2Semi-Annualnd Fiscal Period
Report10 Years After

Masterphase

3-10 Years

Growthphase

3 Years

Quality

Oct. 2

phase

015 M

erger

Our Growth Driver

DiversificationbyProperties

Ratio of Portfolio
Comprised of
Top Ten Properties
25.4%

Growth Model
58.2%

Stable Model
41.8%

Others Area
17.2%

Diversification
by UseRetail Facilities(in residential areas)
6.1%

Office48.1%

Diversification
by Area
Tokyo
82.8%

Retail Facilities(near stations)
10.1%

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

Superior Sponsor Support
Nomura Real Estate Group`s Leasing Business Value Chain

A Rare Opportunity for External Growth

Nomura Real Estate Master Fund, Inc. (NMF) was established on October 1, 2015 through the merger of the former

Merger of Top REIT, Inc.

Nomura Real Estate Master Fund, Inc., Nomura Real Estate Office Fund, Inc., and Nomura Real Estate Residential Fund,
Inc. The new NMF seeks to 1. Achieve sustainable growth through its “diversified type strategy,” 2. Reinforce its stability

Capital is flowing into the J-REIT market from both domes-

intensifying. The J-REIT market is also changing, with someand evolve its growth strategies through its “large-scale REIT strategy,” and 3. Establish a “leasing value chain” with thetic and foreign sources on expectations of recovery in the

J-REITs reorganizing, as polarization continues between

sponsor to accelerate the growth of both companies while making the strengthening of sponsor support a pillar of its

Japanese economy and real estate market. Backed by thislarge J-REITs and medium- to small J-REITs, while invest-

favorable financing environment, property acquisitions byments are being directed to increasingly diverse sectors.

management strategy. By steadily implementing these measures, we are working to meet unitholder expectations.

J-REITs remain brisk, spurred on by both new J-REIT list-

Securing Stable Returns over the Medium to Long Term
By combining investment in sectors that offer stable revenue with sectors thatoffer potential upside, NMF targets sustainable growth based on a moderate risk,
moderate return portfolio while leveraging its strength as a diversified REIT.

ings and additional public offerings by existing J-REITs.

merger with TOP REIT, Inc. on September 1, 2016, thus

Furthermore, as growing numbers of new players enter the

securing a rare opportunity for external growth in the heat-real estate market, competition to acquire properties is

ed real estate acquisition market.

2nd Fiscal Period Performance Highlights

Expanding Assets under Management

Establishing a Strong Fund Brand

By selectively investing in excellent properties across a wide
range of sectors, with investment timing optimized for each,
we aim for stable, sustainable portfolio growth.

By creating and implementing medium- to long-term strategies and sharing them with investors, we seek to earn
investor trust and establish a strong fund brand in which
they can invest with confidence.

Cash Distribution per Unit 36.8% up

Operating Revenues 27.4% up(Yen)(Millions of yen)

3,036

Maximize Value

Measuresto Improve
Property Value

Obtain Trading
Information

Increasing
Brand Value

Investment
Analysis

Property
Acquisition
Pipeline

Office Buildings

Retail Facilities

Logistics Facilities

Price Examination /Negotiation Investment
Analysis

34,527

2,905

30,976

2,219

24,313

Revenue
Improvement
Measures

Site Selection

1st FP(Feb. 2016)

Property
Acquisition

In this environment, NMF completed an absorption type

Sales

2nd FP(Aug. 2016)

1st FP(Feb. 2016)

3rd FP(Feb. 2017)<Plan>

2nd FP(Aug. 2016)

3rd FP(Feb. 2017)<Plan>

Product Design /Development
Leasing

Operating Profit 80.2% up

Net Income 131.1% up(Millions of yen)

(Millions of yen)

11,682

Residential Facilities

9,355

10,892

8,156

6,483
4,048
Landport Kashiwa
Shonan I

PMO Hirakawacho

PMO Nihonbashi
Edo-dori

GEMS Kanda

Proud Flat
Sangenjyaya II

Proud Flat
Omori III

Leasing Business Value Chain of the Nomura Real Estate GroupStrengthening the brands and improve the value of properties held by the REIT

1st FP(Feb. 2016)REAL ESTATEManagement
Pipeline

2nd FP(Aug. 2016)

1st FP(Feb. 2016)

3rd FP(Feb. 2017)<Plan>NOI 24.7% up

LTV 0.4pt up(Millions of yen)(%)

2nd FP(Aug. 2016)

23,182

45.2

20,248

Measuresto Improve
Property Value

Property
Acquisition

Increasing
Brand Value
Site Selection

Revenue
Improvement
Measures16,237

1st FP(Feb. 2016)

Sales

43.4

2nd FP(Aug. 2016)

3rd FP(Feb. 2017)<Plan>

3rd FP(Feb. 2017)<Plan>

1st FP(Feb. 2016)

43.8

2nd FP(Aug. 2016)

3rd FP(Feb. 2017)<Plan>

Product Design /Development
Leasing
Nomura Real Estate Master Fund

1

Message from the Management

Delivering on Our Management Strategy

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

Director of
Satoshi Yanagita Executive
Nomura Real Estate Master Fund, Inc.

Our results for the second fiscal period can befor stable management over the long term through steadysummarized as follows: We delivered on our two

growth in asset size and the strong establishment of the

key priorities of executing strategic property

fund’s brand.

replacements (SPRs) and achieving internal
The basic policy of Nomura Real Estate Master Fund, Inc.

jumped 131.0% to ¥9,356 million, and net income grew(NMF) is to manage its assets to secure stable income over131.1% to ¥9,335 million. The per-unit distribution came tothe medium to long term and ensure the steady growth ofassets under management. We have established a¥3,036, surpassing our previous estimate by ¥276.
Furthermore, on September 1, 2016, we completed thegrowth, especially in the office sector, and theseaccomplishments are evident in our results.
For the third fiscal period, we are planning a
per-unit distribution of ¥2,905, down ¥131 fromIn the Quality phase, NMF aims to utilize the benefits ofbeing one of Japan’s largest diversified REITs while focusing on SPRs to improve the portfolio’s quality by reducing
the high average age of its properties, a long-standing
issue.
Specifically, we initially planned to implement ¥50 billion

Management Strategy aimed at achieving steady growthmerger with TOP REIT, Inc. announced on May 26, 2016.

the second fiscal period. However, the secondin property replacements in the first three to five years.

based on a long-term perspective, and we are working in

By taking advantage of this rare opportunity for external

However, because investor appetite for property acquisi-line with this strategy to increase unitholder value.

growth, NMF has expanded its asset size to ¥933.0 billion

period per-unit distribution excluding the portion

Both domestic and foreign investment capital is flowing

and further secured its position as one of Japan’s largest

from gain on sales of real estate (¥299 per unit)
was ¥2,737; the third fiscal period distribution

into the J-REIT market on expectations of recovery in thediversified REITs. In addition, the merger helped to build aJapanese economy and real estate market. Backed by thishigh-quality portfolio and increase risk tolerance. As such,forecast is 6% higher than this, thanks in part tofavorable financing environment, property acquisitions by

we expect more stable revenue and are better positioned tothe effect of the merger with TOP REIT.

J-REITs remain brisk. NMF is accelerating efforts to improve

pursue both internal and external growth by leveraging theportfolio quality through strategic property replacements

Nomura Real Estate Group’s development capabilities,(SPRs), a key priority under the Management Strategy, andwide-ranging know-how and brand.

is on track to achieve its SPR targets well ahead of schedule. In addition, we are focused on achieving internal

As we move forward, we ask for your continued supportand encouragement.

growth, mainly in upside sectors. During the second fiscal
period, we delivered on these priorities. As a result, operat-

Satoshi Yanagita

ing revenues for the period reached ¥30,976 million, up

Executive Director

27.4% from the previous fiscal period, ordinary income

Nomura Real Estate Master Fund, Inc.

2 Nomura Real Estate Master Fundtions remains strong and competition to acquire properties
is intense in Japan’s real estate market, we decided tomove ahead with the sale of 17 properties, for a total ¥34.1
billion, in the second fiscal period. We sold three of theseproperties, which were aging buildings in excellent locations, to the sponsor on the condition of receiving preferen-

Boosting Performance by Achieving
SPR Targets Well Ahead of Schedule
After our listing in October 2015, we formulated ourManagement Strategy. This strategy divides the 10 years
following NMF’s establishment into three phases—the
Quality phase, Growth phase and Master phase—and aims

tial negotiation rights to re-acquire them after
redevelopment. To help compensate for the loss of revenue
from the properties we sold, we also acquired five properties for a total of ¥21.3 billion.
Through these property replacements, the average building age for the entire portfolio decreased 1.3 years, reducing medium- and long-term repair costs by ¥2,652 million.

Nomura Real Estate Master Fund3

Delivering on Our Management Strategy
Change in average rent
Change(Yen/ tsubo)in average rent

Strategic Property Replacement (1st ~ 3rd Rounds of SPRs)
Of the ¥50 billion targeted for disposition during the initial 3~5 years, ¥34 billion attained in the 2nd fiscal period(Billions of yen)

Acquisition

Acquisition of Landport Kashiwa Shonan II
developed by the sponsor.

2nd
SPR

Total:

Acquisition of
4 properties withAcquisitionPrice¥10.5 bil.

NOF
Nihonbashi
HonchoNOF Tameike

Acquisition Price:

Disposition of
14 properties with

¥795.4

19.7

18.4

years

¥43.5

Improvement in Portfolio Quality
Reduction in building age(-1.3 years)
Asset
Management

Possible forredevelopment¥18.1 bil.

¥806.7¥46.2

Inadequate forredevelopment

the long term.

Reduction in medium- andlong-term repair costs(-¥2.6)*1 As of September 1, 2016.
*2 ‌The sum of long-term (12-year) repair expense
projections given in engineering reports foreach property at the end of the 1st fiscal period for existing properties and at the time ofacquisition for properties acquired during the
2nd fiscal period.

¥34.1 bil.

tors, is a pillar of operations in the Quality phase. In particular, we aim to increase rent revenues from offices and retailfacilities near stations.
The occupancy rate of the entire portfolio as of the endof the second fiscal period was stable and high, at 99.1%.
In the office sector, a key upside sector, the rental market
has seen particularly notable recovery, with rises in newly
advertised rents and successful rent increases upon contract renewal driving the internal growth of the portfolio asa whole. The following overview discusses market conditions
in each sector.

4 Nomura Real Estate Master Fund

Looking at one of NMF’s key retail properties, Universal

Bottomed out
Bottomed
and rising out
and rising

16,915
16,915CityWalk Osaka has seen steadily growing retail sales and16,832
16,832

16,775
16,775

16,757
16,757

sales-linked rent thanks to the growing number of visitors
to the nearby Universal Studios Japan theme park. There
are plans for additional investment in new attractions at 		

14/10
14/10

15/04
15/04

16/02
16/02

Universal Studios Japan going forward, so we expect con-

16/08
16/08

tinued growth from Universal CityWalk Osaka, as well.
Near another key retail property, Morisia Tsudanuma, newRent change and rate of rent change
Rent
and rate of rent change(Millionschange
of yen)
0.9%
0.9%

10
10

-20
-20
-30
-30

-4
-4

-10
-10

-10
-10

-2.4%
-2.4%

-40
-40

OfficeWhile the vacancy rate is stable and low in the office leasing market, rents continue to rise at a slow rate. The supply

(%)
(%)
2.0
2.0

1.7%
1.7%

(Millions of yen)
20
20

5
5

3
3

-19
-19

1.0
1.0
0
0
-1.0
-1.0

14/04
14/04

Rent Change (Left)
Rent Change (Left)

15/04
15/04

16/02
16/02

-4.0
-4.0

16/08
16/08

Rate of Rent Change (Right)
Rate of Rent Change (Right)

Office(Thousands of yen)floor space forecast to maintain the current market balance.

tial population. Redevelopment is expected to cause the population in the vicinity to rise by around 10,000 people.
Retail(Thousands of yen)Ended Feb.
29, 2016(1st FP)
From Oct. 1,
2015, to Feb.
29, 2016

Ended Aug.
31, 2016(2nd FP)
From Mar. 1,
2016, to Aug.
31, 2016

ChangeReal Estate Rental Business
Revenues¥5,055,646¥6,181,693¥1,126,046

22.3

Rental Business Revenues

4,456,151

5,363,669

907,518

20.4

Other Rental Business
Revenues

599,495

818,023

218,527

36.5

Real Estate Rental Business
Expenses

2,489,809

2,886,644

396,834

15.9

Operating Profit

2,565,837

3,295,048

729,211

28.4

Net Operating Income

3,174,068

4,049,228

875,160

27.6% Change

Ended Feb.
29, 2016(1st FP)
From Oct. 1,
2015, to Feb.
29, 2016

Ended Aug.
31, 2016(2nd FP)
From Mar. 1,
2016, to Aug.
31, 2016

ChangeReal Estate Rental Business
Revenues¥10,858,540¥12,950,477¥2,091,936

19.3

Rental Business Revenues

9,893,779

11,729,101

1,835,322

18.6

Other Rental Business
Revenues

964,761

1,221,375

256,613

26.6

Logistics

Real Estate Rental Business
Expenses

5,169,316

5,851,529

682,213

13.2

In terms of logistics facilities, the supply-demand balance

Operating Profit

5,689,224

7,098,947

1,409,722

24.8

Net Operating Income

6,600,947

8,239,129

1,638,182

24.8% Changeremains tight, reflecting the impact of online shopping andthe apparel industry, which are driving demand, as well as
the accompanying demand for third-party logistics (3PL)*
and additional demand arising in recent years from growingof new properties is expected to remain low for the time
being, with demand from companies seeking increased

Retail sales are increasing, backed by growth in the residen-

-3.0
-3.0

-2.9%
-2.9%
14/10
14/10

condominiums are being built as the area is redeveloped.

-2.0
-2.0

-1.8%
-1.8%

Disposition to outside of the group

In addition to SPRs, internal growth, mainly in upside sec-

increases on the back of economic recovery and the rise ofa growing middle class in emerging Asian countries over

¥15.9 bil.

Internal Growth in Upside Sectors
Driving Results

remain stable, as the number of tourists coming to Japan

253

properties

00

Disposition

NOF Minami
Shinjuku

264

After
SPRs

properties

years

SPR

2nd
SPR

Age（*1）
Repair Cost（*2¥21.3 bil.

1st &
3rd
SPRs

Acquisition

Development

Acquisition from outside of the group

Transaction with the sponsor

Disposition

No. ofProperties¥10.8 bil.

Disposition of 3 properties for the sponsor
that are aging but in excellent locations.

