6th Period
From : January 1, 2004 To : June 30, 2004

NBF Report Jan. – Jun. 2004

7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan
http://www.nbf-m.com/nbf/

Profile
Nippon Building Fund Inc. (formerly: “Office Building Fund of Japan, Inc.” The current name was adopted on
March 14, 2003, hereinafter “NBF”) is a real estate fund structured in the form of an investment corporation asprescribed in the Investment Trust Law of Japan. It was formed on March 16, 2001 in Japan as an investment
corporation with the objective of investing in assets, consisting primarily of Designated Assets (as this term is definedin the Investment Trust Law of Japan). The Investment Trust Law of Japan requires an investment corporation to be
managed by an external entity; management of such assets is entrusted to an asset management company (in thiscase, “Nippon Building Fund Management Ltd.” (formerly “Office Building Fund Management Japan Limited”)
hereinafter “NBFM”) which undertakes such asset management.
NBF’s primary investment objective is to achieve sustainable growth in portfolio value and stable profits on a midterm to long-term basis. NBF intends to achieve this objective by investing in real estate consisting of buildings
primarily used for offices with their underlying land located in Tokyo Central Business Districts (hereinafter “CBDs”),
Other Greater Tokyo and Other Cities in Japan as well as securities, beneficiary certificates representing beneficiaryinterests in trusts (hereinafter “beneficiary certificates”) and other assets backed by office properties (collectively
hereinafter “Real Estate etc.”)
NBF, which is a public corporation, is a closed-end fund whose shares are non-redeemable upon demand by ashareholder. The accounting period is six months, except for the first term. For tax reporting purposes, NBF may
deduct its cash dividends of profits from taxable income under Japanese tax regulations if it distributes to its
shareholders amounts being in excess of 90% of taxable income for the period and complies with other organizationaland operational requirements. NBF will continue its efforts to satisfy these requirements.

History of NBF
March 16, 2001

Established by founders: Mitsui Fudosan Co., Ltd., The Chuo Mitsui Trust and Banking Co.,
Ltd., and NBFM (at the time known as “MF Asset Management Co., Ltd.”)

May 10, 2001

Registration under Article 187 of the Investment Trust Law of JapanMay 23, 2001

Commencement of business (acquiring trust beneficiary certificates with respect to properties
consisting of 22 office buildings held in trust)

September 10, 2001

Listing of common shares on the Japanese Real Estate Investment Trust (hereinafter “J-REIT”)
section of the Tokyo Stock Exchange.

Table of Contents
Financial Highlights
Portfolio Highlights
Strength of NBF
Portfolio Management
New Acquisition
Location of Office Properties
Properties Roster
Board of Directors

2
3
4
5
6
12
14
16

Investment Policies of NBF
17
Distribution Policies of NBF
23
Investment Restrictions
24
I Performance Information Report25
II Financial Statements
35
III Appendix
49
Corporate Data
Back cover

Business Structure

General Meeting of
Shareholders

Asset Custody
Entrustment

The Chuo Mitsui Trustand Banking Co., Ltd.

Asset Management
Entrustment

Mitsui Fudosan Co., Ltd.

Asset Custody

Office Management
Entrustment

Nippon Building

Nippon Building
Fund Inc.
(NBF)

Fund Management
Ltd.
(NBFM)

Board of Directors
NBF Office
Management Co., Ltd.

Borrowings/Bonds

Debt service

Liabilities

OfficeQualified
Institutional
Investors/
Bondholders

Management

Investment

Rent etc.

AssetsInvestment

ShareholdersÕ

Distribution

Shareholder

Trading

EquityReal Estate
etc.

Shareholder

Major Related Operating Entities
Assignment

Name

Asset Management Company

Nippon Building Fund Management Ltd. (“NBFM”)

Asset Custodian

The Chuo Mitsui Trust and Banking Co., Ltd.

Office Management Company

Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.

Financial Highlights

6th Period

5th Period

4th Period

3rd Period

2nd Period

from January 1,
2004 to June 30, 2004

from July 1, 2003 to
December 31, 2003

from January 1,
2003 to June 30, 2003

from July 1, 2002 to
December 31, 2002

from January 1,
2002 to June 30, 2002

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

Operating revenues¥ 12,554¥ 12,453¥ 12,239¥ 11,846¥ 11,259

4,263

4,094

4,314

4,563

4,493

Income before income taxes
Net income

(a)

4,262

4,093

4,313

4,562

4,492

Total assets(b)366,200

314,362

307,688

290,725

278,976

Total shareholders’ equity (“Net assets”)(c)

153,161

152,992

153,212

153,461

153,391

Total amount of cash distribution

(e)

4,262

4,093

4,313

4,562

4,492

Total number of common shares issued (shares)(d)

280,700

280,700

280,700

280,700

280,700

Net assets per share (Yen)(c) / (d)545,641545,038

545,823546,710546,460

Distribution per share (Yen)(e) / (d)15,185

14,582

15,367

16,25316,003

NOI from property leasing activities

Note 2

8,311

7,964

8,057

7,886

7,583

FFO per share (Yen)

Note 2

24,20323,141

23,794

23,63522,938Note 1: Operating revenues do not include consumption taxes.
Note 2: All valuations are calculated through the following formulas. The figures in parenthesis are annualized based on the 6 month figures for the period.
NOI (Net Operating Income) from property leasing activities: (Revenue from property leasing - Rental expenses) + Depreciation and amortization
FFO (Funds From Operation) per share: (Net income (excluding Gain on sale of investment properties) + Depreciation and Amortization)/Weighted average number ofcommon shares issued and outstanding during the period.

● Operating revenues
Net income
Operating revenues（Yen in million）

Net income

12,000● Total assets● Distribution per share
Net assets per share（Yen in million）（Yen）

350,000

9,000

Distribution per share

Net assets per share

540,000

15,000300,000

530,000

6,000

10,000250,000

3,000
0

2 nd
Period3 rdPeriod4 thPeriod5 thPeriod6 thPeriod0（Yen）550,000

20,000520,000

5,000
2 nd
Period3 rdPeriod4 thPeriod5 thPeriod6 thPeriod0Distribution
per share

510,000
2 nd
Period3 rdPeriod4 thPeriod5 thPeriod6 thPeriod500,000
Net assets
per share

Stock Price Performance（Yen）
900,000

NBF stock price (the closing price)
TOPIX (the closing price)

1,400

850,000
800,000

1,300

750,000

1,100

650,000
600,000

1,000

550,000

900

500,000
450,000

800

400,000

700
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
2001
2002
2003
2004

2

TOPIX

NBF stock price

1,200
700,000

Portfolio Highlights

Asset Allocation

Regional Allocation

Total Assets ¥366,200 million

Total Real Estate etc. ¥331,861 million

Other Cities¥49,560 million (14.9%)

Real estate¥64,922 million(17.7%)

Other Greater Tokyo¥39,358 million (11.9%)
Real estate held in trust¥266,939 million (72.9%)
Tokyo CBDs
¥242,943 million (73.2%)

Deposits and other assets¥34,339 million (9.4%)

Note: Figures above are based on the book value as of June 30, 2004

Occupancy Rate（%）
00

99.9 99.9 99.9 99.8 99.7 99.8 99.8 99.8

99.7 99.7 99.7 99.7 99.7
98.3

97.7

97.6 97.3 97.4 97.2 97.3 97.4 97.2
97.0

96.6
95.4 96.4
96.0 96.0 96.0 96.4 96.4 96.4 96.4
96.0
96.1 94.9
95.5
95.8
94.6 94.8
95.4 95.5
95.4
95.3
95.0
95.0
94.3
94.7 94.6 94.8
95.6 95.9 95.3
95.1
94.9
95.0
94.7 94.6
94.9
94.6 94.6 94.7
92.5 92.2 92.9 92.6 92.9 94.3
93.8 93.7 94.5
93.7
94.4 94.3
93.6
93.0
93.8 92.4
92.8
92.8 92.7 92.6 92.5
92.1 92.5
91.8 91.7 92.1 92.3
92.0 92.2 91.9 92.0 91.3
91.2
91.0
90.1 90.2 90.3 90.4
88.8

95.0 95.0
94.2 94.6

95

90

98.2 97.9 98.1
97.7 97.9 97.8
97.0 96.6
96.2
96.1
96.0
95.3 95.4 95.2
94.6
95.6
95.1
94.8 95.1 94.7
94.6 94.9
94.0

0
Jan 31
2002

Feb 28 Mar 31 Apr 30 May 31 Jun 30

Jul 31 Aug 31 Sep 30 Oct 31 Nov 30

2nd Period

Dec 31 Jan 31
2003

3rd PeriodTokyo CBDs

Feb 28 Mar 31 Apr 30 May 31 Jun 30

4th Period

Other Greater Tokyo

Jul 31 Aug 31 Sep 30 Oct 31 Nov 30 Dec 31 Jan 31
2004

5th Period
Other Cities

Feb 29 Mar 31 Apr 30 May 31 Jun 30

Jul 31

Aug 31

6th Period

Total

Note: Occupancy rate: Ratio of gross leased area to total rentable area

Major Tenants Roster
The outline of NBF’s major tenants as of June 30, 2004 is as follows:

Name of Tenants

Name of Building

01
02
03

JFE Steel Corporation (*)
GlaxoSmithKline.KK. (*)
Fuji Xerox Co.

04

Mitsui Fudosan (**)

05
06
07

Nippon Steel Corporation (*)
NTT Communications
Transcosmos Inc.

08

NTT Data Corporation

09
10

Sumitomo Densetsu (*)
NEC Facilities

JFE Bldg.
GSK Bldg.
Shinjuku Mitsui Bldg. No.2
Nakano-Sakaue Sunbright Twin
Tsukuba Mitsui Bldg.
Hamamatsu City Bldg.
Naka-Meguro GT Tower
Nishi-Shinjuku Mitsui Bldg.
Nippon Steel Building No.2
Kowa Nishi Shinbashi Bldg. B
Shibuya Garden Front
Hirokoji Toei Bldg.
Shiba A Bldg.
Daiya Toranomon Bldg.
Sumitomo Densetsu Bldg.
Sapporo L-Plaza
Shinjuku Yocho-machi Bldg.

Leased Space(m2)

Percentage of Total
Rentable Area***

65,28022,702
17,886

15.9%
5.5%
4.4%

15,5003.8%

15,333
8,493
8,438

3.7%
2.1%
2.1%

7,160

1.7%

5,978
5,767

1.5%
1.4%

*

Indicates tenants with long-term lease
contracts (JFE Steel Corporation’scontract expires March 2011;
GlaxoSmithKline’s contract expires
September 2010 ;Nippon SteelCorporation’s contract expires
November 2009; Sumitomo Densetsu’s
contract expires June 2008 )**Mitsui Fudosan, the sole tenant of theproperty, pools profits from leasing
operations and then distributes theproceeds proportionally in accordancewith each owner’s percentage of thetotal ownership interest.

***

Percentage of Total Rentable Area =Leased Space ÷ Total Rentable Areaof All Properties in Portfolio

3

Strength of NBF

The First Listed J-REIT• In September 2001, NBF was listed as the first investment corporation in Japan on the JREIT section of the Tokyo Stock Exchange.

The Largest Scale of any J-REIT• The largest total market capitalization of any J-REIT(¥316,195 million as of September 30, 2004)• The largest scale of managed assets(¥406,381 million as of September 30, 2004)

Enrichment of Portfolio• Specializes in investing in office buildings• Possesses 45 properties focusing on large-scale office buildings in theTokyo Central Business Districts (as of September 30, 2004)• Diversified in other Tokyo markets as well as in regional cities.
• Total rentable space of 419,511m2 (as of June 30, 2004)• Diversified tenants (number of tenants at the end of the current period:
629)

Financial Stability and Flexibility• Following receipt of payments in connection with capital increases occurring on July 14, 2004 and August 11,
2004, total capital increased from 148,899 million yen to 210,679 million yen and the number of issued shares
increased from 280,700 shares to 364,700 shares.
• Ratings by Rating Agencies:
Standard & Poor’s Long-term Corporate: A, Short-term Corporate: A-1, Outlook: stable
Moody’sIssuer Rating: A3, Outlook: positive (under review for possible upgrade)• Ratio of Interest-Bearing Debt to Total Assets: decreased from 50.8% as of June 30, 2004 to somewhere
between 30% and 40% as of July 31, 2004 in consequence of the above said capital increase• Ratio of Long Term and Fixed-Interest Rate Debt to total debt : increased from 65.6% as of June 30, 2004 to
91.4% as of July 31, 2004 in consequence of the above said capital increase• Average years remaining till due date for long-term interest-bearing debt: 5.08 years (as of June 30, 2004)• Funding through use of unsecured, non-guaranteed corporate loans

Strategic Partnership with Mitsui Fudosan Co., Ltd.
• Utilization of the know-how of Mitsui Fudosan, the leading real estate company in Japan.

