NBF Report Jul.–Dec. 2004 7th Period

7th Period
From : July 1, 2004 To : December 31, 2004

NBF Report Jul. – Dec. 2004

Nippon Building Fund Inc.

Nippon Building Fund lnc.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan
http://www.nbf-m.com/nbf_e/

Nippon Building Fund Inc.
Corporate Data

ProfileNippon Building Fund Inc. (formerly: “Office Building Fund of Japan, Inc.” The current name was adopted on
March 14, 2003, hereinafter “NBF”) is a real estate fund structured in the form of an investment corporation asprescribed in the Investment Trust Law of Japan. It was formed on March 16, 2001 in Japan as an investment
corporation with the objective of investing in assets, consisting primarily of Designated Assets (as this term is definedin the Investment Trust Law of Japan). The Investment Trust Law of Japan requires an investment corporation to be
managed by an external entity; management of such assets is entrusted to an asset management company (in thiscase, “Nippon Building Fund Management Ltd.” (formerly “Office Building Fund Management Japan Limited”)

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

Date of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding as of December 31, 2004:¥210,679 million
364,700 shares

Shareholders:

19,107 (As of December 31, 2004)

Transfer Agent:

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

Business Office of the Transfer Agent:

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

Independent Public Accountants:

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

Investor Relations:

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

hereinafter “NBFM”) which undertakes such asset management.
NBF’s primary investment objective is to achieve sustainable growth in portfolio value and stable profits on a midterm to long-term basis. NBF intends to achieve this objective by investing in real estate consisting of buildings
primarily used for offices with their underlying land located in Tokyo Central Business Districts (hereinafter “CBDs”),
Other Greater Tokyo and Other Cities in Japan as well as securities, beneficiary certificates representing beneficiaryinterests in trusts (hereinafter “beneficiary certificates”) and other assets backed by office properties (collectively
hereinafter “Real Estate etc.”)
NBF, which is a public corporation, is a closed-end fund whose shares are non-redeemable upon demand by ashareholder. The accounting period is six months, except for the first term. For tax reporting purposes, NBF may
deduct its cash dividends of profits from taxable income under Japanese tax regulations if it distributes to its
shareholders amounts being in excess of 90% of taxable income for the period and complies with other organizationaland operational requirements. NBF will continue its efforts to satisfy these requirements.

History of NBF
March 16, 2001

Established by founders: Mitsui Fudosan Co., Ltd., The Chuo Mitsui Trust and Banking Co.,
Ltd., and NBFM (at the time known as “MF Asset Management Co., Ltd.”)

May 10, 2001

Registration under Article 187 of the Investment Trust Law of JapanMay 23, 2001

Commencement of business (acquiring trust beneficiary certificates with respect to properties
consisting of 22 office buildings held in trust)
Listing of common shares on the Japanese Real Estate Investment Trust (hereinafter “J-REIT”)
section of the Tokyo Stock Exchange.

September 10, 2001

Table of Contents
Financial Highlights
Portfolio Highlights
Strength of NBF
New Acquisition
Location of Office Properties
Properties Roster
Board of Directors

2
3
4
5
8
10
12

13
Investment Policies of NBF
18
Distribution Policies of NBF
19
Investment Restrictions
20
I Performance Information Report32
II Financial Statements
46
III Appendix
Back coverCorporate Data

This document contains translations of selected information described in the Securities Report (Yuka shoken hokokusho) filed on March 31, 2005 pursuant to the
Securities Exchange Law of Japan, and the Financial Statements and the Performance Information Report for the period from July 1, 2004 to December 31, 2004, of
Nippon Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.
This English language document was prepared solely for the convenience of and reference by overseas investors and neither corresponds to the original Japanese
documents nor is it intended to constitute a disclosure document. The Japanese language Securities Report and the Financial Statements and the Performance
Information Report for the aforementioned period should always be referred to as originals of this document.
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms.
With respect to any and all terms herein, including without limitation, financials statements, if there exist any discrepancies in the meaning or interpretation thereof
between the original Japanese documents and English statements contained herein, the original Japanese documents will always govern the meaning and interpretation.
None of Nippon Building Fund Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents oraffiliates will be responsible or liable for the completeness, appropriateness or accuracy of English translations or the selection of the portion(s) of any document(s)translated into English. No person has been authorized to give any informations or make any representations other than as contained in this document in relation to thematters set out in this document, and if given or made, such information or representation must not be relied upon as having been authorized by Nippon Building Fund
Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents or affiliates.
The financial statements of Nippon Building Fund Inc. have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP)
which may materially differ in certain respects from generally accepted accounting principles in other jurisdictions.
Many provisions of this document contain forward-looking statements and information. We base these statements on our beliefs as well as our assumptions based
solely on certain limited information currently available to us. Because these statements reflect our current views concerning future events, these statements involve
known and unknown risks, uncertainties and assumptions. Our future performance could materially differ from those set out in these forward-looking statements. We do
not undertake and will not undertake to release revisions of forward-looking statements to reflect future events or circumstances or of any other statements or information
contained herein.

Business Structure

General Meeting of
Shareholders

The Chuo Mitsui Trustand Banking Co., Ltd.

Asset Custody
Entrustment

Asset Management
Entrustment

Asset Custody

Mitsui Fudosan Co., Ltd.

Office Management
Entrustment

Nippon Building
Fund Management
Ltd.
(NBFM)

Nippon Building
Fund Inc.
(NBF)
Board of Directors

NBF Office
Management Co., Ltd.

Borrowings/Bonds
Debt service

Liabilities

OfficeManagement

Investment

Rent etc.

Real Estateetc.

AssetsInvestment

Shareholders’EquityDistribution

Shareholder

Trading

Shareholder

Major Related Operating Entities
Assignment

Qualified
Institutional
Investors/
Bondholders

Name

Asset Management Company

Nippon Building Fund Management Ltd. (“NBFM”)

Asset Custodian

The Chuo Mitsui Trust and Banking Co., Ltd.

Office Management Company

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

Financial Highlights

7th Period

6th Period

5th Period

4th Period

3rd Period

from July 1, 2004 to
December 31, 2004

from January 1,
2004 to June 30, 2004

from July 1, 2003 to
December 31, 2003

from January 1,
2003 to June 30, 2003

from July 1, 2002 to
December 31, 2002

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

Operating revenues¥ 16,116¥ 12,554¥ 12,453¥ 12,239¥ 11,846

6,307

4,263

4,094

4,314

4,563

Income before income taxes
Net income

(a)

6,306

4,262

4,093

4,313

4,562

Total assets(b)

430,378

366,200

314,362

307,688

290,725

Total shareholders’ equity (“Net assets”)(c)

216,985

153,161

152,992

153,212

153,461

Total amount of cash distribution

(e)

6,306

4,262

4,093

4,313

4,562

Total number of common shares issued (shares)(d)364,700

280,700

280,700

280,700

280,700

Net assets per share (Yen)(c) / (d)594,968

545,641545,038

545,823546,710Distribution per share (Yen)(e) / (d)17,291

15,185

14,582

15,367

16,253

NOI from property leasing activities

Note 2

10,238

8,311

7,964

8,057

7,886

FFO per share (Yen)

Note 2

23,06024,20323,141

23,794

23,635Note 1: Operating revenues do not include consumption taxes.
Note 2: All valuations are calculated through the following formulas. The figures in parenthesis are annualized based on the 6 month figures for the period.
NOI (Net Operating Income) from property leasing activities: (Revenue from property leasing - Rental expenses) + Depreciation and amortization
FFO (Funds From Operation) per share: (Net income (excluding Gain on sale of investment properties) + Depreciation and Amortization)/Weighted average number ofcommon shares issued and outstanding during the period.

● Operating revenues
Net income（Yen in million）

Operating revenues

Net income● Total assets● Distribution per share
Net assets per share（Yen in million）（Yen）

18,000450,000

15,000400,000

12,000Distribution per share

Net assets per share

580,000

15,000560,000

350,000

9,000

10,000300,000

6,000
3,000

250,000

5,000

0

0

0

3 rd
Period4 thPeriod5 thPeriod6 thPeriod7 thPeriod（Yen）

600,000

20,0003 rd
Period4 thPeriod5 thPeriod6 thPeriod7 thPeriodDistribution
per share

540,000
520,000
3 rd
Period4 thPeriod5 thPeriod6 thPeriod7 thPeriod500,000
Net assets
per share

Stock Price Performance
（Yen）

1,600

1,000,000
950,000
NBF stock price (the closing price)
900,000

1,500

TOPIX (the closing price)

1,400

850,000
800,000

1,300

750,000

1,100

650,000
600,000

1,000

550,000

900

500,000
450,000

800

400,000

700
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
2001
2002
2003
2004
2005

2

TOPIX

NBF stock price

1,200
700,000

Portfolio Highlights
Asset Allocation

Regional Allocation

Total Assets ¥430,378 million

Total Real Estate etc. ¥389,586 million
Other Cities¥65,696 million (16.9%)

Real estate¥87,919 million(20.4%)

Other Greater Tokyo¥54,065 million (13.9%)
Real estate held in trust¥301,667 million (70.1%)
Tokyo CBDs
¥269,825 million (69.2%)

Deposits and other assets¥40,792 million (9.5%)

Note: Figures above are based on the book value as of December 31, 2004

Occupancy Rate（%）
100

99.8 99.8
97.7

97.2 97.0

95

90

98.3

96.6
95.4 96.4
96.0 96.0 96.0 96.4 96.4 96.4 96.4
96.0
96.1 94.9
95.5
95.8
94.6 94.8
95.4 95.5
95.4
95.3
95.0
95.0
94.3
94.7 94.6 94.8
95.1
95.3 94.9
94.9
95.0
94.7 94.6
94.6 94.6 94.7
92.5 92.2 92.9 92.6 92.9 94.3
93.8 93.7 94.5
94.3
93.0 94.4 93.8
92.4
92.5
92.1 92.5
91.8 91.7 92.1 92.3
92.0 92.2 91.9 92.0 91.3
91.2
91.0
90.1 90.2 90.3 90.4
88.8

99.7 99.7 99.7 99.7 99.7 99.7 99.7
99.7 99.5
98.2 97.9 98.1
97.7 97.9 97.8
97.6 97.5 97.4 98.0
97.0 96.6
96.7 96.7
96.8
96.2
96.1 96.2
96.0
95.2
95.3 95.4 95.2
95.0
94.7
96.0
94.8
94.6
95.6
95.1
94.8 95.1 94.7
93.3
94.6 94.9
94.2 94.5 94.5 94.4
94.0
92.9
91.9

96.9
96.2
95.8
95.0

Feb 29 Mar 31 Apr 30 May 31 Jun 30

Mar 310
Jul 31 Aug 31 Sep 30 Oct 31 Nov 30
2002

Dec 31 Jan 31
2003

3rd Period

Feb 28 Mar 31 Apr 30 May 31 Jun 30

4th PeriodTokyo CBDs

Jul 31 Aug 31 Sep 30 Oct 31 Nov 30 Dec 31 Jan 31
2004

5th Period

Other Greater Tokyo

Jul 31

6th Period
Other Cities

Aug 31 Sep 30 Oct 31 Nov 30 Dec 31

Jan 31
2005

Feb 28

7th Period

Total

Note: Occupancy rate: Ratio of gross leased area to total rentable area

Major Tenants Roster
The outline of NBF’s major tenants as of December 31, 2004 is as follows:

Name of Tenants

Name of Building

01
02

JFE Steel Corporation (*)
GlaxoSmithKline.KK. (*)

03

Mitsui Fudosan (**)

JFE Bldg.
GSK Bldg.
NBF Unix Bldg.
Nakameguro GT Tower
Toranomon Kotohira Tower
Nishi-Shinjuku Mitsui Bldg.
Shinjuku Mitsui Bldg. No.2
Tsukuba Mitsui Bldg.
Nakano-Sakaue Sunbright Twin
Nippon Steel Building No.2
Kowa Nishi-Shinbashi Bldg. B
Shibuya Garden Front
NBF Nagoya Hirokoji Bldg.
Nihonbashi Muromachi Center Bidg.
NBF Toranomon Bldg.
Aqua Dojima Daiwa Dojima Bldg.
NBF Hiroshima Tatemachi Bldg.
NBF Shiba Koen Bldg.
NBF Toranomon Bldg.
Sumitomo Densetsu Bldg.

04

Fuji Xerox Co.

05
06
07

Nippon Steel Corporation (*)
NTT Communications
Transcosmos Inc.

08

Resona Bank Ltd.

09

NTT Data Corporation

10

Sumitomo Densetsu (*)

Leased Space(m2)

Percentage of Total
Rentable Area***

65,28022,791

14.5%
5.1%

20,426

4.5%

17,526

3.9%

15,333
8,493
8,438

3.4%
1.9%
1.9%

7,507

1.7%

7,160

1.6%

5,978

1.3%

*

Indicates tenants with long-term lease
contracts (JFE Steel Corporation’scontract expires March 2011;
GlaxoSmithKline’s contract expires
September 2010 ;Nippon SteelCorporation’s contract expires
November 2009; Sumitomo Densetsu’s
contract expires June 2008 )**Mitsui Fudosan, the sole tenant of theproperty, pools profits from leasing
operations and then distributes theproceeds proportionally in accordancewith each owner’s percentage of thetotal ownership interest.

