Disclaimer
This document has been prepared solely for the purpose of providing U.K. and Dutch investors withcertain information under Article 23 of the European Alternative Investment Fund Managers
Directive (European Directive 2011/61/EU) (the “AIFMD”) as implemented in their respective
jurisdictions. Accordingly, you should not use this document for any other purpose.
European Economic Area Investors
The Directive 2011/61/EU (the “Alternative Investment Fund Managers Directive”, or the“AIFMD”), was adopted on June 8, 2011 and was required to be implemented by each Member Stateof the EEA into its national legislation by July 22, 2013. The units of INV may not be marketed(within the meaning given to the term “marketing” under the AIFMD), and the Communication may
not be conducted, to prospective investors domiciled or with a registered office in any Member Stateof the EEA unless: (i) the units of INV may be marketed under any national private placement
regime (including under the AIFMD) or other exemption in that Member State; or (ii) the units of
INV can otherwise be lawfully marketed or sold in that Member State in circumstances in which the
AIFMD does not apply, provided that any such offer or sale is not made to a retail investor as
described above. We have made a notification to each of the Netherlands Authority for the Financial
Markets and the United Kingdom Financial Conduct Authority pursuant to Article 42 of the AIFMD
in order to market the units of INV in the Netherlands and the United Kingdom, respectively.

Prohibition of Sales to EEA Retail Investors
In addition to the restrictions under the AIFMD, the units of Invincible Investment Corporation(“INV” or the “AIF”) are not intended to be offered, sold or otherwise made available to and should
not be offered, sold or otherwise made available to any retail investor in the European Economic
Area, or the EEA. For these purposes, a retail investor means a person who is one (or more) of: (i) aretail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU, as amended, or the
MiFID II; or (ii) a customer within the meaning of Directive (EU) 2016/97, where that customer
would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii)
not a qualified investor as defined in Regulation (EU) 2017/1129, as amended, the Prospectus
Regulation. Consequently no key information document required by Regulation (EU) No 1286/2014,or the PRIIPs Regulation, for offering or selling the units of INV or otherwise making themavailable to retail investors in the EEA has been prepared and therefore offering or selling the unitsof INV, or otherwise making them available, to any retail investor in the EEA may be unlawful
under the PRIIPs Regulation.

United Kingdom

The units of INV are being marketed in the United Kingdom pursuant to Article 59 of the United
Kingdom Alternative Investment Fund Managers Regulations 2013. In accordance with thisprovision, the Consonant Investment Management Co., Ltd. (the “AIFM”) has notified the Financial
Conduct Authority (the “FCA”) of its intention to offer these units in the United Kingdom. For the
purposes of the United Kingdom Financial Services and Markets Act 2000 (“FSMA”) INV is an
unregulated collective investment scheme which has not been authorized by the FCA. Accordingly,
any communications of an invitation or inducement to invest in INV may be made only to: (i)investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005, as amended, or the Order; (ii) high net worth companies,
unincorporated associations or other entities falling within Articles 49(2)(a) to (d) of the Order; or(iii) other persons to whom it may lawfully be communicated (all such persons together beingreferred to as “Relevant Persons”). In the United Kingdom, this document and its contents are
directed only at Relevant Persons and must not be acted on or relied on by persons who are not
Relevant Persons. The transmission of this document and its contents in the United Kingdom to any
person other than a Relevant Person is unauthorized and may contravene the FSMA and other United
Kingdom securities laws and regulations.

Prohibition of Sales to UK Retail Investors
In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its domestic
laws, the Units of INV are not intended to be offered, sold or otherwise made available to and should
not be offered, sold or otherwise made available to any retail investor in the United Kingdom. For
these purposes of this provision, a “retail investor” means a person who is one (or more) of: (i) aretail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part ofdomestic law by virtue of the European Union (Withdrawal) Act 2018 (“EUWA”); or (ii) a customer
within the meaning of the provisions of the FSMA and any rules or regulations made under the
FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as aprofessional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014 as it
forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as defined in
Article 2 of Regulation (EU) 2017/1129, as it forms part of domestic law by virtue of the EUWA;
and the expression “offer” includes the communication in any form and by any means of sufficient
information on the terms of the offer and the international units to be offered so as to enable an
investor to decide to purchase or subscribe the international units.

Consequently no key information document required by Regulation (EU) No 1286/2014, as it forms
part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”), for offering or sellingthe international units or otherwise making them available to retail investors in the United Kingdom

2

has been prepared and therefore offering or selling the international units or otherwise making themavailable to any retail investor in the United Kingdom may be unlawful under the UK PRIIPs
Regulation.

Netherlands
The units of INV are being marketed in the Netherlands under Section 1:13b of the Dutch Financial
Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordance with this provision, theAIFM has notified the Dutch Authority for the Financial Markets of its intention to offer these units
in the Netherlands. The units of INV will not, directly or indirectly, be offered, sold, transferred ordelivered in the Netherlands, except to or by individuals or entities that are qualified investors(gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft. and as a consequenceneither the AIFM nor INV is subject to the license requirement pursuant to the Wft. Consequently,
neither the AIFM nor INV is subject to supervision of the Dutch Central Bank (De NederlandscheBank, “DNB”) or the Netherlands Authority for Financial Markets (Autoriteit Financiële Markten,
the “AFM”) and this Article 23 AIFMD Prospectus is not subject to approval by the AFM. No
approved prospectus is required to be published in the Netherlands pursuant to Article 3 of theRegulation (EU) 2017/1129 as amended and applicable in the Netherlands. The AIFM is therefore
solely subject to limited ongoing regulatory requirements as referred to in Article 42 of the AIFMD.

3

Article 23 (1)(a)Objectives of the AIF

INV seeks to achieve distribution growth and enhancement of unitholders’ value
by building a balanced portfolio composed primarily of hotels, particularly limited
service hotels, and affordable residential properties, which together constitute
INV’s “core assets”. By achieving such balance, INV seeks to optimize the mixof stability associated with residential properties and growth opportunities
arising from investments in hotels.

Investment strategy

In addition to investing in and growing a balanced portfolio composed primarilyof hotels and affordable residential properties, INV seeks to:•utilize resources and pipeline support of Fortress Investment Group
LLC and its affiliates (collectively, the “Fortress Group”, whichsponsors INV and is part of the Softbank Group);•source attractive properties using Consonant Investment
Management Co., Ltd.’s (the “Asset Manager”) information network;and•utilize limited service operational expertise of MyStays HotelManagement Co., Ltd. (“MyStays Hotel Management”).

Types of assets theReal estate, including trust beneficiary interests in real estate, securities

AIF may invest in

backed by real estate, specified assets and other assets, including any of theforegoing assets governed by foreign laws and regulations, as well as equity
interests in corporations holding overseas real estate.

Techniques it may

INV invests primarily in hotels and affordable residential properties, while also

employ and all

making investments in select office buildings, retail properties and parking

associated risks

facilities, to achieve distribution growth and enhancement of unitholders’value.

The principal risks with respect to investment in INV are as follows:
Property and Business Risks•

Any adverse conditions in the Japanese economy could adversely affect
INV’s properties.

•

An epidemic such as SARS, MERS and COVID-19 may have asignificant long-term adverse impact on economic activities, including asa result of self-isolation measures, which in turn may adversely affect theoperators’ profitability, performance of INV’s portfolio and market price of
its units.

4•

INV may not be able to acquire properties to execute its growth andinvestment strategy in a manner that is accretive to earnings.

•

INV’s reliance on Fortress Group could have a material adverse effect on
its business.

•

INV’s investment in the Cayman Islands hotels exposes it to risks
inherent in investment in overseas properties, including operational risks
due to its limited experience in operating properties outside of Japan,
exposure to the economic, market and environmental conditions in the
Cayman Islands and foreign exchange risk.

•

INV’s strategy to acquire properties outside of Japan may expose it toadditional risks.

•

As a large portion of INV’s hotels are subject to a variable rent structure,
its results of operations are inherently more volatile than the results ofproperties with fixed-lease arrangements, and INV may not be able toeffectively manage its hotel portfolio due to its relatively limited operating
history in owning full service hotels and resort hotels that it may decide toacquire in greater numbers in the future.

•

INV may not close its anticipated or other future property acquisitions.

•

Increases in prevailing market interest rates, particularly following the
Bank of Japan’s announcement of a major new policy for monetaryeasing, would increase INV’s interest expense and may result in a
decline in the market price of its units.

•

The relatively high geographic concentration of INV’s real estate portfolio
in the greater Tokyo area and other major cities could have a material
adverse effect on its business.

