Galileo Japan Trust : Update on Proposed Sale & FY16 Results Presentation

Update on proposed sale of

the Japanese property portfolio and FY16 Annual Results Presentation

31 August 2016

This presentation is a summary of the annual financial results and should be read in conjunction with the Trust's Update on proposed sale of the Japanese property portfolio and FY16 Annual Results Announcement dated 31 August 2016 and the Financial Report for the year ended 30 June 2016.

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Update on proposed sale of the Japanese property portfolio

• On 23 March 2016, unitholders approved the sale of the Japanese property portfolio, subsequent distribution of net equity proceeds to unitholders and the winding up of GJT. As a result it has been determined that, in accordance with Australian Accounting Standards, GJT's financial statements have been prepared on a liquidation basis as at 30 June 2016

• The Notice of Meeting and Explanatory Memorandum dated 29 February 2016 ("EM") provided that the proposed sale was conditional on the successful listing of a new J-REIT on the Tokyo Stock Exchange ("TSE"). On 5 august a new J-REIT, Sakura Sogo REIT, received approval from the TSE to list its investment units.

• On 31 August 2016, Sakura Real Estate Funds Management Inc. ("SREFM"), the asset manager for Sakura Sogo REIT announced to the TSE the final issue price and number of new securities relating to the proposed IPO. SREFM also confirmed the target listing date of 8 September

  2016 and that an underwriting agreement has been executed with SMBC Nikko Securities Inc. Based on the current timetable it is anticipated that GJFML will announce the record date and amount of the initial special distribution in late September 2016.

• The IPO of Sakura Sogo J-REIT remains subject to market and execution risks

• The EM indicated total special distributions of $2.65 per unit. This amount was determined using the 31 December 2015 balance sheet adjusted for known transaction costs and using the AUDJPY exchange rate of A$1=¥82.0

• Using the 30 June 2016 balance sheet, which accounts for all known selling costs, an estimate for wind up costs, and applying the AUDJPY exchange rate as at that date (A$1=¥76.2), the estimated total special distributions equate to $2.791 per unit

• Factors impacting the estimated total special distributions compared to the EM are as follows:

  • favourable movement in the AUDJPY exchange rate (+$0.20 cpu);

  • earthquake repair works required after the April 2016 earthquake in Kumamoto prefecture of ¥130 million (-$0.02 cpu);

  • capital expenditure incurred during the six months to 30 June 2016 funded from reserves of ¥120 million (-$0.02 cpu);

  • unfavourable movement in the interest rate swap in the Japanese TK business of ¥116 million (-$0.01 cpu); and

  • write off of unamortised debt costs as at 30 June 2016 of ¥105 million (-$0.01 cpu)

• The actual total of the special distributions remain subject to foreign exchange rate movements and the proposal completing as outlined in the EM

• In addition to the special distributions, the Trust expects to pay an ordinary distribution for the period from 1 July 2016 up until completion of the proposed sale

1. 1. $2.75 per unit based on AUDJPY of ¥77.48 the rate applicable on 31 August 2016

   Annual Results FY16 - Key points

   Financial results for the year ended 30 June 2016

   • Funds from operations ("FFO")1 for the year ended 30 June 2016 of A$21.2 million2 (20.2 cents per unit ("cpu")) vs A$15.0 million (14.1 cpu) for the year ended 30 June 2015. FFO for FY15 adjusted for the "one-off" $5.0 million premium paid to refinance the Eurobonds was A$20.0 million (18.8 cpu)

   • Distribution of 17.4 cpu in FY16, up 16.8% vs FY15 (14.9 cpu). FY16 distribution equates to a yield of 6.5% on the closing price of A$2.67 on 31 August 2016

   • Carrying value of the portfolio was ¥57.36 billion (A$752.5 million) 3 as at 30 June 2016, an increase of 3.5% over pcp on a "like for like" basis in Japanese Yen terms

   • Fair value of investment property represents the agreed sale price outlined in the EM

   • Gearing (debt/total assets) was 53.7% at 30 June 2016 vs 54.9% at 30 June 2015

   • Net property income ("NOI") for the year was 0.1% higher than pcp on a "like for like" basis

     Distribution per unit in FY16

     17.4 cents

     FY16 DPU yield on $2.67

     6.5%

     FY16 vs FY15 DPU

     up 16.8%

     Increase in portfolio book value in FY16

     3.5%

     Change in gearing in FY16

     54.9% to 53.7%

   • Funds from operations (FFO) represents net profit attributable to unitholders adjusted for unrealised gains and losses, amortisation expense and one-off costs relating to the proposed sale and wind up funded from working capital or from the sale proceeds

   • Average AUDJPY rate of ¥ 84.98 for the year ended 30 June 2016 (¥ 95.55 for FY15)

2. 3. AUDJPY spot rate of ¥76.23 as at 30 June 2016

   Annual Result FY16 - Key points

   Property portfolio performance

   • Portfolio occupancy as at 30 June 2016 was 96.1% (30 June 2015: 96.0%). GJT's average occupancy since IPO in 2006 has been 97.5%

   • Key sectors of office and retail which represent approximately 84% of portfolio NOI demonstrated modest growth over pcp

   • Industrial sector NOI was lower vs pcp due to vacancy throughout FY16 at Funabashi Hi-Tech. Commercial terms have now been agreed with a new tenant with lease commencement anticipated in the second quarter of FY17

   • Residential NOI was lower than pcp primarily due to lower average occupancy in FY16

   • Upward rent revision on six office tenancies during FY16, with an average increase over the previous passing rent of approximately 16%. The area subject to review represents approximately 9% of the total NRA of the office portfolio (refer slide 10)

   • The Japanese TK Business sold Prejeal Utsubo on 28 April 2016 for ¥450 million. The sale price was consistent with independent appraisal and the forecast sale proceeds outlined in the EM

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