Disclaimers
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative
Investment Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as
implemented in their respective jurisdictions. Accordingly, you should not use thisdocument for any other purpose.
European Economic Area and United Kingdom Investors
The AIFMD was adopted on June 8, 2011 and was required to be implemented by each
Member State of the European Economic Area (the “EEA”) into its national legislation by
July 22, 2013. The units of Nomura Real Estate Master Fund, Inc. (“NMF” or the “AIF”)
may not be marketed (within the meaning given to the term “marketing” under the
AIFMD), and the Communication may not be conducted, to prospective investors
domiciled or with a registered office in any Member State of the EEA or the United
Kingdom unless: (i) the units of NMF may be marketed under any national private
placement regime (including under the AIFMD) or other exemption in that Member Stateor the United Kingdom (as applicable); or (ii) the units of NMF can otherwise be lawfully
marketed or sold in that Member State or the United Kingdom (as applicable) incircumstances in which the AIFMD does not apply, provided that any such offer or sale is
not made to a retail investor as described above. We have made a notification to each of
the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the“AFM”) and the United Kingdom Financial Conduct Authority pursuant to Article 42 of
the AIFMD in order to market the units of NMF in the Netherlands and the United
Kingdom, respectively.
Netherlands
The units of NMF are being marketed in the Netherlands under Section 1:13b of the Dutch
Financial Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordancewith this provision, Nomura Real Estate Asset Management Co. Ltd. (the “AIFM”)
notified with the AFM of its intention to offer these units in the Netherlands. The units of
NMF will not, directly or indirectly, be offered, sold, transferred or delivered in the
Netherlands, except to or by individuals or entities that are qualified investors(gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft. As aconsequence neither the AIFM nor NMF is subject to the license requirement forinvestment institutions (beleggingsinstellingen) or their managers pursuant to the Wft.
Consequently, the AIFM and NMF are only subject to the supervision of the Netherlands
Central Bank (De Nederlandsche Bank) or the AFM for the compliance with the ongoingregulatory requirements as referred to in the Dutch law implementation of Article 42 of
the AIFMD. According to Article 23 of the AIFMD, the prospectus is not subject toapproval by the AFM. No approved prospectus is required to be published in the
Netherlands pursuant to Article 3 of the Regulation (EU) 2017/1129 (the “Prospectus
Regulation”) as amended and applicable in the Netherlands.
Prohibition of Sales to EEA Retail Investors
In addition to the restrictions under the AIFMD, the units of NMF are not intended to beoffered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the EEA. For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU, as amended (the “MiFID II”) including any client,beneficiary, principal, or similar of any person acting as a trustee, agent, nominee, orsimilar; or (ii) a customer within the meaning of Directive (EU) 2016/97, where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1)of MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation, as
amended. Consequently no key information document has been prepared required byRegulation (EU) No 1286/2014 (the “PRIIPs Regulation”) for offering or selling the unitsof NMF or otherwise making them available to retail investors in the EEA. Therefore
offering or selling the units of NMF, or otherwise making them available, to any retailinvestor in the EEA may be unlawful under the PRIIPs Regulation.
United Kingdom
The units of NMF are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, AIFM has notified the Financial Conduct Authority (the “FCA”) of its
intention to offer these units in the United Kingdom. For the purposes of the United
Kingdom Financial Services and Markets Act 2000 (“FSMA”) NMF is an unregulated
collective investment scheme which has not been authorized by the FCA. Accordingly,
any communication of an invitation or inducement to invest in NMF may be made only to(i) investment professionals falling within Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005 (the “Order”), as amended; or (ii)high net worth companies, unincorporated associations or other entities falling within
Articles 49(2)(a) to (d) of the Order; or (iii) other persons to whom it may lawfully be
communicated (all such persons, together being referred to as “Relevant Persons”). In the
United Kingdom, this document and its contents are directed only at Relevant Persons andmust not be acted on or relied on by persons who are not Relevant Persons. The
transmission of this document and its contents in the United Kingdom to any person other2

than a Relevant Person is unauthorized and may contravene the FSMA and other United
Kingdom securities laws and regulations.
Prohibition of Sales to UK Retail Investors
In addition to the restrictions under the AIFMD, as retained by the United Kingdom in its
domestic laws, the Units of NMF are not intended to be offered, sold or otherwise madeavailable to and should not be offered, sold or otherwise made available to any retailinvestor in the United Kingdom. For these purposes of this provision, a “retail investor”
means a person who is one (or more) of: (i) a retail client, as defined in point (8) of Article
2 of Regulation (EU) No 2017/565 as it forms part of domestic law by virtue of theEuropean Union (Withdrawal) Act 2018 (the “EUWA”); or (ii) a customer within themeaning of the provisions of the FSMA and any rules or regulations made under the
FSMA to implement Directive (EU) 2016/97, where that customer would not qualify as aprofessional client, as defined in point (8) of Article 2(1) of Regulation (EU) No 600/2014
as it forms part of domestic law by virtue of the EUWA; or (iii) not a qualified investor as
defined in Article 2 of Regulation (EU) 2017/1129, as it forms part of domestic law byvirtue of the EUWA; and the expression “offer” includes the communication in any formand by any means of sufficient information on the terms of the offer and the units to beoffered so as to enable an investor to decide to purchase or subscribe the international
units.
Consequently no key information document required by Regulation (EU) No 1286/2014,as it forms part of domestic law by virtue of the EUWA (the “UK PRIIPs Regulation”), foroffering or selling the units or otherwise making them available to retail investors in the
United Kingdom has been prepared and therefore offering or selling the units or otherwise
making them available to any retail investor in the United Kingdom may be unlawful
under the UK PRIIPs Regulation.

3

Article 23 (1)(a)Objectives of the AIF

NMF aims to secure stable mid-to-long term income and to achieve steady growth of its
assets by primarily investing in relatively new logistics facilities and retail facilities,
residential buildings, office buildings and hotels mainly in the Tokyo Area, which we
believe will continue to generate strong demand for properties by tenants.

Investment strategy

NMF plans to pursue the following investment strategies.
•

Strengthen NMF’s portfolio through the acquisition of high quality properties inlocations with strong tenant demand, focusing mainly on properties developed by
Nomura Real Estate Development Co., Ltd. (“Sponsor”). Since its establishment on
October 1, 2015, NFM has realized external growth centering on acquisition ofhigh-quality properties in locations with strong tenant demand, focusing mainly on
those developed by the Sponsor.

•

Improve NMF’s portfolio quality and profitability through strategic property
replacement (“SPR”). NFM intends to continue to pursue SPR, disposing ofrelatively older properties that it expects may decline in profitability, in order toimprove the overall quality and profitability of its portfolio. Through continued
SPR, NMF seeks to establish a property replacement cycle in order to build asustainable portfolio with a stable quality and performance, maintaining its
portfolio’s average NOI yield and growth in distributions per unit.

•

Achieve stable income and realize internal growth with a focus on the upside
sector in line with the market environment. NMF refers to office buildings, retailproperties located near train stations and hotels, which it can expect upside
potential in income based on general economic trends, as “upside sector”, andrefers to retail properties located in residential areas, logistics facilities andresidential properties as “stable income sector”. In both sectors, NMF has
maintained high occupancy rates with rising average rents since its formation.
Making full use of the wealth of experience, management capability and knowhow
of the Asset Manager, NMF seeks to achieve stable income from the properties ineach of the two sectors and also proactively pursue internal growth with a focus
on the upside sector in line with the current market environment.

Types of assets the AIF

Real estate, trust beneficiary interests in real estate, real estate securities, specified assets

may invest in

and other assets.

Techniques it may

The principal risks with respect to investment in NMF are as follows:

employ and all
associated risks•

any adverse conditions in the Japanese economy, including as a result ofmacroeconomic factors such as the situation in Ukraine, the increase natural
resource prices and electricity charges and the weakening yen, could adversely
affect NMF;

4•

NMF may not be able to acquire properties to execute the growth and investment
strategy in a manner that is accretive to earnings;•

illiquidity in the real estate market may limit the ability to grow or adjust theportfolio;•

the past experience of the asset manager (“AIFM” or the “Asset Manager”) in theJapanese real estate market is not an indicator or guarantee of the future results;•

NMF’s reliance on Nomura Real Estate Group including the AIFM and other third
party service providers could have a material adverse effect on its business;•

NMF may change its detailed investment policy without a formal amendment of
the articles of incorporation.