***

Percentage of Total Rentable Area =Leased Space ÷ Total Rentable Areaof All Properties in Portfolio

3

Strength of NBF

The First Listed J-REIT• In September 2001, NBF was listed as the first investment corporation in Japanon the J-REIT section of the Tokyo Stock Exchange.

The Largest Scale of any J-REIT• The largest total market capitalization of any J-REIT(¥334,065 million as of March 31, 2005)• The largest scale of managed assets(¥389,586 million as of December 31, 2004)

Enrichment of Portfolio• Specializes in investing in office buildings• Possesses 47 properties focusing on large-scale office buildings in theTokyo Central Business Districts (as of March 31, 2005)• Diversified in other Tokyo markets as well as in regional cities.
• Total rentable space of 460,901m2 (as of December 31, 2004)• Diversified tenants (number of tenants at the end of the current period:
667)

Financial Stability and Flexibility• Ratings by Rating Agencies:
Standard & Poor’s

Long-term Corporate: A, Short-term Corporate: A-1, Outlook: stable

Moody’sIssuer Rating: A2, Outlook: stable

R&I

Issuer Rating: AA-• Ratio of Interest-Bearing Debt to Total Assets: 41.7% (as of December 31, 2004)• Ratio of Long Term and Fixed-Interest Rate Debt to total debt: 83.0% (as of December 31, 2004)• Average years remaining till due date for long-term interest-bearing debt: 4.91 years(as of December 31, 2004)• Funding through use of unsecured, non-guaranteed corporate loans

Strategic Partnership with Mitsui Fudosan Co., Ltd.
• Utilization of the know-how of Mitsui Fudosan, the leading real estate company in Japan.

4New Acquisition

NBF acquired the following properties during the 7th period.

NBF ALLIANCE

Tokyo CBDs

Acquisition date
Outline of acquired property
Acquisition price

July 1, 2004
fee simple¥9,126 million

Acquisition structure
LocationTrust
2-1, Minami-aoyama 5-chome, Minato-ku, Tokyo

Site area

1,673.27m2
6,214.73m2

Floor area of building
Structure
Completion

Above ground 5 floors, below ground 1 floor
January 25, 1989

Aqua Dojima Daiwa Dojima Bldg.

Other Cities

Acquisition date
Outline of acquired property
Acquisition price

September 30, 2004
fee simple¥17,810 million

Acquisition structure
Location

Trust
4-16, Dojimahama 1-chome, Kita-ku, Osaka, Osaka

Site area

3,531.37m2
35,912.97m2

Floor area of building
Structure
Completion

Above ground 19 floors,
below ground 2 floors
December 2, 1996

S-ino Omiya North Wing

Other Greater Tokyo

Acquisition date
Outline of acquired property

October 1, 2004 / November 1, 2004
fee simple

Acquisition price¥16,816 million
Real Estate

Acquisition structure
Location

10-15 (and 16), Sakuragi-cho 1-chome, Omiya-ku,
Saitama, Saitama

Site area

Office building: 3,083.98m2
Administrative building: 2,366.04m2

Floor area of building

Office building: 30,227.21m2
Administrative building: 385.79m2

Structure

Office building: Above ground 20 floors, below
ground 1 floor
Administrative building: Below ground 2 floors
February 20, 2004

Completion5New Acquisition

NBF acquired the following properties during the 7th period.

Toranomon Kotohira Tower

Tokyo CBDs

Acquisition date
Outline of acquired property

November 30, 2004

Acquisition price
Acquisition structure¥6,043 million
Real Estate and Superficies

Location

2-8, Toranomon 1-chome, Minato-ku, Tokyo
3,647.30m2 (*)

Site area
Floor area of building
Structure
Completionco-ownership of condominium interest

29,828.90m2 (*)
Above ground 26 floors, below ground 3 floors
November 30, 2004(*)Note:The figures given for "Site area" and "Floor area" above
indicate the total site area and total floor area of thisproperty. NBF owns about 29% of this property.

NBF has acquired the following properties after the 7th period.

Akasaka Sanno SquareTokyo CBDs

Acquisition date
Outline of acquired property
Acquisition priceFebruary 24, 2005
fee simple¥6,250 million

Acquisition structure
LocationTrust
2-12, Akasaka 2-chome, Minato-ku, Tokyo

Site area

926.63m2
7,427.94m2

Floor area of building
Structure
Completion

Above ground 8 floors, below ground 1 floor
September 7, 1989

Sakaisuji-Honmachi Center Bldg.

Other Cities

Acquisition date
Outline of acquired property
Acquisition priceMarch 25, 2005
ownership / co-ownership of condominium interest¥6,500 million

Acquisition structure
Location

Real Estate
1-6, Honmachi 2-chome, Chuo-ku, Osaka

Site area

3,645.74m2 (*)
32,989.71m2 (*)

Floor area of building
Structure
Completion

Above ground 16 floors, below ground 1 floor
May 1991(*)Note:The figures given for “Site area” and “Floor area”
above indicate the total site area and total floor areaof this property. NBF owns about 46.6% of thisproperty.

6

NBF Higashi-Ginza SquareTokyo CBDs

Acquisition date
Outline of acquired property

March 28, 2005

Acquisition price
Acquisition structure¥5,200 million
Trust

Location

13-14, Tsukiji 1-chome, Chuo-ku, Tokyo
940.09m2

Site area
Floor area of building
Structure
Completionfee simple

7,152.99m2
Above ground 9 floors, below ground 1 floor
February 28, 2005

NBF Utsunomiya Bldg.

Other Greater Tokyo

Acquisition date
Outline of acquired property

March 29, 2005
fee simple

Acquisition price¥2,435 million

Acquisition structure
Location

Real Estate
1-9, Higashi Shukugo 3-chome, Utsunomiya, Tochigi

Site area
Floor area of building

2,074.16m2
8,775.07m2

Structure

Above ground 8 floors
June 5, 1996

Completion

NBF Platinum Tower

Tokyo CBDs

Acquisition date
Outline of acquired property
Acquisition priceMarch 31, 2006 (estimated)
fee simple¥27,600 million(price may be adjusted upward to a maximum of ¥31,000
million depending on the seller’s success in attracting tenants and improving current estimated profits)

Acquisition structure

Trust

Location
Site area

304, Shirokane 1-chome, Minato-ku, Tokyo
4,373.93m2

Floor area of building
Structure

50,630.91m2 (estimated)

Completion

Above ground 26 floors, below ground 2 floors
November, 2005 (estimated)

This is a conceptual drawing of what the completed project will look like. Thus, it may differ from the actual building.

7

Location of Office Properties

Tokyo CBDs

8

JFE Bldg.

Shiba NBF Tower

Nihonbashi Muro-machi
Center Bldg.

Shinjuku Mitsui Bldg. No.2

GSK Bldg.

Naka-Meguro GT Tower

NBF Toranomon Bldg.

Kowa Nishi-Shinbashi Bldg. B

Nippon Steel Bldg. No.2

NBF ALLIANCE

Shibuya Garden Front

Toranomon Kotohira TowerOther Greater Tokyo

Nakano-Sakaue Sunbright Twin

Yokohama ST Bldg.

Sapporo L-PlazaNBF Nagoya Hirokoji Bldg.

Other Cities
S-ino Omiya North Wing

Sakaisuji-Honmachi Center Bldg.

Aqua Dojima Daiwa
Dojima Bldg.

Sun Mullion NBF Tower

9

Properties Roster
The outline of NBF’s properties as of Decemder 31, 2004 is as follows:
Name of Building

Investment
Type

Type of Ownershipof the Buildings

Percentageof Ownership of the
Buildings

Year Built(%)

Acquisition
Price(Yen in millions)Tokyo CBDs
JFE Bldg.
Shiba NBF Tower
Nihonbashi Muromachi Center Bldg.
Shinjuku Mitsui Bldg. No.2
GSK Bldg.
Nakameguro GT Tower
NBF Toranomon Bldg.
Kowa Nishi-Shinbashi Bldg. B
Nippon Steel Bldg. No.2
NBF ALLIANCE
Shibuya Garden Front
NBF Shiba Koen Bldg.
NBF Takanawa Bldg.
Toranomon Kotohira Tower
Sumitomo Densetsu Bldg.
NBF Ikebukuro Tower
NBF Ikebukuro City Bldg.
NBF Sudacho Verde Bldg.
Nishi-Shinjuku Mitsui Bldg.
NBF Ebisu Minami Bldg.

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

fee simple
fee simple
fee simple
fee simple
fee simple
condominium
fee simple
co-ownership of condominium
fee simple
fee simple
co-ownershipfee simple
fee simple
co-ownership of condominium
fee simple
fee simple
fee simple
fee simple
condominium
fee simple

100.0
100.0
100.0
100.0
100.0
60.5
100.0
83.0
100.0
100.0
50.0
100.0
100.0
29.2
100.0
100.0
100.0
100.0
4.1
100.0

1974
1986
1986
1983
1990
2002
1963
1994
1989
1989
2003
1990
1987
2004
1991
1993
1993
1988
1999
1991

¥74,131
32,00023,945
16,285
15,616
14,056
13,337
13,217
12,614
9,126
8,700
6,770
6,667
6,043
5,365
4,695
4,428
2,380
1,603
1,000

¥72,091
33,05824,30815,70014,691
13,747
13,81912,641
12,509
9,455
8,726
6,852
6,357
6,260
5,164
4,806
4,490
2,455
1,647
1,050

Other Greater Tokyo
Nakanosakaue Sunbright Twin
Yokohama ST Bldg.
NBF Atsugi Bldg.
Tsukuba Mitsui Bldg.
S-ino Omiya North Wing
Daido Life Omiya Bldg.
NBF Matsudo Bldg.

Trust
Trust
Ownership
Trust
Ownership
Trust
Ownershipcondominium
co-ownershipfee simple
fee simple
fee simple
fee simple
fee simple

31.6
75.0
100.0
100.0
100.0
100.0
100.0

1996
1987
1991
1990
2004
1991
1992

8,979
13,5292,300
8,876
16,816
2,361
2,455

8,854
12,991
2,316
8,219
16,9392,273
2,472

Other Cities
Sapporo L-PlazaNBF Sapporo Minami Nijo Bldg.
NBF Sendai Honcho Bldg.
NBF Unix Bldg.
NBF Niigata Telecom Bldg.
NBF Nagoya Hirokoji Bldg.
Aqua Dojima Daiwa Dojima Bldg.
Sun Mullion NBF Tower
NBF Sakai-Higashi Bldg.
NBF Tanimachi Bldg.
Aqua Dojima East
Otemae Center Bldg.
NBF Shijo Karasuma Bldg.
NBF Hiroshima Tatemachi Bldg.
Hiroshima Fukuromachi Bldg.
NBF Hakata Gion 21 Bldg.
Four (4) properties already soldOwnership
Trust
Trust
Trust
Trust
Ownership
Trust
Trust
Trust
Trust
Trust
Trust
Trust
Ownership
Ownership
Trust—

condominium
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
fee simple
co-ownership of condominium
fee simple
fee simple
fee simple
co-ownership of condominium
fee simple
—

36.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
23.7
100.0
100.0
100.0
10.4
100.0
—

2003
1990
1987
1994
1989
2000
1996
1996
1991
1993
1993
1992
1991
1991
2002
1993
—

3,434
1,870
3,566
4,029
3,958
5,406
17,81010,500
2,227
1,944
1,914
1,826
1,627
2,930
835
2,629
—

3,505
1,757
3,450
3,628
3,777
5,563
18,392
9,954
2,116
2,005
1,976
1,731
1,478
3,049
828
2,487
—

393,800

389,586

Total

Note 1: Percentage of total revenue is the ratio of revenue from each office property to total revenues from all office properties.
Note 2: Consent for disclosure was not obtained from tenants from whom rent revenue accounts for more than 80% of total rent revenues for the property. However, relevant figures areincluded in the total.
Note 3: Figures stated above are based on NBF’s ownership interest.
Note 4: The figure (above, in the table, etc.) indicates the total sales price of the four (4) properties which have been already sold as of July 30, 2004.

