5th Period
From : July 1, 2003 To : December 31, 2003

NBF Report Jul.–Dec. 2003

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

Profile
Nippon 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”)
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
May 10, 2001
May 23, 2001
September 10, 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.”)
Registration under Article 187 of the Investment Trust Law of Japan
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.

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

2
3
4
5
8
12
14
16

17
Investment Policies of NBF
23
Distribution Policies of NBF
24
Investment Restrictions
25
I Performance Information Report35
II Financial Statements
III Overview of Related Operating Entities 47
58
IV Appendix
Back coverCorporate Data

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

Liabilities

OfficeManagement

Investment
Rent etc.
Real Estateetc.

AssetsDebt service

Investment

ShareholdersÕ
EquityDistribution

Major Related Operating Entities
Assignment
Asset Management Company

Name
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.

Qualified
Institutional
Investors/
Bondholders

Shareholder
Trading
Shareholder

Financial Highlights

1st Period

5th Period

4th Period

3rd Period

2nd Period

from July 1, 2003 to
December 31, 2003

from January 1,
2003 to June 30, 2003

from July 1, 2002 to
December 31, 2002

from January 1,
2002 to June 30, 2002

from March 16,
2001(date of Inception)
to December 31, 2001

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

Operating revenues¥12,453¥12,239¥11,846¥11,259¥12,561

4,094

4,314

4,563

4,493

5,342

Income before income taxes
Net income

(a)

4,093

4,313

4,562

4,492

5,341

Total assets(b)314,362

307,688

290,725

278,976

256,847

Total shareholders' equity ('Net assets')(c)

152,992

153,212

153,461

153,391

154,240

Total amount of cash distribution

(e)

4,093

4,313

4,562

4,492

5,340

Total number of common shares issued (shares)(d)

280,700

280,700

280,700

280,700

280,700

Net assets per share (Yen)(c) / (d)545,038

545,823546,710546,460

549,482

Distribution per share (Yen)(e) / (d)14,582

15,367

16,25316,00319,026

NOI from property leasing activities

Note 2

7,964

8,057

7,886

7,583

8,993

FFO per share (Yen)

Note 2

23,141

23,794

23,63522,93840,857Note 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 + Depreciation and Amortization)/ Weighted average number of common shares issued and outstanding during
the period.

● Operating revenues
Net income
Operating revenues（Yen in million）

Net income

12,000● Distribution per share
Net assets per share（Yen in million）（Yen）

300,000

3 rd
Period4 thPeriod0

5 thPeriod520,000

5,000

50,0002 nd
Period540,000

10,000100,000

1 st
Period（Yen）

550,000

530,000

150,000

3,000

Net assets per share

15,000200,000

6,000

Distribution per share

20,000250,000

9,000

0● Total assets

1 stPeriod2 ndPeriod3 rdPeriod4 thPeriod510,000

0

5 thPeriodDistribution
per share

1 stPeriod2 ndPeriod3 rdPeriod4 thPeriod5 thPeriod500,000
Net assets
per share

Stock Price Performance
NBF’s common share price rose approximately 10% during the course of 2003. Moreover, the total amount of pre-tax distributions
per share applicable to the two payment dates of record for 2003 (August 2003 and March 2004) was ¥29,949, which was equivalent
to a 4.35% income return based on the share price as of the end of 2003.

(Yen)(unit)

30,000720,000
700,000
680,000
660,000
640,000
620,000
600,000
580,000
560,000
540,000
520,000
500,000
480,000

20,00010,000

0

0
Jan
2002

2

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2003

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan
2004

Portfolio Highlights

Asset Allocation

Regional Allocation

Total Assets ¥314,362 million

Total Real Estate etc. ¥282,379 million !" 
 #  

    &"  "( 

&"  " %  '   (#   (     $  "%  "  #   Note: Figures above are based on the book value as of December 31, 2003

Occupancy Rate(%)
100

99.9 99.8 99.8 99.8 99.8 99.8 99.9 99.9 99.9 99.8 99.7 99.8 99.8 99.8
98.3
97.7
96.6
95.4 96.4
96.0 96.0 96.0 96.4 96.4 96.4 96.4
96.1 94.9
95.5 96.0
94.6 94.8
95.8
95.4 95.5
95.3 95.4
94.8 94.2 94.6 95.0 95.0
95.0
95.0
94.4 94.1
94.8
94.3
94.7 94.6
93.6 93.8 93.8
95.6 95.9 95.3
95.1
94.9
95.0 94.7
94.9
94.7
94.6
94.6
92.9
94.6
94.3
92.5 92.2 92.9 92.6
93.8 93.7 94.5
93.7
94.4 94.3
93.6
93.4
93.0
93.0
93.8 92.4
93.0
92.8
92.8 92.7 92.6 92.5
92.5
91.8 91.7 92.1 92.3
92.0 92.2 91.9 92.0 91.3 91.2 92.1
91.4 91.6
91.0
90.5
90.1 90.2 90.3 90.4
88.8

96.9 97.0 96.9 97.2 97.2

95

90

97.5 97.6 97.3 97.4 97.2 97.3 97.4 97.2

97.0

85

80

0

May 23
2001

Aug 31 Sep 30 Oct 31 Nov 30 Dec 31 Jan 31 Feb 28 Mar 31 Apr 30 May 31 Jun 30
2002

2nd Period

1st PeriodTokyo CBDs

Jul 31 Aug 31 Sep 30 Oct 31 Nov 30 Dec 31 Jan 31 Feb 28 Mar 31 Apr 30 May 31 Jun 30
2003

3rd Period

Other Greater Tokyo

4th Period
Other Cities

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

5th Period

Total

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

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(¥193,122 million as of December 31, 2003)• The largest scale of managed assets(¥282,379 million as of December 31, 2003)

Enrichment of Portfolio• Specializes in investing in office buildings• Possesses 33 properties focusing on large-scale officebuildings in the Tokyo Central Business Districts (as ofDecember 31, 2003)• Diversified in other Tokyo markets as well as in regional cities.
• Total rentable space of 358,940m2 (as of December 31, 2003)• Diversified tenants (number of tenants as of the end of thecurrent period: 511)

Financial Stability and Flexibility• Ratings by Rating Agencies:
Standard & Poor's Long-term Corporate: A, Short-term Corporate: A-1, Outlook: stable
Moody's
Issuer Rating: A3, Outlook: stable
Note: On January 26, 2004, Moody's changed NBF's A3 Rating outlook to positive from stable.

• Ratio of interest-bearing debts to total assets: 43.3% (as of December 31, 2003)• Percentage of long-term loans to interest bearing debt: 69.8% (as of December 31, 2003)• Average years remaining till due date for long-term interest bearing debt: 4.98 years (as ofDecember 31, 2003)• 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

To Our Shareholders

1. Performance Results and Distribution
Policy in the 5th Period
The most pressing issue in 2003 was the acquisition of tenants tofill vacancies arising from the termination of leases by large tenants in
the Shiba NBF Tower and the Sumitomo Densetsu Bldg. (formerly theMita City Bldg.). However, by taking this opportunity to perform acomplete renovation of the Shiba NBF Tower in order to differentiate
this building from competitive properties, and engaging in active
tenant marketing, NBF was successful in concluding leases withsuccessor tenants.
Although the occupancy rate of the Shiba NBF Tower at the end of
this period was 27.2%, the execution of lease agreements withsuccessor tenants resulted in 100% occupancy as of the end ofJanuary 2004. In addition, the Sumitomo Densetsu Bldg. has enjoyeda 100% occupancy rate since July 2003 due to the lease of the entire
building to a single tenant.

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

Toshihiko Fukase, Executive Director of Nippon
Building Fund Inc.

The low occupancy rate for the Shiba NBF Tower pulled the average occupancy rate with respect to the total portfolio of properties
at the end of this period down to 92.3% (2.5 percent decrease compared to the previous period), but this rate gradually recovered to95.8% as of the end of January 2004.
NBF’s performance results for the current period consisted of operating revenues of ¥12,453 million (an increase of ¥214 million, or
1.8%, compared to the previous period), operating income from leasing activities of ¥5,562 million (a decrease of ¥129 million, or 2.3%,
compared to the previous period), operating income after asset management, custody and agent fees of ¥4,989 million (a decrease of¥54 million, or 1.1%, compared to the previous period) and income before income taxes of ¥4,094 million (a decrease of ¥220 million,
or 5.1%, compared to the previous period).
During the period, consistent with the loss of a large former tenant of the Shiba NBF Tower in August 2003, there was a decrease inrevenues related to renovation work undertaken on the upper floors of the vacated space. This was offset by an increase in revenues
which was recorded as a consequence of cancellation fees received from this tenant (¥863 million), and the start-up of operations of
the most recently acquired portion of the Naka-Meguro GT Tower as well as the NBF Hiroshima Tatemachi Bldg., the Sapporo L-Plaza,
the Hiroshima Fukuromachi Bldg. and the Sudacho Verde Bldg. during the current period (¥169 million), and the operation for a fullbusiness term of the portions of the Naka-Meguro GT Tower and the Tsukuba Mitsui Bldg. which were acquired during the previous
period. As a result, a marginal increase in operating revenues was recorded. However, operating income declined to an increase inrepair and maintenance expense arising from the renovation of the Shiba NBF Tower (¥239 million) and an increase in interest
payments (including interest payable on NBF Bonds) (¥102 million). NBF distributed almost 100% of its retained earnings (¥14,582 pershare) in accordance with the distribution policies of its Articles of Incorporation and assumes that the regulations concerning thededuction of such distributions from taxable income (Article 67-15 of the Special Taxation Measures Law) will apply resulting in net
income of ¥4,093 million for the current period (down 5.1% compared to the previous period).

5

To Our Shareholders

2. Outline of New Properties
During the current period, after strictly selecting desirable properties based on
information assembled concerning various properties, NBF acquired a total of 5
properties: in September 2003, the Naka-Meguro GT Tower (additional acquisition of coownership of condominium interests, the acquisition price being ¥293 million based on thesale and purchase agreement, hereinafter the same) and the NBF Hiroshima Tatemachi
Bldg. (for ¥2,930 million); in November, the Sapporo L-Plaza (condominium interests, for¥3,195 million) and the Hiroshima Fukuromachi Bldg. (co-ownership of condominium
interests, for ¥835 million); and in December, the Sudacho Verde Bldg. (for ¥2,380 million).
As a result, NBF’s total portfolio of properties at the end of the current period consistedof 33 properties representing a total investment of ¥285,686 million (based on the sale andpurchase agreements) and comprising total rentable area of 358,940 square meters(approximately 108,580 tsubo).
NBF also decided in December 2003 to acquire the Shibuya Garden Front (co-ownership, for ¥8,700 million, which acquisition wascompleted on February 2, 2004), and in September 2003 to acquire an office building located in the area referred to as “The Shirokane
1-chome East Area Redevelopment Project” (trust beneficiary interests, for ¥27,600 million (adjustable upward to a maximum of¥31,000 million) with estimated acquisition date being March 31, 2006).
On the other hand, NBF decided in August 2003 to sell a portion of the site of the Shinjuku Yocho-machi Bldg. (for ¥344 million) to
the City of Tokyo, the conveyance of which was completed on January 22, 2004.

