Our Principles for Exercising Voting Rights(for Domestic Stocks)
as a Responsible Institutional Investor

Sumitomo Mitsui Trust Asset Management Co., Ltd.
Effective as of January 2024

1

I. Purpose of Exercising Voting Rights
Sumitomo Mitsui Trust Asset Management Co., Ltd. (hereinafter, “SMTAM,” “we,” “us,” or “our”),
as a responsible institutional investor, considers our exercise of voting rights in connection with
entrusted assets (hereinafter, “exercise of voting rights”) to be one of the most important elements ofour stewardship activities, and we will strive to ensure that our exercise of voting rights enhances thecorporate value and encourages sustainable growth of investee companies, in order to maximize themedium to long term investment returns for our clients (beneficiaries).

II. Basic Policy on the Exercise of Voting Rights
1.

Our exercise of voting rights must aim to contribute to the sustainable growth of investee
companies thereby maximizing the medium to long term investment returns for our clients(beneficiaries). Based on investee companies’ conditions and details of engagements withthose companies, we will exercise voting rights not only pursuant to the formal criteria for
decision making, but after comprehensively considering the extent to which our exercise of
voting rights would contribute to the sustainable growth of investee companies (and to the
maximization of medium to long term investment returns for our clients (beneficiaries)).
Furthermore, if a proposal has several interchangeable options, we will make our decision byprioritizing the option that would contribute most to sustainable growth.

2.

In exercising voting rights, we will encourage investee companies to efficiently utilize theshareholder’s equity regarding sustainable growth and to actively develop appropriate
corporate governance systems, such as ensuring separation of management supervisory
functions and independence of outside officers (directors or corporate auditors), among others.
In addition, we will encourage the investee companies to conduct corporate activities
appropriately by fully considering the environment and society under soundly developed
corporate governance systems.

3.

If any act that disregards the interests of shareholders, controversies or anti-social behavior by
an investee company or its management occurs, or its corporate value is damaged due toproblems such as poor medium to long term performance, we will consider such act as a serious
issue in the investee company’s corporate governance, and we will exercise voting rights in a
way that would improve the investee company’s corporate governance. We require investee
companies that have been involved in misconducts to provide a full explanation of recurrence
prevention measures, progress of improvement measures, and efforts towards improvement of
their corporate governance, and we will arrive at a decision on the exercise of voting rights
based on the explanations.
2III. Management of Conflicts of Interest in the Exercise of Voting Rights
1.

With the view of prioritizing the interests of clients (beneficiaries), we strictly manage conflictsof interest that could arise in connection with our exercise of voting rights in accordance with
the Conflict of Interest Management Rules, the Investment Operation Rules, and other relevantinternal rules.

Since conflict-of-interest management systems must be independent inparticular when exercising voting rights, we have established the “Stewardship Activity
Advisory Committee” (the “Advisory Committee”) which consisting of the majority of outside
experts, and we will strive to exercise voting rights with high transparency by respecting theAdvisory Committee’s recommendations to the maximum extent.
2.

In order to enhance the visibility of appropriateness of our exercise of voting rights, we will
improve the disclosure of information regarding our exercise of voting rights by publishing
our guideline for the exercise of voting rights that contains clearly defined criteria to guidedecision making.

3.

All proposals concerning our parent company, Sumitomo Mitsui Trust Holdings, Inc., as wellas the company’s affiliated shares, board membership proposals which involve a person withclose ties to our parent or our company (e.g. current board members or officers who have held
an important position) shall be dealt with appropriately for reasons of conflict of interest.
Therefore, we will exercise voting rights based on the proposal made by a proxy advisory
company in line with our guideline and consultation with the Advisory Committee.

IV. Structure for the Exercise of Voting Rights
1.

At SMTAM, the Executive Officer in charge of the Stewardship Development Department(hereinafter, “the Officer”) exclusively holds all authority relating to our exercise of voting
rights, independent from the authority to execute other business activities.

In addition, inorder for the Officer to appropriately exercise voting rights, we have established theSustainability Committee that deliberates on our exercise of voting rights, and we haveestablished the Advisory Committee as an advisory body for the Officer.

2.

