par we willtake a pro-active stance in directly attempting
to influence change.
How engagements are recorded
The team has established a company
engagement log. ESG engagement details
are now recorded so that team members
can easily access a comprehensive list of our
ESG-related engagement issues and responses
on a company-by-company basis. This will
facilitate increased awareness of issues raisedover time, and promote a consistent anddiligent engagement approach.
How engagement activities influence
investment/proxy voting decisions
The Global Head of Property Securities andeach analyst are responsible for the review
of proxy votes and the decision. Many factors
influence the decision, including those gleaned
from engagement activities. The decision will
be ultimately based on what is in the bestinterest of clients.

Engagement and proxyvoting example:
Voting for share issues without
pre-emptive rights
We voted for a number of share issues
without pre-emptive rights where webelieved they benefited minority
shareholders and were in-line with market
practice. Companies included Hang Lung
Properties, Henderson Land Development,
Wharf (Holdings) Limited, Sun Hung Kai
Properties and Kerry Properties.

Responsible Investment and Stewardship Annual Report 2013

Stewardship in practice
Arena REIT
Arena REIT announced a proposed merger
with Sydney Health Care Trust. The termsof merger benefited Sydney Health Care
Trust shareholders more than Arena REIT
shareholders.
As an Arena REIT shareholder the team initially
met with management to gain clarity about
the reasoning of a deal structure. Disapprovalof the deal was communicated back to
management and the intention not to vote tosupport the transaction. This led to a second
engagement with management and board

Global Listed
Total
Property Securities Resolutions

members of Arena where a detailed outline of
the merger proposal was given and backgroundto why certain deal metrics were chosen. The
management and the board communicated
why this deal was in the best interest of bothgroups and that this was the best possible
outcome for Arena REIT.
After this engagement we became comfortablewith the merger structure and pricing metrics.
After understanding the extensive due diligencethat management had undertaken and thatthe deal was well thought out and had strategic
merit even at current pricing, we subsequently
voted for the merger to be approved.

Voted for %Votedagainst %Voteabstained %Proxy Voting Statistics
The table below shows our proxy voting
statistics for calendar year 2013.
In addition to the traditional statistics on voting
decisions, we have also included the percentageof resolutions where, after detailed evaluation,
we voted against both management and proxyadviser’s recommendations.

Voted against
management %Voted against
management
Voted against and Proxy
Proxy Adviser % Adviser %

All

1068

93%

5%

2%

7%

9%

1%

Director elections

561

95%

3%

2%

5%

12%

1%

Compensation
related resolutions(executive)
122

89%

10%

2%

11%

6%

2%

Shareholder
proposals

0%

100%

0%

0%

0%

0%

1

21

Global Resources> Inception Date 1997 > Location Sydney, London
Strategies
Global Resources

Head of Global Resources
Dr. Joanne Warner

ESG Committee member
Tal Lomnitzer
AREAS FOR DEVELOPMENT
Embed and fully utilise the capabilities of new
ESG service providers GMI and Sustainalytics
for aggregate portfolio comparison andbenchmarking.
The team is involved in an ongoing projectwith the Principles of Responsible Investment(PRI) looking at the integration of ESG issues
into executive remuneration.
KEY AREAS OF FOCUS
The team continues to focus engagement
activities on executive remuneration (specificallyensuring alignment with shareholders’ interests),
environmental practices, safety, corporate
governance and community engagement.
‘Stranded Carbon’ is an issue that is getting
increased attention, specifically, the potential
for long-term carbon reserves to become“stranded” or commercially impaired as aresult of government regulation to combat
climate change. We aim to better understandthe carbon reserve risk of the companies that
we are invested or may invest in. See page 34
for more information.

22

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
ESG issues are particularly pertinent for natural
resources companies due to the nature of
the industry and the countries in which they
operate. We believe that a consideration of
ESG issues leads to better risk/return outcomes
and improved long-term returns for clients.
We have developed a tailored ESG frameworkthat is an integral part of the company review
process. The framework is focused on safety,
industrial relations, community, environmental
performance, board structure, compensationand ownership. Primary research is supplemented
with externally-sourced databases to ensure
broad coverage. Each company held by thefunds is formally reviewed annually with more
frequent informal reviews through the year.
How issues are assessed
Site visits and management meetings are a
key component in understanding the exposureand management of ESG risks and companies’
ESG practices. These include environmental,
safety and corporate governance practices aswell as local community engagement. A social
licence is as important as both the operatingand environmental licences, to achieve asustainable financial return.
How material issues are incorporated
into investment decision making
We avoid investing in companies whichcannot demonstrate that they meet appropriate
standards or who are not making clear progress
towards meeting them in the context of theiroperating environment.
If issues are identified we will approach thecompany directly to seek clarification anddiscuss remedies. Generally we find constructive
discussions directly with senior executives orboard members in a one-on-one setting to
be productive and this helps build a stronger
long-term relationship. Formal letters to theboard are used where an informal approachhas failed.

ESG integration example:
Stillwater – US Precious Metals Mining
We identified a number of governanceissues within the operations of thecompany and its board, including a lackof transparency and sub-optimal
expenditure practices. Afterunsatisfactory discussions with the CEO,we wrote directly to the board expressing
our views. At the AGM we joined otherinvestors to vote for new board members.
The board and senior executive teamhave since been restructured. We
continue to engage with the new CEO,who has already made significant
improvements, and will be visiting theoperations in March 2014 to make afirst-hand assessment of the operations
under the new management.

Stewardship through engagement
and proxy voting
What proportion of companies areengaged with
The team engages on material ESG issues withall companies we are invested in. Material
issues are identified via company meetings,
site visits, sell-side research and by external
ESG service providers. Questions about safety
and environmental standards are part of the
discussion, as well as work place culture,staff turnover and interaction with thelocal community.
How issues for engagement are
identified
Engagement with companies is primarily carriedout directly in meetings with management aswell as indirectly via proxy voting. The process
involves highlighting areas for potential
improvement, encouraging disclosure on
ESG issues, and commending companies
that are making progress.
Where management does not respondadequately to engagement it may impact
negatively on the assessment of the stock andcould result in the team divesting its ownership.
How engagement activities influence
investment/proxy voting decisions
Contentious issues are discussed within theteam and with the Responsible Investment
team. In some instances we will seek
to engage with companies and external
subject matter experts, proxy advisers andother shareholders to better inform our views.
Analysts draw on their own experience of theResponsible Investment and Stewardship Annual Report 2013

company along with advice from CGI
Glass Lewis. The final decision is made in
consultation with the portfolio manager.
Reasons for all instances are logged where
the team vote against management oragainst CGI Glass Lewis’s recommendations.

