Principles of Internal Governance and Asset Stewardship

UBS Asset Management (Australia) Ltd

1. Organisational and investment approach

1.1. UBS Asset Management competencies

UBS Asset Management is a large scale asset manager with well diversified businesses across regions, capabilities and distribution channels. We offer investment capabilities and investment styles across all major traditional and alternative asset classes. UBS Asset Management in Australia was first established in 1985. The business is operated by UBS Asset Management (Australia) Ltd "UBS"

1.2. Purpose and values for clients

Our UBS Code of Conduct and Ethics has three core principles

  1. Client Focus, which is about building relationships that create long-term value, focusing on investment returns and anticipating and managing conflicts of interest
  2. Excellence in everything from our products and services to how we collaborate across the firm to deliver the best of what UBS has to offer
  3. Sustainable performance, which is about working continuously to strengthen our reputation as a rock-solid firm

1.3. Ownership

UBS Group AG is the ultimate Parent entity of UBS AM (Australia) Ltd (ABN 31 003 146 290 and holder of Australian Financial Services License No. 222605)

UBS Group AG is a public company incorporated under the laws of Switzerland and with registered and principal offices in Zurich.

The company is listed on the Swiss Stock Exchange (SIX) and the New York Stock Exchange (NYSE).

UBS Group AG significant shareholder information is available on our website:

1.4. Key management & investment personnel

With around 3,400 personnel located in 22 markets, UBS Asset Management is a truly global asset manager. Our principal offices are in Chicago, Frankfurt, Hartford, Hong Kong SAR, London, New York, Paris, Singapore, Sydney, Tokyo and Zurich.

UBS Asset Management (Australia) Ltd is a 100% owned subsidiary of UBS Group AG

2. Internal governance

2.1. Management & Governance

The governance arrangements of UBS AM (Australia) Ltd include:

  • A board of directors;
  • A management committee;
  • A risk committee; and
  • A compliance committee for the purpose of UBS registered managed investment schemes.

UBS is also subject to functional, regional and global UBS corporate governance processes.

Further information about UBS Group corporate governance is available on our website at

2.2. Ethical conduct and professional practice

UBS observes the highest standards of ethical conduct and professional practice.

All staff are subject to the UBS Code of Conduct and Ethics and is available on our website at:

2.3. Management of conflicts of interest to ensure clients interest take priority (including personal trading and gifts and entertainment)

UBS maintains a Conflicts of Interest Policy for the management of conflicts that may arise wholly, or partially, in relation to its activities, or that of its employees, in the provision of financial services.

UBS is committed to act in the clients’ best interest and to treat each client fairly. UBS will either avoid any conflict of interest arising or, where conflicts arise, ensure they are appropriately managed and ensure fair treatment to all its clients by disclosure, internal rules of confidentiality, declining to act, or by other means.

Our conflict of interest management arrangements include policies, robust procedures, physical and technological segregation of business units and independent oversight by UBS Group Risk Control.

UBS monitors and controls staff conduct in relation to a range of topics including: personal trading, holding external directorships and other positions and the giving and receiving of gifts and entertainment.

2.4. Risk management and compliance

At UBS risk management and compliance is the responsibility of all staff. Each business unit operating within UBS is required to maintain embedded processes and procedures to ensure risk management and compliance objectives are met. Processes and procedures are regularly assessed and tested to ensure operating effectiveness.

UBS risk management and compliance is overseen by UBS Group Risk Control whose mandate is to protect the capital and reputation of UBS. Group Risk Control exerts independent oversight of UBS risk management including: market risk, credit risk, operational risk and regulatory compliance risk.

2.5. Error correction policy

UBS error corrections are subject to the operational risk framework and processes and the reporting and management of operational risk events that require all such incidents to be reported, managed and where necessary remediated.

All breaches are required to be logged in an incident register. This register includes all relevant details regarding the breach including a summary of the issue, the cause of the breach, how it was rectified, preventative measures to prevent further instances of the same breach occurring and the financial impact.

2.6. Brokerage and commissions

UBS maintains a robust process for the selection of brokers and the monitoring of broker performance. UBS primarily selects brokers on their execution capabilities, but it may also take into account the quality and amount of their research and brokerage related services they provide for the benefit of our clients.

UBS maintains an internal governance structure to ensure decisions relating to broker selection serve the interests of our clients and are consistent with UBS regulatory requirements.

