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Financial Review Of AGT For The Period For 2nd Quarter FY17/18

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Profit & Loss

Balance Sheet

Review of performance for the 2nd quarter and half year ended 30 September 2017.

2Q FY17/18 vs 2Q FY16/17

Operating income for 2Q FY17/18 was JPY 13,378 million. The performance of the golf course was better than 2Q FY16/17 despite fluctuation on monthly basis. The overall demand for golf has been steady.

Operating expenses for 2Q FY17/18 was JPY 10,925 million. The slight increase was mainly due to increase in selling, general and administrative expenses for third party booking site.

Operating profit for 2Q FY17/18 was JPY 2,453 million, which was 11.3% higher than 2Q FY16/17. This was contributed by higher revenue due to higher utilization rate. Profit attributable to Unitholders was JPY 1,947 million, 16.8% higher than 2Q FY16/17.

Total loss attributable to unitholders during the quarter was JPY 323 million, which was 165% lower than 2Q FY16/17. This is mainly due to payment of borrowing upfront fee and unusually large repayment of membership deposit.

1H FY17/18 vs 1H FY16/17

Operating income for 1H FY17/18 was JPY 27,952 million. The performance of the golf course was slightly better than previous year mainly due to the better weather.

Operating expenses for 1H FY17/18 was JPY 22,298 million. The slight increase was mainly due to increase in selling, general and administrative expenses for third party booking site.

Operating profit for 1H FY17/18 was JPY 5,654 million, which was almost 9.2% stronger than 1H FY15/16. Profit attributable to Unitholders was JPY4,397 million, 13.1% higher than 1H FY16/17.

Total distributable income available during 1H FY17/18 was JPY 1,471 million, which was 27.3% lower than 1H FY16/17. The decrease of distributable cash flow was due to payment of borrowing upfront fee and unusually large repayment of membership deposit.

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

Japanese economy is expected to continue its recovery trend with solid domestic and foreign demand. Driven by the demand, Japan's GDP increased by 2.5% from April 2017 to June 2017 as compared to the corresponding quarter in previous year. Real GDP growth rate for 2017 is expected to be 1.5%. Due to the global economy environment for year 2018, the actual growth rate for GDP is expected to recover at a slower pace despite continuous recovery in Japan. Currently, Japan's potential growth rate is roughly between 0.6% to 1%. GDP growth rate for 2018 is estimated to perform better at around 1%.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 optimisation 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.