1st Fiscal Period Semi-Annual Report
January 31, 2013 to August 31, 2013

NOMURA REAL ESTATE MASTER FUND, INC.
8-5-1, Nishi-Shinjuku, Shinjuku Ward, Tokyo

The leadership behind

Nomura Master Fund
Nomura Master Fund is committed to delivering
stable dividends via our consumption-based
portfolio of logistics and retail facilities.

Providing long-term stability through a portfolio
primarily centered on the Tokyo metropolitan area–
the bastion of Japan’s economy.

Takashi Kataoka

Noriaki Ido

Retail

Masato Yamauchi

Chief Investment Officer, NMF
Managing Director
Managing Director
Executive Officer
Nomura Real Estate Asset Management Co., Ltd.
Head of Asset Management Division
Head of Acquisitions Division
Head of Finance Division
Nomura Real Estate Asset Management Co., Ltd. Nomura Real Estate Asset Management Co., Ltd.
Nomura Real Estate Asset Management Co., Ltd.

Is delivered through aTokyo-centric portfolio (83.9%)

Stable Returns for Investors

Logistics

Naohiro Takahashi

Executive Director
Nomura Real Estate Master Fund, Inc.

Stability provided through a balanced
portfolio of logistics (53.6% of portfolio)
and retail properties (46.4%)

Is achieved by incorporating
established Nomura brands
Landport (logistics) and
GEMS (retail)Is delivered through long-term
contracts often 10 years ormore in length (71.3%)

Stability
Superior Pipeline Enabledby the Nomura Real Estate Group
Disclaimer

Is evidenced through a stablefinancial base with an averageborrowing period of more than
4.8 years and up to 12 years

This document has been prepared for the purpose of provision of information only, and should not be construed as an offer, solicitation or commercial conduct of any nature associated withany specific products. Investors wishing to purchase the investment units of Nomura Real Estate Master Fund, Inc. (NMF) should contact their own securities brokers or dealers. A fee may
be charged by your financial instruments business operator in relation to the sale or purchase of investment units.
For management fees that NMF pays to Nomura Real Estate Asset Management Co., Ltd., please refer to the terms and conditions of NMF, asset management reports, etc.
The forward-looking statements with respect to the future financial results contained in this document are based on the current facts about the investment policy of NMF, applicable laws
and regulations, the market environment, business practice, etc., as of the preparation date of this document and do not reflect or consider any changes in the circumstances after the
preparation date. These forward-looking statements inherently reflect uncertainty about known risks as well as unknown risks and other factors and may deviate from the actual operating
and management results, financial conditions, etc., of NMF.
Investment in real estate investment securities may result in a loss due to a decline in the transaction price caused by, for example, changes in the price or the revenue-generating capabilityof the underlying properties or deterioration of the financial conditions of the issuer.
Although the information contained in this document is intended to be complete and thorough, there is no assurance of its accuracy and reliability. Please note that the contents of thisdocument are subject to change or deletion without prior notice.
The duplication, reproduction, distribution or use of any information, in whole or in part, contained in this document without the express prior written consent of NMF is strictly prohibited.

Is evidenced through ahigh long-term issuer
rating of AA-

Is delivered through 99.8%
occupancy primarily tied up in
long-term contracts

Note: The above figures are based on data as of August 31, 2013.

Contents
Japan Report
Top Message: Strong Start
Portfolio Management: External Growth
Portfolio Table
Portfolio Management: Internal Growth
Finance Strategy

2-3
4-5
6-8
9
10-11
12-13

Portfolio Gallery
Portfolio Data
Corporate Governance
Financial Section
Independent Auditor’s Report
Investor Information

14-16
17
18
19-33
34
35

Nomura Real Estate Master Fund1

Online Boom
Abenomics has also brought good times to thelogistics sector.

JA
AN
Re ortResurgent Japan Drawing Foreign Interest“Japan is back” has become a slogan for Prime Minister
Shinzo Abe during his visits to other countries since
returning to power last December. Evidence that theprime minister is correct is compelling. Signals point tolong-term economic growth, increased foreign investment
and opportunities in multiple sectors. Nowhere is thismore evident than in Tokyo.
Tourist numbers are up, major events are planned in
the city over the next decade, stocks have risen and theweakness of the yen has helped the good times returnto Japanese companies. Consumption and consumer
confidence are also rising. The first steps toward fiscal
consolidation, which is indispensable to Japan’s longterm prospects, have been taken. The government will
implement a 3% consumption tax hike in April next year.
The real estate market and logistics sector are booming.
“It’s safe to say that our investment advisory team ishaving a fantastic year,” said Will Johnson, head ofresearch and consultancy at real estate company Savills
Japan.
Savills Japan said in a September report that doubledigit growth in the capital value of Tokyo residential
property is possible in the next three years.
Johnson says that the effects of Abenomics are
beginning to take hold. “In addition to a healthy pickup in enquires in recent months, we’ve seen a higher
proportion of pipeline deals close successfully, both in
the leasing and investment markets.”
Risks exist. But the determination of the government
to keep the economy on track is real. The consumption
tax hike, which could send spending south, is being
complemented by a 5 trillion yen stimulus package,currently under negotiation, that is likely to include
benefits for corporations, money for those most likely
to be affected by the increase and help for first-time
homebuyers.

CBRE noted in a recent report that vacancy rates in theTokyo area are at 4.3%. “Owners have become more
confident and rents are rising for both new and renewal
leases,” the company wrote in the report. It also
indicated that net demand was at its third highest level
since 2004, when the company started looking at themarket.

Government spending on urban developments and publicprivate partnerships for the Olympic Games is likely
to lead to urban development throughout the capital.
These will be supported by the development of special
economic zones to encourage overseas investment.

Good Times“Recent government land price data,” Johnson said,“supports the widely held view that Japan’s property
market has bottomed out and is entering a period ofrecovery. A marked increase in investment activity isdriving land price growth.
“Multiple factors have influenced this – most notably
Abenomics, which has improved liquidity in the publicmarkets, enabling domestic corporations and listed
REITs to raise record levels of capital for new property
acquisitions. Additionally, as a result of sharp rental
reductions and softened cap rate expectations since
the global financial crisis, pricing for investment-grade
properties looks to be at a good value from an historicalperspective.”
SoftBank Corp. CEO Masayoshi Son, a man known forhis business acumen, was reported in October to haveagreed to a 32 billion yen deal and acquired the Tiffany
building in Tokyo’s upmarket Ginza district. The movecame as property sales soared across the greater Tokyo
area. New condominiums released onto the market in
September increased to 5,968 units, up 77% comparedto the previous year, according to the Real Estate
Economic Institute.
Sentiment suggests purchases such as Son’s are wise.
Consumer spending among Japanese has increased.
Personal consumption grew by 3.3% in the April-Junequarter, and 2.9% between July and September. Confidence
is driving consumption. The Economy Watchers survey,
which measures service sector confidence, has been inpositive territory since January. Consumer confidence, ina notoriously pessimistic country, is also showing signs ofheading into positive territory.

Why? “Given the limited supply during the global
financial crisis,” Andy Hurfurt, executive director at
CBRE remarked, “the increase in demand seen during
the past couple of years has created a very tight market
with vacancy at historically low levels.” “Large, efficientfacilities with easy access to urban centers have grownin appeal,” he added.
Foreign money is coming in. LaSalle Investment
Management of Singapore is among the companies now
looking to Japan as a place to invest in logistics. Its$410 million Japan Logistics Fund III will focus on Tokyo
and Osaka.
The rise of online retailing has contributed to thegrowth in logistics.
Domestic giant Rakuten, Inc. faces increasing
competition from Amazon Japan, Yahoo Japan and othercompanies looking to get into the growing market. “Bulk,
necessity retail,” Hurfurt said, “is where online retailingis most likely to have a more immediate impact. For
example, household consumables that can be boughtin volume and where products by competing retailers/manufacturers are comparatively similar (will do well).”
The sector’s prospects look good, as the Olympic Games
in 2020 make speedily getting goods to the growing
number of tourists essential. The Games are also
expected to boost construction, tourism and investmentin the nation’s capital. Costs for infrastructure andvenue development in time for the games are estimatedto be more than 1 trillion yen. That is money that willtrickle down to construction businesses, architects andblue collar workers. The overall effect of the games will
boost gross domestic product by 0.5%, according to
SMBC Nikko Securities Inc.
And logistics in this environment pose little threat to thehigh street, according to Hurfurt.
Retailers I have spoken with mostly consider online
retail as complimentary to traditional “bricks &mortar” stores.

