INITIATIVES FOR A BUSINESS MANAGEMENTSTRUCTURE THAT PURSUES THE BEST INTERESTS OF
CUSTOMERS (FY2023)
Nikko Asset Management Co., Ltd.
May 31, 2024

CONFIDENTIAL – NOT FOR REDISTRIBUTION

CONTENTS
Introduction
JFSA’s Principles for Customer-Oriented Business Conduct
1. Activities for individual clients1.1. Total AUM of Japan-domiciled publicly offered funds (including ETFs and MRFs)
1.2. Initiatives for cumulative investment including cumulative Nippon Individual
Savings Accounts (NISA)
1.3. Expected Average holding periods of top ten funds for AUM
1.4. AUM and number of asset-building funds (publicly offered equity funds excluding ETFs;
annual or semi-annual annual account settlement)
1.5. Fund Efficiency Initiatives
1.6. Change in distribution pattern for medium- and long-term investment: composition ofJapan-domiciled publicly offered funds
1.7. Risk/return features of Nikko AM’s key funds
1.8. Sharpe ratios of major funds
1.9. Investor returns of major funds (periods since launch)
1.10. Fee transparency
1.11. Response to one-product-many-prices issue for funds linked to the same benchmark
1.12. Easy-to-understand provision of important information to clients
1.13. Provision of suitable services to clients
1.14. Provision of neutral information for investment decisions
1.15. Number of seminars held
1.16. Number of fund awards won【Principle 1, 2】 (Page 4)【Principle 2 & (Note) 】 (Page 6)【Principle 2 & (Note) 】 (Page 7)【Principle 2 & (Note) 】 (Page 7)【Principle 2 & (Note) 】 (Page 8)【Principle 2 & (Note) 】 (Page 9)【Principle 2 & (Note) 】 (Page 10-11)【Principle 2 & (Note) 】 (Page 12)【Principle 2 & (Note) 】 (Page 12)【Principle 4 & Principle 5 (Note 1) (Page 13)【Principle 4】 (Page 13)【Principle 5 & (Note 1) 】 (Page 14)【Principle 5 (Note 1) & Principle 6(Note 3) 】 (Page 14)

2. Activities for corporate clients2.1. Stewardship Activities
2.2. Engagement results
2.3. Voting track record
2.4. ESG initiatives as an Institutional Investor
2

CONTENTS
3. Appropriate management of conflicts of interest【Principle 3 & (Note) 】 (Page 23)

4. ESG Initiatives as a Firm
4.1. Governance4.1.1. Management governance4.1.2. Voting rights governance4.1.3. Fund governance4.1.4. Appropriate frameworks for motivating employees【Principle 7 & (Note) 】 (Page 25)

4.2. Environmental
4.3 Social
In conclusion

3

Introduction(Principles for Customer-Oriented Business Conduct Principle 1 & Principle 2)

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 theirlong-term corporate value and to help society grow sustainably.
Nikko AM is a dedicated maker of a diverse range of funds and investment products intended to deliver various investment methods to a broad
range of investors, from individuals to institutions. As such, we are responsible for helping our clients to build and manage their assets byconsidering how to provide them with investment products they feel they can support, looking into ways of enhancing our ability to manage
those products, and putting our ideas into practice.
This report provides specific examples of our initiatives, as well as voluntary indicators to measure their impact, in the year from April 2023 toMarch 2024 (including the latest information at the time this report was prepared).

 Nikko AM agrees with the JFSA’s publicly released Principles for Customer-Oriented Business Conduct (including revisions). In order to ensure that we put
the best interests of our clients first in our business operations, we have formulated and publicly released our Corporate Missions and Fiduciary & ESG
Principles, which we review periodically. We have also been releasing regular updates on our initiatives since 2017.

4

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 need to put a great deal ofeffort into every aspect of our services, including understandably and simply imparting accurate knowledge of investment management and the
products we offer, proactively delivering timely and appropriate information on market trends from a neutral standpoint to help customers makeinvestment decisions, providing products that are suitable for medium-to 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. Total AUM of Japan-domiciled publicly offered funds (including ETFs and MRFs)
Total AUM of Japan-domiciled publicly offered funds(0.1 billion yen)
Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 Mar 2022 Mar 2023 Mar 2024
98,894 116,382 141,678 147,130 147,030 222,488 216,224
210,710 280,594

Multiple asset investment
100%
80%

Bond investment

8,296

8,656

10,054

11,603

31,25032,39532,74630,812

59,34875,331

16,64333,094Equity investment

15,72814,26913,204

13,88739,646

38,83939,08445,28160%
40%

98,877

104,715

97,293

167,114163,116

158,422

221,425

20%
0%

We consider our investment division as a team ofprofessionals in which fund managers and analysts
forge their own career paths. We also employ anappraisal/compensation structure that emphasizes
medium- and long-term investment performance.
This is supported by a global system we haveintroduced to retain key fund managers.
Out of the total assets in the publicly offered funds
that we manage on behalf of our customers (as ofMarch-end 2024), equity investment funds
accounted for 79%, bond investment funds(including MRFs) accounted for 16%, and multiple
asset investment funds/other funds accounted for
5% of the total.

Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 Mar 2022 Mar 2023 Mar 20245

1.2. Initiatives for cumulative investment including cumulative Nippon Individual Savings Accounts (NISA)（Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
In order to meet cumulative investment needs, in addition to cumulative NISAs, we also promote the use of defined contribution plans, 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 for cumulative investment initiatives by not
only providing products but also creating and offering a variety of support tools.
We have now registered eleven of our funds qualified for the cumulative NISA quota (Tsumitate NISA).
In addition, we emphasise the importance of using cumulative investment as a highly effective way of enhancing investor returns in forums suchas product strategy seminars for distributors.
Registered our funds for eligibility in the cumulative NISA quota
Nikko DC J Growth
Listed Index Fund US Equity (S&P500)
Listed Index Fund World Equity (MSCI ACWI) ex Japan
Listed Index Fund International Developed Countries Equity (MSCI-KOKUSAI)
Listed Index Fund International Emerging Countries Equity (MSCI EMERGING)
Tracers Global Triple Fund（Grown-ups' Balance）
Tracers MSCI All Country Index (World Equity)
Ni-Tsumi Index Wrap Global 10 Indices (Stable Growth Type)
Ni-Tsumi Index Wrap Global 10 Indices (Equal Weight Type)Index Fund Emerging Equity
Index Fund NY Dow 30 (American Equity)(Note) As of April 25th 20246

1.3. Expected Average holding periods of top ten funds for AUM （Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
Expected average
holding period (years)
5.58
4.91
8.07
9.81
4.36
2.00
8.41
6.67
5.26
5.85

Rank Fund name
1 Global Robotics Equity Fund (Semi-annual Settlement Type)
2 Global Robotics Equity Fund (Annual Settlement Type)
3 Global Prospective Fund
4 Global Exponential Innovation Fund
5 Digital Transformation Equity Fund
6 Nikko Index Fund 225
7 Smart Five (Monthly Settlement Type)
8 Nikko LaSalle Global REIT Fund (Monthly Dividend Payment Type)
9 Nikko Triple Fund (Property Bond Equity) Monthly Dividend Payment Type
10 Nikko Index Fund International Stock No Hedge (DC)AUM
Fund investment universe/type(JPY 100M)
5,357 Foreign equity/active
4,508 Foreign equity/active
3,931 Foreign equity/active
3,792 Foreign equity/active
3,095 Foreign equity/active
2,977 Japanese equity/passive
2,908 Balanced
2,705 Global REIT/active
2,696 Balanced
2,176 Foreign equity/passive* Expected average holding period is theoretical calculated by "annual average AUM ÷ annualized redemption amount" (calculation period is fiscal year 2023).
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 March-end,2024.Top 10 AUM funds excluding ETF and MRF.

1.4. AUM and number of asset-building funds (annual or semi-annual annual account settlement)（Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
AUM (JPY Trilion) [left axis]

6.0

Number [right axis]

200

5.0

5.0

4.3

181

4.0

171

3.0

166

159

2.0

165

163

190

3.8
168

180
170

164

161160

1.0
0.0

150

1.5

1.5

2.6

2.7

2.6

4.8

Mar 2016 Mar 2017 Mar 2018 Mar 2019 Mar 2020 Mar 2021 Mar 2022 Mar 2023 Mar 2024

As an asset management company, our paramountmission is to be useful to our customers in theirmedium-to long-term asset building. The asset
management business is one in which firms canonly 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 semiannual annual account settlement). As of March
2024, we have 161 such funds at Nikko AM with a
total AUM of approximately JPY 5.0 trillion.

1407

1.5. Fund Efficiency Initiatives （Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
We believe that it is imperative for asset managers to constantly develop and manage more attractive and effective products for investors. We
strive to achieve this goal through constant efforts to enhance our fund lineups and to expand AUM. However, it is also true that some of ourfunds have small AUMs. Funds with smaller AUMs cost more to manage than other funds and are less likely to realize the investment policies set
out in their investment prospectuses or trust deeds, making it harder to deliver the sustained medium- and long-term investment performancesthat 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 theirtrust periods based on legally stipulated procedures.
We carried out terminations of 27 publicly offered funds in the year from April 2023 to March 2024 and gained the agreement of beneficiaries forthe early termination of one 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.
Publicly offered stock investment funds open type (ex ETFs )Number of small-AUM funds

Number of
funds
140

JPY
100M
300

120

250

100
80

200

60

150

40

100

20
0

Publicly offered stock investment funds open type (ex ETFs )AUM per fund50
2017/3

2018/3

2019/32020/32021/32022/32023/3(Note) Small AUM means AUM under 1 billion Yen.

