Displaying Our Valuein a Changing Market

14th Period
NBF Report January – June 2008

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

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

Displaying Our Value in a
On the Cover

NBF acquired the NBF Minami-Aoyama Buildingfor ¥31 billion in August 2008. Among imagefocused enterprises, demand is high for officespace in Minami-Aoyama, one of Japan’s foremost trend-setting areas. With an elegant
exterior and highly competitive specs, the property has enjoyed a 100 percent occupancy
rate since the date of acquisition.

Changing Market
Contents
Building on Our Strengths2Main Properties

17

Financial Highlights

4

Location of Office Properties

20

To Our Shareholders

6

Portfolio Overview

22

Displaying Our Value in a Changing Market

8Management Team and Management Structure

24

A Continuing Record of Achievement

12

Management’s Discussion and Analysis

28

A Track Record of Steady Growth andHigh Occupancy Rates
Ongoing Improvement in Portfolio Quality

12
13

Acquisitions during the 14th Period

14

Planned Acquisitions in the 15th Period and Beyond

16

Financial Statements

39

Appendix

53

Investment and Distribution Policies

55

Corporate Data

64

Investors’ Information

65

NBF Report January-June 20081

Building on Our Strengths

Over the 14 periods, or roughly 7 years, since its
listing on the J-REIT section of the Tokyo Stock
Exchange in September 2001, NBF has established a
track record of stable profit distribution.
As a result of steady growth, NBF has built a solid
position in the J-REIT market from several perspectives, including scale advantage, portfolio scope, financial stability and level of return.

NBF’s Strengths

NBF will continue to make maximum use of its
strengths and competitive advantages, as well as theexpertise of Mitsui Fudosan Co., Ltd., to steadily
increase value for shareholders.

High-Quality
Properties◆ Specializes in investing in office buildings◆ Possesses 58 properties*, mainly large-scale office buildingsin the Tokyo central business districts◆ Diversified in other Tokyo markets as well as in regional cities◆ Total rentable area of 750,701m2*◆ 931* diversified tenants

2 NBF Report January-June 2008

Japan’s First andLargest J-REIT

Strong Returns◆ On September 10, 2001, NBF was listed as the first real estate
investment corporation in Japan on the J-REIT section of theTokyo Stock Exchange.

◆ Cash distribution of ¥22,549 per share for the 14th Period◆ The largest total market capitalization of any J-REIT(¥677.5 billion)*◆ The largest scale of managed assets (¥725.2 billion)*(total acquisition price)◆ 157.3% total return** since Tokyo Stock Exchange
listing in September 2001
◆ Total return for NBF in the most recent year declined 23.8%
compared with declines of 36.5% and 24.3% in the TSE J-REIT
index and the Topix, respectively.
** Total return includes reinvested distributions.
(Source: NBF calculations, based on data published by Bloomberg L.P.)

Sound Finances◆ Ratings*■ Standard & Poor’s

Long-term Corporate: A+, Short-term Corporate: A-1■ Moody’s Issuer Rating: A1■ R&I Issuer Rating: AA◆ LTV: 42.8%*◆ Percentage of long-term, fixed-rate debt included in interestbearing debt: 83.4%*◆ Average years remaining on long-term, fixed-rate interestbearing debt: 5.43 years*◆ Total average cost: 1.60%*

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

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

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

management capabilities in office management* As of June 30, 2008

NBF Report January-June 20083

Financial Highlights
14th Period

13th Period

12th Period

11th Period

14th Period

from January 1, 2008 toJune 30, 2008

from July 1, 2007 to
December 31, 2007

from January 1, 2007 toJune 30, 2007

from July 1, 2006 to
December 31, 2006

from January 1, 2008 toJune 30, 2008
U.S. dollars in thousands(Note 1)

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

Operating revenues
Income before income taxes
Net income

Note 2¥ 30,088
12,223
12,222¥ 27,814
10,227
10,226¥ 26,641
10,064
10,063¥ 25,894
9,767
9,766

$ 283,393
115,124
115,124

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

Note 3

16,63015,394

15,18814,754

156,633

Note 3(a)20,318
12,222

18,905
10,226

18,442
10,063

17,787
9,766

191,372
115,113(b)Note 3725,627
280,500
398,39842.8%

672,195
272,500
356,67244.3%

680,266
281,500
356,50944.9%

634,117
236,500
356,21340.9%

6,834,575
2,641,989
3,752,449(c)(b) / (c)(a) / (c)542,000
735,050
22,549508,000
702,110
20,129508,000
701,790
19,809508,000
701,206
19,224

