Industrial & Infrastructure Fund Investment : Financial Statements for the 32nd Accounting Period (February 1, 2023 - July 31, 2023)

Financial Statements

Of

INDUSTRIAL & INFRASTRUCTURE FUND INVESTMENT CORPORATION

As of July 31, 2023

Industrial & Infrastructure Fund Investment Corporation (IIF) invests in social infrastructure as a source of power for the Japanese economy and supports Japan's industrial activities from the perspective of real estate.

Industrial & Infrastructure Fund Investment Corporation (IIF) was listed on the REIT securities market of the Tokyo Stock Exchange (securities code: 3249) in October 2007 as the only J-REITspecializing in industrial properties.

IIF aims to continuously expand unitholder valueby securing a stable profitand achieving steady growth of the properties under management. It aims to achieve this by investing in logistics facilities, manufacturing and research and development (R&D) facilities, and infrastructure facilities which play a vital role in various industrial activities and are expected to be utilized stably in the medium and long term (hereinafter collectively referred to as "industrial properties").

KJR Management

IIF has signed an asset management agreement with KJR Management (hereinafter referred to as the "Asset Manager") and consigned the asset management business based on its articles of incorporation and investment policy.

The Asset Manager manages IIF's portfolio with the aim of securing a stable profit and achieving steady growth of the properties under management in the medium and long term.

Distribution Per Unit

 The 32nd Fiscal Period (Result: February 1, 2023 - July 31, 2023)	3,282 yen
	The 33rd Fiscal Period (Forecast: August 1, 2023 - January 31, 2024)	3,260 yen
	The 34th Fiscal Period (Forecast: February 1, 2024 - July 31, 2024)	3,225 yen

Highlight of the 32nd Period

				The 29th			The 30th			The 31st			The 32nd			The 33rd		The 34th
										Period			Period		Period
				Period			Period			Period
										(Actual)			(Forecast)		(Forecast)
	Operating Revenue	16,493	17,194		17,944		17,848		18,405		18,075
	(million yen)
	Net Income			5,786			6,492			5,940			7,419			7,068			6,775
	(million yen)
	Total Asset	413,419	417,430		422,345		433,409		-		-
	(million yen)
	Distribution per Unit			3,060			3,100			3,122			3,282			3,260			3,225
	(yen)*
	Net Asset Value	91,387	91,476		91,257		92,590		-		-
	per Unit (yen)

* The figures include distribution in excess of profit.

Greetings

I would like to take this opportunity to express my sincere gratitude to all investors for your ongoing support. I also would like to express my deepest sympathy to those who have suffered from the novel coronavirus disease, as well as to their families and related persons.

This report provides an update on IIF's performance for the fiscal period ended July 31, 2023 (the 32nd period). In the fiscal period, IIF launched its 11th public offering, and by utilizing IIF's strength in CRE/PRE proposals, IIF has acquired or plans to acquire six properties with excellent profitability, continuity, and versatility for 22.0 billion yen and disposed of IIF Kobe Logistics Center(Co-ownership 35%). As a result, the number of properties under management at the end of the fiscal period was 78, and the AUM was 389.3 billion yen (on an acquisition price basis). With regards to ESG, in addition to acquiring "ResReal" certification, a certification system that quantifies and visualizes the resilience of real estate against natural disasters, IIF borrowed a total of four billion yen in social loans for the first time, as part of efforts to diversify financing methods and contribute to solving social issues.

As a result of these activities, the distribution per unit (including distribution in excess of profit) for the period was 3,282 yen. Currently, the Japanese economy further moved toward normalization of economic activities with recovery mainly in consumer spending due to the change in the classification of COVID-19 infection to "category 5 infectious disease" in May 2023. Meanwhile, the Bank of Japan's decision to flexibly operate the yield curve control can be viewed as a modification of its monetary easing policy in the future. In addition to changes in the financing environment due to higher interest rates, the impact of price hikes due to surging resource prices in the wake of the situation in Ukraine and other factors will hinder the recovery of consumer spending and corporate earnings and it is necessary to closely monitor the situation along with fluctuations in the capital markets. However, IIF will continue to strive for stable management and work to maximize unitholder value through continuous external and internal growth. I would like to look forward to your continuous support.