•

there are potential conflicts of interest between NMF, NMF’s related parties and
AIFM;

•

NMF’s revenues largely comprise leasing revenues from the portfolio properties,
which may be negatively affected by factors including vacancies, decreases in rent,
and late or missed payments by tenants;•

Because many of its logistics and retail properties and some of the officeproperties are used by a single or a few tenants, NMF’s performance may bematerially adversely affected by the performance of a small number of tenants ineach such property.

•

NMF faces significant competition in seeking tenants and it may be difficult to findreplacement tenants, especially as to logistics properties;•

increases in interest rates may increase the interest expense and may result in a
decline in the market price of the units;•

NMF may suffer large losses if any of the properties incurs damage from a natural
or man-made disaster;•

the spread of infectious disease may have a significant, long-term adverse impact
on economic activities, including through self-isolation measures, which may
adversely affect the performance of the portfolio and market price of the units;•

many of the properties in the portfolio are concentrated in the Tokyo
Metropolitan Area;•

any inability to obtain financing from issuance of investments units, loan andissuance of investment corporation bonds for future acquisitions could adversely
affect the growth of the portfolio;•

NMF’s failure to satisfy a complex series of requirements pursuant to Japanese tax
regulations would disqualify NMF from certain taxation benefits and significantly
reduce the cash distributions to the unitholders; and•the ownership rights in some of the properties may be declared invalid or limited.

In addition, NMF is subject to the following risks:5•risks related to increasing operating costs;•

risks related to the restrictive covenants under debt financing arrangement;•risks related to entering into forward commitment contracts;•

risks related to hotels with single tenants or core tenants;•

risks related to third party leasehold interests in the land underlying NMF’s
properties;•risks related to investment in properties where NMF owns only the land or only
the building;•risks related to holding the property in the form of compartmentalized ownership(kubun shoyū) interests or co-ownership interests (kyōyū-mochibun);•risks related to holding the property in the form of limited proprietary right of land
(as it called “soko-chi”)•

risks related to properties not in operation (including properties underdevelopment);•risks related to the defective title, design, construction or other defects or
problems in the properties;•risks related to suffering impairment losses relating to the properties;•risks related to decreasing tenant leasehold deposits and/or security deposits;•risks related to tenants’ default as a result of financial difficulty or insolvency;•

risks related to the insolvency of master lessor;•

risks related to the insolvency of seller of the properties;•risks related to relying on expert appraisals and engineering, environmental andseismic reports as well as industry and market data;•risks related to the presence of hazardous or toxic substances in the properties, orthe failure to properly remediate such substances;•risks related to the strict environmental liabilities for the properties, andimplementation of countermeasures against global warming;•risks related to the amendment of the applicable administrative laws and local
ordinances;•risks related to investments in anonymous associations (tokumei kumiai);•

risks related to investments in trust beneficiary interest;•

risks related to the tight supervision by the regulatory authorities and compliancewith applicable rules and regulations;•risks related to the tax authority disagreement with the AIFM’s interpretations of
the Japanese tax laws and regulations;•risks related to being unable to benefit from reductions in certain real estate taxes
enjoyed by qualified J-REITs;•

risks related to changes in Japanese tax laws; and6•

the risk of dilution as a result of further issuances of units.

Any applicable

NMF is subject to investment restrictions under Japanese laws and regulations (e.g., theinvestment restrictions

Act on Investment Trusts and Investment Corporations (the “ITA”), the Financial
Instruments and Exchange Act (the “FIEA”)) as well as its articles of incorporation.
NMF must invest primarily in specified assets as defined in the ITA. Specified assets
include, but are not limited to, securities, real estate, leaseholds of real estate, surface
rights (chijō-ken) (i.e., right to use land for the purpose of having a structure on it) or trust
beneficiary interests for securities or real estate, leaseholds of real estate or surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets in real estate, realestate-related assets and liquid assets as provided by the listing requirements. Real estatein this context includes, but is not limited to, real estate, leaseholds of real estate, surface
rights, and trust beneficiary interests for these assets, and real estate-related assets in thiscontext include, but are not limited to, anonymous association (tokumei kumiai) interests
for investment in real estate.
Pursuant to the ITA, investment corporations may not independently develop land for
housing or to construct buildings, but may outsource such activities in certain
circumstances.

Circumstances in

NMF may take out loans or issue long-term or short-term investment corporation bonds

which the AIF may use

for the purpose of investing in properties, conducting repairs, paying cash distributions,leverage

repaying obligations (including repayment of tenant leasehold or security deposits, andobligations related to loans or long-term or short-term investment corporation bonds) andother activities.

The types and sourcesof leverage permitted
and associated risks

Loans or investment corporation bonds:
NMF may be subject to restrictive covenants in connection with any future indebtedness
that may restrict the operations and limit the ability to make cash distributions tounitholders, to dispose of the properties or to acquire additional properties. Furthermore,
NMF may violate restrictive covenants contained in the loan agreements NMF executes,
such as the maintenance of debt service coverage or loan-to-value ratios, which may
entitle the lenders to require NMF to collateralize the properties or demand that theentire outstanding balance be paid.
Further, in the event of an increase in interest rates, to the extent that NMF has any debt
with unhedged floating rates of interest or NMF incurs new debt, interest payments may
increase, which in turn could reduce the amount of cash available for distributions tounitholders. Higher interest rates may also limit the capacity for short- and long-termborrowings, which would in turn limit the ability to acquire properties, and could cause
the market price of the units to decline.

7

Any restrictions on

The maximum amount of each loan and investment corporation bond issuance will be twoleveragetrillion yen, and the aggregate amount of all such debt will not exceed two trillion yen.

Any restrictions on

No applicable arrangements.

collateral and asset
reuse arrangements
Maximum level of

NMF has set an upper limit of 60% as a general rule for its loan-to-value, or LTV, ratio inleverage which theorder to operate with a stable financial condition. NMF may, however, temporarily exceed

AIFM is entitled toany such levels as a result of property acquisitions or other events.

employ on behalf of
the AIF
Article 23(1) (b)Procedure by which

Amendment of the articles of incorporation – Amendment requires a quorum of a

the AIF may change its

majority of the total issued units and at least a two-thirds vote of the voting rights

investment strategy /represented at the meeting. Unitholders should note, however, that under the ITA and ourinvestment policy

articles of incorporation, unitholders who do not attend and exercise their voting rights at
a general meeting of unitholders are deemed to be in agreement with proposals
submitted at the meeting, except in cases where contrary proposals are also being
submitted.
Additionally, the guidelines of the AIFM, which provide more detailed policies within
NMF’s overall investment strategy and policy, can be modified without such formal
amendment of the articles of incorporation.

Article 23(1) (c)Description of the

NMF is party to an Asset Custody Agreement with Sumitomo Mitsui Trust Bank, Limited

main legal implications

regarding NMF’s assets.

of the contractual
relationship entered

NMF is party to the following agreements with Mitsubishi UFJ Trust and Banking
Corporation:

into for the purpose of•

Transfer Agency Agreement;

investment, including•

General Administration Agreement

jurisdiction, applicable•Special Account Management Agreement

law, and the existenceor not of any legal
instruments providing
for the recognition andenforcement of
judgments in the
territory where the AIF

NMF is party to a Financial Agency Agreement with MUFG Bank, Ltd. and Sumitomo Mitsui
Banking Corporation regarding NMF’s investment corporation bonds.
All of the above agreements are governed by Japanese law.
NMF is not involved in or threatened by any legal arbitration, administrative or otherproceedings, the results of which might, individually or in the aggregate, be material.

is established8

NMF is a corporate-type investment trust in the form of investment corporation (toshi
hojin) provided for under the ITA. Therefore, the relationship between NMF and its
unitholders is governed by NMF’s articles of incorporation (as opposed to individual
agreements), which can be amended from time to time upon resolution of a generalunitholders’ meeting. NMF’s articles of incorporation stipulate rules relating to generalunitholders meetings, including the convocation, setting of record date, exercise of voting
rights, resolutions and election of NMF’s directors.
The relationship between NMF and its unitholders is also governed by, and is subject tothe provisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid judgment any final and conclusive civil
judgment for monetary claims (which, for this purpose, are limited to those of a purely
civil nature and do not include monetary claims of the nature of criminal or administrative
sanction, such as punitive damages, even though they take the form of civil claims) against
NMF obtained in a foreign court provided that (i) the jurisdiction of such foreign court isadmitted under the laws of Japan, (ii) NMF has received service of process for thecommencement of the relevant proceedings, otherwise than by a public notice or any
method comparable thereto, or has appeared without any reservation before such foreign
court, (iii) neither such judgment nor the relevant proceeding is repugnant to public policy
as applied in Japan, (iv) there exists reciprocity as to the recognition by such foreign courtof a final judgment obtained in a Japanese court and (v) there is no conflicting judgementon the subject matter by any Japanese court.
Article 23(1) (d)The identity of the• AIFM (Asset Manager): Nomura Real Estate Asset Management Co., Ltd.

