O

October 20, 2014

Financial Results for the Fiscal Period
From March 1, 2014 to August 31, 2014
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.
Kosei Murakami
Satoshi Nohara, Director and Chief Financial Officer
Tel: +81-3-3246-3677
Scheduled Filing Date of Securities Report:
November 27, 2014
Scheduled Commencement Date of Cash Distribution Payment: November 18, 2014

1. Business Results for the Fiscal Period from March 1, 2014 to August 31, 2014
(in millions of yen, rounded down; except as noted)(1) Operating Results
Total revenues

Operating income(%)*

Income before income
taxes

(%)*

(%)*

For the period ended
August 31, 2014

10,152

9.9

4,304

3.0

3,541

3.1

February 28, 2014

9,241

2.7

4,181

5.5

3,435

8.5

IncomeIncomebeforebeforeincomeNet income Net income/incometaxes/
per unit
net assets
taxes/
operatingtotal assets
incomeNet income

(%)*

(yen)

(%)

(%)

(%)

For the period ended
August 31, 2014

3,540

3.1

7,672

2.7

1.2

34.9

February 28, 2014

3,434

8.5

7,443

2.7

1.2

37.2

* Percent figures show changes from previous period.

Note:
NAF implemented a two-for-one split of investment units with the effective date of March 1,
2014. “Net income per unit” is calculated on the assumption that this split of investment units
was implemented at the start of the period ended February 28, 2014. Net income per unit iscalculated by dividing net income by the weighted average number of investment units:
461,422 units as of August 31, 2014, and 461,422 units as of February 28, 2014.

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(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
August 31, 2014

7,672

3,540

–

–

100.0

2.7

February 28, 2014
Note:

14,888

3,434

–

–

100.0

2.7

NAF implemented a two-for-one split of investment units with the effective date of March 1,
2014.

(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, 2014

292,317

129,29644.2

280,214February 28, 2014

277,125

129,191

46.6

279,985

Note:
NAF implemented a two-for-one split of investment units with the effective date of March 1,
2014. “Net assets per unit” is calculated on the assumption that this split of investment units
was implemented at the start of the period ended February 28, 2014.

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

Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows fromfinancing activities

Cash and cash
equivalents

For the period ended
August 31, 2014

6,031

(17,358)

11,6058,318

February 28, 2014

5,259

(4,693)

(164)

8,579

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2. Forecasts for the Fiscal Period from September 1, 2014 to February 28, 2015
(in millions of yen, rounded down; except as noted)

Total
revenues

Operatingincome(%)*

For the period ending

February 28, 2015 10,092 (0.6)

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

(%)*
4,311

0.1

3,577

(%)*

(%)*

(yen)

(yen)

1.0

3,576 1.0

7,750

–

* Percent figures show changes from previous period.

Note:
Projected net income per unit for the fiscal period ending February 28, 2015 is ¥7,750.

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. Number of investment units issued(1) The number of investment units issued (including treasury investment units) as of theperiod-end
As of August 31, 2014:

461,422 units

As of February 28, 2014:

230,711 units(2) The number of treasury investment units as of the period-end
As of August 31, 2014:- units

As of February 28, 2014:- units

Note:
NAF implemented a two-for-one split of investment units with the effective date of March 1,
2014. “Net income per unit” is calculated on the assumption that this split of investment units
was implemented at the start of the period ended February 28, 2014.
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.

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17th Period (August 2014) Overview of Investment
External Growth (Acquisition of properties)
During the period under review, NAF acquired a total of 4 new properties with a total acquisition
price of ¥16,020 million: 2 properties in March 2014 and 2 properties in April 2014 (Okawabata
Parking is not included in the number of properties but included in the total acquisition price).
Internal Growth (Management and operation of properties held by NAF)
NAF has chosen Mitsui Fudosan Housing 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 value of
properties such as 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 as environmentally 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, etc.
Financial Strategy (Overview of funds procurement)
One of NAF’s basic policies is to carry out financing in a conservative manner while giving
consideration to such matters as maintaining stable distributions in the medium and long term,and paying attention to various risk factors and market trends. Based on this policy, NAF has
pursued financing from various sources with diversified repayment dates and long-term, fixedinterest rates in its procurement of funds during the period under review.
As a result, at the end of the period, total interest-bearing debt amounted to ¥156,500 million, thelong-term loans ratio was 97.4%, the fixed-rate loans ratio was 90.4%, the LTV (loan-to-value
ratio) was 53.5%. The average annual current maturity of long-term interest-bearing loans was 4.7
years and the number of financial institutions was 21. Furthermore, the weighted average interest
rate at the end of the period was 0.95%, and NAF achieved both further progress in its conversion
to long-term borrowing and a reduction in financing costs.
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. In the period
under review, the expiration date of the commitment line agreement was extended for another4

