Semi-Annual Report
First Half of 2021
(40th Period – January to June 2021)
Including AIFMD Article 23 Information

Nippon Building Fund Inc.

Contents

Performance Results ............................................................................................................................................. 1
Overview of Performance and Distribution.......................................................................................................... 1
Summary of Selected Financial Date ................................................................................................................... 2
Management’s Discussion and Analysis .............................................................................................................. 4
Finacial Statements............................................................................................................................................. 19
Notes to Finacial Statements .............................................................................................................................. 23
Independent Autidor’s Report ............................................................................................................................ 41
Response to Article 23 of the European Alternative Investment Fund Managers Directive .............................. 44

Note regarding the European Alternative Investment Fund Managers Directive (European Directive 2011/61/EU)
This report, which has been prepared to comply with Article 22 of the European Alternative Investment Fund Managers Directive (European
Directive 2011/61/EU), or the AIFMD, also includes certain information required under Article 23 of the AIFMD. Such information required under
Article 23 of the AIFMD is included in the Article 23 portion of this report starting on page 44 of this report.

Performance Results:
NBF has conducted asset management in accordance with its basic policy of “aim to achieve steady growth ofassets under management and secure stable profits on a mid- to long-term basis.”
During the fiscal period under review, NBF acquired “Shinjuku Mitsui Bldg.” (real property, acquisition price:¥170 billion) and “GranTokyo South Tower” (real property, acquisition price: ¥47 billion) in January 2021, andadditionally acquired 40% co-ownership of “Ueno East Tower” (real property, acquisition price: ¥13.4 billion), a
property it already owns, in March 2021 by utilizing its sponsor pipeline under an environment in which acquisitionof prime properties is difficult. In addition, it disposed “NBF Minami-Aoyama Bldg.” (real property, disposition
price: ¥31.6 billion) and 50% co-ownership of NBF Shinkawa Bldg. (East Building and Maison New River) (realproperty, disposition price: ¥5.95 billion) in March 2021 to press ahead with a review its portfolio.
With respect to the existing portfolio, although the level of occupancy rates has entered a correction phase,revenues from the rental business have remained stable as a result of accurate understanding of market trends,
appropriate and flexible leasing activities, maintenance of favorable relationships with tenants and measures forcontinuous rent increase upon renewal of contracts. In addition, NBF has also put forth efforts to reduce costs byproperly allocating the timing and cost of renovation/construction while striving to enhance competitiveness ofproperties by carrying out strategic and rightly focused additional investment.
NBF also promotes ESG initiatives. During the fiscal period under review, NBF announced support for Task
Force on Climate-related Financial Disclosures (TCFD) and newly set a reduction target for CO2 emissions(intensity).

Overview of Performance and Distribution:
As the result of above explained operations, NBF's performance results during the period under review consistedof operating revenues of ¥46,213 million (an increase of ¥4,465 million, or 10.7%, compared with the previous
period), operating income from leasing activities of ¥23,473 million (an increase of ¥4,335 million, or 22.7%,
compared with the previous period), operating income after asset management, custody and agent fees, etc. of¥22,778 million (an increase of ¥4,066 million, or 21.7% compared with the previous period), ordinary income of¥21,428 million (an increase of ¥4,154 million, or 24.0%, compared with the previous period), and net income of¥21,427 million (an increase of ¥4,154 million, or 24.0%, compared with the previous period).
In accordance with the distribution policy prescribed in its Articles of Incorporation, NBF decided to distribute¥19,307 million, the entire amount arrived at by deducting provision of reserve for advanced depreciation (¥2,119
million) from retained earnings (¥21,427 million), so that it will be enable to deduct the maximum amount of cash
distribution of profit from its taxable income through the application of preferential tax measures to investment
corporations (Article 67-15 of the Act on Special Measures Concerning Taxation). As a result, the distribution perunit was ¥11,684 (an increase of ¥684, or 6.2% compared with the previous period).

1

Summary of Selected Financial Data
40th Period
from January 1,
2021 to June 30,
2021

39th Period
from July 1, 2020
to December 31,
2020

38th Period
from January 1,
2020 to June 30,
2020

40th Period
from January 1,
2021 to June 30,
2021

Yen in millions, except per unit data or where otherwise indicatedthousands except(Note 1)

per unit data

U.S. dollars in(Note 1, 2)
46,213¥ 41,747¥ 38,591$416,152

44,68840,35938,591

402,421

1,524

1,388

－

13,730Operating expenses

23,43523,035

21,830211,031

Rental expenses

21,215

21,22020,166

191,045

38

－

－

342

Operating revenues

Note 3

Revenues from property leasing
Gains on sales of real estate
properties¥

Losses on sales of real estate
properties

21,42817,274

15,513

192,961(a)

21,427

17,273

15,512

192,953

Note 427,34023,066

22,680246,197

Note 430,872

26,31925,592

278,007(b)

19,307

18,177

15,512

173,865

Depreciation and amortization

7,399

7,181

7,167

66,631

Capital expenditures

6,777

5,971

4,973

61,0301,305,388

1,197,435

1,044,475

11,754,963

550,500

459,500

435,500

4,957,226
6,032,155

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

Total assets(c)Interest-bearing debt
Net assets(d)669,870666,620541,940

Total number of units issued (Units)(e)1,652,500

1,652,500

1,412,000

Net assets per unit (Yen/$)(d) / (e)405,368

403,401

383,8103,650

Distribution per unit (Yen/$)(b) / (e)11,684

11,00010,986105

Note 4

16,544

15,38816,062

148

Funds from operations per unit
(Yen/$)
ROA

Note 4(Annual rate)
ROE

Note 4(Annual rate)

1.7%

1.5%

1.5%

(3.4%)(3.1%)(3.0%)

3.2%

2.9%

2.9%

(6.4%)(5.7%)(5.7%)

Loan to value (LTV)

Note 4

42.2%

38.4%

41.7%

Capital ratio(d) / (c)

51.3%

55.7%

51.9%

90.1%

105.2%

100.0%

181

184

182

75

74

71

Payout ratio(b) / (a),Note 5

Number of days
Number of real estate properties

Note 6

Number of tenants

Note 6

Total rentable area (m2)Occupancy rate (Average)

Notes:

Note 6

1,606

1,551

1,464

1,216,543

1,106,692

1,082,105

97.8%

98.8%

99.4%

1. From the current period, the amounts of yen in the annual report are rounded down to the nearest million yen.

2

Accordingly, the past figures are changed to the same way. The amounts of U.S. dollar are rounded after the decimal.
2. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥111.05 = U.S. $1.00, the approximate
exchange rate on June 30, 2021.
3. Operating revenues do not include consumption tax.
4. 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 Gains and Losses on sales of real estate properties) + Depreciation andamortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation
and amortization
Funds from operations per unit: (Net income (excluding Gains and Losses on Sales of real estate Properties) +Depreciation and amortization) / Weighted average number of units issued and outstanding during the period
ROA: Ordinary income / (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
5. Payout ratio figures are calculated to one decimal place only.
6. Number of real estate properties means units generally perceived to be one office building. Number of tenants meansgross number of tenants by building. Occupancy rate, end-tenant basis, is the weighted average of month-end occupancy
rate on a floor space basis.

3

Management’s Discussion and Analysis
1. Distribution for the Current Period
Distribution per unit for the current period was ¥11,684. NBF expects to distribute almost all retained
earnings at the current period end remaining after deducting the amount appropriated to the reserve for advanced
depreciation of replacing specified assets as stipulated in Article 65-7 of the Act on Special Measures
Concerning Taxation to be eligible for special tax treatment (Article 67-15 of the Act on Special Measures
Concerning Taxation) that allows NBF to deduct its cash dividends of profits from taxable income.
For the six months
ended June 30,
2021

For the six months
ended December 31,
2020

For the six months
ended June 30,
2020(Yen in thousands, except per unit amounts)
Retained earnings
Undistributed earnings
Transfer to reserve for reduction entry
Reversal of reserve for reduction entry
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）¥21,427,535—
2,119,725—
19,307,810
11,684
19,307,810
11,684——¥17,274,285——
903,214
18,177,500
11,00018,177,500
11,000——¥15,513,000
768——
15,512,232
10,986
15,512,232
10,986——

Notes:
1. Above cash distributions were paid after the period end.

2. Changes in Assets, Liabilities and Net Assets
Assets
As of June 30, 2021, total assets increased by ¥107,953 million to ¥1,305,388 million compared with December
31, 2020. Return on average total assets (ROA) for the six months ended June 30, 2021 increased to 1.7 percent
from 1.5 percent for the previous six-month period.
Current assets decreased by ¥89,580 million to ¥45,324 million compared with December 31, 2020. Real estate
properties increased by ¥197,536 million to ¥1,215,913 million compared with December 31, 2020. Intangible
assets decreased by ¥20 million to ¥35,786 million compared with December 31, 2020.
Liabilities
Current liabilities decreased by ¥19,529 million to ¥40,577 million compared with December 31, 2020,
primarily because of a decrease in Short-term loans and Long-term debt due within one year compared with4

December 31, 2020.
Long-term debt increased by ¥111,000 million to ¥525,500 million compared with December 31, 2020.
As a result, total interest-bearing liabilities increased by ¥91,000 million to ¥550,500 million compared with
December 31, 2020. The ratio of long-term debt (for which the redemption period at the time of contract orissuance is more than one year) to total interest-bearing liabilities was 100 percent same as for the previous sixmonth period.
The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities to total assets, increased to 42.2
percent as of June 30, 2021 from 38.4 percent as of December 31, 2020.
Notes:
1. Interest-bearing liabilities mean "Short-term loans", "Long-term debt due within one year" and "Long-term Debt".

Net assets
Net assets increased by ¥3,250 million to ¥669,870 million compared with December 31, 2020.

3. 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, 2021, NBF
had issued 1,652,500 units out of 4,000,000 total authorized units. NBF’s units were listed on the J-REIT sectionof the Tokyo Stock Exchange in September 2001 upon the completion of a public offering. As the Investment
Trust Law of Japan does not contain any provision for the issue of more than one class of units, NBF’s units
comprise the sole class of units authorized and issued by NBF.

Issue date

March 16, 2001
May 23, 2001
September 8, 2001
July 14, 2004
August 11, 2004
August 10, 2005
March 16, 2006
March 29, 2006
February 4, 2008
March 4, 2008
January 26, 2011

Remarks
Initial capital(private)
Privateplacement
Public offering
Public offering
Third party
allocation
Public offering
Public offering
Third party
allocation
Public offering
Third party
allocation
Public offering

Units issued andoutstanding
Increase
Balance(units)200

200

197,600

197,800

82,90080,000Paid-in capital
Increase
Balance(Yen in millions)100

Note 1

98,80098,900Note 2

280,700
360,700

49,99958,838148,899
207,737

Note 3Note 44,000
58,00080,0005,300

364,700
422,700
502,700
508,000

2,941
51,491
79,0405,236

210,678
262,170
341,210
346,446

Note 5Note 6Note 7Note 831,800539,800

37,158383,605

Note 92,200

542,000

2,570

386,175

Note 1034,000576,000

26,957413,132

Note 11

5

¥

100

¥

Notes

February 22, 2011
January 25, 2012
February 21, 2012
January 23, 2013
January 31, 2013
January 1, 2014
March 19, 2014
March 28, 2014
October 26, 2020
November 6, 2020

Third party
allocation
Public offering
Third party
allocation
Public offering
Third party
allocation
Unit split
Public offering
Third party
allocation
Public offering
Third party
allocation

2,500

578,500

1,982

415,114

Note 1230,000608,500

18,172433,287

Note 134,500

613,000

2,725

436,013

Note 1474,000687,000

63,973499,986

Note 155,000

692,000

4,322

504,308Note 16

692,000
26,5001,384,000
1,410,500―
14,022504,308
518,331

Note 17
Note 18

1,500

1,412,000

793

519,124Note 19

229,000

1,641,000

117,041

636,166

Note 20

11,5001,652,500

5,877

642,044

Note 21

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 fundproperty 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 fundproperty acquisition.
7. Public offering of new units for ¥1,019,200 per unit (excluding underwriting fee: ¥988,000) to repay debt and to fundproperty 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 fundproperty 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 fundproperty 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 fundproperty 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 fundproperty acquisition.
16. Additional issue of new units (third party allocation) for ¥864,500 per unit undertaken pursuant to the public offering in
Note 15.
17．Effective January 1, 2014, NBF implemented a 2-for-1 unit split of its investment units.
18．Public offering of new units for ¥545,860 per unit (excluding underwriting fee: ¥529,150) to repay debt and to fundproperty acquisition.
19．Additional issue of new units (third party allocation) for ¥529,150 per unit undertaken pursuant to the public offering in
Note 18.
20．Public offering of new units for ¥527,240 per unit (excluding underwriting fee: ¥511,100) to fund property acquisition.
21．Additional issue of new units (third party allocation) for ¥511,100 per unit undertaken pursuant to the public offering in
Note 20.

6

Market Price of Units

High/Low (closing price) of units on the TSE:
For the six months ended
June 30, 2021

High
Low

For the six months ended
December 31, 2020

(Yen)
¥655,000
528,000¥731,000
572,000

For the six months ended
June 30, 2020

¥894,000
555,000

Borrowings

Borrowings from financial institutions as of June 30, 2021 are shown below.

Long-term loans
LenderDevelopment Bank of Japan Inc.

MUFG Bank, Ltd.

Sumitomo Mitsui Banking Corporation

Interest

Balance(Yen in millions)¥10,000
13,00010,00010,0005,000
5,000
10,000
6,000
2,500
5,000
3,000
7,000
4,000
3,000
3,000
5,000
8,000
2,000
7,000
6,000
4,000
5,000
5,000
5,000
6,000
4,000
3,000
2,000
4,000
10,0005,000
11,000Sumitomo Mitsui Trust Bank, Limited

6,000
20,00010,000
1,000
6,000
4,000
5,000
3,000
3,000
10,0003,000
10,0007rate (%)（Note 1）

Due on1.263% July 2, 2023
0.747% September 10, 2027
0.357% February 15, 2028
0.256% April 8, 2026
0.250% June 1, 2026
0.387% September 14, 2028
0.491% September 27, 2029
0.230% May 30, 2024
0.417% May 23, 2029
0.400% August 3, 2029
0.450% January 7, 2031
0.358% June 1, 2028
0.180% March 1, 2027
0.104% February 28, 2025
0.138% February 27, 2026
0.400% July 2, 2029
0.400% February 28, 2030
0.270% February 26, 2027
0.270% May 31, 2027
0.150% July 31, 2024
0.400% July 31, 2030
0.320% January 7, 2028
0.400% January 7, 2030
0.450% January 7, 2031
0.450% February 28, 2031
0.180% February 27, 2026
0.400% June 28, 2030
0.335% January 31, 2029
1.123% December 30, 2022
0.982% February 28, 2023
0.958% April 28, 2023
0.205%
June 1, 2029
(Note 4)0.150% April 26, 2024
0.450% January 7, 2031
0.320% January 7, 2028
0.350% June 29, 2029
0.223% May 31, 2024
0.133%
May 31, 2024
(Note 4)0.090% January 25, 2024
0.100% September 9, 2022
0.270% September 11, 2026
0.210% December 30, 2025
0.270% January 27, 2027
0.400% January 7, 2030

Repayment
methodBulletpayment

Use offunds（Note 2）

Notes

Unsecured/unguaranteed/pari passu,
See (Note 3)

Sumitomo Life Insurance Company

Mizuho Bank, Ltd.

5,000
3,000
5,000
5,000
5,000
2,000
2,000
3,000
5,000
5,000
10,0008,000
7,000

Shinkin Central Bank

The Norinchukin Bank

Mizuho Trust & Banking Co., Ltd.
TAIJU LIFE INSURANCE COMPANY
LIMITED

THE BANK OF FUKUOKA, Ltd.

Nippon Life Insurance Company

Daishi Hokuetsu Bank, Ltd.
The Yamaguchi Bank, Ltd.

DAIDO LIFE INSURANCECOMPANYTAIYO LIFE INSURANCE COMPANY
The 77 Bank, Ltd.

The Hachijuni Bank, Limited
The Yamanashi Chuo Bank, Ltd.

