9th Fiscal Period
Semi-Annual Report
September 1, 2019 to February 29, 2020
Securities Code: 3462

Nomura Real Estate Master Fund, Inc.
8-5-1 Nishi-Shinjuku, Shinjuku Ward, Tokyo
https://www.nre-mf.co.jp/en/Driving theMarket as
One of Japan’s
Largest REITs
CONTENTS
Message from the Managementp. 3

To Our Unitholders / Performance Highlights

Topicsp. 5

Top Interview

Management Strategy

p. 9

Track Record of Growth since Incorporation/New Acquisitions (3rd Public Offering)/
Internal Growth

ESG Measures

p. 19

ESG Measures

Financing Statusp. 21

Financing Status/Financial Statements Highlights/Market Review

Portfolio

p. 25

Portfolio Analysis/Portfolio Gallery

Information

p. 31

Distribution Policy/Structure and Organization/Investor Information

Financial Section
Balance Sheet
Statement Of Income And Retained Earnings
Statement Of Changes In Net Assets
Statement Of Cash Flows
Notes To Financial Statements
Independent Auditor’s Reportp. 35

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Information

Financial Section

Message from the Management
PERFORMANCE HIGHLIGHTS

NMF will strive toincrease unitholder value
by securing stable income
over the medium to longterm and ensuring thesteady growth of assets
under management.
Shuhei Yoshida Executive Director
Mineo Uchiyama Supervisory Director
Koichi Owada Supervisory Director
Mika Okada Supervisory Director(Note)

8th Fiscal Period

Cash Distribution
per Unit

In the ninth fiscal period, we have promoted internal growthon the back of an ongoing strong leasing market centering on
the office sector as well as achieved steady external growththrough the acquisition of properties developed by theSponsor through capital increase by the third public offering
since its incorporation.

¥3,279¥3,317

Operating Revenues¥36,617¥36,927¥38,452

Net Income¥11,690¥12,188¥13,018

Total Assets¥1,164,767¥1,193,471—

Net Assets¥600,910¥627,868

million—¥132,146¥133,158—of net income)Net Assets per Unit

As a result, at the end of the ninth fiscal period, our portfolio
comprises 294 properties with a total acquisition price of¥1,031.0 billion. Operating revenues totaled ¥36,927 million,
operating profit reached ¥14,673 million, and net income
came to ¥12,188 million. Accordingly, the per-unit distribution
for the ninth fiscal period came to ¥3,279.
In the aforementioned public offering, by acquiring fiveproperties with total acquisition price of ¥19.7 billion during
the ninth fiscal period and four properties with total acquisition
price of ¥20.6 billion during the following tenth fiscal period, allof which were relatively new and highly value-added properties
developed by the Sponsor, we have improved the portfolio
quality, while achieving growth in distribution from the tenthfiscal period onward and reduction of the ratio of interestbearing liabilities to total assets.
Furthermore, two properties of the properties acquired,
PROUD FLAT Shibuya Tomigaya and Landport HigashiNarashino, were acquired through redevelopment andreacquisition type SPR (Strategic Property Replacement) with
the Sponsor. We were able to acquire high-quality properties
after redevelopment with conversion of property use, taking

full advantage of the characteristics of NMF as a diversified
REIT which was not limited to the use of investment property
and the diverse development capabilities of the Sponsor as acomprehensive real estate developer.
In our activities for ESG (Environmental, Social andGovernance) issues, our sustainability promotion system andother aspects were highly evaluated, and in January 2020, we
became the first J-REIT to be certified and registered under the"EcoAction 21," Japan's original environmental management
system (EMS) established by Ministry of the Environment. In
addition, Principles for Financial Action for the 21st Century
Secretariat selected our certification and registration for
EcoAction 21 as the most excellent efforts in fiscal year 2019,
and Nomura Real Estate Asset Management Co., Ltd., to which
NMF entrusts its asset management, received the "Minister ofthe Environment Award for Principles of Financial Action forthe 21 Century."Moreover, in February 2019, we established our ESG
materiality issues that were of high importance to beaddressed by NMF, as well as targets and key performanceindicators (KPI) for each materiality. In January 2020, we
reviewed them and further raised targets and set new KPIs.
J-REIT market has been adversely affected by COVID-19
outbreak, however, we remain strongly committed to enhance
the fund performance and manage the fund’s assets with theaim of living up to our unitholders’ expectation and trust. We
ask for your continued support and encouragement.

10th Fiscal Period(forecast)*¥3,209(including distribution in excess

millionmillionmillionmillionNomura Real Estate Master Fund, Inc.

To Our Unitholders

9th Fiscal Period

millionmillionmillionmillionmillion*T he above forecast distribution is calculated based on certain assumptions as disclosed in “SUMMARY OF FINANCIAL RESULTS (REIT) For the 9th
Fiscal Period Ended February 29, 2020,” published April 14, 2020. As such, the actual distribution may differ from this forecast due to future property
acquisitions or sales, changes in the real estate market, tenant changes or other changes in the circumstances surrounding NMF. The distribution
forecast is not a guarantee of distributions.

Operating Revenues and Net Income(Millions of yen)

Operating Revenues

Cash Distribution per Unit

Net Income(Yen)

40,000

3,500

3,279

30,000

3,317

3,209
3,128
20,000

3,000

3,028

3,037

3,047

3,084

10,0000

0

3rd FP 4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP

3rd FP 4th FP 5th FP 6th FP 7th FP 8th FP 9th FP 10th FP(Forecast)(Forecast)(Note) Mika Okada is her maiden name and the name she uses professionally. The name recorded on her family register is Mika Furusawa.

3

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

4

Topics

Message from the Management

Management Strategy

ESG Measures

Financing Status

Portfolio

Information

Financial Section

Top Interview
by strong demand in the leasing market in recent years, wehave successfully increased rents through tenant replacement
and rent revision negotiations, mainly in the office building
sector and the residential sector. During the 9th fiscal period,
these sectors have continued to drive our internal growth,Interview on
Growth Strategy

Q3.

Hiroshi Ishigooka

Executive director
Head of the NMF Investment Management Group,
Nomura Real Estate Asset Management Co., Ltd.

Q1.

Can you tell us about your ongoing asset management strategy?

NMF had promoted enhancement of the portfolio’s quality byconducting strategic property replacements (SPRs) for
approximately two years since its establishment throughSeptember 2017. Meanwhile, up to now, we have also
conducted asset management that places more emphasis on
the growth of cash distributions through our endeavors forbetter profitability of the entire portfolio (internal growth) by
upward revision of rents for owned assets and othermeasures, as well as through vigorously selective investments

in high-quality assets, such as acquisition of Sponsordeveloped properties by way of three public offerings
conducted in February 2018, February 2019 and December
2019. As a result, we were able to increase distribution perunit by ¥232, or up 7.6%, over two years from ¥3,047 (5thfiscal period ended February 2018) to ¥3,279 (9th fiscal period
ended February 2020). Based on such asset management
strategy, NMF will aim to achieve continued growth of cash
distributions.

DPU (¥) and LTV (%)■ Forecast ■ Results

3,037
2,950

44.6

LTV

Distribution growth phase +7.6% in 2 yrs (+3.8% per annum)

3,020

3,047
44.6

3,081

3,084
44.4

3,111

3,128

3,182

3,209

2nd PO
44.5

3,248

3,279

Q2.

Feb-18Aug-18NOMURA REAL ESTATE MASTER FUND, INC.

Through this public offering, we have also succeeded inenhancing the portfolio quality, growing cash distributions
during the 10th fiscal period and beyond, and reinforcing thefinancial base. The following three points are essential to the
public offering.
}Acquired recently built and high value-added brand-nameproperties developed by the Sponsor, such as officebuildings and residential facilities located in the Greater
Tokyo area, which have promising upside potential}Acquired two high-quality properties (PROUD FLAT
Shibuya Tomigaya and Landport Higashi-Narashino) after

Aug-19(August 31, 2019)

Feb-20public offering in the fiscal period. As a result, the portfolio
comprises 294 properties or ¥1,031.0 billion as of the end of
the 9th fiscal period.
As for improving the profitability of owned properties, backed

their redevelopment, which involved conversion ofproperty use based on location characteristics, taking fulladvantage of our characteristics as a diversified REIT
investing in unrestricted asset types and the diverse
development capabilities of the Sponsor}Increased forecast distribution for the 10th fiscal period
by about 3.4% above actual distribution in the 8th fiscal
period, while pushing down the interest-bearing debt
rate by 0.8 percentage points
Since its establishment, NMF has promoted external growthcentered on the acquisition of such high-quality properties
developed by the Sponsor, and as a result, following theacquisition of these new properties, four brands (PMO, GEMS,
Landport and PROUD FLAT) now account for 28.5% of ourentire portfolio (based on acquisition price).
Partly because this growth strategy was highly appreciated,
the latest public offering attracted strong demand that wasapproximately 9.5 times larger than the planned issue
amount. We believe that, following on from the first andsecond public offerings, the current public offering has also
been well received by investors.

Change in indicators
End of previous period

How do you look back on the 9th fiscal period ended February 2020?

With regard to the asset management status for the 9th fiscal
period, let me explain our asset acquisition and enhanced
profitability of owned assets. NMF acquired five Sponsordeveloped properties totaling ¥19.7 billion by way of the third5

Feb-19We announced a public offering on December 5, 2019, thethird since our establishment. With this arrangement, we
acquired a total of nine brand-name properties (amounting to¥40.4 billion) developed by Nomura Real Estate Development,
the Sponsor; of these, five properties (¥19.7 billion) wereacquired during the 9th fiscal period and four properties(¥20.6 billion) were acquired after the end of the 9th fiscal
period. The J-REIT market, which had remained firm since theprevious public offering, was viewed as a good opportunity toacquire capital. A distinguishing feature was the unusual
timing of the public offering.

43.9

1st PO

Aug-17Can you explain to us about the third public offering?

3rd PO

42.8

with tenant replacements helping us achieve an increase inrents of 17.6% in the office building sector and 4.5% in theresidential sector mainly in the central Tokyo area. NMF willcontinue its focus on internal growth going forward.

Acquisition

After PO
(March 31, 2020)

Asset size

¥1,011.2 bln¥40.4 bln

¥1,051.6 bln

Number of properties

289

9

298

Average building age

18.8 yrs

1.1 yrs

18.6 yrs

Greater Tokyo area ratio

82.0%

100.0%

82.7%

Average NOI yield

5.1%

4.5%

5.2% (Note 1)

Unrealized gain
(Unrealized gain per unit)¥124.0 bln(¥27,277)¥5.8 bln(¥35,098)¥141.2 bln (Note 2)(¥29,948)

LTV ratio

43.9%

—

43.1% (-0.8%) (Note 3)Distribution per unit

Aug. 2019 FP results¥3,209Feb. 2020 FP results¥3,279 (+2.2%)

Aug. 2020 FP forecast¥3,317 (+3.4%)(Note 1) Average NOI yield is calculated based on February 2020 FP results. For properties acquired at the public offering, it is calculated based on appraisal value.
(Note 2) Unrealized gain includes the increase in unrealized gain on the subsequent appraisal acquired in February 2020 FP.
(Note 3) LTV ratio reflects the balance sheet of February 2020 FP.

NOMURA REAL ESTATE MASTER FUND, INC.

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Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

SPR

Information

Financial Section

Impact of COVID-19 on NMF’s Property Portfolio
No significant impact identified on over 80% of NMF’s investment sectors. The ratio of variable rent in rent revenues is approximately 0.7%

Disposition summary
Former Mitsubishi Motors Shibuya (Land)
Retail Facilities (Residential areas)

Disposition price¥1,720 mln

Appraisal value¥1,720 mln

Gain on sale¥122 mln

1
2
3

NMF receives a notice ofcancellation from tenant

PROUD FLAT Shibuya Tomigaya
Residential

NMF disposes ofproperty on the premiseof redevelopment taking
advantage of its location
NMF acquires property
by exercising preferential
negotiation rights

Effects of SPR

Retail Facilities (Residential areas)

Elimination of the risk of decrease
in income due to tenant move-out

Ratio

Office45.5%

Residential

19.3%

Logistics

16.9%

Retail Facilities (Near Stations)

11.4%

Retail Facilities (Residential Areas)

5.7%

Hotels0.6%

Impact of COVID-19
There has been no significant impact on property management, such as thecurrent leasing activities and rent revision, etc. caused by the spread of COVID-19
infection.

82.3%(Note)

Decrease in variable rent as a result of a fall in sales for retail and hotel facilities• Sales fell mainly at restaurants due to self-restraint from going out. (However, rent at GEMS is based on a fixed-rent)•M ost of stores excluding some in UCW Osaka has been closed due to the closure of USJ (Scheduled from Feb. 29 tomid-May)• Demand for accommodation has decreased due to self-restraint from going out and a sharp decline in number offoreign visitors to Japan (Decline in occupancy rate and ADR).

17.7%

Note) Incudes the share of other sector.

Acquisition price¥3,960 mln

Appraisal value¥4,440 mln
4.6%

NOI yield
Unrealized gain (Note)(Unrealized gain ratio)

Former Ito-Yokado Higashi-Narashino Store

SectorAcquisition summary¥480 mln(12.1%)

Variable-rent ratio
to the total rent
revenue (Total
actual results forthe 7th and 8th FP)

Landport Higashi-Narashino■ Total rent revenue (fixed rent)■ Total variable rent revenue

Fixed-rent ratio

99.3 %

Variable rent revenue breakdown■ UCW■ Hotel Vista Sapporo Odori■ Other Properties

Variable-rent
ratio

0.7%

91.1%

(¥477 mln/yr.)(85.7%: Universal CityWalk Osaka)(5.3%: Hotel Vista Sapporo Odori)Impact of COVID-19 on earnings

Logistics

10th Fiscal Period: Some impact from COVID-19, but no change to per-unit distribution due to progress of internal growth and other factors
11th Fiscal Period: Earnings forecasts from September 2020 assume no significant impact from COVID-19

Increase in value as a result ofredevelopment (conversion ofproperty use)
Securing opportunities for external
growth through sales agreementswith preferential negotiation rights

Disposition price¥664 mln

Appraisal value¥649 mln

Gain on sale

¥15 mln

NOI yield

Building age

22.6 yrs

Unrealized gain (Note)

Q4.

Acquisition price¥11,872 mln

Appraisal value¥15,700 mln(Unrealized gain ratio)

5.7%¥3,828 mln(32.2%)Can you tell us about the impacts of the novel coronavirus (COVID-19)?

Amid the global challenge of preventing the spread of thenovel coronavirus disease (COVID-19), a state of emergency
was declared in Japan on April 7, and day by day, uncertainty
over the economic future has been intensifying, fueled bygovernment requests for self-isolation and the stagnation of
corporate activity.
The asset management company is also working hard toprevent the spread of the disease, such as urging all officers
and employees to work from home as a general rule, and ispraying for the swift resolution of the disease.

7<Policy for impact of COVID-19 on earnings>
In the event there is an additional temporary decrease in revenues in relation to
COVID-19, distributions in excess of earnings will be made, up to the amount ofinternal reserves (Note)

NOMURA REAL ESTATE MASTER FUND, INC.

The percentage of retail and hotel facilities expected to be
directly affected by COVID-19 is approximately 17.7% of NMF’s
entire portfolio, while the percentage of variable rent linked tosales and so on will make up about 0.7% of all rent revenue.
Nevertheless, it is our view that we must pay close attention to
the developments of the coronavirus for the time being. As
we promote operations, we will continue to keep a carefulwatch on changes in the economic situation and on theimpact on the properties we own.

Internal reserves (as of February 29, 2020)¥3.42 billion (¥725/unit)(Note) Refers to the amount of internal reserves equivalent to the gains on sales arising from past property sales.

Q5.

ESG has attracted attention in recent years. Can you describe yourinitiatives in this area?

NMF acknowledges that realizing a sustainable society isessential for its continuous growth, and has long promoted
management of its assets with considerations given to ESG
from a variety of aspects. Our activities are wide-ranging,including more efficient energy use through asset
management, such as investments in properties having low
environmental burdens plus environmental and energysaving measures at owned properties, as well as initiatives oncontributions to local communities. In January 2020, partly inrecognition of NMF’s sustainability policies and systems, webecame the first J-REIT to be certified and registered for“EcoAction 21,” Japan’s original environmental management
system (EMS) established by the Ministry of the Environment.
These efforts were also recognized by the secretariat of the
Principles for Financial Action for the 21st Century as an
example of best practice in fiscal 2019, with the Minister of theEnvironment Award being given to Nomura Real Estate AssetManagement Co., Ltd., to which NMF entrusts its asset
management. Furthermore, in order to promote these
initiatives even more proactively and in a more specificmanner, in February 2019, NMF established the ESG
materiality issues comprising eight highly important items

that NMF should address. In January 2020, following a reviewof the materiality issues, we raised the targets further and set
new Key Performance Indicators (KPIs). NMF will continue topromote ESG-related initiatives, and work to resolve theseissues while disclosing ESG information including onmateriality issues.

(Norio Ambe, President & CEO, Nomura Real Estate AssetManagement Co., Ltd. (left) and Shinjiro Koizumi, Minister of theEnvironment (right) at the award ceremony)(Note) Norio Ambe became Chairman as of Apr. 1, 2020.

NOMURA REAL ESTATE MASTER FUND, INC.

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Message from the Management

Management Strategy

TopicsESG Measures

Financing Status

Portfolio

Information

Financial Section

Track Record of Growth since Incorporation
Improved portfolio quality through property replacement taking advantage of the Sponsor’s support and achieved steady increasein distributions.
Incorporation

Feb. 2020 FP

After PO (Note 2)

294

298

Number of Properties

257

Ratio of top 10 Properties

26.8%

22.7%

22.3%

Ratio of Greater Tokyo area

79.8%

82.4%

82.7%

Average building age

19.3 yrs

18.9 yrs

18.6 yrs

DPU (Note 1)¥2,656

Acquisition of high-quality properties

Disposition of less competitive

mainly developed by the Sponsor

properties due to building age, etc.

¥3,279(+23.5%)

1,031.0

1,011.2
932.8

927.3

922.5

955.9

960.3

1st public offering

783.6

792.6

1,051.6

2nd public offering

3rd public offering

12 Properties

9 Properties¥57.4 bln

¥40.4 bln

10 Properties

784.6¥33.4 bln

Merger with TOP REIT, Inc.

Main acquired properties(23.8 years without SPR) (Note 3)

19 Properties¥137.4 bln

PMO Tamachi
HigashiGEMS
Shinbashi

GEMS Namba

PMO
Hotel Vista
Nihonbashi Sapporo Odori
Mitsukoshi-mae
PMO Akihabara Kita
Summit Store
Honamanuma
NEC Head
Office Bldg.

