Solid Management for Stable Returns

15th Period
NBF Report July – December 2008

Nippon Building Fund Inc.
http://www.nbf-m.com/nbf_e/Solid Management
for Stable Returns
ProfileOn September 10, 2001, Nippon Building Fund Inc. (NBF) became

basis. Its fiscal periods are six months long. NBF primarily invests inthe first Japanese real estate investment trust (J-REIT) investment cor-

office buildings in the central business districts of Tokyo, Greater Tokyo

poration with its listing on the J-REIT section of the Tokyo Stockand other cities in Japan. The Investment Trust Law of Japan requires

Exchange. Today, NBF has the largest market capitalization and assets

an external entity to manage the assets of an investment corporation;

under management among J-REITs.

NBF entrusts asset management to Nippon Building Fund Management

NBF employs funds raised through shareholder subscriptions andLtd. (NBFM). NBF maintains a close relationship with NBFM’s major

borrowing to invest in real estate, real estate-backed securities, trust

shareholder Mitsui Fudosan Co., Ltd., and employs this company’s

beneficiary rights and other assets with the objective of sustainable

expertise to invest in carefully selected, high-quality properties, with thegrowth in portfolio value and stable profits on a medium-to-long-term

aim of generating further asset growth.

Contents
Building on Our Strengths

2

Financial Highlights

4

To Our Shareholders

6

Solid Management for Stable Returns

8

A Continuing Record of Achievement

12

A Track Record of Steady Growth and High Occupancy Rates

12

Ongoing Improvement in Portfolio Quality

13

Acquisitions during the 15th Period

14

Planned Acquisitions in the 16th Period and Beyond

15

Main Properties

16

Location of Office Properties

20

Portfolio Overview

22Management Team and Management Structure

24Management’s Discussion and Analysis

28

Financial Statements

39

Appendix

53

Investment and Distribution Policies

55

Corporate Data

64

Investors’ Information

65

On the CoverSolid Management for Stable Returns

15th Period
NBF Report July – December 2008

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

NBF acquired the Surugadai Project (tentativename) for ¥20.8 billion in April 2009. NBF had
already completed a purchase contract for the
project before its completion. The Surugadai
Project is a prime, high-spec property located in
Chiyoda-ku, Tokyo, where the number of largescale office buildings is growing.

NBF Report July-December 20083

Building on Our Strengths

Over the 15 periods, or roughly seven and a halfyears, since its listing on the J-REIT section of theTokyo Stock Exchange in September 2001, NBF hasestablished a track record of stable profit distribution.
As a result of steady growth, NBF has built asolid position in the J-REIT market from several perspectives, including scale advantage, portfolio scope,financial stability and level of return.
NBF will continue to make maximum use of its

Japan’s First andLargest J-REIT◆ In September 2001, NBF was listed as the first real estate
investment corporation in Japan on the J-REIT section of theTokyo Stock Exchange.
◆ The largest total market capitalization of any J-REIT(¥530.0 billion)*◆ The largest scale of managed assets (¥762.3 billion)*(total acquisition price)

strengths and competitive advantages, as well as theexpertise of Mitsui Fudosan Co., Ltd., to steadily
increase value for shareholders.

High-Quality
Properties◆ Specializes in investing in office buildings◆ Possesses 60 properties*, mainly large-scale office buildingsin the Tokyo Central Business Districts◆ Diversified in other Tokyo markets as well as in regional cities◆ Total rentable area of 763,658m2*◆ 946* diversified tenants

22 NBF Report July-December 2008

Stable Returns◆ Cash distribution of ¥22,252 per share for the 15th Period

NBF’s Strengths◆ Aims to increase distributions to shareholders
over the medium to long term
(Cash distribution:Yen)
25,00022,252
19,391

20,00014,582
15,00010,0005,000

5thSound Finances◆ Ratings*■ Standard & Poor’s

Long-term Corporate: A+, Short-term Corporate: A-1■ Moody’s Issuer Rating: A1■ R & I Issuer Rating: AA◆ LTV: 45.5%*◆ Percentage of long-term, fixed-rate debt included in interestbearing debt: 76.0%*◆ Average years remaining on long-term, fixed-rate interestbearing debt: 4.94 years*◆ Total average cost: 1.58%*

10th

15th

Strategic
Partnership with
Mitsui Fudosan◆ Access to the expertise of Mitsui Fudosan Co., Ltd., the leading
real estate company in Japan■

Acquisition of properties developed by Mitsui Fudosan■ Use of property information-gathering capabilities

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

management capabilities in office management* As of December 31, 2008

NBF Report July-December 200833

Financial Highlights

15th Period

14th Period

13th Period

12th Period

15th Period

from July 1, 2008 to
December 31, 2008

from January 1, 2008 toJune 30, 2008

from July 1, 2007 to
December 31, 2007

from January 1, 2007 toJune 30, 2007

from July 1, 2008 to
December 31, 2008
U.S. dollars in thousands(Note 1)

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

Operating revenues
Income before income taxes
Net income

Note 2¥ 31,218
12,062
12,061¥ 30,088
12,223
12,222¥ 27,814
10,227
10,226¥ 26,641
10,064
10,063$ 343,851
132,853
132,841

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

Note 3

17,417

16,63015,394

15,188

191,835

Note 3(a)21,346
12,061

20,318
12,222

18,905
10,226

18,442
10,063

235,113
132,840(b)Note 3

766,249
318,500
398,23745.5%

725,627
280,500
398,39842.8%

672,195
272,500
356,67244.3%

680,266
281,500
356,50944.9%

8,439,794
3,508,096
4,386,349(c)(b) / (c)(a) / (c)542,000
734,753
22,252542,000
735,050
22,549508,000
702,110
20,129508,000
701,790
19,8098,093
245

Note 332,13431,06630,30329,897354

Total assets
Interest-bearing debt
Net assets
LTV (Loan to value)
Total number ofcommon shares issued (shares)
Net assets per share (Yen/$)Distribution per share (Yen/$)Funds from operations
per share (Yen/$)Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥90.79 = U.S.$1.00, the approximate exchange rate on December 31, 2008.
2. Operating revenues do not include consumption taxes.
3. Funds from operations: Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
Funds from operations per share: (Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization) /Weighted average number of common shares issued and outstanding during the period

Portfolio Highlights (As of December 31, 2008)
Asset Allocation0

Total Assets¥766,249
million

44 NBF Report July-December 2008

Regional Allocation
Deposits andOther Assets¥42,880 million

Other Cities¥90,931 million(5.6%)(11.9%)

Real Estate¥337,158 million

Other GreaterTokyo¥189,180 million(44.0%)(24.8%)

Real Estate Held in Trust¥386,210 million

Tokyo CBDs*¥482,238 million(50.4%)(63.3%)

Total Real
Estate, Etc.

¥762,349
million* Central Business Districts

Operating revenues / Net income(Yen in millions)

Funds from operations per share

Net operating income fromproperty leasing activities(Yen in millions)

(Yen)

15th
Period15th
Period15th
Period14th
Period14th
Period14th
Period13th
Period13th
Period13th
Period12th
Period12th
Period12th
Period11th
Period11th
Period11th
Period05,000 10,000 15,000 20,000 25,000 30,000 35,000O
Operatingrevenues
Net income
N

Total assets

0

5,000

10,00015,00020,00025,000

LTV(%)(Yen in millions)0

10,00025,000550,000 600,000 650,000
0DDistribution
per share (top scale)
Net assets per share (bottom scale)N

700,000

750,000

15th
Period14th
Period14th
Period14th
Period13th
Period13th
Period13th
Period12th
Period12th
Period12th
Period11th
Period11th
Period11th
Period
0

40

42

44

46

48

50

(Yen)

20,00015th
Period10,00040,00015,00015th
Period300,000 400,000 500,000 600,000 700,000 800,000

30,000Distribution per share /Net assets per share
5,000

0

20,000

List of Major Tenants
Name

1
2
3
4
5
6
7
8
9
10

Mitsui Fudosan Co., Ltd.1
IBM Japan, Ltd.2
GlaxoSmithKline K.K.2
Hakuhodo DY Holdings Inc.
AXA Life Insurance Co., Ltd.2
Fuji Xerox Co., Ltd.
Nippon Steel Corporation2
Transcosmos Inc.2
Nikkei Business Publications, Inc.2
The Resolution and Collection Corporation

Leased Space(m2)

Percentage of Total
Leased Area3

169,913
28,184
20,51518,781
17,895
16,252
15,333
14,37013,135
8,569

23.0%
3.8%
2.8%
2.5%
2.4%
2.2%
2.1%
1.9%
1.8%
1.2%

Notes: 1. NBF receives lease revenue from Mitsui Fudosan Co., Ltd. after Mitsui Fudosan has taken a fixed percentage commission of the lease revenue from the tenants of the sub-leased
space.
2. Indicates tenants with long-term lease contracts (IBM Japan, Ltd.’s contract (NBF Toyosu Canal Front) expires December 2009; GlaxoSmithKline K.K.’s contract (GSK Building)expires September 2010; Hakuhodo DY Holdings Inc.’s contract (NBF Toyosu Garden Front) expires March 2013; AXA Life Insurance Co., Ltd.’s contract (NBF Platinum Tower) expires
November 2010; Nippon Steel Corporation’s contract (Nippon Steel Building No. 2) expires November 2009; Transcosmos Inc.’s contracts (Shibuya Garden Front and NBF Sapporo
Minami Nijo Building) expire September 2009 and October 2009, respectively; Nikkei Business Publications, Inc.’s contract (NBF Platinum Tower) expires November 2009)
3. Percentage of total leased area = Leased space / Total leased area of all properties in portfolio

NBF Report July-December 2008

55

To Our Shareholders

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

Based on its sound financial strategy,
NBF aims for steady distributions toshareholders over the medium-to-longterm by generating well-balanced
internal and external growth.

Performance during the Six Months
Ended December 31, 2008

increased 3.8 percent, or ¥1,130 million, compared with the previous six-Due to occupancy at properties acquired during the15th Period, distribution per share was ¥22,252.

occupancy at properties acquired during the 15th Period and other fac-

During the six months ended December 31, 2008 (the “15th Period”),
uncertainty about the outlook for the Japanese economy increased asturmoil in global financial markets stemming from the U.S. subprime
mortgage crisis accelerated.
In the office building leasing market, vacancy rates trended upward
nationwide and rents for new tenants decreased, particularly for higherpriced properties. However, we believe that NBF’s portfolio of highly compet-

Operating revenues for the six months ended December 31, 2008
month period to ¥31,218 million. Operating revenues increased due totors, although ¥868 million from the sale of properties recorded in theprevious six-month period did not recur. Operating income increased 0.4
percent, or ¥62 million, to ¥14,591 million. Net income decreased 1.3
percent, or ¥161 million, to ¥12,061 million. Distribution per sharedecreased ¥297 to ¥22,252.

Initiatives to Generate Internal Growth

In the real estate acquisition market, properties for sale are forecast to

NBF sets appropriate rents to prevent a decrease inoccupancy.

increase due to changes in financial conditions. NBF will maintain its policy

Amid an increase in vacancy rates throughout Japan, the vacancy rateof investing selectively in outstanding properties. Under this policy, NBF

was relatively low in the central business districts (CBDs) of Tokyo, NBF’s

acquired two properties (total acquisition price: ¥37.1 billion) during thecore investment area. The occupancy rate of NBF’s properties was 96.8

15th Period, resulting in a portfolio comprising 60 properties with a total

percent as of December 31, 2008. However, with a downward trend ininvestment value of ¥762.3 billion on an acquisition price basis as ofdemand from new tenants and a longer time required from solicitation to

December 31, 2008.

contract, NBF will base its operations on maintaining its occupancy rate byitive office buildings limited the impact of these factors on its performance.

6 NBF Report July-December 2008

Performance Outlook (As of February 13, 2009)(Yen in millions)

16th Period (Projected)

17th Period (Projected)

from January 1, 2009 to June 30, 2009

from July 1, 2009 to December 31, 2009

Operating revenues¥30,658¥30,526

Net income

11,111

10,623Distribution per share (Yen)

20,50019,600setting rents in response to the market and other measures.
In addition, through an ongoing focus on raising rents at lease contract
negotiation, NBF achieved rent increases totaling ¥30 million per monthfrom existing tenants at below-market rates during the 15th Period.

Initiatives to Generate External Growth
NBF generates steady external growth by selectively
investing in outstanding properties to build a strong
portfolio.
In the real estate market, although properties for sale increased as thebalance of supply and demand loosened, the top-quality buildings that
NBF targets remained scarce.
Under these conditions, we will continue to make the most of the information pipeline we have built to date to strengthen our portfolio by investing selectively in outstanding properties. During the 15th Period, we
acquired the Shibakouen Takahashi Building (acquisition price: ¥6,100
million) and the NBF Minami-Aoyama Building (acquisition price: ¥31,000
million). We also decided to acquire the Higashi-Ueno 4-chome Building(tentative name) (scheduled date of transfer: April 2010, acquisition price:¥11,175 million).
We will continue to base our consideration on selective investments
and the replacement of existing properties.

Financial Strategies
Continuing to implement a conservative approach
to financial operations

Fundamental Management Policies
and Outlook
Deploying its sound financial strategy, NBF aims forsteady growth of distributions to shareholders overthe medium-to-long term, with continued wellbalanced internal and external growth.
In the six months ending June 30, 2009 (the “16th Period”), amid anuncertain outlook for the Japanese economy, we will set appropriate rents
to maintain our occupancy rate while further strengthening our portfolio byinvesting selectively in outstanding properties.
Through these initiatives, for the 16th Period, NBF projects operating
revenues of ¥30,658 million, operating income of ¥13,853 million, net
income of ¥11,111 million and a distribution of ¥20,500 per share. For
the six months ending December 31, 2009 (the “17th Period”), we project
operating revenues of ¥30,526 million, operating income of ¥13,583 million, net income of ¥10,623 million, and a distribution of ¥19,600 per
share. (These projections are valid as of February 13, 2009 and assume
no acquisitions or transfers of buildings other than those under contract atthat time, and no issue of new shares.)
As Japan’s first and largest J-REIT, NBF aims for steady distributions
to shareholders over the medium-to-long term by generating wellbalanced internal and external growth, based on our sound financial strategy and on making the most of our relationship with Mitsui Fudosan Co.,
Ltd. and the high level of management know-how we have accumulated
since our establishment.

With the tightening of credit worldwide, fund procurement is becoming
more challenging as financial institutions take a more cautious stance on
investment and the procurement spread widens.
Under these conditions, NBF will continue to implement a conservative
approach to financial operations, maintaining a targeted LTV (loan-to-

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

value) ratio between 40 percent and 50 percent, with 60 percent as the
maximum. With respect to procurement, NBF will utilize long-term fixedinterest loans that disperse the repayment methods.

NBF Report July-December 2008

7

Solid Management for Stable Returns

Stable AssetManagement

We will work to maintain our occupancy rate by setting rents that are
responsive to market conditions.
Office Building Leasing Market: Vacancy Rate
Although the vacancy rate of the office building leasing mar-

Vacancy Rate in Tokyo CBDs,
Osaka CBDs and Nagoya CBDs

ket has been low over the last several years, it has been risingnationwide as uncertainty about the economic outlook increases.
However, the vacancy rate is relatively low in the central business districts (CBDs) of Tokyo, NBF’s core investment area,(%)
12

where the supply of new office buildings is limited. The period

10

from tenant withdrawal to new lease completion has begun to8

show signs of lengthening, though, as office demand declines in

6tandem with worsening corporate performance.

4

NBF’s Initiatives

20

Under these conditions, maintaining the occupancy rate is a
Dec. 2002

Dec. 2003

Dec. 2004

Dec. 2005

Dec. 2006

Tokyo
Osaka

Dec. 2007

Dec. 2008（Source: Miki Shoji)

Nagoyapriority issue for NBF, which will focus on preventing adecrease by setting rents that are responsive to market conditions. Nevertheless, NBF is factoring in a slight decline in its
occupancy rate in light of growing uncertainty about Japan’s
economic outlook. Although the rate for the 15th Period was
96.8 percent, NBF forecasts a rate of 96.2 percent for the

Occupancy Rate for NBF Properties

16th Period and 95.8 percent for the 17th Period.

Office Floor Space Supply in Greater Tokyo

(%)
100

(Million ㎡)
98

70

96

60
50

94

40
92

30
90

0 June 2005

20
Dec. 2005 June 2006 Dec. 2006 June 2007 Dec. 2007 June 2008 Dec. 2008

10
0

19
1990
9900 11992
9 2 11994
992
9 4 1996
994
19996
9 6 1998
19998
9 8 20002 0 2002
20
200022 2004
20004 2006
200066 2008
2000
008 2009
00 201010 2011
2 11 20122 12 2013
20
2013
Past data from Mori Building Co., Ltd.
Projections
from surveys by Mori BuildingP
Projections
P
from surveys by CB Richard Ellis
Note:Compiled by Nomura Securities Financial & Economic Research Center using datafrom Mori Building and CB Richard Ellis

8 NBF Report July-December 2008

Office Building Leasing Market:
Average Asking Rents
Average asking rents, which had increased over the last several years, are on a downward trend due to a decline in office

Average Asking Rents inTokyo CBDs

demand in a weak Japanese economy. In particular, asking
rents for new large-scale office buildings in Tokyo CBDs havedeclined significantly. However, rents have remained stable(Yen per tsubo )40,000overall with steady average asking rents for existing properties,

35,000which comprise the majority of buildings in Tokyo.
NBF’s portfolio is structured to diversify rent levels. It remains
stable due to the relatively slight impact of the drop in averageasking rents in the leasing market, particularly evident among

30,00025,00020,00015,000high-priced properties, because over half of the portfolio’s contracts are for less than ¥25,000 yen per tsubo per month.

