7th Fiscal Period - IR Webcasting€¦ · Real estate appraisal value for continuously owned...

7th Fiscal Period (ended October 2016)

Presentation Materials December 16, 2016

http://www.hoshinoresorts-reit.com/ Security Code：3287

Asset Management Company Hoshino Resort Asset Management Co., Ltd.

IV. Appendix Portfolio overview (assets under management) (1) – (4) 37 Operational results for each property (1) – (8) 41 Balance sheet for the fiscal period ended October 2016 49 Statement of income for the fiscal period ended October 2016 50 Real estate appraisal value for continuously owned properties as of the end of the fiscal period ended October 2016 (1) – (3) 51

Information on unitholders as of the end of the fiscal period ended October 2016 54

Overview of HRR 55 Overview of Asset Management Company 56

I. Management Results of the Fiscal Period Ended October 2016 Highlights 3 Overview of new property acquisition (7th Fiscal Period) 4 Overview of new property acquisition (8th Fiscal Period) (1) – (3) 5 Improvement in unitholder value by expansion of asset size 8 Status of portfolio after new acquisition of properties 9 Internal growth (management results highlights) (1) – (2) 10 Finances (1) – (2) 12

Table of contents

1

II. Operational Results for Each Property Operational results for each property (1) – (6) 15 Forecasts for 8th fiscal period ending April 2017 and 9th fiscal period ending October 2017 (1) – (2) 21

Rent type (1) – (2) 23

III. Future Management Policy

Management policy for the time being 26 Realization of stable distribution 27 Market trend and strategy for differentiation 28 External growth 29 Facilities (planned to be) operated by the Hoshino Resorts Group 30 Overseas facilities operated by the Hoshino Resorts Group and change in guidelines 31

Portfolio map of hotels and ryokans operated by the Hoshino Resorts Group 32

Internal growth 33 Initiatives for stable maintenance and improvement of the portfolio management results (1) – (2) 34

I. Management Results of the Fiscal Period Ended October 2016

Results of the 6th fiscal period

Forecast for the 7th fiscal period (as of June 15,

2016) (A)

Results of the 7th fiscal period (B)

Comparison with forecast (B)-(A)

Operational status (millions of yen)

Operating revenue 3,559 3,981 3,981 0

Operating income 1,914 2,091 2,097 5

Ordinary income 1,601 1,808 1,816 8

Net income 1,600 1,807 1,815 8

Distribution per unit (yen)

Distribution per unit 20,520 22,104 22,209 105

Others

NOI (millions of yen) 2,992 3,377 3,384 6

NOI yield 6.4% 7.3% 7.3% -

LTV 27.8% 25.6% 25.7% -

22,104 yen 22,209 yen

＋[値] －[値] +33 yen

21,400

21,600

21,800

22,000

22,200

22,400

Highlights

Overview of financial results for the 7th fiscal period (Ended October 2016)

(Amounts are rounded down and ratios are rounded off.)

Overview of financial results for the fiscal period ended October 2016

Distribution per unit was ¥22,209 Comparison with forecast was +¥105 (+0.5%) Main Breakdown of ¥3,981 million of operating revenue:

Fixed rent ¥3,100 million, Floating rent ¥870 million

Main differences in net income from the forecast +14M Decrease in expenses related to rent business

Decrease in depreciation 8M Decrease in repair expenses 6M

－8M Increase in operating expenses Increase in other expenses 10M

+2M Decrease in non-operating expenses Decrease in interest expenses 3M

3

Non-operating income and loss

Increase in operating expenses Forecast

(As of Jun. 15)

Decrease in expenses

related to rent business

Actual

3期連続の公募増資を通じた資産規模拡大による投資主価値の向上 Overview of new property acquisition (7th fiscal period)

4

(Reference) Overview of offering

Property name KAI Kaga Acquisition date May 2, 2016

Acquisition approach Utilization of revitalization know-how of the Hoshino Resorts Group

Lessee’s attribute Hoshino Resorts Group

Rent type Fixed rent + Floating rent (Profit-linked)

Operator’s attribute Hoshino Resorts Group

Acquisition price ¥3.1 billion

Real estate appraisal value (Note) ¥3.3 billion

Lease period 20.0 years

Appraisal NOI yield (Note) 6.1% Offering form Domestic offering

Number of units offered

Domestic primary offering: 3,570 units

Third-party allotment: 179 units Total: 3,749 units

Total amount paid in ¥4,684 million

Issue price per unit ¥1,294,745

Resolution date of the issuance April 8, 2016

Pricing date April 19, 2016

Lead managers Nomura Securities Co., Ltd. SMBC Nikko Securities Inc.

Kagaonsen Station

KAI Kaga

Komatsu Airport

Property acquired in the 7th fiscal period

(Note) Based on real estate appraisal value as of February 29, 2016, etc.

Kaga IC

■ Located approximately 25 minutes from central Osaka by car, away from the bustle though being close to the city center

■ Hard-to-find location allowing a night view of Osaka Bay and the bay area from guest rooms and restaurants

Property name Hyatt Regency Osaka Acquisition date November 1, 2016 Acquisition approach Collaborative investment structure

Lessee’s attribute Hoshino Resorts Group Rent type Floating rent (profit-linked) Operator’s attribute Hyatt International Asia Pacific Limited

Acquisition price ¥16.0 billion Real estate appraisal value ¥16.5 billion

Lease period 20.0 years Appraisal NOI yield 6.2%

Osaka City (Nanko area)

3期連続の公募増資を通じた資産規模拡大による投資主価値の向上 Overview of new property acquisition (8th fiscal period) (1)

5

Property acquired in the 8th fiscal period Tourism characteristics

Universal Studios Japan

Hyatt Regency Osaka

Kaiyukan (aquarium)

Kansai International

Airport

Guest room area/number of guest rooms

Shuttle service

Shuttle service

Vicinity

30ｍ２ 40ｍ２ 80ｍ２ or larger Total

199 rooms 235 rooms 46 rooms 480 rooms

INTEX OSAKA (International

exhibition center)

Asia and Pacific Trade Center

(commercial/exhibition halls)

Adjacent

Adjacent

50 minutes

15 minutes

Shin-Osaka Station

Osaka Sta.

Universal Studio Japan

Nakafuto Sta. Hyatt Regency Osaka

Hommachi Sta. Shinsaibashi Sta.

Mid

osuj

i Lin

e

Namba Sta. Dotonbori

Tsutenkaku

Osaka Castle Park

Tennoji Station

12,746 12,943 15,260 16,420

59.1% 68.2%

78.3% 75.3%

0.0%

50.0%

100.0%

0

10,000

20,000

2013 2014 2015 2016

ADR (actual) (yen) ADR (actual + forecast) (yen)Occupancy rate

0

200

400

600

800

1,000

1,200

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000(Room charge: yen)

21,765 23,344 23,881 28,369

30,366

77.4% 81.1% 82.5%

85.5% 86.8%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

95.0%

2011 2012 2013 2014 20150

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Total number of lodgers (thousand persons)

Occupancy rate


6

Current status and issues of the lodging market in Osaka City

The number of guest room supplies in Osaka City is insufficient, and hotels in high-price range and twin rooms, in particular, tend to be in short supply.

Overview of the operating company

Hyatt International Asia Pacific Limited, the operating company of the hotel property, is a Hong Kong company under the umbrella of Hyatt International Corporation in the U.S., that operates hotels of Hyatt Hotels and Resorts, which is known for brands such as “Hyatt Regency,” “Park Hyatt,” “Andaz” and “Grand Hyatt” in the Asia Pacific region.

Total number of lodgers at lodging facilities in Osaka Prefecture and occupancy rates of city hotels

Source: Japan Tourism Agency Source: Development Bank of Japan Inc.

2016 (actual + forecast)

RevPAR 12,359 yen (Note)

+3.4% from the previous year

Segment currently believed to be lacking

Lodging facilities in Osaka City

Hotel Hankyu International

RIHGA Royal Hotel Osaka Hotel New Hankyu Osaka

Swissotel Nankai, Osaka

The Ritz-Carlton, Osaka InterContinental Osaka

Osaka Marriott Miyako Hotel

Hotel Granvia Osaka

Luxury hotels

Ultra-luxury hotels Business hotels

(Number of guest rooms: rooms)

3,749 5,375 6,074 6,525 6,784

10,114 11,429 12,052

13,524

17,276

0

5,000

10,000

15,000

20,000

25,000

2011 2012 2013 2014 2015

Domestic flight (thousand persons)

International flight (thousand persons)

Operational results

(Note) Calculated based on actual operational results from January 2016 to September 2016 and forecast operational results from October 2016 to December 2016.

0 5,000 15,000 25,000 35,000

Change in the number of air travelers at Kansai International Airport

Source: Kansai Airports


7

Significance of the acquisition (1): Utilization of collaborative investment structure

On November 1, 2016, at the same time with HRR’s acquisition of Hyatt Regency Osaka, the Hoshino Resorts Group acquired the shares of GCP Hospitality Japan K.K., the managing company of the Hyatt Regency Osaka, and made it a 100% owned subsidiary. Concurrently with such, it changed the business name of the managing company to HRO Inc.

