O

October 19, 2023

Financial Results for the Fiscal Period
from March 1, 2023 to August 31, 2023
Nippon Accommodations Fund Inc. (NAF) is listed on the Tokyo Stock Exchange (J-REIT) withthe securities code number 3226. (Website: https://www.naf-r.jp/english/)
Executive Director:
Investment TrustManagement Company:
President and CEO:Inquiries:

Takashi Ikeda

Mitsui Fudosan Accommodations Fund Management Co., Ltd.
Hiroshi Kojima
Tetsuji Kawakami, Director and Chief Financial Officer
Tel: +81-3-3246-3677
Scheduled Filing Date of Securities Report:
November 30, 2023
Scheduled Commencement Date of Cash Distribution Payment: November 15, 2023

1. Business Results for the Fiscal Period from March 1, 2023 to August 31, 2023
(1) Operating Results(in millions of yen, rounded down; except as noted)
Total revenues

Operating income(%)*

Income before income
taxes

(%)*

(%)*

For the period ended
August 31, 2023

13,049

5.7

6,256

7.2

5,893

8.6

February 28, 2023

12,344

(0.7)

5,835

1.9

5,427

2.5

IncomeIncomebeforebeforeNet income Net income/incomeincomeper unit
net assets
taxes/
taxes/
operatingtotal assets
incomeNet income

(%)*

(yen)

(%)

(%)

(%)

For the period ended
August 31, 2023

5,892

8.6

11,703

3.9

1.8

45.2

February 28, 2023

5,426

2.5

10,778

3.6

1.7

44.0

* Percent figures show changes from previous period.

1(2) Distributions(in millions of yen, rounded down; except as noted)
Distribution
Total
per unit
distributions Distribution in
Total
Distributions/(not including (not includingexcess of distributions in
Payout ratio
distributions in distributions inexcess of
net assets
earnings
excess ofexcess of
earnings
per unit
earnings)
earnings)
(yen)
(yen)
(%)
(%)

For the period ended
August 31, 2023

10,645

5,359

–

–

91.0

3.5

February 28, 2023

10,778

5,426

–

–

100.0

3.6

(Note)For the period ended August 31, 2023, because a part of retained earnings (¥533
million) was internally reserved, the amounts of “Total distributions” and “Net income”
are different.

(3) Financial Position(in millions of yen, rounded down; except as noted)

Total assets

Net assets

Net assets/
total assets

Net assets per
unit

(%)

(yen)

As of
August 31, 2023

327,052

151,87446.4

301,653

February 28, 2023

327,109

151,408

46.3

300,728

Cash flows fromoperating activities

Cash flows frominvesting activities(4) Cash Flows(in millions of yen, rounded down; except as noted)

Cash flows fromfinancing activities

Cash and cash
equivalents

For the period ended
August 31, 2023

9,185

(994)

(6,425)

16,872February 28, 2023

6,785

(609)

(6,185)

15,1072

2. Forecasts for the Fiscal Period from September 1, 2023 to February 29, 2024
and Fiscal Period from March 1, 2024 to August 31, 2024
(in millions of yen, rounded down; except as noted)

Total
revenues

Distribution
per unit
Distribution in(not
Incomeexcess ofbeforeNet income including
earnings
income taxes
distributions
per unit
in excess ofearnings)

Operatingincome

(%)*

(%)*

(%)*

(%)*

(yen)

(yen)

February 29, 2024 12,533(4.0)

5,990 (4.2)

5,559 (5.7)

5,558 (5.7)

11,040–August 31, 2024

0.8

5,859 (2.2)

5,388 (3.1)

5,387 (3.1)

10,700–For the period ending
12,632* Percent figures show changes from previous period.

Note:
The net income per unit projections for the fiscal period ending February 29, 2024 and thefiscal period ending August 31, 2024 are ¥11,040 and ¥10,700, respectively.

3. Other

1. Changes in significant accounting policies, Changes in accounting estimates and Restatement(1) Changes in significant accounting policies due to revisions in accounting standards andothers: None
(2) Changes other than in the above item (1): None
(3) Changes in accounting estimates: None
(4) Restatement: None
2. Total number of investment units issued(1) The total number of investment units issued (including treasury investment units) as of theperiod-end
As of August 31, 2023:

503,472 units

As of February 28, 2023:

503,472 units(2) The number of treasury investment units as of the period-end
As of August 31, 2023:- units

As of February 28, 2023:- units

Disclaimer:

The above forecasts are based on information currently available to NAF and on certain
assumptions deemed to be reasonable. Actual operations may differ substantially due to anumber of factors. Accordingly, the forecasts are not a guarantee of any cash distribution
amount.