The Sustainability Committee is a committee to deliberate on our exercise of voting rights,
engagements, ESG-related activities and various other activities under Japan’s Stewardship
Code. In relation to our exercise of voting rights, the committee formulates original plans forthe establishment, revision, or abolition of the guidelines for exercise of voting rights and3

original plans to individually exercise voting rights for a proposal not stipulated in theguidelines. The committee consists of the Chairperson(eligible for making decisions) who is
Officer in charge of Stewardship Development Department, and General Manager of
Stewardship Development Department, Officer in charge of Business Planning Department,
General Manager of Business Planning Department, Officers in charge of Market Front
Departments, General Managers of Market Front Departments, Officer in charge of Investment
Risk Management Department, General Manager of Investment Risk Management
Department, Officer in charge of Compliance Department, (and General Manager of ProductDevelopment and Promotion Department also joins when deliberating ESG product agenda).

3.

The Advisory Committee is a body established to make recommendations for various activities
under Japan’s Stewardship Code to the Officer. Regarding our exercise of voting rights, thecommittee will make recommendations for the establishment, revision, or abolition of theguidelines for the exercise of voting rights, decisions concerning whether to support a proposal
not stipulated in these guidelines, appropriateness of interpretation of these guidelines for anindividual proposal, and verification and improvement of the decision-making process on theexercise of voting rights on a proposal in connection with which a conflict of interest may
occur. The committee consists of outside advisory members (outside experts) and officers
appointed by the board of directors, General Manager of the Compliance Department, and its
secretariat is the Stewardship Development Department.

4.

The Officer will make decisions on various matters taking full account of the recommendationsof the Advisory Committee. If the officer receives recommendations from the Advisory
Committee regarding improvement of its exercise of voting rights, the Officer will promptly
take measures necessary for the correction or improvement, giving due respect to therecommendation.

5.

Our exercise of voting rights will be performed as follows:(1)

the guidelines for exercise of voting rights shall be established, revised, or abolishedwith the approval of the Officer after deliberating at the Sustainability Committee andconsultation to the Advisory Committee.

(2)

a decision to exercise the voting regarding a proposal that is stipulated in our guideline
shall be made with the approval of the General Manager of the Stewardship
Development Department.

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(3)

a decision to exercise the voting rights regarding a proposal that is not stipulated inour guideline or that requires individual interpretation shall be made with the approvalof the Officer after individual deliberation at the Sustainability Committee and after
consultation to the Advisory Committee.

(4)

the result of exercising the voting rights shall be reported to the Sustainability
Committee and the Officer.
Sustainability Committee(Former: Stewardship Meeting)

Chairperson：
Exective officer in charge of Stewardship
スチュワードシップ
Development Department（Approval※1）

Deliberation

Recommendation

Stewardship Activity
Advisory Committee※2

ReportStewardship Development
Department※1 Making decisions based onrecommendation from
Stewardship Activity Advisory
Committee(4)
Results of exercise of voting rights

Proposal for individual exercise of voting rights（3）
Exercise voting for casenot stipulated in guideline

Establishment or revison of guideline

Draft of guideline（1）

Consultation※2 Committee members
・External experts（the majority of members）
・Officer appointed by the boardof directors（2） Exercise of voting rights based on guideline
Proposal for
individual exercise
of voting rights

5

General Manager of
Stewardship Development
Department （Approval）

Ⅴ. Guidelines for Exercise of Voting Rights
When exercising voting rights for an individual proposal regarding Japanese stocks, decisions concerningwhether to support a proposal are made, in principle, based on the criteria set forth below.
However, we may make decisions that differs from our guideline in the situation when we determine it
contributes to the improved corporate value or growing shareholders’ interests, considering the status of
the investee company or our engagements with them.

[Criteria used in this Guideline](1) Business Performance (ROE) Criterion
ROE ranks within the top 75th percentile among the TOPIX component stocks(2) Dividend Criterion
Dividend payout ratio is equal to or exceeds 30%(3) Share price criterion
Stock price performance in the fiscal year ranks within the top 75th percentile among the TOPIX
component stocks(4) Cash-Rich Criterion
The ratio of net cash (cash and deposits + short-term securities - borrowings, etc.) to the total assets isequal to or exceeds 30%(5) Independence Criterion for Outside Officers, etc.
Any of the following cases are deemed to be in conflict with the independence criterion.
①A person who has not registered nor has plans to register as an independent officer on the stock
exchange;②A person who is from a major shareholding (10.0% of total or more) company;③A person who has remained in office for an extended period (tenure has been 12 years or more)④Notwithstanding the above, any other person whose independence is obviously doubtful.

