Astro Japan Property : Stapled Company Annual Financial Report FY17

ASX/Media Release

24 August 2017

FINANCIAL REPORT OF STAPLED COMPANY, ASTRO JAPAN PROPERTY GROUP LIMITED

Astro Japan Property Group (ASX: AJA) earlier today announced its full year results to 30 June 2017 which included the Annual Financial Report covering the operations of the Astro Group as a whole.

In accordance with the Corporations Act 2001 (Cth), the Astro Group prepares two annual financial reports for release to the ASX: one report covers the operations of the Astro Group as a whole (released earlier today); and another smaller report covers only the stapled company, Astro Japan Property Group Limited and its controlled entity.

Please find attached the Annual Financial Report for Astro Japan Property Group Limited for the period ended 30 June 2017 covering the operations of only the stapled company. This Report should be read together with the Annual Financial Report of the Astro Group released earlier today.

ENDS

Investor & Media Enquiries:

Eric Lucas John Pettigrew

Senior Advisor Chief Financial Officer

Phone: [phone] (Japan) Phone: [phone]

About Astro Japan Property Group (AJA)

Astro Japan Property Group is a listed property group which invests in the Japan real estate market. It currently holds interests in a portfolio comprising 29 retail, office, residential and hotel properties. Asset management services in Japan are generally undertaken by Spring Investment Co., Ltd.

AJA is a stapled entity comprising Astro Japan Property Trust (ARSN 112 799 854) and Astro Japan Property Group Limited (ABN 25 135 381 663). For further information please visit our website: www.astrojapanproperty.com.

Astro Japan Property Group Limited

(ABN 25 135 381 663)

Annual Financial Report 30 June 2017 Important: These financial statements should be read in conjunction with the consolidated financial statements of the Astro Group for the year ended 30 June 2017, which were released to the ASX on 24 August 2017

The consolidated financial statements of AJCo Group comprise Astro Japan Property Group Limited (ABN 25 135 381 663) (AJCo) and its controlled entity.

Through our website, we have ensured that our corporate reporting is timely, complete and available globally at minimum cost to the Astro Group. All press releases, financial reports and other information are available on our website: www.astrojapanproperty.com

CONTENTS

Directors' Report 1

Auditor's Independence Declaration 8

Consolidated Statement of Profit or Loss and Other Comprehensive Income 9

Consolidated Statement of Financial Position 10

Consolidated Statement of Cash Flows 11

Consolidated Statement of Changes in Equity 12

Notes to the Financial Statements 13

1. Revenue 14

2. Expenses 14

3. Income tax 14

4. Earnings per stapled security 15

5. Cash and cash equivalents 15

6. Other receivables 15

7. Intangible assets 16

8. Financial assets carried at fair value through the profit or loss (FVTPL) 16

9. Fair value measurement of financial instruments 16

10. Contributed equity 17

11. Dividends 18

12. Remuneration of auditors 18

13. Notes to the consolidated statement of cash flows 18

14. Financial Risk Management 18

15. Director and executive disclosures 20

16. Related parties 21

17. Segment note 21

18. Contingent asset and liabilities 21

19. Lease commitments 22

20. Parent entity financial information 22

21. Statement of other significant accounting policies 22

22. Events occurring after the end of the reporting period 25

Directors' Declaration 27

Independent Auditor's Report 28

DIRECTORS' REPORT

for the year ended 30 June 2017

The Directors of Astro Japan Property Group Limited (ABN 25 135 381 663) ("AJCo") present their report together with the consolidated financial statements of AJCo and its controlled entity ("AJCo Group" or "Group") for the year ended 30 June 2017.

The Astro Japan Property Group

The Astro Japan Property Group ("Astro Group") comprises Astro Japan Property Trust (ARSN 112 799 854) ("AJT") and AJCo and its controlled entity. The shares in AJCo are stapled to the units in AJT on a 'one for one' basis and together are referred to as 'stapled securities'. AJCo and AJT are separate legal entities under the Corporations Act 2001 (Cth) so are therefore required to separately comply with the reporting and disclosure requirements under the Corporations Act 2001 (Cth), Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Interpretations (UIG). This report is in respect of the AJCo Group.

