Voting Policy

March 30, 2018
Daiwa Asset Management Co. Ltd.

Daiwa Asset Management Co. Ltd. (hereinafter referred to as “Daiwa Asset Management”) has established Basic Guidelines for Proxy Voting and Criteria for Executing Voting Rights for shares held by Daiwa Asset Management. Although we understand that there are various ways of managing the guidelines and criteria, we believe that disclosing our guidelines and criteria in detail will contribute to constructive dialogue with investee companies. We will constantly review the pros and cons of our disclosures and the suitability of the following contents through constructive dialogue with investee companies.

I. Proxy Voting Basic Policy

1. Basic Policy for Proxy Voting

Daiwa Asset Management will carry out fiduciary duties (responsibilities as a trustee) and exercise voting rights to contribute to the enhancement of corporate value and sustainable growth of investee companies.

In principle, we will exercise the voting rights by judging the pros and cons of the proposals with respect to the shares of all investee companies that we have an authority to exercise without distinguishing between active and passive investments.

The pros and cons of exercising the voting rights shall be judged based on our own initiative. Therefore, following the deliberations by the Stewardship Committee, the Head of the Fund Management Division (the Chief Investment Officer, the CIO) has established the criteria for executing voting rights as shown in Section II below. In principle, voting rights are judged based on those criteria. However, our decision may differ from those criteria if their adoption of the criteria does not contribute to enhancements of corporate value or sustainable growth of investee companies due to particular circumstances and the specialties of business types to which the companies belong, etc.

In addition, we have established the "Stewardship Supervisory Committee" (hereinafter referred to as the "Supervisory Committee"), where the chairperson and the majority of its members are Outside Directors, which oversees stewardship activities in general, reports to the Board of Directors and make recommendations for improving stewardship activities as necessary. With regard to the exercise of voting rights, the Supervisory Committee will from time-to-time amend criteria for exercising voting rights, receives reports on individual proxy voting results and oversee the day-to-day operations from an independent standpoint.

2. Basic Guidelines for Proxy Voting

In principle, we will vote in favor of company proposals, although this does not preclude us from voting against those that may lead to erosion of the corporate value etc.

We aim to make the criteria for executing voting rights as clear as possible with enhanced objectiveness, careful explanation, and make each vote predictable by investee companies so as to contribute to constructive dialogue with investee companies.

In addition, we will constantly review and revise the criteria for executing voting rights as necessary, which should reflect knowledge gained through our dialogue with investee companies, and changes in the society, economy, political situation and business environment etc., so as to enhance corporate value and sustainable growth of investee companies.

We hope that our criteria will be helpful to investee companies in improving their corporate governance.

3. Decision-making Process for Proxy Voting

Based on the Stewardship Activities Rule (internal rule), the CIO will decide whether to approve or disapprove the proposals according to the criteria for executing voting rights reviewed by the Stewardship Committee and will instruct exercise of the voting rights.

However, we do not intend to automatically apply the criteria for executing voting rights whenever we make our decisions. The CIO may decide independently of the criteria after the deliberation by the Stewardship Committee, considering the dialogues with investee companies, in cases where there are proposals from the members of the Stewardship Committee which suggest not to follow the criteria when the decisions may not lead to enhancements of corporate value or sustainable growth of investee companies due to particular circumstances at the company concerned and the specialties of business types to which the company belongs etc.

If the proposed agenda does not fit with the criteria for executing voting rights due to its strong individual circumstances, the CIO will decide independently of the criteria after the deliberations by the Stewardship Committee.

