4Semi-Annualth Fiscal Period
Report10 Years Onward

Masterphase

3-10 Years

Growthphase

2 Years

Quality ph

ase

Oct.

2015

Merg

er

Our Growth Driver: Diversification

By
Property
Holdings

Top 10 Properties
as Percent ofPortfolio
25.5%

258 Properties
74.5%

Stable Model
41.8%

Growth Model
58.2%

Residential
19.8%

By UseLogistics
16.2%

Retail Facilities(in residential areas)
5.2%

Office45.3%

Other Areas
18.0%

By
Geographic
Area
Tokyo Area
82.0%

Retail Facilities(near stations)
12.9%

8-5-1, Nishi-Shinjuku, Shinjuku Ward, Tokyo

Value Chain of the Nomura Real Estate GroupDRIVING THE MARKET AS ONE OF JAPAN’S LARGEST REITS

Under its Medium-to Long-term Management Strategy,

revenues—for approximately ¥81.5 billion as of the end of

NMF designated the first three to five years after its

the fourth fiscal period.

establishment as its Quality phase, during which it

Of course, as the term SPR implies, we not just sold, butadvanced strategic property replacements (SPRs). The ini-also acquired properties. In addition to the more than ¥130

tial plan called for the replacement of 20 to 25 properties

billion in properties acquired through the September 2016

worth around ¥50 billion. However, we have seized favor-

merger with TOP REIT, Inc., we have acquired ¥94.8 billion

able opportunities and sold 27 properties—mainly proper-

in high-quality assets, mainly properties developed by theties that were aging or presented risks of declining futuresponsor, Nomura Real Estate Development Co., Ltd.

Acquired fromparty outside
the GroupNewbuilding

Relatively
new building

Acquired from
Nomura Real Estate
Development

Investment
Analysis
ObtainTrading
Information

SPR

Price
Examination/
Negotiation
Investment
Analysis

Strategic
Property
Replacement
Able to be
redeveloped
Sold toNomura Real Estate
Development

Property
Acquisition

Sold to party
outside the Group

Measuresto Improve
Property Value

Not suitablefor
redevelopment

Maximize Value
Brand

Increasing Brand Value
Revenue
Improvement
Measures

Leasing Value Chain
OfficeRetail

Sales

Logistics

Residential

Improved Asset Efficiency
Stable Lease Income Streams

Real Estate Management Capabilities
Management of Properties
Group Collaboration
Sharing Know-How
Diversifying Services
Creating High Added Value

Leasing

1 Nomura Real Estate Master Fund

Product Design/
Development

Site
Selection

To Our Stakeholders

THE NOMURA REAL ESTATE GROUP’S DIVERSIFIED REIT

We have decided to transition to the second phase of ourmanagement strategy, the Growth phase. During the Growth phase,
we aim to maintain the portfolio’s high quality while pursuing
growth in order to further increase unitholder value.

Koichi Owada

Shuhei Yoshida

Mineo Uchiyama

Supervisory Director

Executive Director

Supervisory Director

Since its launch in October 2015, NMF has been making

and retail facilities, NMF recorded operating revenues ofsteady progress toward becoming the premiere J-REIT by¥38,139 million, operating profit of ¥15,735 million and net

implementing its Medium- to Long-term Management

income of ¥13,190 million in the fourth fiscal period. As a

Strategy, a concrete roadmap for achieving NMF’s basic

result, the per-unit distribution came to ¥3,037.

strategies of securing stable income over the medium toAfter the conclusion of the 4th fiscal period, NMF exe-

long term and ensuring the steady growth of assets undercuted a transaction with the sponsor in which it acquired

management.

PMO Shin-Nihonbashi, PMO Hirakawacho, GEMS Daimon

We have greatly surpassed our initial target for theand GEMS Kanda, and sold Morisia Tsudanuma. With this,Quality phase of ¥50 billion in asset replacements. As of

we have largely completed the sale of properties subject toAugust 31, 2017, the end of the fourth fiscal period, NMF

strategic property replacements (SPRs). As such, we have

had sold 27 properties for a total of ¥81.5 billion. We had

decided to transition to the second phase of our manage-acquired 19 properties, mainly from the sponsor, Nomura

ment strategy, the Growth phase. During the Growth

Real Estate Development Co., Ltd., for a total of ¥83.4 bil-phase, NMF will target external growth by leveraging thelion. Furthermore, we acquired the 19 properties previously

Nomura Real Estate Group’s property development capabil-owned by TOP REIT, Inc., including office, retail and resi-

ities and internal growth by making more active use of thedential facilities, for a total of ¥137.4 billion through theproperty management pipeline with a focus on strengthen-absorption type merger with said company that came into

ing its property brands. By doing so, we aim to maintaineffect September 1, 2016. Through these replacements,

the portfolio’s high quality while pursuing growth in order

we have enhanced the portfolio’s quality.

to further increase unitholder value.

As a result, as of the end of the fourth fiscal period,
NMF’s portfolio comprised 268 properties with a total

As we move forward, we ask for your continued supportacquisition price of ¥927.3 billion. Thanks to efforts to pro-and encouragement.

mote internal growth, mainly in the upside sectors of officeNomura Real Estate Master Fund

2

Highlights

PERFORMANCE HIGHLIGHTS

3rd fiscal period
Cash distribution per unit
(including distribution in excess of
net income)

¥

3,028

5th fiscal period

4th fiscal period¥(forecast)*

3,037

¥

3,020

Operating revenues¥

34,714 million¥

38,139 million¥

33,365 million

Operating profit¥

11,244 million¥

15,735 million¥

12,504 million

Ordinary income¥

8,672 million¥

13,190 million¥

Net income¥

8,670 million¥

13,190 million¥

932,896 million

Total assets acquired¥

927,318 million¥

10,016 million
10,015 million

922,128 million¥

1,105,979 million ¥1,095,828 million ¥1,085,296 million

Net assets¥

498,784 million

Interest-bearing liabilities¥

488,741 million¥

45.1 %

LTV

482,698 million¥

44.6 %

44.5 %*The above forecast distribution is calculated based on certain assumptions as disclosed in “SUMMARY OF FINANCIAL RESULTS (REIT) For the 4th Fiscal Period Ended August 31, 2017,” published October 13, 2017. 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 the circumstances surrounding NMF. The distribution forecast is not a guarantee of distributions.

Operating Revenue

Net Income(Millions of yen)
40,000(Millions of yen)
15,00038,13934,714

13,19033,36530,97630,00010,015

10,00024,313

9,355
8,670

20,000

5,000

4,048

10,0000

1st FP

2nd FP

3rd FP

4th FP

5th FP(Forecast)

1st FP

2nd FP

3rd FP

4th FP

5th FP(Forecast)

3,036

3,028

3,037

3,020

2nd FP

3rd FP

4th FP

5th FP(Forecast)

Cash Distribution per Unit

Net Assets per Unit

(Yen)
4,000

(Yen)
150,000

128,318

0

128,777

132,939

133,0693,000
100,000

Gain on sales
299
2,219

2,000
2,737

50,0001,000

0

1st FP

3 Nomura Real Estate Master Fund

2nd FP

3rd FP

4th FP0

1st FP

Director and Managing Executive Officer’s Review

TRANSITIONING FROM THE QUALITY PHASE TO THE GROWTH PHASE

The new NMF was formed two years ago through the merger of three REITs. We
designated the first stage of our Medium-to Long-term Management Strategy as
our Quality phase. Our various initiatives have produced results, and during thefourth fiscal period, we largely reached the goals we had set for the Quality phase.
Thus, the fourth fiscal period marked the start of our transition to the next phaseof our strategy: the Growth phase.

Ken Okada
Director and Managing Executive Officer,
Head of NMF Investment Management Group,
Nomura Real Estate Asset Management Co., Ltd.

Strategic Property Replacements
to Dateof about ¥100 billion, roughly double the initial target.
Specifically, we’ve sold 28 properties with an average age

I’d like to begin by reviewing the achievements of the twoof 36.0 years. We’ve thus met our initial targets for improv-

years since the new NMF’s establishment in Octobering the portfolio’s quality three years earlier than originally2015. Looking at property sales, our original plan was toplanned. This record of 28 dispositions sets us well apartsell around ¥50 billion in properties over about five years.

from other J-REITs. Based in part on shifting cap rates, we

In just two years, however, we have realized property sales

decided that it was a good time to sell.

NMF dispositions for the last two years since fund inception in October 2015*
Original Plan
OfficeRetailLogistics
Residential
Other
Total

Term: 5 years
20~25 properties¥50,000million

Result of Sales
Number ofproperties

Building Age

Acquisition
price (¥mln)

11
5
4
8
0
28

40.0
34.0
12.6
25.9
—
36.0

57,76826,199
6,580
3,285
—
93,832

Sales price(¥mln)

60.138 (60%)
28,660 (29%)
7,304 (7%)
3,445 (3%)——
99,547 (100%)Gain on sales(¥mln)

4,221

Distribution

Total ¥1,113 mln(¥299 per unit)
in Aug. 2016

Internal
Reserves

Total ¥3,107 mln(¥742 per unit)

4,221*The figures show the number of properties NMF has completed dispositions from October 1, 2015 through September 30, 2017. However, the impairment loss as at the 1st Fiscal Period and loss
on the sale of Morisia Tsudanuma after the end of the 5th Fiscal Period are excluded from the gains and the losses from sales

Nomura Real Estate Master Fund4

Director and Managing Executive Officer’s Review

TRANSITIONING FROM THE QUALITY PHASE TO THE GROWTH PHASE

Turning to property acquisitions, we are working to achieve

As we’ve implemented the SPRs, we have improved port-

external growth mainly focused on properties developed

folio quality (in terms of NOI and property age), maintainedby the sponsor, Nomura Real Estate Development Co., Ltd.

appropriate LTV control and increased the distribution per

In two years, we have acquired 42 properties for moreunit (internal reserves). We have managed to bring the NOI

than ¥230 billion yen. Although this figure includes theyield up to 5.2% despite difficult property market condi-

merger with TOP REIT, which is a somewhat special cir-tions and a tendency toward decreasing cap rates. In terms

cumstance, it stands out as exceptionally high in compari-of property age, we’ve reduced the portfolio’s average age

son to other J-REITs.

by about three years compared to where it would be had
we not implemented the SPRs. This, too, is an achieve-

Breakdown of acquisitions for the last two years(excluding M&A: Oct. 2015-Sep. 2017)

Residential

0.5%

Logistics

Thanks in part to upward rent revisions, for the fourth fiscal period, we were able to pay a distribution per unit ofSectorDiversification

20.0%

25.5%

stable distributions.

23.1%

7.4%

46.4%

Portfolio Mix
as of Sep. 2017

16.3%
5.2%

billion. Of this, we have designated approximately ¥3.1 bilagainst market changes and other future risks to ensure

Office5.2%

duced a gain on sales of properties of approximately ¥4.2
lion (¥742 per unit) as retained earnings in order to guard

Investing in diversified sectors
Othersment of the Quality phase. Furthermore, the SPRs pro-

¥3,037, ¥87 (2.9%) higher than forecast. I believe that we
now have the strength to maintain a steady distribution perunit of over ¥3,000 going forward. We are also focusing on
building a stable financial base, and we have been able tooperate while keeping the LTV ratio at around 45%.

11.6%

Retail in
Residential Area

0.7%

Retail near Station

Increased portfolio quality

38.1%

Property
Acquisitions

26.4%

3.9%

Over 70% of
properties arecompletedwithin 5 years

NOI yield

0-4 yrs

69.7%

Age (years)

M&A 197

Property
Dispositions

10-14 yrs

5-9 yrs

4

1

17

5.0%

4.9%

19.3

19.6

5.1%

5.1%

7*

4

Achievementof SPR
10*

1

5.2%

5.1%
21.8

18.7

19.5

DPU
DPU(gain on sales)Internal reserves
LTV

19.0

(in case of
unexecuted
SPR)

299

3,028

3,037

(NOI / Age)

18.9

Controlling
LTV

742

¥3,000

Increased
portfolio
quality

3,020

2,737
2,219

Others3.6%

Growth in DPU(Internal reserves)

45%

Nagoya

43.4%

1.2%

43.8%

45.1%

44.6%

44.5%

Feb.
2017

Aug.
2017

Feb.
2018
(Forecast)

Sapporo

9.0%

Osaka

12.2%

Tokyo Area +Major Cities

Fund’sinception(Oct.2015)

Tokyo Area

74.0%

Feb.
2016

Aug.
2016

*Excluded both additional acquisitions and additional dispositions.

In light of these results, we are, for the time being, concluding our SPRs ahead of schedule and transitioning to
the Growth phase, the second phase of the Medium-to
Long-term Management Strategy, from the fifth fiscal period. Going forward, we will seek to enhance distributions as
we aim to promote further growth.

5 Nomura Real Estate Master Fund

Director and Managing Executive Officer’s Review

SHIFT TO THE GROWTH PHASENMF completed its Quality phaseincluding SPRs in two years, three years
ahead of schedule. NMF has advanced to
the Growth phase.
As I’ve said before, I believe that NMF’s initiatives implemented over the past two years have shown themselves
to be strategically correct.
Through SPRs, we have executed property sales that
more than doubled our initial target of ¥50 billion, bringing
down the portfolio’s average property age and generally
improving its quality. In terms of internal growth, we are
steadily accumulating results, mainly in the office sector,

property sales as part of our SPRs have often caused

and I think that we have built up the capacity to steadily

declines in property revenue, somewhat impacting distri-pay distributions per unit of over ¥3,000 going forward.

bution growth. With the transition to the Growth phase,In light of these achievements, in the fifth fiscal period

however, we are concluding SPR-related property sales

we will move out of the Quality phase and into thefor the time being, so I think that the revenue-increasing

Growth phase, actively expanding our assets mainly

effects of such efforts will more clearly translate to distri-through acquisitions of PMO, GEMS and other properties

bution growth.

developed by the sponsor, Nomura Real Estate

Asset growth, distribution growth, and a public offering

Development Co., Ltd., while also redoubling efforts toto raise our total market capitalization and the size of theincrease rent revenue. Based on these initiatives, duringfund—advancing these growth measures will be thethis phase, we will be more focused on growth. Until

core of NMF’s strategy as we move boldly into thenow, while we have achieved rent revenue increases,

Growth phase.