Engagement and proxy voting
example:Barrick – Canadian Gold Mining
Internal analysis raised concerns over highlevels of remuneration for board
members, including in one instance asignificant sign-on bonus. We were also
concerned with what was regarded asundue influence by the Chairman and low
levels of independence amongst theboard. Following a period of very poor
performance and a major share issue toreduce debt, these concerns were raised
during a corporate meeting and provided
comments to a company adviser. We
understand that many shareholders
shared this view and also broughtpressure to bear. Shortly afterwards
the Chairman resigned and several
new board members have been elected.
We still have some reservations about
the independence of the board and willcontinue to engage with the company.

Stewardship in practice

Proxy voting examples:
HESS – US Energy
Having identified several governanceissues we voted against management infavour of various shareholder resolutions
at the last AGM. Specifically we voted
in favour of the nomination of an
independent director as Chairman.
An independent Chairman is better able
to oversee the executives of a company
and set a pro-shareholder agenda. We
also voted in favour of the eliminationof supermajority voting requirements
which can impede shareholders’ ability
to approve ballot items that are in
their interests. We believe that certain
entrenchment provisions such as
supermajority vote standards arenegatively correlated with firm value
and can act as impediments totakeover proposals.
CF Industries – US Agriculture
We voted against management infavour of several shareholder proposals.
The first was a proposal for a Political
Spending Report in the belief that
increased disclosure allows shareholders
to more fully assess risks presented
by the company’s political spending.
The second was a proposal in favourof publishing a sustainability report.
In line with our requirements under
the PRI, we encouraged the company
to produce an annual sustainability
report. The production of acomprehensive sustainability report
should provide shareholders withvaluable information regarding therisks and opportunities associatedwith the company’s operations.

The table below shows the team’s proxy voting
statistics for calendar year 2013.
In addition to the traditional statistics on voting
decisions, we have also included the percentageof resolutions where after detailed evaluation,
the team voted against both management
and proxy adviser’s recommendations.

Voted against
management %Voted
against Proxy
Adviser %Voted against
management
and Proxy
Adviser %Total
Resolutions

All

2379

96%

3%

2%

4%

8%

0%

Director elections

1484

97%

1%

2%

4%

10%

0%

Compensation
related resolutions(executive)
252

94%

5%

0%

6%

7%

1%

Shareholder
proposals

37%

63%

0%

39%

11%

8%

38

Vote
abstained %Proxy Voting Statistics

Global Resources

Voted for %Votedagainst %GlencoreXstrata
GlencoreXstrata is one of the largest mining
companies in the world with an extensive
portfolio of assets, including some locatedin complex socio-political countries suchas the Democratic Republic of the Congo,
Zambia and Kazakhstan.
When Glencore announced the merger
proposal with Xstrata we had meetings with
the Chairmen of both companies to express
views on the proposed transaction and to
make the case for an increased bid for Xstrata.
Despite the initial bid being recommended
by the Xstrata board, the team and othershareholders were ultimately successful inachieving a higher price for shares.
Subsequent to the deal closing the team met
with the CEO, organised a conference call withthe head of ESG and most recently we met
with members of the board and management
following publication of the first group
Sustainability Report. At each of these meetings
the team discussed governance practices,safety performance and environmental
standards building on the extensive internal
fundamental research. It was concluded thatthe company is improving standards in these
difficult jurisdictions, albeit from a low basein some instances, and has credible plansin place to improve further in the future.
First-hand site visits undertaken over recent
years in Africa and Kazakhstan have confirmed
positive progress.

23

Global Fixed Income and Credit> Inception Date 1986 > Location Sydney, Singapore, Hong Kong, Jakarta
Strategies
Asian Fixed Income, Australian Credit, Global
Credit (A$ floating rate return basis), Global
Credit (benchmark return comparison), High
Yield Credit, Australian Sovereign, Diversified
Fixed Interest, Global Sovereign, Inflation-Linked
Bonds and Emerging Market Fixed Interest

Head of Global Fixed Income and Credit
Tony Adams

ESG Committee member
Yen Wong
AREAS FOR DEVELOPMENT
Integration of new ESG research
providers into credit research work flow
and team training– Development of an ESG framework forsovereign issuers– Commitment to participate in the United
Nations Environment Programme FinanceInitiative and Global Footprint Network’s
second phase of Environmental Risk inSovereign Credits (E-RISC) research to assess
the materiality of natural resource related risks
in the context of sovereign credit risk analysis
KEY AREAS OF FOCUS– An increased awareness from emerging
market regulators of the impact of a varietyof ESG factors has increased the likelihood ofnegative impacts on credit quality. For example
in China, increased awareness of thenegative impacts of poor governance andenvironmental practices on the economy
has driven regulatory changes that arehaving a negative impact on some companies.

24

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
To identify key ESG risks the team use customised
ESG rankings as a starting point for assessments.
Analysts consider these alongside their own
research with reference to a variety of otherexternal sources.
How material issues are incorporated
into investment decision making
The team assigns a proprietary internal credit
rating (ICR) to every bond it invests in. The
ICR is a forward looking measure of default
risk and one of the key outputs of our credit
research process. It reflects all risks relevant
for that issuer including ESG risks. The ICR ison the same scale as ratings assigned by therating agencies but is often materially different
for individual issuers.
The ICR is used by all the credit portfolio
managers when making their decision to buy
or sell bonds, and to determine position sizefor the funds we manage. The Head of Credit
Research is responsible for ensuring the qualityof ESG inputs into the credit research process.
ICRs are also used by the passive funds
when making decisions to invest in bonds
ensuring that, even in the team’s passive
funds, ESG issues are integrated.
How issues are assessed(Fixed Income – Government)
We are still at an initial stage of incorporating
ESG issues into assessments for sovereignissuers. Many of the indicators and the data
used to arrive at the assessment of ESG risks
for corporates do not apply for certain
sovereign issuers.
For instance, country or corporate criteria
for assessing ESG risks do not apply forsupranationals. These issuers have a social orsustainable policy objective but there is limited
reporting on their ESG performance to enablebond investors to assess and monitor theserisks. The challenge is to find the appropriate
data in order to assess the risks for a range ofsovereign issuers and to understand how ESG
risks impact the risk of default for these issuers.

