Greeting

Dear Investor,

In the 18th fiscal period (May 1, 2011 – October 31, 2011), Premier Investment Corporation (PIC) was surrounded by an environment in which the Japanese economy, having suffered a downfall due to the Great East Japan Earthquake in March 2011, continued to recover while its downside risks increased, for reasons such as the continuous steep appreciation of the yen and intensified turmoil in the European financial markets.

The real estate rental market underwent prolonged difficult times during the fiscal period, but signs of improvement have started to appear, although slightly, in the occupancy of both office buildings and residential properties, with the drop in rent levels coming to a stop.

Against this background, PIC made efforts to enhance leasing activities, focusing on filling vacant spaces that had been generated in office buildings. As a result of such endeavors, the spaces leased to tenants increased significantly and resulted in the period average occupancy rate of office buildings recovering to 82.1%, up from the previous fiscal period's results. Nevertheless, rental income failed to increase as rentfree periods still had to be granted to new tenants.Meanwhile, the period's average occupancy rate of residential properties was slightly lower than the previous fiscal period, as leasing results were stagnant at some properties in high rent zones.

As a result, PIC posted a decrease both in revenues and profits from the 17th fiscal period, with operating revenues of 4,963 million yen (a decrease of 208 million yen), ordinary income of 1,311 million yen (a decrease of 220 million yen), and net income of 1,309 million yen (a decrease of 210 million yen), all on a period-on-period basis. Meanwhile, PIC secured a distribution per unit of 9,345 yen, surpassing the forecast by 145 yen, but representing a decrease of 1,501 yen period-on-period.

Furthermore, as information on subsequent events that took place in the 19th fiscal period, PIC made a lump-sum acquisition of six office buildings and one residential property on November 18, 2011, with a total acquisition price of 33.1 billion yen. These properties were acquired through sponsor channels; six properties via NTT Urban Development Corporation and one property via Ken Corporation Ltd. In order to procure funds for such acquisition, PIC newly issued 56,599 investment units (through public offering and third-party allotment), obtaining 13,686 million yen. PIC used the proceeds, together with new borrowings of 19,600 million yen, etc., to fund the acquisition. Moreover, PIC sold one residential property from which it plans to record gains on sale of 166 million yen. (For details of these events, please refer to pages 6 to 11 of this semiannual report.) The issuance of new investment units was conducted within extremely difficult conditions in both the real estate market and the investment unit market. However, we believe that the addition of the new properties, acquired at comparatively inexpensive prices amid the stagnancy in the market, should help enhance the portfolio quality over the medium to long term.Furthermore, both the cap rate and the occupancy rate of the seven properties as a whole exceeds those of the existing portfolio, allowing for expectations that the additions will contribute to achieving better portfolio performance. We also took care to avoid dilution of distribution as much as possible by recording gains from the sale of the investment asset as profits.

Going forward, we remain engaged in realizing stable asset management and operations by taking advantage of the strong commitment and support from sponsors.

The continued encouragement you extend to us is highly appreciated.

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