Report on the Management Structure and System of the Issuer of Real Estate Investment Trust Units and Related Parties

Transcription

1 Translation for reference purpose only This translation is for informational purposes only, and the Japanese language release should be referred to as the original. Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail. May 29, 2015 Report on the Management Structure and System of the Issuer of Real Estate Investment Trust Units and Related Parties Issuer of Real Estate Investment Trust Unit Japan Retail Fund Investment Corporation (Securities Code: 8953) Shuichi Namba, Executive Director Asset Manager: Mitsubishi Corp. - UBS Realty Inc. Toru Tsuji, President & CEO Inquiries: TEL: (Main) 1. Basic Information (1) Basic policy concerning compliance [1] Basic compliance policy Japan Retail Fund Investment Corporation (hereinafter referred to as the Investment Corporation ) and Mitsubishi Corp.-UBS Realty Inc. (hereinafter referred to as the Asset Manager ), a company charged with the responsibility of managing the assets of the Investment Corporation, are striving to ensure the appropriateness of asset management and soundness and adequateness of operations, as well as protection of investors at the discretion and on the responsibility of each entity, by strengthening and facilitating functioning of the internal control system based on the highest conscious mind of compliance under the real estate investment fund system. In addition, the Investment Corporation and the Asset Manager are of highly public nature and also assume the social responsibility of making contributions to the economy and society extensively. Given such a business environment and in view of the fact that the Asset Manager is a joint venture company between a Japanese company and a foreign financial institution and characteristically has an international corporate culture, it has developed the following compliance system with the aim of achieving a high-level compliance system in the industry segments. The Ethical Rules and the Compliance Handbook shall serve as the code of conduct for compliance with laws and regulations and the norms of the society by officers and employees. When officers and employees join the Asset Manager, an office of Compliance (the "Compliance Office") shall provide guidance on the said Handbook and fully explain the rules contained therein. In addition, the Compliance Office shall continue to remind officers and employees of these rules from time to time so as to ensure their awareness of the fact that the business activities of the Asset Manager are premised on compliance and adherence to social ethics. The Asset Manager shall cause every officer and employee to submit a statement or report about compliance to the Compliance Office in each period. 1

2 The Company has established Compliance Office, which is headed by the Chief Compliance Officer, and it endeavors to establish a firm-wide compliance system and identify problem areas in its compliance systems. The Company has also established a Compliance Committee, chaired by the President, to discuss important matters concerning compliance on a regular basis, and report the results of such discussions to the Board of Directors, if necessary. Each division (including each department and office) is requested to identify compliance issues. The outcome of internal audit, statutory auditors operational audit, and accounting audit may contain suggestions for improvement. The Compliance Office shall develop an Annual Compliance Program based on these issues and suggestions by around May of each year, to set out key compliance issues for each division. The Compliance Committee shall confirm the status of these suggested improvements on a regular basis. The Board of Directors shall approve the Annual Compliance Program when it is developed. Around the end of each business year, the President shall report on the implementation of the Annual Compliance Program to the Board of Directors. Each division shall appoint a person for compliance liaison officers who will conduct self-assessments on a regular basis and increase the awareness of the importance of compliance in the work place, through communication of compliance information or otherwise. In the event of a threatened or actual violation of compliance, officers and employees shall inform the Compliance Office either through their immediate supervisors (the executives of their division) or directly in accordance with the Compliance Handbook. Upon receipt of such information, the Compliance Office, together with the head of the relevant division, shall immediately investigate the details of such event, seek opinions or advice from outside legal counsels and/or other experts if necessary, and endeavor to implement appropriate remedial measures to prevent a recurrence of such an event. In the event that the Compliance Office, directors and statutory auditors discover or are informed of any compliance problems, they shall promptly report the same to the President. Furthermore, based on the Whistle Blowing Rules, the Company shall avoid any disadvantageous treatment of a whistle blower. Any whistle blower is entitled to appropriate protection and may contact the internal inquiry counter. If he or she wishes to contact external counsel, he or she may use the MC Group lawyers opinion box, which should be designated as the external inquiry counter for consultation and reporting. [2] Systems concerning asset management of more than one investment corporation The Asset Manager currently also manages Industrial & Infrastructure Fund Investment Corporation ( IIF ) and may be entrusted with managing the investment of other real estate funds (including without limitation special purpose companies or other legal entities which are investment vehicles, kumiai and trustees) (hereinafter the Real Estate Funds, and together with JRF and IIF, the Funds ).In addition, MCUBS MidCity Inc.; MidCity, a subsidiary of the Asset Manager, entrusted with the management of investments by MID REIT, Inc. ( MIDREIT ). While IIF in principle invests in industrial properties and MIDREIT invests Office Buildings, different type of assets than JRF does, the investment targets of such other Real Estate Funds may overlap with JRF s investment targets. In order to avoid potential conflicts of interest, the Asset Manager has established its management system as follows: (For the organization chart and other relevant materials, please refer to [3] Management Structure of Asset Manager, (2) Asset Manager in 2. Management Structure and System of Investment Corporation and Asset Manager, or (3) Policies on transactions involving conflicts of interest, etc. in 2. Management Structure and System of Investment Corporation and Asset Manager, as 2