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35th Period (August 2023) Overview of Investment
Main Trend of NAF
NAF is a J-REIT that invests in “Accommodation Assets,” which it defines as real estate that ismainly used/may be used for residence or hotels. Based on the Act on Investment Trusts andInvestment Corporations (hereinafter “Investment Trust Act”), NAF was established on October 12,
2005, and was listed on the Real Estate Investment Trust Securities Market (J-REIT Market) of theTokyo Stock Exchange on August 4, 2006 (securities code number: 3226).
Since being listed, NAF has continued to acquire properties and the assets under management at
the end of the period under review consisted of 133 properties at a total acquisition price of¥339,038 million (assets at time of listing: 27 properties at a total acquisition price of ¥101,385
million).
Investment Environment
During the six months ended August 31, 2023 (the “35th Period”), the Japanese economy
continued to show signs of gradual recovery as restrictions on activity to prevent the spread of
the novel coronavirus disease (COVID-19) were further relaxed. In addition to increased personal
consumption due to improvement in the employment and income situation, despite rising prices
against the backdrop of high resource prices, the weak yen and other factors, consumption frominbound tourists has also recovered almost to the level prior to the COVID-19 pandemic.
Corporate earnings have improved mainly due to easing of supply constraints and progress
made in passing on increases in procurement prices to sales prices, and growth in capital
investment has also reached a high level against the backdrop of labor shortages, etc.
In the residential rental market, the balance of supply and demand was favorable against the
backdrop of a trend of a population influx into urban centers, mainly in the Tokyo metropolitanarea, etc., and property occupancy rates were generally high.
In the real estate trading market, although interest rates have been rising globally due to inflation,monetary tightening, etc., an environment with relatively low interest rates has continued inJapan, and the acquisition environment remains challenging for NAF as demand from investors
with regard to rental apartments, where occupancy and revenue are stable, was robust.
External Growth (Acquisition and sale of properties)
During the period under review, NAF sold Dormy Ashiya in August 2023 (acquisition price inMarch 2011: ¥928 million, sale price: ¥1,304 million).

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Internal Growth (Management and operation of properties held by NAF)
In this environment, as a result of Mitsui Fudosan Residential Lease Co., Ltd., the property
management company of NAF, and Mitsui Fudosan Accommodations Fund Management Co., Ltd.,the asset management company of NAF, properly collaborating and working on management andoperation of NAF’s rental apartments portfolio, the occupancy rate for rental apartments was 96.8%
at the end of the period under review, and rent change before and after turnover was 4.0 % at thetime of tenant turnover, increasing for three consecutive periods, with the balance of supply anddemand of rental apartments continuing to recover amid the normalization of economic and social
activities from the COVID-19 pandemic. In addition, NAF aims to reduce costs by utilizing the meritsof outsourcing all property management tasks to the property management company while
examining, whenever necessary, the adequacy of the grade of property management, cost of
management and operation.
Meanwhile in the management of “Hospitality Facilities” (Note), NAF has concluded long-term
contracts regarding fixed rents to a professional operator or business corporation in order to aim
for stable rental revenue. All properties have been stably occupied in general. In addition, the asset
management company regularly monitors the management and operational activities, and makes
adjustments through professional dialog with the operator or business corporation as necessary.
In order to maintain and improve the competitiveness of NAF’s portfolio, operations, such as
appropriate renewal work according to the property age, and work to enhance the property value,
are systematically carried out, and in the period under review, NAF carried out large-scale repairs
at Park Axis Sapporo Shokubutsuen Mae and renovations, etc. in private areas at Okawabata
Apartment Communities, etc. In addition, NAF is not only making continuous efforts to reduce costs,
but also introducing such features as environmentally friendly, energy-saving facilities, which
includes changing the lighting in common areas to LED lighting, in a timely manner.
(Note) “Hospitality Facilities” is a generic term for “Accommodation Assets” that includes the four categories of“Dormitories, Corporate Housing,” “Serviced Apartments,” “Senior Residences,” and “Hotels,” excluding“Rental Apartments.”

