March 10, To whom it may concern:

Transcription

1 To whom it may concern: March 10, 2009 Name of the issuer of the properties investment fund: Nippon Commercial Investment Corporation Name of the representative: Tomohiro Makino, Executive Director (Securities Identification Code: 3229) Asset Manager: Pacific Commercial Corporation Name of the representative: Tetsuya Saito Chief Executive Officer and President Inquiries: Ryuma Enomoto General Manager of Administration Division Tel: Notice of Petition to Commence Corporate Reorganization Proceedings Filed by the Asset Manager s Parent Company and Future Prospects of the Investment Corporation and Asset Manager Nippon Commercial Investment Corporation (the Investment Corporation ) hereby informs you that Pacific Holdings, Inc. (the Sponsor ), the parent company of Pacific Commercial Corporation, to which the Investment Corporation entrusts the management of its assets (the Asset Manager ), today filed a petition to commence corporate reorganization proceedings with the Tokyo District Court (for details, please refer to the Notice of Petition to Commence Corporate Reorganization Proceedings, dated March 10, 2009, issued by the Sponsor). Since the filing of a petition for corporate reorganization by the Sponsor does not fall under the criteria for delisting the investment units of the Investment Corporation (the Investment Units ), the Investment Units will continue to be listed on the Real Estate Investment Trust (REIT) Section of the Tokyo Stock Exchange. Moreover, we hereby inform you of the impact of the above as well as the future prospects for the Investment Corporation and the Asset Manager. The details are as follows. 1. The Impact on the Investment Corporation

2 The Investment Corporation and the Asset Manager are operated separately from the Sponsor and as such are not directly impacted by the Sponsor filing a petition for corporate reorganization as shown below. Moreover, for details please refer to the following 2. and after. (1) Operating the Investment Corporation Pursuant to laws and regulations, the Investment Corporation entrusts the business relating to the custody of its assets to its custodian The Sumitomo Trust and Banking Co., Ltd. and such assets are under custody separate from the assets of the Sponsor and Asset Manager. In addition, the Investment Corporation has no lending to the Sponsor or Asset Manager. Consequently, the Sponsor s corporate reorganization proceedings do not impact the Investment Corporation. (2) The Investment Corporation s Cash Management There is no problem with the cash flows from operating activities of the Investment Corporation, and as mentioned in the Notice of Revision to Management Forecasts for the Fiscal Period Ending February 2009 (Sixth Fiscal Period), dated February 19, 2009, the forecasts of operating revenues of 8,572 million yen, operating income of 3,750 million yen and net income of 2,252 million yen remain unchanged. Furthermore, in the most recent fiscal period, the Investment Corporation has borrowings due for repayment on March 27, 2009 that amount to over 16.1 billion yen. The Investment Corporation will aim to secure stable cash flows for such based upon strong partnerships with its financial institutions. Moreover, the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor as well as the commencement of said proceedings does not breach the financial covenants for the borrowings and investment corporation bonds of the Investment Corporation. Furthermore, as of March 10, 2009, there are no events that breach the financial covenants in other agreements that the Investment Corporation has concluded. (3) The Asset Manager s Asset Management Structure Following the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor, the Asset Manager has been advancing procedures to