Harumi Triton
Y&Z

PF Sangen Jaya II

220.9

237.4

270.8

Serenite
Shinsaibashi
Grande

330.9

350.6

PROUD FLAT Shibuya
Tomigaya

371.3

Total Acquisition Price

279.9

71 properties¥371.3 bln

181.9

9.0

-34.1

■ Asset Size (¥bln)■ Total Acquisition Price (¥bln)■ Total Disposition Price (¥bln)

Incorporation(Oct-15)

33.6

Total Disposition Price

-34.1
-81.5

Feb-16Aug-16

Feb-17Aug-17-105.0-105.0-110.3-110.3-110.3-110.3

Feb-18Aug-18

Feb-19Aug-19Feb-20After PO

35 properties¥110.3 bln(Note 1) Distributions for February 2016 FP are calculated on a six-month basis for 152 operating days.
(Note 2) “After PO” is the time as of the end of March 2020.
(Note 3) It is an average building age without taking into account the effect of property acquisition and disposition from the original portfolio at incorporation until the end of March 2020.

9

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

10

Message from the Management

Management Strategy

TopicsESG Measures

Financing Status

Acquisition Date

OfficePortfolio

Information

Financial Section

New Acquisitions (3rd Public Offering)
Property Name

SectorAcquisition
Appraisal Appraisal NOI
Floor area (m2)
Price (¥/mln) Value (¥/mln)
Yield (%)

Location

Month ofcompletion

PMO Akihabara Kita

OfficeTaito Ward, Tokyo

8,450

8,930

3.8

6,367.04

Dec, 2018

Jan 7, 2020

PMO Higashi-Shinbashi

OfficeMinato Ward, Tokyo

4,730

5,180

3.8

3,430.06

Apr, 2018

Jan 7, 2020

PMO Hamamatsucho

OfficeMinato Ward, Tokyo

4,380

4,830

3.7

2,872.41

Nov, 2018

Mar 25, 2020

GEMS Sangenjaya

Retail (Near Stations) Setagaya Ward, Tokyo

1,815

1,840

4.0

1,176.76

Apr, 2018

Mar 25, 2020

Landport Higashi-Narashino

Logistics

Narashino City, Chiba

11,872

15,7005.7

61,573.49

Jul, 2019

Mar 2, 2020

PROUD FLAT Shibuya Tomigaya

Residential

Shibuya Ward, Tokyo

3,960

4,440

4.6

5,079.46

Feb, 2019

Jan 7, 2020

PROUD FLAT Miyazakidai

Residential

Kawasaki City

1,390

1,490

4.7

2,473.04

Feb, 2018

Jan 7, 2020

PROUD FLAT Asakusabashi III

Residential

Taito Ward, Tokyo

1,230

1,260

4.4

1,575.38

Jul, 2018

Jan 7, 2020

PROUD FLAT Togoshi-Koen

Residential

Shinagawa Ward

2,580

2,630

4.3

3,354.13

Nov, 2018

Mar 10, 2020

40,40746,3004.5

87,901.77

Total

RetailPMO Hamamatsucho

GEMS Sangenjaya

Located in Minato-ku. Good location within one-minute walk fromstation in “Hamamatsucho” area where redevelopment is underway

Located in “Sangen-jaya,” where stable demand forrestaurants can be expected on both weekdays and weekends.

The Property is a one-minute walk from “Hamamatsucho” Station on the JR
Yamanote and Keihin-Tohoku Lines, and has access to three stations on fivelines, including “Monorail Hamamatsucho” Station on the Tokyo Monorail and“Daimon” Station on the Toei Asakusa and Oedo Lines. Accordingly, theProperty is excellent for convenient transportation to major business areas incentral Tokyo. The Property is also located near JR “Tokyo” Station and JR“Shinagawa” Station, where the Shinkansen stops at. Therefore, high demand
from tenants is expected, including the Tokyo branches of manufacturers andcompanies headquartered in rural areas. In addition, it has excellent access to
Haneda Airport and demand from foreign companies is high. Accordingly,
stable demand from tenants can be expected. Various redevelopment projects
are underway in the vicinity of “Hamamatsucho” Station and the conveniencefor businesses is expected to be strengthened further in the future.

The Property is a two-minute walk from “Sangen-jaya” Station on the Tokyu
Railways Den-en-toshi and Setagaya Lines, has excellent visibility due to its
location at an attractive corner along a flourishing Chazawa Street. In addition,transportation is excellent with the Property being a five-minute via train to“Shibuya” Station, which is the second stop from “Sangen-jaya” Station. In thevicinity of “Sangen-jaya” Station, there is a commercial area visited by residents
along the railway line and because of its high convenience for daily living, suchvicinity is highly valued as a residential area as well and stable demand can be
expected regardless of whether it is a weekday or holiday. The composition oftenants is highly diverse, including flourishing stores associated with
Sangen-jaya, full-scale specialty stores and the new face stores that opened in
the area for the first time. The Property can respond to diverse needs.

Acquisition track record of Sponsor-developed properties (Note 1)(¥bln)

350■ Total acquisition price for 4 brands since incorporation (left) ■ Total acquisition price for 4 brands at incorporation (left)
The ratio of 4 brands (PMO/GEMS/Landport/PROUD FLAT) (right)

300
250
200
150

131.8
16.8%

135.5
17.1%

149.6
19.1%

160.4
17.2%

172.2
18.6%

183.6
19.9%

213.4
22.3%

213.4
22.2%

259.6
25.7%

300.0
28.5%

(%)

30

25

20

100

15

50
0

10

Incorporation(October 2015)

Feb-16Aug-16

Feb-17Aug-17

Feb-18Aug-18

Feb-19Aug-19After PO

(Note 1) The ratio of 4 brands is the ratio of the total acquisition price for the 4 brands to the total acquisition price for the entire portfolio as of the relevant time.

Office11

Logistics

PMO Akihabara Kita

PMO Higashi-Shinbashi

Landport Higashi-Narashino

Large-size PMO with the standard floor area of over 200 tsubo
located in “Akihabara” area

Located in Minato-ku. High visibilityp alongside Dai-ichi Keihin
and easy access to four stations on six lines

High performance logistics facility satisfied every need of “logistics function, location, security and employment environment”

The Property is a seven-minute walk from “Akihabara” Station on the JR
Yamanote, Sobu and Keihin-Tohoku Lines, the Tokyo Metro Hibiya Line, and the
Tsukuba Express of Metropolitan Intercity Railway Company, and a six-minute
walk from “Suehirocho” Station on the Tokyo Metro Ginza Line. Accordingly,
with access to two stations on six lines, the Property is excellent for convenienttransportation to major business areas in central Tokyo. The area surrounding“Akihabara” station, where the Property is located, is concentrated with thehead offices of major corporations and corporate groups, the Tokyo branchesof regional enterprises and companies engaged in the chemical and textile
industries. On the other hand, in and after 2005, large-scale office buildings
were supplied through redevelopment, and IT-related companies engaged insoftware development moved in, improving the area’s reputation as an officearea, and stable demand from a wide range of tenants can be expected.

In addition to being easily visible along Dai-ichi Keihin (National Road No. 15),
the Property is a five-minute walk from “Daimon” Station on the Toei Oedo andAsakusa Lines, a six-minute walk from “Onarimon” Station on the Toei Mita
Line, with access to four stations on six lines, including “Hamamatsucho”
Station on the JR Yamanote and Keihin-Tohoku Lines and “Monorail
Hamamatsucho” Station of the Tokyo Monorail. Accordingly, the Property is
excellent for convenient transportation to major business areas in central
Tokyo. The Property is also located near JR “Tokyo” Station and JR “Shinagawa”
Station, where the Shinkansen stops at. Therefore, high demand from tenants
is expected, including the Tokyo branches of manufacturers and companies
headquartered in rural areas. In addition, it has excellent access to Haneda
Airport and demand from foreign companies is high. Accordingly, stabledemand from tenants can be expected.

NOMURA REAL ESTATE MASTER FUND, INC.

The Property is located within an approx. 30 km area to the center of Tokyo. In addition to its capability of delivery to a wide-area of the Tokyo metropolitan area, it
also has access to Narita International Airport, Haneda Airport and other transportations; thus, it is located in a fit distribution place that can meet diverse logistics
needs. Since the number of the working age population in the vicinity of the Property is high and it is also possible to commute on foot from “Yachiyodai” Station on
the Keisei Electric Railway Main Line, the Property gives a high advantage in securing labor force. The Property is a large-scale property with a total floor space ofmore than 60,000 sqm and designed for improved operational efficiency by adopting a ramp way, etc.. In addition, security gates using IC cards were adopted,
resulting in enhanced security.

NOMURA REAL ESTATE MASTER FUND, INC.

12

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Located in a quiet residential area surrounded by greenerywithin walking distance of “Shibuya”

Located at “Miyazaki-dai” with rich greenery cityscape andhigh convenience

The Property is located within walking distance of the Shibuya area, which is one
of Japan’s leading commercial areas. Using “Yoyogi-Hachiman” Station on the
Odawara Line of Odakyu Electric Railway, “Yoyogi-Koen” Station on the Tokyo
Metro Chiyoda Line and other nearby stations, it has an easy access to major
business and commercial areas, such as Shinjuku, Shibuya, Akasaka andOtemachi, and it offers excellent transportation. Along the road from “YoyogiHachiman” Station and “Yoyogi-Koen” Station, the nearest stations from theProperty, there are restaurants and retail stores. On the east side of Yamate
Street, shopping districts were expanded, making it highly convenient for people
to live in the area. On the northeast side of the Property, there is “Yoyogi Park” andthe Property is located in an area where people can enjoy the greenery in addition
to urban-type living convenience, and therefore demand from single workers and
DINK populations who seek superior living environments can be expected.

The Property is a two-minute walk from “Miyazaki-dai” Station on the Tokyu
Railways Den-en-toshi Line, and by using the Tokyo Metro Hanzomon Line,
which has direct service to, among other stations, Futako-Tamagawa andShibuya, the Property offers direct access to Omotesando and Otemachi. It alsooffers excellent convenience for commuting to work or school, and going out
on holidays. The area around the Property is rich in greenery. In addition, theProperty has an abundance of convenient facilities necessary for daily life, suchas supermarkets and drugstores, the area has a highly convenient and quiet
living environment as a result of planned urban development unique to “Tokyu
Tama Den-en City,” and demand from the single working population can be
expected.

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

3

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

2

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

4

Places that stimulate employee
motivation and communication,
fostering enhanced productivity

NOMURA REAL ESTATE MASTER FUND, INC.

Location

Completion(Planned)

StatusChuo-ku, Tokyo

2016/6

Operating

Chiyoda-ku, Tokyo

2017/5

Operating

3 PMO Nishi-Shinjuku

Shinjuku-ku, Tokyo

2019/6

Operating

4 PMO Kanda-Manseibashi Plan

Chiyoda-ku, Tokyo

2020/1u/c

8 properties

5 PMO Hamamatsucho Daimonmae Minato-ku, Tokyo(2020/7)u/c

6 PMO Shibuya 3-chome

Shibuya-ku, Tokyo(2020/8)u/c

7 PMO Kanda-Iwamotocho 2-chome Chiyoda-ku, Tokyo(2021/1)

u/c

8 PMO Kojimachi

Chiyoda-ku, Tokyo(2021/3)

Planning

11 properties

Landport offers advanced functionality to meetthe needs of the changing logistics environmentand diverse tenants.
Designed for optimized, efficient logistics toenhance tenant satisfaction.

34 properties

PROUD FLAT is developed on locations optimallysuited for urban rental housing selected byleveraging the Nomura Real Estate Group’s
information network and know-how related tohousing development and sales.
Quality control and proper operations andmanagement are ensured utilizing Nomura Real
Estate Group’s proprietary rental housing complex
design standards and quality control inspection
guidelines.

9 Minato-ku Plan 1

Minato-ku, Tokyo(2022/9)

Planning

10 Chuo-ku Plan 1

Chuo-ku, Tokyo(2023/3)

Planning

11 Minato-ku Plan 2

Minato-ku, Tokyo(2025/9)

Planning

12 Chiyoda-ku Plan

Chiyoda-ku, Tokyo(2022/5)

Planning

13 PMO Honmachi West Plan

Osaka-shi, Osaka(2022/2)

Planning

14 Chuo-ku Plan 2

Chuo-ku, Tokyo(2023/4)

Planning

15 PMO Meguro Plan

Meguro-ku, Tokyo(2023/10)

Planning

16 PMO Ikebukuro Plan

Toshima-ku, Tokyo(2023/11)

Planning

GEMS (Retail)

GEMS Jingu-mae

GEMS Sakae

Name

Location

Location

Completion(Planned)

Status1 Landport Ome II Plan

Ome-shi, Tokyo

2020/2u/c

1 GEMS Jingu-Mae

2 Landport Narashino

Narashino-shi, Chiba

2020/3u/c

2 GEMS Sakae

3 Landport Atsugi Aikawacho (Note 2) Atsugi-shi, Kanagawa

2020/3u/c

4 Landport Shinonome

Koto-ku, Tokyo(2020/5)

5 Landport Koshigaya

Koshigaya-shi, Saitama

6 Landport Ome III

GEMS Kawasaki Plan

Completion(Planned)

StatusShibuya-ku, Tokyo

2018/4

Operating

Nagoya-shi, Aichi

2019/10

Operating

3 GEMS Kawasaki Plan

Kawasaki-shi, Kanagawa(2020/10)

u/c

u/c

4 GEMS Meguro Plan

Meguro-ku, Tokyo(2021/1)

u/c(2021/5)u/c

5 GEMS Roppongi Plan

Minato-ku, Tokyo(2021/4)u/c

Ome-shi, Tokyo(2021/5)u/c

6 Chiyoda-ku Plan

Chiyoda-ku, Tokyo(2022/8)

Planning

7 Landport Ageo

Ageo-shi, Saitama(2022/1)

Planning

7 Shinjuku-ku Plan

Shinjuku-ku, Tokyo

TBD

Planning

8 Landport Tama

Hachioji-shi, Tokyo

TBD

Planning

8 GEMS Meieki 3-chome

Nagoya-shi, Aichi(2022/2)

Planning

9 Upcoming project 1

Tokyo Metropolitan Area

TBD

Planning

10 Upcoming project 2

Tokyo Metropolitan Area

TBD

Planning

11 Upcoming project 3

Tokyo Metropolitan Area

TBD

Planning

Name

13

Name

PMO Kanda-Manseibashi Plan

2 PMO Uchi-Kanda

Landport Ome II

The Property is a two-minute walk from “Togoshi-koen” Station on the Tokyu
Railways Oimachi Line, an eight-minute walk from “Nakanobu” Station on the
Toei Asakusa Line. Using these stations, the Property is excellent for convenienttransportation to access stylish commercial areas, such as Jiyugaoka andFutako-Tamagawa, in addition to the business areas such as Shinagawa,Shinbashi and Gotanda. The “Togoshi-koen Central Shopping District,” which
extends north and south of the nearest station, has an abundance of
convenient facilities necessary for living, and the Property is located in a
low-rise residential district while located close to the station. In addition, in thevicinity of the Property, there is “Togoshi Park” which was built using theremnants of the garden of the shimoyashiki (second house) of the state of
Higo, and the area offers an excellent living environment. Therefore, demand
from single workers and DINK populations who seek convenient living
conditions and superior living environments can be expected.

PMO Shibuya 3-chome

GEMS comprise a variety of restaurants, primarily
in urban areas, with a commitment to quality.
Brightening and enriching the lives of nearby
office workers and residents while proposing newlifestyles.

Landport (Logistics)

The Property is a two-minute walk from “Asakusa-bashi” Station on the JR Sobu
Line and the Toei Asakusa Line, and a seven-minute walk from “Bakurocho”
Station on the JR Sobu Rapid Line. The Property is excellent for convenienttransportation to business areas, such as Akihabara, Tokyo, Nihonbashi and
Shinbashi. The Asakusa-bashi area, where the Property is located, isapproximately 2.5 kilometers from JR “Tokyo” Station and is a metropolitan area
near central Tokyo. While the area gives a feeling that central Tokyo is close to
the area and offers a high level of convenience for daily living, it also has an
excellent living environment that preserves the atmosphere of the Edo period
and provides an opportunity to experience the pleasantness of the waterfront
from the Sumida River Terrace and water buses. Demand can be expectedfrom single workers and DINK populations who prefer to live in close proximity
to working place.

PMO Hamamatsucho Daimonmae

1 PMO Nihonbashi Edo-dori (Note 2)

PROUD FLAT Togoshi-Koen

Located in “Togoshi-koen,” a historic town in Jonan area,
within a two-minute walk from station.
Received GOOD DESIGN AWARD FY2019.

PMO (Office)

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

1

Residential

Located in “Asakusa-bashi” near central Tokyo, where an
atmosphere of the Tokyo past decades survives.

Financial Section

4 Property Brands Developed by the Sponsor

PROUD FLAT Miyazakidai

16 properties

PROUD FLAT Asakusabashi III

Information

Driving Force for External Growth: Sponsor Pipelines (Note 1)

Residential
PROUD FLAT Shibuya Tomigaya

Portfolio(Note 1) Based on NREHD presentation materials for the Consolidated Financial Results for the Third Quarter, FY2020. Properties sold as of April 1 ,2020 has been excluded.
(Note 2) Joint venture project(Note 3) As of the date of this presentation materials, NMF does not intend to acquire properties listed above.

NOMURA REAL ESTATE MASTER FUND, INC.

14

Message from the Management

Management Strategy

TopicsESG Measures

Financing Status

Portfolio

Information

Financial Section

Internal Growth: Management Status
Change in floor area from move-ins & move-outs (tsubo)

Office■ Move-out ■ Move-in

Achieved an increase in average unit rent through tenant replacements and rent revisions (Increased to ¥18,214/tsubo (+0.9%) from
¥18,060/tsubo at the end of previous period.)

Net

5,502

Asset Management Topics for Feb. 2020 FP

The rate of rent increase upon tenant replacement: +17.6%(The rate of rent increase within tenant replacement with rent increase: +18.5%)

The rate of rent increase upon rent revision: +3.4%(The rate of rent increase within rent revision with rent increase: +5.8%)

Flat

Increased

Rent revision
within PMO

2

The rate of rent increase upon rent revision at PMOs: +4.7%(contract renewal included)

3,666

3,439

3,444

2,740

2,326

13

1,776

1,791

2,255

The rent gap is still expanding. (Note 1)
As of Feb. 29, 2020: +9.9% (Up 3.5% from previous FP)

882

721 (Contracted)

0

Amount of change in monthly
rent and rate of change inmonthly rent upon tenant
replacement (Note 2)

Amount of change inmonthly rent and rate ofchange in monthly rent
upon rent revision (Note 2)

Average rate of rent increase within
tenant replacementwith rent
increase+18.5%■ Monthly rent decrease ■ Monthly rent increase

Average rate of rent increase within rent
revision with rent
increase+5.8%■ Monthly rent decrease ■ Monthly rent increase

Monthly rent change rate(¥mln)

(%)

10

20

-1,583Monthly rent change rate(¥mln)

(%)

30

6

25

5

17.6%
8

8
11.4%

6

4

5.8%

7.4%
3

2

7

12

23

20
15

5

4

8

4
5

2
0

0

-1

-2

-1

-4

(1,904)(2,326)(3,666)(5,502)(2,740)(2,255)Aug-17

Feb-18Aug-18

Feb-19Aug-19Feb-20

13

2.4%
10

1.9%

-5

-8

-10

15

17

8

0.6%

-2,272

Aug-19Feb-20-5,456

3

Feb-16(5 months)

Aug-16

Feb-17Aug-17

Feb-18Aug-18

Feb-19Aug-20(Forcast)

0-2-7(40,564)(33,304)(29,427)(21,007)(24,914)(22,830)

Aug-17

Feb-18Aug-18

Feb-19Aug-19Feb-20Rent gaps: +9.9% at the end of Feb. 2020 FP(Increased by +3.5% from previous FP)(¥/tsubo)-2,204-3,662

3.4%

2

Average Rent (¥/tsubo)
19,000

-1
-2

+9.9%

<Feb. 2020 FP>
Tenant replacement effect<Aug. 2020 FP>
Progress on tenant replacement (as of Mar. 31, 2020)

2,255 tsubo in total

Floor area subject to move-out (scheduled):

The rate of rent
increase

1,696 tsubo in total+17.6%<Example>

Upper figures show the subjected floor area,and lower figures show rate of rent increase
upon tenant replacement.

