First Half of 2013

( 24th Period – January to June 2013 )NBF Report

Nippon Building Fund Inc.
http://www.nbf-m.com/nbf_e/

Profile
On September 10, 2001, Nippon Building Fund
Inc. (NBF) became the first Japanese real estate
investment trust (J-REIT) to list on the J-REIT
section of the Tokyo Stock Exchange. Today, NBF
has the largest market capitalization and assets
under management among J-REITs.
NBF employs funds raised through unitholder
subscriptions and borrowings to invest in realestate, real estate-backed securities, trust
beneficiary rights and other assets with theobjective of sustainable growth in portfolio value
and stable profits on a medium-to-long-term basis.
NBF primarily invests in office buildings in thecentral business districts of Tokyo, other Greater
Tokyo and other cities in Japan.
Going forward, NBF will continue its steadymanagement for the high quality and growth
befitting the number one J-REIT.

Contents
Features and Policies .......................................................1
Operational Highlights......................................................2
Performance Highlights ....................................................4
To Our Unitholders ...........................................................5
CIO and CFO Message ....................................................8
Portfolio Highlights.........................................................11
Acquisitions in the 24th Period ......................................12
Main Properties ..............................................................14
A Track Record of Steady Growth .................................16
Management Team and Management Structure ............18
Management’s Discussion and Analysis ........................22
Financial Statements......................................................33
Independent Auditor’s Report ........................................48
Appendix ........................................................................49
Investment and Distribution Policies ..............................51
Corporate Data ..............................................................58
Investors’ Information ....................................................59

Features and Policies(As of June 30, 2013)

An office-specialized J-REIT, sponsored by Mitsui Fudosan Co., Ltd.

Increase Unitholder ValueNBF Policies

Stable mid-to-long-term growth indistribution per unit (DPU)
Expansion of NAV per unit

Portfolio Quality

Size

Focused on superior office buildings,
primarily in Tokyo central business
districts (CBDs)

The largest J-REIT

Ratio of investment in Tokyo CBDs
(Acquisition price basis)

High occupancy rate
Occupancy rate

69.0%
97.8%

Appraisal value
Unrealized gain ratio

Total assets¥1,047.9 billion

Market cap¥794.4 billion

Properties

74

Total rentable area

4.9%

1.05 million m

Financial Fundamentals

SponsorHigh credit ratings

Property acquisition pipeline from the
Mitsui Fudosan Group

AA
A+
A2

R&I (Issuer rating)
S&P (Long-term corporate rating)
Moody’s (Issuer rating)Diversified long-term fixed-rate debt
Long-term fixed-rateinterest-bearing debt ratio
Average maturity

94.7%
4.76 years

2

Leverage the comprehensive strengthsof the Mitsui Fudosan Group
Leasing capabilities
Property management capabilities(long-term interest-bearing debt)

NBF Report January – June 2013

1

Operational Highlights
TopicsAcquired 8 Properties, Mainly in Tokyo CBDs, for ¥156.8 Billion
Property Acquisitions by Region in 1H/2013
Other Cities¥14.9 billion (9.5%)¥156.8 billion
8 properties(lncl. additional
acquisitions)

NBF Osaki Building(The former Sony City Osaki)

Sumitomo Mitsui Banking
Nagoya Building

Acquisition price ¥66,660 million

Acquisition price¥14,900 million

NOI yield

5.71%

NOI yield

4.30%

Tokyo CBDs

¥141.8 billion (90.5%)

Celestine Shiba Mitsui Building

Gate City Ohsaki

Shinbashi M-SQUARE(Additional acquisition)
Acquisition price ¥22,500 million

Acquisition price¥15,550 million

Acquisition price¥11,900 million

NOI yield

NOI yield

4.48%

NOI yield

4.20%

4.70%

Shibuya Garden Front

Ikebukuro East

Panasonic Tokyo
Shiodome Building(Additional acquisition)

2

Acquisition price ¥11,569 million

Acquisition price¥8,630 million

Acquisition price¥5,075 million

NOI yield

NOI yield

6.01%

NOI yield

4.32%

4.30%

NBF Report January – June 2013

Maintained a High Occupancy Rate
Occupancy Rate for NBF at Period End: 97.8%
(%)

100

98

96.4
96

93.5

94

97.0

2H/’11
21st
Period1H/’1222nd
Period97.6

97.8

2H/’1223rd
Period1H/’1324th
Period

95.6

95.0

94.7

96.9

93.2

92

90

2H/’0815th
Period1H/’0916th
Period2H/’0917th
Period1H/’1018th
Period2H/’1019th
Period1H/’1120th
PeriodConducted Large-Scale Equity Financing Totaling ¥68.3 Billion
LTV & Acquisition Capacity(%)

New investment units issued,
4 properties acquired,
1 property disposed of 1

50

46
45

Target
LTV
range

45.22
45

44.4
42.9

Approx.
44%

40

40%
level

4 properties
acquired 2

1 property
disposed of 3

36
35

30

Acquisition
capacity approx.
¥30 billion

Acquisition
capacity approx.
¥100 billion
1H/’1222nd
Period2H/’1223rd
PeriodJan.
’13

Issue of new investment units

1H/’1324th
PeriodAug.
’13¥68.3 Billion
1. Acquired Shinbashi M-SQUARE, Sumitomo Mitsui Banking Nagoya Bldg., Gate City Ohsaki (additional acquisition), and Celestine Shiba Mitsui Bldg.;
disposed of NBF Nihonbashi Muromachi Center Bldg. (50% stake)2. Acquired NBF Osaki Bldg., Panasonic Tokyo Shiodome Bldg., Ikebukuro East and Shibuya Garden Front (additional acquisition)
3. Sold NBF Nihonbashi Muromachi Center Bldg. (50% stake)

NBF Report January – June 20133

Performance Highlights
Stable growth continued as NBF acquired new properties.

Net Income

Total Operating Revenues¥35,720

million+13.3%

Occupancy Ratebillion+16.6%
Distribution per Unit

4

million+34.0%

Total Assets¥1,048¥12,94197.8%+0.2 points
Net Asset Value per Unit

¥16,854¥801,781+¥1,100+¥22,454

NBF Report January – June 2013

To Our Unitholders
Market Conditions
The office leasing market to recoverDuring the six months ended June 30, 2013 (the “24thPeriod”), the yen weakened and stock prices rose in Japanas a result of emergency measures to revive the economy
and new monetary easing policies by the Bank of Japan.
Corporate earnings strengthened as a result, mainly in the
manufacturing industry.
In this environment, conditions in the office leasing
market in Tokyo and elsewhere led to expectations of a fullscale market recovery. Limited new supply and improved
corporate results drove increased office demand, including
demand for relocations due to a need to increase or consolidate office space.
In the 23 wards of Tokyo, office demand for 2012 was
2.3 times the level of 2011 and remained strong during thefirst half of 2013 (Sanko Estate Co., Ltd. data).
Strong demand for office space led to a big decline in thevacancy rate of new buildings in the central five wards ofTokyo to 11.6 percent as of June 30, 2013 from 29.9
percent as of December 31, 2012.

The average vacancy rate for the overall market including
existing buildings declined 0.21 percentage points from
December 31, 2012 to 8.46 percent as of June 30, 2013,
underscoring the recovery trend (Miki Shoji Co., Ltd.
vacancy rate data).

Market Vacancy Rates in CBDs
(%)

45
40
35
30
25
20
15
10
5
0

New buildings

Average vacancy rate

11.60
8.46
Existing buildings 8.40

Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Jun.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Miki Shoji Co., Ltd.

Average Asking Rents in Tokyo CBDs
(Yen per tsubo*o)40,00035,00030,000

New buildings

26,611

25,000
Average asking rent

20,000Existing buildings
15,00016,377
16,204

Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Dec. Jun.
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
*1 tsuboo = 3.3m2

Source: Miki Shoji Co., Ltd.

NBF made a large-scale acquisition of highquality properties ahead of the full-fledged
recovery in the leasing market. By doing so,
we strengthened our earnings base for
future growth.
Kenichi Tanaka
President and CEO of Nippon Building Fund Management Ltd.

NBF Report January – June 2013

5

Moreover, signs of recovery became clearer even though
average asking rents for the overall market remained low.
For example, the level of expected rents for high-gradebuildings increased in both the 24th and 25th Periods.
Activity picked up in the real estate transaction market,
backed by improving market conditions and a solid equity
market. Equity financing by J-REITs totaled ¥629.5 billion in
the first half of 2013, which was 1.3 times that in 2012.
Real estate transactions by J-REITs became more active,
totaling ¥1,345.2 billion for the period, which was 1.7 times
larger than that for the full year of 2012.

The Situation Surrounding NBF
Large-scale equity financing and acquisitionof high-quality properties ahead of recoveryof the real estate market
In January 2013, NBF conducted a large-scale public
offering to acquire quality properties from its sponsor, Mitsui
Fudosan Co., Ltd. Anticipating a full-fledged recovery in themarket, we used the proceeds of the public offering toacquire eight properties during the 24th Period for ¥156.8
billion, including additional acquisitions in existing buildings.
This included the NBF Osaki Building (the former Sony City
Osaki) and the Panasonic Tokyo Shiodome Building.
Although the acquisitions in the period were mainly incentral Tokyo, we were able to achieve adequate yields.

Office Floor Space Supply and Demand in the 23 Wards of Tokyo(Thousand tsubo)
o

600

400

200

0
1H actual

-200

-400

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
(Proj.) (Proj.) (Proj.)
Supply6DemandNBF Report January – June 2013

Source: Sanko Estate Co., Ltd.

While expanding our portfolio, we also disposed of someof our properties. We sold 50 percent of the 26-year-old
NBF Nihonbashi Muromachi Center Building in the 24th
Period, and the remaining 50 percent in the 25th Period, toour sponsor, Mitsui Fudosan. These dispositions generated
proceeds of ¥28.2 billion, which was 10 percent above theappraisal value, as well as profits of approximately ¥2.0
billion in each period, of which ¥1.3 billion will be booked asinternal reserves.
As a result of these initiatives, NBF retained its position
as the largest J-REIT, with total assets exceeding ¥1 trillion
and a market cap of ¥794.4 billion as of June 30, 2013.
Contract cancellations for existing properties increased
somewhat during the 24th Period due to the impact of thelarge volume of Tokyo office supply during 2012. However,
we maintained our high occupancy rate by fully leveraging
the leasing capabilities of the Mitsui Fudosan Group. The
occupancy rate improved 0.2 percentage points comparedwith the previous period to 97.8 percent.
In 2013, the large-scale acquisition of new properties led
to an increase in rental revenues, which compensated forthe rental revenue decline in the existing properties.
In the 26th Period, we expect the decline in rental
revenues from the existing properties to shrink due toprogress in tenant replacement, as well as a decrease innegative revisions. We will continue to concentrate on rental
revenue growth.

Conservative financial management fora strong financial base that supports
NBF’s portfolio
By maintaining a solid financial base, NBF is able to takeadvantage of opportunities to acquire properties andrespond to changes in the financial environment.
As for debt financing, we will continue to focus on longterm, fixed-rate funding with diversified maturities backed
by high credit ratings.
We maintain our conservative financial discipline, with an
LTV ratio of 36 to 46 percent (maximum 56 percent), and along-term fixed-rate interest-bearing debt ratio of 90
percent or above. As of June 30, 2013, our LTV was 45.2
percent and the long-term fixed-rate interest-bearing debt
ratio was 94.7 percent.

To Our Unitholders

Financial Position (As of June 30, 2013)
Loan-to-value (LTV) ratio

45.2%

Long-term fixed-rate interest-bearing
debt ratio

94.7%

Average maturity

4.76 years

Average interest rate

1.32%

Successfully increasing unitholder value
Revenues and income for the 24th Period increased
substantially compared with the previous period because of
the above initiatives. Distribution per unit increased ¥1,100
to ¥16,854 and net asset value (NAV) per unit increased¥22,454 to ¥801,781 as a result of new acquisitions andprofits from dispositions. (Please refer to the Management’s
Discussion and Analysis on page 22 for details.)

In property management, our goal is to attract new
tenants and increase rental revenues from existing tenantsby leveraging the leasing and property management skills of
the Mitsui Fudosan Group.
We will continue our conservative financing and further
strengthen our financial base to capture growth opportunities.
Based on the above, we expect the distribution per unit forthe six months ending December 31, 2013 to be ¥17,300.
We will strive to increase unitholder value. We intend to
steadily increase our distribution per unit over the medium
to long term and expand NAV per unit by making full use of
our strengths, including portfolio quality, size, solid financialbase and collaboration with our sponsor, Mitsui Fudosan.
We are counting on the continued support of our unitholders
as we work toward these goals.

Future Policies
An aggressive approach for further growthCompetition to acquire office buildings is now graduallyintensifying, backed by expectations of a full-fledged
recovery in the office leasing market. NBF’s policy is toproactively and selectively invest in high-quality properties
that will consistently contribute to earnings over the medium
to long term. Moreover, we will flexibly consider replacing
portfolio properties to further improve the quality.

Distribution per Unit (DPU)

Net Asset Value (NAV) per Unit (Period End)

(Yen)

(Yen)

18,00017,30016,85417,00016,00015,49515,00015,13815,200

15,480800,000

798,026

790,349

797,074

1H/’1120th
Period2H/’11
21st
Period15,754

801,781779,593779,327

1H/’1222nd
Period2H/’1223rd
Period750,000
700,000

14,0000850,000

2H/’1019th
Period1H/’1120th
Period2H/’11
21st
Period1H/’1222nd
Period2H/’1223rd
Period1H/’1324th
Period2H/’1325th
Period(Proj.)

02H/’1019th
Period1H/’1324th
PeriodNBF Report January – June 20137

CIO and CFO Message
NBF has outstanding growth potential
because it fully leverages thecomprehensive strengths of the
Mitsui Fudosan Group.

Koji Matsufuji
CIO and CFO of Nippon Building Fund Management Ltd.

Large-scale property acquisition
During the 24th Period, NBF made a large-scale acquisition of properties totaling ¥156.8 billion, including additional
acquisitions in existing buildings. We acquired properties
from our main sponsor, Mitsui Fudosan, from third parties
including Sony Corporation, as well as from anothersponsor, Sumitomo Life Insurance Company.
We expect the leasing market to improve and cap rates
to compress. Therefore, we believe these acquisitions werea major achievement for the period, in advance of market
improvements. The eight properties we acquired are all
highly competitive, and the average NOI yield for the sevenproperties located in central Tokyo is an attractive 4.48
percent. The NOI yield for the eight properties, including theproperty in Nagoya, is 4.6 percent.

This large-scale acquisition of high-quality properties has
increased the size and quality of NBF’s portfolio and will
support future earnings.

Strategic renovation of existing properties
NBF categorizes its properties into four grades based on
current earnings and future potential, and formulates andexecutes investment plans for each grade.
We make clearly defined, strategic renovations tomaintain and improve the competitiveness of each property,
while also effectively controlling capital expenditures tomaximize future cash flow.

