21st Period NBF Report July – December 2011

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

NBF has positioned itself for solid growth by continuing to invest in its
portfolio of high-quality properties, by constantly working to enhancequality for tenants, and by maintaining the stable financial baseexpected of Japan’s leading J-REIT.

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

Contents
A Track Record of Steady Growth.................................................... 2

Acquisitions in the 21st Period..................................................... 14

Building on Our Strengths............................................................... 4

Acquisitions in the 22nd Period.................................................... 15

Financial Highlights......................................................................... 5

Location of Office Properties........................................................ 18

To Our Unitholders.......................................................................... 6

Portfolio Overview......................................................................... 20
Management Team and Management Structure............................ 22

Feature: Poised for GrowthManagement’s Discussion and Analysis...................................... 26
Financial Statements.................................................................... 36

Selective Investments that Capture Opportunities
for Acquisition............................................................................. 8

Independent Auditors’ Report...................................................... 52

Maintaining a High Occupancy Rate throughRobust Tenant Relations................................................................ 10

Investment and Distribution Policies............................................ 55

Committed to Stable Financial Management............................... 12

Investors’ Information................................................................... 63

Appendix....................................................................................... 53
Corporate Data.............................................................................. 62

NBF Report July – December 2011 1

A Track Record of Steady Growth
Since its listing in September 2001, NBF has steadily grown its assets through sound and unerringbusiness operations.
(Yen)

25,000Distribution per Unit
19,02620,00016,003

16,25315,367

15,00014,582

15,185

17,291

16,893

17,046

97.5

98.1

98.7

10,000(Yen)

2,000,000

Historical Unit Price

1,500,000

Start of TSE
REIT Index

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

1,000,000

Removal of ban on J-REIT
holdings by investment trusts

500,000
0(Yen in billions)Occupancy Rate and Scale of Managed Assets by Area

1,000

97.5

96.9

97.7

97.4
95.0

94.8

900

800

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

Occupancy Rate
(Right scale)

700

Managed Assets by Area
600

92.3

Equity financing
Target of ¥500 billion in
assets achieved(Left scale)

Other Cities
Other Greater Tokyo
Tokyo CBDs

500

539.3
Equity financing

393.8

400

Equity financing
300

226.5

192.11
192

200

2,265
2,265

2,265
2,265

100

2,265

2,265

22

0

(
2 NBF Report July – December 2011

24

246.0
2,460
2,460

2,460

26

260.2
2,602
2,602

2,602

28

3,938

4,141

3,938

4,141

3,361

2,760
2,760

2,856

3,361

5,393

4,141

3,938

285.6

29

414.1

336.1
276.0

2,760

5,393

2,856
5,393
2,856

33

3,361

43

43

47

52

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

May 23,2001

Dec. 31,2001

Jun. 30,
2002

Dec. 31,2002

Jun. 30,
2003

Dec. 31,2003

Jun. 30,
2004

Dec. 31,2004

Jun. 30,
2005

Dec. 31,
2005

Investmentcommencement date)

19,391

19,22419,80920,12922,54922,252

21,775
19,672
17,125J-REIT market value exceeds¥6 trillion; TSE REIT Index at
2,636.23 points

Subprime loan
problem surfaces

98.7

97.8

99.0

Equity financing

6,248

624.8

15,200D
Decisionby Bank of Japan toppurchase units and bonds ofinvestment corporations

Great East Japan
Earthquake

Bankruptcy ofLehman Brothers

97.4

96.8

95.4

96.6
94.8

94.5

837.1
783.1

783.1

779.5

7,831

7,831

7,795

7,831

7,831

7,795

7,623

7,831

7,831

7,795

60

61

61

59

762.3
725.2
674.3

674.3

6,743

6,743

7,623

7,252

6,248

98.1

892.8*

100

95

870.2
90

779.5

8,431
7,623

6,743

97.1

Equity financing

Equity financing

6,743
6,248

15,138(%)

98.6

Exchange of JFE
Building for 5 buildings

624.8

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

15,495

7,252

6,248

6,248

6,248

6,743

6,743

7,252

55

55

56

56

58

8,431

59

64

64
(67*)

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Buildings

Jun. 30,
2006

Dec. 31,2006

Jun. 30,
2007

Dec. 31,2007

Jun. 30,
2008

Dec. 31,2008

Jun. 30,
2009

Dec. 31,2009

Jun. 30,
2010

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011*Including acquisitions in the 22nd Period, as of April 30, 2012

NBF Report July – December 2011 3

Building on Our Strengths
NBF’s steady asset growth has given it a solid position in the J-REIT market. We will continue to
use our strengths and competitive advantages to the fullest to maximize value for our unitholders.

Strong Portfolio

NBF’sStrengths■ Occupancy Rate

98.1%
(As of December 31, 2011)

NBF owns office buildings in Tokyo’s central business districts(CBDs). We have also diversified our investment into Greater
Tokyo and regional cities, and maintain a high occupancy rate.

Scale Dominance(Largest J-REIT)■ Scale of Managed Assets(Total acquisition price)¥870.2 billion■ Standard &Poor’s■ Moody’s(As of December 31, 2011)¥892.8Sound Finances

A+
A2
AA

(Long-term corporate)(Issuer rating)■ R&I

billion(Including acquisitions in the 22nd Period,
as of April 30, 2012)

Stable Returns(Issuer rating)(As of April 30, 2012)

Strategic Partnershipwith Mitsui Fudosan■ Distribution per Unit forthe 21st Period¥15,200
Over the 21 periods since our listing, we have steadily
distributed profits to unitholders.

4 NBF Report July – December 2011

NBF achieves steady growth using the office building
management and property information collection capabilities
of Mitsui Fudosan Co., Ltd., Japan’s leading real estatecompany, and by acquiring the properties it has developed.

Financial Highlights

20th Pe21st Periodriod

20th Period

from Jfrom July 1, 2011 toto from January 1, 2011 toJune 30, December 31, 20112011
June 30, 2011

19th Period

from July 1, 2010 to
December 31, 2010

18th Period

from January 1, 2010 toJune 30, 2010

21st Period

from July 1, 2011 to
December 31, 2011

U.S. dollars in thousands
Yen in millions, except per unit data or where otherwise indicated		
except per unit data (Note 1)¥ 29,773¥ 28,081¥ 27,314¥ 28,341

Income before income taxes		

9,128

8,758

8,400

9,283

118,577

Net income		

9,127

8,757

8,399

9,282

118,565

Funds from operations

Note 3

15,226

14,291

13,57014,354

197,789

Net operating income 				 from property leasing activities Note 3

19,53018,664

17,661

18,445

253,701

Total amount of cash distribution

(a)

8,793

8,757

8,398

9,282

114,227

Total assets		

852,855

823,705

765,203774,379

11,078,916

Interest-bearing debt		

377,375

350,750

325,125

333,500

4,902,247

Net assets(b)424,242423,872

394,575

395,458

5,511,071

LTV (Loan to value)

Note 3Operating revenues

Note 2

48.2%

46.5%

46.3%

$

386,770

46.8%

Total number of 					 units issued (units)(c)578,500

578,500

542,000

542,000

Net assets per unit (Yen/$)(b) / (c)733,348732,709727,996

729,626

9,526

Distribution per unit (Yen/$)(a) / (c)15,20015,13815,495

17,125

197

Funds from operations
		 per unit (Yen/$)Note 3

26,32024,93725,03626,483342

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥76.98 = U.S.$1.00, the approximate exchange rate on December 31, 2011.
2. Operating revenues do not include consumption taxes.
3. Funds from operations: Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization
		Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
		Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
		Funds from operations per unit: (Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization) /		 Weighted average number of units issued and outstanding during the period

Operating Revenues

Net Income(Yen in millions)(Yen in millions)(Yen)

35,00015,00025,00030,00020,00025,00010,00015,00020,00015,00010,0005,000

10,000

5,000

5,000
0

Distribution per Unit

17th 18th 19th 20th 21st
Period Period Period Period Period

0

17th 18th 19th 20th 21st
Period Period Period Period Period

0

17th 18th 19th 20th
21st
Period Period Period Period Period

NBF Report July – December 2011 5

To Our Unitholders

In January 2012, NBF conducted
equity financing so as to continue
expanding its scale of assets.

Performance during the Six Months
Ended December 31, 2011

December 31, 2011 improved 1.0 percentage point to

In September 2011, NBF acquired the Mitsubishi

previous period.

Heavy Industries Head Office Building. In addition,

98.1 percent from 97.1 percent at the end of theAlso, in addition to the six properties acquired during

the occupancy rate improved to 98.1 percent as ofthe period ended June 30, 2011 (at a total acquisition

December 31, 2011.

price of ¥57,551 million), we expanded our portfolio
through the acquisition of the Mitsubishi Heavy Industries

In the period under review, the Japanese economy

Head Office Building in September 2011 (acquisition

showed some positive signs, including stabilizing personal

price: ¥36,300 million) and an additional ¥99 million

consumption, although exports and production continued

acquisition at the Nishi-Shinjuku Mitsui Building.

to be pressured by a weak global economy, the strong yen
and the effects of flooding in Thailand.
In this environment, demand appeared to be increasing

Under these circumstances, for the 21st Period
operating revenues increased ¥1,692 million, or 6.0
percent, to ¥29,773 million, and operating incomein the office building leasing market for consolidation

increased ¥267 million, or 2.2 percent, to ¥12,186 million.

and relocation to larger offices, particularly for

Net income increased ¥370 million, or 4.2 percent, tohigh-quality large-scale properties with superior anti-¥9,127 million. As a result, distribution per unit was ¥15,200.

seismic features.
With the contract cancellation rate for properties in
NBF’s portfolio decreasing, the occupancy rate as of

6 NBF Report July – December 2011

Moreover, NBF set aside ¥334 million of the ¥572
million gain on sale of the NBF Sudacho Verde Building
as reserves for advanced depreciation.

Performance Outlook (As of February 14, 2012)(Yen in millions)22nd Period (Projected)
from January 1, 2012 to June 30, 2012

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

¥30,008
9,256
15,10097.9%¥30,102
9,256
15,10098.1%

Operating revenues
Net income
Distribution per unit (Yen)
Occupancy rate (End of period)

Performance Outlook and
Future Management Policies
NBF will selectively invest in new properties whileworking to maintain a high occupancy rate.

of up to 50 percent. NBF will use these funds under its
policy of continued selective investment.
We forecast distribution per unit of ¥15,100 in the
22nd and 23rd periods due to factors including thecontribution of new properties put into operation,

Looking ahead, we expect the Japanese economy toalthough rent reductions will affect rental revenue. Ourcontinue its moderate recovery trend due to effective

forecast for future results does not include reversal of

initiatives by the Bank of Japan. The slight easing seen

the reserve for advanced depreciation.

recently in the appreciation of the yen is also having a
positive effect on our market.

We expect market conditions to remain challenging.
However, by making the most of the advantages of the

Although the current vacancy rate of about 5 percent

high-quality portfolio we have built up since we began

in the market for Grade A buildings indicates recovery,

asset management and the leasing capabilities of our

the situation for new supply in Tokyo’s central businesssponsor, Mitsui Fudosan Co., Ltd., we will work to

districts (CBDs), while set to increase through the firstprevent contract cancellations by strengthening tenant

half of 2012, remains unpredictable. NBF will work to

relations and bolster marketing to attract new tenants.

strengthen tenant relations and maintain highoccupancy rates.
Market rents have bottomed out, but due to the still

Furthermore, based on fund procurement capabilities
that leverage our strong financial base, we will continue
to raise the quality of our portfolio by investingremaining gap between market rents and rents forselectively in high-quality properties. Based on thisexisting tenants, we expect rent reductions to slightly

sound financial strategy, we will strive to generate well-affect rental revenue in 2012. However, as progress hasbalanced internal and external growth so as to bring

been made in narrowing this gap, we foresee less of an

our unitholders stable distributions over the medium toimpact than in the past.

long term.

Given these conditions, NBF allocated ¥22,709
million to acquire new properties after conducting equity
finance in January 2012. With the equity finance, NBF
secured a fund reserve of approximately ¥50 billion thatit can invest and still maintain a loan-to-value (LTV) ratio

Tsutomu Nishikawa
Executive Director of Nippon Building Fund Inc.

NBF Report July – December 2011 7

Feature:

Selective Investments that Capture
Opportunities for Acquisition
NBF is using equity financing to build a high-quality portfolio while
securing the capacity for further growth.
In January 2012, NBF carried out equity financing

47 percent following the equity financing.

with a total value of ¥20,898 million.

The six properties we have acquired following the

The purpose of the financing was to acquire high-equity financing are characterized by high yields. They

yield properties, maintain a ¥15,100 dividend level, andhave a total value of ¥22,709 million (combined acquisition

secure a ¥50 billion fund reserve for further growth. It

prices) and an average NOI yield of 6.1 percent, higher thanhas also enabled us to maintain a LTV ratio between 40

the mid-4 percent NOI yield range of NBF's portfolio

and 50 percent (with a maximum of 60 percent) as per

before the acquisitions. We therefore expect these proper-

our financial strategy, with the present ratio being aboutties to make a positive contribution to our portfolio.

Add-On Equity Offering

Number of units offered

Primary units offered

30,000 units

Third party allocation

4,500 units

Total

34,500 units

Total offering size

¥20,898 million

Launch date

January 10, 2012

Pricing date

January 18, 2012

Closing date

January 25 / February 21, 2012

8 NBF Report July – December 2011

By investing selectively in high-quality properties inthis way, NBF has over the approximately ten years
since its listing (as of April 30, 2012) built a robust portfolio of 67 properties with a total asset scale of ¥892.8

Changes to Portfolio
Acquisition price

New Acquisitions
Nishi-Shinjuku Mitsui Building¥99 million(Additional acquisition)

billion (combined acquisition prices), thus becoming theHigashi Gotanda Square¥8,350 million

largest J-REIT fund.

Ryukakusan Building¥4,050 million

Shin-Kawasaki Mitsui Building¥5,520 million

Hiroshima Fukuromachi Building¥1,380 million

NBF Matsuyama Nichigin-mae Building¥3,310 million

Going forward, we will continue to fully leverage our
superiority in scale as well as our accumulated intelligence gathering ability and property acquisition expertise, as we use the recently secured fund reserve toexpand our asset scale through selective investment.

(Additional acquisition)(Additional acquisition)(Previously: Schloss Nichigin-mae)¥22,709 million

Total

Scale of Managed Assets

47%

LTV (loan-to-value ratio)

Aboutfollowing
equity financing

(%)
60
50

(Yen in billions)
900

892.8

40

600

LTV ratio slightly above 47%
ensures future growth capability• Acquisition of new properties• Replacement of properties in portfolio

300

0Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Jun. Dec. Apr.
2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012** Including acquisitions in the 22nd Period, as of April 30, 2012

NBF Report July – December 2011 9

10.8599.01

6Feature:3

Tokyo

Maintaining a High Occupancy Rate
through Robust Tenant Relations
0

Dec.
2002

Dec.
2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

Dec.
2008

Dec.
2009

Dec.
2010

Dec.
2011

Tokyo CBDs: Chiyoda, Chuo, Minato, Shinjuku, Shibuya
Osaka CBDs: Umeda, Minami-Morimachi, Yodoyabashi/Honcho, Senba,
Shinsaibashi/Namba, Shin-Osaka
Nagoya CBDs: Meieki, Fushimi, Sakae, Marunouchi
Source: Miki Shoji Co., Ltd.

NBF will further strengthen its ties with tenants and maintain(Yen per tsubo*)
its high occupancy rate.
40,000The market vacancy rate in Tokyo’s central business dis-

98.1
percent, a 1.0 percentage point improvement from35,000

tricts (CBDs) remains at a high level of 8-9 percent.

a half-year earlier in June 2011. Underlying this is a

However, among Grade A buildings, for which the vacancy

30,000 in contract cancellations.
declinerate is already low compared with the market as a whole

As shown in the graph below, following the Lehman

at about 5 percent, we are seeing improvements in the

25,000Shock, NBF's annualized contract cancellation rate for the
22,473vacancy rate, particularly for properties with superior anti-

two periods ended December 31, 2009 and June 30, 2010seismic features.

exceeded 11 percent. The occupancy rate declined to 94.5
16,932

NBF's occupancy rate as of December 31, 2011 was

20,000percent
15,000 in the period ended June 30, 2010.
Jun. Dec.
2003 2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

16,799

Dec.
2008

Dec.
2009

Dec.
2010

Dec.
2011

*1 tsubo = 3.3m2

Market Vacancy Rates in CBDs (Three Cities)

(%)

(%)

15

10

11.62

Osaka

12

Source: Miki Shoji Co., Ltd.

