Profile
On September 10, 2001, Nippon Building Fund Inc. (NBF) became
the first Japanese real estate investment trust (J-REIT) investment
corporation with a listing on the J-REIT section of the Tokyo Stock
Exchange. Today, NBF has the largest market capitalization and assets
under management among J-REITs.
NBF employs funds raised through shareholder subscriptions andborrowing to invest in real estate, real estate-backed securities, trust
beneficiary rights and other assets with the objective of sustainable growthin portfolio value and stable profits on a medium-to-long-term basis. Its
fiscal periods are six months long. NBF primarily invests in office buildingsin the central business districts of Tokyo, other Greater Tokyo and other
cities in Japan. The Investment Trust Law of Japan requires an external
entity to manage the assets of an investment corporation; NBF entrusts
asset management to Nippon Building Fund Management Ltd. (NBFM).
NBF maintains a close relationship with NBFM’s major shareholder
Mitsui Fudosan Co., Ltd., and employs that company’s expertise to invest
in carefully selected, high-quality properties, with the aim of generating
further asset growth.

Contents
Feature: Quality Creates Value ...................................................................................... 1
Building on Our Strengths........................................................................................ 2
Quality Portfolio ...................................................................................................... 4
Quality Finance........................................................................................................ 6
Financial Highlights....................................................................................................... 8
To Our Shareholders ...................................................................................................... 10
A Track Record of Steady Growth and High Occupancy Rates ........................................ 14
Planned Acquisition in the 20th Period .......................................................................... 15
Location of Office Properties ......................................................................................... 16
Portfolio Overview......................................................................................................... 18
Main Properties............................................................................................................. 20
Management Team and Management Structure ............................................................ 26
Management’s Discussion and Analysis......................................................................... 30
Financial Statements ..................................................................................................... 41
Appendix....................................................................................................................... 57
Investment and Distribution Policies.............................................................................. 59
Corporate Data.............................................................................................................. 66
Investors’ Information ................................................................................................... 67

Quality
Creates ValueNBF continues to create shareholder value by leveraging
the scale advantage and quality of its portfolio as well as its
conservative financial management to maintain a highly
flexible financial base.

NBF Report January – June 2010 1

Building on Our Strengths
Over the 18 periods, or roughly nine years, since its listing on the J-REIT section of the Tokyo Stock
Exchange in September 2001, NBF has established a track record of stable profit distribution.
As a result of steady growth, NBF has built a solid position in the J-REIT market from several
perspectives, including scale advantage, portfolio quality, financial stability and level of return.
NBF will continue to make maximum use of its strengths and competitive advantages, as well as theexpertise of Mitsui Fudosan Co., Ltd., to steadily increase value for shareholders.

NBF’s Strengths
Japan’s First andLargest J-REIT◆ In September 2001, NBF was listed as the first real estate
investment corporation in Japan on the J-REIT section of
the Tokyo Stock Exchange.
◆ The largest total market capitalization of any J-REIT(¥381.5 billion)*◆ The largest scale of managed assets (¥779.5 billion)*(total acquisition price)

2 NBF Report January – June 2010

Quality Creates Value

High-Quality
Properties◆ Specializes in investing in office buildings◆ Possesses 59* properties, mainly large-scale officebuildings in the Tokyo central business districts◆ Diversified in other Tokyo markets as well as inregional cities◆ Total rentable area of 763,000m2*◆ 910* diversified tenants

Stable Returns◆ Cash distribution of ¥17,125 per share for the 18th Period◆ Aims to increase distributions to shareholders
over the medium to long term
Cash distribution per share(Yen)
25,00019,391

20,00017,125

14,582
15,00010,0005,000
0Sound Finances◆ Ratings*■ Standard & Poor’s

Long-term Corporate: A+, Short-term Corporate: A-1■ Moody’s Issuer Rating: A1■ R&I Issuer Rating: AA◆ LTV: 46.8%*◆ Percentage of long-term fixed-rate debt included ininterest-bearing debt: 92.6%*◆ Average years remaining on long-term fixed-rate interestbearing debt: 4.36 years*

5th

18th

10th
PeriodStrategic Partnershipwith Mitsui Fudosan◆ Access to the expertise of Mitsui Fudosan Co., Ltd., theleading real estate company in Japan■ Acquisition of properties developed by Mitsui Fudosan■ Use of property information-gathering capabilities

of Mitsui Fudosan■ Use of Mitsui Fudosan’s tenant mediation and building

management capabilities in office management◆ Total average cost: 1.73%** As of June 30, 2010

NBF Report January – June 2010 3

Quality
Portfolio
Stable portfolio based on scale advantage

As of June 30, 2010, NBF’s real estate portfolio comprised 59 high-quality
large-scale office buildings, mainly in the Tokyo central business districts(CBDs), with a total rentable area of 763,000m2. NBF holds Japan’s largest
J-REIT portfolio, with assets totaling ¥779.5 billion on an acquisition pricebasis, providing not only scale advantage, but also diversified risk. Strategicleasing based on an accurate grasp of market conditions and continued
implementation of measures to enhance tenant satisfaction have resulted in ahigh-quality portfolio with an occupancy rate of 94.5 percent as of the end of
the 18th Period, which is high compared with the market.
Acquisition Price and Occupancy Rate

(%)
100

94.5
(Yen in billions)
800

779.5

90

Acquisition price(left scale)
Occupancy rate(right scale)

700
600
500
400
300

192.1

200
100
0

59

22

Buildings

Buildings

May
2001

Dec.
Dec
2004

Jun.
Jun
2005

Dec.
Dec
2005

4 NBF Report January – June 2010

Jun.
Jun
2006

Dec.
Dec
2006

Jun.
Jun
2007

Dec.
Dec
2007

Jun.
Jun
2008

Dec.
2008

Jun.
2009

Dec.
2009

Jun.
2010

0

Quality Creates ValueNBF Report January – June 2010 5

6 NBF Report January – June 2010

Quality Creates Value

Quality
Finance
Building a highly flexible financial basethrough conservative financial management

NBF maintains conservative financial management to build a stablefinancial base. We are responding to the current financial environment invarious ways. We have established a target range of 40 to 50 percent (maximum
60 percent) for the loan-to-value (LTV) ratio and a target ratio for long-term
fixed-rate debt to total interest-bearing liabilities of 80 to 90 percent.
Furthermore, in addition to diversifying maturities of interest-bearing debt andestablishing a total commitment line of ¥50.0 billion, we have diversified credit
sources among a large number of lending institutions (26 financial institutions,the most for a J-REIT). These solid initiatives have earned NBF high ratingsfrom rating agencies.
Stable Financial Track Record
(%)
100

92.6

Long-term fixed-rate
debt ratio

80

60

LTV

46.8

40

20

0

Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun.
2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

NBF Report January – June 2010 7

Financial Highlights
18th Period

17th Period

16th Period

15th Period

18th Period

from January 1, 2010 toJune 31, 2010

from July 1, 2009 to
December 31, 2009

from January 1, 2009 toJune 30, 2009

from July 1, 2008 to
December 31, 2008

from January 1, 2010 toJune 31, 2010
U.S. dollars in thousands
except per share data (Note 1)(Yen in millions, except per share data or where otherwise indicated)

Operating revenues
Income before income taxes
Net income

Note 2¥ 28,341
9,283
9,282

¥ 29,928
10,663
10,662¥ 30,761
11,803
11,802¥ 31,218
12,062
12,061$ 320,270
104,898
104,888

Funds from operations
Net operating income
from property leasing activities
Total amount of cash distribution

Note 3

14,354

15,944

17,157

17,417

162,213

Note 3(a)18,445
9,282

20,124
10,66221,005
11,802

21,346
12,061

208,444
104,890(b)Note 3774,379
333,500
395,45846.8%

782,311337,875
396,83846.9%

783,793
338,500
397,97847.0%

766,249
318,500
398,23745.5%

8,751,030
3,768,787
4,468,952(c)(b) / (c)(a) / (c)542,000
729,626
17,125542,000
732,173
19,672542,000
734,276
21,775542,000
734,753
22,2528,245
194

Note 3

26,48329,41731,65432,134299

Total assets
Interest-bearing debt
Net assets
LTV (Loan to value)
Total number ofcommon shares issued (shares)
Net assets per share (Yen/$)Distribution per share (Yen/$)Funds from operations
per share (Yen/$)Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥88.49 = U.S.$1.00, the approximate exchange rate on June 30, 2010.
2. Operating revenues do not include consumption taxes.
3. Funds from operations: Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
Funds from operations per share: (Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization) /Weighted average number of common shares issued and outstanding during the period

Portfolio Highlights (As of June 30, 2010)
Regional Allocation

Average Age(Average age of properties weighted byacquisition price of each property)

5 years or less

Other Cities*¥88,302 million(11.3%)
Other Greater
Tokyo*¥189,180 million(24.3%)

10.4%
Total
acquisition
price¥779,560

years

Between 5
and 10 years
17.4%

millionTokyo CBDs*¥502,078 million(64.4%)* Tokyo CBDs (central business districts): The 9 central wards of Tokyo, comprising Chiyoda, Minato,Chuo, Shinjuku, Shinagawa, Shibuya, Toshima, Bunkyo and Meguro
Other Greater Tokyo: The other 14 wards of Tokyo, and neighboring cities
Other Cities: Principal regional cities

8 NBF Report January – June 2010

15.86

Over 10 years
72.2%

Operating revenues / Net income

Net operating income fromproperty leasing activities

Funds from operations per share(Yen in millions)(Yen in millions)(Yen)

35,00025,00040,00030,00020,00030,00025,00020,00015,00015,00010,00020,00010,00010,000

5,000

5,000
0

14th
Period15th
Period16th
Period17th
Period018thPeriod14th
Period15th
Period16th
Period17th
Period018thPeriod14th
Period15th
Period16th
Period17th
Period18th
PeriodOperating revenues
Net income

Total assets

LTV(Yen in millions)

(%)

(Yen)

(Yen)

800,00050

750,000

25,000700,000

48

700,000

20,000600,000

46

500,000

650,000

15,0004442600,000

10,00040

550,000

5,000

400,000
300,000

0Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30,
2008
2008
2009
2010
2009

0

Net assets per share /Distribution per share

0Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30,
2008
2008
2009
2009
2010

14th
Period15th
Period16th
Period17th
Period18th
Period0

Net assets per share (left scale)
Distribution per share (right scale)

Property Concentration Risk Diversification

Tenant Risk Diversification(Ratio of total acquisition price of top 3 properties
to total acquisition price)(Top 10 tenants’ share of total floor space)

Top 9 tenants’ share(excluding Mitsui Fudosan Co., Ltd.)
20.4%

Top 3 properties
19.1%

19.1%

Other properties
80.9%

44.0%
(20.4%)

Top 10 tenants’ share(including Mitsui Fudosan Co., Ltd.)
44.0%

NBF Report January – June 2010 9

To Our Shareholders

NBF aims for steady distributions toshareholders over the medium to longterm by generating well-balanced internaland external growth based on a soundfinancial strategy.
Koichi Nishiyama
Executive Director of Nippon Building Fund Inc.
President and CEO of Nippon Building Fund Management Ltd.

Performance during the Six Months Ended
June 30, 2010

factors. However, economic conditions remained severe

Distribution per share for the “18th Period”
was ¥17,125.

NBF’s revenues and income decreased, mainly due toas companies restrained capital investment. As a result,tenant turnover and rent revisions. Operating revenues
decreased ¥1,587 million, or 5.3 percent, to ¥28,341

During the six months ended June 30, 2010 (themillion. Operating income decreased ¥1,352 million, or“18th Period”), exports, mainly to Asia, marked a

10.0 percent, to ¥12,172 million. Net income decreased

gradual increase and Japan’s economy showed signs of¥1,380 million, or 12.9 percent, to ¥9,282 million.

recovery backed by an upturn in the global economy,

Consequently, distribution per share decreased ¥2,547

the effects of economic stimulus policies and otherto ¥17,125.

Performance Outlook (As of August 16, 2010)

Operating revenues
Net income
Distribution per share (Yen)

10 NBF Report January – June 2010

(Yen in millions)19th Period (Projected)
from July 1, 2010 to December 31, 2010

20th Period (Projected)
from January 1, 2011 to June 30, 2011¥27,177
8,184
15,100¥26,860
8,184
15,100Market Environment and Performance Outlook

Indications that occupancy rates may be bottoming
out are beginning to appear, such as companies
seeking better offices or increased floor space.
In the office building leasing market, moves to

NBF Occupancy Rates
(%)

100
95
90

streamline operations, such as office consolidation and85

relocation, continued. As of June 30, 2010, occupancy

80

rates in the major business districts of Tokyo, Osaka and75

Nagoya remained in a downtrend. The occupancy rate in
the Tokyo central business districts (CBDs) decreased
1.05 percentage points from December 31, 2009 to
90.86 percent. Although NBF’s overall occupancy rate
remains higher than the market rate, it decreased 0.3

Total
Tokyo CBDs
Other Cities
Other Greater Tokyo

70
65
60

May 23,2001(Investmentcommencement date)

Dec. 31,2003

Jun. 30,
2006

Dec. 31,2008

Jun. 30, Jun. 30,
2010 2011(Proj.)

percentage points to 94.5 percent. However, companies
are beginning to seek better offices and increased floor(the end of the 20th Period). Although office floor space

space because of factors such as recovery in corporate

supply in the 23 wards of Tokyo is expected to increase

income and the progressive downward adjustment infrom 2011 onward, we believe the impact on theasking rents for large-scale high-quality properties insupply and demand balance will be limited, depending

CBDs. These trends indicate that NBF’s occupancy rates

on the area.

may be bottoming out. Going forward, we anticipate

In Tokyo CBDs, while asking rents for new officethat our occupancy rate will recover and forecast that itbuildings are decreasing significantly, the overall average

will reach 95.3 percent by December 31, 2010 (the end

asking rent has been relatively stable because askingof the 19th Period) and 95.8 percent by June 30, 2011

rents for existing properties, which comprise the majority

Market Vacancy Rates

Vacancy Rates in Tokyo CBDs

(%)

(%)

25

10

20

8

15

MarketNagoya

Osaka

10

4

5

2

Tokyo
0

NBF

6

Dec.
2002

Dec.
2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

Dec.
2008

Dec. Jun.
2009 2010

Source: Miki Shoji Co., Ltd.
T k CBDTokyo
CBDs: Chi
Chiyoda,d Ch
Chuo, Mi
Minato,t Shi
Shinjuku,
j k Shib
Shibuya
Osaka CBDs: Umeda, Minami-Morimachi, Yodoyabashi/Honcho, Senba, Shinsaibashi/Namba, Shin-Osaka
Nagoya CBDs: Meieki, Fushimi, Sakae, Marunouchi

0

Jun.
2008

Sept.
2008

Dec.
2008

Mar.
2009

Jun.
2009

Sept.
2009

Dec.
Mar.
Jun.
2009 2010 2010
Source: Miki Shoji Co., Ltd.

NBF Report January – June 2010 11

of office buildings in Tokyo, are comparatively stable.

per share of ¥15,100 for the 19th Period and ¥15,100

However, in the severe economic environment, thefor the 20th Period.

overall average asking rent as of June 30, 2010 was¥18,035/tsubo, a decrease of ¥943 from December 31,

Management Policies

2009. NBF’s properties are concentrated in Tokyo, and

NBF aims to increase shareholder value byshifting from internal to external growth basedon its conservative financial strategy.

over half the properties in our portfolio have rents below¥25,000/tsubo. These properties have exhibited relatively
small rent decreases. As a result, we expect our portfolio
rents to bottom out in the latter half of 2011 inconjunction with the recovery of occupancy rates.
In consideration of our portfolio asset composition, in

NBF increased its assets and achieved growth during
the economic recovery following the collapse of the IT
bubble in 2003. Since then, we have grown internally,

the 18th Period we sold the NBF Ebisu-Minami Building

which has led to growth in distributions. Currentfor ¥1.35 billion and the NBF Hakata Gion Building foroccupancy rates, and asking rents are at relatively low¥2.2 billion.

levels, and GDP projections point toward gradual

Under these circumstances, NBF expects revenue

recovery of Japan’s economic fundamentals.

from property leasing to decrease an annualized 4

In the office building leasing market, we will foster

percent over the following year. This includes a

relations with existing tenants, improve occupancy rates

projected net 0.5 percent increase in revenue due toby preventing contract cancellations and strengthenscheduled acquisition of the NBF Ueno Building inmarketing to attract new tenants.

January 2011 and loss of revenue from the sale of two

In addition, we will strategically invest in renewal toproperties during the 18th Period, as well as a projected

increase the competitiveness of our properties and work

4.5 percent decrease in rent revenue due to downward

to reduce management and energy costs.

rent revisions.
Based on these assumptions, NBF expects distributions

Office Floor Space Supply inthe 23 Wards of Tokyo(Thousand m2)

2,500

Activity has resumed in the office building acquisition
market, mainly transactions in CBDs, and information

Average Asking Rents in Tokyo CBDs
(Yen per tsubo )40,000

New buildings
35,000

2,000

1,500

30,0001,000

25,000500

20,000

Average asking rent

0

Existing buildings02002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
(Proj.) (Proj.) (Proj.) (Proj.) (Proj.)
Source: Mori Building Co., Ltd.

12 NBF Report January – June 2010

Jun.
2006

Dec.
2006

Jun.
2007

Dec.
2007

Jun.
2008

Dec.
2008

Jun.
2009

Dec. Jun.
2009 2010

Source: Miki Shoji Co., Ltd.

To Our Shareholders

Occupancy Rate, Real GDP and Acquisition Price(%)

Real GDP (right scale)

NBF occupancy rate (left scale)

100

(%)

3.0
0

95
-3.0

Market occupancy rate* (left scale)90■ Bursting of IT bubble■ “2003 Problem” foroffice leasing■ Recovery from bursting of IT bubble■ Economic growth■ Subprime-loan crisis■ Financial crisis■ Economic crisis-6.0■ Easier financing■ Influx of investment capital■ Recovery of corporate profits(Yen in billions)

800
600

Acquisition priceStrengthening Portfolio■ Selective investment inhigh-quality properties■ Turnover of portfolio

400
200
0

Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun.
2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010

Dec.
2010
(Proj.)