10

Book ValueAppraisal Value

Rentable
Square Meters

Leased Square
Meters at theEnd of Period

Occupancy
Rates at theEnd of Period

Total Number ofTenants at theEnd of Period(Yen in millions)

(m2)

(m2)

(%)

¥75,700
24,80024,32016,50017,80014,30013,80013,60013,100
9,490
9,550
6,810
7,140
6,090
5,160
4,850
4,570
2,410
1,690
1,050

65,28024,796
16,306
14,94622,702
13,924
10,354
10,08817,339
4,043
8,258
7,087
10,473
4,926
5,978
5,794
5,127
2,971
1,576
1,595

65,28024,621
16,306
14,94622,702
13,924
10,232
10,08817,339
4,043
8,258
7,087
10,473
4,926
5,978
5,521
4,996
2,962
1,576
1,595

100.0
99.3
100.0
100.0
100.0
100.0
98.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
95.3
97.4
99.7
100.0
100.0

1
27
15
35
1
1
11
2
2
9
1
3
5
1
1
10
10
7
1
5

¥2,175
1,064
427
696
Note 2668
578
Note 2618
280
Note 2
Note 2327
3Note 2
206
189
120
65
60

14.3
7.0
2.8
4.6
Note 24.4
3.8
Note 24.1
1.8
Note 2
Note 22.2
0.0
Note 2
1.4
1.2
0.8
0.4
0.4

9,590
14,5002,350
8,890
17,8002,240
2,590

12,07420,071
5,242
16,851
20,7093,574
4,772

12,074
19,655
4,826
15,01819,196
3,299
4,684

100.0
97.9
92.1
89.1
92.7
92.3
98.2

1
80
18
59
29
13
25

Note 2
740
135
514
198
114
134

Note 2
4.9
0.9
3.4
1.3
0.8
0.9

3,520
1,730
3,810
4,840
4,340
5,440
18,400
9,820
2,350
2,030
2,010
1,960
1,560
3,000
867
2,450
—

9,058
5,376
7,567
13,47910,2196,873
21,935
14,112
5,332
4,953
3,264
5,532
3,929
5,690
1,310
5,416
—

9,058
4,476
7,542
13,037
10,2196,873
18,592
13,649
5,273
4,725
2,985
5,368
3,830
5,526
1,296
5,416
—

100.0
83.3
99.7
96.7
100.0
100.0
84.8
96.7
98.9
95.4
91.4
97.0
97.5
97.1
99.0
100.0
—

12
7
10
53
36
11
33
26
17
2
17
6
15
26
16
7
—

248
119
209
307
278
234
334
494
148
Note 2
110
141
104
152
43
154
77

1.6
0.8
1.4
2.0
1.8
1.5
2.2
3.3
1.0
Note 2
0.7
0.9
0.7
1.0
0.3
1.0
0.5

398,817

460,901

449,47097.5

667

15,178100.0

Revenues

Percentage ofTotal Revenues(Note 1)

(Yen in millions)

(%)

11

Board of Directors

The number of executive directors of NBF is one or more, andthe number of supervisory directors is four or fewer (but always
equal to the number of executive directors, plus a minimum of
one additional supervisory director) (Articles of Incorporation).
At the end of the immediately preceding term the organizationof NBF consisted of, in addition to the general meeting of theshareholders, two executive directors and four supervisory
directors as well as a Board of Directors comprised of theexecutive directors and supervisory directors.
At the end of the immediately preceding term, members of theBoard of Directors of NBF were as set forth in the table below.

Name of executive directors andsupervisory directors

Title

Sadafumi Abe

Executive Director

Koichi Nishiyama

Executive Director

Tomio Hirota

Supervisory Director

LawyerAkira Nishizawa

Supervisory Director

Real Estate Appraiser

Nobutoshi Kozuka

Supervisory Director

Certified Public Accountant, Certified Public Tax Accountant

Hideo Fukazawa

Supervisory Director

Note: Koichi Nishiyama, Executive Director, is concurrently President & CEO of NBFM. No executive or supervisory director directly or indirectly holds any shares in NBF.
Further, while some supervisory directors are concurrently officers in other corporations, there exist no conflicts of interest between said corporations and NBF.

12

■Investment Policies of NBF
1.

Basic Investment Policies

A.

Basic Policies

NBF’s primary investment objective is to achieve sustainable growth in portfolio value and stable profits on a
mid-term to long-term basis. NBF achieves this objective by investing in real estate consisting of buildings
primarily used for offices with their underlying land located in the Tokyo Central Business Districts (hereinafter“CBDs”), Other Greater Tokyo and Other Cities in Japan as well as securities, beneficiary certificates representing
beneficial interests in trusts (hereinafter “beneficiary certificates”) and other assets backed by office properties（collectively hereinafter “Real Estate etc.”）（“Investment Objects and Policies”, Articles of Incorporation）.
（Reference to : laws, legal documents, etc used as the basis or sources hereof are set forth in parenthesis
herein.)B.

Investment Strategy

Nippon Building Fund Management Ltd. (“NBFM”), based on the investment strategy of NBF set forth below,
invests and manages the assets of NBF. NBFM has established asset management guidelines based on the Articles
of Incorporation of NBF and in accordance with the investment strategy of NBF.
(1) Strategy for Creation of the Portfolio
The goal of the portfolio is to generate steady growth and stable profits on a mid-term to long-term basis. The
selection criteria of investment assets is based on, the composition of investment assets in the portfolio and based on
consideration of a quantitative proportion of the office stock located in the various regions of Japan.

Area Diversification
The investment strategy of NBF divides the investment area into three areas consisting of Tokyo CBDs, Other
Greater Tokyo and Other Cities in such manner that 70% or more of total investment assets (Real Estate etc.) is
allocated to Tokyo CBDs and Other Greater Tokyo and 30% or less to Other Cities. The purpose of this area
diversification is to mitigate cash flow risks such as earthquakes, risk of vacancies and so forth.
The following table sets forth abovesaid area diversification strategy.

- 13 -

Area and Allocation Ratio

Area Analysis

Tokyo CBDs
9 central wards in Tokyo :Chiyoda, Minato, Chuo, Shinjuku,
Shinagawa, Shibuya, Toshima, Bunkyo
and Meguro■ Relatively high rent levels and low vacancy rates compared to
Other Cities; also, relatively large market scale (both leasing andpurchase/sale) with high growth rates.
■ Relatively low yearly NOI yields. Relatively high liquidity at
the time of sales.

Other Greater Tokyo
Other 14 wards in Tokyo and
Neighboring Cities (see Note 1 below)
such as Musashino, Tachikawa,
Yokohama, Kawasaki, Chiba, Kashiwa,
Saitama etc.

■ Basic special characteristics are between those of Tokyo CBDsand Other Cities.

Total of above two areas :70% or more
Other Cities
Principal regional cities such as
Sapporo, Sendai, Niigata, Shizuoka,
Hamamatsu, Nagoya, Kyoto, Osaka,
Kobe, Okayama, Hiroshima,
Takamatsu, Fukuoka, Kumamoto etc.

■ Rent levels relatively low and vacancy rates relatively highcompared to Tokyo CBDs.
■ Also, scale of market is relatively small and growth rates
relatively low.
■ Relatively high yearly NOI yields. Relatively low liquidity at thetime of sales.

Total of above area: 30% or less
Note 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.
Note 2 Due to unforeseeable events such as, extreme fluctuations in macro-economic trends, financial trends, real estate market
trends and so forth, it may not always be possible to operate in accordance with each of the above criteria (“ Investment
Objects and Policies”, Articles of Incorporation).

(2) Acquisition Strategy
Ratio of Real Estate Assets
NBF will maintain ratios of 75% or more with respect to the “Designated Real Estate Ratio”. As of March 31,
2005, NBF satisfied the criteria.
The “Designated Real Estate Ratio” means the ratio of the total amount of Designated Real Estate to thetotal amount of Designated Assets owned by NBF.
Note:

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

- 14 -

Due Diligence
When investing in office properties, selections will be made through comprehensive research and analysis basedon the forecast investment yields resulting from their acquisition costs and their anticipated profits, future prospects
and stability of the area of location, availability of measures responding to risks of deterioration and obsolescence,
insurability and so forth. The details of the relevant criteria are set forth in the following table (“Investment Objects
and Policies”, Articles of Incorporation).
Though such consideration will involve the study of the criteria included in the following table, it is possible thatwhen NBF acquires or intends to acquire operating assets, not all of the following criteria will be satisfied.
Item
Scale of building

Construction type andspecifications of facilities
Earthquake resistance

Measures regarding status oflegal title

Tenancy characteristics
Environmental; condition ofland etc.

Points to be reviewed■ Net rentable area, including net rentable area of entire building andstandard net rentable area per floor. Desired total net rentable area is
1,650㎡(approximately 500 tsubo) or more. Standard net rentable area
per floor is 330㎡ (approximately 100 tsubo) or more.
■ Building design and floor plan suitable for leasing, with divisibility,
adequate ceiling height, electrical service, HVAC equipment etc.
■ Ensure that construction quality exceeds earthquake standards (meaning
those required pursuant to the Building Standards Law as amended in1981) or standards equivalent thereto.
■ In cases such as co-ownership, divided condominium ownership, abuilding erected on leased land etc. where NBF will not obtain complete
ownership of a building, following matters are appropriately treated.
・measures to protect security deposits, policies and measures regarding
cash reserves for long-term renovation plans;
・appropriate measures regarding demands for division of co-owned
interests or the sale of a co-owner’s interest etc;
■ Acceptable creditworthiness of tenants, purposes of use by tenants,
configuration, and condition of collectibility of rents etc.
■ Absence of harmful substances such as asbestos, (or countermeasures canbe implemented for any such substances), non-existence of soil pollution
etc.

Uncompleted or Unleasable Properties
In principle, NBF acquires Real Estate etc. which are leased/leasable assets at the time of closing. NBF may
acquire a property which is not yet leasable at the time of closing based on consideration of the impact on NBF's asset
management activities after taking into account the investment amount, the date of completion or of becoming
leasable, estimated revenues and so forth; provided, however, that the contract amount of any such unleasable asset
combined with the total contract amount of previously acquired unleasable assets (but excluding unleasable assets
which thereafter become operational) will not exceed 10% of the total assets indicated on the most recent balance
sheet of NBF. For this purpose, “leased/leasable assets” shall mean property with respect to which the constructionof the building has been completed and such building is leased or leasable. Properties which are owned by NBF andhave become operational at some point shall be deemed “leasable ” thereafter (including such cases as reconstruction
or large-scale renovation of a building).

- 15 -

(3) Management and Disposition Policies
Regarding acquired operating properties, the goal is to obtain steady growth of operating profits on a mid-term
to long-term basis by planning to maintain and improve asset value and competitive ability through investment infacilities and by expanding income (increasing rents etc., increasing occupancy rates, extending the term of leases andrendering them more stable etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a mid-term to long-term basis, lease out all
operating properties included in operating assets (including installation of parking lots, billboards etc.). When
conducting such leasing, security deposits etc. and other similar monies may be received and said monies will be
managed in accordance with the requirements of “Investment Objects and Policies” of the Articles of Incorporation(“Investment Objects and Policies”, Articles of Incorporation).
NBF is entitled to establish reserves for long-term renovations required to maintain and enhance the value of
operating properties, reserves for payables, reserves for cash distributions and any other similar reserves etc. (Articles
of Incorporation).

Reserves for Long-Term Renovations
From the reserves set forth above, a portion corresponding to renovations, repairs and tenant improvements will
be determined based on renovation plans for each building. As of March 31, 2005, foreseen reserves provided fromJanuary to December 2005 are as follows:
Item
ReasonReserves for long-term renovations■ Average annual amount over an approximately 10-year period
based on engineering reports
Reserves for tenant improvements (reserves ■ Expenses of providing “free access floor”(or raised floor);
for future construction expenses required
expenses for other move-in construction costs (partitions etc.)
for spaces leased to tenants)
Total Foreseen Amount: (annual basis)¥1,865 million(Note1) In addition to the above-mentioned amount, certain amounts are set aside as cash reserves for renovation pursuant tothe administrative rules of the buildings in which NBF owns condominium interests, etc.
(Note 2) The amount of reserves set forth above is the total amount of reserves with respect to the 43 properties owned by NBF
as of the end of December, 2004.

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

Appraisal Value etc.
In the event that valuation of real estate, land leasehold rights and superficies (including beneficiary certificates,
securities and tokumei-kumiai ownership interests, and other asset-backed instruments) is undertaken for the purposeof disclosure in Performance Information Reports etc., the value to be used for disclosure will, in principle, be theappraisal valuation provided by a certified real estate appraiser (Articles of Incorporation).
The appraisal value of property with respect to the period commencing on the acquisition thereof and ending on
the date of disclosure of such value with respect to the next following closure of NBF's accounting term shall be theacquisition price of the said property (excluding miscellaneous acquisition costs, fixed assets tax, city-planning tax
and consumption tax) as stated in the sale and purchase contract etc. for the said property.
- 16 -

Disposition
In disposing of individual operating properties, selections will be made through comprehensive research andanalysis based on the forecasted income, actual and predicted fluctuations in asset value, future prospects and stabilityof the area of location, risks of deterioration and obsolescence of real estate and predicted costs thereof as well as thecomposition of the portfolio etc. Sell/hold studies will be periodically undertaken with respect to all operating
properties (“Investment Objects and Policies”, Articles of Incorporation).

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

Debt Financing
NBF may raise capital (including use of the call loan market) and issue bonds in order to undertake acquisition
and renovation and so forth of assets and to provide allowance for funds required for working capital as well as forthe repayment of debt (including security deposits, borrowings and repayment of obligations regarding NBF bondsetc.) (“Investment Objects and Policies”, Articles of Incorporation).
Borrowings are limited to those from Qualified Institutional Investors as specified in Article 2.3.1 of the
Securities and Exchange Law of Japan, in case 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 (Articles of Incorporation).

