OUR SUSTAINABLE INVESTMENTPHILOSOPHY AND BELIEFS

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What is sustainable investing?

Sustainable investing is an investment approach that seeks to add value or manage risks through a broader, more comprehensive approach to investment analysis, decision-making and engagement with consideration given to Environmental, Social and Governance (ESG) risks and opportunities that can have a material impact on investment returns.

It includes an appraisal of investment activity to consider both the long-term and short-term consequences, ensuring the alignment of activity, to the performance goals of a portfolio.

Our beliefs and actions in relation to the integration of ESG factors are supported by an established body of research and industry evidence that supports the case for greater examination of these factors.

Advance’s approach to sustainable investment is risk and return focused. We believe researching, assessing and managing sustainability factors enhances our ability to meet the long-term investment objectives for our funds. It also provides greater insight into investment risks across all time frames.

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Our approach in contextThis document outlines Advance’s beliefs and approach to the integration of ESG factors into our investment process. It is important to acknowledge that there are other approaches considered under the broad definition of Responsible Investment.

These approaches include screening, which can be applied on exclusionary (negative screening), positive (best-in-class) or norms-based approaches. Typically screening involves inclusion of ethical or social or moral perspectives into investment decision making with a view to achieving specific values based objectives in conjunction with financial objectives. Ethical investing and socially responsible investing typically involve screening processes based on values.

Our approach to ESG integration does not apply a specific screening process. As an investment and fund manager we endeavour to achieve positive financial outcomes for our clients whilst managing risk and protecting our clients’ investments against negative financial events.

Whilst at times some managers may choose not to invest in, or screen out some investments based on specific ESG issues, this is not expected to occur frequently. Our preference is that ESG issues are considered as one of a multitude of criteria within the investment process. We may conduct research directly, through third parties such as our managers or via specialist engagement providers.

What factors are typically considered? ESG factors can be considered at a company or stock or sector level, may impact a country specifically, or be part of a global trend.

Below are some examples of ESG considerations.

Environmental considerations

> Climate change

> Natural resource use

> Water scarcity

> Waste and pollution

> Environmental services

> Environmental products

Social considerations

> Changing demographics

> Health/pandemics

> Labour standards and workforce management

> Human rights issues

> Workplace health and safety

Governance concerns

> Corporate conduct

> Corporate structures

> Board structures and accountability

> Legal compliance

> Management of corruption

> Negligence

> Fraud and bribery issues

> Executive compensation

Other approaches to responsible investment Ethical or socially responsible investment, seeks to achieve a joint objective of financial outcomes overlaid with ethical or social beliefs.

In contrast, our approach to sustainable investment and the integration of ESG into our investment process is motivated by financial goals, aiming to create value and/or manage risk.

What are our investment beliefs regarding sustainability?

> Considering sustainability factors across companies, sectors, regions, asset classes and through time, in addition to the other variables in our investment process, enhances our ability to meet long-term performance objectives.

> Incorporating sustainability within an investment process provides a greater level of risk analysis and enhances portfolio risk management.

> Managers that consider sustainability factors in their investment processes enhance their capability to meet return targets, and manage security and portfolio risks.

> Sustainability issues will be a key focus of governments globally, and will increasingly influence global macro developments.

> We can best meet the overall objectives of a portfolio by considering both the long and short-term implications of an investment activity.

> Executing ownership rights through proxy voting and engagement can influence Board decision making, and therefore investment returns and risk over time.

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SUSTAINABLE INVESTMENT STRATEGY

Improved risk-adjusted returns

Our approach to ESG integration

1 Building knowledge, working

with other institutions

Building our resources, internal knowledge, sources of data and information to inform our decisions, building out institutional/industry relationships.

2 Defining investment beliefs and

philosophy

Setting out investment beliefs and principles, describing our intentions and the link back to the broader investment process.

3 Research and inputs

Reviewing the need for and sources of information; includes our managers, brokers, ESG data services, ESG research providers, understanding our governance limits and ensuring we operate within them.

4 Monitoring, Risk Management Oversight,

Controversies

Understanding and managing risks and opportunities in portfolios; managing controversies.

5 Investment process – strategy/

manager selection

Integration of ESG factors into the manager selection process, review of manager capabilities, including ESG analysis in manager selection, incorporating ESG within mandates.

6 Investment process – asset allocation,

portfolio risk and opportunity set

Including ESG considerations in the asset allocation framework and bringing ESG risks and opportunities into the decision making process; thematic specific investments.

7 Active ownership proxy and

engagement, disclosure

Ensuring managers are active in voting and undertaking engagement both at a manager level and through our own engagement service provider, promoting disclosure.

8 Report, Monitor, Review, Evolve Reporting

Continuous assessment and process improvement of our ESG practices, including reporting under the Principles of Responsible Investing and other initiatives. Engagement with and collaboration with industry groups is also an important part of this process.

How are ESG factors considered in our process?The level of ESG integration and individual investment manager capabilities forms an important part of our selection process.

We encourage our investment managers to include ESG factors in their investment processes.

We undertake a formal assessment of a manager’s approach to integration of ESG, in addition to ongoing dialogue around ESG issues. The ESG credentials of newly proposed and shortlisted managers are reviewed and considered in our manager selection and review process.

We’re committed to practicing active ownership and to working with managers to ensure voting rights are exercised appropriately.

We access research from numerous sources including dedicated ESG organisations such as Regnan, broker research primarily from CitiGroup, Credit Suisse and Macquarie, industry groups such as Investor Group on Climate Change (IGCC), Responsible Investment Association of Australasia (RIAA) and the Carbon Disclosure Project.

The Principles of Responsible InvestmentBT Financial Group (BTFG) is a signatory to the Principles of Responsible Investment (PRI). Advance’s actions in relation to ESG integration form a key component of BTFG’s response to meeting the principles.

Advance Asset Management, GPO Box B87, Perth WA 6838

Customer Relations 1800 819 935 Adviser Services 1300 361 864 Fax (02) 9274 5211

advance.com.au

This document has been issued by Advance Asset Management Limited ABN 98 002 538 329 AFSL No.240902 (Advance). This document contains general information only and has been prepared without taking into account the objectives, financial situation or needs of any particular person. It is not intended to constitute investment, legal of taxation advice and should not be considered or relied upon as a comprehensive statement on any such matter. Before acting on the information, a person should consider its appropriateness, having regard to their objectives, financial situation and needs. Whilst every effort has been taken to ensure that the assumptions on which the outlooks given in this document are based are reasonable, the outlooks may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. Past performance is not a reliable indicator of future performance. Information from third parties is believed to be reliable however it has not been independently verified. While the information in this publication is given by Advance in good faith, it does not warrant that it is accurate, reliable, free from error or omission. Advance is a member of the Westpac Group. An investment in a managed fund issued by Advance does not represent an investment in, deposit with or other liability of Westpac Banking Corporation ABN 33 007 457 141 or any other member of the Westpac Group. Subject to any terms implied by statute which cannot be excluded, neither Advance nor any other company in the Westpac Group and their directors, employees and associates accept any responsibility for errors in, or omissions from the information. Current as at March 2015. AD12070-1214cw