No.

QuestionAnswer

The Merger
1What is meant byMerger means that the former Nomura Real Estate Master Fund, Inc. (hereinafter“merger”?

the “former NMF”), Nomura Real Estate Office Fund, Inc. (hereinafter “NOF”) andNomura Real Estate Residential Fund, Inc. (hereinafter “NRF”) were integrated intoa single investment corporation. The merger was a consolidation-type merger inwhich the former NMF, NOF and NRF were eliminated and the Investment
Corporation was established through comprehensive succession of the companies’
assets and such.

2

What types ofThe former NMF was a REIT that targeted logistics facilities and retail facilities forREITs were theinvestment while NOF targeted offices and NRF targeted residences.

three REITs thatwere eliminated?
3

What is theThe former NMF, NOF and NRF were each “specialized type” REITs which limited

meaning of

their scope of investment to a particular sector (NMF targeted logistics facilities andtransitioning from a

retail facilities, NOF targeted offices and NRF targeted residences). The Investment“specialized type”

Corporation established through the merger will not limit its target investment sectorREIT to aas such and will be a “diversified type” REIT which targets logistics facilities, retail“diversified type”

facilities, offices, residences and other sectors.

REIT?

The Schedule of the Merger
4What is theThe schedule is as follows:schedule for theMay 27, 2015: Conclusion of merger agreement and determination of the merger

merger?

ratio
June 12, 2015: Record date for general meetings of unitholders of former NMF andNRF (April 30 for NOF)
July 30, 2015: General meetings of unitholders of former NMF and NOF
July 31, 2015: General meeting of unitholders of NRFSeptember 28, 2015: Date of delisting for former NMF, NOF and NRF
October 1, 2015: Date of incorporation of the Investment Corporation
October 2, 2015: Date of listing of the Investment Corporation
Mid to late December 2015: Payments of cash distributions on merger
February 29, 2016: End of 1st fiscal period of the Investment Corporation

Allotment of the Investment Corporation’s Investment Units

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No.

Question

Answer5

What are “fractions

The fractions of investment units are investment units of a fraction of one unit thatof investment

are generated as a result of the allotment of the investment units of the Investmentunits”? How will

Corporation to the unitholders of the eliminated REITs.

these be handled?

Pursuant to legal provisions, fractions of one investment unit generated by all
unitholders are added up, the number of investment units equivalent to the total are
sold on the market and the amount obtained is distributed to unitholders withfractions of investment units according to their fractions. Relevant unitholders arenotified of details such as the amount and delivery method by mail and payment isscheduled to commence from mid to late December 2015.

6How will theIn this case, the investment units of the Investment Corporation will be allottedallotment ofaccording to the number of the eliminated REITs’ investment units owned throughinvestment units ofeach securities firm. If the fractions of investment units for the new REIT for thethe Investment

eliminated REITs’ investment units owned through each securities firm adds up to aCorporation benumber larger than 1, the number of investment units according to the integer

handled if I owned

section are allotted to the securities firm with the greatest number of owned units.

investment units ofFor details, please contact your securities firms.

the eliminated
REITs throughmultiple securitiesfirms?
7

Are the “fractions ofIn this case, the fractions of investment units are not added up since they are

investment

units”

fractions from allotments of separate investment corporations. The money in 5

added up if I owned

above is distributed according to the fractions generated from the investment units

investment units ofheld for each investment corporation.

bothNRFandNOF?
Cash Distribution on Merger
8What is the “cashCash distribution on merger refers to the money distributed in place of thedistribution on

eliminated REITs’ final operating periods before their elimination through merger.

merger”?

Cash distribution on merger is scheduled to be paid out in mid to late December
2015 to unitholders of the eliminated REITs as of September 30, 2015.**Excluding unitholders who are against the merger and request the purchase ofowned investment units according to the relevant provisions of the laws andregulations.

Goodwill2

No.

QuestionAnswer

9What is “goodwill”?

“Goodwill” is the difference between the fair value of net assets of the acquired

How does thecompanies (NRF and NOF) on merger and the acquisition price of the acquiring“amortization costscompany (former NMF) when the later exceeds the former. It is an intangible fixedof goodwill” affectasset for the purpose of accounting and is amortized regularly using the straight-line

cash distributions?

method over a period of 20 years.
“Amortization costs of goodwill” is calculated as operating expenses for the purposeof accounting, but there is no cash out. Since the Investment Corporation plans to
distribute the equivalent of the “amortization costs of goodwill” as distribution inexcess of earnings, there is no impact on the cash distribution to unitholders (thisapproach has become possible with the fiscal 2015 tax reform).

10What is thePlease see 9 above for “goodwill”.

difference between“Depreciation and amortization” is the distribution by period of the acquisition costs“amortization costsof fixed assets according to their service life and differs in cause from “goodwill”.

of goodwill” andOn the other hand, “amortization costs of goodwill” and “depreciation and“depreciation andamortization” are similar in that they are accounting costs which do not entail cash

amortization”?

outs.
The Investment Corporation plans to distribute the equivalent of the “amortizationcosts of goodwill” as distribution in excess of earnings alongside the fiscal 2015 tax
reform.

11

Other REITs use

The goodwill generated through the merger will not be used for the purpose of“negative goodwill”

stabilizing cash distributions.

to stabilize cash
distributions. Can“goodwill” be usedin the same way?
12

What is theDistribution in excess of earnings is the distribution of the amount in excess of thedifference frominvestment corporation’s net income in the period to unitholders as cash

other REITs when it

distributions.

comes toThe difference is that, while in other REITs the distribution in excess of earnings isdistribution inbased on “depreciation and amortization,” the Investment Corporation’s distribution

excess ofin excess of earnings for the 2nd fiscal period onwards will be based on amortization

earnings?

costs of “goodwill,” etc.

Tax Treatment

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No.

Question

Answer13

Will the gain (loss)

The gain/loss of investment units will not be established since the investment unitsof the investmentof the Investment Corporation to be allotted with the merger will succeed the bookunits owned as ofvalue of the investment units currently held, excluding the disposition value ofOctober 1, 2015,

fractions of investment units. For details please contact a tax accountant.

the date ofincorporation of theInvestment
Corporation, beestablished?
14

If investment units

Yes, the tax exemptions can still be applied.

are held throughHowever, if fractions are generated and the sum of owned investment units inNISA, can the tax

specific accounts and general accounts makes a unit, the tax exemption cannot be

exemption still beapplied to that unit. For details please contact your securities firm.

applied to theallotted investment
units?

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