February 12, 20202019 Activity Report Summary(October 2018 - September 2019)1.

Management Philosophy“We help institutional investors conduct sound and appropriate stewardship activities,
especially in collective shareholder engagements in which multiple institutional investors
work together in an aim to hold constructive dialogues with listed companies in Japan.”

2.

Organization, Operation and Major Activities
The Institutional Investors Collective Engagement Forum (hereinafter referred to as “IICEF”)
will promote/organize the Institutional Investors Collective Engagement Program (hereinafterreferred to as the “Program”). In this Program, IICEF serves as the coordinator/secretariat(hereinafter referred to as “Secretariat”). The participating institutional investors (hereinafterreferred to as the “Participating Investors”) will discuss key issues of target companies andcome up with common engagement agendas which reinforce ongoing constructive dialogues.
For each agenda, the Secretariat sets up collective engagement meetings with target
companies and facilitate the meetings (i.e. act as moderator and summarize the arguments),
so that the dialogue between the companies and the Participating Investors is constructive.
The Program is based on an individual agreement between IICEF and each Participating
Investor, and Participating Investors are not in a mutual contractual relationship. Accordingly,
there is no “agreement of joint holding and the like.” In addition, a conduct guideline iscovenanted based on which no “act of making important suggestion” is allowed in collectiveengagement meetings. The Program aims to contribute to an increase in long-term corporate
value and sustainable growth of companies, not to pursue short-term shareholder returns.

3.

History and Achievements of Activities(1) Operation of the Institutional Investors Collective Engagement Program(i)

Operation of IICEF, and Participating Investors

Since its establishment on October 2, 2017, based on the revision of Japan’s Stewardship
Code (Guidance 4-4) *, IICEF initiated for the first time in Japan and has held collectiveengagement meetings between multiple investors and companies.
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As of September 30, 2019, the five institutional investors which conduct mainly passive
investment are participating, namely Pension Fund Association, Sumitomo Mitsui DS AssetManagement Company, Limited (formed on April 1, 2019 through merger betweenSumitomo Mitsui Asset Management Company, Limited and Daiwa SB Investments Ltd.),
Sumitomo Mitsui Trust Asset Management Co., Ltd. (part of Sumitomo Mitsui Trust Bank,
Limited was split up and integrated into this company on October 1, 2018), Mitsubishi UFJ
Trust and Banking Corporation, and the Resona Bank, Limited (the asset management
operation was consolidated to Resona Asset Management on January 1, 2020).
(ii) Program Operation Meetings
We held 12 operation meetings in total as a place for discussion by the Participating
Investors, where we discussed methods of operating the Program, examined themes, setagendas, selected target companies and discussed methods of collective engagement
meetings. We also reported the status of matters such as presentation in seminars forexternal parties and individual meetings with various relevant organizations and held study
sessions with experts.
(iii) Setting Agendas and Sending Letters
We examined, from the perspective of superlong-term buy-and-hold investors, requests
which test fundamental awareness and concerns of the management team, are highly
agreeable for companies and in addition, are easier to gain the sympathy and support ofpolicymaking authorities and market participants, rather than requests simply asking
companies for superficial improvements, among themes such as governance, ESG andcapital efficiency which are issues commonly faced by Japanese companies as a whole, andset them as agendas. When examining agendas, we organized logical views based on
lectures by professionals knowledgeable about the themes, provided information and data,exchanged opinions, etc.
And then, we sent letters explaining the underlying views of investors and stating concrete
requests to each target company, specifying president, outside director or others asaddressee.
When sending letters to president, etc., we sent an e-mail attaching the letter in the PDF
format or mailed the letter to a person in charge or other contact point of IR in advance toensure that the information was shared within the target company.
In addition, there were some themes which were in the preparation phase for summarizing
common views at the moment because of various arguments having been presented due
partly to changes in commercial custom and legal systems. On these themes, as part of our2
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collective hearing activities, we presented explanatory material summarizing the current
views of investors and sent letters to conduct hearing of the way of thinking and the current
state of companies.
As a result of these activities, achievements have been gradually built upon for each agenda.
(Figure) Overview of and achievements for each agendaA) Materiality Identification and Disclosure Relating to Sustainability of Business Model
PurposeTo promote awareness and enhance activities and disclosure of “ESG
materiality” expected from investors

Letter timing October 2019 onward
TargetCompanies actively working on ESG-related activities but not articulatecompany

with information disclosure required by investors.