Kumi Honda

Executive Director

Industrial & Infrastructure Fund Investment Corporation

IIF Focus

Continuous improvement of asset value through acquisition of highly profitable properties by CRE proposal and promotion of redevelopment projects

Topics

• DPU is significantly higher than the initial forecast due to continuous cost-reduction efforts (32nd period (actual): 3,282 yen (+6.4%), 33rd period (forecast): 3,260 yen (+3.0%))
• Improved quality and stability of the portfolio through the public offering and asset disposition
• Decided to acquire new building of IIF Narashino Logistics Center I (Redevelopment)

Summary of the 32nd Period (Fiscal Period Ended July 31, 2023)

In the period, due to the increase in rent revenues of four new properties acquired through a public offering, the gain on sale from disposition of a property, and a decrease in utilities expenses, operating revenue was 17,848 million yen (decrease by 96 million yen from the previous period), and net income was 7,419 million yen (increase by 1,478 million yen from the previous period).

As a result, the distribution per unit increased by 160 yen from the previous period to 3,282 yen (no distribution in excess of profit). Net asset value (NAV) per unit*1 increased by 1,673 yen from the previous fiscal period to 134,995 yen.

IIF's portfolio as of July 31, 2023 consists of 78 properties worth 389.3 billion yen (based on acquisition price) with a total leasable area of 2,752,841.91 m2 and an occupancy rate of 99.3%*2.

The average remaining lease term is 9.8 years, and based on these long-term lease agreements, we have secured stable management.

Prospect for the 33rdPeriod (Fiscal Period Ending January 31, 2024), the 34th Period (Fiscal Period Ending July 31, 2024) and Future Management Policies

We forecast an operating revenue of 18,405 million yen, net income of 7,068 million yen, a distribution per unit of 3,260 yen (no distribution in excess of profit) for the fiscal period ending January 31, 2024 (the 33rd period) and an operating revenue of 18,075 million yen, net income of 6,775 million yen, a distribution per unit of 3,225 yen (including distribution in excess of profit of 19 yen*3) for the fiscal period ending July 31, 2024 (the 34th period).

As the only J-REIT specializing in industrial properties*4, IIF has pioneered manufacturing facilities, research & development facilities and infrastructure facilities based upon our unique Corporate Real Estate (CRE*5) proposals. As a result, we have acquired properties with low competition and high growth potential.

In March 2023, IIF launched its 11th public offering, and by utilizing IIF's strength in CRE/PRE proposals, IIF has acquired four properties with high profitability and IIF Atsugi Logistics Center III, which is under redevelopment by IIF, will be completed in December 2023 and IIF plans to acquire it.

Through these measures, we will continue to work diligently to contribute to the maximization of

unitholder value in order to realize continuous growth by strengthening the quality of our portfolio and our foundation.

We would like to ask for your continued support and encouragement from our investors in the future.

*1 "NAV per unit" is net asset value per unit based on the appraisal value (or research value) as of the end of the most recent fiscal period. For the 32nd fiscal period, it is assumed that all interests in IIF Kobe LC will be sold and a new building after redevelopment of IIF Atsugi LC III will be acquired. The same applies hereafter.

*2 Figures are rounded off to two decimal places.

*3 Distribution per unit in excess of profit of 19 yen for the fiscal period ending July 31, 2024 is related to allowance for temporary difference adjustment.

*4 "Industrial properties" is a collective term for properties that serve as bases for a range of industrial activities such as research and development, raw material procurement, stockpiling, storage, manufacturing, production, intercompany distribution, assembly and processing, sale distribution, and recycling, and infrastructure properties that serve as bases for supporting these industrial activities.