Scale of Managed Assets(Yen in billions)

1,200

New
Acquisitions

1,000¥1,066.5
billion¥156.8billion

4.6%

800

600

0

8

Average NOI yield for 8 newacquisitions

2H/’1019th
Period1H/’1120th
PeriodNBF Report January – June 2013

2H/’11
21st
Period1H/’1222nd
Period2H/’1223rd
Period1H/’1324th
PeriodStrategic Additional Investment with Clear Objectives
Set property grades based on
the current earnings andfuture potential of each property

Formulate and execute
investment plans according
to each grade

Capex and Ratio of Capex to Depreciation and Amortization(%)(Yen in millions)

40
34.2

34.8

33.5

30.6

30

20

4,000

36.6

25.4
1,769

1,975

1,694

2,137

2,268
1,704

2,000

1,000

10

0

3,000

2H/’1019th
Period2H/’11
21st
Period1H/’1120th
PeriodCapex (right scale)

1H/’1222nd
Period2H/’1223rd
Period1H/’1324th
Period0

Ratio of capex to depreciation and amortization (left scale)and the remaining 50 percent in August 2013 (during the25th Period), to Mitsui Fudosan.
This property is located in a redevelopment area. We
expected future leasing revenues to decline as a result ofprogress in the redevelopment. We decided to sell theproperty because we were able to achieve favorable terms
and conditions with a price that was higher than both theappraisal and book values. This disposal generated cash to
create additional capacity to acquire other properties. At
the same time, profits from the disposition have enabled us
to increase our distribution per unit over two periods, whileallowing us to lay the groundwork for the future by doubling
the reserve for advanced depreciation.
In August 2013, we announced our plans for property
dispositions in the 26th Period. We plan to dispose of a
portion of the land of the GSK Building to the Tokyo
Metropolitan Government, in cooperation with its roadwidening program.

Flexible property disposals

Property management strategy

NBF takes advantage of favorable opportunities andflexibly disposes of properties. We sold 50 percent of NBF
Nihonbashi Muromachi Center Building during the 24th Period,

As for NBF’s property management strategy, Nippon
Building Fund Management, Ltd. is NBF’s exclusive asset
management company. We use the strengths of our asset

Overview of Dispositions

DeliveryName of asset

1H/2013(24th Period)

2H/2013(25th Period)

1H/2014(26th Period)

May 2013 (completed)

August 2013 (completed)

January 2014 (planned)

NBF Nihonbashi Muromachi NBF Nihonbashi Muromachi
Center Bldg. (50% stake)Center Bldg. (50% stake)644.31m2 of 5,335.28m2 of
GSK Bldg. site
(approx. 12%)

Mitsui Fudosan Co., Ltd.

Mitsui Fudosan Co., Ltd.

Tokyo Metropolitan
Government(for road widening)

Disposition price¥14,100 million¥14,100 million¥3,084 million

Capital gain

¥2,097 million¥2,115 million¥1,902 million

Provision to the reserve foradvanced depreciation¥1,278 million¥1,313 million (planned)¥1,213 million (planned)

Accumulated reserve
for advanced depreciation¥1,612 million¥2,926 million (planned)¥4,140 million (planned)

NBF Nihonbashi Muromachi Center Bldg.
(Chuo-ku, Tokyo)
Disposed portion (664.31m2)

Building area of the
GSK Bldg.

Me

iji-d

ori

Buyer

Internally Retained Amount (Reserve for advanced depreciation)
Utilized for future stable management and stable distributions

Park
Adjacent
land

Site area of the GSK Bldg.
(after disposition)

GSK Bldg. (Shibuya-ku, Tokyo)
NBF Report January – June 20139

management company, our mainsponsor Mitsui Fudosan, and our
exclusive property managementcompany, wholly owned Mitsui
Fudosan subsidiary NBF Office
Management Co., Ltd., to generate strong performance throughclose cooperation among thethree companies.
NBF Office Management, theproperty manager exclusive to
NBF, is a core component of
NBF’s property management strategy. NBF Office Management ishighly motivated and leverages its
expertise in operating and managing Mitsui Fudosan Group buildings
to provide high-quality services.

Property Management Structuret'PSNVMBUFBOEFYFDVUFNBOBHFNFOUBOEPQFSBUJPOQMBOTt'PSNVMBUFBOEFYFDVUFMBSHFTDBMFSFQBJSQMBOTt"QQSPWBMGPSNBKPSJTTVFT/JQQPO#VJMEJOH'VOE.BOBHFNFOU[AM exclusive to NBF]

Cooperationn
Co/#'0GmDF.BOBHFNFOU[PM exclusive to NBF]t/FXUFOBOUMFBTJOHt1SPWJEFTNBOBHFNFOUBOEPQFSBUJPOFYQFSUJTFBOEPQFSBUJOHTZTUFNTt0WFSBMMNBOBHFNFOUPGTVCMFBTFEQSPQFSUJFTt0WFSBMMQSPQFSUZNBOBHFNFOU
0MM FYDMVEJOHTVCMFBTFEQSPQFSUJFTt3FTQPOETUPFYJTUJOHUFOBOUT
t6OJmFEBENJOJTUSBUJPOPGNBOBHFNFOU
JOGPSNBUJPOGPSBMMPQFSBUJOHQSPQFSUJFT

Leasing revenues: trends and outlook
Last, the trends and future outlook of NBF’s leasing
revenues. Since the financial crisis of 2009, we havecontinuously experienced negative internal growth, withmore than 10 percent negative growth when things wereat their worst. However, we have seen an improvement
since then, and annualized leasing revenues declined onlyaround 3 percent in the 24th Period. We expect a declineof around 4 percent in the 25th Period. As for external
growth, we achieved almost none in 2009 and 2010 due
to the lack of property acquisitions. However, the progressin property acquisitions since 2011 is now compensating
for the negative internal growth. Forecasts for the 25th
Period onward only include properties that we havealready disclosed.
There are two key issues. First, the acquisition of new
properties in the 24th Period will drive substantial revenue
growth. Second, the decline in leasing revenues for the
existing properties will bottom in the 25th Period, andsubsequently improve.
As for the revenue growth from the acquisition of new
properties, the large-scale acquisition in the 24th Period
generated nearly 20 percent growth in leasing revenues.
Even if we do not acquire any properties in the 25th Period,
our leasing revenues will grow by almost 10 percent due to10

NBF Report January – June 2013

the full-year contribution of the properties newly acquired in
the 24th Period.
In the future, we plan to achieve external growth byacquiring more properties. We will also work to improve theprofitability of our existing buildings by taking steps toincrease leasing revenues.

Rental Revenues Composition and Percentage Change(Annualized Period-on-Period Comparison)
(%)

25
20
15
10
5
0
-5
-10
-15

2H/’08 1H/’09 2H/’09 1H/’10 2H/’10 1H/’11 2H/’11 1H/’12 2H/’12 1H/’13 2H/’13 1H/’14
15th 16th 17th 18th 19th 20th 21st 22nd 23rd 24th 25th 26th
Period Period Period Period Period Period Period Period Period Period Period Period
External growthInternal growth

Property acquisitions and sales (completed contracts)

Total

Portfolio Highlights
Investment by Region(Acquisition price basis; as of June 30, 2013)

Other Cities¥115.9 billion(10.9%)

Other
Greater Tokyo¥214.4 billion(20.1%)

74

Properties
Tokyo CBDs
¥736.1 billion(69.0%)

Property Age

Tenants by Industry(As of June 30, 2013)(As of June 30, 2013)
10.8%

13.9%

19.2%

1.8%
22.6%
6%
3.0%

Average Property Age
15.64 years

3.5%
19.6%

4.8%

1,524

Tenant Companies

13.5%

5.5%
6.1%
12.2%

66.5%
7.7%
9.3%
Under 5 years
Over 5 years but under 10 years
10 years or older

Service
Information and communications
Electrical equipment
Wholesale
Insurance
Machinery
Construction

Real estate
Pharmaceuticals
RetailOther products
Banking
Other

NBF Report January – June 201311

Acquisitions in the 24th Period

Gate City Ohsaki (Additional acquisition)

NBF Osaki Building (The former Sony City Osaki)
12

NBF Report January – June 2013

Panasonic Tokyo Shiodome BuildingCelestine Shiba Mitsui Building

Shinbashi M-SQUARE

Shibuya Garden Front (Additional acquisition)

Ikebukuro East

Sumitomo Mitsui Banking
Nagoya Building
NBF Report January – June 201313

Main Properties

Nishi-Shinjuku Mitsui Building

NBF Hibiya Building
14

NBF Report January – June 2013

Mitsubishi Heavy Industries
Head Office BuildingNakanosakaue Sunbright Twin

Aqua Dojima NBF Tower and Aqua Dojima East

Shinanobashi Mitsui Building

NBF Matsuyama Nichigin-mae Building
NBF Report January – June 201315

A Track Record of Steady GrowthDistribution per Unit (DPU)(Yen)

25,00019,02620,00016,003

16,25315,367

15,00014,582

15,185

17,291

16,893

17,04698.0

97.9

19,391

19,22410,000

Historical Unit Price(Yen)

2,000,000
1,500,000
1,000,000

Removal of ban on J-REIT
holdings by investment trusts

Start of TSE
REIT Index

Listing on the Tokyo Stock
Exchange (J-REIT section)

500,000
0

Occupancy Rate and Scale of Managed Assets by Area
(Yen in billions)

1,200

97.5

96.9

97.6

97.4
95.0

1,100

94.7

97.4

98.7

97.4

92.2

1,000
900

Occupancy Rate (End-tenant basis)(right scale)

800

Resolution of NBF’s “2003
Problem” (departure of tenantsfrom Shiba NBF Tower and otherbuildings)

Equity financing
Equity financingg

Managed Assets by Area

Target of ¥500
billion in assetss
achieved(left scale)

Other Cities

700

Other Greater Tokyo
Tokyo CBDs

600

539.3
Equity financing

500

393.88393

400

Equity financing
300
200
100
0

265
192.1
122,265

2,265
2
2

2,265

246.0
2,460
2,460

2,760
2,760

2,856

3,361

3,938

6,248

6,248

5,393

4,141

5,393
3,361

6,248

4,141

2,856

2,856

6,248

4,141

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Jun. 30,
2002

Dec. 31,2002

Jun. 30,
2003

Dec. 31,2003

Jun. 30,
2004

Dec. 31,2004

Jun. 30,
2005

Dec. 31,2005

Jun. 30,
2006

Dec. 31,2006

May 23,2001

Dec. 31,2001

NBF Report January – June 2013

285.6

6,248

Buildings

2,460

24

3,938

276.0

6,248

Buildings

Buildings

22

2,602
2,602

3,938

3,361

414.1

6624.82,760

Buildings

2,265

260.2

336.1

5,393

624.8

2,602

2,265

(Investmentcommencement date)

16

2,265
2
2,2
2
226
226.5

Exchange of JFE
Building for 5
buildings

26

28

29

33

43

43

47

52

55

55

19,809

20,12922,54922,252

21,775

19,672
17,125J-REIT market value exceeds¥6 trillion; TSE REIT Index at
2,636.23 points

Subprime loan
problem surfaces

98.8

98.5

Public-private fundestablished; collateralizationof eligible investment
corporation bonds by Bankof Japan

15,495

15,13815,200D
Decisionby Bank of Japan topurchaseunits and bonds ofpinvestment corporations

15,480Great East Japan
Earthquake

Bankruptcy ofLehman Brothers

(%)

96.9

96.4

94.7

93.5

93.2

95.0

95.6

Equity financing

837.1

Equity financing

725.22
725
674.3

6,743

6,743

16,854

Start of Liberal Democratic
Party administration

96.9

762.3
7,623

783.1

783.1

779.5

7,831

7,831

7,795

7,831

7,831

7,795

7,831

7,831

7,795

870.22
870

97.6

97.0

97.8

100

1,066.595

Equity financing

Equity financing

674.3

15,754

892.8
89
28

90

921.6

779.5

7,252
8,431
7,623
7,252

6,743

6,743

56

6,743

6,743

56

7,252

58

7,623

60

61

61

59

8,431

59

64

64

67

68

74

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Jun. 30,
2007

Dec. 31,2007

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011

Jun. 30,
2012

Dec. 31,2012

Jun. 30,
2013

NBF Report January – June 201317

Management Team and Management Structure(As of June 30, 2013)

Nippon Building Fund Inc. (NBF) is an investment corporation that takes a medium-to-long-term
perspective with the aim of generating steady asset growth and stable profits. NBF continues to do its
utmost for investors.
The General Meeting of Unitholders adopts or vetoes resolutions

Nippon Building Fund Inc.

on the basis of a simple majority of the voting rights of unitholders in
Nippon Building Fund Inc. is an investment corporation establishedattendance, unless otherwise stipulated by laws, regulations or NBF’swith the objective of investing in assets, primarily Designated Assets asarticles of incorporation. Decisions on substantive matters such as

defined by the Investment Trust Law of Japan. NBF entrusts thechanges in the articles of incorporation require the attendance ofmanagement of its assets to Nippon Building Fund Management Ltd.,

unitholders that control a simple majority of total units issued andwhich is an asset management company.

outstanding, and a two-thirds majority of the voting rights of such

NBF’s primary investment objective is to achieve sustainable growth

unitholders. In addition, any change in the asset management policies

in portfolio value and stable profits on a medium-to-long-term basis.

and standards, which are stipulated by NBF’s articles of incorporation,

NBF achieves this objective by investing in real estate consisting of

requires an extraordinary resolution of unitholders as outlined above.

buildings primarily used for offices with their underlying land located in
the central business districts (CBDs) of Tokyo, other Greater Tokyo andother cities in Japan. NBF also invests in securities, beneficiary certifi-

Executive Directors, Supervisory Directors andthe Board of Directors
NBF’s articles of incorporation stipulate that NBF must have one orcates representing beneficial interests in trusts and other assets

more executive directors and four or fewer supervisory directors, butbacked by office properties.

the number of supervisory directors must always be at least one

General Meeting of Unitholders

greater than the number of executive directors. As of June 30, 2013,

Specific matters pertaining to NBF that are subject to the

NBF had one executive director and three supervisory directors.

Investment Trust Law of Japan or the Company’s articles of

NBF’s executive directors are responsible for business execution

incorporation are decided by resolution of the General Meeting ofand have authority for all judicial and extrajudicial proceedings related

Unitholders, which convenes at least once every two years, into the operations of NBF. Supervisory directors are responsible forprinciple. The eighth General Meeting of Unitholders convened onsupervising execution by the executive directors.

March 14, 2013. The date of the next General Meeting of Unitholders
has not been set.

General Meeting ofUnitholders

Sumitomo Mitsui
Trust Bank, Ltd.

Asset Custody
Entrustment

Asset Custody

NIPPON BUILDING FUND Inc. (NBF)

Mitsui Fudosan Co., Ltd.

Office Management
Entrustment

NBF Office Management Co., Ltd.

Real Estate, etc.

NBF Report January – June 2013

NIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

Borrowings /Bonds and Notes
Debt Service

Qualified Institutional
Investors / Bondholders
Independent Auditors
KPMG AZSA LLC

Liabilities

Office Management

18

Board of Directors

Asset Management
Entrustment

AssetsInvestment
Rent, etc.

