Universal Materials Incubator Co., Ltd. (hereinafter referred to as “UMI”), a venture capital company that strives to contribute to the development of Japan’s materials and chemical industries, supports the intent of Japan’s Stewardship Code, and declares its acceptance of this Code.

Assets Covered

This policy and related guidelines apply to private equity, which refers to assets targeted for investments by UMI.

UMI’s approach to the principles of Japan’s Stewardship Code

Principle 1:Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.

Based on its vision of “strengthening Japan’s engineering capabilities and fostering a world-class industrial structure through the development of superior materials and chemical companies,” UMI will promote investments that contribute to the development of Japan’s materials and chemical industries; for example, by seeking out exceptional technologies and engineers, providing risk money and appropriate management support, and developing new industrial structures.

UMI’s investment strategy is to focus on themes that demonstrate universal characteristics and that the materials and chemical industries can undertake as new businesses after ten years, and conduct investment activities that concentrate on supporting Stages 2-3 (the stages from product development to production technologies), which present formidable challenges in the creation of business in the materials and chemical industries in particular. Post investment, we collaborate actively with a broad range of large corporations transcending the boundaries of industries, providing support in reliable business operations.

In order to realize its vision based on Japan’s Stewardship Code, UMI will enhance the corporate value of investee companies and promote their sustainable growth, thereby fulfilling its stewardship responsibilities with the goal of increasing the medium- and long-term investment returns of its clients and beneficiaries, while at the same time contributing to the sustainable growth of society through activities that place a priority on environmental issues in particular.

Principle 2:Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities and publicly disclose it.

In order to avoid conflicts of interest with the funds that it operates, as a rule, UMI shall not make investments based on proprietary trading. Furthermore, as a rule, UMI shall not undertake transactions among multiple funds that it operates. In the event that such transactions are undertaken as an exception, UMI shall ensure fairness among the interested parties through highly transparent and appropriate processes; for example, by complying with applicable laws and fund contracts (Limited Partnership Agreements for Investment) and by explaining measures for avoiding conflicts of interest to fund investors and then obtaining approval for those measures.

Principle 3:Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth of the companies.

Prior to investing, UMI will conduct appropriate due diligence related to legal affairs, accounting, taxation, intellectual property, and business, and shall strive to monitor the status of candidate investee companies. UMI shall engage in dialogs with the management teams of investment candidate companies regarding their capital policies and business plans, at times creating those policies and plans together, and shall undertake investments based on a mutual understanding. Following investments, UMI will accurately monitor the status of investee companies, for example by dispatching directors, attending important meetings, and providing support to front-line employees.

Principle 4:Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.

UMI will share issues and risks related to the investee company’s business and management, as well as issues and risks related to sustainability, and will engage in sincere and direct dialogs with the management team and employees at the investee company to collaborate in resolving those issues and risks. Based on these dialogs, UMI will strive to increase the corporate value of the investee company by providing business support in keeping with the growth stage of UMI in question. In the event that the investee company demonstrates a negative attitude toward resolving the issues, regardless of any dialogs or support provided, UMI shall undertake dialogs with other shareholders and collaborate in pressing the investee company to take action.

Principle 5:Institutional 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.

Following extensive dialogs with investee companies, UMI makes careful judgments from the perspective of whether or not proposals from investee companies tie into the sustainable growth of those investee companies and contribute to medium- and long-term returns for fund investors, and then executes voting rights accordingly. If an investee company is lacking in resources, UMI shall provide support in the operation of Meetings of the Board of Directors and General Meetings of Shareholders, and shall provide support so that the investee company can offer appropriate proposals to shareholders. Because the targets of investments include unlisted companies, we must refrain from publishing the results of executed voting rights.

Principle 6:Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.

UMI reports periodically to fund investors regarding fund management status, performance and outlook for investee companies, and ESG related activities, for example by sending reports or through annual meetings of investors. UMI also uses these opportunities to report appropriately on stewardship activities.

Principle 7:To contribute positively to the sustainable growth of investee companies, institutional investors should develop skills and resources needed to appropriately engage with the companies and to make proper judgments in fulfilling their stewardship activities based on in-depth knowledge of the investee companies and their business environment and consideration of sustainability consistent with their investment management strategies.

UMI’s executives and employees leverage their respective areas of specialization to provide support to investee companies. UMI provides systematic training to executives and employees, so that they can regularly deepen their insights into new business fields and growth markets. By undergoing this training in keeping with their actual duties, executives and employees refine their ability to appropriately identify risks and opportunities and to execute strategies that promote better growth, and at the same time gain experience in actual involvement with the investee company’s business and management. In this way, executives and employees gain a deeper understanding of the companies and businesses, and strive to provide support that contributes to increasing the value of investee companies.

Furthermore, by systematically sharing and accumulating the knowledge cultivated through these activities, UMI will effectively increase the skills of executives and employees, thereby building a structure that can support sustainable growth and resolve issues related to the sustainability of investee companies.

Because a large number of investee companies are unlisted companies, we must refrain from publishing self-evaluations on the status of implementation for the various principles in Japan’s Stewardship Code (including policies).

Principle 8:Service providers for institutional investors should endeavor to contribute to the enhancement of the functions of the entire investment chain by appropriately providing services for institutional investors to fulfill their stewardship responsibilities.

As UMI is not a provider of services for institutional investors, this principle does not apply.