6,923
212

Note 331,06630,30329,89729,043293

Total assets
Interest-bearing debt
Net assets
LTV (Loan to value)
Total number ofcommon shares issued (shares)
Net assets per share (Yen/$)Distribution per share (Yen/$)Funds from operations
per share (Yen/$)Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.17 = U.S.$1.00, the approximate exchange rate on June 30, 2008.
2. Operating revenues do not include consumption taxes.
3. Funds from operations: Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
Funds from operations per share: (Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization) /Weighted average number of common shares issued and outstanding during the period

Portfolio Highlights (As of June 30, 2008)
Asset Allocation

Total Assets¥725,627
millionRegional Allocation
Deposits andOther Assets¥37,365 million

Other Cities¥90,931 million(5.2%)(12.5%)

Real Estate¥307,148 million

Other GreaterTokyo¥189,180 million(42.3%)(26.1%)

Real Estate Held in Trust¥381,114 million

Tokyo CBDs*¥445,138 million(52.5%)(61.4%)

Total Real
Estate, Etc.

¥725,249
million* Central Business Districts

4 NBF Report January-June 2008

Operating revenues / Net income(Yen in millions)

Funds from operations per share

Net operating income fromproperty leasing activities(Yen in millions)

(Yen)

14th
Period14th
Period14th
Period13th
Period13th
Period13th
Period12th
Period12th
Period12th
Period11th
Period11th
Period11th
Period10th
Period10th
Period10th
Period05,000 10,000 15,000 20,000 25,000 30,000 35,000O
Operatingrevenues
Net income
N

Total assets

0

5,000

10,00015,00020,00025,000

LTV(%)(Yen in millions)0

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

700,000

750,000

14th
Period13th
Period13th
Period13th
Period12th
Period12th
Period12th
Period11th
Period11th
Period11th
Period10th
Period10th
Period10th
Period
0

40

42

44

46

48

50

(Yen)

20,00014th
Period10,00040,00015,00014th
Period300,000 400,000 500,000 600,000 700,000 800,000

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

0

20,000

List of Major Tenants
Name

1
2
3
4
5
6
7
8
9
10

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

Leased Space(m2)

Percentage of Total
Leased Area3

169,913
28,184
20,51518,781
17,895
16,252
15,333
13,135
12,493
8,569

23.2%
3.9%
2.8%
2.6%
2.4%
2.2%
2.1%
1.8%
1.7%
1.2%

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

NBF Report January-June 2008

5

To Our Shareholders

Adapting to a changing market,
NBF aims for reliable andsteady growth over the mediumto-long term.
Koichi Nishiyama
Executive Director of Nippon Building Fund Inc.
President and CEO of Nippon Building Fund Management Ltd.

Performance during the Six Months Ended
June 30, 2008
During the 14th Period, occupancy at newly acquired
properties and increased rent for existing tenants generated internal growth. The sale of properties also
generated profits. As a result, revenues and earnings
both increased, and distribution per share was¥22,549, a new record.

and gain on sales associated with the transfer of properties. Operating
revenues increased 8.2 percent, or ¥2,274 million, compared with theprevious six-month period to ¥30,088 million. Operating income increased
16.6 percent, or ¥2,072 million, to ¥14,529 million. Net income
increased 19.5 percent, or ¥1,996 million, to ¥12,222 million, and distribution per share increased ¥2,420 to ¥22,549, the highest on record.
In February and March 2008, NBF obtained approximately ¥40 billion
through equity financing.

During the six months ended June 30, 2008 (the “14th Period”), the
J-REIT operating environment changed considerably due to turmoil inglobal financial markets caused by the U.S. subprime loan crisis. However,
the office building leasing market, primarily in the central business districts (CBDs) of Tokyo, NBF’s main area of business, was firm and thevacancy rate remained low.

Initiatives to Generate External Growth
NBF generates steady external growth by selectively
investing in outstanding properties to build a strong
portfolio.
In the real estate market, although the number of investment proper-

In the real estate acquisition market, properties for sale increased asties for sale increased due to changes in real estate players caused byreal estate players changed. Under these conditions, NBF continued toturmoil in global financial markets, NBF has continued to face competition

invest selectively in high-quality properties, acquiring six properties (total

for acquiring top-quality buildings, its main focus.

acquisition price: ¥55.2 billion) and entering into a contract for one other

Under these conditions, we will continue to selectively invest in excel-

property for ¥20.8 billion (scheduled acquisition price) during the 14th

lent properties, deploying the information pipeline we have built to date

Period.

and acquisition methods such as acquiring properties under development.

As of June 30, 2008, NBF’s portfolio comprised 58 properties with a
total investment value of ¥725.2 billion on an acquisition price basis.

In tandem, we will implement a policy of dispersing our various risks andfurther enhancing portfolio quality in order to build a strong portfolio.