Financial Strategy (Overview of funds procurement)
NAF’s basic policy is to carry out operations in a conservative manner that gives consideration tosuch matters as maintaining stable distributions in the medium and long term. In the period underreview, NAF continued to pursue financing from various sources with diversified repayment dates
and an emphasis on long-term, fixed-rate loans in its procurement of funds by taking into accountmarket trends and interest rate levels, and refinancing existing loans.
As a result, at the end of the period, total interest-bearing debt amounted to ¥167,500 million(¥1,000 million decrease from previous period), the long-term debt ratio was 98.8%, the long-term,
fixed-rate debt ratio was 94.6%, and the loan-to-value (LTV) ratio was 51.2 %. The averageremaining maturity of long-term interest-bearing debt was 4.7 years and the number of financial
institutions was 27. Furthermore, the weighted average interest rate at the end of the period was
0.48%.
NAF also has secured a commitment line for the purpose of securing flexible and stable fundprocurement methods. At the end of the period under review, its total maximum borrowing amountwas ¥15,000 million.
With respect to financing through investment corporation bonds, NAF filed a shelf-registration
statement regarding its establishment of a maximum issuance amount for investment corporation5

bonds for public offering in July 2023. The remaining balance of the planned issuance amount at
the end of the period is ¥100 billion.
Planned issuance amountUp to ¥100 billion

Scheduled period of issuance

From July 25, 2023 to July 24, 2025

Purpose for funds

Acquisition of specified assets (as stated in Article 2,
Paragraph 1 of the Law Concerning Investment Trusts andInvestment Corporations of Japan), repayment of borrowings,
redemption of investment corporation bonds, refund ofleasehold and security deposits, payment for repairs andmaintenance, working funds, etc.

Rating of NAF as of August 31, 2023 is as follows.
Rating agency
Rating and Investment Information, Inc.
S&P Global Ratings Japan Inc.

Rating subject
Issuer credit rating
Long-term corporate
Short-term corporate

RatingA A - (Trend of rating: Stable)
A + (Outlook for rating: Stable)
A -1

Overview of Performance and Distribution
In the period under review, NAF recorded total revenues of ¥13,049 million, operating income of¥6,256 million, income before income taxes of ¥5,893 million and net income of ¥5,892 million.
Part of the capital gains resulting from the sale of Dormy Ashiya is to be internally reserved as areserve for reduction entry. In addition to the above, NAF has decided to distribute the majority ofthe ¥5,359 million balance remaining after deduction of ¥533 million of reserve for reduction entry
from retained earnings in accordance with the Distribution Policy (Article 34 of the Articles ofIncorporation) set forth by NAF. The distribution per unit was ¥10,645.

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Management Policy and Issues for the 36th Period Onward
Looking ahead, the Japanese economy is expected to see signs of recovery as personal
consumption and capital investments by companies increase. However, it is important to pay
attention to the risks related to overseas economic trends that will affect Japan’s economic situation,etc., such as the outlook for the price of goods, which is continuing to rise, monetary policy andfluctuating interest rates in Japan and in various major countries and regions overseas, forecasts
for the economies of the U.S. and Europe and concerns about the outlook for China.
As for quality rental apartments in which NAF would invest in the 23 wards of Tokyo, where nearly
90 percent of NAF’s rental apartments portfolio is located, and also in the urban areas of othermajor cities (Note), the supply is gradually increasing. On the other hand, the population trend in the
23 wards of Tokyo has shifted from a net outflow in 2021 to a net inflow of approximately 20,000
people in 2022, and this trend is still ongoing in 2023. The COVID-19 pandemic has mostly cometo an end, and currently, once again, we are observing acceleration in a population influx into urban
centers. Therefore, the needs of tenants to live in urban centers are expected to remain firm.
Concerning the real estate trading market, the placement of quality rental apartments as stable
investment assets is not expected to change, and the acquisition environment is expected toremain challenging, but the response among investors depending on the impact of the rise ininterest rates, etc. due to global monetary tightening and political and economic developments inJapan and overseas should be carefully assessed.
(Note) “Other major cities” refers to each of the urban areas of Sapporo, Sendai, Nagoya, Osaka, Kyoto, Kobe,
Hiroshima and Fukuoka.

