Basic Orientation and Guidelines for Proxy Voting

Basic Orientation for Proxy Voting

I. Basic Stance towards Proxy Voting

1. Basic Stance towards Proxy Voting

Daiwa Asset Management Co. Ltd. (hereinafter referred to as "Daiwa Asset Management") shall exercise voting rights with respect to stocks held in investment trust funds which Daiwa Asset Management has the fiduciary power to manage ("Our Funds"), reflecting the spirit of the investment philosophy of Daiwa Asset Management. Our investment philosophy is distinguished by two key goals: we aim to enhance shareholder value of the stocks over the mid-to-long term and to fulfill our fiduciary duties of fidelity and care in good faith to beneficiaries of Our Funds.

2. Decision-making Process for Proxy Voting

The Corporate Governance Committee of Daiwa Asset Management (Chairperson: Chief Investment Officer) is responsible for determining how the voting on proxies shall be done on behalf of Our Funds and in accordance with the Corporate Governance Committee Regulations (company regulations).

Proxies relating to foreign stocks shall be voted in view of relevant facts and circumstances regarding proxy voting in each country. In the decision-making process the advice from external-specialized agencies can be used if needed.

II. Proxy Voting Guidelines

1. Definition of Screening Criteria for shares in our portfolio

Each agenda proposed for the shareholders' meetings shall be carefully examined in detail. These guidelines define screening criteria for any company that falls under any of following items:

• (1) Companies that have been involved in violations of the laws and regulations or have been involved in anti-social actions.
• (2) Companies of which the executives and/or employees have been involved in violations of the laws and regulations or have been involved in anti-social actions.
• (3) Companies that have problems in terms of the operating results
• (4) Companies that have problems in terms of efficiency of utilization of the shareholders' equity
• (5) Companies that are going to merge or split the business
• (6) Companies that have received any proposal by the shareholders at the shareholders' meetings
• (7) Subsidiary companies of listed companies that are also listed
• (8) Companies with management committees
• (9) Companies that have committed actions especially to damage the shareholder value, other than (1) to (7) set forth above

2. Basic Stance towards Specific Proposals in Shareholders' Meetings

(1) Appointment of directors

Daiwa Asset Management shall generally vote for management proposals to appoint directors. However, nominees for reappointment can NOT be affirmatively considered in regard to such companies that fall under any of following conditions.

1. Companies that meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions.
2. Companies that meet (2) or (3) of Section 1. Definition of Screening Criteria set forth above and are not yet expected to improve such problems.

(2) Appointment of outside directors

Daiwa Asset Management shall generally vote for management proposals to appoint outside directors. However, each nominee for reappointment in respect to such companies that fall under any of following conditions shall be carefully considered based on their independence and their attendance at the board meetings.

1. Companies that meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions
   
   ¹ Operating results include, but are not limited to, consolidated profit and loss statements (or non-consolidated profit and loss statements in the absence of consolidated ones) record overall deficits for three consecutive terms.
   ² Utilization of the shareholders' equity includes, but is not limited to, consolidated profit and loss statements (or non-consolidated profit and loss statements in the absence of consolidated ones) record low-level ROE (Return on Equity) for three consecutive terms.
2. Companies that meet (2) or (3) of Section 1. Definition of Screening Criteria set forth above and are not yet expected to improve such problems
3. Companies that meet (6) of Section 1. Definition of Screening Criteria set forth above
4. Companies that meet (7) of Section 1. Definition of Screening Criteria set forth above

(3) Appointment of corporate auditors

Daiwa Asset Management shall generally vote for management proposals to appoint corporate auditors. However, nominees for reappointment can NOT be affirmatively considered in regard to such companies that meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions.

(4) Appointment of outside corporate auditors

Daiwa Asset Management shall generally vote for management proposals to appoint outside company auditors. However, any nominee who falls under any of following conditions can NOT be affirmatively considered.

1. 1Nominees whose companies meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions
2. Nominees who are judged to have problems in terms of their independence and/or the rate of attendance at the board meetings.

(5) Ratification of accounting auditors

Daiwa Asset Management shall generally vote for management proposals to ratify accounting auditors after due consideration.

(6) Officers' Remuneration

Daiwa Asset Management shall generally vote for management proposals regarding remuneration to officers. However, each management proposal shall be carefully considered in regard to such company that falls under any of following conditions.