4Portfolio Management

As of July 30, 2004 the sales of the Shinjuku Yocho-machi Bldg., Inage Kaigan Bldg., Hamamatsu City Bldg. and Kyoumachibori
Center Bldg. were concluded.

Fundamental Policies
Decisions to sell properties etc. owned by NBF are comprehensively made based upon careful evaluation of expected future
profitability, current and forecasted increase or decrease in asset value, stability and future prospects of the local area, risks ofdeterioration and obsolescence of the property and forecasted costs thereof, and composition of the portfolio etc. Evaluation
regarding whether to sell or retain is periodically implemented with respect to all properties etc. owned by NBF.

Regarding the Properties Sold
The decision to sell was made from the viewpoint of improving the portfolio over the mid to long term and for the purpose ofassuring NBF’s ability to subsequently acquire new properties etc. At the time of such decision, the forecasted future revenues etc.
and in particular, the composition of the portfolio, were considered for each property.

Tokyo CBDs/Other Greater Tokyo
Enhancement of the portfolio through acquisition of the NishiShinjuku Mitsui Bldg., Shibuya Garden Front, Ikebukuro TG
Homest Bldg., Ebisu CS Bldg., NBF Atsugi Bldg., Shiba A Bldg.

Sale of the Shinjuku Yocho-machi
Bldg., Inage Kaigan Bldg.

Other Cities
Osaka Area
Acquisition of the Sun Mullion NBF Tower, Tanimachi Kowa
Bldg., Aqua Dojima East
Other Local Cities
Enhancement of the portfolio in other cities through acquisitionof the Sapporo L-Plaza, NBF Hiroshima Tatemachi Bldg.,
Hiroshima Fukuromachi Bldg., Hirokoji Toei Bldg.

Sale of the Kyoumachibori Center Bldg.

Sale of the Hamamatsu City Bldg.

Image of External Growth (based on acquisition price)（Yen in 100 million）

5,000

5,000

4,064

4,000
3,000
2,000
1,000

(Note 2)Contract base
(Note 1)

2,602
1,921

Outstanding value

Outstanding value

22 Buildings
May 31, 2001
（First Year）

28 Buildings

45 Buildings

Dec 31, 2002

Sep 30, 2004

(Note 1)March 31, 2006

Note 1: Include Aqua Dojima Daiwa Dojima Bldg., S-ino Omiya North Wing, Toranomon Kotohira Tower, Higashi-Ginza Square (tentative name) and Shirokane East
Area Redevelopment Project.
Note 2: As this figure represents the desired acquisition target, it may differ from the actual figure due to market trends etc.

5New Acquisition

NBF has acquired the following property after the 6th period.

ALLIANCE

Tokyo CBDs

Acquisition dateJuly 1, 2004

Outline of acquired property

fee simple

Acquisition price¥9,126 million

Acquisition structure

Trust

Location

2-1, Minami-aoyama 5-chome, Minato-ku, Tokyo

Site area

1,673.27m2

Floor area of building

6,214.73m2

Structure

Above ground 5 floors, below ground 1 floor

Completion

January 25, 1989

S-ino Omiya North Wing

Other Greater Tokyo

Acquisition date

October 1, 2004

Outline of acquired property

condominium and co-ownership (*)

Acquisition price¥11,236 million

Acquisition structure

Real Estate

Location

10-15 (and 16), Sakuragi-cho 1-chome, Omiya-ku,
Saitama, Saitama

Site area

Office building: 3,083.98m2 (total site area for the building)
Administrative building: 2,366.04m2 (total site area for the building)Floor area of building

Office building: 30,227.21m2 (total floor space of the building)
Administrative building: 385.79m2 (total floor space of the building)

Structure

Office building: Above ground 20 floors, below ground 1 floor
Administrative building: Below ground 2 floors

Completion

February 20, 2004

Ownership form
Land: Office building: Approximately 64.3% of co-ownership interest in one parcel of land
Administrative building: Approximately 22.4% of co-ownership interest in one parcel of land
Building: Office building: Condominium interests (13,047.58m2)
Administrative building: Approximately 22.4% of co-ownership interest of the building

Aqua Dojima Daiwa Dojima Bldg.

6

Other Cities

Acquisition date

September 30, 2004

Outline of acquired property

fee simple

Acquisition price¥17,810 million

Acquisition structure

Trust

Location

4-16, Dojimahama 1-chome, Kita-ku, Osaka, Osaka

Site area

3,531.37m2

Floor area of building

35,912.97m2

Structure

Above ground 19 floors, below ground 2 floors

Completion

December 2, 1996

Toranomon Kotohira Tower

Tokyo CBDs

Acquisition dateNovember 30, 2004

Outline of acquired property

co-ownership of condominium interest

Acquisition price¥6,043 million

Acquisition structure

Real Estate and Superficies

Location

1-43, Toranomon 1-chome, Minato-ku, Tokyo

Site area

3,647.30m2(*)

Floor area of building

29,828.90m2(*)

Structure

Above ground 26 floors, below ground 3 floors

Completion

November 30, 2004
The figures given for “Site area” and “Floor area” above
indicate the total site area and total floor area of thisproperty. NBF owns about 29% of this property.

This is a conceptual drawing of what the completed project will look like. Thus, it may differ from the actual building.

Higashi-Ginza Square (tentative name)Tokyo CBDs

Acquisition date

March 28, 2005 (estimated)

Outline of acquired property

fee simple

Acquisition price¥4,800 million(price may be adjusted upward to a maximum of ¥5,200 million depending on the seller’s success in attracting tenants
and improving current estimated profits)

Acquisition structure

Trust

Location

1308-2 (et al.), Tsukiji 1-chome, Chuo-ku, Tokyo

Site area

939.58m2

Floor area of building

7,212.37m2 (estimated)

Structure

Above ground 9 floors, below ground 1 floor

Completion

March 28, 2005 (estimated)

This is a conceptual drawing of what the completed project will look like. Thus, it may differ from the actual building.

Shirokane 1-chome East Area Redevelopment Project

Tokyo CBDs

Acquisition date

March 31, 2006 (estimated)

Outline of acquired property

fee simple

Acquisition price¥27,600 million(price may be adjusted upward to a maximum of ¥31,000
million depending on the seller’s success in attracting tenants and improving current estimated profits)

Acquisition structure

Trust

Location

304, Shirokane 1-chome, Minato-ku, Tokyo

Site area

4,373.93m2

Floor area of building

50,630.91m2 (estimated)

Structure

Above ground 26 floors, below ground 2 floors

Completion

November, 2005 (estimated)

This is a conceptual drawing of what the completed project will look like. Thus, it may differ from the actual building.

7

New Acquisition

NBF acquired the following properties during the 6th period.

Daiya Toranomon Bldg.

Tokyo CBDs

Acquisition dateJune 30, 2004

Outline of acquired property

fee simple

Acquisition price¥13,337 million

Acquisition structure

Trust

Location

6-21, Nishi-shinbashi 1-chome,
Minato-ku, Tokyo

Site area

1,804.45m2

Floor area of building

18,082.47m2

Structure

Above ground 9 floors, below
ground 5 floors

Completion

April 17, 1963

Shibuya Garden Front

Tokyo CBDs

Acquisition dateFebruary 2, 2004

Outline of acquired property

co-ownership

Acquisition price¥8,700 million

Acquisition structure

Real Estate

Location25-18, Shibuya 3-chome,
Shibuya-ku, Tokyo

Site area

3,750.71m2 in which NBF holds
an interest of 50%

Floor area of building

22,650.54m2 in which NBF holds
an interest of 50%

Structure

Above ground 14 floors, below
ground 1 floor

Completion

8

September 30, 2003

Shiba A Bldg.

Tokyo CBDs

Acquisition dateJune 11, 2004

Outline of acquired property

fee simple

Acquisition price¥6,770 million

Acquisition structure

Real Estate

Location

2-18, Shiba 3-chome, Minato-ku, Tokyo

Site area

1,895.59m2

Floor area of building

11,661.69m2

Structure

Above ground 12 floors, below ground 2 floors

Completion

August 17, 1990

Hirokoji Toei Bldg.

Other Cities

Acquisition date

March 30, 2004

Outline of acquired property

fee simple

Acquisition price¥5,406 million

Acquisition structure

Real Estate

Location

3-6, Sakae 2-chome, Naka-ku, Nagoya, Aichi

Site area

1,252.46m2

Floor area of building

11,201.68m2

Structure

Above ground 9 floors, below ground 2 floors

Completion

October 25, 2000

9

New Acquisition

NBF acquired the following properties during the 6th period.

Daiya Ikebukuro Bldg.

Tokyo CBDs

Acquisition dateJune 30, 2004

Outline of acquired property

fee simple

Acquisition price¥4,695 million

Acquisition structure

Trust

Location

33-8, Higashi-Ikebukuro 1-chome, Toshima-ku, Tokyo

Site area

994.03m2

Floor area of building

7,981.88m2

Structure

Above ground 13 floors

Completion

April 8, 1993

Ikebukuro TG Homest Bldg.

Tokyo CBDs

Acquisition date

May 13, 2004

Outline of acquired property

fee simple

Acquisition price¥4,428 million

Acquisition structure

Trust

Location

17-8, Higashi-Ikebukuro 1-chome,Toshima-ku,Tokyo

Site area

857.54m2

Floor area of building

6,747.21m2

Structure

Above ground 9 floors, below ground 1 floor

Completion

February 26, 1993

Ebisu CS Bldg.

10

Tokyo CBDs

Acquisition date

May 14, 2004

Outline of acquired property

fee simple

Acquisition price¥1,000 million

Acquisition structure

Real Estate

Location

9-6, Ebisu-Minami 1-chome, Shibuya-ku, Tokyo

Site area

670.26m2

Floor area of building

2,128.52m2

Structure

Above ground 4 floors, below ground 1 floor

Completion

February 19, 1991

NBF Atsugi Bldg.

Other Greater Tokyo

Acquisition date

May 20, 2004

Outline of acquired property

fee simple

Acquisition price¥2,300 million

Acquisition structure

Real Estate

Location

8-13, Naka-machi 2-chome, Atsugi, Kanagawa

Site area

1,227.79m2

Floor area of building

6,717.71m2

Structure

Above ground 9 floors

Completion

June 10, 1991

Aqua Dojima East

Other Cities

Acquisition dateJune 30, 2004

Outline of acquired property

co-ownership of condominium interest

Acquisition price¥1,914 million

Acquisition structure

Trust

Location

4-4, Dojimahama 1-chome, Kita-ku, Osaka, Osaka

Site area

3,542.00m2 (*)

Floor area of building

24,726.19m2 (*)

Structure

Above ground 19 floors, below ground 2 floors

Completion

April 21, 1993
The figures given for “Site area” and “Floor area” above
indicate the total site area and total floor area of thisproperty. NBF owns about 23.65% of this property.

Tanimachi Kowa Bldg.

Other Cities

Acquisition dateJune 30, 2004

Outline of acquired property

fee simple

Acquisition price¥1,944 million

Acquisition structure

Trust

Location

2-12, Ote-dori 1-chome, Chuo-ku, Osaka, Osaka

Site area

847.65m2

Floor area of building

6,999.81m2

Structure

Above ground 9 floors, below ground 1 floor

Completion

April 12, 199311

Location of Office Properties

Tokyo CBDs

12

JFE Bldg.

Shiba NBF Tower

Shinjuku Mitsui Bldg. No.2

GSK Bldg.

Naka-Meguro GT Tower

Daiya Toranomon Bldg.

Shibuya Garden Front

Shiba A Bldg.

Daiya Ikebukuro Bldg.

Ikebukuro TG Homest Bldg.

Ebisu CS Bldg.

ALLIANCE

Joba
nE
xp
wy

Other Greater Tokyo
sen

IBARAKI

inkan

Tsukuba(temporaly)

Sh

Tsukuba Mitsui Bldg.

in
ka
en

uE
ok
-h
To

ns

wy
xp

S-ino Omiya North Wing

-

Omiya

5)
00

Sh

T
(O suk
pe ub
nn a
in Ex
g pr
pl e
an ss
fo
r2

su

Toho

ku

- et
Jo

TSUKUBA-SHI

SAITAMA-

Job

Nakano-Sakaue Sunbright Twin

an

Lin

e

Daido Life Omiya Bldg.
SAITAMA-SHI

su

et

n-

Ka
Ex

-

ikan

-

o Ga

pw

Toky

y

Expw

y

-

TOKYO
MUSASHINO-SHI

Yokohama ST Bldg.