Unitholders’EquityInvestment

Unitholder

Distribution

Unitholder

TradingManagement Team

From left: Tetsuro Tsugawa, Tsutomu Nishikawa, Yoshiyuki Hirai, Yutaka Fukaya

Name

Career Summary

Executive Director

Tsutomu Nishikawa

Supervisory Directors

Yoshiyuki Hirai
Tetsuro Tsugawa
Yutaka FukayaAppointed Executive Director of NBF in March 2011 after serving as an executive officer of
Mitsui Fudosan Co., Ltd.
Appointed Supervisory Director of NBF in March 2009 and reappointed in March 2013. Real Estate Appraiser.
Appointed Supervisory Director of NBF in March 2013. Attorney.
Appointed Supervisory Director of NBF in March 2013. Certified Public Accountant and Certified Public Tax Accountant.

The Board of Directors consists of the executive and supervisory

The terms of office of executive directors and supervisory directors

directors. Its responsibilities include authorizing business execution

are two years from the time they assume office. The terms of executive

and supervising the performance of the executive directors.

directors and supervisory directors selected to fill a vacancy or

Resolutions by the Board of Directors require a simple majority withto increase the number of directors expire at the same time as themore than half of the members of the Board in attendance.

remaining terms of their predecessors or the current directors.

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

The executive director serving as of April 1, 2013 was elected withsupervisory directors may not participate in decisions in which they

the consent of all unitholders on March 14, 2013. The three supervi-

have a vested interest. Executive and supervisory directors with suchsory directors and the substitute supervisory director were elected atfinancial interest shall not be included in the number of executive and

the General Meeting of Unitholders held on March 14, 2013, andsupervisory directors in attendance for such decisions.

assumed office on March 17, 2013.

NBF Report January – June 201319

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

Matters Entrusted to
Nippon Building Fund Management Ltd.
As the asset management company required by the Investment

Management Structure
General Meeting of Shareholders
AuditorCompliance Committee

Board of Directors
Executive Board

Risk Management Board

CEOInvestment
Review Board

Accounting Auditor

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

Compliance
Officer

Investment & FinanceGroup

Corporate OperationGroup

In addition, in accordance with the manager of general administration
contract designating Nippon Building Fund Management Ltd. as
the institutional manager of NBF’s assets, Nippon Building Fund

Real EstateManagement
Team

Real Estate
Investment
Team

Research
Team

Financial
Team

Fund
Operation
Team

Corporate
Risk
Planning &Management
Administration & Compliance
Team
Team

Management Ltd. executes certain responsibilities in connection withthe operation of the General Meeting of Unitholders and the Board of

executes the operations of Nippon Building Fund Management Ltd.

Directors as manager of general administration.

The heads of the Investment & Finance Group and the Corporate
Operation Group also serve as directors, and oversee their respective

Management Structure of
Nippon Building Fund Management Ltd.
The Board of Directors makes decisions on the basic manage-

divisions under the direction and oversight of the president. Corporate
auditors conduct accounting audits and operational audits of Nippon
Building Fund Management Ltd. The Compliance Officer oversees

ment policies of Nippon Building Fund Management Ltd. andcompliance for the asset management company and is responsible foroversees execution of the duties of the representative director. Theinternal administration in connection with internal audits at the asset

president, who is the representative director, supervises andmanagement company.

Nippon Building Fund Management Ltd. Management Team
Name

Title

Career Summary

Kenichi Tanaka

President and CEO

Apr. 1982
Apr. 2007
Apr. 2010

Koji Matsufuji

Director, Chief
Investment Officer,
Chief Financial Officer

Apr. 2012
Apr. 1987
Apr. 2005
Apr. 2006
Apr. 2007
Apr. 2010
Apr. 201320

Joined Mitsui Fudosan Co., Ltd.
General Manager, Operating Administration Department of Mitsui Fudosan Co., Ltd.
General Manager, Residential Leasing Business Department, Accommodations Business Division of
Mitsui Fudosan Co., Ltd.
Appointed President and CEO of Nippon Building Fund Management Ltd. (current position)
Joined Mitsui Fudosan Co., Ltd.
Manager, PM-II, Kansai Branch of Mitsui Fudosan Building Management Co., Ltd.
Associate General Manager, Kansai Branch of Mitsui Fudosan Building Management Co., Ltd.
Executive Manager, Development Planning Group, Regional Development Department, Retail Properties Division of
Mitsui Fudosan Co., Ltd.
General Manager of Business Promotion Department of NBF Office Management Co., Ltd.
Appointed Director, Chief Investment Officer and Chief Financial Officer of Nippon Building Fund Management Ltd.
(current position)

Masahiko Misao

Director, Chief
Operating Officer

Apr. 1980
Apr. 2003
Mar. 2008
Apr. 2012

Joined Sumitomo Life Insurance Company
General Manager, Real Property Department of Sumitomo Life Insurance Company
Director and General Manager, Commercial Operation Department, Shinagawa Intercity Management Co., Ltd.
Appointed Director and Chief Operating Officer of Nippon Building Fund Management Ltd. (current position)

Hiromu Yamanaka

Director (Part-time)

Apr. 2013

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

Hiroshi Yabuki

Director (Part-time)

Apr. 2013

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

Yasushi Akimoto

Auditor (Part-time)

Apr. 2013

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

Kenshi Ueda

Auditor (Part-time)

Apr. 2013

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

NBF Report January – June 2013

Management Team and Management Structure

Compliance Initiatives

The Asset Management Guidelines consist of management guidelines for management, acquisition and sale of assets; financial guide-The management of NBF and Nippon Building Fund Management

lines for fund procurement and management policies; accounting

Ltd. conduct honest and appropriate business activities while maintain-

guidelines for tax accounting and dividend distribution policies; anding rigorous compliance by adhering to all relevant laws and regula-

guidelines on transactions with potential conflicts of interest.

tions, based on a high level of corporate ethics.
The bylaws of NBF’s Board of Directors stipulate that Board of
Directors’ meetings are to be held at least once every three months. In
practice, NBF holds such meetings once a month. At Board meetings,
executive directors report on the execution of their duties and supervisory directors ensure that oversight and check-and-balance systems
are functioning properly.
Nippon Building Fund Management Ltd. views compliance as amanagement strategy, with a fundamental compliance policy of
conducting operations honestly and fairly while maintaining a rigorouscompliance system based on a high level of corporate ethics.
Specifically, Nippon Building Fund Management Ltd. has establisheda Compliance Committee, consisting of the Compliance Officer, thepresident, the head of the Investment & Finance Group, the head of
the Corporate Operation Group and an outside committee member.
Initiatives to enhance awareness of and adherence to complianceinclude the establishment of Compliance Rules and a Compliance
Manual. In addition, a Compliance Program is formulated each year toverify the progress of the execution plan for that year and identify any
problem areas.

Policy and Management System for
Dealing with Conflict of Interest Transactions
Fundamental Policy on Conflict of Interest
Transactions
Nippon Building Fund Management Ltd. is constantly aware of its
accountability to NBF and NBF’s unitholders with regard to any transactions in which the interests of NBF and the interests of Nippon
Building Fund Management Ltd. and its related corporations or
customers may conflict. Nippon Building Fund Management Ltd.
follows voluntary rules stipulated in laws and internal bylaws to proactively prevent conflicts of interest.
All decisions made in executing the management of NBF’s assets
are subject to the approval of the president, and are made after going
through discussions by the Investment Review Board and Executive
Board of Nippon Building Fund Management Ltd. Sponsor companies
are not permitted to intervene in the decision-making process.

Voluntary Rules for Conflict of Interest
Transactions Stipulated in Internal Bylaws
Nippon Building Fund Management Ltd. has set voluntary rules in its

Risk Management System
NBF and Nippon Building Fund Management Ltd. have establishedthe following risk management system to avoid and minimize risks
related to investments.

NBF
NBF’s Risk Management Regulations define risk management policies
and procedures. The Risk Management Board convenes once every
three months and undertakes deliberation, monitoring and other initiatives
to ensure that the entrusted asset managers are conducting their duties
with due care in good faith in a manner consistent with its fiduciary duty
to the conservation and maintenance of entrusted assets.

Nippon Building Fund Management Ltd.
Nippon Building Fund Management Ltd. formulates a Management

internal bylaws to address transactions with parties, including sponsor
companies that have interests in Nippon Building Fund Management Ltd.
The voluntary rules require the Investment Division, which initiates thetransaction, as well as the Compliance Department, the AssetManagement Examination Meeting and other units to protect NBF’s
managed assets and profits by fully examining the transaction contents
according to the voluntary rules set in the internal bylaws in the event of atransaction in which the interests of Nippon Building Fund Management
Ltd. and parties that have interests in Nippon Building Fund Management
Ltd. may conflict with the interests of NBF. These rules are designed fromthe standpoint of accountability to NBF and its unitholders.
In examining the transaction contents, Nippon Building FundManagement Ltd. solicits the opinions of attorneys, certified tax
accountants and other third-party experts as needed. In addition, when

Policy, a Medium-to-Long-Term Asset Management Policy and anpurchasing real estate or other assets from parties that have interests

Annual Management Plan to follow in managing NBF’s assets. In

in Nippon Building Fund Management Ltd., the purchase price isaddition, Nippon Building Fund Management Ltd. has set Assetstrictly set, in principle no higher than the appraised value according toManagement Guidelines as a set of standards to follow.

a real estate appraiser with no vested interest.
NBF Report January – June 201321

Management’s Discussion and Analysis
Summary of Selected Financial Data

24th Period
from January 1, 2013 toJune 30, 2013

23rd Period
from July 1, 2012 to
December 31, 2012

22nd Period
from January 1, 2012 toJune 30, 2012

Yen in millions, except per unit data or where otherwise indicatedOperating revenues
Note 2
Revenue from property leasing activities
Profits of dispositions
Operating expenses
Rental expenses
Loss on sale of investment property
Income before income taxes
Net income(a)Funds from operations
Note 3
Net operating income from property leasing activities Note 3
Total amount of cash distribution(b)
Depreciation and amortization
Capital expenditures
Total assets(c)Interest-bearing debt
Net assets(d)Total number of units issued (units)(e)
Net assets per unit (Yen/$)(d) / (e)Distribution per unit (Yen/$)(b) / (e)Funds from operations per unit (Yen/$)Note 3
ROA
Note 3(Annual rate)
ROE
Note 3(Annual rate)
Loan to value (LTV)
Note 3
Capital ratio(d) / (c)Payout ratio(b) / (a), Note 4
Number of days
Number of investment properties
Note 5
Number of tenants
Note 5
Total rentable area (m2)Occupancy rate (End-tenant basis)
Note 5¥35,72033,623
2,097
19,904
18,285—
12,942
12,941
17,542
22,036
11,6636,698
1,704
1,047,992
473,250
517,584
692,000
747,954
16,85425,714
1.3%(2.7%)
2.7%(5.4%)
45.2%
49.4%
90.1%
181
74
1,524
1,055,729
97.8%¥ 31,530
31,530—18,90917,614
—
9,658
9,657
15,85020,107
9,657
6,191
2,269
899,123
399,625
446,004
613,000
727,577
15,75425,854
1.1%
2.2%
2.2%
4.3%
44.4%
49.6%
100.0%
184
68
1,460
913,747
97.6%¥ 30,244
30,244—
17,798
16,525
—
9,490
9,489
15,62819,857
9,489
6,139
2,137
871,140
374,000
445,836
613,000
727,302
15,48025,713
1.1%(2.2%)
2.2%(4.4%)
42.9%
51.2%
100.0%
182
67
1,080
893,203
97.0%

24th Period
from January 1, 2013 toJune 30, 2013
U.S. dollars in thousands
except per unit data (Note 1)$

360,044
338,905
21,139200,627
184,303—
130,453
130,445
176,817
222,113
117,558
67,511
17,176
10,563,369
4,770,184
5,217,059
7,539
170
259

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥99.21 = U.S.$1.00, the approximate exchange rate on June 30, 2013.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses after ROA and ROE are annualized based on the six-month figures for the period.
Funds from operations: Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Funds from operations per unit: (Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization) / Weighted average number of units issued
and outstanding during the period
ROA: Income before income taxes / (Initial total assets + Total assets at end of period) ÷ 2
ROE: Net income / (Initial net assets + Net assets at end of period) ÷ 2
LTV: Interest-bearing debt / Total assets
4. Payout ratio figures are calculated to one decimal place only.
5. Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number of tenants by building. Occupancy rate, end-tenant basis,is the ratio of gross leased area to total rentable area at the end of the period.

22

NBF Report January – June 2013

Operating Environment and Results
During the six months ended June 30, 2013 (the “24th Period”), the yen weakened and stock prices rose in Japan as a result of emergency
measures to revive the domestic economy and bold new monetary easing policies. These trends, coupled with moderate recovery in the U.S.
economy, supported increased exports backed by the ongoing depreciation of the yen. Corporate earnings strengthened, mainly in the
manufacturing industry. Personal consumption was firm because of an improvement in consumer sentiment stemming from higher stock prices
and recovery in employment. Vacancy rates decreased moderately in the office leasing market, where the supply of new large-scale properties waslimited during the first half of 2013. Gradual improvement in business sentiment and employment supported demand that included relocations toincrease or consolidate office space and expansion of existing space. In the real estate acquisition market, aggressive property acquisition among
J-REITs backed by factors such as equity financing in a favorable fund procurement environment drove overall transaction volume. J-REITs
substantially increased acquisitions of distribution facilities, while their acquisitions of office buildings during the first half of 2013 alone essentiallyequaled all J-REIT office building acquisitions during 2012.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality office buildings thatare highly competitive in terms of location, size and facilities, and are expected to generate stable cash flow from rents. During the 24th Period,
NBF acquired Shinbashi M-SQUARE (fee simple ownership, acquisition price of ¥11.9 billion; acquisition prices as well for all properties below),
Sumitomo Mitsui Banking Nagoya Building (trust beneficiary interests, ¥14.9 billion), and NBF Osaki Building (the former Sony City Osaki; quasi
co-ownership of trust beneficiary interests, ¥66.7 billion) in February 2013. NBF also acquired Panasonic Tokyo Shiodome Building (quasi
co-ownership of trust beneficiary interests, ¥5.1 billion), Gate City Ohsaki (additional acquisition, condominium interests and co-ownership interests
in condominium interests, ¥15.6 billion), Ikebukuro East (fee simple ownership, ¥8.6 billion), and Shibuya Garden Front (additional acquisition,
co-ownership interests, ¥11.6 billion) in March 2013, and Celestine Shiba Mitsui Building (condominium interests and co-ownership interests incondominium interests, ¥22.5 billion) in May 2013. Total acquisition price was ¥156.8 billion. Furthermore, in May 2013 NBF disposed of NBF
Nihonbashi Muromachi Center Building (50 percent quasi co-ownership of trust beneficiary interests, disposition price of ¥14.1 billion). For
properties already in its portfolio, NBF systematically conducted property management, renovations and new construction to further raise tenantsatisfaction. NBF also worked to secure stable rental revenue by setting appropriate rents for new tenants and revising rents for tenants renewing
their lease contracts while keeping abreast of market trends.
NBF’s real estate portfolio as of June 30, 2013 comprised 74 properties. Total investment on an acquisition price basis was ¥1,066.5 billion.
Total rentable area was 1,055,729m2. Including subleases, the occupancy rate increased 0.2 percentage points from December 31, 2012 to97.8 percent and the number of tenants amounted to 1,524.