Collaborative investment Making it

its 100% owned subsidiary

Leases of real estate

HRO Inc. (Managing company)

Acquisition of shares of

managing company

Acquisition of real estate

Hoshino Resorts Inc.

Hoshino Resorts REIT, Inc.

Seller

Significance of the acquisition (2): Utilization of acquisition capacity

Conducted agile property acquisition by utilizing acquisition capacity from debt financing.

■Total amount of borrowings: ￥16.0 billion ■Reinforcing relationship through new bank formation

LTV 27.8%

End of 6th FP

↓ 34.9%

End of 8th FP (forecast)

0

20

40

60

80

0

20

40

60

80

100

As of listing As of the end of 3rd FP As of the end of 5th FP As of November 2, 2015 As of the end of 7th FP As of December 16, 2016

3期連続の公募増資を通じた資産規模拡大による投資主価値の向上 Improvement in unitholder value by expansion of asset size

8

(billions of yen) (No. of properties)

￥15.0 billion

¥33.3 billion

¥42.5 billion

¥85.4 billion

1st PO 24properties ¥18.3 billion

2nd PO 8 properties ¥7.2 billion

3rd PO 6 properties ¥42.8 billion

6 properties

30 properties

39 properties

47 properties Acquisition during

the 5th FP 1 property ¥1.9 billion

4th PO 2 properties ¥7.7 billion

45 properties

¥93.1 billion

Status of portfolio before and after new acquisition of properties (8th fiscal period)

(Note) Among the 48 properties owned as of December 16, 2016, figures for the 47 properties owned as of October 31, 2016 are based on figures in the real estate appraisal reports as of October 31, 2016, whereas figure for Hyatt Regency Osaka, the property acquired on November 1, 2016, is based on figure in the real estate appraisal report as of September 1, 2016.

Assets owned as of the end of 7th FP Assets owned as of December 16, 2016 No. of properties 47 properties 48 properties Total acquisition price ￥93.1 billion ￥109.1 billion Total real estate appraisal value ￥109.2 billion ￥125.7 billion (Note)

Appraisal NOI yield 7.0% 6.9% Total number of guest rooms 5,412 rooms 5,892 rooms

No. of properties owned (right axis)

Properties leased by the Hoshino Resorts Group (Total acquisition price) (left axis)

Properties leased by those other than the Hoshino Resorts Group (Total acquisition price) (left axis)

1 property ¥16.0 billion

¥109.1 billion

48 properties

新規取得資産取得後のポートフォリオの状況

Diversification by lessee/operator (Based on acquisition prices)

Diversification by region (Based on acquisition prices)

(As of December 16, 2016)

Inside pie: Operator Outside pie: Lessee

Status of portfolio after new acquisition of properties

(As of December 16, 2016) Hokkaido- Tohoku region 7.2%

Kanto region 9.2%

Chubu region 21.1%

Kinki region 17.8%

Chugoku- Shikoku region

20.1%

Kyushu- Okinawa region 11.4%

Hokuriku region 13.2%

2.7%

26.9%

Solare 3.9%

33.0%

78.7%

Hoshino Resorts Group

IHG ANA Hotels Group Japan LLC.

14.6%

Greens Candeo

14.6% 3.9%

2.7%

HOSHINOYA

RISONARE

KAI

Others

O-28

O-27

O-18

O-10 O-11

O-4 O-26

H-2 O-9

O-22

O-20

O-16 O-29

K-2 O-21

O-24

O-17

O-5 O-12

O-7 K-5

K-6

O-13

O-14

O-6

O-25

O-2 H-1

K-1

O-1 O-3

O-15 O-23

R-1

O-8

O-34 O-33

O-31

O-32

O-30

K-7

R-2 K-4

K-3

O-19

O-35

K-8

Others 18.9%

(Note) The Solare Group (Solare Hotels and Resorts Co., Ltd. and its subsidiaries) are referred to as Solare, the Candeo Hospitality Management, Inc. as Candeo, the Greens Co., Ltd. as Greens, IHG ANA Hotels Group Japan LLC as IHG ANA Hotels Group Japan and Abilitas Hospitality Co., Ltd. and Hyatt International Asia Pacific Limited as others, respectively.

9

O-36

Internal growth (management results highlights) (1)

From October 2014 to September 2015

From October 2015 to September 2016

Change (comparison to previous year)

HOSHINOYA Karuizawa Sales (Note 1) ¥3,065 million ¥3,183 million ¥118 million

HOSHINOYA Kyoto Sales (Note 1) ¥1,026 million ¥857 million (Note 2) — (Note 2)

RISONARE Yatsugatake Sales (Note 1) ¥4,275 million ¥4,280 million ¥5 million

6 KAI properties Sales (Note 1) ¥3,527 million ¥3,593 million ¥66 million

As for the operational results (Note) of properties from May 2016 to October 2016, sales increased approximately 51 million yen year-on-year.

Improved recognition rate of the Hoshino Resorts Group and showcasing their attractiveness have contributed to the sales increase.

（出所）星野リゾートグループ調査

(Note) Year-on-year operational results are calculated for HOSHINOYA Karuizawa, RISONARE Yatsugatake, KAI Matsumoto, KAI Izumo,

KAI Ito, KAI Hakone, KAI Aso and KAI Kawaji.

26.8% 29.5% 35.7%

50.8% 62.1%

72.3% 78.6%

2010 2011 2012 2013 2014 2015 2016

Changes in recognition rate

(Note 1) Sales are rounded off to the nearest million. (Note 2) Figure for Change is not indicated for Hoshinoya Kyoto due to its operational results from December 7, 2015 to March 16, 2016 not existing as operations were suspended to

conduct renovation work.

Sales comparison of properties operated by the Hoshino Resorts Group

1st

15th 15th 13th

7th 7th

3rd

10

The Hoshino Resorts Group acquired first place in recognition rate by overtaking other quality hotel brands. It will aim to enhance “loyalty” and “identity” in order to continue strengthening the branding strategy.

(Source) Survey by the Hoshino Resorts Group

From November 2014 to October 2015



22 Solare properties Sales (Note 1) ¥3,467 million ¥3,848 million －(Note 2)




4 ANA Crowne Plaza properties Sales (Note 1) ¥14,152 million ¥14,383 million ¥231 million GOP ¥3,381 million ¥3,484 million ¥103 million

ANA Crowne Plaza Hiroshima

Guest room occupancy rate 83.1% 81.2% -1.8 pt. ADR ¥11,140 ¥13,076 ¥1,936 RevPAR ¥9,253 ¥10,624 ¥1,371 Sales (Note 1) ¥4,896 million ¥5,127 million ¥231 million

ANA Crowne Plaza Fukuoka

Guest room occupancy rate 89.6% 86.5% -3.1 pt. ADR ¥11,940 ¥13,799 ¥1,859 RevPAR ¥10,698 ¥11,941 ¥1,243 Sales (Note 1) ¥3,047 million ¥3,205 million ¥158 million

ANA Crowne Plaza Kanazawa

Guest room occupancy rate 82.3% 83.0% 0.7 pt. ADR ¥14,420 ¥15,851 ¥1,431 RevPAR ¥11,861 ¥13,149 ¥1,288 Sales (Note 1) ¥3,547 million ¥3,461 million -¥86 million

ANA Crowne Plaza

Toyama

Guest room occupancy rate 74.4% 76.5% 2.2 pt. ADR ¥9,866 ¥10,480 ¥614 RevPAR ¥7,337 ¥8,019 ¥682 Sales (Note 1) ¥2,662 million ¥2,590 million -¥72 million

(Note 1) Sales are rounded off to the nearest million. (Note 2) Figure for Change is not indicated for 22 Solare properties due to Chisun Inn Kagoshima Taniyama's (acquired in August 2015) operational results from November 2014 to July

2015 not existing.

Internal growth (management results highlights) (2)

4 ANA Crowne Plaza properties

22 Solare properties

11

125

2,325

3,525

2,381 2,592

3,792

2,492

3,701 3,732 3,558 3,058

3,758 3,937

2,530

30 30

1,141

8 437

0

1,000

2,000

3,000

4,000

FP endingApr. 2017

FP endingOct. 2017

FP endingApr. 2018

FP endingOct. 2018

FP endingApr. 2019

FP endingOct. 2019

FP endingApr. 2020

FP endingOct. 2020

FP endingApr. 2021

FP endingOct. 2021

FP endingApr. 2022

FP endingOct. 2022

FP endingApr. 2023

FP endingOct. 2023

FP endingApr. 2024

FP endingOct. 2024

FP endingApr. 2025

FP endingOct. 2025

FP endingApr. 2026

1.78% 1.84% 1.71% 1.82% 1.66%

1.10% 1.10% 0.92%

4.1 3.8 3.5 3.3

2.5

3.6 4.1 4.3

0.0

1.0

2.0

3.0

4.0

5.0

0.7%

0.9%

1.1%

1.3%

1.5%

1.7%

1.9%

FP ended Oct. 2013

FP ended Apr. 2014

FP ended Oct. 2014

FP ended Apr. 2015

FP ended Oct. 2015

FP ended Apr. 2016

FP ended Oct. 2016

Loans in Nov. 2016

Average interest rate (left axis) Average remaining period of loans (right axis)

35.5%

22.8% 20.6% 18.6%

27.8%

25.7%

34.9%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

FP ended Apr. 2014

FP ended Oct. 2014

FP ended Apr. 2015

FP ended Oct. 2015

FP ended Apr. 2016

FP ended Oct. 2016

FP ended Apr. 2017 (forecast)

Finances (1)

As of December 16, 2016 Controlling LTV

Diversification status of final repayment dates

(LTV)

Aim to build a more stable financial base by making long-term fixed loans and controlling LTV.