The registered office and principal place of business of AJCo is Suite 4, Level 10, 56 Pitt Street, Sydney NSW 2000.

Principal activities

The principal activities of AJCo remain unchanged from 30 June 2016 and are:

• holding 100% of the issued share capital of Astro Japan Property Management Limited ("Responsible Entity"), the Responsible Entity of AJT; and

• holding a 25% economic interest in Spring Investment Co. Ltd ("Spring" or "Japan Asset Manager"), which is the manager of the Astro Group's Japanese property interests.

  Financial and operating review

  AJCo Group made a profit after income tax of $3,015,266 for the year ended 30 June 2017 (2016: $912,955).

  Disposal of Spring's shareholding in Sekisui House SI Asset Management, Ltd.

  On 29 March 2017, it was announced that Spring, in which the AJCo Group has a 25% economic interest, disposed of its shareholding in Sekisui House SI Asset Management, Ltd. (SSA). SSA is the manager of the Tokyo Stock Exchange listed REIT, Sekisui House SI Residential Investment Corporation (TSE code 8973) which owns residential Japanese assets with a book value in excess of ¥200 billion ($2.3 billion approx.).

  Spring acquired its 25% shareholding in SSA (formerly known as Joint Capital Partners) in 2010 in joint venture with leading Japanese real estate developer Sekisui House, Ltd. (TSE code 1928), which owns 75% of SSA. Spring sold its 25% interest to Sekisui House, Ltd and SSA is now Sekisui House, Ltd's 100% subsidiary.

  Details of the sale are confidential, however, reflecting the very substantial growth in SSA's business over the past 7 years, the transaction price was at a significant premium to the book value of Spring's investment. In recognition of the success of this joint venture and in order to maintain the business relationship, Sekisui House, Ltd made a small investment in Spring. This investment does not impact the AJCo Group's 25% economic interest in Spring.

  Likely developments and expected results of operations

  In the year ended 30 June 2017, the primary source of the AJCo Group's revenue was obtained from its deemed parent AJT. As such, the future developments of the AJCo Group are reliant on the future developments of AJT, and the Astro Group as a whole.

  Sale of the Astro Group's property (TK) interests

  Subsequent to the year end, on 1 August 2017, the Astro Group announced that it has entered into agreements with Jetsons Holding II Pte. Ltd., an entity which is incorporated in Singapore by funds managed by Blackstone Real Estate (together with its affiliates, "Blackstone"), that, subject to the approval of Astro Group securityholders and the satisfaction of other conditions including lender consents, will result in:

  • Blackstone acquiring all of the interests held by Astro Group in the TK Agreements, through which the Astro Group indirectly invests in Japanese real estate for net consideration of ¥37.908 billion ($428.3 million at $1:¥88.50). This implies a property portfolio valuation of

    ¥98.642 billion ($1,114.6 million at $1:¥88.50), reflecting a 2.38% premium to recently completed independent valuations;

  • net proceeds from the sale of the TK Interests being returned to Astro Group securityholders; and

  • The Astro Group being delisted from ASX and the constituent entities of Astro Group being wound up (collectively, the "Blackstone Proposal")

    It is expected that Astro Group securityholders will receive net consideration of approximately $7.18 per stapled security (based on an exchange rate of $1:¥88.50) as a result of the Blackstone Proposal ("Proposed Consideration") in October 2017.

    In addition to the Proposed Consideration, Astro Group securityholders will also receive:

  • the normal half yearly distribution payable at the end of August 2017, of 21 cents per stapled security; and

  • distributions currently estimated at 14 cents per Security on the wind up of AJT and AJCo targeted to occur prior to January 2018.

The Blackstone Proposal requires the approval of Astro Group Securityholders, by majority vote pursuant to ASX Listing Rules 10 and 11 (excluding Mr Eric Lucas and his associates). To this end, a meeting of Astro Group securityholders has been convened for 13 September 2017, and the Notice of Meeting and Explanatory Memorandum was lodged with ASX on 1 August 2017.

Page 1 ASTRO JAPAN PROPERTY GROUP LIMITED