AIFM, AIF's depository,

The AIFM provides services related to management and operation of assets, financing

auditor and any otherof the AIF, reporting to the AIF, formulating a business plan for the owned properties byservice providers and a

AIF, and other matters delegated by the AIF.

description of theirduties and the• Auditor: Ernst & Young ShinNihon LLC

investors' rights

The Auditor audits financial statements, prepares audit reports, and report to thetheretosupervisory directors if it finds any misconduct or any material fact that is in violation oflaws and regulations or the articles of incorporation with regard to execution of theduties of the executive director.
• Custodian: Sumitomo Mitsui Trust Bank, Ltd.
The Custodian provides administrative services related to custody of assets and related
documents and cash management.

9• General Administrator, Transfer Agent, and Manager of Special Accounts: Mitsubishi
UFJ Trust and Banking Corporation
The General Administrator, Transfer Agent, and Manager of Special Accounts provides
administrative services related to accounting, taxes, unitholder registry, payments ofcash distributions to unitholders, transfer account book and addressing unitholders’claims, offers and notices.
• General Administrator (Fiscal Agent): MUFG Bank, Ltd. and Sumitomo Mitsui Banking
Corporation
The General Administrator provides administrative services related to investment
corporation bonds.
Service providers owe contractual obligations under their respective agreements with the
AIF or AIFM, as the case may be. In addition, the FIEA provides that the Asset Manager
owes the AIF a fiduciary duty and must conduct its activities as the asset manager in goodfaith.
The FIEA also prohibits the Asset Manager from engaging in certain specified conduct,
including entering into transactions outside the ordinary course of business or with relatedparties of the Asset Manager that are contrary to or violate the AIF’s interests.
Pursuant to the ITA, the unitholders have the right to approve the execution or
termination of the asset management agreement at a general meeting of unitholders.
Article 23(1) (e)Description of how the

Not applicable.

AIFM complies withthe requirements tocover professional
liability risks (ownfunds / professional
indemnity insurance)
Article 23(1) (f)Description of any
delegatedmanagement function
such as portfolio

Not applicable.
There is no delegation of such functions beyond the AIFM, which is responsible for
portfolio and risk management, and the Custodian, which is responsible for safekeeping
activities.

management or risk
management and of
any safekeeping10

function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest
that may arise fromsuch delegations
Article 23(1) (g)Description of the AIF’s NMF makes investment decisions based on the valuation of properties, upon
valuation procedureand pricing
methodology,
including the methods
used in valuing hardto-value assets

consideration of the property appraisal value.
NMF shall evaluate assets in accordance with its Article of Incorporation. The methods andstandards that NMF uses for the evaluation of assets shall be based on the Regulations
Concerning the Calculations of Investment Corporations, as well as the Regulations
Concerning Real Estate Investment Trusts and Real Estate Investment Corporations andother regulations stipulated by ITA, in addition to Japanese GAAP.
J-REITs may only use the valuation methods prescribed in the rules of the Investment
Trusts Association, Japan, which emphasize market price valuation.

Article 23(1) (h)Description of the AIF’s NMF uses investment corporation bonds and long-term loans, to finance acquisitions andliquidity risk

repayment obligations. NMF controls related risk by diversifying lenders and using

management,

multiple ways of raising funds including use of surplus funds and issuing units.

including redemption
rights in normal andexceptional

For floating rate borrowings exposed to the risk of interest rate fluctuations, NMF
maintains low percentage of its LTV, and intends to keep the high proportion of its
obligations subject to fixed rate loans.

circumstances andexisting redemption
arrangements withinvestors

Risks related to deposits are managed through diversifying depositary financial
institutions.
As NMF is a closed-end investment corporation, unitholders are not entitled to request
the redemption of their investment.

Article 23(1) (i)Description of all fees,

Compensation: Compensation for an executive director shall be no more than 800,000 yen

charges and expenses

per month, and the amount of compensation shall be determined by the Board ofand a maximum

Directors taking into account the levels of compensation of directors and statutory

amount which is

auditors performing similar work in similar positions for other companies and legal

directly / indirectly

entities, general economic trends, trends concerning wages and other factors.

borne by the investors

Compensation for a supervisory director shall be no more than 700,000 yen per month,and the amount of compensation shall be determined by the Board of Directors taking

11into account the levels of compensation of directors and statutory auditors performing
similar work in similar positions for other companies and legal entities, general economic
trends, trends concerning wages and other factors.
Asset Manager:• Asset Management Fee: NMF will pay the Asset Manager an asset management fee asfollows:
1. Management Fee I
Management Fee shall be the amount calculated by multiplying (a) the total assets of
NMF determined by the method specified below by (b) 0.45% per annum for theperiod from the day after NMF’s immediately preceding Settlement Date until thelast day of the third month following such Settlement Date (“Calculation Period 1”)
and for the period from the day after the final day of Calculation Period 1 until thenext Settlement Date (“Calculation Period 2”) (pro rata monthly amounts shall becalculated on the basis of 12 months per year; amounts less than one yen shall be
rounded down).
Total Assets in Calculation Period 1
The total amount of assets indicated on NMF’s balance sheet as of the Settlement
Date of NMF’s immediately preceding Fiscal Period (limited to the balance sheet
approved at the meeting of the Board of Directors in accordance with the Article 131,
Paragraph 2 of the Investment Trust Act) (provided, however, that an amountequivalent to unamortized goodwill shall be deducted).
Total Assets in Calculation Period 2
The total amount of assets indicated in Calculation Period 1, plus or minus differenceof the total acquisition price (meaning the purchase price in a case of purchase, theprice of the asset acquired by way of exchange provided in the exchange agreement
in a case of exchange (the amount after the deduction of the compressed amount, if
compressed entry is made), the contribution amount in a case of capital contribution,and the amount of assets recognized with respect to the property (excluding ancillary
expenses) in accordance with the Accounting Standards for Business Combination(kigyo ketsugo ni kansuru kaikei kijun) in a case of merger; excluding national andlocal consumption taxes required for acquisition of buildings, hereinafter the same inthis Item and the following Item) of acquired specified assets, and the total book valueof the disposed specified assets indicated on NMF’s balance sheet as of theSettlement Date of NMF’s immediately preceding Fiscal Period (limited to the balance
sheet approved at the meeting of the Board of Directors in accordance with the
Article 131, Paragraph 2 of the Investment Trust Act), if NMF acquired (including the12case where NMF succeeded specified assets of an absorbed investment corporation
as a result of an absorption-type merger, in which NMF participates as a surviving
investment corporation; hereinafter the same in this Item and the Item 3) or disposedof specified assets as specified in the Articles of Incorporation during Calculation
Period 1.
Fees for Calculation Period 1 shall be paid by the last day of Calculation Period 1 andfees for Calculation Period 2 shall be paid by the last day of Calculation Period 2.