External Growth (New acquisition of properties)
NAF steadily acquires competitive properties that can respond to future changes in demand trends,
leveraging our pipeline to the Mitsui Fudosan Group and enhancing information channel at theasset management company.
While concentrating on a property acquisition strategy of stable acquisition of “Rental Apartments,”
NAF will acquire “Hospitality Facilities,” which are properties that offer stable revenue andcompetitiveness over the long term. NAF will keep the Hospitality Facilities’ share of the portfolio(based on acquisition price) to a maximum of 10% in the near-term, and carry out operations that
carefully select properties to acquire.
Internal Growth (Management and operation of leasehold properties)
NAF aims to achieve solid internal growth while maintaining asset value in the long term by carryingout dynamic leasing that can flexibly respond to the balance of supply and demand in the market
going forward and changes in tenants’ needs as well as by maintaining and improving rent levels
and occupancy rate, and reducing costs, and systematically carrying out appropriate renewal work
according to the property age and work to enhance the property value, etc., through optimal
management and operational activities that utilize the value chain and highly specialized knowhow
of the Mitsui Fudosan Group.

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Financial Strategy
In regard to borrowings, taking into account borrowing cost, NAF will conduct financing activities
that emphasize on financing by long-term, fixed-rate loans and diversified repayment dates bytaking measures to counter future interest rate risks and refinancing risks. With respect to the upper
limit of LTV ratio, although the limit is set at around 60% in the asset management guidelines, NAF
is aiming for a near-term upper limit at a level of around 55% in its external growth process.
NAF will examine the necessity of issuance of new units by paying attention to market trends anddistribution amount levels, and taking into consideration the demand for funds for the purpose ofproperty acquisition, as well as our financial position. Additionally, NAF will examine futureissuances of investment corporation bonds in accordance with market trends, within the range ofthe remaining balance of planned issuance amount for which shelf-registration of NAF bonds has
been carried out.
Significant Subsequent Events
Not applicable(Reference information)
The following asset was acquired on September 1, 2023. The “Acquisition price” is exclusive of
miscellaneous expenses for acquisition, fixed property taxes, and urban planning taxes.
Smile Hotel Nishi Akashi
Acquisition price:
Appraised value:
Type of property:
Location (registration number):Completion date:
Structure/Number of stories:
Rentable area:
Seller:Smile Hotel Okinawa Naha
Acquisition price:
Appraised value:
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable area:
Seller:¥970 million¥994 million(date of value appraisal: July 1, 2023)
Real estate and land lease rights
12-5 Wasaka, Akashi-shi, Hyogo (district whereresidence indication has not been implemented yet)
January 8, 2003
Steel structure/10 stories
2,045.00 m2
Hirakawamon Kanri GK¥1,120 million¥1,240 million(date of value appraisal: July 1, 2023)
Real estate24-1 Maejima 3-chome, Naha-shi, Okinawa
August 27, 2007
Flat-roof reinforced concrete structure/10 stories
2,772.69 m2
Hirakawamon Kanri GK

8Smile Hotel Matsuyama
Acquisition price:
Appraised value:
Type of property:
Location (registration number):Completion date:
Structure/Number of stories:

Rentable area:
Seller:¥1,010 million¥1,040 million(date of value appraisal: July 1, 2023)
Real estate18-1 Katsuyama-cho, Matsuyama-shi, Ehime (district
where residence indication has not been
implemented yet)
October 19, 2007
Flat-roof reinforced concrete structure/11 stories andsingle-story, steel structure with alloy-plated steelsheet cladding
2,144.46 m2
Hirakawamon Kanri GK

9Forecasts of Investment Performance
The forecasts for the 36th period (from September 1, 2023 to February 29, 2024) and for the 37th
period (from March 1, 2024 to August 31, 2024) are as follows. For the underlying assumptions offorecasts, please refer to “Underlying assumptions of forecasts for the 36th period (from September
1, 2023 to February 29, 2024) and the 37th period (from March 1, 2024 to August 31, 2024)” below.