GrowthQuality
Oct. 2015

Aug. 2017

10 yrs from fund inception

External
GrowthSPR+199% disposition
to initial planInternal
GrowthMasterInternal
GrowthRevaluation of
DPU level

Focused on investing
sponsor-developed properties
Sufficient sponsor pipeline
with over 60 properties

Further revenue growthin office sector
Active negotiation with large tenants
to increase rent DPU control
with internal reserves

AUM
AUM ¥1.5 trillion
Various management
indicators remain stable

Fund brandEstablish NMF brandin J-REIT market

Expand market capitalization
PO

1st PO
Increase ininvestment units(+12.4%) by M&A

Increase unitholder value
by public offering (PO)in line with equity market

Become a representative
J-REIT brand

Nomura Real Estate Master Fund

6

Director and Managing Executive Officer’s Review

ROBUST SPONSOR PIPELINE

In recent years, the real estate market has grown quite
heated. Amid these difficult conditions for external prop-

We are aiming for ongoing external
growth using the PMO series and otherproperties in Nomura Real Estate’s
pipeline.

erty acquisitions, we are acquiring carefully selected newproperties from external sources. That said, NMF makes
full use of the development pipeline of Nomura Real
Estate Development Co., Ltd., its sponsor, and this pipeline
has served as the principal driver of its external growth.
As a general developer, Nomura Real Estate Co., Ltd.,
actively develops a wide range of properties, including

Nomura Real Estate’s Core Office Brand
Name

PMO Shibadaimon

PMO Nihonbashi
Mitsukoshimae

PMO is a new category of office building that is mid-sized
yet offers the functionality and grade of a large-sized building to meet the needs of increasingly diverse businesses.
Strategy 1

Office buildings where people will be proud towork, strengthening hiring and retention

Strategy 2

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

Strategy 3

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

Strategy 4

Places that stimulate employee motivation andcommunication, fostering enhanced productivity

Location

Planned Completion

StatusPMO Shibadaimon

Minato, Tokyo

Completed 2014

Operating

PMO Hirakawacho

Chiyoda, Tokyo

Completed 2016 NMF Acquired

PMO Nihonbashi Edo-dori *Chuo,Tokyo

Completed 2016

Operating

PMO Nihonbashi Mitsukoshimae Chuo,Tokyo

Completed 2016

Operating

PMO Shin-Nihonbashi

Chuo,Tokyo

Completed 2016 NMF Acquired

PMO Kanda Iwamotocho

Chiyoda, Tokyo

Completed 2017

Operating

PMO Nishi-Shinbashi

Minato, Tokyo

Completed 2017

Operating

PMO Uchi-Kanda

Chiyoda, Tokyo

Completed 2017

Operating

PMO Shibuya

Shibuya, Tokyo

Completed 2017

Operating

PMO Hanzomon

Chiyoda, Tokyo

Completed 2017

Operating

PMO Shinjuku-gyoen

Shinjuku, Tokyo

Sep. 2018

Under Construction

PMO Tamachi II

Minato, Tokyo

Feb. 2018

Under Construction

PMO Higashi-Shinbashi

Minato, Tokyo

Apr. 2018

Under Construction

PMO Hatchobori III

Chuo,Tokyo

Mar. 2018

Under Construction

PMO Otemachi

Chiyoda, Tokyo

Jul. 2020

Under Construction

PMO Ochanomizu

Chiyoda, Tokyo

Jul. 2018

Under Construction

PMO Hamamatsucho

Minato, Tokyo

Nov. 2018

Under Construction

PMO Kandasudacho

Chiyoda,Tokyo

Apr. 2020

Planning

PMO Shinkawa 2-chome*

Chuo,Tokyo

Apr. 2018

Under Construction

PMO Akihabara III

Taito,Tokyo

Jan. 2019

Under Construction

PMO Nishi-Shinjuku

Shinjuku, Tokyo

Jun. 2019

Planning

PMO Shibuya II

Shibuya, Tokyo

Aug. 2020

Planning

PMO Gotanda

Shinagawa, Tokyo

Jul. 2019

Planning

Planned Completion

Status* ‌Joint venture

Nomura Real Estate’s Core Logistics Facility Brand
Name
Landport Kashiwa-shyonan II

Landport Iwatsuki

Location
Kashiwa, Chiba

Completed 2016 NMF Acquired

Landport Kashiwa-shyonan I

Kashiwa, Chiba

Completed 2016 NMF Acquired

Landport Iwatsuki

Saitama, Saitama

Completed 2016

Operating

Landport Hachioji II

Hachioji, Tokyo

Completed 2016

Operating

Landport Komaki *Komaki, Aichi

Completed 2017

Operating

Landport Shinonome

Koto, Tokyo

Aug. 2018

Planning

Landport Narashino

Narashino, Chiba

Dec. 2019

Planning

Landport Kawaguchi

Kawaguchi, Saitama

Jan. 2020

Planning

Landport Higashi-Narashino

Narashino, Chiba

Aug. 2019

Planning

Landport logistics facilities offer advanced functionality to

Landport Ome I

Ome, Tokyo

Jan. 2019

Planning

meet the needs of the changing logistics environment andLandport Ome II

Ome, Tokyo

Jun. 2020

Planning

Landport Ome III

Ome, Tokyo

Jun. 2020

Planning

Landport Koshigaya

Koshigaya, Saitama

Jun. 2020

Planning

diverse tenants.
Designed for optimized, efficient logistics to enhancetenant satisfaction.

7 Nomura Real Estate Master Fund* ‌Joint ventureDirector and Managing Executive Officer’s Review

ROBUST SPONSOR PIPELINE

office and retail facilities. Today, two years after NMF’s

redeveloped as the Landport Higashi-Narashino Project.

establishment, the sponsor’s stock of property has grown

The ability to make transactions across property sectors

to approximately ¥270 billion. Included in this stock areis one of the strengths of NMF as a diversified REIT withproperties that NMF has sold to the sponsor throughNomura Real Estate Co., Ltd., a general developer, as its

SPRs, properties that the sponsor is now working to rede-sponsor. NMF will continue to use these strengths tovelop. For example, the former Mitsubishi Motors

reinforce its external growth, steadily expanding its

Suginami and Mitsubishi Motors Shibuya are being rede-assets by tapping into the rich new asset acquisition

veloped as part of the PROUD FLAT series, and the for-opportunities offered by the sponsor’s pipeline.

mer Ito-Yokado Higashi-Narashino Store is being

Nomura Real Estate’s Core Retail Facility Brand
Name

GEMS Jingu-mae

GEMS Ebisu

Location

Planned Completion

StatusGEMS Daimon

Minato, Tokyo

Completed 2016 NMF Acquired

GEMS Kanda

Chiyoda, Tokyo

Completed 2016 NMF Acquired

GEMS Ebisu

Shibuya, Tokyo

Completed 2017

Operating

GEMS Jingu-mae

Shibuya, Tokyo

Apr. 2018

Under Construction

GEMS KayabachoChuo,Tokyo

Feb. 2018

Under Construction

GEMS Namba

Osaka,Osaka

Nov. 2018

Under Construction

GEMS Tamachi

Minato, Tokyo

Feb. 2019

Under Construction

GEMS Nishi-Shinjuku

Shinjuku, Tokyo

Not fixed

Planning

GEMS Sangenjaya

Setagaya, Tokyo

May. 2018

Under Construction

GEMS Shin-Yokohama

Yokohama, Kanagawa

Jul. 2018

Under Construction

GEMS retail facilities are located mainly in urban areas and

GEMS Shinbashi

Minato, Tokyo

May. 2018

Under Construction

comprised primarily of a rich variety of select restaurants.

GEMS Sakae

Nagoya, Aichi

Aug. 2019

Planning

Facilities offer new lifestyle ideas to brighten and enrich
the everyday lives of nearby office workers and residents.

<Other Retail facilities>
MIRRAZA Jingumae*

Shibuya, Tokyo

Jun. 2017

Operating

Jinbo-cho

Chiyoda, Tokyo

May. 2019

Planning

Suginami

Suginami, Tokyo

Sep. 2018

Planning

Hiroo

Shibuya, Tokyo

May. 2019

Planning* ‌Renovation of existing retail property. Scheduled completion refers to the scheduled completionof the renovation.

Nomura Real Estate’s Core Residential Facility Brand
Name

PROUD FLAT Sotokanda PROUD FLAT Noborito

PROUD FLAT properties are developed on locations optimally suited for urban rental housing selected by leveraging

Location

Planned Completion

StatusPROUD FLAT Sangenjaya II

Setagaya, Tokyo

Completed 2014

Operating

PROUD FLAT Higashi-Kanda

Chiyoda, Tokyo

Completed 2015

Operating

PROUD FLAT Mitsukoshi-mae Chuo,Tokyo

Completed 2015

Operating

PROUD FLAT Sugamo II

Toshima, Tokyo

Completed 2015

Operating

PROUD FLAT Yoyogi Hachiman Shibuya, Tokyo

Completed 2016

Operating

PROUD FLAT Soto Kanda

Chiyoda, Tokyo

Completed 2016

Operating

PROUD FLAT Noborito

Kawasaki, Kanagawa

Completed 2016

Operating

PROUD FLAT Nakaochiai

Shinjuku, Tokyo

Completed 2016

Operating

PROUD FLAT Asakusabashi

Taito, Tokyo

Completed 2017

Operating

PROUD FLAT Monzen Nakacho V Koto, Tokyo

Oct. 2017

Under Construction

PROUD FLAT Miyazakidai

Kawasaki, Kanagawa

Feb. 2018

Under Construction

PROUD FLAT Togoshi

Shinagawa, Tokyo

Jan. 2019

Planning

the Nomura Real Estate Group’s information network and

PROUD FLAT Asakusabashi II Taito, Tokyo

Jan. 2019

Planning

know-how related to housing development and sales.

PROUD FLAT Higashi-Nihonbashi Chuo,Tokyo

Oct. 2018

Under Construction

PROUD FLAT Asakusabashi III Taito, Tokyo

Aug. 2018

Under Construction

PROUD FLAT Asakusa Kaminarimon Taito, Tokyo

Jan. 2019

Under Construction

PROUD FLAT Ryogoku

Sumida, Tokyo

Nov. 2018

Planning

housing complex design standards and quality control

Tomigaya 2-chome

Shibuya, Tokyo

Feb. 2019

Planning

inspection guidelines.

Kiba 5-chome

Koto, Tokyo

Feb. 2020

Planning

Quality control and proper operations and management
are ensured using Nomura Real Estate’s proprietary rental

Properties already acquired by NMF

Properties being redeveloped through SPRs

*1 Based on Nomura Real Estate Holdings, Inc.’s presentation materials for the first half of the six months from April to September 30, 2017.
*2 As of the date of this document’s publication, NMF has not made plans to acquire any of the above properties (except those indicated as already acquired by NMF).

Nomura Real Estate Master Fund

8

Director and Managing Executive Officer’s Review

NMF’S ESG INITIATIVES

We are also actively working to obtain DBJ Green Building
certification. In the fourth fiscal period, nine properties
were newly certified, bringing the total portion of the port-

NMF works with the Asset Management
Company to enhance unitholder value
over the medium to long term bycarrying out asset management withconsideration for the environment,
society and governance.

folio that is certified up to 47.2% (leasable floor spacebasis). We will continue working to obtain high environmental performance ratings.
Nine newly certified propertiesPMO Tamachi

Social concern for the environment is rising. NMF has now
obtained a 5-star ranking, the highest on the five-grade

PMO Ginza
Hatchome
Hanyu Logistics
CenterEstate Assessment, a sustainability benchmark for real
Furthermore, in recognition of excellent disclosure of environment- and sustainability-related initiatives, NMF has
received an “A” rating, the highest on a five-grade scale,under the GRESB Public Disclosure Level evaluation
scheme launched in 2017.

PMO Shibakoen

Izumiya Obayashi
Kawaguchi Ryoke
Logistics Center

MF Shinjuku EAST
Building
Sagamihara Shopping
Centerscale that compares overall scores on the GRESB Realestate companies and property management entities.

Universal CityWalk
Osaka‌Acquiring certification under BELS (Building-Housing

Energy-efficiency Labeling System) / Acquired for 19.8%
of portfolio (total floor space basis)‌Implementing energy efficiency assessments: Considering

further measures to reduce environmental burden‌Improving water use efficiency / Installed water-saving

auto-sanitizers and smart irrigation facilities‌Launched sustainable procurement / Added environ-ment-oriented conditions to agreements with contractors‌Held locally rooted community events / Hosted a sum-mer festival at Recipe SHIMOKITA and events at Morisia
Tsudanuma‌Active information disclosure (via website) / Began

disclosure of information on energy use, water use andgreenhouse gas emissions. Expanded information on
related initiatives

In addition to GRESB, NMF also takes part in evaluations byother globally notable ESG ratings organizations, including
oekom research, Vigeo Eiris and Sustainalytics, and is
working to obtain ratings from such organizations.

9 Nomura Real Estate Master Fund

Director and Managing Executive Officer’s Review

INTERNAL GROWTH

Like external growth, internal growth is one of the strate-

Retailgies we are focusing most on. In particular, we regard theIn the retail sector, almost all our portfolio properties haveoffice sector as the main driver of internal growth, and it
is helping to increase distributions.

fixed rent, providing stable revenue. In terms of upside,sales-linked rents—mainly at Universal CityWalk Osaka—
are providing revenue increases, and we continue to

Officefocus efforts on increasing occupancy rates at our exist-

In the fourth fiscal period, the overall average monthly

ing properties.

rent for our office properties rose from ¥17,419 per tsubo(3.31 m2) to ¥17,504. This is a per-tsubo rent increase ofnORBESA Acquired in Mar. 2017
A renewed tenant mix on the first floor, from a tax-free

85 yen, or 0.5%, from the period before.
In the fourth fiscal period, rent increases with major

store to a store featuring specialty foods and goods intenants were especially notable. Of all tenants with which

Hokkaido, helped attract new customers and resulted in a

we negotiated rent revisions, including those at Shinjuku

6.3 % rent increase during the 4th period.

Nomura Building and Harumi Island Triton Square OfficeTower Y, approximately 31.4% (on a rent basis) weremajor tenants leasing spaces of over 500 tsubo.
In addition, 14 tenants at PMO properties, which are thecore of our office property acquisitions, renewed theircontracts with us. With 11 of these, accounting for morethan 70% of the total, we achieved upward rent revisions
Hokkaido Kurashi Hyakkaten opened on the first floor in June 2017. Shown in the above
photos, the popular store is operated by Sapporo Drug Store, which is expanding their business to stimulate the regional economy through a comprehensive partnership with the government of Hokkaido.

averaging 4.5%.
Average rent for 3rd period was increased 0.5% fromprevious period (¥17,419/tsubo ¥17,504/tsubo)
Average Rent (¥/tsubo)

17,795

Amount effected bysales and purchases

291
17,419In logistics, we have no contract revisions scheduled
until the sixth fiscal period, so we expect stable operations for the time being. Currently, we are working to sign
new contracts for Landport Atsugi. We have reachedagreements for three-fourths of the property’s total
14,518 tsubo and have been successfully increasing

17,021rents. The occupancy of all our other logistics properties
17,504

16,628

16,599is 100%.
In residential facilities, during the fourth fiscal period,
there were 1,200 contract revisions, of which we
increased rents for 680. As a result, we achieved an aver-Apr. 2015

Feb. 2016(5 months)

Aug. 2016

Feb. 2017

Aug. 2017

age rent increase for all residential properties of about¥60 per tsubo.
Although the residential sector is relatively non-volatile,

Contract Renewals at PMO series

we have been reliably achieving growth of ¥60 per tsubo
each period.

Unchanged

3

Increased

11

The office, retail and residential sectors have all been
acting as growth drivers, helping to increase distributions.

PMO Series
Contract Renewals

Rent increased rateof tenants withincreased rent:

4.5%

NMF raised rents for 11 of the 14 tenants that renewed contracts during the 4th period (and decreased rents for none).
The rate of increase is above average.
Nomura Real Estate Master Fund

10

Financial Strategy

FINANCIAL HIGHLIGHTSNMF continues to take advantage of low interest rates to extend the maturities and lower the interest rates of its borrowings
through refinancing.

LTV

Interest-bearing Liabilities

44.6

%

¥

488,741

millionRatio of Long-term Debt

Ratio of Fixed-rate Debt

88.0

94.9

%

%

Diversification of Repayment Dates
Diversification of Repayment Dates
Borrowings

Investment corporation bonds(Millions of yen)
40,00030,00020,00010,0000

5th 6th 7th 8th 9th 10th 11th 12th 13th 14th 15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th 27th 28th 29th 30th 31st
FP
FP
FP
FP
FP
FP
FP
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. Feb. Aug. Feb. Aug. Feb. Aug. Feb.
2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 2027 2028 2028 2029 2029 2030 2030 2031

Financing in the Fourth Fiscal Period
New Borrowings

Refinancing

New Funding*1

Debt Repaid (At time of repayment)

26,700 million

Total

¥

0.48%

Average interest rate
Average remaining duration

New Funding*2

1.0 years

Total

¥

50,070 million
0.91%

Average interest rate
Average remaining duration¥

Average remaining duration

0.54%
6.5 years*2	‌Of the total amount, ¥5,000 million was borrowed
through a commitment line and repaid in full before
maturity, on May 26th, 2017. For this borrowing, theinterest rate and duration used to calculate the averageinterest rate and duration are those at the time ofprocurement; for all other borrowings, the respective
period-end figures were used.

Credit Ratings

Commitment Lines

Rating Agency

RatingOutlook

JCR

AA

StableR&I

A+

StableLong-term Corporate
Rating: A
Short-term Corporate
Rating: A-1

11 Nomura Real Estate Master Fund

50,070 million

Total
Average interest rate

5.1 years*1	‌The entire above amount was borrowed through commitment lines and was repaid before maturity in three
installments on May 26th, June 20th and July 19th,
2017. Average interest rate and duration are calculatedusing the figures at the time of procurement.