10,000
5,000
5,000
3,000
3,000
4,000
4,000
3,000
2,000
6,000
5,000
3,000
2,000
2,000
5,000
5,000
10,000
4,000
2,000
2,000
2,000
1,000
1,000
1,000
2,000
2,000
2,000
2,000
2,000
2,000
3,000
2,000
2,000
2,000
2,000
2,000
2,000
1,000
2,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
2,000
1,000
2,000
1,000
1,000
2,000
1,000
1,000
1,000

8

0.522% July 16, 2021
0.300% February 3, 2026
0.250% May 22, 2026
0.655% July 16, 2032
0.646% April 28, 2033
0.403% April 28, 2028
0.364% March 31, 2032
0.650% May 23, 2034
0.500% January 7, 2032
0.700% January 7, 2036
0.856% February 28, 2022
1.070% July 29, 2022
0.140%
November 30, 2025
(Note 4)0.450% January 7, 2031
0.425% July 7, 2030
0.250% September 14, 2026
0.381% December 30, 2026
0.356% June 1, 2027
0.433% July 12, 2027
0.219% March 29, 2024
0.100% December 30, 2025
0.188% April 28, 2028
0.307% June 22, 2029
0.450% January 7, 2031
0.300% June 21, 2027
0.270% June 19, 2026
0.300% March 24, 2028
0.270% September 30, 2027
0.320% January 7, 2028
0.982% February 28, 2023
0.947% September 30, 2022
1.033% November 1, 2022
1.486% May 30, 2025
1.047% December 13, 2023
0.084% March 31, 2025
0.416% January 31, 2030
0.400% February 13, 2030
0.491% January 30, 2032
0.548% June 30, 2023
0.238% May 31, 2024
0.177% June 30, 2022
0.300% May 21, 2027
0.400% January 7, 2030
0.947% September 30, 2022
0.400% May 23, 2029
0.200% May 29, 2026
0.450% December 27, 2030
0.257% March 1, 2024
0.245% June 28, 2024
0.400% January 7, 2030
0.477% January 10, 2029
0.400% May 23, 2029
0.500% August 31, 2032
0.500% January 7, 2032
0.456% June 30, 2022
0.417% September 11, 2023
0.302% March 7, 2029
0.400% October 2, 2030
0.997% July 2, 2021
0.532% July 9, 2021
0.650% May 31, 2035
0.007%
June 30, 2023
(Note 4)0.400% May 23, 2029
0.400% March 25, 2030
0.270% June 26, 2027
0.270% December 2, 2027
0.320% January 7, 2028
0.272% October 11, 2024

Bulletpayment（Note 2）

Unsecured/unguaranteed/pari passu,
See (Note 3)

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

The Chugoku Bank, Limited
The Iyo Bank, LTD.

1,000
1,000

Meiji Yasuda Life Insurance Company
The Joyo Bank, Ltd.
The Chiba Bank, Ltd.
Shinsei Bank, Limited
Resona Bank, Limited.

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

The Gunma Bank, Ltd.
Mitsui Sumitomo Insurance Company,
LimitedTotal long-term loans (Note 5)
Total borrowings

1,000
1,000

0.275% May 14, 2025
0.322% March 28, 2031
0.270% May 19, 2027
0.320% May 26, 2028
0.003%
January 27, 2022
(Note 4)0.027%
June 30, 2025
(Note 4)0.320% April 28, 2028
1.277% April 27, 2022
0.386% March 3, 2027
0.300% February 28, 2028
0.258% June 27, 2025
0.270% May 22, 2026
1.533% May 30, 2025
0.450% January 31, 2031
0.165%
June 1, 2027
(Note 4)0.320% January 7, 2028
0.320% January 7, 2038

Bulletpayment（Note 2）

Unsecured/unguaranteed/pari passu,
See (Note 3)¥493,500¥493,500

Notes:
1. Interest Rate is rounded down to the 3rd decimal point.
2. Use of funds for the above includes acquisition of real estate or beneficiary interests, repayment of borrowings and working
capital, etc.
3. A special agreement attached to “Loan Agreement” entered into between NBF and each financial institution provides that theabove borrowings from all financial institutions rank pari passu to each other.
4. This loan is a floating rate loan. Other long-term loans are all fixed rate loans.
5. The total amount of long-term loans (i.e. excluding those expected to be repaid within one year) repayable within 5 years of thedate of the balance sheet and expected to be repaid by specific year(s) is as follows.

Long-term loans

1 to 2 years

2 to 3 years(Yen in millions)
3 to 4 years
4 to 5 years¥53,000¥50,000¥17,000

NBF Bonds¥55,000

Issue date

Balance as ofJune 30,
2021(Yen in millions)No. 13 Unsecured Bonds

June 26, 2013

¥10,000

No. 14 Unsecured Bonds

June 9, 2016

No. 15 Unsecured Bonds

Redemption

Use offunds

1.168% June 26, 2023

Bullet payment

Note 25,000

1.000% June 8, 2046

Bullet payment

Note 2

May 22, 2017

5,000

0.914% May 22, 2037

Bullet payment

Note 2Notes
3 and 4

No. 16 Unsecured Bonds

May 23, 2018

5,000

0.220% May 23, 2025

Bullet payment

Note 2Notes
3 and 4

No. 17 Unsecured Bonds

May 23, 2018

5,000

0.888% May 21, 2038

Bullet payment

Note 2Notes
3 and 4

No. 18 Unsecured Bonds

December 19, 2018

7,000

0.200%

January 10,
2024

Bullet payment

Note 2Notes
3 and 4

No. 19 Unsecured Bonds

August 14, 2020

15,0000.180%

August 14,
2025

Bullet payment

Note 2Notes
3 and 4Issue

9

Coupon(Note 1)Maturity
date

Notes
Notes
3 and 4Notes
3 and 4

No. 20 Unsecured Bonds(Green Bonds)

March 22, 2021

Total (Note 5)5,000

0.150% March 19, 2026 Bullet payment

Note 2¥57,000

Notes:
1. Interest Rate is rounded down to the 3rd decimal point.
2. Use of funds includes repayment of borrowings and investment corporation bonds, etc.
3. Rank pari passu with all other publicly and privately issued bonds.
4. Subject to provision of collateral restrictions.
5. The total amount of bonds repayable within 5 years of the date of the balance sheet and expected to be repaid by specific year(s)is as follows.
(Yen in millions)

Investment
corporation bonds

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years―¥10,000¥7,000¥5,000¥20,000

Others

NBF has security deposits totaling ¥69,283 million as of June 30, 2021.

10

Notes
3 and 4

■ Capital Expenditures
1. Planning
As of June 30, 2021, NBF is planning the following capital expenditures for the renovation of its properties.
The amounts below include repairs and maintenance costs that will be expensed as incurred. Moreover, in
addition to a steady program of expenditures for construction, repair and renovation of facilities, a program ofrenewal construction is being implemented in order to increase competitive power in the market as well as toincrease the level of tenant satisfaction based on the results of tenant satisfaction surveys and neighboring
competitive building specification surveys, etc.
Estimated amounts
Name of property

Objective

Estimated
duration

Totalamounts

Payment for thecurrent period(from January 1, 2021
to June 30, 2021)(Yen in millions)
For the six months ending December 31, 2021 (the 41st fiscal period from July 1, 2021 to December 31, 2021)
From January 2021
Renovation of air
Shinjuku Mitsui Bldg.
¥498¥99
to September 2021
conditioning
Renewal construction
From July 2021
491－
NBF Shinagawa Tower
to improve
to October 2021
competitiveness
From July 2021
Renovation of air
Toyo-cho Center Bldg.
319－
to December 2021
conditioning
From June 2021
Renovation of
NBF Shibakouen Bldg.
250－
to December 2021
restroom
From July 2021
Renovation of
Shinjuku Mitsui Bldg. No.2
235－
to December 2021
substation equipment
NBF COMODIO
From July 2021
Renovation of air
180－
Shiodometo December 2021
conditioning
From April 2020
Renovation of
Aqua Dojima NBF Tower
159－
to December 2021
elevator
From July 2021
Renovation of
Shiba NBF Tower
157－
to December 2021
substation equipment
From September 2021
Renovation of
Shinjuku Mitsui Bldg.
154－
to December 2021
security system
Renovation of central From July 2021
Shinjuku Mitsui Bldg. No.2
129－
to December 2021
monitoring board
Celestine Shiba Mitsui
From July 2021
Renovation of
127
－
Bldg.
firefighting equipment to December 2021
Renovation of wall
Sumitomo Mitsui Banking
From September 2021
126－
through air
Nagoya Bldg.
to December 2021
conditioning
Celestine Shiba Mitsui
Renovation of lighting From July 2021
120
－
Bldg.
to December 2021
equipment
From October 2020
Renovation of
Shiba NBF Tower
119－
to December 2021
elevator
From July 2021
Renovation of
Yokohama ST Bldg.
108－
to December 2021
restroom
From October 2021
Renovation of air
Hakata Gion M-SQUARE
104－
to December 2021
conditioning

11

Cumulative
amount paid

¥99
－
－
－
－
－
－
－
－
－
－
－
－
－
－
－

From August 2021
Renovation of101－
to December 2021
restroom
From July 2021
Renovation of
NBF Ikebukuro Tower
95－
to December 2021
elevator
From June 2021
Renovation of
NBF Shibakouen Bldg.
79－
to December 2021
elevator
From July 2021
Renovation of
NBF Urawa Bldg.
71－
to December 2021
restroom
From August 2021
Renovation of
NBF Takanawa Bldg.
66－
to December 2021
elevator
From July 2021
Renovation of tide
NBF Higashi-Ginza Square45－
to December 2021
platesRenovation of lighting From August 2021
Sapporo L-Plaza
43－
to December 2021
equipment
NBF Sapporo Minami Nijo
From July 2021
Renovation of
34
－
Bldg.
to December 2021
restroom
From August 2021
Renovation of air
Jingumae M-SQUARE
29－
to December 2021
conditioning
For the six months ending June 30, 2022 (the 42nd fiscal period from January 1, 2022 to June 30, 2022)
Renewal construction
From July 2021
¥1,371¥－NBF Shinagawa Tower
to improve
to February 2022
competitiveness
Nagoya Mitsui Main
From October 2020
Renovation of389
47
Building.
to May 2022
substation equipment
From January 2022
Renovation of air
Toyo-cho Center Bldg.
270－
to June 2022
conditioning
From May 2021
Renovation of Gas
NBF Toyosu Canal Front
256－
to May 2022
Heat Pump
Renovation of lighting From May 2021
Shinjuku Mitsui Bldg.
220－
to February 2022
equipment
From January 2022
Renovation of
Shiba NBF Tower
207－
to June 2022
substation equipment
From January 2021
Renovation of
Shinjuku Mitsui Bldg.
20040
to March 2022
security system
Renovation of lighting From August 2021
River City M-SQUARE
189－
to June 2022
equipment
Shin-Kawasaki Mitsui
From May 2021
Renovation of
183
－
Bldg.
to April 2022
elevator
NBF COMODIO
From January 2022
Renovation of air
177－
Shiodometo June 2022
conditioning
Sumitomo Mitsui Banking
Renovation of lighting From January 2022
171－
Nagoya Bldg.
to June 2022
equipment
From April 2021
Renovation of air
Gate City Ohsaki
165－
to March 2022
conditioning
From March 2021
Renovation of
Shinanobashi Mitsui Bldg.
165－
to February 2022
emergency generator
From January 2022
Renovation of
Shinjuku Mitsui Bldg.
150－
to June 2022
security system
Celestine Shiba Mitsui
Renovation of lighting From January 2022
142
－
Bldg.
to June 2022
equipment
Nishi-Shinjuku Mitsui
Renovation of lighting From July 2021
128
－
Bldg.
to March 2022
equipment
Renovation of fire
Celestine Shiba Mitsui
From January 2022
126－
extinguishing
Bldg.
to June 2022
facilities
From January 2022
Renovation of
Shiba NBF Tower
117－
to June 2022
elevator
Sumitomo Densetsu Bldg.

12

－
－
－
－
－
－
－
－
－

¥－
94
－
－
－
－
40
－
－
－
－
－
－
－
－
－
－
－

Nishi-Shinjuku Mitsui
Bldg.

From January 2022
Renovation of air
104－
to March 2022
conditioning
From January 2022
Renovation of
Sumitomo Densetsu Bldg.
101－
to June 2022
restroom
From May 2022
Renovation of air
Roppongi T-CUBE
100－
to June 2022
conditioning
Hiroshima Fukuromachi
From March 2022
Renovation of air
71
－
Bldg.
to June 2022
conditioning
From January 2022
Renovation of air
Jingumae M-SQUARE
64－
to June 2022
conditioning
From January 2022
Renovation of
NBF Urawa Bldg.
60－
to June 2022
restroom
Hiroshima Fukuromachi
From March 2022
Renovation of air
43
－
Bldg.
to June 2022
conditioning
From January 2022
Renovation of
NBF Urawa Bldg.
40－
to June 2022
elevator
Renovation of
NBF Sapporo Minami Nijo
From January 2022
29－
mechanical parking
Bldg.
to June 2022
lot facilities
NBF Sapporo Minami Nijo
From January 2022
Renovation of
28
－
Bldg.
to June 2022
restroom
NBF Sapporo Minami Nijo
From January 2022
Renovation of
23
－
Bldg.
to June 2022
plumbing system
For the six months ending December 31, 2022 (the 43rd fiscal period from July 1, 2022 to December 31, 2022)
From September 2021
Renovation of air
Shinjuku Mitsui Bldg.
¥402¥－
to September 2022
conditioning
NBF COMODIO
From July 2022
Renovation of air
195－
Shiodometo December 2022
conditioning
From July 2022
Renovation of
Shiba NBF Tower
117－
to December 2022
elevator
Renovation of central From December 2021
Shinjuku Mitsui Bldg.
110
44
to September 2022
monitoring facilities

13

－
－
－
－
－
－
－
－
－
－
－

¥－
－
－
44

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥8,141 million incapital expenditures together with ¥1,364 million for repairs and maintenance expenses.

Name of property

Objective

PeriodExpenditure(Yen in millions)

NBF Hatchobori Terrace

Leasehold improvement and life cycle cost
construction, renewal construction for
independent management, renovation of
security system, etc.

¥713

Shinjuku Mitsui Bldg. No.2

Renovation of substation equipment,
renovation of restroom, renovation of foam
fire extinguishing system, etc.

568

NBF Shinkawa Bldg.

Shiba NBF Tower

Leasehold improvement and life cycle cost
construction, renewal construction for
independent management, renovation ofelevator, etc.
Renovation of substation equipment,
renovation of emergency elevator,
renovation of expansion water tank for hot
and chilled water, etc.

528

521

Gate City Ohsaki

Renovation of wall through air conditioning,
renovation of automatic air control,
renovation of ITV equipment, etc.

424

Sakaisuji-Honmachi Center Bldg.

Renovation of air conditioning, renovationof elevator, leasehold improvement of air
conditioning main power, etc.

312
From January 2021
to June 2021

Shinjuku Mitsui Bldg.

Renovation of security system, renovation of
converter, renovation of supplies forincoming and transforming facilities, etc.

Toyo-cho Center Bldg.

Renovation of air conditioning, renovationof parking lot ceiling refrigeration plumbing,renovation of smoke outlet, etc.

292

NBF COMODIO Shiodome

Renovation of air conditioning, renovationof total heat exchanger humidification
element, renovation of emergency broadcast
equipment, etc.

255

Roppongi T-CUBE

Conversion to LED, renovation of common
area, renovation of lighting control panel,
etc.

241

Shin-Kawasaki Mitsui Bldg.

Renovation of lighting equipment,
renovation of low-rise building rooftop air
conditioning, renovation of security system,
etc.

225

Yokohama ST Bldg.

Renovation of restroom, countermeasureconstruction of security, renovation ofindoor fire hydrant pump, etc.

218

14

296

Aqua Dojima NBF Tower

Renovation of elevator, renovation of watthour meter, renovation of gondola, etc.

177

Nakanosakaue Sunbright Twin

Renovation of automatic air control,
renovation of emergency air conditioning
plumbing, installation of scaffold andhandrail for cleaning atrium glass, etc.

160

Sumitomo Mitsui Banking
Nagoya Bldg.

Renovation of wall through air conditioning,
renovation of electric emergency meter,renovation of Date Control Unit for power
reception and distribution system, etc.

149

NBF Nagoya Hirokoji Bldg.

Renovation of lighting equipment,
renovation of wall through air conditioning,
renovation of rental room air conditioning,
etc.

140

NBF Shibuya East

Renewal construction to improve
competitiveness, renovation of power board,renovation of ITV equipment, etc.

136

Gran Tokyo South Tower

Renovation of lighting equipment,
renovation of entrance and exit control
system, renovation of shutter, etc.

133

NBF ALLIANCE

Renewal construction to improve
competitiveness, etc.

