Policy on Product Governance | Marubeni Asset Management Co., Ltd.

Policy on Product Governance

ＨＯＭＥ＞ Policy on Product Governance

Marubeni Asset Management Co., Ltd. (hereinafter referred to as “Company”) adopts all principles stated in the Supplemental Principles on Product Governance (including subsequent revisions; hereinafter referred to as “Supplemental Principles”) announced by Financial Services Agency on September 26, 2024 and is committed to keep conducting its asset management business operations under the Company’s management policy in a manner that places the highest priority on the interests of investors (hereinafter referred to as “Customer(s)”) of the Marubeni Private Real Estate Investment Trust and each fund (hereinafter referred to as “Private Fund(s)”), which entrust the Company with asset management. The Company’s policy on the Supplemental Principles are as follows:

【 Supplemental Principle 1. Basic Policy 】

The Company is committed to utilize its own knowledge, experiences, and wide-ranging expertise in real estate and finance to provide the financial products and business services (including follow-ups; hereinafter referred to as “Products and Services”) suitable for each Customer, considering the Customer’s asset situation, knowledge, needs, and transaction experiences and purpose.

【 Supplemental Principle 2. Formation of Product Governance Framework 】

Based on the Basic Policy described in the Supplemental Principle 1, the Company is committed to control the quality of individual business processes and form the framework to ensure the effectiveness of the overall product governance on the life cycle of Products and Services.

Note 1 : To ensure the effectiveness of the overall product governance on the life cycle of Products and Services and the effectiveness of quality control in the individual business processes, the Company will develop rules to clarify the roles of the individual business tasks and create manuals of the business tasks.
Additionally, the Company will validate the effectiveness of quality control through deliberations by the Investment Committee and Legal Compliance and Risk Management Committee and internal audits conducted with support from external experts.

Note 2 : Based on the validation mentioned above, the Company will maintain the quality and effectiveness of Products and Services by reviewing the business processes and rules, as necessary.

【 Supplemental Principle 3. Actions in the Configuration of Financial Products 】

To provide and recommend the Products and Services suitable for each Customer, the Company will have close communications with the Customers to better understand their needs. The Company will also discuss important considerations, such as types of property which may be backing assets, capitalization rate, acceptable range of risks, management period, and management policies.
Based on the discussions above, the Company will grasp the Customers’ needs and asset situation to configure, provide, and recommend Products and Services to meet their needs.

Note 1 : The personnel engaged in the designing and configuring of Products and Services (hereinafter referred to as “Configurator”) investigates and assesses the real estates as backing assets from multiple viewpoints, forecasts future income and expenditure, and assesses the rationalities of risks, returns, and costs, based on the internal rules.

Note 2 / Note 3 : The Configurator collaborates and shares the information as appropriate with the personnel who solicits and sells the Products and Services (hereinafter referred to as “Sales Representative”) to understand the Customers’ asset situation, knowledge, needs, and transaction experiences and purpose, so that the Configurator can design and configure the Products and Services suited for potential customers. Additionally, in the individual processes in product designing and configuration, such as internal decision-making and escalating discussions to councils, the Configurator studies whether the Customers’ needs are correctly incorporated in the Products and Services.

【 Supplemental Principle 4. Actions After Providing Financial Products 】

The Company is committed to maximizing the Customers’ returns by performing regular and continuous assessments of Products and Services provided to the Customers, as well as reviewing and improving the investment strategies, as necessary.
Additionally, the Company will utilize the assessment results for reviewing the entire product governance framework including the configuration, provision, and management processes of its future Products and Services.

Note 1 : Even after providing the Products and Services, the Company will continue to assess the balance between the risks, returns, and costs under an appropriate assessment organization which has no arbitrariness. Additionally, if it is impossible to provide the originally planned added value, we will consider improving the Products and Services or revising the investment strategies. The Company will utilize the assessment results as necessary for revision of the product governance framework including the configuration, provision, and management processes of its future Products and Services.

Note 2 : The personnel who administers and controls the Products and Services (hereinafter referred to as “Administrator”) collaborates and shares the information with the Configurator and Sales Representative as necessary about the investment situation of the provided Products and Services. Additionally, if the Company outsources the tasks related to soliciting and selling the Products and Services to any third party (hereinafter referred to as “Consignment Distributor”), the Administrator will also collaborate and share the information with the Consignment Distributor to maximize the Customers’ returns. In case a Consignment Distributor does not share the appropriate information, the Company may discontinue outsourcing to the Consignment Distributor.

Note 3 : If the Company outsources the management of the Products and Services designed and configured by the Company to any third party (hereinafter referred to as “Management Outsourcee”), it will assess the investment situation and then improve or revise the Products and Services as necessary based on the assessment results. Additionally, the Company will also collaborate and share the information with the Management Outsourcee to maximize the Customers’ returns.

【 Supplemental Principle 5. Provision of Intelligible Information to the Customers 】

The Company is committed to provide the Customers with intelligible information about its management and product governance frameworks so that the Customers can select better products for themselves.

Note 1 : The Company is committed to provide the Customers with intelligible information about its investment system by itself or through its Consignment Distributor. This information includes (not limited to) the information on the Company’s investment manager and asset manager, and its business performance.