Loan to Value Ratio
The ratio of the total amount of borrowings and issues of NBF bonds to the total amount of assets of NBF(Loan-to-Value ratio) is envisioned to be limited to 60%, but may temporarily exceed 60% when acquiring certain
assets etc(Long and mid-term operating asset management policy and annual management plan established by the
Asset Management Company).

Derivatives
In order to avoid risks of fluctuation in the prices of operating assets as well as risks of fluctuations in interest
rates, futures transactions, option transactions, swap transactions and forward rate transactions with respect toJapanese interest rates may be undertaken (“Investment Objects and Policies”, Articles of Incorporation).

- 17 -

■ Distribution Policies of NBFA.

Distributions of Profits

A registered investment corporation may deduct its cash dividends of profits from taxable income underJapanese tax regulations if it distributes to its shareholders 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 followings policies (Articles of Incorporation).

Earnings Available for Distributions
NBF’s earnings available for distributions is based on accounting of profits prepared in accordance with theInvestment Trust Law and the Securities and Exchange Law of Japan 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 variances) calculated on each closing date in accordance with theInvestment Trust Law of Japan and corporate accounting principles generally deemed to be fair and appropriate.

Cash Distribution of Profits
The amount of cash distributions will be determined by NBF, such amount being in excess of 90% of taxable
income available for dividends of NBF set forth in Article 67-15 of the Special Taxation Measures Law of Japan(hereinafter "Taxable Income Available for Dividends"); provided, however, that the maximum amount of
distributions will be the Distributable Amount. NBF has the right to allow for long-term reserve for repair, reservefor outstanding claims, reserve for distributions and other reserves and allowances similar thereto which are deemednecessary for maintenance or appreciation of the assets of NBF.

B.

Distribution in Excess of Earnings

A registered investment corporation is allowed to distribute cash to its shareholders in excess of retained
earnings under the Investment Trust Law of Japan, although the Investment Trusts Association of Japan has
established rules such that a corporate-style 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 make cash distributions of the amounts
described below in excess of the Distributable Earnings in the following cases; provided, however, that the maximum
amount of such distributions will be the amount set forth in the rules of the Investment Trusts Association of Japan(Article 15.2 of the Articles of Incorporation).
Amount determined by NBF as being eligible for the requirements of the Special Taxation Treatment
for Investment Corporations, in case of the Distributable Earnings being less than the Taxable Income
Available for Dividends
Amount determined by NBF not in excess of the amount of depreciation for the current term less theamount of appropriate reserves for the current term, if NBF determines it appropriate considering
trends in macro-economic environments, real estate markets and leasing markets- 18 -

NBF’s Current Policy on Distributions in Excess of Profits
As for cash distributions in excess of profits, as long as the current Japanese taxation treatment applicable to
NBF’s shareholders in Japan to whom such distributions are paid requires them to calculate capital gain or loss at thetime of each distribution, NBF will not make distributions in excess of profits.
Notwithstanding the above, NBF may make distributions in excess of profits in accordance with the distribution
policies stated above in order to meet “Requirement for Deduction from taxable income of Dividends of Profit, etc.”,
and if such distributions in excess of profits are deemed necessary 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 shareholders
or registered pledgees as are listed in the latest Shareholder Registry as of the closing date, in proportion to thenumber of shares owned by them (Articles of Incorporation).

D.

Prescription for Cash Distributions etc.

NBF will be discharged from the obligation to pay distributions of profits three calendar years from the date ofcommencing payment. Interest will not accrue on unpaid distributions (Articles of Incorporation).

■Investment Restrictions
NBF will invest neither in real estate located outside of Japan nor in assets denominated in non-Japanesecurrencies as specified in the Articles of Incorporation. Please see “Ⅲ Appendix Investment Restrictions” regarding
other investment restrictions. Also, refer to " Basic Investment Policies (B) Investment Strategy" hereinabove.

- 19 -

Ⅰ

Performance Information Report■ Overview of NBF
Financial Highlights
Distribution for the Current Period
Capitalization
Major Shareholders
Categories of Shareholders■ Capital Expenditures
Planning
Capital Expenditures for the Current Period
Cash Reserve for Capital Improvements■ Expenses regarding Entrustment etc.
■ Trading Activities during the Current Period
Trading of Real Estate and Real Estate held in Trust
Trading of Other Assets Including Total Amount and Transactions
Related Parties Transactions- 20 -

■ Overview of NBF
1. Financial Highlights
7th Period

6th Period

5th Period

from July 1, 2004 tofrom January 1,

from July 1, 2003 to

December 31, 2004

2004 to June 30,

December 31, 2003

2004
(Yen in millions, except per share data or where otherwise indicated)

Operating revenues
Revenues from property leasing
Operating expenses
Rental expenses
Income before income taxes
Net income¥16,116
15,178
8,587
7,831
6,307
6,306

¥12,554
12,458
7,392
6,775
4,263
4,262

¥12,453
12,453
7,464
6,891
4,094

Total assets(b)
Total shareholders’ equity (‘Net assets’)(c)Contributed capital
Total amount of cash distribution(e)Total number of common shares issued (shares) (d)Net assets per share (Yen)(c) / (d)Distribution per share (Yen)(e) / (d)Distribution of accumulated earnings per share (Yen)Distribution in excess of accumulated earnings per share(Yen)

430,378
216,985
210,679
6,306
364,700
594,968
17,291
17,291

366,200
153,161
148,899
4,262
280,700
545,641
15,185
15,185314,362
152,992
148,999
4,093
280,700
545,038
14,582
14,582−−−Return on total assets

Note 2

ROE

Note 2

Capital ratio
Payout ratio
Number of days
Other supplementary data:
Number of investment properties
Number of tenants
Total rentable square meters
Occupancy rate
Depreciation and amortization
Capital expenditures
NOI from property leasing activities
FFO per share (Yen)(c) / (b)(e) / (a)1.58%
（3.17%）
3.41%（6.82%）
50.4%
100.0%
184

1.25%（2.51%）
2.78%（5.57%）
41.8%
99.9%
182

1.32%
（2.63%）
2.67%（5.35%）
48.7%
100.0%
184

43
667
460,901
97.5%
2,891
431
10,23823,06043
629
419,511
97.7%
2,628
459
8,311
24,20333
511
358,940
92.3%
2,403
2,314
7,964
23,141(a)Note 4Note 4Note 4Note 2
Note 2

4,093

Note 1 Operating revenues do not include consumption taxes.
Note 2 All valuations are calculated through the following formulas. The figures in parenthesis are annualized based on the 6 months figures for theperiod.
Return on total assets: Income before income taxes / (Initial total assets + Total assets at end of period)÷2
ROE: Net income / (Initial shareholders’ equity + Shareholders’ equity at end of period)÷2
NOI (Net Operating Income) from property leasing activities:(Revenue from property leasing−Rental expenses)＋Depreciation and Amortization
FFO (Funds From Operation) per share : (Net income (excluding Gain on sale of investment properties) + Depreciation and Amortization)/
Weighted average number of common shares issued and outstanding during the period.
Note 3 As for payout ratio, figures beyond the first decimal place have been disregarded.
Note 4 Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number oftenants by building. Occupancy rate is ratio of gross leased area to total rentable area at the end of the period.

- 21 -

2. Distribution for the Current Period
Distribution per share for the current period was ¥17,291. NBF expects to distribute almost all taxable
income for the current period to be eligible for special tax treatment (Special Taxation Measures Law ofJapan Article 67-15) that allows NBF to deduct its cash dividends of profits from taxable income.
For the six months ended
December 31,
June 30,
December 31,
2004
2004
2003

(Yen in thousands, except per share amount)
Retained earnings
Undistributed earnings
Total cash distribution(Total cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash Distribution in excess of accumulated earnings(per share)Note¥ 6,306,101
73
6,306,028
17,291
6,306,028
17,291――¥ 4,262,515
86
4,262,430
15,185
4,262,430
15,185――¥ 4,093,179
12
4,093,167
14,582
4,093,167
14,582――

Above cash distributions were paid after the period end.

3. Capitalization
Balance of Paid-in Capital
NBF was established on March 16, 2001 with initial paid-in capital of ¥100 million. NBF began
investing activities in May 2001 after ¥98,800 million was raised through private placements. As of
December 31, 2004, NBF had issued 364,700 common shares out of 2,000,000 total authorized shares.
NBF’s common shares were listed on the J-REIT section of the Tokyo Stock Exchange in September 2001
upon the completion of a public offering. As the Investment Trust Law of Japan does not contain any
provision for the issue of more than one class of shares, NBF’s common shares comprise the sole class ofshares authorized and issued by NBF.

Issue date

March 16, 2001
May 23, 2001
September 8, 2001
July 14, 2004
August 11, 2004

Remarks

Initial capital(private)
Privateplacement
Public offering
Public offering
Third Party
Allocation

Common Shares
outstanding
Increase
Balance(shares)

Paid-in capital

200

200

¥ 100

¥ 100

Note 1

197,600

197,800

98,80098,900Note 282,90080,000280,700
360,700

49,99958,838148,899
207,737

Note 3Note 44,000

364,700

2,941

210,678

Note 5Note 1

NBF was established with initial capital of ¥500,000 per share.

Note 2

Follow-on private offering at ¥500,000 per share to raise funds for acquisition of 22 properties.

Note 3

Notes

Increase
Balance(Yen in millions)Public offering of new units for ¥625,000 per share (excluding underwriting fee: ¥603,125) to repay debt and to
fund property acquisition.

Note4

Public offering of new units for ¥759,500 per share (excluding underwriting fee: ¥735,475) to repay debt etc.

Note5

Additional issue of new units (third party allocation) for ¥735,475 per share undertaken pursuant to the public
offering in Note 4.
- 22 -

Market Price of shares
High/Low (closing price) of shares on the TSE:
For the six months ended

December 31,2004

High.
Low.

June 30, 2004

December 31,2003(in Yen)¥ 823,000
682,000¥ 900,000
762,000¥696,000
631,000

Borrowings
Borrowings by financial institution as of December 31, 2004 are shown below.
Short-term debt
Average

Lender

The Chuo Mitsui Trust and Banking Co., Ltd.
The Bank of Tokyo- Mitsubishi, Ltd.
The Norinchukin Bank
Sumitomo Mitsui Banking Corporation
The Hachijuni Bank, Ltd.
The Bank of Fukuoka, Ltd.
Shinkin Central Bank
The Kagoshima Bank, Ltd.
The Chugoku Bank, Ltd.
The Gunma Bank, Ltd.
Mizuho Corporate Bank, Ltd.
The Shizuoka Bank, Ltd.
The Yamaguchi Bank, Ltd.
The Daishi Bank, Ltd.
Shinsei Bank, Ltd.
The Yamanashi Chuo Bank, Ltd.
Short-term debt Total
Long-term debt
Sumitomo Life Insurance Company

The Chuo Mitsui Trust and Banking Co., Ltd.

Meiji Yasuda Life Insurance Company

The Norinchukin Bank

Balanceinterestrate(%)(Note 1)

Due on(Note 2)

(Yen in millions)¥3,000
3,000
3,000
3,000
2,000
2,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
500
¥ 25,500

0.5%
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
0.4%
0.4%
0.4%
0.5%
0.4%
0.4%
0.3%
0.4%
0.4%

January 31, 2005
January 31, 2005
January 31, 2005
January 31, 2005
March 31, 2005
January 31, 2005
February 28, 2005
January 31, 2005
February 28, 2005
February 2, 2005
November 4, 2005
February 28, 2005
January 31, 2005
January 31, 2005
January 31, 2005
March 31, 2005

¥ 12,000
5,000
5,000
3,000
10,000
9,000
1,000
5,000
3,000
4,000
1,000
2,000
8,000

1.7%
1.7%
2.1%
1.2%
1.3%
1.3%
1.2%
1.6%
2.1%
2.2%
2.2%
1.2%
1.1%

May 23, 2008
July 16, 2009
July 16, 2011
February 3, 2010
May 23, 2006
July 16, 2007
March 30, 2009
March 30, 2011
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
November 20, 2008

- 23 -

Repayment
MethodBulletpayment

Use ofFunds(Note 3)

Notes

Unsecured/unguaranteed/pari passu,
See (Note 4)
Floating rate

Bulletpayment(Note 3)

Unsecured/unguaranteed/pari passu,
See (Note 4)

Long-term debt（continued)
Average

Balance

Lenderinterestrate(%)(Note 1)

(Yen in millions)
2,000
4,000
2,000
Nippon Life Insurance Company
3,000
2,000
3,000
The Sumitomo Trust and Banking Co, Ltd.
6,000
The Dai-Ichi Mutual Life Insurance Company
2,000
1,000
2,000
Daido Life Insurance Company
2,000
1,000
1,000
Development Bank of Japan
4,000
Sumitomo Mitsui Banking Corporation
2,000
1,000
The Joyo Bank, Ltd.
1,000
1,000
The Iyo Bank, Ltd.
1,000
1,000
The Bank of Tokyo- Mitsubishi, Ltd.
2,000
Taiyo Life Insurance Company
1,000
Zenkyoren (The National Mutual Insurance
1,000
Federation of Agricultural Cooperatives)
Long-term debt Total¥114,000
Borrowings Total(Note 5)¥139,500
Mitsui Life Insurance Company, Ltd.