Achievement Since the start of activities in 2018, approximately 18% of Japanesecompanies have identified and disclosed the materiality from theperspective of investors as required by this agenda. It was indicated bydata that these companies tended to be relatively highly evaluated by
the stock market.
B) Scandal Handling
PurposeTo support to improve information disclosure and to reform corporate
culture and governance by their outside directors at companies whichhave caused corporate scandalsLetter timing November 2018 and February 2019
TargetCompanies of concern for issues in their corporate governance and culturecompany
Achievement Explanatory sessions by the relevant companies were provided forParticipating Investors.
Meetings were held in which the progress of activities and approaches tobe taken by the outside directors were shared, concerns of investors
were conveyed and support for outside directors’ activities was provided.
C) Many “Against” Votes
PurposeTo analyze factors of management’s proposals electing directors for top
management for which many “against” votes were cast at general
meetings of shareholders and recognize awareness as governance issues

Letter timing October 2018 and 2020 January onward [subsequent events]3
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Target2018: 30 companies at which “against” votes in a certain number orcompany

more were cast against management’s proposals electing directors for
top management in their general meetings of shareholders in May andJune 2018 (excluding special cases)
2020: 16 companies at which “against” votes in a certain number ormore were cast against management’s proposals electing directors for
top management people in their general meetings of shareholders in
May and June 2019 (excluding special cases)

Achievement 2018: 29 companies provided a response with the analysis result andcountermeasures. Investors’ comments on the responses were provided
as feedback.
Although there were some companies which lacked seriousness in theiractivities toward improving capital efficiency while being aware of thereasons for “against” votes such as low ROE, there were many cases inwhich companies were working positively on activities to fully address
the issues causing “against” votes by, for example, proactively visiting
and providing explanations to investors.
Approximately 60% of the companies saw a decline in the rate of“against” votes for management’s proposals electing directors for topmanagement in their general meetings in 2019.
2019: Started to receive responses concerning the analysis results andcountermeasures from some companies [subsequent events]D) Takeover Defense Measures (Disclosure on necessities)
PurposeTo recognize management issues through examination of the necessity tointroduce and/or continue takeover defense measures

Letter timing October 2018 and February 2020 [subsequent events]
Target2018: 59 companies with market capitalization above certain amount,company

whose takeover defense measures were to expire in 20192020: 30 companies with market capitalization above certain amount,
whose takeover defense measures were to expire in 2020 [subsequentevents]

Achievement 2018: 37 companies out of 59 companies terminate their takeover
defense measures. Among 22 companies which submitted a proposal forcontinuing takeover defense measures to their general meetings, there
were no companies which provided sufficiently satisfactory reasons for4
www.iicef.jpinvestors. However, establishment of the governance framework showed
progress, such as increasing the number of outside directors andenhancing the board independence.
2020: Sent letters to 30 companies [subsequent events]
E) Collective Hearing Concerning Issues Related to Governance of Parent and Subsidiary
Listed Companies
PurposeTo promote measures and designs for governance to reflect intention ofminority shareholders

Hearing

January and October 2019 [subsequent events]

timingTargetParent company (four companies) and subsidiary (five companies) undercompany

parent-subsidiary listing

Progress

We ascertained the actual situations and activities of parent andsubsidiary listed companies. Examination is underway to form commonviews.

F) Collective Hearing Concerning Policy for Cross-Shareholding
PurposeTo reform the mindset of companies against Cross-Shareholding and thestable shareholder policy

Hearing

February 2019

timingTargetMultiple key companies in each industry

company
Progress

We recognized the actual circumstances of Cross-Shareholding. We
understood efforts toward reduction made by companies, but at thesame time, confirmed that there were companies declining request for
dissolving cross-holding shares held in contradiction to the Corporate
Governance Code. We decided to design future dialogue referencing thefact.

(iv) Meetings and Receipt of Responses
We made coordination with IR contact points at the target companies to which we sentletters through such means as e-mail and telephone and held Secretariat pre-meetings.
Then, we held meetings under the facilitation by the Secretariat, attended by theParticipating Investors to engage in direct dialogue with directors in charge, outside
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directors and department heads in charge at those companies.
For some agendas where we did not ask for meetings but instead asked for responses, theSecretariat received explanations through interviews or explanatory documents through email or mail and reported and shared the responses to the Participating Investors.
At collective hearings regarding the parent-subsidiary listings, with the cooperation of ICJ,
Inc., we invited persons in charge at parent and subsidiary listed companies providing theiropinions and had the hearings with attended multiple companies.
(v) Activities for Announcement, Seminars, etc.
The overview of the letters were publicly disclosed on IICEF’s website in order to broadly
disseminate the issues addressed in the agendas to Japanese companies as a whole, which
are common among them. We also provided notices to market participants, relevantorganizations, stock transfer agents, IR supporting companies, annual report production
companies, etc. via e-mail.
Alongside with the above, we gave lectures at external seminars held by IR supporting
companies, securities companies and various other organizations to introduce IICEF andexplain the overview of the agendas.
As a result of these activities, we successfully communicated the contents of the agendas
to a broad range of listed companies, also including small and medium-sized companies
which have less opportunities of dialogue with investors due partly to a lack of coverage bysecurities analysts.
(Figure) Status of implementation of specific activities for announcement, seminar, etc.
(v)-1 Distribution of e-mailA) Many “Against” Votes
Website update