For discretionary spending, and for products where
different retailers/manufacturers have particularstrengths or features, consumers still show a preference
to see, feel and try before purchasing. Consumers will
therefore still visit stores, even if they subsequently
decide to buy online for convenience.”

Future Hope
Maintaining momentum gathered this year will be
important for achieving sustainable growth and attracting
investment in Japan. To do so, government reform must
continue.
“What Japan would benefit from most is boldderegulation – a stated objective of Prime Minister Abe’s
third policy arrow of structural reform,” said Savills’
Johnson, adding, “If successfully executed, measuresto rationalize the tax system, cut back on red tape,and tackle the unprecedented debt to GDP ratio, would
go a long way to assure investors that the country’s
economic revival is sustainable and not limited to shortterm quantitative easing and currency plays.”
Hurfurt agrees. “Ongoing progress with both economic
and reform initiatives for the optimism to remain beyond
the near term,” he said. “Wage inflation will be vital if
workers are to remain supportive of the initiatives amid
increasing prices.” Signs are that wages will increase.
Among large enterprises, sentiment is positive, theBank of Japan’s Tankan survey of short-term consumer
sentiment shows. The score, calculated by subtracting
those companies that are bearish from those thatare bullish, rose 8 points to 12 in the quarter ended
in September. These businesses forecast a 6.5%
increase in investment next fiscal year. Amid signs ofinflation, the nation’s largest—and largely cooperativewith business—union Rengo is requesting a 1% rise inincomes for its members. It cites inflation as a deciding
factor in its demand.
Is it time to look at Japan? Probably. Abe’s first months
in power have been defined by his economic efforts.
Policy has been coupled with strong signals to themarket. More is to come.
“Strategic special zones,” where lower taxes andlooser regulations have been adopted to attract further
investment, will be launched after new rules clear
parliament in the coming months. They aim to attract
foreign investment. The reasoning is that the Japanese
economy is showing signs of sustainable growth, andmajor foreign investment would further cement this growth.

Richard Smart
2

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

3

Takashi Kataoka
Executive Director
Nomura Real Estate Master Fund, Inc.
Chief Investment Officer, NMF
Nomura Real Estate Asset Management Co., Ltd.

Top Message: Strong Start
On behalf of Nomura Real Estate Master Fund, Inc. (Nomura Master Fund), I would like to express my appreciation to you,
our unitholders, for your robust support.
I am delighted to be able to present the results of our first fiscal period, ended August 2013. The IPO of Nomura Master Fundon June 12, 2013 successfully raised 160.9 billion yen of equity with 78.9% of the capital coming from Japanese investorsand 21.1% from overseas investors. We became the largest J-REIT IPO ever and were soon included in the FTSE EPRA/NAREIT Global Real Estate Index and TSE REIT Index.
Our investment policy calls for investing in logistics and retail properties–properties that form the economic and industrial
infrastructure that support consumption activities. In accordance with our investment philosophy, 83.9% of our portfolio
is located in the Tokyo metropolitan area with a fairly balanced distribution of assets between logistics and retail properties.
We enjoy an astounding occupancy rate of 99.8% and over 70% of our leasing contracts are for 10 years or longer.
We are also careful to observe a conservative financial strategy, proven by our LTV of only 31.1%. This contributes to ourJapan Credit Rating of AA-. We will continue to take advantage of the Nomura Value Chain and invest in solid logistics andretail properties that enable us to reliably pay stable distributions to our investors. These strategies have proven themselves
out of the gate as we are paying a unit distribution of 751 yen per unit, 126 yen more than forecast soon after the IPO.

Joined Nomura Real Estate Development in 1991. Involved in the asset management businessfrom 2003. Appointed to current position in 2013 after working in fund procurement for listed
REITs and fund procurement and fund management for private funds.

Nomura Master Fund has mapped a path to realize stable growth though increasing investment unit price, securing stable
income and maximizing the real estate value of our portfolio properties based on investment, management and financial
strategies. We have also established a medium-term asset size target of 400 billion yen while maintaining an operational LTV
level of between 30% to 40%. We will achieve this target with our internal and external strategies with the aim of further
heightening the stability of our portfolio through the diversification of our portfolio of logistics and retail properties as well as
diversification of tenants.
The following pages provide an overview of our strategies and implementation.
Thank you for your continued support.

Path Toward Growth

Nomura Value Chain
Effective use of pipeline and support from our sponsor

Management support from Nomura Real Estate Group

When real estate Nomura Real Estate Development owns
or will develop in the future is sold, and said real estateis determined to broadly meet Nomura Master Fund’s
property selection criteria, information about the sale will,in principle, be provided to the asset management company
before third parties. Using this pipeline, Nomura MasterFund will endeavor to steadily grow its assets and securestable income over the medium- to long-term.

Nomura Master Fund will make use of Nomura Real EstateGroup’s capabilities in leasing, administration and property
management, while striving to raise satisfaction among
tenants as well as maintain and increase the value of theassets it manages.
From April 2013, Nomura Real Estate Development willtake full charge of the planning, development and leasingof logistics and retail facilities.

Image of Growth Strategy

Increase investment unit priceRealize
Stable Growth

Aim to realize stable distribution based on clear concepts

Medium-term asset size target:

400
billion yen

External Growth

227.6
billion yen

Focused on the Tokyo Area
(80% or more in principle)

Around 5 years

Maximize real estate value

Secure stable income

Stability

Internal growthpotential

Logistics properties andresidential-area retail properties
Creation of stable cash flow basedon long-term lease agreements

Station-front type retail properties
Internal growth engine in market
recovery phase

40%
Information provision agreement

Investment strategy• Set medium-term asset size target• Build a stable portfolio• Expand external acquisition pipeline

Financial strategy• Build a stable ﬁnancial base
• Finance in response to the market

Operating strategy
Against backdrop of long-term lease agreements• Maintain a high occupancy rate
• Maintain and enhance the rent level

4

Nomura Real Estate Master Fund

LTV: 31%

Operational LTV level: 30%–40%30%
1st fiscal
period end

Aim to diversify real estate under management and tenants by expanding asset
size, and realize the building of an increasingly stable portfolio
Note: The above figures are based on data as of August 31, 2013.

Nomura Real Estate Master Fund

5

Noriaki Ido
Managing Director
Head of Acquisitions Division
Nomura Real Estate Asset Management Co., Ltd.

Portfolio Management: External Growth
A Strategy of Stability and Targeted Growth
How does Nomura Master Fund

Q1 deliver on its promise of stability?

Nomura Master Fund investors desire stability. The Nomura
Master Fund portfolio delivers on this stability by investingin logistics and retail properties that by nature are linked
to consumption. The long-term rental contracts that are thenorm with these assets deliver a dependable, steady cash flow.

Joined Nomura Real Estate Development in 1992. Worked in development and operational
management of office buildings for 8 years. After working in the acquisition, retail facility, office
and investment discretion businesses within the asset management section, he was appointed
to his current position in 2013.

Where does Nomura Master Fund’s

Q2 potential for growth lie?

Utilizing the Nomura Real Estate Group’s value chain and clear
investment strategies such as investment focused on the Tokyo
metropolitan area and properties no older than 10 years,
Nomura Master Fund aims to expand asset size to 400 billion
yen and build a competitive portfolio with quality properties.
The ability to apply the potential upside of station-front retailproperties to increase value within the existing portfolio.