3 transfer all of its 23 seconded employees to the Asset Manager, effective March 16, As of today, the Asset Manager has already finished confirming the continuation of operations and has received consent regarding the transfers. Regarding the transfer procedures, confirmations have been made that the Sponsor will also cooperate and since all the employees will continue operations, said filing will not have any immediate impact on the asset management structure of the Asset Manager. Furthermore, regarding its recent financial conditions, the Asset Manager owns enough properties for its continuity as stipulated in applicable laws and regulations. Thus, no events have occurred that would affect the asset management structure and no issues have arisen in regard to carrying out the asset management business in the future. Moreover, the Asset Manager does not have any borrowings from the Sponsor nor financial institutions, and has not made loans to the Sponsor. (4) Investment Securities Issued by the Investment Corporation Since the filing of a petition for corporate reorganization proceedings by the Sponsor does not fall under the criteria for delisting the investment units of the Investment Corporation (the Investment Units ), the Investment Units will continue to be listed on the Real Estate Investment Trust (REIT) Section of the Tokyo Stock Exchange. 2. Relationship with the Investment Corporation As of today, the following is an outline of the relationships between the Sponsor and the Investment Corporation. (1) Capital Ties: As of March 10, 2009, capital ties are as follows: Total number of investment units of the Investment Corporation issued and outstanding: 257,400 units Number of investment units held by the Sponsor: 12,400 units Percentage of total number of investment units issued and outstanding: 4.8% Other group companies of the Sponsor do not own any investment units.

4 (2) Personnel Ties: None. (3) Business Ties: The following is an outline of the support being received, based on the Support Agreement as of August 9, Moreover, said agreement has in part been succeeded by Pacific Realty Corporation ( PRL ), the subsidiary of the Sponsor, as stipulated by the Absorption-Type Split Agreement concluded between the Sponsor and PRL on April 24, (a) Preferential negotiation rights for the sale/purchase of properties, etc. (b) Preferential negotiation rights for the sale/purchase of properties developed by the Sponsor (c) Provision of information regarding properties, etc. (d) Provision of warehousing services for properties, etc. the Investment Corporation intends to acquire (e) Cooperation in terms of securing personnel (f) Other asset management support services: (i) Leasing support that is necessary for the Investment Corporation s portfolio assets to maintain a high occupancy rate as well as a high net operating income; (ii) Property management support to maintain the asset value of the Investment Corporation s portfolio assets; (iii) Support in strengthening our relationship with property managers in connection with routine lease management; (iv) On-going research services to analyze the rental market; (v) Support in obtaining an understanding of the current financial market and enabling the sharing of financial information to increase the synergy between the Investment Corporation and the Sponsor; and (vi) Support with respect to identifying potential buyers of the Investment Corporation s portfolio assets. (4) Other Ties: Other than the above, there are no ties that have the potential of impacting the Investment Corporation

5 3. Relationship with the Asset Manager As of today, the following is an outline of the relationships between the Sponsor and the Asset Manager. (1) Capital Ties: As of March 10, 2009, capital ties are as follows: Total number of shares of the Asset Manager issued and outstanding: 10,000 shares Number of shares held by the Sponsor: 10,000 shares Percentage of total number of shares issued and outstanding: 100% (2) Personnel Ties: As of March 10, 2009, there are the following concurrently holding of another position and conditions of accepting seconded personnel. (a) 1 Chief Executive Officer of the Asset Manager concurrently held positions as a part-time director of the Sponsor, but in correlation to the abovementioned event surrounding the Sponsor, he submitted a letter of resignation as part-time director of the Sponsor. Moreover, he will continue to primarily engage in the businesses of the Asset Manager. (b) 23 employees of the Asset Manager have been seconded from the Sponsor. (3) Business Ties: The Asset Manager is receiving the support outlined in 2. (3) above, based on the Support Agreement as of August 9, (4) Other Ties: Other than the above, the following is an outline of the support being received by the Asset Manager, based on the Advisory Agreement in relation to system development that was concluded on August 9, 2008 with Smart Asset Management Systems Corporation ( SAMS ), a subsidiary of the Sponsor. (a) Advice or assistance in relation to system development (b) Advice or assistance in relation to system management 4. Future Prospects of the Investment Corporation The following are the future prospects of the Investment Corporation following the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor.