112

NBF Ikebukuro Tower

Renovation of elevator, renovation of air
conditioning, renovation of watt-hour meter,
etc.

76

Nihonbashi Kabuto-cho
M-SQUARE

Renovation of air conditioning, putting up
door sheet for private room, renovation ofalarm transmitter, etc.

45

Parale Mitsui Bldg.

Renovation of air conditioning, renovationof emergency lighting equipment,
renovation of ITV equipment, etc.

35

NBF Sapporo Minami Nijo Bldg.

Renovation of mechanical parking facilities,
painting handrail of stairwell andreplacement of P-tile, renovation of chiller
for air-cooling, etc.

31

Other buildings

Asset preservation construction and otherrenewal construction to improve tenantsatisfaction, etc.

979

Total

¥6,77715

■ Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.

Item

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

For the six months
ended June 30,
2021

For the six months
ended December 31,
2020¥1,77951(Yen in millions)¥1,543
50

60
12
15
262
¥2,181

44
12
15
148
¥1,81416

For the six months
ended June 30,
2020¥1,444
49
43
12
15
98
¥1,664

■ 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 or sold by NBF in
the current period.
Acquisition
Name of building

Acquisition price(Note 1)

Date

Shinjuku Mitsui Bldg.
Gran Tokyo South Tower
Ueno East Tower (additional acquisition)

January 8, 2021
January 8, 2021
March 29, 2021

Total

¥170,000¥47,000¥13,400¥230,400

Sale
Name of building

Date

NBF Minami-Aoyama Bldg.
NBF Shinkawa Bldg. (East Building and Residential(Yen in millions)
Sale priceMarch 25, 2021
March 31, 2021

Tower) 50% co-ownership interest (Note 2)(Yen in millions)¥31,600¥5,950Total¥37,550

Notes: 1. “Acquisition price” does not include national consumption tax, local consumption tax and miscellaneous costs of acquisition.
2. Upon the disposition, each of 50% of the co-ownership interest in the property was established as property in trust on the same date ofeach disposition date above, and the beneficiary interests in trust was transferred.

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 bank deposits included in assets held in trust.

3. Transactions with Related Parties of Asset Management Company(1) Ongoing Transactions
Category

Total amountAmount of purchase price, etc. (Note 2)(Note 3)
Purchase price, etc.（Yen in millions）

Sale price, etc.（Yen in millions）¥230,400 (100%)¥37,550 (100%)

Amount of purchases from related

Amount of sales from related parties, etc.

parties, etc.
217,000 (94.2%)― (―)

217,000 (94.2%)― (―)¥217,000 (94.2%)― (―)

Breakdown of transactions with related parties, etc.
Mitsui Fudosan Co., Ltd.
Total

17

(2) Fees Paid for the Period from January 1, 2021 to June 30, 2021
Description of transactions with related parties (Note 1)

Category

Amount ofpayment (B)Total fees paid
(A)

Paid to¥1,576

Mitsui Fudosan Co., Ltd.

¥1,52096.4%

NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsui Fudosan Facilities Co., Ltd.
Mitsui Fudosan Building Management Co.,Ltd.
Mitsui Fudosan Facilities West Co., Ltd.
Mitsui Fudosan Residential Lease Co., Ltd.

56
1,413
578

3.6%
30.8%
12.6%

254

5.5%

251
1

5.5%
0.0%

18
6
0

50.2%
17.5%
1.1%

(Yen in millions)

Office management fees,
etc.
(Note 4)

Property maintenance fees

Leasing related service fees

4,583

36

(Yen in millions)

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

B/A

Notes:
1. “Related parties” are defined as related parties of asset management companies under asset management agreementwith NBF as defined in Article 123 of Order for Enforcement of the Law Concerning Investment Trusts andInvestment 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. During the period fromJanuary 1, 2021 to June 30, 2021, transactions with and fees paid to, Mitsui Fudosan Co., Ltd., NBF Office
Management Co., Ltd., Mitsui Fudosan Facilities Co., Ltd., Mitsui Fudosan Facilities West Co., Ltd., Mitsui Fudosan
Building Management Co., Ltd., Mitsui Fudosan Residential 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 (18 properties: Shinjuku Mitsui Bldg., Roppongi T-CUBE, Nishi-Shinjuku Mitsui Bldg.,
Celestine Shiba Mitsui Bldg., Toranomon Kotohira Tower, Yotsuya Medical Bldg., Panasonic Tokyo Shiodome Bldg.,
NBF Ogawamachi Bldg., Gate City Ohsaki, Osaki Bright Core – Bright Plaza, Nakameguro GT Tower, OSAKI
BRIGHT TOWER, Higashi Gotanda Square, Shin-Kawasaki Mitsui Bldg., Parale Mitsui Bldg., Nagoya Mitsui New
Building., Nagoya Mitsui Main Building. and Shinanobashi Mitsui 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, etc.
(Yen in millions)

Mitsui Fudosan Co., Ltd.

¥1,499Mitsui Fudosan Building Management Co., Ltd

481

MITSUI Designtec Co., Ltd.

131

Mitsui Fudosan Facilities West Co., Ltd.

43

Mitsui Fudosan Facilities Co., Ltd.

5Harajuku-no-mori Co., Ltd.

4

Mitsui Fudosan Residential Lease Co., Ltd.

2

18

Financial Statements

NIPPON BUILDING FUND INC.
BALANCE SHEETSAs of June 30, 2021 and December 31, 2020

As ofJune 30, 2021

As ofDecember 31, 2020

(Yen in millions)
AssetsCurrent Assets:
Cash and cash equivalents（Note 3）
Tenant receivables
Prepaid expenses
Other current assets
Total current assets
Real Estate 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）
Total real estate properties, net
Intangible assets:
Superficies（Note 13）
Leasehold rights in trust accounts（Notes 13）
Other intangible assets（Notes 13）
Total intangible assets
Long-term Prepaid Expenses（Note 13）
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: 4,000,000 units
Units issued and outstanding: 1,652,500 units
Reserve for reduction entry
Retained earnings
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these statements.

19¥ 44,075
345
805
97
45,324¥ 133,731
292
747
133
134,904

930,168
463,833
16,187(194,275)
1,215,913

737,485455,600
15,383(190,092)
1,018,377

11,882
23,726
176
35,786
6
8,357¥1,305,388

11,882
23,726196
35,8068
8,338¥1,197,435¥—
25,000
8,951
4,907
1,717
40,577525,500
69,283
156
635,517¥ 10,000
35,000
9,486
4,826
792
60,106
414,500
56,067
141
530,814642,044642,044

6,398
21,427
669,870¥1,305,388

7,302
17,274
666,620¥1,197,435

NIPPON BUILDING FUND INC.
STATEMENTS OF INCOME
For the six months ended June 30, 2021, December 31, 2020 and June 30, 2020

For the six months
ended June30, 2021

For the six months
ended December
31, 2020

For the six months
ended June30, 2020(Yen in millions)Operating Revenues and Expenses
Operating Revenues:
Rental revenue（Note 7）¥41,571¥36,622¥35,890

Other revenues related to property leasing（Note 7）

3,117

3,736

2,700

Gains on sales of real estate properties（Note 8）

1,524

1,388

—

46,21341,74738,591

Property management fees（Note 7）

6,031

5,816

5,406

Real estate taxes（Note 7）

3,615

3,554

3,579

Repairs and maintenance（Note 7）

1,364

1,798

1,184

38

34

33

Other rental expenses（Note 7）

2,766

2,835

2,795

Depreciation and amortization（Note 7）

7,399

7,181

7,167

38

—

—

Asset management fees

1,779

1,543

1,444

Other operating expenses

401

271

219

Total Operating Expenses

23,43523,035

21,830Operating Income

22,77818,712

16,760Interest income

0

0

0

Property tax refund and interest on refund

0

0

6

Other non-operating revenues

6

2

6

(1,306)(1,160)(1,217)

Amortization of bond issuance costs

(19)

(16)

(10)

New investment units issuance costs

—

(238)

—

Other non-operating expenses

(32)

(26)

(32)

Ordinary Income

21,42817,274

15,513

Income before Income Taxes

21,42817,274

15,513

(0)

(0)

(1)

Total Operating Revenues
Operating Expenses:

Insurance（Note 7）

Loss on sale of real estate property（Note 8）

Non-Operating Revenues and Expenses
Non-Operating Revenues:

Non-Operating Expenses:
Interest expense

Current and deferred income taxes（Note 9）
Net Income¥

21,427

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

20¥

17,273¥

15,512NIPPON BUILDING FUND INC.
STATEMENTS OF CHANGES IN NET ASSETSFor the six months ended June 30, 2021, December 31, 2020 and June 30, 2020

(Yen in millions)
Reserve for
Number of Unitholders’ reduction
Retained
Units
Capitalentry
Earnings
Balance as of December 31, 2019 . . . . . . . . . . . 1,412,000

Total¥ 519,124¥ 7,302¥ 15,548¥ 541,975

Cash dividends declared . . . . . . . . . . . . . . . . . . . . .

—

—

—

(15,547)(15,547)

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

—

—

—

15,512

15,512

Balance as of June 30, 2020 . . . . . . . . . . . . . . . . . 1,412,000

519,124

7,302

15,513541,940

Cash dividends declared . . . . . . . . . . . . . . . . . .
Issuance of new units through public offering asof October 26, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Issuance of new units through allocation to athird party as of November 6, 2020 . . . . . . . . .

—

—

—

(15,512)(15,512)229,000

117,041——

117,041

11,500

5,877

—

—

5,877

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

—

—

—

17,273

17,273

Balance as of December 31, 2020 . . . . . . . . . . . 1,652,500

642,044

7,302

17,274

666,620

Reversal of reserve for reduction entry . . . . . . . .

—

—

(903)

903

—

Cash dividends declared . . . . . . . . . . . . . . . . . . . . .

—

—

—

(18,177)(18,177)

Net income

—

—

—

21,427

21,427

Balance as of June 30, 2021 . . . . . . . . . . . . . . . . . 1,652,500¥ 642,044¥ 6,398¥ 21,427¥ 669,870...........................

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

21

NIPPON BUILDING FUND INC.
STATEMENTS OF CASH FLOWSFor the six months ended June 30, 2021, December 31, 2020 and June 30, 2020

For the six
months ended
June 30,
2021

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Amortization of bond issuance costs
Interest expense(Increase) Decrease in tenant receivables
Increase (Decrease) in accounts payable
Increase (Decrease) in rents received in advance
Decrease in real estate properties due to sales
Cash payments of interest expense
Others, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of real estate properties
Proceeds from tenant security deposits
Payments for tenant security deposits
Payments for security deposits paid to lessors
Refunds from 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 (Used in) Financing Activities
Net Change in Cash and Cash Equivalents
Cash and Cash Equivalents at the Beginning of Period
Cash and Cash Equivalents at the End of Period

For the six
months ended
June 30,
2020(Yen in millions)¥ 21,428
7,399
19
1,306
(53)
(1,857)80
35,759(1,096)714
63,700¥ 17,274
7,181
16
1,160
18
2,953
(16)
3,706
(1,271)(472)
30,549¥ 15,513
7,167
10
1,217
425
137
(71)
—
(1,163)(177)
23,059(238,885)
15,605(2,389)(8)4(478)(226,152)(47,127)
3,672(1,466)
(0)
13
(491)
(45,400)(6,787)1,126(1,314)
(19)
4
(448)
(7,440)(10,000)
128,000(27,000)—(29)(18,174)
72,795(89,655)
133,731¥ 44,075

10,00037,000(23,000)
122,681(68)(15,511)
131,100
116,249
17,482¥ 133,731—
35,000(33,000)——(15,544)(13,544)
2,074
15,407¥ 17,482

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

22

For the six
months ended
December 31,
2020

NIPPON BUILDING FUND INC.
Notes To Financial Statements
For the six months ended June 30, 2021, December 31, 2020 and June 30, 2020
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
office properties on May 23, 2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset
management company, is engaged in acquiring, managing, leasing, and renovating office properties. Mitsui
Fudosan Co., Ltd. currently owns 46% of NBFM while Sumitomo Life Insurance Company owns 35% and theremaining 19% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering ofunits. Those units are listed on the J-REIT section of the Tokyo Stock Exchange.
As of June 30, 2021, NBF had ownership or beneficiary interests in 75 office properties containing
approximately 1,216,543 square meters of rentable office space. As of June 30, 2021, NBF had leased officespace to 1,606 tenants engaged in a variety of businesses. The occupancy rate for the office properties wasapproximately 97.2%.

Basis of Presentation

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

23

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.

Real Estate Properties

Real estate properties are recorded at cost, which includes the allocated purchase price, related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over the estimated useful lives. The estimateduseful lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and improvements including trust accounts
Buildings and improvements
2-50 years
Other tangible assets
Structures
2-50 years
Machinery and equipment
2-17 years
Tools, furniture and fixtures
2-20 years
Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures forrepairs and maintenance which do not add to the value or prolong the useful life of a property, are expensed
when incurred.

Investment Corporation Bond Issuance Costs

Deferred investment corporation bond issuance costs are amortized using the straight-line method over therespective terms of the bonds.

New Investment Units Issuance Costs

The issuance costs of new investment units are expensed when incurred.

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 thepurchase date of each property until the end of the calendar year as part of the acquisition cost of the relevant
property. Capitalized real estate taxes amounted to ¥1,330 million for the period ended June 30, 2021, ¥57 million
for the period ended December 31, 2020 and ¥6 million for the period ended June 30, 2020.

Revenue Recognition

NBF operates office properties that are rented to tenants on lease terms of generally two years, with monthly
payments due in advance. Rental and other property income is recorded when due from tenants and isrecognized 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.

24

Note 3 – Financial Instruments
Status of Financial Instruments
Policy for Financial Instruments
NBF procures funds for acquisition of assets and repayment of debt, which includes repayment of tenantsecurity deposits, loans and investment corporation bonds, through issuance of new investment units, bank loans
and issuance of investment corporation bonds, with the aim of ensuring steady asset growth and stable earnings
from a mid- and long-term angle.
As a general rule NBF invests surplus funds in deposits considering safety of the investments.
NBF may enter into derivative transactions solely for the purpose of reducing interest rate risks and otherrisks arising from liabilities. NBF does not engage in speculative transactions. Currently NBF is not engaged inany 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 the depository financial institutions. NBF limits credit risk by using only short-term deposits infinancial institutions with high credit ratings.
Proceeds from loans and investment corporation bonds are used mainly to acquire real estate properties andrepay outstanding loans and bonds. While these loans and bonds are exposed to liquidity risk, such risk ismanaged in the following ways such as diversifying the means of funding and lending institutions, dispersing
repayment dates, establishing committed credit line, keeping sufficient liquidity in hand, and monitoring cash
flows projected monthly.
Floating rate loans are exposed to interest-rate fluctuation. NBF limits the impact of such risks by maintaining
the ratio of interest-bearing liabilities to total assets 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 thetermination of contract. NBF manages this risk by monitoring forecasted cash flows on a monthly basis toensure 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 isno 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.

Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of June 30, 2021 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from thefollowing table (See Note 2. below).
(Yen in millions)(For the six months ended June 30, 2021)

(1)

(1)
(2)

AssetsCash and cash equivalents
Total
Liabilities
Long-term debt due within
one yearLong-term debt
Total

Book value

Fair value¥ 44,075¥ 44,075¥ 44,075¥ 44,075¥ 25,000
525,500¥550,500¥ 25,076
527,419¥552,495

Notes:

25

Difference
¥
¥

－
－

¥ 76
1,919
¥1,995

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 are settled within a short term period.
Liabilities:(1) Long-term debt due within one year
Long-term debt due within one year which includes Long-term loans are as follows.
(Yen in millions)(For the six months ended June 30, 2021)(1)

Book value¥25,000¥25,000

Long-term loans
Total

Fair value¥25,076¥25,076

Difference¥76¥76(1) Long-term loans
Fair values of floating rate long-term loans are based on the book values because the market interest rates arereflected within a short term period and the book values are considered to approximate fair values. Fair values of fixed
rate 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) Long-term debt
Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)(For the six months ended June 30, 2021)

(1)
(2)

Book value¥57,000
468,500¥525,500

Investment corporation bonds
Long-term loans
Total

Fair value¥56,643
470,775¥527,419

Difference¥ (356)2,275¥1,919(1) Investment corporation bonds
Fair values of investment corporation bonds are based on observable market value, if available. When there is noobservable market value available, fair values are calculated based on the present value of principal and interest cash
flows discounted at the current interest rate that is estimated by taking into consideration the remaining term of theinvestment corporation bonds and their credit risk.
(2) Long-term loans
Fair values of floating rate long-term loans are based on the book values because the market interest rates arereflected within a short term period and the book values are considered to approximate fair values. Fair values of fixed
rate 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.