3 described later.) (i) Separation of asset management division and support from other divisions The Asset Manager has established the following three divisions: the Retail Division, to the division responsible for the management of the assets of JRF; the Industrial Division, the division responsible for the management of the assets of IIF; and the Private Fund Management Department, the division responsible for the management of the assets of such other Real Estate Funds (each such division a Front Department and, collectively, the Front Departments ) thereby clarifying responsibilities for the management of the Funds. In addition, as described later in [3] Management Structure of Asset Manager, (2) Asset Manager in 2. Management Structure and System of Investment Corporation, the Acquisition Division offers operational support to the Front Departments, including discovery of investment target assets, control and allocation of information therefor and negotiation, etc. regarding acquisitions and dispositions thereof. Finally, the Corporate Division offers operational support to the Front Departments, including management of organization, market research, accounting and timely disclosure operation and financing operation. (ii) Securing independence concerning asset management decision-making As described later in (3) Policies on transactions involving conflicts of interest, etc. in 2. Management Structure and System of Investment Corporation and Asset Manager, decision-making concerning asset management of Funds shall require the confirmation of the President of the Asset Manager, the approval of Investment Committee, and in some cases, the approval of the Board of Directors. Go or no go on the confirmations by the President, the approvals by the Investment Committee, and the Board of Directors shall be contemplated from the viewpoint solely of whether it is an appropriate decision of each division, Front department, and circumstances of the other Front department shall not be taken into consideration. (iii) Rules Regarding Preferential Consideration Rights on Investment Information The Asset Manager is, and may be in the future, entrusted with the management of investments or the discretionary investment management by funds. MidCity which is a subsidiary of the Asset Manager, is entrusted with the management of investments by MID REIT. In light of the type of business of the Asset Manager and MidCity, and of the fact that the Asset Manager will provide support to MidCity, including by providing property information to MidCity in the capacity of its parent company, the Asset Manager stipulates and implements certain rules to decide, with respect to Information Regarding the Disposition of Real Estate Properties (Information on searching for potential buyers interested in real estate properties and assets supported by these properties and acquired by the Asset Manager that could be investment targets of the respective funds and MID REIT and information that helps the respective funds and MID REIT to consider whether such properties are investable. ) obtained by the Asset Manager, whether one of the divisions of the Funds should preferentially consider such information or if such information should be provided to MidCity. (The right of MidCity and the respective fund divisions to consider information on sales of real estate properties, etc., obtained by the Asset Manager in accordance with the guideline of the Deal Review 3

4 Meeting, (i) prior to the respective fund divisions in the case of MidCity along with the Asset Manager providing such information on sales of real estate properties to MidCity, and (ii) prior to other fund divisions in the case of the respective fund divisions without providing such information on sales of real estate properties to MidCity, is hereinafter called the Preferential Consideration Right with respect to information on sales of real estate properties, etc. ) a. Preferential Consideration Right with respect to Commercial Properties *1 i. As to the Commercial Properties (limited to the Single Facilities *2 ; hereinafter the same in this Paragraph), the Retail Division is granted the first preferential consideration right (the First Preferential Consideration Right, hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information ). ii. In the event that the Retail Division decides not to purchase the Commercial Properties or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the second preferential consideration right (the Second Preferential Consideration Right, hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information ). *1 Commercial Properties are a single property whose building is used only as shops and facilities for other commercial purposes (hereinafter called used for commercial purposes ) and a complex facility whose building has the largest floor space used for commercial purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. *2 Single property is a real estate property used for a single purpose and an asset supported by such property, of single properties real estate which is considered to constitute a single property in consideration of the structure, usage and function of such property and other conditions; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. b. Preferential Consideration Right with respect to Industrial Properties i. As to the Logistics Facilities *1, the Manufacturing and Research and Development Facilities *2, the Infrastructure Facilities *3 and the Data Centers *4 (collectively, the Industrial Properties ) (limited to the Single Facilities; hereinafter the same in this Paragraph), the Industrial Division is granted the First Preferential Consideration Right. ii. In the event that the Industrial Division decides not to purchase the Industrial Properties or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Investment Department is granted the Second Preferential Consideration Right. *1 Logistics Properties are a single property whose building is used for business-to-business logistics operations and sales logistics operations, which consist of each function of transportation, shipping, storage, stock, cargo, packing, assortment, distributive processing and providing information (hereinafter called used for logistics purposes ) and a complex facility whose building has the largest floor space used for logistics purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. 4

5 *2 Manufacturing and Research and development Properties are a single property whose building is used for research and development, raw procurement and stock, storage, manufacture and production, assembly and processing, recycling, etc. (hereinafter called used for Manufacturing and Research and development purposes ), and a complex facility whose building has the largest floor space used for Manufacturing and Research and development purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. *3 Infrastructure Properties are a single property whose building is used for developed as a base of industrial activity such as traffic, communication, energy, water service, public facilities, etc. (hereinafter called used for Infrastructure purposes ), and a complex facility whose building has the largest floor space used for Infrastructure purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. *4 Data Centers are a single property whose building is used for a server and data communication equipment, etc. are installed and operated (hereinafter called used for Data Center purposes ), and a complex facility whose building has the largest floor space used for Data Center purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. c. Preferential Consideration Right with respect to Office Buildings *1, Residential Facilities *2 and Hotels *3 i. As to the Office Buildings, the Residential Facilities and the Hotels (including the Mixed-Use Facilities for office use and residential use, the Mixed-Use Facilities for office use and the Hotel Use, the Mixed-Use Facilities for residential use and the Hotel Use and the Mixed-Use Facilities for office use, residential use and the Hotel Use, but excluding the Mixed-Use Facilities which include an area used for other purposes; hereinafter the same in this section c. Preferential Consideration Right with respect to Office Buildings, Residential Facilities and Hotels ), MidCity is granted the First Preferential Consideration Right. ii. In the event that MidCity decides not to purchase the Office Buildings, the Residential Facilities or the Hotels or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Investment Department is granted the Second Preferential Consideration Right. *1 Office Buildings are a single property whose building is used for office purposes, and a complex facility whose building has the largest floor space used for office purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. *2 Residential Facilities are a single property whose building is used for residential purposes, and a complex facility whose building has the largest floor space used for residential purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. *3 Hotels are a single property whose building is used for hotel purposes, and a complex facility whose building has the largest floor space used for hotel purposes, of all floor space used for other purposes; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. 5

