Lazard Asset Management Environmental, Social, and Corporate Governance Policy

Lazard Asset Management Environmental, Social, and Corporate Governance Policy

1 Table of Contents 1 Introduction.......2 2 Environmental, Social, and Corporate Governance Guidelines.......2 3 ESG Tools and Resources.......3 4 Engagement.......4 5 Proxy Voting......5 Appendix A: Examples of ESG Issues.......7 Appendix B: Collaborative Organizations and Initiatives.......7 Appendix C: Response to the UK Stewardship Code 2012.......8

2 1 Introduction 1.1 Lazard Asset Management ( Lazard ) is committed to maintaining an investment approach that incorporates environmental, social, and corporate governance ( ESG ) in a comprehensive manner in order to safeguard the interests of our clients. 1.2 Lazard provides investment management services to institutional and individual investors around the world. Lazard, as a fiduciary to our clients, seeks, at all times, to act in clients best interests and treat each client fairly. This duty at Lazard has always been interpreted as the best financial interest of the client, and this principle underlies all aspects of Lazard s investment processes. We recognize that a company s ESG practices, whether good or bad, can affect its valuation and financial performance. As a result, we take ESG issues into consideration when making investment decisions. We utilize internal and external resources to assist us in analyzing ESG issues, engage with companies in which we invest, and when authorized, normally vote proxies on all resolutions. 1.3 ESG issues are not always easily tied to valuations and returns, and their potential impact may differ across companies, sectors, and regions. However, we believe that there are a number of factors, such as a company s corporate governance structure or carbon emissions, which may be used to help gain a better understanding of a company. Appendix A includes examples of ESG issues that Lazard may consider when developing a deeper understanding of a company and its ESG practices. 1.4 As a global firm we recognize that there are differing governance models adopted in various countries and that local laws and practices vary widely. We also recognize that best practices and guidelines related to ESG may change and develop over time. As a result, it is not practicable to set detailed guidelines covering all markets. However, there are several organizations and initiatives, outlined in Appendix B, such as the International Corporate Governance Network ( ICGN ) and the United Nations-supported Principles for Responsible Investment ( PRI ), which help provide Lazard with guidance on integrating ESG into our investment processes. 1.5 There are additional specific regulatory and statutory requirements that apply to Lazard s business in certain markets, such as the UK Stewardship Code. These are addressed in Appendix C, as appropriate. 2 Environmental, Social, and Corporate Governance Guidelines Overview 2.1 Lazard is committed to an ongoing and long-term process of improving our approach to integrating ESG into our investment processes. As a result, this Environmental, Social, and Corporate Governance Policy (this Policy ) reflects our current approach, and we expect that this Policy will evolve over time to reflect changes in business practices, business structures, technology, and the law. Accordingly, we monitor this Policy on an ongoing basis and typically review our approach annually. 2.2 Lazard has an internal group that is responsible for oversight and implementation of this Policy. Members of this group serve as internal leaders in the area of ESG to help frame our overall policy and serve as resources to our investment professionals globally. Among other responsibilities, these individuals conduct ESG training, educate investment professionals on relevant ESG issues, and help them to understand the potential risks that these issues may present to companies. 2.3 At Lazard, our investment professionals are responsible for incorporating all factors believed to have a financial impact, including, but not limited to, those of an ESG nature, into the investment process. As such, each investment professional is individually responsible for the integration of ESG into the investment process, rather than outsourcing this responsibility to dedicated ESG analysts. 2.4 As an investment manager with diverse investment strategies, the implementation and incorporation of ESG issues into our investment processes is reflected differently across asset classes, in certain strategies, and is an evolving process. Guidelines 2.5 ESG issues are incorporated into our investment analysis and decision-making process when we believe they could have a material impact on a company s valuation and financial performance. 2.6 Assessing a company s corporate governance practices is, and has always been, an important aspect of Lazard s investment processes. We recognize that there is no one single indicator with global application that identifies when companies are failing to adopt best corporate governance practices, and that different markets may adopt different practices and structures of corporate governance. Therefore, our approach to corporate governance may change according to a company s local laws, regulations, and established guidelines. In addition, Lazard may refer to the Organisation for Economic Co-operation and Development ( OECD ) Principles of Corporate Governance, as they represent widely accepted standards for corporate governance in many countries. We may also refer to other established guidelines of corporate governance, such as the ICGN, and in the United Kingdom, the UK Corporate Governance Code (formerly the Combined Code ). More information on these principles and codes of corporate governance can be found in Appendix B.

