INTERNATIONAL CORPORATE GOVERNANCE PRINCIPLES

Hermes Investment Management is a fund manager wholly owned by the largest British
pension fund. Hermes believes that in the long term good governance adds value to its clients’
equity investments. The following principles will be used to guide Hermes’ voting decisions and will apply to all publicly quoted
companies in which Hermes’ clients invest outside the United Kingdom. Hermes will be pragmatic
in applying these principles, which are goals for strong corporate governance, and which may,
at times, have to be adapted for local laws.
HERMES’ CODE OF CONDUCT IN SUPPORT OF COMPANIES
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INTERNATIONAL CORPORATE GOVERNANCE PRINCIPLES
1. CORPORATE OBJECTIVE
The overriding objective of the corporation should be to optimise
over time the returns to its shareholders. Where other
considerations affect this objective, they should be clearly stated
and disclosed. To achieve this objective, the corporation should
endeavour to ensure the long-term viability of its business, and to
manage effectively its relationships with stakeholders.
2. COMMUNICATIONS AND REPORTING
Corporations should disclose accurate, adequate and timely
information, in particular meeting market guidelines where they
exist, so as to allow investors to make informed decisions about
the acquisition, ownership obligations and rights, and sale of
shares.
3. VOTING RIGHTS
Corporations’ ordinary shares should feature one vote for each
share. Corporations should act to ensure the owners’ rights to
vote. Fiduciary investors have a responsibility to vote1. Regulators
and law should facilitate voting rights and timely disclosure of the
levels of voting.
4. CORPORATE BOARDS
The board of directors, or supervisory board, as an entity, and
each of its members, as an individual, is a fiduciary for all
shareholders, and should be accountable to the shareholder body
as a whole. Each member should stand for election on a regular
basis.
Corporations should disclose upon appointment to the board and
thereafter in each annual report or proxy statement information on
the identities, core competencies, professional or other
backgrounds, factors affecting independence, and overall
qualifications of board members and nominees so as to enable
investors to weigh the value they add to the company. Information
on the appointment procedure should also be disclosed annually.
CORPORATE GOVERNANCE PRINCIPLES
Nb. These principles are based on those adopted at the 9 July 1999 meeting of the International Corporate Governance
Network, a group representing the interests of major institutional investors, corporates, financial intermediaries and other
parties interested in the development of global corporate governance practices. These principles are the investors’
interpretation of the OECD’s Principles of Corporate Governance published in May 1999.
Hermes acknowledges, on behalf of its clients, that shareholders have responsibilities as owners to participate in the
stewardship of companies and that, in companies outside their home market, the primary way of achieving this is through proxy
voting. Accordingly, Hermes will endeavour to lodge proxies at company general meetings, subject to excessive costs or
administrative difficulties, in accordance with the principles outlined in this document. Companies, for their part, can promote
good practice and system development in their own market, thus minimising the obstacles to shareholder voting. We recommend
following the International Corporate Governance Network’s Global Share Voting Principles to achieve this end.
Management of companies run in the long term interests of shareholders can be confident of Hermes’ continuing support.
Hermes is committed to applying its corporate governance and voting policies with thought, giving due consideration to the
specific circumstances of individual companies, and will adopt a pragmatic approach where appropriate. Hermes will reconsider,
at the request of a company, any company-specific circumstances that may make it inappropriate to apply Hermes’ standard
policies.
Hermes will contact companies to explain its reasons for voting against or abstaining on resolutions. Hermes prefers these
discussions to be kept private. Hermes welcomes correspondence from companies