Matsudo City Bldg.

-

MatsudoMATSUDO-SHI

CHIBA

Kitasenju

Nakano-Sakaue
Sunbright Twinwy
to Exphi-kan

Tokyo

Higas

Sapporo L-Plaza

Shibuya

pwy

- Ex
o
Chu
-

Akihabara

Shinjuku-

CHOFU-SHI

Inagekaigan

CHIBA-SHI

Inage Kaigan Bldg.*

Chiba

SAGAMIHARA-SHI

NBF Atsugi Bldg.

Tom

ei

Ex

pw

y

Shinagawa--Hirokoji Toei Bldg.

To kyo -Bay

KANAGAWA

Kawasaki

Toky owan
Aqua

KAWASAKI-SHI

YOKOHAMA-SHI
Yokohama(*) NBF sold on July 2004.
Line

Yokohama ST Bldg.
Hon-Atsugi

ATSUGI-SHI

JR LineExpress Way

Other Cities
NBF Atsugi Bldg.

Sun Mullion NBF Tower

Tanimachi Kowa Bldg.

Aqua Dojima East

13

Properties Roster
The outline of NBF’s properties as of June 30, 2004 is as follows:
Name of Building

Investment
Type

Type of Ownershipof the Buildings

Percentageof Ownership of the
Buildings

Year Built(%)

Acquisition
Price(Yen in millions)Tokyo CBDs
JFE Bldg.
Shiba NBF Tower
Shinjuku Mitsui Bldg. No.2
GSK Bldg.
Naka-Meguro GT Tower
Daiya Toranomon Bldg.
Kowa Nishi Shinbashi Bldg. B
Nippon Steel Bldg. No.2
Nihonbashi Muro-machi Center Bldg.
Shibuya Garden Front
Shiba A Bldg.
Takanawa 1-chome Bldg.
Sumitomo Densetsu Bldg.
Daiya Ikebukuro Bldg.
Ikebukuro TG Homest Bldg.
Sudacho Verde Bldg.
Shinjuku Yocho-machi Bldg.
Nishi-Shinjuku Mitsui Bldg.
Ebisu CS Bldg.

Trust
Trust
Trust
Trust
Ownership
Trust
Trust
Ownership
Trust
Ownership
Ownership
Trust
Trust
Trust
Trust
Ownership
Trust
Ownership
Ownership

fee simple
fee simple
fee simple
fee simple
condominium
fee simple
co-ownership of condominium
fee simple
condominium
co-ownershipfee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
condominium
fee simple

100.0
100.0
100.0
100.0
60.5
100.0
83.0
100.0
48.6
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
4.1
100.0

1974
1986
1983
1990
2002
1963
1994
1989
1986
2003
1990
1987
1991
1993
1993
1988
1989
1999
1991

¥74,131
32,00016,285
15,616
14,056
13,337
13,217
12,614
9,945
8,700
6,770
6,667
5,365
4,695
4,428
2,380
2,348
1,603
1,000

¥72,237
33,373
15,76814,813
13,89813,872
12,72012,620
9,902
8,757
6,862
6,401
5,214
4,865
4,502
2,446
1,981
1,662
1,050

Other Greater Tokyo
Nakano-Sakaue Sunbright Twin
Yokohama ST Bldg.
NBF Atsugi Bldg.
Tsukuba Mitsui Bldg.
Daido Life Omiya Bldg.
Matsudo City Bldg.
Inage Kaigan Bldg.

Trust
Trust
Ownership
Trust
Trust
Ownership
Trust

condominium
co-ownershipfee simple
fee simple
fee simple
fee simple
fee simple

31.6
75.0
100.0
100.0
100.0
100.0
100.0

1996
1987
1991
1990
1991
1992
1992

8,979
13,529
2,300
8,876
2,361
2,455
1,941

8,945
13,119
2,327
8,353
2,284
2,494
1,836

Other Cities
Sapporo L-Plaza
Sapporo Minami Nijo Bldg.
NBF Sendai Honcho Bldg.
Unix Bldg.
Niigata Telecom Bldg.
Hamamatsu City Bldg.
Hirokoji Toei Bldg.
Sun Mullion NBF Tower
Sakai Higashi Center Bldg.
Tanimachi Kowa Bldg.
Aqua Dojima East
Otemae Center Bldg.
Kyoumachibori Center Bldg.
Shijo Karasuma Minami Bldg.
NBF Hiroshima Tatemachi Bldg.
Hiroshima Fukuromachi Bldg.
Hakata Gion 21 Bldg.

Ownership
Trust
Trust
Trust
Trust
Trust
Ownership
Trust
Trust
Trust
Trust
Trust
Trust
Trust
Ownership
Ownership
Trust

condominium
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
co-ownership of condominium
fee simple
fee simple
fee simple
fee simple
co-ownership of condominium
fee simple

36.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
23.7
100.0
100.0
100.0
100.0
10.4
100.0

2003
1990
1987
1994
1989
1990
2000
1996
1991
1993
1993
1992
1987
1991
1991
2002
1993

3,195
1,870
3,566
4,029
3,958
1,377
5,406
10,500
2,227
1,944
1,914
1,826
749
1,627
2,930
835
2,629

3,302
1,772
3,434
3,678
3,799
1,288
5,594
10,120
2,129
1,946
1,979
1,755
847
1,500
3,074
836
2,507

336,180

331,861

Total

Note 1: Percentage of total revenue is the ratio of revenue from each office property to total revenues from all office properties.
Note 2: Consent for disclosure was not obtained from tenants from whom rent revenue accounts for more than 80% of total rent revenues for the property. However, relevant figures areincluded in the total.
Note 3: These buildings were acquired on June 30, 2004, but no profit or expense has accrued with respect thereto during the current period.
Note 4: Figures stated above are based on NBF’s ownership interest.

14

Book ValueAppraisal Value

Rentable
Square Meters

Leased Square
Meters at theEnd of Period

Occupancy
Rates at theEnd of Period(Yen in millions)

(m2)

(m2)

(%)

¥74,700
24,60016,40017,60014,10013,80013,50013,050
9,710
9,000
6,810
7,240
5,200
4,840
4,570
2,380
2,410
1,630
1,050

65,28024,728
14,94622,702
13,924
10,354
10,08817,338
8,041
8,258
7,087
10,473
5,978
5,801
5,127
2,971
5,155
1,576
1,595

65,28024,72814,74422,702
13,924
10,232
10,08817,338
8,041
8,258
7,087
10,273
5,978
5,521
5,127
2,962
5,155
1,576
1,595

100.0
100.0
98.7
100.0
100.0
98.8
100.0
100.0
100.0
100.0
100.0
98.1
100.0
95.2
100.0
99.7
100.0
100.0
100.0

1
28
34
1
1
11
2
2
9
1
3
4
1
10
9
7
5
1
5

¥2,175717
672(Note 2)
683
(Note 3)(Note 2)609
427
(Note 2)
(Note 2)316
(Note 2)
(Note 3)
50
118
122
67
15

17.5
5.8
5.4
(Note 2)
5.5
(Note 3)(Note 2)4.9
3.4
(Note 2)
(Note 2)2.5
(Note 2)
(Note 3)
0.4
0.9
1.0
0.5
0.1

9,500
13,800
2,330
8,850
2,240
2,600
2,050

12,07420,0895,254
16,863
3,604
4,772
5,878

12,074
19,495
4,815
15,093
3,368
4,246
5,878

100.0
97.0
91.6
89.5
93.4
89.0
100.0

1
79
17
58
9
23
15

(Note 2)
719
31
530
124
120
139

(Note 2)
5.8
0.2
4.3
1.0
1.0
1.1

3,280
1,850
3,830
4,860
4,330
1,210
5,440
9,510
2,360
2,030
2,010
1,990
654
1,560
2,780
856
2,410

8,461
5,376
7,567
13,47910,220
5,077
6,873
13,974
5,332
4,953
3,265
5,532
3,101
3,929
5,690
1,310
5,416

8,461
4,476
7,002
13,037
10,220
5,052
6,697
13,511
5,273
3,977
2,985
5,398
2,728
3,830
5,084
1,296
5,416

100.0
83.3
92.5
96.7
100.0
99.5
97.4
96.7
98.9
80.3
91.4
97.6
88.0
97.5
89.3
99.0
100.0

11
7
7
56
36
25
10
25
17
1
17
7
13
15
22
16
7

244
118
211
315
271
101
116
471
146
(Note 3)(Note 3)
133
51
100
144
42
149

2.0
0.9
1.7
2.5
2.2
0.8
0.9
3.8
1.2
(Note 3)(Note 3)
1.1
0.4
0.8
1.2
0.3
1.2

334,920

419,511410,02197.7

629

12,458100.0

Total Number ofTenants at theEnd of Period

Revenues

Percentage ofTotal Revenues(Note 1)

(Yen in millions)

(%)

15

Board of Directors

The number of executive directors of NBF is one or more, andthe number of supervisory directors is four or fewer (but always
equal to the number of executive directors, plus a minimum of
one additional supervisory director) (Articles of Incorporation).
At the end of the immediately preceding term the organizationof NBF consisted of, in addition to the general meeting of theshareholders, two executive directors and four supervisory
directors as well as a Board of Directors comprised of theexecutive directors and supervisory directors.
At the end of the immediately preceding term, members of theBoard of Directors of NBF were as set forth in the table below.

Name of executive directors andsupervisory directors

Title

Toshihiko Fukase

Executive Director

Koichi Nishiyama

Executive Director

Tadashi Niizawa

Supervisory Director

Certified Public Accountant, Certified Public Tax Accountant

Tomio Hirota

Supervisory Director

LawyerAkira Nishizawa

Supervisory Director

Real Estate Appraiser

Nobutoshi Kozuka

Supervisory Director

Certified Public Accountant, Certified Public Tax Accountant

Note: Koichi Nishiyama, Executive Director, is concurrently President & CEO of NBFM. No executive or supervisory director directly or indirectly holds any shares in NBF.
Further, while some supervisory directors are concurrently officers in other corporations, there exist no conflicts of interest between said corporations and NBF.

16

■Investment Policies of NBF
1.

Basic Investment Policies

A.

Basic Policies

NBF’s primary investment objective is to achieve sustainable growth in portfolio value and stable profits on a
mid-term to long-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 Tokyo Central Business Districts (hereinafter“CBDs”), Other Greater Tokyo and Other 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 “Real Estate etc.”）（“Investment Objects and Policies”, Articles of Incorporation）.
（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 the investment strategy of NBF set forth
below, invests and manages the assets of NBF. NBFM has established asset management guidelines based on
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 on a mid-term to long-term basis.
The selection criteria of investment assets is based on, the composition of investment assets in the portfolio andbased on consideration of a quantitative proportion of the office stock located in the various regions of Japan.
Area Diversification
The investment strategy of NBF divides the investment area into three areas consisting of Tokyo CBDs,
Other Greater Tokyo and Other Cities in such manner that 70% or more of total investment assets (Real Estateetc.) is allocated to Tokyo CBDs and Other Greater Tokyo and 30% or less to Other Cities. The purpose ofthis area diversification is to mitigate cash flow risks such as earthquakes, risk of vacancies and so forth.
The following table sets forth abovesaid area diversification strategy.

- 17 -

Area and Allocation Ratio

Tokyo CBDs
9 central wards in Tokyo :Chiyoda, Minato, Chuo, Shinjuku,
Shinagawa, Shibuya, Toshima, Bunkyo
and Meguro
Other Greater Tokyo
Other 14 wards in Tokyo and Neighboring
Cities (see Note 1 below) such asMusashino, 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.
Total of above area: 30% or lessArea Analysis■ Relatively high rent levels and low vacancy rates compared to
Other Cities; also, relatively large market scale (both leasing
and purchase/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 CBDsand Other Cities.

■ Rent levels relatively low and vacancy rates relatively highcompared to Tokyo CBDs.
■ Also, scale of market is relatively small and growth rates
relatively low.
■ Relatively high yearly NOI yields. Relatively low liquidity at
the time of sales.

Note 1 "Neighboring Cities" refers to the Metropolis of Tokyo excluding its 23 wards, and the 6 prefectures of
Kanagawa, Chiba, Saitama, Ibaraki, Gunma and Tochigi.
Note 2 Due to unforeseeable events such as, extreme fluctuations in macro-economic trends, financial trends, realestate market trends and so forth, it may not always be possible to operate in accordance with each of theabove criteria (“ Investment Objects and Policies”, Articles of Incorporation).

