6th Fiscal Period
Semi-Annual Report
March 1, 2018 to August 31, 2018
Securities Code: 3462

Nomura Real Estate Master Fund, Inc.
8-5-1 Nishi-Shinjuku, Shinjuku Ward, Tokyo
https://www.nre-mf.co.jp/en/Driving the Market as One of Japan’s Largest REITs

CONTENTS

Message from the Management  p 3

Management StrategyTo Our Unitholders,
Performance Highlights

Internal Growth, Market Review

Topics 

p5

Strengths of NMF
ESG Initiativesp7

Financial Strategy 

p9Investor Information 

p 15

Distribution Policy, Results of Our
Unitholder Survey, Structure andOrganization, Investor Information,
Unitholder Information

Financial Strategy, Balance Sheet
Highlights

Nomura Real Estate Master Fund

Financial Section 

p 31

Balance Sheet
Statement of Income andRetained Earnings
Statement of Changes in Net Assets
Statement of Cash Flows

Portfolio 

p 17

Portfolio Analysis, External Growth,Portfolio Gallery

1

p 25

Notes to Financial Statements
Independent Auditor’s Report
Nomura Real Estate Master Fund2

Message from
the Management

Message from the Management

TopicsESG Initiatives

Management Strategy

Financial Strategy

Investor Information

Portfolio

Financial Section

PERFORMANCE HIGHLIGHTS
5th Fiscal Period

NMF will strive to increase
unitholder value by securing stable
income over the medium to long termand ensuring the steady growth ofassets under management.

Cash Distribution
per Unit

6th Fiscal Period

7th Fiscal Period(forecast)*¥3,047¥3,084¥3,111

Operating Revenues¥34,218¥34,731¥34,644Net Income¥10,714¥10,709¥10,825

Total Assets¥1,089,820¥1,118,644¥1,116,093

Net Assets¥555,090¥571,836¥569,010¥132,697¥132,314¥131,661(including distribution inexcess of net income)millionmillionmillionmillionmillionmillionShuhei Yoshida
Executive Director
Nomura Real Estate Master Fund, Inc.

millionmillionTo Our Unitholders
Net Assets per Unit

In the 6th fiscal period, NMF steadily advanced

excellent properties developed by the sponsor, andexternal growth by leveraging the Nomura Realinvested in its first ever hotel.

Estate Group’s property development capabilities

In GRESB’s Fiscal 2018 Real Estate Assessment,

and internal growth by making maximum use of the

NMF acquired Green Star and 5 Star ratings and,property management pipeline with a focus on

moreover, was selected as a Global Sector Leader.

strengthening its property brands. As a result, at

We are actively promoting management thatthe end of the 6th fiscal period, NMF’s portfolio

accounts for environmental, social, and governancecomprised 281 properties with a total acquisition(ESG) issues to improve medium- to long-term unit-

price of ¥955.9 billion. Thanks to internal growth inholder value, and we appear to have garnered

upside sectors, including the office building sector,

some accomplishments.

operating revenues totaled ¥34,731 million, operat-

formance and will manage the fund’s assets withcame to ¥10,709 million. As a result, the per-unit

the aim of living up to the expectations and trust of

distribution for the 6th fiscal period came to ¥3,084.

our unitholders.

public offering since its founding, acquired nine

As we move forward, we ask for your continued

Operating Revenues and Net Income(Millions of yen)

Operating Revenues

Cash Distribution per Unit

Net Income(Yen)

40,0003,500

30,000

3,000

3,028

3,037

3,047

3rd FP

4th FP

5th FP

3,084

3,111

6th FP

7th FP(Forecast)Gain on sales
299

20,000

2,500

2,219
2,737

10,0002,000

support and encouragement.
1,500
1st FP

Nomura Real Estate Master Fund

million* The above forecast distribution is calculated based on certain assumptions as disclosed in “SUMMARY OF FINANCIAL RESULTS (REIT) For the 6th Fiscal Period Ended August 31, 2018,” published
October 15, 2018. As such, the actual distribution may differ from this forecast due to future property acquisitions or sales, changes in the real estate market, tenant changes or other changes in thecircumstances surrounding NMF. The distribution forecast is not a guarantee of distributions.

0

3

millionmillionWe remain strongly committed to enhancing per-ing profit reached ¥13,285 million, and net income

In the 6th fiscal period, NMF carried out its firstmillion2nd FP

3rd FP

4th FP

5th FP

6th FP

7th FP(Forecast)

1st FP

2nd FP

Nomura Real Estate Master Fund

4

Message from
the Management

Topics

TopicsESG Initiatives

Management Strategy

Financial Strategy

Investor Information

Portfolio

Financial Section

Strengths of NMF
NMF conducts stable management with a medium- to long-term focus, centering on three pillars: its diversified type strategy, large scale strategy, and the value chain of the Nomura Real Estate GroupStrengths

1

Diversified type strategy

Strengths

Pursuing stability and growththrough sector diversification
By doing business in sectors where
profits are expected to remain stable and relatively untouched byeconomic fluctuations (such as
logistics facilities, retail facilities
near residences, and residential
facilities) as well as sectors where
profits are anticipated to rise due toeconomic fluctuations (such as
office buildings, retail facilities nearstations, and hotels), we believe
we are able to pursue both stability
and growth in profits.

2

Large scale strategy

Strengths

Reducing risks through diversification
To ensure stable profits over the medium to long term,
NMF will utilize the portfolio diversification effect in its
ongoing efforts to reduce risks related to declining revenues from owned assets, portfolio imbalances, and tenantconcentration.

Marketdiversification

Upside sectors

57.0%■ Office Buildings

Stable sectors ■ Retail Facilities(near residences)% ■ Logistics Facilities

43.0

0.4%
5.6%
16.8%

■ Residential Facilities■ Other

By leveraging economy of scale resulting from having
one of the largest asset sizes in Japan, NMF will continue to reduce building management costs and construction costs from all-inclusive orders encompassing repair
and maintenance work. In addition, we are now able toshow tenants and brokerages many properties,
enabling more effective leasing activities.

11.2%

20.1%
0.5%

Value chain of the Nomura Real Estate Group

Established a leasing value chain
Property
diversification■ Top 10 properties

24.5%■ Others

75.5%

By establishing a property acquisition pipeline and a management
pipeline linking itself and the
Nomura Real Estate Group, NMF
aims to build a positive cycle ofmutual growth with the Group andimprove unitholder value.

Effectively managing properties byleveraging economy of scale

45.5%■ Retail Facilities(near stations)■ Hotels

3

Sellers of
owned
properties(as of August 31,
2018)

Sponsor ratio

Tenantdiversification■ Top 10 tenants

20.0%■ Others

80.0%

56.9%

Since we began entering into leasing value chain contracts, we haveacquired sponsor-developed properties worth over ¥92.0 billion.

■ Sponsor-developed properties(4 brands*1)■ Sponsor-developed properties(excl. 4 brands*1)■ Externally acquired properties

22.3%■ TOP REIT merger

14.3%

28.8%

*1 The four brands are PMO, GEMS, Landport, and PROUD FLAT.

Track Record of Growth since Inception

Achieved asset size expansion and portfolio quality enhancement through property replacement maximizing the Sponsor’s support.

Inception: Oct. 2015

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

Merger with TOP

Major Acquisitions

34.6%

Asset Size (bln)
Total Acquisition Price (bln)
Total Disposition Price(bln)ー Average Building Age (years)

Kichijoji
Bldg.

GEMS
Ichigaya

PMO
TamachiPMO Ginza
HacchoumePF
Hacchobori

PF Itabashi
HonchoPMO
Shibakouen

PU Meguro
Mita

NEC Head
Office Bldg.

The 1st PO

Harumi Triton
Y&Z

Nakaza Cui-daore Bldg.

PMO ShinNihonbashi

GEMS
DaimonPMO
PF
Nihonbashi
Sangenjaya II
Mitsukoshi-mae(*) Excluding the acquisition price of the merger with TOP REIT

4.4%

Average NOI Yield
783.6

19.3

792.6

4.3%
19.5

4.7%
932.8

784.6

19.5

LP
Hachioji II

Hotel Vista
Sapporo OdorinORBESA

Summit Store
Mukodaicho Store

4.5%

4.2%

4.4%

922.5

955.9

927.3

19.0

33.6

18.7

44.4

83.4

99.9
-105.0

17 properties ¥34.1 bln *2

11 properties ¥47.4 bln *2

2 properties ¥23.4 bln *2

NOF Nihonbashi Honcho Bldg.
NOF Tameike Bldg.
NOF Minami Shinjuku Bldg.
NOF Shinagawa Konan Bldg.
JCB Sapporo Higashi Bldg., etc.

Ito-Yokado Higashi Narashino
Mitsubishi Motors (2 lands)
NOF Technoport Kamata Center Bldg.
Tennozu Parkside Bldg.
Logistics in Gunma (4 properties)

Morisia Tsudanuma
Funabashi LC

-34.1

133.4

Weighted average building
age of the properties
acquired(excluding. properties transferredfrom TOP REIT)

-81.5

-34.1

22.3 yrs(without property
replacement)

18.8

18.8
9.0

Major
Dispositions

LP Kashiwa Shonan II-105.04.1 years*3

Weighted average building
age of the properties
disposed of

34.9 years*3*2 The amount shows disposition price*3 Weighted average building age of the properties acquired / disposed of as of their transaction date.

5

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

6

Message from
the Management

ESG Initiatives

ESG Initiatives

TopicsESG Initiatives

Management Strategy

Financial Strategy

Portfolio

NMF is engaged in asset management that takes environment,
society and governance (collectively referred to as “ESG”)
issues into consideration for the benefit of unitholders overthe medium to long term.

NMF’s Initiatives

Initiatives for the Environment

Reducing Energy Use Intensity Based on
the Energy Savings Act

Participation in GRESB

environmental impact (The examples below are from 2018 onwards.)

31.0

World No. 1 in the diversified, listed sector

30.1

30.0
29.0

Real Estate Assessment:
Green Star, 5 Star
NMF acquired a 5 Star rating(five-level rating with the highest being 5 Star) for two consecutive years in the GRESB
Rating which shows a participants’ relative status vis-à-vis
their overall GRESB Score.

Public Disclosure: A
GRESB selects real estate companies and funds as Sector Leaders if they
achieve the highest score in a specific category, including listed, unlisted,
property type, and region. NMF was able to secure its No. 1 position (asGlobal Sector Leader) among 29 companies worldwide in the diversified,listed sector.

Acquiring DBJ Green Building Certification
Certified
Properties:

Certified
Rate:

48 in total, of which 5 werec­ ertified in the period ended
August 2018.

56.3%*(+2.2 pts from previous period)

Newly certified properties
Kawasaki More’s
NMF Kayabacho Building, NMF Aoyama 1-chome Building,
Nitori Makuhari, FESTA SQUARE

Acquiring BELS Certification

NMF achieved an A rating(five-level rating from A to E
with the highest being A) for
two consecutive years in the
GRESB Public Disclosure Levelevaluation scheme introduced
in 2017 for our proactive disclosure practices in connection with environmental andsustainability initiatives.

Certified
Properties:

19 in total

CertifiedRate:

19.7%*

28.6
29.0

28.0
27.0

VS. FY2016

Legally mandated target

26.0

−3.7%

Annual average reduction of 1% or more(>−1%)

over a 5-year period from fiscal 2016

25.0

FY2016FY2017FY2018

Participating in the Ministry of theEnvironment’s Light-Down Campaign

Nomura Real Estate Master Fund•NMF Aoyama 1-chome

Building

Building

Building•NRE Tennozu Building•NMF Shin-Yokohama•NRE Osaka Building•Landport Urayasu

Building•Izumiya Yao•Landport Hachioji•NMF Sendai Aoba-dori•Nakaza Cui-daore•Recipe SHIMOKITA

Building

Building•NMF Shiba-Koen● Conducted energy-saving checks

NMF’s Board of Directors
Executive director (1 person): Lawyer In order to ensure
neutrality in conducting operations ofComposition Supervisory directors (2 people):
Certified public accountant
NMF, all three Board
Real estate appraiser
members (one executive director and two
Meeting
Once a month (and as necessary)supervisory directors)
frequency
are chosen from
2 years in principle for executive and among independent
Termsupervisory directors
professionals.

* Total floor space basis

Item

FY2016FY2017

Female employee ratio

28.60%

29.75%

Female manager ratio

5.38%

5.45%

Female junior manager ratio

14.80%

15.08%—

Male: 3.57%
Female: 4.46%

119 (2)86 (3)

Parental leave return ratio—

92.59%

People who took caregiving leave

2

4

Employees aged 60 or up

434

404

Attrition rate by gender
People who took parental leave (male)7•Shinjuku Nomura

G Initiatives for GovernanceInitiatives for Society

Promoted by setting up a telecommuting system andsatellite offices.

Established in 1992, this partnership between UNEP and financial institutions aims to promote the adoption of financial systems that integrate economic development and consideration
for ESG issues. The asset management company is an active
participant in the Property Working Group.

UpgradingAir
Conditioners

We participate in the CO2
Reduction/Light-Down
Campaign that the Ministry of
the Environment launched in2003 to help stop global­warming.

● Promoted working-style reforms

United Nations Environment Programme FinanceInitiative (UNEP FI)

UpgradingToilets

FY2021● Conducted employee satisfaction surveys by NRE

As NMF’s asset management company, NREAM believes it is necessary to manage assets with consideration for
ESG issues to sustainably improve the value of assets under management. In line with this belief, the asset management company became a signatory to both PRI and UNEP FI in December 2017.

An international network of investors established in 2006 working to realize the Six Principles for the financial industry under
the leadership of Kofi Annan, the then UN Secretary General.
As of April 2018, about 2,000 institutions have signed on to PRI.

FY2020● Promoted various working styles

NREAM’s Initiatives

Principles for Responsible Investment (PRI)FY2019The Nomura Real Estate Group
Promotes Diversity

Landport Kashiwa Shonan I

Saving Energy
with LEDs

24.0

S

Newly certified properties

Taking Specific Measures That Reduce
Environmental Impact● Invested capital in owned properties to reduce our(l/m2)

Selected as a Global Sector Leader

Financial Section

Please visit our website for more detailed information.

E

INTERNATIONAL INITIATIVES AND EXTERNAL CERTIFICATIONSInvestor Information

Number of foreign national employees
Disabled people employment ratio

7

14

1.97%

1.90%

Note: The disabled people employment ratio for fiscal 2017 is as of June 1, 2018. The figure
includes Group companies included in the scope of the disabled people ratio system.

Corporate governance/compliance structure
NREAM thoroughly prevents conflicts of interest, manages risks
and complies with laws and regulations by establishing a governance system that gives top priority to compliance.
Deliberates approval of significant transactions with

Compliance Committee related parties, etc., and confirms legal compliance.
Deliberates basic policies, etc., on asset manage-

Investment Committee ment and investment advisory activities and makes
decisions as NREAM.

Training programs provided by NREAM
Compliance training:

12 times a year

BCP training:

Once a year in principle

ER training:

About 2 times a year

Appraisal training:

About 2 times a year

Other business-related training:

About 6 times a year
Nomura Real Estate Master Fund

8

Message from
the Management

Management Strategy

Internal Growth

TopicsTOPICS

Pursuing income growth with upside potential through active tenant turnover backed by strong leasing demand
Change in floor area from move-ins and move-outs (tsubo)
AppliedMove-ins

3,444

Move-outs

4,746

Net

3,667

3,439

3,268 (Applied)

2,327

1,791

1,777

1,478 (Contract)-1,584-2,226-2,470-2,755-3,240-3,663-5,402Feb. 2016(5 months)

Aug. 2016

Feb. 2017

Aug. 2017

6th FP: Tenant turnover effect3,667

Financial Strategy

Portfolio

Investor Information

Financial Section

Feb. 2018

Aug. 2018

Feb. 2019(Forecast)Responding to recent trends in work styles and other social needs, Nomura Real Estate and NMF offer a new,more personally fulfilling way to spend time in the office that helps motivate each office worker and encourage
their growth. By supporting workers’ growth and motivation, we ensure that our office services contribute to thedevelopment of not only tenant companies but also the neighborhood and society as a whole.
Floor Layout and Patrons’ Opinions
The design concept underlying NEON is something we call park life. Like a park, its mainarea is an open space that fits right in with everyday life—a space where all types of people
can come and go freely. Another one of our goals is to help office workers find an appealing
spot where they can create a new working style. Inside the facility, we have put up originalart and products designed to harmonize with the facility concept to provide patrons with
comfort and inspiration upon viewing.

1

1 Concierge

2 Café

3 NEON ROOM

To build a second community centering on
office workers, we have stationed a concierge in the facility to support workers inplanning events, building personal networks
outside of their company, studying, and otheractivities

The café offers a menu focused on supporting mental and physical health to heighten
office workers’ drive. This, of course,
includes superb coffee and, for busy workers,
daily bento box options from popular chainsand bento boxes that come with an extra
dish.

Small meeting rooms that completely
alter your state of mind
We have set up 7 types of meeting rooms seating 6 to 12 people and featuring various fragrances and color schemes to pique the fivesenses. There are four modes of backgroundmusic to choose from. Regular time slots can bereserved to meet temporary needs for additional
floor space, such as project meeting rooms.