Average Vacancy Rates in Tokyo

23 wards of Tokyo
8

Nagoya

7.3

10.85
9

9.01

6

4

3

0

Dec.
2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

Dec.
2008

Dec.
2009

Dec.
2010

Dec.
2011

Tokyo CBDs: Chiyoda, Chuo, Minato, Shinjuku, Shibuya
Osaka CBDs: Umeda, Minami-Morimachi, Yodoyabashi/Honcho, Senba,
Shinsaibashi/Namba, Shin-Osaka
Nagoya CBDs: Meieki, Fushimi, Sakae, Marunouchi
Source: Miki Shoji Co., Ltd.

10 NBF Report July – December 2011

5.1

Grade A buildings

2

Tokyo

Dec.
2002

7.2

CBD buildings

6

0

Sep.
2010

Dec.
2010

Mar.
2011

Jun.
2011

Sep.
2011

Dec.
2011

Note: Building classes as determined by the Comprehensive Assessment System for Built
Environment Efficiency (CASBEE)
Source: CBRE K.K.

30,000

25,00022,47320,00016,932
15,00016,799Jun. Dec.
2003 2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

Dec.
2008

Dec.
2009

Dec.
2010

Dec.
2011

*1 tsubo = 3.3m2
Source: Miki Shoji Co., Ltd.

(%)
10

(%)

23 wards of Tokyo

15

Under these conditions, NBF strengthened 11.62
its tenant
12

relations, accurately gauged tenants' needs and behav-

6

to prevent cancellations. We believe that this decisive
9.01

In addition, while the new supply of office buildings inTokyo CBDs is set to increase through the first half ofmaintain today.

2

5.1

2012, it isGrade
expected
to decline in 2013 and should be
A buildings
absorbed as Japan's recovery improves.

Based on these strong tenant relations, NBF expects to

NBF will continue to work to strengthen relations withTokyo

be able to maintain high occupancy rates of 97.9 percent
0

7.2

CBD buildings

6

4

action has enabled the high occupancy rate that we3

7.3

ally as the Japanese economy recovers.

Nagoya10.85
ior, enacted necessary proposals, and otherwise
moved
9

8

Osaka

lowest values, and expects that these will recover gradu-in the 22nd Period and 98.1 percent in the 23rd Period.

Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
2002
2003 2004
2005 a 2006
2007 20082009 20102011
Moreover,againstbackgroundof peaking
vacancy0

its tenants, while maintaining a high occupancy rate

Sep.
Dec.
Mar.
Jun.
Sep.
2010
2010 observation
2011
2011
2011
through closeof tenancy
trends.

Note: Building classes as determined by the Comprehensive Assessment System for Built
Environment Efficiency (CASBEE)Tokyo CBDs: Chiyoda, Chuo, Minato, Shinjuku, Shibuya

rates,
NBF
recognizes
market rents
Osaka CBDs:
Umeda,
Minami-Morimachi,that
Yodoyabashi/Honcho,
Senba, are hitting their
Shinsaibashi/Namba, Shin-Osaka
Nagoya CBDs: Meieki, Fushimi, Sakae, Marunouchi

Dec.
2011

Source: CBRE K.K.

Source: Miki Shoji Co., Ltd.

Average Asking Rents in Tokyo CBDs

Occupancy and Contract Cancellation Rates(Yen per tsubo*)(%)

40,000100

35,00095

30,000

90

98.1
94.5
NBF occupancy rate
(Left scale)

NBF contract
cancellation rate
(Right scale)

(%)
8

5.8

25,000

98.1
97.9

5.7

6

22,4734

2.4

20,00016,932
15,000

2.1

2.3

Dec.
2011

Jun. Dec.
2012 2012(Proj.) (Proj.)

16,799Jun. Dec.
2003 2003

Dec.
2004

Dec.
2005

Dec.
2006

Dec.
2007

Dec.
2008

Dec.
2009

Dec.
2010

Dec.
2011

Jun.
2008

Dec.
2008

Jun.
2009

Dec.
2009

Jun.
2010

Dec.
2010

Jun.
2011

2
0

*1 tsubo = 3.3m2
Source: Miki Shoji Co., Ltd.

(%)
10NBF Report July – December 2011 11

Feature:Committed to Stable
Financial Management
NBF will continue to strengthen the soundness of its finances within
the current favorable financial environment.
Under a conservative financial strategy, NBF has set

With regard to debt financing, NBF manages its

a target LTV ratio of 40 to 50 percent, with a maximum

long-term fixed-rate interest-bearing debt ratio with aof 60 percent. Our LTV ratio as of December 31, 2011

target of 80 percent to 90 percent to limit exposure towas 48.2 percent, which has since declined to about

interest rate risk, and had a rate of 82.8 percent as of

47 percent following the equity financing conducted in

December 31, 2011.

January 2012. As a result, we have secured a fund

While diversifying the maturities of interest-bearing debt

reserve of about ¥50 billion, enabling a LTV ratio of up

to reduce refinancing risk, NBF has established a total

to 50 percent.

commitment line of ¥60.0 billion to prepare for the

Stable Financial Track Record

(%)

100

Financing (As of December 31, 2011)

Long-term fixed-rate
debt ratio

90

Total average cost of debt:

1.56%

Number of lenders:

25

Average years remaining
on long-term fixed-rateinterest-bearing debt:

4.01 years

82.8

80
70
60

48.2

50
40
30

LTV (loan-to-value ratio)

20

Commitment lines:¥40 billion for 3 years¥20 billion for 2 years

100

Total of¥60 billion*

Dec.
2001

Dec.
2003

Dec.
2005

12 NBF Report July – December 2011

Dec.
2007

Dec.
2009

Dec.
2011

* As of April 30, 2012(%)

Long-term fixed-rate
debt ratio

100
90

82.8

80
70
60

48.2

50
flexibleacquisition of new properties and for refinanc-bution from our relationships with sponsors such as the40
ing.
In addition, we procure funds from a wide range of

Sumitomo Life Insurance Company, Sumitomo Mitsui30

LTV (loan-to-value ratio)

sources, with loans from 25 financial institutions (as of

Banking Corporation and The Sumitomo Trust &December 31, 2011).

Banking Co., Ltd. These advantages are well recog-

0 Japan’s financial environment is favorable at present,
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
2001 maintains
2003 good
2005
2007 at all2009
2011
and NBF
relationships
times withnized, and NBF continues to obtain high ratings from20
10banks and other lenders. We recognize that these relationships are due not only to our high-quality portfolio

credit rating agencies.
NBF will continue to strengthen its financial foundation as the base for further growth.

and stable performance as the number-one J-REIT, butalso to the good relationships gained through the sponsorship of Mitsui Fudosan Co., Ltd., with added contri-

Diversified Maturities of Interest-Bearing Debt

Financial Ratings (As of April 30, 2012)(Yen in billions)700

Short-term loans
Bonds

600

Long-term debt

Standard &Poor’s:A+(Long-term corporate)

500
400

Moody’s:

A2(Issuer rating)

300
200

R&I:

100

AA

(Issuer rating)
0

2012

2013

2014

2015

2016

2017

2018

2019

NBF Report July – December 2011 13

Acquisitions in the 21st Period
4 Mitsubishi Heavy Industries Head Office Building●

Location:	
16-5, Konan 2-chome, Minato-ku, Tokyo
Completion date:

April 1, 2003

Acquisition date:

September 1, 2011

Acquisition price: ¥36,300 million

2 Nishi-Shinjuku Mitsui Building (Additional Acquisition)●

Location:	
24-1, Nishi-Shinjuku 6-chome, Shinjuku-ku, Tokyo
Completion date:

April 28,1999

Acquisition date:

December 6, 2011

Acquisition price: ¥99 million

14 NBF Report July – December 2011

Acquisitions in the 22nd Period

65 Higashi Gotanda Square●

Location:	
10-2, Higashi-Gotanda 2-chome, Shinagawa-ku, Tokyo
Completion date:

April 30, 2009

Acquisition date:February 1, 2012

Acquisition price: ¥8,350 million

NBF Report July – December 2011 15

66 Ryukakusan Building●

Location:	
5-12, Higashi-Kanda 2-chome, Chiyoda-ku, Tokyo
Completion date:November 30, 1991

Acquisition date:February 1, 2012

Acquisition price: ¥4,050 million

67 NBF Matsuyama Nichigin-mae Building (Previously: Schloss Nichigin-mae)●

Location:	
9-6, Sanbancho 4-chome, Matsuyama, Ehime
Completion date:

March 11, 2009

Acquisition date:

March 30, 2012

Acquisition price: ¥3,310 million

16 NBF Report July – December 2011

Acquisitions in the 22nd Period

62 Hiroshima Fukuromachi Building (Additional Acquisition)●

Location:	5-25, Fukuromachi, Naka-ku, Hiroshima, Hiroshima
Completion date:

January 30, 2002

Acquisition date:

April 13, 2012

Acquisition price: ¥1,380 million

38 Shin-Kawasaki Mitsui Building (Additional Acquisition)●

Location:	
890-12, Kashimada, Saiwai-ku, Kawasaki, Kanagawa
Completion date:

May 22, 1989

Acquisition date:

March 30, 2012

Acquisition price: ¥5,520 million

NBF Report July – December 2011 17

Location of Office Properties(As of April 30, 2012)

Tokyo Central Business Districts (CBDs)
1 NBF Hibiya Building
2 Nishi-Shinjuku Mitsui Building(Additional acquisition in December 2011)
3 Gate City Ohsaki
4 Mitsubishi Heavy Industries Head Office Building(Acquired in September 2011)
5 Shiba NBF Tower
6 NBF Platinum Tower
7 NBF Minami-Aoyama Building
8 Toranomon Kotohira Tower
9 NBF Nihonbashi Muromachi Center Building
10 Nakameguro GT Tower
11 Mitsuiseimei Ochanomizu Building
12 NBF Ginza Street Building
13 Shinjuku Mitsui Building No. 2
14 GSK Building
15 River City M-SQUARE
16 NBF Toranomon Building
17 Kowa Nishi-Shinbashi Building B
18 Nippon Steel Building No. 2
19 NBF Alliance
20 Yotsuya Medical Building
21 Shibuya Garden Front
22 NBF Shibuya East
23 NBF Shibakouen Building
24 NBF Takanawa Building
25 NBF Akasaka Sanno Square
26 NBF Shibakouen Daimon Street Building
27 Sumitomo Densetsu Building
28 NBF Higashi-Ginza Square
29 NBF Ogawamachi Building
30 Nihonbashi Kabuto-cho M-SQUARE
31 NBF Ikebukuro Tower
32 NBF Ikebukuro City Building
65 Higashi Gotanda Square(Acquired in February 2012)
66 Ryukakusan Building(Acquired in February 2012)

1 NBF Hibiya Building●

3 Gate City Ohsaki●

18 NBF Report July – December 2011

Kita-ku
Arakawa-ku

32 31

Toshima-ku
Taito-ku

Bunkyo-ku

Nakano-ku

36
33

Sumida-ku
11

Shinjuku-ku

2
13

66

29

Chiyoda-ku

20

9Imperial
Palace14

125

Shibuya-ku
21 22

8 16
17

7
19

Minato-ku

Setagaya-ku
6

Meguro-ku

24

27

12

28

5

Koto-ku

18
15
35 34

26

23
10

30

Chuo-ku

4

Tokyo Bay

65
3

Shinagawa-ku

5 Shiba NBF Tower●

6 NBF Platinum Tower●

7 NBF Minami-Aoyama Building●Other Greater Tokyo
33 Nakanosakaue Sunbright Twin
34 NBF Toyosu Canal Front
35 NBF Toyosu Garden Front
36 NBF Ueno Building
37 Chofu South Gate Building
38 Shin-Kawasaki Mitsui Building(Additional acquisition in March 2012)TOCHIGI42

UTSUNOMIYA

43

IBARAKITo Omiya

SAITAMA

44

39 Yokohama ST Building
40 Parale Mitsui Building
41 NBF Atsugi Building
42 Tsukuba Mitsui Building
43 NBF Utsunomiya Building
44 S-ino Omiya North Wing
45 NBF Urawa Building
46 NBF Shin-Urayasu Tower
47 NBF Matsudo Building

45

TOKYO

47

CHIBA

36

33

35 34

37

46

Other Cities
38

Tokyo Bay

48 Sapporo L-Plaza
49 NBF Sapporo Minami Nijo Building

40

39

41

50 NBF Sendai Honcho Building
51 NBF Unix Building

48 49

52 NBF Niigata Telecom Building

KANAGAWA

53 NBF Nagoya Hirokoji Building
54 Aqua Dojima NBF Tower
55 Shinanobashi Mitsui Building
52

56 Sun Mullion NBF Tower

50
51

57 Sakaisuji-Honmachi Center Building
58 NBF Sakai-Higashi Building
59 Aqua Dojima East

63
64

62 61
67

53

60

60 NBF Shijo Karasuma Building
61 NBF Hiroshima Tatemachi Building

54 55 56 57

62 Hiroshima Fukuromachi Building(Additional acquisition in April 2012)

58 59

63 Hakata Gion M-SQUARE
64 NBF Kumamoto Building
67 NBF Matsuyama Nichigin-mae Building(Previously: Schloss Nichigin-mae)(Acquired in March 2012)

33 Nakanosakaue●

Sunbright Twin

34 NBF Toyosu Canal Front●

35 NBF Toyosu Garden Front●

54 ●59 Aqua Dojima NBF Tower,●

Aqua Dojima East

55 Shinanobashi Mitsui Building●

NBF Report July – December 2011 19

Portfolio Overview
NBF’s properties as of December 31, 2011 are as follows:

			
		
		
			
Investment
Percentage
Acquisition		
Name of Building
Type of OwnershipYear Built
Book ValueTypeof OwnershipPrice																		Tokyo Central Business Districts (CBDs)

1 NBF Hibiya Building		●
2 Nishi-Shinjuku Mitsui Building		●
3 Gate City Ohsaki
		●
4 Mitsubishi Heavy Industries Head Office Building		●
5 Shiba NBF Tower
		●
6 NBF Platinum Tower
		●
7 NBF Minami-Aoyama Building		●
8 Toranomon Kotohira Tower
		●
9 NBF Nihonbashi Muromachi Center Building		●
10 Nakameguro GT Tower
		●
11 Mitsuiseimei Ochanomizu Building		●
12 NBF Ginza Street Building		●
13 Shinjuku Mitsui Building No. 2
		●
14 GSK Building				●
15 River City M-SQUARE		●
16 NBF Toranomon Building		●
17 Kowa Nishi-Shinbashi Building B		●
18 Nippon Steel Building No. 2
		●
19 NBF Alliance				●
20 Yotsuya Medical Building		●
21 Shibuya Garden Front		●
22 NBF Shibuya East		●
23 NBF Shibakouen Building		●
24 NBF Takanawa Building		●
25 NBF Akasaka Sanno Square		●
26 NBF Shibakouen Daimon Street Building		●
27 Sumitomo Densetsu Building		●
28 NBF Higashi-Ginza Square		●
29 NBF Ogawamachi Building		●
30 Nihonbashi Kabuto-cho M-SQUARE		●
31 NBF Ikebukuro Tower
		●
32 NBF Ikebukuro City Building		●		 NBF Sudacho Verde Building(%)(Yen in millions)

Trust
Ownership
Ownership
Trust
Trust
Trust
Ownership
Ownership
Trust
Ownership
Ownership
Trust
Trust
Trust
Ownership
Trust
Trust
Ownership
Trust
Trust
Ownership
Ownership
Ownership
Trust
Trust
Trust
Trust
Trust
Ownership
Ownership
Trust
Trust
—

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

100.0
85.4
18.6
18.1
100.0
100.0
100.0
100.0
100.0
93.1
100.0
100.0
100.0
100.0
100.0
100.0
83.0
100.0
100.0
100.0
50.0
100.0
100.0
100.0
100.0
87.0
100.0
100.0
83.8
100.0
100.0
100.0
—

1984
1999
1999
2003
1986
2005
1995
2004
1986
2002
2009
1990
1983
1990
2010
1963
1994
1989
1989
2004
2003
1992
1990
1987
1989
1991
1991
2005
1986
2009
1993
1993
1988

63,50045,002
41,73136,30032,00031,00031,00024,54323,94523,856
20,84017,00016,285
15,616
13,35013,337
13,217
12,614
9,126
8,800
8,700
8,000
6,770
6,667
6,250
6,100
5,365
5,200
4,940
4,850
4,695
4,428
—

64,48734,98535,25637,52029,11928,81331,541
20,037
24,19620,084
21,123
17,582
16,411
13,607
13,423
13,350
11,635
11,042
9,438
8,287
7,952
8,118
6,467
6,502
6,292
6,316
4,761
4,760
5,126
4,874
4,581
4,304
—