How does the Nomura Value Chain differentiate

Q3 Nomura Master Fund from other REITs ?

Nomura Real Estate and the Nomura Real Estate Group of companies are unique market leading sources
for both assets developed by the group and assets sourced by the group.
The support of the Nomura Real Estate Group building management, property management and leasing teams means“Nomura Quality” throughout. Our tenants know that they are supported by a robust team.

Utilizing Pipeline and Network for Growth

Portfolio Distribution

The Nomura Master Fund growth strategy calls for a portfolio of 400 billion yen in five years. This will be attained byinvesting in logistics properties (53.6% of portfolio), station-front retail (25.5%) and residential oriented retail (20.9%)
properties in a balanced manner. Growth will be achieved through utilization of the pipeline and network of the Nomura
Real Estate Group.

Proof positive of the implementation of the strategy is demonstrated in the below geographical diversification, portfolio
composition and age of portfolio properties.

Logistics

Geographical Diversification
Other Areas
Kinki Area

Retail5.7%

Portfolio Composition by Property Type

10.5%

Tokyo Area
investment ratio

83.9%●●Investment focused on large, high-performance logistics
facilities●●Ability to apply Nomura expertise●●A bility to take advantage of large, high performance
facilities emerging as industry structure changes●●Investment in retail facilities with stable demandachieved by providing daily necessities, food/beverages,etc.
●●S tation-front retail: Investment in facilities in close
proximity to stations with dense traffic●●Residential-oriented retail: Investment in facilities inresidential areas with high populations

Residential
facility typeAge of Portfolio Properties
20.9%

Retail

46.4%

Logistics

53.6%

Less than 5 years

10 years or more

17.0%

25.5%

Average 46.1%
property age

13.3 years

Station-front type

36.9%
5 to 10 years
Note: The above figures are based on data as of August 31, 2013.

6

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

7

Portfolio Table (as of the end of the 1st fiscal period)

External Growth Strategy
Nomura Master Fund invests primarily in competitive logistics and retail products less than 10 years old and located in theTokyo metropolitan area.

Investment Perspective

A Balanced Portfolio Delivering Stability and Potential for Growth

Location Area of Portfolio Properties●●Investment focused on the Tokyo Area (80% or more inprinciple), where strong demand is expected

Use Area No.

40km

17

●●A cquire properties aged 10 years or less, which havecompetitive advantages

4
16

6

16

Tokyo

20km
Tokyo Area
X
Property Age of
10 years or less Within
20km

20 – 40km

5 years

14

Over
40km
Three major
metropolitan areas

10 yearsTokyo
Station20(excluding Tokyo Area)

Haneda Airport(Tokyo International Airport)

16

16

246

Tokyo Area

Over 10 years

Other

Area

Logistics

Main Target

Surrounding areas ofcabinet-orderdesignated cities

Logistics
Retail
134

Property Age

Recipe SHIMOKITA
Expressway

2nd Fiscal Period: Nomura Master Fund Acquires Recipe SHIMOKITA*PML (Probable Maximum Loss) indicates the probable losses caused by a major earthquake, as a percentage of the expected recovery cost to the replacement cost. PML is calculated based on
the statistical assumption that within the next 475 years there is a 0.211% annual chance (10% probability every 50 years or average life time of buildings) of a major earthquake occurring.

8

Nomura Real Estate Master Fund

Other
Other

Recipe SHIMOKITA¥10,407 million¥10,600 million
December 13, 2013 (scheduled)
2-20-17 Kitazawa, Setagaya Ward, Tokyo
1-minute walk from Shimokitazawa Station on the Odakyu Odawara Lineand Keio Inokashira Line
Site area
1,716.03m2
Leasable floor space 6,295.22m2
Floors
B2/8F
Completion
July 2011
PML
2.71%

Retail (land only)

Name
Acquisition priceAppraisal
Acquisition date
Location
AccessKinki

Nomura Master Fund signed a purchase agreement on September 30, 2013
to acquire Recipe SHIMOKITA from a Japanese firm in December 2013. The
property is a retail asset (with clinic) and will be acquired for 10,407 million
yen using a combination of cash on hand and borrowings. The property is
located in Shimokitazawa, a popular and high-density residential, shopping andentertainment destination in close proximity to Shibuya, within 10km from
Tokyo station. The property is nearly fully occupied, built recently and boasts a
strong PML*. NMF is convinced that it further strengthens our portfolio.

Tokyo

New Acquisition

Retail Properties

Tokyo

Investment Universe

16

Name

Acquisition Investment
Appraisal
Price
Ratio
Value
(millions of yen)(%)(millions of yen)

Location

1 Landport Urayasu
2 Landport Itabashi
3 Landport Kawagoe
4 Landport Atsugi
5 Sagamihara Tana Logistics Center
6 Sagamihara Onodai Logistics Center
7 Landport Hachioji
8 Landport Kasukabe
9 Funabashi Logistics Center
10 Atsugi Minami Logistics Center B Tower
11 Hanyu Logistics Center
12 Kawaguchi Logistics Center B Tower
13 Kawaguchi Logistics Center A Tower
14 Atsugi Minami Logistics Center A Tower
15 Ota Nitta Logistics Center
16 Ota Higashishinmachi Logistics Center
17 Ota Kiyohara Logistics Center
18 Chiyodamachi Logistics Center
1 Morisia Tsudanuma
2 Yokosuka More's City
3 EQUINIA Shinjuku
4 Kawasaki More's
5 EQUINA Ikebukuro
6 covirna machida
7 Nitori Makuhari
8 Konami Sports Club Fuchu
9 FESTA SQUARE
10 GEMS Shibuya
11 Sundai Azamino
12 EQUINIA Aobadai
13 Megalos Kanagawa
14 Izumiya Senrioka

Urayasu City, Chiba
Itabashi Ward, Tokyo
Kawagoe City, Saitama
Atsugi City, Kanagawa
Sagamihara City, Kanagawa
Sagamihara City, Kanagawa
Hachioji City, Tokyo
Kasukabe City, Saitama
Funabashi City, Chiba
Atsugi City, Kanagawa
Hanyu City, Saitama
Kawaguchi City, Saitama
Kawaguchi City, Saitama
Atsugi City, Kanagawa
Ota City, Gunma
Ota City, Gunma
Ota City, Gunma
Oura-Gun, Gunma
Narashino City, Chiba
Yokosuka City, Kanagawa
Shinjuku Ward, Tokyo
Kawasaki City, Kanagawa
Toshima Ward, Tokyo
Machida City, Tokyo
Chiba City, Chiba
Fuchu City, Tokyo
Saitama City, Saitama
Shibuya Ward, Tokyo
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Yokohama City, Kanagawa
Suita City, Osaka

17,40015,71013,70011,41010,600
8,700
8,250
7,340
4,660
4,590
3,810
3,750
2,830
2,690
3,430
2,170
650
330
16,60013,640
4,260
4,000
3,990
3,440
3,080
2,730
2,600
2,490
1,700
1,560
1,000
8,930

7.6
6.9
6
5
4.7
3.8
3.6
3.2
2
2
1.7
1.6
1.2
1.2
1.5
1
0.3
0.1
7.3
6
1.9
1.8
1.8
1.5
1.4
1.2
1.1
1.1
0.7
0.7
0.4
3.9

18,20016,50013,90012,000
11,100
9,180
8,690
7,560
4,840
4,750
4,180
4,070
3,030
2,910
3,690
2,380
700
354
17,20014,200
4,330
4,220
4,140
3,780
3,310
2,990
2,810
2,500
1,760
1,690
1,190
9,820

