Basic Policy on Exercise of Voting Rights

April 1, 2019

1. Fundamental ideas on the exercise of voting rights

In fulfilling its stewardship responsibilities, Sumitomo Mitsui DS Asset Management (SMDAM) will exercise voting rights with the aim of raising value in, or mitigating damage to, investee companies and REIT investment firms, 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 improved value in investee companies, etc. through goal-oriented dialogue (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 firms, etc." refers to investment firms that hold REIT assets, as well as asset management companies sub-contracted by investment firms to manage assets.

2. The structure and process followed in the exercise of voting rights

SMDAM's in-house regulations, which form the basis for the Basic Policy on Exercise of Voting Rights, are either determined by resolution of the Board of Directors or deliberated on by the Management Committee, which is composed of directors and executive officers, and then finalized by the CEO.

SMDAM will undertake particularly detailed research and analysis before deciding how to vote if there has been an act causing social discredit or an anti-social act (hereinafter referred to as "acts causing discredit"), or if an investee company, etc. has any agenda proposals that are considered likely to have a significant impact on value such as proposals to be raised at an extraordinary general meeting, shareholder (or investor) proposals, capital reductions, capital increases allocated to third parties or mergers/business transfers, etc.

In principle, for foreign stocks and foreign REITs, SMDAM exercises voting rights in line with conditions pertaining to the fund and the issuing country. However, 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.

  • (*3)"Deep dialogue" indicates dialogue that includes not only short-term performance and business strategy but also sustainability of growth and improvement of value in (or mitigation of damage to) the investee company, etc. from a medium- to long-term perspective, as well as the exercise of voting rights, etc. to support these objectives.

3. CSR (Corporate Social Responsibility) and the Exercise of Voting Rights

SMDAM believes that investee companies, etc., need to fulfill their social responsibilities to improve their value or mitigate damage 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 any acts causing discredit have significant potential to damage the value of investee companies, etc., regardless of whether such acts are short term or long term.

SMDAM takes a tough stance on any acts causing discredit and takes into account whether or not the value of the investee company, etc. will improve, or damage to the investee company, etc. will be mitigated, when exercising voting rights.

4. Disclosure of voting results

On its website SMDAM publishes how it votes on all proposals as well as aggregated results by proposal category. The voting results are compiled at three-month intervals, in principle on the last day of March, June, September and December, and the aim is to make them public around two months after the respective month end.