Of the above,
floor area subject
to move-in(scheduled)<Example>

Contracted…721 tsubo
Applied…161 tsubo (Note)

The rate of rent increase+24.2%

882 tsubo
Upper figures show the subjected floor area, and lower figures show rate ofrent increase upon tenant replacement.

Impact by acquisition anddisposition of real estate

18,50018,06018,00017,50017,41917,54817,723

86

18,214

17,15618,301

16,50016,000PMO Akihabara

15,500131 tsubo(+27.0%)0Aug-1715-2,226

1

0

-4

3.3%

(Note 1) It is calculated subject to the properties held by NMF excluding the properties which the entire building leased to one tenant.
(Note 2) Figures in parentheses are the floor area upon tenant replacement and the floor area (Tsubo) subject to rent revision. The change in monthly rent is calculated as the weighted
average of all subjected area. The same applies to the following investment sectors.

17,000-2,469-2,755

4

3.7%

10

7.5%
5.9%

-1,696-3,24016161 (Applied)Feb-18NOMURA REAL ESTATE MASTER FUND, INC.

Aug-18

Feb-19Aug-19Feb-20

NRE Higashinihonbashi Building

506 tsubo(+20.0%)

NRE Nishi-Umeda
Building

56 tsubo(+70.5%)NMF Gotanda Ekimae
Building

213 tsubo(+51.8%)PMO Nihonbashi
Mitsukosi-mae

68 tsubo(+20.0%)

NMF Tenjin-Minami
Building

62 tsubo(+35.5%)(Note) The figure shows floor area for which NMF received an application for occupancy.

NOMURA REAL ESTATE MASTER FUND, INC.

16

Message from the Management

Management Strategy

TopicsESG Measures

Financing Status

Portfolio

Information

Financial Section

Internal Growth: Management Status
Residential

Logistics

Promoting continuous rent increase with a focus on the downtown Tokyo area through move-ins and move-outs.

Completed lease-up of Landport Iwatsuki. Achieved environmental load reduction and rent increase through green lease agreement.

Asset Management Topics in February 2020 FP

Asset Management Topics in February 2020 FP

Change in monthly rent due to move-ins and move-outs orcontract renewal

Achieved rent increase mainly in the downtown Tokyo
area through move-ins and move-outs.

1) Change in monthly rent due to move-ins and move-outs

Rent increase by move-ins/outs in the Tokyo 23 wards:+5.4% (Increased by +1.7% from previous FP)

733 out of 978 units (74.9%) replaced with increased rent
Change in monthly rent +4.5% (+¥4,617 thousand/mo)Name of property

Number of
move-ins/outs

Change inrent (¥)

Change inrent (%)

Type

2) Change in monthly rent duo to contract renewals

Kojimachi Millennium
Garden (Residential)

2¥211,000

34.1%

Family93 out of 1,194 units (7.8%) renewed contract with increased rent
Change in monthly rent +0.4% (+¥488 thousand/mo)

PRIME URBAN Shinkawa

9¥425,400

25.4%

FamilyPRIME URBAN
Nihonbashi Kayabacho

12¥143,000

10.1%

SingleRIME URBAN Ebisu

2¥39,000

10.0%

Compact

Amount of change in monthly rent at move-ins and move-outs■ Amount of change in monthly rent

4,617
2,863

2,500

1,609

1,896

1.3

1.9

Aug-17

Feb-18

0

2,844
2.8

2.2

3,235

5(%)

Feb-19Rate of change in monthly rent at renewals

2.5

100 (%)

9.2

5.9

7.0

3.3

7.8

92.9

90.8

94.1

92.9

96.7

92.2

Landport Hachioji: Contract renewal (ten years)

50

0Feb-20

0.2

0.0

0.1

0.1

0.0

0.0

Aug-17

Feb-18Aug-18

Feb-19Aug-19Feb-20RetailAsset Management Topics in February 2020 FP

Rent change upon rent revision

Floor area subject to replacement: 865 tsubo
Rent change rate +19.7% (+¥3,355 thousand/mo)

Floor area subject to rent revision: 4,048 tsubo
Rent change rate +5.0% (+¥1,801 thousand/mo)<Example><Example>

EQUINIA Aobadai: 479 tsubo (+26.5%)

Recipe SHIMOKITA: 65 tsubo (+59.4%)

Amount of change in monthly rent and rate of change in monthly
rent upon tenant replacement (Retail properties in station area)

Amount of change in monthly rent and rate of change in monthly
rent upon rent revision (Retail properties in station area)■ Amount of change in monthly rent

Rate of change in monthly rent

4,000 (¥thousand)4 (%)

Rate of change in monthly rent

2,000 (¥thousand)

0

17

16.7

766

587

Aug-17

Feb-1810.9
1,531
Aug-182,498

2

NOMURA REAL ESTATE MASTER FUND, INC.

7.5%

7.3%
3.8%

0.5%
Aug-20Feb-21

Aug-21

Feb-22Aug-22

Feb-23Aug-23

Feb-24Aug-24Feb-252.2%
Aug-25

Occupancy Rate and Average Rent

1.1

Feb-200(%)

Aug-17

Feb-18Aug-18

Feb-19Aug-19Feb-20

Office

99.2

99.4

99.4

99.4

99.8

99.8

Logistics

99.1

99.3

99.6

99.6

99.1

99.2

Retail

98.2

98.3

100.0

100.0

100.0

98.5

Residential

96.7

97.2

97.0

97.2

96.8

97.3

Hotels

—

—

100.0

100.0

100.0

100.0

Others

100.0

100.0

100.0

100.0

100.0

100.0

Total

98.4

98.6

99.3

99.3

99.3

98.8

Average Rent
3

1,000

3,355
0

Aug-19

7.1%

3.1%

19.7

0.0
Feb-19

9.4%

6 (%)

5.0

12.5

11.8%

Occupancy Rate

Rent change upon tenant replacement

11.6

12.3%

7.1%

Feb-20

Proactive promotion for rent increase upon tenant replacement and rent revision, supported by a high occupancy rate and stable income
from fixed rents.

2,000

Landport Iwatsuki (1): Lease-up (five years)
Landport Iwatsuki (2)Lease-up(six months)(Note) From the presentation material of the fiscal period ended February 2020, as to “Amount of change in monthly rent at move-ins and move-outs” and “Rate of change in monthly
rent at renewals,” they are recounted and revised for the purpose the subject area is the residential area excluding the area used as retail stores, including the actual results for theprevious fiscal periods.

■ Amount of change in monthly rent

• Achieved rent increase through conclusion of green lease agreement with 3
tenants (3,781 tsubo)
Tenant A (lease maturity: Aug. 2020 FP)
Re-contracted to extend lease maturity to June 2030 with rent
increase by +13.2% from previous contract.
Tenant B and C
Rent revision during lease term with rent increase by the average of+3.3%.
• All repair costs can be recovered during the lease term.
• Expected annual power reduction of approximately 56% at sites where LED
devices are installed and replaced. (Note)

Lease Maturity (Rent basis)

6.9

2.6

Aug-19Landprt Hachioji
Conclusion of green lease agreement in line with LED installment
work at LP Hachioji(Note) Annual power reduction is the estimated reduction in areas where LED devices are installed and replaced.

4.5

0Aug-18The move-out of a tenant leasing the entire
building on December 1, 2019. (7,287 tsubo)•A ccomplished the early lease-up (without
downtime) with a new tenant for 5-year contract
term for the half of the sections.
• For the remaining half, the short-term leaseagreement for 6 months has been concluded witha new tenant with an eye to continuous leasing in
the future.
(Rent increase by +12.1% compared with previous
tenant)■ Down ■ Flat ■ UpRate of change in monthly rent

5,000 (¥thousand)Asset Management Topics in February 2020 FP

0.8

1.1

1.6

263

317

273

343

Aug-17

Feb-18Aug-18

Feb-19

1.5

1,801

729
Aug-190

Feb-20(¥/ tsub)Aug-17

Feb-18Aug-18

Feb-19Aug-19Feb-20

Office17,156

17,41917,54817,72318,06018,301

Logistics

8,731

8,471

8,461

8,255

8,642

8,693

Retail

3,887

3,915

3,922

3,936

3,983

3,999

Residential

11,106

11,107

11,234

11,327

11,358

11,520NOMURA REAL ESTATE MASTER FUND, INC.

18

Message from the Management

TopicsESG Measures

Management Strategy

Financing Status

Portfolio

Information

Financial Section

ESG Measures
NREAM received Minister of the Environment Award being evaluated NMF’s registration for Environment Management System (EMS) as
the first J-REIT.
NREAM has received Minister of the Environment Award in the general department as the most excellent efforts in fiscal year 2019from Principles for Financial Action for the 21st Century Secretariat
NMF’s certification and registration for an Environmental Management System (EMS) by the third party,
EcoAction 21, as the first J-REIT initiative, was highly evaluated and led to reception of the Award.
Principles for Financial Action for the 21st Century

As the action guidelines of financial institutions who hope fulfill their
responsibilities and roles required for the formation of a sustainable society,"Financial Principles towards the Formation of a Sustainable Society” wasformed in October 2011. NREAM agreed with the principles advocated by the
Ministry of the Environment and signed on Principles for Financial Action for The financial institutions whichhave signed the Principles: 284
the 21st Century in July 2019.
institutions (as of Nov. 28, 2019)(Left: Norio Ambe (Note), President & CEO of Nomura Real Estate
Asset Management, Co., Ltd.
Right: KOIZUMI Shinjiro, Minister of the Environment) (Note) Norio Ambe became Chairman as of Apr. 1, 2020.

Specific Measures to Reduce Environmental Impact
Invested capital in owned properties to reduce our environmental impact (The examples below are from the 9th FP)
1) Saving Energy with LED Lighting• Shinjuku Nomura Building• NMF Gotanda Ekimae Building• Musashiurawa Shopping Square• EQUINIA Shinjuku• Kawaguchi Logistics Center A Tower• PROUD FLAT Yoyogi Uehara• PROUD FLAT Fujimidai, others

3) Saving Water by Upgrading Toilets• Landport Atsugi<Energy reduction by the works in the 9th FP>-1,992Mwh/year (approx.-61.1%)

Conducted energysaving checks
Plans future energy-saving
works based on the results ofthe checks<Water use reduction by theworks in the 9th FP>-39 Kl/year (approx.-42.4%)
Kawaguchi Logistics Center A
Tower

NMF Gotanda Ekimae
Building

2) Saving Energy by Upgrading Air Conditioners• NMF Shinjuku EAST Building• Universal CityWalk Osaka• Izumiya Senrioka• Atsugi Minami Logistics Center A Tower, others<Energy reduction by the works in the 9th FP>-344 Mwh/year (approx.-20.3%)

Percentage of checked areas(as of February 29, 2020)
64.0% (Total floor area basis)

NMF received and registered to EcoAction 21, an Environmental Management System (EMS), as the first J-REIT.
EcoAction 21

S

The EcoAction 21 Certification/Registration Program is the certification and registration system by a third party for business operators
promoting environmental management based on “EcoAction 21 Guidelines” formulated by Japan’s Ministry of the Environment as part of its
Environmental Management System.
* E nvironmental Management System (EMS)
In the course of its operation and management, the organization sets its own environmental policies and targets and works toachieve them. This is called "Environmental Management" and the system and procedures for this purpose are called"Environmental Management System (EMS).“[Scope of Certification and Registration]
Investment and management of officebuildings and residential properties

Response to tenants’ satisfaction survey
認証番号 0012949

Revised ESG materiality issues (Materiality) and reset KPI targets to higher levels

After
BeforePlease visit our website for moredetailed information.

Cooperation with UNHCR (Japan for UNHCR)

ESG Measures (E: Environment)

Provided a part of the common area of NMF’s properties tohelp UNHCR (Japan for UNHCR) for their refugee assistancecampaign activities.

Environmental Indicators[Target] Improve to 70% by FY2030 (total floor area basis)[Target] Reduce 40% by FY2030 (compared to 2016 level)

Green certification (Total)

GHG

Target80.0%

Greenhouse Gas

Green certification

Green certification (with three stars or more or equivalent to)

70.0%

70.0%
60.0%
50.0%
40.0%

44.7%
FY2017

48.8%

50.1%

FY2018FY2019-10.0%-20.0%-17.5%-30.0%-40.0%

FY2030-4.3%

FY2016FY2017FY2018Month

Training Session Theme

Mar-19

Review of compliance training program for the fiscal year of 2018

Apr-19

Schedule of compliance training program for the fiscal year of 2019

May-19

Responding to antisocial forcesJun-19Anti-money laundering system

Jul-19Insider transaction regulations

Aug-19Insider transaction regulations (Web training)Sep-19Outline of the Civil Code RevisionOct-19

Information management

Nov-19

Information management (Web training)Dec-19Regulations on related party transactions

Jan-20Regulations on related party transactions (Web training)Feb-20Case study from issues pointed out in inspection to financial instruments
business operators by the authority and its member association

Training is conducted for the officers and employees at NREAM
and property management companies.

-8.6%-25.1%

Training is conducted once a month to enhance complianceawareness and ensure thorough compliance with laws andregulations.

Enhancement of sustainability promotion system throughsustainability training session (once a year).

Energy Consumption (Intensity)

0.0%

ESG Measures (G: Governance)

Compliance training sessions at the Asset Management Company

Installed community lounge on the first floor at NMF Ginza
4-chome Building in response to its tenants’ request on thesatisfaction survey.

<Principal changes>• Addition of “Countering water resources” to Materiality and setting of quantitative target• Target property of “Raising the proportion of “green” properties in our investment
portfolio” are redefined as property acquired green certification with three stars or moreor equivalent. (No level of evaluation has been defined in the previous target.)• Raised KPI target of “Countering climate change” to -40% from previous target of -25%.
• KPI and a part of KPI targets of Materiality in “Society” and “Governance” were defined.

E

G

ESG Measures (S: Society)Target-40.0%
FY2030Musashiurawa Shopping Square

Omron Kyoto Center Building

Promotion of taking paid leaves[Target] Reduce 10% by FY2030 (compared to 2016 level)

NREAM encourages its employees to take paid leaves, etc.,
targeting 18 days per year.

Water Use

Water Use

0.0%
-2.0%

-5.0%

-4.0%

-5.0%
Target-6.0%-10.0%-8.0%-10.0%FY2016FY2017FY2018FY2030

Average days of paid
leaves taken

FY2017FY2018FY201916

17

19

Safety confirmation of the officers and employees
Nomura Real Estate Group has introduced a safety confirmation system via theInternet and e-mail to quickly ascertain the state of damage and the safety of
its officers and employees in the event of a disaster. We conduct safety
confirmation drills for all officers and employees.

Safety confirmation drills conducted: 4 times (FY2019)(Note) “Green certification” refers to either DBJ Green Building Certification, BELS Certification or CASBEE for Real Estate.”Green certification with three stars or more or equivalent to”
refers to DBJ Green Building Certification with three stars or more, BELS Certification with three stars or more, or CASBEE for Real Estate (B+ or higher).

19

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

20

Message from the Management

TopicsManagement Strategy

Financing Status

ESG Measures

Portfolio

Financing Status

Financial Statements Highlights

Continuing to reduce average interest rate and prolong borrowing period. NMF has been upgraded to AA-at R&I issuer rating.

DPU for Feb. 2020 FP: ¥3,279, up ¥70 (+2.2%) from previous fiscal period results.
Interest-bearing debt at the end of February 2020 FP
Aug. 2018 (6th FP)

Feb. 2019 (7th FP)

Aug. 2019 (8th FP)

Feb. 2020 (9th FP)

Total Interest-bearing debt

¥497,155 million¥497,112 million¥510,770 million¥510,727 million

Average remaining duration

4.61 years

4.52 years

4.64 years

4.82 years

Average interest rate

0.88%

0.87%

0.83%

0.82%

Ratio of long-term debt

87.2%

86.9%

86.0%

87.1%

Ratio of fixed-rate debt

95.4%

95.4%

94.1%

95.6%

LTV

44.4%

44.5%

43.9%

42.8%

Operating Revenue
Rental revenues
Other rental revenues
Gain on sales of real estate
Operating Expense
Rental Business Expenses
Repair Expenses
Tax and Public Dues
Depreciation and Amortization
OthersAsset management fees
Amortization of goodwill
Other operating expenses
Operating profit
Non-operating revenues
Non-operating expenses
Interest Expenses and otherfinancial costs
Investment units issuance costs
Other non-operating expenses
Ordinary income
Extraordinary gain and loss
Net income(¥Mln)

60,0001.92%(

50,000

1.33%

1.19%
0.70%

40,000

0.92%
1.02%

0.70%

1.12%

0.93%
0.99%

)

0.54%

0.67% 0.65% 0.67% 0.62%

0.60%

0.68% 0.71%

1.03%
0.60% 0.55% 0.68%

0.90%

Distribution of Earnings
Distribution in excess of
net earnings
Total distributions

Debt

30,000Investment Corporation Bond
Average Interest Rate

20,000Ended Feb. 29,
2020

Differences

Result (A)Result (B)(B)-(A)

36,61733,3883,222
622,351
15,887
1,727
2,982
5,135
6,041
3,224
2,622
617
14,265
5
2,578



0

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
20/8 21/2 21/8 22/2 22/8 23/2 23/8 24/2 24/8 25/2 25/8 26/2 26/8 27/2 27/8 28/2 28/8 29/2 29/8 30/2 30/8 31/2

Refinancing during February 2020 FP
Repayment Overview (Note 1)
Total amount of
repayment
Average interest rate
Average remaining
duration

37,900 mln
0.58%
3.7 years(Note 1) A verage remaining duration is it at the time ofborrowing and average interest rate is weighted
average interest rate at the time of repayment.
Excluding ¥42.8 million in contractual repayment.

46
38/8

49
41/2

Scheduled repayment during August 2020 FP
Refinancing Overview (Note 2)
Total amount of
repayment
Average interest rate
Average remaining
duration

37,900 mln
0.47%
9.3 years(Note 2) T he average interest rate and remaining duration arecalculated using figures at the time of borrowing.