ESG integration examples:
Bumi Resources
In 2009 we reviewed Bumi Resources andbecause of ESG concerns, did not rate(or invest) in the credit. The main concern
related to the owner, Bakrie Group. Bakrie
Group defaulted on its USD2.5bn debt
during the Asian financial crisis in 1997
and it took over two years to restructure
the debt. There was also the issue of the
mudflow incident in East Java. Bakrie
Group controls PT Lapindo Brantas, theoperator responsible for the mudflow
incident (Aug 2006).
Since that time, further problems came tolight through 2012-2013 which means thebond now trades at 66c, i.e. a 43% loss
from the security we declined to invest in.
Adani Abbot Point Terminal (AAPT)In 4Q13, we reviewed Adani Abbot Point
Terminal (AAPT) and assigned an internalrating of ‘bb-’, which meant we did notinvest in the issue. The note from theanalyst stated:– Credit metrics are sub-investment grade(Debt/Capital 74%, Debt/EBITDA 8.6x,
EBITDA/Interest 1.5x), and equate
broadly to the bb-rating level. Also,
there is no operating history to gauge
any trends or volatility in the credit
profile over time.
– EDF of parent/controlling entity (AdaniEnterprises Ltd) is 3.34% (B-), and was
12% (CCC-) in mid-2012.
– Complex corporate structure – became
even more so after recent restructure(which saw introduction of Caymans
domiciled shell entities).
– Significant ESG issues (across all pillars,i.e., Environmental, Social, andGovernance).

Responsible Investment and Stewardship Annual Report 2013

Stewardship through engagement
and proxy voting
What proportion of companies areengaged with
The team’s key engagement is with banks
and counterparties to understand their ESG
risks and their approach to managing thoserisks. For example, climate change and otherenvironmental risks relating to the bank’sloan book and financing, and aspects of theirlending policies.
We do not engage systematically with issuers
as this continues to be a challenging area fordebt investors. However, we are increasingly
conducting targeted engagements and recently
undertook a pilot study to engage withsemi-government bond issuers in Australia,
including conducting its own research toassess the ESG risks faced (see case study
on page 35). This assessment is an input toinvestment decisions.
How engagements are recorded
All engagements are recorded in the team’s
counterparty review records.

What follow up occurs after company
meetings
Where we have engaged with counterparties,
a note of the meeting outcomes is recorded in
the following year’s counterparty review, alongwith our updated assessment. This forms partof the following year’s discussion so that we
can monitor progress over time.

Stewardship in practice
We assigned HSBC a “B-“ score on ESG. Whilethe company rates well on environmental
factors, the level of desired reporting is lacking
with the bank focused on reporting their own
environmental footprint, neglecting the risks
investors need to know about. These risks
relate to the bank’s exposure to climate change
and other environmental risks through its loan
book and financing activities. In the assessment
report we encouraged more meaningful
reporting on environmental risk exposures andrisk management, and have welcomed further
discussion regarding how environmental risks
are identified and managed by HSBC.

In response to the assessment, HSBC requested
a meeting to discuss how sustainability issues
are being managed specifically in relation totheir lending practices. The team met with
two HSBC representatives who described theirframework for assessing sustainability risk andpolicies covering certain sensitive sectors;
however it was not clear how this is applied
within group. We also expressed concerns
following the recent money laundering andbribery allegations, given only limited
information was available regarding thesettlement and how the company wasaddressing the issue internally.
We recently sent out our 2014 counterparty
review and HSBC has again been proactive inengaging to request a meeting. We see this as
positive and look forward to seeing how thesematters have progressed since last year.

25

Emerging Markets Debt
> Inception Date 2011 > Location London
Strategies
Emerging Markets Sovereign
and Corporate Debt

Head of Emerging Markets Debt
Helene Williamson

ESG Committee member
Manuel Cañas
AREAS FOR DEVELOPMENT
We have added a corporate debt specialist
to the team. As a result this will enable
us to increase our focus on this area anddevelop the team’s ESG analysis in relation
to corporate debt.
We aim to gain systematic access to data
regarding investment restrictions put inplace by national and supranational entities,
including national foreign policy measuresand UN sanctions among others.
KEY AREAS OF FOCUS– Politics and social unrest– Management of natural resources

26

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
Issues are identified and considered in thecourse of the team’s investment analysis. At
the core of the process is a Key Factor Model(KFM). The KFM is comprised of six factors, orangles, from which we approach the analysisof the issuers in our investment universe.
Three of these factors are intimately related
to RI and stewardship: fiscal policy, politics,
and structural reform.
We observe that investment restrictions put
in place by the national and supranational
entities relevant to their investment vehicles:
national foreign policy measures, United
Nations sanctions, European investment
restrictions, among others.
The majority of information needed in orderto analyse sovereign issuers is publicly available
through National Statistics Offices. However,
it is important for the analysts to spend timeon the ground and observe country conditions
first-hand to verify whether the statistics or thenews is giving the full picture. This time spenton the ground can include meetings withgovernment officials, but a great deal canalso be gauged simply by observing thesurrounding environment.
How issues are assessed for materiality
We have found that certain governanceindicators regularly produced by the WorldBank are relevant and statistically robust
variables (in multivariate time-regression
analysis) in determining a key measure ofsovereign risk: the spread over US Treasuries.
As part of the investment process, the teamconduct a valuation exercise that gives a broad
estimate of where one key variable like country
sovereign spreads should be at any given point
in time. It is a purely statistical tool that looks attime-series of a number of variables and feeds
a model that estimates the spread. Among thevariables used, the World Bank Government
Effectiveness index, is one of their Government
Indicators. We have tested a number of variables
for relevance and robustness, and this one inparticular, in combination with the other threevariables, seems to work best as a predictor
of country spreads.

How material issues are incorporated
into investment decision making
ESG issues are complex and while the issuesof fiscal policy, politics and structural reform
are systematically assessed through the KFM,
the approach to incorporating ESG factors isstill evolving.
Incorporating ESG into investment
decision making
Areas where we recognise the relevance andare working to incorporate ESG factors into
our investment process include:
Managing natural resources
For example, many countries in the emerging
world rely heavily on their natural resources
to keep their finances in good condition. Poor
decision-making in managing those resources,
like calibrating sustainable harvest ratios forfisheries, or the adequate replenishment of soil
nutrients in agriculture, or proper reinvestment
in exploration for non-renewables, could
potentially undermine a country’s export
output and, ultimately, their ability to source
the hard currency needed to service their debt.
Social issues
Likewise, social issues could reflect on thescores of the KFM’s politics and structuralreform. It is not uncommon for elections inemerging countries to be highly polarised.
The political spectrum can be quite broad,and so is the range of possible outcomeswhen key elections are held. In this context,
we try to gauge social cohesion, to ensure thatwhatever the election outcome, the government
will enjoy a broad and diverse base of support.
To the extent that it may not be the case, thewillingness to pay by the incoming government
could be challenged or questioned.
Structural reform
Structural reform, the third factor in the
KFM that is relevant for RI principles, can also
have an impact on a country’s social issues.
Consider a country where, in order to unleash
the productive potential of certain economic
sectors, the power amassed by labour unions
over decades may be challenged. What at firstsight may seem as a clear positive for the issuer’s
ability to service their debt may turn out tobe a destabilizing social factor with negative
consequences that may dominate the better
prospects for the economic outlook. A
sustainable balance between labour andcapital is vital to sustaining minimum levelsof political stability.