Total:

Before
SPRs

Transaction
with the sponsor
Acquisition Price:

1st &
3rd
SPRs

Effect of SPRs

(Yen / tsubo)
17,20017,20017,10017,141
17,10017,141
17,00017,00016,90016,90016,80016,80016,70016,70016,60016,60016,500
14/04
16,500
14/04

Retaillogistics sophistication in the food wholesaling industry.
New supply of large-scale facilities is expected from 2017,

Concerning the environment surrounding retail facilities,

which may temporarily push up the vacancy rate. However,April 2015, and has since been rising steadily. Reflecting

individual consumption is weak, reflecting thriftiness among

demand for highly functional logistics facilities is solid, so

favorable market conditions, demand for increased floor

households. Demand related to daily necessities, such as

the supply-demand balance is expected to recover.

space from tenants relocating to a larger space orgroceries and dining, is firm, supported by improvement inconsolidating locations is growing, and the proportion of ouremployment as a result of labor shortages. Nevertheless,stable management of our logistics facilities under long-existing tenants that sought additional floor space grew

shifting consumer attitudes require careful attention. Rental

term contracts and working to spread out risk by diversify-

from 9.3% in the first fiscal period to 22.1%. Similarly, thedemand for retail facilities in major urban areas is firm over-ing lease maturities.

average rent-free period granted to tenants decreased fromall, thanks to solid demand for new retail outlets caused by

4.2 months to 2.2 months, and the rate of rent increases

continued population inflows to such areas. Demand gener-

upon rent revision grew from 0.9% to 1.7%.

ated by visitors to Japan from overseas is also expected to

The office sector’s average per-unit rent bottomed out in

Under these conditions, we are striving to maintain the

Nomura Real Estate Master Fund

5

Delivering on Our Management Strategy
Logistics(Thousands of yen)Ended Feb.
29, 2016(1st FP)
From Oct. 1,
2015, to Feb.
29, 2016

Ended Aug.
31, 2016(2nd FP)
From Mar. 1,
2016, to Aug.
31, 2016

ChangeReal Estate Rental Business
Revenues¥3,790,705¥4,736,769¥946,063

25.0

Rental Business Revenues

3,632,136

4,524,926

892,790

24.6

Residential(Thousands of yen)Ended Feb.
29, 2016(1st FP)
From Oct. 1,
2015, to Feb.
29, 2016

Ended Aug.
31, 2016(2nd FP)
From Mar. 1,
2016, to Aug.
31, 2016

ChangeReal Estate Rental Business
Revenues¥4,607,717¥5,608,457¥1,000,739

21.7

Rental Business Revenues

4,304,368

5,172,191

867,823

20.2% Change

158,569

211,843

53,273

33.6

Other Rental Business
Revenues

303,349

436,266

132,916

43.8

Real Estate Rental Business
Expenses

1,718,591

2,137,950

419,359

24.4

Real Estate Rental Business
Expenses

2,168,991

2,613,625

444,633

20.5

Operating Profit

2,072,114

Operating Profit

2,438,726

Net Operating Income

3,015,245

3,725,780

526,703
710,534

25.4
23.6

Net Operating Income

Under the Quality phase of our Management Strategy, we

Portfolio SummaryType

Other Rental Business
Revenues

2,598,818¥137.4 billion(*)% Change

3,447,103

2,994,832
4,179,196

556,106
732,092

Forecast for the Quality Phase of theManagement Strategy(*) ‌Detailed evaluations of the fairvalues of assets accepted fromTOP are ongoing

Assumed Acquisition Priceare working to further improve our reputation among inves-

Name
NEC Head Office Building

tors through SPRs, external growth and internal growth inHarumi Island Triton Square Office Tower Y

order to make our first public offering a success. Initially,

Akasaka Oji Building

we planned for the Quality phase to last three to five years.

Kanda Nishiki-cho 3-chome Building

22.8

However, as result of delivering on our key priorities andHarumi Island Triton Square Office Tower Z

Office21.2

Shinkawa Chuo Building

merging with TOP REIT, we now expect to reach our tar-

Shinjuku EAST Building

gets ahead of schedule. Accordingly, we have revised the

Shiba-Koen Building

planned period of the Quality phase to be no more than

Ginza Oji Building

three years.

Faret East Building

Residential
Concerning the environment surrounding the rental apartment market, both the existing stock and new supply ofhigh-quality rental condominiums in good locations are low,

Approaching ¥1 Trillion Asset Size
Goal by Leveraging External Growth
Opportunities

In terms of asset size, as we are now approaching our

Sagamihara Shopping Center

RetailMusashiurawa Shopping Squareprevious goal of ¥1 trillion, we have set our sights on

Ito-Yokado Higashi-Narashino Store

increasing our asset size to ¥1.5 trillion over the next 5 to

MEL Building

6 years.

Fukasawa House Towers H&I

As for distributions, following the merger with TOP REIT,PRIME URBAN Toyosu

while population inflows to major urban areas continue to

On September 1, 2016, NMF completed an absorption type

PRIME URBAN Nihonbashi Kayabacho

we expect to keep distributions steady at around ¥2,900 for

be strong. At the same time, land prices in major urban

merger with TOP REIT, Inc., acquiring all of its 19 proper-

PRIME URBAN Yoga II

the time being, with the aim of again increasing them

areas are expected to continue rising, as are construction

ties. As a result, NMF’s asset size has jumped to over ¥930

PRIME URBAN Musashi-Koganei II

through internal growth as we go forward.

costs, and competition with for-sale condominiums andbillion, the second largest among J-REITs. The real estateother sectors to acquire building sites is intensifying. As

market has been hot, and acquiring excellent office proper-

such, a limited supply of rental apartments is expected.

ties has become especially difficult. Given this environment,

Reflecting this, the occupancy rate of rental condominiums

we believe the acquisition of excellent office properties in

owned by J-REITs remains high overall. Newly advertised

Tokyo through the merger was an especially valuablerents are forecast to follow a gentle upward trajectory forachievement.

The residential sector is also seeing steady growth in thewith TOP REIT is Harumi Island Triton Square, a landmark in
the Tokyo bayside area. Following the 2020 Tokyo

proportion of units that achieve rent increases upon tenant

Olympics, a 6,000-unit housing complex is planned to bechange. Although this is not a sector with a major upsidebuilt near the property, and the area’s working population is

expected in the future, we will continue working to increase

expected to grow. Improvements to nearby transportation

rents.

infrastructure are also planned. Considering these factors,

At the end of the fiscal period under review, the numberof properties held by NMF was 252, with a total acquisition

we expect continued growth from this property.

19.2 years

5-6 years
from now¥1.5 tln

19.1 years
18.7 years¥792.6¥932.8¥784.6Focused investment insponsor-developed properties

Continue SPR

Target: 15 years

External growth throughvarious methods

Another property acquired from TOP REIT is the Ito-

price of ¥784,607 million. The ratio of investment in the

Yokado Higashi-Narashino Store. This property’s tenant is

Greater Tokyo area was 79.7%, the gross leasable area ofscheduled to move out in June 2017. We are currently

the portfolio was 1,654,570.95 m2, and the portfolio

exploring both the possibility of leasing to a new tenant andremained highly diversified.*of selling the property to the sponsor. We plan to finalize
the business plan for the property by the end of 2016.

* All figures exclude Landport Kashiwa Shonan II, which was acquired after theend of the fiscal period(Billions of yen)

Medium- to Long-term Management Strategy
accelerated through the merger
Average Age

improving incomes.

One of the properties we acquired through the merger

Progress of Medium- to Long-term Management Strategy

Asset Size

the time being, backed by tight supply, strong demand andResidential

Although the tenant’s move-out was decided after we

1st FP(5 months)

3rd FP

Quality phase
Within 3 years of listing

Growth phase
(yen)

L
T
V

43.4%

43.8%

45.0%

(Assumed)

Operational LTV level: 40 〜 50%
Control of LTV to maintain additional acquisition capacity

At merger

announced the merger, the impact on NMF is minimal as(initial
forecast)

we had accounted for this vacancy risk in our pricing
assessment of the property.

2nd FP(Actual) *¥299(forecast)

Promotion of continuous internal growthD
PU

Aiming for steady growth in DPU¥2,219¥2,710 ¥2,737¥2,905* For the 2nd fiscal period, the portion of the DPU from gain on sales of real estate (¥299) is shown separately from the portion excluding this amount (¥2,737).

6 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

7

Delivering on Our Management Strategy
NMF’s Financial Strategy

ChangeChange inin average
average remaining
remaining duration
duration andand average
averageinterest
interest rate
rate
Average
Average Remaining
Remaining Duration
Duration (Left)(Left)Taking advantage of the current low interest rate environment, NMF is working to extend the terms and lower the

Fiscal Management
Financing

Average
Average Interest
Interest Rate
Rate (Right)(Right)(years)(years)

(%)
(%)

5.0
5.0

1.5
1.5

Financial Institution

Billions of Yen

Share

Financial Institution

Billions of Yen

Share

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

62.7

16.6%

The Chugoku Bank, Limited

4.5

1.2%

Sumitomo Mitsui Banking Corporation

61.2

16.2%

Mitsui Sumitomo Insurance Company, Limited

3.7

1.0%

Mitsubishi UFJ Trust and Banking Corporation

38.6

10.2%

The Nishi-Nippon City Bank, Ltd.

3.1

0.8%

Mizuho Bank, Ltd.

33.5

8.9%

Daido Life Insurance Company

3.1

0.8%

ly. Furthermore, using cash on hand generated by the sale

Sumitomo Mitsui Trust Bank, Limited

31.6

8.4%

Aozora Bank, Ltd.

2.5

0.7%

of assets, NMF repaid a total of ¥18,800 million in existing

Development Bank of Japan Inc.

31.3

8.3%

The Hachijuni Bank, Ltd.

2.5

0.7%

Mizuho Trust & Banking Co., Ltd.

13.8

3.7%

The Chiba Bank, Ltd.

2.5

0.7%

The Norinchukin Bank

13.4

3.6%

The Hyakujushi Bank, Ltd.

2.0

0.5%

Resona Bank, Ltd.

8.9

2.4%

The 77 Bank, Ltd.

2.0

0.5%

The Nomura Trust and Banking Co., Ltd.

8.2

2.2%

The Keiyo Bank, Ltd.

1.7

0.5%

The Bank of Fukuoka

8.0

2.1%

The Hiroshima Bank, Ltd.

1.0

0.3%

Taiyo Life Insurance Company

6.5

1.7%

Mitsui Life Insurance Company Limited

1.0

0.3%

The Dai-ichi Life Insurance Company, Limited

6.3

1.7%

Sompo Japan Nipponkoa Insurance Inc.

1.0

0.3%

Sumitomo Life Insurance Company

5.5

1.5%

The Tokyo Tomin Bank, Limited.

1.0

0.3%

(%)
(%)

Shinkin Central Bank

5.2

1.4%

The Bank of Yokohama, Ltd.

0.5

0.1%

55.0
55.0

The Iyo Bank, Ltd.

5.0

1.3%

Corporate bonds

32.5

Nippon Life Insurance Company

5.0

1.3%

Total

409.7

interest rates of its borrowings. During the second fiscal
period, NMF took out loans of ¥14,700 million and ¥10,800
million on March 1, 2016 and August 31, 2016, respective-loans. NMF also refinanced ¥22,330 million in existing

1.03
1.03
4.5
4.5

4.0
4.0

4.36
4.36

loans. As a result, at the end of the second fiscal period,
the average remaining duration until maturity of our bor-

3.5
3.5

rowings was 4.36 years, compared with 3.96 years at theAug. 31,
31, 2016
2016
Aug.
(2nd FP)
FP)
(2nd

0.96
0.96

0.5
0.5

4.06
4.06
Sep. 1,
1, 2016
2016
Sep.
(after Merger)
Merger)(afterprevious period-end, and our average interest rate on borrowings was 1.03%, compared with 1.09% at the previous
period end.
To secure a stable financial base, in addition to its existing commitment line agreements (with a period of one

ChangeChange inin LTV
LTV
LTV
LTV (total(total asset)
asset)

year and borrowing limit of ¥40 billion), NMF established anew, three-year commitment line with a borrowing limit of

45.0
45.0

43.8
43.8

the end of the fiscal period under review was ¥409,771
million, and the ratio of interest-bearing liabilities to total
assets (LTV) was 43.8%.
The borrowings we took over from TOP REIT had shortperiods remaining until maturity and low interest rates. As

0.0
0.0

50.0
50.0

¥10 billion.
As a result, the balance of interest-bearing liabilities at

1.0
1.0

45.0
45.0

Diversification of Repayment Dates

40.0
40.0

Diversification of Repayment Dates

35.0
35.0

(Billions of yen; Rounded)

Debts of TOP
Aug.
Aug. 31,
31, 2016
2016(2nd(2nd FP)FP)

Sep.
Sep. 1,
1, 2016
2016(after(after Merger)
Merger)

Debts

REIT Bonds

60such, following the merger, we expect our averageremaining duration until maturity of borrowings to fall to
4.06 years, and the average interest rate to fall to 0.96%.

40

Also, LTV is expected to rise to 45.0%. Our policy is tocontrol LTV at between 40% and 50% while considering

20

our capacity for additional property acquisitions, but weare aiming to bring it down somewhat from its current
level in the medium term.