S&P

New Funding (At period-end)

Loan Limit(commitment period)

Commitment Line 2¥40.0 billion¥10.0 billion(one year)(three years)

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation

Participating
Financial Institutions

StableCommitment Line 1

Mizuho Bank, Ltd.
Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Trust Bank, Limited

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

Financial Strategy

BALANCE SHEET HIGHLIGHTS

4th fiscal period DPU: ¥3,037 (¥87 higher than forecast)
5th fiscal period DPU forecast: ¥3,020(Millions of yen)

Main factors accounting fordifferences between Aug. 2017
period forecasts and results

Ended
Ended Aug. 31, 2017
Differences Feb. 28, 2018 Differences(4th FP)(5th FP)
Forecasts(A) Result(B)Operating revenue(B)-(A) Forecasts(C)(C)-(B)

Ordinary income
Net income

35,86931,6203,197
1,052
22,457
15,841
1,827
2,878
4,951
6,183
3,057
2,622
936
13,412
—
2,634
2,627
6
10,777
10,77638,13931,6563,375
3,107
22,403
15,962
2,083
2,883
4,862
6,133
3,063
2,622
755
15,735
24
2,569
2,563
6
13,19013,190

2,269
36
177
2,055
-53
121
255
4
-89
-49
5
—
-181
2,323
24
-64
-64
—
2,412
2,413

33,36530,5512,810
320,86014,652
1,548
2,700
4,752
5,651
2,960
2,622
625
12,504
—
2,487
2,479
8
10,016
10,015-4,774-1,105-565-3,103-1,542-1,310
-534
-183
-109
-482
-102
—
-129
-3,231
-24
-82
-83
1
-3,174-3,174

Earnings aDistribution in excess of profit b
Total distributions a+ b
Internal reserves c

10,436
1,903
12,3401,052

12,704—
12,704
3,107

2,267-1,903363
2,055

10,286
2,346
12,633
3-2,417
2,346-71-3,103

DPU

2,950
2,495
—

3,037
3,037
—

87
542
—

3,020
2,459
295

-17
-578
295

455

—

-455

266

266

1,109,104 1,095,828
939,838
927,318
504,941
488,741
45.5%
44.6%
—
607,808
23,92723,931
17,29917,568-13,275-12,520-16,200
-0.9%
—
3
269

1,085,296
922,128
482,698
44.5%—
23,461
17,388-10,531-5,190-6,042
-0.1%
—
-469
-179

Rental revenues
Other rental revenues
Gain on sales of real estate

Operating expense
Rental business expenses  Repair expenses   Tax and public dues   Depreciation and amortization  Others
Asset management fees
Amortization of goodwill
Other operating expenses

Operating profit
Non-operating revenues
Non-operating expenses
Interest expenses and other financial costs
Other non-operatng expenses

Distributions of earnings
Distributions in excess of retained earnings per unit
Distributions in excess of retained earnings per unit
(other distributions in excess of net earnings)

TotaI assets
Acquisition priceInterest-bearing debt
LTV
Market capitalization

NOI
FFO

+ Positive‌
Increase
rental revenues
due to internal growth
and acquisitions+¥373 mln

‌Gain on sales+¥2,055 mln(internal reserves)‌
Decreaseother operating
expenses+¥181 mln

– Negative‌
Decrease
rental revenues
due to disposition- ¥159 mln‌(Merad Owada, Ota Nitta LC, Ota
Higashi-shinmachi LC,Ota Kiyohara
LC, Chiyodamachi LC)‌Increase rental expenses(Increase in repair expenses ofexisting properties)- ¥121 mln

Main factors accounting fordifferences between
Aug. 2017 period results andFeb. 2018 forecasts+ Positive‌
Increase
rental revenues
due to acquisition+¥404 mln‌
Decreasein rental
expenses+¥1,448 mln‌(Decrease in repair expenses, tax
and property management fees
due to disposition)– Negative‌
Decreasein rental revenue -¥1,835 mln
due to disposition‌Decrease in gain on sales -¥3,103 mln*Figures have been truncated at millions of yen.

Factors in change of DPU (¥/unit)
August 2017 period (4th)3,500

Increase in rental revenues
OfficeRetailLogistics
Residential
Increase in utility
expenses received
OthersCancellation fees,
pay-by-the-hour parking
fees, move-in andrenewal fees, etc.
Impact on asset swap
51

3,000

251

2,950

+34
+26
+5
-11
+14
+14
+36
+7
-14

February 2018 period (Forecast)Internal reserves
DPU

Decrease in other expenses
Increase in taxes and dues,
consumption taxes
Decrease in financial costs

+52
-9
+15

491

-33
-28

742

64

Increase in repair expenses -55
Decrease in leasing fees
+20
Increase in utility expenses -16
Others+15
Impact on asset swap
+6

Decrease in rental -32
revenue
Decrease in rental +53
expenses
Repair expenses +83

-108
21

3,037

Decrease in asset+24
management fees
Decrease in taxes and+28
dues, consumption taxes
Decrease in financial+19
costs, etc

70

3,020

Acquisitions
63
disposition -171

2,500
Aug. 2017
period DPU(Forecast)Rentalrevenues

Rental business
expenses

OthersGain on sales

Aug. 2017
period DPU(Result)

Propertyacquisitions &disposition

Existing
properties

OthersFeb. 2018
period DPU(Forecast)

Nomura Real Estate Master Fund

12

Portfolio

PORTFOLIO LIST (AS OF THE END OF THE 4TH FISCAL PERIOD)

Location

Acquisition
Price

Location

Acquisition
Price

Office Buildings
Of-T-001 Shinjuku Nomura Building

Rt-T-012
Shinjuku, Tokyo

43,900Rt-T-013

Sundai Azamino

Yokohama, Kanagawa

1,700

EQUINIA Aobadai

Yokohama, Kanagawa

Of-T-002

NRE Tennozu Building

Shinagawa, Tokyo

20,500Rt-T-014

1,560

Megalos Kanagawa

Yokohama, Kanagawa

Of-T-003

Kojimachi Millennium Garden

Chiyoda, Tokyo

26,7001,000

Rt-T-015

Mitsubishi Motors Meguro

Meguro, TokyoOf-T-006

NMF Shinjuku Minamiguchi Building

Shibuya, Tokyo

10,0002,740

Rt-T-016

Mitsubishi Motors Chofu

Chofu, Tokyo

1,760

Of-T-007NMF Shibuya Koen-dori Building

Shibuya, Tokyo

10,400Of-T-008

Secom Medical Building

Chiyoda, Tokyo

11,100Rt-T-018

Mitsubishi Motors Nerima

Nerima, Tokyo

1,240

Rt-T-019

Mitsubishi Motors Kawasaki

Kawasaki, Kanagawa

Of-T-009

NMF Shiba Building

Minato, Tokyo

7,040

950

Rt-T-020

Mitsubishi Motors Takaido

Suginami, TokyoOf-T-010

Nishi Shinjuku Showa Building

Shinjuku, Tokyo

850

8,140

Rt-T-021

Mitsubishi Motors Katsushika

Katsushika, TokyoOf-T-011

NRE Shibuya Dogenzaka Building

800

Shibuya, Tokyo

5,310

Rt-T-022

Mitsubishi Motors Higashikurume

Higashikurume, TokyoOf-T-013

800

Iwamoto-cho Toyo Building

Chiyoda, Tokyo

4,050

Rt-T-023

Mitsubishi Motors Setagaya

Setagaya, Tokyo

770

Of-T-015

NMF Surugadai Building

Chiyoda, Tokyo

4,690

Rt-T-025

Mitsubishi Motors Sekimachi

Nerima, Tokyo

600

Of-T-016

PMO Nihonbashi Honcho

Chuo, Tokyo

4,320

Rt-T-026

Mitsubishi Motors Higashiyamato

Higashiyamato, Tokyo

450

Of-T-017

PMO Nihonbashi KayabachoChuo, Tokyo

5,010

Rt-T-027

Mitsubishi Motors Motosumiyoshi

Kawasaki, Kanagawa

370

Of-T-018

NMF Gotanda Ekimae Building

Shinagawa, Tokyo

4,430

Rt-T-028

Mitsubishi Motors Kawagoe

Kawagoe, Saitama

350

Of-T-019

NRE Higashi-nihonbashi Building

Chuo, Tokyo

3,570

Rt-T-029

Mitsubishi Motors Edogawa

Edogawa, Tokyo

200

Of-T-020

PMO Akihabara

Chiyoda, Tokyo

4,240

Rt-T-030

Mitsubishi Motors Sayama

Sayama, Saitama

160

Of-T-021

Hatchobori NF Building

Chuo, Tokyo

2,480

Rt-T-031

NRE Kichijoji Building

Musashino, Tokyo

10,410Of-T-022

NMF Kanda Iwamotocho Building

Chiyoda, Tokyo

4,160

Rt-T-032

GEMS Ichigaya

Chiyoda, Tokyo

2,080

Of-T-023

NMF Takanawa Building

Shinagawa, Tokyo

2,830

Rt-T-033

Sagamihara Shopping Center

Sagamihara, Kanagawa

6,840

Of-T-024

PMO Hatchobori

Chuo, Tokyo

2,880

Rt-T-034

Musashiurawa Shopping Square

Saitama, Saitama

2,720

Of-T-026

PMO Nihonbashi Odenmacho

Chuo, Tokyo

2,210

Rt-T-036

Summit Store Naritahigashi (Land)

Suginami, Tokyo

700

Of-T-028

PMO Higashi-nihonbashi

Chuo, Tokyo

1,690

Rt-S-001

Universal CityWalk Osaka

Osaka, Osaka

15,500

Settlement
Number

Property Name(Millionsof yen)Settlement
Number

Property Name(Millionsof yen)Of-T-029

NRE Ueno Building

Taito, Tokyo

6,470

Rt-S-002

Izumiya Senrioka

Suita, Osaka

8,930

Of-T-031

NF Hongo Building.

Bunkyo, Tokyo

4,890

Rt-S-004

Izumiya Yao

Yao, Osaka

4,406

Of-T-034

Crystal Park Building

Musashino, Tokyo

3,390

Rt-S-005

Izumiya Obayashi

Takarazuka, Hyogo

3,020

Of-T-035

NMF Kichijoji Honcho Building

Musashino, Tokyo

1,780

Rt-S-006

Ichibancho stear

Sendai, Miyagi

4,700

Of-T-036

Faret Tachikawa Center Square

Tachikawa, Tokyo

3,850

Rt-S-007EQUINIA Aobadori

Sendai, Miyagi

1,640
1,060

Of-T-037

NMF Kawasaki Higashiguchi Building

Kawasaki, Kanagawa

7,830

Rt-S-008

MEL Building

Sendai, Miyagi

Of-T-038

NMF Yokohama Nishiguchi Building

Yokohama, Kanagawa

5,460

Rt-S-009

nORBESA

Sapporo, Hokkaido

8,500

Of-T-039

NMF Shin-Yokohama Building

Yokohama, Kanagawa

2,620

Rt-S-010

Nakaza Cui-daore Building

Osaka, Osaka

11,600Subtotal (42 properties)

Of-T-041

PMO Tamachi

Minato, Tokyo

6,210

Of-T-042

PMO Ginza Hatchome

Chuo, Tokyo

3,970

Of-T-043
Of-T-044

PMO Shibakoen

Minato, Tokyo

3,900

Logistics Facilities

NEC Head Office Building

Minato, Tokyo

44,100

Lg-T-001

Landport Urayasu

Urayasu, Chiba

17,400Of-T-045

Harumi Island Triton Square Office Tower Y

Chuo, Tokyo

18,200

Lg-T-002

Landport Itabashi

Itabashi, Tokyo

15,710Of-T-046

NMF Aoyama 1-chome Building

Minato, Tokyo

10,400

Lg-T-003

Landport Kawagoe

Kawagoe, Saitama

13,700Of-T-047

NMF Takebashi Building

Chiyoda, Tokyo

8,330

Lg-T-004

Landport Atsugi

Atsugi, Kanagawa

11,410Of-T-048

Harumi Island Triton Square Office Tower Z

Chuo, Tokyo

8,180

Lg-T-005

Sagamihara Tana Logistics Center

Sagamihara, Kanagawa

10,600167,723

Of-T-049

NMF Kayabacho Building

Chuo, Tokyo

6,070

Lg-T-006

Sagamihara Onodai Logistics Center

Sagamihara, Kanagawa

8,700

Of-T-050

NMF Shinjuku EAST Building

Shinjuku, Tokyo

5,710

Lg-T-007

Landport Hachioji

Hachioji, Tokyo

8,250

Of-T-051

NMF Shiba-Koen Building

Minato, Tokyo

3,620

Lg-T-008

Landport Kasukabe

Kasukabe, Saitama

7,340

Of-T-052

NMF Ginza 4-chome Building

Chuo, Tokyo

1,850

Lg-T-009

Funabashi Logistics Center

Funabashi, Chiba

4,660

Of-T-053

Tachikawa, Tokyo
Sapporo, Hokkaido

1,850
6,250

Lg-T-010

Atsugi Minami Logistics Center B Tower

Atsugi, Kanagawa

4,590

Of-S-001

Faret East Building
Sapporo North Plaza

Lg-T-011

Hanyu Logistics Center

Hanyu, Saitama

3,810

Of-S-002

NRE Sapporo Building

Sapporo, Hokkaido

4,140

Lg-T-012

Kawaguchi Logistics Center B Tower

Kawaguchi, Saitama

3,750

Of-S-004

NMF Sendai Aoba-dori Building

Sendai, Sendai

2,030

Lg-T-013

Kawaguchi Logistics Center A Tower

Kawaguchi, Saitama

2,830

Of-S-005

NOF Utsunomiya Building

Utsunomiya, Tochigi

2,320

Lg-T-014

Atsugi Minami Logistics Center A Tower

Atsugi, Kanagawa

2,690

Of-S-006

NMF Nagoya Fushimi Building

Nagoya, Aichi

2,240

Lg-T-015

Kawaguchi Ryoke Logistics Center

Kawaguchi, Saitama

10,790Of-S-007NMF Nagoya Yanagibashi Building

Nagoya, Aichi

2,280

Lg-T-016

Landport Kashiwa Shonan II

Kashiwa, Chiba

10,800Of-S-008

Omron Kyoto Center Building

Kyoto, Kyoto

18,300

Lg-T-017

Landport Kashiwa Shonan I

Kashiwa, Chiba

9,900

Of-S-009

SORA Shin-Osaka 21

Osaka, Osaka

12,100

Lg-S-005

Hirakata Kuzuha Logistics Center

Hirakata, Osaka

Of-S-010

NRE Osaka Building

Osaka, Osaka

6,100

Subtotal (18 properties)

3,460
150,390

Of-S-011

NRE Nishi-Umeda Building

Osaka, Osaka

3,450

Of-S-012

NRE Yotsubashi Building

Osaka, Osaka

4,000

Residential Facilities

Of-S-013

NRE Hiroshima Building

Hiroshima, Hiroshima

2,280

Rs-T-001

PROUD FLAT Shirokane Takanawa

Minato, Tokyo

3,400

Of-S-014

NMF Hakata Ekimae Building

Fukuoka, Fukuoka

4,210

Rs-T-002

PROUD FLAT Yoyogi Uehara

Shibuya, Tokyo

989

Of-S-015

NMF Tenjin-Minami Building

Fukuoka, Fukuoka

2,230

Rs-T-003

PROUD FLAT Hatsudai

Shibuya, Tokyo713

420,260

Rs-T-004

PROUD FLAT Shibuya Sakuragaoka

Shibuya, Tokyo

750

Rs-T-005

PROUD FLAT Gakugei Daigaku

Meguro, Tokyo746

Rs-T-006

PROUD FLAT Meguro Gyoninzaka

Meguro, Tokyo939

Rs-T-007

PROUD FLAT Sumida Riverside

Chuo, Tokyo

2,280

Subtotal (57 properties)
Retail Facilities
Rt-T-001

Morisia Tsudanuma

Narashino, Chiba

16,600Rt-T-002

Yokosuka More’s City

Yokosuka, Kanagawa

13,640Rs-T-008

PROUD FLAT Kagurazaka

Shinjuku, Tokyo

1,590

Rt-T-003

Recipe SHIMOKITA

Setagaya, Tokyo

10,407

Rs-T-009

PROUD FLAT Waseda

Shinjuku, Tokyo

1,110

Rt-T-004

Kawasaki More’s

Kawasaki, Kanagawa

6,080

Rs-T-010

PROUD FLAT Shinjuku Kawadacho

Shinjuku, Tokyo

947

Rt-T-005

EQUINIA Shinjuku

Shinjuku, Tokyo

4,260

Rs-T-011

PROUD FLAT Sangen Jaya

Setagaya, Tokyo

1,190

Rt-T-006

EQUINA Ikebukuro

Toshima, Tokyo

3,990

Rs-T-012

PROUD FLAT Kamata

Ota, Tokyo

1,160

Rt-T-007

covirna machida

Machida, Tokyo

3,440

Rs-T-013

PROUD FLAT Kamata II

Ota, Tokyo

3,320

Rt-T-008

Nitori Makuhari

Chiba, Chiba

3,080

Rs-T-014

PROUD FLAT Shin-Otsuka

Toshima, Tokyo

623

Rt-T-009

Konami Sports Club Fuchu

Fuchu, Tokyo

2,730

Rs-T-015

PROUD FLAT Kiyosumi Shirakawa

Koto, Tokyo

928

Rt-T-010

FESTA SQUARE

Saitama, Saitama

2,600

Rs-T-016

PROUD FLAT Monzen Nakacho II

Koto, Tokyo

652

Rt-T-011

GEMS Shibuya

Shibuya, Tokyo

2,490

Rs-T-017

PROUD FLAT Monzen Nakacho I

Koto, Tokyo

1,030

13 Nomura Real Estate Master FundPortfolio

PORTFOLIO LIST (AS OF THE END OF THE 4TH FISCAL PERIOD)