6 (1) Support Based on the Support Agreement The Sponsor and PRL currently gives support by providing information regarding investment properties owned directly or indirectly by the Sponsor, etc., based on the Support Agreement mentioned in 2. (3) above. Furthermore, said companies play an important role in assisting with the long-term portfolio growth of the Investment Corporation. Moreover, there are currently no plans for acquiring new property. If the current environment surrounding the financial and REIT markets is also taken into consideration, it is believed that on the short-term, the Investment Corporation will not receive any significant impact. (2) Administration and Management of Assets of the Investment Corporation Pursuant to laws and regulations, the Investment Corporation entrusts the business relating to the custody of its assets to its custodian The Sumitomo Trust and Banking Co., Ltd. and such assets are under custody separate from the assets of the Sponsor and Asset Manager. In addition, the Investment Corporation has no lending to the Sponsor or Asset Manager. Consequently, the Sponsor s corporate reorganization proceedings do not impact the Investment Corporation. Moreover, the Investment Corporation has verified with the Asset Manager, to which it entrusts the management of its assets, the Asset Manager s policy for dealing with the management of assets in correlation with the Sponsor s petition to commence corporate reorganization proceedings. Based on this verification, the Investment Corporation will not change its policy to continue entrusting the management of its assets to the Asset Manager. For details on whether or not there are any impacts in regard to asset management, please refer to 5. below. (3) Fund Procurement Environment Surrounding the Investment Corporation In the most recent fiscal period, the Investment Corporation has borrowings due for repayment on March 27, 2009 that amount to over 16.1 billion yen. In correlation with the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor and the commencement of said proceedings, there are concerns that there will be a certain amount of impact on the negotiations with the financial institutions regarding the refinancing of said borrowings.

7 The Investment Corporation has granted collateral by concluding Agreements on Grant of Collateral on December 26, Furthermore, the Investment Corporation, as mentioned in the Notice of Sale of Assets, dated February 19, 2009, has completed partial early repayment through the sale of properties and has secured liquidity on hand, etc. Through such measures taken, the Investment Corporation has received a certain amount of good evaluation from its financial institutions. The Investment Corporation has to date worked to establish good relationships with its financial institutions. Stable cash flows will be secured through the above measures and by smoothly proceeding with the selection of a new sponsor with the Asset Manager playing a leading role, as well as through strong partnerships with financial institutions. Moreover, the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor as well as the commencement of said proceedings does not breach the financial covenants for the borrowings and investment corporation bonds of the Investment Corporation. Furthermore, as of March 10, 2009, there are no events that breach the financial covenants in other agreements that the Investment Corporation has concluded. (4) Investment Units of the Investment Corporation The Sponsor as of March 10, 2009 is a major unitholder holding 12,400 investment units of the Investment Corporation, which amounts to 4.8% of the total number of units issued and outstanding. Depending upon the progress of the Sponsor s corporate reorganization proceedings, if the Sponsor sells investment unitholdings, then there are concerns of the impact this will have on the investment unit price of the Investment Corporation. 5. Future Prospects of the Asset Manager The Asset Manager would like to continue carrying out the asset management business of the Investment Corporation. Moreover, the following is the future prospects of the Asset Manager following the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor. (1) The Asset Manager s Asset Management Structure The Sponsor is a parent company of the Asset Manager, holding all of its shares issued