0

3rd
FP
Feb.
2017

4th
FP
Aug.
2017

5th
FP
Feb.
2018

6th
FP
Aug.
2018

7th
FP
Feb.
2019

8th
FP
Aug.
2019

9th
FP
Feb.
2020

10th
FP
Aug.
2020

11th
FP
Feb.
2021

12th
FP
Aug.
2021

13th
FP
Feb.
2022

14th
FP
Aug.
2022

Commitment Lines

8 Nomura Real Estate Master Fund

15th
FP
Feb.
2023

16th
FP
Aug.
2023

17th
FP
Feb.
2024

18th
FP
Aug.
2024

19th
FP
Feb.
2025

20th
FP
Aug.
2025

21st
FP
Feb.
2026

22nd
FP
Aug.
2026

26th
FP
Aug.
2028

31st
FP
Aug.
2031

Credit Ratings

Commitment Line 1

Commitment Line 2

Loan Limit(commitment period)

40(one year)

10(three years)

Participating
Financial Institutions

Tokyo-Mitsubishi UFJ,
Sumitomo Mitsui,
Mizuho,Mitsubishi UFJ Trust,
Sumitomo Mitsui TrustTokyo-Mitsubishi UFJ,
Sumitomo Mitsui

Rating Agency

LT Issuer Rating

Outlook

JCR

AA

StableR&I

A+

StableS&P

A

StableNomura Real Estate Master Fund

9

Portfolio Table (As of the end of the 2nd Fiscal Period)
Property Name

Location

Acquisition
Price(Millionsof yen)Of-T-001 Shinjuku Nomura Building

Shinjuku, Tokyo

43,900Of-T-002 NRE Tennozu Building

Shinagawa, TokyoOf-T-003 Kojimachi Millennium Garden

Settlement
Number

Property Name

Location

Acquisition
Price(Millionsof yen)Location

Acquisition
Price(Millionsof yen)Property Name

Location

Acquisition
Price(Millionsof yen)Rt-T-015

Mitsubishi Motors Meguro

Meguro, Tokyo

2,740

Rt-T-016

Mitsubishi Motors Chofu

Chofu, Tokyo

1,760

Rs-T-018 PROUD FLAT Fujimidai

Nerima, Tokyo

Rs-T-019 PROUD FLAT Asakusa

Taito, Tokyo

1,470

Rs-T-091 PRIME URBAN Kasai East

Edogawa, Tokyo

1,140

1,920

Rs-T-093 PRIME URBAN Itabashi Kuyakushomae

Itabashi, Tokyo

20,500Rt-T-017

Mitsubishi Motors Shibuya

Shibuya, Tokyo

1,570

Rs-T-020 PROUD FLAT Yokohama

1,080

Yokohama, Kanagawa

2,090

Rs-T-094 PRIME URBAN Asakusa

Taito, Tokyo

Chiyoda, Tokyo

26,700Rt-T-018

Mitsubishi Motors Nerima

Nerima, Tokyo

1,240

Rs-T-021 PROUD FLAT Kamioooka

Yokohama, Kanagawa

2,710

Rs-T-095 PRIME URBAN Machiya South Court

Arakawa, Tokyo

1,910

Of-T-004 NOF Nihonbashi Honcho Building

Chuo, Tokyo

10,914

Rt-T-019

Mitsubishi Motors Kawasaki

Of-T-005 Tennozu Park Side Building

Shinagawa, Tokyo

12,700Rt-T-020

Mitsubishi Motors Takaido

Kawasaki, Kanagawa
Suginami, Tokyo950

Rs-T-022 PROUD FLAT Tsurumi II

Yokohama, Kanagawa

1,650

Rs-T-096 PRIME URBAN Musashi Koganei

Koganei, Tokyo

1,910

850

Rs-T-023 PRIME URBAN Azabu Juban

Minato, Tokyo

1,100

Rs-T-097 PRIME URBAN Musashino Hills

Koganei, TokyoOf-T-006 NOF Shinjuku Minamiguchi Building

Shibuya, Tokyo

10,000Rt-T-021

Mitsubishi Motors Katsushika

1,280

Katsushika, Tokyo

800

Rs-T-024 PRIME URBAN Akasaka

Minato, Tokyo

938

Rs-T-098 PRIME URBAN Koganei Honcho

Koganei, TokyoOf-T-007 NOF Shibuya Koen-dori Building

Shibuya, Tokyo

10,400Rt-T-022

Mitsubishi Motors Higashikurume

Higashikurume, Tokyo

800

Rs-T-025 PRIME URBAN Tamachi

Minato, Tokyo972

Rs-T-099 PRIME URBAN Kumegawa

Higashimurayama, Tokyo

1,520

Of-T-008 Secom Medical Building

Chiyoda, TokyoOf-T-009 NOF Shiba Building

Minato, Tokyo

11,1007,040

Rt-T-023

Mitsubishi Motors Setagaya

Setagaya, Tokyo

770

Rs-T-026 PRIME URBAN Shibaura

Minato, Tokyo

1,830

Rs-T-100 PRIME URBAN Musashi Kosugi comodo

Kawasaki, Kanagawa

1,940

Rt-T-024

Mitsubishi Motors Suginami

Suginami, Tokyo

740

Rs-T-028 PRIME URBAN Yoyogi

Shibuya, Tokyo359

Rs-T-101 PRIME URBAN Kawasaki

Kawasaki, Kanagawa

Of-T-010 Nishi-Shinjuku Showa Building

Shinjuku, Tokyo

962

8,140

Rt-T-025

Mitsubishi Motors Sekimachi

Nerima, Tokyo

600

Rs-T-029 PRIME URBAN Ebisu II

Shibuya, Tokyo

1,140

Rs-T-102 PRIME URBAN Shinyurigaoka

Kawasaki, Kanagawa

1,020

Of-T-011 NRE Shibuya Dogenzaka Building
Of-T-013 Iwamoto-cho Toyo Building

Shibuya, Tokyo

5,310

Rt-T-026

Mitsubishi Motors Higashiyamato

Higashiyamato, Tokyo

450

Rs-T-030 PRIME URBAN Bancho

Chiyoda, Tokyo

1,090

Rs-T-103 PRIME URBAN Tsurumi Teraya

Yokohama, Kanagawa

493

Chiyoda, Tokyo

4,050

Rt-T-027

Mitsubishi Motors Motosumiyoshi

Kawasaki, Kanagawa

370

Rs-T-031 PRIME URBAN Chiyoda Fujimi

Chiyoda, Tokyo

679

Rs-T-105 PRIME URBAN Urayasu

Urayasu, Chiba

804

Of-T-015 NOF Surugadai Plaza Building

Chiyoda, Tokyo

4,690

Rt-T-028

Mitsubishi Motors Kawagoe

Kawagoe, Saitama

350

Rs-T-032 PRIME URBAN Iidabashi

Chiyoda, Tokyo

2,040

Rs-T-106 PRIME URBAN Gyotoku I

Ichikawa, Chiba

633

Of-T-016 PMO Nihonbashi Honcho

Chuo, Tokyo

4,320

Rt-T-029

Mitsubishi Motors Edogawa

Edogawa, Tokyo

200

Rs-T-033 PRIME URBAN Ebisu

Meguro, Tokyo

1,260

Rs-T-107 PRIME URBAN Gyotoku II

Ichikawa, Chiba

730

Of-T-017 PMO Nihonbashi KayabachoChuo, Tokyo

5,010

Rt-T-030

Mitsubishi Motors Sayama

Sayama, Saitama

160

Rs-T-034 PRIME URBAN Naka Meguro

Meguro, Tokyo

1,410

Rs-T-108 PRIME URBAN Gyotoku Ekimae

Ichikawa, Chiba

488

Of-T-018 Otemachi Tatemono Gotanda Building

Shinagawa, Tokyo

4,430

Rt-T-031

NRE Kichijoji Building

Musashino, Tokyo

5,310

Rs-T-035 PRIME URBAN Gakugei Daigaku

Meguro, Tokyo

775

Rs-T-109 PRIME URBAN Gyotoku Ekimae II

Ichikawa, Chiba

469

Of-T-019 NRE Higashi-nihonbashi Building

Chuo, Tokyo

3,570

Rt-T-032

GEMS Ichigaya

Chiyoda, Tokyo

2,080

Rs-T-036 PRIME URBAN Senzoku

Meguro, Tokyo

474

Rs-T-110 PRIME URBAN Gyotoku III

Ichikawa, Chiba

747

Of-T-020 PMO Akihabara

Chiyoda, Tokyo

4,240

Rt-S-001 Universal CityWalk Osaka

Osaka, Osaka

15,500Rs-T-037 PRIME URBAN Meguro Riverside

Meguro, Tokyo

414

Rs-T-111 PRIME URBAN Nishi Funabashi

Funabashi, Chiba

Of-T-021 Hatchobori NF Building

Chuo, Tokyo

2,480

Rt-S-002 Izumiya Senrioka

Suita, Osaka

8,930

Rs-T-038 PRIME URBAN Meguro Ohashi Hills

Meguro, Tokyo

2,970

Rs-T-112 PRIME URBAN Kawaguchi

Kawaguchi, Saitama

Of-T-022 NOF Kanda Iwamoto-cho Building

Chiyoda, Tokyo

4,160

Rt-S-003 Merad Owada

Osaka, Osaka

6,640

Rs-T-039 PRIME URBAN Meguro Aobadai

Meguro, Tokyo

1,310

Rs-T-113 PROUD FLAT Hatchobori

Chuo, TokyoOf-T-023 NOF Takanawa Building

Shinagawa, Tokyo

2,830

Rt-S-004 Izumiya Yao

Yao, Osaka

4,406

Rs-T-040 PRIME URBAN Gakugei Daigaku II

Meguro, Tokyo

1,080

Rs-T-114 PROUD FLAT Itabashi Honcho

Itabashi, Tokyo

720

Of-T-024 PMO Hatchobori

Chuo, Tokyo

2,880

Rt-S-005 Izumiya Obayashi

Takarazuka, Hyogo

3,020

Rs-T-041 PRIME URBAN Naka Meguro II

Meguro, Tokyo

2,850

Rs-T-115 PRIME URBAN Meguro Mita

Meguro, Tokyo

1,058

Of-T-026 PMO Nihonbashi Odenmacho

Chuo, Tokyo

2,210

Rt-S-006 Ichibancho stear

Sendai, Miyagi

4,700

Rs-T-042 PRIME URBAN Kachidoki

Chuo, Tokyo

2,570

Rs-S-001 PROUD FLAT Itsutsubashi

Sendai, Miyagi

652

Of-T-028 PMO Higashi-nihonbashi

Chuo, Tokyo

1,690

Rt-S-007 EQUINIA Aobadori

Sendai, Miyagi

1,640

Rs-T-043 PRIME URBAN Shinkawa

Chuo, Tokyo

2,100

Rs-S-002 PROUD FLAT Kawaramachi

Sendai, Miyagi

735

Of-T-029 NRE Ueno Building

Taito, Tokyo

6,470

Subtotal (39 properties)

Rs-T-044 PRIME URBAN Nihonbashi Yokoyamacho Chuo, Tokyo

4,220

Rs-S-003 PROUD FLAT Shin Osaka

Osaka, Osaka

1,620

Of-T-030 NOF Technoport Kamata Center Building

Ota, Tokyo

4,780

Rs-T-045 PRIME URBAN Nihonbashi Hamacho

Chuo, Tokyo

1,550

Rs-S-005 PRIME URBAN Kita Juyo Jo

Sapporo, Hokkaido

274

Of-T-031 NF Hongo Building.

