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Financial Review Of AGT For The Period For 1st Quarter FY17/18

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Profit & Loss

Balance Sheet

Review of performance for the 1st quarter ended 30 June 2017

1Q FY17/18 vs 1Q FY16/17

Operating income for 1Q FY17/18 was JPY 14,574 million, 1.1% higher than 1Q FY16/17. The increase was mainly due to 4.1% increase in number of visitors as AGT offered lower pricing during non-peak days. The overall demand for golf had been steady.

Operating expenses for 1Q FY17/18 was JPY 11,372 million. The slight decrease was mainly due to decrease in depreciation expenses as a result of impairment loss recorded in prior year.

Operating profit for 1Q FY17/18 was JPY 3,202 million, which was 7.6% higher than 1Q FY16/17. Profit attributable to Unitholders was JPY 2,451 million, 10.4% higher than 1Q FY16/17.

Total distributable income available during the period was JPY 1,794 million, which was 17.6% higher than 1Q FY16/17. The increase in distributable cash flow is in line with the increase in the operating profit.

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

Japan's economy is expected to recover gradually due to underlying factors, such as growth in real wages, increase of export and capex investment. In addition, Bank of Japan Tankan's June 2017 survey results also reflect that. The effective job opening-to application ratio for regular employees has reached a historical high of 0.99 times recently. The trend of increasing share prices is also leading to an improvement in consumer spending sentiment. A report(1) regarding Japan's economy is of the view that the GDP growth of Japan's economy is expected to be 1.4% in 2017 and 1.1% in 2018.

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

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. AGT adopts profit maximisation strategy and promotes larger private group competition to achieve more stable revenue. Furthermore, AGT's golf courses have started to install new GPS navigation systems on the golf carts and introduced "U-40 Passport" which provides special additional points for under 40 passport holders, "L-Style" including ladies golf circles to encourage ladies players and junior programs known as "Accordia Kids" which supports younger generation. AGT has been making efforts to expand to a more varied player base to generate stable cash flow and distribution.

(1)July 2017 Japan Research Institute – monthly report of prospectus for Japan's economy