O

April 18, 2017

Financial Results for the Fiscal Period
From September 1, 2016 to February 28, 2017
Nippon Accommodations Fund Inc. (NAF) is listed on the Tokyo Stock Exchange (J-REIT) withthe securities code number 3226. (Website: http://www.naf-r.jp/english/)
Executive Director:
Investment TrustManagement Company:
President and CEO:Inquiries:

Nobumi Tobari

Mitsui Fudosan Accommodations Fund Management Co., Ltd.
Tateyuki Ikura
Satoshi Nohara, Director and Chief Financial Officer
Tel: +81-3-3246-3677
Scheduled Filing Date of Securities Report:
May 31, 2017
Scheduled Commencement Date of Cash Distribution Payment: May 15, 2017

1. Business Results for the Fiscal Period from September 1, 2016 to February 28,
2017(1) Operating Results(in millions of yen, rounded down; except as noted)
Total revenues

Operating income(%)*

Income before income
taxes

(%)*

(%)*

For the period ended
February 28, 2017

10,650

0.3

4,717

3.3

4,139

5.1

August 31, 2016

10,621

1.8

4,567

0.8

3,940

1.2

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

(%)*

(yen)

(%)

(%)

(%)

For the period ended
February 28, 2017

4,138

5.1

8,541

3.0

1.4

38.9

August 31, 2016

3,939

1.2

8,130

2.8

1.3

37.1

* 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(not including (not includingexcess of
distributions inDistributions/
Payout ratio
distributions in distributions inearnings
excess of
net assets
excess ofexcess of
per unit
earnings
earnings)
earnings)
(yen)
(yen)
(%)
(%)

For the period ended
February 28, 2017

8,428

4,083

–

–

98.7

2.9

August 31, 2016

8,130

3,939

–

–

100.0

2.8

Note:
For the period ended February 28, 2017, the amounts of “Total distributions” and “Net income”
are different because a part of retained earnings (¥55 million) was retained internally.

(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
February 28, 2017

293,446

139,81247.6

288,557

August 31, 2016

295,463

139,61247.3

288,145

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
February 28, 2017

7,170

(272)

(5,939)8,050

August 31, 2016

6,318

(4,196)(2,394)7,092

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2. Forecasts for the Fiscal Period from March 1, 2017 to August 31, 2017
(in millions of yen, rounded down; except as noted)

Total
revenues

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

Operatingincome

(%)*

(%)*

(%)*

(%)*

(yen)

(yen)

0.2

4,545 (3.7)

3,974 (4.0)

3,973 (4.0)

8,200

0

For the period ending

August 31, 2017

10,666* Percent figures show changes from previous period.

Note:
Projected net income per unit for the fiscal period ending August 31, 2017 is ¥8,200.

3. Other
1. Changes in significant accounting policies, Changes in accounting estimates and Restatement(1) Changes due to revisions in accounting standards and others: 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 February 28, 2017:484,522 units

As of August 31, 2016:

484,522 units(2) The number of treasury investment units as of the period-end
As of February 28, 2017:- units

As of August 31, 2016:- 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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22nd Period (February 2017) Overview of Investment
External Growth (Acquisition of properties)
No properties were acquired during the period under review.
NAF sold Park Axis Shibuya in December 2016 (acquisition price in August 2006: ¥1,282 million,
sale price: ¥1,270 million).
Internal Growth (Management and operation of properties held by NAF)
NAF has chosen Mitsui Fudosan Residential Lease Co., Ltd. as master property managementcompany (below, “Master PM”) on management of NAF’s rental apartments portfolio. The
company and the asset management company collaborate in the management of properties NAF
owns with the aim of implementing effective management and operational activities based onregional characteristics and the individual features of each property. These include efforts such as
speedy management and operations by the Master PM by applying the portfolio management
system, the tenant recruiting activities suited to the circumstances of individual properties, thestreamlining efforts such as reduction of management cost, etc., and providing tenants the“accommodation” services by corresponding to various needs based on the results of resident
questionnaires.
In order to maintain and improve the competitiveness of NAF’s portfolio, operations areadequately planned and carried out at the asset management company. These include
appropriate renewal work according to the property age, and work to enhance the property value
at Okawabata Apartment Communities, which is one of the core properties of NAF. In addition,
NAF is not only making continuous efforts to reduce costs, but also introducing such features asenvironmentally friendly, energy-saving facilities in a timely manner.
In the period under review, NAF carried out renovations in common areas and private areas at
Okawabata Apartment Communities. Changes implemented at other properties include reviews ofcontract capacity for electricity through the introduction of controllable circuit breakers, and work
to change the lighting in common areas to LED lighting.
Financial Strategy (Overview of funds procurement)
One of NAF’s basic policies is to carry out operations, while paying attention to risk factors andmarket trends, in a conservative manner that gives consideration to such matters as maintaining
stable distributions in the medium and long term. Based on this policy, during the period underreview, while taking into account market trends and interest rate levels, NAF pursued financing
from various sources with diversified repayment dates and an emphasis on long-term, fixed-rateloans in its procurement of funds, and repaid ¥2,000 million of its loans. As a result, at the end of
the period, total interest-bearing debt amounted to ¥147,000 million, the long-term debt ratio was
95.9%, the long-term, fixed-rate debt ratio was 94.9%, and the loan-to-value (LTV) ratio was
50.1%. The average annual current maturity of long-term interest-bearing debt was 4.2 years andthe number of financial institutions was 22. Furthermore, the weighted average interest rate at theend of the period was 0.76%.
NAF has also established a commitment line with a total maximum borrowing amount of ¥10,000
million, for the purpose of securing flexible and stable fund procurement methods.