The Stewardship Committee will treat the voting rights as special cases when exercising the voting rights for securities issued by companies with capital relationship (Daiwa Securities Group Inc. and its subsidiaries and its affiliates etc.) and business relationship (companies that are distributors of our Investment Trusts including its parent companies), as it may lead to conflict of interest. For proposals by these companies which should be decided independently of the criteria, we will exercise the voting rights based on the advice by the external proxy advisors so as to avoid conflict of interest and ensure the neutrality of the decision. However, if the advice by the external proxy advisors is inappropriate, for instance due to its reliability, the CIO shall decide whether to approve or disapprove the proposals independently of the criteria after deliberations by the Stewardship Committee. In these cases, we will avoid conflict of interest and ensure our neutrality by reporting to the Supervisory Committee the details and the reasons why the advice was deemed inappropriate, as well as the contents of individual deliberations by the Stewardship Committee, and the decisions by the CIO. In addition, the Stewardship Committee may receive advice from the Supervisory Committee before the individual deliberations by the Stewardship Committee or the decisions by the CIO as necessary.

As for foreign stocks, we will exercise voting rights by considering the local market practice in each country and will refer to external proxy advisors in order to make decision based on the criteria for executing voting rights.

Ⅱ. Criteria for Executing Voting Rights

Daiwa Asset Management shall carefully examine all proposals and exercise voting rights of the domestic investee companies based on the following criteria.

(1) Appointments of Senior Managing Directors (excluding Outside Directors)

In principle, we will vote in favor of the company proposals. However, we will vote against the reappointments of Senior Managing Directors (excluding Outside Directors) of companies in the following cases.

1. The reappointments of the candidates (including new candidates who used to serve as Executive Officers including Corporate Auditors etc.) for companies (to be considered independently) which committed a major violation of the law or misconduct by executives and employees of companies or corporations and have not taken corrective measures to prevent its recurrence.

2. The reappointments of candidates who served more than the last three terms (fiscal year), for which it has been deemed inappropriate in terms of the past earnings results or capital allocations (in case of companies with nominating committee etc., the tenure of the Executives will also be considered). However, exceptions could be taken for some types of industries.

(*) The criteria for judging problematic earnings results or capital allocations are the following conditions

·Condition 1: Falling under any of the following criteria (i) - (iii) and also falling under the criteria (iv).
i) Companies that are making losses for the past three consecutive fiscal years
ii) Companies which the Return on Equities, ROEs for the last three fiscal years are all below the low 33% level of the same industry group ranking.
iii) Companies which the ROEs have been declining for the past two consecutive fiscal years and are below the low 33% level of the same industry group ranking for the last fiscal year and have been deemed problematic.
iv) Companies which the Price-to-Book ratio (based on the latest fiscal-year-end) has been falling below the low 33% level of the same industry group ranking.

·Condition 2: Falling under any of the criteria (i) - (iii) of the Condition 1 and the Investor Relations, IR activities are deemed to be extremely inadequate.

(Notes) The industry classification is based on the TOPIX-17 Series by the Tokyo Stock Exchange.

3. Reappointing candidates where the company has no Outside Directors under the Companies Act.

In addition, we will oppose to the Representative Directors (or Representative Executive Officers) of companies that fall under the following.

4. Reappointing candidates who have served as Representative Directors (or Representative Executive Officers) and were appointed as Senior Managing Directors for more than three consecutive fiscal years and have served for companies which have been deemed insufficient in terms of capital allocation while maintaining excess capital and cash, and have a low dividend payout ratio, and are not improving in terms of its usage of capital.
However, companies falling under below criteria are excluded.
(i) Proposals for surplus disposals are being put on agenda at the same time
(ii) Belonging to the financial sector. In addition, companies that do not belong to the financial sector and have high exposure to the financial related business may also be excluded.

(*)The criteria for maintaining excess capital or cash, low dividend payout ratio and insufficient capital allocation are the following all three conditions. We will monitor companies that fall under these criteria and will decide whether they are improving or not.

· Condition 1: Falling under one of three conditions of the following criteria (i)- (iii).

(i) The capital ratio is 75% or more
(ii) Cash and Cash Equivalents to Total Assets is 50% or more
(iii) Cash and Cash Equivalents is more than 2/3 of total sales

· Condition 2: The Dividend on Equity (DOE) is less than 2%

· Condition 3: The ROE is below the top 33% level of the same industry group and it does
not exceed 8% (excluding companies falling under “2.” above) for the past two out of the last
three fiscal years.