Bunkyo, Tokyo

4,890

Logistics Facilities

Rs-T-046 PRIME URBAN Hongo Ikizaka

Bunkyo, Tokyo

557

Rs-S-006 PRIME URBAN Odori Koen I

Sapporo, Hokkaido

502

Of-T-034 Crystal Park Building

Musashino, Tokyo

3,390

Lg-T-001 Landport Urayasu

Urayasu, Chiba

17,400Rs-T-047 PRIME URBAN Hakusan

Bunkyo, Tokyo

866

Rs-S-007 PRIME URBAN Odori Koen II

Sapporo, Hokkaido

334

Of-T-035 NOF Kichijoji Honcho Building

Musashino, Tokyo

1,780

Lg-T-002 Landport Itabashi

Itabashi, Tokyo

15,710Rs-T-048 PRIME URBAN Yotsuya Gaien Higashi

Shinjuku, Tokyo

1,490

Rs-S-008 PRIME URBAN Kita Juichi Jo

Sapporo, Hokkaido

547

Of-T-036 Faret Tachikawa Center Square

Tachikawa, Tokyo

3,850

Lg-T-003 Landport Kawagoe

Kawagoe, Saitama

13,700Rs-T-050 PRIME URBAN Nishi Shinjuku I

Shinjuku, Tokyo

1,090

Rs-S-009 PRIME URBAN Miyanosawa

Sapporo, Hokkaido

475

Of-T-037 NOF Kawasaki Higashiguchi Building

Kawasaki, Kanagawa

7,830

Lg-T-004 Landport Atsugi

Atsugi, Kanagawa

11,410Rs-T-051 PRIME URBAN Nishi Shinjuku II

Shinjuku, Tokyo

885

Rs-S-010 PRIME URBAN Odori Higashi

Sapporo, Hokkaido

394

Of-T-038 NOF Yokohama Nishiguchi Building

Yokohama, Kanagawa

5,460

Lg-T-005 Sagamihara Tana Logistics Center

Sagamihara, Kanagawa

10,600Rs-T-052 PRIME URBAN Shinjuku Naitomachi

Shinjuku, Tokyo430

Rs-S-011 PRIME URBAN Chiji Kokan

Sapporo, Hokkaido

249

Of-T-039 NOF Shin-Yokohama Building

Yokohama, Kanagawa

2,620

Lg-T-006 Sagamihara Onodai Logistics Center

Sagamihara, Kanagawa

8,700

Rs-T-053 PRIME URBAN Nishi Waseda

Shinjuku, Tokyo

421

Rs-S-012 PRIME URBAN Maruyama

Sapporo, Hokkaido

229

Of-T-041 PMO Tamachi

Minato, Tokyo

6,210

Lg-T-007 Landport Hachioji

Hachioji, Tokyo

8,250

Rs-T-054 PRIME URBAN Shinjuku Ochiai

Shinjuku, Tokyo

594

Rs-S-013 PRIME URBAN Kita Nijuyo Jo

Sapporo, Hokkaido

437

Of-T-042 PMO Ginza Hatchome

Chuo, Tokyo

3,970

Lg-T-008 Landport Kasukabe

Kasukabe, Saitama

7,340

Rs-T-055 PRIME URBAN Mejiro

Shinjuku, Tokyo

1,430

Rs-S-014 PRIME URBAN Sapporo Idaimae

Sapporo, Hokkaido

616

Of-T-043 PMO Shibakoen

Minato, Tokyo

3,900

Lg-T-009 Funabashi Logistics Center

Funabashi, Chiba

4,660

Rs-T-056 PRIME URBAN Kagurazaka

Shinjuku, Tokyo

2,900

Rs-S-015 PRIME URBAN Sapporo Riverfront

Sapporo, Hokkaido

4,480

Of-S-001 Sapporo North Plaza

Sapporo, Hokkaido

6,250

Lg-T-010 Atsugi Minami Logistics Center B Tower

Atsugi, Kanagawa

4,590

Rs-T-057 PRIME URBAN Sangen Jaya III

Setagaya, Tokyo

718

Rs-S-016 PRIME URBAN Kita Sanjo Dori

Sapporo, Hokkaido

1,730

Of-S-002 NRE Sapporo Building

Sapporo, Hokkaido

4,140

Lg-T-011 Hanyu Logistics Center

Hanyu, Saitama

3,810

Rs-T-058 PRIME URBAN Chitose Karasuyama

Setagaya, Tokyo

717

Rs-S-017 PRIME URBAN Nagamachi Icchome

Sendai, Miyagi

1,140

Of-S-004 NOF Sendai Aoba-dori Building

Sendai, Sendai

2,030

Lg-T-012 Kawaguchi Logistics Center B Tower

Kawaguchi, Saitama

3,750

Rs-T-060 PRIME URBAN Sangen Jaya

Setagaya, Tokyo

724

Rs-S-018 PRIME URBAN Yaotome Chuo

Sendai, Miyagi

466

Of-S-005 NOF Utsunomiya Building

Utsunomiya, Tochigi

2,320

Lg-T-013 Kawaguchi Logistics Center A Tower

Kawaguchi, Saitama

2,830

Rs-T-061 PRIME URBAN Minami Karasuyama

Setagaya, Tokyo

667

Rs-S-019 PRIME URBAN Tsutsumidori Amamiya

Sendai, Miyagi

949

Of-S-006 NOF Nagoya Fushimi Building

Nagoya, Aichi

2,240

Lg-T-014 Atsugi Minami Logistics Center A Tower

Atsugi, Kanagawa

2,690

Rs-T-062 PRIME URBAN Karasuyama Galleria

Setagaya, Tokyo

549

Rs-S-020 PRIME URBAN Aoi

Nagoya, Aichi

712

Of-S-007 NOF Nagoya Yanagibashi Building

Nagoya, Aichi

2,280

Lg-T-015 Kawaguchi Ryoke Logistics Center

Kawaguchi, Saitama

10,790Rs-T-063 PRIME URBAN Karasuyama Court

Setagaya, Tokyo

338

Rs-S-021 PRIME URBAN Kanayama

Nagoya, Aichi

553

Of-S-008 Omron Kyoto Center Building

Kyoto, Kyoto

18,300

Lg-S-001 Ota Nitta Logistics Center

Ota, Gunma

3,430

Rs-T-065 PRIME URBAN Chitose Funabashi

Setagaya, Tokyo

746

Rs-S-022 PRIME URBAN Tsurumai

Nagoya, Aichi

1,020

Of-S-009 SORA Shin-Osaka 21

Osaka, Osaka

12,100

Lg-S-002 Ota Higashishinmachi Logistics Center

Ota, Gunma

2,170

Rs-T-066 PRIME URBAN Yoga

Setagaya, Tokyo

1,390

Rs-S-023 PRIME URBAN Kamimaezu

Nagoya, Aichi

1,590

Of-S-010 NRE Osaka Building

Osaka, Osaka

6,100

Lg-S-003 Ota Kiyohara Logistics Center

Ota, Gunma

650

Rs-T-067 PRIME URBAN Shinagawa Nishi

Shinagawa, Tokyo

494

Rs-S-024 PRIME URBAN Izumi

Nagoya, Aichi

3,770

Of-S-011 NRE Nishi-Umeda Building

Osaka, Osaka

3,450

Lg-S-004 Chiyodamachi Logistics Center

Oura, Gunma

330

Rs-T-068 PRIME URBAN Osaki

Shinagawa, Tokyo

1,860

Rs-S-025 PRIME URBAN Esaka I

Suita, Osaka

652

Of-S-012 NRE Yotsubashi Building

Osaka, Osaka

4,000

Lg-S-005 Hirakata Kuzuha Logistics Center

Hirakata, Osaka

3,460

Rs-T-069 PRIME URBAN Oimachi II

Shinagawa, Tokyo

1,040

Rs-S-026 PRIME URBAN Esaka II

Suita, Osaka794

Of-S-013 NRE Hiroshima Building

Hiroshima, Hiroshima

2,280

Subtotal (20 properties)

136,270

Rs-T-070 PRIME URBAN Yukigaya

Ota, Tokyo

951

Rs-S-027 PRIME URBAN Esaka III

Suita, Osaka

1,190

Of-S-014 NOF Hakata Ekimae Building

Fukuoka, Fukuoka

4,210

Rs-T-071 PRIME URBAN Omori

Ota, Tokyo

905

Rs-S-028 PRIME URBAN Tamatsukuri

Osaka, Osaka

1,020

Of-S-015 NOF Tenjin-Minami Building

Fukuoka, Fukuoka

2,230

Rs-T-072 PRIME URBAN Denenchofu Minami

Ota, Tokyo

774

Rs-S-029 PRIME URBAN Sakaisuji Honmachi

Osaka, Osaka

1,810

1,720

Rs-S-030 PRIME URBAN Hakata

Fukuoka, Fukuoka

588

Rs-S-031 PRIME URBAN Yakuin Minami

Fukuoka, Fukuoka

265

Rs-S-032 PRIME URBAN Kashii

Fukuoka, Fukuoka

398

Rs-S-033 PRIME URBAN Hakata Higashi

Fukuoka, Fukuoka

622

Settlement
NumberOffice Buildings

340,344

Subtotal (50 properties)
Retail Facilities

140,153

Residential Facilities

Settlement
Number

Property Name

Rs-T-001 PROUD FLAT Shirokane Takanawa

Minato, Tokyo

3,400

Rs-T-073 PRIME URBAN Nagahara KamiikedaiOta, Tokyo

Rs-T-002 PROUD FLAT Yoyogi Uehara

Shibuya, Tokyo

989

Rs-T-075 PRIME URBAN Nakano Kamitakada

Nakano, Tokyo

498

Rs-T-003 PROUD FLAT Hatsudai

Shibuya, Tokyo

713

Rs-T-076 PRIME URBAN Takaido

Suginami, Tokyo

1,060

Settlement
Number

Rt-T-001

Morisia Tsudanuma

Narashino, Chiba

16,600Rs-T-004 PROUD FLAT Shibuya Sakuragaoka

Shibuya, Tokyo

750

Rs-T-077 PRIME URBAN Nishi Ogikubo

Suginami, Tokyo

414

Rt-T-002

Yokosuka More’s

Yokosuka, Kanagawa

13,640Rs-T-005 PROUD FLAT Gakugei Daigaku

Meguro, Tokyo746

Rs-T-078 PRIME URBAN Nishi Ogikubo II

Suginami, Tokyo

1,790

Rs-S-034 PRIME URBAN Chihaya

Fukuoka, Fukuoka

Rt-T-003

Recipe SHIMOKITA

Setagaya, Tokyo

10,407

Rs-T-006 PROUD FLAT Meguro Gyoninzaka

Meguro, Tokyo939

Rs-T-079 PRIME URBAN Otsuka

Toshima, Tokyo

730

Rs-S-035 PRIME URBAN Chikusa

Nagoya, Aichi

Rt-T-004

Kawasaki More’s

Kawasaki, Kanagawa

6,080

Rs-T-007 PROUD FLAT Sumida Riverside

Chuo, Tokyo

2,280

Rs-T-080 PRIME URBAN Komagome

Toshima, Tokyo

437

Subtotal (142 properties)

Rt-T-005

EQUINIA Shinjuku

Shinjuku, Tokyo

4,260

Rs-T-008 PROUD FLAT Kagurazaka

Shinjuku, Tokyo

1,590

Rs-T-081 PRIME URBAN Ikebukuro

Toshima, Tokyo

3,800

Rt-T-006

EQUINA Ikebukuro

Toshima, Tokyo

3,990

Rs-T-009 PROUD FLAT Waseda

Shinjuku, Tokyo

1,110

Rs-T-082 PRIME URBAN Monzen Nakacho

Koto, Tokyo

2,420

Rt-T-007

covirna machida

Machida, Tokyo

3,440

Rs-T-010 PROUD FLAT Shinjuku Kawadacho

Shinjuku, Tokyo

947

Rs-T-083 PRIME URBAN Kameido

Koto, Tokyo

779

Rt-T-008

Nitori Makuhari

Chiba, Chiba

3,080

Rs-T-011 PROUD FLAT Sangen Jaya

Setagaya, Tokyo

1,190

Rs-T-084 PRIME URBAN Sumiyoshi

Koto, Tokyo

632

Rt-T-009

Konami Sports Club Fuchu

Fuchu, Tokyo

2,730

Rs-T-012 PROUD FLAT Kamata

Ota, Tokyo

1,160

Rs-T-085 PRIME URBAN Mukojima

Sumida, Tokyo

528

Rt-T-010

FESTA SQUARE

Saitama, Saitama

2,600

Rs-T-013 PROUD FLAT Kamata II

Ota, Tokyo

3,320

Rs-T-086 PRIME URBAN Kinshi Koen

Sumida, Tokyo

1,290

Rt-T-011

GEMS Shibuya

Shibuya, Tokyo

2,490

Rs-T-014 PROUD FLAT Shinotsuka

Toshima, Tokyo

623

Rs-T-087 PRIME URBAN Kinshicho

Sumida, Tokyo

758

Rt-T-012

Sundai Azamino

Yokohama, Kanagawa

1,700

Rs-T-015 PROUD FLAT Kiyosumi Shirakawa

Koto, Tokyo

928

Rs-T-088 PRIME URBAN Hirai

Edogawa, Tokyo

722

Rt-T-013

EQUINIA Aobadai

Yokohama, Kanagawa

1,560

Rs-T-016 PROUD FLAT Monzen Nakacho II

Koto, Tokyo

652

Rs-T-089 PRIME URBAN Kasai

Edogawa, Tokyo

640

Rt-T-014

Megalos Kanagawa

Yokohama, Kanagawa

1,000

Rs-T-017 PROUD FLAT Monzen Nakacho I

Koto, Tokyo

1,030

Rs-T-090 PRIME URBAN Kasai II

Edogawa, Tokyo981

10 Nomura Real Estate Master FundOt-T-001

Ryotokuji University Shin-Urayasu
Campus (Land)

384

791

761
1,580
920

604
1,110
162,940

Urayasu, Chiba

4,900

Subtotal (1 properties)

4,900

Total (252 properties)

784,607

Nomura Real Estate Master Fund

11

Portfolio Gallery
NMF Office Portfolio

Total Office Portfolio

NMF’s investment in office facilities centers on properties
developed by Nomura Real Estate Development, including thePremium Midsize Office (PMO) brand, with a focus on state-ofthe-art features to meet ever-changing tenant needs.

Shinjuku Nomura Building

50

Total Acquisition Value for Portfolio¥340,344

properties

Kojimachi Millennium Garden

million

NRE Tennozu Building

NMF Retail Portfolio
NMF invests primarily in urban retail facilities that offer richvariety and enliven their surroundings, mainly through the
GEMS brand developed by Nomura Real Estate Development.

NRE Kichijoji Building

Total Retail Portfolio

Total Acquisition Value for Portfolio

39¥140,153

properties

GEMS Ichigaya

GEMS Shibuya

Acquisition Price: ¥43,900 million

Acquisition Price: ¥26,700 million

Acquisition Price: ¥20,500 million

Acquisition Price: ¥5,310 million

Acquisition Price: ¥2,080 million

Acquisition Price: ¥2,490 million

Nearest Station: Shinjuku Station

Nearest Station: Yotsuya Station

Nearest Station: Tennozu Isle Station

Nearest Station: Kichijoji Station

Nearest Station: Ichigaya Station

Nearest Station: Shibuya Station

Completion: May 1978

Completion: May 2000

Completion: June 1996

Completion: July 2014

Completion: October 2014

Completion: September 2012

Universal CityWalk Osaka
PMO Ginza Hatchome

Tennozu Park Side Building

12 Nomura Real Estate Master FundPMO Tamachi

Omron Kyoto Center Building

PMO Shibakoen

SORA Shin-Osaka 21

millionMorisia Tsudanuma

Yokosuka More’s City

Secom Medical Building

NOF Shibuya
Koen-dori Building

Kawasaki More’s

Recipe SHIMOKITAEQUINA Ikebukuro

Ichibancho stear

Izumiya Senrioka

Izumiya Yao

EQUINA Shinjuku

Nomura Real Estate Master Fund

13

Portfolio Gallery
NMF Logistics Portfolio

Total Logistics Portfolio

Centered on the Landport brand, NMF invests in logistics facilities with advanced functionality to meet the evolving needs ofdiverse tenants with an emphasis on optimization and efficiency.

20¥136,270

properties

Landport Itabashi

Total Acquisition Value for Portfolio

millionNMF Residential Portfolio
NMF invests in high-quality residential facilities in excellent
urban locations, chiefly the PROUD FLAT and PRIME URBAN
series developed by Nomura Real Estate Development.

Total Residential Portfolio

Total Acquisition Value for Portfolio

142¥162,940

properties

millionLandport Urayasu

Acquisition Price: ¥15,710 million

Acquisition Price: ¥17,400 million

Nearest Station: Nishidai Station

Nearest Station: Maihama Station

Completion: January 2008

Completion: May 2008

Hirakata Kazuha Logistics Center

PROUD FLAT Shirokane Takanawa

PRIME URBAN Meguro Ohashi Hills

PRIME URBAN Sapporo Riverfront

Acquisition Price: ¥3,400 million

Acquisition Price: ¥2,970 million

Acquisition Price: ¥4,480 million

Nearest Station: Shirokane Takanawa Station

Nearest Station: Ikejiri Ohashi Station

Nearest Station: Nakajima Koen Station

Completion: July 2008

Completion: February 2008

Completion: January 2008

Sagamihara Onodai Logistics
Center

Landport Kawagoe
Acquisition Price: ¥13,700 million

PRIME URBAN
Nihonbashi Yokoyamacho

PRIME URBAN Ikebukuro

PROUD FLAT Kamata II

PROUD FLAT Hatchobori

PRIME URBAN Chikusa

PROUD FLAT
Sumida Riverside

PRIME URBAN
Naka Meguro II

PROUD FLAT Kamioooka

PRIME URBAN Meguro Mita

PROUD FLAT
Itabashi Honcho

Nearest Station: Minami-Otsuka Station
Completion: May 2009

Landport Kasukabe

14 Nomura Real Estate Master Fund

Kawaguchi Ryoke Logistics Center

Landport Atsugi

Sagamihara Tana Logistics Center

Landport Hachioji

Nomura Real Estate Master Fund

15

Portfolio Diversification

Structure and Organization

Diversification is critical for stability of a J-REIT and NMF achieved diversification through the factors
illustrated bellow.

Structure of NMF(As of September 1, 2016; after the merger with Top REIT, Inc.)

Diversification by Area

Diversification by Use

Property quantity is also spread among various geographicalareas with 80% or more of the properties in the Tokyo area andabout 20% in three major metropolitan areas and government
designated cities.

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

Growth Model

Stability Model

41.8%

Other Area

Other Facilities
Residential0.5%
Facilities

Stability Model 19.4%

17.2%

Tokyo

82.8%
Tokyo

82.8%

41.8% Logistics
Facilities

Residential
15.8%

OfficeBuildings

48.1%

Retail Facilities(in residential areas)
6.1%

19.4%
Logistics
Facilities

15.8%

OfficeBuildings

48.1%

25.4%

Growth Model

58.2%

Retail Facilities(near stations)
10.1%

Retail Facilities

Retail Facilities

Diversification by Tenant

Ratio of Portfolio Comprised of Top Ten Properties

58.2%

Facilities(in residential areas)
6.1%

Diversification by Property

Nomura Real Estate
Master Fund, Inc.

Nomura Real Estate
Asset Management Co., Ltd.

0.5%

17.2%

Investment Corporation

Parent Company of theAsset Management Company
Nomura Real Estate Holdings, Inc.