Book value, fair value and difference between the two as of December 31, 2020 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from thefollowing table (See Note 2. below).
(Yen in millions)(For the six months ended December 31, 2020)(1)

AssetsCash and cash equivalents
Total

Book value¥ 133,731¥ 133,731

26

Fair value¥ 133,731¥ 133,731

Difference
¥
¥

－
－

(1)
(2)
(3)

Liabilities
Short-term loans
Long-term debt due within
one yearLong-term debt
Total

¥ 10,000¥ 10,000

35,000414,500¥459,500

35,067416,166¥461,234

¥

－
67
1,666
¥1,734

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 are settled 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 are settled within a short term period.
(2) Long-term debt due within one year
Long-term debt due within one year which includes Long-term loans are as follows.
(Yen in millions)(For the six months ended December 31, 2020)(1)

Book value¥35,000¥35,000

Long-term loans
Total

Fair value¥35,067¥35,067

Difference¥67¥67(1) Long-term loans
Fair values of floating rate long-term loans are based on the book values because the market interest rates arereflected within a short term period and the book values are considered to approximate fair values. Fair values of fixed
rate 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)(For the six months ended December 31, 2020)

(1)
(2)

Book value¥52,000
362,500¥414,500

Investment corporation bonds
Long-term loans
Total

Fair value¥51,539
364,627¥416,166

Difference¥ (460)2,127¥1,666(1) Investment corporation bonds
Fair values of investment corporation bonds are based on observable market value, if available. When there is noobservable market value available, fair values are calculated based on the present value of principal and interest cash
flows discounted at the current interest rate that is estimated by taking into consideration the remaining term of theinvestment corporation bonds and their credit risk.
(2) Long-term loans
Fair values of floating rate long-term loans are based on the book values because the market interest rates arereflected within a short term period and the book values are considered to approximate fair values. Fair values of fixed
rate long-term loans are based on the present value of principal and interest cash flows discounted at the current interest

27

rate estimated to be applied if similar new loans were entered into.
2. Financial Instruments for which it is Very Difficult to Estimate the Fair Value.
(Yen in millions)

As of June 30, 2021
Tenant security deposits
including trust accounts

As of December 31, 2020

¥69,283¥56,067

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, thatmakes a reasonable estimate of future cash flows difficult.
3. Redemption Schedule for Monetary Claims as of June 30, 2021
(Yen in millions)Due within
one year

Due after one
to two years

Due after two
to three years

Due after
three to four
years

¥44,075－－－

Cash and cash
equivalents

Due after four
to five years

Due after five
years

－

－

Redemption Schedule for Monetary Claims as of December 31, 2020
(Yen in millions)Due within
one year

Due after one
to two years

Due after two
to three years

Due after
three to fouryears

Due after four
to five years

Due after fiveyears

¥133,731

－

－

－

－

－

Cash and cash
equivalents

4. Repayment Schedule for Loans and Investment Corporation Bonds as of June 30, 2021
Due after
two to threeyears

Due after
three to four
years

－

¥10,000¥7,000¥5,000¥20,000¥15,000

25,00053,00050,00017,00055,000293,500¥25,000¥63,000¥57,000¥22,000¥75,000¥308,500

Due within
one yearInvestment
corporationbonds
Long-term
loans
Total

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

Due after
one to two
years

¥

Repayment Schedule for Loans and Investment Corporation Bonds as of December 31, 2020
Due after
two to threeyears

Due after
three to four
years

¥

－

¥

¥

－

－

10,0007,000

20,00015,00035,00041,00042,00044,00030,000205,500¥45,000¥41,000¥52,000¥51,000¥50,000¥220,500

Due within
one year
Short-term
loans
Investment
corporationbonds
Long-term
loans
Total

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

Due after
one to two
years¥10,000－

Note 4 – Tangible Assets of Real Estate Properties
28

－

¥

－

¥

－

Tangible assets as of June 30, 2021 and December 31, 2020 consisted of the following:
As of June 30, 2021

¥583,854
346,314930,168
252,867

Accumulated
depreciation¥———(91,269)

210,966(92,586)

118,379

208,004(89,463)

118,540

463,833
3,580
2,265
2,434
2,980

(183,855)(2,247)(1,623)(1,541)(1,841)

279,977
1,332
641
892
1,138

455,600
3,456
2,158
2,213
2,978

(179,932)(2,225)(1,593)(1,496)(1,791)

275,668
1,231
564
717
1,187

2,287

(1,728)

559

2,246

(1,690)555(1,436)898—
304(10,419)5,767¥(194,275) ¥1,215,913

2,279
51
15,383¥1,208,470

Acquisition costs
Land
Land in trust
Land including trust total
Buildings and improvements
Buildings and improvements
in trust
Buildings 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 intrust
Construction in process
Other tangible assets total
Total

As of December 31, 2020

(Yen in millions)

2,335
304
16,187¥1,410,189

Book value

Acquisition costs¥583,854
346,314930,168
161,598¥391,171
346,314
737,485
247,596

Accumulated
depreciation¥———(90,469)

Book value¥391,171
346,314
737,485
157,127(1,363)915—
51(10,160)
5,223¥(190,092) ¥1,018,377

Note 5 – 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 are designated as stated capital. NBF maintains at least ¥50 million as the minimum net assets
as required by the Investment Trust Law of Japan.

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 annualinterest rates on short-term loans outstanding are floating rates and on December 31, 2020 was at 0.128%. Longterm debt as of June 30, 2021 and December 31, 2020 consisted of the following:
As ofJune 30, 2021

Unsecured loans due 2021 to 2036 principally from banks andinsurance companies with interest rates mainly ranging from0.003% to 1.533% ............................................................................
1.168% unsecured bonds due 2023
0.200% unsecured bonds due 2024
0.180% unsecured bonds due 2025
0.220% unsecured bonds due 2025
0.150% unsecured bonds due 2026
0.914% unsecured bonds due 2037
0.888% unsecured bonds due 2038
1.000% unsecured bonds due 2046

(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................
(Note 1) ....................................

29

As of
December 31,
2020(Yen in millions)¥493,500
10,0007,000
15,000
5,000
5,000
5,000
5,000
5,000
550,500¥397,500
10,0007,000
15,000
5,000
—
5,000
5,000
5,000
449,500

Less: amount due within one year ........................................................

25,000¥525,500

Notes: 1. Subject to provision of collateral restrictions.

35,000¥414,500

The annual maturities of long-term debt as of June 30, 2021 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……………………………………
……………………………………
……………………………………
……………………………………
……………………………………

¥ 63,000
57,00022,00075,000308,500

During the period ended June 30, 2021, NBF had commitment credit line contracts of ¥52 billion with several
financial institutions to reduce refinancing risk. The unused amount of such committed credit lines was ¥52 billion
as of June 30, 2021.

Note 7 – Rental Revenues and Expenses

Rental revenues and expenses for the periods ended June 30, 2021, December 31, 2020 and June 30, 2020 wereas follows:
For the six
months ended
June 30, 2021

Revenues from Property Leasing:
Rental revenue:
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Common area charges . . . . . . . . . . . . . . . . . . . . . . ..
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 maintenance . . . . . . . . . . . . . . . . . . . . .
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other rental expenses . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . .
Total rental expenses . . . . . . . . . . . . . . . . . .. . . . . . . . .
Operating Income from Property Leasing Activities. . .

For the six
months ended
June 30, 2020

(Yen in millions)¥38,980
2,413
177
41,571¥33,806
2,612
203
36,622¥33,0132,649
226
35,890

673
294
1,750
327
70
3,117
44,688

640
280
1,915
864
36
3,736
40,359

622
275
1,718
26
59
2,700
38,591

6,031
3,615
1,364
38
2,766
7,399
21,215¥23,473

5,816
3,554
1,798
34
2,835
7,181
21,220¥19,138

5,406
3,579
1,184
33
2,795
7,167
20,166¥18,424Note 8 – Gains and Loss on Sales of Real Estate Properties

30

For the six
months ended
December 31,
2020

Gains and loss on sales of real estate properties for the periods ended June 30, 2021 and December 31, 2020
were as follows. No real estate properties were sold during the periods ended June 30, 2020.
For the six months ended June 30, 2021
NBF Shinkawa Bldg. (East Building and Residential
Tower) 50% co-ownership interest
Proceeds from sale of real estate property
Cost of sale of real estate property
Other related sale expenses
Gain on sale of real estate property(Yen in millions)¥5,9504,220
204¥ 1,524

NBF Minami-Aoyama Bldg.
Proceeds from sale of real estate property
Cost of sale of real estate property
Other related sale expenses
Loss on sale of real estate property(Yen in millions)¥31,600
31,53899¥ 38

For the six months ended December 31, 2020
NBF Shinkawa Bldg. (East Building and Residential
Tower) 50% co-ownership interest
Proceeds from sale of real estate property
Cost of sale of real estate property
Other related sale expenses
Gain on sale of real estate property(Yen in millions)¥5,9503,706
854¥ 1,388

Note 9 – Income Taxes

NBF is subject to income taxes in Japan. The effective tax rate on NBF's income was 0.00% for the periods
ended June 30, 2021 and December 31, 2020, and 0.01% for the periods ended June 30, 2020. The following tablesummarizes the significant differences between the statutory tax rates and NBF's effective tax rates for financial
statement purposes.

Statutory tax rate . . . . . . . . . . . . . . . . . . . . . .
Deductible dividends . . . . . . . . . . . . . . . . . . . . .
Transfer to reserve for reduction
entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of reserve for
reduction entry . . . . . . . . . . . . . . . . . . . . . . . .
Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate. . . . . . . . . . . . . . . . . . . . . . . . . .

For the six months
ended June 30,2021

31.46%(28.35)(3.11)

—
0.00
0.00%

For the six months
ended December 31,
2020

31.46%(33.11)
—

1.64
0.00
0.00%

For the six months
ended June 30,
2020

31.46%(31.46)
—

—
0.00
0.01%

NBF was established as an investment corporation under the Investment Trust Law of Japan, and as long as aninvestment corporation distributes to its unitholders at least 90% of earnings available for dividends for a period
and other requirements prescribed in Japanese tax regulations are met, the investment corporation is allowed todeduct total amount of dividends in calculating its taxable income under Japanese tax regulations.

Note 10 – Per Unit Information31

Information about earnings per unit for the periods ended June 30, 2021, December 31, 2020 and June 30, 2020and net assets per unit as of June 30, 2021, December 31, 2020 and June 30, 2020 were as follows.
The computation of earnings per unit is based on the weighted average number of units outstanding during theperiod. The computation of net assets per unit is based on the number of units outstanding at each period end.
For the six months
ended June 30,
2021

For the six months
ended December 31,
2020

For the six months
ended June 30,
2020

Net income per unit (Yen)¥12,966¥11,524¥10,986

Weighted average number ofunits outstanding

1,652,500

1,498,886

1,412,000

Earnings per Unit:

As ofJune 30, 2021

¥405,368

Net Assets per Unit (Yen)

As ofDecember 31, 2020

¥403,401

As ofJune 30, 2020

¥383,810

Note 11 – Leases

As Lessor

NBF leases some of its real estate properties to outside parties under non-cancelable operating leases. As of June30, 2021 and December 31, 2020, future minimum rental revenues under the non-cancelable operating leases are
as follows:

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

As of June 30, 2021
As of December 31, 2020
(Yen in millions)¥ 20,770¥ 18,398
33,78432,715¥ 54,554¥ 51,113

As Lessee
None applicable.

Note 12 – Transactions with Related Parties(1) Parent Company and Major Corporate Unitholders(For the six months ended June 30, 2021)
None applicable.
(For the six months ended December 31, 2020)
None applicable.
(For the six months ended June 30, 2020)
None applicable.
(2) Affiliates(For the six months ended June 30, 2021)
None applicable.
(For the six months ended December 31, 2020)
None applicable.
32

(For the six months ended June 30, 2020)
None applicable.
(3) Sister Companies(For the six months ended June 30, 2021)
None applicable.
(For the six months ended December 31, 2020)
None applicable.
(For the six months ended June 30, 2020)
None applicable.
(4) Directors and Major Individual Unitholders(For the six months ended June 30, 2021)
None applicable.
(For the six months ended December 31, 2020)
None applicable.
(For the six months ended June 30, 2020)
None applicable

Note 13 – Investment and Rental Properties

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)
For the six months ended
For the six months ended
June 30, 2021
December 31, 2020
Carrying amount(Note 1)
Balance at beginning¥ 1,054,141¥ 1,017,820
of the Fiscal Period
Amount of increase(decrease) during
197,261
36,320current period(Note 2)
Balance at end of the
1,251,402
1,054,141
Fiscal Period
Fair value at end of theperiod¥ 1,548,790¥ 1,338,120(Note 3)
Notes:
1. Carrying amounts represent acquisition cost less accumulated depreciation.
2. The major increase in the fiscal period ended June 30, 2021 was mainly due to the acquisitions of 3
properties (Shinjuku Mitsui Bldg., Gran Tokyo South Tower and Ueno East Tower (additional
acquisition), ¥233,422 million) and the major decrease was mainly due to sale of 2 properties (East
Building and Residential Tower of NBF Shinkawa Bldg. (50% co-ownership interest) and NBF
Minami-Aoyama Bldg., ¥35,759 million) and recognition of depreciation costs.
The major increase in the fiscal period ended December 31, 2020 was mainly due to the acquisitionsof 4 properties (NBF Ogawamachi Bldg. (additional acquisition), OSAKI BRIGHT TOWER, Nagoya
Mitsui Main Building (70% co-ownership interest) and Nagoya Mitsui New Building, ¥41,232
million) and the major decrease was mainly due to sale of a property (East Building and Residential
Tower of NBF Shinkawa Bldg. (50% co-ownership interest), ¥3,706 million) and recognition ofdepreciation costs.

33

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) and Note 8 (Gains and Loss on Sales of Real Estate Properties).

Note 14 – Segment 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, 2021)
1. Information by Products and Services

Disclosure of this information has been omitted as NBF has a single product/service line that accounts for morethan 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) Real estate properties
Disclosure of this information has been omitted as total domestic real estate properties account for more than
90% of the book value of total real estate properties.

3. Information on Major Tenants(Yen in millions)
TenantOperating revenues
Related segment
Mitsui Fudosan
Real estateCo., Ltd.
¥17,681
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 other properties to
Mitsui Fudosan Co., Ltd.

(For the six months ended December 31, 2020)
1. Information by Products and Services

Disclosure of this information has been omitted as NBF has a single product/service line that accounts for morethan 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) Real estate properties
Disclosure of this information has been omitted as total domestic real estate properties account for more than
90% of the book value of total real estate properties.

3. Information on Major Tenants(Yen in millions)34

Tenant
Operating revenues
Related segment
Mitsui Fudosan
Real estateCo., Ltd.
¥12,552
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 other properties to
Mitsui Fudosan Co., Ltd.

(For the six months ended June 30, 2020)
1. Information by Products and Services

Disclosure of this information has been omitted as NBF has a single product/service line that accounts for morethan 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) Real estate properties
Disclosure of this information has been omitted as total domestic real estate properties account for more than
90% of the book value of total real estate properties.

3. Information on Major Tenants(Yen in millions)
TenantOperating revenues
Related segment
Mitsui Fudosan
Real estateCo., Ltd.
¥11,765
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 other properties to
Mitsui Fudosan Co., Ltd.

Note 15 – Asset Retirement Obligations

NBF owns real estate properties containing asbestos material and is obligated to remove those materials upon
disposition of the properties. However, since sufficient information is not available to reasonably estimate theobligation amount due to uncertainty about the method and timing of settlement, asset retirement obligation is notrecognized for the obligations to remove asbestos materials.

Note 16 – Significant Subsequent Events
1. Conclusion sale and purchase agreements regarding acquisition
NBF concluded sale and purchase agreements regarding acquisition of the following asset on August 16, 2021,
and delivery is scheduled for September 30, 2021. An overview of the property as of the date of the conclusion of
the agreements is as follows.
Name of property: IIDABASHI GRAND BLOOM
Category of asset: Real estate
Acquisition Price: ¥77,600 million
Seller: Mitsui Fudosan Co., Ltd
Acquisition date: September 30, 2021
Note:
1. NBF shall pay to the seller a penalty equivalent to 10% of the acquisition price in the event of the termination35

of a contract due to a breach of its contractual obligations.

