October 2017

Nicola Theron

Manager – RFP Direct: +44 (0)20 7680 2326

Email: Nicola.Theron@hermes-investment.com

Global Emerging Markets ESG

EUROPEAN SRI TRANSPA RENCY

CODE (EUROSIF)

Questionnaire

2

For institutional investors only

Global Emerging Markets ESG

Contents Statement of Commitment ...............................................................................................................................3

Section 1 – Basic Details .................................................................................................................................4

Section 2 - Approach to ESG Evaluation of Companies ........................................................................... 12

Section 3 - Fund Management Process ...................................................................................................... 14

Section 4 – Controls and ESG Reporting ................................................................................................... 18

Important Information ................................................................................................................................... 20

3

Global Emerging Markets ESG

Statement of Commitment Sustainable and Responsible Investing is an essential part of the strategic positioning and behaviour of Hermes

Investment Management. We have been involved in SRI since the early 1990s and welcome the European

SRI Transparency Code.

This is our first statement of commitment and covers the period 12 months from approval. Our full response to

the European SRI Transparency Code can be accessed below and is available in the annual report of the retail

funds and on our web site.

Compliance with the Transparency Code

Hermes Investment Management is committed to transparency and we believe that we are as transparent as

possible given the regulatory and competitive environments that exist in the countries in which we operate.

Hermes Investment Management meets the full recommendations of the European SRI Transparency Code

without any exceptions.

October 2017

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Section 1 – Basic Details

1a Provide the name of the fund management company managing the fund(s) to which this Code

applies.

Hermes Fund Managers Limited

Lloyds Chambers

1 Portsoken Street, London, E1 8HZ

Direct: +44 (0)20 7702 0888 (switchboard)

1b Describe the general approach of the fund management company with regards to how it takes

environmental, social and governance (ESG) criteria into consideration.

At Hermes, we believe that, while our primary purpose is helping beneficiaries retire better by providing world

class active investment management and stewardship services, our role goes further. We believe we have a

duty to deliver holistic returns – outcomes for our clients that go far beyond the financial and consider the

impact our decisions have on society, the environment and the wider world. Our goal is to help people invest

better, retire better and create a better society for all.

In the context of our mission as a firm, described above, each of our funds is committed to incorporating ESG

considerations into their investment approach in order that portfolio managers are cognisant of the full range

of risks and opportunities inherent in any company and are similarly mindful of the impact of a company’s

operations on wider society and ultimately are able best able to generate strong and sustainable returns.

Is the fund management company approach towards ESG criteria part of its corporate

social responsibility approach? Yes/No. If yes, insert a link to the company's CSR policy.

Our goal as an asset management firm is to help people invest better, retire better and create a better

society for all. This goal is one that is shared across the firm and in turn shapes how all that we do as an

organisation and as individuals.

Our ownership structure ensures we understand well the interests and needs of our clients and their

beneficiaries. Consequently, our understanding of our fiduciary responsibility is at the heart of Hermes’ ethos.

In addition to our behaviours as individual employees and the delivery of strong investment performance for

our clients, we also believe we should lead by example as a firm. Hermes strives therefore to make a difference,

not only through our investment solutions, but in how we contribute to both the financial system and wider

community.

We are proud to have a strong culture of responsibility and aspire to both maintain and further foster this client

focused approach. The Hermes Pledge of Responsibility and Transparency, created in 2015, expresses our

commitment to always put the interests of our clients and their beneficiaries at the heart of what we do. In

addition, the Pledge states that we will: “encourage responsible behaviour in the firms in which we invest and

on which we engage”; and also, “act with consideration for society and the environment both now and in the

future.”

In evidence of our commitment to managing our organisation’s impact on the environment, we were proud to

achieve the revised ISO 14001 requirement this year. The ISO 14001 is the international standard for

environmental management systems (EMS) and the most widely used EMS in the world. Similarly, during

2016, in recognition of the value of a diverse workforce and in particular the benefits of having a diversity of

experience amongst senior management, we became a founding signatory to the Women in Finance Charter

and have set ourselves firm-wide, board level and senior management level gender diversity targets.

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Additionally, in late 2015, Hermes launched the Hermes Corporate Citizenship programme, which brought

together all of our corporate social responsibility (CSR) initiatives under one umbrella. The Corporate

Citizenship programme includes ACE (community engagement), Hermes’ current charity of the year, Blesma,

SPLASH (staff sports and leisure) and the EMS working group (environmental issues). The continued work

carried out throughout 2016 by these groups has been exceptional and demonstrates how Hermes “walks the

talk” through the community, environmental and employee initiatives it encourages investee companies to

adopt as part of the Hermes EOS engagement programme. By bringing these groups together under one

umbrella, Hermes has been in a position to develop a more cohesive strategy, aligning our activities to our

values and beliefs and further demonstrating our commitment to responsibility.

In 2016 our activities in the local community and with the below partnerships continued to be supported by our

staff. These projects included lunchtime reading and numeracy sessions with young people, renovating local

schools and gardens, and supporting those more vulnerable within the London Borough of Tower Hamlets,

which is one of the most deprived communities in Western Europe and also right on our doorstep.

Notable partnerships that Hermes worked with in 2016 include:

Mosaic Mosaic strives to inspire young people from poorer communities to realise their talents and potential.

It also aims to rehabilitate young offenders in prison.

Business in the Community Hermes is an active member of Business in the Community, the Prince of

Wales’ responsible business network and a gender diversity “champion”. Members of the network tackle a

wide range of issues that are essential to building a fairer society and a more sustainable future.

East End Community Foundation The EECF has been dedicated to increasing opportunities for people

living in London's East End for 25 years. Hermes is working with them on a number of initiatives to help raise

educational achievement, enhance employability and increase social cohesion.

