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Financial Review of AGT For 4th Quarter And Full Year Ended 31 March 2017

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Profit & Loss

Balance Sheet

Review of performance for the 4th quarter and full year ended 31 March 2017

4Q FY16/17 vs 4Q FY15/16

Operating income for 4Q FY16/17 was JPY 9,911 million, 5.1% lower than 4Q FY15/16. This is mainly attributed to the February 2017 heavy snowfall in Nagoya and Osaka area and some golf courses are forced to close for operation. In addition, there was a one off other income refund amounting to JPY 265 million in January 2016. During the quarter, number of visitors to AGT's golf courses decreased 0.2% from the previous year.

Operating expenses for 4Q FY16/17 was JPY 12,232 million, 10.5% higher than 4Q FY15/16. The increase is mainly due to the impairment loss occurred in current year amounting to JPY 1,499 million while impairment loss recorded in Q4 FY15/16 was JPY 184 million.

Operating loss for 4Q FY16/17 was JPY 2,321 million, which was 273.2% higher than 4Q FY15/16. Loss attributable to Unitholders had also increased from JPY 777 million to JPY 2,838 million translating to a 265.3% increase.

Total distributable income available during the period was JPY 1,297 million. The net distributable cash flow is positive despite the operating loss, due to membership fees that are recognized monthly but received and become distributable mostly in the fourth quarter.

FY16/17 vs FY15/16

Operating income for FY16/17 was JPY 51,919 million. The performance of the golf course was weaker than previous year mainly due to the earthquake in Kyushu area in April 2016, heavy rain in June 2016, torrential rain caused by typhoons in August and September 2016, warm weather during winter season in 3Q FY15/16, heavy snowfall in February 2017. There was also a one off other income refund amounting to JPY 265 million in January 2016. The revenues were slightly affected despite overall steady golf demand.

Operating expenses for FY16/17 was JPY 45,347 million. The increase was mainly due to impairment loss recorded in Q4 FY16/17 amounting to JPY 1,499 million while impairment loss recorded in Q4 FY15/16 was JPY 184 million.

Operating profit for FY16/17 was JPY 6,572 million, which was 25.6% lower than FY15/16. Profit attributable to Unitholders was JPY4,000 million, 38.6% lower than FY15/16.

Total distributable income available during FY16/17 was JPY 5,178 million. The computation of total distributable income available for FY16/17 is for illustrative purpose only. AGT makes distributions on a semi-annual basis and the next distribution is for the period from 1 October 2016 to 31 March 2017 and payable by the Trustee-Manager within 90 days from the end of the said period.

Commentary on the significant trends and competitive conditions of the industry in which the group operates and any known factors or events that may affect the group in the next reporting period and the next 12 months

According to market report, the Bank of Japan ("BOJ") March 2017 Tankan survey of corporate sentiment showed that the current trend in business sentiment for the manufacturing sector has improved. With stable export demand and inventory investment in the fiscal year 2017, the growth is expected to accelerate. In the fiscal year 2018, with the improvement of employment circumstance and investment for the improvement of efficiency, Japan's economy is expected to grow on a good balance of inside and outside demand. The forecast of Japan's real gross domestic product (GDP) for fiscal year 2017 is expected to be 1.5% and 2018 to be 1.1%., nominal GDP for the fiscal year 2017 to be 1.8% and 2018 to be 1.6%.(1).

The Japanese golf market continues to remain stable with the support of weekdays play demand from senior players.

In addition, the higher healthy life expectancy of seniors has also led to increasing demand as players can continue to play golf at a higher age. On the other hand, younger players are not increasing in proportion to older players due to Japan's aging population. Such a situation is widely recognised in the golf industry.

AGT's sponsor recognised this trend years ago and has focused on building the assets portfolio of golf courses located in key metropolitan area. Such golf courses can generate steadier cash flow. As at 31 March 2017, approximately 70% of AGT's 89 courses are located in the 3 largest metropolitan areas. AGT adopts profit maximisation strategy and promotes larger private group competition to achieve more stable revenue. Furthermore, booming inbound tourism to Japan could have a positive impact on golf demand in the mid to long term. AGT has been making efforts to expand to a more varied player base to generate stable cash flow and distribution.

1Source: Daiwa Institute of Research: No. 193 Japan economy forecast