Note 1.
Note 2.
Note 3.
Note 4.
Note 5.

Repayment
MethodDue on

1.7%
1.8%
1.6%
0.7%
0.7%
0.9%
1.3%
0.7%
0.9%
0.8%
1.2%
1.8%
2.0%
1.8%
1.2%
1.5%
0.9%
1.4%
0.7%
0.7%
0.7%
1.2%

February 13, 2012
March, 30, 2012
November 1, 2012
August 9, 2005
September 30, 2005
October 30, 2009
July 16, 2007
March 31, 2006
September 29, 2006
February 13, 2008
February 3, 2010
March 30, 2012
October 31, 2014
November 28, 2014
March 12, 2007
June 30, 2009
May 23, 2006
May 23, 2008
March 31, 2006
February 2, 2007
September 28, 2007
February 12, 2010

1.7%

June 1, 2011

Use of
Funds

Notes

Fixed rate

Average interest rate is stated for each lender (average weighted by borrowing outstanding in case of more than one
loan from the same lender) by rounding down to the second decimal place.
With respect to the date of drawdown and date of repayment in case of more than one short-term loan from the samelender, the earliest date of repayment for all such loans coming due is given.
Use of funds for the above includes acquisition of real estate or beneficiary interests, repayment of borrowings andworking capital.
A special agreement attached to “Loan Agreement” entered into between the NBF and each financial institution
provides that the above borrowings from all financial institutions rank pari passu to each other.
The total amount of long-term borrowings (i.e. excluding those expected to be repaid within one year) repayable within
5 years of the date of the balance sheet and expected to be repaid by specific year(s) is as follows.
(Unit：¥1000)
1 to 2 years
Amount Borrowed

15,000,000

2 to 3 years
20,000,000- 24 -

3 to 4 years
23,000,000

4 to 5 years
10,000,000

NBF Bonds
Issue
No.2 Unsecured
Bonds
No.3 Unsecured
Bonds
No.4 Unsecured
Bonds
No.5 Unsecured
Bonds
Total(Note 3)
Note 1.
Note 2.
Note 3.

Balance as ofDecember 31, 2004
(Yen in millions)

Issue
Date

CouponMaturity
Date

Use ofProceeds

Note

Note 1

Note 2

Feb 10, 2003

¥ 10,000

0.75％

Feb 9, 2007

Redemption
BulletPayment

June12, 2003

¥ 10,000

2.00％

June 12, 2018

BulletPayment

Note 1

Note 2¥ 10,000

1.04％

BulletPayment

Note 1

Note 2¥ 10,000

1.60％

BulletPayment

Note 1

Note 2September 22,
2004
September 22,
2004

September 22,
2009
September 22,
2011¥ 40,000

Use of funds includes acquisition of Real Estate etc., repayment of borrowings and working capital.
The bonds are limited to qualified institutional investors and rank pari passu with other debts issued.
The total amount of bonds repayable within 5 years of the date of the balance sheet and expected to be repaid byspecific year(s) is as follows.
(Unit: ¥1000)
within １ year
Amount Borrowed

1 to 2 years−

2 to 3 years−

3 to 4 years

10,000,000

4 to 5 years−

10,000,000

Others
NBF has security deposits totaling ¥26,185 million as of December 31, 2004.

4. Major Shareholders
The following table sets forth our major shareholders’ information as of December 31, 2004.
Number ofCommonAddress
Name
SharesOwned
Japan Trustee Services Bank, Ltd. ................. 8-11, Harumi 1-Chome, Chuo-ku, Tokyo
25,391
Mitsui Fudosan Co., Ltd. ................................ 1-1 Nihonbashi Muro-machi, 2-chome Chuo-ku, Tokyo
18,235

Ownership
6.96％
5.00

The Master Trust Bank of Japan, Ltd. ............ 11-3 Hamamatsucho 2-chome Minato-ku, Tokyo
The Nomura Securities Co., Ltd. .................... 9-1 Nihonbashi 1-chome, Chuo-ku, Tokyo

14,98011,378

4.10
3.11

Sumitomo Life Insurance Company ............... 18-24 Tsukiji 7-chome, Chuo-ku, Tokyo
Obic Business Consultants Co., Ltd. .............. 8-1 Nishi Shinjuku 6-chome, Shinjuku-ku, Tokyo
Trust & Custody Services Bank, Ltd. ............. Harumi Island Triton Square Office Tower Z,

11,256
10,61910,423

3.08
2.91
2.85

10,315
6,712
6,205
125,514

2.82
1.84
1.70
34.41%

8-12, Harumi 1-Chome, Chuo-ku, Tokyo

The Chugoku Bank, Ltd. ................................ 15-20 Marunouchi 1-chome, Okayama,Okayama
Meiji Yasuda Life Insurance Company .......... 1-1, Marunouchi 1-chome, Chiyodaku, Tokyo
North Pacific Bank, Ltd. ................................ 11, Odori Nishi 3-chome, Chuo-ku, Sapporo, Hokkaido
Total- 25 -

5.

Categories of Shareholders（As of December 31, 2004）

Number ofshareholders
Financial institutions
Other legal entities
Overseas investors
Individuals and others
Securities companies
Japanese government and regional authorities
Total

191
446
197
18,26013
19,107- 26 -

Number ofshares owned
209,871
52,36039,16950,504
12,796364,700

Percent of
total number ofissued shares
57.54%
14.36
10.74
13.85
3.51
100.0%

■ Capital Expenditures
1. Planning
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 steadyprogram 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 tenant satisfaction surveys and neighboring competitive
building specification surveys etc.
Estimated Amounts
Payment for theName of Property

Objective

Estimated
Duration

Current Period

Total(from July 1, 2004

Amounts

to December31,

Cumulative
Amount Paid

2004)

(Yen in millions)
Sapporo Minami Nijo
Bldg.
Hakata Gion 21 Bldg.

Renovation of heatsource system etc.
Renovation ofCentral Monitoring
SystemFrom July 2005
To September 2005

¥ 56

¥ −

¥ −

From July 2005
To September 2005

40

−

−

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥ 431 million
in capital expenditures together with ¥ 493 million for repairs and maintenance expenses.
Name of Property
Tanimachi Kowa Bldg.
NBF Sendai Honcho Bldg.
Other buildings

Objective
Renovation for leasing, rework of security
system etc.
Renovation of toilets, installation of OA
floors, monitoring camera at the entrance etc.
Renovations intended to improve the level oftenant satisfaction

Total

PeriodExpenditure(Yen in millions)¥ 65

From July 2004
To December 2004

40
326
¥ 431

- 27 -

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 and repairs and maintenance that will be conducted in accordance with NBF’s business planfor each property.
As ofDecember 31, 2004

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

As ofJune 30, 2004

(Yen in millions)¥ 1,647¥ 2,149
760
2,771
909
3,274
¥ 1,498¥ 1,647

Note 1 Upon the acquisition of Real Estate etc., NBF also assumed accumulated reserves of ¥ 898 million as ofDecember 31, 2004 for capital expenditures from previous owners, which were not included in the above
accumulated amounts.
Note 2 The reserve figures represent only the amount of reserves attributable to NBF's ownership interest, the amountof reserves attributable to other owners has been excluded.

■

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

December 31, 2004

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

¥ 575
17
55
11
12
86
¥ 756

June 30, 2004
(Yen in millions)
¥ 443
14
45
11
12
92
¥ 617

December 31, 2003
¥ 438
14
38
11
12
60
¥ 573

Note: In addition to the amounts stated above, there are asset management fees of ¥ 281 million for the period from
July 1, 2004 to December 31, 2004, ¥ 242 million for the period from January 1, 2004 to June 30, 2004 and ¥ 48
million for the period from July 1, 2003 to December 31, 2003 related to investment in properties which werebooked on each property.

- 28 -

■Trading Activities during the Current Period
1. Trading of Real Estate and Real Estate held in Trust
AcquiredName of Building
Date
ALLIANCE
Shinjuku Yocho-machi Bldg.
Inage Kaigan Bldg.
Hamamatsu City Bldg.
Kyomachibori Center Bldg.
Aqua Dojima Daiwa Dojima Bldg.

S-ino Omiya North Wing
S-ino Omiya North Wing
Toranomon Kotohira Tower
Sapporo L-Plaza
Sapporo L-Plaza
Nihonbashi Muromachi Center Bldg.

July 1, 2004−−−−
September 30, 2004
October 1, 2004
November 1 ,2004
November 30, 2004
November 30, 2004
November 30, 2004
December 24, 2004

Total

Acquisition
Price(Note 1)

Date

9,126
−
−
−
−
17,810
11,236
5,580
6,043
59
180
14,000¥ 64,034−July 30, 2004
July 30, 2004
July 30, 2004
July 30, 2004
−
−
−
−
−
−
−
−

(Yen in millions)
Transferred
Transfer
Capital
Price
Book
Gain/
(Note 2) Value
Loss
−
2,700
2,100
1,400
900
−
−
−
−
−
−
−
7,100

−
1,977
1,831
1,284
846
−
−
−
−
−
−
−
5,938

−
640
203
71
24
−
−
−
−
−
−
−
938

Note 1 “Acquisition price” does not include national consumption tax, regional consumption tax and miscellaneous costs ofacquisition.
Note 2 In addition to the above-listed "Transfer Price”, there were other costs and expenses incurred for transfer, which arereflected in the amount of “Capital Gain/Loss”. Breakdown of gain or loss on sale of each property is as follows:

Shinjuku Yocho-machi Bldg.
Revenue from sale of Real Estate etc.
Cost of Real Estate etc.
Other sales expenses
Gain on sale of Real Estate etc

2,700 million Yen
1,977 million Yen
83 million Yen
640 million Yen

Inage Kaigan Bldg.
Revenue from sale of Real Estate etc.
Cost of Real Estate etc.
Other sales expenses
Gain on sale of Real Estate etc

2,100 million Yen
1,831 million Yen
66 million Yen
203 million Yen

Hamamatsu City Bldg.
Revenue from sale of Real Estate etc.
Cost of Real Estate etc.
Other sales expenses
Gain on sale of Real Estate etc

1,400 million Yen
1,284 million Yen
45 million Yen
71 million Yen

Kyomachibori Center Bldg.
Revenue from sale of Real Estate etc.
Cost of Real Estate etc.
Other sales expenses
Gain on sale of Real Estate etc- 29 -

900 million Yen
846 million Yen
30 million Yen
24 million Yen

2. Trading of Other Assets Including Total Amount and Transactions
Other major assets besides real estate and real estate held in trust stated above consist mostly of bankdeposits or bank deposits included in assets held in trust.

3. Related Parties Transactions
1. Ongoing Transactions
None.
2. Fees Paid for the period from July 1, 2004 to December 31, 2004
Description of Transactions with Related Parties (Note 1)

Amount ofPayment (B)Total Fees Paid(A)
Category(Yen in millions)
Brokerage commissions
1,632
Office management fees etc.
722
(Note 3)

Property transfer fees
Property maintenance fees

Leasing related service fees

Handling fees for private
placement of NBF Bonds(Note 4)

29
1,193

60

80

Paid toMitsui Fudosan Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
Daiichi Seibi Co., Ltd.
Mitsui Fudosan Co., Ltd.
Izumitec Co., Ltd.
Mitsui Fudosan Building Management
Co., LtdFirst Facilities Yokohama Co.,Ltd
Mitsui Fudosan Housing Lease Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Building Management
Co., Ltd
Daiwa Securities SMBC Co., Ltd.

(Yen in millions)

B/A（Note 2）

1,562
716
6
29
223
140
118

95.7%
99.2%
0.8%
100.0%
18.7%
11.7%
9.9%

64

5.3%

6
2
1
10
10

0.5%
0.2%
0.1%
16.3%
16.0%

1

2.0%

80

100.0%

Note 1 “Related parties” mean parties defined in Article 20 of the government ordinance regarding the Investment Trust
Law of Japan, principally, parties related to an asset management company.
Note 2 Figures indicate percentages of total prices.
Note 3 NBF leases the Naka-Meguro GT Tower, Toranomon Kotohira Tower and the Nishi-Shinjuku Mitsui Building to
Mitsui Fudosan Co., Ltd., which sub-leases them to sub-lessees. Accordingly, NBF does not entrust the officemanagement business for those properties to Mitsui Fudosan.

Instead, NBF Office Management Co., Ltd. has

been entrusted to undertake such business on behalf of NBF, the owner and lessor of those properties.
Note 4 This amount represents the handling fees directly paid by NBF to Daiwa Securities SMBC Co., Ltd. for private
placement of the No.4 and No. 5 NBF Bonds. In addition to the above fees, a certain portion of the fees paid by
NBF to a third party (a company supervising investment company securities) for handling payments of principal
and interest concerning the No.2 and No.3 NBF Bonds was paid by the said company to Daiwa Securities SMBC
Co., Ltd.
Note 5 Public offering of new investment shares, the payment date for which was July 13, 2004, was conducted through afirm commitment underwriting agreement, under which an underwriting securities company underwrites shares at- 30 -

an issue price and sells them at an offering price different from such issue price to general investors (“spreadmethod”).