Ownership/Trust
Trust
Ownership
Ownership
Ownership
Ownership
Trust
Ownership
Ownership
Trust
Ownership
Ownership
Ownership
Ownership
Ownership

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

81.0
100.0
100.0
78.1
84.4
35.0
75.0
97.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1996
2004
2007
2010
2007
1989
1987
1990
1991
1990
1996
2004
1990
1990
1992

40,75035,20025,018
10,4009,320
20,30013,529
3,800
2,300
8,876
2,435
16,8162,000
15,7002,455

37,591
32,022
24,33010,403
9,320
18,21812,315
3,230
2,196
6,998
2,381
14,8281,920
15,8242,202

48 Sapporo L-Plaza		●
OwnershipComparted ownership
46.2
2003
49 NBF Sapporo Minami Nijo Building
		●
Trust
Fee simple
100.0
1990
50 NBF Sendai Honcho Building
		●
Trust
Fee simple
100.0
1987
51 NBF Unix Building
		●
Trust
Fee simple
100.0
1994
52 NBF Niigata Telecom Building
		●
Trust
Fee simple
100.0
1989
53 NBF Nagoya Hirokoji Building		●
Ownership
Fee simple
100.0
2000
54 Aqua Dojima NBF Tower
		●
Trust
Fee simple
100.0
1996
55 Shinanobashi Mitsui Building		●
Ownership
Co-ownership
99.0
1982
56 Sun Mullion NBF Tower
		●
Trust
Fee simple
100.0
1996
57 Sakaisuji-Honmachi Center Building		●
Ownership
Co-ownership of comparted ownership
49.3
1991
58 NBF Sakai-Higashi Building
		●
Trust
Fee simple
100.0
1991
59 Aqua Dojima East
		●
Trust
Co-ownership of comparted ownership
23.7
1993
60 NBF Shijo Karasuma Building
		●
Trust
Fee simple
100.0
1991
61 NBF Hiroshima Tatemachi Building		●
Ownership
Fee simple
100.0
1991
62 Hiroshima Fukuromachi Building		●
Ownership
Co-ownership of comparted ownership
10.4
2002
63 Hakata Gion M-SQUARE		●
Ownership
Fee simple
100.0
2009
64 NBF Kumamoto Building		●
Ownership
Fee simple
100.0
2008
Total						

4,404
1,870
3,566
4,029
3,958
7,232
17,81014,40010,500
6,500
2,227
1,914
1,627
2,930
835
8,000
4,500
870,230

3,704
1,700
3,559
3,080
3,610
6,942
16,22911,327
8,036
6,118
1,957
1,710
1,376
2,857
681
7,950
4,424
811,032

Other Greater Tokyo

33 Nakanosakaue Sunbright Twin
		●34 NBF Toyosu Canal Front
		●
35 NBF Toyosu Garden Front		●
36 NBF Ueno Building		●
37 Chofu South Gate Building		●
38 Shin-Kawasaki Mitsui Building		●
39 Yokohama ST Building		●
40 Parale Mitsui Building		●
41 NBF Atsugi Building		●
42 Tsukuba Mitsui Building		●
43 NBF Utsunomiya Building		●44 S-ino Omiya North Wing
		●
45 NBF Urawa Building		●
46 NBF Shin-Urayasu Tower
		●
47 NBF Matsudo Building		●

Other Cities

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.

20 NBF Report July – December 2011			
Total Number of		
Percentage ofRentable
Leased Area at
Occupancy Rate at
Appraisal Value
Tenants at
Revenue
Total Revenues
Area
End of Period
End of Period													End of Period		
(Note 1)

Probable
Maximum Loss

(Yen in millions)

(%)

(PML)
(%)

85
1
1
12
32
6
8
1
14
1
1
1
47
1
8
12
2
2
8
1
1
5
6
6
6
7
1
8
1
2
12
10
—

1,465
1,087
1,386
Note 2
996
1,532
457
880
833
894
Note 2
Note 2532
Note 2617
674
Note 2
Note 2
264
245
Note 2
192
306
309
221
142
Note 2
233
163
Note 2
182
173
Note 2

4.9
3.7
4.7
Note 2
3.4
5.2
1.5
3.0
2.8
3.0
Note 2
Note 2
1.8
Note 22.1
2.3
Note 2
Note 20.9
0.8
Note 2
0.6
1.0
1.0
0.7
0.5
Note 20.8
0.6
Note 20.6
0.6
Note 2

1.6
1.8
1.5
1.7
2.3
1.5
4.7
1.6
4.8
1.2
5.8
8.2
1.6
0.8
4.0
8.4
2.0
3.5
7.3
5.6
3.4
4.4
5.9
5.3
9.9
2.8
5.2
3.1
4.2
6.4
3.9
9.9
—

97.7
98.7
100.0
100.0
100.0
100.0
95.6
100.0
90.8
97.2
95.1
96.6
100.0
96.8
92.7

9
9
4
6
1
1
94
1
17
60
39
38
13
41
23

1,091
1,049
985
283
Note 2
859
636
287
110
441
126
703
101
582
126

3.7
3.5
3.3
1.0
Note 2
2.9
2.1
1.0
0.4
1.5
0.4
2.4
0.3
2.0
0.4

1.4
4.2
3.5
1.9
4.3
2.1
1.7
2.8
16.9
0.5
0.5
1.8
10.2
2.6
7.8

100.0
100.0
92.4
98.9
96.4
98.2
94.7
100.0
93.8
90.3
79.8
87.3
87.7
94.2
100.0
100.0
98.3
98.1

12
3
9
48
33
23
46
1
29
42
19
19
15
30
17
16
15
1,042

322
107
166
260
204
252
709
573
377
242
105
76
72
131
39
388
193
29,773

1.1
0.4
0.6
0.9
0.7
0.9
2.4
1.9
1.3
0.8
0.4
0.3
0.2
0.4
0.1
1.3
0.7
100.0%

0.3
1.0
2.1
2.9
4.9
6.7
3.3
4.9
1.6
3.6
6.6
3.4
1.6
3.9
3.1
Less than 0.1
3.0
1.6(Yen in millions)

(m2)

(m2)

(%)		

55,40044,10040,70038,90026,40051,20016,90030,70027,10021,70014,70014,50014,60021,70013,80017,10015,70013,97010,3007,400
13,900
6,570
8,200
7,640
7,000
4,400
4,990
7,210
5,530
4,860
5,000
4,930
—

27,57633,092
29,94035,641
24,72833,503
9,631
16,84816,30921,4236,627
3,440
14,874
20,426
16,232
10,067
10,08817,338
4,043
7,481
8,258
4,993
7,087
10,458
5,258
3,428
5,991
4,871
4,805
3,298
5,652
5,127
—

27,05833,092
29,94035,641
24,38333,503
9,521
16,84815,957
21,4236,627
3,440
14,717
20,426
16,232
8,498
10,061
17,338
4,043
7,481
8,258
4,993
7,087
10,458
5,258
3,428
5,991
4,871
4,805
3,298
4,669
4,758
—

98.1
100.0
100.0
100.0
98.6
100.0
98.9
100.0
97.8
100.0
100.0
100.0
98.9
100.0
100.0
84.4
99.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
82.6
92.8
—

30,30035,70028,7008,630
9,320
14,50013,900
3,530
2,100
7,290
2,090
18,0001,770
11,5002,280

32,082
36,63828,3008,504
13,762
27,924
20,03012,545
5,242
16,785
6,160
20,6983,455
22,8384,770

31,35836,15428,3008,504
13,762
27,924
19,15812,545
4,759
16,3185,857
19,9903,455
22,096
4,420

6,560
1,540
2,860
3,310
2,980
7,230
18,20013,400
7,930
6,390
1,620
1,780
1,230
2,400
770
8,070
3,710
856,690

11,396
5,351
7,539
13,32910,208
9,876
21,91725,314
14,954
11,435
5,255
3,243
3,932
5,568
1,309
14,328
7,934
861,153

11,396
5,351
6,962
13,1789,837
9,696
20,762
25,314
14,027
10,324
4,196
2,832
3,448
5,243
1,309
14,3287,801
844,704

NBF Report July – December 2011 21

Management Team and Management Structureof April 1, 2012)(As of December (As31, 2011)
Nippon Building Fund Inc. (NBF) is an investment corporation that takes a medium-to-long-term
perspective with the aim of generating steady asset growth and stable profits. NBF continues to do its
utmost for investors.

The General Meeting of Unitholders adopts or vetoes resolutions on

Nippon Building Fund Inc.

the basis of a simple majority of the voting rights of unitholders inattendance, unless otherwise stipulated by laws, regulations or NBF’s

Nippon Building Fund Inc. is an investment corporation estab-

articles of incorporation. Decisions on substantive matters such as

lished with the objective of investing in assets, primarilychanges in the articles of incorporation require the attendance of unit-

Designated Assets as defined by the Investment Trust Law ofholders that control a simple majority of total units issued and out-

Japan. NBF entrusts management of its assets to Nippon Building

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

Fund Management Ltd., which is an asset management company.

holders. In addition, any change in the asset management policies and

NBF’s primary investment objective is to achieve sustainable

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

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

requires an extraordinary resolution of unitholders as outlined above.

basis. NBF achieves this objective by investing in real estate consistlocated in the central business districts (CBDs) of Tokyo, other Greater

Executive Directors, Supervisory Directors andthe Board of Directors

Tokyo and other cities in Japan. NBF also invests in securities, benefi-

NBF’s articles of incorporation stipulate that NBF must haveciary certificates representing beneficial interests in trusts and otherone or more executive directors and three or fewer supervisory

assets backed by office properties.

directors (but the number of supervisory directors must always be

ing of buildings primarily used for offices with their underlying land

at least one greater than the number of executive directors). As of

General Meeting of Unitholders

December 31, 2011, NBF had two executive directors and three

Specific matters pertaining to NBF that are subject to the Investment
Trust Law of Japan or the Company’s articles of incorporation aresupervisory directors. As of April 1, 2012, following the retirementof Koichi Nishiyama, NBF has one executive director.

decided by resolution of the General Meeting of Unitholders, which

NBF’s executive directors are responsible for business execution,

convenes at least once every two years, in principle. The seventhand have authority for all judicial and extrajudicial proceedings related

General Meeting of Unitholders convened on March 10, 2011. The dateto the operations of NBF. Supervisory directors are responsible forof the next General Meeting of Unitholders has not been set.

supervising execution by the executive directors.

General Meeting ofUnitholders

Asset Custody

Sumitomo Mitsui
Trust Bank, Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.

Asset Custody
Entrustment

OfficeManagement
Entrustment

Board of Directors

NIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

Borrowings /Bonds and
Notes
Debt
Service

Qualified Institutional
Investors / Bondholders

Investment

Unitholder

Distribution

Unitholder

Liabilities

Office Management
Investment

Real Estate, etc.

NIPPON BUILDING FUND Inc. (NBF)

AssetManagement
Entrustment

Rent, etc.

AssetsUnitholders’EquityIndependent Auditors
KPMG AZSA LLC

Trading

22 NBF Report July – December 2011
Compliance Committee

Investment Committee

Management Team

From left: Sadao Kamiyama, Tsutomu Nishikawa, Hatsuo Komatsu, Yoshiyuki Hirai

Name

Background Summary

Executive Director

Tsutomu Nishikawa

Supervisory Directors

Hatsuo Komatsu
Sadao Kamiyama

Appointed Executive Director of NBF in March 2011 after serving as an executive officer of
Mitsui Fudosan Co., Ltd.
Attorney. Appointed Supervisory Director of NBF in March 2007.
Certified Public Accountant. Certified Public Tax Accountant. Appointed Supervisory Director
of NBF in March 2007.
Appointed Supervisory Director of NBF in March 2009. Real Estate Appraiser.

Yoshiyuki Hirai

The Board of Directors consists of the executive and supervisory

The terms of office of executive directors and supervisory directors

directors. Its responsibilities include authorizing business execution andare two years from the time they assume office. The terms of executive

supervising the performance of the executive directors. Resolutions bydirectors and supervisory directors selected to fill a vacancy or to

the Board of Directors require a simple majority with more than half ofincrease the number of directors expire at the same time as the remain-

the members of the Board in attendance.

ing terms of their predecessors or the current directors. Both of the

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

executive directors serving as of December 31, 2011, all three supervi-and supervisory directors may not participate in decisions in whichsory directors and the substitute supervisory director were elected at thethey have a vested interest. Executive and supervisory directors with

General Meeting of Unitholders held on March 10, 2011, and assumed

such financial interest shall not be included in the number of executive

office on March 17, 2011.

and supervisory directors in attendance for such decisions.

NBF Report July – December 2011 23

Nippon Building Fund Management Ltd.

Management Structure

NBF entrusts asset management to Nippon Building Fund

General Meeting of Shareholders

Management Ltd. under an asset management agreement.

Compliance Committee

Matters Entrusted to
Nippon Building Fund Management Ltd.
As the asset management company required by the Investment
Trust Law of Japan, Nippon Building Fund Management Ltd. manages
NBF’s assets in accordance with the asset management objectives andGeneral Meetin

AuditorBoard of Directors
Executive Board
Risk Management Board
CEOInvestment
Review Board

Accounting Auditor

Compliance
Officer

Investment & FinanceGroup

Corporate OperationGroup

policies stipulated by NBF’s articles of incorporation. In addition, in
accordance with the manager of general administration contract desig-

Real EstateManagementTeamnating Nippon Building Fund Management Ltd. as the institutional man-Real Estate
Investment
Team

Research
Team

Financial
Team

Fund
Operation
Team

Corporate
Risk
Planning &Management
Administration & Compliance
Team
Team

ager of NBF’s assets, Nippon Building Fund Management Ltd. also
executes certain responsibilities in connection with the operation of theGeneral Meeting of Unitholders and the Board of Directors as manager

of Nippon Building Fund Management Ltd. The heads of theof general administration.

Investment & Finance Group and the Corporate Operation Group also

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

serve as directors, and oversee their respective■
divisions under the
direction and oversight of the president. Corporate auditors conduct
accounting audits and operational audits of Nippon Building FundManagement Ltd. The Compliance Officer oversees compliance forpolicies of Nippon Building Fund Management Ltd. and oversees exe-

the asset management company and is responsible for internal

cution of the duties of the representative director. The president, who

administration in connection with internal audits at the asset manage-

is the representative director, supervises and executes the operations

ment company.

Nippon Building Fund Management Ltd. Management Team (As of April 1, 2012)
Name

Title

Career Summary

Kenichi Tanaka

President and CEO

Apr. 1982		 Joined Mitsui Fudosan Co., Ltd.
Apr. 2007		 Business Administration Manager of Mitsui Fudosan Co., Ltd.
Apr. 2010		 Rental Housing Business Manager, Accommodation Business Department of Mitsui Fudosan Co., Ltd.
				 (current position)
Apr. 2012 		 Appointed President and CEO of Nippon Building Fund Management Ltd. (current position)

Yasushi Akimoto

Director, Head ofInvestment &Finance Group

Apr. 1983		 Joined Mitsui Fudosan Co., Ltd.
Apr. 1998		 Seconded to Daiichi Engei Co., Ltd. under the supervision of Personnel Department of Mitsui Fudosan
Apr. 2006		 Head of Group under Business Promotion Section, Building Department of Mitsui Fudosan
Apr. 2008		 Seconded to Nippon Building Fund Management Ltd. under the supervision of Personnel Department of				 Mitsui Fudosan (current position)
Apr. 2011		 Became Director of Nippon Building Fund Management Ltd. (current position)

Masahiko Misao

Director, Head ofApr. 1980		 Joined Sumitomo Life Insurance Company

Corporate Operation

Apr. 2003		 Manager of Real Property Department, Sumitomo Life Insurance Company
Mar. 2008		 Director and General Manager, Commercial Operation Department, Shinagawa Intercity Management Co., Ltd. 		
				 (current position)
Mar. 2012		 Appointed Director and Head of Corporate Operation Group of Nippon Building Fund Management Ltd.
				 (current position)Group

Masato Shikata

Director (Part-time)

Apr. 2009		 Became Director of Nippon Building Fund Management Ltd. (current position)

Fukuhisa Kumada

Director (Part-time)

Sep. 2010		 Became Director of Nippon Building Fund Management Ltd. (current position)

Toru Suzuki

Auditor (Part-time)

Apr. 2008		 Became Auditor of Nippon Building Fund Management Ltd. (current position)

Hideo Yoshimura

Auditor (Part-time)

Jul. 2011		 Became Auditor of Nippon Building Fund Management Ltd. (current position)

24 NBF Report July – December 2011

Management Team and Management Structure

Compliance Initiatives

The Asset Management Guidelines consist of management guidelines
for management, acquisition and sale of assets; financial guidelines forfund 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

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

rigorous compliance by adhering to all relevant laws and regulations,

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 the execution of their duties and supervisoryaccountability to NBF and NBF’s unitholders with regard to any transac-

directors ensure that oversight and check-and-balance systems are func-

tions in which the interests of NBF and the interests of Nippon Building

tioning properly.

