Accordia Golf Trust / AGT

Transcription

1 COVERAGE INITIATED ON: Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an owner s manual to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg. Research Report by Shared Research Inc.

2 INDEX How to read a Shared Research report: This report begins with the trends and outlook section, which discusses the company s most recent earnings. First-time readers should start at the business section later in the report. Executive Summary Key financial data Recent updates Highlights Trends and outlook Business Overview Structure of AGT Earnings structure Operating revenue Portfolio Strengths and weaknesses Market and value chain Historical performance Income statement Balance sheet Statement of cash flows Other information History Distribution policy Corporate governance What is a business trust? Outline of Accordia Golf (AGT s sponsor) Profile /57

3 Executive Summary Singapore listed business trust investing in golf courses Accordia Golf Trust (AGT) is a business trust listed on the main board of the Singapore Stock Exchange. A business trust is an investment trust similar to a J-REIT. While a J-REIT focuses on real estate, a business trust invests in various businesses. AGT is listed on the Singapore Stock Exchange because it is structured as a business trust, a format not available in Japan. The sponsor of AGT is Accordia Golf Co., Ltd. (unlisted), one of the largest golf course operators in Japan. In August 2014, Accordia Golf announced a decision to focus on golf course management and business revitalization to boost ROA. Under its asset-light strategy, it transferred 89 of the 133 existing golf course assets it owned and managed to AGT. AGT invests in golf-related businesses, with a primary focus on Japan. While the company is listed on the Singapore Stock Exchange, as of May 2018 all of its assets (89 golf courses) were in Japan. Around 70% were in Japan s three major metropolitan areas. The company invests in golf courses via silent partnerships, receiving 99% of earnings as dividends. As a result, it has narrowed the scope of taxation to withholding tax of around 20%. While AGT s operating structure is complicated, its earnings structure is straightforward, and the company enjoys stable revenues. About 90% of operating revenue is from green fees, as well as from food and beverage sales. It is calculated by multiplying the number of golf course visitors by revenue per visitor. Most of operating expenses are fixed costs (such as personnel and management), with variable expenses (merchandise, materials, and management fees proportional to sales) accounting for about 20%. Distributable income for a business trust is based on cash flow and is roughly in line with net income. AGT aims to distribute over 90% of profits to unitholders. In FY03/18, distributions were SGD per unit (roughly JPY3.13). Trends and outlook In FY03/18, operating revenue was JPY51.5bn (-0.9% YoY), operating profit was JPY6.1bn (-7.6%), net income was JPY4.1bn (+0.5%), and distributable income was JPY3.4bn (-33.6%). Shared Research thinks that medium-term profit growth will come from new golf course acquisitions. The company plans to make an average annual purchase of five additional golf courses (it owned 89 courses as of May 2018). For the foreseeable future, the company intends to fund the purchase using loans. As of end FY03/18, its loan-to-value ratio (LTV; debt/appraisal value of portfolio) was 29.1%. In the medium term, AGT targets an LTV ratio of 40 50% with additional loans of around JPY40bn. Of the total 43 golf courses held by Accordia Golf (as of May 2017), 17 courses are subject to call options, and AGT can start negotiating the purchase with Accordia Golf at any time. Accordia Golf also planned to continue buying golf courses and selling them to AGT after improving their profitability. Strengths and weaknesses Shared Research thinks that AGT s strengths are a portfolio of golf courses mainly located in the three major metropolitan regions; high margins and stable revenues; and growth potential from new assets facilitated by support of Accordia Golf. Weaknesses: limited scope for growth from existing assets; low liquidity of golf course assets; and a complicated structure, making it difficult for fund providers to understand the business (see Strengths and weaknesses section for details). 03/57

4 Key financial data Income statement FY03/15 FY03/16 FY03/17 FY03/18 (JPYmn) Cons. Cons. Cons. Cons. Operating revenue 33,425 53,175 51,919 51,450 YoY % -0.9% Operating profit 4,063 8,828 6,572 6,071 YoY % -7.6% OPM 12.2% 16.6% 12.7% 11.8% Pre-tax profit 2,765 7,141 4,914 4,468 YoY % -9.1% Pre-tax margin 8.3% 13.4% 9.5% 8.7% Net income 2,648 6,662 4,113 4,132 YoY % 0.5% Net margin 7.9% 12.5% 7.9% 8.0% Per unit data (JPY) Number of units issued ('000) 1,099,122 1,099,122 1,099,122 1,099,122 EPU (JPY) DPU (JPY) Net asset value per unit (JPY) Balance sheet (JPYmn) Cash and cash equivalents 12,317 11,238 10,252 8,145 Total current assets 16,438 15,092 14,121 12,229 Tangible fixed assets 149, , , ,033 Intangible fixed assets 17,115 17,136 17,131 17,245 Total assets 184, , , ,952 Short-term debt ,830 28,847 Total current liabilities 21,318 21,834 37,602 50,547 Long-term debt 42,329 42,500 28,299 14,108 Total fixed liabilities 79,485 77,669 60,174 45,250 Total liabilities 100,803 99,503 97,776 95,797 Total equity 83,451 82,117 80,596 80,155 Total interest-bearing debt 43,266 43,443 43,629 43,455 Statement of cash flows (JPYmn) Cash flows from operating activities 4,174 10,336 8,590 8,364 Cash flows from investing activities -51,251-1,567-1,659-2,340 Cash flows from financing activities 59,332-10,259-7,478-8,131 Financial ratios ROA (pre-tax profit based) - 3.9% 2.7% 2.5% ROE - 8.1% 5.1% 5.2% Equity ratio 45.3% 45.2% 45.2% 45.6% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. 04/57

5 Recent updates Highlights On August 13, 2018, Accordia Golf Trust announced earnings results for Q1 FY03/19; see the results section for details. On July 4, 2018, Shared Research updated the report following interviews with the company. 05/57

6 Trends and outlook Quarterly trends and results Cumulative (JPYmn) Q1 FY03/18 Q2 Q3 Q4 Q1 FY03/19 Q2 Q3 Q4 Operating revenue 14,574 27,952 41,895 51,450 14,413 YoY 1.1% 2.0% -0.3% -0.9% -1.1% Operating expenses 11,372 22,298 32,896 45,379 11,327 YoY -0.6% 0.4% -0.7% 0.1% -0.4% % of operating revenue 78.0% 79.8% 78.5% 88.2% 78.6% Operating profit 3,202 5,654 8,999 6,071 3,086 YoY 7.6% 9.2% 1.2% -7.6% -3.6% OPM 22.0% 20.2% 21.5% 11.8% 21.4% Pre-tax profit 2,798 4,846 7,792 4,468 2,689 YoY 9.2% 11.5% 1.9% -9.1% -3.9% Pre-tax margin 19.2% 17.3% 18.6% 8.7% 18.7% Net income 2,499 4,428 7,022 4,132 2,420 YoY 9.9% 12.8% 1.7% 0.5% -3.2% Net margin 17.1% 15.8% 16.8% 8.0% 16.8% Quarterly (JPYmn) Q1 FY03/18 Q2 Q3 Q4 Q1 FY03/19 Q2 Q3 Q4 Operating revenue 14,574 13,378 13,943 9,555 14,413 YoY 1.1% 3.1% -4.6% -3.6% -1.1% Operating expenses 11,372 10,926 10,598 12,483 11,327 YoY -0.6% 1.4% -2.7% 2.0% -0.4% % of operating revenue 78.0% 81.7% 76.0% 130.6% 78.6% Operating profit 3,202 2,452 3,345-2,928 3,086 YoY 7.6% 11.3% -10.0% % OPM 22.0% 18.3% 24.0% % Pre-tax profit 2,798 2,048 2,946-3,324 2,689 YoY 9.2% 14.9% -10.8% % Pre-tax margin 19.2% 15.3% 21.1% % Net income 2,499 1,929 2,594-2,890 2,420 YoY 9.9% 16.7% -12.9% % Net margin 17.1% 14.4% 18.6% % Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Seasonality Golf is an outdoor sport subject to the weather. A golf course loses a profit opportunity if a previously scheduled round is canceled on the day of play due to rain or snow. The number of days a golf course can operate can be impacted by extended rain in the rainy season or unexpected snowfalls. Golf course earnings tend to be high in Q1 and Q3 due to mild spring and autumn weather and low in 2Q in 4Q due to harsh winter and summer weather. 06/57

7 Operating revenue breakdown Quarterly (cumulative) FY03/18 FY03/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Number of visitors ('000) 1,618 3,178 4,610 5,695 1,575 YoY 4.1% 3.5% 0.6% -1.0% -2.7% Operating revenue (JPYmn) 14,574 27,952 41,895 51,450 14,413 YoY 1.1% 2.0% -0.3% -0.9% -1.1% Golf course revenue (JPYmn) 9,948 18,693 28,128 34,234 9,788 YoY 2.1% 2.5% 0.1% -0.4% -1.6% % of operating revenue 68.3% 66.9% 67.1% 66.5% 67.9% Golf course revenue per visitor (JPY'000) Restaurant revenue (JPYmn) 3,469 6,792 10,132 12,499 3,494 YoY 1.5% 1.3% -0.8% -1.8% 0.7% % of operating revenue 23.8% 24.3% 24.2% 24.3% 24.2% Restaurant revenue per visitor (JPY'000) Membership revenue (JPYmn) 1,095 2,152 3,181 4,127 1,006 YoY -5.9% -5.9% -6.2% -6.9% -8.1% % of operating revenue 7.5% 7.7% 7.6% 8.0% 7.0% Quarterly FY03/18 FY03/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Number of visitors ('000) 1,618 1,560 1,432 1,085 1,575 YoY 4.1% 3.0% -5.3% -7.3% -2.7% Operating revenue (JPYmn) 14,574 13,378 13,943 9,555 14,413 YoY 1.1% 3.1% -4.6% -3.6% -1.1% Golf course revenue (JPYmn) 9,948 8,745 9,435 6,106 9,788 YoY 2.1% 2.9% -4.4% -2.5% -1.6% % of operating revenue 68.3% 65.4% 67.7% 63.9% 67.9% Golf course revenue per visitor (JPY'000) Restaurant revenue (JPYmn) 3,469 3,323 3,340 2,367 3,494 YoY 1.5% 1.0% -4.8% -5.7% 0.7% % of operating revenue 23.8% 24.8% 24.0% 24.8% 24.2% Restaurant revenue per visitor (JPY'000) Membership revenue (JPYmn) 1,095 1,057 1, ,006 YoY -5.9% -5.8% -7.0% -9.2% -8.1% % of operating revenue 7.5% 7.9% 7.4% 9.9% 7.0% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. 07/57

8 Operating expenses Cumulative (JPYmn) Q1 FY03/18 Q2 Q3 Q4 Q1 FY03/19 Q2 Q3 Q4 Operating expenses 11,372 22,298 32,896 45,379 11,327 YoY -0.6% 0.4% -0.7% 0.1% -0.4% Merchandise and material costs 996 1,943 2,900 3, YoY 1.8% 0.4% -2.4% -3.9% -2.8% % of operating expenses 8.8% 8.7% 8.8% 7.8% 8.5% % of restaurant revenue 28.7% 28.6% 28.6% 28.5% 27.7% Personnel and outsourcing expenses 4,314 8,458 12,498 16,367 4,357 YoY -0.9% 0.6% -0.7% 0.0% 1.0% % of operating expenses 37.9% 37.9% 38.0% 36.1% 38.5% Golf course management fee 1,585 3,051 4,585 5,823 1,548 YoY 0.6% 0.3% -1.0% -1.6% -2.3% % of operating expenses 13.9% 13.7% 13.9% 12.8% 13.7% Depreciation and amortization 753 1,521 2,314 3, YoY -5.8% -5.3% -4.6% -2.8% 2.8% % of operating expenses 6.6% 6.8% 7.0% 7.0% 6.8% Utility expenses 536 1,124 1,650 2, YoY 6.3% 3.9% 4.3% 3.0% -8.2% % of operating expenses 4.7% 5.0% 5.0% 4.8% 4.3% SG&A expenses 1,049 2,088 3,124 5,242 1,009 YoY -3.0% 5.0% 4.2% 0.4% -3.8% % of operating expenses 9.2% 9.4% 9.5% 11.6% 8.9% Other operating expenses 2,139 4,113 5,825 9,037 2,179 YoY -0.5% -1.1% -1.6% 3.2% 1.9% % of operating expenses 18.8% 18.4% 17.7% 19.9% 19.2% Quarterly (JPYmn) Q1 FY03/18 Q2 Q3 Q4 Q1 FY03/19 Q2 Q3 Q4 Operating expenses 11,372 10,926 10,598 12,483 11,327 YoY -0.6% 1.4% -2.7% 2.0% -0.4% Merchandise and material costs YoY 1.8% -1.1% -7.6% -9.8% -2.8% % of operating expenses 8.8% 8.7% 9.0% 5.3% 8.5% % of restaurant revenue 28.7% 28.5% 28.7% 27.9% 27.7% Personnel and outsourcing expenses 4,314 4,144 4,040 3,869 4,357 YoY -0.9% 2.3% -3.4% 2.2% 1.0% % of operating expenses 37.9% 37.9% 38.1% 31.0% 38.5% Golf course management fee 1,585 1,466 1,534 1,238 1,548 YoY 0.6% 0.1% -3.5% -3.6% -2.3% % of operating expenses 13.9% 13.4% 14.5% 9.9% 13.7% Depreciation and amortization YoY -5.8% -4.8% -3.2% 2.4% 2.8% % of operating expenses 6.6% 7.0% 7.5% 6.8% 6.8% Utility expenses YoY 6.3% 1.7% 5.2% -0.7% -8.2% % of operating expenses 4.7% 5.4% 5.0% 4.3% 4.3% SG&A expenses 1,049 1,039 1,036 2,118 1,009 YoY -3.0% 14.6% 2.8% -4.7% -3.8% % of operating expenses 9.2% 9.5% 9.8% 17.0% 8.9% Other operating expenses 2,139 1,974 1,712 3,212 2,179 YoY -0.5% -1.8% -2.7% 13.1% 1.9% % of operating expenses 18.8% 18.1% 16.2% 25.7% 19.2% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. 08/57