2024/30

2017/3

2018/3

2019/32020/32021/32022/32023/32024/38

1.6. Change in distribution pattern for medium- and long-term investment: composition of Japan-domiciled publicly offered funds（Principles for Customer-Oriented Business Conduct principle2 & 【Note】）

Ratio of monthly dividend funds
in open-end equity typed
funds (excluding ETF)
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/32023/32024/3

The ratio of publicly offered funds (excluding ETFs) that pay out monthly
dividends is falling and stood at 21% as of March 2024.

91.7. Risk/return features of Nikko AM’s key funds （Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
Procedures for selecting Nikko AM’s key funds
1. Rank Nikko AM’s publicly offered funds (excluding money funds, ETFs and index funds) as of March-end 2024).
2. If there are multiple series funds among the top funds for AUM, use the funds with the largest AUMs.
3. For the relevant period, we selected the 10 funds in the below chart as Nikko AM’s key funds (excluding funds that have lessthan a year to maturity) as of March-end 2024.
Fund name

AUM(JPY100M)
As of 2024 Mar-end

Launch date

Asset Class

Risk/Return Abbreviated name on
profile2 Global Prospective Fund

5,357

3,792

Aug-15 Foreign equity

Global Robotics (Semi-annual)

3 Global Exponential Innovation Fund

3,095

Apr-21 Foreign equity＊Graph not shown because theinvestment period is less than 3 years

4 Digital Transformation Equity Fund

2,696

Jul-20 Foreign equity

Digital Transformation

6 Nikko LaSalle Global REIT Fund (Monthly Dividend Payment Type)

2,705

Mar-04 Global REIT

LaSalle Global REIT Fund (Monthly
Dividend)

2,908

Aug-03 Balanced

Nikko Triple Fund (Monthly Dividend)

8 Global Three Times Triple Fund (Annual Settlement Type)

1,729

Oct-18 Balanced

Global Three Times Triple Fund
(Annual)9 Global Fintech Equity Fund1,482

Dec-16 Foreign equity

Global Fintech

1 Global Robotics Equity Fund (Semi-annual Settlement Type)

5 Smart Five (Monthly Settlement Type)

7

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

10 Nikko DC J Growth

3,931

904

Jun-19 Foreign equity

Jul-13 Balanced

Global Prospective

Smart Five (Monthly Settlement)

Oct-01 Japanese equity DC J Growth101.7. Risk/return features of Nikko AM’s key funds （Principles for Customer-Oriented Business Conduct principle2 & 【Note】
Annualized Return (%)

25
20

Global Robotics (Semi-annual)

MSCI ACWI JPY base

15
10
5

TOPIX Total Return
DC Ｊ Growth

LaSalle Global REIT Fund (Monthly Dividend)
S&P Developed REIT Gross JPY base

JPM EMBI Global Div JPY base
Smart Five (Monthly Settlement)
Nikko Triple Fund (Monthly Dividend)
WGBI ex JP JPY base
MSCI EM JPY base0

Global Three Times Triple Fund (Annual)-5
Global Fintech-10

Digital Transformation

-15
-20

Global Prospective

0

5

10

15

20

25

30

35

40

45

Annualized Risk (%)

11

1.8. Sharpe ratios of major funds (As of March-end 2024)（Principles for Customer-Oriented Business Conduct principle2 & 【Note】）
past 1 year

A
ExcessReturnFund name
1
2
3
4
5
6
7
8
9
10

(Annualized)

Global Robotics Equity Fund (Semi-annual Settlement Type)
Global Prospective Fund
Global Exponential Innovation Fund
Digital Transformation Equity Fund
Smart Five (Monthly Settlement Type)Nikko LaSalle Global REIT Fund (Monthly Dividend Payment Type)Nikko Triple Fund (Property Bond Equity) Monthly Dividend Payment Type
Global Three Times Triple Fund (Annual Settlement Type)
Global Fintech Equity Fund
Nikko DC J Growth

1.9. Investor returns of major funds (periods since launch)
Fund nameB

39.79%
48.79%
44.93%
60.35%
10.50%
23.30%
17.79%
19.81%
62.80%
32.87%

A/B

AStandard
Sharpe Ratio
Deviation

18.69%
45.23%
41.44%
39.21%
5.93%
15.59%
7.55%
18.83%
36.80%
12.02%

2.13
1.08
1.08
1.54
1.77
1.49
2.36
1.05
1.71
2.73

past 3 years

ExcessReturn(Annualized)

19.11%-7.76%-3.48%
4.44%
14.18%
4.48%
2.34%-0.03%
12.49%B

A/B

Standard
Sharpe Ratio
Deviation

20.33%
42.99%
40.80%
5.41%
17.31%
7.74%
21.29%
39.85%
13.67%

0.94
-0.18
-0.09
0.82
0.82
0.58
0.11
-0.00
0.91

（Principles for Customer-Oriented Business Conduct principle2 & 【Note】）

1 Global Robotics Equity Fund (Semi-annual Settlement Type)
2 Global Prospective Fund
3 Global Exponential Innovation Fund
4 Digital Transformation Equity Fund
5 Smart Five (Monthly Settlement Type)
6 Nikko LaSalle Global REIT Fund (Monthly Dividend Payment Type)
7 Nikko Triple Fund (Property Bond Equity) Monthly Dividend Payment Type
8 Global Three Times Triple Fund (Annual Settlement Type)
9 Global Fintech Equity Fund
10 Nikko DC J Growth