Custodian
Asset
Custody
Agreement

Unitholders’ Meeting

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 Concerning“Leasing Value Chain”

Information Provider
Nomura Real Estate Development Co., Ltd.

Mitsubishi UFJ Trust andBanking Corporation
Transfer Agency Agreement
General Administration Agreement
Agreement Concerning Management of Special Account

Satoshi Yanagita
Supervisory Director
Sadahiko Yoshimura

General Administrator(Financial Agent)

Shuhei Yoshida
AuditorErnst & Young Shin Nihon LLC

Financial
Agent
Agreement

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

(near stations)
10.1%

20.2%

Ratio of Portfolio Comprised of Top Ten Tenants

25.4%

Asset
Management
Agreement

Information Provision
Agreement

Sumitomo Mitsui Trust Bank, Limited

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

Asset Management Company
Other Facilities

Other Area

Specified Related Party

Organization of NREAM

20.2%

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

Strategic Property Replacement
NMF’s Strategic Property Replacement (SPR) calls for selling old and less competitive properties and acquiring newer andmore competitive properties, and for effective utilization of depreciation.

What is Strategic Property Replacement?
Old buildings with lesscompetitiveness and profitability

Nomura Real Estate Master FundSell

NMF Boasts a Large and Broadly
Diversified Portfolio

Lowering of average portfolio age
Reduction of maintenanceand repair fees
Effective use of depreciation…

Reinvest money from sale

Acquired
Properties
Acquire young properties that arehighly competitive

16 Nomura Real Estate Master Fund

AcquireTotal acquisition
prices272¥932.8 billion

Improvement in Portfolio
Quality

Chief Strategy Officer

Legal & Compliance

Product Management

Internal Audit

Research & Analysis

Finance & Accounting

Acquisitions

Client Relations & Marketing

Investment Management Planning

Investment Management

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

Nomura Real Estate Master Fund

17

Balance Sheet
Thousands of Yen

As of August 31, 2016

Thousands of Yen

As of February 29, 2016

ASSETSLIABILITIESCurrent Assets:

Current Liabilities:

Cash and bank deposits
Rental receivables
Income taxes receivable
Other current assets
Allowance for doubtful accounts
Total current assets¥75,270,568¥58,325,160

592,582436,677

1,423

35

1,180,067

1,015,420

(54)

(54)

77,044,586

59,777,238

Trade accounts payable
Short-term debt

As of February 29, 2016

¥2,562,468¥2,162,601—

9,100,000

Current portion of investment corporation bonds

10,000,000

5,000,000

Current portion of long-term debt

47,805,600

50,015,600

Lease obligations
Other accounts payable
Accrued expenses

Property and Equipment:

As of August 31, 2016

Accrued income taxes

8,651

8,651

2,226,125

1,888,592

330,953

325,814

605

994

Land

516,284,405

523,662,007

Accrued consumption taxes

530,466

140,702

Buildings and structures

270,808,636

267,849,174

Rent received in advance

4,320,066

4,394,283

Machinery and equipment

698,335

569,328

Unearned revenue

341,707369,865

Tools, furniture and fixtures

379,682

224,983

Derivative liabilities

73,21837,854

Leased assets

24,49524,495

Other current liabilities

292,886

298,548

68,492,745

73,743,504

Investment corporation bonds

22,500,000

27,500,000

Long-term debt

329,466,200

311,549,000

Construction in progress  Subtotal
Less accumulated depreciation
Net property and equipment

838,601

436,021789,034,154

792,766,008(15,010,664)(10,942,164)774,023,490

781,823,844

Investments and Other Assets:

Total current liabilities
Long-term Liabilities:

Lease obligations

9,721

14,047

Goodwill

74,305,825

76,252,703

Long-term advanced received

671,420

838,163

Leasehold rights

8,492,841

8,493,227

Security deposits from tenants

33,331,213

34,221,440

Intangible assets

32,72525,399Derivative liabilities

2,181,237

2,829,741—

91,431

Total long-term liabilities

388,159,791

376,952,391

Total Liabilities

456,652,536

450,695,895

161,120,405

161,120,405

315,299,775

315,299,775(6,137,594)—   Other deductions from capital surplus(941,669)—   Total deductions from capital surplus(7,079,263)—   Capital surplus, net

308,220,512

315,299,775  Retained earnings

12,225,011

4,048,907  Total surplus

320,445,523

319,348,682

Total unitholders’ equity

481,565,928

480,469,087

Deferred gains or losses on hedges(2,254,454)(2,867,595)

Valuation and translation adjustments(2,254,454)(2,867,595)

Total Net Assets

479,311,474

477,601,492

Total Liabilities and Net Assets¥935,964,010¥928,297,387

Investment securities
Long-term prepaid expenses

1,005,942

742,792

Long-term deposits

89,38689,386

Security deposits

946,804

977,584

Deferred investment corporation bond issuance costs

22,411

23,78384,895,934

86,696,305¥935,964,010¥928,297,387

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

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

Valuation and Translation Adjustments:

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

18 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

19

Statement of Income and Retained Earnings

Statement of Changes in Net Assets

Thousands of Yen

For the period
from March 1, 2016
to August 31, 2016

For the period from March 1, 2016 to August 31, 2016
Thousands of Yen

For the period
from October 1, 2015
to February 29, 2016

Unitholders’ Equity
SurplusCapital surplus
Total deduction from capital surplus
Allowance fortemporary
Deduction fromTotal deduction
difference
other capitalfrom capitaladjustment
surplussurplusOperating Revenues and Expenses
Operating Revenues:
Real estate rental revenues¥29,532,380¥24,312,612

Gain on sales of real estate

1,442,275

—

1,900

1,066

30,976,555

Gain on investments in silent partnership—

24,313,678 Distributions in excess of net earnings from allowance fortemporary difference adjustments——— (¥6,137,594)—(¥6,137,594)(6,137,594) Other distributions in excess
of net earnings

—

—

—

—

(941,669)(941,669)(941,669)

—

—

—

—

—

—

—

—

—

—

—

—

—

¥161,120,405 ¥315,299,775 (¥6,137,594)(¥941,669)—

79,0202,565,116

1,505,234

Net income Net changes of items otherthan unitholder’s equity
Balance as of August 31, 2016

Asset custody fees

48,38021,349Administrative service fees

147,697

185,996

Merger expenses

375,5012,590,275

Amortization of goodwill

1,946,878

1,622,398

Other operating expenses

391,184

279,520

19,293,886

17,830,501

Balance as of March 1, 2016

11,682,669

6,483,177 Distributions of retained earnings

Non-Operating Revenues: Other distributions in excess
of net earnings

6,064

4,081

3,907

—

17

Interest expenses on investment corporation bonds
Amortization of investment corporation bond issuance costs
Loan arrangement fees
Other offering costs associated with the issuance of investment units
Other non-operating expenses

Net income

Retained earnings

Total surplus

Total unitholders’equity¥ 4,048,907¥319,348,682¥480,469,087(¥2,867,595)(¥2,867,595)¥477,601,492(1,179,877)(1,179,877)(1,179,877)——(1,179,877)—(6,137,594)(6,137,594)——(6,137,594)

Balance as of August 31, 2016

41

97
10,085

1,714,123

1,408,455

284,082

294,326

1,372

1,143

324,256

297,926—

436,525

Increase by merger

Total
Net Assets—(941,669)(941,669)——(941,669)

9,355,981

9,355,981

9,355,981——

9,355,981 Net changes of items otherthan unitholder’s equity

4,431
Non-Operating Expenses:(¥7,079,263) ¥308,220,512

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

Unitholders’ Equity
Surplus

Non-Operating Revenues and Expenses

309—
3,722,010

Thousands of Yen Distributions in excess of net earnings from allowance fortemporary difference adjustments

Interest expense¥315,299,775——

Other non-operating revenues——

11,546,709

Interest on refund——

329,201

Reversal of dividends payable

Net capital surplus——

13,489,929

Interest income¥161,120,405 ¥315,299,775—

Real estate rental expenses

Operating Profit

3,722,010—

Loss on sale of real estate
Asset management fees

Balance as of March 1, 2016

CapitalSurplus Distributions of retained earnings

Operating Expenses:

Impairment Loss

Unitholders’Capital

Units

—

—

—

613,141

613,141

613,141¥12,225,011¥320,445,523¥481,565,928(¥2,254,454)(¥2,254,454)¥479,311,474

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

For the period from October 1, 2015 to February 29, 2016

6,681

4,550

2,330,514

2,442,925  Ordinary Income

9,356,586

4,050,337   Income before Income Taxes

9,356,586

4,050,337

Thousands of Yen

Unitholders’CapitalUnits

Balance as of October 1, 2015

Unitholders’ Equity
SurplusCapitalRetained
Surplus
Earnings

Total Surplus

Total
Unitholders’Equity——3,722,010¥161,120,405¥315,299,775

Cash distribution paid

—

—

—

(912,562)(912,562)(912,562)

Net income

—

—

—

4,048,278

4,048,278

4,048,278 Net changes of items otherthan unitholder’s equity
Balance as of February 29, 2016

—

—

—

¥913,191¥316,212,966¥477,333,371

—

—

—

—

—

—

3,722,010¥161,120,405¥315,299,775¥4,048,907¥319,348,682¥480,469,087

Thousands of Yen
Valuation and Translation
Adjustments
Deferred Gains
Total Valuationor Losses on
and Translation
HedgesAdjustments

Income Taxes:  Current

605

2,019

  Deferred

—

40

605

2,059

  Net Income

9,355,981

4,048,278   Retained earnings brought forward

2,869,030

—

—

629

   Retained earnings received by merger  Retained Earnings at End of Period
The accompanying notes to financial statements are an integral part of these statements.

20 Nomura Real Estate Master Fund

¥12,225,011¥4,048,907

Balance as of October 1, 2015

Total
Net Assets

—

—

—

Increase by merger——¥477,333,371

Cash distribution paid——

(912,562)

Net income——

4,048,278 Net changes of items otherthan unitholder’s equity(2,867,595)(2,867,595)(2,867,595)

Balance as of February 29, 2016(¥2,867,595)(¥2,867,595)¥477,601,492

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

Nomura Real Estate Master Fund

21

Statement of Cash Flows

Notes to Financial Statements
Thousands of Yen

For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

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
Increase (Decrease) in accrued consumption taxes
Increase (Decrease) in accrued expenses
Increase (Decrease) in rent received in advance
Decrease in property and equipment due to sales
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¥9,356,586
4,207,239—
1,946,878
1,372
(309)
1,998,205
5,166—(157,025)(263,149)—
399,867
150,153
389,764
15,792(74,218)
9,423,685
23,127,270(174,316)
50,352,960
309(2,187,967)(2,382)
48,162,920¥4,050,337
3,472,856
79,0201,622,398
1,143(6,064)
1,702,781
6,882
54
138,204(218,802)(180)
606,537(8,392)(347,570)(524,025)
86,852——
129,783
10,791,814
6,064(2,077,288)
5,251
8,725,841

Cash Flows from Investing Activities
Payments for purchases of property and equipment
Payments for purchases of leasehold rights and intangible assets
Proceeds from withdrawal of investment securities
Reimbursement of security deposits to tenants
Proceeds from security deposits from tenants
Payments for security deposits
Proceeds from security deposits   Net cash provided by (used in) investing activities(28,773,290)(15,064)
86,592(2,582,461)
1,697,875—
30,780(29,555,568)(11,178,616)(11,882)
8,754(1,253,605)
944,334(10,000)
76(11,500,939)

6,000,000(15,100,000)
46,530,000(30,822,800)—(1,189,881)

5,000,000—
29,500,000(11,082,800)(15,000,000)(8,886,988)(6,137,594)(941,669)(1,661,944)——(469,788)

16,945,408
58,325,160—¥75,270,568(3,244,886)—
61,570,046¥58,325,160

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

1. ORGANIZATION
Nomura Real Estate Master Fund, Inc. is a real estate investment corporation formed to own and invest primarily in logistics facilities, retailfacilities, 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 was established 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 the same year.
NMF adopts the basic policy of investing primarily in real estate and other assets to secure stable income and steady growth of assets undermanagement over the medium to long term. In order to realize this basic policy, NMF adopts an investment strategy that centers on the Greater
Tokyo area (Tokyo, Kanagawa, Chiba and Saitama prefectures) which has strong tenant demand while also considering regional diversification
through the three major metropolitan areas and cabinet-order designated cities, etc. By combining the “diversified type strategy” in whichinvestments are made in facilities of a variety of sectors such as logistics facilities, retail facilities, offices and residential facilities with the“large-scale REIT strategy” which pursues the effects of diversifying properties and tenants to make the portfolio more stable as well as withthe utilization of the “leasing value chain” with the Nomura Real Estate Group, the sponsor, NMF will aim to increase unitholder value by
securing stable income and steady growth of assets under management over the medium to long term.

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

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

3 - 70 years
2 - 45 years
2 - 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.

Investment securities
Non-marketable securities are stated at cost determined by the moving average method.

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

For the silent partnership equity interest, the method of allocating the partnership’s profit/loss is based on the Company’s proportional interest.

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

22 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

23

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.

4. CASH AND CASH EQUIVALENTS
Cash and cash equivalents as of August 31, 2016 and February 29, 2016 consist of the following:Thousands of Yen
As of August 31, 2016

As of February 29, 2016

Cash and bank deposits¥75,270,568¥58,325,160

Deferred investment corporation bond issuance costs

Cash and cash equivalents¥75,270,568¥58,325,160

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

Cash and cash equivalents was increased by ¥61,570,046 thousand by the merger.

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.

Important contents of the non-cash transactions
NMF was established through the consolidation type merger of the former NMF with the consolidated investment corporations, namely NOF
and NRF. The main breakdown of the assets and liabilities inherited from these three investment corporations is as follows. The increase ofunitholders’ capital and capital surplus are ¥161,120,405 thousand and ¥315,299,775 thousand respectively.
Thousands of Yen
For the period
from March 1, 2016
to August 31, 2016

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 ¥77,205 thousand for the fiscal period ended August 31, 2016.

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.

Current assets—¥63,281,118

Non-current assets—

783,332,892

Deferred assets—

24,926

Total assets—¥846,638,936

Current liabilities—

62,222,671

Long-term liabilities—

384,957,994

Total liabilities—¥447,180,665

5. SCHEDULE OF PROPERTY AND EQUIPMENT
Property and equipment as of August 31, 2016 and February 29, 2016 consist of the following:Thousands of Yen
As of August 31, 2016

As of February 29, 2016

Acquisition costs

Book value

Acquisition costs

Book value

Land¥185,217,460¥185,217,460¥171,862,734¥171,862,734

Buildings and structures

106,359,015

Accumulated depreciation
Machinery and equipment

Consumption taxes

For the period
from October 1, 2015
to February 29, 2016

(3,144,755)

102,418,893
103,214,260

569,898(1,545,725)

100,873,168

501,737

Accumulated depreciation(109,416)

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

Tools, furniture and fixtures

82,496

Derivative financial instruments(5,002)77,494(765)

21,120Land in trust

331,066,945

331,066,945

351,799,273

351,799,273

Buildings and structures in trust

164,449,621

Accumulated depreciation(11,698,891)

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.

