loading...
NEZU ASIA CAPITAL MANAGEMENT LIMITED
Nezu Asia Capital Management Limited Logo

NEZU ASIA’S POLICY REGARDING JAPAN STEWARDSHIP CODE

The Japan Financial Services Agency (“FSA”) published the “Principles for Responsible Institutional Investors” (the “Japan Stewardship Code”) as of February 26, 2014. (A copy of the Japan Stewardship Code can be found here: http://www.fsa.go.jp/en/refer/councils/stewardship/20140407/01.pdf.)

The stated purpose of the Japan Stewardship Code is to promote sustainable growth of companies in Japan through investment and dialogue. The Code seeks to define principles considered by industry leaders in Japan to be helpful for institutional investors to fulfil their stewardship responsibilities of the companies in which they invest, taking into consideration their contractual, statutory and fiduciary duties to their clients, beneficiaries, and the investee companies. Under the Japan Stewardship Code, stewardship responsibilities of institutional investors include the responsibility to enhance the medium-term to long-term investment return for their clients by nurturing the investee companies’ corporate value and sustainable growth, through constructive engagement and purposeful discourse, based on their in-depth knowledge of the Japanese investee companies and the global business environment in which such companies operate.

Nezu Asia Capital Management Limited agrees to adopt the Japan Stewardship Code on behalf of itself, its affiliates and its related companies (collectively referred to herein as “Nezu Asia”) and is a signatory to the Code in regard to Nezu Asia’s management of Japanese equity securities. We set forth below the manner in which we accept the principles of the Japan Stewardship Code and the way we discharge our stewardship responsibilities thereunder.

Principle 1: Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.
An integral aspect of Nezu Asia’s investment philosophy is comprehensive and continuous research, monitoring and engagement with its investee companies. As part of our investment process, we invest significant effort in conducting thorough due diligence on each investee company to understand each company’s business strategy, long-term view, appetite for risk, and attitude towards corporate governance. As part of our stewardship activities, we actively engage such companies through purposeful dialogue on a wide range of issues and effective exercising of voting rights based on publicly available information, to maximise “corporate value” and to assess whether the company adheres to standards of corporate governance that will support the company’s long-term business and sustainable growth prospects while fulfilling the best interests of its shareholders.

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 a fiduciary, the interests of customers and beneficiaries are our primary concern and we seek to avoid or appropriately mitigate conflicts of interest, including those that arise from voting or other engagement. Our business model, ownership structure and corporate culture seek to align the interests of our customers and beneficiaries with those of our firm.

In compliance with rules and guidelines prescribed by various regulators who supervise us, Nezu Asia adopts a risk-based approach to avoid conflicts of interest and to take these into consideration in the implementation of its policies and procedures. The policy requires all staff to notify Nezu Asia’s compliance team in the event that they become aware of any material conflict of interest. All conflicts of interest are disclosed in Nezu Asia’s relevant reports filed with the regulators.

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 the companies.
As mentioned above, an integral aspect of Nezu Asia’s investment philosophy is comprehensive and continuous research, monitoring and engagement with its investee companies. Nezu Asia not only conducts fundamental research and analysis of investee companies but also engages in dialogue with their management on a daily basis, through thousands of meetings and conference calls each year both in Japan and overseas, as well as attending shareholder meetings, roadshows and conferences.

Nezu Asia’s fundamental research and analysis of an investee company may include consideration of a company’s published reports, accounts and announcements as well as publicly available information provided by brokers and independent research firms and other documents evidencing the corporate governance of such companies (including but not limited to the effectiveness of their board of directors).

Nezu Asia’s investment team conducting such research and analysis is comprised of fund managers, portfolio managers and research analysts. More than half of our investment team are fluent or native Japanese speakers.

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 investee companies.
As mentioned above, we seek to engage in regular discourse with our investee companies through meetings and conference calls in order to identify, understand and appropriately consider relevant investment risks and opportunities. Our investment process requires us to carefully consider both global and local inputs and we seek to take into account all relevant financial and non-financial factors when making investment decisions. Where we feel that our expertise and knowledge can contribute to the enhancement of corporate value of an investee company, we engage with them in a deeper dialogue. We emphasize sound corporate governance as a way to add value to the investment process and believe that stronger governance practices will result in better company and stock performance.

We attempt to discern the appropriate level of engagement on a case by case basis. We normally prefer to engage with companies individually rather than taking collective action with other investors.

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 be designed to contribute to the sustainable growth of investee companies.
All votes we cast are considered in the context of our voting policy, which has been designed to facilitate the collection and analysis of relevant information and casting of votes in a timely manner. All proxies are voted in line with the best interests of our clients. The policy is subject to regular senior management review by the firm's Chief Compliance Officer, Director of Legal, and Management Committee. Proxy voting procedures and record-keeping are the responsibility of the Nezu Asia compliance and operations teams. Where appropriate, the team refers to the relevant Portfolio Manager for voting decisions.

Nezu Asia has appointed a third party proxy voting agent to generally manage the receipt of incoming proxies, provide us with analysis and recommendations related to each vote where we have voting authority, vote most proxies on behalf of its clients and maintain appropriate record-keeping. Although the voting agent provides us with recommendations, we retain ultimate responsibility for all proxy voting decisions we take after careful consideration and each resolution is voted on its merit. Our proxy voting policy is available to our clients upon request.

Principle 6: Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.
Our proxy voting policy is available for our clients and investors upon request. Where it does not conflict with client confidentiality and does not impede the execution of our investment strategies, the manner in which voting rights have been executed may be disclosed to our clients and investors or others if deemed appropriate under the circumstances.

Principle 7: To contribute positively to the sustainable growth of investee companies, institutional investors should have in-depth knowledge of the investee companies and their business environment and skills and resources needed to appropriately engage with the companies and make proper judgments in fulfilling their stewardship activities.
As part of our investment analysis of potential investee companies and our assessment of the sustainable long-term growth of such companies, we seek to gather in-depth knowledge of each company’s capital structure, financial structure, corporate governance practices and business activities through our research and analysis mentioned above.

Our investment team is dispersed among our offices in Hong Kong, Tokyo, Singapore and New York. Our diverse worldwide presence and the international scope of our business gives us perspective in understanding the global context in which Japanese companies must operate in order to succeed.

Although Nezu Asia undertakes its engagement with investee companies on an independent basis, the firm recognizes that discussions with other investors may foster better engagement with investee companies, and does not exclude the possibility of engaging in such dialogue in the event that this is likely to enhance the fulfillment of its stewardship responsibilities.