2

3

7th FP: Progress on tenant turnover (as of Sep. 30, 2018)

Rate of rent increase
from tenant turnovertsubo in total

Management Strategy

Opened the innovative space NEON in
the Shinjuku Nomura Building

Management Status

Achieved average rent increase of 0.4% (5th FP: ¥18,060/tsubo → 6th FP: ¥18,126/tsubo)

OfficeESG Initiatives

Floor area
subject totenantturnover:

+5.9%

5,402

(Reasons for move-out: Relocations to better
locations and expansion of office space, etc.)

tsubo in total

Of the above,  Contracted 1,478 tsubo
Applied 3,268 tsubo*

Examples:Rate of rent increase
from tenant turnover+9.4%

4,746 tsubo(floor area subject to turnover, rate of rent increase from tenant turnover)(Tentative contracted ratio: approx. 87.9%)

Examples:Securing a stable cash flow through contract renewal with tenants by entering into
negotiations at an early stage.

Logistics(floor area subject to turnover, rate of rent increase from tenant turnover)

TOPICS

Completed contract renewals with tenants expecting lease maturity in February 2019 period

NRE Osaka Building

SORA Shin-Osaka 21

882 tsubo, +7.1%

233 tsubo, +18.3%

NMF Yokohama
Nishiguchi Building
103 tsubo, +11.3%

Change in Rent from Tenant Turnover(million)

8.0

Monthly rent increase (left axis)
Monthly rent decrease (left axis)
Monthly rent change rate(right axis)

Average rate of rent
increase from new
tenants with higher rent

4.0
2.0

4

4
5.3

2

5.8
2

+12.5%

-4.0

-3
Feb.
2016
(5 months)

9489 tsubo, +10.9%(%)(million)

12.0

30

1

1

3

5.9

2
Aug.
2016

Feb.
2017

Nomura Real Estate Master Fund

Aug.
2017

Feb.
2018

Lease Maturity (Rent basis)

Average rate of rent
increase from upward
rent revisions

+5.9%

Aug.
2018

(%)

Contract renewal

14.6%

Contract renewal

4
0.9
-1

0

Feb.
2016
(5 months)

Aug.
2016

0
Feb.
2017

Aug.
2017

0.0

Feb. 2019-2.0

Challenge in
Landport
UrayasuAug. 2019Feb. 2020

Aug. 2020Feb. 2021

Aug. 2021

Feb. 2022

Aug. 2022

Feb. 2023

Aug. 2023

0

Decreased rent > Market rent

-10

7.8%

0.6%

Under leasing

0.6
0

7.8%

2.5%

2.0

1.9

7

5

12.9%

5.3%

3.7
10

13.7%

11.6%

6.0

13

2.0

1.7

10

-3.0
-6.0

The lease contract has been renewed toextend the lease maturity for 17,077 tsubo(Approx. 3/4 of total floor) to December 2020

4.0

0

1

Landport Kawagoe

The lease contract has been renewed toextend the lease maturity for 11,276 tsubo
to February 2022.

23

6.0
3.0

0

Monthly rent increase (left axis)
Monthly rent decrease (left axis)
Monthly rent change rate(right axis)

20

4Landport Itabashi* The figure shows floor area for which NMF received an application for occupancy.

0.0

-1.3

140 tsubo, +5.6%

9.0

7.4

0.0
-2.0

NMF Shibuya Koen-doriChange in Rent from Rent Revisions

10.7

6.0

NMF Aoyama 1-chome
Building

Feb.
2018

-7
Aug.
2018

The Fund has made a decision to seek tenant turnover regarding a 10,570 tsubo lease maturing in the fiscal period ending
August 2019 after considering the competitiveness of the property.
To guard against the potential impact to the distribution due to vacancy losses, the Fund is considering the use of internal reserves, etc.

Nomura Real Estate Master Fund

10

Message from
the Management

Management Strategy

Internal Growth
RetailTopicsManagement Strategy

ESG Initiatives

Financial Strategy

Investor Information

Portfolio

Financial Section

Management Status

Residential Facilities

NMF secured internal growth thanks to tenant turnover based on stable fixed rents.

Pursuing increases in residential sector rents, with a focus on the greater Tokyo area
through move-ins & move-outs.

TOPICSTOPICS t University City Walk, NMF succeeded in persuading Universal Studios Japan to establishA
its largest official store outside the environs of the franchise’s theme park.

 hange in rent due to tenant turnoverCor contract renewal
1 Change in rent due to tenant turnover
793 out of 1,259 units (63.0%) replaced withincreased rent
Change in monthly rent +2.0% (+¥2,557,000/month)• We saw rental revenues jump in comparison to those garnered from theprevious tenant due to the use of combined fixed and sales-linked rent.
• Due to high public interest, the USJ store’s sales have surpassed those of
the previous tenant.

Tenant sales

Tenant rental revenues

Previous tenant
USJ store

2 Change in rent due to contract renewal
119 out of 2,117 units (5.6%) renewed contracts
with increased rent
Change in monthly rent +0.1% (+¥278,000/month)Previous tenant rent
USJ store fixed-rent
USJ store sales-linked rent

Sales-linked
rent +

Fixed rent only

+831.7%+137.1%(%)

100
USJ store

Previous tenant

Down

Flat

46.5

USJ store

Note: The graphs present a comparison of sales for 7/20–8/31 with those in the same period of
the previous year (and part of 2016). Based on the agreement, sales-linked rent is collected ina lump sum once per year.

34.2

Total rent (Fixed-rent + sales-linked rent)

120

100

109

111

2015.9–2016.8

2016.9–2017.8

PRIME URBAN Kagurazaka (Replaced 21 units)
Change in monthly rent +5.5%(+¥153,000/month)

Up

55.9

55.4

56.9

60.2

Feb. 2016

Challenge

PRIME URBAN Toyosu

Change in Rent upon Contract Renewal

The portion accounted forby rent increases is rising.

(%)

Down

100

Flat

Up

9.6

6.5

9.5

6.9

9.0

5.6

89.8

93.1

90.2

92.9

91.0

94.3

63.0
50

19.3

0

120

PRIME URBAN Toyosu (Replaced 34 units)
Change in monthly rent +4.3%(+¥177,500/month)

50

Rent Trends for Universal City Walk Osaka (indexed)
Sales-linked rent

Model rooms set up showcasing customers’
target attributes

Change in Rent upon Tenant Replacement(Up ¥2,962,000 / month)Previous tenantEfforts to increase rent upon tenant replacement

22.3

20.0

19.6

21.0

21.7

24.6

23.5

18.8

18.4

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018

18.6
0.7

0.4

0.3

0.2

0.0

0.1

Feb. 2016

Aug. 2016

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 20180

In response to residential property demands in the Osaka and Nagoya area central business districts,
NMF is considering property replacements over the medium to long term.

2017.9–2018.8

Note: Sales for 2015.9 – 2016.8 are indexed at 100.

HotelsChange in rent due to tenant turnover (excluding tenants with sales-linked rent)

Rate of rent
increase due totenant turnover

Examples: (floor area subject to turnover, rate of rent increase from tenant turnover)757

Floor area
subject totenant turnover

10,0008,000

3.7Rebranded Hotel Vista Sapporo Odori (formerly, the Watermark Hotel Sapporo)+7.2[Station area]nORBESA[Station area]
EQUINIA Shinjuku

268 tsubo (+32.3%)

127 tsubo (+33.3%)

4.2

Change in Rent Due to Rent Revisions

Impact of the North Osaka
Earthquake and typhoons (%)(−¥30 million)
5.0

4.3

4.4

(Retail properties in station area)(Thousands of yen)

4.0

StableFixed Rent

0

11

Aug.
2016

Feb.
2017

Aug.
2017

Nomura Real Estate Master Fund

Feb.
2018

Aug.
2018

(%)

1,000

2.5

800

2.0

3.0

600

2.0

400

1.0

200

0.0

0

1.5

1.5
498

Upside4,000
2,000

Amount of change in monthly rent (left axis)
Rate of change in monthly rent (right axis)

The entrance of the restaurant Wa Oyobare

Breakfast at Wa Oyobare

Operational Performance (year-on-year change)

3.8

6,000

Feb.
2016

New operator, Vista Hotel Management Co., Ltd., took over hotel management from June
2018. Discussions are currently under way with the relevant people to further improve
hotel and restaurant operations.

%

Sales-linked rent (left axis)
Fixed rent (Station area)(left axis)
Fixed rent (Residential area)(left axis)
Sales-linked ratio (right axis)

4.0

TOPICS

tsubo

Rent Revenue Breakdown (Retail Overall)(Millions of yen)

Added value to the hotel by bringing in a well experienced hotel operator as well asa local restaurant that serves locally grown food.

176

1.5

1.1
180

263

1.1

0.8
317

273

0.3
Feb.
2016

Aug.
2016

1.0
0.5
0.0

Feb.
2017

June

Aug.
2017

Feb.
2018

Aug.
2018

RevPAR
Occupancy
Rate
ADR

July

August

2017

2018

2017

2018

2017

2018

¥7,954¥7,904(−0.6%)¥9,028¥9,591(+6.2%)¥9,506¥10,374(+9.1%)

86.3%

80.1%

88.6%

84.6%

86.6%

86.0%

¥9,217¥9,870¥10,190¥11,336¥10,978¥12,063* RevPAR: Revenue per available room** ADR: Average daily rate

Nomura Real Estate Master Fund

12

Message from
the Management

Management Strategy

TopicsManagement Strategy

ESG Initiatives

Financial Strategy

Investor Information

Portfolio

Financial Section

Market Review
OfficeRetailVacancy Rate Tokyo Central Five Wards

Average Monthly Rent Tokyo Central Five Wards

Retail Sales Volume by Store Type (12-month moving average)

Retail Sales Volume by Product Type (12-month moving average)(%)(¥ / tsubo)

End of 2013=100

End of 2013=100

10.0

25,000125
22,9019.43

8.0

8/31 20,291

20,000ー Supermarkets
ー GMS/ Chain storesー Department stores

120

105

115
6.0

ー Food & beverages ー Housing goods ー Clothing

110

100

110

15,00016,207

95
105

4.0

10,0002.49

2.0

8/31 2.45

90

100

85

95

5,000

80

90
0.0

’14

0
’05

’06

’07

’08

’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

’05

’06

’07

’08

Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd.

Supply of Office Buildings Tokyo Central Five Wards
700

’11

’12

’13

’14

’15

’16

’17

’18

23,000

Forecast

Previous peak
‘08.Q2
3.49

400

’14

Source: Prepared by NREAM based on data from the Ministry of Economy, Trade and Industry
and the Japan Chain Store Association(Tsubo)700,000‘01.Q3
3.21

’15

’16

’17

’18

Source: Prepared by NREAM based on data from the Japan Chain Store Association‘03.Q2
8.57‘05.Q25.03

18,000‘12.Q29.43

17,00016,0000

15,000’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21

Forecast(%)(Trillions of yen)

16

30

Forecast■ Online Retail Sales Revenue

14

25

12

500,000

10

400,000

8

300,000

20
15

6
5.3

200,000‘14.Q2
6.45

Japanese E-commerce (B2C) Market

completion, right axis)

600,000‘17.Q4
3.17‘18.Q2100■ New supply (left axis)■ New demand (left axis)
ー Vacancy rate (overall) (right axis)
ー Vacancy rate (a year or more after

800,000

19,000 2.57

200

’18

Large-Scale Rental Logistics Facility Supply and
Demand in the Tokyo Metropolitan Area (as of Q2 2018)

22,00020,000300’17Logistics

21,000500’16Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd.

Rent (Yen)

600

’10

Rent and Vacancy Rate Matrix (Tokyo Central Five Wards)■ New Supply(Thousands of tsubo)

’09

’15

100,000

19.3
15.4

16.6

20.6

21.8

24.5

23.1

25.9

18.0

10

4
5

2
1.6

2

3

4

10 Vacancy
Rate (%)
Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd.

Source: Prepared by NREAM based on data from Miki Shoji Co., Ltd.

5

6

7

8

9

0

0
’09

’10

’11

’12

’13

’14

’15

’16

’17

’18

0

’19

’15

Source: Prepared by NREAM based on data from CBRE
* Forecasts are for years ending December 31

Residential

’16

’17

’18

’19

’20

’21

’22

’23

Source: Prepared by NREAM based on data from Nomura Research Institute, Ltd* Years show fiscal years ending March 31

HotelsNet Population Inflow (Tokyo Prefecture)

Rental Condominium Rent Index (Tokyo’s 23 Wards)

ー Population increase(People)7,000

09 Q1=100

112

Total Number of Overnight Guests

ー Single type (18m2-30m2)
ー Compact type (30m2-60m2)■ Japanese overnight travelers ■ International overnight guests(Millions of people)

600

110
500

108

6,000

106

400

104
300

102

5,000

100
200

98

4,000

96

100

94
’11

’12

’13

’14

’15

’16

’17

Source: Prepared by NREAM based on data from the Ministry of Internal Affairs
and Communications

13

0

92

3,000

Nomura Real Estate Master Fund

’18

’11

’12

’13

’14

’15

’16

’17

’18

Source: Prepared by NREAM based on data from At Home Co., Ltd. and Sumitomo Mitsui
Trust Research Institute Co., Ltd.

’11

’12

’13

’14

’15

’16

’17

Source: Prepared by NREAM based on data from Tourism Agency

Nomura Real Estate Master Fund

14

Message from
the Management

Financial Strategy

TopicsESG Initiatives

Management Strategy

Financial Strategy

Financial Strategy

Balance Sheet Highlights

Continued to promote the lowering of average interest rate and extension of borrowing periods through refinancing utilizing the low-interest rate environment.

August 2018 Fiscal Period DPU: ¥3,084 (¥3 higher than forecast)

Total Interest-bearing debt

Feb. 2017

Aug. 2017

Feb. 2018

Aug. 2018(2nd FP)(3rd)(4th FP)(5th FP)(6th FP)

Average remaining duration

4.36 years

Average interest rate

4.31 years

1.03%

Ratio of long-term debt

4.54 years

0.95%

85.9%

4.52 years

0.92%

83.2%

4.61 years

0.91%

88.0%

0.88%

88.0%

87.2%

Ratio of fixed-rate debt

95.8%

92.2%

94.9%

95.4%

95.4%

LTV

43.8%

45.1%

44.6%

44.6%

44.4%

Diversification of Repayment Dates(Millions of yen)

■ Investment corporation bonds (left axis)■ Borrowings (right axis)● Average interest rate (right axis)

50,0001.18

1.03

40,0000.72(%)

Commitment line ¥50 billion + uncommitted line of credit ¥30 billion

60,0000.60

1.03

0.99 0.95
0.74

0.70

1.5
1.13

1.06

0.56

30,000

0.70

0.66

0.72

0.67

0.72

0.75

2.0

1.53

1.23

1.33

1.92

1.0

0.77

0.5
0

20,00010,0000
7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
FP
Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug. Feb. Aug.
2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028

29th
FP
Feb.
2030

31st
FP
Feb.
2031

46th
FP
Aug.
2038

¥1,500 million

Interest rate

1.03%

Issue date

May 23, 2018

6th FP
Results

Differences

Operating Revenue
Rental revenues
Other rental revenues
Operating Expenses
Rental business expenses  Repair expenses   Tax and public dues   Depreciation and amoritization  Others
Asset management fees
Amortization of goodwill
Other operating expenses
Operating Income
Non-operating Revenues
Non-operating Expenses
Interest Expenses and other financial costs
Investment units issuance costs
Other non-operating expenses
Ordinary Income
Extraordinary loss
Net Income

34,60531,596
3,008
21,352
15,032
1,535
2,809
4,892
5,795
3,074
2,622
623
13,253
—
2,554
2,527
19
8
10,698—
10,697

34,731
31,695
3,035
21,44515,158
1,555
2,846
4,901
5,854
3,074
2,622
590
13,285
6
2,536
2,508
19
8
10,75543
10,709

126
98
27
93
125
20
37
9
59
0
—
-33
32
6
-18
-18
-0
0
57
43
12

Distribution of EarningsaDistribution in Excess of Net Earnings b
Total Distributions
a+b

10,692
2,623
13,315

10,7092,619
13,32817-412Internal Reserves(Total Internal Reserves)

—
3,694

—
3,694

—
—

DPU (Yen)Distributions of earnings per unit (Yen) Distributions in excess of retained earnings per unit [allowance for adjustment of temporary differences](Yen) Distributions in excess of retained earnings per unit [other distributions in excess of net
earnings] (Yen)

3,081
2,474

3,084
2,478

3
4

312

306

-6

295

300

5

1,118,585
955,984
497,15544.4%

1,118,644
955,984
497,155
44.4%

59
—
—
—

—
24,465
18,214

669,01424,47518,282

—
9
68

Ended
Ended
Aug. 31, 2018 Aug. 31, 2018

Maturity date

May 21, 2038

Total Assets
Acquisition Price
Interest-bearing debt
LTV
Market capitalization
NOI
FFO

Collateral / Guarantee

Not provided

Factors Contributing to Change in DPU (¥/ unit)

Third Series of Unsecured Investment Corporation Bonds
Total amount of issuance

6th FP
Forecasts

Item¥409,771 million ¥498,784 million ¥488,741 million ¥486,198 million ¥497,155 million

Financial Section(Millions of yen)

Status of Interest-bearing Debt (as of end of fiscal period)
Aug. 2016

Investor Information

Portfolio■ DPU

Main factors accounting for differences
between forecast and results in the 6th FP (¥mln)■ Increase factors

Net income (excl. gain on sales)+12

Real estate rental profit����������������������

+1(1) Rental revenues��������������������������������������

+126

Increase in rent and common area������

+98

Increase in utility expenses�������������������

+59

Other�������������������������������������������������������

-31(2) Rental expenses������������������������������������� (-125)
Increase in property and other taxes���-37

Increase in utility expenses paid����������

-84O perating expenses, excluding
property-related expenses�����������������

+33

Decrease in other rental expenses(lawyer fees, etc.)����������������������������������������

+33N
 on-operating profits�������������������������

+24

Decrease in interest expenses and otherfinancial expenses��������������������������������������

+18

 xtraordinary loss (expenses for postEnorthern Osaka earthquake reconstruction)-43* The impact on net income is represented by plus (+)
and minus (–) signs.

