| Sumitomo
Trust hereby stipulates the Fundamental Policy Regarding the
Establishment of the Internal Control System designed to
ensure the safety and soundness of its business activities by
way of appropriate managerial supervision. This fundamental
policy comprises compliance, or conformity to relevant laws
and regulations, improvement of the protection and convenience
of customers, and the development and establishment of proper
risk management systems for various risks.
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| 1. |
System
to Ensure that the Execution of Duties by the Directors
Conforms to Laws and the Articles of Incorporation |
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(1) |
The Board of Directors ranks
compliance as one of its top management priorities. In order
to carry out business activities within the boundaries of
sound social behavior, it has stipulated the Ethics Charter, a
code of conduct for directors and employees, the Social
Activity Charter, and compliance policies.
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(2) |
The Board of Directors develops
systems against anti-social powers, which threaten the order
and safety of society, with firm resolution
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(3) |
If a director discovers a serious
violation of the law or any other important fact related to
compliance involving another director, he or she shall report
it to the statutory auditors immediately, and present the case
to the Board of Directors without delay.
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| 2. |
System
Concerning the Storage and Management of Information Related to
the Execution of Duties by the Directors |
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Based
on Sumitomo Trust's in-house rules concerning document
management and information security, the Board of Directors
shall have information stored and managed in a manner
appropriate to its storage medium and in an easily retrievable
form, and shall have it preserved in a viewable condition for
at least ten years according to necessity.
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| 3. |
Regulations
and Other Systems Concerning the Management of the Risk of
Loss |
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(1) |
Sumitomo Trust recognizes the
following ten categories of risk involved in business
execution.
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| 1) |
Credit Risk: the risk of partial or complete
loss of the value of assets, including off-balance-sheet
assets, owing to factors such as the deterioration of a
borrower's financial condition.
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| 2) |
Market Risk: the risk of loss caused by a
change in the value of assets and liabilities or a reduction
in revenue as a result of fluctuations in prices and rates,
such as interest rates, stock prices, currency exchange rates,
or fluctuations in other asset prices.
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| 3) |
Liquidity Risk: the risk of failure to secure
necessary funds due to rapid changes in the business
environment, worsening of the company's reputation, etc.; and
the risk of loss caused by failure to conduct transactions
promptly at the appropriate price.
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| 4) |
Operational Risk: the risk of losses incurred
from inappropriate business processes, activities by directors
and employees, or systems, as well as losses stemming from
external events (includes the next six categories of risk).
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| 5) |
Business Processing Risk: the risk of losses
incurred as a result of directors or employees failing to
carry out duties correctly, causing accidents, or committing
improprieties.
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| 6) |
Information Security Risk: the risk of losses
arising from information management, information system
breakdowns, inappropriate management of system development
projects, or from loss of the confidentiality, integrity, or
availability of the information or information systems of
Sumitomo Trust.
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| 7) |
Compliance Risk: the risk of losses incurred
from penalties, complaints, or lawsuits following the failure
to comply with domestic or international laws, regulations, or
social norms; or losses incurred from failure to complete
transactions due to contractual obstacles such as the omission
of necessary clauses, a lack of legal competence on the part
of another party, etc.
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| 8) |
Human Resource Risk: the risk of losses
incurred due to problems such as unfairness or injustice in
relation to personnel management (problems such as
remuneration, special allowances, dismissal, and harassment).
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| 9) |
Event Risk: risk of losses incurred due to
the occurrence of emergencies such as natural disasters, wars
and crimes.
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| 10) |
Reputation Risk: the risk of losses incurred
when the reputation of Sumitomo Trust and its subsidiaries and
related entities, is maligned by mass media reports, rumors,
hearsay, etc., resulting in a major impact on business
performance.
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(2) |
As the foundation of the risk
management system (hereinafter referred to as "risk
management policies"), the Board of Directors stipulates
management policies for each risk category and an enterprise
risk management policy which assesses these individual
policies from an overall perspective and consists of overall
risk management comparing and contrasting the financial
strength (capital adequacy) for the various risks.
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(3) |
The Board of Directors, in
accordance with risk management policies, establishes systems
for the prevention of loss and minimization of the impact of
unforeseen circumstances, including enforcement of the
regulations stipulating the arrangements regarding risk
management, establishment of departments in charge of risk
management and the appointment of officers (directors and
executive officers) responsible for these departments.
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(4) |
The Board of Directors receives
regular reports from departments in charge of risk management
regarding the status of risk management (and reports on
important matters as they arise) and as necessary have
investigations carried out, so that it can verify the
effectiveness and appropriateness of policies and the
functionality of the system, and implement timely reviews.