9 Distributable income Cumulative FY03/18 FY03/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 EBITDA 3,954 7,174 11,312 10,958 3,859 YoY 4.8% 5.8% 0.0% -3.3% -2.4% Net income 2,499 4,428 7,022 4,132 2,420 Depreciation and amortization 753 1,521 2,314 3, Interest and other financial expenses ,207 1, Income taxes Adjustments -2,160-5,703-8,264-7,522-2,194 Interest and other financial expenses paid Change in working capital ,809-3, Income tax paid ,290-1, Others ,558-2, ,278 Total distributable income 1,794 1,471 3,048 3,436 1,665 Quarterly FY03/18 FY03/19 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 EBITDA 3,954 3,220 4, ,859 YoY 4.8% 7.0% -8.7% % Net income 2,499 1,929 2,594-2,890 2,420 Depreciation and amortization Interest and other financial expenses Income taxes Adjustments -2,160-3,543-2, ,194 Interest and other financial expenses paid Change in working capital ,380-1,755 3, Income tax paid Others , ,883-1,278 Total distributable income 1, , ,665 Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Balance sheet (JPYmn) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Assets Cash and cash equivalents 9,140 7,932 7,369 8,145 8,297 Trade and other receivables 2,113 2,231 2,101 2,596 2,313 Other current assets 1,304 1,214 1,397 1,488 1,363 Total current assets 12,557 11,377 10,867 12,229 11,973 Total tangible fixed assets 146, , , , ,350 Total intangible fixed assets 17,135 17,161 17,207 17,245 17,237 Other fixed assets Total fixed assets 164, , , , ,997 Total assets 177, , , , ,970 Liabilities Loans from financial institutions 14,900 28,740 28,867 28,847 28,977 Trade and other payables 5,374 4,447 4,386 5,441 4,852 Membership deposits 11,058 10,705 10,321 10,521 10,366 Other current assets 5,236 3,951 2,813 5,738 5,353 Total Current Liabilities 36,568 47,843 46,387 50,547 49,548 Loans from financial institutions 28,389 14,102 14,141 14,108 14,148 Finance lease obligations 2,701 2,715 2,894 3,044 3,628 Membership deposits Deferred tax liabilities 28,019 28,112 28,050 27,427 27,377 Other fixed liabilities Total fixed liabilities 60,640 46,358 46,519 45,250 45,843 Total liabilities 97,208 94,201 92,906 80,155 95,391 Equity FY03/18 Unitholders' fund 81,086 81,086 81,086 81,086 81,086 Retained earnings -1, ,670-1, Net assets attributable to unitholders of AGT 79,545 81,558 82,624 79,802 80,197 Total equity 79,909 81,905 82,991 80,155 80,579 Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. FY03/19 09/57

10 Q1 FY03/19 results Performance was slightly weaker given unfavorable weather conditions in May and the Osaka earthquake in June. Operating revenue was JPY14.4bn (-1.1% YoY), operating profit JPY3.1bn (-3.6%), net income JPY2.4bn (-3.2%), and distributable income JPY1.7bn (-7.2%). Distributions were SGD per unit (SGD in Q1 FY03/18). Operating revenue Golf course revenue was JPY9.8bn (-1.6% YoY), and restaurant and beverage sales JPY3.5bn (+0.7%). Revenue from annual membership fees amounted to JPY1.0bn (-8.1%). The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, were as follows. Number of course visitors The number of course visitors totaled 1.6mn, indicating a 2.7% decline YoY. Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY6,200 (+1.1% YoY) at golf courses and JPY2,200 (+3.5%) at restaurants. According to AGT s data, revenue per player averaged JPY8,563 (+1.6%), broken down to JPY5,903 (+1.1%) in green fees and JPY2,261 (+3.2%) from restaurant and shop spending. Revenue per player on weekdays was JPY7,014 (+0.5%) with JPY4,437 (-0.1%) in green fees and JPY2,197 (+2.7%) in restaurant and shop spending. Weekend per player revenue was JPY10,904 (+2.4%) with JPY8,122 (+1.9%) in green fees and JPY2,357 (+3.9%) in restaurant and shop spending. Operating expenses Operating expenses were JPY11.3bn (-0.4% YoY). Golf course operating expenses were JPY9.5bn (-0.8%). SG&A expenses came to JPY1.9bn (+1.5%). Distributable income Distributable income was JPY1.7bn (-7.2% YoY). Distributable income dropped YoY due to a relatively lower net income versus the same period a year earlier, and as the company set aside a provision of upfront fee mainly for the purpose of refinancing. Distributable profits were SGD per unit (SGD in Q1 FY03/17). AGT makes distributions to unit holders in Singapore dollars on a semiannual basis. For details on previous quarterly and annual results, please refer to the Historical performance section. 10/57

11 Full-year company forecasts FY03/19 forecasts FY03/16 FY03/17 FY03/18 FY03/19 (JPYmn) Act. Act. Act. SR Est. YoY Number of visitors ('000) 5,807 5,753 5,695 5, % Operating revenue 53,175 51,919 51,450 51, % Golf course revenue 34,812 34,373 34,234 34, % Golf course revenue per visitor (JPY'000) Restaurant revenue 12,914 12,725 12,499 12, % Restaurant revenue per visitor (JPY'000) Membership revenue 4,811 4,435 4,127 3, % Other operating revenue % Operating expenses 44,347 45,347 45,379 45, % Merchandise and materials 3,745 3,704 3,560 3, % % of restaurant revenue 29.0% 29.1% 28.5% 28.5% Personnel expenses 16,325 16,373 16,367 16, % Management fees 6,048 5,915 5,823 5, % Maintenance expenses 2,570 2,497 2,558 2, % Depreciation and amortization 3,415 3,259 3,168 3, % Utilities expenses 2,315 2,118 2,182 2, % Operating lease payments 2,054 2,022 1,995 1, % SG&A expenses 4,914 5,219 5,242 5, % Other operating expenses 2,961 4,240 4,484 4, % Operating profit 8,828 6,572 6,071 6, % Interest and other financial expenses 1,687 1,658 1,603 1, % Pretax profit 7,141 4,914 4,468 4, % Income taxes % Implied tax rate 6.7% 16.3% 7.5% 7.5% - Net income 6,662 4,113 4,132 4, % Distributable income 6,041 5,178 3,436 4, % DPU (JPY) % Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. FY03/19 forecasts AGT does not publish earnings forecasts. Based on conversations with the company, for FY03/19, Shared Research expects operating revenue of roughly JPY51.8bn (-1% YoY), operating profit of roughly JPY6.5bn (+7%), net income of around JPY4.5bn (+9%), distributable income of JPY4.6bn (-35%), and distributions of JPY4.21 per unit. AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. Assumptions: number of golf courses owned remains at 89; number of golf course visitors, 5.8mn (+1.0% YoY); golf revenue per visitor, JPY6,070 (+1.0%); and restaurant revenue per visitor, JPY2,190 (unchanged). Number of golf course visitors may fall 1.0% YoY Shared Research estimates 5.8mn golf course visitors in FY03/19 (+1.0% YoY). FY03/18 saw the number of visitors fall 1.0% from the previous fiscal year due to factors such as bad weather. However, golf course visitor reservations at the start of the month (simple average, excluding weather-related cancellations) increased 5.8% YoY. Shared Research believes the number of visitors may have increased YoY if there had not been any impact from bad weather. Our outlook for 1.0% YoY growth in FY03/19 corresponds to the average growth in golf course visitors over the last three years. We expect an increase in golf course visitors driven by structural factors such as an extended healthy life expectancy and an increase in senior golfers aged 60 plus who tend to play more frequently, and an economic recovery driven by the Abenomics policies. In addition, we expect impact from typhoons in October 2017 and from heavy rain and snow in January March 2018 to ease in FY03/19. 11/57

12 Golf course revenue per player to rise slightly Based on conversations with the company, we expect golf course revenue per player of JPY6,070 (+1.0% YoY). The company does not release revenue per customer, but the FY03/18 average was JPY6,010 (up 0.6% from FY03/17), derived by dividing golf course revenue by the number of visitors. Golf course revenue been in a long-term downtrend since the 1990s. However, the decline eased from around 2017, when signs of renewed growth emerged. Based on data from the Survey of Selected Service Industries conducted by the Ministry of Economy, Trade and Industry, Shared Research estimates that user fees in 2017 (excluding caddie fees and food and drink fees) averaged JPY6,370 (-0.4% YoY): JPY5,602 on weekdays (-0.5%) and JPY7,382 on weekends and holidays (+0.7%). Green fees (which account for 60 70% of the company s golf course revenue) have risen from the previous year for weekends, and increased on average and for weekdays since Q4 FY03/18. Shared Research believes the increase in the number of golf course visitors noted above was a key factor that helped ease the long-term downtrend in green fees, paving the way for growth. We believe green fees will continue to recover in FY03/19. Restaurant revenue per visitor to remain unchanged We expect restaurant revenue per visitor to remain almost unchanged at JPY2,190. Revenue has been stable for some time, and we do not expect any changes for FY03/19. Membership revenue to drop 7% YoY We expect revenue from annual membership fees to continue declining in tandem with a drop in the number of members. Based on past trends, we look for a 7% drop in FY03/19. Operating expenses We expect operating expenses of about JPY45.3bn (-0.3% YoY). We do not expect significant changes in operating expenses, but anticipate a decline in other operating expenses. Impairment losses, which are included under other operating expenses, totaled JPY184mn in FY03/16, JPY1.5bn in FY03/17, and JPY1.7bn in FY03/18. These losses arise from a reduction of the amounts recorded on the balance sheet owing to declines in golf course valuations or earnings. In FY03/19, we believe the pace of decline in golf course valuations will ease thanks to an improvement in golf course profitability driven by an increase in the number of golf course visitors and golf course revenue per visitor. Distributable income We expect distributable income of about JPY4.6bn (+35.0% YoY) and distributions of about JPY4.21 per unit. In FY03/18, distributable income came in JPY696mn below net income. This was mainly attributable to JPY1.9bn in refunds of membership deposits for which the lock-in period had ended, and JPY383mn in costs to extend a term loan repayment deadline (Term Loan A; principal: JPY15bn, original repayment deadline: August 2017 extended by a year to August 2018) JPY0mn in FY03/17). Membership deposits for which the lock-in period falls within the fiscal year are significantly lower compared to FY03/18; as such we expect a YoY decline in deposit refunds during FY03/19. We also believe costs associated with refinancing loans will decline as the company negotiates relaxed terms. 12/57

13 Medium-term outlook AGT s growth drivers are improving the profitability of existing golf courses (internal growth) and acquiring more assets (external growth). Shared Research believes that internal growth will be limited in the medium-term and that AGT must depend on external factors for further expansion. Internal growth opportunities (raising the profitability of existing golf courses) Improving the profitability of AGT s existing golf courses (internal growth) entails boosting utilization rates, attracting more visitors, and reducing expenses. When it buys golf courses from Accordia Golf, AGT obtains access to Accordia Golf s network, customer base, and strategy. Accordia Golf provides golf course management and other services AGT s golf courses under management contracts. According to AGT, Accordia Golf adds value to golf courses it buys and improves their profitability. It increases the number of visitors by offering competitive fees. It also cuts costs by promoting self-service and automation, reducing personnel expenses by outsourcing, and centralizing purchasing to cut procurement costs. AGT s golf courses have already been turned around by Accordia Golf and are generating steady cash flows. As such, AGT sees limited scope for growth from existing golf courses. External growth opportunities (adding more golf courses) AGT plans to expand operations by adding more golf courses (external growth) via loans. In particular, AGT plans to buy about five additional golf courses per year on average (as of May 2018, it owned 89 courses). The company s sponsor, Accordia Golf, has several golf course acquisition candidates to be sold to AGT. In the medium-term, plans to purchase of around 25 golf courses using more loans As for the guideline of loans, AGT targets an LTV (loan-to-valuation; debt/appraisal value of portfolio) ratio in the medium term at 40 50%. As of end FY03/18 its LTV ratio was 29.1%. Boosting this to 40% demonstrates scope to increase borrowings by around JPY40bn. According to AGT, one golf course costs around JPY1.5bn, so the target LTV ratio implies the purchase of around 25 golf courses. Golf courses to be obtained from sponsor Accordia Golf AGT (via Accordia Golf Asset LLC) has right of first refusal over golf courses that Accordia Golf buys or sells. Accordia Golf has given an undertaking (i.e., is obligated) to offer golf courses it already owns and future asset purchases to AGT, which also has call options over certain golf courses (for discussion of right of first refusal, undertaking, and call options, see the Business section). Pipeline as of May 2017 Of the total 43 golf courses held by Accordia Golf (as of May 2017), 17 courses are subject to call options, and AGT can start negotiating the purchase with Accordia Golf at any time. The Accordia brand targets casual golfers of various ages. Accordia Golf aims to distinguish its golf courses from competition through course maintenance and reasonable green fees and food and drink prices. Accordia Golf adopted a multi-brand strategy in FY03/14. In addition to the Accordia brand, it has a premium brand, Trophia Golf, as well as a low-cost brand, Evergolf. Together with new golf courses Accordia Golf may acquire in future, existing golf courses should offer an external growth path for AGT. 13/57

14 Accordia Golf s acquisition and asset-light strategies As of the end of December 2017 there were 2,272 golf courses in Japan, and 458 (20.2%) were operated by 10 major golf course companies. Golf courses not operated by major golf companies are less competitive, and due to legally enforced or voluntary liquidation as a result of financial difficulties, they are potential acquisition candidates. Other candidates are golf courses owned by major corporations that do not specialize in golf. Accordia Golf bought 59 such golf courses during FY03/06 FY03/13 and plans to continue. After turning the purchased golf courses around, it will continue selling them to AGT as part of its asset-light business strategy. Since implementing the asset-light strategy in August 2014, Accordia Golf continued to advocate its cyclical business model but AGT had faced difficulties because it required substantial time to arrange financing with relevant parties, and had not been able to come up with the funds to acquire Accordia Golf s golf courses. Accordia Golf also utilized cash flows for shareholder returns, which meant it could not invest in the acquisition and refurbishment of new courses and driving ranges. Against this backdrop, a tender offer for the shares of Accordia Golf was conducted by K.K. MBKP Resort between November 2016 and January Consequently, Accordia Golf was delisted from the Tokyo Stock Exchange in March According to MBKP Resort s plan, Accordia Golf s cash flows were to be redirected from dividend payouts to the acquisition of new golf courses and driving ranges. 14/57

15 Business Overview Accordia Golf Trust: business trust listed in Singapore Accordia Golf Trust (AGT) is a business trust that invests in Japanese golf courses, and is listed on the main board of the Singapore Stock Exchange. As of May 2018, AGT owned 89 golf courses and paid distributions to investors from the cash generated by these golf course businesses. A business trust is an investment trust similar to a J-REIT. While a J-REIT focuses on real estate, a business trust invests in various businesses. While REITs invest in and own assets, a business trust has no restrictions on investments, sources of income, or loans. AGT is organized as a business trust to operate more flexibly than a J- REIT. Previously, the company s sponsor, Accordia Golf, had to sign a land-leasing contract every time it sold assets, but now the entire operation is transferred under the business trust arrangement. J-REITs can avoid corporate tax payments if they meet certain conditions, such as distributing more than 90% of their income. AGT invests in golf courses via silent partnerships, receiving 99% of earnings as dividends. As a result, it has narrowed the scope of taxation to withholding tax of around 20%. For Japanese unit holders, AGT is an overseas investment trust and a tax rate of 20% applies to distributions and capital gains. Bought 89 golf courses from Accordia Golf AGT s sponsor is Accordia Golf (delisted from TSE in March 2017), Japan s largest golf course operator. A sponsor is a company that owns a stake in an asset management firm and plays a leading role in the formation of a business trust. The sponsor s support is indispensable for a business trust to grow and develop. In August 2014, Accordia Golf announced a decision to focus on golf course management and corporate turnaround to boost its ROA. As a result, it transferred 89 of the 133 golf courses it owned and managed to AGT. Accordia Golf transferred shares in subsidiaries that owned 90 (excluding the Otsu Country Club Higashi and Nishi courses) of its 133 golf courses as a contribution in kind to Accordia Golf Asset LLC and acquired shares in the silent partnership that invested in Accordia Golf Asset LLC. Accordia Golf transferred its silent partnership stake in Accordia Golf Asset LLC to AGT for roughly JPY113.2bn. Accordia Golf used the proceeds to retire debt, buy back shares, and shift to the new business structure focusing on golf course management and corporate turnaround. In August 2014, AGT acquired shares in the silent partnership that invested in Accordia Golf Asset LLC. The purchase was financed by JPY62.5bn from its listing on the Singapore Stock Exchange, an investment of JPY25.4bn from Accordia Golf, and JPY45.0bn in loans from financial institutions. Forty-three of the golf courses were not included in the asset transfer when AGT listed its shares. These included courses not under the Accordia brand or without an established business model; courses being revamped by Accordia Golf, those in the midst of business changes, or those being rebranded; courses with complicated issues regarding land rights that Accordia Golf had to resolve, and those with large buildings that required major repairs. Investment strategy: buy golf courses The company s investment strategy focuses on businesses with golf courses, driving ranges, and related assets that generate stable income, primarily in Japan. Although AGT is listed on the Singapore Stock Exchange, as of May 2018 its 89 golf courses were located in Japan (70% in the three major metropolitan areas). 15/57