Occupancy Rate

Total Investment(Yen in billions)

(%)

1,200

100

1,000

98
96

800

94

600

92

400

90
200
0

0
Jun. 30,
2011

Dec. 31,2011

Jun. 30,
2012

Dec. 31,2012

Jun. 30,
2013

Jun. 30,
2011

Dec. 31,2011

Jun. 30,
2012

Dec. 31,2012

Jun. 30,
2013

NBF Report January – June 201323

Overview of Performance
New operation of the eight properties acquired during the six months ended June 30, 2013 (including additional acquisitions) and full-period
operation of properties acquired in the previous period were major factors that increased earnings. As a result, operating revenues for the six months
ended June 30, 2013 increased ¥4,190 million, or 13.3 percent, to ¥35,720 million. Operating income increased ¥3,195 million, or 25.3 percent, to¥15,816 million. Net income increased ¥3,284 million, or 34.0 percent, to ¥12,941 million. Distribution per unit was ¥16,854.

(Yen in millions)Operating Income From Property
Leasing Activities

40,000(Yen in millions)Operating Revenues

20,00030,00015,00020,00010,00010,0000

5,000

1H/’1120th
Period2H/’11
21st
Period1H/’1222nd
Period2H/’1223rd
Period0

1H/’1324th

Period1H/’1120th
Period2H/’11
21st
Period1H/’1222nd
Period2H/’1223rd
Period1H/’1324th

PeriodDistribution for the Current Period
Distribution per unit for the current period was ¥16,854. NBF expects to distribute all retained earnings at the current period end remaining after
deducting the amount appropriated to the reserve for advanced depreciation of non-current assets as stipulated in Article 66-2 of the Special
Taxation Measures Law of Japan to be eligible for special tax treatment (Special Taxation Measures Law of Japan Article 67-15) that allows NBF todeduct its cash dividends of profits from taxable income.
For the six months ended
June 30, 2013

For the six months ended
December 31, 2012

For the six months ended
June 30, 2012

(Yen in thousands, except per unit amounts)¥12,941,753—
1,278,785
11,662,968
16,854
11,662,968
16,854——Retained earnings
Undistributed earnings
Reserve for advanced depreciation
Total cash distribution(Cash distribution per unit)
Distribution of accumulated earnings(Distribution of accumulated earnings per unit)
Cash distribution in excess of accumulated earnings(Per unit)¥9,657,486
284—
9,657,202
15,754
9,657,202
15,754——¥9,489,337
97—
9,489,240
15,4809,489,240
15,480——Note: Above cash distributions were paid after the period end.

Total Amount of Cash Distribution

Distribution per Unit
(Yen)

(Yen in millions)

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

5,000
0

24

1H/’1120th
Period2H/’11
21st
Period1H/’1222nd
PeriodNBF Report January – June 2013

2H/’1223rd
Period1H/’1324th

Period0

1H/’1120th
Period2H/’11
21st
Period1H/’1222nd
Period2H/’1223rd
Period1H/’1324th

PeriodManagement’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of June 30, 2013, total assets increased by ¥148,869 million to ¥1,047,992 million compared with December 31, 2012. Return on average
total assets (ROA) for the six months ended June 30, 2013 increased to 1.33 percent from 1.09 percent for the previous six-month period.
Current assets increased by ¥4,326 million to ¥42,514 million compared with December 31, 2012. Investment properties increased by¥143,881 million to ¥999,218 million compared with December 31, 2012.

Liabilities
Current liabilities increased by ¥14,356 million to ¥87,516 million compared with December 31, 2012, primarily because of an increase in longterm debt due within one year compared with December 31, 2012.
Long-term debt increased by ¥59,625 million to ¥396,500 million compared with December 31, 2012.
As a result, total interest-bearing liabilities increased by ¥73,625 million to ¥473,250 million compared with December 31, 2012. However, theratio of long-term fixed-rate debt (for which the redemption period at the time of contract or issuance is more than one year) to total interestbearing liabilities decreased to 94.7 percent as of June 30, 2013 from 95.0 percent as of December 31, 2012.
The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities to total assets, increased to 45.2 percent as of June 30, 2013 from44.4 percent as of December 31, 2012.
In addition, NBF worked to diversify funding sources. In January 2013, NBF updated a shelf registration to publicly offer up to ¥200 billion inbonds.

Net assets
Net assets increased by ¥71,580 million to ¥517,584 million compared with December 31, 2012.

Net Assets

Total Assets(Yen in millions)(Yen in millions)1,200,000

600,000

1,000,000

500,000
400,000

800,000

300,000

600,000

200,000
400,000
100,000
0Jun. 30,
2011

Dec. 31,2011

Jun. 30,
2012

Dec. 31,2012

Jun. 30,2013

0Jun. 30,
2011

Dec. 31,2011

Jun. 30,
2012

Dec. 31,2012

Jun. 30,
2013

Funding
Balance of Paid-in Capital
NBF was established on March 16, 2001 with initial paid-in capital of ¥100 million. NBF began investing activities in May 2001 after ¥98,800
million was raised through private placements. As of June 30, 2013, NBF had issued 692,000 units out of 2,000,000 total authorized units. NBF’sunits were listed on the J-REIT section of the Tokyo Stock Exchange in September 2001 upon the completion of a public offering. As theInvestment Trust Law of Japan does not contain any provision for the issue of more than one class of units, NBF’s units comprise the sole class ofunits authorized and issued by NBF.

NBF Report January – June 201325

Issue date

Units issued and outstanding
Increase
Balance(Units)Remarks

Initial capital(private)
May 23, 2001
Private placement
September 8, 2001 Public offering
July 14, 2004
Public offering
Third
party
August 11, 2004 allocation
August 10, 2005 Public offering
March 16, 2006
Public offering
Third
party
March 29, 2006
allocation
February 4, 2008 Public offering
Third party
March 4, 2008
allocation
January 26, 2011 Public offering
party
February 22, 2011 Third
allocation
January 25, 2012 Public offering
party
February 21, 2012 Third
allocation
January 23, 2013 Public offering
January 31, 2013 Third party
allocation
March 16, 2001

Paid-in capital
Increase

Balance

Notes(Yen in millions)

200

200

100

Note 1

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

98,80049,99958,838100¥

98,900148,899
207,737

Note 2
Note 3Note 44,000

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

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

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

Note 1034,000576,000

26,957413,133

Note 112,500

578,500

1,982

415,115

Note 1230,000608,500

18,172433,287

Note 134,500

613,000

2,726

436,013

Note 1474,000687,000

63,973499,986

Note 155,000

692,000

4,323

504,309

Note 16

Notes: 1. NBF was established with initial capital of ¥500,000 per unit.
2. Follow-on private offering at ¥500,000 per unit to raise funds for acquisition of 22 properties.
3. Public offering of new units for ¥625,000 per unit (excluding underwriting fee: ¥603,125) to repay debt and to fund property acquisition.
4. Public offering of new units for ¥759,500 per unit (excluding underwriting fee: ¥735,475) to repay debt, etc.
5. Additional issue of new units (third party allocation) for ¥735,475 per unit undertaken pursuant to the public offering in Note 4.
6. Public offering of new units for ¥916,300 per unit (excluding underwriting fee: ¥887,782) to repay debt and to fund property acquisition.
7. Public offering of new units for ¥1,019,200 per unit (excluding underwriting fee: ¥988,000) to repay debt and to fund property acquisition.
8. Additional issue of new units (third party allocation) for ¥988,000 per unit undertaken pursuant to the public offering in Note 7.
9. Public offering of new units for ¥1,205,400 per unit (excluding underwriting fee: ¥1,168,500) to repay debt and to fund property acquisition.
10. Additional issue of new units (third party allocation) for ¥1,168,500 per unit undertaken pursuant to the public offering in Note 9.
11. Public offering of new units for ¥818,025 per unit (excluding underwriting fee: ¥792,855) to repay debt and to fund property acquisition.
12. Additional issue of new units (third party allocation) for ¥792,855 per unit undertaken pursuant to the public offering in Note 11.
13. Public offering of new units for ¥624,975 per unit (excluding underwriting fee: ¥605,745) to repay debt and to fund property acquisition.
14. Additional issue of new units (third party allocation) for ¥605,745 per unit undertaken pursuant to the public offering in Note 13.
15. Public offering of new units for ¥891,800 per unit (excluding underwriting fee: ¥864,500) to repay debt and to fund property acquisition.
16. Additional issue of new units (third party allocation) for ¥864,500 per unit undertaken pursuant to the public offering in Note 15.

Market Price of Units
High/Low (closing price) of units on the TSE:

High
Low

For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen)

For the six months ended
June 30, 2012

¥1,435,000
892,000¥904,000
737,000¥809,000
629,000

Borrowings
Borrowings from financial institutions as of June 30, 2013 are shown below.
Short-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

Repayment
methodUse of
funds

Notes

Bulletpayment(Note 4)

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

Sumitomo Mitsui Trust Bank, Limited.
¥10,000
Sumitomo Mitsui Banking Corporation
10,000Mitsubishi UFJ Trust and Banking Corporation
5,000
Total short-term loans
26

NBF Report January – June 2013

¥25,000

0.2%
0.2%
0.2%

July 31, 2013
July 31, 2013
July 31, 2013

Management’s Discussion and Analysis

Long-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.8%
1.5%
1.8%
2.0%
2.4%
2.2%
2.2%
1.3%
1.8%
1.8%
1.5%
1.1%
0.8%
0.7%
1.0%
1.6%
1.8%
1.0%
0.8%
0.6%
1.0%
1.6%
1.2%
1.1%
1.2%
1.7%
1.2%
0.7%
0.9%
1.9%
1.8%
1.1%
1.0%
1.0%
2.1%
1.9%
1.7%
1.8%
1.0%
1.5%
2.3%
1.6%
1.9%
1.1%
0.9%
1.2%
1.0%
1.5%
1.0%
1.0%
0.6%
0.5%
2.0%
1.0%
1.0%
1.0%
0.7%
1.4%
1.3%
1.3%
1.7%
2.1%
2.0%
1.0%
1.0%

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
April 28, 2019
August 30, 2019
July 2, 2023
July 31, 2014
September 30, 2014
March 4, 2016
March 1, 2019
July 31, 2020
February 26, 2021
June 30, 2021
September 30, 2013
September 30, 2014
June 1, 2017
July 2, 2019
February 28, 2020
May 29, 2020
September 30, 2013
June 1, 2018
December 30, 2019
March 5, 2021
July 31, 2013
November 30, 2018
February 7, 2017
February 28, 2022
April 28, 2014
June 30, 2014
December 30, 2022
February 28, 2023
April 28, 2023
May 23, 2018
May 23, 2016
July 16, 2014
February 3, 2016
July 19, 2017
September 11, 2015
May 30, 2016
December 13, 2013
May 29, 2014
February 13, 2020
March 29, 2019
March 30, 2021
November 1, 2022
May 30, 2025
February 28, 2023
June 1, 2017
June 30, 2017
July 12, 2017
October 30, 2015
June 1, 2017
March 8, 2019
June 1, 2017
December 30, 2016
April 1, 2015
October 19, 2018
May 31, 2019
December 15, 2014
July 11, 2014
August 31, 2015
July 2, 2021
May 29, 2020

Repayment
methodUse of
funds

Notes

(Note 4)

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

(Yen in millions)

Development Bank of Japan Inc.

¥ 4,000
10,00010,00010,00010,000
4,000
8,250
10,000Mitsubishi UFJ Trust and Banking Corporation 3,000
1,000
7,000
15,00015,00010,0005,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
8,000
4,000
4,000
5,000
10,0007,000
Sumitomo Mitsui Trust Bank, Limited.
5,000
10,00010,0005,000
Mizuho Bank, Ltd.
8,000
7,000
2,000
10,000Sumitomo Mitsui Banking Corporation
6,000
1,000
4,000
10,0005,000
Sumitomo Life Insurance Company
7,000
5,000
5,000
3,000
5,000
Zenkyoren (The National Mutual Insurance 10,000
Federation of Agricultural Cooperatives)
10,000
MITSUI LIFE INSURANCE COMPANY, LIMITED
3,000
3,000
2,000
2,000
2,000
2,000
2,000
Mizuho Trust Banking Co., Ltd.
10,000
THE BANK OF FUKUOKA, Ltd.
2,000
2,000
4,000
Resona Bank, Limited.
3,000
1,000
3,000
Shinkin Central Bank
3,000
3,000
Nippon Life Insurance Company
2,000
2,000
2,000
TAIYO LIFE INSURANCE COMPANY
1,000
2,000
1,000
1,000
1,000

(Note 2)
(Note 3)

Bulletpayment

NBF Report January – June 201327

Lender

Balance

Averageinterest rate (%)

Due on(Note 1)

Repayment
method

2.0%
1.4%
1.6%
0.9%
1.7%
1.0%
1.0%
0.7%
0.6%
0.5%
1.4%
1.8%
1.8%
0.9%
1.1%
1.1%
1.3%
0.7%
0.6%
0.4%
1.9%
0.7%
1.5%

October 31, 2014
October 4, 2013
February 3, 2015
March 29, 2019
May 29, 2014
February 25, 2016
May 29, 2020
March 3, 2017
June 30, 2017
April 27, 2018
December 2, 2013
June 26, 2014
March 30, 2015
January 4, 2017
May 1, 2019
September 4, 2020
April 27, 2022
March 3, 2017
March 27, 2020
December 28, 2015
April 30, 2014
May 31, 2018
May 30, 2025

Bulletpayment

Use of
funds

Notes

(Note 4)

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

(Yen in millions)

DAIDO LIFE INSURANCE COMPANY

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

The Chugoku Bank, Limited
The Daishi Bank, Ltd.
The Hachijuni Bank, Ltd.
The Yamaguchi Bank, Ltd.
Meiji Yasuda Life Insurance Company
The Joyo Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.
The Iyo Bank, LTD.
The Gunma Bank, Ltd.
Shinsei Bank, Limited

Total long-term loans
Total borrowings (Note 6)¥378,250¥403,250

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

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥26,750¥62,750¥23,750¥48,750

NBF Bonds
Issue

No. 3 Unsecured Bonds
No. 7 Unsecured Bonds
No. 9 Unsecured Bonds
No. 10 Unsecured Bonds
No. 11 Unsecured Bonds
No. 12 Unsecured Bonds
No. 13 Unsecured Bonds
Total (Note 6)

Issue dateJune 12, 2003
November 9, 2005
May 24, 2007
May 24, 2007
January 28, 2010
September 15, 2011
June 26, 2013

Balance as ofJune 30, 2013
(Yen in millions)¥10,000
10,00010,00010,00010,00010,00010,000¥70,000

Coupon

2.00%
1.85%
1.74%
2.04%
1.23%
0.64%
1.17%

Maturitydate

Redemption

June 12, 2018
Bullet payment
November 9, 2015 Bullet payment
May 23, 2014
Bullet payment
May 24, 2017
Bullet payment
January 28, 2015
Bullet payment
September 15, 2016 Bullet payment
June 26, 2023
Bullet payment

Use ofproceeds

Notes

Note 1
Note 1
Note 1
Note 1
Note 1
Note 1
Note 1

Notes 2 and 4
Notes 3 and 5
Notes 3 and 5
Notes 3 and 5
Notes 3 and 5
Notes 3 and 5
Notes 3 and 5

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

Investment
corporation bonds
28

NBF Report January – June 2013

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥10,000¥10,000¥10,000¥20,000¥10,000

Management’s Discussion and Analysis

Others
NBF has security deposits totaling ¥46,311 million as of June 30, 2013.