3 2.7 We believe that companies will generally be judged to be environmentally and socially responsible corporate citizens if they act in the interests of their shareholders, obey relevant local laws, and seek to comply with prevailing community expectations about corporate responsibilities. Standards and community expectations have evolved over time and we believe that this will continue. 2.8 Specifically as it relates to environmental issues, we recognize the growing importance that these factors play in our global economy. While the importance of these factors will differ by company, sector, or region, we are focused on evaluating how environmental issues may impact a company s financial performance. Proprietary Research 2.9 Lazard s investment processes depend heavily on the robustness of our proprietary research process and financial analysis. Our research incorporates our best judgment of the likely impact of all factors that we believe have a financial impact including, but not limited to, those of an ESG nature. We engage with most companies in which we invest for our clients and, when authorized, normally vote their proxies on all resolutions. 2.10 Lazard s proprietary research provides our investment professionals with in-depth information required to understand and analyze a company s business fundamentals. Investment professionals conduct original research, which may include one-on-one meetings with management of companies, and, as an integral part of that research, analysts may engage management on issues that might present concerns for our stakeholders. 2.11 Our investment professionals are particularly sensitive to any issues in a business that may impact financial performance. In this regard, Lazard s investment professionals incorporate the governance of a company, its social behavior, and its environmental impact in their fundamental analysis, as well as their view of the impact of these issues on the valuation of a company. While this analysis and research has been a part of our investment processes for some time, this Policy reflects our efforts to make this a more systematic part of this process. 2.12 Lazard s analysts generally document the basis of their investment recommendations in an Investment Thesis or otherwise. This report typically covers a range of factors, including views on the potential impact of ESG issues, where relevant, along with views on the drivers of company returns. While a Portfolio Manager/Analyst is never prohibited from purchasing or holding a position due to an ESG issue, consideration of these issues is made part of the investment decision. 2.13 At the start of 2011, Lazard amended the section on Corporate Governance and Management in the Investment Thesis template in our proprietary research database to include a section in which investment professionals include specific information on ESG issues. 2.14 Investment professionals utilize internal and external resources to assist in the analysis of ESG issues and incorporate ESG into decisionmaking and engagement activities. Fixed Income 2.15 Lazard s fixed income investment processes will take ESG factors into account where it is felt that any issues that arise could have a material impact on the financial performance of a fixed income security. 2.16 The integration of ESG issues into the investment processes of Lazard s fixed income strategies is generally most applicable to strategies that hold corporate bonds, and, where relevant, sovereign bonds. 2.17 ESG issues are evaluated by fixed income investment professionals as part of their fundamental corporate or sovereign credit analysis and research process. Internal and external tools and resources are utilized to help support this research and analysis. 2.18 Individual fixed income investment teams may take additional or different steps to integrate ESG into their investment process. 2.19 We continue to make improvements to our approach and to add tools to help incorporate ESG considerations for both sovereign and corporate issuers into our fixed income investment processes. 3 ESG Tools and Resources 3.1 Lazard utilizes internal and external tools and resources to assist us in identifying and analyzing ESG issues as part of our investment processes. Service Providers 3.2 Lazard subscribes to several service providers that help our investment professionals gain a better understanding of a company s ESG practices and the risks that they may present to our current and potential portfolio holdings. While these service providers do not cover every company in our investment universe, they provide a comprehensive tool to enhance and supplement fundamental research and analysis. Trucost is a leading environmental research organization that helps companies and investors understand the environmental impacts of business activities. Trucost provides Lazard with environmental ratings and research that enables our investors to assess a company s environmental impact and the overall environmental footprint of their investment portfolios.

4 MSCI ESG Research, built upon the expertise of sustainability pioneers KLD, Innovest, IRRC, and the recently acquired corporate governance expertise of GMI Ratings, is a global leading source of ESG ratings and research, screening and compliance tools to advisers, asset managers and asset owners worldwide. MSCI ESG Research provides Lazard with research that helps to improve our understanding of a company s ESG practices, and ratings that allow for systematic comparison of ESG performance across companies. ESG Watch Lists 3.3 On a quarterly basis, Lazard s Global Risk Management team generates and distributes a report containing environmental, social and corporate governance ratings for a universe of more than 5,500 companies to our equity and fixed-income investment professionals. These ratings are also included in the Company Profile section of Lazard s proprietary research database. 3.4 Companies held in Lazard s portfolios with below average environmental or corporate governance ratings are flagged and included on Environmental and Corporate Governance Watch Lists. In the case of fixed income, investment professionals cross-reference Watch List companies with their fixed income corporate bond holdings. 3.5 The Watch Lists are tools utilized by both equity and fixed income investment professionals to help identify potential ESG issues in the companies or corporate bond issuers in their investment universe. Investment professionals conduct research on these companies to determine the reasons for the low rating, and, as part of this process, may engage with company management on ESG issues, where appropriate. Written commentary of their findings is formally documented internally. 3.6 While our investment professionals may utilize Social ratings and research provided by MSCI ESG Research, we do not have a formal Watch List based on social criteria at this time. However, we are continually looking to improve our approach to identifying and quantifying social issues, and to further systemize and incorporate such issues into our investment processes. Portfolio Analysis 3.7 Lazard s Global Risk Management team evaluates ESG Style tilts using information generated by Style Research as part of its monthly risk management review of equity portfolios across the firm. This data compares a portfolio s ESG Style factors to the relevant index on a sector and overall portfolio basis. While investment professionals do not manage their portfolios based on these results, this assessment tool is available to them as a way to further evaluate their portfolios against the competitive universe and to be aware of potential risks. 4 Engagement 4.1 As an integral part of Lazard s global research process, our investment professionals conduct meetings with company management in order to understand how companies are using their capital and conducting their business. Our investment professionals typically meet with a company s senior management as well as plant managers and division or subsidiary management at their headquarters, local operating sites, investment conferences, and in Lazard s offices around the world. During these meetings, our investment professionals may engage with company management on a variety of issues, including ESG matters that present a potential material risk to a company s financial performance. 4.2 The decision to engage is primarily based on what we believe will maximize shareholder value as long-term investors. Our approach is integrated into our fundamental analysis, and our decision to engage a company is driven by this fundamental research. 4.3 Investment professionals may engage with company management on a variety of issues, including ESG matters that present a potential material risk to a company s financial performance. On occasion, companies seek our input on a range of issues, and we use such opportunities to work with them and, when permitted by and consistent with local regulation, may play an active role in seeking to effect changes that maximize shareholder value. 4.4 Lazard believes that our investment professionals are in the best position to evaluate the potential impact that ESG issues or the outcome of a given proposal will have on long-term shareholder value. As such, Lazard s engagement activities are the responsibility of the investment professionals and are fully integrated into our investment processes, rather than being delegated to stewardship specialists. 4.5 Lazard s fixed income investment professionals may engage with both sovereign and corporate debt issuers. In addition to arranging their own meetings, fixed income investment professionals may also participate in meetings with management arranged by Lazard s global equity investment professionals. Regular meetings with management enable investment professionals to further understand a company s business models, financial projections, stress-case scenarios, as well as stay current on economic and financial conditions. 4.6 The normal methods through which Lazard engages with companies are: a. Ongoing dialogue with the company management through regular meetings, visits, and telephone calls during which Lazard discusses and poses questions on operational, strategic, and other management issues and, where appropriate, will offer its own opinions and comments, based on its duties to Lazard s clients.

