1. Basic Policy on the Exercise of Voting Rights

From the standpoint of fiduciary responsibility in the asset management business, our basic policy on the exercise of shareholder rights is to ensure that investee companies undertake corporate governance in good faith, in line with our aim of ensuring profits for the entrusted party (investment advisor) and beneficiary (investment trust). As we recognize corporate governance to be an important factor in raising investment returns, rather than exercising Voting Rights automatically we endeavor to exercise these rights influentially and in ways that will communicate shareholders' opinions to corporate management. Our exercise of Voting Rights is a substantive way of declaring shareholders' intentions and fulfilling our fiduciary responsibilities.

2. Objectives in Exercising Voting Rights

• Assuming the entrusted party and beneficiaries to be substantive owners, the sole objective behind the decisions we make when exercising Voting Rights is to benefit the entrusted party and beneficiaries.
• When investing in equities, we consider sustained corporate value to be the source of investment returns.
• As corporate governance is particularly influential with regard to (1) good-faith management (2) effective resource deployment and (3) the selection of appropriate investments, we take this as our objective when making decisions in the course of exercising Voting Rights to maximize shareholder value. Rather than focusing exclusively on short-term shareholder returns, corporate management must strike a balance among its returns to all stakeholders, which also include employees, business partners and society. We recognize that maintaining favorable relations with these stakeholders is necessary to maximize shareholder returns over the long term.

3. Guidelines for the Exercise of Voting Rights

In line with our basic policy, when exercising Voting Rights, we express our intentions by voting for or against major proposals such as those outlined below. In principal, we follow the same policy when exercising Voting Rights on foreign equities, while taking into consideration compliance country by country.

1. Appropriation of retained earnings: balance among financial strength, dividend payout ratio, growth, etc.
2. Appointment of directors: instances of misconduct by candidates, concurrent executive positions, independence of outside directors, etc.
3. Appointment of auditors: instances of misconduct by candidates, independence of outside auditors, etc.
4. Appointment of accounting auditor: background for changing the auditor selection, etc.
5. Own-share acquisitions: fairness of shareholder returns, liquidity after repurchasing shares, etc.
6. Granting of retirement allowances: instances of misconduct by parties to be granted allowances, allowances for outside directors and auditors, etc.
7. Changes in director compensation: instances of misconduct by parties to be granted compensation, disparities from general compensation levels, etc.
8. Mergers, acquisitions, transfer and assignment of operations: disclosure of material information, impact on shareholder returns, etc.
9. Stock acquisition rights: qualifications of parties to be granted such rights, conditions for granting rights, etc.
10. Changes to the Articles of Incorporation: increases Board of Directors' authority, background for increases in authorized capital, background for changes in scope of business, etc.
11. Capital reductions: individual judgment from the perspective of restructuring
12. Shareholder proposals: fairness of shareholder returns, etc.
13. Takeover defense measures: approval by the General Meeting of Shareholders, disclosure of material information, independence of decisions to trigger measures, etc.

4. System for Exercising Voting Rights

With regard to the exercise of Voting Rights, equities investment departments within the Investment Division scrutinize proposals, draft proposals for the exercise of Voting Rights, receive approval from the Investment Research Department Manager on Japanese equities and report to the Chief Investment Officer. The Responsible Investment Committee, chaired by the Chief Investment Officer, makes final decisions on such proposals involving companies that have poor operating performance or engage in antisocial behavior. At the end of each month, a report outlining the status of the exercise of Voting Rights is submitted to the Performance Review Committee.