Capital Expenditures
1. Planning
As of June 30, 2013, NBF is planning the following capital expenditures for the renovation of its properties. The amounts below
include repairs and maintenance costs that will be expensed as incurred. Moreover, in addition to a steady program of
expenditures for construction, repair and renovation of facilities, a program of renewal construction is being implemented in order
to increase competitive power in the market as well as to increase the level of tenant satisfaction based on the results of tenantsatisfaction surveys and neighboring competitive building specification surveys, etc.

Name of property

Ikebukuro East
Yokohama ST Bldg.
Yokohama ST Bldg.
NBF Shinkawa Bldg.

Objective

Renovation of air conditioning
Renovation of air conditioning
Renovation of air conditioning
Renovation of air conditioning(West Building)
NBF Shinkawa Bldg.
Renovation of power generation facilities(West Building)
NBF Shinkawa Bldg.
Renovation of power generation facilities(East Building)
NBF Shinkawa Bldg.
Renovation of air conditioning(East Building)
Ryukakusan Bldg.
Renovation of air conditioning
Shibuya Garden Front
Renovation of air conditioning
NBF Shinkawa Bldg.
Renovation of air conditioning(East Building)
GSK Bldg.
Renovation of air conditioning
GSK Bldg.
Renovation of air conditioning
NBF Shin-Urayasu Tower
Earthquake resistance improvement ofemergency elevator
NBF Matsudo Bldg.
Renovation of air conditioning
NBF Matsudo Bldg.
Renovation of air conditioning
NBF Niigata Telecom Bldg. Renovation of disaster prevention
equipment
Sumitomo Densetsu Bldg. Renovation of restroom
Sumitomo Densetsu Bldg. Renovation of restroom
Parale Mitsui Bldg.
Renovation of air conditioning
NBF Utsunomiya Bldg.
Renovation of exterior
NBF Sakai-Higashi Bldg.
Renovation of access control system
NBF Sapporo Minami Nijo Bldg. Renovation of restroom
NBF Atsugi Bldg.
Renovation of restroom
NBF Hiroshima Tatemachi Bldg. Renovation of elevator
NBF Sapporo Minami Nijo Bldg. Renovation of restroom
NBF Sakai-Higashi Bldg.
Renovation of air conditioning
NBF Matsudo Bldg.
Renovation of lighting equipment
NBF Shijo Karasuma Bldg. Renovation of access control system
NBF Shijo Karasuma Bldg. Renovation of exterior

Estimated amounts
Payment for thecurrent period
Cumulative(from January 1, 2013 amount paid
to June 30, 2013))(Yen in millions)

Estimated
duration

Totalamounts

From January 2014 to June 2014
From January 2014 to June 2014
From July 2013 to December 2013
From February 2014 to June 2014

¥441
262
225
195

¥—
—
—
—

¥—
—
—
—

From July 2013 to December 2013

194

—

—

From July 2013 to December 2013

188

—

—

From February 2014 to June 2014

185

—

—

From September 2013 to November 2013
From March 2014 to June 2014
From July 2013 to December 2013

171
166
139

—
—
—

—
—
—

From July 2013 to December 2013
From January 2014 to June 2014
From August 2013 to November 2013

116
116
109

—
—
—

—
—
—

From September 2013 to November 2013
From January 2014 to March 2014
From April 2014 to June 2014

107
87
68

—
—
—

—
—
—

From August 2013 to November 2013
From February 2014 to May 2014
From October 2013 to December 2013
From July 2013 to August 2013
From April 2014 to June 2014
From October 2013 to December 2013
From July 2013 to December 2013
From February 2014 to June 2014
From January 2014 to March 2014
From September 2013 to December 2013
From March 2014 to May 2014
From March 2014 to June 2014
From March 2014 to April 2014

63
58
52
43
42
42
41
40
36
34
29
23
16

—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—

NBF Report January – June 201329

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥1,704 million in capital expenditures
together with ¥1,085 million for repairs and maintenance expenses.
Name of property

Objective

Expenditure(Yen in millions)

PeriodShinjuku Mitsui Bldg. No. 2

Renovation of air conditioning, renovation of restroom, renovation of lighting equipment
and emergency lighting equipment, etc.
Aqua Dojima NBF Tower
Renovation of wall through air conditioning, exchange of tenant entrance key, wiring
maintenance, renovation of emergency rectifier, etc.
Nakanosakaue Sunbright Twin Leasehold improvement, raised floor laying, renovation of rooftop cooling tower fan, etc.
NBF Hibiya Bldg.
Renovation of air conditioning, renovation of water supply pipe, renovation ofcalorimeter, etc.
NBF Sakai-Higashi Bldg.
Renovation of air conditioning, renovation of watt-hour meter, renovation of restroom
From January 2013
wash basin, etc.
to June 2013
Ryukakusan Bldg.
Renovation of air conditioning, renovation of air supply and exhaust fan for parking,installation of rooftop equipment foundation, etc.
NBF Unix Bldg.
Renovation of air conditioning, improvement of cold/warm water pump and coolingwater pump, renovation of heater for private power generator fuel tank, etc.
NBF Shijo Karasuma Bldg.
Renovation of all heat exchanges, compartment alteration work, extension of drive
way surveillance camera, etc.
Other buildings
Asset preservation construction and other renewal construction to improve tenantsatisfaction.
Total

¥ 176
173
120
104
63
55
40
14
959
¥1,704

3. Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements andrepairs and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of June 30, 2013

As of December 31, 2012
(Yen in millions)¥1,7103,432
4,629¥2,907

Reserve balance at the beginning of the period
Amount accumulated in the current period
Withdrawal from reserves in the current period
Amount carried forward¥1,1772,907
2,374¥1,710Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF’s ownership interest; the amount of reserves attributable to other owners has been excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management of properties, for the
purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to ¥5,599 million as of June 30, 2013.

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen in millions)

For the six months ended
June 30, 2012

¥1,241
42
52
12
14
258
¥1,619¥1,087
42
47
12
14
93
¥1,295¥1,050
40
47
14
14
108
¥1,273Item

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

30

NBF Report January – June 2013

Management’s Discussion and Analysis

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

(Yen in millions)

Acquisitions
Name of building

Shinbashi M-SQUARE
Sumitomo Mitsui Banking Nagoya Bldg.
NBF Osaki Bldg.
Panasonic Tokyo Shiodome Bldg.
Gate City Ohsaki (Additional Acquisition)
Ikebukuro East
Shibuya Garden Front (Additional Acquisition)
Celestine Shiba Mitsui Bldg.
Total

Date

Acquisition price (Note 1)

February 1, 2013
February 1, 2013
February 28, 2013
March 12, 2013
March 22, 2013
March 25, 2013
March 29, 2013
May 31, 2013

¥ 11,900
14,90066,6605,075
15,5508,630
11,56922,500¥156,784

Note: 1. “Acquisition price” does not include national consumption tax, local consumption tax and miscellaneous costs of acquisition.

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 bank deposits or bankdeposits included in assets held in trust.

3. Transactions with Related Parties and Transactions with Major Shareholders of AssetManagement Company(1) Ongoing Transactions
Category

Total amount

Breakdown of transactions with related parties, etc.
Mitsui Fudosan Co., Ltd.
Daisetsu Properties Godo Kaisha (LLC)
Sumitomo Life Insurance Company
Total

Amount of purchase price, etc. (Note 2) (Note 3)
Purchase price, etc. (Yen in millions)
Sale price, etc. (Yen in millions)¥156,784
Amount of purchasesfrom related parties, etc.
¥ 78,646 (50.2)¥14,100
Amount of sales from
related parties, etc.
¥14,100 (100.0)¥ 49,950 (31.9)
14,900 (9.5)
13,796 (8.8)¥ 78,646 (50.2)¥14,100 (100.0)
—
(—)
—
(—)
¥14,100 (100.0)

NBF Report January – June 201331

Management’s Discussion and Analysis(2) Fees Paid for the Period from January 1, 2013 to June 30, 2013
Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Property intermediary fees

¥2,273

Office management fees, etc.
(Note 4)
Property maintenance fees

1,402

Leasing related service fees

58

3,358

Amount ofpayment (B)(Yen in millions)

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

¥ 129
129
1,360
37
544
390
225
122
5
0
15
12
0

B/A

5.7%
5.7%
97.0%
2.6%
16.2%
11.6%
6.7%
3.6%
0.2%
0.0%
25.5%
19.8%
0.3%

Notes: 1. “Related parties” are defined as related parties of asset management companies under asset management agreement with NBF as defined in Article 123 of Order for
Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 27 of the Regulations regarding management report of theInvestment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset managementcompanies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the period from January 1, 2013 to June 30, 2013,transactions with and fees paid to, Mitsui Fudosan Co., Ltd., NBF Office Management Co., Ltd., First Facilities Co., Ltd., Mitsui Fudosan Building Management Co., Ltd., First
Facilities West Co., Ltd., First Facilities Yokohama Co., Ltd., Mitsui Fudosan Housing Lease Co., Ltd. and Mitsui Fudosan Realty Co., Ltd. which meet either of the said definitions, are as described above.
2. Figures indicate contractual sales prices.
3. Figures indicate percentages of total prices.
4. In terms of properties for which NBF has not entrusted office management businesses to Mitsui Fudosan Co., Ltd. due to its master leasing (12 properties: Gate City Ohsaki,
Nishi-Shinjuku Mitsui Bldg., Toranomon Kotohira Tower, Nakameguro GT Tower, Celestine Shiba Mitsui Bldg., Higashi Gotanda Square, NBF Ogawamachi Bldg., ShinKawasaki Mitsui Bldg., Parale Mitsui Bldg., Shinanobashi Mitsui Bldg., Sakaisuji-Honmachi Center Bldg. and Yotsuya Medical Bldg.), NBF has entrusted them to NBF Office
Management Co., Ltd. as business representative of the property owners or lessors.
5. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.

(Yen in millions)

Mitsui Fudosan Facilities Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
Uniliving Co., Ltd.
Mitsui Designtec Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Fudosan Retail Management Co., Ltd.
Mitsui Fudosan Realty Co., Ltd.
Daiichi Engei Co., Ltd

¥547
363
219
165
12
11
9
3
2
0

6. On April 1, 2013, First Facilities Co., Ltd and LaLaport Management Co., Ltd. have changed each company name to Mitsui Fudosan Facilities Co., Ltd. and Mitsui
Fudosan Retail Management Co., Ltd.

32

NBF Report January – June 2013

Balance Sheets
NIPPON BUILDING FUND INC.
As of June 30, 2013 and December 31, 2012

As ofJune 30, 2013

As ofDecember 31, 2012
(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents (Note 3)
Tenant receivables
Other current assets
Total current assets
Investment Properties:
Land including trust accounts (Notes 4, 13)
Buildings and improvements including trust accounts (Notes 4, 13)
Other tangible assets (Notes 4, 13)
Less: accumulated depreciation (Notes 4, 13)
Leasehold rights in trust accounts and other intangible assets (Note 13)
Total investment properties, net
Other Assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans (Notes 3, 6)
Long-term debt due within one year (Notes 3, 6)
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term Debt (Notes 3, 6)
Tenant Security Deposits Including Trust Accounts (Note 3)
Other Liabilities
Total Liabilities
Net Assets (Note 5)
Unitholders’ Equity
Unitholders’ capital
Units authorized: 2,000,000 units
Units issued and outstanding: 692,000 units as of June 30, 2013 and613,000 units as of December 31, 2012
Retained earnings
Total Net Assets
Total Liabilities and Net Assets¥

39,760400
2,354
42,514¥ 37,265
321
602
38,188663,456
387,595
12,265(99,801)35,703
999,218
6,260¥1,047,992

564,252
338,515
10,839(93,917)35,648855,337
5,598¥899,123¥

25,00051,750
4,861
4,392
1,513
87,516
396,500
46,311
81
530,408¥ 20,000
42,750
4,691
3,950
1,769
73,160336,875
43,00579453,119504,309

436,013

13,275517,584¥1,047,992

9,991
446,004¥899,123

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

NBF Report January – June 201333

Statements of Income
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2013, December 31, 2012 and June 30, 2012

For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen in millions)

For the six months ended
June 30, 2012

Operating Revenues:
Rental (Note 7)
Other revenues related to property leasing (Note 7)
Gain on sale of investment property (Note 8)¥30,752
2,871
2,097

¥28,516
3,014—¥27,710
2,534—

Total Operating Revenues

35,72031,53030,244

Operating Expenses:
Property management fees (Note 7)
Real estate taxes (Note 7)
Repairs and maintenance (Note 7)
Insurance (Note 7)
Other rental expenses (Note 7)
Depreciation and amortization (Note 7)
Asset management fees
Other operating expenses
Total Operating Expenses
Operating Income

4,741
2,900
1,085
37
2,824
6,698
1,241
378
19,904
15,816

4,518
2,738
1,046
35
3,086
6,191
1,087
208
18,90912,621

4,346
2,785
732
34
2,489
6,139
1,050
223
17,79812,446

4
255

3
—

4
—

Non-Operating Expenses:
Interest expense
Amortization of bond issuance costs
New investment units issuance costs
Other non-operating expenses, net(3,001)
(11)
(85)
(36)

(2,917)
(11)
—
(38)

(2,863)
(11)
(47)
(39)

Ordinary Income

12,942

9,658

9,490

Income before Income Taxes
Current and deferred income taxes (Note 9)

12,942
(1)

9,658
(1)

9,490
(1)

Net Income¥12,941¥ 9,657¥ 9,489

Operating Revenues and Expenses

Non-Operating Revenues and Expenses
Non-Operating Revenues:
Interest income
Property tax refund and interest on tax refund

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

34

NBF Report January – June 2013

Statements of Changes in Net Assets
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2013, December 31, 2012 and June 30, 2012

(Yen in millions)
Number of
Units

Unitholders’CapitalRetained
Earnings

Total

Balance as of December 31, 2011

578,500¥415,115¥ 9,127¥424,242

Cash dividends declaredIssuance of new units through public offering as of January 25, 2012
Issuance of new units through allocation to a third party as ofFebruary 21, 2012
Net income—
30,000—18,172(8,793)—(8,793)
18,172

4,500
—

2,726
—

—
9,489

2,726
9,489

Balance as of June 30, 2012

613,000

436,0139,823

445,836————(9,489)9,657(9,489)9,657

Balance as of December 31, 2012

613,000

436,0139,991

446,004

Cash dividends declaredIssuance of new units through public offering as of January 23, 2013
Issuance of new units through allocation to a third party as ofJanuary 31, 2013
Net income—
74,000—63,973(9,657)—(9,657)
63,973

5,000
—

4,323
—

—
12,941

4,323
12,941

Balance as of June 30, 2013

692,000¥504,309¥13,275¥517,584

Cash dividends declared
Net income

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

NBF Report January – June 201335

Statements of Cash FlowsNIPPON BUILDING FUND INC.
For the six months ended June 30, 2013, December 31, 2012 and June 30, 2012

For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen in millions)

For the six months ended
June 30, 2012

¥ 12,942
6,698
11
3,001
(79)
62
442
11,998(2,773)¥ 9,658
6,191
11
2,917
(24)
554
119
—
(2,887)¥ 9,490
6,139
11
2,863
(2)
304
35
—
(2,937)(1,875)(285)
30,142—329
16,868—(381)
15,522(162,268)
(56)
6,465
(3,159)(6)(752)(159,776)(31,095)—
2,362(1,221)(9)(260)(30,223)(25,276)—
2,113(1,759)(10)(275)(25,207)

5,000
85,000(16,375)
68,210(51)(9,655)132,129
2,495
37,265¥ 39,760(9,000)46,000(11,375)——(9,489)16,1362,781
34,484¥ 37,265

7,000
21,000(31,375)
20,851—(8,793)8,683(1,002)35,486¥ 34,484

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Amortization of bond issuance costs
Interest expense
Increase in tenant receivables
Increase in accounts payable
Increase in rents received in advance
Decrease in investment properties due to sale
Cash payments of interest expense
Decrease in consumption tax
refund receivable
Others, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Payments for purchases of intangible assets
Proceeds from tenant security deposits
Payments for tenant security deposits
Payments for security deposits paid to lessors
Others, net
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Net proceeds from (repayment of) short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of new units
Payments for bond issuance 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 Period
Cash and Cash Equivalents at the End of Period
The accompanying notes to financial statements are an integral part of these statements.