5. Reappointing candidates who have served as Representative Directors (or Representative Executive Officers) in companies which introduced or continued to take takeover defense measures by the resolution of the Board of Directors, and are against the criteria in "(17) Introduction and Continuation of Takeover Defense Measures”.

(2) Appointments of Outside Directors

In principle, we will vote in favor of company proposals. However, we will oppose to candidates who fall under the following criteria.

1. Reappointment candidates (including new candidates who used to serve as Executive Officers including Corporate Auditors etc.) in companies which committed a major violation of the law or misconduct by executives and employees of companies or corporations and have not taken corrective measures to prevent its recurrence.

2. Candidates judged as having problems with regard to the independence .
(*) It would be on the issue only when the majority of the Board of Directors does not consist of independent outside directors, and the criteria with regard to the independence of candidates are falling under any of the following conditions.
·Condition 1: Not stated as "Independent officers" or "met the requirements of independent officers" of the Tokyo Stock Exchange (including other domestic exchanges) in the notice of general meeting of shareholders.
·Condition 2: Belong(ed) to major shareholders (holding 10% or more stake) or to the parent company, subsidiaries and affiliate companies (however, if the candidates have retired more than 5 years ago, the Condition will not be applied)

3. Candidates judged as having problems with regard to the attendance at the Board of Directors and the other applicable committees
(*) The criteria for judging the issues with regard to the attendance at the Board of Directors
are the following conditions.
·Condition 1: Reappointment candidates whose attendance rate at the Board of Directors is less than 75%.
·Condition 2: New candidates who have been transferred from Outside Corporate Auditors, whose attendance rate at the Board of Directors or the Board of Corporate Auditors during the time of the appointments as an Outside Corporate Auditor is less than 75%.

4. Candidates who have a long term tenure as Outside Officers (12 years or more tenure as officers as of the general meeting of shareholders).

(3) Appointments of Corporate Auditors (excluding Outside Corporate Auditors)

In principle, we will vote in favor of company proposals. However, we will oppose to reappointment candidates (including new candidates who have been transferred from other Executive Officers such as Senior Managing Directors) in companies which committed a major violation of the law or misconduct by executives and employees of companies or corporations and have not taken corrective measures to prevent its recurrence.

(4) Appointments of Outside Corporate Auditors

In principle, we will vote in favor of company proposals. However, we will oppose to candidates who fall under the following criteria.
1. Reappointment candidates (including new candidates who has been transferred from other Executive Officers such as Senior Managing Directors) of companies which committed a major violation of the law or misconduct by executives and employees of companies or corporations and have not taken corrective measures to prevent its recurrence.
2. Candidates judged as having problems with regard to the independence
(*) For criteria to judge whether there are problems on the independence, see Condition 1 and Condition 2, Clause 2 “(2)Appointments of Outside Directors”.
3. Candidates judged as having problems with regard to the attendance at the Board of Directors and the other applicable committees
(*) The criteria for judging the issues with attendance at the Board of Directors are whether the attendance rate at the Board of Directors or the Board of Auditors of reappointment candidates is less than 75%.
4. Candidates who have long term tenures as Outside Officers (12 years or more tenure as Outside Officers as of the general meeting of shareholders).

(5) Appointments of Senior Managing Directors which are members of Companies with Audit and Supervisory Committee or Audit Committee Members of Companies with Nominating Committee etc.

We will apply the criteria according to the policy of appointing Corporate Auditors. Besides, on the criteria for judging the issues with regard to the independence of candidates for Outside Directors, see Clause 2, (2) Appointments of Outside Directors And in the following criteria, when stated as "Corporate Auditors", it includes Senior Managing Directors as members of Companies with Audit and Supervisory Committee or Audit Committee Members as Senior Managing Directors of Company with Nominating Committee etc.

(6) Appointments of candidates for Executive Officers at vacant positions

We will respect the proposals from the company.

