NOMURA ASSET MANAGEMENT

NOMURA

Proxy Voting

i) Basic Policy for Proxy Voting 1

As an investment manager it is our duty to do our best to enhance returns for our clients. We have formulated our own proxy voting guidelines. We will continue to encourage appropriate management practices for both domestic and overseas investee companies, in order to help them to enhance corporate value and achieve sustainable growth. We also request that investee companies operate business in the best interest of shareholders over the long term through our proper proxy voting activity.

ii) Basic Policy for Proxy Voting 2: Proxy Voting Guidelines

When exercising proxy rights, we will vote for resolutions that are deemed to enhance shareholder value, while voting against those that are deemed detrimental to shareholder value. We closely examine the voting resolution that meets one or more of the conditions listed below. Where we believe that a specific resolution is not in the best interest of shareholders, we will, in principle, decide to vote against the resolution.

  1. (1)In cases where criminal activities or fraudulent practices by the company are observed. Said activities/practices, which are considered in the judgment of resolutions, include acts that raise great concern in view of compliance with rules, regulations, rules of stock exchanges, efforts directed at ESG issues, social norms, etc., and harm the shareholder value. However, we do not exercise our proxy voting rights solely as a means to address specific social or political issues, irrespective of investment returns of the company.
  2. (2)The company’s business and financial strategies are deemed to harm shareholders' value.
  3. (3)The company continuously reports sluggish business performance and its management’s business improvement efforts are considered inadequate. Sluggish business performance, which is considered in the judgment of resolutions, includes performance that leads to a significant decline in investment returns of the company, such as recording a deficit for three consecutive years. Business performance is based on consolidated accounts. If consolidated accounts are not reported, business performance is based on nonconsolidated accounts. (The same shall apply hereafter.)
  4. (4)The company accumulates a large amount of excessive funds that are deemed not to be used effectively and/or are not distributed to shareholders adequately.
  5. (5)The company’s disclosure is deemed to be inadequate and harmful to the shareholders’ value.
  6. (6)The auditor’s opinion on the issuer is qualified.
  7. (7)The composition and/or size of the company’s board of directors or the composition and/or size of its board of statutory auditors, audit committee, audit and supervisory committee is deemed to be inadequate and may harm shareholders’ value.
  8. (8)Extraordinary resolutions are deemed to definitely harm shareholders’ value.