2. Management Fee II
Management Fee II for each Fiscal Period of NMF shall be the amount calculated bymultiplying the Net Income before Deduction of Management Fee II by 5.5%
(amounts less than one yen shall be rounded down). The “Net Income before
Deduction of Management Fee II” means the amount obtained by adding goodwill
amortization cost to, and deducting gain on negative goodwill from, income before
income taxes calculated in accordance with generally accepted corporate accounting
principles in Japan (before deduction of Management Fee II and non-deductible
consumption taxes on Management Fee II) and after compensation of loss carriedforward (if any). If the result of the above calculation of the Net Income before
Deduction of Management Fee II becomes negative value, the amount of the Net
Income before Deduction of Management Fee II shall be zero yen.
Management Fee II shall be paid within three months after the Settlement Date forthe relevant Fiscal Period.

3. Acquisition Fee
If NMF acquired specified assets as specified in Articles of Incorporation, NMF shallpay Acquisition Fee in the amount obtained by multiplying the acquisition price by arate separately agreed upon with the Asset Management Company, which rate shallbe up to 1.0% (0.5%, if the acquisition is from a related party defined in the Article
201, Paragraph 1 of the Investment Trust Act or a company etc. for which a related
party provides the asset management or investment advisory service).
Acquisition Fees shall be paid by the last day of the month following the month inwhich the specified asset was acquired (the month to which the effective date ofmerger or the date of incorporation of NMF belongs, in a case of merger).

13

4. Disposition Fee
If NMF disposed of specified assets as specified in Article 29, Paragraph 1, NMF shallpay Disposition Fee in the amount obtained by multiplying the disposition price(meaning the disposition price in a case of sale, and the price of the asset disposedof by way of exchange provided in the exchange agreement in a case of exchange;
excluding national and local consumption taxes required for disposition of buildings,
hereinafter the same in this Item) by a rate separately agreed upon with the AssetManagement Company, which rate shall be up to 1.0% (0.5%, if the disposition is toa related party defined in the Article 201, Paragraph 1 of the Investment Trust Act
or a company etc. for which a related party provides the asset management orinvestment advisory service).
Disposition Fees shall be paid by the last day of the month following the month inwhich the specified asset was disposed of.

Custodian:• Custodian Fee: NMF will pay the Custodian fee and the compensation tax per threemonths ending February, May, August and November every year as follows (for any
period of less than a month, the fee will be calculated on a pro-rata basis; amounts
less than one yen shall be rounded down):
Not more than the amount calculated by multiplying (a) total amount indicated in
the assets section on NMF’s balance sheet as of the Settlement Date of NMF’s
immediately preceding Fiscal Period by (b) 0.03% and then dividing 12, which is
calculated by NMF and the Custodian upon discussion.

General Administrator:• General Administrators Fee: NMF will pay the General Administrators fee and thecompensation tax per three months ending February, May, August and November
every year as follows (for any period of less than three months, the fee will becalculated on a pro-rata basis; amounts less than one yen shall be rounded down):
Not more than the amount calculated using the following table, based of the total
asset amount indicated on NMF’s balance sheet as of the Settlement Date of NMF’s
immediately preceding Fiscal Period, which is calculated by NMF and the General
Administrator in compliance with the asset structure, and the compensation tax.

14

Total Asset Amount (JPY billion)

Method of Calculation

Portions not exceeding 10

11,000,000 yen

Over 10 to 50

11,000,000 yen + (Total asset amount – 10
billion yen) × 0.080 %Over 50 to 100

43,000,000 yen + (Total asset amount – 50
billion yen) × 0.060 %Over 100 to 200

73,000,000 yen + (Total asset amount –100 billion yen) × 0.055 %Over 200 to 300

128,000,000 yen + (Total asset amount –200 billion yen) × 0.040 %Over 300 to 500

168,000,000 yen + (Total asset amount –300 billion yen) × 0.035 %Over 500

238,000,000 yen + (Total asset amount –500 billion yen) × 0.030 %Transfer Agent:• Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as preparation, maintenance andstorage of NMF’s unitholder register; preparation and reporting of the end-of-fiscal
period unitholders register and unitholder statistical data.
The monthly standard fees will be the total of the amount 1 and 2 below.
1. The amount calculated using the following table divided by 6, with a minimum
monthly fee of 220,000 yen.
Number of Unitholders

Fees per Unitholder

first 5,000 unitholders

390 yenover 5,000 to 10,000

330 yenover 10,000 to 30,000

280 yenover 30,000 to 50,000

230 yenover 50,000 to 100,000

180 yenover 100,000

150 yen

2. 55 yen per unitholder disqualified in each month.
• Other fees:
NMF pays the transfer agent other fees for various other services, including inconnection with the issuance of dividends.

15

Manager of Special Accounts:• Special Account Management Fee:
Special account management fees are for services such as preparation, maintenanceand storage of NMF’s transfer account registry and annexed books; reporting
regarding notice to all unitholders; opening/closing of special accounts and otherrelated matters.
The monthly special account management fees will be the total of the amount 1 and
2 below.
1. The monthly special account management fee:
The monthly fee is calculated using the following table, with a minimum monthly
fee of 20,000 yen.
Number of Unitholders Using Special
Accounts

Fees per Unitholder

first 3,000 unitholders

150 yenover 3,000 to 10,000

125 yenover 10,000 to 30,000

100 yenover 30,000

75 yen2. Other special account management fee:
The following fees are paid as special account management fee:
Type of Fee

AmountReporting to notice of all unitholders

150 yen/report

Receipt of request to individual
unitholder notice
Receipt of request to provision of

250 yen/receipt
250 yen/receipt

information
Receipt of various notifications
Assisting of designation for transfer ofdividends

250 yen/receipt
130 yen/assisting• Other fees:
NMF pays the manager of Special Accounts other fees for various other services,
including in connection with the transfer to other accounts of the unitholder using
special accounts.
Auditor:16• Auditor Fee:
The compensation amount to the independent auditor for each fiscal period(defined in the Article of Incorporation) subject to audit shall be determined by the
Board of Directors within a maximum amount of thirty million (30,000,000) yen, andsuch amount shall be paid no later than the last day of the month following themonth when the audit engagement for the settlement of the relevant fiscal period
finishes.
The AIF may also incur other miscellaneous fees in connection with property
management, issuance of units, investment corporation bonds and the operation,acquisition or disposition of properties.
Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the Act on Investment Trusts and Investment

AIFM's procedure to

Corporations of Japan, which applies the requirements of Article 109 paragraph 1 of theensure fair treatment

Companies Act to investment corporations, investment corporations are required to treatof investors and details

unitholders equally depending on the number and content of units held. In addition, uponof any preferential

liquidation, the allotment of residual assets to unitholders is required to be made equallytreatment received bydepending on the number units held under Article 77 paragraph 2 item 2 and Article 158

investors, includingof the ITA.

detailing the type ofinvestors and theirlegal or economic links
with the AIF or AIFM
Article 23(1) (k)The latest annual

Additional information may be found in our most recent semi-annual report prepared inreport referred to inaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s office

Article 22(1)located at 8-5-1 Nishi-Shinjuku, Shinjuku-ku, Tokyo.

Article 23(1) (l)The procedure and

NMF is authorized under the articles of incorporation to issue up to 20,000,000 units.

conditions for the

NMF’s units have been listed on the Tokyo Stock Exchange since October 2, 2015.

issue and sale of theSecondary market sales and transfers of units will be conducted in accordance with theunitsrules of the Tokyo Stock Exchange. Unit prices on the Tokyo Stock Exchange aredetermined on a real-time basis by the equilibrium between bids and offers. The Tokyo
Stock Exchange sets daily price limits, which limit the maximum range of fluctuation within
a single trading day. Daily price limits are set according to the previous day’s closing priceor special quote.