6 d. Preferential Consideration Right with respect to Information Regarding the Disposition of Real Estate Properties for Mixed-Use Facilities i. Commercial Properties which are Mixed-Use Facilities [1]As to the Commercial Properties which are Mixed-Use Facilities, the Retail Division is granted the First Preferential Consideration Right. [2] In the event that the Retail Division decides not to purchase the Commercial Properties which are Mixed-Use Facilities or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Second Preferential Consideration Right. [3] Notwithstanding the provisions of [1]and [2] above, in the event that part of the Commercial Properties which are Mixed-Use Facilities includes an area used as the Industrial Properties ( Industrial Properties Use ) and the size of the floor cannot be used as the determining factor for the grant of the Preferential Consideration Right because it is likely to create an inappropriate result, a meeting between the President, the Deputy President and the members of the Deal Review Meeting will be held to decide which of the Retail Division or the Industrial Division should be granted the First Preferential Consideration Right or the Second Preferential Consideration Right (furthermore, in this case, the Private Fund Management Department always is granted the third preferential consideration right (the Third Preferential Consideration Right )). In such case, the Compliance Officer must call an independent outside expert who has no conflict of interest with respect to the decision to participate in the meeting as an observer and ask for his/her opinion. ii. Industrial Properties which are Mixed-Use Facilities [1]As to the Industrial Properties which are Mixed-Use Facilities, the Industrial Division is granted the First Preferential Consideration Right. [2] In the event that the Industrial Division decides not to purchase the Industrial Properties which are Mixed-Use Facilities or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Second Preferential Consideration Right. [3] Notwithstanding the provisions of [1]and [2] above, in the event that part of the Industrial Properties which are Mixed-Use Facilities includes an area used for the Commercial Properties Use and the size of the floor cannot be used as the determining factor for the grant of the Preferential Consideration Right because it is likely to create an inappropriate result, a meeting between the President, the Deputy President and the members of the Deal Review Meeting will be held to decide which of the Retail Division or the Industrial Division should be granted the First Preferential Consideration Right or the Second Preferential Consideration Right (furthermore, in this case, the Private Fund Management Department always is granted the Third Preferential Consideration Right). In such case, the Compliance Officer must call an independent outside expert who has no conflict of interest with respect to the decision to participate in the meeting as an observer and ask for his/her opinion. iii. Office Buildings, Residential Facilities and Hotels (limited to the Mixed-Use Facilities which include an area used for other purposes; 6

7 hereinafter the same in this section iii. Office Buildings, Residential Facilities and Hotels ) [1] As to the Office Buildings, the Residential Facilities and the Hotels, MidCity is granted the First Preferential Consideration Right. [2] In the event that MidCity decides not to purchase the Office Buildings, the Residential Facilities or the Hotels or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Second Preferential Consideration Right. [3] Notwithstanding the provisions of [1] and [2] above, in the event that part of the Office Buildings, the Residential Facilities or the Hotels includes an area used for the Commercial Properties Use or the Industrial Properties Use, the Retail Division is granted the First Preferential Consideration Right when an area used for the Commercial Properties Use is included, and the Industrial Division is granted the First Preferential Consideration Right when an area used for the Industrial Properties Use is included. In this case, MidCity always is granted the Second Preferential Consideration Right and the Private Fund Management Department always is granted the Third Preferential Consideration Right. [4]Notwithstanding the provisions of [1] through [3] above, in the event that part of the Mixed-Use Facilities includes both an area used for the Commercial Properties Use and an area used for the Industrial Properties Use, the Preferential Consideration Right will be granted based on the largest floor area for each use. If the area used for the Commercial Properties Use accounts for the largest floor area, the Retail Division will be granted the First Preferential Consideration Right, and if the area used for the Industrial Properties Use accounts for the largest floor area, the Industrial Division will be granted the First Preferential Consideration Right. Provided, however, that if the size of the floor cannot be used as the determining factor for the grant of the Preferential Consideration Right because it is likely to create an inappropriate result, a meeting between the President, the Deputy President and the members of the Deal Review Meeting will be held to decide which of the Retail Division or the Industrial Division should be granted the First Preferential Consideration Right or the Second Preferential Consideration Right (furthermore, in this case, MidCity always is granted the Third Preferential Consideration Right and the Private Fund Management Department always is granted the Fourth Preferential Consideration Right). In such a case, the Compliance Officer must call an independent outside expert who has no conflict of interest with respect to the decision to participate in the meeting as an observer and ask for his/her opinion. iv. The Retail Division or the Industrial Division which was granted the Preferential Consideration Right may grant the Joint Preferential Consideration Right to MidCity (limited to the case where MidCity has the next priority Preferential Consideration Right) or to another Division of the Funds which has the next priority Preferential Consideration Right. In addition, in the event that the Preferential Consideration Right is granted to MidCity and MidCity proposes the joint investment by MIDREIT and the Funds, the Division of the Funds which have the next priority Preferential Consideration Right will consider such proposal. e. Preferential Consideration Right with respect to Information Regarding the Disposition of Real Estate Properties for Multiple Properties* i. In considering the Information Regarding the Disposition of Real Estate Properties for Multiple Properties, if it is possible to consider such information for each property individually, the Preferential Consideration Right will be granted pursuant to the provisions of a through d above. 7