•Competition for tenants and hotel guests may adversely affect INV’s
ability to retain its current tenants and find new tenants, and to maintainoccupancy rates and revenue.

•

INV’s domestic hotels are subject to the operating risks common to thehospitality industry, which have a direct effect on the variable rent
component of its portfolio’s revenue.

•

The cyclical and seasonal nature of the hospitality industry may cause
fluctuations in INV’s operating performance, which could have a material
adverse effect on it and its variable rent revenues.

•

INV may incur unexpected expenses, expenditure or other losses forrepair or maintenance of its properties, and its hotels require periodic

5

capital reinvestment for renovation.
•

The majority of INV’s hotels are leased to MyStays Hotel Management or
its subsidiaries which are owned by Fortress Group-managed funds, andsubject to the risk of default under their hotel lease agreements.

•

INV’s focus on residential properties could have a material adverse effecton its business.

•

INV may lose rental revenues in the event of defaults by end-tenants
under their lease agreements for properties other than hotels.

•

Master leases may give rise to certain risks.

•

INV may suffer large losses if any of its properties incur damage from anatural or man-made disaster or acts of violence.

•

INV may be liable for an unforeseen loss, damage or injury suffered by athird party at its properties.

•

Because most of INV’s operating expenses are largely fixed, it may
suffer adverse consequences if its rental revenues decline.

•

INV may not be able to promptly acquire suitable properties or sell thosein its portfolio on acceptable terms in response to changing economic,
financial or investment conditions.

•Defects or problems relating to INV’s properties, including nonconformity to agreements, may adversely affect its financial condition
and results of operations.

•

INV relies on expert appraisals and engineering, environmental andseismic reports, which are subject to significant uncertainties.

•

The environmental assessments of INV’s properties made prior to its
ownership may not have uncovered all environmental liabilities, andJapanese laws and other overseas laws subject property owners to strict
environmental liabilities.

•

Decreases in tenant leasehold and/or security deposits would increase
INV’s funding costs.

•

Any inability to obtain financing for future acquisitions, or any restrictions
on INV’s activities under its financing arrangements, could adversely
affect INV.

•

A high LTV ratio may increase INV’s exposure to changes in interest
rates and have a material adverse effect on its results of operations.

•

INV may suffer impairment losses relating to its properties and may also
suffer adverse tax effects upon recognizing impairments.

6•The performance of Fortress Group is not an indicator or guarantee of
INV’s future results.

•

INV’s financial statements are prepared in accordance with Japanese
GAAP, which differs in certain material respects from IFRS, U.S. GAAP
and generally accepted accounting principles and financial reporting
standards in other jurisdictions.

•

INV relies on industry and market data that are subject to significant
uncertainties.

•

INV may be exposed to risks relating to investments in the operators or
master lessees of its properties.

Management and Governance Risks•

INV’s success depends on the performances of service providers towhich it is required to assign various key functions.

•

There are potential conflicts of interest between INV and certain FortressGroup affiliates or Fortress Group-related companies including the AssetManager, MyStays Hotel Management.

•

INV depends on the efforts of its executive director and key personnel ofthe Asset Manager.

•

Unitholders have limited control over INV’s policies.

•

The Japanese regulatory authorities have tightened regulatory
supervision of J-REITs and their asset managers and their corporate
governance.

•

If unitholders do not exercise their voting rights, INV may count theirvotes in favor of proposals at a general meeting of unitholders.

Taxation Risks•

INV’s failure to satisfy a complex series of requirements pursuant toJapanese tax regulations would disqualify INV from certain taxation
benefits and significantly reduce its distributions to its unitholders.

•

If the Japanese tax authorities disagree with the interpretations INV used
for prior periods, it may be forced to pay additional taxes for those
periods.

•

INV may not be able to benefit from reductions in certain real estatetaxes enjoyed by qualified J-REITs.

•

Changes in Japanese tax laws may significantly increase INV’s tax
burden.

•INV may be subject to taxes in countries other than Japan due to its

7

investments outside of Japan and investors may not be able to takeadvantage of available credits associated with such taxes.
•

INV’s distributions may decrease due to reversals of allowance fortemporary differences adjustment.

•

INV expects to be treated as a “passive foreign investment company” for
U.S. federal income tax purposes.

•

Unitholders may become subject to U.S. Foreign Account Tax
Compliance Act (FATCA) withholding tax.

Legal and Regulatory Risks•

INV’s ownership rights in some of its properties may be declared invalid
or limited.

•

INV’s may lose its rights in a property it owns if the purchase of theproperty is recharacterized as a secured financing.

•

Acquisition of properties for which third parties hold leasehold interests inthe land and own the buildings may subject INV to various risks.

•

INV’s leasehold interests may be terminated or may not be asserted
against a third party in some cases, or its leases with its tenants could be
modified.

•

INV currently hold interests in Sheraton Grande Tokyo Bay Hotel through,and may make further investments in, preferred equities of a TMK (tokutei
mokuteki kaisha), and illiquidity in the market for such equities may limit
its ability to sell its interests, and INV is exposed to risks unique to thisinvestment structure.

•

INV may hold interests in some properties through Japanese anonymous
association (tokumei kumiai) agreements.

•

INV currently holds several properties in the form of compartmentalized
ownership interests (kubun shoyu-ken) and its rights relating to suchproperties may be affected by the intentions of other owners•

INV may acquire properties in the form of co-ownership (kyoyu) and its
rights relating to such properties may be affected by the intentions ofother owners.

•

Tax increases or adverse changes in applicable laws may affect INV’s
potential liabilities relating to its properties and operations.

•

Compliance with energy conservation regulations in Japan may
adversely affect INV’s financial results.

•

INV’s costs of complying with regulations applicable to its properties8

could adversely affect its results of operations.
•

INV owns a substantial portion of its properties through trust beneficiaryinterests and may suffer losses as a trust beneficiary.

•

The Alternative Investment Fund Managers Directive (AIFMD) may
negatively affect INV’s ability to market its units in the EEA and increase
its compliance costs associated with the marketing of its units in the
EEA.

•

INV’s assets may be deemed to constitute “plan assets” for ERISA
purposes, which may lead to the rescission of certain transactions, tax or
fiduciary liability and its being held in violation of ERISA requirements.

Any applicable

INV is subject to investment restrictions under Japanese laws and regulations

investment restrictions(e.g., the Act on Investment Trusts and Investment Corporations (the “ITA”),
the Financial Instruments and Exchange Act (the “FIEA”)) as well as its
articles of incorporation.
INV must invest primarily in specified assets as defined in the ITA. Specified
assets include, but are not limited to, securities, real estate, leaseholds of realestate, surface rights (chijō-ken) (i.e., right to use land for the purpose of
having a structure on it) or trust beneficiary interests for securities or realestate, leaseholds of real estate or surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets in realestate, real estate-related assets and liquid assets as provided by the listing
requirements. Real estate in this context includes, but is not limited to, realestate, leaseholds of real estate, surface rights, and trust beneficiary interests
for these assets, and real estate-related assets in this context include, but notlimited to, anonymous association (tokumei kumiai) interests for investment inreal estate.
Pursuant to the ITA, investment corporations may not independently develop
land for housing or to construct buildings, but may outsource such activities incertain circumstances.
The investment by the AIF must be made in accordance with the basic
investment policy as set out in its articles of incorporation.

Circumstances in

INV may take out loans or issue investment corporation bonds (includingwhich the AIF may

short-term corporation bonds) for the purpose of, among other things,

use leverageacquiring assets, repair or distribution payments and acquiring operational
funding or procuring funds for debt repayment, which are conducive to theefficient management of investment assets and the stability of management.

9

The types and

INV may take out loans or issue investment corporation bonds for financing its

sources of leverage

activities.

permitted and

INV currently has outstanding loans from major financial institutions, such as

associated risks

Mizuho Bank, Ltd., Sumitomo Mitsui Trust Bank, Limited, The Bank of TokyoMitsubishi UFJ, Ltd. and Sumitomo Mitsui Banking Corporation.
INV currently does not have any outstanding guarantees and may be subject
to restrictive covenants in connection with any future indebtedness that may
restrict the operations and limit the ability to make cash distributions tounitholders, to dispose of the properties or to acquire additional properties.
Furthermore, INV may violate restrictive covenants contained in the loan
agreements INV executes, such as the maintenance of debt service coverageor loan-to-value, or LTV, ratios, which may entitle the lenders to require INV tocollateralize the properties or demand that the entire outstanding balance be
paid. Further, in the event of an increase in interest rates, to the extent that
INV has any debt with unhedged floating rates of interest or INV incurs new
debt, interest payments may increase, which in turn could reduce the amountof cash available for distributions to unitholders. Higher interest rates may also
limit the capacity for short- and long-term borrowings, which would in turn limit
the ability to acquire properties, and could cause the market price of the units
to decline.

