ACTIVITY REPORT

2012-2013

GUILÉ EUROPEAN ENGAGEMENT FUND Socially Responsible Investment Fund NOTICE This document is published for information purposes only. The content of this document does not constitute an offer for sale or a solicitation of an offer to purchase nor does it constitute an incentive to invest or to engage in arbitrage transactions. It may not be construed as a contract under any circumstances. The information contained in this document has not been analyzed with regard to your personal profile. If you have questions regarding any investment or if you have doubts as to whether an investment decision is appropriate, please contact your particular client representative or, if applicable, seek financial, legal, or tax advice from your customary advisors. de Pury Pictet Turrettini S.A. makes every effort to verify the information provided but cannot give any guarantee as to its accuracy. Past performance that might be indicated in the information transmitted by de Pury Pictet Turrettini S.A. in no way determines future returns. Any decision to invest or divest that may be made by the reader of the information appearing herein is made at the sole initiative of the investor who is familiar with the mechanisms governing the financial markets. All documents legally required to be made available to investors, in particular the prospectus relating to an investment company with variable share capital (SICAV), will be provided to them upon their request. This document is the intellectual property of de Pury Pictet Turrettini S.A. Any reproduction or transmission of this document in whole or in part to a third party without the prior written authorization of de Pury Pictet Turrettini S.A. is strictly prohibited.

ABSENCE OF CONFLICT OF INTEREST DECLARATION The mission of the Fondation Guilé requires strict attention to matters of independence and impartiality in order to preserve the integrity of its engagement process. It is extremely important that the extra-financial analysis of companies in the Guilé Funds, a critical part of these products, is not compromised by any conflict of interest on the part of analysts. Therefore, the Fondation Guilé formally states that BHP, the company that provided the specialists on the Guilé Engagement Team, received no fees in 2012-2013 from the companies that compose the Guilé Funds. WELCOME

For the third consecutive year, the Guilé Funds are publishing a transparent and exhaustive report on their engagement activities on behalf of their investors, with one minor operational change. We have decided to modify our reporting period, which will now cover the 12 months starting on April 1 and ending March 31.

We made this decision because many companies publish their extra-financial information after their financial statements, sometimes even very late in the calendar year, which made us feel that we had to rush our analysis in order to carry out the engagement on time. Therefore, this new reporting period will allow the Guilé Engagement Team to take all the time it needs to pursue its work.

We hope you will enjoy reading this 2012-2013 Activity Report.

ENGAGEMENT OF GUILÉ INVESTORS

Socially responsible investing is making great progress in Switzerland:

By choosing to invest in Guilé Funds or mandates, private and institutional investors are assuming their responsibility as shareholders: - by meticulously exercising their voting rights, - and by having an annual dialogue with the companies in the portfolio.

At Guilé, the fund manager takes on the financial cost of this action, and pays back to the Fondation Guilé part of his management commission so that the Fondation’s experts can perform these tasks independently and objectively: - analyze the company’s sustainable development policy; - assess to what extent the company observes the commitments it made by signing the United Nations Global Compact and/or sustainable development goals favorable to its shareholders; -hold discussions with the representatives of each company to establish and/or plan the progress expected by investor-shareholders.

Lastly, this active shareholder responsibility does not occur at the expense of fund or mandate performance: wealth managers and corporate responsibility experts combine their respective knowledge of each company to add value to Guilé investments over the long term, while assessing the financial AND extra-financial risk they present.

3 ENGAGEMENT OF GUILÉ INVESTORS

The Novethic study, “Controversial companies: do investor blacklists make a difference?”, published in early 2013, reviews the various types of responsible investors among 19 European institutional investors managing over 1.5 trillion euros. The study shows that engagement, followed by exclusion as a last resort, is the strategy adopted by companies such as ABP and APG in the Netherlands, Nordea and AP1-4 in Sweden, and by the Government Pension Fund in Norway.

The study states, “The large Dutch pension fund APG is skilled in this strategy. It explains that its responsible investing policy, applied to 200 billion euros of assets, consists of using its role as a shareholder to encourage companies to improve their sustainable development strategies. It feels that engagement is the best way to create long-term change.”

Although the Guilé Funds are not comparable to the largest funds in northern Europe in terms of assets managed, they do manage to engage effectively with other companies due to the acknowledged expertise of the Fondation Guilé.

