19th Fiscal Period Results (from Jul. 1, 2012 to Dec. 31, 2012) Invincible Investment Corporation (Feb. 28, 2013) http://www.invincible-inv.co.jp/eng/ 1 Table of Contents Sponsor Support and Activities Appendix （P. 2 5 ） from Year 2011 to Year 2012 (P.3) - History and Background Section 1 Highlights of Performance (P.26) - Activities during the 19th fiscal period ended Dec. 2012 - Financial Metrics - Highlights of the 19th fiscal period Results - Comparison between Forecast and Results for the 19th fiscal period /Forecast for the 20th fiscal period - Difference between the Initial Forecast (as of Aug. 27, 2012) - Ensuring the Stability of Distribution Amount in the mid -term and Results for the 19th fiscal period - Simulation of Changes in the Amount of Distribution by - Difference between Forecast (as of Dec. 20, 2012) and Results Refinancing for the 19th fiscal period - Forecast for the 20th fiscal period (as of Feb. 27, 2013) - Difference between Results for the 19th fiscal period Operational Results for the 19th Fiscal Period (P. 9) and Forecast for the 20th fiscal period - Conduit Requirements and Distributions - Distributions for the 19th fiscal period and the 20th fiscal period - Acquisition Details and Results Section 2 Financial Statements for the 19th Fiscal Period (P.35) - Overview of Borrowings (as of the end of Dec. 2012) - Income Statement - Overview of Borrowings (as of the end of Dec. 2012 / - Difference between results for the 18th fiscal period Feb. 28, 2013) and the 19th fiscal period - Overview of Borrowing Mortgages (As of Dec.31, 2012) - Balance Sheet - Investment in Residential Properties for the Stable Cash Flow - Cash Flow Statement/ - Characteristics of Portfolio Financ i al St at em ent s pert ainin g t o Di stri buti on of M oni es - His tor ica l Occupancy Ra tes - Initiatives for Cost Reductions Section 3 Overview of New 24 Properties (P.43) - Improvement of the Asset Value and the Profitability - New 24 Properties (Residences) - Major Unitholders (TOP 10) - Overview of Unitholders Section 4 Other Information (()P.54) - Historical Unit Price - Performance by Properties in the 19th Fiscal Period - Appraisal Values & Book Values at the end of 19th Fiscal Period - Portfolio List ■Disclaimer 2 Sponsor Support and Activities from Year 2011 to Year 2012 3 History and Background With regard to the debt facilities, the REIT had a cause for forfeiture of the benefit of time was established, leading to a statement on “Note regarding the Going Concern Basis” being added in the fiscal period ended December 2010 . Calliope Godo Kaisha, an affiliate of Fortress Investment Group LLC, became the new sponsor of Invincible Investment Corporation (hereinafter, “INV”) in July 2011 helping to recapitalize INV through: - Financing approximately JPY 7 billion of equity by way of third party allotment - Refinancing majority of debt with new loans to realize extension of loan periods with diversified maturity dates - Acquiring 97% of share of asset manager (Consonant Investment Management Co., Ltd.) Since there arose certain prospects of full repayment of the then-existing securitized loan, INV decided to remove the statement on “Note regarding the Going Concern Basis” in the financial summary (Kessan-Tanshin) for the fiscal period ended June 2011. As a result of series of transactions mentioned above, avoidance of the bankruptcy risk of INV and removal of the cause for forfeiture of the benefit of time were successfully done. INV has been focusing on further Internal Growth through the improvement of occupancy rates and conducting cost reductions since the fiscal period ended December 2011 (17th fiscal period) . Broke away from the critical phase by the recapitalization 4 Activities during the 19th fiscal period ended Dec. 2012 New debt financing and Acquisition of Properties Asset Management Refinancing with Unitholders’ Meeting the increased loan amount Acquired properties Improved the average New debt financing Revision of the Articles of by new debt financing and occupancy rate compared to Procuring funds through a loan Incorporation refinanc ing w ith th e thifilidhe prior fiscal period backed by trust assets increased loan amount 18th 19th : JPY 9,960mn <Distribution Policy> Enabling INV to determine - Residences 94.2%→ %* 95.2 the amount of - Residences: 24 properties (*of these, occupancy based on Refinancing with the increased loan amount distributions flexibly the existing 39 properties: 95.0% regardless of the Repayment of Syndicate Loan A - Acqu isition price : JPY14, 043mn - Offices etc. 94.4%→ 95. 