9999AE2005-VWHO

APPRAISAL REPORT
February10, 2006

Prepared for
ABCD K.K.

Prepared by(Signature)

Takashi Yamaguchi (Appraiser)
Value Workers, Inc.
20-1-303 Kitamachi, Shinjuku, Tokyo, 162-0834, Japan

Pursuant to your request, I have prepared a summary report of a complete appraisal
for the subject property. The attached report details the scope of work, level ofreporting, definition of value, valuation methodology, and pertinent data researched andanalyzed in the development of this appraisal.

(Notes)1. This appraisal was developed to estimate the real estate value, not business value,according to the client’s purpose, that is, for reference to the client’s long-term
financial projection.
2. Above mentioned financial projection is to be examined under the premises of“disposal in the form of vacant lot”, “sale of improved property” and “sale ofbusiness”. This appraisal was performed to evaluate the value under the premise ofsale of improved property.

Table of Contents-1-

Final Opinion, Definition of Value, Effective Date of Appraisal…… P.01-2-

Scope of Work…… P.02-3-

History of Subject Property…… P.02-4-

Identification of the Property…… P.03-5-

Property Right Appraised, Owner on the Registry Book…… P.04-6-

Date of On-site inspection and Report…… P.04-7-

General Assumptions and Limiting Conditions…… P.04-8-

Purpose, Intended Use of the Appraisal, Intended User(s)…… P.05-9-

Valuing Process…… P.06

1. General factors which affect value of real estate…… P.06

2. Location and Means of Transportation…… P.07

3. General Condition of Subject Neighborhood…… P.07

4. General Condition of Subject Property, and Zoning…… P.08

5. Highest and Best Use…… P.09

6. Application of Appraisal Methods…… P.11

Sheet 1

Land Sales Data sheet

Area Map, Residential Map, Public Sectional Map, Building Drawings, Photos, etc.
Certification

-1-. Final Opinion, Definition of Value, Effective Date of Appraisal< Final Opinion of Value >Value in case of sale of land and buildings

JPY 1,706,300,000.(In terms of cash, not including consumption tax)

< Definition of Value >For the purpose of this report, market value is defined as:
The most probable price which a property should bring in a competitive
and open market, under all conditions requisite to a fair sale, the buyer andseller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus.
Implicit in this definition are the consummation of a sale as of a specified
date and the passing of title from seller to buyer under conditions whereby:
1. Buyer and seller are typically motivated.
2. Both parties are well-informed or well-advised, and acting in what they
consider their best interests.
3. A reasonable time is allowed for exposure in the open market.
4. Payment is made in terms of cash or in terms of financial arrangements
comparable thereto; and5. The price represents the normal consideration for the property sold
unaffected by special or creative financing or sales concessions granted byanyone associated with the sale.
< Reasonable Exposure Time >Over three years.
< Effective Date of Appraisal >February 10, 2006
< Opinion for the possibility of sale>1

In Japan, economic depression had continued after the collapse of bubble
economy. In these days, recovery trend is appearing clearly. But, as a whole,
local industrial real estate markets are still stagnating.
In industrial parks near the subject plant, there are many lots which could not
get any buyer for a long time and are repeating price reductions.
Since the subject buildings have unique formations, I think, the potential
buyers may be limited for a little number.
I evaluated above value only for reference, because the subject property
might have such value only when it gets the buyers who want to use them inthe same way as current manner. I think that the possibility of such a
successful sale is low under the premise of sale of improved real estate. (Ifunder the premise of sale of business, transfer would be more successful, I
think.)-2-. Scope of Work
This appraisal is performed based on the following conditions.
1. This report is a Limited Report in compliance with the Uniform Standardsof Professional Appraisal Practice inasmuch as the omission of the income
approach and market approach. I think the income approach would be
hypothetical under the assumptions of this appraisal, since the transfer ofbusiness is not premised. Also, I think the market approach would not be
reliable in this case, because the plants’ formations are respectively uniqueand not easy to compare in a whole property concept.
2. This appraisal was developed to estimate the real estate value, not businessvalue, according to the client’s assignment. So, in this appraisal, subject
financial statements were not examined.
3. I conducted on-site inspection on the subject plant.
4. I collected and examined many comparable sales data of industrial
properties in the comparable areas.
-3-. History of Subject Property
After built as a plant, subject property has not been transferred to any otherentities (except for business combination).
2