36

NBF Report January – June 2013

Notes to Financial Statements
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2013, December 31, 2012 and June 30, 2012

Note 1

Organization and Basis of Presentation

Organization
Nippon Building Fund Inc. (hereinafter "NBF") was formed on March 16, 2001 as an investment corporation under the Law Concerning
Investment Trusts and Investment Corporations of Japan (hereinafter the Investment Trust Law of Japan) with Mitsui Fudosan Co., Ltd.,
Sumitomo Mitsui Trust Bank, Limited., and Nippon Building Fund Management Ltd. (hereinafter "NBFM") acting as sponsors. Registration
with the Kanto Local Finance Bureau of the Ministry of Finance was completed on May 10, 2001 and NBF started acquisition of officeproperties on May 23, 2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset management company, isengaged in acquiring, managing, leasing, and renovating office properties. Mitsui Fudosan Co., Ltd. currently owns 43% of NBFM while
Sumitomo Life Insurance Company owns 35% and the remaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering of units. Those units are listedon the J-REIT section of the Tokyo Stock Exchange.
As of June 30, 2013, NBF had ownership or beneficiary interests in 74 office properties containing approximately 1,055,729 square
meters of rentable office space. As of June 30, 2013, NBF had leased office space to 1,160 tenants engaged in a variety of businesses.
The occupancy rate for the office properties was approximately 98.2%.

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

Note 2

Summary of Significant Accounting Policies

Cash and Cash Equivalents
NBF considers all highly liquid investments with original maturity of three months or less to be cash and cash equivalents.

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

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

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

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

Investment Corporation Bond Issuance Costs
Deferred investment corporation bond issuance costs are amortized using the straight-line method over the respective terms of the bonds.

New Investment Units Issuance Cost
The issuance costs of new investment units are expensed when incurred.

NBF Report January – June 201337

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

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of newly purchased
properties, NBF capitalizes a portion of the real estate taxes that relate to a period from the purchase date of each property until the endof the calendar year as part of the acquisition cost of the relevant property. Capitalized real estate taxes amounted to ¥741 million for theperiod ended June 30, 2013, ¥56 million for the period ended December 31, 2012 and ¥133 million for the period ended June 30, 2012.

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

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

Note 3Financial Instruments

Status of Financial Instruments
Policy for Financial Instruments
NBF procures funds for acquisition of assets and repayment of debt, which includes repayment of tenant security deposits, loans andinvestment corporation bonds, through issuance of new investment units, bank loans and issuance of investment corporation bonds, withthe aim of ensuring steady asset growth and stable earnings from a mid- and long-term angle.
As a general rule NBF invests surplus funds in deposits considering safety of the investments.
NBF may enter into derivative transactions solely for the purpose of reducing interest rate risks and other risks arising from liabilities.
NBF does not engage in speculative transactions. Currently NBF is not engaged in any derivative transactions.

Financial Instruments, Their Risks and Risk Management System
Deposits are used for investment of NBF’s surplus funds. These deposits are exposed to credit risks such as bankruptcy of thedepository financial institutions. NBF limits credit risk by using only short-term deposits in financial institutions with high credit ratings.
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties and repay outstanding loans
and bonds. While these loans and bonds are exposed to liquidity risk, such risk is managed in the following ways such as diversifying themeans of funding and lending institutions, dispersing repayment dates, establishing committed credit line, keeping sufficient liquidity in
hand, and monitoring cash flows projected monthly.
Short-term loans are exposed to interest-rate fluctuation. NBF limits the impact of such risks by maintaining the debt-asset ratio low
and the level of long-term fixed-rate debt high.
Tenant security deposits are exposed to liquidity risk arising from vacating of properties by tenants due to the termination of contract.
NBF manages this risk by monitoring forecasted cash flows on a monthly basis to ensure it has sufficient funds.

Supplemental Explanation regarding Fair Values of Financial Instruments
The fair value of financial instruments is based on their observable market value, if available. When there is no observable market value
available, fair value is based on a price that is reasonably estimated. Since various factors are reflected in estimating the fair value, different
assumptions and factors could result in a different value.

38

NBF Report January – June 2013

Notes to Financial Statements

Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of June 30, 2013 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from the following table (See Note 2. below).
(Yen in millions)

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

Book value

Fair value

Difference¥ 39,760¥ 39,760¥ 39,760¥ 39,760¥¥¥ 25,000
51,750396,500¥473,250¥ 25,000
52,142403,882¥481,024

¥

—
—

—
392
7,382
¥7,774

Notes: 1. Methods to Estimate Fair Value of Financial Instruments
Assets:(1) Cash and cash equivalents
Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments aresettled within a short term period.
Liabilities:(1) Short-term loans
Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments aresettled within a short term period.
(2) Long-term debt due within one year
Long-term debt due within one year which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference¥10,000¥10,123¥123(1) Investment corporation bonds(2) Long-term loans
41,75042,019269
Total¥51,750¥52,142¥3921) Investment corporation bonds
Fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fair values arecalculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into consideration theremaining term of the investment corporation bonds and their credit risk.
2) Long-term loans
Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
(3) Long-term debt
Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference¥ 60,000¥ 61,691¥1,691(1) Investment corporation bonds(2) Long-term loans
336,500
342,191
5,691
Total¥396,500¥403,882¥7,382
1) Investment corporation bonds
Fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fair values arecalculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into consideration theremaining term of the investment corporation bonds and their credit risk.
2) Long-term loans
Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.

NBF Report January – June 201339

Book value, fair value and difference between the two as of December 31, 2012 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from the following table (See Note 2. below).
(Yen in millions)

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

Book value

Fair value

Difference¥ 37,265¥ 37,265¥ 37,265¥ 37,265¥¥¥ 20,000
42,750336,875¥399,625¥ 20,000
43,045
348,761¥411,806

¥

—
—

—
295
11,886¥12,181

Notes: 1. Methods to Estimate Fair Value of Financial Instruments
Assets:(1) Cash and cash equivalents
Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments aresettled within a short term period.
Liabilities:(1) Short-term loans
Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments aresettled within a short term period.
(2) Long-term debt due within one year
Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
(3) Long-term debt
Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference(1) Investment corporation bonds¥ 60,000¥ 61,985¥ 1,985(2) Long-term loans
276,875
286,776
9,901
Total¥336,875¥348,761¥11,886
1) Investment corporation bonds
Fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fair values arecalculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into consideration theremaining term of the investment corporation bonds and their credit risk.
(2) Long-term loans
Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
2. Financial Instruments for Which It Is Very Difficult to Estimate the Fair Value.
As of June 30, 2013
¥46,311

Tenant security deposits including trust accounts(Yen in millions)
As of December 31, 2012
¥43,005

Security deposits from tenants are not subject to fair value disclosure because they are not marketable, and actual deposit period is not estimable as leases may be cancelled, renewed or re-signed even if a lease term is set in the lease contract, that makes a reasonable estimate of future cash flows difficult.
3. Redemption Schedule for Monetary Claims as of June 30, 2013

Cash and cash equivalents

Due within
one year¥39,760

Due after one
to two years—

Due after two
to three years—

Due after three
to four years—

Due after four
to five years—(Yen in millions)Due after fiveyears—

Due after two
to three years—

Due after three
to four years—

Due after four
to five years—(Yen in millions)Due after fiveyears—

Due after three
to four years¥—
20,00023,750¥43,750

Due after four
to five years¥—
10,00048,750¥58,750(Yen in millions)Due after five
years
¥
—
10,000174,500¥184,500

Redemption Schedule for Monetary Claims as of December 31, 2012

Cash and cash equivalents

Due within
one year¥37,265

Due after one
to two years—

4. Repayment Schedule for Loans and Investment Corporation Bonds as of June 30, 2013

Short-term loans
Investment corporation bonds
Long-term loans
Total

40

NBF Report January – June 2013

Due within
one year¥25,000
10,00041,750¥76,750

Due after one
to two years¥—
10,00026,750¥36,750

Due after two
to three years¥—
10,00062,750¥72,750

Notes to Financial Statements

Repayment Schedule for Loans and Investment Corporation Bonds as of December 31, 2012

Short-term loans
Investment corporation bonds
Long-term loans
Total

Note 4

Due within
one year¥20,000—
42,750¥62,750

Due after one
to two years¥—
10,00036,750¥46,750

Due after two
to three years¥—
20,00030,750¥50,750

Due after three
to four years¥—
10,00040,750¥50,750

Due after four
to five years¥—
10,00039,750¥49,750(Yen in millions)Due after five
years
¥
—
10,000128,875¥138,875

Schedule of Tangible Assets of Investment Properties

Tangible assets as of June 30, 2013 and December 31, 2012 consisted of the following:
As of June 30, 2013

As of December 31, 2012
(Yen in millions)

Acquisition
costs

Land
Land in trust
Land including trust total
Buildings and improvements
Buildings and improvements in trust
Building and improvements including
those in trust total
Structures
Machinery and equipment
Tools, furniture and fixtures
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Construction in process
Construction in process in trust
Other tangible assets total
Total

Note 5

Accumulated
depreciation

Book value

Acquisition
costs

Accumulated
depreciation

Book value¥ 309,480
353,976
663,456
203,175
184,420¥———(41,963)(52,398)¥309,480
353,976
663,456
161,212132,022¥257,640
306,612564,252
183,251
155,264¥———(38,702)(50,158)¥257,640
306,612564,252
144,549
105,106

387,595
3,026
1,721
1,368
2,797
1,779
1,574
—
—
12,265¥1,063,316(94,361)(1,260)
(826)
(638)
(900)
(1,004)(812)——(5,440)¥(99,801)

293,234
1,766
895
730
1,897
775
762
—
—
6,825
¥963,515

338,515
2,830
1,568
1,265
2,139
1,655
1,367
11
4
10,839¥913,606(88,860)(1,189)
(750)
(575)
(840)
(939)
(764)
—
—
(5,057)¥(93,917)

249,655
1,641
818
690
1,299
716
603
11
4
5,782
¥819,689

Net Assets

NBF issues only non-par value units in accordance with the Investment Trust Law of Japan and all of the issue prices of new units aredesignated as stated capital. NBF maintains at least ¥50 million as the minimum net assets as required by the Investment Trust Law of Japan.

NBF Report January – June 201341

Note 6

Short-Term Loans and Long-Term Debt

Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest rates on shortterm loans outstanding are floating rates and on June 30, 2013 and December 31, 2012 ranged from 0.23% to 0.45%. Long-term debt is
at fixed rates and as of June 30, 2013 and December 31, 2012 consisted of the following:
As of June 30, 2013

As of December 31, 2012
(Yen in millions)

Unsecured loans due 2013 to 2025 principally from banks and insurancecompanies with interest rates mainly ranging from 0.4% to 2.4%
1.74% unsecured bonds due 2014 (Note 1)
1.23% unsecured bonds due 2015 (Note 1)
1.85% unsecured bonds due 2015 (Note 1)
0.64% unsecured bonds due 2016 (Note 1)
2.04% unsecured bonds due 2017 (Note 1)
2.00% unsecured bonds due 2018 (Note 2)
1.17% unsecured bonds due 2023 (Note 1)¥378,250
10,00010,00010,00010,00010,00010,00010,000448,250
51,750¥396,500

Less: amount due within one year

¥319,625
10,00010,00010,00010,00010,00010,000—379,625
42,750¥336,875

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

The annual maturities of long-term debt as of June 30, 2013 were as follows:(Yen in millions)Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years¥ 36,750
72,75043,75058,750184,500

During the period ended June 30, 2013, NBF obtained committed credit lines of ¥60 billion with certain financial institutions to reducerefinancing risk. The unused amount of such committed credit lines was ¥60 billion on June 30, 2013.

42

NBF Report January – June 2013

Notes to Financial Statements

Note 7

Rental Revenues and Expenses

Rental revenues and expenses for the periods ended June 30, 2013, December 31, 2012, and June 30, 2012 were as follows:

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

Note 8For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen in millions)

For the six months ended
June 30, 2012¥27,727
2,910
115
30,752¥25,551
2,849
116
28,516¥24,957
2,640
113
27,710

648
222
1,893
52
56
2,871
33,623

604
184
2,064
105
57
3,014
31,530

578
181
1,636
46
93
2,534
30,244

4,741
2,900
1,085
37
2,824
6,698
18,285

4,518
2,738
1,046
35
3,086
6,191
17,614

4,346
2,785
732
34
2,489
6,139
16,525¥15,338¥13,916¥13,719

Gain on Sale of Investment Property

Gain on sale of investment property for the period ended June 30, 2013 was as follows. No investment properties were sold during theperiods ended December 31, 2012 and June 30, 2012.

NBF Nihonbashi Muromachi Center Bldg.
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Gain on sale of investment property(Yen in millions)¥14,100
11,9985¥ 2,097

NBF Report January – June 201343

Note 9

Income Taxes

NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income was 0.01% for the periods ended June 30, 2013,
December 31, 2012 and June 30, 2012. The following table summarizes the significant differences between the statutory tax rates and
NBF’s effective tax rates for financial statement purposes.
For the six months ended
June 30, 2013

Statutory tax rate
Deductible dividends
Reserve for advanced depreciation
Others
Effective tax rate

36.59%(32.97)(3.62)
0.01
0.01%

For the six months ended
December 31, 2012

For the six months ended
June 30, 201236.59%(36.59)
—
0.01
0.01%

39.33%(39.33)
—
0.01
0.01%

NBF was established as an investment corporation under the Investment Trust Law of Japan, and as long as an investment
corporation distributes to its unitholders at least 90% of earnings available for dividends for a period and other requirements prescribed inJapanese tax regulations are met, the investment corporation is allowed to deduct total amount of dividends in calculating its taxable
income under Japanese tax regulations.
The Act to Revise the Income Tax Act, etc., in Order to Construct a Tax System Addressing Changes in the Socio-Economic Structure(Act No. 114 of 2011) and the Act on Special Measures for Securing Necessary Financial Resources to Implement Measures to Rebuild
Areas Devastated by the Great East Japan Earthquake (Act No. 117 of 2011) were promulgated on December 2, 2011. In accordancewith the promulgation, the corporation tax rate fell and special corporate tax for reconstruction was imposed at the fiscal period beginning
April 1, 2012. These changes had little impact on the deferred tax assets and the income taxes-deferred.