Note 2 : The Company is committed to providing the Customers with intelligible information about merchantability of its Products and Services by itself or through its Consignment Distributor. This information includes (not limited to) the investment strategies and investment situation of the Products and Services in a management period.

【Policy on Product Governance 】Business situation in 2024

【 Supplemental Principle 1. Basic Policy 】

The Company’s main Products and Services are private REITs and real estate Private Funds. Both are the Products and Services using real estates as backing assets for which the Company can maximize its knowledge, experiences, and wide-ranging expertise in real estate and finance.
Based on the Basic Policy, the Company only provides the private REITs as Products and services to qualified institutional investors so that it can secure stable profit and growth of invested assets to maximize its Customers’ returns.
On the other hand, the real estate Private Funds are the Products and Services mainly for professional investors. Every fund has distinct characteristics, and the Company share adequate information with the Customers so that they can make correct decisions for investments.

【 Supplemental Principle 2. Formation of Product Governance Framework 】

The Company has established the rules for providing and recommending the Products and Services to its Customers. The Company's officers and employees perform their tasks following these rules so that all business processes are performed at a constant quality level.

Note 1 : The rules related to the business processes include the following: - Organization Rules, Division of Duties Rules, Administrative Authority Rules, Decision-making Standards Rules
- Committee Rules, Risk Management Rules, Internal Audit Rules
- Compliance Rules, Compliance Manuals, Rules on Transactions between Interested Parties
- Due Diligence Appraisal Meeting Rules, Property Related Assets Information Distribution Rules
- Operational Manual (for Acquisition), Operational Manual (for Management), Operational Manual (for Disposition)
In FY2024, the Company held 9 Legal Compliance and Risk Management Committee meetings and 37 Investment Committee meetings to make discussions and decisions, involving external experts. Additionally, we performed an annual internal audit to verify that the effectiveness of quality control has been ensured.

Note 2 : For the issues pointed out by the internal audit, the Company revised the business processes and rules as necessary to maintain the quality of the Products and Services and to ensure the effectiveness of the product governance.

【 Supplemental Principle 3. Actions in the Configuration of Financial Products 】

To provide the Products and Services suitable for the Customers, the Company is committed to having close communication with them from the configuration process, understand their specific needs (type of property, capitalization rate, scale of investment, and management period), and design the products and services to meet their needs.

Note 1 : The Configurator analyzes the value of the real estate to be the backing assets and designs the Products and Services to meet the Customer’s needs (including balances between risks, returns and costs) based on the information which the Sales Representative obtained from the Customer, as per the following internal rules:
- Decision-making Standards Rules
- Committee Rules
- Compliance Rules
- Due Diligence Appraisal Meeting Rules
- Operational Manual (for Acquisition)

Note 2 / Note 3 : As described above, the Configurator collaborates and shares the information as appropriate with the Sales Representative to understand the Customers’ asset situation, knowledge, needs, and transaction experiences and purpose, so that the Configurator can provide and recommend the Products and Services suitable for the Customers. Additionally, the Company checks and verifies whether those factors are incorporated in the Products and Services through internal meetings, such as LOI meeting, DD meeting, Legal Compliance and Risk Management Committee meeting, and Investment Committee meeting, and decision-making processes.

【 Supplemental Principle 4. Actions After Providing Financial Products 】

The Company performs the management control of individually managed Products and Services by developing the management control plans on a regular basis, having the plans discussed and decided by the Investment Committee, and obtaining consent from the stakeholders in the investment scheme such as lenders and trustees. When developing the management control plans, the Company is committed to maximizing the Customers’ returns by reviewing and improving the investment strategies as necessary based on the past performances. The results of reviews and improvements are utilized as necessary for reviewing the product governance framework for other Products and Services.

Note 1 : For the regular reviews of management control plans described above, the Company verifies whether the core factors, such as income gains from the invested properties, repair cost including capital expenditure, and management control cost, are appropriate in consideration of the balances between the risks, returns, and costs, based on the characteristics of the Products and Services. If it is impossible to provide the originally planned added value, the Company will change its investment strategies to take actions such as early extinguishment and early disposition to maximize the Customers’ returns in accordance with the characteristics of the Products and Services.

Note 2 : After designing and configuring the Products and Services, they are basically managed within the Company, which enables the Administrator, Configurator, and Sales Representative to collaborate, share the information as necessary, and make prompt decisions even in situations requiring quick judgment.

Note 3 : Even in case that the management control task is outsourced, the Company can collaborate and share the information with the Management Outsourcee by taking measures like regular meetings.

【 Supplemental Principle 5. Provision of Intelligible Information to the Customers 】

The Company publishes the information about its management and product governance frameworks on the Company’s homepage to provide the Customers with intelligible information so that they can select better products for themselves.
URL: https://www.marubeni-asset.com/en/business/index.html
Note 1 / Note 2 : The Company gives its investment managers and asset managers the opportunities to have close communications with the Customers and share the information directly about individual Products and Services. The Company also pays full attention to the information to share so that the information is intelligible and does not cause any doubt.