-4-. Identification of the Property(1) Land
Address: 996 ABC, ABC City, Niigata, Japan<Legal description>(sq.m.: square meter)
Category of
Lands

Lot Number

Area (sq.m.)(Registered Area)

996 ABC, ABC City
997 ABC, ABC City
998 ABC, ABC City

Building site
Building site
Building site
Total

(2)

6,338.30
25,154.50
10,003.00
41,495.80

Buildings<Legal description>
House Number

Structure, Category

Area (sq.m.)(Registered Area)

Bldg-A

996-1

Bldg-B Annex-1
Bldg-C Annex-2
Bldg-D Annex-3
Bldg-E

Annex-4

Bldg-F

Annex-5

Reinforced concrete, Steel-frame.
Zincified flat steel roof. 2-story.
Factory building
Steel-frame. Zincified flat steel roof.
1-story. Warehouse.
Steel-frame. Zincified flat steel roof.
1-story. Warehouse.
Steel-frame. Zincified flat steel roof.
1-story. Warehouse.
Steel-frame. Zincified flat steel roof.
1-story. Warehouse.
Steel-frame. Zincified flat steel roof.
1-tory. Machine house.

1F
2F

5,008.10
2,141.20

1F

1,577.40

1F

1,606.25

1F

749.001F

334.751F

770.00Total 12,186.70

3-5-. Property Right appraised, Owner on the Registry Book
< Property Right appraised >Land:
Fee simple [Occupant: ABCD K.K.]
Buildings:
Fee simple [Occupant: ABCD K.K.]< Owner registered on the registry book > (As of February 10, 2006)Land:
Owner: ABCD K.K. (Address: 123 XYZ, XYZ City, Niigata, Japan)
Buildings:
Owner: ABCD K.K. (Address: 123 XYZ, XYZ City, Niigata, Japan)-6-. Date of On-site inspection and ReportFebruary 10, 2006 (Date of on-site inspection)
February 10, 2006 (Date of Report)-7-. General Assumptions and Limiting Conditions
This appraisal report has been made with the following general assumptions andlimiting conditions:
1. This appraisal is developed to estimate the real estate value, not business value
premised on transfer of business, according to the client’s assignment.
2. In this report, installations, equipments, machineries, personal properties andintangible assets are not included in the subject property, according to the client’s
assignment.
3. Subject land and buildings are occupied and used by the owner. This appraisal isdeveloped under the condition that the properties are free of any rights other thanownership. (Properties are appraised free and clear of any or all liens orencumbrances.)
4. In this report, sizes of land and buildings are depending on the registered sizes.
5. In recent years, industrial real estate dealing market is stagnating in Japan,
especially in local areas. The forecasts, projections, or operating estimates
contained herein are based on current market conditions anticipated the4continuing depression. These forecasts are, therefore, subject to changes with
future conditions.
6. Physical test for checking hazardous materials, which may or may not be present
on the properties, has not been performed. The value estimated in this report ispredicated on the assumption that no hazardous materials are on or in theproperties that would cause a loss in value. No responsibility is assumed for suchconditions or for any expertise or engineering knowledge required to discoverthem.
7. Any unknown conditions existing at the time of inspection could alter the value.
No responsibility is assumed for latent defects of any nature which may affectvalue, nor for any expertise required to disclose such conditions.
8. Appraiser who performed this appraisal has no present or prospective interest in
the subject property. Compensation for the appraiser is not contingent on thereporting of a predetermined value or direction in value that favors the cause of
the client. This appraisal is performed in a manner that is independent, impartial
and objective.

-8-. Purpose, Intended Use of the Appraisal, Intended User(s)Purpose and Intended Use of this appraisal is for reference to the client’s long term
financial projection, and definition of value is the fair market value. This appraisal
is intended for the use of the client only.

5

-9-. Valuing Process
1. General factors which affect value of real estate< Economic conditions >In Japan, economic depression had continued over 1.5 decades after the collapseof bubble economy (1990). Government had introduced various anti-deflation
measures. Bank of Japan had continued ultra-low-interest rate policy.
Recently, stock price has hit the bottom and the flattening-off trend is appearing
clearly. According to the “Cabinet Office Economy Watchers Survey” in February
2006, “Japanese economy is picking up now”.
< Land price trend >Also, real estate dealing market had stagnated after the collapse of bubble
economy.
According to the public survey of land price as of July 1, 2005, national averageof land price declined by 4.2% per year. Declining trend has continued for 14
consecutive years.
But lately, in three major metropolitan area (Tokyo, Osaka and Nagoya), rate of
decline diminished distinctively. And in the central areas of these areas, land priceseems to have bottomed out.
Demands for offices and expansion of investment for real estates are regarded as
the main factors of the recovery.
But in local areas, real estate markets are still stagnating. There seem variancesamong areas. (Subject property is located in a local area.)
Transition of Gov. published land price (Industrial land near the subject plant)
㎡単価

year

yen/sq.m.