1. Companies that meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions
2. Companies that meet (2) or (3) of Section 1. Definition of Screening Criteria set forth above and are not yet expected to improve such problems

(7) Retirement bonuses to officers

Daiwa Asset Management shall generally vote for management proposals regarding retirement bonuses to officers. However, each management proposal shall be carefully considered in any case that falls under any of following conditions.

1. Nominees are judged to have been involved in serious violations of the laws and regulations or anti-social actions during their terms in the positions as officers, in any company that meets (1) of Section 1. Definition of Screening Criteria set forth above.
2. Nominees include outside directors and/or outside corporate auditors.

(8) Provision of stock options

Daiwa Asset Management shall generally vote for management proposals regarding provision of stock options, unless the provision causes significant dilution of the stock value, and/or, unless the nominees are inappropriate.

(9) Appropriation of surplus

Daiwa Asset Management shall generally vote for management proposals regarding allocation of income. However, each management proposal shall be carefully considered from the mid-to-long term perspective in regard to any company that meets (3) of Section 1. Definition of Screening Criteria set forth above.

(10) Acquisition of treasury stocks (setting acquisition quotas)

Daiwa Asset Management shall generally vote for management proposals regarding acquisition of treasury stocks. However, each management proposal shall be carefully considered in case that acquisition of treasury stocks may damage shareholder value or acquisition of full quota seriously affects the company's financial condition.

(11) Allocation of new shares to a third party

Daiwa Asset Management shall generally vote for management proposals regarding allocation of new shares to a third party after due consideration.

(12) Mergers and acquisitions, splits of business, etc.

Daiwa Asset Management shall generally vote for management proposals regarding mergers and acquisitions and splits of business, etc. after due consideration.

(13) Introduction of Poison Pills (anti-takeover measures)

Daiwa Asset Management shall generally vote against management proposals to introduce any poison pills (anti-takeover measures) in regard to such company that falls under any of following conditions.

1. Companies that meet (3) of Section 1. Definition of Screening Criteria set forth above and are not yet expected to improve such problems
2. Companies that meet (1) of Section 1. Definition of Screening Criteria set forth above and have not yet taken any adequate countermeasures against recurrence of such violations or anti-social actions
3. Companies that have problems in terms of the corporate governance.

Daiwa Asset Management shall vote on a case-by-case basis such management proposals in any case that falls under any of following conditions.

1. A company is being targeted in a takeover attempt.
2. Introduction of poison pills (anti-takeover measures) may damage shareholder value.

(14) Amendments to the articles of association

1. Increase in the total number of authorized shares
   

   Daiwa Asset Management shall generally vote for management proposals to increase the total number of authorized shares. However, each management proposal shall be carefully considered in any case that falls under any of following items.

   • 1) Increase in the total number of authorized shares may cause significant dilution of the stock value that may damage shareholder value
   • 2) Increase in the total number of authorized shares is related to any kind of poison pills (anti-takeover measures).
2. Delegation of authority to board of directors and elimination from resolution of shareholders' meetings regarding appropriation of surplus.
   

   Daiwa Asset Management shall consider on a case-by-case basis management proposals to delegate authority for appropriation of surplus to board of directors in view of the corporate governance. However, Daiwa Asset Management shall vote against management proposals to eliminate appropriation of surplus from resolution of shareholders' meetings.

3. Introduction of management committee systems
   

   Daiwa Asset Management shall generally vote for management proposals to introduce management committee systems carefully considering the independence of the outside directors.

4. Strengthening of conditions to dismiss directors
   

   Daiwa Asset Management shall generally vote against management proposals to require tighter condition to dismiss directors.

5. Indemnification and liability protection of directors, corporate auditors and accounting auditors
   

   Daiwa Asset Management shall generally vote against management proposals to indemnify directors, corporate auditors and accounting auditors and/or to protect them from their liabilities. However, such proposals regarding external officers shall be affirmatively judged.

6. Issuance of class shares
   

   Daiwa Asset Management shall generally vote for management proposals to issue class shares. However, each management proposals shall be carefully considered in any case that falls under any of following items.

• 1) Issuance of class shares may cause significant dilution of the stock value that may damage shareholder value.
• 2) Issuance of class shares is related to any kind of poison pills (anti-takeover measures).
• 3) Lack of sufficient reasons for issuance of class shares.

(15) Shareholder Proposals

Daiwa Asset Management shall vote on a case-by-case basis on shareholder proposals based on whether or not the proposals contribute to enhance shareholder value.