Investor Return（Annualized）
15.04%
3.60%-10.61%-6.85%
3.50%
9.49%
1.62%
4.87%
14.41%
11.73%NAV Return（Annualized）
17.57%
7.77%-11.71%-2.72%
3.93%
5.97%
5.19%
6.91%
14.86%
7.41%※Please note that the rate of increase / decrease in NAV is theoretically calculated assuming dividend (before tax) was reinvested.
12

1.10. Fee transparency (Principles for Customer-Oriented Business Conduct Principle 4 & Principle 5 【Note 1】)
Given that we develop funds, we are naturally obligated to provide clients with detailed and easy-to-understand explanations of fees and othersuch costs. At Nikko AM, we provide this information in delivery prospectuses to enable clients to compare our many publicly offered funds. In
some cases, we also include figures such as the amount of fees payable for each JPY 1 million purchase in sales materials for distributors to enable
them to provide more detailed explanations to retail clients.
Furthermore, our investment reports include details of costs per unit and total expense ratios.
In addition to linking expenses and other information to important information sheets prepared and presented by distributors, we started
including total expense ratios in delivery prospectuses in February 2024. We will continue our constant efforts to provide correct information toindividual customers in an easy-to-understand manner.
Fund-specific details of our activities to address Principle 4 can be found on our website.
1.11. Response to one-product-many-prices issue for funds linked to the same benchmark(Principles for Customer-Oriented Business Conduct Principle 4)
We continue to consider which funds should be reviewed in terms of management fee levels in view of the product attributes of each fund andindustry conditions.

13

1.12. Easy-to-understand provision of important information to clients(Principles for Customer-Oriented Business Conduct Principle 5 & 【Note 1】)
As a developer of funds, Nikko AM discloses information on product risks, product characteristics, target market trends, and costs such as fees foreach of its funds in distributor materials and prospectuses. Based on our belief that ongoing follow-up work after making a sale is an important
responsibility of fund developers, we also provide information on matters including trends in target markets and their impact on funds inmaterials such as spot reports, videos and dedicated websites using simple expressions, pictures and charts. We obtain this kind of information
on market trends and product attributes directly from investment managers (including investment advisors) and believe that it is important todisclose negative information as well as positive news to clients if we deem it important.
Fund-specific details of our activities to address Principle 5 can be found on our website.
1.13. Provision of suitable services to clients(Principles for Customer-Oriented Business Conduct Principle 5 【Note 1】 & Principle 6 【Note 3】)
Since 2021, we have been identifying the target client types for each of our publicly offered funds based on product risks and client risk tolerance
levels. We have also developed a framework for coordinating the information we disclose with the information provided by the distributors ofeach fund.
Please contact distributors of Nikko AM’s funds for details.

14

1.14. Provision of neutral information for investment decisions
Main investment information sources
provided as seriesFrequency

Rakuyomi

Twice weekly

KAMIYAMA Seconds!

Irregular

KAMIYAMA Reports

Irregular

Why should we invest?

Irregular

Follow-up Memo

Irregular

Weekly Market

WeeklyGlobal REIT Weekly

WeeklyMarket 5 Minutes
Monthly
Data Watch
WeeklyMonthly Market
Monthly
Global Foresight
Quarterly
Nikko AM Newsletter
IrregularJAPAN in Motion
Monthly
CHINA INSIGHT
Irregular
MLP Monthly
Monthly
Growth potential of high-tech industries Irregular
What Nikko AM wants you to know
about healthy money management

Irregular

GokuyomiMonthly

KoyomiMonthly

Content

Additional information

Explains timely market topics in a
91 released in FY2023
readable text volume
Naoki Kamiyama, Chief Strategist,
47 released in FY2023
explains market news in just 90 seconds
Covers topics that can be used as areference for investment based on our
15 released in FY2023
experience in investment strategy andfinance theory
Introduces tips on how to get yourmoney to work for you successfully, and 8 released in FY2023
how to eliminate investment worries
Extraordinary reports when major events
2 released in FY2023
occur
Helps readers keep up with trends with 53 released in FY2023
latest data on major countries andvarious markets, including foreign
50 released in FY2023
exchange, stock prices, interest rates,
REITs and commodities
12 released in FY2023
Provides market views from a slightly
12 released in FY2023
longer perspective of one to three
12 released in FY2023
months with easy-to-understand videos
4 released in FY2023
and reports
2 released in FY2023
4
Experts in each field provide information released in FY2023
17 released in FY2023
on each investment asset andinvestment theme, from timely topics to 12 released in FY2023
medium- to long-term outlooks
16 released in FY2023
Provides key points on the global
economy, market trends, and asset
0 released in FY2023
management
Glossary of terms from a newcomer's
4 released in FY2023
perspective
Short reports from call center
12 released in FY2023

We strive to contribute to the asset
building of customers by providing
investment information that is as
neutral as possible. Under our Fund
Academy brand, we provide fundrelated knowledge and informationthat we judge to be essential, notonly to retail investors anddistributors but also to noncustomers. In addition to the titles
shown in the table, our website
contains videos, e-learning
documents, simulation tools andother such information sources.
Fund Academy：
Nikko AM Fund Academy(nikkoam.com)
Creating Your Future with Mutual
Funds：
People Looking Forward 20 Years
Later Lab.