15 Merad Owada

Osaka City, Osaka

6,640

2.9

6,960

16 Izumiya Yao
17 Izumiya Obayashi
18 Ichibancho stear
19 EQUINIA Aobadori
20 Mitsubishi Motors Meguro
21 Mitsubishi Motors Chofu
22 Mitsubishi Motors Shibuya
23 Mitsubishi Motors Nerima
24 Mitsubishi Motors Kawasaki
25 Mitsubishi Motors Takaido
26 Mitsubishi Motors Katsushika
27 Mitsubishi Motors Higashikurume
28 Mitsubishi Motors Setagaya
29 Mitsubishi Motors Suginami
30 Mitsubishi Motors Sekimachi
31 Mitsubishi Motors Higashiyamato32 Mitsubishi Motors Motosumiyoshi
33 Mitsubishi Motors Kawagoe
34 Mitsubishi Motors Edogawa
35 Mitsubishi Motors Sayama

Yao City, Osaka
Takarazuka City, Hyogo
Sendai City, Miyagi
Sendai City, Miyagi
Meguro Ward, Tokyo
Chofu City, Tokyo
Shibuya Ward, Tokyo
Nerima Ward, Tokyo
Kawasaki City, Kanagawa
Suginami Ward, Tokyo
Katsushika Ward, Tokyo
Higashikurume City, Tokyo
Setagaya Ward, Tokyo
Suginami Ward, Tokyo
Nerima Ward, Tokyo
Higashiyamato City, Tokyo
Kawasaki City, Kanagawa
Kawagoe City, Saitama
Edogawa Ward, Tokyo
Sayama City, Saitama

4,406
3,020
4,700
1,640
2,740
1,760
1,570
1,240
950
850
800
800
770
740
600
450
370
350
200
160

1.9
1.3
2.1
0.7
1.2
0.8
0.7
0.5
0.4
0.4
0.4
0.4
0.3
0.3
0.3
0.2
0.2
0.2
0.1
0.1

4,640
3,190
5,090
1,740
2,800
1,820
1,690
1,270
1,010
889
810
813
777
781
612
484
374
353
207
165

820

0.4

Total

227,616

Total

10,407238,023

36

Mitsubishi Motors Ibaraki MaintenanceCenter

Ibaraki City, Osaka

Leasable
Floor Space
(m2)

PML
(%)

70,045.85
52,794.55
71,569.89
47,995.23
50,450.00
57,448.03
34,896.32
29,630.48
30,641.98
24,909.96
24,850.80
13,648.70
12,003.57
9,825.52
42,328.00
23,584.72
9,397.38
4,592.00
39,301.49
29,383.65
3,611.57
14,446.48
2,701.66
2,891.32
14,367.98
12,385.18
7,480.63
1,791.34
2,286.47
2,457.36
6,217.85
24,399.12
14,941.54
5,856.50
34,198.01
11,714.36
4,582.81
4,030.37
3,381.19
4,183.63
1,421.31
1,725.61
3,057.02
1,923.64
1,930.05
4,105.00
1,305.78
1,831.00
989.772,783.79
1,646.97
2,462.40
892.56
1,793.00

4.61
6.17
4.85
10.06
4.92
12.96
11.29
7.33
5.24
12.38
5.15
5.05
6.32
12.35
2.01
1.39
1.39
7.23
5.93
12.79
7.5
11.24
10.82
14.8
5.93
2.4
6.36
1.81
6.93
9.91
11.24
14.44

877

5,704.24–

100

239,326

890,795.63

5.28

–
–

10,600249,926

6,295.22
897,090.85––(Retail)(Logistics)

10.16
14.37
12.95
2.76
0.34
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–

New Acquisition
Recipe SHIMOKITA

Setagaya Ward, Tokyo

Nomura Real Estate Master Fund

9

Naohiro Takahashi
Managing Director
Head of Asset Management Division
Nomura Real Estate Asset Management Co., Ltd.

Portfolio Management: Internal Growth
Nomura Value Chain Drives Stability and Growth
How does the Nomura Value Chain
to management of theQ1 contributeexisting portfolio?
Led by our internal team, Geo Akamatsu,
a Nomura Real Estate Group member and experts in retailproperty management, along with other Nomura Real
Estate Group companies, we are able todeliver dependable results that are essential for a J-REIT.

will Nomura Master Fund
Q2 Howdeliver stability to investors?
The outstanding 99.8% occupancy rate for the portfolio,
stable rents over long-term contracts and latent profits of
9.8 billion yen in the portfolio value are proof positive of
our skills. We are confident that we will deliver solid results.

skills backed by numbers?
Q3 Are these
Nomura Master Fund will utilize the Nomura Real Estate Group’s capabilities to lease up

Joined Nomura Real Estate Development in 1989. Worked in sales of detached houses andcondominiums for 14 years. Appointed to current position in 2012 after working in disposals of
owned real estate.

properties and achieve a diversified tenant base while leveraging long-term rental contracts so as
to diversify rent agreement maturations and steadily deliver the results our investors desire.

Tenant Diversification

Proven Leasing Experience: Morisia Tsudanuma

Our diverse tenant base and lease terms show our lack of dependence on any single tenant or any single industry that may besusceptible to market upheavals.

This property was initially acquired by a private fund managed by the Nomura Real Estate Group after a major supermarket
and department store vacated the premises, it was then turned around and revitalized as a shopping center with 115 tenants
and about 39,000m2 of leasing space, and presently is enjoying strong growth in sales.

Area Ratio

Remaining Lease Term(leased area based)

Lease Term(leased area based)

10.4%
7.9%
Amazon Japan Logistics
6.3%
Caterpillar Logistics Services 5.7%
Yokohama Okadaya
4.9%
Mitsui-Soko Logistics
4.8%
Not disclosed
4.6%
ASKUL
4.2%
Otsuka Warehouse
3.9%
Shinkai Transport Systems
3.9%

Ratio of leased floor area

Fukuyama Transporting

Other

43.4%
Total numberof tenants

241

Total rent area

888,992.03m

2Less than
2 years
0.3%

2 to 5 years

Izumiya

8.4%

5 to 10 years

19.9%

Average lease term
12.2 years 10 years
or more71.3%

Morisia Tsudanuma Revitalization

Less than
2 years

10 yearsor more
23.1%

17.0%

After

After

Average remaining
lease term
6.6
years
2 to 5 years

29.9%

5 to 10 years
30.0%

BeforeBeforeMorisia Tsudanuma Monthly Sales Index

Diversification of Lease Maturities

150

The diversification of the long-term rental agreements that form the base of our portfolio ensures that the potential loss of alarge proportion of tenants or occupancy rate upheaval will occur in any given fiscal period.

130

15.0%
RetailLogistics

1.9%

6.6%

9.2%

10.0%
1.2%

2.3%

5.0%
0.3%

5.0%

3.0%
1.0%

0.0%

2nd FP 3rd FP
Feb.
Aug.
2014 2014

4.5%

6.5%

4.2%
1.2%

4th FPFeb.
2015

5th FPAug.
2015

6th FPFeb.
2016

7th FP
Aug.
2016

0.8%

8th FP
Feb.
2017

5.8%
1.6%

110

0.8%

3.8%

4.7%

Nomura Real Estate Master Fund

120

0.1%
6.7%

100
1.9%

4.7%
0.1%

0.2%

0.2%

0.2%

9th FP 10th FP 11th FP 12th FP 13th FP 14th FP 15th FP 16th FP 17th FP 18th FP 19th FP 20th FP 21st FP
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
2017 2018 2018 2019 2019 2020
2020 2021
2021 2022 2022 2023 2023
Note: The above figures are based on data as of August 31, 2013.

10

Indexed with the figures for April 2008 as 100.
140

90
80
Apr.
2008

Oct.
2008

Apr.
2009

Oct.
2009

Apr.
2010

Oct.
2010

Apr.
2011

Oct.
2011

Apr.
2012

Oct.
2012

Apr.
2013

Nomura Real Estate Master Fund

11

Masato Yamauchi
Executive Officer
Head of Finance Division
Nomura Real Estate Asset Management Co., Ltd.

Finance Strategy
A Conservative and Stable Strategy that is Highly Appraised

would you define the Nomura
Q1 How
Master Fund financial strategy?
Conservative, conservative, conservative.
We want our investors to be confident of the stability ofour product in good and bad times, and we are convincedthat a conservative sub-40% LTV (presently 31.1%)
will provide this stability.