Responsible Investment and Stewardship Annual Report 2013

Country examples:
Venezuela – social unrest
The situation in Venezuela is currently
deeply concerning. Widespread riots inthe capital city of Caracas have resulted indeaths, yet they have received little media
coverage. The underlying problem is thatthe country’s foreign exchange reserves
are falling. This is a major problem for acountry in which the majority of food, andmany other staple goods, is imported. A
significant rise in the country’s Scarcity
Index indicated that supplies of basic andessential items were becoming stressed.
Unless the government can address thisit seems certain that social unrest
will persist and political stability becompromised as opposition to thegovernment intensifies. This in turn will
have a potentially negative impact forthe country’s government bonds.

Argentina – governance concerns
Argentina has over recent years
persistently understated inflation levels.
In fact this issue dates back to 2007, whenjust as a sharp increase in inflation due to
medical insurance was widely anticipated,data was unexpectedly withheld and theBoard of the National Statistics Officereplaced overnight; in itself raising clear
governance concerns. During visits to thecountry it has become abundantly clear
to us that inflation is being considerably
understated. As a result we have applieda higher risk premium to Argentinian
debt securities.

27

Australian Equities Core
> Inception Date 1993 > Location Sydney
Strategies
Australian Equities, Long Short, Tax Aware,
Equity Income, Geared, Indexed, Small
Companies, Small Companies Long Short

Head of Australian Equities, Core
Matthew Reynolds

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
The Australian Equities, Core team has adopted
a bottom-up approach to identifying key ESG
risks. Our internal analysis is supplemented
by company disclosures, media andexternal research.
How issues are assessed
Analysts consider ESG and sustainability issues
as one of six factors in the stock researchand selection process. A consideration of
a company’s sustainability and governancepolicies and practices is therefore an explicit
part of the stock research process.
How material issues are incorporated
into investment decision making
Where ESG and sustainability factors are
determined to have a material impact on
profitability, they are quantified and impliedin all other factors; most directly in thevaluation and financials of the stock.

ESG Committee member
Robin Balcomb
AREAS FOR DEVELOPMENT
We are:– Developing ESG dashboards for eachcompany to support analysis,– Improving the portfolio level monitoringof ESG risks,– Increasing engagement activities andfollow-up with companies on issues
impacting on sustainability of earnings
such as unburnable carbon.
KEY AREAS OF FOCUS– Corporate governance focus areas arelikely to include executive remuneration
and board structure.
– Management of environmental and social
issues in supply chains will also be a focus
area following a series of significant incidents
in the last few years.
– The potential risk of assets becoming ‘stranded’
flowing from both the physical impacts ofclimate change and enforcement of a carbon‘budget’. See page 34 for more information.

28

ESG integration example:
Origin Energy
Safety does not feature prominently or
regularly in presentations to the market.
This contributed to concerns about safety
and risk management in the analyst’s
overall stock recommendation.
Subsequently safety and risk management
issues have been tabled for ongoing
discussion in meetings with management.

Stewardship through engagement
and proxy voting
What proportion of companies areengaged with
We engage with all companies held in our
portfolios and many others in the investment
universe and beyond. We collectively
completed more than 2,000 company
visits during 2013.
How issues for engagement are
identified
Issues for engagement are identified throughthe detailed company research and analysis
described above and have been an explicit
component of the Australian Equities,
Core investment process since 2007.

How engagements are recorded
All company visits are recorded in a centralised
database available to all team members. ESG
comments are included as a separate field
and are easily identified.
What follow up occurs after
company meetings
Progress on ESG issues is monitored by analysts
through a review of the company visits historical
record. Subsequent meetings with management
provide opportunities to monitor progresson particular topics of concern.
How engagement activities influence
investment/proxy voting decisions
Engagement activities are designed to improve
our understanding of the policies andpractices of companies and assess theireffectiveness in managing ESG risks. The
outcomes of our engagement with companies
flows through to proxy voting decisions and,ultimately, investment decisions.

Engagement and proxy voting
examples:Leighton Holdings
We engaged the company on theimplementation of a new employee KPI
system for the entire group, facilitated by
the appointment of a new Chief Human
Resources Officer. This is expected to havea positive impact on the company culture
and the quality of new work being won,
although we expect this will take time toflow through to financial results.
Fortescue Metals GroupWe voted against the appointment of anominee to the board of directors, as theirprincipal experience was as an employee ofMacquarie Bank. As Fortescue paid material
fees to Macquarie Bank in the period we did
not believe the nominee was sufficiently
independent to safeguard minority
shareholder interests. More broadly,
we believe that Fortescue Metals Group
have a director independence issue andhave raised this with management.

Responsible Investment and Stewardship Annual Report 2013

Stewardship in practice
BHP Billiton
BHP Billiton’s sustainability rating wasdowngraded from a positive to neutralreflecting concerns on a number ofsustainability issues, including community
relations at the Cerro Matoso nickel operations
in Columbia; a concentrate spill at zinc andcopper mine Antamina in Peru; an ongoing US
Department of Justice corruption investigation;and the Papua New Guinean Parliament revisiting
the Ok Tedi agreement, which grants BHP
immunity from legal action for environmental
damage caused by the mine’s operations.
Although BHP Billiton has good corporate policies
and reporting in place for environmental andsocial issues, the frequency of recent incidents
is of concern to the team. A number of recent
sustainability related issues raised concernsthat BHP Billiton will be increasingly exposed
to negative media, which could damage its
image and reputation.
Increased activity in onshore drilling in shalewells in Texas, US, further exposes BHP Billiton
to negative public relations issues due toheightened public concern around the negativeenvironmental and social impacts from“fracking”2. These will be monitored closely.
While Texas is a very oil and gas friendly
jurisdiction, suggesting these issues will notmaterially affect operations, meetings were
nevertheless arranged to discuss these issues
with the company and dialogue is ongoing.

Proxy Voting Statistics
The table below shows the team’s proxy voting
statistics for calendar year 2013.
In addition to the traditional statistics on voting
decisions, we have also included the percentageof resolutions where after detailed evaluation,
the team voted against both management
and proxy advisers’ recommendations.

Voted against
management
and Proxy
Adviser %Australian
Equities Core

Total
Resolutions

Voted for %Votedagainst %Voteabstained %Voted against
management %Voted
against Proxy
Adviser %

All

1523

92%

8%

0%

7%

6%

3%

Director elections

689

93%

7%

0%

7%

6%

2%

Compensation
related resolutions(executive)
517

90%

10%

0%

10%

8%

5%

Shareholder
proposals

33%

67%

0%

33%

33%

0%

3

2 Fracking or hydraulic fracturing is the forcing open of fissures in subterranean rocks by introducing liquid at high pressure in order to extract oil or gas.

