Our Approach to Stewardship

Michael CohenCapital Group

Private ownership fosters stability and a long-term focus

• We are stable: being a privately held company allows us to make decisions with a long-term focus, yet we have the rigorous accountability of a publicly held company.• We are focused: investment management is our

only business.Why it matters: We are able to focus on the long-term interests of our clients.

Data as at 31 December 2014

US$ 1.4 trillionassets under management

US$ 1.2 trillion equity assets managed

US$ 224 billion fixed-income assets managed

US$ 93 billionInstitutional assets managed

Capital Group by the numbers

Our heritage1931Jonathan Bell Lovelace founded a small company based on the belief that fundamental research is essential to achieving superior, long-term investment results.

TodayCapital Group’s private ownership and focus on delivering consistent, positive results for long-term investors has made us one of the largest asset managers in the world.

Top 5 active asset managers1

1. Based on percentage share of active assets under management for funds. As at 30 September 2014. Source: Morningstar.2. As at 31 December 2014. Source: Capital Group.

$224bnfixed incomeassets under

management2

1 Fidelity2 Capital Group3 Vanguard4 JPMorgan5 BlackRock

$1.4tnassets under

management2

As a private firm with an independent charter and robust balance sheet, we invest in improving our capabilities through good markets and bad. With one of the highest retention rates in the industry,1 we have some of the most experienced investment professionals and a commitment to sustaining our investment process over generations.

1. Source: Morningstar, for the American Funds, as at 31 December 2013. Based on percentage of portfolio managers who have stayed with the firm during the past five calendar years.

Built to last

Aligned with investor successLong-term perspective

1. Source: Morningstar, for the American Funds, as at 31 December 2013. Based on percentage of portfolio managers who have stayed with the firm during the past five calendar years.

2. For the American Funds only, as at 31 December 2012.Average holding periods as of the most recent fiscal year-end periods available through 31 December 2012.Source for comparable equity funds: Lipper.

• We are privately owned and base our decisions on a long-term perspective, which we believe aligns our goals with the interests of our clients.

• Achieving superior, long-term returns is our only goal, so managers are rewarded for their results, not the level of assets they manage.

4.5

1.7

Average holding period (years)1

Comparable equity funds

Capital Group2

Compensation basis (years)

1

4 8

Short-term emphasis

Capital Group emphasis

A long-term perspective on behalf of clients

The Capital System is at the core of our sustained results

The graphic shown above right is for illustration purposes only and does not represent the exact composition of a portfolio.

• Portfolios are divided into segments that are managed independently by individual portfolio managers.

• The portfolios are built from the bottom up, security by security, based on extensive research.

Why it matters: The blend of managers (portfolio managers and analysts) is designed to lower volatility while striving for consistently superior long-term returns.

Example

Portfolio managers Analysts

Researchportfolio

• We combine on-the-ground research with comprehensive macro analysis around the world.

• Equity and fixed-income analysts work together, pooling research.

Fundamental, global research is crucial for identifying investment opportunities and risks.

An extensive global research effort is the backbone of our system Few firms can match our scale and scope

Local knowledge around the worldOur research offices1

1. Beijing: limited to macroeconomic research. Mumbai: Capital Group International, Inc (CGII) only.2. As at 31 December 2013. All other data to 31 December 2014.The Capital Group companies manage equities through three investment divisions that make investment and proxy voting decisions independently. Fixed-income investment professionals provide fixed-income research and investment management across the Capital organisation; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

Our approach for effective integration of responsible investingCapital Group1 is a discretionary investment manager with a bottom-up investment process focused on delivering long-term results. Our approach is to fully integrate environmental, social and governance (ESG) issues into our research process, rather than treating them as the responsibility of a separate team.