Any restrictions on

The maximum amount of any borrowing and issuance of investment

leverage

corporation bonds is JPY 500 billion each, and the aggregate amount of all
such debt must not exceed JPY 500 billion.

Any restrictions on

No applicable arrangements.

collateral and asset
reuse arrangements
Maximum level of

INV has, in principle, set an upper limit of 60% for its LTV ratio (based on bookleverage which thevalue) in order to operate with a stable financial condition. INV may, however,

AIFM is entitled totemporarily exceed such level as a result of acquiring new investment assets.

employ on behalf of
the AIF
Article 23(1) (b)Procedure by which

INV’s investment policy is set forth in its articles of incorporation. As a result,the AIF may change

any change in its investment policy will require an amendment of its articles of

its investment strategy

incorporation. Amendment of the articles of incorporation requires a quorum of/ investment policya majority of the total issued units and at least a two-thirds vote of the voting

10

rights represented at the meeting. Unitholders should note, however, that
under the ITA and INV’s articles of incorporation, unitholders who do notattend and exercise their voting rights at a general meeting of unitholders are
deemed to be in agreement with proposals submitted at the meeting, except incases where contrary proposals are also being submitted or cases regarding(i) dismissal of an executive director or supervisory director, (ii) consent to thetermination of the asset management agreement by the Asset Manager, (iii)
termination of the asset management agreement by INV, (iv) addition,
amendment or abolition of the provisions related to deemed affirmative vote in
the articles of incorporation or (v) dissolution of INV.
Additionally, the guidelines of the AIFM, which provide more detailed policies
within INV’s overall investment strategy and policy, can be modified without
such formal amendment of the articles of incorporation.
Article 23(1) (c)Description of the

INV is a corporate-type investment trust in the form of investment corporation

main legal(toshi hojin) provided for under the ITA. Therefore, the relationship between

implications of the

INV and its unitholders is governed by INV’s articles of incorporation (ascontractual

opposed to individual agreements), which can be amended from time to time

relationship entered

upon resolution of a general unitholders’ meeting. INV’s articles of

into for theincorporation stipulate rules relating to general unitholders meetings, including

purpose of

the convocation, setting of record date, exercise of voting rights, resolutions

investment, including

and election of INV’s directors.

jurisdiction, applicable

The relationship between INV and its unitholders is also governed by, and islaw, and the existence

subject to the provisions of, Japanese law, including the ITA.

or not of any legal

The courts in Japan would recognize as a valid judgment any final andinstruments providing

conclusive civil judgment for monetary claims (which, for this purpose, arefor the recognition andlimited to those of a purely civil nature and do not include monetary claims ofenforcement of

the nature of criminal or administrative sanction, such as punitive damages,

judgments in theeven though they take the form of civil claims) against INV obtained in aterritory where the AIF

foreign court provided that (i) the jurisdiction of such foreign court is admitted

is establishedunder the laws of Japan, (ii) INV has received service of process for thecommencement of the relevant proceedings, otherwise than by a public noticeor any method comparable thereto, or has appeared without any reservation
before such foreign court, (iii) neither such judgment nor the relevant
proceeding is repugnant to public policy as applied in Japan, (iv) there exists
reciprocity as to the recognition by such foreign court of a final judgment

11

obtained in a Japanese court and (v) there is no conflicting judgement on thesubject matter by any Japanese court.

The AIFM has entered into a sponsor support agreement with Fortress
Investment Group Japan Godo Kaisha. INV has also entered into amemorandum of understanding with certain Fortress Group-related SPCs,
which provides INV with preferential negotiation rights to acquire certain
properties.
All of the above agreements are governed by Japanese law.
INV is not involved in or threatened by any legal arbitration, administrative orother proceedings, the results of which might, individually or in the aggregate,
be material.
Article 23(1) (d)The identity of the⚫

AIFM (Asset Manager) / General Administrator: Consonant Investment

AIFM, AIF's

Management Co., Ltd.

depositary, auditor

The Asset Manager provides the services including asset management,

and any other service

financing, investor relations and financial reporting, and operational

providers and aplanning.

description of their

The General Administrator provides administrative services to us,

duties and theincluding administration of unitholder meetings (excluding services

investors' rights

related to distribution of documents for the unitholders’ meeting andtheretoacceptance and tabulation of the voting ballots) and administration ofboard meetings.
⚫

Auditor: Ernst & Young ShinNihon LLC
The independent auditor audits financial statements and prepare audit
reports.

⚫

Asset Custodian / Unitholders’ Register Administrative Agent / Special
Accounts Administrator: Sumitomo Mitsui Trust Bank, Limited (“SMTB”)
The Asset Custodian provides custodial services to us, including custodyof our assets.
The Unitholders’ Register Administrative Agent provides administrative
services to us, including creation, administration and custody of theunitholders’ register and related documents.
The Special Accounts Administrator provides administrative services tous, including the preparation, management and custody of the transfer
account book and other services in relation to the special accounts of12

pre-merger unitholders of LCP.
⚫

Special Accounts Administrator: Mitsubishi UFJ Trust and Banking
Corporation (“MUTB”)
The Special Accounts Manager provides administrative services to us,
including the preparation, management and custody of the transfer
account register and collection, registration, custody, use, removal anddeletion of the individual number and other information in relation to thespecial accounts of pre-merger unitholders of us.

⚫

Accounting Administrator: SMTB
The Accounting Administrator provides administrative services to us,
including administration of accounting matters, preparation of accounting
books and tax-related services.

INV relies on Consonant Investment Management Co., Ltd. to manage its
operations, to formulate and implement strategies to achieve its investment
objectives and to administer unitholder meeting and board meetings. Ernst &Young ShinNihon LLC is INV’s independent auditor and audits INV’s financial
statements. SMTB provides custodian services and certain administrative
services to INV, including custody of its assets, creation of the unitholders’register and preparation of the transfer account book in relation to the special
accounts of pre-merger unitholders of LCP Investment Corporation (“LCP”).
MUTB provides certain administrative services to INV, including the custody ofthe transfer account register in relation to the special accounts of pre-merger
unitholders of INV. SMTB provides certain administrative services to INV,
including the administration of accounting matters and preparation of
accounting books.

Service providers owe contractual obligations under their respective
agreements with the AIF or the AIFM, as the case may be. In addition, the
FIEA provides that the Asset Manager owes the AIF a fiduciary duty and must
conduct its activities as the Asset Manager in good faith. The FIEA also
prohibits the Asset Manager from engaging in certain specified conduct,
including entering into transactions outside the ordinary course of business orwith related parties of the Asset Manager that are contrary to or violate the
AIF’s interests. Pursuant to the ITA, the unitholders have the right to approvethe execution or termination of the asset management agreement at a general13

meeting of unitholders.

The unitholders do not have any contractual relationship with INV’s service
providers and therefore will not be able to bring any contractual claims against
a service provider.
Article 23(1) (e)Description of how the

Not applicable.

AIFM complies withthe requirements tocover professional
liability risks (ownfunds / professional
indemnity insurance)
Article 23(1) (f)Description of any

Not applicable. There is no delegation of such functions beyond the AIFM,

delegatedwhich is responsible for portfolio and risk management, and the asset

management function

custodian, which is responsible for safekeeping activities.

such as portfolio
management or risk
management and of
any safekeeping
function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest
that may arise fromsuch delegations
Article 23(1) (g)Description of theINV makes investment decisions based on the valuation of properties, upon

AIF’s valuationconsideration of the property appraisal value. INV evaluates assets inprocedure and pricing

accordance with its articles of incorporation. The methods and standards thatmethodology,

INV uses for the evaluation of assets are based on the Regulations

including the methods

Concerning the Calculations of Investment Corporations, as well as theused in valuing hard-

Regulations Concerning Real Estate Investment Trusts and Real Estate

to-value assets

Investment Corporations and other regulations stipulated by ITA, in addition to14

Japanese GAAP. J-REITs may only use the valuation methods prescribed in
the rules of the Investment Trusts Association, Japan, which emphasize
market price valuation.
Article 23(1) (h)Description of the

INV seeks to manage its capital resources and liquidity sources to provide

AIF’s liquidity risk

adequate funds for current and future financial obligations and other cash

management,

needs and acquisitions.

including redemption

Net cash provided by operating activities constitutes INV’s primary source ofrights in normal andliquidity to fund distributions, interest payments on loans payable, fees to the

exceptional

Asset Manager and other service providers, property-related taxes, repairs

circumstances andand maintenance, and capital expenditures for its properties in the ordinary

existing redemption

course of business. INV’s liquidity risks are managed by the Asset Manager byarrangements withpreparing monthly plans for funds, and monitoring the covenants defined ininvestors

loan agreements.
As INV is a closed-end investment corporation, unitholders are not entitled torequest the redemption of their investment.