Joined Nomura Real Estate Development in 1991. Worked in tenant marketing, development,
property and asset management businesses of office buildings for 14 years. Worked in asset
management business of offices in the asset management section from 2008. Appointed to current
position in 2011.

Japan Credit Rating has given Nomura Master Fund a long-term rating of AA- (Stable),a clear vote of confidence in our REIT and our strategy.

Bank Formation

These key markers are resounding evidence of a conservative, well executed strategy.

Nomura Master Fund’s bank formation boasts loans fromleading Japanese financial institutions and the averageinterest rate of 0.99% needs no explanation as to the highevaluation of Nomura Master Fund’s management byfinancial institutions.

Ratio of Interest-Bearing Liabilities to Total Assets
LTV

Total amount ofinterest-bearing debt

Long-term
debt ratio

Average remaining
years to maturity

Averageinterest rate

Ratio of fixedinterest rate

(ratio of interest-bearing
liabilities to total assets)

78.4

78.9%

4.82

0.99%

79.0%

31.1%

years

*Includes fixed interest rates throughinterest-rate swap agreements

Diversification of Loan Maturities

Commitment Line

Financial Institution(billions of yen)

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

19.9

Sumitomo Mitsui Banking Corporation

19.9

Mizuho Bank, Ltd.

13.5

Mitsubishi UFJ Trust and Banking Corporation

5.8

Sumitomo Mitsui Trust Bank, Limited

5.8

The Norinchukin Bank

5.8

Development Bank of Japan Inc.

3.8

Mizuho Trust & Banking Co., Ltd.

3.8

(millions of yen)

Total

20

16.5
15

13.0

10.0

10

10.8

0.9
0

2nd FP 3rd FP 4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP 11th FP 12th FP 13th FP 14th FP 15th FP 16th FP 17th FP 18th FP 19th FP 20th FP 21st FP 22nd FP 23rd FP 24th FP 25th FP
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb. Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug.
Feb.
Aug. Feb.
Aug.
Feb.
Aug.
2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025
Note: Nomura Master Fund has clearly spread out loan maturities enabling the REIT to consistently refinance even in potentially severe economic climes.

12

Nomura Real Estate Master Fund

Portfolio Value(billions of yen)

LTV

9.0
5.0

5

78.4

LTV: Proving Stable Operations
12.2

Nomura Master Fund is delivering stability to our investors
through a high rate of long-term loans (78.9%), with thecurrent average length until maturity of 4.82 years. We arealso spreading out the loan maturities so that we are notoverwhelmed by refinancing in any single period.

Q3 How has this strategy been appraised by the market?

Key Debt Markers

billion yen

what other ways are you working
Q2 In
to assure stability?

Nomura Master Fund

31.1%

227.6

REIT 1

48.9%

221.3

REIT 2

48.0%

117.0

REIT 3

41.3%

794.2

REIT 4

41.0%

271.6

Note: Compared with REITs specialized in logistics and/or other commercial facilities.

The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
Commitment Line Agreement

10 billion yen(Commitment period: 1 year)

Credit Ratings
Credit Rating
AgencyJapan Credit Rating Agency, Ltd. (JCR)

Long-Term
Issuer Rating

AA-

Outlook

StableNote: The figures are based on data as of August 31, 2013.

Nomura Real Estate Master Fund

13

Portfolio Gallery
Effectively Applying the Nomura Value Chain to Deliver a Robust Portfolio to Investors

Landport Kawagoe

Logistics/Other

Ota Higashishinmachi
Logistics Center

Chiyodamachi Logistics Center

Ota Nitta Logistics Center

Ota Kiyohara Logistics Center

Landport Urayasu

Retail/Tokyo

Yokosuka More’s City

Station-front type
Residential facility typeKawasaki More’s

Landport Itabashi

Logistics/Tokyo

14

Morisia Tsudanuma

Landport Atsugi

Sagamihara Tana
Logistics Center

Sagamihara Onodai
Logistics Center

Nitori Makuhari

Landport Hachioji

Landport Kasukabe

Funabashi Logistics Center

Atsugi Minami
Logistics Center B Tower

covirna machida

Hanyu Logistics Center

Kawaguchi
Logistics Center B Tower

Kawaguchi
Logistics Center A Tower

Atsugi Minami
Logistics Center A Tower

FESTA SQUARE

Nomura Real Estate Master Fund

EQUINA Ikebukuro

Konami Sports Club Fuchu

EQUINIA Aobadai

GEMS Shibuya

EQUINIA Shinjuku

Sundai Azamino

Megalos Kanagawa

Nomura Real Estate Master Fund

15

Portfolio Data (as of the end of the 1st fiscal period)
Stability with Promise through Tokyo-Centric and Major Metropolitan Area Focused Portfolio

Portfolio Map

Logistics

Tokyo Area

1. Landport Urayasu
2. Landport Itabashi
3. Landport Kawagoe
4. Landport Atsugi
5. Sagamihara Tana Logistics Center
6. Sagamihara Onodai Logistics Center
7. Landport Hachioji
8. Landport Kasukabe
9. Funabashi Logistics Center
10. Atsugi Minami Logistics Center B Tower
11. Hanyu Logistics Center
12. Kawaguchi Logistics Center B Tower
13. Kawaguchi Logistics Center A Tower
14. Atsugi Minami Logistics Center A Tower
15. Ota Nitta Logistics Center
16. Ota Higashishinmachi Logistics Center
17. Ota Kiyohara Logistics Center
18. Chiyodamachi Logistics Center

09

Retail/Kinki

33

Merad Owada

Station-front type
Residential facility type

Saitama

03

35

08

12 & 13
02
31

Tokyo

08

07

27

30
21

25

22

Izumiya Senrioka

Izumiya Obayashi

Izumiya Yao

05

06 06

11
12

04

05
03

34
09

10

20

28

Chiba

26

29 23

01

01

32

24

Retail14
13

10 & 14

Kanagawa

Retail/Other

Retail (land only)/Tokyo

Station-front type

Residential facility type

Ichibancho stear

EQUINIA Aobadori

Mitsubishi Motors Meguro
Mitsubishi Motors Chofu
Mitsubishi Motors Shibuya
Mitsubishi Motors Nerima
Mitsubishi Motors Kawasaki
Mitsubishi Motors Takaido
Mitsubishi Motors Katsushika
Mitsubishi Motors Higashikurume
Mitsubishi Motors Setagaya
Mitsubishi Motors Suginami
Mitsubishi Motors Sekimachi
Mitsubishi Motors Higashiyamato
Mitsubishi Motors Motosumiyoshi
Mitsubishi Motors Kawagoe
Mitsubishi Motors Edogawa
Mitsubishi Motors Sayama

Retail (land only)/Kinki
Mitsubishi Motors Ibaraki Maintenance Center

16

Nomura Real Estate Master Fund02

18 & 19

15

17

16
18 11

17 14

36

15 16

07

1. Morisia Tsudanuma
2. Yokosuka More’s City
3. EQUINIA Shinjuku
4. Kawasaki More’s
5. EQUINA Ikebukuro
6. covirna machida
7. Nitori Makuhari
8. Konami Sports Club Fuchu
9. FESTA SQUARE
10. GEMS Shibuya
11. Sundai Azamino
12. EQUINIA Aobadai
13. Megalos Kanagawa
14. Izumiya Senrioka
15. Merad Owada
16. Izumiya Yao
17. Izumiya Obayashi
18. Ichibancho stear
19. EQUINIA Aobadori
20. Mitsubishi Motors Meguro
21. Mitsubishi Motors Chofu
22. Mitsubishi Motors Shibuya
23. Mitsubishi Motors Nerima
24. Mitsubishi Motors Kawasaki
25. Mitsubishi Motors Takaido
26. Mitsubishi Motors Katsushika
27. Mitsubishi Motors Higashikurume
28. Mitsubishi Motors Setagaya
29. Mitsubishi Motors Suginami
30. Mitsubishi Motors Sekimachi
31. Mitsubishi Motors Higashiyamato
32. Mitsubishi Motors Motosumiyoshi
33. Mitsubishi Motors Kawagoe
34. Mitsubishi Motors Edogawa
35. Mitsubishi Motors Sayama
36. Mitsubishi Motors Ibaraki Maintenance Center

