Overview of SSGA Stewardship Approach and Activities March 2015 Rick Lacaille Global Chief Investment Officer Mirza Baig Vice President of Corporate Governance EMPRES-4470 1 Introduction to State Street Global Advisors EMPRES-4470 2 A Leading Provider of Financial Services to Institutional Investors SSGA is a global leader in asset management relied on by sophisticated institutions • The investment management arm of State Street Corporation, one of the world’s leading providers of financial services to institutional investors, with a heritage dating back over two centuries • Entrusted with over $2.45 trillion* in assets worldwide worldwide for their investment • Clients include governmental entities, corporations, endowments and foundations, third party asset gatherers, multi employer plans, pension funds and sovereign wealth funds needs • ETF industry pioneer and leader since 1993 with $465.9 billion* in global AUM State Street Global Services A global leader in asset servicing A global leader in asset management State Street Global Markets State Street Global Exchange A global leader in research and trading A global leader in data utilization and management As of December 31, 2014 * This AUM includes the assets of the SPDR Gold Trust (approx. $27.3 billion as of December 31, 2014), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. GLSTND-1740 3 SSGA — A Trusted Partner Active, enhanced, fundamental, passive, pure alpha and multi-asset class solutions $2.45 Trillion1 in Assets Under Management* Multi Asset Class Solutions3 $126.9 B 100 Alternative Investments2 $128.3 B 90 80 70 74% 60 Cash4 $398.9 B 50 56% 40 Equity $1,474.7 B 30 Fixed Income $319.3 B 20 10 SSGA clients with two or more strategies* 0 Percentage of new business from existing SSGA clients* $465.9 Billion in Global ETF Assets Under Management Equity $388.2 B Fixed Income $38.4 B Cash $1.3 B Alternative Multi Asset Investments Class Solutions $37.7 B $250.4 M *As of December 31, 2014 1 This AUM includes the assets of the SPDR Gold Trust (approx. $27.3 billion as of December 31, 2014), for which State Street Global Markets, LLC, an affiliate of State Street Global Advisors, serves as the marketing agent. 2 Includes Absolute Return, Commodities, Currency, Company Stock, Global Multi Strategy, Hedge Fund of Funds, Managed Futures, Private Equity and Real Estate 3 Assets in Solutions are not counted in the underlying asset class 4 Includes securities lending collateral, cash, and money market GLSTND-1520 4 Stewardship Approach & Highlights EMPRES-4470 5 Stewardship — Highlights SSGA Capabilities Stewardship Overview SSGA Investment Committee oversees Stewardship strategy Corporate Governance Team based in Boston and London Collaboration between global investment teams and strategies ESG Active participant in global and regional industry bodies and initiatives • Senior executive commitment and involvement establishing strong ‘tone from the top’ • Detailed global and regional voting and engagement policies • Voting & engagement centralised across all funds and strategies enabling SSGA to maximise influence • Screening methodology prioritises Stewardship activities to maximise value added for clients • Voted over 14,000 meetings across 68 markets in 2014 • Engaged with over 600 companies on ESG issues in 2014 • Signatory to the UN PRI and UK & Japan Stewardship Code Stewardship approach guided by objective of maximising long-term value for clients As of 31 December 2014. EMPRES-3885 6 SSGA Stewardship Strategy & Philosophy Value Driven - Companies that adopt robust governance and sustainability practices, should be better positioned to generate long-term value and manage risk. Long-Term Holders - SSGA is predominately a passive investment manager and perpetual holder of listed companies. Therefore the informed exercise of voting rights coupled with value-driven engagement is the most effective mechanism of creating value for our clients. Unified Voice - All voting and engagement activities are centralised irrespective of investment strategy or geographic region. Consolidating and harmonising our Stewardship activities, allows us to maximise influence with companies. Market-wide Responsibilities – SSGA’s exposure to entire markets/indices means Stewardship activities must address both micro and macro concerns. SSGA complements specific company engagement with open communication with regulators to encourage robust ESG market standards and the development of more efficient capital markets. Dedicated ESG Specialists – SSGA has a team of governance specialists, based in Boston and London, responsible for executing proxy voting and engagement activities on a global basis. The CG