Contact: Mitsuo Hashimoto, Financial Controller (Tel )

Transcription

1 Translation 1 Company name: J-REP Co., Ltd. Representative: Kaname Wakabayashi, President (Company code: 8992 Tokyo Stock Exchange Mothers) Approval of Tender Offer for J-REP Shares by Controlling Shareholder Recommendation to Shareholders of J-REP to Subscribe for Tender Offer Execution of Loan Agreement with Tender Offeror Issuance of Stock Acquisition Rights through Third-Party Allotment Contact: Mitsuo Hashimoto, Financial Controller (Tel ) J-REP Co., Ltd ( J-REP ) announces that the following matters have been resolved at a meeting of its board of directors held today. These resolutions were passed on the basis that, through a Tender Offer and subsequent procedures, the Offeror intends to acquire all the common shares of J-REP, and that those common shares will be delisted upon J-REP becoming a wholly owned subsidiary of the offeror: (1) J-REP supports the public tender offer (the Tender Offer ) for J-REP shares and stock acquisition rights ( SARs )* by Macquarie Goodman Japan Pte. Ltd. ( MGJ or the Offeror ), a controlling shareholder of J-REP as described below, and recommends that the shareholders of J-REP accept the Tender Offer. With respect to the existing SARs, J-REP believes that the determination of whether to respond to the Tender Offer should be at the discretion of each holder of existing SARs; (2) In order to raise new funding, J-REP will enter into a loan agreement with MGJ as lender and J-REP as borrower dated 15 October 2010 (the "Loan Agreement") in order to secure a new loan facility. As part of the Loan Agreement, J-REP will issue SARs to affiliates of the lender, Macquarie Capital Group Limited ( MCGL ), an indirect 100% subsidiary of Macquarie Group Limited (ABN ) ( Macquarie ), and Goodman Singapore Holdings (Aust) Pty Limited ( GSH ), a 100% subsidiary of Goodman Limited ( Goodman ), which is also a co-investor in MGJ **, through a third party allotment; and (3) J-REP will participate as an investor in a new logistics real estate development fund to be established by Macquarie and Goodman, the co-investors in MGJ, and will provide services to such fund. * The existing SARs include all the stock acquisition rights issued based on: (i) a resolution of a meeting of shareholders held on 13 April 2007 and a resolution of a meeting of the board of directors held on 30 May 2007; (ii) a resolution of a meeting of shareholders held on 24 June 2007 and a resolution of the board of directors held on 30 August 2007, (iii) a resolution of a meeting of shareholders held on 27 February 2008 and a resolution of a meeting of the board of directors held on 13 March 2008; and (iv) a resolution of a meeting of shareholders held on 12 June 2009 and a resolution of the board of directors held on 28 September ** Macquarie was founded in Australia in 1969 and provides banking, financial, advisory, investment and funds management services around the world. It currently employs more than 14,600 people in approximately 70 office locations in 28 countries. As of March 31, 2010, Macquarie had assets under management of A$ 326 billion. Macquarie s shares are listed on the Australian Stock Exchange and have a market capitalization of A$ 12.5 billion as of the end of September 2010.

2 Goodman was founded in Australia in 1953 (former trade name: C.A. Baker & Son Pty Limited) and engages in global logistics real estate business. It currently employs more than 755 people in 16 countries, and provides a range of services around the world including funds management, property management and development management services. As of June 30, 2010, Goodman s logistics real estate portfolio was valued at A$3.6 billion and it has total funds under management of A$16.2 billion. Goodman s shares are listed on the Australian Stock Exchange and have a market capitalization of A$ 4.1 billion as of the end of September I. Background *** J-REP and its subsidiaries provide a range of brokerage, asset management, funds management, property management and construction management services in relation to logistics real estate. As a consequence of the global financial crisis arising from the so-called Lehman Shock in 2008, J- REP had to divest four of its portfolio of six real estate assets in order to improve its cash flow for the fiscal year ending 31 March One of the two remaining assets was sold in April Also, J-REP reduced its headcount by soliciting voluntary retirement and downsizing or closing some of its branch offices. As a result, J-REP incurred a net loss for the fiscal year ending 31 March 2009 of JPY billion, which it managed to reduce to a net loss of JPY 3.89 billion for the fiscal year ending 31 March As of the end of August 2010, J-REP employs 47 people (excluding officers) and manages assets worth approximately JPY103.3 billion. Today, J-REP s only significant asset is its 85.2% interest in a portfolio of completed logistics facilities held by MGJ One TMK and one development property held by MGJ Four TMK (the Initial Portfolio ). The Initial Portfolio has a single debt facility, which was procured by MGJ One TMK from a syndicate of six Japanese financial institutions. This debt facility consists of senior debt as well as specified bonds. As of the end of August 2010, the Initial Portfolio has leverage of approximately 74% of total market value of investment properties and its existing debt facility expires in February 2012, with the option to extend the term of the facility for one year at an increased margin. Given the deterioration of the performance of J-REP s business and of the overall real estate market, J-REP believes that it is necessary to reduce the leverage so as to secure a new debt facility for the Initial Portfolio by sourcing additional equity from the Initial Portfolio`s investors. Due to its 85.2% interest in the portfolio, J-REP expects that it may be required to undertake a recapitalization. J-REP believes that it would be challenging for it to obtain funds from third parties to make its contribution to the recapitalization of the Initial Portfolio without seeking further funding from the Offeror and its affiliates. J-REP believes that this risk relating to the Initial Portfolio s refinancing is the greatest risk to J-REP s long-term prospects. In addition to the refinancing risk, J-REP is also facing challenges in its ability to grow. J-REP s business model involves new development projects and financing logistics assets and raising third party investment capital to fund these projects. However, as a listed company, J-REP believes that it would be quite difficult for new third party capital to be obtained due to the depressed share price and the perceived risks regarding the longevity of the business. As a result, the business cannot grow in its current form or pursue new projects. At the beginning of August 2010, the Offeror presented the board of directors of J-REP with an indicative non-binding proposal (the Proposal ) for the refinancing and repositioning of J-REP. For an explanation of the Proposal, please refer to Section III.2(2)2(c) below. The board of directors of J-REP quickly established stringent protocols for considering the Proposal such as excluding the directors who are related to the Offeror from J-REP s decision-making processes. J-REP sought clarity around several aspects of the Proposal during August and asked the Offeror to amend 2

3 several of the proposed terms, and a revised indicative non-binding proposal was conceptually agreed upon at the end of August subject to the formal approvals of both J-REP and the Offeror. J-REP has judged that it is in the best interest of J-REP to implement the Proposal because it would assist J-REP to solve the problems described above, and also provides protection for the shareholders of J-REP other than the Offeror. II. Outline 1. Description of the Tender Offer The Tender Offer is being made by MGJ, J-REP's controlling parent company, with the objective of acquiring and holding all of J-REP's shares. According to a press release released by the Offeror today and entitled Announcement of Commencement of Tender Offer for J-REP common shares and stock acquisition rights, the Offeror has decided, at a meeting of the board of directors held on 15 October 2010, to carry out the Tender Offer for all of J-REP's outstanding shares and all of the existing SARs, with the objective of converting J-REP into a wholly owned subsidiary of the Offeror. The Tender Offer does not provide for a maximum or minimum with respect to the number of share certificates that the Offeror would purchase through the Tender Offer. 2. Description of the SARs Issue by Third-party Allotment and Financing under the Loan Agreement The loan provided by the Offeror under the Loan Agreement is a revolving loan (contractual interest rate: 3% per annum) with a final maturity date of 15 October 2010 and with a facility limit of JPY 3.5 billion. The Loan represents a means for J-REP to secure funding on more favorable terms than available in the market. In connection with the loan, J-REP will issue a total of 100,000 SARs (one share for each SAR), 50,000 of which would be issued to each of MCGL and GSH, on 31 October 2010 during the period for the Tender Offer, for no issue consideration. According to the press release of the Offeror, immediately after the issuance of the new SARs becomes effective, in accordance with applicable law, the Offeror intends to submit an amendment to the Tender Offer registration statement reflecting the issuance of the new SARs. Both MCGL and GSH intend to continue to hold the new SARs without exercising them during the Tender Offer period. In addition, in the event that all of the new SARs are exercised, MCGL and GSH shall each hold 50,000 common shares in J-REP. The number of outstanding common shares of J-REP as of 30 June 2010 was 146, 807, and with the addition of the 100,000 common shares of J-REP that are subject to the new SARs, the total number becomes 246,807, and therefore 50,000 shares represents 20.26% of this total. The schedule for the Tender Offer, the Issuance of the new SARs, and the Financing through the Loan Agreement is presented below. October 15, 2010 October 15, 2010 October 18, 2010 October 31, 2010 December 1, 2010 December 7, 2010 Resolution passed in support of the Tender Offer; establishing the SARs offering terms and approving the Financing Execution and performance of the Loan Agreement Starting date of the Tender Offer Distribution date of the SARs Ending date of the Tender Offer Settlement date for the Tender Offer 3. Description of Arrangements Concerning New Projects 3

4 J-REP will participate in a new development scheme named the Japan Logistics Development Framework (the JLDF ) controlled by Macquarie and Goodman to facilitate investment in logistics real estate in Japan. J-REP and co-investors will hold equity interest in JLDF projects and in principle the percentage of equity contributed by J-REP will be no more than 20% for each JLDF project. J-REP will seek new opportunities for projects under the JLDF scheme and act as the manager of the JLDF. 4

5 III. About the Position Statement for the Tender Offer 1. Description of the Offeror (as of 15 October 2010) (1) Company name Macquarie Goodman Japan Pte. Ltd. (2) Company headquarters 6 Battery Road #33-01, Singapore (3) Name and title of company representative Director: Gregory Goodman Director: Stefanie Yuen Thio Director : Shaiful Adhli Bin Yazid Director: Christopher John Green All the directors above are representatives of the Offeror. (4) Business description Investment (5) Shareholders' Equity 32,860,010,000 yen (Capital from shareholders) (6) Date established 14 May 2007 (7) Major shareholders and ownership ratio Goodman Japan Holdings (Singapore) Pte. Ltd.: 50% MGJ Holdings Pte. Limited: 50% (8) Relationship of J-REP and the Offeror Equity relationship The Offeror has 75,950 shares of J-REP. Personal relationship Gregory Goodman is a director of both Goodman and J-REP. Paul McGarry, who is seconded by Macquarie Advisors Capital Limited, a group company of Macquarie and James Hodgkinson, who is a director of Goodman are also directors of the Offeror. Business relationship Affiliate Relationship The Offeror executed a capital and business alliance agreement with J-REP on 17 May Executed the Loan Agreement on 15 October 2010 as described above. The Offeror is a parent company of J-REP, and so it is an affiliate of J- REP. 2. Board of Directors Opinion Regarding the Tender Offer; Basis and Rationale for such Opinion (1) Board of Directors Opinion Regarding the Tender Offer 5

6 At a board of directors meeting on 15 October 2010, with the unanimous consent of the four directors in attendance, J-REP approved the Tender Offer and resolved to encourage its shareholders to accept the Tender Offer. With regards to the existing SARs, the board resolved to leave the determination of whether or not to accept the Tender Offer to the judgment of each individual holder of existing SARs. The board's resolution above was passed with the unanimous consent of the directors who do not have any conflict of interest as set forth in Section (3)3. (2) Basis and rationale for opinion regarding the Tender Offer 1 Overview of the Tender Offer The Offeror is an investment company incorporated pursuant to a joint venture agreement between Macquarie Group Limited and Goodman Limited, each of which indirectly hold 50% of the shares in the Offeror as of the date of filing this document. According to the Offeror s press release, the Offeror already holds 75,950 common shares in J-REP (51.73% of the total outstanding shares as of 30 June 2010) as of the date of this document, and decided to implement this Tender Offer for all common shares and existing SARs of J-REP with the aim of making J-REP its wholly owned subsidiary. The purchase price is JPY 35,000 per common share and JPY 1 per SAR, and the Tender Offer sets no minimum or maximum for the number of shares that the Oferror will purchase. In connection with the Loan Agreement, J-REP will issue a total of 100,000 SARs, 50,000 of which would be issued to each of MCGL and GSH, on 31 October 2010 during the period for the Tender Offer for no issue consideration. According to the press release of the Offeror, immediately after the issuance of the new SARs becomes effective, in accordance with applicable law, the Offeror intends to submit an amendment to the Tender Offer registration statement reflecting such issuance. Both MCGL and GSH intend to continue to hold the new SARs without exercising them during the Tender Offer Period. In addition, in the event that all of the new SARs are exercised, MCGL and GSH shall each hold 50,000 common shares in J-REP. The number of outstanding common shares of J-REP as of 30 June 2010 is 146, 807, and with the addition of the 100,000 common shares of J-REP that are subject to the new SARs, the total number becomes 246,807, and accordingly 50,000 shares represents 20.26% of this total. 2 Basis and Rationale for Opinion regarding the Tender Offer (a) Background of J-REP, the Offeror, Macquarie and Goodman The Offeror was incorporated on 14 May 2007 through an indirect investment from Macquarie and Goodman (50% each). The Offeror executed a capital and business alliance agreement with J-REP on 17 May of the same year, and invested billion yen in J-REP by subscribing for 75,950 new common shares allotted by J-REP on 8 June 2007, all of which it has continued to hold to date. This investment represented an expansion of the logistics joint venture of Macquarie and Goodman into Japan and provided J-REP with significant growth capital, which was invested in a range of logistics assets. As of the date of the filing of this document, MGJH and GJHS each hold 50% of the shares of the Offeror. As of the day of publication of this Press Release, MGJH is a 100% subsidiary of Macquarie Bank Limited, which is a company subject to the complete control of Macquarie B.H. Pty Limited, which in turn is a 100% subsidiary of Macquarie. Goodman Japan Holdings (Singapore) Pte. Ltd. is a 100% subsidiary of GSH. GSH is a 100% subsidiary of Goodman. 6