Changes in average interest rate and average remaining period of loans (years)

(Unit: millions of yen)

12

HRR will continue to consider taking out loans by temporarily raising LTV up to 40% for agile property acquisition.

Credit Rating Agency

Japan Credit Rating Agency, Ltd. (JCR)

Subject of Rating Long-term issuer rating

Rating A- Outlook Stable

Finances (2)

Status of credit rating

13

HRR was able to release collateral for the entire amount of existing borrowings on August 31, 2016.

In addition, financial base was further stabilized with the interest rate swap agreements concluded for part of loans taken out on November 1, 2016. 33.5%

26.4%

24.9%

3.0%

2.7%

2.4% 2.3%

1.9% 1.6% 0.7%

0.7%

The Bank of Tokyo-Mitsubishi UFJ, Ltd.Sumitomo Mitsui Banking CorporationDevelopment Bank of Japan Inc.The Ashikaga Bank, Ltd.The Bank of Fukuoka, Ltd.The Hokuriku Bank, Ltd.Resona Bank, LimitedThe Shizuoka Bank, Ltd.The Yamaguchi Bank, Ltd.The Bank of Kyoto, Ltd.The Senshu Ikeda Bank, Ltd.

As of December 16, 2016 Release of collateral Bank formation

II. Operational Results for Each Property

0

20,000

40,000

60,000

80,000

100,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

May Jun. Jul. Aug. Sep. Oct.

ADR (yen) ADR (yen) Guest room occupancy rate Guest room occupancy rate

Operational results

2015 2016

Accumulated total

(Reference) Nov. 2014 – Oct. 2015

Accumulated total

Change Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct.

Guest room occupancy rate 83.3% 77.0% 71.8% 72.2% 68.4% 72.0% 80.4% 79.0% 91.6% 98.2% 90.0% 83.2% 80.8% 82.9% -2.1 pt.

ADR (yen) 68,508 70,605 64,821 61,362 61,884 69,800 76,349 71,893 81,219 98,684 86,955 84,333 76,093 69,140 6,953

RevPAR (yen) 57,095 54,337 46,520 44,325 42,336 50,250 61,348 56,798 74,414 96,907 78,297 70,166 61,502 57,320 4,182 Sales (millions of yen) 255 237 164 187 195 221 282 248 335 432 333 316 3,204 3,075 129

HOSHINOYA Karuizawa

Address: Karuizawa-machi, Kitasaku-gun, Nagano

Number of guest rooms: 77 rooms

(Note 1) The monthly major indices are based on figures provided by the lessee, Hoshino Resorts Inc. (Note 2) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and Sales are rounded to the nearest specified unit.

(yen)

Operational results for each property (1)

15

ADR (yen) May 2015 – Oct. 2015 Guest room occupancy rate (%) May 2015 – Oct. 2015


0

20,000

40,000

60,000

80,000

100,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%



HOSHINOYA Kyoto

Address: Kyoto-shi, Kyoto


(Note 1) The monthly major indices are based on figures provided by the lessee, K.K. Arashiyama Onsen Rankyokan. (Note 2) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and sales are rounded to the nearest specified unit. (Note 3) Figure for Change is not indicated due to its operational results from December 7, 2015 to March 16, 2016 not existing as operations were suspended to conduct renovation work.

Operational results

2015 2016

Accumulated total


Accumulated total


Guest room occupancy rate 97.7% 96.7% －－ 79.2% 78.7% 76.8% 87.2% 76.0% 82.8% 87.9% 91.1% 84.7% 88.5% -3.9 pt.

ADR (yen) 101,884 108,554 －－ 108,005 106,155 94,656 82,927 88,688 96,753 86,987 97,844 95,656 80,308 15,348

RevPAR (yen) 99,575 104,936 －－ 85,540 83,508 72,671 72,312 67,403 80,149 76,429 89,133 80,989 71,088 9,901 Sales (millions of yen) 116 25 －－ 50 96 90 90 87 100 90 110 854 1,050 - (Note 3)

(yen)


16



0

20,000

40,000

60,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%



Operational results

2015 2016

Accumulated total


Accumulated total



ADR (yen) 24,091 34,811 35,861 28,100 32,510 29,743 32,201 23,695 38,059 57,682 36,039 32,412 34,727 29,752 4,975


RISONARE Yatsugatake

Address: Hokuto-shi, Yamanashi


(Note 1) The monthly major indices are based on figures provided by the lessee, K.K. Horizon Hotels. (Note 2) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and Sales are rounded to the nearest specified unit.

(yen)


17



0

20,000

40,000

60,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%



6 KAI properties

Total number of guest rooms: 181 rooms

Operational results

2015 2016

Accumulated total


Accumulated total



ADR (yen) 39,277 40,510 38,650 32,407 35,757 38,925 39,791 32,864 37,942 52,434 37,912 42,321 39,436 36,459 2,977


(Note 1) 6 KAI properties refer to KAI Matsumoto, KAI Izumo, KAI Ito, KAI Hakone, KAI Aso and KAI Kawaji. (Note 2) The monthly major indices are based on figures provided by the lessee, Hoshino Resort Management Co., Ltd. (Note 3) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and Sales are rounded to the nearest specified unit.

(yen)


18



0

1,600

3,200

4,800

6,400

8,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


ADR (yen) ADR (yen) Guest room occupancy rate Guest room occupancy rateTotal number of guest rooms: 2,205 rooms


22 Solare properties

Operational results

2015 2016

Accumulated total


Accumulated total



ADR (yen) 5,409 5,383 5,334 5,310 5,622 5,662 5,948 5,454 5,859 6,845 5,761 5,761 5,711 5,560 151

RevPAR (yen) 4,350 4,126 3,801 4,135 4,481 4,394 4,602 4,232 4,720 5,846 4,479 4,763 4,497 4,382 115 Sales (millions of yen) 307 301 277 281 327 309 335 293 339 424 313 343 3,848 3,467 －(Note 2)

(yen)

(Note 1) The monthly major indices are based on figures provided by the lessee, SHR Roadside Inn Co., Ltd. (Note 2) Figure for Change is not indicated for 22 Solare properties due to Chisun Inn Kagoshima Taniyama's (acquired in August 2015) operational results from November 2014 to July

2015 not existing. (Note 3) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and Sales are rounded to the nearest specified unit. 19



0

4,000

8,000

12,000

16,000

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%


ADR (yen) ADR (yen) Guest room occupancy rate Guest room occupancy rateTotal number of guest rooms: 1,229 rooms


4 ANA Crowne Plaza properties

Operational results

2015 2016

Accumulated total


Accumulated total



ADR (yen) 13,369 12,161 11,637 11,834 12,354 14,217 14,471 12,411 13,131 15,342 13,504 14,971 13,348 11,821 1,527

RevPAR (yen) 11,887 9,189 7,680 9,626 10,265 12,083 11,907 10,132 10,658 13,366 11,620 12,919 10,946 9,791 1,155 Sales (millions of yen) 1,374 1,255 982 1,029 1,200 1,170 1,299 1,260 1,193 1,137 1,144 1,342 14,383 14,152 231

(yen)

(Note 1) The monthly major indices are based on figures provided by the lessee, K.K. Horizon Hotels. (Note 2) Figures for guest room occupancy rates are rounded to one decimal place, and figures for ADR, RevPAR and Sales are rounded to the nearest specified unit.

20



FP ending April 2017 Assumption FP ending October 2017 Assumption

Operating revenue (millions of yen)

4,462 [Operating revenue] Fixed rent ¥3,105 million Floating rent ¥1,346 million [Operating expenses] Fixed assets tax, city planning tax, etc. ¥365 million Depreciation ¥956 million Maintenance/repair expenses ¥144 million Asset management fees ¥372 million [Non-operating expenses] Debt-financing-related expenses ¥366 million [Expected LTV at the end of FP] 34.9％

Operating revenue (millions of yen)

4,417 [Operating revenue] Fixed rent ¥3,105 million Floating rent ¥1,301 million [Operating expenses] Fixed assets tax, city planning tax, etc. ¥410 million Depreciation ¥977 million Maintenance/repair expenses ¥107 million Asset management fees ¥403 million [Non-operating expenses] Debt-financing-related expenses ¥283 million [Expected LTV at the end of FP] 35.0％

Operating income (millions of yen) 2,261 Operating income

(millions of yen) 2,181

Ordinary income (millions of yen) 1,895 Ordinary income


Net income (millions of yen) 1,894 Net income


Distribution per unit (yen) 11,584 Distribution

per unit (yen) 11,602

Forecasts for 8th fiscal period ending April 2017 and for 9th fiscal period ending October 2017 (1)

(Amounts are rounded down. Ratios are rounded off.)

