Basic Policy For

RESPONSIBLE
INVESTMENT
Basic policy for responsible investment

On November 1, 2023, the Responsible Investment Committee revised items related to“ 1 Proper Efforts on Environmental and Social Issues”, “ 3 Adequate Performance of Corporate

Governance” and “ 4 Adequate information disclosure and a dialogue with investors” of the “BasicPolicy for Responsible Investment.”
Regarding “ 4 ”, we added the specific initiatives that we believe to be particularly important.
The basic policy for responsible investment defines our philosophy and specific approaches toresponsible investment, and includes details regarding the “management practices expected forinvestee companies” and the engagement and proxy voting to achieve this.

BASIC
POLICY FORRESPONSIBLE
INVESTMENT
ConcreteActions

19

Responsible Investment Report 2023

1

Understanding
Investee Companies

2

Approach to Investee
Companies

3

Reflection ininvestment decisions

4

Control Conflicts ofInterests

5

Collaboration andOutside Activities

6

Information Disclosureand Accountability

7

Organization and Actions

In order for investee companies to enhance corporate value and achieve sustainablegrowth, stipulate the“Ideal Form of Business Management of Investee Companies” *and encourage investee companies to realize it. Stipulate “Basic Principles ofEngagement” and “Global Proxy Voting Policy” and give encouragement to investee
companies from a fair and consistent posture. Reflect the status of engagement inproxy voting.
*Ideal Form of Business Management of Investee Companies P. 20-22

B asic Principles of Engagement/ Global Proxy Voting Policy
https://global.nomura-am.co.jp/responsibility-investment/pdf/basic_policy.pdf

Basic Policy OnRESPONSIBLE
INVESTMENT
Ideal Form of Business Management ofInvestee Companies1Proper Efforts on
Environmental andSocial Issues

We believe that making proper efforts on global environmental and social issues from the perspectives of risk management andthe pursuit of business opportunities will lead to increase in corporate value and sustainable growth. We also see such efforts as aprerequisite for a company to be accepted as a member of the society. Examples of issues that we consider particularly importantand efforts that portfolio companies need to make are shown on the right.

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3

4

Basic Policy stablishment of a basic policy regarding theEcompany’s efforts on ESG issues
e stablishment of a system to promote andoversee those efforts;

Key issues(materiality)I dentification of key issues; by the management,
r esponses to and disclosure of risks that areidentified as key issues (e.g., data security,
product liability, etc., as well as those listed in 3
through 7),
d isclosure of business opportunities that areidentified as key issues;

Climate change erification of business portfolio and promotion
Vof technological innovation to respond to theclimate change issue,
information disclosure based on the final reportpublished by the Task Force on Climate-related
Financial Disclosures (TCFD), which is consistent
with the Paris Agreement,
s etting of a net zero target for medium- to longterm greenhouse gas (GHG) emissions,a pproval of or commitment to science basedtargets (SBTs)
m easurement of GHG emissions and absorption
including Scope3 under the international
standards for the accounting and reporting of
GHG emissions
a nd introduction of internal carbon pricing;

Natural capital evelopment of measures and goals for prevention
Dof deforestation, marine pollution, or air pollution,
sustainable use of water resources, timber, or marine
products,
setting countermeasures and goals for reducing
waste, improving recycling, etc;

Human rights

 evelopment of a policy on human rights atDinvestee companies that is consistent withinternational norms,
h uman rights due diligence and audits including
supply chain,c orrective action and relief mechanism
a nd disclosure of due diligence results;

6

Human CapitalWith DiverseValues

 trategy for developing and maximizing humanS
capital value
S etting a medium- to long-term target for thepercentage of women among board members,senior executives, or managers,A human resources system that enhances diversity,fairness, inclusion, and a sense of belonging(Measures to prevent job separation due to life
events, fair opportunities providing meetings,
implementing employee engagement, etc.)
creation of a corporate culture that embraces
diversity and inclusion;

7

Society that
promotes wellbeing

 management plan (including R&D andA
marketing strategies) that turns the resolutionof social issues, such as health and safety,
education and intelligence, and regional
revitalization, into business opportunities
m easurement and disclosure of progress toward
the resolution of social issues, and8

Cooperation with stakeholders, such as participation ininitiatives that are related to the issues listed above.

