Engagement Regarding Fiduciary/ESG
Principles
29 January 2020
Nikko Asset Management Co., Ltd.
Junichi Sayato, Representative Director, Executive Chairman and Co-CEO
Hideo Abe, Representative Director, President and Co-CEO1

At Nikko Asset Management (“Nikko AM”), we regard acting in the best interests of the customers who entrust us with their assets
as our primary mission. This means that we attach the highest importance to fiduciary and ESG principles in our corporate
philosophy and business activities.
In view of Nikko AM’s status as a responsible institutional investor, we also position Environment, Society and Governance (“ESG”)
assessments and stewardship activities at the heart of our investment process. With this in mind, we strive constantly to help
investee firms to enhance their long-term corporate value and to help society grow sustainably.
We specialize in the creation of funds and investment management products that meet the asset management needs of a diverse
range of investors, from individuals to institutions, in a variety of different forms. This involves working daily to help ourcustomers build and manage their assets in any way we can by delivering products that inspire them, by devising ways to help
them invest more effectively, and by clearly informing them of the risks and returns that our products involve. We also endeavour
to provide unbiased information on societal and market conditions to help our customers make investment decisions. This reportprovides examples of our achievements in these areas in 2019 and explanations of our activities using indicators we havevoluntarily adopted.

1.

Activities for individual and corporate clients

1.1

Activities for individual clientsAs an asset management company, our paramount mission is to be useful to our customers in their medium-to long-term asset
building. Realizing this mission is not just a case of delivering strong investment management outcomes, however. We also needto put a great deal of effort into every aspect of our services, including understandably and simply imparting accurate knowledgeof investment management and the products we offer, proactively delivering timely and appropriate information on market
trends from a neutral standpoint to help customers make investment decisions, providing products that are suitable for mediumto long-term investment that serves customer needs, and helping customers to manage risks.
Our initiatives in this area, together with the results we have delivered to date, are detailed below.
1.1.1

Expected Average holding periods of top ten funds for AUM

Ranking

Fund name

Expected average holding
period (years)

AUM(JPY 100M)

Fund investment
universe/type1

Nikko LaSalle Global REIT Fund (Monthly
Dividend Payment Type)

5.47

4,632

Global REIT/active

2

Nikko Triple Fund (Property Bond Equity)
Monthly Dividend Payment Type

6.09

4,009

Balanced

3

Global Robotics Equity Fund (Semi-annual
Settlement Type)

2.36

3,711

Foreign equity/active

4

Global Three Times Triple Fund (Annual
Settlement Type)

4.42

3,600

Balanced

5

Smart Five (Monthly Settlement Type)

8.62

3,539

Balanced

6

Global Robotics Equity Fund (Annual Settlement
Type)

1.85

3,237

Foreign equity/active

7

Nikko Index Fund 225

2.21

1,999

Japanese equity/passive2

8

Global Three Times Triple Fund (Bi-Monthly
Dividend Payment Type)

5.48

1,947

Balanced

9

Global Fintech Equity Fund

1.60

1,712

Foreign equity/active

10

Nikko Developed Countries High Yielding Bond
Open (Monthly Dividend Payment Type)

4.92

1,160

Foreign bond/active* Expected average holding period is theoretical calculated by "annual average AUM ÷ annualized redemption amount"(calculation period is year 2019). The figure is different from the actual average holding period of the investor.
* Funds with very small redemption amount compared with the subscription amounts or AUM may result in longer period than
the actual holding period.
* AUM as of 2019/12/30.Top 10 AUM funds excluding ETF and MRF.
1.1.2 AUM and number of asset-building funds (publicly offered equity funds excluding ETFs; annual or semi-annual
annual account settlement)
3.5

AUM (JPY Trilion) [left axis]

Number [right axis]

185

181
3.0

180

2.5

175

171

2.0

170
167

1.5

1.0

0.5

165

166

159

2.6

1.5

1.5

Mar 2016

Mar 2017

2.7

3.1

160

155

0.0

150
Mar 2018

Mar 2019

Dec 2019

As an asset management company, our paramount mission is to be useful to our customers in their medium-to long-term asset
building. The asset management business is one in which firms can only grow if they also grow their customers’ assets. We are
therefore increasing the number of publicly offered equity funds that are suitable for long-term asset building (excluding ETFs;
annual or semi-annual annual account settlement). As of December 2019, we have 167 such funds at Nikko AM with a total AUM
of approximately JPY 3.1 trillion.

3

Major publicly offered funds that we deem suitable for customers' medium- and long-term asset-building needs (examples)
Fund investment target

Fund name

Japanese Equity/Active

Japan Robotics Equity Fund

Annual,semiannual

894

Nikko Japan Open

Annual

362

Nikko DC Ｊ Growth

Annual292

Global Robotics Equity Fund

Annual,semiannual

7,414

Global Fintech Equity Fund

Annual,semiannual

3,079

Foreign Bond/Active

Nikko Developed Countries High Yielding Bond Open (Growth
Type)

Annual93

Balanced

Smart Five (Annual Settlement Type)

Annual

510

Fine Blend (Growth Type)

Annual200

Nikko GW7 Eggs

Annual

559

Nikko Triple Fund (Property Bond Equity) Growth Type

Annual151

Global Three Times Triple Fund (Annual Settlement Type)

Annual3,600

Foreign Equity/Active

Distribution
frequency

AUM (JPY 100M)* AUM as of end Dec 2019. Aggregate value is shown for series funds. AUM is in descending order by fund investment destination.
* For fund with multiple settlement types, hyperlink is set to the fund with the largest AUM.