■ Decrease factors

3,500 (¥)

Credit Ratings
Credit rating agency

Rating description

Note

Japan Credit Rating
Agency, Ltd. (JCR)

Long-term Issuer Rating:Rating outlook:

AA

StableRating & Investment
Information, Inc. (R&I)

Issuer Rating:Rating outlook:

A+

StableLong-term Corporate Rating:
S&P Global Ratings
Japan Inc. (S&P)

Increase in utility expenses paid -20
Increase in tax and public dues
-8

Commitment Lines*

A

Outlook:

Short-term Corporate Rating:StableA-1

Commitment line 1

Commitment line 2

Loan Limit¥40.0 billion (one year)¥10.0 billion (three years)

Participating
Financial
Institutions

MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation
Mizuho Bank, Ltd.
Sumitomo Mitsui Trust
Bank, Limited

3,081

Increase in rent revenues andcommon area charges
+22
Office+17
Retail-0
Logistics+3
Residential+2
Increase in utility expenses
received+13
Settlement/ Penalty fee, etc-7

Nomura Real Estate Master Fund

+13

-10

3,084

Decrease in other operating
expenses
Decrease in interest expenses

+7
+4

2,500
Aug. 2018 period
DPU (Forecast)

15

-29

3,000

MUFG Bank, Ltd.
Sumitomo Mitsui Banking
Corporation* In addition to the above commitment lines, NMF has established a 1-year, ¥30.0 billion
uncommitted line of credit.

+29

Rentalrevenues

Rental business
expenses

OthersExtraordinaryloss

Aug. 2018 period
DPU (Result)

Nomura Real Estate Master Fund

16

Message from
the Management

Portfolio

TopicsPortfolio Analysis (as of Aug. 31, 2018)

Management Strategy

ASSET SIZE

281

¥955,984%
2 Properties 12 Properties

10,390

Other Area

10,267

1 Property

8,500

0.4% 0.5%

1 Property

3,600

Residential Facilities

Tokyo Area

20.1%

82.1%

Tokyo Area
Office Buildings

45.5%
Logistics Facilities

16.8%(based on acquisition price)

Diversification by
use

11.2%

OTHER

14 Properties

Retail35 Properties

Retail

9 Properties

Logistics

18 Properties

Logistics

Residential

121 Properties

Residential

1 Property

Other

34 Properties
1 Property

Hotels

222 Properties

1 Property

59 Properties

Total

5 Properties
3 Properties 3,942
1 Property 7,400

24.5%

271 Properties

OfficeTotal

Top Ten Properties
as a Percentage
of Portfolio

75.5%

47 Properties

Retail Facilities (near stations)

5.6%

Other Areas

Office(based on acquisition price)

Retail Facilities (residential areas)

Other

Financial Section

99.3
Hotels Other

Diversification by
location

Investor Information

OCCUPANCY RATE

million

17.9%

Portfolio

Financial Strategy

Portfolio Distribution (property locations in Japan, millions of yen)

NUMBER OF PROPERTIES

properties

ESG Initiatives

2,030

Other

Diversification byproperty type

62.0%

(based on acquisition price)

Top Ten Tenants
as a Percentage
of Portfolio

Diversification bytenant38.0%(based on leased area)

44 Properties 346,710
105 Properties

141,281

22 Properties

7 Properties

59,37748,310

1 Property

2,320

3 Properties

33,190

1 Property

4 Properties

18,300

5,830

6 Properties
1 Property

3,020

2 Properties

4,520

4 Properties

40,436

1 Property

2,280

3 Properties

38,100

1 Property

1,580

5 Properties

8,755

37,9908 Properties

32,140

1 Property

3,460

2 Properties

6,440

5 Properties

2,477

4 Properties

25,650

1 Property
1 Property 7 Properties

3 Properties

15,910

6 Properties

8 Properties

3,080

4,632

4,900

12,081

7,086

For a detailed list of properties in our portfolio, visit the website below.
https://www.nre-mf.co.jp/en/portfolio/index.html

17

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund18

Message from
the Management

Portfolio

External Growth

PMO Nihonbashi
Edo-dori

PMO is a new category of office building that is midsized yet offers the functionality and grade of a largesized building to meet the needs of increasingly
diverse businesses.

Name

Completion(plan) period

Status

Nomura Real Estate’s Core Logistics
Facility Brand

Name

Location

Completion(plan) period

StatusOperating

Landport Komaki *2

Komaki-shi, Aichi

Jan. 2017

OperatingMay 2017

Operating

Landport Shinonome Project

Koto-ku, Tokyo

Nov. 2018

Planning

PMO Shibuya

Shibuya-ku, Tokyo

Jun. 2017

Operating

Landport Narashino Project

Narashino-shi, Chiba

Jan. 2020

Under Construction

PMO Hanzomon

Chiyoda-ku, Tokyo

Jun. 2017

Operating

Landport Kawaguchi Project

Kawaguchi-shi, Saitama

Jun. 2019

Under Construction

PMO Shinjuku-gyoen Project

Shinjuku-ku, Tokyo

May 2019

Under Construction

Landport Higashi-Narashino Project

Narashino-shi, Chiba

Jul. 2019

Under Construction

PMO Tamachi Higashi

Minato-ku, Tokyo

Feb. 2018

Operating

Landport Ome I ProjectOme-shi, Tokyo

Nov. 2018

Under Construction

PMO Higashi-Shinbashi

Minato-ku, Tokyo

Apr. 2018

Operating

Landport Ome II ProjectOme-shi, Tokyo

Jun. 2020

Planning

PMO Kyobashi-Higashi

Chuo-ku, Tokyo

May 2018

Operating

Landport Ome III ProjectOme-shi, Tokyo

Jun. 2020

Planning

PMO Ochanomizu Project

Chiyoda-ku, Tokyo

Jul. 2018

Under Construction

Landport Koshigaya Project

Koshigaya-shi, Saitama Jun. 2020

Planning

PMO Hamamatsucho Project

Minato-ku, Tokyo

Nov. 2018

Under Construction

Landport Kasukabe II Project

Kasukabe-shi, Saitama May 2021

Planning

PMO Kandasudacho Project

Chiyoda-ku, Tokyo

Jan. 2020

Planning

Landport Atsugi-Aikawamachi Project *2

Atsugi-shi, Kanagawa

Planning

Name

LocationPMO Hatchobori Shinkawa Project *2

Chuo-ku, Tokyo

Apr. 2018

Operating

PMO Akihabara-Kita Project

Taito-ku, Tokyo

Dec. 2018

Under Construction

PMO Nishi-Shinjuku Project

Shinjuku-ku, Tokyo

Jul. 2019

Planning

PMO Shibuya II Project

Shibuya-ku, Tokyo

Aug. 2020

Planning

PMO Gotanda Project

Shinagawa-ku, Tokyo

Jul. 2019

Under Construction

PMO Hamamatsucho Daimonmae
Project

Minato-ku, Tokyo

Jul. 2020

Planning

Chuo-ku,Tokyo

Mar. 2021

Planning

Chuo-ku ProjectChuo-ku,Tokyo

Mar. 2020

Planning

Strategy 3

Strategy 4

Chiyoda-ku Project

Chiyoda-ku,Tokyo

Jan. 2021

Planning

Buildings with one tenant
per floor to ensure efficiency, independence and safety

Places that stimulate
employee motivation andcommunication, fosteringenhanced productivity

Shibuya-ku Project

Shibuya-ku, Tokyo

Oct. 2020

Planning

Nomura Real Estate Master Fund

Financial Section

Jun. 2016

Chiyoda-ku Project

Facilities offer new lifestyle ideas to brighten andenrich the everyday lives of nearby office workers andresidents.

Investor Information

Chiyoda-ku, Tokyo

Offices that enhance corporate image and reputation, helping to attract
customers

GEMS retail facilities are located mainly in urban areasand comprised primarily house a rich variety of select­restaurants.

Portfolio

Chuo-ku, Tokyo

Office buildings where
people will be proud towork, strengthening hiringand retention

GEMS Sangenjaya
Project

Financial Strategy

PMO Uchi-Kanda

Strategy 2

GEMS Kayabacho
Project

Management Strategy

PMO Nihonbashi Edo-dori *2

Other Offices

Nomura Real Estate’s Core Retail Facility Brand

19

Location

Strategy 1

GEMS Jingu-mae
Project

ESG Initiatives

The sponsor has launched new brands for income-generating real estate targeting residential, logistics,
office and retail use and has promoted their development and operations, starting with PROUD FLAT in
2005, Landport in 2007, PMO in 2008 and GEMS in 2012.

Strong Sponsor Pipelines

Nomura Real Estate’s Core Office Brand

PMO KyobashiHigashi Project

TopicsName

Location

Completion(plan) period

Landport Higashi-Narashino Project(former Ito-Yokado Higashi Narashino)

Landport logistics facilities offer advanced functionality to meet the needs of the changing logistics environment and diverse tenants.
Designed for optimized, efficient logistics toenhance tenant satisfaction.

Nomura Real Estate’s Core Residential
Facility Brand

StatusGEMS Jingu-mae

Shibuya-ku, Tokyo

Apr. 2018

Operating

GEMS KayabachoChuo-ku, Tokyo

Feb. 2018

Operating

GEMS Namba Project

Osaka-shi, Osaka

Nov. 2018

Under Construction

GEMS Tamachi Project

Minato-ku, Tokyo

Feb. 2019

Under Construction

GEMS Nishi-Shinjuku Project

Shinjuku-ku, Tokyo

Not fixed

Planning

GEMS Sangenjaya

Setagaya-ku, Tokyo

May 2018

Operating

GEMS Shinbashi Project

Minato-ku, Tokyo

Sep. 2018

Under Construction

GEMS Shinbashi Project

Minato-ku, Tokyo

Sep. 2018

Under Construction

GEMS Sakae Project

Nagoya-shi, Aichi

Oct. 2019

Planning

GEMS Yokohama Project

Yokohama-shi, Kanagawa Sep. 2019

Planning

Kawasaki-shi Project

Kawasaki-shi, Kanagawa Oct. 2020

Planning

Minato-ku Project

Minato-ku, Tokyo

Apr. 2021

Planning

Jinbo-cho Project

Chiyoda-ku, Tokyo

Jan. 2020

Planning

Suginami Project

Suginami-ku, Tokyo

Sep. 2018

Under Construction

Hiroo Project

Shibuya-ku, Tokyo

Feb. 2020

Under Construction

Katase-Kaigan ProjectFujisawa-shi, Kanagawa

Sep. 2019

Planning

Chayamachi Project

Osaka-shi, Osaka

Mar. 2020

Planning

Jingumae Project

Shibuya-ku, Tokyo

Aug. 2020

Planning

Hankyu Tsukaguchi Station Rebuilding
Project

Amagasaki-shi, Hyogo Mar. 2022

Planning

Tokorozawa Project

Tokorozawa-shi, Saitama Feb. 2024

Planning

Saitama-shi Project

Saitama-shi, Saitama

Planning

Mar. 2020

Tomigaya 2-chome Project (former
Mitsubishi Motors Shibuya Store)

Proud Flat Miyazakidai

PROUD FLAT properties are developed on locations
optimally suited for urban rental housing selected byleveraging the Nomura Real Estate Group’s information network and know-how related to housing development and sales.
Quality control and proper operations and management are ensured using Nomura Real Estate’s proprietary rental housing complex design standards andquality control inspection guidelines.

Completion(plan) period

StatusProud Flat Higashi-Kanda

Chiyoda-ku, Tokyo

May 2015

Operating

Proud Flat Mitsukoshi-mae

Chuo-ku, Tokyo

Jul. 2015

Operating

Proud Flat Monzen Nakacho V

Koto-ku, Tokyo

Oct. 2017

Operating

Proud Flat Miyazakidai

Kawasaki-shi, Kanagawa Feb. 2018

Operating

Proud Flat Togoshi Koen

Shinagawa-ku, Tokyo

Dec. 2018

Under Construction

Proud Flat Asakusabashi II

Taito-ku, Tokyo

Mar. 2019

Under Construction

Proud Flat Higashi-Nihonbashi

Chuo-ku,Tokyo

Oct. 2018

Under Construction

Proud Flat Asakusabashi III

Taito-ku, Tokyo

Aug. 2018

Under Construction

Proud Flat Asakusa Kaminarimon

Taito-ku, Tokyo

Feb. 2019

Under Construction

Proud Flat Ryougoku

Sumida-ku, Tokyo

Sep. 2019

Under Construction

Proud Flat Tomigaya

Shibuya-ku, Tokyo

Feb. 2019

Under Construction

Kiba 5-chome Project

Koto-ku, Tokyo

Feb. 2020

Planning

Proud Flat Minami-Shinagawa
2-choume

Shinagawa-ku, Tokyo

Mar. 2019

Under Construction

Kinshicho II Project

Sumida-ku, Tokyo

Jan. 2020

Planning

Ryogoku 3-chome Project

Sumida-ku, Tokyo

Dec. 2019

Planning

Kameido 6-chome Project

Koto-ku, Tokyo

Dec. 2022

Planning

Togoshi Ginza Project

Shinagawa-ku, Tokyo

Feb. 2020

Planning

Asakusa 6-chome Project

Taito-ku,Tokyo

Jun. 2020

Planning

Other Retail Facilities

Jul. 2020

Properties developed through property replacement*1 Based on NREHD Presentation Materials for the Consolidated Financial Results for the First Quarter, FY2019. Properties sold at the end of August 2018 are excluded.
*2 Joint venture project*3 Properties listed in sponsor pipeline, excluding those listed as NMF acquired, are not planned to be acquired by NMF as of Oct. 17, 2018.

