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Active Stewardship: Company Engagement & Proxy Voting

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• EU Sustainable Action Plan and Shareholder Rights Directive II:• ESG integration as standard, plus sustainability objectives as appropriate• Mandatory ESG/Sustainability fund disclosures and mandatory investment suitability assessments• Climate-related disclosures for benchmarks and funds• Stewardship expectations and enhanced disclosure requirements

• Cautionary market guidance (e.g. US DOL) and concern over “greenwashing” (e.g. HK SFC) • Rising awareness and expertise on client side • Change in attitudes among investor base

• Serious questions raised about credibility of “passive ESG”• Clients focus on performance enhanced by Integrated ESG and/or Sustainability goals• Focus shifting from “ESG profile of portfolios” to “real world impact” of investments

Legislative/ Regulatory Pressure

More Discerning Client Demand

Strong Opportunity for Active Management

At the outset of a new sustainability paradigm?

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AllianzGI ESG Integration

Source: Allianz Global Investors, 2019. For illustrative purposes only.

ESG Integrated Objective:§ Manage ESG tail risks in portfolio holdings

§ Creating alpha with ESG

§ Active stewardship

Integrated ESG (IESG) at AllianzGI

ESG Integrated Main Characteristics:

Place portfolio managers at the heart of integration

Focus on material ESG risks

Actively challenge 3rd party ratings

Include PMs and Equity/ FI analysts in ESG risk debates

Require robust risk/return analysis

Engage heavily with higher risk companies

Gradually integrate ESG across the entire firm

Make it transparent so clients can see ESG Integration at work

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ESG and active stewardship – AllianzGI’s journey

2000 first SRI equity strategy

2007 signatory to UNPRI; first SRI fixed income strategy

2008 pioneering Global Water strategy in the US

2013 Renewable Energy strategy

2015 launch of Green Bond and Climate Transition strategies

2016 ESG integration framework with in-house ESG expertise, global fundamental research, and digital collaboration as key ingredients

2016 Global Stewardship Statement

2016 Climate risk statement

2017 First Integrated ESG (IESG) strategies

2017 Stewardship transparency via public engagement reports and real-time proxy voting disclosure tool

2018 AllianzGI Sustainable Investing Report

From 2017 Top score A+ in PRI Assessment for ESG Strategy & Governance

2019 EUR121bn Integrated ESG

2019 New SRI products launched (e.g. EM SRI Bond)

2019 and 2018 Shortlisted at ICGN Global Stewardship Awards

Global strategyESG integration framework since 2016

FoundationA pioneer in sustainable investing since 2000

Implementation Outcomes /recognition

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Active Stewardship at AllianzGI

§ Active stewardship is an integral component of our active approach to investment

Stewardship helps to protect companies from downside risks and unlock alpha potential.

§ Our engagement work is grounded in driving performance in our portfolios

We focus on material issues, and use engagement to enrich investment decision-making, assess company leadership and culture and to build trust.

§ We are ‘holders’ not ‘traders’ of the assets we manage

Engagement requires active involvement from portfolio managers and sector analysts, often creating multiple pressure points from within AllianzGI;

Our engagements are linked to Proxy Voting decisions

We are active stewards of the assets we own on behalf of the clients we serve

Proxy Voting

Investment Research

Company engagement

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AllianzGI engagement activities in 2018

§ Signatory to national Stewardship Codes across all key markets

§ 343 recorded engagements in 21markets:

ü 247 companies engaged (~1.4 engagements per company)

ü 39% of issuer engagements led by fundamental analysts/ PMs

ü 18% of engagements included non-ESG issues

§ Initiated and participated in collective engagements via UK Investor Forum andClimate Action 100+

§ Actively engaged in public policy matters on major issues impacting our investment portfolios

Engagement success is part of delivering investment performance

Source: Allianz Global Investor, February 2019

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Engagement Activities: 2018 overview

Engagements per industry

24%

17%

17%

11%

9%

8%

5%5% 4%

United Kingdom GermanyNorth America AsiaRest of the world FranceSpain ItalySwitzerland

AllianzGI engaged 247 companies across 21 markets

Engagements per geography

24%

15%

10%9%

9%

8%

6%

5%5%

5% 4%

Financials IndustrialsTechnology MaterialsTelecoms Consumer discretionaryConsumer staples EnergyReal Estate Utilities

343 engagements across 11 industries with Financials, Industrials and Technology accounting

for almost 50%

Source: Allianz Global Investor, February 2019

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UK Consumer Staples company – health, hygiene and home products

Widely held across IESG and SRI portfolios

Integrated ESG: Stewardship OutcomeTwo way engagement in past 12m on various ESG topics

Source: Allianz Global Investors, March 2019.