Jun.
2011(Proj.)

Dec.
2011(Proj.)

Jun.
2012(Proj.)

Dec.
2012(Proj.)*Tokyo 23 wards; floor area over 10,000m2
Source: Market occupancy rate: Mori Building Co., Ltd.; Real GDP: Cabinet Office, Government of Japan; Projections for April 2010 – March 2012: Japan Center for Economic Research

about properties has increased. The number of office

Regarding financial strategy, the current fundbuildings for sale with excellent specifications in superior

procurement environment is stable, but uncertainty

locations — the type of property that NBF targets —remains about the future direction of the global

remains low. However, the number of transactions is

economy, including uneasiness in European financial

expected to increase. We will therefore closely watch

markets. We will therefore firmly maintain athe market and selectively invest in highly competitive

conservative policy that includes controlling the loan-to-

high-quality properties from which we can expect stablevalue (LTV) ratio and the ratio of long-term fixed-rate

rental cash flow to achieve external growth whiledebt to total interest-bearing debt in addition toturning over our existing portfolio.

diversifying maturities and credit sources.
The operating environment remains severe. However,Diversified Maturities ofInterest-Bearing Debt

by making the most of the advantages of the high-(Yen in billions)management and the leasing capabilities of our

80

60

quality portfolio we have built up since we began asset

Short-term loans
Bonds
Long-term debt

sponsor, Mitsui Fudosan Co., Ltd., we will achieve abalance of internal and external growth based on
sound financial strategies, adhere to a fundamental
policy of stable distributions to shareholders over the40

medium to long term and enhance investor value.

20

02010 2011 2012 2013 2014 2015 2016 2017 2018 2019
(As of June 30, 2010)

Koichi Nishiyama
Executive Director of Nippon Building Fund Inc.
President and CEO of Nippon Building Fund Management Ltd.

NBF Report January – June 2010 13

A Track Record of Steady Growth and High Occupancy Rates

Occupancy rate (%)

100.0

96.9

97.7

98.1

97.5

98.1

98.7

97.8

99.0

98.6

97.4

96.8

95.4

94.8

94.5

90.0

Acquisition priceTotal rentable area (m2)Tokyo CBDs
Other Greater Tokyo

750,701

763,658 770,270 770,150 763,000

800,000

Other Cities
Acquisition price(Yen in billions)670,249 670,513

692,222

Occupancy rate

800

700,000

692,286

783.1

779.5

725.2

578,243

700

783.1
762.3

Total rentable area
674.3
624.8

600,000

674.3

624.8

488,323600

500,000

460,901
539.3

419,511500

400,000

393.8

400

414.1
300,000

336.1
300

247,687
200,000

200

192.1

100,000

100

0

22

43

43

47

52

55

55

56

56

58

60

61

61

59

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Dec. 31,2004

Jun. 30,
2005

Dec. 31,2005

Jun. 30,
2006

Dec. 31,2006

Jun. 30,
2007

Dec. 31,2007

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,
Jun. 30,
20092010(As of June 30, 2010)

May 23,
Jun. 30,
2001
2004(Investment commencement date)

14 NBF Report January – June 20100

Planned Acquisition in the 20th Period

60 NBF Ueno Building●
Acquisition date:

January 31, 2011 (scheduled)

Acquisition price:¥10,400 million

Site area:

2,405.22m2 (NBF share: approx. 78%)

Floor area of building:

15,467.77m2

Structure:

13 floors above ground, 2 floors below

Location:24-11, Higashi-Ueno 4-chome, Taito-ku, Tokyo

NBF Report January – June 2010 15

Location of Office Properties(As of June 30, 2010, excluding properties sold in the 18th Period)

Tokyo CBDs
1 NBF HIbiya Building
2 Nishi-Shinjuku Mitsui Building
3 Shiba NBF Tower
4 NBF Platinum Tower
5 NBF Minami-Aoyama Building
6 Gate City Ohsaki
7 Toranomon Kotohira Tower
8 NBF Nihonbashi Muromachi Center Building
9 Nakameguro GT Tower
10 Mitsuiseimei Ochanomizu Building
11 NBF Ginza Street Building
12 Shinjuku Mitsui Building No. 2
13 GSK Building
14 NBF Toranomon Building
15 Kowa Nishi-Shinbashi Building B
16 Nippon Steel Building No. 2
17 NBF Alliance
18 Yotsuya Medical Building
19 Shibuya Garden Front
20 NBF Shibuya East
21 NBF Shibakouen Building
22 NBF Takanawa Building
23 NBF Akasaka Sanno Square
24 NBF Shibakouen Daimon Street Building
25 Sumitomo Densetsu Building
26 NBF Higashi-Ginza Square
27 NBF Ogawamachi Building
28 NBF Ikebukuro Tower

Kita-ku

Arakawa-ku

29 28

Toshima-ku
Taito-ku

Bunkyo-ku

Nakano-ku

60

31

Sumida-ku
10

Shinjuku-ku

2

Chiyoda-ku

12

8

18
Imperial
Palace13

19 20

Minato-ku

Setagaya-ku

21
9

Koto-ku

7 14
15

5
17

4

Chuo-ku

1

23

Shibuya-ku

29 NBF Ikebukuro City Building
30 NBF Sudacho Verde Building

27

30

11

26

3

16

33 32

24

22
25

Tokyo Bay

Meguro-ku
6

Shinagawa-ku

Other Greater Tokyo
31 Nakanosakaue Sunbright Twin
32 NBF Toyosu Canal Front
33 NBF Toyosu Garden Front
60 NBF Ueno Building(Scheduled for acquisition in January 2011)

8 NBF Nihonbashi●

Muromachi Center Building

16 Nippon Steel Building No. 2●

16 NBF Report January – June 2010

18 Yotsuya Medical Building●

21 NBF Shibakouen●

Building

26 NBF Higashi-Ginza Square●

Other Greater TokyoTOCHIGI

34 Shin-Kawasaki Mitsui Building
35 Yokohama ST Building
36 Parale Mitsui Building
37 NBF Atsugi Building
38 Tsukuba Mitsui Building
39 NBF Utsunomiya Building
40 S-ino Omiya North Wing
41 NBF Urawa Building
42 NBF Shin-Urayasu Tower
43 NBF Matsudo Building

38

UTSUNOMIYA

39

IBARAKITo Omiya

SAITAMA

40

41

TOKYO

43

CHIBA
60

31

33 32

42

Other Cities
34

Tokyo Bay

44 Sapporo L-Plaza

36

45 NBF Sapporo Minami Nijo Building
46 NBF Sendai Honcho Building

35

37

47 NBF Unix Building

44 45

48 NBF Niigata Telecom Building

KANAGAWA

49 NBF Nagoya Hirokoji Building
50 Aqua Dojima NBF Tower
51 Shinanobashi Mitsui Building48

52 Sun Mullion NBF Tower

46
47

53 Sakaisuji-Honmachi Center Building
54 NBF Sakai-Higashi Building
55 Aqua Dojima East

56

49

56 NBF Shijo Karasuma Building

58 57
59

36 Parale Mitsui Building●

42 NBF Shin-Urayasu Tower●

44 Sapporo L-Plaza●

50 51 52 53

57 NBF Hiroshima Tatemachi Building

54 55

58 Hiroshima Fukuromachi Building
59 NBF Kumamoto Building

52 Sun Mullion NBF Tower●

53 Sakaisuji-Honmachi●

Center Building

NBF Report January – June 2010 17

Portfolio Overview
NBF’s properties as of June 30, 2010 are as follows (excluding properties sold in the 18th period):
Name of Building

Investment
Type

Type of Ownership

Percentageof OwnershipYear Built

Acquisition
Price

(%)

Book Value(Yen in millions)Tokyo CBDs
1 NBF Hibiya Building
Trust●
2 Nishi-Shinjuku Mitsui Building
Ownership●
3 Shiba NBF Tower
Trust●
4 NBF Platinum Tower
Trust●
5 NBF Minami-Aoyama Building
Ownership●
6 Gate City Ohsaki
Ownership●
7 Toranomon Kotohira Tower
Ownership●
8 NBF Nihonbashi Muromachi Center Building
Trust●
9 Nakameguro GT Tower
Ownership●
10 Mitsuiseimei Ochanomizu Building
Ownership●
11 NBF Ginza Street Building
Trust●
12 Shinjuku Mitsui Building No. 2
Trust●
13 GSK Building
Trust●
14 NBF Toranomon Building
Trust●
15 Kowa Nishi-Shinbashi Building B
Trust●
16 Nippon Steel Building No. 2
Ownership●
17 NBF Alliance
Trust●
18 Yotsuya Medical Building
Trust●
19 Shibuya Garden Front
Ownership●
20 NBF Shibuya East
Ownership●
21 NBF Shibakouen Building
Ownership●
22 NBF Takanawa Building
Trust●
23 NBF Akasaka Sanno Square
Trust●
24 NBF Shibakouen Daimon Street Building
Trust●
25 Sumitomo Densetsu Building
Trust●
26 NBF Higashi-Ginza Square
Trust●
27 NBF Ogawamachi Building
Ownership●
28 NBF Ikebukuro Tower
Trust●
29 NBF Ikebukuro City Building
Trust●
30 NBF Sudacho Verde Building
Ownership●

Fee simple
Comparted ownershipFee simple
Fee simple
Fee simple
Comparted ownership
Comparted ownershipFee simple
Comparted ownershipFee simple
Fee simple
Fee simple
Fee simple
Fee simple
Co-ownership of comparted ownershipFee simple
Fee simple
Fee simple
Co-ownershipFee simple
Fee simple
Fee simple
Fee simple
Co-ownership of comparted ownershipFee simple
Fee simple
Comparted ownershipFee simple
Fee simple
Fee simple

100.0
85.1
100.0
100.0
100.0
12.9
100.0
100.0
93.1
100.0
100.0
100.0
100.0
100.0
83.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
87.0
100.0
100.0
83.8
100.0
100.0
100.0

1984
1999
1986
2005
1995
1999
2004
1986
2002
2009
1990
1983
1990
1963
1994
1989
1989
2004
2003
1992
1990
1987
1989
1991
1991
2005
1986
1993
1993
1988

63,50044,90332,00031,00031,00030,10024,54323,94523,856
20,84017,00016,285
15,616
13,337
13,217
12,614
9,126
8,800
8,700
8,000
6,770
6,667
6,250
6,100
5,365
5,200
4,940
4,695
4,428
3,280

64,47035,58429,841
29,62331,70424,063
20,511
24,337
21,896
21,442
17,59915,83013,65813,482
11,827
11,334
9,474
8,348
8,113
8,179
6,599
6,365
6,263
6,305
4,709
4,872
5,077
4,612
4,371
3,345

Ownership/Trust Co-ownership of comparted ownership
Trust
Fee simple
Ownership
Fee simple
Ownership
Co-ownership
Trust
Co-ownership
Ownership
Co-ownership of comparted ownership
Ownership
Fee simple
Trust
Fee simple
Ownership
Fee simple
Ownership
Fee simple
Ownership
Fee simple
Ownership
Fee simple
Ownership
Fee simple

81.0
100.0
100.0
35.0
75.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1996
2004
2007
1989
1987
1990
1991
1990
1996
2004
1990
1990
1992

40,75035,20025,01820,30013,529
3,800
2,300
8,876
2,435
16,8162,000
15,7002,455

38,55232,855
24,81018,55812,538
3,293
2,106
7,188
2,472
15,271
1,909
15,776
2,239

46.2
100.0
100.0
100.0
100.0
100.0
100.0
99.0
100.0
49.3
100.0
23.7
100.0
100.0
10.4
100.0
–
–

2003
1990
1987
1994
1989
2000
1996
1982
1996
1991
1991
1993
1991
1991
2002
2008
–
–

4,404
1,870
3,566
4,029
3,958
7,232
17,81014,40010,500
6,500
2,227
1,914
1,627
2,930
835
4,500
–
–
779,560

3,883
1,711
3,582
3,134
3,667
7,121
16,442
11,517
8,365
6,197
1,958
1,769
1,389
2,900
708
4,492
–
–
729,233

Other Greater Tokyo
31 Nakanosakaue Sunbright Twin●
32 NBF Toyosu Canal Front●
33 NBF Toyosu Garden Front●
34 Shin-Kawasaki Mitsui Building●
35 Yokohama ST Building●
36 Parale Mitsui Building●
37 NBF Atsugi Building●
38 Tsukuba Mitsui Building●
39 NBF Utsunomiya Building●
40 S-ino Omiya North Wing●
41 NBF Urawa Building●
42 NBF Shin-Urayasu Tower●
43 NBF Matsudo Building●

Other Cities
44 Sapporo L-Plaza●
45 NBF Sapporo Minami Nijo Building●
46 NBF Sendai Honcho Building●
47 NBF Unix Building●
48 NBF Niigata Telecom Building●
49 NBF Nagoya Hirokoji Building●
50 Aqua Dojima NBF Tower●
51 Shinanobashi Mitsui Building●
52 Sun Mullion NBF Tower●
53 Sakaisuji-Honmachi Center Building●
54 NBF Sakai-Higashi Building●
55 Aqua Dojima East●
56 NBF Shijo Karasuma Building●
57 NBF Hiroshima Tatemachi Building●
58 Hiroshima Fukuromachi Building●
59 NBF Kumamoto Building●■ NBF Ebisu-Minami Building■ NBF Hakata Gion Building
Total

Ownership
Trust
Trust
Trust
Trust
Ownership
Trust
Ownership
Trust
Ownership
Trust
Trust
Trust
Ownership
Ownership
Ownership––Comparted ownershipFee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Co-ownershipFee simple
Co-ownership of comparted ownershipFee simple
Co-ownership of comparted ownershipFee simple
Fee simple
Co-ownership of comparted ownershipFee simple––

Notes: 1. Percentage of total revenues is the ratio of revenue from each office property to total revenues from all office properties.
2. Consent for disclosure was not obtained from tenants from whom rent revenue accounts for more than 80% of total rent revenue for the property. However, relevant figures are included in the total.
3. Figures stated above are based on NBF‘s ownership interest.

18 NBF Report January – June 2010

Revenue

Percentage ofTotal Revenues(Yen in millions)(Note 1)
(%)

65
1
25
6
8
1
1
11
1
1
1
46
1
13
2
2
9
1
1
3
7
5
7
7
1
8
1
13
11
1

1,294
1,363
1,028
1,498
428
1,019
840
800
982
Note 2
Note 2574
Note 2558
Note 2
Note 2308
257
Note 2
218
334
336
233
180
Note 2
251
198
219
188
Note 2

4.6
4.9
3.7
5.4
1.5
3.6
3.0
2.9
3.5
Note 2
Note 22.0
Note 22.0
Note 2
Note 21.1
0.9
Note 2
0.8
1.2
1.2
0.8
0.6
Note 2
0.9
0.7
0.8
0.7
Note 2

100.0
98.7
100.0
100.0
90.1
100.0
71.6
91.4
90.5
96.5
94.6
89.0
96.4

9
9
4
1
86
1
13
61
34
34
13
37
24

1,172
Note 2
1,166
860
709
317
104
422
118
777
106
555
130

4.2
Note 2
4.2
3.1
2.5
1.1
0.4
1.5
0.4
2.8
0.4
2.0
0.5

100.0
100.0
87.3
92.1
89.3
61.8
86.8
100.0
93.8
77.1
89.0
63.5
81.6
87.6
96.5
82.8
–
–
94.5

12
4
8
49
30
13
41
1
28
36
20
15
13
25
15
14
–
–
910

322
107
194
263
206
247
716
605
385
278
109
72
78
136
38
164
22
46
28,035

1.2
0.4
0.7
0.9
0.7
0.9
2.6
2.2
1.4
1.0
0.4
0.3
0.3
0.5
0.1
0.6
0.1
0.2
100.0

Appraisal Value

Rentable
Area

Leased Area at
End of Period

Occupancy Rate at
End of Period(Yen in millions)

(m2)

(m2)

(%)

56,50048,30027,50050,40016,80030,70030,40027,20022,60014,60014,50016,00021,10016,60016,40013,93010,4007,380
13,600
6,640
8,360
7,320
7,400
4,390
6,020
7,250
5,500
5,050
4,900
3,210

27,64432,96824,72833,503
9,619
20,70916,84816,30621,4236,627
3,440
14,874
20,426
10,067
10,08817,338
4,043
7,450
8,258
4,993
7,087
10,458
5,258
3,433
5,991
4,871
4,805
5,652
5,127
2,971

21,52732,96822,55833,5038,208
20,70916,84815,802
21,4236,627
3,440
14,67820,426
9,556
10,061
17,338
4,043
7,450
8,258
4,635
7,087
10,158
5,258
3,433
5,991
4,871
4,805
5,652
5,127
427

77.9
100.0
91.2
100.0
85.3
100.0
100.0
96.9
100.0
100.0
100.0
98.7
100.0
94.9
99.7
100.0
100.0
100.0
100.0
92.8
100.0
97.1
100.0
100.0
100.0
100.0
100.0
100.0
100.0
14.4

31,20035,70028,70016,70015,200
3,470
2,110
7,560
2,090
19,5001,760
11,5002,290

32,082
36,63828,30027,92420,027
12,545
5,230
16,768
6,160
20,6983,455
22,775
4,770

32,08236,15428,30027,92418,041
12,545
3,743
15,330
5,573
19,9793,270
20,269
4,597

6,390
1,560
3,170
3,350
3,020
7,870
19,20013,400
8,300
6,570
1,660
1,900
1,330
2,610
810
3,690
–
–
783,560

11,396
5,351
7,539
13,390
10,208
9,878
21,917
25,237
14,954
11,438
5,308
3,243
3,931
5,612
1,309
7,913
–
–
763,000

11,3965,351
6,581
12,332
9,120
6,107
19,022
25,237
14,027
8,818
4,727
2,059
3,206
4,916
1,263
6,555
–
–
721,390

Total Number ofTenants at
End of Period

4. Properties marked ■ were sold in March 2010.

NBF Report January – June 2010 19

Main Properties

1 NBF Hibiya Building●

2 Nishi-Shinjuku Mitsui Building (top right)●
3 Shiba NBF Tower (right)●

20 NBF Report January – June 2010

5 NBF Minami-Aoyama Building
●

(top)

7 Toranomon Kotohira Tower●(bottom)

4 NBF Platinum Tower (top)●
6 Gate City Ohsaki (bottom)●

NBF Report January – June 2010 21

9 Nakameguro GT Tower (left)●
14 NBF Toranomon Building (below)●

12 Shinjuku Mitsui Building No. 2●

10 Mitsuiseimei Ochanomizu Building●

22 NBF Report January – June 2010

Main Properties

17 NBF Alliance (below)●

31 Nakanosakaue Sunbright Twin (bottom)●

19 Shibuya Garden Front (top)●23 NBF Akasaka Sanno Square (bottom)●

NBF Report January – June 2010 23

34 Shin-Kawasaki Mitsui Building (top)●35 Yokohama ST Building (bottom)●
32 NBF Toyosu Canal Front (top) / ●33 NBF Toyosu Garden Front (bottom)●

24 NBF Report January – June 2010

Main Properties

50 ●55 Aqua Dojima NBF Tower, Aqua Dojima East (below)●

40 S-ino Omiya North Wing (top left)●
51 Shinanobashi Mitsui Building (left)●

NBF Report January – June 2010 25

Management Team and Management Structure(As of June 30, 2010)

Nippon Building Fund Inc. (NBF) is an investment corporation that takes a medium-to-long-term perspective withthe aim of generating steady asset growth and stable profits. NBF believes that fair, transparent management iscentral to increasing return on investment.
in attendance, unless otherwise stipulated by laws, regulations or

Nippon Building Fund Inc.