15

1.15. Seminars held
For distributor salespeople

8,000
6,000

5,974

5,325

5,594 5,633

6,155

5,651
4,381

3,899

4,000

2,155 2,161

2,000
0

For retail investors

2,213

1,560

3,596

1,464
112

103

We deliver our products via channels including the sales teamsof the distributors we work with and the internet. The
information we provide to retail investors, as well as our efforts
to supply appropriate information and training to salespeople,
contribute to the final investment decisions made byindividuals. The extensive framework we have in place enables
us to hold over 4,000 training sessions for salespeople annually.
Even under COVID-19, we have in place enables us to hold over
100 seminars for retail investors.

367

207

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023

1.16. Number of fund awards won
25
20
15

24

10
5
0

15

14

17

15

20

19

24
17

We work daily to develop products that serve the interests ofour customers. In fiscal year 2023, external assessment
institutions have given awards to two of our Japanese equity
funds, ten of our foreign equity funds, three of our foreign bondfunds and six of our balanced funds, three of our other funds,
recognising a total of 24 of our funds.
* Aggregation of awards from R&I Fund Awards, Fund of theYear (Former company name Morning Star) and Lipper FundAwards. After FY2022, the Fund of the Year award is not to beannounced.

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
16

2.

Activities for corporate clients2.1. Stewardship Activities
We believe that engaging (holding constructive, objective-focused dialogue) with investee firms as well as proactively conducting stewardship
activities including proxy voting are extremely important aspects of Nikko AM’s responsibilities as a fiduciary trusted by its clients. Furthermore,
we see ESG matters as an essential concept in fulfilling our fiduciary duty. We therefore incorporate ESG considerations in all areas of ourinvestment management process and conduct assessments of investees’ corporate value that include non-financial information in order tostimulate sustainable growth as well as medium- and long-term corporate value improvements. The results of these assessments are also
reflected in our investment decisions.
2.2. Engagement results
In FY2023, we engaged with many companies as in the previous year. During engagement, we examined publicly available information on thecompanies to understand the essential issues in advance, shared the issues we had identified with the companies, and encouraged them to takeaction to resolve them. To improve the effectiveness of our engagement activities, we revised our key ESG themes (by expanding them fromthree to six), revised our voting standards in response to changes in the social environment, and participated in various initiatives to acquire ESG
knowledge.
See page 18 for information on progress management for issues identified through the engagement activities with companies.

17Issues Handled in Issue Management Platform(Issue progress management)
Issues identified in engagement are monitored on the issue progress
platform. As of end-March 2024, there were 356 companies and 605 issues
managed on the platform. Progress on these issues is analysed annually toassist in planning for the next fiscal year.
In FY2023, the Fixed Income Fund Management Department began using
the platform, which was already in use by the Equity Fund Management
Department and the Japan Sustainable Investment Department.

Other
1%
Governance
28%

Management
strategy
22%
Capital policy+
Shareholder
returns9%

Social14%

Environment
14%Disclosures12%18

2.3. Voting track record

1. Company-generated proposals (July 2022– June 2023)
ProposalJuly 2022 - June 2023
Election/dismissal of directors

Proposal on company

Proposal on executive remuneration

Yea(Reference) Number of companies
Election/dismissal of corporate auditors(Reference) Number of companies
Selection of accounting auditors
Executive remuneration
Retirement benefit payments

Other proposals on capital policy
Partial revision to articles of incorporation
Other

Proposal on executive remuneration(Reference) Number of companies
Election/dismissal of corporate auditors(Reference) Number of companies
Selection of accounting auditors
Executive remuneration

Retirement benefit payments
Appropriation of surpluses
Restructuring

Proposal on capital policy(Except proposals concerning the articles of incorporation) Introduction, update, abolition of takeover defense measures
Other proposals on capital policy
Partial revision to articles of incorporation
Other
Total

Yea

Nay ratio

18.9%

2,258
2,053
946
86
703
80

52.7%
12.7%
21.9%
0.0%
8.8%
81.3%

54

5.6%

1,439

6.2%

1

81

82

98.8%

71
711

2
42

73
753

2.7%
5.6%

19,359

4,007

23,366

17.1%

0July 2022 - June 2023
Election/dismissal of directors

18,043

3

0

Total

Subtotal

89

51

Proposal on capital policy(Except proposals concerning the articles of incorporation) Introduction, update, abolition of takeover defense measures