Both revenues and income rose during the six months ended June 30,

Under this policy, in the six months ended June 30, 2008, NBF

2008, due to internal growth including additional occupancy at properties

acquired six properties (total acquisition price: ¥55.2 billion), entered intoacquired during the 14th Period and rent increases for existing tenants,

a contract for one property (scheduled acquisition price: ¥20.8 billion),and transferred two properties (total sale value: ¥5.1 billion).

6 NBF Report January-June 2008

Performance Outlook(Yen in millions)

15th Period (Projected)

16th Period (Projected)

from July 1, 2008 to December 31, 2008

from January 1, 2009 to June 30, 2009

Operating revenues¥30,950¥30,887

Net income

11,436

11,436

Distribution per share (Yen)

21,10021,100Initiatives to Generate Internal Growth
Against the backdrop of the strong office building
leasing market, NBF continues to work to strengthen
earnings by increasing rent when renewing the contracts of existing tenants.

Fundamental Management Policies andOutlook

The low vacancy rate continued in the rental office market, centered

Deploying its solid financial strategy, NBF aims forsteady growth of distributions to shareholders
over the medium-to-long term, with continued wellbalanced internal and external growth.

on Tokyo CBDs. The supply of new office buildings is unlikely to increase

NBF aims to gradually increase distributions to shareholders over thesignificantly in the next two to three years, and rental revenues upon con-medium-to-long term by adapting appropriately to changes in the market.

tract for existing properties remained firm. In order to maximize the bene-

In the six months ending December 31, 2008, NBF will achieve this byfits of this solid market, we focused on negotiating rent increases for ourselectively investing in excellent properties with medium-to-long-term

existing tenants. As a result, we increased monthly rental revenue by ¥89

potential in order to build a strong portfolio. In the firm office building leas-

million during the 14th Period. We plan to increase monthly rental revenue

ing market, we aim to increase revenues based on maintaining or improv-

by an additional ¥35 million during the six months ending December 31,

ing our high occupancy rate and increasing rents for existing tenants.

2008 (the “15th Period”), and by ¥61 million during the six months ending
June 30, 2009 (the “16th Period”).

Through these initiatives, for the 15th Period, NBF projects operating
revenues of ¥30,950 million, operating income of ¥14,199 million, net

Due to an increased vacancy rate in some properties in other cities,

income of ¥11,436 million, and a distribution of ¥21,100 per share. For

NBF will aim to find new tenants using the sales strengths of Mitsui

the 16th Period, we project operating revenues of ¥30,887 million, oper-

Fudosan Co., Ltd.

ating income of ¥14,266 million, net income of ¥11,436 million and a
distribution of ¥21,100 per share. (These projections are valid as ofFinancial Strategies

August 14, 2008 and assume no acquisitions or transfers of buildings

Continuing to implement a conservative approach tofinancial operations

other than those under contract at that time, and no issue of new shares.)

With the tightening of credit for real estate financing, a change in theshareholders over the medium-to-long term by generating well-balanced inter-

attitude of financial institutions toward lending is becoming apparent. The

nal and external growth, based on our firm financial strategy and on making the

procurement spread is widening for some J-REITs and private placement

most of our relationship with Mitsui Fudosan Co., Ltd. and the high level offunds with the emergence of refinancing risk.

management know-how we have accumulated since our establishment.

As Japan’s largest J-REIT, NBF aims to steadily increase distributions to

Under such circumstances, NBF will maintain a targeted LTV (loan-tovalue) ratio between 40 percent and 50 percent, with 60 percent as the
maximum. With respect to procurement, NBF will utilize long-term, fixedinterest loans that disperse the repayment periods.

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

NBF Report January-June 2008

7

Displaying Our Value in a Changing Market

Strengthening Our
Portfolio in a
Changing Market

Changes in the Acquisition Market
The flow of foreign capital into Japan’s real estate market hasabated, due to changes in world financial affairs. In addition, theglobal credit crunch has caused a decline in players aggressively
investing in real estate on the prospects of rising rents and alower cap rate. While a reduced number of major players in thereal estate sales market has caused the number of properties forsale to rise and the likelihood of a lower cap rate has decreased,

Acquisition/Sale
Market Conditions

fierce competition among players continues for Class A officebuildings, NBF’s main target. As a result, NBF expects the cap
rate for outstanding properties to remain at its current level.
If the cap rate remains at the current level, it will comply

Change in
Financial Situation

Change in Real
Estate Players

Increase in
Properties for Sale

with NBF’s investment criterion, and we deem it a good opportunity for purchasing high-quality office buildings.