16 AGT purchases golf courses that have been revamped by its sponsor, Accordia Golf. This means there is limited scope for AGT to improve their profits, but also limited risk of profits worsening. The assets owned by AGT produce stable earnings, and growth comes mainly from new assets. Complicated operating structure, but simple earnings structure and stable profits The company s operating structure is complicated, but its earnings structure is straightforward and profits are stable. About 90% of AGT s operating revenue comes from green fees and food and beverage sales. Revenue is calculated by multiplying the number of persons visiting its golf courses by revenue per visitor. In FY03/18, there were 5.7mn visitors (-1.0% YoY), with revenue per visitor (sum of golf course revenue and restaurant and beverage sales) of JPY8,200 (+0.2%) Despite Japan s shrinking population in the long-term, the number of golf course visitors is stable due to an increasing number of rounds per person per year. Spend per customer is also on a long-term downtrend, but the rate of decline has slowed since As of May 2018, green fees were bottoming out. Operating expenses of AGT are primarily fixed (such as personnel and management). Variable expenses (merchandise, materials, and management fees proportional to sales) account for roughly 20% of operating expenses. Distributable income for the business trust is based on cash flow. AGT has a policy of distributing over 90% of distributable income to unitholders. The amount is roughly in line with net income. In FY03/18, distributable income came to JPY3.4bn (-33.6% YoY) against net income of JPY4.1bn (+0.5%), with distributions of SGD per unit (-36.1%). Distributions based on cash flow from gold course business Trust distributions come from cash flow generated by the golf course businesses operated by Accordia Golf Course Asset LLC. Distributable income comes from a surplus of consolidated net income for the relevant period. 16/57

17 Structure of AGT Trust outline Source: Shared Research based on company data The following companies are involved in AGT s operations: Accordia Golf Asset LLC (golf course owner), Accordia Golf Trust Management (trustee-manager), Accordia Golf (sponsor, golf course operation and management), and Daiwa Real Estate Asset Management (asset management). Roles of each are outlined below. Accordia Golf Trust (business trust) Accordia Golf Trust is a business trust, and uses funds collected by issuing units (beneficiary certificates) to investors to acquire golf course businesses. It makes distributions to investors using the cash flow generated by these businesses. As of May 2018, the company s sponsor, Accordia Golf, owned 28.85% of units outstanding. AGT uses a silent partnership to invest in 89 golf courses via Accordia Golf Asset LLC. It receives distributions from profits generated by Accordia Golf Asset LLC s golf course management business. Accordia Golf Trust Management (trustee-manager) Accordia Golf Trust Management Pte. Ltd. is the trustee-manager for AGT. The trustee-manager has two roles: owning trust assets on behalf of unitholders, and managing and operating the business trust. Under the Business Trusts Act, business trust management and operation must be carried out by a trustee-manager. Accordia Golf Trust Management is owned by Accordia Golf (49%) and TM Partner (51%; subsidiary of Daiwa Securities Group). AGT pays fees to the trustee-manager. This comprises base fees, performance fees, and commissions when an investment asset is bought or sold. In FY03/18, AGT paid management fees of JPY254mn, 0.4% higher than the previous fiscal year (0.6% of operating expenses in FY03/18). Accordia Golf Asset LLC (golf course owner) Accordia Golf Asset LLC owns golf courses. In August 2014 it obtained 89 golf courses in Japan through contribution in kind from Accordia Golf. As of May 2018, it owned these assets and operated AGT S golf course business. AGT has a silent partnership (it owns 98.99% of the shares) that invests in Accordia Golf Asset LLC, making it a consolidated subsidiary of AGT. 17/57

18 Based on a silent partnership agreement between AGT and Accordia Golf Asset LLC, 99.0% of the distributable income derived from Accordia Golf Asset LLC s golf course business operations is distributed to AGT. These distributions are subject to withholding tax at a rate of 20.42%. However, foreign tax credits apply to these taxes, and because the corporate tax rate for AGT in Singapore is lower than Japan s withholding tax rate, AGT is not subject to corporate taxes. Accordia Golf (sponsor, golf course operation and management) Accordia Golf, AGT s sponsor, operates and manages golf courses. Supports AGT s profit margin improvement as a sponsor Accordia Golf has a sponsor support agreement with the trustee-manager, Accordia Golf Trust Management. Under the agreement, Accordia Golf helps improve profitability of existing golf courses (internal growth) and provides support to acquire more golf courses (external growth). Support for internal growth (raising the profitability of existing golf courses) Accordia Golf operates the 89 golf courses owned by Accordia Golf Asset LLC under a management outsourcing contract. It provides stable management that enhances profitability of the golf courses. Under these arrangements, the golf courses AGT purchases from Accordia Golf have access to Accordia Golf s networks, customer bases, and strategy. Accordia Golf helps acquired golf courses improve profitability. It offers playing formats and fees tailored to various playing formats to attract more customers and reduce costs. Of the 7.2mn golfers in Japan as of March 2017, 4.8mn (62.0%) held Accordia point cards (for discounts, etc.) provided by Accordia Golf. (See Outline of Accordia Golf for details.) Support for external growth (adding more golf courses) AGT (via Accordia Golf Asset LLC) has the right of first refusal over golf courses that Accordia Golf buys or sells. Also, Accordia Golf has given an undertaking (obligations) to offer AGT future golf courses it buys as part of an undertaking, and AGT has call options over some of Accordia Golf s existing golf courses. As of May 2018, of the 43 golf courses Accordia Golf held, AGT had call options over 17 courses, so it could start negotiations with Accordia Golf at any time. Right of first refusal: Until the management contract expires, Accordia Golf Asset LLC has preemptive rights to purchase relevant assets when Accordia Golf intends to transact with a third party to purchase or dispose of such assets. Relevant assets refer to golf course businesses and others that generate continuous and stable cash flows that fit the company s investment mandate. Undertaking: Accordia Golf has given an undertaking to offer golf courses and similar assets to the trustee-manager within five years of the acquisition date. AGT had not purchased any additional golf courses as of May 2018, besides the initial 89 from its establishment in August However, AGT intends to buy more golf courses, and Accordia Golf aims to continue its asset-light strategy. Assuming that Accordia Golf succeeds in establishing a cyclical business model (see Outline of Accordia Golf section), AGT can expect to obtain a continuous stream of new golf courses. Between November 2016 and January 2017, a tender offer for the shares of Accordia Golf was conducted by K.K. MBKP Resort. Consequently, Accordia Golf was delisted from the Tokyo Stock Exchange in March According to MBKP Resort s plan, Accordia Golf s cash flows were to be redirected from dividend payouts to the acquisition of new golf courses and driving ranges. 18/57

19 Personnel, administrative, and golf course managers dispatched to Accordia Golf Asset LLC Accordia Golf dispatches HR and administrative managers, and golf course managers to Accordia Golf Asset LLC. Accordia Golf Asset LLC is responsible for the salaries and bonuses of the dispatched employees. AGT pays management fees and labor costs for workers loaned to Accordia Golf Accordia Golf Asset LLC pays management fees to Accordia Golf. These comprise base fees, incentive fees, member sales incentive fees, and fees to use the centralized purchasing system. In FY03/18 management fees were JPY5.8bn, 1.6% lower than the previous fiscal year (12.8% of operating expenses in FY03/17). In FY03/18 labor costs for dispatch workers were JPY1.7bn (+0.2% YoY). Daiwa Real Estate Asset Management (asset manager) Daiwa Real Estate Asset Management, as the asset manager, offers advisory services regarding golf course facility purchases and sales to Accordia Golf Asset LLC. Daiwa Real Estate Asset Management is a real estate management company wholly owned by Daiwa Securities Group, which offers diversified financial services. Accordia Golf Asset LLC pays asset management fees to the asset manager. These fees comprise ongoing fees and fees when investment assets are bought or sold. In FY03/18 management fees were JPY99mn (0.2% of operating expenses in FY03/18). 19/57

20 Earnings structure Operating revenue The main sources of operating revenue for AGT are golf courses (66.5% of operating revenue in FY03/18), restaurants (24.3%), memberships (8.0%), and other (1.1%). Operating revenue (JPYmn) FY03/15 FY03/16 FY03/17 FY03/18 Number of visitors ('000) 3,619 5,807 5,753 5,695 YoY % -1.0% Operating revenue 33,425 53,175 51,919 51,450 YoY % -0.9% Golf course revenue 21,786 34,812 34,373 34,234 YoY % -0.4% % of operating revenue 65.2% 65.5% 66.2% 66.5% Golf course revenue per visitor (JPY'000) Restaurant revenue 8,032 12,914 12,725 12,499 YoY % -1.8% % of operating revenue 24.0% 24.3% 24.5% 24.3% Restaurant revenue per visitor (JPY'000) Membership revenue 3,345 4,811 4,435 4,127 YoY % -6.9% % of operating revenue 10.0% 9.0% 8.5% 8.0% Other operating revenue YoY % 52.8% % of operating revenue 0.8% 1.2% 0.7% 1.1% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: The company listed in August Figures for FY03/15 are actual results for an eight-month accounting period. Golf course revenue (66.5% of FY03/18 operating revenue) In FY03/18, golf course revenue accounted for 66.5% of operating revenue. This comprises green fees (including cart fees), caddie fees, accommodation charges, driving range charges, and golf equipment rentals. This revenue is a function of the number of visitors and golf course revenue per visitor. Golf course revenue FY03/15 FY03/16 FY03/17 FY03/18 Number of visitors ('000) 3,619 5,807 5,753 5,695 YoY % -1.0% Golf course revenue per visitor (JPY'000) YoY % 0.6% Golf course revenue (JPYmn) 21,786 34,812 34,373 34,234 YoY % -0.4% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: The company listed in August Figures for FY03/15 are actual results for an eight-month accounting period. Number of golf course visitors The number of golf course visitors depends on several factors including the number of golfers in the area where the golf course is situated, economic conditions, employment rate and disposable incomes, seasonal factors, and the weather. According to AGT, however, the fluctuation in salaries is a lagging economic indicator, and because the golfing demographic tends to have sufficient finances, the number of visitors is not highly sensitive to the economy. The number of golfers in Japan has been declining steadily since the 1990s. On the other hand, the number of golf course visitors fell in 2011 due to the Great East Japan earthquake but recovered in 2012, and has remained stable. Shared Research thinks that this is because the proportion of golfers in their 50s and older (who play more frequently) is rising, as is the number of rounds played per person per year (see section on Market and value chain). Golf course revenue per visitor Green fees (including cart fees) differ by golf course. They are influenced by overall competitiveness including the supply and demand for golf courses, location, course conditions, accessibility, customer service, crowding, ease of play, and facilities. AGT s sponsor, Accordia Golf, has a strategy of setting competitive green fees by analyzing past demand trends. 20/57

21 Green fees have been in a downtrend since the late 1990s, but since the late 2000s, the decline has slowed. From the annual average decline was 4.6%, but this slowed to 0.7% from Restaurant revenue (24.3% of FY03/18 operating revenue) Restaurant revenue is comprised of sales from golf course restaurants, hotel meal charges, revenue from receptions at the hotels, and golf course shop sales. Revenue is calculated by multiplying the number of visitors by restaurant revenue per visitor. The latter is relatively stable at JPY2,200-2,300. Restaurant revenue FY03/15 FY03/16 FY03/17 FY03/18 Number of visitors ('000) 3,619 5,807 5,753 5,695 YoY % -1.0% Restaurant revenue per visitor (JPY'000) YoY % -0.8% Restaurant revenue (JPYmn) 8,032 12,914 12,725 12,499 YoY % -1.8% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: The company listed in August Figures for FY03/15 are actual results for an eight-month accounting period. Membership revenue (8.0% of FY03/18 operating revenue) Membership revenue comprises annual fees paid by members, name transfer fees, and initial fees. Annual fees account for around 80% of membership revenue. Total annual fees are a function of the number of members and annual membership charges. Membership revenue FY03/15 FY03/16 FY03/17 FY03/18 Number of total members ('000) YoY % - - Total membership revenue (JPYmn) 3,345 4,811 4,435 4,127 YoY % -6.9% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: The company listed in August Figures for FY03/15 are actual results for an eight-month accounting period. Number of members The number of members for AGT declined from 162,846 in March 2011 to 147,588 in March The number declined partly because some members were forced to cancel their memberships for failing to pay annual fees. Membership offers participation in competitions and other events exclusive to members, discounted lessons, official handicaps, special discounted fees, and priority when booking rounds. According to AGT, members play more frequently and bring guests, so are a source of steady income, although more members means lower green fees. AGT and the manager Accordia Golf are targeting the middle income demographic, using membership point cards to lock in this customer base. Annual fees Annual fees differ by the golf course. Joining fees for the Daiatsugi Country Club Main Course and Sakura Course (Atsugi City, Kanagawa Prefecture) are JPY600,000 and annual fees are JPY60,000. For Osato Golf Club the joining fees are JPY166,000 and annual fees are JPY18,000. Other revenue (1.1% of FY03/18 operating revenue) Other operating revenue is primarily rental payments from Accordia Golf subsidiaries that operate pro shops, and compensation for taxes related to golf course use. Operating expenses Operating expenses primarily comprise product procurement and materials (7.8% in FY03/18), personnel and outsourcing (36.1%), management fees (12.8%), and SG&A expenses (11.6%). Variable operating expenses are product procurement and materials, base management fees for golf courses, and incentive fees, together representing 14% of operating expenses in 21/57