In addition to the fees listed in the above table, the portion of ¥1,922 million which is the difference

between the offering price and the issue price comprises actual underwriting fees for Nomura Securities Co., Ltd
Note 6 In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)

Daiichi Seibi Co., Ltd¥ 112

Izumitec Co., Ltd.

79

Mitsui Fudosan Building Management Co., Ltd.

59

Mitsui Designtech Co., Ltd.

12

Mitsui Fudosan Housing Lease Co., Ltd.

7

Mitsui Fudosan Co., Ltd.

1

- 31 -

Ⅱ

Financial Statements
Independent Auditors’ Report
Balance Sheets
Statements of Income
Statements of Shareholders’ Equity
Statements of Cash Flows
Notes to Financial Statements- 32 -

NIPPON BUILDING FUND INC.
BALANCE SHEETSAs of December 31, 2004 and June 30, 2004

As of
As of
December 31, 2004
June 30, 2004
(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents
Tenant receivables
Consumption tax refund receivables and other current assets
Total current assets
Investment properties:
Land including trust accounts
Building and improvements including trust accounts
Other tangible assets
Less: accumulated depreciation
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans
Long-term debt due within one year
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term debt
Tenant security deposits
Other liabilities
Total Liabilities
Shareholders’ Equity
Common shares, non-par value
Shares Authorized: 2,000,000 shares
Shares Issued and Outstanding: 364,700 shares as ofDecember 31, 2004 and 280,700 shares as of June 30, 2004
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
The accompanying notes to financial statements are an integral part of these balance sheets.

- 34 -¥¥¥¥

38,489183768
39,440243,359
139,572
2,679(15,913)
19,848389,545
1,393
430,378

25,500
5,000
4,234
2,589
844
38,167
149,000
26,185
41
213,393¥¥¥

32,160242
700
33,102
205,600
120,737
2,181(13,543)
16,840331,815
1,283
366,200

64,050
1,582
2,611
881
69,124122,000
21,87837
213,039

210,679

148,899

6,306
216,985
430,378

4,262
153,161
366,200¥

NIPPON BUILDING FUND INC.
STATEMENTS OF INCOME
For the six months ended December 31, 2004, June 30, 2004 and December 31, 2003

For the six months ended
December 31, 2004

June 30, 2004

December 31, 2003

(Yen in millions)

Revenues:
RentalOther revenues related to property leaseing
Gain on sale of investment properties
Total Revenues
Operating Expenses:
Property management fees
Real estate taxes
Insurance
Repairs and maintenance
Other rental expenses
Depreciation and amortization
Asset management fees
Other expenses
Total Operating Expenses
Operating Income
Interest income
Interest expense
New investment shares issue costs
Amortization of deferred bond issue costs
Other expenses, net
Income Before Income Taxes
Current and deferred income taxes
Net Income¥

13,6101,568
938
16,116
1,954
1,167
37
493
1,289
2,891
575
181
8,587
7,529
1
(1,012)
(154)
(38)
(19)
6,307
(1)
¥ 6,306

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

- 35 -¥¥

11,265
1,193
96
12,554
1,623
1,193
48
318
965
2,628
443
174
7,392
5,162
1
(871)
−
(21)
(8)
4,263
(1)
4,262

¥

10,476
1,977
12,453
1,632
1,097
46
648
1,065
2,403
438
135
7,464
4,989
1
(782)
−
(27)
(87)
4,094
(1)
¥ 4,093

NIPPON BUILDING FUND INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
For the six months ended December 31, 2004, June 30, 2004 and December 31, 2003

(Yen in millions)
Number ofCommonSharesCommonSharesRetained
Earnings

280,700¥148,899¥4,313¥153,212

Cash Dividends declared--(4,313)(4,313)

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

-

-

4,093

4,093

Balance as of December 31, 2003 . . . . . . . . . . . . . . . . . . .

280,700

148,899

4,093

152,992

Cash Dividends declared--(4,093)(4,093)

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

-

-

4,262

4,262

Balance as of June 30, 2004 . . . . . . . . . . . . . . . . . . . . . . . .

280,700

148,899

4,262

153,161

Cash Dividends declaredIssuance of New Shares through Public Offering as of July
14, 2004
Issuance of New Shares through Allocation to a Third
Party as of August 11, 2004--

(4,262)(4,262)80,00058,838-58,838

4,000

2,942

-

2,942

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

-

-

6,306

6,306

Balance as of December 31, 2004 . . . . . . . . . . . . . . . . . . .

364,700¥210,679¥6,306¥216,985

Balance as of June 30, 2003 . . . . . . . . . . . . . . . . . . . . . . . .

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

- 36 -Total

NIPPON BUILDING FUND INC.
STATEMENTS OF CASH FLOWSFor the six months ended December 31, 2004, June 30, 2004 and December 31, 2003

For the six months ended
December 31, 2004

June 30, 2004

December 31, 2003

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

¥

6,307
2,891
38
1,012
59
247
(22)

4,263
2,628
21
871
(106)
(2,477)781¥ 4,094
2,403
27
782
24
2,252
10

5,939
(919)
(216)
15,336

261
(790)
(271)
5,181

(769)
195
9,018

(62,304)(1,837)
6,133(1,826)
10
(11)
(40)
(59,875)(52,337)(29)
4,768(1,619)
19
(11)
(41)
(49,250)(12,249)
2,621(5,259)25(6)(68)(14,936)

58,400(96,950)
32,000(99)
61,779(4,262)50,868
6,329
32,160¥ 38,489

214,450(183,550)
27,000(8,000)(4,089)45,811
1,742
30,418¥ 32,160

48,700(42,500)
1,000(4,312)
2,888(3,030)33,448¥ 30,418

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

- 37 -¥NOTES TO FINANCIAL STATEMENTS
Nippon Building Fund Inc.
December 31, 2004, June 30, 2004 and December 31, 2003

Note 1 –Organization and Basis of Presentation
Organization
Nippon Building Fund Inc. (formerly: "Office Building Fund of Japan, Inc." The current name was adopted on
March 14, 2003, hereinafter "NBF") was formed on March 16, 2001 as an investment corporation under theInvestment Trust Law of Japan with Mitsui Fudosan Co., Ltd., The Chuo Mitsui Trust and Banking Co., Ltd., andNippon Building Fund Management Ltd. (formerly: "Office Building Fund Management Japan Limited",hereinafter "NBFM") acting as sponsors. Registration with the Kanto Local Finance Bureau of the Ministry of
Finance was completed on May 10, 2001 and NBF started acquisition of office properties on May 23, 2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset
management company, is engaged in acquiring, managing, leasing, and renovating office properties. Mitsui
Fudosan Co., Ltd. currently owns 43 % of NBFM while Sumitomo Life Insurance Company owns 35% and theremaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering ofcommon shares. Those common shares are listed on the J-REIT section of the Tokyo Stock Exchange.
As of December 31, 2004, NBF had ownership or beneficiary interests in 43 office properties containing
approximately 460,901 rentable square meters of office space. As of December 31, 2004, NBF had leased officespace to 667 tenants engaged in a variety of businesses. The occupancy rate for the office properties wasapproximately 97.5%.

Basis of Presentation
The accompanying financial statements have been prepared in accordance with the provisions set forth in theInvestment Trust Law of Japan and the Japanese Securities and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
The accompanying financial statements have been restructured and translated into English (with some expanded
descriptions and the inclusion of statements of shareholders' equity) from the financial statements of NBF preparedin accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Financeas required by the Securities 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.

- 38 -

Investment Properties
Investments properties are recorded at cost, which included the allocated purchase price and related costs andexpenses for acquisition of the office properties and the beneficiary interests of properties in trust. Property andequipment balances are depreciated using the straight-line method over estimated useful lives. Estimated useful
lives of the principal tangible fixed assets (including assets held in trust) are as follows:
Buildings and improvements
2-50 years
Structures
2-52 years
Machinery and equipment
2-17 years
Tools, furniture and fixtures
2-16 years
Costs related to the renovation, construction and improvement of properties are capitalized. Expenditures forrepairs and maintenance which do not add to the value or prolong the useful life of a property, are expensed as
incurred.
In the period ended December 31, 2004, NBF did not adopt early the new accounting standard for impairment of
fixed assets (“Opinion Concerning Establishment of Accounting Standard for Impairment of Fixed Assets” issued
by the Business Accounting Deliberation Council on August 9, 2002) and the implementation guidance for theaccounting standard for impairment of fixed assets (the Financial Accounting Standard Implementation Guidance
No. 6 issued by the Accounting Standards Board of Japan on October 31, 2003). The new accounting standard isrequired to be adopted in periods beginning on or after April 1, 2005, but the standard does not prohibit earlier
adoption.

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

New Investment Shares Issue Costs
New investment shares issue costs are expensed in the period of payment.
The public offering of new investment shares on July 13, 2004 was conducted through an underwriting
agreement under which an underwriting securities company underwrote all of the newly issued shares at an agreed
issued shares at an agreed issue price and sold them at an offering price different from such issue price to investors(“spread method”). Since, pursuant to such spread method, the difference between an offering price and the issue
price is earned by an underwriting securities company as substantial underwriting fees, there were no underwriting
fees paid by NBF to the underwriting securities company. In the case of the public offering of new investment
shares on July 13, 2004, the total amount of the difference between the offering price and the issue price was¥1,922 million, which would have been accounted for as new investment shares issue costs of NBF if it had been
conducted through an underwriting agreement under which an underwriting securities company underwrites sharesat an issue price and sells them at an offering price which is the same as such issue price (“conventional method”).
Therefore, under the spread method, the new investment shares issue costs were recognized ¥1,922 million lower,
and the operating income and the income before income taxes were resulted in ¥1,922 million greater than the caseif the conventional method was applied.

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

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis. NBF is allocated the portion of the real
- 39 -

estate taxes related to the period following the purchase date of each property through the end of the year and theequivalent amounts of those allocated portions are capitalized as part of the acquisition costs of the relative
properties. Capitalized real estate taxes amounted to ¥106 million for the period ended December 31, 2004 and¥208 million for the period ended June 30, 2004 and ¥19 million for the period ended December 31, 2003,
respectively.

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

Reclassifications
Certain reclassifications have been made to prior periods' financial statements to conform with the presentation
used for the period ended December 31, 2004.

Note 3 – Schedule of tangible assets of investment properties
Tangible assets as of December 31,2004 and June 30, 2004 consisted of the following:
As of December 31, 2004

¥ 43,064
200,295
243,359
42,80396,769(Yen in millions)
Accumu-latedAcquisiBook Value
Depreci-tion Costs-ation¥¥ 43,064¥ 34,150
200,295
171,450
243,359
205,600(1,996)40,807
31,378(13,288)
83,48189,359

Accumu-latedDepreci-ation¥(1,308)(11,701)

139,572
671
381
94
545
640
333
15
2,679
¥385,610(15,284)
(79)
(31)
(10)
(154)
(202)
(153)
(629)
¥(15,913)(13,009)
(55)
(17)
(5)
(134)
(187)
(136)
(534)
¥(13,543)

Acquisi-tion Costs
Land
Land in trust
Land including trust total
Buildings and improvements
Buildings and improvements in trust
Building and improvements
including trust
Structures
Machinery and equipment
Tools, furniture and fixtures
Structures in trust
Machinery and equipment in trust.
Tools, furniture and fixtures in trust.
Construction in process in trust
Other tangible assets total

Total

As of June 30, 2004

- 40 -

124,288
592
350
84
391
438
180
15
2,050
¥369,697

120,737
449
277
44
452
648
307
4
2,181
¥328,518

Book Value¥ 34,150
171,450
205,600
30,07077,658
107,728
394
260
39
318
461
171
4
1,647
¥314,975

Note 4 – Shareholders’ Equity
NBF issues only non-par value shares in accordance with the Investment Trust Law of Japan and all of the issue
price of new shares is designated as stated capital. NBF maintains at least ¥50 million as the minimum net assets as
required by the Investment Trust Law of Japan.

Note 5 – Short-Term Loans and Long-Term Debt
Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest
rates on short-term loans outstanding are floating rates and at December 31, 2004 and June 30, 2004 ranging from
0.30% to 0.48% and from 0.41% to 0.52%, respectively. Long-term debt is fixed rates and as of December 31, 2004
and June 30, 2004 consisted of the following:(Yen in millions)
As of
As of
December 31,
June 30,
2004
2004
Unsecured loans due 2005 to 2014 principally from banks andinsurance companies with interest rates mainly ranging from
0.7% to 2.2% .....................................................................................
¥ 114,000¥ 102,000
0.75% unsecured bonds due 2007..........................................................
10,00010,0001.04% unsecured bonds due 2009..........................................................
10,000
1.60% unsecured bonds due 2011 ..........................................................
10,0002.00% unsecured bonds due 2018..........................................................
10,00010,000154,000
122,000
Less: amount due within one year..........................................................
5,000¥ 149,000¥ 122,000
The annual maturities of long-term debt as of December 31, 2004 were as follows:(Yen in millions)2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 5,000
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,0002007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,0002008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,0002009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61,000During the period ended December 31, 2004, NBF obtained committed credit lines of ¥30 billion with certain
financial institutions to reduce refinancing risk. The unused amount of such committed credit lines was ¥30 billion at
December 31, 2004.