NBF’s articles of incorporation. Decisions on substantive matters such
Nippon Building Fund Inc. is an investment corporation established with the objective of investing in assets, primarily Designated
Assets as defined by the Investment Trust Law of Japan. NBF entrusts
management of its assets to Nippon Building Fund Management
Ltd., which is an asset management company.

as changes in the articles of incorporation require the attendance ofshareholders that control a simple majority of total shares issued andoutstanding, and a two-thirds majority of the voting rights of suchshareholders. In addition, any change in the asset management policies and standards, which are stipulated by NBF’s articles of incorpo-

NBF’s primary investment objective is to achieve sustainableration, requires an extraordinary resolution of shareholders as out-

growth in portfolio value and stable profits on a medium-to-long-

lined above.

term basis. NBF achieves this objective by investing in real estate
consisting of buildings primarily used for offices with their underlying
land located in the central business districts (CBDs) of Tokyo, other

Executive Directors, Supervisory Directors and theBoard of Directors

Greater Tokyo and other cities in Japan. NBF also invests in securities,

NBF’s articles of incorporation stipulate that NBF must havebeneficiary certificates representing beneficial interests in trusts andone or more executive directors and four or fewer supervisory

other assets backed by office properties.

directors (but the number of supervisory directors must always
be at least one greater than the number of executive directors).
As of June 30, 2010, NBF had two executive directors and four

General Meeting of Shareholders

supervisory directors.

Specific matters pertaining to NBF that are subject to theInvestment Trust Law of Japan or the Company’s articles of incorpora-

NBF’s executive directors are responsible for business execution. Intion are decided by resolution of the General Meeting of Shareholders,

addition, they have authority for all judicial and extrajudicial proceed-

which convenes at least once every two years, in principle. The sixth

ings related to the operations of NBF.
Supervisory directors are responsible for supervising execution by

General Meeting of Shareholders convened on March 12, 2009. The
date of the next General Meeting of Shareholders has not been set.

the executive directors.

The General Meeting of Shareholders adopts or vetoes resolutions

The Board of Directors consists of the executive and supervisoryon the basis of a simple majority of the voting rights of shareholders

directors. Its responsibilities include authorizing business execution

General Meeting of
Shareholders

Asset Custody

The Chuo Mitsui Trustand Banking Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.

Asset Custody
Entrustment

OfficeManagement
Entrustment

NIPPON BUILDING FUND Inc. (NBF)

Board of Directors

Borrowings /Bonds and
Notes
Debt
Service

Investment

Real Estate, etc.
Rent, etc.

AssetsShareholders’EquityNIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

Qualified Institutional
Investors / Bondholders
Independent Auditors
KPMG AZSA LLC

Liabilities

Office Management

26 NBF Report January – June 2010

Asset
Management
Entrustment

Investment

Shareholder

Distribution

Shareholder

TradingManagement Team

Seated from left:

Sadafumi Abe
Koichi Nishiyama
Standing from left:

Sadao Kamiyama
Hideo Fukazawa
Hatsuo Komatsu
Yoshiyuki Hirai

Executive Directors

Name

Background Summary

Sadafumi Abe

Appointed Executive Director of NBF in March 2005 after serving as Corporate Auditor of
Mitsui Fudosan Co., Ltd.
Representative Director of Nippon Building Fund Management Ltd. Executive Director of
NBF since August 2001.
Appointed Supervisory Director of NBF in March 2005 after serving as a deputy director of
the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), and director of theGovernment Housing Loan Corporation.
Attorney. Appointed Supervisory Director of NBF in March 2007.
Certified Public Accountant. Certified Public Tax Accountant. Appointed Supervisory Director
of NBF in March 2007.
Appointed Supervisory Director of NBF in March 2009. Real Estate Appraiser.

Koichi Nishiyama
Supervisory Directors Hideo Fukazawa

Hatsuo Komatsu
Sadao Kamiyama
Yoshiyuki Hirai

and supervising the performance of the executive directors.

The terms of office of executive directors and supervisory direc-

Resolutions by the Board of Directors require a simple majority withtors are two years from the time they assume office. The terms of

more than half of the members of the Board in attendance.

executive directors and supervisory directors selected to fill a vacancy

The bylaws of NBF’s Board of Directors stipulate that executive

or to increase the number of directors expire at the same time as theand supervisory directors may not participate in decisions in which

remaining terms of their predecessors or the current directors. Boththey have a vested interest. Executive and supervisory directors withof the two executive directors and all four supervisory directors weresuch financial interest shall not be included in the number of execu-

elected at the General Meeting of Shareholders held on March 12,

tive and supervisory directors in attendance for such decisions.

2009, and assumed office on March 17, 2009.

NBF Report January – June 2010 27

Management Structure

Nippon Building Fund Management Ltd.
NBF entrusts asset management to Nippon Building FundManagement Ltd. under an asset management agreement.

General Meeting of Shareholders
AuditorCompliance Committee

Board of Directors
Executive Board

Matters Entrusted to
Nippon Building Fund Management Ltd.

Risk Management BoardCEOAs the asset management company required by the Investment

Investment
Review Board

Accounting Auditor

Trust Law of Japan, Nippon Building Fund Management Ltd. manages
NBF’s assets in accordance with the asset management objectives andpolicies stipulated by NBF’s articles of incorporation. In addition, in

Compliance
Officer

Investment & FinanceGroup

Corporate OperationGroupaccordance with the manager of general administration contract designating Nippon Building Fund Management Ltd. as the institutional

Real EstateManagement
Team

Real Estate
Investment
Team

Research
Team

Financial
Team

Fund
Operation
Teammanager of NBF’s assets, Nippon Building Fund Management Ltd. also

Corporate
Risk
Planning &Management
Administration & Compliance
Team
Team

executes certain responsibilities in connection with the operation of
the General Meeting of Shareholders and the Board of Directors as

operations of Nippon Building Fund Management Ltd. The heads ofmanager of general administration.

the Investment & Finance Group and the Corporate Operation
Group also serve as directors, and oversee their respective divisions
under the direction and oversight of the president. Corporate audi-

Management Structure of
Nippon Building Fund Management Ltd.

tors conduct accounting audits and operational audits of Nippon

The Board of Directors makes decisions on the basic management

Building Fund Management Ltd. The Compliance Officer oversees

policies of Nippon Building Fund Management Ltd. and oversees

compliance for the asset management company and is responsible

execution of the duties of the representative director. The president,

for internal administration in connection with internal audits at the

who is the representative director, supervises and executes theasset management company.

Nippon Building Fund Management Ltd. Management Team
Name

Title

Career Summary

Koichi Nishiyama

President and CEO
and Representative
Director

April 1974
April 2000
Sept. 2000

Yasushi Nakayama

Director, Head ofInvestment& Finance Group

Hiroshi Yabuki

Director and COO

Masato Shikata
Fukuhisa Kumada
Noriaki Moromachi

Director (Part-time)
Director (Part-time)
Corporate Auditor(Part-time)
Corporate Auditor(Part-time)

Toru Suzuki

28 NBF Report January – June 2010

Aug. 2001
April 1981
April 2001
April 2006
April 2007
April 1984
April 2004
Oct. 2008
Feb. 2010
April 2009
Sept. 2010
April 2003

Joined Mitsui Fudosan Co., Ltd.
Manager of Building Fund Office, Building Division of Mitsui Fudosan
Became President and Representative Director of MF Asset Management Co., Ltd.
(now Nippon Building Fund Management Ltd.) (current position)
Became Executive Director of NBF (current position)
Joined Mitsui Fudosan Co., Ltd.
Head of Building Business Division, Building Department of Mitsui Fudosan
Manager of Building Department, Chiyoda Development Division of Mitsui Fudosan
Became Director of Nippon Building Fund Management Ltd. (current position)
Joined Sumitomo Life Insurance Company
Head of Niigata Branch Office of Sumitomo Life Insurance
Head of Real Estate Department, Real Estate Operating Office of Sumitomo Life Insurance
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Auditor of Nippon Building Fund Management Ltd. (current position)

April 2008

Became Auditor of Nippon Building Fund Management Ltd. (current position)

Management Team and Management Structure

Compliance Initiatives

guidelines for management, acquisition and sale of assets; financial
guidelines for fund procurement and management policies; account-

The management of NBF and Nippon Building Fund Management
Ltd. conduct honest and appropriate business activities while main-ing guidelines for tax accounting and dividend distribution policies;and guidelines on transactions with potential conflicts of interest.

taining rigorous compliance by adhering to all relevant laws and regulations, based on a high level of corporate ethics.
The bylaws of NBF’s Board of Directors stipulate that Board of
Directors meetings are to be held at least once every three months. In

Policy and Management System for
Dealing with Conflict of Interest Transactions■

practice, NBF holds such meetings once a month. At Board meetings,

Fundamental Policy on Conflict of Interest Transactions

Nippon Building Fund Management Ltd. is constantly aware of its

executive directors report on the execution of their duties and super-

accountability to NBF and NBF’s shareholders with regard to any

visory directors ensure that oversight and check-and-balance systems

transactions in which the interests of NBF and the interests of Nippon

are functioning properly.

Building Fund Management Ltd. and its related corporations or cus-

Nippon Building Fund Management Ltd. views compliance as a

tomers may conflict. Nippon Building Fund Management Ltd. follows

management strategy, with a fundamental compliance policy ofvoluntary rules stipulated in laws and internal bylaws to proactively

conducting operations honestly and fairly while maintaining a rigor-

prevent conflicts of interest.

ous compliance system based on a high level of corporate ethics.

All decisions made in executing the management of NBF’s assets

Specifically, Nippon Building Fund Management Ltd. has establishedare subject to the approval of the president, and are made after goinga Compliance Committee, consisting of the Compliance Officer, thethrough discussions by the Investment Review Board and Executive

president, the head of the Investment & Finance Group, the head ofBoard of Nippon Building Fund Management Ltd. Sponsor companies

the Corporate Operation Group and an outside committee member.

are not permitted to intervene in the decision-making process.

Initiatives to enhance awareness of and adherence to compliance■include the establishment of Compliance Rules and a Compliance

Voluntary Rules for Conflict of Interest Transactions
Stipulated in Internal Bylaws

Manual. In addition, a Compliance Program is formulated each year

Nippon Building Fund Management Ltd. has set voluntary rules into verify the progress of the execution plan for that year and identify

its internal bylaws to address transactions with parties, including

any problem areas.

sponsor companies that have interests in Nippon Building FundManagement Ltd.

Risk Management System

The voluntary rules require the Investment Division, which initiates

NBF and Nippon Building Fund Management Ltd. have estab-the transaction, as well as the Compliance Department, the Assetlished the following risk management system to avoid and minimize

Management Examination Meeting and other units to protect NBF’srisks related to investments.

managed assets and profits by fully examining the transaction con-■

NBF

tents according to the voluntary rules set in the internal bylaws in

NBF’s Risk Management Regulations define risk management poli-

the event of a transaction in which the interests of Nippon Building

cies and procedures. The Risk Management Board convenes once

Fund Management Ltd. and parties that have interests in Nippon

every three months and undertakes deliberation, monitoring and other

Building Fund Management Ltd. may conflict with the interests ofinitiatives to ensure that the entrusted asset manager is conducting its

NBF. These rules are designed from the standpoint of accountability

duties with due care in good faith in a manner consistent with its fidu-

to NBF and its shareholders.

ciary duty to the conservation and maintenance of entrusted assets.
■

In examining the transaction contents, Nippon Building Fund

Nippon Building Fund Management Ltd.

Management Ltd. solicits the opinions of attorneys, certified tax

Nippon Building Fund Management Ltd. formulates aaccountants and other third-party experts as needed. In addition,

Management Policy, a Medium-to-Long-Term Asset Management

when purchasing real estate or other assets from parties that have

Policy and an Annual Management Plan to follow in managing

interests in Nippon Building Fund Management Ltd., the purchase

NBF’s assets. In addition, Nippon Building Fund Management Ltd. hasprice is strictly set, in principle no higher than the appraised value

set Asset Management Guidelines as a set of standards to follow.

according to a real estate appraiser with no vested interest.

The Asset Management Guidelines consist of management

NBF Report January – June 2010 29

Management’s Discussion and Analysis
Summary of Selected Financial Data
18th Period
from January 1, 2010 toJune 30, 2010

17th Period
from July 1, 2009 to
December 31, 2009

16th Period
from January 1, 2009 toJune 30, 2009

(Yen in millions, except per share data or where otherwise indicated)

Operating revenues
Note 2
Revenue from property leasing activities
Gain on sale of investment property
Operating expenses
Rental expenses
Loss on sale of investment property
Income before income taxes
Net income(a)Funds from operations
Note 3
Net operating income from property leasing activities Note 3
Total amount of cash distribution(b)
Depreciation and amortization
Capital expenditures
Total assets(c)Interest-bearing debt
Net assets(d)Total number of common shares issued (shares)(e)
Net assets per share (Yen/$)(d) / (e)Distribution per share (Yen/$)(b) / (e)Funds from operations per share (Yen/$)Note 3
ROA
Note 3(Annual rate)
ROE
Note 3(Annual rate)
LTV (Loan to value)
Note 3
Capital ratio(d) / (c)Payout ratio(b) / (a) Note 4
Number of days
Number of investment properties
Note 5
Number of tenants
Note 5
Total rentable area (m2)Occupancy rate
Note 5¥ 28,341
28,035306
16,16914,828
140
9,283
9,282
14,354
18,445
9,282
5,239
1,478
774,379
333,500
395,458
542,000
729,626
17,12526,483
1.2%(2.4%)
2.3%(4.7%)
46.8%
51.1%
100.0%
181
59
910
763,000
94.5%¥ 29,928
29,928—16,40415,086—
10,663
10,662
15,944
20,124
10,662
5,282
1,407
782,311337,875
396,838
542,000
732,173
19,672
29,4171.4%(2.7%)
2.7%(5.4%)
46.9%
50.7%
100.0%
184
61
898
770,150
94.8%¥ 30,761
30,761—
16,464
15,111—
11,803
11,802
17,15721,005
11,802
5,355
836
783,793
338,500
397,978
542,000
734,276
21,77531,654
1.5%(3.1%)
3.0%(6.0%)
47.0%
50.8%
100.0%
18161
926
770,270
95.4%

18th Period
from January 1, 2010 toJune 30, 2010
U.S. dollars in thousands
except per share data (Note 1)$ 320,270
316,8113,460
182,720
167,565
1,586
104,898
104,888
162,213
208,444
104,890
59,19916,706
8,751,030
3,768,787
4,468,952
8,245
194
299

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥88.49 = U.S. $1.00, the approximate exchange rate on June 30, 2010.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses after ROA and ROE are annualized based on the six-month figures for the period.
Funds from operations: Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Funds from operations per share: (Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization) / Weighted average number of common shares issued
and outstanding during the period
ROA: Income before income taxes / (Initial total assets + Total assets at end of period) ÷ 2
ROE: Net income / (Initial net assets + Net assets at end of period) ÷ 2
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
4. Payout ratio figures are calculated to one decimal place only.
5. Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number of tenants by building. Occupancy rate is the ratio of grossleased area to total rentable area at the end of the period.