2.7. Equitable Asset Valuation and Pricing

The UBS Valuation policy lays out the key principles to ensure that all investments held in client accounts are valued in a consistent manner and that appropriate governance, segregation of duties and controls are applied to the processes used to determine those values.

2.8. Best Execution and Trade Allocation

UBS has an obligation to take all sufficient or reasonable steps to seek to obtain best execution when executing orders on behalf of clients, taking into account price, costs, likelihood of execution and settlement, size, nature and or any other relevant order execution considerations.

It is UBS trade allocation policy that all clients must be treated in a non-preferential manner

2.9. Remuneration policy

The UBS remuneration policy is covered within UBS’s compensation philosophy and framework which can be found on our website at:

2.10. Whistle blower protection policy

UBS has in place a dedicated policy to facilitate whistleblowing and maintains clear procedures that enable staff to raise whistleblowing concerns in confidence.

All employees are encouraged to promptly report any conduct which they reasonably believe violates any applicable laws, regulations, rules, or other legal requirements, or applicable UBS codes of conduct and policies, ethical code or any professional standards, with assurance that they will receive adequate protection.

2.11. Training and development

UBS maintains minimum annual training requirements for staff to ensure competencies are maintained and enhanced. UBS provides a range of training programs to enable staff to meet both minimum training requirements and development objectives. Staff are eligible to participate in various programs to support and promote personal development objectives.

2.12. Complaints and dispute resolution

The aim of UBS Dispute Resolution and Complaints Handling Policy is to:

  • recognise the rights of our clients to complain if they are not satisfied with any aspect of our service;
  • ensure that all complaints are responded to in a prompt and positive manner; and
  • provide an efficient, fair and accessible mechanism for complaint resolution.
    UBS regards any expression of dissatisfaction made with regard to its products or service to be a complaint and is committed to acknowledging and resolving complaints in a timely manner by ensuring that clients are aware of how to raise enquiries and complaints, the timeframes within which they are to be dealt with, and the manner in which they will be handled and escalated.

3. Asset Stewardship

3.1. Monitoring of company performance on financial and non-financial matters

UBS stewardship policy is our commitment to act as good stewards of assets held and managed on behalf of our clients. We seek to be active shareholders by encouraging good governance and a high standard of corporate practices.

We believe that it is strong governance that drives corporate behaviour and if a company displays effective governance then it will usually have a well-considered approach to environmental and social issues. If such matters are well managed they should lead towards both better corporate performance and improved shareholder value over the long term.

At UBS our monitoring involves the following:

  • our analysts and portfolio managers regularly monitor their investee companies and have frequent meetings with company executives and non-executive board members. These give us the opportunity to judge the success of the ‘outputs’ of governance – such as the strategy, acquisitions, capital allocation and operational performance.
  • we review the ‘inputs’ to governance (such as board committee structures) ahead of the annual shareholder vote and on an ad-hoc basis as appropriate.
  • on an on-going basis we monitor corporate developments through market news sources and company announcements.
  • to identify issues of concern and to help with the monitoring of investee companies we use both internal information shared upon our proprietary databases, together with external specialist data and ESG rating tools.
  • as part of our oversight process we assess the quality of explanations given for any deviations from relevant corporate governance codes that a company may report from a 'comply or explain' perspective.
  • as necessary we may undertake additional reviews on a company specific or sector basis.

3.2. Engagement with company management and the board (as appropriate) escalation of issues in instances where initial engagement have not been adequately responded to

We have a strong interest in ensuring that companies in which we invest on behalf of our clients are successful and through our stewardship activities we seek to develop a relationship with investee companies, together with an understanding of mutual objectives and concerns.

It can be difficult to judge the effectiveness of a board from outside the boardroom and we believe that effective monitoring is an essential component of stewardship. For this reason we do not outsource any of our engagement activity.

We judge companies not only on the traditional governance inputs, such as board structure, but also the outputs of governance such as operational performance.

Some of the most important issues for us are:

  • Strategy - including acquisitions and the deployment of capital
  • Operational performance
  • Quality of the board
  • Risk management
  • Remuneration
  • Reputation
  • Environmental & Social impact
  • Ethics & culture

There may be occasions when, despite discussions with companies, our concerns have not been sufficiently addressed. If a company fails to meet our expectations and we are not satisfied through our regular engagement process with the explanations provided, we will seek to escalate our concerns with the board. In the first instance, this is likely to be through further discussions with the chairman or other senior non-executives.