*5"CRE" is the abbreviation for Corporate Real Estate, which refers to properties owned by companies. To contribute to solving managerial and operational issues and needs of private-sector companies and public institutions, IIF purses CRE strategy that involves making proposals for optimum and efficient management of such property holdings, and works on projects for developing plants, research facilities, and other properties.

Acquired "ResReal" certification (Flood damage assessment category)

IIF's Growth

Launched the 11th Public Offering to Acquire Highly Profitable Properties

Offering Highlight

IIF announced its 11th public offering in March 2023. We have continuously acquired assets with excellent profitability, continuity, and versatility by implementing unique solution proposals to meet diversifying CRE needs along with changes in the macro environment.

Summary of the New Acquisitions

（*1）

New acquisitions

Profitability

Aggregate of

Unrealized Gain/

Average Ratio of

Unrealized Gain（*4）

Number of properties		Total acquisition price
6properties		JPY 22.0bn
Average Appraisal NOI		Average Appraisal NOI Yield
	After Depreciation（*3）
Yield（*2）
(considering continuous surplus cash distribution)
%		3.9%
5.5		(4.3%)
Aggregate		Average Ratio of
+JPY 5.56bn	Unrealized Gain
%
		+25.2

		Manufacturing/
Development
	R&D Facilities
44.7%
	31.3%
JPY 9.8bn
	JPY 6.9bn

CRE/PRE

Proposals

100.0%

Logistics Facilities 24.1% JPY 5.3 bn

(Based on the Acquisition Price)

*1 The figures include IIF Yokkaichi LC (new building) already acquired in Sep. 2022 and IIF Atsugi LC III (redevelopment) to be acquired in Dec. 2023. *2 Average Appraisal NOI Yield = Total Appraisal NOI / Total Acquisition Price

*3 Average Appraisal NOI Yield after Depreciation = (Total Appraisal NOI - Total depreciation) / Total Acquisition Price *4 Average Ratio of Unrealized Gain = Total unrealized gain / Total Acquisition Price

*5 Figures are rounded off to two decimal places

Main properties to be acquired by the Project

					Logistics		Logistics
Manufacturing /	Manufacturing /
R&D facilities			R&D facilities		Facilities		Facilities
IIF Ota Manufacturing Center	IIF Hanno Manufacturing Center
IIF Shiga Ryuoh Logistics Center	IIF Omihachiman Logistics Center
		(land with leasehold interest)

Location	Ota-ku, Tokyo
Acquisition Price	JPY4,570 mn
Appraisal value*1	JPY5,020 mn
Acquisition date	May 15, 2023

Location	Hanno-shi, Saitama
Acquisition Price	JPY2,335 mn
Appraisal value *1	JPY3,020 mn
Acquisition date	March 23, 2023

Location	Ryuoh cho, Gamo-gun,
Shiga
Acquisition Price	JPY3,500 mn
Appraisal value *1	JPY3,920 mn
Acquisition date	March 23, 2023

Location	Omihachiman -shi, Shiga
Acquisition Price	JPY1,810 mn
Appraisal value *1	JPY2,270 mn
Acquisition date	March 23, 2023

*1 Appraisal value" is the appraisal value stated in the appraisal report with the valuation date of July 31, 2023.

【Redevelopment】

Commencement of redevelopment project at IIF Narashino Logistics Center I

Summery of Project

IIF NarashinoLC I

Key

Points

・Development of BTS-type logistics facility to meet a major logistics company's need for a new operation base.

・Signed long-term lease reservation contract (15 -year contract term / 10 -yearnon-cancelable period) with the tenant. ・Maintain profitability during the development period through redeveloping through using the bridge scheme.