8 ii. (a) If it is not possible to consider the Information Regarding the Disposition of Real Estate Properties for each property individually (including a case where properties are being sold in bulk), in the event that Office Buildings, Residential Facilities or Hotels are included in such properties, the Preferential Consideration Right will be granted pursuant to the provisions of [1] through [4] below, and in the event that Office Buildings, Residential Facilities and Hotels are not included in such properties, the Preferential Consideration Right will be granted pursuant to the provisions of [1] through [3] below: [1] If Commercial Properties are included in part or all of the Multiple Properties, the Retail Division will be granted the First Preferential Consideration Right. [2] If Industrial Properties are included in part or all of the Multiple Properties, the Industrial Division will be granted the First Preferential Consideration Right. [3] If both of Commercial Properties and Industrial Properties are included in part or all of the Multiple Properties, the Preferential Consideration Right will be granted based on the largest floor area for each use. If the Commercial Properties Use accounts for the largest floor area, the Retail Division will be granted the First Preferential Consideration Right, and if the Industrial Properties Use accounts for the largest floor area, the Industrial Division will be granted the First Preferential Consideration Right. [4] If none of the above applies, MidCity will be granted the First Preferential Consideration Right. (b) In the event that the Retail Division or the Industrial Division which was granted the First Preferential Consideration Right pursuant to (a) [1] and [2] above decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term and Office Buildings, Residential Facilities or Hotels are included in such properties, MidCity is granted the Second Preferential Consideration Right, and in the event that MidCity decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Third Preferential Consideration Right. In the case described in (a) [3] above, if the Retail Division is granted the First Preferential Consideration Right, the Industrial Division will be granted the Second Preferential Consideration Right, and if the Industrial Division is granted the First Preferential Consideration Right, the Retail Division will be granted the Second Preferential Consideration Right. In the event that the Industrial Division or the Retail Division which was granted the Second Preferential Consideration Right decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term and Office Buildings, Residential Facilities or Hotels are included in such properties, MidCity is granted the Third Preferential Consideration Right, and in the event that MidCity decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Fourth Preferential Consideration Right. Furthermore, in the event that MidCity which was granted the First Preferential Consideration Right pursuant to (a) [4] above decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term, the Private Fund Management Department is granted the Second Preferential Consideration Right. In the event that the Retail Division or the Industrial Division which was granted the First Preferential 8

9 Consideration Right pursuant to (a) [1] and [2] above decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term and Office Buildings, Residential Facilities and Hotels are not included in such properties, the Private Fund Management Department is granted the Second Preferential Consideration Right. In the case described in (a) [3] above, if the Retail Division is granted the First Preferential Consideration Right, the Industrial Division will be granted the Second Preferential Consideration Right, and if the Industrial Division is granted the First Preferential Consideration Right, the Retail Division will be granted the Second Preferential Consideration Right. In the event that the Industrial Division or the Retail Division which was granted the Second Preferential Consideration Right decides not to purchase the relevant properties or does not make a decision to purchase such properties within the preferential consideration term and Office Buildings, Residential Facilities and Hotels are not included in such properties, the Private Fund Management Department is granted the Third Preferential Consideration Right. (c) Notwithstanding the provisions of (a) and (b) above, in the event that the size of the floor cannot be used as the determining factor for the grant of the Preferential Consideration Right because it is likely to create an inappropriate result, a meeting between the President, the Deputy President and the members of the Deal Review Meeting is held to decide the preferential right holder (the Preferential Consideration Right Holder ) and the rank of each Preferential Consideration Right Holder. In such a case, the Compliance Officer must call an independent outside expert who has no conflict of interest with respect to the decision to participate in the meeting as an observer and ask for his/her opinion. (d) The Retail Division or the Industrial Division which was granted the Preferential Consideration Right may grant the Joint Preferential Consideration Right to MidCity (limited to the case where MidCity has the next priority Preferential Consideration Right) or other Division of the Funds which has the next priority Preferential Consideration Right. In addition, in the event that the Preferential Consideration Right is granted to MidCity and MidCity proposes the joint investment by MIDREIT and the Funds, the Division of the Funds which have the next priority Preferential Consideration Right will consider such proposal. * Multiple Properties means the aggregation of single property, including each of the aggregation of single facility, multiple properties, single facility and multiple properties; hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information. f Preferential Consideration Right with respect to land with leasehold interest (the Land (with leasehold interest); hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information i. As to the Land, the Preferential Consideration Right is granted pursuant to the provisions of items a through d above based on the use of the facility which is built on the Land and utilizes the leasehold interest of the Land. ii. If there are several facilities which are built on the Land and utilize the leasehold interest of the Land, the Preferential Consideration Right will be granted in a manner similar to the provision of item e above. 9