Fund Management Ltd. and its related corporations or customers may

based on a high level of corporate ethics.
The bylaws of NBF’s Board of Directors stipulate that Board of

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

agement strategy, with a fundamental compliance policy of conducting

stipulated in laws and internal bylaws to proactively prevent conflicts

operations honestly and fairly while maintaining a rigorous complianceof interest.

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

All decisions made in executing the management of NBF’s assets are

Building Fund Management Ltd. has established a Compliancesubject to the approval of the president, and are made after going

Committee, consisting of the Compliance Officer, the president, the headthrough discussions by the Investment Review Board and Executiveof the Investment & Finance Group, the head of the Corporate Operation

Board of Nippon Building Fund Management Ltd. Sponsor companies

Group and an outside committee member. Initiatives to enhance aware-

are not permitted to intervene in the decision-making process.

ness of and adherence to compliance include the establishment of■ Voluntary Rules for Conflict of Interest Transactions

Compliance Rules and a Compliance Manual. In addition, a Compliance

Stipulated in Internal Bylaws

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

Nippon Building Fund Management Ltd. has set voluntary rules in its

plan for that year and identify any problem areas.

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

Risk Management System
NBF and Nippon Building Fund Management Ltd. have establishedThe voluntary rules require the Investment Division, which initiates thetransaction, as well as the Compliance Department, the Assetthe following risk management system to avoid and minimize risks related

Management Examination Meeting and other units to protect NBF’s

to investments.

managed assets and profits by fully examining the transaction contents■ NBF

according to the voluntary rules set in the internal bylaws in the event of a

NBF’s Risk Management Regulations define risk management policies

transaction in which the interests of Nippon Building Fund Management

and procedures. The Risk Management Board convenes once every threeLtd. and parties that have interests in Nippon Building Fund Managementmonths and undertakes deliberation, monitoring and other initiatives toLtd. may conflict with the interests of NBF. These rules are designed fromensure that the entrusted asset manager is conducting its duties with due

the standpoint of accountability to NBF and its unitholders.

care in good faith in a manner consistent with its fiduciary duty to the con-

In examining the transaction contents, Nippon Building Fundservation and maintenance of entrusted assets.

Management Ltd. solicits the opinions of attorneys, certified tax accoun-■ Nippon Building Fund Management Ltd.

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

Nippon Building Fund Management Ltd. formulates a Management

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

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

Building Fund Management Ltd., the purchase price is strictly set, in prin-

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

ciple no higher than the appraised value according to a real estate

Nippon Building Fund Management Ltd. has set Asset Management

appraiser with no vested interest.

Guidelines as a set of standards to follow.
NBF Report July – December 2011 25

Management’s Discussion and Analysis■ Summary of Selected Financial Data
21st Period
from July 1, 2011 to
December 31, 2011

20th Period
from January 1, 2011 toJune 30, 2011

19th Period
from July 1, 2010 to
December 31, 2010

21st Period
from July 1, 2011 to
December 31, 2011

U.S. dollars in thousands
Yen in millions, except per unit data or where otherwise indicated		
except per unit data (Note 1)

Operating revenues
Note 2
		 Revenue from property leasing activities		
		 Gain on sale of investment property		Operating expenses				 Rental expenses				 Loss on sale of investment property		
Income before income taxes		
Net income(a)Funds from operations
Note 3
Net operating income from property leasing activities Note 3
Total amount of cash distribution(b)
Depreciation and amortization		
Capital expenditures		
Total assets(c)Interest-bearing debt
Net assets(d)Total number of units issued (units)(e)
Net assets per unit (Yen/$)(d) / (e)Distribution per unit (Yen/$)(b) / (e)Funds from operations per unit (Yen/$)Note 3
ROA
Note 3
		 (Annual rate) 		
ROE
Note 3
		 (Annual rate) 		
LTV (Loan to value)
Note 3
Capital ratio(d) / (c)Payout ratio(b) / (a) Note 4
Number of days		
Number of investment properties
Note 5
Number of tenants
Note 5
Total rentable area (m2) 		
Occupancy rate
Note 5¥ 29,773
29,773—
17,587
16,145
197
9,128
9,127
15,226
19,530
8,793
5,902
1,975
852,855
377,375
424,242
578,500
733,348
15,20026,3201.1%(2.2%)
2.2%(4.3%)
48.2%
49.7%
96.3%
184
64
1,042
861,153
98.1%¥ 28,081
28,081—
16,162
14,951
—
8,758
8,757
14,291
18,664
8,757
5,534
1,695
823,705
350,750
423,872
578,500
732,709
15,13824,9371.1%(2.3%)
2.1%(4.3%)
46.5%
51.5%
100.0%
181
64
1,011
828,491
97.1%¥ 27,314
27,314—
15,995
14,824
—
8,400
8,399
13,57017,661
8,398
5,171
1,769
765,203
325,125
394,575
542,000
727,996
15,49525,0361.1%(2.2%)
2.1%(4.3%)
46.3%
51.6%
100.0%
184
59
952
762,983
96.6%$

386,770
386,770—
228,463
209,734
2,559
118,577
118,565
197,789
253,701
114,227
76,66525,656
11,078,916
4,902,247
5,511,071
9,526
197
342

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥76.98 = U.S. $1.00, the approximate exchange rate on December 31, 2011.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses after ROA and ROE are annualized based on the six-month figures for the period.
		 Funds from operations: Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization
		 Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
		
Funds from operations per unit: (Net income (excluding Gain and Loss on sale of investment properties) + Depreciation and amortization) / Weighted average number of units issued
		 and outstanding during the period
		 ROA: Income before income taxes / (Initial total assets + Total assets at end of period) ÷ 2
		 ROE: Net income / (Initial net assets + Net assets at end of period) ÷ 2
		 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 gross		 leased area to total rentable area at the end of the period.

26 NBF Report July – December 2011

4 billion
mpleted)*Operating Environment and Results
In the Japanese economy during the six months ended December 31, 2011 (the “21st Period”), factors including restoration of facilities damagedby the Great East Japan Earthquake of March 2011 resulted in a moderate increase in capital investment. Personal consumption firmed as well. On
the other hand, exports and production were flat due to the deceleration of overseas economies, the appreciation of the yen and the lingering effectsof flooding in Thailand.
In the office building leasing market, vacancy rates remained at high levels. At the same time, market rents remained weak and near bottom.
However, with downward adjustment in rents and demand to consolidate and move to larger offices, occupancy rates in the central business districts(CBDs) of Tokyo seem to have bottomed out. Occupancy rates showed improvement particularly in high-quality large-scale properties with superioranti-seismic features, with expansion of floor space in certain buildings.
In the real estate acquisition market, despite a temporary decrease in transactions due to the effects of the Great East Japan Earthquake, activity
was apparent, mainly in Tokyo CBDs, due to factors including stabilization of the fund procurement environment and adjustment of property prices.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality office buildings that arehighly competitive in terms of their location, size and infrastructure, and are expected to have stable cash flow from rents. During the 21st Period,
NBF acquired two properties: the Mitsubishi Heavy Industries Head Office Building (acquisition price of ¥36,300 million) in September and the Nishi-

Total Investment

Shinjuku Mitsui Building (additional acquisition of ¥99 million) in December. In
line with its asset replacement strategy, NBF sold the NBF Sudacho(Yen in billions)
Verde Building (sale price of ¥3,250 million).

900

December 31,

800
2008
¥794.4billionFor existing tenants,
NBF systematically conducted
property
management,
renovations and new construction to further increase tenant(contract completed)*

700

Juneworked
30,
satisfaction. NBF also
to secure stable rental revenue by maintaining a sound grasp of the market, setting appropriate rents for new tenants
2008
600

December31,
and revising rents
for tenants
renewing their lease contracts.
2007

500

4002011 totaled 64 properties. Total investment on an acquisition priceAs a result of these
efforts, NBF’s real estate portfolio as of December 31,
June 30,
2007

300

December 31,
percent. The number 2006of tenants totaled 1,042.

200

basis was ¥870,230 million. Total rentable area was 861,153m2. The occupancy rate increased 1.0 percentage points from June 30, 2011 to 98.1
100

June 30,
2006

0Dec. 31,2009

Jun. 30,
2010

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011* Contract basis

Total Investment(Yen in billions)

900

600

(%)

100

June 30,
2008

98

December 31,
2007

96

500
400

June 30,
2007

300

December 31,
2006

200

94
92
90

June 30,
2006

100
0

Occupancy Rate

December 31,
2008

800
700

(%)

0
Dec. 31,2009

Jun. 30,
2010

Occupancy Rate

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011

Dec. 31,2009

Jun. 30,
2010

Operating Revenues(%)(Yen in millions)100

35,00098

30,00096

25,00094

20,00092

15,00010,000NBF Report July – December 2011 27

Occupancy Rate

Operating Revenues(%)(Yen in millions)100

35,000Operating Revenues

Occupancy Rate
98(%)

(Yen in millions)
30,00035,000100
96
25,00030,00098
94
20,00025,00096
92
15,00020,00094
90
10,00015,00092
11revenuesthOperatingfor the six months ended December 31, 2011 increased¥1,692 million, or 6.0 percent, compared with the previous six5,000
Period10,000 of the six properties acquired during the period ended June 30, 2011,
90
month
period to ¥29,773 million, mainly because of the full-period occupancy
00Dec. 31,11thJun. 30,
Dec. 31,
Jun. 30,
Dec. 31,
17th
18th
19th
20thDecember
21stincluding
additional
acquisitions,the new occupancyof the two properties
during5,000 acquired
2009
2010 and 2011
2011
PeriodPeriod the period
Period ended
PeriodPeriod31, 2011, including
Period 2010

Overview of Performance

additional
acquisitions. Operating income increased ¥267 million, or 2.2 percent,to ¥12,186 million. Net income increased ¥370 million, or 4.2
0
0
17th
18th
19th
20th
21st
Dec.
31,
Jun.
30,
Dec.
31,
Jun.
30,
Dec.
31,
percent,2009
to ¥9,1272010
million. Distribution
per unit was¥15,200.
PeriodPeriodPeriodPeriodPeriod
2010
2011
2011
(Yen in millions)Operating Income From Property
Leasing Activities

35,000(Yen in millions)Operating Revenues

Operating Income From Property
20,00015th
Operating Revenues

Leasing Activities

30,000(Yen in millions) Period

15,00020,000Period13th
Period14th
Period12th
Period13th
Period11th
Period12th
Period30,00020,00025,00015,00020,00010,00015,0005,000
10,0000
5,000(Yen in millions)

14th
15th
Period35,00025,000

11th
17PeriodthPeriod10,00015,0005,000
10,00018th

Period19th

Period20th

Period

21st

0
5,000

Period0

17th
18ththe Current
19th
20Periodth
21stDistribution
for
PeriodPeriodPeriodPeriodPeriod0

17thPeriod18th
Period19th
Period20th
Period21stPeriod17th
Period18th
Period19th
Period20th
Period21stPeriodDistribution per unit for the current period was ¥15,200. NBF expects to distribute all retained earnings at the current period end remaining after

Operating Income
From Property
Distribution per Unit
15amountthdeductingappropriated to the reserve for advanced depreciationof non-current assets as stipulated in Article 66-2 of the Special(Yen)
Leasingthe
Activities
Period(Yen in millions)Measures Law of Japan to be eligible for special tax treatment 25,000
Taxation(Special Taxation Measures Law of Japan Article 67-15) that allows NBF to
14
Distribution per Unit
Operating
IncomeFrom of
Property
20,000
15ththdividends
deductits cashprofits from taxable income.
Period(Yen)

Leasing Period
Activities

20,00013th
25,000For the six months ended
For the six months ended
For the six months ended
Period14th
PeriodDecember 31, 2011
June 30, 2011
December 31, 2010
12th
15,00020,000Period13th(Yen in thousands, except per unit amounts)			
Period10,00015,000 earnings
11th
Retained¥9,127,28910,000¥8,757,477¥8,398,598
Period12th
15,000
UndistributedPeriod
earnings
—
144
308
10th
5,000
10,000Reservefor advanced
depreciation
334,08910,000
—
—
5,000
Period11th
PeriodTotal cash distribution
8,793,200
8,757,333
8,398,290(Yen in millions)		
15,000		20,000

10th per unit)
0 distribution
(Cash
5,000
17Period
18th
19th
20th
21st
DistributionPeriod
ofthaccumulated
Period earnings
PeriodPeriodPeriod(Distributionof accumulated earnings per unit)0
Cash distribution
earnings
17th in excess
18th of accumulated
19th
20th
21st
PeriodPeriodPeriodPeriod(Per unit)Period

Note:
Above cash distributions
Distribution
per Unit were paid after the period end.
(Yen)

25,00015th
Period(Yen)

15,00020,00010,00015,0005,000
10,0000
5,000
0(Yen in millions)

14th
15th
PeriodPeriod13th
Period14th
Period12th
Period13th
Period11th
Period12th
Period10th
Period11th
Period10th
17th

Period17th
Period15,13818th
8,757,333
Period15,13818th—
Period—19th

15,49520th8,398,290
21stPeriodPeriod19th
Period20th
Period15,49521—stPeriod—PeriodTotal Amount of Cash Distribution(Yen in millions)

Total Amount of Cash Distribution(Yen in millions)12,50010,00010,000
7,500

7,500
5,000

18th

19th

20th

21st

PeriodPeriodPeriodPeriodPeriodPeriod17th
Period18th
Period19th
Period20th
Period21stPeriodTotal Amount of Cash Distribution
in millions)
28 (Yen
NBF
Report July – December 2011
15th
12,500Period17th

12,500Distribution per Unit

20,00025,000(Yen in millions)

15,200 5,000
08,793,200
15,200
0
—
—

5,000
0

0

17th
Period18th
Period19th
Period20th
Period21stPeriod17th
Period18th
Period19th
Period20th
Period21stPeriodTotal Assets(Yen in millions)

1,000,000

Total Assets

millions)

Distribution per Unit
(Yen)

(Yen in millions)

15th

25,000Total Amount of Cash Distribution(Yen in millions)Management’s Discussion and Analysis

12,500Period14th

Period20,00010,00013th
Period15,00012inthChangesPeriod
Assets, Liabilities and Net Assets
10,0007,500

11th
PeriodAssets5,000
As of December
31, 2011, total assets increased by ¥29,150 million to ¥852,855 million compared with June 30, 2011. Return on average total
5,000
10th
Periodassets (ROA) for the six months ended December 31, 2011 decreased to 1.09 percent from 1.13 percent for the previous six-month period.
0
Current
assets decreasedby¥1,682 20
millionto ¥36,418
million compared0 with 17
June
2011.
properties
increasedby ¥30,643
19th
20th
21st
th 30, 18
th Investment
17th
18th
19th
21st
th
PeriodPeriodPeriodPeriodPeriodPeriodmillion to ¥810,998
millioncomparedwithJune 30,
2011.

