Balance, Scale and Quality

12th Period
NBF Report January – June 2007

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

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

Contents
Building on Our Strengths

2

Financial Highlights

4

To Our Shareholders

6

Balance, Scale and Quality

8

A Continuing Record of Achievement

11

New Acquisitions

11

A Track Record of Steady Growth and High Occupancy Rates

12

Ongoing Improvement in Portfolio Quality

13

Planned New Acquisitions

14

Main Properties

15

Location of Office Properties

18

Portfolio Overview

20

Management Team and Management Structure

22Management’s Discussion and Analysis

26

Financial Statements

37

Appendix51

Investment and Distribution Policies

53

Corporate Data

62

Investors’ Information

63

On the CoverIn March 2007, NBF increased its ownership interest in
Nakanosakaue Sunbright Twinfrom 31.6 percent to 80.6 percent, substantially expanding
future earnings potential.

Balance, Scale and Quality
Generate Strong Returns

NBF Report January–June 20071

Building on Our Strengths

Over the 12 periods, or roughly 6 years, since its listingon the J-REIT section of the Tokyo Stock Exchange in
September 2001, NBF has established a track record of
stable profit distribution.
As a result of steady growth, NBF has built a solid position in the J-REIT market from several perspectives, including scale advantage, portfolio scope, financial stability andlevel 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(¥868.6 billion)*◆ The largest scale of managed assets (¥674.3 billion)*strengths and competitive advantages, as well as theexpertise of Mitsui Fudosan Co., Ltd., to steadily increasevalue for shareholders.

High-Quality
Properties◆ Specializes in investing in office buildings◆ Possesses 56 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 692,222m2*◆ 910* diversified tenants

2

NBF Report January–June 2007

Strong Returns◆ Cash distribution of ¥19,809 per share for the 12th period◆ 243.7% total return** since Tokyo Stock Exchange listingon September 10, 2001

NBF’s Strengths◆ 57.8% total return** for NBF in most recent year, comparedwith 43.6% for TSE J-REIT index** Total return includes reinvested distributions.
(Source: NBF calculations, based on data published by Bloomberg L.P.)

Sound Finances

Strategic
Partnership with
Mitsui Fudosan◆ Ratings*■ Standard & Poor’s

Long-term Corporate: A+, Short-term Corporate: A-1■ Moody’s Issuer Rating: A1◆ Access to the expertise of Mitsui Fudosan Co., Ltd., the leading
real estate company in Japan■ R & I Issuer Rating: AA◆ LTV: 44.9%*■◆ Percentage of long-term, fixed-rate debt included in interestbearing debt: 75.3%*◆ Average years remaining on long-term, fixed-rate interestbearing debt: 5.52 years*

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

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

management capabilities in office management◆ Total average cost: 1.53%** As of June 30, 2007

NBF Report January–June 2007

3

Financial Highlights
12th Period

11th Period

10th Period

9th Period

12th Period

from January 1, 2007 toJune 30, 2007

from July 1, 2006 to
December 31, 2006

from January 1, 2006 toJune 30, 2006

from July 1, 2005 to
December 31, 2005

from January 1, 2007 toJune 30, 2007
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¥ 26,641
10,064
10,063¥ 25,894
9,767
9,766

¥ 24,307
9,852
9,851

¥ 19,363
7,206
7,205

$ 215,906
81,56081,553Funds from operations
Net operating income
from property leasing activities
Total amount of cash distribution

Note 3

15,18814,754

12,951

10,869123,085

Note 3(a)18,442
10,063

17,787
9,766

15,936
9,851

13,333
7,205

149,461
81,554(b)Note 3680,266
281,500
356,50944.9%

634,117
236,500
356,21340.9%

633,693
237,500
356,29741.0%

564,902257,500
269,37548.5%

5,513,139
2,281,384
2,889,292(c)(b) / (c)(a) / (c)508,000
701,790
19,809508,000
701,206
19,224

508,000
701,373
19,391

422,700
637,274
17,046

5,688
161

Note 329,89729,04327,39526,505242

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 ¥123.39 = U.S.$1.00, the approximate exchange rate on June 30, 2007.
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 June 30, 2007)
Asset Allocation

Total Assets¥680,266
millionRegional Allocation
Deposits andOther Assets

Other Cities¥36,598 million(5.4%)¥80,326 million(12.5%)

Real Estate

Other Greater
Tokyo

Total
Real Estate, Etc.

¥255,095 million(37.5%)¥145,652 million(22.6%)¥643,669

Real Estate Held in TrustTokyo CBDs*¥388,573 million(57.1%)¥417,691 million(64.9%)

million* Central Business Districts

4

NBF Report January–June 2007

Operating revenues / Net income(Yen in millions)

Funds from operations per share

Net operating income fromproperty leasing activities(Yen in millions)

(Yen)

12th
Period12th
Period12th
Period11th
Period11th
Period11th
Period10th
Period10th
Period10th
Period9th
Period9th
Period9th
Period8th
Period8th
Period8th
Period005,000 10,000 15,000 20,000 25,000 30,000
Operating revenues
Net income

Total assets

5,000

10,00015,00020,000

LTV(%)(Yen in millions)

10,0000

20,00025,000550,000 600,000 650,000
0Distribution per share (top scale)
Net assets per share (bottom scale)

700,000

750,000

12th
Period12th
Period11th
Period11th
Period11th
Period10th
Period10th
Period10th
Period9th
Period9th
Period9th
Period8th
Period8th
Period8th
Period
0

40

42

44

46

48

50

10,000(Yen)

15,00012th
Period300,000 400,000 500,000 600,000 700,000

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

0

20,000

List of Major Tenants (As of June 30, 2007)
Name

1
2
3
4
5
6
7
8
9
10

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

Leased Space(m2)

Percentage of Total
Rentable Area3

169,913
28,184
20,515
17,895
16,106
15,333
13,135
10,193
8,756
8,493

24.8%
4.1%
3.0%
2.6%
2.4%
2.2%
1.9%
1.5%
1.3%
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 expires December 2009; GlaxoSmithKline K.K.’s contract (GSK Building) expires September 2010; AXA
Life Insurance Co., Ltd.’s contract expires November 2010; Nippon Steel Corporation’s contract expires November 2009; Nikkei Business Publications, Inc.’s contract expires
November 2009; Transcosmos Inc.’s contract (Shibuya Garden Front) expires September 2009)
3. Percentage of total rentable area = Leased space / Total rentable area of all properties in portfolio

NBF Report January–June 2007

5

To Our Shareholders
NBF emphasizes external and internal growth, financial
strategy and compliance in working to increase distributions over the medium and long term with the aim of
expanding shareholder value.

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

Performance during the Six Months
Ended June 30, 2007

Initiatives to Generate External Growth

During the six months ended June 30, 2007, newly

network we have built to selectively invest in outstand-acquired properties generated external growth whileing properties and generate steady external growth.

We are employing the scale, expertise and information

factors including increased rent for existing tenants

The strength of the real estate leasing market has caused acquisition

generated internal growth. As a result, revenues andprices to rise and has made the real estate acquisition market increasingly

earnings both increased, and distribution per sharecompetitive. Given these conditions, we avoid investment for the sake ofwas ¥19,809.

scale alone. Based on our strategy of investing in high-quality, highly com-During the six months ended June 30, 2007 (the “12th Period”), NBF’spetitive office buildings with comparatively stable rental cash flow and little

operating environment continued to become increasingly challenging as

risk of decline in asset value, we invest selectively, making the most of ouracquisition prices rose while returns on investment decreased. NBF madeinnovative techniques and collective expertise. As a result, during the six

use of its unique information channels, including the Mitsui Fudosan Group,

months ended June 30, 2007, we increased our stake in Nakanosakaue

as well as its accumulated know-how in selectively acting on information.

Sunbright Twin and acquired a stake in the adjacent Nakanosakaue

After meticulous research, we made one new acquisition and two additional

Sunbright Annex in March 2007. Moreover, in April 2007 NBF acquired theacquisitions to increase ownership of existing properties. Consequently,

NBF Ginza Street Building using the Mitsui Fudosan Group’s information net-

NBF had 56 properties in its portfolio as of June 30, 2007, and total invest-

work, and in June 2007 acquired land with a building located atment on an acquisition price basis stood at ¥674,354 million.

Kandasuda-cho 2-chome, Chiyoda-ku, Tokyo, adjacent to an existing prop-

Operating revenues for the six months ended June 30, 2007 increased

erty, the NBF Sudacho Verde Building.

2.9 percent, or ¥747 million, compared with the previous six-month peri-

While our current policies have moderated the pace at which we are

od to ¥26,641 million. Primary factors in the increase included the contri-acquiring properties to generate external growth, we still expect our asset

bution of new acquisitions, efforts to set rents at appropriate market lev-

portfolio to reach ¥1 trillion.

els, and rent increases for existing tenants. As a result, operating income
increased 3.9 percent, or ¥460 million, compared with the previous six-

Initiatives to Generate Internal Growth

month period to ¥12,112 million. Net income increased 3.0 percent, orAgainst the backdrop of the strong office building¥297 million, compared with the previous six-month period to ¥10,063

leasing market, NBF is working to strengthen earnings

million, and distribution per share increased ¥585 compared with the pre-by increasing rent when renewing the contracts ofvious six-month period to ¥19,809.

existing tenants.
Corporate demand for office space is expanding against the backdropof Japan’s economic recovery. In particular, lease rates for new contracts

6

NBF Report January–June 2007

Prospects of Performance

Fundamental Management
Policies and Outlook(Yen in millions)13th Period

14th Period(Projected)
from July 1, 2007 to
December 31, 2007

(Projected)
from January 1, 2008
to June 30, 2008

Operating revenues

27,57028,318Net income

9,804

10,312Distribution per
share (Yen)

19,30020,300NBF is a driving force among Japanese real estate
investment trusts (J-REITs). We will make maximum
use of the foundation for growth we have constructed
to fulfill our mission of generating additional growth in
the future.
Looking forward, competition in acquiring properties will continue tointensify. Moreover, interest rates are likely to rise, which will increase theimportance of sound finances. Given this market environment, NBF aims

in the central business districts (CBDs) of Tokyo continue to rise. NBF isconcentrating on enhancing earnings by using the high-quality portfolio it
has constructed to raise rents for existing tenants. As of June 30, 2007,
contracts up for renewal within two years with below-market lease rates
accounted for 50.5 percent of NBF’s total rental revenue. These contracts
provide the potential for rent increases over the coming two years, and weare therefore taking a focused approach to this issue. During the six
months ended June 30, 2007, renegotiation of existing lease contracts
increased monthly rental revenue by ¥62 million. During the six months
ending December 31, 2007 (the “13th Period”), we plan to increase
monthly rental revenue by an additional ¥30 million.

to generate additional growth with four primary policies. We will makemaximum use of our outstanding portfolio and acquire additional properties to build the foundation for external growth. We will also strengthen
earnings capabilities for internal growth. In addition, NBF will execute astable, conservative financial strategy that can accommodate rising interest rates, and will further strengthen compliance risk management.
Under these policies, NBF aims to further strengthen earnings during
the 13th Period, primarily through internal growth. We project operating
revenues of ¥27,570 million, operating income of ¥12,236 million, net
income of ¥9,804 million, and a distribution of ¥19,300 per share. For theperiod ending June 30, 2008 (the “14th Period”), we project operating

However, even though market conditions are excellent, rent increases
are predicated on explanation that merits tenant understanding during
each contract renewal. We therefore expect gradual improvement inearnings.

revenues of ¥28,318 million, operating income of ¥13,003 million, net
income of ¥10,312 million, and a distribution of ¥20,300 per share. These
projections assume no acquisitions or transfers of buildings other thanthose currently under contract, and no issue of new shares.
The scale of NBF’s assets and its management system make it a driv-

Financial Initiatives

ing force in the J-REIT market. We will use the foundation for growth we

NBF will continue to manage its finances

have constructed to fulfill our mission of generating additional growth.

conservatively.
NBF expects interest rates to rise moderately as a result of thestrength of Japan’s economy. We will therefore work to maintain a conservative loan-to-value (LTV) ratio at 40 to 50 percent, with a maximum 60
percent. Moreover, we are also basing our finances on continued procure-

NBF will manage its assets according to its investment policy of achieving sustainable growth in portfolio value and stable profits over the medium-to-long term. Our objective will be increased shareholder value. We will
be counting on your continued support as we work toward these goals.

ment of long-term, fixed-rate funding to avoid the risk of sudden sharp
increases in interest payments because of higher interest rates.

