Guidelines on Exercising Voting Rights

Amova AM exercises proxy voting rights independently and solely in the interests of our clients and beneficiaries in order to fulfill our fiduciary responsibilities. In line with the "Amova Asset Management Group Proxy Voting Policy", we establish "Guidelines on Exercising Voting Rights" and makes decisions on the exercise of voting rights in compliance with the Guidelines.

General Provisions

(Purpose)
Article 1

1. The purpose of these Guidelines on Exercising Voting Rights ("Guidelines") is to set forth the basis for decision-making at Amova AM when exercising proxy voting rights, to promote the systematic and consistent exercise of voting rights, and assure the faithful execution of Amova AM's fiduciary responsibilities.

(Definitions)
Article 2

1. In these Guidelines, "voting rights" shall refer to all shareholder rights under the Companies Act, including voting rights.
2. In these Guidelines, "beneficiary" shall refer to the beneficiaries of managed investment trust funds.
3. In these Guidelines, "client" shall refer to investment advisory contract clients.
4. In these Guidelines, "beneficiary (client) interests" shall refer to increases in shareholder value or the prevention of damage to such value.

(Basic Policy)
Article 3

1. When considering how to exercise voting rights for individual stocks, each resolution item shall be carefully examined in accordance with these Guidelines. If a resolution is regarded as being against the interests of the beneficiary or client, Amova AM shall express its intention to oppose the resolution.
2. Voting rights shall not be exercised in order to promote the interests of a third party other than the beneficiary or client.
3. The exercise of voting rights shall be in accordance with the country’s state of affairs. The advice of external experts may be utilized, as necessary.
4. The advice of an independent third party may be used if there is the possibility of a conflict of interests.

(Person with Decision-making Authority)
Article 4

1. The Stewardship and Proxy Voting Committee shall establish basic provisions for decision-making regarding the exercise of voting rights.
2. Fund management departments shall be responsible for instructions to exercise voting rights for individual stocks.

(Types of Instructions)
Article 5

1. Instructions to exercise voting rights for each resolution item shall be either instructions to approve or instructions to oppose the item. Blanket discretion must not be awarded. However, in line with the custom or voting system in the relevant country, in certain cases an instruction to abstain shall be issued as a substitute for an opposition vote or in order to indicate a lack of agreement.

(Requests from Clients)
Article 6

1. When a client makes a request to disclose the voting outcome and decision-making basis for an individual stock, disclosure shall be made, only in respect of those stocks managed within the client's assets.
2. When a client provides guidance regarding the exercise of voting rights, these Guidelines shall be presented to the client for discussion.
3. If a client retains partial authority to issue instructions regarding the exercise of voting rights and issues instructions that in Amova AM’s view are clearly irrational, Amova AM shall endeavor to express its opinion to the client.

(Handling Sub-advised Funds)
Article 7

1. Even when the exercise of investment discretion is entrusted to an outside party, in principle Amova AM shall issue instructions regarding the exercise of voting rights.
2. Notwithstanding the provisions of the preceding paragraph, if the outside investment manager prefers to cast proxy votes, a different approach may be taken through discussion with the outside manager.

(Split Exercise)
Article 8

1. In principle, split voting instructions shall not be issued. This restriction does not apply to the cases in Paragraph 3 of Article 6, and Paragraph 2 of Article 7.

(Screening)
Article 9

1. Screening criteria shall be established for decision-making when exercising voting rights for individual stocks and the resolution items for each stock shall be carefully examined.
2. Screening criteria shall be determined by the Stewardship and Proxy Voting Committee. The following specific items shall be included in the criteria.
1. Level of ROE and ROA and past fluctuation
2. Degree of shareholder return
3. Occurrence of any misconduct
4. Any adverse opinion from accounting auditors
5. Any non-public takeover offers

 

(Revision and Abolition)
Article 10

1. Revision and abolition of these Guidelines shall be determined by resolution of the Stewardship and Proxy Voting Committee.

Detailed Provisions

(Shareholder Return)
Article 11

1. Resolutions on shareholder return, such as dividends, shall be opposed where significant doubts arise when considering the following items.
1. Total return ratio, such as shareholder dividends, is continually low compared with the average level for listed companies
2. Total return ratio, such as shareholder dividends, is markedly high compared with the average level for listed companies or the investee company records a net loss and its financial soundness is impacted negatively.
3. Level of current liquidity and shareholder equity ratio when compared with future business plans
4. Consistency of executive compensation with amount of shareholder return, such as dividends
5. Any concerns over financial statements or audit procedures
2. Resolutions that allow the board of directors to dispose of surplus shall be approved if it is determined that the board of directors is highly independent from management execution.

