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. 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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 yearin pointspoints 48 (max. per 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