Note 10Per Unit Information

Information about earnings per unit for the periods ended June 30, 2013, December 31, 2012 and June 30, 2012 and net assets perunit as of June 30, 2013, December 31, 2012 and June 30, 2012 were as follows.
The computation of earnings per unit is based on the weighted average number of units outstanding during the period. The
computation of net assets per unit is based on the number of units outstanding at each period end.

Earnings per Unit:
Net income per unit (Yen)
Weighted average number of units outstanding
Net Assets per Unit (Yen)

Note 11For the six months ended
June 30, 2013

For the six months ended
December 31, 2012
(Yen)

For the six months ended
June 30, 2012¥18,970
682,177¥15,754
613,000¥15,613607,783

As of June 30, 2013

As of December 31, 2012

As of June 30, 2012

¥747,954¥727,577¥727,302

LeasesAs Lessor
NBF leases some of its investment properties to outside parties under non-cancelable operating leases. As of June 30, 2013 andDecember 31, 2012, future minimum rental revenues under the non-cancelable operating leases are as follows:
As of June 30, 2013

Due within one year
Due after one year
Total

44

NBF Report January – June 2013

¥23,604
39,073¥62,677

As of December 31, 2012
(Yen in millions)¥17,849
24,072¥41,921

Notes to Financial Statements

As Lessee
NBF leases some of its investment properties from outside parties under non-cancelable operating leases. As of June 30, 2013 andDecember 31, 2012, future minimum rental expenses under the non-cancelable operating leases are as follows:
As of June 30, 2013

¥2
1
¥3

Due within one year
Due after one year
Total

Note 12

As of December 31, 2012
(Yen in millions)

¥1
2
¥3

Transactions with Related Parties(1) Parent Company and Major Corporate Unitholders(For the six months ended June 30, 2013)
None applicable.
(For the six months ended December 31, 2012)
None applicable.
(For the six months ended June 30, 2012)
None applicable.
(2) Affiliates(For the six months ended June 30, 2013)
None applicable.
(For the six months ended December 31, 2012)
None applicable.
(For the six months ended June 30, 2012)
None applicable.
(3) Sister Companies(For the six months ended June 30, 2013)
None applicable.
(For the six months ended December 31, 2012)
None applicable.
(For the six months ended June 30, 2012)
None applicable.
(4) Directors and Major Individual Unitholders(For the six months ended June 30, 2013)
None applicable.
(For the six months ended December 31, 2012)
None applicable.
(For the six months ended June 30, 2012)
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

Executive Director
of NBF and
President & CEO
of NBFM(Note 1) (Note 3)

Payment of asset
management fees
to NBFM (Note 1)
Payment of fees to
NBFM for the provisionof general administration
services relating
to organizational
management (Note 3)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,163(Note 2) (Note 4)

Accounts
payable¥314(Note 4)¥2(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama resigned from this investment company’s corporate executive officer on March 31, 2012. He entered into this transaction as a former representative(retirement as of March 31, 2012) of a third party (NBFM), and the fee amount is subject to the conditions set forth in the by-laws of NBF.
2. The amount of asset management fees includes ¥113 million for management related to acquisition of properties included in the book value of each investment property, etc.
3. Koichi Nishiyama resigned from this investment company’s corporate executive officer on March 31, 2012. He entered into this transaction as a former representative(retirement as of March 31, 2012) of a third party (NBFM), and the fee amount is set forth in the “General Administration Agreement Regarding the Management ofInstitutions” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

NBF Report January – June 201345

Note 13

Investment and Rental Property

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

Carrying amount
Balance at beginning of the Fiscal Period
Amount of increase (decrease) during
current period
Balance at end of the Fiscal Period
Fair value at end of the period

For the six months ended
June 30, 2013

For the six months ended
December 31, 2012

¥ 855,360¥830,226

143,909
999,269¥1,048,180

25,134855,360¥896,740

Notes: 1. Carrying amounts represent acquisition cost less accumulated depreciation.
2. The major increase in the fiscal period ended June 30, 2013 was mainly due to the acquisitions of 8 properties (Shinbashi M-SQUARE, Sumitomo Mitsui Banking Nagoya
Bldg., NBF Osaki Bldg., Panasonic Tokyo Shiodome Bldg., Gate City Ohsaki (Additional Acquisition), Ikebukuro East, Shibuya Garden Front (Additional Acquisition) andCelestine Shiba Mitsui Bldg., ¥160,799 million) and the major decrease was mainly due to sale of NBF Nihonbashi Muromachi Center Bldg. (50% quasi co-ownership)
which amounted to ¥11,998 million and recognition of depreciation costs.
The major increase in the fiscal period ended December 31, 2012 was mainly due to the acquisitions of 2 properties (NBF COMODIO Shiodome and Nishi-Shinjuku
Mitsui Bldg. (Additional Acquisition), ¥28,961 million) and the major decrease was mainly due to recognition of depreciation costs.
3. Fair value at end of the period is based on appraisals provided by independent real estate appraisers.

Information about profit and loss from investment and rental properties is disclosed in Note 7 (Rental Revenues and Expenses).

Note 14Segment Information

Segment Information
Segment information has been omitted as NBF has only one segment, which is real estate leasing business.

Related Information(For the six months ended June 30, 2013)
1. Information by Products and Services
Disclosure of this information has been omitted as NBF has a single product/service line that accounts for more than 90% of total
operating revenues.
2. Information by Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as total domestic revenues account for more than 90% of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as total domestic investment properties account for more than 90% of the bookvalue of total investment properties.
3. Information on Major Tenants
TenantMitsui Fudosan Co., Ltd.

(Yen in millions)Operating revenues¥7,228Related segment

Real estate leasing businessNote: NBF leases properties to Mitsui Fudosan Co., Ltd. under a master lease agreement, and Mitsui Fudosan Co., Ltd. subleases such properties to subtenants. NBF leases otherproperties to Mitsui Fudosan Co., Ltd.

(For the six months ended December 31, 2012)
1. Information by Products and Services
Disclosure of this information has been omitted as NBF has a single product/service line that accounts for more than 90% of total
operating revenues.
2. Information by Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as total domestic revenues account for more than 90% of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as total domestic investment properties account for more than 90% of the bookvalue of total investment properties.

46

NBF Report January – June 2013

Notes to Financial Statements

3. Information on Major Tenants(Yen in millions)

TenantOperating revenues

Related segment

Mitsui Fudosan Co., Ltd.

¥6,982

Real estate leasing businessNote: NBF leases properties to Mitsui Fudosan Co., Ltd. under a master lease agreement, and Mitsui Fudosan Co., Ltd. subleases such properties to subtenants. NBF leases otherproperties to Mitsui Fudosan Co., Ltd.

(For the six months ended June 30, 2012)
1. Information by Products and Services
Disclosure of this information has been omitted as NBF has a single product/service line that accounts for more than 90% of total
operating revenues.
2. Information by Geographic Areas(1) Operating revenues
Disclosure of this information has been omitted as total domestic revenues account for more than 90% of total operating revenues.
(2) Investment properties
Disclosure of this information has been omitted as total domestic investment properties account for more than 90% of the bookvalue of total investment properties.
3. Information on Major Tenants(Yen in millions)

TenantOperating revenues

Related segment

Mitsui Fudosan Co., Ltd.

¥6,727

Real estate leasing businessNote: NBF leases properties to Mitsui Fudosan Co., Ltd. under a master lease agreement, and Mitsui Fudosan Co., Ltd. subleases such properties to subtenants. NBF leases otherproperties to Mitsui Fudosan Co., Ltd.

Note 15Significant Subsequent Events

None applicable.

NBF Report January – June 201347

Independent Auditor’s Report48

NBF Report January – June 2013

Appendix
Major Interested Parties
Nippon Building Fund Management Ltd. (Asset Management Company and Administrative Agent
regarding the Management of Institutions, herein “NBFM”)
NBFM, as Asset Management Company provided for in theManagement Fees 3

Investment Trust Law of Japan, performs management of NBF’s

In the event that Real Estate, etc. is newly acquired, compensation

assets and undertakes management of the institutions of NBF. As

equivalent to the total amount of the acquisition price of said Realof June 30, 2013, NBFM has been entrusted as an asset

Estate, etc. (meaning the acquisition price of both land andmanagement company only by NBF.

buildings, and in the event of the simultaneous acquisition of multiple
units of Real Estate, etc., the acquisition price of each item,

Operation■

provided, however, that national consumption tax, regional

Undertakes asset management of NBF pursuant to an Assetconsumption tax and miscellaneous costs of acquisition areManagement Entrustment Agreement based on an entrustment

excluded) multiplied by the following percentage rates will, infrom NBF in accordance with the Articles of Incorporation of NBF

principle, be payable, provided, however, that with the approval ofand the Investment Objects and Policies set forth therein.

the directors of NBF, compensation may be calculated using
different rates not exceeding the following rates.

■

Undertakes management of the general affairs of the general●

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

0.5%

meeting of unitholders and the Board of Directors as●

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

0.2%

Administrative Agent regarding the Management of Institutions
based on an entrustment from NBF and pursuant to an
Agreement for General Administration Regarding the●

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

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

Management of Institutions.

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

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

NBF Report January – June 201349

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited

As of June 30, 2013, the directors and corporate auditors of

liability company duly established under the laws of Japan. Major

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

NBFM is comprised of 21 persons.

September 19, 2000 Established

Name of Directors and Auditors

November 17, 2000

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

January 29, 2001

Obtained approval as a discretionary transaction agent
under the Building Lots and Building Transactions Law

February 15, 2001

Registered as a general real estate investment advisor
under the Real Estate Investment Advisor Registration
Regulations

Kenichi Tanaka

President & CEO (standing)

Koji Matsufuji

Director, Head of Investment & Finance Group(standing)Masahiko Misao

Director, Head of Administration Group(standing)

Hiromu Yamanaka

Director

Hiroshi Yabuki

Director

Yasushi Akimoto

Corporate Auditor

Kenshi Ueda

Corporate Auditor

March 7, 2001

Obtained approval as an Asset Management Company
under the Investment Trust Law of Japan

March 22, 2001

Increased capital from ¥100 million to ¥198 million

Outline of Financial Condition

May 23, 2001

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

Outline of principal assets and liabilities for the most recent

June 16, 2001

Increased capital from ¥198 million to ¥495 million

March 14, 2003

Changed name (from “Office Building FundManagement Japan Limited” to “Nippon Building FundManagement Ltd.”)

September 30, 2007 Registered as a financial instruments firm with the
Kanto Local Finance Bureau Chief (Financial
Instruments) No. 371

An outline of the financial condition of NBFM is as follows.
fiscal year:
As of March 31, 2013

List of Shareholders (as of June 30, 2013)
Numberof Shares Owned

Percent

Mitsui Fudosan Co., Ltd.

4,257

43.0%

Sumitomo Life
Insurance Company

Name

3,465

35.0

Sumitomo Mitsui Trust Bank,
Limited495

5.0

Sumitomo Mitsui Banking
Corporation

495

5.0

Daido Life
Insurance Company

297

3.0

Mitsui Sumitomo
Insurance Co., Ltd.

297

3.0

Mitsui Life Insurance
Company Limited

297

3.0

Britel Fund Trustees Limited

297

3.0

9,900

100.0%Total

NBF Report January – June 2013

(Yen in millions)

Total Assets¥2,411

Total Liabilities

518

Total Net assets

1,893

Profit and loss for the most recent fiscal year:
Year ended March 31, 2013

50

Title

Operating Income(Yen in millions)¥2,661

Ordinary Profit

1,918

Net Income

1,185

Investment and Distribution Policies
Investment Policies of NBF
A. Basic Policies
NBF’s primary investment objective is to achieve sustainable growth inportfolio value and stable profits on a medium-to-long-term basis. NBF

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

Area Analysis

Tokyo CBDs■

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

■

Relatively low yearly NOI yields.

■

Relatively high liquidity at the time of sale.

■

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

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

achieves this objective by investing in real estate consisting of buildings
primarily used for offices with their underlying land located in the Tokyo

Other Greater Tokyo

central business districts (hereinafter “CBDs”), Other Greater Tokyo andOther 14 wards of Tokyo andneighboring cities (see Note 1
below) such as Musashino,
Tachikawa, Yokohama, Kawasaki,
Chiba, Kashiwa, Saitama, etc.

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 Objectives and Policies,”
Articles of Incorporation). (Reference to laws, legal documents, etc. usedas the basis or sources hereof are set forth in parenthesis herein.)

Total of above two areas: 70% or more
Other Cities■

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

■

Relatively high yearly NOI yields.

■

Relatively low liquidity at the time of sales.

investment strategy of NBF set forth below, invests and manages the

Principal regional cities such as
Sapporo, Sendai, Niigata,
Shizuoka, Hamamatsu, Nagoya,
Kyoto, Osaka, Kobe, Okayama,
Hiroshima, Takamatsu, Fukuoka,
Kumamoto, etc.

assets of NBF. NBFM has established asset management guidelines

Total of above area: 30% or less

B. Investment Strategy
Nippon Building Fund Management Ltd. (“NBFM”), based on thebased on the Articles of Incorporation of NBF and in accordance with theinvestment strategy of NBF.

(1) Strategy for Creation of the Portfolio

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

The goal of the portfolio is to generate steady growth and stableprofits on a medium-to-long-term basis. The selection criteria of(2) Acquisition Strategy

investment assets is based on the composition of investment assets in thea) Ratio of Real Estate Assets

portfolio and on consideration of a quantitative proportion of the officestock located in the various regions of Japan.

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

NBF will maintain a ratio of 75% or more with respect to the“Designated Real Estate Ratio” (“Investment Objectives and Policies,”
Articles of Incorporation). As of December 31, 2012, NBF satisfied
the 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 83.4.3.1 of the Special Taxation Measures Law of Japan).

b) Due Diligence
When investing in office properties, selections will be made throughcomprehensive research and analysis based on the forecast investment
yields resulting from the acquisition costs and their anticipated profits,
future prospects and stability of the area of location, availability ofmeasures responding to risks of deterioration and obsolescence,
insurability and so forth of the relevant office properties (or Beneficiary
NBF Report January – June 201351

Certificates backed by such office properties) (“Investment Objectives andunleasable assets which thereafter become operational) will not exceed

Policies,” Articles of Incorporation). The details of the relevant criteria are

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

set forth in the following table.