1.1.3

Initiatives for cumulative investment including cumulative Nippon Individual Savings Accounts

In order to meet cumulative investment needs, in addition to cumulative NISAs, we also promote the use of defined contributionplans, personal defined contribution pension plans and general accounts. Through these products, we advocate long-term,
cumulative and diversified investments to those who wish to build up their assets. We also provide assistance to distributors forcumulative investment initiatives by not only providing products but also creating and offering a variety of support tools.
We have now registered five of our funds for eligibility in the cumulative NISA system.
We also hold events such as the “Product Strategy Seminar” for distributors, at which we emphasize the effectiveness of
cumulative investment in enhancing returns for investors.

4

1.1.4

AUM and Performance of Japan-domiciled publicly offered funds (including ETFs and MRFs)

Breakdown by investment assets * Numerical values indicate AUM (0.1 billion yen)
Multiple asset investment
100%

80%

Bond investment

8,656

8,296

32,39531,250Equity investment

10,054

11,60332,74630,812

98,877

104,715

116,835

Mar 2018

Mar 2019

Dec 2019

18,06135,74560%

40%
59,34875,331Mar 2016

Mar 2017

20%0%Total AUM of Japan-domiciled publicly offered funds(0.1 billion yen)
Mar 2016

Mar 2017
98,894

Mar 2018
116,382

Mar 2019
141,678

Dec 2019
147,130

170,642* Figures for publicly offered funds are aggregated. including ETFs and MRFs*”Equity Investment” includes REITs.

We consider our investment division as a team of professionals in which fund managers and analysts forge their own career
paths, and we reflect that status in their appraisals and treatment. We also employ an appraisal and compensation structure thatemphasizes medium- and long-term investment performance. This is supported by a global system we have introduced to retain
key fund managers. We try to enhance the performance of our funds through these appraisal and compensation frameworks.
Out of the total assets in the publicly offered funds that we manage on behalf of our customers (as of December-end 2019),
equity investment funds accounted for 68%, bond investment funds (including MRFs) accounted for 21%, and multiple asset
investment funds/other funds accounted for 11% of the total.

5Equity investment funds: largest returns in past three years
Rank

Fund name

Launch date

AUM

Return (inc. dividends) (%)(JPY 100M)

Since
launch5 years

3 years

1 year1

Nikko Growing Venture Fund

Jul-03

207

420%

162%

111%

25%

2

Global Fintech Equity Fund

Dec-16

1,712

79%

-

83%

37%

3

Japanese Emerging Equity Open

Dec-96

176

434%

105%

62%

18%

4

Global Robotics Equity Fund (Annual Settlement Type)

Aug-15

3,237

67%

-

48%

35%

5

Global Robotics Equity Fund (Semi-annual SettlementType)Aug-15

3,711

66%

-

48%

35%

6

Nikko DC Ｊ Growth

Oct-01

292

175%

56%

36%

26%

7

Japan Robotics Equity Fund (Annual Settlement Type)

Jan-16

693

50%

-

36%

24%

8

Nikko Profit Return Growth Stock Open

Jun-91

292

116%

56%

36%

26%

9

Japan Robotics Equity Fund (Semi-annual Settlement
Type)

Jan-16

200

50%

-

36%

24%

10

Nikko Index Fund International Stock No Hedge (DC)

Dec-02

530

271%

38%

36%

29%

(Reference index: Japanese equity) TOPIX

22%

13%

15%

(Reference index: foreign equity) MSCI All Country World Index (ex. Japan, no hedge, JPY-based)

22%

27%

25%

* Publicly offered open-end funds (incl ETFs). AUMs are as of December-end 2019. Funds with AUMs below JPY 10 billion are excluded.

Bond investment funds: largest returns in past three years
Rank

Fund name

Launch date

AUM

Return (inc. dividends) (%)(JPY 100M)

Since
launch5 years

3 years

1 year1

Nikko PIMCO High Income Sovereign Fund Monthly
Dividend Payment Type (US Dollar course)

Sep-03

195

152%

18%

15%

13%

2

Listed Index Fund Emerging Bond

Jan-12

203

47%

-1%

11%

10%

3

Nikko Index Fund International Fixed Income No
Hedge (DC)

Dec-02

303

84%

-3%

6%

5%

4

Listed Index Fund International Bond (FTSE WGBI)Monthly Dividend Payment Type

Sep-09

261

44%

-4%

5%

5%

5

Nikko Five Continents Bond Fund (Monthly Dividend
Payment Type)

Jun-06

509

46%

-3%

5%

6%

-2%

7%

5%

(Reference index) FTSE World Government Bond Index (ex. Japan, no hedge, JPY-based)* Publicly offered open-end funds(incl ETFs). AUMs are as of December-end 2019. Funds with AUMs below JPY 10 billion are excluded.