22 FY03/18. Shared Research estimates that after taking into account other variable costs, total variable expenses comprise roughly 20% of operating expenses. Most other expenses are fixed. Breakdown of operating expenses (JPYmn) FY03/15 FY03/16 FY03/17 FY03/18 Operating expenses 29,362 44,347 45,347 45,379 YoY % 0.1% Merchandise and materials 2,302 3,745 3,704 3,560 YoY % -3.9% % of operating expenses 7.8% 8.4% 8.2% 7.8% % of restaurant revenue 28.7% 29.0% 29.1% 28.5% Personnel and outsourcing 10,509 16,325 16,373 16,367 YoY % 0.0% % of operating expenses 35.8% 36.8% 36.1% 36.1% Golf course management fees 3,905 6,048 5,915 5,823 YoY % -1.6% % of operating expenses 13.3% 13.6% 13.0% 12.8% Golf course maintenance and repair expenses 1,440 2,570 2,497 2,558 YoY % 2.4% Depreciation and amortization 2,485 3,415 3,259 3,168 YoY % -2.8% Utilities 1,766 2,315 2,118 2,182 YoY % 3.0% Operating lease payments 1,392 2,054 2,022 1,995 YoY % -1.3% SG&A expenses 3,888 4,914 5,219 5,242 YoY % 0.4% Fees paid to trustee manager YoY % 0.4% Fees paid to asset manager YoY % -1.0% Impairment losses ,499 1,720 YoY % Other operating expenses 1,435 2,414 2,388 2,411 YoY % 1.0% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: The company listed in August Figures for FY03/15 are actual results for an eight-month accounting period. Product procurement and materials (7.8% of FY03/18 operating expenses) Product procurement and materials expenses are the cost of ingredients for meals served in club restaurants and golf course food shops. These expenses totaled JPY3.6bn (-3.9% YoY) in FY03/18. These primarily variable expenses are linked to restaurant revenues, and their ratio vis-à-vis restaurant revenues have trended at around 29% since FY03/11. Personnel and outsourcing (36.1% of FY03/18 operating expenses) Personnel and outsourcing expenses include general office employees, golf course restaurant employees, and caddies. These expenses were JPY16.4bn (unchanged YoY) in FY03/18. Personnel expenses remain stable, trending broadly sideways. Accordia Golf dispatches personnel managers, administrative managers, and golf course managers to Accordia Golf Asset LLC. Accordia Golf pays salaries and bonuses for dispatched employees, and is reimbursed by Accordia Golf Asset LLC. Golf course management fees (12.8% of FY03/18 operating expenses) Several services are outsourced to Accordia Golf under a management outsourcing contract between Accordia Golf Asset LLC and Accordia Golf: management of the golf course business, office management support services, certain customer services, and other related services. Under the contract, Accordia Golf Asset LLC pays Accordia Golf management fees comprised of the following items. In FY03/18 golf course management fees were JPY5.8bn (-1.6% YoY). Corporate fees of JPY2.75mn per month for 18 holes. These fees totaled JPY3.5bn in FY03/16 Monthly base fees: 3.0% of net sales of the silent partnership (Accordia Golf Asset LLC) for the relevant month (JPY1.6bn in FY03/16) Incentive fees: 5% of the increase in operating profit before depreciation (after deducting base fees and corporate fees) for the relevant month (JPY672mn in FY03/16) 22/57

23 SG&A expenses (11.6% of FY03/18 operating expenses) SG&A expenses mainly comprise commissions on reservations via online reservation sites, advertising and promotion, and insurance expenses. SG&A expenses have largely held stable at around JPY5.0bn. However, they trended up YoY in FY03/17 due to an increase in commissions on reservations via online reservation sites (golf reservation sites), and remained at the same level in FY03/18. Asset manager compensation: Ongoing annual fees of 0.066% of the appraisal value of all of Accordia Golf Asset LLC s golf courses, driving ranges, related hotels and restaurants (if any). This is based on the latest available appraisal value obtained by Accordia Golf Asset LLC. When Accordia Golf Asset LLC purchases an investment asset, an acquisition fee equivalent to 0.75% of the appraisal value as assessed by a valuer nominated by Accordia Golf Asset LLC. When Accordia Golf Asset LLC sells an investment asset, a disposal fee equivalent to 0.15% of the appraisal value as assessed by a valuer nominated by Accordia Golf Asset LLC. Trustee-manager compensation The trustee-manager is entitled to receive compensation based on the following calculation methodology Base fees equivalent to 0.11% per annum of AGTs total consolidated asset value Performance fees of 0.25% per annum of the adjusted net operating profit generated by AGT s investment assets An acquisition fee of 0.60% of the appraisal value of an investment asset as assessed by an independent third party appraiser nominated by the trustee-manager when AGT directly or indirectly (through a special purpose vehicle or other means) acquires investment assets A disposal fee of 0.15% of the latest available appraisal value of an investment asset as assessed by an independent third party appraiser nominated by the trustee-manager or the special purpose vehicle when AGT directly or indirectly (through a special purpose vehicle or other means) sells or otherwise disposes investment assets Interest payments and other financial expenses In FY03/18 interest payments and other financial expenses were JPY1.6bn. These charges comprised primarily interest on bank loans and amortization of capitalized loan facility fees. Interest payments In August 2014, Accordia Golf Asset LLC obtained syndicated loan financing worth JPY45.0bn from a consortium of nine Japanese banks. The loan was divided into three tranches of JPY15.0bn each for terms of 3-5 years, at variable interest rates of six-month TIBOR plus % (the maturity for JPY15.0bn of the amount with maturity in three years was extended by one year). Interest rates on JPY25.0bn of the amount were fixed at % using interest rate swap contracts. Amortization of capitalized loan facility fees Fees on the above-mentioned syndicated loan facility were JPY2.4bn. Amortization on loan facility fees is expensed over the life of the loans from financial institutions. Corporate and other taxes Corporate and other taxes consist of withholding tax and corporate tax adjustments. The golf course owner, Accordia Golf Asset LLC, pays AGT 99% of distributable income generated from the golf course businesses that it operates. Distributions from the silent partnership are subject to Japanese withholding tax of 20.42%. Foreign tax credits apply to this withholding tax for the company in Singapore. In Singapore, because the company s corporate tax rate is lower than the withholding tax rate in Japan, the company is not subject to corporate tax. The distributions from the silent partnership appear deductible from the taxable income of Accordia Golf Asset LLC. Therefore, Japanese corporate tax applies only to residual taxable income (profit after distribution payments) for Accordia Golf Asset LLC. 23/57

24 Distributable income A business trust pays distributions to investors from operating cash flows. (However, the trustee-manager must be able to repay any of the business trust liabilities due at the end of the relevant period.) As such, a business trust may pay unitholders amounts greater than net income. Even if the company has recorded an after-tax loss, it is possible to pay a distribution, as long as it is paid from operating cash flow. Distributable income FY03/15 FY03/16 FY03/17 FY03/18 (JPYmn) Cons. Cons. Cons. Cons. Reconciliation of net income to income available for distribution Net income 2,648 6,662 4,113 4,132 Depreciation and amortization 2,485 3,415 3,259 3,168 Impairment losses ,499 1,720 Interest and other financial expenses 1,298 1,687 1,656 1,602 Income tax expense EBITDA 6,548 12,427 11,328 10,958 Adjustment for: Change in working capital 2, Interest paid and other financial expenses paid Income taxes paid -4,383-1,241-1,457-1,290 Others Cash flows from operating activities 4,174 10,337 8,590 8,364 Cash flows from investing activities -51,251-1,567-1,659-2,340 Cash flows from financing activities 59,332-1,941-1,647-3,435 Others -6, Total distributable income available 5,673 6,041 5,178 3,436 Source: Shared Research based on company data AGT s distributable income in regular fiscal years (FY03/16 onward) Distributable income may differ from net income because it is calculated based on actual cash flow. The main differences arise from discrepancies between depreciation charges and capex (outflows to purchase tangible fixed assets), movements in working capital, refunds of membership deposits, and repayments of finance leases. In regular fiscal years (from AGT s second year onward), individual cash inflows and outflows offset each other, and distributable income is approximately equivalent to net income. However, although annual membership revenue is booked every quarter, inflows are concentrated in Q4, and the resulting fluctuations in working capital lead to differences in net income and distributable income. Depreciation costs versus capex (outflows to purchase tangible fixed assets) Outflows for the purchase of tangible fixed assets, which comprise most of the outflows in investment activities, require maintenance and repair expenses for golf courses, clubhouses, offices, and other facilities, and depreciation expenses apply. According to the company, it does not plan on any major clubhouse renovations, so it expects depreciation to remain above capital spending. In FY03/18, outflows for the purchase of tangible fixed assets were JPY2.2bn (JPY1.7bn in FY03/17), and depreciation was JPY3.2bn (JPY3.3bn) for JPY938bn in excess inflows (JPY1.6bn). Movements in working capital Cash flows from movements in working capital tend to be cash outflows from Q1-Q3 and inflows in Q4. The main reason is that annual membership revenue is booked on a monthly basis, but the actual inflows of annual membership fees tend to concentrate in Q4. According to AGT, in general invoices for annual membership fees are sent out to members in January and are paid in March. Refunds of membership deposits Membership deposits are refunded at the request of members after a lock-in period of years. Cash outflows from this were JPY1.9bn in FY03/18 (JPY1.0bn in FY03/17). In FY03/18, total membership deposits for which the lock-in period ended during the fiscal year were substantial, and the percentage of refund requests was similarly high. 24/57

25 Repayments of finance lease liabilities Finance lease liability repayments are for carts and other golf course equipment obtained through finance lease contracts with Accordia Golf. Finance lease interest payments are booked on the income statement as interest payments and other financing expenses, and repayments of finance lease principal are not recognized in the income statement but accompany fund transfers. In FY03/18, finance lease liabilities (current liabilities) were JPY983mn, finance lease liabilities (fixed liabilities) were JPY3.0bn. There were JPY664mn in cash outflows from the repayment of finance lease liabilities. AGT s distributable income in the first year (FY03/15) AGT was established in FY03/15 (FY03/15 was irregular, as this first year covered an eight-month period). It booked net income of JPY2.6bn and distributable income of JPY5.7bn. In addition to the differentiating factors mentioned above, net income and distributable income differed in FY03/15 due to the following: corporate tax payments, outflows for acquiring golf course businesses, issuance of units, loans from financial institutions, repayments of loans from related parties, and adjustments to distributions. These factors (explained below) are one-off, and so we do not see them as vital to understanding distributable income for AGT from FY03/16 onward. Corporate tax payments Corporate tax payments include the tax liability generated by the absorption-type company split to execute the transfer of golf courses owned by Accordia Golf as well as taxable income accrued in April-July 2014 before the company listed on the Singapore stock exchange. Outflows for golf course business acquisitions These are cash outflows generated by the acquisition of shares in the Accordia Golf Asset LLC silent partnership from Accordia Golf, AGT s sponsor. FY03/15 outflows related to golf course business acquisitions are calculated by subtracting Accordia Golf s JPY25.4bn investment in AGT from the JPY75.2bn payment for golf course businesses. Issuance of units When AGT listed in August 2014, it issued 782.0mn units, raising JPY62.5bn. Loans from financial institutions Accordia Golf Asset LLC acquired a syndicated loan worth JPY45.0bn from a consortium of nine banks when it listed in August Regarding this syndicated loan, Japan Credit Rating Agency, Ltd. granted a new ABL rating of BBB+ to Accordia Golf Asset LLC in January Repayment of loans from related parties Accordia Golf Asset LLC repaid loans from Accordia Golf of JPY38.3bn, from when it received a contribution in kind from Accordia Golf in August Adjustment to distributions There was a downward adjustment to distributions of JPY6.6bn for FY03/15. This comprised cash on hand of JPY4.5bn to operate golf courses, and cash on hand to pay other withholding taxes and for other purposes. 25/57

26 Portfolio 89 golf courses, diverse locations in Japan AGT owned 89 golf courses as of May 2018, widely distributed geographically within Japan. This limits the impact on the company from bad weather in a certain location, and from changes in regulations by local governments in a particular prefecture. AGT: Number of golf courses by region Source: Shared Research based on company data Tokyo area: Ibaraki, Tochigi, Gunma, Saitama, Chiba, Kanagawa and Tokyo Osaka area: Shiga, Kyoto, Nara, Osaka, Wakayama and Hyogo Nagoya area: Aichi, Gifu and Mie About 70% of its portfolio in Japan s three major metropolitan regions Some 70% of the golf courses owned by AGT are in Japan s three major metropolitan areas of Tokyo, Osaka, and Nagoya. Golf courses in these areas account for 85.7% of the appraisal value (based on appraisal value of golf courses owned as of end December 2017). As shown in the following figure, the company s portfolio has more golf courses in Japan s three major metropolitan regions compared to the proportion of golf courses nationwide. Geographic distribution of golf courses: AGT versus Japan overall Source: Shared Research based on company data Japan s population is concentrated in Tokyo, Nagoya, and Osaka. Around 60% of the Japanese population lives in roughly 20% of Japan s total land area. 26/57

27 Population, land area and population density by region Population ('000) Land area(sq.km) Population density % of total % of total (people/sq.km) Nationwide 126, % 377, % 336 Tokyo area 43, % 32, % 1,330 Nagoya area 11, % 21, % 526 Osaka area 20, % 27, % 756 Other areas 51, % 296, % 175 Source: Shared Research based on census data, Statistics Bureau, Ministry of Internal Affairs and Communications, Tokyo area: Ibaraki, Tochigi, Gunma, Saitama, Chiba, Kanagawa and Tokyo Osaka area: Shiga, Kyoto, Nara, Osaka, Wakayama and Hyogo Nagoya area: Aichi, Gifu and Mie According to the company, golf courses in densely populated regions generally have greater customer drawing power and higher margins. The major metropolitan regions have more advanced transportation infrastructure with better access to golf courses, and the weather is more stable than in certain regions (for example, closures dues to snowfall are for shorter periods). AGT said that assets in the three metropolitan regions are more liquid than those in other regions. 27/57

28 Strengths and weaknesses Strengths Diversified portfolio with many properties in three major metropolitan regions. AGT has a diversified portfolio of 89 golf courses, 70% of which are in in the densely populated three major metropolitan regions around Tokyo, Osaka, and Nagoya. The ease of access boosts visitor numbers and green fees. Furthermore, Shared Research thinks that when AGT reshuffles its asset portfolio to improve margins, golf courses in the metropolitan areas will prove to be more liquid than those in other areas. High margins and stable revenue. AGT acquired 89 golf courses from Accordia Golf, who had already turned them around. Accordia Golf has continued to manage these golf courses using management experience. Thanks to astute management, in FY03/18 AGT s golf courses had an average of 63,989 visitors per year, 70% higher than the national average of 37,574. AGT had an OPM of 11.8% in FY03/18. Its revenue depends on the number of golf course visitors and revenue per visitor. Visitor numbers are stable, and revenue per visitor has bottomed out since We understand that most expenses are fixed, enabling high margins. AGT has higher asset efficiency than J-REITs. The average ROE for J-REITs is 5.5% (and average interest-bearing debt ratio 44.0%) but in FY03/18 AGT had leverage (interest-bearing debt ratio 24.7%) lower than the average ROE for J-REIT, with an ROE of 5.2% after booking one-off impairment losses. Growth from new assets possible with support from Accordia Golf. Accordia Golf s core business is operating golf courses and improving the value of purchased assets in line with its asset-light strategy. AGT has preemptive buying rights and call options over Accordia Golf assets. With the support of Accordia Golf, AGT has the ability to increase borrowings and buy golf courses that Accordia Golf sells, enabling externally driven growth. Weaknesses Limited growth potential from existing assets. AGT has a strategy of investing in golf courses that generate stable revenues, and is considering acquiring golf course properties on its own (not from Accordia Golf). Still, it mostly purchases golf courses that Accordia Golf has turned around. Consequently, margins on AGT s assets are high and revenues are stable. However, because the golf courses AGT acquires have already been improved, there is limited room to further improve margins, meaning limited growth from existing assets. Low liquidity of golf course assets. According to AGT, the liquidity of its investments in golf course businesses is lower than that of offices or residential properties. As such, Shared Research believes that portfolio adjustments by selling underperforming golf courses are harder for AGT than for an office REIT. According to Urban Research Institute Corporation, in FY2017, listed companies and J-REITs transacted JPY4.9tn (+20.9% YoY) in domestic real estate. In 2017, 38 golf courses (three courses more than the previous year) changed management (source: statistics on golf course transactions by Ikki Publishing s Golf Tokushin). Assuming a price of JPY1.5bn per golf course, the industry s total transaction value was only about JPY57.0bn. Complicated structure makes AGT hard for fund providers to understand. AGT, which is listed on the Singapore Stock Exchange, is the only business trust that invests in golf courses. The business activities of companies involved in management and shareholding structure are complicated, so we believe that fund providers such as investors and banks may find it difficult to adequately understand the business and earnings structure. 28/57