Nomura Real Estate Master Fund

20

Message from
the Management

Portfolio Gallery

ESG Initiatives

Management Strategy

Financial Strategy

Portfolio

OfficeRetailTOP 3 properties (acquisition price)

TOP 3 properties (acquisition price)1

21

TopicsNEC Head Office Building
Location: Minato Ward, Tokyo
Acquisition price: ¥44,100 million
Total floor area: 144,476.05 m2

2

Shinjuku Nomura Building
Location: Shinjuku Ward, Tokyo
Acquisition price: ¥43,900 million
Total floor area: 117,258.88 m2

3

Kojimachi Millennium
GardenLocation: Chiyoda Ward, Tokyo
Acquisition price: ¥26,700 million
Total floor area: 16,050.53 m2

1

Universal CityWalk Osaka
Location: Osaka City, Osaka
Acquisition price: ¥15,500 million
Total floor area: 86,888.64 m2

2

Yokosuka More’s City
Location: Yokosuka City, Kanagawa
Acquisition price: ¥13,640 million
Total floor area: 43,890.82 m2

Investor Information

3

Financial Section

Nakaza Cui-daore
Building
Location: Osaka City, Osaka
Acquisition price: ¥11,600 million
Total floor area: 8,280.08 m2

PMO Nihonbashi Mitsukoshi-mae

NMF Shibuya Koen-dori Building

NRE Tennozu Building

GEMS Daimon

EQUINA Ikebukuro

Kawasaki More’s

Location: Chuo Ward, Tokyo
Total floor area: 2,968.75 m2

Location: Shibuya Ward, Tokyo
Total floor area: 5,358.55 m2

Location: Shinagawa Ward, Tokyo
Total floor area: 25,260.48 m2

Location: Minato Ward, Tokyo
Total floor area: 1,387.89 m2

Location: Toshima Ward, Tokyo
Total floor area: 3,476.36 m2

Location: Kawasaki City, Kanagawa
Total floor area: 22,235.96 m2

PMO Shibakoen

Sapporo North Plaza

Omron Kyoto Center Building

GEMS Kanda

Konami Sports Club Fuchu

Summit Store Mukodaicho

Location: Minato, Tokyo
Total floor area: 1,755.21 m2

Location: Sapporo City, Hokkaido
Total floor area: 18,842.51 m2

Location: Kyoto City, Kyoto
Total floor area: 34,616.84 m2

Location: Chiyoda Ward, Tokyo
Total floor area: 1,177.49 m2

Location: Fuchu City, Tokyo
Total floor area: 12,214.97 m2

Location: Nishi-Tokyo City, Tokyo
Total floor area: 10,659.55 m2

Nomura Real Estate Master Fund

NEW

NEW

Nomura Real Estate Master Fund

22

Message from
the Management

Portfolio Gallery

ESG Initiatives

Management Strategy

Financial Strategy

Portfolio

Logistics

Residential

TOP 3 properties (acquisition price)

TOP 3 properties (acquisition price)1

Landport Urayasu
Location: Urayasu City, Chiba
Acquisition price: ¥17,400 million
Total floor area: 71,570.64 m2

Location: Hachioji City, Tokyo
Total floor area: 33,028.63 m2

2

Landport Itabashi
Location: Itabashi Ward, Tokyo
Acquisition price: ¥15,710 million
Total floor area: 53,561.44 m2

Landport Iwatsuki

Landport Hachioji

23

TopicsNEW

Saitama City, Saitama
Total floor area: 24,177.15 m2

NEW3

Landport Kawagoe
Location: Kawagoe City, Saitama
Acquisition price: ¥13,700 million
Total floor area: 72,352.88 m2

1

Fukasawa House
Towers H&I
Location: Setagaya Ward, Tokyo
Acquisition price: ¥7,140 million
Total floor area: 12,135.36 m2

2

PRIME URBAN Toyosu
Location: Koto Ward, Tokyo
Acquisition price: ¥5,290 million
Total floor area: 9,630.96 m2

Landport Kashiwa Shonan II

PROUD FLAT Sangen Jaya II

PROUD FLAT Soto Kanda

Location: Kashiwa, Chiba
Total floor area: 51,485.62 m2

Location: Setagaya Ward, Tokyo
Total floor area: 3,522.92 m2

Location: Chiyoda Ward, Tokyo
Total floor area: 2,882.48 m2

NEW

Landport Kasukabe

Kawaguchi Ryoke Logistics Center

Atsugi Minami Logistics Center B Tower

PROUD FLAT Yoyogi Hachiman

PROUD FLAT Nakaochiai

Location: Kasukabe, Saitama
Total floor area: 29,553.64 m2

Location: Kawaguchi City, Saitama
Total floor area: 41,867.82 m2

Atsugi City, Kanagawa
Total floor area: 24,929.27 m2

Location: Shibuya Ward, Tokyo
Total floor area: 1,081.03 m2

Location: Shinjuku Ward, Tokyo
Total floor area: 1,333.42 m2

Nomura Real Estate Master Fund

NEW

Investor Information

3

Financial Section

PRIME URBAN Sapporo
Riverfront
Location: Sapporo City, Hokkaido
Acquisition price: ¥4,480 million
Total floor area: 21,239.84 m2

PROUD FLAT Noborito
NEW

Location: Kawasaki City, Kanagawa
Total floor area: 2,000.91 m2

NEW

PRIME URBAN Nihonbashi Yokoyamacho
NEW

Location: Chuo Ward, Tokyo
Total floor area: 6,898.33 m2

Nomura Real Estate Master Fund24

Message from
the Management

Investor Information

TopicsDistribution Policy
Basic Distribution Policy
Distribute net earnings+ amortization of goodwill

ESG Initiatives

Management Strategy

Financial Strategy

Results of Our Unitholder Survey
Distribution Policy for Periods with Gain on Sales
To ensure stable distributions over the medium and long term,by adjusting distributions in excess of net income, a cash
amount equivalent to gain on sales may be designated asretained earnings.
10
Gain onsales

10

Retain10

Net
incomeNet
incomeDistributions inexcess of net
incomeDistributionsof net income

Goodwill
amortization
Gain onsales

Netincome,less gainon salesRetained earnings
equivalent to gain on
sales

Total
distributions

Net income(as on statementof income)

9.1%

40s 6.9%

Male

Female
23.4%

3,085

30s 2.7%

Under 30 0.9%

76.6%

50s 11.1%
70 or older
53.4%

Age

Distributions in excess
of net income

60s

Net
income,less gainon sales

80

10

80

Gain on sales is
distributed, anddistributions in excess
of net income areadjusted accordinglyLess than 1 year 5.4%
1–3 years
16.8%

3 or more years
77.8%

Total
distributions

Already sold all 0.7%

Plan to sell some 1.7%

Undecided 5.7%

Plan to buy more 1.7%
Own short term(less than 1 year)
1.2%
Own long term
(1 or more years)
14.6%

Ownership
periodNet income(as on statementof income)

33,731

Response
rate

25.0%

Gain onsales

Netincome,less gainon salesUnitholders Responses

20

10

80

Financial Section

Respondent Demographics

We conducted a survey with the release of our Semi-Annual Report for the 5th
Fiscal Period, ended February 28, 2018. Thank you for your cooperation. Going forward, NMF will use the valuable opinions and ideas collected in its operations andIR activities. A portion of the survey results are presented below.

GenderGoodwill
amortization

Investor Information

Portfolio

Own long term
(5 or more years total)
74.4%

Future planfor units

Distribution
breakdown* Numbers shown above are for illustrative purposes only.

77.8% answered 3 or more years

Distributions in Excess of Net Earnings in the 6th Fiscal Period (Millions of yen)
Distributions of allowance for temporary

Other distributions inexcess of net
earnings (Income tax
not withheld)

difference adjustment
Other distributions in excess of net earnings

Amount equivalent
to goodwill
amortization
expenses

2,622

Distributions inexcess of net income-1,298

1,296

2,622

¥2,622 million

1,324¥1,296 million

Q.1 Why did you purchase NMF units?
57.6%

43.5%
37.6%

1,322

30.6%

Total distributions

10,709¥12,031 million

Yield

Stability of
distributions

The NREGroup’smanagement

I look forward to longterm stable growth
owing to the NREGroup’s capability.
Net income(as on statementof income)Distribution
policy* Figures in the bar graph disregard amounts less than ¥1 per unit.

25

Nomura Real Estate Master Fund

Goodwill
amortization

Allowance fortemporarydifference
adjustment

22.2%
18.0%

Distributions of net
earnings, etc.
(Income tax withheld)¥13,328 million

26.8%

31.5%

Lack of depreciation attributable
to the difference between
accounting and tax treatment

10,709ahead, what do you expect from
Q.2 Looking
NMF’s management?

54.8%

32.0%

Net income, excluding
10,709gain on sales

74.4% answered own long term (5 or more years total)

Distributions inexcess of net
income(Breakdown)*

Anticipationof priceincrease

Suggestion by
a securities
company

Stable management ofowned assets

Stablefinancialmanagement

Expansion in
asset scale

Acquisitionof NREdeveloped
properties

Acquisition ofproperties in
new sectors

I look forward to stable
distributions and stable
management over the
medium to long term.

Going forward, we will continue working to improve unitholder value through the assurance of stableearnings over the medium to long term and the steady growth of assets under management.
Nomura Real Estate Master Fund

26

Message from
the Management

Investor Information

ESG Initiatives

Management Strategy

Financial Strategy

Investor Information

Portfolio

Financial Section

Investor Information

Structure and Organization

Changes in Investment Unit Price

Structure of NMF
Specified Related Party

Investment Corporation

Parent Company of theAsset Management Company

Nomura Real Estate
Master Fund, Inc.

Nomura Real Estate Development Co., Ltd.
Nomura Real Estate Holdings, Inc.

Custodian
Sumitomo Mitsui Trust Bank, Ltd.

Asset
Custody
Agreement

Mitsubishi UFJ Trust andBanking Corporation

Asset
Management
Agreement

Information Provision
Agreement

Leasing Value Chain

Board of Directors

Nomura Real Estate
Development Co., Ltd.
Nomura Real Estate Partners Co., Ltd.
GEO AKAMATSU CO., LTD.

Executive Director

Basic Agreement with respect toLeasing Value Chain

Information Provider
Nomura Real Estate Development Co., Ltd.

Transfer Agency Agreement,
General Administration Agreement
Agreement on Special Account Management

Unitholders’ Meeting

General Administrator(Financial Agent)
MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation
Nomura Securities Co., Ltd.
Mizuho Securities Co., Ltd.

Shuhei Yoshida
Supervisory Directors
Mineo Uchiyama
Koichi Owada
AuditorErnst & Young ShinNihon LLC

The baseline set is at NMF’s Tokyo Stock Exchange (TSE) closing price on October 2, 2015. Changes in NMF’s
investment unit price, the TSE REIT index, and net sales for the period between October 2, 2015 (IPO date), andAugust 31, 2018 (last day of trading for the 6th FP), are as below.
(%)

General Administrator(Institutional Administration/
Accounting)Transfer Agent andSpecial Account Administrator

Asset Management Company
Nomura Real Estate
Asset Management Co., Ltd.

TopicsFinancial Agent Agreement (related to Former NMF’s 1st series
bonds, NOF’s 7th series bonds, NOF’s 10th series bonds,
NMF’s 2nd series bonds and NMF’s 3rd series bonds) / Principal
Payment Entrustment Agreement (NOF’s 2nd series bonds) /Registration Entrustment Agreement (NOF’s 2nd series bonds) /Investment Corporation Bond Management Agreement (related to
NOF’s 2nd series bonds)

General administrator of investment
corporation bonds
General Administrator (Short-Term
Investment Corporation Bonds)

Investment Corporation BondManagement Agreement (related to
NOF’s 2nd series bonds)
Agreement on Entrustment of Issuance, Redemption andSettlement of Short-Term Investment Corporation Bonds /Private Placement Handling Agreement

MUFG Bank, Ltd.

Organization of NREAMTSE REIT Index (left axis)

Changes in NMF Investment Unit Price (left axis)

120■ Net Sales (right axis)(Units)180,000

100

150,000

80

120,000

60

90,00040

60,00020

30,000

0

0
2015
2016
2017
2018
10/2 11/2 12/1 1/4 2/1 3/1 4/1 5/2 6/1 7/1 8/1 9/1 10/3 11/1 12/1 1/4 2/1 3/1 4/1 5/2 6/1 7/1 8/1 9/1 10/3 11/1 12/1 1/4 2/1 3/1 4/1 5/2 6/1 7/1 8/1

Composition of Unitholders
Foreign Corporations
Financial Institutions
517 1.5%(including financial
Other Domestic
Individuals and Others
instrument businesses)
Corporations
348,147 8.1%
203 0.6%
521 1.6%
Other Domestic Corporations
334,089 7.7%

Financial Institutions(including financial
instrument businesses)
2,398,779 55.5%

General Meeting of Shareholders

Unitholder
composition
Total

Investment Committee
Statutory Auditors

Board of Directors

Compliance Committee

President & CEO

Risk Management Committee

Number ofinvestment units
Total

33,401

4,321,800

NPR Valuation Committee
Project Screening Committee
Corporate Planning

Chief Strategy Officer

International Business Planning

Product Development

Legal & Compliance

Research & Analysis

Internal Audit

Acquisitions

Finance & Accounting

Investment Management Planning

Client Relations & Marketing
Investment Management

Foreign Corporations
1,240,785 28.7%

Individuals and Others
32,160 96.3%

NMF Investment Management Group
Fund Management
Asset Management I

IR Calendar

January

End ofFebruary

Fiscal period
end

Mid-April

February

March

April

Announcement offinancial results
May

June

July

Mid-May

Commencement of payment of distributions
Release of Asset Management Report

End of AugustFiscal period
end

Mid-October

Announcement offinancial results

AugustSeptember

OctoberNovember

December

Mid-November

Commencement of payment of distributions
Release of Asset Management Report

Asset Management II
NPR Investment Management27

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

28

Message from
the Management

Investor Information

TopicsESG Initiatives

Management Strategy

Financial Strategy

Unitholder Information

Portfolio

Investor Information

Financial Section

WEBSITENMF strives to ensure accurate, timely disclosure through its website. For convenience, the website

Unitholder Information

also offers a variety of other information, including the following.

The process for changing your address and other information
To change your address, name, seal, or other information, please contact the securities firm where your account
was established.
Distributions
Stockholders can collect distributions at a Japan Post Bank or post office. If the receipt date has passed, pleaserefer to instructions on the back of the distribution receipt and either send it to the Corporate Agency Division of
Mitsubishi UFJ Trust and Banking Corporation or present it at the counter of one of the bank’s branches. In addition, regarding distributions going forward, if you wish distributions to be paid in the form of bank deposits orother, please contact your securities firm.

An overview of NMF and its features; information about the Asset Management Company
A portfolio summary; property overviews (with photos, maps, etc.); occupancy rate data
Press releases, disclosure materials, and information on distributions and financial results
We will continue to enhance the website’s content and use it to provide timely information.

https://www.nre-mf.co.jp/en/

Nomura Master Fund

Important Reminders for Unitholders
Closing dates

The last days of February and August of every year

General Meeting of Unitholders

At least once every two years in principle

Unitholder record date forvoting eligibility

A day announced in advanceDistribution payment
record dates

The last days of February and August of every year

Stock exchange listings

Tokyo Securities Exchange (securities code: 3462)

Newspaper for announcements

Nihon Keizai Shimbun

Share transfer agent

Mitsubishi UFJ Trust and Banking Corporation

Contact information forthe share transfer agent

Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corporation
1-1, Nikko-cho, Fuchu, Tokyo, Japan TEL. 0120-232-711 (toll free)
Mailing address: P.O. Box #29 Shin-Tokyo Post Office, Tokyo, Japan 137-8081
Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corporation

The site has overviews of owned properties, maps,
occupancy rate data, and more.

The latest news is aggregated on thehome page.
(An RSS feed is available.)

IR Highlights●J oined events for individual investors called “J-REIT Nationwide Caravan”
sponsored by ARES
● Joined seminars for individual investors sponsored by securities companies● Joined “Morningstar J-REIT Seminar for Individual Investors”● Held property tours for investors (PMOs in Tokyo, Shinjuku Nomura Building, etc.)●C onducted reporting for overseas investors in: Hong Kong, Singapore,
Switzerland, the Netherlands, the United Kingdom, and the United States

29

Nomura Real Estate Master Fund

Excel files with detailed data are available for download.

Nomura Real Estate Master Fund

30

Message from
the Management

Financial Section

TopicsESG Initiatives

Management Strategy

Financial Strategy

Portfolio

Investor Information

Financial Section

Balance Sheet
Thousands of Yen

As of August 31, 2018ASSETS

Rental receivables
Income taxes receivable
Consumption taxes receivable
Other current assets
Total current assets

As of August 31, 2018

As of February 28, 2018¥    2,558,715¥    2,223,178

LIABILITIESCurrent Assets:
Cash and bank deposits

Thousands of Yen

As of February 28, 2018

Current Liabilities:¥   74,556,830¥   76,536,938

719,156

556,648—

54

Current portion of long-term debt
Lease obligations

206,657—

1,280,252

973,71576,762,897

78,067,357

Trade accounts payable
Short-term debt

Other accounts payable
Accrued expenses
Accrued income taxes

Property and Equipment:

Accrued consumption taxes

500,000—

63,160,600

58,315,600

2,728

3,797

2,370,672

2,437,546

322,498

291,069

2,120

605

—

223,118

5,069,434

4,896,718
263,512Land

654,095,186

629,702,459

Rent received in advance

Buildings and structures

314,219,167

301,548,314

Unearned revenue

228,281

Machinery and equipment

1,080,099

904,607

Provision for loss on disaster

17,922—Tools, furniture and fixtures

837,179

569,889

Derivatives liabilities

62,64349,325

Leased assets

10,107

23,900

Other current liabilities

7,603

46,66874,303,221

68,751,140

Investment corporation bonds

22,000,000

20,500,000

Long-term debt

411,495,000

407,382,800

Construction in progress  Subtotal
Less accumulated depreciation
Net property and equipment

7,228

98,999970,248,969

932,848,171(31,759,037)(26,882,795)

938,489,931

905,965,376

Investments and Other Assets:

Total current liabilities
Long-term Liabilities:

Lease obligations

227

1,591

Goodwill

90,831,465

93,453,708

Long-term advanced received

346,546

449,677

Leasehold rights

8,959,693

8,960,079

Security deposits from tenants

37,844,909

36,525,325

Intangible assets

45,95049,156

Derivative liabilities

818,237

1,118,774

1,908,481

1,725,575

Total long-term liabilities

472,504,921

465,978,169

Long-term deposits

527,786

537,247

Security deposits

946,367

945,963

Total Liabilities

546,808,142

534,729,310

Derivatives Assets

109,11074,639Deferred investment corporation bond issuance costs

63,15940,964

103,392,015

105,787,336¥1,118,644,844¥1,089,820,070

181,730,086

162,791,125

394,012,959

394,012,959(7,878,667)(7,169,175)

Long-term prepaid expenses

Total investments and other assets
Total Assets
The accompanying notes to financial statements are an integral part of these statements.