Key Indices

Before Redevelopment		After Redevelopment

Anticipated *1 acquisition price

Appraisal Value*2

(Survey Value)

Unrealized gain*3

(Ratio)

Total floor area *4

Contract term

(Note5)

※IIF owns land with leasehold interest only

Before Redevelopment (Land with leasehold interest)

JPY 1,190 mn

JPY 1,950 mn

JPY 760 mn （+63.9%）

ー

22.0 years

(Remaining for 0.1years)

After Redevelopment (Land and Building)

JPY 6,371mn

JPY 8,610mn

（+ JPY 6,660 mn）

JPY 2,238mn

（+35.1％）

27,614.58㎡

15.0 years

(Non-cancelable for 10 years)

*1 The "Anticipated acquisition price" for "After Redevelopment (Land and Building)" is a reference figure totaling the acquisition price of the trust beneficiary interest for the Anticipated Acquisition (excluding acquisition costs, property tax, city planning tax, consumption tax, etc.) as described in the purchase and sale agreement for the building, land price already acquired (the acquisition price of the land described in the purchase and sale agreement for the property at the time of acquisition in 2010), and the land value proportionally divided by the area of the land (1,777.88m2) to be delivered (the Land to be delivered) to the Property from the land of IIF Narashino Logistics Center II, adjacent to the Property. The actual acquisition price of the Anticipated Acquisition may change in the future due to changes in the project plan, etc.. In addition, the NOI yield After Redevelopment (Land and Building) and NOI yield after depreciation may also change in the future, as the above land delivery has not been determined as of today. The same shall apply hereinafter.

*2 The "Appraisal Value (Survey Value)" of "Before Redevelopment (Land with leasehold interest)" is the appraisal value based on the appraisal report for the land portion with a date of valuation of July 31, 2023 and that of After Redevelopment (Land and Building) is the survey value based on the survey report for the entire land (including the Land to be delivered) and building with a survey date of July 1, 2023. The same shall apply hereafter.

*3 The "Unrealized gain" of "Before Redevelopment (Land with leasehold interest)" is the difference between the appraisal value and the acquisition price of the Property. The "Unrealized gain" of "After Redevelopment (Land and Building)" is the difference between the survey value for the entire land (including the Land to be delivered) and building and the Anticipated acquisition price of the Anticipated Acquisition. The "Unrealized gain" of "Before Redevelopment (Land with leasehold interest)" and "After Redevelopment (Land and Building)" are estimated figures as of today and there is no guarantee that they will be consistent with each actual unrealized gain. The price of the Anticipated Acquisition and the actual survey value of the Anticipated Acquisition may change in the future due to changes in the content of the plan for the Development Project. The same shall apply hereafter.

*4 The "Total floor area" of "After Redevelopment (Land and Building)" is the reference figure based on the current plan for the

Development Project. The "Total floor area" of "After Redevelopment (Land and Building)" may change in the future due to changes in the content of the plan for the Development Project.

【Disposition】

Stabilize distributions by distributing gains on the sale of IIF Kobe Logistics Center over three fiscal periods

Decided to dispose IIF Kobe Logistics Center early in light of the impact on the portfolio

Stabilize distributions by disposing of 35% of the co-ownership interest for the fiscal period ending July 31, 2023 (32nd fiscal period), 40% of the co-ownership interest for the fiscal period ending January 31, 2024 (33rd fiscal period), and 25% of the co-ownership interest for the fiscal period ending July 31, 2024 (34th fiscal period)

【Renovation】

Grasp end-tenants' contract expiry dates and make value-up investments to increase profitability and asset value.

*1 The "Appraisal value" and "NOI" for the "After Renovation (land and building)" are the survey value stated in the survey report for the land and the entire building after assumed completion of renovation works, with a valuation date of July 1, 2023, and the net operating income under the direct capitalization method. The same shall apply hereinafter.

*2 "NOI yield" and the "NOI yield after depreciation (After adjustment by surplus cash distribution)" is calculated following formula below. The same shall apply hereinafter.

NOI yield = NOI / Acquisition price

NOI yield after depreciation = (NOI - depreciation*) / Acquisition price

• Depreciation has not been incurred for the "Before Renovation (land with leasehold interest)", as IIF only owns the land with leasehold interest, and is estimated calculated by using the depreciation rates under the straight-line method for "After Renovation (Land and Building)", as with the other existing assets owned by IIF.