10 g Preferential Consideration Right with respect to Development Land (not with leasehold interest) (the Development Land ); hereinafter the same under 1. (1) [2] (iii) Rules Regarding Preferential Consideration Rights on Investment Information ) i. As to the Development Land, the Acquisition Division prepares the plan of the facility which is deemed most appropriate for the Development Land (the Development Plan ), and the Preferential Consideration Right is granted, pursuant to the provisions of items a through d above, based on the use of the facility which is to utilize the leasehold interest of the Development Land in the Development Plan (the Planned Facility ). ii. If there are several facilities concerning the Development Land, the Preferential Consideration Right will be granted in a manner similar to the provision of item e above. iii. Notwithstanding the provisions of items i. and ii. above, in the event that the Development Plan prepared pursuant to the provision of i. above is not obviously appropriate for the Development Land in objective terms, in light of the form, plotting, and nature of the soil of the Development Land, land use conditions and economic conditions around the Development Land as well as other circumstances relating to the Development Land, a meeting between the President, the Deputy President and the members of the Deal Review Meeting is held to decide the Development Plan. In such a case, the Compliance Officer must call an independent outside expert who has no conflict of interest with respect to the decision to participate in the meeting as an observer and ask for his/her opinion. h Exception to application of Preferential Consideration Right The Information Regarding the Disposition of Real Estate Properties which falls under the category of any of the following items is excluded from the application of the Preferential Consideration Right: i. When the potential acquirers of the properties are designated by the investors and other related parties of the Real Estate Funds managed by the Company; ii. When the potential acquirers of the properties are designated by the seller of the properties; iii. When the properties are warehoused pursuant to a written document and the potential acquirers of the properties are designated therein; iv. When the contractual preferential negotiation right or the opportunity to consider future acquisition is attached to the properties and the potential acquirers of the properties are designated; or v. When the disclosure of the Information Regarding the Disposition of Real Estate Properties by the Company to MidCity is prohibited by the confidentiality obligation and other laws and regulations or contractual obligations. i Procedure for determining the Preferential Consideration Right Holder i. The Preferential Consideration Right Holder for an individual property is determined by the Head of the Acquisition Division after he/she confirms certain factors concerning the Information Regarding the Disposition of Real Estate Properties. ii. If the Head of the Acquisition Division determines the Preferential Consideration Right Holder, the Preferential Consideration Right Holder must promptly report to the Deal Review Meeting the relevant information on the Preferential Consideration Right Holder and other related matters. 10

11 j iii. A member of the Deal Review Meeting may raise an objection if he/she determines that the decision of the Head of the Acquisition Division is against these Rules and other internal rules of the Company. If such objection is raised, the Deal Review Meeting will review whether such decision complies with these Rules and other internal rules of the Company. iv. In the event that an amendment to the decision of the Head of the Acquisition Division is approved as a result of the review by the Deal Review Meeting, the Head of the Acquisition Division will again determine the Preferential Consideration Right Holder in accordance with such approval. Outline of Preferential Consideration Right i. The preferential consideration term for the Information Regarding the Disposition of Real Estate Properties based on the Preferential Consideration Right is, in principle, 10 business days from the date of grant of the Preferential Consideration Right. However, if it is deemed appropriate in light of the nature of the Information Regarding the Disposition of Real Estate Properties, the Head of the Acquisition Division may extend or shorten such term in determining the Preferential Consideration Right Holder. Notification to MidCity regarding the determination of the Preferential Consideration Right Holder is made by the secretariat. ii. Following the determination of the Preferential Consideration Right Holder, the Head of the Retail Division, the Head of the Industrial Division or the Head of the Private Fund Management Department controlling each Division of the Funds which became the Preferential Consideration Right Holder must indicate their intention as to whether to continue considering acquisition of the relevant properties at the Deal Review Meeting by the end of the preferential consideration term. The secretariat reports the content of MidCity s intention at the Deal Review Meeting. iii. The Head of the Retail Division, the Head of the Industrial Division or the Head of the Private Fund Management Department controlling each Division of the Funds which became the Preferential Consideration Right Holder must clarify their reasons when indicating their intention as to whether to continue considering acquisition of the relevant properties. When MidCity indicates their intention as to whether to continue considering acquisition of the relevant properties, the secretariat must confirm their reasons and report the result of such confirmation upon reporting the content of MidCity s intention at the Deal Review Meeting. iv. In the event that the Head of the Retail Division, the Head of the Industrial Division or the Head of the Private Fund Management Department controlling each Division of the Funds indicates their intention to continue considering acquisition of the relevant properties or the secretariat makes such report at the Deal Review Meeting, in principle, the preferential consideration term is automatically extended until such consideration of acquisition ends. However, if it is determined, as a result of the review by the Deal Review Meeting, that reasonable reason for such extension does not exist, the preferential consideration term will not be extended. v. In the event that the intention not to continue considering acquisition of the relevant properties was indicated at the Deal Review Meeting or no intention was indicated by the end of the preferential consideration term, the Preferential Consideration Right of the relevant Preferential Consideration Right Holder expires, and the Preferential Consideration Right concerning the relevant Information Regarding the Disposition of Real Estate Properties is transferred to the Preferential Consideration Right Holder with the next priority. In such case, the preferential consideration term for the Information Regarding the Disposition of Real Estate Properties based on the 11