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Basic Policy On

RESPONSIBLE
INVESTMENT
Ideal Form of Business Management ofInvestee Companies

2Value Creation
through
Capital Efficiency

21

Responsible Investment Report 2023

NAM believes that in order for investee companies toenhance corporate value and achieve sustainable growth, it
is necessary for investees to create value that exceeds thecost of capital over the medium to long term by utilizing capitalefficiently under proper risk management and constructing
a business portfolio that has a high growth potential and isefficient. To this end, we consider that the following efforts are
particularly important:1

To formulate a growth strategy and an investment plan to create value thatexceeds the cost of capital and to conduct proper progress management;

2

To verify the business portfolio against the growth strategy and replacebusinesses in the portfolio as necessary;

3

To sell assets that do not contribute to the creation of value that exceeds
the cost of capital and, in particular, to reduce cross-shareholdings;

4

To implement group governance to enable the optimal allocation ofmanagement resources, etc.;
If there is a listed company within the group, to regularly verify thereasonableness of maintaining a listed company within the group; toproperly manage the conflict of interest with general shareholders; and tosupport the listed company’s efforts to strengthen corporate governance;

5

To properly manage the risks associated with businesses, etc.;

6

To implement a capital structure and shareholder returns that reflect 1through 5 above; and7To properly disclose information about 1 through 6 above.

Basic Policy On

RESPONSIBLE
INVESTMENT
Ideal Form of Business Management of
Investee Companies

3

Adequate
Performanceof Corporate
GovernanceFunction

4

Adequate information
disclosure anda dialogue withinvestors

We believe that it is necessary for a company to have sufficiently functioning corporate governance as a prerequisite for value
creation through the efficient utilization of capital and proper efforts on environmental and social issues. We believe that thefollowing components should be covered to realise appropriate corporate governance systems.

1

The board consists of an adequate number of qualified and diversemembers who have the ability and experience, including business
management, finance and ESG, to supervise the execution of management
and any conflict of interest with the management, controlling shareholder, or
any other parties on behalf of shareholders and functions effectively.

2

The audit committee, audit and supervisory committee or the boardof auditors consists of qualified members who are capable of auditing
directors’ operations on behalf of shareholders and functions effectively.

3Committees relating to nomination and compensation have been
established, each of which consists of qualified and independent members
and adequately fulfills the necessary roles and responsibilities in 4 and 5below.

4Standards and processes to determine whether the replacement of seniorexecutives is required have been established, and a succession plan in caseof such replacement has been formulated.

5Compensation of senior executives is appropriate as their incentive andcommitment for value creation through the efficient utilization of capital andproper efforts on environmental and social issues.

6

The board makes appropriate judgment in the best interest of minority
shareholders on any transaction involving a conflict of interest or fight forcontrol of the company.
In our view, as anti-takeover measures limit the rights of shareholders to buy
and sell shares freely, they are unnecessary unless there is a risk that such atransaction or fight will significantly impair corporate value and the common
interest of shareholders.

7

The board of directors monitors environmental and social issues andbusiness and other risks and oversees initiatives by senior executives, andcorporate governance systems are in place to ensure sufficient internal
control in terms of compliance and internal auditing.

8Comply with laws and regulations, and properly respond to the Corporate
Governance CodeWe believes that it is important for companies to fulfill their accountability for the matters stated in 1 . through 3 . To this end, weconsider that the following efforts are particularly important.

12To disclose information in a timely and appropriate manner in accordancewith appropriate standards based on the trends of regulatory authorities
in each country and international initiatives. In particular, a company isexpected to obtain third-party audits and assurances as much as possible,
especially for quantitative information.

3

If a company is found to have engaged in any activity that is materiallyharmful to corporate value, it is important for the company to provide
sufficient disclosure and explanations on investigations of cause,clarification of where responsibility lies, and the formulation anddissemination of effective recurrence countermeasures.

To actively hold dialogue with each investor in order to appropriately reflect
investors’ opinions in corporate management.

22Nomura Asset Management supports
the transition to a monitoring board
Advisory board

Towards Realizing a
Monitoring Board

Management board
Main roles andresponsibilities

Member composition

Management
decision-making

Centered on insidedirectors(management team)

We expectcompanies totransit to thisMain roles andresponsibilities

Member composition

Management
decision-making,advice tomanagement teamCentered on insidedirectors (managementteam), but there are also aminority of outside directors