0 Dec. 2004

Dec. 2005

Dec. 2006

Dec. 2007

Average Asking Rent for New Buildings
Average Asking Rent for Existing Buildings
Total Average Asking Rent

NBF’s Outlook

Dec. 2008（Source: Miki Shoji)

Among overall weakness in the leasing market, setting
appropriate rents is essential to maintaining the occupancyrate, a priority issue for NBF. NBF achieved rent increases
totaling ¥30 million per month in the 15th Period. However,

A Wider Range of NBF Rents

given recent conditions in the leasing market, NBF will take a(Monthly Rent per tsubo at Lease Renewal)

flexible stance on rent negotiations, and assumes that internal
growth will remain flat, with rent decreases paralleling rent
increases. Taking a more conservative stance, NBF forecasts

More than¥35 - ¥40 thousand(12.4%)¥40 thousand(2.2%)

that total monthly rents will decrease ¥5 million in the 16th
Period and increase ¥5 million in the 17th Period.

¥30 - ¥35

thousand(6.2%)¥25 - ¥30
thousand(16.4%)

Less than¥20 thousand(29.4%)¥20 - ¥25
thousand(33.4%)(As of December 31, 2008)

NBF Report July-December 2008

9

Selective
Investment

Selectively invest in outstanding
properties while also considering
portfolio turnover.
Real Estate Acquisition Market
The number of properties for sale has been increasing since

Area Decentralization

2008 amid changes in global financial conditions and the effect of(Acquisition Price Basis)

worsening economic sentiment on the real economy. However,buildings of the outstanding quality that NBF targets remain scarce.

Other Cities

11.9%
NBF’s Selective Investment
Other
Greater
Tokyo

Tokyo
CBDs

NBF recognizes the need to be extremely cautious in new invest-

24.8%

63.3%

ment but also sees excellent opportunities to acquire high-quality

In an environment of financial crisis and economic slowdown,

assets with high returns. Therefore, NBF will continue to selectively invest in outstanding assets based on strict guidelines(As of December 31, 2008)

while also considering asset turnover.
Guided by these basic policies, NBF acquired two properties
in the 15th Period. In July 2008 NBF acquired the Shibakouen

Steady and Continuous External Growth(Acquisition Price – Contract Basis)

Takahashi Building (acquisition price: ¥6,100 million), and in
August 2008 it acquired the NBF Minami-Aoyama Building(acquisition price: ¥31,000 million) and completed a contact toacquire the Higashi-Ueno 4-chome Building (tentative name)(Yen in billions)(acquisition price: ¥11,175 million, scheduled date of transfer:

800

April 2010). The Shibakouen Takahashi Building and the NBF
Minami-Aoyama Building are located in Tokyo CBDs and have

700

contributed to earnings with 100 percent occupancy rates since
600

500
0

NBF took possession.
NBF will work to increase its portfolio quality through selec10th
Period11th
Period12th
Period13th
Period14th
Period15th
PeriodCContract basis

10 NBF Report July-December 2008

tive investments, including turnover of properties.

Solid Management for Stable Returns

NBF will maintain a conservative
approach to financial management.

Conservative
Finances

Fund Raising Conditions for J-REITs
Loan procurement has become more difficult with the negative

Stable Financial Track Record

stance on lending to companies in the real estate sector taken byfinancial institutions since the collapse of Lehman Brothers in
September 2008. Refinancing is a collective concern within the
J-REIT industry in this environment.

(%)

100
80
60

NBF’s Strong Financial Foundation
In consideration of the above, NBF will maintain positive rela-

40

tionships with financial institutions and continue to take a con-20

servative financial approach. Specifically, NBF has set a targeted

0 June 2005 Dec. 2005 June 2006 Dec. 2006 June 2007 Dec. 2007 June 2008 Dec. 2008

LTV (loan-to-value) ratio between 40 and 50 percent, with 60

LTV

Long-Term Fixed-Rate Debt Ratio

percent as the maximum. The LTV ratio as of the end of the
15th Period was 45.5 percent. To deal with refinancing risk,
NBF will procure long-term fixed-rate loans. The ratio of fixedrate long-term debt to total interest-bearing liabilities as ofDecember 31, 2008 was 76.0 percent, compared with a targetof 80 to 90 percent. Furthermore, in addition to dispersing

Diversified Maturities ofInterest-Bearing Debt

repayment periods, NBF has established a commitment line
totaling ¥50.0 billion to secure a stable foundation for loan pro-

(Yen in billions)100

curement. In addition to these initiatives, NBF has earned the80

approval of its robust group of sponsor companies, including
60

Sumitomo Life Insurance Company, Sumitomo Mitsui Banking
Corporation and the Chuo Mitsui Trust and Banking Company,

40

Limited as well as Mitsui Fudosan Co., Ltd., and high ratings

20

from ratings organizations.

0

2009

2010

2011

LLong-Term Debt

2012

2013
B
Bonds

2014

2015

2016

2017

2018

Short-Term
Loans
S

NBF Report July-December 200811

A Continuing Record of Achievement

A Track Record of Steady Growth and High Occupancy Rates

Occupancy rate (%)

100.0

97.7

96.9

97.5

98.1

98.1

98.7

97.8

99.0

98.6

97.4

96.8

94.8
92.3
Total rentable area (m2)90.0

750,701

763,658

800,000

Acquisition price692,222

Tokyo CBDs

Acquisition price(Yen in billions)692,286

Other Greater Tokyo

800

700,000

670,249 670,513

794.4 ¥32.0 billion

Other Cities(contract basis)*725.2

578,243700

674.3

Occupancy rate
Total rentable area

624.8

600,000

674.3

624.8

488,323
460,901600

500,000

539.3

419,511500

400,000

358,940414.1

340,497

400

393.8

300

300,000

336.1

247,687
276.0

285.6
200,000

200

192.1

100,000
100

0

22

29

Buildings

Buildings

May 23,
Jun. 30,
2001
2003(Investment commencement date)

33

43

43

47

60

52

55

55

56

56

58

(62*)

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Dec. 31,2003

Jun. 30,
2004

Dec. 31,2004

Jun. 30,
2005

Dec. 31,
Jun. 30,
Dec. 31,
Jun. 30,
Dec. 31,
Jun. 30,
Dec. 31,
2005
2006
2006
2007
2007
2008
2008
* Including Surugadai Project (tentative name): ¥20.8 billion contract completed andHigashi-Ueno 4-chome Bldg. (tentative name): ¥11.2 billion contract completed.
(As of December 31, 2008)

12 NBF Report July-December 20080

Ongoing Improvement in Portfolio Quality
End of the 1st Period

End of the 9th Period

End of the 15th Period(December 31, 2001)(December 31, 2005)(December 31, 2008)

39.0%

43.7%
20.7%

Diversifying tenant risk
(Top 10 tenants’ share of total floor space)

31.9%

54.3%

Top 10 tenants’ share excluding Mitsui Fudosan Co., Ltd. (Top 10 tenants at the end of the 1st Period)

Mitsui Fudosan Co., Ltd.

Diversifying property concentration risk
(Ratio of total acquisition price of top three properties to total acquisition price of all owned properties)

19.6%

32.0%

54.0%

Average age(Average age of properties weighted by acquisition price of each property at the end of each period)

17.72 years

16.38 years
20.4%

11.5%

14.77 years
19.8%
15.7%

5.4%

88.5%

64.4%

74.3%
Over 10 years

Between 5 and 10 years

5 years or less

Portfolio PML (Probable Maximum Loss)

4.8%

3.8%
1.5%
Note: Analysis method of earthquake risk changed as of February 2007.

NBF Report July-December 200813

Acquisitions during the 15th Period

5 NBF Minami-Aoyama Building●

23 Shibakouen Takahashi Building●

Acquisition dateJuly 7, 2008

Site area

836.45m2 (NBF share: 733.12m2)

Floor area of building

5,350.75m2 (NBF share: approx. 87%)

Structure

9 floors above ground, 1 floor below

Location

8-12, Shibakouen 1-chome,
Minato-ku, Tokyo

Acquisition price¥6,100 million

14 NBF Report July-December 2008

Acquisition dateAugust 1, 2008

Site area

3,272.74m2

Floor area of building

18,720.59m2

Structure

11 floors above ground, 2 floors below

Location

1-31, Minami-Aoyama 3-chome,
Minato-ku, Tokyo

Acquisition price¥31,000 million

Planned Acquisitions in the 16th Period and Beyond

61 Surugadai Project (tentative name )●Acquisition date

April 30, 2009 (scheduled)

Site area

1,767.94m2

Floor area of building

9,773.30m2

Structure

11 floors above ground, 1 floor below

Location

3, Kanda-Surugadai 2-chome, Chiyoda-ku, Tokyo

Acquisition price¥20,840 million

62 Higashi-Ueno 4-chome Building (tentative name )●Acquisition date

April 30, 2010 (scheduled)

Site area

2,405.22m2 (estimated)

Floor area of building

15,949.26m2 (NBF share: approx. 77%)

Structure

13 floors above ground, 2 floors below

Location

38-2, Higashi-Ueno 4-chome, Taito-ku, Tokyo

Acquisition price¥11,175 million

NBF Report July-December 200815

Main Properties
1 Yamato Seimei Building●

2 Nishi-Shinjuku Mitsui Building●

4 NBF Platinum Tower●

3 Shiba NBF Tower●

16 NBF Report July-December 2008

6 Gate City Ohsaki●

7 Toranomon Kotohira Tower●
9 Nakameguro GT Tower●

13 NBF Toranomon Building●

NBF Report July-December 200817

32 NBF Toyosu Canal Front (top) /●33 NBF Toyosu Garden Front (bottom)●

31 Nakanosakaue Sunbright Twin●

34 Shin-Kawasaki Mitsui Building●

18 NBF Report July-December 2008

35 Yokohama ST Building●

50 ●55 Aqua Dojima NBF Tower, Aqua Dojima East●

42 Shin-Urayasu Center Building●

51 Shinanobashi Mitsui Building●

NBF Report July-December 200819

Location of Office Properties
As of December 31, 2008

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

Kita-ku

Arakawa-ku

28 27

Toshima-ku
Taito-ku

Bunkyo-ku

Nakano-ku

62

31

Sumida-ku
61

Shinjuku-ku

2

26

29

Chiyoda-ku

11

8

17
Imperial
Palace12

Chuo-ku

22

Koto-ku

1

Shibuya-ku

7

5
16
18 19

Setagaya-ku

29 NBF Sudacho Verde Building
30 NBF Ebisu-Minami Building
61 Surugadai Project (tentative name)(Scheduled for acquisition in April 2009)

9

Minato-ku
20

30
4

13

14

10

25

15

3

33 32

23

21
24

Tokyo Bay

Meguro-ku
6

Shinagawa-ku

Other Greater Tokyo
31 Nakanosakaue Sunbright Twin
32 NBF Toyosu Canal Front
33 NBF Toyosu Garden Front
62 Higashi-Ueno 4-chome Building (tentative name)(Scheduled for acquisition in April 2010)

8 NBF Nihonbashi●

17 Yotsuya Medical Building●

Muromachi Center Building

20 NBF Report July-December 2008

16 NBF Alliance●

18 Shibuya Garden Front●

20 NBF Shibakouen●

Building

Other Greater TokyoTOCHIGI

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

UTSUNOMIYA

39

38

IBARAKITo Omiya40

SAITAMA
41

TOKYO

43

CHIBA
31
33 32

42

Other Cities
Tokyo Bay

34

44 Sapporo L-Plaza

36

45 NBF Sapporo Minami Nijo Building
46 NBF Sendai Honcho Building

35

37

47 NBF Unix Building

44 45

48 NBF Niigata Telecom Building

KANAGAWA

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

52 Sun Mullion NBF Tower

46
47

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

56

49

56 NBF Shijo Karasuma Building

58 57
59
60

50 51 52 53

57 NBF Hiroshima Tatemachi Building

54 55

58 Hiroshima Fukuromachi Building
59 NBF Hakata Gion Building
60 NBF Kumamoto Building

36 Parale Mitsui Building●

40 S-ino Omiya North Wing●

44 Sapporo L-Plaza●

52 Sun Mullion NBF Tower●

53 Sakaisuji-Honmachi●

Center Building

NBF Report July-December 200821

Portfolio Overview
NBF’s properties as of December 31, 2008 are as follows:
Investment
Type

Name of Building

Type of Ownership

Percentageof OwnershipYear Built

Acquisition
Price

(%)

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

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

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

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

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

63,50044,90332,00031,00031,00030,10024,54323,94523,85617,00016,285
15,616
13,337
13,217
12,614
9,126
8,800
8,700
8,000
6,770
6,667
6,250
6,100
5,365
5,200
4,940
4,695
4,428
3,280
1,000

64,48136,33330,71330,426
31,79524,57721,01524,181
21,773
17,616
15,93813,921
13,624
12,044
11,584
9,489
8,534
8,279
8,226
6,733
6,278
6,252
6,322
4,783
4,994
4,951
4,487
4,445
3,378
1,017

81.0 Note 4
100.0
100.0
35.0
75.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0

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

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

39,52033,69825,287
19,33912,764
3,283
2,133
7,446
2,526
15,738
1,925
15,891
2,262

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

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

4,404
1,870
3,566
4,029
3,958
7,232
17,81014,40010,500
6,500
2,227
1,914
1,627
2,930
835
2,629
4,500
762,349

4,065
1,729
3,667
3,253
3,669
7,305
16,906
11,770
8,808
6,274
1,992
1,826
1,399
2,961
740
2,315
4,625
723,369

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

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

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

Ownership
Trust
Trust
Trust
Trust
Ownership
Trust
Ownership
Trust
Ownership
Trust
Trust
Trust
Ownership
Ownership
Trust
OwnershipComparted ownershipFee simple
Fee simple
Fee simple
Fee simple
Fee simple
Fee simple
Co-ownershipFee simple
Co-ownership of comparted ownershipFee simple
Co-ownership of comparted ownershipFee simple
Fee simple
Co-ownership of comparted ownershipFee simple
Fee simple

Notes: 1. Percentage of total revenues is the ratio of revenue from each office property to total revenues from all office properties.
2. Consent for disclosure was not obtained from tenants from whom rent revenue accounts for more than 80% of total rent revenue for the property. However, relevant figures are included in the total.
3. Figures stated above are based on NBF‘s ownership interest.
4. This figure does not include the Nakanosakaue Sunbright Annex, in which NBF has 50.3% ownership interest.

22 NBF Report July-December 2008

Revenue

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

61
1
27
5
9
1
1
14
1
1
43
1
11
3
2
6
1
1
5
7
4
7
7
1
8
1
12
11
3
3

1,938
1,498
1,186
1,515
555
1,173
1,070
957
1,138
Note 2
770
Note 2578
Note 2
Note 2
249
263
Note 2
226
344
345
280
182
Note 2
259
199
234
205
Note 2
63

6.2
4.8
3.8
4.9
1.8
3.8
3.4
3.1
3.6
Note 22.5
Note 2
1.9
Note 2
Note 20.8
0.8
Note 2
0.7
1.1
1.1
0.9
0.6
Note 2
0.8
0.6
0.8
0.7
Note 2
0.2

100
100
100
100
91.7
100
97.7
91.5
93.5
98.3
100
92.4
87.3

8
9
3
1
85
1
18
67
33
34
14
39
22

1,267
1,156
1,172
1,002
783
287
144
511
146
808
113
649
126

4.1
3.7
3.8
3.2
2.5
0.9
0.5
1.6
0.5
2.6
0.4
2.1
0.4

100
100
98.4
88.5
73.8
88.5
93.6
100
94.9
94.8
96.5
86.7
94.9
90.5
100
100
74.7
96.8

12
4
9
51
33
13
42
1
30
43
20
19
18
25
17
8
9
946

324
110
211
272
217
295
843
742
469
340
131
119
91
151
41
157
127
31,218

1.0
0.4
0.7
0.9
0.7
0.9
2.7
2.4
1.5
1.1
0.4
0.4
0.3
0.5
0.1
0.5
0.4
100.0

Appraisal Value

Rentable
Area

Leased Area at
End of Period

Occupancy Rate at
End of Period(Yen in millions)

(m2)

(m2)

(%)

68,80057,90035,80057,00025,10034,60036,60032,40031,400
16,10022,50023,60018,90021,00014,88011,5008,690
16,700
7,770
9,050
8,400
8,440
5,870
6,450
7,850
6,380
5,870
5,600
4,070
1,530

27,64032,96824,72833,503
9,618
20,714
16,84816,30621,4233,440
14,921
20,426
10,123
10,08817,338
4,043
7,450
8,258
4,993
7,087
10,473
5,258
3,431
5,991
4,871
4,805
5,652
5,127
2,971
1,595

24,72532,96824,72833,503
9,618
20,714
16,84816,30621,423
3,440
14,221
20,426
9,320
10,08817,338
2,555
7,450
8,258
4,993
7,087
10,258
5,258
3,431
5,991
4,871
4,805
5,389
4,936
2,855
1,595

89.5
100
100
100
100
100
100
100
100
100
95.3
100
92.1
100
100
63.2
100
100
100
100
97.9
100
100
100
100
100
95.3
96.3
96.1
100

38,10040,20032,50020,90019,500
4,390
2,360
9,310
2,770
21,8002,170
15,0002,730

32,082
36,66828,33027,92420,06912,545
5,230
16,755
6,197
20,6983,455
22,7894,770

32,08236,65528,33027,924
18,405
12,545
5,107
15,3295,793
20,344
3,455
21,064
4,166

6,610
1,740
3,940
3,810
3,700
8,610
23,60015,10010,600
7,640
2,170
2,370
1,670
3,170
902
2,740
3,960
924,812

11,396
5,351
7,539
13,39010,214
9,890
21,917
25,237
14,954
11,438
5,308
3,243
3,931
5,612
1,309
5,416
7,913
763,658

11,396
5,351
7,415
11,8487,539
8,748
20,51425,237
14,193
10,847
5,125
2,813
3,730
5,076
1,309
5,416
5,909
739,061

Total Number ofTenants at
End of Period

NBF Report July-December 200823

Management Team and Management Structure(As of December 31, 2008)

Corporate Structure and Management
Nippon Building Fund Inc. (NBF) is an investment corporation that takes a medium-to-long-term perspective with the aim of generating steady asset growth and stable earnings. NBF believes that fair,transparent management is central to increasing return on investment.