Scheduled Repayment (Note 3)
Total amount of
repayment

33,400 mln

Average interest rate
Average remaining
duration

1.33%
7.8 years

2,439

-74

Operating Expense55
811,692–
11,69055
1012,17516
12,188

-0
2
482
16
498

Rental Business Expenses

a11,691

12,188

b
a+b

2,901
14,592-282(4,074)-654(3,420)-372(-654)

Total assets
Acquisition priceInterest-bearing debt
LTV
Market Capitalization
NOI
FFO

Long-term issuer rating:Rating and Investment Information, Inc. (R&I)

Issuer rating:

S&P Global Ratings Japan Inc. (S&P)

NOMURA REAL ESTATE MASTER FUND, INC.

Long-term issuer credit rating:

3,300

AA

AA-

A/Short-term issuer credit rating: A-1

Impact of tenant turnover at LP Iwatsuki-76

Impact of acquisition

219

-173

Other rental revenues
Seasonal changes in residential properties (keymoney and contract renewal fee)

-56

Absence of cancellation penalty fee, etc.

-116

-6

Absence of gain on sales (a part of the land areaof PF Shinjuku Kawadacho)

-97
-166
-54

Rental business expenses of portfolio properties(excluding utility expenses paid)

-178

497

Impact of acquisition (excluding utility expenses paid)

65

3,272

371

15,461

868

Asset management fees/Other operating
expenses

3,279
2,585

(¥)
70
14

342

368

26

296

326

30

1,193,471
1,031,039
510,72742.8%
807,713
26,357
19,953(¥mln)
28,704
19,760-42-1.1%-35,810498
505

Increase in rent revenues+57
Office+48
Retail+3
Logistics+7
Residential
+4
Hotel
-5
Seasonal changes in residential properties -12
Absence of cancellation penalty, etc.
-23

NMF has been upgraded to AA- at R&I issuers rating in January 2020.

Japan Credit Rating Agency, Ltd. (JCR)

346

68
-72

Non-operating expenses-74

Interest Expenses and other financial costs
Other non-operating expenses

2

Extraordinary gain and loss

16
16

Extraordinary gain on natural disasters (Insuranceincome>Restoration expenses)

498

Net income¥654 mln(¥138/unit)

Reversal of internal reserves
Amount equivalent to tenant turnover impact at
LP Urayasu and LP Iwatsuki¥164 mln(¥34/unit)

Amount equivalent to dilution of investment
units due to issuance of new investment units¥490 mln(¥104/unit)

Feb. 2020 FP Results

3,600

Rating description

Rent and common area charges of portfolio
properties (excluding impact of tenant turnoverat LP Iwatsuki)

Seasonal changes in utility expenses paid, etc.

3,209
2,571

1,164,767
1,011,279
510,77043.9%
843,524
25,85919,447489

Rental revenues

Main factors in change of DPU (¥/unit)(¥)

Credit rating agency

310

Operating Revenue

2,514

DPU
Distributions of earnings per unit
Distributions in excess of retained
earnings per unit [allowance foradjustment of temporary differences](Note 3) Average remaining duration is it at the time ofborrowing and average interest rate is weighted
average interest rate as of the end of February 2020.
Excluding ¥42.8 million in contractual repayment.

Ratings

Main factors accounting for differences between the
8th results and the 9th results (¥mln)

310
489
-173
-6
-97
-166
-69
-6
15
-107
66
–
1
408
2
-72

Distributions in excess of retained
earnings per unit [other distributions
in excess of net earnings]

(9th FP)

Financial Section

36,92733,877
3,049–
22,253
15,720
1,658
2,976
5,151
5,934
3,291
2,622
619
14,6738
2,506Internal reserves(Total Internal reserves)

10,000(¥mln)

Ended Aug. 31,
2019(8th FP)

Diversified maturity of repayment at the end of February 2020 FP

21

Information

Aug. 2019
FP DPU result

50

Increase factors
Decrease factors
DPU

-15

45

22
3,209

ecrease in repair expenses+17
Decrease in utility expenses paid +13
Decrease in PM fee+13
Decrease in other expenses+7

Increase in asset management fee to the-14
asset management company
Decrease in interest expenses and otherfinancial cost
+16
Extraordinary gain
+3
Dilution of investment units due to-114
issuance of new investment units
Reversal of internal reserves+77

Increase in rent revenues and common area charges +46
Others-1

Rent revenues(Portfolio properties)

Rent revenues(Acquisition)

Rental business expenses(Portfolio properties)

Increase in repair expenses
Increase in maintenance cost
Increase in depreciation expenses
Increase in other expenses

Rental business expenses(Acquisition)

-2
-2
-7
-4

-32
3,279

OthersFeb. 2020
FP DPU result

NOMURA REAL ESTATE MASTER FUND, INC.

22

Message from the Management

TopicsManagement Strategy

Financing Status

ESG Measures

Portfolio

Information

Financial Section

Market Review
RetailOfficeVacancy Rate Tokyo Central Five Wards(%)

Jan.’14=100(¥/tsubo)

10.00

24,0009.43

20/2
22,54822,901

22,000100

19,000105

18,000

100

90

80

70

17,000
2.00

120

110

20,0004.00

95

16,000

2.49
20/2
1.49

0

16,207

15,00014,000’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20

Office Building Supply Tokyo Central Five Wards

23,000

Forecast
600
500(Tsubo)22,000800,000

21,000700,000

Q3 ’01
3.24

20,000

’17

’18

’19

’20

’14

600,000

400
300■ New supply■ New demand
Vacancy rate (overall) (right axis)
Vacancy rate (a year or more after completion)(right axis)

Forecast(%)(\Tln)

30

16
14

100

Q2 ’129.43

16,000

0

10

’16

’17

’18

’19

’20

’21

’22

1

2

3

4

5

6

7

8

9

1.1%
0.4%
’15

’16

’17

’18

0

’19

Tokyo

Rental Condominium Rent Index (Tokyo’s 23 wards)(Number of People)

Osaka (Right axis)
Aichi (Right axis)

09Q1=100

1,000

120

8,000

800

115

6,000

600

110

4,000

400

105

(Mln)

Compact Type 30 m2–60 m2

35■ Foreign Visitor Arrivals

YoY Change (Right axis)

-0
-200

-2,000

’14

’15

’16

’17

’18

’19

Source: Prepared by NREAM based on data from Ministry of Internal Affairs andCommunications

23

NOMURA REAL ESTATE MASTER FUND, INC.

’20

18.1
16.6 17.6

20.8

22.1

26.3

10
5
0

’15

(%)

60

31

31

30

’16

’17

’18

’19

’20

’21

’22

’23

’24

(Mln)

560

■ Japanese overnight travelers■ International overnight travelers

540
40

25
20

520
500
480

95

0

8.7

100

2.2

10
0

15.4

15

19.5

24.9

Total Number of Overnight Guests

15
200

20

23.4

Source: P repared by NREAM based on data from “IT Navigator 2020” published by Nomura
Research Institute, Ltd.
*Years show fiscal years

20

2,000

25

Foreign Visitor Arrivals

Single Type 18 m2–30 m2

Forecast

’20

Hotel

Net Population Inflow (12-month moving average)’20

2

Source: Prepared by NREAM based on data from CBRD

Residential(Number of People)

4

0

10

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

10,0006

200,000

Vacancy Rate (%)

’23

’19

8

300,000

100,000

15,000’15’18■ Online Retail Sales Revenue

12400,000

Previous
bottom

17,000’17

Ecommerce (B2C) Market

20

18,000
200

’16

18

500,000

Q2 ’038.57

19,000’15

Source: Prepared by NREAM based on data from Japan Chain Store Association

Large-Scale Rental Logistics Facility Supply and Demand in theTokyo Metropolitan Area as of Q4 2019

Q2 ’08
3.49

Q3 ’19
1.55’16

Source: P repared by NREAM based on data from the Ministry of Economy, Trade andIndustry, Japan Chain Store Association, Japan Department Stores Association

Previous peak

Rent (¥)

700’15

Logistics

Rent and Vacancy Rate Matrix (Tokyo Central Five Wards)(‘000 Tsubo) ■ New supply

60

90

’14

’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20’14Food & Beverages
Housing Goods(daily necessities, home appliances, etc.
Clothing

110

115

21,000
6.00

by product type

Retail Sales Volume by Product Type (12-month moving average)
Jan.’14=100

Supermarkets and Food Section of Department Stores
Chain Stores (Supermarkets including GMS)
Department Stores (Tokyo Area)

125

23,0008.00

by store type

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

Average Monthly Rent Tokyo Central Five Wards

5

90

0

’14

’15

’16

’17

’18

’19

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

’20

’15

’16

’17

’18

Source: Prepared by NREAM based on data from JNTO
*Figures for 2020 is estimated figures from Jan. to Feb. 2020

’19

375

-20

-29.2

-40

460
440
420

’20 (Jan. to Feb.)

400

’14

’15

’16

’17

’18

’19

Source: Prepared by NREAM based on data from Tourism Agency* Figures are from the second preliminary report

NOMURA REAL ESTATE MASTER FUND, INC.

24

Message from the Management

TopicsManagement Strategy

ESG Measures

Portfolio

Financing Status

Information

Financial Section

Portfolio Analysis (as of Feb. 29, 2020)
NUMBER OF PROPERTIES

294

propertiesASSET SIZE

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

OCCUPANCY RATE

¥1,031,039

98.8

million%1 Property 1 Property
1 Property 1 Property

HotelsOther

0.6%
Other Area

17.6%

Tokyo Area

Diversification by
location

82.4%

Residential
Facilities

19.3%(based on acquisition price)

Logistics
Facilities

8,500

10,39045.5%

Diversification byproperty type10,39010,26722.7%(based on acquisition price)

Logistics

OthersTokyo Area

Other

Other Areas

53 Properties■ Retail
39 Properties■ Logistics
19 Properties■ Residential 124 Properties■ Other
1 Property

RetailFacilities(near stations)

11.4%

Other

73.5%

Hotels■ Office

5.7%

Diversification byproperty

10,267

SapporoSapporo(based on acquisition price)(Residential areas)

77.3%

RetailOfficeBuildings

Retail Facilities

Top Ten Properties
as a Percentage ofPortfolio

3,600

Residential

2 Properties
2 Properties
12 Properties
12 Properties

0.5%

16.9%

Other
284 properties

3,600
8,500

OfficeTop Ten
Properties as a
Percentage ofPortfolio

Diversification bytenant26.5%(based on leased area)

3 Properties
3 Properties

7,400

7,400

5 Properties
5 Properties

3,942

1 Property 1 Property

2,030

Total

58 Properties■ Retail■ Logistics
■ Residential

236 Properties

Total

■ Hotels

14 Properties
11 Properties
1 Property
30 Properties
2 Properties■ Office

3,942

2,030

50 Properties
50 Properties
4 Properties
4 Properties
1 Property 1 Property
381,365 381,365

46,830Sendai Sendai

46,8302,320

2,320

7 Properties
7 Properties
25 Properties
48,310 48,310 25 Properties

66,941

66,941

Tochigi Prefecture
Tochigi Prefecture

107 Properties
107 Properties

146,456 146,456

Kyoto Kyoto

1 Property 1 Property

18,3004 Properties
4 Properties
1 Property 1 Property
5,830
5,830

18,3001,580

5 Properties
5 Properties

5 Properties
5 Properties
44,236
2 Properties
2 Properties
7,645
7,645
6,580
6,580
4,520
4,520
1
Property
1
Property
4 Properties
4 Properties
3,460
3,460
25,650 25,650

2 Properties
2 Properties 44,236
1 Property 1 Property

2,280

2,280

3 Properties
3 Properties

Kobe
1 Property 1 Property

2,650

2,650

Naha

Naha

2 Properties
2 Properties
6,440 5 Properties
6,440 5 Properties

2,477

2,477

Kobe

8,997

8,997

Nagoya Nagoya

Hiroshima
Hiroshima

1,580

3 Properties
3 Properties

38,100SaitamaSaitama
Prefecture
Prefecture

5 Properties
5 Properties
9 Properties
9 Properties
37,990 37,990

33,96015,9107 Properties
7 Properties

33,9603 Properties
3 Properties 9 Properties
9 Properties
Tokyo

15,910 13,471

13,471

38,100

4,632

4,632

1 Property 1 Property 1 Property 1 Property

3,080
Tokyo

3,080 4,900
OthersOthersChiba Prefecture
Chiba Prefecture

Osaka Osaka

FukuokaFukuoka

4,900

Kanagawa
Kanagawa
Prefecture
Prefecture

For a detailed list of properties in our portfolio, visit the website below.
(Note) In the diversification by tenant, the leased areas of properties under pass-through master lease agreements are calculated based on the leased areas of end tenants.

25

NOMURA REAL ESTATE MASTER FUND, INC.

https://www.nre-mf.co.jp/en/portfolio/index.html

NOMURA REAL ESTATE MASTER FUND, INC.

26

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Information

Financial Section

Portfolio Gallery
OfficeRetailTOP 3 Properties (acquisition price)1

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

PMO Higashi Shinbashi
Location: Minato Ward, Tokyo
Total floor area: 3,430.06 m2

NEW

PMO Tamachi Higashi
Location: Minato Ward, Tokyo
Total floor area: 7,088.17 m2

27

NOMURA REAL ESTATE MASTER FUND, INC.

2

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

TOP 3 Properties (acquisition price)
3

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

1

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

2

Yokosuka More’s City

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

3

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

NRE Tennozu Building

Harumi Island Triton
Square Office Tower Y

GEMS Shinbashi

NRE Kichijoji Building

Recipe SIMOKITASORA Shin-Osaka 21

NMF Hakata Ekimae Building

Nitori Makuhari

Kawasaki More’snORBASA

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

Location: Osaka City, Osaka
Total floor area: 38,252.92 m2

Location: Chuo Ward, Tokyo
Total floor area: 24,000.76 m2

Location: Fukuoka City, Fukuoka
Total floor area: 10,961.34 m2

Location: Minato Ward, Tokyo
Total floor area: 1,478.44 m2

Location: Chiba City, Chiba
Total floor area: 13,521.89 m2

Location: Musashino City, Tokyo
Total floor area: 5,550.35 m2

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

Location: Setagaya Ward, Tokyo
Total floor area: 8,552.53 m2

Location: Sapporo City, Hokkaido
Total floor area: 21,564.42 m2

NOMURA REAL ESTATE MASTER FUND, INC.

28

Message from the Management

TopicsManagement Strategy

ESG Measures

Portfolio

Financing Status

Information

Financial Section

Portfolio Gallery
Logistics

Residential

TOP 3 Properties (acquisition price)1

Landport Urayasu

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

Landport Atsugi

Location: Atsugi City, Kanagawa
Total floor area: 49,504.38 m2

Landport Kashiwa Shonan I
Location: Kashiwa City, Chiba
Total floor area: 49,394.87 m2

29

NOMURA REAL ESTATE MASTER FUND, INC.

2

Landport Itabashi

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

Landport Ome I

Location: Oume City, Tokyo
Total floor area: 57,721.34 m2

Landport Kashiwa Shonan II
Location: Kashiwa City, Chiba
Total floor area: 51,485.62 m2

TOP 3 Properties (acquisition price)3

Landport Kawagoe

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

Landport Hachioji

Location: Hachioji City, Tokyo
Total floor area: 35,948.63 m2

Sagamihara Tana Logistics Center
Location: Sagamihara City, Kanagawa
Total floor area: 51,474.82 m2

1

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

PROUD FLAT Shibuya Tomigaya
Location: Shibuya Ward, Tokyo
Total floor area: 5,079.46 m2

NEW

PRIME URBAN Nakameguro II
Location: Meguro Ward, Tokyo
Total floor area: 2,990.65 m2

2

Serenite Shinsaibashi Grande
Location: Osaka City, Osaka
Acquisition price: ¥5,567 million
Total floor area: 7,794.23 m2

3

PRIME URBAN Toyosu

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

PRIME URBAN Nihonbashi
Yokoyamacho

PROUD FLAT Shirokane
Takanawa

PROUD FLAT Sotokanda

PRIME URBAN Sapporo
Riverfront

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

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

Location: Minato Ward, Tokyo
Total floor area: 3,620.46 m2

Location: Sapporo City, Hokkaido
Total floor area: 21,239.84 m2

NOMURA REAL ESTATE MASTER FUND, INC.

30

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Distribution Policy
Basic distribution policy

Distribution policy if gain on sales of real estate occurs

Structure of NMF

Gain on sales

Distributions in excess of net earnings may be adjusted to retain cash of an amountequivalent to gain on sale of real estate to promote stable medium-to long-term
management. (Note 1)

Internal reserves
equivalent to gain on
sale

10

Specified Related Party

Investment Corporation

Nomura Real Estate Development Co., Ltd.
(Parent Company of the AssetManagement Company)

Nomura Real Estate Master Fund,Inc.

Nomura Real Estate Holdings, Inc.

10

Total
distribution

80

Net earnings(Statement of income)Distribution
policy20

Gain on sales

Amortization of goodwill

10

Distribution inexcess of net
earnings

10

Net earnings excl. gain on sales

Distribution of
net earnings

Unitholders' Meeting
Board of Directors

Asset Management Company

Net earnings excl. gain on sales

Net earnings excl. gain on sales

Gain on sales

Distributions inexcess of net
earnings

Net earnings

Net earnings

Amortization of goodwill

Reserve(Statement of income)Financial Section

Structure and Organization

Distribute net earnings + amortization of goodwill

Net earnings

Information

Portfolio

80

Nomura Real Estate Asset Management
Co., Ltd.

10

Gain on sales is distributed,
and a corresponding
amount is deducted from
distributions in excess of
net earnings

1

Sumitomo Mitsui Trust Bank, Ltd.

36

General Administrator (Institutional
Administration / Accounting)Transfer Agent and Special Account
Administrator

Executive Director: Shuhei Yoshida
Supervisory Directors: Mineo Uchiyama

Mitsubishi UFJ Trust and Banking
Corporation

Supervisory Directors: Koichi Owada

4

5

Custodian

2

Supervisory Directors: Mika Okada

7

Information Provider
Auditor

Nomura Real Estate Development Co., Ltd.