Team is supervised by SSGA’s Investment Committee (IC), with a dedicated IC sub-committee providing day-to-day oversight of the Team. EMPRES-3885 7 Leveraging our Global Footprint to Enhance Effectiveness Europe • CG Team • Investment Integration • IC • GPRC • Client input North America • CG Team • Investment Integration • IC • GPRC • Client input As of 31 December 2014. Leveraging the insights of regional investment professionals to enhance effectiveness of voting and engagement activities ASIA Ex-Japan • Investment Integration Japan • Investment Integration • IC • Japan Stewardship Code Australia • Investment Integration • IC • GPRC • Client input EMPRES-3885 8 Industry Collaboration Acting Alone- Majority of corporate engagements are carried out on a one-to-one basis behind closed doors as this is essential to building trust and establishing constructive long-term relationships with investee companies. When to Collaborate - SSGA will consider collaborating with like-minded investors if deemed to be the most effective path to positive change. Factors considered include: • Responsiveness of management to prior engagement; • Concentrated ownership; • Market culture; • Systemic concerns and regulatory environment; and • Agreement amongst investors on core areas of concern. Investor Networks – SSGA are active members and participants of global and regional investor bodies and forums to facilitate collective investor action. Project Delphi – SSGA sponsors and leads a multi-stakeholder project to build consensus within the investment industry on the material ESG data points that impact value and the most effective mechanism for investment integration. EMPRES-3885 9 2015 Stewardship Priorities On an annual basis SSGA develops a series of strategic priorities that are designed to enhance the quality and scope of our Stewardship approach and respond to emerging areas of best practice. The following are the broad strategic focus areas for our Stewardship activities in 2015: Project Focus: Targeting Underperforming Stocks Sector Focus: Global Pharmaceuticals Thematic Focus: Cybersecurity Threat Voting Policy Focus: US Proxy Access Asset Class Focus: Fixed Income EMPRES-3885 10 Proxy Voting & Engagement In Practice EMPRES-4470 11 Stewardship Themes Governance Issues Environmental and Social Issues Corporate Strategy Environmental Management Board Governance Climate Change Remuneration Health & Safety Audit & Controls Labour Standards Capital Management Human Rights Reporting Bribery & Corruption Engagement determined by impact on long-term value EMPRES-3885 12 SSGA Engagement Approach Targeted Engagement – SSGA holds > 9,000 listed equities so determining where/how to allocate resources is critical to our Stewardship approach. Risk-based Prioritization - SSGA developed an ESG screening tool to determine priority companies in each major market and region. Factors considered include size of holdings, financial performance, sustainability policies and performance, historic engagement and annual thematic and sector priorities. Determining Objectives – SSGA assesses an individual company’s ESG practices, risks and opportunities, and determines tangible objectives and changes that will better position the company to generate long-term sustainable value. Engagement on Full ESG Spectrum – Guided by materiality, engagement topics include corporate strategy, board governance, remuneration, audit, capital, environmental management, H&S, human rights and anti-corruption. Monitoring Progress – All engagements are recorded and progress against objectives monitored. The Governance Team will escalate voting and engagement if outcome of process is deemed unsatisfactory. EMPRES-3885 13 SSGA Proxy Voting Approach Global and Regional Guidelines – Global and six market specific proxy voting guidelines designed to encourage better governance practices at investee companies based upon understanding of global principles of good governance, while taking account of local market nuances. Risk-Based Categorisation - Vote > 14,000 shareholder meetings on an annual basis . Tier companies based on size of holdings, voting history, financial performance and issues identified as areas of potential concern. Allocate resources to higher-risk shareholder meetings and ballot items to maximize value to clients. Pre-vote Engagement - Extensive engagement prior to exercising voting rights at shareholder meetings. Extend proxy related engagement to proponents of shareholder tabled resolutions or dissident parties partaking in a proxy contest. Partner with ISS – ISS assist with the mechanics of the voting process and input into the research of shareholder meetings. However, all voting