Settlement
Number

Property Name

Location

Acquisition
Price(Millionsof yen)Settlement
Number

Property Name

Location

Acquisition
Price(Millionsof yen)Rs-T-018

PROUD FLAT Fujimidai

Nerima, Tokyo

1,470

Rs-T-096

PRIME URBAN Musashi Koganei

Koganei, Tokyo

1,910

Rs-T-019

PROUD FLAT Asakusa Komagata

1,920

Rs-T-097

PRIME URBAN Musashino Hills

Koganei, Tokyo

1,280

Rs-T-020

PROUD FLAT Yokohama

Taito, Tokyo
Yokohama, Kanagawa

2,090

Rs-T-098

PRIME URBAN Koganei Honcho

Koganei, Tokyo

Rs-T-021

PROUD FLAT Kamioooka

Yokohama, Kanagawa

2,710

Rs-T-099

PRIME URBAN Kumegawa

Rs-T-022

PROUD FLAT Tsurumi II

Yokohama, Kanagawa

1,650

Rs-T-100

PRIME URBAN Musashi Kosugi comodo

Higashimurayama, Tokyo
Kawasaki, Kanagawa

Rs-T-023

PRIME URBAN Azabu Juban

Minato, Tokyo

1,100

Rs-T-101

PRIME URBAN Kawasaki

Kawasaki, Kanagawa

962

Rs-T-024

PRIME URBAN Akasaka

Minato, Tokyo

938

Rs-T-102

PRIME URBAN Shinyurigaoka

Kawasaki, Kanagawa

1,020

Rs-T-025

PRIME URBAN Tamachi

Minato, Tokyo972

Rs-T-103

PRIME URBAN Tsurumi Teraya

Yokohama, Kanagawa

493

Rs-T-026

PRIME URBAN Shibaura LOFT

Minato, Tokyo

1,830

Rs-T-105

PRIME URBAN Urayasu

Urayasu, Chiba

804

Rs-T-028

PRIME URBAN Yoyogi

Shibuya, Tokyo359

Rs-T-106

PRIME URBAN Gyotoku I

Ichikawa, Chiba

633

Rs-T-029

PRIME URBAN Ebisu II

Shibuya, Tokyo

1,140

Rs-T-107

PRIME URBAN Gyotoku II

Ichikawa, Chiba

730

Rs-T-030

PRIME URBAN Bancho

Chiyoda, Tokyo

1,090

Rs-T-108

PRIME URBAN Gyotoku Ekimae

Ichikawa, Chiba

488

Rs-T-031

PRIME URBAN Chiyoda Fujimi

Chiyoda, Tokyo

679

Rs-T-109

PRIME URBAN Gyotoku Ekimae II

Ichikawa, Chiba

469

Rs-T-032

PRIME URBAN Iidabashi

Chiyoda, Tokyo

2,040

Rs-T-110PRIME URBAN Gyotoku III

Ichikawa, Chiba

747

Rs-T-033

PRIME URBAN Ebisu

Meguro, Tokyo

1,260

Rs-T-111

PRIME URBAN Nishi Funabashi

Funabashi, Chiba

761

Rs-T-034

PRIME URBAN Naka Meguro

Meguro, Tokyo

1,410

Rs-T-112

PRIME URBAN Kawaguchi

Kawaguchi, Saitama

1,580

Rs-T-035

PRIME URBAN Gakugei Daigaku

Meguro, Tokyo

775

Rs-T-113

PROUD FLAT Hatchobori

Chuo, Tokyo

Rs-T-036

PRIME URBAN Senzoku

Meguro, Tokyo

474

Rs-T-114

PROUD FLAT Itabashi Honcho

Itabashi, Tokyo

720

Rs-T-037

PRIME URBAN Meguro Riverside

Meguro, Tokyo

414

Rs-T-115

PRIME URBAN Meguro Mita

Meguro, Tokyo

1,058

Rs-T-038

PRIME URBAN Meguro Ohashi Hills

Meguro, Tokyo

2,970

Rs-T-116

Fukasawa House Towers H&I

Setagaya, Tokyo

7,140

Rs-T-039

PRIME URBAN Meguro Aobadai

Meguro, Tokyo

1,310

Rs-T-117

PRIME URBAN Toyosu

Koto, Tokyo

5,290

Rs-T-040

PRIME URBAN Gakugei Daigaku II

Meguro, Tokyo

1,080

Rs-T-118

PRIME URBAN Nihonbashi KayabachoChuo, Tokyo

2,850

Rs-T-041

PRIME URBAN Naka Meguro II

Meguro, Tokyo

2,850

Rs-T-119

PRIME URBAN Yoga II

Setagaya, Tokyo

1,320

Rs-T-042

PRIME URBAN Kachidoki

Chuo, Tokyo

2,570

Rs-T-120

PRIME URBAN Musashi-Koganei II

Koganei, Tokyo

1,310

Rs-T-043

PRIME URBAN Shinkawa

Chuo, Tokyo

2,100

Rs-T-121

PRIME URBAN Gakugei Daigaku Parkfront Meguro, Tokyo

1,300

Rs-T-044

PRIME URBAN Nihonbashi Yokoyamacho

Chuo, Tokyo

4,220

Rs-T-122

PROUD FLAT Omori III

Shinagawa, Tokyo

1,110

Rs-T-045

PRIME URBAN Nihonbashi Hamacho

Chuo, Tokyo

1,550

Rs-T-123

PROUD FLAT Kinshicho

Sumida, Tokyo785

Rs-T-046

PRIME URBAN Hongo Ikizaka

Bunkyo, Tokyo

557

Rs-S-001 PROUD FLAT Itsutsubashi

Sendai, Miyagi

652

Rs-T-047

PRIME URBAN Hakusan

Bunkyo, Tokyo

866

Rs-S-002 PROUD FLAT Kawaramachi

Sendai, Miyagi

735

Rs-T-048

PRIME URBAN Yotsuya Gaien Higashi

Shinjuku, Tokyo

1,490

Rs-S-003 PROUD FLAT Shin Osaka

Osaka, Osaka

1,620

Rs-T-050

PRIME URBAN Nishi Shinjuku I

Shinjuku, Tokyo

1,090

Rs-S-005 PRIME URBAN Kita Juyo Jo

Sapporo, Hokkaido

274

Rs-T-051

PRIME URBAN Nishi Shinjuku II

Shinjuku, Tokyo

885

Rs-S-006 PRIME URBAN Odori Koen I

Sapporo, Hokkaido

502

Rs-T-052

PRIME URBAN Shinjuku Naitomachi

Shinjuku, Tokyo430

Rs-S-007 PRIME URBAN Odori Koen II

Sapporo, Hokkaido

334

Rs-T-053

PRIME URBAN Nishi Waseda

Shinjuku, Tokyo

421

Rs-S-008 PRIME URBAN Kita Juichi Jo

Sapporo, Hokkaido

547

Rs-T-054

PRIME URBAN Shinjuku Ochiai

Shinjuku, Tokyo

594

Rs-S-009 PRIME URBAN Miyanosawa

Sapporo, Hokkaido

475

Rs-T-055

PRIME URBAN Mejiro

Shinjuku, Tokyo

1,430

Rs-S-010 PRIME URBAN Odori Higashi

Sapporo, Hokkaido

394

Rs-T-056

PRIME URBAN Kagurazaka

Shinjuku, Tokyo

2,900

Rs-S-011 PRIME URBAN Chiji Kokan

Sapporo, Hokkaido

249

Rs-T-057

PRIME URBAN Sangen Jaya III

Setagaya, Tokyo

718

Rs-S-012 PRIME URBAN Maruyama

Sapporo, Hokkaido

229

Rs-T-058

PRIME URBAN Chitose Karasuyama

Setagaya, Tokyo

717

Rs-S-013 PRIME URBAN Kita Nijuyo Jo

Sapporo, Hokkaido

437

Rs-T-060

PRIME URBAN Sangen Jaya

Setagaya, Tokyo

724

Rs-S-014 PRIME URBAN Sapporo Idaimae

Sapporo, Hokkaido

616

Rs-T-061

PRIME URBAN Minami Karasuyama

Setagaya, Tokyo

667

Rs-S-015 PRIME URBAN Sapporo Riverfront

Sapporo, Hokkaido

4,480

Rs-T-062

PRIME URBAN Karasuyama Galleria

Setagaya, Tokyo

549

Rs-S-016 PRIME URBAN Kita Sanjo Dori

Sapporo, Hokkaido

1,730

Rs-T-063

PRIME URBAN Karasuyama Court

Setagaya, Tokyo

338

Rs-S-017 PRIME URBAN Nagamachi Ichome

Sendai, Miyagi

1,140

Rs-T-065

PRIME URBAN Chitose Funabashi

Setagaya, Tokyo

746

Rs-S-018 PRIME URBAN Yaotome Chuo

Sendai, Miyagi

466

Rs-T-066

PRIME URBAN Yoga

Setagaya, Tokyo

1,390

Rs-S-019 PRIME URBAN Tsutsumidori Amamiya

Sendai, Miyagi

949

Rs-T-067

PRIME URBAN Shinagawa Nishi

Shinagawa, Tokyo

494

Rs-S-020 PRIME URBAN Aoi

Nagoya, Aichi

712

Rs-T-068

PRIME URBAN Osaki

Shinagawa, Tokyo

1,860

Rs-S-021 PRIME URBAN Kanayama

Nagoya, Aichi

553

Rs-T-069

PRIME URBAN Oimachi II

Shinagawa, Tokyo

1,040

Rs-S-022 PRIME URBAN Tsurumai

Nagoya, Aichi

1,020

Rs-T-070

PRIME URBAN Yukigaya

Ota, Tokyo

951

Rs-S-023 PRIME URBAN Kamimaezu

Nagoya, Aichi

1,590

Rs-T-071

PRIME URBAN Omori

Ota, Tokyo

905

Rs-S-024 PRIME URBAN Izumi

Nagoya, Aichi

3,770

Rs-T-072

PRIME URBAN Denenchofu Minami

Ota, Tokyo

774

Rs-S-025 PRIME URBAN Esaka I

Suita, Osaka

652

Rs-T-073

PRIME URBAN Nagahara KamiikedaiOta, Tokyo

1,720

Rs-S-026 PRIME URBAN Esaka II

Suita, Osaka794

Rs-T-075

PRIME URBAN Nakano Kamitakada

Nakano, Tokyo

498

Rs-S-027 PRIME URBAN Esaka III

Suita, Osaka

1,190

Rs-T-076

PRIME URBAN Takaido

Suginami, Tokyo

1,060

Rs-T-077

PRIME URBAN Nishi Ogikubo

Suginami, Tokyo

414

Rs-T-078

PRIME URBAN Nishi Ogikubo II

Suginami, Tokyo

1,790

Rs-T-079

PRIME URBAN Otsuka

Toshima, Tokyo

Rs-T-080

PRIME URBAN Komagome

Rs-T-081

791
1,520
1,940

920

Rs-S-028 PRIME URBAN Tamatsukuri

Osaka, Osaka

1,020

Rs-S-029 PRIME URBAN Sakaisuji Honmachi

Osaka, Osaka

1,810

Rs-S-030 PRIME URBAN Hakata

Fukuoka, Fukuoka

588

730

Rs-S-031 PRIME URBAN Yakuin Minami

Fukuoka, Fukuoka

265

Toshima, Tokyo

437

Rs-S-032 PRIME URBAN Kashii

Fukuoka, Fukuoka

398

PRIME URBAN Ikebukuro

Toshima, Tokyo

3,800

Rs-S-033 PRIME URBAN Hakata Higashi

Fukuoka, Fukuoka

622

Rs-T-082

PRIME URBAN Monzen Nakacho

Koto, Tokyo

2,420

Rs-S-034 PRIME URBAN Chihaya

Fukuoka, Fukuoka

604

Rs-T-083

PRIME URBAN Kameido

Koto, Tokyo

779

Rs-S-035 PRIME URBAN Chikusa

Nagoya, Aichi

Rs-T-084

PRIME URBAN Sumiyoshi

Koto, Tokyo

632

Subtotal (150 properties)

Rs-T-085

PRIME URBAN Mukojima

Sumida, Tokyo

528

Rs-T-086

PRIME URBAN Kinshi Koen

Sumida, Tokyo

1,290

Rs-T-087

PRIME URBAN Kinshicho

Sumida, Tokyo

758

Rs-T-088

PRIME URBAN Hirai

Edogawa, Tokyo

722

Rs-T-089

PRIME URBAN Kasai

Edogawa, Tokyo640

Rs-T-090

PRIME URBAN Kasai II

Edogawa, Tokyo

981

Rs-T-091

PRIME URBAN Kasai East

Edogawa, Tokyo

1,140

Rs-T-093

PRIME URBAN Itabashi Kuyakushomae

Itabashi, Tokyo

1,080

Rs-T-094

PRIME URBAN Asakusa

Taito, Tokyo

Rs-T-095

PRIME URBAN Machiya South Court

Arakawa, Tokyo

1,110
184,045

OthersOt-T-001

Ryotokuji University Shin-Urayasu
Campus (Land)

Urayasu, Chiba

4,900

Subtotal (1 property)

4,900

Total (268 properties)

927,318384
1,910

Nomura Real Estate Master Fund

14

Portfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 4TH FISCAL PERIOD)NMF Office Portfolio

Total Office Portfolio

ties developed by Nomura Real Estate Development,

57

including the Premium Midsize Office (PMO) brand,

Total Acquisition Price for Portfolio

NMF’s investment in office facilities centers on proper-with a focus on state-of-the-art features to meet everchanging tenant needs.

PMO Tamachi

PMO Ginza Hatchomeproperties¥420,260

PMO Shibakoen

Acquisition Price: ¥6,210 million

Acquisition Price: ¥3,970 million

Acquisition Price: ¥3,900 million

Location: Minato, Tokyo

Location: Chuo, Tokyo

Location: Minato, Tokyo

Completion: February 2014

Completion: April 2014

Completion: July 2014

NMF Takebashi Building

NMF Shinjuku EAST Building

NRE Ueno Building

Acquisition Price: ¥8,330 million

Acquisition Price: ¥5,710 million

Acquisition Price: ¥6,470 million

Location: Chiyoda, Tokyo

Location: Shinjuku, Tokyo

Location: Taito, Tokyo

Completion: March 1973

Completion: October 2002

Completion: March 1990

NMF Aoyama 1-chome Building

SORA Shin-Osaka 21

Secom Medical Building

Acquisition Price: ¥10,400 million

Acquisition Price: ¥12,100 million

Acquisition Price: ¥11,100 million

Location: Minato, Tokyo

Location: Osaka, Osaka

Location: Chiyoda, Tokyo

Completion: April 1989

Completion: July 1994

Completion: February 2005

15 Nomura Real Estate Master Fund

millionPortfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 4TH FISCAL PERIOD)NMF Retail Portfolio

Total Office Portfolio

rich variety and enliven their surroundings, mainly

42

through the GEMS brand developed by Nomura Real

Total Acquisition Price for Portfolio

NMF invests primarily in urban retail facilities that offer

properties¥167,723

Estate Development.

million

GEMS Shibuya
Acquisition Price: ¥2,490 million
Location: Shibuya, Tokyo
Completion: September 2012

GEMS Ichigaya
Acquisition Price: ¥2,080 million
Location: Chiyoda, Tokyo
Completion: October 2014

nORBESA

Musashiurawa Shopping Square

Megalos Kanagawa

Acquisition Price: ¥8,500 million

Acquisition Price: ¥2,720 million

Acquisition Price: ¥1,000 million

Location: Sapporo, Hokkaido

Location: Saitama, Saitama

Location: Yokohama, Kanagawa

Completion: April 2006

Completion: October 2005

Completion: May 2002

Sagamihara Shopping Center

Nakaza Cui-daore Building

covirna Machida

Acquisition Price: ¥6,840 million

Acquisition Price: ¥11,600 million

Acquisition Price: ¥3,440 million

Location: Sagamihara, Kanagawa

Location: Osaka, Osaka

Location: Machida, Tokyo

Completion: August 1993 etc.

