Rheos Capital Works Inc. (hereinafter, “the Company,” or “We”) is an independent investment management firm established in 2003. The Company is a Japan-based financial instrument business operator and is a member of The Investment Trusts Association, Japan, and the Japan Investment Advisors Association.
The Company accepts the “Principles for Responsible Institutional Investors (Japan’s Stewardship Code)” and our conduct policies are outlined below. (Revised on September 13, 2017.)
Following the discussions of the Industrial Competitiveness Council under the auspices of the Headquarters for Japan’s Economic Revitalization, and as instructed by the Prime Minister (in his role as the chief of the Headquarters), the Cabinet approved in 2013 the Japan Revitalization Strategy, which states that “with the aim of promoting the sustainable growth of companies, principles for a wide range of institutional investors to appropriately discharge their stewardship responsibilities” should be discussed and drafted. Based on the discussions of the Council of Experts Concerning the Japanese Version of the Stewardship Code, the following seven principles were established by the Financial Services Agency.
Principle 1Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.
We believe that constructive dialogue and engagement with companies, based on the principles of Japan’s Stewardship Code, fosters those companies’ medium- to long-term growth as well as enhances the return on investments for our clients and beneficiaries. As asset managers acting in accordance with Japan’s Stewardship Code, we will invest the funds our clients have entrusted to us in the equity markets.
Principle 2Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.
We adhere to internal guidelines to appropriately manage any transactions which may potentially be of conflict of interest so that our clients’ and beneficiaries’ interests will not be unduly harmed. Additionally, operational procedures based on this Principle are routinely monitored by a Fiduciary Duty Committee (hereinafter, “FD Committee”), where the majority of the members are outside experts.
Principle 3Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation toward the sustainable growth of the companies.
Comprehensive, continuous and ingenious proprietary research and monitoring of investee companies is essential to our investment and management process. In order for our investment and management process to be effective as well as to meet this Principle, our investment professionals will accurately grasp the condition of a company and be closely attuned to any changes by proactively visiting investee companies to interview management, etc.
Principle 4Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.
We believe that respectful and constructive dialogue with investee companies fosters those companies’ sustained growth as well as enhances the return on investments for our clients and beneficiaries. Through our investment and research activities based on purposeful dialogue, we strive not only to have a positive impact on the growth of investee companies but also to yield beneficial results for society.
Principle 5Institutional 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.
We exercise proxy voting rights in accordance with internal regulations. While we disclose proxy voting results, we will disclose individual results solely in the case of ‘against votes’ at the end of the year (after a period of six months or more has passed) for the following reasons:
1) In reflection of our basic investment stance to entrust the management of a business to the executive team of investee companies, the percentage of ‘supporting votes’ has been close to 100%. As such, we feel the necessity for disclosure of company-specific voting records on an individual agenda item basis is very limited.
2) Although we view the exercising of proxy voting rights as an important means of dialogue with the investee company, we place greater value on engagement based on daily dialogue. We will indicate our opposition by the sale of shares, etc. if we are not in agreement with the management policies of an investee company.
3) Disclosure of company-specific voting records on an individual agenda item basis will allow our portfolio position (of our main investment products “Hifumi Fund,” “Hifumi Plus,” and “Hifumi Nenkin”) to be speculated, which may potentially harm the interests of our beneficiaries. Therefore, our policy on disclosure of voting activity is as indicated above.
Principle 6Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.
We publish our Proxy Voting Guidelines and our proxy voting results (regarding companies whose annual shareholders’ meeting are held in May and June of each year) on our Company web site. Furthermore, we will disclose individual results solely in the case of ‘against votes’ at the end of the year en bloc (after a period of six months or more has passed), as mentioned in Principle 5.
Principle 7To contribute positively to the sustainable growth of investee companies, institutional investors should have in-depth knowledge of the investee companies and their business environment and skills and resources needed to appropriately engage with the companies and make proper judgments in fulfilling their stewardship activities.
Our proprietary research and investment process is designed in a manner which allows our associates to gain insight, knowledge and experience. This process is repeated daily so that we may collectively attain the skills necessary to have creative and constructive dialogue with companies. In order to accelerate learning and further elevate the level of insight and knowledge, we also maintain an environment which encourages our associates to have frequent discussions with senior fund managers. Additionally, operational procedures based on this Principle are routinely monitored by the FD Committee, where the majority of members are outside experts.