Nomura Real Estate Asset Management Co., Ltd.Nomura Real Estate Asset Management Co., Ltd.

ABOUT US

Fiduciary Duty

Nomura Real Estate Asset Management Co., Ltd. (NREAM) has adopted all the Principles for Customer-Oriented Business Conduct, published by the Financial Services Agency on March 30, 2017. By ensuring fiduciary duty to investors, NREAM aims to be an asset management company that earns and retains the support of all investors.

  • Establish and Publish Policy Regarding Fiduciary Duty to Investors

    To ensure fiduciary duty to investors is applied in practice, NREAM will continually monitor progress, and where necessary, review its Policy Regarding Fiduciary Duty to Investors.

  • Pursue the Best Interests of Investors

    As a financial business operator, NREAM will work in the best interests of investors by maintaining the high standards of expertise and ethical behavior and by providing honest and fair advice.
    NREAM will also strive to make fiduciary duty an integral part of its corporate culture.

    Initiatives to Pursue the Best Interests of Investors
  • Appropriately Manage Conflicts of Interest

    To pursue the best interests of investors in the provision of asset management and other services, NREAM maximizes the expertise and network of the Nomura Real Estate Group. As part of that relationship, NREAM sells and purchases assets, carries out subcontracted business activities and conducts other business transactions with related parties in the Nomura Real Estate Group and other partners, creating the potential for conflicts of interest with investors. Furthermore, NREAM has been entrusted with the management of several investment funds, which also presents the potential for conflicts of interest with investors.
    NREAM is well aware of this aspect of its business. Consequently, NREAM will seek to retain the confidence of investors by putting in place systems to prevent transactions involving conflicts of interest and by appropriately managing any potential conflicts of interest.

    Initiatives to Appropriately Manage Conflicts of Interest
  • Clearly Communicate Fees and Other Charges

    NREAM will work to disclose more information to provide investors with a better understanding of its products and services, including detailed information regarding commissions and charges such as asset management fees paid by investors, as required by law, and information disclosed voluntarily by the Company.
    NREAM has been entrusted to carry out all asset management-related services for Nomura Real Estate Master Fund, Inc. (NMF). Asset management fees received for those services are explained in an easy-to-understand manner on NMF's website.

    Initiatives to Clearly Communicate Fees and Other Charges
  • Disclose Important Information that is Understandable to Investors

    To ensure investor understanding, NREAM will diligently provide easy-to-understand information about the funds it has been entrusted to manage and other financial products and services.
    Important information related to the operation of NMF is disclosed in a timely and understandable manner on NMF's website.

    Initiatives to Disclose Important Information that is Understandable to Investors
  • Provide Services Suitable for Each Investor

    NREAM will endeavor to understand the needs of investors and develop products and services and provide asset management services tailored to those needs.

  • Create a Framework to Appropriately Motivate Employees to Fulfill Their Fiduciary Duties

    To ensure employees pursue the best interests of investors and to appropriately manage conflicts of interest, NREAM is raising awareness about compliance and establishing an investment management approach that puts fiduciary duty.

    Specifically, in principle, NREAM develops a compliance program each year, and based on that program, implements compliance training and other measures to raise awareness about compliance.
    As part of efforts to thoroughly establish a compliance mindset, NREAM has also developed a Compliance Manual for all employees and executives containing concrete advice about how to put compliance into practice.

    In entrusted fund management, NREAM strives to conduct asset management that puts even greater emphasis on returns for investors.
    Specifically, NMF revised its asset management fee structure in September 2017, creating a closer link between fees and investor returns. These changes to fee structure are designed to motivate employees to pursue the best interests of investors.

    Create a Framework to Appropriately Motivate Employees to Fulfill Their Fiduciary Duties

Enacted March 15, 2018

As a financial business operator, Nomura Real Estate Asset Management Co., Ltd. (NREAM) strives to heighten professional competencies of its executives in part through human resource development initiatives. To that end, we encourage our executives and employees to gain professional qualifications such as those of Real Estate Transaction Agent certification and Association for Real Estate Securitization (ARES) Certified Master (ACM), and accordingly cover costs associated particularly with such studies, testing and maintaining qualifications.
We also hold regularly scheduled in-house training sessions with the aim of ensuring that business conducted by our executives and employees accords with sound ethical standards.