Nippon Building Fund Inc.

attendance, unless otherwise stipulated by laws, regulations or NBF’s arti-

Nippon Building Fund Inc. is an investment corporation establishedcles of incorporation. Decisions on substantive matters such as changes

with the objective of investing in assets, primarily Designated Assets asin the articles of incorporation require the attendance of shareholders thatdefined by the Investment Trust Law of Japan. NBF entrusts management

control a simple majority of total shares issued and outstanding, and aof its assets to Nippon Building Fund Management Ltd., which is an asset

two-thirds majority of the voting rights of such shareholders. In addition,

management company.

any change in the asset management policies and standards, which are

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

stipulated by NBF’s articles of incorporation, requires an extraordinary resolution of shareholders as outlined above.

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

Executive Directors, Supervisory Directors and thebusiness districts (CBDs) of Tokyo, Greater Tokyo and other cities in

Board of Directors

Japan. NBF also invests in securities, beneficiary certificates representing

NBF’s articles of incorporation stipulate that NBF must have one or

beneficial interests in trusts (beneficiary certificates) and other assets

more executive directors and four or fewer supervisory directors (but thebacked by office properties.

number of supervisory directors must always be at least one greater than
the number of executive directors). As of December 31, 2008, NBF had
two executive directors and four supervisory directors.

General Meeting of Shareholders
Specific matters pertaining to NBF that are subject to the Investment

NBF’s executive directors are responsible for business execution. In

Trust Law of Japan or the Company’s articles of incorporation are decided

addition, they have authority for all judicial and extrajudicial proceedings

by resolution of the General Meeting of Shareholders, which convenes atrelated to the operations of NBF.
Supervisory directors are responsible for supervising execution by theleast once every two years, in principle. The sixth General Meeting of
Shareholders convened on March 12, 2009. The date of the next General

executive directors.
The Board of Directors consists of the executive and supervisory direc-

Meeting of Shareholders has not been set.
The General Meeting of Shareholders adopts or vetoes resolutions on

tors. Its responsibilities include authorizing business execution and super-

the basis of a simple majority of the voting rights of shareholders invising the performance of the executive directors. Resolutions by theGeneral Meeting of
Shareholders

Asset Custody

The Chuo Mitsui Trustand Banking Co., Ltd.
Mitsui Fudosan Co., Ltd.

Asset
Management
Entrustment

Asset Custody
Entrustment

NIPPON BUILDING FUND Inc. (NBF)
OfficeManagement
Entrustment

Board of Directors

NBF Office Management Co., Ltd.

Qualified Institutional
Investors / Bondholders
Independent Auditors

Liabilities

Office Management
Investment

Real Estate, etc.
Rent, etc.

24 NBF Report July-December 2008

Borrowings /Bonds and
Notes
Debt
Service

NIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

AssetsShareholders’EquityInvestment
Distribution

Shareholder
Trading

Shareholder

Management Team

From left:

Sadao Kamiyama
Sadafumi Abe
Hideo Fukazawa
Hatsuo Komatsu
Koichi Nishiyama
Yoshiyuki Hirai

Executive Directors

Name

Background Summary

Sadafumi Abe

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

Koichi Nishiyama
Supervisory Directors Hideo Fukazawa

Hatsuo Komatsu
Sadao Kamiyama
Yoshiyuki Hirai

Board of Directors require a simple majority with more than half of thetwo years from the time they assume office. The terms of executive direc-

members of the Board in attendance.

tors and supervisory directors selected to fill a vacancy or because of an

The bylaws of NBF’s Board of Directors stipulate that executive andincrease in the number of directors expire at the same time as thesupervisory directors may not participate in decisions in which they have aremaining terms of their predecessors or the current directors. Both of thevested interest. Executive and supervisory directors with such financial

two executive directors and all four supervisory directors were elected atinterest shall not be included in the number of executive and supervisory

the General Meeting of Shareholders held on March 12, 2009, anddirectors in attendance for such decisions.

assumed office on March 17, 2009.

The terms of office of executive directors and supervisory directors are

NBF Report July-December 200825

Nippon Building Fund Management Ltd.

Management Structure

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

General Meeting of Unitholders
AuditorCompliance Committee

Matters Entrusted to

Board of Directors
Executive Board

Risk Management Board

Nippon Building Fund Management Ltd.

CEOAs the asset management company required by the Investment Trust

Investment
Review Board

Accounting Auditor

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

Compliance
Officer

Investment & FinanceGroup

Corporate Operation
Group

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

Real EstateManagement
Team

Real Estate
Investment
Team

Research
Team

FinancialTeam

Building Fund Management Ltd. also executes certain responsibilities in

Fund
Operation
Team

Corporate
Risk
Planning &Management
Administration & Compliance
Team
Team

connection with the operation of the General Meeting of Shareholders andthe Board of Directors as manager of general administration.

Building Fund Management Ltd. The heads of the Investment & FinanceGroup and the Corporate Operation Group also serve as directors, andManagement Structure ofoversee their respective divisions under the direction and oversight of the

Nippon Building Fund Management Ltd.

president. Corporate auditors conduct accounting audits and operational

The Board of Directors makes decisions on the basic management

audits of Nippon Building Fund Management Ltd. An internal audit unit

policies of Nippon Building Fund Management Ltd. and oversees execution

conducts internal audits covering the operations and departments ofof the duties of the representative director. The president, who is the rep-

Nippon Building Fund Management Ltd. at the request of the Board ofresentative director, supervises and executes the operations of Nippon

Directors.

Nippon Building Fund Management Ltd. Management Team
Name

Title

Career Summary

Koichi Nishiyama

President and CEO
and Representative
Director

April 1974
April 2000
Sept. 2000

Yasushi Nakayama

Director, Head ofInvestment& Finance GroupRiichi Morihiro

Director, Head ofCorporate Operation
Group

Hideharu Matsumoto
Masato Shikata
Noriaki Moromachi

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

Toru Suzuki

26 NBF Report July-December 2008

Aug. 2001
April 1981
April 2001
April 2006
April 2007
April 1978
Oct. 2002
April 2005
April 2006
March 2009
April 2009
April 2003

Joined Mitsui Fudosan Co., Ltd.
Manager of Building Fund Office, Building Division of Mitsui Fudosan
President and representative director of MF Asset Management Co., Ltd.
(now Nippon Building Fund Management Ltd.) (current position)
Became Executive Director of NBF (current position)
Joined Mitsui Fudosan Co., Ltd.
Head of Building Business Division, Building Department of Mitsui Fudosan
Manager of Building Department, Chiyoda Development Division of Mitsui Fudosan
Became Director of Nippon Building Fund Management Ltd. (current position)
Joined Sumitomo Life Insurance Company
Assistant Manager, Financial Corporation Division of Sumitomo Life Insurance
Director and Manager of Residential Planning Division, Eisen Realty Co., Ltd.
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Director of Nippon Building Fund Management Ltd. (current position)
Became Auditor of Nippon Building Fund Management Ltd. (current position)

April 2008

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

Management Team and Management Structure

The Asset Management Guidelines consist of management guidelines

Compliance Initiatives

for management, acquisition and sale of assets; financial guidelines for
The management of NBF and Nippon Building Fund Management Ltd.
conduct honest and appropriate business activities while maintaining rigorous compliance by adhering to all relevant laws and regulations, based

fund procurement and management policies; accounting guidelines for tax
accounting and dividend distribution policies; and guidelines on transactions with potential conflicts of interest.

on a high level of corporate ethics.
The bylaws of NBF’s Board of Directors stipulate that Board of
Directors meetings are to be held at least once every three months. In
practice, NBF holds such meetings once a month. At Board meetings,

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

executive directors report on their execution of their duties and supervisory
directors ensure that oversight and check-and-balance systems are functioning properly.
Nippon Building Fund Management Ltd. views compliance as a management strategy, with a fundamental compliance policy of conducting
operations honestly and fairly while maintaining a rigorous compliance

Nippon Building Fund Management Ltd. is constantly aware of its
accountability to NBF and NBF’s shareholders with regard to any transactions in which the interests of NBF and the interests of Nippon Building
Fund Management Ltd. and its related corporations or customers may conflict. Nippon Building Fund Management Ltd. follows voluntary rules stipulated in laws and internal bylaws to proactively prevent conflicts of interest.

system based on a high level of corporate ethics. Specifically, Nippon
Building Fund Management Ltd. has established a Compliance
Committee, consisting of the Compliance Officer, the president, the headof the Investment & Finance Group, the head of the Corporate Operation
Group and an outside committee member. Initiatives to enhance awareness of and adherence to compliance include the establishment ofCompliance Rules and a Compliance Manual. In addition, a Compliance
Program is formulated each year to verify the progress of the execution
plan for that year and identify any problem areas.

Fundamental Policy on Conflict of Interest Transactions

All decisions made in executing the management of NBF’s assets are
subject to the approval of the president, and are made after going throughdiscussions by the Investment Review Board and Executive Board of
Nippon Building Fund Management Ltd. Sponsor companies are not permitted to intervene in the decision-making process.
■Voluntary Rules for Conflict of Interest Transactions
Stipulated in Internal Bylaws

Nippon Building Fund Management Ltd. has set voluntary rules in its
internal bylaws to address transactions with parties, including sponsor
companies that have interests in Nippon Building Fund Management Ltd.

Risk Management System
NBF and Nippon Building Fund Management Ltd. have established thefollowing risk management system to avoid and minimize risks related toinvestments.
■

NBF

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

Nippon Building Fund Management Ltd.

Nippon Building Fund Management Ltd. formulates a Management
Policy, a Medium-to-Long-Term Asset Management Policy and an Annual
Management Plan to follow in managing NBF’s assets. In addition, Nippon
Building Fund Management Ltd. has set Asset Management Guidelines as

The voluntary rules require the Investment Division, which initiates thetransaction, as well as the Compliance Department, the AssetManagement Examination Meeting and other units to protect NBF’s managed assets and profits by fully examining the transaction contents
according to the voluntary rules set in the internal bylaws in the event of atransaction in which the interests of Nippon Building Fund Management
Ltd. and parties that have interests in Nippon Building Fund Management
Ltd. may conflict with the interests of NBF. These rules are designed fromthe standpoint of accountability to NBF and its shareholders.
In examining the transaction contents, Nippon Building FundManagement Ltd. solicits the opinions of attorneys, certified tax accountants and other third-party experts as needed. In addition, when purchasing real estate or other assets from parties that have interests in Nippon
Building Fund Management Ltd., the purchase price is strictly set, in principle no higher than the appraised value according to a real estateappraiser with no vested interest.

a set of standards to follow.

NBF Report July-December 200827

Management’s Discussion and Analysis
Summary of Selected Financial Data
15th Period
from July 1, 2008 to
December 31, 2008

14th Period
from January 1, 2008 toJune 30, 2008

13th Period
from July 1, 2007 to
December 31, 2007

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

Operating revenues
Note 2
Revenue from property leasing
Revenue from capital gain
Operating expenses
Rental expenses
Income before income taxes
Net income(a)Funds from operations
Note 3
Net operating income from property leasing activities Note 3
Total amount of cash distribution(b)
Depreciation and amortization
Capital expenditures
Total assets(c)Interest-bearing debt
Net assets(d)Total number of common shares issued (shares)(e)
Net assets per share (Yen)(d) / (e)Distribution per share (Yen)(b) / (e)Funds from operations per share (Yen)
Note 3
ROA
Note 3(Annual rate)
ROE
Note 3(Annual rate)
LTV (Loan to value)
Note 3
Capital ratio(d) / (c)Payout ratio(b) / (a) Note 4
Number of days
Number of investment properties
Note 5
Number of tenants
Note 5
Total rentable area (m2)Occupancy rate
Note 5¥ 31,218
31,218—
16,627
15,22812,062
12,061
17,417
21,346
12,0615,356
2,146
766,249
318,500
398,237
542,000
734,753
22,252
32,134
1.6%(3.2%)
3.0%(6.1%)
45.5%
52.0%
99.9%
184
60
946
763,658
96.8%¥ 30,088
29,220868
15,55914,178
12,223
12,222
16,63020,318
12,222
5,276
1,620
725,627
280,500
398,398
542,000
735,050
22,54931,066
1.7%(3.5%)
3.2%(6.5%)
42.8%
54.9%
99.9%
182
58
931
750,701
97.4%¥ 27,814
27,814—
15,357
14,077
10,227
10,226
15,39418,905
10,226
5,168
1,193
672,195
272,500
356,672
508,000
702,110
20,12930,3031.5%(3.0%)
2.9%(5.7%)
44.3%
53.1%
99.9%
184
56
897
692,286
98.6%

15th Period
from July 1, 2008 to
December 31, 2008
U.S. dollars in thousands
except per share data (Note 1)$ 343,851
343,851—
183,140
167,732
132,853
132,841
191,835
235,113
132,840
58,994
23,6268,439,794
3,508,096
4,386,349
—
8,093
245
354

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥90.79 = U.S. $1.00, the approximate exchange rate on December 31, 2008.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses after ROA and ROE are annualized based on the 6-month figures for the period.
Funds from operations: Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Funds from operations per share: (Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization) / Weighted average
number of common shares issued and outstanding during the period.
ROA: Income before income taxes / (Initial total assets + Total assets at end of period) ÷ 2
ROE: Net income / (Initial net assets + Net assets at end of period) ÷ 2
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
4. Payout ratio figures are calculated to one decimal place only.
5. Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number of tenants by building. Occupancy rate is the ratio of grossleased area to total rentable area at the end of the period.

28 NBF Report July-December 2008

Operating Environment and Results
During the six months ended December 31, 2008, Japan’s economy weakened further due to the impact on corporate profits, capital
investment trends and consumer spending of turmoil in global financial markets stemming from the U.S. subprime mortgage crisis andsubstantial volatility in stock and currency markets.
The office building leasing market began to weaken with signs of a decrease in the overall occupancy rate, which had remained at ahigh level for several years, amid increasing uncertainty about the outlook for the Japanese economy.
In the real estate acquisition market, demand slackened due to changes in the environment for fund raising including a more cautious
stance by financial institutions toward financing, particularly following the collapse of Lehman Brothers in September 2008.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality office buildings that are highly competitive in terms of their location, size, facilities and infrastructure and are expected to have relatively stable cash
flow from rents based on excellent tenants.
During the 15th Period, NBF made the most of its accumulated expertise and original information channels such as the Mitsui FudosanGroup to conduct rigorous screening of information and careful deliberation in accordance with this policy. As a result, in July 2008 NBF
acquired the Shibakouen Takahashi Building (acquisition price: ¥6,100 million), and in August 2008 it acquired the NBF Minami-Aoyama
Building (acquisition price: ¥31,000 million) and decided to acquire the Higashi-Ueno 4-chome Building (tentative name) (acquisition price:¥11,175 million, scheduled date of transfer: April 2010).
For its portfolio properties, NBF worked to expand internal growth by conducting property management, scheduled renovations andnew construction of facilities to increase tenant satisfaction. At the same time, NBF further strengthened profitability by maintaining asound grasp of the market, setting rent for new tenants and revising rents for existing tenants who renewed their lease contracts.
As a result of these efforts, NBF’s real estate portfolio as of December 31, 2008 totaled 60 buildings. Total investment on an acquisition price basis was ¥762,349 million. Total rentable area was 763,658 m2 (231,006 tsubo). The occupancy rate declined 0.6 percentage
points from June 30, 2008 to 96.8 percent. Tenants totaled 946.

Total investment
December 31,
2008(Yen in billions)¥794.4 billion(contract completed)*

Occupancy rate
December 31,
2008

June 30,
2008

June 30,
2008

December 31,
2007

December 31,
2007

June 30,
2007

June 30,
2007

December 31,
2006

December 31,
2006

June 30,
2006

June 30,2006
0

100 200 300 400 500 600 700 800 900(%)

090 91 92 93 94 95 96 97 98 99 100* Contract basis

NBF Report July-December 200829

Overview of Performance
Operating revenues for the six months ended December 31, 2008 increased 3.8 percent, or ¥1,130 million, compared with the previous
six-month period to ¥31,218 million. Operating revenues increased due to new occupancy in properties acquired during the 15th Period andother factors, although ¥868 million from the sale of properties recorded in the previous six-month period did not recur. Operating income
increased 0.4 percent, or ¥62 million, to ¥14,591 million. Net income decreased 1.3 percent, or ¥161 million, to ¥12,061 million. Distribution
per share decreased ¥297 to ¥22,252.

