Formulated on May 22, 2014
Revised on July 2, 2020

Pension Fund Association: Stewardship Responsibilities Policy

1. Basic Concept
Pension Fund Association (“PFA”) is an institutional investor that invests its pension assets indomestic equities, among other assets. PFA has two capacities—as an institutional investor
holding assets (“asset owner”) that entrusts investment in domestic equities to investment
managers, and as an institutional investor managing assets (“investment manager”) that
conducts in-house investment in domestic equities.
As a trustee of pension assets, PFA has a responsibility to manage and invest pension assets
efficiently for the sole purpose of increasing the benefits of beneficiaries such as early seceders
from employees’ pension funds (“end beneficiaries”).
Recognizing its stewardship responsibilities as one aspect of its fiduciary responsibility, PFA
has declared its acceptance of the Japan’s Stewardship Code, the Principles for Responsible
Institutional Investors (the “Japan’s Stewardship Code” or the “Code”) and herein establishes
policies for the fulfilment of its stewardship responsibilities.
2. Policy on Individual Principles of the Code(Principle 1)
Institutional investors should have a clear policy on how they fulfill their stewardship
responsibilities, and publicly disclose it.
As an “asset owner,” PFA shall require the external investment managers to which it has
outsourced investment in domestic equities to accept the Japan’s Stewardship Code and tocontribute to the sustainable growth and medium- to long-term enhancement of corporate valueof investee companies in accordance with various principles of the Code, thereby increasing
medium- to long-term return on investments. In addition, PFA shall require its investment
managers to formulate and announce clearly defined policies for the fulfillment of their own
stewardship responsibilities. In this process, PFA shall also require investment managers todeliberate on how they take issues regarding sustainability (medium-to long-term sustainability
including ESG factors) into consideration based on the investment strategies and to indicate
such considerations clearly in their policies. PFA shall take into consideration the status of theefforts made by its external investment managers toward the various principles of the Japan’s
Stewardship Code as one factor in its qualitative evaluation of those investment managers.
In its capacity as an “investment manager,” PFA shall accept the “Japan’s Stewardship Code”
and shall formulate and announce its clearly defined policies for the fulfillment of its own
stewardship responsibilities in accordance with the various principles of the Code.
PFA shall require its investee companies to specify and disclose material issues (materiality)
regarding business model sustainability, including ESG factors. In this way, PFA shallencourage the sustainable growth and medium- to long-term enhancement of corporate value1