① Number of qualification holders and their percentage of the workforce (out of 161 employees and officers in Fiscal 2017 and 162 employees and officers in Fiscal 2018)

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Professional qualifications Fiscal 2017
161 executives and employees
Fiscal 2018
162 executives and employees
Qualification holders * Percentage Qualification holders * Percentage
Real Estate Transaction Agent 139 86.3% 140 86.3%
ARES Certified Master (ACM) 92 57.1% 109 67.3%
Certified Building Administrator (CBA) 12 7.5% 21 13.0%
Chartered Member of the Securities Analysts Association of Japan (CMA) 16 9.9% 13 8.0%
Real Estate Consulting Master 8 5.0% 8 4.9%
First-class Architect 6 3.7% 6 3.7%
Real Estate Appraiser 6 3.7% 5 3.1%
Logistics Operator, grade 3 2 1.2% 5 3.1%
Licensed Strata Management Consultant 3 1.9% 3 1.9%
Licensed Representative of Condominium Management Company 2 1.2% 3 1.9%
Certified Shopping Center business Administrator (SCBA) 2 1.2% 2 1.2%

* Including those who passed the test.

② Number of in-house training sessions

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In-house training Fiscal 2017 Fiscal 2018
Compliance training 12 sessions 12 sessions
Sustainability training 1 sessions 1 sessions

NREAM has established and appropriately manages the Investment Committee and the Compliance Committee, both of which function as part of the framework for preventing conflicts of interest as cited in the Corporate Philosophy.

Flowchart on procedures for carrying out business transactions with stakeholders

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Stakeholders
  1. NREAM and any NREAM executive, employee or other such person
  2. A stakeholder or other such person as stipulated inArticle 201, Paragraph 1 of the Act on Investment Trusts and Investment Corporations
  3. A counterparty of an aforementioned party, such that manages the party's asssets or otherwise furnishes advice with respect to administering or managing such assets

*1 This does not include the Fund Managers or Executive Officers concurrently serving as general managers of respective departments established within the NMF operations group.
*2 Voting rights are possessed neither by Compliance Officers nor by Executive Officers in charge of administrative operations.

Number of Compliance Committee meetings held

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Compliance Committee Fiscal 2017 Fiscal 2018
Number of meetings 17 16
Number of proposals 39 total 33 total
Acquisition or sale of Properties* 22 proposals 13 proposals
Leasing 9 proposals 9 proposals
Outsourcing
( property management,
intermediary services, etc. )
4 proposals 4 proposals
Repairs and capital expenditure 1 proposals 1 proposals
Other 3 proposals 6 proposals

* The proposals regarding acquisition and sale of properties include 20 proposals in Fiscal 2017 and 13 proposals in Fiscal 2018 involving outsourcing (property management, intermediary services, etc.).

Number of Investment Committee meetings held

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Investment Committee Fiscal 2017 Fiscal 2018
Number of meetings 35 40
Number of proposals 131 total 127 total
Acquisition or sale of Properties 43 proposals 45 proposals
Borrowing and repayment 25 proposals 25 proposals
Repairs and capital expenditure 5 proposals N/A
Capital increase 4 proposals 3 proposals
Financial results 9 proposals 7 proposals
Asset management policy 21 proposals 13 proposals
Lease 3 proposals 15 proposals
Other 21 proposals 19 proposals

NREAM undertakes business affairs with respect to managing assets and furnishing investment advice primarily to Nomura Real Estate Master Fund, Inc. (NMF), Nomura Real Estate Private REIT, Inc. (NPR) and other real estate funds.

In carrying out such duties, NREAM strives to take preventative action that would avoid the prospect of any conflicts of interest arising among the respective funds for which it manages assets, particularly when considering possibilities of making property acquisitions on the basis of third-party sales information to which it has gained access. To that end, NREAM stringently implements information management practices such that involve ensuring those who make investment decisions for the respective funds handle their duties separately. Meanwhile, NREAM has also adopted the Rotation Rule whereby it ensures that each fund is equitably granted preference to consider acquisition opportunities on a rotating basis particularly depending on the year in which construction was completed with respect to target properties ("completion year").

Moreover, NREAM makes decisions to acquire properties, or otherwise forgo such investment, in accordance with investment policies specific to each of the funds.

Flowchart for application of the Rotation Rule

*1 NPR: Nomura Real Estate Private REIT, Inc. (private-placement REIT)
*2 NMF: Nomura Real Estate Master Fund, Inc. (listed REIT)

NREAM has been entrusted to carry out all asset management-related services for Nomura Real Estate Master Fund, Inc. (NMF), and accordingly receives asset management fees as consideration for such services.