In June 2017, Hermes published our Modern Slavery statement. We are committed to running our business

responsibly. We endeavour to uphold high ethical principles and to respect human rights. It also means doing

our best to encourage high standards in our supply chain and business. In this context, we have used the

requirements introduced by the Modern Slavery Act 2015 as an opportunity to review the way in which we

operate our own business, together with the way in which we interact with others, including our clients, our

suppliers, and we have also considered the area where we have the ability to make the most impact – our

investments. Our objective is to ensure that there is no modern slavery or human trafficking in any of our

business dealings.

In addition our Delivering Holistic Returns document which was authored last year, covers what we do across

asset classes and as a responsible investor, owner and firm.

Has the fund management company signed the Principles for Responsible Investment? If

yes, please insert the link to the answer to the PRI questionnaire.

Yes. Hermes was a founding signatory and chair of the drafting committee that created the PRI. Attached as

appendix 1 is our 2017 PRI Transparency Report.

Is the fund management company a signatory or a member of other international and/or

national initiatives supporting SRI practices? Please answer if you deem this information

to be useful.

Yes. Hermes is a member of a number of industry bodies and initiatives which seek to promote and support

the adoption of more responsible investment practices around the world. Indeed, we are founders of many of

them. Below is an overview of some of the main bodies Hermes is involved with:

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Senior level involvement Committee membership Membership

Banking Standards Board, board

member British Property Federation Aiming for A Investor Coalition

CFA Institute’s Future of Finance

Advisory Council, council member Building Performance Institute

Europe Alternative Investment Management

Association (AIMA)

Eumedion Asian Corporate Governance Association

Canadian Coalition of Good

Governance Associação de Investidores no Mercado de

Capitais (AMEC), Brazil

IIRC Council Global Real Estate Sustainability

Benchmark, Association of Real Estate Funds (AREF)

Investment Association Assogestioni

Pensions and Lifetime Savings

Association Better Buildings Partnership (BBP)

CDP British Council for Offices

Council of Institutional Investors British Council of Shopping Centres

Quoted Companies Alliance

(QCA) British Private Equity & Venture Capital

Association (BVCA)

Dansif (Denmark)

The 300 Club, founder Institute of Chartered

Accountants in England Wales

(ICAEW), Extractive Industries Transparency Initiative

French Social Investment Forum (FIR)

Principles for Responsible Investment

(PRI) Institutional Investors Group on

Climate Change Global Institutional Governance Network

(GIGN)

Institutional Investor Council Global Investors Coalition on Climate Change

International Corporate

Governance Network Institutional Limited Partners Association

Invest Europe (formerly known as EVCA)

Japan Corporate Governance Network

JSIF (Japan)

NORSIF (Norway)

CFA Institute – Centre for

Financial Market Integrity Official Monetary and Financial Institutions

Forum

Pacific Pension Institute

Royal Institute of Chartered Surveyors

The European Association for Investors in

Non-Listed Real Estate Vehicles (INREV)

The Institute of Business Ethics (IBE)

Thinking Ahead Institute

Chartered Banker, Professional

Standards Board Tomorrow’s Company

UKSIF

In July 2016, Hermes became a signatory to HM Treasury’s Women in Finance Charter, pledged for gender

balance across financial services.

In early September 2017 Hermes joined the United Nations Global Compact, the world’s largest corporate

sustainability initiative. Hermes is committed to making the UN Global Compact and its principles part of the

strategy, culture and day-to-day operations of the company, and to engaging in collaborative projects which

advance the broader development goals of the United Nations, particularly the Sustainable Development

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Goals. The firm believes that this is not only the right thing to do but that sustainable growth creates a more

sustainable financial ecosystem for the benefit of all.

Has the fund management company established an ESG engagement policy? If yes,

describe the policy by outlining its objectives and its methodology and/or, if it is public,

insert a link to the policy

Since our establishment in 1983, we have believed that our responsibilities as investors do not stop with a

decision to buy a stock. Instead, we must act as engaged owners of the companies in which we are invested

and the assets that we manage. For that reason, carrying out our stewardship responsibilities is an integral

element of our overall approach to being a responsible investment management firm and a crucial contributing

factor to delivering strong risk-adjusted performance over the short, medium and long-term.

The Responsible Ownership Principles have been long standing and aim to create a common understanding

between boards, managers and owners. The Principles convey our expectations of listed companies and

similarly what these companies can expect from us as owners. The expectations which are set out are derived

from Hermes’ extensive experience as an active and engaged shareholder, and as such these principles

underpin the manner in which we fulfil our stewardship responsibilities beyond public companies.

Our in-house Stewardship team, Hermes EOS, engages with stewardship clients on the formulation of its rolling

three-year engagement plan and the corresponding KPIs.

Specifically, the core client objectives which we seek to influence through our engagement work are:

Environment: Improved management of the risks arising from climate change; sustainable levels of

consumption of global water resources; pollution of air, land and water reduced to below harmful levels

and improved resource efficiency through better waste management, all while supporting long-term

sustainable economic growth.

Social and ethical: the advance of the long-term sustainability of the economy through respect for basic

human and labour rights; the payment of appropriate levels of tax; good management of key social and

ethical risks such as cyber security in both the company and in supply chains; the establishment of a

diverse workforce, together with best practices in wider human capital management; and the

development of an appropriate corporate culture and conduct, including the elimination of bribery and

corruption, to support long-term sustainable value creation.

Governance: Improvement of the governance of companies through better board composition and

effectiveness, the alignment of executive remuneration with the creation of long-term value and the

protection and enhancement of shareholder rights.

Strategy, risk and communications: Deployment of a long-term sustainable business model and strategy;

robust risk management practices and transparent disclosure of sufficient information to investors and

wider stakeholders to make informed decisions on long-term investment.

Stewardship: More active ownership by investors to support a global financial system that acts in the

interests of ultimate beneficiaries and not their various agents.

These objectives help our clients to achieve strong risk-adjusted financial returns sustainably, over the long-

term, as well as protecting and enhancing the value of the wider economy and society for all stakeholders

which together achieves higher holistic returns for beneficiaries.

