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Local Government Superannuation Scheme

PRI reporting framework 2017

Gateway asset class implementation indicators [OO 10 - 12]

Investment policy [SG 01 - 04] Objectives and strategies [SG 05 - 06] Governance and human resources [SG 07 - 08] Promoting responsible investment [SG 09 - 11] Implementation not in other modules [SG 12 - 16] Innovation [SG 17]

Indirect – Manager Selection, Appointment and Monitoring

Overview [SAM 01 - 02] Listed Equity and Fixed Income Strategies [SAM 03 - 04] Selection [SAM 05 - 06] Appointment [SAM 07.1 - 07.2-5] Monitoring [SAM 08 - 10] Outputs and outcomes [SAM 11 - 12] Communication [SAM 13]

Direct - Listed Equity Incorporation

Overview [LEI 01 - 02] ESG incorporation in actively managed listed equities [LEI 03 - 12] Implementation processes [LEI 03 - 12] (A) Implementation: Screening [LEI 06 - 08] (B) Implementation: Thematic [LEI 09] (C) Implementation: Integration of ESG issues [LEI 10 - 12] Outputs and outcomes [LEI 14 - 16] Communication [LEI 17]

Direct - Listed Equity Active Ownership

Engagement [LEA 01 - 16] Overview [LEA 01 - 02] Process [LEA 03 - 10] Process for engagements run internally [LEA 03 - 04] Process for engagements conducted via collaborations [LEA 05 - 06] Process for engagements conducted with/on your behalf by service providers [LEA 07 - 08] General processes for all three groups of engagers [LEA 09 - 10] Outputs and outcomes [LEA 11 - 15] Communication [LEA 16] (Proxy) voting and shareholder resolutions [LEA 17 - 27] Overview [LEA 17] Process [LEA 18 - 22] Outputs and outcomes [LEA 23 - 26] Communication [LEA 27]

Direct - Property

Overview [PR 01 - 04] Pre-investment (selection) [PR 07 - 09] Selection, appointment and monitoring third-party property managers [PR 10] Post-investment (monitoring and active ownership) [PR 11 - 17] Overview [PR 11] Property monitoring and management [PR 12 - 13] Property developments and major renovations [PR 14] Occupier engagement [PR 15 - 16] Community engagement [PR 17] Outputs and outcomes [PR 18 - 19] Communication [PR 20]

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Basic Information

OO 01. Signatory category and services

01.1. Select the type that best describes your organisation or the services you provide.

Non-corporate pension or superannuation or retirement or provident fund or plan

Corporate pension or superannuation or retirement or provident fund or plan

Insurance company

Foundation

Endowment

Development finance institution

Reserve - sovereign or government controlled fund

Family office

Other, specify

01.2. Additional information. [Optional]

LGS manages approximately USD 7.1 billion* in superannuation assets for over 92,000 members including employees working for local government or related employers throughout NSW and former local government employees. The fund is also open to members of the public.

LGS is a certified responsible investor, with investments across Australian and international shares, property, infrastructure, fixed interest, private equity and absolute return asset classes.

*Discrepancy with OO.04.2 due to UNPri exchange rate used.

OO 02. Headquarters and operational countries

02.1. Select the location of your organisation’s headquarters.

Australia

02.2. Indicate the number of countries in which you have offices (including your headquarters).

2-5

6-10

>10

02.3. Indicate the approximate number of staff in your organisation in full-time equivalents (FTE).

95 FTE

02.4. Additional information. [Optional]

OO 03. Subsidiaries that are separate PRI signatories

03.1. Indicate whether you have subsidiaries within your organisation that are also PRI signatories in their own right.

Yes

03.3. Additional information. [Optional]

OO 04. Reporting year and AUM

04.1. Indicate the year end date for your reporting year.

31/12/2016

04.2. Indicate your total AUM at the end of your reporting year, excluding subsidiaries you have chosen not to report on.

Total AUM
Total AUM	trillions	billions	millions	thousands	hundreds
Currency
Assets in USD
Assets in USD	trillions	billions	millions	thousands	hundreds

04.4. Additional information. [Optional]

USD figure used throughout report based on A$/US$ exchange rate of $0.7214 at 31 December 2016.

OO 06. How would you like to disclose your asset class mix

New selection options have been added to this indicator. Please review your prefilled responses carefully.