4With respect to financing through investment corporation bonds, NAF filed a shelf-registration
statement regarding its establishment of a maximum issuance amount for investment corporation
bonds for public offering in July 2015. The remaining balance of the planned issuance amount at
the end of the period is ¥100,000 million.
Planned issuance amountUp to ¥100,000 million

Scheduled period of issuance

From July 18, 2015 to July 17, 2017

Purpose for funds

Acquisition of specified new assets (as defined in Article 2,
Paragraph 1 of the Act on Investment Trusts and Investment
Corporations), repayment of borrowings, redemption of
investment corporation bonds, repayment of tenant security
deposits, payment for maintenance and renovations, andoperational use

Rating of NAF as of February 28, 2017 is as follows.
Rating agency
Rating and Investment Information, Inc.
(R&I)
S&P Global Ratings Japan Inc. (S&P)*
Moody’s Japan K.K. (Moody’s)

Rating subject
Issuer credit rating

RatingA A - (Trend of rating: Stable)

Long-term corporate
Short-term corporate
Issuer credit rating

A + (Outlook for rating: Stable)
A -1
A 3 (Outlook for rating: Positive)* Standard & Poor’s Ratings Japan K.K. changed its trade name to S&P Global Ratings Japan Inc. on April 1, 2017.

Overview of Performance and Distribution
In the period under review, NAF recorded total revenues of ¥10,650 million, operating income of¥4,717 million, income before income taxes of ¥4,139 million and net income of ¥4,138 million.
Part of the capital gains resulting from the sale of Park Axis Shibuya is to be internally reserved asa reserve for reduction entry. In addition to the above, NAF has decided to distribute the majorityof the ¥4,083 million balance remaining after deduction of ¥55 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 ¥8,428.
Management Policy and Issues for the 23rd Period Onward
NAF has always aimed to maximize its unitholder value through investments in “Accommodation
Assets” and utilization of the Mitsui Fudosan Group as well as formulation and management of ahigh quality portfolio centered on “Rental Apartments” located in the 23 wards of Tokyo.
From the 23rd period onward, we aim to manage our portfolio stably based on theabove-mentioned policies and further maximize the unitholder value by achieving internal andexternal growth expectations.