- 41 -

Note 6 –Rental Revenues and Expenses
Rental revenues and expenses for the periods ended December 31, 2004, June 30, 2004 and December 31, 2003
were as follows:
For the six months ended
December 31, 2004

June 30, 2004

December 31, 2003

(Yen in millions)

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

¥ 11,955
1,574
81
13,610¥ 9,953
1,243
69
11,265¥ 9,154
1,254
68
10,476

359
67
1,067
59
16
1,568
15,178

298
63
708
116
8
1,193
12,458

284
60
684
938
11
1,977
12,453

1,954
1,167
493
37
1,289
2,891
7,831
¥ 7,347

1,623
1,193
318
48
965
2,628
6,775
¥ 5,683

1,632
1,097
648
46
1,065
2,403
6,891
¥ 5,562

Note 7 – Breakdown of Gain on sale of investment properties
On July 30, 2004, NBF sold four properties set forth below:
Shinjuku Yocho-machi Bldg.
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of investment properties
Inage Kaigan Bldg.
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of investment properties- 42 -(Yen in millions)¥ 2,700
1,977
83
¥ 640

¥ 2,100
1,831
66
¥ 203

Hamamatsu City Bldg.
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of investment properties¥ 1,400
1,284
45
¥ 71

Kyomachibori Center Bldg.
Revenue from sale of investment properties
Cost of investment properties
Other sales expenses
Gain on sale of investment properties

¥ 900
846
30
¥ 24

Note 8 –Income Taxes
NBF is subject to income taxes in Japan. The effective tax rate on NBF's income based on applicable Japanese tax
law was 0.02% for the periods ended December 31, 2004, 0.01% for the periods ended June 30, 2004 and 0.02% for
the periods ended December 31, 2003, respectively. The following table summarizes the significant differences
between the statutory tax rates and NBF's effective tax rates for financial statement purposes.
For the six months ended
December 31, 2004

Statutory effective tax rate........
Deductible dividends paid . . . . . . . . . . . . . . . .
Special deduction for expropriation etc.
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . .

39.39%(39.38)0.01
0.02 %

June 30, 2004

39.39%(38.93)(0.46)
0.01
0.01 %

December 31, 2003

39.39%(39.38)0.01
0.02%

NBF was established as an investment corporation under the Investment Trust Law of Japan, and as long as aninvestment corporation distributes to its shareholders at least 90% of taxable income for the period and otherrequirements are met, an investment corporation is allowed to deduct its dividends from taxable income underJapanese tax regulations.

- 43 -

Note 9– Per Share Information
Information about earnings per share for the periods ended December 31, 2004, June 30, 2004 and December 31,
2003 and net assets per share as of December 31, 2004 and June 30, 2004 was as follows.
The computation of earnings per share and net assets per share is based on the weighted average number ofcommon shares outstanding during the period.
For the six months ended
December 31, 2004

June 30, 2004

December 31, 2003

（Yen）

Earnings per Share of Common Shares:
Net income:¥ 17,607¥ 15,185¥ 14,582

Weighted average number ofcommon shares outstanding:

358,157

280,700

280,700

As of
December 31, 2004

Net Assets Per Share. .. . . . . . . . . . . . . . .

¥ 594,968- 44 -

As ofJune 30, 2004

¥ 545,641

Note 10–Leases
NBF leases its investment properties to outside parties under non-cancelable operating leases. As of December 31,
2004 and June 30, 2004, the future lease revenues under the non-cancelable operating leases are as follows:
As of December 31, 2004
As of June 30, 2004
(Yen in millions)Due within one year.................................
Due after one year ...................................
Total.....................................................

¥ 10,266
17,089¥ 27,355¥ 10,446
21,421¥ 31,867

Note 11– Significant Subsequent Events
Cash Distribution
As of February 10, 2004, the Board of Directors of NBF declared to effect payment of a cash distribution of¥17,291 per share aggregating ¥ 6,306million to shareholders of record on December 31, 2004.

Issuance of Unsecured Bonds
At the board meeting held on January 27, 2005, it was resolved that NBF issue unsecured bonds in the amount of¥10,000 million with coupon of 0.80% due 2010. Receipt of the proceeds of such issue was completed on March 9,
2005. NBF intends to use such proceeds to repay short-term loans.

- 45 -

Ⅲ Appendix■

Major Interested Parties

Nippon Building Fund Management Ltd. (Asset Management Company and Administrative
Agent regarding the Management of Institutions, herein "NBFM")
NBFM, as Asset Management Company provided for in the Investment Trust Law of Japan, performs
management of NBF's assets and undertakes management of the institutions of NBF. As of March 31 2005,
NBFM has been entrusted as an asset management company only by NBF.
As of the same date, NBFM has paid-in capital of ¥ 495 million. There is no capital relationship with
NBF. Koichi Nishiyama, President & CEO of NBFM, is concurrently an executive director of NBF.

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

Fees for the Asset Management Operation
Management Fees 1
The amount equivalent to 2.5% effective from July 1, 2004 of the amount of the revenue arising from Real
Estate etc. as calculated on each closing date (provided, however, that revenues from the sale of Real Estate etc.
and other Managed Assets will be excluded) will be payable.
Management Fees 2
The amount equivalent to 3% of income before income tax (provided, however, that in the event a loss iscarried forward, then the 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.
Management Fees 3
In the event that Real Estate etc. is newly-acquired, compensation equivalent to the total amount of theacquisition price of said Real Estate etc.(meaning the acquisition price of both land and buildings, and in theevent of the simultaneous acquisition of multiple units of Real Estate etc., the acquisition price of each item;
provided, however, that national consumption tax, regional consumption tax and miscellaneous costs ofacquisition are excluded) multiplied by the following percentage rates will, in principle, be payable; provided,
however, that with the approval of the directors of NBF, compensation will be calculated within the scopedecided up to the following maximum rates.
・The portion up to and including ¥10,000million
0.5％・The portion exceeding ¥10,000 million up to and including ¥30,000 million
0.2％
・The portion exceeding ¥30,000 million up to and including ¥50,000 million
0.05％
・The portion exceeding ¥ 50,000 million
nothing- 46 -

History of NBFM
NBFM is an Asset Management Company which is a limited company duly established under the laws ofJapan. Major events in the history of NBFM are as follows.
September 19, 2000
November 17, 2000
January 29, 2001
February 15, 2001
March 7, 2001
March 22, 2001
May 23, 2001
June 16, 2001
March, 2003

EstablishedObtained license as a building lots and building transactions agent under the
Building Lots and Building Transactions Law
Obtained approval as a discretionary transaction agent under the Building Lots andBuilding Transactions Law
Registered as a general real estate investment advisor under the Real Estate
Investment Advisor Registration Regulations
Obtained approval as an Asset Management Company under the Investment Trust
Law of Japan
Increased capital from ¥100 million to ¥198 million
Changed name (from “MF Asset Management Co., Ltd.” to "Office Building FundManagement Japan Limited")
Increased capital from ¥198 million to ¥495 million
Changed name (from "Office Building Fund Management Japan Limited" to"Nippon Building Fund Management Ltd.")

List of Shareholders （as of December 31 2004）
Name
Mitsui Fudosan Co., Ltd.
Sumitomo Life Insurance Company
The Chuo Mitsui Trust and Banking Co., Ltd.
Sumitomo Mitsui Banking Corporation
Daido Life Insurance Company
Mitsui Sumitomo Insurance Co., Ltd
Mitsui Mutual Life Insurance Company
Britel Fund Trustees Limited
Total

Number of shares owned
4,257
3,465
495
495
297
297
297
297
9,900

Percent
43.0%
35.0
5.0
5.0
3.0
3.0
3.0
3.0
100.0%

Directors and Staff
As of April 1, 2005 the directors and corporate auditors of NBFM are as follows.
directors and auditors of NBFM is comprised of 14 persons.
Name of Directors and Auditors
Koichi Nishiyama
Hiroyuki Sawa
Satoru Yamanaka
Yuri Giga
Tamotsu Shinyama
Yoshinori Nishitsuji
Noriaki Moromachi

The staff other than

Title
President & CEO (standing)
Director, Head of Investment & Finance Group (standing)
Director, Head of Administration Group (standing)
Director
Director
Corporate Auditor
Corporate Auditor- 47 -

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
Current as of March 31, 2005
Total Assets
Total Liabilities
Shareholders’ Equity

Yen in thousands
1,655,814
451,128
1,204,686

Profit & Loss for the Most Recent Fiscal YearFirst Fiscal Year
From: April 1, 2004
To: March 31, 2005
Operating Income
Ordinary Profit
Net Income

Yen in thousands
1,633,753
1,069,218
600,782- 48 -

■Investment Objects
The Investment Objects of NBF specified in the Articles of Incorporation are as follows.

A.

Principal Investment Objects among Designated Assets

NBF will principally invest in the below-listed Designated Assets with the objective of assuring steady growthand stable profits from the Managed Assets.
(1) Real estate, real estate leasehold interests and superficies.
(2) Beneficiary Certificates backed by real estate, land leasehold rights and superficies, including inclusive
trusts consisting of funds appurtenant to real estate.
(3) Tokumei-kumiai ownership interests (provided, however, that this is limited to those the assets of which
are primarily invested and Managed Assets principally referred to in paragraphs (1) and (2) above).
(4) Preferred Investment Certificates of Special Purpose Companies (meaning those specified in Article
2.1.5.3 of the Securities and Exchange Law of Japan; provided, however, that this is limited to those theassets of which are primarily invested and Managed Assets principally referred to in paragraphs (1) and(2) above).
(5) Special Purpose Beneficiary Certificates (meaning those specified in Article 2.1.7.4 of the Securities
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).
(6) Beneficiary Certificates of investment trusts (meaning those specified in Article 2.1.7 of the Securities
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) Investment Securities (meaning those specified in Article 2.1.7.2 of the Securities and Exchange Law
of Japan; provided, however, that this is limited to those the assets of which are primarily invested andManaged Assets principally referred to in paragraphs (1) and (2) above).
(8) Beneficiary Certificates of Money Trust (limited to those the trust assets of which are primarily
invested and Managed Assets referred to in paragraph (1) above).

B.

Other Investment Objects among Designated Assets
NBF may, for the purpose of efficiently managing surplus funds, invest in the following Designated Assets.
(1) Bank deposits.
(2) Call loans.
(3) Japanese Government Bonds, Notes and Bills(4) Regional Treasury Bonds, Notes and Bills(5) Commercial Paper(6) Designated Bonds of Special Purpose Companies (meaning those specified in Article 2.1.3.2 of the
Securities and Exchange Law of Japan; provided, however, that this is limited to asset-backed securities
principally referred to in paragraphs (1) and (2) of section (A) above).
(7) Monetary Claims (excluding those subject to the provisions of Paragraphs 1, 12 and 14 of Article 3 ofthe government ordinance regarding the Investment Trust Law of Japan).
- 49 -

(8) Beneficiary Certificates of Money Trust invested and managed for the purpose of any of the foregoing
items.
Moreover, in order to avoid risks of fluctuation in the prices of the Managed Assets as well as risks of fluctuationsin interest rates, futures transactions, option transactions, swap transactions and forward rate transactions with respect
to Japanese interest rates may be undertaken. In addition, NBF may acquire shares of stock in real estate managementcompanies etc. to the extent that such acquisition is incidental to NBF’s investment in the principal Designated
Assets.

C.

Assets other than Designated Assets

NBF may, for the purpose of efficiently managing surplus funds, invest in Certificates of Deposit issued by
Japanese legal entities. In addition, NBF may invest in equity interests of partnerships defined under Article 667 of
the Civil Code (but limited to such partnerships established by contribution of real estate, real estate leasehold rights
and superficies for the purpose of leasing, operating or managing etc. of the same) as well as trademark rights to theextent that such investment is incidental to NBF’s investment in the principal Designated Assets.

D.

Investment in Ordinary Securities

NBF does not, in principle, have the objective of investing in and managing assets which are securities, except for
those described in A and B above.

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■ Investment Restrictions
A. The investment restrictions specified in the Articles of Incorporation and the asset management
guidelines applicable to NBF. Please also refer to "Investment Policies of NBF 1. Basic Investment
Policies B. Investment Strategy" herein.
Investment Location and Currencies
NBF will invest neither in real estate located outside of Japan nor in assets denominated in non-Japanesecurrencies ("Investment Objects and Policies", Articles of Incorporation).