6

Multiple asset investment funds/other funds: largest returns in past three years
Rank

Fund name

Launch date

AUM

Return (inc. dividends) (%)(JPY 100M)

Since
launch5 years

3 years

1 year1

Nikko GW7 Eggs

Feb-03

559

158%

22%

20%

17%

2

Nikko Triple Fund (Property Bond Equity) Monthly
Dividend Payment Type

Aug-03

4,009

128%

20%

18%

15%

3

Nikko Triple Fund (Property Bond Equity) Growth Type

Aug-09

151

98%

19%

18%

15%

4

Nikko Three Top (Bi-Monthly Dividend Payment Type)

Oct-06

243

58%

10%

17%

14%

5

Nikko DC Index Balance （Equity 60）

Dec-02

104

133%

24%

16%

13%

* Publicly offered open-end funds(incl ETFs). AUMs are as of December-end 2019. Funds with AUMs below JPY 10 billion are excluded.

Top 10 funds in performance for the past one year
Rank

Fund name

Launch date

AUM

Return (inc. dividends) (%)(JPY 100M)

Since
launch5 years

3 years

1 year1

Shenzhen Innovation Equity Fund (Annual SettlementType)

Nov-17

385

1%

-

-

54%

2

Global Fintech Equity Fund

Dec-16

1,712

79%

-

83%

37%

3

Global Fintech Equity Fund (Semi-annual SettlementType)

Sep-17

1,083

38%

-

-

36%

4

Global Robotics Equity Fund (Annual Settlement Type)

Aug-15

3,237

67%

-

48%

35%

5

Global Robotics Equity Fund (Semi-annual SettlementType)Aug-15

3,711

66%

-

48%

35%

6

Global Robotics Equity Fund (Currency Hedge Annual
Settlement Type)

Jan-17

243

44%

-

-

35%

7

Global Robotics Equity Fund (Currency Hedge Semiannual Settlement Type)

Jan-17

222

44%

-

-

35%

8

Global Fintech Equity Fund (Currency Hedge)

Sep-17

179

33%

-

-

35%

9

Global Fintech Equity Fund (Currency Hedge Semiannual Settlement Type)

Sep-17

106

33%

-

-

35%

10

Global Three Times Triple Fund (Bi-Monthly Dividend
Payment Type)

Oct-18

1,947

29%

-

-

33%

* Publicly offered open-end funds (incl ETFs). AUMs are as of December-end 2019. Funds with AUMs below JPY 10 billion are excluded.

7

1.1.5Fund Efficiency Initiatives

We believe that it is imperative for asset managers to constantly develop and manage more attractive and effective products forinvestors. We strive to achieve this goal through constant efforts to enhance our fund lineups and to expand AUM. However, it isalso true that some of our funds have small AUMs. Funds with smaller AUMs cost more to manage than other funds and are lesslikely to realize the investment policies set out in their investment prospectuses or trust deeds, making it harder to deliver thesustained medium- and long-term investment performances that customers expect.
At Nikko AM, we address this by not only terminating smaller funds once they reach maturity but also terminating them early by
shortening their trust periods based on legally stipulated procedures.
We carried out terminations of 16 publicly offered funds between January and December of 2019 and gained the understandingof beneficiaries for the early termination of 10 of them.
These efforts are essential ways for us to maintain the strength of our funds’ product attributes and to deliver strong investment
performances. We firmly believe that the effective allocation of human resources is the key to delivering medium- and long-term
profits to investors.
1.1.6 Change in distribution pattern for medium- and long-term investment: composition of Japan-domiciled publicly
offered funds

Ratio of monthly dividend funds
in open-end equity typed
funds (excluding ETF)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2014/122015/122016/122017/122018/122019/12

The ratio of publicly offered funds (excluding ETFs) that pay out monthly dividends is falling and stood at 37% as of December
2019

1.1.7

Risk/return features of Nikko AM’s key funds

Procedures for selecting Nikko AM’s key funds
1.
2.
3.

Rank Nikko AM’s publicly offered funds (excluding money funds, ETFs and index funds) as of October-end 2019).
If there are multiple series funds among the top funds for AUM, use the funds with the largest AUMs.
For the relevant period, we selected the 19 funds in the below chart as Nikko AM’s key funds (excluding funds that have lessthan a year to maturity) as of November-end 2019.