Many corporate executives whom we work with confirm this view:

“Guilé's COP assessment provided very helpful input for compiling our next report. The external expertise confirmed my feeling to report more information that might seem obvious to us, but not necessarily to our external stakeholders.“ Ms. Nicki Crayfourd, Director of Health, Safety and Environment, COMPASS GROUP

"H&M is very committed to addressing and openly reporting on the UN Global Compact principles. The assessment of and feedback to our COP that is provided by Fondation Guilé is very helpful; it is valuable to have an external point of view and the suggestions from Guilé will be incorporated into H&M’s next report.“ Maritha Lorentzon, Global Code of Conduct Coordinator and Nils Vinge, Head of Investor Relations, H&M

“It is most appreciated and very useful to have an external opinion on the way our reporting is perceived by our stakeholders.” Mr. Grégory Soudan, Deputy Head of Group Risk Management, SCOR

At times, the expertise of the Fondation Guilé is requested earlier by some companies, who state this directly in their public annual Corporate Social Responsibility report (see following pages).

4 Extract from the CSR report of Coca-Cola Hellenic published in 2012

5 Extract from the CSR report of Heineken published beginning 2013

6 ENGAGEMENT OF GUILÉ INVESTORS

Over the six years of engagement of our European fund, company representatives we’ve met have often stressed that our experts actively contributed to the progress we witnessed within their companies in the area of extra-financial disclosure and sustainable development strategies.

Based on the results of our annual analyses, we can now offer some observations. The following information is the product of six consecutive years of analysis and subsequent engagement with 20 companies*. principles analized Average comprehensiveness of by yearinpoints points 48 per (max. principle)

Improvement in extra-financial information transparency for all Global Compact principles is quite clear. Of the 10 principles, the greatest progress has undeniably been made in information on measures involving principle no. 2, combating complicity in human rights abuses. It is even more encouraging that the data in this graphic represent European multinationals. They are therefore assumed to have long-standing established policies on human rights in their own companies. But the Fondation Guilé helped convince others of these companies’ responsibility all along their value chains (upstream with suppliers, and downstream with distributors/clients), which can be seen in the considerable progress the companies have made in strategic efforts and the information they provided to show that they are not complicit in objectionable practices elsewhere by their business partners.

* = Siemens, Société Générale, HSBC, E.ON, Standard Chartered, UBS, Nestlé, H&M, Danone, Credit Suisse, Total, Heineken, Novartis, Axa, Essilor, GDF Suez, Holcim, BP, ABB and Royal Dutch Shell, analysis of their CSR reporting published from 2007 to 2012. 7 ENGAGEMENT OF GUILÉ INVESTORS

Our tracking of these 20 companies over six consecutive years also shows the progress made according to the various analysis criteria used by the Engagement Team:

+ 49% (+ 8.2%/y)

Comprehensiveness criteria Average points per analyzedcriterion by year (max. 60 points per criterion)

The companies expressed greater strategic thinking about the importance (materiality) that each Global Compact principle represents in the sustainable development of their business. Persuaded by shareholders such as Guilé Fund investors among others, they also publicly adopted many more indicators and monitoring procedures to demonstrate their environmental, social, and governance performance (ESG).

+ 29% (+ 4.8%/y)

Quality criteria Averageanalyzed qualitysustainability of reportsby in pointsYearpoints (max. per item)3

Regarding the quality of extra-financial reports, we observed a vast improvement in the clarity of information, but also in terms of reliability of the information disclosed, due to systemization of internal and external verification procedures (type audit) to validate the data published.

8 RESPONSIBILITY

• Exercise investors’ VOTING RIGHTS at General Shareholders’ Meetings, according to chosen governance rules;

• Engage in DIALOGUE with portfolio companies in order to obtain transparency and full information regarding their compliance with the ten principles of the Global Compact. EXERCISE OF VOTING RIGHTS IN SWITZERLAND AND IN EUROPE

Voting at General Shareholders’ Meetings is a right that allows shareholders to express their views in order to define good corporate governance. Since the Swiss vote on the Minder initiative, this right has become an obligation for Swiss pension funds.