(7) Appointments of Financial Auditors

In principle, we will vote in favor of company proposals. However, we will consider independently of the criteria for companies which committed a major violation of the law in terms of accounting or financing, by executives and employees of companies or corporations, and have not taken corrective measures to prevent its recurrence, and those companies with notes related to Going Concern Assumptions.

(8) Establishments and revisions of Executive Officers’ remunerations and Executive Officers’ bonus payments

In principle, we will vote in favor of company proposals. However, we will oppose to the proposals to increase compensations for Executive Officers (including cases when the compensations are increased due to decrease in the number of executives, but excluding cases when deciding remunerations for Senior Managing Directors who are member of Companies with Audit and Supervisory Committee) and the proposals to pay bonuses to Executive Officers in companies that fall under the following criteria.

1. Companies which have committed a major violation of the law or misconduct by executives and employees of companies or corporations and have not taken corrective measures to prevent its recurrence.

2. Companies which have issues in terms of earnings results or capital allocations. However, exceptions could be taken for some types of industries.

(9) Payments of Retirement Benefits for Executive Officers

In principle, we will vote in favor of company proposals. However, we will oppose to proposals which fall under the following criteria.

1. Companies which have committed a major violation of the law or misconduct by executives and employees of companies or corporations, and that the retirement benefits were paid to Executive Officers during the tenure.

2. Payments to Outside Directors or Outside Corporate Auditors
* We will vote in favor of the company proposals for Outside Officers if the termination of the payments has been put on the agenda at the same time.

(10) Introduction of Performance-Linked Remunerations

In principle, we will vote in favor of company proposals. However, we will vote against the proposals when the applicable persons are not appropriate (if the applicable persons include Corporate Auditors or Outside Directors).

(11) Granting of Stock Options

In principle, we will vote in favor of company proposals. However, we will vote against the proposals when there are significant dilutions of the share value and when the applicable persons are deemed inappropriate.

(*) The criteria for judging significant dilutions of share value correspond to any of the following conditions.
·Condition 1: When granting more than 10% of the total number of shares outstanding.
·Condition 2: In case of stock based compensations, the maximum number of share issuance per year exceeds 1% of the total number of shares outstanding.
(*) The criteria for judging that persons to be granted are deemed inappropriate correspond to any of the following conditions.
·Condition 1:When the applicable persons include Corporate Auditors or Outside Directors .
·Condition 2: When the applicable persons include Business Partners (except when the purpose of the granting is acquisition related or third-party allocations of shares). .

(12) Proposals for Surplus Disposals

If the shareholder proposals are being put on agenda at the same time, we will consider it independently (we will consider the growth potentials from utilizing the retained earnings), and if there are no shareholder proposals, we will vote in favor of the proposals in principle. However, we will vote against the proposals when it falls under the following criteria.

1. When companies have issue on its financial condition.

(*) The criteria for judging issues with regard to the financial condition of companies are those that are making losses for the past three consecutive fiscal years, or those that have a capital ratio of 10% or less and a dividend payout ratio of 100% or more (including companies which pay dividends while making losses but excluding companies belong to financial sector).

2. Companies which have been deemed insufficient in terms of capital allocation while maintaining excess capital and cash, and have a low dividend payout ratio, and are not improving in terms of its usage of capital
(*) The criteria for judging insufficient in terms of capital allocation while maintaining excess capital and cash, and have a low dividend payout ratio, see Clause 4, "(1) Appointments of Senior Managing Directors (excluding Outside Directors)”.

(13) Reverse Stock Split

In principle, we will vote in favor of company proposals. However, we will oppose to the proposals if substantial dilution of the share value are involved.

(*) The criteria for judging that substantial dilution of share value are if it involves substantial increase in the total number of issuable shares and if it exceeds more than twice the current number of shares outstanding.

(14) Share Repurchases (setting upper limits)

In principle, we will vote in favor of company proposals. However, if the shareholder proposals are being put on agenda at the same time, we will consider it independently by assessing the growth potentials from utilizing the retained earnings.