Article 23(1) (i)Description of all fees,

Compensation: INV’s articles of incorporation provide that it may pay its

charges andexecutive director up to JPY 800,000 per month and its supervisory director up

expenses and a

to JPY 400,000 per month. The board of directors is responsible for

maximum amountdetermining the amounts of the monthly remuneration for the executive

which is directly /director and the supervisory director.

indirectly borne by theinvestors

Asset Manager:•

Asset Management Fee: INV pays to the AIFM an asset management
fee as follows:(1)

From January 2023 through December 2023, as a fee for every half
accounting period (three months), an amount not exceeding the lower of
either (A) the amount calculated by multiplying the total amount of therelevant assets recorded as of the end of the relevant half accounting
period by 0.4%, and then dividing by 4 (disregarding any amounts lessthan one yen) or (B) JPY 150,000,000:(2)

From January 2024, as a monthly fee, the higher of either (A) the amountcalculated by multiplying the total amount of the relevant assets recorded
as of the end of each relevant month by 0.4%, and then dividing by 12(disregarding any amounts less than one yen) or (B) JPY 25,000,000.

15•Acquisition Fee:
If INV acquires any real estate or other underlying real estate by which
other assets, including trust beneficiary interests, which are backed by
any Real Estate, etc., which are targeted for asset investment, INV pays
an amount not exceeding 0.5% of the amount contributed by INV among
the purchase price thereof (excluding an amount equivalent to theconsumption tax thereon relevant to the building) within three months
from the end of the month in which the date of acquisition of such assets
falls.

•

Disposition Fee:
If INV disposes of any real estate or other underlying real estate by which
other assets, including trust beneficiary interests, which are backed by
any Real Estate, etc., which are targeted for asset investment, INV pays
an amount not exceeding 0.5% the amount received by INV among of
the disposition price thereof (excluding an amount equivalent to theconsumption tax thereon relevant to the building) within three months
from the end of the month in which the date of disposition of such assets
falls.

•

Administrative Agency Fee:
INV pays the AIFM a fee of JPY 100,000 for each month, payable on aquarterly basis for services performed during the three-month periods
ending March 31, June 30, September 30, and December 31,
respectively, and payable within two months of the end of the relevant
period. If INV holds a general meeting of unitholders, INV pays the AIFM
an additional fee of JPY 500,000 for services performed in connection
with each such meeting, payable within the three month period
immediately following the end of the month in which such meeting is
held.

Custodian:•Custodian Fee:
INV pays to the Asset Custodian a custodian fee for each fiscal period,
which may not exceed, on an annual basis, 0.02% of the total amount of
its assets.

Unitholders’ Register Administrative Agent:16•Standard Fees:
INV pays standard fees for services such as storage and administrationof INV’s unitholder’s register, monthly reports or other reports that form
part of the regular services, and the determination of the identity of INV’s
unitholders as of end-of-period, mid-period, and quarterly dates(excluding extraordinary determinations) and compilation of various
statistical data. Monthly standard fees are equal to one-sixth of the sumof the total amount of fees calculated in the manner below, provided thatthe minimum monthly fee is set at JPY 200,000.
Number of unitholders

Fees per Unitholder

The first 5,000 unitholders

JPY 480

Over 5,000 and not more than 10,000

JPY 420

Over 10,000 and not more than 30,000

JPY 360

Over 30,000 and not more than 50,000

JPY 300

Over 50,000 and not more than 100,000

JPY 260

Over 100,000 unitholders

JPY 225

INV also pays a JPY 70 fee per case for data entry regarding
deregistrations from the unitholder’s register.
•

Administration of Distributions Fees:
INV pays fees for the calculation of distributions and services such as thecreation of distribution records and receipts, processing of stamp tax
payment, preparation of payment records, determination of unpaid
distributions and preparation of unpaid distributions records, preparationof wire transfer notices, wire transfer tape and wire transfer slips for
distributions, application of withholding tax rates other than general tax
rates, and preparation of distribution statements of accounts. The fees
are determined based on the total number of unitholders as of the record
date and calculated according to the table below, provided that theminimum fee is set at JPY 350,000.
Number of unitholders

Fees per unitholder
receiving
distributions

The first 5,000 unitholders

JPY 120

Over 5,000 and not more than 10,000

JPY 110

Over 10,000 and not more than 30,000

JPY 100

Over 30,000 and not more than 50,000

JPY 8017Over 50,000 and not more than 100,000

JPY 60Over 100,000 unitholders

JPY 50

INV pays an additional charge of JPY 150 per instance in connection
with distribution wire transfer instructions; a charge of JPY 100 per
instance in connection with postal dividends receipts; a charge of JPY
150 per instance in connection with the application of special tax rates;
and a charge of JPY 15 per instance for preparation of distribution
account statements.

Special Accounts Administrator:•

Special Account Administration Fees (SMTB):
These fees are for the administration of special accounts, transfer agent
and handling reports, verification of securities storage and transfer
mechanism and total unit numbers, and creation of reports on transaction
totals. The fees are based on the total number of subscribers as of theend of the relevant month and are calculated according to the tablebelow. There is a minimum special account administration fee of JPY
20,000 per month.

•

Number of subscribers

Fees per subscriber

The first 5,000 subscribers

JPY 150

Over 5,000 and up to 10,000

JPY 130

Over 10,000 subscribers

JPY 110Special Account Administration Fees (MUTB):
These fees are for the creation and administration of the transfer accountregister and the account ledger attached thereto; for reports for the
notification of general unitholders; new listing, registration, cancellation,and total cancellation procedures; individual unitholder requests for
information; listing and registration in the transfer account register, listing
and registration of pledges, and listing and registration of trustees andassets held in trust; the opening and closing of special accounts;
registration of seals for subscriber information and notifications, renewalof registration, and notifications to the subscriber information
mechanism; services related to requests for the opening of special
accounts for purchasers under the New Act on the Transfer of Corporate
Bonds, etc.; and services relating to unit splits and reverse unit splits.

18

The fees are based on the total number of unitholders as of the end of
the relevant month and calculated according to the table below. There isa minimum fee of JPY 20,000 per month.
Number of unitholders

Fees per unitholder

The first 3,000 unitholder

JPY 150

Over 3,000 and up to 10,000

JPY 125

Over 10,000 and up to 30,000

JPY 100

Over 30,000 unitholders

JPY 75

INV also pays special account administration fees for the administrationof each special account (except for certain unitholders as separately
defined) as follows: a fee of JPY 150 for a general unitholder report; afee of JPY 250 for offer or receipt of an individual unitholder notification;a fee of JPY 250 for receipt of information requests; a fee of JPY 250 forreceipt of various notices; a fee of JPY 130 for services related to
distribution wire transfers; and a fee of JPY 250 for services related to
documents delivery.

Accounting Administrator:•

Accounting Administration Fee:
INV pays an accounting administration fee, payable by the end of themonth immediately following the month in which it receives an invoicefrom the Accounting Administrator. The accounting administration fee forany month is established by written agreement between INV and the
Accounting Administrator, subject to a cap calculated as follows: total
assets shown on INV’s trial balance as of the end of the immediately
prior month, multiplied by 0.09% and divided by 12 (subject to aminimum fee of JPY 500,000).
The accounting administration fee in respect of any period less than amonth is calculated on a daily pro rata basis for such period.

Auditor:•

Auditor Fee:
Remuneration for the independent auditor shall be determined by theboard of directors within the maximum amount of JPY 25,000,000 per
fiscal period subject to audit.