Completion: February 2004

Completion: September 1981

Nomura Real Estate Master Fund

16

Portfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 4TH FISCAL PERIOD)

NMF Logistics Portfolio

Total Office Portfolio

tics facilities with advanced functionality to meet the18

evolving needs of diverse tenants with an emphasis on

Total Acquisition Price for Portfolio

Centered on the Landport brand, NMF invests in logis-

properties¥150,390

optimization and efficiency.

Landport Kashiwa Shonan I

millionLandport Kashiwa Shonan II

Acquisition Price: ¥9,900 million

Acquisition Price: ¥10,800 million

Location: Kashiwa, Chiba

Location: Kashiwa, Chiba

Completion: January 2016

Completion: April 2016

Landport Hachioji

Landport Kasukabe

Acquisition Price: ¥8,250 million

Acquisition Price: ¥7,340 million

Location: Hachioji, Tokyo

Location: Kasukabe, Saitama

Completion: November 2008

Completion: June 2009

Sagamihara Onodai Logistics Center

Kawaguchi Ryoke Logistics Center

Atsugi Minami Logistics Center B Tower

Acquisition Price: ¥8,700 million

Acquisition Price: ¥10,790 million

Acquisition Price: ¥4,590 million

Location: Sagamihara, Kanagawa

Location: Kawaguchi, Saitama

Location: Atsugi, Kanagawa

Completion: August 2000

Completion: October 2003

Completion: May 2005

17 Nomura Real Estate Master FundPortfolio

PORTFOLIO GALLERY (AS OF THE END OF THE 4TH FISCAL PERIOD)NMF Residential Portfolio

Total Office Portfolio

excellent urban locations, chiefly the PROUD FLAT and

150

PRIME URBAN series developed by Nomura Real

Total Acquisition Price for Portfolio

NMF invests in high-quality residential facilities in¥184,045

Estate Development.

PROUD FLAT Shirokane Takanawa

properties

PROUD FLAT Sangen Jaya

PROUD FLAT Monzen Nakacho I

Acquisition Price: ¥3,400 million

Acquisition Price: ¥1,190 million

Acquisition Price: ¥1,030 million

Location: Minato, Tokyo

Location: Setagaya, Tokyo

Location: Koto, Tokyo

Completion: July 2008

Completion: January 2007

Completion: July 2008

PROUD FLAT Kamioooka

PROUD FLAT Asakusa Komagata

PROUD FLAT Kagurazaka

Acquisition Price: ¥2,710 million

Acquisition Price: ¥1,920 million

Acquisition Price: ¥1,590 million

Location: Yokohama, Kanagawa

Location: Taito, Tokyo

Location: Shinjuku, Tokyo

Completion: March 2008

Completion: March 2008

Completion: November 2006

Fukasawa House Towers H&I

PRIME URBAN Naka Meguro

millionPRIME URBAN Shibaura LOFT

Acquisition Price: ¥7,140 million

Acquisition Price: ¥1,410 million

Acquisition Price: ¥1,830 million

Location: Setagaya, Tokyo

Location: Meguro, Tokyo

Location: Minato, Tokyo

Completion: June 2004

Completion: December 2004

Completion: July 2006

Nomura Real Estate Master Fund

18

Portfolio

PORTFOLIO SUMMARY

Properties

Acquisition price(¥mln)

Building age(years)Appraisal value(¥mln)

Floor area(m2)

Total

268

¥

Office57¥

420,260 million¥

442,060 million 24.8 years

779,234.79 m

Retail18¥

119,657 million¥

132,910 million 19.8 years

244,323.27 m

Retail(Residential areas)24

56,004 million 18.7 years

194,840.14 m

Logistics

18¥

150,390 million¥

176,050 million 10.5 years

691,065.29 m

Residential

150¥

184,045 million¥

189,976 million 12.5 years

357,207.02 m(Near stations)

1

Other

927,318 million ¥1,002,130 million 19.0 years 2,266,670.51 m

2

48,066 million¥¥

4,900 million¥¥

5,130 million

2

2

2

2

2

—

—

Diversification by Area

Diversification by Use

Properties are also spread among various geographical areas

The portfolio is also allocated by use to provide further stability.

with 80% or more of the properties in the Tokyo area andabout 20% in three major metropolitan areas and government

Other Facilities

designated cities.

0.6%

Other Areas

Stability Model

18.0%

41.8%

Growth Model

19.8%
Logistics
Facilities

Tokyo Area

82.0%

58.2%

Residential
Facilities

16.2%

OfficeBuildings

45.3%

RetailFacilities(in residential areas)

5.2%

Retail Facilities(near stations)

12.9%

Diversification by Property

Diversification by Tenant

Top Ten Properties as a Percentage of Portfolio

Top Ten Tenants as a Percentage of Portfolio

25.5%

19 Nomura Real Estate Master Fund

36.2%

Structure and Organization

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

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

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

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)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Nomura Securities Co., Ltd.
Mizuho Securities Co., Ltd.

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

Financial Agent Agreement (related to Former NMF’s 1st series
bonds, NOF’s 7th series bonds, NOF’s 9th series bonds and NOF’s
10th series bonds) / Principal Payment Entrustment Agreement(NOF’s 2nd series bonds) / Registration Entrustment Agreement(NOF’s 2nd series bonds) / Investment Corporation BondManagement 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

The Bank of Tokyo-Mitsui UFJ, Ltd.

Organization of NREAM
General Meeting of Shareholders
Investment Committee
Statutory Auditors

Board of Directors

Compliance Committee

President & CEO

Risk Management Committee
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

NMF Investment Management Group
Fund Management
Asset Management I
Asset Management II
NPR Investment Management

Nomura Real Estate Master Fund

20

Financial Section

Balance Sheet

Thousands of Yen

As of August 31, 2017

As of February 28, 2017

¥71,227,676¥73,331,039

787,203

464,183

ASSETS
Current Assets:
Cash and bank deposits
Rental receivables
Income taxes receivable

56—

Consumption taxes receivable—

147,670

Other current assets

1,289,537

1,237,456

73,304,472

75,180,348

Land

629,968,513

629,423,318

Buildings and structures

306,496,171

309,299,034

Machinery and equipment

828,600

760,188

Tools, furniture and fixtures

609,927

497,128

Leased assets

23,901

24,495

Total current assets
Property and Equipment:

Construction in progress  Subtotal
Less accumulated depreciation

5,229

22,180937,932,341

940,026,343(23,357,245)(19,763,573)

914,575,096

920,262,770

Goodwill

96,075,952

98,698,194

Leasehold rights

8,580,708

8,581,094

Net property and equipment
Investments and Other Assets:

Intangible assets

33,06036,868

1,692,617

1,600,246

Long-term deposits

566,019533,242

Security deposits

945,754956,754

Derivatives Assets

35,372

108,612Deferred investment corporation bond issuance costs

19,667

21,039107,949,149

110,536,049¥1,095,828,717¥1,105,979,167

Long-term prepaid expenses

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

21 Nomura Real Estate Master Fund

Financial Section

Balance Sheet

Thousands of Yen

As of August 31, 2017

As of February 28, 2017

¥3,078,365¥2,410,374—

5,000,000

LIABILITIESCurrent Liabilities:
Trade accounts payable
Short-term debt
Current portion of investment corporation bonds

4,000,000

9,000,000

Current portion of long-term debt

54,760,600

69,975,600

Lease obligations
Other accounts payable
Accrued expenses
Accrued income taxes

6,630

8,651

1,536,891

2,294,600

333,667

361,542

605

1,550

Accrued consumption taxes

1,227,566—

Rent received in advance

4,942,250

5,083,682

Unearned revenue

300,134

366,627

Derivative liabilities

50,64998,866

Other current liabilities

299,281

297,926

70,536,638

94,899,418

Investment corporation bonds

18,500,000

18,500,000

Long-term debt

411,480,600

396,308,400

Total current liabilities
Long-term Liabilities:

Lease obligations

2,956

5,395

Long-term advanced received

574,828

713,191

Security deposits from tenants

36,575,246

37,892,970

Derivative liabilities

1,509,405

1,555,381

Total long-term liabilities

468,643,035

454,975,337

Total Liabilities

539,179,673

549,874,755

162,592,574

161,883,753

394,012,959

394,012,959(7,367,727)(5,374,246)   Other deductions from capital surplus(5,801,917)(3,800,508)   Total deductions from capital surplus(13,169,644)(9,174,754)   Net capital surplus

380,843,315

384,838,205  Retained earnings

14,737,837

10,928,088  Total surplus

395,581,152

395,766,293

Total unitholders’ equity

558,173,726

557,650,046

Deferred gains or losses on hedges(1,524,682)(1,545,634)

Total valuation and translation adjustments(1,524,682)(1,545,634)

556,649,044

556,104,412¥1,095,828,717¥1,105,979,167

NET ASSETS
Unitholders’ Equity:
Unitholders’ capital
Surplus  Capital surplus   Allowance for temporary difference adjustment

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.

Nomura Real Estate Master Fund

22

Financial Section

Statement of Income and Retained Earnings

Thousands of Yen

For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Operating Revenues and Expenses
Operating Revenues:
Real estate rental revenues¥35,032,000

Gain on sales of real estate

3,107,662¥34,714,979—

38,139,662

34,714,979

15,962,926

15,791,522

Operating Expenses:
Real estate rental expenses
Impairment Loss—

269,797

3,063,129

2,783,115

Asset custody fees

56,591

48,740Administrative service fees

174,470

155,545—

1,374,890

Amortization of goodwill

2,622,243

2,622,243

Other operating expenses

524,491

424,331

22,403,850

23,470,183

15,735,812

11,244,796

Asset management fees

Merger expenses

Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Reversal of dividends payable
Interest on refund
Other non-operating revenues

366

358

23,67323,391

853

2

48

82

24,94023,833

1,950,878

1,886,021

206,638

279,333

Non-Operating Expenses:
Interest expense
Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuance costs

1,372

1,372

405,750

423,783

5,311

5,560

2,569,949

2,596,069  Ordinary Income

13,190,803

8,672,560   Income before Income Taxes

13,190,803

8,672,560

605

1,605

605

1,605

  Net Income

13,190,198

8,670,955   Retained earnings brought forward

1,547,639

2,257,133  Retained Earnings at End of Period¥14,737,837¥10,928,088

Loan arrangement fees
Other non-operating expenses

Income Taxes:  Current

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

23 Nomura Real Estate Master Fund

Financial Section

Statement of Changes in Net Assets

For the period from March 1, 2017 to August 31, 2017
Thousands of Yen
Unitholders’ Equity

Unitholders’CapitalUnits

Balance as of March 1, 2017
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Distributions in excess of net earnings from allowance fortemporary difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of August 31, 2017

4,183,130—

SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other deductions Total deduction
difference
from capitalfrom capitaladjustment
surplussurplusCapitalSurplus¥161,883,753 ¥394,012,959 (¥5,374,246)
—
—
—

—

—
—
—
4,183,130(¥3,800,508)—

Net capital surplus(¥9,174,754) ¥384,838,205——

708,821—708,821(708,821)

—

—

—

—

(2,702,302)—(2,702,302)(2,702,302)

—
—

—
—

—
—

(1,292,588)—(1,292,588)—(1,292,588)————¥162,592,574 ¥394,012,959 (¥7,367,727)———(¥5,801,917) (¥13,169,644) ¥380,843,315
Thousands of Yen

Retained earnings

Total surplus

Total unitholders’equityValuation and Translation
Adjustments
Deferred Gains
Total Valuationor Losses on
and Translation
HedgesAdjustments¥10,928,088(8,671,628)¥395,766,293(8,671,628)¥557,650,046(8,671,628)(¥1,545,634)—(¥1,545,634)—¥556,104,412(8,671,628)(708,821)(708,821)

—

—

—

—

—

(2,702,302)(2,702,302)——(2,702,302)—
13,190,198(1,292,588)
13,190,198(1,292,588)
13,190,198

—
—

—
—

(1,292,588)
13,190,198—¥14,737,837—¥395,581,152—¥558,173,726

20,952(¥1,524,682)

20,952(¥1,524,682)

20,952¥556,649,044

Unitholders’ Equity
Surplus

Balance as of March 1, 2017
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Distributions in excess of net earnings from allowance fortemporary difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of August 31, 2017

Total
Net Assets

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

For the period from September 1, 2016 to February 28, 2017
Thousands of Yen
Unitholders’ Equity

Unitholders’CapitalUnits

Balance as of September 1, 2016
Increase by merger
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of February 28, 2017

3,722,010
461,120—

SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other deductions Total deduction
difference
from capitalfrom capitaladjustment
surplussurplusCapitalSurplus¥161,120,405 ¥315,299,775 (¥6,137,594)—
78,713,184————(¥941,669)——

Net capital surplus(¥7,079,263) ¥308,220,512—
78,713,184———

763,348—

763,348(763,348)

—

—

—
—

—
—

—
—

—
—

(2,095,491)—(2,095,491)—(2,095,491)————¥161,883,753 ¥394,012,959 (¥5,374,246)—(¥3,800,508)——(¥9,174,754) ¥384,838,205—
4,183,130

Thousands of Yen

Retained earnings

Total surplus

Total unitholders’equityValuation and Translation
Adjustments
Deferred Gains
Total Valuationor Losses on
and Translation
HedgesAdjustments¥12,225,011—(9,204,530)¥320,445,523
78,713,184(9,204,530)¥481,565,928
78,713,184(9,204,530)(¥2,254,454)——(¥2,254,454)——¥479,311,474
78,713,184(9,204,530)(763,348)(763,348)

—

—

—

—

—
8,670,955(2,095,491)
8,670,955(2,095,491)
8,670,955

—
—

—
—

(2,095,491)
8,670,955—¥10,928,088—¥395,766,293—¥557,650,046

708,820(¥1,545,634)

708,820(¥1,545,634)

708,820¥556,104,412

Unitholders’ Equity
Surplus

Balance as of September 1, 2016
Increase by merger
Distributions of retained earnings Reversal of allowance fortemporary difference adjustments Other distributions in excess
of net earnings
Net income Net changes of items otherthan unitholders’ equity
Balance as of February 28, 2017

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

Total
Net Assets

Nomura Real Estate Master Fund24

Financial Section

Statement of Cash Flows

Thousands of Yen

For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Cash Flows
Cash Flows from Operating Activities
Income before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Amortization of investment corporation bond issuance costs
Interest income
Interest expense
Loss on disposal of property and equipment
Increase (Decrease) in allowance for doubtful accounts
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
Other  Subtotal
Interest received
Interest paid
Income taxes paid   Net cash provided by (used in) operating activities¥13,190,803
4,862,891—
2,622,243
1,372
(366)
2,157,516
4,998—(324,497)(92,370)(32,777)
667,990(59,416)
147,670
1,227,566
9,344(141,432)
43,502,593(54,162)
67,689,966
366(2,389,746)(1,606)
65,298,980¥8,672,560
4,757,916
269,797
2,622,243
1,372
(358)
2,165,354
5,259
(54)
176,868(227,234)
3,407(466,026)(106,694)(147,670)(698,979)(144,523)(599)—
272,228
17,154,867
358(2,383,092)
367
14,772,500

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
Proceeds from security deposits   Net cash provided by (used in) investing activities(43,360,739)(470)(2,881,873)
1,565,683
11,000(44,666,399)(13,686,180)(7,949)(809,438)
895,27050(13,608,247)

31,700,000(36,700,000)
45,070,000(45,112,800)(5,000,000)(8,699,524)

5,000,000—
42,950,000(44,055,300)(5,000,000)(10,219,933)(2,701,640)(1,291,980)(22,735,944)(1,782)(2,092,350)(13,419,365)(2,103,363)
73,331,039—¥71,227,676(12,255,112)
75,270,568
10,315,583¥73,331,039

Cash Flows from Financing Activities
Proceeds from short-term debt
Repayments of short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Redemption of investment corporation bonds
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
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Increase in Cash and Cash Equivalents Resulting from Merger
Cash and Cash Equivalents at End of Period
The accompanying notes to financial statements are an integral part of these statements.

25 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

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. The Company is externally managed by a licensed asset management company, Nomura Real
Estate Asset Management Co., Ltd. (“NREAM”). NREAM is a wholly-owned subsidiary of Nomura Real Estate Holdings, Inc. NMF wasestablished on October 1, 2015 through the consolidation type merger of 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 thesame 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
The Company maintains its accounting records and prepares its financial statements in accordance with accounting principles generally acceptedin 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 of International Financial Reporting Standards.
The accompanying financial statements are a translation of the audited financial statements of the Company, which were prepared in accordancewith Japanese GAAP and were presented in the Securities Report of the Company filed with the Kanto Local Finance Bureau. In preparing theaccompanying financial statements, certain reclassifications and modifications have been made to the financial statements issued domesticallyin order to present them in a format that is more familiar to readers outside Japan. In addition, the notes to financial statements include certain
information that 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 Japanesefinancial statements prepared in accordance with Japanese GAAP.
The Company’s fiscal period is a six-month period which ends at the end of February or August. The Company does not prepare consolidated
financial statements because it has no subsidiaries.