(15) Capital increases through third-party allocation

We will consider it case by case (taking into consideration the significance and the effectiveness of the capital increases, the relevance of the issue price and the allocated third-parties, etc., comprehensively judging with reference to the reaction of the stock market after the announcements). Particularly for proposal of treasury share disposal by allotment to a third-party foundation, we consider the following points in voting.
・The allotment to the foundation including stock options does not exceed 10% of the total number of shares outstanding.
・The voting rights of the allotted shares are delegated to a party independent from the company or the foundation and are exercised by the delegate’s initiative.

(16) Mergers, Corporate Divestitures, Share Exchanges, Share Transfers

We will consider it case by case (taking into consideration the significance and effectiveness of the merger transactions, the appropriateness of the integration ratio, etc. comprehensively judging with reference to the reaction of the stock market after the announcements).

(17) Introduction and Continuation of Takeover Defense Measures

1. We will oppose to the takeover defense measures that will not lead to securing or enhancing the corporate value and common interests of the shareholders, due to the possibility of arbitrary implementations by the management team of the company, etc.

(*) The criteria that may not lead to securing or enhancing corporate value / common interests of shareholders corresponds to any of the following conditions.
· Condition 1: The measures can be invoked only by the resolutions of the Board of Directors not confirmed by or ignoring the shareholders’ resolution and it has possibilities for invocations not by the requirements below.

1) The acquirer does not comply with the Large-Scale Purchase Rules.

2) The so-called Tokyo High Court 4 Types.

3) The so-called Compulsive Two-Step Acquisitions.

4) When the acquirer is clearly inappropriate from the viewpoint of public order and morals, such as when the acquirer includes persons related to anti-social forces.

· Condition 2: It does not meet any of the requirements below. However, this condition is not applied if there is a system to get confirmed by shareholders for invoking the Takeover Defense Measures to counter the offer which is in line with the Large-Scale Purchase Rules.

1) The decisions are made by third-party organizations (such as an Independent Committee) where a majority of the members of the third-party organization satisfies the independence.

2) A majority of the members of the Board of Directors are Outside Directors which satisfies the independence.

· Condition 3: The evaluation period of the acquirer exceeds 90 days (+ extension of 30 days).

· Condition 4: The expiration date of takeover defense measures exceeds 3 years.

2. We will oppose to companies that have insufficient corporate governance structures (companies that do not have multiple Outside Directors that have the independence).

3. When an acquisition is already anticipated at the introduction, we will consider it independently.

(18) Reduction of Capital

In the case of nominal capital reduction, we will vote in favor of the proposals in principle. However, in the case of 100% capital reduction and in the case of substantial capital reduction with refunds, we will consider them independently.

(19) Changes to the Articles of Incorporation

As for the proposals to amend the articles of incorporation, we will vote in favor of the following proposals.

1. Changes relating to company profiles (e.g. change of company name, fiscal year, headquarter location etc.).

2. Changes in public notice methods (e.g., adoption of electronic public notice etc.).

3. Changes to the provisions of the Share Handling Regulations (Rules).

4. Reduction of the total number of issuable shares.

5. Changes to the number of lot shares.

6. Regulations on shares less than the lot shares (including rights restriction).

7. Changes related to General Shareholders Meetings (e.g. change of the meeting place, introduction of Internet Disclosure System, change of reference date, etc.).

8. Relaxation of quorum of special resolutions.

9. Transition to a company with nominating committee, etc..

10. Transition to a company with audit and supervisory committee.

11. Changing the number of Executive Officers.

12. Changing the tenure of Senior Managing Directors.

13. Easing of dismissal requirements of Senior Managing Directors (transition to ordinary resolutions).

14. New establishments and abolitions of positions.

15. Setting the effect of resolutions for appointing Substitute Corporate Auditors and its tenure.

16. Limited liabilities for Senior Managing Directors, Corporate Auditors, and Financial Auditors.

17. Delegations to Senior Managing Directors with regard to decisions on important business executions by the resolutions of the Board of Directors.

