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  • Nippon Commercial Investment Corporation

    Nippon Commercial Investment Corporation

    Pacific Commercial Investment Corporation

    NIPPON COMMERCIAL INVESTMENT CORPORATION (Listed on the Tokyo Stock Exchange under securities code 3229)

    October, 2007

  • 1(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    Table of ContentsTable of Contents

    Table of Contents ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・1

    Investment Highlight・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・2

    Growth Strategy・・・・・・・・・・・・・・・・・・・・・・・・・・・ 5

    Financial Strategy ・・・・・・・・・・・・・・・・・・・・・・・・22

    ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 25

    Disclaimer ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 36

    Section 1

    Section 2

    Appendix

  • 2(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    Investment HighlightInvestment Highlight

    Achieved stable internal growth by improving rental income supported by favorite market condition and introducing cost control Achieved 12,530 yen of dividend per unit

    630 yen increase (+5.2%) from the initial forecast announced in the beginning of the term

    Highlights of the 3rd Fiscal Period (ending Aug. 2007)

    Internal growth Office properties: Achieved stable improvement of NOI by promoting replacement of tenants and increasing rents Office properties: Introduced branding strategy (“Pacific Marks”). Promoted refurbishment of office properties Retail properties: Raised occupancy rate by attracting new tenants. Developed the extension plan of Mallage Kashiwa.

    External growth Acquired two large scale core properties in urban areas of Tokyo and Osaka. To acquire two properties in urban area of Tokyo. Stay focus on

    “large scale properties” and “Tokyo properties”. (Pacific Marks Esaka acquired at 14.5 billion yen, Kawasaki East One Building at 15.1 billion yen)

    Financial Strategy Issued investment corporation bond of 27 billion yen, which is the largest transaction in the history of private offering of investment corporation

    bonds in Japan Realized wider choices of financing methods by obtaining commitment line loans Increased the number of lenders (12 financial institutions ⇒ 24 financial institutions)

    Updates on Business Performance since Mar. 2007

    Improve portfolio quality through active portfolio management

    Realize capital gain from internal growth achieved in one year since IPO

    Review the portfolio Office properties: Focus on scale and growth

    Retail properties: Need to watch transition of commercial areas and promote replacement of properties within commercial areas

    More focus on properties with good locations and large scale. Aim to replace existing properties with properties which have potentials of internal growth

    Further investment in office properties and retail properties located in urban areas (“Retail-A type”)

    Future Strategy

  • 3(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    Market Recognition and Future StrategyMarket Recognition and Future Strategy

    “Japanese economy is growing gradually” (from the opening remarks by the Governor of Bank of Japan at branch manager meeting, Oct. 2007)

    <Office buildings> In Tokyo, rent of mid-to-large scale properties is increasing driven by rent increase in large scale properties

    Significant rent increase in specific areas in Osaka and Nagoya

    Office building supply in Tokyo is limited. Further demand growth is expected.

    <Commercial facilities> Significant concentration of outlets from suburban area to metropolitan area

    In suburban area, outlets are expanding their scale

    Real Estate Market - Leasing

    Credit crunch triggered by sub-prime loan crisis Larger attention on corporate governance to comply newly enforced Financial Instruments & Exchange Law

    Financial institutions became cautious on lending

    Financial Market

    Quality properties in Tokyo are highly popular and they are traded at 3 – 4% cap rate Increase in cap rates of small scaled properties located in regional cities other than the three major metropolitan areas (price going down)

    Real Estate Market - Sales

    Improve operation and corporate governance level to cope with changing global financial market conditions

    Promotion of Financial Strategy and Enhancement of Corporate Governance

    Further invest in properties with potentials of internal growth

    Develop and execute a strategy which ensures steady internal growth

    Realize capital gain from internal growth

    Improve portfolio quality through active portfolio management

    Improvement of Portfolio Quality

  • 4(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    Disposition Realization of

    capital gain

    Internal growth results in improved asset value

    Improved portfolio quality by replacement of properties

    Achieve further external growth

    Active Portfolio ManagementActive Portfolio Management

    PCI ensures appropriate executionPCI ensures appropriate execution of the strategy with itsof the strategy with its excellent management excellent management

    capabilitycapability

    Achieve external growth by Achieve external growth by following our investment policyfollowing our investment policy

    Identify and acquire properties Identify and acquire properties with potentials of internal growth with potentials of internal growth

    Focus investment in office and Focus investment in office and retail properties located in urban retail properties located in urban areasareas

    Achieve external growth by following our investment policy ⇒ Internal growth ⇒Improve asset value ⇒ Realize capital gain ⇒ Improve portfolio quality through active replacement

    of properties

    Achieve external growth by following our investment policy ⇒ Internal growth ⇒Improve asset value ⇒ Realize capital gain ⇒ Improve portfolio quality through active replacement

    of properties

    Execute internal growth Execute internal growth strategies for office and retail strategies for office and retail propertiesproperties

    Realize capital gain Realize capital gain obtained by improved obtained by improved asset valueasset value

    Replace properties with Replace properties with potentials of internal potentials of internal growthgrowth

    1 .Establish high quality portfolio supported by external growth

    11 ..Establish high quality portfolio Establish high quality portfolio supported by external growthsupported by external growth

    2. Execute the internal growth strategy

    2.2. Execute the internal Execute the internal growth strategygrowth strategy

    3. Realize capital gain and improve portfolio quality further

    3.3. Realize capital gain and improve Realize capital gain and improve portfolio quality furtherportfolio quality further

    Increase in Increase in appraisal valueappraisal value

  • Section 1 Growth Strategy

  • 6(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    191191..77Bn yenBn yen

    300Bn yen300Bn yen

    500Bn yen500Bn yen

    External Growth StrategyExternal Growth Strategy

    Achieve mid-long term increase of portfolio size up to 500 Bn yen while maintain high level of dividends Aim to achieve external growth with improving portfolio quality

    Achieve mid-long term increase of portfolio size up to 500 Bn yen while maintain high level of dividends Aim to achieve external growth with improving portfolio quality

    October, 2007*October, 2007* Mid-Long Term FutureMid-Long Term Future

    224242..77Bn yenBn yen

    September, 2006 Listed on TSE

    September, 2006 Listed on TSE

    * Total asset size (acquisition price base) as of October 31, 2007* Total asset size (acquisition price base) as of October 31, 2007

    Aim to acquire newly developed Aim to acquire newly developed properties from both the sponsor properties from both the sponsor

    and third partiesand third parties

    Over JPY 50 Bn asset acquisition Over JPY 50 Bn asset acquisition in one year since IPOin one year since IPO

  • 7(This is a free translation edition. The original edition is written in Japanese.)Nippon Commercial Investment Corporation Pacific Commercial Investment Corporation

    PMC私募ファンド運用残高

    External Growth StrategyExternal Growth Strategy

    Acquisition of newly developed properties from the sponsor Acquisition through PCI’s sourci

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