[Supplementary Provisions for the Independence Criterion]
・ A person who has met the independence criteria but has not registered as an independent
officer may still be approved upon a reasonable explanation through engagement.
・ The cooling-off period (the period after which independence from major shareholding
company is to be confirmed) is set at three years after retirement.
・ If the relevant company is under restructuring, we will determine whether to apply the6independence criterion for outside officers according to the circumstances of each case, inorder to prioritize the restructuring of the management.
・ Mutual appointments of outside officers are deemed questionable from the viewpoint of
independence. In this instance, a clear and reasonable explanation will be required(6) Controversy Criterion
In principle, the following acts are deemed controversies whereby the relevant company has been
judged to have been involved as an organization:
・Violation of antitrust laws and/or laws and regulations prohibiting bribery, corruption, etc.
・Inappropriate accounting practices and delay in the release of settling of accounts.
・Cases where fraudulent inspections and falsification of data, among others, have materially
impacted the relevant company’s management and operations
・Cases where socially unacceptable actions have resulted in the loss of social credibility of therelevant company
・Cases where significant governance failure is identified.
・Other acts which may have a profound impact on society or the environment7

1. Board of Directors, its Composition, and Appointment of Directors[Approach to Proposals]
We believe that the Board of Directors, as an executive body that governs corporate management, should
comprise members with sufficient competence to make prompt and appropriate management decisions
and should dedicate itself to adequately performing the management supervisory function by separating
the executive functions and the supervisory functions.
It is our belief that the Board of Directors should be structured in such a way that appropriate knowledge,
experience, and abilities are provided as a whole and that diversity is considered with the aim ofachieving sustainable growth and improving corporate value over the medium to long term. Regarding
board gender diversity, we believe that implementing measures to elect a female director from not only
external but also internal human resource must be encouraged, and two and more will be elected in thelong term. We also believe that outside directors with appropriate qualities should be appointed as aminimum proportion of total. Further, in order for outside directors to execute their roles appropriately,
we do not believe that the number of companies in which they serve concurrently should be increased
excessively.
In addition, we believe that it is desirable to maintain the size of the Board of Directors with an optimal
number of directors enabling the board to make effective and efficient decisions regarding the executionof the relevant company’s management strategies. We believe that the Board of Directors should takeactions to achieve management that is conscious of cost of capital and evaluation in the stock market.
We also believe that it is desirable to disclose the information on policies, concrete measures, targets,on-going process and so on for improvement of evaluation with using concrete metrics such as Price toBook Ratio(PBR), Return on Equity(ROE) or others in a practical manner.

[General Rules of Exercise]（１）In any of the following cases, we will dissent in principle from the proposals:①Composition of the Board of Directors
・In cases where we consider that the total number of directors is inadequate given the size of thecompany and scope of the business・In cases where there is a significant increase or decrease in the number of directors without reasonablereasons
・The number of independent outside directors*1 appointed falls below the minimum proportion of
the total number of directors.
・In the case where the relevant company*2, which has a parent company, does not have a majority of
independent outside directors on its board.
(*1 Outside directors who have registered or are about to register on the stock exchange. The same
applies hereafter in this section.)8

(*2 In the case where the relevant company has a parent company or controlling shareholder according
to the corporate governance report. The same applies hereafter in this section.)・In cases where there is no female director②Appointment of Directors
・In cases where the business performance, capital efficiency, or share price was stagnant over the
medium to long term during his/her tenure
・In cases where a candidate who is considered to have been involved in, or to have had supervisory
responsibilities for a controversy which has impacted on the value of the relevant company.
③Appointment of Outside Directors
・In cases where our independence criterion*3 is not met(*3(5) Independence Criterion for Outside Officers. The same applies hereafter in this section)
・In cases where a candidate's execution of operation is concerned judged from his/her past attendance
status（２）We will make the following decisions on the exercise of voting rights in response to ESG issues:
・Regarding our response to climate change, we are opposed in principle to companies with relatively
high levels of greenhouse gas emissions that fall into any of the following categories and do notprovide a rational explanation for their actions.
① Cases where there has been inadequate disclosure in accordance with the Task Force on
Climate-related Financial Disclosures (TCFD) or equivalent framework.
② When there has been a failure to set medium- and long-term goals in line with the Paris
Agreement or to disclose specific measures to achieve them.
③ When there has been no evidence of progress in reducing greenhouse gas emissions.
・In cases where the companies, which have cross shareholding excessively*⁴, we will dissent fromthe proposals in principle.
In addition, we are also aware of the problem of companies with excessive cross-shareholdings, andwe ask them not to hinder their reduction.
（*⁴ The total value of investment stocks held for purposes other than pure investment and deemedholdings as a percentage of net assets is roughly within the top 10th percentile among the TOPIX
component stocks. Determined based on figures based on securities reports for the previous fiscal
year）
・We will consider objecting to companies with other significant ESG issues when they do not engage
or have not made improvement of the situation despite continued engagement.