21

Rent type Name of facility, etc. Fixed rent

Floating rent

Other rent Total

Fixed rent + Floating rent (Sales-linked)

(Note 2)

HOSHINOYA Karuizawa HOSHINOYA Kyoto 408 125 － 533

RISONARE Yatsugatake 262 16 － 279

KAI Matsumoto KAI Izumo

KAI Ito KAI Hakone

KAI Aso KAI Kawaji

233 46 － 279

22 Solare properties 547 157 10 715

Fixed rent 5 Candeo properties 3 Greens properties 269 －－ 269

Fixed rent + Floating rent (Profit-linked)

(Note 2)

RISONARE Atami KAI Kinugawa

KAI Kaga Asahikawa Grand Hotel

544 －－ 544

4 ANA Crowne Plaza properties 840 615 － 1,455

Floating rent Hyatt Regency Osaka － 341 － 341 Total 3,105 1,301 10 4,417

Rent type Name of facility, etc. Fixed rent

Floating rent

Other rent Total

Fixed rent + Floating rent (Sales-linked)

(Note 2)

HOSHINOYA Karuizawa HOSHINOYA Kyoto 408 96 － 504

RISONARE Yatsugatake 262 58 － 321

KAI Matsumoto KAI Izumo

KAI Ito KAI Hakone

KAI Aso KAI Kawaji

233 54 － 287

22 Solare properties 547 154 10 712

Fixed rent 5 Candeo properties 3 Greens properties 269 －－ 269

Fixed rent + Floating rent (Profit-linked)

(Note 2)

RISONARE Atami KAI Kinugawa

KAI Kaga Asahikawa Grand Hotel

544 －－ 544

4 ANA Crowne Plaza properties 840 596 － 1,436

Floating rent Hyatt Regency Osaka － 387 － 387 Total 3,105 1,346 10 4,462

Forecasts for 8th fiscal period ending April 2017 and for 9th fiscal period ending October 2017 (2)

Expected rent for the 8th fiscal period ending April 2017 Expected rent for the 9th fiscal period ending October 2017

(Note 1) Floating rent is calculated based on actual figures of past sales and profits of each facility, reflecting seasonal factors and other fluctuating factors, using calculation methods prescribed in the lease agreement of each facility. For 5 Candeo properties and 3 Greens properties, as well as RISONARE Atami, KAI Kinugawa, KAI Kaga and Asahikawa Grand Hotel which will have premium fixed rent from the fiscal period ending April 2017, floating rent will not apply.

(Note 2) Sales-linked floating rent is calculated deeming sales of the 12 months from October 2015 to September 2016 as the base sales. Profit-linked floating rent is calculated deeming profits of the 12 months from June 2015 to May 2016 as the base profits.

(Note 3) Since RISONARE Atami, KAI Kinugawa, KAI Kaga and Asahikawa Grand Hotel have premium fixed rents during the fiscal period ending April 2017, the premium fixed rents are indicated.

(Note 4) Among the properties owned by HRR, the 22 hotels operated by SHR Roadside Inn Co., Ltd. are referred to as 22 Solare properties, the 5 properties operated by Candeo Hospitality Management, Inc. as 5 Candeo properties, the 3 hotel properties operated by Greens Co., Ltd. as 3 Greens properties and the 4 properties operated by IHG ANA Hotels Group Japan LLC as 4 ANA Crowne Plaza properties.

(Note 1) Floating rent is calculated based on actual figures of past sales and profits of each facility, reflecting seasonal factors and other fluctuating factors, using calculation methods prescribed in the lease agreement of each facility. For 5 Candeo properties and 3 Greens properties, as well as RISONARE Atami, KAI Kinugawa, KAI Kaga and Asahikawa Grand Hotel which will have premium fixed rent during the fiscal period ending October 2017, floating rent will not apply.

(Note 2) Sales-linked floating rent is calculated deeming sales of the 12 months from April 2016 to March 2017 as the base sales. Profit-linked floating rent is calculated deeming profits of the 12 months from December 2015 to November 2016 as the base profits.

(Note 3) Since RISONARE Atami, KAI Kinugawa, KAI Kaga and Asahikawa Grand Hotel have premium fixed rents during the fiscal period ending October 2017, the premium fixed rents are indicated.

22

(Note 3) (Note 3)

(million yen) (million yen)

Rent type Fixed rent + Floating rent Fixed rent + Floating rent Floating rent Fixed rent Index for floating

rent Sales Profits Profits －

Number of properties 31 properties 8 properties 1 property 8 properties

Acquisition price

Price ¥35.3 billion ¥50.6 billion ¥16.0 billion ¥7.2 billion Ratio 32.4% 46.4% 14.7% 6.6%

Name of facility

HOSHINOYA Karuizawa, HOSHINOYA Kyoto,

RISONARE Yatsugatake, KAI Matsumoto, KAI Izumo, KAI

Ito, KAI Hakone, KAI Aso, KAI Kawaji, 22 Solare properties

RISONARE Atami, KAI Kinugawa, KAI Kaga,

4 ANA Crowne Plaza properties,

Asahikawa Grand Hotel

Hyatt Regency Osaka 5 Candeo properties, 3 Greens properties

23

Floating rent (Sales-linked) Floating rent (Profit-linked)

Floating

Fixed

Base profits × 95％ Base profits Base sales

Base sales x Floating rate

Floating

Fixed

[Floating rate] HOSHINOYA 25.0％ RISONARE 15.0％ KAI 16.0％ 21 Solare properties 36.5％

(example) 4 ANA Crowne Plaza properties

Rent type (1)

Floating rent (Profit-linked)

Floating

Base profits × 95％ Base profits

Hyatt Regency Osaka

Rent type (2)

24

Period used for base sales for monthly floating rent (Note)

(1) For May to October every year, deem sales for the 12 months from April of the previous year to March of the relevant year as base sales; (2) For November to the following April every year, deem sales for the 12 months from October of the previous year to September of the relevant

year as base sales.

2014 2015 2016 2017 2018 Nov.

Dec.

Jan. Feb. M

ar. Apr. M

ay Jun. Jul. Aug. Sep. O

ct. N

ov. D

ec. Jan. Feb. M

ar. Apr. M


ct. N

ov. D

ec. Jan. Feb. M

ar. Apr. M


ct. N

ov. D

ec. Jan. Feb. M

ar. Apr.

4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP

Sales-linked type

Profit-linked type Period used for base sales for monthly floating rent (Note)

(1) For May to October every year, deem sales for the 12 months from December two years prior to November of the previous year as base profits; (2) For November to the following April every year, deem sales for the 12 months from June of the previous year to May of the relevant year as

base profits.

2014 2015 2016 2017 2018 Nov.

Dec.

Jan. Feb. M

ar. Apr. M


ct. N

ov. D

ec. Jan. Feb. M

ar. Apr. M


ct. N

ov. D

ec. Jan. Feb. M

ar. Apr. M


ct. N

ov. D

ec. Jan. Feb. M

ar. Apr.

4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP

(Note) The timing of floating rents arising and the specific calculation methods vary depending on the acquisition timing and such of each property. In the lease agreements with each lessee, the starting dates of floating rent are stated as November 1, 2016 (8th FP) for Chisun Inn Kagoshima Taniyama, November 1, 2018 (12th FP) for RISONARE Atami and KAI Kinugawa, November 1, 2019 (14th FP) for Asahikawa Grand Hotel and May 1, 2019 (13th FP) for KAI Kaga. Therefore, floating rent will not arise prior to those said dates regardless of the amounts of sales or profits of the hotels, ryokans and ancillary facilities.

12th FP base sales 8th FP base sales 10th FP base sales


8th FP base sales 10th FP base sales


III. Future Management Policy

Utilization of Sponsor Support Agreement, etc.

Utilization of revitalization know-how of the Hoshino Resorts Group

Utilization of the Asset Management Company’s unique information on properties operated by those other than the Hoshino Resorts Group

External growth strategy

1

2

3

Management policy for the time being

26

Maintenance of growth and stability of distribution

Continuous improvement in unitholder value

Internal growth by operators and the Asset Management Company

Introduction of floating rent linked to sales or profits

Maintenance/Enhancement of asset value and competitiveness of the portfolio through establishment/execution of capital expenditures and repair plans from a medium- to long-term perspective

Internal growth strategy

1

2

3

6,540

8,324 8,537 9,144

10,260 11,104 11,584 11,602

35.5%

22.8% 20.6% 18.6%

27.8% 25.7%

34.9% 35.0%

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

0

00

00

00

00

00

00Distribution per unit (yen) LTV (%)

Actual result FP ended April 2014 (2nd fiscal period)

Actual result FP ended October 2014

(3rd fiscal period)

Actual result FP ended April 2015 (4th fiscal period)

Actual result FP ended October 2015

(5th fiscal period)

Actual result FP ended April 2016 (6th fiscal period)

Actual result FP ending October 2016

(7th fiscal period)

Forecast FP ending April 2017

(8th fiscal period)

Forecast FP ending October 2017

(9th fiscal period)

Distribution up by 27.3%


安定した分配金の実現

Aim for stable improvement in distribution through realization of external growth utilizing sponsor support agreement and internal growth by executing capital expenditures and repair plans from a medium- to long-term perspective.