5 b. Proxy Voting. Where clients delegate the responsibility to vote proxies, Lazard, as a fiduciary, is obligated to vote proxies in the best interests of its clients. Lazard has adopted a written policy (the Proxy Voting Policy ) that is designed to ensure that it satisfies its fiduciary obligation. For additional details, please refer to Section 5. 4.7 In addition, where Lazard s concerns have not been adequately addressed, Lazard may consider the following: a. A private meeting with the Chairman or other Board members; b. A letter to the Chairman or the Board of the Company; or c. Where appropriate and deemed necessary, further action may be considered (i.e., resolutions, litigation, press activity, etc.), although circumstances where this conduct becomes necessary are rare. 4.8 On rare occasions, and only where permissible by applicable laws and regulations, Lazard may participate in collaborative engagement initiatives where we believe it to be in our client s best interests to do so. However, in practice we do not often consider it to be the best way to proceed. We typically do not undertake joint or collective engagement initiatives that could be interpreted as having acted in concert with another financial institution. In these cases, we prefer to act independently on issues that we have identified rather than adopt a more public pressure group approach. We believe engagement is best served through dialogue in one-on-one meetings and by sharing our concerns privately in order to seek to improve the outcome for our shareholders. 4.9 As a consequence of our comprehensive Proxy Voting Policy, and the proxy-voting services we receive from Institutional Shareholder Services, Inc. ( ISS ), we rarely attend shareholder meetings of investee companies in person. As mentioned, it is our belief that corporate engagement is generally best served through dialogue in one-on-one meetings and we prefer to share our concerns privately. 4.10 The Lazard Investment Council and/or the Legal/Compliance Department are often consulted prior to initiating any significant written or public engagement activities, as they may have investment, regulatory, or other legal implications. The Investment Council is a discussion forum designed to ensure the effectiveness of Lazard s research and investment platforms. Lazard s investment professionals may hold regular investment discussion meetings at which issues including, but not limited to, ESG concerns and shareholder value are discussed. 4.11 Lazard s investment professionals communicate internally on the status of engagement activities and any outcomes arising. Periodically, we take examples of Lazard s engagement with companies to produce case studies in order to illustrate activities undertaken with a goal to enhance shareholder value and to demonstrate our approach and process to clients. 5 Proxy Voting Introduction 5.1 We are aware of our fiduciary responsibilities to our clients where they wish us to exercise their rights as shareholders. Lazard s proxy voting structure, as outlined in our Proxy Voting Policy, is designed to ensure that proxy voting is conducted in an appropriate manner, consistent with our obligations to, and in the best interests of, our clients. Our policy is based on the view that, in our role as investment managers, we must vote proxies based on what we believe will maximize shareholder value as a long-term investor, and the votes we cast on behalf of our clients are intended to accomplish that objective. 5.2 Generally, Lazard is willing to accept delegation from its clients to vote proxies. Lazard does not delegate that authority to any other person or entity, but retains complete authority for voting all proxies on behalf of its clients. Not all clients delegate proxy voting authority to Lazard, however, and Lazard will not vote proxies, or provide advice to clients on how to vote proxies, in the absence of a specific delegation of authority or an obligation under applicable law. Similarly, Lazard will not generally advise, in advance, how it intends to vote on any specific issue, although we may be willing to discuss the relevant context and matters under consideration. Administration and Implementation of Proxy-Voting Process 5.3 Lazard s proxy-voting process is administered by its Proxy Operations Department ( ProxyOps ), which reports to Lazard s Chief Operations Officer. Oversight of the process is provided by Lazard s Legal/Compliance Department and by a Proxy Committee consisting of senior Lazard officers, including representatives of the investment platform. The Proxy Committee meets at least annually to review Lazard s Proxy Voting Policy and to evaluate potential enhancements. Meetings may be convened more frequently (for example, to discuss a specific proxy voting proposal) as requested by the manager of ProxyOps or at the request of any member of the Proxy Committee. A representative of our Legal/Compliance Department is present at all Proxy Committee meetings. 5.4 To assist it in its proxy-voting responsibilities, Lazard currently subscribes to several research and other proxy-related services offered by ISS and by Glass Lewis & Co. ( Glass Lewis ). These proxy advisory services provide independent analysis and recommendations regarding various companies proxy proposals. Glass Lewis and ISS research and voting recommendations are made available to the Lazard investment professionals responsible for voting a company s proxy. While this research serves to help improve our understanding of the issues surrounding a company s proxy proposals, Lazard s investment professionals are responsible for providing the vote recommendation for a given

6 proposal. Voting for each agenda of each meeting is instructed specifically by Lazard in accordance with our Proxy Voting Policy; we do not employ outside services to vote on our behalf. 5.5 Lazard s Proxy Committee has approved specific proxy voting guidelines regarding the most common proxy proposals (the Approved Guidelines ). These Approved Guidelines provide that Lazard should vote For or Against the proposal, or that the proposal should be considered on a case-by-case basis. Lazard s investment professional provides the vote recommendation in accordance with the Approved Guidelines. Any exceptions to this, which are rare, require approval from the Proxy Committee. In these instances, the investment professional must provide detailed rationale for their recommendation, and the Proxy Committee will then determine whether or not that vote recommendation is to be accepted and applied to the specific meeting s agenda. 