2. Conclusion sale and purchase agreements regarding disposition
NBF concluded sale and purchase agreements regarding disposition of the following assets on August 16, 2021,
and delivery is scheduled for September 30, 2021 and January 31, 2022. An overview of the properties as of the dateof the conclusion of the agreements is as follows.
In addition, NBF shall pay to the buyer a penalty equivalent to 20% of the acquisition price in the event of thetermination of a contract due to a breach of its contractual obligations.
Name of property: NBF Nakanosakaue Sunbright Twin
Category of asset: Trust beneficiary interest and Real estate (Note 2)
Disposition Price: ¥40,000 million
Transferee: The Special Purpose Company (TMK)
Disposition date: September 30, 2021
Note:
2. Upon the disposition, the property will be established as property in trust on the same date of disposition dateabove, and the beneficiary interests in trust will be transferred.
3. In the sale and purchase agreement regarding disposition of the property, it is stipulated that the buyer may
cancel the sale and purchase agreement regarding disposition of the property if either NBF Unix Bldg. or Sun
Mullion NBF Tower will not be disposed by the date of disposition of the said property due to the cancellationof the sale and purchase agreement for either property.
Name of property: NBF Unix Bldg.
Category of asset: Trust beneficiary interest
Disposition Price: ¥4,900 million
Transferee: The Special Purpose Company (TMK)
Disposition date: September 30, 2021
Note:
4. In the sale and purchase agreement regarding disposition of the property, it is stipulated that the buyer may
cancel the sale and purchase agreement regarding disposition of the property if either Nakanosakaue SunbrightTwin or Sun Mullion NBF Tower will not be disposed by the date of disposition of the said property due to thecancellation of the sale and purchase agreement for either property.
Name of property: Sun Mullion NBF Tower
Category of asset: Trust beneficiary interest
Disposition Price: ¥14,400 million
Transferee: The Special Purpose Company (TMK)
Disposition date: January 31, 2022
Note:
5. In the sale and purchase agreement regarding disposition of the property, it is stipulated that the buyer may
cancel the sale and purchase agreement regarding disposition of the property if either Nakanosakaue SunbrightTwin or NBF Unix Bldg. will not be disposed due to the cancellation of the sale and purchase agreement foreither property.

3. Disposition of Property
NBF concluded sale and purchase agreements regarding disposition of the following assets on August 16, 2021
and disposed on the same date.

36

Name of property: NBF Ochanomizu Bldg.
Category of asset: Real estate (Note 6)
Disposition Price: ¥16,100 million
Transferee: Hulic Co., Ltd.
Disposition date: August 16, 2021
Note:
6. Upon the disposition, the property was established as property in trust on the same date of disposition dateabove, and the beneficiary interests in trust was transferred.

37

Ⅲ 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 the Investment Trust Law of Japan, performs
management of NBF's assets and undertakes management of the institutions of NBF. As of June 30, 2021,
NBFM has been entrusted as an asset management company only by NBF.

Operation- Undertakes asset management of NBF pursuant to an Asset Management Entrustment Agreement based on an
entrustment from NBF in accordance with the Articles of Incorporation of NBF and the Investment Objects
and Policies set forth therein.
- Undertakes management of the general affairs of the general meeting of unitholders and the Board of
Directors as Administrative Agent regarding the Management of Institutions based on an entrustment from
NBF and pursuant to an Agreement for General Administration Regarding the Management of Institutions.

Fees for the Asset Management Operation

Management Fee 1
The amount equivalent to 2.5% of the total amount of (i) rent, common area charges, parking lot charges,
incidental income, facility charges, facility installation fees, delay damages, lease contract cancellation
penalty or monies similar thereto and other leasing operating revenues arising from leasing operations, plus(ii) dividends, distributions or monies similar thereto and other proceeds attributable to Real Estate, etc.
recorded by NBF (provided, however, that revenues from the sale of Real Estate, etc. will be excluded;
hereinafter, “Leasing Revenues, etc.” in this Paragraph) as calculated on each closing date (rounded down to
the nearest yen) will be payable.
Management Fee 2
The amount equivalent to 3% of net income before income taxes (provided, however, that in the event aloss is carried forward, then the amount of income before income taxes remaining after the entire amount ofsuch loss has been covered) prior to deduction of Management Fee 2 as calculated on each closing date(rounded down to the nearest yen; provided, however, that in the event of a negative amount, then 0 yen) will
be payable.
Management Fee 3
In the event that Real Estate, etc. is newly acquired (in the event of merger by NBF, then succeeded bysaid merger) as Managed Assets, the amount of the acquisition price of said Real Estate, etc. (meaning theacquisition price of both land and buildings; in the event of the simultaneous acquisition of multiple units ofReal Estate, etc., then the acquisition price of each Real Estate, etc., in the event of equity investment, thenthe equity investment amount, and in the event of merger by NBF, then the appraised value of each Real
Estate, etc. succeeded by said merger at the time of the merger; provided, however, that national consumption
tax, regional consumption tax and miscellaneous costs of acquisition or succession are excluded) multipliedby the following percentage rates, in principle, in total amount (rounded down to the nearest yen) will bepayable; provided, however, that with the approval of the board of directors of NBF, compensation may be
calculated using different rates not exceeding the following rates.
・The portion up to and including ¥10,000 million ………………………………… 0.5%
・The portion exceeding ¥10,000 million up to and including ¥30,000 million …… 0.2%
・The portion exceeding ¥30,000 million up to and including ¥50,000 million …… 0.05%
・The portion exceeding ¥50,000 million …………………………………………. Nothing38

Management Fee 4
In the event of sale of Real Estate, etc. owned as Managed Assets, the amount of the sales price of said
Real Estate, etc. (in the event of the simultaneous sale of multiple units of Real Estate, etc., then the sales
price of each Real Estate, etc.; provided, however, that national consumption tax, regional consumption tax
and miscellaneous costs of sale are excluded) multiplied by the following percentage rates, in principle, in
total amount (rounded down to the nearest yen) will be payable; provided, however, that with the approval of
the board of directors of NBF, compensation may be calculated using different rates not exceeding thefollowing rates.
・The portion up to and including ¥10,000 million ………………………………… 0.5%
・The portion exceeding ¥10,000 million up to and including ¥30,000 million …… 0.2%
・The portion exceeding ¥30,000 million up to and including ¥50,000 million …… 0.05%
・The portion exceeding ¥50,000 million …………………………………………. nothing

History of NBFM

NBFM is an Asset Management Company which is a limited liability company duly established under thelaws of Japan. Major events in the history of NBFM are as follows.
September 19, 2000
November 17, 2000
January 29, 2001
February 15, 2001
March 7, 2001
March 22, 2001
May 23, 2001
June 16, 2001
September 30, 2007

EstablishedObtained license as a building lots and building transactions agent under the
Building Lots and Building Transactions Law
Obtained approval as a discretionary transaction agent under the Building Lots
and Building Transactions Law
Registered as a general real estate investment advisor under the Real Estate
Investment Advisor Registration Regulations
Obtained approval as an Asset Management Company under the Investment
Trust Law of Japan
Increased capital from ¥100 million to ¥198 million
Changed name (from “MF Asset Management Co., Ltd.” to " Nippon Building
Fund Management Ltd.")
Increased capital from ¥198 million to ¥495 million
Registered as a financial instruments firm with the Kanto Local Finance Bureau
Chief (Financial Instruments) No. 371

List of Shareholders (as of June 30, 2021)
Numberof Shares Owned
4,554
3,465
495
495
297
297
297
9,900

Name

Mitsui Fudosan Co., Ltd.
Sumitomo Life Insurance Company
Sumitomo Mitsui Trust Bank, Limited
Sumitomo Mitsui Banking Corporation
Daido Life Insurance Company
Mitsui Sumitomo Insurance Co., Ltd.
Britel Fund Trustees Limited
Total

39

Percent
46.0%
35.0
5.0
5.0
3.0
3.0
3.0
100.0%

Directors and Staff

As of June 30, 2021, the directors and corporate auditors of NBFM are as follows. The staff other thandirectors and auditors of NBFM is comprised of 33 persons.
Name of Directors and Auditors
Title
Yoshiyuki Tanabe
President & CEO (standing)
Hideki Shuto
Director, Head of Investment & Finance Group (standing)
Tetsuya Saito
Director, Head of Administration Group (standing)Masahiko Okamoto
Director
Yusuke Ogata
Director
Yasuki Nozue
Corporate Auditor
Masayuki Hori
Corporate Auditor.

Outline of Financial Condition

An outline of the financial condition of NBFM is as follows.
Outline of principal assets and liabilities for the most recent fiscal year:
As of March 31, 2021
Total Assets
Total Liabilities
Total Net Assets(Yen in millions)¥3,529
837
2,691

40

41

42

43

DISCLAIMER
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative Investment
Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as implemented
in their respective jurisdictions. Accordingly, you should not use this document for any otherpurpose.
Netherlands
The units of Nippon Building Fund Inc. (“NBF” or the “AIF”) are being marketed in the
Netherlands under Section 1:13b of the Dutch Financial Supervision Act (Wet op het
financieel toezicht, or the “Wft”). In accordance with this provision, Nippon Building FundManagement Ltd. (the “AIFM”) has submitted a notification with the Dutch Authority for the
Financial Markets. The units of NBF will not, directly or indirectly, be offered, sold,transferred or delivered in the Netherlands, except to or by individuals or entities that are
qualified investors (gekwalificeerde beleggers) within the meaning of Article 1:1 of the Wft,and as a consequence neither the AIFM nor NBF is subject to the license requirement
pursuant to the Wft. Consequently, neither the AIFM nor NBF is subject to supervision of
the Dutch Central Bank (De Nederlandsche Bank, “DNB”) or the Netherlands Authority for
Financial Markets (Autoriteit Financiële Markten, the “AFM”) and this Article 23 AIFMD
Prospectus is not subject to approval by the AFM. No approved prospectus is required to be
published in the Netherlands pursuant to Article 3 of the Regulation (EU) 2017/1129 (the“Prospectus Regulation”) as amended and applicable in the Netherlands. The AIFM istherefore solely subject to limited ongoing regulatory requirements as referred to in Article
42 of the AIFMD.
United Kingdom
Units of NBF are being marketed in the United Kingdom pursuant to Article 59 of the United
Kingdom Alternative Investment Fund Managers Regulations 2013. In accordance with thisprovision, the AIFM has notified with the Financial Conduct Authority (the “FCA”) of its
intention to offer these units in the United Kingdom.
For the purposes of the United Kingdom Financial Services and Markets Act 2000 (“FSMA”)
NBF is an unregulated collective investment scheme which has not been authorized by the
FCA.

44

Accordingly, any communication of an invitation or inducement to invest in NBF may only bemade to (i) investment professionals falling within Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005, as amended, or “the Order”; or (ii) highnet worth companies falling within Articles 49(2)(a) to (d) of the Order and other persons towhom it may lawfully be communicated (all such persons referred to under (i) and (ii) of thisparagraph, together being referred to as “Relevant Persons”). In the United Kingdom, thisdocument and its contents are directed only at Relevant Persons and must not be acted onor relied on by persons who are not Relevant Persons. The transmission of this document
and its contents in the United Kingdom to any person other than a Relevant Person isunauthorized and may contravene the FSMA and other United Kingdom securities laws andregulations.
European Economic Area and United Kingdom
In addition to the restrictions under the AIFMD, the Units of NBF are not intended to beoffered, sold or otherwise made available to and should not be offered, sold or otherwise
made available to any retail investor in the European Economic Area (“EEA”) or the United
Kingdom. For these purposes, a retail investor means a person who is one (or more) of: (i) aretail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended,“MiFID II”); (ii) a customer within the meaning of Directive (EU) 2016/97, where that
customer would not qualify as a professional client as defined in point (10) of Article 4(1) of
MiFID II; or (iii) not a qualified investor as defined in the Prospectus Regulation, as
amended. Consequently no key information document required by Regulation (EU) No
1286/2014 (the "PRIIPs Regulation") for offering or selling the Units of NBF or otherwise
making them available to retail investors in the EEA or the United Kingdom has been
prepared and therefore offering or selling the Units of NBF or otherwise making themavailable to any retail investor in the EEA or the United Kingdom may be unlawful under the
PRIIPs Regulation.

45

Article 23 (1)(a)Objectives of the

Nippon Building Fund Inc. (“NBF” or the “AIF”) invests in office buildings in the Tokyo Central

AIF.

Business Districts (“CBDs”, which comprises the 23 wards of Tokyo), Other Greater Tokyo
Areas (neighboring cities within Tokyo other than the 23 wards, as well as cities within theneighboring prefectures of Kanagawa, Chiba, Saitama, Ibaraki, Gunma and Tochigi
prefectures, including the cities of Yokohama, Kawasaki, Chiba, Kashiwa and Saitama) and
Other Cities (principal regional cities, including Sapporo, Sendai, Niigata, Shizuoka,
Hamamatsu, Nagoya, Kyoto, Osaka, Kobe, Okayama, Hiroshima, Takamatsu, Fukuoka andKumamoto).
The basic policy of NBF is to operate assets with the objective of assuring steady growth andstable profits for the mid to long term.

Investment

The investment strategy of NBF aims to assure steady growth of and stable profits from NBF’s

strategy.

portfolio for the mid to long term by considering the proportion of Japan’s office stock byregion. Specifically, the strategy divides the investment area into three areas consisting ofTokyo CBDs, Other Greater Tokyo Areas and Other Cities in such manner that 70% or more of
total investment assets is allocated to Tokyo CBDs and Other Greater Tokyo Areas and 30% orless to Other Cities. The purpose of this area diversification is to minimize cash flow risks suchas those due to earthquakes and risk of vacancies. In general, NBF fully exploits its uniquecharacteristics when conducting investment activities. It is one of the largest listed J-REITs on
the Tokyo Stock Exchange in terms of total assets, and is able to take advantage of Mitsui
Fudosan Group’s powerful information network, as well as the industry knowledge andfamiliarity that it has cultivated itself. NBF investment strategy focuses on expanding its asset
portfolio by making aggressive acquisitions and flexible dispositions mainly of highly
competitive office buildings, primarily in Tokyo CBDs while conducting appropriate risk
management.

Types of assets theReal estate, trust beneficiary interests in real estate, real estate securities, specified assets

AIF may invest in.

and other assets.

Techniques it may

NBF achieves its objective by investing in real estate consisting of buildings primarily used for

employ and all

offices with their underlying land located in the Tokyo CBDs, Other Greater Tokyo Areas andassociated risks.