3. Perception of Investment Environment
In spite of the possible risk of continued deflation in Japan’s economy, consumer spending showed a slight recovery, and to bepicking up in step with the global economic recovery starting with the U.S. economy, and a modest rebound can be foreseen
supported by continuous improvement in corporate revenues and exports as well as an increase in capital expenditures.
In the office building rental market, the worst of the massive increase in the supply of new floors in new office buildings in Tokyo
CBDs (the so called “2003 problem”) is now over and supply has stabilized. As a result, the occupancy rate likely hit bottom at the endof 2003. On the other hand, while the level of rents is still edging downward, data from some brokers indicates that rents offered forlarge-scale buildings in Tokyo CBDs may have seen the worst already.
As for regional cities, although the decrease in occupancy rates seems to have ceased in major cities such as Osaka, Nagoya andFukuoka, those markets are expected to remain weak as a whole, due mainly to the concentration of business in Tokyo and struggling
local economies.
The office building trading market saw active investment in real estate by private funds, etc. against a background of bad
performance in other investments in consequence of continued low interest rates. However, it is expected that opportunities to acquire
desirable properties will increase based on the assumption that the acceleration in write-offs of bad loans by banks, improvements inthe financial strength of corporations and the introduction of accounting standards for impairment of fixed assets will result in further
disposals of real estate.

6

4. Management Policy in 2004
As stated above, NBF has overcome its own “2003 problem” and occupancy rates in its portfolio have recovered. Accordingly,
NBF’s management goal for 2004 is to achieve a significant leap in external growth for the coming year and NBF will actively invest
during 2004. We believe that our original target of ¥500 billion (based on acquisition price) in assets by the end of March 2006 is
realistic. NBF will continue to avoid acquisitions under extremely competitive circumstances and to invest in competitive, desirable
properties using rigorous selection criteria and improved acquisition methods.
（Yen in 100 million）

5,000(Note 2)

5,000
4,000
3,000

1,921

2,822

3,220

Contract baseContract base
(Note 1)

28 Buildings

31 Buildings

35 Buildings

Dec 31, 2002

Jul 31, 2003

Dec 31, 2003

2,602
Outstanding value

Outstanding value

2,000

22 Buildings

1,000

May 31, 2001
（First Year）(Note 1)March 31, 2006

Note 1: Include both Shibuya Garden Front and Shirokane 1-chome East Area Redevelopment Project
Note 2: As this figure represents the desired acquisition target, it is possible it will differ from the actual figure due to market trends etc.

5. Prospects of Performance in the 6th and 7th Periods
During the 6th period (Jan.- June 2004), NBF foresees operating revenues of ¥12,011 million, operating income of ¥4,769 million, net
income of ¥3,817 million and a cash distribution per share of ¥13,600.
During the 7th period (July- Dec. 2004), NBF foresees operating revenues of ¥12,337 million, operating income of ¥5,037 million, net
income of ¥4,070 million and a cash distribution per share of ¥14,500. (Those figures do not include the effects of future acquisitions ofproperties or issues of new shares.)
The 6th period will see a temporary decrease in operating revenues due to the change of tenants at the Shiba NBF Tower. However,
the worst effects of such change will end during the 6th period. During the 7th period, we expect a recovery in performance as thecontribution of the revenues from the said building is fully taken into account.
NBF foresees average occupancy rates of 95.7% in the 6th period, and 96.2% in the 7th period.

6. Conclusion
In March 2004, the number of J-REIT corporations became 12 and their total market capitalization reached a level of more than one
trillion yen. It is expected that more J-REIT corporations will be listed in the future, and with such expansion of the total market, 2004 willsee very severe competition among J-REITs.
Under these circumstances, by remaining grounded in NBF's original perception that “rent from tenants is the source of revenues”,
we will further focus on improvement of the level of tenant satisfaction. By establishing “NBF" as a well-known brand among tenants,
NBF ultimately aims to deliver improved value to investors. NBF intends to distinguish itself from other REITS by creating a strong “NBFbrand” in both real estate and financial markets, thereby consolidating its position as the No. 1 J-REIT. For the above reasons, NBF
believes that it can assure solid growth and stable revenues through asset management from a mid and long term viewpoint. NBF willcontinue to exert its best efforts to respond to the expectations of investors.

Koichi Nishiyama
Executive Director of
President & CEO of
Nippon Building Fund Inc. Nippon Building Fund Management Ltd.
7

New Acquisition

NBF acquired the following property in 6th period. An overview of the property as of February 2, 2004 is as follows:

Shibuya Garden Front

Tokyo CBDs

Acquisition date
Outline of acquired property
Acquisition priceFebruary 2, 2004
Co-ownership¥8,700 million
Acquisition structure Real Estate
25-18, Shibuya 3-chome, Shibuya-ku, Tokyo
Location
3,750.71m2 in which NBF holds an interest of 50%
Site area
Floor area of building 22,650.54m2 in which NBF holds an interest of 50%
Structure
Completion
Number of tenants
Rentable area
Leased area
Occupancy rate

8

Above ground 14 floors, below ground 1 floor
September 30, 2003
1
16,516.06m2
16,516.06m2
100%

NBF announced on September 2003 that it would acquire the following property on March 31, 2006. An overview of the property as of December 31, 2003 is as follows:

Shirokane 1-chome East Area Redevelopment Project
Acquisition date
Outline of acquired property
Acquisition priceTokyo CBDs

March 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 successin attracting tenants and improving current
estimated profits)

Acquisition structure
Location
Site area
Floor area of building
Structure
Completion

Trust
304, Shirokane, 1-chome, Minato-ku, Tokyo
4,373.93m2
50,631.91m2 (estimated)
Above ground 26 floors, below ground 2 floors
November 30, 2005 (estimated)

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

9New Acquisition

NBF acquired the following properties between July 1, 2003 and December 31, 2003:

Sudacho Verde Bldg.

Tokyo CBDs

Acquisition date
Outline of acquired property
Acquisition price
Acquisition structure
Location
Site area
Floor area of building
Structure
Completion
Number of tenants
Rentable area
Leased area
Occupancy rate

December 25, 2003
fee simple¥2,380 million
Real Estate
3, Kanda-Sudacho 2-chome, Chiyoda-ku, Tokyo
515.04m2
4,196.61m2
Above ground 9 floors, below ground 1 floor
March 19, 1988
7
2,971m2
2,961m2
99.7%

Sapporo L-Plaza

Other Cities

Acquisition dateNovember 5, 2003

Outline of acquired property

Condominium interest¥3,195 million

Acquisition price
Acquisition structure
Location
Site area
Floor area of building

Real Estate
28, Kita hachi-jo, Nishi 3-chome, Kita-ku,
Sapporo, Hokkaido
4,759.69m2 in which NBF holds an interest of
23.2%
Gross floor area of the entire building:
32,601.54m2
Floor space of divided condominium interests ofStructure
Completion
Number of tenants
Rentable area

10

NBF: 8,127.54m2
Above ground 13 floors, below ground 2 floors
March 7, 2003
11

Leased area

8,461m2
8,461m2

Occupancy rate

100%

NBF Hiroshima Tatemachi Bldg.

Other Cities

Acquisition date
Outline of acquired property
Acquisition price
Acquisition structure
Location
Site area
Floor area of building
Structure
Completion
Number of tenants
Rentable area
Leased area
Occupancy rate

September 30, 2003
fee simple¥2,930 million
Real Estate
2-27, Tatemachi, Naka-ku, Hiroshima, Hiroshima
1,013.35m2
8,656.97m2
Above ground 12 floors, below ground 1 floor
November 12, 1991
19
5,693m2
4,814m2
84.6%

Hiroshima Fukuromachi Bldg.

Other Cities

Acquisition dateNovember 7, 2003

Outline of acquired property

Co-ownership of Condominium interest¥835 million

Acquisition price
Acquisition structure
Location
Site area
Floor area of building

Structure
Completion
Number of tenants
Rentable area
Leased area
Occupancy rate

Real Estate
5-25, Fukuromachi, Naka-ku, Hiroshima, Hiroshima
2,039.20m2 in which NBF holds an interest of 10%
Gross floor area of the entire building: 16,411.08m2
in which NBF holds a co-ownership ofcondominium interest of 10.4%
Above ground 14 floors
January 30, 2002
15
1,310m2
1,280m2
97.8%

11

Location of Office Properties

Tokyo CBDs
Property acquired during 5th period

Kita-ku
Itabashi-ku
Arakawa-ku

$Toshima-ku

13

Nishi-shinjuku Mitsui Bldg.

" 

 



11

Sudacho Verde Bldg.

-  
Bunkyo-ku  

14

3

13

 
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12

 

1 

Imperial Palace4  

 
 



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 




!

 

Sumida-ku

11

Chiyoda-ku

3

Shinjuku Mitsui Bldg. No.2-

Taito -ku

1

JFE Bldg.

 !  

    - -Ko to -ku$Shinjuku-ku" 

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Meguro-ku

Shibuya Garden Front

12


 $
 
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 
& 

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 ' ( )    )  $   )  $ ( ) 
 "  )   ! ) & 
 $ 
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Property acquired in 6th periodA 

Shinagawa-ku

5Naka-Meguro GT Tower

7

Nippon Steel Bldg. No.2

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

A

ano
Yam

GSK Bldg.

$!

Minato-ku

Setagaya-ku%
JFE Bldg.
Shiba NBF Tower
Shinjuku Mitsui Bldg. No.2
GSK Bldg.
Naka-Meguro GT Tower
Kowa Nishi Shinbashi Bldg. B
Nippon Steel Bldg. No.2
Nihonbashi Muro-machi Center Bldg.
Takanawa 1-chome Bldg.
Sumitomo Densetsu Bldg.
Sudacho Verde Bldg.
Shinjuku Yocho-machi Bldg.
Nishi-Shinjuku Mitsui Bldg.
(Other Greater Tokyo)
Nakano-Sakaue Sunbright Twin
Property acquired in 6th period
A Shibuya Garden Front
Property scheduled to be acquired during 10th period
B Shirokane 1-chome East Area Redevelopment Project

-

Ot k

6

Kowa Nishi Shinbashi Bldg. B

2

Shiba NBF Tower
 !

/'#


#


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IBARAKI

Tsukuba Mitsui Bldg.


 
 
## 
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SAITAMA

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Other Greater Tokyo



'#

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

Daido Life Omiya Bldg.
   2'#

 

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Matsudo City Bldg.
 

-TOKYO
  
Nakano-Sakaue
Sunbright Twin

/'#1 '/



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Nakano-Sakaue Sunbright Twin

CHIBA

Tokyo CBDs
'#1

 


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/'#(&

Inage Kaigan Bldg.

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Yokohama ST Bldg.


KANAGAWA&'       

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&

Other Cities#/

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Property acquired during 5th period

Yokohama ST Bldg.
Sapporo L-Plaza
Sapporo Minami Nijo Bldg.

"3 -'#$% 

Property acquired during 5th period

Sapporo L-PlazaNBF Hiroshima Tatemachi Bldg.

NBF Sendai Honcho Bldg.
(formerly: Daido Life Sendai Bldg.)

Niigata Telecom Bldg.

Hiroshima Fukuramachi Bldg.

Unix Bldg.
Shijo Karasuma Minami Bldg.

Property acquired during 5th period OSAKA

Hamamatsu City Bldg.
Hakata Gion 21 Bldg.
NBF Hiroshima Tatemachi Bldg.

Sun Mullion NBF Tower
Otemae Center Bldg.
Kyoumachibori Center Bldg.
Sakai Higashi Center Bldg.

Hiroshima Fukuromachi Bldg.

Sun Mullion NBF Tower

13

Properties Roster
The outline of NBF’s properties as of December 31, 2003 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
Shinjuku Mitsui Bldg. No.2
GSK Bldg.
Naka-Meguro GT Tower
Kowa Nishi Shinbashi Bldg. B
Nippon Steel Building No.2
Nihonbashi Muro-machi Center Bldg.
Takanawa 1-chome Bldg.
Sumitomo Densetsu Bldg. (Note 4)
Sudacho Verde Bldg.
Shinjuku Yocho-machi Bldg.
Nishi-Shinjuku Mitsui Bldg.