Koichi Nishiyama

Compliance Initiatives

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

NBF is acutely aware of compliance risk.
NBF is further strengthening compliance risk management to accommodate increasing scale and changing social obligations.

NBF Report January–June 2007

7

Balance, Scale and Quality

BALANCE
Steady External Growth
The office building acquisition market in
Japan has become increasingly competitive¥49,515

millionExternal growth

While conditions are strong in the officebuilding leasing market, the supply of new

as a result of the strength of the office building leasing market. NBF is making maximum

Acquisition
price

use of its high-quality portfolio in emphasizing
enhanced earnings through internal growth. At

Nakanosakaue Sunbright Twin
Nakanosakaue Sunbright Annex

31,615NBF Ginza Street Building¥17,000

millionthe same time, we recognize that external
growth through acquiring additional highquality properties is crucial to building a solid
foundation for growth. Both approaches are
therefore important to steady growth.

Strong Potential forInternal Growth

millionLand with a building located at
Kandasuda-cho 2-chome,
Chiyoda-ku, Tokyo

¥900
millionparticularly prominent in the five central business districts1 of Tokyo, where average lease
rates per square meter as of June 30, 2007
increased 7.2 percent from December 31,
2006 (Source: Miki Shoji Company).
NBF is taking full advantage of thesefavorable market conditions. We have

¥49,515

During the six months ended June 30,

office buildings is limited. Rising rents are

millionincreased lease rates for new tenants while

2007, NBF increased its stake inemphasizing rent increases in renewing con-

Nakanosakaue Sunbright Twin, an existing

tracts with below market lease rates. In

property, and made a new acquisition at theJapan’s leasing market, rent does not cus-

adjacent Nakanosakaue Sunbright Annex, for a
total acquisition price of ¥31,615 million. NBF
also acquired the NBF Ginza Street Building foran acquisition price of ¥17,000 million, andacquired land with a building located at

50.5%

tomarily increase for existing tenants other

Below-market lease
contracts

As of June 30, 2007, contracts up for

Sudacho Verde Building, for an acquisition

Lease contracts
to be renewed
after July 2009

Below-market
lease contracts

standing properties.

more than half, of NBF’s total rental revenue.
growth.

25.0% 50.5%

lion. Looking forward, NBF aims to strengthen
its foundation for growth by acquiring out-

renewal within two years with below-market

This indicates strong potential for internal

price of ¥900 million. The total acquisition costfor these three properties was ¥49,515 mil-therefore coincide with contract renewals.

lease rates accounted for 50.5 percent, orKandasuda-cho 2-chome, Chiyoda-ku, Tokyo,
adjacent to an existing property, the NBF

than at contract renewal. Rent increases

24.5%

Lease contracts
with potential
rent increases
within 2 years

During the six months ended June 30,
2007, renegotiation of existing lease contracts
increased monthly rental revenue by ¥62.0
million. NBF is now conducting lease negotiations with the target of raising rental revenue

Above-market lease
contracts to be renewed within 2 years

from renewed contracts by 7 to 8 percent.
Note 1. Chuo-ku, Chiyoda-ku, Minato-ku, Shinjuku-ku,
Shibuya-ku

8

NBF Report January–June 2007

Balance, Scale and Quality

SCALE

business districts as of June 30, 200771%

decreased 0.6 percentage points from

Portfolio growth

Potential for Asset Expansion
The vacancy rate in Tokyo’s five central

The Advantages of Scale
NBF was the first Japanese real estate
investment trust (J-REIT), and has steadily

December 31, 2006 to 1.7 percent, indicating(Yen in billions)continued strong demand for office space

Portfolio value(Source: CB Richard Ellis Japan).

(Acquisition price basis)

674
625

394

on the J-REIT section of the Tokyo Stock
Exchange. Its portfolio as of June 30, 2007
encompassed 56 owned properties valued at

625

539

The strength of the office leasing market
has caused competition in the office building

expanded the scale of its assets since listing¥674.3 billion on an acquisition price basis,414

making NBF the largest J-REIT in Japan. The

acquisition market to intensify. However, NBF

powerful advantage of NBF’s scale is not only

has been able to steadily increase the scale ofexpressed by the number or value of its prop-

its portfolio with high-quality assets. NBF haserties, but also by total rentable area of692,222m2, which is directly related to earn-

increased its portfolio on an acquisition pricebasis by 71 percent from the end of the 7th

7th
Period8th
Period9th
Period10th
Period11th
Period12th
Periodings.
NBF’s market capitalization also indicates

Period through June 30, 2007. NBF has beenable to achieve this kind of performancecompetitive advantage. The market capitaliza-

because of its extensive expertise in acquisi-tion of the entire J-REIT market as of June 30,

tions. We use a powerful information pipelinethat includes the Mitsui Fudosan Group, andemploy other techniques such as acquiring
projects under development and making

692,222m

2

REIT market capitalization. As in the case of

acquisitions that add to existing properties.
We do not intend to expand the scale of670,249 670,513

We will deploy our strengths and manage(m2)

scale of assets, NBF is Japan’s largest J-REIT.

692,222

We will make maximum use of the advantages of the scale of assets we have built in

578,243
460,901

capitalization of ¥868.6 billion at that daterepresents a significant proportion of the J-

Total rentable area

our assets simply for the sake of expansion.

2007 was about ¥5.7 trillion. NBF’s market

working to further raise profitability as we con-488,323

centrate on structuring a matchless portfolio.

risks appropriately to acquire outstanding
properties that will maintain their value overthe medium to long term in working to further
expand and strengthen our portfolio.
7thPeriod8th
Period9th
Period10th
Period11th
Period12th
PeriodNBF Report January–June 2007

9

Balance, Scale and Quality

QUALITY
A High Occupancy Rate
NBF believes that a high level of tenantsatisfaction is essential to maintaining a highoccupancy rate, and continuously addresses

99.0%

age and probable maximum loss (PML) are

Occupancy rateerties. As a result of our efforts to acquire

The first is reducing property risk. Building
two key criteria we use when acquiring prophighly competitive properties, the average

this strategic issue.
Specifically, since listing on the J-REIT section of the Tokyo Stock Exchange in 2001 NBF(%)

97.5 98.1 98.1 98.7 97.8 99.0

the PML for our portfolio was 1.5 percent, or

tenant needs through surveys. We precisely

3.3 percentage points lower than at the end

address needs uncovered through this analy-of the 1st Period.

sis in working to raise the level of tenant satis-

The second is reducing property concen-

faction. During the period ended June 30,

tration risk. Constant efforts have reduced the2007, NBF earned a highly positive response
7thPeriod8th
Period9th
Period10th
Period11th
Period12th
Periodan acquisition cost basis from 54.0 percent at

events.

the end of the 1st Period.

One result of our strategic emphasis on rais-

percent or higher since the 6th Period. Moreover,910

the occupancy rate as of the end of the 12th

Tenants

tained an occupancy rate for our portfolio of 97

The third is reducing tenant risk byincreasing the number of tenants. NBF had
910 tenants (1,236 actual tenants2) as ofJune 30, 2007, compared with 411 tenants at
the end of the 1st Period. As a result, the pro-

Period on June 30, 2007 was 99.0 percent.
A good relationship with tenants does morethan just keep the occupancy rate high. It also
supports NBF in negotiations to increase lease

proportion of the value of our top three properties to 22.1 percent of our entire portfolio on

security facilities, as well as by holding various

ing tenant satisfaction is that we have main-2007 was 13.80 years, or 3.90 years lessthan at the end of NBF’s 1st Period. Moreover,has quantitatively and qualitatively determinedby implementing upgrades of plumbing andbuilding age of our portfolio as of June 30,

868

887

892

(Number)

portion of floor space occupied by NBF’s top

910

ten tenants excluding Mitsui Fudosan Co.,
Ltd.3 was 20.2 percent as of June 30, 2007,

763
667

down significantly from 54.3 percent at therates at contract renewal time, and we willend of the 1st period.

continue to execute programs that support

NBF will continue working to improve port-

profitability.

folio quality through precise risk management.

Outstanding Risk
Management

Notes: 2. The figure of 1,236 actual tenants includes tenants
occupying space under sublease contracts.
7th
Period8th
Period9th
Period10th
Period11th
Period12th
PeriodNBF works to generate stable earnings
through three primary risk management initiatives.

10

NBF Report January–June 2007

3. Technically, NBF’s largest tenant is Mitsui FudosanCo., Ltd., which has contracts covering 169,913m2
for 327 sublease tenants. Mitsui Fudosan is excluded
from the weighting calculation because it is not an
actual large-scale tenant.

A Continuing Record of Achievement
New Acquisitions
Nakanosakaue Sunbright Twin1
Other Greater Tokyo
Nakanosakaue Sunbright Twin

Nakanosakaue Sunbright Annex(Additional acquisition)

Acquisition date

March 23, 2007

Ownership status

Comparted ownership

Acquisition price¥452 million¥31,163 million

Acquisition structure

Ownership
46-4, Honcho 2-chome,
Nakano-ku, Tokyo

46-1, Honcho 2-chome,
Nakano-ku, Tokyo

Location

10,331.90m2

Site area
Floor area of building

63,396.95m2 (NBF share: 49.0%)

2,463.94m2 (NBF share: 50.3%)

Structure

30 floors above ground,
2 floors below

5 floors above ground,
1 floor below

Completed

September 30, 1996

Notes: 1. In this report, Nakanosakaue Sunbright Twin and Nakanosakaue Sunbright Annex are collectively referred toas Nakanosakaue Sunbright Twin.
2. Including previous acquisitions (31.6%) and the additional acquisition (49.0%), NBF’s ownershipinterest in Nakanosakaue Sunbright Twin (excluding the Annex) is 80.6%.