17

Article 23(1) (m)Latest net asset value

NMF’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromof the AIF or latest

financial information venders (including Reuters, which can be viewed atmarket price of thehttps://www.reuters.com/markets/companies/3462.T/).

unit or share of the AIF
Article 23(1) (n)Details of the historical

The units of NMF were established on the Tokyo Stock Exchange on October 1, 2015.

performance of the

The performance of the units for the most recent five fiscal periods is as follows

AIF, where available
Fiscal period ended

Total Assets

Total Net Assets

Net Assets per unit

(JPY million)(JPY million)(JPY)

17th Fiscal Period(ended February 29,

1,187,285

611,611

129,710

1,192,127

614,690130,363

1,185,099

613,540

130,119

1,187,581

615,128

130,456

1,187,420

616,878

130,8272024)
16th Fiscal Period(ended August 31, 2023)
15th Fiscal Period(ended February 28,
2023)
14th Fiscal Period(ended August 31, 2022)
13th Fiscal Period(ended February 28,
2022)
Article 23(1) (o)Identity of the prime

No applicable prime broker.

broker, any material
arrangements of the
AIF with its prime
brokers, how conflictsof interest aremanaged with theprime broker and theprovision in thecontract with thedepositary on thepossibility of transfer

18and reuse of AIF
assets, andinformation about any
transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how and The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodicallywhen periodic

through the AIF Internet website and other public disclosures.

disclosures will bemade in relation toleverage, liquidity andrisk profile of theassets, pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shall inform

Not applicable.

the investors before
they invest in the AIF
of any arrangement
made by thedepositary tocontractually discharge
itself of liability inaccordance with
Article 21(13)The AIFM shall also

Not applicable.

inform investors of any
changes with respect
to depositary liability
without delay
Article 23(4)(a)Percentage of the AIF's assets which

There are no assets that are subject to special arrangements arising fromare subject to special arrangements

their illiquid nature.

arising from their illiquid nature. The
percentage shall be calculated as the
net value of those assets subject to19

special arrangements divided by the
net asset value of the AIF concerned
Overview of any special

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements
Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements
How management and performance

There are no such special arrangements.

fees apply to such assets
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF

disclosed at an appropriate time.

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed-end

disclosed at an appropriate time.

AIF, notify to investors wheneverthey make changes to its liquidity
management systems (which enable
an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (ie.
there is a substantial likelihood that areasonable investor, becoming awareof such information, would
reconsider its investment in the AIF,
including because such information
could impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).

20

Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements
Terms of redemption and

NMF is a closed-end investment corporation, and unitholders are notcircumstances where management

entitled to request the redemption of their investment.

discretion applies, where relevant
Also any voting or other restrictions

There are no voting or other restrictions on the rights attaching to units.

exercisable, the length of any lock-up
or any provision concerning ‘first inline’ or ‘pro-rating’ on gates andsuspensions shall be included
Article 23(4)(c)
The current risk profile of the AIF and

Investment corporation bonds and long-term loans are used to financethe risk management systems

rehabilitation obligations, acquisition of real estate and repayment of loans.

employed by the AIFM to manage

These financial instruments are exposed to liquidity risk. NMF manages andthose risks

limits such risk by diversifying the lenders, inquest and implement ofdiversified procuring funds including use of surplus funds and the
procurement from the capital market by issuing investment units.
For floating rate borrowings exposed to the risk of rising interest, NMF, inorder to limit the impact caused by maintaining a low LTV ratio and highratio of fixed rate loans compared to floating rate loans. Also, NMF can use
derivatives trading as hedging instruments.
Deposits are exposed to risks of failure of the financial institution holding
the deposit and other credit risks, but such risks are managed throughdiversifying the financial institutions holding the deposits.

Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded and21where these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken
Article 23(5)(a)Any changes to the maximum

Any new arrangements or change in applicable arrangements will beamount of leverage which the AIFM

disclosed at an appropriate time.

may employ on behalf of the AIF,
calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofRegulation (EU) No 231/2013,,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of NMF’s interest-bearing debt (including

leverage employed by the AIF

investment corporation bonds) was JPY 521,334 million as of April 17, 2024.

calculated in accordance with thegross and commitment methods

22

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS – SFDR PRECONTRACTUAL DISCLOSURE
Product Name: Nomura Real Estate Master Fund, Inc.
Legal Entity Identifier: 353800TNNZOQ1CPZE086
Nomura Real Estate Master Fund, Inc. (“NMF”) promotes environmental or social characteristics, butdoes not have as its objective a sustainable investment within the meaning of article 9(1) of Regulation (EU)2019/2088 (“SFDR”). NMF does not have any employees in accordance with the prohibition on having
employees under the Act on Investment Trusts and Investment Corporations of Japan, and NMF relies on
Nomura Real Estate Asset Management Co., Ltd. (the “Asset Manager”) to manage and operate the properties
in the portfolio. NMF and the Asset Manager are hereinafter referred to collectively as “we,” “us” or “our”
unless noted otherwise. References to “fiscal year” or “FY” are to the 12 months began or beginning March 1of the year, unless noted otherwise.

Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
investments with an environmental
characteristics and while it does not have as its objective
objective: __%a sustainable investment, it will have a minimum
proportion of __% of sustainable investments☐ in economic activities that qualify☐ with an environmental objective in economic
as environmentally sustainable
under the EU Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do not☐ withanenvironmental
objectiveinqualifyasenvironmentally
sustainable
under
the EUeconomic activities that do not qualify as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective: __%☒ It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social characteristics are promoted by NMF?
Based on the belief that a sustainable society is essential for our sustainable growth, Nomura Real Estate
Master Fund, Inc. has made effort to address social issues through its business in line with the fundamental
philosophy of securing stable profit over the medium to long term while achieving steady growth of assets undermanagement. NMF, together with its asset manager, Nomura Real Estate Asset Management Co., Ltd. (“AssetManager”), has conducted asset management in a manner that takes into consideration environmental, social andgovernance (ESG) issues in order to enhance unitholder value over the medium to long term.
In December 2015, we established our Sustainability Policy, and in January 2019, in order to implement
specific initiatives toward sustainable society, we identified the most material ESG issues to us after reviewing
the impact of ESG issues on our business, including our stakeholders’ expectations. We subsequently reviewed
and updated the list of the most material ESG issues in January 2020. Below are the representative examples ofour environmental and social initiatives implemented as a result of this update.

1•Increasing the proportion of “green” properties. We aim to minimize our environmental burden
attributable to our portfolio by investing in environmentally-friendly properties and enhancing theefficiency of energy use through eco-friendly and energy-saving measures at our properties. We aim toincrease the proportion of properties based on floor area that have acquired Green Certification (3 Stars
or Higher) (as defined below) to 70% by 2030.

•

Countering climate change. We contribute to efforts to counter climate change with measures toincrease the efficiency of energy usage and reduce greenhouse gas (GHG) emissions at our properties.
Such measures include increased reliance on renewable energy by installing solar panels, reducing
energy consumption by installing LED lighting and double sash windows, renovating air-conditioning
facilities, and expanding greenery at our properties.

•

Improved use of water resources. We make effort to efficiently use water while reducing overall water
consumption at our properties. To reduce water consumption at some of our properties, we have renewed
toilet equipment before new tenants occupy their space, and we have installed smart sprinkler systems
that store and use rainwater in tanks, at some of our “Landport” brand properties. Moreover, rainwater
is used to flush toilets and water plants at some of our logistics facilities and office properties. Some
commercial facilities are equipped with well-water filtering systems that provide clean water for
flushing toilets.

•

Improved safety, security and comfort for tenants. Property specifications and services that tenants
expect from property owners have changed, as people’s lifestyles and work habits have changed in
response to the ongoing structural shift in society. To be responsive to changing needs of our tenants,
we communicate closely with our tenants by conducting regular tenant satisfaction surveys and, basedon the feedback we receive, we upgrade our facilities and improve our services to provide our tenantswith safety, security and comfort. Our tenant support services include training programs, shuttlebus
services, and a job search website for tenants’ staff. We also hold events to strengthen our ties with thelocal community, such as an annual summer festival at Shinjuku Nomura Building and a take-yourchildren-to-work “BIC Global Education Week”, in cooperation with tenants.

•

A healthy work environment. We make effort to ensure that our employees’ work environment is fair
and work is rewarding by ensuring that their evaluations are impartial. For example, Nomura Real EstateGroup has introduced a system that allows employees to propose and take initiatives in their jobs andwork with managers and supervisors to achieving their targets. We have adopted a 360 degree evaluation
framework that allows employees to evaluate their supervisors in terms of skills, performance and otherqualities. We also respect employees’ right of association and right to bargain as basic labor rights. Even
though there is no labor union in NMF nor the Asset Manager, labor representatives and officers of ourhuman resource divisions hold periodic meetings to collaborate on improving the workplaceenvironment.