1998

19,1001999

18,2002000

17,5002001

16,9002002

16,40010,0002003

15,800

5,000

2004

14,9000

2005

14,00025,00020,00015,000

1

2

6

3

4

5

6

7

8

2. Location and Means of Transportation
Nearby railroad station:
ABC station of the ABC-Railroad
Direction and distance (on road line) from the nearby railroad station:
East of the station: about 15 km
Other means of transportation:
ABC I.C. of the ABC free way: about 25 km
3. General Condition of Subject Neighborhood
(1)

Range
I identified the subject neighborhood within the area of ABC industrial park
where subject property is located.

(2)

Characteristics of the subject neighborhood< Street condition >Paved public road is ordinal in this area, and the level of arrangement andcontinuity of these roads are normal.
< Access >Access to the nearby railroad station:

Not good

Access to the nearby shopping center:

Not good

Access to the public offices:

Not good< Environmental conditions >Subject neighborhood is an industrial area where large plants are gathering.
< Standard use of land in the area>
Width of the road:13m width public road.

Standard lot size:

Around 40,000 sq.m.

Standard use:

Site of factory7

< Future trend >Few factors are observed which would change the subject neighborhood in thenear future.
4. General Condition of Subject Property, and Zoning
The property-specific value influences of subject land are as follows.
(1) Street conditions< Lot classification >Lot which fronts to two roads< Road condition >Direction

Width

Pavement

Classification

Ground height

East side

13.0m

Paved

Public road

Equal level

West side

8.5m

Paved

Public road

Equal level(2) Lot conditions< Topography >Level< Shape >Close to rectangle< Dimensions >150 m X 280 m(3) Lifeline
Electric power service:

ServedPublic water service:

ServedIndustrial water service:

Not served

Public sewer service:

Not served

City gas service:

Not served(4) Present use of the land
Site of a factory
The property-specific value influences of subject buildings are as follows.
< Completion of construction >Bldg-A (factory)

April, 1989

Bldg-A (factory- extension)

August, 1998
8

Bldg-B (warehouse)

August, 1998

Bldg-C (warehouse)

August, 1998

Bldg-D (warehouse)

September, 1992

Bldg-E (warehouse)

October, 1989

Bldg-F (machine house)

August, 1998

< Grade of materials and construction >Middle grade< Present use >Buildings of a factory and storages< Maintenance and management >Normal< Degree of depreciation >NormalZoning< Designation of the City Planning Zone >Designated as Urbanizable Zone
< Other zoning regulations >Range: Whole subject land
Zoning:Existing in an area designated as Exclusive Industrial Zone.
Building restriction:
Maximum Building Coverage Ratio: 80%
Maximum Floor Area Ratio: 200% ** Restriction according to the road width: Not applied.
(Article 52, 2nd clause of the Building Standard Law)
5. Highest and Best Use< Highest and Best Use of the land as though vacant >I think the Highest and Best Use of the subject land as though vacant is the use
as a site of plant.
< Highest and Best Use of the property as improved >I think the Highest and Best Use of the subject property as improved is the use
9as a plant.

10

6. Application of Appraisal Methods
In this appraisal, I applied the Cost Approach to estimate the value of subject
property. Market Approach is omitted because the subject plants’ formation is quite
unique and not easy to compare in a whole property concept. Also, Income Approachis omitted because the transfer of business is not premised in this case.

A. Application of the Cost Approach(1)

Land value(i) Sales Comparison Approach for land value
I collected many comparable sales data within the subject and the comparable
neighborhoods. Then, I chose some suitable data. And I made time adjustment tomake them reliable data.
I compared the subject land with the comparables from the viewpoint ofmarket-specific value influences and property-specific value influences, andestimated the unit value of subject land as below.
: JPY 10,400 /sq.m. (See attached sheet 1)(ii) Land value
I reexamined each stages of appraisal process objectively and critically, andreconsidered the feature of the methods and data.
Gov. published land price was also taken into account (based on the Land Price
Publication Law). And I estimated the value of subject land as below.
: 10,400 / sq.m. X(2)41,495.80 sq.m. =JPY 431,600,000. -Reproduction cost of subject buildings
Materials of the buildings, the grade of construction and the trend of the building
costs were examined, and I estimated the subject buildings’ reproduction cost as
follows.