7 Macquarie was founded in Australia in 1953 (former trade name: C.A. Baker & Son Pty Limited) and provides banking, financial, advisory, investment and funds management services around the world. It currently employs more than 14,600 people in approximately 70 office locations in 28 countries. As of 31 March 2010, Macquarie had assets under management of $A326 billion. Macquarie s shares are listed on the Australian Stock Exchange and have a market capitalization of A$12.5 billion as of the end of September Goodman was founded in Australia in 1995 and engages in global logistics real estate business. It currently employs more than 755 people in 16 countries, and provides a range of services around the world including funds management, property management and development management services. As of 30 June 2010, it owns a logistics real estate portfolio valued at A$3.6 billion and has total funds under management of A$16.2 bn. Goodman s shares are listed on the Australian Stock Exchange and have a market capitalization of A$ 4.1 billion as of the end of September (b) The prospects for the business of J-REP J-REP and its subsidiaries provide a range of brokerage, asset management, funds management, property management and construction management services in relation to logistics property. As a consequence of the global financial crisis arising from the so-called Lehman Shock in 2008, J- REP had to divest four of its portfolio of six real estate assets in order to improve its cash flow for the fiscal year ending 31 March One of the two remaining assets was sold in April Also, J-REP reduced its headcount by soliciting voluntary retirement and downsizing or closing some of its branch offices. As a result, J-REP incurred a net loss for the fiscal year ending 31 March 2009 of JPY billion, which it managed to reduce to a net loss of JPY 3.89 billion for the fiscal year ending 31 March As of the date of this Press Release, J-REP employs 47 people (excluding officers) and manages assets worth approximately JPY103.3 billion. Today, J-REP s only significant asset is its 85.2% interest in the Initial Portfolio. The Initial Portfolio has a single debt facility, which was procured by MGJ One TMK from a syndicate of six Japanese financial institutions. This debt facility consists of senior debt as well as specified bonds. As of the end of August 2010, the Initial Portfolio has leverage of approximately 74% and its existing debt facility expires in February 2012, with the option to extend the term of the facility for one year at an increased margin. Given the deterioration of the performance of J-REP s business and of the overall real estate market, J-REP believes that it is necessary to reduce the leverage so as to secure a new debt facility for the Initial Portfolio by sourcing additional equity from the Initial Portfolio`s investors. Due to its 85.2% interest in the Initial Portfolio, J-REP expects that it may be required to undertake a recapitalization. J-REP believes that it would be challenging for it to obtain funds from third parties to make its contribution to the recapitalization of the Initial Portfolio without seeking further funding from the Offeror and its affiliates. J-REP believes that this risk relating to the Initial Portfolio s refinancing is the greatest risk to J-REP s long-term prospects. In addition to the refinancing risk, J-REP is also facing challenges in its ability to grow. J-REP s business model involves sourcing new development projects, logistics properties and raising third party investment capital to fund these projects and acquisitions. However, as a listed company, J-REP believes that it would be quite difficult for new third party capital to be obtained due to the depressed share price and the perceived risks regarding the longevity of the business. As a result, the business cannot grow in its current form or pursue new projects. (c) The Offeror s proposal to J-REP 7

8 According to the Offeror s press release, the Offeror has been aware of the various risks and challenges J- REP is facing as mentioned above, and is of the view that it would be difficult for J-REP to manage these risks and take advantage of opportunities that become available for J-REP to grow its business in the medium- to long-term if J-REP remains a listed company. The Offeror believes the best strategy to address this would be for the Offeror to become the sole shareholder of J-REP, and to help J-REP strengthen its abilities to obtain financing, manage its business, and incentivise and retain its staff. At the beginning of August 2010, the Offeror presented the board of directors of J-REP with the nonbinding Proposal for the refinancing and repositioning of J-REP. The Proposal presented a package with four key elements designed to address the various challenges facing J-REP. One of the four key elements was a Tender Offer under which the Offeror is seeking to acquire all outstanding shares of J-REP, thus making J-REP a wholly owned subsidiary. The rationale for this element of the Proposal is explained in the section below regarding the Tender Offer. The board of directors of J-REP quickly established stringent protocols for considering the Proposal such as excluding the directors who are related to the Offeror from J-REP s decision-making processes. J-REP sought clarity about several aspects of the Proposal during August and asked the Offeror to amend several of the proposed terms, and a revised indicative non-binding proposal was conceptually, subject to the formal approvals of both J-REP and the Offeror. J-REP appointed several independent advisers in order to assist the board of directors in considering the Proposal. Jones Day was appointed as J-REP s legal adviser. ABeam M&A Consulting ( Abeam ) was appointed as J-REP s financial advisor. Plutus Consulting ( Plutus ) was appointed to assist J-REP with evaluating the issuance of new SARs to MCGL and GSH (see 3. Loan Agreement and Issuance of SARs to MCGL and GSH below). J-REP judged that the Proposal would help J-REP solve the problems that it had encountered as set forth above, and so J-REP examined the detailed terms and conditions of the Proposal from the Offeror. J-REP determined that the best way to continue the business of J-REP in a stable manner would be to implement the Proposal below because, whether taken separately or together, they were in line with the business strategy of J-REP and also provided protection for the interest of the minority shareholders of J-REP. After extensive negotiations, J-REP and the Offeror agreed to the final terms of the Proposal on 15 October The Proposal, as agreed between J-REP and the Offeror, consists of the following four elements: 1. Tender Offer The Offeror will make a Tender Offer for all J-REP s common shares for cash consideration of JPY 35,000 per share, without setting a maximum or minimum with respect to the number of shares that the Offeror would purchase through the Tender Offer. For the reasons set forth below, the Offeror believes that the best way to sustain and grow J-REP s business is for the Offeror to increase its shareholding of J-REP. To facilitate this objective, the Offeror is seeking to acquire all outstanding common shares and all existing SARs in order to make J-REP its wholly owned subsidiary and to delist J-REP. The change in the Offeror s ownership of J-REP should be a strong sign of support by Macquarie and Goodman in the eyes of J-REP s logistics customers (tenants) as well as its global logistics equity investors. Additionally, the Offeror believes that this support is likely to be viewed positively 8

9 by the Initial Portfolio`s banking syndicate, and as such the Tender Offer could assist J-REP with completing the refinancing of the Initial Portfolio s debt facility. The Offeror has indicated that it believes that the Tender Offer provides J-REP s shareholders with an opportunity to terminate their exposure to the risks surrounding the refinancing of the Initial Portfolio s debt facility and the risks relating to J-REP s ability to grow, as described above. Furthermore, the Tender Offer will proceed regardless of the number of shares tendered. In the event that the Offeror is unable to acquire all issued common shares of J-REP through the Tender Offer, the Offeror intends to do so following the Tender Offer in accordance with the methods set forth in Section III.2(4) below. 2. Arrangement Regarding New Development Opportunities Macquarie and Goodman will make a combined amount of JPY 4 billion available to fund new development projects in Japan identified by J-REP through the JLDF. J-REP will provide various services to Macquarie and Goodman pursuant to this new arrangement and will be responsible for sourcing new projects for Macquarie and Goodman. This is consistent with J-REP s business model of acquiring and managing logistics investment properties and development projects on behalf of third party investors, and provides J-REP with new income streams, including fees. J-REP will also be expected to co-invest up to 20% of the equity in each JLDF project. Projects will have to be approved by Macquarie and Goodman on a case-by-case basis and as such there is no guarantee as to the size or number of developments that will be undertaken, the amount that will be paid to J-REP for services related to the JLDF, or the profits J-REP will receives as a coinvestor in such projects. J-REP will be required to offer all identified investment opportunities in the real estate logistics sector to Macquarie and Goodman for consideration in priority to any other party, except where J- REP is required to first offer such opportunities to third parties or the investors in the Initial Portfolio. As of the date of this announcement, a development matter for a Japanese major logistics company is expected to be the first project based on the JLDF. 3. Loan Agreement and Issuance of SARs to MCGL and GSH Recognizing that it is difficult for J-REP to obtain third party funding, the Offeror will enter into the Loan Agreement, with a facility limit of JPY 3.5 billion, with J-REP. In consideration for the provision of loans under the new Loan Agreement and the appointment of J-REP as manager of the JLDF, J-REP will issue, for no issue consideration, a total of 100,000 new SARs to MCGL and GSH. The terms of the Loan Agreement have been negotiated between the Offeror and J-REP on an arm`s length basis. The facility expires on 15 October The proceeds under the Loan Agreement will be used primarily for the purpose of participating in investments made by the JLDF (drawdowns for any other reason will be made only upon the Offeror s approval of the borrower s request). Drawdowns under the Loan Agreement are conditional on the board of directors of J-REP 9

10 recommending the Tender Offer and not withdrawing or adversely altering such recommendation, and on the issuance of the new SARs. The new SARs issuance is expected to become effective on 31 October Each of the new SARs is convertible into one common share in J-REP (subject to various terms regarding issuances after exchanges of common stock for newly created classes of stock, anti-dilution protections and issuance of partial shares). The new SARs expire on 31 October The exercise price of each new SAR is JPY 35,000 and the new SARs can be exercised by the holder of the SARs either by payment of cash or through cancellation of balances due under the Loan Agreement. In addition, the new SARs are subject to a redemption provision. That provision is triggered if J-REP provides notice to the lender seven business days prior to the final maturity date of the Loan Agreement that: (i) it is expected that on the final maturity date under the Loan Agreement, certain investment properties funded under the Loan Agreement will not have been sold, (ii) it is expected that J-REP will not have sufficient funds to repay the outstanding loan that correspond to such investment properties, and (iii) there have not been any defaults under the Loan Agreement nor any changes in circumstances that have a materially adverse impact on J-REP. Such notice must specify the aggregate amount of the exercise price of the new SARs to be redeemed under the redemption provision. If the lender does not raise an objection to the redemption prior to the final maturity date or if the lender raises an objection and then a court of competent jurisdiction determines that as of the final maturity date under the Loan Agreement all of conditions (i) through (iii) described above were satisfied, J-REP is entitled to redeem the number of SARs that have an aggregate exercise price equal to (x) the outstanding loans related to such unsold investment properties and (y) the capitalized interest relating to those loans, by delivering to the holder of such new SARs the shares subject to such new SARs. In such event, the loans relating to those unsold investment properties shall be automatically transferred to the new SARs holder from the Offeror as of the redemption date of the new SARs, and such shall be deemed an investment in J-REP. As it is anticipated under J-REP s business plan that the investment properties funded by the loans under the Loan Agreement will remain unsold on the final maturity date under the Loan Agreement (and as long as there has been no default under the Loan Agreement nor change in circumstances that has a materially adverse impact on J-REP), J-REP is expected to redeem all the SARs issued in connection with the Loan Agreement in consideration of the deemed investment into J-REP of the outstanding loan amounts on the terms described above. 4 Re-branding of J-REP as Goodman Upon reaching final agreement wth J-REP on various conditions, Goodman intends to grant J-REP a license to use the Goodman brand in Japan, in which case J-REP will change its name to Goodman Japan Co., Ltd. and its brand to Goodman. As of 30 June 2010, as Goodman manages 327 assets around the world (amount of assets under management: A$ 16.2 billion) for approximately 1,260 tenants and has raised over A$ 1.3 billion from global logistics investors, the Goodman brand is well known globally as a leader in logistics property. This re-branding should therefore assist J-REP in attracting new customers (tenants) and investors to its platform and thus be very beneficial to J-REP. In the event that Goodman agrees to grant such license to J-REP, J-REP will convene an extraordinary general meeting of its shareholders to vote on the proposal to change its name to Goodman Japan Co., Ltd. (d) The Board`s Process for Reaching an Opinion 10

11 Having received the Proposal from the Offeror, J-REP has held discussions and negotiations with the Offeror on several occasions regarding the offer price for the common shares of J-REP under the Tender Offer and other such terms, and also has appointed ABeam as its financial advisor. ABeam provided J- REP with a valuation of J-REP's shares and a fairness opinion to the effect that the JPY 35,000 Tender Offer price is appropriate from a financial standpoint for the shareholders of J-REP other than the Offeror. Furthermore, J-REP has appointed Jones Day as its legal adviser, independent of both J-REP and the Offeror, in respect of the deliberation and decision-making processes of the board of directors, and has received legal advice from Jones Day regarding, among other matters, discussions with the Offeror pertaining to the Tender Offer, the process by which J-REP should consider possible positions in respect of the tender offer, and the manner in which J-REP should express its opinion. J-REP has taken into consideration the above-mentioned valuation and fairness opinion, together with the legal advice, in prudently examining the various terms of the tender offer. As a result, on 15 October 2010, the board of directors unanimously passed a resolution to approve the tender offer and encourage J-REP s shareholders to accept the tender offer with respect to J-REP s shares. Regarding the SARs, because these have been issued to the directors, auditors and employees of J-REP and its subsidiaries, and could potentially be used by their holders to comply with the Tender Offer in either the form of SARs or, upon their conversion to common stock, in the form of common stock, the board resolved to leave the determination of whether or not to accept the tender offer in respect of the SARs to the judgment of each respective SARs holder. This resolution was made after giving consideration to: the fact that the Tender Offer price and other terms can be deemed to be appropriate, the fact that the proposal sufficiently considers the interests of minority shareholders and the shareholders economic benefits (though there is no minimum for the number of shares for the tender offer), the fact that the proposal provides J-REP s shareholders with a reasonable opportunity to sell their shares at a fairly high premium relative to the average trading price for J-REP s shares over recent periods, the fact that for the reasons describe in section entitled The Offeror s proposal to J-REP above, it is necessary to become a 100% subsidiary of the Offeror under the tender offer in order to sustain the business of J-REP, the fact that the 35,000 tender offer price represents a premium of: 51.2% relative to the closing price of J-REP s common stock on the Mothers section of the Tokyo Stock Exchange as of 14 October 2010 (JPY 23,150), which is the business day before the date of the board of directors meeting; 44.7% relative to the simple average of closing prices over the previous month up to that date (JPY 24,191); 39. 3% relative to the simple average of closing prices over the previous three months (JPY 25,130); and 28.2% relative to the simple average of closing prices over the previous six months (JPY 27,311), and that we have obtained from ABeam a fairness opinion to the effect that the tender offer price is appropriate from a financial standpoint for the shareholders of J-REP other than the Offeror. The board resolution described above was passed with the unanimous consent of the directors who do not have any conflict of interest as set forth in Section (3). 3 Strategy for J-REP following the Tender Offer The Tender Offer, in combination with the other three elements of the Proposal (as outlined above), aims to assist J-REP in growing its business. As such, J-REP will endeavor to continue to operate its business in connection with logistics real estate and seek to source new development projects for a range of third party investors for the foreseeable future. The Loan Agreement provides the financing necessary for J-REP to secure, participate in and generate fees from new development opportunities under the JLDF. In addition, the Offeror`s increase in its shareholding of J-REP through the Tender Offer and through the SARs demonstrates the Offeror`s commitment to J-REP s business. 11