29

Australian Equities Growth> Inception Date 1989 > Location Sydney
Strategies
Australian Equities, Growth, Imputation, Long
Short, Small-mid Cap, Micro Cap

Head of Australian Equities, Growth
Marcus Fanning

ESG Committee member
Alex Gallard
AREAS FOR DEVELOPMENT
We are:– Ensuring each stock covered in the coming
months will have its valuation summary page
include ESG ratings to provide a flag for low
ESG ratings so portfolio managers andanalysts can easily review without having
to access the company reports manually.
– In the process of streamlining our proxyvoting system by moving from a manual toan automated process.
KEY AREAS OF FOCUS– Board governance, particularly with respect
to remuneration, environmental issues
and diversity are likely to be a key issue
for Australian-listed companies in 2014.
– We expect the key issues to be similar toprevious years. Our focus will remain on
board and management incentives andour alignment with clients’ interests.

How ESG factors affect the team’s
investment decisions
How relevant issues are identified
ESG risks are primarily identified by theteam’s own internally-driven research, which
is based on a rigorous company engagement
programme. Analysts assess how companies
are managing ESG issues and encourage theentities in which they invest to improve their
ESG performance and disclosure.
How issues are assessed
This analysis is vigorously stress tested andscreened under a peer review process. This
process seeks to highlight the analysts’ andteam’s conviction in the target price andrecommendation.
ESG considerations are used to help develop
quantitative and qualitative risk assumptionsin analysts’ assessment of industries andstocks, and are overlayed in target priceand stock recommendations.

ESG integration example:
Sims Metal Management
There were instances of poor capital
allocation and value-destructive
acquisitions at the company which placed
the balance sheet at risk and manifested
in write-downs.
We engaged in dialogue with thecompany board and the Chairman about
concerns on the strategy and future of
the company under the CEO’s leadership.
The CEO was ultimately replaced, and theholding was retained in the stock as wecame to the view that the management
team had a renewed focus and direction.

Stewardship through engagement
and proxy voting
What proportion of companies areengaged withWe undertake active engagement with many
companies’ senior management and boards.
We take the opportunity to raise material ESG
issues in these discussions.
How issues for engagement are
identified
We seek to gain comfort that senior
management and company boards are awareof, and accountable for, the managementof material ESG issues.

30

Where there is concern that material issues
are not being appropriately addressed, an
engagement strategy is developed for theissue. This may ultimately flow into the proxyvoting and investment decisions.
How engagements are recorded
Company engagements are not currently
recorded. We are in the process of
implementing a database of company
engagements that will be available to allteam members by the end of 2014.
How engagement activities influence
investment/proxy voting decisions
Engagement activities are an importantpart of the fundamental, bottom-up,
analytical framework used to assess theinvestment universe.
All proxy voting resolutions are reviewed,
taking into account all relevant factors, andan appropriate recommendation is made inline with the corporate governance guidelines
and principles. The exercising of voting rights
is always executed in the belief that it is anasset of and in the best interests of investors
and clients to do so.

Engagement and proxy voting
example:David Jones
The CEO unexpectedly resigned, citing
personal reasons for his departure. We
were concerned about the timing andnature of the resignation, and held
multiple discussions with the Chairman
and senior management to get a clearer
understanding. Subsequently we voted
against the board members at thecompany’s Annual General Meeting,believing the board composition was
sub optimal, as there was no retailexperience on the board.
We did, however, vote in favour ofthe company’s resolution concerning theRemuneration Report where some othermajor investors voted against in protestof the board. We carefully review eachresolution on its merits, and didn’t believea vote against was in the best long-term
interests of the company or clients.

Responsible Investment and Stewardship Annual Report 2013

Stewardship in practiceBoral
In mid-2010, Boral did not specify any hurdles
for their short-term incentives (STIs), while
long-term incentives (LTIs) were wholly linked
to total shareholder return (TSR) relative to the
ASX 100. Following the appointment of a new
Chairman, STIs were wholly linked to earnings
before interest and tax (EBIT) growth. LTI
hurdles remained unchanged however.
In 2011, the newly-appointed CEO announced
a change in strategy and made several
acquisitions in a short space of time, spending
more than AUD850m. The largest of these
was the acquisition of 50% of the Lafarge
plasterboard company in Asia for $600m at aforecast EBITDA multiple of 11.1x; a very full
price which significantly increased the leveragein the business.

Throughout 2011 and 2012, we had several
conversations with the Chairman around
remuneration. It was the view that the lack of
hurdles relating to return on funds employed(ROFE) was encouraging management
behaviour to acquire at any cost, even as
its core markets of Australia and the US wereon a cyclical downturn.
To try and resolve the matter we wrote a letterto the board explicitly recommending thatthey divest the recently acquired Asian joint
venture business, de-gear the company andfocus on their core Australian and US franchises.
We also persisted with the view that there
needed to be ROFE hurdles for management.
In the 2013 remuneration report, the company
altered the hurdles. LTI hurdles are now based
off ROFE (33%) and relative TSR (67%). Whilst
still not ideal, we believe this is a stepin the right direction. In October 2013, thecompany sold down its 50% of the Lafarge

business to USG Corporation for roughly
AUD$500m at an EBITDA multiple of 10.6x.
Whilst below the 11.1x that they recently
paid, it de-geared the balance sheet andallowed the company to focus on its core
Australian and US businesses.
While these outcomes are unlikely to be as adirect result of our engagement, we hope tohave had some part to play towards achieving
a positive outcome for the long-term benefitof the company and end investors.

Proxy Voting Statistics
The table below shows the team’s proxyvoting statistics for calendar year 2013.
In addition to the traditional statistics
on voting decisions, we have also included
the percentage of resolutions where after
detailed evaluation, the team voted against
both management and proxy advisers’
recommendations.

Voted against
management
and Proxy
Adviser %Australian
Equities Growth

Total
Resolutions

Voted for %Votedagainst %Voteabstained %Voted against
management %Voted
against Proxy
Adviser %

All

941

94%

6%

0%

5%

5%

0%

Director elections

407

96%

4%

0%

4%

6%

0%

Compensation
Related resolutions(executive)
340

93%

7%

0%

7%

4%

1%

Shareholder
proposals

50%

17%

33%

67%

0%

0%

6

31

Emerging Practice – Our New FrontiersIndonesian Equities
Indonesia is a dynamic developing market where
basic shareholder protections and governancepractices which would be found in otherdeveloping markets are absent or fairly new.
Consequently, of all our investment teams, ourIndonesian equities team have faced some of
the most significant challenges in
implementing RI practices.
Even basic stewardship responsibilities likeproxy voting are difficult in Indonesia as noticeof meetings have very little information on
resolutions, with shareholders expected toattend meetings and vote with almost no
background information as to the issues.
In 2013 our Indonesian Equities teamcelebrated its 10-year anniversary. Over thattime their efforts to integrate ESG factors into
investment decision-making remains as unique
as its all-female investment team.