NET ASSETS
Unitholders’ Equity:
Unitholders’ capital
Surplus  Capital surplus   Allowance for temporary difference adjustment   Other deductions from capital surplus(7,060,439)(6,000,467)   Total deductions from capital surplus(14,939,107)(13,169,643)   Net capital surplus

379,073,851

380,843,315  Retained earnings

11,804,535

12,549,780  Total surplus

390,878,386

393,393,095

Total unitholders’ equity

572,608,472

556,184,220

Deferred gains or losses on hedges(771,769)(1,093,460)

Total valuation and translation adjustments(771,769)(1,093,460)

571,836,702

555,090,759¥1,118,644,844¥1,089,820,070

Valuation and Translation Adjustments:

Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these statements.

31

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

32

Message from
the Management

Financial Section

TopicsStatement of Income and Retained Earnings

Management Strategy

Financial Strategy

For the period from March 1, 2018 to August 31, 2018
Thousands of Yen

For the period
from September 1, 2017
to February 28, 2018

Unitholders’ Equity
SurplusCapital surplus
Deductions from capital surplus

OPERATING REVENUES AND EXPENSES
Operating Revenues:
Real estate rental revenues¥34,731,869¥33,631,626

Gain on sales of real estate—

587,249

34,731,869

34,218,876

Real estate rental expenses

15,158,332

14,785,472

Asset management fees

3,074,928

3,007,249

Operating Expenses:

Asset custody fees

55,871

56,139Administrative service fees

165,937

154,619

Amortization of goodwill

2,622,242

2,622,242

Other operating expenses
Operating Income

368,580

380,816

21,445,892

21,006,539

13,285,976

13,212,336

NON-OPERATING REVENUES AND EXPENSES

571

635

5,198

11,437

Interest on refund

132—

Other non-operating revenues

103

19

6,006

12,092

Reversal of dividends payable

1,908,070

1,873,772

182,048

187,113

2,951

2,147

Loan arrangement fees

418,730

396,804

Investment units issuance expenses

19,231

42,462Other non-operating expenses

5,319

6,862

2,536,351

2,509,162

Interest expenses on investment corporation bonds
Amortization of investment corporation bonds issuance costs  Ordinary Income

10,755,631

10,715,266

Extraordinary Losses:
Loss on disaster   Income before Income Taxes

43,651—

43,651—

10,711,980

10,715,266

605

2,175

605

  Net Income

10,709,804

10,714,661   Retained earnings brought forward

1,094,730

1,835,119   Retained Earnings at End of Period

CapitalSurplus4,183,130
138,670¥162,791,125
18,460,443¥394,012,959—¥(7,169,175)—¥(6,000,467)—¥(13,169,643)—¥380,843,315
—

—

—

—

—

—

—

—

—

478,516—

478,516(478,516)

—

—

—

—

—

(1,188,008)—(1,188,008)(1,188,008)

—
—

—
—

—
—

—
—

(581,455)—(581,455)—(581,455)——
4,321,800—¥181,730,086—¥394,012,959—¥(7,878,667)—¥(7,060,439)—¥(14,939,107)—¥379,073,851

Unitholders’ Equity
SurplusRetained earnings

Net capital surplus

Balance as of March 1, 2018
Issuance of new investment units Distributions of retained
earnings Distributions in excess of net earnings from allowance for temporary
difference adjustments Other distributions in excess of
net earnings Net income Net changes of items other thanunitholoders’ equity
Balance as of August 31, 2018

Valuation and Translation
Adjustments
Deferred Gains
Total Valuationor Losses on
and Translation
HedgesAdjustments

Total
Net Assets

Total surplus

Total unitholders’ equity¥12,549,780—¥393,393,095—¥556,184,220
18,460,443¥(1,093,460)—¥(1,093,460)—¥555,090,759
18,460,443(10,976,533)(10,976,533)(10,976,533)——(10,976,533)(478,516)(478,516)

—

—

—

—

—

(1,188,008)(1,188,008)——(1,188,008)—
10,709,804(581,455)
10,709,804(581,455)
10,709,804

—
—

—
—

(581,455)
10,709,804—¥11,804,535—¥390,878,386—¥572,608,472

321,691¥  (771,769)

321,691¥  (771,769)

321,691¥571,836,702

For the period from September 1, 2017 to February 28, 2018
Thousands of Yen
Unitholders’ Equity
SurplusCapital surplus
Deductions from capital surplus

Balance as of September 1, 2017
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Distributions in excess of net earnings from allowance for temporary
difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of February 28, 2018

Allowance fortemporary difference Other deductions from Total deduction fromadjustment
capital surplus
capital surplus

Units

Unitholders’CapitalCapitalSurplus4,183,130—¥162,592,573—¥394,012,959—¥(7,367,727)—¥(5,801,916)—¥(13,169,643)—¥380,843,315——

198,551—

198,551(198,551)

—

—

—

—

—

—

—

—

—

—
—

—
—

—
—

—
—

—
—

—
—

—
—

—
4,183,130—¥162,791,125—¥394,012,959—¥(7,169,175)—¥(6,000,467)—¥(13,169,643)—¥380,843,315¥11,804,535¥12,549,780

Net capital surplus

Thousands of Yen
Unitholders’ Equity
Surplus2,175

The accompanying notes to financial statements are an integral part of these statements.

Unitholders’CapitalThousands of Yen

Income Taxes:  Current

Allowance fortemporary difference Other deductions from Total deduction fromadjustment
capital surplus
capital surplus

Units

The accompanying notes to financial statements are an integral part of these statements.

Non-Operating Expenses:
Interest expense

Balance as of March 1, 2018
Issuance of new investment units Distributions of retained
earnings Reversal of allowance fortemporary difference adjustments Distributions in excess of net earnings from allowance for temporary
difference adjustments Other distributions in excess of
net earnings Net income Net changes of items other thanunitholoders’ equity
Balance as of August 31, 2018

 Reversal of allowance fortemporary difference adjustments

Non-Operating Revenues:
Interest income

Financial Section

Investor Information

PortfolioStatement of Changes in Net Assets
Thousands of Yen

For the period
from March 1, 2018
to August 31, 2018

ESG Initiatives

Retained earnings

Balance as of September 1, 2017
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Distributions in excess of net earnings from allowance for temporary
difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of February 28, 2018

Valuation and Translation
Adjustments
Deferred Gains
Total Valuationor Losses on
and Translation
HedgesAdjustments

Total
Net Assets

Total surplus

Total unitholders’ equity¥14,737,836(12,704,165)¥395,581,151(12,704,165)¥558,173,725(12,704,165)¥(1,524,682)—¥(1,524,682)—¥556,649,043(12,704,165)(198,551)(198,551)

—

—

—

—

—

—

—

—

—

—

—
10,714,661—
10,714,661—
10,714,661

—
—

—
—

—
10,714,661—¥12,549,780—¥393,393,095—¥556,184,220

431,221¥(1,093,460)

431,221¥(1,093,460)

431,221¥555,090,759

The accompanying notes to financial statements are an integral part of these statements.

33

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

34

Message from
the Management

Financial Section

Statement of Cash Flows
Thousands of Yen

For the period
from September 1, 2017
to February 28, 2018

CASH FLOWSCash Flows from Operating Activities
Income before income taxes
Depreciation
Amortization of goodwill
Investment units issuance expenses
Amortization of investment corporation bonds issuance costs
Increase (Decrease) in provision for loss on disaster
Interest income
Interest expense
Loss on disposal of property and equipment
Decrease (Increase) in rental receivables
Decrease (Increase) in long-term prepaid expenses
Decrease (Increase) in long-term deposits
Increase (Decrease) in trade accounts payable
Increase (Decrease) in other accounts payable
Decrease (Increase) in consumption taxes receivables
Increase (Decrease) in accrued consumption taxes
Increase (Decrease) in accrued expenses
Increase (Decrease) in rent received in advance
Decrease in property and equipment in trust due to sales
Decrease in intangible assets in trust due to sales
Other  Subtotal
Interest received
Interest paid
Income taxes paid   Net cash provided by (used in) operating activities¥10,711,980
4,904,202
2,622,242
19,231
2,951
17,922(571)
2,090,118
11,491(162,508)(182,905)
9,460
335,536(5,783)(206,657)(223,118)(830)
172,716——(348,376)
19,767,104571(2,196,550)(605)
17,570,519¥10,715,266
4,738,059
2,622,242
42,462
2,147
—
(635)
2,060,886
6,256
226,256(32,959)
28,771(855,186)
318—(1,004,447)
839,836(45,530)
22,433,392
1,828
59,387
41,838,353
635(2,264,760)(603)
39,573,624

Cash Flows from Investing Activities
Payments for purchases of property and equipment
Payments for purchases of leasehold rights and intangible assets
Reimbursement of security deposits to tenants
Proceeds from security deposits from tenants
Payments of security deposits
Proceeds from security deposits   Net cash provided by (used in) investing activities(37,442,038)(6,913)(867,342)
2,186,960(648)
210(36,129,771)(18,540,240)(397,311)(1,599,527)
1,553,905(210)—(18,983,384)

2,500,000(2,000,000)
38,855,000(29,897,800)
1,500,000—(25,147)
18,460,443(61,693)(10,982,284)——
24,320,000(24,862,800)
2,000,000(4,000,000)(23,444)——(12,712,708)(1,188,092)(581,282)
16,579,143(1,108)(915)(15,280,976)(1,980,108)
76,536,938¥74,556,830

5,309,263
71,227,675¥76,536,938

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period

ESG Initiatives

Management Strategy

Financial Strategy

Portfolio

Investor Information

Financial Section

Notes to Financial Statements
For the period
from March 1, 2018
to August 31, 2018

Cash Flows from Financing Activities
Proceeds from short-term debt
Repayments of short-term debt
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of investment corporation bonds
Redemption of investment corporation bonds
Payments of investment corporation bonds issuance costs
Proceeds from issuance of investment units
Payment of investment units issuance expenses
Distributions to unitholders Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
Net cash provided by (used in) financing activities

Topics

1. ORGANIZATION
Nomura Real Estate Master Fund, Inc. (NMF) is a real estate investment corporation formed to own and invest primarily in logistics facilities,
retail facilities, offices and residential facilities. NMF is externally managed by a licensed asset management company, Nomura Real Estate AssetManagement Co., Ltd. (“NREAM”). NREAM is a wholly-owned subsidiary of Nomura Real Estate Holdings, Inc. NMF was established on
October 1, 2015 through the consolidation type merger involving the former Nomura Real Estate Master Fund, Inc. (hereinafter the “former NMF”),
Nomura Real Estate Office Fund, Inc. (hereinafter “NOF”) and Nomura Real Estate Residential Fund, Inc. (hereinafter “NRF”), and listed its
investment securities (TSE code: 3462) on the Real Estate Investment Trust Section of the Tokyo Stock Exchange on October 2 of the same year.
NMF adopts the basic policy of investing primarily in real estate and other assets to secure stable income and steady growth of assets undermanagement over the medium to long term. In order to realize this basic policy, NMF adopts an investment strategy that centers on the Greater
Tokyo area (Tokyo, Kanagawa, Chiba and Saitama prefectures), which has strong tenant demand, while also considering regional diversification
through the three major metropolitan areas and cabinet-order designated cities, etc. By combining the “diversified type strategy” in whichinvestments are made in facilities of a variety of sectors such as logistics facilities, retail facilities, offices and residential facilities with the“large-scale REIT strategy”, which pursues the effects of diversifying properties and tenants, to make the portfolio more stable as well as withthe utilization of the “leasing value chain” with the Nomura Real Estate Group, the sponsor, NMF will aim to increase unitholder value by
securing stable income and steady growth of assets under management over the medium to long term.

2. BASIS OF PRESENTATION
NMF maintains its accounting records and prepares its financial statements in accordance with accounting principles generally accepted in Japan(“Japanese GAAP”), including provisions set forth in the Investment Trust Act of Japan, the Companies Act of Japan, the Financial Instruments
and Exchange Act of Japan and related regulations, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
The accompanying financial statements are a translation of the audited financial statements of NMF, which were prepared in accordance withJapanese GAAP and were presented in NMF’s Securities Report filed with the Kanto Local Finance Bureau. In preparing the accompanying
financial statements, certain reclassifications and modifications have been made to the financial statements issued domestically in order topresent them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain informationthat might not be required under Japanese GAAP but is presented herein as additional information. Amounts have been rounded to the nearest
thousand yen in the accompanying financial statements and the notes thereto, whereas amounts were truncated in the Japanese financial
statements prepared in accordance with Japanese GAAP.
NMF’s fiscal period is a six-month period which ends at the end of February or August. NMF does not prepare consolidated financial statements
because it has no subsidiaries.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESCash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits placed with banks and short-term investments that are highly liquid, readily
convertible to cash, with an insignificant risk of market value fluctuation, and with a maturity of three months or less when purchased.

Property and equipment
Property and equipment are stated at cost, which includes the purchase price and related costs for acquisition, less accumulated depreciation.
Depreciation is calculated by the straight-line method over the estimated useful lives of the fixed assets outlined below:
Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

3 - 70 years
2 - 45 years
2 - 15 years
2 - 20 years

Intangible assets
Intangible assets are amortized by the straight-line method.
Goodwill is amortized using the straight-line method over 20 years.

Long-term prepaid expenses
Long-term prepaid expenses are amortized by the straight-line method.

The accompanying notes to financial statements are an integral part of these statements.

35

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund36

Financial Section

Message from
the Management

TopicsESG Initiatives

Management Strategy

Financial Strategy

Financial Section

Investor Information

Portfolio

Impairment of fixed assets

4. CASH AND CASH EQUIVALENTS

NMF reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying value of its fixed assets may
not be recoverable. An impairment loss is recognized if the carrying value of an asset exceeds the aggregate estimated future cash flows. If a
fixed asset is determined to be impaired, it is written down to its recoverable amount and the write-down is recorded as an impairment loss
during the period in which it occurs.

Cash and cash equivalents as of August 31, 2018 and February 28, 2018 consist of the following:

Deferred investment corporation bond issuance costs

Thousands of Yen
As of August 31, 2018

As of February 28, 2018

Cash and bank deposits¥74,556,830¥76,536,938

Cash and cash equivalents¥74,556,830¥76,536,938

Deferred investment corporation bond issuance costs are amortized by the straight-line method over the respective terms of the bonds.

Investment units issuance expenses
The entire amount is expensed as incurred.

Allowance for doubtful accounts

Important contents of the non-cash transactions:Not applicable.

5. ASSETS PLEDGED AS COLLATERAL AND SECURED LIABILITIES(1) For allowance for doubtful accounts against possible losses arising from default on receivables, the uncollectable amount is estimated andrecorded by investigating collectability based on historical loan loss ratios for general receivables and on a case-by-case examination for doubtful
and other specific receivables.

The assets pledged as collateral are as follows:(2) Provision for loss on disaster
Provision for loss on disaster is recorded at the amount estimated as of August 31, 2018 to provide for possible repair and recovery costs arisingfrom the 2018 Northern Osaka Earthquake.

Accounting treatment of beneficial interests in real estate
All assets and liabilities held in trust, for which the real estate in possession of NMF was entrusted, and all related earnings and expenses
incurred are reflected in the accompanying balance sheet and statement of income and retained earnings, respectively.

Thousands of Yen
As of August 31, 2018

As of February 28, 2018

Buildings in trust¥3,294,755¥3,327,532

Land in trust

6,096,368

6,096,368

Tools, furniture and fixtures in trust  Total

185

206¥9,391,308¥9,424,106

As of August 31, 2018

As of February 28, 2018

The secured liabilities are as follows:
Thousands of Yen

Revenue recognition
Operating revenues consist of rental revenues including base rents and common area charges, and other operating revenues including utility
charge reimbursements, parking space rental revenues and other income. Rental revenues are generally recognized on an accrual basis over thelife of each lease. Utility charge reimbursements are recognized when earned and their amounts are reasonably estimated.

Tenant leasehold and security deposits in trust¥726,648¥726,648  Total¥726,648¥726,648

Property related taxes

6. SCHEDULE OF PROPERTY AND EQUIPMENT

Property in Japan is subject to property taxes, urban planning taxes and depreciable property taxes on a calendar year basis. The taxes related toproperty are generally imposed based on the value of the relevant property and incurred for the fiscal period. The seller of a property is liable forproperty related taxes for the period from the purchase date through the end of that calendar year because taxes are imposed on the ownerregistered in the record as of January 1 for the entire year based on the assessment made by the local government. The amount applicable tothe buyer of a property is usually settled between each party and capitalized as part of the acquisition cost of the property. The capitalized
property related taxes amounted to ¥12,466 thousand for the fiscal period ended February 28, 2018, and ¥116,332 thousand for the fiscal period
ended August 31, 2018.

Property and equipment as of August 31, 2018 and February 28, 2018 consist of the following:

Income taxes

Machinery and equipment

Deferred tax assets and liabilities are computed based on the differences between the financial statements and income tax bases of assets andliabilities using the applicable statutory tax rates.

Accumulated depreciation(363,337)

Tools, furniture and fixtures

237,337

Consumption taxes(56,101)

181,235(37,880)

152,619

Land in trust

406,677,823

406,677,823

406,677,823

406,677,823

Consumption taxes received and paid are not included in the accompanying statement of income and retained earnings.