29 Market and value chain Golf market overview Trends in number of golfers and visitors The number of golfers and golf course visitors grew until the early 1990s due to population growth and economic expansion Against the backdrop of Japan s postwar economic and population growth, the number of golf course visitors in Japan grew until the early 1990s (from 4.5mn per year in 1960 to 102mn in 1992). Total number of golf course visitors ( ; 000) 120, ,000 80,000 60,000 40,000 20, Total visitors ('000) 4,508 11,261 20,500 41,690 54,088 68,159 95,193 97,512 Source: Shared Research based on NGK (Japan Golf Course Managers Association) data Steady downtrend in number of golfers and visitors from 1990s through early 2000s Following the bursting of economic bubble in the 1990s, the number of golfers and golf course visitors turned downward. After peaking at 13.7mn in 1994, the number of golfers declined to 10.8mn 2005, and the number of golf course visitors shrank from 102mn 1992 to 85.3mn Total number of golf course visitors ( ; 000) 105, ,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60, Total visitors ('000) 95,193 97,512 90,000 86,046 Source: Shared Research based on NGK (Japan Golf Course Managers Association) data Trends since late the 2000s The downturn in the number of golf course visitors persisted through 2004, but since 2005 the trend decline has eased and numbers are stable. The number of visitors shrank to 85.3mn in 2004, but recovered to 90.8mn in The number declined to 84.3mn in 2011 in the wake of the global financial crisis and Great East Japan earthquake, but was on a recovery trend since Driving this recovery is golfers playing more rounds per year. 29/57

30 Total number of golf course visitors (since 2005; 000) 100,000 95,000 90,000 85,000 80,000 75,000 70,000 65,000 60, Golf course visitors ('000) 86,046 88,235 89,020 90,786 91,642 88,061 84,327 86,745 86,746 86,505 87,753 85,744 Source: Shared Research based on NGK (Japan Golf Course Managers Association) data Number of golfers and number of rounds played per year According to the Leisure White Paper, the number of golfers grew through the early 1990s and started declining after peaking at 13.7mn in 1994, shrinking to 5.5mn in Meanwhile, the number of rounds played per golfer per year has been on a long-term uptrend, particularly since In 2000, the average golfer played 7.0 rounds per year, but this rose to 15.6 in As explained below, we understand that this is because there is a rising share of golfers in their 50s and older, who tend to play golf more frequently. Trends in number of golfers and number of rounds played per annum 19,000 17,000 15,000 13,000 11,000 9,000 7,000 ゴルフ参加 ( 左軸 単位 : 千 ) ゴルフ参加者あたり年間プレー回数 ( 右軸 単位 : 回 ) , 年 1990 年 1995 年 2000 年 2005 年 2010 年 2015 年 2016 年 ゴルフ参加 ( 千 ) 9,900 12,700 13,700 12,900 10,800 8,100 7,600 5,500 ゴルフ参加者あたり年間プレー回数 ( 回 ) Source: Shared Research based on NGK (Japan Golf Course Managers Association) data and Leisure White Paper Breakdown of number of rounds (days) per year and golfers by age According to the 2016 Survey on Time Use and Leisure Activities conducted by Statistics Bureau, Ministry of Internal Affairs and Communication, the proportion of players who go to the golf course 20 or more times (days) per year rises with age: 11.9% for those in their 20s, 17.4% for those in their 30s, 24.6% for those in their 40s, 35.8% for those in their 50s, and 45.8% for those in their 60s. This indicates that the older the golfer, the more rounds (days) they play per year. Older golfers may play more frequently due to factors such as more free time. 30/57

31 Number of visits (days) to golf courses per year 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Total 47.4% 19.3% 15.6% 9.3% 5.1% 1.6% 20s 70.1% 16.3% 6.6% 3.5% 1.5% 0.2% 30s 60.7% 20.7% 10.5% 4.9% 1.4% 0.6% 40s 55.5% 18.4% 13.9% 7.2% 2.8% 0.8% 50s 43.9% 18.3% 18.3% 10.4% 5.5% 1.6% 60s 29.7% 23.2% 19.9% 15.0% 8.3% 2.6% (once a month) (2 3 days per month) (1 3 days per week) (2 3 days per week) 200 and more (4 days or more per week) Source: Shared Research based on Survey on Time Use and Leisure Activities conducted by Statistics Bureau, Ministry of Internal Affairs and Communication As the Japanese population ages, the share of golfers aged 50 and over (who tend to golf more frequently), is climbing. According to data from the Survey on Time Use and Leisure Activities (Statistics Bureau, Ministry of Internal Affairs and Communications), the share of golfers aged 50 and over climbed from 16.7% in 1986 to 56.6% in Breakdown of golfers by age 15.2% 14.8% 15.7% 21.2% 29.0% 26.7% 36.1% 19.9% 18.1% 17.4% 21.0% 22.3% 18.3% 30.8% 18.6% 19.3% 22.5% 20.6% 21.8% 24.9% 19.1% 23.4% 23.5% 23.6% 22.6% 19.5% 17.9% 19.9% 16.3% 12.8% 13.2% 11.4% 6.8% 3.2% 4.0% 0.7% 0.6% 1.4% 3.3% 5.9% 9.5% 15.3% 's 30's 40's 50's 60's 70's Source: Shared Research based on Survey on Time Use and Leisure Activities, Statistics Bureau, Ministry of Internal Affairs and Communications Population over 60 in Japan to keep growing until 2038 The Japanese population started declining in 2009, and is projected to keep falling in the long term (source: Household Projections for Japan prepared by the National Institute of Population and Social Security Research). However, the population aged 60 and above is forecast to keep rising until 2038, growing at an average annual pace of 0.4% in /57

32 Population projections for Japan: total population, population over 60 ('000) 130,000 ('000) 50, ,000 45, ,000 40,000 Total population Aged 60 and older (right axis) 100, , Total population (mn) Aged 60 and older (mn) Source: Shared Research based on Household Projections for Japan, National Institute of Population and Social Security Research Trends in golf course user fees In Japan, golf course fees (including caddie and cart fees) have been on a downtrend since the late 1990s. We understand that there was a decline in the number of visitors following the bursting of the economic bubble. In the 2000s, foreign firms such as the Goldman Sachs Group and Lone Star Group purchased golf courses that had applied for debt relief under civil rehabilitation procedures, and lowered green fees at these courses to boost customer drawing power. Since the late 2000s, the decline in user fees has slowed. From the annual average fall was 4.6%, but this slowed to 0.7% from Based on data from the Survey of Selected Service Industries, Shared Research estimates that user fees in 2017 (excluding caddie fees and food and drink fees) averaged JPY6,370 (-0.4% YoY): JPY5,602 on weekdays (-0.5%) and JPY7,382 on weekends and holidays (+0.7%). Trends in user charges 10,000 9,000 Weekdays Saturdays, Sundays, holidays All days 8,000 7,000 6,000 5, All days 8,892 8,373 7,690 7,336 7,169 7,076 6,911 6,932 6,891 6,696 6,621 6,439 6,419 6,383 6,422 6,389 6,393 6,370 Weekdays 8,159 7,657 6,953 6,629 6,449 6,372 6,140 6,105 6,030 5,910 5,845 5,708 5,686 5,605 5,672 5,613 5,633 5,602 Sat.,Sun.,holidays 9,710 9,151 8,512 8,133 7,985 7,896 7,821 7,941 7,942 7,631 7,523 7,385 7,350 7,381 7,375 7,338 7,328 7,382 Source: Shared Research based on METI, Survey of Selected Service Industries 32/57

33 Competition Number of golf courses The total number of golf courses in Japan grew in line with growth in the number of golfers from the late 1950s to the early 1990s. The number of golf course visitors peaked at 102mn in 1992, but the number of golf courses continued to climb from 195 golf courses in 1960 to 2,460 in Number of golf courses visitors and number of golf courses 4,000 3,500 3,000 2,500 Golf courses Visitors (right axis) ('000) 120, ,000 80,000 2,000 60,000 1,500 1, ,000 20, Visitors ('000) 4,508 11,261 20,500 41,690 54,088 68,159 95,193 97,512 90,000 86,046 88,061 86,505 87,753 85,744 Golf courses ,093 1,416 1,496 1,818 2,273 2,443 2,446 2,432 2,336 2,317 2,282 Source: Shared Research based on NGK (Japan Golf Course Managers Association) data Shared Research understands that from the late 1980s to early 1990s, golf courses made membership deposits nonrefundable for years after the customer joined. They used these deposits to develop golf courses. (According to METI data, in 2004 this system was used by 1,370 golf courses, roughly 70% of the total 2,026 golf courses nationwide.) During this period, many golf courses did not consider repayment of the deposits. Golf course members were able to sell their memberships for more than the purchase price, so golf courses did not need to refund deposits. However, in the 1990s after the economic bubble burst, the price of golf course memberships fell, and many members quit, requesting deposit refunds. Some golf courses that had used the deposits for development were unable to meet these requests, and asked for debt relief under the Corporate Reorganization Act and the Civil Rehabilitation Act. From , 931 established golf courses underwent legal liquidation procedures (estimates by Shared Research based on Golf Tokushin, Ikki Publishing). Some of these golf courses were closed or turned into mega-solar power plants, but some were bought by non-japanese companies and continued under new management. According to Golf Tokushin, 1,526 golf courses changed management in In 2016, the number of golf courses visitors was down 16% from its peak in 1992, but the number of golf courses was just 7% below its peak. As of 2016 there were 2,282 courses (-1.5% YoY). Competition As of May 2018, the largest corporate operator of golf courses in Japan was the Pacific Golf Management (PGM) Group, followed by Accordia Golf, the Orix Group, the Seibu Group, and the Tokyu Group. The PGM Group and Accordia Golf have bought golf courses since the 2000s and specialize in golf course and driving range management. The others are conglomerates in the real estate, construction, and hospitality industries. Orix, Seibu, and Tokyu are involved in a wide range of industry sectors including real estate, finance, transport, and retail. 33/57

34 Top golf course operators and number of courses Operator No. of courses Market share (based on no. of courses) Accordia Golf % PGM group % Orix Group % Seibu group % Tokyu group % Ichikawa Golf Kogyo group % OGI group % Cherry Golf Group % Unimat group % Taiheiyo Club % Source: Shared Research based on company data Barriers to entry According to AGT, the typical golf course requires 50-80ha of land. Because the land tends to be uneven, the cost of building golf courses in Japan is higher than in other countries. The typical cost (excluding land acquisition) is JPY5-6bn. In Japan, almost all golf courses continue to trade for less than the replacement cost. AGT said that aside from construction costs, it would be difficult for new players to enter the market due to a tough competitive climate and the specialized knowledge and scale economies necessary to operate these businesses. 34/57

35 Full-year FY03/18 results Historical performance Operating revenue was JPY51.5bn (-0.9% YoY), operating profit JPY6.1bn (-7.6%), net income JPY4.1bn (+0.5%), and distributable income JPY3.4bn (-33.6%). Distributions were SGD per unit (SGD in FY03/17). Operating revenue Golf course revenue was JPY34.2bn (-0.4% YoY), and restaurant and beverage sales JPY12.5bn (-1.8%). Revenue from annual membership fees amounted to JPY4.1bn (-6.9%), and other operating revenue to JPY590mn (+52.8%). Revenue at golf courses and restaurants declined modestly on a slight drop in the number of golf course visitors. Revenue from annual membership fees decreased in tandem with a drop in the number of members. Under other operating revenue, the company booked a one-time compensation income in connection with golf course repairs. The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, were as follows. Number of course visitors The number of course visitors totaled 5.7mn, indicating a 1.0% decline YoY. Structural factors such as an extended healthy life expectancy and an increase in senior golfers aged 60 plus who tend to play more frequently, and an economic recovery driven by the Abenomics policies supported growth. However, the number of course visitors fell YoY in Q3 (October December) and Q4 (January March) due to bad weather. By quarter, the number of course visitors rose 4.1% YoY in Q1 (April June) and 3.0% in Q2 (July September), but declined 5.4% in Q3 and 7.3% in Q4. In October 2017, the number dropped 14.7% YoY as two typhoons made landfall, and this had a strong impact. In Q4, the number of course visitors dropped in each month (January through March) due to impact from rain and snowfall. Compared to the average over the past three years, the number rose 2.7% in Q1 and 3.3% in Q2, but declined 4.7% in Q3 and 6.4% in Q4. In FY03/18, golf course visitor reservations at the start of the month (simple average, excluding weather-related cancellations) increased a solid 5.8% YoY. Shared Research believes the number of golf course visitors may have increased YoY if there had not been any impact from bad weather. Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY6,000 (+0.6% YoY) at golf courses and JPY2,200 (-0.8%) at restaurants. According to AGT s data, revenue per player averaged JPY8,348 (+0.2% YoY), broken down to JPY5,684 (+0.8%) in green fees and JPY2,243 (-1.0%) from restaurant and shop spending. Revenue per player on weekdays was JPY6,868 (unchanged YoY) with JPY4,305 (+0.8%) in green fees and JPY2,158 (-1.1%) in restaurant and shop spending. Weekend per player revenue was JPY10,648 (+1.0% YoY) with JPY7,827 (+1.8%) in green fees and JPY2,376 (-0.6%) in restaurant and shop spending. Revenue per player was unchanged YoY for weekdays, but increased YoY for weekends. Green fees increased YoY on average, on weekdays, and on weekends, reflecting a slowdown in the pace of decline and signs of a bottoming out. Operating expenses Operating expenses were JPY45.4bn (+0.1% YoY). While golf course maintenance and repair costs, utility costs, and impairment losses increased, product procurement costs and materials expenses, golf course management fees, and depreciation and amortization declined. On the whole, operating expenses only increased slightly thanks to efforts to keep procurement prices down through bulk purchases and other efforts to reduce costs. 35/57