32

The team’s investment process incorporates
EGS factors by:– allocating an ESG score for large
companies, and– ensuring that the team has regularmeetings with the management of smaller
companies and engaging on ESG issues
wherever possible.
As part of its RI development the team has
undertaken to provide more detailed
explanations of their ESG scores and where
sufficient information is available, votecompany proxies.
To support the Indonesian team, the RI teamis working on providing them better accessto ESG research through GMI, Sustainalytics
and RepRisk, and encouraging the providers
to expand coverage wherever possible. The
RI team will also be helping the team improve
proxy voting processes with the help of our

proxy voting advisor CGI Glass Lewis. And
lastly, both the Indonesian Equities team and
FSI more broadly will continue to support the
Asian Corporate Governance Association in its
excellent work on improving corporate
governance practice across Asia, including
in Indonesia.
The experience of our Indonesian Equities
team shows us that no matter the market,
improving RI practices is possible. Over time
we believe this focus and leadership in theIndonesian market will provide us aninvestment edge as the market inevitably
recognises the impact of these factors on
long-term performance.

Responsible Investment and Stewardship Annual Report 2013

Head of Indonesian Equities
Hazrina Dewi

Q&A with our Head of Indonesian
Equities, Hazrina Dewi
1. What do you find the most challenging
aspect of integrating ESG factors into
your investment decisions?
Information, or the lack of it, is our main
challenge. Even though some companies
do issue sustainability reports, their reports
usually only cover their corporate social
responsibility (CSR) activities rather thanaddressing ESG risks and opportunities.
We appreciate their effort on CSR activities,
although however we do feel the disclosures
are mostly cosmetic.
Companies often act as if once they have done
their share in CSR their ESG responsibilities arecompleted. To make it worse even investor
relations personnel sometimes have a lack ofunderstanding on what ESG means (risk) andhow the company they represent has carriedout their ESG responsibilities. As a result we areheavily dependent on market information to
make sure there are no ESG related shocks.
2. Given the difficulty in obtaining good
information, what are some of thethings you look for when assessing
companies on their ESG performance?
Governance is our main consideration.
Access to company information and investor
relation responses are what we are looking
for. Take two companies from the same
industry for example; we would put premium
valuation on the one that answers our phone
calls and replies to our emails promptly.
Consistency of information is also importantas the communication needs to happen inboth good and bad times. We usually makequarterly contact with companies whose
shares we are holding.

3. Which is the most sustainable
Indonesian company
in your portfolio and what does
this add to the investment case?
This is a very hard question for a market
such as ours. Most listed companies areeither family related or state owned. Astra
International is a company that has beenable to perform for a long period of time andtransformed from a family business to becomea professionally managed conglomerate.
Having Jardines as majority shareholders
certainly helped the company to adopt global
standards of practice, at least in governance.
We believe they are working hard on the otheraspect of ESG as well, although having mining
and plantations as one of its many businesses
makes the job harder.
4. When trying to discuss ESG issues
with Indonesian companies what is
the general response like, and can
you give an example of a company
that was open to discussing their
ESG performance?
Our difficulty was not caused by companies
hiding their ESG problems. Rather it is theirlack of understanding about ESG that was
the main culprit. For example not all investor
relations departments of property companies
can answer our questions on their waste
management policy. In fact none of theproperty companies we talked to know how
much of their waste is recycled. Therefore
we have a lot of work to do to make surethat companies integrate ESG information
into their investor presentations in addition
to operational and financial information.
We keep asking the right questions andhoping one day they will have the answer
in hand rather than telling us that they will
get back to us with the information. Better
yet would be to give us the information
without us having to ask them!

33

Case Studies

Working Group – “Stranded Assets”
BackgroundIn 2010, international governments formally
set a long-term goal to limit global warming
to below 2 degrees centigrade, requiring astabilisation of the atmospheric concentrationof greenhouse gas (GHG). More than 80% of
the world’s growing energy demand is currently
met by fossil fuels; however, a significant bodyof scientific research states that to achieve the2 degree goal, fossil fuel related GHG emissions
will have to be significantly reduced.

According to the International Energy Agency,
the world is currently on a path to raise theatmospheric concentration of GHGs to a level
corresponding with warming of 3.6 degrees
or more. The World Bank recently warned that
there could be no certainty that adaptation
to this level of climate change is possible andthat a “4 degree warmer world can, and must,
be avoided”.
In 2009, research by the Potsdam Institutecalculated that to reduce the chance of
exceeding 2 degrees warming to 20%, theworld should adopt a carbon budget equivalent
to 565 GtCO2 emissions from 2009 and 2050.
At the current rate this would be reached inapproximately 16 years.

In 2013 this work was reframed in an investment
context by the Carbon Tracker Initiative whichfound that if known fossil fuel reserves are used,humanity would exceed the carbon budget byseveral times. Conversely, if the carbon budget
were to be implemented, there is a risk ofsignificant write-downs to the value of thesefossil fuel reserves causing them to become‘stranded’. The carbon budget approach has
subsequently been endorsed in the October
2013 Intergovernmental Panel on Climate
Change’s fifth assessment report.
Our response
In considering this issue our Global Resources
team has taken the lead by engaging withcompanies within its portfolios that they
consider at risk. Through this process theteam is collecting specific information on
how companies are considering the issue andwhat strategies they are developing to mitigate
and manage the potential business risks.
In December 2013 the ESG Committee formeda stranded assets working group to explore andbetter understand the investment implicationsof the complex issues and debates aroundcarbon budgets and the risk of stranded assets.
The group’s work will involve:– Literature review: The group will collect andassess the available literature on the issue.
– Exposure assessment: The group will develop
a framework for determining which assets
may be most at risk. The framework will be
used to determine the risk exposure acrossour global investment portfolios.
– Options assessment: The group will (at ahigh-level) consider the range of options
investment teams can take to understand,evaluate and manage any perceived risks forthe long term protection of our clients assets.
To date the literature review has been
completed and the former head of Deutsche
Bank Climate Change Advisors, Mark Fulton,
presented at the first meeting of the group.
We expect this work to be complete by the
middle of 2014.