12 next priority Preferential Consideration Right is prescribed pursuant to item i above. (iii) Risk Management System In consideration of the importance of the asset management system of one or more investment funds, each division, Retail Division and Industrial Division, shall manage various risks associated with the acquisition or disposal of assets (principally the risk concerning the risk of deficiencies and defects of real estate, the risk associated with the bankruptcy of sellers, the risk associated with common properties, the risk associated with properties for development, and the risk concerning hazardous substances), various risks associated with operation and management of assets (principally the risk concerning lease contract, the risk of damage, loss and deterioration of assets caused by disasters, the risk concerning owner liability and the expenses of repair and maintenance on real estate), and various risks concerning financing of each investment corporation. In addition to the management of the above-mentioned risks, the Compliance Office shall carry out planning of risk management system, and control checking and improving task of its condition and management from the company-level viewpoint on grounds that are independent from each division, department, and office which it takes charge of and make a proposal about the risk management method, etc., under risk manager (Deputy President) In addition, the Asset Manager shall verify and argue the overall risks for the entire portfolio with regard to the acquisition or disposal of assets, operation and management, policy or standard of operation and management, the budgeting and closing and finance with Investment Committee while deciding countermeasures against those risks. Moreover, the Asset Manager has established a system where the Compliance Committee, which is comprised of the President, Deputy President, heads of each division, heads of each department and Compliance Officer, who serve as permanent committee, is held once every three months as a general rule and to grasp and examine the risks other than those of dependent to Investment Committee and formulate necessary countermeasures and management policies on a timely basis. Auditors are allowed to participate in each of the Investment Committee and the Compliance Committee and give opinions. For the details of each committee, please also refer to [1] Policy and management system for dealing with transactions involving conflict of interests in (3) Policies on transactions involving conflicts of interest, etc. in 2. Management Structure and System of Investment Corporation and Asset Manager, as stated below. Moreover, the Internal Audit Office shall perform internal audits regularly based on the Internal Audit Regulations and prepare an internal audit report about risk management in the Asset Manager and each division. Suggestions pointed out in the internal audit report, along with items pointed out in the audit by Auditors and the audit by Accounting Auditors shall be put together into the compliance program. The General Manager of the Internal Audit Office shall participate in the meeting of the Compliance Committee as its committee member, hold discussions and endeavor to keep track of the progress of the compliance program. The compliance program shall be reported to the Board of Directors and receive its approval. The progress of this program is monitored by the Compliance Committee and reported to the Board of Directors. The post of Head of the Internal Audit Office is held concurrently by the Deputy President of the Asset Manager, who appoints a third-party professional as auditor in accordance with the Internal Audit Regulations and performs internal audit. The Internal Audit Office 12

13 has established an appropriate self-inspection system in which compliance staff in each department will carry out self-assessment for risk management and increased operational efficiency in the department. 13

14 (2) Unitholders Name Relationship with the Investment Corporation, the Asset Manager or sponsors and the background for holding units As of February 28, 2015 Unite held (unit) Percentage (%) Japan Trustee Services Bank, Ltd. (Trust Account) 430, The Master Trust Bank of Japan, Ltd. (Trust Account) 191, Trust and Custody Services Bank, Ltd. (Securities Investment Trust Account) 165, The Nomura Trust and Banking Co. (Investment Trust Account) 111, NUMURA BANK (LUXEMBOURG) S.A. 90, THE BANK OF NEW YORK MELLON SA/NV 10 71, CBLDN - STICHTING PGGM DEPOSITARY LISTED REAL ESTATE PF FUND 42, STATE STREET BANK WEST CLIENT - TREATY 41, STATE STREET BANK - WEST PENSION FUND CLIENTS-EXEMPT 38, STATE STREET BANK AND TRUST COMPANY , Total of the top 10 unitholders 1,217, Note: The figures in the percentage column represent the percentage of units held by individual unitholders to the total number of units issued, and are indicated by rounding off to the second decimal place. (3) Major shareholders of the Asset Manager As of May 29, 2015 Name Number of Relationship with the Investment Corporation, the Asset Manager or Percentage shares held sponsors and the background for holding units (%) (shares) Mitsubishi Corporation Provided capital at the time of formation of the Asset Manager 5, UBS AG Same as above. 4, Total 10, Note: The figures in the percentage column represent the percentage of shareholdings of individual shareholders to the number of shares outstanding and are indicated by rounding off to the second decimal place. 14