NBF Ginza Street Building
Tokyo CBDs
Acquisition date

April 25, 2007

Ownership status

Fee simple

Acquisition price¥17,000 million

Acquisition structure

Trust

Location

7-5, Ginza 5-chome, Chuo-ku, Tokyo

Site area

425.60m2

Floor area of building

3,408.79m2

Structure

10 floors above ground, 1 floor below

Completed

June 12, 1990 (Building expansion: September 30, 1997)

NBF Report January–June 200711

A Track Record of Steady Growth and High Occupancy Rates

Occupancy rate (%)

100.0

96.9

97.5

97.4

97.7
95.0

97.5

98.1

98.1

98.7

97.8

99.0

94.8
92.3
Total rentable area (m2)90.0
800,000

Acquisition price692,222

Tokyo CBDs

Acquisition price(Yen in billions)

700,000

670,249 670,513

Other Greater Tokyo

800

Other Cities

578,243700

600,000

696.1¥21.8 billion

Occupancy rate(contract completed)*

Total rentable area

624.8

624.8

488,323
460,901600

500,000

539.3

419,511500

400,000

358,940400

277,054

303,486

322,344414.1

340,497

393.8

300

226.5
200

300,000

336.1

247,687
246.0

260.2

276.0

285.6
200,000

192.1

100,000
100

0

22

24

26

28

29

33

43

43

47

52

55

55

57

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

May 23, December 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30, December 31, June 30,
2001
2001
2002
2002
2003
2003
2004
2004
2005
2005
2006
2006
2007
* Contract basis. Toyosu 5-Chome Building (tentative name) calculated as ¥20 billion for convenience.
(Investment commencement date)

12

NBF Report January–June 2007

0

A Continuing Record of Achievement

Ongoing Improvement in Portfolio Quality
End of the 1st Period

End of the 9th Period

End of the 12th Period(December 31, 2001)(December 31, 2005)(June 30, 2007)

39.0%

45.0%
20.2%

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)

22.1%

32.0%

54.0%

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

17.70 years

16.38 years
20.4%

11.5%

13.80 years
20.0%
15.6%

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%
*

NBF Report January–June 200713

Planned New Acquisitions

Toyosu 5-Chome Building (Tentative Name)

14th Period, Other Greater Tokyo (scheduled)

Integration with the adjacent IST Building adds value
Integrating this acquisition with the IST Building will increase total rentable area to 65,090m2 and heighten the property’s profile. We
aim to raise competitiveness by managing the two properties as one, which will add flexibility to tenant management as we work to
improve property management cost efficiency.

B

A

Toyosu 5-Chome Building (A)IST Building (B)(Tentative Name)(A) + (B)

Acquisition price¥16,200 million
to ¥25,100 million

Maximum of¥60,300 million

Location

Koto-ku, Tokyo

Site area

12,551m2

14,335m2

26,886m2

Rentable area

28,326m2

36,764m2

65,090m2

Structure

10 floors

11 floors—

Completion of construction

October 2007

September 7, 2004—

Acquisition date

March 31, 2008 (scheduled)

September 13, 2005—

SellerShimizu Corporation

Special Purpose Company of —Shimizu Corporation¥35,200 million—

NBF Nagoya Hirokoji Building

14th Period, Other Cities (scheduled)Expansion increases scale and grade
The expansion of the NBF Nagoya Hirokoji Building will raise the standard area of each floor to 1,117m2 and total floor area to
14,652m2, thus increasing the scale of the existing building. This will raise the grade of the property. Efforts to add value including
improvements to common areas will further support our objective of increasing competitiveness and rent levels.

A

14

B

NBF Nagoya Hirokoji Building(A) (Expansion)

NBF Nagoya Hirokoji Building(B) (Existing)(A) + (B)

Acquisition price¥1,826 million¥5,406 million¥7,232 million

LocationNaka-ku, Nagoya, Aichi

Site area

431m2

1,252m2

1,683m2

Rentable area

2,903m2

6,873m2

9,776m2

Structure

9 floors

9 floors above ground,
2 floors below—

Completion of construction

March 17, 2008 (scheduled)

October 25, 2000—

Acquisition date

March 17, 2008 (scheduled)

March 30, 2004—

SellerTaisei Corporation

Toei Corporation—

NBF Report January–June 2007—

Main Properties

From upper left
1 Yamato Seimei Building●
2 Nishi-Shinjuku Mitsui Building●
From lower left
3 Shiba NBF Tower●
4 NBF Platinum Tower●

NBF Report January–June 200715

From upper left
5 Gate City Ohsaki●
6 Toranomon Kotohira Tower●
From lower left
12 NBF Toranomon Building●
15 NBF Alliance●
8 Nakameguro GT Tower●

16

NBF Report January–June 2007

Main Properties

From upper left
29 IST Building●
30 Shin-Kawasaki Mitsui Building●
Center
20 NBF Akasaka Sanno Square●
From lower left
47 Shinanobashi Mitsui Building●
46 ●52 Aqua Dojima NBF Tower, Aqua Dojima East●

NBF Report January–June 200717

Location of Office Properties

Tokyo CBDs
Kita-ku

1 Yamato Seimei Building
2 Nishi-Shinjuku Mitsui Building
3 Shiba NBF Tower

Arakawa-ku

25 24

4 NBF Platinum Tower

Toshima-ku

5 Gate City Ohsaki
6 Toranomon Kotohira Tower
7 NBF Nihonbashi Muromachi Center Building

Taito-ku

Bunkyo-ku

Nakano-ku

8 Nakameguro GT Tower
28

9 NBF Ginza Street Building
10 Shinjuku Mitsui Building No. 2

Sumida-ku
Shinjuku-ku

2

23

11 GSK Building

Chiyoda-ku

10

12 NBF Toranomon Building
13 Kowa Nishi-Shinbashi Building B

7

16
Imperial
Palace11

14 Nippon Steel Building No. 2

26

Chuo-ku

20

15 NBF Alliance

Koto-ku

1

Shibuya-ku

16 Yotsuya Medical Building

6

17 Shibuya Garden Front

12

9

13

15
17

18 NBF Shibakouen Building
19 NBF Takanawa Building

Setagaya-ku

20 NBF Akasaka Sanno Square

8

Minato-ku

22

3

14

57 29

18

27
4

21 Sumitomo Densetsu Building

19
21

22 NBF Higashi-Ginza SquareTokyo Bay

Meguro-ku

23 NBF Ogawamachi Building
24 NBF Ikebukuro Tower
25 NBF Ikebukuro City Building

5

26 NBF Sudacho Verde Building

Shinagawa-ku

27 NBF Ebisu-minami Building

Other Greater Tokyo
28 Nakanosakaue Sunbright Twin
29 IST Building
57 Toyosu 5-Chome Building(Scheduled for acquisition in March 2008)

7 NBF Nihonbashi●

16 Yotsuya Medical Building●

17 Shibuya Garden Front●

Muromachi Center Building

18

18 NBF Shibakouen●

Building

NBF Report January–June 2007

22 NBF Higashi-Ginza Square●As of June 30, 2007
Other Greater TokyoTOCHIGI

30 Shin-Kawasaki Mitsui Building
31 Yokohama ST Building

UTSUNOMIYA

35

32 Parale Mitsui Building

34

33 NBF Atsugi Building

IBARAKITo Omiya

36 37

34 Tsukuba Mitsui Building
35 NBF Utsunomiya Building

SAITAMA

36 S-ino Omiya North Wing
37 Daido Life Omiya Building

38

38 NBF Urawa Building
39 NBF Matsudo Building

TOKYO

39

CHIBA
28
57 29

Other Cities
Tokyo Bay

30
32

40 Sapporo L-Plaza
41 NBF Sapporo Minami Nijo Building

31

33

40 41

42 NBF Sendai Honcho Building
43 NBF Unix Building

KANAGAWA

44 NBF Niigata Telecom Building
45 NBF Nagoya Hirokoji Building
46 Aqua Dojima NBF Tower
44

42
43

47 Shinanobashi Mitsui Building
48 Sun Mullion NBF Tower
49 Sakaisuji-Honmachi Center Building
50 NBF Sakai-Higashi Building

53

45

51 NBF Tanimachi Building

54 55
56

46 47 48 49

52 Aqua Dojima East

50 51 52

53 NBF Shijo Karasuma Building
54 NBF Hiroshima Tatemachi Building
55 Hiroshima Fukuromachi Building
56 NBF Hakata Gion Building

32 Parale Mitsui Building●

36 S-ino Omiya North Wing●

40 Sapporo L-Plaza●

48 Sun Mullion NBF Tower●

49 Sakaisuji-Honmachi●

Center Building

NBF Report January–June 2007

19

Portfolio Overview
NBF’s properties as of June 30, 2007 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 Gate City Ohsaki●
6 Toranomon Kotohira Tower●
7 NBF Nihonbashi Muromachi Center Building●
8 Nakameguro GT Tower●
9 NBF Ginza Street Building●
10 Shinjuku Mitsui Building No. 2●
11 GSK Building●
12 NBF Toranomon Building●
13 Kowa Nishi-Shinbashi Building B●
14 Nippon Steel Building No. 2●
15 NBF Alliance●
16 Yotsuya Medical Building●
17 Shibuya Garden Front●
18 NBF Shibakouen Building●
19 NBF Takanawa Building●
20 NBF Akasaka Sanno Square●
21 Sumitomo Densetsu Building●
22 NBF Higashi-Ginza Square●
23 NBF Ogawamachi Building●
24 NBF Ikebukuro Tower●
25 NBF Ikebukuro City Building●
26 NBF Sudacho Verde Building●
27 NBF Ebisu-minami Building●

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

Fee simple
Comparted ownershipFee 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
Comparted ownershipFee simple
Fee simple
Fee simple
Fee simple

100.0
85.1
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
100.0
83.8
100.0
100.0
100.0
100.0

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

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

64,55037,08731,56831,25525,06821,51324,01522,68017,605
15,736
14,10913,78012,285
11,910
9,513
8,731
8,446
6,806
6,295
6,288
4,921
5,111
4,965
4,550
4,494
3,381
1,029

80.6 Note 4
100.0
35.0
75.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0

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

40,59435,20020,30013,529
3,800
2,300
8,876
2,435
16,816
2,361
2,000
2,455

40,18934,30520,02912,634
3,345
2,199
7,673
2,540
16,215
2,213
1,972
2,336

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

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

4,404
1,870
3,566
4,029
3,958
5,406
17,81014,40010,500
6,500
2,227
1,944
1,914
1,627
2,930
835
2,629
674,354

4,247
1,734
3,620
3,408
3,696
5,290
17,29512,013
9,248
6,432
2,048
1,911
1,880
1,393
2,963
773
2,376
643,669

Other Greater Tokyo
28 Nakanosakaue Sunbright Twin●
29 IST Building●
30 Shin-Kawasaki Mitsui Building●
31 Yokohama ST Building●
32 Parale Mitsui Building●
33 NBF Atsugi Building●
34 Tsukuba Mitsui Building●
35 NBF Utsunomiya Building●
36 S-ino Omiya North Wing●
37 Daido Life Omiya Building●
38 NBF Urawa Building●
39 NBF Matsudo Building●

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

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

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

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

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

20

NBF Report January–June 2007

Revenue

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

61
1
27
5
1
1
14
1
1
44
1
11
2
2
9
1
1
7
5
6
1
9
1
13
12
4
3

1,938
1,407
1,058
1,430
1,051
1,042
903
1,049
Note 2685
Note 2537
Note 2614
303
327
Note 2
238
339
248
Note 2
235
199
217
188
114
59

7.3
5.3
4.0
5.4
3.9
3.9
3.4
3.9
Note 22.6
Note 22.0
Note 22.3
1.1
1.2
Note 20.9
1.3
0.9
Note 2
0.9
0.7
0.8
0.7
0.4
0.2

99.9
99.6
100
98.8
100
100
90.1
98.8
99.8
100
100
90.5

8
9
1
88
1
20
67
35
34
14
14
23

846
1,144
944
757
304
140
506
145
767
120
114
140

3.2
4.3
3.5
2.8
1.1
0.5
1.9
0.5
2.9
0.4
0.4
0.5

100
100
98.4
94.9
98.0
100
99.9
100
94.8
96.4
85.3
100
96.4
100
92.3
98.0
100
99.0