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

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

100.0
100.0
100.0
100.0
60.5
83.0
100.0
48.6
100.0
100.0
100.0
100.0
4.1

1974
1986
1983
1990
2002
1994
1989
1986
1987
1991
1988
1989
1999

¥74,131
32,00016,285
15,616
14,056
13,217
12,614
9,945
6,667
5,365
2,380
2,348
1,603

¥72,528
33,68815,865
14,93814,06312,80012,743
9,865
6,437
5,267
2,457
2,262
1,677

Other Greater Tokyo
Nakano-Sakaue Sunbright Twin
Yokohama ST Bldg.
Tsukuba Mitsui Bldg.
Daido Life Omiya Bldg.
Matsudo City Bldg.
Inage Kaigan Bldg.

Trust
Trust
Trust
Trust
Ownership
Trust

condominium
co-ownershipfee simple
fee simple
fee simple
fee simple

31.6
75.0
100.0
100.0
100.0
100.0

1996
1987
1990
1991
1992
1992

8,979
13,529
8,876
2,361
2,455
1,941

9,069
13,187
8,480
2,275
2,516
1,857

Other Cities
Sapporo L-Plaza
Sapporo Minami Nijo Bldg.
NBF Sendai Honcho Bldg. (Note 5)
Unix Bldg.
Niigata Telecom Bldg.
Hamamatsu City Bldg.
Sun Mullion NBF Tower
Sakai Higashi Center Bldg.
Otemae Center Bldg.
Kyoumachibori Center Bldg.
Shijo Karasuma Minami Bldg.
NBF Hiroshima Tatemachi Bldg.
Hiroshima Fukuromachi Bldg.
Hakata Gion 21 Bldg.

Ownership
Trust
Trust
Trust
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
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
100.0
100.0
10.4
100.0

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

3,195
1,870
3,566
4,029
3,958
1,377
10,500
2,227
1,826
749
1,627
2,930
835
2,629

3,313
1,787
3,428
3,719
3,816
1,308
10,298
2,147
1,766
852
1,516
3,078
847
2,530

-

-

¥285,686¥282,379

Total

-

-

Major Tenants Roster
The outline of NBF’s major tenants as of December 31, 2003 is as follows:
Leased Space

Percentage of Total
Rentable Area***

Name of Tenants

Name of Building

01
02
03

JFE Steel Corporation*
GlaxoSmithKline. KK.*
Fuji Xerox Co.

65,28020,407
18,032

19.7%
6.2%
5.4%

04
05
06
07
08
09

Nippon Steel Corporation*
NTT Communications
Sumitomo Densetu*
Sumitomo Life Insurance
Toden Kogyo
NEC Facilities

JFE Bldg.
GSK Bldg.
Shinjuku Mitsui Bldg. No.2
Tsukuba Mitsui Bldg.
Nakano-Sakaue Sunbright Twin
Hamamatsu City Bldg.
Nippon Steel Building No.2
Kowa Nishi Shinbashi Bldg. B
Sumitomo Densetsu Bldg.
Yokohama ST Bldg. and 5 other buildings
Takanawa 1-chome Bldg.
Sapporo L-Plaza

15,333
8,493
5,978
5,516
5,411
4,176

4.6%
2.6%
1.8%
1.7%
1.6%
1.3%

Naka-Meguro GT Tower
Nishi-Shinjuku Mitsui Bldg.

15,500Mitsui Fudosan**14Book Value(m2)

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)

(%)

¥74,700
22,40016,40017,60014,10013,50012,80010,000
7,160
5,190
2,380
2,410
1,630

65,28024,912
14,946
20,407
13,924
10,08817,3398,041
10,473
5,978
2,971
5,155
1,576

65,2806,787
14,847
20,407
13,924
10,08817,338
8,041
9,469
5,978
2,961
5,155
1,576

100.0
27.2
99.3
100.0
100.0
100.0
100.0
100.0
90.4
100.0
99.7
100.0
100.0

1
6
30
1
1
2
2
9
3
1
7
5
1

¥2,175
1,374
764(Note 2)
667
(Note 2)
613
417
341
(Note 2)
4
120
65

17.5
11.0
6.1
(Note 2)
5.4
(Note 2)
4.9
3.3
2.7
(Note 2)
0.0
1.0
0.5

9,410
13,900
8,650
2,270
2,600
1,940

12,22020,08916,863
3,604
4,772
5,878

12,22018,895
15,724
3,447
3,842
4,795

100.0
94.1
93.2
95.6
80.5
81.6

1
76
61
9
22
13

(Note 2)
753
519
131
122
142

(Note 2)
6.0
4.2
1.1
1.0
1.1

3,270
1,960
3,610
4,350
4,260
1,210
9,260
2,360
1,950
630
1,520
2,900
855
2,370

8,461
5,376
7,510
13,47910,221
5,085
13,974
5,332
5,532
3,110
3,925
5,693
1,310
5,416

8,461
5,266
7,498
13,154
9,679
5,060
13,662
5,100
5,398
2,734
3,520
4,814
1,280
4,992

100.0
97.9
99.8
97.6
94.7
99.5
97.8
95.6
97.6
87.9
89.7
84.6
97.8
92.2

11
8
7
59
32
26
27
16
7
13
14
19
15
6

73
136
243
324
272
99
466
146
135
51
104
71
12
156

0.6
1.1
2.0
2.6
2.2
0.8
3.7
1.2
1.1
0.4
0.8
0.6
0.1
1.3

¥279,545

358,940

331,392

92.3

511¥12,453

100.0

Revenues

Percentage ofTotal Revenues(Note 1)

(Yen in millions)(%)

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: Effective July 1, 2003, the name of this building changed (formerly: Mita City Bldg.).
Note 5: Effective February 1, 2004, the name of this building changed (formerly: Daido Life Sendai Bldg.).

*
**
***

Indicates tenants with long-term lease contracts (JFE Steel Corporation's contract 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 the property, pools profits from leasing operations and then distributes the proceeds proportionally in accordance with each owner's percentageof the total ownership interest.
Percentage of Total Rentable Area = Leased Space ÷ Total Rentable Area of All Properties in Portfolio

15

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

Toshihiko Fukase

Executive Director

Koichi Nishiyama

Executive Director

Tadashi Niizawa

Supervisory Director

Certified Public Accountant, Certified Public Tax Accountant

Tomio Hirota

Supervisory Director

LawyerAkira Nishizawa

Supervisory Director

Real Estate Appraiser

Nobutoshi Kozuka

Supervisory Director

Certified Public Accountant, Certified Public Tax Accountant

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.

16

■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 officeproperties（collectively hereinafter “Real Estate etc.”）（“Investment Objects and Policies”, Articles ofIncorporation）. （Reference to : laws, legal documents, etc used as the basis or sources hereof are set forthin 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) Special Characteristic of Investment Objectives
Compared to other sectors of income-producing real estate in Japan, NBF believes there to exist a
relatively abundant stock of high-quality office buildings. NBF also believes it will be able to takeadvantage of this special characteristic both to create the portfolio and to efficiently undertake managementof the office buildings (Office Management Business, as defined below), placing emphasis thereon in
adopting the basic policies described above.

(2) 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-termbasis. The selection criteria of investment assets is based on, the composition of investment assets in theportfolio and based on consideration of a quantitative proportion of the office stock located in the various
regions of Japan.
Area Diversification
The investment strategy of NBF divideds 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.
- 17 -

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

Area Analysis

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

Other Greater Tokyo■ Basic special characteristics are between those of
Other 14 wards in Tokyo andTokyo CBDs and Other Cities.
Neighboring Cities (see Note 1 below)
such as Musashino, Tachikawa,
Yokohama, Kawasaki, Chiba, Kashiwa,
Saitama etc.
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
high compared to Tokyo CBDs.
■ Also, scale of market is relatively small and growth
rates relatively low.
■ Relatively high yearly NOI yields. Relatively low
liquidity at the time 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 eachof the above criteria (“ Investment Objects and Policies”, Articles of Incorporation).

(3) Acquisition Strategy
Ratio of Real Estate Assets
NBF will maintain ratios of 75% or more with respect to both the “Designated Real Estate Ratio” andthe “Real Estate etc. Ratio”(both defined in the Note below). As of December 31, 2003, NBF satisfied
both of the above criteria.
Note:
The ratio of the amount of Designated Real Estate acquired by NBF to the total amount of Designated
Assets (as those terms are defined in the Investment Trust Law of Japan, with such ratio hereinafter“Designated Real Estate Ratio”) will be 75% or more.
Note:

Designated Real Estate includes real estate, real estate leasehold rights, superficies andbeneficiary certificates backed by real estate, land leasehold rights and superficies (as designated under
Article 83.4.3.1 of the Special Taxation Measures Law of Japan).
- 18 -

The ratio of the amount of Real Estate etc. (real estate, real estate leasehold rights, superficies andbeneficiary certificates (but limited to real estate held in trust, land leasehold rights and superficies) andtokumei kumiai ownership interests (but limited to operating real estate, real estate leasehold rights andsuperficies) to the total amount of all assets (herein “Real Estate etc. Ratio”) will, in accordance with therelevant Article of the Finance Ministry Ordinance (Finance Ministry Ordinance) be 75% or more.

Due Diligence
When investing in office properties, selections will be made through comprehensive research andanalysis based on the forecast investment yields resulting from their acquisition costs and their anticipatedprofits, future prospects and stability of the area of location, availability of measures responding to risks ofdeterioration 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 ispossible that when NBF acquires or intends to acquire operating assets, not all of the following criteria will
be satisfied.
Item

Points to be reviewed

Scale of building■ Net rentable area, including net rentable area of entire building
and standard 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.

Construction type andspecifications of facilities■ Building design and floor plan suitable for leasing, withdivisibility, adequate ceiling height, electrical service, HVAC
equipment etc.

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

Measures regarding status oflegal title■ In cases such as co-ownership, divided condominium ownership,a building erected on leased land etc. where NBF will not obtaincomplete ownership of a building, following matters areappropriately 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;
・condition of secured interests established prior to acquisition etc.
■ Acceptable creditworthiness of tenants, purposes of use bytenants, configuration, and condition of collectibility of rents etc.

Tenancy characteristics

Current building managementetc.

■ Condition of compliance with applicable laws and regulations
etc.

Environmental; condition ofland etc.

■ Absence of harmful substances such as asbestos, (orcountermeasures can be implemented for any such substances),
non-existence of soil pollution etc.
- 19 -

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 ofcompletion 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 construction of the building has been
completed and such building is leased or leasable. Properties which are owned by NBF and have become
operational at some point shall be deemed “leasable ” thereafter (including such cases as reconstruction orlarge-scale renovation of a building).
Direct Acquisition of Real Estate
One objective is for the ratio of the amount of real estate directly acquired by NBF to the total amountof Designated Assets acquired by NBF during each year to be 50% or more of Designated Real Estate.
This objective will be applicable during the period from April 1, 2002 until the existence of the measures toabate the real estate acquisition tax (“Investment Objects and Goals”, Articles of Incorporation).However,this requirement was abolished effective December 31, 2003 pursuant to amendments of the tax law.

(4) 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 in facilities and by expanding income (increasing rents etc., increasing occupancy rates,
extending the term of leases and rendering them more stable etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a mid-term to long-term basis,
lease out all operating properties included in operating assets (including installation of parking lots,
billboards etc.). When conducting such leasing, security deposits etc. and other similar monies may bereceived and said monies will be managed in accordance with the requirements of “Investment Objectives
and Policies” of the Articles of Incorporation (“Investment Objectives and Policies”, Articles ofIncorporation).
NBF is entitled to establish reserves for long-term renovations required to maintain and enhance thevalue of operating properties, reserves for payables, reserves for cash distributions and any other similar
reserves etc. (Articles of Incorporation).

- 20 -

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 23, 2004,
foreseen reserves provided from January to December 2004 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 for future construction
expenses required for spaces leased
to tenants)■ Expenses of providing “free access floor”(orraised floor); expenses for other move-inconstruction costs (partitions etc.)