A Stronger Portfolio by Selectively Investing in
Outstanding Properties
NBF considers constructing a strong portfolio necessary for

NBF’s Strategy

steady and continuous external growth. To accomplish this, weSelectively Invest in Superior Properties toStrengthen Our Portfolio

follow a policy of continuing to selectively invest in outstanding(Enhance Our Information Pipeline,
Decentralize Portfolio to Reduce Risk)

high-spec properties in desirable locations that are highly competitive over the medium-to-long term while strengthening ourportfolio and reducing risk by dispersing acquisition dates,

Area Decentralization

A Wider Range of Rents(Acquisition Price Basis)(Monthly Rent per tsubo at Lease Renewal)

Other
Cities26.1%¥40 thousand
2.3%

thousand

12.5%
Other
GreaterTokyo

More than¥35 - ¥40 thousand
8.8%¥30 - ¥35
Tokyo
CBDs

61.4%

Less than

6.5%¥25 - ¥30
thousand

16.4%¥20 thousand
34.4%¥20 - ¥25
thousand

31.6%

8 NBF Report January-June 2008

areas mainly in the central business districts (CBDs) of Tokyoand Greater Tokyo, and rent unit costs.
Under current market conditions, NBF will deploy its uniquestrategy for external growth. One aspect of this is utilizing
NBF’s fundamental strength, namely acquisition throughacceptable development risk, enabled by our information net-

Initiatives toRaise the Level of
NBF Properties

work and large-scale and high-quality portfolio. Another aspect
is acquiring outstanding properties by making use of the information pipeline and accumulated know-how of the Mitsui
Fudosan Group, a leading Japanese real estate company.
Since January 2008, we have deployed these strengths to

Leasing Market Conditionsacquire NBF Toyosu Garden Front, the Surugadai Project (tentative name), and the Higashi-Ueno 4-chome Building (tentative name), which are development-type properties (contracts

Limited Supply of
New Properties

Continuing Market
Stability

Firm Demandconcluded).

NBF’s Strategy
Steady Rent
Increases

Steady and Continuous External Growth

Improve Tenant
Satisfaction to
MaintainHigh Occupancy
Rate

Enhance
Competitivenesswith Investment in
Scheduled
Renovations

Vacancy Rate of Class A Buildings(Acquisition Price – Contract Basis)(Yen in billions)

(%)
7.0

800

6.0
5.0

700

4.0
3.0

600

2.0
1.0

500
0

10th
Period11th
Period12th
Period13th
Period14th
Period15th
Period0 Dec. 2004 June 2005 Dec. 2005 June 2006 Dec. 2006 June 2007 Dec. 2007 June 2008
Mar. 2005 Sept. 2005 Mar. 2006 Sept. 2006 Mar. 2007 Sept. 2007 Mar. 2008
Tokyo CBDs

Osaka
(Source: IKOMA CBRE)NBF Report January-June 20089

levels accounted for 61.1 percent of NBF’s total rental revenue.

A Solid Market Continues

This indicates strong potential for internal growth.

In the office building leasing market, vacancy rates
remained low in the Tokyo CBDs. The supply of new office

NBF also implemented measures to maintain a high occu-

buildings in the Tokyo CBDs until 2010 is forecast to be lesspancy rate, such as initiatives to increase customer satisfaction

than the 2007 level, and demand is expected to remain firm.

and regular renovations. As a result of these sustained efforts,

From a supply and demand point of view, we do not foresee a

NBF’s occupancy rate remained at the high level of 97.4 per-significant rise in vacancy rates, and in particular we forecastcent as of June 30, 2008.
However, the Japanese economy has precipitated a slightsteady growth in the market for outstanding properties.
Rents for new, large-scale office buildings with particularly

weakening in the need for larger floor space among NBF’s cor-high rent per tsubo trended downward, with a sudden drop

porate customers. Under these conditions, NBF will allow for a

from the previous year’s high levels. However, for existing

longer than usual period of vacancy between tenant withdrawal

office buildings, which account for the great majority of proper-

and new tenant entry. Consequently, NBF predicts that theties, rents continued to rise, albeit at a more gradual rate.

effects of increased rents and the longer vacancy periods dur-

Looking forward, this will firmly support the balance of supply

ing tenant turnaround will result in a leveling out of internaland demand. We believe that the office building lease market

growth for the 15th and 16th Periods.

will remain firm, with continued growth at or slightly below thecurrent level centering on outstanding properties.