Buildings and structures in trust

182,090,345

Accumulated depreciation(20,673,871)

Derivative financial instruments
NMF utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure to changes in interest
rates. NMF defers recognition of gains or losses resulting from changes in the fair value of interest rate swap contracts which meet the criteria
for deferral hedge accounting.
Although deferral hedge accounting is generally applied, NMF applies the special treatment to those interest-rate swap contracts that meet thecriteria for such special treatment. Under the special treatment, interest-rate swaps are not remeasured at fair value; instead, the net amount
paid or received under the interest rate swap contract is recognized and included in interest expense or income.

Thousands of Yen
As of August 31, 2018
Acquisition costs

Book value

Acquisition costs

Book valueLand¥247,417,363¥247,417,363¥223,024,636¥223,024,636

Buildings and structures

132,128,821

Accumulated depreciation

Accumulated depreciation

Machinery and equipment in trust
Accumulated depreciation
Tools, furniture and fixtures in trust
Accumulated depreciation
Lease assets in trust
Accumulated depreciation
Construction in progress  Total37

Nomura Real Estate Master FundAs of February 28, 2018(10,463,686)

121,861,493
121,665,135

650,784
287,446(298,650)

321,391

190,500

179,686,820
161,416,473(17,892,398)

161,794,421

284,564
375,871599,842(141,226)

113,367,230

620,042429,315(53,443)(8,494,263)(36,334)

248,230

379,389458,615

10,107(104,417)

274,972

23,900(7,369)2,737(18,850)

5,050

7,228

7,228

98,99998,999¥938,489,931¥938,489,931¥905,965,376¥905,965,376

Nomura Real Estate Master Fund

38

Message from
the Management

Financial Section

Topics

7. SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT

Financial Strategy

Long-term debt as of August 31, 2018 and February 28, 2018 consist of the following:

As of February 28, 2018

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Financial Section

Investor Information

Portfolio

Amount(Thousands of Yen)

As of August 31, 2018
Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

As of February 28, 2018

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)¥   500,000

0.45545%——

Unsecured loans from banks due on March 29, 2019——

¥ 4,500,000

0.81625%

Unsecured loans from banks due on March 27, 2018——

¥ 4,670,000

0.65545%

Unsecured loans from banks due on March 29, 2019——

4,000,000

0.89635%

Unsecured loans from a bank due on March 27, 2018——

2,355,000

1.08448%

Unsecured loans from banks due on May 27, 2019——

9,000,000

1.11750%

Unsecured loans from banks due on April 27, 2018——

1,230,000

0.65545%

Unsecured loans from a bank due on May 27, 2019——

1,000,000

1.04875%

Unsecured loans from banks due on May 28, 2018——12,200,000

0.86250%

Unsecured loans from a bank due on May 27, 2019——

1,100,000

0.69894%

Unsecured loans from a bank due on June 26, 2018——

2,000,000

1.09000%

Unsecured loans from banks due on August 26, 2019——

5,700,000

1.25200%

Unsecured loans from a bank due on August 27, 2018——

2,000,000

1.03500%

Unsecured loans from a bank due on August 26, 2019——

2,200,000

1.22000%

Unsecured loans from banks due on August 27, 2018——

5,400,000

0.99000%

Unsecured loans from banks due on August 26, 2019——2,500,000

1.27625%

Unsecured loans from banks due on November 26, 2018

2,000,000

0.93600%

2,000,000

0.93600%

Unsecured loans from banks due on August 26, 2019——

4,700,000

0.81080%

Unsecured loans from banks due on November 26, 2018

4,000,000

0.72500%

4,000,000

0.72500%

Unsecured loans from banks due on October 28, 2019

¥ 3,000,000

0.22545%

3,000,000

0.22545%

Unsecured loans from banks due on November 26, 2018

3,000,000

0.77650%

3,000,000

0.77650%

Unsecured loans from banks due on October 28, 2019

4,000,000

0.19545%

4,000,000

0.19545%

Unsecured loans from a bank due on November 26, 2018

1,000,000

0.48250%

1,000,000

0.48250%

Unsecured loans from banks due on November 26, 20191,600,000

1.16500%

1,600,000

1.16500%

Unsecured loans from banks due on November 26, 2018

1,700,000

0.50250%

1,700,000

0.50250%

Unsecured loans from banks due on November 26, 2019

4,000,000

0.72650%

4,000,000

0.72650%

Unsecured loans from banks due on December 26, 2018

6,375,000

0.16545%

6,375,000

0.16545%

Unsecured loans from banks due on November 26, 20195,600,000

0.54065%

5,600,000

0.54065%

Unsecured loans from banks due on February 26, 2019

3,000,000

1.44450%

3,000,000

1.44450%

Unsecured loans from banks due on November 26, 2019

3,450,000

0.37420%

3,450,000

0.37420%

Unsecured loans from a bank due on February 26, 2019

2,000,000

0.90759%

2,000,000

0.90759%

Unsecured loans from banks due on February 26, 2020

5,750,000

1.01150%

5,750,000

1.01150%

Unsecured loans from banks due on February 26, 2019

5,300,000

0.87695%

5,300,000

0.87695%

Unsecured loans from banks due on February 26, 2020

2,500,000

0.64685%

2,500,000

0.64685%

Unsecured loans from banks due on March 29, 2019

4,500,000

0.81625%——

Unsecured loans from banks due on May 26, 2020

10,000,000

1.33750%

10,000,000

1.33750%

Unsecured loans from banks due on March 29, 2019

4,000,000

0.89635%——

Unsecured loans from a bank due on May 26, 2020

800,000

1.25875%

800,000

1.25875%

Unsecured loans from banks due on May 27, 2019

9,000,000

1.11750%——

Unsecured loans from a bank due on May 27, 2020

1,000,000

1.48625%

1,000,000

1.48625%

Unsecured loans from a bank due on May 27, 2019

1,000,000

1.04875%——

Unsecured loans from banks due on May 29, 2020

4,000,000

0.43000%

4,000,000

0.43000%

Unsecured loans from a bank due on May 27, 2019

1,100,000

0.69894%——

Unsecured loans from a bank due on August 26, 2020

1,100,000

1.53674%

1,100,000

1.53674%

Unsecured loans from banks due on August 26, 2019

5,700,000

1.25200%——

Unsecured loans from a bank due on August 26, 2020

800,000

1.28277%

800,000

1.28277%

Unsecured loans from a bank due on August 26, 2019

2,200,000

1.22000%——

Unsecured loans from banks due on August 26, 2020

4,700,000

1.18000%

4,700,000

1.18000%

Unsecured loans from banks due on August 26, 20192,500,000

1.27625%——

Unsecured loans from a bank due on August 26, 2020

500,000

1.15566%

500,000

1.15566%

Unsecured loans from banks due on August 26, 2019

4,700,000

0.81080%——

Unsecured loans from banks due on August 26, 2020

4,500,000

1.08100%

4,500,000

1.08100%

Unsecured loans from a bank due on May 26, 2025 (Note 2)

42,8002.17000%

42,8002.17000%

Unsecured loans from a bank due on August 26, 2020

1,000,000

0.72000%

1,000,000

0.72000%

Unsecured loans from a bank due on May 26, 2025 (Note 2)

42,8002.21812%42,8002.21812%

Unsecured loans from banks due on September 28, 2020

3,000,000

0.22545%

3,000,000

0.22545%

Unsecured loans from banks due on November 26, 2020

3,500,000

0.46075%

3,500,000

0.46075%

Unsecured loans from banks due on November 26, 2020

2,350,000

0.46190%

2,350,000

0.46190%

Unsecured loans from a bank due on November 26, 2020

500,000

0.47375%

500,000

0.47375%

Unsecured loans from banks due on November 26, 2020

1,230,000

0.19545%——

Unsecured loans from banks due on February 26, 2021

5,000,000

1.35250%

5,000,000

1.35250%(1)	The Company entered into ¥10,000 million credit facilities in the form of commitment lines with two financial institutions for the
fiscal period ended August 31, 2018. The total unused amounts of such credit facilities were ¥10,000 million as of August 31, 2018.

Unsecured loans from a bank due on February 26, 2021

2,000,000

1.17750%

2,000,000

1.17750%

Unsecured loans from banks due on February 26, 2021

2,000,000

1.19211%2,000,000

1.19211%(2)	The Company entered into ¥40,000 million credit facilities in the form of commitment lines with four financial institutions for the
fiscal period ended August 31, 2018. The total unused amounts of such credit facilities were ¥39,500 million as of August 31, 2018.

Unsecured loans from banks due on February 26, 2021

2,000,000

0.80832%2,000,000

0.80832%

Unsecured loans from a bank due on February 26, 2021

3,000,000

0.86350%

3,000,000

0.86350%

Unsecured loans from banks due on February 26, 2021

2,120,000

0.85050%

2,120,000

0.85050%

Unsecured loans from a bank due on February 26, 2021

500,000

0.46725%500,000

0.46725%

Unsecured loans from a bank due on February 26, 2021

2,000,000

0.22560%

2,000,000

0.22560%

Unsecured loans from banks due on February 26, 2021

2,800,000

0.14700%

2,800,000

0.14700%

Unsecured loans from a bank due on February 26, 2021

400,000

0.21810%400,000

0.21810%

Unsecured loans from banks due on March 26, 2021

4,670,000

0.22545%——

Unsecured loans from banks due on May 26, 2021

8,000,000

1.56250%

8,000,000

1.56250%

Unsecured loans from a bank due on May 26, 2021

1,000,000

1.46375%

1,000,000

1.46375%

Unsecured loans from a bank due on May 27, 2021

1,000,000

1.68200%

1,000,000

1.68200%

Unsecured loans from a bank due on May 27, 2021

3,500,000

1.62500%

3,500,000

1.62500%

Unsecured loans from banks due on July 26, 2021

4,180,000

1.23920%

4,180,000

1.23920%

Unsecured loans from a bank due on August 26, 2021

2,700,000

1.24100%

2,700,000

1.24100%

Unsecured loans from banks due on August 26, 2021

3,600,000

0.81585%

3,600,000

0.81585%

Unsecured loans from a bank due on November 26, 2021

2,000,000

1.30289%2,000,000

1.30289%

Unsecured loans from banks due on November 26, 2021

2,000,000

1.11662%2,000,000

1.11662%

Unsecured loans from banks due on April 2, 2019   Total¥63,660,600¥58,315,600

Note 1: T he weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: R epay ¥10.7 million of principal at each repayment date during the period between August 26, 2013, and February 26, 2025, and repay ¥497.1 million on May 26,
2025, the last repayment date(3) The Company entered into ¥10,000 million credit facilities in the form of commitment lines with two financial institutions for the fiscal
period ended February 28, 2018. The total unused amounts of such credit facilities were ¥10,000 million as of February 28, 2018.
(4) The Company entered into ¥40,000 million credit facilities in the form of commitment lines with five financial institutions for the fiscal
period ended February 28, 2018. The total unused amounts of such credit facilities were ¥40,000 million as of February 28, 2018.

39

Management Strategy

8. LONG-TERM DEBT

Short-term debt and current portion of long-term debt as of August 31, 2018 and February 28, 2018 and consist of the following:
As of August 31, 2018

ESG Initiatives

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

40

Message from
the Management

Financial Section

As of August 31, 201841

TopicsESG Initiatives

Management Strategy

Financial Strategy

As of February 28, 2018

As of August 31, 2018

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on November 26, 2021

4,900,000

0.97410%4,900,000

0.97410%

Unsecured loans from a bank due on January 26, 2022

3,500,000

1.48300%

3,500,000

1.48300%

Unsecured loans from banks due on February 28, 2022

4,500,000

1.31850%

4,500,000

Unsecured loans from a bank due on February 28, 2022

2,750,000

1.29600%

Unsecured loans from banks due on February 28, 2022

4,000,000

Unsecured loans from banks due on May 26, 2022
Unsecured loans from banks due on May 31, 2022

Financial Section

Investor Information

Portfolio

As of February 28, 2018

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from a bank due on February 26, 2025

