Invincible Investment : Financial Results Materials

Financial Summary for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

Invincible Investment

Corporation

Financial Summary

for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

August 24, 2023

Name	: Invincible Investment Corporation ("INV")
Representative	: Naoki Fukuda, Executive Director
Stock Listing	:	Tokyo Stock Exchange
Securities Code	:	8963
URL	:https://www.invincible-inv.co.jp/en/
Contact	: Consonant Investment Management Co., Ltd.
		(Asset Manager of INV)
		Jun Komo, General Manager of Planning Department
		Tel. [phone]
Start date for
dividend distribution	:	September 21, 2023

This English language notice is a translation of the Japanese-language notice released on August 24, 2023 and was prepared solely for the convenience of, and reference by, non-Japanese investors. It is not intended as an inducement or solicitation for investment. We caution readers to undertake investment decisions based on their own investigation and responsibility. This translation of the original Japanese- language notice is provided for informational purposes only, and no warranties or assurances are given regarding the accuracy or completeness of this English translation. Readers are advised to read the original Japanese-language notice. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail in all respects.

Financial Summary for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

(Figures are rounded down to the nearest JPY million)

1. Financial Results for the Fiscal Period ended June 30, 2023 (from January 1, 2023 to June 30, 2023)

1. Operating Results

(Percentages indicate percentage change from the preceding period)

	Operating Revenues		Operating Income	Ordinary Income	Net Income
	JPY million	%		JPY million	%	JPY million	%	JPY million	%
Fiscal period ended	15,914	33.4		10,356	65.5	8,914	75.6	8,913	75.6
June 30, 2023
Fiscal period ended	11,929	55.3		6,257	195.9	5,075	399.7	5,075	400.0
December 31, 2022
	Net Income per Unit		Net Income /	Ordinary Income /	Ordinary Income /
		Unitholders' Equity	Total Assets	Operating Revenues
		JPY				%		%			%
Fiscal period ended		1,462				3.5		1.8			56.0
June 30, 2023
Fiscal period ended		832				2.0		1.0			42.5
December 31, 2022
(2) Distributions
	Distribution				Excess Profit Distribution
	(Excluding excess profit distribution)		Dividend Payout	Distribution
								Ratio	/ Net Assets
	Per Unit	Total		Per Unit	Total
	JPY		JPY million		JPY	JPY million		%		%
Fiscal period ended	1,464		8,925		-	-		100.1		3.5
June 30, 2023
Fiscal period ended	832		5,072		-	-		99.9		2.0
December 31, 2022

(Note 1) Dividend Payout Ratio is calculated in accordance with the following formula and is rounded to the nearest one decimal place: Dividend Payout Ratio = Distribution Amount (Excluding excess profit distribution) ÷ Net Income × 100

(Note 2) Distribution / Net Assets is calculated based on the figures excluding excess profit distribution.

1. Financial Position

		Total Assets	Net Assets	Net Assets / Total	Net Assets per Unit
		JPY million	JPY million	%	JPY
Fiscal period ended	496,819	254,024	51.1	41,665
June 30, 2023
Fiscal period ended	494,237	250,321	50.6	41,058
December 31, 2022
(Note)	Net Assets per Unit is calculated based on the number of investment units issued and outstanding at the end of each fiscal

period and is rounded to the nearest yen.

(4) Cash Flows

	Cash Flows from	Cash Flows from	Cash Flows from	Closing Balance of
	Operating	Investment	Financing	Cash and
	Activities	Activities	Activities	Cash Equivalents
	JPY million	JPY million	JPY million	JPY million
Fiscal period ended	13,782	924	(7,188)	28,041
June 30, 2023
Fiscal period ended	6,670	(993)	(2,178)	20,521
December 31, 2022

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Financial Summary for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

2. Forecasts for the Fiscal Periods ending December 31, 2023 (from July 1, 2023 to December 31, 2023) and the Fiscal Periods ending June 30, 2024 (from January 1, 2024 to June 30, 2024)

(Percentages indicate percentage change from the preceding period)

Distribution per

Excess Profit

Operating

Operating

Ordinary

Unit (excluding

Net Income

Distribution per

Income

Income

Revenues

excess profit

Unit

distribution)

JPY

JPY

JPY

JPY

million

%

million

%

million

%

million

%

JPY

JPY

Fiscal period

ending

17,786

11.8

11,255

8.7

9,586

7.5

9,586

7.5

1,441

-

December 31, 2023

Fiscal period

ending

18,000

1.2

11,348

0.8

9,855

2.8

9,854

2.8

1,466

-

June 30, 2024

(Reference) Estimated net income per unit for the fiscal periods ending December 31, 2023 and the fiscal periods ending June 30, 2024 are

JPY 1,422.and JPY 1,462.