Please refer to our website where public case studies of our engagements can be found https://www.hermes-

investment.com/ukw/stewardship/hermes-eos-case-studies/

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Has the fund management company established a voting policy? If yes, describe the

policy by outlining its objectives and its methodology and/or, if it is public, insert a link to

the policy.

Hermes considers the vote as part of the asset that a shareholder owns and recognises that we have an implicit

fiduciary duty to exercise, or to recommend the exercising of this right in a considered and intelligent fashion.

We also recognise that voting can be a powerful tool in signalling to a company our views and ultimately as a

catalyst for beneficial change.

While we have developed our own best practice regional principles which are based on local market standards,

we also benefit from additional external research. Crucially, we retain complete authority over our final voting

decisions and our recommendations to stewardship clients. Voting recommendations are made by and for

experienced investors, aiming to support companies’ sustainability and long-term performance. Similarly, in

line with our voting policy, we exercise our voting rights at formal bondholder meetings.

We vote across all markets and assist stewardship clients in setting their policies.

Hermes EOS has developed its own very detailed country-specific customised voting policies for most markets.

These policies are designed by our engagement and voting staff, drawing on their knowledge and experience

of local markets and incorporate our Regional Corporate Governance Principals, which reflect developments

in corporate governance and local market practices. These policies are reviewed annually and extended to

markets such as Mexico and Turkey.

A list of our voting policies are available on our website at www.hermes-investment.com/stewardship/eos-

literature/ . These cover the principal markets. Malaysia currently falls under our EOS voting guidelines, which

is also attached for your reference or can be found on our website at www.hermes-investment.com/wp-

content/uploads/2015/09/the-hermes-ownership-principles.pdf .

We believe it is right that companies are clear as to our expectations of them and how it is that we will exercise

our votes in line with these expectations. To that end, the Hermes Responsible Ownership Principles and our

various regional corporate governance principles provide a clear framework for our voting policy. Further detail

on our approach in different regions and on particular topics can be found on our website -

https://www.hermesinvestment.com/ukw/stewardship/eos-literature/

We also publish our voting disclosure one quarter in arrears so that we are transparently accountable publicly

but that our dialogue with companies around voting issues is not compromised. This disclosure provides a

description of where and why we have opposed management.

Describe how the fund management company or the group contributes to the promotion

and the development of SRI

We aim to deliver sustainable, risk-adjusted outperformance to clients for the long term, and our approach to

responsibility is critical to achieving this.

Our long-term ownership of investments and strong alignment with the chief objectives of our clients – the

long-term, sustainable growth of shareholder wealth and the global economy – is fundamental to this. In the

context of the increasing evidence and our responsibility as a fiduciary for our clients, we seek to:

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integrate awareness of ESG risks and opportunities into our investment processes;

ensure we remain cognisant of and trend in these risks within individual investments and across our

portfolios;

actively engage as appropriate, with those companies in which we, and our clients, have invested, and

utilise our rights as investors in a considered and informed fashion to promote long-term success, and;

work with policy makers to promote responsible investment and advocate for a global financial system

that operates in the interests of its ultimate beneficiaries, not its various agents.

In addition to our active participation and leadership in a number of leading responsible investment initiatives,

notable examples of work that we have undertaken in the past 12 months to promote and develop the practice

of responsible investment include:

- Research published by our Global Equities team which demonstrated that a ‘governance premium’ is

now entrenched: companies with strong corporate oversight have tended to outperform their poorly

governed competitors by an average of over 30bps per month since the beginning of 2009.

Furthermore, this study showed that the premium holds true across different geographies and sectors

– albeit with a few caveats – proving the widespread power of effective corporate governance.

- Research published by our Credit team in conjunction with colleagues in our stewardship team entitled

‘Pricing ESG Risk in Credit Markets’ explained how we have developed a pricing model to capture the

influence of ESG factors on credit instruments

- Our ongoing support for the 300 Club which was originally founded by our CEO. In early 2017 our

CEO published a paper entitled The Why Question which argued that rethinking the ‘why’ of investment

should dictate the ‘how’ to reconnect capital with its underlying purpose, indeed, equity holdings should

no longer be seen as a way to allocate capital, but rather, should be redefined as a method for owners

to control the companies that determine their economic social destiny

Furthermore, Hermes contributes to the promotion and the development of SRI with its innovation and

dedicated SRI product offering which complement our ESG aware strategies. We can, and have, adapted

our investment approach for clients with specific ethical or environmental beliefs, developed a new low

carbon strategy during 2016 and operate products which combine both a negative screen and a positive

impact overlay to offer positive impact ESG strategies to SRI-minded clients.

Due to Hermes continued success of integrating environmental, social and governance issues into the firm’s

decision making, on the 4th October 2017 Hermes won ESG Manager of the Year (Financial News) for the

second year running. Our strong outperformance across our ESG-focused strategies and our asset growth, of

which our Global Equity and Global Emerging Markets teams were highlighted, have further contributed to this

recognition.

1c Describe/List your SRI products and the specific resources allocated to your SRI activities.

Briefly describe the SRI fund range (number, assets under management, strategies)

Describe/Detail the resources allocated by the fund management company (organisation,

ESG research internal/external, , dedicated portfolio management team,…) and indicated

where this information is available.

Hermes SRI funds and services offering is set out below.

ESG aware investment strategies – We believe that a responsible approach to investing is appropriate

across all asset classes and for all investment strategies. Our ability to mitigate ESG risks and capture

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investment opportunities arising from these considerations is essential to achieving consistent

investment outperformance and delivering for our clients.

Positive impact ESG strategies – SRI-minded clients can chose from investment products that

complement our ESG aware strategies with a negative screen and a positive impact overlay.

Engagement service – We have one of the world’s largest teams dedicated to active ownership,

engagement and public policy work, Hermes EOS. Launched over 13 years ago, Hermes EOS provides

active ownership services to Hermes and over 40 global asset owners.

We embed responsibility in our investment processes across all asset classes, including public and private

markets: listed equities and corporate bonds, real estate, infrastructure and private equity. We believe a

responsible investment approach needs to consider longer-term risk factors including a company’s relationship

with its stakeholders and impact on the environment alongside traditional financial analysis and this approach

is applied across the €34.3 billion of assets under management.

