Engagement Activity Results: April 2017 - March 2018
(Former Sumitomo Mitsui Asset Management Company)

* Prepared by the former Sumitomo Mitsui Asset Management Company Limited.

At Sumitomo Mitsui Asset Management, analysts and fund managers are routinely in contact with investee companies in order to improve investment performance. Specifically, we work to collect a diverse range of information for research and analysis through individual meetings with management teams and IR officers, governance meetings centered on the exercise of voting rights, briefings on financial results, and visits to facilities and factories. In FY2017, analysts from our Corporate Research Group made contact with companies on around 5,300 occasions (FY2016: approx. 5,600). This included around 3,500 individual meetings (FY2016: 3,700), of which approximately 910 (FY2016: 900) were individual interviews with directors or executive officers.
At Sumitomo Mitsui Asset Management we are making greater efforts to engage not only in general dialog on overall management strategy, but also in "deeper dialog" to promote sustainable growth and enhance corporate value. Topics covered under "deeper dialog" include management strategy, capital policy/shareholder returns, enhanced IR and disclosure of information, and improved governance.
Furthermore, we "invest in engagement" to enhance corporate value through "deeper dialog" which is carried out primarily by our analysts and fund managers from our Engagement Investment Group.

Below are some examples of individual meetings held in FY2017 (April 2017- March 2018) (note that the industry sectors are from the 33 sectors used on the Tokyo Stock Exchange (TSE)).

(i)TSE 1st Section Machinery
As a result of past discussions concerning the importance of information disclosure, we confirmed that IR activities have actually been enhanced and the assessment by the market is improving. To take this a step forward, we conveyed that the long-term management approach and targets should be clarified and that there should also be a focus on capital cost to increase the level of trust in the company. The company also intends to take proactive initiatives to fulfill its accountability.

(ii)TSE 1st Section Chemicals
Based on the content of past dialogue, we once again discussed the formulation of a long-term vision and how to disseminate this throughout the company. A sense of a specific image was gained by introducing examples of other companies, and we received a response from the company that it would like to take active initiatives toward structural reform. At the same time, to deepen market understanding, we conveyed the need to enhance information disclosure such as through the implementation of IR briefings.

(iii)TSE 1st Section Textiles & Apparels
In order to increase the sustainability of management, we proposed incorporating ESG into management and the disclosure of ESG information. We held discussions that also incorporated examples from other companies and received a response from the company that it understood the significance of incorporating an ESG perspective into management.

(iv)TSE 1st Section Machinery
We exchanged opinions and shared ideas about the business environment and competitive advantages. Furthermore, we discussed strategies for harnessing synergies throughout the entire corporate group. The company plans to engage in actively raising awareness to share strategies with employees and to enable smoother coordination and communication between divisions.

(v)TSE 1st Section Electric Appliances
We shared awareness of business risks while deepening the understanding of stories about the past, the internal climate and corporate culture. Based on the content of such dialogue, we proposed enhancements to information disclosure and more proactive IR activities. We were able to receive a positive response from the company.

(vi)TSE 1st Section Chemicals
We discussed the categories of business characteristics and M&A policy. In addition to sharing awareness concerning business characteristics and synergies, we conveyed that investors also focus on companies’ policies and management methods related to M&A and encouraged proactive information disclosure while providing examples of other companies.

 (vii)TSE 1st Section Chemicals
We appreciated that the company had reflected on the content of past conversations, and had started disclosing its approach to balance sheet management, ESG perspectives in managements and capital productivity. We also had deeper discussion on capital productivity while including examples of other companies. We received a response from the company that it would like to increase the knowledge of its management team and further brush up the content of disclosure.

(viii)TSE 1st Section Construction
We discussed approaches to capital policy and explained the importance of proactively managing ROE as a target variable such as through balance sheet management in the future. We also heard from the company that it recognizes the importance of explaining the intended use of funds to investors, and that it would first like to increase the level of knowledge of its management team.

 (ix)TSE 1st Section Metal Products
We confirmed and shared our understanding of the strength of the competitive advantages of the business and barriers to entry, but conveyed that such competitive strength may not have been amply communicated to the market. The company responded that it would like to receive proposals about initiatives to improve the stock market valuation through future dialogue.

 (x)TSE 1st Section Chemicals
While appreciating that the company is improving stock price awareness such as by conducting awareness surveys targeting investors, we shared our awareness that the market still under estimates the corporate value. We introduced examples of other companies that have ameliorated such discounts of corporate value and proposed more aggressive IR activities to deepen investor understanding.