Bldg-A

Construction cost
111,247 / sq.m.

XTime adjustment
0.67
11

≒

Estimated unit cost
75,000 / sq.m.

Bldg-A
Bldg-B
Bldg-C
Bldg-D
Bldg-E
Bldg-F(3)

195,983
110,856
73,838212,026
140,726
97,762/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.

≒
≒
≒
≒
≒
≒

X
X
X
X
X
X

0.95
0.95
0.95
0.80
0.95
0.95

Unit cost
Bldg-A 172,000 / sq.m.
Bldg-B 105,000 / sq.m.
Bldg-C70,000 / sq.m.

X
X
X

Size
1,429.86 sq.m.
315.48 sq.m.
321.25 sq.m.

Bldg-D
Bldg-E

170,000 / sq.m.
134,000 / sq.m.

XX

149.80 sq.m.
66.95 sq.m.

≒≒≒

Bldg-F93,000 / sq.m.

X

154.00 sq.m.

≒

JPY 71,600,000.-

Total amountJPY 1,751,500,000.-≒≒

186,000
105,000
70,000170,000
134,000
93,000/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.
/ sq.m.

Reproduction cost
JPY 1,229,700,000.JPY 165,600,000.JPY 112,400,000.JPY 127,300,000.JPY 44,900,000.-

Reproduction cost of the subject property as improved
The Reproduction cost of subject buildings indicated in (2) were added to theLand value indicated in (1), and I estimated the Reproduction cost of the subject
property as improved to be JPY 2,183,100,000.-.

(4)

Depreciation and the value indicated by the Cost Approach
Physical, functional and economic impairments which were estimated by themethods based on economic life and observation, was deducted from thereconstruction cost of the subject property, and I estimated the value indicated by
the Cost Approach to be JPY 1,706,300,000.(Land: JPY 431,600,000.-

Buildings: JPY 1,274,700,000.-)<Calculation process>
Land: Above estimated value is adopted: JPY 431,600,000. Building: Strait line method is adopted. Salvage value is estimated to be zero.
Economic life is anticipated to be 30 years.

12Reproduction cost
Bldg-A 1,229,700,000 ×
165,600,000 ×Bldg-B
112,400,000 ×Bldg-C127,300,000 ×Bldg-D
44,900,000 ×Bldg-E
71,600,000 ×Bldg-F

Depreciation

Current value

( 1 -

7.5 /

30 )

≒

JPY 922,300,000.-

( 1 -

7.5 /

30 )

≒

JPY 124,200,000.-

( 1 -

7.5 /

30 )

≒

JPY 84,300,000.-( 1 -13.5 /30 )≒JPY 70,000,000.-( 1 -16.5 /30 )≒JPY 20,200,000.-

( 1 -

7.5 /

30 )

≒

JPY 53,700,000.-

Total amountJPY 1,274,700,000.-

B. Value in case of sale of land and buildings (for reference)
As above mentioned,
Value indicated by the Cost Approach is estimated to be JPY 1, 706,300,000.(Land: JPY 431,600,000.-

Buildings: JPY 1,274,700,000.-)

It is evaluated by focusing on the costs.
I estimated the reconstruction cost of subject property as improved, and deductedfrom it the depreciated value based on physical, functional and external factors.
In valuing process, many data are adopted and utilized appropriately. Indicatedvalue reflects market condition, and is reliable. Then I concluded the value opinion
in case of sale of land and buildings for JPY 1, 706,300,000.-(Note)
1. This appraisal is developed to estimate the real estate value, not businessvalue, according to the client’s assignment.
2. The forecasts, projections, or operating estimates contained herein are
based on current market conditions, anticipated the continuing depression.
These forecasts are, therefore, subject to changes with future conditions.

13

LAND SALES DATA ＳＨＥＥＴ

A
B
C
α
β

A
B
C
α
β
Sub.L.

