Proxy Voting Guidelines

1.Objectives of Proxy Voting Guidelines

This guideline aims at contributing to ensure proper voting rights exercise in line with the interest of the investors by specifying its criteria for instruction on exercising the rights and its operation structure, as well as showing the basic policy regarding proxy voting.

2.Basic Policy on Proxy Voting

  • (1)Voting rights have proprietary value and the exercise of those consists of investment activities. SNAM (hereinafter “the Company”) shall exercises its voting rights solely for the interests of investors with the same importance of deciding security trades in order to fulfill its fiduciary responsibility.
  • (2)In principle the Company does not abstain or give blank votes for all resolutions, it shall choose to vote for or against after examining them thoroughly. This shall be applied in the case where the Company holds voting rights only after selling the relevant stocks.
  • (3)The Company must decide to vote for or against each resolution by judging its effect on value for shareholder as the sole standard, and shall indicate its intention by voting for the resolution which would lead to increase shareholders’ value, against one which would decrease the value. This shall be applied in such case where the relevant decision might have conflict with the other interests of the Company.
  • (4)For the below listed companies, the Company shall exercise its voting rights by examining the resolutions with particular attention from the point of maintaining value for shareholders and letting the companies to improve their corporate governance. This shall be applied for such companies that the Company did investment after the below listed problematic conducts had arisen.
  • (a)Companies that have been involved in anti-social actions.

    Anti-social actions mean such listed actions as; violation of the laws and regulations, violation of the environment, violation of the financial rules, violation of the labor related rules, violation of the products related rules, violation of the business conducts, or actions against public order and morals.

    • a-1)Violation of the laws and regulations

      Such actions as bid-rigging, cartel, evasion or omission of tax, which may cause significant damage to the corporate value as a result of payment for fine or compensation, business restriction due to administrative punishment, damage to corporate image

    • a-2)Violation of the environment

      Such actions as pollution or illegal dump of industrial waste which may cause significant damage to the corporate value as a result of payment for fine or compensation, damage to corporate image

    • a-3)Violation of the financial rules

      Such actions as accounting fraud or fake statement of securities filing reports, may infringe on the listing requirement

    • a-4)Violation of the labor related rules

      Such actions as sexual harassment, discrimination on employment, industrial accident due to overworks, which may cause significant damage to the corporate value as a result of payment for fine or compensation, damage to corporate image

    • a-5)Violation of the products related rules

      Such actions as manufacturing or selling the harmful products or service to human bodies, which may cause significant damage to the corporate value as a result of payment for fine or compensation, damage to corporate image

    • a-6)Violation of the business conducts

      Such actions as illegal donation to politicians, payoff to corporate racketeers, bribery, which may cause significant damage to the corporate value as a result of business restriction due to administrative punishment, damage to corporate image

    • a-7)Actions against public order and morals

      Such actions as apparently against common sense even if it is legal, which may cause significant damage to the corporate value as a result

  • (b)Companies which have problems in terms of the disclosure
  • (c)Companies of which business results and performance of those stocks are significantly deteriorated
  • (d)Companies which adopt business plan or capital policy causing damage to shareholders’ value or destabilizing it

3.Guidelines for individual resolution

The Company shall follow the below listed guidelines in principle when it chooses for or against about individual resolution.

  • (1)Disposition of Surplus (Dividend Policy)

    The Company shall examine whether the dividend policy is in accordance with the company’s growth or profitability. In the case that the dividend payout ratio is significantly low in comparison with the ROE, the Company shall vote against it in principle

  • (2)Appointment of directors and auditors (Structure of the Board)

    The Company shall examine whether the board structure is appropriate to produce the expected corporate governance effectively. In the case that the numbers of the board member is significantly large, the Company shall vote against it in principle

  • (3)Appointment of directors and auditors (Eligibility of the Directors and Auditors)

    The Company shall examine whether the nominees of the directors or auditors are eligible to fulfill the role expected. As for the companies defined in the Section 2-(4), the Company shall examine the eligibility of those nominees with particular attention

  • (4)Appointment of outside directors and auditors

    The Company shall examine whether the nominees of outside directors or auditors are eligible to fulfill the role expected. In the case that each nominee falls under any of following conditions, the Company shall vote against it in principle

    • (a)the executives, the major shareholder, the major business counterparty of the relevant company or its affiliates and those who, such as accountant specialist, are rewarded from the relevant company besides director’s or auditor’s remuneration, and who are considered to have problems in terms of their independency
    • (b)the nominees whose rate of attendance at the board meeting is significantly low without due reasons
  • (5)Remuneration to directors such as bonus, retirement bonus, provision of stock options.

    The Company shall examine whether the remuneration to directors is appropriate in accordance with the company’s earnings or dividend policy for its shareholders, and whether it would contribute to the future growth of its enterprise and shareholders value. In the case that each resolution falls under any of the followings, the Company shall vote against it in principle

    • (a)in case of the companies defined in the Section 2-(4) and the proposal of remuneration to directors lacks adequacy
    • (b)in case of the remuneration proposal is considered to be problematic such as the case of damaging independency of outside directors in terms of corporate governance
    • (c)in case of the remuneration proposal is considered to be conflicted with existing shareholders’ interests such as a stock option which might cause substantial dilution

    In principle the Company shall vote for the resolution regarding disclosure of individual remuneration to directors as it is considered to be useful information when voting for the individual directors

  • (6)Amendments to the articles of association

    Regarding amendments to the articles of association, the Company shall examine whether the relevant amendments contribute to maintain or develop shareholders’ value, or whether those restrict existing shareholders’ rights unfairly.
    In the case that each amendment falls under any of following conditions, the Company shall vote against it in principle

    • (a)Increase in the total number of authorized shares without any necessity, which may cause significant dilution of the stock value that may damage shareholder value
    • (b)Amendments for stricter conditions regarding the dismissal of directors without special circumstances
    • (c)Amendments for elimination of shareholders’ rights of resolution regarding disposition of surplus without special circumstances
  • (7)Resolutions regarding the amendments of business and capital structure

    The Company shall examine individual resolutions regarding the amendments of business and capital structure such as merger, acquisition, transfer of business

  • (8)Resolutions regarding the introduction of anti-takeover measures (Poison Pills)

    The Company shall examine individual resolutions regarding the introduction of anti-takeover measures whether those contribute to enhance existing shareholders’ value.
    In principle the Company shall vote against the resolution regarding the issuance of stock warrant which may cause significant dilution as an anti-takeover measures, which conditions invoking the counter measure would not objectively be adequate and transparent

  • (9)Shareholder Proposals

    The Company shall examine shareholder proposals based on whether or not the proposals contribute to enhance shareholder value

4.Operation Framework regarding the Proxy Voting

  • (1)The Investment Strategy meeting of Japanese Equity is finally responsible for the decision making on proxy voting
  • (2)The analyst of the relevant company is responsible for preparing the agenda of the Investment Strategy meeting of Japanese Equity concerning the exercise of voting rights
  • (3)The Compliance and Risk Management Dept. is responsible for checking validity of the proxy voting instruction in terms of due decision making process defined under this Guideline

The Company shall vote its proxies on Japanese stocks under the above Guideline, proxies relating to foreign stocks shall be voted in view of relevant facts and circumstances regarding proxy voting in each country

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