Total revenues
Operating income
Income before income taxes
Net income
Distribution per unit
(not including distributions in excess of earnings)
Distribution in excess of earnings per unit

36th period(February 2024)¥12,533 million¥5,990 million¥5,559 million¥5,558 million

37th period(August 2024)¥12,632 million¥5,859 million¥5,388 million¥5,387 million¥11,040¥10,700¥―¥―(Note) The above forecasted figures are calculated based on certain assumptions at the time of preparation of thisinformation. Therefore, actual total revenues, operating income, income before income taxes, net income
and distribution per unit may change due to future acquisition or sale of investment assets, fluctuation in thereal estate market or other changes in the environment in which NAF operates. Accordingly, the forecasts
are not a guarantee of any cash distribution amount.

Underlying assumptions of forecasts for the 36th period (from September 1, 2023 to
February 29, 2024) and the 37th period (from March 1, 2024 to August 31, 2024)
Item
Number of operating days:
Investment assets/
Total revenues

Underlying assumptions- From September 1, 2023 to February 29, 2024 (182 days)- From March 1, 2024 to August 31, 2024 (184 days)- The number of properties held by NAF as of the date of thisdocument is 136 properties. In the forecasts of investment
performance, it is assumed that no transfer of properties (such as
acquisition of new properties, sale of properties acquired, etc.) shalloccur until August 31, 2024.
- The average month-end occupancy rates for total properties forthe 36th period and 37th period are expected to be 97.2% and97.0%, respectively.
- The actual figures may change due to factors such as transfer ofproperties.

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Item
Operating expenses

Interest-bearing debt/
Non-operating expenses

Number of units issued

Distribution per unit
(not including distributions inexcess of earnings)

Underlying assumptions- The fixed property taxes and urban planning taxes recognized as
expenses are expected to be ¥668 million for the 36th period and¥674 million for the 37th period. However, when an investment
asset is acquired, the fixed property taxes and urban planning taxes
that are settled with the previous owner according to the number ofdays the asset is owned are not recognized as expenses because
they are included in the acquisition price.
- The amounts recognized for the repairs and maintenanceexpenses and outsourcing expenses of buildings are the required
amounts forecast for the number of operating days. However,
because repairs and maintenance expenses and outsourcing
expenses may arise suddenly due to some unexpected cause(building damage, etc.), amounts usually vary depending on theyear, some expenses arise occasionally, etc., the repair andmaintenance expenses and outsourcing expenses for the numberof operation days may be different from the amounts forecast.
- We calculate depreciation and amortization expenses (including
ancillary expenses upon initial acquisition) using the straight-line
method, and the expenses are expected to be ¥1,905 million for the36th period and ¥1,903 million for the 37th period.
- It is assumed that NAF’s balance of interest-bearing debt, whichis ¥167,500 million as of the date of this document, shall not change
until August 31, 2024. In addition, it is assumed that loans that
become due during the period will be fully refinanced.
- Interest expense and interest expenses on investment corporation
bonds, etc. are expected to be ¥428 million for the 36th period and¥470 million for the 37th period.
- Amortization of costs related to the issuance of new units, etc. is
expected to be ¥2 million for the 36th period.
- We assume 503,472 units outstanding as of the date of thisdocument. In the forecasts of investment performance, it isassumed that there shall be no issuance of new units until August
31, 2024.
- Distribution (distribution per unit) is calculated assuming it will bein accordance with the Distribution Policy set forth in the Articles ofIncorporation of NAF.
- The actual amount may change due to factors such as fluctuations
in rent revenues owing to changes in tenants, transfer of properties,
interest rate fluctuations, and additional issuance of investment
units.

11

Item
Distribution in excess ofearnings per unit
Other

Underlying assumptions- There is no distribution in excess of earnings planned as of thedate of this document.
- NAF has assumed no enforcement of such revisions to laws andregulations, tax systems, accounting standards, regulations of theTokyo Stock Exchange and rules of The Investment Trusts
Association, Japan, etc. that may affect the above forecasts.
- NAF’s forecasts assume no unforeseen significant changes ingeneral economic trends or conditions in the real estate market.

12Disclaimer:This financial report has been prepared in accordance with Japanese accounting standards andJapanese laws. Figures have been rounded down to eliminate amounts of less than one million
yen.
Please note that this English translation, a summary of the Japanese original document, is provided
solely for informational purposes. In the event of any discrepancy between the Japanese original
and this English translation, the Japanese original shall prevail.

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