(Appointment of Directors and Independent Directors)
Article 12

1. A firm's board of directors is expected to make decisions intended to improve medium- and long-term shareholder value and to supervise the firm’s execution of business, and should fulfil those functions effectively. A board of directors should therefore be structured in a way that fully takes into consideration factors such as the abilities, characteristics and diversity of its members as well as its ratio of independent outside directors. It should also be of a size that enables it to make swift decisions on business matters. Specifically, decisions to vote for or against such resolutions shall be made based on the below criteria.
2. Resolutions on the appointment of directors shall be opposed where doubts arise when considering the following items.
1. It is determined that there are personal character issues or other problems that may make the candidate unsuitable as a director
2. It is determined that, from an independence perspective, the composition of the board of directors or committees will prevent a director from performing at an appropriate capacity
3. It is determined that the composition of the board of directors does not meet the diversity criteria required by the market
4. It is determined that an individual has taken action that is inappropriate for a director
5. It is determined that the director has a poor attendance record at board meetings without reasonable cause
3. If there is material fault on the part of management, proposals for the reappointment of a current director who is recognized as being associated with such deficiencies shall be opposed. In particular, the following cases shall be monitored carefully.
1. When an important decision has been made and implemented without shareholder approval
2. When company resources have not been effectively utilized
4. Resolutions to reappoint as director an individual who was a director during any periods of time when the company engaged in anti-social activities or other activity that damaged shareholder value, shall in principle, be opposed.
5. Appointments of directors responsible for the following shall, in principle, be opposed.
1. It is determined that a company with significant risks related to climate change is not addressing the risks sufficiently, and the situation has not improved.
2. It is determined that a company that is facing serious sustainability issues is not addressing the issues sufficiently and the situation has not improved.
6. Resolutions to appoint outside directors, shall in principle, be approved, after considering their level of independence. Independence shall, in principle, be defined as the candidate having no relationship with the company other than their appointment as an independent director.
7. Proposals to appoint directors through cumulative voting shall, in principle, be approved.

(Appointment of Statutory Auditors and Outside Statutory Auditors)
Article 13

1. The provisions of the preceding article shall also apply to proposals for the appointment of statutory auditors (including proposals for filling statutory auditor vacancies). However, if it is determined that a statutory auditor lacks appropriateness for the position, for example. if they have difficulty monitoring and oversee directors from an independent standpoint, the proposal shall, in principle, be opposed.
2. Appointments of independent auditing officers, shall in principle, be approved. However, the appointment shall be opposed it is determined that they clearly lack independence.

(Appointment of Accounting Auditors)
Article 14

1. Resolutions to appoint accounting auditors, shall in principle, be approved. However, the resolution shall be opposed if doubts arise over the appropriateness of audit implementation or the independence of the auditors.
2. If an accounting auditor is not to be reappointed because of a conflict with the company regarding its auditing policies, the entire resolution shall be carefully examined.

(Executive Compensation)
Article 15

1. All of the following conditions should be met for resolutions on executive compensation.
1. Compensation is properly linked to business performance, and the basis for its calculation has been made clear
2. Compensation is determined by a committee of which the majority of members are independent directors, or executive compensation has been individually disclosed
2. If there is material fault on the part of management, proposals on executive compensation shall be opposed.

(Say on Pay)
Article 16

1. Taking into consideration the conditions set forth below, resolutions on executive compensation shall be approved if it is determined there are no problems.
1. Correlation between company performance and CEO compensation
2. Existence of any problematic compensation systems or practices
3. Dialog and action between the board of directors and shareholders with regard to compensation

 

(Responsibilities of Officers and Accounting Auditors)
Article 17

1. Resolutions to increase the responsibilities of directors or accounting auditors, shall in principle, be approved. However, resolutions that will impose an enormous amount of liability for damages from a minor mishap by a director or accounting auditor shall be opposed.
2. Resolutions to limit or waive the liability of a director or accounting auditor shall, in principle, be opposed. If, however, a rational explanation is presented that shows the proposal is based on the Companies Act or other laws, and it is in the overall best interests of the company, the resolution shall be approved.