Total Foreseen Amount: (annual basis)¥1,555 million(Note) In addition to the above-mentioned amount, certain amounts are set aside as cash reserves for renovation pursuant
to the administrative rules of the buildings in which NBF owns condominium interests, etc.

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 of tenants and so forth, efforts, beginning with area diversification, will be exerted to obtainadequate fire and casualty insurance, such as fire insurance, insurance for loss of rental income caused byearthquakes, owner’s liability insurance etc.
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 purpose of disclosure in Performance Information Reports etc., the value to be used fordisclosure will, in principle, be the appraisal valuation provided by a certified real estate appraiser (Articles
of Incorporation).
Disposition
In disposing of individual operating properties, selections will be made through comprehensive
research and analysis based on the forecasted income, actual and predicted fluctuations in asset value,
future prospects and stability of the area of location, risks of deterioration and obsolescence of real estateand predicted costs thereof as well as the composition of the portfolio etc. Sell/hold studies will be
periodically undertaken with respect to all operating properties (“Investment Objects and Policies”, Articles
of Incorporation).

(5) Financial Policies
Issuance of Shares
NBF may issue shares in order to undertake acquisition and renovation and so forth of assets and toprovide 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.)- 21 -

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 for the repayment of debt (including security deposits, borrowings and repayment of
obligations regarding NBF bonds etc.) (“Investment Objects and Policies”, Articles of Incorporation).
NBF will in principle, when undertaking borrowings or issues of NBF bonds, undertake short-termborrowings as a flexible method of obtaining capital required for the acquisition of new properties, andundertake mid-term to long-term borrowings at fixed interest rates, or issue NBF bonds, as a stable methodof obtaining capital.
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 suchborrowings and issues of NBF bonds will be ¥1,000,000 million. When undertaking borrowings or whenissuing 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.
Derivatives
In order to avoid risks of fluctuation in the prices of operating assets as well as risks of fluctuations ininterest rates, futures transactions, option transactions, swap transactions and forward rate transactions withrespect to Japanese interest rates may be undertaken (“Investment Objects and Policies”, Articles ofIncorporation).

- 22 -

■ Distribution Policies of NBFA.

Distributions of Profits

A registered investment corporation may deduct its cash dividends of profits from taxable income
under Japanese tax regulations if it distributes to its shareholders in excess of 90% of its taxable income andcomplies with other 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 ofIncorporation).
Earnings Available for Distributions
NBF’s earnings available for distributions is based on accounting of profits prepared in accordancewith the Investment Trust Law and the Securities and Exchange Law of Japan and in conformity withgenerally 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 theamount of total expenses, capital surplus reserves and estimated variances) calculated on each closing datein accordance with the Investment 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 forlong-term reserve for repair, reserve for outstanding claims, reserve for distributions and other reserves andallowances similar thereto which are deemed necessary 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 ofretained earnings under the Investment Trust Law of Japan, although the Investment Trusts Association ofJapan 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 rulesof the Investment Trusts Association of Japan (Article 16.2 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
- 23 -

less the amount of appropriate reserves for the current term, if NBF determines it appropriate
considering trends in macro-economic environments, real estate markets and leasing markets
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 the time 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 Boardof Directors of NBF.

C.

Method of Distributions

Distributions will be made in cash, in principle, within three months from the closing date, to suchshareholders or registered pledgees as are listed in the latest Shareholder Registry as of the closing date, in
proportion to the number 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 thedate of commencing 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-Japanese currencies as specified in the Articles of Incorporation. Please see “Ⅳ Appendix Investment
Restrictions” regarding other investment restrictions. Also, refer to " Basic Investment Policies (B)Investment Strategy" hereinabove.

- 24 -

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- 25 -

■ Overview of NBF
1. Financial Highlights
5th Period
from July 1, 2003 to
December 31, 2003

4th Period
from January 1,
2003 to June 30,
2003

3rd Period
from July 1, 2002 to
December 31, 2002

(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¥12,453
12,453
7,464
6,891
4,094
4,093

¥12,239
12,239
7,196
6,548
4,314
4,313

¥11,846
11,846
6,656
6,031
4,563
4,562

314,362
152,992
148,999
4,093

307,688
153,212
148,899
4,313

290,725
153,461
148,899
4,562

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)

280,700
545,038
14,582
14,582

280,700
545,823
15,367
15,367

280,700
546,710
16,253
16,253−−−Return on total assets

Note 2

ROE

Note 2

Capital ratio
Payout ratio
Number of days(c) / (b)(e) / (a)1.32%
（2.63%）
2.67%（5.35%）
48.7%
100.0%
184

1.44%（2.88%）
2.81%（5.63%）
49.8%
100.0%
181

1.60%（3.20%）
2.97%（5.95%）
52.8%
99.9%
184

33
511
358,940
92.3%
2,403
2,314
7,964
23,14129
446
340,497
94.8%
2,366
1,167
8,057
23,79428
441
322,344
95.0%
2,072
368
7,886
23,635

Total assets
Total shareholders’ equity (‘Net assets’)Contributed capital
Total amount of cash distribution

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)

(a)
(b)
(c)
(e)

Note 4Note 4Note 4Note 2
Note 2

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 forthe period.
Return on total assets: Income before income taxes / (Initial total assets + Total assets at end of period)÷2
ROE: Net income / (Initial shareholder’s equity + Shareholder’s 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 + Depreciation and Amortization)/ Weighted average number of common sharesissued 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 numberof tenants by building. Occupancy rate is ratio of gross leased area to total rentable area at the end of the period.

- 26 -

2. Distribution for the Current Period
Distribution per share for the current period was ¥14,582. NBF expects to distribute almost all
taxable income for the current period to be eligible for special tax treatment (Special Taxation
Measures Law of Japan Article 67-15) that allows NBF to deduct its cash dividends of profits fromtaxable income.
For the six months ended
December 31, 2003

June 30, 2003

December 31, 2002

(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¥ 4,093,179
12
4,093,167
14,582
4,093,167
14,582――¥ 4,313,553
36
4,313,517
15,367
4,313,517
15,367――¥ 4,562,325
108
4,562,217
16,2534,562,217
16,253――

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, 2003, NBF had issued 280,700 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 notcontain any provision for the issue of more than one class of shares, NBF’s common shares comprisethe sole class of shares authorized and issued by NBF.

Payment date

Remarks

March 15, 2001

Initial capital(private)

May 22, 2001
September 7, 2001
Note 1

Common Shares
outstanding
Increase
Balance(shares)

Paid-in capital

Notes

Increase
Balance(Yen in millions)

200

200

¥ 100

¥ 100

Note 1

Privateplacement

197,600

197,800

98,80098,900Note 2Public offering

82,900280,700

49,999148,899

Note 3

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 3Public offering of new units for ¥625,000 per share (excluding underwriting fee: ¥603,125) to repay debt
and to fund property acquisition.

- 27 -

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

December 31, 2003

High.
Low.

June 30, 2003

December 31, 2002

(in Yen)¥ 694,000
570,000¥ 696,000
631,000¥ 624,000
537,000

Borrowings
Borrowings by financial institution as of December 31, 2003 are shown below.
Short-term debt
Average

Balance

Lender

The Chuo Mitsui Trust and Banking Co., Ltd.
Bank of Tokyo Mitsubishi
The Norinchukin BankThe Sumitomo Mitsui Banking Corp.
The Hachijuni bank
Shinkin Central BankThe Chugoku Bank, Ltd.
Yamanashi Chuo BankThe Gunma Bank, Ltd.
The Bank of Fukuoka, Ltd.
The Shizuoka Bank, Ltd.
Mizuho Corporate Bank, Ltd.
The Yamaguchi Bank, Ltd.
The Kagoshima Bank, Ltd.
Short-term debt Total(Yen in millions)¥ 10,800
5,400
3,300
3,150
2,000
1,000
1,000
500
500
2,000
1,000
1,000
1,000
500
¥ 33,150

Long-term debt
Sumitomo Life Insurance Company

The Chuo Mitsui Trust and Banking Co., Ltd..
Yasuda Life Insurance Company

Sumitomo Trust and Banking Corp.
Nippon Life Insurance Company
The Sumitomo Mitsui Banking Corp.
The Joyo Bank, Ltd.
Daido Life Insurance Company
The Dai-Ichi Mutual Life Insurance Company
The Iyo Bank, Ltd.
Long-term debt Total
Borrowings Total

Note 1.

interestrate(%)(Note 1)

¥ 12,000
5,000
5,000
3,000
10,000
9,000
3,000
4,000
1,000
2,000
6,000
3,000
2,000
2,000
1,000
1,000
2,000
2,000
1,000
1,000
¥ 75,000¥108,150

Due on

0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%

May 21, 2004
January 9, 2004
May 21, 2004
May 21, 2004
February 6, 2004
March 22, 2004
March 22, 2004
March 16, 2004
February 3, 2004
February 5, 2004
February 5, 2004
November 4, 2004
February 27, 2004
February 27, 2004

1.7%
1.7%
2.1%
1.2%
1.3%
1.3%
2.1%
2.2%
2.2%
1.2%
1.3%
0.7%
0.7%
1.2%
0.9%
1.4%
1.2%
0.7%
0.9%
0.7%

May 23, 2008
July 16, 2009
July 16, 2011
February 3, 2010
May 23, 2006
July 16, 2007
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
July 16, 2007
August 9, 2005
September 30, 2005
March 12, 2007
May 23, 2006
May 23, 2008
February 3, 2010
March 31, 2006
September 29, 2006
March 31, 2006

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)

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.
- 28 -

Note 2.

With respect to the date of drawdown and date of repayment in case of more than one short-term loan from thesame lender, 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
and working 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)

Note 3.
Note 4.
Note 5.

1 to 2 years

2 to 3 years

5,000,000

Amount Borrowed

3 to 4 years

15,000,000

4 to 5 years

17,000,000

13,000,000

NBF Bonds
Issue
Date

Issue
No.1 Unsecured
Bonds
No.2 Unsecured
Bonds
No.3 Unsecured
Bonds
Total
Note 1.
Note 2.
Note 3.

Balance as of December
31, 2003(Yen in millions)

CouponMaturity
Date

Redemption

Use ofProceeds

Note

May 23, 2001

¥ 8,000

0.68％

May 21, 2004

BulletPayment

Note 1

Note 2

Feb 10, 2003

¥ 10,000

0.75％

Feb

9, 2007

BulletPayment

Note 1

Note 2

June12, 2003

¥ 10,000

2.00％

June 12, 2018

BulletPayment

Note 1

Note 2¥ 28,000

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−

8,000,000

3 to 4 years−

10,000,000

Others
NBF has security deposits totaling ¥18,730 million as of December 31, 2003.

- 29 -

4 to 5 years−

4. Major Shareholders
The following table sets forth our major shareholders’ information as of December 31, 2003.

Name
Mitsui Fudosan Co., Ltd. . . . . . . . . . . . . . . . .
Japan Trustee Services Bank, Ltd. . . . . . .
The Nomura Securities Co., Ltd . . . . . . .

5.

Number ofCommonAddress
SharesOwned
16,2001-1 Nihonbashi Muro-machi, 2-chome, Chuo-ku, Tokyo
8-11, Harumi 1-Chome, Chuo-ku, Tokyo
14,4549-1 Nihonbashi 1-chome, Chuo-ku, Tokyo
11,502

Obic Business Consultants Co., Ltd. . . . . .
Sumitomo Life Insurance Company . .
The Joyo Bank, Ltd. . . . . . . . .
Bank Of Ikeda . . . .
Yasuda Mutual Life Insurance Company . . .