12 The focus for the Offeror and the J-REP management team following the Tender Offer will be on refinancing the Initial Portfolio by seeking to secure a new debt facility and on raising new equity from third party investors. Additionally, the management of J-REP and the Offeror will work toward reducing J-REP s share of the Initial Portfolio significantly. It should be noted, though, that there is no certainty that this refinancing or reduction of ownership can be achieved and this remains a key risk to the longterm viability of the J-REP business. It is further expected that following the Tender Offer J-REP will continue to be managed by the current management. J-REP and the Offeror have implemented the measures described below to ensure the fairness of the transactions under the Proposal, including the Tender Offer. (3) Measures to Ensure Fairness of Purchase Price, Measures to Avoid Conflict of Interests and Other Measures to Ensure Fairness of the Tender Offer 1 Fairness Opinion and a Valuation of J-REP s stock from an Independent Third Party J-REP has appointed ABeam to serve as a financial advisor independent of both J-REP and the Offeror and has asked that firm to calculate a value for J-REP s stock. J-REP has provided Abeam with its financial statements, business plans and similar documents, together with its explanations of those documents. Based on that information and certain assumptions and parameters, Abeam has analyzed the value of J-REP s stock and presented a valuation thereof dated 15 October 2010 (the base date for the calculation was 14 October 2010). ABeam computed the value of J-REP s shares using the market price valuation method, the comparable (proxy) valuation method and the equity cash flow method (which is a kind of discounted cash flow (DCF) method), which methods are considered appropriate for providing a broad ranging analysis of share value for a going concern. The valuation ranges (per share of common stock) resulting from each of these methods are presented below. (a) Market price valuation method: JPY 23,150 to JPY 31,168 In reference to a base date of 13 October 2010 and with regards to J-REP s common stock as traded on the Mothers section of the Tokyo Stock Exchange, the market share price valuation method produces a valuation range of JPY 23,150 JPY 31,168 per share of common stock based on a simple average of closing prices and weighted average trading volume over the most recent six-month period up to that date, a simple average of closing prices and weighted average trading volume over the most recent three-month period, a simple average of closing prices and weighted average trading volume over the most recent onemonth period, and the closing price on the base date. (b) Comparable (proxy) valuation method: JPY 16,826 to JPY 21,277 The comparable (proxy) valuation method is employed to value J-REP s stock through a comparison with the share prices, profitability and other financial indices of listed companies with a business similar to that of J-REP. This method produces a valuation range of JPY 16,826 21,277 per share of common stock. (c) Equity cash flow method: JPY 23,884 to JPY 42,083 In the equity cash flow method, analysis is provided for share value by determining a present value of estimated future free cash flows by discounting at a rate that reflects J-REP s cost of capital for shareholders and other considerations. The estimates of future equity cash flows (taking into consideration the increase and decrease of depreciation and debts with interest and the investment in and 12

13 divestment from private funds, in addition to the net profit for the year) are based on a number of assumptions and parameters, including those pertaining to earnings and investment plans contained in J- REP s business plans (*1), management interviews with J-REP and other information obtained from J- REP and from public sources. Equity cash flow, which means the net cash flow attributable to the shareholders of J-REP, is an appropriate metric for such evaluation because the main business of J-REP is investment in logistics real estate through private funds and management of the assets of such funds, and so paid interest is an important element of cash flow arising from its business, and because the disposition or transfer of assets held by such private funds requires approval of all the members of the fund. This method produces a valuation range of JPY 23,884 JPY 42,083 per share of common stock (*2). (*1) The business plans of J-REP were prepared by J-REP taking into consideration the transactions under the Proposal and the synergies that are expected to result from J-REP becoming a wholly owned subsidiary of the Offeror, and assuming the equity dilution resulting from the exercise of new SARs. Those business plans consist of the business plans for the fiscal years ending March 31 of 2011, 2012, 2013 and The business plans anticipate a net profit of approximately JPY 100 million for the fiscal year ending 31 March 2011, a net profit of approximately JPY 500 million for the fiscal year ending 31 March 2012, a net profit of approximately JPY 600 million for the fiscal year ending 31 March 2013 and a net profit of approximately JPY 900 million for the fiscal year ending 31 March 2014, with such increases in net profits expected to result from increases in development profit and fees from the JLDF. There is a possibility that the actual result may greatly differ due to known or unknown risks, uncertainties and other factors and there is no guarantee that such forecast will prove correct in the end. (*2) ABeam made its calculations based on the earnings forecasted by J-REP without taking into consideration the transactions under the Proposal and the synergies that are expected to result from J- REP s becoming a wholly owned subsidiary of the Offeror, and without assuming the equity dilution resulting from the exercise of new SARs. Based on such assumptions, the range of the value per share of common stock using the equity cash flow is between JPY 29,781 and JPY 34,627. Such results are within the calculation range of share value based on the business plans of J-REP. Furthermore, the board of directors has received from ABeam a fairness opinion to the effect that that the JPY 35,000 Tender Offer price is proper from a financial standpoint for company shareholders other than the Offeror, particularly in terms of the fairness of the compensation to be paid. Such opinion effectively serves as an opinion that the resolution approved by the board of directors on 15 October 2010 in which the board expresses approval and encourages the acceptance of the Tender Offer does not run counter to the interests of minority shareholders. ABeam is not a related party of either J-REP or the Offeror. 2 Advice from Independent Legal Counsel J-REP has appointed Jones Day as its legal adviser, independent of both J-REP and the Offeror, in respect of the deliberation and decision-making processes of the board of directors with regard to the Tender Offer, and has received legal advice from Jones Day regarding, among other matters, discussions with the Offeror pertaining to the Tender Offer, the process by which J-REP should consider possible positions in respect of the tender offer, and the manner in which J-REP should express its opinion. J-REP has taken into consideration the above-mentioned valuation and fairness opinion, together with the legal advice, in prudently examining the various terms of the tender offer. 3 Approval through Unanimous Consent of Directors Free of any Conflict of Interest 13

14 At a board of directors meeting of 14 October 2010, upon prudent consideration of the various terms of the Tender Offer based on the valuation of J-REP s stock and fairness opinion obtained from ABeam, together with the legal advice obtained from Jones Day, it was resolved through the unanimous approval of the four directors in attendance to approve the Tender Offer and to encourage J-REP s shareholders to accept the Tender Offer; while, with regards to the existing SARs, it was resolved to leave the determination of whether to accept the Tender Offer to the judgment of each holder of the existing SARs. Of the seven directors of J-REP, Mr. Paul McGarry is an employee and appointee of Macquarie Capital Advisors Limited, a related company from the standpoint of the Offeror, and Mr. Gregory Goodman and Mr. James Hodgkinson also hold positions as CEO and Director, respectively, in Goodman Limited, which is also a related company from the standpoint of the Offeror. Thus, to assure the fairness and neutrality of J-REP s decision-making process, these three directors did not participate in any discussions or resolutions concerning the Tender Offer at the meetings of the board of directors, except that Mr. Paul McGarry as Director of the Company attended a portion of the meetings in order to provide information known only by him, nor did they participate on J-REP s behalf in any discussions or negotiations with the Offeror. Furthermore, with regards to the board of directors' expression of its position on the Tender Offer, two of the three auditors in attendance at the above meeting of the board of directors (all of whom are external auditors) did not express any particular objection. Kunio Namekata, one of the auditors, did not attend the above meeting for personal reasons. 4 Objective Circumstances to Ensure Appropriateness of Purchase Prices Applicable law requires that the tender offer period last at least 20 business days, and in this case such period has been set at a relatively long 30 business days. According to the Offeror, this long tender offer period provides the shareholders with a suitable opportunity to assess whether to accept the Tender Offer and, by providing other purchasers with an opportunity to buy J-Rep s stock, is intended to ensure the appropriateness of the Tender Offer price. Furthermore, while the other elements of the Proposal are conditional on, among other things, the board of directors of J-REP recommending acceptance of the Tender Offer to all shareholders and not withdrawing or adversely altering such recommendation and the satisfaction of conditions precedent and covenants under the Loan Agreement, no agreement has been made between J-REP and the Offeror that would limit contact between J-REP and another entity proposing to make a competing tender offer. 5 Obtaining a Fairness Opinion from Independent Third-party (i) Valuation by an independent third party According to the Offeror s press release, to ensure the appropriateness of the Tender Offer price, Macquarie (Japan) Limited, a subsidiary of Macquarie in Japan, commissioned Nikko Cordial Securities Inc. ( Nikko ) for the Offeror, as a valuation firm independent from the Offeror and J-REP to undertake an independent valuation of J-REP s shares. Nikko computed the value of J-REP s common shares using the average market price method and the discounted cash flow method (the DCF method ). The following is a summary of the results as stated in the Report on the Valuation Result of Nikko s valuation of J-REP s common shares using each such method: a. Average Market Price Method 14

15 Using the average market price method, with 12 October 2010 as the record date, the range of value per share was calculated to be between JPY 24,374 and JPY 25,188 on the basis of the average closing prices of J-REP s common shares on the Mothers section of Tokyo Stock Exchange for the previous one-month period (JPY 24,374) and three-month period (JPY 25,188). b. DCF method Using the DCF method, the share value was calculated by using a specified discount rate to discount to present value the cash flow expected to be produced by J-REP in the future. The resulting range value per share was calculated to be between JPY 25,174 and JPY 36,743. For this computation, Nikko did not assume that the SARs issued in connection with the Loan Agreement will be exercised nor did it consider the loans under the Loan Agreement. By referring to the value of J-REP s common share as stated in said Report on the Valuation Result, and examining comprehensively various issues such as (i) the level of premium adopted in previous tender offers conducted by parties other than the issuer, (ii) the likelihood of J-REP s approval of the Tender Offer, (iii) prospects for the results of the Tender Offer, (iv) the result of the due diligence conducted on the business, legal and financial affairs of J-REP, and (v) trends of the market price of J-REP shares (vi) other elements that constitute the Proposal (including the issuance of the new SARs, and further based on the discussion with J-REP it was decided that the Purchase Price would be JPY 35,000 per share at the Offeror s board of directors meeting held on 15 October 2010 as it considered that it was proper to have the Purchase Price be a price close to the maximum price with respect to the results of the calculation stated above. (4) Plan for Reorganization Following the Tender Offer (So-Called Two-stage Acquisition) If the Offeror cannot acquire all issued and outstanding common shares of J-REP through the Tender Offer, the Offeror plans to acquire all of the remaining shares in J-REP through the procedures described below. After the completion of the Tender Offer, the Offeror intends to request that J-REP hold an extraordinary shareholders meeting to approve, among other things: (i) amending its Articles of Incorporation so that a new class of shares can be issued, thereby transforming J-REP into a class-share issuing company as defined in the Companies Act of Japan; (ii) further amending its Articles of Incorporation to include a provision making all the common shares of J-REP redeemable; and (iii) issuing shares of the newly created class to the holders of common shares in exchange for the acquisition and redemption by J-REP of the common shares. If proposal (i) described above is approved at the extraordinary shareholders meeting, J-REP will become a class-share issuing company as defined in the Companies Act of Japan. Applicable law specifies that proposal (ii) would require, in addition to the approval at the extraordinary shareholders meeting, approval at a class shareholders meeting (which would include all the holders of common shares of J- REP). The Offeror intends to vote in favor of each of the proposals at the extraordinary shareholders meeting and class shareholders meeting. The extraordinary shareholders meeting and class shareholders meeting are scheduled to be held in or around February The detailed procedures and timing of these meeting will be determined upon discussion with J-REP, and will be announced promptly by J-REP when determined. 15