36 Golf course maintenance and repair costs were JPY2.6bn (+2.4% YoY). The company increased expenditure on maintenance and repair as deemed adequate and necessary for golf course operation. Utility costs were JPY2.2bn (+3.0%), rising on a sharp increase in crude oil prices. Impairment losses were JPY1.7bn (+14.7%), reflecting the booking of impairment losses on 10 golf courses due to a decline in golf course appraisal value and earnings. Product procurement and materials costs were JPY3.6bn (-3.9% YoY), with the decline reflecting a drop in restaurant revenue. Golf course management fees were JPY5.8bn (-1.6%), with the decline attributable to a drop in operating revenue. Depreciation and amortization were JPY3.2bn (-2.8%). Distributable income Distributable income was JPY3.4bn (down JPY1.7bn YoY, -33.6%). Net income remained flat YoY but distributable income decreased due to JPY384mn in costs related to extending a term loan repayment deadline (JPY0mn in FY03/17) and JPY1.9bn in refunding costs for membership deposits (JPY1.0bn in FY03/17). There are golf course memberships that entail refunds of membership deposits (members may claim refunds after the lock-in period, depending on the membership contracts) when resigning from a membership after a certain lock-in period. Membership deposit refunds are costs for the return of membership deposits. These deposits are composed of deposit refunds for which the lock-in period ended during the same fiscal year and deposit refunds for which the lock-in periods ended in previous fiscal years. In FY03/18, as the total amount of deposits for which the lock-in period ended in FY03/18 were large and the percentage of refund request was high, deposit refunds for which the lock-in period ended in FY03/18 increased YoY. As of the end of FY03/18, membership deposits were JPY10.6bn (JPY12.0bn as of the end of FY03/17) and membership deposits for which the lock-in period has not ended were JPY31mn (JPY821mn). Distributable profits were SGD per unit (SGD in FY03/17). AGT makes distributions to unit holders in Singapore dollars on a semiannual basis. Balance sheet items Current assets Current assets came to JPY12.2bn (down by JPY1.9bn from end FY03/17). Distributions and other payments to beneficiaries led to a decline in cash and cash equivalents to JPY8.1bn (-JPY2.1bn). Fixed assets Fixed assets came to JPY163.7bn (down by JPY528mn from end FY03/17). Current liabilities Current liabilities came to JPY50.5bn (up by JPY12.9bn from end FY03/17). The increase was primarily due to a rise in loans from financial institutions. Loans from financial institutions amounted to JPY28.8bn (up by JPY14.0bn from end FY03/17). The company reclassified a Term Loan B (principal of JPY15.0bn with maturity in August 2018) from a fixed liability to a current liability. Fixed liabilities Fixed liabilities came to JPY45.3bn (down by JPY15.0bn from end FY03/17). The decrease was primarily due to a reduction in loans from financial institutions. Loans from financial institutions amounted to JPY14.1bn (down by JPY14.2bn from end FY03/17). As noted above, the company reclassified Term Loan B from a fixed liability to a current liability and booked Term Loan C (principal of JPY15.0bn with maturity in August 2019) as a fixed liability. 36/57

37 Q3 FY03/18 results In Q3 FY03/18, operating revenue was JPY41.9bn (-0.3% YoY), operating profit JPY9.0bn (+1.2%), net income JPY7.0bn (+1.7%), and distributable income JPY3.0bn (-21.5%). Distributions were SGD per unit (SGD in Q3 FY03/17). Operating revenue Golf course revenue was JPY28.1bn (+0.1% YoY), and restaurant and beverage sales JPY10.1bn (-0.8%). Revenue from annual membership fees amounted to JPY3.2bn (-6.2%). Golf course revenue and restaurant and beverage sales were flat YoY as the number of golf course visitors only slightly increased. Revenue from annual membership fees declined because of a fall in the number of members. The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, were as follows. Number of course visitors The number of course visitors totaled 4.6mn, indicating a 0.6% rise YoY. Contributing factors include structural factors such as extended healthy life expectancy and increase in senior golfers aged 60 plus who tend to play more frequently, Abenomics-driven economic recovery. Looking at the quarterly trend, while the number of golf course visitors increased 3.5% YoY until 1H (April September), the number of visitors decreased 5.3% YoY in Q3 (October December), affected by 14.7% fall YoY in October 2017 due to the impact of two typhoons. In cumulative Q3, golf course visitor reservations (simple average, excluding weather-related cancellations) increased a solid 5.9% YoY. Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY6,100 (-0.5% YoY) at golf courses and JPY2,200 (-1.4%) at restaurants. According to AGT s data, revenue per player averaged JPY8,442 (-0.8% YoY), broken down to JPY5,771 (-0.3%) in green fees and JPY2,246 (-1.5%) from restaurant and shop spending. Revenue per player on weekdays was JPY6,941 (-1.0% YoY) with JPY4,364 (-0.5%) in green fees and JPY2,166 (-1.8%) in restaurant and shop spending. Weekend per player revenue was JPY10,805 (+0.9% YoY) with JPY7,986 (+1.7%) in green fees and JPY2,371 (-0.8%) in restaurant and shop spending. Revenue per player on weekdays continued to decrease, but weekend per player revenue increased. According to the company, revenue per player stopped falling on weekends and at golf courses near the three major cities, and even increased at some locations. Revenue per player continued to trend down on weekdays and at golf courses not close to the three major cities. However, as the pace of decline levels off, revenue per player has been showing signs of bottoming out. Operating expenses Operating expenses were JPY32.9bn (-0.7% YoY). Golf course operating expenses were JPY27.7bn (-0.9%). While the rise in crude oil prices drove utility costs higher to JPY1.7bn (+4.3%), personnel costs and outsourcing costs declined to JPY12.5bn (-0.7%) and depreciation and amortization to JPY2.3bn (-4.6%). SG&A expenses came to JPY3.1bn (+4.2%). Fees stemming from reservations via online reservation sites were on an uptrend. The company stated that it is undertaking measures to encourage customers to switch to Accordia from other online reservation sites, for example, by guaranteeing cheaper prices for reservations via Accordia. 37/57

38 Distributable income Distributable income was JPY3.0bn (-21.5% YoY). Net income increased but distributable income decreased due to costs JPY383mn (versus zero in Q3 FY03/17) related to extending a term loan repayment deadline (Term Loan A; principal: JPY15.0bn, original repayment deadline: August 2017 extended by a year to August 2018) and to refunding membership deposits of JPY1.4bn (JPY1.0bn in full-year FY03/17). There are golf course memberships that entail refunds of membership deposits (members may claim refunds after the lock-in period, depending on the membership contracts) when resigning from a membership after a certain lock-in period. Membership deposit refunds are costs for the return of membership deposits. These deposits are composed of deposit refunds for which the lock-in period ended during the same fiscal year and deposit refunds for which the lock-in periods ended in previous fiscal years. In cumulative Q3 FY03/18, as the total amount of deposits for which the lock-in period ended in FY03/18 were large and the percentage of refund request was high, deposit refunds for which the lock-in period ended in FY03/18 increased YoY. According to Accordia, as of the end of Q3 FY03/18, membership deposits were JPY10.6bn (deposits of JPY327mn have already been requested for refund) and membership deposits for which the lock-in period has not ended were JPY772mn. Distributable profits were SGD per unit (SGD in Q3 FY03/17). AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. Balance sheet items Current assets Current assets came to JPY10.9bn (down by JPY3.3bn from end FY03/17). Distributions and other payments to beneficiaries led to a decline in cash and cash equivalents to JPY7.4bn (-JPY2.9bn). Fixed assets Fixed assets came to JPY165.0bn (up JPY779mn from end FY03/17). Current liabilities Current liabilities came to JPY46.4bn (up JPY8.8bn from end FY03/17). The increase was primarily due to a rise in loans from financial institutions. Loans from financial institutions amounted to JPY28.9bn (up JPY14.0bn). The company reclassified a Term Loan B (principal of JPY15.0bn with maturity in August 2018) from a fixed liability to a current liability. Fixed liabilities Fixed liabilities came to JPY46.5bn (down JPY13.7bn from end FY03/17). The decrease was primarily due to a reduction in loans from financial institutions. Loans from financial institutions amounted to JPY14.1bn (down JPY14.2bn). As noted above, the company reclassified Term Loan B from a fixed liability to a current liability and booked Term Loan C (principal of JPY15.0bn with maturity in August 2019) as a fixed liability. 1H FY03/18 results Operating revenue was JPY28.0bn (+2.0% YoY), operating profit JPY5.7bn (+9.2%), net income JPY4.4bn (+12.8%), and distributable income JPY1.5bn (-27.3%) in 1H FY03/18. Distributions were SGD per unit (SGD in 1H FY03/17). Operating revenue Golf course revenue was JPY18.7bn (+2.5% YoY), and restaurant and beverage sales JPY6.8bn (+1.3%). Revenue from annual membership fees amounted to JPY2.2bn (-5.9%). An increase in the number of visitors was the main factor contributing to 38/57

39 growth in golf course and restaurant revenues. Revenue from annual membership fees turned down because of a fall in the number of members. The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, were as follows. Number of course visitors The number of course visitors totaled 3.2mn, indicating a 3.5% rise YoY. Contributing factors include structural factors such as extended healthy life expectancy and increase in senior golfers aged 60 plus who tend to play more frequently, Abenomics-driven economic recovery, and more favorable weather patterns than a year earlier. Measures implemented by AGT such as discounted off-peak green fees also contributed to results. In 1H FY03/18, golf course visitor reservations (simple average, excluding weather-related cancellations) increased a solid 7.3% YoY. Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY5,900 (-1.0% YoY) at golf courses and JPY2,100 (-2.2%) at restaurants. According to AGT s data, revenue per player averaged JPY8,158 (-1.3%), broken down to JPY5,563 (-0.7%) in green fees and JPY2,184 (-2.2%) from restaurant and shop spending. Revenue per player on weekdays was JPY6,762 (-1.6% YoY) with JPY4,230 (-0.8%) in green fees and JPY2,133 (-2.4%) in restaurant and shop spending. Weekend per player revenue was JPY10,281 (-0.0%): JPY7,590 (+0.9%) in green fees and JPY2,262 (-1.8%) in restaurant and shop spending. According to the company, revenue per player stopped falling on weekends and at golf courses near the three major cities, and even increased at some locations. Revenue per player continued to trend down on weekdays and at golf courses not close to the three major cities due to intense competition. Operating expenses Operating expenses were JPY22.3bn (+0.4% YoY). Golf course operating expenses were JPY18.8bn (+0.2% YoY). Personnel, outsourcing, and utility expenses increased SG&A and other costs came to JPY3.5bn (+1.4%). SG&A expenses were JPY2.1bn (+5.0% YoY), with online booking-related commissions paid to golf course reservation and other sites trending up. Distributable income Distributable income was JPY1.5bn (-27.3% YoY). Net income increased but distributable income decreased due to costs of JPY383mn (versus zero in 1H FY03/17) related to extending a term loan repayment deadline (Term Loan A; principal: JPY15bn, original repayment deadline: August 2017 extended by a year to August 2018) and to refunding membership deposits totaling JPY1.3bn versus JPY491mn in 1H FY03/17. For membership deposit refunds, refunds of deposits for which the lock-in period ended in 1H FY03/18 increased to JPY1.1bn from JPY227mn in 1H FY03/17. Refunds of deposits whose lock-in period ended are calculated as the total amount of corresponding deposits x percentage of repayment claims. Membership deposits whose lock-in period ended in 1H FY03/18 totaled JPY2.7bn versus JPY1.2bn in 1H FY03/17 and the percentage of repayment claims was higher than a year earlier. The company commented that its estimated membership deposits whose lock-in period ends in FY03/19 at JPY750mn, and after that there were no more golf course memberships that entail the repayment of membership deposits claimed by members after the lock-in period. 39/57

40 Distributable profits were SGD per unit (SGD in 1H FY03/17). AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. Balance sheet items Current assets Current assets came to JPY11.4bn (down by JPY2.7bn from end FY03/17). Distributions and other payments led to a decline in cash and cash equivalents to JPY7.9bn (-JPY2.3bn). Fixed assets Fixed assets came to JPY164.7bn (up JPY478mn from end FY03/17). Current liabilities Current liabilities came to JPY47.8bn (up JPY10.2bn from end FY03/17). The increase was primarily due to a rise in loans from financial institutions. Loans from financial institutions amounted to JPY28.7bn (up JPY14.0bn). The company reclassified a Term Loan B (principal of JPY15.0bn with maturity in August 2018) from a fixed liability to a current liability. Fixed liabilities Fixed liabilities came to JPY46.4bn (down JPY13.8bn from end FY03/17). The decrease was primarily due to a reduction in loans from financial institutions. Loans from financial institutions amounted to JPY14.1bn (down JPY14.2bn). As noted above, the company reclassified Term Loan B from a fixed liability to a current liability and booked Term Loan C (principal of JPY15.0bn with maturity in August 2019) as a fixed liability. Q1 FY03/18 results For Q1 FY03/18, operating revenue was JPY14.6bn (+1.1% YoY), operating profit JPY3.2bn (+7.6%), net income JPY2.5bn (+9.9%), and distributable income JPY1.8bn (+17.6%). Distributions were SGD per unit (SGD0.020 in Q1 FY03/17). Operating revenue Golf course revenue was JPY9.9bn (+2.1% YoY), and restaurant and beverage sales JPY3.5bn (+1.5%). Revenue from annual membership fees amounted to JPY1.1bn (-5.9%). Golf course revenue and restaurant and beverage sales were up year-on-year thanks to a higher number of golf course visitors, while revenue from annual membership fees was down due to the decline in number of members. According to AGT, membership is on a downtrend due to the aging of the members. The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, were as follows. Number of course visitors The number of course visitors totaled 1.6mn, indicating a 4.1% rise YoY. The company s decision to set green fees at a low price during the low demand periods contributed to an increase in the number of course visitors. Average monthly reservations in Q1 grew robustly year-on-year (up 8.3%). Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY6,100 (-1.8% YoY) at golf courses and JPY2,100 (-2.4%) at restaurants. 40/57

41 According to AGT s data, revenue per player averaged JPY8,428 (-2.0%), broken down to JPY5,841 (-1.6%) in green fees and JPY2,191 (-2.4%) from restaurant and shop spending. Revenue per player on weekdays was JPY6,977 (-2.1% YoY) with JPY4,444 (-1.4%) in green fees and JPY2,142 (-2.8%) in restaurant and shop spending. Weekend per player revenue was JPY10,652 (-0.2%): JPY7,968 (+0.6%) in green fees and JPY2,269 (-1.6%) in restaurant and shop spending. According to AGT, revenue per player on weekdays went down as the company s measures to improve the utilization rate resulted in a higher sales composition ratio of early morning players. Revenue per player during time slots other than weekends and early mornings on weekdays is showing signs of bottoming out. Operating expenses Operating expenses were JPY11.4bn (-0.6% YoY). Expense items which went up year-on-year were procurement costs and material expenses, which came to JPY996mn (+1.8%). The growth in number of course visitors contributed to higher restaurant revenue but also pushed up material costs. The rise in crude oil price drove electricity prices up, and utilities came to JPY506mn (+6.3%). In terms of expense items which went down year-on-year, personnel costs and outsourcing costs came to JPY4.3bn (-0.9%). The company had booked performance-based bonuses in the same period the previous year. SG&A costs came to JPY1.8bn (-3.0%). Foreign exchange loss was down. Fees stemming from reservations via online reservation sites on the Internet were on an uptrend. Depreciation dropped 5.8% to JPY753mn reflecting the impairment losses booked in the previous fiscal year. Distributable income Distributable income was JPY1.8bn (+17.6% YoY, or +JPY268mn). Quarterly net income was up JPY225mn year-on-year, while cash and cash equivalent reserves for future payments came to JPY278mn (-JPY612mn YoY). Distributable profits were SGD per unit (SGD0.020 in FY03/17). AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. Balance sheet items Current assets Current assets came to JPY12.6bn (down by JPY1.6bn from end FY03/17). Dividend payment led to a decline in cash and cash equivalents to JPY9.1bn (-JPY1.1bn) Fixed assets Fixed assets came to JPY164.6bn (up JPY309mn from end FY03/17). Current liabilities Current liabilities came to JPY36.6bn (down JPY1.0bn from end FY03/17). The decrease was primarily due to a drop in operating and other liabilities, membership deposits, and unpaid corporate taxes. Loans from financial institutions amounted to JPY14.9bn (up JPY70mn). The company booked a Term Loan A (with maturity scheduled in August 2017). In July 2017, Term Loan A s maturity was extended by one year beyond its original three years. Fixed liabilities Fixed liabilities came to JPY60.6bn (up JPY466mn from end FY03/17). The increase was primarily due to a rise in finance lease liabilities. Loans from financial institutions amounted to JPY28.4bn (up JPY90mn). The company booked a Term Loan B (principal of JPY15.0bn with maturity in August 2018) and a Term Loan C (principal of JPY15.0bn with maturity in August 2019). 41/57