Nomura Real Estate Master Fund

17

Corporate GovernanceCompliance that Ensures Investment Integrity and Investor Confidence
Nomura Real Estate Asset Management (NREAM) created its compliance rules and structure at the dawn of the Japanesereal estate investment management business in the 1990s to meet the strict standards of foreign investors. Over the years,
NREAM has established a highly-refined compliance structure for the many facets of investment management, including
private funds, J-REITs and discretionary investment services.
The key elements of NREAM’s compliance structure are the Compliance Department, the Compliance Officer, who is the headof the Compliance Department, and the Compliance Committee.
The Compliance Department handles risk management and Risk Management Committee matters along with those related
to compliance and the Compliance Committee. Thus, the Compliance Department is the corporate body that ensures day-today compliance in decision-making and actions.
The Compliance Committee revises compliance regulations, and establishes and revises the Compliance Manual andCompliance Program. It also handles countermeasures when required and instructed to do so by the Compliance Officer inthe event of compliance violations by the Asset Manager. The Compliance Committee also analyzes deals with interested
parties at the behest of the Compliance Officer and considers improvements needed to maintain compliance with laws andregulations. The Compliance Committee additionally administers and verifies achievement of the company wide Compliance
Program.

Financial Section

The Compliance Officer constantly monitors and inspects legal compliance of the Asset Manager’s investment and advisory
activities. The Compliance Officer verifies the compliance of all matters under discussion by the Investment Committee andvoices his or her opinion. The Compliance Officer also verifies daily compliance and reports to the President when complianceissues are discovered and seeks implementation of proper countermeasures.

Contents

The flow of compliance matters regarding investment is shown in the table below.

Balance Sheet

Preparer and Presenter of Proposal
Preparation of proposal
Submission

Compliance Officer
提出
Confirmationof proposal
Approval

Investment Committee
Investment decision
ReportProposal is redirected if the proposal relates to amaterial transaction with a related party or if theCompliance Officer otherwise deems it necessary

20

Statement of Income and Retained Earnings

22

Statement of Changes in Net Assets

23

Statement of Cash Flows24

Notes to Financial Statements

25

Report of Independent Auditors

34

Compliance Committee
Deliberation

Approval

Proposal is redirected when the Compliance Officer
identifies any critical issue with the proposal during
Investment Committee deliberations

Compliance Committee

18

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

19

Balance Sheet
Thousands of Yen

Thousands of Yen

As of August 31, 2013

As of August 31, 2013ASSETSLIABILITIESCurrent Assets:

Current Liabilities:

Cash and bank deposits
Rental receivables¥16,460,088
138,212

Consumption taxes receivable
Other current assets

4,713,348
249,363

Total current assets

21,561,011

Property and Equipment, at Cost:
131,144,877

Buildings and structures

95,221,008

Current portion of long-term debt
Other accounts payable¥262,587
16,500,000
85,6001,085,077

Accrued expenses

10,658

Accrued income taxes

1,523

Other current liabilities
Total current liabilities

1,335,426
47,051
19,327,922

574

Subtotal

226,366,459

Less accumulated depreciation(698,513)

Net property and equipment

Short-term debt

Rent received in advanceLand
Tools, furniture and fixtures

Trade accounts payable

225,667,946

Long-term Liabilities:
Long-term debt

61,893,000

Security deposits from tenants

8,672,524

Total long-term liabilities

70,565,524

Total Liabilities

89,893,446

Investments and Other Assets:
Leasehold rights

3,821,371

Intangible assets

11,445Long-term prepaid expenses

648,602

Long-term deposits

39,101

Security deposits

515,926

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

5,036,445¥252,265,402

NET ASSETS
Unitholders’ Equity:
Unitholders’ capital

161,120,405

SurplusRetained earnings

1,251,551

Total surplus

1,251,551

Total unitholders’ equity

162,371,956

Total Net Assets

162,371,956

Total Liabilities and Net Assets¥252,265,402

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

20

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

21

Statement of Income andRetained Earnings

Statement of Changes in Net Assets
Thousands of Yen

Thousands of Yen

For the period from January 31, 2013
to August 31, 2013

For the period from January 31, 2013
to August 31, 2013
Unitholders’ Equity

Operating Revenues and Expenses
Operating Revenues:
Real estate rental revenues
Operating Expenses:
Real estate rental expenses
Asset management fees
Asset custody fees
Administrative service fees
Other operating expenses

Operating Profit¥3,683,130
3,683,130
1,258,501
277,764
3,993
23,54029,702
1,593,500

Surplus

Unitholders’CapitalUnits

Retained
Earnings

Total
Unitholders’EquityTotal Surplus

Total
Net Assets

Balance as ofJanuary 31, 2013
Issuance of new
investment units
Net income

–

–

–

1,665,260 ¥161,120,405–– ¥161,120,405 ¥161,120,405–¥1,251,551¥1,251,551

Balance as ofAugust 31, 2013

1,665,260 ¥161,120,405¥1,251,551¥1,251,551 ¥162,371,956 ¥162,371,956

–

–

–

1,251,551–

1,251,551

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

2,089,630

Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Other non-operating revenues
Non-Operating Expenses:
Interest expense
Loan arrangement fees
Investment units issuance costs
Other offering costs associated with the issuance of investment units
Organization expenses
Other non-operating expenses

889
4
893
144,739
147,198
293,249
149,006
100,000
3,125
837,317

Ordinary Income

1,253,206

Income before Income Taxes

1,253,206

Income Taxes:
Current
Deferred

1,704
(49)

Net Income

1,251,551

Retained Earnings at End of Period¥1,251,551

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

22

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund23

Statement of Cash Flows

Notes to Financial Statements
Thousands of Yen

For the period from January 31, 2013
to August 31, 2013
Cash Flows
Cash Flows from Operating Activities
Income before income taxes
Depreciation
Investment units issuance costs
Interest income
Interest expense
Decrease (Increase) in rental receivables
Decrease (Increase) in consumption taxes receivable
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 rent received in advance
Other
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities
Payments for purchases of property and equipment
Payments for purchases of leasehold rights and intangible assets
Reimbursement of security deposits to tenants
Proceeds from security deposits from tenants
Payments for security deposits
Net cash provided by (used in) investing activities¥1,253,206
699,118
293,249(889)
144,739(138,212)(4,713,348)(648,602)(39,101)
262,587
376,561
1,335,426(202,263)(1,377,529)
889(134,081)(181)(1,510,902)(225,663,944)(3,827,420)(23,066)
8,695,590(515,926)(221,334,766)

Cash Flows from Financing Activities
Proceeds from short-term debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of investment units
Payments for investment units issuance costs
Net cash provided by (used in) financing activities

16,500,000
62,000,000(21,400)
161,120,405(293,249)
239,305,756

Net Increase (Decrease) in Cash and Cash Equivalents

16,460,088

Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
The accompanying notes to financial statements are an integral part of these statements.

–¥16,460,088

1. ORGANIZATION
Nomura Real Estate Master Fund, Inc. (the “Company”) is a real estate investment corporation formed to own and invest
primarily in logistics facilities and retail facilities. The Company is externally managed by a licensed asset managementcompany, Nomura Real Estate Asset Management Co., Ltd. (“NREAM”). NREAM is a wholly-owned subsidiary of Nomura
Real Estate Holdings, Inc.
On January 31, 2013, the Company was incorporated under the Act on Investment Trusts and Investment Corporations(the “Investment Trust Act”) of Japan. On June 12, 2013, the Company was listed on the Tokyo Stock Exchange and started
operations on the following day. As of August 31, 2013, the Company owned a portfolio of 54 logistics facilities and retailfacilities containing an aggregate of approximately 890,795.63 square meters of leasable area and leased space to 241 tenants.