PeriodPeriodPeriodPeriodLiabilities
Total Assets
Total
Amountof CashDistribution
Current
liabilities
decreasedby ¥8,034 million to ¥74,392 million comparedwith June 30, 2011, primarily because of a decrease in long-term(Yen in millions)(Yen in millions)debt due within
15thone year compared with June 30, 2011.
1,000,000
12,500PeriodLong-term
debt increased by ¥35,625 million to ¥312,625 million compared with June 30, 2011.
14th
As a result,
total interest-bearing liabilities increased by ¥26,625 million
to ¥377,375 million compared to June 30, 2011. However, the ratio of
Period800,000
10,000long-term fixed-rate
debt (less amounts due within one year) to total interest-bearing liabilities increased to 82.8 percent as of December 31, 2011
13th
Periodfrom 79.0 percent as of June 30, 2011. The loan-to-value ratio, calculated
as the ratio of interest-bearing liabilities plus deposits under management
600,000
12th
7,500
to total assets,
increased to 48.2 percent as of December 31, 2011 from 46.5 percent as of June 30, 2011.
Periodth
In addition,11NBF
worked to diversify funding sources. In January 2011,400,000
NBF updated a shelf registration to publicly offer up to ¥200 billion in bonds.
Period5,000

10thPeriodNet assets
000Dec. 31,
17thincreased
18th by ¥370
19thmillion 20
21stmillion compared with June 30,
Net assets
toth¥424,242
2011. Jun. 30,
PeriodPeriodPeriodPeriod20092010

Dec. 31,2009

Jun. 30,
2010

Period(Yen in millions)(Yen in millions)

1,000,000

500,000

15th
Period400,000

13th
Period300,000

12th
Period200,000

11th
Period100,000

10th
PeriodDec. 31,2009

0Dec. 31,2011

400,000

14th
Period600,000

Jun. 30,
2011

Net Assets

Total Assets

800,000

Dec. 31,2010

Jun. 30,
2010

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011

0Dec. 31,2010

Jun. 30,
2011

Dec. 31,
2011

Net Assets(Yen in millions)
Funding

500,000

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
400,000
million was raised through private placements. As of December 31, 2011, NBF had issued 578,500 units out of 2,000,000 total authorized units.
300,000units were listed on the J-REIT section of the Tokyo Stock Exchange in September 2001 upon the completion of a public offering. As the
NBF’sInvestment Trust Law of Japan does not contain any provision for the issue of more than one class of units, NBF’s units comprise the sole class of
200,000
units authorized and issued by NBF.
100,000
0Dec. 31,2009

Jun. 30,
2010

Dec. 31,2010

Jun. 30,
2011

Dec. 31,2011

NBF Report July – December 2011 29				Issue date
Remarks		Units issued and outstanding
Increase
Balance(Units)

Initial capital
March 16, 2001		
(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
February 4, 2008 Public offering
Third party
March 4, 2008		
allocation
January 26, 2011 Public offering
February 22, 2011 Third party		
allocation

200

200

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

4,000

Paid-in capital
Increase

Balance

Notes(Yen in millions)

¥

100

¥

100

Note 1

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

Note 2
Note 3Note 4

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

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

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

Note 1034,000576,000

26,957413,133

Note 112,500

578,500

1,982

415,115

Note 12

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

Market Price of Units
High/Low (closing price) of units on the TSE:		
For the six months ended		
December 31, 2011			For the six months ended
June 30, 2011
(Yen)

For the six months ended
December 31, 2010

¥871,000
735,000¥850,000
702,000¥830,000
620,000

High
Low

Borrowings
Borrowings from financial institutions as of December 31, 2011 are shown below.
Short-term loans			
LenderBalance		

Averageinterest rate (%)

Due on(Note 1)

Repayment
method

0.3%
0.5%
0.5%
0.5%
0.5%
0.5%

January 31, 2012
January 31, 2012
February 29, 2012
January 31, 2012
February 29, 2012
March 30, 2012

Bulletpayment

Use of
funds

Notes

(Note 4)

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

Mitsubishi UFJ Trust and Banking Corporation ¥15,000
The Gunma Bank, Ltd.
2,000
The 77 Bank, Ltd.
2,000
Shinkin Central Bank
1,000
The Joyo Bank, Ltd.
1,000
The Chugoku Bank, Limited
1,000
Total short-term loans

30 NBF Report July – December 2011¥22,000

Management’s Discussion and Analysis

Long-term loans			
LenderBalance		

Averageinterest rate (%)

Due on(Note 1)

Repayment
methodUse of
funds

Notes

(Yen in millions)

Development Bank of Japan Inc.
¥ 4,000
		
10,000		
10,000		
10,000		
10,000
		
4,375
		
9,000
Mitsubishi UFJ Trust and Banking Corporation 3,000
		
1,000
		
7,000
		
15,000Sumitomo Life Insurance Company
7,000
		
5,000
		
5,000
		
3,000
		
5,000
Sumitomo Mitsui Banking Corporation
5,000
		
5,000
		
4,000
		
6,000
		
1,000
Zenkyoren (The National Mutual Insurance 10,000
Federation of Agricultural Cooperatives) 10,000
The Chuo Mitsui Trust and10,000Banking Co., LIMITED
10,000Mizuho Corporate Bank, Ltd.
2,000
		
8,000
		
7,000
MITSUI LIFE INSURANCE COMPANY, LIMITED 2,000
		
4,000
		
2,000
		
3,000
		
2,000
		
3,000
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
8,000
4,000
4,000
The Sumitomo Trust and
5,000Banking Company, Limited
7,000
Shinkin Central Bank
4,000
		
3,000
		
3,000
Resona Bank, Limited.
3,000
		
1,000
		
3,000
THE BANK OF FUKUOKA, Ltd.
4,000
		
2,000
Nippon Life Insurance Company
2,000
		
2,000
		
2,000
Meiji Yasuda Life Insurance Company
4,000
		
1,000
DAIDO LIFE INSURANCE COMPANY
1,000
		
1,000
		
1,000
		
2,000
The Hachijuni Bank, Ltd.
1,000
		
2,000
		
1,000
TAIYO LIFE INSURANCE COMPANY
1,000
		
2,000
		
1,000

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

November 28, 2014				September 11, 2015			
September 27, 2017
February 15, 2016
May 30, 2018
(Note 2)
April 28, 2019
August 30, 2019
(Note 3)
July 31, 2014
September 30, 2014
March 4, 2016
March 1, 2019
May 23, 2018
May 23, 2016
July 16, 2014
February 3, 2016
July 19, 2017
April 30, 2013
June 27, 2013
December 28, 2012
April 28, 2014
June 30, 2014
September 11, 2015
May 30, 2016
June 1, 2018
December 30, 2019
February 7, 2012
July 31, 2013
November 30, 2018
February 13, 2012
Unsecured
March 30, 2012
/unguaranteed
November 1, 2012
Bullet/pari passu,(Note 4)
December 13, 2013
payment
See (Note 5)
May 30, 2013
Fixed rate
May 29, 2014
September 30, 2013
September 30, 2014
June 1, 2017
September 30, 2013
April 27, 2012
June 27, 2013
June 1, 2017
December 30, 2016
October 30, 2015
June 1, 2017
March 8, 2019
July 12, 2012
June 1, 2017
April 1, 2015
October 19, 2018
May 31, 2019
April 27, 2012
May 23, 2012
March 30, 2012
October 31, 2014
October 4, 2013
February 3, 2015
December 2, 2013
June 26, 2014
March 30, 2015
December 15, 2014
July 11, 2014
August 31, 2015

NBF Report July – December 2011 31

			LenderBalance		

Averageinterest rate (%)

Due on(Note 1)

Repayment
method

1.7%
1.0%
0.9%
1.1%
1.1%
1.9%

May 29, 2014
February 25, 2016
January 4, 2017
May 1, 2019
December 28, 2012
April 30, 2014

Use of
funds

Notes

(Note 4)

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

(Yen in millions)

The Chugoku Bank, Limited		
The Yamaguchi Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.
The Iyo Bank, LTD.

Total long-term loans
Total borrowings (Note 6)

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

Bulletpayment¥285,375¥307,375

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

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥42,750¥36,750¥29,750¥40,750

NBF Bonds			
Issue
Issue date			

No. 3 Unsecured Bonds June 12, 2003
No. 7		Unsecured Bonds November 9, 2005
No. 8		Unsecured Bonds March 7, 2007
No. 9		Unsecured Bonds May 24, 2007
No. 10 Unsecured Bonds May 24, 2007
No. 11 Unsecured Bonds January 28, 2010
No. 12 Unsecured Bonds September 15, 2011
Total (Note 6)		Balance as of		
December 31, 2011
Coupon(Yen in millions)¥10,000
10,00010,00010,00010,00010,00010,000¥70,000

2.00%
1.85%
1.48%
1.74%
2.04%
1.23%
0.64%

Maturitydate

Redemption

Use ofproceeds

Notes

June 12, 2018
November 9, 2015
March 7, 2012
May 23, 2014
May 24, 2017
January 28, 2015
September 15, 2016

Bullet payment
Bullet payment
Bullet payment
Bullet payment
Bullet payment
Bullet payment
Bullet payment

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

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

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

Investment
corporation bonds

Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

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

Others
NBF has security deposits totaling ¥41,510 million as of December 31, 2011.

Capital Expenditures
1. Planning
As of December 31, 2011, NBF is planning the following capital expenditures for the renovation of its properties. The amounts
below include repairs and maintenance costs that will be expensed as incurred. Moreover, in addition to a steady program of
expenditures for construction, repair and renovation of facilities, a program of renewal construction is being implemented in order
to increase competitive power in the market as well as to increase the level of tenant satisfaction based on the results of tenantsatisfaction surveys and neighboring competitive building specification surveys, etc.
32 NBF Report July – December 2011

Management’s Discussion and Analysis

					Estimated amounts					 Payment for the 		Estimatedcurrent period
Cumulative
Name of property
Objective
Total amounts
			
duration		(from July 1, 2011
amount paid					to December 31, 2011)					(Yen in millions)

NBF Shin-Urayasu Tower
Renovation of air conditioning			
Sumitomo Densetsu Bldg.
Renovation of air conditioning			Shinjuku Mitsui Bldg. No. 2
Renovation of air conditioning			
Aqua Dojima NBF Tower
Renovation of air conditioning			Nishi-Shinjuku Mitsui Bldg.
Renovation of common area			Nakanosakaue
Renovation of automatic control
Sunbright Twin		Shin-Kawasaki Mitsui Bldg.
Renovation of heating equipment
			
Sumitomo Densetsu Bldg.
Renovation of air conditioning		
Aqua Dojima NBF Tower
Renovation of air conditioning			
NBF Takanawa Bldg.
Renovation of air conditioning			
NBF Unix Bldg.
Renovation of air conditioning			
NBF Ogawamachi Bldg.
Renovation of air conditioning			
NBF Atsugi Bldg.
Renovation of air conditioning		
Aqua Dojima East
Renovation of central		monitoring board
NBF Utsunomiya Bldg.
Attachment of sunshine		
adjustment film
NBF Shijo Karasuma Bldg.
Renovation of car parking tower			

From October 2012
to November 2012
From July 2012
to December 2012
From July 2012
to December 2012
From January 2012
to April 2012
From July 2012
to December 2012
From July 2012
to December 2012
From September 2011
to February 2012
From January 2012
to June 2012
From October 2012
to December 2012
From July 2012
to December 2012
From October 2012
to October 2012
From March 2012
to May 2012
From January 2012
to March 2012
From March 2012
to May 2012
From April 2012
to June 2012
From September 2012
to September 2012

¥270

¥—

¥—

142

—

—

130

—

—

123

—

—

119

—

—

119

—

—

113

—

—

112

—

—

101

—

—

93

—

—

58

—

—

53

—

—

52

—

—

34

—

—

25

—

—

20

—

—

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥1,976 million in capital expenditures
together with ¥836 million for repairs and maintenance expenses.
Name of property
Objective
Period					

Expenditure(Yen in millions)Shinjuku Mitsui Bldg.
No. 2
Aqua Dojima NBF Tower		
NBF Takanawa Bldg.
		
Sumitomo Densetsu Bldg.
		
GSK Bldg.
		Yotsuya Medical Bldg.

Renovation of air conditioning, renovation of restroom,
renovation of total enthalpy heat exchanger, etc.		 ¥ 194
Renovation of air conditioning, renovation of fire information equipment,
192
renovation of security system, etc.		
Renovation of air conditioning, renovation of incoming and133transforming facilities, renovation of steel door in common area, etc.
Renovation of air conditioning, renovation of elevator,
attachment of power demand monitor, etc.		 115Renovation of air conditioning, renovation of lighting distribution board,107
renovation of incoming and transforming facilities, etc.		
Leasehold improvement, movement of equipment,
From July 2011106
renovation of emergency generator, etc.		
to December 2011
NBF Hibiya Bldg.
Renovation of cooling tower, renovation of air conditioning,102
		leasehold improvement, etc.		
NBF Sendai Honcho Bldg.
Leasehold improvement, renovation of central monitoring board,		attachment of sunshine adjustment film, etc.		 78NBF Atsugi Bldg.
Renovation of air conditioning, renovation of incoming and40		transforming facilities, leasehold improvement, etc.		
NBF Shijo Karasuma Bldg.
Renovation of lightning equipment, renovation of car parking tower,
17		renovation of restroom, etc.		
Other buildings
Asset preservation construction and other renewal construction892
		
to improve tenant satisfaction.		
Total			¥1,976

NBF Report July – December 2011 33

3. Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements andrepairs and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of December 31, 2011

As of June 30, 2011
(Yen in millions)¥2,755
1,817
2,942¥1,630Reserve balance at the beginning of the period
Amount accumulated in the current period
Withdrawal from reserves in the current period
Amount carried forward¥1,1824,414
2,841¥2,755

Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF's ownership interest; the amount of reserves attributable to other owners has been excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management of properties, forthe purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to ¥4,958 million as ofDecember 31, 2011.

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
		For the six months ended
December 31, 2011
Item		

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

For the six months ended
June 30, 2011
(Yen in millions)

For the six months ended
December 31, 2010

¥ 973
36
51
17
13
121
¥1,211

¥ 943
37
44
19
13
115
¥1,171¥1,027
39
46
16
13
104
¥1,245

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



				
		

Name of building(Yen in millions)

Acquisitions
Date

Acquisition price (Note 1)

Mitsubishi Heavy Industries Head Office Bldg.
September 1, 2011
Nishi-Shinjuku Mitsui Bldg. (additional acquisition)
December 6, 2011
Total		

¥36,300
99¥36,399

Note: 1. “Acquisition price” does not include national consumption tax, local consumption tax and miscellaneous costs of acquisition.
(Yen in millions)

				
		

Name of building

Sale
Date

NBF Sudacho Verde Bldg.
August 1, 2011
		
December 26, 2011
Total		

Sale price¥3,250¥3,2502. Trading of Other Assets Including Total Amount and Transactions
Other major assets besides real estate and real estate held in trust stated above consist mostly of bank deposits or bankdeposits included in assets held in trust.

34 NBF Report July – December 2011

Management’s Discussion and Analysis

3. Transactions with Related Parties and Transactions with Major Shareholders ofAsset Management Company(1) Ongoing Transactions
None. (No purchases, or sales or other transactions involving interested parties.)(2) Fees Paid for the Period from July 1, 2011 to December 31, 2011

		Description of transactions with related parties (Note 1)					Category			Total fees paid		
(A)
Paid to(Yen in millions)		

Office management fees, etc.
¥1,252(Note 4)		Property maintenance fees
2,989
		
		
		
		
		
Leasing related service fees
55
		
		

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

Amount ofpayment (B)(Yen in millions)¥1,215
32
517
343
174
119
11
2
24
9
1

B/A

97.0%
2.5%
17.3%
11.5%
5.8%
4.0%
0.4%
0.1%
43.5%
15.5%
1.0%

Notes: 1.	“Related parties” are defined as related parties of asset management companies under asset management agreement with NBF as defined in Article 123 of Order for
Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 27 of the Regulations regarding management report of theInvestment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset managementcompanies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the period from July 1, 2011 to December 31, 2011,transactions with and fees paid to, Mitsui Fudosan Co., Ltd., NBF Office Management Co., Ltd., First Facilities Co., Ltd., First Facilities West Co., Ltd., Mitsui Fudosan
Building Management Co., Ltd., First Facilities Yokohama Co., Ltd., Mitsui Fudosan Housing Lease Co., Ltd., and Mitsui Real Estate Sales Co., Ltd. which meet either of thesaid definitions, are as described above.
2. Figures indicate contractual sales prices.
3. Figures indicate percentages of total prices.
4.	Properties that have not entrusted office management businesses through such means as master leasing by Mitsui Fudosan Co., Ltd. (10 properties: Nishi-Shinjuku Mitsui
Bldg., Gate City Ohsaki, Nakameguro GT Tower, Toranomon Kotohira Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg., Parale Mitsui Bldg., Shinanobashi Mitsui
Bldg., Sakaisuji-Honmachi Center Bldg. and Yotsuya Medical Bldg.) have entrusted them to NBF Office Management Co., Ltd. as business representative of the property
owners or lessors.
5. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.

			First Facilities Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.
First Facilities Yokohama Co., Ltd.
LaLaport Management Co., Ltd.
Mitsui Home Linkage Co., Ltd.