18. Introduction of written resolutions at the Board of Directors.

19. Modifications and changes of wording.

We oppose to the following proposals to amend the articles of incorporation.

1. A Staggered Board.

2. Stricter requirements for removing Senior Managing Directors.

Among proposals to amend the articles of incorporation, our decision may vary depending on the circumstances for the following proposals.

1. Expansion of total number of issuable shares.

We will vote in favor of the proposals in principle. However, with regard to the expansion of the total number of issuable shares, we will vote against the proposals when there are no clear reasons (or the reason is set as a flexible capital policy) or there is a concern that a significant dilution could occur which leads to substantial erosion of corporate value (when the total number of issuable shares after expansion are more than twice the total number of current shares outstanding). Also, if it relates to takeover defense measures, it is in accordance with the criteria of takeover defense measures.

2. Dividends from surplus and share repurchases by resolutions of the Board of Directors.
We will vote in favor of the proposals in principle. However, if the shareholder proposal rights are excluded, we will vote against the proposals.

3. Issuances of Class Shares.

We will consider independently and vote in favor of the proposals if it does not erode the corporate value. Also, we will vote in favor of the proposals aimed for Squeeze-Outs.

4. Introduction of takeover defense measures.

We will make the same decisions as the agendas for takeover defense measures (Refer to "(17) Introduction and Continuation of Takeover Defense Measures").

In principle, we will vote in favor of the proposals for other amendments to the articles of incorporation. However, if there are risks of eroding corporate value, we will consider it independently.

(20) Other Agendas of Company Proposals

We will vote in favor of the proposals in principle. However, if there are risks of eroding corporate value, we will consider it independently of the criteria.

(21) Agendas of Shareholder Proposals

The criteria for executing voting rights for agendas by shareholder proposals are judged whether or not the shareholder proposals will contribute to an increase in the corporate value.

In the shareholder proposals, we will vote in favor of the following proposals.

1. Proposals for dismissal (refusal to reappointments) of Senior Managing Directors which are against our criteria for executing voting rights (Refer to "(1) Appointments of Senior Managing Directors (excluding Outside Directors)" through "(2) Appointments of Outside Directors"). However, candidates who will retire as of the general shareholders meeting are excluded.

2. Proposals that shortens the tenure of Senior Managing Directors.

3. Proposals that mandates the introduction of Outside Directors.

4. Proposals to limit the liability of Senior Managing Directors and Corporate Auditors.

5. Proposals requiring disclosures of the attendance rate of Outside Officers at the Board of Directors (and Board of Auditors).

As for the shareholder proposals, we will oppose to the following proposals.

1. Proposals for appointing Senior Managing Directors and Corporate Auditors.

2. Proposals for dismissal (refusal to reappointments) of Executive Officers which are acting within our criteria for executing voting rights.

3. Limiting / changing the number of Senior Managing Directors and Corporate Auditors.

4. Disclosure of remuneration by each individual Executive Officer.

5. Changing the handling of blank votes.

Among the agendas by shareholder proposals, our decision may vary depending on the circumstances for the following proposals.

1. Proposals for dismissal (refusal to reappointments) of Corporate Auditors which are against the criteria for executing voting rights.
(Refer to "(3) Appointments of Corporate Auditors (excluding Outside Corporate Auditors)" through "(4) Appointments of Outside Corporate Auditors".)

2. With regard to the proposals for increasing the number of words suggested by shareholders, we will vote in favor of the proposals if the company has restricted the number of words.

In principle, we will vote against the other agendas by shareholder proposals. In particular, we will vote against proposals that impose constraints on business unless there are special reasons. However, when the agendas by shareholder proposals (proposals for Surplus Disposals, Share Repurchases, etc.) may contribute to the enhancement of corporate value, we may consider and vote in favor of the proposals independently.