(Stock Option Plan)
Article 18

1. A decision regarding a proposed resolution to grant stock options to directors shall be made taking into consideration the items set forth below in addition to the provisions of Article 15.
1. Whether the number granted is reasonable
2. If the strike price comes with a clause on downward revision, whether the basis is reasonable
3. If stock options are exercised, the degree of dilution of other shareholders' equity
2. A decision regarding a proposed resolution to grant employee stock options shall be made taking into consideration the scope of the grantees and the items set forth in the preceding paragraph
3. A decision regarding a proposed resolution to grant stock options to third parties other than directors and employees shall be made after consideration of the items set forth in Paragraph 1 and below.
1. Relationship between the grantees and the company
2. Whether there is a rational explanation for providing stock options if the proposed grant is a substitute for labor or compensation

 

(Takeover Defenses and Resolutions that Contest Company Control)
Article 19

1. Resolutions aimed at introducing or maintaining takeover defenses shall, in principle, be opposed. If the board of directors passes a resolution for the introduction or maintenance of takeover defenses, resolutions aimed at the reappointment of directors shall be opposed.

(Restructuring)
Article 20

1. Resolutions aimed at establishing a holding company shall be approved if the explanation for the establishment of the holding company is rational and clear and will lead to enhanced corporate value.
2. Mergers and acquisitions shall, in principle, be approved if the calculation basis for the merger ratio or acquisition price is provided by a neutral third party and such calculation is considered to be reasonable. If, however, the merger or acquisition will clearly damage shareholder value, the resolution shall be opposed.
3. Resolutions aimed at transferring a business or obtaining a business by transfer shall, in principle, be approved if the calculation basis is provided by a neutral third party and is considered to be reasonable. If, however, it is clear that the business transfer will damage shareholder value, the resolution shall be opposed.
4. Resolutions aimed at exchanging shares or transferring shares shall, in principle, be approved if there is a rational explanation for such reorganization and if the calculation basis for exchange or transfer ratios is provided by a neutral third party. If, however, it is clear that the exchange or transfer of shares will damage shareholder value, the resolution shall be opposed.

(New Stock Issuance)
Article 21

1. Resolutions on issuing common stock shall be examined and considered. However, the resolution shall be opposed if existing shareholder equity will be significantly diluted or if the receiver of new shares will be given a particularly advantageous issue price.
2. Resolutions aimed at issuing classes of shares with different voting rights shall be examined and considered. However, the resolution shall be opposed if it may lead to the strengthening of management control.
3. Resolutions to issue preferred stock and deferred stock shall, in principle, be approved. However, the resolution shall be opposed if existing shareholder equity will be significantly diluted or if the common stock acquisition right mechanism is not rational.

(Other Company Proposals)
Article 22

1. Resolutions aimed at increasing authorized capital shall be approved if the purpose is rational and clear and will lead to enhanced corporate value.
2. Resolutions aimed at changing the business year shall, in principle, be approved if they are accompanied by a rational explanation and if they have no effect or only a minor effect on business performance. If, however, the primary purpose is to postpone a regular shareholders meeting, the resolution shall be opposed.
3. Resolutions to tighten or ease resolution approval requirements shall be opposed unless such action is accompanied by a satisfactory explanation to demonstrate that it is necessary and will not harm shareholder value.
4. Voting decisions on resolutions regarding a company’s advisory vote (say-on-climate) on its climate change measures shall be decided in line with Amova AM’s Mission Statement on Climate Change based on considerations such as the conditions set forth below.
1. The level of the company’s greenhouse gas emission reduction targets and its commitment to them
2. The extent of the company's climate change-related disclosure efforts
3. Third-party certifications, etc.

 

(Shareholder Proposals)
Article 23

1. Resolutions proposed by shareholders shall be examined and considered from the standpoint of maximizing shareholder value. In particular, resolutions that meet the following requirements will be considered for approval. In addition, shareholder proposals that may be used to pursue the interests of particular shareholders shall be opposed.
1. Proposals calling for enhanced disclosure or transparency that will not put the firm at a competitive disadvantage.
2. Proposals that can be expected to improve corporate governance within a reasonable cost range.
3. Proposals that can be expected to improve responses to social and environmental issues without imposing an excessive burden on the company or unduly restricting its actions.

 

(Supplementary Provisions)
These Guidelines shall take effect on April 1, 2024.

Established: September 13, 2002 (Effective date: October 1, 2002)
Revised: April 22, 2003
August 16, 2004
January 31, 2005
June 10, 2005
March 3, 2006
June 8, 2006
May 16, 2007
April 17, 2008
May 20, 2009
May 13, 2010
February 7, 2011
April 1, 2012
August 9, 2012
June 26, 2014
June 22, 2016
April 27, 2018
November 20, 2018
February 25, 2021
December 25, 2023
September 1, 2025