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Message from the Management

 The basic policy of Nomura Real Estate Master Fund, Inc.(NMF) is to manage its assets to secure stable income over the medium to long term and ensure the steady growth of assets under management. We have established a Management Strategy aimed at achieving steady growth based on a long-term perspective, and we are working in line with this strategy to increase unitholder value.

 Both domestic and foreign investment capital is flowing into the J-REIT market on expectations of recovery in the Japanese economy and real estate market. Backed by this favorable financing environment, property acquisitions by J-REITs remain brisk.
NMF is accelerating efforts to improve portfolio quality through strategic property replacements (SPRs), a key priority under the Management Strategy, and is on track to achieve its SPR targets well ahead of schedule.
 In addition, we are focused on achieving internal growth, mainly in upside sectors. During the second fiscal period, we delivered on these priorities. As a result, operating revenues for the period reached \30,976 million, up 27.4% from the previous fiscal period, ordinary income for stable management over the long term through steady growth in asset size and the strong establishment of the fund’s brand.
 In the Quality phase, NMF aims to utilize the benefits of being one of Japan’s largest diversified REITs while focusing on SPRs to improve the portfolio’s quality by reducing the high average age of its properties, a long-standing issue.
Specifically, we initially planned to implement \50 billion in property replacements in the first three to five years.
 However, because investor appetite for property acquisitions remains strong and competition to acquire properties is intense in Japan’s real estate market, we decided to move ahead with the sale of 17 properties, for a total \34.1 billion, in the second fiscal period. We sold three of these properties, which were aging buildings in excellent locations, to the sponsor on the condition of receiving preferential negotiation rights to re-acquire them after redevelopment. To help compensate for the loss of revenue from the properties we sold, we also acquired five properties for a total of \21.3 billion.
 Through these property replacements, the average building age for the entire portfolio decreased 1.3 years, reducing medium- and long-term repair costs by \2,652 million. jumped 131.0% to \9,356 million, and net income grew 131.1% to \9,335 million. The per-unit distribution came to \3,036, surpassing our previous estimate by \276.
Furthermore, on September 1, 2016, we completed the merger with TOP REIT, Inc. announced on May 26, 2016.
 By taking advantage of this rare opportunity for external growth, NMF has expanded its asset size to \933.0 billion and further secured its position as one of Japan’s largest diversified REITs. In addition, the merger helped to build a high-quality portfolio and increase risk tolerance. As such, we expect more stable revenue and are better positioned to pursue both internal and external growth by leveraging the Nomura Real Estate Group’s development capabilities, wide-ranging know-how and brand. As we move forward, we ask for your continued support and encouragement.

Executive Director of Nomura Real Estate Master Fund, Inc.

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