12
8
9
56
35
9
38
1
29
44
20
3
20
19
25
16
8
910

329
126
211
296
266
235
840
718
436
329
125
Note 2
116
97
161
40
157
26,641

1.2
0.5
0.8
1.1
1.0
0.9
3.2
2.7
1.6
1.2
0.5
Note 2
0.4
0.4
0.6
0.1
0.6
100.0

Appraisal Value

Rentable
Area

Leased Area at
End of Period

Occupancy Rate at
End of Period(Yen in millions)

(m2)

(m2)

(%)

68,30053,50036,50054,60034,40034,70032,00029,80016,50023,00020,20019,70018,50015,21011,6009,170
16,150
8,350
8,420
8,160
6,460
7,560
6,060
6,220
5,610
4,140
1,450

27,64032,96824,72833,503
20,714
16,84816,30621,423
3,440
14,90020,426
10,193
10,08817,338
4,043
7,450
8,258
7,087
10,473
5,258
5,991
4,871
4,805
5,666
5,127
2,971
1,595

27,111
32,96824,72833,503
20,714
16,84816,30621,4233,440
14,841
20,426
9,884
10,08817,338
4,043
7,450
8,258
7,087
10,458
5,258
5,991
4,871
4,805
5,666
5,127
2,971
1,595

98.1
100
100
100
100
100
100
100
100
99.6
100
97.0
100
100
100
100
100
100
99.9
100
100
100
100
100
100
100
100

39,30037,80020,50022,200
4,470
2,520
9,690
2,790
22,000
2,560
2,100
2,750

31,93636,76427,92420,06912,545
5,230
16,834
6,197
20,698
3,574
3,455
4,770

31,90036,61527,924
19,833
12,545
5,230
15,165
6,122
20,650
3,574
3,455
4,319

6,170
1,770
4,380
4,630
4,490
6,350
24,20015,30010,700
7,430
2,430
2,190
2,370
1,810
3,290
917
2,790
826,157

11,396
5,345
7,539
13,47910,221
6,873
21,93525,237
14,896
11,438
5,301
4,948
3,243
3,931
5,612
1,309
5,416
692,222

11,396
5,345
7,415
12,794
10,012
6,873
21,917
25,237
14,121
11,027
4,520
4,948
3,125
3,931
5,178
1,283
5,416
685,064

Total Number ofTenants at
End of Period

NBF Report January–June 200721

Management Team and Management Structure(As of June 30, 2007)

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

dance, unless otherwise stipulated by laws, regulations or NBF’s articles

Nippon Building Fund Inc. is an investment corporation establishedof incorporation. Decisions on substantive matters such as changes in thewith the objective of investing in assets, primarily Designated Assets asarticles of incorporation require the attendance of shareholders that con-defined by the Investment Trust Law of Japan. NBF entrusts management

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

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

management company.

change in the asset management policies and standards, which are stipu-

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

lated 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 central
business districts (CBDs) in Tokyo, Greater Tokyo and other cities in

Executive Directors, Supervisory Directors and theBoard 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 June 30, 2007, 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 fifth General Meeting of
Shareholders convened on March 8, 2007. 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 in atten-

vising 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.

22

Borrowings /Bonds and
Notes
Debt
Service

NIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

AssetsShareholders’EquityInvestment
Distribution

NBF Report January–June 2007

Shareholder
Trading

Shareholder

Management Team

Seated from left:

Sadafumi Abe
Koichi Nishiyama
Standing from left:

Hatsuo Komatsu
Akira Nishizawa
Hideo Fukazawa
Sadao Kamiyama

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 August 2001. Real estate appraiser. Tokyo
District Court Appraisal Committee member.
Appointed Supervisory Director of NBF in March 2005 after serving as a deputy director of
the Ministry of Land, and director of the Government 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.

Koichi Nishiyama
Supervisory Directors

Akira Nishizawa
Hideo Fukazawa
Hatsuo Komatsu
Sadao Kamiyama

Board of Directors require a simple majority with more than half of thetors and supervisory directors selected to fill a vacancy or because of an

members of the Board in attendance.

increase in the number of directors expire at the same time as the

The bylaws of NBF’s Board of Directors stipulate that executive andremaining terms of their predecessors or the current directors. Both of thesupervisory directors may not participate in decisions in which they have

two executive directors and all four supervisory directors were elected at

a vested interest. Executive and supervisory directors with such financial

the General Meeting of Shareholders held on March 8, 2007, andinterest shall not be included in the number of executive and supervisory

assumed office on March 17, 2007.

directors in attendance for such decisions.
The terms of office of executive directors and supervisory directors are
two years from the time they assume office. The terms of executive direc-

NBF Report January–June 200723

Nippon Building Fund Management Ltd.

Management Structure

NBF entrusts asset management to Nippon Building Fund

General Meeting of Unitholders

Management Ltd. under an asset management agreement.

AuditorBoard of Directors

Matters Entrusted to
Nippon Building Fund Management Ltd.

Internal Audit Organization
Executive BoardCEOAs the asset management company required by the Investment Trust

Accounting Auditor
Investment
Review Board

Law of Japan, Nippon Building Fund Management Ltd. manages NBF’s

Risk
Management
Board

assets in accordance with the asset management objectives and policies
Investment & Finance Group

stipulated by NBF’s articles of incorporation. In addition, in accordance with

Corporate Operation Groupthe 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 andBuilding Fund Management Ltd. The heads of the Investment & Financethe Board of Directors as manager of general administration.

Group and the Corporate Operation Group also serve as directors, andManagement Structure of
Nippon Building Fund Management Ltd.

oversee their respective divisions under the direction and oversight of thepresident. 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

Yasushi Nakayama

Director, Head ofInvestment& Finance GroupRiichi Morihiro

Director, Head ofCorporate OperationGroup

Kimihiro Suwa
Tamotsu Shinyama
Kaneo Maeda

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

April 1974 Joined Mitsui Fudosan Co., Ltd.
April 2000 Manager of Building Fund Office, Building Division of Mitsui Fudosan
Sept. 2000 President and representative director of MF Asset Management Co., Ltd.
(now Nippon Building Fund Management Ltd.) (current position)
Aug. 2001 Became Executive Director of NBF (current position)
April 1981 Joined Mitsui Fudosan Co., Ltd.
April 2001 Head of Building Business Division, Building Department of Mitsui Fudosan
April 2006 Manager of Building Department, Chiyoda Development Division of Mitsui Fudosan
April 2007 Became Director of Nippon Building Fund Management Ltd. (current position)
April 1978 Joined Sumitomo Life Insurance Company
Oct. 2002 Assistant Manager, Financial Corporation Division of Sumitomo Life Insurance
April 2005 Director and Manager of Residential Planning Division, Eisen Realty Co., Ltd.
April 2006 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2007 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2002 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2007 Became Auditor of Nippon Building Fund Management Ltd. (current position)

Noriaki Moromachi

24

April 2003 Became Auditor of Nippon Building Fund Management Ltd. (current position)

NBF Report January–June 2007

Management Team and Management Structure

Compliance Initiatives

fund procurement and management policies; accounting guidelines for

The management of NBF and Nippon Building Fund Management Ltd.
conduct honest and appropriate business activities while maintaining rig-

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

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

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

Fundamental Policy on Conflict of Interest Transactions

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

Nippon Building Fund Management Ltd. is constantly aware of its

executive directors report on their execution of their duties and superviso-

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

ry directors ensure that oversight and check-and-balance systems aretions in which the interests of NBF and the interests of Nippon Building

functioning properly.

Fund Management Ltd. and its related corporations or customers may con-

Nippon Building Fund Management Ltd. views compliance as a man-flict. Nippon Building Fund Management Ltd. follows voluntary rules stipu-

agement strategy, with a fundamental compliance policy of conducting

lated in laws and internal bylaws to proactively prevent conflicts of interest.

operations honestly and fairly while maintaining a rigorous complianceAll decisions made in executing the management of NBF’s assets are

system based on a high level of corporate ethics. Specifically, Nippon

subject to the approval of the president, and are made after going throughBuilding Fund Management Ltd. requires that a compliance officer be

discussions by the Investment Review Board and Executive Board ofassigned to the Corporate Operation Group, and has establishedNippon Building Fund Management Ltd. Sponsor companies are not per-Compliance Rules and a Compliance Manual. In addition, a Compliancemitted to intervene in the decision-making process.

Program is formulated each year to verify the progress of the execution■

Voluntary Rules for Conflict of Interest Transactions
Stipulated in Internal Bylaws

plan for that year and identify any problem areas.

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

Risk Management System
NBF and Nippon Building Fund Management Ltd. have established thefollowing risk management system to avoid and minimize risks related tocompanies that have interests in Nippon Building Fund Management Ltd.
The voluntary rules require the Investment Division, which initiates theinvestments.

transaction, as well as the Compliance Department, the Asset■

NBF

Management Examination Meeting and other units to protect NBF’s man-

NBF’s Risk Management Regulations define risk management policies

aged assets and profits by fully examining the transaction contents

and procedures. The Risk Management Board convenes once every threeaccording to the voluntary rules set in the internal bylaws in the event of amonths and undertakes deliberation, monitoring and other initiatives totransaction in which the interests of Nippon Building Fund Management

ensure that the entrusted asset manager is conducting its duties with due

Ltd. and parties that have interests in Nippon Building Fund Management

care in good faith in a manner consistent with its fiduciary duty to theLtd. may conflict with the interests of NBF. These rules are designed fromconservation and maintenance of entrusted assets.

the standpoint of accountability to NBF and its shareholders.

■

In examining the transaction contents, Nippon Building Fund

Nippon Building Fund Management Ltd.

Nippon Building Fund Management Ltd. formulates a Management

Management Ltd. solicits the opinions of attorneys, certified tax account-

Policy, a Medium-to-Long-Term Asset Management Policy and an Annual

ants and other third-party experts as needed. In addition, when purchas-

Management Plan to follow in managing NBF’s assets. In addition, Nippon

ing real estate or other assets from parties that have interests in Nippon

Building Fund Management Ltd. has set Asset Management Guidelines as

Building Fund Management Ltd., the purchase price is strictly set no high-a set of standards to follow.

er than the appraised value according to a real estate appraiser, who, as a

The Asset Management Guidelines consist of management guidelines

rule, shall have no vested interest.

for management, acquisition and sale of assets; financial guidelines for

NBF Report January–June 200725

Management’s Discussion and Analysis
Summary of Selected Financial Data
12th Period
from January 1, 2007 toJune 30, 2007

11th Period
from July 1, 2006 to
December 31, 2006

10th Period
from January 1, 2006 toJune 30, 2006

(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¥ 26,641
26,641—
14,52913,323
10,064
10,063
15,18818,442
10,0635,125
1,210
680,266
281,500
356,509508,000
701,790
19,80929,897
1.53%(3.06%)
2.82%(5.65%)
44.9%
52.4%
100.0%
181
56
910
692,22299.0%¥ 25,894
25,894—
14,242
13,0959,767
9,766
14,754
17,787
9,766
4,988
1,317
634,117
236,500
356,213508,000
701,206
19,22429,043
1.54%(3.08%)
2.74%(5.48%)
40.9%
56.2%
99.9%
184
55
892
670,513
97.8%¥ 24,307
22,872
1,435
12,622
11,472
9,852
9,851
12,951
15,936
9,851
4,536
753
633,693
237,500
356,297
508,000
701,373
19,391
27,395
1.64%(3.29%)
3.15%(6.30%)
41.0%
56.2%
100.0%
18155
887
670,249
98.7%

12th Period
from January 1, 2007 toJune 30, 2007
U.S. dollars in thousands
except per share data (Note 1)$ 215,906
215,906—
117,746
107,977
81,56081,553123,085
149,461
81,554
41,532
9,806
5,513,139
2,281,384
2,889,292
—
5,688
161
242

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥123.39 = U.S. $1.00, the approximate exchange rate on June 30, 2007.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses are annualized based on the 6-month figures for 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
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Funds from operations: Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + 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.
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.