Accumulated depreciation

Machinery and equipment in trust
Accumulated depreciation
Tools, furniture and fixtures in trust
Accumulated depreciation
Lease assets in trust
Accumulated depreciation
Construction in progress  Total24 Nomura Real Estate Master Fund

460,482

165,430,281
152,750,730(9,325,899)

156,104,382

67,591
121,287

297,186(38,082)

453,495

21,885

128,437(7,150)(48,242)(2,382)

65,209203,098
259,104

24,495(15,802)

187,296

24,495(7,368)17,127(3,349)21,146

838,601

838,601

436,021436,021¥774,023,490¥774,023,490¥781,823,844¥781,823,844

Nomura Real Estate Master Fund25

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

7. LONG-TERM DEBT

Short-term debt and current portion of long-term debt as of August 31, 2016 and February 29, 2016 consist of the following:

Long-term debt as of August 31, 2016 and February 29, 2016 consist of the following:

As of August 31, 2016
Amount(Thousands of Yen)

As of February 29, 2016

Weighted-averageinterest rate (Note 1)

As of August 31, 2016

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

As of February 29, 2016

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on May 26, 2016——

¥4,100,000

0.17545%

Unsecured loans from banks due on March 11, 2017——

¥5,000,000

0.39545%

Unsecured loans from a bank due on December 27, 2016 (Note 2)

—

—

—

—

Unsecured loans from banks due on March 26, 2017——

1,000,000

0.25545%

Unsecured loans from banks due on February 24, 2017 (Note 3)——

5,000,000

0.67863%

Unsecured loans from banks due on June 10, 2017——

3,900,000

1.43500%

Unsecured loans from banks due on February 26, 2017 (Note 3)

—

—

—

—

Unsecured loans from banks due on August 26, 2017——

750,000

0.48000%

Unsecured loans from a bank due on May 26, 2016——

1,000,000

0.52000%

Unsecured loans from banks due on August 26, 2017——

5,000,000

0.25545%

Unsecured loans from a bank due on June 26, 2016——

9,400,000

1.11700%

Unsecured loans from banks due on August 27, 2017——

9,000,000

1.12850%

Unsecured loans from a bank due on August 26, 2016——

3,000,000

1.10100%

Unsecured loans from banks due on August 27, 2017——

3,920,000

1.08500%

Unsecured loans from a bank due on August 26, 2016——

2,000,000

0.79750%

Unsecured loans from banks due on September 26, 2017

¥4,000,000

0.15182%

4,000,000

0.19545%

Unsecured loans from a bank due on August 26, 2016 (Note 3)——

3,000,000

0.44545%

Unsecured loans from a bank due on December 26, 201712,900,000

1.03775%

12,900,000

1.03775%

Unsecured loans from a bank due on November 26, 2016

¥13,000,000

0.64250%

13,000,000

0.64250%

Unsecured loans from banks due on February 26, 2018

1,000,000

1.84650%

1,000,000

1.84650%

Unsecured loans from a bank due on February 26, 2017

1,000,000

1.07450%

1,000,000

1.07450%

Unsecured loans from banks due on February 26, 2018

1,500,000

0.44000%

1,500,000

0.48000%

Unsecured loans from a bank due on February 26, 2017

2,000,000

0.88700%

2,000,000

0.88700%

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 February 26, 2017

1,800,000

0.69000%

1,800,000

0.69000%

Unsecured loans from a bank due on May 26, 201812,200,000

0.86250%

12,200,000

0.86250%

Unsecured loans from a bank due on February 26, 2017 (Note 4)

1,000,000

0.45182%

4,500,000

0.49545%

Unsecured loans from banks due on June 26, 2018

2,000,000

1.09000%

2,000,000

1.09000%

Unsecured loans from banks due on March 11, 2017 (Note 5)

4,000,000

0.35182%——

Unsecured loans from banks due on August 26, 2018

2,000,000

1.03500%

2,000,000

1.03500%

Unsecured loans from a bank due on March 26, 2017

1,000,000

0.21182%——

Unsecured loans from a bank due on August 26, 2018

5,400,000

0.99000%

5,400,000

0.99000%

Unsecured loans from banks due on June 10, 2017

3,900,000

1.43500%——

Unsecured loans from a bank due on November 26, 2018

2,000,000

0.93600%

2,000,000

0.93600%

Unsecured loans from a bank due on August 26, 2017

750,000

0.44000%——

Unsecured loans from a bank due on November 26, 2018

4,000,000

0.72500%

4,000,000

0.72500%

Unsecured loans from banks due on August 26, 2017

5,000,000

0.21182%——

Unsecured loans from a bank due on November 26, 2018

3,000,000

0.77650%

3,000,000

0.77650%

Unsecured loans from banks due on August 27, 2017

9,000,000

1.12850%——

Unsecured loans from banks due on November 26, 2018

1,000,000

0.48250%

1,000,000

0.48250%

Unsecured loans from banks due on August 27, 2017

3,920,000

1.08500%——

Unsecured loans from banks due on November 26, 2018

1,700,000

0.50250%

1,700,000

0.50250%

Unsecured loans from a bank due on June 25, 2016 (Note 6)——

6,750,000

1.97000%

Unsecured loans from a bank due on February 26, 2019

3,000,000

1.44450%

3,000,000

1.44450%

Unsecured loans from a bank due on August 27, 2016 (Note 7)——

1,080,000

2.10000%

Unsecured loans from a bank due on February 26, 2019

2,000,000

0.90759%

2,000,000

0.90759%

1,350,000

2.03000%

1,400,000

2.03000%

Unsecured loans from a bank due on February 26, 2019

5,300,000

0.87695%

5,300,000

0.87695%

Unsecured loans from a bank due on May 26, 2025 (Note 9)42,8002.17000%

42,8002.17000%

Unsecured loans from a bank due on May 26, 2019

9,000,000

1.11750%

9,000,000

1.11750%

Unsecured loans from a bank due on May 26, 2025 (Note 9)42,8002.21812%42,8002.21812%

Unsecured loans from a bank due on May 26, 2019

1,000,000

1.04875%

1,000,000

1.04875%

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

5,700,000

1.25200%

5,700,000

1.25200%

Unsecured loans from a bank due on August 26, 20192,500,000

1.27625%2,500,000

1.27625%

Unsecured loans from a bank due on August 26, 2019

4,700,000

0.81080%

4,700,000

0.81080%

Unsecured loans from a bank due on November 26, 20191,600,000

1.16500%

1,600,000

1.16500%

Unsecured loans from a bank due on November 26, 2019

4,000,000

0.72650%

4,000,000

0.72650%

Unsecured loans from a bank due on November 26, 20195,600,000

0.54065%

5,600,000

0.54065%

Unsecured loans from a bank due on November 26, 2019

3,450,000

0.37420%

3,450,000

0.37420%

Unsecured loans from a bank due on February 26, 2020

5,750,000

1.01150%

5,750,000

1.01150%

Unsecured loans from a bank due on February 26, 2020

2,500,000

0.64685%

2,500,000

0.64685%

Unsecured loans from a bank 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 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 a bank 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 a bank 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 a bank due on November 26, 2020

3,500,000

0.46075%

3,500,000

0.46075%

Unsecured loans from a bank 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 a bank 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 a bank due on February 26, 2021

2,000,000

1.19211%2,000,000

1.19211%

Unsecured loans from a bank due on February 26, 2016 (Note 8)   Total¥47,805,600¥59,115,600

Note 1: T he weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: T he borrowing was fully repaid on August 31, 2016 in advance to the maturity date.
Note 3: T he borrowing was fully repaid on May 26, 2016 in advance to the maturity date.
Note 4: T he borrowing was ¥3,500 million repaid on May 26, 2016 in advance to the maturity date.
Note 5: T he borrowing was ¥1,000 million repaid on May 26, 2016 in advance to the maturity date.
Note 6: R epay ¥250 million of principal at each Repayment Date until December 25, 2009, and repay ¥6,750 million on June 25, 2016, the last repayment date.
Note 7: T he amount of ¥40 million every Date of Repayment from February 27, 2010 to February 27, 2016, and the repayment of ¥1,080 million on August 27, 2016, theFinal Date of Repayment.
Note 8: The amount of ¥50 million every Date of Repayment from August 26, 2010 to August 26, 2016, and ¥1,350 million on February 26, 2017, the last Date of Repayment.
Note 9: R epay ¥10.7 million of principal at each repayment date during the period between August 26, 2013, and February 26, 2025, and repay ¥497.1 million on May 26,
2025, the last repayment date.

(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, 2016. The total unused amounts of such credit facilities were ¥10,000 million as of August 31, 2016.
(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, 2016. The total unused amounts of such credit facilities were ¥40,000 million as of August 31, 2016.
(3) The Company entered into ¥10,000 million credit facilities in the form of commitment lines with three financial institutions for the
fiscal period ended February 29, 2016. The total unused amounts of such credit facilities were ¥5,000 million as of February 29, 2016.
(4) The Company entered into ¥30,000 million credit facilities in the form of commitment lines with three financial institutions for the
fiscal period ended February 29, 2016. The total unused amounts of such credit facilities were ¥30,000 million as of February 29, 2016.

26 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund27

As of August 31, 2016

As of February 29, 2016

As of August 31, 2016

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from a bank due on February 26, 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 a bank due on February 26, 2021

2,120,000

0.85050%

2,120,000

Unsecured loans from a bank due on February 26, 2021

500,000

0.46725%

Unsecured loans from a bank due on February 26, 2021

2,000,000

0.22560%

Unsecured loans from a bank due on February 26, 2021

As of February 29, 2016

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on February 26, 2025

¥4,200,000

0.62675%——

Unsecured loans from a bank due on February 26, 2025

1,000,000

0.52140%——0.85050%

Unsecured loans from banks due on August 26, 2025

3,000,000

0.56380%——

500,000

0.46725%

Unsecured loans from banks due on August 26, 2025

4,050,000

0.58727%——2,000,000

0.22560%

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.09830%¥1,100,000

1.09830%

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

400,000

0.21810%——

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 May 26, 2021

8,000,000

1.56250%

8,000,000

1.56250%

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 May 26, 2021

1,000,000

1.46375%

1,000,000

1.46375%

Unsecured loans from a bank due on November 26, 2025

2,000,000

0.59639%——

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 November 26, 2025

2,000,000

0.60448%——

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 February 26, 2026

4,000,000

0.74080%——

Unsecured loans from a bank due on July 26, 2021

4,180,000

1.23920%

4,180,000

1.23920%

Unsecured loans from a bank due on May 26, 2026

2,500,000

0.63995%——

Unsecured loans from a bank due on August 26, 2021

2,700,000

1.24100%

2,700,000

1.24100%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%——

Unsecured loans from a bank due on August 26, 2021

3,600,000

0.81585%

3,600,000

0.81585%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%——

Unsecured loans from a bank due on November 26, 2021

2,000,000

1.30289%2,000,000

1.30289%

Unsecured loans from a bank due on October 26, 2030

1,100,000

1.92250%

1,100,000

1.92250%

Unsecured loans from a bank due on November 26, 2021

2,000,000

1.11662%2,000,000

1.11662%

Unsecured loans from a bank due on October 26, 2030

1,100,000

1.91700%

1,100,000

1.91700%

Unsecured loans from a bank due on November 26, 2021

4,900,000

0.97410%4,900,000

0.97410%

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

818,100

2.17000%

839,500

2.17000%

Unsecured loans from a bank due on January 26, 2022

3,500,000

1.48300%

3,500,000

1.48300%

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

818,100

2.21812%

839,500

2.21812%

Unsecured loans from a bank due on February 26, 2022

4,500,000

1.31850%

4,500,000

1.31850%   Total

Unsecured loans from a bank due on February 26, 2022

2,750,000

1.29600%

2,750,000

1.29600%

Unsecured loans from a bank due on February 26, 2022

4,000,000

1.16000%

4,000,000

1.16000%

Unsecured loans from a bank due on May 26, 2022

5,500,000

1.25900%

5,500,000

1.25900%

Unsecured loans from a bank 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 a bank 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%——

Unsecured loans from a bank due on November 26, 2022

2,100,000

0.92280%

2,100,000

0.92280%

Unsecured loans from a bank due on November 26, 2022

1,800,000

1.05000%

1,800,000

1.05000%

Unsecured loans from a bank due on November 26, 2022

4,550,000

1.11000%

4,550,000

1.11000%

Unsecured loans from a bank due on November 26, 2022

1,500,000

0.98624%

1,500,000

0.98624%

Unsecured loans from a bank due on November 26, 2022

1,000,000

0.71221%1,000,000

0.71221%

Unsecured loans from a bank due on November 26, 2022

1,500,000

0.69250%

1,500,000

0.69250%

Unsecured loans from a bank due on February 26, 2023

1,300,000

1.13250%

1,300,000

1.13250%

Unsecured loans from banks due on February 26, 2023

2,800,000

0.40740%——

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%——

Unsecured loans from a bank due on August 26, 2023

1,000,000

1.14850%

1,000,000

1.14850%

Unsecured loans from a bank due on August 26, 2023

1,000,000

1.15850%

1,000,000

1.15850%

Unsecured loans from a bank due on August 26, 2023

1,000,000

1.18032%

1,000,000

1.18032%

Unsecured loans from a bank due on August 26, 2023

4,000,000

1.20772%

4,000,000

1.20772%

Unsecured loans from a bank due on August 26, 2023

6,100,000

1.08510%

6,100,000

1.08510%

Unsecured loans from a bank due on August 26, 2023

1,000,000

0.43466%——

Unsecured loans from a bank due on August 26, 2023

1,000,000

0.41000%——

Unsecured loans from a bank due on November 26, 2023

2,000,000

1.75900%

2,000,000

1.75900%

Unsecured loans from a bank due on November 26, 2023

2,600,000

0.82800%

2,600,000

0.82800%

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 May 26, 2024

1,100,000

0.51000%——

Unsecured loans from a bank due on May 26, 2024

2,700,000

0.46376%——

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%——

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%——

Unsecured loans from a bank due on November 26, 2024

2,250,000

0.50825%——

28 Nomura Real Estate Master Fund

¥329,466,200¥311,549,000

Note 1: T he weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As forthe borrowings, which were hedged by interest rate swaps for the purpose of avoiding interest rate fluctuation risk, the swapped interest rates are used to
calculate the weighted average of interest.
Note 2: Installments 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 29, 2016

¥53,475,600¥43,685,600¥49,185,600¥49,455,600

As of August 31, 2016

¥46,505,600¥48,285,600¥47,385,600¥49,435,600

8. INVESTMENT CORPORATION BONDS
Details of investment corporation bonds outstanding are summarized as follows:
As of August 31, 2016

As of February 29, 2016

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

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

¥5,000,000

2.47%¥5,000,000

2.47%

NOF’s 6th series of unsecured investment corporation bonds
due on March 17, 2017

5,000,000

2.21%

5,000,000

2.21%

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

4,500,000

2.9%

4,500,000

2.9%

NOF’s 9th series of unsecured investment corporation bonds
due on November 24, 2017

4,000,000

1.52%

4,000,000

1.52%

NRF’s 2nd series of unsecured investment corporation bonds
due on February 24, 2017

5,000,000

1.03%

5,000,000

1.03%

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

3,000,000

0.87%

3,000,000

0.87%

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¥32,500,000¥32,500,000

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

As of February 29, 2016

¥5,000,000¥9,000,000——¥5,000,000

4-5 years

As of August 31, 2016

¥10,000,000¥4,000,000—¥5,000,000—

Nomura Real Estate Master Fund29

9. UNITHOLDERS’ EQUITY

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

The net asset values per unit and the net income per unit as of August 31, 2016 and February 29, 2016 were as follows:

10. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
On the Balance Sheet ,there are the increase and decrease of Allowance for temporary difference adjustments.
For the period from March 1, 2016 to August 31, 2016

For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

Net assets per unit

¥128,777¥128,318

Net income per unit

¥2,513¥1,087For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

¥9,355,981¥4,048,278

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.