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[Decision Criteria for Exercise of Voting Rights]
Proposal Details

General Rules Criteria

Exceptional Criteria

Composition of the①If the total number of directors exceeds

・ If we consider that the total

Board of Directors

20, we will dissent from the proposed

number proposed is adequate

appointment of directors

in light of the trends in the pastbusiness

performance,thescale of current businesses andscope of current operations, aswell as future business plans,visions, etc., we will support
the proposal.
② If there is a significant increase in the・If there is a reasonable reason

number of directors (if the relevant(merger, absorption, etc.),

company has less than 10 directors, anwill support the proposal

weincrease by more than 50%; or if the ・ If the number of directors’
relevant company has 10 or moreincreases occurs because of adirectors, an increase by more than 30%),

change into a company with

we will dissent from the proposed

the Nominating Committee, or

appointment of directors

a company with the Audit andSupervisory Committee,

wewill support the proposal③ We will dissent from in principle theappointment

・For companies listed on markets

ofdirectors

unlessother than the Prime Market

numberofoutsidewith more than one independent

independent directors*1 are appointed

outside director, we will support

and at least one-third of the board is

the proposal

multiplecomprised of outside independent
directors*1 (*1 As stated under the“General Rules of Exercise”)

10④ In case the relevant company, which・If the shareholding ratio of a

has a parent company*2, does not have

major shareholder is 50% or lessa majority of independent outside

and it does not fall under the

directors on its board, we will dissent

category of parent company orfrom the proposed appointment ofcontrolling shareholder, and there

directors

is a concern over the protection of2(* As stated under “General Rules ofgeneral shareholders' interests

Exercise”)

due to substantive control rights,
we will dissent from the proposed
appointment of directors⑤ In cases where there is no female
director, we will dissent from the・Targets are listed companies on
the Prime Market

proposed appointment of directors
Appointment
Directorsof⑥ If the relevant company records

・ If the failure to satisfy theoperating losses for three consecutive

criterion is considered not to haveperiods, we will dissent from thebeen caused

proposed appointment of directors

attributable to the management

who have served as a director for those(such as the occurrence of an

three years or more

unexpected natural disaster etc.)

by any factor

or is considered to have beencaused by recognizing costs ofstructural reforms, etc., we will
support the proposal⑦ If the relevant company does notsatisfythebusiness

・ If the failure to satisfy theperformance

criterion is considered not tocriterion (ROE) for three consecutive

have been caused by any factor

periods, we will dissent from theattributable to the management

proposed appointment of directors(such as the occurrence of an

who have served as a director for those

unexpected

three years or more.

etc.) or is considered to havenaturaldisasterbeen caused by recognizing
costs of structural reforms,
etc., we will support the
proposal・If we consider that the criterion
is highly likely to be met inlight of the trends in the past11

business

performance,businesses

plans

going

forward, etc., we will support
the proposal
・ We

shall

vote

for

the

appointment, if there has been
progressinenhancingshareholder value through ourengagements

or

other

measures⑧ If the relevant company does not

・ If the failure to satisfy thesatisfy the share price criterion for

criterion is considered not tothree consecutive periods, we will

have been caused by any factor

dissent from the proposed appointment

attributable to the managementof directors who have served as a(such as the occurrence of an

director for those three years or more.

unexpectednaturaldisasteretc.), we will support the
proposal⑨ In cases where the companies, which・If a reduction plan to a level thathave cross shareholding excessively*

meets

the

³, we will dissent from the proposed

confirmed through engagement,

appointment of directors who haveetc.,

served as a director for those threeprogressing, we will approve it.

years or more.