Borrowing
See “Investment Policies of NBF

1. Basic Investment Policies B. Investment Strategy (5) Financial Policies”

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

1.Basic Investment

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

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

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

B. Compliance with the Investment Trust Law of Japan
While a registered investment corporation must entrust business related to asset management to an asset
management company, an asset management company is prohibited from performing certain acts related to thebusiness of managing the assets of said investment corporation. As a result, an investment corporation is subject tocertain investment restrictions (all references in parentheses below are to the provisions of the Investment Trust Law
of Japan) besides restrictions applied to a registered investment corporation. NBF will naturally comply with suchinvestment restrictions, a general overview of which follows.

Reciprocal Transactions with Investment Corporations (§34.3.1.5)
Transactions between investment corporations, the assets of which are managed by an asset management company
are prohibited except for certain cases specified in the provisions of the government ordinance regarding theInvestment Trust Law of Japan that are considered unlikely to result in failure to protect the interests of shareholders.

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Transactions by an Investment Corporation with Investment Trust Assets (§15.1.3)
Transactions between an investment corporation and investment trust assets subject to asset management areprohibited except for certain cases specified in the provisions of the government ordinance regarding the Investment
Trust Law of Japan that are considered unlikely to result in failure to protect the interests of shareholders.

Transactions for the benefit of Third Parties (§34.3.1.6)
An asset management company may not undertake transactions in certain securities based on fluctuations in theprice, index, value, or amount of consideration related to transactions in the assets of an investment corporation,
without a legally-valid reason, with the objective of benefiting a third party other than NBF or said investment.

Transactions Harmful to the Interests of NBF (§34.3.1.7)
An asset management company may not undertake transactions that are other than upon normal terms andconditions for such transaction, and further, such transaction upon said conditions would be harmful to the interests of
the investment.

Other Transactions specified in the Government Ordinance regarding the Investment Trust Law ofJapan (§34.3.1.8)
In the addition to the foregoing, those acts specified in the government ordinance regarding the Investment Trust
Law of Japan being certain acts committed by an asset management company that would result in failure to protect
the interests of shareholders, damage the fairness of the management of the assets of NBF, and pose a risk ofdamaging the good public reputation of NBF are prohibited.

Limitation on Acquisition of the Same Issue of Shares (§194)
A registered investment corporation may not acquire the same shares issued by a corporation in excess of 50/100 of
total number of said issued and outstanding shares.

Restriction on Acquisition of Own Shares and Acceptance of Pledge (§80.1)
An investment corporation may not acquire shares issued by itself, or accept them for the purpose of pledge, unlessit acquires shares issued by itself in the following cases
・ when acquired as the result of merger;
・ if necessary for attaining the purpose of exercising its rights; or・ when purchasing shares pursuant to the provisions of the Investment Trust Law of Japan.

Restriction on Acquisition of Parent Corporation’s Shares by Subsidiary Corporation(§81.1)An investment corporation (e.g. subsidiary), a majority of the shares of which is owned by another investment
corporation (e.g. parent) may not acquire the shares of such parent investment corporation except in the following
cases
・ when acquired as the result of merger; or・ if necessary for attaining the purpose of exercising its rights.

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

b)

Undertaking transactions which harm the interests of an investment corporation with the objective ofbenefiting an Interested Party etc. of NBFM.

c)

Undertaking transactions clearly recognized to be unnecessary in light of the management policies for theassets of an investment corporation, the amount of net assets of NBF, or market conditions, with the
purpose of benefiting a securities company, registered financial institution, residential land and building
specialist or other person specified in the government ordinance regarding the Investment Trust Law ofJapan who is an Interested Party etc. of an asset management company.

d)

In the event that a securities company, who is an Interested Party etc. of an asset management company,
acts as an underwriter in a securities transaction, undertaking transactions with the objective of fraudulently
manipulating the market for the purpose of having an influence upon the conditions of the primary offer orsecondary distribution of said securities not reflecting correct market pricing.

e)

In the event that an issuer, securities company or registered financial institution, who is an Interested Party
etc. of an asset management company, undertakes a primary offer or secondary distribution of securities orparticipates in handling a primary offer, private offering, or secondary distribution at a time when thesubscription amount of said acquisition or the amount of purchase offer of securities to said issuer,
securities company or registered financial institution is not foreseen to reach that otherwise expected bysaid issuer, securities company or registered financial institution, acquiring or purchasing said securities
with assets of NBF at the request of said issuer, securities company or registered financial institution.

f)

In the event that a specified real estate syndicate, who is an Interested Party etc. of an asset managementcompany, makes a solicitation in connection with the execution of a specified real estate syndicationagreement at a time when the contract amount of said specified real estate syndication agreement is notforeseen to reach that otherwise expected by said specified real estate syndicate, acquiring a tokumei
kumiai interest pursuant to said specified real estate syndication agreement with assets of NBF at therequest of said specified real estate syndicate.

g)

In the event that the manager of a tokumei kumiai, who is an Interested Party etc. of an asset managementcompany, makes a solicitation in connection with the execution of a tokumei kumiai agreement at a time
when the total investment amount otherwise obtained pursuant to said tokumei kumiai agreement is not- 53 -

foreseen to reach that expected by the manager of said tokumei kumiai, acquiring a tokumei kumai interest
pursuant to said tokumei kumiai agreement with assets of NBF at the request of the manager of said tokumei
kumiai.
h)

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

i)

In the event that a distributor of trust beneficiary interests, who is an Interested Party etc. of an asset
management company, distributes, or acts as an agency or intermediary of distribution of, trust beneficiaryinterests at a time when the total amount of purchase offer of said trust beneficiary interests to said
distributor of trust beneficiary interests is not foreseen to reach that otherwise expected by said distributorof trust beneficiary interests, purchasing said trust beneficiary interests with assets of NBF at the request of
said distributor of trust beneficiary interests.

（２）Submission of written notice when conflict of interest is anticipatedSubmission of written notice when conflict of interest is anticipated (§34.6.2-4 of the Investment
Trust Law)
An asset management company must, in the event that any sale or purchase of, or any other transaction set forth
under the government ordinance regarding the Investment Trust Law with respect to, the Designated Assets(excluding the specified assets set forth under the Investment Trust Law and such assets as are set forth under theenforcement regulations of the Investment Trust Law, the same to apply hereinafter in this paragraph) is conducted
between an investment corporation the assets of which are managed by said asset management company on one hand,and said asset management company, its director or executive officer, any other investment corporation, investment
fund which directs management, Interested Party etc. or other person set forth under the government ordinanceregarding the Investment Trust Law on the other, submit written notice, in accordance with the enforcement
regulations of the Investment Trust Law, to said investment corporation, other investment corporations (which invest
in the same kind of assets as the said Designated Assets) the assets of which are managed by said asset managementcompany and other persons set forth under the government ordinance regarding the Investment Trust Law specifying
the matters relating to such transaction; provided, however, that in lieu of such submission of written notice, said
asset management company may, in accordance with the government ordinance regarding the Investment Trust Law,provide the matters to be specified in such written notice by such methods as using electronic information processing
systems or other telecommunication technology which are set forth under the enforcement regulations of theInvestment Trust Law with the consent of said investment corporation the assets of which are managed by said asset
management company, other investment corporations (which invest in the same kind of assets as the said Designated
Assets) the assets of which are managed by said asset management company and other persons set forth under thegovernment ordinance regarding the Investment Trust Law.

（３）Restriction on an investment corporation
Restrictions on Asset Management(§195)A registered investment corporation must not, in principle, acquire or sell securities, lend or borrow securities,
acquire or sell real estate, lease real estate or entrust the supervision of real estate (provided, however, that, it isacceptable to cause NBFM to act as an agent or broker concerning the purchase or leasing of residential building lots
- 54 -

or buildings) or otherwise engage in transactions concerning Designated Assets other than the preparation ofresidential building lots and design of buildings, with its executive directors or supervisory directors, asset
management companies who perform asset management, close relatives of executive directors or supervisory
directors, or persons or employees who perform duties similar to directors or auditors of an asset managementcompany who perform asset management.

- 55 -

Nippon Building Fund Inc.
Corporate Data

ProfileNippon Building Fund Inc. (formerly: “Office Building Fund of Japan, Inc.” The current name was adopted on
March 14, 2003, hereinafter “NBF”) is a real estate fund structured in the form of an investment corporation asprescribed in the Investment Trust Law of Japan. It was formed on March 16, 2001 in Japan as an investment
corporation with the objective of investing in assets, consisting primarily of Designated Assets (as this term is definedin the Investment Trust Law of Japan). The Investment Trust Law of Japan requires an investment corporation to be
managed by an external entity; management of such assets is entrusted to an asset management company (in thiscase, “Nippon Building Fund Management Ltd.” (formerly “Office Building Fund Management Japan Limited”)

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

Date of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding as of December 31, 2004:¥210,679 million
364,700 shares

Shareholders:

19,107 (As of December 31, 2004)

Transfer Agent:

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

Business Office of the Transfer Agent:

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

Independent Public Accountants:

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

Investor Relations:

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

hereinafter “NBFM”) which undertakes such asset management.
NBF’s primary investment objective is to achieve sustainable growth in portfolio value and stable profits on a midterm to long-term basis. NBF intends to achieve this objective by investing in real estate consisting of buildings
primarily used for offices with their underlying land located in Tokyo Central Business Districts (hereinafter “CBDs”),
Other Greater Tokyo and Other Cities in Japan as well as securities, beneficiary certificates representing beneficiaryinterests in trusts (hereinafter “beneficiary certificates”) and other assets backed by office properties (collectively
hereinafter “Real Estate etc.”)
NBF, which is a public corporation, is a closed-end fund whose shares are non-redeemable upon demand by ashareholder. The accounting period is six months, except for the first term. For tax reporting purposes, NBF may
deduct its cash dividends of profits from taxable income under Japanese tax regulations if it distributes to its
shareholders amounts being in excess of 90% of taxable income for the period and complies with other organizationaland operational requirements. NBF will continue its efforts to satisfy these requirements.

History of NBF
March 16, 2001

Established by founders: Mitsui Fudosan Co., Ltd., The Chuo Mitsui Trust and Banking Co.,
Ltd., and NBFM (at the time known as “MF Asset Management Co., Ltd.”)

May 10, 2001

Registration under Article 187 of the Investment Trust Law of JapanMay 23, 2001

Commencement of business (acquiring trust beneficiary certificates with respect to properties
consisting of 22 office buildings held in trust)
Listing of common shares on the Japanese Real Estate Investment Trust (hereinafter “J-REIT”)
section of the Tokyo Stock Exchange.

September 10, 2001

Table of Contents
Financial Highlights
Portfolio Highlights
Strength of NBF
New Acquisition
Location of Office Properties
Properties Roster
Board of Directors

2
3
4
5
8
10
12

13
Investment Policies of NBF
18
Distribution Policies of NBF
19
Investment Restrictions
20
I Performance Information Report32
II Financial Statements
46
III Appendix
Back coverCorporate Data

This document contains translations of selected information described in the Securities Report (Yuka shoken hokokusho) filed on March 31, 2005 pursuant to the
Securities Exchange Law of Japan, and the Financial Statements and the Performance Information Report for the period from July 1, 2004 to December 31, 2004, of
Nippon Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.
This English language document was prepared solely for the convenience of and reference by overseas investors and neither corresponds to the original Japanese
documents nor is it intended to constitute a disclosure document. The Japanese language Securities Report and the Financial Statements and the Performance
Information Report for the aforementioned period should always be referred to as originals of this document.
English terms for Japanese legal, accounting, tax and business concepts used herein may not be precisely identical to the concept of the equivalent Japanese terms.
With respect to any and all terms herein, including without limitation, financials statements, if there exist any discrepancies in the meaning or interpretation thereof
between the original Japanese documents and English statements contained herein, the original Japanese documents will always govern the meaning and interpretation.
None of Nippon Building Fund Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents oraffiliates will be responsible or liable for the completeness, appropriateness or accuracy of English translations or the selection of the portion(s) of any document(s)translated into English. No person has been authorized to give any informations or make any representations other than as contained in this document in relation to thematters set out in this document, and if given or made, such information or representation must not be relied upon as having been authorized by Nippon Building Fund
Inc., Nippon Building Fund Management Ltd. or any of their respective directors, officers, employees, partners, shareholders, agents or affiliates.
The financial statements of Nippon Building Fund Inc. have been prepared in accordance with generally accepted accounting principles in Japan (Japanese GAAP)
which may materially differ in certain respects from generally accepted accounting principles in other jurisdictions.
Many provisions of this document contain forward-looking statements and information. We base these statements on our beliefs as well as our assumptions based
solely on certain limited information currently available to us. Because these statements reflect our current views concerning future events, these statements involve
known and unknown risks, uncertainties and assumptions. Our future performance could materially differ from those set out in these forward-looking statements. We do
not undertake and will not undertake to release revisions of forward-looking statements to reflect future events or circumstances or of any other statements or information
contained herein.

NBF Report Jul.–Dec. 2004 7th Period

7th Period
From : July 1, 2004 To : December 31, 2004

NBF Report Jul. – Dec. 2004

Nippon Building Fund Inc.

Nippon Building Fund lnc.
7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan
http://www.nbf-m.com/nbf_e/