8

4,632
4,009

Aug-03

3,711

Aug-153,600

Oct-18

4

Nikko LaSalle Global REIT Fund (Monthly
Dividend Payment Type)Nikko Triple Fund (Property Bond Equity)
Monthly Dividend Payment Type
Global Robotics Equity Fund (Semi-annual
Settlement Type)
Global Three Times Triple Fund (Annual
Settlement Type)

Launchdate
Mar-04

5

Smart Five (Monthly Settlement Type)

3,539

Jul-13Global Fintech Equity Fund

1,712

Dec-16

Nikko Developed Countries High Yielding
Bond Open (Monthly Dividend Payment Type)

1,160

Aug-03

Japan Robotics Equity Fund (Annual
Settlement Type)Nikko GW7 Eggs
Global Mobility Service Equity Fund (Annual
Settlement Type)

693

Jan-16559
557

Feb-03Jan-18

Nikko Five Continents Bond Fund (Monthly
Dividend Payment Type)Greater China Equity Fund (Monthly Dividend
Payment Type）
Gold Fund Currency Hedge (for SMA)

509

Jun-06434

Oct-10398

Sep-17

Nikko AMP Global REIT Fund Monthly
Dividend Payment Type A (No Hedge)
Shenzhen Innovation Equity Fund (Annual
Settlement Type)Nikko Japan Open394

Jan-04385

Nov-17

362

Aug-98Fund name
1
2
3

6
7
8
9
10
11
12
13
14
15
16
17
18
19

Nikko PIMCO High Income Sovereign Fund
Monthly Dividend Payment Type (US Dollar
course)(Note1)
Nikko World Triple Fund (Property Bond
Equity) Monthly Dividend Payment TypeNikko Profit Return Growth Stock OpenAUM(JPY100M)

Asset Class
Global REIT
Balanced
ForeignequityBalanced-

Jul-09329

Sep-05292

Jun-91

Balanced
ForeignequityForeignbondJapanese
equityBalanced
ForeignequityForeignbondForeignequityOther
Global REIT
ForeignequityJapanese
equityForeignbondBalanced
Japanese
equityRisk/Return Abbreviated name on
profileLaSalle Global REIT Fund(Monthly Dividend)
Nikko Triple Fund (Monthly
Dividend)
Global Robotics (Semi-annual)＊Graph not shown because theinvestment period is less than 2
years
Smart Five (Monthly Settlement)
Global Fintech
Developed Countries High
Yielding Bond Open (Monthly
Dividend)
Japan Robotics (Annual)Nikko GW7 Eggs
＊Graph not shown because theinvestment period is less than 2
years
Five Continents Bond Fund(Monthly Dividend)
Greater China Equity＊Graph not shown because theasset class is other.
AMP Global REIT Fund (Monthly
Dividend) A Course (No Hedge)
Shenzhen Innovation
Nikko Japan OpenPIMCO High Income Sovereign
Fund Monthly Dividend (USD
course)Nikko World Triple Fund (Monthly
Dividend)
J-Growth

Note1: For Nikko PIMCO High Income Sovereign Fund, risk-return figures for the USD course (converted to JPY), a major fund in the same strategy, were used.
*As the USD course is not the largest fund of the same strategy, AUM is blanked to prevent confusion.

91.1.8

Risk/return profile of major funds in past two years (as of December-end 2019)10

1.1.9Risk/return profile of major balanced funds in past two years (as of December-end 2019)11

1.1.10 Risk/return profile of major Japanese equity funds in past two years (as of December-end 2019)12

1.1.11 Risk/return profile of major foreign equity funds in past two years (as of December-end 2019)13

1.1.12 Risk/return profile of major foreign bond funds in past two years (as of December-end 2019)14

1.1.13 Risk/return profile of major global REIT funds in past two years (as of December-end 2019)15

1.1.14 Sharpe ratios of major funds in past three years (as of December-end 2019)

Fund name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Nikko LaSalle Global REIT Fund (Monthly
Dividend Payment Type)Nikko Triple Fund (Property Bond Equity)
Monthly Dividend Payment Type
Global Robotics Equity Fund (Semiannual Settlement Type)
Smart Five (Monthly Settlement Type)
Global Fintech Equity Fund
Nikko Developed Countries High Yielding
Bond Open (Monthly Dividend Payment
Type)
Japan Robotics Equity Fund (Annual
Settlement Type)Nikko GW7 Eggs
Nikko Five Continents Bond Fund(Monthly Dividend Payment Type)Greater China Equity Fund (Monthly
Dividend Payment Type）
Nikko AMP Global REIT Fund Monthly
Dividend Payment Type A (No Hedge)
Nikko Japan OpenNikko PIMCO High Income Sovereign
Fund Monthly Dividend Payment Type(US Dollar course)(Note2)
Nikko World Triple Fund (Property Bond
Equity) Monthly Dividend Payment TypeNikko Profit Return Growth Stock Open

Dec-19AUM(JPY 100M)
4,632

Mar-04A
Excess Return（Annualized）
4.88%

BStandard
Deviation
11.54%

A/B
SharpeRatio
0.42

Launch date

4,009

Aug-03

5.72%

5.91%

0.97

3,711

Aug-1514.86%

17.86%

0.83

3,539
1,712
1,160

Jul-13
Dec-16
Aug-03

3.11%
22.21%
0.40%

3.19%
18.95%
4.62%

0.97
1.17
0.09

693

Jan-16

11.47%

14.87%

0.77

559
509

Feb-03Jun-06

6.69%
1.67%

8.97%
4.30%

0.75
0.39

434

Oct-1010.58%

18.63%

0.57

394

Jan-046.02%

11.50%

0.52

362

Aug-98
Jul-0910.13%
4.91%

14.21%
5.71%

0.71
0.86

329

Sep-05

5.12%

6.26%

0.82

292

Jun-9111.30%

13.83%

0.82-

Note 1: LIBOR1M was used for the risk-free rate.
Note 2: For Natural Resources Equity Fund, risk-return figures for the USD course (converted to JPY), a major fund in the same strategy, were used.
*As the USD course is not the largest fund of the same strategy, AUM is blanked to prevent confusion.