(Yen in millions)

¥590
332
306
160
9
0
0
0
0

NBF Report July – December 2011 35

Balance Sheets
NIPPON BUILDING FUND INC.
As of December 31, 2011 and June 30, 2011				

Assets		Current Assets:
		 Cash and cash equivalents (Note 4)
		 Tenant receivables
		 Other current assets
			 Total current assets
Investment Properties:
		 Land including trust accounts (Notes 5, 15)
		 Buildings and improvements including trust accounts (Notes 5, 15)		 Other tangible assets (Notes 5, 15)			 Less: accumulated depreciation (Notes 5, 15)
		 Leasehold rights in trust accounts and other intangible assets (Note 15)
			 Total investment properties, net
Other Assets
Total Assets
Liabilities
Current Liabilities:
		 Short-term loans (Notes 4, 7)
		 Long-term debt due within one year (Notes 4, 7)
		 Accounts payable
		 Rents received in advance		 Provision for loss on disaster (Note 10)
		 Accrued expenses and other liabilities
			 Total current liabilities
Long-term Debt (Notes 4, 7)
Tenant Security Deposits Including Trust Accounts (Note 4)
Other Liabilities
Total Liabilities
Net Assets (Note 6)
Unitholders’ Equity
		 Unitholders’ capital
			 Units authorized: 2,000,000 units
			 Units issued and outstanding: 578,500 units
		 Retained earnings
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these statements.

36 NBF Report July – December 2011

As of
December 31, 2011

As ofJune 30, 2011
(Yen in millions)¥ 35,486
294
638
36,418¥ 35,995
286
1,819
38,100530,202316,673
10,073(81,601)
35,651810,998
5,439¥852,855

503,240
307,783
9,585(75,905)
35,652
780,355
5,250¥823,705¥ 22,000
42,750
3,889
3,795
—
1,958
74,392
312,625
41,51086
428,613¥ 8,000
65,750
3,630
3,648
43
1,355
82,426
277,000
40,32879
399,833

415,115415,1159,127
424,242¥852,855

8,757
423,872¥823,705

Statements of Income
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2011, June 30, 2011 and December 31, 2010

For the six months ended
December 31, 2011		For the six months ended
June 30, 2011
(Yen in millions)

For the six months ended
December 31, 2010

Operating Revenues and Expenses			
Operating Revenues:
		 Rental (Note 8)¥27,041¥25,773¥24,747
		 Other revenues related to property leasing (Note 8)
2,732
2,308
2,567
Total Operating Revenues
29,77328,081
27,314
Operating Expenses:					 Property management fees (Note 8)
4,217
3,947
3,776
		 Real estate taxes (Note 8)
2,645
2,678
2,621
		 Repairs and maintenance (Note 8)
836
579
718
		 Insurance (Note 8)34
32
32
		 Other rental expenses (Note 8)
2,511
2,181
2,506
		 Depreciation and amortization (Note 8)
5,902
5,534
5,171
		 Loss on sale of investment property (Note 9)197——
		 Asset management fees
1,027
973
943
		 Other operating expenses
218
238
228
Total Operating Expenses
17,587
16,162
15,995
Operating Income
12,186
11,91911,319Non-Operating Revenues and Expenses			
Non-Operating Revenues:					 Interest income
447
Non-Operating Expenses:					 Interest expense(3,006)(2,861)(2,888)
		 Amortization of bond issuance costs
(9)
(5)
(5)
		 New investment units issuance costs—(58)—
		 Other non-operating expenses, net
(47)
(35)
(33)
Or­dinary Income
9,128
8,964
8,400
Extraordinary Loss:
		 Loss on disaster (Note 10)
—
(163)
—
		 Provision for loss on disaster (Note 10)—(43)—
Income before Income Taxes
9,128
8,758
8,400
		 Current and deferred income taxes (Note 11)
(1)
(1)
(1)
Net Income¥ 9,127¥ 8,757¥ 8,399
The accompanying notes to financial statements are an integral part of these statements.

NBF Report July – December 2011 37

Statements of Changes in Net Assets
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2011, June 30, 2011 and December 31, 2010		

(Yen in millions)				

Number of
Units

Unitholders’CapitalRetained
Earnings

Total

Balance as of June 30, 2010

542,000¥386,176¥ 9,282¥395,458————(9,282)
8,399(9,282)
8,399

Balance as of December 31, 2010

542,000

386,176

8,399

394,575

Cash dividends declaredIssuance of new units through public offering as of January 26, 2011
Issuance of new units through allocation to a third party as ofFebruary 22, 2011
Net income—
34,000—26,957(8,399)—(8,399)26,957

2,500
—

1,982
—

—
8,757

1,982
8,757

Balance as of June 30, 2011

578,500

415,115

8,757

423,872————(8,757)9,127(8,757)
9,127

578,500¥415,115¥ 9,127¥424,242

Cash dividends declared
Net income

Cash dividends declared
Net income
Balance as of December 31, 2011
The accompanying notes to financial statements are an integral part of these statements.

38 NBF Report July – December 2011

Statements of Cash FlowsNIPPON BUILDING FUND INC.
For the six months ended December 31, 2011, June 30, 2011 and December 31, 2010

For the six months ended
December 31, 2011		For the six months ended
June 30, 2011
(Yen in millions)

For the six months ended
December 31, 2010

Cash Flows from Operating Activities:					 Income before income taxes¥ 9,128¥ 8,758¥ 8,400
		 Depreciation and amortization
5,902
5,534
5,171
		 Amortization of bond issuance costs
955		 Increase (Decrease) in provision for loss on disaster
(43)
43
—
		 Interest expense
3,006
2,861
2,888
		 (Increase) Decrease in tenant receivables
(8)
(6)
21
		 Increase (Decrease) in accounts payable
272
(162)
757
		 Increase (Decrease) in rents received in advance
147
300
(28)
		 Decrease in investment properties due to sale
3,319
—
—
		 Cash payments of interest expense(3,004)(2,864)(2,887)		(Increase) Decrease in consumption tax
refund receivable
1,102(1,102)—		 Others, net
690
(272)
(226)
Net Cash Provided by Operating Activities
20,52013,095
14,101
Cash Flows from Investing Activities:					 Payments for purchases of investment properties(39,809)(60,042)(1,756)
		 Proceeds from tenant security deposits
2,663
5,039
4,213
		 Payments for tenant security deposits(1,481)(1,348)(4,727)
		 Payments for security deposits paid to lessors
(8)
(10)
(15)
		 Others, net
(208)
(517)
(92)
Net Cash Used in Investing Activities(38,843)(56,878)(2,377)
Cash Flows from Financing Activities:					 Proceeds from (Repayment of) short-term loans, net
14,000—(8,000)		 Proceeds from long-term debt
47,00032,0002,000
		 Repayment of long-term debt
(34,375)(6,375)(2,375)
		 Proceeds from issuance of new units—
28,881—
		 Payments for bond issuance costs(53)——
		 Payment of dividends(8,758)(8,396)(9,281)Net Cash Provided by (Used in) Financing Activities
17,814
46,110(17,656)
Net Change in Cash and Cash Equivalents
(509)
2,327
(5,932)
Cash and Cash Equivalents at the Beginning of Period
35,99533,66839,600Cash and Cash Equivalents at the End of Period¥ 35,486¥ 35,995¥ 33,668
The accompanying notes to financial statements are an integral part of these statements.

NBF Report July – December 2011 39

Notes to Financial Statements
NIPPON BUILDING FUND INC.
For the six months ended December 31, 2011, June 30, 2011 and December 31, 2010

Note 1

Organization and Basis of Presentation

Organization
Nippon Building Fund Inc. (hereinafter “NBF”) was formed on March 16, 2001 as an investment corporation under the Law Concerning
Investment Trusts and Investment Corporations of Japan (hereinafter the Investment Trust Law of Japan) with Mitsui Fudosan Co., Ltd.,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 acquisitionof 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 units. Those units are listedon the J-REIT section of the Tokyo Stock Exchange.
As of December 31, 2011, NBF had ownership or beneficiary interests in 64 office properties containing approximately 861,153 square
meters of rentable office space. As of December 31, 2011, NBF had leased office space to 1,042 tenants engaged in a variety ofbusinesses. The occupancy rate for the office properties was approximately 98.1%.

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

Note 2

Summary of Significant Accounting Policies

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

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

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

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

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

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

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

40 NBF Report July – December 2011

Provision for Loss on Disaster
Provision for loss on disaster is recorded at the amount reasonably estimated at the period-end to provide for repair costs for assets
damaged by the Great East Japan Earthquake.

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

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis and expensed when incurred. In terms of newly purchased
properties, NBF capitalizes a portion of the real estate taxes that relate to a period from the purchase date of each property until the endof the calendar year as part of the acquisition cost of the relevant property. Capitalized real estate taxes amounted to ¥66 million for theperiod ended December 31, 2011 and ¥293 million for the period ended June 30, 2011. No capitalized real estate taxes were incurred forthe period ended December 31, 2010.

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

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

Additional Information
Effective from the accounting changes and corrections of past errors to be conducted after the beginning of the fiscal period ended
December 31, 2011, NBF adopted the “Accounting Standard for Accounting Changes and Error Corrections” (Accounting Standards
Board of Japan (ASBJ) Statement No. 24 issued on December 4, 2009) and the “Guidance on Accounting Standard for Accounting
Changes and Error Corrections” (ASBJ Guidance No. 24 issued on December 4, 2009).

Note 3

Change in Accounting Policy

The New Accounting Standard for Asset Retirement Obligations
Effective from the fiscal period ended December 31, 2010, NBF adopted “Accounting Standard for Asset Retirement Obligations”(Accounting Standards Board of Japan (“ASBJ”) Statement No. 18 issued on March 31, 2008) and the “Guidance on AccountingStandard for Asset Retirement Obligations” (ASBJ Guidance No. 21 issued on March 31, 2008). There was no impact on its financial
position or results of the operation as a result of such adoption.

Note 4

Financial Instruments(For the six months ended December 31, 2011)

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

Financial Instruments, Their Risks and Risk Management System
Deposits are used for investment of NBF’s surplus funds. These deposits are exposed to credit risks such as bankruptcy of thedepository financial institutions. NBF limits credit risk by using only short-term deposits in financial institutions with high credit ratings.
NBF Report July – December 2011 41

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

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

Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of December 31, 2011 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from the following table (See Note 2. below).
(Yen in millions)

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

Book value

Fair value

Difference¥ 35,486¥ 35,486¥ 35,486¥ 35,486­­­¥¥¥ 22,000
42,750312,625­­­¥377,375¥ 22,000­­­¥—
42,932
182
322,838
10,213­­­¥387,770	­­­¥10,395——

Notes: 1. Methods to Estimate Fair Value of Financial Instruments
		Assets:		 (1) Cash and cash equivalents			 Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments
are settled within a short term period.
		Liabilities:		 (1) Short-term loans			 Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments
are settled within a short term period.
		 (2) Long-term debt due within one year			Long-term debt due within one year which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference(1) Investment corporation bonds¥10,000¥10,020¥ 20(2) Long-term loans
32,75032,912
162
Total¥42,750¥42,932¥182
			 1) Investment corporation bonds
				 The fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fairvalues are calculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into
consideration the remaining term of the investment corporation bonds and their credit risk.
			 2) Long-term loans				 Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied
if similar new loans were entered into.
		 (3) Long-term debt
			Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference(1) Investment corporation bonds¥ 60,000¥ 61,860¥ 1,860(2) Long-term loans
252,625
260,978
8,353
Total¥312,625¥322,838¥10,213
			 1) Investment corporation bonds
				 The fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fairvalues are calculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into
consideration the remaining term of the investment corporation bonds and their credit risk.
			 2) Long-term loans				 Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.

42 NBF Report July – December 2011

Notes to Financial Statements

2. Financial instruments for which it is very difficult to estimate the fair value.

(Yen in millions)Book value¥41,510

Tenant Security Deposits Including Trust Accounts					 Security deposits from tenants are not subject to fair value disclosure because they are not marketable, and actual deposit period is not estimable as leases may becancelled, renewed or re-signed even if a lease term is set in the lease contract, that makes a reasonable estimate of future cash flows difficult.
3. Redemption Schedule for Monetary Claims				
Due within		
one year			 Cash and cash equivalents¥35,486

Due after one
to two years—

Due after two
to three years—

Due after three
to four years—

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

4. Repayment Schedule for Loans and Investment Corporation Bonds				
Due within
Due after one		one yearto two years
			 Short-term loans¥22,000¥—
			 Investment corporation bonds
10,000—			 Long-term loans
32,75042,750			 Total¥64,750¥42,750

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

Due after three
to four years¥—
20,00029,750¥49,750

Due after four
to five years¥—
10,00040,750¥50,750(Yen in millions)Due after five
years
¥
—
20,000102,625¥122,625(For the six months ended June 30, 2011)

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

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

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

Estimated Fair Value of Financial Instruments
Book value, fair value and difference between the two as of June 30, 2011 are as follows.
The financial instruments for which it is very difficult to estimate the fair value are excluded from the following table (See Note 2. below).

NBF Report July – December 2011 43

(Yen in millions)

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

Book value

Fair value

Difference¥ 35,995¥ 35,995¥ 35,995¥ 35,995

¥­­­
­­­¥

¥ 8,000
65,750277,000¥350,750¥ 8,000
66,089286,276¥360,365

­­­¥

—
—

—
339
9,276
¥9,615

Notes: 1. Methods to Estimate Fair Value of Financial Instruments
		Assets:		 (1) Cash and cash equivalents			 Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments
are settled within a short term period.
		Liabilities:		 (1) Short-term loans			 Book values of those instruments are used to determine their fair values, as the book values are considered to approximate fair values because these instruments
are settled within a short term period.
		 (2) Long-term debt due within one year			 Long-term debt due within one year which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference(1) Investment corporation bonds¥20,000¥20,079¥ 79(2) Long-term loans
45,75046,010260
Total¥65,750¥66,089¥339
			 1) Investment corporation bonds
				 The fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fairvalues are calculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into
consideration the remaining term of the investment corporation bonds and their credit risk.
			 2) Long-term loans				 Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
		 (3) Long-term debt
			 Long-term debt which includes Investment corporation bonds and Long-term loans are as follows.
(Yen in millions)Book value
Fair value
Difference(1) Investment corporation bonds¥ 50,000¥ 51,763¥1,763(2) Long-term loans
227,000
234,513
7,513
Total¥277,000¥286,276¥9,276
			 1) Investment corporation bonds
				 The fair values of investment corporation bonds are based on observable market value, if available. When there is no observable market value available, fairvalues are calculated based on the present value of principal and interest cash flows discounted at the current interest rate that is estimated by taking into
consideration the remaining term of the investment corporation bonds and their credit risk.
			 2) Long-term loans				 Fair values of long-term loans are based on the present value of principal and interest cash flows discounted at the current interest rate estimated to be applied if
similar new loans were entered into.
2. Financial instruments for which it is very difficult to estimate the fair value.

(Yen in millions)Book value

Tenant Security Deposits Including Trust Accounts¥40,328					 Security deposits from tenants are not subject to fair value disclosure because they are not marketable, and actual deposit period is not estimable as leases may becancelled, renewed or re-signed even if a lease term is set in the lease contract, that makes a reasonable estimate of future cash flows difficult.
3. Redemption Schedule for Monetary Claims							 Cash and cash equivalents

Due within
one year¥35,995

Due after one
to two years—

Due after two
to three years—

Due after three
to four years—

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

Due after two
to three years¥—
10,00041,750¥51,750

Due after three
to four years¥—
10,00026,750¥36,750

Due after four
to five years¥—
10,00061,750¥71,750

Due after five
years
¥
—
20,00069,000¥89,000

4. Repayment Schedule for Loans and Investment Corporation Bonds
		
		
			
			
			
			

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

44 NBF Report July – December 2011

Due within
one year¥ 8,000
20,00045,750¥73,750

Due after one
to two years¥——
27,750¥27,750(Yen in millions)Notes to Financial Statements

Note 5

Schedule of Tangible Assets of Investment Properties

Tangible assets as of December 31, 2011 and June 30, 2011 consisted of the following:		
As of December 31, 2011
As of June 30, 2011		
(Yen in millions)
			Accumu-			Accumu		
Acquisition
lated
Acquisition
latedBook value		
costs
depreci-		
costs
depreci			ation			ation

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

Note 6

Book value¥245,812
284,390
530,202170,556
146,117¥———(32,492)(44,833)¥245,812
284,390
530,202138,064
101,284¥248,256
254,984
503,240
170,905
136,878¥———(29,674)(42,298)¥248,256
254,984
503,240
141,231
94,580316,673
2,684
1,432
1,098
2,047
1,589
1,214
9
—
10,073¥856,948(77,325)(1,025)
(612)
(462)
(732)
(792)
(653)
—
—
(4,276)¥(81,601)

239,348
1,659
820
636
1,315
797
561
9
—
5,797
¥775,347

307,783
2,673
1,424
1,071
1,936
1,373
1,101
—
7
9,585
¥820,608(71,972)
(941)
(553)
(416)
(680)
(728)
(615)
—
—
(3,933)¥(75,905)

235,811
1,732
871
655
1,256
645
486
—
7
5,652
¥744,703

Net Assets

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

Note 7

Short-Term Loans and Long-Term Debt

Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest rates on shortterm loans outstanding are floating rates and on December 31, 2011 and June 30, 2011 ranged from 0.33% to 0.49% and from 0.54% to0.65%, respectively. Long-term debt is at fixed rates and as of December 31, 2011 and June 30, 2011 consisted of the following:				

As of December 31, 2011		
As of June 30, 2011
(Yen in millions)

Unsecured loans due 2012 to 2019 principally from banks and insurance		 companies with interest rates mainly ranging from 0.7% to 2.4%
1.60% unsecured bonds due 2011 (Note 1)
1.48% unsecured bonds due 2012 (Note 2)
1.74% unsecured bonds due 2014 (Note 2)
1.23% unsecured bonds due 2015 (Note 2)
1.85% unsecured bonds due 2015 (Note 2)
0.64% unsecured bonds due 2016 (Note 2)
2.04% unsecured bonds due 2017 (Note 2)
2.00% unsecured bonds due 2018 (Note 1)					Less: amount due within one year			¥285,375—
10,00010,00010,00010,00010,00010,00010,000355,375
42,750¥312,625¥272,750
10,00010,00010,00010,00010,000—10,00010,000342,750
65,750¥277,000

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

NBF Report July – December 2011 45

The annual maturities of long-term debt as of December 31, 2011 were as follows:(Yen in millions)¥ 42,750
46,75049,75050,750122,625

Due after one to two years
Due after two to three years
Due after three to four years
Due after four to five years
Due after five years

During the period ended December 31, 2011, NBF obtained committed credit lines of ¥60 billion with certain financial institutions to
reduce refinancing risk. The unused amount of such committed credit lines was ¥60 billion on December 31, 2011.