(2) Acquisition Strategy
Ratio of Real Estate Assets
NBF will maintain ratios of 75% or more with respect to both the “Designated Real Estate Ratio” and the“Real Estate etc. Ratio”(both defined in the Note below). As of September 28, 2004, NBF satisfied both of
the above criteria.
The “Designated Real Estate Ratio” means the ratio of the total amount of 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 83.4.3.1of the Special Taxation Measures Law of Japan).
The “Real Estate etc. Ratio” means, as provided for by Finance Ministry Ordinance, the ratio of the total
amount of real estate etc. (including real estate, real estate leasehold rights, superficies, beneficiary certificatesheld in trust (but limited to trust assets consisting of real estate, land leasehold rights and superficies) andtokumei-kumiai ownership interests (but limited to investments in operating real estate, real estate leasehold
rights and superficies designated in the agreement with such tokumei-kumiai )) to the total amount of assets. The- 18 -

Real Estate etc. Ratio is set forth in the “Investment Objects and Policies” of the Articles of Incorporation of
NBF; provided, however, that the relevant Finance Ministry Ordinance is no longer in force.

Due Diligence
When investing in office properties, selections will be made through comprehensive research and analysis
based on the forecast investment yields resulting from their acquisition costs and their anticipated profits,
future prospects and stability of the area of location, availability of measures responding to risks ofdeterioration and obsolescence, insurability and so forth. The details of the relevant criteria are set forth in thefollowing table (“Investment Objects and Policies”, Articles of Incorporation).
Though such consideration will involve the study of the criteria included in the following table, it ispossible that when NBF acquires or intends to acquire operating assets, not all of the following criteria will besatisfied.
Item

Scale of building

Construction type andspecifications of facilities
Earthquake resistance

Measures regarding status oflegal title

Tenancy characteristics
Environmental; condition ofland etc.

Points to be reviewed■ Net rentable area, including net rentable area of entire building andstandard net rentable area per floor. Desired total net rentable area is
1,650㎡(approximately 500 tsubo) or more. Standard net rentablearea per floor is 330㎡ (approximately 100 tsubo) or more.
■ Building design and floor plan suitable for leasing, with divisibility,
adequate ceiling height, electrical service, HVAC equipment etc.
■ Ensure that construction quality exceeds earthquake standards(meaning those required pursuant to the Building Standards Law asamended in 1981) or standards equivalent thereto.
■ In cases such as co-ownership, divided condominium ownership, abuilding erected on leased land etc. where NBF will not obtaincomplete ownership of a building, following matters are appropriately
treated.
・measures to protect security deposits, policies and measures regarding
cash reserves for long-term renovation plans;
・appropriate measures regarding demands for division of co-owned
interests or the sale of a co-owner’s interest etc;
■ Acceptable creditworthiness of tenants, purposes of use by tenants,
configuration, and condition of collectibility of rents etc.
■ Absence of harmful substances such as asbestos, (or countermeasures
can be implemented for any such substances), non-existence of soil
pollution etc.

- 19 -

Uncompleted or Unleasable Properties
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 the investment amount, the date of completion orof becoming leasable, estimated revenues and so forth; provided, however, that the contract amount of any such
unleasable asset combined with the total contract amount of previously acquired unleasable assets (butexcluding unleasable assets which thereafter become operational) will not exceed 10% of the total assets
indicated on the most recent balance sheet of NBF. For this purpose, “leased/leasable assets” shall mean
property with respect to which the construction of the building has been completed and such building is leasedor leasable. Properties which are owned by NBF and have become operational at some point shall be deemed“leasable ” thereafter (including such cases as reconstruction or large-scale renovation of a building).
Direct Acquisition of Real Estate
One objective is for the ratio of the amount of real estate directly acquired by NBF to the total amount of
Designated Assets acquired by NBF during each year to be 50% or more of Designated Real Estate. Thisobjective will be applicable during the period from April 1, 2002 until the existence of the measures to abate
the real estate acquisition tax (“Investment Objects and Policies”, Articles of Incorporation).However, thisrequirement was abolished effective December 31, 2003 pursuant to amendments of the tax law.

(3) Management and Disposition Policies
Regarding acquired operating properties, the goal is to obtain steady growth of operating profits on a
mid-term to long-term basis by planning to maintain and improve asset value and competitive ability throughinvestment in facilities and by expanding income (increasing rents etc., increasing occupancy rates, extending
the term of leases and rendering them more stable etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a mid-term to long-term basis, leaseout all operating properties included in operating assets (including installation of parking lots, billboards etc.).
When conducting such leasing, security deposits etc. and other similar monies may be received and saidmonies will be managed in accordance with the requirements of “Investment Objects and Policies” of the
Articles of Incorporation (“Investment Objects and Policies”, Articles of Incorporation).
NBF is entitled to establish reserves for long-term renovations required to maintain and enhance the valueof operating properties, reserves for payables, reserves for cash distributions and any other similar reserves etc.
(Articles of Incorporation).

- 20 -

Reserves for Long-Term Renovations
From the reserves set forth above, a portion corresponding to renovations, repairs and tenant
improvements will be determined based on renovation plans for each building. As of September 28, 2004,
foreseen reserves provided from January to December 2004 are as follows:
Item
ReasonReserves for long-term renovations ■ Average annual amount over an approximately 10-year period
based on engineering reports
Reserves for tenant improvements(reserves for future construction
expenses required for spaces leased
to tenants)■ Expenses of providing “free access floor”(or raised floor);
expenses for other move-in construction costs (partitions etc.)

Total Foreseen Amount: (annual basis)¥1,555 million(Note1) In addition to the above-mentioned amount, certain amounts are set aside as cash reserves for renovation pursuant tothe administrative rules of the buildings in which NBF owns condominium interests, etc.
(Note 2) The amount of reserves set forth above is the total amount of reserves with respect to the 33 properties owned by NBF
as of the end of December, 2003.

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
insurances etc., will be exerted.
Appraisal Value etc.
In the event that valuation of real estate, land leasehold rights and superficies (including beneficiary
certificates, securities and tokumei-kumiai ownership interests, and other asset-backed instruments) is
undertaken for the purpose of disclosure in Performance Information Reports etc., the value to be used fordisclosure will, in principle, be the appraisal valuation provided by a certified real estate appraiser (Articles ofIncorporation).
The appraisal value of property with respect to the period commencing on the acquisition thereof andending on the date of disclosure of such value 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 the said property.
Disposition
In disposing of individual operating properties, selections will be made through 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 undertaken withrespect to all operating properties (“Investment Objects and Policies”, Articles of Incorporation).

- 21 -

(4) Financial Policies
Issuance of Shares
NBF may issue shares in order to undertake acquisition and renovation and so forth of assets and toprovide allowance for funds required for working capital as well as for the repayment of debt (including
security deposits, borrowings and repayment of obligations regarding NBF bonds etc.)
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 of assets and to provide allowance for funds required for working
capital as well as for the repayment of debt (including security deposits, borrowings and repayment of
obligations regarding NBF bonds etc.) (“Investment Objects and Policies”, Articles of Incorporation).
Borrowings are limited to those from Qualified Institutional Investors as specified in Article 2.3.1 of the
Securities and Exchange Law of Japan, in case capital is borrowed. Further, the total limit on all suchborrowings and issues of NBF bonds will be ¥1,000,000 million. When undertaking borrowings or whenissuing NBF bonds, NBF may provide operating assets as collateral (Articles of Incorporation).
Loan to Value Ratio
The ratio of the total amount of borrowings and issues of NBF bonds to the total amount of assets of NBF(Loan-to-Value ratio) is envisioned to be limited to 60%, but may temporarily exceed 60% when acquiringcertain assets etc(Long and mid-term operating asset management policy and annual management planestablished by the Asset Management Company).
Derivatives
In order to avoid risks of fluctuation in the prices of operating assets as well as risks of fluctuations ininterest rates, futures transactions, option transactions, swap transactions and forward rate transactions withrespect to Japanese interest rates may be undertaken (“Investment Objects and Policies”, Articles ofIncorporation).

- 22 -

■ Distribution Policies of NBFA.

Distributions of Profits

A registered investment corporation may deduct its cash dividends of profits from taxable income underJapanese tax regulations if it distributes to its shareholders in excess of 90% of its taxable income and complies
with other organizational and operational requirements. NBF intends to make dividend distributions that
ensure that NBF satisfies those requirements.
NBF will, in principle, effect distributions in accordance with the followings policies (Articles ofIncorporation).
Earnings Available for Distributions
NBF’s earnings available for distributions is based on accounting of profits prepared in accordance with
the Investment Trust Law and the Securities and Exchange Law of Japan 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 theamount of total expenses, capital surplus reserves and estimated variances) calculated on each closing date inaccordance with the Investment Trust Law of Japan and corporate accounting principles generally deemed to
be fair and appropriate.
Cash Distribution of Profits
The amount of cash distributions will be determined by NBF, such amount being in excess of 90% of
taxable income available for dividends of NBF set forth in Article 67-15 of the Special Taxation Measures Law
of Japan (hereinafter "Taxable Income Available for Dividends"); provided, however, that the maximum
amount of distributions will be the Distributable Amount. NBF has the right to allow for long-term reserve
for repair, reserve for outstanding claims, reserve for distributions and other reserves and allowances similar
thereto which are deemed necessary for maintenance or appreciation of the assets of NBF.

B.

Distribution in Excess of Earnings

A registered investment corporation is allowed to distribute cash to its shareholders in excess of retained
earnings under the Investment Trust Law of Japan, although the Investment Trusts Association of Japan has
established rules such that a corporate-style J-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 make cash distributions of theamounts described below in excess of the Distributable Earnings in the following cases; provided, however,that the maximum amount of such distributions will be the amount set forth in the rules of the Investment
Trusts Association of Japan (Article 16.2 of the Articles of Incorporation).
Amount determined by NBF as being eligible for the requirements of the Special Taxation
Treatment for Investment Corporations, in case of the Distributable Earnings being less than the
Taxable Income Available for Dividends
Amount determined by NBF not in excess of the amount of depreciation for the current term lessthe 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- 23 -

NBF’s Current Policy on Distributions in Excess of Profits
As for cash distributions in excess of profits, as long as the current Japanese taxation treatment applicable
to NBF’s shareholders in Japan to whom such distributions are paid requires them to calculate capital gain orloss at the time of each distribution, NBF will not make distributions in excess of profits.
Notwithstanding the above, NBF may make distributions in excess of profits in accordance with the
distribution policies stated above in order to meet “Requirement for Deduction from taxable income of
Dividends of Profit, etc.”, and if such distributions in excess of profits are deemed necessary 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 suchshareholders or registered pledgees as are listed in the latest Shareholder Registry as of the closing date, in
proportion to the number of shares owned by them (Articles of Incorporation).

D.

Prescription for Cash Distributions etc.

NBF will be discharged from the obligation to pay distributions of profits three calendar years from thedate of commencing payment. Interest will not accrue on unpaid distributions (Articles of Incorporation).

■Investment Restrictions
NBF will invest neither in real estate located outside of Japan nor in assets denominated in non-Japanesecurrencies as specified in the Articles of Incorporation. Please see “ Ⅲ Appendix Investment Restrictions”
regarding other investment restrictions. Also, refer to " Basic Investment Policies (B) Investment Strategy"
hereinabove.