1-1 Nishi Shinjuku 2-chome, Shinjuku-ku, Tokyo

The Chugoku Bank,Ltd. . .
Aozora Bank, Ltd. . . . . . . . . . . . . . . . .
Total

15-20 Marunouchi 1-chome, Okayama,Okayama

18-24 Tsukiji 7-chome, Chuo-ku, Tokyo
5-5 Minami-machi 2-Chome, Mito, Ibaraki
1-11 Jyounan2-Chome,Ikeda,Osaka
9-1 Nishi Shinjuku 1-chome, Shinjuku-ku, Tokyo
3-1 Kudan-Minami 1-chome, Chiyoda-ku, Tokyo

Ownership
5.7%
5.1
4.0

11,00010,000
7,002
6,946
6,712

3.9
3.5
2.4
2.4
2.3

6,712
6,630
97,158

2.3
2.3
34.6%

Categories of Shareholders（as of December 31, 2003）

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

Number ofshareholders

Number ofshares owned

140
364
134
12,130912,777

148,611
48,81833,13337,63012,508
280,700

Japan Securities Depositary Center (JASDEC) is included in “Other legal entities”.

- 30 -

Percent of
number ofshares owned
52.9%
17.4
11.8
13.4
4.5
100.0%

■ Capital Expenditures
1. Planning
NBF is planning the following capital expenditures for the renovation of the properties. The
amounts below include repairs and maintenance costs that will be expensed as incurred.
Moreover, in addition to a steady program of expenditures for construction, repair and renovationof 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
Property(Location)

Estimated
DurationObjective

Total
Amounts

Payment for theCurrent Period(from July 1, 2003
to December 31,
2003)

Cumulative
AmountPaid(Yen in millions)
Daido Life Omiya
Bldg.

Renovation of bicycle
parking area withinparking lot

From March 2004
To May 2004

¥ 34

¥ −

¥ −

2. Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥ 2,314
million in capital expenditures together with ¥ 648 million for repairs and maintenance expenses.
Name of Property
Shiba NBF Tower
Tsukuba Mitsui Bldg.
Hamamatsu City Bldg.

Other buildings

Objective
Renewal work to maintain andimprove competitiveness
Leasehold improvements for new
tenantLeasehold improvements
associated with tenant
relocation within the building androof repairs
Renovations intended to improve
the level of tenant satisfaction

Total

PeriodExpenditure(Yen in millions)
1,807
163

From July, 2003
To December, 2003

18326
¥ 2,314- 31 -

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 plan for each property.
As ofDecember 31,2003

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, 2003

(Yen in millions)¥ 2,114¥ 1,984
1,104
1,635
1,069
1,505
¥ 2,149¥ 2,114

Note 1 Upon the acquisition of Real Estate etc., NBF also assumed accumulated reserves of ¥ 811
million as of December 31,2003 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 ownershipinterest, the amount of 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, 2003

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

June 30, 2003
(Yen in millions)

December 31, 2002

¥ 438
14
38

¥ 501
13
47

¥ 497
12
38

11
12
60
¥ 573

11
12
64
¥ 648

11
12
55
¥ 625

Note: In addition to the amounts stated above, there are asset management fees of ¥ 48 million for theperiod from July 1, 2003 to December 31, 2003, ¥ 68 million for the period from January 1,
2003 to June 30, 2003 and ¥ 63 million for the period from July 1, 2002 to December 31, 2002
related to investment in properties, which were booked on each property.

- 32 -

■Trading Activities during the Current Period
1. Trading of Real Estate and Real Estate held in Trust
AcquiredName of Building
Naka-Meguro GT Tower（Note 2）

NBF Hiroshima Tatemachi Bldg.
Sapporo L-plaza
Hiroshima Fukuromachi Bldg.
Sudacho Verde Bldg.
Total

Date
September 1, 2003
September 30, 2003
November 5, 2003
November 7, 2003
December 25, 2003

Acquisition
Price(Note 1)
293
2,930
3,195
835
2,380
¥ 9,633

Date
−
−
−
−
−
−

(Yen in millions)
Transferred
CapitalTransfer Book Gain/
Price
Value
Loss
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−
−

Note 1“Acquisition price” does not include national consumption tax, regional consumption tax and miscellaneous

Note 2

On its acquisition date, the acquired portion was converted into an equity interest in the “Naka-Meguro GT

costs of acquisition.
Tower Kyouyushoukumiai” （a voluntary partnership as defined by Article 667 of the Civil Code of Japan）.

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

Category

Amount of Purchase Price etc. (Note 2) (Note 3)
Purchase Price etc. (Yen in millions)

Sale Price etc. (Yen in millions)−

9,633
Total AmountAmount of purchases from relatedparties
1,247(13.0)

Amount of sales to related parties
−

( − )

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

1,247 (100.0)

−

( − )

Total:

1,247 (100.0)

−

( − )

- 33 -

2. Fees Paid for the period from July 1, 2003 to December 31, 2003
Description of Transactions with Related Parties

Amount ofPayment (B)Total Fees Paid(A)
(Yen in millions)Category
Brokerage commissions
252
Office management fees etc.
623

Property transfer fees
Property maintenance fees

Paid toMitsui Fudosan Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsui Fudosan Co., Ltd.
Daiichi Seibi Co., Ltd.
Izumitec Co., Ltd.
Mitsui Fudosan Building Management
Co., Ltd
Mitsui Fudosan Housing Lease Co.,Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.

11
1,012

Leasing related service fees

125

(Yen in millions)

B/A

164
617
6
11
220
137
81

65.1%
99.1%
0.9%
100.0%
21.8%
13.6%
8.0%

12

1.2%

2

0.2%

1
18
16

0.1%
14.0%
13.1%

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. Effective August 1, 2003,
MF Building Management Co., Ltd. changed its name to Mitsui Fudosan Building Management Co., Ltd.
Note 2 Figures set forth above are purchase prices taken from sale and purchase agreements and do not include ¥ 2million paid to Mitsui Fudosan Co., Ltd. in settlement of fixed assets taxes etc.
Note 3 Figures in parentheses indicate percentages of total purchase prices and sale prices respectively.
Note 4

NBF leases the Naka-Meguro GT 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 office management business for
those properties to Mitsui Fudosan.

Instead, NBF Office Management Co., Ltd. has been entrusted to undertakesuch business on behalf of NBF, the owner and lessor of those properties.
Note 5 In addition to the above fees, a certain portion of the fees paid by NBF to a third party (a company supervising
investment company shares) for handling payments of principal and interest concerning No.2 and No.3 NBF
Bonds was paid by the said company to Daiwa Securities SMBC Co., Ltd.
Note 6

In addition to the above fees paid, the following have been paid to related parties for repair and maintenancework.

(Yen in millions)

Izumitec Co., Ltd.

¥ 136

Daiichi Seibi Co., Ltd

77

Mitsui Fudosan Co., Ltd.

74

Mitsui Fudosan Building Management Co., Ltd.

27

Mitsui Fudosan Housing Lease Co., Ltd.

6

Mitsui Designtech Co., Ltd.

4

- 34 -

Ⅱ

Financial Statements
Independent Auditors’ Report
Balance Sheets
Statements of Income
Statements of Shareholders’ Equity
Statements of Cash Flows
Notes to Financial Statements- 35 -

- 36 -

NIPPON BUILDING FUND INC.
BALANCE SHEETSAs of December 31, 2003 and June 30, 2003

As of
As of
December 31,
June 30,
2003
2003(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents
Tenant receivables
Consumption tax refund receivables and other 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
assetsTotal 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: 280,700 shares
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity¥ 30,418
136
199
30,753¥ 33,448
160
281
33,889170,904
103,756
1,777(10,920)

166,297
96,241
1,724(8,539)16,816282,333
1,276¥ 314,362

16,818272,541
1,258¥ 307,688¥ 33,150
8,000
4,059
1,830
569
47,60895,00018,73032
161,370¥ 26,950
8,000
1,807
1,820
500
39,07794,00021,36930
154,476

148,899

148,899

4,093
152,992¥ 314,362

4,313
153,212¥ 307,688

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

- 37 -

NIPPON BUILDING FUND INC.
STATEMENTS OF INCOME
For the six months ended December 31, 2003 and June 30, 2003 and December 31, 2002

For the six months ended
December 31, 2003

June 30, 2003

December 31, 2002

(Yen in millions)

Revenues:
RentalOthersTotal 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
Amortization of deferred bond issue costs
Other expenses, net
Income Before Income Taxes
Current and deferred income taxes
Net Income¥ 10,476
1,977
12,453¥ 11,111
1,128
12,239¥ 10,366
1,480
11,846

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

1,684
1,093
47
408
950
2,366
501
147
7,196
5,043
1
(679)
(27)
(24)
4,314
(1)
¥ 4,313

1,542
974
47
521
875
2,072
496
129
6,656
5,190
1
(585)
(6)
(37)
4,563
(1)
¥ 4,562

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

- 38 -

NIPPON BUILDING FUND INC.
STATEMENTS OF SHAREHOLDERS’ EQUITY
For the six months ended December 31, 2003 and June 30, 2003 and December 31, 2002

(Yen in millions)
Number ofCommon Common Retained
Total
SharesShares Earnings
Balance as of June 30, 2002 . . . . . . . . . . . . . . . . . . . . . . . . 280,700¥148,899¥4,492¥153,391

Cash Dividends declared――(4,492)(4,492)

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

―

―

4,562

4,562

Balance as of December 31, 2002 . . . . . . . . . . . . . . . . . . .

280,700

148,899

4,562

153,461

Cash Dividends declared――（4,562）（4,562）

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

―

―

4,313

4,313

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

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

- 39 -

NIPPON BUILDING FUND INC.
STATEMENTS OF CASH FLOWSFor the six months ended December 31, 2003 and June 30, 2003 and December 31, 2002

For the six months ended
December 31, 2003

June 30, 2003

December 31, 2002

(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 in accounts payable
Increase in rents received in advanceCash payments of interest expense
Other, net
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Payments for purchases of investment properties
Proceeds from tenant security deposits
Payments for tenant security deposits
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 deferred bond issue costs
Payment of dividends
Net Cash Provided by Financing Activities
Net Change in Cash and Cash Equivalents
Cash and cash equivalents at the beginning of theperiodCash and Cash Equivalents at the end of the period¥ 4,094
2,403
27
782
24
2,252
10
(769)
195
9,018

¥ 4,314
2,366
27
679
(55)
85
73
(618)
(105)
6,766

¥ 4,563
2,072
6
585
78
334
79
(557)
137
7,297

(12,249)
2,621(5,259)25(6)(68)(14,936)(17,472)
2,914(4,397)
21
(10)
(42)
(18,986)(14,991)
2,979(1,781)6(9)(42)(13,838)

48,700(42,500)
1,000−(4,312)
2,888(3,030)125,150(136,650)
30,000(126)(4,560)13,814
1,594

117,100(112,100)
5,000−(4,488)5,512(1,029)33,44831,85432,883¥ 30,418¥ 33,448¥ 31,854

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

- 40 -NOTES TO FINANCIAL STATESMENTS
Nippon Building Fund Inc.
December 31, 2003, June 30, 2003 and December 31, 2002

Note 1 –Organization and Basis of Presentation
Organization
Nippon Building Fund Inc. (formerly: "Office Building Fund of Japan, Inc." The current name wasadopted on March 14, 2003, hereinafter "NBF") was formed on March 16, 2001 as an investment
corporation under the Investment Trust Law of Japan with Mitsui Fudosan Co., Ltd., The Chuo Mitsui
Trust and Banking Co., Ltd., and Nippon Building Fund Management Ltd. (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 the remaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public
offering of common shares. Those common shares are listed on the J-REIT section of the Tokyo Stock
Exchange.
As of December 31, 2003, NBF had ownership or beneficiary interests in 33 office properties
containing approximately 358,940 rentable square meters of office space. As of December 31, 2003, NBF
had leased office space to 511 tenants engaged in a variety of businesses. The occupancy rate for the
Office Properties was approximately 92.3%.