16 If the procedures mentioned above are implemented, all of the shareholders of J-Rep will have their common stock redeemed and will receive the new class of stock. However, shareholders allotted only fractional shares of such new class of stock will instead receive, in place of such fractional shares in J- REP, the cash equivalent to what J-REP would obtain through a sale of the aggregate number of such fractional shares (any fractional shares after such aggregation will be discarded) in accordance with the procedures provided in Article 234 of the Companies Act and other applicable law. The amount of cash to be delivered to shareholders as a result of the sale of J-REP shares corresponding to the total amount of such fractional shares will, unless there are special circumstances, be computed based on the Tender Offer price. The class and number of shares of the new class to be allotted to shareholders in exchange for common stock have not yet been determined. However, the Offeror will request that J-REP define those characteristics of the redemption provision and the class of new shares to ensure that the number of common shares held by each shareholder other than the Offeror would be insufficient to exchange for more than a fractional share of the new class of stock (and thus those shareholders would receive the cash consideration described above, rather than shares of the new class of stock). This process would leave Offeror with all of the issued and outstanding shares in J-REP. In order to protect the minority shareholders interests as provided for in the Companies Act of Japan, when J-REP s Articles of Incorporation are amended to allow J-REP to attach a redemption provision to all common shares as described in proposal (ii) above, the shareholders will have the right to: (a) request that J-REP purchase the shares they hold in accordance with applicable law, and (b) file a petition to determine the acquisition price of such shares in accordance with the provisions of applicable law. The per-share purchase or acquisition price in the event that either of these rights are exercised will be determined ultimately by the court. The timing or method of the process described above, or whether it will be implemented at all, will ultimately depend on the number of shares held by the Offeror after the Tender Offer and on the interpretation of the relevant laws and regulations by the relevant authorities. The Tender Offer is not intended to solicit J-REP shareholders votes for the proposal or proposals planned for the extraordinary shareholders meeting and class shareholders meeting described above. Each shareholder should consult with their own tax advisor as to the tax implications of their action with respect to the Tender Offer. If the Tender Offer is completed but the Offeror has not purchased all the existing SARs of J-REP, J-REP, might at Offeror s request, undertake procedures to extinguish such SARs, but the details for such procedures have not yet been determined. Further, the existing SARs are subject to vesting, but J-REP resolved at the board of directors meeting held on 15 October 2010 that such vesting requirements for the existing SARs will be temporarily suspended during the Tender Offer period. With respect to the SARs to be issued in connection with the Loan Agreement, because those SARs will be subscribed for by Macquarie and Goodman s wholly owned indirect or direct subsidiaries, the Offeror does not plan to request that J-Rep undertake any procedures to cancel those SARs. (5) Rationale and Expectations for Delisting 1 Rationale and Expectations for Delisting J-REP s common stock is listed on the Mothers section of the Tokyo Stock Exchange. As the Offeror has set no upper limit on the number of shares it intends to purchase pursuant to the Tender Offer, it is possible that, depending on the results of that offer, the stock will be subject to rules of the Tokyo Stock Exchange requiring it to be delisted. Even the stock does not become subject to those rules upon the 16

17 completion of the Tender Offer, the Offeror plans to institute procedures to cause J-REP to become its wholly owned subsidiary. Those procedures would also cause J-REP s common stock to be delisted. If J- REP s common stock is delisted, it could not be traded on the Tokyo Stock Exchange. 2 Rationale for Expressing Approval of a Tender Offer Expected to Lead to Delisting; Consideration of Alternative Measures J-REP s board of directors has prudently considered the terms of the Tender Offer based on the valuation of J-REP s stock and fairness opinion obtained from ABeam, together with the legal advice obtained from Jones Day. As a result of such consideration, and also based on the board s judgment that becoming a wholly owned subsidiary of the Offeror is necessary for the stable continuation of J-REP s business, that the price and other terms of the Tender Offer are appropriate, that the interests of minorities shareholders are sufficiently protected, that the Tender Offer provides J-REP s shareholders with a rational opportunity to sell their shares at a fairly high premium relative to their average prices over recent intervals, the board of directors, through the unanimous approval of the four directors in attendance, resolved to approve the Tender Offer and to encourage J-REP s shareholders to accept the Tender Offer. With regards to the existing SARs, because such SARs have been issued as stock options to J-REP s directors, auditors and employees, and to the directors, auditors and employees of J-REP s subsidiaries, the board has resolved to leave the determination of whether to accept the Tender Offer for the SARs to the judgment of the holders of such SARs. In order to protect the interests of J-REP s shareholders, the Offeror plans to provide the shareholders with an opportunity to exchange their common stock (due for delisting) for a cash payment according to the procedures described above in the section relating to a reorganization of J-REP after the Tender Offer. J-REP anticipates that the calculation of the cash payment for that common stock will be based on the Tender Offer price. 3. Disclosure of Important Agreements between the Offeror and J-REP s shareholders Regarding Participation in the Tender Offer No such agreements exist. 4. Disclosure of Incentives Provided to the Offeror and Parties with Special Connections to the Offeror No such incentives will be provided. 5. Response guidelines in connection with basic guidelines for control of J-REP None. 6. Additional Questions for the Offeror J-REP does not believe that any additional questions need be posed to the Offeror. 7. Requests by J-REP for Extension of the Tender Offer Period J-REP does not believe that it is necessary to request an extension. 8. Outlook (1)Plans for J-REP after the Tender Offer 17

18 Please see J-REP s discussion above regarding Strategy for J-REP following the Tender Offer. (2)Future earnings outlook J-REP is currently studying the impact of the Tender Offer on J-REP s consolidated earnings for the fiscal year ending March J-REP will immediately disclose any revisions of consolidated earnings that have been publicly disclosed if such revisions become necessary. 9. Disclosures Concerning Transactions with the Controlling Shareholder Because the Offeror is J-REP s controlling shareholder and has the same parent companies as J-REP, expressions of opinion regarding the Tender Offer are subject to rules governing transactions with a controlling shareholder. The Corporate Governance Report that J-REP published on 30 June 2010 included pointers concerning guidelines for the protection of minority shareholders in the event of transactions with the controlling shareholder, in which it was stated, in the event of transactions between J-REP and its parent company, or other subsidiaries of the parent company, strict approval procedures must be followed to ensure the general fairness of the details of relevant decisions, to ensure that the terms of such transactions are not decided arbitrarily; systems must be established to ensure oversight and scrutiny of such transactions, to prevent any resulting harm to minority shareholders. Applying those pointers to the Tender Offer, J-REP has guaranteed the fairness of the Tender Offer through the methods taken to guarantee the fairness of the Tender Offer prices, measures taken to prevent conflicts of interest and measures taken to guarantee the fairness of the Tender Offer described in various places in this Press Release. Additionally, J-REP s board of directors has received a valuation of J-REP s stock and a fairness opinion dated 15 October 2010 from ABeam, a valuation firm independent of both J-REP and the Offeror. That fairness opinion stated that the Board s approval and decision to recommend acceptance of the Tender Offer by its shareholders is not disadvantageous to minority shareholders, particularly with regard to the fairness of the Tender Offer price, and that the Tender Offer price of JPY 35,000 is fair to J-REP s shareholders. (Note) Offeror s Outline of the Tender Offer Regarding the outline of the Tender Offer, please refer to the attached Announcement of Commencement of Tender Offer for J-REP common shares and stock acquisition rights IV.Regarding the issuance of SARs, and the Financing 1. Objectives and Purpose of the Issuance of the SARS and the Loan Agreement (1) The objectives of the issuance of the SARs and the Loan Agreement J-REP and its subsidiaries provide a range of brokerage, asset management, funds management, property management and construction management services in relation to logistics real estate. As a consequence of the global financial crisis arising from the so-called Lehman Shock in 2008, J-REP had to divest four of its portfolio of six real estate assets in order to improve its cash flow for the fiscal year ending 31 March One of the two remaining assets was sold in April Also, J-REP reduced its headcount by soliciting voluntary retirement and downsizing or closing some of its branch offices. As a result, J- 18

19 REP incurred a net loss for the fiscal year ending 31 March 2009 of JPY billion, which it managed to reduce to a net loss of JPY 3.89 billion for the fiscal year ending 31 March As of the end of August 2010, J-REP employs 47 people (excluding officers) and manages assets worth approximately JPY103.3 billion in its asset management line of business. Today, J-REP s only significant asset is its 85.2% interest in the Initial Portfolio. The Initial Portfolio has a single debt facility, which was procured by MGJ One TMK from a syndicate of six Japanese financial institutions. This debt facility consists of senior debt as well as specified bonds. As of the end of August 2010, the Initial Portfolio has leverage of approximately 74% and its existing debt facility expires in February 2012, with the option to extend the term of the facility for one year at an increased margin. Given the deterioration of the performance of J- REP s business and the overall real estate market, MGJ and J-REP believe that it is necessary to reduce the leverage ratio as the Initial Portfolio receives additional funds from investors so as to secure a new debt facility for the Initial Portfolio. To protect its 85.2% interest in the portfolio, J-REP expects that it may be required to undertake a recapitalization. J-REP believes that it would be challenging for it to obtain funds from third parties to make its contribution to the recapitalization of the Fund without seeking further funding from the Offeror and its affiliates. J-REP believes that this risk relating to the Fund s refinancing is the greatest risk to J-REP s long-term prospects. In addition to the refinancing risk, J-REP is facing challenges in its ability to grow. J-REP s business model involves new development projects and financing logistics assets and raising third party investment capital to fund these projects. However, in continuing to maintain its status as a listed company, J-REP believes that it would be quite difficult for new third party capital to be obtained due to the depressed share price and the perceived risks regarding the longevity of the business. As a result, the business cannot grow in its current form or pursue new projects. At the beginning of August 2010, the Offeror presented the board of directors of J-REP with the Proposal for the refinancing and repositioning of J-REP. The Proposal presented four key elements designed to address the various challenges facing J-REP as a comprehensive package. One of the four key elements was a Tender Offer under which the Offeror is seeking to acquire all the outstanding shares of J-REP, thus making J-REP a wholly owned subsidiary. The rationale for this element of the Proposal is explained further in other sections of this Press Release. The board of directors of J-REP quickly established stringent protocols for considering the Proposal such as excluding the directors who are related to the Offeror from J-REP s decision-making processes. J-REP sought clarity around several aspects of the Proposal during August and asked the Offeror to amend several of the proposed terms, and a revised indicative non-binding proposal was conceptually agreed to subject to the formal approvals of both J-REP and the Offeror. The loans under the Loan Agreement are necessary for addressing the risks described above, and the issuance of existing SARs to MCGL and GSH is required by MGJ as a condition to entering into the Loan Agreement on terms relatively favorable to J-REP. The Loan Agreement and the SARs issued in connection with the Loan Agreement also enable J-REP to strengthen its business relationship with Macquarie and Goodman, which is necessary for the stable continuation of J-REP s business. Accordingly, J-REP decided to enter into the Loan Agreement, issue the related SARs and use the loans under the Loan Agreement to finance projects of JLDF. MGJ plans to raise the funds that will be lent to J-REP under the Loan Agreement from (i) Macquarie Financial Holdings Limited, a group company of Macquarie through MCGL and (ii) Goodman Funding Singapore Pte Limited, a group company of Goodman. (2) Reasons for Choosing this Method of Financing In connection with this round of financing, J-REP considered a variety of possible financing methods, and 19

20 negotiated with a number of financial institutions. J-REP determined that MGJ s financing proposal was the best option for the following reasons: 1 MGJ s financing proposal satisfies J-REP s requirements for obtaining capital in both the present and the future. 2 The Loan Agreement will allow J-REP to obtain uncollateralized funds on a flexible basis. 3 Through the Loan Agreement and the issuance of the related SARs, J-REP will continue to have access to new funds despite the recent severity of the financial environment, which has made it difficult to borrow from financial institutions. 4 The Loan Agreement is with MGJ, which is well aware of the particular characteristics of J-REP s financial policies, creditworthiness, business model and business environment. This has made smoother the considerations of a proposal that satisfies J-REP s needs and the negotiation of its terms. 5 MGJ s financing proposal is structured to allow either cash or outstanding loans under the Loan Agreement to be provided as consideration for the exercise of the SARs. If outstanding loans are provided, the exercise of the SARs will result in a lessening of J-REP s debt burden, which would strengthen J-REP s financial state. 6 Even if J-REP s share price should decline, the exercise price of the SARs would not put additional downward pressure on the share price. 7 Through the Tender Offer and subsequent procedures, it is anticipated that J-REP will become a wholly owned subsidiary of the Offeror, which would strengthen the ties between J-REP, MGJ, Macquarie and Goodman, which are co-investors in MGJ, and strengthen their incentive to provide support to J-REP. 2. Summary of the Loan Agreement (1) Summary of the Loan Agreement 1 Type of borrowing: revolving loan providing for drawdowns on demand and borrowing that may be repaid at any time, subject to certain limits and conditions. 2 Facility Limit: JPY 3.5 billion 3 Lender: MGJ 4 Effective Date of Agreement: 15 October Use of Funds: to invest in development projects for logistics properties 6 Repayment date: 15 October Repayment method: may be repaid at any time 8 Fixed interest rate: 3% annually (based on 360-day year) 9 Interest payment dates: every 90 days after funds are drawn 10 Fees for prepayment of loans: J-REP will bear all expenses incurred by MGJ relating to a prepayment by J-REP (JD: we understand there are no commitment fees) (2) Other Special Terms and Conditions 1 Drawdowns under the Loan Agreement are subject to the satisfaction of certain conditions. These conditions include the following: 1 J-REP issues the related SARs to MCGL and GSH 2 The board of directors of J-REP agrees to the Tender Offer and recommends that its shareholders accept the Tender Offer, and that during the Tender Offer period it does not rescind its support of the Tender Offer. The loans under he Loan Agreement may be repaid, generally at the lender s discretion, either through cash or a mixture of cash and shares of J-REP through the exercise of SARs. 20