Operating revenues(Yen in millions)

15th

Operating income from property
leasing activities(Yen in millions)

15th

PeriodPeriod14th
Period14th
Period13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period05,000 10,000 15,000 20,000 25,000 30,000 35,000

0

5,000

10,00015,00020,000Distribution for the Current Period
Distribution per share for the current period was ¥22,252. NBF expected to distribute almost all taxable income for the current period
to be eligible for special tax treatment (Special Taxation Measures Law of Japan Article 67-15) that allows NBF to deduct its cash dividends of profits from taxable income.
For the six months ended
December 31, 2008

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007

(Yen in thousands, except per share amounts)

Retained earnings
Undistributed earnings
Total cash distribution(Cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash distribution in excess of accumulated earnings(Per share)¥12,060,900
316
12,060,584
22,252
12,060,584
22,252——¥12,221,797
239
12,221,558
22,54912,221,558
22,549——¥10,225,655
123
10,225,532
20,12910,225,532
20,129——Note: Above cash distributions were paid after the period end.

Total cash distribution

Distribution per share
15th
Period(Yen in millions)

(Yen)

15th
Period14th

14th
PeriodPeriod13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th

10th
PeriodPeriod0

5,000

10,00015,00030 NBF Report July-December 2008

20,00025,000

0

5,000

7,500

10,00012,500Management’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of December 31, 2008, total assets increased ¥40,622 million to ¥766,249 million compared with June 30, 2008. Return on average total assets (ROA) for the six months ended December 31, 2008 decreased to 1.62 percent from 1.75 percent for the previous sixmonth period.
Current assets increased ¥5,649 million to ¥38,547 million compared with June 30, 2008. Investment properties increased ¥34,979
million to ¥723,336 million compared with June 30, 2008.

Liabilities
Current liabilities increased ¥31,942 million to ¥86,230 million compared with June 30, 2008, primarily because of an increase in
short-term loans and long-term debt due within one year compared with June 30, 2008.
Long-term debt increased ¥8,000 million to ¥242,000 million compared with June 30, 2008.
As a result, total interest-bearing liabilities increased ¥38,000 million to ¥318,500 million compared to June 30, 2008. However, theratio of fixed-rate long-term debt to total interest-bearing liabilities decreased to 76.0 percent from 83.4 percent as of December 31,
2008. The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities plus deposits under management to total assets,
increased to 45.5 percent from 42.8 percent as of December 31, 2008.
In addition, NBF worked to diversify funding sources. In January 2007, NBF submitted a shelf registration to publicly offer up to ¥200
billion in bonds. As of December 31, 2008, NBF had issued bonds totaling ¥30 billion under this shelf registration.

Net Assets
Net assets decreased ¥161 million to ¥398,237 million compared with June 30, 2008.

Net assets

Total assets(Yen in millions)

15th(Yen in millions)

15th

PeriodPeriod14th
Period14th
Period13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th
Period10th
Period0400,000

600,000

800,0000

100,000

200,000

300,000

400,000

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 December 31, 2008, NBF had issued 542,000 common shares out of
2,000,000 total authorized shares. NBF’s common shares were listed on the J-REIT section of the Tokyo Stock Exchange in September
2001 upon the completion of a public offering. As the Investment Trust Law of Japan does not contain any provision for the issue of morethan one class of shares, NBF’s common shares comprise the sole class of shares authorized and issued by NBF.

NBF Report July-December 200831

Issue dateCommon shares outstanding
Increase
Balance(Shares)

Remarks

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

200

200

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

4,000

Paid-in capital
Increase

Balance

Notes(Yen in millions)

¥

100

¥

100

Note 1

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

Note 2
Note 3Note 4

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

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

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

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

Market Price of Shares
High/Low (closing price) of shares on the TSE:

High
Low

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen)

For the six months ended
December 31, 2007

¥1,330,000
689,000¥1,560,000
1,070,000¥1,790,000
1,340,000

Borrowings
Borrowings from financial institutions as of December 31, 2008 are shown below.
Short-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.0%
1.1%

January 30, 2009
April 30, 2009

1.0%
1.0%
1.1%
1.1%
1.1%
1.1%
1.1%
1.0%
1.1%
1.1%
1.2%
1.2%

January 30, 2009
January 30, 2009
January 30, 2009
May 29, 2009
January 30, 2009
June 26, 2009
January 30, 2009
February 27, 2009
February 27, 2009
February 27, 2009
January 30, 2009
April 30, 2009

Repayment
methodUse of
funds

Notes

(Yen in millions)

The Chuo Mitsui Trust and¥22,000
Banking Co., LIMITED
Mizuho Corporate Bank, Ltd.
8,000
The Sumitomo Trust and Banking
5,000
Company, Limited
Shinkin Central Bank
4,000
Mitsubishi UFJ Trust and Banking Corporation
3,000
The Chugoku Bank, Limited
3,000
THE KAGOSHIMA BANK, LTD.
2,000
The Hachijuni Bank, Ltd.
2,000
The Gunma Bank, Ltd.
2,000
The Yamanashi Chuo Bank, Ltd.
1,500
The Joyo Bank, Ltd.
1,000
THE SHIZUOKA BANK, LTD.
1,000
The Yamaguchi Bank, Ltd.
1,000

The Iyo Bank, Ltd.
Total short-term loans

1,000¥56,500

32 NBF Report July-December 2008

Bulletpayment(Note 2)

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

Management’s Discussion and Analysis

Long-term debt
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.8%
1.5%
1.8%
2.0%
2.4%
1.7%
2.1%
1.2%
2.1%
1.9%
1.7%
1.5%
2.3%
1.6%
1.2%
1.4%
1.5%
1.5%
1.8%
1.5%
1.7%
1.8%
1.6%
1.6%
2.0%
2.1%
2.2%
2.2%
1.2%
0.9%
0.8%
1.1%
1.8%
1.4%
1.2%
1.8%
2.0%
1.4%

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
July 16, 2009
July 19, 2011
February 3, 2010
May 23, 2018
May 23, 2016
June 1, 2011
September 11, 2015
May 30, 2016
March 30, 2011
March 30, 2009
December 30, 2011
June 30, 2009
April 30, 2013
June 27, 2013
December 28, 2012
February 13, 2012
March 30, 2012
November 1, 2012
December 13, 2013
May 30, 2013
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
October 30, 2009
April 1, 2010
October 19, 2010
June 27, 2013
December 30, 2011
February 3, 2010
March 30, 2012
October 31, 2014
October 4, 2013

1.6%
1.9%
1.2%
1.7%
2.1%
1.3%
1.5%
1.4%

September 30, 2013
July 12, 2012
February 12, 2010
December 15, 2014
July 11, 2014
September 9, 2011
February 7, 2012
December 2, 2013

Repayment
methodUse offunds

Bulletpayment(Note 2)

Notes

(Yen in millions)¥ 4,000
10,00010,00010,00010,000Sumitomo Life Insurance Company
5,000
5,000
3,000
7,000
5,000
Zenkyoren
1,000(The National Mutual Insurance
10,000Federation of Agricultural Cooperatives) 10,000
The Chuo Mitsui Trust and Banking
5,000
Co., LIMITED
1,000
10,000Sumitomo Mitsui Banking Corporation
1,000
5,000
5,000
4,000
MITSUI LIFE INSURANCE COMPANY, LIMITED 2,000
4,000
2,000
3,000
2,000
Meiji Yasuda Life Insurance Company
3,000
4,000
1,000
2,000
Nippon Life Insurance Company
3,000
2,000
2,000
Shinkin Central Bank
4,000
3,000
DAIDO LIFE INSURANCE COMPANY
2,000
1,000
1,000
1,000
Development Bank of Japan Inc.

The Sumitomo Trust andBanking Company, Limited
THE BANK OF FUKUOKA, Ltd.
TAIYO LIFE INSURANCE COMPANY

Resona Bank, Limited
Mizuho Corporate Bank, Ltd.
The Hachijuni Bank, Ltd.

Total long-term debt
Total borrowings (Note 4)

5,000
4,000
1,000
1,000
2,000
3,000
2,000
1,000
¥182,000¥238,500

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

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

NBF Report July-December 2008

33

(Yen in millions)

Amount Borrowed

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥12,000¥30,000¥24,000¥26,000

NBF Bonds
Issue date

Balance as ofDecember 31, 2008
(Yen in millions)

CouponNo. 3 Unsecured Bonds
No. 4 Unsecured Bonds

June 12, 2003
September 22, 2004

¥10,000
10,000

2.00%
1.04%

No. 5 Unsecured Bonds

September 22, 2004

10,0001.60%

No. 6 Unsecured Bonds
No. 7 Unsecured Bonds

March 9, 2005
November 9, 2005

10,00010,000

0.80%
1.85%

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

March 7, 2007
May 24, 2007
May 24, 2007

10,00010,00010,000

1.48%
1.74%
2.04%

Issue

Total (Note 6)

MaturitydateJune 12, 2018
September 22,
2009
September 22,
2011
March 9, 2010
November 9,
2015
March 7, 2012
May 23, 2014
May 24, 2017

Redemption

Use ofproceeds

Notes

Bullet payment
Bullet payment

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

Bullet payment

Note 1 Notes 2 and 4

Bullet payment
Bullet payment

Note 1 Notes 3 and 5
Note 1 Notes 3 and 5

Bullet payment
Bullet payment
Bullet payment

Note 1 Notes 3 and 5
Note 1 Notes 3 and 5
Note 1 Notes 3 and 5¥80,000

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

Amount Borrowed

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

10,00010,00010,00010,000—

Others
NBF had security deposits totaling ¥39,718 million as of December 31, 2008.

34 NBF Report July-December 2008

Management’s Discussion and Analysis

Capital Expenditures
Planning
As of December 31, 2008, 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 forconstruction, repair and renovation of facilities, a program of renewal construction is being implemented in order to increase competitive
power in the market as well as to increase the level of tenant satisfaction based on the results of tenant satisfaction surveys and neighboring competitive building specification surveys, etc.

Name of property

Objective

Estimated
duration

Total amounts

Estimated amounts
Payment for thecurrent period(from July 1, 2008
to December
31, 2008)(Yen in millions)

Cumulative
amount paid

NBF Ikebukuro Tower

Renovation of
HVAC equipment (1st Period)

From February 2009
to May 2009

¥78

¥—

¥—

NBF Ogawamachi Bldg.

Renovation of air
conditioning

From September 2009
to November 2009

60

¥—

¥—

NBF Ikebukuro Tower

Renovation of
HVAC equipment (2nd Period)

From September 2009
to November 2009

60

¥—

¥—

NBF Unix Bldg.

Renovation of central
monitoring facilities

From October 2009
to October 2009

48

¥—

¥—

Parale Mitsui Bldg.

Renovation of lighting
equipment (1st Period)

From July 2009
to September 2009

34

¥—

¥—

From April 2009
to May 2009

22

¥—

¥—

NBF Shijo Karasuma Bldg. Renovation of air conditioning(1st, 2nd, 3rd floor systems)

NBF Report July-December 200835

Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥2,146 million in capital expenditures together
with ¥829 million for repairs and maintenance expenses.
Name of property

Yokohama ST Bldg.
NBF Toyosu Canal Front.
Shinjuku Mitsui Bldg. No.2

Shin-Kawasaki Mitsui Bldg.

Aqua Dojima NBF Tower

GSK Bldg.

Shinanobashi Mitsui Bldg.

NBF Nihonbashi
Muromachi Center Bldg.
NBF Utsunomiya Bldg.

NBF Shijo Karasuma Bldg.

Other buildings

Objective

PeriodRenovation of exterior, upgrade air conditioning
equipment on 18th floor, OA flooring on 12th floor, etc.
Renovation of exterior, etc.
Updated building security equipment, renovationof drainpipes, renovation of all heat exchangeequipment on upper floors, etc.
Renovation of central monitoring equipment(2nd Period), overhaul of cold water pump,installation of openings to check for asbestos
Renovation of central monitoring facilities,
replacement of solution pump for ice thermal energy
storage unit, renovation to restore 3rd, 8th and 11th
floors to original condition
Installation of new main control panel,
expansion of rooftop drainage, furnishing ofreceiver for terrestrial digital broadcasts, etc.
Installation of security system, renovation of
emergency lighting, introduction of motion sensors
for emergency lighting, etc.
Renovation of bathrooms (3rd Period),renovation of elevator hall (2nd Period), restorationof lighting equipment in non-public areas (2nd Period)
Construction work on 3rd floor, repair outdoor
install automated door entrance, replaced air
compressor (2nd Period), repair outdoor electricalmachinery (2nd Period), etc.
Renovation of air conditioning (4th〜7th floors)
replacement of bathroom floor tiles on 2nd and5th floors, renovation of air conditioning on 1st floor
Asset preservation construction and other renewal
construction to improve tenant satisfaction

Expenditure(Yen in millions)

¥277
246
203

194

185

139
From July 2008
to December 2008

122

122

41

32

585

Total

¥2,146

Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements and repairs
and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of December 31, 2008

As of June 30, 2008
(Yen in millions)

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

¥ 948
2,463
2,555
¥ 856

¥ 538
2,717
2,307
¥ 948

Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF’s ownership interest; the amount of reserves attributable to other owners has been
excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management of properties, for the purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to ¥3,917 million as of December 31, 2008.

36 NBF Report July-December 2008

Management’s Discussion and Analysis

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen in millions)

For the six months ended
December 31, 2007

¥1,15434¥1,10932¥1,012
32

51
19
13
128
¥1,399

54
19
13
155
¥1,382

48
19
13
155
¥1,279Item

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

Note: In addition to the amounts stated above, there are asset management fees of ¥121 million for the period from July 1, 2008 to December 31, 2008 and ¥214 million for theperiod from January 1, 2008 to June 30, 2008 related to investment properties which were booked on each property.

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

Shibakouen Takahashi Bldg.
Otemachi Tatemono Aoyama Bldg.
Total

Date

Acquisition price (Note 1)

July 7, 2008
August 1, 2008

¥ 6,100
31,000¥37,100

Notes: 1. “Acquisition price” does not include national consumption tax, regional consumption tax and miscellaneous costs of acquisition.
2. The name of “Otemachi Tatemono Aoyama Bldg.” was changed to the “NBF Minami-Aoyama Bldg.” after delivery of the property.

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.

NBF Report July-December 200837

Management’s Discussion and Analysis

3. Transactions with Related Parties and Transactions with Major Shareholders of Asset Management Company(1) Ongoing Transactions
None. (No purchases, or sales or other transactions involving interested parties.)(2) Fees Paid for the Period from July 1, 2008 to December 31, 2008
Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Brokerage commission¥ 901

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

1,289

Leasing related service fees

60

2,746

Amount ofpayment (B)(Yen in millions)

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

¥

183
100
1,240
30
435
337
122
99
12
0
20
12

B/A
(Note 3)

20.3%
11.1%
96.2%
2.3%
15.8%
12.3%
4.4%
3.6%
0.5%
0.0%
33.4%
19.8%

Notes: 1. “Related parties” are defined as related parties of asset management companies under the asset management agreement with NBF as defined in Article 123 of Orderfor Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 27 of the Regulations regarding management report of
the Investment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset management companies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the 15th Period, transactions with and fees paid
to, Mitsui Fudosan Co., Ltd., Mitsui Fudosan Investment Advisors, Inc., NBF Office Management Co., Ltd., First Facilities Co., Ltd., First Facilities West Co., Ltd., Mitsui
Fudosan Building Management Co., Ltd., First Facilities Yokohama Co., Ltd., and Mitsui Fudosan Housing Lease Co., Ltd. are as described above.
2. Properties that have not entrusted office management businesses through such means as master leasing by Mitsui Fudosan Co., Ltd. (10 properties: Nishi-Shinjuku
Mitsui Bldg., Gate City Ohsaki, Naka-Meguro GT Tower, Toranomon Kotohira Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg., Parale Mitsui Bldg.,
Shinanobashi Mitsui Bldg., Sakaisuji-Honmachi Center Bldg. and Yotsuya Medical Bldg.) have entrusted them with NBF Office Management Co., Ltd. as business representative of the property owners or lessors. Moreover, NBF signed a contract with NBF Office Management on August 1, 2008, where the role of NBF Office Management
Co., Ltd. was changed from a business representative to a chief office manager for the 10 properties effective October 1, 2008.
3. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)First Facilities Co., Ltd.
Mitsui Fudosan Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Home Linkage Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.
NBF Office Management Co., Ltd.

38 NBF Report July-December 2008

¥417
376
289
191
2
1
0
0

Operating Environment and Results
During the six months ended December 31, 2008, Japan’s economy weakened further due to the impact on corporate profits, capital
investment trends and consumer spending of turmoil in global financial markets stemming from the U.S. subprime mortgage crisis andsubstantial volatility in stock and currency markets.
The office building leasing market began to weaken with signs of a decrease in the overall occupancy rate, which had remained at ahigh level for several years, amid increasing uncertainty about the outlook for the Japanese economy.
In the real estate acquisition market, demand slackened due to changes in the environment for fund raising including a more cautious
stance by financial institutions toward financing, particularly following the collapse of Lehman Brothers in September 2008.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality office buildings that are highly competitive in terms of their location, size, facilities and infrastructure and are expected to have relatively stable cash
flow from rents based on excellent tenants.
During the 15th Period, NBF made the most of its accumulated expertise and original information channels such as the Mitsui FudosanGroup to conduct rigorous screening of information and careful deliberation in accordance with this policy. As a result, in July 2008 NBF
acquired the Shibakouen Takahashi Building (acquisition price: ¥6,100 million), and in August 2008 it acquired the NBF Minami-Aoyama
Building (acquisition price: ¥31,000 million) and decided to acquire the Higashi-Ueno 4-chome Building (tentative name) (acquisition price:¥11,175 million, scheduled date of transfer: April 2010).
For its portfolio properties, NBF worked to expand internal growth by conducting property management, scheduled renovations andnew construction of facilities to increase tenant satisfaction. At the same time, NBF further strengthened profitability by maintaining asound grasp of the market, setting rent for new tenants and revising rents for existing tenants who renewed their lease contracts.
As a result of these efforts, NBF’s real estate portfolio as of December 31, 2008 totaled 60 buildings. Total investment on an acquisition price basis was ¥762,349 million. Total rentable area was 763,658 m2 (231,006 tsubo). The occupancy rate declined 0.6 percentage
points from June 30, 2008 to 96.8 percent. Tenants totaled 946.