- 24 -

Ⅰ

Performance Information Report■ Overview of NBF
Financial Highlights
Distribution for the Current Period
Capitalization
Major Shareholders
Categories of Shareholders■ Capital Expenditures
Planning
Capital Expenditures for the Current Period
Cash Reserve for Capital Improvements■ Expenses regarding Entrustment etc.
■ Trading Activities during the Current Period
Trading of Real Estate and Real Estate held in Trust
Trading of Other Assets Including Total Amount and Transactions
Related Parties Transactions- 25 -

■ Overview of NBF
1. Financial Highlights
6th Period
from January 1,
2004 to June 30,
2004

5th Period
from July 1, 2003
to December 31,
2003

4th Period
from January 1,
2003 to June 30,
2003(Yen in millions, except per share data or where otherwise indicated)

Operating revenues
Revenues from property leasing
Operating expenses
Rental expenses
Income before income taxes
Net income(a)Total assets(b)
Total shareholders’ equity (‘Net assets’)(c)Contributed capital
Total amount of cash distribution(e)Total number of common shares issued (shares) (d)Net assets per share (Yen)(c) / (d)Distribution per share (Yen)(e) / (d)Distribution of accumulated earnings per share (Yen)Distribution in excess of accumulated earnings per share (Yen)
Return on total assets
Note 2
ROE

Note 2

Capital ratio
Payout ratio
Number of days
Other supplementary data:
Number of investment properties
Number of tenants
Total rentable square meters
Occupancy rate
Depreciation and amortization
Capital expenditures
NOI from property leasing activities
FFO per share (Yen)(c) / (b)(e) / (a)Note 4Note 4Note 4Note 2
Note 2¥12,554
12,458
7,392
6,775
4,263
4,262
366,200
153,161
148,899
4,262
280,700
545,641
15,185
15,185−1.25%（2.51%）
2.78%（5.57%）
41.8%
99.9%
182

¥12,453
12,453
7,464
6,891
4,094
4,093
314,362
152,992
148,999
4,093
280,700
545,038
14,582
14,582−1.32%（2.63%）
2.67%（5.35%）
48.7%
100.0%
184¥12,239
12,239
7,196
6,548
4,314
4,313
307,688
153,212
148,899
4,313
280,700
545,823
15,367
15,367−
1.44%（2.88%）
2.81%（5.63%）
49.8%
100.0%
181

43
629
419,511
97.7%
2,628
459
8,311
24,20333
511
358,940
92.3%
2,403
2,314
7,964
23,14129
446
340,497
94.8%
2,366
1,167
8,057
23,794Note 1 Operating revenues do not include consumption taxes.
Note 2 All valuations are calculated through the following formulas. The figures in parenthesis are annualized based on the 6 months figures for theperiod.
Return on total assets: Income before income taxes / (Initial total assets + Total assets at end of period)÷2
ROE: Net income / (Initial shareholders’ equity + Shareholders’ equity at end of period)÷2
NOI (Net Operating Income) from property leasing activities:(Revenue from property leasing−Rental expenses)＋Depreciation and Amortization
FFO (Funds From Operation) per share : (Net income (excluding Gain on sale of investment properties) + Depreciation and Amortization)/
Weighted average number of common shares issued and outstanding during the period.
Note 3Note 4

As for payout ratio, figures beyond the first decimal place have been disregarded.
Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number oftenants by building. Occupancy rate is ratio of gross leased area to total rentable area at the end of the period.

- 26 -

2. Distribution for the Current Period
Distribution per share for the current period was ¥15,185. NBF expects to distribute almost all
taxable income for the current period 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.

June 30,
2004

Retained earnings
Undistributed earnings
Total cash distribution(Total cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash Distribution in excess of accumulated earnings(per share)
Note

For the six months ended
December 31,
June 30,
2003
2003(Yen in thousands, except per share amount)¥ 4,262,515¥ 4,093,179¥ 4,313,553
86
12
36
4,262,430
4,093,167
4,313,517
15,185
14,582
15,367
4,262,430
4,093,167
4,313,517
15,185
14,582
15,367――――――

Above cash distributions were paid after the period end.

3. Capitalization
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 June30, 2004, NBF had issued 280,700 common shares out of 2,000,000 total authorized shares. NBF’scommon 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 of more than one class of shares, NBF’s common shares comprise the sole class ofshares authorized and issued by NBF.

Payment date

March 15, 2001
May 22, 2001
September 7, 2001

Remarks

Initial capital(private)
Privateplacement
Public offering

Common Shares
outstanding
Increase
Balance(shares)

Paid-in capital

Notes

Increase
Balance(Yen in millions)

200

200

¥ 100

¥ 100

Note 1

197,600

197,800

98,80098,900Note 282,900280,700

49,999148,899

Note 3Note 1

NBF was established with initial capital of ¥500,000 per share.

Note 2

Follow-on private offering at ¥500,000 per share to raise funds for acquisition of 22 properties.

Note 3Public offering of new units for ¥625,000 per share (excluding underwriting fee: ¥603,125) to repay debt andto fund property acquisition.

- 27 -

Market Price of shares
High/Low (closing price) of shares on the TSE:
For the six months ended

June30, 2004

December31,2003¥ 823,000
682,000(in Yen)¥696,000
631,000

High.
Low.

June30,2003¥ 694,000
570,000

Borrowings
Borrowings by financial institution as of June 30, 2004 are shown below.
Short-term debt
Average

Balance

Lender

The Chuo Mitsui Trust and Banking Co., Ltd.
The Bank of Tokyo- Mitsubishi, Ltd.
The Norinchukin Bank
Sumitomo Mitsui Banking Corporation
The Hachijuni Bank, Ltd.
Shinkin Central Bank
The Bank of Fukuoka, Ltd.
The Kagoshima Bank, Ltd.
The Chugoku Bank, Ltd.
The Gunma Bank, Ltd.
Mizuho Corporate Bank, Ltd.
The Shizuoka Bank, Ltd.
The Yamaguchi Bank, Ltd.
The Daishi Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.
Short-term debt Total

Due on(Yen in millions)¥16,500
15,400
9,500
8,150
2,000
2,000
2,000
2,000
1,000
1,000
1,000
1,000
1,000
1,000
500
¥ 64,050

0.5%
0.5%
0.5%
0.5%
0.4%
0.5%
0.5%
0.4%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.4%

July 20, 2004
July 20, 2004
July 20, 2004
July 20, 2004
September 30, 2004
July 20, 2004
July 30, 2004
July 20, 2004
August 31, 2004
February 2, 2005
November 4, 2004
July 30, 2004
July 30, 2004
July 20, 2004
September 30, 2004

¥ 12,000
5,000
5,000
3,000
10,000
9,000
1,000
5,000
3,000
4,000
1,000
2,000
8,000
6,000
2,000
4,000
3,000
2,000
2,000
1,000
2,000
2,000
1,000

1.7%
1.7%
2.1%
1.2%
1.3%
1.3%
1.2%
1.6%
2.1%
2.2%
2.2%
1.2%
1.1%
1.3%
1.7%
1.8%
0.7%
0.7%
0.7%
0.9%
0.8%
1.2%
1.5%

May 23, 2008
July 16, 2009
July 16, 2011
February 3, 2010
May 23, 2006
July 16, 2007
March 30, 2009
March 30, 2011
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
November 20, 2008
July 16, 2007
February 13, 2012
March, 30, 2012
August 9, 2005
September 30, 2005
March 31, 2006
September 29, 2006
February 13, 2008
March 12, 2007
June 30, 2009

Long-term debt
Sumitomo Life Insurance Company

The Chuo Mitsui Trust and Banking Co., Ltd.

Meiji Yasuda Life Insurance Company

The Norinchukin BankThe Sumitomo Trust and Banking Co, Ltd.
Mitsui Life Insurance Company, Ltd.
Nippon Life Insurance Company
The Dai-Ichi Mutual Life Insurance Company
Sumitomo Mitsui Banking Corporationinterestrate(%)(Note 1)

- 28 -

Repayment
MethodBulletpayment

Use ofFunds(Note 3)

Notes

Unsecured/unguaranteed/pari passu,
See (Note 4)
Floating rate

Bulletpayment(Note 3)

Unsecured/unguaranteed/pari passu,
See (Note 4)

Fixed rate

Long-term debt（continued)
Average

Balance

Lenderinterestrate(%)(Note 1)

(Yen in millions)
2,000
1,000
The Joyo Bank, Ltd.
1,000
1,000
The Iyo Bank, Ltd.
1,000
1,000
Taiyo Life Insurance Company
1,000
Zenkyoren (The National Mutual Insurance
1,000
Federation of Agricultural Cooperatives)
Long-term debt Total¥102,000
Borrowings Total¥166,050
Daido Life Insurance Company

Note 1.
Note 2.
Note 3.
Note 4.
Note 5.

Repayment
MethodDue on

1.2%
1.8%
0.9%
1.4%
0.7%
0.7%
1.2%

February 3, 2010
March 30, 2012
May 23, 2006
May 23, 2008
March 31, 2006
February 2, 2007
February 12, 2010

1.7%

June 1, 2011

Use of
Funds

Notes

Average interest rate is stated for each lender (average weighted by borrowing outstanding in case of more than one
loan from the same lender) by rounding down to the second decimal place.
With respect to the date of drawdown and date of repayment in case of more than one short-term loan from the samelender, the earliest date of repayment for all such loans coming due is given.
Use of funds for the above includes acquisition of real estate or beneficiary interests, repayment of borrowings andworking capital.
A special agreement attached to “Loan Agreement” entered into between the NBF and each financial institution
provides that the above borrowings from all financial institutions rank pari passu to each other.
The total amount of long-term borrowings (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.
(Unit：¥1000)
1 to 2 years
2 to 3 years
3 to 4 years
4 to 5 years
Amount Borrowed

19,000,000

4,000,000

30,000,000

10,000,000

NBF Bonds
Issue
No.2 Unsecured
Bonds
No.3 Unsecured
Bonds
Total
Note 1.
Note 2.
Note 3.

Issue
Date

Balance as of June 30,
2004(Yen in millions)Feb 10, 2003

¥ 10,000

June12, 2003

¥ 10,000Maturity
CouponDate
0.75
Feb 9, 2007％
2.00
June 12, 2018％

Redemption
BulletPayment
BulletPayment

Use ofProceeds

Note

Note 1

Note 2

Note 1

Note 2¥ 20,000

Use of funds includes acquisition of Real Estate etc., repayment of borrowings and working capital.
The bonds are limited to qualified institutional investors and rank pari passu with other debts issued.
The total amount of bonds repayable within 5 years of the date of the balance sheet and expected to be repaid byspecific year(s) is as follows.
(Unit: ¥1000)
within １ year
Amount Borrowed

1 to 2 years−

2 to 3 years−

3 to 4 years

10,000,000

Others
NBF has security deposits totaling ¥21,878 million as of June 30, 2004.

- 29 -

4 to 5 years−−

4. Major Shareholders
The following table sets forth our major shareholders’ information as of June 30, 2004.

Name
Mitsui Fudosan Co., Ltd. .............................
Japan Trustee Services Bank, Ltd. ..............
Obic Business Consultants Co., Ltd. ...........
The Nomura Securities Co., Ltd. ..............

Number ofCommonAddress
SharesOwned
16,2001-1 Nihonbashi Muro-machi, 2-chome Chuo-ku, Tokyo
8-11, Harumi 1-Chome, Chuo-ku, Tokyo
11,867
1-1 Nishi Shinjuku 2-chome, Shinjuku-ku, Tokyo
9-1 Nihonbashi 1-chome, Chuo-ku, Tokyo

Sumitomo Life Insurance Company. ...........
The Chugoku Bank, Ltd. .............................
State Street Bank and Trust Company .........

15-20 Marunouchi 1-chome, Okayama,Okayama(Standing Proxy: Kabuto-cho Custody Operation(6-7 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)

18-24 Tsukiji 7-chome, Chuo-ku, Tokyo
P.O.Box 351 Boston Massachusetts 02101 U.S.A

Ownership
5.8%
4.2

10,66910,1873.8
3.6

10,000
8,385
6,945

3.6
3.0
2.4

6,842

2.4

Room, Mizuho Corporate Bank, Limited)

Trust & Custody Services Bank, Ltd. ..........

Harumi Island Triton Square Office Tower Z,
8-12, Harumi 1-Chome, Chuo-ku, Tokyo

Meiji Yasuda Life Insurance Company .......

9-1 Nishi Shinjuku 1-chome, Shinjuku-ku, Tokyo

6,712

2.3

Aozora Bank, Ltd. .......................................
Total

3-1 Kudan-Minami 1-chome, Chiyoda-ku, Tokyo

6,177
93,9842.2
33.5%

5. Categories of Shareholders（As of June 30, 2004）

Number ofshareholders
Financial institutions
Other legal entities
Overseas investors
Individuals and others
Securities companies
Japanese government and regional authorities
Total
Note

Number ofshares owned

154
335
170
11,342
10
12,011

Japan Securities Depositary Center (JASDEC) is included in “Other legal entities”.

- 30 -

154,170
47,52732,38533,701
12,917
280,700

Percent of
total number ofissued shares
54.9%
16.9
11.6
12.0
4.6
100.0%

■ Capital Expenditures
1. Planning
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 ofrenewal construction is being implemented in order to increase competitive power in the market aswell as to increase the level of tenant satisfaction based on the results of tenant satisfaction surveys andneighboring competitive building specification surveys etc.
Estimated Amounts
Payment for theName of Property

Objective

Estimated
Duration

Total
Amounts

Current Period

Cumulative(from January 1,

Amount2004 to June 30,

Paid

2004)

(Yen in millions)Shinjuku Mitsui Bldg.
No.2
Shiba NBF Tower

Niigata Telecom Bldg.

Renovation ofCentral Monitoring
Facility
Renovation ofElevator Platform
etc.
Renovation ofCentral Monitoring
SystemFrom January 2005
To June 2005

¥ 80

From January 2005
To June 2005

50

From June 2005
To June 2005

41

¥ −

¥ −

−

−

−

−

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥ 459
million in capital expenditures together with ¥ 318 million for repairs and maintenance expenses.
Name of Property

Objective

Daido Life Omiya Bldg.

New Construction of Parking System etc.

NBF Sendai Honcho Bldg.