of investee companies, thereby increasing medium- to long-term return on investments.
(Principle 2)
Institutional investors should have a clear policy on how they manage conflicts of interest in
fulfilling their stewardship responsibilities and publicly disclose it.
As an “asset owner,” PFA shall require its investment managers to formulate and announce
clearly defined policies on conflicts of interests to be managed for the fulfillment of theirstewardship responsibilities.
PFA is a corporation authorized under the Employees’ Pension Insurance Act* and has nocapital relationship, etc. with any other corporation. In its capacities as an “asset owner” and an“investment manager,” PFA shall faithfully execute its duties solely for the interest of thebeneficiaries, etc. in the management and investment of PFA’s pension assets from theviewpoint of fiduciary responsibility.
*The Employees’ Pension Insurance Act prior to its revision provided for in Article 3, Item (i) of the
Supplementary Provisions of the Act for Partial Amendment of the Employees’ Pension Insurance Act, etc. toEnsure the Soundness and Reliability of the Public Pension System (Act No. 63 of 2013)(Principle 3)
Institutional investors should monitor investee companies so that they can appropriately fulfill
their stewardship responsibilities with an orientation towards the sustainable growth of thecompanies.
As an “asset owner,” PFA shall require external investment managers to identify the status ofinvestee companies correctly and continuously, to appropriately fulfill their stewardship
responsibilities for the sustainable growth of said investee companies. In doing so, investment
managers should endeavor to identify matters that may harm the corporate value of investee
companies at an early stage.
PFA has adopted passive investment in domestic equities for its in-house investments andenjoys the benefits of low management fees. Accordingly, so as not to impede such low-costbenefits, in its capacity as an “investment manager,” PFA shall implement this principle
efficiently through the means such as the use of external professional organizations from theperspective of cost effectiveness.
(Principle 4)
Institutional investors should seek to arrive at an understanding in common with investee
companies and work to solve problems through constructive engagement with investeecompanies.
As an “asset owner,” PFA shall require external investment managers, through constructive and“purposeful dialogue” with investee companies, to endeavor to share their views with thosecompanies and to make efforts to mitigate any problems, including issues concerning
sustainability. In doing so, it is preferable that investment managers explain to investee
companies the status of their shareholdings and hold dialogue with independent outside
directors or corporate auditors.
As an “investment manager,” PFA shall implement this principle while striving to reduce costs
2through the means such as the use of external professional organizations, so as not to impede
the benefits of low-cost management as described above. In holding constructive and“purposeful dialogue” with investee companies, PFA shall retain its awareness of sustainabilityrelated issues. In addition, PFA shall engage in collaborative engagement in the belief that it isefficient and beneficial to work with other institutional investors to hold constructive and“purposeful dialogue” collaboratively with investee companies.
(Principle 5)
Institutional investors should have a clear policy on voting and disclosure of voting activity.
The policy on voting should not be comprised only of a mechanical checklist; it should bedesigned to contribute to the sustainable growth of investee companies.
As an “asset owner,” PFA shall require external investment managers to formulate clearly
defined policies for the exercise of voting rights and disclosure of the results thereof and to
exercise the voting rights of their shareholdings as part of their investment operations.
PFA shall leave the specific exercise of shareholder voting rights to the discretion of individual
external investment managers. However, PFA shall require them to do so with the objective ofenhancing the interests of PFA and, ultimately, of PFA’s end beneficiaries, and to disclose theresults of such exercise in a manner consistent with the intent of the Code.
As an “investment manager,” PFA shall exercise its shareholder voting rights in accordancewith the “Guidelines for the Exercise of Shareholder Voting Rights” as separately established.
From the perspective of increasing return on investment, PFA shall implement securities
lending of certain stocks that it holds for in-house investment. PFA shall decide whether or not
to terminate the lending of the stocks in question and exercise the shareholder voting rights ineach case, after taking into consideration the level of lending fee revenue.
In its capacities as “asset owner” and “investment manager,” PFA shall make the result of theexercise of shareholder voting rights public on PFA’s website every fiscal year. The number ofvotes exercised for and against proposals by investment managers (externally managedinvestment) and by PFA (in-house investment) shall be made public for each individual type ofproposals. PFA shall also disclose the number of votes exercised by PFA (in-house investment)
by investee company and by proposal separately, along with its reasons.
(Principle 6)
Institutional investors in principle should report periodically on how they fulfill theirstewardship responsibilities, including their voting responsibilities, to their clients andbeneficiaries.
As an “asset owner,” PFA shall require its external investment managers to make the following
reports:(1) Submission of policies, etc. concerning the Japan’s Stewardship CodeInvestment managers shall submit to PFA their policies, etc. concerning the Japan’s Stewardship
Code as described below. If any changes are made to these policies, etc., the investment
manager shall notify PFA of it without delay.
1) Policy for the fulfillment of stewardship responsibilities
2) Organizational structure for the fulfillment of stewardship responsibilities
This includes internal organizational structure, decision-making processes for the exercise3

of voting rights, status of use of proxy advisory firms, etc.
3) Policies for managing conflict of interests for the fulfillment of stewardship
responsibilities
4) Policies for the exercise of shareholder voting rights (voting guidelines)
5) Policies for conducting “purposeful dialogue (engagement)” with investee companies(2) Report on implementation of the Japan’s Stewardship CodeInvestment managers shall report to PFA on the following matters each fiscal year:
1) Status of exercise of shareholder voting rights
Status of exercise of shareholder voting rights in investee companies whose financial
results were reported during the previous fiscal year (the portion held by PFA)
2) Status of understanding of situation at investee companies
3) Status of “purposeful dialogue (engagement)” with investee companies
4) Results of self-evaluation of implementation of stewardship activities
If an investment manager to which PFA has outsourced investment also applies the Japan’s
Stewardship Code to investments in assets other than domestic equities, PFA may require suchinvestment manager to report the above 2) to 4) of (2) above to PFA.
In its capacities as “asset owner” and an “investment manager,” PFA shall make the status ofimplementation of its stewardship activities public on PFA’s website.
(Principle 7)
To contribute positively to the sustainable growth of investee companies, institutional investors
should develop skills and resources needed to appropriately engage with the companies and to
make proper judgments in fulfilling their stewardship activities based on in-depth knowledgeof the investee companies and their business environment and consideration of sustainability
consistent with their investment management strategies.
As an “asset owner,” PFA shall require external investment managers to have the ability to holdappropriate dialogue with the investee companies, and to make decisions related to stewardship
activities.
In its capacity as an “investment manager,” upon the allocation of personnel capable ofappropriately implementing stewardship activities, PFA shall strive to make its stewardship
activities more appropriate by utilizing the insight of external expert organizations, so as not toimpede the benefits of low-cost management set out in the policy for Principle 3, and byexchanging views with other investors through collaborative engagement.
(Principle 8)Service providers for institutional investors should endeavor to contribute to the enhancementof the functions of the entire investment chain by appropriately providing services for
institutional investors to fulfill their stewardship responsibilities.
This principle does not apply to PFA as it is either an “asset manager” or an “investmentmanager.”4