・ For the time being, target

andcriteria

thecanreduction(*³As stated under “General Rules ofcompanies

Exercise”)

constituting the TOPIX 500

are

be

is

those

⑩ We will dissent from the proposed
appointment of a director who isconsidered to have been involved in, or
to

have

had

supervisory

responsibilities for controversies⑪ If the total number of corporate
auditors exceeds 8, we will dissent
from the proposed appointment of
directors⑫ Regarding the proposed appointment

12・ If the change of structure

of corporate auditors, if the total

occurs because of a change into a

numberauditorscompany with the Nominating

decreases by two or more, or if theCommittee, or a company withnumber of outside corporate auditors

the

Audit

and

Supervisorydecreases by two or more, we will

Committee,

or

there

are

dissent from the proposed appointment

reasonablereasons,wewillof directors

support the proposalof

corporate⑬ If a proposed disposition of surplus
determined at the board of directors
comes into conflict with the decision
criteria set forth in our guideline 5(Disposition of Surplus and Returning
Profits to Shareholders), we will
dissent

fromtheproposed

reappointment of directors⑭ Regarding the system or design of
takeover defense measures, if therelevant

company

introducesor

renews the takeover defense measures
withoutany

resolution

at

the

shareholders’ meeting, we will dissent
from the proposed appointment of
directors.
Appointment
Outside Directorsof⑮ We will dissent from the proposed
appointment of outside directors who
don’t meet the independence criterion*⁴(*⁴(5) Independence Criterion for Outside
Officers)

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⑯ If an outside director’s attendance rate

・If

an outside director’s

at the Board of Directors meeting,absence at Board of Directors’

Audit Committee,or Audit andmeetings etc. is considered toSupervisory Committee is less thanhave been inevitable, we will

75% of all meetings held, or cannot be

support the proposed

confirmed, we will dissent from theappointment of the outside

proposed appointment of the outside

director

director

2. Appointment of Corporate Auditor[Approach to Proposals]
We believe that the Board of Corporate Auditors should be structured and operated in order that it
adequately functions as a body monitoring and supervising directors’ execution of their duties.
We believe that outside corporate auditors should be independent from the company, in order to truly
enhance the management supervisory function. We will encourage the outside corporate auditors toadequately perform their functions by attending a certain number or more of Board of Directors’ meetings
and Board of Corporate Auditors’ meetings.
In addition, we believe that it is desirable to maintain the size of the Board of Corporate Auditors with
an optimal number of corporate auditors enabling the board to make effective and efficient decisions.

[General Rules of Exercise]
In any of the following cases, we will dissent from proposals in principle.
① Composition of the Board of Corporate Auditors
・In cases where we consider that the number of corporate auditors is inadequate in light of the scaleof the company and scope of its function (we will dissent from the proposed appointment of
directors).
・In cases where there is a significant decrease in the number of corporate auditors without reasonablereasons (we will dissent from the proposed appointment of directors).
② Appointment of Corporate Auditors
・In cases where a candidate who is considered to have been involved in, or to have had supervisory
responsibilities for a controversy which has impacted on the value of the relevant company.
③ Appointment of Outside Corporate Auditors
・In cases where our independence criterion*2 is not met.

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(*2 (5) Independence Criterion for Outside Officers)
・In cases where a candidate's execution of operation is concerned judged from his/her past attendance
status[Decision Criteria for Exercise of Voting Rights]
Proposal Details
Appointment

General Rules Criteria

Exceptional Criteriaof① We will dissent from the proposed

Corporate Auditors

appointment of a corporate auditor who isconsidered to have been involved in,
and/or

to

have

had

supervisory

responsibility over controversies
Appointmentof② We will dissent from the proposed

Outside Corporate

appointment of outside corporate auditors

Auditors

who

don’t

meet

the

independence

criterion*. (*2(5) Independence Criterion
for Outside Officers③ If an outside corporate auditor’s total

If an outside corporate auditor’s

attendance rate at Board of Directors’

absence at Board of Directors’

meetings or Board of Corporate Auditors’

meetings or Board of Corporate

meetings is less than 75% of all meetings

Auditors’meetings

held, or cannot be confirmed, we willconsideredtodissent from the proposed appointment ofinevitable, we will support thethe outside corporate auditor

proposed appointment of the

have

is
been

outside corporate auditor

3.Compensation for Officers, Bonus for Officers, Retirement benefits[Approach to Proposals]
We believe that compensation for officers should be set at a level or have contents that are in line withthe company’s business performance and the goal of maximum enhancement of shareholder value, andshould be appropriate in terms of effectiveness as an incentive, among others.