Improvement of Parking Machine,
Engineering Work on Air Conditioning,
Complete Renovation of Boiler Rooms etc.

Other buildings

Renovations intended to improve the levelof tenant satisfaction

Total

PeriodExpenditure(Yen in millions)
31
35

From January 2004
To June 2004
393
¥ 459

- 31 -

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 and repairs and maintenance that will be conducted in accordance with NBF’s
business plan for each property.
As ofJune 30, 2004

Reserve balance at the beginning of the period. . . . . . . .
Amount accumulated in current period . . . . . . . . . . . . .
Withdrawal from reserves in the current period . . . . . .
Amount carried forward . . . . . . . . . . . . . . . . . . . . . . . .

As ofDecember 31,2003(Yen in millions)¥ 2,149¥ 2,114
2,771
1,104
3,274
1,069
¥ 1,647¥ 2,149

Note 1 Upon the acquisition of Real Estate etc., NBF also assumed accumulated reserves of ¥ 858 million
as of June 30, 2004 for capital expenditures from previous owners, which were not included in theabove accumulated amounts.
Note 2 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.

■

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

Asset management fees . . . . . . .
Asset custody fees . . . . . . . . . . .
Agent fees (stock transfer,accounting and administrative)
Directors' remuneration . . . . . . .
Auditor’s fees . . . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . .
Total

June 30, 2004

December 31, 2003
(Yen in millions)

June 30, 2003

¥ 443
14
45

¥ 438
14
38

¥ 501
13
47

11
12
92
¥ 617

11
12
60
¥ 573

11
12
64
¥ 648

Note: In addition to the amounts stated above, there are asset management fees of ¥ 242 million for theperiod from January 1, 2004 to June 30, 2004, ¥ 48 million for the period from July 1, 2003 to
December 31, 2003 and ¥ 68 million for the period from January 1, 2003 to June 30, 2003 related
to investment in properties which were booked on each property.

- 32 -

■Trading Activities during the Current Period
1. Trading of Real Estate and Real Estate held in Trust(Yen in millions)
Acquired
Acquisition
Price
Date
(Note 1)−−Name of Building
Shinjuku Yocho-machi
Bldg.（portion of site）
Shibuya Garden Front
Sapporo L-Plaza（adjoining site）

Hirokoji Toei Bldg.
Ikebukuro TG Homest Bldg.

Ebisu CS Bldg.
NBF Atsugi Bldg.
Shiba A Bldg.
Daiya Toranomon Bldg.
Daiya Ikebukuro Bldg.
Tanimachi Kowa Bldg.
Aqua Dojima East
Total

8,700
−
5,406
4,428
1,000
2,300
6,770
13,337
4,695
1,944
1,914
¥ 50,494

February 2, 2004

March 5, 2004
March 30, 2004
May 13, 2004
May 14, 2004
May 20, 2004
June 11, 2004
June 30, 2004
June 30, 2004
June 30, 2004
June 30, 2004

Transferred

Date
January 22,
2004
−
−
−
−
−
−
−
−
−
−
−
−

Transfer
Price
344

Book
Value
261

Capital
Gain/
Loss
96

−
−
−
−
−
−
−
−
−
−
−
344

−
−
−
−
−
−
−
−
−
−
−
261

−
−
−
−
−
−
−
−
−
−
−
96

Note 1“Acquisition price” does not include national consumption tax, regional consumption tax and miscellaneous costs

Note 2

The figure given for “Capital Gain/Loss” for the ShinjukuYocho-machi Bldg.(portion of site) reflects, in additionof acquisition.
to the foregoing, compensation and other sales expenses associated with the expropriation of land. A breakdownof the Capital Gain is as follows:
Revenue from sale of Real Estate etc.

364 million Yen

Cost of Real Estate etc.

261 million Yen

Other sales expenses

7 million Yen

Gain on sale of Real Estate etc

96 million Yen

2. 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 bankdeposits or bank deposits included in assets held in trust.

3. Related Parties Transactions
1. Ongoing Transactions

Category

Amount of Purchase Price etc. (Note 2) (Note 3)
Purchase Price etc. (Yen in millions)

Sale Price etc. (Yen in millions)

50,494
Total AmountAmount of purchases from related parties

344
Amount of sales to related parties

5,780 (11.4)

−

( − )

Mitsui Fudosan Co., Ltd.

5,780 (100.0)

−

( − )

Total:

5,780 (100.0)

−

( − )

Breakdown of transactions with related parties etc.

- 33 -

2. Fees Paid for the period from January 1, 2004 to June 30, 2004
Description of Transactions with Related Parties

Total Fees Paid(A)
Category
Brokerage commissions(Yen in millions)875

Office management fees etc.

587

Property transfer fees
Property maintenance fees

27
1,001

Leasing related service fees48

Amount ofPayment (B)Paid to(Yen in millions)
Mitsui Fudosan Co., Ltd.
731
Mitsui Fudosan Investment Advisors, Inc.
14
Mitsui Fudosan Co., Ltd.
581
NBF Office Management Co., Ltd.
6
Mitsui Fudosan Co., Ltd.
27
Daiichi Seibi Co., Ltd.
183
Mitsui Fudosan Co., Ltd.
86
Izumitec Co., Ltd.
84
Mitsui Fudosan Building Management
38
Co., Ltd
Mitsui Fudosan Housing Lease Co., Ltd.
2NBF Office Management Co., Ltd.
1NBF Office Management Co., Ltd.
14
Mitsui Fudosan Co., Ltd.
12
Chugoku Mitsui Real Estate Sales Co.,
1
Ltd.

B/A
83.5%
1.6%
99.0%
1.0%
100.0%
18.3%
8.6%
8.4%
3.8%
0.2%
0.1%
28.9%
25.1%
1.5%

Note 1 “Related parties” mean parties defined in Article 20 of the government ordinance regarding the Investment Trust
Law of Japan, principally, parties related to an asset management company.
Note 2 Figures set forth above are purchase prices taken from sale and purchase agreements and do not include ¥ 28

million paid to Mitsui Fudosan Co., Ltd. in settlement of fixed assets taxes etc.
Note 3 Figures in parentheses indicate percentages of total prices.
Note 4 NBF leases the Naka-Meguro GT Tower and the Nishi-Shinjuku Mitsui Building to Mitsui Fudosan Co., Ltd.,
which sub-leases them to sub-lessees. Accordingly, NBF does not entrust the office management business for those
properties to Mitsui Fudosan. Instead, NBF Office Management Co., Ltd. has been entrusted to undertake suchbusiness on behalf of NBF, the owner and lessor of those properties.
Note 5 In addition to the above fees, a certain portion of the fees paid by NBF to a third party (a company supervising
investment company shares) for handling payments of principal and interest concerning No.2 and No.3 NBF Bonds
was paid by the said company to Daiwa Securities SMBC Co., Ltd.
Note 6

In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)

Daiichi Seibi Co., Ltd¥ 107

Izumitec Co., Ltd.

66

Mitsui Fudosan Building Management Co., Ltd.

32

Mitsui Fudosan Co., Ltd.

11

Mitsui Fudosan Housing Lease Co., Ltd.

7

Mitsui Designtech Co., Ltd.

3

- 34 -

Ⅱ

Financial Statements
Independent Auditors’ Report
Balance Sheets
Statements of Income
Statements of Shareholders’ Equity
Statements of Cash Flows
Notes to Financial Statements- 35 -

NIPPON BUILDING FUND INC.
BALANCE SHEETSAs of June 30, 2004 and December 31, 2003

As of
As of
December 31,
June 30,
2003
2004(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents
Tenant receivables
Consumption tax refund receivables and other current assets
Total current assets
Investment properties:
Land including trust accounts
Building and improvements including trust accounts
Other tangible assets
Less: accumulated depreciation
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans
Long-term debt due within one year
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term debt
Tenant security deposits
Other liabilities
Total Liabilities
Shareholders’ Equity
Common shares, non-par value
Shares Authorized: 2,000,000 shares
Shares Issued and Outstanding: 280,700 shares
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity

¥

¥

¥

¥

32,160242
700
33,10230,418136
199
30,753

205,600
120,737
2,181(13,543)
16,840331,815
1,283
366,200

170,904
103,756
1,777(10,920)
16,816282,333
1,276¥ 314,362

64,050
1,582
2,611
881
69,124122,000
21,87837
213,039¥

33,150
8,000
4,059
1,830
569
47,60895,00018,73032
161,370

148,899

148,899

4,262
153,161
366,200

4,093
152,992¥ 314,362

The accompanying notes to financial statements are an integral part of these balance sheets.

- 37 -¥

NIPPON BUILDING FUND INC.
STATEMENTS OF INCOME
For the six months ended June 30, 2004, December 31, 2003 and June 30, 2003

For the six months ended
June 30, 2004

December 31, 2003

June 30, 2003

(Yen in millions)

Revenues:
RentalOther revenues related to property leaseing
Gain on sale of investment properties
Total Revenues
Operating Expenses:
Property management fees
Real estate taxes
Insurance
Repairs and maintenance
Other rental expenses
Depreciation and amortization
Asset management fees
Other expenses
Total Operating Expenses
Operating Income
Interest income
Interest expense
Amortization of deferred bond issue costs
Other expenses, net
Income Before Income Taxes
Current and deferred income taxes
Net Income¥¥

11,265
1,193
96
12,554
1,623
1,193
48
318
965
2,628
443
174
7,392
5,162
1
(871)
(21)
(8)
4,263
(1)
4,262

The accompanying notes to financial statements are an integral part of these statements.

- 38 -¥

10,476
1,977
12,453

¥

1,632
1,097
46
648
1,065
2,403
438
135
7,464
4,989
1
(782)
(27)
(87)
4,094
(1)
4,093

¥

¥

11,111
1,128
12,239
1,684
1,093
47
408
950
2,366
501
147
7,196
5,043
1
(679)
(27)
(24)
4,314
(1)
4,313

NIPPON BUILDING FUND INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
For the six months ended June 30, 2004, December 31, 2003 and June 30, 2003

(Yen in millions)
Number ofCommonSharesCommonSharesRetained
Earnings

280,700¥148,899¥4,562¥153,461

Cash Dividends declared--(4,562)(4,562)

Net income ........................................................................

-

-

4,313

4,313

Balance as of June 30, 2003 ............................................

280,700

148,899

4,313

153,212

Cash Dividends declared--(4,313)(4,313)

Net income ........................................................................

-

-

4,093

4,093

Balance as of December 31, 2003 ...................................

280,700

148,899

4,093

152,992

Cash Dividends declared--(4,093)(4,093)

Net income ........................................................................

-

-

4,262

4,262

Balance as of June 30, 2004 ............................................

280,700¥148,899¥4,262¥153,161

Balance as of December 31, 2002 ...................................

The accompanying notes to financial statements are an integral part of these statements.

- 39 -Total

NIPPON BUILDING FUND INC.
STATEMENTS OF CASH FLOWSFor the six months ended June 30, 2004, December 31, 2003 and June 30, 2003

For the six months ended
June 30, 2004

December 31, 2003

June 30, 2003

(Yen in millions)
Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Amortization of deferred bond issue costs
Interest expense(Increase) Decrease in tenant receivables(Decrease) Increase in accounts payable
Increase in rents received in advance
Decrease in investment properties in trust accounts
due to sale
Cash payments of interest expense
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
Refunds from security deposits paid to lessors
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 short-term loans
Repayment of short-term loans
Proceeds from long-term debt
Payments for redemption of bonds
Payments for deferred bond issue costs
Payment of dividends
Net Cash Provided by Financing Activities
Net Change in Cash and Cash Equivalents
Cash and cash equivalents at the beginning of the period
Cash and Cash Equivalents at the end of the period

¥

4,263
2,628
21
871
(106)
(2,477)781¥ 4,094
2,403
27
782
24
2,252
10

¥ 4,314
2,366
27
679
(55)
85
73

261
(790)
(271)
5,181

(769)
195
9,018

(618)
(105)
6,766

(52,337)
4,768(1,619)
19
(11)
(70)
(49,250)(12,249)
2,621(5,259)25(6)(68)(14,936)(17,472)
2,914(4,397)
21
(10)
(42)
(18,986)

214,450(183,550)
27,000(8,000)(4,089)45,811
1,742
30,418¥ 32,160

48,700(42,500)
1,000(4,312)
2,888(3,030)33,448¥ 30,418

125,150(136,650)
30,000(126)(4,560)13,814
1,594
31,854¥ 33,448

The accompanying notes to financial statements are an integral part of these statements.