30 NBF Report January – June 2010

Operating Environment and Results
During the six months ended June 30, 2010 (the “18th Period”), the Japanese economy showed signs of a turnaround, including
a gradual increase in exports, mainly to Asia, the bottoming out of capital investment, and improved employment conditions andpersonal consumption. However, economic conditions remained severe, with a persistently high unemployment rate.
In the office building leasing market, the occupancy rate declined further and rents continued to fall as a result of ongoing trends
that led to reductions in rented floor space and contract cancellations. These trends included economic rationalization measures suchas office consolidation and relocation and cutbacks in occupied space due to the ongoing drive to cut costs. On the other hand, thecontinued downward revision of rents has resulted in new occupancies and increases in floor space rented. In particular, it appears
that occupancy rates have bottomed out for high-quality large-scale properties in central business districts.
In the real estate acquisition market, improvements in the fund procurement environment and adjustment of property prices led
to an increase in transactions mainly in central business districts. However, the number of properties for sale with excellent specifications in superior locations remains low.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality officebuildings that are highly competitive in terms of their location, size, facilities and infrastructure and are expected to have stable cash
flow from rents. Deliberation concerning properties did not result in new acquisitions in the 18th Period. In consideration of its portfolio asset composition, NBF sold the NBF Ebisu-Minami Building for ¥1.35 billion and the NBF Hakata Gion Building for ¥2.2 billion.
NBF systematically conducted property management, renovations and new construction to increase tenant satisfaction. NBF also
worked to secure stable rental revenue by maintaining a sound grasp of the market, setting appropriate rents for new tenants andrevising rents for tenants renewing their lease contracts.
As a result of these efforts, NBF’s real estate portfolio as of June 30, 2010 totaled 59 properties. Total investment on an acquisition price basis was ¥779.5 billion. Total rentable area was 763,000m2 (231,000 tsubo). The occupancy rate declined 0.3 percentage
points from December 31, 2009 to 94.5 percent. Tenants totaled 910.

Total investment

Occupancy rate

(Yen in billions)

(%)

900

100

800

98

700

96

600
500

94

400

92

300

90

200
100
0

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,2010

0Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

NBF Report January – June 2010 31

Overview of Performance
Operating revenues for the six months ended June 30, 2010 decreased ¥1,587 million, or 5.3 percent, compared with the previous
six-month period to ¥28,341 million. Operating income decreased ¥1,352 million, or 10.0 percent, to ¥12,172 million. Net income
decreased ¥1,380 million, or 12.9 percent, to ¥9,282 million. Distribution per share decreased ¥2,547 to ¥17,125. The main factor wasa decrease in rental revenue due to tenant turnover, rent revisions and other issues.

(Yen in millions)Operating income from property
leasing activities

35,000(Yen in millions)Operating revenues

20,00030,00025,00015,00020,00010,00015,00010,000

5,000

5,000
0

14th

Period15th

Period16th

Period17th

Period018thPeriod14th
Period15th
Period16th
Period17th
Period18th
PeriodDistribution for the Current Period
Distribution per share for the current period was ¥17,125. NBF expects to distribute almost all retained earnings at thecurrent period end to be eligible for special tax treatment (Special Taxation Measures Law of Japan Article 67-15) that allows NBF
to deduct its cash dividends of profits from taxable income.
For the six months ended
June 30, 2010

For the six months ended
December 31, 2009

For the six months ended
June 30, 2009

(Yen in thousands, except per share amounts)

Retained earnings
Undistributed earnings
Total cash distribution(Cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash distribution in excess of accumulated earnings(Per share)¥9,281,802
52
9,281,750
17,1259,281,750
17,125——¥10,662,478
254
10,662,224
19,672
10,662,224
19,672——¥11,802,315
265
11,802,050
21,775
11,802,050
21,775——

Note: Above cash distributions were paid after the period end.

Distribution per share

Total amount of cash distribution(Yen)(Yen in millions)

25,00012,50020,00010,00015,0007,500
10,000
5,000

5,000
0

0

14th

Period15th

Period16th

Period32 NBF Report January – June 201017th

Period18th

Period14th
Period15th
Period16th
Period17th
Period18th
PeriodManagement’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of June 30, 2010, total assets decreased ¥7,932 million to ¥774,379 million compared with December 31, 2009. Returnon average total assets (ROA) for the six months ended June 30, 2010 decreased to 1.19 percent from 1.36 percent for theprevious six-month period.
Current assets increased ¥1,092 million to ¥40,493 million compared with December 31, 2009. Investment properties
decreased ¥7,010 million to ¥729,232 million compared with December 31, 2009.

Liabilities
Current liabilities decreased ¥22,483 million to ¥32,950 million compared with December 31, 2009, primarily because of adecrease in short-term loans and long-term debt due within one year compared with December 31, 2009.
Long-term debt increased ¥17,625 million to ¥308,750 million compared with December 31, 2009.
As a result, total interest-bearing liabilities decreased ¥4,375 million to ¥333,500 million compared to December 31, 2009.
However, the ratio of long-term fixed-rate debt (less amounts due within one year) to total interest-bearing liabilities increased to
92.6 percent as of June 30, 2010 from 86.2 percent as of December 31, 2009. The loan-to-value ratio, calculated as the ratio ofinterest-bearing liabilities plus deposits under management to total assets, decreased to 46.8 percent as of June 30, 2010 from46.9 percent as of December 31, 2009.
In addition, NBF worked to diversify funding sources. In January 2009, NBF updated a shelf registration to publicly offer up to¥200 billion in bonds.

Net Assets
Net assets decreased ¥1,380 million to ¥395,458 million compared with December 31, 2009.

Net assets

Total assets(Yen in millions)(Yen in millions)

800,000

400,000

300,000

600,000

200,000
400,000
100,000

00Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

Funding
Balance of Paid-in Capital
NBF was established on March 16, 2001 with initial paid-in capital of ¥100 million. NBF began investing activities in May 2001
after ¥98,800 million was raised through private placements. As of June 30, 2010, NBF had issued 542,000 common shares out of
2,000,000 total authorized shares. NBF’s common shares were listed on the J-REIT section of the Tokyo Stock Exchange in September
2001 upon the completion of a public offering. As the Investment Trust Law of Japan does not contain any provision for the issue ofmore than one class of shares, NBF’s common shares comprise the sole class of shares authorized and issued by NBF.

NBF Report January – June 2010 33

Issue dateCommon shares outstanding
Increase
Balance(Shares)

Remarks

Initial capital(private)
May 23, 2001
Private placement
September 8, 2001 Public offering
July 14, 2004
Public offering
Third party
August 11, 2004
allocation
August 10, 2005
Public offering
March 16, 2006
Public offering
Third
party
March 29, 2006
allocation
February 4, 2008 Public offering
Third party
March 4, 2008
allocation
March 16, 2001

200

200

197,600
82,90080,000197,800
280,700
360,700

4,000

Paid-in capital
Increase

Balance

Notes(Yen in millions)

¥

100

¥

100

Note 1

98,80049,99958,83898,900148,899
207,737

Note 2
Note 3Note 4

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

51,491
79,040262,170
341,210Note 6Note 75,300

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

Note 10Notes: 1. NBF was established with initial capital of ¥500,000 per share.
2. Follow-on private offering at ¥500,000 per share to raise funds for acquisition of 22 properties.
3. Public offering of new shares for ¥625,000 per share (excluding underwriting fee: ¥603,125) to repay debt and to fund property acquisition.
4. Public offering of new shares for ¥759,500 per share (excluding underwriting fee: ¥735,475) to repay debt, etc.
5. Additional issue of new shares (third party allocation) for ¥735,475 per share undertaken pursuant to the public offering in Note 4.
6. Public offering of new shares for ¥916,300 per share (excluding underwriting fee: ¥887,782) to repay debt and to fund property acquisition.
7. Public offering of new shares for ¥1,019,200 per share (excluding underwriting fee: ¥988,000) to repay debt and to fund property acquisition.
8. Additional issue of new shares (third party allocation) for ¥988,000 per share undertaken pursuant to the public offering in Note 7.
9. Public offering of new shares for ¥1,205,400 per share (excluding underwriting fee: ¥1,168,500) to repay debt and to fund property acquisition.
10. Additional issue of new shares (third party allocation) for ¥1,168,500 per share undertaken pursuant to the public offering in Note 9.

Market Price of Shares
High/Low (closing price) of shares on the TSE:
For the six months ended
June 30, 2010

For the six months ended
December 31, 2009(Yen)

For the six months ended
June 30, 2009

¥815,000
704,000¥895,000
679,000¥993,000
739,000

High
Low

Borrowings
Borrowings from financial institutions as of June 30, 2010 are shown below.
Short-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

Repayment
methodUse of
funds

Notes

Bulletpayment(Note 4)

Unsecured/unguaranteed/pari passu,
See (Note 5)(Yen in millions)

The Sumitomo Trust andBanking Company, Limited
Shinkin Central BankThe Gunma Bank, Ltd.
THE KAGOSHIMA BANK, LTD.
The Joyo Bank, Ltd.
THE SHIZUOKA BANK, LTD.
The Yamaguchi Bank, Ltd.
The Chugoku Bank, Limited¥ 5,000
4,000
2,000
1,000
1,000
1,000
1,000
1,000

Total short-term loans¥16,000

34 NBF Report January – June 2010

0.8%
0.7%
0.7%
0.7%
0.7%
0.7%
0.8%
0.8%

October 29, 2010
July 30, 2010
July 30, 2010
July 30, 2010
August 31, 2010
August 31, 2010
October 29, 2010
December 30, 2010

Management’s Discussion and Analysis

Long-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.8%
1.5%
1.8%
2.0%
2.4%
2.2%
2.2%
2.1%
2.1%
1.9%
1.7%
1.8%
1.5%
1.8%
1.5%
1.9%
1.8%
1.7%
1.5%
2.3%
1.7%
1.8%
1.6%
1.6%
2.0%
1.9%
1.6%
1.4%
1.6%
1.8%
1.6%
1.6%
1.8%
1.8%
1.5%
1.5%
1.7%
2.1%
2.2%
2.2%
1.8%
1.4%
1.3%
2.0%
1.8%
2.0%
1.4%
1.6%
1.7%
2.1%
2.0%
1.4%
1.8%
1.8%

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
April 28, 2019
August 30, 2019
July 19, 2011
May 23, 2018
May 23, 2016
July 16, 2014
February 3, 2016
April 30, 2013
June 27, 2013
December 28, 2012
April 28, 2014
June 30, 2014
June 1, 2011
September 11, 2015
May 30, 2016
February 13, 2012
March 30, 2012
November 1, 2012
December 13, 2013
May 30, 2013
May 29, 2014
March 30, 2011
December 30, 2011
September 30, 2013
September 30, 2014
September 30, 2013
April 27, 2012
July 31, 2014
September 30, 2014
March 4, 2016
February 7, 2012
July 31, 2013
December 21, 2011
April 27, 2012
May 23, 2012
June 27, 2013
December 30, 2011
September 9, 2011
October 30, 2015
March 30, 2012
October 31, 2014
October 4, 2013
February 3, 2015
December 15, 2014
July 11, 2014
August 31, 2015
December 2, 2013
June 26, 2014
March 30, 2015

Repayment
methodUse of
funds

Notes

(Yen in millions)¥ 4,000
10,00010,00010,00010,0004,750
9,750
Sumitomo Life Insurance Company
5,000
7,000
5,000
5,000
3,000
Sumitomo Mitsui Banking Corporation
5,000
5,000
4,000
6,000
1,000
Zenkyoren
1,000(The National Mutual Insurance
10,000Federation of Agricultural Cooperatives) 10,000
MITSUI LIFE INSURANCE COMPANY, LIMITED 2,000
4,000
2,000
3,000
2,000
3,000
The Chuo Mitsui Trust and Banking
5,000
Co., LIMITED
10,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
8,000
4,000
The Sumitomo Trust and
5,000Banking Company, Limited
7,000
Mitsubishi UFJ Trust and
3,000
Banking Corporation
1,000
7,000
Mizuho Corporate Bank, Ltd.
2,000
8,000
Meiji Yasuda Life Insurance Company
3,000
4,000
1,000
Shinkin Central Bank
4,000
3,000
Resona Bank, Limited.
3,000
3,000
DAIDO LIFE INSURANCE COMPANY
1,000
1,000
1,000
2,000
TAIYO LIFE INSURANCE COMPANY
1,000
2,000
1,000
The Hachijuni Bank, Ltd.
1,000
2,000
1,000
Development Bank of Japan Inc.

(Note 2)
(Note 3)

Bulletpayment(Note 4)

Unsecured/unguaranteed/pari passu,
See (Note 5)
Fixed rate

NBF Report January – June 2010 35

Lender

Balance

Averageinterest rate (%)

Due on(Note 1)

Repayment
method

1.9%
1.1%
1.4%
1.7%
1.1%
1.9%

July 12, 2012
October 19, 2010
April 1, 2015
May 29, 2014
December 28, 2012
April 30, 2014

Use of
funds

Notes

(Yen in millions)

4,000
2,000
2,000
2,000
1,000
1,000
¥247,500¥263,500

THE BANK OF FUKUOKA, Ltd.
Nippon Life Insurance Company
The Chugoku Bank, Limited
The Yamanashi Chuo Bank, Ltd.
The Iyo Bank, LTD.

Total long-term loans
Total borrowings (Note 6)

Bulletpayment(Note 4)

Unsecured/unguaranteed/pari passu,
See (Note 5)
Fixed rate

Notes: 1. With respect to the date of drawdown and date of repayment in case of more than one short-term loan from the same lender, the earliest date of repayment for all suchloans coming due is given.
2. Scheduled for repayment of ¥125 million at six-month intervals and ¥2,625 million at the final maturity date.
3. Scheduled for repayment of ¥250 million at six-month intervals and ¥5,250 million at the final maturity date.
4. Use of funds for the above includes acquisition of real estate or beneficiary interests, repayment of borrowings and working capital.
5. A special agreement attached to “Loan Agreement” entered into between NBF and each financial institution provides that the above borrowings from all financial
institutions rank pari passu to each other.
6. The total amount of long-term loans (i.e. excluding those expected to be repaid within one year) repayable within 5 years of the date of the balance sheet and expected
to be repaid by specific year(s) is as follows.
(Yen in millions)Long-term loans

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥45,750¥27,750¥41,750¥26,750

NBF Bonds
Issue date

Balance as ofJune 30, 2010
(Yen in millions)

CouponNo. 3 Unsecured Bonds
No. 5 Unsecured Bonds

June 12, 2003
September 22, 2004

¥10,000
10,000

2.00%
1.60%

No. 7 Unsecured Bonds

November 9, 2005

10,0001.85%

No. 8 Unsecured Bonds
No. 9 Unsecured Bonds
No. 10 Unsecured Bonds
No. 11 Unsecured Bonds

March 7, 2007
May 24, 2007
May 24, 2007
January 28, 2010

10,00010,00010,00010,000

1.48%
1.74%
2.04%
1.23%

Issue

Total (Note 6)

MaturitydateJune 12, 2018
September 22,
2011
November 9,
2015
March 7, 2012
May 23, 2014
May 24, 2017
January 28, 2015

Redemption

Use ofproceeds

Notes

Bullet payment
Bullet payment

Note 1 Notes 2 and 4
Note 1 Notes 2 and 4

Bullet payment

Note 1 Notes 3 and 5

Bullet payment
Bullet payment
Bullet payment
Bullet payment

Note 1
Note 1
Note 1
Note 1

Notes 3 and 5
Notes 3 and 5
Notes 3 and 5
Notes 3 and 5¥70,000

Notes: 1. Use of funds includes acquisition of real estate, etc., repayment of borrowings and working capital.
2. These bonds are only issued to qualified institutional investors.
3. Rank pari passu with all other publicly and privately issued bonds.
4. Subject to provision of collateral and financial restrictions pursuant to material decline in credit rating.
5. Subject to provision of collateral restrictions.
6. The total amount of bonds repayable within 5 years of the date of the balance sheet and expected to be repaid by specific year(s) is as follows.
(Yen in millions)

Investment
corporation bonds

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years—¥20,000—¥10,000¥10,000

Others
NBF had security deposits totaling ¥37,151 million as of June 30, 2010.

36 NBF Report January – June 2010

Management’s Discussion and Analysis

Capital Expenditures
1. Planning
As of June 30, 2010, NBF is planning the following capital expenditures for the renovation of its properties. The amounts below
include repairs and maintenance costs that will be expensed as incurred. Moreover, in addition to a steady program of expenditures for construction, repair and renovation of facilities, a program of renewal construction is being implemented in order toincrease competitive power in the market as well as to increase the level of tenant satisfaction based on the results of tenant satisfaction surveys and neighboring competitive building specification surveys, etc.

Name of property

Shinjuku Mitsui Bldg.
No. 2
NBF Nihonbashi
Muromachi Center Bldg.
Shinjuku Mitsui Bldg.
No. 2
NBF Hibiya Bldg.
Shin-Kawasaki
Mitsui Bldg.
NBF Ogawamachi Bldg.
NBF Ikebukuro Tower
NBF Atsugi Bldg.
NBF Atsugi Bldg.
NBF Urawa Bldg.

Objective

Renovation of heating
equipment (1st stage)
Renovation of parking
equipment
Renovation of heating
equipment (2nd stage)
Renovation of
security system
Renovation of heater(1st stage)
Renovation of air
conditioning
Renovation of air
conditioning (4th stage)
Renovation of air
conditioning (8th, 9th floor)
Renovation of air
conditioning (6th, 7th floor)
Renovation of exterior

Estimated
duration

From August 2010
to December 2010
From May 2011
to June 2011
From February 2011
to June 2011
From April 2010
to September 2010
From April 2010
to February 2011
From September 2010
to December 2010
From September 2010
to November 2010
From September 2010
to November 2010
From April 2011
to May 2011
From July 2010
to September 2010

Total amounts

Estimated amounts
Payment for thecurrent period(from January 1, 2010
to June 30, 2010)(Yen in millions)

Cumulative
amount paid

¥260

¥—

¥—

226

—

—

205

—

—

140

—

—

130

—

—

72

—

—

55

—

—

30

—

—

29

—

—

20

—

—

NBF Report January – June 2010 37

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥1,478 million in capital expenditures together with ¥883 million for repairs and maintenance expenses.
Name of property

NBF Hibiya Bldg.

NBF Takanawa Bldg.