Hermes’ investment teams also benefit from the expertise of a specialist in-house stewardship team, Hermes

EOS, which was established in 2004 and boasts one of the largest stewardship resources globally, composed

of an effective group of highly and diversely skilled, multi-national professionals, all committed to influencing

leading businesses on governance and sustainability matters. Our stewardship team, advises €353.8 billion of

assets on behalf of 40 clients. As at 30 June 2017, Hermes EOS had a team of 14 engagement specialists

with on average 14 years of experience, organised by global sectors, major countries and ESG theme. They

highlight those sectors that are more exposed to ESG issues and which ESG issues each sector is most

exposed to. Hermes EOS employs a team with 11 nationalities and nine languages to be able to effectively

engage companies around the world. Biographical details for the EOS team members can be found here -

https://www.hermes-investment.com/ukw/stewardship/eos-team/

Hermes has over 100 investment professionals with expertise in regional and global equities, fixed income and

credit, as well as an in-house economist, of which, more than 50% have dedicated ESG objectives. This

provides an additional source of investment insight that the team can call upon to provide greater breadth and

depth to its research process. With all the teams sitting in an open-plan office on the same floor, regular

informal discussions take place alongside the more formal periodic Strategic Ideas Discussion forum.

In 2015 we established a Responsibility Working Group which includes senior representatives from across our

business and is Chaired by our Head of Responsibility who reports directly to our CEO. This Group is charged

with developing our policy and approach in respect of all matters which appertain to responsibility. This includes

our approach to stewardship and the integration of ESG issues within investment processes. The dedicated

Responsibility team which is tasked with coordinating and supporting the implementation of these policies

across all of our activities consists of five full-time members of staff, with an average of 12 years of experience,

which coordinates and supports the integration of ESG and active ownership across all our funds and

stewardship services.

1d Describe the content, frequency and resources allocated/used by the fund management

company to inform investors about the ESG criteria taken into account.

We strongly believe in the principle of transparency and therefore include in our quarterly investment team

client reports information about our stewardship activities, including engagement, voting and ESG integration

activity. Recently, we have reversed the ordering of our investment performance in order to give priority to our

fund’s longer-term performance while also bringing greater focus to how our analysis of ESG matters and

company engagement informs our view on individual companies.

In addition, our public reporting on stewardship matters includes Hermes EOS’ annual report, quarterly public

engagement reports, quarterly voting disclosure, public case studies and weekly blog. In addition to the above,

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Hermes EOS engages with stewardship clients on the formulation of its rolling three-year engagement plan

and the corresponding KPIs (key performance indicators); subsequently, clients are kept informed of the

progress of engagements against the various agreed milestones. Further still, stewardship clients are provided

with a suite of reporting on our stewardship activities which includes:

daily voting recommendation reports; detailed voting disclosures; quarterly voting statistics;

weekly engagement news; detailed engagement reports and quarterly reports; and,

client alerts on specific engagement news stories.

Hermes EOS’ client portal website, EOSi, provides clients with real-time access to all of this information and

more, and our monthly EOSi Highlights calls expand on our work with companies, themes and sectors.

The SRI Fund(s)

1e Provide the name of the fund(s) to which this Code applies and its (their) main characteristics

Describe the main characteristics of the fund(s): geographical focus, asset class, SRI

Strategy used (use the classification provided by Eurosif/EFAMA).

Hermes Global Emerging Markets Equity Fund

As at 30 June 2017, total assets in the fund was €2,182.4m.

ISIN - IE00BBHXD989

Legal Form – OEIC

Thematic focus – Global Emerging Markets Equity

Hermes Global Emerging Markets KIID

The fund is managed by Emerging Markets team. Gary Greenberg, Head of Emerging Markets, has overall

responsibility. Gary is closely supported by a dedicated global emerging markets team of investment

professionals, a portfolio assistant and an equity product specialist. Kunjal Gala is responsible for idea

generation for Asia ex Japan with Jasper Wright providing support in this area; Elena Tedesco covers the

CEEMEA region; and Yasmin Chowdhury covers Latin America; James Cook is the product specialist;

Hugh Shepherd is the portfolio assistant. In addition, Jonathan Pines, Sandy Pei and Maggie Sun, who

manage the Hermes Asia ex Japan strategy, share the best ideas uncovered through their research.

The investment objective of the Hermes Global Emerging Markets strategy is to achieve an excess return

of 2-4% per annum over rolling three-year periods against the benchmark MSCI Emerging Markets IMI

Index (segregated) or MSCI Emerging Markets Net Index (UCITS).

The SRI strategy adopted is Integration of ESG Factors in Financial Analysis and Engagement and Voting

on Sustainability Matters

1f What is (are) the (these) fund(s) trying to achieve through taking into account ESG criteria.

For instance, financing a specific sector, reducing risks, support better CSR practices,

develop new value creation opportunities, other objectives.

Hermes Global Emerging Markets fund

The global emerging markets team considers ESG matters as part of their fundamental analysis of all

companies. The analysis feeds into their allocation decisions, which are focused on risk-adjusted returns. This

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extra integration enables the team to incorporate ESG considerations into their bottom-up investment process

in a seamless, complementary and risk-aware manner, and further strengthens the alignment and

transparency with our clients.

If part of the fund(s) assets is invested in unlisted organisations with high social,

community or impact investing relevance, please specify.

The Hermes Global Emerging Markets fund does not invest in unlisted organisations. 100% of the fund is

invested in publicly listed equities.

Section 2 - Approach to ESG Evaluation of Companies

2a What fundamental principles underlie the ESG Research methodology?

We believe that companies with strong governance and astute management of their environmental and social

responsibilities, such as emissions control or labour rights, not only make a more positive contribution than

those that do not, but also provide greater long-term value for shareholders.