5.6 Lazard believes that the investment professionals are in the best position to evaluate the impact that the outcome of a given proposal will have on long-term shareholder value. Therefore, ProxyOps seeks the relevant investment professionals recommendations on all proposals to be considered on a case-by-case basis. Lazard s investment professionals formulate their vote recommendation based on research of the company and evaluation of the specific proposal. Our investment professionals may engage with the company s executives or board members to improve their understanding of a proxy proposal and/or to provide our advice on how a company can enhance their corporate governance practices. Conflicts of Interest 5.7 The Proxy Voting Policy recognizes that there may be times when meeting agendas or proposals create a material conflict of interest or the appearance of a material conflict of interest for Lazard. A conflict could arise, for example, where an affiliated company is advising a target or bidder or company management in some way involving a corporate finance transaction. In such a case, Lazard will typically seek to alleviate the conflict by voting in a manner consistent with the Approved Guidelines (to vote For or Against ), or, in situations where the pre-approved guideline is to vote case-by-case, with the recommendation of an independent source, such as ISS and Glass Lewis, or in limited cases, by abstaining. This allows Lazard to ensure that a vote is not influenced by a material or perceived conflict of interest, yet receives the benefit of thorough analysis and recommendation designed to further long-term shareholder value. Reporting of Voting Activities 5.8 Where a client delegates responsibility for proxy voting to Lazard, we provide reports on all voting activity undertaken on their behalf on a quarterly, semi-annual or annual basis as directed by the client. Information on how Lazard voted securities within a reporting period and information regarding our rationale for proxy-voting decisions in a client s portfolio may also be provided upon request. We generally view our clients voting records as their property, rather than as our records to make public. 5.9 In general, Lazard does not disclose detailed voting records publicly, except where we are required to do so by law, such as the annual N-PX filing required by the U.S. Securities and Exchange Commission. However, aggregated global statistics of Lazard s voting activities are published annually on our website. Please refer to Lazard s Proxy Voting Policy for further details regarding our proxy voting practices. Conclusion Lazard seeks to deliver superior risk-adjusted investment performance, innovative solutions, and exceptional client service for the benefit of our clients. Our ESG Policy and practices are consistent with this commitment and our fiduciary duty. As long-term investors, we recognize ESG issues have the potential to impact valuations, and we understand the growing importance of these issues. As a result, the analysis of ESG issues is systematically integrated into our investment processes. Our ESG Policy is a continuous and long-term process that will evolve over time to reflect further enhancements.

7 Appendix A: Examples of ESG Issues ESG issues and their potential impact on a company s financial performance differ across companies, sectors, and regions. The following list (which is not exhaustive) includes examples of potential ESG issues that Lazard may consider in developing a deeper understanding of a company and its ESG practices. Environmental (E) Social (S) Corporate Governance (G) Environmental impact and related risks Greenhouse gas (GHG) emissions New regulation and potential change to regulation Renewable energy Energy efficiency Depletion of energy resources Chemical pollution Waste management Water management Performance, transparency, and accountability Workplace health and safety Community relations Corporate Behavior Labor standards and human rights issues in the supply chain Transparency and accountability Use of capital Board Structure Board Independence Quality of Board Membership Shareholder Rights/Anti-Takeover Measures Management Protocols Compensation Policies Auditor Structure and independence of auditors Accounting and disclosure practices Transparency and accountability Appendix B: Collaborative Organizations and Initiatives Lazard is a member of, or a signatory to, several organizations and initiatives that seek to promote responsible investment or consideration of ESG issues. International Corporate Governance Network ( ICGN ) The ICGN is an investor-led organization of governance professionals that seeks to inspire and promote effective standards of corporate governance to advance efficient markets and economies world-wide. Several professionals at Lazard are members of the ICGN and our investment professionals regularly attend their conferences. In addition, one of our investment professionals is a member of the ICGN Accounting and Auditing Practices Committee. United Nations-supported Principles for Responsible Investment ( PRI ) Lazard is a signatory to the United Nations-supported PRI. The PRI Initiative is an international network of investors working together to put the six principles for responsible investment (the Principles ) into practice: 1. We will incorporate ESG issues into investment analysis and decision-making processes. 2. We will be active owners and incorporate ESG issues into our ownership policies and practices. 3. We will seek appropriate disclosure on ESG issues by the entities in which we invest. 4. We will promote acceptance and implementation of the Principles within the investment industry. 5. We will work together to enhance our effectiveness in implementing the Principles. 6. We will each report on our activities and progress towards implementing the Principles. Source: www.unpri.org UK National Association of Pension Funds ( NAPF ) Lazard is a member of the NAPF, which is the leading body in the UK for providing representation and other services to those involved in designing, operating, advising and investing in all aspects of workplace pensions. UK Stewardship Code In the UK, Lazard Asset Management Limited is a signatory to the UK Stewardship Code. The UK Stewardship Code is a set of principles issued by the Financial Reporting Council ( FRC ) which aim to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and to promote the efficient exercise of governance responsibilities. Lazard s response to the UK Stewardship Code can be found in Appendix C. Japan Stewardship Code In Japan, Lazard Japan Asset Management K.K. has adopted the Japan Stewardship Code, which seeks to promote sustainable growth of companies through investment and dialogue.