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(5) |
The Board of Directors stipulates
internal auditing policies related to risk management and
other aspects of the internal management system, and receives
timely and appropriate reports on the audit results from the
department in charge of internal auditing, which conducts
internal auditing independently of the departments involved in
business execution. Furthermore, when necessary, Sumitomo
Trust undergoes external audits of the effectiveness of its
risk management system.
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| 4. |
System
to Ensure the Efficient Execution of Duties by the Directors |
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(1) |
The Board of Directors stipulates
the companywide management policies shared by the directors
and employees, endeavors to diffuse the management policies
throughout the company, and determines the management plan
based on the management policies. When determining the
management plan, the Board of Directors stipulates the
strategic objectives, including deciding companywide revenue
objectives, efficient allocation of risk amount (capital
allocation) to each risk category, and efficient allocation of
management resources to each business group.
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(2) |
The Board of Directors stipulates
capital management policies and establishes the management
system in order to preserve and improve the soundness of
business activities through capital adequacy, and the
efficiency of business activities through effective capital
utilization.
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(3) |
The Board of Directors, in order
to improve the protection and convenience of customers,
stipulates customer protection and other management policies.
It establishes the management system to enable the provision
of appropriate and sufficient explanations to customers,
handling of customer complaints, inquiries, etc., and
management of customer information, and implements the
thorough management of customer protection.
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(4) |
The Board of Directors receives
regular reports on the progress of the operating and other
management plans in each group and amends the plans as
necessary.
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(5) |
Meetings of the Board of
Directors are held at least once a month, and the Board
implements prompt decision-making and the efficient execution
of duties. The items on the agenda at the Board of Directors
meeting, as a general rule, are deliberated and decided in
advance by the Executive Committee which is composed of the
president, and the directors designated by the president.
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(6) |
The Board of Directors has
established the Executive Committee and a number of other
committees as bodies tasked with deliberating and deciding
matters concerning individual business strategies, risk
management and operations. The Board may establish additional
committees as advisory bodies when necessary.
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(7) |
The Board of Directors uses the
business group management system to clarify the
responsibilities of each group, and aims for the more
efficient execution of duties by the directors by ensuring
that executive officers appointed by the Board of Directors
execute business operations. Furthermore, the internal company
organization, authority, and responsibilities are defined and
clarified in regulations.
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(8) |
In order to obtain the
understanding of stakeholders so that business execution can
be managed efficiently, the Board of Directors has established
the Disclosure Committee as well as a department responsible
for IR, and upholds the transparency of its management.
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| 5. |
System
to Ensure that the Execution of Duties by Staff Conforms to
Laws and the Articles of Incorporation |
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(1) |
The Board of Directors has
established the Ethics Charter, a code of conduct for
directors and employees, along with the compliance policies
and the Compliance Standards Manual. The directors constantly
communicate the spirit of these documents to other officers
and employees in order to ensure their thorough
implementation.
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(2) |
The Board of Directors has
established the Compliance Committee with the officer
(directors and executive officers) responsible for the
department in charge of legal and compliance as committee
chairman. The Board of Directors receives regular
recommendations and reports on the state of implementation and
administrative problems concerning compliance (and
recommendations and reports on important matters as they
arise), and reflects them in management measures.
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(3) |
The Board of Directors has
established a department in charge of legal and compliance to
consolidate the companywide compliance system, enforce related
regulations and provide related training. Furthermore, it has
posted compliance officers at all branches. Compliance
officers work to practice compliance and provide compliance
training at branches.
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(4) |
As a way to initiate
investigations based on employee tips and to protect
whistle-blowers, the Board of Directors has established a
Compliance Hotline. In this system, directors and employees
are able to report incidents that are suspicious in terms of
compliance directly to the Compliance Committee or a
non-company lawyer. The Compliance Committee regularly reports
to the Board of Directors on the situation related to the
operation of the Compliance Hotline.
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(5) |
If a director discovers a serious
violation of the law or any other important fact related to
compliance at Sumitomo Trust, he or she shall report it to the
statutory auditors immediately, and present the case to the
Board of Directors without delay.
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(6) |
The Board of Directors stipulates
internal auditing policies related to compliance and other
aspects of the internal management system, and receives timely
and appropriate reports on the auditing results from the
department in charge of internal auditing which conducts
internal auditing independently of the departments involved in
business execution. Furthermore, when necessary, Sumitomo
Trust undergoes external audits of the effectiveness of its
compliance management system.
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| 6. |
System
to ensure that the internal controls with regard to the
disclosure of corporate information in general are effective |
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(1) |
The Board of Directors
establishes a policy to control the disclosure and establishes
a system to disclose its management-related information in a
fair and timely manner so as to ensure the effectiveness of
the internal controls regarding corporate information
including financial reporting.
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(2) |
The Board of Directors
establishes the Disclosure Committee, which evaluates concrete
strategies to properly maintain and manage the internal
controls regarding the disclosure.