NBF Nihonbashi Muromachi
Center Bldg.
NBF Ikebukuro Tower

NBF Ogawamachi Bldg.

Parale Mitsui Bldg.
NBF Sapporo Minami
Nijo Bldg.

Other buildings

Objective

Expenditure(Yen in millions)

PeriodRenovation of 1st floor entrance and smoking room,
renovation of refrigeration system, renovation of air
conditioning (2nd Period)
Renovation of air conditioning, restoration
construction work on 1st to 4th floors, OA floor workon 1st to 4th floors
Restoration construction work on 1st and 2nd floors,
air conditioning-related construction on 1st and 2nd
floors, replacement of fan coil units (2nd stage), etc.
Renovation of air conditioning (3rd stage), renovationof air supply and exhaust fans (3rd stage), renovationof vacuum circuit breakers, etc.
Renovation of air conditioning (2nd stage),construction to counter high-frequency vibration
modes, etc.
Renovation of lighting equipment (2nd stage),renovation of restroom lighting, OA floor work
Renovation of hot and chilled water generator,
renovation of air conditioning on 1st and 3rdbasement floors, replacement of parking lot
sequencers, etc.
Asset preservation construction and other renewal
construction to improve tenant satisfaction.

¥ 177

170

120

58

From January 2010
to June 2010

52
47

23

831

Total

¥1,478

3. Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements andrepairs and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of June 30, 2010

As of December 31, 2009
(Yen in millions)

Reserve balance at the beginning of the period
Amount accumulated in the current period
Withdrawal from reserves in the current period
Amount carried forward¥1,2732,751
2,626¥1,398¥1,5581,715
2,000¥1,273

Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF’s ownership interest; the amount of reserves attributable to other owners has been
excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management ofproperties, for the purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to¥4,242 million as of June 30, 2010.

38 NBF Report January – June 2010

Management’s Discussion and Analysis

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
June 30, 2010

For the six months ended
December 31, 2009
(Yen in millions)

For the six months ended
June 30, 2009

¥ 988
37

¥1,07837¥1,134
36

45
19
13
99
¥1,201

47
19
13
124
¥1,318

51
19
13
100
¥1,353Item

Asset management fees
Asset custody fees
Agent fees (stock transfer, accounting andadministrative)
Directors’ remuneration
Auditor’s fees
Other expenses
Total

Note: In addition to the amounts stated above, there are asset management fees of ¥72 million for the period from January 1, 2009 to June 30, 2009 related to acquisition of investment properties which were booked on each property acquired. There were no such expenses during the period from January 1, 2010 to June 30, 2010 and from July 1, 2009 to
December 31, 2009.

Trading Activities during the Current Period
1. Trading of Real Estate and Real Estate Held in Trust
The following table shows a summary of real estate and real estate held in trust, sold by NBF in the current period.
(Yen in millions)

Sale
Name of building

NBF Ebisu-Minami Bldg.
NBF Hakata Gion Bldg.
Total

Date

Sale priceMarch 5, 2010
March 8, 2010

¥1,3502,200¥3,5502. Trading of Other Assets Including Total Amount and Transactions
Other major assets besides real estate and real estate held in trust stated above consist mostly of bank deposits or bankdeposits included in assets held in trust.

NBF Report January – June 2010 39

Management’s Discussion and Analysis

3. Transactions with Related Parties and Transactions with Major Shareholders of AssetManagement Company(1) Ongoing Transactions
None. (No purchases, or sales or other transactions involving interested parties.)(2) Fees Paid for the Period from January 1, 2010 to June 30, 2010
Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Office management fees, etc.
(Note 2)
Property maintenance fees

¥1,151

Leasing related service fees

121

2,640

Amount ofpayment (B)(Yen in millions)

Paid toMitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
First Facilities Co., Ltd.
Mitsui Fudosan Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
First Facilities Yokohama Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.

¥1,114
32
421
356
119
113
10
1
56
14
2

B/A

96.7%
2.7%
16.0%
13.5%
4.5%
4.3%
0.4%
0.0%
46.4%
11.9%
1.2%

Notes: 1. “Related parties” are defined as related parties of asset management companies under asset management agreement with NBF as defined in Article 123 of Order for
Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 27 of the Regulations regarding management report of theInvestment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset managementcompanies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the period from January 1, 2010 to June 30, 2010,transactions with and fees paid to, Mitsui Fudosan Co., Ltd., NBF Office Management Co., Ltd., First Facilities Co., Ltd., First Facilities West Co., Ltd., Mitsui Fudosan
Building Management Co., Ltd., First Facilities Yokohama Co., Ltd., Mitsui Fudosan Housing Lease Co., Ltd., and Mitsui Real Estate Sales Co., Ltd. who meet either ofthe said definitions, are as described above.
2. Properties that have not entrusted office management businesses through such means as master leasing by Mitsui Fudosan Co., Ltd. (10 properties: Nishi-Shinjuku
Mitsui Bldg., Gate City Ohsaki, Nakameguro GT Tower, Toranomon Kotohira Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg., Parale Mitsui Bldg.,
Shinanobashi Mitsui Bldg., Sakaisuji-Honmachi Center Bldg. and Yotsuya Medical Bldg.) have entrusted them to NBF Office Management Co., Ltd. as business representative of the property owners or lessors.
3. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)First Facilities Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Home Linkage Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.

40 NBF Report January – June 2010

¥353
249
117
66
8
0
0

Financial
Statements
NBF Report January – June 2010

NBF Report January – June 2010 41

Balance Sheets
NIPPON BUILDING FUND INC.
As of June 30, 2010 and December 31, 2009

As ofJune 30, 2010

As of
December 31, 2009
(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents (Note 5)
Tenant receivables
Other current assets
Total current assets
Investment Properties:
Land including trust accounts (Note 6)
Buildings and improvements including trust accounts (Note 6)
Other tangible assets (Note 6)
Less: accumulated depreciation (Note 6)
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other Assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans (Note 5, 8)
Long-term debt due within one year (Note 5, 8)
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term Debt (Note 5, 8)
Tenant Security Deposits Including Trust Accounts (Note 5)
Other Liabilities
Total Liabilities
Net Assets (Note 7)
Shareholders’ Equity
Common shares, non-par value
Shares authorized: 2,000,000 shares
Shares issued and outstanding: 542,000 shares
Retained earnings
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these balance sheets.

42 NBF Report January – June 2010

¥ 39,600
302
591
40,493¥ 40,731
295
559
41,585473,463
276,923
8,408(65,217)35,655729,232
4,654¥774,379

475,670
277,1318,301(60,517)35,657736,2424,484¥782,311¥ 16,000
8,750
3,022
3,376
1,802
32,950308,750
37,151
70
378,921¥ 24,000
22,750
3,219
3,536
1,928
55,433291,125
38,846
69
385,473

386,176

386,176

9,282
395,458¥774,379

10,662396,838¥782,311

Statements of Income
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2010, December 31, 2009 and June 30, 2009

For the six months ended
June 30, 2010

For the six months ended
December 31, 2009
(Yen in millions)

For the six months ended
June 30, 2009

¥25,5832,452
306
28,341¥26,986
2,942—
29,928¥27,903
2,858—
30,761

3,798
2,648
883
36
2,224
5,239
140
988
213
16,16912,172

4,033
2,535
739
37
2,460
5,282
—
1,078
240
16,404
13,524

3,973
2,557
669
36
2,521
5,355
—
1,134
219
16,464
14,2978

7

22(2,862)
(5)
(30)
9,283

(2,798)(27)(43)
10,663(2,527)(27)(32)
11,733—9,283(1)¥ 9,282—
10,663(1)¥10,66270
11,803(1)¥11,802

Operating Revenues and Expenses
Operating Revenues:
Rental (Note 9)
Other revenues related to property leasing (Note 9)
Gain on sale of investment properties (Note 10)
Total Operating Revenues
Operating Expenses:
Property management fees (Note 9)
Real estate taxes (Note 9)
Repairs and maintenance (Note 9)
Insurance (Note 9)
Other rental expenses (Note 9)
Depreciation and amortization (Note 9)
Loss on sale of investment property (Note 10)
Asset management fees
Other operating expenses
Total Operating Expenses
Operating Income
Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Non-Operating Expenses:
Interest expense
Amortization of bond issue costs
Other non-operating expenses, net
Ordinary Income
Extraordinary Income:
Adjustment of depreciation for prior periods (Note 4)
Income before Income Taxes
Current and deferred income taxes (Note 11)
Net Income
The accompanying notes to financial statements are an integral part of these statements.

NBF Report January – June 2010 43

Statements of Changes in Net Assets
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2010, December 31, 2009 and June 30, 2009

(Yen in millions)

Balance as of December 31, 2008
Cash dividends declared
Net income
Balance as of June 30, 2009
Cash dividends declared
Net income
Balance as of December 31, 2009
Cash dividends declared
Net income
Balance as of June 30, 2010
The accompanying notes to financial statements are an integral part of these statements.

44 NBF Report January – June 2010

Number ofCommonSharesCommonSharesRetained
Earnings

Total

542,000¥386,176¥ 12,061¥398,237————(12,061)
11,802(12,061)
11,802542,000

386,176

11,802397,978————(11,802)
10,662(11,802)
10,662542,000

386,176

10,662396,838————(10,662)
9,282(10,662)
9,282

542,000¥386,176¥ 9,282¥395,458

Statements of Cash FlowsNIPPON BUILDING FUND INC.
For the six months ended June 30, 2010, December 31, 2009 and June 30, 2009

For the six months ended
June 30, 2010

For the six months ended
December 31, 2009
(Yen in millions)

For the six months ended
June 30, 2009

¥ 9,283
5,239
5
2,862
—
(8)
(197)
(159)
3,272
(2,815)—(203)
17,279¥ 10,663
5,282
27
2,798
—
358
308
(78)
—
(2,636)—236
16,958¥ 11,803
5,355
27
2,527
70
(241)
(1,108)(160)—(2,459)540(463)
15,751(1,501)
3,408(5,103)(8)(119)(3,323)(1,435)3,324(3,727)(3)(80)(1,921)(22,565)
1,531(2,000)(9)(107)(23,150)(8,000)24,000(20,375)(54)(10,658)(15,087)(1,131)40,731¥ 39,600(27,500)
45,000(18,125)—(11,802)(12,427)2,610
38,121¥ 40,731(5,000)27,000(2,000)—(12,056)
7,944
545
37,576¥ 38,121

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Amortization of bond issue costs
Interest expense
Adjustment of depreciation for prior periods(Increase) Decrease in tenant receivables
Increase (Decrease) in accounts payable
Increase (Decrease) in rents received in advance
Decrease in investment properties due to sale
Cash payments of interest expense
Proceeds from a settlement
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Proceeds from tenant security deposits
Payments for tenant security deposits
Payments for security deposits paid to lessors
Payments for purchases of other assets
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Proceeds from (Repayment of) short-term loans, net
Proceeds from long-term debt
Repayment of long-term debt
Payment for bond issue costs
Payment of dividends
Net Cash Provided by (Used in) Financing Activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of Period
Cash and Cash Equivalents at the End of Period
The accompanying notes to financial statements are an integral part of these statements.

NBF Report January – June 2010 45

Notes to Financial Statements
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2010, December 31, 2009 and June 30, 2009

Note 1 – Organization and Basis of Presentation
Organization
Nippon Building Fund Inc. (hereinafter “NBF”) was formed on March 16, 2001 as an investment corporation under the Law
Concerning Investment Trusts and Investment Corporations of Japan (hereinafter the Investment Trust Law of Japan) with Mitsui
Fudosan Co., Ltd., The Chuo Mitsui Trust and Banking Co., Ltd., and Nippon Building Fund Management Ltd. (hereinafter “NBFM”)
acting as sponsors. Registration with the Kanto Local Finance Bureau of the Ministry of Finance was completed on May 10, 2001 and
NBF started acquisition of office properties on May 23, 2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset management company,
is engaged in acquiring, managing, leasing, and renovating office properties. Mitsui Fudosan Co., Ltd. currently owns 43% of NBFM
while Sumitomo Life Insurance Company owns 35% and the remaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering of common shares.
Those common shares are listed on the J-REIT section of the Tokyo Stock Exchange.
As of June 30, 2010, NBF had ownership or beneficiary interests in 59 office properties containing approximately 763,000 square
meters of rentable office space. As of June 30, 2010, NBF had leased office space to 910 tenants engaged in a variety of businesses.
The occupancy rate for the office properties was approximately 94.5%.

Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust
Law of Japan and the Japanese Financial Instruments and Exchange Law and their related accounting regulations, and in conformity
with accounting principles generally accepted in Japan (hereinafter “Japanese GAAP”), which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial statements of NBF
prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as
required by the Financial Instruments and Exchange Law. Some supplementary information included in the statutory Japanese language financial statements, but not required for fair presentation, is not presented in the accompanying financial statements. NBF
does not prepare consolidated financial statements, as NBF has no subsidiaries.

Note 2 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
NBF considers all highly liquid investments with original maturity of three months or less to be cash and cash equivalents.

Investment Properties
Investment properties are recorded at cost, which includes the allocated purchase price, related costs and expenses for acquisitionof the office properties and the beneficiary interests of properties in trust. Property and equipment balances are depreciated using
the straight-line method over the estimated useful lives. The estimated useful lives of the principal tangible fixed assets (including
assets held in trust) are as follows:

Buildings and improvements
Structures
Machinery and equipment
Tools, furniture and fixtures

46 NBF Report January – June 2010

2-50 years
2-50 years
2-17 years
2-19 years

Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures for repairs and maintenance which do not add to the value or prolong the useful life of a property, are expensed as incurred.

Investment Corporation Bond Issue Costs
Deferred investment corporation bond issue costs are amortized using the straight-line method over the respective term of thebonds (See Note 3).

Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effect of temporary differences
between the amounts of assets and liabilities for financial statements and for income tax purposes is recognized as deferred taxes.

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of newly purchased
properties, NBF capitalizes a portion of the real estate taxes that relate to a period from the purchase date of each property until theend of the calendar year as part of the acquisition cost of the relevant property. NBF incurred no capitalized real estate taxes for theperiods ended June 30, 2010 and December 31, 2009. Capitalized real estate taxes amounted to ¥12 million for the period ended
June 30, 2009.

Revenue Recognition
NBF operates office properties that are rented to tenants on lease terms of generally two years, with monthly payments due inadvance. Rental and other property income is recorded when due from tenants and is recognized monthly as it is earned. Common
area charges provided for in tenant leases are recognized as income when earned and their amounts can be reasonably estimated.

Accounting Treatment of Beneficiary Interests in Trust Assets including Real Estate
For trust beneficiary interests in real estate, all accounts of assets and liabilities within assets in trust as well as all income generated
and expenses incurred from assets in trust are recorded in the relevant balance sheets and income statement accounts.

Reclassifications
Certain reclassifications have been made to prior periods’ financial statements to conform with the presentation used for theperiod ended June 30, 2010.

Note 3 – Change in Accounting Policy
Amortization of Deferred Assets
Beginning from the fiscal period ended June 30, 2010, deferred investment corporation bond issue costs are amortized using thestraight-line method over the respective terms of the bonds. These costs previously had been amortized equally over three years. Thischange was made to treat the investment corporation bond issue costs as part of fund raising costs, and to record period earnings
more appropriately. As a result of the change in accounting policy, ordinary income and income before income taxes increased by¥3,588 million each, as compared to the previous method.

NBF Report January – June 2010 47

Note 4 – Additional Information for the Six Months Ended June 30, 2009
With respect to a 35% co-ownership interest in the Shin-Kawasaki Mitsui Building (henceforth “the Property”) acquired on
March 31, 2006, certain differences of opinion concerning the interpretation of the Sale and Purchase Agreement thereof arose
between NBF and Mitsui Fudosan Co., Ltd., the seller. NBF therefore filed a petition for conciliation with the Tokyo District Court on
March 28, 2008. The aforementioned differences were settled through the conciliation process on February 27, 2009, and NBF
received a settlement amount of ¥567 million on April 30, 2009.
Based on the management judgment that it is reasonable to treat the settlement amount of ¥540 million (after consumption
taxes and other items) as a reduction of the original acquisition cost, NBF has written down the book value of the Property by ¥471
million, and recorded ¥70 million at extraordinary income as an adjustment of depreciation for prior periods.

Note 5 – Financial Instruments
Effective from the fiscal period ended June 30, 2010, NBF adopted the revised Accounting Standard, “Accounting Standard for
Financial Instruments” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 10 revised on March 10, 2008) and the“Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19 revised on March 10, 2008). Thesestandards and guidance require companies to disclose fair value and certain other information of financial instruments as follows.

(For the six months ended June 30, 2010)

Status of Financial Instruments
Policy for Financial Instruments
NBF procures funds for acquisition of assets and repayment of debt, which includes repayment of tenant security deposits, loans
and investment corporation bonds, through issuance of new investment units, bank loans and issuance of investment corporation
bonds, with the aim of ensuring steady asset growth and stable earnings from a mid- and long-term angle.
As a general rule NBF invests surplus funds in deposits considering safety of the investments.
NBF may enter into derivative transactions solely for the purpose of reducing interest rate risks and other risks arising fromliabilities. NBF does not engage in speculative transactions. Currently NBF is not engaged in any derivative transactions.
Financial Instruments, Their Risks and Risk Management System
Deposits are used for investment of NBF’s surplus funds. These deposits are exposed to credit risks such as bankruptcy of thedepository financial institutions. NBF limits credit risk by using only short-term deposits in financial institutions with high credit ratings.
Proceeds from loans and investment corporate bonds are used mainly to acquire real estate properties and repay outstandingloans and bonds. While these loans and bonds are exposed to liquidity risk, such risk is managed in ways such as diversifying themeans of funding and lending institutions, dispersing repayment dates, establishing a committed credit line, keeping sufficientliquidity in hand, and monitoring cash flows projected monthly.
Short-term loans are exposed to interest-rate fluctuation. NBF limits the impact of such risks by maintaining the debt-asset ratio
low and the level of long-term fixed-rate debt high.
Tenant security deposits are exposed to liquidity risk arising from the vacating of tenants due to the expiration of contracts. NBF
manages this risk by monitoring forecast cash flows on a monthly basis to ensure it has sufficient funds.
Supplemental Explanation regarding Fair Values of Financial Instruments
The fair value of financial instruments is based on their observable market value, if available. When there is no observable
market value available, fair value is based on a price that is reasonably estimated. Since various factors are reflected in estimating thefair value, different assumptions and factors could result in a different value.