3,402

1,189
261
207
0
62
65

1,350

Restructuring

Proposal on company

Nay

1,069
1,792
739
86
641
15

Appropriation of surpluses

2. Shareholder proposals (July 2022– June 2023)
Proposal

14,641

24

0
1
0
0

Nay

58

0
1
0
0

0

Subtotal82

0.0%

Nay ratio

29.3%

0
2
0
0

0.0%
50.0%
0.0%
0.0%

0

0.0%

5

16

21

3

29

32

2

0

2

100.0%

1
15

31
213

32
228

3.1%
6.6%

51

352

403

12.7%

0
0

0

0
0

4

0

4

23.8%

9.4%
0.0%

0.0%

19

Exercising Voting Rights
We revise our proxy voting standards annually in view of changes in the environment and the response of companies to engagement. The
revisions announced in February 2023 are as follows:
1. Appointment of directors (expansion of markets covered by requirements regarding female directors)
2. Appointment of outside directors (expansion of requirements regarding attendance at board of directors meetings)
3. Appointment of auditors (addition of principle of opposition in cases of misconduct)
4. Appointment of auditors (expansion of requirements regarding attendance at board of directors meetings and board of statutory auditors
meetings)
5. Shareholder proposals (specification of position on shareholder proposals regarding disclosure of climate change responses)(Expansion of markets covered by requirements regarding female directors)

The standard requiring the appointment of at least one female director for companies listed on the Prime Market has been in place since 2023. Asof 2024, the scope of the target market has been expanded to all markets, and companies outside the Prime Market will also be required toappoint at least one female director. We recognise that ensuring diversity in human resources is essential for companies to respond to futurechanges in the business environment more effectively. While diversity is necessary at all levels of the company, we believe that ensuring diversity
in the board of directors, the forum in which important decisions are made, is an especially important factor in improving the quality of decisionmaking. In the future, we will consider gradually raising the number of female directors required in view of a government policy requiring
companies listed on the Prime Market to have at least 30% female directors by 2030.
(Specifying our position on shareholder proposals regarding disclosure of climate change responses)

We joined the Net Zero Asset Managers initiative (NZAMi) in 2021. The initiative is intended to achieve net zero greenhouse gas emissions in asset
management portfolios by 2050 and encourages companies to take action to decarbonise. Based on our belief that disclosure of climate change
responses as part of that process is an important way of enhancing corporate value, at the June 2023 general meetings of shareholders, we voted
in favor of many shareholder proposals that called for disclosure of climate change responses. We will clearly state our philosophy on this area toensure that investee companies understand this approach.
We will continue to consider revisions to our proxy voting standards.

20

2.4.

ESG initiatives as an Institutional Investor

Nikko AM launched the Nikko Eco Fund, which invests in companies with strong environmental initiatives, as Japan’s first SRI fund (*) in 1999. We
have been incorporating ESG factors in all our investment management process since then based on our view that they contribute to mediumand long-term enterprise value. Furthermore, we consistently introduce innovations in our approach to ensure that we invest responsibly. In fiscal
year 2023 we strengthened our investment product offerings that help to address ESG issues with initiatives such as submitting new applications
for some of our Japanese equity active funds to be Article 8 funds under the EU’s Sustainable Finance Disclosure Regulation (SFDR). We alsoestablished our new Japan Sustainable Investment Department in our Japan office April 2023 with the aim of conducting stewardship activities
and deepening ESG integration across multiple asset classes. Going forward, the department’s mission is to enhance the degree to which ESG
issues are addressed for each of our investment products by supporting our various investment management departments’ ESG integration
efforts. We will also augment our ESG initiatives to ensure that they are of a high quality that meets the expectations of customers around theworld. As part of this, we will strengthen coordination among our global offices with our Global Sustainable Investment Team in our Singapore
office taking a central role.
Given how essential obtaining ESG knowledge is to engagement, we actively participate in a wide range of initiatives such as CA100+ and the
30% Club. We are working to share the knowledge we acquire from these activities internally and to use it to enhance the quality of ourengagement and investment management methods.
＊ SRI stands for Socially Responsible Investment, which is an approach (method) for investing in companies in which traditional investment criteria (economic aspects ofcompanies) are combined with assessments of companies’ environmental and social initiatives (their responsibilities and contributions).

21

ESG funds
Based on a partial revision (establishment of points to consider regarding ESG funds) of the Comprehensive Guidelines for Supervision of
Financial Instruments Business Operators etc., nine of our publicly offered funds were recognised as ESG funds and two funds were classified as
non-ESG funds. For the ESG funds, we added ESG-related information to the prospectuses and investment reports, and for the non-ESG funds, we
added cautionary notes and changed the fund names in the prospectuses. In addition, we established a framework for ESG assessments andongoing monitoring in FY2023.