In the context of the increasing evidence and our responsibility as a fiduciary for our clients, we seek to:

integrate awareness of ESG risks into our investment decision processes;

ensure we remain cognisant of these risks within individual investments and across our portfolios;

actively engage as appropriate, with those companies in which we, and our clients, have invested, and

utilise our rights as investors in a considered and informed fashion to promote long-term success, and;

work with policy makers to promote responsible investment and advocate for a global financial system that

operates in the interests of its ultimate beneficiaries, not its various agents.

We believe that our focus on responsible investing, responsible ownership, policy advocacy and behaving

responsibly are integral to delivering holistic returns.

2b What internal and external resources are used to carry out this research?

Hermes Global Emerging Markets

Internal

The Global Emerging Markets team benefits from nine investment professionals with an average of 13

years of experience in the asset class, who undertake research of Latin America, Asia ex Japan, Central

Emerging Europe, Middle East and Africa.

The team has appointed a responsible investment ‘champion’, ESG Portfolio Manager Elena Tedesco on

the Global Emerging Markets team, to advise and support the practical implementation of Hermes’

responsible investment philosophy within its investment processes (incorporating ESG considerations),

practices and products. Elena is further supported by Maxime LeFloch from our Responsibility team.

Hermes EOS has a team of 14 engagement specialists with 14 years industry experience

Our dedicated Responsibility team is comprised of five full-time ESG experts

External

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The primary ESG inputs are derived from our proprietary data tools which include our ESG Dashboard

which presents aggregated data, qualitative insights and information from a range of external providers

such as Sustainalytics, MSCI, Trucost and Bloomberg.

Research is supplemented by further research from a number of sell-side brokers and a qualitative

assessment of the ESG risks/opportunities by professionals in the investment team with the help of

Hermes Responsibility team when needed.

We manage our voting via a partnership with proxy advisory firm ISS. We benefit from the additional

research and vote processing service ISS provides. The research received is, however, only one of

several inputs we utilise in reaching a judgement and making voting decisions.

The team’s country reports utilise data from the World Bank and Yale Centre for Environmental Law and

Policy (YCELP) and Columbia University (Centre for International Earth Science Information Network,

CIESIN). Country report’s, models and target prices are updated every six months, however,

developments at the country level are also discussed during daily meetings in respect of significant

political or macro developments. The country reports and models incorporate a review of data on

macroeconomics (e.g. inflation, GDP growth, exchange rates), top down drivers (e.g. commodity prices),

bottom up drivers (e.g. index constituents), politics, control of corruption, rule of law, environmental

performance (e.g. data by Yale and Columbia University covering trends in carbon intensity), risk (e.g.

bond spreads, CSD) and valuation (e.g. P/E multiples, yields). In addition, we perform comparisons vs

historical data and vs peer countries.

2c Which ESG analysis criteria are used?

Hermes Global Emerging Markets

ESG factors form an integral part of the investment process. The Hermes’ Global Emerging Markets team have

a number of tools available to them which they use to monitor companies they invest in. These include the

ESG Dashboard, our QESG Score (proprietary ESG rating) and a Portfolio ESG Monitor. These tools highlight

potential high-risk behaviour from an ESG perspective within companies, at which point the investment team

liaises closely with our stewardship team Hermes EOS in order to engage with the company in order to better

understand the risk and where necessary seek positive beneficial change.

The Global Emerging Markets investment team complements the above elements with its own qualitative

assessment of the key ESG features of a company, including its shareholder structure, the risk of abuse of

minority shareholders’ rights, the relationship with stakeholders, and the sustainability of its business model in

the long term.

2d What is your ESG analysis and evaluation methodology (how the investment universe is

built, rating system, …)?

Our proprietary ESG dashboard ensures that all companies in the investible universe (subject to the availability

of the data) can be compared against their peers on a sector, region or global basis with respect to a range of

ESG considerations.

The ESG Dashboard amalgamates Hermes EOS’ records on voting and engagement on ESG issues with

data from a range of carefully-evaluated external providers. It gives transparent access to key ESG-related

information (where data is available) on every company across a global universe. The risk factors which each

company is measured by are either generic, such as board structure, or sector specific, focusing on the major

risks in their respective industries, such as carbon dioxide emissions and fleet consumption for the automobiles

industry, paper sourcing for media and energy efficiency for airlines.

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The QESG Score is a ranking applied to each company, distilling the information collated on the ESG

Dashboard into a single number. Not only does this score capture how well a company manages ESG risks,

but also the trend in its exposure to these risk. The score is weighted 50% to governance factors, 25% to

environmental factors and 25% to social factors. Following research into the growing impact of ESG factors,

the team found, in particular, a significant correlation between governance and stock performance.

The QESG Score is designed to capture a company’s behaviour on various ESG issues as well as observed

change in its ESG behaviour. A change in a company’s ESG profile would be highlighted by a change in the

QESG Score, which would be flagged to the portfolio managers. Any such significant change would be

questioned, firstly to validate, but also to inform the investment case on a stock.

The quantitative rating, importantly, is complemented by a fundamental bottom-up review of ESG issues, which

critically leverages on our direct contact with companies which provides the investment teams with greater

colour and more up to date picture of the current positioning of a company with respect to its ESG performance.

The outcome from the subjective analysis may lead to a company being removed from the trade list depending

upon the materiality of the issue and also the anticipated change as demonstrated by the company.

The Portfolio ESG Monitor delivers a portfolio perspective of ESG risk exposures. It reports on the ESG

characteristics of holdings, both in absolute and benchmark-relative terms, and highlights companies with

potentially controversial practices. The monitor captures thematic ESG risks as well as identifying the best and

the worst companies according to various ESG metrics.

We have developed an internal Carbon Footprint tool, to enhance our ability to integrate ESG into our

investment strategies, In particular, we want to bring together ESG, financial, and our in-house QESG rating

and engagement data into a multi-faceted approach. Also our focus is not only on aggregate positioning relative

to the benchmark but also on identifying outlier companies through various lenses. For instance, among other

applications, we can identify companies that may have lower carbon efficiency than industry peers, lower

returns, deteriorating QE score, with an engagement that is not progressing, which then may be more at risk

and thus less attractive.