16

1.1.15 Sharpe ratios of major funds in past one year (as of December-end 2019)

Fund nameDec-19AUM(JPY 100M)
4,632

Launch dateA
Excess Return（Annualized）
16.94%B
Standard
Deviation
10.31%

A/B
SharpeRatio
1.64

Nikko LaSalle Global REIT Fund
Mar-04(Monthly Dividend Payment
Type)
Nikko Triple Fund (Property
4,009
Aug-03
14.46%
5.12%
2.83
2
Bond Equity) Monthly Dividend
Payment Type
Global Robotics Equity Fund
3,711
Aug-1532.84%
19.80%
1.66
3(Semi-annual Settlement Type)
Global Three Times Triple Fund
3,600
Oct-1828.37%
8.19%
3.46
4(Annual Settlement Type)
Smart Five (Monthly Settlement
3,539
Jul-13
8.85%
3.21%
2.76
5
Type)
6
Global Fintech Equity Fund
1,712
Dec-1633.82%
19.08%
1.77
Nikko Developed Countries High
1,160
Aug-03
5.06%
3.38%
1.50
7
Yielding Bond Open (Monthly
Dividend Payment Type)Japan Robotics Equity Fund693
Jan-1622.28%
11.62%
1.92
8(Annual Settlement Type)
9
Nikko GW7 Eggs
559
Feb-0316.08%
7.97%
2.02
Global Mobility Service Equity
557
Jan-1830.21%
23.72%
1.27
10
Fund (Annual Settlement Type)Nikko Five Continents Bond509
Jun-06
5.96%
2.45%
2.43
11
Fund (Monthly Dividend
Payment Type)Greater China Equity Fund434
Oct-1029.79%
21.01%
1.42(Monthly Dividend Payment
12Type）Gold Fund Currency Hedge (for398
Sep-1713.84%
12.23%
1.13
13
SMA)
Nikko AMP Global REIT Fund
394
Jan-0423.12%
10.13%
2.28
14
Monthly Dividend Payment
Type A (No Hedge)
Shenzhen Innovation Equity385
Nov-1747.56%
26.02%
1.83
15
Fund (Annual Settlement Type)
16
Nikko Japan Open362
Aug-9820.61%
12.29%
1.68
Nikko PIMCO High Income
Jul-0912.93%
4.81%
2.69
Sovereign Fund Monthly
17
Dividend Payment Type (USDollar course)(Note2)
Nikko World Triple Fund329
Sep-0514.35%
5.63%
2.55
18
(Property Bond Equity) Monthly
Dividend Payment TypeNikko Profit Return Growth292
Jun-9124.30%
11.75%
2.07
19
Stock Open
Note 1: LIBOR1M was used for the risk-free rate.
Note 2: For Nikko PIMCO High Income Sovereign Fund, risk-return figures for the USD course (converted to JPY), a major fund in the same
strategy, were used.
*As the USD course is not the largest fund of the same strategy, AUM is blanked to prevent confusion.
117

1.1.16 Investor returns of major funds (periods since launch)
Fund name

Investor Return（Annualized）

NAV Return（Annualized）

1

Nikko LaSalle Global REIT Fund (Monthly Dividend Payment Type)

9.70%

5.02%

2

Nikko Triple Fund (Property Bond Equity) Monthly Dividend Payment Type

1.31%

5.25%

3

Global Robotics Equity Fund (Semi-annual Settlement Type)

9.47%

12.76%

4

Global Three Times Triple Fund (Annual Settlement Type)19.74%

22.69%

5

Smart Five (Monthly Settlement Type)

3.68%

4.39%

6

Global Fintech Equity Fund16.79%

21.68%

7

Nikko Developed Countries High Yielding Bond Open (Monthly Dividend
Payment Type)

3.37%

3.89%

8

Japan Robotics Equity Fund (Annual Settlement Type)

5.50%

11.20%

9

Nikko GW7 Eggs

0.49%

5.91%

10

Global Mobility Service Equity Fund (Annual Settlement Type)

2.66%-0.14%

11

Nikko Five Continents Bond Fund (Monthly Dividend Payment Type)

0.12%

2.90%

12

Greater China Equity Fund (Monthly Dividend Payment Type）-0.33%

5.46%

13Gold Fund Currency Hedge (for SMA)

6.62%

3.84%

14

Nikko AMP Global REIT Fund Monthly Dividend Payment Type A (NoHedge)

7.95%

6.48%

15

Shenzhen Innovation Equity Fund (Annual Settlement Type)-2.01%

0.45%

16

Nikko Japan Open

-3.95%

3.10%

17

Nikko PIMCO High Income Sovereign Fund Monthly Dividend Payment
Type (US Dollar course)-10.06%

7.55%

18

Nikko World Triple Fund (Property Bond Equity) Monthly Dividend
Payment Type-4.59%

4.34%

19

Nikko Profit Return Growth Stock Open

-26.01%

12.41%

Note: the figures for Nikko PIMCO High Income Sovereign Fund Monthly Dividend Payment Type (US Dollar course) and Nikko Profit Return Growth Stock Openstart from September-end 2010 because of issues with acquiring past data.