iii) Basic Policy for Proxy Voting 3: Positions on Specific Issues

(1)Election of Directors
A director is expected to be a person who is qualified for the position with sufficient skills and experience and the capability to supervise the business execution on behalf of shareholders.
If the company is found to have engaged in any criminal activities or fraudulent practices, or if the company’s business performance remains sluggish over a long period and little remedial effort is apparent, or any activity that we deem is harmful to the shareholders’ value, we will carefully consider the resolution on the reelection of directors who are deemed to be responsible for such issues/activities. When candidates are deemed as not being qualified, we will vote against them.
In principle, we vote for the election of outside directors. However we pay special attention to the directors’ qualifications, such as their independence. We determine the independence of the outside directors from comprehensive perspectives on whether they are representatives of major shareholders, have received a large amount of remuneration other than executive remuneration, and are related to other executive members.
The number of directors should be adequate and appropriate considering the nature of the company’s business and its scale.
(2)Election of Auditors
Auditors are expected to be qualified to audit the business of directors on behalf of shareholders, and are expected to function adequately for that purpose.
Where the company has engaged in criminal activities/fraudulent accounting practices, or has engaged in illegal activities in which an auditor is found responsible for any part thereof, or is deemed to have failed to fully perform his/her duties, we will vote against the reelection of the auditor.
It is desirable that outside auditors are independent of management. It is not desirable to have the board of statutory auditors composed of outside auditors all of whom lack independence. We determine the independence of the outside auditors from a comprehensive perspective on whether they are representatives of major shareholders, have received a large amount of remuneration other than executive remuneration, and are related to other executive members.
Where a reduction in the number of auditors is proposed, there should be proper justification for such a reduction.
(3)Election of Accounting Auditors
In principle, we vote for the election of accounting auditors except where it is found that:
  • The accounting auditor has an interest in the company and lacks independence.
  • Excessive non-audit remuneration has been paid to the accounting auditor.
  • The accounting auditor has expressed opinions with inaccurate financial conditions of the company.
(4)Executive Remuneration
When a company is discovered to have engaged in criminal activities/fraudulent accounting practices, we expect to see corrective measures reflected in executives' remuneration.
We vote for reasonable executive remuneration plans that are aligned with the long-term interests of shareholders. However, we vote against plans that we believe are inconsistent with or inequitable compared to the company’s overall financial condition, or that would substantially harm the interests of shareholders.
(5)Executive Bonus
We will vote against resolutions on executive bonuses when it has found a material criminal activity/fraudulent accounting practice or a significant decline in business performance or share price or found that the amount of bonuses to be unreasonably large in view of past achievement and the current financial condition or as compared with other competitors.
(6)Retirement Bonus for Directors and Auditors
We will vote against resolutions on retirement bonuses for retiring executives when it has found a material criminal activity/fraudulent accounting practice or a significant decline in business performance or share price or found that the amount of retirement bonuses to be unreasonably large in view of past achievement and the current financial condition or as compared with other competitors.
(7)Stock Options
We will vote against resolutions on granting of stock options as remuneration when it has found a material criminal activity/fraudulent accounting practice or a significant decline in business performance or share price or found that the value of stock options to be unreasonably high in view of past achievement and the current financial condition or as compared with other competitors.
In principle, we vote for stock option plans when the terms and conditions of the plan, such as eligibility and scale, are properly set forth for the purpose of incentivizing executives and employees. However, we vote against such plans when the terms and conditions of the plan including eligibility and scale are deemed to be improper. We will require sufficient explanation on stock options offered or granted to outside parties in light of whether it leads to enhancing the shareholders’ value.
We will determine whether to vote for or against resolutions on granting of company shares as remuneration by applying mutatis mutandis the rules mentioned above.
(8)Allocation of dividends and profits
In deciding on distributions to its shareholders, the company should ensure that such distributions are consistent with its long-term investment plan and capital policies. In principle, it is desirable that excess funds are distributed to shareholders.
While considering whether the company’s allocation of dividends and profits is consistent with its long-term investment plan and capital policies, we vote against allocation policies that are deemed to be significantly inadequate and harmful to shareholders’ value.
(9)Acquisition of the company’s own stock
While we view the acquisition of the company’s own stock positively as a means to enhance the shareholders’ value, we would oppose such a resolution when it is deemed to be inappropriate for the sake of the company’s capital structure.
(10)Change in number of authorized shares
When the said purposes are inappropriate, we will vote against a company’s proposed increase in the number of authorized shares in principle.
(11)Issuance of preferred and other classes of shares
In principle, we will vote for resolutions if the purpose and application requirements are deemed to be clear and appropriate, and they have no concerns about the fairness of voting rights, appropriateness of beneficiaries and/or diversity of shareholders. Otherwise, we would oppose the resolution in principle.
(12)Corporate restructurings and capital policy(mergers, acquisitions, sale/transfer of business, corporate separation, capital increase, etc.)
With regard to mergers, acquisitions sale/transfer of business, corporate separation, capital increase and other corporate restructurings and capital policy, we assess the contents of respective resolutions, financial condition, basis and rationality of management judgment, fair disclosure, etc., from an overall perspective. When we determine that they will contribute to an increase in shareholders’ value, we will vote for the resolutions. Otherwise, we would oppose the resolutions.
(13)Anti-takeover measures
We individually analyze anti-takeover measures. We would oppose the resolutions unless shareholders’ value is protected.
(14)Amendment of Articles
We will determine whether to vote for or against resolutions on amendments to the articles of incorporation on a case by case basis from the perspective of long-term enhancement of shareholders’ value or the protection of shareholders’ value from impairment. We will vote for (against) such resolutions if we find them appropriate (inappropriate) from these perspectives.
With regard to resolutions regarding accepting the staggering of terms of office of directors, we would oppose them if these resolutions are deemed to impair effectiveness of corporate governance.
(15)Shareholder Resolution
We will determine whether to vote for or against shareholder resolutions on a case by case basis from the perspective of long-term enhancement of shareholders’ value or the protection of shareholders’ value from impairment. We will vote for (against) such resolutions if we find them appropriate (inappropriate) from these perspectives.
(16)Other
We will determine whether to vote for or against resolutions on any other issues on a case by case basis from the perspective of long-term enhancement of shareholders’ value or the protection of shareholders’ value from impairment. We will vote for (against) such resolutions if we find them appropriate (inappropriate) from these perspectives.