19

INV may also incur other miscellaneous fees in connection with the payment
of distributions; certain notices, investigations and certificates; mailing ofnotices; handling of returned mail; preparation for general unitholders’meetings; preparation of table of unitholders; preparation of CD-ROM; printing;solicitation of wire transfer distributions; creation and processing of certain
data; processing of individual or corporate number-related data; and receipt oftransfer requests.
Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the ITA, which applies the requirements of

AIFM's procedure to

Article 109 paragraph 1 of the Companies Act to investment corporations,ensure fair treatment

investment corporations are required to treat unitholders equally depending onof investors andthe number and content of units held. In addition, upon liquidation, thedetails of any

allotment of residual assets to unitholders is required to be made equally

preferential treatment

depending on the number units held under Article 77 paragraph 2 item 2 andreceived by investors,

Article 158 of the ITA.

including detailing thetype of investors andtheir legal or
economic links with
the AIF or AIFM
Article 23(1) (k)The latest annual

Additional information may be found in INV’s most recent semi-annual reportreport referred to in

prepared in accordance with Article 22 of the AIFMD, which is available at the

Article 22(1)Asset Manager’s office located at Roppongi Hills Mori Tower, 6-10-1
Roppongi, Minato-ku, Tokyo.

Article 23(1) (l)The procedure and

INV is authorized under the articles of incorporation to issue up to 10,000,000

conditions for theunits. The units of INV’s predecessor, TGR Investment, Inc., were listed on

issue and sale of the

Osaka Stock Exchange on May 17, 2004. On February 1, 2010, TGR

units

Investment, Inc. merged with LCP and changed the corporate name to
Invincible Investment Corporation. The units of INV have been listed on theTokyo Stock Exchange since August 1, 2006. Secondary market sales andtransfers of units will be conducted in accordance with the rules of the Tokyo
Stock Exchange. Unit prices on the Tokyo Stock Exchange are determined ona real-time basis by the equilibrium between bids and offers. The Tokyo Stock
Exchange sets daily price limits, which limit the maximum range of fluctuation

20

within a single trading day. Daily price limits are set according to the previous
day’s closing price or special quote.
Article 23(1) (m)Latest net asset value

INV’s unit’s latest market price is publicly available at the Tokyo Stockof the AIF or latest

Exchange or from financial information venders (including Reuters), which canmarket price of thebe viewed atunit or share of the

http://www.reuters.com/finance/stocks/overview?symbol=8963.T

AIF
Article 23(1) (n)Details of the

The units of INV were listed on the Tokyo Stock Exchange on August 1, 2006.

historical performance

The performance of the units for the most recent five fiscal periods is asof the AIF, where

follows.

available
Fiscal period

34th fiscal period

Total Assets

Total NetNet Assets per(JPY million)

Assets (JPY

unit (base value)

million)(JPY)

516,663249,538

40,929516,490249,641

40,946497,899

245,113

40,203494,819

246,130

40,370490,118

246,21140,383(from January 1,
2020 to June 30,
2020)
35th fiscal period(from July 1, 2020
to December 31,
2020)
36th fiscal period(from January 1,
2021 to June 30,
2021)
37th fiscal period(from July 1, 2021
to December 31,
2021)
38th fiscal period(from January 1,
2022 to June 30,
2022)

21

Article 23(1) (o)Identity of the prime

No applicable prime broker.

broker, any material
arrangements of the
AIF with its prime
brokers, how conflictsof interest aremanaged with theprime broker and theprovision in thecontract with thedepositary on thepossibility of transfer
and reuse of AIF
assets, andinformation about any
transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how

The AIFM will disclose the matters described in Articles 23(4) and 23(5)and when periodic

periodically through the AIF Internet website and other public disclosures.

disclosures will bemade in relation toleverage, liquidity andrisk profile of theassets, pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shall inform

Not applicable.

the investors before
they invest in the AIF
of any arrangement
made by the22

depositary tocontractuallydischarge itself ofliability in accordancewith Article 21(13)The AIFM shall also

Not applicable.

inform investors of
any changes withrespect to depositary
liability without delay
Article 23(4)(a)Percentage of the

There are no assets that are subject to special arrangements arising from their

AIF's assets which are

illiquid nature.

subject to special
arrangements arisingfrom their illiquid
nature. The
percentage shall becalculated as the net
value of those assets
subject to special
arrangements divided
by the net asset valueof the AIF concerned
Overview of any

There are no such special arrangements.

special arrangements,
including whether they
relate to side pockets,gates or otherarrangements
Valuation

There are no such special arrangements.

methodology applied
to assets which are
subject to sucharrangements
How management

There are no such special arrangements.

23and performance fees
apply to such assets
Article 23(4)(b)Any new

Any new arrangements or change in applicable arrangements will bearrangements fordisclosed at an appropriate time.

managing the liquidityof the AIF
For each AIF that the

Any new arrangements or change in applicable arrangements will be

AIFM manages that is

disclosed at an appropriate time.

not an unleveraged
closed-end AIF, notify
to investors wheneverthey make changes to
its liquidity
management systems(which enable an
AIFM to monitor theliquidity risk of the AIF
and to ensure theliquidity profile of theinvestments of the AIF
complies with its
underlying obligations)that are material inaccordance with
Article 106(1) ofRegulation (EU) No
231/2013(i.e., there is a
substantial likelihoodthat a reasonable
investor, becoming
aware of suchinformation, would
reconsider its
investment in the AIF,

24

including becausesuch information could
impact an investor’sability to
exercise its rights inrelation to its
investment, orotherwise prejudice
the interests of one ormore investors in the
AIF).
Immediately notify

Any new arrangements or change in applicable arrangements will be

investors where they

disclosed at an appropriate time.

activate gates, side
pockets or similar
special arrangements
or where they decideto suspend
redemptions
Overview of changes

Any new arrangements or change in applicable arrangements will be

to liquidity

disclosed at an appropriate time.

arrangements, even if
not special
arrangements
Terms of redemption

INV is a closed-end investment corporation, and unitholders are not entitled toand circumstances

request the redemption of their investment.

where management
discretion applies,
where relevant
Also any voting or

There are no voting or other restrictions on the rights attaching to units.

other restrictions
exercisable, the lengthof any lock-up or any
provision concerning‘first in line’ or ‘prorating’ on gates and25

suspensions shall be
included
Article 23(4)(c)
The current risk profile

The appropriateness and effectiveness of the risk management structure areof the AIF and the risk

regularly evaluated and enhanced by the AIFM.

management systems

Funds from debts are mainly used for asset acquisition or debt repayment.

employed by the AIFM

These are exposed to liquidity risk at the time of repayment. However, theto manage those risks

liquidity risk is controlled through such measures as striving to maintain andstrengthen the capacity to procure funds from the capital market via capitalraising, along with securing several fund procurement sources and diversifying
repayment deadlines, and also preparing monthly plans for funds.
Debt with a floating interest rate is exposed to interest rate fluctuation risks,
but the impact that interest rate rises have on the operations is limited bykeeping the LTV at low levels and maintaining the proportion of debt that islong-term, fixed-rate debt at high levels.
Furthermore, derivative transactions (interest rate swap transactions) areavailable as hedging instruments to mitigate the risks of rises in floatinginterest rates.
Tenant leasehold and security deposits are deposits from tenants and are
exposed to liquidity risks arising from tenants moving out of properties, but theliquidity risk is controlled through such measures as preparing monthly plans
for funds.

Measures to assess

No such measures have been implemented.

the sensitivity of the
AIF’s portfolio to themost relevant risks towhich the AIF is or
could be exposed
If risk limits set by theNo such situation has occurred.