The Guilé Funds have always exercised voting rights associated with the securities we hold to their full advantage. The main principles that underpin our voting policy are primarily based on the Swiss Code of Best Practice for Corporate Governance approved by Economiesuisse (including the SWX Directive on corporate governance disclosure). Furthermore, we also exercise voting rights on the basis of the recommendations of the Ethos Foundation and the ECGS (European Corporate Governance Service, which has an alliance in France with the Proxinvest company, for example).

However, the Guilé Fund manager is ultimately the one authorized to vote in the best interest of investors holding shares. The manager, better than anyone else, can fill the central role reserved for shareholders at the General Shareholders’ Meeting, i.e., voting on allocation of earnings, particularly by determining the right dividend level.

The Guilé Funds often do not follow the voting recommendations received from analysts/service providers, rather, they apply their own guidelines and expertise in this area. One example of this freedom of maneuver can be seen in the appointment of members to the Board of Directors: the Guilé Funds managers feel it is much more important to decide on the choice of board members on a “case-by-case” basis rather than to simply follow a few rules of seniority or consider the total number of directorships a board member has taken on.

In principle, Guilé Fund managers exercise voting rights for all companies in the European fund and, to the extent possible, for all companies in the Emerging Markets fund. However, this exercise depends on the constraints associated with various laws, the voting rights attached to the securities, and certain practices such as share blocking or the obligation to have local representation. You may request the guidelines for the Guilé Funds exercise of voting rights at [email protected]

10 EXERCISE OF VOTING RIGHTS IN SWITZERLAND AND IN EUROPE

Overall, the topics submitted to a shareholder vote may be categorized as follows:

1) Annual report/financial statement report 2) Earnings allocation/dividend policy 3) Discharge of the Board of Directors 4) Structure of the Board of Directors/election of members and Chairman 5) Company compensation policy/rules, committees, contracts, etc. 6) Compensation policy for members of the Board of Directors 7) Compensation policy for executives (or even employees) through share-based profit sharing 8) Election of auditors 9) Capital transactions/purchase, sale of shares, defense against takeover bids, etc. 10) Other issues like shareholder resolutions, the time frame for setting the General/ Extraordinary Shareholders’ Meeting, gifts, etc.

For the companies in the European fund, in 2012 Guilé voted AGAINST the Board of Directors in 21.33% of the resolutions proposed. Our opposing votes were divided into the following topics:

Negative Guilé votes 2012

0.66% 1.32% Financials (topics 1 and 2) 9.93% 22.52% Guilé rejected the Board elections (topic 4) discharge of the Board of Compensation (topics 5-6 et Directors at UBS. 47% of 7) 22.52% the bank’s shareholders Auditor (topic 8) ultimately refused to give this discharge. Capital transactions (topic 9) Others

11.92% 31.13% Discharge Board (topic 3)

Negative Guilé votes 2011 The managers of the Guilé European fund are 0.93% increasingly demanding 16.66% 11.11% Financials (topics 1 and 2) regarding the choice of Board elections (topic 4) members of the Board of

Compensation (topics 5-6 et Directors, who must be the 7) guarantors of the Auditor (topic 8) 24.07% company’s good Capital transactions (topic 9) governance, including in the 40.74% Others area of executive pay.

6.48% 11 EXERCISE OF VOTING RIGHTS IN SWITZERLAND AND IN EUROPE

In 22.5% of the cases in which Guilé cast a negative vote, the resolutions dealt with the election of members of the Board of Directors.

There are several reasons for this stance:

• Lack of independence: An independent director is a person who does not maintain any relationships (with the company or its group) that might compromise his or her judgment because such person has the duty to be fully objective when participating in the Board’s work. • Combined roles of CEO and Chairman of the Board of Directors: It has become customary for good governance to separate these two functions. • Availability and attendance: In a few extreme cases, it may be advisable to oppose the election of a member who has seats on too many boards or who has been participating in too few meetings during the year. • Other: A nonvoting member, for example (which is not in the best interest of the board because such a member takes part in all the meetings and can therefore influence them yet bears no direct responsibility for the decisions made), or a member who has an unimpressive skill set.