2nd PO


3rd PO

1st PO

Realization of stable distribution


4th PO


(forecast)

27

Split of investment units

(Note) Since split of investment units was implemented on November 1, 2016, distribution per unit for the 7th FP and before indicated are one-half of the actual amount considering the split.



(forecast)

Acquisition during the 5th FP

Market trend and strategy for differentiation

The annual accumulated total number of foreign visitors to Japan in 2015 has reached 19.73 million, exceeding the number of outbound Japanese travelers for the first time in 45 years. The government has set “40 million foreign tourists in 2020” and “60 million foreign tourists in 2030”as the new goal. On the other hand, domestic movement for launching new hotels has been also active and the hotel transaction market has continued to boom. Competition for acquisitions mainly in the cities is expected to further intensify and the decline in cap rate to further deepen.

Trends in the hotel property investment market

28

Even in the rather over-heated hotel transaction market, HRR will basically target properties that are competitive but with fewer acquisition competitors.

HRR’s strategy for differentiation

Superior know-how and experience Whether it has a business model, brand power, etc. that can differentiate itself from competitors, and whether it is operated by an operator with extensive expertise

Superior equipment and facilities Whether the facility itself possesses superiority as to its location, rarity of the building, etc.

Criteria for selecting investment properties

[Measures for realization of external growth]

External growth strategy

I Utilization of Sponsor Support Agreement, etc. HRR will utilize the comprehensive sponsor support, such as information on domestic/overseas properties

owned by the Hoshino Resorts Group, the provision of human/material resources, knowledge, experience and know-how in the tourism industry and the resort sector, etc.

II Utilization of revitalization know-how of the Hoshino Resorts Group HRR will be provided with information on properties that have regained attractiveness through revitalization

know-how of the Hoshino Resorts Group.

III Utilization of the Asset Management Company’s unique information on properties operated by those other than the Hoshino Resorts Group HRR is collecting information on property acquisitions by establishing networks not only with the Hoshino

Resorts Group but also with the owners and operators of hotels, ryokans and ancillary facilities across the nation. HRR will strive to acquire competitive properties by utilizing the Asset Management Company’s unique information gathering ability.

Aim for asset size of 200 billion yen

While focusing on stable growth and the speed of external growth, HRR will aim to make continuous property acquisitions from the Hoshino Resorts Group and also to acquire properties operated by those other than the

Hoshino Resorts Group from which long-term and stable cash flow can be expected.

External growth

29

Facilities (planned to be) operated by the Hoshino Resorts Group

30

Facilities under development (including facilities under consideration)

Facilities owned by the Hoshino Resorts Group

Aim for further expansion of external growth through property acquisition utilizing the sponsor pipeline.

Facilities owned by third parties ■HOSHINOYA Taketomijima Address: Yaeyama-gun, Okinawa

■HOSHINOYA Fuji Address: Minamitsuru-gun, Yamanashi

■KAI Nikko Address: Nikko-shi, Tochigi

Facilities owned by the Hoshino Resorts Group

Start year of operation Name of facility

1995 Hotel Bleston Court 2003 Alts Bandai Ski Resort 2003 Bandaisan Onsen Hotel 2008 KAI Atami 2008 Kai Atami Annex (Villa del Sol) 2008 Ura Bandai Nekoma Ski Resort 2010 KAI Enshu 2012 HOSHINOYA Taketomijima 2013 KAI Nikko 2015 HOSHINOYA Fuji 2017 (plan) KAI Alps

Facilities owned by third parties Start year of

operation Name of facility

2004 RISONARE Tomamu 2004 Tomamu SKI Resort 2004 Tomamu 2005 Aomoriya 2005 Oirase Keiryu Hotel 2009 UTOCO Auberge & Spa 2010 KAI Tsugaru 2011 RISONARE Kohamajima 2015 L'Hotel de Hiei 2015 Hotel Kia Ora Resort and Spa 2016 HOSHINOYA Tokyo

2017 (plan) HOSHINOYA Bali

■L'Hotel de Hiei Address: Kyoto-shi, Kyoto

■KAI Anjin (scheduled to open on April 13, 2017) Address: Ito-shi, Shizuoka

■Other facilities under development (addresses of development): Nara Prefecture, Yamaguchi Prefecture, Okinawa Prefecture

■HOSHINOYA Tokyo Address: Tokyo

Overseas facilities operated by the Hoshino Resorts Group and modification of guidelines

31

■The Surfjack Hotel & Swim Club

HRR’s sponsor, Hoshino Resorts Inc., established Hoshino Resorts Hawaii LLC in Hawaii, the U.S.A. in November 2016 and plans to acquire the Surfjack Hotel & Swim Club located in the center of Waikiki (Honolulu) within the year.

■HOSHINOYA Bali (scheduled to open on January 20, 2017)

(Some of) overseas properties Modification of guidelines (effective from December 15, 2016)

(Basic policies) (1) Continuously invest in properties operated by the Hoshino

Resorts Group (2) Invest in properties operated by operators other than the

Hoshino Resorts Group. (3) Invest in overseas properties in which the Hoshino Resorts

Group is engaged and which is expected to secure a long-term and stable cash flow (that meet the following conditions).

■Major changes (Underlines sections indicate changes, partially excerpted)

■Locational criteria (Excerpt of the section applicable to the above (3))

1. Properties which the Hoshino Resorts Group or entities, etc. in which the Hoshino Resorts Group invests, owns and engages in the development or operation.

2. Properties that we judge to meet the above condition after a certain period of time following acquisition by HRR.

Brand Locational criteria Overseas properties in which the Hoshino Resorts Group is engaged in

The property, in principle, stands in an area which we judge to allow stable operation as in Japan, centering on areas well-recognized as global tourist destinations.

(Note) Maximum investment ratio for oversea properties in which the Hoshino Resorts Group is engaged will be 15.0%.

Portfolio map of hotels and ryokans operated by the Hoshino Resorts Group

KAI Nikko

HOSHINOYA Karuizawa

Hotel Bleston Court

KAI Aso

HOSHINOYA Kyoto

KAI Enshu

KAI Hakone KAI Atami

RISONARE Atami UTOCO

Auberge & Spa

KAI Izumo

RISONARE Tomamu

Tomamu Tomamu SKI Resort

Alts Bandai Ski Resort Ura Bandai Nekoma Ski Resort

Bandaisan Onsen Hotel

KAI Ito

HOSHINOYA Fuji

HOSHINOYA Tokyo

KAI Kaga KAI Kawaji

KAI Alps (scheduled to open in 2017)

RISONARE Yatsugatake KAI Matsumoto

Aomoriya

KAI Tsugaru

Oirase Keiryu Hotel

Hoshino Resorts Group’s portfolio

L'Hotel de Hiei

KAI Kinugawa

Myanmar

Indonesia

China

Tahiti

Kiaora Rangiroa

(Source) Prepared by the Asset Management Company based on materials provided by Hoshino Resorts Inc. (Note 1) Based on information as of December 16, 2016. (Note 2) The map shows facilities operated by the Hoshino Resorts Group and includes properties that are not acquired by HRR. There are

no specific plans or guarantee that HRR will acquire these properties in the future, as of December 16, 2016. (Note 3) The scheduled openings are subject to change.

32

KAI Anjin (Scheduled to open in 2017)

HRR’s portfolio

(Excluding the above properties)

Vietnam Thailand

Philippines

Malaysia

HOSHINOYA Bali (scheduled to open in 2017)

RISONARE Kohamajima

Iriomote Island

Ishigaki Island

HOSHINOYA Taketomijima Taketomi

Island Kuro Island Aragusuku

Island

Okinawa Prefecture Yaeyama Islands

Internal growth

33

HRR will aim to realize both stable distribution and growth of distribution through the expansion of sales or profits that are indices for floating rent as well as maintenance/improvement of the competitiveness of facilities.

Internal growth strategy

[Measures for realization of internal growth] I Internal growth by operators and the Asset Management Company

HRR intends to maintain/enhance the competitiveness of facilities by selecting property management operators who have a deep understanding of HRR’s property features and possess business models and know-how that are deemed to be optimum based on characteristics of the relevant properties.

The Asset Management Company will aim to reinforce the profitability of the portfolio by conducting operation, management and renewals for maintaining/enhancing the competitiveness of facilities.

II Introduction of floating rent linked to sales or profits HRR will discuss introduction of floating rent linked to sales or profits in accordance with calculation method for

floating rents set with consideration given to the facility’s brand and operating features, in addition to the fixed rent system, in the lease agreement. HRR believes this is a system that will enable HRR to enjoy the enhanced business results of hotels, ryokans and ancillary facilities operated with the know-how of operators and lessees.

III Maintenance/Enhancement of asset value and competitiveness of the portfolio through establishment/execution of capital expenditures and repair plans from a medium- to long-term perspective HRR will aim for stable earnings from operations by reducing the future excessive risks of major repairs, and of

decreased sales resulting from deterioration of facility attractiveness through careful and sufficient capital expenditures, while at the same time making efforts to maintain/enhance the asset value and competitiveness of the portfolio from a medium- to long-term perspective.