Total investment
December 31,
2008(Yen in billions)¥794.4 billion(contract completed)*

Occupancy rate
December 31,
2008

June 30,
2008

June 30,
2008

December 31,
2007

December 31,
2007

June 30,
2007

June 30,
2007

December 31,
2006

December 31,
2006

June 30,
2006

June 30,2006
0

100 200 300 400 500 600 700 800 900(%)

090 91 92 93 94 95 96 97 98 99 100* Contract basis

NBF Report July-December 200829

Overview of Performance
Operating revenues for the six months ended December 31, 2008 increased 3.8 percent, or ¥1,130 million, compared with the previous
six-month period to ¥31,218 million. Operating revenues increased due to new occupancy in properties acquired during the 15th Period andother factors, although ¥868 million from the sale of properties recorded in the previous six-month period did not recur. Operating income
increased 0.4 percent, or ¥62 million, to ¥14,591 million. Net income decreased 1.3 percent, or ¥161 million, to ¥12,061 million. Distribution
per share decreased ¥297 to ¥22,252.

Operating revenues(Yen in millions)

15th

Operating income from property
leasing activities(Yen in millions)

15th

PeriodPeriod14th
Period14th
Period13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period05,000 10,000 15,000 20,000 25,000 30,000 35,000

0

5,000

10,00015,00020,000Distribution for the Current Period
Distribution per share for the current period was ¥22,252. NBF expected to distribute almost all taxable income for the current period
to be eligible for special tax treatment (Special Taxation Measures Law of Japan Article 67-15) that allows NBF to deduct its cash dividends of profits from taxable income.
For the six months ended
December 31, 2008

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007

(Yen in thousands, except per share amounts)

Retained earnings
Undistributed earnings
Total cash distribution(Cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash distribution in excess of accumulated earnings(Per share)¥12,060,900
316
12,060,584
22,252
12,060,584
22,252——¥12,221,797
239
12,221,558
22,54912,221,558
22,549——¥10,225,655
123
10,225,532
20,12910,225,532
20,129——Note: Above cash distributions were paid after the period end.

Total cash distribution

Distribution per share
15th
Period(Yen in millions)

(Yen)

15th
Period14th

14th
PeriodPeriod13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th

10th
PeriodPeriod0

5,000

10,00015,00030 NBF Report July-December 2008

20,00025,000

0

5,000

7,500

10,00012,500Management’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of December 31, 2008, total assets increased ¥40,622 million to ¥766,249 million compared with June 30, 2008. Return on average total assets (ROA) for the six months ended December 31, 2008 decreased to 1.62 percent from 1.75 percent for the previous sixmonth period.
Current assets increased ¥5,649 million to ¥38,547 million compared with June 30, 2008. Investment properties increased ¥34,979
million to ¥723,336 million compared with June 30, 2008.

Liabilities
Current liabilities increased ¥31,942 million to ¥86,230 million compared with June 30, 2008, primarily because of an increase in
short-term loans and long-term debt due within one year compared with June 30, 2008.
Long-term debt increased ¥8,000 million to ¥242,000 million compared with June 30, 2008.
As a result, total interest-bearing liabilities increased ¥38,000 million to ¥318,500 million compared to June 30, 2008. However, theratio of fixed-rate long-term debt to total interest-bearing liabilities decreased to 76.0 percent from 83.4 percent as of December 31,
2008. The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities plus deposits under management to total assets,
increased to 45.5 percent from 42.8 percent as of December 31, 2008.
In addition, NBF worked to diversify funding sources. In January 2007, NBF submitted a shelf registration to publicly offer up to ¥200
billion in bonds. As of December 31, 2008, NBF had issued bonds totaling ¥30 billion under this shelf registration.

Net Assets
Net assets decreased ¥161 million to ¥398,237 million compared with June 30, 2008.

Net assets

Total assets(Yen in millions)

15th(Yen in millions)

15th

PeriodPeriod14th
Period14th
Period13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th
Period10th
Period0400,000

600,000

800,0000

100,000

200,000

300,000

400,000

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 December 31, 2008, NBF had issued 542,000 common shares out of
2,000,000 total authorized shares. NBF’s common shares were listed on the J-REIT section of the Tokyo Stock Exchange in September
2001 upon the completion of a public offering. As the Investment Trust Law of Japan does not contain any provision for the issue of morethan one class of shares, NBF’s common shares comprise the sole class of shares authorized and issued by NBF.

NBF Report July-December 200831

Issue dateCommon shares outstanding
Increase
Balance(Shares)

Remarks

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

200

200

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

4,000

Paid-in capital
Increase

Balance

Notes(Yen in millions)

¥

100

¥

100

Note 1

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

Note 2
Note 3Note 4

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

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

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

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

Market Price of Shares
High/Low (closing price) of shares on the TSE:

High
Low

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen)

For the six months ended
December 31, 2007

¥1,330,000
689,000¥1,560,000
1,070,000¥1,790,000
1,340,000

Borrowings
Borrowings from financial institutions as of December 31, 2008 are shown below.
Short-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.0%
1.1%

January 30, 2009
April 30, 2009

1.0%
1.0%
1.1%
1.1%
1.1%
1.1%
1.1%
1.0%
1.1%
1.1%
1.2%
1.2%

January 30, 2009
January 30, 2009
January 30, 2009
May 29, 2009
January 30, 2009
June 26, 2009
January 30, 2009
February 27, 2009
February 27, 2009
February 27, 2009
January 30, 2009
April 30, 2009

Repayment
methodUse of
funds

Notes

(Yen in millions)

The Chuo Mitsui Trust and¥22,000
Banking Co., LIMITED
Mizuho Corporate Bank, Ltd.
8,000
The Sumitomo Trust and Banking
5,000
Company, Limited
Shinkin Central Bank
4,000
Mitsubishi UFJ Trust and Banking Corporation
3,000
The Chugoku Bank, Limited
3,000
THE KAGOSHIMA BANK, LTD.
2,000
The Hachijuni Bank, Ltd.
2,000
The Gunma Bank, Ltd.
2,000
The Yamanashi Chuo Bank, Ltd.
1,500
The Joyo Bank, Ltd.
1,000
THE SHIZUOKA BANK, LTD.
1,000
The Yamaguchi Bank, Ltd.
1,000

The Iyo Bank, Ltd.
Total short-term loans

1,000¥56,500

32 NBF Report July-December 2008

Bulletpayment(Note 2)

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

Management’s Discussion and Analysis

Long-term debt
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

1.8%
1.5%
1.8%
2.0%
2.4%
1.7%
2.1%
1.2%
2.1%
1.9%
1.7%
1.5%
2.3%
1.6%
1.2%
1.4%
1.5%
1.5%
1.8%
1.5%
1.7%
1.8%
1.6%
1.6%
2.0%
2.1%
2.2%
2.2%
1.2%
0.9%
0.8%
1.1%
1.8%
1.4%
1.2%
1.8%
2.0%
1.4%

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
July 16, 2009
July 19, 2011
February 3, 2010
May 23, 2018
May 23, 2016
June 1, 2011
September 11, 2015
May 30, 2016
March 30, 2011
March 30, 2009
December 30, 2011
June 30, 2009
April 30, 2013
June 27, 2013
December 28, 2012
February 13, 2012
March 30, 2012
November 1, 2012
December 13, 2013
May 30, 2013
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
October 30, 2009
April 1, 2010
October 19, 2010
June 27, 2013
December 30, 2011
February 3, 2010
March 30, 2012
October 31, 2014
October 4, 2013

1.6%
1.9%
1.2%
1.7%
2.1%
1.3%
1.5%
1.4%

September 30, 2013
July 12, 2012
February 12, 2010
December 15, 2014
July 11, 2014
September 9, 2011
February 7, 2012
December 2, 2013

Repayment
methodUse offunds

Bulletpayment(Note 2)

Notes

(Yen in millions)¥ 4,000
10,00010,00010,00010,000Sumitomo Life Insurance Company
5,000
5,000
3,000
7,000
5,000
Zenkyoren
1,000(The National Mutual Insurance
10,000Federation of Agricultural Cooperatives) 10,000
The Chuo Mitsui Trust and Banking
5,000
Co., LIMITED
1,000
10,000Sumitomo Mitsui Banking Corporation
1,000
5,000
5,000
4,000
MITSUI LIFE INSURANCE COMPANY, LIMITED 2,000
4,000
2,000
3,000
2,000
Meiji Yasuda Life Insurance Company
3,000
4,000
1,000
2,000
Nippon Life Insurance Company
3,000
2,000
2,000
Shinkin Central Bank
4,000
3,000
DAIDO LIFE INSURANCE COMPANY
2,000
1,000
1,000
1,000
Development Bank of Japan Inc.

The Sumitomo Trust andBanking Company, Limited
THE BANK OF FUKUOKA, Ltd.
TAIYO LIFE INSURANCE COMPANY

Resona Bank, Limited
Mizuho Corporate Bank, Ltd.
The Hachijuni Bank, Ltd.

Total long-term debt
Total borrowings (Note 4)

5,000
4,000
1,000
1,000
2,000
3,000
2,000
1,000
¥182,000¥238,500

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

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

NBF Report July-December 2008

33

(Yen in millions)

Amount Borrowed

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥12,000¥30,000¥24,000¥26,000

NBF Bonds
Issue date

Balance as ofDecember 31, 2008
(Yen in millions)

CouponNo. 3 Unsecured Bonds
No. 4 Unsecured Bonds

June 12, 2003
September 22, 2004

¥10,000
10,000

2.00%
1.04%

No. 5 Unsecured Bonds

September 22, 2004

10,0001.60%

No. 6 Unsecured Bonds
No. 7 Unsecured Bonds

March 9, 2005
November 9, 2005

10,00010,000

0.80%
1.85%

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

March 7, 2007
May 24, 2007
May 24, 2007

10,00010,00010,000

1.48%
1.74%
2.04%

Issue

Total (Note 6)

MaturitydateJune 12, 2018
September 22,
2009
September 22,
2011
March 9, 2010
November 9,
2015
March 7, 2012
May 23, 2014
May 24, 2017

Redemption

Use ofproceeds

Notes

Bullet payment
Bullet payment

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

Bullet payment

Note 1 Notes 2 and 4

Bullet payment
Bullet payment

Note 1 Notes 3 and 5
Note 1 Notes 3 and 5

Bullet payment
Bullet payment
Bullet payment

Note 1 Notes 3 and 5
Note 1 Notes 3 and 5
Note 1 Notes 3 and 5¥80,000

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

Amount Borrowed

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

10,00010,00010,00010,000—

Others
NBF had security deposits totaling ¥39,718 million as of December 31, 2008.

34 NBF Report July-December 2008

Management’s Discussion and Analysis

Capital Expenditures
Planning
As of December 31, 2008, 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 forconstruction, repair and renovation of facilities, a program of renewal construction is being implemented in order to increase competitive
power in the market as well as to increase the level of tenant satisfaction based on the results of tenant satisfaction surveys and neighboring competitive building specification surveys, etc.

Name of property

Objective

Estimated
duration

Total amounts

Estimated amounts
Payment for thecurrent period(from July 1, 2008
to December
31, 2008)(Yen in millions)

Cumulative
amount paid

NBF Ikebukuro Tower

Renovation of
HVAC equipment (1st Period)

From February 2009
to May 2009

¥78

¥—

¥—

NBF Ogawamachi Bldg.

Renovation of air
conditioning

From September 2009
to November 2009

60

¥—

¥—

NBF Ikebukuro Tower

Renovation of
HVAC equipment (2nd Period)

From September 2009
to November 2009

60

¥—

¥—

NBF Unix Bldg.

Renovation of central
monitoring facilities

From October 2009
to October 2009

48

¥—

¥—

Parale Mitsui Bldg.

Renovation of lighting
equipment (1st Period)

From July 2009
to September 2009

34

¥—

¥—

From April 2009
to May 2009

22

¥—

¥—

NBF Shijo Karasuma Bldg. Renovation of air conditioning(1st, 2nd, 3rd floor systems)

NBF Report July-December 200835

Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥2,146 million in capital expenditures together
with ¥829 million for repairs and maintenance expenses.
Name of property

Yokohama ST Bldg.
NBF Toyosu Canal Front.
Shinjuku Mitsui Bldg. No.2

Shin-Kawasaki Mitsui Bldg.

Aqua Dojima NBF Tower

GSK Bldg.

Shinanobashi Mitsui Bldg.

NBF Nihonbashi
Muromachi Center Bldg.
NBF Utsunomiya Bldg.

NBF Shijo Karasuma Bldg.

Other buildings

Objective

PeriodRenovation of exterior, upgrade air conditioning
equipment on 18th floor, OA flooring on 12th floor, etc.
Renovation of exterior, etc.
Updated building security equipment, renovationof drainpipes, renovation of all heat exchangeequipment on upper floors, etc.
Renovation of central monitoring equipment(2nd Period), overhaul of cold water pump,installation of openings to check for asbestos
Renovation of central monitoring facilities,
replacement of solution pump for ice thermal energy
storage unit, renovation to restore 3rd, 8th and 11th
floors to original condition
Installation of new main control panel,
expansion of rooftop drainage, furnishing ofreceiver for terrestrial digital broadcasts, etc.
Installation of security system, renovation of
emergency lighting, introduction of motion sensors
for emergency lighting, etc.
Renovation of bathrooms (3rd Period),renovation of elevator hall (2nd Period), restorationof lighting equipment in non-public areas (2nd Period)
Construction work on 3rd floor, repair outdoor
install automated door entrance, replaced air
compressor (2nd Period), repair outdoor electricalmachinery (2nd Period), etc.
Renovation of air conditioning (4th〜7th floors)
replacement of bathroom floor tiles on 2nd and5th floors, renovation of air conditioning on 1st floor
Asset preservation construction and other renewal
construction to improve tenant satisfaction

Expenditure(Yen in millions)

¥277
246
203

194

185

139
From July 2008
to December 2008

122

122

41

32

585

Total

¥2,146

Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements and repairs
and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of December 31, 2008

As of June 30, 2008
(Yen in millions)

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

¥ 948
2,463
2,555
¥ 856

¥ 538
2,717
2,307
¥ 948

Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF’s ownership interest; the amount of reserves attributable to other owners has been
excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management of properties, for the purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to ¥3,917 million as of December 31, 2008.

36 NBF Report July-December 2008

Management’s Discussion and Analysis

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen in millions)

For the six months ended
December 31, 2007

¥1,15434¥1,10932¥1,012
32

51
19
13
128
¥1,399

54
19
13
155
¥1,382

48
19
13
155
¥1,279Item

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

Note: In addition to the amounts stated above, there are asset management fees of ¥121 million for the period from July 1, 2008 to December 31, 2008 and ¥214 million for theperiod from January 1, 2008 to June 30, 2008 related to investment properties which were booked on each property.

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

Shibakouen Takahashi Bldg.
Otemachi Tatemono Aoyama Bldg.
Total

Date

Acquisition price (Note 1)

July 7, 2008
August 1, 2008

¥ 6,100
31,000¥37,100

Notes: 1. “Acquisition price” does not include national consumption tax, regional consumption tax and miscellaneous costs of acquisition.
2. The name of “Otemachi Tatemono Aoyama Bldg.” was changed to the “NBF Minami-Aoyama Bldg.” after delivery of the property.

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.

NBF Report July-December 200837

Management’s Discussion and Analysis

3. Transactions with Related Parties and Transactions with Major Shareholders of Asset Management Company(1) Ongoing Transactions
None. (No purchases, or sales or other transactions involving interested parties.)(2) Fees Paid for the Period from July 1, 2008 to December 31, 2008
Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Brokerage commission¥ 901

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

1,289

Leasing related service fees

60

2,746

Amount ofpayment (B)(Yen in millions)

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

¥

183
100
1,240
30
435
337
122
99
12
0
20
12

B/A
(Note 3)

20.3%
11.1%
96.2%
2.3%
15.8%
12.3%
4.4%
3.6%
0.5%
0.0%
33.4%
19.8%

Notes: 1. “Related parties” are defined as related parties of asset management companies under the asset management agreement with NBF as defined in Article 123 of Orderfor Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 27 of the Regulations regarding management report of
the Investment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset management companies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the 15th Period, transactions with and fees paid
to, Mitsui Fudosan Co., Ltd., Mitsui Fudosan Investment Advisors, Inc., NBF Office Management Co., Ltd., First Facilities Co., Ltd., First Facilities West Co., Ltd., Mitsui
Fudosan Building Management Co., Ltd., First Facilities Yokohama Co., Ltd., and Mitsui Fudosan Housing Lease Co., Ltd. are as described above.
2. Properties that have not entrusted office management businesses through such means as master leasing by Mitsui Fudosan Co., Ltd. (10 properties: Nishi-Shinjuku
Mitsui Bldg., Gate City Ohsaki, Naka-Meguro GT Tower, Toranomon Kotohira Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg., Parale Mitsui Bldg.,
Shinanobashi Mitsui Bldg., Sakaisuji-Honmachi Center Bldg. and Yotsuya Medical Bldg.) have entrusted them with NBF Office Management Co., Ltd. as business representative of the property owners or lessors. Moreover, NBF signed a contract with NBF Office Management on August 1, 2008, where the role of NBF Office Management
Co., Ltd. was changed from a business representative to a chief office manager for the 10 properties effective October 1, 2008.
3. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)First Facilities Co., Ltd.
Mitsui Fudosan Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Home Linkage Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.
NBF Office Management Co., Ltd.