21 In addition, the new SARs are subject to a redemption provision. That provision is triggered if J-REP provides notice to the lender seven business days prior to the final maturity date of the Loan Agreement that: (i) it is expected that on the final maturity date under the Loan Agreement, certain investment properties funded under the Loan Agreement will not have been sold, (ii) it is expected that J-REP will not have sufficient funds to repay the outstanding loan that correspond to such investment properties, and (iii) there have not been any defaults under the Loan Agreement nor any changes in circumstances that have a materially adverse impact on J-REP. Such notice must specify the aggregate amount of the exercise price of the new SARs to be redeemed under the redemption provision. If the lender does not raise an objection to the redemption prior to the final maturity date or if the lender raises an objection and then a court of competent jurisdiction determines that as of the final maturity date under the Loan Agreement all of conditions (i) through (iii) described above were satisfied, J-REP is entitled to redeem the number of SARs that have an aggregate exercise price equal to (x) the outstanding loans related to such unsold investment properties and (y) the capitalized interest relating to those loans, by delivering to the holder of such new SARs the shares subject to such new SARs. In such event, the loans relating to those unsold investment properties shall be automatically transferred to the holder of the SARs from the Offeror as of the redemption date of the SARs, and such loans shall be deemed an investment in J-REP. As it is anticipated under J-REP s business plan that the investment properties funded by the loans under the Loan Agreement will remain unsold on the final maturity date under the Loan Agreement (and as long as there have not been any defaults under the Loan Agreement and no changes in circumstances that have a materially adverse impact on J-REP have occurred), J-REP is expected to redeem all the SARs that remain unexercised as of the final maturity date of the facility under the Loan Agreement equivalent to the amount of the outstanding loan that corresponds to the investment properties described above issued in connection with the Loan Agreement in consideration of the deemed investment into J-REP of outstanding loan amounts on the terms described above. Furthermore, in the event that new SARs are exercised with the loan receivables used as consideration, the facility limit shall be reduced by the amount equivalent to the exercise price for such new SARs. 3. Summary of new issue of SARs (1)Summary of the Offering 1 Allotment date 31 October Total number of SARs to be issued 100,000 3 Issue price Zero 4 Number of shares underlying these 100,000 shares acquisition rights 5 Proceeds of issue JPY 3,500,000,000 Net after commissions (estimated): JPY 3,492,900,000 6 Exercise price JPY 35,000 7 Method of offering or allotment (recipients) Third-party allotment 50,000 each to Macquarie Capital Group Limited and Goodman Singapore Holdings (Aust) Pty Limited 8 Other The transfer of these new SARs is subject to approval by the J-REP s Board of Directors. 21

22 Assets to be transferred for the exercise of these new stock option may be 1 cash, or 2 all or part of the loan credits. Allotment of these new SARs is conditioned on the issuance of a valid securities registration statement. seven business days prior to the final maturity date of the Loan Agreement that: (i) it is expected that on the final maturity date under the Loan Agreement, certain investment properties funded under the Loan Agreement will not have been sold, (ii) it is expected that J-REP will not have sufficient funds to repay the outstanding loan that correspond to such investment properties, and (iii) there have not been any defaults under the Loan Agreement nor any changes in circumstances that have a materially adverse impact on J-REP. Such notice must specify the aggregate amount of the exercise price of the new SARs to be redeemed under the redemption provision. If the lender does not raise an objection to the redemption prior to the final maturity date or if the lender raises an objection and then a court of competent jurisdiction determines that as of the final maturity date under the Loan Agreement all of conditions (i) through (iii) described above were satisfied, J-REP is entitled to redeem the number of SARs that have an aggregate exercise price equal to (x) the outstanding loans related to such unsold development projects and (y) the capitalized interest relating to those loans, by delivering to the holder of such new SARs the shares subject to such new SARs. (2)Type and Number of Shares to be Issued in Connection with the new SARs Each of the new SARs is convertible into one common share in J-REP, so a total of 100,000 common shares may be issued upon the exercise of the new SARs. 22

23 However, if J-REP changes the exercise price (the amount to be paid for the exercise of each SAR) in accordance with rules set forth in the next section, the number of shares to be issued upon the exercise of each SAR (the share allotment ) will be adjusted according to the formula set forth below. If as a result of this adjustment the number of allotted shares is less than one, the fractional portion shall be be settled with cash, rather than a fraction of a share. If, however, a holder of the new SARs exercises two or more new SARs at the same time, the fractional portions of shares attributable to each of the SARs shall be aggregated for purposes of calculating the total number of shares issued. Adjustment formula: Post-adjustment share allotment = Pre-adjustment exercise price pre-adjustment share allotment Post-adjustment exercise price (3)Exercise Price and Calculation Method for SARs 1 The initial exercise price for the new SARs shall be JPY 35,000. However, the exercise price is subject to adjustment as described below. (i) If J-REP`s ordinary shares are listed on a stock exchange, the issuance of common stock of J- REP at a subscription price below the market price for such shares (calculated as the simple average of the volume weighted average price of shares of common stock of J-REP announced by Tokyo Stock Exchange over the 30 trading day period prior to the issuance of such common stock) (except where such stock is issued upon the conversion of convertible bonds in accordance with Article of the Commercial Code (before revision on April 1, 2002), exercise of rights in accordance with Article 210-1(2)3 of the Commercial Code (before revision on October 1, 2001), or the exercise of new SARs), the exercise price will be adjusted using the formula below. Any fractional portion of a share resulting from the adjustment will be rounded up. = Postadjustment exercise price Preadjustment exercise price Number of Number of shares alreadyissued Paid-in amount per share + alloted shares Current market value per share Number of shares alloted + Number of already-issued shares Number of already-issued shares in the above formula means the total number of J-REP s issued and outstanding shares, less the number of J-REP s treasury shares. If J-REP disposes of its treasury shares, Paid-in amount per share shall be replaced by Disposition price per share. (ii) If J-REP conducts any share split (including a feree allotment) or reverse share split (including an issuance of a separate class of stock in exchange for the common stock where an entire redemption clause (zenbu shutoku joukou) is attached to the common stock and such clause is triggered), the exercise price will be adjusted using the formula below. Any fractional portion of a share resulting from the adjustment will be rounded up. 23

24 Post-adjustment = pre-adjustment exercise price exercise price 1 Ratio of split or reverse-split (iii) If circumstances arise requiring J-REP to adjust the exercise price due to a merger, share transfer, share exchange, share split, or similar transaction, J-REP shall adjust the exercise price in a reasonable range, taking into account the terms of the transaction in question. 2 Method for Calculating the Exercise Price of the New SARs The exercise price for the new SARs shall be JPY 35,000 per share. As a means of ensuring the fairness of the Tender Offer price, J-REP requested a valuation of J-REP s stock from ABeam, an independent valuation firm. In its valuation, the value of one ordinary share of J-REP was calculated using J-REP s business projections and an equity cash flow analysis. Based on those calculations, J-REP s financial situation, the business climate, and the predisposition of the recipients to underwrite the allotment, J-REP decided to set the exercise price of the new SARs at JPY 35,000 per share, equal to the Tender Offer price. In addition, in consultation with MGJ, J-REP has been decided that the new SARs will be issued for no cash consideration. (4) Assets to be Provided as Payment in Connection with the Exercise of the New SARs Cash or all or part of the loans outstanding under the Loan Agreement may be provided as payment for the exercise of the SARs. (5) If the holders of the SARs choose to exercise the SARs for cash payment, the amount of cash required for the exercise of each SAR shall be as described in the section above relating to the exercise price of the SARs. If the SARs Holders choose to exercise the SARs in consideration of the extinguishment of loans outstanding under the Loan Agreement, loans with a face value equal to the exercise price of the SARs being exercised will be extinguished in consideration for the exercise of those SARs. (6) Period during which SARs may be Exercised The period during which the new SARs may be exercised pursuant to their terms will be 31 October 2010 through 31 October However, certain United States securities laws prevent MGJ and its affiliates from purchasing shares of J-REP during the duration of the Tender Offer, other than through the Tender Offer or in specified exceptional circumstances. Therefore, MCGL and GSH, the entities to which the new SARs are to be issued, are not permitted to exercise those SARs during the Tender Offer period. 4. Amount of funds to be raised, purposes, and timing of planned expenditures (1) Amount of Funds to be Received under the Loan Agreement 1 Total amount of money to be paid JPY 3,500,000,000 2 Estimated costs of issuance JPY 7,100,000 3 Estimated net available funds JPY 3,492,900,000 24

25 (Notes) 1. The total amount of money to be paid represents the total of income from the issuance of the new SARs (JPY 0) plus income from the assets to be tendered in connection with the exercise of the SARs (cash and all or part of the Loan Claims) (JPY 3,500,000,000). This is the best estimate as of the date of the publication of this Press Release. 2. The estimated costs of issuance do not include consumption tax or other taxes. 3. If the exercise price is adjusted, the total amount of money to be paid may increase or decrease. Also, if the new SARs are not exercised within the exercise period, or if new SARs acquired by J-REP are cancelled, the total amount of money to be paid may increase or decrease. 4. The estimate of costs of issuance may be broken down as follows: legal fees and the like (JPY 5 million), costs for estimating the value of the SARs (JPY 2 million) and paralegal fees (JPY 100,000). (2) Specific Use of Funds Received under the Loan Agreement Because the new SARs are issued for no cash consideration, no new money will be raised from the issuance of the new SARs. Also, if outstanding loans under the Loan Agreement are extinguished as payment for exercise of the new SARs, no new money will be received by J-REP. As described in other sections of this Press Release, J-REP expects to acquire all of the new SARs that remain unexercised on the final maturity date under the Loan Agreement, in accordance with the provision of the Loan Agreement calling for redemption of the SARs on the final maturity date in exchange for extinguishment of loans relating to unsold projects. Consequently, J-REP does not expect that any income will be realized either from the issuance or the exercise of the new SARs. At the same time, based on the Loan Agreement, and in connection with the issuance of the new SARs, J- REP may borrow up to JPY 3,500,000,000 from MGJ by 15 October J-REP plans to use the funds provided under the Loan Agreement to invest in new development projects in the logistics real estate market in Japan with Macquarie and/or Goodman (and other investors, depending on the circumstances). More specifically, J-REP plans to invest (through the JLDF) roughly JPY 400 million to JPY 1.1 billion in a total of four development projects (one project this fiscal year, two projects for the fiscal year that ends in March 2012 and one project for the fiscal year that ends in March 2013) over the next two years (a total of JPY 2.6 billion). There is no guarantee as of now with respect to the number of projects, the scale of projects and the schedule because the execution of projects require the approval of Macquarie and Goodman. Furthermore, J-REP hopes to use the remaining funds to refinance the Initial Portfolio, but whether J-REP may do so is subject to MGJ s discretion, and as of now it has not obtained MGJ s approval. (3) Timing of Use of Funds Received under the Loan Agreement The Loan Agreement is a revolving loan allowing for borrowing and ad hoc repayment of up to JPY 3.5 billion, and J-REP plans to borrow suitable amounts, as needed, for the purposes described above. Any funds borrowed will be invested, without delay, in the JLDF (unless other uses are approved by the lender). 5. Reasonableness of the Use of Fund Received under the Loan Agreement Up to JPY 3.5 billion borrowed under the Loan Agreement will be used to invest in the JLDF, as described above. Any profits on these investments (after repayment of the loans relating thereto) will be 25

26 used to strengthen the foundations of J-REP s business and the stability of its related funds. J-REP believes this will contribute to to the stable continuation of its business, so J-REP finds the planned use of funds to be reasonable. 6. Reasonableness of issuance terms (1) Basis for Calculation of Issue Price J-REP plans to issue the new SARs to the recipients for no cash consideration. The SARs are issued in conjunction with the Loan Agreement, and may be exercised in exchange for the extinguishment of loans under the Loan Agreement, at the option of the holders of the new SARs. J-REP believes that the loans under Loan Agreement relating to the SARs are necessary for mitigating the refinance risks described in various sections of this Press Release, pursuing opportunities in new development projects and logistics real estate and stably continuing its business by strengthening the relationship with MGJ, Macquarie and Goodman. As a result of repeated discussions with the parties to which the new SARs are proposed to be issued, J-REP believes those parties plan to build a strong supportive relationship with J-REP. J-REP has given due consideration to many possible funding options, as a result of which it has concluded that without the issuance of SARs it would be impossible to gain access to funds on terms as favorable as the terms of the Loan Agreement. Based on such conclusion, J-REP has decided to issue the SARs for no cash consideration. In deciding the appropriate amount to be paid for the issuance of the new SARs, J-REP asked the independent valuation firm Plutus to determine the value of the new SARs and the Loan Agreement. J- REP received the Plutus report on the value of the new SARs and the Loan Agreement on 14 October In its valuation report, which considers the terms of the issuance of the new SARs, the terms of the Loan Agreement, J-REP s expectations regarding the behavior of the holders of the new SARs, and the generally recognized pricing model known as Monte Carlo simulation, and relies on assumptions regarding J-REP s current share price, share liquidity and share price volatility, Plutus determined that the value of the new SARs is JPY 73 each, for a total value of JPY 7,300,000 for the 100,000 new SARs issued in connection with the Loan Agreement. This represents a difference of JPY 188,227,417 from the face value of the Loan Agreement. In J-REP s view: (1) unless the new SARs are issued, it will not be possible for J-REP to raise funds on terms this advantageous to J-REP, and (2) based on the fact that issuance of the SARs to the designees is a condition of the Loan Agreement, there is an intimate connection between the issuance of the new SARs and the Loan Agreement. J-REP believes that such valuation of the new SARs issuance can only occur in conjunction with the valuation of the Loan Agreement. According to the valuation report prepared by Plutus, the total value of the new SARs is less than the difference between the face value of the Loan Agreement and its current value. For this reason, the new SARs are being offered for not cash consideration. Therefore, J-REP believes that the issuance of new SARs will not be categorized as an issuance of SARs especially advantageous to the allottees, which would be subject to a special shareholders' resolution under the Companies Act of Japan. In this connection, in advance of the board of directors meeting on 15 October 2010 at which the decision to issue the new SARs was made, J-REP received an opinion dated 14 October 2010 from all of J-REP s three auditors (all external auditors) to the effect that the concept of advantageous issuance is not applicable to the planned issuance of new SARs and thus the planned issuance is legal for the following reasons: (i) the auditors found the above calculations in the Plutus report both reasonable and appropriate, and (ii) the Loan Agreement, drawdowns for which are conditioned on the issuance of the new SARs, contains a redemption provision. That provision is triggered if J-REP delivers notification to the lender seven business days prior to the final maturity date of the Loan Agreement that: (i) it is expected that on the final maturity date under the Loan Agreement certain investment properties funded under the Loan Agreement will not have been sold, (ii) it is expected that J-REP will not have sufficient funds to repay 26