22

（Other references）Number of accounts utilising risk management tool for institutional investors
130
120
110
100
90
80
70
60
50
40
30
20
10
0

122

122

End-Mar2023

End-Mar
2024

104
81

82

82

End-Mar2020

End-Mar2021

45

End-Mar2018

End-Mar2019

End-Mar2022

Our starting point for institutional investors is to find out
our customers' needs, and to work hard to meet thoseneeds. In our sales activities, we then propose products inline with each customer's level of risk tolerance. As a part ofthese efforts, in December 2017 we launched a tool andused it to start providing support to help our corporate
investor customers improve their risk management. As of
March-end 2024, the support tool was being used for 122
accounts.

3. Appropriate management of conflicts of interest (Principles for Customer-Oriented Business Conduct Principle 3 & 【Note】)
Nikko AM’s Conflict of Interest Control Policy sets out its approach to conflicts of interest as an asset manager. We impose strict controls
on transactions with potential conflicts of interest to prevent unfair harm to client interests based on the policy.
Given that proxy voting is identified in our internal regulations as a form of transaction in which influence is exercised, we take aparticularly intensive approach to controlling our proxy voting activities to ensure that they do not unfairly compromise client interests.
Controls on conflicts of interest in our stewardship activities are discussed based on the principle of putting client interests first by our
Stewardship and Voting Rights Policy Oversight Committee, whose membership mainly consists of outside directors including its chair.

23

4. 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.
4.1 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.
4.1.1 Management governanceOur governance framework is distinctive in the Japanese asset management industry for its extremely high levels of independence andtransparency. Specifically, our Board of Directors is chaired by an outside director, and as of April 1st 2024, 9 of its 11 members are outside
directors, eight of whom are independent directors with no capital relationship with Nikko AM.
In June 2019, we transformed Nikko AM into a company with an Audit and Supervisory Board in order to strengthen the auditing and supervisionof 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 moreclearly, and to speed up management decision-making.
Furthermore, in August 2021, the Nomination and Corporate Governance Committee, an advisory committee to the Board of Directors, wasreorganized as the Nomination Committee to establish a future-oriented and sustainable management structure to realize our vision of placing
the highest priority on client interests and strengthening management capabilities as a global asset management company. Specifically, thecommittee is led by an independent outside director, and the committee has established a system to carefully discuss management personnel
who will lead the Company from various perspectives.
* We continue to discuss the corporate governance functions at the Board of Directors meetings.
4.1.2 Voting rights governanceWe established the Stewardship and Voting Rights Policy Oversight Committee in June 2016 as a way of improving transparency in ourstewardship activities such as engaging with firms and exercising voting rights as well as strengthening our governance. Drawing the majority ofits members from outside the company, the committee is the first such third-party body to be established at a Japanese asset managementcompany. It holds meetings once a quarter in principle and provides a venue for outside committee members to have lively discussions on how
Nikko AM exercises its voting rights. The committee held five meetings in FY2023. Please refer to the Appendix (PDF) for details of its activities.
24

4.1.3 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 ten times so far and its outside members The board has held a total of 22 meetings
so far (four meetings in FY2023) and its outside members participate in debates at its meetings. Please refer to the Appendix (PDF) for details of
its activities.
4.1.4 Appropriate frameworks for motivating employees (Principles for Customer-Oriented Business Conduct Principle 7 & 【Note】)
Nikko AM has established six values (Stability, Diversity, Focus, Innovation, Teamwork, and Communication) as important indicators that clearly
express who we are, what we achieve, and how we work, and that unite all employees including those working globally.
In order to provide the best performance and solutions to our customers over the long term, which is the most important role of an asset
management company, we implement various development programs to support each job and level in achieving results through actions basedon these “values”.
As of FY2021 we enhanced our employee evaluation process by adding efforts to pursue best practice and make improvements (as well as simple
compliance with laws, regulations and internal rules, consideration of whether employees have operated appropriately in the interests of clientsand stakeholders and have consistently worked to make improvements) as an assessment criterion for all employees. We also introduced amechanism by which employees’ final evaluations are deemed not to meet the required standard if they are found to have any compliance areasthat need to be improved, regardless of other evaluation items. We will continue working to ensure that our employees correctly understandthese performance criteria.
4.2.

Environmental

We are committed to contributing to the sustainability of the environment by reducing our greenhouse gas emissions, creating environmentallyfriendly workplaces and implementing employee-led environmental initiatives. Considering Nikko AM’s status as an asset manager that has
agreed to the Task Force on Climate-related Financial Disclosures (“TCFD”), we also understand the importance of promoting awareness ofclimate change and other such environmental issues in our investment and business activities.

