Disclaimer
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain 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 State of 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 State of 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) a retail 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 them available to retail investors in the EEA has been prepared and therefore offering or selling the units of INV, or otherwise making them available, to any retail investor in the EEA may be unlawful under the PRIIPs Regulation. 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 this provision, 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 being referred 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) a retail client, as defined in point (8) of Article 2 of Regulation (EU) No 2017/565 as it forms part of domestic 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 a professional 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 selling the international units or otherwise making them available to retail investors in the United Kingdom has been prepared and therefore offering or selling the international units or otherwise making them available 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, the AIFM 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 or delivered 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 consequence neither 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 Nederlandsche Bank, "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 the Regulation (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.
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 sum of the total amount of fees calculated in the manner below, provided that
. Administration of Distributions Fees: INV pays fees for the calculation of distributions and services such as the creation of distribution records and receipts, processing of stamp tax payment, preparation of payment records, determination of unpaid distributions and preparation of unpaid distributions records, preparation of 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 the
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 the end of the relevant month and are calculated according to the table below. There is a minimum special account administration fee of
. Special Account Administration Fees (MUTB): These fees are for the creation and administration of the transfer account register 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 and assets held in trust; the opening and closing of special accounts; registration of seals for subscriber information and notifications, renewal of 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. 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 is a minimum fee of JPY 20,000 per month.
month is calculated on a daily pro rata basis for such period. Auditor:
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”). We have no employees in accordance with the prohibition on having employees under the Act on Investment Trusts and Investment Corporations of Japan, and relies on Consonant Investment Management Co., Ltd. (“Asset Manager”), to manage and operate the properties in our portfolio. INV and Consonant Investment Management Co., Ltd. are hereinafter referred to collectively as “we,” “us” or “our.” References to “fiscal year” or “FY” are to the 12 months began or beginning April 1 of the year, unless noted othervise. We have no reference benchmark designated for the purposes of attaining the environmental or social characteristics promoted by our investment units.

What environmental and/or social (“E/S”) characteristics are promoted by INV?
We recognize the importance of environmental, social, and governance ("ESG") considerations in real 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 part of our management strategy. We have established the policies that promote sustainability based on our belief 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. INV does not have a specific index designated as a reference benchmark to determine whether INV is aligned with the environmental or social characteristics that it promotes. 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 134 total properties, as of December 31, 2023, we have implemented the following 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 (for 130 properties), installation of on-site renewable energy in the form of solar power (for two properties), installation of high-efficiency air-conditioning equipment and appliances (for 51 properties), installation of gas generation systems (which utilize otherwise wasted heat to reduce greenhouse gas emissions as compared to the previous power generation systems) (for 10 properties) and installation of other kinds of energy-efficient equipment such as inverters (which help make electrical facilities operate more efficiently) (for 48 properties). We have established the following targets with respect to energy saving efforts and the reduction of greenhouse gas emissions: Target to reduce energy consumption: Reduce energy intensity of our assets we o manage as owner by 5% during the period from fiscal 2020 to fiscal 2024; and Target to reduce greenhouse gas: Reduce emission intensity (scope 1 and scope 2) of o our entire portfolio by 5% during the period from fiscal 2020 to fiscal 2024. Reducing water use. As of December 31, 2023, we have implemented the following water saving measures in our properties: installation of water-saving type toilets (for six properties) and water-saving showers (for 85 properties), implementation of wastewater treatment (for one property) and reuse of rainwater, reclaimed water, and drainage (for four 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 a matching 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 and share various environment-related data with us. As of December 31, 2023, Green Lease provisions have been introduced in 60.8% 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 from overseas. In addition, we made available meeting rooms at Hotel MyStays Shin Osaka Conference Center as a vaccination venue. Contribution to disaster prevention.  As of December 31, 2023, three of our properties are designated as "Tsunami Evacuation Buildings", which are buildings designated by municipalities 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 e- learning 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 Asset Manager 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 the officers 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 established various benefit programs, listed below, to support the work and lifestyles of our employees. >バ> > ^ ^バ> > Full subsidy for a comprehensive medical checkup (no age restriction) Childcare leave (including shortened work hours for childcare) for employees with young 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 to heterogeneity in order to maximize the abilities of each employee. We aspire to achieve sustainable corporate growth creating additional value. Our compliance regulations clearly prohibit 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 rules that allow its officers and employees (including temporary employees) to report or consult about potential harassment, fraud or other inappropriate acts. In accordance with the Whistleblower 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 have engaged in inappropriate behavior. In addition to using an in-house contact system, a whistleblower may consult an outside attorney who has no business relationship with the Asset 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 each fiscal period after an interview with all employees to look back on their performance and provide feedback on the evaluation results. Such results are reflected in each employee's compensation. We also have established a transparent personnel evaluation system through regular measurement and feedback processes. . Promotion of local consumption of locally produced foods. Two of our properties, Hotel Epinard Nasu and Hotel MyStays Gotanda Station, have restaurants that offer food made with locally sourced ingredients. In this way, 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 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 to measure ESG integration of real estate companies and funds. It was founded in 2009 by a group of major European pension funds who played leading roles in launching Principles for Responsible Investment ("PRI"). The GRESB Real Estate Assessment is characterized by evaluating sustainability initiatives of real estate companies, REITs, and real estate funds, rather than targeting individual real estate. In the 2023 GRESB Real Estate Assessment, INV received the "3-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 third 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 engagement of properties owned. Furthermore, INV was highly evaluated for its ESG information disclosure efforts and received, for the third consecutive year, the "A Level", which is the highest 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 by real 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 these policies, 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 fixed- rent subleases) in March 2022 through an external research organization. We continuously collect opinions and requests of residents and share them with property management companies to improve building/equipment specifications and services. Building-housing Energy-efficiency Labeling System (“BELS”) Certification. The BELS system was