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| 7. |
System
to Ensure the Appropriateness of Operations in the Corporate
Group Comprising the Corporation and its Parent
Company/Subsidiaries |
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(1) |
The Board of Directors, in a
manner adapted to the size and characteristics of the business
operations of subsidiaries and related entities, manages the
business operations of the entities appropriately, and takes
appropriate measures from the perspective of compliance,
customer protection, and risk management.
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(2) |
Based on the regulations
stipulating basic matters concerning the business operations
of subsidiaries, the Board of Directors maintains the system
for reporting from and guidance to subsidiaries regarding
their business operations.
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(3) |
The Board of Directors, in
addition to the department which carries out the overall
monitoring and management of subsidiaries (hereinafter
referred to as the department in charge of consolidated
management), designates the Sumitomo Trust department that is
the department in charge for each subsidiary. As a general
rule, the heads of these departments serve as non-executive
directors at the subsidiaries and related entities,
participate in their management, and provide guidance.
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(4) |
The department in charge of
consolidated management and the departments in charge of the
subsidiaries and related entities monitor the performance of
the entities, and provide guidance. As necessary, other
related departments at Sumitomo Trust also provide guidance.
The department in charge of consolidated management and the
departments in charge of the entities regularly report to the
Board of Directors and the Executive Committee on the overall
situation at the subsidiaries and related entities.
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(5) |
Transaction prices between the
subsidiaries and related entities, and Sumitomo Trust, and
among the subsidiaries and related entities are decided on the
basis of market prices.
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(6) |
The department in charge of
internal auditing implements internal audits of the
subsidiaries and affiliates as necessary and within the scope
of laws, and reports the audit results to the Board of
Directors in a timely and appropriate manner.
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| 8. |
Matters
Concerning Staff Assisting in the Duties of the Statutory
Auditors |
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Sumitomo
Trust deploys a suitable number of staff, including one office
head, to the Statutory Auditors Office, which was established
as a dedicated organization tasked with assisting the
execution of duties by the statutory auditors.
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| 9. |
Matters
Concerning the Independence of the Staff Assisting in the
Duties of the Statutory Auditors from the Directors |
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The
staff of the Statutory Auditors Office is not under the
command or control of the directors. Remuneration and other
personnel matters concerning these staff are determined in
consultation with the statutory auditors in advance.
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| 10. |
System
for Reporting by the Directors and Staff to the Statutory
Auditors and Other Systems Concerning Reporting to the
Statutory Auditors |
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(1) |
In addition to the matters to be
reported under the Board of Directors rules, directors,
executive officers, and staff shall make the following three
kinds of reports to the statutory auditors.
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| 1) |
Report immediately the discovery of facts
that could cause significant damage to the company.
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| 2) |
Report on each instance of reporting under
the Compliance Hotline system.
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| 3) |
Report on the state of business execution,
including at subsidiaries and related entities, regularly and
when requested by the statutory auditors.
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(2) |
The department in charge of
internal auditing reports the results of internal audits to
the statutory auditors regularly or when requested by the
statutory auditors.
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| 11. |
Other
Systems to ensure that the Audits of Statutory Auditors are
Implemented Effectively |
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(1) |
Directors, executive officers,
and staff cooperate with the implementation of audits based on
the audit plan drawn up by the statutory auditors each fiscal
year.
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(2) |
In order to ensure the
appropriateness and credibility of accounting audits, Sumitomo
Trust has constructed a system composed of the following five
elements designed to enable the accounting auditors to
preserve their independence.
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| 1) |
The accounting auditors submit their audit
plan to the statutory auditors and exchange opinions on the
plan.
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| 2) |
The accounting auditors keep the statutory
auditors informed regarding the system to ensure the
appropriate execution of duties.
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| 3) |
Prior approval of the statutory auditors is
required regarding the reappointment and suitability of
remuneration of the accounting auditors.
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| 4) |
The accounting auditors meet and exchange
opinions with the statutory auditors, regularly or when
requested by the statutory auditors.
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| 5) |
In addition, directors, executive officers,
and staff cooperate in the development and construction of any
system deemed necessary by the statutory auditors.
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(3) |
The Chief Executive Officer meets
and exchanges views with the statutory auditors, regularly or
when requested by the statutory auditors.
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(4) |
The department in charge of
internal auditing meets and exchanges views with the statutory
auditors, regularly or when requested by the statutory
auditors.
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(5) |
The statutory auditors serve
concurrently as non-executive statutory auditors of
subsidiaries and related entities, if the situation requires,
and exchange views with the directors and statutory auditors
of the companies.
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(6) |
The statutory auditors shall seek
the opinions of external experts as necessary.
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Disclosure Policy
News Releases
Fundamental
Policy Regarding the Establishment of the Internal Control System
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