8 and outstanding. Furthermore, all 23 employees of the Asset Manager are all employees seconded from the Sponsor, excluding 3 full-time directors, 1 part-time corporate auditor and 7 contract employees. Said 23 employees only engaged in the asset management for the Investment Corporation and do not engage in the Sponsor s other businesses. Following the filing of a petition for commencement of corporate reorganization proceedings by the Sponsor, the Asset Manager has been advancing procedures to transfer all of its 23 seconded employees to the Asset Manager, effective March 16, As of today, the Asset Manager has already finished confirming the continuation of operations and has received consent regarding the transfers. Regarding the transfer procedures, confirmations have been made that the Sponsor will also cooperate and since all the employees will continue operations, said filing will not have any immediate impact on the asset management structure of the Asset Manager. Furthermore, in order to strengthen the asset management structure of the Asset Manager, it has decided to newly receive 3 employees from the Sponsor, effective March 16, 2009, as transferred personnel and today has already finished confirming their desire to transfer. Said 3 employees will be received in order to strengthen the compliance and risk management business, as well as the internal audit business. As a result, the plan is to have a total of 37 officials and employees as at March 16, 2009 (including the part-time corporate auditor). The personnel costs related to said employees seconded from the Sponsor have been borne by the Asset Manager to date as part of their share in seconded employee costs. It is estimated that the increase of personnel costs in correlation with the increase of new employees will actually not increase the costs, due to the cost reduction in correlation with the improvement of efficiency and partial absorption of the administration business that had been entrusted to the Sponsor. Furthermore, said personnel costs is an internal cost of the Asset Manager and regardless of any increase in costs, the Investment Corporation will not be bearing the costs. Moreover, as for the financial standing of the Asset Manager its 5 th fiscal year starting April 1, 2007 and ending March 31, 2008, which is its most recent fiscal year, there has been secured enough retained earnings. Furthermore, the Asset Manager has been issued an unqualified opinion from Deloitte Touche Tohmatsu for the financial statements and supplementary schedules for said 5 th fiscal year.

9 Furthermore, regarding its recent financial conditions, the Asset Manager owns enough properties for its continuity as stipulated in applicable laws and regulations. Thus, no events have occurred that would affect the asset management structure and no issues have arisen in regard to carrying out the asset management business in the future. Moreover, the Asset Manager does not have any borrowings from the Sponsor nor financial institutions, and has not made loans to the Sponsor. (2) Support Based on the Support Agreement The Sponsor and PRL play an important role in supporting the asset management structure of the Asset Manager, such as cooperating in the securing of personnel and with other management support businesses, etc., based on the Support Agreement mentioned in 2. (3) above. The securing of personnel for the Asset Manager will not receive immediate impact from the measures mentioned in (1) above. However, if said support cannot be received from a new sponsor, it is possible that there will be a certain amount of impact on the asset management structure of the Asset Manager in the medium- to long-term perspective. As will be mentioned in 6. below, the Asset Manager will focus its efforts on stabilizing the base of its management structure and will strive to avoid negative impacts on the asset management of the Investment Corporation. (3) Support Based on the Advisory Agreement in Relation to System Development Based on the Advisory Agreement in relation to system development mentioned in 3. (4) above, SAMS, a subsidiary of the Sponsor, plays an important role in supporting the asset management structure of the Asset Manager, such as through giving advice and assistance in relation to system development as well as through giving advice and assistance in relation to system management. SAMS is not directly involved with the Sponsor s reorganization proceedings and will not immediately receive an impact. However, in the case that said supports are not received, it is possible that there will be a certain amount of impact on the asset management structure of the Asset Manager in the medium- to long-term perspective.

10 (4) Other Please also refer to Notice of Cancellation of Asset Manager s Chief Executive Officer Concurrently Holding Another Position and Notice of Management and Administration of Portfolio Assets, dated March 10, Selection of a New Sponsor With the events surrounding the Sponsor, the Asset Manager, through the Emergency Response Headquarters it established on February 27, 2009, will increasingly mount efforts towards the selection of a corporation that, with the Asset Manager playing the central role and with the cooperation of the Sponsor s provisional administrator and others, is able to support the Investment Corporation as a new shareholder of the Asset Manager (the New Sponsor ). The policy is to determine the New Sponsor as soon as possible and thereby promote the establishment of a stable base for the asset management structure of the Asset Manager as well as improve the fund procurement environment surrounding the Investment Corporation. Furthermore, the Asset Manager plans to proceed with the selection of the New Sponsor in full cooperation with the Investment Corporation and its main financial institutions. 7. Other The Investment Corporation will announce the impact of this matter on its management performance for the fiscal period ending August 2009 (from March 1, 2009 to August 31, 2009) once it has been ascertained after taking into consideration future conditions. Moreover, if there are any new items to report, such items will be disclosed appropriately and promptly.