AIFM have been or
are likely to be
exceeded and wherethese risk limits havebeen exceeded a
description of thecircumstances and the26remedial measures
taken
Article 23(5)(a)Any changes to the

Any new arrangements or change in applicable arrangements will be

maximum amount of

disclosed at an appropriate time.

leverage which the
AIFM may employ onbehalf of the AIF,
calculated inaccordance with thegross andcommitment methods.
This shall include theoriginal and revised
maximum level ofleverage calculated inaccordance with
Articles 7 and 8 ofRegulation (EU) No
231/2013, whereby
the level of leverage
shall be calculated as
the relevant exposure
divided by the net
asset value of the AIF.
Any right of the reuse

No such right or guarantee exists.

of collateral or any
guarantee granted
under the leveraging
agreement, including
the nature of the rights
granted for the reuseof collateral and thenature of theguarantees granted
Details of any change

Any new arrangements or change in applicable arrangements will be27

in service providers

disclosed at an appropriate time.

relating to the above.
Article 23(5)(b)Information on the

The aggregated amount of debt with interest is JPY 241,372 million as of

total amount ofJune 30, 2022.

leverage employed by
the AIF calculated inaccordance with thegross andcommitment methods

28

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS
SFDR PRE-CONTRACTUAL DISCLOSURE
Product Name/Legal Identifier: Invincible Investment Corporation / 353800JY6M2692VAV685
Invincible Investment Corporation (hereafter referred to as “INV”) promotes environmental and social
characteristics, but does not have as its objective a sustainable investment within the meaning of article
9(1) of Regulation (EU) 2019/2088 (“SFDR”). INV and Consonant Investment Management Co., Ltd.
(“Asset Manager”) are hereinafter referred to collectively as “we,” “us” or “our.” We have no reference
benchmark designated for the purposes of attaining the environmental or social characteristics promoted
by our investment units.
Does this financial product have a sustainable investment objective?
Yes
No
It will make a minimum of sustainableIt
promotes
Environmental/Social(E/S)
investments with an environmental
characteristics and while it does not have as its
objective a sustainable investment, it will have aobjective: ＿%minimum proportion of ＿% of sustainable investmentsin economic activities thatwith an environmental objective in economic
qualifyasenvironmentally
activities that qualify as environmentally
sustainable under the EU
sustainable under the EU Taxonomy
Taxonomyin economic activities that do notwith an environmental
objectiveinqualifyasenvironmentally
economic activities that do not qualify assustainable under the EU
environmentally sustainable under the EU
Taxonomy
Taxonomywith a social objective
It will make a minimum of sustainable
investments with a social objective: ＿%It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social (“E/S”) characteristics are promoted by INV?
We recognize the importance of environmental, social, and governance (“ESG”) considerations inreal estate investment management. With respect to this, we consider economic and social development,
contribution to global environmental conservation and achieving sustainability goals as an important partof our management strategy. We have established the policies that promote sustainability based on ourbelief that the incorporation of ESG considerations into the real estate investment management business,
which is our primary business, is essential for maximizing unitholder value over the medium to long term.
We have implemented various environmental initiatives including the following:•
Promotion of energy conservation and reduction of greenhouse gas. We promote energy
saving efforts and the reduction of greenhouse gas emissions in managing our investment
assets. Out of our 128 total properties, as of June 30, 2022, we have implemented thefollowing initiatives: Introduction of automatic meter readings (for three properties),
adoption of Building and Energy Management System (“BEMS”, which efficiently manages
air conditioning systems and lighting) (for one property), installation of LED lightning (for121 properties), installation of on-site renewable energy in the form of solar power (for two
properties), installation of high-efficiency equipment and appliances (for 36 properties),1

installation of gas generation systems (which utilize otherwise wasted heat to reducegreenhouse gas emissions as compared to the previous power generation systems) (for ten
properties) and installation of inverters (which help make electrical facilities operate more
efficiently) (for 35 properties). We have established the following targets with respect toenergy saving efforts and the reduction of greenhouse gas emissions:oTarget to reduce energy consumption: Reduce energy intensity of our assets wemanage as owner by 5% during the period from fiscal 2020 to fiscal 2024; andoTarget to reduce greenhouse gas: Reduce emission intensity (scope 1 and scope 2) ofour entire portfolio by 5% during the period from fiscal 2020 to fiscal 2024.

•

Reducing water use. As of June 30, 2022, we have implemented the following water saving
measures in our properties: installation of water-saving type toilets (for 5 properties) andwater-saving showers (for 78 properties), implementation of wastewater treatment (for 1
property) and reuse of rainwater, reclaimed water, and drainage (for 2 properties).

•

Effective utilization of resources and reduction of waste. MyStays Hotel Management Co.,
Ltd. (“MHM”), the main operator of INV’s domestic hotel portfolio, has established amatching system that reuses furniture, fixtures, equipment, tableware, and artwork that are
no longer needed at other properties, in order to realize cost reduction and waste reduction.

•

Education of our hotel assets’ operators. We provide our hotel assets’ operators with
documentation regarding sustainable hotel operations. We conduct such education efforts
and cooperate with them in order to decrease the burden on the environment caused by hotel
operations and improve hotel users’ consciousness about environmental issues.

•

Including “Green Lease” provisions in our agreements. We have introduced environmental
provisions, which we refer to as “Green Lease” provisions, in our leases with our tenants,
under which tenants are required to collaborate on environmentally conscious measures andshare various environment-related data with us. As of June 30, 2022, Green Lease
provisions have been introduced in 65.6% of our portfolio based on gross floor area.

We have implemented various social initiatives at our properties, including the following:•

Collaboration with tenants, supply chains and local communities. Amid the COVID-19
pandemic, we have made available three of our properties as accommodation and medical
facility for patients with mild symptoms or as quarantine facility for returnees fromoverseas. In addition, we made available meeting rooms at Hotel MyStays Shin Osaka
Conference Center as a vaccination venue.

•

Contribution to disaster prevention. As of June 30, 2022, three of our properties aredesignated as “Tsunami Evacuation Buildings”, which are buildings designated bymunicipalities in advance as an emergency evacuation site to which local residents can be
evacuated temporarily when a Tsunami inundates an area.

•

Providing support for employees. Employees of the Asset Manager are provided with elearning content to prepare for qualification exams and to acquire various business skills.
Employees can use such content at any time to improve their expertise and skills. The AssetManager also conducts sustainability-focused training for all its officers and employees,
including temporary staff, at least once a year. The purpose of this training is to help theofficers and employees acquire knowledge and raise awareness of sustainability
considerations in line with business practices, such as market trends and regulations related
to ESG investment and environmentally friendly real estate.

•

Benefit programs for the health and well-being of each employee. The Asset Manager has

2

established various benefit programs, listed below, to support the work and lifestyles of ouremployees.
✓
✓
✓
✓
✓
✓
✓
✓
✓

Full subsidy for a comprehensive medical checkup (no age restriction)
Childcare leave (including shortened work hours for childcare) for employees withyoung children
Nursing care leave (including shortened work hours for nursing care)
Leave to care for sick or injured children
Monetary gifts for congratulations, condolences, etc.
Cooperation with social services companies“Premium Friday” (which means a shorter work day one Friday a month)
Designating Wednesdays as “no overtime days”
Off-peak commuting and remote working arrangements in the case of
emergencies, such as infectious disease outbreaks•

Respect for human rights and promotion of diversity. The Asset Manager acknowledges
and accepts differences in each employee’s ability and values and pays respect toheterogeneity in order to maximize the abilities of each employee. We aspire to achievesustainable corporate growth creating additional value. Our compliance regulations clearlyprohibit each kind of discrimination and sexual harassment, and we strive to foster a
corporate culture that respects each personality. We also promote the active participation of
women by a creating work environment and systems that are comfortable for women.

•

Whistleblowing system. The Asset Manager has established whistleblower protection rulesthat allow its officers and employees (including temporary employees) to report or consult
about potential harassment, fraud or other inappropriate acts. In accordance with theWhistleblower Protection Act of Japan, the rules protect whistleblowers by prohibiting
inappropriate treatment upon whistleblowing, allowing anonymous reports and keeping
whistleblowers’ reports confidential, and stipulate procedures to find and correct reported
acts, including investigation and disciplinary actions for those who are found to haveengaged in inappropriate behavior. In addition to using an in-house contact system, awhistleblower may consult an outside attorney who has no business relationship with theAsset Manager.

•

Regular performance appraisals and feedback processes. All of the Asset Manager’s
employees set an annual performance goal following an interview with their supervisor at
the beginning of each fiscal period. We conduct personnel evaluations at the end of eachfiscal period after an interview with all employees to look back on their performance andprovide feedback on the evaluation results. Such results are reflected in each employee's
compensation. We also have established a transparent personnel evaluation system throughregular measurement and feedback processes.

•

Promotion of local consumption of locally produced foods. One of our properties, Hotel
Epinard Nasu, has a restaurant that offers food made with locally sourced ingredients. In thisway, we support local agriculture and promote education regarding food.