•

Human resource development and talent management. We aim to help our employees improve theircapabilities by providing them with periodic training and encouraging them to engage in self-directedstudies and acquire job-related certification. Our employees can take advantage of Nomura Real EstateGroup’s use skills development programs to study to obtain real estate-related certifications, such asreal estate notary, real estate appraiser, and first-class architect, and other general business-skills
programs, such as on finance and language.

NMF does not have a specific index designated as a reference benchmark to determine whether NMF
is aligned with the environmental and/or social characteristics that it promotes.

2-

What sustainability indicators are used to measure the attainment of each of the E/S characteristics
promoted by NMF?
We use the following indicators to measure the attainment of the E/S characteristics we promote.
•Environmental certification of our properties. To track the environmental performance of our properties,
we rely on the following certifications issued by third-party organizations (“Green Certification”). As
of February 29, 2024, 56.8% of our properties had obtained Green Certification at the level of at least 3stars (or an equivalent) (“Green Certification (3 Stars or Higher)”) while 57.6% of our properties had
obtained any Green Certification.
o

DBJ Green Building Certification. The DBJ Green Building Certification is a certification
system created by the Development Bank of Japan (DBJ) to support real estate properties withenvironmental and social consciousness. The certification system evaluates a property basedon convenience, comfort, disaster/crime prevention efforts, energy-saving, level ofinvolvement with the local community, in addition to environmental performance. We consider
a property to have obtained Green Certification (3 Stars or Higher) if it received 3 stars or
higher (out of the maximum of 5 stars).

o

BELS Certification. The Building-Housing Energy-efficiency Labeling System (BELS) is athird-party certification system to evaluate the energy conservation performance of nonresidential buildings under the Act on Improving Energy Consumption Performance forArchitectural Structures of Japan. The evaluation uses the Building Energy Index (BEI) value
derived from primary energy consumption based on the building energy efficiency standards
stipulated by the Japanese government. We consider a property to have obtained Green
Certification (3 Stars or Higher) if it received 3 stars or higher (out of the maximum of 5 stars).

o

CASBEE. The Comprehensive Assessment System for Built Environment Efficiency(CASBEE) is a method of evaluating and rating the environmental performance of buildings
and is being promoted under the leadership of the Ministry of Land, Infrastructure, Transport
and Tourism of Japan. The evaluation focuses on five categories: energy/greenhouse gases,
water, resource use and safety, biodiversity/sites and indoor environment. We consider aproperty to have obtained Green Certification (3 Stars or Higher) if it received B+ or higher(on a scale of C (lowest), B, B+, A, S (highest)).

•Sustainability evaluation. GRESB was founded in 2009 by a group of major European pension
funds who played leading roles in launching Principles for Responsible Investment (PRI), is anannual benchmarking assessment to measure the ESG integration of real estate companies and funds.
The Asset Manager has become a GRESB real estate/company & fund member to contribute toimproved sustainability through networking and information sharing with ESG-oriented companies
while introducing best practices in Japan. In 2023, NMF received 4 Stars in the GRESB rating, andGreen Star designation for the eighth consecutive year by achieving high performance both in the
management component and performance component, and an A rating for the seventh consecutive
year under the five-grade GRESB public disclosure level evaluation.

•

GHG emission/Water use targets: We have established the following sustainability targets in order
to counter climate change and address water resources issues:o

GHG emission: We aim to achieve 0 GHG emissions per floor area (intensity) from ourportfolio by 2050 (Medium-term goal: Achieve a 20% reduction by 2030 compared with the2019 level). By fiscal year 2022, we had achieved a 3.2% reduction; and

3

o

-

Water use: We aim to achieve a 10% reduction in water use per floor area (intensity) in our
portfolio by 2030 compared with the 2016 level. By fiscal year 2022, we had achieved a 18.3%
reduction.

•

Tenant satisfaction survey. We regularly conduct satisfaction surveys to obtain feedback from ourtenants, residents and other property users. The surveys for our residents are conducted each year;
and the surveys for our office, retail and logistics tenants are conducted every three years. The
results of these surveys are shared with property managers, building managers, developers and otherrelevant parties, and we use them to improve the properties and services for tenants. For example,
based on feedback received in the surveys, we added a lounge for waiting/business meetings in theentrance of NMF Ginza 4-chome Building, provided shared bicycles and arranged pop-up shops on
wheels on the premises of PROUD FLAT Shibuya Tomigaya and PROUD FLAT Sangenjaya forresidents, renovated the entrance and empty space on the first floor of Sapporo North Plaza to
improve tenant comfort, and introduced a toilet congestion prevention media service (AirKnockAds), which improves the comfort of residents by displaying the congestion status and usage time
to relieve the congestion, at NMF Aoyama 1-chome Building.

•

Employee satisfaction survey. Nomura Real Estate Group, including us, conducts an annual
employee satisfaction survey, and we use the feedback received to ensure that our work
environment is fair. Employees’ satisfaction is measured on a five-point scale with regard to (1)fulfillment in work, (2) workplace satisfaction, (3) satisfaction with superiors, (4) loyalty to thecompany, (5) extent to which employees gain satisfaction through NMF’s growth and success inthe market, and (6) level of monotony of work, as well as (7) workstyle reform and wellness
management. In fiscal year 2022, our employees rated their satisfaction at 3.86 (out of 5.00).

•

Number of paid holidays actually taken. As an indicator to measure our employees’ satisfaction
with their workplaces, we use the number of paid holidays which our employees actually take. The
target is 15 days per year or more. In fiscal year 2022, our employees took 17 days of paid holiday
on average, which we believe shows our employees’ good work-life balance, which leads to a highlevel of satisfaction with their workplaces.

•

Training hours/job-related certifications. To evaluate our human resource development and talentmanagement efforts, we track the number of hours each employee spends on training provided by
Nomura Real Estate Group for improving job skills, such as organizational management or financeknowledge, and the number of employees who hold job-related certifications. In fiscal year 2022,
our employees spent 9.7 hours on average on training. As of August 31, 2023, 299 of the AssetManager’s employees had job-related certifications.

What are the objectives of the sustainable investments that the financial product partially intends tomake and how does the sustainable investment contribute to such objectives?
Not applicable.

-

What are the objectives of the sustainable investments that the financial product partially intends tomake and how does the sustainable investment contribute to such objectives?
Not applicable.

4Principle adverse impacts
Does NMF consider principal adverse impacts on sustainability factors?
Yes, we collect on an ongoing basis select information on our existing portfolio regarding the principal
adverse impact indicators, including exposure to fossil fuels through investment assets, exposure to energyinefficient investment assets and energy consumption intensity. We aim to manage the risk connected to principal
adverse impacts from our investment decisions in several ways, including general screening criteria and due
diligence.
•

Exposure to fossil fuels through assets. We do not invest in real estate assets involved in the extraction,
storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient investment assets. We consider properties other than the properties thathave received any of Green Certifications to be energy-inefficient. As of February 29, 2024, 42.4% of
our properties did not obtain the Green Certifications based on floor area. As described in more detailabove, we implement as appropriate measures to reduce the environmental impact of these properties,
including by obtaining Green Certifications.

•

GHG emissions. Scope 1 GHG emissions generated by our properties were 1,535 t-CO2e (in FY 2020),
1,358 t-CO2e (in FY 2021) and 1,289 t-CO2e (in FY 2022). Scope 2 GHG emissions generated by ourproperties were 21,883 t-CO2e (in FY 2020), 19,637 t-CO2e (in FY 2021) and 21,324 t-CO2e (in FY2022). Scope 3 GHG emissions generated by our properties were 34,657 t-CO2e (in FY 2020), 31,114
t-CO2e (in FY 2021) and 36,697 t-CO2e (in FY 2022). Total GHG emissions generated by ourproperties were 58,075 t-CO2e (in 2020), 52,108 t-CO2e (in FY 2021) and 59,310 t-CO2e (in FY 2022).