October 1, 2018

(Japanesesection)
E-mail notice

20 destinations

sentB) Takeover Defense Measures
Website update

October 10, 2018

(Japanesesection)
E-mail notice

18 destinations
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www.iicef.jpsentC) Policy Concerning Cross-Holding Shares (Collective Hearing)
Website update

March 7, 2019

(Japanesesection)D) Issues Related to Governance of Parent and Subsidiary Listing (Collective Hearing)
Website update

June 27, 2019

(Japanesesection)E) Status of Responses Concerning Materiality by Japanese Companies as of 2018 and Their
Future Identification and Disclosure [Subsequent Events]
Website update

October 16, 2019

(Japanesesection)(v)-2 Lectures at External Seminars
External seminar

10 times; six times since October 2019 [subsequent events](2) Visits to IR Supporting Companies to Provide Explanations
We visited IR supporting companies to report IICEF’s activities, provide detailed explanations
on the agendas and exchange opinions with the aim of promoting recognition of the agendasof IICEF broadly among Japanese companies as a whole.
(Figure) Status of visiting IR supporting companies to provide explanations
Visits to provide

8 times

explanations(3) External Affairs (Lobbying Activities)
We interviewed policymaking authorities, central banks, foreign public institutions, pension
funds, institutional investors in and out of Japan, relevant organizations in and out of Japan,ESG research organizations overseas, research institutions, etc. to introduce IICEF, report ouractivities and exchange opinions concerning collective engagement meetings.
In addition, we corresponded to press interviews.
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(Figure) Status of external affairs (lobbying activities)
Visits to

18 times

provideThree times since October 2019 [subsequent events]

explanationsandexchange
opinions
Answering

2 times

interviews

4.

Issues to Be Addressed
Two years have passed since our launch as Japan’s first organization to support collectiveengagement meetings by institutional investors. During the period, we set up six agendas,
conducted collective engagement dialogues with more than 100 companies and worked onactivities to broadly make announcements. On the back of attention from companies,
institutional investors in Japan and overseas, government offices, various relevantorganizations, etc., we have looked for and gradually advanced methods of collectiveengagement meetings unique to Japan. In other words, we act as an organization to conduct
activities aimed at increasing long-term corporate value of Japanese companies as a whole,rather than activities to pursue short-term shareholder returns.
As a result, we made achievements as described in “3. History and Achievements of Activities.”
We are seeing what we can considerably refer to as achievements in agendas started last fiscal
year, and many Japanese companies have come to understand IICEF’s approaches as well asviews and requests of the Participating Investors. We feel confidence about gradual changes
in views of companies.
In addition, IICEF has come to receive certain appreciation for its activities from policymaking
authorities, securities exchanges, public pension funds, etc., and now, non-participating
investors, relevant organizations overseas, etc. are also showing interest in our activities. We
are gradually gaining influence over Japanese companies, and a circle of support andcooperation is expanding.

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However, naturally there is a limit to the number of companies for which collective
engagement meetings can be held, and at the same time, management resources are limited.
Amid such circumstances, the issues lie in how we can increase the influence over the stock
market as a whole, or Japanese companies as a whole. Among other issues, issues still remain
in clarifying the advantages unique to collective engagement meetings which cannot beoffered in non-collective dialogue and establishing methods of collective engagement
meetings in line with the circumstances of Japanese companies and the stock market.
Furthermore, in order to address these issues, we understand we are, as a generalincorporated association, required to establish management foundation capable of generating
sustainable growth.

Contact information:
Institutional Investors Collective Engagement Forum
Directors in charge: Yuki Kimura, Naomi Yamazaki and Ryusuke Ohori
Address: Tokyo Entre Salon, Shinmaki-chou Building Annex 1, 3-2-14, Nihonbashi, Chuo-ku,
Tokyo 103-0027 JAPANE-mail: info@iicef.jp*In Japan’s Stewardship Code, Guidance 4-4 stipulates “Institutional investors should have a clear
policy in advance on how they design dialogue with investee companies in various possible
situations.”

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