Other Cities. NBF also invests in securities, beneficiary certificates representing beneficial
interests in trusts and other assets backed by office properties.
The principal risks with respect to investment in NBF are as follows:(1) General Risks(a) Risks concerning NBF’s ability to make cash distributions(b) Risks concerning resale or redemption of investment units or investment
corporation bonds

46

(c) Risks concerning market price fluctuations of the investment units orinvestment corporation bonds(d) Risks concerning changes to treatment of investment corporations under legal,
taxation and other systems(e) Risks concerning dilution of per-unit value through the issuance of new
investment units(f) Risks concerning merger of investment corporations(2) Risks Related to Product Structure and Affiliates of NBF(a) Risks concerning investment units or investment corporation bonds as financial
products(b) Risks concerning fluctuations in revenues, expenditures and cash flow(c) Risks concerning loan-to-value ratio(d) Risks concerning borrowings and investment corporation bonds(e) Risks concerning insider trading(f) Risks concerning the asset manager(g) Risks concerning office management service providers(h) Risks concerning dependency on NBF’s affiliates(i) Risks concerning conflict of interests between NBF and other corporations
involved with the management of NBF(j) Risks concerning changes to NBF’s investment policy(k) Risks concerning tenant leasehold deposits and security deposits(l) Risks of NBF going bankrupt or its registration being cancelled(m) Risks arising from bankruptcy of the seller of properties(3) Risks Related to Real Estate(a) Risks concerning illiquidity in the real estate market and transactional costs(b) Risks concerning the defective title, design, construction (such as piles andbeams), quality of materials or other non-conformity or problems in theproperties(c) Risks concerning competition in acquisition of properties(d) Risks concerning competition in seeking tenants(e) Risks concerning co-owned properties(f) Risks concerning compartmentalized ownership of buildings(g) Risks concerning properties on leased lands(h) Risks concerning leased properties(i) Risks concerning properties not in operation (including properties underdevelopment)

47

(j) Risks concerning hazardous materials and radioactive contamination(k) Risks concerning strict environmental liabilities for the properties(l) Risks concerning reliance on expert appraisals and engineering, environmental
and seismic reports as well as industry and market data(m) Risks concerning lease contracts in Japan(n) Risks concerning building damage and loss due to fire, explosion, lightning, wind,
hail, snow, floods, electrical and mechanical hazards and other unexpected
accidents(o) Risks concerning building damage and loss due to fire, explosion and collapse
caused by earthquakes and other disasters such as eruptions, tsunami andliquefaction(p) Risks concerning the concentration of properties in the portfolio in certain areas(q) Risks concerning tenants’ financial status and insolvency(r) Risks concerning fluctuation of profits due to a limited number of tenants(s) Risks concerning subleases(t) Risks concerning ownership liabilities related to real estate(u) Risks concerning repair and maintenance costs related to real estate(v) Risks concerning liability as the seller of properties(w) Risks related to holding partnership interests(x) Risks concerning complexity of ownership and other interests of properties andinaccuracy of real estate registration(y) Risks concerning administrative rules and regulations and prefectural or municipal
ordinances for real estate(z) Risks concerning establishment of new or revisions of existing laws andregulations(aa) Risks concerning conclusion of post-dated sale agreements (forward
commitment contracts)(bb)

Risks concerning of acquisition and disposition(4) Risks Related to Trust Beneficiary Rights(a) Risks concerning investments in trust beneficiary interests(b) Risks concerning liquidity of beneficiary interests(c) Risks concerning insolvency of the trustee(5) Risks Related to Taxation(a) Risks of failure to satisfy pass-through requirements due to inability to pay
dividends and other reasons48

(b) Risks of failure to satisfy pass-through requirements due to excessive amount oftax burden(c) Risk of additional tax liability as a result of a tax audit, which could, among otherthings, retroactively cause us to fail to satisfy pass-through requirements(d) Risks that preferential tax measures associated with real estate acquisitions
cannot be applied(e) Risks of failure to satisfy pass-through requirements due to treatment of NBF as afamily corporation under Japanese tax law.
(f) Risks of failure to satisfy pass-through requirements due to borrowings fromcompanies or individuals other than institutional investors(g) Risks of failure to satisfy pass-through requirements due to the composition of
investors(h) Risks concerning revisions of the general taxation system(i) Risks that tax burdens will increase due to discrepancies between accounting
treatment and tax treatment(6) Risks Related to Disasters and Spread of Infection
Any applicable

NBF is subject to investment restrictions under Japanese laws and regulations (e.g., the Act on

investment

Investment Trusts and Investment Corporations (the “ITA”), the Financial Instruments andrestrictions.

Exchange Act (the “FIEA”)) as well as its articles of incorporation.
NBF must invest primarily in specified assets as defined in the ITA. Specified assets include, but
are not limited to, securities, real estate, leaseholds of real estate, surface rights (chijō-ken)(i.e., right to use land for the purpose of having a structure on it) or trust beneficiary interests
for securities or real estate, leaseholds of real estate or surface rights. A listed J-REIT must invest
substantially all of its assets in real estate, real estate-related assets and liquid assets asprovided by the listing requirements. Real estate in this context includes, but is not limited to,real estate, leaseholds of real estate, surface rights, and trust beneficiary interests for theseassets, and real estate-related assets in this context include, but are not limited to, anonymous
association (tokumei kumiai) interests for investment in real estate. Pursuant to the ITA,
investment corporations may not independently develop land for housing or to constructbuildings, but must outsource such activities.

Circumstances in

NBF may take out loans or issue long-term or short-term investment corporation bonds forwhich the AIF may

the purpose of investing in properties, conducting repairs and related work, paying cash

use leverage.

distributions, operating capital, repaying obligations (including repayment of tenant leasehold
or security deposits, and obligations related to loans or long-term or short-term investment
corporation bonds) and other activities.

49

The types andLoans or investment corporation bonds. Currently, all of NBF’s outstanding long- and short-sources of leverageterm loans as well as outstanding investment corporation bonds are unsecured andpermitted andunguaranteed.

associated risks.
Loans or investment corporation bonds in which NBF enters or NBF issues may be subject torestrictive covenants in connection with any future indebtedness that may restrict operations
and limit its ability to make cash distributions to unitholders, to dispose of properties or toacquire additional properties. Furthermore, if NBF were to violate such restrictive covenants,
such as with regard to debt service coverage or loan-to-value ratios, lenders may be entitled
to require NBF to collateralize portfolio properties or demand that the entire outstandingbalance be paid.
In the event of an increase in interest rates, to the extent that NBF has any debt withunhedged floating rates of interest or NBF incurs new debt, interest payments may increase,which in turn could reduce the amount of cash available for distributions to unitholders.
Higher interest rates may also limit the capacity for short- and long-term borrowings, which
would in turn limit NBF’s ability to acquire properties, and could cause the market price of theunits to decline.
Any restrictions on

The maximum amount of each loan and investment corporation bond issuance will be 1

leverage.

trillion yen, and the aggregate amount of all such debt will not exceed 1 trillion yen.

Any restrictions on

No applicable arrangements.

collateral and asset
reusearrangements.
Maximum level of

NBF has set an upper limit of 56% as a general rule for its loan-to-value, or LTV, ratio, which isleverage which thethe ratio of (x) the aggregate principal amount of borrowings and investment corporation

AIFM is entitled tobonds to (y) the total assets of NBF’s portfolio, in order to operate with a stable financial

employ on behalf

condition. NBF may, however, temporarily exceed such levels as a result of propertyof the AIF.

acquisitions or other events.

Article 23(1) (b)Procedure by

Amendment of the articles of incorporation. Amendment requires a quorum of a majority ofwhich the AIF may

the total issued units and at least a two-thirds vote of the voting rights represented at thechange its

meeting. Unitholders should note, however, that under the ITA and our articles ofinvestment

incorporation, unitholders who do not attend and exercise their voting rights at a general

strategy /meeting of unitholders are deemed to be in agreement with proposals submitted at theinvestment policy.

meeting, except in cases where contrary proposals are also being submitted. Additionally, theguidelines of the AIFM, which provide more detailed policies within NBF’s overall investment

50

strategy and policy, can be modified without such formal amendment of the articles ofincorporation.
Article 23(1) (c)Description of themain legal

NBF has entered into the following agreements with Mitsui Fudosan Co., Ltd.:•

Master lease agreement under which NBF leases properties to Mitsui Fudosan Co.,

implications of theLtd. under a master lease agreement, and Mitsui Fudosan Co., Ltd. subleases suchcontractual

properties to subtenants;

relationship•Direct lease agreements with Mitsui Fudosan Co., Ltd. as tenant;entered into for•Purchase and sale agreements regarding certain NBF assets originally held by Mitsui
Fudosan Co., Ltd., and management contracts with regard to such assets; andthe purpose ofinvestment,
including•

Agreements for the development of certain properties.

NBF has entered into the following agreements with Sumitomo Mitsui Trust Bank, Limited:jurisdiction,•

A custody agreement regarding NBF’s assets;

applicable law, and•A transfer agent agreement regarding the units;

the existence or•Loan agreements over certain of our short- and long-term loans;

not of any legal•

Agreements establishing Sumitomo Mitsui Trust Bank, Limited as the trustee forcertain trust beneficiary rights held by NBF; andinstruments
providing for therecognition and•

Various agreements related to our investment corporation bond offerings.

NBF has entered into the following agreements with Sumitomo Life Insurance Company:

enforcement of•

Loan agreements over certain of our long-term loans;judgments in the•

Lease agreements for certain properties with Sumitomo Life Insurance Company astenant; andterritory where the
AIF is established.

•

Purchase and sale agreements regarding certain NBF assets originally held by
Sumitomo Life Insurance Company.

All of the above agreements are governed by Japanese law.
NBF is not involved in or threatened by any legal arbitration, administrative or otherproceedings, the results of which might, individually or in the aggregate, be material.
NBF is a corporate-type investment trust in the form of investment corporation (toshi hojin)
provided for under the ITA. Therefore, the relationship between NBF and its unitholders isgoverned by NBF’s articles of incorporation (as opposed to individual agreements), which canbe amended from time to time upon resolution of a general unitholders’ meeting. NBF’s
articles of incorporation stipulate rules relating to general unitholders meetings, including theconvocation, setting of record date, exercise of voting rights, resolutions and election of NBF’s
directors.

51

The relationship between NBF and its unitholders is also governed by, and is subject to theprovisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid judgment any final and conclusive civil
judgment for monetary claims (which, for this purpose, are limited to those of a purely civil
nature and do not include monetary claims of the nature of criminal or administrative
sanction, such as punitive damages, even though they take the form of civil claims) against
NBF obtained in a foreign court provided that (i) the jurisdiction of such foreign court isadmitted under the laws of Japan, (ii) NBF has received service of process for thecommencement of the relevant proceedings, otherwise than by a public notice or any method
comparable thereto, or has appeared without any reservation before such foreign court, (iii)neither such judgment nor the relevant proceeding is repugnant to public policy as applied inJapan, (iv) there exists reciprocity as to the recognition by such foreign court of a final
judgment obtained in a Japanese court and (v) there is no conflicting judgement on thesubject matter by any Japanese court.
Article 23(1) (d)The identity of the• AIFM (Asset Manager): Nippon Building Fund Management Ltd.

AIFM, AIF's

The AIFM provides services related to management and operation of assets, financing ofdepositary, auditor

the AIF, reporting to the AIF, and other matters delegated by the AIF.

and any other• Auditor: KPMG AZSA LLC

service providers

The Auditor audits financial statements, prepares audit reports, and report to theand a description

supervisory directors if it finds any misconduct or any material fact that is in violation ofof their duties andlaws and regulations or the articles of incorporation with regard to execution of the duties

the investors' rightsof the executive director.

thereto.

• Custodian and Transfer Agent: Sumitomo Mitsui Trust Bank, Ltd.
The Custodian provides administrative services related to custody of assets and related
documents.
The Transfer Agent provides administrative services related to unitholders’ roster, issuanceof the investment units, payments of cash distributions to unitholders and addressing
unitholders’ claims, offers and notices.
Service providers owe contractual obligations under their respective agreements with the AIF
or AIFM, as the case may be. In addition, the FIEA provides that an asset manager owes a JREIT a fiduciary duty and must conduct its activities as the asset manager in good faith. The
FIEA also prohibits an asset manager from engaging in certain specified conduct, including
entering into transactions outside the ordinary course of business or with related parties of
the asset manager that are contrary to or violate the J-REIT’s interests. Pursuant to the ITA,

52

the unitholders have the right to approve the execution or termination of the asset
management agreement at a general meeting of unitholders.
Article 23(1) (e)Description of how

Not applicable.

the AIFM complies
with therequirements tocover professional
liability risks (ownfunds /
professional
indemnity
insurance).
Article 23(1) (f)Description of any

Not applicable. There is no delegation of such functions beyond the AIFM, which isdelegated

responsible for portfolio and risk management, and the Custodian, which is responsible formanagement

safekeeping activities.

function such as
portfolio
management orrisk management
and of any
safekeeping
function delegatedby the depositary,
the identificationof the delegate andany conflicts ofinterest that may
arise from suchdelegations.
Article 23(1) (g)Description of the

NBF makes investment decisions based on its investment strategies and in accordance with its

AIF’s valuation

articles of incorporation and based on the results of due diligence, including the valuation ofprocedure andproperties and consideration of the property appraisal value. The methods and standards thatpricing

NBF uses for the evaluation of assets are based on the Regulations Concerning themethodology,

Calculations of Investment Corporations, as well as the Regulations Concerning Real Estateincluding theInvestment Trusts and Real Estate Investment Corporations and other regulations stipulated53

methods used inby ITA, in addition to Japanese GAAP. J-REITs may only use the valuation methods prescribedvaluing hard-to-in the rules of the Investment Trusts Association, Japan, which emphasize market pricevalue assets.

valuation.
Regarding hard to value assets, such assets comprise tenant security deposits including trust
accounts. 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. This makes a reasonableestimate of future cash flows difficult. Valuation of such hard to value assets is included in thenotes to our financial statements.
If asset valuation methods other than those mentioned in the paragraphs above are to be
used in order to determine values for asset management reports, etc., valuation shall be
conducted in the following manner.
(1) Real estate, real estate leasehold rights and surface rights
In principle, valuation shall be based on the appraisal by a real estate appraiser.
(2) Trust beneficiary interests and equity interests in anonymous associations and voluntary
associations
Valuation shall be made by calculating the value of the equity interests in anonymous
associations or voluntary associations in relation to real estate, real estate leasehold rights or
surface rights, or the value of the trust beneficiary interests obtained by subtracting theamount of liabilities from the aggregate value of assets after (i) determining valuation as
described in (1) above with respect to trust assets or the assets of anonymous associations
composed of real estate, real estate leasehold rights or surface rights and (ii) determining
valuation in accordance with general accepted accounting principles in Japan with respect totrust assets or the assets of anonymous associations or voluntary associations composed offinancial assets.

Article 23(1) (h)Description of the

NBF seeks to manage the capital resources and liquidity sources to provide adequate funds

AIF’s liquidity risk

for current and future financial obligations and other cash needs and acquisitions. NBF hasmanagement,

entered into credit lines in the amount of 52 billion yen as of December 31, 2019, and has

includingentered into loans and has issued investment corporation bonds in the past. While loans andredemption rights

investment corporation bonds are exposed to liquidity risk, such risk is managed in ways suchin normal andas by diversifying the means of funding and lending institutions, dispersing repayment dates,

exceptional

establishing committed credit lines, and keeping sufficient liquidity in hand.

circumstances andexisting

54redemption

NBF is a closed-end investment corporation, and unitholders are not entitled to request thearrangements withredemption of their investment.

investors.
Article 23(1) (i)Description of all•Compensation: The articles of incorporation provide that the AIF may pay its

fees, charges andexecutive and supervisory officers up to 700,000 yen per month. The board of officers

expenses and ais responsible for determining a reasonable compensation amount for the executive

maximum amountofficer and each of the supervisory officers.

which is directly /indirectly borne by
the investors.

•

Asset Management Fee: The AIF will pay the Asset Manager an asset management fee
as follows:

Management Fees 1 – The amount equivalent to 2.5% of theamount of the revenue arising from real estate, real estate-related and real estate-backed
assets (“Real Estate”) as calculated on each closing date (provided, however, that revenues
from the sale of Real Estate and other managed assets will be excluded) will be payable.
Management Fees 2 – The amount equivalent to 3% of income before income tax(provided, however, that in the event a loss is carried forward, then the amount of income
before income taxes remaining after such loss has been covered) prior to deduction ofManagement Fees 2 as calculated on each closing date will be payable.
Management Fees 3 – In the event that Real Estate is newly acquired (or acquired inconnection with a merger executed by NBF), compensation equivalent to the total amount of
the acquisition price of said Real Estate (meaning the acquisition price of both land andbuildings, and in the event of the simultaneous acquisition of multiple units of Real Estate, theacquisition price of each item, provided, however, that national consumption tax, regional
consumption tax and miscellaneous costs of acquisition are excluded) multiplied by thefollowing percentage rates will, in principle, be payable, provided, however, that with theapproval of the officers of NBF, compensation may be calculated using different rates notexceeding the following rates.
The portion up to and including ¥10,000 million .........................

0.5%

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

0.2%

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

0.05%

The portion exceeding ¥50,000 million.........................................

nothing55

Management Fees 4 – In the event that Real Estate is sold, compensation equivalent to thetotal amount of the sale price of said Real Estate(or the sale price of each unit, in the event where multiple units of said Real Estate are soldsimultaneously), excluding the national consumption tax, regional consumption tax andmiscellaneous costs of the sale, multiplied by one the following applicable percentage rates
will, in principle, be payable; provided, however, that with the approval of the officers of NBF,
different rates not exceeding the following rates may be used.
The portion up to and including ¥10,000 million .........................

0.5%

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

0.2%

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

0.05%

The portion exceeding ¥50,000 million.........................................

nothing

In addition to the above, NBF will pay the Asset Manager a management agent fee as follows:
3,000,000 yen per year for services related to the meetings of the board of officers and
5,000,000 yen per meeting for services related to the meeting of unitholders.
•Custodian Fee: The AIF will pay the Custodian as follows:

A yearly fee calculated as follows:
The amount of total assets as indicated at the beginning of the period trial balance x 0.01%•

Transfer Agent Fee (Standard Fee):

Standard transfer agent fees are for services such as the preparation, maintenance andstorage of NBF’s unitholder register; and preparation of materials concerning end-of-period
unitholder statistical data (number of unitholders, total units held, distribution per geographicarea). Monthly standard fees are determined by calculating one sixth of the total number ofunitholders falling under each section as shown below. There is a minimum monthly fee of¥200,000.
Up to 5,000....................................................