18

1.1.17 Information provision under Nikko AM Academy brand
Main investment information sources provided as series
Rakuyomi
KoyomiGokuyomi
Market 5 Minutes
Weekly Market
Data Watch
Follow-up Memo
Global REIT WeeklyMonthly Market
JAPAN in Motion
GLOBAL EQUITY OVERVIEW
Nikko AM Newsletter
CHINA INSIGHT
KAMIYAMA Reports
KAMIYAMA Seconds!
Why should we invest?
Robotics Report
FinTech Report
What Nikko AM wants you to know about healthy money management

Frequency
Twice weeklyMonthlyMonthlyMonthly
WeeklyWeeklyIrregular
WeeklyMonthlyMonthly
Quarterly
Irregular
Irregular
Irregular
Irregular
Irregular
Twice monthly
Twice monthly
Irregular

Additional information
112 released in 20197 released in 20193 released in 201919 released in 201928 released in 201951 released in 20194 released in 20191 released in 2019

1.1.18 Number of seminars held
(Unit: occurrences)
For distributor salespeople
6,000

5,974

For retail investors
5,633

5,594
5,325

4,965

4,000
2,155

2,213

2,161
1,560

2,000

1,274

0
FY2015FY2016FY2017FY2018FY2019Apr-Dec19

1.1.19 Number of fund awards won
25

20

15
24
10
15

17

14

5
5
0
FY2015FY2016FY2017FY2018FY2019Apr-Dec

We work constantly to develop products that serve the interests of our customers. In FY 2019 (April to December 2019), external assessment institutions recognized
us with awards for five of our funds: one of our Japanese equity funds, two of our foreign equity funds and two of our foreign bond funds.
* Aggregation of awards from R&I Fund Awards, Fund of the Year (Morning Star) and Lipper Fund Awards.

1.2

Activities for corporate clients

Number of accounts utilizing risk management tool for institutional investors

110
100
90
80
70
60
50
40
30
20
10
0

94

89

19

End-Dec 2017

End-Dec 2018

End-Dec 2019

Our starting point for institutional investors is to find out our customers' needs, and to work hard to meet those needs. In oursales activities, we then propose products in line with each customer's level of risk tolerance. As a part of these efforts, in
December 2017 we launched a tool and used it to start providing support to help our corporate investor customers improve theirrisk management. As of December-end 2019, the support tool was being used for 89 accounts.

20

2.

Stewardship Activities

We believe that it is one of our key responsibilities as an asset manager to help the companies in which we invest to improve thevalue they offer to investors by vigorously pursuing our stewardship activities including the exercise of voting rights. We constantly
work to ensure that our activities are sustained and steadily improved upon. At the same time, we incorporate the concept of ESG
into all of our investment management processes and perform assessments of the corporate value of firms—including their nonfinancial information—in order to promote medium- and long-term improvements as well as sustainable growth, and thisapproach is useful in our investment decision-making process. We also organized the ESG Global Steering Committee in order tofurther expand the global reach of our ESG efforts. Comprised of leaders in our investment management operations in Japan andoverseas, the committee deliberates over matters such as ESG initiatives, ways of putting them into practice, and new approaches.
Our initiatives and results to date in the above-mentioned areas are as follows.
2.1

Engagement results
No. of firms

No. of Engagement
3,939

3,903

4,000
3,482

2,985

3,000

2,656

2,000
1,459

1,433
1,000

1,051

957

1,230

0
FY2015FY2016FY2017FY2018FY2019Apr-Dec

Our fund managers and analysts have always been proactively involved in engagement and proxy voting in order to help firms inwhich our active strategies invest improve their corporate value. We have worked since 2013 to boost the corporate value of awide range of firms, including their ESG levels, by starting to assign CSV scores (a way of giving firms comprehensive assessmentsthat include ESG scores). Since then we have assessed over 600 firms with a focus on helping them to achieve sustainable growthand enhance their corporate values in the medium to long term. In March 2017, we launched a body devoted to activities topromote better corporate and shareholder value for Japanese names in which we invest, including in our passive strategies.
These initiatives have further improved our ability to engage with firms and exercise our voting rights in order to help maximize
the corporate value of firms. In 2019 (April to December) we engaged with 1,230 firms, and in the same period the number of
instances of engagement we had was 2,985.