15[General Rules of Exercise]
In any of the following cases, we will dissent from the proposals in principle.
①Compensation and Bonus for Officers
・ In cases where the amount thereof is considered obviously inadequate in light of the relevant
company’s business performance or social norms
・In cases where the relevant company whose business performance, capital efficiency, or share pricehas been stagnant over the medium to long term period pays a bonus to its officers or increases theamount of compensation for officers without reasonable reasons
・In cases where the relevant company pays a bonus to its outside directors, directors of the Audit andSupervisory Committee ,corporate auditors, and outside corporate auditors
・In cases where the relevant company involved in controversies pays a bonus to its officers or increases
the amount of compensation for officers without reasonable reasons②Retirement benefits
・Retirement benefits are characterized by the strong nature of seniority and do not necessarily reflect
the goals of the medium to long term corporate or shareholder value enhancement. Therefore, in
principle we will dissent from any proposals on retirement benefits. This also will be applied to golden
handshakes and condolence monies

Decision Criteria for Exercise of Voting Rights
Proposal Details

General Rules Criteria

Exceptional Criteriafor① If the relevant company records operating

・ If there is a clear cause

Officers/Bonus forlosses for three consecutive periods, we

including an increase in the

Officers

will dissent from the proposed increase in

number of outside directors,

the compensation for officers or payment

we will support the proposal

Compensationof bonuses② If the relevant company does not satisfy
the business performance criterion (ROE)
for three consecutive periods, we will
dissent from the proposed increase in thecompensation for officers or payment ofbonuses
Proposal Details

General Rules Criteria

Exceptional Criteria③ If the relevant company does not satisfy
the

share

price

criterion

for

three

consecutive periods, we will dissent fromthe proposed increase in the compensationfor officers or payment of bonuses

16

④ If outside directors, directors who serve as
the Audit and Supervisory Committee
members, corporate auditors or outside
corporate auditors are included amongrecipients of bonuses, we will dissent fromthe proposal⑤ If an officer who is considered to havebeen involved, or to have supervisory
responsibility in controversies, is included,
we will dissent from the proposed increasein the compensation for officers or
payment of bonuses
Retirement benefits⑥ We will oppose proposals on the paymentof retirement bonuses and benefits

4. Performance-based payments, Stock Compensation, Stock Options[Approach to Proposals]
We believe that compensation for officers should be set at a level or have contents that are in line withthe company’s business performance and distribution of profits to shareholders, and that is appropriate
in terms of effectiveness as an incentive, among others. We will require that performance-based
payment and stock-based compensation to be appropriate as an incentive for improvement of themedium to long term shareholder value.
[General Rules of Exercise]
In any of the following cases, we will dissent from proposals in principle.
・In cases where outside directors, directors who serve as audit and supervisory committee members,
corporate auditors, or outside corporate auditors are included in the grantees of the plans
・In cases where the plans are not considered to be devised as related to enhancing the medium to longterm corporate value
・In cases where the proposed plan results in a significant dilution of the shareholder value

17

Decision Criteria for Exercise of Voting Rights
Proposal Details

General Rules Criteria

Exceptional Criteria

Performance-based① If outside directors, directors who serve as

payment(Cash,

audit and supervisory committee members,

stock

stock

corporate auditors, or outside corporate

andoptions-based

auditors or persons who are not consideredpayment)

directly related to the improvement ofbusiness performance are included in the
grantees of the plans, we will dissent fromthe proposal② If the sale of shares is permitted less than
3years after distribution, or before theofficer’s retirement, we will dissent fromthe proposal③ If the proposed plan results in the
cumulative dilution percentage of 5% or
more, or an annual dilution of 1% or more ,we will dissent from the proposal

Proposal Details

General Rules Criteria

Exceptional Criteria

Stock Options④ If outside directors, directors who serve as
audit and supervisory committee members,
corporate

auditors,

outsidecorporate

auditors, or persons who are not considereddirectly related to the improvement ofbusiness performance are included in the
grantees of rights, we will dissent from the
proposal⑤ If the proposed plan results in the
cumulative dilution percentage of 5% or
more, we will dissent from the proposal⑥ If the exercise price is less than the market
price, we will dissent from the proposal⑦ If the exercise price is scheduled to be
reduced, we will dissent from the proposal
Stock and Stock⑧ If outside directors, directors who serve as

18

Regardingthegrantingofoption-based
payment

(Not

based

on

performance)

audit and supervisory committee members,

positions to outside directors, if

corporate

theauditors,

outsidecorporatenecessityisconfirmed

auditors, or persons who are not consideredthrough engagement, etc., and if

directly related to the improvement of

there are no problems withbusiness performance are included in thesystem design and governance,

grantees, we will dissent from the proposal

we will support the proposal.