27 the outstanding loans that correspond to such investment properties, and (iii) there have not been any defaults under the Loan Agreement nor any changes in circumstances that have a materially adverse impact on J-REP. Such notice must specify the aggregate amount of the exercise price of the new SARs to be redeemed under the redemption provision. If the lender does not raise an objection to the redemption prior to the final maturity date or if the lender raises an objection and then a court of competent jurisdiction determines that as of the final maturity date under the Loan Agreement all of conditions (i) through (iii) described above were satisfied, J-REP is entitled to redeem the number of SARs that have an aggregate exercise price equal to (x) the outstanding loans related to such unsold development projects and (y) the capitalized interest relating to those loans, by delivering to the holder of such new SARs the shares subject to such new SARs. In such event, the loans relating to those unsold development projects shall be automatically transferred to the new SARs holder from the Offeror as of the redemption date of the new SARs, and such Loans shall be deemed an investment in J-REP. This is a condition that is disadvantageous for the parties to which the new SARs are proposed to be issued. (2) Reasons for Concluding that the Volume of the Issuance and Scale of the Share Dilution are Reasonable Up JPY 3.5 billion may be borrowed under the Loan Agreement, and the number of new SARs to be issued is 100,000. If all of the new SARs are exercised, the number of shares issued would be 100,000 shares, at an initial exercise price of JPY 35,000. Based on J-REP s current market capitalization and the current number of shares outstanding, this is a very large financing. The dilution rate (which J-REP calculates as the ratio of the number of voting rights associated with the shares to be newly issued, if all the new SARs are exercised, to the voting rights associated with number of J-REP shares outstanding prior to the issue of the new SARs) would be 68.12%. This represents a dilution of existing shareholders current equity in J-REP. However, J-REP believes that the funds raised through the issuance of the new SARs are indispensible to the continuation of J-REP s business, because they will reduce refinance risk, lead to the acquisition of new development projects and logistics real estate, and strengthen support from MGJ, Macquarie and Goodman, as discussed above. Also, because it is anticipated that J-REP will become a wholly owned subsidiary of MGJ through the Tender Offer and subsequent transactions, J-REP believes that the current shareholders will never feel the impact of this dilution. As described in other sections of this Press Release, J-REP has obtained an Opinion Report from outside auditors Yoshihiro Ototake and Tadatsugu Ishimoto expressing the view that the issuance of the new SARs is both necessary and suitable. 7. Reasons for the Selection of the Parties to Which the SARs are Proposed to be Issued (1) Facts Regarding the Parties to Which the SARs are Proposed to be Issued 1 MCGL (1) Name Macquarie Capital Group Limited (2) Headquarters location Level Collins Street, Melbourne, Australia 3000 (3)Representatives Director: David Roseman Director: Richard John Hughes Director: John Stuart Roberts (4) Description of business Investment business (5) Capital 1,378,360, Australian Dollars (6) Date of establishment May 4, 2001 (7) Number of shares 1,237,385,491 shares outstanding (8) Fiscal year April 1 - March 31 (9) Number of employees 450 (consolidated) (10) Major customers N/A 27 (As of 15 October 2010)

28 (11) Main banks N/A (12) Main shareholders / Macquarie Financial Holdings Limited:100% equity stakes (13) Connections between J- Capital ties N/A REP and the planned Allocatee, Business ties MCGL plans to co-invest in development projects with J-REP and Goodman etc. under the JLDF as described above Personnel ties Applicability of rules on related parties (14) Business and financial results in past three years Fiscal year Year ended March 31, 2008 Consolidated net assets (Million AUD) Consolidated total assets (Million AUD ) Consolidated operating income (Million AUD ) Consolidated operating profit (Million AUD ) Consolidated recurring profit (Million AUD ) Consolidated net profit (Million AUD ) 2, ,888000,000 yen) 6,507.2 (531,312,000 yen) Paul McGarry, who is on secondment from Macquarie Capital Advisors Limited, which is a Macquarie Group company, has been appointed as a director of J-REP MCGL does not constitute a related party of J-REP. Year ended March 31, 2009 Year ended March 31, ,158.5 (176,241,000,000 yen) 6,436.0 (525,499,000,000 yen) (77,518,000,000 yen) (52,280,000,000 yen) (45,968,000,000 yen) (65,891,000,000 yen) (37,093,000,000 yen) (25,009,000,000 yen) 2,107.4 (172,069,000,000 yen) 7,803.1 (637,123,000,000 yen) (77,722,000,000 yen) (30,733,000,000 yen) 83.8 (6,842,000,000 yen) Consolidated net profit per share (AUD ) Dividend per share (AUD ) Consolidated net assets per share (JPY ) 0.38 (31 yen) (113 yen) 0.21 (17 yen) 0.15 (12 yen) 1.50 (122 yen) 0.07 (6 yen) (139 yen) 2 GSH (1) Name Goodman Singapore Holdings (Aust) Pty Limited (2) Headquarters location Level 60 Castlereagh Street, Sydney, NSW 2000 (3) Representatives Director: Gregory Leith Goodman Director: Anthony Rozic (4) Description of business Holding company (5) Capital AUD 10 (6) Date of establishment May 9, 2007 (7) Number of shares 10 shares outstanding (8) Fiscal year July 1 June 30 (9)Number of employees 0 (consolidated) (10) Major customers Not applicable (11) Main banks Not applicable (12) Main shareholders / Goodman Limited: 100% equity stakes (13) Connections between J-REP and the planned Allocatee, etc. Capital ties Business ties Personnel ties (As of 15 October 2010) Not applicable Not applicable Gregory Leith Goodman, a director of the planned Allocatee, has been appointed a director of J-REP. James Hodgkinson, a director of Goodman, has been appointed a director of J-REP. 28

29 Applicability of rules on GSH does not constitute a related party of J-REP. related parties (14) Business and financial results in past three years Fiscal year Year ending in June 2008 Year ending in June 2009 Year ending in June 2010 Consolidated net assets (Million AUD) Consolidated total assets (Million AUD ) Consolidated operating income (Million AUD ) Consolidated operating profit (Million AUD ) Consolidated recurring profit (Million AUD ) Consolidated net profit (Million AUD ) (22,696,000,000 yen) 2,750.0 (224,537,000,000 yen) Δ (Δ 21,851,000,000 yen) (22,696, 000,000 yen) (22,129,000,000 yen) 2,750.0 (224,537,000,000 yen) Δ ( ,000 yen) (Δ 6,709,000,000 yen) (29,927,000,000 yen) 2,750.0 (224,537,000,000) Δ (Δ 11,030,000,000 yen) 95.5 (7,798,000,000) Consolidated net profit per 9,551, ,797, , share (AUD ) (779,843,361 (2,269,628,319 yen) (-56,690,994 yen) yen) Dividend per share (AUD ) Consolidated net assets per share (AUD ) 27,796, (2,269,619,783 yen) 27,102, (2,212,928,789 yen) 36,653, (2,992,772,150 yen) (Note) 1. The above amounts use the rate as of October 7, 2010 (1 AUD = yen). (2) Reasons for the Selection of the Parties to Which the SARs are Proposed to be Issued MCGL and GSH, the parties to which the SARs are proposed to be issued, are, respectively, wholly-owned subsidiaries of Macquarie and Goodman, which are shareholders of MGJ, which is the parent company of J-REP (MCGL is an indirect wholly owned subsidiary). As discussed in the above Item III.2.(2) 2 Offeror s Proposal to J-REP, the issuance of SARs to MCGL and GSH through a third-party allotment was presented to J-REP as an element of the Proposal, and one that is a condition to entering into the Loan Agreement on terms relatively favorable to J-REP. In addition, the issuance of SARs will (i) through the establishment of a capital relationship between J-REP and the direct or indirect subsidiaries of Macquarie and Goodman, make the relationship with Macquarie and Goodman stronger than if the joint venture, MGJ, were allocated the new SARs, (ii) strengthen the credibility of J-REP with respect to financial institutions and other third parties, and (iii) exert positive influence on the future business of J- REP. Also, J-REP has confirmed the financial strength of both Macquarie and Goodman. For these reasons, J-REP decided to issue SARs to MCGL and GSH, indirect or direct wholly owned subsidiaries of Macquarie and Goodman, respectively. MGJ became J-REP s parent company through a third-party share allocation on 8 June Macquarie and Goodman have continued to hold shares in J-REP through MGJ since that time and are also well aware of the particular facts of J-REP s financial policies, creditworthiness, business model and business environment. Also, Macquarie and Goodman plan to make J-REP a wholly owned subsidiary through the Tender Offer and subsequent transactions via MGJ. There is no commitment from MCGL or GSH that MCGL and GSH will hold for the long term shares issued pursuant to the exercise of the new SARs, and there is a possibility that the SARs or shares issued pursuant to the exercise of such SARs may be sold to a third party. 29

30 Together with the Tender Offer, it is intended that the planned issuance of SARs will deepen the cooperative relationship between Macquarie and Goodman and J-REP in light of the refinancing strategy of the Initial Portfolio as described above. (3) Intentions of the Parties to which the SARs are Proposed to be Issued Regarding Holding Their Shares MCGL and GSH, the parties to which the SARs are proposed to be issued, are, respectively, an indirect wholly-owned subsidiary of Macquarie and direct wholly-owned subsidiary of Goodman. They intend to be stable long-term shareholders of J-REP, with the aim of enhancing J-REP s enterprise value through their capital and operational cooperation with J-REP, while respecting its autonomy. Macquarie and Goodman continue to hold J-REP s business management policies in high regard. There is no commitment from MCGL or GSH that MCGL and GSH will hold for the long term shares issued pursuant to such exercise of the new SARs, and there is a possibility that the SARs or shares issued pursuant to the exercise of such SARs may be sold to a third party. Furthermore, the transfer of the new SARs requires the approval of the board of directors of J-REP. (4) Details of Confirmation of Existence of Assets Required for Payment by the Party to which the SARs will be Issued Because the issue price of the new SARs is zero, no payment will be required for their issuance. As described in above Item 2 (2) Other Special Items, J-REP expects to redeem all of the new SARs that remain unexercised as of the final maturity date of the Loan Agreement, in accordance with the redemption clause. However, even if cash is proffered for the exercise of the new SARs, MCGL and GSH are to obtain financing from Macquarie group companies and Goodman group companies, respectively, for up to JPY 1,750,000,000. MCGL obtains financing from Macquarie Financial Holdings Limited ( MFHL ), a Macquarie group company. J-REP has reviewed MFHL s cash flow statement and perform analyses for the past three fiscal years and verified that it has sufficient funds for the financing. GSH will obtain funds from Goodman Funding Singapore Pte Limited ( GFS ), a Goodman group company. GFS has executed a revolving loan agreement with Societe General Asia Limited, from which it will fund such amounts. Although J-REP did not receive a copy of the loan agreement due to confidentiality restrictions, J-REP obtained a confirmation statement from Societe General Asia Limited with respect to the availability of JPY 9 billion under such agreement, and J-REP has verified that there are sufficient funds for financing. Thus, J-REP has verified that loan under the Loan Agreement is sufficiently financed. 30

31 (5)Current status of Parties to Which the SARs are Proposed to be Issued As discussed in above Item (2) above, MCGL, one of the parties to which the SARs are proposed to be issued, is an indirect wholly owned subsidiary of Macquarie and in the same way, GSH, the other party to which the SARs are proposed to be issued, is the wholly owned subsidiary of Goodman. Shares of both Macquarie are listed on the Australian Securities Exchange. J-REP has conferred with Macquarie and Goodman and has received written confirmation from Macquarie that neither MCGL nor MFHL, which is MCGL s lender, have any involvement with antisocial elements. J-REP has also received written confirmation from Goodman that GSH does not have any involvement with anti-social elements. In addition, J-REP has received the results of an investigation by Complinet, a third-party investigative firm with a network outside Japan, stating that the executives have no criminal history in major countries, and attesting that they have no connection to anti-social elements. Additionally, in the selection of the investigative firm, J-REP compared Complinet and other investigative firms. Complinet provides the option of checking for criminal sentences and credit information in a set of countries that includes Japan, Australia and Singapore, which are the major business development targets of J-REP, Macquarie and Goodman. As a result, J-REP is satisfied that the parties to which the SARs are proposed to be issued, their executives and their shareholders have no connection to anti-social elements. In addition, J-REP has provided the Tokyo Stock Exchange with a written statement that MCGL and GSH, their primary shareholders (MFHL, Goodman and GFS), and their executives have no connection to anti-social elements. 8. Major Shareholders and Equity Stakes Pre-offering (as of June 30, 2010) Macquarie Goodman Japan Pte. Ltd. (Standing representative UBS Securities) 51.73% Post-offering (reflecting latent shares) Macquarie Goodman Japan Pte. Ltd. (Standing representative UBS Securities) 30.77% 31

32 Tadahito Kataji 5.75% Macquarie Capital Group Limited 20.26% Kiyohiro Kazumoto 3.62% Goodman Singapore Holdings (Aust) Pty Limited 20.26% Misao Tanita 2.04% Tadahito Kataji 3.42% Chizuyo Kazumoto 2.04% Kiyohiro Kazumoto 2.16% Saneito KS Investment Partnership 2.04% Operations/execution union member Masahide Katsukata Japan Securities Finance Co., Ltd. 1.82% Misao Tanita Chizuyo Kazumoto 1.22% 1.22% Smallwoods 1.80% Tadao Kazumoto Nomura Securities Co., Ltd. Nomura Joy 0.63% 1.50% Saneito KS Investment Partnership 1.22% Operations/execution union member Masahide Katsukata Japan Securities Finance Co., Ltd. 1.09% Smallwoods 1.07% Tadao Kazumoto 0.89% Nomura Securities Co., Ltd. Nomura Joy 0.38% Notes: 1. Percentage figures rounded to two decimal places. 2. Estimate of the number of latent shares is based on the assumption that all new SARs are exercised. 3. The post-offering figures are based on the total number of outstanding shares in the preoffering figures (as of June 30, 2010). It is possible there will be additional changes in the post-offering figures as a result of the Tender Offer. 9. Outlook 32