7% satisfaction of conduit : JPY10,850mn - Total 95.2%→ 96.0%* requirements - NOI yield: 6.1% Borrowing of Syndicate Loan B <Change of Structure of : JPY13,400mn - Averaged age: 7.7years (*of these, occupancy based on Asset Management Fees> the existing 54 properties: 96.0%) (increase of JPY 2,550 mn) Reduction of asset management fees Cost reduction of PM /BM fees LTV based on Unitholders’ (Reduction of asset management : JPY - mn Capital after such financing 18 fees for the period up to December 57.6% (during the fiscal period Improved the appraisal values 2014) ended Jun. 2012: 49.4%) compared to the last time (Jun. 2012/ Sep. 2012) Average interest rate during - Total the fiscal period ended Dec. 2012 JPY73,249mn→JPY73,483mn 3.964% (during the fiscal period (JPY+234mn/+0.3%) ended Jun. 2012: 4.407%) →Excluding the Shinsei Trust Loan A/ B 2. 321% Expansion of asset size/ Enhancement of profitability Flexible utilization of Surplus Establishment of Achieved the acquisition foundation for Profits / Enhancement of Asset value of the new properties / Cost reduction By external growth without capital increase, INV has established a solid platform that will enable INV to pay a consistent dividend (distribution per unit of approximately JPY 200) over the mid- term from portfolio earnings in and after the fiscal period ended June 2013. 5 Highlights of the 19th fiscal period Results / Forecast for the 20th fiscal period 18th fiscal period 19th fiscal period Compared to 20th fiscal period Compared to (Jun. 2012) (Dec. 2012) 18th fiscal (Jun. 2013) 19th fiscal Results Results period Forecast period As of Feb. 27, 2013 No. of properties 54 78 24 78 － Operating revenues JPY 2,176 mn JPY 2,476 mn JPY +299 mn JPY 2,761 mn JPY +284 mn Operating expenses JPY 1,282 mn JPY 1,392 mn JPY +109 mn JPY 1,578 mn JPY +185 mn Operating income JPY 894 mn JPY 1,084 mn JPY +190 mn JPY 1,183 mn JPY +98 mn Other operating JPY 770 mn JPY 972 mn JPY +202 mn JPY 902 mn JPY -70 mn expenses Interest expenses JPY 695 mn JPY 763 mn JPY +67 mn JPY 803 mn JPY +39 mn Finance related JPY 73 mn JPY 208 mn JPY +134 mn JPY 98 mn JPY -110 mn costs Net Income JPY 128 mn JPY 114 mn JPY -13 mn JPY 280 mn JPY+165 mn EPS JPY 95 JPY 85 JPY -10 JPY 207 JPY +122 Reversal of Surplus JPY 105 JPY 32 JPY -73 － JPY -32 per Unit Distribution per Unit JPY 200 JPY 117 JPY -83 JPY 200 JPY +83 NOI yield 5.0％ 5.2％ +0.2％ 5.1％ -0.1% 6 Ensuring the Stability of Distribution Amount in the mid-term 11, 563 Paying DPU of approximately JPY 200 Distribution focusing on the stability Aiming for by utilizing the Surplus in the mid-term further 2,255 2,036 enhancement of DPU 435 105 117 200 200 200 32 207 95 85 200 15th 16th 17th 18th 19th 20th 21th 22th (Dec. 2010) (Jun. 2011) (Dec. 2011) (Jun. 2012) (Dec. 2012) (Jun. 2013) (Dec. 2013) (Jun. 2014) (Forecast) (Target) (Target) -1,836 Reversal of Surplus per Unit (JPY) (Note) (Note) Net income/ loss (JPY) is calculated based -2,055 on the following formula in this page: Net Income/ loss per Unit (JPY) (Note) Net income/ loss per unit (JPY)＝ Distribution per Unit (JPY) Net income/ loss ÷Issued investment units at the end of fiscal period -11,128 <DPU from 15th to 18th> <DPU of 19th> <DPU from 20th over the mid term> DPU of JPY 200 DPU was decreased By the acquisition of new 24 properties, significantly due to INV has established a solid platform since the 20th fiscal with relying on the negative goodwill surplus (Note) temporary costs that period ended June 2013. (Note) Term of the 15th fiscal period was 1 year from Jan. 1, 2010 to Dec. accompanied the Aiming to ensure the stability of 31, 2010 and the distribution per unit for this period is JPY 435. acquisition of properties . distribution amount in the mid -term. Feb. 2010 Jul. to Aug. 2011 Sep. 2012 th - Split units - Invitation of new sponsor - Acquisition of Action Plan from 20 over the mid term - Implement of Third Party Allotment - Merger new 24 properties - New borrowings Internal Growth Strategy Financial Strategy Feb. to Jun. 2010 - A certain expectation of realizing the - New borrowings - Further enhancement of profitability - Partial repayments of refinance & repayment of all of the - Refinancing of - Further enhancement of the of portfolio earnings , and of asset the existing borrowings existing borrowings→ RlfRemoval of Syndicate Loan A with rela tions hip w ith the ex is ting the increased loan value by the sale of statement on “Note regarding financial institutions amount (Implement of strengthening leasing mortgaged properties the Going Concern Basis” Nov. 2012 activities and various Measures) - Developing the relationship 2010.9 Oct. 2011 - Full payment of the existing borrowing - Reduction of asset with new financial institution/ - “Note regarding - Working continnously Strengthening lender formation by the sale of mortgaged property management fees on further cost reductions the Going - Additional borrowing Other Concern Basis” Jul. 2011- - Implement of various - Focus on internal growth such as improvement initiatives of occupancy rates, cost reductions for internal growth Note The descriptions regarding forward-looking statements and goals mentioned above are merely statements based on the currently available information and certain assumptions that are considered to be reasonable; therefore, there may be currently unknown risks and uncertainties in such descriptions.