1. Reason, related assets and amounts
Thousands of Yen

Related assets, etc.

InitialamountReasonBalance at the Allowance set
Balance at theend of previous aside during Reversal during end of current
periodperiodperiodperiodReason forreversal

Goodwill

Amortization of goodwill¥1,622,398—¥1,622,398—¥1,622,398—

Land, buildings, etc.

Merger expenses

2,638,862—

1,568,581—

1,568,581—

Land, buildings, etc.

Impairment loss

79,020—79,020—79,020—

Deferred gains orlosses on hedges

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

2,867,595—

2,867,595—

2,867,595—

7,207,875—

6,137,594—

6,137,594—

Increase - subtotal
Buildings, building
improvements, etc.

Depreciation deficiency
equivalent(790,132)

—

—

—

—

—

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

—

—

—

—

—

Write-down of loss on interest
Unearned revenue, etc.
 rate swap due to merger(172,304)

—

—

—

—

—

Other

(10,287)

—

—

—

—

—

Decrease - subtotal(1,070,281)

—

—

—

—

—

Total

¥6,137,594—¥6,137,594—¥6,137,594——

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.

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

Net income available to ordinary unitholders (Thousands of Yen)

¥9,355,981¥4,048,278

Average number of units during the period (Units)

3,722,010

3,722,010

12. RELATED PARTY TRANSACTIONS
For the periods from March 1, 2016 to August 31, 2016 and from October 1, 2015 to February 29, 2016
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

13. INCOME TAXESThe Company, as an investment corporation, is subject to corporate income taxes at a statutory tax rate of approximately 34% for the fiscal
period ended August 31, 2016. 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 ¥11,300,022 thousand forthe fiscal period ended August 31, 2016 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¥12,309,409¥15,343,108

Deferred gains or losses on hedges

712,266

926,521

Unearned revenue

319,728

389,900

Write-offs for long-term prepaid expenses

32,21136,451

Impairment losses of non-repudiation—

25,531

Depreciation costs of trust leasehold rights

611

500

Accrued enterprise tax—

97

Excess allowance for doubtful accounts

1717  Subtotal¥13,374,242¥16,722,125  Valuation allowance(¥13,374,242)(¥16,722,125)

—

—

—

—

—

—

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

30 Nomura Real Estate Master FundFor the period
from October 1, 2015
to February 29, 2016

Deferred tax asset:
Valuation difference on other assets acquired by merger

For the period from October 1, 2015 to February 29, 2016
Not applicable

For the period
from March 1, 2016
to August 31, 2016

Nomura Real Estate Master Fund

31

The following summarizes the significant differences between the statutory tax rate and the effective tax rate.
For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

Statutory tax rate

32.31%

32.31%

Deductible cash distributions(8.61%)(58.38%)Valuation of allowance(30.43%)13.16%

Amortization of goodwill

6.72%

12.94%

Other

0.01%

0.01%

Effective tax rate

0.01%

0.05%

14. 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 “19. 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, 2016 to August 31, 2016
The following table summarizes the carrying value and the estimated fair values of financial instruments as of August 31, 2016.

For the period from October 1, 2015 to February 29, 2016
The following table summarizes the carrying value and the estimated fair values of financial instruments as of February 29, 2016.
Thousands of Yen
Carrying value (Note 1)

Fair value (Note 1)¥58,325,160¥58,325,160(ii) Short-term debt

(9,100,000)(9,100,000)—(iii) Current portion of investment corporation bonds(5,000,000)(5,046,550)¥46,550(iv) Current portion of long-term debt

(50,015,600)(50,192,167)

176,567(v) Investment corporation bonds(27,500,000)(29,536,482)

2,036,482(vi) Long-term debt

(311,549,000)(318,556,852)

7,007,852(vii) Derivative transactions(¥2,882,186)(¥2,882,186)—(i) Cash and bank deposits

Carrying value(i) Cash and bank deposits

Fair value(Note 1)

Note 3: Financial instruments for which fair value is difficult to determine

Thousands of Yen
Type of asset

As of August 31, 2016

As of February 29, 2016

Investment securities—¥91,431(*) T he fair value of the investment securities is not disclosed because there is no quoted market price available for these securities and it is extremely difficult todetermine the fair value.
Note 4: Redemption schedule for cash and bank deposits as of August 31, 2016

Thousands of Yen
Due within
one year

After one year,
within two years

Cash and bank deposits¥75,270,568

—

—

—

—

—

  Total¥75,270,568

—

—

—

—

—

After four years,
within five years

After five years

Redemption schedule for cash and bank deposits as of February 29, 2016

Thousands of Yen
Due within
one year

After one year,
within two years

Cash and bank deposits¥58,325,160

—

—

—

—

—

  Total¥58,325,160

—

—

—

—

—

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

After four years,
within five years

After five years

Thousands of Yen
Due within
one yearDifference¥75,270,568

—

—

—

—

(iii) Current portion of investment corporation bonds(10,000,000)(10,074,295)¥74,295(iv) Current portion of long-term debt

(47,805,600)(47,886,883)

81,283(v) Investment corporation bonds(22,500,000)(24,314,967)

1,814,967(vi) Long-term debt

(329,466,200)(336,081,428)

6,615,228(vii) Derivative transactions(¥2,274,820)(¥2,274,820)—

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¥10,000,000¥4,000,000—¥5,000,000—¥13,500,000

Long-term debt

¥47,805,600¥46,505,600¥48,285,600¥47,385,600¥49,435,600¥137,853,800

Total¥57,805,600¥50,505,600¥48,285,600¥52,385,600¥49,435,600¥151,353,800

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 29, 2016

Thousands of Yen
Due within
one year

32 Nomura Real Estate Master Fund

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

Note 5: Redemption schedule for debt as of August 31, 2016

¥75,270,568(ii) Short-term debt—

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 long-term debt and (iv) 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 “19. 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.
(v) Derivative transactions		
See “19. Derivatives and Hedge Accounting.”

Thousands of Yen(Note 1)

Difference

After one year,
within two years

After five years

Short-term debt

¥9,100,000

—

—

—

—

—

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

Long-term debt

¥50,015,600¥53,475,600¥43,685,600¥49,185,600¥49,455,600¥115,746,600

Total¥64,115,600¥62,475,600¥43,685,600¥49,185,600¥54,455,600¥129,246,600

Nomura Real Estate Master Fund33

15. INVESTMENT AND RENTAL PROPERTIES

17. BREAKDOWN OF REAL ESTATE RENTAL REVENUES AND EXPENSES

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.

Real estate rental revenues and expenses for the fiscal period ended August 31, 2016 and February 29, 2016 consist of the following:Thousands of Yen

Thousands of Yen
For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

Carrying value
Balance at beginning of the period

Real estate rental revenues

For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

¥29,532,380¥24,312,612

Rental revenues

26,844,872

22,286,436  Rental revenues

24,461,221

20,176,657   Common area charges

2,383,651

2,109,779

Other rental revenues

2,687,508

2,026,176¥790,306,905¥781,610,588(7,849,126)

8,696,317

Balance at end of the period

782,457,778

790,306,905  Parking revenues

533,526

450,566

Fair value at end of the period¥834,749,000¥829,072,000  Incidental income

2,069,384

1,529,932

Amount of increase (decrease) during the period

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: T he major increase in the carrying value during the period ended February 29, 2016 was mainly due to the acquisition of NRE Kichijoji Building™ (¥5,347,396
thousand) and GEMS Ichigaya (¥2,112,624 thousand) and PROUD FLAT Hatchobori (¥962,150 thousand) and PROUD FLAT Itabashi Honcho (¥767,484 thousand)and decrease in the carrying value during the period ended February 29, 2016 was mainly due to depreciation (total ¥3,471,460 thousand).
The amount of increase during current period is mainly attributable to acquisition of PMO Tamachi (¥6,328,987 thousand), PMO Ginza Hatchome (¥4,025,053
thousand), PMO Shibakoen (¥3,975,082 thousand), Hirakata Kuzuha Logistics Center (¥3,516,505 thousand), PRIME URBAN Meguro Mita (¥1,137,130 thousand),
PRIME URBAN Chikusa (¥1,205,712 thousand), and Ryotokuji University Shin-Urayasu Campus (Land) (¥5,125,367 thousand).
The decrease during the current period is mainly attributable to sale of NOF Nihonbashi Honcho Building (¥10,449,586 thousand), NOF Tameike Building(¥4,804,276 thousand), NOF Shinagawa Konan Building (¥3,471,844 thousand), NOF Minami Shinjuku Building (¥2,219,005 thousand), Central Shintomicho
Building (¥1,328,098 thousand), Toho Edogawabashi Building (¥1,095,234 thousand), Toshin Meguro Building (¥854,458 thousand), Yokohama Odori Koen
Building (¥1,806,149 thousand), JCB Sapporo Higashi Building (¥3,266,519 thousand), PRIME URBAN Hatagaya (¥470,012 thousand), PRIME URBAN Ochiai(¥337,641 thousand), PRIME URBAN Sangen Jaya II (¥483,603 thousand), PRIME URBAN Kamikitazawa (¥596,632 thousand), PRIME URBAN Nakano (¥468,054
thousand), PRIME URBAN Ekoda (¥408,769 thousand), PRIME URBAN Urayasu II (¥219,614 thousand), and PRIME URBAN Yamahana (¥271,452 thousand) as well
as depreciation (¥4,203,908 thousand).
Note 3: T he fair value as of August 31, 2016 represents the sum of the appraisal values estimated by external real estate appraisers.

   Other miscellaneous revenues

84,59845,678

Real estate rental expenses

13,489,929

11,546,709   Property management costs

1,614,328

1,378,031   Property management fees

874,717654,354   Property and other taxes

2,315,517

2,114,886  Utility expenses

1,711,878

1,389,966  Casualty insurance

37,63530,985

1,581,099

1,555,617   Repairs and maintenance  Land rents

193,397

162,378  Depreciation

4,205,687

3,471,462   Other rental expenses
The real estate rental revenues and expenses for the fiscal period ended August 31, 2016 are presented in “16. Breakdown of Real Estate
Rental Revenues and Expenses”.

For the period from March 1, 2016 to August 31, 2016 and from October 1, 2015 to February 29, 2016
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, 2016 to August 31, 2016
Nomura Real Estate Partners Co., Ltd.

Revenues (Thousands of Yen)

Related segment name4,289,956

Rental real estate business

Nomura Real Estate Partners Co., Ltd.

789,030¥12,765,903

In the fiscal period ended February 29, 2016, the Company recorded impairment loss on the following asset group.
Property nameToho Edogawabashi Building

Use

Type

Location

Impairment loss
(Thousands of Yen)

OfficeBuildings, land, etc.

Tokyo¥50,924

PRIME URBAN Nakano

Residential

Buildings, land, etc.

Tokyo

20,959PRIME URBAN Urayasu II

Residential

Buildings, land, etc.

Chiba

¥7,137

In calculating impairment loss, each property is considered a single asset group. In the fiscal period ended February 29, 2016, based on theirintended sale and the conclusion of a purchase agreement on March 30, 2016 for the above three of fixed asset groups, the book value was
reduced to the recoverable amount and the difference was charged to the operating expenses account as impairment loss.
Furthermore, as the impairment loss arising from the sale is deemed to be similar to operating expenses in nature, it was charged to theoperating expenses account in accordance with Article 48, Paragraph 2 of the “Regulations Concerning Accounting of Investment Corporations”.
In addition, the recoverable amount of the asset groups was determined by the net selling value. The net selling value is calculated as the actual
selling price net of the estimated selling-related expenses.

19. BREAKDOWN OF GAIN AND LOSS ON SALES OF REAL ESTATE
Thousands of Yen
For the period
from March 1, 2016
to August 31, 2016

For the period
from October 1, 2015
to February 29, 2016

Proceeds from sale of real estate¥29,633,000—

Cost of real estate

27,746,678—

Other related sales expense

444,047—

Gain on sale of real estate¥1,442,275—

Proceeds from sale of real estate¥4,500,000—

Cost of real estate

4,804,277—

Other related sales expense

24,924—

Loss on sale of real estate¥329,201—

Gain on sale of real estate

For the period from October 1, 2015 to February 29, 2016
Customer name955,671¥16,042,451

18. IMPAIRMENT LOSS

16. SEGMENT INFORMATION

Customer nameReal estate rental profits

Revenues (Thousands of Yen)

Related segment name3,542,264

Rental real estate business

Loss on sale of real estate

34 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund3520. LEASES

22. CASH DISTRIBUTIONS

The future minimum rental revenues from tenants under non-cancelable operating lease of properties as of August 31, 2016 and February 29,
2016 are summarized as follows:
Thousands of Yen
As of August 31, 2016

As of February 29, 2016

Due within one year

¥24,861,465¥23,715,979

Due after one year

71,432,067

58,287,999  Total¥96,293,532¥82,003,97821. DERIVATIVES AND HEDGE ACCOUNTING
Derivative transactions as of August 31, 2016
(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:
Notional amountType of derivative instruments

Main hedged item

Due after one year

(Note 1)

Fair value (Note 2)Long-term debt

¥135,300,000¥117,600,000(¥2,274,820) (Note 3)

Special treatment ofinterest rate swaps

Long-term debt

114,760,900

101,718,100(2,159,763) (Note 4)¥250,060,900¥219,318,100(¥4,434,584)  TotalNote 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, (¥20,365 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥2,159,763 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest rate swaps.