decisions are exercised exclusively in accordance with SSGA’s in-house policies. Public Disclosure – Publish quarterly proxy voting reports for Global MPF funds. EMPRES-3885 14 Corporate Engagement in Practice Number of Engagements Number of 420 engagements increased from 251 377 to 610 from 52 USA & Canada 62 United Kingdom 33 Japan 2% 25 Europe (ex-UK) 2013 2013 2013 to 2014 56 32 Australia 8 25 15 8 Japan RoW 2014 2014 RoW* 6% Australia 2% RoW* 3% Europe (ex-UK) 9% Europe (ex-UK) 9% United Kingdom 14% USA & Canada 67% Japan 4% Australia 5% USA & Canada 69% United Kingdom 10% * RoW= Rest of World. Source: SSGA Engagement Spreadsheets 2013 and 2014. EMPRES-4470 15 Proxy Voting in Practice SSGA Voting Trends 2013 2014 14,022 14,284 Number of Resolutions Voted 124,377 130,081 With Management 111,581 115,960 Against Management 13,218 14,363 Against Management (%) 10.63% 11.04% 122,199 127,621 109,088 113,289 12,898 13,999 10.6% 10.97% 3,078 3,219 2,573 2,671 320 364 10.4% 11.3.% 68 68 Number of Meetings Voted Management Proposals With Management Against Management Against Management (%) Shareholder Proposals With Management Against Management Against Management (%) Number of Countries Voting by Region 2014 North America 29% Rest of World 31% Australia 2% United Kingdom 9% Japan 12% Europe 17% Source: SSGA voting statistics provided by Institutional Shareholder Services (ISS). As of 31 December 2014. NB: Management and Shareholder proposals do not add up exactly to overall total due to categorisation of certain proposals by ISS. EMPRES-4419 16 Case Study: Extractives Engaged key personnel from global and regional O&G and Mining majors Key Issues Addressed: Strategy – focus on returns and asset quality over growth – Impact of falling oil price on capex and optimum asset mix Risk Management – Monitoring and managing political risks (Russia, Africa) – Greater focus on operational excellence (inc. E&S) within remuneration plans Environmental Management – Climate — stranded assets, scenario planning, regulation, carbon price, technology, targets – Water — recycling and purification of water used for Fracking Operations in Higher Risk Regions – Progress and challenges in implementation of human rights policies – Disclosure of payments to host governments EMPRES-3885 17 Case Study: Japanese Governance Reforms SSGA was amongst the first investors to become signatories to the Japanese Stewardship Code. SSGA joined an investor delegation to communicate expectations of international investors. Issues addressed with regulators, industry bodies and corporates included: Regulators & Industry Bodies Development of a new national corporate governance code Building capacity to execute effective stewardship and shareholder engagement Importance of cultural reform to complement regulatory and structural changes Companies The role of independent directors in the effective oversight of management and internal controls Efficient allocation of capital and long-term value creation Adapting management structures and culture to capitalise on international growth opportunities Assessment Prime Minister Abe’s ‘three arrows’ agenda has catalyzed top-down governance reform Companies that have experienced governance challenges have responded positively while limited evidence that the market as a whole has embraced the importance of governance reforms Success will be determined by ability of companies and investors to understand and embrace the comply or explain model espoused by new CG Code EMPRES-3885 18 Questions & Answers EMPRES-4419 19 Important Disclosures State Street Global Advisors Limited. Authorised and regulated by the Financial Conduct Authority. Registered in England. Registered No. 2509928. VAT No. 5776591 81. Registered office: 20 Churchill Place, Canary Wharf, London, E14 5HJ. Telephone: 020 3395 6000. Facsimile: 020 3395 6350. Web: www.SSGA.co.uk. Investing involves risk including the risk of loss of principal. The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA's express written consent. The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2004/39/EC) and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor's or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. 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This communication is directed at professional clients (this includes eligible counterparties as defined by the [Financial Conduct Authority (FCA)) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description (including retail clients) should not rely on this communication. Web: www.SSGA.com © 2015 State Street Corporation — All Rights Reserved. Tracking Number: EMPRES-4470 Expiration date: 31 January 2016 EMPRES-4470 20