1. Capital Group (Capital) refers to Capital International Limited, Capital International Sàrl , Capital International, Inc., Capital International K.K. and Capital Guardian Trust Company each of which is a subsidiary of Capital Group International, Inc. (CGII)

We are long-term investors underpinned by our own strong culture and code of ethics and private ownership

We invest in companies we believe have a sustainable business model and good growth prospects

Fundamental research capabilities with depth and breadth of experience

Trust, built on long-term relationships with companies

Access and credibility to engage and have a dialogue with companies

Coordinating with industry associations and other investors on corporate governance regulatory developments

Responsible investing is integrated into our investment processOur philosophy

Front line

Facilitating responsible investingIntegrated approach

• Our investment analysts have a deep knowledge and understanding of companies

• Analysts evaluate factors which could affect a company's long-term growth prospects including ESG issues, where they believe they are relevant to long-term value

Research based

• Our analysts and portfolio managers make thousands of company visits annually, and regularly meet with the management of companies

• Capital generally prefers to engage privately with companies

• We will engage more broadly with governments, regulators and stakeholders relevant to our investments

Engagement

• Around 100 in-house analysts covering equity and fixed income

• With their in-depth knowledge of industry sectors, analysts can factor in the circumstances of each company rather than using a box-ticking approach

Review and oversight

Dedicated support

Voting/corporate actions

A consistent process supported by dedicated resourcesOur process

In-house decision making• Proxy and corporate action decisions

are made in-house • Analysts are responsible for making

proxy voting and corporate action decisions

• We do not allow stock lending in our funds

Regional proxy committees• Associates from the Investment Group

and Legal form our regional proxy voting committees

• Analysts covering companies provide the committees with a recommendation on voting decisions

• These committees review selected proxy decisions

Corporate Governance team• Provides dedicated expertise and

consistent set of policies and procedures applied globally

• Aims to vote every share of every company we hold

• Works with the Investment Group on company engagement and voting decisions

• Provides global consistency with regional flexibility and the capacity to meet growing demands

Our Global Model• Truly integrated approach to stewardship• Key themes identified by investment professionals during discussion facilitated by

the Governance team (GAP) before and after proxy season• Proxy policy • Engagements

• GAP works alongside investment professionals in voting and engagement process which allows a joined-up approach• Investors make final decisions

• Additional global resource provided by GAP complements analyst research on key themes including remuneration, proxy voting and ESG issues, e.g. climate change

Approach to StewardshipPrinciple 1: Stewardship

• Strong, long-term relationships our investment professionals develop with a company board and management enable us to maintain an active approach to stewardship of the companies in which we invest

Principle 2: Conflicts of Interest

• Not part of a diversified financial services company that also provides investment banking, consulting or custodial services

• Associates must adhere to the Capital Group Code of Ethics

Principle 3: Monitoring

• Monitoring and engagement with companies are natural aspects to our investment process

• Analysts are responsible for making voting and corporate action decisions, ensuring our stewardship activity is aligned with our investment theses

Principle 4: Intervention

• Intervention would be a natural extension of engagement where there are issues of concern

• Alternatively, if we believe it is in the best financial interests of the client, we may sell the shares or bonds of a company

Approach to StewardshipPrinciple 5: Acting Collectively

• May work with other investors where we believe this will increase value for shareholders or creditors

• May join other investors in engagement activity at an industry level

Principle 6: Voting

• Aim to vote all proxies on behalf of clients in accounts for which it has proxy voting authority

• Voting decisions are made according to our internal voting policy and analyst recommendations

Principle 7: Reporting

• Publish quarterly reports which provide an overview of our engagement activities

• Provide quarterly proxy voting reports to clients that have authorised Capital to vote on their behalf and wish to receive them

Climate change survey and impact on investing• Surveyed our London based equity and fixed income investment groups to

gather views on climate change• Results showed that this is a very relevant topic with broad impacts,

creating risks and opportunities across sectors• Analysts and portfolio managers integrate the consideration of climate

change into the investment process and decisions• Portfolio manager Michael Cohen: “Climate change touches every aspect of

our portfolios”

Observations and focus areas in Stewardship• Engagement: is there a better way to engage with the Chair and Boards

of companies?• Investment horizon: conflicts in the market with focus on short term results• Regulation: shift in the environment with too many differing agendas,

potential to create negative consequences for investors

Regulatory informationThis marketing communication is issued by Capital International Limited, which is authorised and regulated by the Financial Conduct Authority. It is intended for professional clients only and should not be relied upon by retail clients. While Capital Group uses reasonable efforts to obtain information from sources which it believes to be reliable, Capital Group makes no representation or warranty as to the accuracy, reliability or completeness of the information. This marketing communication is intended merely to highlight issues, and not to be comprehensive or to provide investment, tax or other advice. Should you have any queries on the issues reported here, please contact one of your regular contacts at Capital Group.