The Global Emerging Markets investment team complements the above quantitative elements with its own

qualitative assessment of the key ESG features of a company.

2e How frequently is the ESG evaluation reviewed?

Our QESG Scores are designed to capture a company’s behaviour on various ESG issues as well as observed

change in its ESG behaviour, as a result ratings will be continually updated as new information is made

available.

The investment team closely monitor company’s in their portfolio and formally speak with colleagues in our

stewardship team in order to stay abreast of the latest insights gleaned from ongoing engagements with

companies in the portfolio.

The team continues to research new data sources as they become available and will incorporate these into its

systems as appropriate and following a robust testing process.

Section 3 - Fund Management Process

3a How do you take into account ESG criteria when defining the universe of eligible investment?

If appropriate, describe the eligibility threshold and the resulting level of selectivity.

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All Hermes investment teams obey to Hermes’s restriction to avoid investment in cluster munitions and anti-

personnel land-mines.

Hermes Global Emerging Markets

The team’s bottom-up research approach is augmented with the integration of ESG analysis at the stock and

country levels. The fundamental research which accompanies the quantitative screen provided by the QESG

dashboard is essential for a comprehensive understanding of the risks and opportunities in emerging market

companies. The team actively incorporates ESG factors in their assessment of the valuation, risks and

catalysts of a stock or country.

To determine whether to invest in a certain stock and to assess any impact on discount rates, the team

considers elements such as shareholder structure, risk of abuse of minority shareholders’ rights, sustainability

of the business model, carbon emissions, exposure to workers’ strikes and community protests, and/or the

country’s political stability and the level of corruption.

The Hermes Global Emerging Markets equity fund avoids investing in companies having more than 20% of

total turnover coming from coal production. Furthermore, it avoids specific tobacco and military equipment

companies.

3b How do you take ESG criteria into account into the portfolio construction?

Describe how you link ESG selection with the financial analysis or with portfolio

management. More precisely, describe how the results of the analysis of each of the

dimensions (E, S, and G) are integrated into the investment/divestment process.

Our Gemologist – ESG challenging the dominant investment paradigm white paper written by Gary Greenberg,

Head of Hermes Emerging Markets, goes into further details on how we look at environmental, social and

governance risks in emerging markets and how they are integrated into the investment decisions (giving

practical examples) and ultimately the process.

If applicable, state where you provide information on divestments occurred in the past

year on the basis of ESG criteria? If appropriate, explain how potential ESG weightings re

defined and describe your treatment of companies that are not subjected to an ESG

analysis.

Hermes Global Emerging Markets Portfolio Construction

ESG factors form an integral part of the investment process for Hermes Global Emerging Markets Strategies.

The investable universe is defined using the exclusion criteria described above. Hermes proprietary ESG

Dashboard incorporates data from leading providers MSCI, Sustainalytics, Trucost, FactSet and Bloomberg

alongside voting information and engagement insights from Hermes EOS. The dashboard ensures that all

companies (subject to the availability of the data) can be compared against their peers on a sector, region or

global basis with respect to a range of ESG considerations. Hermes proprietarily developed QESG score

captures how well a company manages its ESG risks, and importantly whether this is improving or not. The

change in score can provide an early warning signal or suggest that management is successfully grappling

with an issue. This stock-specific analysis is a valuable input to our investment decisions as well as ongoing

monitoring of, and, where appropriate, engagement with companies.

The team complements the above elements with its own qualitative assessment of the key ESG features of a

company including its shareholder structure, the risk of abuse of minority shareholders’ rights, the relationship

with stakeholders, and the sustainability of its business model in the long term. The team’s approach is

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supported by regular interactions with Hermes EOS to exchange views and form a holistic view on a company’s

prospects.

Through the use of our proprietary Portfolio ESG Monitor we are able to observe the aggregate ESG risk

across our portfolios in both absolute and benchmark-relative terms, subject to the availability of data and

company disclosures. Investment teams are able to break these measures down into the constituent

environmental, social or governance risks and view the ESG metrics for each portfolio company with the best

and worst performers identified.

This portfolio level view enables portfolio managers to, for example, be aware of the estimated level of carbon

in their portfolios, including which investments are the largest contributors to a portfolio’s carbon footprint.

Examples of divestment in the past year would include Hyundai Motor, Petrobras, Rosneft.

3c Does (do) the fund(s) have a specific ESG engagement policy?

Yes. The fund has a formal engagement programme drawn up with EOS and the engagement policy is set out

within our Responsible Ownership Principles and the triennial Hermes EOS engagement plan.

Please explain what you mean by engagement. Describe how you select the

companies/themes for engagement activities and the impact on the portfolio management

of the fund(s). Who undertakes engagement on behalf of the fund (internal and/or service

providers)?

We strive to be active owners of the companies we invest in and as such our in-house stewardship team,

Hermes EOS, one of the largest stewardship resources globally, is committed to influencing leading

businesses on governance and sustainability matters.

Our stewardship team has clear and well-established protocols for how to identify engagement issues, to

escalate an engagement and how to measure an engagement’s effectiveness. Engagements with companies

will normally relate to longer-term strategic, environmental, social or governance issues. Generally our

engagement activity becomes more active where we believe:

• engagement will lead to an increase in the value of a company over the long term; and/or,

• engagement will prevent or limit a decrease in the value of a company over the long term.

In determining whether and how the engagement is taken forward, due regard is given to:

• the level of the company’s exposure to the issue at hand;

• the likelihood of engagement success and potential to bring about positive change; and,

• the value of our clients’ ownership of the company.