33 J-REP is currently studying the impact of the Tender Offer on J-REP s consolidated earnings for the fiscal year ending March J-REP will make public, without delay, any necessary revisions to published earnings forecasts. In addition, the new SARs are subject to a redemption provision. That provision is triggered if J-REP provides notice to the lender seven business days prior to the final maturity date of the Loan Agreement that: (i) it is expected that on the final maturity date under the Loan Agreement, certain investment properties funded under the Loan Agreement will not have been sold, (ii) it is expected that J-REP will not have sufficient funds to repay the outstanding loan that correspond to such investment properties, and (iii) there have not been any defaults under the Loan Agreement nor any changes in circumstances that have a materially adverse impact on J-REP. Such notice must specify the aggregate amount of the exercise price of the new SARs to be redeemed under the redemption provision. If the lender does not raise an objection to the redemption prior to the final maturity date or if the lender raises an objection and then a court of competent jurisdiction determines that as of the final maturity date under the Loan Agreement all of conditions (i) through (iii) described above were satisfied, J-REP is entitled to redeem the number of SARs that have an aggregate exercise price equal to (x) the outstanding loans related to such unsold development projects and (y) the capitalized interest relating to those loans, by delivering to the holder of such new SARs the shares subject to such new SARs. In such event, the loans relating to those unsold investment properties shall be automatically transferred to the holder of the SARs from the Offeror as of the redemption date of the SARs, and such loans shall be deemed an investment in J-REP. As it is anticipated under J-REP s business plan that the investment properties funded by the loans under the Loan Agreement will remain unsold on the final maturity date under the Loan Agreement (and as long as there have not been any defaults under the Loan Agreement and no changes in circumstances that have a materially adverse impact on J-REP have occurred), J-REP is expected to redeem all the SARs that remain unexercised as of the final maturity date of the facility under the Loan Agreement equivalent to the amount of the outstanding loan that corresponds to the investment properties described above issued in connection with the Loan Agreement in consideration of the deemed investment into J-REP of outstanding loan amounts on the terms described above. 10.Procedures for Code of Corporate Conduct The issuance of the new SARs will result in a dilution ratio greater than 25%, triggering procedures under the Tokyo Stock Exchange s Rule 432 for listed securities, which require that an opinion from a person with a certain degree of independence from management be obtained or that the opinion of shareholders be sought. J-REP views two of its three outside auditors, Yoshihiro Ototake and Tadatsugu Ishimoto as persons having the appropriate independence from management because they have no special connection to J- REP or its executives, except that they are outside auditors. Prior to the board of directors meeting on 15 October 2010, where the decision to issue the new SARs was made, J-REP explained to them in detail the issuance of the new SARs (for example, the purpose and reasons for offering the new SARs, the amount of funds to be raised, the applications of those funds, the timing of the use of those funds, the terms of the issuance, the reasons for selection of parties to which the new SARs are proposed to be issued, the major shareholders and equity ratios after offering, and the outlook of J-REP) and other relevant matters. As a result, J-REP obtained from Yoshihiro Ototake and Tadatsugu Ishimoto an Opinion Report dated 14 October 2010 stating that they find the issuance of the new SARs to be both necessary and appropriate: necessary for the reasons described in the sections above relating to the Objectives of the Issuance of the SARS and the Loan Agreement and the Reasons for Choosing this Method of Financing, and appropriate because the Tender Offer and subsequent transactions are expected to make J-REP a wholly 33

34 owned subsidiary of MGJ, virtually eliminating any possibility that the dilution of J-REP s shares as a result of the exercise of the new SARs will have any impact on current shareholders. The third of J-REP s external auditors, Kunio Namekata, did not participate in the drafting of the above Opinion Report, in order to maintain its fairness because he is a partner of TMI Associates, with which J- REP has a legal consulting agreement. 11.Transactions with the Controlling Shareholder Because MGJ, which is the lender under the Loan Agreement, is J-REP s controlling shareholder and there is an intimate connection between the issuance of the new SARs and the Loan Agreement, both the new SARs issuance and the execution of the Loan Agreement are regarded as transactions with the controlling shareholder. The Corporate Governance Report that J-REP published on 30 June 2010 included pointers concerning guidelines for the protection of minority shareholders in the event of transactions with the controlling shareholder, in which it was stated, in the event of transactions between J-REP and its parent company, or other subsidiaries of the parent company, strict approval procedures must be followed to ensure the general fairness of the details of relevant decisions, to ensure that the terms of such transactions are not decided arbitrarily; systems must be established to ensure oversight and scrutiny of such transactions, to prevent any resulting harm to minority shareholders. Applying those pointers to the new SARs issuance and the execution of the Loan Agreement, J-REP and its external auditors have carefully studied the reasonableness of the new SARs issuance and the Loan Agreement, and have decided, by unanimous vote of the four directors attending the meeting of the board of directors of J-REP on 15 October 2010, to proceed with the new SARs issuance and the execution of the Loan Agreement in light of obtaining an opinion letter from two auditors as stated below. In the interest of preserving the fairness and neutrality of the decision-making process, three of the seven members of J-REP s board of directors did not participate in any of the deliberations by the board of directors or decisions regarding the issuance of the new SARs or agenda items concerning the Loan Agreement, except that Mr. Paul McGarry as Director of the Company attended a portion of the meetings in order to provide information known only by him; moreover, they did not act on behalf of J-REP or participate in any discussions or negotiations of these matters with the Tender Offeror. The three conflicted directors are Paul McGarry, who is on secondment from Macquarie Capital Advisors Limited; Gregory Goodman, who is CEO of Goodman; and James Hodgkinson, who is a director of Goodman. Accordingly, J-REP has taken measures to avoid conflicts of interest. As a statement of the view that the decisions concerning the new SARs issuance and Loan Agreement are not disadvantageous to minority shareholders, the Board of Directors obtained from two of J-REP s external auditors, Yoshihiro Ototake and Tadatsugu Ishimoto, an Opinion Report dated 14 October 2010, issued prior to the Board of Directors meeting on 15 October The Opinion Report states that they find the issuance of the new SARs to be not disadvantageous to J-REP s minority shareholders for several reasons, including the expectation that obtaining the financing and participation in new development projects will help enhance J-REP s enterprise value, and that while minority shareholders may experience a dilution of their equity, the Tender Offer and subsequent transactions is expected to complete the transformation of J-REP into a wholly owned subsidiary, eliminating any remaining concern that the process will be disadvantageous to the minority shareholders. The third of J-REP s external auditors, Kunio Namekata, did not participate in the drafting of the above Opinion Report, in order to maintain its fairness because he is a partner of TMI Associates, with which J- 34

35 REP has a legal consulting agreement. J-REP has taken measures, such as obtaining such Opinion Report in connection with the valuation of the new SARs and the Loan from Plutus, to ensure fairness. 12. Earnings and equity financing in the past three years (1) Earnings in the past three years (consolidated) (Unit: millions of yen) Fiscal year ending March 2008 March 2009 March 2010 Operating income 3,615 9,096 12,790 Operating profit 1, ,367 Recurring profit 1,808 2,290 3,442 Net profit ,620 3,890 Net profit per share (JPY ) 6, , , Dividend per share (JPY ) 1,000 Net assets per share (JPY ) 249,914,54 175, , (2) Number of shares outstanding, and number of latent shares (current, as of 15 October 2010) Type Number of shares Ratio, as percentage of total shares outstanding Total number of shares outstanding 146,807 shares 100% Total number of latent shares, based on current 1,417 shares 0.97% Exercise Price Total number of latent shares, based on lowest shares % Exercise Price Total number of latent shares, based on highest Exercise Price shares % Notes: 1. Percentage figures rounded to two decimal places. 2. Estimate of the number of latent shares is based on the assumption that all new SARs are exercised. (3) Total number of shares outstanding, and latent shares, after current round of equity financing Type Number of shares Ratio, as percentage of total shares outstanding Total number of shares outstanding 146,807 shares 100% Total number of latent shares, based on current Exercise Price (JPY 35,000) 101,417 shares 69.08% Total number of latent shares, based on lowest % % Exercise Price Total number of latent shares, based on highest Exercise Price % % Notes: 1. Percentage figures rounded to two decimal places. 2. Estimate of the number of latent shares is based on the assumption that all new SARs and Existing SARs are exercised. 35

36 (4) Recent share price trends 1 Most recent three years Year ended March 2008 Year ended March 2009 Year ended March 2010 Open JPY 431,000 JPY 112,000 JPY 34,100 High JPY 607,000 JPY 189,000 JPY 56,800 Low JPY 97,300 JPY 19,650 JPY 18,000 Close JPY 110,000 JPY 34,200 JPY 28,400 2 Most recent six months April May June July August September Open JPY 27,900 JPY 36,850 JPY 26,600 JPY 23,950 JPY 24,600 25,410 High JPY 43,450 JPY 39,000 JPY 29,850 JPY 26,400 JPY 32,000 26,000 Low JPY 25,600 JPY 23,100 JPY 24,290 JPY 23,110 JPY 21,000 23,000 Close JPY 37,350 JPY 27,100 JPY 24,450 JPY 24,100 JPY 25,850 23,640 3 Stock price on day prior to date of decision to issue As of October 14, 2010 Open JPY 23,810 High JPY 24,300 Low JPY 22,530 Close JPY 23,150 (5) Facts about current equity financing J-REP Co., Share Acquisition Rights No. 6 Issue date 15 October 2010 Amount of funds to be raised JPY 3.5 billion Number of shares outstanding as of offer date 146,807 shares Number of latent shares associated with this 100,000 shares offering Allocatee Macquarie Capital Group Limited : 50,000 Goodman Singapore Holdings (Aust) Pty Limited) : 50,000 (6) Equity financing in the most recent three years Issuance of Share Acquisition Rights to third parties Issue date February 2, 2009 Amount of funds to be raised JPY 6,500,000,000 Number of shares outstanding as of offer date 145,904 shares Number of latent shares associated with the 5,149 shares offering Allocatee Macquarie Goodman Japan Pte. Ltd. 36

37 Current status of SARs exercise No SARs have been exercised. The final day of the exercise period was June 30, 2010, and all SARs became void. Initial purpose of funds Debt repayment, acquisition of new real estate properties, etc. Planned timing of outlays March-September 2009 Current status of appropriation No funds were disbursed. 13. Key points regarding issuance For key points regarding the issuance of the new SARs, see the attached The terms and conditions of the issuance of the SARs. 37

38 V.Decisions regarding new development cases 1.Facts about this arrangement (1) Fund name Japan Logistics Development Framekwork (JLDF) (2) Arrangement scheme J-REP and its investment partners are to make an equity investment in the JLDF projects. J-REP intends to invest no more than 20% of the equity in each of the JLDF projects. J-REP intends to work toward sourcing new projects under the JLDF arrangement and utilizing the JLDF. 2.Advantages of participation in creation of the JLDF (1) Participate in the JLDF will increase the fees J-REP receives the provision of services. It will also make possible the effective use of the property services, development management, asset management and fund management expertise that J-REP and its subsidiaries provide. (2) In addition, investing in tandem with J-REP s investment partners in JLDF will position J-REP to earn profits from latent upside trends in Japan s logistics market. 38

39 Terms and Conditions of the Issue of the Stock Acquisition Rights 1. Name of the Stock Acquisition Rights J-REP Co., Ltd. Series 6 Stock Acquisition Rights (the Stock Acquisition Rights ) 2. Method of Offering the Stock Acquisition Rights 50,000 units of the Stock Acquisition Rights will be allotted to Macquarie Capital Group Limited and 50,000 units of the Stock Acquisition Rights will be allotted to Goodman Singapore Holdings (Aust) Pty Limited, in each case, by way of third-party allotment. 3. Features of the Stock Acquisition Rights (1) Class and Number of Shares underlying the Stock Acquisition Rights The class of shares underlying the Stock Acquisition Rights is common stock (or, if an entire redemption clause (zenbu shutoku joukou) is attached to the common stock and a separate class of stock is issued in exchange for the common stock, such separate class of stock) of the Company, and the number of shares of common stock of the Company to be newly issued upon exercise of Stock Acquisition Rights or the number of shares of common stock of the Company held by the Company to be transferred instead of such issuance (such issuance and transfer of shares of common stock of the Company is referred to as Delivery ) is 100,000 shares in aggregate (the number of shares underlying each of the Stock Acquisition Rights (the Number of Shares Allotted ) is one (1) share); provided, however, that if the Exercise Price set out in (2)(c) below is adjusted in accordance with (2)(d) below, the Number of Shares Allotted will be adjusted using the following formula, and then the aggregate number of shares underlying the Stock Acquisition Rights will be adjusted in accordance with the Number of Shares Allotted After Adjustment set out below. Where the Number of Shares Allotted becomes a fraction of one share, any such fraction shall be rounded down and an adjustment by cash shall be made provided that, if two or more Stock Acquisition Rights are exercised at any one time by the same holder of the Stock Acquisition Rights (the Stock Acquisition Right Holder ), the number of shares to be Delivered shall be calculated on an aggregated basis. Number of Shares Allotted = After Adjustment Number of Shares Allotted x Exercise Price Before Adjustment Before Adjustment Exercise Price After Adjustment (2) Value or Calculation Method of Value of Property to be Contributed upon Exercise of the Stock Acquisition Rights (a) The property to be contributed upon the exercise of the Stock Acquisition Rights is, at the election of the holder of the Stock Acquisition rights, (i) cash or (ii) all or part(s) of the loan principle receivables, interest receivables and fee receivables (the Loan Receivables ) then existing and outstanding as of each exercise of the relevant Stock Acquisition Rights under the Loan Agreement (the Loan Agreement ) dated 15 October 2010 executed by and between Macquarie Goodman Japan Pte Limited (the Lender ) and the Company. (b) In case of (a)(i) above, the value of cash to be contributed upon the exercise of the Stock Acquisition Rights shall be the amount of the Exercise Price set out in (c) below for each of the Stock Acquisition Rights. (c) The value of the property to be contributed upon the exercise of the Stock Acquisition Rights (the Exercise Price ) will be 35,000 yen per share. The Exercise Price will be adjusted in accordance with (d) below. (d) (i) When shares of common stock of the Company are listed and shares of common stock of the Company are issued at a subscription price that falls below the Market Price per share 39