※Others

(1) Changes in Accounting Policies, Accounting Estimates or Restatements

(a)

Changes in Accounting Policies due to Revisions to

Accounting Standards and Other Regulations

None

(b)

Changes in Accounting Policies due to Other Reasons

None

(c)

Changes in Accounting Estimates

None

(d) Restatements

None

(2) Number of Investment Units Issued and Outstanding
(a) Number of Units Issued and Outstanding	June 30, 2023	6,096,840	December 31, 2022	6,096,840
as of the End of the Fiscal Period (Including Treasury Units)
(b) Number of Treasury Units as of the End of the Fiscal Period	June 30, 2023	0	December 31, 2022	0

(Note) Please refer to "Notes Related to Per Unit Information" regarding the number of investment units which is the basis for the

calculation of net income per unit.

• Financial Summary report is not subject to audit procedure by certified public accountants or audit corporations.
• Special Consideration
  The forward-looking statements contained in this financial summary report are based on the information currently available to us and certain assumptions which we believe are reasonable. Actual operating performance may differ significantly due to factors we cannot predict as of the date of this document, including gains or losses from the disposition of properties, repayment of borrowings, decreases in rents and changes in operating conditions. Unless otherwise specified herein, amounts less than JPY 1 are rounded down, and ratios are rounded to the nearest one decimal place.

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Financial Summary for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

1. Operating Conditions

1. Operating Conditions

a Overview of the Fiscal Period Ended June 30, 2023

1. Main Trends of INV

INV was established in January 2002 in accordance with the Investment Trust and Investment Corporation Act (Act No. 198 of 1951, as amended). In May 2004, INV was listed on the Osaka Securities Exchange (application for delisting was made in August 2007), and in August 2006 was listed on the Real Estate Investment and Trust Securities Section of the Tokyo Stock Exchange (Ticker Code: 8963).

After the absorption-type merger with LCP Investment Corporation ("LCP") was implemented on February 1, 2010, INV issued new investment units through a third-party allotment on July 29, 2011 and refinanced its debt. Calliope Godo Kaisha ("Calliope"), an affiliate of the Fortress Investment Group LLC ("FIG" and together with Calliope and other affiliates of FIG, collectively the "Fortress Group") was the main allottee, and the sponsor changed to the Fortress Group.

Ever since the commencement of sponsorship from the Fortress Group (Note 1), INV has been focusing its efforts on improving the profitability of its portfolio and establishing a revenue base in order to secure stable distributions, and has strengthened the lender formation through new borrowings and the refinancing of existing bank borrowings, thereby creating a financial base for external growth. With this platform as a base, in June 2014, Consonant Investment Management Co., Ltd., the asset manager to which INV entrusts the management of its assets ("CIM") revised the Investment Guidelines for INV, positioned hotels as a core asset class alongside residential properties with a view towards expanding investments in the hotel sector in which demand is forecasted to rise going forward, and has expanded its portfolio.

INV's portfolio at the end of the Fiscal Period ended June 30, 2023 (the "Reporting Period") comprised of 128 properties (86 hotels (Note 2) (Note 3), 41 residential properties and one retail facility) with a total acquisition price of JPY 491,416 million (Note 4). Furthermore, INV's hotel portfolio has the largest asset size (Note 5) of JPY 450,631 million (86 properties, 15,597 rooms) among all J-REITs (real estate investment corporations which listed on the Tokyo Stock Exchange Real Estate Investment Trust Securities Market, hereinafter the same shall apply) hotel portfolios including Hotel J-REITs (Note 6) .

(Note 1) Calliope transferred 80.0% of issued shares to Fortress CIM Holdings L.P., a subsidiary of SoftBank Group and 20.0% to SoftBank Group Corp. ("SoftBank Group") on March 29, 2018, but the SoftBank Group transferred its issued shares of CIM to Fortress CIM Holdings L.P. As of the date of this document, SoftBank Group indirectly owns 100% of issued shares of CIM through Fortress CIM Holdings L.P. The SoftBank Group announced that it has entered into a definitive agreement to transfer its interest in the indirect parent company of Fortress CIM Holdings L.P. to Mubadala Capital and others during the first quarter of 2024.

(Note 2) The preferred equity interest held by INV is counted as one property. Such preferred equity interest issued by a special purpose company (tokutei mokuteki kaisha) refers to 178,458 units of the preferred equity interest issued by Kingdom Special Purpose Company (equivalent to 49.0% of the outstanding preferred equity interest), which owns the trust beneficiary interest of the Sheraton Grande Tokyo Bay Hotel as an underlying asset. The property is classified as a hotel, based on the use of Sheraton Grande Tokyo Bay Hotel, the underlying asset of the preferred equity interest, and INV's investment amount of the preferred equity interest is used as the acquisition price of the preferred equity interest, unless otherwise stated. The "underlying asset" refers to the real estate or the real estate related assets owned by a TK operator of TK interest or a TMK relating to the preferred equity interest which INV owns, thus the real estate or the real estate related assets which will be the revenue source of INV. Hereinafter the same shall apply.