Notional amount
Main hedged item

(Note 1)

Due after one year

Fair value (Note 2)

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

¥149,700,000¥130,457,200(¥2,882,186) (Note 3)

Special treatment ofinterest rate swaps

Long-term debt

103,382,300

90,339,500(2,492,211) (Note 4)¥253,082,300¥220,796,700  TotalInterest rate swaps:
Received/floating and paid/fixed¥4,048,907,447

2. Distributions in excess of retained earnings¥2,095,491,630¥7,079,263,020—¥6,137,594,490¥2,095,491,630¥941,668,530

3. Incorporation into unitholders' capital¥763,347,909—   Of which, reversal of allowance for temporary difference adjustments¥763,347,909—¥11,300,022,360¥8,259,140,190   Of which, allowance for temporary difference adjustment   Of which, other distributions in excess of net income   [Distribution per unit](¥3,036)(¥2,219)¥9,204,530,730¥1,179,877,170   [Of which, other distributions in excess of net income (per unit)]   Of which, allowance for temporary difference adjustments  [Of which, distributions in excess of retained earnings per unit
[allowance for temporary difference adjustments]]  Of which, other distributions in excess of net income(¥317)—¥6,137,594,490—(¥1,649)¥2,095,491,630¥941,668,530(¥563)(¥253)¥2,257,132,762¥2,869,030,277  [Of which, distributions in excess of retained earnings per unit
[other distributions in excess of net income]]
4. Retained earnings carried forward(¥2,473)

Concerning distributions for the 2nd fiscal period, the Company set the distribution per unit at ¥3,036.
Thousands of Yen

Type of derivative instruments¥12,225,011,401

Calculation method of distribution amount

Derivative transactions as of February 29, 2016
(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:

Hedge accounting method

1. Retained earnings at end of period   Of which, distributions of earnings

Interest rate swaps:
Principal treatment method
Received/floating and paid/fixedInterest rate swaps:
Received/floating and paid/fixed

For the period
from October 1, 2015
to February 29, 2016

4. Distributions
Thousands of Yen

Hedge accounting method

For the period
from March 1, 2016
to August 31, 2016(¥5,374,397)

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, (¥14,591 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥2,492,211 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest rate swaps.

With regard to the above distribution, in order to include the maximum amount of earnings distributions in tax deductible expenses inaccordance with the special measures for the tax treatment (Article 67-15, Paragraph 1 of the Act on Special Measures Concerning Taxation (ActNo. 26 of 1957)), NMF decided to distribute almost the entire amount of net income as stipulated in Article 136 Paragraph 1 of the Investment
Trust Act except reversal of allowance for temporary difference adjustments, excluding fractional amounts of the earnings distribution perinvestment unit less than one yen. Accordingly, the Company declared an earnings distribution per investment unit (excluding distributions inexcess of earnings) of ¥2,473.
In addition, in accordance with the distribution policy stipulated in the Articles of Incorporation and in consideration of the impact that costs
related to the merger, such as amortization costs of goodwill and reduction in net assets (as described in Article 2 Paragraph 2 (30) (b) of the
Calculation Rules for Investment Corporations), and reversal of allowance for temporary difference adjustments (excluding net asset
deductions;together with costs related to the merger such as amortization costs of goodwill (hereafter, “merger expenses, etc.”)) will have on
distributions, NMF will distribute a distribution in excess of earnings that it decides with the amount equivalent to the merger-related costs(hereinafter, “distribution in excess of earnings”). When making distributions in excess of earnings, if each period’s distribution of the allowancefor temporary difference adjustments (that which is stipulated in Article 2 Paragraph 2 (30) (b) of the Calculation Rules for Investment
Corporations) is less than the amount of merger-related costs, etc., then other distribution in excess of net income will also be made.
For the fiscal period ended August 31, 2016, the Company decided to pay out ¥2,095 million of distributions in excess of earnings, which is thesum of ¥1,946 million of amortization expenses for goodwill, ¥150 million of reversal of allowance for temporary difference adjustments(excluding net asset deductions). The Company decided to pay out ¥2,095 million of other distribution in excess of net income, and so the perunit distribution of other distribution in excess of net income was ¥563.

23. INFORMATION ON ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS
For the period from March 1, 2016 to August 31, 2016
1. Reason of reversal, related assets and amounts
Thousands of Yen

Related assets, etc.

Land, buildings, etc.

Sale of property and depreciation of merger expenses

Land, buildings, etc.

Sale of property on which impairment was recognized

79,020

Deferred gains or losses on hedges

Changes in fair value of derivative transactions

613,141  Total36 Nomura Real Estate Master Fund

Reason of reversal

Reversal of allowancefor temporary
difference adjustments¥71,187¥763,348

Nomura Real Estate Master Fund37

24. BUSINESS COMBINATION

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

Current fiscal period (From from March 1, 2016 to August 31, 2016)
Not applicable(2) Merger expenses
Item

Previous fiscal period (From October 1, 2015 to February 29, 2016)

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.

Business Combination through Acquisition
1. Overview of Business Combination(1) Name and Business Description of Acquirees

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) 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 October 1, 2015 to February 29, 2016
1. Reason of provision, related assets and amounts
Thousands of Yen

Related assets, etc.

Reason of provision

Provision of allowancefor temporary
difference adjustments

Goodwill

Amortization of goodwill¥1,622,398

Land, buildings, etc.

Merger expenses

2,638,862

Land, buildings, etc.

Impairment loss

79,020

Deferred gains or losses on hedges

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

Increase - subtotal

2,867,595
7,207,875(790,132)

Names of acquirees

Business description

Nomura Real Estate Office Fund, Inc. (“NOF”)

Real estate investment trust

Nomura Real Estate Residential Fund, Inc. (“NRF”)

Real estate investment trust(2) Main Reasons for Business Combination
		NMF believed that the merger would expand acquisition opportunities, stabilize the portfolio, enhance risk tolerance, increase competitive
strength for asset acquisitions and stabilize the financial base by increasing the asset size and diversifying target investment sectors. In
addition, NMF believed that it could achieve both growth and stable management by effectively leveraging the wide-range of know-how
and brands held by Nomura Real Estate Group, one of the major comprehensive real estate developers in Japan. As such, NMF was
confident that the merger was the best option for its unitholders and has therefore entered into the merger agreement.
(3) Date of Business Combination
		 October 1, 2015(4) Legal Framework of Business Combination
		 A consolidation-type merger involving the former NMF, and NOF and NRF, as the consolidated investment corporations.
(5) Name of the Investment Corporation after Business Combination
		 Nomura Real Estate Master Fund, Inc.
(6) Main Reasons for Determining Acquiring Company
		 [1] The former NMF’s unitholders hold the most voting rights among the three investment corporations.
		 [2] The Company’s Board of Directors is constituted from the former NMF’s Board of Directors.

Buildings, building improvements, etc.

Depreciation deficiency equivalent

Investment corporation bond issuance costs

Investment corporation bonds issuance cost amortization
deficiency equivalent(97,557)

Unearned income, etc.

Reversal of loss on interest rate swap due to merger(172,304)

Names of acquirees

Operating period

Other

—

(10,287)

NOF

From October 1, 2015 to February 29, 2016

(1,070,280)

NRF

From October 1, 2015 to February 29, 2016

Decrease - subtotal  Total

2. Operating Period of Acquirees Included in the Statement of Income and Retained Earnings¥6,137,594
3. Acquisition Cost of Acquirees and the Breakdown

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

Leasehold in trust
Investment securities

Acquisition cost

NOF

¥205,604,427 thousand

NRF¥109,695,348 thousand

Total¥315,299,775 thousand

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

Former NMF

NOF

NRF

1.00

1.00

3.60

4.45

Merger Ratio

Land in trust, etc.
LeaseholdNames of acquirees

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) Deferred gains or losses on hedges
Based on changes in the fair value derivatives used as the hedging instruments, the corresponding amount is scheduled to be reversed.

(2) Method of Calculation
		Each investment corporation appointed a financial advisor for the merger and requested each financial advisor to perform a financial
analysis of the merger ratio. The former NMF appointed Nomura Securities Co., Ltd., NOF appointed Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd. and NRF appointed SMBC Nikko Securities Inc. (hereafter, referred to as the “FA”). The merger ratios were calculated
based on factors such as financial position, asset status and future outlooks, and the merits of the merger were comprehensively
considered upon reference to the results of the calculations of the financial position by each FA, leading to an agreement among theformer NMF, NOF and NRF with regard to the above merger ratios.
(3) Number of Investment Units Granted
Names of acquirees

38 Nomura Real Estate Master Fund

Investment units issued

NOF

1,341,190 units

NRF

715,560 units

Nomura Real Estate Master Fund39

Independent Auditor’s Report
5. Details on and Amount of Main Acquisition-Related Expenses
Description

Relevant investment corporation

AmountFA fees

Former NMF¥600,000 thousand

Acquisition fees for merger

The Company¥2,590,275 thousand

6. Amount and Reason for Goodwill(1) Amount of Goodwill		 ¥77,875,100 thousand(2) Reason
		Goodwill resulted from the acquisitions of NOF and NRF, the former for ¥205,604,427 thousand (acquisition price), which exceeded theacquisition-date fair value of its net assets of ¥159,932,291 thousand, and the latter for ¥109,695,348 thousand (acquisition price), which
exceeded the acquisition-date fair value of its net assets of ¥77,492,382 thousand.
(3) Method of Goodwill Amortization and Amortization Period
		 Goodwill is being amortized using straight-line method over 20 years.
7. Breakdown of Assets Accepted Acquired and Liabilities Assumed
Thousands of Yen

Current assets¥39,178,399

Non-current assets

518,620,230  Total assets¥557,798,629

Current liabilities¥51,711,857

Long-term liabilities

268,662,098  Total liabilities¥320,373,955

8. 	Estimated Impact on the Statement of Income and Retained Earnings for the Fiscal Period Ended February 29, 2016 Assuming the Business
Combination was Completed at the Beginning of the Fiscal Period.
Not applicable because the acquisition date was at the beginning of the fiscal period.

25. SIGNIFICANT SUBSEQUENT EVENTS
Merger with TOP
On May 26, 2016, NMF and Top REIT, Inc. (“TOP”) resolved, at their respective Board of Directors’ meetings, to implement an absorption-typemerger (the “absorption-type merger”) with NMF as the surviving corporation and TOP as the absorbed corporation, effective September 1,
2016. On the same day, NMF and TOP entered into a merger agreement.
(1) Objective of the absorption-type merger
	NMF believes that the absorption-type merger presented a rare opportunity for external growth in the heated real estate acquisition market.
Furthermore, the absorption-type merger increased NMF’s ratio of investment in properties for which future internal growth can be expected,
specifically properties that are in upside sectors or located within Tokyo’s five central wards. Through the absorption-type merger, NMF
sought to increase the portfolio’s diversity, thereby raising risk tolerance, and expected that the increase in the market capitalization of its
investment units accompanying the issue of investment units would further enhance their liquidity. As a result of these and other effects,
NMF expected the absorption-type merger to contribute to unitholder value.
(2) Method of the merger
	The merger was an absorption-type merger with NMF as the surviving corporation; TOP was dissolved through the absorption-type merger.
(3) Allotment ratio	Through the absorption-type merger, 2.62 investment units of NMF were allotted per 1.00 unit of TOP.
(4) Merger distribution
	Instead of the cash distributions to the unitholders of TOP for TOP’s final fiscal period (May 1 to August 31, 2016), NMF will make a cash
distribution to the unitholders recorded on the final unitholders’ register for TOP as of the day immediately prior to the effective date of theabsorption-type merger in an amount equivalent to the cash distribution for TOP’s final fiscal period, based on the amount of profit available
for distribution by TOP for said period.
(5) Unitholders’ capital	Increases in NMF’s unitholders’ capital and capital surplus due to the absorption–type merger are as follows.
	Unitholder’s capital: ¥0	Capital surplus: The amount of change in unitholders’ equity as described in Article 22 Paragraph 1 of the Regulations Concerning Accountingof Investment Corporations less the amount of unitholders’ capital shown above(6) TOP’s business	The operation of assets, mainly as investments in specified assets, in accordance with the Investment Trust Act.

40 Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

41

Investor Information
IR Calendar
Announcement of financial results(Mid-April)

January

February

March

April

May

Announcement of financial results(Mid-October)

June

July

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

Fiscal period end(End of February)

Number of Investment Units
Other domestic corporations

340,636 units (9.2%)

307,242 units (8.3%)

Individuals and others
Financial institutions

Other domestic corporations

340,636units(9.2%)(including
financial
instruments business operators) 307,242 units (8.3%)
1,929,619 units (51.8%)
Financial institutions

1,929,619 units (51.8%)

September

Fiscal period end(End of August)OctoberNovember

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

Top 10 Unitholders

Individuals and others(including financial instruments business operators)

AugustForeign corporations

1,144,513 units (30.7%)
Foreign corporations

1,144,513 units (30.7%)

Numberof Unitholders
Financial institutions(including financial instruments business operators)
162 (0.5%)

Financial institutions (including financial instruments business operators)
Individuals and others
162 (0.5%)

Unitholder

Units heldShare

1 Japan Trustee Services Bank, Ltd.

888,83123.88%

2 The Master Trust Bank of Japan, Ltd.

316,564

8.51%

3 Trust & Custody Services Bank, Ltd.

270,023

7.25%

4 Nomura Real Estate Development Co., Ltd.

210,671

5.66%

5 The Nomura Trust and Banking Co., Ltd.

135,697

3.65%

112,185

3.01%

86,5122.32%

59,607

1.60%

6

STATE STREET BANK WEST CLIENT - TREATY
505234

7 NOMURA BANK (LUXEMBOURG) S.A.
8

STATE STREET BANK - WEST PENSION FUND
CLIENTS - EXEMPT 505233

30,367 (96.6%)

9 SIX SIS FOR SWISS NATIONAL BANK

41,296

1.11%

Individuals and others
Other domestic corporations 474 (1.5%)

10 STATE STREET BANK AND TRUST COMPANY

34,799

0.93%

Total

2,156,185

57.93%

30,367 (96.6%)

Foreign corporations 434 (1.4%)

Other domestic corporations 474 (1.5%)
Foreign corporations 434 (1.4%)

Guide to Website
http://www.nre-mf.co.jp/en/
The website is going through a dramatic update with the end of thefirst fiscal period and will have an entire new set of data installed. We
hope that you will take the time to access and view the new site. The
English website is at http://www.nre-mf.co.jp/en/.
Disclosure materials of the former three REITs before the merger are
also available at “Disclosure Materials” under “Investor Relations.”

42 Nomura Real Estate Master Fund

Note: The figures are based on data as of August 31, 2016.