26

NBF Report January–June 2007

Operating Environment and Results
During the six months ended June 30, 2007 (the “12th Period”), Japan’s economy continued its gradual expansion, supported by firm
exports with continued steady growth in capital investment.
In the office building leasing market, strong corporate performance fueled aggressive business expansion and improved employment
conditions, which further raised demand for office space in the central business districts (CBDs) of Tokyo. The result was a marked
decrease in vacancy rates and increase in rents for new tenants. Moreover, continued strong growth in the leasing market was not limited
to rents for new tenants in Tokyo CBDs, with an upward trend also apparent in rent for lease contract renewals.
In the real estate acquisition market, solid demand for office space and low interest rates continued to drive aggressive investment bydomestic and foreign funds, J-REITs and other institutions, which significantly increased acquisition prices and lowered yields. As a result,the environment for real estate acquisition remained challenging.
Under these conditions, NBF continued to manage its assets based on a strategy of investing in high-quality, highly competitive officebuildings with comparatively stable rental cash flow and little risk of decline in asset value.
During the 12th Period, NBF exercised careful deliberation that made the most of its accumulated expertise and original information
channels such as the Mitsui Fudosan Group. In March 2007, NBF made an additional acquisition in Nakanosakaue Sunbright Twin (acquisition price: ¥31,163 million) and a new acquisition in the Nakanosakaue Sunbright Annex (acquisition price: ¥452 million). In April 2007,
NBF acquired the NBF Ginza Street Building (acquisition price: ¥17,000 million). In June 2007, NBF closed the acquisition of land with abuilding located at Kandasuda-cho 2-chome, Chiyoda-ku, Tokyo, for which it had completed an acquisition contract in December 2006
(acquisition price: ¥900 million).
For its portfolio properties, NBF also implemented various measures to increase tenant satisfaction, including conducting surveys toachieve an understanding of tenant needs, providing meticulous property management services, doing regular renewal construction andimproving administrative processes. At the same time, NBF identified suitable markets, set appropriate rents and increased rents for existing tenants who renewed their lease contracts. These and other efforts further enhanced profitability.
As a result of these efforts, NBF’s real estate portfolio as of June 30, 2007 totaled 56 buildings. Total investment on an acquisition
price basis was ¥674,354 million. Total rentable area was 692,222m 2. The occupancy rate increased 1.2 percentage points from
December 31, 2006 to 99.0 percent. Tenants totaled 910.

Occupancy rate

Total investment(Yen in billions)

June 30,
2007¥21.8 billion(contract completed)*

December 31,
2006

(%)

June 30,
2007
December 31,
2006

June 30,
2006

June 30,
2006

December 31,
2005

December 31,
2005

June 30,
2005

June 30,
2005
0

100

200

300

400

500

600

700

0

90 91 92 93 94 95 96 97 98 99 100* Contract basis. Toyosu 5-Chome Building (tentative name)calculated as ¥20 billion for convenience.

Overview of Performance
Operating revenues for the six months ended June 30, 2007 increased 2.9 percent, or ¥747 million, compared with the previous sixmonth period to ¥26,641 million. Operating income in the property leasing business increased 4.0 percent, or ¥519 million, comparedwith the previous six-month period to ¥13,318 million. Operating income increased 3.9 percent, or ¥460 million, compared with the previ-

NBF Report January–June 200727

ous six-month period to ¥12,112 million.
Operating income increased due to an increase in operating revenues resulting from the contribution of Nakanosakaue Sunbright Twinand the NBF Ginza Street Building, which NBF acquired during the six months ended June 30, 2007, as well as internal growth resulting
from factors including rent increases for existing tenants who renewed their leases.

Operating income from property
leasing activities

Operating revenues(Yen in millions)(Yen in millions)

12th

12th
PeriodPeriod11th
Period11th
Period10th
Period10th
Period9th
Period9th
Period8th
Period8th
Period005,000 10,000 15,000 20,000 25,000 30,000

5,000

10,00015,000Distribution for the Current Period
Distribution per share for the current period was ¥19,809. 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
June 30, 2007

For the six months ended
December 31, 2006

For the six months ended
June 30, 2006

(Yen in thousands, except per share amounts)

Retained earnings
Undistributed earnings
Total cash distribution(Total cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash distribution in excess of accumulated earnings(per share)¥10,063,002
30
10,062,972
19,80910,062,972
19,809——¥9,766,001
209
9,765,792
19,224
9,765,792
19,224——¥9,850,811
183
9,850,628
19,3919,850,628
19,391——

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

Distribution per share

Total cash distribution
(Yen)

12th
PeriodPeriod11th
Period11th
Period10th
Period10th
Period9th
Period9th
Period8th
Period8th
Period0

28(Yen in millions)

12th

5,000

10,00015,00020,00005,000

NBF Report January–June 2007

7,500

10,00012,500Management’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of June 30, 2007, total assets increased ¥46,149 million to ¥680,266 million compared with December 31, 2006. Return on average total assets (ROA) for the six months ended June 30, 2007 decreased to 1.53 percent from 1.54 percent for the previous six-month
period.
Current assets decreased ¥2,336 million to ¥32,441 million compared with December 31, 2006. Investment properties increased¥46,521 million to ¥643,643 million compared with December 31, 2006.

Liabilities
Current liabilities increased ¥27,868 million to ¥77,188 million compared with December 31, 2006, primarily because of an increasein short-term loans compared with December 31, 2006.
Long-term debt increased ¥17,000 million to ¥212,000 million compared with December 31, 2006.
As a result, total interest-bearing liabilities increased ¥45,000 million to ¥281,500 million compared with December 31, 2006.
However, the ratio of fixed-rate long-term debt to total interest-bearing liabilities decreased to 75.3 percent from 82.5 percent as of June30, 2007. The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities plus deposits under management to total assets,
increased to 44.9 percent from 40.9 percent as of June 30, 2007.
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 June 30, 2007, NBF had issued bonds totaling ¥30 billion under this shelf registration.

Net Assets
Net assets increased ¥297 million to ¥356,509 million compared with December 31, 2006.

Total assets

Net assets(Yen in millions)

12th
Period(Yen in millions)

12th
Period11th
Period11th
Period10th
Period10th
Period9th
Period9th
Period8th
Period0300,000 400,000 500,000 600,000 700,000

8thPeriod0100,000

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 June 30, 2007, NBF had issued 508,000 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

NBF Report January–June 200729

the completion of a public offering. As the Investment Trust Law of Japan does not contain any provision for the issue of more than one
class of shares, NBF’s common shares comprise the sole class of shares authorized and issued by NBF.
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
August 11, 2004 Third party
allocation
August 10, 2005 Public offering
March 16, 2006
Public offering
Third party
March 29, 2006
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 8Notes: 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 units for ¥625,000 per share (excluding underwriting fee: ¥603,125) to repay debt and to fund property acquisition.
4. Public offering of new units for ¥759,500 per share (excluding underwriting fee: ¥735,475) to repay debt, etc.
5. Additional issue of new units (third party allocation) for ¥735,475 per share undertaken pursuant to the public offering in Note 4.
6. Public offering of new units for ¥916,300 per share (excluding underwriting fee: ¥887,782) to repay debt and to fund property acquisition.
7. Public offering of new units for ¥1,019,200 per share (excluding underwriting fee: ¥988,000) to repay debt and to fund property acquisition.
8. Additional issue of new units (third party allocation) for ¥988,000 per share undertaken pursuant to the public offering in Note 7.

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

High
Low

For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen)

For the six months ended
June 30, 2006

¥1,990,000
1,550,000¥1,580,000
1,080,000¥1,170,000
995,000

Borrowings
Borrowings from financial institutions as of June 30, 2007 are shown below.
Short-term debt
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

Repayment
methodUse of
funds

Notes

(Yen in millions)

The Sumitomo Trust and Banking¥10,000
Company, Limited
Shinkin Central Bank
7,000
The Shinsei Bank, Limited
7,000
Mitsubishi UFJ Trust and Banking Corporation
3,000
THE BANK OF FUKUOKA, LTD.
2,000
The Hachijuni Bank, Ltd.
2,000
1,000
THE KAGOSHIMA BANK, LTD.

The Gunma Bank, Ltd.
The Yamaguchi Bank, Ltd.
THE SHIZUOKA BANK, LTD.
The Chugoku Bank, Limited
The Iyo Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.

Total short-term debt

30

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

0.8%
0.8%
0.8%
0.8%
0.9%
1.0%
0.9%
0.9%
0.9%
0.9%
0.9%
0.9%
1.0%

July 31, 2007
July 31, 2007
July 31, 2007
July 31, 2007
July 31, 2007
September 28, 2007
July 31, 2007
July 31, 2007
July 31, 2007
August 31, 2007
July 31, 2007
July 31, 2007
September 28, 2007

¥37,500

NBF Report January–June 2007

Bulletpayment(Note 2)

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

Management’s Discussion and Analysis

Long-term debt
LenderAverageinterest rate (%)

BalanceDue on(Note 1)

Repayment
methodUse of
funds

Notes

(Yen in millions)¥ 4,000
10,00010,00010,00010,000Sumitomo Life Insurance Company
12,000
5,000
5,000
3,000
Zenkyoren
1,000(The National Mutual Insurance
10,000Federation of Agricultural Cooperatives) 10,000
The Chuo Mitsui Trust and
9,000
Banking Co., LIMITED
5,000
1,000
MITSUI LIFE INSURANCE COMPANY,
2,000
LIMITED
4,000
2,000
3,000
2,000
Meiji Yasuda Life Insurance Company
3,000
4,000
1,000
2,000
The Norinchukin Bank
8,000
Nippon Life Insurance Company
3,000
2,000
2,000
The Sumitomo Trust and
6,000
Development Bank of Japan

1.8%
1.5%
1.8%
2.0%
2.4%
1.7%
1.7%
2.1%
1.2%
1.7%
1.5%
2.3%
1.3%
1.6%
1.2%
1.7%
1.8%
1.6%
1.6%
2.0%
2.1%
2.2%
2.2%
1.2%
1.1%
0.9%
0.8%
1.1%
1.3%

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
May 23, 2008
July 16, 2009
July 19, 2011
February 3, 2010
June 1, 2011
September 11, 2015
May 30, 2016
July 16, 2007
March 30, 2011
March 30, 2009
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
November 20, 2008
October 30, 2009
April 1, 2010
October 19, 2010
July 16, 2007

1.2%
1.8%
2.0%
1.4%
0.8%

February 3, 2010
March 30, 2012
October 31, 2014
October 4, 2013
February 13, 2008

Bulletpayment(Note 2)

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

Banking COMPANY, LIMITEDDAIDO LIFE INSURANCE COMPANY

The Dai-Ichi Mutual Life
Insurance Company

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

(Continued)

NBF Report January–June 200731

Long-term debt (Continued)
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

Repayment
method

0.7%
1.2%
1.7%
1.5%
1.5%
1.4%

September 28, 2007
February 12, 2010
December 15, 2014
February 7, 2012
June 30, 2009
May 23, 2008

Use of
funds

Notes

(Yen in millions)

2,000
1,000
1,000
Mizuho Corporate Bank, Ltd.
2,000
Sumitomo Mitsui Banking Corporation
1,000
The Joyo Bank, Ltd.
1,000
Total long-term debt
¥164,000
Total borrowings (Note 4)¥201,500
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
TAIYO LIFE INSURANCE COMPANY

Bulletpayment(Note 2)

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 the 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.
(Yen in millions)

Amount Borrowed

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥10,000¥18,000¥8,000¥22,000

NBF Bonds
Issue date

Balance as ofJune 30, 2007
(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

¥ 10,000

1.60%

No. 6 Unsecured Bonds
No. 7 Unsecured Bonds

March 9, 2005
November 9, 2005

¥ 10,000¥ 10,000

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

¥ 10,000¥ 10,000¥ 10,000

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)
Within 1 year

Amount Borrowed—

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years—¥20,000—¥20,000

Others
NBF had security deposits totaling ¥34,515 million as of June 30, 2007.