1,000,000

0.52140%

1,000,000

0.52140%

Unsecured loans from banks due on February 26, 2025

3,000,000

0.53936%3,000,000

0.53936%

1.31850%

Unsecured loans from banks due on February 26, 2025

1,500,000

0.53880%

1,500,000

0.53880%

2,750,000

1.29600%

Unsecured loans from banks due on February 26, 2025

1,000,000

0.50604%——

1.16000%

4,000,000

1.16000%

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

5,500,000

1.25900%

5,500,000

1.25900%

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

4,500,000

0.82500%

4,500,000

0.82500%

Unsecured loans from banks due on May 26, 2025

2,800,000

0.60286%

2,800,000

0.60286%

Unsecured loans from banks due on August 26, 2022

2,980,000

1.19700%

2,980,000

1.19700%

Unsecured loans from a bank due on May 26, 2025

1,000,000

0.61434%

1,000,000

0.61434%

Unsecured loans from a bank due on August 26, 2022

3,000,000

1.09133%

3,000,000

1.09133%

Unsecured loans from a bank due on May 26, 2025

1,000,000

0.50506%——

Unsecured loans from banks due on August 26, 2022

4,000,000

1.08034%

4,000,000

1.08034%

Unsecured loans from banks due on August 26, 2025

3,000,000

0.56380%

3,000,000

0.56380%

Unsecured loans from a bank due on August 26, 2022

1,000,000

0.32886%

1,000,000

0.32886%

Unsecured loans from banks due on August 26, 2025

4,050,000

0.58727%

4,050,000

0.58727%

Unsecured loans from banks due on September 30, 2022

4,000,000

0.76250%

4,000,000

0.76250%

Unsecured loans from banks due on August 26, 2025

1,850,000

0.67915%1,850,000

0.67915%

Unsecured loans from banks due on November 28, 2022

2,100,000

0.92280%

2,100,000

0.92280%

Unsecured loans from banks due on August 26, 2025

2,600,000

0.60489%

2,600,000

0.60489%

Unsecured loans from banks due on November 28, 2022

4,550,000

1.11000%

4,550,000

1.11000%

Unsecured loans from banks due on August 26, 2025

3,000,000

0.58380%

3,000,000

0.58380%

Unsecured loans from a bank due on November 28, 2022

1,800,000

1.05000%

1,800,000

1.05000%

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.09830%

1,100,000

1.09830%

Unsecured loans from banks due on November 28, 2022

1,500,000

0.98624%

1,500,000

0.98624%

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.06250%

1,100,000

1.06250%

Unsecured loans from a bank due on November 28, 2022

1,000,000

0.71221%1,000,000

0.71221%

Unsecured loans from a bank due on November 26, 2025

2,000,000

1.03955%

2,000,000

1.03955%

Unsecured loans from banks due on November 28, 2022

1,500,000

0.69250%

1,500,000

0.69250%

Unsecured loans from a bank due on November 26, 2025

2,000,000

0.59639%2,000,000

0.59639%

Unsecured loans from a bank due on February 27, 2023

1,300,000

1.13250%

1,300,000

1.13250%

Unsecured loans from a bank due on November 26, 2025

2,000,000

0.60448%2,000,000

0.60448%

Unsecured loans from banks due on February 27, 2023

2,800,000

0.40740%2,800,000

0.40740%

Unsecured loans from banks due on November 26, 2025

4,200,000

0.64616%

4,200,000

0.64616%

Unsecured loans from banks due on February 28, 2023

10,000,000

0.48700%

10,000,000

0.48700%

Unsecured loans from a bank due on November 26, 2025

900,000

0.65123%900,000

0.65123%

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.86500%

2,000,000

1.86500%

Unsecured loans from a bank due on November 26, 2025

1,300,000

0.64278%

1,300,000

0.64278%

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.89500%

2,000,000

1.89500%

Unsecured loans from a bank due on November 26, 2025

1,000,000

0.59499%

1,000,000

0.59499%

Unsecured loans from a bank due on May 26, 2023

1,000,000

1.83875%

1,000,000

1.83875%

Unsecured loans from a bank due on November 26, 2025

500,000

0.56311%——

Unsecured loans from a bank due on May 26, 2023

1,000,000

0.41250%

1,000,000

0.41250%

Unsecured loans from banks due on February 26, 2026

4,000,000

0.74080%

4,000,000

0.74080%

Unsecured loans from a bank due on May 26, 2023

2,500,000

0.43408%2,500,000

0.43408%

Unsecured loans from banks due on February 26, 2026

2,500,000

0.59592%——

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.14850%

1,000,000

1.14850%

Unsecured loans from a bank due on May 26, 2026

2,500,000

0.63995%

2,500,000

0.63995%

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.15850%

1,000,000

1.15850%

Unsecured loans from a bank due on May 26, 2026

1,100,000

0.65267%

1,100,000

0.65267%

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.18032%

1,000,000

1.18032%

Unsecured loans from banks due on May 26, 2026

3,600,000

0.60880%——

Unsecured loans from a bank due on August 28, 2023

4,000,000

1.20772%

4,000,000

1.20772%

Unsecured loans from a bank due on May 26, 2026

1,000,000

0.59614%——

Unsecured loans from banks due on August 28, 2023

6,100,000

1.08510%

6,100,000

1.08510%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%2,700,000

0.67591%

Unsecured loans from a bank due on August 28, 2023

1,000,000

0.43466%

1,000,000

0.43466%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%2,700,000

0.67591%

Unsecured loans from a bank due on August 28, 2023

1,000,000

0.41000%

1,000,000

0.41000%

Unsecured loans from banks due on August 26, 2026

3,000,000

0.77669%

3,000,000

0.77669%

Unsecured loans from a bank due on August 28, 2023

500,000

0.41435%——

Unsecured loans from a bank due on August 26, 2026

1,000,000

0.70414%1,000,000

0.70414%

Unsecured loans from banks due on August 31, 2023

6,700,000

0.55700%

6,700,000

0.55700%

Unsecured loans from banks due on August 26, 2026

3,000,000

0.67483%

3,000,000

0.67483%

Unsecured loans from banks due on November 27, 2023

2,000,000

1.75900%

2,000,000

1.75900%

Unsecured loans from a bank due on August 26, 2026

1,000,000

0.64500%——

Unsecured loans from banks due on November 27, 2023

2,600,000

0.82800%

2,600,000

0.82800%

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.76000%

2,000,000

0.76000%

Unsecured loans from banks due on November 27, 2023

4,000,000

0.49380%

4,000,000

0.49380%

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.74229%2,000,000

0.74229%

Unsecured loans from banks due on November 27, 2023

1,500,000

0.47483%

1,500,000

0.47483%

Unsecured loans from banks due on November 26, 2026

4,165,000

0.73506%

4,165,000

0.73506%

Unsecured loans from a bank due on February 26, 2024

2,750,000

1.59400%

2,750,000

1.59400%

Unsecured loans from banks due on November 26, 2026

4,000,000

0.69956%

4,000,000

0.69956%

Unsecured loans from banks due on February 26, 2024

1,300,000

0.53630%

1,300,000

0.53630%

Unsecured loans from banks due on November 26, 2026

1,500,000

0.64999%——

Unsecured loans from banks due on May 27, 2024

1,100,000

0.51000%

1,100,000

0.51000%

Unsecured loans from banks due on February 26, 2027

2,320,000

0.71500%

2,320,000

0.71500%

Unsecured loans from a bank due on May 27, 2024

2,700,000

0.46376%

2,700,000

0.46376%

Unsecured loans from banks due on March 26, 2027

1,500,000

0.69068%——

Unsecured loans from a bank due on May 27, 2024

2,000,000

0.53676%

2,000,000

0.53676%

Unsecured loans from banks due on May 26, 2027

3,060,000

0.78177%

3,060,000

0.78177%

Unsecured loans from a bank due on June 26, 2024

2,700,000

0.85925%2,700,000

0.85925%

Unsecured loans from banks due on May 26, 2027

2,300,000

0.74736%2,300,000

0.74736%

Unsecured loans from a bank due on June 26, 2024

2,700,000

0.49533%

2,700,000

0.49533%

Unsecured loans from a bank due on May 26, 2027

1,800,000

0.70250%——

Unsecured loans from a bank due on August 26, 2024

3,000,000

0.58175%

3,000,000

0.58175%

Unsecured loans from banks due on August 26, 2027

4,000,000

0.76843%

4,000,000

0.76843%

Unsecured loans from a bank due on August 26, 2024

2,430,000

0.49971%2,430,000

0.49971%

Unsecured loans from banks due on August 26, 2027

2,600,000

0.76290%

2,600,000

0.76290%

Unsecured loans from banks due on August 26, 2024

5,670,000

0.49485%

5,670,000

0.49485%

Unsecured loans from a bank due on August 26, 2027

1,000,000

0.74500%——

Unsecured loans from a bank due on November 26, 2024

2,250,000

0.50825%

2,250,000

0.50825%

Unsecured loans from a bank due on November 26, 2027

2,000,000

0.89209%2,000,000

0.89209%

Unsecured loans from banks due on November 26, 2024

3,000,000

0.58000%

3,000,000

0.58000%

Unsecured loans from banks due on November 26, 2027

5,000,000

0.79571%

5,000,000

0.79571%

Unsecured loans from a bank due on November 26, 2024

1,800,000

0.55979%

1,800,000

0.55979%

Unsecured loans from a bank due on November 26, 2027

1,800,000

0.75050%——

Unsecured loans from a bank due on November 26, 2024

500,000

0.52384%

500,000

0.52384%

Unsecured loans from a bank due on February 28, 2028

1,000,000

0.82130%

1,000,000

0.82130%

Unsecured loans from banks due on February 26, 2025

4,200,000

0.62675%

4,200,000

0.62675%

Unsecured loans from a bank due on February 28, 2028

2,355,000

0.76241%——

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

42

Message from
the Management

Financial Section

As of August 31, 2018

Topics

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on February 28, 2028

1,500,000

0.78296%——

Unsecured loans from a bank due on February 28, 2028

1,800,000

0.79642%——

Unsecured loans from banks due on May 26, 2028

5,000,000

0.79880%——

Unsecured loans from banks due on August 28, 2028

3,600,000

0.84750%——Weighted-averageinterest rate (Note 1)

Unsecured loans from a bank due on November 26, 2029

2,000,000

1.12506%

2,000,000

1.12506%

Unsecured loans from a bank due on November 26, 2029

2,000,000

1.12506%

2,000,000

1.12506%

Unsecured loans from a bank due on October 28, 2030

1,100,000

1.92250%

1,100,000

1.92250%

Unsecured loans from a bank due on October 28, 2030

1,100,000

1.91700%

1,100,000

1.91700%

Unsecured loans from a bank due on May 26, 2025 (Note 2)

732,500

2.17000%

753,900

2.17000%

Unsecured loans from a bank due on May 26, 2025 (Note 2)

732,500

2.21812%753,900

2.21812%  Total¥411,495,000

Management Strategy

Financial Strategy

Investor Information

Portfolio

Financial Section

11. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS

As of February 28, 2018

Amount(Thousands of Yen)

Amount(Thousands of Yen)

ESG Initiatives

The movement in the allowance for temporary difference adjustments on the Balance Sheet was as follows:
For the period from March 1, 2018 to August 31, 2018
1. Reason, related assets and amounts
Thousands of Yen

Related assets, etc.

Goodwill

ReasonAmortization of goodwill

Land, buildings, etc.

Initialamount¥6,866,883

Balance at the Allowance set
end of previous aside during
periodperiod¥4,244,640

ReversalduringperiodBalance at theend of current
period—¥5,432,649—

1,352,557

Sale anddepreciation ofproperties forwhich merger
expenses wererecorded¥1,188,008

Merger expenses¥407,382,800

Note 1: The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest-rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: Installments of ¥10.7 million will be made on the 26th day of every third month starting on August 26, 2013, with the remaining payment of ¥497.1 million to be
repaid on May 26, 2025.

The scheduled repayment amounts of long-term debt for each of the five years after the balance sheet date (excluding the current
portion of long-term debt) are as follows.

4,029,135

1,399,852—¥ (47,295)

Reason forreversal

2,867,594

1,524,682—(431,221)

1,093,460

Changes in fairvalue ofderivativetransactions

Increase - subtotal—

7,169,175

1,188,008(478,516)

7,878,667—   Total—¥7,169,175 ¥1,188,008¥(478,516)¥7,878,667—

Loss on interest-rate swaps
recognized at the end of
the fiscal period

Deferred gains orlosses on hedges

Thousands of Yen
1-2 years

2-3 years

3-4 years

4-5 years

As of February 28, 2018

¥64,685,600¥59,655,600¥47,715,600¥51,615,600

As of August 31, 2018

¥58,385,600¥61,135,600¥44,715,600¥61,435,600

Item

9. INVESTMENT CORPORATION BONDS
Details of investment corporation bonds outstanding are summarized as follows.
As of August 31, 2018
Amount(Thousands of Yen)

NOF’s 2nd series of unsecured investment corporation bonds
due on March 16, 2020
NOF’s 7th series of unsecured investment corporation bonds
due on March 17, 2028

As of February 28, 2018

Interest rate (Note)

Amount(Thousands of Yen)

Interest rate (Note)¥ 5,000,000

2.47%¥ 5,000,000

2.47%

4,500,000

2.90%

4,500,000

2.90%

Former NMF’s 1st series of unsecured investment
corporation bonds due on October 30, 2024

3,000,000

0.87%

3,000,000

0.87%

NOF’s 10th series of unsecured investment corporation
bonds due on November 25, 2024

6,000,000

1.02%

6,000,000

1.02%

NMF’s 2nd series of unsecured investment corporation
bonds due on November 16, 2027

2,000,000

0.59%

2,000,000

0.59%

NMF’s 3rd series of unsecured investment corporation bonds
due on May 21, 2038

1,500,000

1.03%

—

—

   Total

2. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses¥22,000,000¥20,500,000

Method of reversal

Buildings, etc.

Upon depreciation and sale, etc, the corresponding amount is scheduled to be reversed.

Land

Upon sale, etc, the corresponding amount is scheduled to be reversed.

Buildings in trust,etc.

Upon depreciation or sale, etc, the corresponding amount is scheduled to be reversed.

Land in trust
Leasehold rights
Leasehold rights in trust

Upon sale, etc, the corresponding amount is scheduled to be reversed.

(3) Deferred gains or losses on hedges.
Based on changes in the fair value of derivatives used as hedging instruments, the corresponding amount is scheduled to be reversed.
For the period from September 1, 2017 to February 28, 2018
1. Reason, related assets and amounts
Thousands of Yen

Related assets, etc.

Goodwill

ReasonAmortization of goodwill

Initialamount¥4,244,640

Balance at the Allowance set
end of previous aside during
periodperiod¥4,244,640—

Reversalduringperiod—Balance at theend of current
period¥4,244,640

1,399,852

Sale anddepreciation ofproperties forwhich merger
expenses wererecorded

1,524,682

Changes infair value ofderivativetransactions

Note: The interest rate is rounded to the nearest fifth decimal place.

The scheduled redemption amounts of investment corporation bonds for each of the five years after the balance sheet date are as follows.
Thousands of Yen
2-3 years

3-4 years

4-5 years

As of February 28, 2018

Within a year—

1-2 years—¥5,000,000——

As of August 31, 2018—

¥5,000,000

—

—

—

Land, buildings, etc.

Merger expenses
4,029,135

Deferred gains orlosses on hedges

Loss on interest-rate swaps
recognized at the end of
the fiscal period

Land, buildings, etc.

Impairment loss

2,867,594

1,491,074

1,545,633——¥ (91,221)(20,951)

10. UNITHOLDERS’ EQUITYThe Company issues only non-par value investment units in accordance with the Investment Trust Act. The entire amount of the issue price of
new units is designated as stated capital. The Company is required to maintain net assets of at least ¥50,000 thousand as set forth in theInvestment Trust Act.

43

Nomura Real Estate Master Fund

Reason forreversal

Sale of properties
for whichimpairment loss—
were recorded

269,797

86,378—(86,378)

Increase - subtotal—

7,367,727—(198,551)

7,169,175—   Total—¥7,367,727—¥(198,551)¥7,169,175—

Nomura Real Estate Master Fund

44

Message from
the Management

Financial Section

TopicsESG Initiatives

Management Strategy

Financial Strategy

Portfolio

Financial Section

Investor Information

14. INCOME TAXES

2. Method of reversal(1) Amortization of goodwill

The Company, as an investment corporation, is subject to corporate income taxes at a statutory tax rate of approximately 31.74% for the fiscal
period ended August 31, 2018. However, the Company may deduct dividend distributions paid to its unitholders from its taxable income
amounts, provided such distributions meet the requirements under the Act on Special Measures Concerning Taxation of Japan. Under this act,
an investment corporation must meet a number of tax requirements, including a requirement to distribute in excess of 90% of its distributable
income for the fiscal period, in order to deduct such amounts. If the investment corporation does not satisfy all of the requirements, the entire
taxable income of the investment corporation will be subject to regular corporate income taxes.

(2) Merger expenses
Item

Method of reversal

Buildings, etc.

Upon depreciation and sale, etc, the corresponding amount is scheduled to be reversed.

Land

Upon sale, etc, the corresponding amount is scheduled to be reversed.

Buildings in trust,etc.

Upon depreciation or sale, etc, the corresponding amount is scheduled to be reversed.

Land in trust
Leasehold rights
Leasehold rights in trust

Upon sale, etc, the corresponding amount is scheduled to be reversed.

Since the Company distributed in excess of 90% of its distributable income in the form of cash distributions totaling ¥13,328,431 thousand forthe fiscal period ended August 31, 2018, such distributions were treated as deductible distributions for purposes of corporate income taxes.

(3) Impairment loss
Upon the sale of the relevant properties, the corresponding amount is scheduled to be reversed.
(4) Deferred gains or losses on hedges.
Based on changes in the fair value of derivatives used as hedging instruments, the corresponding amount is scheduled to be reversed.

The following summarizes breakdown of deferred tax assets and liabilities:
Thousands of Yen
For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018

Deferred tax asset:

12. PER UNIT INFORMATION

Valuation difference on other assets acquired by merger¥ 21,204,411¥ 21,567,576

The net asset values per unit and the net income per unit as of August 31, 2018 and February 28, 2018 were as follows:

Deferred gains or losses on hedges

243,830

345,465

Unearned revenue

180,889

224,444

Write-offs for long-term prepaid expenses

18,75322,193

Depreciation costs of trust leasehold rights

1,099

977

For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018

Net assets per unit

¥132,314¥132,697

Net income per unit¥  2,478¥  2,561

Non-deductible accrued enterprise tax  Subtotal  Valuation allowance

Note 1: The net income per unit is calculated by dividing net income by the weighted-average number of units outstanding.
Note 2: The basis for calculating net income per unit is as follows.

95—

21,649,079

22,160,656¥(21,649,079)¥(22,160,656)

—

—

—

—

—

—

   Total non-current deferred tax assets
Total deferred tax assets

Net income (Thousands of Yen)

For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018¥10,709,804¥10,714,661

Amount not available to ordinary unitholders (Thousands of Yen)——

Net income available to ordinary unitholders (Thousands of Yen)

¥10,709,804¥10,714,661

4,321,111

4,183,130

Average number of units during the period (Units)

Net deferred tax assets
The following summarizes the significant differences between the statutory tax rate and the effective tax rate.

For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018

Statutory tax rate

31.74%

31.74%

Deductible cash distributions(35.65%)(35.26%)

13. RELATED PARTY TRANSACTIONSValuation of allowance(3.84%)(4.24%)For the periods from March 1, 2018 to August 31, 2018 and from September 1, 2017 to February 28, 2018
Parent Company and major corporate unitholders
Not applicable
Subsidiaries and affiliates
Not applicable
Fellow subsidiary companies
Not applicable
Directors and major individual unitholders
Not applicable

Amortization of goodwill

7.77%

7.77%

Other

0.01%

0.01%

Effective tax rate

0.02%

0.01%

15. FINANCIAL INSTRUMENTS
Overview(1) Policy for Financial Instruments
Upon acquisition of property-related assets, the Company may raise funds through certain financing methods including borrowings, issuance ofinvestment corporation bonds and issuance of investment units. In financing through interest - bearing debt, to secure stable financing capability
and reduce future risks of rising interest rates, the Company’s investment policy is to secure longer-term, fixed-rate borrowings with welldiversified maturities.
The Company enters into derivative transactions only for the purpose of reducing risk of future interest rate fluctuations and does not engage in
speculative transactions.
(2) Type and Risk of Financial Instruments and Related Risk Management
Borrowings and investment corporation bonds are primarily used to fund the acquisition of property-related assets as well as the repayment ofdebts and redemption of investment corporation bonds. The Company is exposed to liquidity risk of being unable to meet its obligations onscheduled due dates. The Company controls and limits such risk by diversifying not only the financial institutions, but also the type of financing
to include the effective use of surplus funds and direct financing from the capital markets such as issuance of investment units. In addition, theCompany is exposed to the market risk arising from fluctuations in interest rates on its floating-rate debt. However, the effect of such risk on theoperation of the Company is limited by maintaining the LTV ratio at low levels and the ratio of long-term fixed-rate debt to total debt at highlevels. Furthermore, the Company may utilize derivative transactions (interest-rate swap transactions) as a hedging instrument to reduce themarket risk under floating-rate debt by swapping such floating-rate interest payments for fixed-rate interest payments.

45

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

46

Message from
the Management

Financial Section

TopicsBank deposits are held as a means of investing surplus funds, and the Company is exposed to the credit risk that financial institutions may
default. However, the effect of such risk is limited by diversifying the financial institutions with which surplus funds are deposited.
(3) Supplementary Explanation on Estimated Fair Value of Financial Instruments
The fair value of financial instruments is based on the quoted market price, if applicable. When there is no quoted market price available, fairvalue is reasonably estimated. Certain assumptions are used for the estimation of fair value. Accordingly, the result of such estimation may
change if different assumptions are used. Furthermore, the contractual amounts of derivative transactions stated in “21. Derivatives and Hedge
Accounting” below do not represent the market risk involved in these derivative transactions.