(Note 3) From September 28, 2018 (Cayman Island local time; September 29, 2018 in Japan local time), INV owned 100% of the TK interest in Seven Mile Resort Holdings Ltd. (the "Cayman SPC"), a Cayman Islands special purpose company that holds leasehold interests in Westin Grand Cayman Seven Mile Beach Resort & Spa and Sunshine Suites Resort (collectively, the "Cayman Hotels") and ancillary assets as underlying assets. However, INV implemented the investment structure change (the "Structure

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Financial Summary for the June 2023 Fiscal Period

(from January 1, 2023 to June 30, 2023)

Change" in some cases hereinafter) regarding the Cayman Hotels on May 9, 2019 (Cayman Island local time; May 10, 2019 in Japan local time) and has directly held the Leasehold Interests, etc. of the Cayman Hotels thereafter. Both of the TK interest and the Cayman Hotels are counted as two properties before and after the Structure Change. In addition, the "Leasehold Interests, etc." means leasehold interests (rights equivalent to long-term real estate leases on land and buildings under the British Cayman laws) and furniture, fixtures, equipment, ornaments, kitchen instrument, and other assets required for hotel operations. Hereinafter the same shall apply.

(Note 4) Due to the Structure Change, the book value of the leasehold interests of the Cayman Hotels recorded by the Cayman SPC as of May 9, 2019 (Cayman Island local time; May 10, 2019 in Japan local time), when INV succeeded the leasehold interests of the Cayman Hotels from the Cayman SPC via distribution in kind in connection with the termination of TK agreement, is deemed as the acquisition price of the Cayman Hotels. The book value is converted into JPY amount via exchange rate of USD 1=JPY 110.45 based on the foreign exchange forward contracts executed on July 26, 2018 and implemented on September 26, 2018 in connection with the investment in the TK interest by INV. Hereinafter the same shall apply.

(Note 5) Hotel J-REIT is defined as the J-REIT whose majority part of portfolio consists of hotel assets.

(Note 6) "The largest asset size … among all J-REIT hotel portfolios" refers to the total acquisition price of 86 hotels owned by INV as compared with the total acquisition price of hotels (including inns and other accommodation facilities) owned by listed investment corporations other than INV as of June 30, 2023.

1. Operational Environment and Performance

During the Reporting Period, the Japanese economy maintained a gradual recovery trend, mainly driven by domestic demand and the normalization of economic activities, as the classification of COVID-19 under the Infectious Disease Control Law was lowered from the previous Class 2 equivalent to Class 5, the same category as seasonal influenza, effective May 8, 2023.

In this environment, real GDP (second preliminary report) for the January-March period of 2023 increased 0.7% from the previous quarter, marking the second consecutive quarter of growth following the October-December period of 2022.

The number of inbound visitors in the Reporting Period showed a remarkable recovery trend. The cumulative number of inbound visitors from January to June 2023 was 10,712,000 (estimated by the Japan National Tourism Organization), far exceeding the 507,000 in the same period in 2022. Compared to 2019, prior to the COVID-19 pandemic, the inbound visitor figures in June 2023 decreased by 28.0% and the inbound visitor figures in the period from January to June decreased by 35.6%. Moreover, according to the Japan National Tourism Organization's Survey, the breakdown of travel spending of inbound visitors from April to June 2023 is estimated to be 1,205.2 billion yen (first preliminary report), or 95.1% of the same period in 2019. Regarding the employment trends, the unemployment rate for May 2023 was 2.6%, the same level of the previous month. The effective job openings ratio was 1.31 times, the same level of the previous month and 0.06 points higher than the rate in May 2022, indicating that the employment situation has not worsened.

The portfolio NOI (Note 1) increased by 194.2% or JPY 9,587 million compared to the same period in the previous year (the June 2022 fiscal period) to JPY 14,523 million. The hotel portfolio NOI increased by JPY 9,547 million. The residential and retail portfolio NOI increased by JPY 39 million. Compared to the December 2019 fiscal period prior to the COVID-19pandemic, the portfolio NOI decreased by 1.4% or JPY 211 million, of which the hotel portfolio NOI increased by JPY 1,255 million and the residential and retail portfolio NOI decreased by JPY 1,467 million due to asset sales.

Commentary on hotel and residential performance is as described below.

Each performance metric of the domestic hotel portfolio increased significantly over the same period of the previous year's results and has recovered to levels close to 2019, before the COVID-19 pandemic, due to the government's travel subsidy program "National Travel Discount Campaign" and increased inbound demand. The GOP for the Reporting Period of the 75 domestic hotels (Note 3) owned by INV increased by 228.7% compared to the same period in the previous year (figures exclude nine domestic hotels with fixed-rent lease agreements among the 84 domestic hotels owned by INV as of the end of the Reporting Period, including Sheraton Grande Tokyo Bay Hotel, the underlying asset of the preferred equity interest of TMK owned by

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