32

NBF Report January–June 2007

Management’s Discussion and Analysis

Capital Expenditures
Planning
As of June 30, 2007, NBF is planning the following capital expenditures for the renovation of its properties. The amounts below include
repairs and maintenance costs that will be expensed as incurred. Moreover, in addition to a steady program of expenditures for construction, repair and renovation of facilities, a program of renewal construction is being implemented in order to increase competitive power inthe 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

Yokohama ST Bldg.
NBF Sendai Honcho Bldg.
NBF Utsunomiya Bldg.
NBF Ogawamachi Bldg.
NBF Ikebukuro Tower
Parale Mitsui Bldg.
NBF Urawa Bldg.
NBF Utsunomiya Bldg.

Estimated
durationObjective

Security equipment
renovation
Air conditioning equipment
renovation (4th Period)
Cleaning and sealing
renovation of exterior walls
Renovation of central
monitoring facilities
Renovation of HVAC
equipment (1st Period)
New lighting ballast
installation (1st Period)
Exterior wall renovation
Outdoor unit fan motor
replacement
Compressor overhaul

From July 2007
to December 2007
From September 2007
to December 2007
From July 2007
to October 2007
From March 2008
to May 2008
From April 2008
to May 2008
From May 2008
to June 2008
From September 2007
to January 2008
From April 2008
to June 2008

NBF Report January–June 2007

Total amounts

Estimated amounts
Payment for thecurrent period(from January 1, 2007 toJune 30, 2007)(Yen in millions)

Cumulative
amount paid

¥142

¥—

¥—

¥ 82

¥—

¥—

¥ 25

¥—

¥—

¥ 75

¥—

¥—

¥ 59

¥—

¥—

¥ 45

¥—

¥—

¥ 40

¥—

¥—

¥ 26

¥—

¥—

33

Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥1,210 million in capital expenditures together
with ¥618 million for repairs and maintenance expenses.
Name of property

NBF Shibakouen Bldg.

NBF Sendai Honcho Bldg.
Other buildings

Objective

PeriodRenovation of common areas, barrier-free construction,
renovation of air conditioning system including regulatorsand heat exchangers
Air conditioning equipment renovation (3rd Period)
Work including 6th floor east air conditioning equipment
Work including maintenance projects andrenovation to raise tenant satisfaction

Expenditure(Yen in millions)¥ 132

From January 2007
June 2007

Total

85
993

¥1,210Cash 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 June 30, 2007

As of December 31, 2006
(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

¥ 949
1,536
1,899
¥ 586

¥1,413
1,460
1,924
¥ 949

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. The above reserves do not include an accumulated reserve of ¥3,627 million as of June 30, 2007 for repair based on maintenance and other contracts with management organizations at buildings owned by NBF.

34

NBF Report January–June 2007

Management’s Discussion and Analysis

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen in millions)

For the six months ended
June 30, 2006

¥ 977
30

¥ 949
30

¥ 877
26

58
19
13
108
¥1,20556
19
12
80¥1,147

67
11
12
157
¥1,150Item

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 ¥161 million for the period from January 1, 2007 to June 30, 2007, and ¥493 million for theperiod from January 1, 2006 to June 30, 2006 related to investment in properties which were booked on each property.

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

Date

Acquisition price (Note 1)

Nakanosakaue Sunbright Twin
Nakanosakaue Sunbright Annex
NBF Ginza Street Bldg.
NBF Sudacho Verde Bldg.
Total

March 23, 2007
March 23, 2007
April 25, 2007
June 11, 2007

¥31,163452
17,000900¥49,515

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

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.

Transactions with Interested Parties and Transactions with Major Shareholders of Investment Trust Management Company(1) Ongoing Transactions
None. (No purchases, sales or other transactions involving interested parties)

NBF Report January–June 200735

Management’s Discussion and Analysis(2) Fees Paid for the Period from January 1, 2007 to June 30, 2007
Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Brokerage commission
Office management fees, etc.
(Note 3)

¥ 537
1,058

Property transfer fee
Property maintenance fees

8
2,249

Leasing related service fees

102

Corporate bonds acceptancecommission

125

Amount ofpayment (B)(Yen in millions)

Paid toMitsui Fudosan Investment Advisors, Inc.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan 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.
Mizuho Securities Co., Ltd.

¥ 510
1,022
28
8
326
321
127
80
12
1
36
35
40

B/A
(Note 2)

95.0%
96.5%
2.6%
100.0%
14.5%
14.3%
5.6%
3.6%
0.5%
0.0%
35.4%
34.4%
32.0%

Notes: 1. “Interested parties” are as defined in Article 20 of the government ordinance regarding investment trusts and investment corporations, principally, parties related to
NBF and the asset management firm to which it entrusts investment trust management under contract. “Major shareholders of the investment trust management company” are as defined by Article 9, Paragraph 3 of the government ordinance regarding investment trusts and investment corporations. During the period ended June 30,
2007, transactions with and fees paid to Mitsui Fudosan Investment Advisors, Inc., Mitsui Fudosan Co., Ltd., First Facilities Co., Ltd., First Facilities West Co., Ltd.,
Mitsui Fudosan Building Management Co., Ltd., NBF Office Management Co., Ltd., First Facilities Yokohama Co., Ltd., Mitsui Fudosan Housing Lease Co., Ltd. andMizuho Securities Co., Ltd. were as described above.
2. Figures indicate percentages of total prices.
3. NBF leases Nishi-Shinjuku Mitsui Bldg., Gate City Ohsaki, Toranomon Kotohira Tower, Naka-Meguro GT Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg.,
Parale Mitsui Bldg. and Shinanobashi Mitsui Bldg. to Mitsui Fudosan Co., Ltd., which sub-leases them to sub-lessees. Further, Sumitomo Trust & Banking Co., Ltd., astrustee, also leases the Yotsuya Medical Bldg. to Mitsui Fudosan Co., Ltd., which sub-leases it to sub-lessees. Accordingly, NBF does not entrust the office management business for those properties to Mitsui Fudosan. Instead, NBF Office Management Co., Ltd. has been entrusted to undertake such business on behalf of NBF, theowner and lessor of those properties.
4. In addition to the above fees, a certain portion of the fees paid by NBF to a third party (a company supervising investment company securities ) for handling payments ofprincipal and interest concerning the No. 2, No. 3, No. 4, No. 5 and No. 6 NBF Bonds was paid to Daiwa Securities SMBC Co., Ltd. and in the same manner, a certain
portion of the fees for the No. 6 NBF Bond was paid to Nomura Securities Co., Ltd.
5. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)

Mitsui Fudosan Co., Ltd.
First Facilities Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
Mitsui Designtech Co., Ltd.
First Facilities Yokohama Co., Ltd.
Rehouse Escrow Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsuihome Linkage Co., Ltd.

36

189
175
157
120
32
13
6
5
1

NBF Report January–June 2007

Financial Statements

NBF Report January–June 200737

Balance Sheets
NIPPON BUILDING FUND INC.
As of June 30, 2007 and December 31, 2006

As ofJune 30, 2007

As of
December 31, 2006
(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 3)
Building and improvements including trust accounts (Note 3)
Other tangible assets (Note 3)
Less: accumulated depreciation (Note 3)
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans (Note 5)Long-term debt due within one year (Note 5)
Bonds due within one year (Note 5)
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term debt (Note 5)
Tenant security deposits
Other liabilities
Total Liabilities
Net Assets (Note 4)
Shareholders’ equity
Common shares, non-par value
Shares authorized: 2,000,000 shares
Shares issued and outstanding: 508,000 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.

38

NBF Report January–June 2007

¥ 31,383
509
549
32,441¥ 34,131
336
310
34,777

390,757
245,9116,108(34,801)
35,668643,643
4,182¥680,266

357,174
235,037
5,897(29,693)
28,707597,1222,218¥634,117¥ 37,500
32,000
—
3,439
3,181
1,068
77,188212,000
34,515
54323,757¥ 11,500
20,00010,000
2,440
2,987
2,392
49,319195,000
33,53451
277,904

346,446

346,446

10,063356,509¥680,266

9,767
356,213¥634,117

Statements of Income
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2007, December 31, 2006 and June 30, 2006

For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen in millions)

For the six months ended
June 30, 2006

¥23,992
2,649——
26,641¥23,121
2,773——
25,894¥20,799
2,073
685
750
24,307

3,327
2,178
35
618
2,041
5,125
977
228
14,52912,11216(1,944)—(64)(56)
10,064(1)¥10,063

3,403
1,765
36
593
2,310
4,988
949
198
14,242
11,652
3(1,822)
—
(36)
(30)
9,767
(1)
¥ 9,766

2,832
1,923
37
474
1,670
4,536
877
273
12,622
11,6850(1,642)
(141)
(36)
(14)
9,852
(1)
¥ 9,851

Revenues:
Rental (Note 6)
Other revenues related to property leasing (Note 6)
Gain on sale of investment properties (Note 7)
Gain on exchange of investment properties (Note 7)
Total Revenues
Operating Expenses:
Property management fees (Note 6)
Real estate taxes (Note 6)
Insurance (Note 6)
Repairs and maintenance (Note 6)
Other rental expenses (Note 6)
Depreciation and amortization (Note 6)
Asset management fees
Other expenses
Total Operating Expenses
Operating Income
Interest income
Interest expense
New investment shares issue costs
Amortization of bond issue costs
Other expenses, net
Income before Income Taxes
Current and deferred income taxes (Note 8)
Net Income
The accompanying notes to financial statements are an integral part of these statements.

NBF Report January–June 2007

39

Statements of Shareholders’ Equity
NIPPON BUILDING FUND INC.
For the six months ended June 30, 2007, December 31, 2006 and June 30, 2006

(Yen in millions)
Number ofCommonSharesCommonSharesRetained
Earnings

Total

Balance as of December 31, 2005

422,700¥262,170¥ 7,205¥269,375

Cash dividends declaredIssuance of new shares through public offering as of March 16, 2006
Issuance of new shares through allocation toa third party as of March 29, 2006
Net income—
80,000—79,040(7,205)—(7,205)79,040

5,300
—

5,236
—

—
9,851

5,236
9,851

Balance as of June 30, 2006

508,000

346,446

9,851

356,297————(9,850)9,766(9,850)9,766

508,000

346,446

9,767

356,213————(9,767)
10,063(9,767)
10,063508,000¥346,446¥10,063¥356,509

Cash dividends declared
Net income
Balance as of December 31, 2006
Cash dividends declared
Net income
Balance as of June 30, 2007
The accompanying notes to financial statements are an integral part of these statements.