15 (4)-1 Investment policy and investment target The Investment Corporation has established a basic investment policy of managing investment with the aim of securing stable profit on a mediumand long-term basis and steadily building investment assets. The Investment Corporation shall make investments primarily in retail properties such as urban commercial buildings, suburban shopping centers and roadside stores (hereinafter referred to as Retail Properties ) directly or mainly through specified assets which are supported by the Retail Properties. The investment portfolio will be comprised of income assets, which are expected to generate stable cash flows in the medium- and long-term, and growth assets, which can offer potential growth in property value and cash flows through the replacement of tenants, etc. In addition, the Investment Corporation shall analyze the domestic economic conditions, real estate market and trends of the retail industry on a regular basis and make diversified investment of assets categorized by different attribution of type of business, area and lessee of the Retail Properties, in order to reduce the risks of disasters such as earthquakes, and the risk of vacancy due to the moving out of tenants and stabilize cash flows. For details, please refer to the Financial Statements of the Investment Corporation. (4)-2 Matters concerning selection criteria of tenants Upon the selection of tenants, tenants credibility, competitiveness as a retailer and or service provider, lease period, lease cancellation terms, condition on revision of rent, availability of tenant leasehold and security deposits are thoroughly reviewed, and both the growth potential and stability are analyzed. Terms of lease agreements are being reviewed regularly in the light of the remaining lease period, credit risk, economic environment and sales of tenants. With regard to the certainty in fulfillment of obligation, constant attention is paid and credit check is conducted as necessary. (4)-3 Matters concerning overseas real estate investment a. Investment stance toward overseas real estate properties The Investment Corporation has no specific plan for making investments in overseas real estate properties as of the date of this report. (5) Matters concerning sponsors [1] Details of the businesses of sponsor company groups The Investment Corporation has two sponsor companies which specifically are Mitsubishi Corporation and UBS AG. They are major shareholders of the Asset Manager. Mitsubishi Corporation is one of the largest global general trading companies in Japan with more than 200 offices and subsidiaries in Japan and approximately 90 countries worldwide. The Mitsubishi Corporation Group has a network of over 600 group companies with about 60,000 employees. It develops and operates businesses across a diverse range of industries including the Global Environmental & Infrastructure Business, Industrial Finance, Logistics & Development, Energy Business, Metals, Machinery, Chemicals and Living Essentials, as well as Business Service. 15

16 In the real estate related business, Mitsubishi Corporation is engaged in diversified businesses, ranging from development and sale of condominiums to the PFI business and overseas real estate property investment, by making full use of its comprehensive capabilities as a general trading company. For details of the corporate group of Mitsubishi Corporation, please refer to the financial statements of that company. UBS AG is one of the largest financial institutions in the world with about 63,500 employees worldwide and provides financial services in 50 countries. UBS Global Asset Management, the asset management vehicle of the UBS Group, is the largest global leading asset management company with approximately 68 trillion yen s worth of assets under management. It offers diverse investment opportunities to investors by building an investment portfolio in virtually all asset classes including real estate. The UBS AG Group is providing a wide variety of financial services by making the most of its world-class asset size, global network and business bases which it has established in countries around the world. In the real estate business, the Group offers a wide range of services from trading to investment and management of real estate properties mainly in Europe and the U.S. as part of its efforts for global asset management. For details of the UBS AG Group, please refer to the financial statements of that company. [2] Agreements on supply of properties and information provision with sponsor company groups Not applicable. 16

17 2. Management structure and system of the Investment Corporation and the Asset Manager (1) Investment Corporation [1] Directors of the Investment Corporation As of May 29, 2015 Job title Name Brief biography Reason for selection April 1984 Admitted to Japanese Bar and joined Ozaki & Momo-o September 1986 Received Master of Law at Columbia University, Law School (U.S.) Mr. Namba was selected September 1987 Joined Weil, Gotshal & Manges as Executive Director as February 1988 Admitted to New York Bar he was deemed to be June 1988 Joined Bankers Trust Company qualified for the position Executive Shuichi December 1988 Admitted to California Bar of implementing the JRF Director Namba April 1989 Partner of Momo-o, Matsuo & Namba (present post) operation from the view February 1998 Part-time Auditor of Sanshin Corporation (present post) point of a legal expert September 2001 Supervisory Director of the Investment Corporation and was in charge of June 2002 Part-time Auditor of Itochu Enex Co., Ltd. (present post) Supervisory Director for December 2012 Japan Retail Fund Investment Corporation Executive Director (present post) many years. Alternate Executive Director Fuminori Imanishi April 1979 March 1998 September 2001 October 2001 April 2002 March 2004 October 2004 April 2005 February 2007 September 2010 Joined Nichii Co., Ltd. (presently MYCAL Corporation) Nichii Co., Ltd, Head Financial Planning Nichii Co., Ltd, Management Reform Division, General Manager in charge of Corporate Planning Hankyu Railway Corporation, Group Management Division, Group Policy Development Department, Assistant General Manager Hankyu railway Corporation, Real Estate Management Department, Assistant General Manager Seconded to Hankyu REIT Asset Management, Inc., Board Member, Asset Management Department, General Manager Seconded to Hankyu Facilities Co., Ltd., Management Control Office, Assistant General Manager Mitsubishi Corp.-UBS Realty Inc., Strategic Planning Department, General Manager Mitsubishi Corp.-UBS Realty Inc., Head of Retail Division (present post) Japan Retail Fund Investment Corporation, Executive Director Mr. Imanishi was selected as Alternate Executive Director as he was deemed to be qualified for the position of implementing the JRF operation promptly from the viewpoint of a real estate expert when Executive Director is vacant. 17