06.1. How you would like to disclose your asset class mix.

as percentage breakdown

as broad ranges

	Internally managed (%)	Externally managed (%)
Listed equity	<10% 0.3	10-50% 41.4
Fixed income	0 0	10-50% 15.4
Private equity	0 0	<10% 5.9
Property	<10% 4.5	<10% 2.5
Infrastructure	0 0	<10% 3.1
Commodities	0 0	<10% 0.2
Hedge funds	0 0	10-50% 11.9
Forestry	0 0	0 0
Farmland	0 0	0 0
Inclusive finance	0 0	0 0
Cash	0 0	10-50% 10.3
Other (1), specify	0 0	<10% 4.5
Other (2), specify	0 0	0 0

'Other (1)' specified

          Other: Semi liquids

06.2. Publish our asset class mix as per attached image [Optional].

06.3. Provide contextual information on your AUM asset class split. [Optional]

OO 07. Fixed income AUM breakdown

07.1. Provide to the nearest 5% the percentage breakdown of your Fixed Income AUM at the end of your reporting year, using the following categories.

Externally managed

61.7 SSA

11 Corporate (financial)

21.8 Corporate (non-financial)

5.5 Securitised

Total 100%

OO 08. Segregated mandates or pooled funds

New selection options have been added to this indicator. Please review your prefilled responses carefully.

08.1. Provide a breakdown of your organisation’s externally managed assets between segregated mandates and pooled funds.

Asset class breakdown	Segregated mandate(s)	Pooled fund(s)
[a] Listed equity	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[b] Fixed income - SSA	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[c] Fixed income – Corporate (financial)	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[d] Fixed income – Corporate (non-financial)	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[e] Fixed income – Securitised	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[f] Private equity	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[g] Property	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[h] Infrastructure	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[i] Commodities	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[j] Hedge funds	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[n] Cash	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
[o] Other (1), specify	0% <10% 10-50% >50 %	0% <10% 10-50% >50 %
Total externally managed assets	Please ensure the entire table (both columns combined) totals to 100%

08.2. Additional information. [Optional]

Other: Semi Liquids

OO 09. Breakdown of AUM by market

09.1. Indicate the breakdown of your organisation’s AUM by market.

Developed Markets	0% <10% 10-50% >50 %
Emerging, Frontier and Other Markets	0% <10% 10-50% >50 %
Total	100%

09.2. Additional information. [Optional]

At LGS the tools employed for Responsible Investment include: -

Negative and postive screens;

LGS SRI Overlay;

ESG and low carbon thematic investments across numerous asset classes;

Quantitative assessment of ESG and carbon risks in our listed equities portfolios;

Engagement with our external managers (who undertake the bulk of daily portfolio investment management in accordance with mandates determined by LGS);

Engagement and proxy voting on ASX and international equities.

LGS is also actively involved in industry groups with directorships of the Austalian Council of Superannuation Investors (ACSI), Investor Group on Climate Change (IGCC) and membership of the UNPRI, Responsible Investment Association of Australasia (RIAA) and Global Real Estate Sustainability Benchmark (GRESB).

LGS' mission statement is: "To provide above average and sustainable investment returns, competitive products, quality personalised service and non-commission driven financial advice".

The LGS vision statement is: " To provide an outstanding retirement scheme for current and former employees of local government while the agreed values for all LGS staff are: trust, integrity, professionalism and unity".

LGS has a long standing commitment to responsible investment. It commenced in 1999 when we excluded tobacco stocks across our equities portfolio and has developed considerably since then. As an asset owner that aspires to be a universal owner with a long term, future looking investment horizon, we believe ESG issues create material investment risks that need to be managed. A well developed responsible investment strategy can both assist in generating long term risk controlled investment returns whilst also aligning ourselves with our members' environmental and social concerns. It is recognised that the long term prosperity of the economy and the well being of members depends on a healthy environment, social cohesion and good governance of the companies in which it invests. Adopting a systematic approach to managing ESG risk in our investments is entirely consistent with and will assist our fiduciary duties of acting in the best interests of our members and achieving strong long term investment returns.

Effectively implementing responsible investment practices requires sound governance procedures and dedicated management attention. For LGS, this has resulted in formal involvement from the Board and executive team, the employment of dedicated internal Sustainbility staff and increasing commitment to sustainability to cover corporate matters.

In future, LGS will continue to monitor its portfolios and external managers for leading practice examples that integrate sustainability with superannuation investment returns. This will continue our journey of developing our capacity in incorporating ESG issues within our investment decision making process with an aspiration to creating portfolio "hedges" or responses against climate change and other ESG risks while maintaining alignment with our members' values. LGS is looking to incorporate ESG considerations and strategies across all our asset classes as long as they meet minimum investment risk reward hurdles.

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