42 FY03/17 results For full-year FY03/17, operating revenue was JPY51.9bn (-2.4% YoY), operating profit JPY6.6bn (-25.6%), net income JPY4.1bn (-38.3%), and distributable income JPY5.2bn (-14.3%). Distributions were SGD per unit (SGD in FY03/16). Operating revenue suffered from a decrease in the number of golf course visitors due to factors including earthquake in Kyushu in April 2016, heavy rains in August and September, and snowfall in February A decline in visitors drove golf-course and restaurant sales down. Revenue from annual membership fees also fell. Decreased revenue and booking of impairment losses led to a YoY profit decline. Operating revenue Due to fewer golf course visitors, golf course revenue was JPY34.4bn (-1.3% YoY), and restaurant and beverage sales JPY12.7bn (-1.5% YoY). Revenue from annual membership fees also fell to JPY4.4bn (-7.8% YoY). Moreover, as a pullback from the previous fiscal year, which saw a refund on consumption tax, other operating revenue came to JPY386mn (-39.5%). The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, are as follows. Number of course visitors The number of course visitors totaled 5.8mn, indicating a 0.9% decline YoY but a 1.4% increase compared to the average over the past three years. The company had fewer visitors because of heavy rains in western Japan in June, and typhoons and heavy rains in August and September The number of visitors also fell between October and December compared to the previous year when more people played golf thanks to a warm winter weather. Snowfall in February 2017 also caused the decline in number of visitors. Revenue per player Per our calculation based on AGT s operating revenue and number of golf course visitors, revenue per player was JPY6,000 (flat YoY) at golf courses and JPY2,200 (flat YoY) at restaurants, generally the same YoY. According to AGT s data, revenue per player averaged JPY7,654 (-1.4% YoY); of this, JPY5,045 was accounted for by green fees (-1.6%) and JPY2,202 from restaurant and shop spending (-0.2%). Revenue per player on weekdays was JPY6,323 (-0.6% YoY) with JPY3,845 (-0.6%) in green fees and JPY2,089 (-0.2%) in restaurant and shop spending. Weekend per player revenue was JPY9,834 (+0.1% YoY): JPY7,010 (+0.3%) in green fees and JPY2,386 (+0.5%) in restaurant and shop spending. Weekend per player revenue bottomed out. Operating expenses Operating expenses were JPY45.3bn (+2.3% YoY). Product procurement costs and materials expenses came to JPY3.7bn (-1.1%) as the number of golf course visitors decreased. The fall in crude oil prices drove electricity prices down, and utilities came to JPY2.1bn (-8.5%). SG&A costs came to JPY5.2bn (+6.2%) as commissions paid increased from an upswing in reservations via online golf reservation sites. Other expenses were JPY3.9bn (+49.6%) due to booking of impairment losses of JPY1.5bn. The company booked impairment losses of JPY1.5bn in recognition of the losses stemming from the decline in the appraisal value of the golf courses from December 2014 to December However, the total appraisal value of all the 89 courses in December 2016 amounted to JPY150.9bn, which was higher than the figure in December 2014 (JPY150.3bn). Distributable income Distributable income was JPY5.2bn (-14.3% YoY). Partly due to the fact that the aforementioned impairment losses of JPY1.5bn were without cash flows, distributable income was JPY1.1bn higher than net income, which totaled JPY4.1bn. 42/57

43 Distributable profits were SGD per unit (SGD in FY03/16). AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. Balance sheet items Current assets Current assets came to JPY14.1bn (down by JPY971mn from end FY03/16). Lower sales led to a fall in cash and cash equivalents. Cash and cash equivalents came to JPY10.3bn (down by JPY986mn). Fixed assets Fixed assets came to JPY164.3bn (down JPY2.3bn YoY). Impairment losses of JPY1.5bn and depreciation resulted in a decrease in fixed assets. Current liabilities Current liabilities came to JPY37.6bn (up by JPY15.8bn from end FY03/16). The increase was primarily due to a rise in loans from financial institutions and in membership deposits. Loans from financial institutions amounted to JPY14.8bn (up JPY14.4bn). The company reclassified a Term Loan A (with maturity in August 2017) from a noncurrent to a current liability. Membership deposits came to JPY11.2bn (up JPY1.1bn). The increase was brought on as the company reclassified them from long-term to current liabilities at the time of redemption. Fixed liabilities Fixed liabilities came to JPY60.2bn (down JPY17.5bn YoY). The decrease was due to a fall in loans from financial institutions and in membership deposits. Loans from financial institutions amounted to JPY28.3bn (down JPY14.2bn). The company reclassified a Term Loan A from noncurrent to current liability. Membership deposits came to JPY821mn (down JPY2.7bn). The decline was brought on as the company reclassified them from noncurrent to current liabilities, as mentioned above. FY03/16 results For FY03/16, operating revenue was JPY53.2bn, operating profit was JPY8.8bn, net income was JPY6.7bn, and distributable income was JPY6.0bn (compared with JPY5.7bn a year earlier). Distributions were SGD per unit (SGD a year earlier). AGT s FY03/16 earnings were its first full-year results since the stock was listed in August Thus, a full-year comparison cannot be made with FY03/15, which ran only eight months. However, comparisons are possible for Q3 (October November) and Q4 (January March). For both quarters, AGT posted an increase in revenue from a year earlier, as well as a year-on-year profit increase in Q3 and a narrowed operating loss in Q4. Operating revenue for Q3 and Q4 benefitted from an increase in the number of golf players, which boosted golf-course and restaurant sales. Increased revenue led to a year-on-year profit increase in Q3 and a narrowed operating loss in Q4. Operating revenue In Q3 and Q4, AGT saw an increase in revenue at golf courses and restaurants because it had more golf course visitors. 43/57

44 The number of golf course visitors and revenue per player, which we regard as key indicators for AGT s management performance, are as follows. Number of course visitors The number of course visitors totaled 5.8mn (+2.1% YoY). According to AGT, this growth was because many people in their 50s and above are becoming golfers and the nation s economy recovers. In addition, there were more operating days (given more days with favorable weather conditions), contributing to an increase in the utilization rate and in the number of golf course visitors. The number of visitors fell 2.5% during Q2 from a year earlier because the rainy season was prolonged and there were downpours in some parts of Japan. However, the weather was more favorable during Q1, Q3, and Q4, when the number rose 2.6%, 5.6%, and 3.2%, respectively, from a year earlier. Revenue per player Revenue per player was JPY6,000 at golf courses and JPY2,200 at restaurants. For Q3 and Q4, for which year-on-year comparisons are available, revenue per player at golf courses was JPY6,500 (-1.2% YoY) and JPY5,400 (-0.9% YoY), respectively. Revenue per player at restaurants for Q3 and Q4 were JPY2,300 (+0.6% YoY) and JPY2,100 (+0.1 YoY). Revenue per player declined mainly because AGT implemented a pricing strategy to better attract customers, and revenue from caddie fees fell. Operating expenses Operating expenses were JPY44.3bn. The figures for Q3 and Q4, for which year-on-year comparisons are available, were JPY10.8bn (+0.1 YoY) and JPY11.1bn (+1.2% YoY), respectively. Procurement costs for goods and materials expenses rose as the number of visitors increased. Distributable income Distributable income was JPY6.0bn, JPY621mn lower than net income, which totaled JPY6.7bn. The difference between depreciation charges and capital expenditures helped push up distributable income. However, income was negatively affected by the difference between the corporate income tax recorded and the actual amount paid, refunds of membership deposits, repayments of finance leases, and adjustments to distributions. Distributions were JPY5.5 (SGD0.0663) per unit. AGT makes distributions to unitholders in Singapore dollars on a semiannual basis. 44/57

45 Income statement Income statement FY03/15 FY03/16 FY03/17 FY03/18 (JPYmn) Cons. Cons. Cons. Cons. Operating revenue 33,425 53,175 51,919 51,450 YoY % -0.9% Operating expenses 29,362 44,347 45,347 45,379 Operating profit 4,063 8,828 6,572 6,071 YoY % -7.6% OPM 12.2% 16.6% 12.7% 11.8% Interests paid and other financial expenses 1,298 1,687 1,658 1,658 Pretax profit 2,765 7,141 4,914 4,468 YoY % -9.1% Pretax margin 8.3% 13.4% 9.5% 8.7% Tax charges Implied tax rate 4.2% 6.7% 16.3% 7.5% Net income 2,648 6,662 4,113 4,132 YoY % 0.5% Net margin 7.9% 12.5% 7.9% 8.0% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Note: FY03/15 was the first accounting period of the company, and reflects earnings from August 2014 to March For a detailed explanation of income statement refer to Earnings Structure section. 45/57

46 Balance sheet Balance sheet FY03/15 FY03/16 FY03/17 FY03/18 (JPYmn) Cons. Cons. Cons. Cons. Assets Cash and deposits 12,317 11,238 10,252 8,145 Trade and other receivables 2,315 2,391 2,407 2,596 Inventories Other current assets 1,559 1,218 1,206 1,207 Total current assets 16,438 15,092 14,121 12,229 Total tangible fixed assets 149, , , ,033 Total intangible fixed assets 17,115 17,136 17,131 17,245 Other fixed assets Total fixed assets 167, , , ,723 Total assets 184, , , ,952 Liabilities Loans from financial institutions ,830 28,847 Financial lease liabilities Trade and other payables 5,104 5,099 5,621 5,441 Membership deposits 9,778 10,142 11,215 10,521 Income tax payable Other current assets 4,641 4,630 4,350 4,135 Total current liabilities 21,318 21,834 37,602 50,547 Loans from financial institutions 42,329 42,500 28,299 14,108 Finance lease obligations 1,723 1,946 2,219 3,044 Loans payable to related parties Initial fees 5,028 3, Deferred tax liabilities 29,588 28,711 28,068 27,427 Other non-current liabilities Total long-term liabilities 79,485 77,669 60,174 45,250 Total liabilities 100,803 99,503 97,776 95,797 Equity Unitholders' fund 81,086 81,086 81,086 81,086 Deferred gains on hedges Retained earnings 2,590 1, ,206 Net assets attributable to unitholders of AGT 83,393 81,914 80,280 79,802 Non-controlling interest Total equity 83,451 82,117 80,596 80,155 Working capital -2,542-2,463-2,958-2,564 Total interest-bearing debt 43,266 43,443 43,629 43,455 Net debt (net cash) 30,949 32,205 33,377 35,310 Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Assets AGT invests directly and indirectly in businesses that own golf courses, driving ranges, and related assets. The company makes distributions to investors based on the cash flows generated from these businesses. As such, assets are primarily golf courses and related facilities (tangible fixed assets), comprising 83.0% of total assets in FY03/18. Assets also include goodwill. Tangible fixed assets Tangible fixed assets mainly comprise golf courses and related assets. In FY03/18, tangible fixed assets were JPY146.0bn. The breakdown was disclosed for FY03/16, when land totaled JPY19.7bn (13.2% of tangible fixed assets in FY03/16), golf courses JPY102.3bn (68.8%), buildings and structures JPY22.4bn (15.1%), and machinery, transport equipment and fixtures JPY4.1bn (2.7%). Further, AGT discloses appraisal values for its golf courses at the end of each year. At-end December 2017, the value of its 89 golf courses was appraised at JPY149.2bn. 46/57

47 Appraised value of golf courses (JPYmn) FY12/14 FY12/15 FY12/16 FY12/17 Total appraisal value of golf courses 150, , , ,237 YoY - 0.5% -0.1% -1.1% Tokyo area 73,396 73,658 73,984 72,691 YoY - 0.4% 0.4% -1.7% % of total 48.8% 48.8% 49.0% 48.7% Osaka area 37,861 37,969 37,860 37,397 YoY - 0.3% -0.3% -1.2% % of total 25.2% 25.1% 25.1% 25.1% Nagoya area 18,178 18,198 17,884 17,804 YoY - 0.1% -1.7% -0.4% % of total 12.1% 12.1% 11.9% 11.9% Other areas 20,872 21,159 21,166 21,345 YoY - 1.4% 0.0% 0.8% % of total 13.9% 14.0% 14.0% 14.3% Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Of tangible fixed assets, buildings and structures, machinery, transport equipment, and fixtures are depreciable assets. Depreciable periods are 1-56 years for buildings and structures, and 1-25 years for transport equipment and fixtures. In FY03/16 depreciation expenses were JPY3.4bn, with JPY2.3bn from buildings and structures, and JPY1.1bn from machinery, transport equipment, and fixtures. Goodwill In FY03/16 goodwill of JPY17.1bn accounted for nearly all of intangible fixed assets of JPY17.1bn. Goodwill comprises the difference between the JPY75.2bn that AGT paid to acquire shares in the silent partnership in Accordia Golf Asset LLC and the net assets of JPY58.1bn of Accordia Golf Asset LLC. Liabilities Main liabilities are loans from financial institutions, membership deposits, and deferred tax liabilities. Loans from financial institutions In August 2014, Accordia Golf Asset LLC acquired a syndicated loan worth JPY45.0bn from a consortium of nine Japanese banks. The loan was divided into three tranches of JPY15.0bn each for terms of three to five years, at variable interest rates of six-month Japanese yen TIBOR plus %. Interest rates on JPY25.0bn were fixed at % using rate swap contracts. There are principal repayment installments due at six monthly intervals on each tranche in the amount of JPY75mn, for a total of JPY225mn. Loans from financial institutions Principal (JPYmn) Interest rate Term Term Loan A 15,000 TIBOR +1.25% years ( August 2018) Term Loan B 15,000 TIBOR +1.50% 4 years ( August 2018) Term Loan C 15,000 TIBOR +1.75% 5 years ( August 2019) Note: Repayment of Term Loan A principal was due in August 2017 (maturity period of three years), but the repayment deadline was extended by a year in July Rate swap contracts Estimated principal (JPYmn) Fixed interest rate Term Term Loan B 15, % 4 years ( August 2018) Term Loan C 10, % 5 years ( August 2019) As the Term Loan A (principal of JPY15.0bn) and Term Loan B (principal of JPY15.0bn) were both due August 2018, the company recorded the loans under current liabilities in FY03/18. Term Loan C (principal of JPY15.0bn) is classified under fixed liabilities. 47/57

48 Membership deposits Membership deposits are deposits received from golf course members and can be refunded to members after an average year lock-in period following sign-up. Membership deposits are transferred from fixed liabilities to current liabilities when the lock-in period is over. In FY03/18, deposits (current liabilities) were JPY10.5bn and deposits (fixed liabilities) were JPY31mn. Deferred tax liabilities Deferred tax liabilities of JPY30.3bn were recognized on the day AGT was established (in August 2014). These represent taxable temporary differences of JPY81.6bn between the book value of golf course assets generated by the acquisition of the silent partnership stake and tax standards. These deferred tax liabilities are calculated by applying a tax rate of 37.11% to Accordia Golf Asset LLC. If Accordia Golf Asset LLC reserves future income for the purpose of paying future taxes, it becomes subject to Japanese corporate tax. 48/57