- 40 -NOTES TO FINANCIAL STATEMENTS
Nippon Building Fund Inc.
June 30, 2004, December 31, 2003 and June 30, 2003

Note 1 –Organization and Basis of Presentation
Organization
Nippon Building Fund Inc. (formerly: "Office Building Fund of Japan, Inc." The current name wasadopted on March 14, 2003, hereinafter "NBF") was formed on March 16, 2001 as an investment
corporation under the Investment Trust Law of Japan with Mitsui Fudosan Co., Ltd., The Chuo Mitsui Trustand Banking Co., Ltd., and Nippon Building Fund Management Ltd. (formerly: "Office Building FundManagement Japan Limited", 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 offeringof common shares. Those common shares are listed on the J-REIT section of the Tokyo Stock Exchange.
As of June 30, 2004, NBF had ownership or beneficiary interests in 43 office properties containing
approximately 419,511 rentable square meters of office space. As of June 30, 2004, NBF had leased officespace to 629 tenants engaged in a variety of businesses. The occupancy rate for the office properties wasapproximately 97.7%.

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 Securities and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English (with some
expanded descriptions and the inclusion of statements of shareholders' equity) 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 Securities and Exchange Law. Some supplementary information
included in the statutory Japanese language financial statements, but not required for fair presentation, is notpresented in the accompanying financial statements. NBF does not prepare consolidated financial statements,
as NBF has no subsidiaries.

- 41 -

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 andcash equivalents.

Investment Properties
Investments properties are recorded at cost, which included the allocated purchase price and related costs
and expenses for acquisition of the office properties and the beneficiary interests of properties in trust.
Property and equipment balances are depreciated using the straight-line method over estimated useful lives.
Estimated useful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and improvements
2-50 years
Structures
2-52 years
Machinery and equipment
2-17 years
Tools, furniture and fixtures
2-16 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 aproperty, are expensed as incurred.
In the period ended June 30, 2004, NBF did not adopt early the new accounting standard for impairmentof fixed assets (“Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed
Assets” issued by the Business Accounting Deliberation Council on August 9, 2002) and the implementation
guidance for the accounting standard for impairment of fixed assets (the Financial Accounting Standard
Implementation Guidance No. 6 issued by the Accounting Standards Board of Japan on October 31, 2003).
The new accounting standard is required to be adopted in periods beginning on or after April 1, 2005, but thestandard does not prohibit earlier adoption.

Deferred Bond Issue Costs
Deferred bond issue costs are amortized using the straight-line method over three years.

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. NBF is allocated the portion of thereal estate taxes related to the period following the purchase date of each property through the end of theyear and the equivalent amounts of those allocated portions are capitalized as part of the acquisition costs of
the relative properties. Capitalized real estate taxes amounted to ¥208 million for the period ended June 30,
2004 and ¥19 million for the period ended December 31, 2003 and ¥96 million for the period ended June 30,
2003, respectively.

- 42 -

Revenue Recognition
NBF operates office properties that are rented to tenants on lease terms of generally two years, withmonthly payments due in advance. Rental and other property income is recorded when due from tenants andis recognized monthly as it is earned. Common area charges provided for in tenant leases are recognized asincome 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
sheet and income statement accounts.

Note 3 – Schedule of tangible assets of investment properties
Other tangible assets as of June 30, 2004 and December 31, 2003 consisted of the following:
As of June 30, 2004
As of December 31, 2003
(Yen in millions)¥ 34,150
171,450
205,600
31,37889,359120,737

Accumu-latedBook Value
Depreci-ation¥¥ 34,150
171,450
205,600(1,308)30,070(11,701)
77,658(13,009)107,728

449
277
44
452
648
307
4
2,181
¥328,518

(55)
(17)
(5)
(134)
(187)
(136)
(534)
¥(13,543)

Acquisi
-tion
Costs
Land
Land in trust
Land including trust total
Buildings and improvements
Buildings and improvements in trust
Building and improvements
including trust
Structures
Machinery and equipment
Tools, furniture and fixtures
Construction in process
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust

Construction in process in trust
Other tangible assets total

Total- 43 -

394
260
39
318
461
171
4
1,647
¥314,975¥ 19,224
151,680
170,904
21,785
81,971
103,756

Accumu-latedDepreci-ation¥(789)(9,706)(10,495)

350
150
16
7
422
565
267
1,777
¥276,437

(34)
(7)
(2)
(111)
(155)
(116)
(425)
¥(10,920)

Acquisi-tion Costs

Book Value¥ 19,224
151,680
170,904
20,996
72,26593,261
316
143
14
7
311
410
151
1,352
¥265,517

Note 4 – Shareholders’ Equity
NBF issues only non-par value shares in accordance with the Investment Trust Law of Japan and all of theissue price of new shares is designated as stated capital. NBF maintains at least ¥50 million as the minimum net
assets as required by the Investment Trust Law of Japan.

Note 5 – Short-Term Loans and Long-Term Debt
Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annualinterest rates on short-term loans outstanding are floating rates and at June 30, 2004 and December 31, 2003
ranging from 0.41% to 0.52% and from 0.48% to 0.52%, respectively. Long-term debt is fixed rates and as ofJune 30, 2004 and December 31, 2003 consisted of the following:(Yen in millions)
As of
As of
June 30,
December 31,
2004
2003
Unsecured loans due 2005 to 2012 principally from banks andinsurance companies with interest rates mainly ranging from¥ 102,000¥ 75,000
0.7% to 2.2% .................................................................................
0.68% unsecured bonds due 2004 .....................................................
8,000
0.75% unsecured bonds due 2007 .....................................................
10,00010,0002.00% unsecured bonds due 2018 .....................................................
10,00010,000122,000
103,000
Less: amount due within one year
8,000
¥ 122,000¥ 95,000
The annual maturities of long-term debt as of June 30, 2004 were as follows:(Yen in millions)2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,000
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,0002007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,0002008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,0002009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
44,000During the period ended June 30, 2004, NBF obtained committed credit lines of ¥30 billion with certain
financial institutions to reduce refinancing risk. The unused amount of such committed credit lines was ¥30
billion at June 30, 2004.

- 44 -

Note 6 –Rental Revenues and Expenses
Rental revenues and expenses for the periods ended June 30, 2004, December 31, 2003 and June 30, 2003
were as follows:
For the six months ended
June 30, 2004

December 31, 2003

June 30, 2003

(Yen in millions)

Revenues from Property Leasing :Rental:Rental revenues .........................................................
Common area charges ...............................................
Others ........................................................................
Subtotal ..................................................................
Other revenues related to property leaseing:
Parking lots .......................................................
Facility charge ...........................................................
Incidental income ......................................................
Cancellation fees .......................................................
Miscellaneous income ...............................................
Subtotal ................................................................
Total revenues from property leasing ............................
Rental Expenses:
Property management fee ..........................................
Real estate taxes ........................................................
Repairs and maintenance ...........................................
Insurance ....................................................................
Other rental expenses .................................................
Depreciation and amortization ...................................
Total rental expenses .....................................................
Operating Income from Property Leasing Activities :- 45 -¥ 9,953
1,243
69
11,265¥ 9,154
1,254
68
10,476¥ 9,598
1,448
65
11,111

298
63
708
116
8
1,193
12,458

284
60
684
938
11
1,977
12,453

281
61
555
213
18
1,128
12,239

1,623
1,193
318
48
965
2,628
6,775
¥ 5,683

1,632
1,097
648
46
1,065
2,403
6,891
¥ 5,562

1,684
1,093
408
47
950
2,366
6,548
¥ 5,691

Note 7 – Breakdown of Gain on sale of investment properties
On January 22, 2004, NBF sold a portion of the site of Shinjuku Yocho-machi Bldg. in connection with the
expropriation of the relevant land.

Revenue from sale of investment properties .................................
Cost of investment properties ........................................................
Other sales expenses ......................................................................
Gain on sale of investment properties ...........................................

(Yen in millions)
¥364
261
7
¥ 96

Note 8 –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 0.01% for the periods ended June 30, 2004, 0.02% for the periods ended December 31,
2003 and June 30, 2003, respectively. The following table summarizes the significant differences between thestatutory tax rates and NBF's effective tax rates for financial statement purposes.
For the six months ended

Statutory effective tax rate ......................
Deductible dividends paid ........................
Special deduction for expropriation etc....
Others .......................................................
Effective tax rate.......................................

June 30, 2004

December 31, 2003

39.39 %
(38.93)%(0.46)
0.01
0.01 %

39.39 %
(39.38)%0.01
0.02 %

June 30, 2003

39.39 %
(39.38)%0.01
0.02 %

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 taxable income for the period and otherrequirements are met, an investment corporation is allowed to deduct its dividends from taxable income underJapanese tax regulations.

- 46 -

Note 9– Per Share Information
Information about earnings per share for the periods ended June 30, 2004, December 31, 2003 and June 30,
2003 and net assets per share as of June 30, 2004 and December 31, 2003 was as follows.
The computation of earnings per share and net assets per share is based on the weighted average number ofcommon shares outstanding during the period.
For the six months ended
June 30, 2004

December 31, 2003

June 30, 2003

（Yen）

Earnings per Share of Common Shares:
Net income:Weighted average number ofcommon shares outstanding:¥ 15,185¥ 14,582¥ 15,367

280,700

280,700

280,700

As ofJune 30, 2004

Net Assets Per Share ....................................

¥ 545,641

As ofDecember 31, 2003

¥ 545,038

Note 10–Leases
NBF leases its investment properties to outside parties under non-cancelable operating leases. As of June 30,
2004 and December 31, 2003, the future lease revenues under the non-cancelable operating leases are as
follows:
As ofJune 30, 2004

As of
December 31, 2003

(Yen in millions)¥ 10,446¥ 7,940
21,421
17,609¥ 31,867¥ 25,549

Due within one year .......................................
Due after one year .........................................
Total ...........................................................

- 47 -

Note 11– Significant Subsequent Events
Cash Distribution
As of August 18, 2004, the Board of Directors of NBF declared to effect payment of a cash distribution of¥15,185 per share aggregating ¥ 4,262 million to shareholders of record on June 30, 2004.

Issues of New Shares
On June 18, 2004 and again on July 5, 2004 the Board of Directors of NBF resolved to issue new shares asfollows and having received full payment on July 13, 2004 and August 10, 2004 said shares were issued inaccordance with the following conditions.
As the result, the total amount of capital became ¥210,679 million and the number of shares issued became
364,700.
A. Issuance of New Shares through Public Offering(i) Offering Method(ii)

Number of shares issued：

Public Offering：

80,000 shares(iii) Issue Price(Offering Price）： 759,500 Yen per share(iv) Total Offering Price：(v)： 735,475 Yen per share

Proceeds per share

60,760 million Yen(vi) Aggregate Proceeds：

58,838 million Yen(vii) Payment Date：

July 13, 2004

(viii) Initial date subject to distribution：

July 1, 2004

B. Issue of New Shares through Allocation to a Third Party(i) Offering Method：

Allocation to a Third Party：

4,000 shares(iii) Proceeds per share：

735,475 Yen per share(iv) Aggregate Proceeds：

2,942 million Yen(v)：

August 10, 2004(vi) Initial date subject to distribution：

July 1, 2004(vii) Allottee：

Nomura Securities Co., Ltd.

(viii) Number of Allocated Shares：

4,000shares(ii)

Number of shares issued

Payment Date

Use of Procured Proceeds
The proceeds procured through the current public offering and allocation to a third party was applied to
repayment of loans etc. procured by NBF for acquisition of real estate etc.

Issuance of Unsecured Bonds
At the board meeting held on September 8, 2004, it was resolved that NBF issue unsecured bonds in theamount of ¥10,000 million with coupon of 1.04% due 2009 and unsecured bonds in the amount of ¥10,000
million with coupon of 1.60% due 2011. Receipt of the proceeds of such issue was completed on September
22, 2004. NBF intends to use such proceeds to acquire designated assets.

- 48 -

Ⅲ■

Appendix

Investment Objects

The Investment Objects of NBF specified in the Articles of Incorporation are as follows.

A.