Basis of Presentation
NBF maintains its records and prepares financial statements in Japanese yen and in accordance withthe provisions set forth in the Investment Trust Law of Japan and the Securities and Exchange Law ofJapan, and in conformity with accounting principles generally accepted in Japan. Certain accounting
principles and practices generally accepted in Japan are different from International AccountingStandards and standards in other countries in certain respects as to application and disclosure
requirements. Accordingly, the accompanying financial statements are intended for use by those who are
informed about Japanese accounting principles and practices. The accompanying financial statements
have been translated from the audited financial statements that were prepared for Japanese domestic
purposes from accounts and records maintained by NBF and were filed with Local Finance Bureau of the
Ministry of Finance as required by the Securities and Exchange Law. NBF does not prepare consolidated
financial statements, as NBF has no subsidiaries.
In preparing the accompanying financial statements, certain reclassifications and modifications havebeen made in the financial statements issued domestically in order to present them in a form that is more
- 41 -

familiar to readers outside Japan. The statements of shareholders’ equity and cash flows have been
prepared for the purpose of inclusion in the accompanying financial statements, although such statements
were not required for domestic purposes and were not filed with regulatory authorities.

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

Investment Properties
Investments properties are recorded at cost, which included the allocated purchase price and related
costs and expenses for acquisition of the office properties and the beneficiary interests of properties intrust. Property and equipment balances are depreciated using the straight-line method over estimateduseful lives. The estimated useful lives of the buildings vary from 16 to 50 years. Costs related to therenovation, construction and improvement of properties are capitalized. Expenditures for repairs andmaintenance which do not add to the value or prolong the useful life of a property, are expensed as
incurred.

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

Income Taxes
Income taxes are accounted for on the basis of income for financial statement purposes. The tax effectof temporary differences between the amounts of assets and liabilities for financial statements and forincome 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 estate taxes related to the period following the purchase date of each property through the end of
the year and the equivalent amounts of those allocated portions are capitalized as part of the acquisition
costs of the relative properties. Capitalized real estate taxes amounted to ¥19 million for the period ended
December 31, 2003 and ¥96 million for the period ended June 30, 2003 and ¥13 million for the period
ended December 31, 2002, respectively.

Revenue Recognition
NBF operates office properties that are rented to tenants on lease terms of generally two years, withmonthly payments due in advance. Rental and other property income is recorded when due from tenants
and is recognized monthly as it is earned. Common area charges provided for in tenant leases arerecognized 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 relevantbalance sheet and income statement accounts.
- 42 -

Note 3 – Schedule of Other Tangible Assets
Other tangible assets as of December 31, 2003 and June 30, 2003 consisted of the following:
As of December 31, 2003
As of June 30, 2003
(Yen in millions)

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. . . . . . . . . .

Total

Acquisi
-tion
Costs

Accumu-latedDepreci-ationBook
Value

Acquisi
-tion
Costs

Accumu-latedDepreci-ation

Book
Value

¥ 350
150
16
422
565
267
7
¥1,777¥ (34)
(7)
(2)
(111)
(155)
(116)
¥(425)

¥ 316
143
14
311
410
151
7
¥1,352

¥ 314
26
4
396
562
244
178
¥1,724¥ (16)
(3)
(1)
(96)
(123)
(97)
¥ (336)

¥ 298
23
3
300
439
147
178
¥ 1,388

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 theminimum 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, 2003 and June30, 2003 mainly ranging from 0.48% to 0.52% and from 0.48% to 0.52%, respectively. Long-term debt isfixed rates and as of December 31, 2003 and June 30, 2002 consisted of the following:(Yen in millions)
As of
As of
June 30,
December 31,
2003
2003
Unsecured loans due 2005 to 2012 principally from banks andinsurance companies with interest rates mainly ranging
from 0.7% to 2.2%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 75,000¥ 74,000
0.68% unsecured bonds due 2004. . . . . . .. . . . . . . . . . . . . . . . . .
8,000
8,000
0.75% unsecured bonds due 2007. . . . . . .. . . . . . . . . . . . . . . . .
10,00010,0002.00% unsecured bonds due 2018. . . . . . .. . . . . . . . . . . . . . . . .
10,00010,000103,000
102,000
Less: amount due within one year
8,000
8,000
¥ 95,000¥ 94,000
The annual maturities of long-term debt as of December 31, 2003 were as follows:(Yen in millions)2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
¥ 8,000
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,0002006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,0002007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27,0002008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,000
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35,000During the period ended December 31, 2003, NBF obtained committed credit lines of ¥30 billion with- 43 -

certain financial institutions to reduce refinancing risk. The unused amount of such committed credit lines
was ¥30 billion at December 31, 2003.

Note 6 –Rental Revenues and Expenses
Rental revenues and expenses for the periods ended December 31, 2003, June 30, 2003 and December 31,
2002 were as follows:
For the six months ended
December 31, 2003

June 30, 2003

December 31, 2002

(Yen in millions)

Revenues from Property Leasing :Rental:Rental revenues . . . . . . . . . . . . . . . . . . .
Common area charges. . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . .
Others: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- 44 -¥ 9,154
1,254
68
10,476¥ 9,598
1,448
65
11,111¥ 8,925
1,404
37
10,366

284
60
684
938
11
1,977
12,453

281
61
555
213
18
1,128
12,239

255
59
563
585
18
1,480
11,846

1,632
1,097
648
46
1,065
2,403
6,891

1,684
1,093
408
47
950
2,366
6,548

1,542
974
521
47
875
2,072
6,031

¥ 5,562¥ 5,691¥ 5,815

Note 7 –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, 2003, June 30, 2003 and December 31,
2002, 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, 2003

Statutory effective tax rate . . . .
Deductible dividends paid . . . . .
Others . . . . . . . . . . . . . . . . . . . .
Effective tax rate . . . . . . . . . . . .

June 30, 2003

39.39 %
(39.38)%0.01
0.02 %

December 31, 2002

39.39 %
(39.38)%0.01
0.02 %

39.39 %
(39.37)%0.00
0.02 %

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

Note 8– Per Share Information
Information about earnings per share for the periods ended December 31, 2003, June 30, 2003 andDecember 31, 2002 and net assets per share as of December 31, 2003 and June 30, 2003 was as follows.
The computation of earnings per share and net assets per share is based on the weighted average numberof common shares outstanding during the period.
For the six months ended
December 31, 2003

June 30, 2003

December 31, 2002

（Yen）

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

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

¥ 14,582¥ 15,367¥ 16,253

280,700

280,700

280,700

As of

As of

December 31, 2003

June 30, 2003

¥ 545,038¥ 545,823- 45 -

Note 9–Leases
NBF leases its real estate properties to outside parties under non-cancelable operating leases. As of
December 31, 2003 and June 30, 2003, the future lease revenues under the non-cancelable operating leases
are as follows:
As of December 31, 2003

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

As of June 30, 2003

(Yen in millions)¥ 7,940
17,609¥ 25,549¥ 6,609
18,390¥ 24,999

Note 10– 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 ¥14,582 per share aggregating ¥ 4,093 million to shareholders of record on December 31,
2003.

- 46 -

Ⅲ

Overview of Related Operating Entities

Summary of the Business RelationshipAs an investment corporation, NBF undertakes management of funds obtained from investors byinvesting mainly in Real Estate etc. The following sets forth in general terms the business relationships
related to the asset management with related operating entities and their businesses.

(1) Business Related to Asset Management and Real Estate etc. Acquisition
NBFM, as the asset management company of NBF, studies and determines whether or not to acquire
Real Estate etc. as part of its asset management of NBF. NBFM is entitled to require that NBF Office
Management Co., Ltd., as Property Acquisition Advisory Agent, provide advice concerning the acquisition
of Real Estate etc. In order to perform such advice, the Property Acquisition Advisor is entitled to receivenecessary materials etc. from Mitsui Fudosan Co., Ltd., as Property Acquisition Assistant Advisor.
When NBF acquires Real Estate etc., Mitsui Fudosan Co., Ltd., as Property Transfer Agent, will
undertake supervision of the repair of existing defects and delivery of notifications etc. which must occur
prior to the delivery of Real Estate etc., in advance of commencing the management of Real Estate etc.
With the exception of a certain portion of such business, all such business will be entrusted to NBF Office
Management Co., Ltd., as Property Transfer Sub-Agent.

(2) Business Related to Management etc. of Real Estate etc.
In the event that NBF acquires Real Estate etc., Mitsui Fudosan Co., Ltd., as Office Management
Business Agent, will, upon an entrustment from NBF, undertake office management of said Real Estate etc.
In addition to above, while the trustee will possess managerial authority over any real estate held in
trust, NBF, as beneficiary, will have certain rights to instruct, and the Office Management Business Agent,
as agent and upon an entrustment from NBF, will perform on behalf of the trustee, such businessconcerning office management of such real estate held in trust.
Among Office Management Business concerning Real Estate etc. acquired by NBF, all business,
excluding a certain portion of such business, will be entrusted to the Office Management Business
Sub-Agent.
Furthermore, businesses such as acting as intermediary in the execution of leasing agreements
including the delivery of information regarding the leasing market in general, possible relocation of existing
tenants (vacancies), identification of prospective new tenants, maintaining custody of information regarding
business opportunities will be conducted for the existing tenants by NBF Office Management Co., Ltd. etc.
as Existing Tenant Intermediary Agent, and for other than existing tenants, by Mitsui Fudosan Co., Ltd. etc.
as New Tenant Intermediary Agent.

- 47 -

(a) Nippon Building Fund Inc. ("NBF", an Investment Corporation)
Organization of NBF
The number of executive directors of NBF is one or more, and the 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).
As of December 31, 2003, the organs of 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 the executive directors and supervisory directors.
As of December 31, 2003, members of the Board of Directors of NBF were as set forth in the tablebelow, each of which was reelected at the 3rd general meeting of NBF held on March 14, 2003 for 2
years terms commencing March 17, 2003.
Name of executive directors andsupervisory directors
Toshihiko Fukase
Koichi Nishiyama
Tadashi Niizawa
Tomio Hirota
Akira Nishizawa
Nobutoshi Kozuka
Note

Title
Executive Director
Executive Director
Supervisory Director
Supervisory Director
Supervisory Director
Supervisory Director

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.