2. BASIS OF PRESENTATIONThe Company maintains its accounting records and prepares its financial statements in accordance with accounting principles
generally accepted in Japan (“Japanese GAAP”), including provisions set forth in the Investment Trust Act of Japan, theCompanies 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 wereprepared in accordance with Japanese GAAP and were presented in the Securities Report of the Company filed with the
Kanto Local Finance Bureau. In preparing the accompanying financial statements, certain reclassifications and modifications
have been made to the financial statements issued domestically in order to present them in a format that is more familiar toreaders 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 of yen in the accompanying financial statements and the notes thereto, whereas amounts were truncated in theJapanese financial 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 notprepare 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, lessaccumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the fixed
assets outlined below:
		 Buildings
		 Structures
		 Tools, furniture and fixtures

3 - 70 years
2 - 10 years
6 years

Intangible assets
Intangible assets are amortized by the straight-line method.

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

24

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund

25

Impairment of fixed assets

4. CASH AND CASH EQUIVALENTS

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. No impairment losses
have been recognized to date.

Cash and cash equivalents as of August 31, 2013 consist of the following:

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

Organization expenses

Thousands of Yen

As of August 31, 2013
Cash and bank deposits¥16,460,088

Cash and cash equivalents¥16,460,088

5. SCHEDULE OF PROPERTY AND EQUIPMENT
Property and equipment as of August 31, 2013 consist of the following:

The entire amount is expensed as incurred.

Thousands of Yen

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 and expenses 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 the life of each lease. Utility charge reimbursements are recognized when earned andtheir 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 to property are generally imposed based on the value of the relevant property and incurred for fiscal period.
The seller of a property is liable for property related taxes for the period from the purchase date through the end of thatcalendar year because taxes are imposed on the owner registered in the record as of January 1 for the entire year based on
the assessment made by the local government. The amount applicable to the 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 to768,771 thousand yen for the fiscal period ended August 31, 2013.

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

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

Derivative financial instruments
The Company utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its
exposure to changes in interest rates. The Company defers recognition of gains or losses resulting from changes in the fairvalue 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 that meet the criteria for such special treatment. Under the special treatment, interest-rate swaps are notremeasured at fair value; instead, the net amount paid or received under the interest rate swap contract is recognized andincluded in interest expense or income.

26

Nomura Real Estate Master FundAs of August 31, 2013
Acquisition costs
Book value¥2,440,333¥2,440,333
1,109,122(6,473)
1,102,649
128,704,544
128,704,544
94,111,886(692,032)
93,419,854
574
(8)
566
¥225,667,946¥225,667,946

Land
Buildings and structures
Accumulated depreciation
Land in trust
Buildings and structures in trust
Accumulated depreciation
Tools, furniture and fixtures in trust
Accumulated depreciation
Total

6. SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT
Short-term debt and current portion of long-term debt as of August 31, 2013 consist of the following:
As of August 31, 2013
AmountWeighted-average(Thousands of Yen)
interest rate (Note1)¥8,000,000
0.35000%

Unsecured loans from banks due on May 26, 2014
Unsecured loans from banks due on May 26, 2014
Unsecured loans from a bank due on May 26, 2025

(Note 2)

Unsecured loans from a bank due on May 26, 2025

(Note 2)

Total

8,500,000

0.35000%

42,8002.21812%42,8002.17000%¥16,585,600

Note1:	The weighted-average interest rate is weighted by the balance of each borrowing at the end of the period and rounded to the nearest fifth decimal place. As
for the 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.
Note2:	Installments of 10.7 million yen will be made on the 26th day of every three month starting on August 26, 2013, with the remaining payment of 497.1 million
yen to be repaid on May 26, 2025.

The Company entered into 10,000 million yen credit facilities in the form of commitment lines with three financial
institutions for the fiscal period ended August 31, 2013. The total unused amounts of such credit facilities were 10,000
million yen as of August 31, 2013.

Nomura Real Estate Master Fund27

7. LONG-TERM DEBT

9. PER UNIT INFORMATION

Long-term debt as of August 31, 2013 consists of the following:

The net asset values per unit and the net income per unit as of August 31, 2013 were as follows:

Unsecured loans from banks due on November 26, 2016

As of August 31, 2013
AmountWeighted-average(Thousands of Yen)
interest rate (Note 1)¥13,000,000
0.64250%

For the period from January 31, 2013
to August 31, 2013
Net assets per unit

¥97,505

Net income per unit

¥1,948

Unsecured loans from banks due on May 26, 201812,200,000

0.86250%

Unsecured loans from banks due on May 26, 2019

9,000,000

1.11750%

Unsecured loans from a bank due on May 26, 2019

1,000,000

1.04875%

Unsecured loans from banks due on May 26, 2020

10,000,000

1.33750%

Unsecured loans from a bank due on May 26, 2020

800,000

1.25875%

Net income (Thousands of Yen)

Unsecured loans from banks due on May 26, 2021

8,000,000

1.56250%

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

Unsecured loans from a bank due on May 26, 2021

1,000,000

1.46375%

Net income available to ordinary unitholders (Thousands of Yen)

¥1,251,551

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.89500%

Average number of units during the period

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.86500%

Unsecured loans from a bank due on May 26, 2023

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

1,000,000

1.83875%

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

946,500

2.21812%

10. RELATED PARTY TRANSACTIONS(Note 2)

946,500

2.17000%

For the period from January 31, 2013 to August 31, 2013

Unsecured loans from a bank due on May 26, 2025
Total

¥61,893,000

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

For the period from January 31, 2013
to August 31, 2013
¥1,251,551

642,316

Parent Company and major corporate unitholders
		Not applicable
Subsidiaries and affiliates
		Not applicable
Fellow subsidiary companies
		Not applicable
Directors and major individual unitholders
		Not applicableThousands of Yen

Long-term debt

1-2 years

2-3 years

3-4 years

4-5 years

85,60085,60013,085,600

12,285,600

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

11. INCOME TAXESThe Company, as an investment corporation, is subject to corporate income taxes at a statutory tax rate of approximately
37% for the fiscal period ended August 31, 2013. 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 orderto 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 1,250,610
thousand yen for the fiscal period ended August 31, 2013, such distributions were treated as deductible distributions forpurposes of corporate income taxes. The following summarizes the significant differences between the statutory tax rate andthe effective tax rate:
For the period from January 31, 2013
to August 31, 2013
Statutory tax rate
Deductible cash distributions
Other
Effective tax rate

28

Nomura Real Estate Master Fund

36.59%(36.51)0.05
0.13%

Nomura Real Estate Master Fund29

12. FINANCIAL INSTRUMENTS
Overview(1) Policy for Financial Instruments
	Upon acquisition of property-related assets, the Company may raise funds through certain financing methods including
borrowings, issuance of investment corporation bonds and issuance of investment units. In financing through interestbearing debt, to secure stable financing capability and reduce future risks of rising interest rates, the Company’s
investment policy is to secure longer-term, fixed-rate borrowings with well-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(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 “17. 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
is determined by discounting the sum of its principal and interest payments at a rate reasonably estimated to be applicable to similar fixed-rate debt.
(v) Derivative transactions
		 See “17. Derivatives and Hedge Accounting”.
Note 3: Redemption schedule for cash and bank deposits as of August 31, 2013
Thousands of Yen

Cash and bank deposits
Total

Due within
After one year, After two years, After three years, After four years,
one yearwithin two years within three years within four years within five years¥16,460,088––––¥16,460,088–

	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 whichsurplus funds are deposited.
	The fair value of financial instruments is based on the quoted market price, if applicable. When there is no quoted
market price available, fair value 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 “17. Derivatives and Hedge Accounting” below do not represent the market
risk involved in these derivative transactions.