Note 8

Rental Revenues and Expenses

Rental revenues and expenses for the periods ended December 31, 2011, June 30, 2011 and December 31, 2010 were as follows:
For the six months ended		
December 31, 2011			For the six months ended
June 30, 2011
(Yen in millions)

For the six months ended
December 31, 2010

Revenues from Property Leasing:					 Rental:						 Rental revenues¥24,359¥23,061¥22,025
			 Common area charges
2,568
2,598
2,608
			 Others
114
114
114
				Subtotal
27,041
25,77324,747
		 Other revenues related to property leasing:						 Parking lots
566
554
531
			 Facility charge
175
156
138
			 Incidental income
1,719
1,483
1,808
			 Cancellation fees
219
64
46
			 Miscellaneous income
53
51
44
				Subtotal
2,732
2,308
2,567
		 Total revenues from property leasing
29,77328,081
27,314
Rental Expenses:						 Property management fees
4,217
3,947
3,776
			 Real estate taxes
2,645
2,678
2,621
			 Repairs and maintenance
836
579
718
			 Insurance
34
32
32
			 Other rental expenses
2,511
2,181
2,506
			 Depreciation and amortization
5,902
5,534
5,171
		 Total rental expenses
16,145
14,951
14,824
Operating Income from Property
		 Leasing Activities¥13,628¥13,130¥12,490

Note 9Loss on Sale of Investment Property

Loss on sale of investment property for the period ended December 31, 2011 was as follows. No investment properties were soldduring the periods ended June 30, 2011 and December 31, 2010.

NBF Sudacho Verde Building
Proceeds from sale of investment property
Cost of sale of investment property
Other related sale expenses
Loss on sale of investment property

46 NBF Report July – December 2011

(Yen in millions)¥3,250
3,319
128
¥ 197

Notes to Financial Statements

Note 10Extraordinary Loss

Repair costs for assets damaged by the Great East Japan Earthquake were recognized as extraordinary loss.

Note 11

Income Taxes

NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income was 0.01% for the periods ended December 31,
2011, June 30, 2011 and December 31, 2010. The following table summarizes the significant differences between the statutory tax rates
and NBF’s effective tax rates for financial statement purposes.
		

Statutory tax rate
Deductible dividends
Others
Effective tax rate

For the six months ended
December 31, 2011

For the six months ended
June 30, 2011

For the six months ended
December 31, 201039.33%(37.89)(1.43)
0.01%

39.33%(39.33)0.01
0.01%

39.33%(39.33)0.01
0.01%

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

Note 12Per Unit Information

Information about earnings per unit for the periods ended December 31, 2011, June 30, 2011 and December 31, 2010 and net assets
per unit as of December 31, 2011, June 30, 2011 and December 31, 2010 were as follows.
The computation of earnings per unit is based on the weighted average number of units outstanding during the period. The
computation of net assets per unit is based on the number of units outstanding at each period end.

For the six months ended		
December 31, 2011			For the six months ended
June 30, 2011
(Yen)

For the six months ended
December 31, 2010

Earnings per Unit:					 Net income¥15,777¥15,280¥15,495
		 Weighted average number of units outstanding
578,500
573,086
542,000

		
Net Assets per Unit

As of December 31, 2011

As of June 30, 2011

As of December 31, 2010

¥733,348¥732,709¥727,996­
Note 13

LeasesAs Lessor
NBF leases some of its investment properties to outside parties under non-cancelable operating leases. As of December 31, 2011 andJune 30, 2011, future minimum rental revenues under the non-cancelable operating leases are as follows:
As of December 31, 2011
As of June 30, 2011			
(Yen in millions)Due within one year
Due after one year		Total¥23,687
36,864¥60,551¥22,450
32,119¥54,569

NBF Report July – December 2011 47

As Lessee
NBF leases some of its investment properties from outside parties under non-cancelable operating leases. As of December 31, 2011
and June 30, 2011, future minimum rental expenses under the non-cancelable operating leases are as follows:
As of December 31, 2011
As of June 30, 2011			
(Yen in millions)

¥2
3
¥5

Due within one year
Due after one year		TotalNote 14¥2
4¥6Transactions with Related Parties(For the six months ended December 31, 2011)(1) Parent Company and Major Corporate Unitholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Unitholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,120(Note 2) (Note 4)

Accounts
payable¥296(Note 4)¥2(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is subject to the conditions set forth in the by-laws of NBF.
2.	The amount of asset management fees includes ¥94 million for management related to acquisition of properties included in the book value of each investment property, etc.
3.	Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is set forth in the “General Administration Regarding theManagement of Institutions” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

(For the six months ended June 30, 2011)(1) Parent Company and Major Corporate Unitholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Unitholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,244(Note 2) (Note 4)

Accounts
payable¥285(Note 4)

¥7(Note 4)

Accounts
payable¥1(Note 4)

Notes: 1. Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is subject to the conditions set forth in the by-laws of NBF.
2.	The amount of asset management fees includes ¥272 million for management related to acquisition of properties included in the book value of each investment property, etc.
3.	Koichi Nishiyama entered into this transaction as a representative of a third party (NBFM), and the fee amount is set forth in the “General Administration Regarding theManagement of Institutions” concluded between NBF and NBFM.
4. Consumption taxes are not included in transaction amounts. Consumption taxes are included in the balance at the end of the period.

48 NBF Report July – December 2011

Notes to Financial Statements(For the six months ended December 31, 2010)(1) Parent Company and Major Corporate Unitholders
None applicable.
(2) Affiliates
None applicable.
(3) Sister Companies
None applicable.
(4) Directors and Major Individual Unitholders
Classification

Name

Director
and/or close
relative

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

Payment of asset
management fees to
NBFM (Note 1)
Executive Director of
Payment of fees to
NBF and
NBFM for the provision
President & CEOof general administrationof NBFM
services relating
to organizational
management (Note 2)

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥943(Note 3)

Accounts
payable¥241(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 the fee 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 the fee amount is set forth in the “General Administration Regarding theManagement of Institutions” 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.

Note 15

Investment and Rental Property(For the six months ended December 31, 2011)
NBF owns office buildings (including land) for rent in Tokyo and other areas. The carrying amounts, net changes in the carrying amounts
and the fair value of the investment and rental properties are as follows.
(Yen in millions)

		
		

		

As of June 30, 2011

Carrying amount
Net increase

As of December 31, 2011

Fair value
As of December 31, 2011

¥780,381¥30,651¥811,032¥856,690

Notes: 1. Carrying amounts represent acquisition cost less accumulated depreciation.
2.		The major increase in the carrying amount during the period was mainly due to the acquisitions of 2 properties (Mitsubishi Heavy Industries Head Office Bldg. and NishiShinjuku Mitsui Bldg. (additional acquisition), ¥37,746 million) and the major decrease was mainly due to sale of NBF Sudacho Verde Bldg. which amounted to ¥3,319
million and recognition of depreciation costs.
3.		Fair value as of December 31, 2011 is based on appraisals provided by independent real estate appraisers.

Information about profit and loss from investment and rental properties for the six months ended December 31, 2011 is disclosed in
Note 8 (Rental Revenues and Expenses) and Note 9 (Loss on Sale of Investment Property).

(For the six months ended June 30, 2011)
NBF owns office buildings (including land) for rent in Tokyo and other areas. The carrying amounts, net changes in the carrying
amounts and the fair value of the investment and rental properties are as follows.
(Yen in millions)				 As of December 31, 2010

Carrying amount
Net increase

As of June 30, 2011

Fair value
As of June 30, 2011		¥725,823¥54,558¥780,381¥822,483

Notes: 1. Carrying amounts represent acquisition cost less accumulated depreciation.
2.	The major increase in the carrying amount during the period was mainly due to the acquisitions of 6 properties (NBF Ueno Bldg., River City M-SQUARE, Nihonbashi Kabutocho M-SQUARE, Hakata Gion M-SQUARE, Gate City Ohsaki (additional acquisition), and Chofu South Gate Bldg., ¥58,409 million) and the major decrease was mainly due torecognition of depreciation costs.
3. Fair value as of June 30, 2011 is based on appraisals provided by independent real estate appraisers.

Information about profit and loss from investment and rental properties for the six months ended June 30, 2011 is disclosed in Note 8(Rental Revenues and Expenses) and Note 9 (Loss on Sale of Investment Property).

NBF Report July – December 2011 49

Note 16

Segment Information

Effective from the fiscal period ended December 31, 2010, NBF has adopted the “Accounting Standard for Disclosure of Segment
Information” (ASBJ Statement No. 17, revised on March 27, 2009) and the “Guidance on Accounting Standard for Disclosure of Segment
Information” (ASBJ Guidance No. 20, issued on March 21, 2008).

(For the six months ended December 31, 2011)

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

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

TenantOperating revenues

Related segment

Mitsui Fudosan Co., Ltd.

¥6,388

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

(For the six months ended June 30, 2011)

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

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

TenantOperating revenues

Related segment

Mitsui Fudosan Co., Ltd.

¥6,320Real estate leasing businessNote: NBF leases properties to Mitsui Fudosan Co., Ltd. under a master lease agreement, and Mitsui Fudosan Co., Ltd. subleases such properties to subtenants. NBF leases otherproperties to Mitsui Fudosan Co., Ltd.

50 NBF Report July – December 2011

Notes to Financial Statements(For the six months ended December 31, 2010)

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

Related Information
1. Information by Products and Services
		 Disclosure of this information has been omitted as NBF has a single product/service line that accounts for more than 90% of total
operating revenues.
2. Information by Geographic Areas(1) Operating revenues		 Disclosure of this information has been omitted as total domestic revenues account for more than 90% of total operating revenues.
(2) Investment properties		 Disclosure of this information has been omitted as total domestic investment properties account for more than 90% of thebook value of total investment properties.
3. Information on Major Tenants(Yen in millions)

TenantOperating revenues

Related segment

Mitsui Fudosan Co., Ltd.

¥6,306

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

Note 17Significant Subsequent Events

Issuance of New Units
At meetings of the Board of Directors held on January 10, 2012 and January 18, 2012, NBF resolved the issuance of new units.
Payments for the new issuance were made on January 25, 2012 and February 21, 2012, and the new units were issued under theconditions described below.
As a result, the total amount of stated capital increased to ¥436,013 million and the number of units issued and outstanding increased
to 613,000 units.

A. Issuance of New Units through Public Offering
(I)
(II)
(III)
(IV)
(V)
(VI)
(VII)

Number of units issued

30,000 units

Offering price per unit
Total offering price
Issue price per unit
Total issue price
Payment date
Initial date subject to distribution¥624,975¥18,749 million¥605,745¥18,172 million
January 25, 2012
January 1, 2012

B. Issuance of New Units through Third Party Allotment
(I)
(II)
(III)
(IV)
(V)
(VI)

Number of units issued
Issue price per unit
Total issue price
Payment date
Initial date subject to distribution
Allottee

4,500 units¥605,745¥2,726 million
February 21, 2012
January 1, 2012
Nomura Securities Co., Ltd.

NBF Report July – December 2011 51

Independent Auditors’ Report

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

We have audited the accompanying financial statements of Nippon Building Fund Inc. (a Japanese Real Estate Investment Trust),
which comprise the balance sheets as of December 31, 2011 and June 30, 2011, and the related statements of income, changes in
net assets and cash flows for each of the six months ended December 31, 2011, June 30, 2011 and December 31, 2010, and asummary of significant accounting policies and other explanatory information expressed in Japanese yen.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
principles generally accepted in Japan, and for such internal control as management determines is necessary to enable thepreparation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordancewith auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nippon Building
Fund Inc. as of December 31, 2011 and June 30, 2011, and the results of its operations and its cash flows for each of the six months
ended December 31, 2011, June 30, 2011 and December 31, 2010, in conformity with accounting principles generally accepted inJapan.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 17 to the financial statements, which states that Nippon Building Fund Inc.
issued new units.

Tokyo, Japan
March 28, 2012

52 NBF Report July – December 2011

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

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

In the event that Real Estate, etc. is newly acquired,assets and undertakes management of the institutions of NBF.

compensation equivalent to the total amount of the acquisition priceAs of December 31, 2011, NBFM has been entrusted as an assetof said Real Estate, etc. (meaning the acquisition price of both land

management company only by NBF.

and buildings, and in the event of the simultaneous acquisition of

As of the same date, NBFM has paid-in capital of ¥495 million.

multiple units of Real Estate, etc., the acquisition price of each item,

There is no capital relationship with NBF. Koichi Nishiyama, President

provided, however, that national consumption tax, regional& CEO of NBFM, is concurrently an executive director of NBF.

consumption tax and miscellaneous costs of acquisition are
excluded) multiplied by the following percentage rates will, in

Operation

principle, be payable, provided, however, that with the approval of	
Undertakes asset management of NBF pursuant to an Assetthe directors of NBF, compensation may be calculated using different

Management Entrustment Agreement based on an entrustment

rates not exceeding the following rates.

■from NBF in accordance with the Articles of Incorporation of NBF

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

0.5%

and the Investment Objects and Policies set forth therein.

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

0.2%

	
Undertakes management of the general affairs of the general

The portion exceeding ¥30,000 million up to and		 including ¥50,000 million ............................................................ 0.05%■

meeting of unitholders and the Board of Directors as

●
●

●

●

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

Administrative Agent regarding the Management of Institutions
based on an entrustment from NBF and pursuant to an
Agreement for General Administration Regarding theManagement 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, thenthe amount of income before income taxes remaining after such loss
has been covered) prior to deduction of Management Fees 2 as
calculated on each closing date will be payable.

NBF Report July – December 2011 53

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited

As of December 31, 2011, the directors and corporate auditors

liability company duly established under the laws of Japan. Major

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

events in the history of NBFM are as follows.

of NBFM is comprised of 17 persons.

September 19, 2000 Established

Name of Directors and Auditors

Title

November 17, 2000 	Obtained license as a building lots and building
transactions agent under the Building Lots and Building
Transactions Law

Koichi Nishiyama

President & CEO (standing)January 29, 2001 	Obtained approval as a discretionary transaction agent
under the Building Lots and Building Transactions Law

Hiroshi Yabuki	Director, Head of Administration Group(standing)

February 15, 2001 	Registered as a general real estate investment advisor
under the Real Estate Investment Advisor Registration
Regulations
March 7, 2001 	Obtained approval as an Asset Management Company
under the Investment Trust Law of Japan
March 22, 2001

Increased capital from ¥100 million to ¥198 million

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 FundManagement Japan Limited” to “Nippon Building FundManagement Ltd.”)
September 30, 2007	Registered as a financial instruments firm with the
Kanto Local Finance Bureau Chief (Financial
Instruments) No. 371

Yasushi Akimoto	Director, Head of Investment & Finance Group(standing)

Masato Shikata

Director

Fukuhisa Kumada

Director

Hideo Yoshimura

Corporate Auditor

Toru Suzuki

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, 2011
Total assets

		

Total liabilities

341

		

Total net assets

1,538

		
Name

Numberof Shares Owned

Percent

Mitsui Fudosan Co., Ltd.

