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NEZU ASIA CAPITAL MANAGEMENT LIMITED
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NEZU ASIA’S POLICY REGARDING JAPAN STEWARDSHIP CODE

The Japan Financial Services Agency (“FSA”) published the “Principles for Responsible Institutional Investors” as of February 26, 2014 and revised such principles as of March 24, 2020 (the “Japan Stewardship Code” or “Code”). (A copy of the Japan Stewardship Code can be found here: https://www.fsa.go.jp/en/refer/councils/stewardship/20200324/01.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 (including issues of sustainability), 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 clients 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 clients and beneficiaries with those of our firm. Part of our voting process includes identifying whether specific circumstances may give rise to conflicts of interest which may significantly influence the exercise of voting rights.

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 voting policy requires Nezu Asia’s compliance team, as well as relevant operations personnel and investment personnel to review all identified conflicts to determine whether it is material. All conflicts of interest and the related governance structures 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 portfolio managers and research analysts.

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 and sustainable growth 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 independently rather than taking collaborative 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 review by the firm's compliance team and senior management. Proxy voting procedures and record-keeping are the responsibility of the Nezu Asia compliance and operations personnel. Where appropriate, the team refers to the relevant investment personnel for voting decisions.

Our proxy voting policy is available to our clients upon request. We do not disclose company-specific voting records as a policy.

Nezu Asia reviews its voting policy on an annual basis, including consideration of the effectiveness of its voting policy in the implementation of the principles of the Stewardship Code.

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 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 knowledge of the investee companies and their business environment and consideration of sustainability consistent with their investment management strategies.
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 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.

Nezu Asia is an independent asset manager and is not affiliated with or related to any financial groups.

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.

Principle 8: Service providers for institutional investors should endeavor to contribute to the enhancement of the functions of the entire investment chain by appropriately providing services for institutional investors to fulfil their stewardship responsibilities.
Nezu does not currently utilize proxy advisors or investment consultants for pensions, but generally supports the guidance in Principle 8 in furtherance of the fulfilment of stewardship responsibilities by institutional investors.