8 Organisation for Economic Co-operation and Development (OECD) Principles of Corporate Governance The OECD Principles of Corporate Governance provide best practice recommendations on corporate governance. Lazard supports the OECD Principles of Corporate Governance in all material respects. Appendix C: Response to the UK Stewardship Code 2012 Principle 1: Stewardship Institutional investors should publicly disclose their policy on how they will discharge their stewardship responsibilities. Guidance Stewardship activities include monitoring and engaging with companies on matters such as strategy, performance, risk, capital structure, and corporate governance, including culture and remuneration. Engagement is purposeful dialogue with companies on those matters as well as on issues that are the immediate subject of votes at general meetings. The policy should disclose how the institutional investor applies stewardship with the aim of enhancing and protecting the value for the ultimate beneficiary or client. The statement should reflect the institutional investor s activities within the investment chain, as well as the responsibilities that arise from those activities. In particular, the stewardship responsibilities of those whose primary activities are related to asset ownership may be different from those whose primary activities are related to asset management or other investment-related services. Where activities are outsourced, the statement should explain how this is compatible with the proper exercise of the institutional investor s stewardship responsibilities and what steps the investor has taken to ensure that they are carried out in a manner consistent with the approach to stewardship set out in the statement. The disclosure should describe arrangements for integrating stewardship within the wider investment process. Our Response Lazard Asset Management ( LAM ) provides investment management services to institutional and individual investors around the world. LAM, as a fiduciary to its clients, seeks, at all times, to act in clients best interests and treat each client fairly. This duty at LAM has always been interpreted as the best financial interest of the client, and this principle underlies all aspects of LAM s investment process. We recognise that ESG issues can affect the valuation of the companies in which we invest on our clients behalf. As a result, we take ESG issues into consideration when making investment decisions. We utilise internal and external resources to assist us in analysing ESG issues, engage with companies in which we invest, and when authorised, normally vote proxies on all resolutions. Our central approach to investment is based upon fundamental research of individual companies carried out by our Analysts and Portfolio Managers ( Investment Professionals ) as outlined in our Environmental, Social, and Corporate Governance Policy ( ESG Policy ). Corporate governance has long been a part of this process and LAM s monitoring and engagement activities are fully integrated into our investment process. For more detailed information specific to LAM s stewardship activities addressing environmental, social, and corporate governance concerns, please see LAM s ESG Policy, available at www.lazardassetmanagement.co.uk/esg Principle 2: Conflicts of Interest Institutional investors should have a robust policy on managing conflicts of interest in relation to stewardship which should be publicly disclosed. Guidance An institutional investor s duty is to act in the interests of all clients and/or beneficiaries when considering matters such as engagement and voting. Conflicts of interest will inevitably arise from time to time, which may include when voting on matters affecting a parent company or client. Institutional investors should put in place and maintain a policy for managing conflicts of interest with the aim of taking all reasonable steps to put the interests of their client or beneficiary first. The policy should also address how matters are handled when the interests of clients or beneficiaries diverge from each other. Our Response Lazard Asset Management Limited ( LAML ), as a company authorised and regulated in the UK by the Financial Conduct Authority (FCA), is required to manage and to minimise whenever possible, conflicts of interest that may arise in its business to ensure that all its clients are treated fairly. As a member of the Lazard Group, LAML has put in place a number of policies to manage conflicts between LAML and a client, between two clients, or between LAML and another company within the Lazard Group. This includes the existence of strong information barriers between different parts of the Lazard Group to minimise information flows that could result in conflicts of interest.