48 NBF Report January – June 2010

Notes to Financial Statements

Estimated Fair Value of Financial Instruments
Book value, fair value and the difference between the two as of June 30, 2010 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from the following table(See Note 2. below).
(Yen in millions)

Assets(1) Cash and cash equivalents
Total
Liabilities(1) Short-term loans(2) Long-term debt due within one year
(3) Long-term debt
Total

Book value

Fair value

Difference¥ 39,600¥ 39,600¥ 39,600¥ 39,600¥¥¥ 16,000
8,750
308,750¥333,500¥ 16,000
8,794
314,278¥339,072

¥

—
—

—
44
5,528
¥5,572

Notes: 1. Methods to Estimate Fair Value of Financial Instruments
Assets:(1) Cash and cash equivalents
Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments aresettled within a short-term period.
Liabilities:(1) Short-term loans
Book values of those instruments are used to determine their fair values, as the fair values are considered to approximate fair values because these instruments aresettled within a short-term period.
(2) Long-term debt due within one year
Fair values of long-term debt due within one year are based on the present value of principal and interest cash flows discounted at the current interest rate estimated tobe applied if similar new loans were entered into.
(3) Long-term debt
Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)(1) Investment corporation bonds(2) Long-term loans
Total

Book value

Fair value

Difference¥ 70,000
238,750¥ 71,177
243,101¥1,177
4,351¥308,750¥314,278¥5,5281) Investment corporation bonds
The fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fair values
are calculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into consideration theremaining term of the investment corporation bonds and their credit risk.
2) Long-term loans
Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
2. Financial Instruments for Which it is Very Difficult to Estimate the Fair Value.
(Yen in millions)Book value
Tenant Security Deposits Including Trust Accounts¥37,151

Security deposits from tenants are not subject to fair value disclosure because they are not marketable, and the actual deposit period is not estimable as leases may becancelled, renewed or re-signed even if a lease term is set in the lease contract, making a reasonable estimate of future cash flows difficult.
3. Redemption Schedule for Monetary Claims with Maturity Dates after June 30, 2010
(Yen in millions)

Cash and cash equivalents

Due within
one year

Due after one
to two years

Due after two
to three years

Due after three
to four years

Due after four
to five years

Due after fiveyears

¥39,600

—

—

—

—

—

NBF Report January – June 2010 49

4. Repayment Schedule for Loans and Investment Corporation Bonds due after June 30, 2010
(Yen in millions)Due within
one year

Due after one
to two years

Due after two
to three years

Due after three
to four years

Due after four
to five years

Due after fiveyears

Short-term loans
Investment corporation bonds
Long-term loans¥16,000
—
8,750

¥

—
20,00045,750¥——27,750¥—10,00041,750¥—10,00026,750¥—30,00096,750

Total¥24,750¥65,750¥27,750¥51,750¥36,750¥126,750

Note 6 – Schedule of Tangible Assets of Investment Properties
Tangible assets as of June 30, 2010 and December 31, 2009 consisted of the following:
As of June 30, 2010

As of December 31, 2009
(Yen in millions)

Acquisition
costsBook value

Acquisition
costs

—
—

¥218,479
254,984¥219,238
256,432

Land
Land in trust¥218,479
254,984

Land including trust total

473,463—

473,463

Buildings and improvements
Buildings and improvements in trust

142,172
134,751(24,389)(37,510)

Buildings and improvements
including those in trust

276,923

Structures
Machinery and equipment
Tools, furniture and fixtures
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Construction in process
Other tangible assets total
Total

¥

Accumulated
depreciation

Accumulated
depreciation¥

Book value——¥219,238
256,432

475,670—

475,670

117,783
97,241

142,085
135,046(21,960)(35,469)

120,125
99,577(61,899)

215,024

277,131(57,429)

219,702

2,238
1,119
804
1,904
1,312
994
37

(788)
(449)
(331)
(582)
(641)
(527)
—

1,450
670
473
1,322
671
467
37

2,236
1,103
755
1,899
1,345
951
12

(716)
(403)
(291)
(538)
(653)
(487)
—

1,520
700
464
1,361
692
464
12

8,408

(3,318)

5,090

8,301

(3,088)5,213¥758,794¥(65,217)¥693,577¥761,102¥(60,517)¥700,585

Note 7 – Net Assets
NBF issues only non-par value shares in accordance with the Investment Trust Law of Japan and all of the issue prices of newshares are designated as stated capital. NBF maintains at least ¥50 million as the minimum net assets as required by the Investment
Trust Law of Japan.

50 NBF Report January – June 2010

Notes to Financial Statements

Note 8 – Short-Term Loans and Long-Term Debt
Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest rates on
short-term loans outstanding are floating rates and on June 30, 2010 and December 31, 2009 ranged from 0.69% to 0.82% andfrom 0.58% to 0.95%, respectively. Long-term debt is at fixed rates and as of June 30, 2010 and December 31, 2009 consisted of
the following:
As of June 30, 2010

As of December 31, 2009
(Yen in millions)

Unsecured loans due 2010 to 2019 principally from banks and insurancecompanies with interest rates mainly ranging from 1.1% to 2.4%
0.80% unsecured bonds due 2010 (Note 2)
1.60% unsecured bonds due 2011 (Note 1)
1.48% unsecured bonds due 2012 (Note 2)
1.74% unsecured bonds due 2014 (Note 2)
1.23% unsecured bonds due 2015 (Note 2)
1.85% unsecured bonds due 2015 (Note 2)
2.04% unsecured bonds due 2017 (Note 2)
2.00% unsecured bonds due 2018 (Note 1)¥247,500—
10,00010,00010,00010,00010,00010,00010,000¥243,875
10,00010,00010,00010,000—10,00010,00010,000317,500

313,875

8,750

22,750¥308,750¥291,125

Less: amount due within one year

Notes: 1. Subject to provision of collateral and financial restrictions pursuant to material decline in credit rating.
2. Subject to provision of collateral restrictions.

The annual maturities of long-term debt as of June 30, 2010 were as follows:(Yen in millions)Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
After five years¥ 65,750
27,75051,75036,750126,750

During the period ended June 30, 2010, NBF obtained committed credit lines of ¥50 billion with certain financial institutions to
reduce refinancing risk. The unused amount of such committed credit lines was ¥50 billion on June 30, 2010.

NBF Report January – June 2010 51

Note 9 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended June 30, 2010, December 31, 2009 and June 30, 2009 were as follows:

Revenues from Property Leasing:
Rental:Rental revenues
Common area charges
OthersSubtotal
Other revenues related to property leasing:
Parking lots
Facility charge
Incidental income
Cancellation fees
Miscellaneous income
Subtotal
Total revenues from property leasing
Rental Expenses:
Property management fees
Real estate taxes
Repairs and maintenanceInsurance
Other rental expenses
Depreciation and amortization
Total rental expenses
Operating Income from Property
Leasing Activities

For the six months ended
June 30, 2010

For the six months ended
December 31, 2009
(Yen in millions)

For the six months ended
June 30, 2009

¥22,757
2,706
120
25,583¥24,022
2,844
120
26,986¥24,804
2,974
125
27,903

534
140
1,486
228
64
2,452
28,035

557
139
1,766
439
41
2,942
29,928

588
151
1,695
345
79
2,858
30,761

3,798
2,648
883
36
2,224
5,239
14,828

4,033
2,535
739
37
2,460
5,282
15,086

3,973
2,557
669
36
2,521
5,355
15,111¥13,207¥14,842¥15,650

Note 10 – Gain and Loss on Sale of Investment Properties
Gain and loss on sale of investment properties for the period ended June 30, 2010 were as follows. No investment properties weresold during the periods ended December 31, 2009 and June 30, 2009.

NBF Ebisu-Minami Building
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Gain on sale of investment property(Yen in millions)

NBF Hakata Gion Building
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Loss on sale of investment property(Yen in millions)

52 NBF Report January – June 2010

¥1,350
1,001
43
¥ 306
¥2,200
2,271
69
¥ 140

Notes to Financial Statements

Note 11 – Income Taxes
NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income based on applicable Japanese tax law was
estimated as 0.01% for the periods ended June 30, 2010, December 31, 2009 and June 30, 2009. The following table summarizes
the significant differences between the statutory tax rates and NBF’s effective tax rates for financial statement purposes.

Statutory tax rate (Note 1)
Deductible dividends
Others
Effective tax rate

For the six months ended
June 30, 2010

For the six months ended
December 31, 2009

For the six months ended
June 30, 200939.33%(39.33)0.01
0.01%

39.33%(39.33)0.01
0.01%

39.33%(39.33)0.01
0.01%

NBF was established as an investment corporation under the Investment Trust Law of Japan, and as long as an investment
corporation distributes to its shareholders at least 90% of earnings available for dividends for a period and other requirements
prescribed in Japanese tax regulations are met, the investment corporation is allowed to deduct total amount of dividends incalculating its taxable income under Japanese tax regulations.
Note 1. The statutory tax rate was revised due to a change in the corporate business tax rate and the creation of a local corporate special tax, which is effective for fiscal years
beginning on or after October 1, 2008.

Note 12 – Per Share Information
Information about earnings per share for the periods ended June 30, 2010, December 31, 2009 and June 30, 2009 and net
assets per share as of June 30, 2010, December 31, 2009 and June 30, 2009 were as follows.
The computation of earnings per share is based on the weighted average number of common shares outstanding during the period.
The computation of net assets per share is based on the number of common shares outstanding at each period end.

Earnings per Share of Common Shares:
Net income
Weighted average number ofcommon shares outstanding
Net Assets per Share

For the six months ended
June 30, 2010

For the six months ended
December 31, 2009(Yen)

For the six months ended
June 30, 2009

¥17,124¥19,671¥21,774

542,000

542,000

542,000

As of June 30, 2010

As of December 31, 2009

As of June 30, 2009

¥729,626¥732,173¥734,276

Note 13 – Leases
As Lessor
NBF leases some of its investment properties to outside parties under non-cancelable operating leases. As of June 30, 2010 and
December 31, 2009 future minimum rental revenues under the non-cancelable operating leases are as follows:
As of June 30, 2010

Due within one year
Due after one year
Total

¥16,699
25,892¥42,591

As of December 31, 2009
(Yen in millions)¥15,032
21,371¥36,403

NBF Report January – June 2010 53

Note 14 – Transactions with Related Parties(For the six months ended June 30, 2010)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

Payment of asset
management fees to
NBFM (Note 1)
Executive Director of
Payment of fees to
NBF and
NBFM for the provision
President & CEOof general administrationof NBFM
services relating
to organizational
management (Note 2)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥988(Note 3)

Accounts
payable¥303(Note 3)¥2
(Note 3)

Accounts
payable¥1(Note 3)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is subject to the conditions set forth in the by-laws of NBF.
2. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is set forth in the “General Administration Agreement relating
to Organizational Management” concluded between NBF and NBFM.
3. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

(For the six months ended December 31, 2009)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

Payment of asset
management fees to
NBFM (Note 1)
Executive Director of
Payment of fees to
NBF and
NBFM for the provision
President & CEOof general administrationof NBFM
services relating
to organizational
management (Note 2)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,078(Note 3)

Accounts
payable¥321(Note 3)¥2
(Note 3)

Accounts
payable¥1(Note 3)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is subject to the conditions set forth in the by-laws of NBF.
2. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is set forth in the “General Administration Agreement relating toOrganizational Management” concluded between NBF and NBFM.
3. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

54 NBF Report January – June 2010

Notes to Financial Statements(For the six months ended June 30, 2009)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

Payment of asset
management fees to
NBFM (Note 1)
Executive Director of
Payment of fees to
NBF and
NBFM for the provision
President & CEOof general administrationof NBFM
services relating
to organizational
management (Note 3)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,206(Notes 2 and 4)

Accounts
payable¥386(Note 4)

¥7(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is subject to the conditions set forth in the by-laws of NBF.
2. The amount of asset management fees includes ¥72 million for management related to acquisition of properties included in the book value of each investment property, etc.
3. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is set forth in the “General Administration Regarding theManagement of Institutions” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

Note 15 – Investment and Rental Property
Effective from the fiscal period ended June 30, 2010, NBF adopted the “Accounting Standard for Disclosures about Fair Value ofInvestment and Rental Property” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 20 issued on November 28, 2008)
and the “Guidance on Accounting Standard for Disclosures about Fair Value of Investment and Rental Property” (ASBJ Guidance No.
23 issued on November 28, 2008).These standards and guidance require companies to disclose fair value and certain other information of investment and rental property as follows.

(For the six months ended June 30, 2010)
NBF owns office buildings (including land) for rent in Tokyo and other areas. The carrying amounts, net changes in the carrying
amounts and the fair value of the investment and rental properties are as follows.
(Yen in millions)

Carrying amount

Fair value

As of December 31, 2009

Net decrease

As of June 30, 2010

As of June 30, 2010

¥736,271¥7,038¥729,233¥783,560

Notes: 1. Carrying amounts represent acquisition cost less accumulated depreciation.
2. The major decrease in the carrying amount during the period was mainly due to sale of two properties (NBF Ebisu-Minami Bldg. and NBF Hakata Gion Bldg.) whichamounted to ¥3,272 million and recognition of depreciation costs.
3. Fair value as of June 30, 2010 is based on appraisals provided by independent real estate appraisers.

Information about profit and loss from investment and rental properties for the six months ended June 30, 2010 is disclosed in
Note 9 (Rental Revenues and Expenses) and Note 10 (Gain and Loss on sale of Investment Properties).

Note 16 – Significant Subsequent Events
None applicable.

NBF Report January – June 2010 55

Independent Auditors’ Report
To the Board of Directors of
Nippon Building Fund Inc.:

We have audited the accompanying balance sheets of Nippon Building Fund Inc. (a Japanese Real Estate
Investment Trust) as of June 30, 2010 and December 31, 2009, and the related statements of income,changes in net assets and cash flows for each of the six months ended June 30, 2010, December 31,
2009 and June 30, 2009 expressed in Japanese yen. These financial statements are the responsibility of
the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Nippon Building Fund Inc. as of June 30, 2010 and December 31, 2009, and theresults of its operations and its cash flows for each of the six months ended June 30, 2010, December
31, 2009 and June 30, 2009 in conformity with accounting principles generally accepted in Japan.
Without qualifying our opinion, we draw attention to Note 12 to the financial statements, which statesthat Nippon Building Fund Inc. issued unsecured bonds.

Tokyo, Japan
September 28, 2010

56 NBF Report January – June 2010

Appendix
Major Interested Parties
Nippon Building Fund Management Ltd. (Asset Management Company and Administrative Agent
regarding the Management of Institutions, herein “NBFM”)

NBFM, as Asset Management Company provided for in theManagement Fees 3
In the event that Real Estate, etc. is newly acquired, compensation

Investment Trust Law of Japan, performs management of NBF’s
assets and undertakes management of the institutions of NBF. As ofequivalent to the total amount of the acquisition price of said Real

June 30, 2010, NBFM has been entrusted as an asset management

Estate, etc. (meaning the acquisition price of both land and buildings,

company only by NBF.

and in the event of the simultaneous acquisition of multiple units of

As of the same date, NBFM has paid-in capital of ¥495 million.

Real Estate, etc., the acquisition price of each item, provided,

There is no capital relationship with NBF. Koichi Nishiyama, President

however, that national consumption tax, regional consumption tax& CEO of NBFM, is concurrently an executive director of NBF.

and miscellaneous costs of acquisition are excluded) multiplied by thefollowing percentage rates will, in principle, be payable, provided,

Operation■■

however, that with the approval of the directors of NBF, compensa-

Undertakes asset management of NBF pursuant to an Assettion will be calculated within the scope decided up to the following

Management Entrustment Agreement based on an entrustment

maximum rates.

from NBF in accordance with the Articles of Incorporation of NBF●

The portion up to and including ¥10,000 million .......................... 0.5%

and the Investment Objects and Policies set forth therein.

●

The portion exceeding ¥10,000 million up to andincluding ¥30,000 million ............................................................ 0.2%●

The portion exceeding ¥30,000 million up to andincluding ¥50,000 million ............................................................ 0.05%●

The portion exceeding ¥50,000 million ........................................ nothing

Undertakes management of the general affairs of the General
Meeting of Shareholders and the Board of Directors as
Administrative Agent regarding the Management of Institutions
based on an entrustment from NBF and pursuant to an Agreement
for General Administration Regarding the Management ofInstitutions.

Fees for the Asset Management Operation
Management Fees 1
The amount equivalent to 2.5% effective from July 1, 2003 of theamount of the revenue arising from Real Estate, etc. as calculated oneach closing date (provided, however, that revenues from the saleof Real Estate, etc. and other Managed Assets will be excluded) will
be payable.

Management Fees 2
The amount equivalent to 3% of income before income tax (provided, however, that in the event a loss is carried forward, then theamount of income before income taxes remaining after such loss has
been covered) prior to deduction of Management Fees 2 as calculatedon each closing date will be payable.

NBF Report January – June 2010 57

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited

As of June 30, 2010, the directors and corporate auditors of

liability company duly established under the laws of Japan. Major

NBFM are as follows. The staff other than directors and auditors ofevents in the history of NBFM are as follows.

NBFM is comprised of 17 persons.