Breakdown of Lease Contracts

Continuing Implementation of Rent Increases

Lease contracts
with more than
2 years until
renewalGiven the strong office leasing market, NBF will continue its

Current rent below
expected rent level

16.3%
61.1%

measures to aggressively raise rents in line with current market

22.6%

levels. During the six months ended June 30, 2008 (the “14thPeriod”), NBF increased total monthly revenue by ¥89 million,
more than its initial forecast. As of June 30, 2008, contracts up
for renewal within two years with rents below expected rent

Current rent above
expected rent level/
lease contracts to be
renewed within 2 years

Average Asking Rents in Tokyo CBDs

Breakdown of NBF’s Lease Contracts(1,000㎡)(Yen per tsubo )40,0002,500

35,000

Lease contracts
with potential
rent increases
within 2 years

Average
1.05 million ㎡ / year

Average
0.67 million ㎡ / year

2,000

30,0001,500
25,0001,000
20,000500

15,0000 Dec. 2004

June 2005 Dec. 2005 June 2006 Dec. 2006 June 2007 Dec. 2007 June 2008
Average Asking Rent for New Buildings
Average Asking Rent for Existing Buildings
Total Average Asking Rent
(Source: Miki Shoji)

10 NBF Report January-June 2008

01986
9866 11988
9 8 11990
988
9 0 11992
990
9 2 1994
992
9 4 1996
994
1996
9 6 1998
9 8 2000998
2 0 200220
2 2 200420
2 4 2020
2006
0066 2008
200088 2010
2 0 2020
22012
012
SSupplied Floor Space

Development PlanD
（Underdevelopment)（

Development Plan
D
(Source: Mori Building)Displaying Our Value in a Changing Market

A More Conservative
Approach amid
Changing Conditions

Changes in Financing for Real Estate
The global credit crunch has triggered a considerable
decrease in the amount of foreign capital flowing into theJapanese real estate market, contributing to the bankruptcy of anumber of new real estate companies and changing the lending
landscape for real estate financing by financial institutions.
Specifically, the procurement spread is widening for some
J-REITs and private placement funds with the emergence ofrefinancing risk.

Financial Environment
Changing fiscal
approach of financial institutions

Emergence ofrefinance risk

Widening spread
for acquisitions

Under such conditions, maintaining and improving our creditworthiness will become increasingly important.

A Conservative Financial Approach
In consideration of the above, NBF will maintain a targeted
LTV (loan-to-value) ratio between 40 percent and 50 percent,with 60 percent as the maximum, and pursue a conservative
financial approach by procuring long-term, fixed-rate debt to

NBF’s Strategy

prepare against interest rates increases.
From the point of view of stability, we will disperse repayment
periods, avoid finance risk by setting a commitment line, andMaintenance ofconservative LTV
ratio

Dispersal of
repayment periods

Acquisitions at
long-term fixedrateemphasize diversity in procuring funds.
As a result of these efforts, NBF has earned a high ratingfrom ratings organizations and enjoys a high evaluation fromfinancial institutions, exemplified by the cost of debt procurement remaining unchanged over the last year.

Stable Financial Track Record(%)

Diversified Maturities of Interest-Bearing Debt
(Yen in billions)

100

50

80

40

60

30

40

20

20

10

0 Dec. 2001

Dec. 2002 Dec. 2003 Dec. 2004 Dec. 2005 Dec. 2006 Dec. 2007
June 2002 June 2003 June 2004 June 2005 June 2006 June 2007 June 2008
LTV

Long-Term Fixed-Rate Debt Ratio02008 2009 20
20100 2011 2012 2013 2014 2015 20
20166 202017 2018
LLong-Term Debt

B
Bonds

Short-Term LoansSNBF Report January-June 200811

A Continuing Record of Achievement
A Track Record of Steady Growth and High Occupancy Rates

Occupancy rate (%)

100.0

96.9

97.7
95.0

97.5

98.1

98.1

98.7

97.8

99.0

98.6

97.4

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

750,701

Acquisition price692,222

Tokyo CBDs

Acquisition price(Yen in billions)692,286

Other Greater Tokyo

800

700,000

670,249 670,513¥20.8 billion
746.1 (contract basis)*600,000

Other Cities

578,243700

674.3

Occupancy rate
Total rentable area

624.8

674.3

624.8

488,323
460,901600

500,000

539.3

419,511500

400,000

358,940400

322,344414.1

340,497393.8
300,000

336.1

247,687
300

260.2

276.0

285.6
200,000

200

192.1

100,000100

220

Buildings

28
Buildings

May 23,
Dec. 31,
2001
2002(Investment commencement date)

12 NBF Report January-June 2008

29

33

43

43

47

Buildings

Buildings

Buildings

Buildings

Buildings

Jun. 30,
2003

Dec. 31,2003

Jun. 30,
2004

Dec. 31,2004

Jun. 30,
2005

52
Buildings

58

55

55

56

56

(59*)

Buildings

Buildings

Buildings

Buildings

Buildings

Dec. 31,
Jun. 30,
Dec. 31,
Jun. 30,
Dec. 31,
Jun. 30,
2005
2006
2006
2007
2007
2008
* Including Surugadai Project (tentative name): ¥20.8 billion contract completed(As of June 30, 2008)0Ongoing Improvement in Portfolio Quality
End of the 1st Period

End of the 9th Period

End of the 14th Period(December 31, 2001)(December 31, 2005)(June 30, 2008)

39.0%

43.9%
20.7%

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

31.9%

54.3%

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

Mitsui Fudosan Co., Ltd.