General Administrator (Financial Agent)

Ernst & Young Shin Nihon LLC

MUFG Bank, Ltd.
Sumitomo Mitsui Banking Corporation

Basic Agreement with respect to Leasing
Value Chain

80

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

Breakdown ofdistributions

1 Asset Management Agreement
2 Asset Custody Agreement
3	Transfer Agency Agreement, General
Administration Agreement(Note) Figures shown above are for illustrative purposes only

4 Information Provision Agreement
5 Basic Agreement with respect to Leasing Value Chain
6 Agreement on Special Account Management
7 Financial Agent Agreement

Distributions in excess of net earnings in the 9th Fiscal Period

1,735(Adjustmentoffractions)

Total distribution¥15,461 million(¥3,279/unit)

12,18812,18812,18812,18912,188Distributions of
net earnings¥12,188 million

12,188income)(Before adjustmentof fractions less than
one unit)

Net earnings Total distribution
defined by the (After adjustment of
fractions less than one
Investment
unit)
Trusts Act

Distributions of
net earnings, etc.
(Income tax
withheld)¥13,923 million(¥2,953/unit)(¥2,585/unit)

Total
Net earnings Distribution(Statement of
distribution
policy(¥326/unit)

Allowance forDistributions in
temporary difference excess of net
adjustments
earnings(fractional adjustment) (breakdown)(Note 1) When there is a gain on sales, NMF’s policy is, in principle, to set aside an amount equivalent to the gain that is not more than the amount of amortization of goodwill as retained
earnings within the scope that will not be subject to income tax.
(Note 2) The amount is obtained by deducting underdepreciation, etc. (provision deduction items) attributable to the difference between depreciation in tax and accounting treatmentsfrom amortization of goodwill, etc. (provision addition items).

31

NOMURA REAL ESTATE MASTER FUND, INC.

Legal & Compliance

Statutory Auditors

Internal Audit
Finance & Accounting
Board of Directors

President & CEO

Client Relations & Marketing
Acquisitions
Investment Management Planning
Private Fund Management

NMF Investment
Management Group(*2)

Chief Strategy Officer

1,739

Project Screening Committee

3,272International Business Planning

NPR Valuation Committee(¥694/unit)

1,537

Other
distributions inexcess of net
earnings (Income
tax not withheld)¥1,537 million

Risk Management Committee

3,272

2,622

Corporate Planning

Other distributions in excess of net earnings

Compliance Committee

2,622

Distributions inexcess of net
earnings ¥3,272
millionOrganization of NREAM

Distribution of allowance for temporary difference

Investment Committee

654
Amortization of goodwill[About distribution in excess of net earnings]

General Meeting of Shareholders<Reversal of internal reserves>
Amount equivalent to decrease in income from LP Urayasu and LP Iwatsuki.
Amount equivalent to dilution of investment units due to issuance of new
investment units during the 9th FP.

Fund Management
Asset Management I
Asset Management II
NPR Investment Management

NOMURA REAL ESTATE MASTER FUND, INC.

32

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Information

Portfolio

Financial Section

Investor Information
Composition of Unitholders

WEBSITE
Financial Institutions(including financial instrument businesses)

Foreign Corporations

237 0.8%563 1.9%

Individuals and Others

Government/Local Public Bodies

Other Domestic
Corporations

1 0.0%

493 1.6%

Government/Local Public Bodies

300,289 6.4%

9 0.0%

Financial Institutions(including financial
instrument businesses)

Other Domestic Corporations

307,765 6.5%

2,806,189 59.5%

Unitholder composition

Number of investment units

Total

Total

30,065■ An overview of NMF and its features; information about the Asset Management Company■ A portfolio summary; property overviews (with photos, maps, etc.); occupancy rate data
■ Press releases, disclosure materials, and information on distributions and financial results

We will continue to enhance the website’s content and use it to provide timely information.

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

4,715,200

Individuals andOthersNMF strives to ensure accurate, timely disclosure through its website. For convenience, the website also offers a variety of otherinformation, including the following.

Revisions were made to the materiality
issues in the ESG section of the website.

Foreign Corporations

1,300,948 27.6%

28,771 95.7%

Nomura Master Fund

ESG
Policies and Management Structure

IR Calendar

Materiality

Fiscal period
End of February

Announcement of financial results

Fiscal period

Announcement of financial results

Stakeholder Engagement

Mid-April

End of August

Mid-October

GRI Standards
International Initiatives and Certifications

January

February

March

April

May

June

July

AugustSeptember

OctoberNovember December

Mid-May

Mid-November

Commencement of payment of distributions
Release of Asset Management Report

Commencement of payment of distributions
Release of Asset Management Report

Environmental Measures
Social Responsibility
Governance
ESG Disclosure Policy and Reporting Framework

NMF will continue to update information.

Unitholder Information

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

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

Important Reminders for Unitholders
Closing dates

The last days of February and August of every year

General meeting of unitholders

At least once every two years in principle

Unitholder record date for voting
eligibility

The last day of February 2017, and then the last day of February every second year or adate announced in advanceDistribution payment record dates The last days of February and August of every year

33

Stock exchange listings

Tokyo Securities Exchange (securities code: 3462)

Newspaper for announcements

Nihon Keizai Shimbun

Share transfer agent

Mitsubishi UFJ Trust and Banking Corporation

Contact information for the sharetransfer agent

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

NOMURA REAL ESTATE MASTER FUND, INC.

Excel files with detailed data are available for download.

NOMURA REAL ESTATE MASTER FUND, INC.

34

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

BALANCE SHEETASSETS
Current Assets:

As of August 31, 2019

Thousands of Yen

As of February 29, 2020

LIABILITIES

73,420,753

87,599,067

Rental receivables

695,682593,233

Consumption taxes receivable

657,804-

Cash and bank deposits

1,673,760

1,606,233

76,448,000

89,798,534

Land

696,240,931

711,394,696

Buildings and structures

332,825,576

340,477,012

Machinery and equipment

1,332,528

1,516,277

Tools, furniture and fixtures

1,135,222

1,259,197

Other current assets
Total current assets
Property and Equipment:

Leased assets

14,8594,752

Construction in progress

12,05024,761

1,031,561,168(41,470,695)

1,054,676,697(46,604,324)

990,090,472

1,008,072,373

Goodwill

85,586,980

82,964,737

Leasehold rights

8,958,920

8,958,534

Intangible assets

35,56532,785

SubtotalLess accumulated depreciation
Net property and equipment
Investments and Other Assets:

2,131,942

2,065,881

Long-term deposits

508,948519,577

Security deposits

946,452

936,452

Derivatives assets

3,320

-

Long-term prepaid expenses

Deferred investment corporation bond issuance costs
Total investments and other assets
Total Assets
The accompanying notes to financial statements are an integral part of these statements.

56,838123,090

98,228,969

95,601,059

1,164,767,442

1,193,471,967

As of August 31, 2019

Thousands of Yen

As of February 29, 2020

Current Liabilities:
Trade accounts payable
Short-term debt
Current portion of investment corporation bonds
Current portion of long-term debt
Lease obligations
Other accounts payable
Accrued expenses
Accrued income taxes
Accrued consumption taxes
Rent received in advance
Unearned revenue
Provision for loss on disaster
Derivatives liabilities
Other current liabilities
Total current liabilities

2,820,452
8,000,000
5,000,000
58,385,600
1,082
2,535,771
344,928
1,999
5,260,541
159,244
65,574
9,683
82,584,878

2,559,513
5,000,000
60,885,600871
2,827,990
364,346
2,998
1,158,419
5,380,495
132,539
20,24439,952
10,171
78,383,142

Long-term Liabilities:
Investment corporation bonds
Long-term debt
Lease obligations
Long-term advanced received
Security deposits from tenants
Derivatives liabilities
Total long-term liabilities

17,000,000
422,384,400
4,134
187,30240,852,194
843,558
481,271,590

25,000,000
419,841,600
3,775
129,354
41,500,327
745,604
487,220,660

Total Liabilities

563,856,468

565,603,803

214,855,487

244,185,429

394,012,959(10,439,617)(9,301,010)(19,740,627)
374,272,331
12,688,967
386,961,298
601,816,786

394,012,959(11,903,126)(10,738,678)(22,641,804)
371,371,154
13,094,910
384,466,064
628,651,494(905,812)(905,812)(783,330)(783,330)

600,910,974

627,868,163

1,164,767,442

1,193,471,967

NET ASSETS
Unitholders’ Equity:
Unitholders’ capital
SurplusCapital surplus
Allowance for temporary difference adjustment
Other deductions from capital surplus
Total deductions from capital surplus
Net capital surplus
Retained earnings
Total surplus
Total unitholders’ equity
Valuation and Translation Adjustments:
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these statements.

35

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

36

Message from the Management

TopicsManagement Strategy

ESG Measures

STATEMENT OF INCOME AND RETAINED EARNINGSOPERATING REVENUES AND EXPENSES
Operating Revenues:
Real estate rental revenues
Gain on sales of real estate
Operating Expenses:
Real estate rental expenses
Asset management fees
Asset custody fees
Administrative service fees
Amortization of goodwill
Other operating expenses
Operating Income

For the period
from September 1, 2019
to February 29, 2020

36,610,991
6,213
36,617,204

36,927,357
36,927,357

15,887,320
3,224,402
57,119173,069
2,622,242
387,680
22,351,834
14,265,370

15,720,670
3,291,289
59,207
169,605
2,622,242
390,886
22,253,901
14,673,456

NON-OPERATING REVENUES AND EXPENSES
Non-Operating Revenues:
Interest income
Reversal of dividends payable
Interest on refund
Other non-operating revenues
Non-Operating Expenses:
Interest expense
Interest expenses on investment corporation bonds
Amortization of investment corporation bonds issuance costs
Loan arrangement fees
Investment units issuance expenses
Other non-operating expenses

Ordinary Income
Extraordinary Income:Insurance income
Extraordinary Losses:
Loss on disaster
Income before Income Taxes
Income Taxes:
Current

415
4,123
3,379
176
8,095

1,907,676
185,270
3,160
421,076
55,843
5,259
2,578,287

1,813,077
210,186
5,584
416,21055,7275,255
2,506,040

11,692,763

12,175,510-

28,611
28,611

11,692,763

12,344
12,344
12,191,777

3,057
3,057
12,188,719

Retained earnings brought forward

998,259

906,191

Retained Earnings at End of Period

12,688,967

13,094,910

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

37

596
4,975
107
5,679

2,055
2,055
11,690,708

Net Income

NOMURA REAL ESTATE MASTER FUND, INC.

Portfolio

Financial Section

Information

STATEMENT OF CHANGES IN NET ASSETS
Thousands of Yen

For the period
from March 1, 2019
to August 31, 2019

Financing Status

For the period from March 1, 2019 to August 31, 2019

Thousands of Yen

Unitholders’ Equity

Balance as of March 1, 2019
Issuance of new investment units
Distributions of retained earnings
Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’ equity
Total changes of items during the period
Balance as of August 31, 2019

SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other deductions Total deductions
difference
from capitalfrom capitaladjustment
surplussurplus(8,879,447)(8,678,670)(17,558,118)
–
–
–
–
–
–

Units
4,321,800
225,500–

Unitholders’capital
182,051,777
32,803,710–

Capitalsurplus394,012,959––

Net capitalsurplus376,454,840
–
–

–

–

–

(1,560,169)–(1,560,169)(1,560,169)–––
225,500
4, 547,300–––
32,803,710
214,855,487––––
394,012,959–––(1,560,169)(10,439,617)(622,339)––(622,339)(9,301,010)(622,339)––(2,182,509)(19,740,627)(622,339)––(2,182,509)
374,272,331

Thousands of Yen
Unitholders’ Equity
Surplus
Balance as of March 1, 2019
Issuance of new investment units
Distributions of retained earnings
Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’ equity
Total changes of items during the period
Balance as of August 31, 2019

Valuation and Translation Adjustments
Total valuation
Deferred gains or
and translation
losses on hedges
adjustments(997,480)(997,480)––––

Retained earnings Total surplus
12,334,340
388,789,181––(11,336,081)(11,336,081)

Total
unitholders’equity570,840,958
32,803,710(11,336,081)–(1,560,169)(1,560,169)––(1,560,169)–
11,690,708–
354,626
12,688,967(622,339)
11,690,708–(1,827,882)
386,961,298(622,339)
11,690,708–
30,975,828
601,816,786––
91,667
91,667(905,812)––
91,667
91,667(905,812)(622,339)
11,690,708
91,66731,067,496
600,910,974

Total net assets
569,843,478
32,803,710(11,336,081)

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

For the period from September 1, 2019 to February 29, 2020

Thousands of Yen

Unitholders’ Equity

Balance as of September 1, 2019
Issuance of new investment units
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’ equity
Total changes of items during the period
Balance as of February 29, 2020

Units
4,547,300
167,900–

Unitholders’capital214,855,487
29,238,273–

Capitalsurplus394,012,959–––

91,667–

91,667

–

–

–

–
–
–
167,900
4, 715,200–––
29,329,941
244,185,429––––
394,012,959

Unitholders’ Equity
Surplus
Balance as of September 1, 2019
Issuance of new investment units
Distributions of retained earnings
Reversal of allowance for temporary difference
adjustments
Distributions in excess of net earnings from allowance fortemporary difference adjustments
Other distributions in excess of net earnings
Net income
Net changes of items other than unitholders’ equity
Total changes of items during the period
Balance as of February 29,2020SurplusCapital surplus
Deductions from capital surplus
Allowance fortemporary
Other deductions Total deductions
difference
from capitalfrom capitaladjustment
surplussurplus(10,439,617)(9,301,010)(19,740,627)
–
–
–
–
–
–

Retained earnings Total surplus
12,688,967
386,961,298––(11,691,108)(11,691,108)

Total
unitholders’equity601,816,786
29,238,273(11,691,108)

Net capitalsurplus374,272,331––(91,667)––(1,555,176)–(1,555,176)(1,555,176)–––(1,463,508)(11,903,126)(1,346,000)––(1,437,668)(10,738,678)(1,346,000)––(2,901,177)(22,641,804)(1,346,000)––(2,901,177)
371,371,154

Valuation and Translation Adjustments
Total valuation
Deferred gains or
and translation
losses on hedges
adjustments(905,812)(905,812)––––

Thousands of Yen

Total net assets
600,910,974
29,238,273(11,691,108)(91,667)(91,667)

–

–

–

–

–

(1,555,176)(1,555,176)––(1,555,176)–
12,188,719–
405,943
13,094,910(1,346,000)
12,188,719–(2,495,234)
384,466,064(1,346,000)
12,188,719–
26,834,707
628,651,494––
122,481
122,481(783,330)––
122,481
122,481(783,330)(1,346,000)
12,188,719
122,481
26,957,189
627,868,163

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

NOMURA REAL ESTATE MASTER FUND, INC.

38

Message from the Management

TopicsManagement Strategy

ESG Measures

STATEMENT OF CASH FLOWSCASH FLOWSFor the period
from March 1, 2019
to August 31, 2019

Thousands of Yen

For the period
from September 1, 2019
to February 29, 2020

11,692,763
5,137,887
2,622,242
55,843
3,160(43,480)(596)
2,092,946
5,302(37,771)(184,298)(16,043)
863,316(21,753)(657,804)(990,633)
8,739
224,309
14,403(280,470)
20,488,065
596(2,166,900)(925)
18,320,837

12,191,777
5,153,337
2,622,242
55,727
5,584
20,244(415)
2,023,263
4,042
102,448
66,061(10,628)(260,939)
16,901
657,804
1,158,419
53,619119,954
69,17524,048,621
415(2,088,004)(2,059)21,958,973

Cash Flows from Investing Activities
Payments for purchases of property and equipment
Payments for purchases of leasehold rights and intangible assets
Reimbursement of security deposits to tenants
Proceeds from security deposits from tenants
Proceeds from security deposits
Net cash provided by (used in) investing activities(54,380,717)(551)(1,016,699)
3,468,968
35(51,928,965)(22,909,351)(4,620)(865,829)
1,513,961
10,000(22,255,840)

Net Increase (Decrease) in Cash and Cash Equivalents
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.

Portfolio

Information

Financial Section

NOTES TO FINANCIAL STATEMENTS

Cash Flows from Operating Activities
Income before income taxes
Depreciation
Amortization of goodwill
Investment units issuance expenses
Amortization of investment corporation bonds issuance costs
Increase (Decrease) in provision for loss on disaster
Interest income
Interest expense
Loss on disposal of property and equipment
Decrease (Increase) in rental receivables
Decrease (Increase) in long-term prepaid expenses
Decrease (Increase) in long-term deposits
Increase (Decrease) in trade accounts payable
Increase (Decrease) in other accounts payable
Decrease (Increase) in consumption taxes receivables
Increase (Decrease) in accrued consumption taxes
Increase (Decrease) in accrued expenses
Increase (Decrease) in rent received in advance
Decrease in property and equipment due to sales
Other
SubtotalInterest received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

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

Financing Status

1. ORGANIZATION
Nomura Real Estate Master Fund, Inc. (NMF) is a real estate investment corporation formed to own and invest primarily in officebuildings, retail facilities, logistics and residential facilities. NMF 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 involving the former Nomura Real Estate
Master Fund, Inc. (hereinafter the “former NMF”), Nomura Real Estate Office Fund, Inc. (hereinafter “NOF”) and Nomura Real Estate
Residential Fund, Inc. (hereinafter “NRF”), and listed its investment securities (TSE code: 3462) on the Real Estate Investment Trust
Section of the Tokyo Stock Exchange on October 2 of the same year.
NMF adopts the basic policy of investing primarily in real estate and other assets to secure stable income and steady growth ofassets under management 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 which investments are made in facilities of a variety of sectors such as office buildings,
retail facilities, logistics 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 with the utilization of the “leasing value chain” with the Nomura
Real Estate Group, the sponsor, NMF will aim to increase unitholder value by securing stable income and steady growth of assets
under management over the medium to long term.

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
13,600,000(6,100,000)
40,900,000(34,742,800)
32,803,710(123,730)(11,334,400)(1,563,076)(8,000,000)
29,900,000(29,942,800)
8,000,000(71,836)
29,238,273(55,727)(11,691,370)(1,554,693)

Cash and cash equivalents(623,564)
32,816,137(1,346,666)
14,475,179(791,990)
74,212,743
73,420,753

14,178,313
73,420,753
87,599,067

Buildings
Structures
Machinery and equipment
Tools, furniture and fixtures

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 whenpurchased.
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:
4–70 years
2–45 years
4–15 years
3–20 years

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

39

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

40

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

NOTES TO FINANCIAL STATEMENTS
Long-term prepaid expenses(Accounting standards issued but not yet applied)Long-term prepaid expenses are amortized by the straight-line method.

“Accounting Standard for Revenue Recognition” (the Accounting Standards Board of Japan (ASBJ) Statement No. 29, issued by ASBJ
on March 30, 2018)

Impairment of fixed assets
NMF reviews fixed assets for impairment whenever events or changes in circumstances indicate that the carrying value of its fixed
assets may not be recoverable. An impairment loss is recognized if the carrying value of an asset exceeds the aggregate estimatedfuture cash flows. If a fixed asset is determined to be impaired, it is written down to its recoverable amount and the write-down isrecorded as an impairment loss during the period in which it occurs.
Deferred investment corporation bond issuance costs
Deferred investment corporation bond issuance costs are amortized by the straight-line method over the respective terms of thebonds.
Investment units issuance expenses
The entire amount is expensed as incurred.
Allowances and provisions(1) Allowance for doubtful accounts
For allowance for doubtful accounts against possible losses arising from default on receivables, the uncollectable amount isestimated and recorded by investigating collectability based on historical loan loss ratios for general receivables and on a case-bycase examination for doubtful and other specific receivables.
(2) Provision for loss on disaster
The amount that is reasonably estimated at the end of the fiscal period under review is recorded to cover expenditures forrestoration etc. following Typhoons Faxai and Hagibis in 2019.
Accounting treatment of beneficial interests in real estate
All assets and liabilities held in trust, for which the real estate in possession of NMF was entrusted, and all related earnings 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 the life of each lease. Utility charge reimbursements are recognized when earned and theiramounts 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 the fiscal period. The
seller of a property is liable for property related taxes for the period from the purchase date through the end of that calendar year
because taxes are imposed on the owner registered in the record as of January 1 for the entire year based on the assessment madeby the local government. The amount applicable to the buyer of a property is usually settled between each party and capitalized aspart of the acquisition cost of the property. The capitalized property related taxes amounted to ¥182,534 thousand for the fiscal
period ended August 31, 2019, and ¥67,984 thousand for the fiscal period ended February 29, 2020.

“Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, issued by ASBJ on March 30,
2018)(1) Overview
Comprehensive accounting standards on revenue recognition were developed jointly by the International Accounting Standards
Board (IASB) and the US Financial Accounting Standards Board (FASB), and were released publicly in May 2014 as “Revenue fromContracts with Customers” (IFRS 15 by the IASB, and Topic 606 by the FASB). In light of this, the ASBJ developed a comprehensive
accounting standard on revenue recognition, and issued it together with implementation guidance.
The basic policy adopted by the ASBJ in developing the accounting standard was to start by incorporating the basic principles of
IFRS 15 from the perspective of comparability between financial statements, which is one of the benefits of maintaining
consistency with IFRS 15. Then, where consideration should be given to practices used up to that time in Japan, the ASBJ added
alternative treatments, to the extent they do not impair comparability.
(2) Scheduled date of application
These accounting standard and guidance will be applied from the beginning of the fiscal period ending February 28, 2022.
(3) Impact of applying the new accounting standard.
The impact on financial statements of applying these accounting Standard and guidance is currently under evaluation.
“Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, issued by ASBJ on July 4, 2019)“Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, issued by ASBJ on July 4,2019).
(1) Overview
The IASB and the FASB have established detailed guidance on measuring fair value (IFRS 13 “Fair Value Measurement” issued by
the IASB, and Topic 820 “Fair Value Measurement” issued by the FASB). In order to improve comparability with the provisions ofthese international accounting standards, the ASBJ gave extensive consideration primarily regarding guidance and disclosure
concerning the fair value of financial instruments, following which it issued the Accounting Standard for Fair Value Measurement
and the Implementation Guidance on Accounting Standard for Fair Value Measurement.
The basic policy adopted by the ASBJ in developing the accounting standard was to fundamentally incorporate all of theprovisions of IFRS 13 from the perspective of improving comparability of financial statements between companies in Japan andoverseas by using uniform methods of calculation. Then, taking account of practices used up to that time in Japan, the ASBJ
established other treatment for individual items, to the extent it does not significantly impair comparability between financial
statements.
(2) Scheduled date of application
These accounting standard and guidance will be applied from the beginning of the fiscal period ending February 28, 2022.
(3) Impact of applying the new accounting standard.
The impact on financial statements of applying these accounting standard and guidance is currently under evaluation.

Income taxes
Deferred tax assets and liabilities are computed based on the differences between the financial statements and income tax bases ofassets 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
NMF utilizes interest-rate swap contracts as derivative financial instruments only for the purpose of hedging its exposure tochanges in interest rates. NMF defers recognition of gains or losses resulting from changes in the fair value of interest rate swap
contracts which meet the criteria for deferral hedge accounting.
Although deferral hedge accounting is generally applied, NMF applies the special treatment to those interest-rate swap contracts
that meet 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.

41

NOMURA REAL ESTATE MASTER FUND, INC.

NOMURA REAL ESTATE MASTER FUND, INC.

42

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Information

Financial Section

NOTES TO FINANCIAL STATEMENTS
4. CASH AND CASH EQUIVALENTS

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

Cash and cash equivalents as of August 31, 2019 and February 29, 2020 consist of the following:

Short-term debt and current portion of long-term debt as of August 31, 2019 and February 29, 2020 consist of the following:Thousands of Yen

As of August 31, 2019

As of February 29, 2020

Cash and bank deposits

73,420,753

87,599,067

Cash and cash equivalents

73,420,753

87,599,067

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

5. ASSETS PLEDGED AS COLLATERAL AND SECURED LIABILITIESThe assets pledged as collateral are as follows:
Thousands of Yen
As of August 31, 2019
Buildings in trust
Land in trust
Structures in trust
Tools, furniture and fixtures in trust
Total

As of February 29, 2020

3,349,815
6,096,368
2,581
143

3,323,304
6,096,368
2,528
122

9,448,908

9,422,323

The secured liabilities are as follows:
Thousands of Yen
As of August 31, 2019

As of February 29, 2020

Tenant leasehold and security deposits in trust

726,648

726,648

Total

726,648

726,648

6. SCHEDULE OF PROPERTY AND EQUIPMENT
Property and equipment as of August 31, 2019 and February 29, 2020 consist of the following:Thousands of Yen
As of August 31, 2019
Acquisition costs

Book value

Acquisition costs

Book valueLand

282,632,048

282,632,048

294,597,869

294,597,869

Buildings and structures
Accumulated depreciation

145,727,184(14,332,350)

131,394,833

150,505,558(16,519,965)

133,985,593

Machinery and equipment
Accumulated depreciation

729,577(465,179)

264,397

834,291(500,882)

333,409

Tools, furniture and fixtures
Accumulated depreciation

333,772(103,877)

229,895

398,249(134,487)

263,761

Land in trust

413,608,883

413,608,883

416,796,827

416,796,827

Buildings and structures in trust
Accumulated depreciation

187,098,392(26,202,758)

160,895,634

189,971,453(28,994,937)

160,976,516

Machinery and equipment in trust
Accumulated depreciation

602,951(106,849)

496,102681,985(138,124)

543,861

Tools, furniture and fixtures in trust
Accumulated depreciation

801,449(249,652)

551,797

860,947(315,398)

545,548

Lease assets in trust
Accumulated depreciation

14,859(10,028)

4,830

4,752
(528)

4,224

Construction in progress

12,05012,05024,761

24,761

990,090,472

990,090,472

1,008,072,373

1,008,072,373

Total

43

As of February 29, 2020

NOMURA REAL ESTATE MASTER FUND, INC.

Unsecured loans from banks due on October 2,2019Unsecured loans from banks due on October 28,2019Unsecured loans from banks due on October 28,2019Unsecured loans from banks due on November 26,2019Unsecured loans from banks due on November 26,2019Unsecured loans from banks due on November 26,2019Unsecured loans from banks due on November 26,2019Unsecured loans from banks due on February 26,2020Unsecured loans from banks due on February 26,2020Unsecured loans from banks due on May 26,2020Unsecured loans from a bank due on May 26,2020Unsecured loans from a bank due on May 27,2020Unsecured loans from banks due on May 29,2020Unsecured loans from a bank due on August 26,2020Unsecured loans from a bank due on August 26,2020Unsecured loans from banks due on August 26,2020Unsecured loans from a bank due on August 26,2020Unsecured loans from banks due on August 26,2020Unsecured loans from a bank due on August 26,2020Unsecured loans from banks due on September 28, 2020
Unsecured loans from banks due on November 26, 2020
Unsecured loans from banks due on November 26, 2020
Unsecured loans from a bank due on November 26, 2020
Unsecured loans from banks due on November 26, 2020
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
Unsecured loans from banks due on February 26, 2021
Unsecured loans from a bank due on February 26, 2021
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

As of August 31, 2019
AmountWeighted-average(Thousands of Yen)
interest rate (Note 1)
8,000,000
0.46545%
3,000,000
0.24545%
4,000,000
0.21545%
1,600,000
1.16500%
4,000,000
0.72650%
5,600,000
0.54065%
3,450,000
0.37420%
5,750,000
1.01150%
2,500,000
0.64685%
10,000,000
1.33750%
800,000
1.25875%
1,000,000
1.48625%
4,000,000
0.43000%
1,100,000
1.53674%
800,000
1.28277%
4,700,000
1.18000%
500,000
1.15566%
4,500,000
1.08100%
1,000,000
0.72000%
42,8002.17000%
42,8002.21812%
66,385,600

As of February 29, 2020
AmountWeighted-average(Thousands of Yen)
interest rate (Note 1)
10,000,000
1.33750%
800,000
1.25875%
1,000,000
1.48625%
4,000,000
0.43000%
1,100,000
1.53674%
800,000
1.28277%
4,700,000
1.18000%
500,000
1.15566%
4,500,000
1.08100%
1,000,000
0.72000%
3,000,000
0.23909%3,500,000
0.46075%
2,350,000
0.46190%
500,000
0.47375%
1,230,000
0.20909%5,000,000
1.35250%
2,000,000
1.17750%
2,000,000
1.19211%2,000,000
0.80832%
3,000,000
0.86350%
2,120,000
0.85050%
500,000
0.46725%2,000,000
0.22560%
2,800,000
0.14700%
400,000
0.21810%42,8002.17000%
42,8002.21812%60,885,600

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 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 ofinterest.
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.

(1) The Company entered into ¥10,000 million of credit facilities in the form of commitment lines with two financial institutions forthe fiscal period ended August 31, 2019. The total unused amount of such credit facilities was ¥10,000 million as of August 31,
2019.
(2) The Company entered into ¥40,000 million of credit facilities in the form of commitment lines with four financial institutions forthe fiscal period ended August 31, 2019. The total unused amount of such credit facilities was ¥32,000 million as of August 31,
2019.
(3) The Company entered into ¥10,000 million of credit facilities in the form of commitment lines with two financial institutions forthe fiscal period ended February 29, 2020. The total unused amount of such credit facilities was ¥10,000 million as of February
29, 2020.
(4) The Company entered into 40,000 million of credit facilities in the form of commitment lines with four financial institutions forthe fiscal period ended February 29, 2020. The total unused amount of such credit facilities was ¥40,000 million as of February
29, 2020.

NOMURA REAL ESTATE MASTER FUND, INC.

44

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

NOTES TO FINANCIAL STATEMENTS
8. LONG-TERM DEBT
Long-term debts as of August 31, 2019 and February 29, 2020 consist of the following:
As of August 31, 2019
Amount(Thousands of Yen)

AmountAs of August 31, 2019

Weighted-averageinterest rate (Note 1)(Thousands of Yen)

AmountAs of February 29, 2020

Weighted-averageinterest rate (Note 1)(Thousands of Yen)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from banks due on September 28, 2020

3,000,000

0.24545%--

Unsecured loans from a bank due on May 26, 2023

1,000,000

1.83875%

1,000,000

1.83875%

Unsecured loans from banks due on November 26, 2020

3,500,000

0.46075%--

Unsecured loans from a bank due on May 26, 2023

1,000,000

0.41250%

1,000,000

0.41250%

Unsecured loans from banks due on November 26, 2020

2,350,000

0.46190%--

Unsecured loans from a bank due on May 26, 2023

2,500,000

0.43408%2,500,000

0.43408%

Unsecured loans from a bank due on November 26, 2020

500,000

0.47375%--

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.14850%

1,000,000

1.14850%

Unsecured loans from banks due on November 26, 2020

1,230,000

0.21545%--

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.15850%

1,000,000

1.15850%

Unsecured loans from banks due on February 26, 2021

5,000,000

1.35250%--

Unsecured loans from a bank due on August 28, 2023

1,000,000

1.18032%

1,000,000

1.18032%

Unsecured loans from a bank due on February 26, 2021

2,000,000

1.17750%--

Unsecured loans from a bank due on August 28, 2023

4,000,000

1.20772%

4,000,000

1.20772%

Unsecured loans from banks due on February 26, 2021

2,000,000

1.19211%--

Unsecured loans from banks due on August 28, 2023

6,100,000

1.08510%

6,100,000

1.08510%

Unsecured loans from banks due on February 26, 2021

2,000,000

0.80832%--

Unsecured loans from a bank due on August 28, 2023

1,000,000

0.43466%

1,000,000

0.43466%

Unsecured loans from a bank due on February 26, 2021

3,000,000

0.86350%--

Unsecured loans from a bank due on August 28, 2023

1,000,000

0.41000%

1,000,000

0.41000%

Unsecured loans from banks due on February 26, 2021

2,120,000

0.85050%--

Unsecured loans from a bank due on August 28, 2023

500,000

0.41435%

500,000

0.41435%

Unsecured loans from a bank due on February 26, 2021

500,000

0.46725%--

Unsecured loans from banks due on August 31, 2023

6,700,000

0.55700%

6,700,000

0.55700%

Unsecured loans from a bank due on February 26, 2021

2,000,000

0.22560%--

Unsecured loans from banks due on November 27, 2023

2,000,000

1.75900%

2,000,000

1.75900%

Unsecured loans from banks due on February 26, 2021

2,800,000

0.14700%--

Unsecured loans from banks due on November 27, 2023

2,600,000

0.82800%

2,600,000

0.82800%

Unsecured loans from a bank due on February 26, 2021

400,000

0.21810%--

Unsecured loans from banks due on November 27, 2023

4,000,000

0.49380%

4,000,000

0.49380%

Unsecured loans from banks due on March 26, 2021

4,670,000

0.24545%

4,670,000

0.23909%

Unsecured loans from banks due on November 27, 2023

1,500,000

0.47483%

1,500,000

0.47483%

Unsecured loans from banks due on May 26, 2021

8,000,000

1.56250%

8,000,000

1.56250%

Unsecured loans from a bank due on February 26, 2024

2,750,000

1.59400%

2,750,000

1.59400%

Unsecured loans from a bank due on May 26, 2021

1,000,000

1.46375%

1,000,000

1.46375%

Unsecured loans from banks due on February 26, 2024

1,300,000

0.53630%

1,300,000

0.53630%

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 February 26, 2024

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 May 27, 2024

Unsecured loans from banks due on July 26, 2021

4,180,000

1.23920%

4,180,000

1.23920%

Unsecured loans from a bank due on May 27, 2024

2,700,000

0.46376%

2,700,000

0.46376%

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 May 27, 2024

2,000,000

0.53676%

2,000,000

0.53676%

Unsecured loans from banks due on August 26, 2021

3,600,000

0.81585%

3,600,000

0.81585%

Unsecured loans from a bank due on June 26, 2024

2,700,000

0.85925%2,700,000

0.85925%

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 June 26, 2024

2,700,000

0.49533%

2,700,000

0.49533%

Unsecured loans from banks due on November 26, 2021

2,000,000

1.11662%2,000,000

1.11662%

Unsecured loans from a bank due on August 26, 2024

3,000,000

0.58175%

3,000,000

0.58175%

Unsecured loans from banks due on November 26, 2021

4,900,000

0.97410%4,900,000

0.97410%

Unsecured loans from a bank due on August 26, 2024

2,430,000

0.49971%2,430,000

0.49971%

Unsecured loans from banks due on December 27, 2021

6,375,000

0.24545%

6,375,000

0.23909%

Unsecured loans from banks due on August 26, 2024

5,670,000

0.49485%

5,670,000

0.49485%

Unsecured loans from a bank due on January 26, 2022

3,500,000

1.48300%

3,500,000

1.48300%

Unsecured loans from a bank due on August 26, 2024

1,000,000

0.28624%

1,000,000

0.28624%

Unsecured loans from banks due on February 28, 2022

4,500,000

1.31850%

4,500,000

1.31850%

Unsecured loans from a bank due on November 26, 2024

2,250,000

0.50825%

2,250,000

0.50825%

Unsecured loans from a bank due on February 28, 2022

2,750,000

1.29600%

2,750,000

1.29600%

Unsecured loans from banks due on November 26, 2024

3,000,000

0.58000%

3,000,000

0.58000%

Unsecured loans from banks due on February 28, 2022

4,000,000

1.16000%

4,000,000

1.16000%

Unsecured loans from a bank due on November 26, 2024

1,800,000

0.55979%

1,800,000

0.55979%

Unsecured loans from banks due on May 26, 2022

5,500,000

1.25900%

5,500,000

1.25900%

Unsecured loans from a bank due on November 26, 2024

500,000

0.52384%

500,000

0.52384%

Unsecured loans from banks due on May 31, 2022

4,500,000

0.82500%

4,500,000

0.82500%

Unsecured loans from banks due on November 26, 2024

2,000,000

0.42630%

2,000,000

0.42630%

Unsecured loans from banks due on June 27, 2022--

4,000,000

0.20909%

Unsecured loans from a bank due on November 26, 2024--

800,000

0.21380%

Unsecured loans from banks due on August 26, 2022

2,980,000

1.19700%

2,980,000

1.19700%

Unsecured loans from banks due on February 26, 2025

4,200,000

0.62675%

4,200,000

0.62675%

Unsecured loans from a bank due on August 26, 2022

3,000,000

1.09133%

3,000,000

1.09133%

Unsecured loans from a bank due on February 26, 2025

1,000,000

0.52140%

1,000,000

0.52140%

Unsecured loans from banks due on August 26, 2022

4,000,000

1.08034%

4,000,000

1.08034%

Unsecured loans from banks due on February 26, 2025

3,000,000

0.53936%3,000,000

0.53936%

Unsecured loans from a bank due on August 26, 2022

1,000,000

0.32886%

1,000,000

0.32886%

Unsecured loans from banks due on February 26, 2025

1,500,000

0.53880%

1,500,000

0.53880%

Unsecured loans from banks due on September 30, 2022

4,000,000

0.76250%

4,000,000

0.76250%

Unsecured loans from banks due on February 26, 2025

1,000,000

0.50604%

1,000,000

0.50604%--

3,000,000

0.23909%

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

Unsecured loans from banks due on November 28, 2022

2,100,000

0.92280%

2,100,000

0.92280%

Unsecured loans from a bank due on May 26, 2025

2,000,000

0.60286%2,000,000

0.60286%

Unsecured loans from banks due on November 28, 2022

4,550,000

1.11000%

4,550,000

1.11000%

Unsecured loans from banks due on May 26, 2025

2,800,000

0.60286%

2,800,000

0.60286%

Unsecured loans from a bank due on November 28, 2022

1,800,000

1.05000%

1,800,000

1.05000%

Unsecured loans from a bank due on May 26, 2025

1,000,000

0.61434%

1,000,000

0.61434%

Unsecured loans from banks due on November 28, 2022

1,500,000

0.98624%

1,500,000

0.98624%

Unsecured loans from a bank due on May 26, 2025

1,000,000

0.50506%

1,000,000

0.50506%

Unsecured loans from a bank due on November 28, 2022

1,000,000

0.71221%1,000,000

0.71221%

Unsecured loans from banks due on May 26, 2025

2,000,000

0.46301%2,000,000

0.46301%

Unsecured loans from banks due on November 28, 2022

1,500,000

0.69250%

1,500,000

0.69250%

Unsecured loans from banks due on August 26, 2025

3,000,000

0.56380%

3,000,000

0.56380%

Unsecured loans from a bank due on February 27, 2023

1,300,000

1.13250%

1,300,000

1.13250%

Unsecured loans from banks due on August 26, 2025

4,050,000

0.58727%

4,050,000

0.58727%

Unsecured loans from banks due on February 27, 2023

2,800,000

0.40740%2,800,000

0.40740%

Unsecured loans from banks due on August 26, 2025

1,850,000

0.67915%1,850,000

0.67915%

Unsecured loans from banks due on February 28, 2023

10,000,000

0.48700%

10,000,000

0.48700%

Unsecured loans from banks due on August 26, 2025

2,600,000

0.60489%

2,600,000

0.60489%

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.86500%

2,000,000

1.86500%

Unsecured loans from banks due on August 26, 2025

3,000,000

0.58380%

3,000,000

0.58380%

Unsecured loans from a bank due on May 26, 2023

2,000,000

1.89500%

2,000,000

1.89500%

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.09830%

1,100,000

1.09830%

Unsecured loans from banks due on October 26, 2022

45

As of February 29, 2020

Weighted-averageinterest rate (Note 1)

NOMURA REAL ESTATE MASTER FUND, INC.