What sustainability indicators are used to measure the attainment of each of the E/S characteristics
promoted by INV?
We use the following indicators to measure the attainment of the E/S characteristics we promote.
•

GRESB Real Estate Assessment. The GRESB is an annual benchmarking assessment tomeasure ESG integration of real estate companies and funds. It was founded in 2009 by agroup of major European pension funds who played leading roles in launching Principles for
Responsible Investment (“PRI”). The GRESB Real Estate Assessment is characterized byevaluating sustainability initiatives of real estate companies, REITs, and real estate funds,3

rather than targeting individual real estate. In the 2022 GRESB Real Estate Assessment,
INV received the “2-Star” GRESB Rating, which is based on overall GRESB scores and its
quintile position among participants. INV was also awarded the “Green Star” designation
for the second consecutive year by achieving high performance in both the “Management
Component” that evaluates policies and organizational structure for ESG promotion, and the"Performance Component" that assesses environmental performance and tenant engagementof properties owned. Furthermore, INV was highly evaluated for its ESG information
disclosure efforts and received, for the second consecutive year, the “A Level”, which is thehighest level for GRESB Public Disclosure assessing the substantiality of ESG information
disclosure.
•Environmental targets. The Asset Manager has formulated an “Energy Conservation
Policy”, “Greenhouse Gas Emissions Reduction Policy”, “Water Saving Policy” and “Waste
Management Policy”, which stipulate initiatives to reduce environmental impact caused byreal estate investment management operations. Through the cycle of planning,
implementation, performance management, and improvement set forth in an “Environmental
Management System Operation Manual” that stipulates the details for operating thesepolicies, the Asset Manager strives to continuously reduce the environmental impact. The
Asset Manager has specific targets as stated above under “Promotion of energy conservation
and reduction of greenhouse gas.”•

Tenant Satisfaction Survey. The Asset Manager conducted a satisfaction survey for all
residents of our residential properties (excluding three residences for students with fixedrent subleases) in March 2022 through an external research organization. We continuously
collect opinions and requests of residents and share them with property managementcompanies to improve building/equipment specifications and services.

•

Building-housing Energy-efficiency Labeling System (“BELS”) Assessment. The BELS
system was created for the purpose of implementing accurate evaluation and labeling ofnonresidential buildings’ energy-efficiency performance by third-party organizations basedon the evaluation guidelines for energy-efficiency labeling for non-residential buildings
issued by the Ministry of Land, Infrastructure, Transport and Tourism of Japan in October
2013. As of November 30, 2022, we had received five stars for three properties, four stars
for two properties, three stars for one property and two stars for two properties out of the
maximum rating system of five stars.

What are the objectives of the sustainable investments that the financial product partially intends tomake and how does the sustainable investment contribute to such objectives?
Not applicable.
How do the sustainable investments that the financial product partially intends to make, not causesignificant harm to any environmental or social sustainable investment objective?
Not applicable.
Principal Adverse Impacts
Does INV consider principal adverse impacts on sustainability factors?
Yes, INV considers principal adverse impacts on sustainability factors. INV collects on an ongoingbasis select information on our existing portfolio regarding the principal adverse impact indicators,
including exposure to fossil fuels through investment assets, exposure to energy-inefficient investment
assets and GHG emission intensity. We aim to manage the risk connected to principal adverse impacts from
our investment decisions in several ways, including general screening criteria and due diligence.

4•

Exposure to fossil fuels through assets. We do not invest in real estate assets involved in theextraction, storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient investment assets. We consider properties that have notreceived any of the green building certifications to be energy-inefficient. As described in
more detail above, we implement appropriate measures to reduce the environmental impactof these properties and believe such engagement results in obtaining environmental
certifications.

•

GHG emission intensity. Total GHG emissions generated by INV’s portfolio were 31,405 tCO2 in FY2019, 24,545 t-CO2 in FY2020 and 25,718 t-CO2 in FY2021. The portfolio
comprises 95 properties that have been held from the beginning of FY2019 to the end of
FY2021 and for which data that enables comparison under the same conditions can beobtained. We aim to reduce GHG emissions intensity (aggregate amount of Scope 1 and 2)of our portfolio by 5% over five years compared to the FY2019 levels. Furthermore, we aim
to reduce GHG emissions intensity (Scope 3 and aggregate amount of Scope 1, 2 and 3) ofour portfolio by 1% over five years compared to the FY2019 levels.

•

Respect for human rights. The Asset Manager respects human rights and diversity, and does
not tolerate human rights infringement such as forced labor, child labor, discrimination andharassment in its business activities pursuant to our compliance rules. We also promote theactive participation of women by creating work environment and systems that are
comfortable for women and create a corporate culture that respects each personality.

We believe that investment decisions that negatively affect climate or other environmental elements,or have negative implications for society, can have a significant impact to risk and value creation for ourunitholders. To this end, we consider the principal adverse impacts of our investment decisions on the above
sustainability factors throughout all major steps of the investment decision and management process
throughout the lifecycle of the properties in our portfolio.
More information related to principal impacts on sustainability factors can be found on the website:
https://www.invincible-inv.co.jp/en/strategy/sustainability.html

5Investment Strategy
What investment strategy does INV follow?
•

Investment policy. INV, which makes focused investments in hotels and residential
properties as core assets, manages its assets with an aim to secure stable growth and profits
over the medium and long term. INV also recognizes its social responsibility to theenvironment and local communities as a J-REIT and therefore proactively implements ESGfriendly investment management and sustainability initiatives that take advantage of ourassets’ characteristics, such as providing our properties for use by patients with mild casesand people who have recently returned from abroad as a countermeasure against the spreadof COVID-19 infections and carry out social contribution activities such as voluntarycleanup on roads and rivers.

•

Due diligence. Prior to our investment in a property, to identify risks and avoid investments
in properties that have overly high levels of risk, the Asset Manager conducts a due
diligence review of the property, including investigation of soil contamination and toxic
substances such as asbestos, Freon gas and polychlorinated biphenyls (“PCB”) by obtaining
real estate appraisal reports and engineering reports, from real estate appraisers and realestate investigators, in addition to conducting economical, physical and legal assessment.
For overseas property, INV complies with laws and regulations regarding the environmentand geology in the country or region where properties are located and makes acomprehensive judgment on whether or not to invest, taking into account real estate market
trends based on political and economic conditions, the practices in the region and various
risks in various fields such as legal affairs, accounting, taxation, foreign exchange, andsocio-economic conditions.

•Sustainability Committee. The Asset Manager has established the Sustainability Committee,
which generally meets at least four times a year. The Sustainability Committee uses the dataof environmental performance to assess progress made against sustainable targets, anddecides on necessary action plans in order to implement initiatives continuously andsystematically based on our Sustainability Policy. The activity conducted by the
Sustainability Committee is reported to all officers and employees of the Asset Manager and
INV’s board of directors.

What are the binding elements of the investment strategy used to select the investments to attain eachof the E/S characteristics promoted by INV?
When the Investment Committee and the Compliance Committee of the Asset Manager make adecision to invest in a property (subject to the approval of the board of directors of the Asset Manager),
findings about the property on the sustainability considerations are incorporated into the overall investment
proposal. To the extent possible, the committees generally exclude investment proposals with the following
ESG issues: (i) the level of asbestos in the property, after removal or treatment, exceeds the maximum
level permitted under applicable environmental law; (ii) the usage and disposal of PCB-containing
machines in the property are not properly handled in accordance with relevant law; (iii) soil contamination,
after treatment, exceeds the maximum level permitted under applicable environmental law. As discussed
above, the Asset Manager has established the Sustainability Committee, which uses environmental
performance data to assess progress made against sustainable targets with the aim of not increasing intensity
levels (e.g., of energy consumption, greenhouse gas emissions and water usage and waste volume)
compared to the FY 2019 levels, and decides on necessary action plans in order to implement initiatives
continuously and systematically based on our Sustainability Policy.
Also, INV does not invest in real estate assets involved in the extraction, storage, transport or6

manufacture of fossil fuels and/or nuclear energy-related activities.
What is the committed minimum rate to reduce the scope of the investments considered prior to theapplication of that investment strategy?
All investments are made pursuant to our current investment strategy and no reduction of investments
is planned.
Prior to our investment in a property, the Asset Manager conducts due diligence review of theproperty, including the assessment of compliance with applicable environmental laws and regulations,environmental performance and disaster risks, as well as investigation into hazardous substances and soil
contamination by obtaining environmental assessment from third parties. We also do not consider investingin properties that do not meet the standards for soil contamination and other environmental contaminationin accordance with the related environmental laws and ordinances. However, from time to time we invest
in properties not meeting the standards as long as they are deemed fixable promptly after the investment.
What is the policy to assess good governance practices of the investee companies and INV?
INV invests directly or indirectly through trust beneficiary interests in real estate and real estaterelated assets. Therefore, the assessment of good governance practices in relation to investee companies is
not applicable to INV.
While there is no third-party rating used to assess our governance practices, we, along with the AssetManager, have introduced the following measures to assess and enhance our governance systems:•

Related-party transactions. When INV conducts certain transactions such as asset
acquisition from sponsor related parties, prior approvals by the Board of Directors of INV
are required to ensure an objectivity in deliberation regarding conflicts of interests. In suchagenda, only two supervisory directors (a lawyer and a certified public accountant) will
participate in the vote, and the executive director who concurrently serves as therepresentative director of the Asset Manager will not participate in the vote as he is arelated-party.