Combined roles Lack of Availability and CEO / President Other independence attendance Board AXA 1 BNP PARIBAS 1 1 DANONE 1 2 GDF-SUEZ 2 1 1 L'OREAL 2 1 NOVARTIS 3 PUBLICIS 1 SAINT GOBAIN 2 SAP 3 SCHNEIDER 2 SOCIETE GENERALE 1 1 TELEFONICA 2 1 TOTAL 3 1 UNICREDIT 1

Note that despite international shareholder pressure for better corporate governance, there are still multinationals that have just one person granting himself all authority and combining the roles of CEO and Chairman of the Board of Directors.

12 EXERCISE OF VOTING RIGHTS IN SWITZERLAND AND IN EUROPE

In 31.1% of our no votes in 2012, Guilé was opposed to the company’s compensation policy report because we believed that the policy was :

- either too generous (particularly golden parachutes provided for when key executives leave the company early), - or not transparent or instructive enough (for example, compensation systems that do not spell out the performance components on which bonuses will be calculated).

Here is the official public report on these votes:

% votes AGAINST the % votes AGAINST the % votes AGAINST the Company Country remuneration report remuneration report remuneration report in 2012 in 2011 in 2010 ABB LTD-REG Suisse 10.88% 10.24% 5.79% BBVA Espagne 3.40% 2.20% not submitted to vote BG Group UK 6.03% 6.27% 5.83% BP PLC UK 11.79% 11.62% 9.26% BMW Allemagne 4.55% 4.17% 0.004% COMPASS GROUP PLC UK 6.60% 4.80% 1.89% CREDIT SUISSE GROUP AG-REG Suisse 31.56% 23.45% 29.16% DIAGEO PLC UK 7.46% 20.00% 11.74% GEBERIT AG-REG Suisse 8.88% 5.19% not submitted to vote HSBC HOLDINGS PLC UK 10.20% 18.74% 13% LINDE Allemagne 3.95% not submitted to vote 1.42% NESTLE SA-REG Suisse 8.43% 7.08% 7.92% ROYAL DUTCH SHELL PLC-A SHS UK/NL 9.12% 1.24% 1.27% SAP Allemagne 34.15% not submitted to vote 2.46% SGS SA-REG Suisse 24.38% 18.79% 15.82% STANDARD CHARTERED PLC UK 7.44% 7.84% 6.41% SWISS REINSURANCE CO LTD-REG Suisse 18.81% 22.64% 7.73% SYNGENTA AG-REG Suisse 12.57% 14.02% not submitted to vote TELEFONICA Espagne 24.91% not submitted to vote not submitted to vote UBS AG-REG Suisse 36.84% 32.22% 39.43% UNICREDIT SPA Italie 28.39% 22.41% 11.37%

However we approved the compensation policy of three companies in the fund: H&M, Holcim, and Reckitt Benckiser.

13 EXERCISE OF VOTING RIGHTS IN SWITZERLAND AND IN EUROPE

In 11.9% of our no votes, Guilé was opposed to the election of the auditor.

It is important to be sure of the absolute integrity of the external auditor. This is to avoid investing in companies that could be subject to accounting manipulation, sometimes fated to bankruptcy.

The principles of good governance stipulate that auditors should not have any conflicts of interest in performing their duties. To give just two examples, they should neither be economically dependent on the audited company nor provide other consulting services for an amount that is excessive in relation to their auditing duties.

This is why we voted against the election of the auditors at Axa, BMW, BNP Paribas, Compass, E.ON, Heineken, H&M, Linde, Novo Nordisk, Saint-Gobain, Société Générale, and Vallourec.

In 22.5% of our no votes, the issue related to transactions on the company’s capital, which could prove to be detrimental for shareholders. These are mainly: - capital increases, with or without pre-emptive rights, in unacceptable proportions; - employee share-distribution programs resulting in a capital imbalance or representing a significant discount; - share buybacks planned for the purpose of defending against attempted takeover bids.

14 SHAREHOLDER DIALOGUE IN EUROPE

After first sending the Guilé analysis to the companies, the Engagement Team establishes contact to discuss the results of this analysis.