18 Supervisory Director Supervisory Director Alternate Supervisory Director Masahiko Nishida Masaharu Usuki Shuhei Murayama November 1998 February 2001 April 2003 April 2005 December 2005 January 2007 December 2008 January 2010 June 2012 November 2012 April 1981 April 1994 October 1998 October 2000 April 2003 October 2003 April 2005 April 2011 December 2011 April 1972 March 1976 August 1978 July 1986 August 1993 August 1996 August 2000 August 2011 February 2015 Joined the Chuo Coopers & Lybrand Consulting Co., Ltd Joined the Asahi Arthur Andersen Limited Joined the Arcadia Group Limited Joined Tokyo International Audit Corporation Web Crew. Inc, Non-Standing Corporate Auditor Marks Group Co.,Ltd., President (present post) Nihon Falcom Corporation, Non-Standing Corporate Auditor Supervisory Director of the Investment Corporation (present post) ShineWing Tokyo LLC, Non-Standing Member Registered as a Certified Public Accountant in USA Joined the Long-term Credit Bank of Japan, Ltd. Transferred to LTCB Research Institute Inc. Joined NLI Research Institute Part-time Lecturer at the Graduate School of International Management of International University of Japan Guest Professor at Chuo Graduate School of International Accounting Guest Professor at Graduate School of Economics of Senshu University Part-time Lecturer at Waseda University Graduate School of Finance Professor at Graduate School of Economics of Nagoya City University (present post) Japan Retail Fund Investment Corporation, Supervisory Director (present post) Tohmatsu Aoki & Co. (presently Deloitte Touche Tohmatsu LLC) Registered as a Certified Public Accountant Tohmatsu Awoki & Co. (presently Deloitte Touche Tohmatsu LLC), Los Angeles office Partner of Tohmatsu Awoki & Co (presently Deloitte Touche Tohmatsu LLC) Tohmatsu & Co. (presently Deloitte Touche Tohmatsu LLC), New York office Tohmatsu & Co. (presently Deloitte Touche Tohmatsu LLC), Naha office Tohmatsu & Co. (presently Deloitte Touche Tohmatsu LLC), Tokyo office President of Shuhei Murayama CPA office (present post) External director of Oracle Corporation Japan (present post) External auditor of Nippon Filcon Co., Ltd. (present post) Mr. Nishida was selected as Supervisory Director as he was deemed to be qualified for the position of supervising the activities of Executive Directors from the viewpoint of an accounting expert. Mr. Usuki was selected as Supervisory Director as he was deemed to be qualified for the position of supervising the activities of Executive Directors from the viewpoint of an accounting expert. Mr. Murayama was selected as Alternate Supervisory Director as he was deemed to be qualified for the position of supervising the activities of Directors from the viewpoint of an accounting expert when Supervisory Director is vacant. 18

19 [2] Reasons why Directors of the Investment Corporation concurrently holding the position of officers and staff of the Asset Manager and measures for relationships involving conflicts of interest Not applicable. [3] Other relationships involving conflicts of interest due to other positions held simultaneously by directors of the Investment Corporation. Not applicable. 19

20 (2) Asset Manager [1] Officers of the Asset Manager Job title/ permanent or part-time President & CEO Deputy President & Representative Director Name Toru Tsuji Takanobu Yoshimoto April 1990 September 1991 September 1998 July 2002 September 2002 February 2005 July 2006 October 2010 June 2011 June 2012 August 2012 April 2013 June 2013 April 2015 April 1987 July 1990 May 1996 June 1996 April 1997 July 1998 October 2000 October 2004 August 2006 December 2009 February 2010 April 2015 Brief biography Mitsubishi Corporation, Building Equipment & System Dept. Urban Development Dept., Mitsubishi Corporation Machinery & Information Business Dept., Kyushu Branch, Mitsubishi Corporation Construction & Building Equipment Unit, Mitsubishi Corporation LAWSON Project Management Unit, Mitsubishi Corporation (additional post) Part-time Director of MC Architects, Inc. Housing Development Unit, Mitsubishi Corporation Commercial Real Estate Development Unit, Mitsubishi Corporation Part-time Director of Mitsubishi Corporation Urban Development, Inc. Part-time Director of Mitsubishi Corp.-UBS Realty Inc. General Manager of Real Estate Asset Management Team, Real Estate Investment & Management Unit, Mitsubishi Corporation Director/Senior Executive Officer of Mitsubishi Corp.-UBS Realty Inc. President & CEO of Mitsubishi Corp.-UBS Realty Inc. (present post) Executive Director of the Investment Trusts Association Japan (present post) Part-time Director of MCUBS MidCity Inc. (present post) The Long-Term Credit Bank of Japan, Ltd. ( LTCB ), Treasury Division System Development Division, LTCB Received MBA at the School of Business of Columbia University (U.S.) Manager of Structured Finance Division, LTCB Manager of Operation & Administration Division and Investment Planning Division, LTCB Investment Management Co., Ltd. (presently, UBS Global Asset Management (Japan) Ltd.) Director of Control & Administration, LTCB UBS Brinson Co., Ltd. (presently, UBS Global Asset Management (Japan) Ltd.) Director of Financial Institutions and Intermediaries, UBS Brinson Asset Management (Japan) Ltd. (presently, UBS Global Asset Management (Japan) Ltd.) Head of Client Management, UBS Global Asset Management (Japan) Ltd. Executive Director and Head of Client Management, UBS Global Asset Management (Japan) Ltd. Senior Executive Officer of Mitsubishi Corp. - UBS Realty Inc. Deputy President & Representative Director of Mitsubishi Corp. - UBS Realty Inc. (present post) Part-time Director of MCUBS MidCity Inc. (present post) As of May 29, 2015 Interlocking of post/assignment, temporal transfer (Interlocking of post/assignment) Not applicable. (Temporal transfer) Mitsubishi Corporation (Interlocking of post/assignment) Not applicable. (Temporary transfer) UBS Global Asset Management (Japan) Ltd. 20