Such considerations are based around an assessment of the likely impact of the engagement and the ultimate

benefit to the value of the underlying holding. Each engagement is subsequently given an appropriate intensity

tiering. Measuring and monitoring progress on engagements is carried out by setting clear engagement

objectives and systematically measuring milestone progress against four objectives, these are:

1. the raising of the issue with the company

2. recognition by the company that the concern is valid

3. a plan to address the particular issue; and,

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4. successful delivery of the objective

Hermes EOS alerts Hermes investment teams of any ESG issues affecting stocks that are included in their

portfolios and votes at company companies . This enables Hermes investment teams to incorporate corporate

social performance and responsibility considerations into their investment process in a seamless,

complementary and risk-aware manner, and further strengthens the alignment and transparency with our

clients.

The emerging markets team will speak to management prior to any investment and typically look to meet with

management prior to investment, where possible, or within three months of an initial investment, to establish

a detailed picture of its financial health and long-term prospects.

When the team identifies an issue with a company, they will not necessarily choose not to invest in it, as long

as its business case is strong, the valuation already reflects the risks, and they believe in management’s ability.

When this is the case, the team relies on Hermes EOS to undertake engagements with the company due to

their expertise and the significant influence they wield through their many clients (Hermes EOS often has

multiple clients invested in the stocks the team chooses). The aim of these engagements is to protect the value

of clients’ investments by limiting risk or unlocking value or to voice clients’ concerns. Members of the

investment team will often join their stewardship colleagues in these meetings with companies.

3d Does(do) the fund(s) have a specific voting policy integrating ESG criteria?

Yes/No

We are fully cognisant that we, as shareholders, are granted a wide range of rights which both offer us

protection and enable us to fulfil effectively our stewardship responsibilities. In particular, we consider the vote

as part of the asset and accept that we have a responsibility to exercise this right in a considered fashion.

Proxy voting of shares is undertaken by Hermes EOS on behalf of clients and the different Hermes investment

teams. Hermes EOS’ ‘intelligent voting’ is undertaken by its engagement staff, integrating dialogue and

engagement with companies in order to achieve beneficial change.

We believe it is right that companies are clear as to our expectations of them and how it is that we will exercise

our votes in line with these expectations. To that end, the Hermes Responsible Ownership Principles and our

various regional corporate governance principles provide a clear framework for our voting policy.

We manage our voting via a partnership with proxy advisory firm ISS. While we have developed our own best

practice regional principles which are based on local market standards, we benefit from the additional research

and vote processing service ISS provide. The research received from ISS is however, only one of several

inputs that we utilise in reaching a judgement and making voting decisions.

Additional research is drawn from a number of other places, including pre-vote engagement and informal

discussion with other market participants. Our engagement and voting activities are supported extensively by

information provided by external ESG research providers such as Sustainalytics and MSCI, as well data

obtained through BoardEx, Bloomberg, CDP, Factiva, FactSet, Reuters Knowledge, and Trucost and other

sources.

Following our review of available material, we frequently reach out to companies to discuss AGM proposals

with executive and board level representatives. This engagement gives us an opportunity to discuss any

contentious proposals and obtain further information if required.

These methods allow us to make informed and intelligent voting decisions .

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3e Does (do) the fund(s) engage in securities lending activities?

If yes,

(i) Is a policy to recall the securities in place in order to exercise the voting rights?

(ii) Does the counterparty selection process integrate ESG criteria?

No.

3f Does (do) the fund(s) use derivative instruments?

If yes describe,

(i) Their nature

(ii) The objective(s)

(iii) The potential limits in terms of exposure

(iv) If appropriate, their impact on the SRI quality of the fund

The Hermes Global Emerging Markets strategy invests predominantly in equities, however, the portfolio

manager may use financial derivative instruments such as futures, options, participatory notes, non-voting

depository receipts, subscription rights and warrants for direct investment or to assist with cash flow

management. They are used primarily to gain exposure to certain markets and securities in the emerging

markets in a quicker and/or more cost-effective manner. These derivatives may be traded on an exchange

traded or OTC basis. Typically these instruments are only used for market access, such as P-notes for

mainland China A shares or Saudi shares.

3g Is a share of the fund(s) invested in unlisted entities pursuing strong social goals?

If yes, please provide a brief description of the objective(s) of this investment, in no more

than one or two sentences.

The Hermes Global Emerging Markets fund does not invest in unlisted organisations. 100% of the fund is

invested in publicly listed equities.

Section 4 – Controls and ESG Reporting

4a What internal/external control procedures are in place to ensure the compliance of the

portfolio with the ESG rules defined in section 3 of this code?

State who is carrying out the controls, their frequency and within which timeframe the

fund(s) have to comply should a breach be detected.

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We have established a Responsibility Working Group, which meets on a quarterly basis and is constituted of

senior representatives from across the business. This group is charged with reviewing and making

recommendations to the Hermes Executive Committee (ExCo) with respect to our policy and approach to all

matters related to the delivery of holistic returns to the beneficiaries of Hermes' owner and clients and to share

best practice across the organisation.

Our dedicated Responsibility Office is tasked with coordinating and supporting the development of our policies

and their subsequent integration across our funds and stewardship services. Leon Kamhi, our Head of

Responsibility, reports directly to our CEO and is a member of the Hermes Strategy Group responsible for

helping the ExCo formulate and implement the long-term strategy of the firm. Each of Hermes' investment

teams meet formally with Leon and his team on a quarterly basis to discuss their ESG integration activities.

The Hermes Investment Office is also a critical part of our risk management process, in providing an

independent oversight role. Working as an independent body in conjunction with the Portfolio Review

Committee (PRC) across all investment teams, the Investment Office’s investment and risk specialists provide

independent oversight and monitoring and ensure implementation of best practice across the investment

teams. On a monthly basis the PRC meets to independently review the performance and risk exposures,

including ESG risks, of all portfolios across Hermes. The purpose of the PRC is to provide comfort to both

senior managers and clients alike that portfolio managers are adhering to fund objectives and constraints and

that no unnecessary risks are being taken.