ESG Initiatives

Management Strategy

Thousands of Yen
Due within
one year

After one year,
within two years

After two years, After three years,
within three years within four years

Cash and bank deposits¥74,556,830——  Total¥74,556,830——

After four years,
within five years

After five years

—

—

—

—

—

—

Redemption schedule for cash and bank deposits as of February 28, 2018

Thousands of Yen

For the period from March 1, 2018 to August 31, 2018
The following table summarizes the carrying value and the estimated fair values of financial instruments as of August 31, 2018.
Thousands of Yen(ii) Short-term debt

Financial Section

Investor Information

Portfolio

Note 3: Redemption schedule for cash and bank deposits as of August 31, 2018

Fair Value of Financial Instruments(i) Cash and bank deposits

Financial Strategy

Carrying value (Note 1)

Fair value (Note 2)¥ 74,556,830¥ 74,556,830—(500,000)(500,000)—

Due within
one year

After one year,
within two years

After two years, After three years,
within three years within four years

Cash and bank deposits¥76,536,938——  Total¥76,536,938——

After four years,
within five years

After five years

—

—

—

—

—

—

Difference(iii) Current portion of long-term debt

(63,160,600)(63,349,094)¥  188,494(iv) Investment corporation bonds(22,000,000)(23,221,767)

1,221,767(v) Long-term debt

(411,495,000)(415,825,820)¥4,330,820(vi) Derivative transactions¥   (778,253)¥   (778,253)—

For the period from March 1, 2017 to August 31, 2017
The following table summarizes the carrying value and the estimated fair values of financial instruments as of February 28, 2018.

Note 4: Redemption schedule for debt as of August 31, 2018

Thousands of Yen
Due within
one year

Short-term debt

After one year,
within two years

After two years, After three years,
within three years within four years

After four years,
within five years—¥ 5,000,000

—

—

—

¥ 17,000,000

Long-term debt

Investment corporation bonds¥63,160,600¥58,385,600¥61,135,600¥44,715,600¥61,435,600¥185,822,600  Total¥63,660,600¥63,385,600¥61,135,600¥44,715,600¥61,435,600¥202,822,600

After two years, After three years,
within three years within four years

After four years,
within five years

Redemption schedule for debt as of February 28, 2018

Thousands of Yen(i) Cash and bank deposits(ii) Short-term debt(iii) Current portion of long-term debt

After five years¥   500,000

Carrying value (Note 1)

Fair value (Note 2)¥ 76,536,938¥ 76,536,938

—

—

—

—

(58,315,600)(58,423,277)¥  107,677

Thousands of Yen

Difference

Due within
one year

After one year,
within two years

After five years

Short-term debt

—

—

—

—

—

—

Investment corporation bonds——¥ 5,000,000——¥ 15,500,000(iv) Investment corporation bonds(20,500,000)(21,791,171)

1,291,171

Long-term debt

¥58,315,600¥64,685,600¥59,655,600¥47,715,600¥51,615,600¥183,710,400(v) Long-term debt

(407,382,800)(412,310,168)¥4,927,368  Total¥58,315,600¥64,685,600¥64,655,600¥47,715,600¥51,615,600¥199,210,400(vi) Derivative transactions¥  (1,097,928)¥  (1,097,928)—

Note 1: The numbers in parenthesis indicate liabilities.
Note 2: Method for determining the fair value of financial instruments and derivative transactions(i) Cash and bank deposits and (ii) Short-term debt
		As these items are settled within a short-term period, their fair value is nearly equal to the carrying value. Therefore, for these items, the carrying value isreported as the fair value.
(iv) Investment corporation bonds
		The fair value of investment corporation bonds issued by the Company is determined based on their market prices.
(iii) 	Current portion of long-term debt and (v) Long-term debt For floating-rate long-term debt, the carrying value is reported as it is considered to beapproximately equal to the fair value because such debt reflects the market interest rates within a short-term period. (However, the fair value of certain
floating-rate long-term debt that qualifies for the special treatment of interest-rate swaps (see “21. Derivatives and Hedge Accounting”) is determined bydiscounting the sum of its principal and interest payments net of any cash flows from the interest-rate swap at a rate reasonably estimated to be applicableto similar fixed-rate debt.) The fair value of fixed-rate long-term debt is determined by discounting the sum of its principal and interest payments at a rate
reasonably estimated to be applicable to similar fixed-rate debt.
(vi) Derivative transactions		
See “21. Derivatives and Hedge Accounting.”

16. INVESTMENT AND RENTAL PROPERTIESThe Company owns leasable office, leasable retail facilities, leasable logistics facilities, leasable residential (including land) in Greater Tokyo area
and other areas for the purpose of earning revenue from leasing. The following table summarizes the carrying value and the estimated fair valueof these properties.
Thousands of Yen
For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018¥  914,834,180¥  923,155,804

Carrying value
Balance at beginning of the period
Amount of increase (decrease) during the period

32,615,444(8,321,623)

Balance at end of the period

947,449,625

914,834,180

Fair value at end of the period¥1,041,183,000¥1,001,250,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: O f the change in investment and rental properties, the increase during the previous period is mainly attributable to the acquisition of PMO Shinnihonbashi(¥4,496,617 thousand), PMO Hirakawacho (¥3,460,311 thousand), GEMS Daimon (¥2,087,357 thousand), GEMS Kanda(¥1,520,710 thousand) and Summit Store
Mukodaicho (¥5,159,847 thousand). The decrease during the previous period is mainly attributable to the sale of Morisia Tsudanuma (¥17,897,287 thousand) andFunabashi Logistics Center (¥4,537,933 thousand) as well as depreciation (¥4,733,427 thousand). The increase during the current period is mainly attributable tothe acquisition of Landport Hachioji II (¥9,365,947 thousand), Landport Iwatsuki (¥6,176,597 thousand), Hotel Vista Sapporo Odori (¥3,784,521 thousand), PMO
Nihonbashi Mitsukoshi-mae(¥4,374,216 thousand), PMO Shibadaimon (¥2,160,398 thousand), PROUD FLAT Sangenjaya II (¥2,836,531 thousand), PROUD FLAT
Sotokanda (¥2,384,706 thousand), PROUD FLAT Noborito (¥1,278,507 thousand), PROUD FLAT Yoyogi Hachiman (¥1,005,747 thousand) and PROUD FLAT
Nakaochiai (¥880,458 thousand). The decrease during the current period is mainly attributable to the depreciation (¥4,897,379 thousand).
Note 3: F air value at the end of the period is the appraisal value or survey price determined by an outside real estate appraiser.

The real estate rental revenues and expenses for the fiscal period ended August 31, 2018 are presented in “18. Breakdown of Real Estate
Rental Revenues and Expenses”.

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Message from
the Management

Financial Section

Topics

17. SEGMENT INFORMATIONESG Initiatives

Management Strategy

Financial Strategy

Portfolio

19. BREAKDOWN OF GAIN AND LOSS ON SALES OF REAL ESTATE

For the periods from March 1, 2018 to August 31, 2018 and September 1, 2017 to February 28, 2018
Segment Information
Since the Company has been engaged in the real estate leasing business as a single segment, segment information has been omitted.
Related Information
1. Information about products and services	Since revenues from external customers of products and services within a single segment are more than 90 percent of total operating
revenues, information about products and services has been omitted.
2. Information about geographical areas(1) Revenues		Since more than 90 percent of the total operating revenues were generated from external customers in Japan, geographical breakdown ofrevenues has been omitted.
(2) Property and equipment
		Since more than 90 percent of the total property and equipment on the balance sheet are located in Japan, geographical breakdown ofproperty and equipment has been omitted.
3. Information about major clients
For the period from March 1, 2018 to August 31, 2018
Customer name

Thousands of Yen
For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018

Proceeds from sale of real estate—¥23,480,000

Cost of real estate—

22,435,221

Other related sales expense—

457,529

Gain on sale of real estate—¥587,249

Proceeds from sale of real estate——

Cost of real estate——

Other related sales expense——

Loss on sale of real estate——

Gain on sale of real estate

Loss on sale of real estate

20. LEASESRevenues (Thousands of Yen)

Related segment name

¥5,056,661

Rental real estate business

Nomura Real Estate Partners Co., Ltd.

The future minimum rental revenues from tenants under non-cancelable operating lease of properties as of August 31, 2018 and February 28,
2018 are summarized as follows:
Thousands of Yen

For the period from September 1, 2017 to February 28, 2018
Customer name

Nomura Real Estate Partners Co., Ltd.

Financial Section

Investor Information

Revenues (Thousands of Yen)

Related segment name

¥4,773,517

Rental real estate business

As of August 31, 2018

As of February 28, 2018

Due within one year

¥29,708,567¥ 29,455,791

Due after one year

69,224,703

76,898,091  Total¥98,933,271¥106,353,883

18. BREAKDOWN OF REAL ESTATE RENTAL REVENUES AND EXPENSES
Real estate rental revenues and expenses for the fiscal period ended August 31, 2018 and February 28, 2018 consist of the following:Thousands of Yen

Real estate rental revenues

For the period
from September 1, 2017
to February 28, 2018¥34,731,869¥33,631,626

Derivative transactions as of August 31, 2018
(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:
Thousands of Yen
Notional amountRental revenues

31,695,901

30,724,009  Rental revenues

29,254,971

28,294,468

Hedge accounting method

Type of derivative instruments

Main hedged item

(Note 1)

Due after one year

Fair value (Note 2)   Common area charges

2,440,930

2,429,540

Principal treatment method

Other rental revenues

3,035,967

2,907,617

Interest rate swaps:
Received/floating and paid/fixedLong-term debt

¥129,380,000¥101,180,000¥  (778,253) (Note 3)

Special treatment ofinterest rate swaps

Interest rate swaps:
Received/floating and paid/fixedLong-term debt

89,475,300

74,732,500(745,750) (Note 4)¥218,855,300¥175,912,500  Parking revenues

588,545584,742  Incidental income

2,376,113

2,198,012

71,308124,862

Real estate rental expenses

15,158,332

14,785,472   Property management costs

1,604,399

1,592,435   Property management fees

980,132

888,375   Property and other taxes

2,846,279

2,699,055  Utility expenses

1,882,466

1,784,615  Casualty insurance

43,614

43,247

1,555,208

1,758,408   Other miscellaneous revenues   Repairs and maintenance49

For the period
from March 1, 2018
to August 31, 201821. DERIVATIVES AND HEDGE ACCOUNTING  Land rents

215,680

210,439  Depreciation

4,901,925

4,737,224   Other rental expenses

1,128,627

1,071,669

Real estate rental profits¥19,573,536¥18,846,154

Nomura Real Estate Master Fund  Total¥(1,524,003)

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥6,483 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥745,750 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

Nomura Real Estate Master Fund

50

Message from
the Management

Financial Section

TopicsESG Initiatives

Management Strategy

Financial Strategy

Financial Section

Investor Information

Portfolio

23. INFORMATION ON ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS

Derivative transactions as of February 28, 2018
(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:

For the period from March 1, 2018 to August 31, 2018
1. Reason for provision related assets and amounts
Thousands of Yen

Thousands of Yen

Notional amount
Hedge accounting method

Type of derivative instruments

Interest rate swaps:
Principal treatment method
Received/floating and paid/fixedSpecial treatment ofinterest rate swaps

Interest rate swaps:
Received/floating and paid/fixed

Main hedged item

(Note 1)

Due after one year

Fair value (Note 2)Long-term debt

¥134,780,000¥116,080,000¥(1,097,928) (Note 3)

Related assets, etc.

Long-term debt  Total101,696,700

83,753,900¥236,476,700¥199,833,900(1,043,451) (Note 4)¥(2,141,379)

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥4,467 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,043,451 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

For the period
from March 1, 2018
to August 31, 2018

For the period
from September 1, 2017
to February 28, 2018

1. Retained earnings at end of period¥11,804,535,046¥12,549,780,041

2. Distributions in excess of retained earnings¥2,619,010,800¥1,769,463,990   Of which, allowance for temporary difference adjustment¥1,322,470,800¥1,188,008,920   Of which, other distributions in excess of net income¥1,296,540,000¥581,455,070

3. Incorporation into unitholders’ capital¥321,691,082¥478,516,800   Of which, reversal of allowance for temporary difference adjustments¥321,691,082¥478,516,800¥13,328,431,200¥12,745,997,110

4. Distributions   [Distributions (per unit)]   Of which, distributions of earnings   [Of which, distributions of earnings (per unit)]   Of which, allowance for temporary difference adjustments  [Of which, allowance for temporary difference adjustments (per unit)]  Of which, other distributions in excess of net income  [Of which, other distributions in excess of net income (per unit)]
5. Retained earnings carried forward

Reason for reversal

Goodwill

Amortization of goodwill

Long-term deposits

Shortfall of reserve for repairs¥2,622,242
1,613

Increase-subtotal

2,623,856

Buildings, facilities, etc.

Depreciation deficiency equivalent

Unearned revenue

Write-down of loss on interest rate swap due to merger

Others

22. CASH DISTRIBUTIONS¥(3,084)¥(3,047)¥10,709,420,400¥10,976,533,120¥(2,478)¥(2,624)¥1,322,470,800¥1,188,008,920¥(306)¥(284)¥1,296,540,000¥581,455,070¥(300)¥(139)¥773,423,564¥1,094,730,121

Calculation method of distribution amount
NMF calculates distributions in accordance with the cash distribution policies as specified in Article 36, Paragraphs 1 and 2 of NMF’s Articles ofIncorporation. For the fiscal period under review, NMF decided to implement ¥13,328,431,200 in distributions, for a distribution per unit of¥3,084. This figure was calculated as ¥10,709,804,925 in net income plus ¥2,622,242,820 in amortization of goodwill, from which the portion forwhich per-unit distributions comprising the types of dividends laid out below would be less than ¥1 was excluded.

Provision of allowancefor temporary
difference adjustments(1,142,482)(137,860)—(21,042)

Decrease-subtotal(1,301,385)  Total¥1,322,470

2. Reason for reversal, related assets and amounts
Thousands of Yen

Related assets, etc.

Provision of allowancefor temporary
difference adjustments

Reason for reversal

Land, buildings, etc.

Sale and depreciation of properties for which merger expenses were recorded

Deferred gains or losses on hedges

Changes in fair value of derivatives— (Note 1)¥(321,691)  Total¥(321,691)

Note 1: T he amount of reversal during the current fiscal period (¥5,754 thousand) is included in “Depreciation deficiency equivalent” on “1. Reasons for provision,
related assets and amounts”.

3. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses
Item

Method of reversal

Buildings, etc.

Upon depreciation or sale, the corresponding amount is scheduled to be reversed.

Land

Upon sale, the corresponding amount is scheduled to be reversed.

Buildings in trust, etc.

Upon depreciation or sale, the corresponding amount is scheduled to be reversed.

Land in trust, etc.
LeaseholdUpon sale, the corresponding amount is scheduled to be reversed.

Leasehold in trust(3) Long-term deposits
In principle, long-term deposits are not reserved.
(4) Deferred gains or losses on hedges
The amount corresponding to changes in the fair value of derivatives used as hedging instruments is scheduled to be reversed.

Total distributions comprise distributions of earnings and distributions in excess of net income. Distributions of earnings came to¥10,709,420,400 (¥2,478 per unit), calculated as income as stipulated in Article 136 Paragraph 1 of the Act on Investment Trusts and Investment
Corporations, less reversal of allowance for temporary difference adjustments (hereinafter ATA). Distributions in excess of net income comprisea ¥1,322,470,800 (¥306 per unit) distribution of ATA and ¥1,296,540,000 (¥300 per unit) in other distributions in excess of net income.

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52

Message from
the Management

Financial Section

TopicsESG Initiatives

Management Strategy

Financial Strategy

Portfolio

Investor Information

Financial Section

Independent Auditor’s Report
For the period from September 1, 2017 to February 28, 2018
1. Reason for provision related assets and amounts
Thousands of Yen

Related assets, etc.

Reason for reversal

Goodwill

Amortization of goodwill

Long-term deposits

Shortfall of reserve for repairs

Provision of allowancefor temporary
difference adjustments¥2,622,242
7,570

Increase-subtotal

2,629,813

Buildings, facilities, etc.

Depreciation deficiency equivalent

Unearned revenue

Write-down of loss on interest rate swap due to merger(1,234,822)

Others—(161,277)(45,704)

Decrease-subtotal(1,441,804)  Total¥1,188,008

2. Reason for reversal, related assets and amounts
Thousands of Yen

Reason for reversal

Provision of allowancefor temporary
difference adjustments

Land, Buildings, etc.

Sale and depreciation of properties for which merger expenses were recorded¥ (47,295)

Deferred gains or losses on hedges

Changes in fair value of derivatives

Related assets, etc.

(431,221)  Total¥(478,516)

3. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses
Item

Method of reversal

Buildings, etc.

Upon depreciation or sale, the corresponding amount is scheduled to be reversed.

Land

Upon sale, the corresponding amount is scheduled to be reversed.

Buildings in trust, etc.

Upon depreciation or sale, the corresponding amount is scheduled to be reversed.

Land in trust, etc.
LeaseholdUpon sale, the corresponding amount is scheduled to be reversed.

Leasehold in trust(3) Long-term deposits
In principle, long-term deposits are not reserved.
(4) Deferred gains or losses on hedges
The amount corresponding to changes in the fair value of derivatives used as hedging instruments is scheduled to be reversed.

24. SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

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