3. Summary of significant accounting policies
Cash 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 - 10 years
2 - 20 years

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

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

Nomura Real Estate Master Fund

26

Financial Section

Notes to Financial Statements

Impairment of fixed assets
The Company 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.

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

Allowance for doubtful accounts
For allowance for doubtful accounts against possible losses arising from default on receivables, uncollectable amount is estimated and recorded
by investigating collectability based on historical loan loss ratios for general receivables and on a case-by-case examination for doubtful and otherspecific receivables.

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

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.

Property related taxes
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 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 ¥3,333 thousand for the fiscal period ended February 28, 2017, and ¥135,274 thousand for the fiscal period
ended August 31, 2017.

Income taxes
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.

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

Derivative financial instruments
The Company utilizes interest rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure
to changes in interest rates. The Company 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 the deferred hedge treatment is generally applied, the Company applies special treatment to those interest rate swap contracts thatmeet the criteria 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.

4. Cash and cash equivalents
Cash and cash equivalents as of August 31, 2017 and February 28, 2017 consist of the following:Thousands of Yen
As of August 31, 2017

As of February 28, 2017

Cash and bank deposits¥71,227,676¥73,331,039

Cash and cash equivalents¥71,227,676¥73,331,039

27 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

Important contents of the non-cash transactions
Below is a breakdown of the main components of the assets and liabilities transferred from TOP REIT, Inc., as a result of the merger with said
company in the period under review. The increase in capital surplus due to the merger was ¥78,713,184 thousand.
Thousands of Yen
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Current assets—¥10,701,317

Non-current assets—

138,313,333

Total assets—¥149,014,650

Current liabilities—¥43,815,959

Long-term liabilities—

53,500,119

Total liabilities—¥97,316,078

5. Assets pledged as collateral and secured liabilities
The assets pledged as collateral are as follows:
Thousands of Yen
As of August 31, 2017

As of February 28, 2017

Buildings in trust¥3,319,061¥3,335,340

Land in trust

6,096,368

6,096,368  Total¥9,415,429¥9,431,708

As of August 31, 2017

As of February 28, 2017

The secured liabilities are as follows:
Thousands of Yen

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

6. Schedule of property and equipment
Property and equipment as of August 31, 2017 and February 28, 2017 consist of the following:Thousands of Yen
As of August 31, 2017Land

¥214,805,613

Buildings and structures

118,505,725

Accumulated depreciation
Machinery and equipment(6,669,922)¥214,805,613

Accumulated depreciation(235,885)
143,823¥193,986,143¥193,986,143

112,734,556
111,835,803

597,359

Tools, furniture and fixtures
Accumulated depreciation

As of February 28, 2017

(4,897,682)

107,836,874

591,582
361,474(172,580)

419,002

109,031(23,985)

119,838(13,537)

95,494

Land in trust

415,162,900

415,162,900

435,437,175

435,437,175

Buildings and structures in trust

187,990,446

Accumulated depreciation(16,282,808)

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

196,564,478
171,707,638

231,241(24,553)

181,979,086

168,606
206,688466,104(105,142)(14,585,392)(14,366)

154,240

388,097
360,962

23,901(68,629)

319,468

24,495(14,950)

8,951(11,387)

5,229

5,229

22,18013,10822,180¥914,575,096¥914,575,096¥920,262,770¥920,262,770

Nomura Real Estate Master Fund28

Financial Section

Notes to Financial Statements

7. Short-term debt and current portion of long-term debt
Short-term debt and current portion of long-term debt as of August 31, 2017 and February 28, 2017 consist of the following:
As of August 31, 2017
Amount(Thousands of Yen)

As of February 28, 2017

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on March 13, 2017 (Note 2)——¥4,000,000

0.33606%

Unsecured loans from a bank due on March 27, 2017——

1,000,000

0.21000%

Unsecured loans from banks due on April 18, 2017——

5,000,000

0.58205%

Unsecured loans from banks due on June 12, 2017——

3,900,000

1.43500%

Unsecured loans from banks due on June 30, 2017——

17,500,000

Note 4

Unsecured loans from a bank due on August 28, 2017——

750,000

0.43727%

Unsecured loans from banks due on August 28, 2017——

5,000,000

0.21000%

Unsecured loans from banks due on August 28, 2017——

9,000,000

1.12850%

Unsecured loans from banks due on August 28, 2017——

3,920,000

1.08500%

Unsecured loans from banks due on September 26, 2017

¥4,000,000

0.15000%

4,000,000

0.15000%

Unsecured loans from banks due on December 26, 201712,900,000

1.03775%

12,900,000

1.03775%

Unsecured loans from a bank due on February 26, 2018

1,000,000

1.84650%

1,000,000

1.84650%

Unsecured loans from banks due on February 26, 2018

1,500,000

0.43727%

1,500,000

0.43727%

Unsecured loans from banks due on February 27, 2018

5,420,000

1.12013%5,420,000

1.12013%

Unsecured loans from a bank due on March 27, 2018

2,355,000

1.08448%——

Unsecured loans from banks due on March 27, 2018

4,670,000

0.63000%——

Unsecured loans from banks due on April 27, 2018

1,230,000

0.63000%——

Unsecured loans from banks due on May 28, 201812,200,000

0.86250%——

Unsecured loans from a bank due on June 26, 2018

2,000,000

1.09000%——

Unsecured loans from a bank due on August 27, 2018

2,000,000

1.03500%——

Unsecured loans from banks due on August 27, 2018

5,400,000

0.99000%——

42,8002.17000%

42,8002.17000%

42,8002.21812%42,8002.21812%

Unsecured loans from a bank due on May 26, 2025 (Note 3)
Unsecured loans from a bank due on May 26, 2025 (Note 3)   Total¥54,760,600¥74,975,600

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: The borrowing was ¥1,000 million repaid on May 26,2016 in advance to the maturity date.
Note 3: Repay ¥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.
Note 4: Based on an agreement, of the ¥17,500 million, the weighted average interest rates were 0.51000% applicable to ¥9,000 million and 0.79450% applicable to theremaining ¥8,500 million in consideration of the effect of interest rate swaps used for the purpose of avoiding interest rate fluctuation risk.

(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, 2017. The total unused amounts of such credit facilities were ¥10,000 million as of August 31, 2017.
(2) The Company entered into ¥40,000 million credit facilities in the form of commitment lines with five financial institutions for the fiscal
period ended August 31, 2017. The total unused amounts of such credit facilities were ¥40,000 million as of August 31, 2017.
(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, 2017. The total unused amounts of such credit facilities were ¥10,000 million as of February 28, 2017.
(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, 2017. The total unused amounts of such credit facilities were ¥35,000 million as of February 28, 2017.

8. Long-term debt
Long-term debt as of August 31, 2017 and February 28, 2017 consist of the following:
As of August 31, 2017
Amount(Thousands of Yen)

As of February 28, 2017

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

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

¥4,670,000

0.63000%

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

2,355,000

1.08448%

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

1,230,000

0.63000%

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

0.86250%

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

2,000,000

1.09000%

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

2,000,000

1.03500%

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

5,400,000

0.99000%

29 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

As of August 31, 2017

As of February 28, 2017

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, 2018

¥2,000,000

0.93600%

2,000,000

0.93600%

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 November 26, 2018

3,000,000

0.77650%

3,000,000

0.77650%

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, 2018

1,700,000

0.50250%

1,700,000

0.50250%

Unsecured loans from banks due on December 26, 2018

6,375,000

0.14000%——

Unsecured loans from banks due on February 26, 2019

3,000,000

1.44450%

3,000,000

1.44450%

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, 2019

5,300,000

0.87695%

5,300,000

0.87695%

Unsecured loans from banks due on March 29, 2019

4,500,000

0.81625%

4,500,000

0.81625%

Unsecured loans from banks due on March 29, 2019

4,000,000

0.89635%

4,000,000

0.89635%

Unsecured loans from banks due on May 27, 2019

9,000,000

1.11750%

9,000,000

1.11750%

Unsecured loans from a bank due on May 27, 2019

1,000,000

1.04875%

1,000,000

1.04875%

Unsecured loans from a bank due on May 27, 2019

1,100,000

0.69894%

1,100,000

0.69894%

Unsecured loans from a bank due on August 26, 2019

2,200,000

1.22000%

2,200,000

1.22000%

Unsecured loans from banks due on August 26, 2019

5,700,000

1.25200%

5,700,000

1.25200%

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

1.27625%2,500,000

1.27625%

Unsecured loans from banks due on August 26, 2019

4,700,000

0.81080%

4,700,000

0.81080%

Unsecured loans from banks due on October 28, 2019

3,000,000

0.20000%

3,000,000

0.20000%

Unsecured loans from banks due on October 28, 2019

4,000,000

0.17000%——

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, 2019

4,000,000

0.72650%

4,000,000

0.72650%

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

0.54065%

5,600,000

0.54065%

Unsecured loans from banks due on November 26, 2019

3,450,000

0.37420%

3,450,000

0.37420%

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, 2020

2,500,000

0.64685%

2,500,000

0.64685%

Unsecured loans from banks due on May 26, 2020

10,000,000

1.33750%

10,000,000

1.33750%

Unsecured loans from a bank due on May 26, 2020

800,000

1.25875%

800,000

1.25875%

Unsecured loans from a bank due on May 27, 2020

1,000,000

1.48625%

1,000,000

1.48625%

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 August 26, 2020

1,100,000

1.53674%

1,100,000

1.53674%

Unsecured loans from a bank due on August 26, 2020

800,000

1.28277%

800,000

1.28277%

Unsecured loans from banks due on August 26, 2020

4,700,000

1.18000%

4,700,000

1.18000%

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, 2020

4,500,000

1.08100%

4,500,000

1.08100%

Unsecured loans from a bank due on August 26, 2020

1,000,000

0.72000%

1,000,000

0.72000%

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 February 26, 2021

5,000,000

1.35250%

5,000,000

1.35250%

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%

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 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%

Nomura Real Estate Master Fund

30

Financial Section

Notes to Financial Statements

As of August 31, 2017

As of February 28, 2017

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 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 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

1.31850%

Unsecured loans from a bank due on February 28, 2022

2,750,000

1.29600%

2,750,000

1.29600%

Unsecured loans from banks due on February 28, 2022

4,000,000

1.16000%

4,000,000

1.16000%

Unsecured loans from banks due on May 26, 2022

5,500,000

1.25900%

5,500,000

1.25900%

Unsecured loans from banks due on May 31, 2022

4,500,000

0.82500%

4,500,000

0.82500%

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 August 26, 2022

3,000,000

1.09133%

3,000,000

1.09133%

Unsecured loans from banks due on August 26, 2022

4,000,000

1.08034%

4,000,000

1.08034%

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 September 30, 2022

4,000,000

0.76250%

4,000,000

0.76250%

Unsecured loans from banks due on November 28, 2022

2,100,000

0.92280%

2,100,000

0.92280%

Unsecured loans from a bank due on November 28, 2022

1,800,000

1.05000%

1,800,000

1.05000%

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 November 28, 2022

1,500,000

0.98624%

1,500,000

0.98624%

Unsecured loans from a bank due on November 28, 2022

1,000,000

0.71221%1,000,000

0.71221%

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 February 27, 2023

1,300,000

1.13250%

1,300,000

1.13250%

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 February 28, 2023

10,000,000

0.48700%

10,000,000

0.48700%

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 May 26, 2023

2,000,000

1.89500%

2,000,000

1.89500%

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 May 26, 2023

1,000,000

0.41250%

1,000,000

0.41250%

Unsecured loans from a bank due on May 26, 2023

2,500,000

0.43408%2,500,000

0.43408%

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 August 28, 2023

1,000,000

1.15850%

1,000,000

1.15850%

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.18032%

1,000,000

1.18032%

Unsecured loans from a bank due on August 28, 2023

4,000,000

1.20772%

4,000,000

1.20772%

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 28, 2023

1,000,000

0.43466%

1,000,000

0.43466%

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 31, 2023

6,700,000

0.55700%

6,700,000

0.55700%

Unsecured loans from banks due on November 27, 2023

2,000,000

1.75900%

2,000,000

1.75900%

Unsecured loans from banks due on November 27, 2023

2,600,000

0.82800%

2,600,000

0.82800%

Unsecured loans from banks due on November 27, 2023

4,000,000

0.49380%

4,000,000

0.49380%

Unsecured loans from banks due on November 27, 2023

1,500,000

0.47483%

1,500,000

0.47483%

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 February 26, 2024

1,300,000

0.53630%

1,300,000

0.53630%

Unsecured loans from banks due on May 27, 2024

1,100,000

0.51000%

1,100,000

0.51000%

Unsecured loans from a bank due on May 27, 2024

2,700,000

0.46376%

2,700,000

0.46376%

Unsecured loans from a bank due on May 27, 2024

2,000,000

0.53676%

2,000,000

0.53676%

Unsecured loans from a bank due on June 26, 2024

2,700,000

0.85925%2,700,000

0.85925%

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 August 26, 2024

3,000,000

0.58175%

3,000,000

0.58175%

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, 2024

5,670,000

0.49485%——

Unsecured loans from a bank due on November 26, 2024

2,250,000

0.50825%

2,250,000

0.50825%

Unsecured loans from banks due on November 26, 2024

3,000,000

0.58000%

3,000,000

0.58000%

31 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

As of August 31, 2017

As of February 28, 2017

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 November 26, 2024

1,800,000

0.55979%

1,800,000

0.55979%

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 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%——

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

Unsecured loans from banks due on May 26, 2025

2,800,000

0.60286%

2,800,000

0.60286%

Unsecured loans from a bank due on May 26, 2025

1,000,000

0.61434%——

Unsecured loans from banks due on August 26, 2025

3,000,000

0.56380%

3,000,000

0.56380%

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 August 26, 2025

1,850,000

0.67915%1,850,000

0.67915%

Unsecured loans from banks due on August 26, 2025

2,600,000

0.60489%——

Unsecured loans from banks due on August 26, 2025

3,000,000

0.58380%——

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.09830%

1,100,000

1.09830%

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 26, 2025

2,000,000

1.03955%

2,000,000

1.03955%

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 November 26, 2025

2,000,000

0.60448%2,000,000

0.60448%

Unsecured loans from banks due on November 26, 2025

4,200,000

0.64616%

4,200,000

0.64616%

Unsecured loans from a bank due on November 26, 2025

900,000

0.65123%——

Unsecured loans from a bank due on November 26, 2025

1,300,000

0.64278%——

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, 2026

2,500,000

0.63995%

2,500,000

0.63995%

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 26, 2026

2,700,000

0.67591%2,700,000

0.67591%

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 26, 2026

1,000,000

0.70414%——

Unsecured loans from banks due on August 26, 2026

3,000,000

0.67483%——

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.76000%

2,000,000

0.76000%

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.74229%——

Unsecured loans from banks due on November 26, 2026

4,165,000

0.73506%——

Unsecured loans from banks due on May 26, 2027

3,060,000

0.78177%——

Unsecured loans from banks due on August 26, 2027

4,000,000

0.76843%——

Unsecured loans from a bank due on November 26, 2027

2,000,000

0.89209%2,000,000

0.89209%

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)

775,300

2.17000%

796,700

2.17000%

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

775,300

2.21812%796,700

2.21812%   Total¥411,480,600¥396,308,400

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.
Thousands of Yen
1-2 years

2-3 years

3-4 years

4-5 years

As of February 28, 2017

¥51,940,600¥60,685,600¥56,655,600¥47,715,600

As of August 31, 2017

¥63,160,600¥58,385,600¥52,235,600¥44,715,600

Nomura Real Estate Master Fund32

Financial Section

Notes to Financial Statements

9. Investment corporation bonds
Details of investment corporation bonds outstanding are summarized as follows.
As of August 31, 2017
Amount(Thousands of Yen)

NOF’s 2nd series of unsecured investment corporation bonds
due on March 16, 2020
NOF’s 6th series of unsecured investment corporation bonds
due on March 17, 2017
NOF’s 7th series of unsecured investment corporation bonds
due on March 17, 2028
NOF’s 9th series of unsecured investment corporation bonds
due on November 24, 2017
Former NMF’s 1st series of unsecured investment
corporation bonds due on October 30, 2024

Interest rate (Note)

Interest rate (Note)¥5,000,000

2.47%¥5,000,000

2.47%

—

—

5,000,000

2.21%

4,500,000

2.9%

4,500,000

2.9%

4,000,000

1.52%

4,000,000

1.52%

3,000,000

0.87%

3,000,000

0.87%

6,000,000

1.02%

6,000,000

1.02%

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

As of February 28, 2017
Amount(Thousands of Yen)

¥22,500,000¥27,500,000

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
Within a year

1-2 years

2-3 years

3-4 years¥5,000,000

—

—

—

As of February 28, 2017

¥9,000,000——

As of August 31, 2017

¥4,000,000—¥5,000,000

4-5 years

10. Unitholders’ equity
The 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 the Investment Trust Act.

11. Allowance for temporary difference adjustments
The movement in the allowance for temporary difference adjustments on the Balance Sheet was as follows:
For the period from March 1, 2017 to August 31, 2017
1. Reason, related assets and amounts
Thousands of Yen

Related assets, etc.

