September 2020
Dalton Investments LLC (together with its affiliated entities, “Dalton”) supports the Japan Stewardship Code and its aim to promote the sustainable growth of investee companies through investment and dialogue with company management. Adoption of the Code is consistent with our value investing discipline and reflects our commitment to capital preservation and long term growth. This statement describes Dalton’s adherence to the principles of the Japan Stewardship Code.
Principle 1: Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.
Dalton supports the Code by thorough analysis of portfolio companies including engagement with management, and thoughtfully voting proxies. These responsibilities are incorporated into our investment process and are summarized in Dalton’s Proxy Voting Guidelines and Proxy Voting Policies and Procedures (the Guidelines and the Policies and Procedures being together “Dalton’s Proxy Voting Policies”) which are (i) available to our clients upon request and (ii) summarized in Part 2A of Dalton’s Form ADV, available on the SEC website at the following location:
https://adviserinfo.sec.gov/firm/summary/109538
These documents explain our voting policy and how we deal with conflict-of-interest and are reviewed and updated at least annually.
Additionally, Dalton has adopted a sustainable investment policy (the “Sustainable Investment Policy”) which covers the integration of environmental, social and governance (ESG) risk analysis into its investment process and its policy on stewardship of client assets. This policy is located on Dalton’s website at the following location:
https://www.daltoninvestments.com/sustainable-investment-philosophy/
Dalton is a signatory to the Principles for Responsible Investment (the “PRI”) and the Climate Action 100+.
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.
We explain our approach to managing conflicts of interest in Dalton’s Code of Ethics and Dalton’s Proxy Voting Policies, which are summarized in Part 2A of Dalton’s Form ADV.
Dalton’s governance structure for monitoring conflicts of interest includes both Dalton’s Chief Compliance Officer and Dalton’s Risk Management Committee, which is composed of senior Dalton executives. Together, they monitor, minimize, and disclose conflicts of interest, including conflicts related to voting. Dalton’s policies and procedures enumerate specific circumstances which can give rise to conflicts of interest.
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.
Dalton typically monitors the companies in which it invests by focusing on alignment of interests between investee company management and shareholders. In conducting their ongoing monitoring, Dalton analysts and portfolio managers consider a variety of resources including company reports and press releases, third-party research, and independent proxy voting advisor reports and recommendations.
Dalton seeks to take an active approach in addressing corporate governance in fulfilling its fiduciary duties. Where possible and when deemed necessary, Dalton will engage companies seeking to promote positive change in matters of corporate governance.
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.
We believe that dialogue with investee companies as well as proxy voting are ways to add value to the investment process and that stronger governance practices will be reflected in better company and stock performance. Through constructive engagement with company management, from a medium term to long term perspective, we believe that we can help promote an investee company’s sustainable growth. Additionally we seek to enhance corporate governance at investee companies through proxy voting. From time to time, Dalton will collaborate with other institutional investors for collective engagement with investee companies, as necessary.
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.
Dalton’s Proxy Voting Policies are summarized in Part 2A of Dalton’s Form ADV available on the SEC website. We disclose our voting activity to the extent required by any applicable regulatory authorities, and we provide our clients periodic updates on our voting activities as required in the respective client agreements or upon client request. When Dalton discloses voting activity, Dalton may disclose its voting activity in the aggregate or on an individual agenda item basis, may disclose the name of any proxy adviser, and Dalton may also explain reasons for voting for or against agenda items.
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.
We keep records of our proxy voting activity. We disclose our voting activity as detailed in our statement regarding Principle 5, above. We also provide our clients periodic updates on our voting activities as required in the respective client agreements.
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.
Dalton’s research team endeavors to develop an in-depth knowledge of investee companies. Dalton uses a number of external resources to deepen its knowledge of business, sustainability, and governance practices at investee companies, including daily market news, proxy voting research and external corporate governance sources, in line with Dalton’s Sustainable Investment Philosophy. Dalton’s Management Committee, comprised of its senior officers including certain portfolio managers, ultimately oversees the firm’s governance activities. In connection with being a signatory to the PRI, Dalton discloses its stewardship activities to the PRI.
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 an investment adviser to institutional investors, we explain our approach to managing conflicts of interest in Dalton’s Code of Ethics and Dalton’s Proxy Voting Policies, which are summarized in Part 2A of Dalton’s Form ADV.