9 LAM s approach to proxy voting and engagement, as outlined in our ESG Policy, is designed to ensure these activities are conducted in an appropriate manner, consistent with our fiduciary obligations to, and in the best interests of our clients. In addition, our Proxy Voting policy addresses proxy voting conflicts. These details are further outlined in LAM s Proxy Voting Policy and summarised in the LAM ESG Policy. LAML s Conflicts of Interest Policy is designed to include the prior identification of potential conflicts of interest, and is also intended to manage such conflicts so that we can meet our obligations under the Conduct of Business ( COB ) rules of the FCA. It is also designed to ensure that new conflicts of interest are identified as they arise and that they are recorded in LAML s conflict of interests register and appropriately dealt with. A summary of our Conflicts of Interest Policy is available to all existing LAML clients and made available annually with the IMA Level 1 Disclosure. Principle 3: Monitoring Institutional investors should monitor their investee companies. Guidance Effective monitoring is an essential component of stewardship. It should take place regularly and be checked periodically for effectiveness. When monitoring companies, institutional investors should seek to: keep abreast of the company s performance; keep abreast of developments, both internal and external to the company, that drive the company s value and risks; satisfy themselves that the company s leadership is effective; satisfy themselves that the company s board and committees adhere to the spirit of the UK Corporate Governance Code, including meetings with the chairman and other board members; consider the quality of the company s reporting; and attend the General Meetings of companies in which they have a major holding, where appropriate and practicable. Institutional investors should consider carefully explanations given for departure from the UK Corporate Governance Code and make reasoned judgments in each case. They should give a timely explanation to the company, in writing where appropriate, and be prepared to enter a dialogue if they do not accept the company s position. Institutional investors should endeavour to identify problems at an early stage to minimise any loss of shareholder value. If they have concerns they should seek to ensure that the appropriate members of the investee company s board are made aware. Institutional investors may or may not wish to be made insiders. An institutional investor who may be willing to become an insider should indicate in its stewardship statement the willingness to do so, and the mechanism by which this could be done. Institutional investors will expect investee companies and their advisers to ensure that information that could affect their ability to deal in the shares of the company concerned is not conveyed to them without their agreement. Our Response LAM is committed to maintaining an investment approach that is consistent with high standards of environmental, social, and corporate governance in order to safeguard the interests of our clients and shareholders. LAM, as a fiduciary to its clients, seeks, at all times, to act in clients best interests and treat each client fairly. As fiduciaries making investment decisions with our clients money, we seek to maximise shareholder value for our clients. As a result, our first priority and focus is on the valuation and profitability of a company. When deemed to be in the best interests of clients, our investment professionals may engage with companies in order to seek to improve the outcome for shareholders. Our approach is integrated into our fundamental analysis, and our decision to engage a company is driven by this fundamental research. Please see our ESG Policy for further details regarding engagement. Corporate governance is an important aspect of the LAM investment process. LAM s research views on the corporate governance of investments (if any) are typically reflected in our investment thesis (the basis of our investment decision), along with our rationale for owning the shares in a company. For example, we will work with investee companies to seek to maximise shareholder value and attempt to avoid companies where we believe sustained poor corporate governance practices will lead to deterioration in value. To this end, we regularly meet with companies in which we invest on behalf of our clients. In 2011, we held over 3,300 meetings with company management globally. LAM believes that there are no absolute hard and fast rules that guarantee that a company s management and its Board adopt good corporate governance practices. Regardless of our rigour, we believe that there is no one single indicator with global application that identifies when companies are failing to adopt best corporate governance practices. Different markets adopt different practices and structures of corporate governance. In relation to the final decision on controversial situations, LAM s proxy voting process, administered by its Proxy Operations Department ( ProxyOps ), seeks the relevant Investment Professionals recommendations on all proposals to be considered on a case-by-case basis. Investment

10 Professionals are also given the opportunity to review other than routine proposals where the Approved Guideline is to vote For or Against, and, in compelling circumstances, to overrule the Approved Guideline, subject to the Proxy Committee s final determination. Periodically, we may be asked by a company if we are willing to become an insider. Generally, we are not willing to do this as we want to retain the ability to trade in companies that we hold, in order to maintain our commitment to our clients of maximizing shareholder value. Please see our ESG Policy for further details relating to this Principle. Principle 4: Institutional investors should establish clear guidelines on when and how they will escalate their activities Guidance Institutional investors should set out the circumstances when they will actively intervene and regularly assess the outcomes of doing so. Intervention should be considered regardless of whether an active or passive investment policy is followed. In addition, being underweight is not, of itself, a reason for not intervening. Instances when institutional investors may want to intervene include, but are not limited to, when they have concerns about the company s strategy, performance, governance, remuneration, or approach to the risks, including those that may arise from social and environmental matters. Initial discussions should take place on a confidential basis. However, if boards do not respond constructively when institutional investors intervene, then institutional investors will consider whether to escalate their action, for example, by: holding additional meetings with management specifically to discuss concerns; expressing concerns through the company s advisers; meeting with the chairman or other board members; intervening jointly with other institutions on particular issues; making a public statement in advance of General Meetings; submitting resolutions at shareholders meetings; and requisitioning a General Meeting, in some cases proposing to change board membership. Our Response When deemed to be in the best interests of our clients, our Investment Professionals may engage with companies in order to seek to improve the outcome for shareholders. Our approach is integrated into our fundamental analysis, and our decision to engage a company is driven by this fundamental research. On occasion, companies seek our input on a range of issues, and we use such opportunities to work with them and, when permitted by local regulation, may play an active role in seeking to effect changes that maximise shareholder value. Our engagement takes the form of ongoing dialogue with company management through regular meetings, visits, and telephone calls, and will cover a variety of topics, which may include strategic or ESG issues that present a potential risk to a company s valuations. Although LAM would not generally become involved in detailed operational issues, there may be circumstances where this may be necessary. In addition to the standard methods of engagement highlighted in Principle 3, where LAM s concerns have not been adequately addressed, LAM may consider the following: a private meeting with the Chairman or other Board members; a letter to the Chairman or the Board of the Company; or where appropriate and deemed necessary, further action may be considered (i.e., resolutions, litigation, press activity, etc.), although there are rarely circumstances where this conduct becomes necessary. We do not generally issue statements or campaign publicly on issues. We are also unlikely to requisition a shareholder meeting or submit a shareholder resolution other than in exceptional circumstances. Please see our ESG Policy for further details relating to this Principle. Principle 5: Institutional investors should be willing to act collectively with other investors where appropriate Guidance At times collaboration with other investors may be the most effective manner in which to engage. Collaborative engagement may be most appropriate at times of significant corporate or wider economic stress, or when the risks posed threaten to destroy significant value.