Initiatives for stable maintenance and improvement of the portfolio management results (1)

Case of initiatives during 7th FP

RISONARE Atami From May 2016 to July 2016, efforts such as renovation work on guest rooms and common use areas were conducted in collaboration with operators. This initiative not only solves issues that received low marks in the past customer satisfaction survey but also enables securement of stable earnings in the future with creation of new attractiveness.

34

[Investment effect] Accumulated total from Aug. 2015 to Oct. 2015

Accumulated total from Aug. 2016 to Oct. 2016 Change

Terrace building (Guest room building subject to renovation)

Occupancy rate 71.3％ 68.5％ -2.8 pt. ADR ¥66,680 ¥76,217 ¥9,537

RevPAR ¥47,550 ¥52,195 ¥4,645

Initiatives for stable maintenance and improvement of the portfolio management results (2)

HRR is executing capital expenditures and repairs for maintaining and improving operational results by collaborating with operators and utilizing their know-how on facility operation in addition to those of the

Asset Management Company.

35

Future initiatives (scheduled)

RISONARE Yatsugatake Renovation of guest rooms and restaurant (YY grill) will be conducted from December 2016 to April 2017. [Investment amount: approx. ￥1.3 billion (plan)]

KAI Hakone Renovation mainly of guest rooms will be conducted from December 2016 to February 2017. [Investment amount: approx. ￥200 million (plan)]

Aim for stable earnings in the future through enhancement of ADR of facilities

Renovation of restaurant (YY grill) Renovation of guest rooms

[Investment effect] Before the renovation

After the renovation (forecast) Change

Occupancy rate 78.8% 78.6% -0.2% ADR ¥26,167 ¥34,176 ¥8,009

Renovation of guest rooms

[Guest room with open-air bath]

[Guest room with a living room overlooking the stream]

IV. Appendix

HOSHINOYA Karuizawa Address Karuizawa-machi, Kitasaku-gun, Nagano Acquisition Price ¥7,600 million Name of tenant Hoshino Resorts Inc. Number of guest rooms 77

RISONARE Atami Address Atami-shi, Shizuoka Acquisition Price ¥3,750 million Name of tenant K.K. Horizon Hotels Number of guest rooms 76

HO

SHIN

OYA

K

AI KAI Izumo

Address Matsue-shi, Shimane Acquisition Price ¥680 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 24

Portfolio overview (assets under management) (1)

HOSHINOYA Kyoto Address Kyoto-shi, Kyoto Acquisition Price ¥2,785 million Name of tenant K.K. Arashiyama Onsen Rankyokan Number of guest rooms 25

RISONARE Yatsugatake Address Hokuto-shi, Yamanashi Acquisition Price ¥4,500 million Name of tenant K.K. Horizon Hotels Number of guest rooms 172

RISO

NA

RE

37

KAI Kawaji Address Nikko-shi, Tochigi Acquisition Price ¥1,000 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 54

KAI Hakone Address Hakone-machi, Ashigarashimo-gun, Kanagawa Acquisition Price ¥950 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 31

KAI Aso Address Kokonoe-machi, Kusu-gun, Oita Acquisition Price ¥575 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 12

KAI Ito Address Ito-shi, Shizuoka Acquisition Price ¥670 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 34

KAI Kinugawa Address Nikko-shi, Tochigi Acquisition Price ¥3,080 million Name of tenant Hoshino Resorts Inc. Number of guest rooms 48

KAI Kaga Address Kaga-shi, Ishikawa Acquisition Price ¥3,160 million Name of tenant K.K. Arashiyama Onsen Rankyokan Number of guest rooms 48

KA

I KAI Matsumoto

Address Matsumoto-shi, Nagano Acquisition Price ¥600 million Name of tenant Hoshino Resort Management Co., Ltd. Number of guest rooms 26

Chisun Inn Fukushima Nishi IC Address Fukushima-shi, Fukushima Acquisition Price ¥672 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Niigata Chuo IC Address Niigata-shi, Niigata Acquisition Price ¥630 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Nagasaki Airport Address Omura-shi, Nagasaki Acquisition Price ¥630 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Chisun Inn Kumamoto Miyukifueda Address Kumamoto-shi, Kumamoto Acquisition Price ¥616 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Utsunomiya Kanuma Address Utsunomiya-shi, Tochigi Acquisition Price ¥714 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Fukui Address Fukui-shi, Fukui Acquisition Price ¥644 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Toyokawa IC Address Toyokawa-shi, Aichi Acquisition Price ¥602 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 94

Chisun Inn Tosu Address Tosu-shi, Saga Acquisition Price ¥504 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Chisun Inn Chiba Hamano R16 Address Chiba-shi, Chiba Acquisition Price ¥798 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 94

Chisun Inn Shiojiri Kita IC Address Shiojiri-shi, Nagano Acquisition Price ¥672 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Chisun Inn Sano Fujioka IC Address Sano-shi, Tochigi Acquisition Price ¥742 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Chisun Inn Suwa IC Address Suwa-shi, Nagano Acquisition Price ¥658 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Others

Others


38

Chisun Inn Karuizawa Address Karuizawa-machi, Kitasaku-gun, Nagano Acquisition Price ¥812 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 90

Chisun Inn Hitachinaka Address Hitachinaka-shi, Ibaraki Acquisition Price ¥742 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Chisun Inn Kofu Isawa Address Fuefuki-shi, Yamanashi Acquisition Price ¥658 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92 O

thers

Others


Chisun Inn Marugame Zentsuji Address Marugame-shi, Kagawa Acquisition Price ¥588 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Munakata Address Munakata-shi, Fukuoka Acquisition Price ¥504 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Iwate Ichinoseki IC Address Ichinoseki-shi, Iwate Acquisition Price ¥700 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

39

Chisun Inn Tsuchiura Ami Address Ami-machi, Inashiki-gun, Ibaraki Acquisition Price ¥770 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 92

Candeo Hotels Handa Address Handa-shi, Aichi Acquisition Price ¥620 million Name of tenant Candeo Hospitality Management, Inc. Number of guest rooms 126

Candeo Hotels Chino Address Chino-shi, Nagano Acquisition Price ¥793 million Name of tenant Candeo Hospitality Management, Inc. Number of guest rooms 119

Chisun Inn Himeji Yumesakibashi Address Himeji-shi, Hyogo Acquisition Price ¥616 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Chisun Inn Kurashiki Mizushima Address Kurashiki-shi, Okayama Acquisition Price ¥728 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 98

Candeo Hotels Fukuyama Address Fukuyama-shi, Hiroshima Acquisition Price ¥1,075 million Name of tenant Candeo Hospitality Management, Inc. Number of guest rooms 164

Candeo Hotels Sano Address Sano-shi, Tochigi Acquisition Price ¥1,260 million Name of tenant Candeo Hospitality Management, Inc. Number of guest rooms 124

Chisun Inn Kagoshima Taniyama Address Kagoshima-shi, Kagoshima Acquisition Price ¥1,995 million Name of tenant SHR Roadside Inn Co., Ltd. Number of guest rooms 217

ANA Crowne Plaza Toyama Address Toyama-shi, Toyama Acquisition Price ¥4,008 million Name of tenant K.K. Horizon Hotels Number of guest rooms 251

ANA Crowne Plaza Kanazawa Address Kanazawa-shi, Ishikawa Acquisition Price ¥6,609 million Name of tenant K.K. Horizon Hotels Number of guest rooms 249

ANA Crowne Plaza Hiroshima Address Hiroshima-shi, Hiroshima Acquisition Price ¥17,784 million Name of tenant K.K. Horizon Hotels Number of guest rooms 409

ANA Crowne Plaza Fukuoka Address Fukuoka-shi, Fukuoka Acquisition Price ¥7,599 million Name of tenant K.K. Horizon Hotels Number of guest rooms 320

Asahikawa Grand Hotel Address Asahikawa-shi, Hokkaido Acquisition Price ¥4,619 million Name of tenant Asahikawa Grand Hotel Co., Ltd. Number of guest rooms 237

Others

Others


40

Comfort Hotel Tomakomai Address Tomakomai-shi, Hokkaido Acquisition Price ¥963 million Name of tenant Greens Co., Ltd. Number of guest rooms 123

Comfort Hotel Hakodate Address Hakodate-shi, Hokkaido Acquisition Price ¥937 million Name of tenant Greens Co., Ltd. Number of guest rooms 139

Candeo Hotels Kameyama Address Kameyama-shi, Mie Acquisition Price ¥470 million Name of tenant Candeo Hospitality Management, Inc. Number of guest rooms 170

Comfort Hotel Kure Address Kure-shi, Hiroshima Acquisition Price ¥1,100 million Name of tenant Greens Co., Ltd. Number of guest rooms 149

Hyatt Regency Osaka Address Osaka-shi, Osaka Acquisition Price ¥16,000 million Name of tenant GCP Hospitality Japan K.K. Number of guest rooms 480

Operational results 2015 2016 Accumulated total Nov. Dec. Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct.