September 19, 2000 Established

Name of Directors and Auditors

November 17, 2000

Obtained license as a building lots and building
transactions agent under the Building Lots andBuilding Transactions Law

Koichi Nishiyama

President & CEO (standing)

Yasushi Nakayama

Director, Head of Investment & Finance Group(standing)Obtained approval as a discretionary transaction
agent under the Building Lots and Building
Transactions Law

Hiroshi Yabuki

Director, Head of Administration Group(standing)

Masato Shikata

Director

Hideharu Matsumoto

Director

Noriaki Moromachi

Corporate Auditor

Toru Suzuki

Corporate Auditor

January 29, 2001

February 15, 2001

March 7, 2001

Registered as a general real estate investment advisor under the Real Estate Investment Advisor
Registration Regulations
Obtained approval as an Asset Management
Company under the Investment Trust Law of Japan

March 22, 2001

Increased capital from ¥100 million to ¥198 million

May 23, 2001

Changed name (from “MF Asset Management Co.,
Ltd.” to “Office Building Fund Management Japan
Limited”)

June 16, 2001
March 14, 2003

September 30, 2007

Increased capital from ¥198 million to ¥495 million
Changed name (from “Office Building Fund Management Japan Limited” to “Nippon Building FundManagement Ltd.”)
Registered as a financial instruments firm with the
Kanto Local Finance Bureau Chief (Financial
Instruments) No. 371

List of Shareholders (As of June 30, 2010)
Numberof Shares Owned

Percent

Mitsui Fudosan Co., Ltd.

4,257

43.0%

Sumitomo Life Insurance Company

Name

3,465

35.0

The Chuo Mitsui Trust andBanking Co., Ltd.

495

5.0

Sumitomo Mitsui Banking
Corporation

495

5.0

Daido Life Insurance Company

297

3.0

Mitsui Sumitomo InsuranceCo., Ltd.

297

3.0

Mitsui Mutual Life Insurance
Company297

3.0

Britel Fund Trustees Limited
Total

58 NBF Report January – June 2010

297

3.0

9,900

100.0%

Title

Outline of Financial Condition
An outline of the financial condition of NBFM is as follows.
Outline of principal assets and liabilities for the most recent
fiscal year:
As of March 31, 2010

(Yen in millions)

Total assets¥1,888

Total liabilities

292

Total net assets

1,596

Profit and loss for the most recent fiscal year:
Year ended March 31, 2010

(Yen in millions)Operating income¥2,253

Ordinary profit

1,491

Net income

880

Investment and Distribution Policies
Investment Policies of NBF

The following table sets forth above said area diversification strategy.
Area and Allocation Ratio

A. Basic Policies
NBF’s primary investment objective is to achieve sustainable growth inportfolio value and stable profits on a medium-to-long-term basis. NBF
achieves this objective by investing in real estate consisting of buildings

Area Analysis

Tokyo CBDs
9 central wards in Tokyo:
Chiyoda, Minato, Chuo, Shinjuku,
Shinagawa, Shibuya, Toshima,
Bunkyo and Meguro

primarily used for offices with their underlying land located in the Tokyo
central business districts (hereinafter “CBDs”), Other Greater Tokyo andOther Cities in Japan as well as securities, beneficiary certificates representing beneficial interests in trusts (hereinafter “Beneficiary Certificates”)
and other assets backed by office properties (collectively hereinafter “RealEstate, etc.”) (“Investment Objectives and Policies,” Articles ofIncorporation). (Reference to laws, legal documents, etc. used as the basis
or sources hereof are set forth in parenthesis herein.)

B. Investment Strategy
Nippon Building Fund Management Ltd. (“NBFM”), based on theinvestment strategy of NBF set forth below, invests and manages theassets of NBF. NBFM has established asset management guidelines basedon the Articles of Incorporation of NBF and in accordance with the investment strategy of NBF.

(1) Strategy for Creation of the Portfolio
The goal of the portfolio is to generate steady growth and stable profits

Other Greater Tokyo■

Relatively high rent levels and low vacancy
rates compared to Other Cities; also, relatively large market scale (both leasing andpurchase/sale) with high growth rates.

■

Relatively low yearly NOI yields.

■

Relatively high liquidity at the time of sales.

■

Basic special characteristics are between
those of Tokyo CBDs and Other Cities.

Other 14 wards of Tokyo andneighboring cities (see Note 1
below) such as Musashino,
Tachikawa, Yokohama, Kawasaki,
Chiba, Kashiwa, Saitama, etc.

Total of above two areas: 70% or more
Other Cities
Principal regional cities such as
Sapporo, Sendai, Niigata,
Shizuoka, Hamamatsu, Nagoya,
Kyoto, Osaka, Kobe, Okayama,
Hiroshima, Takamatsu, Fukuoka,
Kumamoto, etc.

■

Rent levels relatively low and vacancy rates
relatively high compared to Tokyo CBDs, withsome variance by each area’s characteristics;
also, relatively small market scale and low
growth rates.

■

Relatively high yearly NOI yields.

■

Relatively low liquidity at the time of sales.

Total of above area: 30% or less
Notes: 1. “Neighboring cities” refers to the metropolis of Tokyo excluding its 23 wards, andthe 6 prefectures of Kanagawa, Chiba, Saitama, Ibaraki, Gunma and Tochigi.
2. Due to unforeseeable events, such as extreme fluctuations in macro-economic
trends, financial trends, real estate market trends and so forth, it may not always be
possible to operate in accordance with each of the above criteria (“Investment
Objectives and Policies,” Articles of Incorporation).

on a medium-to-long-term basis. The selection criteria of investment
assets is based on the composition of investment assets in the portfolio(2) Acquisition Strategy

and based on consideration of a quantitative proportion of the office stocka) Ratio of Real Estate Assets

located in the various regions of Japan.

NBF will maintain a ratio of 75% or more with respect to the“Designated Real Estate Ratio” (“Investment Objectives and Policies,”

Area Diversification
The investment strategy of NBF divides the investment area into threeareas consisting of Tokyo CBDs, Other Greater Tokyo and Other Cities insuch manner that 70% or more of total investment assets (Real Estate,etc.) are allocated to Tokyo CBDs and Other Greater Tokyo and 30% orless to Other Cities. The purpose of this area diversification is to mitigate
cash flow risks such as earthquakes, risk of vacancies and so forth(“Investment Objectives and Policies,” Articles of Incorporation).

Articles of Incorporation). As of June 30, 2010, NBF satisfied the criteria.
The “Designated Real Estate Ratio” means the ratio of the total amountof Designated Real Estate to the total amount of Designated Assets
owned by NBF.
Note: Designated Real Estate includes real estate, real estate leasehold rights, superficies
and beneficiary certificates backed by real estate, land leasehold rights and superficies(as designated under Article 83.4.3.1 of the Special Taxation Measures Law of Japan).

b) Due Diligence
When investing in office properties, selections will be made throughcomprehensive research and analysis based on the forecast investment
yields resulting from the acquisition costs and their anticipated profits,
future prospects and stability of the area of location, availability of measures responding to risks of deterioration and obsolescence, insurability andso forth of the relevant office properties (or Beneficiary Certificates backed

NBF Report January – June 2010 59

by such office properties) (“Investment Objectives and Policies,” Articles

unleasable assets which thereafter become operational) will not exceedof Incorporation). The details of the relevant criteria are set forth in the

10% of the total assets indicated on the most recent balance sheet offollowing table.

NBF. For this purpose, “leased/leasable assets” shall mean property withThough such consideration will involve the study of the criteria included

respect to which the construction of the building has been completed

in the following table, it is possible that when NBF acquires or intends toand such building is leased or leasable. Properties which are owned byacquire operating assets, not all of the following criteria will be satisfied.

NBF and have become operational at some point shall be deemed

Item“leasable” thereafter (including such cases as reconstruction or large-

Scale of building

Points to be reviewed

scale renovation of a building) (“Investment Objectives and Policies,”■

Net rentable area, including net rentable areaof entire building and standard net rentablearea per floor.

■

Desired total net rentable area is 1,650m(approximately 500 tsubo) or more.

■

Desired standard net rentable area per floor is
330m2 (approximately 100 tsubo) or more.

Construction type andspecifications of facilities■

Building design and floor plan suitable
for leasing, with divisibility, adequate
ceiling height, electrical service, HVAC
equipment, etc.

growth of operating profits on a medium-to-long-term basis by planning toEarthquake resistance■

Ensure that construction quality exceeds
earthquake standards (meaning those required
pursuant to the Building Standards Law asamended in 1981) or standards equivalent
thereto (obtain structural appraisal/assessment (appraisal/assessment of the building
structure pursuant to the Building Standards
Law conducted by The Building Center ofJapan), etc.).

ing occupancy rates, extending the term of leases and rendering them

In cases such as co-ownership, divided
condominium ownership, a building erected
on leased land, etc. where NBF will not
obtain complete ownership of a building, thefollowing matters are appropriately treated.

monies may be received and said monies will be managed in accordance

Measures to protect security deposits, policies and measures regarding cash reserves
for long-term renovation plans.

NBF is entitled to establish reserves for long-term renovations required

Measures regarding
status of legal title

■

●

●

Articles of Incorporation).

2

Appropriate measures regarding demands fordivision of co-owned interests or the sale ofa co-owner’s interest, etc.

(3) Management and Disposition Policies
Regarding acquired Real Estate, etc., the goal is to obtain steady
maintain and improve asset value and competitive ability through investment in facilities and by expanding income (increasing rents, etc., increasmore stable, etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a
medium-to-long-term basis, lease out all Real Estate, etc. included inoperating assets (including installation of parking lots, billboards, etc.).
When conducting such leasing, security deposits, etc. and other similar
with the requirements of the Articles of Incorporation (“Investment
Objectives and Policies,” Articles of Incorporation).
to maintain and enhance the value of operating properties, reserves forpayables, reserves for cash distributions and any other similar reserves,etc. (Article 14.1 (2) of the Articles of Incorporation).

Tenancy characteristics■

Acceptable creditworthiness of tenants, purposes of use by tenants, configuration, andcondition of collectibility of rents, etc.

a) Reserves for Long-Term Renovations

Environmental:
condition of land, etc.

■

Absence of harmful substances suchas asbestos (or countermeasures can be
implemented for any such substances), nonexistence of soil pollution, etc.

tions, repairs and tenant improvements will be determined based on reno-

From the reserves set forth above, a portion corresponding to renovavation plans for each building. As of June 30, 2010, foreseen reserves
provided from July 2010 to June 2011 are as follows:
Itemc) Uncompleted or Unleasable Properties

ReasonReserves forlong-term renovations■

Average annual amount over an approximately 10-year period based on engineering
reports■

Expenses of providing “free access floor”■

Expenses for other move-in construction costs(partitions, etc.)

investment amount, the date of completion or of becoming leasable,

Reserves for tenant improvements (reserves for future
construction expenses required
for spaces leased to tenants)

estimated revenue and so forth, provided, however, that the contract

Total Foreseen Amount (annual basis): ¥3,389 million

In principle, NBF acquires Real Estate, etc. which are leased/leasable
assets at the time of closing. NBF may acquire a property which is not
yet leasable at the time of closing based on consideration of the impact
on NBF’s asset management activities after taking into account theamount of any such unleasable asset combined with the total contract
amount of previously acquired unleasable assets (but excluding

60 NBF Report January – June 2010

Notes: 1. In addition to the above-mentioned amount, certain amounts are set aside as cash
reserves for renovation pursuant to the administrative rules of the buildings in which
NBF owns condominium interests, etc.

Investment and Distribution Policies

2. The amount of reserves set forth above is the total amount of reserves with respect
to the 59 properties owned by NBF as of June 30, 2010.

b) Measures to Avoid Reductions and Fluctuations in
Operating Income
In order to avoid large-scale reductions and fluctuations in operating
income due to fire damage, withdrawal of tenants and so forth, efforts,such as area diversification and obtaining adequate fire and casualty
insurance, etc., will be exerted.

c) Disposition
In disposing of individual operating properties, selections will be madethrough comprehensive research and analysis based on the forecasted
income, actual and predicted fluctuations in asset value, future prospects
and stability of the area of location, risks of deterioration and obsolescence of real estate and predicted costs thereof as well as the composition of the portfolio, etc. Sell/hold studies will be periodically undertakenwith respect to all operating properties (“Investment Objectives andPolicies,” Articles of Incorporation).

(4) Financial Policiesa) Issuance of Shares
NBF may issue shares in order to undertake acquisition and renovation

temporarily exceed 60% when acquiring certain assets, etc. (medium-tolong-term operating asset management policy and annual management
plan established by the Asset Management Company).

d) Derivative Transactions
NBF purchases rights in derivatives transactions solely to hedge
against risks, including risks of fluctuation in interest rates for debt, as set
out in Article 2.20 of the Financial Instruments and Exchange Law ofJapan (“Investment Objectives and Policies,” Articles of Incorporation).

(5) Disclosure Policy
NBF’s policy on disclosure is to earn recognition from society byshowing itself to be an open and transparent investment company. It also
works at all times to engender an environment in which it can disseminate fair and unbiased information to all its investors without delay. In
addition to conducting disclosure in the style required by the Investment
Trust and Investment Corporation Law of Japan, the Financial
Instruments and Exchange Law of Japan, the Tokyo Stock Exchange, theInvestment Trusts Association and other laws and organizations, NBF also
voluntarily discloses information it deems necessary for investor
decision-making.

a) Appraisal Value, etc.

and so forth of assets and to provide allowance for funds required for

In the event that NBF undertakes asset valuation for the purpose ofworking capital as well as for the repayment of debt (including security

disclosure in Performance Information Reports, etc. using methods anddeposits, borrowings and repayment of obligations regarding NBF bonds, etc.).

standards different from those it has set forth, (a) the disclosure value tob) Debt Financing
NBF may raise capital (including use of the call loan market) and issue
bonds in order to undertake acquisition and renovation and so forth ofassets and to provide allowance for funds required for working capital aswell as for the repayment of debt (including security deposits, borrowings
and repayment of obligations regarding NBF bonds, etc.) (“Investment
Objectives and Policies,” Articles of Incorporation).
Borrowings are limited to those from Qualified Institutional Investors as
specified in the Financial Instruments and Exchange Law of Japan, incase capital is borrowed. Further, the total limit on all such borrowings
and issues of NBF bonds will be ¥1,000,000 million. When undertaking
borrowings or when issuing NBF bonds, NBF may provide operating
assets as collateral (Article 15 of the Articles of Incorporation).

c) Loan-to-Value Ratio
The ratio of the total amount of borrowings, issues of NBF bonds
and lease deposits under management to the total amount of assets ofbe used for real estate, real estate leasehold rights and superficies will, in
principle, be the appraised valuation provided by a certified real estateappraiser, and (b) the disclosure value to be used for beneficiary certificates, equity interests of tokumei kumiai and equity interests of partnerships for which respective assets are real estate, real estate leasehold
rights or superficies will be the calculated value of equity interests of eachbased on the value of their respective assets as determined in (a) plus thefair value of any financial assets as determined in conformity with generally accepted accounting principles, less trust and total tokumei kumiai
liabilities (Articles of Incorporation).
The appraisal value of property with respect to the period commencing
on the acquisition thereof and ending on the date of disclosure of suchvalue with respect to the next following closure of NBF’s accounting term
shall be the acquisition price of the said property (excluding miscellaneous acquisition costs, fixed assets tax, city-planning tax and consumption tax) as stated in the sale and purchase contract, etc. for thesaid property.

NBF (loan-to-value ratio) is envisioned to be limited to 60%, but may

NBF Report January – June 2010 61

Investment Objectives of NBF

that this is limited to those the assets of which are primarily invested
and Managed Assets principally referred to in paragraphs (1) andInvestment Restrictions in Articles of Incorporation(2) above)

The Investment Objectives of NBF specified in the Articles ofIncorporation are as follows. Please also refer to “B. Investment Strategy”
of “Investment Policies of NBF” herein.

A. Principal Investment Objectives among
Designated Assets
NBF will principally invest in the below-listed Designated Assets withthe objective of assuring steady growth and stable profits from theManaged Assets.

(9) Beneficiary Certificates of Money Trust (limited to those the trust assetsof which are primarily invested and Managed Assets referred to inparagraph (1), (3) or (4) above, provided, however, that those that are
deemed securities are excluded)

B. Other Investment Objectives among
Designated Assets
NBF may, in the course of efficiently managing funds or in other cases
as necessary, invest in the following Designated Assets.

(1) Real estate, real estate leasehold interests and superficies(1) Bank deposits(2) Beneficiary Certificates backed by real estate, real estate leasehold(2) Certificates of deposit issued by Japanese legal entities

rights and superficies, including inclusive trusts consisting of funds
appurtenant to real estate(3) Tokumei kumiai ownership interests as defined by Article 535 of theCommercial Code of Japan (provided, however, that this is limited tothose the assets of which are primarily invested and Managed Assets
principally referred to in paragraphs (1) and (2) above)(4) Equity interests in partnerships as defined by Article 667 of the Civil
Code of Japan (limited to leased, operating and managed partnershipassets primarily referred to in paragraphs (1) and (2) above that are(3) Call loans(4) Japanese government bonds, notes and bills (meaning thosespecified in Article 2.1.1 of the Financial Instruments and Exchange
Law of Japan)(5) Regional treasury bonds, notes and bills (meaning those specified in
Article 2.1.2 of the Financial Instruments and Exchange Law of Japan)(6) Commercial paper (meaning that specified in Article 2.1.15 of the
Financial Instruments and Exchange Law of Japan)(7) Designated bonds of Special Purpose Companies (meaning thosespecified in Article 2.2.5 of the Financial Instruments and Exchange

specified in Article 2.1.4 of the Financial Instruments and Exchange

Law of Japan)

Law of Japan, provided, however, that this is limited to asset-backed(5) Preferred Investment Certificates of Special Purpose Companies(meaning those specified in Article 2.1.8 of the Financial Instruments
and Exchange Law of Japan, provided, however, that this is limited tosecurities principally referred to in paragraphs (1) and (2) of section
A above)(8) Monetary claims (limited to those claims that are deemed

those the assets of which are primarily invested and Managed Assets

Designated Assets under the Investment Trust Law of Japan otherprincipally referred to in paragraphs (1) and (2) above)

than those referred to in section A and above)(6) Special Purpose Beneficiary Certificates (meaning those specified in(9) Securities (other than those listed in section A and above)

Article 2.1.13 of the Financial Instruments and Exchange Law of Japan,(10) Rights to financial derivative transactions (limited to those specified inprovided, however, that this is limited to those the assets of which are

Article 2.20 of the Financial Instruments and Exchange Law of Japan)

primarily invested and Managed Assets principally referred to in paragraphs (1) and (2) above)(7) Beneficiary Certificates of investment trusts (meaning those specified

C. Assets Other than Designated Assets
NBF may, in the course of efficiently managing funds or in other casesin Article 2.1.10 of the Financial Instruments and Exchange Law ofas necessary, invest in the following assets.

