Best Execution Policy

This Best Execution Policy (“Policy”) sets forth the policy and methods used to execute transactions on the best terms and conditions for our customers in connection with the provisions of Article 40-2, Paragraph 1 of the Financial Instruments and Exchange Law of Japan (“FIEL”).

Upon acceptance of a customer order for securities listed on a financial instruments exchange in Japan, Morgan Stanley MUFG Securities Co., Ltd. (“Morgan Stanley”) will endeavor to execute that order in accordance with the following policy:

1. Securities Covered in the Policy

  1. “Listed Securities, etc.,” as prescribed under Article 16-6 of the Financial Instruments and Exchange Law Enforcement Order

    Listed shares of stock, bonds with stock acquisition rights. warrants, preferred capital securities, beneficiary rights of investment trusts or foreign investment trusts, investment securities or foreign investment securities similar to such investment securities, investment securities listed on a financial instruments exchange in Japan, which are issued by entities incorporated under special laws, beneficiary right certificates issued by trusts capable of issuing such beneficiary right certificates under the Trust Law of Japan, the foreign equivalent of the securities listed above if listed on a financial instruments exchange in Japan.

  2. “Green Sheet Securities” as defined in Article 67-18, Item 4 of FIEL

2. Best Execution Method

  1. Listed Securities, etc.

    Unless a specific instruction is provided by the customer, or an overall agreement between the customer and Morgan Stanley on the execution method (“customer instruction”) exists, Morgan Stanley will place an agency order on a financial instruments exchange (“stock exchange”) where the relevant security is listed for all customer orders. However, customer orders for foreign securities listed on both domestic and overseas stock exchanges will be placed through an overseas Morgan Stanley group affiliate for execution. Unless instructed otherwise, customer orders received during off-market hours of the stock exchange will be placed on the stock exchange when the trading session reopens. Morgan Stanley will not execute a customer order against a Morgan Stanley principal account, execute the order off exchange, or send a customer order to PTS, unless a customer instruction exists. Such customer instruction includes giving Morgan Stanley the discretion to execute the order outside the stock exchange if it is deemed more effective in serving the customer’s purpose.

    Agency orders will be placed on the stock exchange in the following manner (excluding foreign securities listed on both domestic and overseas stock exchanges):

    1. Security listed on a single stock exchange will be placed on the said exchange.
    2. Security listed on multiple stock exchanges will be placed on the ‘QUICK priority exchange’ determined by QUICK Corporation.
    3. If Morgan Stanley is not a participating member of the stock exchange selected in pursuant to a. or b., security will be placed through an exchange participating member with whom Morgan Stanley has an agreement to liaise brokerage to.
  2. Green Sheet Securities

    Orders relating to Green Sheet Securities will only be executed against a Morgan Stanley principal account at an agreed price, in accordance with instructions from the customer.

3. Reasons for Selecting the Relevant Execution Method

  1. Listed Securities, etc.

    Stock exchanges generally have high concentration of customer demand from a number of investors and when compared to off-exchange transactions, exchanges offer more liquidity, likelihood of execution, and potentially low cost of execution etc. Therefore, it is believed to be the most rational choice for the customer to execute the trade on a stock exchange.

    Among all stock exchanges in Japan, we believe the most rational choice for the customer is to execute on the most liquid exchange.

  2. Green Sheet Securities

    Trading against a Morgan Stanley principal account is believed to be the most rational choice for the customer as it will ensure a safe transaction.

4. Other points

  1. Notwithstanding 2. above, Morgan Stanley will execute the following types of transactions as indicated below:
    1. A transaction with instructions from the customer regarding the method of execution (request for a cross transaction with another customer order or a Morgan Stanley principal account, request for an executing stock exchange or PTS, request for executing time frame, etc.,) will be executed as instructed.
    2. A transaction under the discretionary trading agreements, etc., will be executed in accordance with instructions and discretion contained in such agreements.
    3. A transaction involving fractional shares or shares of less than one unit (odd lots) will be either executed against a Morgan Stanley principal account or will be placed with an appropriate broker. However, please note that Morgan Stanley may not be able to agree to a transaction depending on the terms of the transaction.
  2. Orders placed by a customer to stock exchanges and other markets through their direct use of Morgan Stanley systems will be executed in accordance with the instructions specifically inputted or agreed upon by such customer. All such customers are subject to the terms and conditions of direct access agreements with Morgan Stanley.
  3. In some cases, system failures or other disruptions may prevent us from using all execution methods normally at our disposal. In such cases, Morgan Stanley will endeavor to execute on the best terms possible.
  4. Morgan Stanley does not conduct any business for OTC Securities (tentoubaibai yuukashouken).

The best execution obligation is the obligation to execute orders by taking into consideration not only the price but also the cost, the speed, the probability of execution and other various factors in a comprehensive manner. Therefore, the mere fact that our execution may not result in the best price will not necessarily constitute a breach of such obligation.

Revised on January 1, 2014

Morgan Stanley MUFG Securities Co., Ltd.