ASSESSMENT OF PORTFOLIO COMPANIES Nb Companies assessments bought in the Nb Nb sent to the Nb portfolio companies in companies CEO and CSR companies during the the portfolio analyzed Director non analyzed 4th quarter EUROPE 43 43 43 0 0

For some companies, this exercise is conducted by telephone due to the geographic distance, while other companies meet with us in their offices. This year, a few companies even made a special trip to the Engagement Team’s offices:

ENGAGEMENT WITH COMPANIES Nb Nb engaged Nb companies Nb companies companies analysis companies with no Nb analysis discussed on with no dialogue companies in discussed in conference dialogue up meeting in the portfolio meeting call to date 2012/2013 EUROPE 43 14 24 1 4 *

In 2012-2013, the Guilé Engagement Team was able to have conversations with 88.4% Another remarkable development in of portfolio companies. Guilé’s engagement work over the At each meeting, whether on site or over the past three years has been the sharp phone, the engagement process was the decrease in the number of same: a presentation of the gaps identified companies with whom we have by Guilé in the company’s disclosure of its made no contact. In 2010 this figure social, environmental and anticorruption was approximately 30%, then it was challenges, then a discussion of the areas for 4.5% in 2011, and by the end of improvement in the interest of the company March 2013, just one company is still and its stakeholders. resistant to our attempts at dialogue.

* Lack of contact occurs for various reasons, for example, a total overhaul of the reporting within the company, or the departure of the person in charge.

15 SHAREHOLDER DIALOGUE IN EUROPE

Impact of the dialogues :

EUROPE Level Nb 6 1 (Publicizes Guilé's recommendations) NUMBER OF 5 10 Shows improvement on at least one weak point raised by Guilé COMPANIES BY 4 21 Approves the progress objectives clearly specified by the Guilé assessment LEVEL OF 3 7 Displays awareness and accepts the principle of a regular (annual) dialogue ENGAGEMENT 2 1 Agrees to a detailed discussion about our assessment WITH GUILÉ 1 3 Acknoledges receipt of our assessment

22 20 Nb of companies 18 16 14 12 NbNb sociétés companies 2012in 2012 10 NbNb sociétés companies 2011in 2011 8 Two years ago, the NbNb sociétés companies 2010in 2010 majority of the dialogues 6 with companies were in 4 their infancy, the “first 2 detailed discussion” of 0 Level of engagement with Guilé the Guilé analysis. 1 2 3 4 5 6

The evolution in the quality of our engagement by late March 2013 is visible in the graphic: more and more multinationals approve of the progress objectives submitted by Guilé and are showing year-over-year tangible improvements.

Comments on the impact of the dialogues:

Guilé has always set ambitious progress goals: A) create an ongoing dialogue (grade 3 and above) with all the companies in the portfolio; B) obtain approval for (grade 4) and report on (grade 5) increasing substantive progress that results from the influence of our analysis and our dialogue, among others. This ambition is embodied and is fostered by one of the industry’s most astute engagement teams.

16 FUND MANAGEMENT

• Produce ADDED FINANCIAL VALUE through active management of European equities compared to the fund’s benchmark index;

• Provide transparent, structured, independent, and stable asset management. GUILÉ EUROPEAN ENGAGEMENT FUND managed by de Pury Pictet Turrettini & Cie - Geneva

PERFORMANCE OF EUROPEAN MARKETS World economy: austerity persists, but return to modest growth Coûts unitaires du travail par Unit labor rapportcosts compared à l'Allemagne to Germany After three years of crisis, the euro zone is showing 120 some significant progress in competitiveness among the periphery countries: In reaction to the 115 contraction of their economies resulting from the 110 austerity measures imposed by the European Union, most of the periphery countries saw salaries decline, 105 Irlande which led to a drop in unit labor costs compared to 100 France Germany. These countries, with the notable Espagne exception of Italy, also witnessed a large boost in 95 Italie Portugal their exports and improvement in their current 90 accounts. 2006 2007 2008 2009 2010 2011 2012

Doubts about sustained recovery in the euro zone were significantly lessened by the announcement over the summer of 2012 of structural measures aimed at strengthening the monetary union. The plan is to create a European banking regulator under the aegis of the European Central Bank as part of a genuine bank union that will separate the risks associated with the banking system from the risks of individual countries. Also, the simple announcement by the ECB of massive support for refinancing the sovereign debt of any countries requesting it led to a major drop in interest rates and contraction of the risk premium.

The ECB’s goal was to eliminate the premium, which seemed to reflect the market’s view on the risk of a breakup of the euro zone.