Such engagements are selective and focused around where we have identified particular issues. We are particularly keen to engage early with companies in order to minimise the loss of shareholder value. Factors for intervention with a company include where our assessment is that shareholder’s interests are at risk as a result of a governance failing.

In making decisions as to whether to escalate our engagement we will consider the following:

  • The circumstances which have led to our concern
  • The materiality of the potential negative impact
  • Best practice standards, including national guidelines
  • Any explanation provided by the company
  • The significance of the issue for our clients
  • Any pattern of concerns over a period of time
  • The likelihood of success

If a company consistently fails to meet our expectations, or if a company’s ESG disclosures are insufficient to allow for investors to gain an appropriate understanding of a company’s sustainability-related risks, we may decide to vote against management proposals at the shareholder meeting, including the election of board candidates. We may also encourage more robust ESG reporting or as an ultimate sanction seek to institute changes in company strategy or in the management or board.

We regard any such action, however, as representing a breakdown in our longer-term relationship with the company. We are only likely to pursue this course when the company’s performance has been extremely poor or the board has consistently ignored what we believe to be the legitimate concerns of shareholders.

3.3. Approach to considering Environmental, Social and Governance factors (risks and opportunities) and whether these considerations influence investment decision making and company engagement

UBS generally does not take into account labour standards or social, ethical or environmental considerations when making, holding or selling an investment
However, on a case by case basis where such issues may materially impact the value or performance of an underlying investment they may be taken into account. There is no predetermined view as to what constitutes a labour standard or social, ethical or environmental consideration.

UBS does recognise the importance of corporate governance, environmental and social factors (ESG) to companies and believe that non-financial factors that are material in nature are indicators of sustainability and therefore helpful to the investment process, by broadening the range of data being considered.

They may have a direct and material impact on the future revenues and costs of companies, and thereby the long-term risk adjusted rate of return to investors and their beneficiaries or clients. For this reason, where possible, we seek to protect and enhance the value of clients' assets by ensuring that such factors are assessed and integrated into our overall company research and active investment decision making process, including in our estimation of cash flows, valuation metrics and growth opportunities.

3.4. Proxy Voting

UBS regards voting at shareholder meetings as a vital component of our overall approach to effective stewardship of our clients' assets. Voting is not an end in itself, but is an important part of our oversight role. It enables us to voice our opinion to a company on a broad range of topics and is a way of encouraging boards to listen to and address investor concerns. A high voting turnout at general meetings can help ensure that decisions are representative of all stakeholders and not only those with large holdings or shorter-term perspectives. Voting by a large body of shareholders can protect the interests of minority investors.

We will engage with boards ahead of general meetings where appropriate, subject to the need to issue voting instructions to fit in with voting deadlines.

Where we have concerns with a company arising from our stewardship and engagement activities, or in relation to a particular resolution that we believe is not in the interests of our clients, we may choose not to support a particular proposal.

3.5. Collaborative engagement with other investors including involvement with industry groups and associations

The significant nature of many of our investments provides us with access to the management and boards of companies and as a general rule our preference is to engage privately and directly with our investee companies, as we believe it better serves the interests of our clients to build long-term relationships with companies.

Where we believe the effectiveness of engagement and the chance of success can be increased we are willing to work both formally and informally with collective bodies, or to collaborate with other shareholders. This particularly applies where we have a small holding in a company where we feel that individual engagement would not have a strong likelihood of success.

Prior to undertaking any collaboration with other investors we will first review the following:

  • That any collaboration or action with others investors is permitted by law and/or regulation
  • General agreement amongst investors on issues of concern and potential solutions
  • Responsiveness of management or board to direct individual engagement
  • hat engagement will be private and that any public statements have our prior explicit authorisation.

As part of our collaboration efforts we maintain an active participation in both formal and informal investor networks in order to ensure that we are aware of best practice in the area of corporate governance, social and environmental matters and to improve dialogue between institutional investors and other stakeholder groups.

3.6. Principles used for policy advocacy including participation with industry groups and associations

We collaborate with other asset managers and industry groups to share insights on corporate governance trends and local market considerations. We engage with other investors when such action would be in our clients' best interests and is permissible under applicable laws and regulations.

3.7. The approach to client engagement, education and communication regarding asset stewardship

UBS aim to provide transparency of our stewardship activities including publishing online our shareholder voting information. We maintain a record of our voting, engagement and other stewardship activities.