⑨ If the proposed plan results in the
cumulative dilution percentage of 5% or
more, or an annual dilution of 1% or more,
we will dissent from the proposal⑩ If the sale of shares or the exercise of rights
is permitted less than 3 years after
distribution,or

beforetheofficer’s

retirement, we will dissent from the
proposal

5.Disposition of Surplus, Returning Profits to Shareholders[Approach to Proposals]
Regarding stock dividends, we believe that an appropriate distribution of profits should be made inaccordance with the stage of growth of the relevant company, taking into account the balance between
returning profits to shareholders, retaining internal reserves and investment in growth based on thecompany’s financial condition and business plan.
[General Rules of Exercise]
In any of the following cases, we will dissent from proposals in principle.
If disposition of surplus is resolved at a meeting of the board of directors, we will manifest our intention
by supporting or dissenting from the proposed appointment of directors
・In cases where, as a result of considering the relevant company’s capital efficiency and financial
condition, the dividend payout rate is not adequate and there is no reasonable reasons
・In cases where we consider that a dividend policy has the risk of damaging shareholder value fromthe perspective of the medium to long term interests of shareholders
・In cases where the appropriateness of the level of shareholder returns cannot be judged.
Even if the following exercise criteria is met, if we cannot receive a rational explanation of the capital
policy and shareholder return policy, we may dissent from the proposal,

19Other than dividends, we will consider other means of shareholder returns including share buybacks by
way of engagements

Decision Criteria for Exercise of Voting Rights
Proposal Details
Disposition
Surplusof

General Rules Criteria

Exceptional Criteria① If the relevant company with PBR below

・ If the failure to satisfy the

1X and ROE ranking in the bottom 50

criterion is considered not topercentile among the TOPIX component

have been caused by any factor

stocks for the relevant period and does not

attributable to the management

satisfy the dividend criterion, we will(such as the occurrence of andissent from the proposal

unexpected natural disaster etc.)② If the relevant company satisfies the cash-

or is considered to have beenrich criterion and does not satisfy thecaused by recognizing costs ofdividend criterion, we will dissent fromstructural reforms, etc., we will

the proposal

support the proposal③ If the relevant company satisfies the cash-

・ If the relevant accounting

rich criterion, and that with PBR below 1X

period is less than 12 months

and ROE ranking in the bottom 50

due to a change of the fiscal

percentile among the TOPIX component

period or only a short period has

stocks for the relevant period and does notelapsed after the listing, we will

satisfy the dividend payout ratio is lesssupport the proposal

than 50%, we will dissent from the・ If we can receive a rational

proposal

explanation how to use the cashby way of engagements, we will
support the proposal
・ If the relevant company’s
financesareconsideredextremely

fragile,wewill

support the proposal which will
not pay dividends④ If the relevant company records operating

If

the

relevant

company’s

losses for three consecutive periods, we

finances are considered robust,

will dissent from the proposed dividend

we will support the proposed

payments

dividend payments

20

6.Anti-takeover Measures[Approach to Proposals]
We believe that takeover defense measures must not be intended to protect the Board of Directors but
should contribute to the improvement over the medium to long term shareholder value.
[General Rules of Exercise]
We will dissent from the proposed takeover defense measures in principle.
However, with respect to takeover defense measures to be introduced in an emergency, a decision on theexercise of such measures will be made in conjunction with the decision on whether or not to invoke
takeover defense measures, based on a substantial judgment of shareholder value, including future
prospects
If the relevant company introduces or renews the takeover defense measures without any resolution at
the shareholders’ meeting, we will manifest our intention by supporting of dissenting from the proposal
for appointments of the directors.

7.Acquisition, Merger, Capital Increase by Third-party Allotment[Approach to Proposals]
In raising new capital, affecting other changes to corporate financial structure, or readjusting scale andlines of business through a merger, transfer of business, acceptance of transfer of business, company split,
etc., we believe that they must not damage the interests of shareholders or the future business developmentof the company.
[General Rules of Exercise]
In any of the following cases, we will dissent in principle from the proposals.
① Proposals on financing the relevant company by issuing shares・Regarding a proposal for issuance of shares, in cases where we do not believe that the proposal isbased on reasonable reasons for capital policies
・In cases where a proposal, including a proposal for issuance of new stocks through third-party
allotment, is considered to cause a significant dilution② Proposals on a merger, transfer of business, acceptance of transfer of business, company split, etc.
・In cases where the necessity of the relevant corporate actions is not fully explained・Regarding consideration or exchange rates in relation to the relevant corporate actions, in cases
where measures to secure fairness, including calculation basis through an external neutral appraisalorganization are not indicated ,or measures to avoid conflicts of interest (if any) are not indicated,21

or we consider that the proposal is not based on a reasonable reason
・In cases where it is clearly judged that the shareholders will be adversely affected; for example
shareholders’ interests are damaged due to deterioration of the profit structure