38 NBF Report July-December 2008

¥417
376
289
191
2
1
0
0

Financial Statements

NBF Report July-December 200839
39

Balance Sheets
NIPPON BUILDING FUND INC.
As of December 31, 2008 and June 30, 2008

As of
December 31, 2008

As ofJune 30, 2008
(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents
Tenant receivables
Consumption tax refund receivables and other current assets
Total current assets
Investment Properties:
Land including trust accounts (Note 4)
Buildings and improvements including trust accounts (Note 4)
Other tangible assets (Note 4)
Less: accumulated depreciation (Note 4)
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans (Note 6)Long-term debt due within one year (Note 6)
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term debt (Note 6)
Tenant security deposits
Other liabilities
Total Liabilities
Net Assets (Note 5)
Shareholders’ equity
Common shares, non-par value
Shares authorized: 2,000,000 shares
Shares issued and outstanding: 542,000 shares
Retained earnings
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these balance sheets.

40 NBF Report July-December 2008

¥ 37,576
412
559
38,547¥ 31,324
461
1,113
32,898459,488
270,386
7,760(49,959)
35,661
723,3364,366¥766,249

425,367
264,834
7,206(44,713)35,663688,357
4,372¥725,627¥ 56,500
20,000
4,014
3,774
1,942
86,230242,000
39,71864
368,012¥ 36,500
10,000
3,112
3,603
1,073
54,288234,000
38,882
59
327,229

386,176

386,176

12,061
398,237¥766,249

12,222
398,398¥725,627

Statements of Income
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2008, June 30, 2008 and December 31, 2007

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen in millions)

For the six months ended
December 31, 2007

¥28,069
3,149—
31,218¥26,708
2,512
868
30,088¥25,056
2,758—
27,814

4,030
2,247
37
829
2,729
5,356
1,154
245
16,627
14,59136(2,447)(27)—(91)
12,062(1)¥12,061

3,612
2,288
35
781
2,186
5,276
1,109
272
15,55914,52931(2,193)
(38)
(79)
(27)
12,223(1)¥12,222

3,613
2,157
34
721
2,384
5,168
1,012
268
15,357
12,45730(2,178)(47)—(35)
10,227(1)¥10,226

Revenues:
Rental (Note 7)
Other revenues related to property leasing (Note 7)
Gain on sale of investment properties (Note 8)
Total Revenues
Operating Expenses:
Property management fees (Note 7)
Real estate taxes (Note 7)
Insurance (Note 7)
Repairs and maintenance (Note 7)
Other rental expenses (Note 7)
Depreciation and amortization (Note 7)
Asset management fees
Other expenses
Total Operating Expenses
Operating Income
Interest income
Interest expense
Amortization of bond issue costs
New investment shares issue costs
Other expenses, net
Income before Income Taxes
Current and deferred income taxes (Note 9)
Net Income
The accompanying notes to financial statements are an integral part of these statements.

NBF Report July-December 2008

41

Statements of Shareholders’ Equity
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2008, June 30, 2008 and December 31, 2007

(Yen in millions)

Balance as of June 30, 2007
Cash dividends declared
Net income
Balance as of December 31, 2007

Number ofCommonSharesCommonSharesRetained
Earnings

Total

508,000¥346,446¥ 10,063¥356,509————(10,063)
10,226(10,063)
10,226

508,000

346,446

10,226356,672

Cash dividends declaredIssuance of new shares through public offering
as of February 4, 2008——

(10,226)(10,226)

31,80037,159—37,159Issuance of new shares through allocation to a third party
as of March 4, 2008

2,200

2,571

—

2,571

—

—

12,222

12,222542,000

386,176

12,222

398,398————(12,222)
12,061(12,222)
12,061

542,000¥386,176¥ 12,061¥398,237

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

42 NBF Report July-December 2008

Statements of Cash FlowsNIPPON BUILDING FUND INC.
For the six months ended December 31, 2008, June 30, 2008 and December 31, 2007

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen in millions)

For the six months ended
December 31, 2007

¥ 12,062
5,356
27
2,447
49
901
171
—
(2,385)510908
20,046¥ 12,223
5,276
38
2,193
(137)
100
393
4,080
(2,200)(510)(893)
20,563¥ 10,227
5,168
47
2,178
185
(247)
29
—
(2,194)190
797
16,381(40,374)
3,133(2,296)(10)(28)(39,575)(57,893)
6,615(2,581)(3)(184)(54,046)(1,523)2,014(1,681)(2)(131)(1,323)20,00026,000(8,000)——(12,219)
25,781
6,252
31,324¥ 37,576(2,000)21,000(15,000)
39,649—(10,223)
37,426
3,943
27,381¥ 31,324(3,000)11,000(17,000)—(0)(10,060)(19,060)(4,002)
31,383¥ 27,381

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

NBF Report July-December 200843

Notes to Financial Statements
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2008, June 30, 2008 and December 31, 2007

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, or the Investment Trust Law of Japan with Mitsui Fudosan Co., Ltd., The Chuo Mitsui
Trust and Banking Co., Ltd., and Nippon Building Fund Management Ltd. (hereinafter “NBFM”) acting as sponsors. Registration with the Kanto
Local Finance Bureau of the Ministry of Finance was completed on May 10, 2001 and NBF started acquisition of office properties on May 23,
2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset management company, isengaged in acquiring, managing, leasing, and renovating office properties. Mitsui Fudosan Co., Ltd. currently owns 43% of NBFM while
Sumitomo Life Insurance Company owns 35% and the remaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering of common shares. Those common shares are listed on the J-REIT section of the Tokyo Stock Exchange.
As of December 31, 2008, NBF had ownership or beneficiary interests in 60 office properties containing approximately 763,658 rentable
square meters of office space. As of December 31, 2008, NBF had leased office space to 946 tenants engaged in a variety of businesses. The
occupancy rate for the office properties was approximately 96.8%.

Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in the Investment Trust Law ofJapan and the Japanese Financial Instruments and Exchange Law and its 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 of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English from the financial statements of NBF preparedin 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 notrequired for fair presentation, is not presented in the accompanying financial statements. NBF does not prepare consolidated financial statements, as NBF has no subsidiaries.

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

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

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

44 NBF Report July-December 2008

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

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

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

New Investment Shares Issue Cost
The issue costs of new investment shares 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 the purchase 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 ¥68 million for the period ended
December 31, 2008 and ¥205 million for the period ended June 30, 2008 and ¥28 million for the period ended December 31, 2007.

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 is recognized monthly as it is earned. Common area charges provided for in tenant leases are recognized as income when earned and their amounts can be reasonably estimated.

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

Reclassifications
Certain reclassifications have been made to prior periods’ financial statements to conform with the presentation used for the period ended
December 31, 2008.

Finance Leases
Finance leases that do not transfer ownership of the leased property to lessees are accounted for as operating leases under accounting
principles generally accepted in Japan.

NBF Report July-December 200845

Note 3 – Change in Accounting Policy
Application of Accounting Standard for Lease Transactions
The Accounting Standard for Lease Transactions (Accounting Standards Board of Japan Statement No. 13, revised March 30, 2007) and
the Guidance on Accounting Standard for Lease Transactions (Accounting Standards Board of Japan Guidance No. 16, revised March 30,2007) are applied from the period ended December 31, 2008. This had no effect on NBF’s income.

Note 4 – Schedule of Tangible Assets of Investment Properties
Tangible assets as of December 31, 2008 and June 30, 2008 consisted of the following:
As of December 31, 2008

As of June 30, 2008
(Yen in millions)

Acquisition
Costs

Book Value

Acquisition
Costs

—

¥203,056¥174,259

Accumulated
Depreciation

Book Value¥—¥174,259

Land¥203,056

Land in trust
Land including trust total

256,432
459,488——

256,432
459,488

251,108425,367——

251,108425,367

Buildings and improvements
Buildings and improvements in trust

136,550
133,836(16,960)(30,508)

119,590103,328

132,739
132,095(14,428)(28,095)

118,311104,000

Building and improvements
including those in trust
Structures
Machinery and equipment
Tools, furniture and fixtures
Structures in trust
Machinery and equipment in trust
Tools, furniture and fixtures in trust
Construction in process
Construction in process in trust

270,386
2,185
955
578
1,874
1,325
826
11
6

(47,468)
(568)
(313)
(211)
(439)
(567)
(393)
—
—

222,918
1,617
642
367
1,435
758
433
11
6

264,834
2,151
938
537
1,360
1,304
771
94
51

(42,523)
(487)
(271)
(177)
(388)
(519)
(348)
—
—

222,311
1,664
667
360
972
785
423
94
51

7,760

(2,491)

5,269

7,206

(2,190)5,016¥737,634¥(49,959)¥687,675¥697,407¥(44,713)¥652,694

Other tangible assets total
Total

46 NBF Report July-December 2008¥

Accumulated
Depreciation

Notes to Financial Statements

Note 5 – Net Assets
NBF issues only non-par value shares in accordance with the Investment Trust Law of Japan and all of the issue price of new shares isdesignated 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 annual interest rates on short-termloans outstanding are floating rates and on December 31, 2008 and June 30, 2008 ranged from 0.95% to 1.19% and from 0.86% to 1.12%,
respectively. Long-term debt is at fixed rates and as of December 31, 2008 and June 30, 2008 consisted of the following:
As of December 31, 2008

As of June 30, 2008
(Yen in millions)

Unsecured loans due 2009 to 2018 principally from banks and insurancecompanies with interest rates mainly ranging from 0.8% to 2.4%
1.04% unsecured bonds due 2009 (Note 1)
0.80% unsecured bonds due 2010 (Note 2)
1.60% unsecured bonds due 2011 (Note 1)
1.48% unsecured bonds due 2012 (Note 2)
1.74% unsecured bonds due 2014 (Note 2)
1.85% unsecured bonds due 2015 (Note 2)
2.04% unsecured bonds due 2017 (Note 2)
2.00% unsecured bonds due 2018 (Note 1)¥182,000
10,00010,00010,00010,00010,00010,00010,00010,000¥164,000
10,00010,00010,00010,00010,00010,00010,00010,000262,000

244,000

20,00010,000¥242,000¥234,000

Less: amount due within one year

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

The annual maturities of long-term loans as of December 31, 2008 were as follows:(Yen in millions)

2009
2010
2011
2012
2013
Thereafter¥10,000
12,00030,00024,00026,00080,000During the period ended December 31, 2008, NBF obtained committed credit lines of ¥30 billion with certain financial institutions to
reduce refinancing risk. The unused amount of such committed credit lines was ¥30 billion on December 31, 2008.

NBF Report July-December 200847

Note 7 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended December 31, 2008, June 30, 2008 and December 31, 2007 were as follows:

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

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen in millions)

For the six months ended
December 31, 2007

¥24,8833,060
126
28,069¥23,626
2,957
125
26,708¥22,157
2,776
123
25,056

599
147
2,032
324
47
3,149
31,218

589
149
1,657
54
63
2,512
29,220

574
134
1,850
141
59
2,758
27,814

4,030
2,247
829
37
2,729
5,356
15,228

3,612
2,288
781
35
2,186
5,276
14,178

3,613
2,157
721
34
2,384
5,168
14,078¥15,990¥15,042¥13,736

Note 8 – Gain on Sale of Investment Properties
Gain on sale of investment properties for the period ended June 30, 2008 was as follows:

Daido Life Omiya Building
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Gain on sale of investment property(Yen in millions)

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

48 NBF Report July-December 2008

¥2,707
2,191
84
¥ 432

¥2,400
1,889
75
¥ 436

Notes to Financial Statements

Note 9 – Income Taxes
NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income based on applicable Japanese tax law was 0.01% for theperiods ended December 31, 2008, June 30 2008 and December 31, 2007. The following table summarizes the significant differences
between the statutory tax rates and NBF’s effective tax rates for financial statement purposes.

Statutory effective tax rate
Deductible dividends paid
Others
Effective tax rate

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007

39.39%(39.39)0.01
0.01%

39.39%(39.39)0.01
0.01%

39.39%(39.39)0.01
0.01%

NBF was established as an investment corporation under the Investment Trust Law of Japan, and as long as an investment corporation distributes to its shareholders at least 90% of taxable income for a period and other requirements prescribed in Japanese tax regulations aremet, the investment corporation is allowed to deduct the total amount of dividends paid in calculating its taxable income under Japanese tax
regulations.

Note 10 – Change In Tax Rate
The statutory tax rate was revised due to a change in corporate business tax rate and the creation of local corporate special tax, which iseffective for fiscal years beginning on or after October 1, 2008. As a result, the tax effect of the temporary differences as of December 31,
2008, which are expected to reverse in January 2009 or thereafter, was calculated using the revised statutory tax rate of 39.33%. Thischange had no material effect on the value of deferred tax assets as of December 31, 2008.

Note 11 – Per Share Information
Information about earnings per share for the periods ended December 31, 2008, June 30, 2008 and December 31, 2007 and net assets
per share as of December 31, 2008, June 30, 2008 and December 31, 2007 were as follows.
The computation of earnings per share is based on the weighted average number of common shares outstanding during the period. The
computation of net assets per share is based on the number of common shares outstanding at each period end.

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

Net Assets per Share

For the six months ended
December 31, 2008

For the six months ended
June 30, 2008
(Yen)

For the six months ended
December 31, 2007

¥22,252¥22,831¥20,129542,000

535,298

508,000

As of December 31, 2008

As of June 30, 2008

As of December 31, 2007

¥734,753¥735,050¥702,110NBF Report July-December 200849

Note 12 – Leases
Under Japanese accounting standards for leases, finance leases that have been deemed to transfer ownership of the leased property to
the lessee (“ownership-transfer finance leases”) are capitalized by the lessee, while other finance leases (“non-ownership-transfer financeleases”) are permitted to be accounted for as operating lease transactions.
NBF treats all non-ownership-transfer finance leases as operating leases. Accordingly, leased assets with respect to non-ownership-transfer
finance leases where NBF is the lessee are not recognized in the accompanying balance sheets and lease payments are charged to income
when incurred.

As Lessee
Pro forma information of non-ownership-transfer finance leases contracted as a lessee, such as acquisition cost and related accumulated
depreciation of leased assets, obligation under finance leases and depreciation expense of finance leases, which is required under Japanese
accounting standards for leases for the six months ended December 31, 2008 and June 30, 2008 is summarized as follows:(Tools, furniture and fixtures)
As of December 31, 2008
As of June 30, 2008
(Yen in thousands)

Acquisition cost
Accumulated depreciation
Net book value———¥3,027
2,926
101

Obligations under finance leases as of December 31, 2008 and June 30, 2008 are as follows:
As of December 31, 2008
As of June 30, 2008
(Yen in millions)Due within one year
Due after one year
Total

—
—
—

¥ 1
—
¥ 1

The amount of obligations under finance leases includes the imputed interest expense portion.

As Lessor
NBF leases some of its investment properties to outside parties under non-cancelable operating leases. As of December 31, 2008 andJune 30, 2008 future minimum rental revenues under the non-cancelable operating leases are as follows:
As of December 31, 2008
As of June 30, 2008
(Yen in millions)Due within one year
Due after one year
Total

¥12,293
14,596¥26,889

Note 13 – Transactions with Related Parties(July 1, 2008 - December 31, 2008)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Subsidiaries
None applicable.

50 NBF Report July-December 2008

¥12,208
18,220¥30,428

Notes to Financial Statements(3) Sister Companies
None applicable.
(4) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,274(Notes 2 and 4)

Accounts
payable¥406(Note 4)¥2(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is subject to the conditions set forth in the by-laws of NBF.
2. The amount of asset management fees includes ¥121 million for management related to acquisition of properties included in the book value of each investment property, etc.
3. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is set forth in the “General Administration Agreement relating toOrganizational Management” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

Additional Information
The Accounting Standard for Related Party Disclosures (Accounting Standards Board of Japan Statement No. 11, released October 17, 2006)
and the Guidance on Accounting Standard for Related Party Disclosures (Accounting Standards Board of Japan Guidance No. 13, released
October 17, 2006) are applied from the period ended December 31, 2008.
This caused no change to the scope of disclosure.

(January 1, 2008 - June 30, 2008)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,322(Notes 2 and 4)

Accounts
payable¥408(Note 4)¥2(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is subject to the conditions set forth in the by-laws of NBF.
2. The amount of asset management fees includes ¥214 million for management related to acquisition of properties included in the book value of each investment property, etc.
3. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is set forth in the “General Administration Agreement relating to Organizational Management” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

(3) Subsidiaries
Not applicable, because the Company has no subsidiaries in which it has invested.
(4) Sister Companies
None applicable.

Note 14 – Significant Subsequent Events
None applicable.