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

20.6%

32.0%

54.0%

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

17.72 years

16.38 years
20.4%

11.5%

14.28 years
22.0%
15.4%

5.4%

88.5%

62.6%

74.3%
Over 10 years

Between 5 and 10 years

5 years or less

Portfolio PML (Probable Maximum Loss)

4.8%

3.8%
1.5%

NBF Report January-June 200813

Acquisitions during the 14th Period

From left
31 NBF Toyosu Garden Front●
18 NBF Shibuya East●

40 Shin-Urayasu Center Building●

31 NBF Toyosu Garden Front

18 NBF Shibuya East

40 Shin-Urayasu Center Building

Acquisition date

March 31, 2008

January 9, 2008

March 27, 2008

Site area

12,551.33m2

1,418.21m2

15,875.86m2

Floor area of building

35,621.93m2

7,615.76m2

38,421.81m2

Structure

9 floors above ground

8 floors above ground, 2 floors below

20 floors above ground, 2 floors below

Location

6-15, Toyosu 5-chome,

3-5, Shibuya 3-chome,

5-2, Irifune 1-chome,

Koto-ku, Tokyo

Shibuya-ku, Tokyo

Urayasu, Chiba¥25,018 million¥8,000 million¥15,700 million

Acquisition price

14 NBF Report January-June 2008

From left
58 NBF Kumamoto Building●
29 Nakanosakaue Sunbright Twin●

47 NBF Nagoya Hirokoji Building●

Expansion area

58 NBF Kumamoto Building

29 Nakanosakaue Sunbright Twin 47 NBF Nagoya Hirokoji Building

March 24, 2008

March 14, 2008

March 17, 2008

1,775.52m2

10,331.90m2 (total)

431.30m2

9,766.12m2

63,396.95m2 (NBF share: 81.0%)

3,388.10m2

10 floors above ground

30 floors above ground, 2 floors below 9 floors above ground

3-20, Karashima-cho,

46-1, Honcho 2-chome,

311, Sakae 2-chome,

Kumamoto City, Kumamoto

Nakano-ku, Tokyo

Naka-ku, Nagoya, Aichi¥4,500 million¥156 million¥1,826 million(Additional acquisition)

Existing area

(Expansion)

NBF Report January-June 200815

Planned Acquisitions in the 15th Period and Beyond

Above and above right
60 NBF Minami-Aoyama Building●
59 Shibakouen Takahashi Building●

From left
61 Surugadai Project●(tentative name)62 Higashi-Ueno 4-chome Building●(tentative name)

59 Shibakouen Takahashi Building 60 NBF Minami-Aoyama Building

61 Surugadai Project62 Higashi-Ueno 4-chome Building(Tentative name)(Tentative name)Acquisition dateJuly 7, 2008

August 1, 2008

April 30, 2009 (scheduled)

April 30, 2010 (scheduled)

Site area

share:
836.45m2 (NBF
approx. 88%)3,272.74m2

1,767.94m2 (estimated)

2,405.22m2 (estimated)

Floor area of building

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

18,720.59m2

9,773.30m2 (estimated)

15,949.26m2 (estimated)

Structure

9 floors above ground,
1 floor below

11 floors above ground,
2 floors below

11 floors above ground,
1 floor below (estimated)

13 floors above ground,
2 floors below (estimated)

Location

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

1-31, Minami-Aoyama 3-chome, 3-11, Kandasurugadai 2-chome, 38-2, Higashi-Ueno 4-chome,
Chiyoda-ku, Tokyo
Taito-ku, Tokyo
Minato-ku, Tokyo

Acquisition price¥6,100 million¥31,000 million

16 NBF Report January-June 2008

¥20,840 million¥11,175 million

Main Properties

2 Nishi-Shinjuku Mitsui Building●

1 Yamato Seimei Building●

3 Shiba NBF Tower●

4 NBF Platinum Tower●

NBF Report January-June 200817

5 Gate City Ohsaki●

6 Toranomon Kotohira Tower●

12 NBF Toranomon Building●

15 NBF Alliance●

18 NBF Report January-June 2008

8 Nakameguro GT Tower●

Main Properties

30 NBF Toyosu Canal Front●

49 Shinanobashi Mitsui Building●

29 Nakanosakaue Sunbright Twin●

48 ●53 Aqua Dojima NBF Tower, Aqua Dojima East●

NBF Report January-June 200819

Location of Office Properties
As of June 30, 2008

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

Kita-ku

Arakawa-ku

26 25

Toshima-ku
Taito-ku

Bunkyo-ku

Nakano-ku

62

29

Sumida-ku
61

Shinjuku-ku

2

24

27

Chiyoda-ku

10

7

16
Imperial
Palace11

Chuo-ku

21

Koto-ku

1

Shibuya-ku

6

60
15
17 18

Setagaya-ku

59 Shibakouen Takahashi Building(Acquired in July 2008)
60 NBF Minami-Aoyama Building(Acquired in August 2008)
61 Surugadai Project (tentative name)(Scheduled for acquisition in April 2009)8