34

Responsible Investment and Stewardship Annual Report 2013Engaging with Semi Government
Bond issuers
In April 2013, the Fixed Income & Credit
team established, with the support of the RI
and Strategy team, a semi-government bondengagement program. This engagement teamdeveloped an approach for assessing andengaging with Australian state governments
on ESG risks and opportunities.
Early on in the process the limitations of
traditional ESG risks assessments for semi
government issuers were recognised, including:– how and whether individual ESG issues will
impact the performance of the bonds,– assessing how and when different risks mightmanifest themselves, and– the need to take a more systems-based
approach to the assessment due to therelationships between many of the issues.
As a result, rather than assessing and seeking toquantify the impact of individual issues, the team
decided to explore and fully understand thegovernance and decision-making frameworks
used by state governments. In particular wewere interested in those decisions which
required trade-offs between different
stakeholder groups and/or between long-termand short-term outcomes.
To pilot the framework we chose to review theAustralian state governments of Queensland
and New South Wales. These states were chosen
due to our existing good relationships with therelevant treasury departments.
Examples of ESG issues we wished to explore
included:– Mining approvals– Social disadvantage and inequality– Infrastructure planning– Biodiversity loss
– Climate change adaptation– Gaming machines

various other government departments andmet with the treasurer of NSW. We found thatonce our purpose and objectives wereexplained there was a willingness and openness
to discuss the issues. Whilst there werechallenges along the way, for example,
sourcing the most relevant information,a good platform for future engagements
was established.
With the first round of pilot discussions
complete the team are now planning to:– roll out the framework to other
Australian states– inviting other debt investors to engage withthese state governments via the PRI clearing
house system, and– monitoring the issues identified for eachstate and incorporating annual checks in our
discussion of the issues in future meetings.
More information on this engagement
programme will be published during 2014.

In our meetings and correspondence we met
with treasury officials, corresponded with35

Industry Collaboration

During 2013 we continued to support a variety
of industry initiatives which promote andraise standards for responsible investors aswell as help us improve our own practices. We
participate in initiatives either through financial
contributions, intellectual capital contributions,or both. For some we will lend our name insupport of initiatives that are advocating for
better practices, while for others we will takea much more active role, including in thegovernance of the organisation.
We are very proud and strong supporters of
the initiatives we participate in, however likeany other aspect of our business it is importantto review our support to ensure that it remainsaligned with our strategic priorities and that
we are making best use of the limited
resources available for this purpose.
We also are aware, and have raised concerns in
the markets where we are most active, that asgroups with related objectives have developed
and grown over time, they have not always
communicated or collaborated with each otherwhich has resulted in either overlaps or gaps
developing. This is of particular concern where
there are overlapping membership bases. We
have, and will continue to, encourage thegroups we support to communicate moreso that good coverage over what are a broad
range of complex and ever-changing issues
can be maintained and encouraged.
For this reason in 2014 we will perform a
strategic review of collaborative initiatives while
also identify any gaps which we believe need tobe filled. This review will ensure we are allocating
resources effectively, but most importantly allow
us to engage with different groups in a more
effective way. We expect this review to becompleted in the second half of 2014.

Key Collaborations
Global Initiatives

Association for Sustainable andResponsible Investment in Asia

PRI
– Infrastructure Steering Committee

Green Building Council of Australia– Member of the Board of Directors– Clearinghouse Steering Committee

Investor Group on Climate Change– Member of the Committee of Management– PRI Country Network Steering Committee(Australia)– Sustainable Palm Oil Working Group– Chair of the Property Working Group– Reporting Framework Advisory Group– Member Water Working Group

United Nations Environment Programme
Finance Initiative– Member of the Property Working Group

Property Council of Australia (PCA)– Member of the National Sustainability
Roundtable– Member of the Asset Management
Working Group– Member of the PCA (NSW Division)
Sustainable Development committee– Member of the Supply Chain Working Group.

Better Buildings Partnership– Member of leadership panel

Investment Leaders Group– Founder Member
Integrated Reporting– Member of Pilot Program Investor group (UK)– Business Reporting Leaders Forum (Aust)
Asia Pacific

NABERS (Shopping Centres) TechnicalAdvisory Group (TAG)– Member
NABERS (Multi-Tool) TAG– MemberFinancial Services Council– Member of the Investment Committee

GBCAB Greenstar Performance Technical
Working Group– Member– Member of the ESG Working Group

EMEA

Responsible Investment Association
Australasia– Chair

Institutional Investor Groupon Climate Change– Member– Member of Governance Committee

UK Sustainable Investment Forum– Board Member

Infrastructure Sustainability Councilof Australia– First Deputy Chair and Director
ESG Research Australia– Management Committee Member
Association of Superannuation Funds
of Australia– Member of ESG Working Group36– Chair of the Research Working GroupEUROSIF– Board Member
Signatory initiatives– Carbon Disclosure Project– Water Disclosure Project– Extractive Industries Transparency Initiative

Responsible Investment and Stewardship Annual Report 2013

Responsible Investment Team Contacts

Will Oulton
Global Head, Responsible Investment
will.oulton@ﬁrststate.co.uk+44 (0)20 7332 6529
Pablo Berrutti
Head of Responsible Investment, Asia Paciﬁc
pablo.berrutti@colonialﬁrststate.com.au+61 2 9303 0433
Elizabeth Dourof
Team Assistant, Responsible Investment
elizabeth.dourof@ﬁrststate.co.uk+44 (0) 20 7332 6801

We welcome your comments and feedback –please email
stewardship@ﬁrststate.co.uk

37

Appendix 1 – Proxy Voting and Engagement Summary

2011

2012

2013

Company meetings

1539

1547

1466

Resolutions voted on

15116

15647

15115

Resolutions supported

13374

14253

14083

Resolutions against

1497

1287

929

Resolutions abstained

93

103

103

Director election

6745

7044

6851

Executive remuneration

533

478

512

Non-executive remuneration

509

488

501

Issue of new shares

283

232

207

Remuneration Report

744

780

749

Financial scheme/reconstruction of capital

62

67

35

Constitution/articles of association change

554

578

479

Appoint/Reappoint auditor

877

933

896

Takeover or merger speculation

98

121

67

Shareholder proposals

115

139

150

Shareholder proposal - Environment

27

29

27

Shareholder proposal - Social

57

58

51

4512

4700

4590

All other proposals
Number of company meetings involving director elections / re-elections