21

2.2

Voting track record

Company-generated proposals (July 2018 – June 2019)
Proposal

Yea

Nay

Subtotal

Nay ratio

Election/dismissal of directors

14,703

3,129

17,832

17.5%(Reference) Number of companies

1,247

912

2,159

42.2%

Election/dismissal of corporate auditors

2,522

215

2,737

7.9%

(Reference) Number of companies

1,022

187

1,209

15.5%

Selection of accounting auditors

57

1

58

1.7%

Executive remuneration

758

87

845

10.3%

Retirement benefit payments

144

43

187

23.0%

Appropriation of surpluses

1,396

120

1,516

7.9%

Restructuring

56

0

56

0.0%

Introduction, update, abolition of takeover
defense measures

2

71

73

97.3%

Other proposals on capital policy

58

2

60

3.3%

Partial revision to articles of incorporation

532

33

565

5.8%

Other

1

0

1

0.0%

Total

20,2293,701

23,93015.5%

Proposal on company

Proposal on executive remuneration

Proposal on capital policy(Except proposals concerning thearticles of incorporation)

22

Shareholder proposals (July 2018 – June 2019)
Yea

Nay

Subtotal

Nay ratio

Election/dismissal of directors

14

30

44

31.8%

(Reference) Number of companies

2

16

18

11.1%

Election/dismissal of corporate auditors

0

2

2

0.0%

(Reference) Number of companies

0

2

2

0.0%

Selection of accounting auditors

0

0

0

0.0%

Executive remuneration

1

8

9

11.1%

Retirement benefit payments

0

0

0

0.0%

Appropriation of surpluses

0

10

10

0.0%

Restructuring

0

0

0

0.0%

Introduction, update, abolition of
takeover defense measures

1

0

1

100.0%

Other proposals on capital policy

0

0

0

0.0%

Partial revision to articles of incorporation

0

0

0

0.0%

Other

3

87

90

3.3%

Total

19

137

156

12.2%

Proposal on company

Proposal on executive remuneration

Proposal on capital policy(Except proposals concerning thearticles of incorporation)

It is our responsibility as an institutional investor to help the companies we invest in to improve their value and grow sustainably
through our stewardship activities, including the exercise of voting rights. In addition, we understand the importance ofstrengthening our own governance and increasing transparency for those outside the company. With this in mind, we establishedthe Stewardship and Voting Rights Policy Oversight Committee in June 2016. Not only is the committee’s chairperson an outside
officer, but the majority of its members are from outside Nikko AM, thus ensuring its independence. The committee holds quarterly
meetings at which it decides Nikko AM’s policy for the exercise of voting rights from a neutral standpoint, monitors our exercise of
voting rights as one of its oversight responsibilities, and provides other forms of guidance.
2.3

ESG initiatives

Since launching the Nikko Eco Fund in 1999, which invests in environmentally friendly firms and is Japan’s first Socially
Responsible Investment (“SRI”) fund*, we have incorporated ESG factors in all of our investment management processes based on
our understanding that they contribute to medium- and long-term corporate value. We also constantly introduce new initiatives
in order to put our EGS activities into practice more effectively. Since August 2013, we have been applying the principle of
Creating Shared Value (“CSV”; the practice of creating value for society and firms by aligning efforts to solve societal issues withcorporate interests and pursuing both goals simultaneously) by having our analysts formulate unique CSV scores that incorporate
comprehensive assessments of firms’ financial standings, market competitiveness levels and ESG initiatives, and use them in theirstock selections. We currently formulate scores for 600 stocks listed on the Tokyo Stock Exchange from a medium- to long-term
perspective. We have already built up a track record of over six years of assessment and engagement based on our analysts’ close
engagement with the 600 firms whose CSV scores we assess and their daily work to improve corporate value including ESG.
* Socially Responsible Investment (“SRI”) is an approach to investing in firms that takes into account assessments of investees’ environmental and social initiatives(responsibilities and contributions) in addition to traditional investment criteria (firm’s economic strengths).

23

Our other initiatives are as described below.
Principles of Responsible Investing (PRI) ratings from assessment institutions
2019

2018

2017

Approach to responsible investing(overall assessment)

A+

A+

A+

Incorporation of responsible investing in listed stocks

A+

A+

A+

Engagement

A+

A+

A+

Exercise of voting rights

A+

A+

A+

Fixed income investment – Government etc.

A+

A+

A

Fixed income investment – Corporate (Financial)

A+

A+

B

Fixed income investment – Corporate (Non-financial)

A+

A+

B

Active ownership in listed stocks

Investment target

Fund name

Japanese Equity

Nikko Eco Fund80

Nikko DC Eco Fund

8

Nikko World Bank Bond Fund (Monthly Dividend Payment Type)146

SMBC Nikko World Bank Bond Fund

18

World Bank Green Bond Fund

28

Foreign BondAUM (JPY 100M)* AUMs are as of end-December 2019. * Open-end, publicly offered funds.

Funds focused on Socially Responsible Investing (SRI)
We have been a signatory to the United Nations’ Principles for Responsible Investment (PRI) since 2007. Our pioneering approachas an investment manager demonstrates our commitment to contributing to medium- and long-term corporate value andsustainable responsible investment. We have consistently been awarded the top assessment level (A+, out of six levels from A+ toE) for the main assessment items, including our approach to responsible investment.
Since launching a body specializing in this area in March 2013, we have expanded the number of firms whose ESG we research fromthe previous number of about 950 (active strategy investment universes) to 2,200 by adding firms in which our passive strategies
invest to the scope of our research.