In the US, the Federal Reserve continued to intervene in long-term interest rates with a third program of quantitative easing (QE3). Another aim of this action was to quell investor anxiety over negotiations in the US Congress on the fiscal cliff, which finally led to a very temporary compromise on the last day of the year. In addition, the business cycle improved at the end of the year in the emerging countries of Asia. Contributing over one-third of growth worldwide, China is in first place. Emerging economies represent two-thirds of medium-term growth, and Asia alone accounts for over 50% of that growth. The rise of the consumer in emerging economies remains the major structural trend here. Over the course of this decade, the number of individuals escaping from poverty and likely to earn enough income to purchase a diversified basket of consumer goods will jump from 600 million to 1.7 billion. This trend is a major factor in the profitability of investments. It supports direct investment in emerging countries on the one hand, and the sales and profits of a growing number of companies in industrialized nations on the other.

18 GUILÉ EUROPEAN ENGAGEMENT FUND managed by de Pury Pictet Turrettini & Cie - Geneva

Trends in European equities market As at the start of 2011, European markets began the year with a strong recovery, aided by long-term bank financing transactions by the European Central Bank and the announcement of a second refinancing round for Greece.

In the spring, the markets realized these measures were simply tactical and did not solve the euro zone’s structural problems. Spain, and to a lesser extent Italy, had trouble refinancing their debt. The elections in France also contributed to investor anxiety.

A series of decisions made during several European summits, along with the ECB’s announcements, convinced investors of the political will in Europe to keep the euro zone intact. This led to a steep cut in the risk premium associated with European equities and also triggered a major rally in the second half of the year.

European equities index (Dow Jones Stoxx 50 with reinvested dividends)

Source Bloomberg

19 GUILÉ EUROPEAN ENGAGEMENT FUND managed by de Pury Pictet Turrettini & Cie - Geneva

PERFORMANCE OF THE GUILÉ EUROPEAN ENGAGEMENT FUND

The subfund’s A and B classes posted a performance of 15.4% and 16.3%, respectively, for 2012, thereby surpassing the performance of the benchmark index (Dow Jones Stoxx 50, net dividends reinvested), which climbed by 13.0%.

Shares in consumption companies exposed to the world business cycle, particularly in emerging markets (L’Oréal, Reckitt Benckiser, BMW, Publicis, Diageo, Heineken), appreciated considerably during the year.

Another big boost came from the financial sector, which benefited from the considerable drop in risk premiums following actions by European authorities to manage the sovereign debt crisis (BNP Paribas, Société Générale, HSBC, Standard Chartered, Axa, Swiss Re, Scor). Banks in periphery countries (BBVA, Unicredit) experienced some serious volatility, but stabilized towards the end of the year. Like the rest of the industry, Swiss banks (Credit Suisse, UBS) have to adapt their business models to the sweeping changes imposed by regulators.

Both the industrial and the technology sectors ended the year on a high note with the excellent performance of some companies with good exposure to world growth (Schneider Electric, SGS, Holcim, Linde, Syngenta, SAP).

Lastly, two stocks in the health sector (Essilor International, Novo Nordisk) saw firm growth for their own specific reasons.

Uncertainty about the direction of global growth and more specific problems faced by individual companies dampened performance in the energy sector (BG Group, BP, Royal Dutch Shell, Total) and among some industrial companies (Vallourec), and raw materials groups (ArcelorMittal). The weakness of the European economy also explained the sluggish growth in utilities (E.On, GDF Suez) and telecoms (Telefonica).

In 2012, the fund manager made only slight adjustments to the portfolio. The one exception was the sale of Siemens, a major industrial group whose outlook for value creation was not appealing.

20 GUILÉ EUROPEAN ENGAGEMENT FUND managed by de Pury Pictet Turrettini & Cie - Geneva

PERFORMANCE OF THE GUILÉ EUROPEAN ENGAGEMENT FUND (continued)

Our investment style continues to be based on selecting shares for medium-term value creation and generally calling on a limited number of transactions throughout the year, which was the case in 2012 as well.

The stability in our positions inherent in our management style is one of the reasons why the Fondation Guilé Engagement Team is able to develop its work of actively engaging with the companies represented in the portfolio. Over the course of the year, the Fondation Guilé increased its contacts with the executives of these companies. This work is described in an ad hoc report issued by the manager.