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

respect to which the construction of the building has been completed

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

NBF and have become operational at some point shall be deemed

Item

Points to be reviewed“leasable” thereafter (including such cases as reconstruction or large-

Scale of building■

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

■

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

■

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

Construction type andspecifications of facilities■

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

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

Earthquake resistance■

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

increasing occupancy rates, extending the term of leases and rendering

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

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

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

NBF is entitled to establish reserves for long-term renovations required
to maintain and enhance the value of operating properties, reserves for

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

etc. (Article 14.1 (2) of the Articles of Incorporation).

Measures regarding
status of legal title

■

●

●

Articles of Incorporation).

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

payables, reserves for cash distributions and any other similar reserves,

Tenancy characteristics■

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

a) Reserves for Long-Term Renovations

Environmental:
condition of land, etc.

■

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

renovations, repairs and tenant improvements will be determined based on

From the reserves set forth above, a portion corresponding torenovation plans for each building. As of June 30, 2013, foreseen reserves
provided from July 2013 to June 2014 are as follows:
Item

ReasonReserves forlong-term renovations■

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

Expenses of providing “free access floor”■

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

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

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

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

Total Foreseen Amount (annual basis): ¥3,954 millionc) 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 theamount of any such unleasable asset combined with the total contract
amount of previously acquired unleasable assets (but excluding
52

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

NBF Report January – June 2013

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

Investment and Distribution Policies

2. The amount of reserves set forth above is the total amount of reserves with respect
to the 74 properties owned by NBF as of June 30, 2013.

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

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

(4) Financial Policiesa) Issuance of Units
NBF may issue units in order to undertake acquisition and renovation andtemporarily exceed 60% when acquiring certain assets, etc. (medium-tolong-term operating asset management policy and annual management
plan established by the Asset Management Company).

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

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

a) Appraisal Value, etc.

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

In the event that NBF undertakes asset valuation for the purpose ofcapital as well as for the repayment of debt (including security deposits, bor-

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

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

c) Loan-to-Value Ratio
The ratio of the total amount of borrowings, issues of NBF bonds
and lease deposits under management to the total amount of assets of

to be used for real estate, real estate leasehold rights and superficies
will, in principle, be the appraised valuation provided by a certified realestate appraiser, and (b) the disclosure value to be used for beneficiary
certificates, equity interests of tokumei kumiai and equity interests ofpartnerships for which respective assets are real estate, real estateleasehold rights or superficies will be the calculated value of equity
interests of each based on the value of their respective assets asdetermined in (a) plus the fair value of any financial assets asdetermined in conformity with generally accepted accounting principles,less trust and total tokumei kumiai liabilities (Articles of Incorporation).
The appraisal value of property with respect to the period
commencing on the acquisition thereof and ending on the date ofdisclosure 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, cityplanning tax and consumption tax) as stated in the sale and purchase
contract, etc. for the said property.

NBF (loan-to-value ratio) is envisioned to be limited to 60%, but may
NBF Report January – June 201353

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

A. Principal Investment Objectives among
Designated Assets
NBF will principally invest in the below-listed Designated Assets withthe objective of assuring steady growth and stable profits from the(8) Investment Securities (meaning those specified in Article 2.1.11 of the
Financial Instruments 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)(9) Beneficiary Certificates of Money Trust (limited to those the trust
assets of which are primarily invested and Managed Assets referred toin paragraph (1), (3) or (4) above, provided, however, that those thatare deemed securities are excluded)

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

Managed Assets.

as necessary, invest in the following Designated Assets.

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

rights and superficies, including inclusive trusts consisting of funds(3) Call loans

appurtenant to real estate(4) Japanese government bonds, notes and bills (meaning those(3) Tokumei kumiai ownership interests as defined by Article 535 of theCommercial Code of Japan (provided, however, that this is limited tothose the assets of which are primarily invested and Managed Assets
principally referred to in paragraphs (1) and (2) above)(4) Equity interests in partnerships as defined by Article 667 of the Civil
Code of Japan (limited to leased, operating and managed partnershipassets primarily referred to in paragraphs (1) and (2) above that are

specified in Article 2.1.1 of the Financial Instruments and Exchange
Law of Japan)(5) Regional treasury bonds, notes and bills (meaning those specified in
Article 2.1.2 of the Financial Instruments and Exchange Law of Japan)(6) Commercial paper (meaning that specified in Article 2.1.15 of the
Financial Instruments and Exchange Law of Japan)(7) Designated bonds of Special Purpose Companies (meaning thosespecified in Article 2.2.5 of the Financial Instruments and Exchange

specified in Article 2.1.4 of the Financial Instruments and Exchange

Law of Japan)

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

those the assets of which are primarily invested and Managed Assets

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

than those referred to in section A and above)(6) Special Purpose Beneficiary Certificates (meaning those specified in
Article 2.1.13 of the Financial Instruments and Exchange Law ofJapan, provided, however, that this is limited to those the assets of(9) Securities (other than those listed in section A and above)(10) Rights to financial derivative transactions (limited to those specified in
Article 2.20 of the Financial Instruments and Exchange Law of Japan)

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

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

Japan, provided, however, that this is limited to those the assets ofwhich are primarily invested and Managed Assets principally referred(1) Equity interests of partnerships, excluding assets in section A,
paragraph (4)to in paragraphs (1) and (2) above)(2) Easements(3) Trademark rights(4) Copyrights

54

NBF Report January – June 2013

Investment and Distribution Policies(5) Chattels

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

Association of Japan has established rules such that a corporate-stylesection A

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 makecash distributions of the amounts described below in excess of theDistribution Policies of NBF

Distributable Amount in the following cases, provided, however, that the
maximum amount of such distributions will be the amount set forth in the

A. Distributions of Profits
A registered investment corporation may deduct its cash dividends ofprofits from taxable income under Japanese tax regulations if it distributes to
its unitholders in excess of 90% of its taxable income and complies withother 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 following policies (Article 14.1 of the Articles of Incorporation).

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

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

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

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

rules of the Investment Trusts Association of Japan (Article 14.2 of the
Articles of Incorporation).

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

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

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

D. Prescription for Cash Distributions, etc.
NBF will be discharged from the obligation to pay distributions ofprofits three calendar years from the date of commencing payment.
Interest will not accrue on unpaid distributions (Article 14.4 of the
Articles of Incorporation).
NBF Report January – June 201355

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

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

(2) Borrowing
See “Investment Policies of NBF, B. Investment Strategy,(4) Financial Policies.”(3) Concentration of Investment
There is no limitation on concentration of investment. See “Investment
Policies of NBF, B. Investment Strategy, (1) Strategy for Creation of thePortfolio.”(4) Investment Objectives
NBF does not invest aggressively in the Monetary Claims andtions, the rules stipulated by the Investment Trusts Association (asamended), as well as “Investment Objectives and Policies” of the Articles
of Incorporation.

B. Compliance with the Financial
Instruments and Exchange Law and theInvestment Trust Law of Japan
NBF is subject to restrictions on investment under the Financial
Instruments and Exchange Law and the investment Trust Law of Japan.
Main restrictions are as follows.

(1) Pursuant to Article 198.1 of the Investment Trust Law of Japan, aregistered investment corporation must entrust business related toasset management to an asset management company registered as afinancial instrument firm, but an asset management company isprohibited from performing certain acts related to the business ofmanaging the assets of said investment corporation. As a result, aninvestment corporation is subject to certain investment restrictions (allreferences in parentheses below are to the provisions of the Financial
Instruments and Exchange Law of Japan, except where stated otherwise) besides restrictions applied to a registered investment
corporation. NBF will naturally comply with such investment restrictions,a general overview of which follows.
a) Internal Transactions (§ 42.2.1)

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

Transactions between an asset management company and its direc-

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

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

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

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

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

financial instruments business.

risks of fluctuation in interest rates for debt (“Investment Objectives andPolicies,” Articles of Incorporation).
Moreover, investment in other funds (investment securities orTransactions between asset management companies of investment

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

provisions of the government ordinance regarding the Financial

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

Instruments and Exchange Law of Japan that are considered unlikely to

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

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

located outside of Japan (Articles of Incorporation).

actions or discredit the financial instruments business.

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

The Managed Assets of NBF will be managed in compliance with the
Financial Instruments and Exchange Law of Japan and related regula-56b) Reciprocal Transactions with Managed Assets (§ 42.2.2)

NBF Report January – June 2013

An asset management company may not undertake transactions incertain financial instruments, indices or options based on fluctuations in theInvestment and Distribution Policies

price, index, value, or amount of consideration related to transactions in theassets of an investment corporation, without a legally valid reason, with the(2) Limitation on Acquisition of the Same Issueof Units (§ 194 of the Investment Trust Law)

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

An investment corporation may not acquire the same units issued by acorporation in excess of 50/100 of total number of said issued and out-d) Transactions Harmful to the Interests of NBF (§ 42.2.4)

standing units.

An asset management company may not undertake transactions thatare other than upon normal terms and conditions for such transactions,and further, such transactions upon said conditions would be harmful tothe interests of the investment.

(3) Restriction on Acquisition of Own Units andAcceptance of Pledge (§ 80.1 of the Investment
Trust Law)
An investment corporation may not acquire units issued by itself, ore) Other Transactions Defined by Cabinet
Office Ordinances

In addition to the above, the following activities are prohibited

accept them for the purpose of pledge, unless it acquires units issued byitself in the following cases:●

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

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

(§42.2.7 of the Financial Instruments and Exchange Law, Cabinet Office
Ordinance §130).
(i)

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

Transactions for the benefit of the investment management company
or third parties that would be harmful to the interests of theinvestment corporation(iii)

Transactions for the benefit of third parties that are not necessary
according to investment management policies, the financial condition of(4) Restriction on Acquisition of Parent
Corporation’s Units by Subsidiary Corporation(§ 81.1.2)

assets under management, or market conditions
(iv)
(v)

An investment corporation (subsidiary), a majority of the units of which

Asset management that introduces unfair restrictions or other limitations

is owned by another investment corporation (parent), may not acquire thefrom external entities

units of such parent investment corporation except in the following cases:

The sale or purchase of investment securities, or similar transactions,●when acquired from another investment corporation as the surviving
entity of a merger; or●

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

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

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

the said underwriter differ from the planned amounts(a) foreign entities including corporations for their own account (asstipulated by Cabinet Office Ordinance §126.3)(b) entities that hold more than 50/100 of the total amount of investment securities representing underlying managed assets issued in
the two most recent fiscal years, as defined by §2.8.1-3, §2.8.8
and §2.8.9 of the Financial Instruments and Exchange Law (limited
to investment securities that give holders rights in the said managed
assets and such rights)(viii) Other activities prohibited by Cabinet Office Ordinance 130
NBF Report January – June 201357

Corporate Data
(As of June 30, 2013)

Corporate Office38th Floor, GranTokyo North Tower, 9-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-6738, Japan+81-3-6259-8681
http://www.nbf-m.com/nbf_e/

Date of Inception

March 16, 2001

CapitalContributed capital and units issued and outstanding:¥504,308 million
692,000 units

Unitholders

16,138Transfer Agent

Sumitomo Mitsui Trust Bank, Ltd.
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005, Japan

Business Office of the Transfer Agent

Stock Transfer Agency Department of Sumitomo Mitsui Trust Bank, Ltd.
8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan+81-3-3323-7111

Independent Auditors

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

Investor Relations

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

This document contains translations of selected information described in thetranslations or the selection of the portions of any documents translated into English. No

Securities Report (Yuka shoken hokokusho) filed on September 27, 2013 pursuant toperson has been authorized to give any information or make any representations otherthe Securities Exchange Law of Japan, and the Financial Statements and thethan as contained in this document in relation to the matters set out in this document,

Performance Information Report for the period from January 1, 2013 to June 30, 2013,

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

having been authorized by Nippon Building Fund Inc., Nippon Building FundThis English-language document was prepared solely for the convenience of andreference by overseas investors. It neither corresponds to the original Japaneseunitholders/shareholders, agents or affiliates.

documents nor is intended to constitute a disclosure document. The Japanese-

The financial statements of Nippon Building Fund Inc. have been prepared in accor-

language Securities Report and the Financial Statements and the Performancedance with generally accepted accounting principles in Japan (Japanese GAAP), which

Information Report for the aforementioned period should always be referred to as

may materially differ in certain respects from generally accepted accounting principles inoriginals of this document.

other jurisdictions.

English terms for Japanese legal, accounting, tax and business concepts used

Many provisions of this document contain forward-looking statements and informa-

herein may not be precisely identical to the concept of the equivalent Japanese terms.

tion. We base these statements on our beliefs as well as our assumptions based solelyWith respect to any and all terms herein, including without limitation, financial state-on certain limited information currently available to us. Because these statements reflect

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

our current views concerning future events, these statements involve known andthe original Japanese documents and English statements contained herein, the original

unknown risks, uncertainties and assumptions. Our future performance could materiallyJapanese documents will always govern the meaning and interpretation. None of Nippon

differ from those set out in these forward-looking statements. We do not undertake andBuilding Fund Inc., Nippon Building Fund Management Ltd. or any of their respective

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

directors, officers, employees, partners, unitholders/shareholders, agents or affiliates will

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

be responsible or liable for the completeness, appropriateness or accuracy of English

58

Management Ltd. or any of their respective directors, officers, employees, partners,

NBF Report January – June 2013

Investors’ Information(As of June 30, 2013)

Fiscal Periods

Unitholders

Six months ending June 30 and December 31

Other domestic corporations
415 (2.6%)

Overseas investors 388 (2.4%)
Financial institutions(Including securities companies)

204 (1.3%)

Total Number of Units Issued
24th Period (From January 1, 2013 to June 30, 2013)

692,000 units

23rd Period (From July 1, 2012 to December 31, 2012)

613,000 units

Total numberof unitholders:

16,138

Individuals andothers38,942 (5.6%)

Other domestic
corporations
48,772 (7.0%)

Individuals and others
15,131 (93.8%)

Total numberof units:

Distributions per Unit

692,000

Expected distribution for the 25th Period
For the operating period from July 1, 2013 to December 31, 2013 (6 months)¥17,300 per unit
Financial institutions

Confirmed distribution for the 24th Period
For the operating period from January 1, 2013 to June 30, 2013 (6 months)(Including securities companies)

Overseas
investors
198,630(28.7%)

405,656 (58.6%)¥16,854 per unit

Major Unitholders
NameJapan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Nomura Trust and Banking Co., Ltd. (Trust Account)
Mitsui Fudosan Co., Ltd.
Nomura Bank (Luxembourg) SA
Sumitomo Life Insurance Company
Nomura Securities Co., Ltd.
State Street Bank West Client-Treaty
State Street Bank-West Pension Fund Clients-Exempt

Number of Units Held

Percentage of Total

119,295
54,043
41,771
41,732
22,815
19,271
12,256
8,640
8,356
8,179

17.2%
7.8
6.0
6.0
3.3
2.8
1.8
1.2
1.2
1.2

Historical Unit Price(Yen)
2,000,000(Points)
3,000

NBF unit price (left scale)
TSE REIT Index (right scale)
TOPIX (right scale)

2,500

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

1,500
1,000

800,000
500
400,000

0
Sep. 10, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30, Dec. 31, Jun. 30,
2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013

NBF Report January – June 201359

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

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

Printed in Japan