General Meeting of Shareholders
Certain matters concerning NBF set forth in the Investment Trust Law of Japan or its Articles ofIncorporation are determined by the general meeting of shareholders. The general meeting ofshareholders of NBF is held once or more during each two year period. The time for convocation ofa meeting is not fixed. The meetings are to take place in Chuo-ku or any neighboring ward in Tokyo.
The general meeting of shareholders is to be convened by public notice at least two months prior to thedate of meeting as well as by notice to be sent to each shareholder at least two weeks prior to such date
(Article 91.1 of the Investment Trust Law of Japan). In principle, a resolution may be adopted by amajority of the voting rights of those present; provided, however, that with respect to certain material
matters such as amendment of the Articles of Incorporation, a resolution must be adopted by two-thirdsof the total voting rights (special resolution) of the shareholders present who represent a majority of allissued and outstanding shares.
Policies of asset management by NBF are set forth in its Articles of Incorporation. In order tochange the policies of asset management set forth in the Articles of Incorporation, the Articles ofIncorporation must be amended pursuant to the procedures for special resolutions set forth above.
NBF has entered into an Asset Management Entrustment Agreement with NBFM, an asset
management company, and entrusted business such as managing the assets of NBF (herein “Managed
Assets”) to NBFM. In the event that NBFM is to terminate the Asset Management Entrustment
Agreement, it must obtain the agreement of NBF, and in order for the executive directors to give suchagreement, they must obtain the approval of the general meeting of shareholders. Also, in the event- 48 -

NBF terminates the Asset Management Entrustment Agreement, it must, in principle, be determined byresolution of the general meeting of shareholders.
Executive Directors, Supervisory Directors and Board of Directors
In addition to executing the business of NBF, the executive directors, as representatives of NBF,
are authorized to conduct any and all judicial or non-judicial acts in relation to the business of NBF
except for executing asset management. However, certain acts such as agreeing to the termination by
NBFM of the Asset Management Entrustment Agreement, convening the general meeting ofshareholders, entrusting administrative affairs to the Administrative Agent, execution of an asset
management entrustment agreement or asset custody entrustment agreement, or any other businessundertaking set forth in the Investment Trust Law of Japan, need to be approved by the Board of
The supervisory directors are authorized to supervise the business conduct of the
Directors.
executive directors. The Board of Directors has the authority to approve certain matters concerningbusiness as stated above and also has such authority as is set forth in the Investment Trust Law ofJapan and the Articles of Incorporation as well as the authority to supervise the business conduct of theexecutive directors. Resolutions of the Board of Directors will be adopted at a meeting at which amajority of directors comprising the Board of Directors is present and with the consent of the majorityof such attending directors.
The rules of the Board of Directors of NBF stipulate that an executive director or supervisory
director may not participate in a resolution in which such director has any specific interest, and that, insuch case, such executive director or supervisory director will be excluded from the calculation of thenumber of executive directors and supervisory directors present.
Change of Directors
The term of office of the executive directors and supervisory directors is two years commencing
upon their appointment; provided, however, that the term of office of an executive director orsupervisory director who is appointed due to a vacancy or an increase in the number of directors willbe the same as the remaining term of his predecessor or the concurrent directors (Articles ofIncorporation).
The executive directors and supervisory directors are selected and appointed at the general
meeting of shareholders (Articles 95 & 100 of the Investment Trust Law of Japan, Articles ofIncorporation) except for those who are deemed selected and appointed upon the establishment of NBF
based on the provisions of the Investment Trust Law of Japan (Article 72 of the Investment Trust Law
of Japan, Articles of Incorporation).
Executive directors and supervisory directors may be removed by a special resolution of thegeneral meeting of shareholders. If the motion for removal of an executive director or supervisory
director is rejected in spite of the fact that there was material misconduct or violation of laws or the
Articles of Incorporation with respect to the duties of such executive director or supervisory director,
any shareholder representing 3% or more of the total issued and outstanding shares (and who has beena shareholder with respect to said shares for not less than six months) may, within thirty days of said
resolution, submit a demand for the removal of such executive director or supervisory director to thecourt (Articles 99.1 & 104 of the Investment Trust Law of Japan, Article 257 of the Commercial Codeof Japan).
- 49 -

Appointment of Third Parties
Under the Investment Trust Law of Japan, due to the legal requirement of external asset
management, the Board of Directors of NBF has limited functions which include approving thecommencement of any bond offering and the appointment of a Bond Trustee for any of NBF bonds,
issuance of new shares, convocation of the general meeting of shareholders, termination of the AssetManagement Entrustment Agreement (subject to approval by the general meeting of shareholders),
financial documents, appointment of NBF administrative service provider, any agreements pertaining
to asset management and asset custody, and any payment of fees, charges or other expenses pertaining
to asset management and asset custody.
NBF is required under the Investment Trust Law of Japan to appoint third parties to undertake its
management and administrative functions, including the management of its properties. Related
operating entities to NBF means the asset management company that performs management of theassets of NBF, the Administrative Agent of NBF, the Asset Custodian, the Bond Trustee and so forth
involved in the management of NBF, the names and related functions of which are set forth below.

(b) 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
December 31 2003, 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 relationshipwith 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 ( (1)in the diagram on page 57 ) based on an entrustment from NBF in accordance with the Articles ofIncorporation of NBF and the Investment Objects and Policies 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 and pursuant to an Agreement for General Administration Regarding the Management ofInstitutions ( (2) in the diagram on page 57 ) .

- 50 -

Fees for the Asset Management Operation
Management Fees 1
The amount equivalent to 2.5% effective from July 1, 2003 of the amount of the revenue arisingfrom Real Estate etc. as calculated on each closing date (provided, however, that revenues from thesale 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 aloss is carried 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 bepayable.
Management Fees 3
In the event that Real Estate etc. is newly-acquired, compensation equivalent to the total amountof the acquisition price of said Real Estate etc.(meaning the acquisition price of both land andbuildings, and in the event of the simultaneous acquisition of multiple units of Real Estate etc., theacquisition price of each item; provided, however, that national consumption tax, regional
consumption tax and miscellaneous costs of acquisition are excluded) multiplied by the following
percentage rates will, in principle, be payable; provided, however, that with the approval of thedirectors of NBF, compensation will be calculated within the scope decided 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
History of NBFM
NBFM is an Asset Management Company which is a limited company duly established under thelaws of Japan. Major events in the history of NBFM are as follows.
September 19, 2000
November 17, 2000
January 29, 2001
February 15, 2001
March 7, 2001
March 22, 2001
May 23, 2001
June 16, 2001
March, 2003

EstablishedObtained license as a building lots and building transactions agent underthe Building Lots and Building Transactions Law
Obtained approval as a discretionary transaction agent under the Building
Lots and Building Transactions Law
Registered as a general real estate investment advisor under the Real
Estate Investment Advisor Registration Regulations
Obtained approval as an Asset Management Company under theInvestment Trust Law of Japan
Increased capital from ¥100 million to ¥198 million
Changed name (from “MF Asset Management Co., Ltd.” to "Office
Building Fund Management 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.")- 51 -

List of Shareholders （as of December 31 2003）
Name

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

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

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

Directors and Staff
As of December 31, 2003 the directors and corporate auditors of NBFM are as follows. The
staff other than directors and auditors of NBFM is comprised of 14 persons.
Name of Directors and Auditors
Koichi Nishiyama
Kenji Iino
Satoru Yamanaka
Yasuo Kitagawa
Tamotsu Shinyama
Yoshinori Nishitsuji
Noriaki Moromachi

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

Outline of Financial Condition
An outline of the financial condition of NBFM is as follows.
Outline of Principal Assets and Liabilities for the Most Recent Fiscal Year
Current as of March 31, 2003
Total Assets
Total Liabilities
Shareholders’ Equity

Yen in thousands
1,055,131
183,892
871,238

Profit & Loss for the Most Recent Fiscal YearFirst Fiscal Year
From: April 1, 2002
To: March 31, 2003
Operating Income
Ordinary Profit
Net Income

Yen in thousands
1,129,810
574,692
318,834- 52 -

(c) The Chuo Mitsui Trust and Banking Co., Ltd. (Manager of General Administration regarding
Share Transfers and General Asset Custodian)
The Chuo Mitsui Trust and Banking Co., Ltd. performs commercial banking and trust businesspursuant to the Bank Act and the Trust Law in Japan. As of September 30, 2003 the Bank had paid-in
capital of ¥351 billion. As of December 31, 2003, the Bank owned 2,000 shares of NBF. There are no
concurrent directorships with NBF.
Operation- acting as a Transfer Agent pursuant to a Share Transfer Entrustment Agreement ( (3) in the diagram on
page 57 ), based on an entrustment from NBF, creates, controls and maintains the Shareholder
Registry and Beneficial Shareholder Registry, transfers names of owners of shares, delivers investment
share certificates, prepares convocation notices for the general meeting of shareholders and performs
other administration work concerning the procedures for the calculation and payment of cash
distributions as well as the issue of new shares etc.
- acting as an Asset Custodian pursuant to an Asset Custody Agreement ( (4) in the diagram on page 57 )and based on an entrustment from NBF , undertakes custody of written documents, including
documents required to prove ownership of assets owned by NBF, such as real estate registration
documents, beneficiary certificates, contracts, securities and other certificates and instruments andother documents.

(d) Heisei Kaikeisya Tax. Co. (Formerly:Akira Sugai of Heiseikaikeisha Accounting Office)(General
Agent Concerning Accounting Business Etc.)
Heisei Kaikeisya Tax. Co. is an Accounting Office. There is neither a capital relationship nor any
concurrent directorships with NBF.
Operation- acting as an Accounting Agent pursuant to a General Accounting Business Entrustment Agreement( (5) in the diagram on page 57 ) and based on an entrustment from NBF, undertakes the preparation offinancial and accounting documents and tax-related affairs.

(e) Mitsui Fudosan Co., Ltd. (Office Management Business Agent, Property Acquisition Assistant
Advisor, Property Transfer Agent and New Tenant Intermediary Agent)
Mitsui Fudosan Co., Ltd. performs comprehensive real estate business, such as real estatedevelopment, leasing, sales of housing, office building and land, brokerage and so forth. As of
September 30, 2003, Mitsui Fudosan had paid-in capital of ¥134 billion. As of December 31, 2003,
Mitsui Fudosan owned 16,200 shares of NBF. There are no concurrent directorships with NBF.

- 53 -

Operation- based on Office Management Agreements ( (6) in the diagram on page 57 ) concluded with respect tooffice property(ies), performs Office Management Business concerning Real Estate Real Estate etc.
acquired by NBF.
Excluding a portion of such business, entrusts all business (herein "Subcontracted Office
Management Business ") to NBF Office Management Co., Ltd. ( (7) in the diagram on page 57 )(Note) Office Management“Office Management”, as defined by Mitsui Fudosan group, means the active and fully-integrated
management of office properties,. “Office Management Business” is collectively defined to include
profit management, interfacing with tenants, planning renovations, emergency management and soforth concerning Real Estate etc. acquired by NBF as well as real estate held in trust, providing
instructions to trustees, and similar trust representative business including the provision of accounting
support.
- based on a Supplemental Property Acquisition Advisory Agreement ( (11) in the diagram on page 57 )assists NBF Office Management Co., Ltd. in performing Property Acquisition Advisory Businessincluding preparation and gathering of documents, conducting investigations etc. as required forundertaking the Property Acquisition Advisory Business for NBFM (hereinafter "Supplemental
Property Acquisition Advisory Business").
- based on a Property Transfer Agency Business Agreement ( (8) in the diagram on page 57 ) when NBF
acquires Real Estate etc., in order to avoid thereafter hindering the entrustment of management of realestate and having received a request from NBF, undertakes supervision of the repairs of existing
defects etc. and delivery of notifications etc. which must occur prior to the delivery of real estate, in
advance of commencing the management of real estate.
- excluding a portion of such business, entrusts all Property Transfer Agency Business (herein"Subcontracted Property Transfer Agency Business") to NBF Office Management Co., Ltd. ( (9) in the
diagram on page 57 )- based on a New Tenant Intermediary Business Agreement ( (13) in the diagram on page 57 ), acts as anintermediary concerning the execution of leasing agreements (hereinafter "New Tenant IntermediaryBusiness") including delivery of information regarding the leasing market in general, and possible
relocations of potential tenants other than existing tenants to, NBF.
Fees for the Office Management Operation
Entrustment Business Fees
The total amount of both fees described below payable pursuant to each Office Management
Agreement, which in the case of real estate is paid by NBF, and in the case of real estate held in trust,is paid from the trust assets related to the real estate held in trust.
・ 2.5% effective from July 1,2003 of revenue arising from each item of Real Estate etc. as
calculated on each closing date (provided, however, that revenues from the sale of Real Estateetc. and other Managed Assets will be excluded);- 54 -

・ 3% of net operating income before deduction of Entrustment Business Fees and amount ofdepreciation (hereinafter “Adjusted NOI”); provided, however, that income from the sale ofReal Estate etc. and other Managed Assets is excluded herefrom; and further provided that
notwithstanding the foregoing, if Adjusted NOI becomes zero or negative, no fees based on
Adjusted NOI will be payable.
Construction Supervision Fees
In the event that the Office Management Business Agent prepares plans and undertakes supervision ofbuilding-maintenance construction or tenant improvements and large-scale renovation, construction
supervision fees calculated per instance in accordance with construction cost (before consumption tax)
as described below will be payable.
・ No Fees for construction cost less than ¥0.5 million
・ Fees of 5％ of construction cost from ¥0.5 million up to and excluding ¥10 million
・ Fees of ¥0.5 million plus 3% of construction cost from ¥10 million up to and excluding ¥100
millionNote

Construction supervision fees will be determined on a case-by-case basis pursuant to separate
discussions regarding execution of extraordinarily large-scale renovation with respect tosupervision of planning and construction, negotiations with tenants, neighborhood andadministration agency concerning the execution of construction projects which areconsidered to be very large compared to ordinary construction projects, including
construction cost exceeding ¥100 million.

