Basic Policy on Exercise of Voting Rights
April 1, 2026
1. Basic Approach to the Exercise of Voting Rights
In fulfilling its stewardship responsibilities, Sumitomo Mitsui DS Asset Management Company, Limited (hereinafter “SMDAM”) exercises voting rights with the aim of increasing the value of, or mitigating damage to, investee companies and REIT investment corporations, etc. (see *1 & *2) (hereinafter referred to as “investee companies, etc.”) for the benefit of customers and final beneficiaries.
Voting rights are important rights that can impact corporate management and REIT management, and change the value of an investee company, etc., depending on exactly how they are exercised. SMDAM strives to exercise voting rights so as to prevent management, etc. from damaging shareholder (or investor) interests and to motivate management, etc. to create the greatest value by making effective use of the resources available within the company or REIT properties.
When managing assets, SMDAM invests in assets that are expected to have higher investment returns and, rather than simply continuing to hold assets, it believes that it is possible to promote sound development and increase the value of investee companies, etc. through engagement and the assertive exercise of voting rights.
SMDAM utilizes voting rights in an assertive manner to ensure that good governance systems are established in investee companies, etc. and that capital markets are soundly managed, and also to develop desirable conditions for investors, taking the shareholder's (or investor's) position into account.
| (*1) | "REIT" refers to Real Estate Investment Trust; and "J-REIT" to Japanese REIT. |
|---|---|
| (*2) | "REIT investment corporations, etc." refers to investment corporations that hold REIT assets, and asset management companies to which investment corporations entrust management. |
2. Structure and Process for the Exercise of Voting Rights
Internal regulations, which form the basis for the Basic Policy on Exercise of Voting Rights, are determined by the CEO following either a resolution of the Board of Directors or deliberation by the Management Committee, which is composed of directors and executive officers.
In accordance with the finalized internal regulations, the process for formulating the Basic Policy and specific criteria for the exercise of voting rights (hereinafter referred to as the "Criteria for Determining the Exercise of Voting Rights"), developing practical procedures for implementation, and establishing an organizational framework for handling instructions regarding the exercise of voting rights involves deliberation by the Stewardship/ESG Meeting and subsequent approval by the Executive Officer in charge of the Responsible Investment Section.
In principle, decisions on whether to vote for or against individual proposals on Japanese stocks and J-REITs are made by the person in charge in accordance with the “Rules on Instructions for Exercising Voting Rights, Etc.,” the “Administrative Operation Guidelines on Exercising Voting Rights, Etc. For Domestic Stocks,” the “Administrative Operation Guidelines on Exercising Voting Rights, Etc. for J-REITs,” and the “Criteria for Determining the Exercise of Voting Rights,” and are approved by the General Manager of the Responsible Investment Section. Depending on the content of the proposals, deliberations are held at the Stewardship/ESG Meeting. In principle, SMDAM does not provide blank proxies; it selects either “for,” “against,” or “abstain” for all proposals and issues instructions for the exercise of voting rights, etc. SMDAM carefully examines proposals from investee companies, etc. based on the belief that voting rights are important rights for shareholders (or investors) and that their exercise is a key means to increase the value of, or mitigate damage to, investee companies, etc.
When exercising its voting rights for companies with which SMDAM has close ties and affiliated parties, etc. (such as a shareholder company), SMDAM acts in the best interests of customers and final beneficiaries and votes to increase the value of, or mitigate damage to, the investee companies, etc. In principle, SMDAM exercises voting rights itself for companies that present the potential for a conflict of interest in accordance with the “Criteria for Determining the Exercise of Voting Rights” as it does for other investee companies, etc., but for proposals at SMDAM's shareholder companies (Sumitomo Mitsui Financial Group, Daiwa Securities Group, and MS&AD Insurance Group Holdings) and other parties for which management of conflicts of interest is particularly important, SMDAM exercises voting rights with reference to the recommendations of an external proxy advisory firm (currently Institutional Shareholder Services). Furthermore, the results of the exercise of voting rights are periodically monitored by the “Responsible Investment Committee” and SMDAM strives to ensure further transparency by individually disclosing the voting results (affirmative/negative) for each investee company, etc., and each proposal.
In cases where there have been acts that affect social trust, or for proposals considered to have a significant impact on the value of investee companies, etc. —such as proposals submitted to extraordinary general meetings, shareholder (or investor) proposals, capital reductions, third-party allotment of shares, mergers, and business transfers—SMDAM makes decisions after conducting particularly detailed research and analysis.
Note that when exercising voting rights for investee companies, etc. with which engagement has been implemented, SMDAM considers the content of the dialogue and applies the “Criteria for Determining the Exercise of Voting Rights” more flexibly, striving to make judgments from a medium- to long-term perspective based on individual circumstances.
In principle, for foreign stocks and foreign REITs, SMDAM exercises voting rights in accordance with the "Administrative Operation Guidelines on Exercising Voting Rights, Etc. for Foreign Stocks" and the "Administrative Operation Guidelines on Exercising Voting Rights, Etc. for Foreign REITs," taking into consideration the actual conditions of the fund and the issuing country. However, for foreign stocks and foreign REITs, as well as foreign-domiciled accounts holding some domestic stocks and J-REITs, in order to exercise voting rights more efficiently, SMDAM may commission an external company to study the agenda proposals or use the services of an external proxy advisory firm.
SMDAM's "Criteria for Determining the Exercise of Voting Rights" are as follows:
PDF "Criteria for Determining the Exercise of Voting Rights"
3. Sustainability and the Exercise of Voting Rights
SMDAM believes that investee companies, etc., need to take autonomous actions aimed at resolving issues from a medium- to long-term perspective, including environmental, social and governance (ESG) themes, to increase the value of, or mitigate damage to, investee companies, etc. in the medium to long term. In addition to complying with laws and statutory regulations, SMDAM believes that sound management contributes to the value of investee companies, etc., i.e. management that respects cooperative relationships with stakeholders besides shareholders (or investors) such as consumers, business partners, local communities, and society in general. Moreover, SMDAM takes the view that acts that affect social trust have significant potential to damage the value of investee companies, etc.
SMDAM takes a strict stance on any acts that affect social trust and makes judgments based on criteria for increasing the value of, or mitigating damage to, investee companies, etc. when exercising voting rights.
4. Disclosure of Voting Results
On its website, SMDAM publishes the results of voting (for/against/abstain) on all proposals as well as aggregated results by proposal category. The voting results are compiled at three-month intervals as of the end of March, June, September and December, and the aim is to make them public approximately two months after the respective month end.