•

Risk management. The Asset Manager has established a risk management manual for the
purpose of ensuring stable management and performing appropriate risk management as afinancial instruments business operator. In addition, the Asset Manager’s Board of Directors
has established a risk management policy and procedures to monitor and supervise thedevelopment of an appropriate risk management system.

•

Internal audit system. The Asset Manager conducts annual internal audits at least once a
year, in order to evaluate its risk management. Once the internal audit is completed, theCompliance Officer, who serves as the chief controller of internal audit, reports the audit
results to the representative director of the Asset Manager, Compliance Committee and theaudited departments. The Compliance Officer also reports to the Board of Directors of theAsset Manager as necessary. The Compliance Officer reports the progress made on mattersfor improvement indicated by internal audits. Verification of the status of improvement will
be conducted subsequent to on-site audits.

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Asset Allocation
What is the asset allocation planned for INV?
INV’s asset allocation is 100% in real estate and real estate-related assets. INV has a BELS
certification for its eight hotels, accounting for 13.2% of our properties based on appraisal value, as ofNovember 30, 2022. We target to acquire other certifications, such as CASBEE, prioritizing hotels which
represent major portions of INV’s portfolio in terms of gross floor area.

#1 Aligned with E/S characteristics includes the investments of the financial product used to attain theenvironmental or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental
or social characteristics that do not qualify as sustainable investments.
#2 Other includes the remaining investments of the financial product which are neither aligned with theenvironmental or social characteristics, nor are qualified as sustainable investments.
How does the use of derivatives attain the environmental or social characteristics promoted by INV?
Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the
EU Taxonomy?
Not applicable.
Does INV invest in fossil gas and/or nuclear energy related activities that comply with the EU
Taxonomy?
Not applicable. INV does not invest in real estate assets involved in the extraction, storage, transport
or manufacture of fossil fuels and/or nuclear energy-related activities.
What is the minimum share of investments in transitional and enabling activities?
Not applicable.
What is the minimum share of sustainable investments with an environmental objective that are notaligned with the EU Taxonomy?
Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable.
What investments are included under “#2 Other,” what is their purpose and are there any minimum
environmental or social safeguards?

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We have invested in these properties in accordance with our investment strategy before weestablished the policies for sustainability, because these properties met our minimum investment criteria
and we believed the acquisition of these properties would enhance unitholder value. We implement
appropriate measures such as installation of energy-saving or water-saving equipment and waste recycling
to reduce their environmental impact following acquisition, including by obtaining environmental
certifications. We also investigate the presence of harmful substances, the history of past land usages andthe soil when investing in properties. We do not invest in properties with respect to which appropriate
measures have not been taken under the Soil Contamination Countermeasures Act of Japan and otherenvironmental laws and ordinances.
Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether INV is aligned with theenvironmental or social characteristics that it promotes?
INV does not use a specific ESG benchmark. However, our investment units have been included in
the Nikkei ESG-REIT index (“Nikkei Index”), which was established in 2020, since its establishment. The
Nikkei Index is an index composed of Tokyo Stock Exchange-listed J-REITs, which are included based on
GRESB’s evaluations on ESG indicators. Its constituents are reviewed and updated every November.
How is the reference benchmark continuously aligned with each of the environmental or social
characteristics promoted by INV?
Not applicable.
Where can the methodology used for the calculation of the designated index be found?
Not applicable.
How is the alignment of the investment strategy with the methodology of the index ensured on acontinuous basis?
We ensure the alignment of our investment strategy with the methodology of Nikkei ESG throughinvestments in energy saving or environmentally certified buildings.
How does the designated index differ from a relevant broad market index?
See above.
More Product-specific Information
Where can I find more product-specific information online?
More product-specific information can be found on the website:
https://www.invincible-inv.co.jp/en/strategy/sustainability.html
Note Regarding the EU Taxonomy Regulation
As set out above, we promote certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”),
to disclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy
regulation. The EU Taxonomy Regulation is to be complemented by technical standards and screening
criteria which are currently being developed. The technical screening criteria for the first two environmental
objectives (climate change mitigation and climate change adaptation) were adopted in December 2021.

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They apply as of January 1, 2022.
We invest in economic activities that are eligible under the EU Taxonomy Regulation in respect ofclimate change mitigation and/or climate change adaptation. This means that screening criteria for theseinvestments have been or will be developed. The Asset Manager expressly states that in view of the factthat the regulations are still under development or have only recently been adopted and the fact that, as aresult thereof, data on alignment of our investments with these environmental objectives and climate related
goals in line with EU Taxonomy Regulation are not sufficiently available, the Asset Manager is not
currently in a position to disclose on an accurate and reliable basis to what extent our investments
technically qualify as Taxonomy-aligned or “environmentally sustainable” within the specific meaning of
the EU Taxonomy Regulation. Our investments may have a positive contribution to these environmental
objectives and may therefore eventually be considered Taxonomy-aligned, but at this stage, the AssetManager is required to state that there is no minimum proportion of our investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to thoseinvestments underlying the financial product that takes into account the EU criteria for environmentally
sustainable economic activities. The investments underlying the other portion of this financial product do
not take into account the EU criteria for environmentally sustainable economic activities.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF INV (SFDR ARTICLE 6 DISCLOSURE)
INV and the Asset Manager address sustainability risks by taking into account environmental, socialand governance, or ESG, factors in our investment decision process and on a continuous basis.
The Asset Manager tracks and monitors the property-level environmental performance indicators of
our properties to assess the environmental performance of our portfolio appropriately. The Asset Manager’s
Sustainability Committee, which generally meets at least four times a year, uses the data of environmental
performance to assess progress made against sustainable targets, and decides on necessary action plans inorder to implement initiatives continuously and systematically based on our Sustainability Policy. The
Sustainability Committee consists of (i) the President and CEO, who is the final decision-maker, (ii) thegeneral manager of the Asset Management Department and the general manager of the Planning
Department, who are responsible for executing sustainability initiatives, and (iii) officers and employeesthat engage in promoting sustainability.
Under this organizational structure, we have instituted a number of initiatives, at both the portfolio
level and individual property level, to promote E/S characteristics. Such initiatives include climate change
initiatives, initiatives for saving/reducing energy consumption, local community initiatives, and initiatives
for employees’/tenants’ initiatives.
In order to conduct sustainable asset management while maximizing the value of our properties, wehave considered ESG factors in our investment and asset management processes. Our Sustainability Policy
expressly states that we consider the environment and stakeholders such as tenants, supplier and local
communities, and we request our hotel tenants to cooperate with our sustainability initiatives. We consider
environmental and social factors when procuring products and services.
While sustainability issues will severely impact our business activities, we believe that such issues
may also become potential business opportunities to create new value for sustainable growth. Accordingly,
we position our commitment to sustainability as one of the top priorities in our management strategies. We
also believe that integrating sustainability factors alongside traditional financial and operational metrics in
our investment decision process helps us make a more holistic assessment of a property’s risks andopportunities and is commensurate with the pursuit of superior risk-adjusted returns. In other words, we
believe that if we fail to consider ESG factors enough in the investment decision-making process, it may
cause the increase of capital cost and even reduce investors’ returns. If our ESG initiatives are not sufficient,10

our investment units may be excluded from investment by investors who use the status of ESG initiatives
as one of their investment criteria. As a result, the investment unit price may be adversely affected. We areexposed to the following risks in particular.
Physical risks
The assets in which we invest are exposed to earthquake, flood and storm risks because some of ourproperties are located in areas that are sensitive to their impact. If a significant earthquake, flood or storm
hits any of our properties, it will likely have a negative effect on its value. This may include physical damage
to the properties and tenants’ premises. In order to secure stable growth of investment assets and stableprofits over the medium and long term, INV aims to construct a portfolio of geographically diverse
investment assets by avoiding concentrated investment in certain areas to mitigate earthquake and otherrisks.
Reputation and fund raising risks
We are exposed to the risk of funds being available only at less advantageous terms due to stricter
ESG requirements on portfolio composition and other factors, as well as the risk of reputational decline if
INV’s measures on climate-related issues are perceived negatively by investors or the general public. We
fulfill our accountability for stakeholders by actively disclosing ESG related information. We also consider
the use of external evaluations and third-party certification to visualize the results of our environmental andsocial initiatives.

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