Proxy Voting on Board Changes at

AGM

§ Two Board refreshments are positive changes

§ In light of our engagement and reduction in LTIP payout, recommend voting For the remuneration report resolution

Company Engaged us on CEO LTIP Award Proposal

§ The company asked for our feedback on the CEO’s LTIP award, given recent share performance

§ We had originally supported LTIP levels and were satisfied the 3-year performance objectives were met

Company Engaged us on Remuneration

Policy Proposals

§ RemCo Chair asked for our feedback on Awards Reduction, Salary, LTIP, Deferral, Pension, new KPI’s

§ Discussion between ESG Analyst, Sector Analyst, 2 Portfolio Managers ensued

Final Remuneration Policy Reflects our

Feedback

§ Reduction in pension contributions for new hires; mandatory deferral of awards under bonus scheme; post-employment shareholding requirement; and higher shareholding requirement for new hires

Expressed our Concerns about

Production Issues

§ Series of one-off events weighing on our (and the market’s)trust in the company

§ CFO reassured us product quality taken seriously, and stability of supply chain strengthened

Mar 2018 Apr 2018 Nov 2018 Dec 2018 Feb 2019

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Engagement Activities by market1. United StatesActivision Blizzard IncAmerican Express CoAmerican Water Works Co IncAmeriprise Financial IncAnthem IncAo Smith CorpAqua America IncBank Of America CorpBoingo Wireless IncBright Horizons Family Solutions IncCaterpillar IncCboe Global Markets IncCelanese CorpCno Financial Group IncComcast CorpConocophillipsDollar Tree IncDte Energy CoDxc Technology CoEagle Pharmaceuticals Inc/deFireeye IncGeneral Dynamics CorpHewlett Packard Enterprise CoHilltop Holdings IncIdex CorpIBM CorpJPMorgan Chase & CoKansas City SouthernLabCorpMarathon Oil CorpMcDonald’s CorpMcKesson CorpMohawk Industries IncMylan NVNetapp IncNovocure LtdNuance Communications IncO’reilly Automotive IncOwens CorningPdc Energy IncPioneer Natural Resources CoRaytheon CoServicenow IncSm Energy CoSplunk IncTesla IncValero Energy CorpWalgreens Boots Alliance IncXylem Inc/ny

2. United KingdomAccesso Technology Group plcAnglo American plcAshmore Group plcAsos plcAuto Trader Group plcBalfour Beatty plcBhp Group plcBodycote plcBovis Homes Group plcBP plcBT Group plcBunzl plcCentrica plcEquiniti Group plcFaroe Petroleum plcFirstgroup plcGenus plcGlencore plcHammerson plcIg Group Holdings plcImperial Brands plcInforma plcInmarsat plcItv plcJ Sainsbury plcJohn Laing Group plcKin And Carta plcLegal & General Group plcLloyds Banking Group plcPrudential plcReckitt Benckiser Group plcRightmove plcRBS plcRoyal Dutch Shell plcRoyal Mail plcRpc Group plcSegro plcSenior plcSevern Trent plcSirius Real Estate LtdSophos Group plcSpectris plcSpirax-Sarco Engineering plcSt James’s Place plcSthree plcTate & Lyle plcTp Icap plcTullow Oil plcTyman plcUnilever plcUrban Logistics Reit plcWorkspace Group plcWpp plc

3. GermanyAdidas AGAllianz SEAxel Springer SEBASF SEBayer AGBayerische Motoren Werke AGBechtle AGCovestro AGDeutsche Boerse AGDeutsche Lufthansa AGDeutsche Pfandbriefbank AGDeutsche Telekom AGGea Group AGInfineon Technologies AGLanxess AGLeg Immobilien AGMerck KGaAMtu Aero Engines AGMunich Re AGNorma Group SEOsram Licht AGProsiebensat.1 Media SES&T AGSAP SESchaeffler AGScout24 AGSiemens AGStabilus SAStroeer SE & Co KGaAThyssenkrupp AGTui AGVolkswagen AGVonovia SEZalando SE