Minato-ku
19

28
4

12

9

13

23

3

14

31 30

59

20
22

Tokyo Bay

Meguro-ku
5

Shinagawa-ku

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

7 NBF Nihonbashi●

16 Yotsuya Medical Building●

Muromachi Center Building

20 NBF Report January-June 200817 Shibuya Garden Front●

19 NBF Shibakouen●

Building

23 NBF Higashi-Ginza Square●

Other Greater TokyoTOCHIGI

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

UTSUNOMIYA

37

36

IBARAKITo Omiya38

SAITAMA
39

TOKYO

41

CHIBA
29
31 30

40

Other Cities
Tokyo Bay32

42 Sapporo L-Plaza

34

43 NBF Sapporo Minami Nijo Building
44 NBF Sendai Honcho Building

33

35

45 NBF Unix Building

42 43

46 NBF Niigata Telecom Building

KANAGAWA

47 NBF Nagoya Hirokoji Building
48 Aqua Dojima NBF Tower
49 Shinanobashi Mitsui Building
46

50 Sun Mullion NBF Tower

44
45

51 Sakaisuji-Honmachi Center Building
52 NBF Sakai-Higashi Building
53 Aqua Dojima East

54

47

54 NBF Shijo Karasuma Building

55 56
57
58

48 49 50 51

55 NBF Hiroshima Tatemachi Building

52 53

56 Hiroshima Fukuromachi Building
57 NBF Hakata Gion Building
58 NBF Kumamoto Building

34 Parale Mitsui Building●

38 S-ino Omiya North Wing●

42 Sapporo L-Plaza●

50 Sun Mullion NBF Tower●

51 Sakaisuji-Honmachi●

Center Building

NBF Report January-June 200821

Portfolio Overview
NBF’s properties as of June 30, 2008 are as follows:
Investment
Type

Name of Building

Type of Ownership

Percentageof OwnershipYear Built

Acquisition
Price

(%)

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

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

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

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

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

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

64,50836,55531,01130,70524,734
21,184
24,12922,071
17,622
15,82913,903
13,67312,129
11,693
9,497
8,600
8,335
8,196
6,772
6,300
6,267
4,823
5,035
4,954
4,519
4,469
3,388
1,023

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

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

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

39,79533,74225,376
19,483
12,593
3,310
2,147
7,533
2,523
15,901
1,938
15,855
2,275

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

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

4,404
1,870
3,566
4,029
3,958
7,232
17,81014,40010,500
6,500
2,227
1,914
1,627
2,930
835
2,629
4,500
—
—
725,249

4,127
1,741
3,699
3,307
3,685
7,365
16,958
11,773
8,966
6,303
2,012
1,844
1,386
2,960
751
2,340
4,649
—
—
688,262

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

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

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

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

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

22 NBF Report January-June 2008

Revenue

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

60
1
25
5
1
1
14
1
1
42
1
11
3
2
7
1
1
5
7
5
7
1
8
1
13
12
3
3

1,984
1,487
1,113
1,490
1,113
1,028
928
1,124
Note 2
728
Note 2565
Note 2
Note 2288
273
Note 2
204
344
342
263
Note 2
252
206
238
196
109
62

6.8
5.1
3.8
5.1
3.8
3.5
3.2
3.8
Note 22.5
Note 2
1.9
Note 2
Note 21.0
0.9
Note 2
0.7
1.2
1.2
0.9
Note 2
0.9
0.7
0.8
0.7
0.4
0.2

100
99.6
100
100
96.7
100
100
93.9
97.2
100
100
96.5
87.3

8
8
3
1
86
1
19
69
35
35
14
40
22

1,196
1,143
580
987
774
301
139
510
146
790
115
358
121

4.1
3.9
2.0
3.4
2.6
1.0
0.5
1.7
0.5
2.7
0.4
1.2
0.4

100
100
98.4
84.9
83.3
77.9
93.6
100
94.9
96.1
96.5
97.1
92.2
90.2
98.0
100
51.1
—
—
97.4

12
5
9
51
34
11
39
1
29
44
20
21
17
25
16
8
6
—
—
931

327
105
208
272
237
244
832
731
453
343
129
121
99
143
40
155
46
108
Note 2
29,220