4,257

43.0%

Sumitomo Life Insurance Company

3,465

35.0

495

5.0

The Chuo Mitsui Trust andBanking Co., Ltd.
Sumitomo Mitsui Banking
Corporation

495

5.0

Daido Life Insurance Company

297

3.0

Mitsui Sumitomo InsuranceCo., Ltd.

297

3.0

Mitsui Life Insurance
Company Limited

297

3.0

Britel Fund Trustees Limited

297

3.0

9,900

100.0%Total

54 NBF Report July – December 2011

¥1,879Profit and loss for the most recent fiscal year:
		 Year ended March 31, 2011

List of Shareholders (as of December 31, 2011)(Yen in millions)				(Yen in millions)Operating income¥2,165

		Ordinary profit

1,409

		

Net income

832

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

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

Area Analysis

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

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

Other Greater Tokyo

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

Other Cities in Japan as well as securities, beneficiary certificates
representing beneficial interests in trusts (hereinafter “beneficiary
certificates”) and other assets backed by office properties (collectively
hereinafter “Real Estate, etc.”) (“Investment Objectives and Policies,”
Articles of Incorporation). (Reference to laws, legal documents, etc. usedas the basis or sources hereof are set forth in parenthesis herein.)■■

Relatively low yearly NOI yields.

■

Relatively high liquidity at the time of sale.

■

Other Cities

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

■

investment strategy of NBF set forth below, invests and manages theassets of NBF. NBFM has established asset management guidelines based

Total of above area: 30% or less

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

(1) Strategy for Creation of the Portfolio

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

Total of above two areas: 70% or more

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

B. Investment Strategy

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

■

Relatively high yearly NOI yields.

■

Relatively low liquidity at the time of sales.

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

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

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

and on consideration of a quantitative proportion of the office stock locatedin the various regions of Japan.

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

NBF will maintain a ratio of 75% or more with respect to the“Designated Real Estate Ratio” (“Investment Objectives and Policies,”
Articles of Incorporation). As of December 31, 2011, NBF satisfied the 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).

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

NBF Report July – December 2011 55

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

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

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

set forth in the following table.

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

respect to which the construction of the building has been completed

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

NBF and have become operational at some point shall be deemed

Item“leasable” thereafter (including such cases as reconstruction or large-

Scale of building

Points to be reviewed	
Net rentable area, including net rentable areaof entire building and standard net rentablearea per floor.

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

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

Earthquake resistance

Measures regarding
status of legal title

Regarding acquired Real Estate, etc., the goal is to obtain steady
growth of operating profits on a medium-to-long-term basis by planning to	E nsure that construction quality exceeds
earthquake standards (meaning those required
pursuant to the Building Standards Law asamended in 1981) or standards equivalent
thereto (obtain structural appraisal/assessment (appraisal/assessment of the building
structure pursuant to the Building Standards
Law conducted by The Building Center ofJapan), etc.).

increasing occupancy rates, extending the term of leases and rendering

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

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

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

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

Appropriate measures regarding demands for		 division of co-owned interests or the sale of		 a co-owner’s interest, etc.

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

■

■

●

Environmental:
condition of land, etc.

(3) Management and Disposition Policies

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

■●

Tenancy characteristics

Articles of Incorporation).

2■

Construction type andspecifications of facilities

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

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

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

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

a) Reserves for Long-Term Renovations

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

renovations, repairs and tenant improvements will be determined based onc) Uncompleted or Unleasable Properties
In principle, NBF acquires Real Estate, etc. which are leased/leasable
assets at the time of closing. NBF may acquire a property which is not

From the reserves set forth above, a portion corresponding torenovation plans for each building. As of December 31, 2011, foreseen
reserves provided from January 2011 to December 2012 are as follows:
Item

Reserves forlong-term renovations

Reason	
Average annual amount over an approximately 10-year period based on engineering
reports■	
Expenses of providing “free access floor”

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

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

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

Total Foreseen Amount (annual basis): ¥3,560 million

yet leasable at the time of closing based on consideration of the impact
on NBF’s asset management activities after taking into account theamount of any such unleasable asset combined with the total contract
amount of previously acquired unleasable assets (but excluding

56 NBF Report July – December 2011■

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

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

Investment and Distribution Policies

2. The amount of reserves set forth above is the total amount of reserves with respect		to the 64 properties owned by NBF as of December 31, 2011.

temporarily exceed 60% when acquiring certain assets, etc. (medium-to-b) Measures to Avoid Reductions and Fluctuations inplan established by the Asset Management Company).

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

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

(4) Financial Policiesa) Issuance of Units
NBF may issue units in order to undertake acquisition and renovation andlong-term operating asset management policy and annual managementd) Derivative Transactions
NBF purchases rights in derivatives transactions solely to hedge
against risks, including risks of fluctuation in interest rates for debt, as set
out in Article 2.20 of the Financial Instruments and Exchange Law ofJapan (“Investment Objectives and Policies,” Articles of Incorporation).

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

a) Appraisal Value, etc.

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

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

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

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

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

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

NBF (loan-to-value ratio) is envisioned to be limited to 60%, but may

NBF Report July – December 2011 57

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

A. P rincipal 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.

Financial Instruments and Exchange Law of Japan, provided, however,that this is limited to those the assets of which are primarily invested
and Managed Assets principally referred to in paragraphs (1) and (2)above)(9)	Beneficiary Certificates of Money Trust (limited to those the trust assetsof which are primarily invested and Managed Assets referred to inparagraph (1), (3) or (4) above, provided, however, that those that are
deemed securities are excluded)

B. Other Investment Objectives among
Designated Assets
NBF may, in the course of efficiently managing funds or in other cases
as necessary, invest in the following Designated Assets.
(1) Bank deposits(1) Real estate, real estate leasehold interests and superficies(2) Certificates of deposit issued by Japanese legal entities(2)	Beneficiary Certificates backed by real estate, real estate leasehold(3) Call loansrights and superficies, including inclusive trusts consisting of funds
appurtenant to real estate(3)	Tokumei kumiai ownership interests as defined by Article 535 of theCommercial Code of Japan (provided, however, that this is limited tothose the assets of which are primarily invested and Managed Assets
principally referred to in paragraphs (1) and (2) above)(4)	Equity interests in partnerships as defined by Article 667 of the Civil
Code of Japan (limited to leased, operating and managed partnership(4) Japanese government bonds, notes and bills (meaning thosespecified in Article 2.1.1 of the Financial Instruments and Exchange
Law of Japan)(5)	Regional treasury bonds, notes and bills (meaning those specified in
Article 2.1.2 of the Financial Instruments and Exchange Law of Japan)(6)	Commercial paper (meaning that specified in Article 2.1.15 of the
Financial Instruments and Exchange Law of Japan)(7)	Designated bonds of Special Purpose Companies (meaning thoseassets primarily referred to in paragraphs (1) and (2) above that are

specified in Article 2.1.4 of the Financial Instruments and Exchange

specified in Article 2.2.5 of the Financial Instruments and Exchange

Law of Japan, provided, however, that this is limited to asset-backed

Law of Japan)

securities principally referred to in paragraphs (1) and (2) of section(5) Preferred Investment Certificates of Special Purpose Companies	(meaning those specified in Article 2.1.8 of the Financial Instruments

A above)(8) Monetary claims (limited to those claims that are deemedand Exchange Law of Japan, provided, however, that this is limited to		 Designated Assets under the Investment Trust Law of Japan other

those the assets of which are primarily invested and Managed Assets

		 than those referred to in section A and above)

principally referred to in paragraphs (1) and (2) above)(9) Securities (other than those listed in section A and above)(6)	Special Purpose Beneficiary Certificates (meaning those specified in
Article 2.1.13 of the Financial Instruments and Exchange Law of Japan,(10)	Rights to financial derivative transactions (limited to those specified in
Article 2.20 of the Financial Instruments and Exchange Law of Japan)

provided, however, that this is limited to those the assets of which areprimarily invested and Managed Assets principally referred to in paragraphs (1) and (2) above)(7)	Beneficiary Certificates of investment trusts (meaning those specified

C. Assets Other than Designated Assets
NBF may, in the course of efficiently managing funds or in other cases
as necessary, invest in the following assets.

Japan, provided, however, that this is limited to those the assets of(1)	Equity interests of partnerships, excluding assets in section A,
paragraph (4)which are primarily invested and Managed Assets principally referred(2) Easements

to in paragraphs (1) and (2) above)(3) Trademark rights

in Article 2.1.10 of the Financial Instruments and Exchange Law of(8)	Investment Securities (meaning those specified in Article 2.1.11 of the58 NBF Report July – December 2011

(4) Copyrights

Investment and Distribution Policies(5) Chattels

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

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

J-REIT may pay out the excess of retained earnings for the period up to a
maximum of 60% of depreciation for the period. NBF is entitled to makecash distributions of the amounts described below in excess of the■ Distribution Policies of NBF

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

A. Distributions of Profits
A registered investment corporation may deduct its cash dividends ofprofits from taxable income under Japanese tax regulations if it distributes to
its unitholders in excess of 90% of its taxable income and complies withother organizational and operational requirements. NBF intends to make dividend distributions that ensure that NBF satisfies those requirements.
NBF will, in principle, effect distributions in accordance with the following policies (Article 14.1 of the Articles of Incorporation).

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

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

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

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

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

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

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

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

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

NBF Report July – December 2011 59

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

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

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

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

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

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

Transactions between an asset management company and its direc-

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

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

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

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

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

financial instruments business.

risks of fluctuation in interest rates for debt (“Investment Objectives andPolicies,” Articles of Incorporation).
Moreover, investment in other funds (investment securities orb) R eciprocal Transactions with Managed Assets (§ 42.2.2)

Transactions between asset management companies of investment

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

provisions of the government ordinance regarding the Financial

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

Instruments and Exchange Law of Japan that are considered unlikely to

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

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

located outside of Japan (Articles of Incorporation).

actions or discredit the financial instruments business.

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

The Managed Assets of NBF will be managed in compliance with the

An asset management company may not undertake transactions in

Financial Instruments and Exchange Law of Japan and related regulations,certain financial instruments, indices or options based on fluctuations in the

60 NBF Report July – December 2011

Investment and Distribution Policies

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

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

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

standing units.

An asset management company may not undertake transactions thatare other than upon normal terms and conditions for such transactions,and further, such transactions upon said conditions would be harmful tothe interests of the investment.
e) Other Transactions Defined by Cabinet
Office Ordinances

In addition to the above, the following activities are prohibited(§42.2.7 of the Financial Instruments and Exchange Law, Cabinet Office
Ordinance §130).
(i)	Transactions among the auditors, officers and employees of an asset
management company(ii)

Transactions for the benefit of the investment management company(3) Restriction on Acquisition of Own Units andAcceptance of Pledge (§ 80.1 of the Investment
Trust Law)
An investment corporation may not acquire units issued by itself, or
accept them for the purpose of pledge, unless it acquires units issued byitself in the following cases:	when acquired from another investment corporation as the surviving
entity of a merger;●

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

●

or third parties that would be harmful to the interests of theinvestment corporation(iii)	Transactions for the benefit of third parties that are not necessary
according to investment management policies, the financial condition of(4) Restriction on Acquisition of Parent
Corporation’s Units by Subsidiary Corporation(§ 81.1.2)

assets under management, or market conditions(iv)	Asset management that introduces unfair restrictions or other limitations
from external entities(v)	The sale or purchase of investment securities, or similar transactions,

An investment corporation (subsidiary), a majority of the units of which
is owned by another investment corporation (parent), may not acquire theunits of such parent investment corporation except in the following cases:	when acquired from another investment corporation as the surviving
entity of a merger; or●with the objective of unfairly inflating transaction amounts or artificiallyinflating prices(vi)	Transactions between third parties and their agents (excluding specifictransactions to which rights holders have agreed pursuant to advance
explanation of the rationale for the transaction)(vii)	When entities as specified below engage in underwriting investment
securities or other transactions, requested tenders or acquisitions ofinvestment securities when the subject investment securities to beacquired by or the amount subscribed under the tender agreement by the	when purchasing units pursuant to a government ordinance regarding
the Investment Trust Law of Japan.

●

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

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

NBF Report July – December 2011 61

Corporate Data
(As of April 30, 2012)

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

Date of Inception:

March 16, 2001

Capital:				Contributed capital and units issued and outstanding:¥415,115 million
578,500 units

Unitholders:

15,220Transfer Agent:		Sumitomo Mitsui Trust Bank, Ltd.
4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-0005, Japan

Business Office of the Transfer Agent:				

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

Independent Auditors:
				

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

Investor Relations:
		
		
		
		

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

This document contains translations of selected information described in theof English translations or the selection of the portion(s) of any document(s) translated

Securities Report (Yuka shoken hokokusho) filed on March 29, 2012 pursuant to theinto English. No person has been authorized to give any information or make any repre-

Securities Exchange Law of Japan, and the Financial Statements and the Performancesentations other than as contained in this document in relation to the matters set out inInformation Report for the period from July 1, 2011 to December 31, 2011, of Nippon

this document, and if given or made, such information or representation must not be

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

relied upon as having been authorized by Nippon Building Fund Inc., Nippon BuildingThis English language document was prepared solely for the convenience of and­reference by overseas investors. It neither corresponds to the original Japanese documents nor is intended to constitute a disclosure document. The JapaneseFund Management Ltd. or any of their respective directors, officers, employees, partners, unitholders/shareholders, agents or affiliates.
The financial statements of Nippon Building Fund Inc. have been prepared inlanguage Securities Report and the Financial Statements and the Performanceaccordance with generally accepted accounting principles in Japan (Japanese GAAP),

Information Report for the aforementioned period should always be referred to aswhich may materially differ in certain respects from generally accepted accounting

originals of this document.

principles in other jurisdictions.

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

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

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

mation. We base these statements on our beliefs as well as our assumptions based

With respect to any and all terms herein, including without limitation, financial state-solely on certain limited information currently available to us. Because thesements, if there exist any discrepancies in the meaning or interpretation thereof between

statements reflect our current views concerning future events, these statements involvethe original Japanese documents and English statements contained herein, the original

known and unknown risks, uncertainties and assumptions. Our future

Japanese documents will always govern the meaning and interpretation. None ofperformance could materially differ from those set out in these forward-looking state-

Nippon Building Fund Inc., Nippon Building Fund Management Ltd. or any of theirments. We do not undertake and will not undertake to release revisions of forward-

respective directors, officers, employees, partners, unitholders/shareholders, agents or

looking statements to reflect future events or circumstances or of any other statements

affiliates will be responsible or liable for the completeness, appropriateness or accuracy

or information contained herein.

62 NBF Report July – December 2011

Investors’ Information(As of December 31, 2011)

Fiscal Periods

Unitholders

Six months ending June 30 and December 31

Other domestic corporations
353 (2.3%)

Overseas investors 363 (2.4%)
Financial institutions(Including securities companies)

Total Number of Units Issued

192 (1.3%)

21st Period (From July 1, 2011 to December 31, 2011)

578,500 units

20th Period (From January 1, 2011 to June 30, 2011)

578,500 units

Total numberof unitholders:

15,220

Other domestic
corporations
46,176 (8.0%)

Individuals andothers
36,705 (6.3%)
Individuals and others
14,312 (94.0%)

Distributions

Total numberof units:

Expected distribution for the 22nd Period (ending June 2012)
For the operating period from January 1, 2012 to June 30, 2012 (6 months)¥15,100 per unit

578,500

Confirmed distribution for the 21st Period (ended December 2011)
For the operating period from July 1, 2011 to December 31, 2011 (6 months)¥15,200 per unit

Overseas
investors
170,538(29.5%)

Financial institutions(Including securities companies)

325,081 (56.2%)

Major Unitholders
Name		

Japan Trustee Services Bank, Ltd. (Trust Account)
The Nomura Trust and Banking Co., Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)
Mitsui Fudosan Co., Ltd.		
The Master Trust Bank of Japan, Ltd. (Trust Account)
Sumitomo Life Insurance Company		
Nomura Bank (Luxembourg) SA		The Chugoku Bank, Ltd.		
State Street Bank and Trust Company 505223
Zenkyoren (National Mutual Insurance Federation of Agricultural Cooperatives)

Number of Units Held

Percentage of Total

89,581
46,65844,831
20,815
18,312
12,256
11,573
7,636
7,530
7,071

15.5%
8.1
7.7
3.6
3.2
2.1
2.0
1.3
1.3
1.2

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

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

2,500

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

1,500
1,000

800,000
500
400,000

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

NBF Report July – December 2011 63

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

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

Printed in Japan