Monitoring board
Main roles andresponsibilities

Member composition

Supervision ofmanagement teamCentered onoutside directorsAbout Corporate Governance“Corporate governance” means a structure
for transparent, fair, timely and decisivedecision-making by companies, with due
attention to the needs and perspectivesof shareholders and also customers,
employees and local communities.
(From Japan’s Corporate Governance Code)In response to corporate governance reforms,
boards of directors of Japanese companies arebeing asked to move away from their traditionalrole as management boards. Although there is amovement towards advisory boards that emphasize
the advice of outside directors, we are supporting
the transition to monitoring boards in order torealize a “structure for transparent, fair, prompt,and decisive decision-making” as advocated by theCorporate Governance Code. Please refer to Page
23 of the Responsible Investment Report 2022 formore on our underlying philosophy.
Reference23

https://global.nomura-am.co.jp/responsibility-investment/pdf/
ri_report_2022.pdf

Responsible Investment Report 2023

Desirable monitoring board and undesirable monitoring board
Desirable
Supervision

Independent
outside director(nomination/compensation)

Chairpersonand PresidentManagementdecision-making

Management’s
PDCA cycle functions

 ebate with management team about management strategy, etc. (management team is accountable)
DEvaluate management team based on management strategy, etc., and reflect in nominations
and compensation. Also, provide feedback on evaluation details to management team.
Nomination: Establish standards and process for periodically determining the necessity for replacing members of senior
management, formulate a successor plan to prepare for such replacements.
Compensation: M anagement team incentives/commitments aimed at enhancing corporate value

Provide advice to management team as needed during the supervision process.

Undesirable

1

AdviceIndependent
outside director

Undesirable

Advisory board

Supervision
does notfunction2

Independent
outside director+
Chairperson+
President

Chairperson,
CEO,executive officer

Management
decision-making

Biased advice

Cannot break away from a management board

Supervision

Executive officer,
department headManagement
decision-making

Independent
outside directors
participate indecision-making
Supervision ofchairperson andpresident does not
function

Handling of proxy voting standards

In order to support a voluntary transition to a monitoring board, not merely a transition as a formality, our proxy voting
standards include the following.

Show the requirements for determining whether or not a board falls under the category of a monitoring board (“Monitoring Board Requirements” below).
We will not oppose company proposals on the reasoning that the company’s board does not fall under the category of a monitoring board, but it will be easier to support acompany proposal if it does.
The above requirements will be shifted to conditions for opposing in stages (after changing the threshold, etc. as needed)In addition to carrying out engagement aimed at transitioning to an effective monitoring board, if outside directors failed to fully fulfill their expected roles, we will vote against
the reelection of outside directors.
Revised in Nov 2023
Monitoring board standards
Monitoring board requirements*1

1

Number of directors

Voting result

Standards to oppose company proposals
Requirements to oppose company
proposals

NEWNEW

More than 5. fewer than 20

under 5 or more than 20

Proposals to vote against
Election of directors

Falls below the minimum level: umber of outsideNdirectors Majority

Majority

 omination andN
compensationcommittee

Establish a nomination and compensationcommittee in which outside directors
comprise a majority and the committee
chair is an outside director

4

Diversity

The ratio of women directors is at least
10%5Takeover defense plan

No takeover defense plans

6Strategic
shareholdings Does
not hold in excess

Does not hold in excess(for financial institutions: less than 25% ofnet assets; for non-financial companies:
less than 10% of invested capital)7 irector’ term inDofficeIf the company is a company with a boardof corporate auditors, one year8

 he chair of the board
Tof directors

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If there are controlling shareholders,outside director

If a board satisfies all of
the requirements on theleft, we determine it tobe a monitoring board
We will ease therequirements for voting
in favor of company
proposals related todirector appointments(business performancestandards* 2) or executivecompensation.
We will not oppose
company proposals
on the reasoning thatthe company’s board
does not fall under thecategory of a monitoringboard.

Under 1/3. For companies with acontrolling shareholder, a majority.
From November 2024Minimum level is a majority. However,
1/3 if a company has no controllingshareholder and has nomination
governance in place*3

Expand the scope of application

Compensation governance is not inplace*3

Election of directors

Executive compensation/Executive
retirement benefits

No women directors

Election of directors

Has a takeover defense plan

Takeover defense plan or election ofdirectors

Hold in excess(for financial institutions: more than 50%of net assets; for non-financial companies:
more than 20% of invested capital)

Election of directors

NEWIf the company is a company with aboard of corporate auditors, two years

Election of directors--*1 We view the above requirements as the bare minimum for being a monitoring board. *2 Standard to vote in opposition of re-appointment of chairperson and president, etc. who have been in the position for the most recent
three or more consecutive fiscal years, if return on equity (ROE) has been in question and efforts for management improvement have not been demonstrated. *3 A case in which nomination and compensation governance isin place refers to the case where statutory or voluntary nomination and compensation committees have been established, the committee members include two or more outside directors, and the number of internal directors
among the committee members is fewer than the number of outside directors.

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