500,0000.24000%

500,0000.24000%

1,100,000

0.51000%

1,100,000

0.51000%

NOMURA REAL ESTATE MASTER FUND, INC.

46

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

NOTES TO FINANCIAL STATEMENTS
As of August 31, 2019
Amount(Thousands of Yen)

Amount(Thousands of Yen)

As of August 31, 2019

Weighted-averageinterest rate (Note 1)

AmountAs of February 29, 2020

Weighted-averageinterest rate (Note 1)(Thousands of Yen)

Amount(Thousands of Yen)

Weighted-averageinterest rate (Note 1)

Unsecured loans from a bank due on November 26, 2025

1,100,000

1.06250%

1,100,000

1.06250%

Unsecured loans from a bank due on November 26, 2027

1,800,000

0.75050%

1,800,000

0.75050%

Unsecured loans from a bank due on November 26, 2025

2,000,000

1.03955%

2,000,000

1.03955%

Unsecured loans from banks due on November 26, 2027

1,700,000

0.70750%

1,700,000

0.70750%

Unsecured loans from a bank due on November 26, 2025

2,000,000

0.59639%2,000,000

0.59639%

Unsecured loans from banks due on November 26, 2027

2,500,000

0.52234%

2,500,000

0.52234%

Unsecured loans from a bank due on November 26, 2025

2,000,000

0.60448%2,000,000

0.60448%

Unsecured loans from a bank due on February 28, 2028

1,000,000

0.82130%

1,000,000

0.82130%

Unsecured loans from banks due on November 26, 2025

4,200,000

0.64616%

4,200,000

0.64616%

Unsecured loans from a bank due on February 28, 2028

2,355,000

0.76241%

2,355,000

0.76241%

Unsecured loans from a bank due on November 26, 2025

900,000

0.65123%900,000

0.65123%

Unsecured loans from banks due on February 28, 2028

1,500,000

0.78296%

1,500,000

0.78296%

Unsecured loans from a bank due on November 26, 2025

1,300,000

0.64278%

1,300,000

0.64278%

Unsecured loans from a bank due on February 28, 2028

1,800,000

0.79642%1,800,000

0.79642%

Unsecured loans from a bank due on November 26, 2025

1,000,000

0.59499%

1,000,000

0.59499%

Unsecured loans from a bank due on February 28, 2028

2,650,000

0.54205%2,650,000

0.54205%

Unsecured loans from a bank due on November 26, 2025

500,000

0.56311%500,000

0.56311%

Unsecured loans from banks due on February 28, 2028

1,500,000

0.57365%

1,500,000

0.57365%

Unsecured loans from banks due on February 26, 2026

4,000,000

0.74080%

4,000,000

0.74080%

Unsecured loans from banks due on May 26, 2028

5,000,000

0.79880%

5,000,000

0.79880%

Unsecured loans from banks due on February 26, 2026

2,500,000

0.59592%

2,500,000

0.59592%

Unsecured loans from a bank due on May 26, 2028

2,000,000

0.75922%2,000,000

0.75922%

Unsecured loans from banks due on February 26, 2026

800,000

0.37630%

800,000

0.37630%

Unsecured loans from a bank due on May 26, 2028

1,550,000

0.55038%

1,550,000

0.55038%

Unsecured loans from a bank due on February 26, 2026

500,000

0.39196%

500,000

0.39196%

Unsecured loans from a bank due on May 26, 2028

500,000

0.54010%500,000

0.54010%

Unsecured loans from banks due on February 26, 2026

1,500,000

0.17136%

1,500,000

0.17136%

Unsecured loans from banks due on May 26, 2028

2,000,000

0.54750%

2,000,000

0.54750%

Unsecured loans from a bank due on May 26, 2026

2,500,000

0.63995%

2,500,000

0.63995%

Unsecured loans from a bank due on May 26, 2028

Unsecured loans from a bank due on May 26, 2026

1,100,000

0.65267%

1,100,000

0.65267%

Unsecured loans from banks due on August 28, 2028

Unsecured loans from banks due on May 26, 2026

3,600,000

0.60880%

3,600,000

0.60880%

Unsecured loans from a bank due on August 28, 2028

500,000

0.61005%

500,000

0.61005%

Unsecured loans from a bank due on May 26, 2026

1,000,000

0.59614%1,000,000

0.59614%

Unsecured loans from banks due on August 28, 2028

1,000,000

0.62163%

1,000,000

0.62163%

Unsecured loans from a bank due on May 26, 2026

1,100,000

0.37000%

1,100,000

0.37000%

Unsecured loans from a bank due on August 28, 2028

500,000

0.62025%500,000

0.62025%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%2,700,000

0.67591%

Unsecured loans from a bank due on August 28, 2028

500,000

0.37500%

500,000

0.37500%

Unsecured loans from a bank due on August 26, 2026

2,700,000

0.67591%2,700,000

0.67591%

Unsecured loans from banks due on November 27, 2028

2,000,000

0.81130%

2,000,000

0.81130%

Unsecured loans from banks due on August 26, 2026

3,000,000

0.77669%

3,000,000

0.77669%

Unsecured loans from banks due on November 27, 2028

3,000,000

0.59375%

3,000,000

0.59375%

Unsecured loans from a bank due on August 26, 2026

1,000,000

0.70414%1,000,000

0.70414%

Unsecured loans from a bank due on November 27, 2028

Unsecured loans from banks due on August 26, 2026

3,000,000

0.67483%

3,000,000

0.67483%

Unsecured loans from banks due on February 26, 2029

Unsecured loans from a bank due on August 26, 2026

1,000,000

0.64500%

1,000,000

0.64500%

Unsecured loans from banks due on February 26, 2029

1,400,000

0.67098%

1,400,000

0.67098%

Unsecured loans from a bank due on August 26, 2026

1,000,000

0.42118%

1,000,000

0.42118%

Unsecured loans from a bank due on February 26, 2029

2,300,000

0.63692%

2,300,000

0.63692%

Unsecured loans from a bank due on August 26, 2026

500,000

0.43627%

500,000

0.43627%

Unsecured loans from a bank due on February 26, 2029

500,000

0.63692%

500,000

0.63692%

Unsecured loans from banks due on August 26, 2026

1,500,000

0.20880%

1,500,000

0.20880%

Unsecured loans from a bank due on February 26, 2029

3,500,000

0.41815%3,500,000

0.41815%

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.76000%

2,000,000

0.76000%

Unsecured loans from banks due on May 28, 2029

5,000,000

0.64000%

5,000,000

0.64000%

Unsecured loans from a bank due on November 26, 2026

2,000,000

0.74229%2,000,000

0.74229%

Unsecured loans from a bank due on May 28, 2029--

800,000

0.55190%

Unsecured loans from banks due on November 26, 2026

4,165,000

0.73506%

4,165,000

0.73506%

Unsecured loans from banks due on August 27, 2029

2,000,000

0.46130%

2,000,000

0.46130%

Unsecured loans from banks due on November 26, 2026

4,000,000

0.69956%

4,000,000

0.69956%

Unsecured loans from banks due on August 27, 2029

3,900,000

0.46130%

3,900,000

0.46130%

Unsecured loans from banks due on November 26, 2026

1,500,000

0.64999%

1,500,000

0.64999%

Unsecured loans from banks due on August 27, 2029--

2,800,000

0.55845%

Unsecured loans from banks due on November 26, 2026

2,000,000

0.60750%

2,000,000

0.60750%

Unsecured loans from a bank due on November 26, 2029

2,000,000

1.12506%

2,000,000

1.12506%

Unsecured loans from banks due on November 26, 2026--

1,000,000

0.28000%

Unsecured loans from a bank due on November 26, 2029

2,000,000

1.12506%

2,000,000

1.12506%

Unsecured loans from banks due on November 26, 2026--

1,200,000

0.30000%

Unsecured loans from a bank due on November 26, 2029--

1,200,000

0.59500%

Unsecured loans from banks due on February 26, 2027

2,320,000

0.71500%

2,320,000

0.71500%

Unsecured loans from a bank due on November 26, 2029--

1,000,000

0.59500%

Unsecured loans from banks due on February 26, 2027

1,500,000

0.46630%

1,500,000

0.46630%

Unsecured loans from a bank due on November 26, 2029--

750,000

0.48000%

Unsecured loans from a bank due on February 26, 2027

500,000

0.44859%

500,000

0.44859%

Unsecured loans from a bank due on November 26, 2029--

500,000

0.59500%

Unsecured loans from banks due on February 26, 2027

1,000,000

0.48144%

1,000,000

0.48144%

Unsecured loans from banks due on February 26, 2030--

4,250,000

0.52000%

Unsecured loans from a bank due on February 26, 2027--

1,500,000

0.28500%

Unsecured loans from a bank due on February 26, 2030--

1,500,000

0.48000%

Unsecured loans from a bank due on February 26, 2027--

1,000,000

0.28500%

Unsecured loans from a bank due on October 28, 2030

1,100,000

1.92250%

1,100,000

1.92250%

Unsecured loans from banks due on March 26, 2027

1,500,000

0.69068%

1,500,000

0.69068%

Unsecured loans from a bank due on October 28, 2030

1,100,000

1.91700%

1,100,000

1.91700%

Unsecured loans from banks due on May 26, 2027

3,060,000

0.78177%

3,060,000

0.78177%

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

689,700

2.17000%

668,300

2.17000%

Unsecured loans from banks due on May 26, 2027

2,300,000

0.74736%2,300,000

0.74736%

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

689,700

2.21812%668,300

2.21812%

Unsecured loans from a bank due on May 26, 2027

1,800,000

0.70250%

1,800,000

0.70250%

Unsecured loans from a bank due on May 26, 2027

47

As of February 29, 2020

Weighted-averageinterest rate (Note 1)--

1,400,000

0.32000%

Unsecured loans from banks due on August 26, 2027

4,000,000

0.76843%

4,000,000

0.76843%

Unsecured loans from banks due on August 26, 2027

2,600,000

0.76290%

2,600,000

0.76290%

Unsecured loans from a bank due on August 26, 2027

1,000,000

0.74500%

1,000,000

0.74500%

Unsecured loans from a bank due on August 26, 2027

1,000,000

0.51356%

1,000,000

0.51356%

Unsecured loans from banks due on August 26, 2027

1,500,000

0.29000%

1,500,000

0.29000%

Unsecured loans from a bank due on November 26, 2027

2,000,000

0.89209%2,000,000

0.89209%

Unsecured loans from banks due on November 26, 2027

5,000,000

0.79571%

5,000,000

0.79571%

NOMURA REAL ESTATE MASTER FUND, INC.

Total

-

-

1,400,000

0.40500%

3,600,000

0.84750%

3,600,000

0.84750%--

1,800,000

0.50880%

2,500,000

0.65880%

2,500,000

0.65880%

422,384,400

419,841,600

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 for the borrowings,
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 interest rate.
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.

NOMURA REAL ESTATE MASTER FUND, INC.

48

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

NOTES TO FINANCIAL STATEMENTS
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.

As of August 31, 2019
As of February 29, 2020

1-2 years
61,135,600
58,760,600

2-3 years
51,090,600
58,615,600

Thousands of Yen

3-4 years
61,435,600
45,535,600

4-5 years
38,035,600
44,435,600

Related assets,
etc.

As of August 31, 2019
AmountInterest rate (Note 1)

As of February 29, 2020
AmountInterest rate (Note 1)(Thousands of Yen)

(Thousands of Yen)

5,000,000

2.47%

5,000,000

2.47%

4,500,000

2.90%

4,500,000

2.90%

3,000,000

0.87%

3,000,000

0.87%

6,000,000

1.02%

6,000,000

1.02%

2,000,000

0.59%

2,000,000

0.59%

1,500,000

1.03%

1,500,000

1.03%

-

-

3,000,000

0.53%

-

-

5,000,000

0.90%

22,000,000

30,000,000

Note 1: The interest rate is rounded to the nearest second decimal place.

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

As of August 31, 2019
As of February 29, 2020

For the period from March 1, 2019 to August 31, 2019
Thousands of Yen

Details of investment corporation bonds outstanding are summarized as follows.

Within a year
5,000,000
5,000,000

The movement in the allowance for temporary difference adjustments on the Balance Sheet was as follows:
1. Reason, related assets and amounts

9. INVESTMENT CORPORATION BONDS

NOF’s 2nd series of unsecured investment corporation bonds due
on March 16, 2020
NOF’s 7th series of unsecured investment corporation bonds due
on March 17, 2028
Former NMF’s 1st series of unsecured investment corporation
bonds due on October 30, 2024
NOF’s 10th series of unsecured investment corporation bonds
due on November 25, 2024
NMF’s 2nd series of unsecured investment corporation bonds dueon November 16, 2027
NMF’s 3rd series of unsecured investment corporation bonds due
on May 21, 2038
NMF’s 4th series of unsecured investment corporation bonds due
on September 20, 2029 (green bonds)
NMF’s 5th series of unsecured investment corporation bonds due
on September 20, 2039
Total

11. ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS

1-2 years––

2-3 years––

3-4 years––

Thousands of Yen
4-5 years–
9,000,000

ReasonBalance at theReversalend of current
during period
periodReason forreversalAmortization of
goodwill

12,111,369

6,760,875

1,347,369-

8,108,244-

Land, buildings,
etc.

Merger expenses

4,029,135

1,346,802(12,910)-

1,333,892-

Loss on interestrate swaps
Deferred gains or
recognized at thelosses on hedges
end of the fiscal
period2,867,594

771,769

225,710-

997,480-

Increase - subtotal-

8,879,447

1,560,169-

10,439,617

-

Total

-

8,879,447

1,560,169-

10,439,617-

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

Method of reversal

Buildings, etc.

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

Land

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

Buildings in trust, etc.

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

Land in trust
Leasehold rights
Leasehold rights in trust

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

(3) 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 bereversed.

10. UNITHOLDERS’ EQUITY

For the period from September 1, 2019 to February 29, 2020

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

1. Reason, related assets and amounts

NOMURA REAL ESTATE MASTER FUND, INC.

Allowance set
aside during
periodGoodwillThousands of Yen

Related assets,
etc.

ReasonBalance at theInitial amount end of previous
periodAllowance set
aside during
periodBalance at theReversalend of current
during period
periodReason forreversal

Goodwill

Amortization of
goodwill

14,733,612

8,108,244

1,560,840-

9,669,084-

Land, buildings,
etc.

Merger expenses

4,029,135

1,333,892(5,663)-

1,328,228-

Loss on interestrate swaps
Deferred gains or
recognized at thelosses on hedges
end of the fiscal
period49

Balance at theInitial amount end of previous
period2,867,594

997,480-(91,667)

905,812

Changes in fairvalue ofderivativetransactions

Increase - subtotal-

10,439,617

1,555,176(91,667)

11,903,126

-

Total

-

10,439,617

1,555,176(91,667)

11,903,126-

NOMURA REAL ESTATE MASTER FUND, INC.

50

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

2. Method of reversal

Financial Section

Information

requirement to distribute in excess of 90% of its distributable income for the fiscal period, in order to deduct such amounts. If theinvestment corporation does not satisfy all of the requirements, the entire taxable income of the investment corporation will be
subject to regular corporate income taxes.

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

Since the Company distributed in excess of 90% of its distributable income in the form of cash distributions totaling ¥15,461,140
thousand for the fiscal period ended February 29, 2020, such distributions were treated as deductible distributions for purposes ofcorporate income taxes.

(2) Merger expenses
Item

Method of reversal

Buildings, etc.

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

Land

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

Buildings in trust, etc.

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

Land in trust
Leasehold rights
Leasehold rights in trust

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

The following summarizes breakdown of deferred tax assets and liabilities:
Thousands of Yen(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 bereversed.

12. PER UNIT INFORMATIONThe net asset values per unit and the net income per unit as of August 31, 2019 and February 29, 2020 were as follows:
For the period fromMarch 1, 2019 toAugust 31, 2019

For the period from
September 1, 2019 toFebruary 29, 2020

Net assets per unit

132,146

133,158

Net income per unit

2,571

2,642

Deferred tax asset:
Valuation difference on other assets acquired by merger
Deferred gains or losses on hedges
Unearned revenue
Write-offs for long-term prepaid expenses
Depreciation costs of trust leasehold rights
Non-deductible accrued enterprise tax
Subtotal
Valuation allowance
Total non-current deferred tax assets
Total deferred tax assets
Net deferred tax assets

For the period fromMarch 1, 2019 toAugust 31, 2019

For the period from
September 1, 2019 toFebruary 29, 2020

11,690,708

12,188,719

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

Net income available to ordinary unitholders (Thousands of Yen)

11,690,708

12,188,719

Average number of units during the period (Units)

4,545,840

4,612,315

For the period
from March 1, 2019
to August 31, 2019

For the period
from September 1, 2019
to February 29, 2020

20,452,773
284,970
108,620
12,332
1,338
86
20,860,121(20,860,121)–––

20,204,388
246,437
82,144
9,300
1,459
170
20,543,900(20,543,900)–––

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

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

Net income (Thousands of Yen)

Portfolio

Statutory tax rate
Deductible cash distributions
Valuation of allowance
Amortization of goodwill
Other
Effective tax rate

For the period
from March 1, 2019
to August 31, 201931.51%(35.69%)(2.87%)
7.07%
0.01%
0.02%

For the period
from September 1, 2019
to February 29, 2020
31.51%(35.99%)(2.28%)
6.78%
0.00%
0.02%

15. FINANCIAL INSTRUMENTS
13. RELATED PARTY TRANSACTIONS

Overview

For the periods from March 1, 2019 to August 31, 2019 and from September 1, 2019 to February 29, 2020

(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 interest-bearing
debt, to secure stable financing capability and reduce future risks of rising interest rates, the Company’s investment policy is tosecure longer-term, fixed-rate borrowings with well-diversified maturities.

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

14. INCOME TAXESThe Company, as an investment corporation, is subject to corporate income taxes at a statutory tax rate of approximately 31.51%
for the fiscal period ended February 29, 2020. 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

51

NOMURA REAL ESTATE MASTER FUND, INC.