11 Institutional investors should disclose their policy on collective engagement, which should indicate their readiness to work with other investors through formal and informal groups when this is necessary to achieve their objectives and ensure companies are aware of concerns. The disclosure should also indicate the kinds of circumstances in which the institutional investor would consider participating in collective engagement. Our Response As outlined in our ESG Policy, our Investment Professionals regularly engage with companies to seek to improve the outcome for shareholders. On rare occasions and where permissible by applicable laws and regulations, LAM may participate in collective engagement initiatives when we believe it to be in our client s best interests to do so. However, in practice we do not often consider it to be the best way to proceed. We have reservations about undertaking joint or collective engagement initiatives that could be interpreted as having acted in concert with another financial institution. We prefer to act independently on issues that we have identified rather than adopt a more public pressure group approach. We believe engagement is best served through dialogue in one-on-one meetings and by sharing our concerns privately in order to seek to improve the outcome for our shareholders. If our normal practice of company engagement, and dialogue with management, has failed to achieve our desired outcome, then we would consider a number of other options, including a complete outright sale of our clients holdings in a company or, on rare occasions, engaging with other investors. As outlined in our ESG Policy, the action of collective engagement would only be undertaken when we believe it will be to the benefit of shareholder value, and only to the extent that it is permissible under applicable laws and regulations. Principle 6: Institutional investors should have a clear policy on voting and disclosure of voting activity Guidance Institutional investors should seek to vote all shares held. They should not automatically support the board. If they have been unable to reach a satisfactory outcome through active dialogue then they should register an abstention or vote against the resolution. In both instances, it is good practice to inform the company in advance of their intention and the reasons why. Institutional investors should disclose publicly their voting records. Institutional investors should disclose the use made, if any, of proxy voting or other voting advisory services. They should describe the scope of such services, identify the providers, and disclose the extent to which they follow, rely upon, or use recommendations made by such services. Institutional investors should disclose their approach to stock lending and recalling lent stock. Our Response LAM considers proxy voting an integral part of its corporate engagement and part of our overall investment process. Our full Proxy Voting Policy is available upon request. Generally, LAML is willing to accept delegation from its clients to vote proxies in accordance with the LAM Proxy Voting Policy. LAM, and its subsidiaries, as applicable, retains complete authority for voting decisions on all proxies on behalf of its clients that delegate such authority to LAML and does not delegate that authority to any other person or entity. Not all clients delegate proxy voting authority to LAML, however, and LAML will not vote proxies, or provide advice to clients on how to vote proxies, in the absence of a specific delegation of authority or an obligation under applicable law. Similarly, LAML will not advise, in advance, how it intends to vote on any specific issue, although we may be willing to discuss the relevant context and matters under consideration. Where clients delegate the responsibility to vote proxies, LAML is obliged to vote proxies in the best interests of its clients. LAM s Proxy Voting Policy is designed to ensure that LAM and its subsidiaries satisfies its obligations to our clients. LAM has developed a structure to aim to ensure that proxy voting is conducted in an appropriate manner, consistent with clients best interests, and within the framework of that Policy. LAML manages assets for a variety of institutional clients, including financial institutions, pension funds, charities, and local authorities, both within and outside the United Kingdom. In the absence of specific guidelines provided by a client, or instructions specific to a particular proxy, our policy is generally to vote proxies on a given issue in the same way for all of our clients. The Policy is based on the view that, in its role as investment managers, LAM must vote proxies based on what it believes will maximise shareholder value as a long-term investor, and the relevant votes it casts on behalf of all its clients are intended to accomplish that objective. To assist it in its proxy-voting responsibilities, LAM currently subscribes to several research and other proxy-related services offered by Institutional Shareholder Services, Inc. (ISS), a leading provider of proxy-voting services. ISS provides LAM with independent analysis and recommendations regarding virtually every proxy proposal on which LAM votes on behalf of its clients. ISS also provides LAM with proxy-related administrative services as well as vote execution, recordkeeping, and reporting support services. While LAM may take into consideration the analysis of ISS, proxy votes are cast independent of ISS recommendation.

