Overview of conflict of interest management policy

Under its Fiduciary Duty Declaration, Sumitomo Mitsui DS Asset Management Company, Limited (the “Company”) promises to fulfill to the best of its ability and sincerity its “investment responsibilities” in regard to the valuable funds that customers entrust it to invest, and acts from the customers’ point of view in all of operational areas.
As the Company manages funds on behalf of many customers and is also a member of the SMBC Group with a wide range of businesses, there is a risk that various conflicts of interest may arise between customers, the Company, its officers or employees, shareholders, Group companies (all entities from the Company to “Group companies” are collectively referred to as the “Company, etc.” hereinafter; see also Notes at the end of this document), other customers, or other third parties. Therefore, from the point of view of complying with not only laws and regulations, etc. but also fiduciary duties (“FD”), the Company will establish a mechanism to appropriately control such conflicts of interest as described below to prevent unreasonable damage to the customers’ interests.

  1. Transactions, etc. subject to control
    1. Transactions, etc. with a risk of conflict of interest subject to control
      A transaction, etc. with a risk of conflict of interest that is subject to control under the Policy is a conflict of interest between the customer and the Company, etc. or other customer or other third party due to an action taken by the Company, etc. itself, or an investment decision or the exercise of rights or other action in the management of funds that the customer has entrusted to the Company to manage (“Trust Assets”), and is referred to as a “Transaction with Conflict of Interest” below.
    2. Main examples of Transactions with Conflicts of Interest
      The main examples of Transactions with Conflicts of Interest are as follows. However, these do not cover all Conflicts of Interest, and are not uniformly prohibited.
      1. Examples in research and investment decision-making
        i) Transactions that take place between the Trust Assets and the Company
        ii) Inclusion of securities issued by the Company, etc. in the Trust Assets
        iii) Inclusion of securities underwritten by the Company, etc. in the Trust Assets at the request of the relevant underwriter when it is expected that the acquisition or the offer to buy will not reach the planned amount
        iv) Transactions undertaken between the Trust Assets and another customer’s trust assets
        v) Exercise of shareholder rights such as voting rights in conflict with the customer’s interest
      2. Examples in trading operations
        i) Ordering a transaction in securities within the Trust Assets from a financial instruments business operator among the Group companies which is not a financial instruments business operator offering the best terms
        ii) Unfair allocation of newly-issued securities or bulk-ordered securities among the Trust Assets and other customers’ trust assets
      3. Examples in product development operations
        i) Setting unreasonable trust fee rates
        ii) Product design that prioritizes business policies of the seller rather than the customer’s needs
      4. Example in customer service
        i) Recommending investments or products that are not suitable for the customer or the investment purpose of the customer
      5. Examples in information management
        i) Transactions by the Company, etc. that utilize transaction information from the Trust Assets or information obtained from the customer
        ii) Use of information obtained from the customer in Group company sales activities
        iii) Transactions that utilize information concerning the Company’s investment decisions pertaining to the customer’s Trust Assets, etc.
  2. Systems for controlling Conflicts of Interest
    1. Establishment of a general administration section and assigning the person responsible
      he department responsible for general management of conflict of interests, which will ensure that conflicts of interest are controlled and managed appropriately, shall be the Legal & Compliance Department, and the person with overall responsibility for controlling the conflicts of interest with authority and responsibility for the department’s control of conflicts of interest and establishment of mechanisms to do so shall be the Executive Officer in charge of the department.
    2. Internal audits
      The status of development of the mechanism for appropriately controlling and managing Transactions with Conflicts of Interest and its validity will be subject to audits by the Internal Audit Department.
    3. Supervision and audits by external directors
      The Company’s business operations including control of Transactions with Conflicts of Interest are supervised by the Board of Directors, which includes external officers who are independent of the Group companies, and also by the responsible investment committee, and audited by the Company’s auditors (Board of Auditors).
    4. Control of conflicts of interest in stewardship activities
      The Company has a process in place to obtain a decision from the CEO regarding conflicts of interest in stewardship activities including constructive “dialogue with purpose” (engagement) based on an in-depth understanding of companies that are issuers of the stock included in the Trust Assets and their operating environment, etc. This decision is obtained after consulting with the Risk Management Committee, Compliance Committee, and Management Committee, etc. depending on the particular case, and is also subject to (3).
  3. Methods of controlling Transactions with Conflicts of Interest

    The main methods of controlling Transactions with Conflicts of Interest are as follows.

    1. Ensuring independence in decision-making pertaining to research and investment decisions
    2. Blocking information pertaining to research and investment decisions from shareholders and Group companies
    3. Organizational separation and check of the Investment Decision Department and Trading Department, and appropriate assignment of the Executive Officers in charge
    4. Organizational separation of the Investment Decision Department and Proprietary Asset Management Department
    5. Blocking information obtained from customers from being accessed by shareholders and Group companies
    6. Deliberation on stewardship activities within the meeting body in charge
    7. Validation of appropriateness of sales activities by the CX Promotion Department
    8. Disclosure of Transactions with Conflicts of Interest to customers and obtaining their consent
    9. Refusal, amendment, or cancellation of all or part of a transaction
  4. Continuous improvement
    The Company will regularly check the effectiveness of control of Transactions with Conflicts of Interest and strive for continuous improvement. Should any situation that would unjustly damage a customer’s interest arise, the Company will promptly, accurately, and transparently deal with it and implement reliable preventative measures.

End

Note)

The “Group companies” in this document refer to the Company’s “parent company, etc.” under the Financial Instruments and Exchange Act Article 31-4, Paragraph 3, “subsidiaries” under Paragraph 4 of the same Act, and “affiliated companies abroad” under the Cabinet Office Ordinance on Financial Instruments Businesses, Article 126, Item 3.