8.Acquisition of Treasury Shares[Approach to Proposals]
We consider that acquisition of treasury shares is an effective means to enhance the corporate value andshareholder value.
[General Rules of Exercise]
In any of the following cases, we will dissent in principle from the proposals.
・In cases where we consider that the proposed acquisition of treasury shares has no reasonable reason
and the scale of the proposed transaction is not appropriate in light of the relevant company’s asset sizeand business plan, or that the proposed acquisition of treasury shares would otherwise damage theshareholder value

9. Amendment to Articles of Incorporation, Other Proposals[Approach to Proposals]
We believe that proposals for amendments to articles of incorporation or other policies must contributeto improving the medium to long term shareholder value and profits for clients (beneficiaries), and thatthe relevant company must fully perform its accountability obligation.
[General Rules of Exercise]
In principle, if any of the following is applicable, this is contradicted.
①

Amendment to Articles of Incorporation
Judgment is made in accordance with the following specific criteria.

②

Contribution of Treasury Shares to an Incorporated Foundation
・In cases where we don’t consider that the purpose of an incorporated foundation would contributeto the improvement of the company’s corporate value
・In cases where there are not reasonable reasons why funding for an incorporated foundation’s
operations should be through stock dividends rather than donations
・In cases where the proposed contribution will result in a significant dilution
・In cases where there is a risk that the voting rights attached to the shares are not appropriately
exercised22

[Decision Criteria for Exercise of Voting Rights
Proposal Details

General Rules Criteria

Exceptional Criteria

Amendment

to① If the proposal intends to significantly

・ If the number of directors’

Articlesofincrease the fixed number of directors (ifincreases occurs because of athe relevant company has less than 10change into a company with thedirectors, an increase by more than 50%;

Nominating Committee, or a

or if the relevant company has 10 or morecompany with the Audit anddirectors, an increase by more than 30%),

Supervisory Committee

Incorporation

we will dissent from the proposal② If the proposal intends to add arequirement to dismiss directors, we will
dissent from the proposal;③ If the authority to adopt a resolution for
distribution of surplus is granted to theBoard of Directors, and resolutions
thereof by the shareholders’ meeting are
excluded, we will dissent from the
proposal;

Proposal Details

General Rules Criteria

Exceptional Criteria④ If the relevant company fails to meet thecriteria

for

DispositionofSurplus,Returning Profits to Shareholders and theBoard of Directors possesses an authority
to adopt a resolution for distribution of
surplus, we will dissent in principle fromthe proposals;
to・ If the proposal is based onincrease the total number of authorized

capital policies such as businessshares, if the number of outstanding sharesplans, or is based on reasonable

is less than 50% of the authorized sharesreasonsor the increase ratio of the total number ofmergers, we will support theauthorized shares is equal to of more thanproposal

50%, we will dissent from the proposals

・If the proposal is to strengthen⑤ Regardinga

proposalintending

the

such

financialasbusiness

base

under

business reconstruction, etc., wewill support the proposal

23

・If the proposal is accompanied
by introducing anti-takeovermeasures that meet the criteria,
we will support the proposal⑥ Regarding a proposal for staggered board,
flexible date of right allotment, or
reduction in the fixed number of directors,
with the view of defense against atakeover, we will dissent from the
proposals⑦ Regarding an Advisers System that is to be
newly established, we will dissent fromthe proposal⑧ Regardinganappointmentofanaccounting auditor, if its independence isdoubtful, we will dissent from the
proposal⑨ In cases where terms of directors areshortened, we will support the proposal
Contributionof⑩ If the proposal results in the dilution of 1%

Treasury Shares toor more, we will dissent from the proposal

a Foundation⑪ If the voting rights attached to the sharesare not non-exercise, we will dissent fromthe proposal

10. Shareholder Proposals[General Rules of Exercise]
We will make our decision on the shareholder’s proposal in the same manner as with the relevant
company’s proposal, from the perspective of maximizing the medium to long term shareholder value.
However, in any of the following cases, we will dissent in principle from the proposals:
・It is not in line with the company’s management policy and measures.
・It is intended to resolve a specific social or political issue.
・The reasons for the proposal are considered unreasonable.
・It seeks to change the articles of incorporation for specific business executions.

24Regarding shareholder proposals that seek to address climate change, decisions will be made inaccordance with the criteria described in “1. Composition of the Board of Directors, Appointment of
Directors” of these Guidelines.

25