Transcript Title of Presentation, Georgia 36pt, Black

Overview of SSGA
Stewardship Approach
and Activities
March 2015
Rick Lacaille
Global Chief Investment Officer
Mirza Baig
Vice President of Corporate Governance
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Introduction to State Street Global
Advisors
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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.
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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
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Stewardship Approach & Highlights
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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.
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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.
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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
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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.
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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
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Proxy Voting & Engagement In Practice
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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
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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.
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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.
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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.
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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.
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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
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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
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Questions & Answers
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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.
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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.
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risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor. All material has been obtained from sources believed to be
reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
The views expressed in this material are the views of Corporate Governance team through the period ended 31 December 2014. and are subject to change based on market and other conditions.
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Tracking Number: EMPRES-4470
Expiration date: 31 January 2016
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