25

In 2021,we renewed our Environmental Policy regarding Nikko AM’s environmental approach in its business operations by expanding its content
and extending its coverage beyond the areas that currently attract the most attention.
We regard our setting of a group-wide target for reducing greenhouse gas emissions (including overseas offices) as a particularly important effort
in this area. Specifically, we are aiming to reduce our firm-wide greenhouse gas emissions per employee by 40% from the 2019 figure by 2030
(see Note).
The target is based on a measurement of Nikko AM’s greenhouse gas emissions coupled with an offsetting process that we established ourselves.
For several years, we have been aggregating data on Nikko AM’s energy usage and business travel, and having external consultants convert thefigures into equivalent greenhouse gas emission figures. These actions demonstrate our ongoing commitment to contributing to environmental
sustainability through efforts including the creation of environmentally friendly workplaces, the implementation of employee-led environmental
initiatives, and reductions in greenhouse gas emissions.
For office electricity, we purchase green energy contracts or equivalent where available and plan to pursue similar arrangements in all offices. For
business travel, we have implemented a process to visualize how our carbon footprint is impacted by requiring international flights to be
included in the carbon footprint for international travels.
We offset our calculated greenhouse gas emission figures by purchasing carbon credits through a certified project. Our plan is to develop thisinitiative further by working to minimise Nikko AM’s carbon footprint (i.e., its greenhouse gas emissions) and only offsetting emissions for which a
reduction is not possible.
Our efforts will be focused on the two areas that account for most of Nikko AM’s carbon footprint: emissions from energy usage in our officebuildings and from business travel.
In order to deepen our employees’ understanding of environmental issues, we have been operating our Environmental Working Group, in which
employees can voluntarily participate, since 2019. The working group discusses themes of interest to Nikko AM and works to improve employee
awareness by inviting external experts to deliver talks for online events that are open to all employees.
Breakdown of Nikko AM Group Carbon Footprint
2019

2020

2021

2022

% changeonpreviousyear

Total Tonnes CO2 Emissions

5,477.4

1,822.8

1,127.3

1,658.1-69.7%

Tonnes of CO2 / Employee

5.9

2.1

1.2

1.7

-71.1%NAM Group Carbon Footprint*2022 data: full time employees and permanent employees of Nikko AM Group (As of 31 Dec 2022)(Note) Includes direct / indirect emissions in Scopes 1&2 (fuel combustion and consumption of purchased electricity), and certain indirect emissions in
Scope 3 (transmission & distribution of energy and business travel not included in Scopes 1&2), as defined by the Greenhouse Gas Protocol.

26

4.3. Social
We 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.
🔷🔷Establishment of Global D&I Policy
We established our Global D&I Policy in 2021 in order to nourish a culture of diversity and inclusion among employees and underscore Nikko
AM’s commitment to maintaining that culture. The policy expresses our commitment to strengthening our organisation by developing a soundwork environment in which all employees can contribute based on their differences. In addition to ensuring that our corporate culture promotes
respect for diversity, we will continue to contribute to the furthering of social causes through other efforts including external charitable activities
and donations. We are involved in addressing societal issues from a range of perspectives as part of our efforts to increase our employees’
awareness of diversity and inclusion, from acting as a venue for transformation to taking the lead in initiatives.
🔷🔷Increase in ratio of female managers
We recently stepped up our efforts to enable women to thrive at Nikko AM by setting a new target of raising the ratio of female managers
throughout the Nikko AM Group, including overseas offices, to 30% by 2030. Clarifying our target for females in managerial positions is intended
to enhance the transparency of disclosures on our progress in this area, further expand our efforts to promote career progression for women, andfurther improve our employees’ diversity awareness.
The ratio of female employees and the ratio of female managers in our company

27🔷🔷Sustainability Working Group activities
Nikko AM operates 11 Sustainability Groups in which employees can participate on a voluntary basis. The working group discusses sustainability
issues and launches bottom-up sustainability initiatives. In the area of diversity and inclusion, the group addresses matters related to women,
people with disabilities, the LGBT community and racial equality. It works with departments such as the Human Resources Department and theGeneral Affairs Department to ensure that as many kinds of employees as possible can thrive at Nikko AM. All groups have a member of senior
management appointed as an “executive sponsor” to ensure active involvement and to increase the presence of each group.
🔷🔷Donations and support activities for charitable organisations
We also support organisations and participate in charitable activities that help to address a variety of societal issues. Employees can directly
contribute portions of their monthly wages to charitable causes through our Employee Charity Program, in which the company matches theircontributions. Given that we have also considered and provided one-off donations for aid and humanitarian assistance following major disasters,
our track record of charitable activities is wide ranging and extends beyond Japan.
Please refer to Nikko AM’s 2023 Sustainability Report for more information on our environmental and social initiatives.

28

In conclusion
Throughout the many changes we have experienced—including changes in the business environment, technological innovations, and growth infinancial products—we have consistently striven to act in the best interests of our customers. We strongly believe that continuing to do so is our
mission as a firm.
The emergence and global spread of COVID-19 made recent years in which society as a whole and all of our lifestyles went through greatchanges, and we were forced to transform the way we think about many different aspects of life. We are sure that all of us–including our clients–
will continue to face a challenging environment going forward. At Nikko AM, we have been given an even keener awareness of the importance ofadapting to different environments by continuing to give clients ways to carry on building their assets as well as enabling them to continue
investing for their long-term goals regardless of short-term turmoil in the market.
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 our corporate governance.

29