year.
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 2013. The remaining balance of the planned issuance amount at
the end of the period is ¥100,000 million.
Planned issuance amount
Scheduled period of issuancePurpose for funds

Up to ¥100,000 million
From July 18, 2013 to July 17, 2015
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
deposit, payments for maintenance and renovations, andoperational use

Rating of NAF as of August 31, 2014 is as follows.
Rating agency
Rating and Investment Information, Inc.
(R&I)
Standard & Poor’s Ratings Japan K.K.
(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: Stable)

Overview of Performance and Distribution
In the period under review, NAF recorded total revenues of ¥10,152 million, operating income of¥4,304 million, income before income taxes of ¥3,541 million and net income of ¥3,540 million. In
addition to the above, NAF has decided to distribute nearly the entire amount of earnings inaccordance with the Distribution Policy (Article 34 of the Articles of Incorporation) set forth by NAF.
The distribution per unit was ¥7,672.
Management Policy and Issues for the 18th 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 18th 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.
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

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channel. Our basic strategy will be to stably expand our portfolio based on the Park Axis Series
developed by the Mitsui Fudosan Group in addition to the Park Cube Series constructed bycompanies 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 continues to be stable acquisition of “Rental
Apartments”. However, we will continue making acquisitions of “Dormitories” and “Student
Apartments”, “Corporate Housing” and “Senior Residences”, as the investment market in “Other
Accommodation Assets” appears to have matured in some categories. In the management of its
portfolio, NAF has set the upper limit of the share of “Other Accommodation Assets” in the overall
portfolio to around 10% on an acquisition price basis for the time being. The share of “Other
Accommodation Assets” in the overall portfolio was 3.4% at the end of the 17th period.
We will also continue to work towards achieving high quality due diligence at acquiring properties
in order to avoid risk.
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 Mitsui Fudosan Co., Ltd., 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(loan-to-value 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 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 applicable7Forecasts of Investment Performance
The forecasts for the 18th period (from September 1, 2014 to February 28, 2015) 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)18th period(February 2015)
10,092
4,311
3,577
3,576
7,750
―

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

Expenses:

Interest-bearing debt:

Number of units issued:-From September 1, 2014 to February 28, 2015 (181 days)-The number of properties held by NAF as of the date of thisdocument is 112. In the forecasts of investment performance, it isassumed that no subsequent transfer of properties (such as
acquisition of new properties, sale of properties acquired, etc.)
shall occur until February 28, 2015.
-The average month-end occupancy rate during the 18th period
for total properties is expected to be 96.0%.
-The following expenses are assumed.
(in millions of yen)
18th period
Fixed property taxes and urban planning
505
taxes
Depreciation and amortization
2,076
Interest expense and interest expenses on734
investment corporation bonds-It is assumed that NAF’s balance of interest-bearing debt that is¥156,500 million as of the date of this document shall not change
until February 28, 2015.
- We assume 461,422 units outstanding as of the date of thisdocument.
-It is assumed that, there shall be no issuance of new units until
February 28, 2015.

The forecasts are the figures calculated based on the above assumptions at the time of
preparation of this information. Therefore, actual total revenues, 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 the environment in which NAF
operates. Accordingly, the forecasts are not a guarantee of any cash distribution amount.

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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 of the Japanese original document is provided solely for
informational purposes. In the event of any discrepancy between the Japanese original and thisEnglish translation, the Japanese original shall prevail.

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