49 Statement of cash flows Statement of cash flows FY03/15 FY03/16 FY03/17 FY03/18 (JPYmn) Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 4,174 10,336 8,590 8,364 Cash flows from investing activities (2) -51,251-1,567-1,659-2,340 Free cash flow (1+2) -47,077 8,769 6,931 6,024 Cash flows from financing activities 59,332-10,259-7,478-8,131 Depreciation and amortization of goodwill (A) 2,485 3,415 3,259 3,168 Capital expenditures (B) -1,296-1,571-1,661-2,344 Changes in working capital (C) 2, Simple FCF (NI + A + B - C) 6,235 8,608 5,248 4,600 Source: Shared Research based on company data Note: Figures may differ from company data due to differences in rounding methods. Cash flows from operating activities Operating cash flow mainly depends on net income, depreciation, and changes in working capital. In FY03/15, there was a large gap between the sum of net income (JPY2.6bn), depreciation (JPY2.5bn), and changes in working capital (JPY2.7bn), which came to JPY7.8bn, and cash flow from operating activities of JPY4.2bn. This was largely due to differences between the amount of income tax recorded on the income statement and the actual amount paid of JPY4.3bn: corporate tax of JPY117mn on the income statement minus an outflow of corporate tax payments of JPY4.4bn. Corporate tax payments in FY03/15 arose from the absorption-type company split executed to transfer golf courses owned by Accordia Golf, as well as the tax liability relating to taxable income in April-July 2014 prior to AGT s listing. Cash flows from investing activities Investing cash flow is mainly outflows to purchase tangible fixed assets. In FY03/15 there were JPY50.0bn in outflows to purchase golf course businesses. Cash flows from financing activities The main items influencing financing cash flows are the issuance of beneficiary certificates, distribution payments, changes in borrowings, and refunds of membership deposits. 49/57

50 Other information History Prior to Accordia Golf s asset-light strategy Purchased and rehabilitated golf courses starting in 2005; grew profits through FY03/08 Accordia Golf was established in 1981 and acquired by Goldman Sachs in During 2005 and 2008, it purchased golf courses nationwide from companies that had filed for bankruptcy. Accordia Golf increased the number of visitors by offering competitive fees, reduced costs, improving profitability at these golf courses. The number of courses it owned peaked at 134 in FY03/13 from 45 in FY03/05. Accordia Golf s operating profit reached a record JPY14.1bn in FY03/10, from JPY5.2bn in FY03/06. November 2012: PGM Holdings launches takeover bid In November 2012, PGM Holdings, a subsidiary of Heiwa (TSE1: 6412) that owned and operated golf courses, announced a takeover bid for Accordia Golf. PGM Holdings offered a premium of 52.3% (JPY81,000 per share) to the last trading price of Accordia Golf shares with the aim of acquiring % of issued capital. In December 2012 Accordia Golf rejected the offer and announced a medium-term growth strategy, and a target consolidated dividend payout ratio of 90%. January 2013: PGM Holdings takeover bid unsuccessful In January 2013, Reno Co. Ltd. announced that it and its affiliated companies had purchased 18.1% of Accordia Golf. Reno demanded that Accordia Golf enter merger negotiations with PGM Holdings after the end of the tender offer and use its free cash flow to buy back shares. Accordia Golf announced that it intended to address these demands. Reno did not participate in the tender offer, however, and the number of shares tendered to PGM Holdings in its takeover bid was below the minimum. Thus, the bid was unsuccessful. August 2014: asset-light strategy to improve asset efficiency In March 2014, in response to shareholder demands, Accordia Golf announced its intention to conduct an asset-light (asset spinoff) transaction via a business trust with the aim of improving asset efficiency. In August that year, it executed the deal. According to Accordia Golf, its asset-light strategy allows the company to sell its assets and use the money to buy back shares. This cyclical business model entails Accordia Golf buying new golf courses, turning them around, and selling them to AGT. It uses the proceeds and management income to buy more golf courses. Accordia Golf owned and operated 133 golf courses in Japan, but 90 of them were transferred to AGT s subsidiary Accordia Golf Asset LLC. Accordia Golf sold its entire investment in those golf courses to AGT for roughly JPY113.2bn (of which JPY25.4bn was accounted for by 317,087 units in the company [28.85% of units outstanding]). Accordia Golf borrowed JPY20bn with stock acquisition rights from Daiwa PI partners (a subsidiary of the Daiwa Securities Group, TSE1: 8601) and used these funds to reduce interest-bearing debt and buy back shares (total amount: JPY45.0bn, to purchase 32.1mn shares, or 30.5% of outstanding shares). Establishment of AGT AGT listed on the Singapore Stock Exchange in August 2014 and raised funds through the issue of beneficiary certificates and bank loans. Through an investment in a silent partnership of Accordia Golf Asset LLC, AGT purchased 89 golf courses from Accordia Golf. Execution of asset-light strategy: 1. Reorganization of subsidiaries that own golf courses by Accordia Golf Subsidiaries of Accordia Golf that owned golf courses were reorganized into two groups via a corporate split: subsidiaries that only own golf courses to be transferred, and those that own the rest of the golf course assets. 2. Accordia Golf transfers shares in subsidiaries that own golf courses to Accordia Golf Asset LLC. as a contribution in kind Accordia Golf and Accordia Golf Asset LLC entered a silent partnership with Accordia Golf Asset LLC as the operator and Accordia Golf as the silent partner. Accordia Golf Asset LLC received shares in subsidiaries that owned golf courses (to be transferred as contribution in kind) from Accordia Golf. 50/57

51 Accordia Golf owned shares in the silent partnership as a result, and the transferred subsidiaries that owned golf courses became wholly owned subsidiaries of Accordia Golf Asset LLC. 3. Transfer of limited partnership shares in Accordia Asset LLC to AGT Accordia Golf transferred shares in the silent partnership to AGT in August 2014 when it listed. Accordia Golf employees involved in managing the transferred golf courses were now employed by Accordia Golf Asset LLC. 4. Assign shares in silent partnership of Accordia Golf Asset LLC using funds acquired through listing On its listing day in August 2014, AGT issued 782.0mn units at a price of SGD0.97 per unit, raising SGD759mn (JPY62.5bn). Separately, 317.1mn units worth SGD308mn (JPY25.4bn) were issued to Accordia Golf as part consideration for acquiring shares in the Accordia Golf Asset LLC silent partnership. AGT also borrowed a total of JPY45.0bn in syndicated loans from a consortium of nine Japanese banks. Using these funds, AGT paid roughly JPY113.2bn to purchase the stake in the Accordia Golf Asset LLC silent partnership owned by Accordia Golf. Distribution policy AGT makes distributions to unitholders on a semiannual basis. The amount to be distributed for each six-month period is calculated on March 31 and September 30 every year. The company has the following distribution policy: For FY03/15, the trustee-manager distributed 100.0% of distributable income to unitholders. For FY03/16 onward, the trustee-manager distributes at least 90.0% of distributable income to unitholders. Actual distribution levels are decided by the trustee-manager based on needs to procure funds, consideration regarding capital management, and overall distribution stability. Distributions are denominated in Singapore dollars. Corporate governance The Business Trusts Act stipulates that the board of directors of the trustee-manager must have a majority of directors who are independent from management and who do not have business relationships with the trustee-manager. The board of AGT has five members, three of whom are independent directors in accordance with the Business Trusts Act. AGT also complies with other conditions regarding corporate governance based on the Business Trusts Act. 51/57

52 What is a business trust? Business trust A business trust, a system employed in Singapore, is similar to an investment trust. A business trust collects money from investors and invests in a specific business or assets. Through investments and operation of these assets, it distributes profits to investors. Business trust Source: Shared Research Business trust vs. REIT In Singapore, a business trust has much more freedom than a REIT, as there are no restrictions on assets, revenue sources, or borrowing. Difference between business trust and REIT Major asset types Business Trust Not regulated REIT Real estate Management structure Trustee and manager(management company) Trustee and manager(management company) are identical are separate Regulation Real estate Not regulated Real estate and related assets to represent 75% or more of net assets Development Not regulated Development properties to represent less than property 10% of net assets Revenue sources Not regulated Rents to represent 90% or more of total revenue Borrowing Not regulated Borrowings to represent 35% or less of net assets (60% or less, if rating is obtained) Taxation Income tax as in the case of business corporations Income tax deducted on the condition that 90% or more of profit to be distributed to unitholders within the fiscal year of accrual Profit share Exempt from income tax Subject to income tax in Singapore Source: Shared Research based on various sources 52/57

53 Outline of Accordia Golf (AGT s sponsor) Purchased and revamped golf courses starting in 2005; grew profits through FY03/10 The predecessor of Accordia Golf, Takenuma Golf Driving Range, was established in 1981 in Fujioka, Gunma to manage golf driving ranges. It became a subsidiary of Nitto Kogyo Co., Ltd. in 1991, and in 2002 Nitto Kogyo transferred all of the company s shares to the Goldman Sachs Group. Shared Research understands that from the late 1980s to early 1990s, golf courses in Japan locked-in membership deposits for years after the customer joined, using these deposits to develop golf courses. (According to data from METI, in ,370 golf courses used this system, roughly 70% of the total 2,026 golf courses nationwide.) According to Accordia Golf, as the bulk of golf course development funds came from membership deposits, it was important for golf course managers to sell memberships while developing golf courses and maintain membership prices once the golf course opened. As such, emphasis was placed on maintaining the status of golf courses and memberships, rather than attracting many visitors and increasing revenues. Yet after the economic bubble burst in the 1990s, the price of golf course memberships fell, and many members quit, requesting deposit refunds. Golf courses that used the deposits for development were unable to meet these requests, and asked for debt relief under the Corporate Reorganization Act and the Civil Rehabilitation Act. From , 956 golf courses underwent legal liquidation procedures (estimates by Shared Research based on Golf Tokushin, Ikki Publishing, for established golf courses). Accordia Golf, which was acquired by Goldman Sachs in 2002, sought to improve its profitability from 2005 to 2008 by purchasing golf courses nationwide from the companies that had filed for bankruptcy and improving their profitability. It did so by making fees more competitive to attract more visitors, and by cutting costs. As a result, Accordia increased the number of its golf courses from 45 in FY03/05 to a peak of 134 in FY03/13. The company s operating profit increased to a record JPY14.1bn in FY03/10, from JPY5.2bn in FY03/06. Business performance of Accordia Golf FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 No. of golf courses held Net increase Acquired Sold No. of golf courses managed Number of visitors (mn) Customer spend (JPY) 10,934 10,516 10,036 9,873 9,639 9,651 9,553 9,465 9,452 Operating revenue 77,505 87,443 87,373 86,694 86,799 90,920 91,983 63,909 48,550 47,652 YoY 12.8% 12.8% -0.1% -0.8% 0.1% 4.7% 1.2% -30.5% -24.0% Operating profit 12,565 12,693 14,087 13,317 12,601 13,303 12,247 7,331 7,308 5,718 YoY 6.7% 1.0% 11.0% -5.5% -5.4% 5.6% -7.9% -40.1% -0.3% OPM 16.2% 14.5% 16.1% 15.4% 14.5% 14.6% 13.3% 11.5% 15.1% Recurring profit 11,072 10,442 12,373 11,461 10,726 11,140 10,318 3,536 8,142 YoY 5.0% -5.7% 18.5% -7.4% -6.4% 3.9% -7.4% -65.7% 130.3% RPM 14.3% 11.9% 14.2% 13.2% 12.4% 12.3% 11.2% 5.5% 16.8% Net Income 9,582 8,511 10,438 8,121 11,294 6,025 4,617 6,015 5,469 YoY -8.5% -11.2% 22.6% -22.2% 39.1% -46.6% -23.4% 30.3% -9.1% Net income 12.4% 9.7% 11.9% 9.4% 13.0% 6.6% 5.0% 9.4% 11.3% Total asset 213, , , , , , , , ,054 Shareholders' equity 56,134 63,588 72,973 78,035 88,303 93,097 92,203 47,163 49,905 ROE 18.7% 14.2% 15.3% 10.8% 13.6% 6.6% 5.0% 8.7% 11.3% Source: Shared Research based on Accordia Golf data How Accordia Golf improves profitability at golf courses Accordia Golf improves the profitability of its golf courses by increasing the number of visitors and cutting costs. 53/57

54 Attracting visitors by offering various playing formats and setting competitive rates Accordia Golf works to increase the number of visitors and cut costs at the golf courses that it buys. To do so, it prioritizes golf course maintenance, and offers a variety of playing formats and green fees such as early morning rounds and rounds without caddies. It also provides golf pro shops and expansive restaurant menus. As a result, the average annual number of visitors at golf courses operated by Accordia Golf is about 30-40% above national averages. Of the 7.2mn golfers in Japan as of March 2017, 4.8mn (62.0%) held Accordia point cards. Number of golf course visitors per year 55,000 50,000 45,000 National average 40,000 Accordia Golf 35,000 30, National average 36,132 36,454 37,177 37,481 36,209 34,947 36,069 36,356 37,031 Accordia Golf 48,751 48,074 49,885 51,328 49,359 50,505 52,458 50,003 51,705 Source: Shared Research based on Accordia Golf data Cutting costs Accordia Golf reduces costs at golf courses by standardizing operations, promoting services without caddies, outsourcing labor, and leveraging economies of scale to cut procurement costs. The company s model case is doubled operating profit before amortization three years after purchasing a golf course. Accordia Golf s three-year profit growth model for acquired courses Number of customers ('00) Operating profit (JPYmn) Personnel expenses (JPYmn) Other expenses (JPYmn) Operating profit before amortization (JPYmn) 0 Acquisition year 1st year 2nd year 3rd year Acquisition year 1st year 2nd year 3rd year Number of customers ('00) Operating profit (JPYmn) Personnel expenses (JPYmn) Other expenses (JPYmn) Operating profit before amortization (JPYmn) Source: Shared Research based on company data 54/57

55 Asset-light strategy executed in August 2014 to boost returns In March 2014, Accordia Golf announced a decision to implement an asset-light strategy to boost ROA. In August 2014, it transferred 89 golf courses to AGT. According to Accordia Golf, under its asset-light strategy, it sells assets and uses the money to buy back shares to increase its ROE. Accordia Golf s value chain Accordia Golf buys a golf course, adds value using its expertise to turn the business around, sells the relevant assets to AGT after improving profitability, and uses the proceeds of the sale and management fees to buy more golf courses. Value chain in Accordia Golf s cyclical business model Source: Shared Research based on Accordia Golf data Tender offer by MBKP Resort leads to delisting in March 2017 Since implementing the asset-light strategy in August 2014, Accordia Golf has continued to advocate the cyclic business model but AGT has also faced difficulties investing in buying new golf courses and driving ranges or adding value to the properties. This was because AGT required much time to arrange financing and had not been able to come up with the funds to acquire Accordia Golf s golf courses. Moreover, Accordia Golf utilized cash flows for shareholder returns. Against this backdrop, a tender offer for the shares of Accordia Golf was conducted by K.K. MBKP Resort between November 2016 and January Consequently, Accordia Golf was delisted from the Tokyo Stock Exchange in March According to MBKP Resort s plan, after delisting Accordia Golf, its cash flows were to be redirected from dividend payouts to the acquisition of new golf courses and driving ranges. 55/57