Transfer Supervision Fees
If NBF or the Trustee entrusts supervision of management of assets to the Office Management
Business Agent as representative of the seller of Real Estate etc., Transfer Supervision Fees (including
costs of preparation to conduct leasing business), being the amount equivalent to the actual costs ofsupervision of the delivery of documents etc., will be paid as separately determined by discussions.

(f) NBF Office Management Co., Ltd. (Office Management Business Sub-Agent, Agent for Vicarious
Execution of Office Business, Property Transfer Sub-Agent, Existing Tenant Intermediary Agentand Property Acquisition Advisor, herein "NBFOM")
NBFOM engages solely in businesses concerning office management of NBF and is a 100%
owned subsidiary of Mitsui Fudosan Co., Ltd. as of December 31, 2003. As of September 30, 2003,
NBFOM had paid-in capital of ¥10,000,000. There is neither a capital relationship nor any
concurrent directorships with NBF.
Operation- upon an entrustment from Mitsui Fudosan Co., Ltd. and pursuant to an Office Management Business
Sub-Agent Agreement ( (7) in the diagram on page 57 ), performs Subcontracted Office Management
Business (as defined below)- based on a Vicarious Execution of Office Business Entrustment Agreement ((14) in the diagram on- 55 -

page 57 ) concluded with respect to office property(ies) for which certain Office Management
Business activities have not been entrusted to third parties, performs said Office Business
Management activities in lieu of the owners and lessors of said buildings.
- upon an entrustment from Mitsui Fudosan Co., Ltd. and pursuant to a Property Transfer Sub-Agent
Agreement ( (9) in the diagram on page 57 ), performs subcontracted Property Transfer Agency
Business (as defined below)- based on an Existing Tenant Intermediary Business Agreement ( (12) in the diagram on page 57 ), acts
as an intermediary concerning the execution of leasing agreements, including delivery of information
regarding Real Estate etc. acquired by NBF to existing tenants and regarding possible relocations of,or expansions of leased space occupied by, existing tenants to NBF (Existing Tenant IntermediaryBusiness).
- based on a Property Acquisition Advisory Agreement ( (10) in the diagram on page 57 ), when NBFM
is to acquire Real Estate etc., advises NBFM concerning study and determination of the acquisition ofsuch Real Estate etc.

- 56 -

Diagram of Related Operating Entities

Nippon Building FundManagement Limited(“NBFM”)
As Asset Management
Company（１）,（２）

Nippon Building
Fund Inc.

(“NBF”)（３）,（４）As Trust
Beneficiary
Board of Directors
Executive directors
Supervisory
directors

（１４）
（１０）

The Chuo Mitsui
Trust and Banking
Co.,Ltd.
.As Manager of General
Administration regarding
Share Transfers andGeneral Asset Custodian

Heisei Kaikeisha
Tax. Co.

（５）（８）

Real estate trust
agreements（６）

Mitsui FudosanCo., Ltd.

Entities relating to
NBF Bonds

Trust Banks（１３）

As Trustee(1)Asset Management Entrustment Agreement(2)General Administration Regarding the Management of Institutions

（７）

（９）

（１１）
（１２）

(3)Share Transfer Entrustment Agreement(4)Asset Custody Agreement(5)General Accounting Business Entrustment Agreement(6)Office Management Agreements(7)Office Management Business Sub-Agent Agreement(8)Property Transfer Agency Business Agreement(9)Property Transfer Sub-Agent Agreement

NBF Office Management
Co., Ltd. (“NBFOM”)(10)Property Acquisition Advisory Agreement(11)Supplemental Property Acquisition Advisory Agreement(12)Existing Tenant Intermediary Business Agreement(13)New Tenant Intermediary Business Agreement(14) Vicarious Execution of Office Business Entrustment Agreement

Note:
This diagram indicates, in the event that NBF holds real estate held in trust, the principal contractual relationships andentities.

In the event NBF directly holds real estate, the parties to contracts (6) and (13) are NBF and Mitsui Fudosan Co.,

Ltd., and as for contract (12), NBF and NBFOM.

In the case of other forms of ownership, the contracts and their parties(entities) may vary.
With respect to contracts and entities not included in this diagram, for example, building security and maintenance etc., theProperty Maintenance Company will perform pursuant to a Property Maintenance Agreement.

In the event that NBF

acquires real estate directly, said agreement will be by and among the Property Maintenance Company, NBF and NBFOM.
In the event NBF acquires real estate held in trust, the agreement will be by and among Trust Banks as Trustee, the Property
Maintenance Company and NBFOM.
- 57 -

Ⅳ Appendix■

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

A.

Principal Investment Objectives among Designated Assets

NBF will principally invest in the below-listed Designated Assets with the objective of assuring steady
growth and 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 assetsof 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 islimited to those the assets of which are primarily invested and Managed Assets principallyreferred 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 theassets of which are primarily invested and Managed Assets principally referred to inparagraphs (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 theassets of which are primarily invested and Managed Assets principally referred to inparagraphs (1) and (2) above).
(7) Investment Securities (meaning those specified in Article 2.1.7.2 of the Securities andExchange Law of Japan; provided, however, that this is limited to those the assets of which
are primarily invested and Managed Assets principally referred to in paragraphs (1) and (2)above).
(8) Beneficiary Certificates of Money Trust (limited to those the trust assets of which areprimarily invested and Managed Assets referred to in paragraph (1) above).

- 58 -

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 2.1.3.2of the Securities and Exchange Law of Japan; provided, however, that this is limited toasset-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 of the government ordinance regarding the Investment Trust Law of Japan).
(8) Beneficiary Certificates of Money Trust invested and managed for the purpose of any of theforegoing items.
Moreover, in order to avoid risks of fluctuation in the prices of the Managed Assets as well as risks offluctuations in interest rates, futures transactions, option transactions, swap transactions and forward ratetransactions with respect to Japanese interest rates may be undertaken.

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. Moreover, NBF may invest in equity interests of voluntary partnerships as
defined by Article 667 of the Civil Code of Japan associated with investment in real estate, lease rights or
superficies (but limited to investment in partnerships established with contributions of real estate, leaserights or superficies and having the objective of leasing, operating and managing etc. the same).

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.

- 59 -

■ Investment Restrictions
A. The investment restrictions specified in the Articles of Incorporation and the asset management
guidelines applicable to NBF.
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). Please also refer to "Investment
Policies of NBF 1. Basic Investment Policies B. Investment Strategy" herein.
Subscription and Margin Trading of Securities
NBF may not subscribe to, or conduct margin trading of, securities.
Borrowing
See “Investment Policies of NBF(5) Financial Policies”

1. Basic Investment Policies B. Investment Strategy

Concentration of investment
There is no limitation on concentration of investment. See “Investment Policies of NBF
Investment Policies B. Investment Strategy (2) Strategy for Creation of the Portfolio”.

1.Basic

Investment in Other Funds
See “Ⅳ Appendix Investment Objects A. Principal Investment Objects amongst Designated Assets”.
The real estate held by such funds may not include any real estate located outside of Japan (Articles ofIncorporation).
Investment in Assets Lacking Liquidity
There is no limitation on investment in assets lacking liquidity.
Compliance with Laws and Regulations
The Managed Assets of NBF will be managed in compliance with Investment Trust Law of Japan andrelated 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 tothe business of managing the assets of said investment corporation. As a result, an investment corporation
is subject to certain investment restrictions (all references in parentheses below are to the provisions of theInvestment Trust Law of Japan) besides restrictions applied to a registered investment corporation. NBF
will naturally comply with such investment restrictions, a general overview of which follows.

- 60 -

Reciprocal Transactions with Investment Corporations (§34.3.1.5)
Transactions between investment corporations, the assets of which are managed by an asset managementcompany are prohibited except for certain cases specified in the provisions of the government ordinanceregarding the Investment Trust Law of Japan that are considered unlikely to result in failure to protect theinterests of shareholders.
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
are prohibited 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 ofshareholders.
Transactions for the benefit of Third Parties (§34.3.1.6)
An asset management company may not undertake transactions in certain securities based on fluctuationsin the price, 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
and conditions for such transaction, and further, such transaction upon said conditions would be harmful tothe 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 theInvestment 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 of damaging 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 ofpledge, unless it 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 anotherinvestment 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.
- 61 -

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 prohibitedfrom committing any of the following acts in connection with transactions with an Interested Party etc.
"Interested Party etc." as used herein means a person who holds 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. ofan asset management company undertakes a transaction which harms the interests of NBF withthe 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 objectiveof benefiting an Interested Party etc. of NBFM.

c)

Undertaking transactions clearly recognized to be unnecessary in light of the management policies
for the assets of an investment corporation, the amount of net assets of NBF, or market conditions,with the purpose of benefiting a securities company, registered financial institution, residential
land and building specialist or other person specified in the government ordinance regarding theInvestment Trust Law of Japan 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 managementcompany, acts as an underwriter in a securities transaction, undertaking transactions with theobjective of fraudulently manipulating the market for the purpose of having an influence upon theconditions of the primary offer or secondary distribution of said securities not reflecting correct
market pricing.

e)

In the event that a 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 or participates in handling a primary offer, private offering, or secondary distribution ata time when the subscription amount of said acquisition or the amount of purchase offer of
securities to said securities company or registered financial institution is not foreseen to reach that
otherwise expected by said securities company or registered financial institution, acquiring orpurchasing said securities with assets of NBF at the request of said securities company orregistered financial institution.

f)

In the event that the manager of a tokumei kumiai, who is an Interested Party etc. of an asset
management company, 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 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.

- 62 -

g)(2)

In the event that a trust company, who is an Interested Party etc. of an asset management company,
makes a solicitation in connection with the execution of a trust agreement at a time when theamount of trust assets otherwise obtained pursuant to said trust agreement is not foreseen to reachthat expected by said trustee, acquiring a beneficiary certificate pursuant to said trust with assets
of NBF at the request of said trustee.
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 is acceptable to cause NBFM to act as an agent or broker concerning the purchase orleasing of residential building lots or buildings) or otherwise engage in transactions concerning Designated
Assets other than the preparation of residential 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 management company who perform asset management.

- 63 -

Nippon Building Fund Inc.
Corporate Data
Corporate Office:7-2, Yaesu 2-chome, Chuo-ku, Tokyo, 104-0028, Japan+81-3-3281-8810
http://www.nbf-m.com/nbf/_eDate of Inception:

March 16, 2001

Capital:Contributed capital and common shares issued and outstanding as of December 31, 2003:¥148,899 million
280,700 shares

Shareholders:

12,777 (As of December 31, 2003)

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:

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

Investor Relations:

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

This document contains translations of selected information described in the Securities Report (Yuka shoken hokokusho) filed on March 23, 2004 pursuant to the
Securities Exchange Law of Japan, and the Financial Statements and the Performance Information Report for the period from July 1, 2003 to December 31, 2003, 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.