480 yen5,001 to 10,000..............................................

420 yen

10,001 to 30,000............................................

360 yen30,001 to 50,000............................................

300 yen50,001 to 100,000..........................................

260 yenMore than 100,001.........................................

225 yen56

NBF also pays certain de minimis fees in addition to the standard fee in connection with theadministration and handling of distributions (minimum of 350,000 yen per distribution) andother shareholder related functions.
•Auditor Fee:

NBF may pay the accounting auditor up to ¥20 million per fiscal period. The board of officers
is responsible for determining the compensation amount for the accounting auditor.
•

Accounting Service Fee

One 12 of the following in either (1) or (2) below each month:th(1) A fixed amount of 10,170,000 yen.
(2) A variable amount calculated at April 1 and October 1 of each year in accordance withthe following:
Fewer than 30
properties.........................................

780,000 yen per property

Between 30 and 60
properties.........................................

590,000 yen per property

More than 60
properties.........................................
•

390,000 yen per property

Miscellaneous

NBF also pays fees to certain service providers in connection with:oAdministration of special accounts;o

Property control;oReferral of tenants;o

Tax administration; andoOffice management;oProperty transfer;oProperty development;oAdministration for investment corporation bonds governance

Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the ITA, which applies the requirements of Article 109

AIFM's procedureparagraph 1 of the Companies Act to investment corporations, investment corporations are

to ensure fairrequired to treat unitholders equally depending on the number and content of units held. In

treatment ofaddition, upon liquidation, the allotment of residual assets to unitholders is required to beinvestors andmade equally depending on the number units held under Article 77 paragraph 2 item 2 anddetails of any

Article 158 of the ITA.

57

preferential
treatment received
by investors,
including detailingthe type ofinvestors and theirlegal or economic
links with the AIF
or AIFM.
Article 23(1) (k)The latest annual

Additional information may be found in our most recent semi-annual report prepared inreport referred toaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s officein Article 22(1).

located at 16th Floor, Muromachi Furukawa Mitsui Building, 3-1, Nihonbashi Muromachi 2chome, Chuo-ku, Tokyo, 103-0022, Japan.

Article 23(1) (l)The procedure and

NBF is authorized under the articles of incorporation to issue up to 4 million units. Its units

conditions for thehave been listed on the Tokyo Stock Exchange since September 10, 2001. Secondary market

issue and sale ofsales and transfers of units will be conducted in accordance with the rules of the Tokyo Stockthe units.

Exchange. Unit prices on the Tokyo Stock Exchange are determined on a real-time basis by theequilibrium between bids and offers. The Tokyo Stock Exchange sets daily price limits, which
limit the maximum range of fluctuation within a single trading day. Daily price limits are set
according to the previous day’s closing price or special quote.

Article 23(1) (m)Latest net asset

NBF’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromvalue of the AIF or

financial information vendors at

latest market pricehttps://www.reuters.com/finance/stocks/overview?symbol=8951.Tof the unit or shareof the AIF.

58

Article 23(1) (n)Details of the

The units of NBF were listed on the Tokyo Stock Exchange on September 10, 2001.

historical

The most recent five fiscal period performance of the units is as follows.

performance of the

Fiscal period (six months

Total Assets

Total Net Assets

Net Assets per unit

AIF, whereended)(JPY million)(JPY million)(base value) (JPY)available.

June 30, 2021

1,305,388

669,870

405,368

December 31, 2020

1,197,435

666,620

403,401

June 30, 2020

1,044,475

541,940

383,810December 31, 2019

1,042,753

541,975

383,384

June 30, 2019

1,043,765

541,338

383,384

Article 23(1) (o)Identity of theNo applicable prime broker.

prime broker, anymaterial
arrangements of
the AIF with its
prime brokers, howconflicts of interest
are managed withthe prime broker
and the provisionin the contract withthe depositary on
the possibility oftransfer and reuseof AIF assets, andinformation about
any transfer of
liability to theprime broker that
may exist.
Article 23(1) (p)Description of how

The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodically throughand when periodic

its Internet website and semi-annual report.

disclosures will bemade in relation to59

leverage, liquidity
and risk profile of
the assets,pursuant to Articles
23(4) and 23(5).
Article 23(2)The AIFM shallNot applicable.

inform theinvestors before
they invest in the
AIF of any
arrangement madeby the depositary
to contractuallydischarge itself ofliability inaccordance with
Article 21(13).
The AIFM shall also

Not applicable.

inform investors of
any changes withrespect todepositary liability
without delay.
Article 23(4)(a)Percentage of the AIF's assets which

There are no assets that are subject to special arrangements arising fromare subject to special arrangements

their illiquid nature.

arising from their illiquid nature. The
percentage shall be calculated as the
net value of those assets subject tospecial arrangements divided by the
net asset value of the AIF concerned.
Overview of any special

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements.

60

Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements.
How management and performance

There are no such special arrangements.

fees apply to such assets.
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF.

disclosed at an appropriate time.

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed-end

disclosed at an appropriate time.

AIF, notify to investors whenever they
make changes to its liquidity
management systems (which enable
an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (ie.
there is a substantial likelihood that areasonable investor, becoming awareof such information, would reconsider
its investment in the AIF, including
because such information could
impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).
Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions.
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements.

61

Terms of redemption and

NBF is a closed-end investment corporation, and unitholders are notcircumstances where management

entitled to request the redemption of their investment.

discretion applies, where relevant.
Also any voting or other restrictions

There are no voting or other restrictions on the rights attaching to units.

exercisable, the length of any lock-up
or any provision concerning ‘first inline’ or ‘pro-rating’ on gates andsuspensions shall be included.
Article 23(4)(c)
The current risk profile of the AIF and

The appropriateness and effectiveness of the risk management structure

the risk management systems

are regularly evaluated and enhanced by the AIFM.

employed by the AIFM to manage
those risks.

Deposits are exposed to risks of failure of the financial institution holding
the deposit and other credit risks, but such risks are controlled by striving todiversify the financial institutions holding the deposits.
Funds from debts and investment corporation bonds are mainly used for
asset acquisition or debt repayment, etc. While loans and investment
corporation bonds are exposed to liquidity risk, such risk is managed inways such as by diversifying the means of funding and lending institutions,dispersing repayment dates, establishing committed credit lines, andkeeping sufficient liquidity in hand. Our credit line is in the amount of 52
billion yen; no amount has been drawn down as of December 31, 2019.
Debt with a floating interest rate is exposed to interest rate fluctuation
risks, but the impact that interest rate rises have on the operations islimited by maintaining the proportion of debt that is long-term fixed-rate
debt at high levels, and setting a procurement limit depending on theeconomic and financial environment, terms of lease agreements withtenants, asset holding period and other factors.
Furthermore, derivative transactions (interest rate swap transactions) areavailable as hedging instruments to mitigate the risks of rises in floatinginterest rates.
Tenant security deposits are exposed to liquidity risk arising from vacatingof properties by tenants due to the termination of contract.

62

NBF manages this risk by monitoring forecasted cash flows on a monthly
basis to ensure it has sufficient funds.
Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed.
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded andwhere these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken.
Article 23(5)(a)Any changes to the maximum amountAny new arrangements or change in applicable arrangements will beof leverage which the AIFM may

disclosed at an appropriate time.

employ on behalf of the AIF,
calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofRegulation (EU) No 231/2013,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted.
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of debt with interest is JPY 550,500 million as ofleverage employed by the AIF

September 30, 2021.

63

calculated in accordance with thegross and commitment methods.

64

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS – SFDR PRECONTRACTUAL DISCLOSURE
Product Name/Legal Entity Identifier: Nippon Building Fund Inc.
Nippon Building Fund Inc. (“NBF”) promotes environmental and social characteristics, but does not have as
its objective a sustainable investment within the meaning of Article 9(1) of Regulation (EU) 2019/2088(“SFDR”). NBF and Nippon Building Fund Management Ltd. (“Asset Manager”) are hereinafter referred tocollectively as “we,” “us” or “our.”
NBF has no reference benchmark designated for the purposes of attaining the environmental or social
characteristics promoted by NBF.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
characteristics and while it does not have as its objective
investments with an environmental
objective: __%a sustainable investment, it will have a minimum
proportion of __% of sustainable investments☐ in economic activities that qualify☐ with an environmental objective in economic
as environmentally sustainable
under the EU Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do not☐ withanenvironmental
objectiveinqualifyasenvironmentally
sustainable
under
the
EU
economic activities that do not quality as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective: __%☒ It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social characteristics are promoted by NBF?
The Asset Manager established an ESG policy in November 2017, in recognition of the importance ofconsidering environmental, social and governance (“ESG”) factors in real estate investment and management.
The ESG policy stipulates the implementation of environment-friendly initiatives as well as initiatives targetingstakeholders including investors, tenants, employees, business partners and local communities in our daily asset
management operations, based on policies established by Mitsui Fudosan Co., Ltd, NBF’s main sponsor. Under
the ESG policy, we undertake efforts to reduce our environmental burden, improve safety, security and comfort
for tenants and engage in a diverse range of collaboration and cooperation with various stakeholders.
We implement various environmental initiatives at our properties including the following.
•

Reducing greenhouse gas emissions and energy consumption from our properties. We aim to reduceenergy consumption by installing energy saving equipment such as LED lighting at our properties.
As of June 30, 2021, LED lighting was installed at 31 properties out of our 75 properties. We aim
to introduce LED lighting in 37 properties by June 30, 2023. We also use renewable energy through65

installation of solar panels. As of June 30, 2021, two of our properties were equipped with solar
panels.
•Reducing water use. Some of our office buildings are equipped with facilities for reusing rainwaterand greywater to reduce the consumption of tap water.

•

Including “Green Lease” provisions in our agreements. We have executed lease agreements, which
include clauses requiring our tenants to collaborate with us in implementing various measures andto promote environmental consideration, including installation of LED lighting at our properties
with the consent of the tenants. As of June 30, 2021, two of our properties were subject to leaseagreements with green lease provisions.

•

Collaboration with the Asset Manager and third party. We utilize the expertise of NBF Office
Management Co., Ltd. (“NBFOM”) to maintain and increase the competitiveness, occupancy rates
and rent at our properties while effectively advancing environmental initiatives. In meetings with
NBFOM that are held once every two months, we share and discuss initiatives and other information
concerning the various energy saving and environmental issues. We utilize the support of Nikken
Sekkei Construction Management, Inc. as an expert consultant for suggestions on energy
management and measures that contribute to increasing the environmental performance of ourportfolio.

We implement various social initiatives at our properties including the following.
•

Providing support to tenants and their employees. To keep good indoor air quality and sanitaryconditions and enhance users’ health and productivity, we monitor the indoor environment basedon a satisfaction survey of tenants (excluding master lessees) and aim to make our properties
comfortable every day. In 2019, 88% of the tenants (798 entities) and 80% of their employees (7,419
persons) answered the survey that covered matters regarding the office environment andconvenience, cleaning, crime and disaster prevention, service quality, effectiveness of customer
satisfaction activities at each property and tenants’ needs. Based on the survey, we expanded
kitchenettes and installed built-in counters for garbage bins, expanded hot water supply rooms with
hot water supply rooms with occupancy indicators, installed air purification equipment and sanitizer
stations to improve the convenience and cleanliness of Shinjuku Mitsui Building No. 2 in 2020.

•

Supporting local communities and social development. For the local communities, we holdinitiatives such as lunchtime concerts, seasonal events, water sprinkling programs for cooling down
and local cleanup programs. In office buildings that have residential portions required under local
ordinances, we have performed major renovations on the residential portions to ensure that theresidents have adequate space and to improve their living environment. We also manage buildings
with consideration given to historical and cultural heritage. For example, Toranomon Kotohira
Tower was developed in a manner that protected Kotohira-Gu shrine, a historic property for thearea, and is designed to be a mixed-use building with space made available for the shrine office.
We also contribute to local communities by providing space for bicycle sharing services at our
properties.

•

Disaster countermeasures. In support of the Minato-ku Regional Disaster Prevention Plan, we
provide free of charge some of our leasable spaces to store emergency materials at Roppongi TCUBE, Celestine Shiba Mitsui Building and Shiba NBF Tower.

•

Promoting universal design. We introduced universal design at some of our properties such as
widening of ramps and installation of handrails, improvement of interior signage and automationof service entrance doors (for wheelchair accessibility and COVID-19 safety). As part of our capital
investment decision-making process, we always review the status of the building’s compliance with66

the Barrier-Free Law of Japan, accessibility for people with disabilities and accessibility to public
transportation around the property. These matters are also periodically reviewed by obtaining
engineering reports and other relevant documents following acquisition. Through these inclusive
efforts, we aim to manage properties that are comfortable for all office users.
•

Respecting human rights. We support the Universal Declaration of Human Rights in theInternational Bill of Human Rights, international labor standards such as the ILO Declaration on
Fundamental Principles and Rights at Work, and the UN Guiding Principles on Business andHuman Rights.

•

Providing support for employees. The Asset Manager promotes the acquisition of qualifications by
its employees such as ARES Certified Master (a qualification obtainable after participating in an
educational program that teaches practical expert know-how in real estate and finance). The AssetManager has also introduced various training programs, including on compliance, and will bear thecosts of its employees attending seminars, lectures and courses that lead to self-improvement.

What sustainability indicators are used to measure the attainment of the environmental or social
characteristics promoted by NBF?
We use the following indicators to measure the attainment of the environmental or social characteristics
we promote:•

GRESB Real Estate Assessment. The GRESB Assessment, established in 2009 primarily by major European
pension fund groups, is an annual benchmark survey for evaluating ESG considerations in the real estate
sector. It evaluates sustainability efforts by real estate companies and REITs. NBF received a “Green Star”
in 2020, for the sixth consecutive year. NBF also received in 2020 a “5-Star”, the highest rating based on its
overall GRESB score.

•

Environmental certification of properties: To track the environmental performance of our properties, werely on certifications issued by third-party organizations, such as the Development Bank of Japan’s (“DBJ”)
Green Building Certification, Comprehensive Assessment System for Built Environment Efficiency(“CASBEE”) certification, Building Energy-efficiency Labeling System (“BELS”) certification and otherequivalent certifications. We call our property that receives any such certifications an “Eligible Green Asset”.
With respect to DBJ certifications, we consider a property to have sufficient environmental certification if
it received 3 stars or higher out of DBJ’s five-star ranking system. With respect to CASBEE, we consider aproperty to have sufficient environmental certification if it received B+ Rank or higher out of the CASBEE
ranking system featuring Rank S (excellent), Rank A (very good), Rank B+ (good), Rank B- (slightly
inferior) and Rank C (inferior). With respect to BELS, we consider a property to have sufficientenvironmental certification if it received a three stars or higher out of BELS’ five-star ranking system. As
of June 30, 2021, 74.4% of our properties were Eligible Green Assets based on gross floor area.

•

Climate change initiatives: The Asset Manager has expressed support for the Task Force on Climate-related
Financial Disclosures (TCFD), established by the Financial Stability Board and clarified stronger efforts toaddress climate-related issues. The Asset Manager aims to assess the financial impact of future climatechange risks and opportunities and assertively disclose activities. The Asset Manager also has set a target of
reducing energy-based CO2 emissions by 40% or more from that in 2013 by 2030 and intends to promote
initiatives addressing climate-related risks and opportunities.

•

Social initiatives – tenants: We conduct customer satisfaction surveys targeting the tenants excluding master
lessees every year in order to understand the level of satisfaction and needs of tenants, and the PDCA cycle
is applied to promptly address any issues identified in the survey. For example, as a response to the resultof the surveys, we changed the layout of the common space at NBF Toyosu Canal Front to enhance userfriendliness.

67•Social initiatives – employees: The Asset Manager provides all of its employees with regular opportunities
to consult with their superiors and directors. This program provides them with opportunity to discuss theircareers, receive feedback on their performance and discuss requests to the company. The Asset Manager
also conducts an employee satisfaction survey every year as part of its efforts to maintain excellent relations
with its employees. The surveys (which had a response rate of 100% in 2020) allows the Asset Manager to
see whether employees are satisfied about their assigned responsibilities and working environment andrequests for company initiatives.

Does NBF consider principal adverse impacts on sustainability factors?
Yes.