Outlook The world business cycle improved by the end of the year, both in the emerging countries of Asia, including China, and in the US. In Europe, however, indicators point to stabilization at best. But 2012 marks a turning point in the euro zone debt crisis. Backed by the protections put in place by the ECB, to be interpreted in the context of the single currency as a political project that cannot be allowed to fail, the risk of the euro zone’s breakup was largely dispelled. Despite the lack of a complete solution, budget deficits were reduced and competition was restored in several countries, exceeding even the most optimistic projections. This progress helped to significantly reduce risk premiums in the periphery countries.

After nearly five years of underperformance compared to the other regions of the world, European shares have even greater potential for catching up now that companies are in good shape, with solid balance sheets and healthy cash flows. After the crisis, most companies began programs to economize and improve efficiency, which had a strong positive impact on profit margins. Although many of these programs have already produced results, pressure on salaries and costs remains weak, thereby continuing to support the wider margins. In addition, numerous companies are benefiting from global exposure and in particular, from growth in Asia and America.

21 GUILÉ EUROPEAN ENGAGEMENT FUND

COMPOSITION OF THE PORTFOLIO AS OF 31.12.2012

Country GEEF Portfolio as of 31.12.2012 Currency %

Allemagne BMW EUR 2.40 Allemagne E.ON EUR 0.91 Allemagne FRESENIUS MEDICAL CARE EUR 2.60 Allemagne LINDE EUR 2.58 Allemagne SAP EUR 3.33 Danemark NOVO NORDISK A/S-B DKK 1.95 Espagne BBVA EUR 2.85 Espagne TELEFONICA EUR 1.46 France AXA EUR 1.81 France BNP PARIBAS EUR 1.60 France DANONE EUR 2.65 France ESSILOR INTERNATIONAL EUR 3.42 France GDF SUEZ EUR 0.51 France L'OREAL EUR 2.90 France PUBLICIS GROUPE EUR 2.34 France SAINT-GOBAIN EUR 2.34 France SCHNEIDER ELECTRIC EUR 2.42 France SCOR EUR 2.68 France SOCIETE GENERALE EUR 1.57 France TOTAL EUR 2.11 France VALLOUREC EUR 2.65 Hollande HEINEKEN EUR 2.64 Hollande / UK ROYAL DUTCH SHELL PLC-A SHS EUR 2.58 Italie UNICREDIT SPA EUR 0.16 Luxembourg ARCELORMITTAL EUR 1.32 Suède H&M AB-B SHS SEK 2.95 Suisse ABB LTD-REG CHF 2.28 Suisse CREDIT SUISSE AG-REG CHF 1.49 Suisse GEBERIT AG-REG CHF 1.95 Suisse HOLCIM LTD-REG CHF 0.42 Suisse NESTLE SA-REG CHF 3.21 Suisse NOVARTIS AG-REG CHF 2.86 Suisse SGS SA-REG CHF 2.39 Suisse SWISS RE LTD-REG CHF 1.40 Suisse SYNGENTA AG-REG CHF 2.21 Suisse UBS AG-REG CHF 2.62 UK BG Group GBP 1.93 UK BP PLC GBP 2.60 UK COMPASS PLC GBP 3.29 UK DIAGEO PLC GBP 2.14 UK HSBC PLC GBP 2.58 UK RECKITT BENCKISER PLC GBP 3.28 UK STANDARD CHARTERED PLC GBP 2.60

22 CONFIDENTIAL REPORT

• Results of corporate extra-financial disclosure analysis

• Minutes of the dialogue in the name of Guilé Funds investors (dialogue with each company that was in our portfolio as of 31.12.2012 and that published a CSR report on due time for the assessment)

Source: FONDATION GUILÉ ABB – signatory to the Global Compact since 2000

ANALYSIS OF THE REASONS FOR INVESTING ANALYSIS OF THE CORPORATE SOCIAL RESPONSIBILITY ISSUES A giant in the heavy-industry sector, serving a broad range of customers including many energy produ- The ABB group has over 50,000 direct suppliers. This cers/distributors (automation products, generators, exceptionally high figure spotlights the company’s main services and processes). Subject to the economic cycle, issue: the dilemmas posed by management of this but nevertheless participating in the dominant trends supply chain. (e.g. infrastructure-building in China and other In 2011 ABB conducted a vast survey of its stakeholders, emerging-market countries). Excellent financial mana- using a materiality matrix to define the five priorities for gement for the past ten years and strong value creation. sustainable development.

