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Foreign Fund Proposals Rejected at Japan AGMs

Activist overseas funds lost battles against Japan's J-Power and NipponKoa Insurance on Thursday, as shareholders knocked back moves to oust management and win dividend hikes.

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CNBC.com
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J-Power's stock sank 6 percent on the news while NipponKoa edged slightly higher, rising 0.6 percent to 965 yen.

Expectations that Japan's traditionally compliant shareholders would be more vocal had been fuelled after the surprise success of U.S. hedge fund Steel Partners in forcing management change at wig maker Aderans last month.

But management at electricity wholesaler Electric Power Development, better known as J-Power, prevailed with shareholders rejecting proposals for management change, dividend hikes, a limit on cross-shareholdings and more share buybacks.

The measures had been proposed by The Children's Investment Fund (TCI), which is the utility's biggest shareholder with a 9.9 percent stake and which has long locked horns with the company.

Earlier this year, the government prevented TCI from doubling its stake in J-Power to 20 percent, the first time Japan has blocked a foreign investor on national security grounds.

Shareholders of NipponKoa voted to re-elect chief executive Makoto Hyodo, rebuffing an attempt by U.S. fund Southeastern Asset Management to oust him on the claim he delivered subpar returns.

The fund suggested NipponKoa adopt a business model based on Warren Buffett's Berkshire Hathaway. This would include the complete separation of its investing and underwriting operations.

Southeastern has also proposed that NipponKoa consider a merger or alliance with another non-life insurance company or financial firm strong in investment management.

NipponKoa has countered that it is trying to reward investors and improve its corporate governance.

It sought and got approval to add two more outside directors at the shareholders' meeting on Thursday, giving it four outside directors out of 10.

One of the new outside directors is Junichiro Sano, head of the Japanese unit of U.S. activist fund Dalton Investments.

Steel Partners was joined by other Aderans shareholders in May in refusing to re-elect the president and most board members, the first time the management of a Japanese firm has been ejected under pressure from an activist fund.