5External Growth (New acquisition of properties)
We will strive to obtain the best real estate information possible by utilizing our pipeline to the
Mitsui Fudosan Group and fortifying the asset management company’s unique information
channel. Our basic strategy will be to stably expand our portfolio based on the acquisition of Park
Axis Series developed by the Mitsui Fudosan Group in addition to Park Cube Series constructedby companies outside the Mitsui Fudosan Group. Moreover, we will work to steadily acquire
properties considered to possess mid- to long-term competitive advantages through NAF’s
individual strategies such as enhancing our portfolio within the 23 wards of Tokyo and other partsof the Tokyo area, mainly with single-occupant and compact residential properties for which a highoccupancy rate is expected, and carefully selecting properties for investment in major cities ofregional areas. We will also consider making investments in “Equity Interests in Anonymous
Partnerships relating to Real Estate” or “Real Estate-Backed Securities” (including obtaining firstrefusal rights) for such purposes as securing opportunities of property acquisitions.
The main part of NAF’s acquisition strategy is stable acquisition of “Rental Apartments”. However,
we will continue making acquisitions of “Dormitories” and “Student Apartments”, “Corporate
Housing”, “Serviced Apartments” and “Senior Residences”, as the investment market in “Other
Accommodation Assets” appears to have matured. In the management of its portfolio, NAF has
set the upper limit of the share of “Other Accommodation Assets” in the portfolio to 10% on an
acquisition price basis for the time being. The share of “Other Accommodation Assets” in theoverall portfolio was 3.9% at the end of the 22nd period.
We will also continue to work towards achieving high quality due diligence at acquiring properties
in order to avoid risks.
Internal Growth (Management and operation of leasehold properties)
NAF will aim to improve its rent levels and occupancy rate through the formulation andimplementation of a leasing strategy that takes into account the characteristics of each individual
property with the objective of maximizing rent revenues over the mid- to long-term range of years.
NAF will review the adequacy of the grade of property management, cost of management andoperation as to each invested property in an appropriate timeframe and manner, and reduce thecost by reviewing rationally the management cost by utilizing the merits of outsourcing all property
management tasks to the Master PM. NAF will continue to maintain and enhance market
competitiveness by implementing strategic renovations, primarily at Okawabata Apartment
Communities.
Further, NAF will collaborate with the Mitsui Fudosan Group to establish brand power byconcentrating on the “Park Axis” brand, NAF’s main investment asset to penetrate the market andfurther enhance brand recognition in the rental housing market.
Financial Strategy
NAF will emphasize the continued use of long-term, fixed-rate loans by taking measures tocounter future interest rate 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 anear-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 of6

property 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 sales contract for the following asset was concluded on March 30, 2017. The planned
acquisition date is April 27, 2017. The “Acquisition price” is exclusive of miscellaneous
expenses for acquisition, fixed property taxes, urban planning taxes, consumption taxes, andlocal consumption taxes.
Park Axis Higashi Koenji
Acquisition price:
Appraised value:
Type of property:
Location (residence indication):
Completion date:
Structure/Number of stories:
Rentable units:
Rentable area:
Seller:¥2,300 million¥2,310 million(date of value appraisal: February 28, 2017)
Real estate
50-1, Horinouchi 3-chome, Suginami-ku, Tokyo
February 27, 2015
Flat-roofed reinforced concrete structure/10 stories
85
2
2,679.96 m
Mitsui Fudosan Residential Co., Ltd.

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Forecasts of Investment Performance
The forecasts for the 23rd period (from March 1, 2017 to August 31, 2017) are as follows.
(in millions of yen, rounded down; except as noted)

Total revenues
Operating income
Income before income taxes
Net income
Distribution per unit (not including distributions
in excess of earnings) (yen)Distribution in excess of earnings per unit (yen)23rd period(August 2017)
10,666
4,545
3,974
3,973
8,200
―

Notes: Underlying assumptions of forecasts
Number of operating days:
Investment assets:

Expenses:

Interest-bearing debt:

Number of units issued:- From March 1, 2017 to August 31, 2017 (184 days)- In the forecasts for investment performance, NAF is assuming
119 properties, consisting of 118 properties held as of the date ofthis document and “Park Axis Higashi Koenji” to be acquired on
April 27, 2017.
- The average monthly occupancy rate during the 23rd period for
total properties is expected to be 96.4%.
- The following expenses are assumed.
(in millions of yen)
23rd period
Fixed property taxes and urban planning taxes
587
Depreciation and amortization
2,056Interest expense, etc.
566
Amortization of investment unit issuance4
expenses- Upon the acquisition of “Park Axis Higashi Koenji “ Planned forApril 27, 2017, we assume new financing of ¥2,000 million inloans.
- It is assumed that NAF’s balance of interest-bearing debt that is
expected to be ¥149,000 million after the above financing shall notchange until August 31, 2017.
- We assume 484,522 units outstanding as of the date of thisdocument.
- It is assumed that, there shall be no issuance of new units until
August 31, 2017.

The forecasts are the figures calculated based on the above assumptions at the time of
preparation of this information. Therefore, actual total revenues, operating income, income
before income taxes, net income and distribution per unit may change due to future acquisitions
or sale of investment assets, fluctuation in the real estate market or other changes in the8environment in which NAF operates. Accordingly, the forecasts are not a guarantee of any cash
distribution amount.

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, isprovided solely for informational purposes. In the event of any discrepancy between the Japaneseoriginal and this English translation, the Japanese original shall prevail.

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