Types of fees

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Fee Description
Management Fee I The amount obtained by multiplying "total assets" by 0.45% (pro rata daily amounts shall be calculated on the basis of 365 days per year; amounts less than one yen shall be rounded down)
Management Fee II The amount obtained by multiplying "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 tastes (before deduction of Management Fee II and non-deductible consumption tastes on Management Fee II) and after compensation of loss carried forward (if any)

Acquisition Fee In the event that specified assets have been acquired, the amount obtained by multiplying the "acquisition price" by 1.0% (maximum)

* Or, 0.5% (maximum) in the event that the acquisition is from a stakeholder or other such party

Sales Fee In the event of disposition of specified assets, The amount obtained by multiplying the "disposition price" (the disposition price in the event of sale, or the price of the asset disposed of by way of exchange provided in the exchange agreement in the event of exchange) by 1.0% (maximum)

* 0.5% (maximum) in the event that the sale involves transfer to a stakeholder or other such party

*For further details, refer to the Articles of Incorporation of Nomura Real Estate Master Fund, Inc.

To ensure investor understanding, NREAM diligently provides easy-to-understand information about its management of the Nomura Real Estate Master Fund.

① Number of press releases issued by Nomura Real Estate Master Fund

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Number of press releases Fiscal 2017 Fiscal 2018
Total number 48 total 47 total
Acquisition or sale of properties 9 6
Financial results 3 3
Borrowing and repayment 24 24
Capital increase 4 4
Other 8 10

Note: For further details, refer to the Press Release page of the Nomura Real Estate Master Fund, Inc. website.

② IR initiatives of Nomura Real Estate Master Fund

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IR activities Fiscal 2017 Fiscal 2018
Earnings briefings 2 2
IR meetings (Japan) * 114 companies 104 companies
IR meetings (overseas) * 49 companies 52 companies
Conferences and seminars for individual investors (Japan) 4 days 3 days
Conferences and seminars for institutional investors (overseas) 6 days 2 days

*Includes conference calls

③ Credit ratings of Nomura Real Estate Master Fund (as of March 31, 2018)

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Rating company Rating target Rating Outlook
Japan Credit Rating Agency, Ltd. (ICR) Long-term Issuer Rating AA Stable
Rating and Investment Information, Inc. (R&I) Issuer Rating A+ Stable
S&P Global Ratings Japan Inc. (S&P) Long-Term Corporate Rating
Short-Term Corporate Rating
A
A-1
Stable
④ Management of Nomura Real Estate Master Fund

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Fund information Link
Portfolio Summary https://www.nre-mf.co.jp/en/portfolio/
Interest-bearing Debt https://www.nre-mf.co.jp/en/finance/
Financial Highlights https://www.nre-mf.co.jp/en/ir/highlight.html
Policies, Systems and Targets (ESG initiatives) * https://www.nre-mf.co.jp/en/esg/
Disclosure Materials https://www.nre-mf.co.jp/en/ir/library.html
*Details on international initiatives of which NREAM and NMF are signatories and certifications from outside entities are as follows (as of March 31, 2019)

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International initiatives and certifications Date Logo
Principles for Responsible Investment (PRI)
Nomura Real Estate Asset Management Co., Ltd.
December 2017
Signatory
United Nations Environment Programme Finance Initiative (UNEP FI)
Nomura Real Estate Asset Management Co., Ltd.
December 2017
Signatory
Japan Climate Initiative (JCI)
Nomura Real Estate Asset Management Co., Ltd.
October 2018
Participated
Principles for Financial Action for the 21st Century (PFA21)
Nomura Real Estate Asset Management Co., Ltd.
July 2019
Signatory
GRESB Real Estate Ranking "Global Sector Leader"
Nomura Real Estate Master Fund, Inc. (NMF)
September 2018
Obtained
GRESB Real Estate Ratings "Green Star" and "5-Star" ratings
Nomura Real Estate Master Fund, Inc. (NMF)
September 2018
Obtained
GRESB Public Disclosure "A" rating
Nomura Real Estate Master Fund, Inc. (NMF)
September 2018
Obtained
DBJ Green Building Certification 52 properties at a total floor area of 54.6% (as of April 25, 2019)
Nomura Real Estate Master Fund, Inc. (NMF)
Obtained
periodically
BELS Certification 19 properties at a total floor area of 18.9% (as of April 25, 2019)
Nomura Real Estate Master Fund, Inc. (NMF)
Obtained
periodically

At its first General Meeting of Unitholders held on May 26, 2017, Nomura Real Estate Master Fund, Inc. (NMF) resolved to modify its provisions on asset management fees with the aim of establishing an asset management fee structure that would be better geared to investor interests.
The change took effect from the fiscal period ended February 28, 2018 (from September 1, 2017 to February 28, 2018).