The Company enters into derivative transactions only for the purpose of reducing risk of future interest rate fluctuations anddoes not engage in speculative transactions.
(2) Type and Risk of Financial Instruments and Related Risk Management
Borrowings and investment corporation bonds are primarily used to fund the acquisition of property-related assets as well as
the repayment 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 thefinancial institutions, but also the type of financing to include the effective use of surplus funds and direct financing from thecapital markets such as issuance of investment units. In addition, the Company is exposed to the market risk arising fromfluctuations in interest rates on its floating-rate debt. 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 debt to total debt at high levels. Furthermore, theCompany may utilize derivative transactions (interest-rate swap transactions) as a hedging instrument to reduce the market risk
under floating-rate debt by swapping such floating-rate interest payments for fixed-rate interest payments.

NOMURA REAL ESTATE MASTER FUND, INC.

52

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

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.

Thousands of Yen

Fair Value of Financial Instruments

Cash and bank deposits
Total

For the period from March 1, 2019 to August 31, 2019

After one year,
within two years––

After two years,
within three years––

After three years,
within four years––

After four years,
within five years––

After five years

After five years––

Thousands of Yen

Due within
one year
87,599,067
87,599,067

After one year,
within two years––

After two years,
within three years––

After three years,
within four years––

After four years,
within five years––

After one year,
within two years––
61,135,600
61,135,600

After two years,
within three years––
51,090,600
51,090,600

After three years,
within four years––
61,435,600
61,435,600

After four years,
within five years––
38,035,600
38,035,600

After one year,
within two years–
58,760,600
58,760,600

After two years,
within three years–
58,615,600
58,615,600

After three years,
within four years–
45,535,600
45,535,600

After four years,
within five years
9,000,000
44,435,600
53,435,600––

Note 4: Redemption schedule for debt as of August 31, 2019

The following table summarizes the carrying value and the estimated fair values of financial instruments as of August 31, 2019.

Thousands of Yen

Thousands of Yen

Difference(i) Cash and bank deposits

73,420,753

73,420,753–(ii) Short-term debt

(8,000,000)(8,000,000)–(iii) Current portion of investment corporation bonds(5,000,000)(5,061,335)

61,335(iv) Current portion of long-term debt

(58,385,600)(58,577,585)

191,985(v) Investment corporation bonds(17,000,000)(18,376,555)

1,376,555(vi) Long-term debt

(422,384,400)(432,947,922)

10,563,522(909,813)(909,813)–(vii) Derivative transactions

Due within
one year
73,420,753
73,420,753

Redemption schedule for cash and bank deposits as of February 29, 2020

Cash and bank deposits
Total

Fair value (Note 1)

Financial Section

Information

Note 3: Redemption schedule for cash and bank deposits as of August 31, 2019(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 priceavailable, fair value is reasonably estimated. Certain assumptions are used for the estimation of fair value. Accordingly, the resultof such estimation may change if different assumptions are used. Furthermore, the contractual amounts of derivativetransactions stated in “23. Derivatives and Hedge Accounting” below do not represent the market risk involved in thesederivative transactions.

Carrying value (Note 1)

Portfolio

For the period from September 1, 2019 to February 29, 2020

Short-term debt
Investment corporation bonds
Long-term debt
Total

Due within
one year
8,000,000
5,000,000
58,385,600
71,385,600

After five years–
17,000,000
210,687,000
227,687,000

Redemption schedule for debt as of February 29, 2020
Thousands of Yen

Investment corporation bonds
Long-term debt
Total

Due within
one year
5,000,000
60,885,600
65,885,600

After five years
16,000,000
212,494,200
228,494,200

The following table summarizes the carrying value and the estimated fair values of financial instruments as of February 29, 2020.
Thousands of Yen(i) Cash and bank deposits

Carrying value (Note 1)
87,599,067

Fair value (Note 1)
87,599,067––

Difference–

16. INVESTMENT AND RENTAL PROPERTIES(iii) Current portion of investment corporation bonds(5,000,000)(5,003,760)

3,760

The Company owns leasable office, leasable retail facilities, leasable logistics facilities, leasable residential (including land) in Greater
Tokyo area and other areas for the purpose of earning revenue from leasing. The following table summarizes the carrying value andthe estimated fair value of these properties.

(iv) Current portion of long-term debt

(60,885,600)(61,129,898)

244,298

Thousands of Yen(v) Investment corporation bonds(25,000,000)(26,141,290)

1,141,290(vi) Long-term debt

(419,841,600)(430,150,417)

10,308,817(785,528)(785,528)–(ii) Short-term debt(vii) Derivative transactions–

Note 1: The numbers in parenthesis indicate liabilities.
Note 2: Method for determining the fair value of financial instruments and derivative transactions(i) Cash and bank deposits and (ii) Short-term debt
As these items are settled within a short-term period, their fair value is nearly equal to the carrying value. Therefore, for these items, the carrying value is reported as the fairvalue.
(iii) Current portion of investment corporation bonds and (v) Investment corporation bonds
The fair value of investment corporation bonds issued by the Company is determined based on their market prices.
(iv) Current portion of long-term debt and (vi) Long-term debt
For floating-rate long-term debt, the carrying value is reported as it is considered to be approximately equal to the fair value because such debt reflects the market interest
rates within a short-term period. (However, the fair value of certain floating-rate long-term debt that qualifies for the special treatment of interest-rate swaps (see “23.
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.
(vii) Derivative transactions
See “23. Derivatives and Hedge Accounting.”

For the period
from March 1, 2019
to August 31, 2019

For the period
from September 1, 2019
to February 29, 2020

Carrying value
Balance at beginning of the period

949,867,203

999,049,393

Amount of increase (decrease) during the period

49,182,189

17,969,957

Balance at end of the period

999,049,393

1,017,019,350

Fair value at end of the period

1,123,089,000

1,158,232,000

Note 1: The carrying value represents the acquisition cost less accumulated depreciation.
Note 2: Of the change in investment and rental properties, the increase during the previous period is mainly attributable to the acquisition of PMO Tamachi Higashi (¥11,055,064
thousand), PMO Hatchobori Shinkawa (¥3,863,665 thousand), PMO Kyobashi Higashi (¥2,926,836 thousand), PMO Ochanomizu (¥3,941,809 thousand), GEMS Shinbashi(¥2,856,526 thousand), GEMS Kayabacho (¥2,628,660 thousand), Summit Store Honamanuma (¥2,183,962 thousand), GEMS Shin-Yokohama (¥1,844,634 thousand), GEMS
Namba (¥3,851,753 thousand), Landport Ome I (¥13,874,977 thousand) and Red Planet Naha Okinawa (¥2,692,522 thousand). The decrease period is mainly attributable to thepartial sale of PROUD FLAT Shinjuku Kawadacho (¥14,403 thousand) as well as depreciation expenses (¥5,130,411 thousand).The increase during the current period is mainly
attributable to the acquisition of PMO Akihabara Kita (¥8,547,300 thousand), PMO Higashi-Shinbashi (¥4,801,865 thousand), PROUD FLAT Shibuya Tomigaya (¥4,080,033
thousand), PROUD FLAT Miyazakidai (¥1,461,354 thousand) and PROUD FLAT Asakusabashi III (¥1,282,437 thousand). The decrease during the current period is mainly
attributable to depreciation expenses (¥5,146,129 thousand).
Note 3: Fair value at the end of the period is the appraisal value or survey price determined by an outside real estate appraiser.

The real estate rental revenues and expenses for the fiscal period ended February 29, 2020 are presented in “18. Breakdown of Real
Estate Rental Revenues and Expenses.”

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Message from the Management

TopicsManagement Strategy

ESG Measures

17. SEGMENT INFORMATION

Financing Status

Portfolio

Financial Section

Information

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

For the periods from March 1, 2019 to August 31, 2019 and from September 1, 2019 to February 29, 2020

Thousands of Yen

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 for 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, a geographicalbreakdown of revenues 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, a geographicalbreakdown of property and equipment has been omitted.
3. Information about major clients

Gain on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Gain on sale of real estate
Loss on sale of real estate
Proceeds from sale of real estate
Cost of real estate
Other related sales expense
Loss on sale of real estate

For the period
from March 1, 2019
to August 31, 2019

For the period
from September 1, 2019
to February 29, 2020

23,00014,403
2,383
6,213

–
–
–
–

–
–
–
–

–
–
–
–

20. BREAKDOWN OF EXTRAORDINARY INCOME
For the period from March 1, 2019 to August 31, 2019
Not applicable

For the period from March 1, 2019 to August 31, 2019
Customer name

Revenues (Thousands of Yen)

Related segment name

Nomura Real Estate Partners Co., Ltd.

5,169,816

Rental real estate business

For the period from September 1, 2019 to February 29, 2020
The insurance amount of ¥71,833 thousand related to the assets damaged by the Typhoons Faxai and Hagibis in 2019 was offset
by the loss amount of ¥43,222 thousand. Therefore, the amount of ¥28,611 thousand is recorded as insurance income.

For the period from September 1, 2019 to February 29, 2020
Customer name

Revenues (Thousands of Yen)

Related segment name

Nomura Real Estate Partners Co., Ltd.

5,190,268

Rental real estate business

21. BREAKDOWN OF EXTRAORDINARY LOSS
For the period from March 1, 2019 to August 31, 2019
Not applicable.

18. BREAKDOWN OF REAL ESTATE RENTAL REVENUES AND EXPENSES

For the period from September 1, 2019 to February 29, 2020

Real estate rental revenues and expenses for the fiscal period ended August 31, 2019 and February 29, 2020 consist of thefollowing:

The loss amount of ¥13,840 thousand related to the assets damaged by the Typhoons Faxai and Hagibis in 2019 was offset by the
insurance amount of ¥1,495 thousand. Therefore, the amount of ¥12,344 thousand is recorded as loss on disaster.

Thousands of Yen

Real estate rental revenues
Rental revenues
Rental revenues
Common area charges
Other rental revenues
Parking revenues
Incidental income
Other miscellaneous revenues
Real estate rental expenses
Property management costs
Property management fees
Property and other taxes
Utility expenses
Casualty insurance
Repairs and maintenanceLand rents
Depreciation
Other rental expenses
Real estate rental profits

55

NOMURA REAL ESTATE MASTER FUND, INC.

For the period
from March 1, 2019
to August 31, 201936,610,991
33,388,571
30,916,343
2,472,228
3,222,419
598,968
2,368,743
254,707
15,887,320
1,716,309
1,005,772
2,982,222
1,883,595
42,787
1,727,718
211,417
5,135,610
1,181,885
20,723,671

For the period
from September 1, 2019
to February 29, 2020
36,927,357
33,877,972
31,441,906
2,436,066
3,049,384
609,2032,267,052
173,128
15,720,670
1,760,058
950,345
2,976,127
1,829,299
42,831
1,658,591
204,347
5,151,274
1,147,795
21,206,687

22. LEASESThe future minimum rental revenues from tenants under non-cancelable operating lease of properties as of August 31, 2019 andFebruary 29, 2020 are summarized as follows:
Thousands of Yen

As of August 31, 2019

As of February 29, 2020

Due within one year

34,037,212

Due after one year

79,314,693

34,932,268
76,918,092

Total

113,351,905

111,850,360

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Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

24. CASH DISTRIBUTIONS

23. DERIVATIVES AND HEDGE ACCOUNTING
Derivative transactions as of August 31, 2019

For the period
from March 1, 2019
to August 31, 2019(1) There were no derivative financial instruments not subject to hedge accounting.
(2) Derivative financial instruments subject to hedge accounting were as follows:

For the period
from September 1, 2019
to February 29, 2020

1. Retained earnings at end of period

12,688,967,476

13,094,910,659

2. Distributions in excess of retained earnings

Thousands of Yen

Hedge accounting
methodType of derivative
instruments

Main hedged item

Interest-rate swaps:
Principal treatment
Received/floating
Long-term debt
methodand paid/fixedInterest-rate swaps:
Special treatment ofReceived/floating
Long-term debt
interest-rate swaps
and paid/fixed
Total

Notional amountDue after one year

(Note 1)

101,180,000

Fair value (Note 2)(909,813)

78,130,000

74,732,500

51,639,700

175,912,500

129,769,700(1,019,257)(Note 4)

(1,929,071)

NOMURA REAL ESTATE MASTER FUND, INC.

91,667,763

122,481,948

91,667,763

122,481,948

14,592,285,700

15,461,140,800

3. Incorporation into unitholders’ capital
Of which, reversal of allowance for temporary difference adjustments
4. Distributions[Distributions (per unit)]

Of which, other distributions in excess of net income[Of which, other distributions in excess of net income (per unit)]

Main hedged item
Long-term debt
Long-term debt

Notional amount(Note 1)

91,330,000

Due after one year
70,210,000

61,661,100

42,868,300

152,991,100

113,078,300

Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥2,198 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥959,582 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

57

1,537,155,200[Of which, allowance for temporary difference adjustments (per unit)]

Thousands of Yen

Total

1,346,000,800

Of which, allowance for temporary difference adjustments(2) Derivative financial instruments subject to hedge accounting were as follows:

Interest-rate swaps:
Special treatment ofReceived/floatinginterest-rate swaps
and paid/fixed

Of which, other distributions in excess of net income[Of which, distributions of earnings (per unit)](1) There were no derivative financial instruments not subject to hedge accounting.

Interest-rate swaps:
Principal treatment
Received/floating
methodand paid/fixed

1,735,193,600

Of which, distributions of earnings

Derivative transactions as of February 29, 2020

Type of derivative
instruments

3,272,348,800

1,555,176,600(Note 3)Note 1: Contract amount is based on notional amount.
Note 2: Fair value is measured by swap counterparty, based on the actual market interest rate, etc.
Note 3: Out of the fair value, (¥4,001 thousand) is booked as “accrued expenses” on the Balance Sheet.
Note 4: Out of the fair value, (¥1,019,257 thousand) is not marked to market on the Balance Sheet, since adopting special treatment for interest-rate swaps.

Hedge accounting
method2,901,177,400

Of which, allowance for temporary difference adjustment

Fair value (Note 2)(785,528)(Note 3)(959,582)(Note 4)

(1,745,111)

5. Retained earnings carried forward(3,209)(3,279)

11,691,108,300

12,188,792,000(2,571)(2,585)

1,555,176,600

1,735,193,600

(342)

(368)

1,346,000,800

1,537,155,200

(296)

(326)

906,191,413

783,636,711

Calculation method of distribution amount
NMF calculates distributions in accordance with the cash distribution policies as specified in Article 36, Paragraphs 1 and 2 of NMF’s
Articles of Incorporation.
For the fiscal period under review, NMF decided to implement a total of ¥15,461,140,800 in distributions (¥3,279 per investmentunit). This figure was arrived at by excluding the portion for which per-unit distribution comprising the types of dividends laid out
below would be less than ¥1 from ¥15,465,559,688, the amount calculated based on ¥12,188,719,246 in net income after taxes plus
¥2,622,242,820 in amortization of goodwill, and adding ¥654,597,622 in consideration of temporary decrease in operating revenues
due to the move out of a large tenant and effect to per-unit distribution due to increase in investment units by issuance of new
investment units.
Total distributions comprise distribution of earnings and distribution in excess of net income. Distribution of earnings as stipulated
in Article 136, Paragraph 1 of the Investment Trust Act came to ¥12,188,792,000 (¥2,585 per investment unit). Distribution in excess
of net income comprises a distribution of ¥1,735,193,600 (¥368 per investment unit) as allowance for temporary difference
adjustment and ¥1,537,155,200 (¥326 per investment unit) in other distribution in excess of net income.

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Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Financial Section

Information

25. INFORMATION ON ALLOWANCE FOR TEMPORARY DIFFERENCE ADJUSTMENTS

For the period from September 1, 2019 to February 29, 2020

For the period from March 1, 2019 to August 31, 2019

1. Reason for provision, related assets and amounts

1. Reason for provision, related assets and amounts

Thousands of Yen
Thousands of Yen

Related assets, etc.

Provision of allowance for temporary
difference adjustments

Reason for provision

Goodwill

Amortization of goodwill

Long-term deposits

Shortfall of reserve for repairs

2,622,242
4,753

Increase-subtotal

2,626,996

Buildings, facilities, etc.

Depreciation deficiency equivalent(953,085)

Unearned revenue

Write-down of loss on interest rate swap due to merger(102,629)

Land

Cost of sales of land

Others-(781)(15,323)

Decrease-subtotal(1,071,819)

Total

1,555,176

Related assets, etc.
Goodwill

Amortization of goodwill

Long-term deposits

Shortfall of reserve for repairs
Depreciation deficiency equivalent(797,086)

Unearned revenue

Write-down of loss on interest rate swap due to merger(84,157)

Others-Sale and depreciation of properties for which merger
expenses were recorded

Land, Buildings, etc.

–

(Note 1)

Deferred gains or losses on hedges Changes in fair value of derivatives(91,667)

Total(91,667)

Note 1: The amount of reversal during the current fiscal period (¥5,663 thousand) is included in “Depreciation deficiency equivalent” on “1. Reasons for provision, related assets andamounts.”

3. Method of reversal(2) Merger expenses
Method of reversal

Buildings, etc.

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

Land

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

Buildings in trust, etc.

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

Land in trust, etc.
Leasehold(897,146)

Total

1,735,193

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

Reason for reversal

Land, Buildings, etc.

Sale and depreciation of properties for which merger
expenses were recorded

Deferred gains or losses on hedges

Changes in fair value of derivatives

Provision of allowancefor temporary difference adjustments–(Note 1)

(122,481)

Total(122,481)

Note 1: T he amount of reversal during the current fiscal period (¥5,534 thousand) is included in “Depreciation deficiency equivalent” on “1. Reasons for provision, related assets andamounts.”

3. Method of reversal(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
(2) Merger expenses(1) Amortization of goodwill
In principle, amortization of goodwill is not reversed.
Item(15,902)

Decrease-subtotal

Related assets, etc.
Provision of allowancefor temporary difference adjustments

10,0972,632,339

Buildings, facilities, etc.

Thousands of Yen

Reason for reversal

2,622,242

Increase-subtotal

2. Reason for reversal, related assets and amounts

Related assets, etc.

Reason for provision

Provision of allowancefor temporary difference adjustments

Upon sale, the corresponding amount is scheduled to be reversed

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

Item

Method of reversal

Buildings, etc.

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

Land

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

Buildings in trust, etc.

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

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

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

26. SIGNIFICANT SUBSEQUENT EVENTSIn response to the Japanese government's declaration of a state of emergency and the local government’s request for suspension
and self-restraint of business operation due to the spread of COVID-19 infection, NMF has decided to take measures such as
requesting some tenants of NMF’s properties to restrain themselves from operating their business. Accordingly, some tenants of
NMF’s properties are taking their actions such as voluntary curtail of their business operations, etc. Therefore, this may have an
impact on NMF’s future results of operations. It is difficult to reasonably estimate the impact at present.

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60

Message from the Management

TopicsManagement Strategy

ESG Measures

Financing Status

Portfolio

Information

Financial Section

INDEPENDENT AUDITOR’S REPORT61

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