Guest room occupancy rate 82.8% 84.7% 86.0% 83.1% 90.0% 75.0% 92.6% 88.2% 77.9% 88.7% 80.4% 76.9% 81.3% ADR (yen) 39,400 47,914 45,300 37,036 42,599 45,732 74,249 38,077 64,674 86,914 46,112 46,591 50,871 RevPAR (yen) 32,626 40,566 38,976 30,780 38,332 34,279 68,754 33,598 50,349 77,101 37,051 35,833 41,354 Sales (millions of yen) 122 135 97 97 142 118 58 40 126 239 125 126 1,425

RISONARE Atami



Guest room occupancy rate 73.8% 69.1% 66.5% 63.0% 67.2% 63.8% 74.8% 68.8% 83.5% 92.8% 87.1% 85.2% 75.0% ADR (yen) 38,116 40,631 36,587 28,159 31,447 39,114 42,578 34,540 41,973 61,359 43,938 45,645 41,469 RevPAR (yen) 28,147 28,077 24,324 17,740 21,147 24,973 31,854 23,765 35,047 56,943 38,248 38,906 31,111 Sales (millions of yen) 44 41 27 31 37 38 48 34 53 76 56 58 541







KAI Matsumoto

KAI Izumo

KAI Ito

KAI Hakone

41


Guest room occupancy rate － 56.4% 53.4% 51.7% 54.8% 52.8% 55.3% 53.0% 60.1% 76.1% 70.6% 75.1% 60.0% ADR (yen) － 32,883 32,081 28,908 30,719 36,319 40,490 32,315 33,505 44,324 32,421 37,203 35,094 RevPAR (yen) － 18,541 17,119 14,949 16,832 19,168 22,394 17,119 20,152 33,749 22,875 27,954 21,068 Sales (millions of yen) － 57 54 45 53 55 64 48 62 93 70 79 681

KAI Kinugawa




KAI Kawaji



KAI Aso

42


Guest room occupancy rate － 58.5% 48.9% 61.0% 52.9% 46.9% 64.2% 49.7% 50.2% 76.1% 74.6% 69.7% 59.3% ADR (yen) － 38,558 38,456 35,529 37,002 40,554 40,352 33,256 36,019 43,198 34,242 38,003 37,858 RevPAR (yen) － 22,565 18,789 21,670 19,570 19,024 25,898 16,512 18,082 32,863 25,539 26,482 22,461 Sales (millions of yen) － 53 58 65 59 50 76 50 55 93 74 74 707

KAI Kaga




Chisun Inn Tosu





Chisun Inn Suwa IC

Chisun Inn Toyokawa IC

43





Chisun Inn Shiojiri Kita IC

Chisun Inn Sano Fujioka IC



Chisun Inn Fukushima Nishi IC






Chisun Inn Utsunomiya Kanuma

Chisun Inn Fukui

44





Chisun Inn Chiba Hamano R16

Chisun Inn Kumamoto Miyukifueda



Chisun Inn Kofu Isawa






Chisun Inn Hitachinaka

Chisun Inn Tsuchiura Ami

45





Chisun Inn Niigata Chuo IC

Chisun Inn Nagasaki Airport



Chisun Inn Himeji Yumesakibashi






Chisun Inn Iwate Ichinoseki IC

Chisun Inn Karuizawa

46





Chisun Inn Marugame Zentsuji

Chisun Inn Munakata




ANA Crowne Plaza Hiroshima



ANA Crowne Plaza Kanazawa



ANA Crowne Plaza Fukuoka

47



Chisun Inn Kagoshima Taniyama



Chisun Inn Kurashiki Mizushima




ANA Crowne Plaza Toyama



Asahikawa Grand Hotel

48

Balance sheet for the fiscal period ended October 2016 (Unit: thousands of yen)

Previous fiscal period (ended Apr. 30, 2016)

Current fiscal period (ended Oct. 31, 2016)

Liabilities Current liabilities

Operating accounts payable 104,560 94,787 Short-term loans payable 1,100,000 - Current portion of long-term loans payable

4,565,213 950,724

Accounts payable 563,476 561,547 Income taxes payable 789 889 Accrued expenses 2,715 - Advance received 658,034 695,672 Other - - Total current liabilities 6,994,789 2,303,620

Non-current liabilities Long-term loans payable 22,720,410 26,209,332 Tenant leasehold and security deposits

2,718,309 2,789,454

Total non-current liabilities 25,438,719 28,998,786 Total liabilities 32,433,509 31,302,406

Net assets Unitholders’ equity

Unitholders’ capital 67,906,895 72,591,623 Surplus

Unappropriated retained earnings (undisposed loss) (−)

1,600,757 1,815,796

Total surplus 1,600,757 1,815,796 Total unitholders’ equity 69,507,653 74,407,420

Total net assets 69,507,653 74,407,420 Total liabilities and net assets 101,941,162 105,709,827

Previous fiscal period (ended Apr. 30, 2016)

Current fiscal period (ended Oct. 31, 2016)

Assets Current assets

Cash and deposits 8,243,199 9,514,280 Operating accounts receivable 40,416 39,832 Prepaid expenses 129,450 182,643 Consumption tax receivable 1,205,689 67,952 Deferred tax asset 13 14 Other - - Total current assets 9,618,770 9,804,723

Non-current assets Tangible assets

Buildings 51,692,917 55,399,273 Accumulated depreciation -1,984,232 -2,729,273 Buildings, net 49,708,684 52,670,000

Structures 1,311,237 1,569,735 Accumulated depreciation -58,106 -80,642 Structures, net 1,253,131 1,489,093

Machinery and equipment 83,801 83,801 Accumulated depreciation -20,498 -24,115

Machinery and equipment, net 63,303 59,685

Tools, furniture and fixtures 458,598 475,715 Accumulated depreciation -50,718 -109,170 Tools, furniture and fixtures, net 407,879 366,545

Land 39,116,980 39,351,315 Construction in progress 70,114 201,094 Total tangible assets 90,620,094 94,137,734

Intangible assets Leasehold rights 1,002,287 1,028,324 Software 11,786 13,504 Total intangible assets 1,014,073 1,041,829

Investment and other assets Long-term prepaid expenses 375,334 412,650 Guarantee deposits 10,000 10,000 Other 302,890 302,890 Total investment and other assets 688,224 725,540

Total non-current assets 92,322,392 95,905,104 Total assets 101,941,162 105,709,827

49

Previous fiscal period (From Nov. 1, 2015 to Apr. 30, 2016)

Current fiscal period (From May 1, 2016 to Oct. 31, 2016)

Operating revenue Rent revenue – real estate 3,559,947 3,981,640 Total operating revenue 3,559,947 3,981,640

Operating expenses Expenses related to rent business 1,303,096 1,428,747 Asset management fee 249,568 342,999 Asset custody fee 2,139 3,786 Administrative service fees 10,407 15,741 Directors’ compensations 2,640 2,640 Accounting auditors’ compensations 6,500 6,751 Other operating expenses 71,426 83,750 Total operating expenses 1,645,777 1,884,418

Operating income 1,914,169 2,097,222 Non-operating income

Interest income 702 47 Insurance received - 1,559 Interest on refunds 602 - Miscellaneous income 17 18 Total non-operating income 1,322 1,625

Non-operating expenses Interest expenses 144,948 156,288 Borrowing related expenses 100,279 90,394 Investment unit issuance expenses 68,634 35,506 Total non-operating expenses 313,863 282,188

Ordinary income 1,601,628 1,816,659 Income before income taxes 1,601,628 1,816,659 Income taxes –current 897 896 Income taxes –deferred 0 0 Total income taxes 897 896 Net income 1,600,731 1,815,763 Retained earnings brought forward 26 33 Unappropriated retained earnings (undisposed loss) (−) 1,600,757 1,815,796

Statement of income for the fiscal period ended October 2016

50

(Unit: thousands of yen)

Real estate appraisal value for continuously owned properties as of the end of the fiscal period ended October 2016 (1)

Appraisal value for continuously owned properties 109,299 million yen Unrealized gain 14,700 million yen Net asset per unit 910,104 yen

Total book value 94,598 million yen Unrealized gain per unit 179,808 yen NAV per unit 1,089,912 yen

Property No. Property name Acquisition

Price

Real estate appraisal value, etc.