Japan, provided, however, that this is limited to those the assets ofwhich are primarily invested and Managed Assets principally referred(1) Equity interests of partnerships, excluding assets in section A,
paragraph (4)to in paragraphs (1) and (2) above)(2) Easements(8) Investment Securities (meaning those specified in Article 2.1.11 of the
Financial Instruments and Exchange Law of Japan, provided, however,

62 NBF Report January – June 2010

(3) Trademark rights(4) Copyrights

Investment and Distribution Policies(5) Chattels

Instruments and Exchange Law of Japan, although the Investment Trusts(6) Requisite ancillary rights to Designated Assets referred to in

Association of Japan has established rules such that a corporate-style J-

section A

REIT may pay out the excess of retained earnings for the period up to a
maximum of 60% of depreciation for the period. NBF is entitled to makecash distributions of the amounts described below in excess of theDistribution Policies of NBF
A. Distributions of Profits
A registered investment corporation may deduct its cash dividends ofprofits from taxable income under Japanese tax regulations if it distributes to
its shareholders in excess of 90% of its taxable income and complies withother organizational and operational requirements. NBF intends to makedividend distributions that ensure that NBF satisfies those requirements.
NBF will, in principle, effect distributions in accordance with the following policies (Article 14.1 of the Articles of Incorporation).

(1) NBF’s earnings available for distributions are based on accounting of
profits prepared in accordance with the Investment Trust Law and in conformity with generally accepted accounting principles in Japan.
The distributable amount which results from operation of managed
assets of NBF (hereinafter, “Distributable Amount”) shall be the amount of
profit (the amount of net assets on the balance sheet less the amount of
total expenses, capital surplus reserves and estimated or equivalent variances) calculated on each closing date.

(2) The amount of cash distributions will be determined by NBF, suchamount being in excess of 90% of earnings available for dividends of NBF
set forth in Article 67.15 of the Special Taxation Measures Law of Japan(hereinafter “Distributable Earnings”), provided, however, that the maximum amount of distributions will be the Distributable Amount. NBF has
the right to allow for long-term reserve for renovations, reserve forpayables, reserve for cash distributions and other reserves and allowances
similar thereto which are deemed necessary for maintaining or enhancing
the assets of NBF.

(3) Earnings retained and not allocated to cash distributions or otherwise available for distribution as of the closing date will be managed inaccordance with “Investment Objectives and Policies” in the Articles
of Incorporation.

B. Distribution in Excess of Earnings
A registered investment corporation is allowed to distribute cash to its
shareholders in excess of the Distributable Amount under the Financial

Distributable Amount in the following cases, provided, however, that the
maximum amount of such distributions will be the amount set forth in therules of the Investment Trusts Association of Japan (Article 14.2 of the
Articles of Incorporation).

(1) Amount determined by NBF as being eligible for the requirements ofArticle 39.32.3 of the Special Taxation Treatment for Investment
Corporations, in case of the Distributable Amount being less than the
Taxable Income Available for Dividends.

(2) Amount determined by NBF not in excess of the amount of depreciation
for the current term less the amount of appropriate reserves for the current
term, if NBF determines it appropriate considering trends in macro economic
environments, real estate markets and leasing markets.
As for cash distributions in excess of profits, as long as the current
Japanese taxation treatment applicable to NBF’s shareholders in Japan towhom such distributions are paid requires them to calculate capital gainor loss at the time of each distribution, NBF will not make distributions inexcess of profits.
Notwithstanding the above, NBF may make distributions in excess of
profits in accordance with the distribution policies stated above in order tomeet “Requirement for Deduction from Taxable Income of Dividends ofProfit, etc.,” and if such distributions in excess of profits are deemednecessary by the Board of Directors of NBF.

C. Method of Distributions
Distributions will be made in cash, in principle, within three months
from the closing date, to such shareholders or registered pledgees as arelisted or recorded in the latest Shareholder Registry as of the closing date,in proportion to the number of shares owned by or pledged to them
(Article 14.3 of the Articles of Incorporation).

D. Prescription for Cash Distributions, etc.
NBF will be discharged from the obligation to pay distributions ofprofits three calendar years from the date of commencing payment.
Interest will not accrue on unpaid distributions (Article 14.4 of the Articles
of Incorporation).

NBF Report January – June 2010 63

Investment Restrictions
A. Investment Restrictions in Articles
of Incorporation
The investment restrictions specified in the Articles of Incorporationand the asset management guidelines applicable to NBF. Please also refer
to “Investment Policies of NBF, B. Investment Strategy” herein.

as well as “Investment Objectives and Policies” of the Articles
of Incorporation.

B. Compliance with the Financial Instruments
and Exchange Law and the Investment Trust
Law of Japan
NBF is subject to restrictions on investment under the Financial
Instruments and Exchange Law and the investment Trust Law of Japan.

(1) Investment Location and Currencies

Main restrictions are as follows.

NBF will invest neither in real estate located outside of Japan nor in
assets denominated in non-Japanese currencies (“Investment Objectives
and Policies,” Articles of Incorporation).

(1) Pursuant to Article 198.1 of the Investment Trust Law of Japan, aregistered investment corporation must entrust business related toasset management to an asset management company registered as a(2) Borrowing
See “Investment Policies of NBF, B. Investment Strategy,(4) Financial Policies.”

financial instrument firm, but an asset management company isprohibited from performing certain acts related to the business ofmanaging the assets of said investment corporation. As a result, aninvestment corporation is subject to certain investment restrictions (all(3) Concentration of Investment
There is no limitation on concentration of investment. See “Investment
Policies of NBF, B. Investment Strategy, (1) Strategy for Creation of
the Portfolio.”references in parentheses below are to the provisions of the Financial
Instruments and Exchange Law of Japan, except where statedotherwise) besides restrictions applied to a registered investment
corporation. NBF will naturally comply with such investment restrictions,a general overview of which follows.

(4) Investment Objectives
NBF does not invest aggressively in the Monetary Claims anda) Internal Transactions (§ 42.2.1)

Securities referred to in “Investment Objectives, B. Other Investment

Transactions between an asset management company and its direc-

Objectives among Designated Assets.” Rather, NBF takes into accounttors or officers are prohibited except for certain cases specified in Article

their stability and liquidity based on the extent of their relationship with

128 of the government ordinance regarding the Financial Instruments andDesignated Assets referred to in “Investment Objectives, A. Principal

Exchange Law that are considered unlikely to result in failure to protect

Investment Objectives among Designated Assets.” NBF invests in rights tothe interests of shareholders, damage fair transactions or discredit thefinancial derivatives transactions solely to hedge against risks, including

financial instruments business.

risks of fluctuation in interest rates for debt (“Investment Objectives andPolicies,” Articles of Incorporation).
Moreover, investment in other funds (investment securities orb) Reciprocal Transactions with Managed Assets (§ 42.2.2)

Transactions between asset management companies of investment

Beneficiary Certificates) is limited mainly to those the assets of which arecorporation assets are prohibited except for certain cases specified in thereferred to in “Investment Objectives of NBF, A. Principal Investment

provisions of the government ordinance regarding the Financial

Objectives among Designated Assets,” paragraphs (1) and (2).

Instruments and Exchange Law of Japan that are considered unlikely to

The real estate held by such funds may not include any real estate

result in failure to protect the interests of shareholders, damage fair trans-

located outside of Japan (Articles of Incorporation).

actions or discredit the financial instruments business.

(5) Compliance with Laws and Regulationsc) Transactions for the Benefit of Third Parties (§ 42.2.3)

The Managed Assets of NBF will be managed in compliance with the

An asset management company may not undertake transactions in cer-

Financial Instruments and Exchange Law of Japan and related regulations,tain financial instruments, indices or options based on fluctuations in thethe rules stipulated by the Investment Trusts Association (as amended),price, index, value, or amount of consideration related to transactions in the

64 NBF Report January – June 2010

Investment and Distribution Policies

objective of benefiting a third party other than NBF or said investment.

(2) Limitation on Acquisition of the Same Issue of
Shares (§ 194 of the Investment Trust Law)d) Transactions Harmful to the Interests of NBF (§ 42.2.4)

a corporation in excess of 50/100 of total number of said issued and out-

assets of an investment corporation, without a legally valid reason, with the

An investment corporation may not acquire the same shares issued by
An asset management company may not undertake transactions thatstanding shares.

are other than upon normal terms and conditions for such transactions,and further, such transactions upon said conditions would be harmful tothe interests of the investment.

(3) Restriction on Acquisition of Own Shares andAcceptance of Pledge (§ 80.1 of the Investment
Trust Law)e) Other Transactions Defined by Cabinet
Office Ordinances

In addition to the above, the following activities are prohibited(§42.2.7 of the Financial Instruments and Exchange Law, Cabinet Office

An investment corporation may not acquire shares issued by itself, or
accept them for the purpose of pledge, unless it acquires shares issued byitself in the following cases:●

when acquired from another investment corporation as the surviving entityof a merger;●

when purchasing shares pursuant to the provisions of the Investment
Trust Law of Japan; or●when purchasing shares pursuant to a government ordinance regarding
the Investment Trust Law of Japan.

Ordinance §130).
(i)

Transactions among the auditors, officers and employees of an asset
management company(ii)

Transactions for the benefit of the investment management company
or third parties that would be harmful to the interests of theinvestment corporation(iii) Transactions for the benefit of third parties that are not necessary
according to investment management policies, the financial condition of(4) Restriction on Acquisition of Parent Corporation’s
Shares by Subsidiary Corporation (§ 81.1.2)

assets under management, or market conditions(iv) Asset management that introduces unfair restrictions or other limitations
from external entities(v)

The sale or purchase of investment securities, or similar transactions,

An investment corporation (subsidiary), a majority of the shares of which isowned by another investment corporation (parent), may not acquire the sharesof such parent investment corporation except in the following cases:●

when acquired from another investment corporation as the surviving entityof a merger; or●

when purchasing shares pursuant to a government ordinance regarding
the Investment Trust Law of Japan.

with the objective of unfairly inflating transaction amounts or artificiallyinflating prices(vi) Transactions between third parties and their agents (excluding specifictransactions to which rights holders have agreed pursuant to advance
explanation of the rationale for the transaction)(vii) When entities as specified below engage in underwriting investment
securities or other transactions, requested tenders or acquisitions ofinvestment securities when the subject investment securities to beacquired by or the amount subscribed under the tender agreement by the

C. Other Restrictions
Subscription and Margin Trading of Securities
Pursuant to the guidelines set by its asset management company, NBF
may not subscribe to, or conduct margin trading of, securities.

said underwriter differ from the planned amounts(a) foreign entities including corporations for their own account (asstipulated by Cabinet Office Ordinance §126.3)(b) entities that hold more than 50/100 of the total amount of investment securities representing underlying managed assets issued in
the two most recent fiscal years, as defined by §2.8.1-3, §2.8.8
and §2.8.9 of the Financial Instruments and Exchange Law (limited
to investment securities that give holders rights in the said managed
assets and such rights)(viii) Other activities prohibited by Cabinet Office Ordinance 130

NBF Report January – June 2010 65

Corporate Data
(As of June 30, 2010)

Corporate Office:38th Floor, GranTokyo North Tower, 9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6738, Japan+81-3-6259-8681
http://www.nbf-m.com/nbf_e/

Date of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding.
¥386,176 million
542,000 shares

Shareholders:

15,293

Transfer Agent:

The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo, 105-8574, Japan

Business Office of the Transfer Agent:

Stock Transfer Agency Department of the Chuo Mitsui Trust and Banking Co., Ltd.
8-4, Izumi 2-chome, Suginami-ku, Tokyo, 168-0063, Japan+81-3-3323-7111

Independent Auditors:

KPMG AZSA LLCAZSA Center Building
1-2, Tsukudo-cho, Shinjuku-ku, Tokyo, 162-8551, Japan

Investor Relations:

For further information, please contact our asset management company:
Investor Relations of Financial Department
Nippon Building Fund Management Ltd.
38th Floor, GranTokyo North Tower, 9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6738, Japan+81-3-6259-8681

This document contains translations of selected information described in theor the selection of the portion(s) of any document(s) translated into English. No person

Securities Report (Yuka shoken hokokusho) filed on September 29, 2010 pursuant tohas been authorized to give any information or make any representations other than as

the Securities Exchange Law of Japan, and the Financial Statements and thecontained in this document in relation to the matters set out in this document, and if

Performance Information Report for the period from January 1, 2010 to June 30, 2010,

given or made, such information or representation must not be relied upon as havingof Nippon Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.

been authorized by Nippon Building Fund Inc., Nippon Building Fund Management Ltd.

This English language document was prepared solely for the convenience of andor any of their respective directors, officers, employees, partners, shareholders, agentsreference by overseas investors and neither corresponds to the original Japanese documents nor is intended to constitute a disclosure document. The Japanese language

or affiliates.
The financial statements of Nippon Building Fund Inc. have been prepared in

Securities Report and the Financial Statements and the Performance Information Reportaccordance with generally accepted accounting principles in Japan (Japanese

for the aforementioned period should always be referred to as originals of this document.

GAAP), which may materially differ in certain respects from generally accepted

English terms for Japanese legal, accounting, tax and business concepts usedherein may not be precisely identical to the concept of the equivalent Japanese terms.

accounting principles in other jurisdictions.
Many provisions of this document contain forward-looking statements and informa-With respect to any and all terms herein, including without limitation, financial state-tion. We base these statements on our beliefs as well as our assumptions based solely

ments, if there exist any discrepancies in the meaning or interpretation thereof between

on certain limited information currently available to us. Because these statements reflect

the original Japanese documents and English statements contained herein, the original

our current views concerning future events, these statements involve known andJapanese documents will always govern the meaning and interpretation. None of Nippon

unknown risks, uncertainties and assumptions. Our future performance could materially

Building Fund Inc., Nippon Building Fund Management Ltd. or any of their respective

differ from those set out in these forward-looking statements. We do not undertake anddirectors, officers, employees, partners, shareholders, agents or affiliates will be respon-

will not undertake to release revisions of forward-looking statements to reflect future

sible or liable for the completeness, appropriateness or accuracy of English translations

events or circumstances or of any other statements or information contained herein.

66 NBF Report January – June 2010

Investors’ Information(As of June 30, 2010)

Fiscal Periods

Shareholders

Six months ending June 30 and December 31

Other domestic corporations
350 (2.3%)

Overseas investors 351 (2.3%)
Financial institutions(Including securities companies)

Total Number of Common Shares Issued

164 (1.1%)

18th Period (From January 1, 2010 to June 30, 2010)

542,000 shares

17th Period (From July 1, 2009 to December 31, 2009)

542,000 shares

Individuals and others
14,428 (94.3%)

Individuals andothers37,377 (6.9%)

Total number of shareholders:

Financial
institutions

Distributions
Expected distribution for the 19th Period (ending December 2010)

15,293For the operating period from July 1, 2010 to December 31, 2010 (6 months)(Including
securities
companies)¥15,100 per share

296,124(54.6%)

Confirmed distribution for the 18th Period (ended June 2010)¥17,125 per share

For the operating period from January 1, 2010 to June 30, 2010 (6 months)

Other domestic
corporations
53,247 (9.8%)

Overseas
investors
155,252(28.7%)

Total number of shares:

542,000

Major Shareholders
Name

Number of Shares Held

Percentage of Total

51,86043,34340,05325,423
21,62919,735
12,256
8,857
7,944
7,071

9.6%
8.0
7.4
4.7
4.0
3.6
2.3
1.6
1.5
1.3

Japan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
NCT Trust and Banking Corporation (Trust Account)*
The Nomura Trust and Banking Co., Ltd. (Trust Account)*
The Master Trust Bank of Japan, Ltd. (Trust Account)
Mitsui Fudosan Co., Ltd.
Sumitomo Life Insurance Company
The Chugoku Bank, Ltd.
AIG Edison Life Insurance Company GA NON DIMA
Zenkyoren (National Mutual Insurance Federation of Agricultural Cooperatives)* The Nomura Trust and Banking Co., Ltd. and NCT Trust and Banking Corporation merged on July 20, 2010.
Historical Share Price(Yen)
2,000,000(Points)
3,000

NBF share price (left scale)
TSE REIT Index (right scale)
TOPIX (right scale)
cale)

2,500

1,600,000
2,000
1,200,000

1,500
1,000

800,000
500
400,000

Sep. 10,2001

Dec. 31,2001

Jun. 30,
2002

Dec. 31,2002

Jun. 30,
2003

Dec. 31,2003

Jun. 30,
2004

Dec. 31,2004

Jun. 30,
2005

Dec. 31,2005

Jun. 30,
2006

Dec. 31,2006

Jun. 30,
2007

Dec. 31,2007

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

0

NBF Report January – June 2010 67

Nippon Building Fund Inc.
38th Floor, GranTokyo North Tower,
9-1, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-6738, Japan

http://www.nbf-m.com/nbf_e/

Printed in Japan