We believe that investment decisions that negatively affect climate or other environment-relatedresources, or have negative implications for society, can have a significant impact to risk and value creation for
our unitholders. To this end, we consider the principal adverse impacts of our investment decisions on the above
sustainability factors throughout all major steps of the investment decision and management process throughout
the lifecycle of the properties in our portfolio.
We consider, both at the entity-level (i.e., the Asset Manager) and at the fund-level (i.e., NMF) principal
adverse impacts of our investment decisions on sustainability factors. Under the Act on Investment Trusts andInvestment Corporations of Japan, NMF is prohibited from having any employees and is required to theoutsource asset management function to a third party. Accordingly, as discussed in detail elsewhere, any
consideration at the fund-level of principal adverse impacts of our investment decisions on sustainability is
principally conducted by the Asset Manager, subject to approval of our Board of Directors. In addition to the
Asset Manager’s contractual obligations to NMF under the asset management agreement, the Financial
Instruments and Exchange Act of Japan provides that the Asset Manager owes NMF a fiduciary duty inconducting its activities, including making investment decisions informed by sustainability considerations.
More information related to principal impacts on sustainability factors can be found on the website:
https://www.nre-mf.co.jp/en/ir/library.html.
Investment Strategy
What investment strategy does NMF follow?
We invest primarily in the properties used as logistics facilities, retail facilities, office buildings andresidential facilities in the three major metropolitan areas and other major cities in Japan to secure stable earnings
and steady growth in the properties for the medium to long-term. Our investment strategy takes into
consideration sustainability factors as follows.

5•Consideration of sustainability risks at the time of investment. The Investment Committee of the AssetManager makes investment decisions after taking into consideration climate change risks,contamination risk and other sustainability risks as part of its due diligence process. For example, we
consider the possibility of flooding at a target property based on review of the history of flooding at theproperty and various hazard maps as well as hydraulic engineering work conducted on the property. In
addition, we investigate whether the property has environmental and energy-conserving facilities(including whether it has acquired any environmental certification), any business continuity plan, any
issues arising from the use or storage of hazardous substances, or any soil contamination risk.

•

Urban redevelopment with sponsor. We collaborate with Nomura Real Estate Development Co., Ltd.,
NMF’s sponsor, in the redevelopment of properties to reduce their environmental burden. The sponsor
aims to acquire environmental certification for its properties developed for leasing under the following
brands: PMO, GEMS, Landport and PROUD FLAT. We actively acquire these properties, and in turn,sell our aged properties to the sponsor for redevelopment. We also contribute to redevelopment by
providing the sponsor with feedback on our environmental efforts.

•

Access to public transportation. When making investment decisions in properties, NMF considers
accessibility to public transportation, which is not only convenient for tenants and visitors but also tends
to mitigate carbon footprint.

In May 2019, we also established a green finance framework (“Green Finance Framework”), whichallows us to broaden our investor base to include those interested in ESG investment and financing and further
promote our sustainability. NMF issues green bonds and borrows green loans pursuant to our Green Finance
Framework, which is subject to the following requirements.
•

Use of funds. All proceeds from green finance are allocated to (i) acquisition of assets meeting eligibility
criteria (“Eligible Green Assets”), (ii) refinancing of loans used to acquire Eligible Green Assets, and(iii) redemption of outstanding investment corporation bonds issued to acquire Eligible Green Assets.

•

Eligibility criteria. Eligible Green Assets have acquired any of the following Green Certifications or
any recertification thereof within 36 months after the date of receiving proceeds from green finance, orwill acquire such (re)notification in the future.
o

DBJ Green Building Certification: 3, 4, or 5 starso

BELS Certification: 3, 4, or 5 starso

CASBEE Certification for Real Estate: B+, A or S•

Project evaluation and selection process: The eligibility criteria are developed by the Sustainability
Promotion Committee of the Asset Manager and adopted by the Investment Committee of the AssetManager. The NMF Investment Management Group and Finance & Accounting Department evaluate
and select the Eligible Green Assets, subject to approval by the Investment Committee or the Head of
the NMF Investment Management Group.

•Management of proceeds. We manage any unallocated proceeds from green finance to ensure that suchamount does not exceed the Eligible Green Debt Amount, which is defined as the total book value of
the Eligible Green Assets owned by NMF, multiplied by total assets loan-to-value ratio as of the mostrecent fiscal period end. Furthermore, as long as any proceeds from green finance remain unallocated,
we will internally track and manage the allocated funds on a portfolio basis.

•

Reporting: We disclose on our website the status of allocation and the environmental impact achieved
as follows.

6

oReporting on allocation of proceeds
The following information is disclosed annually:
▪
▪
▪

o

Amount of green bonds outstanding
Details of issuance of green bonds
Amount of unallocated proceeds from green bonds

Impact reporting
As long as the balance of green finance remains, the following indices as of the end of every
February are disclosed:
▪
▪
▪

-

Number of Eligible Green Assets
Level of each Green Certification acquired by our properties
GHG emissions, energy consumption and water consumption at Eligible Green Assets(limited to properties or portions of properties that NMF exclusively occupies)

What are the binding elements of the investment strategy used to select the investments to attain each of
the E/S characteristics promoted by NMF?
A binding element of the investment strategy is our Green Finance Framework, which involves
determination of whether a target property has satisfied the criteria to qualify as an Eligible Green Asset.
The eligibility criteria are developed by the Sustainability Promotion Committee of the Asset Manager andadopted by the Investment Committee of the Asset Manager. The NMF Investment Management Groupand Finance & Accounting Department evaluate and select Eligible Green Assets, subject to approval by
the Investment Committee or the Head of the NMF Investment Management Group.

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What is the committed minimum rate to reduce the scope of the investments considered prior to theapplication of that investment strategy?
When investing in properties using proceeds from our green financing, we do not consider
properties that do not meet the eligibility criteria under our Green Finance Framework. We also do notconsider investing in properties that building engineering report alleges any issue arising from the use or
storage of hazardous substances to exist or any potential for soil contamination. We also review whether
the property we may acquire is compliant with applicable law.
-

What is the policy to assess good governance practices of investee companies and NMF?
We directly or indirectly through trust beneficiary interests invest in real estate. Therefore, due
diligence (including the assessment of good governance practices) in relation to investee companies is notapplicable.
While there is no third-party rating used to assess our governance practices, we, along with
the Asset Manager, have introduced the following measures to assess and enhance our governancesystems.
•

Internal Audit. The Asset Manager’s Internal Audit Department conducts internal audits. The
Internal Audit Department formulates an audit plan for each fiscal year and, based on the plan,
generally conducts an internal audit of each department once a year. The Internal Audit
Department uses a risk-based approach to assess the effectiveness of the risk management, risk
control, and governance processes. The Internal Audit Department also confirms whether
business is carried out in accordance with internal rules and manuals established in accordancewith the Nomura Real Estate Group Ethics Regulations and various laws and regulations related
to the business.

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•

Decision-making process for investment management. The Investment Committee of the AssetManager deliberates on and makes decisions based on basic policies related to operating theassets of NMF, operation management policies related to assets, and policies regarding importantmatters such as finance, as well as acquisition or sale of assets based on relevant policies,
operation management, and important matters related to operating the assets of NMF such as
funds procurement. All proposals submitted to the Investment Committee need to be screened
and approved by the Compliance Officer, who reviews such proposals to ensure that there are no
violations of or conflict with applicable laws.

•

Prevention of conflict of interest in transactions. When the Compliance Officer determines thata proposal to the Invest Committee is an important transaction with a stakeholder or otherwise
requires additional detail regarding the transaction, the Compliance Committee meeting is held
to deliberate on whether there is any compliance issue. In addition, an acquisition, disposition or
lending of securities or real estate between NMF and a related party of the Asset Manager requires
approval from the Board of Directors of NMF.

•

Timely and appropriate information disclosure. We disclose our corporate information in atimely and accurate manner that conforms with legal requirements. We also proactively disclose
any other information, including through our website, in the interest of transparency if wedetermine that such disclosure would be beneficial.

•

Adoption of performance-linked asset management fees. We pay to the Asset Manager asset
management fees linked to NMF’s performance in order to align the interest of our unitholders and theinterest of the Asset Manager.

Asset Allocation
What is the asset allocation planned for NMF?
As of February 29, 2024, 56.8% of our properties had obtained Green Certification (3 Stars or Higher)
while 57.6% of our properties in the portfolio had obtained any Green Certification, and 42.4% had not, basedon floor area. We will continue our efforts to increase the percentage of properties holding Green Certifications
to our target.

