Sompo Asset Management’s (hereinafter Sompo AM) proxy voting guidelines were designed to ensure voting rights are exercised in the interests of the client. The guidelines lay out the basic principles Sompo AM abides to when exercising voting rights, criteria for voting, and the systems it has in place to ensure proxy voting is carried out properly. It should be noted that Sompo AM exercises proxy voting on behalf of its clients, unless otherwise specified in the relevant investment management agreements.

• (1)Voting rights have economic value and their exercise is one part of Sompo AM’s investment process. To fulfil its fiduciary duties as an asset manager, Sompo AM prioritises the interests of clients when exercises voting rights, the same way it does when coming to sell/buy decisions on stocks.
• (2)Sompo AM does not abstain from voting or submit blank votes. Whether Sompo AM votes for or against a resolution, the decision is made based on thorough examination of the matter at hand. Sompo AM abides by this even in the event it retains voting rights after selling shares.
• (3)The sole factor Sompo AM takes into consideration when exercising voting rights is a resolution’s impact on shareholder value. The company votes for resolutions that it believes will increase shareholder value and votes against resolutions it believes will reduce shareholder value. This holds true even when doing so could harm its own interests.
• (4)When exercising voting rights on the companies that fit the below criteria, Sompo AM shall carefully examine resolutions with the dual goal of protecting shareholder value and improving corporate governance.

• (a)Companies that have engaged in anti-social behaviours

  Sompo AM defines anti-social behaviour as behaviour that goes against public order and standards of decency. Such behaviour can include violations of rules and regulations, environmental violations, violations of financial rules, labour violations, and manufacturing violations.

  • a-1)Violations of rules and regulations

    Actions that can cause significant damage to corporate value through the imposition of fines/penalties, administrative orders to limit business operations, or damage to corporate brand. These can result from such actions as collusion, cartel behaviour, and tax evasion/avoidance.

  • a-2)Environmental violations

    Actions that can cause significant damage to corporate value through the imposition of fines/penalties, administrative orders to limit business operations, or damage to corporate brand. These can result from such actions as damaging the environment and illegal disposal of industrial waste.

  • a-3)Violations of financial rules

    Actions that could infringe upon listing requirements. These can result from such conduct as fraudulent accounting or false information being included in securities filing reports.

  • a-4)Labour violations

    Actions that can cause significant damage to corporate value through the imposition of fines/penalties or damage to company reputation. These can result from sexual harassment, discrimination in hiring, and accidents related to overwork.

  • a-5)Manufacturing violations

    Actions that can cause significant damage to corporate value through the imposition of fines/penalties or damage to company reputation. These can result from the manufacturing/sales practices that can cause bodily harm.

  • a-6)Other violations

    Actions that can cause significant damage to corporate value through administrative orders to limit business operations, or damage to company reputation. These can result from illegal contributions to politicians, or blackmail payments to yakuza-related racketeers.

  • a-7)Violations of public order/decency

    Actions that can cause significant damage to corporate value that while are not technically illegal do go against basic social customs.

• (b)Companies with disclosure-related problems
• (c)Companies that have suffered significant declines in earnings or share price
• (d)Companies that have adopted a business strategy or capital allocation and distribution policies that will damage or significantly de-stabilize shareholder value.
• (e)Companies with inadequate responses to sustainability issues, primarily issues relating to society and the environment
• (f)Companies with consecutively low profit margins and shareholder returns in which we do not foresee improvements

Sompo AM adheres the below guidelines when deciding whether to vote for or against a resolution:

• (1)Resolutions concerning use of capital (dividends)

  The company shall examine whether dividend payment decisions take a balanced view of company growth and profitability. The company shall vote against resolutions concerning dividend payment if it would result in a significantly low dividend payout relative to the company’s ROE level.

• (2)Resolutions concerning the appointment of directors and auditors (structure of the board)

  The company shall examine whether the board is capable of effectively carrying out the expected level of corporate governance.

  The company shall vote against resolutions concerning the appointment of directors and auditors when there are too many board members for the size of the company.

• (3)Resolutions concerning the appointment of directors and auditors (eligibility of directors and auditors)

  The company shall examine whether director/auditor nominees are capable of achieving what is expected of the role.

  The company shall pay particular attention when examining the eligibility of directors and auditors for companies defined in section 2-(4).

• (4)Resolutions concerning the appointment of outside directors

  The company shall examine whether outside director/auditor nominees are capable of achieving what is expected of the role.

  The company shall vote against appointment if the nominee fits either of the two below descriptions:

  • (a)Nominees who could be reasonably seen to lack independence. These can include employees, major shareholders, and major business partners of the company in question or related companies as well as those who receive cash or in-kind payments outside of executive remuneration (certified accountants, etc.).
  • (b)A nominee with an extremely low attendance rate at board meeting (without good reason).

• (5)Resolution concerning remuneration, retirement bonus, and stock options for executives

  The company shall examine whether executive remuneration is appropriate given corporate earnings and the level of returns to shareholders as well as whether remuneration policy will contribute to improved corporate value and shareholder value. The company shall vote against companies that fit the descriptions below:

  • (a)The company fits the description in Section 2-(4) and the remuneration proposal is not suitable.
  • (b)The remuneration proposal could damage the company’s ability to execute effective corporate governance. Such proposals include those that damage the independence of outside executives.
  • (c)The remuneration proposal could damage the interests of shareholders by for example causing significant share dilution through the use a stock option plan.

  The company shall approve remuneration resolutions that dictate the disclosure of remuneration packages because of the valuable information this provides when voting on resolutions for the appointment/dismissal of directors.

• (6)Resolutions concerning articles of incorporation

  The company shall examine whether the proposed change to the articles of incorporation will help preserve/improve shareholder value or whether it will impose unjust restrictions on the rights of shareholders.

  The company shall vote against resolutions concerning articles of incorporation in the following circumstances:

  • (a)The resolution could potentially cause dilution of shareholder value for existing shareholders by increasing the total number of authorised shares when not necessary.
  • (b)The resolution will impose a higher majority vote to dismiss directors without stating a specific reason.
  • (c)The resolution will make it impossible for shareholders to submit resolutions concerning the payment of dividends without stating a specific reason.

• (7)The company shall examine whether resolutions concerning acquisitions, business segment sales, changes to business/capital will be to the benefit of existing shareholders

• (8)Resolutions concerning anti-takeover measures

  The company shall examine whether resolutions concerning anti-takeover measures will benefit existing shareholders.

  Sompo AM shall vote against resolutions that as part of a takeover defence will make it possible for the company to issue enough new stock acquisition rights to significantly dilute share count and does not guarantee objective and transparent conditions for the activation of such a defence.

• (9)Shareholder resolutions

  The company shall examine whether the shareholder resolution will benefit shareholders as a whole.

• (1)Sompo AM analysts shall examine resolutions and put forth their own resolutions to the Japan Equity Investment Strategy Meeting Body based on company guidelines.
• (2)The Japan Equity Investment Strategy Meeting Body has final decision-making power in proxy voting decisions. Discussion is required with the Responsible Investment Committee when decisions are made contrary to company guidelines.
• (3)The results of proxy voting activities are reported to the Responsible Investment Committee and Management Meeting Body every quarter.

*Proxy voting instructions for overseas equities are dependent on the circumstances of the country in which the company in question operates.