ReasonInitialamountBalance at the Allowance set
end of previous aside during
periodperiodReversalduringperiodBalance at theend of current
periodReason forreversal

Goodwill

Amortization of goodwill¥4,244,641¥1,622,398¥2,622,243—¥4,244,641—

Land, buildings, etc.

Merger expenses

4,029,136

1,497,394(6,320)—1,491,074—

Deferred gains orlosses on hedges

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

2,867,595

2,254,454

Land, buildings, etc.

Impairment loss

269,797—

86,379—86,379—Long-term deposits

Shortfall of reserve for repair

15,186

—

—

—

—

—

—

5,374,246(708,821)

7,367,727

—

—

—

—
—

Increase - subtotal—

2,702,302(¥708,821)

Changes in fairvalue of derivative
1,545,633
transactions

Buildings, building
improvements, etc.

Depreciation deficiency
equivalent(1,302,167)——

Unearned revenue,etc.

Write-down of loss on interest
rate swap due to merger(216,262)

—

—

—

—

Other

—

(¥76,769)

—

—

—

—

—

Decrease - subtotal

—

—

—

—

—

—

   Total—¥5,374,246(¥708,821)¥7,367,727—

33 Nomura Real Estate Master Fund

¥2,702,302

Financial Section

Notes to Financial Statements

2. 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 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) 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.
For the period from September 1, 2016 to February 28, 2017
1. Reason, related assets and amounts
Thousands of Yen

Related assets, etc.

Goodwill

ReasonAmortization of goodwill

Land, buildings, etc.

Merger expenses

Land, buildings, etc.

Impairment loss

Deferred gains orlosses on hedges

Loss on interest-rate swaps
recognized at the end of the
fiscal period¥1,622,398

2,638,862

79,020

Increase - subtotal
Buildings, building
improvements, etc.

InitialamountDepreciation deficiency
equivalent

Balance at the
Allowanceend of previous
set aside
periodduring period¥1,622,398

1,568,581

79,020

Reversalduringperiod———Balance at theend of current
periodReason forreversal¥1,622,398—(¥71,187)

Sale of property
and amortization of
1,497,394 merger expenses(79,020)

Sale of property on
which impairment— was recognized—

2,867,595

2,867,595—(613,141)

Changes in fairvalue of derivative
2,254,454
transactions

7,207,875

6,137,594—(763,348)

5,374,246—(790,132)

—

—

—

—

—

Investment corporation bonds
Investment corporation
issuance cost amortizationbond issuance costs
deficiency equivalent(97,558)

—

—

—

—

—

Unearned revenue,etc.

Write-down of loss on interest
rate swap due to merger(172,304)

—

—

—

—

—

Other

—

(10,287)

—

—

—

—

—

Decrease - subtotal(1,070,281)

—

—

—

—

—

   Total¥6,137,594¥6,137,594—(¥763,348)¥5,374,246—

2. 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 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.

Investment securities

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

(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.

Nomura Real Estate Master Fund34

Financial Section

Notes to Financial Statements

12. Per unit information
The net asset values per unit and the net income per unit as of August 31, 2017 and February 28, 2017 were as follows:
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Net assets per unit

¥133,069¥132,939

Net income per unit

¥3,153¥2,072For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017¥13,190,198¥8,670,955

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.

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

Net income available to ordinary unitholders (Thousands of Yen)

¥13,190,198¥8,670,955

4,183,130

4,183,130

Average number of units during the period (Units)

13. Related party transactions
For the periods from March 1, 2017 to August 31, 2017 and from September 1, 2016 to February 28, 2017
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

14. Income taxes
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, 2017. 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.
Since the Company distributed in excess of 90% of its distributable income in the form of cash distributions totaling ¥12,704,166 thousand forthe fiscal period ended August 31, 2017 respectively, such distributions were treated as deductible distributions for purposes of corporate
income taxes.
The following summarizes breakdown of deferred tax assets and liabilities:
Thousands of Yen
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Deferred tax asset:
Valuation difference on other assets acquired by merger¥21,965,966¥24,633,095

Deferred gains or losses on hedges

481,704

488,323

Unearned revenue

275,398

339,961

Write-offs for long-term prepaid expenses

25,63428,780

Impairment losses of non-repudiation—

85,628Depreciation costs of trust leasehold rights

855

733

Accrued enterprise tax—

39  Subtotal¥22,749,557¥25,576,559  Valuation allowance(¥22,749,557)(¥25,576,559)

—

—

—

—

—

—

   Total non-current deferred tax assets
Total deferred tax assets
Net deferred tax assets

35 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

The following summarizes the significant differences between the statutory tax rate and the effective tax rate.
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Statutory tax rate

31.74%

31.74%

Deductible cash distributions(16.57%)(41.62%)

Valuation of allowance(21.48%)0.30%

Amortization of goodwill

6.31%

9.60%

Other

0.00%

0.01%

Effective tax rate

0.00%

0.02%

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, issuanceof investment 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 withwell-diversified 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
	Debts 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 offinancing to include the effective use of surplus funds and direct financing from the capital markets such as issuance of investment units. In
addition, the Company is exposed to the market risk arising from fluctuations in interest rates on its floating-rate debts. However, the effect ofsuch risk on the operation of the Company is limited by maintaining the LTV ratio at low levels and the ratio of long-term fixed-rate debts tototal debt at high levels. Furthermore, the Company may utilize derivative transactions (interest rate swap transactions) as a hedging instrument
to reduce the market risk under floating-rate debts by swapping such floating-rate interest payments for fixed-rate interest payments.
	Bank 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 “22. Derivatives andHedge Accounting” below do not represent the market risk involved in these derivative transactions.

Fair Value of Financial Instruments
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 August 31, 2017.
Thousands of Yen
Carrying value (Note 1)

Fair value (Note 2)¥71,227,676¥71,227,676

—

—

—

(iii) Current portion of investment corporation bonds(4,000,000)(4,011,828)¥11,828(iv) Current portion of long-term debt

(54,760,600)(54,912,627)

152,027(v) Investment corporation bonds(18,500,000)(19,932,756)

1,432,756(vi) Long-term debt

(411,480,600)(417,122,162)¥5,641,562(vii) Derivative transactions(¥1,539,851)(¥1,539,851)—(i) Cash and bank deposits(ii) Short-term debt

Difference—

Nomura Real Estate Master Fund36

Financial Section

Notes to Financial Statements

For the period from September 1, 2016 to February 28, 2017
The following table summarizes the carrying value and the estimated fair values of financial instruments as of February 28, 2017.
Thousands of Yen
Carrying value (Note 1)

Fair value (Note 2)¥73,331,039¥73,331,039(ii) Short-term debt

(5,000,000)(5,000,000)—(iii) Current portion of investment corporation bonds(9,000,000)(9,042,508)¥42,508(iv) Current portion of long-term debt

(69,975,600)(69,997,721)

22,121(v) Investment corporation bonds(18,500,000)(19,979,231)

1,479,231(vi) Long-term debt

(396,308,400)(399,857,342)

3,548,942(vii) Derivative transactions(¥1,563,490)(¥1,563,490)—(i) Cash and bank deposits

Difference—

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) Shot-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.
(iii) 	Current portion of investment corporation bonds and (iv) Investment corporation bonds
		 The fair value of investment corporation bonds issued by the Company is determined based on their market prices.
(v)	Current portion of long-term debt and (vi) Long-term debt
		For floating-rate long-term debt, the carrying value is reported as it is considered to be approximately equal to the fair value because such debt reflects themarket interest rates within a short-term period. (However, the fair value of certain floating-rate long-term debt that qualifies for the special treatment ofinterest rate swaps (see “22. Derivatives and Hedge Accounting”) is determined by discounting 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 applicable to similar fixed-rate debt.) The fair value of fixed-rate long-term debt isdetermined by discounting the sum of its principal and interest payments at a rate reasonably estimated to be applicable to similar fixed-rate debt.
(vii) 	Derivative transactions		
See “22. Derivatives and Hedge Accounting.”
Note 3: Redemption schedule for cash and bank deposits as of August 31, 2017

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¥71,227,676——  Total¥71,227,676——

After four years,
within five years

After five years

—

—

—

—

—

—

Redemption schedule for cash and bank deposits as of February 28, 2017

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¥73,331,039——  Total¥73,331,039——

After four years,
within five years

After five years

—

—

—

—

—

—

Note 4: Redemption schedule for cash and bank deposits as of August 31, 2017

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

After five years

—

—

—

—

—

—

Investment corporation bonds¥4,000,000—¥5,000,000——¥13,500,000

Long-term debt

¥54,760,600¥63,160,600¥58,385,600¥52,235,600¥44,715,600¥192,983,200  Total¥58,760,600¥63,160,600¥63,385,600¥52,235,600¥44,715,600¥206,483,200

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

After four years,
within five years

Redemption schedule for cash and bank deposits as of February 28, 2017

Thousands of Yen
Due within
one year

After one year,
within two years

After five years

Short-term debt

¥5,000,000

—

—

—

—

—

Investment corporation bonds¥9,000,000——¥5,000,000—¥13,500,000

Long-term debt

¥69,975,600¥51,940,600¥60,685,600¥56,655,600¥47,715,600¥179,311,000  Total¥83,975,600¥51,940,600¥60,685,600¥61,655,600¥47,715,600¥192,811,000

37 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

16. Investment and rental properties
The Company owns leasable office, leasable retail facilities, leasable logistics facilities and 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 fairvalue of these properties.
Thousands of Yen
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

¥928,836,719¥782,457,778(5,680,915)

146,378,940

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

923,155,804

928,836,719

Fair value at end of the period¥1,002,630,000¥996,084,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: Of the change in investment and rental properties, the increase during the previous period is mainly attributable to the acquisition of 19 properties as a result of
the absorption-type merger with TOP REIT, Inc. (total of ¥137,495,038 thousand) and the acquisition of Landport Kashiwa Shonan II (¥10,916,634 thousand). The
decrease during the previous period is mainly attributable to depreciation (¥4,754,117 thousand). The increase during the current period is mainly attributable tothe acquisition of nORBESA (¥8,638,004 thousand), NRE Kichijoji Building (¥5,141,844 thousand), Nakaza Cui-daore Building (¥12,165,807 thousand), Landport
Kashiwa Shonan I (¥10,040,496 thousand), PRIME URBAN Gakugei Daigaku Parkfront (¥1,402,842 thousand), Proud Flat Omori III (¥1,165,489 thousand), Proud
Flat Kinshicho (¥831,191 thousand), Summit Store Narita-Higashi (Land) (¥744,810 thousand). The decrease during the current period is mainly attributable to thesale of NOF Technoport Kamata Center Building (¥4,725,469 thousand), NOF Nihonbashi Honcho Building (¥10,889,175 thousand), Tennozu Park Side Building(¥12,467,899 thousand), Mitsubishi Motors Shibuya (¥1,586,458 thousand), Mitsubishi Motors Suginami (¥748,922), Ito-Yokado Higashi-Narashino Store (¥641,752
thousand), Merad Owada (¥6,510,260 thousand), Ota Nitta Logistics Center (¥3,081,630 thousand), Ota Higashishinnmachi Logistics Center (¥1,958,017 thousand),Ota Kiyohara Logistics Center(¥578,054 thousand) and Chiyodamachi Logistics Center (¥314,953 thousand) as well as depreciation (¥4,858,613 thousand).
Note 3: Fair value at the end of the period is the appraisal value or survey price determined by an outside real estate appraiser. However, the scheduled transfer price isused as the fair value for NOF Technoport Kamata Center Building, NOF Nihonbashi Honcho Building, Tennozu Park Side Building, Mitsubishi Motors Shibuya,
Mitsubishi Motors Suginami and Ito-Yokado Higashi-Narashino Store in the previous period and for Morisia Tsudanuma in the current period.

The real estate rental revenues and expenses for the fiscal period ended August 31, 2017 are presented in “18. Breakdown of Real Estate
Rental Revenues and Expenses”.

17. Segment information
For the periods from March 1, 2017 to August 31, 2017 and from September 1, 2016 to February 28, 2017
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, 2017 to August 31, 2017
Customer name

Revenues (Thousands of Yen)

Related segment name

¥4,708,156

Rental real estate business

Revenues (Thousands of Yen)

Related segment name

¥4,499,817

Rental real estate business

Nomura Real Estate Partners Co., Ltd.
For the period from September 1, 2016 to February 28, 2017
Customer name

Nomura Real Estate Partners Co., Ltd.

Nomura Real Estate Master Fund

38

Financial Section

Notes to Financial Statements

18. Breakdown of real estate rental revenues and expenses
Real estate rental revenues and expenses for the fiscal period ended August 31, 2017 and February 28, 2017 consist of the following:Thousands of Yen
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Real estate rental revenues¥35,032,000¥34,714,979

Rental revenues

31,656,774

31,730,412  Rental revenues

29,096,278

29,030,376   Common area charges

2,560,496

2,700,036

Other rental revenues

3,375,226

2,984,567  Parking revenues

661,984

689,795  Incidental income

2,507,620

2,174,961   Other miscellaneous revenues

205,622

119,811

Real estate rental expenses

15,962,926

15,791,522   Property management costs

1,697,881

1,692,981   Property management fees

955,304

901,770   Property and other taxes

2,883,602

3,016,773  Utility expenses

2,013,032

1,807,086  Casualty insurance

46,03245,751

2,083,226

2,135,500   Repairs and maintenance  Land rents

208,035

208,052  Depreciation

4,862,343

4,757,368   Other rental expenses

1,213,471

1,226,241

Real estate rental profits¥19,069,074¥18,923,457

19. Impairment loss
In the previous period ended, the Company recorded impairment loss on the following asset group.
Property name

Use

Type

Location

Impairment loss
(Thousands of Yen)

Tennozu Park Side Building

OfficeBuildings, land,in trust, etc.

Tokyo

¥220,723

NOF Technoport Kamata Center Building

OfficeBuildings, land,in trust, etc.

Tokyo49,074

For the purpose of calculating impairment loss, each property is considered an asset group. NMF reached sales agreements for NOF Technoport
Kamata Center Building and Tennozu Park Side Building on December 22, 2016, and April 4, 2017, respectively. As a result, the properties’ bookvalues were reduced to their respective recoverable amounts and the difference was recorded as impairment loss under operating expenses.
Any impairment loss recognized as a result of sales is regarded as having the characteristics of an operating expense and is therefore recorded
under operating expenses in accordance with Article 48 Paragraph 2 of the Regulations Concerning Accounting of Investment Corporations.
Also, the recoverable amounts of the asset groups are measured using the respective net realizable values or values in use. The net realizablevalues are calculated by subtracting the expected disposal costs from the actual sales prices. In the calculation of values in use, the discountrate is not taken into account because the estimated periods of future cash flows are all short term.

20. Breakdown of gain and loss on sales of real estate
Thousands of Yen
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017

Gain on sale of real estate
Proceeds from sale of real estate¥47,414,250—

Cost of real estate

43,502,593—

Other related sales expense

803,995—

Gain on sale of real estate¥3,107,662—

Proceeds from sale of real estate——

Cost of real estate——

Other related sales expense——

Loss on sale of real estate——

Loss on sale of real estate

39 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements

21. Leases
The future minimum rental revenues from tenants under non-cancelable operating lease of properties as of August 31, 2017 and February 28,
2017 are summarized as follows:
Thousands of Yen
As of August 31, 2017

As of February 28, 2017

Due within one year

¥32,493,388¥32,053,051

Due after one year

82,875,214

83,352,588¥115,368,602¥115,405,639  Total

22. Derivatives and hedge accounting
Derivative transactions as of August 31, 2017
(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 amount
Hedge accounting method

Main hedged item

(Note 1)

Due after one year

Fair value (Note 2)

Interest rate swaps:
Principal treatment method
Received/floating and paid/fixedType of derivative instruments

Long-term debt

¥154,100,000¥129,380,000(¥1,539,851) (Note 3)

Special treatment ofinterest rate swaps

Long-term debt

101,718,100

89,475,300(1,402,532) (Note 4)¥255,818,100¥218,855,300

Interest rate swaps:
Received/floating and paid/fixed  Total(¥2,942,383)

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is calculated by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥15,169 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,402,532 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest rate swaps.