4. FranceAccor SAAir Liquide SAAkka Technologies SE ArcelormittalBNP Paribas SACarrefour SACoface SACovivioDanone SAGecina SAImerys SAIngenico Group SAL’Oreal SANatixis SAOrange SARenault SASchneider Electric SEScor SESociete Generale SATeleperformanceUnibail-Rodamco-WestfieldVeolia Environnement SAVinci SAWorldline SA/France

5. SpainAcsAmadeus It Group SABBVA SABanco Santander SAEnagas SAIberdrola SALiberbank SAMerlin Properties Socimi SATelefonica SAUnicaja Banco SAVidrala SA

6. ItalyAssicurazioni Generali S.p.A.Cerved Group S.p.A.Enel S.p.A.Finecobank S.p.A.Intesa Sanpaolo S.p.A.Leonardo S.p.A.Mediobanca Prysmian S.p.A.Unicredit S.p.A.Unipol Gruppo S.p.A

7. SwitzerlandBaloise Holding AGCie Financiere Richemont SAGeorg Fischer AGGivaudan SAKardex AG-RegLafargeholcim LtdLonza Group AGNestle SAPartners Group Holding AGSiegfried Holding AGSunrise Communications Group AGSwiss Re AGUBS Group AG

8. JapanDaikin Industries LtdDenso CorpHeiwa Real Estate Co LtdIhi CorpItochu CorpKeyence CorpMitsubishi Ufj Financial Group IncNidec CorpPola Orbis Holdings IncShimizu CorpShionogi & Co LtdSompo Holdings IncTeijin LtdUbe Industries Ltd

9. China3sbio IncAlibaba Group Holding LtdChina Everbright International LtdChina Overseas Land & InvestCountry Garden Holdings Co LtdQingling Motors Co Ltd-HSinotrans Shipping Ltd

Engagements in other countriesBelgium Aedifica SAOntex Group NVWarehouses De Pauw Comm Va

BrazilItau Unibanco Holding SA

Czech RepublicMoneta Money Bank As

DenmarkDsv A/sSimcorp A/s

Finland Amer Sports Oyj

Hong Kong China Everbright Greentech LtdHong Kong Exchanges & Clearing LtdHongkong Land Holdings LtdPccw Ltd

IrelandDalata Hotel Group plcIfg Group plcRyanair Holdings plc

KoreaNasmedia Co LtdSamsung Electronics Co Ltd

NetherlandsIng Groep NVKoninklijke Dsm NVOci NVUnilever NV

Russia PjscGazprom Pao derPolymetal International plcSberbank Of Russia Pjsc

SingaporeDbs Group Holdings Ltd United Overseas Bank LtdVenture Corp Ltd

SwedenDustin Group AB Hexpol ABNordea Bank ABSwedbank AB

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Collaborative Engagement on Tailings SafetyBrumadinho – Jan 2019

§ AllianzGI actively participates in the Investor Initiative on Tailings Safety

§ Signatory to a letter sent to mining companies requesting additional disclosure around their tailings storage facilities (TSF)

üAUM of signatories was >$10tn

ü Letter sent to 683 CEO/Chairs of listed extractive companies

§ This issue has formed a core part of our engagements with Metals & Mining companies

§ Complicated issue impacted by factors such as dam design (upstream, downstream & centreline); regional seismicity and rainfall patterns; proximity to communities etc.

§ Common causes of failures include slope instability; overtopping (water erosion), earthquakes and foundations (structural).

§ Our expectations are for companies to increase disclosure on the management of tailings facilities

§ Aim is to have a better view of future risk exposures across our portfolios

Focus on 10 Metals & Mining holdings

Name Market Cap [mn] Country Total TSF

Rio Tinto PLC 74,764 GBR 136BHP Group PLC 96,231 GBR 115ArcelorMittal 17,728 NLD Not disclosedAnglo American PLC 25,890 GBR 79Aurubis AG 1,858 DEU N/AGlencore PLC 42,365 GBR 140Boliden AB 5,640 SWE 8POSCO 15,482 KOR Not disclosedAntofagasta PLC 9,269 GBR 4Newcrest Mining Ltd 9,761 AUS 13

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Climate Engagement: collaborative and direct

engagements

CA100+ Engagements:

§ ArcelorMittal:ü Had individual discussions with ArcelorMittal's

sustainability and technical experts; joined collective

engagement to emphasise importance of low-carbon

transition for the business.