F
a
c
t
o
r
s

Time ajastment

Category, Size, Date

January/01/2003
January/01/2004
January/01/2005～～～

Sale price(A)

December/31/2003
December/31/2004
February/10/2006- 4.0％- 5.7％- 7.5％

Sheet 1-1

Sale Condit-Time ajast-Standard- Market
Property
A×B×C×D×E Standard price
Indicated Value
influences
ions (B) ment (C) izing (D) influences(E)category building site
100
83
100
100
53,482.30㎡
12,54010,008
ABC, XX-City
size
100
100
104
100
JPY/㎡
JPY/㎡
date 01/11/2003①②
category building site
100
91
100
100
103
48,255.60㎡
17,882
10,532
10,10010,400
ABC, XX-City
size
100
100
103
150
100
JPY/㎡
JPY/㎡
JPY/㎡
JPY/㎡
date 09/29/2004③④⑪
category building site
100
84
100
100
50,000.00㎡
18,244
9,824
ABC, XX-City
size
100
100
104
150
JPY/㎡
JPY/㎡
date 05/29/2003⑤⑥
category building site
93
100
100
103
Gov. PublishedLand Price
25,125㎡
14,000
－
－
9,800
size
－
100
104
131
100
JPY/㎡
JPY/㎡
JPY/㎡
⑦
⑧
⑪
No.9-1, XX-City date 01/01/2005
category
93
100
100
103
－
－
0
size
－
100
100
100
100
JPY/㎡
JPY/㎡
JPY/㎡
⑪
date 01/01/2005⑨⑩
Property-specific value influences and standardizing (D)Market-specific value influences (E)Memoranda
Accessi- Environ- AdministAccessi- Environ- Administment
ment
rationration Other
Road
bility
Site
Other
total
bility
Road
Total
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
104
100
104
100
100
100
100
100
100
①
②
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
103
100
103
100
115
130
100
100
150
③
④
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
104
100
104
100
115
130
100
100
150
⑤
⑥
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
104
100
104
100
105
125
100
100
131
⑦
⑧
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
⑨
⑩
(Memoranda)
100
100
100
100
103
100
103
100
100
100
100
100
100
100
⑪
Location

C
o
m
p
a
r
i
s
o
n

Sheet 1-1

TABLE OF FACTORS
A

B

C

α

＋4

＋3

＋4

＋4

＋5
＋ 10

＋5
＋ 10

＋5

＋ 10
＋ 20

＋ 10
＋ 20

＋5
＋ 20

Sheet 1- 2
βSubject

Memoranda

Width. Continuity

Road condition Pavement
P
r
o
p
e
r
t
y
F
a
c
t
o
r
s

Other condition
To station, bus stop
Accessibility To shopping centerTo others
Pollution, Noise
Environment Residential environment
Other environment
Floor area ratio
Administration Administrative restriction
Other condition
Ｃorner lot, etc.
Ｉrregular shape
Site condition Ｌｏｔ ｓｉｚｅ
Difference of ground level
Other condition＋3

Other condition
Width. Continuity

Road condition Pavement
M
a
r
k
e
t

Other condition

A new free way I.C. is to open in 2007.
B and C are near to the I.C.
and the ABC residential area.
B and C are served with
Industrial water and sewage.

Sheet 1- 2

F
a
c
t
o
r
s

Other condition
To station, bus stop
Accessibility To central metropolitan area
To I.C. of free way
Pollution, Noise
Environment Recruitment of workers
Industrial water supply, sewage
Floor area ratio
Administration Administrative restriction
Other condition
Ｃorner lot, etc.
Ｉrregular shape
Site condition Ｌｏｔ ｓｉｚｅ
Difference of ground level
Other condition

Since this report is a sample, City map, Residential map, Public
sectional map, Building drawings, Photos, etc. are intentionally
excluded.

Certification

I certify to the best of my knowledge and belief that:
1. The statements of fact contained in this report are true and correct.
2. The reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal impartial, and unbiased
professional analyses, opinions, and conclusions.
3. I have no present or prospective interest in the property that is the subject of thisreport, and no personal interest with respect to the parties involved.
4. I have no bias with respect to the property that is the subject of this report or to theparties involved with this assignment.
5. My engagement in and compensation for this assignment were not contingent upondeveloping or reporting predetermined results, the amount of the value estimate, or aconclusion favoring the client.
6. My analyses, opinions, and conclusions were developed, and this report has been
prepared in conformity with the Uniform Standards of Professional Appraisal Practice.
7. I have the knowledge and experience to complete the assignment competently.
8. No one provided significant professional assistance to the person(s) signing thisreport.

Signature:

Takashi Yamaguchi

Date of certification: February 10, 2006