Derivative transactions as of February 28, 2017
(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 amount
Hedge accounting method

Type of derivative instruments

Main hedged item

(Note 1)

Due after one year

Fair value (Note 2)

Principal treatment method

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

¥175,500,000¥134,780,000(¥1,563,490) (Note 3)

Special treatment ofinterest rate swaps

Interest rate swaps:
Received/floating and paid/fixedLong-term debt  Total101,739,500

101,696,700(1,399,669) (Note 4)¥277,239,500¥236,476,700(¥2,963,160)

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, (¥17,856 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,399,669 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest rate swaps.

Nomura Real Estate Master Fund40

Financial Section

Notes to Financial Statements

23. Cash distributions
For the period
from March 1, 2017
to August 31, 2017

For the period
from September 1, 2016
to February 28, 2017¥14,737,836,769¥10,928,087,899

2. Distributions in excess of retained earnings—¥3,994,889,150   Of which, allowance for temporary difference adjustment—¥2,702,301,980   Of which, other distributions in excess of net income—¥1,292,587,170

3. Incorporation into unitholders’ capital¥198,551,954¥708,820,764   Of which, reversal of allowance for temporary difference adjustments¥198,551,954¥708,820,764¥12,704,165,810¥12,666,517,640

1. Retained earnings at end of period

4. Distributions   [Distributions (per unit)]   Of which, distributions of earnings(¥3,037)(¥3,028)¥12,704,165,810¥8,671,628,490   [Of which, distributions of earnings (per unit)](¥3,037)(¥2,073)   Of which, allowance for temporary difference adjustments—¥2,702,301,980  [Of which, allowance for temporary difference adjustments (per unit)]—(¥646)  Of which, other distributions in excess of net income—¥1,292,587,170  [Of which, other distributions in excess of net income (per unit)]—(¥309)¥1,835,119,005¥1,547,638,645

4. Retained earnings carried forward
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 pay ¥12,704,165,810 in distributions, for a distribution per unit of ¥3,037. This
figure was calculated as ¥13,190,198,124 in net income plus ¥2,622,242,820 in amortization of goodwill minus ¥3,107,662,242 in gains on saleof real estate, for a subtotal of ¥12,704,778,702, from which the portion for which per-unit distributions would be less than ¥1 was excluded.
Note that, for the fiscal period under review, the distribution consists entirely of the distribution of earnings, and there is no distribution in excessof earnings as defined in Article 36, Paragraph 2 of NMF’s Articles of Incorporation.

24. Information on allowance for temporary difference adjustments
For the period from March 1, 2017 to August 31, 2017
1. Reason for reversal, related assets and amounts
Thousands of Yen

Related assets, etc.

Reason for reversal

Provision of allowancefor temporary
difference adjustments

Land, buildings, etc.

Sale and depreciation of properties for which merger expenses were recorded(¥91,222)

Land, buildings, etc.

Sale of property on which impairment was recognized(86,379)

Deferred gains or losses on hedges

Changes in fair value of derivatives(20,951)  Total(¥198,552)

2. 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.
Leasehold
Leasehold in trust

41 Nomura Real Estate Master Fund

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

Financial Section

Notes to Financial Statements

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
The amount corresponding to changes in the fair value of derivatives used as hedging instruments is scheduled to be reversed.

For the period from September 1, 2016 to February 28, 2017
1. Reason of provision, related assets and amounts
Thousands of Yen

Related assets, etc.

Provision of allowancefor temporary
difference adjustments

Reason of provision

Goodwill

Amortization of goodwill¥2,622,243

Land, buildings, etc.

Merger expenses

1,390,273

Land, buildings, etc.

Impairment loss

269,797

Long-term deposits

Shortfall of reserve for repairs

15,186

Increase - subtotal

4,297,499

Buildings, building improvements, etc.

Depreciation deficiency equivalent

Unearned income, etc.

Reversal of loss on interest rate swap due to merger(1,302,166)

Other

—

(216,262)(76,769)

Decrease - subtotal(1,595,197)  Total¥2,702,302

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

Related assets, etc.

Reversal of allowancefor temporary
difference adjustments

Reason for reversal

Land, buildings, etc.

Sale of property and amortization of merger expenses

Deferred gains or losses on hedges

Changes in fair value of derivative transactions—*(¥708,820)  Total(¥708,820)* The amount cancelled in the period under review (¥6,319 thousand) was deducted from “Depreciation deficiency equivalent”under 1 above.

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
Investment securities

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

(3) Impairment loss
At the time of the sale of the relevant property, the corresponding amount is scheduled to be reversed.
(4) Long-term deposits
In principle, Long-term deposits are not reversed.
(5) 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.

Nomura Real Estate Master Fund42

Financial Section

Notes to Financial Statements

25. Business combination
For the period from March 1, 2017 to August 31, 2017
Not applicable.
For the period from September 1, 2016 to February 28, 2017
Business Combination through Acquisition
1. Overview of Business Combination(1) Name and Business Description of Acquire
Name of acquire

Business description

TOP REIT, Inc. (hereinafter, “TOP”)

Real estate investment trust(2) Main Reasons for Business Combination
		NMF believes that the absorption-type merger with TOP presented a rare opportunity for external growth in the heated real estate
acquisition market. Furthermore, the absorption-type merger with TOP increased NMF’s ratio of investment in properties for which futureinternal growth can be expected, specifically properties that are in upside sectors or located within Tokyo’s five central wards. TOP
expected that, because the absorption-type merger would make Nomura Real Estate Group, a general real estate developer, its sponsor,
said merger would promote external growth by reinforcing the property pipeline. Furthermore, TOP expected that the absorption-typemerger would significantly diversify its portfolio and thereby improve its income stability. Thus, having reached the shared understandingthat the absorption-type merger would best increase their respective unitholder value, NMF and TOP entered into an absorption-typemerger agreement.
(3) Date of Business Combination
		 September 1, 2016(4) Legal Form of Business Combination
		 An absorption-type merger with NMF as the surviving corporation and TOP as the absorbed corporation.
(5) Name of the Investment Corporation after Business Combination
		 Nomura Real Estate Master Fund, Inc.
(6) Main Reasons for Determining Acquiring Company
		NMF was determined to be the acquiring company in accordance with the Accounting Standards for Business Combinations and otherrelevant standards based on a comprehensive consideration of such factors as corporate scale, including each company’s total assets andnet income; the ratio of voting rights that would be controlled by each company’s unitholders after the absorption-type merger; and thecomposition of the Board of Directors after the absorption-type merger.
2. Period for which the Operating Results of Acquiree Included in the Statement of Income and Retained Earnings
Name of acquire

Operating results period

TOP

September 1, 2016 to February 28, 2017

3. Acquisition Cost of Acquiree and the Breakdown
Name of acquire

Acquisition costTOP

¥78,713,184 thousand

4. Exchange Ratio, Method of Calculation and Number of Investment Units Issued as Consideration for the Acquisition(1) Exchange Ratio of Investment Units
Merger Ratio

NMF

TOP

1.00

2.62

(2) Method of Calculation
		Each investment corporation appointed a financial advisor (hereafter “FA”) for the absorption-type merger and requested that said financial
advisor perform a financial analysis of the merger ratio. NMF appointed Nomura Securities Co., Ltd., and TOP appointed Daiwa Securities
Co., Ltd. Based on comprehensive consideration of such factors as each corporation’s financial performance, assets and liabilities, andfuture outlook, as well as the merits of the absorption-type merger for each corporation and the results of the financial analyses conductedby the two FAs, NMF and TOP reached an agreement with regard to the above merger ratio through careful negotiation and concluded on
absorption-type merger agreement.

43 Nomura Real Estate Master Fund

Financial Section

Notes to Financial Statements(3) Number of Investment Units Issued
Names of acquirees

Investment units issued

TOP461,120 units

5. Details on and Amount of Main Merger Expenses
Description

AmountFA fees¥240,000 thousand

Acquisition fees for merger¥1,374,890 thousand

6. Amount and Reason for Goodwill(1) Amount of Goodwill		 ¥27,014,612 thousand(2) Reason
		Goodwill resulted from the acquisition of the acquiree, TOP, and represents the excess of the acquisition cost (¥78,713,184 thousand) overthe fair value of its net assets (¥51,698,571 thousand).
(3) Method of Goodwill Amortization and Amortization Period		Goodwill is being amortized using the straight-line method over 20 years.
7. Breakdown of Assets Acquired and Liabilities Assumed (As of the date of the business combination)
Thousands of Yen

Current assets¥10,701,317

Non-current assets

138,313,333  Total assets¥149,014,650

Current liabilities¥43,815,959

Long-term liabilities

53,500,119  Total liabilities¥97,316,078

8. 	Estimated Impact on the Statement of Income and Retained Earnings for the Fiscal Period under Review Assuming the Business Combination
Was Completed at the Beginning of the Fiscal Period
There was no impact since the acquisition date is the same as the beginning date of the fiscal period

26. Significant subsequent events
Asset Sales
NMF reached an agreement to sell and sold the following asset after the conclusion of the 4th fiscal period (August 31, 2017).
(1) Morisia Tsudanuma• Type of asset:
Trust beneficiary interest in mainly real estate• Use:
Retail facility• Contract date:
September 29, 2017
September 29, 2017
• Transfer date:• Transfer price:¥18,000 million• Buyer:
Nomura Real Estate Development Co., Ltd.
• Impact on 5th fiscal period earnings (Scheduled): ¥3 million
The impact of (1), above, on earnings for the 5th fiscal period (September 1, 2017 to February 28, 2018) will be recorded as gain on sales of realestate under operating revenues.

Nomura Real Estate Master Fund

44

Financial Section

Independent Auditor’s Report

45 Nomura Real Estate Master Fund

Financial Strategy

Distribution Policy
To ensure stable distributions over the medium and long term, we have adopted a new policy for handling gains on sales.*Under this new policy, by adjusting distributions in excess of net income, an amount equivalent to gain on sales of properties
may be designated as retained earnings.
*This does not constitute a change to NMF’s basic distribution policy.

Basic Distribution Policy

Distribution Policy for Periods with Gain on Sales

Distribute net income +goodwill amortization expenses

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 as retained earnings.
Gain onsales

RetainGoodwill
amortization

Distributions
in excess of
net income

Gain onsales

NetincomeNet
incomeDistributionsof net income

Net income
less gainon salesNet income(as on statementof income)

Total
distributions

1080

Net income(as on statementof income)

Goodwill
amortization

Net income
less gainon sales10

10Retained earnings
equivalent to gain on sales

10

Distributions in excess of net income

20

Gain on
sales

10

80

Net income
less gainon sales80

Total
distributions

Distribution
breakdown

Gain on sales is distributed,
and distributions in excess
of net income are adjusted
accordingly*Numbers shown above are forillustrative purposes only.

Reserves Equivalent to Gain on Sales in 4th Fiscal Period
1,052
3,107
Gain on
sales

3,107

2,622

Profitexcl.
gain onsales

10,082

10,082

Profit(Statement ofincome)Distribution
policyMajor decrease in taxable income due to loss on sale ofreal estate for tax purposes = Earnings can be reserved
within the scope that will not be taxed

Reserves equivalent
to gain on sales
1,052(¥3,107 mln)*1- 1,192

Reserve

Cash reserved
Profit reserved

Amortizationof goodwill

10,082

12,704- 269

Difference indepreciation

Other differences
between accounting
and tax treatment- 7,463

Loss on sale ofreal estate fortax purposes*2

Total
distribution(¥12,704 mln)

6,887

Total distributions(incl. distributions in excess of profit)

Taxable income(before distribution
payments)

Good
amortiz*1 When‌
there is a gain on sales, NMF’s policy is, in principle, to set aside an amount equivalent to the gain that is not more than the amount of goodwill amortization expenses as reserves within thescope that will not be subject to income tax. For the 4th fiscal period, NMF will reserve earnings in excess of the amount of distributions in excess of net income (distribution reducing unitholders’capital for tax purposes), but because it recorded a loss on sales for tax purposes and other decreases, it does not expect the reserves equivalent to the period’s gain on sales to be taxed.
*2 ‌Because a property’s book value for tax purposes is the book value used by absorbed companies prior to their mergers, property sales may result in a loss on sale for tax purposes even when they
result in a gain on sale for accounting purposes.

Convocation of the 1st General Meeting of Unitholders
NMF’s 1st General Meeting of Unitholders was held on May 26, 2017. Below is a summary of the proposals approved atsaid meeting.
Proposal

Summary‌
NMF
made necessary amendments to the Articles of Incorporation to enable it to lease investment assets otherthan real estate, such as renewable energy power generation facilities and movable assets acquired by NMF.

Proposal No. 1

Partial Amendment to Articles
of Incorporation

Proposal No. 2

Appointment of One (1)Executive Director

Shuhei Yoshida was appointed to a two-year term beginning June 1, 2017.

Proposal No. 3

Appointment of Two (2)Supervisory Directors

Mineo Uchiyama and Koichi Owada were each appointed to a two-year term beginning June 1, 2017.

Asset management fee structure from thestart of the fifth fiscal period(September 1, 2017) onward‌ establish an asset management fee structure that better reflects unitholders’ interests, NMF decreased the rateToof the existing asset management fee linked to total assets and introduced a new asset management fee linked to
net income.

Asset management fee I

Asset management fee II

Total assets (excluding goodwill) × 0.45% (annual basis)

Net income* × 5.5% (annual basis)* “Net income” here refers to income before income taxes as calculated according to the standards of Japanese Generally Accepted Accounting Principles (but before the deductions of management fee II and non-deductible consumption tax related to management fee II) plus goodwill deductions, minus gain on negative goodwill, and after the settlement of any losses carried forward.

Nomura Real Estate Master Fund

46

Investor Information

IR Calendar
Announcement of financial results(Mid-April)

January

February

March

April

Announcement of financial results(Mid-October)

May

June

July

Commencement of payment of distributions
Release of Asset Management Report(Mid-May)

Fiscal period end(End of February)Distribution of Investment Units
Individuals and others

Other domestic corporations

364,291andunits(8.7%)
Individuals
others323,833
unitscorporations(7.7%)
Other
domestic

364,291 units (8.7%)

323,833 units (7.7%)

Financial institutions

2,181,687
units (52.2%)
Financial
institutions
2,181,687 units (52.2%)
Foreign corporations

1,313,319
units (31.4%)
Foreign corporations
1,313,319 units (31.4%)

Number of Unitholders

Financial institutions(0.5%)
Financial182
institutions

182 (0.5%)

Individuals and others

32,653
Individuals(96.5%)
and others
32,653 (96.5%)

Other domestic corporations 520 (1.5%)

SeptemberAugustNovember

DecemberCommencement of payment of distributions
Release of Asset Management Report(Mid-November)

Fiscal period end(End of August)Top 10 Unitholders
Unitholder

Units heldShare

1 Japan Trustee Services Bank, Ltd.

894,31421.38%

2 The Master Trust Bank of Japan, Ltd.

407,922

9.75%

3 Trust & Custody Services Bank, Ltd.

317,891

7.60%

4 Nomura Real Estate Development Co., Ltd.

210,671

5.04%

5 The Nomura Trust and Banking Co., Ltd.

164,166

3.92%

6 NOMURA BANK (LUXEMBOURG) S.A.

109,848

2.63%

STATE STREET BANK WEST CLIENT - TREATY
7505234

108,689

2.60%

8

STATE STREET BANK - WEST PENSION FUND
CLIENTS - EXEMPT 505233

79,635

1.90%

9STATE STREET BANK AND TRUST COMPANY
505012

63,961

1.53%

STATE STREET BANK AND TRUST COMPANY
1050522358,622

1.40%

Total

2,415,719

57.75%

Foreign corporations 520
482 (1.5%)(1.4%)
Other domestic
Foreign corporations 482 (1.4%)

Websitehttp://www.nre-mf.co.jp/en/
NMF strives to ensure accurate, timely disclosure through its website. For convenience, the website also offers a variety of other information, including the following.

‌Overview of NMF and its features; information about the Asset Management
Company‌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 contents and use it to provide timely information.

47 Nomura Real Estate Master Fund

October