1. Purpose
The purpose of this guideline is to set out basic principle for our proxy voting and to provide clear standards and decision-making process to abide by our fiduciary’s duties.
2. Basic Principle
VARECS, as a fiduciary, to abide by the fiduciary’s duty, based on the engagement with the investees and other factors which should be considered, exercise voting rights to increase and protect the investee’s value. For the avoidance of doubt, in the circumstance where we can consider the investee’s business performance and value will be improved in light of our communication with the investee, or in any other similar circumstances, we can vote for regardless of the below.
3. Standards
The below is basic standards for decision making as to each proposal.
(1) Income Allocation/Dividends
We review the proposal of the dividend distribution if it aligns with maximizing medium/long-term company’s value on the ground of its stage in business lifecycle, profitability of the business, external business environment, financial condition, investment plan.
(2) Voting on Director/Statutory Auditor Nominees
We will review if the Board of Directors etc. is consisted of the members who can assure the company meeting corporate governance standards. We also review if the nominee is considered being suitable to delegate management of the company to maximize medium/long-term shareholder value.
(3) Voting on Outside Director/Outside Statutory Auditor Nominees
We regard Outside Director and Outside Statutory Auditor as the person acting on behalf of the shareholders. Therefore, we will check if they are really independent and if they are able to perform their obligation to maximize medium/long-term shareholder value.
(4) Annual Bonuses/Retirement Bonuses/Stock Option Plans etc.
We will check if it is appropriate considering the company’s performance and shareholder return. In addition, we will review if the proposal will contribute to increasing future Company’s value and shareholder value.
(5) Article Amendment
The proposed amendment shall be reviewed if it will contribute to protect or enhance shareholder right and if existing shareholders’ rights will be restricted without reasonable basis.
(6) Mergers/Acquisitions, Capital Policies
Mergers, Acquisitions, Business Transfer, or other proposals relating to company’s business position or capital structure, shall be reviewed one by one basis if those proposals contribute existing shareholders’ interest and enhance medium/long-term shareholder value.
(7) Takeover Defense Plan
We will review if it will contribute to the benefit of the existing shareholders.
(8) Shareholder Proposal
We will review if the proposal will increase long term shareholder value. Then, we will also examine if the proposal is beneficial to all shareholders.
4. Decision-Making Process etc.
(1) Investment Advisory Group is responsible for the exercise of proxy voting.
(2) In light of our fiduciary duty, in principle, we will vote all proposals.
(3) We exercise our voting right for the benefit of our clients. We do not use our voting power to pursues the interests of ourselves nor any third party.
(4) We engage the investees using their disclosure materials and communicate with them. We exercise voting rights based on our engagement to increase investee’s value.
(5) As to proposal which we regard as “Problematic”, we record the reason why we think it is “Problematic” and the reason of our decision. In addition, we maintain these records with the convocation notice of the shareholder meeting and the copy of the voting instruction to the custody until five (5) years after the instruction date. As to the proposal which is not “Problematic”, we maintain the convocation notice of the shareholder meeting and the copy of the voting instruction to the custody until five (5) years after the instruction date.
(6) When the client requests us to report our proxy voting result, we will report it to the client.