57.6% is #1 Alignedwith E/S#1B Other E/Scharacteristics

Investments of NMF
42.4% qualifies as #2
Other#1 Aligned with E/S characteristics includes the investments of the financial product used to attain theenvironmental or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental or social
characteristics that do not qualify as sustainable investments.
#2 Other includes the remaining investments of the financial product which are neither aligned with theenvironmental or social characteristics, nor are qualified as sustainable investments.
-

How does the use of derivatives attain the environmental or social characteristics promoted by NMF?

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Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the EU
Taxonomy?
Not applicable.
•

Does this financial product invest in fossil gas and/or nuclear energy related activities thatcomply with the EU Taxonomy?
No. NMF does not invest in real estate assets involved in fossil gas and/or nuclear energyrelated activities.

●

What is the minimum share of investments in transitional and enabling activities?
Not applicable.

What is the minimum share of sustainable investments with an environmental objective that are not alignedwith the EU Taxonomy?
Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable.
What investments are included under “#2 Other”, what is their purpose and are there any minimum
environmental or social safeguards?
•

As of February 29, 2024, 42.4% of our properties did not obtain any Green Certification. However, we
implement as appropriate measures to reduce their environmental impact following acquisition,
including by obtaining Green Certifications, installing environmentally-friendly equipment, using
renewable energy and undertaking appropriate renovations.

Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether NMF is aligned with theenvironmental or social characteristics that it promotes?
NMF’s investment units have been included in the MSCI Japan ESG Select Leaders Index (“MSCI
Index”) since May 2019. MSCI Index is an index that includes companies with high ESG performance selectedbased on data from the MSCI Japan IMI Top 700 Index. The Government Pension Investment Fund, a Japaneseadministrative agency that manages Japanese government pension plans, has also selected the MSCI Index as
one of its ESG indices for its passive investments. We use MSCI Index not only as a reference benchmark for
performance comparison and market context purposes, but also to consider how best to implement and disclose
our ESG initiatives.
-

How is the reference benchmark continuously aligned with each of the environmental or social
characteristics promoted by NMF?

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We believe that NMF’s investment units are included in the MSCI Index because of our highpercentage of properties with environmental certifications issued by third-party organizations, strong efforts
on human resource development including support for employees to improve their capabilities and ourstrong governance structure such as the adoption of an executive level committee for overseeing ethicalconduct and a whistleblower protection mechanism.
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How is the alignment of the investment strategy with the methodology of the index ensured on acontinuous basis?
With each acquisition opportunity, in addition to the review of ESG-related due diligence findings,
and environmental performance including GHG emissions, we take into account the acquisition of Green
Certifications. We try to increase the number of properties which acquires Green Certifications tocontinuously align with the reference benchmark.

-How does the designated index differ from a relevant broad market index?
See above.

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Where can the methodology used for the calculation of the designated index be found?
The methodology for the MSCI Index can be found at: https://www.msci.com/our-solutions/japanesg-select-leaders-index.

More Product-specific Information
Where can I find more product specific information online?
More product-specific information can be found on the website: https://www.nre-mf.co.jp/en/esg/indextop.html
Note Regarding the EU Taxonomy Regulation
As set out above, we promote certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”), todisclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy
regulation. The EU Taxonomy Regulation is to be complemented by technical standards and screening criteria.
The technical screening criteria for the first two environmental objectives (climate change mitigation and climatechange adaptation) were adopted in December 2021 and amended in June 2023. The amended criteria apply asof January 1, 2024. The technical screening criteria for the other four environmental objectives (sustainable use
and protection of water and marine resources, transition to a circular economy, pollution prevention and control,
and protection and restoration of biodiversity and ecosystems) were adopted in June 2023. They apply as ofJanuary 1, 2024.
NMF invest in economic activities that are eligible under the EU Taxonomy Regulation in respect ofclimate change mitigation and/or climate change adaptation. This means that screening criteria for theseinvestments have been or will be developed. The Asset Manager expressly states that in view of the fact that theregulations are still under development or have only recently been adopted and/or amended and the fact that, asa result thereof, data on alignment of our investments with these environmental objectives and climate related
goals in line with EU Taxonomy Regulation are not sufficiently available, the Asset Manager is not currently ina position to disclose on an accurate and reliable basis to what extent our investments technically qualify as
Taxonomy-aligned or “environmentally sustainable” within the specific meaning of the EU Taxonomy
Regulation. NMF’s investments may have a positive contribution to these environmental objectives and may

10therefore eventually be considered Taxonomy-aligned, but at this stage, the Asset Manager is required to statethat there is no minimum proportion of our investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to thoseinvestments underlying the financial product that takes into account the EU criteria for environmentally
sustainable economic activities. The investments underlying the other portion of this financial product do nottake into account the EU criteria for environmentally sustainable economic activities.
INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF NMF (SFDR ARTICLE 6 DISCLOSURE)
In order to realize sustainability in our asset management while maximizing our portfolio value, we
consider ESG factors in our investment and asset management processes.
In our investment decision, the Investment Committee takes into consideration climate change relatedrisks, contamination risk and other sustainability risks discovered in the due diligence process. Also we haveestablished the Green Finance Framework.
As stated above, we have instituted a number of initiatives, at the corporate level, the portfolio level andthe property level, to promote E/S characteristics. Such initiatives include climate change initiatives, initiatives
for saving/reducing energy consumption and initiatives for employees and tenants. We have established theSustainability Promotion Committee, which generally meets at least four times a year to set sustainability targets,measures and other matters, make recommendations related thereto and conduct monitoring (including risk
management).
While sustainability issues will severely impact our business activities, we believe that such issues may
also become potential business opportunities to create new value for sustainable growth. Accordingly, we
position our commitment to sustainability as a top priority in our management strategies. We also believe that
integrating sustainability factors alongside traditional financial and operational metrics in our investment
decision process helps us make a more holistic assessment of a property’s risks and opportunities and iscommensurate with the pursuit of superior risk-adjusted returns.
The assets in which NMF invests are exposed to transition and physical risks, such as the following.
Category

Risk Factors

Transition Risk
- Policy

Stricter regulations on totalbuilding carbon emissions
and energy conservation
standards

Identified Risks (Possible
Financial Impacts on
Investment Unit Return)
Increased costs for
retrofitting building(modification of existingbuildings to increaseenergy efficiency)

Decreased cost ofdeveloping andmaintaining energygenerating and energyconserving buildings as aresult of advances in ZEB(net zero energy building)technologies
Introduction of carbon
taxes

Increase in carbon tax

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Initiatives• CO2 (intensity) reduction targets (40%reduction by 2030 compared with FY
2016) and monitoring and disclosure of
progress• Promotion of modification of existingbuildings• Promotion of green leases in cooperation
with tenants, encouragement of energy
conservation to tenants• Introduction of renewable energy(including procurement of green
electricity)• Replacement of existing properties with
and/or investment in properties with goodenvironmental performanceIntroduction of emissions
trading systems

Increased costs to purchaseof renewable energy credits

Expansion or mandating of
disclosure systems relating
to building energy
efficiency assessments

Increased certification andother costs• Targets for acquisition of environmental
certification (70% of our properties with
Green Certification (3 Stars or Higher) by
FY2030) and monitoring and disclosure of
progress

Transition Risk
– Reputation

Selection of properties bycompanies and tenantswith an emphasis on
disaster preparedness

Lower occupancy rates atbuildings with high disasterrisks

Physical Risk –AcuteIncrease in concentrated
heavy rain, typhoons andfloods, landslides, andhigh tides

Loss of sale opportunities
due to building flooding• New investment phase: Investigation ofrisks of climate change (e.g., flood risk) indue diligence process• Property management phase: Regularassessment of sustainability risks including
risks of climate change (e.g., flood risk)• Hard disaster measures (e.g., installation ofwater-stopping plates and/or a heating
system that melts snow on the property tomake it safe to walk and soft disastermeasures (e.g., inland flood risk alertnotification system, business continuity
plan, evacuation drills)• Insurance contracts covering disaster risks

Physical Risk Chronic

Rise in sea level

Increase in repair costs andcasualty insurance
premiums due to building
flooding

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