NBF Report July-December 200851

Independent Auditors’ Report

To the Board of Directors of
Nippon Building Fund Inc.:

We have audited the accompanying balance sheets of Nippon Building Fund Inc. (a Japanese Real Estate
Investment Trust) as of December 31, 2008 and June 30, 2008, and the related statements of income, shareholders’ equity and cash flows for each of the six months ended December 31, 2008, June 30, 2008 andDecember 31, 2007 expressed in Japanese yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to independently express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Nippon Building Fund Inc. as of December 31, 2008 and June 30, 2008, and the results of its operations and its cash flows for each of the six months ended December 31, 2008, June 30, 2008 and December
31, 2007 in conformity with accounting principles generally accepted in Japan.

Tokyo, Japan
March 27, 2009

52 NBF Report July-December 2008

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

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

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

and undertakes management of the institutions of NBF. As of December

equivalent to the total amount of the acquisition price of said Real31, 2008, NBFM has been entrusted as an asset management company

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

only by NBF.

and in the event of the simultaneous acquisition of multiple units of RealAs of the same date, NBFM has paid-in capital of ¥495 million. There

Estate, etc., the acquisition price of each item; provided, however, thatis no capital relationship with NBF. Koichi Nishiyama, President & CEO ofnational consumption tax, regional consumption tax and miscellaneous

NBFM, is concurrently an executive director of NBF.

costs of acquisition are excluded) multiplied by the following percentage
rates will, in principle, be payable; provided, however, that with the

Operation■

approval of the directors of NBF, compensation will be calculated within

Undertakes asset management of NBF pursuant to an Assetthe scope decided up to the following maximum rates.

Management Entrustment Agreement based on an entrustment from●

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

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

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

Investment Objects and Policies set forth therein.
■

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

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

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 ofincome before income taxes remaining after such loss has been covered) prior to deduction of Management Fees 2 as calculated on eachclosing date will be payable.

NBF Report July-December 200853

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited liability

As of December 31, 2008, the directors and corporate auditors ofcompany duly established under the laws of Japan. Major events in the

NBFM are as follows. The staff other than directors and auditors ofhistory of NBFM are as follows.

NBFM is comprised of 17 persons.

September 19, 2000 Established

Name of Directors and Auditors

November 17, 2000

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

Koichi Nishiyama

President & CEO (standing)

Yasushi Nakayama

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

Riichi Morihiro

Director, Head of Administration Group(standing)

Tamotsu Shinyama

Director

Hiroshi Matsumoto

Director

Noriaki Moromachi

Corporate Auditor

Toru Suzuki

Corporate Auditor

January 29, 2001

February 15, 2001

March 7, 2001

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

March 22, 2001

Increased capital from ¥100 million to ¥198 million

May 23, 2001

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

June 16, 2001

Increased capital from ¥198 million to ¥495 million

March 14, 2003

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

September 30, 2007

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

List of Shareholders (as of December 31, 2008)
Numberof Shares Owned

Percent

Mitsui Fudosan Co., Ltd.

4,257

43.0%

Sumitomo Life Insurance Company

Name

3,465

35.0

The Chuo Mitsui Trust andBanking Co., Ltd.

495

5.0

Sumitomo Mitsui Banking
Corporation

495

5.0

Daido Life Insurance Company

297

3.0

Mitsui Sumitomo InsuranceCo., Ltd.

297

3.0

Mitsui Mutual Life Insurance
Company297

3.0

Britel Fund Trustees Limited
Total

54 NBF Report July-December 2008

297

3.0

9,900

100.0%

Title

Outline of Financial Condition
An outline of the financial condition of NBFM is as follows.
Outline of principal assets and liabilities for the most recent fiscal year:
As of March 31, 2008

(Yen in thousands)

Total Assets¥2,030,749

Total Liabilities

350,604

Total Net Assets¥1,680,145

Profit and loss for the most recent fiscal year:
Year ended March 31, 2008

(Yen in thousands)

Operating Income¥2,308,792

Ordinary Profit

1,584,200

Net Income

964,493

Investment and Distribution Policies
Investment Policies of NBF
A. Basic Policies
NBF’s primary investment objective is to achieve sustainable growthin portfolio value and stable profits on a mid-term to long-term basis.
NBF achieves this objective by investing in real estate consisting ofbuildings primarily used for offices with their underlying land located in
the Tokyo Central Business Districts (hereinafter “CBDs”), Other Greater
Tokyo and Other Cities in Japan as well as securities, beneficiary certifi-

Area and Allocation Ratio

Area Analysis

Tokyo CBDs■

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

■

Relatively low yearly NOI yields. Relatively
high liquidity at the time of sales.

■

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

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

Other Greater Tokyo

hereinafter “Real Estate, etc.”) (“Investment Objectives and Policies,”

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

Articles of Incorporation). (Reference to: laws, legal documents, etc. used

Total of above two areas: 70% or morecates representing beneficial interests in trusts (hereinafter “beneficiary
certificates”) and other assets backed by office properties (collectively

as the basis or sources hereof are set forth in parenthesis herein.)
Other Cities

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

(1) Strategy for Creation of the Portfolio
The goal of the portfolio is to generate steady growth and stableprofits on a mid-term to long-term basis. The selection criteria of investment assets is based on the composition of investment assets in theportfolio and based on consideration of a quantitative proportion of theoffice stock located in the various regions of Japan.

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

■

Rent levels relatively low and vacancy rates
relatively high compared to Tokyo CBDs.

■

Also, scale of market is relatively small andgrowth rates relatively low.

■

Relatively high yearly NOI yields. Relatively
low liquidity at the time of sales.

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

(2) Acquisition Strategy
Ratio of Real Estate Assets
NBF will maintain ratios of 75% or more with respect to the

Area Diversification
The investment strategy of NBF divides the investment area into
three areas consisting of Tokyo CBDs, Other Greater Tokyo and Other
Cities in such manner that 70% or more of total investment assets(Real Estate, etc.) are allocated to Tokyo CBDs and Other Greater Tokyoand 30% or less to Other Cities. The purpose of this area diversification
is to mitigate cash flow risks such as earthquakes, risk of vacancies“Designated Real Estate Ratio.” As of June 30, 2008, NBF satisfied thecriteria.
■

The “Designated Real Estate Ratio” means the ratio of the total amountof Designated Real Estate to the total amount of Designated Assets
owned by NBF.

Note: Designated Real Estate includes real estate, real estate leasehold rights, superficies
and beneficiary certificates backed by real estate, land leasehold rights and superficies(as designated under Article 83.4.3.1 of the Special Taxation Measures Law of Japan).

and so forth.
The following table sets forth above said area diversification strategy.

Due Diligence
When investing in office properties, selections will be made throughcomprehensive research and analysis based on the forecast investment
yields resulting from their acquisition costs and their anticipated profits,
future prospects and stability of the area of location, availability of meas-

NBF Report July-December 200855

ures responding to risks of deterioration and obsolescence, insurability

Uncompleted or Unleasable Properties

and so forth. The details of the relevant criteria are set forth in the fol-

In principle, NBF acquires Real Estate, etc. which are leased/leasable

lowing table (“Investment Objectives and Policies,” Articles ofassets at the time of closing. NBF may acquire a property which is not

Incorporation).

yet leasable at the time of closing based on consideration of the impact

Though such consideration will involve the study of the criteria

on NBF’s asset management activities after taking into account theincluded in the following table, it is possible that when NBF acquires orinvestment amount, the date of completion or of becoming leasable,

intends to acquire operating assets, not all of the following criteria will

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

be satisfied.

amount of any such unleasable asset combined with the total contract

Item

Points to be reviewed

Scale of building■

Construction type andspecifications of facilities■

Earthquake resistance■

Measures regarding
status of legal title

■

●

●

Tenancy characteristics

Environmental;
condition of land, etc.

■■

amount of previously acquired unleasable assets (but excluding

Net rentable area, including net rentable areaof entire building and standard net rentablearea per floor. Desired total net rentable area
is 1,650m 2 (approximately 500 tsubo ) or
more. Standard net rentable area per floor is
330m2 (approximately 100 tsubo) or more.

unleasable assets which thereafter become operational) will not exceed

Building design and floor plan suitable forleasing, with divisibility, adequate ceilingheight, electrical service, HVAC equipment,etc.

and such building is leased or leasable. Properties which are owned by

Ensure that construction quality exceeds
earthquake standards (meaning those required
pursuant to the Building Standards Law asamended in 1981) or standards equivalent
thereto.

scale renovation of a building).

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

10% of the total assets indicated on the most recent balance sheet of
NBF. For this purpose, “leased/leasable assets” shall mean property withrespect to which the construction of the building has been completed
NBF and have become operational at some point shall be deemed“leasable” thereafter (including such cases as reconstruction or large-(3) Management and Disposition Policies
Regarding acquired operating properties, the goal is to obtain steady
growth of operating profits on a mid-term to long-term basis by planningto maintain and improve asset value and competitive ability throughinvestment in facilities and by expanding income (increasing rents, etc.,

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

increasing occupancy rates, extending the term of leases and rendering

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

NBF will, in principle, for the purpose of assuring stable income on a

Acceptable creditworthiness of tenants, purposes of use by tenants, configuration, andcondition of collectibility of rents, etc.
Absence of harmful substances such as
asbestos, (or countermeasures can be implemented for any such substances), non-existence of soil pollution, etc.

them more stable, etc.) and reducing property-related expenses.
mid-term to long-term basis, lease out all operating properties included
in operating assets (including installation of parking lots, billboards, etc.).
When conducting such leasing, security deposits, etc. and other similar
monies may be received and said monies will be managed in accordance with the requirements of “Investment Objectives and Policies” ofthe Articles of Incorporation (“Investment Objectives and Policies,”
Articles of Incorporation).
NBF is entitled to establish reserves for long-term renovations
required to maintain and enhance the value of operating properties,
reserves for payables, reserves for cash distributions and any other similar reserves, etc. (Articles of Incorporation).

Reserves for Long-Term Renovations
From the reserves set forth above, a portion corresponding to renovations, repairs and tenant improvements will be determined based on

56 NBF Report July-December 2008

Investment and Distribution Policies

renovation plans for each building. As of June 30, 2008, foreseen

prospects and stability of the area of location, risks of deterioration andreserves provided from January to December 2008 are as follows:

obsolescence of real estate and predicted costs thereof as well as the

Item

Reasoncomposition of the portfolio, etc. Sell/hold studies will be periodicallyReserves forlong-term renovations■

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

Average annual amount over an approximately 10-year period based on engineering
reports
Expenses of providing “free access floor” (orraised floor); expenses for other move-in construction costs (partitions, etc.)

Total Foreseen Amount: (annual basis) ¥3,079 million
Notes: 1. In addition to the above-mentioned amount, certain amounts are set aside as cash
reserves for renovation pursuant to the administrative rules of the buildings in which
NBF owns condominium interests, etc.
2. The amount of reserves set forth above is the total amount of reserves with respect
to the 58 properties owned by NBF as of June 30, 2008.

undertaken with respect to all operating properties (“Investment
Objectives and Policies,” Articles of Incorporation).

(4) Financial Policies
Issuance of Shares
NBF may issue shares in order to undertake acquisition and renovation and so forth of assets and to provide allowance for funds required
for working capital as well as for the repayment of debt (including security deposits, borrowings and repayment of obligations regarding NBF
bonds, etc.)

Debt Financing
Measures to Avoid Reductions and Fluctuations in
Operating Income

NBF may raise capital (including use of the call loan market) andissue bonds in order to undertake acquisition and renovation and so

In order to avoid large-scale reductions and fluctuations in operating

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

income due to fire damage, withdrawal of tenants and so forth, efforts,

capital as well as for the repayment of debt (including security deposits,

such as area diversification and obtaining adequate fire and casualty

borrowings and repayment of obligations regarding NBF bonds, etc.)

insurances, etc., will be exerted.

(“Investment Objectives and Policies,” Articles of Incorporation).

Appraisal Value, etc.

as specified in Article 2.3.1 of the Securities and Exchange Law ofBorrowings are limited to those from Qualified Institutional Investors
In the event that valuation of real estate, land leasehold rights andJapan, in case capital is borrowed. Further, the total limit on all suchsuperficies (including beneficiary certificates, securities and tokumei-

borrowings and issues of NBF bonds will be ¥1,000,000 million. Whenkumiai ownership interests, and other asset-backed instruments) is

undertaking borrowings or when issuing NBF bonds, NBF may provide

undertaken for the purpose of disclosure in Performance Information

operating assets as collateral (Articles of Incorporation).

Reports, etc., the value to be used for disclosure will, in principle, be theappraisal valuation provided by a certified real estate appraiser (Articles
of Incorporation).

Loan-to-Value Ratio
The ratio of the total amount of borrowings, issues of NBF bonds and

The appraisal value of property with respect to the period commenc-

lease deposits under management to the total amount of assets of NBF

ing on the acquisition thereof and ending on the date of disclosure of(Loan-to-Value ratio) is envisioned to be limited to 60%, but may tem-such value with respect to the next following closure of NBF’s account-porarily exceed 60% when acquiring certain assets, etc. (Long- and mid-ing term shall be the acquisition price of the said property (excluding

term operating asset management policy and annual management plan

miscellaneous acquisition costs, fixed assets tax, city-planning tax andestablished by the Asset Management Company).

consumption tax) as stated in the sale and purchase contract, etc. forthe said property.

Derivatives
In order to avoid risks of fluctuation in the prices of operating assets

Disposition

as well as risks of fluctuations in interest rates, futures transactions,

In disposing of individual operating properties, selections will be

option transactions, swap transactions and forward rate transactions

made through comprehensive research and analysis based on the fore-

with respect to Japanese interest rates may be undertaken (“Investment

casted income, actual and predicted fluctuations in asset value, futureObjectives and Policies,” Articles of Incorporation).

NBF Report July-December 200857

Distribution Policies of NBF
A. Distributions of Profits

depreciation for the period. NBF is entitled to make cash distributions ofA registered investment corporation may deduct its cash dividends ofthe amounts described below in excess of the Distributable Earnings in

profits from taxable income under Japanese tax regulations if it distrib-

the following cases; provided, however, that the maximum amount ofutes to its shareholders in excess of 90% of its taxable income andsuch distributions will be the amount set forth in the rules of thecomplies with other organizational and operational requirements. NBF

Investment Trusts Association of Japan (Article 14.2 of the Articles ofintends to make dividend distributions that ensure that NBF satisfies

Incorporation).

those requirements.

■

Amount determined by NBF as being eligible for the requirements of
the Special Taxation Treatment for Investment Corporations, in case

NBF will, in principle, effect distributions in accordance with the fol-of the Distributable Earnings being less than the Taxable Income

lowing policies (Articles of Incorporation).

Available for Dividends

Earnings Available for Distributions■

Amount determined by NBF not in excess of the amount of depreciation

NBF’s earnings available for distributions are based on accounting offor the current term less the amount of appropriate reserves for the cur-profits prepared in accordance with the Investment Trust Law and therent term, if NBF determines it appropriate considering trends in macro

Securities and Exchange Law of Japan and in conformity with generally

economic environments, real estate markets and leasing markets

accepted accounting principles in Japan.
The distributable amount which results from operation of managed
assets of NBF (hereinafter, “Distributable Amount”) shall be the amount

NBF’s Current Policy on Distributions in Excessof Profits

of profit (the amount of net assets on the balance sheet less the amountAs for cash distributions in excess of profits, as long as the currentof total expenses, capital surplus reserves and estimated or equivalentJapanese taxation treatment applicable to NBF’s shareholders in Japanvariances) calculated on each closing date in accordance with theto whom such distributions are paid requires them to calculate capital

Investment Trust Law of Japan and corporate accounting principles gen-gain or loss at the time of each distribution, NBF will not make distribu-

erally deemed to be fair and appropriate.

tions in excess of profits.
Notwithstanding the above, NBF may make distributions in excess of

Cash Distribution of Profits

profits in accordance with the distribution policies stated above in order

The amount of cash distributions will be determined by NBF, suchto meet “Requirement for Deduction from taxable income of Dividends ofamount being in excess of 90% of taxable income available for dividends

Profit, etc.,” and if such distributions in excess of profits are deemedof NBF set forth in Article 67-15 of the Special Taxation Measures Law

necessary by the Board of Directors of NBF.

of Japan (hereinafter “Taxable Income Available for Dividends”); provided, however, that the maximum amount of distributions will be theC. Method of Distributions

Distributable Amount. NBF has the right to allow for long-term reserve

Distributions will be made in cash, in principle, within three months

for repair, reserve for outstanding claims, reserve for distributions andfrom the closing date, to such shareholders or registered pledgees asother reserves and allowances similar thereto which are deemed neces-are listed or recorded in the latest Shareholder Registry as of the closing

sary for maintenance or appreciation of the assets of NBF.

date, in proportion to the number of shares owned by them (Articles ofIncorporation).

B. Distribution in Excess of Earnings
A registered investment corporation is allowed to distribute cash to

D. Prescription for Cash Distributions, etc.

its shareholders in excess of retained earnings under the Investment

NBF will be discharged from the obligation to pay distributions ofTrust Law of Japan, although the Investment Trusts Association of Japanprofits three calendar years from the date of commencing payment.

has established rules such that a corporate-style J-REIT may pay out theInterest will not accrue on unpaid distributions (Articles of Incorporation).

excess of retained earnings for the period up to a maximum of 60% of

58 NBF Report July-December 2008

Investment and Distribution Policies

Distribution Policies of NBF
The Investment Objectives of NBF specified in the Articles ofIncorporation are as follows.

(8) Beneficiary Certificates of Money Trust (limited to those the trust
assets of which are primarily invested and Managed Assets referred
to in paragraph (1) or (3) above; provided, however, that those thatare deemed securities are excluded).