Valuation date

2015 2016

Aug. 31 Oct. 31 Feb. 29 Apr. 30 Oct. 31 H-1 HOSHINOYA Karuizawa 7,600 － 10,400 － 10,900 11,100 H-2 HOSHINOYA Kyoto 2,785 － 3,480 － 3,550 3,760 R-1 RISONARE Yatsugatake 4,500 － 5,830 － 5,920 6,000 R-2 RISONARE Atami 3,750 －－－ 4,000 4,080 K-1 KAI Matsumoto 600 － 728 － 745 783 K-2 KAI Izumo 680 － 803 － 822 847 K-3 KAI Ito 670 － 862 － 881 923 K-4 KAI Hakone 950 － 1,190 － 1,220 1,240 K-5 KAI Aso 575 － 674 － 674 676 K-6 KAI Kawaji 1,000 － 1,110 － 1,130 1,140 K-7 KAI Kinugawa 3,080 3,220 －－ 3,280 3,280 K-8 KAI Kaga 3,160 －－ 3,300 － 3,330


51


Price


Valuation date 2014 2015 2016

Oct. 31 Apr. 30 Oct. 31 Apr. 30 Oct. 31 O-1 Chisun Inn Shiojiri Kita IC 672 757 768 786 799 809 O-2 Chisun Inn Sano Fujioka IC 742 845 861 876 894 895 O-3 Chisun Inn Suwa IC 658 746 757 775 788 802 O-4 Chisun Inn Toyokawa IC 602 678 691 708 720 726 O-5 Chisun Inn Tosu 504 568 579 588 600 630 O-6 Chisun Inn Chiba Hamano R16 798 947 971 988 1,010 1,020 O-7 Chisun Inn Kumamoto Miyukifueda 616 686 697 708 708 736 O-8 Chisun Inn Utsunomiya Kanuma 714 770 795 808 823 833 O-9 Chisun Inn Fukui 644 715 724 738 752 767 O-10 Chisun Inn Fukushima Nishi IC 672 718 739 751 765 773 O-11 Chisun Inn Niigata Chuo IC 630 699 709 725 736 747 O-12 Chisun Inn Nagasaki Airport 630 702 713 730 746 752 O-13 Chisun Inn Hitachinaka 742 852 879 894 900 903 O-14 Chisun Inn Tsuchiura Ami 770 886 896 901 918 921 O-15 Chisun Inn Kofu Isawa 658 738 751 764 777 786 O-16 Chisun Inn Marugame Zentsuji 588 647 656 668 679 692 O-17 Chisun Inn Munakata 504 552 582 606 613 618 O-18 Chisun Inn Iwate Ichinoseki IC 700 739 749 749 763 773 O-19 Chisun Inn Karuizawa 812 918 933 984 1,040 1,050 O-20 Chisun Inn Himeji Yumesakibashi 616 686 698 712 724 731 O-21 Chisun Inn Kurashiki Mizushima 728 805 814 830 845 857


52



Price


Valuation date 2015 2016

Aug. 15 Oct. 31 Feb. 29 Apr. 30 Oct. 31 O-22 Candeo Hotels Handa 620 - 670 - 684 693 O-23 Candeo Hotels Chino 793 - 886 - 903 914 O-24 Candeo Hotels Fukuyama 1,075 - 1,200 - 1,220 1,240 O-25 Candeo Hotels Sano 1,260 - 1,410 - 1,440 1,460 O-26 Candeo Hotels Kameyama 470 - 513 - 524 532 O-27 Comfort Hotel Hakodate 937 - 1,010 - 1,030 1,040 O-28 Comfort Hotel Tomakomai 963 - 1,040 - 1,060 1,070 O-29 Comfort Hotel Kure 1,100 - 1,190 - 1,210 1,230 O-30 Chisun Inn Kagoshima Taniyama 1,995 - 2,160 - 2,210 2,230 O-31 ANA Crowne Plaza Hiroshima 17,784 19,000 - - 19,700 19,900 O-32 ANA Crowne Plaza Fukuoka 7,599 8,100 - - 8,440 8,630 O-33 ANA Crowne Plaza Kanazawa 6,609 6,990 - - 7,150 7,170 O-34 ANA Crowne Plaza Toyama 4,008 4,280 - - 4,420 4,440 O-35 Asahikawa Grand Hotel 4,619 - - 4,770 4,770 4,770


53


Information on unitholders as of the end of the fiscal period ended October 2016

(Note) Ratio indicates the ratio of the number of investment units held to the total investment units issued and outstanding, rounded down to two decimal places.

Composition of unitholders

54

Major unitholders Number of investment

units held (units)

Ratio (%)

Japan Trustee Services Bank, Ltd. (Trust account) 15,209 18.60 Trust & Custody Services Bank, Ltd. (Securities investment trust account) 10,162 12.42 The Master Trust Bank of Japan, Ltd. (Trust account) 7,374 9.01 Nomura Trust and Banking Co., Ltd. (Investment trust account) 3,992 4.88 Hoshino Resorts Inc. 3,070 3.75 JP MORGAN CHASE BANK 385632 2,478 3.03 THE BANK OF NEW YORK, NON-TREATY JASDEC ACCOUNT 1,375 1.68 STATE STREET BANK AND TRUST COMPANY 505012 1,366 1.67 The Hokkoku Bank, Ltd. 835 1.02 EVERGREEN 805 0.98

Total 46,666 57.07

IndividualFinancial institutions (including financial trading operators)Other domestic corporationsForeign corporations, etc.

Number of units held by type of unitholder

Total: 81,757 units

Number of investors by type of unitholder

Total: 10,278

17,611 units (21.54%) 42,541 units (52.03%) 4,931 units (6.03%)

16,674 units (20.39%)

9,803 (95.38%)

91 (0.89%) 237

(2.31%) 147 (1.43%)

Overview of HRR

Structure of HRR

55

February 28, 2013 Application for registration of HRR was filed by the organizer (Hoshino Resort Asset Management Co., Ltd.) under Article 69-1 of the Act on Investment Trusts and Investment Corporations (Investment Trusts Act) March 6, 2013 HRR was registered and established under Article 166 of the Investment Trusts Act March 25, 2013 Application for registration of HRR was filed under Article 188 of the Investment Trusts Act April 10, 2013 HRR was registered by the Prime Minister under Article 187 of the Investment Trusts Act (registration number 84, filed with the Director of the Kanto Local Financial Bureau) July 12, 2013 HRR was listed on the Real Estate Investment Trust Section of the Tokyo Stock Exchange (securities code: 3287) July 16, 2013 Asset management started

History

HRR

General Meeting of Unitholders

Board of Directors Executive Officer: Kenji Akimoto

Supervisory Director: Hiroshi Shinagawa Supervisory Director: Yukiko Fujikawa

Independent Auditor Grant Thornton Taiyo LLC

Sponsor Support

Agreement

Sponsor Hoshino Resorts Inc.

Asset Management Company

Hoshino Resort Asset Management Co., Ltd.

Asset Management Agreement

Asset Custodian Mitsubishi UFJ Trust and Banking

Corporation

Asset Custody

Agreement

Administrative Agent for Unitholders’ Registry

Mitsubishi UFJ Trust and Banking Corporation

Transfer Agency

Agreement

Administrative Agent for Operation of Institutions

Mitsubishi UFJ Trust and Banking Corporation

General Service

Agreement

Overview of Asset Management Company

Structure of Asset Management Company

Overview

56

Name Hoshino Resort Asset Management Co., Ltd. Address 6-18, Kyobashi 3-chome, Chuo-ku, Tokyo Date of Establishment May 14, 2010 Paid-in Capital ¥100 million Shareholder Hoshino Resorts Inc. 100% Registration and Licenses Registration as a Financial Instruments Business: Director of Kanto Local Finance Bureau (Kin-sho) No. 2405

Discretionary Real Estate Transaction License: The Minister of Land, Infrastructure, Transportation and Tourism No.74 Building Lots and Buildings Transaction Business License: The Governor of Tokyo No. (1) 94316

General Meeting of Shareholders

Board of Directors

President & CEO Compliance Officer

Compliance Department

Corporate Planning Department

Investment Management Department

Auditor

Investment Management Committee

Compliance Committee

Finance & Administration Department

Disclaimer

57

Contact TEL：+81-3-5159-6338

This document is provided for information purposes only and is not a solicitation for investment, nor recommendation or invitation to make specific transactions. We caution readers to undertake investment decisions at their own discretion and responsibility. This document is not a disclosure document or report based upon the Financial Instruments and Exchange Act, the Act on Investment Trusts and Investment Corporations, public listing regulations of the Tokyo Stock Exchange or other related laws and regulations. This document includes charts, data and other materials prepared by Hoshino Resort Asset Management Co., Ltd. (the “Asset Management Company”) based on data, indices, etc. disclosed by third parties, in addition to statements related to Hoshino Resorts REIT, Inc. (“HRR”). Statements on analysis, judgments and other opinions of the Asset Management Company as of the date of the document are also included. The contents of this document have not been audited and their accuracy and completeness are not guaranteed. Analysis, judgments and other opinions of the Asset Management Company that are not actual instance are only reflecting the views of the Asset Management Company as of the date of the document. Therefore, other views and opinions exist and the Asset Management Company may change its views in the future. The figures under the same item of other disclosed materials may differ from figures presented in this document due to different rounding of fractions and such. While HRR has taken due care in the preparation of this document, the possibility of errors exists. Readers are also cautioned that the contents of this document are subject to correction or change without prior notice. HRR or the Asset Management Company will not be responsible for any inaccuracy in data, indices and such disclosed by third parties. Although this documents include statements regarding HRR’s future policies, etc., these statements do not guarantee such future policies, etc. For the convenience of preparing graphs, the dates indicated may differ from actual business dates.

Registration as a Financial Instruments Business: Director of Kanto Local Finance Bureau (Kin-sho) No. 2405 Member of the Investment Trusts Association, Japan

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