ü Collective meetings and discussions progress slowly;

the lead investors made public requests at the AGM

around scenario analysis, corporate lobbying and GHG

targets, and met the Chairman to get additional insights

and commitments.

§ PetroChina:ü Historically been challenges getting direct access to the

company and having opportunity to discuss

environmental challenges. The hope was that through

this collective engagement AllianzGI would have more

progress on this topic.

ü Unfortunately the company has been reticent to meet

with the full investor group, and reliance on the lead

investor has not been as effective as envisioned.

Individual engagements outside of initiative:

As part of our engagement programme we have had

individual discussions with a number of CA100+ companies.

Selected examples include:

§ Chevron:ü AllianzGI had direct conversations with the company

regarding its preparedness for the energy transition

which were constructive – and the conversation

continues.

§ BASF:ü Both PMs as well as ESG analysts had multiple

discussions with the company related to their GHG

emissions, targets and management of climate risks

(e.g. EU ETS).

§ Shell:ü Discussions with board chairman on strategy and

preparedness for the transition. More recent

conversations with the RemCo chair about how their

commitments to include GHG targets in compensation

have progressed.

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Climate Engagement examples

Climate-related EngagementsBeyond the list of CA100+ companies AllianzGI has had extensive engagement with many companies on climate change and the energy transition, for example:

• Orange (2019): Fixed income colleagues questioned environmental policy regarding GHG emissions -driven by intensive base stations and technology centres at peers

• Ping An (2019): Engaged company on their climate change related management structure; ESG strategy and board oversight

• Mondelez (2019): Engaged the company to encourage Scope 3 goals and to consider environmental risks of their dairy supply chain.

• Tullow Oil (2018): Engaged on their preparedness to a low carbon economy as well on the management of the integrity and reliability of their offshore assets

*Data as of 29th August 2019

** YTD

1

2

5

11

3

8

16

17

2016 2017 2018 2019 **

CA100+ Not CA100+

AllianzGI: Climate Related engagements*

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Proxy voting

§ Core element of fiduciary responsibilities -100% voting coverage

§ Active global approach aimed at improving governance standards across all portfolios

§ Corporate Governance Guidelines and Proxy Voting Policy designed to protect clients' interests and to hold boards and management accountable

§ Active involvement from portfolio managers and sector analysts in proxy voting decisions

§ Full transparency through online real-time disclosures of votes cast at https://www.allianzgi.com/en/our-firm/our-esg-approach

Active investment strategies benefit from active exercise of voting rights

AllianzGI’s 2018 Global Proxy Voting

Source: Allianz Global Investors, February 2019

25%

75%

All resolutions in favour

At least one vote Against, Withhold orAbstain

Voted at 8,535 shareholder meetings

74%

25%1%

Voted in favourVoted againstAbstained

Voted on 85,876 proposals

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Proxy voting: regional variationsAllianzGI voting records reveals gulf in governance standards

Source: Allianz Global Investors, February 2019

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Proxy Voting Policy: Climate-related resolutions

§ AllianzGI has enhanced public disclosure of in-house approach to Climate-related shareholder proposals within our Proxy Voting policy.

Global Corporate Governance Guidelines

Please see the link here or visit https://www.allianzgi.com/en/our-firm/esg/documents for the policy documents

Shareholder Proposals – Climate change related• AllianzGI supports shareholder proposals seeking information on the climate related

financial, physical or regulatory risks and how the company identifies, measures, and manages such risks.

• We normally support shareholder proposals calling for the reduction of GHG emissions, subject to our assessment of the company’s efforts and improvements achieved.

• We also vote for shareholder proposals requesting a report/disclosure of company’s goals on GHG emissions from operations and/or products, as appropriate.

• AllianzGI generally supports proposals requesting that a company report on its energy efficiency policies and the feasibility of developing/switching to renewable energy sources.

Active is:Allianz Global Investors