A. Principal Investment Objectives among
Designated Assets
NBF will principally invest in the below-listed Designated Assets withthe objective of assuring steady growth and stable profits from theManaged Assets.
(1) Real estate, real estate leasehold interests and superficies.

B. Other Investment Objectives among
Designated Assets
NBF may, in the course of efficiently managing funds or in othercases as necessary, invest in the following Designated Assets.
(1) Bank deposits(2) Beneficiary Certificates backed by real estate, land leasehold rights
and superficies, including inclusive trusts consisting of funds appurtenant to real estate.
(3) Tokumei-kumiai ownership interests (provided, however, that this is(2) Call loans(3) Japanese Government Bonds, Notes and Bills(4) Regional Treasury Bonds, Notes and Bills

limited to those the assets of which are primarily invested and(5) Commercial Paper

Managed Assets principally referred to in paragraphs (1) and (2)(6) Designated Bonds of Special Purpose Companies (meaning thoseabove).
(4) Preferred Investment Certificates of Special Purpose Companies(meaning those specified in Article 2.1.5.3 of the Securities andExchange Law of Japan; provided, however, that this is limited tothose the assets of which are primarily invested and Managed Assets
principally referred to in paragraphs (1) and (2) above).

specified in Article 2.1.3.2 of the Securities and Exchange Law ofJapan; provided, however, that this is limited to asset-backed
securities principally referred to in paragraphs (1) and (2) of section(A) above).
(7) Monetary Claims (limited to those claims that are deemed
Designated Assets under the Investment Trust Law of Japan otherthan those referred to above).

(5) Special Purpose Beneficiary Certificates (meaning those specified in
Article 2.1.7.4 of the Securities and Exchange Law of Japan; provided,(8) Securities (other than those listed above or in section (A)).

however, that this is limited to those the assets of which are primarily(9) Rights to financial futures transactions (limited to those deemed

invested and Managed Assets principally referred to in paragraphs

Designated Assets under the Investment Trust Law of Japan).

(1) and (2) above).

(10) Rights to financial derivative transactions (limited to those deemed(6) Beneficiary Certificates of investment trusts (meaning those specified

Designated Assets under the Investment Trust Law of Japan).

in Article 2.1.7 of the Securities and Exchange Law of Japan; provided,(11) Moreover, in order to avoid risks of fluctuation in the prices of the

however, that this is limited to those the assets of which are primarily

Managed Assets as well as risks of fluctuations in interest rates,

invested and Managed Assets principally referred to in paragraphs

futures transactions, option transactions, swap transactions and(1) and (2) above).

forward rate transactions with respect to Japanese interest rates(7) Investment Securities (meaning those specified in Article 2.1.7.2 of
the Securities and Exchange Law of Japan; provided, however, that
this is limited to those the assets of which are primarily invested andManaged Assets principally referred to in paragraphs (1) and (2)above).

may be undertaken. In addition, NBF may acquire shares of stock
in real estate management companies, etc. to the extent that suchacquisition is incidental to NBF’s investment in the principal
Designated Assets.
(12) Beneficiary Certificates of trusts for securities of monetary claims

NBF Report July-December 2008

59

C. Assets Other than Designated Assets
NBF may, in the course of efficiently managing funds or in other

Investment Restrictions

cases as necessary, invest in the following assets.
(1) Certificates of deposit issued by Japanese legal entities(2) Equity interests of partnerships defined under Article 667 of the Civil
Code (limited to such partnerships established by contribution of realestate, real estate leasehold rights and superficies for the purpose ofleasing, operating or managing, etc., of the same; hereafter,“Voluntary Partnership Equity Interests”)(3) Trademark rights

A. The investment restrictions specified in the
Articles of Incorporation and the asset management guidelines applicable to NBF.
Please also refer to “Investment Policies of
NBF, B. Investment Strategy” herein.
Investment Location and Currencies
NBF will invest neither in real estate located outside of Japan nor in(4) Copyrights

assets denominated in non-Japanese currencies (“Investment Objectives(5) Chattels defined under the Civil Code (hereafter, “Chattels”)

and Policies,” Articles of Incorporation).

D. Investment in Ordinary Securities
NBF does not, in principle, have the objective of investing in andmanaging assets which are securities, except for those described in A.
above.

Borrowing
See “Investment Policies of NBF, B. Investment Strategy, (4) Financial
Policies.”

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

Investment in Other Funds
See “Investment Objectives, A. Principal Investment Objectives
among Designated Assets.”
The real estate held by such funds may not include any real estate
located outside of Japan (Articles of Incorporation).

Subscription and Margin Trading of Securities
NBF may not subscribe to, or conduct margin trading of, securities.

Compliance with Laws and Regulations
The Managed Assets of NBF will be managed in compliance with
Investment Trust Law of Japan and related regulations, the rules stipulated by the Investment Trusts Association (as amended), as well as“Investment Objectives and Policies” of the Articles of Incorporation.

60 NBF Report July-December 2008

Investment and Distribution Policies

B. Compliance with the Investment Trust Law
of Japanand further, such transactions upon said conditions would be harmful tothe interests of the investment.

While a registered investment corporation must entrust business
related to asset management to an asset management company, anasset management company is prohibited from performing certain acts
related to the business of managing the assets of said investment cor-Other Transactions Specified in the Government
Ordinance regarding the Investment Trust Law ofJapan (§ 34.3.1.8)

poration. As a result, an investment corporation is subject to certain

In the addition to the foregoing, those acts specified in the govern-

investment restrictions (all references in parentheses below are to thement ordinance regarding the Investment Trust Law of Japan being cer-

provisions of the Investment Trust Law of Japan) besides restrictions

tain acts committed by an asset management company that would result

applied to a registered investment corporation. NBF will naturally comply

in failure to protect the interests of shareholders, damage the fairness ofwith such investment restrictions, a general overview of which follows.

the management of the assets of NBF, and pose a risk of damaging thegood public reputation of NBF are prohibited.

Reciprocal Transactions with Investment
Corporations (§ 34.3.1.5)
Transactions between investment corporations, the assets of which

Limitation on Acquisition of the Same Issue of
Shares (§ 194)

are managed by an asset management company, are prohibited except

A registered investment corporation may not acquire the samefor certain cases specified in the provisions of the government ordinanceshares issued by a corporation in excess of 50/100 of total number ofregarding the Investment Trust Law of Japan that are considered unlikely

said issued and outstanding shares.

to result in failure to protect the interests of shareholders.

Transactions by an Investment Corporation with
Investment Trust Assets (§ 15.1.3)
Transactions by an investment corporation with investment trust

Restriction on Acquisition of Own Shares andAcceptance of Pledge (§ 80.1)
An investment corporation may not acquire shares issued by itself, or
accept them for the purpose of pledge, unless it acquires shares issued

assets subject to asset management are prohibited except for certain

by itself in the following cases:

cases specified in the provisions of the government ordinance regarding●

when acquired as the result of merger;

the Investment Trust Law of Japan that are considered unlikely to result●

if necessary for attaining the purpose of exercising its rights; orin failure to protect the interests of shareholders.

●when purchasing shares pursuant to the provisions of the Investment
Trust Law of Japan.

Transactions for the Benefit of Third Parties(§ 34.3.1.6)
certain securities based on fluctuations in the price, index, value, orRestriction on Acquisition of Parent
Corporation’s Shares by Subsidiary Corporation(§ 81.1)

amount of consideration related to transactions in the assets of an

An investment corporation (e.g. subsidiary), a majority of the sharesinvestment corporation, without a legally valid reason, with the objectiveof which is owned by another investment corporation (e.g. parent), mayof benefiting a third party other than NBF or said investment.

not acquire the shares of such parent investment corporation except in

An asset management company may not undertake transactions in

the following cases:

Transactions Harmful to the Interests of NBF(§ 34.3.1.7)●

when acquired as the result of merger; or●if necessary for attaining the purpose of exercising its rights.

An asset management company may not undertake transactions thatare other than upon normal terms and conditions for such transactions,

NBF Report July-December 200861

Restrictions of Transactions with Interested
Parties(1) Restriction on an asset management company (§ 34.3)
In accordance with the provisions of laws and regulations, an asset
management company is prohibited from committing any of the following acts in connection with transactions with an Interested Party, etc.
“Interested Party, etc.” as used herein means a person who holds amajority of the shares of an asset management company or otherwise
has a close relationship with said asset management company as designated by the government ordinance regarding the Investment Trust Law
of Japan.
a) An investment trust agent, trust company, financial institution
engaged in trust business, investment advisor, residential land andbuilding specialist, etc. who is an Interested Party, etc. of an asset
management company undertakes a transaction which harms theinterests of NBF with the objective of benefiting a customer, etc.
specified in the Investment Trust Law of Japan.

e) In the event that an issuer, securities company or registered financial
institution, who is an Interested Party, etc. of an asset managementcompany, undertakes a primary offer or secondary distribution of
securities or participates in handling a primary offer, private offering,or secondary distribution at a time when the subscription amount of
said acquisition or the amount of purchase offer of securities to said
issuer, securities company or registered financial institution is notforeseen to reach that otherwise expected by said issuer, securities
company or registered financial institution, acquiring or purchasing
said securities with assets of NBF at the request of said issuer, securities company or registered financial institution.
f) In the event that a specified real estate syndicate, who is an
Interested Party, etc. of an asset management company, makes asolicitation in connection with the execution of a specified real estatesyndication agreement at a time when the contract amount of said
specified real estate syndication agreement is not foreseen to reachthat otherwise expected by said specified real estate syndicate,acquiring a tokumei kumiai interest pursuant to said specified realb) Undertaking transactions which harm the interests of an investment
corporation with the objective of benefiting an Interested Party, etc.

estate syndication agreement with assets of NBF at the request of
said specified real estate syndicate.

of NBFM.
g) In the event that the manager of a tokumei kumiai , who is anc) Undertaking transactions clearly recognized to be unnecessary in lightof the management policies for the assets of an investment corporation, the amount of net assets of NBF, or market conditions, with the
purpose of benefiting a securities company, registered financial institution, residential land and building specialist or other person specified in the government ordinance regarding the Investment Trust Law
of Japan who is an Interested Party, etc. of an asset managementcompany.
d) In the event that a securities company, who is an Interested Party,
etc. of an asset management company, acts as an underwriter in asecurities transaction, undertaking transactions with the objective offraudulently manipulating the market for the purpose of having an
influence upon the conditions of the primary offer or secondary distribution of said securities not reflecting correct market pricing.

Interested Party, etc. of an asset management company, makes asolicitation in connection with the execution of a tokumei kumiai
agreement at a time when the total investment amount otherwise
obtained pursuant to said tokumei kumiai agreement is not foreseen
to reach that expected by the manager of said tokumei kumiai,acquiring a tokumei kumiai interest pursuant to said tokumei kumiai
agreement with assets of NBF at the request of the manager of said

tokumei kumiai.
h) In the event that a trust company, who is an Interested Party, etc. ofan asset management company, makes a solicitation in connection
with the execution of a trust agreement at a time when the amount oftrust assets otherwise obtained pursuant to said trust agreement is
not foreseen to reach that expected by said trustee, acquiring a beneficiary certificate pursuant to said trust with assets of NBF at therequest of said trustee.

62 NBF Report July-December 2008

Investment and Distribution Policies

i) In the event that a distributor of trust beneficiary interests, who is an

the enforcement regulations of the Investment Trust Law with the con-Interested Party, etc. of an asset management company, distributes,

sent of said investment corporation the assets of which are managed byor acts as an agency or intermediary of distribution of, trust benefici-

said asset management company, other investment corporations (which

ary interests at a time when the total amount of purchase offer ofinvest in the same kind of assets as the said Designated Assets) the

said trust beneficiary interests to said distributor of trust beneficiary

assets of which are managed by said asset management company andinterests is not foreseen to reach that otherwise expected by said dis-other persons set forth under the government ordinance regarding thetributor of trust beneficiary interests, purchasing said trust beneficiary

Investment Trust Law.

interests with assets of NBF at the request of said distributor of trust
beneficiary interests.

(3) Restriction on an investment corporation
Restrictions on Asset Management (§ 195)

(2) Submission of written notice when conflict of interest is
anticipated

A registered investment corporation must not, in principle, acquire orsell securities, lend or borrow securities, acquire or sell real estate, lease

Submission of Written Notice When Conflict of Interest isreal estate or entrust the supervision of real estate (provided, however,

Anticipated (§ 34.6.2-4 of the Investment Trust Law)

that, it is acceptable to cause NBFM to act as an agent or broker con-

An asset management company must, in the event that any sale orcerning the purchase or leasing of residential building lots or buildings)

purchase of, or any other transaction set forth under the government

or otherwise engage in transactions concerning Designated Assets otherordinance regarding the Investment Trust Law with respect to, thethan the preparation of residential building lots and design of buildings,

Designated Assets (excluding the specified assets set forth under thewith its executive directors or supervisory directors, asset management

Investment Trust Law and such assets as are set forth under thecompanies who perform asset management, close relatives of executive

enforcement regulations of the Investment Trust Law, the same to apply

directors or supervisory directors, or persons or employees who performhereinafter in this paragraph) is conducted between an investment cor-

duties similar to directors or auditors of an asset management company

poration the assets of which are managed by said asset management

who perform asset management.

company on one hand, and said asset management company, its director or executive officer, any other investment corporation, investment
fund which directs management, Interested Party, etc. or other person
set forth under the government ordinance regarding the Investment Trust
Law on the other, submit written notice, in accordance with the enforcement regulations of the Investment Trust Law, to said investment corporation, other investment corporations (which invest in the same kind ofassets as the said Designated Assets) the assets of which are managed
by said asset management company and other persons set forth under
the government ordinance regarding the Investment Trust Law specifying
the matters relating to such transaction; provided, however, that in lieu
of such submission of written notice, said asset management company
may, in accordance with the government ordinance regarding theInvestment Trust Law, provide the matters to be specified in such written
notice by such methods as using electronic information processing systems or other telecommunication technology which are set forth under

NBF Report July-December 200863

Corporate Data
As of December 31, 2008

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

Date of Inception:

March 16, 2001

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

Shareholders:

13,972

Transfer Agent:

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

Business Office of the Transfer Agent:

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

Independent Public Accountants:

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

Investor Relations:

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

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

Securities Report (Yuka shoken hokokusho) filed on March 30, 2009 pursuant to thehas been authorized to give any information or make any representations other than as

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

Information Report for the period from July 1, 2008 to December 31, 2008, of Nippon

given or made, such information or representation must not be relied upon as having

Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.

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

This English language document was prepared solely for the convenience of andreference by overseas investors and neither corresponds to the original Japanese docu-

or any of their respective directors, officers, employees, partners, shareholders, agentsor affiliates.

ments nor is it intended to constitute a disclosure document. The Japanese language

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

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

for the aforementioned period should always be referred to as originals of this docu-

which may materially differ in certain respects from generally accepted accounting

ment.

principles in other jurisdictions.

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

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

in may not be precisely identical to the concept of the equivalent Japanese terms. Withtion. We base these statements on our beliefs as well as our assumptions based solely

respect to any and all terms herein, including without limitation, financial statements, if

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

there exist any discrepancies in the meaning or interpretation thereof between the origi-

our current views concerning future events, these statements involve known and

nal Japanese documents and English statements contained herein, the original

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

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

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

directors, officers, employees, partners, shareholders, agents or affiliates will be respon-

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

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

64 NBF Report July-December 2008

Investors’ Information
As of December 31, 2008

Fiscal Periods

Shareholders

Six months ending June 30 and December 31

Other domestic corporations
323 (2.3%)

Overseas investors 413 (3.0%)
Financial institutions(Including securities companies)

Total Number of Common Shares Issued

161 (1.1%)

15th Period (From July 1, 2008 to December 31, 2008)

542,000 shares

14th Period (From January 1, 2008 to June 30, 2008)

542,000 shares

Individuals and others
13,075 (93.6%)

Distributions
Total number of shareholders:Confirmed distribution for the 15th Period (ended December 2008)
For the operating period from July 1, 2008 to December 31, 2008 (6 months)

13,972¥22,252 per share

Expected distribution for the 16th Period (ending June 2009)
For the operating period from January 1, 2009 to June 30, 2009 (6 months)¥20,500 per share

Overseas investors
186,201 (34.4%)

Other domestic corporations
46,310 (8.5%)
Individuals and others
32,041 (5.9%)
Financial
institutions(Including
securities
companies)

277,448(51.2%)

Total number of shares:

542,000

Major Shareholders
Name

NikkoCiti Trust and Banking Corporation (Trust Account)
Japan Trustee Services Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
Mitsui Fudosan Co., Ltd.
The Nomura Trust and Banking Co., Ltd. (Trust Account)
The Bank of New York, Treaty JASDEC AccountState Street Trust & Banking Co., Ltd.
Sumitomo Life Insurance Company
The Chugoku Bank, Ltd.

Number of Shares Held

Percentage of Total

46,17937,48335,26330,066
19,73519,006
16,176
12,791
12,256
8,681

8.52%
6.91
6.50
5.54
3.64
3.50
2.98
2.35
2.26
1.60

Stock Price Range and Trading Volume(Yen)
2,000,000
1,800,000(Shares)
100,000

Trading Volume (Right scale)

90,000

Closing Price (Left scale)

1,600,000

80,0001,400,000

70,0001,200,000

60,0001,000,000

50,000800,000

40,000600,000

30,000400,000

20,000200,000

10,0000

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2004
2005
2006
2007
2008

0

NBF Report July-December 200865

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

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

Printed in Japan