We collect on an ongoing basis select information on our existing portfolio regarding the principal
adverse impact indicators, including exposure to fossil fuels through investment assets, exposure to energyinefficient investment assets, GHG emissions and energy consumption intensity. We aim to manage the risk
connected to principal adverse impacts from our investment decisions in several ways, including generalscreening criteria and due diligence.
•

Exposure to fossil fuels through assets. We do not invest in real estate assets involved in the extraction,
storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient investment assets. We consider properties other than Eligible Green Assets
to be energy-inefficient. As of June 30, 2021, 74.4% of our properties were not Eligible Green Assets, andas of June 30, 2021, 25.6% of our properties were not Eligible Green Assets. As described in more detailabove, we implement as appropriate measures to reduce the environmental impact of these properties,
including by obtaining environmental certifications.

•

Energy consumption intensity. The amount of the energy consumption of our assets per square meter is 173.2
kWh in Fiscal 2020.

We believe that investment decisions that negatively affect climate or other environment-relatedresources, or have negative implications for society, can have a significant impact to risk and value creation for
our unitholders. To this end, we consider the principal adverse impacts of our investment decisions on the above
sustainability factors throughout all major steps of the investment decision and management process throughout
the lifecycle of the properties in our portfolio.
We consider, both at the entity-level (i.e., the Asset Manager) and at the fund-level (i.e., NBF), principal
adverse impacts of our investment decisions on sustainability factors. Under the Investment Trust Act of Japan,
NBF is prohibited from having any employees and is required to outsource asset management to a third
party. Accordingly, as discussed in detail elsewhere, any consideration at the fund-level of principal adverse
impacts of our investment decisions on sustainability is principally conducted by the Asset Manager, subject toapproval of our Board of Directors. In addition to the Asset Manager’s contractual obligations to NBF under theasset management agreement, the Financial Instruments and Exchange Act of Japan provides that the AssetManager owes NBF a fiduciary duty in conducting its activities, including making investment decisions
informed by sustainability considerations.
Investment Strategy
What investment strategy does NBF follow?
With our strategy of aiming to achieve consistent growth of assets and stable income, we havedeveloped an urban portfolio focused in central Tokyo and surrounding urban areas where office leasing demandis relatively strong. In order to realize sustainability in our asset management while maximizing our portfolio

68value, we consider ESG factors in our investment and asset management processes. In particular, we haveestablished a green finance framework where proceeds are used only to acquire Eligible Green Assets or repay
loans or bonds financed for such acquisitions. As of June 30, 2021, we had issued ¥50 billion in green bonds
under our green finance framework.
•

Selection of projects that qualify for green financing. When determining whether to acquire or invest inproperties by green financing, we rely on the DBJ and CASBEE certifications. We use green financing toacquire properties that receive (i) three stars or higher out of DBJ’s five-star ranking system, (ii) B+ Rankor higher out of the CASBEE ranking system or (iii) three stars or higher out of BELS’s five-star ranking
system.

•Second-party opinion. We have obtained (most recently in February 2021) a second-party opinion from
Sustainalytics, a third-party ESG evaluation agency, that our green finance framework is “credible andimpactful and aligns with the four core components of the Green Bond Principles 2018 (GBP) and the Green
Loan Principles 2020 (GLP)”.

We ensure our investment strategy is implemented on a continuous basis by establishing andmaintaining green eligible criteria, and ensuring that any proceeds from our green financing will be used
exclusively toward properties that meet such criteria.
The Asset Manager’s ESG Promotion Committee, which includes the President and CEO as its final
decision maker, and the ESG Promotion Subcommittee, which has been established to oversee and promote
initiatives on climate change as well as other environmental and social initiatives based on the Asset Manager’s
ESG policy. The ESG Promotion Subcommittee meets at least once every three months to assess ESG risks andopportunities and consults with the ESG Promotion Committee on numerical targets and specific measures toreduce CO₂. The ESG Promotion Committee meets at least once every six months and makes the final decisionon specific targets and measures. The ESG Promotion Subcommittee reports on the progress of the targets andmeasures to the ESG Promotion Committee at least once a year. In addition, these targets and measures areshared with all officers and employees through briefings, shared folders and email.
What are the binding elements of the investment strategy used to select the investments to attain each of theenvironmental or social characteristics promoted by NBF?
A binding element of the investment strategy is our green finance framework, which involves
determination of whether a target property has satisfied the criteria to qualify as an Eligible Green Asset.
Candidate projects for our green finance framework are selected by NBF and the Real Estate Investment
Department of Investment & Finance Group of the Asset Manager. Final selection is made with the decision of
the President after deliberation at the Investment Review Meeting consisting of general managers or higher
ranked personnel of each department and deliberation at the Executive Board.
How is the strategy implemented in the investment process on a continuous basis?
When investing in properties using proceeds from green financing, we do not consider properties that
do not meet the criteria under our green finance framework. We also investigate use of hazardous substances
including asbestos or countermeasures to such substances and soil contamination when investing in properties.
What is the policy to assess good governance practices of the investee companies and NBF?
We do not invest in investee companies and have therefore opted to provide information on thegovernance policies adopted by us and the Asset Manager.
We, along with the Asset Manager, have introduced the following measures to assess and enhance ourgovernance systems:

69

•

Adoption of a decision-making process in conflict-of-interest transactions involving independent outside
experts. We have adopted a governance structure stricter than what is legally required. The Asset Manager
reviews and examines conflict-of-interest transactions through its Compliance Committee, whose members
include outside expert(s).

•Corporate Governance. The Asset Manager believes that compliance refers not only to legal compliancebut also to compliance with the Asset Manager’s Code of Ethics and Compliance Rules, which include
concrete guidelines on how to take ethical actions. In addition, its Compliance Officer promotes companywide compliance activities by planning and offering a compliance program and training and awarenessraising activities for all officers and employees.

Asset Allocation
What is the asset allocation planned for NBF?
As of June 30, 2021, 74.4% of the properties in the portfolio were Eligible Green Assets, and 25.6%
were nonqualified assets based on gross floor area.

Investments of
NBF

74.4% is #1
Aligned with E/S#1B Other E/Scharacteristics

25.6% qualifies as#2 Other

How does the use of derivatives attain the environmental or social characteristics promoted by NBF?
Not applicable.
What investments are included under “#2 Other”, what is their purpose and are there any minimum
environmental or social safeguards?
As of June 30, 2021, based on gross floor area, 25.6% of our properties were not Eligible Green Assets.
We invested in these properties before we established our green finance framework, because these properties
met our minimum investment criteria and we believed the acquisition of the properties would enhance unitholder
value. We implement as appropriate measures to reduce their environmental impact following acquisition,
including by obtaining environmental certifications.
We investigate use of hazardous substances including asbestos or countermeasures to such substancesand soil contamination when investing in properties.
How will sustainable investments contribute to a sustainable objective and not significantly harm any othersustainable investment objectives?
There are no properties specifically earmarked as having a sustainable objective and as such, nocalculation is required to be made as to whether any individual property does significant harm to any sustainable
investment objective as referred to in the SFDR. Nevertheless, our sustainable investment objective isconsistently integrated and monitored in the management of the assets.

70

As described in further detail above, the ESG Promotion Subcommittee meets at least once every threemonths to assess ESG risks and opportunities and consults on numerical targets and specific measures to reduce
CO2 with the ESG Promotion Committee, which meets at least once every six months and decides specifictargets and measures as the final decision maker. We have instituted a number of initiatives, at both the portfolio
level and the property level, to promote environmental or social characteristics. Such initiatives include thefollowing.
•

Climate change initiatives. The key drivers of our climate change initiatives are energy-saving andrenewable energy. At the properties we operate, we set numerical targets and monitor the amount of energy
used as well as the amount of CO2 emissions within the property in order to reduce our environmental
burden. To achieve these targets, we have installed LED lighting and solar panels. As of June 30, 2021, LED
lighting was installed at 31 properties and solar panels were installed at two of our properties. We haveincluded in our leases with our tenants Green Lease provisions that require them to collaborate with us in
implementing various measures, to promote environmental consideration, including installation of LED
lighting at our properties with the consent of the tenants. In fiscal 2020, we reduced the amount of energy
used in our properties by about 40 million kWh compared to the amount of energy used in fiscal 2018, due
to our ESG initiatives and property replacement.

•

Water resources and waste management initiatives. We have installed facilities for reusing rainwater andgreywater to reduce the consumption of tap water. In fiscal 2020, we reduced the amount of water used in
our properties by about 400,000 m2 compared to the amount of water used in fiscal 2018.

•

Tenant initiatives. To keep good indoor air quality and sanitary conditions and enhance users’ health andproductivity, we monitor the indoor environment based on a satisfaction survey of tenants (excluding master
lessees) and aim to make our properties comfortable every day. The survey covered matters regarding theoffice environment and convenience, cleaning, crime and disaster prevention, service quality, effectivenessof customer satisfaction activities at each property and tenants’ needs

More Product-specific Information
Where can I find more product-specific information online?
More product-specific informationm.com/en/sustinability/index.html.

can

be

found

on

the

website:https://esg.nbf-

Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether NBF is aligned with theenvironmental or social characteristics that it promotes?
Our investment units have been included in the MSCI Japan ESG Select Leaders Index (“MSCI”) sinceJune 2021. MSCI is an index composed of companies from the top 700 index of MSCI Japan Investable Market
Index, with high ESG performance and is reviewed periodically based on MSCI ESG Ratings, market
capitalization and other criteria. MSCI also has been selected as one of the ESG indices for passive investment
by Japan’s Government Pension Investment Fund. We use MSCI not only as a reference benchmark for
performance comparison and market context purposes, but also to consider how best to construct and manage
our portfolio.
How does the designated index differ from a relevant broad market index?
See above.

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How is the reference benchmark continuously aligned with each of the environmental or social characteristics
promoted by NBF and with the investment strategy?
We believe that our units are included in MSCI because of our high percentage of properties withenvironmental certifications issued by third-party organizations and our strong commitment to local
communities and the Asset Manager’s employees with respect to initiatives such as holding events to improvethe environment.
INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE
IMPACT OF SUCH RISKS ON THE RETURNS OF NBF (SFDR ARTICLE 6 DISCLOSURE)
We have established ESG Promotion Committee and ESG Promotion Subcommittee. The ESG
Promotion Subcommittee meets at least once every three months to assess ESG risks and opportunities andconsults with the ESG Promotion Committee on numerical targets and specific measures to reduce CO₂, whichmeets at least once every six months and makes the final decision on specific targets and measures.
In order to realize sustainability in our asset management and to maximize the value of our portfolio
assets, we have emphasized taking into consideration ESG factors in our investment and asset management
processes. The Asset Manager has established a green finance framework in accordance with the 2018 Green
Bond Principles and the 2017 Green Bond Guidelines to conduct sustainable finance. Green financing under ourgreen finance framework consists of green bonds where proceeds are used only to acquire Eligible Green Assets
or refinance loans or bonds financed for such acquisition.
Under this organizational structure, we have instituted a number of initiatives, at both the portfolio level
and the property level, to promote environmental or social characteristics. Such initiatives include climate change
initiatives, water resources and waste management initiatives and tenant initiatives.
To address the sustainability risks including the risk of occurrence of damage to the asset value of lowperformance buildings due to the impact of environmental performance on real estate prices against the backdropof the tightening of regulations and change in tenant preference, we promote investment under our green financeframework and try to improve our portfolio environmental performance through property replacements. We
believe that our ESG initiatives contribute to the competitive strength of our portfolio and our sustainable growth
in returns.
The following table presents the key climate-related risks that may have a financial impact on NBFʼsreal estate investment management business and the initiatives that NBF has taken to address those risks.
Type ofrisks
Transition

Category

Identified risks

Initiatives

Policy/legal
regulation(i) Risk of increased costs for the purchase ofcarbon credit and repair of properties tocomply with regulatory requirements underapplicable laws, including the Act on the
Rational Use of Energy, Act on Promotion of
Global Warming Countermeasures and thetotal (pollutant) load control by the Tokyo
Metropolitan Government, and any additional
obligations that may arise in the future.

• Establishment of goals
on energy consumption
intensity and GHG
emission intensity• Systematic energysaving renovation ofbuildings• Joint review of energy
efficiency withNIKKEN SEKKEICONSTRUCTION
MANEGEMNT Inc.
• Encouragement ofenergy saving and(ii) Risk of additional costs to purchase CO2
emission rights or from energy procurement
price due to carbon tax, etc.

72

promotion of green
leases through tenant
engagement• Introduction ofrenewable energy
Technology

Risk of change in specifications required forbuildings due to the spread of low-carbon
technology such as electric vehicles.

Market(i) Risk of unexpected losses at buildings withrelatively low environmental performance,
which may have a significant impact on
occupancy rate, cash flows and asset value, as
regulations become stricter and tenants’
preferences change(ii) Risk of increased expenses for entrusting
businesses to the property manager and othervendors as a result of tightening ofenvironmental regulations.

Reputation(i) Risk of funds being available only at lessadvantageous terms due to stricter ESG
requirements on portfolio composition andother factors.
(ii) Risk of reputational decline if NBF’s
measures on climate-related issues areperceived negatively by investors or thegeneral public.

PhysicalAcute(i) Risk of damage to facilities caused by flood(river flooding, etc.) in the event of heavy
rainfall disasters.

73• Systematic energysaving renovation ofbuildings andintroduction of new
products andtechnologies• Joint review of energy
efficiency withNIKKEN SEKKEICONSTRUCTION
MANEGEMNT Inc.
and monitoring ofenvironmental
performance• Acquisition andmaintenance of
external certifications
and ratings• Property replacement
strategies withsponsors• Maintenance andimprovement ofproperty value throughthe assessment andmonitoring of tenantneeds• Acquisition andmaintenance of
external certifications
and ratings• Transparency throughESG disclosure• Disaster risk
assessment at the timeof acquisition andperiodically during theholding period

(ii) Risk of people experiencing difficulty
returning home from their workplaces in theevent of disasters.
(iii) Risk of increases in nonlife insurance
premiums associated with increases in thefrequency and magnitude of disasters.
(iv) Risk of impact on the business continuityof the Asset Manager and NBF Office
Management due to the frequent occurrence
and intensification of disasters.
Chronic

Risk of impact on retail spaces due tobehavioral change of users (promotion of
remote work, etc.) with the increase in thenumber of bad weather days (fierce heat,
severe cold, rainstorm and heavy snow).

74• Establishment ofcountermeasureprograms against
flooding• Improvement ofemergency facilities atproperties• Development ofbusiness continuity
plans at each property• Monitoring of officedemandDisclaimer
This document contains translations of selected information described in the Securities Report (Yuka shoken
hokokusho) filed on September 29, 2021 pursuant to the Securities Exchange Law of Japan, and the Financial
Statements and the Performance Information Report for the period from January 1, 2021 to June 30, 2021, of Nippon
Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.

This English-language document was prepared solely for the convenience of and reference by overseas investors. It
neither corresponds to the original Japanese documents nor is intended to constitute a disclosure document. The
Japanese-language Securities Report and the Financial Statements and the Performance Information Report for the
aforementioned period should always be referred to as originals of this document.

English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identicalto the concept of the equivalent Japanese terms. With respect to any and all terms herein, including without
limitation, financial statements, if there exist any discrepancies in the meaning or interpretation thereof between theoriginal Japanese documents and English statements contained herein, the original Japanese documents will always
govern the meaning and interpretation. None of Nippon Building Fund Inc., Nippon Building Fund Management Ltd.
or any of their respective directors, officers, employees, partners, unitholders/shareholders, agents or affiliates will be
responsible or liable for the completeness, appropriateness or accuracy of English translations or the selection of the
portions of any documents translated into English. No person has been authorized to give any information or makeany representations other than as contained in this document in relation to the matters set out in this document, and if
given or made, such information or representation must not be relied upon as having been authorized by Nippon
Building Fund Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees,
partners, unitholders/shareholders, agents or affiliates.

The financial statements of Nippon Building Fund Inc. have been prepared in accordance with generally accepted
accounting principles in Japan (Japanese GAAP), which may materially differ in certain respects from generally
accepted accounting principles in other jurisdictions.

Many provisions of this document contain forward-looking statements and information. We base these statementson our beliefs as well as our assumptions based solely on certain limited information currently available to us.
Because these statements reflect our current views concerning future events, these statements involve known andunknown risks, uncertainties and assumptions. Our future performance could materially differ from those set out inthese forward-looking statements. We do not undertake and will not undertake to release revisions of forward-looking
statements to reflect future events or circumstances or of any other statements or information contained herein.

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