The Investment Office helps in the goal to deliver sustainable risk-adjusted alpha, while providing timely

guidance to the investment teams and PRC when it identifies potential problem areas. Their aim is to identify

principal risks in the portfolios and the drivers of performance, both positive and negative, and relay this to the

fund managers. In addition, the group monitors adherence to the stated investment process and changes in

decision-making methodology and efficacy. It uses a combination of proprietary systems, off-the-shelf software

and direct questioning to perform its duties. Where necessary, fund managers will be challenged to justify a

position or view.

Crucially, the Investment Office acts in the interest of clients, not fund managers or the Hermes profit and loss

account. – it is the eyes and ears of the end investor on the Hermes investment floor. The Investment Office

also provides thought leadership on strategic issues of interest to all investors.

The Hermes Compliance team monitors fund guidelines, including objectives and constraints; the firm-wide

exclusion policy with respect to cluster munitions and anti-personnel land mines, through thinkFolio.

Finally, while Hermes receives an annual independent external assurance on our internal controls which

includes those relating to our proxy voting processes, we have committed to obtaining independent assurance

over the policies and procedures which underpin our stewardship policy statements in line with the AAF 01/06

Stewardship Supplement for FY 2017. We are also continuing to review what further external assurance we

can obtain on our ESG integrations processes to supplement the periodic reviews that are undertaken by our

internal audit function.

4b Please list all public media and documents used to inform investors about the SRI approach

to the fund, and include URLs. This should include a link to the detailed, no more than 6

months old, list of holdings of the fund(s)

Prospectus

Prospectus

(semi-) Annual report

Annual Report and Financial Statements 31 December 2016

Addendums

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Hermes Global Emerging Markets Sub-fund Supplement

KIID

Hermes Global Emerging Markets KIID

Fund Fact Sheet

Hermes Global Emerging Markets Fund Fact Sheet

Dedicated SRI Web page(s) at company / fund level (if applicable)

Hermes Responsibility / Hermes EOS

Engagement/voting policy/votes (if applicable)

Hermes Approach to stewardship

Voting disclosure and policies

Engagement objectives and plan

Public Engagement Report Q1 2017

Link to Web page of ESG Analysis provider(s) (if applicable)

URL to the research findings that are available to investors (if appropriate)

ESG investing – it still makes you feel good, it still makes you money

Hermes EOS blog - Key topics that shape our engagement work

Detailed fund holdings (no more than 6 months old)

Please find attached as appendix 2, detailed fund holdings for our Global Emerging Markets fund as

at 30 June 2017.

CSR Policy of the Company l (if applicable)

Hermes Delivering Holistic Returns

Other (please list):

How sustainability benefits profits, people and the planet

From faith to fact in ESG exclusions: a behind-the-scenes analysis Within

investors’ reach? The UN Sustainable Development Goals

Gemologist – ESG challenging the dominant investment paradigm

Additional

If applicable, specify what the amount of donations and the percentage of management fees that the

fund gave to charities in the last year.

Not applicable.

Important Information This document is for Professional Investors only. This document does not constitute a solicitation or offer to any person to buy or sell any

related securities or financial instruments; nor does it constitute an offer to purchase securities to any person in the United States or to

any US Person as such term is defined under the US Securities Exchange Act of 1933. It pays no regard to the investment objectives or

financial needs of any recipient. No action should be taken or omitted to be taken based on this document. Tax treatment depends on

personal circumstances and may change. This document is not advice on legal, taxation or investment matters so investors must rely on

their own examination of such matters or seek advice. Before making any investment (new or continuous), please consult a professional

and/or investment adviser as to its suitability.

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Any opinions expressed may change. The value of investments and income from them may go down as well as up, and you may

not get back the original amount invested. Any investments overseas may be affected by currency exchange rates. Past

performance is not a reliable indicator of future results and targets are not guaranteed. All figures, unless otherwise indicated,

are sourced from Hermes. For more information please read any relevant Offering Documents or contact Hermes.

UCITS funds: Further information on investment products and any associated risks can be found in the Fund’s Key Investor Information

Document (“KIID”), the Prospectus, the articles of association and the annual and semi-annual reports. In the case of any inconsistency

between the descriptions or terms in this document and the Prospectus, the Prospectus shall prevail. These documents are available free

of charge at Hermes Investment Funds plc, Georges Court, 54-62 Townsend Street, Dublin 2, Ireland, www.hermes-investment.com; and

at its representative in Switzerland (ACOLIN Fund Services AG, Affolternstrasse 56, CH-8050 Zurich, www.acolin.ch). The Paying agent

in Switzerland is NPB Neue Privat Bank AG., Limmatquai 1/am Bellevue, P.O. Box, CH-8022 Zürich. HIML is the investment manager

and promoter of Hermes Investment Funds plc (“HIF”) - an open-ended investment company with variable capital and with segregated

liability between its sub-funds - incorporated in Ireland. Authorised by the Central Bank of Ireland and recognised by the Financial Conduct

Authority.

The main entities operating under the name Hermes are: Hermes Investment Management Limited (“HIML”); Hermes Alternative

Investment Management Limited (“HAIML”); Hermes European Equities Limited (“HEEL”); Hermes Real Estate Investment Management

Limited (“HREIML”); Hermes Equity Ownership Limited (“HEOS”); Hermes GPE LLP (“Hermes GPE”); Hermes GPE (USA) Inc (“Hermes GPE USA”) and Hermes GPE (Singapore) Pte. Limited (“HGPE Singapore”). All are separately authorised and regulated by the Financial

Conduct Authority except for HREIML, HEOS, Hermes GPE USA and HGPE Singapore. HIML currently carries on all regulated activities

associated with HREIML. HIML, HEEL and Hermes GPE USA are all registered investment advisers with the United States Securities and

Exchange Commission (“SEC”). HGPE Singapore is regulated by the Monetary Authority of Singapore.

Issued and approved by Hermes Investment Management Limited which is authorised and regulated by the Financial Conduct Authority.

Registered address: Lloyds Chambers, 1 Portsoken Street, London E1 8HZ. Telephone calls may be recorded for training and monitoring

purposes. Potential investors in the United Kingdom are advised that compensation will not be available under the United Kingdom

Financial Services Compensation Scheme.