Fair Value of Financial Instruments
For the period from January 31, 2013 to August 31, 2013
The following table summarizes the carrying value and the estimated fair values of financial instruments as of August 31, 2013.
Thousands of Yen

Fair value(Note 1)

Difference(i) Cash and bank deposits¥16,460,088¥16,460,088–(ii) Short-term debt

(16,500,000)(16,500,000)–(85,600)(86,521)¥921(61,893,000)(62,528,386)

635,386–––(iii) Current portion of long-term debt(iv) Long-term debt(v) Derivative transactions––
Thousands of Yen

Short-term debt

Due within
After one year, After two years, After three years, After four years,
one yearwithin two years within three years within four years within five years¥16,500,000
–
–
–
–

After
five years–

Long-term debt

85,600¥85,600¥85,600¥13,085,600¥12,285,600¥36,350,600

Total¥16,585,600¥85,600¥85,600¥13,085,600¥12,285,600¥36,350,600

13. INVESTMENT AND RENTAL PROPERTIESThe Company owns leasable logistics facilities and leasable retail facilities (including land) in Greater Tokyo area and otherareas for the purpose of earning revenue from leasing. The following table summarizes the carrying value and the estimatedfair value of these properties.
Thousands of Yen

For the period from January 31, 2013
to August 31, 2013(3) Supplementary Explanation on Estimated Fair Value of Financial Instruments

Carrying value––

Note 4: Redemption schedule for debt as of August 31, 2013	Debts and investment corporation bonds are primarily used to fund the acquisition of property-related assets as well as therepayment of debts and redemption of investment corporation bonds. The Company is exposed to liquidity risk of being
unable to meet its obligations on scheduled due dates. The Company controls and limits such risk by diversifying not only
the financial institutions, but also the type of financing to include the effective use of surplus funds and direct financing
from the capital markets such as issuance of investment units. In addition, the Company is exposed to the market risk
arising from fluctuations in interest rates on its floating-rate debts. However, the effect of such 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 to total 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 fixedrate interest payments.

(Note 1)–

After
five years

Carrying value
Balance at beginning of the period
Amount of increase (decrease) during the period
Balance at end of the period
Fair value at end of the period–¥229,489,317
229,489,317¥239,326,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2:	The major increase in the carrying value during the period ended August 31, 2013 was mainly due to the acquisition of 54 properties including Landport
Urayasu (total 230,163,004 thousand yen) and decrease in the carrying value during the period ended August 31, 2013 was mainly due to depreciation (total
698,513 thousand yen).
Note 3: The fair value as of August 31, 2013 represents the sum of the appraisal values estimated by external real estate appraisers.

The real estate rental revenues and expenses for the fiscal period ended August 31, 2013 are presented in “15. Breakdown ofReal Estate Rental Revenues and Expenses.”

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.

30

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund3114. SEGMENT INFORMATION

16. LEASESFor the period from January 31, 2013 to August 31, 2013

The future minimum rental revenues from tenants under non-cancelable operating lease of properties as of August 31, 2013
are summarized as follows:

Segment Information

Thousands of Yen

Since the Company has been engaged in the real estate leasing business as a single segment, segment information has been omitted.

As of August 31, 2013

Related Information

Due within one year

1. Information about products and services

Due after one year	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¥13,165,343
36,701,720
Total¥49,867,063

17. DERIVATIVES AND HEDGE ACCOUNTING
Derivative transactions as of August 31, 2013

(1) Revenues		Since more than 90 percent of the total operating revenues were generated from external customers in Japan,
geographical breakdown of revenues has been omitted.

(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:
Thousands of Yen(2) Property and equipment
		Since more than 90 percent of the total property and equipment on the balance sheet are located in Japan, geographicalbreakdown of property and equipment has been omitted.
3. Information about major clients	Since no single external client represents 10 percent or more of the Company’s total operating revenues, information
about major clients has been omitted.

15. BREAKDOWN OF REAL ESTATE RENTAL REVENUES AND EXPENSES
Real estate rental revenues and expenses for the fiscal period ended August 31, 2013 consist of the following:

Hedge accounting
methodType of derivative
instruments

Main hedged
itemInterest-rate swaps:
Special treatment ofReceived/floatinginterest-rate swaps
and paid/fixedLong-term debt

Notional amount

Fair
value

Due after
one year
55,189,300

55,146,500

Method used for
determining fair
value

(*)

*Since the derivative financial instruments qualifying for the special treatment of interest-rate swaps are accounted for as one transaction together with their hedged
item, long-term debt, the fair value of these derivatives is included in that of related long-term debt (see “12. Financial Instruments (Note 2) (iii) Current portion of
long-term debt and (iv) Long-term debt”).

Thousands of Yen

Real estate rental revenues
Rental revenues
Rental revenues
Common area charges
Other rental revenues

3,392,016
3,291,204
100,812291,114

Parking revenues

34,578

Incidental income

253,525

Other miscellaneous revenues
Real estate rental expenses

3,011
1,258,501

Property management costs

131,204

Property management fees

60,336

Utility expenses

223,476

Casualty insurance

7,386

Repairs and maintenance

58,105Land rents

30,673

Depreciation

698,513

Other rental expenses

48,808

Real estate rental profits32

For the period from January 31, 2013
to August 31, 2013
¥3,683,130

Nomura Real Estate Master Fund

¥2,424,629

Nomura Real Estate Master Fund33

Independent Auditor's Report

Investor Information
Structure
Asset Management Company
Nomura Real Estate
Asset Management Co., Ltd.

Asset Custodian
Sumitomo Mitsui Trust Bank, Limited

Nomura Real Estate Master Fund, Inc.

Asset Custody Agreement
Unitholders’ Meeting

Asset Management
Agreement

General Administrator(Organizational Administration, Accounting)
Administrator of Unitholders’ Register
Mitsubishi UFJ Trust and Banking Corporation

Board of Directors' Meeting
Information Provision Agreement

Executive Director

Takashi Kataoka

Supervisory Director

Sadahiko Yoshimura

Supervisory Director

Shuhei YoshidaTransfer Agency Agreement andGeneral Administration Agreement

AuditorErnst & Young Shin Nihon LLC

Information Provider
Nomura Real Estate Development Co., Ltd.

IR Calendar
Commencement of payment of distribution
Dispatch of Asset Management Report(mid-November)

Announcement of financial results(mid-April)

January

February

March

Fiscal period end(end of February)

April

May

June

Commencement of payment of distribution
Dispatch of Asset Management Report(mid-May)

Breakdown of Unitholders
Foreign corporations and individuals

Other domestic corporations
Financial institutions(including financial instruments
business operators)

234,342 units 14.1%
225,459 units 13.5%
548,633 units 32.9%

Individuals and others

656,826 units 39.4%

July

SeptemberAugustFiscal period end(end of August)OctoberNovember

DecemberAnnouncement of financial results(mid-October)Top 10 Unitholders
Unitholder
1 Japan Trustee Services Bank, Ltd.
(Trust Account)2 Nomura Real Estate Development Co., Ltd.
3 The Nomura Trust and Banking Co., Ltd.
(Trust Account)
4 Trust & Custody Services Bank, Ltd. (Securities
Investment Trust Account)
5 Nomura Bank Luxembourg SA
6 The Master Trust Bank of Japan ,Ltd.
(Trust Account)
7 The Gibraltar Life Insurance Co., Ltd.
(J-REIT Account)
8 Credit Suisse Securities (Europe) Limited PB
Omnibus Client Account
9 The Bank of New York, Non-Treaty JASDEC Account10 The Bank of New York Mellon as Agent BNYM. AS
EA Dutch Pension Omnibus 140016
Total

Units heldShare

199,271

11.97%

87,8205.27%

73,6594.42%

73,187

4.39%

50,671

3.04%

48,522

2.91%

15,2500.92%

13,442

0.81%

11,2150.67%

10,7580.65%

583,795

35.06%

Note: The figures are based on data as of August 31, 2013.

34

Nomura Real Estate Master Fund

Nomura Real Estate Master Fund35