24

3.

ESG Initiatives as a Firm

As an asset manager engaged in ESG initiatives directed at investee companies, we also believe in the importance of implementing
our own ESG activities as a firm.
3.1

GovernanceOur role as an asset manager is not only to seek improvements in the governance of investee companies but to continuously
ensure that our own governance is at a world-class level. To achieve this, we work on the three governance areas shown below.
3.1.1

Management governanceOur governance framework is distinctive in the Japanese asset management industry for its extremely high levels of
independence and transparency. Specifically, our Board of Directors is chaired by an outside director, and as of December-end
2019 seven of its ten members are outside directors, six of whom are independent directors with no capital relationship with
Nikko AM.
We have increased the number of outside directors in our ten-member Board of Directors from five to seven and boosted thenumber of independent directors with no capital relationship with Nikko AM from four to six in the year since end-December
2018. This increase in the proportion of our board members who are outside or independent directors has enhanced the ability of
our corporate governance framework to exercise control over our management.
In June 2019, we transformed Nikko AM into a company with an Audit and Supervisory Board in order to strengthen the auditing
and supervision of our Board of Directors, to further enhance our corporate governance framework and to boost our corporate
value. The transition has enabled us to incorporate monitoring-board-style governance in our management, to separate
management monitoring from business execution more clearly, and to speed up management decision-making.
3.1.2

Voting rights governanceWe established the Stewardship and Voting Rights Policy Oversight Committee in June 2016 as a way of improving transparency
in our stewardship activities such as engaging with firms and exercising voting rights as well as strengthening our governance.
Drawing the majority of its members from outside the company, the committee is the first such third-party body to beestablished at a Japanese asset management company. It holds meetings once a quarter in principle and provides a venue foroutside committee members to have lively discussions on how Nikko AM exercises its voting rights. The committee has held atotal of 18 meetings so far (six meetings in 2019). Please refer to the Appendix (PDF) for details of its activities.
3.1.3

Fund governanceWe established the Fund Advisory Board, whose members are also mostly from outside Nikko AM, in September 2017. The Fund
Advisory Board meets every quarter in principle. The board has met a total of seven times so far and its outside members
participate in debates at its meetings (three meetings in 2019). Please refer to the Appendix (PDF) for details of its activities.
3.2

Environmental

We strive to contribute to a sustainable environment through eco-friendly offices, employee-led eco-initiatives, and minimisationof our carbon footprint.
•

Achievement of Carbon-neutral Operations

Based on an assessment of the carbon dioxide emissions of our Tokyo, Singapore, Sydney, Auckland, New York and London
offices for our operations in FY2018, we offset our emissions by contributing funds to projects for the reduction of an equalamount of carbon dioxide emissions, earning us certification as a “carbon-neutral company”.
We are also receiving an increasing number of requests from customers, particularly from outside Japan, about our sustainability
initiatives as an asset manager. Although our industry has a low environmental impact compared to other industries, we support25

the Task Force and Climate-related Financial Disclosures and believe that it is important to raise awareness about climate change
and other environmental issues.
3.3

SocialWe strive to enhance social causes, both within the company by supporting a diverse and inclusive environment, and outside of
the company through hands-on initiatives and charitable donations.
•

Women's GroupNikko AM was the first Japanese Asset Manager to be a signatory to the UN Women’s Empowerment Principles. In all our offices inJapan and around the world, we strive to provide an environment in which all people can work comfortably by deepening ourunderstanding of and respect for our workforce’s diversity.
•

LGBT

Nikko AM is an official member of “LGBT Finance”, an organization set up by financial institutions in Japan to support LGBT
people. We are highly committed to this initiative, which has both very visible grass-roots support from our employees and very
engaged sponsorship from our senior management. We also work to promote awareness of LGBT causes.
•

Idea Generation ForumWe promote transparency and open discussion throughout Nikko AM, including on issues relating to our social policies. The
original suggestion of an LGBT-focused effort was originated in this forum, as were many other discussions that help us tocontinuously progress on our ESG journey.
•

Charitable Donations and Activities

Employees throughout Nikko AM support global charitable causes and activities. We complement this with support for local
outreach and charitable activities around the world.
As one example of our activities, we awarded internships to three Syrian graduate students participating in the Japanese Initiative
for the future of Syrian Refugees, a project planned by the Japan International Cooperation Agency and operated by the Japan
Association for Refugees. Our interns gained experience of working at a Japanese firm while also acquiring business skills. Theinternships were made possible through a partnership between Nikko AM and the United Nations High Commissioner for
Refugees.

In conclusion
We celebrated our 60th anniversary in December 2019. Throughout the many changes we have experienced in that time—
including changes in the business environment, technological innovations, and growth in financial products—we haveconsistently striven to act in the best interests of our customers. We strongly believe that continuing to do so is our mission as afirm.
We will continue to ensure that Nikko AM earns the trust of customers and attracts praise for its performance by fostering
investment management innovation, developing products that fully serve the interests of customers, and strengthening ourcorporate governance.

26