REVIEW OF SHAREHOLDER ENGAGEMENT STATUS OF THE SHAREHOLDER DIALOGUE IN PROGRESS Contact with the Guilé engagement team: 2012 : meeting in the offices of ABB in Oerlikon • 6th COP analysis Participant: the Head of Corporate Social Responsibility • 4th discussion with the company since its entry into the portfolio

DISCUSSION OF THE COMPREHENSIVENESS OF THE COMPANY’S NON-FINANCIAL REPORTING

 Overall, ABB’s communication on corporate social responsibility is very thorough.  Over the years, the company has become increasingly adept at expressing the importance of the human rights issue to its future. It has also improved its communication on the monitoring of its supply chain’s respect for the human rights principles.  In the Fondation Guilé’s opinion, ABB should press on with the improvements seen in its communication on materiality, particularly as regards the principles relating to child labour and forced labour.  The ABB group shows an extremely high level of commitment to environmental responsibility. Moreover, in its precautionary approach (principle 7) it has extended this commitment to its supply chain.  Lastly, the anti-corruption reporting is very detailed, particularly thanks to publication of the Integrity Programme document.

DISCUSSION OF THE QUALITY OF THE COMPANY’S NON- FINANCIAL REPORTING

 The corporate social responsibility reporting is published on ABB’s website in good time, i.e. barely a week after the company’s Annual Report.  The reporting is of high quality but its structure in line with the Global Reporting Initiative (GRI) framework can make it hard for the general public to follow.  The performance indicators cover the past three years.  External assurance of some performance data is entrusted to an independent body, Det Norske Veritas. 24 ABB – signatory to the Global Compact since 2000

CORPORATE SOCIAL RESPONSIBILITY AT ABB Organisational structure and approach to the issues at stake: • The manager with whom the Fondation Guilé is in dialogue heads up the Corporate Social Responsibility team. • This team belongs to the broader Sustainability Affairs department, whose manager, Adam Roscoe, reports direct to the Head of Human Resources.

AREAS WITH POTENTIAL FOR PROGRESS, SUGGESTED BY THE GUILÉ SHAREHOLDERS 1. Guilé’s experts feel that in general, the objectives for all the Global Compact principles could be communicated more systematically and transparently. This applies particularly to the long-term environmental performance targets, which should enable the group to maintain its significant advance in that area. But ABB’s philosophy is to work with feasible objectives, and to communicate these only once they have been reached, or are sure to be reached. The manager nevertheless said that the company would work on developing indicators and targets in 2012 and 2013. 2. We also recommend that ABB clearly explain whether or not its senior management sees principles 4 and 5 (forced labour and child labour) as being important. Stakeholders need to be able to understand how these principles might impact on responsible and sustainable management of the company. For example, in the Gulf States, it is not uncommon for employees to have to entrust their passport to their employer, which is akin to forced labour. If, and only to the extent that, this kind of issue affects ABB, socially responsible communication should make that explicit. 3. Meanwhile, the company itself has identified another route to progress that it will explore this year: a tool that measures the added value of its community engagement policy by quantifying its social impact. This systematic analysis will begin in 2013 and the first results are expected in 2014.

LEVEL OF ENGAGEMENT IN 2012

The Fondation Guilé’s engagement with ABB has become reliable. For several years now, the same manager has continued the dialogue with our experts, which ensures effective monitoring of the improvements planned and the progress achieved. Nevertheless, the company adopts a strictly pragmatic attitude towards a) the idea of communication devoted solely to social and environmental responsibility; and b) more specifically, the Global Compact. No doubt, for ABB, sustainable development is far more of a concrete daily challenge than its reporting would suggest.

(6) (Publicizes Guilé's recommendations) 5 Shows improvement on at least one weak point raised by Guilé 4 Approves the progress objectives clearly specified by the Guilé assessment 3 Displays awareness and accepts the principle of a regular (annual) dialogue 2 Agrees to a detailed discussion about our assessment 1 Acknoledges receipt of our assessment

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