40

NBF Report January–June 2007

Statements of Cash FlowsNIPPON BUILDING FUND INC.
For the six months ended June 30, 2007, December 31, 2006 and June 30, 2006

Cash Flows from Operating Activities:
Income before income taxes
Depreciation and amortization
Amortization of bond issue costs
Interest expense(Increase) Decrease in tenant receivables
Gain on exchange of investment properties
Increase (Decrease) in accounts payable
Increase (Decrease) in rents received in advance
Decrease in investment properties in trust
accounts 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
Payments for purchases of intangible assets
Proceeds from tenant security deposits
Payments for tenant security deposits
Refunds from security deposits paid to lessors
Payments for security deposits paid to lessors
Payments for purchases of other assets
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Proceeds from short-term loans
Repayment of short-term loans
Proceeds from (Repayment of) long-term debt, net
Payments for bond issue costs
Proceeds from issuance of common shares
Repayments of common shares
Payment of dividends
Net Cash Used in (Provided by) Financing Activities
Net Change in Cash and Cash Equivalents
Cash and cash equivalents at the beginning of period
Cash and Cash Equivalents at the End of Period

For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen in millions)

For the six months ended
June 30, 2006

¥ 10,064
5,125
64
1,944
(173)
—
818
193

¥ 9,767
4,988
36
1,822
4
—
(209)
31

—
(1,889)(190)(1,400)14,556—(1,815)2,219
1,082
17,925

1,677(1,553)(1,145)274
14,771(44,515)(6,963)
3,167(2,187)9(14)(1,877)(52,380)(2,341)—
1,900(1,188)—(9)(81)(1,719)(64,419)(8,871)
10,212(8,879)4(3)(695)(72,651)

125,000(99,000)
19,000(164)——(9,760)35,076(2,748)34,131¥ 31,383

24,000(24,000)(1,000)———(9,844)(10,844)
5,362
28,769¥ 34,131

168,000(206,000)
18,000—84,135—(7,199)56,936(944)
29,713¥ 28,769

¥

9,852
4,536
36
1,642
(102)
(774)
525
(197)

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

NBF Report January–June 200741

Notes to Financial Statements
NIPPON BUILDING FUND INC.
June 30, 2007, December 31, 2006 and June 30, 2006

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 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 June 30, 2007, NBF had ownership or beneficiary interests in 56 office properties containing approximately 692,222 rentable square
meters of office space. As of June 30, 2007, NBF had leased office space to 910 tenants engaged in a variety of businesses. The occupancy
rate for the office properties was approximately 99.0%.

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 Securities 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
Securities 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 fixtures42

2-50 years
2-52 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.

NBF Report January–June 2007

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 in the period of payment.
The public offering of new investment shares on March 16, 2006 was conducted through underwriting agreements under which a securities company underwrote all of the newly issued shares at an agreed issue price and sold them at an offering price different from such issue
price to investors (“spread method”). Under the spread method, the substantial difference between the offering price and the issue priceserves as the underwriting fee for the underwriting securities company. NBF therefore did not pay underwriting fees to the underwriting securities company. In the case of the public offering of new investment shares on March 16, 2006, the total amount of the difference between theoffering price and the issue price was ¥2,496 million, which would have been accounted for as the issue cost of new NBF investment shares if
it had been conducted through underwriting agreements under which the securities company had underwritten shares at an issue price andsold them at an offering price that was the same as the issue price (“conventional method”). Therefore, under the spread method, the issue
cost of new investment shares was ¥2,496 million lower, and operating income and income before income taxes were ¥2,496 million higher,
than had the conventional method been applied.

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. In terms of newly purchased properties, NBF capitalizes a portion of
the real estate taxes that relate to the purchase date of each property until the end of the calendar year as part of the acquisition cost of therelevant property. Capitalized real estate taxes amounted to ¥166 million for the period ended June 30, 2007 and ¥105 million for the period
ended June 30, 2006, respectively. No capitalized real estate taxes for the period ended December 31, 2006.

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.

NBF Report January–June 2007

43

Reclassifications
Certain reclassifications have been made to prior periods’ financial statements to conform with the presentation used for the period ended
June 30, 2007.

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.

Note 3 – Schedule of Tangible Assets of Investment Properties
Tangible assets as of June 30, 2007 and December 31, 2006 consisted of the following:
As of June 30, 2007

As of December 31, 2006
(Yen in millions)

Accumulated
Depreciation

Acquisition
Costs

Acquisition
Costs

—
—
—

¥137,624
253,133
390,757¥114,256
242,918
357,174

Land
Land in trust
Land including trust total¥137,624
253,133
390,757

Buildings and improvements
Buildings and improvements in trust

113,167
132,744(9,710)(23,438)

103,457
109,306

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 in trust

245,911
1,592
819
351
1,353
1,279
683
31

(33,148)
(337)
(193)
(108)
(314)
(433)
(268)
—

6,108
¥642,776

Other tangible assets total
Total

¥

Book Value

Accumulated
Depreciation¥

Book Value———¥114,256
242,918
357,174

103,361
131,676(7,513)(20,797)

95,848110,879

212,763
1,255
626
243
1,039
846
415
31

235,037
1,502
765
313
1,327
1,250
631
109

(28,310)
(266)
(154)
(76)
(274)
(386)
(227)
—

206,727
1,235
611
237
1,054
864
404
109

(1,653)

4,455

5,897

(1,383)

4,514¥(34,801)¥607,975¥598,108¥(29,693)¥568,415

Note 4 – 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.

44

NBF Report January–June 2007

Notes to Financial Statements

Note 5 – Short-Term Loans and Long-Term Debt
Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest rates on short-termloans outstanding are floating rates and on June 30, 2007 and December 31, 2006 ranged from 0.77% to 0.99% and from 0.67% to 0.81%,
respectively. Long-term debt is at fixed rates and as of June 30, 2007 and December 31, 2006 consisted of the following:
As of June 30, 2007

Unsecured loans due 2007 to 2018 principally from banks and insurancecompanies with interest rates mainly ranging from 0.7% to 2.4%
0.75% unsecured bonds due 2007
1.04% unsecured bonds due 2009
0.80% unsecured bonds due 2010
1.60% unsecured bonds due 2011
1.48% unsecured bonds due 2012
1.74% unsecured bonds due 2014
1.85% unsecured bonds due 2015
2.04% unsecured bonds due 20172.00% unsecured bonds due 2018

(Yen in millions)
As of December 31, 2006

¥164,000—
10,00010,00010,00010,00010,00010,00010,00010,000¥165,000
10,00010,00010,00010,000——10,000—10,000244,000

225,000

32,00030,000¥212,000¥195,000

Less: amount due within one year

The annual maturities of long-term debt as of June 30, 2007 were as follows:(Yen in millions)

2007
2008
2009
2010
2011
Thereafter¥17,000
23,00010,00012,00014,00088,000During the period ended June 30, 2007, 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 June 30, 2007.

NBF Report January–June 200745

Note 6 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended June 30, 2007, December 31, 2006 and June 30, 2006 were as follows:
For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen in millions)

For the six months ended
June 30, 2006

¥21,099
2,770
123
23,992¥20,180
2,817
124
23,121¥18,198
2,467
134
20,799

597
138
1,524
289
101
2,649
26,641

584
148
1,807
186
48
2,773
25,894

531
76
1,325
81
60
2,073
22,872

3,327
2,178
618
35
2,041
5,125
13,324

3,403
1,765
593
36
2,310
4,988
13,095

2,832
1,923
474
37
1,670
4,536
11,472¥13,317¥12,799¥11,400

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

Note 7 – Breakdown on Gain on Sale of Investment Properties
On June 30, 2006 NBF sold two properties set forth below:(Yen in millions)

Otemae Center Building
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of investment properties(Yen in millions)

JFE Building¥2,370
1,677
8
¥ 685

Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Advanced depreciation of investment properties
Gain on exchange of investment properties(Yen in millions)

Total
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Advanced depreciation of investment properties
Gain on sale of investment properties
Gain on exchange of investment properties

46¥93,370
73,38432
18,519¥ 685¥ 750

NBF Report January–June 2007

¥91,000
71,70724
18,519¥ 750

Notes to Financial Statements

Note 8 – Income Taxes
NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income based on applicable Japanese tax law was 0.01% for theperiod ended June 30, 2007, December 31, 2006 and June 30, 2006. 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
June 30, 2007

For the six months ended
December 31, 2006

For the six months ended
June 30, 2006

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 are met,
the investment corporation is allowed to deduct total amount of dividends paid in calculating its taxable income under Japanese tax regulations.

Note 9 – Per Share Information
Information about earnings per share for the periods ended June 30, 2007, December 31, 2006 and June 30, 2006 and net assets per
share as of June 30, 2007 and December 31, 2006 was as follows.
The computation of earnings per share is based on the weighted average number of common shares outstanding during the period. The
computation of net assets per share is based on the number of common shares outstanding at each period end.

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

Net Assets per Share

For the six months ended
June 30, 2007

For the six months ended
December 31, 2006
(Yen)

For the six months ended
June 30, 2006

¥19,808¥19,224¥20,836

508,000

508,000

472,745

As of June 30, 2007

As of December 31, 2006

¥701,790¥701,206

NBF Report January–June 200747

Note 10 – 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-ownershiptransfer finance leases where NBF is the lessee are not recognized in the accompanying balance sheets and lease payments are charged toincome 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 June 30, 2007 is summarized as follows:(Yen in thousands)
Acquisition costTools, furniture and fixtures¥3,027

Accumulated depreciation

Net book value¥2,320¥706

Obligations under finance leases as of June 30, 2007 and December 31, 2006 are as follows:
As of June 30, 2007

Due within one year
Due after one year
Total

As of December 31, 2006
(Yen in millions)

¥ 1
—
¥ 1

¥—
—
¥—

The amount of obligations under finance leases includes the imputed interest expense portion.
Total payment for non-ownership-transfer finance leases for the six months ended June 30, 2007 was ¥302 thousand.
Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method over therespective lease period. The residual value at the end of the lease period is not considered for the calculation of depreciation. Depreciation
expense for the six months ended June 30, 2007 was equal to the above total payment for finance leases.

48

NBF Report January–June 2007

Notes to Financial Statements

Note 11 – Transactions with Related Parties(January 1, 2007 – June 30, 2007)(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 2)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,139(Note 3)

Accounts
payable¥348(Note 3)

¥7(Note 3)

Accounts
payable¥1(Note 3)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is subject to the conditions set forth in the by-laws of NBF.
2. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and this amount is set forth in the “General Administration Agreement relating to Organizational Management” concluded between NBF and NBFM.
3. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.
4. Asset management fees include management fees totaling ¥161,343,000 related to the acquisition of real estate and other tangible assets and calculated as a component of their respective book values.

(3) Subsidiaries
Not applicable, because the Company has no subsidiaries in which it has invested.
(4) Sister Companies
None applicable(July 1, 2006 – December 31, 2006)(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 2)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥949(Note 3)

Accounts
payable¥320(Note 3)¥2
(Note 3)

Accounts
payable¥1(Note 3)

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

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

Note 12 – Subsequent Events
None applicable

NBF Report January–June 200749

Independent Auditors’ Report

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

We have audited the accompanying balance sheets of Nippon Building Fund Inc. (a Japanese Real Estate
Investment Trust) as of June 30, 2007 and December 31, 2006, and the related statements of income, shareholders’ equity and cash flows for each of the six months ended June 30, 2007, December 31, 2006 and June30, 2006 expressed in Japanese yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. 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 June 30, 2007 and December 31, 2006, and the results of its operations and its cash flows for each of the six months ended June 30, 2007, December 31, 2006 and June 30,
2006 in conformity with accounting principles generally accepted in Japan.