Principal Investment Objects among Designated Assets

NBF will principally invest in the below-listed Designated Assets with the objective of assuring steady
growth and stable profits from the Managed Assets.
(1) Real estate, real estate leasehold interests and superficies.
(2) Beneficiary Certificates backed by real estate, land leasehold rights and superficies, including
inclusive trusts consisting of funds appurtenant to real estate.
(3) Tokumei-kumiai ownership interests (provided, however, that this is limited to those the assets ofwhich are primarily invested and Managed Assets principally referred to in paragraphs (1) and (2)above).
(4) Preferred Investment Certificates of Special Purpose Companies (meaning those specified in
Article 2.1.5.3 of the Securities and Exchange Law of Japan; provided, however, that this islimited to those the assets of which are primarily invested and Managed Assets principallyreferred to in paragraphs (1) and (2) above).
(5) Special Purpose Beneficiary Certificates (meaning those specified in Article 2.1.7.4 of the
Securities and Exchange Law of Japan; provided, however, that this is limited to those the assetsof which are primarily invested and Managed Assets principally referred to in paragraphs (1) and(2) above).
(6) Beneficiary Certificates of investment trusts (meaning those specified in Article 2.1.7 of the
Securities and Exchange Law of Japan; provided, however, that this is limited to those the assetsof which are primarily invested and Managed Assets principally referred to in paragraphs (1) and(2) above).
(7) Investment Securities (meaning those specified in Article 2.1.7.2 of the Securities and Exchange
Law of Japan; provided, however, that this is limited to those the assets of which are primarily
invested and Managed Assets principally referred to in paragraphs (1) and (2) above).
(8) Beneficiary Certificates of Money Trust (limited to those the trust assets of which are primarily
invested and Managed Assets referred to in paragraph (1) above).

- 49 -

B.

Other Investment Objects among Designated Assets
NBF may, for the purpose of efficiently managing surplus funds, invest in the following Designated Assets.
(1) Bank deposits.
(2) Call loans.
(3) Japanese Government Bonds, Notes and Bills(4) Regional Treasury Bonds, Notes and Bills(5) Commercial Paper(6) Designated Bonds of Special Purpose Companies (meaning those specified in Article 2.1.3.2 of
the Securities and Exchange Law of Japan; provided, however, that this is limited to asset-backed
securities principally referred to in paragraphs (1) and (2) of section (a) above).
(7) Monetary Claims (excluding those subject to the provisions of Paragraphs 1, 12 and 14 of Article
3 of the government ordinance regarding the Investment Trust Law of Japan).
(8) Beneficiary Certificates of Money Trust invested and managed for the purpose of any of theforegoing items.

Moreover, in order to avoid risks of fluctuation in the prices of the Managed Assets as well as risks offluctuations in interest rates, futures transactions, option transactions, swap transactions and forward ratetransactions with respect to Japanese interest rates may be undertaken.

C.

Assets other than Designated Assets

NBF may, for the purpose of efficiently managing surplus funds, invest in Certificates of Deposit issued by
Japanese legal entities. Moreover, NBF may invest in equity interests of voluntary partnerships as defined by
Article 667 of the Civil Code of Japan associated with investment in real estate, lease rights or superficies (butlimited to investment in partnerships established with contributions of real estate, lease rights or superficies andhaving the objective of leasing, operating and managing etc. the same).

D.

Investment in Ordinary Securities

NBF does not, in principle, have the objective of investing in and managing assets which are securities,
except for those described in A and B above.

- 50 -

■ Investment Restrictions
A. The investment restrictions specified in the Articles of Incorporation and the asset management
guidelines applicable to NBF.
Investment Location and Currencies
NBF will invest neither in real estate located outside of Japan nor in assets denominated in non-Japanesecurrencies ("Investment Objects and Policies", Articles of Incorporation). Please also refer to "Investment
Policies of NBF 1. Basic Investment Policies B. Investment Strategy" herein.
Subscription and Margin Trading of Securities
NBF may not subscribe to, or conduct margin trading of, securities.
Borrowing
See “Investment Policies of NBF
Policies”

1. Basic Investment Policies

B. Investment Strategy

Concentration of investment
There is no limitation on concentration of investment. See “Investment Policies of NBF
Investment Policies B. Investment Strategy (1) Strategy for Creation of the Portfolio”.

(5) Financial

1.Basic

Investment in Other Funds
See “Ⅲ Appendix Investment Objects A. Principal Investment Objects amongst Designated Assets”.
The real estate held by such funds may not include any real estate located outside of Japan (Articles ofIncorporation).
Investment in Assets Lacking Liquidity
There is no limitation on investment in assets lacking liquidity.
Compliance with Laws and Regulations
The Managed Assets of NBF will be managed in compliance with Investment Trust Law of Japan and related
regulations, the rules stipulated by the Investment Trusts Association (as amended), as well as “Investment
Objects and Policies” of the Articles of Incorporation.

B. Compliance with the Investment Trust Law of Japan
While a registered investment corporation must entrust business related to asset management to an asset
management company, an asset management company is prohibited from performing certain acts related to thebusiness of managing the assets of said investment corporation. As a result, an investment corporation is
subject to certain investment restrictions (all references in parentheses below are to the provisions of theInvestment Trust Law of Japan) besides restrictions applied to a registered investment corporation. NBF will
naturally comply with such investment restrictions, a general overview of which follows.

- 51 -

Reciprocal Transactions with Investment Corporations (§34.3.1.5)
Transactions between investment corporations, the assets of which are managed by an asset managementcompany are prohibited except for certain cases specified in the provisions of the government ordinanceregarding the Investment Trust Law of Japan that are considered unlikely to result in failure to protect theinterests of shareholders.
Transactions by an Investment Corporation with Investment Trust Assets (§15.1.3)
Transactions between an investment corporation and investment trust assets subject to asset management areprohibited except for certain cases specified in the provisions of the government ordinance regarding theInvestment Trust Law of Japan that are considered unlikely to result in failure to protect the interests ofshareholders.
Transactions for the benefit of Third Parties (§34.3.1.6)
An asset management company may not undertake transactions in certain securities based on fluctuations in
the price, index, value, or amount of consideration related to transactions in the assets of an investment
corporation, without a legally-valid reason, with the objective of benefiting a third party other than NBF or said
investment.
Transactions Harmful to the Interests of NBF (§34.3.1.7)
An asset management company may not undertake transactions that are other than upon normal terms andconditions for such transaction, and further, such transaction upon said conditions would be harmful to theinterests of the investment.
Other Transactions specified in the Government Ordinance regarding the Investment Trust Law of Japan(§34.3.1.8)
In the addition to the foregoing, those acts specified in the government ordinance regarding the Investment
Trust Law of Japan being certain acts committed by an asset management company that would result in failure
to protect the interests of shareholders, damage the fairness of the management of the assets of NBF, and pose arisk of damaging the good public reputation of NBF are prohibited.
Limitation on Acquisition of the Same Issue of Shares (§194)
A registered investment corporation may not acquire the same shares issued by a corporation in excess of
50/100 of total number of said issued and outstanding shares.
Restriction on Acquisition of Own Shares and Acceptance of Pledge (§80.1)
An investment corporation may not acquire shares issued by itself, or accept them for the purpose of pledge,
unless it acquires shares issued by itself in the following cases
・ when acquired as the result of merger;
・ if necessary for attaining the purpose of exercising its rights; or・ when purchasing shares pursuant to the provisions of the Investment Trust Law of Japan.

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Restriction on Acquisition of Parent Corporation’s Shares by Subsidiary Corporation (§81.1)
An investment corporation (e.g. subsidiary), a majority of the shares of which is owned by anotherinvestment corporation (e.g. parent) may not acquire the shares of such parent investment corporation except in
the following cases
・ when acquired as the result of merger; or・ if necessary for attaining the purpose of exercising its rights.
Restrictions of Transactions with Interested Parties(1) Restriction on an asset management company (§34.3)
In accordance with the provisions of laws and regulations, an asset management company is prohibited fromcommitting any of the following acts in connection with transactions with an Interested Party etc. "Interested
Party etc." as used herein means a person who holds a majority of the shares of an asset management company
or otherwise has a close relationship with said asset management company as designated by the government
ordinance regarding the Investment Trust Law of Japan.
a)An investment trust agent, trust company, financial institution engaged in trust business, investment
advisor, residential land and building specialist etc. who is an Interested Party etc. of an asset
management company undertakes a transaction which harms the interests of NBF with the objectiveof benefiting a customer etc. specified in the Investment Trust Law of Japan.

b)

Undertaking transactions which harm the interests of an investment corporation with the objective ofbenefiting an Interested Party etc. of NBFM.

c)

Undertaking transactions clearly recognized to be unnecessary in light of the management policies forthe assets of an investment corporation, the amount of net assets of NBF, or market conditions, withthe purpose of benefiting a securities company, registered financial institution, residential land andbuilding specialist or other person specified in the government ordinance regarding the Investment
Trust Law of Japan who is an Interested Party etc. of an asset management company.

d)

In the event that a securities company, who is an Interested Party etc. of an asset managementcompany, acts as an underwriter in a securities transaction, undertaking transactions with theobjective of fraudulently manipulating the market for the purpose of having an influence upon theconditions of the primary offer or secondary distribution of said securities not reflecting correct
market pricing.

e)

In the event that a securities company or registered financial institution, who is an Interested Party etc.
of an asset management company, undertakes a primary offer or secondary distribution of securities
or participates in handling a primary offer, private offering, or secondary distribution at a time when
the subscription amount of said acquisition or the amount of purchase offer of securities to said
securities company or registered financial institution is not foreseen to reach that otherwise expectedby said securities company or registered financial institution, acquiring or purchasing said securities
with assets of NBF at the request of said securities company or registered financial institution.

f)

In the event that the manager of a tokumei kumiai, who is an Interested Party etc. of an asset
management company, makes a solicitation in connection with the execution of a tokumei kumiai- 53 -

agreement at a time when the total investment amount otherwise obtained pursuant to said tokumei
kumiai agreement is not foreseen to reach that expected by the manager of said tokumei kumiai,acquiring a tokumei kumai interest pursuant to said tokumei kumiai agreement with assets of NBF at
the request of the manager of said tokumei kumiai.
g)(2)

In the event that a trust company, who is an Interested Party etc. of an asset management company,
makes a solicitation in connection with the execution of a trust agreement at a time when the amountof trust assets otherwise obtained pursuant to said trust agreement is not foreseen to reach that
expected by said trustee, acquiring a beneficiary certificate pursuant to said trust with assets of NBF
at the request of said trustee.
Restriction on an investment corporation

Restrictions on Asset Management(§195)A registered investment corporation must not, in principle, acquire or sell securities, lend or borrow
securities, acquire or sell real estate, lease real estate or entrust the supervision of real estate (provided,
however, that, it is acceptable to cause NBFM to act as an agent or broker concerning the purchase or leasing ofresidential building lots or buildings) or otherwise engage in transactions concerning Designated Assets otherthan the preparation of residential building lots and design of buildings, with its executive directors or
supervisory directors, asset management companies who perform asset management, close relatives ofexecutive directors or supervisory directors, or persons or employees who perform duties similar to directors or
auditors of an asset management company who perform asset management.

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Nippon Building Fund Inc.
Corporate Data
Corporate Office:7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan+81-3-3281-8810
http://www.nbf-m.com/nbf_e

Date of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding as of June 30, 2004:¥148,899 million, 280,700 shares, which, due to the capital increases on July 14 and August
11, 2004, have subsequently increased to ¥210,679 million and 364,700 shares respectively.

Shareholders:

12,011 (As of June 30, 2004)

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 Public Accountants:

KPMG AZSA & Co.
AZSA 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.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan+81-3-3281-8810

This document contains translations of selected information described in the Securities Report (Yuka shoken hokokusho) filed on September 28, 2004 pursuant to the
Securities Exchange Law of Japan, and the Financial Statements and the Performance Information Report for the period from January 1, 2004 to June 30, 2004, of
Nippon Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.
This English language document was prepared solely for the convenience of and reference by overseas investors and neither corresponds to the original Japanese
documents nor is it intended to constitute a disclosure document. The Japanese language Securities Report and the Financial Statements and the Performance
Information Report for the aforementioned period should always be referred to as originals of this document.
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms.
With respect to any and all terms herein, including without limitation, financials statements, if there exist any discrepancies in the meaning or interpretation thereof
between the original Japanese documents and English statements contained herein, the original Japanese documents will always govern the meaning and interpretation.
None of Nippon Building Fund Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents oraffiliates will be responsible or liable for the completeness, appropriateness or accuracy of English translations or the selection of the portion(s) of any document(s)translated into English. No person has been authorized to give any informations or make any representations other than as contained in this document in relation to thematters set out in this document, and if given or made, such information or representation must not be relied upon as having been authorized by Nippon Building Fund
Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents or affiliates.
The financial statements of Nippon Building Fund Inc. have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP)
which may materially differ in certain respects from generally accepted accounting principles in other jurisdictions.
Many provisions of this document contain forward-looking statements and information. We base these statements on our beliefs as well as our assumptions based
solely on certain limited information currently available to us. Because these statements reflect our current views concerning future events, these statements involve
known and unknown risks, uncertainties and assumptions. Our future performance could materially differ from those set out in these forward-looking statements. We do
not undertake and will not undertake to release revisions of forward-looking statements to reflect future events or circumstances or of any other statements or information
contained herein.

NBF Report Jan. Jun. 2004 6th PeriodNi

on Building Fund Inc.