12 We provide clients with their voting records every quarter. LAML does not currently publish detailed voting records, as we have historically viewed clients voting records as their property, which they may choose to publish if they wish, rather than as our records to make public. However, global aggregated voting statistics are made publicly available on our website, www.lazardassetmanagement.co.uk/esg. LAM does not generally vote proxies for securities that a client has authorised their custodian bank to use in a stock loan programme, which passes voting rights to the party with possession of the shares. Under certain circumstances, LAM may determine to recall loaned stocks in order to vote the proxies associated with those securities. For example, if LAM determines that the entity in possession of the stock has borrowed the stock solely to be able to obtain control over the issuer of the stock by voting proxies, or if the client should specifically request LAM to vote the shares on loan, LAM may determine to recall the stock and vote the proxies itself. However, it is expected that this will be done only in exceptional circumstances. Please see our ESG Policy and our Proxy Voting Policy for further details relating to this Principle. Principle 7: Institutional investors should report periodically on their stewardship and voting activities Guidance Institutional investors should maintain a clear record of their stewardship activities. Asset managers should regularly account to their clients or beneficiaries as to how they have discharged their responsibilities. Such reports will be likely to comprise qualitative as well as quantitative information. The particular information reported and the format used, should be a matter for agreement between agents and their principals. Asset owners should report at least annually to those to whom they are accountable on their stewardship policy and its execution. Transparency is an important feature of effective stewardship. Institutional investors should not, however, be expected to make disclosures that might be counterproductive. Confidentiality in specific situations may well be crucial to achieving a positive outcome. Asset managers that sign up to this Code should obtain an independent audit opinion on their engagement and voting processes having regard to an international standard or a UK framework such as AAF 01/06. The existence of such assurance reporting should be publicly disclosed. If requested, clients should be provided access to such assurance reports. Our Response As part of our ongoing global research process, LAM investment professionals conduct meetings with companies in order to thoroughly understand their businesses, strategies, industries, and environments in which they compete. Our investment professionals typically meet with a company s senior management as well as plant managers and division or subsidiary management at their headquarters, local operating sites, investment conferences, and in LAM s offices around the world. These meetings are an integral part of LAM s research process. In calendar 2011, LAM investment professionals undertook more than 3,300 company meetings around the world. Investment professionals may engage with company management on a variety of issues, including ESG matters that present a potential material risk to a company s financial performance. On occasion, companies seek our input on a range of issues, and we use such opportunities to work with them and, when permitted by local regulation, may play an active role in seeking to effect changes that maximise shareholder value. As described above, it is LAM s belief that corporate engagement is best served through dialogue in one-on-one meetings and sharing our concerns privately, to give management an understanding of our views before an issue is put to vote, in order to minimize potential loss of shareholder value. Periodically, we take examples of LAM s engagement with companies to produce ESG Research & Engagement Case Studies, in order to illustrate activities undertaken with a goal to enhance shareholder value and to demonstrate our approach and process to clients. These are made available to clients as part of their reports and/or review meeting materials. LAML provides clients with their own voting records every quarter along with the brief rationale behind any vote. As described above, summary global aggregate statistics may also be included in periodic performance reviews upon request. Our proxy voting process and controls are independently reviewed as part our annual SSAE-16 audit, which is available to all clients. Lastly, LAM is committed to an ongoing and long-term process of improving our approach to ESG, and incorporating these issues into our investment processes. As a result, both our ESG Policy and this response to the UK Stewardship Code (as amended in 2012), reflects our current approach to these issues. We expect that both will evolve over time to reflect changes in business practices, business structures, and the law. Accordingly, we monitor both our Policy and this response on an ongoing basis and typically review our approach annually. The current version of our ESG Policy and this response to the UK Stewardship Code (2012) can be found on our website under the following link, www.lazardassetmanagement.co.uk/esg.

Lazard Asset Management Environmental, Social, and Corporate Governance Policy Important Information Published on 9 April 2015. Information and opinions presented have been obtained or derived from sources believed by Lazard to be reliable. Lazard makes no representation as to their accuracy or completeness. All opinions expressed herein are as of the published date and are subject to change. This report is being provided for informational purposes only. It is not intended to be, and does not constitute, an offer to enter into any contract or investment agreement with respect to any product offered by Lazard Asset Management, and should not be considered as an offer or solicitation with respect to any product, security or service in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorized or otherwise restricted or prohibited. This material is for informational purposes only. It is not intended to, and does not constitute financial advice, fund management services, an offer of financial products or to enter into any contract or investment agreement in respect of any product offered by Lazard Asset Management and shall not be considered as an offer or solicitation with respect to any product, security, or service in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or unauthorized or otherwise restricted or prohibited. Australia: FOR WHOLESALE INVESTORS ONLY. Issued by Lazard Asset Management Pacific Co., ABN 13 064 523 619, AFS License 238432, Level 39 Gateway, 1 Macquarie Place, Sydney NSW 2000. Dubai: Issued and approved by Lazard Gulf Limited, Gate Village 1, Level 2, Dubai International Financial Centre, PO Box 506644, Dubai, United Arab Emirates. Registered in Dubai International Financial Centre 0467. Authorised and regulated by the Dubai Financial Services Authority to deal with Professional Clients only. Germany: Issued by Lazard Asset Management (Deutschland) GmbH, Neue Mainzer Strasse 75, D-60311 Frankfurt am Main. Hong Kong: Issued by Lazard Asset Management (Hong Kong) Limited (AQZ743), Unit 30, Level 8, Two Exchange Square, 8 Connaught Place, Central, Hong Kong. Lazard Asset Management (Hong Kong) Limited is a corporation licensed by the Hong Kong Securities and Futures Commission to conduct Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. This document is only for professional investors as defined under the Hong Kong Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) and its subsidiary legislation and may not be distributed or otherwise made available to any other person. Japan: Issued by Lazard Japan Asset Management K.K., ATT Annex 7th Floor, 2-11-7 Akasaka, Minato-ku, Tokyo 107-0052. Korea: Issued by Lazard Korea Asset Management Co. Ltd., 10F Seoul Finance Center, 136 Sejong-daero, Jung-gu, Seoul, 100-768. Singapore: Issued by Lazard Asset Management (Singapore) Pte. Ltd., 1 Raffles Place, #15-02 One Raffles Place Tower 1, Singapore 048616. Company Registration Number 201135005W. This document is for institutional investors or accredited investors as defined under the Securities and Futures Act, Chapter 289 of Singapore and may not be distributed to any other person. United Kingdom: FOR PROFESSIONAL INVESTORS ONLY. Issued by Lazard Asset Management Ltd., 50 Stratton Street, London W1J 8LL. Registered in England Number 525667. Authorised and regulated by the Financial Conduct Authority (FCA). United States: Issued by Lazard Asset Management LLC, 30 Rockefeller Plaza, New York, NY 10112. HB12311