Tokyo, Japan
September 28, 200750

NBF Report January–June 2007

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 June 30,

equivalent to the total amount of the acquisition price of said Real2007, 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.

Estate, etc., the acquisition price of each item; provided, however, that

There is no capital relationship with NBF. Koichi Nishiyama, President &national consumption tax, regional consumption tax and miscellaneous

CEO of 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 January–June 200751

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited liability

As of June 30, 2007, the directors and corporate auditors of NBFM

company duly established under the laws of Japan. Major events in theare as follows. The staff other than directors and auditors of NBFM ishistory of NBFM are as follows.

comprised of 16 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)January 29, 2001

Riichi Morihiro

Director, Head of Administration Group(standing)

February 15, 2001

March 7, 2001

Obtained approval as a discretionary transaction
agent under the Building Lots and Building
Transactions Law
Registered as a general real estate investment advisor under the Real Estate Investment Advisor
Registration Regulations
Obtained approval as an Asset Management
Company under the Investment Trust Law of Japan

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.”)

Name

52

Director

Kaneo Maeda

Corporate Auditor

Noriaki Moromachi

Corporate Auditor

Outline of Financial Condition
An outline of the financial condition of NBFM is as follows.
Outline of principal assets and liabilities for the most recent fiscal year:
As of March 31, 2007

(Yen in thousands)

Total Assets¥2,186,889

Total Liabilities
Net Assets

524,926¥1,661,963

Profit and loss for the most recent fiscal year:(Yen in thousands)¥2,318,993

Percent

Ordinary Profit

1,678,473

Net Income

968,968

4,257

43.0%

Sumitomo Life Insurance Company

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
Company

297

3.0

Total

Director

Tamotsu Shinyama

Operating Income

Mitsui Fudosan Co., Ltd.

Britel Fund Trustees Limited

Kimihiro Suwa

Year ended March 31, 2007

List of Shareholders (as of June 30, 2007)
Numberof Shares Owned

Title

297

3.0

9,900

100.0%NBF Report January–June 2007

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, rela9 central wards in Tokyo:
Chiyoda, Minato, Chuo, Shinjuku, tively large market scale (both leasing andpurchase/sale) with high growth rates.
Shinagawa, Shibuya, Toshima,■ Relatively low yearly NOI yields. Relatively
Bunkyo and Meguro
high liquidity at the time of sales.

Other Greater Tokyo■

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

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.

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

used 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.

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.

(1) Strategy for Creation of the Portfolio

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).

The goal of the portfolio is to generate steady growth and stable profits on a mid-term to long-term basis. The selection criteria of investment assets is based on the composition of investment assets in theportfolio and based on consideration of a quantitative proportion of the(2) Acquisition Strategy

office stock located in the various regions of Japan.

Ratio of Real Estate Assets
NBF will maintain ratios of 75% or more with respect to the“Designated Real Estate Ratio.” As of June 30, 2007, NBF satisfied 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

criteria.
■

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

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

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 January–June 200753

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.

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

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.
measures to protect security deposits, policies and measures regarding cash reserves
for long-term renovation plans.
appropriate measures regarding demands fordivision of co-owned interests or the sale ofa co-owner’s interest, etc.
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.

10% of the total assets indicated on the most recent balance sheet of
NBF. For this purpose, “leased/leasable assets” shall mean property
with respect to which the construction of the building has been completby 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.,
increasing occupancy rates, extending the term of leases and rendering
them more stable, etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a
mid-term to long-term basis, 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

54

NBF Report January–June 2007

Investment and Distribution Policies

renovation plans for each building. As of June 30, 2007, foreseen

prospects and stability of the area of location, risks of deterioration andreserves provided from January to December 2007 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.)

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 renova-

Total Foreseen Amount: (annual basis) ¥2,982 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 55 properties owned by NBF as of the end of June 2007.

tion 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

NBF may raise capital (including use of the call loan market) andOperating Income

issue 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).
Borrowings are limited to those from Qualified Institutional Investors

Appraisal Value, etc.

as specified in Article 2.3.1 of the Securities and Exchange Law ofIn 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- anding term shall be the acquisition price of the said property (excluding

mid-term operating asset management policy and annual management

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

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

Derivatives

Disposition

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

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

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 January–June 2007

55

Distribution Policies of NBF
depreciation for the period. NBF is entitled to make cash distributions of

A. Distributions of Profits
A 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
profits in accordance with the distribution policies stated above in order

Cash Distribution of Profits
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

56

NBF Report January–June 2007

Investment and Distribution Policies

Investment Objectives
The Investment Objectives of NBF specified in the Articles of(8) Beneficiary Certificates of Money Trust (limited to those the trust
assets of which are primarily invested and Managed Assets referred

Incorporation are as follows.

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.

B.Other Investment Objectives among
Designated Assets
NBF may, in the course of efficiently managing funds or in other(1) Real estate, real estate leasehold interests and superficies.

cases 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 appur-(2) Call loans(3) Japanese Government Bonds, Notes and Bills

tenant to real estate.
(3) Tokumei-kumiai ownership interests (provided, however, that this is(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).

specified in Article 2.1.3.2 of the Securities and Exchange Law of(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).

Japan; provided, however, that this is limited to asset-backed
securities principally referred to in paragraphs (1) and (2) of section(A) above).
(7) Monetary Claims (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 January–June 2007

57

C. Assets Other than Designated Assets

Investment Restrictions

NBF may, in the course of efficiently managing funds or in othercases 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”)

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(3) Trademark rights

assets denominated in non-Japanese currencies (“Investment Objectives(4) Copyrights

and Policies,” Articles of Incorporation).

(5) Chattels defined under the Civil Code (hereafter, “Chattels”)

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

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.

58

NBF Report January–June 2007

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 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 therelated to asset management to an asset management company, anasset management company is prohibited from performing certain acts

good 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 unlike-said issued and outstanding shares.

ly 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)
An asset management company may not undertake transactions incertain 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
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 January–June 200759

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 Lawe) 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.

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.

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,specified in the Investment Trust Law of Japan.

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 management

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.

company.
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.

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.

60

NBF Report January–June 2007

Investment and Distribution Policies

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

set forth under the enforcement regulations of the Investment Trust Law

Interested Party, etc. of an asset management company, distributes,

with the consent of said investment corporation the assets of which areor acts as an agency or intermediary of distribution of, trust benefici-

managed by said asset management company, other investment corpo-

ary interests at a time when the total amount of purchase offer ofrations (which invest in the same kind of assets as the said Designatedsaid trust beneficiary interests to said distributor of trust beneficiary

Assets) the assets of which are managed by said asset management

interests is not foreseen to reach that otherwise expected by said dis-company and other persons set forth under the government ordinancetributor of trust beneficiary interests, purchasing said trust beneficiary

regarding the 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 theenforcement regulations of the Investment Trust Law, to said investment
corporation, other investment corporations (which invest in the samekind of assets as the said Designated Assets) the assets of which aremanaged 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 ordinanceregarding the Investment 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

NBF Report January–June 200761

Corporate Data
As of June 30, 2007

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

Date of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding.
¥346,447 million
508,000 shares

Shareholders:

14,906

Transfer Agent:

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

Business Office of the Transfer Agent:

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

Independent Public Accountants:

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

Investor Relations:

For further information, please contact our Asset Management company:
Investor Relations of Financial Department
Nippon Building Fund Management Ltd.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan+81-3-3281-8810

This document contains translations of selected information described in the Securities

portion(s) of any document(s) translated into English. No person has been authorized to give

Report (Yuka shoken hokokusho) filed on September 26, 2007 pursuant to the Securities

any information or make any representations other than as contained in this document in rela-

Exchange Law of Japan, and the Financial Statements and the Performance Information

tion to the matters set out in this document, and if given or made, such information or repre-

Report for the period from January 1, 2007 to June 30, 2007, of Nippon Building Fund Inc.

sentation must not be relied upon as having been authorized by Nippon Building Fund Inc.,

prepared pursuant to the Investment Trust Law of Japan.

Nippon Building Fund Management Ltd. or any of their respective directors, officers, employ-

This English language document was prepared solely for the convenience of and refer-

ees, partners, shareholders, agents or affiliates.

ence by overseas investors and neither corresponds to the original Japanese documents nor

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

is it intended to constitute a disclosure document. The Japanese language Securities Report

dance with generally accepted accounting principles in Japan (Japanese GAAP) which

and the Financial Statements and the Performance Information Report for the aforementioned

may materially differ in certain respects from generally accepted accounting principles inperiod should always be referred to as originals of this document.

other jurisdictions.

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

Many provisions of this document contain forward-looking statements and information.

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

We base these statements on our beliefs as well as our assumptions based solely on certain

to any and all terms herein, including without limitation, financials statements, if there exist

limited information currently available to us. Because these statements reflect our current

any discrepancies in the meaning or interpretation thereof between the original Japanese

views concerning future events, these statements involve known and unknown risks, uncer-

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

tainties and assumptions. Our future performance could materially differ from those set out inalways govern the meaning and interpretation. None of Nippon Building Fund Inc., Nippon

these forward-looking statements. We do not undertake and will not undertake to release

Building Fund Management Ltd. or any of their respective directors, officers, employees, part-revisions of forward-looking statements to reflect future events or circumstances or of any

ners, shareholders, agents or affiliates will be responsible or liable for the completeness,other statements or information contained herein.

appropriateness or accuracy of English translations or the selection of the62

NBF Report January–June 2007

Investors’ Information
As of June 30, 2007

Fiscal Period

Shareholders

Six months ending June 30 and December 31

Other domestic corporations
324 (2.2%)

Overseas investors 360 (2.4%)
Financial institutions(Including securities companies)

Total Number of Common Shares Issued

188 (1.3%)

12th Period (From January 1, 2007 to June 30, 2007)

508,000 shares

11th Period (From July 1, 2006 to December 31, 2006)

508,000 shares

Individuals and others
14,034 (94.1%)

Distributions
Total number of shareholders:Confirmed distribution for the 12th Period (ended June 2007)
For the operating period from January 1, 2007 to June 30, 2007 (6 months)

14,906¥19,809 per share

Expected distribution for the 13th Period (ending December 2007)
For the operating period from July 1, 2007 to December 31, 2007 (6 months)¥19,300 per share

Overseas investors
168,611 (33.2%)

Other domestic corporations
45,113 (8.9%)
Individuals and others
33,212 (6.5%)
Financial
institutions(Including
securities
companies)

261,064(51.4%)

Total number of shares:

508,000

Major Shareholders
NameJapan Trustee Services Bank, Ltd. (Trust Account)
NikkoCiti Trust and Banking Corporation (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Bank of New York, Treaty JASDEC AccountTrust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
Mitsui Fudosan Co., Ltd.
The Nomura Trust and Banking Co., Ltd. (Trust Account)
UBS AG London Asia Equities
Sumitomo Life Insurance Company
The Chugoku Bank, Ltd.

Number of Shares Held

Percentage of Total

33,526
31,79030,884
27,847
24,995
19,735
14,75913,314
11,256
10,413

6.6%
6.3
6.1
5.5
4.9
3.9
2.9
2.6
2.2
2.0

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

Trading Volume (Right scale)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

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 1 2 3 4 5 6
2002
2003
2004
2005
2006
2007

NBF Report January–June 2007

063

Nippon Building Fund Inc.
7-2, Yaesu 2-chome, Chuo-ku,
Tokyo 104-0028, Japan

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

Printed in Japan