iv) Basic Policy for Proxy Voting 4: Conflict-of-Interest Management Policy

We conduct businesses in good faith and fairness for the clients, and appropriately manage the conflicts of interest based on our "Conflict-of-Interest Management Policy".
To manage the possibility of conflict of interest, we appropriately conduct business giving the first priority to the clients’ interests.
With regard to proxy voting, the Responsible Investment Committee consisting of members with high independency is in charge of policy-makings and final decisions. In case exercising proxy rights for the securities issued by the Group Companies and the subsidiaries and affiliated companies of Nomura Holdings Inc. and/or concerning the Group Companies’ interests, after making such facts clear, we refer opinions from multiple proxy advisors and make decisions at the Responsible Investment Committee to protect the clients’ interests. The Responsible Investment Council validates the adequateness of such decisions and if necessary may make a recommendation to the Responsible Investment Committee. If receiving the recommendation, the Responsible Investment Committee reviews the related proxy voting decision again and makes final decisions.

v) Basic Policy for Proxy Voting 5: Other

We may be unable to vote or may decide to refrain from voting in certain circumstances. The following list, although not exhaustive, highlights some potential instances in which a proxy may not be voted:

(1)Securities Lending
When securities are offered for rent as of the record date of exercising a proxy vote, they need to be collected before exercising the vote. We may not exercise a proxy vote through the consideration of the usefulness of such exercise and cost incurred for collecting such securities.
(2)Share Blocking
Some countries and regions require shareholders to deposit their shares with a designated depository during a specific period shortly before a shareholders’ meeting as a condition for exercising a proxy vote and shares cannot be sold during this blocking period. In such case, we may not exercise a proxy vote through consideration of the usefulness of such exercise and opportunity loss.
(3)Re-registration
In some countries and regions, re-registration of shares is required to exercise a proxy vote. We may not exercise a proxy vote in consideration of the fact that the shares cannot be sold during the re-registration period.
(4)Other
For example, when we are unable to obtain adequate information, the period between the reception of resolutions and the exercise of voting is insufficient, or the cost of voting the proxy outweighs the possible benefit to the client, we may not exercise a proxy vote.

vi) Organizational Structure in Relation to Proxy Voting

Decisions regarding proxy voting will be made by the Responsible Investment Committee. The Responsible Investment Committee comprises a Chairperson appointed by the Executive Management Committee, and other members who have been appointed by the Chairperson. We have established an organizational structure that enables highly transparent decision making through the participation of outside directors on the Responsible Investment Committee.
Operations in relation to proxy voting will be executed by each Department in charge of respective roles and tasks.

vii) Proxy Voting Result

Proxy Voting Result from May to June 2016

(1) Number of company proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

Company Agenda For Against Abstain Carte Blanche Total Proposals
Allocation of Dividends and Profits 1,096 92 0 0 1,188
Election/Removal of Directors*1 1,642 281 0 0 1,923
Election/Removal of Statutory Auditors*1 849 506 0 0 1,355
Amendment of Articles 564 49 0 0 613
Retirement Bonus for Directors & Auditors 185 1 0 0 186
Revision of Remuneration 519 6 0 0 525
Stock Option Issuance 204 37 0 0 241
Election/Removal of Accounting Auditors 36 0 0 0 36
Company Reorganization*2 22 0 0 0 22
Others*3 245 155 0 0 400
Total 5,362 1,127 0 0 6,489
  1. (*1)Votes are for main resolutions. Against votes include those with one or more against votes on the sub resolutions.
  2. (*2)Includes merger, sale/transfer of business, equity transfer, stock splits, corporate separation, etc.
  3. (*3)Includes share buyback, legal reserve decline, third party allotment, capital reduction, reverse equity split, executive bonus, takeover defense, etc.

(2) Number of shareholder proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

For Against Abstain Carte Blanche Total Proposals
Total 2 120 0 0 122

(3) Summary of proxy voting results

  • For the May and June shareholders' meetings, there were 6,489 cases of company resolutions and 122 cases of shareholder resolutions. Decisions for approval or disapproval totalled 6,611 cases.
  • Company resolutions comprised 1,923 cases related to the election of directors, 1,355 cases related to the election of statutory auditors, 1,188 cases related to the allocation of dividends and profits, and 613 cases related to the amendment of articles.
  • Regarding resolutions of allocation of dividends and profits, we voted against mainly when we judged there to be insufficient shareholder returns in spite of the company having enough financial capacity.
  • Regarding resolutions related to the election of directors, we voted against the appointment of candidates we judged to be responsible for earnings downturns, as well as outside director candidates lacking independence in a company with a nominating committee and a company with an audit and supervisory committee.
  • Regarding resolutions for election of statutory auditors, we mainly voted against outside director candidates that we thought lacked independence.
  • Regarding resolutions to partially change the articles of incorporation, we mainly opposed giving authority, to the boards of directors of institutions, to vote on the dividends of companies whose dividend performance is not high.
  • Regarding other company resolutions, we voted against directors' bonuses of companies with poor performance or those using takeover defense measures.
  • As for shareholder resolutions, there were 122 cases, on which we voted for in 2 cases, and against for all other resolutions after assessing their merits.