40 (calculated as simple average of the volume weighted average price of shares of common stock of the Company announced by Tokyo Stock Exchange, Inc. over the 30 trading day period prior to the issuance of such common stock) (excluding the cases of conversion of convertible bonds in accordance with Article of the Commercial Code before revision on April 1, 2002; exercise of the rights in accordance with Article 210-1(2)3 of the Commercial Code before revision on October 1, 2001; and exercise of stock acquisition rights), the Exercise Price will be adjusted using the following formula. Any fraction under one (1) yen resulting from the adjustment will be rounded up. Exercise Price After Adjustment = Exercise Price Before Adjustment Number of Outstanding Shares issued + Number of Delivered SharesラPaid-in Amount per share Market Price per share Number of (Outstanding + Delivered ) Shares Number of Outstanding Shares in the above formula means the total number of the Company s issued and outstanding shares, less the number of the Company s treasury shares. In case that the Company disposes its treasury shares, Paid-in Amount per share shall be replaced by Dispose Price per share. (ii) If the Company conducts any share split (including gratis allotment) or reverse share split of shares of common stock of the Company (including an issuance of a separate class of stock in exchange for the common stock where an entire redemption clause (zenbu shutoku joukou) is attached to the common stock and such clause is triggered) after the Stock Acquisition Rights Allotment Date, the Exercise Price will be adjusted using the following formula. Any fraction of less than one (1) yen resulting from the adjustment will be rounded up. Exercise Price After Adjustment = Exercise Price Before Adjustment 1 Share Split/ Reverse Share Split Ratio (iii) If the Company conducts merger (gappei), share transfer (kabushiki iten), share exchange (kabushiki kokan) or demerger (kaisha bunkatsu), or in any other case where an adjustment of the Exercise Price is required, the Company shall make a reasonable adjustment to the Exercise Price, taking into account the terms of such merger, share transfer, share exchange or demerger. (3) Statement of Contribution of Property other than Cash upon Exercise of the Stock Acquisition Rights and Description and Value of Such Property (a) The property to be contributed upon the exercise of the Stock Acquisition Rights is (i) cash or (ii) all or part(s) of the Loan Receivables. (b) In case of (a)(ii) above, the description of the property to be contributed upon the exercise of the Stock Acquisition Rights shall be all or any part(s) of the Loan Receivables. The Value of the consideration to be provided for each Stock Acquisition Right will be equal to the value of the Exercise Price. Provided that the Exercise Price will be adjusted in accordance with (2)(d) above. The Loan Receivables to be contributed upon the exercise of the Stock Acquisition Rights will, at the same time as such contribution, become due and payable and will be extinguished because the creditor and the debtor for such receivables will be the same company. (4) Exercise Period of the Stock Acquisition Rights 40

41 The period during which the Stock Acquisition Rights may be exercised (the Exercise Period ) will be from 31 October 2010, (the Commencement Date ) until 31 October 2012 (the Expiration Date ). (5) Conditions of Exercise of the Stock Acquisition Rights Other conditions for the exercise of the Stock Acquisition Rights will be in accordance with the resolutions of the Board of Directors of the Company. (6) Events and Causes for Acquisition of Stock Acquisition Rights by the Company If both (a) and (b), both (a) and (c) or both (a) and (d) provided in this section are satisfied, the Company may redeem such number of the Stock Acquisition Rights as have an aggregate Exercise Price equal to (x) the Loans drawdown to fund the acquisition of the Incomplete Investment Opportunities (as defined in (a) below) set out in the notice as of the final maturity date of the Loan Agreement plus (y) capitalised interest due hereunder in respect of those Loans, by delivering to the Stock Acquisition Rights Holder the same number of common stocks of the Company as the number of shares underlying the Stock Acquisition Rights in consideration for such redemption. Under such circumstances, the relevant portion of Loan Receivables shall be deemed to have automatically been transferred from the Lender to the Stock Acquisition Rights Holder and to have automatically contributed to the Company, as of the date of redemption of such Stock Acquisition Rights. (a) At least seven Business Days (as defined under the Loan Agreement) (but not more than 10 Business Days) prior to the final maturity date of the Loan Agreement, the Company promptly notify the Lender if it expects that any Investment Opportunity will not have been sold and will not generate sales proceeds prior to the final maturity date of the Loan Agreement (an Incomplete Investment Opportunity ) and such notice is accompanied by a certificate of a duly authorised director of the Company dated the same date as the notice which certificate shall certify to the Lender: (i) that the Company does not have on the date of the notice and will not have on the final maturity date of the Loan Agreement sufficient funds to repay the Loans corresponding to the Incomplete Investment Opportunities because the Incomplete Investment Opportunities will not have been sold and will not have generated sales proceeds with which to repay the Loans prior to the final maturity date of the Loan Agreement; (ii) that, after carrying out appropriate investigations, no event of default or material adverse change in the circumstances of the Company has occurred as of the date of the notice or is expected to occur on the final maturity date of the Loan Agreement; and (iii) the aggregate Exercise Price of the Stock Acquisition Rights that the Company anticipates will be redeemed on the final maturity date of the Loan Agreement pursuant to section 3.(6) (with details of the basis for such calculation). (b) Following receipt by the Lender of the notice and certificate delivered by the Company in accordance with section 3.(6)(a), prior to the final maturity date of the Loan Agreement, the Lender has not notified the Company that it wishes to discuss the Company s assessment of the matters set out in the notice or certificate or the accuracy of such matters as of the final maturity date of the Loan Agreement. 41

42 (c) (i) Following receipt by the Lender of the notice and certificate delivered by the Company in accordance with section 3.(6)(a), prior to the final maturity date of the Loan Agreement, the Lender has notified the Company that it wishes to discuss the Company s assessment of the matters set out in the notice or certificate or the accuracy of such matters as of the final maturity date of the Loan Agreement and (ii) following such discussions, the Lender notifies the Company that it agrees that the conditions set out in section 3.(6)(a)(i), (ii) and (iii) have been satisfied as of the final maturity date of the Loan Agreement. (d) (i) Following receipt by the Lender of the notice and certificate delivered by the Company in accordance with section 3.(6)(a), prior to the final maturity date of the Loan Agreement, the Lender has notified the Company that it wishes to discuss the Company s assessment of the matters set out in the notice or certificate or the accuracy of such matters as of the final maturity date of the Loan Agreement, (ii) during 10 Business Days following such notification the Lender and the Company have not resolved any disagreement as to whether those conditions set out section 3.(6)(a)(i),(ii) and (iii) have been satisfied and such disagreement is brought in the competent court, and then (iii) the competent court issues a final ruling that those conditions set out section 3.(6)(a)(i),(ii) and (iii) were satisfied as of the final maturity date of the Loan Agreement. (7) Capital and Capital Reserves that will be Increased in case where Shares will be Issued as a Result of the Exercise of the Stock Acquisition Rights. (a) The amount of capital that will be increased in case where shares will be issued as a result of the exercise of the Stock Acquisition Rights equals half of the Maximum Capital Increase Amount that is calculated in accordance with Article 17(1) of the Corporation Calculation Regulations (with any fraction of a yen being rounded up to the nearest whole yen). (b) The amount of capital reserves that will be increased in case where shares will be issued as a result of the exercise of the Stock Acquisition Rights equals the Maximum Capital Increase Amount set out in (a) above less the amount of capital to be increased under (a) above. (8) Restrictions on Acquisition of the Stock Acquisition Rights by Transfer Any acquisition of the Stock Acquisition Rights by transfer requires the approval of the Company by a resolution of Board of Directors of the Company. (9) Policy concerning Determination of Details regarding Forfeiture of Stock Acquisition Rights and Delivery of new Stock Acquisition Rights in the Post-Reorganization Company upon Reorganization In the event the Company conducts a merger (limited to where the Company is dissolved as a result of the merger), an absorption-type demerger (kyushu bunkatsu) or an incorporation-type demerger (shinsetsu bunkatsu) (respectively limited to where the Company is split as a result of the demerger and the obligations pertaining to the Loan Receivables are transferred and assumed upon the demerger), or a share exchange or a share transfer (respectively limited to where the Company becomes a wholly owned subsidiary of the other company) (collectively, the Reorganization ), stock acquisition rights in one of the stock corporations listed in Article 236, Paragraph 1, Items 8(a) through (e) of the Companies Act (as the case may be) ( Post- Reorganization Company ) will be delivered to the Stock Acquisition Right Holder of the remaining Stock Acquisition Rights immediately before the Reorganization takes effect (the Remaining Stock Acquisition Rights ) (as for an absorption-type merger (kyushu gappei), the effective date of such merger; as for an incorporation-type merger (shinsetsu gappei), the incorporation date of newly incorporated company; as for an absorption-type demerger, the effective date of such demerger; as for an incorporation-type demerger, the incorporation date of newly incorporated company; as for a share exchange, the effective date of share exchange; and as for a share transfer, the incorporation date of newly incorporated company which owns whole 42

43 shares of the Company) in accordance with the following conditions. In this case, the Remaining Stock Acquisition Rights will be forfeited and the Post-Reorganization Company will newly issue its stock acquisition rights. However, the foregoing applies only where the delivery of the stock acquisition rights of the Post-Reorganization Company, in accordance with the following terms, is provided for in the relevant absorption-type merger agreement, incorporation-type merger agreement, absorption-type demerger agreement, incorporation-type demerger plan, share exchange agreement, or share transfer plan: (a) Number of Stock Acquisition Rights in the Post-Reorganization Company to be Delivered Stock acquisition rights will be delivered to the respective Stock Acquisition Right Holders in the same number as the Remaining Stock Acquisition Rights held by the Stock Acquisition Right Holder. (b) Class of Shares in the Post-Reorganization Company to be Delivered upon the Exercise of the Stock Acquisition Rights Shares in the common stock of the Post-Reorganization Company (c) Number of Shares in the Post-Reorganization Company to be Delivered upon the Exercise of Stock Acquisition Rights To be determined in accordance with (1) above, considering the terms for the Reorganization (d) Value or Calculation of Value of Property to be Contributed upon the Exercise of Stock Acquisition Rights Property to be contributed upon the exercise of each stock acquisition right in the Post- Reorganization Company is cash, all or part(s) of the Loan Receivables, and the value of such property will be determined in accordance with (2) above, considering the terms for the Reorganization. (e) Statement of Contribution of Property other than Cash upon the Exercise of Stock Acquisition Rights and Description and Value of Such Property Property to be contributed upon the exercise of each stock acquisition right in the Post- Reorganization Company is cash, all or part(s) of the Loan Receivables, and the value of such property will be determined in accordance with (3) above, considering the terms for the Reorganization. (f) Period for Exercising Stock Acquisition Rights Period commencing on either the Commencement Date, or the effective date of the Reorganization, whichever is earlier, and ending on the Expiration Date. (g) Matters regarding Capital and Capital Reserves that will be Increased in case where Shares will be Issued as a Result of the Exercise of Stock Acquisition Rights To be determined in accordance with (7) above (h) Restrictions on Acquisition of Stock Acquisition Rights by Transfer Any acquisition of stock acquisition rights in the Post-Reorganization Company by transfer is subject to the approval of the Board of Directors of the Post-Reorganization Company. (i) Conditions for the Exercise of Stock Acquisition Rights and Causes for Acquisition of Stock Options To be determined in according with (5) and (6) above (10) Stock Acquisition Rights Certificates No certificates representing the Stock Acquisition Rights will be issued. 4. Total Number of the Stock Acquisition Rights 100,000 units 5. Amount to be Paid-in for the Issuance of Stock Acquisition Rights No monetary payment shall be required for issuance of Stock Acquisition Rights. 43

44 6. Application Period 31 October, Stock Acquisition Rights Allotment Date 31 October, Method of Exercising the Stock Acquisition Rights (1) If a Stock Acquisition Right Holder wishes to exercise the Stock Acquisition Rights, it shall submit to the Location to Submit Exercise Requests set out in 9. below during the Exercise Period a written exercise request in a form designated by the Company that includes matters such as the terms and the number of the Stock Acquisition Rights subject to such exercise and the date of the exercise of the Stock Acquisition Rights after affixing its signature or seal to such written exercise request. (2) An exercise of the Stock Acquisition Rights will become effective when all of the necessary documents for the exercise are received at the Location for Submit Exercise Requests set out in 9. below. 9. Location to Submit Exercise Requests Accounting & Finance Division, J-REP Co., Ltd. 10. Other Matters (1) Each of the above items is conditioned on the relevant filing under the Financial Instruments and Exchange Law becoming effective. (2) In addition to the above matters, the decisions necessary to issue the Stock Acquisition Rights shall be made by the Board of Directors of the Company. (3) This final Japanese version of this document is the binding version. If there are any discrepancies between the Japanese version and any translation thereof, the Japanese version shall prevail. END 44