1150

1165

1127

Number of resolutions involving director elections/re-elections

6745

7044

6851

Director elections/re-elections supported

92.4%

93.4%

95.6%

Director elections/re-elections against

6.9%

5.7%

3.6%

Director elections/re-elections abstained

0.7%

0.9%

1.0%

Number of company meetings involving remuneration reports

523

573

567

Number of resolutions involving remuneration reports

744

780

749

Remuneration reports supported

80.4%

86.7%

89.3%

Remuneration reports against

19.6%

13.1%

10.4%

Remuneration reports abstained

0.0%

0.3%

0.3%

Number of company meetings involving executive remuneration reports

223

224

226

Number of resolutions involving executive remuneration reports

533

478

512

Executive remuneration reports supported

87.2%

83.3%

93.8%

Executive remuneration reports against

12.6%

16.5%

6.3%

Executive remuneration reports abstained

0.2%

0.2%

0.0%

Number of company meetings involving non-executive remuneration reports

359

348

344

Number of resolutions involving non-executive remuneration reports

509

488

501

Non-executive remuneration reports supported

96.3%

95.3%

96.8%

Non-executive remuneration reports against

3.3%

4.3%

2.6%

Non-executive remuneration reports abstained

0.4%

0.4%

0.4%

38

Responsible Investment and Stewardship Annual Report 2013

Appendix 2 – Companies Subject to theCluster Munitions Policy

Cluster Munitions & Anti-Personnel
Mines Policy
During 2013 we launched our policy on cluster
munitions and anti-personnel mines. This policy
states that we will not invest our clients’ money
in securities, whether equity or debt, issued bycompanies that are involved in the manufactureof cluster munitions or anti-personnel mines.
This policy is applied globally across all our asset
classes, including index strategies.

The list of companies as published by the Dutch
Authority for Financial Markets has been
adopted as our starting point for the purposesof the exclusion policy. Companies on the
exclusion list at December 2013 are:
– AFM Risico-Radar

The on-going monitoring of excluded
companies is undertaken by our ESG research
providers and is reviewed by the GRIC andthe ESG Committee on a regular basis.

– Aeroteh– Alliant Tech
– Aryt Industries– Ashot Ashkelon– Hanwha Corporation– Kaman Corp
– Lockheed Martin Corp
– Norinco– Poongsan Corporation– Singapore Technologies– Splav State Research– Textron

39

Appendix 3 – GRIC and ESG Committees

Global Responsible Investment Committee members
Name

Title

Location

Mark Lazberger (Chairman)

Chief Executive Officer

SydneyChris Turpin

Regional Managing Director, EMEA & Global Head of ProductLondonPaul Griffiths

Chief Investment Officer, Fixed Income and Credit

LondonKanesh Lakhani

Head of Distribution, EMEA & Global Consultant Relationships

LondonDavid Dixon

Chief Investment Officer, Equities

SydneyDavid Gait

Senior Portfolio Manager, First State Stewart

Edinburgh

Stephen Deane

Investment Analyst, First State Stewart

Edinburgh

Niall Mills

Head of Infrastructure Asset Management, Europe

Joe Fernandes

Head of Global Investment Solutions GroupMartin Lau

Director Greater China Equities, First State Stewart

Alexis Ng

Managing Director, South East Asia & Head of Distribution, Asia

Singapore

Caroline Gibson

Head of Human Resources, Asia & Japan

Hong Kong

Anneliese Diedrichs

Corporate Communications Manager

Hong Kong

Harry Moore

Head of Sales, Australia and New Zealand

Melbourne

Hario Soeprobo

President Director, Indonesian Equities

Toni Spencer

Head of Credit Research – Fixed Income and Credit

SydneyMark Rogers

Associate Director Asset Management, Direct Infrastructure

SydneyWill Oulton

Global Head, Responsible Investment

London

Pablo Berrutti

Head of Responsible Investment, Asia PacificSydneyLondonSydneyHong Kong

Jakarta

ESG Committee members
Name

Title

Joseph Daguio

Investment Analyst, Global Property Securities

SydneyYen Wong

Manager, Fixed Income & Credit

SydneyManuel Canas

Senior Portfolio Manager, Emerging Market Debt

LondonTal Lomnitzer

Portfolio Manager, Global Resources

LondonLizzie Reid

Assistant Portfolio Manager, Fixed Income & Credit

SydneyGokce Bulut

Investment Analyst, First State Stewart

Robin Balcomb

Portfolio Manager, Structured Equities, Australian Equities Core

Alex Gallard

Senior Investment Analyst, Australian Equities Growth

SydneyMark Rogers (Chairman)

Associate Director Asset Management, Direct Infrastructure

SydneyHazrina Dewi

Head of Equities, Indonesia

Jakarta

Rebecca Sherlock

Senior Investment Analyst, Global Listed Infrastructure Securities

London

Pablo Berrutti

Head of Responsible Investment, Asia PacificSydneyWill Oulton

Global Head, Responsible Investment

London40

Location

Edinburgh
SydneyAucklandFirst State Investments
Level 3, 33–45 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
Telephone: +64 9 448 4922
Facsimile: +64 9 486 7131
Edinburgh
First State Investments
23 St Andrew Square
Edinburgh EH2 1BB
United Kingdom
Telephone: +44 (0) 131 473 2200
Facsimile: +44 (0) 131 473 2222
FrankfurtFirst State Investments
Westhafen Tower
Westhafenplatz 1
60327 Frankfurt a.M.
Germany
Telephone: +49 (0) 69 710456 - 302

www.firststateinvestments.com

FP856_0314

Hong KongFirst State Investments
6th Floor
Three Exchange Square
8 Connaught PlaceCentralHong Kong
Telephone: +852 2846 7566
Facsimile: +852 2868 4742
JakartaFirst State Investments
29th Floor
Gedung Artha Graha
Sudirman Central Business District
Jl. Jend. Sudirman Kav. 52–53
Jakarta 12190
Indonesia
Telephone: +62 21 2935 3300
Facsimile: +62 21 2935 3388
LondonFirst State Investments
3rd Floor
30 Cannon Street
London EC4M 6YQ
United Kingdom
Telephone: +44 (0) 20 7332 6500
Facsimile: +44 (0) 20 7332 6501

Melbourne
Colonial First State Global
Asset Management
Level 18, Tower One,
Collins Square
727 Collins Street
Melbourne VIC 3008
Australia
Telephone: +61 3 8628 5600
Facsimile: +61 3 8628 5608
New York
First State Investments
599 Lexington Avenue, 17th Floor
New York, New York 10022
United States of America
Telephone: +1 212 848 9200
Facsimile: +1 212 336 7725
Paris
First State Investments
14, avenue d'Eylau
75016 Paris
FranceTelephone: +33 1 73 02 46 74

SingaporeFirst State Investments
1 Temasek Avenue#17–01 Millenia Tower
Singapore 039192
Singapore
Telephone: +65 6538 0008
Facsimile +65 6538 0800
SydneyColonial First State Global
Asset Management
Ground Floor
Tower 1 Darling Park
201 Sussex Street
Sydney NSW 2000
Australia
Telephone: +61 2 9303 3000
Facsimile: +61 2 9303 3200
Tokyo
First State Investments
8th Floor,
Toranomon Waiko Building
12–1, Toranomon 5-chome
Minato-ku
Tokyo 105-0001
Japan
Telephone: +81 3 5402 4831
Facsimile: +81 3 5402 4839