(Reference-1) Proxy Voting Result from May to June 2015

(1) Number of company proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

Company Agenda For Against Abstain Carte Blanche Total Proposals
Allocation of Dividends and Profits 1,178 95 0 0 1,273
Election/Removal of Directors*1 1,690 177 0 0 1,867
Election/Removal of Statutory Auditors*1 1,370 290 0 0 1,660
Amendment of Articles 962 39 0 0 1,001
Retirement Bonus for Directors & Auditors 256 3 0 0 259
Revision of Remuneration 314 18 0 0 332
Stock Option Issuance 135 29 0 0 164
Election/Removal of Accounting Auditors 15 0 0 0 15
Company Reorganization*2 29 1 0 0 30
Others*3 202 133 0 0 335
Total 6,151 785 0 0 6,936
  1. (*1)Votes are for main resolutions. Against votes include those with one or more against votes on the sub resolutions.
  2. (*2)Includes merger, sale/transfer of business, equity transfer, stock splits, corporate separation, etc.
  3. (*3)Includes share buyback, legal reserve decline, third party allotment, capital reduction, reverse equity split, executive bonus, takeover defense, etc.

(2) Number of shareholder proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

For Against Abstain Carte Blanche Total Proposals
Total 1 154 0 0 155

(Reference-2) Proxy Voting Result from July 2015 to June 2016

(1) Number of company proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

Company Agenda For Against Abstain Carte Blanche Total Proposals
Allocation of Dividends and Profits 1,430 125 0 0 1,555
Election/Removal of Directors*1 2,177 361 0 0 2,538
Election/Removal of Statutory Auditors*1 1,090 649 0 0 1,739
Amendment of Articles 909 69 0 0 978
Retirement Bonus for Directors & Auditors 260 3 0 0 263
Revision of Remuneration 720 12 0 0 732
Stock Option Issuance 255 52 0 0 307
Election/Removal of Accounting Auditors 46 0 0 0 46
Company Reorganization*2 50 0 0 0 50
Others*3 289 173 0 0 462
Total 7,226 1,444 0 0 8,670
  1. (*1)Votes are for main resolutions. Against votes include those with one or more against votes on the sub resolutions.
  2. (*2)Includes merger, sale/transfer of business, equity transfer, stock splits, corporate separation, etc.
  3. (*3)Includes share buyback, legal reserve decline, third party allotment, capital reduction, reverse equity split, executive bonus, takeover defense, etc.

(2) Number of shareholder proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

For Against Abstain Carte Blanche Total Proposals
Total 3 146 0 0 149

(Reference-3) Proxy Voting Result from July 2014 to June 2015

(1) Number of company proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

Company Agenda For Against Abstain Carte Blanche Total Proposals
Allocation of Dividends and Profits 1,479 125 0 0 1,622
Election/Removal of Directors*1 2,112 221 0 0 2,333
Election/Removal of Statutory Auditors*1 1,762 339 0 0 2,101
Amendment of Articles 1,145 43 0 0 1,188
Retirement Bonus for Directors & Auditors 331 7 0 0 338
Revision of Remuneration 351 19 0 0 370
Stock Option Issuance 172 39 0 0 211
Election/Removal of Accounting Auditors 31 0 0 0 31
Company Reorganization*2 46 1 0 0 47
Others*3 249 161 0 0 410
Total 7,696 955 0 0 8,651
  1. (*1)Votes are for main resolutions. Against votes include those with one or more against votes on the sub resolutions.
  2. (*2)Includes merger, sale/transfer of business, equity transfer, stock splits, corporate separation, etc.
  3. (*3)Includes share buyback, legal reserve decline, third party allotment, capital reduction, reverse equity split, executive bonus, takeover defense, etc.

(2) Number of shareholder proxy voting resolutions for Japanese companies voted for, against, abstain, or carte blanche

For Against Abstain Carte Blanche Total Proposals
Total 2 163 0 0 165