created for the purpose of implementing accurate evaluation and labeling of nonresidential buildings' energy-efficiency performance by third-party organizations based on 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 December 31, 2023, we had received five stars for four properties, four stars for three properties, three stars for three properties and two stars for five properties out of the maximum rating system of five stars. Comprehensive Assessment System for Built Environment Efficiency ("CASBEE"). CASBEE is a method that comprehensively assesses the quality of a building, and evaluates features such as interior comfort and scenic aesthetics, in consideration of environment practices including use of materials and equipment that save energy or achieve smaller environmental loads. As of December 31, 2023, we had acquired CASBEE Certification for Buildings (Existing Buildings) for two hotel properties with the certification rank of Rank A and Rank B+, out of a scale with the following five ranks: Rank S (the highest rank), Rank A, Rank B+, Rank B-, and Rank C. In addition, we had acquired Certification for CASBEE for Real Estate for two residential properties with the certification rank of Rank A, out of a scale with the following four ranks: Rank S (the highest rank), Rank A, Rank B+, and Rank B-. What are the objectives of the sustainable investments that the financial product partially intends to make 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 cause significant 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 ongoing basis 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. . Exposure to fossil fuels through assets. We do not invest in real estate assets involved in the extraction, storage, transport or manufacture of fossil fuels. . Exposure to energy-inefficient investment assets . We consider properties that have not received any of the green building certifications to be energy-inefficient. As described in more detail above, we implement appropriate measures to reduce the environmental impact of 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 t- CO2 in FY2019, 24,546 t-CO2 in FY2020, 25,722 t-CO2 in FY2021, 26,477 t-CO2 in FY2022, and 26,553 t-CO2 in FY2023. The portfolio comprises 95 properties that have been held from the beginning of FY2019 to the end of FY2022 and for which data that enables comparison under the same conditions can be obtained. 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) of our 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 and harassment in its business activities pursuant to our compliance rules. We also promote the active 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 our unitholders. 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
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 the environment and local communities as a J-REIT and therefore proactively implements ESG- friendly investment management and sustainability initiatives that take advantage of our assets' characteristics, such as providing our properties for use by patients with mild cases and people who have recently returned from abroad as a countermeasure against the spread of COVID-19 infections and carry out social contribution activities such as voluntary cleanup 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 real estate investigators, in addition to conducting economical, physical and legal assessment. For overseas property, INV complies with laws and regulations regarding the environment and geology in the country or region where properties are located and makes a comprehensive 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, and socio-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 data of environmental performance to assess progress made against sustainable targets, and decides on necessary action plans in order to implement initiatives continuously and systematically 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 each of the E/S characteristics promoted by INV? When the Investment Committee and the Compliance Committee of the Asset Manager make a decision 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 or 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 the application of that investment strategy? All investments are made pursuant to our current investment strategy. Prior to our investment in a property, the Asset Manager conducts due diligence review of the property, 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 investing in properties that do not meet the standards for soil contamination and other environmental contamination in 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 estate- related 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 Asset Manager, 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 such agenda, only two supervisory directors (a lawyer and a certified public accountant) will participate in the vote, and the executive director who concurrently serves as the representative director of the Asset Manager will not participate in the vote as he is a related-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 a financial instruments business operator. In addition, the Asset Manager's Board of Directors has established a risk management policy and procedures to monitor and supervise the development 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, the Compliance 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 the audited departments. The Compliance Officer also reports to the Board of Directors of the Asset Manager as necessary. The Compliance Officer reports the progress made on matters for improvement indicated by internal audits. Verification of the status of improvement will be conducted subsequent to on-site audits.
What is the asset allocation planned for INV?
INV's asset allocation is 100% in real estate and real estate-related assets. As of December 31, 2023 INV has a BELS certification for its 15 hotels, accounting for 20.6% of our properties based on appraisal value on the valuation date of December 31, 2023 and acquisition price of the preferred equity interest in the TMK which holds Sheraton Grande Tokyo Bay Hotel as an underlying asset. In addition, INV has CASBEE Certification for Buildings (Existing Buildings) for its two hotels and Certification for CASBEE for Real Estate for its two residential properties, accounting for 7.0% of our properties. We target to further acquire BELS and CASBEE certifications, prioritizing hotels which represent major portions of INV's portfolio in terms of gross floor area. As a result, 22.1% of our properties is #1 aligned with E/S characteristics. #1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental 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 the environmental 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 not aligned 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? We have invested in these properties in accordance with our investment strategy before we established 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 and the 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 other environmental laws and ordinances. Index as Reference Benchmark Is a specific index designated as a reference benchmark to determine whether INV is aligned with the environmental or social characteristics that it promotes? INV does not use a specific index designated as a reference benchmark to determine whether INV is aligned with the environmental or social characteristics that it promotes. 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 a continuous basis? We ensure the alignment of our investment strategy with the methodology of Nikkei ESG through investments 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. The technical screening criteria for the first two environmental objectives (climate change mitigation and climate change adaptation) were adopted in December 2021 and amended in June 2023. The amended criteria apply as of January 1, 2024. The technical screening criteria for the other four environmental objectives (sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems) were adopted in June 2023. They apply as of January 1, 2024. We invest in economic activities that are eligible under the EU Taxonomy Regulation in respect of climate change mitigation and/or climate change adaptation. This means that screening criteria for these investments have been or will be developed. The Asset Manager expressly states that in view of the fact that the regulations are still under development or have only recently been adopted and/or amended and the fact that, as a result 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 Asset Manager 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 those investments 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, social and 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 in order 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) the general 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 employees that 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, we have 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 and opportunities 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, 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 are exposed 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 our properties 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 stable profits 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 other risks.
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 and social initiatives.