1.1
0.4
0.7
0.9
0.8
0.8
2.8
2.5
1.6
1.2
0.4
0.4
0.3
0.5
0.1
0.5
0.2
0.4
Note 2
100.0

Appraisal Value

Rentable
Area

Leased Area at
End of Period

Occupancy Rate at
End of Period(Yen in millions)

(m2)

(m2)

(%)

71,00058,80038,40060,50036,70036,70034,30032,90016,50024,50024,40019,70021,70015,68011,6009,190
17,700
8,080
9,180
9,080
8,690
6,740
7,850
6,460
6,230
5,840
4,490
1,540

27,64032,96824,72833,503
20,714
16,84816,30621,4233,440
14,921
20,426
10,123
10,08817,338
4,043
7,450
8,258
4,993
7,087
10,473
5,258
5,991
4,871
4,805
5,656
5,127
2,971
1,595

27,01332,96824,20433,503
20,714
16,84816,30621,4233,440
14,603
20,426
10,004
10,08817,338
3,066
7,450
8,258
4,993
7,087
10,458
5,258
5,991
4,871
4,805
5,656
5,127
2,971
1,595

97.7
100
97.9
100
100
100
100
100
100
97.9
100
98.8
100
100
75.8
100
100
100
100
99.9
100
100
100
100
100
100
100
100

40,50040,20032,50021,90021,700
4,490
2,540
9,650
2,830
22,8002,200
16,0002,760

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

32,08236,50628,33027,924
19,40012,545
5,230
15,738
6,022
20,6983,455
21,987
4,166

6,860
1,820
4,150
4,050
4,350
9,280
24,80015,700
11,100
7,880
2,330
2,490
1,850
3,140
951
2,800
4,520
—
—
932,591

11,396
5,351
7,539
13,47910,214
9,890
21,917
25,237
14,954
11,438
5,308
3,243
3,931
5,612
1,309
5,416
7,913
—
—
750,701

11,396
5,351
7,415
11,4508,504
7,705
20,51525,237
14,193
10,990
5,121
3,150
3,626
5,060
1,283
5,416
4,041
—
—
730,995

Total Number ofTenants at
End of Period

NBF Report January-June 200823

Management Team and Management Structure(As of June 30, 2008)

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

Nippon Building Fund Inc.

dance, unless otherwise stipulated by laws, regulations or NBF’s articles
Nippon Building Fund Inc. is an investment corporation establishedwith the objective of investing in assets, primarily Designated Assets as
defined by the Investment Trust Law of Japan. NBF entrusts managementof its assets to Nippon Building Fund Management Ltd., which is an asset
management company.

of incorporation. Decisions on substantive matters such as changes in thearticles of incorporation require the attendance of shareholders that control a simple majority of total shares issued and outstanding, and a twothirds majority of the voting rights of such shareholders. In addition, anychange in the asset management policies and standards, which are stipu-

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

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

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

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

Board of Directors

Japan. NBF also invests in securities, beneficiary certificates representing
beneficial interests in trusts (beneficiary certificates) and other assets
backed by office properties.

NBF’s articles of incorporation stipulate that NBF must have one ormore executive directors and four or fewer supervisory directors (but the
number of supervisory directors must always be at least one greater than
the number of executive directors). As of June 30, 2008, NBF had two

General Meeting of Shareholders

executive directors and four supervisory directors.

Specific matters pertaining to NBF that are subject to the Investment
Trust Law of Japan or the Company’s articles of incorporation are decided
by resolution of the General Meeting of Shareholders, which convenes at

NBF’s executive directors are responsible for business execution. In
addition, they have authority for all judicial and extrajudicial proceedings
related to the operations of NBF.

least once every two years, in principle. The fifth General Meeting of
Shareholders convened on March 8, 2007. The date of the next General

Supervisory directors are responsible for supervising execution by the
executive directors.

Meeting of Shareholders has not been set.

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

The General Meeting of Shareholders adopts or vetoes resolutions on

tors. Its responsibilities include authorizing business execution and super-

General Meeting of
Shareholders

Asset Custody

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

Asset
Management
Entrustment

Asset Custody
Entrustment

NIPPON BUILDING FUND Inc. (NBF)
OfficeManagement
Entrustment

Board of Directors

NBF Office Management Co., Ltd.

Qualified Institutional
Investors / Bondholders
Independent Auditors

Liabilities

Office Management
Investment

Real Estate, etc.
Rent, etc.

24 NBF Report January-June 2008

Borrowings /Bonds and
Notes
Debt
Service

NIPPON BUILDINGFUND MANAGEMENT Ltd. (NBFM)

AssetsShareholders’EquityInvestment
Distribution

Shareholder
Trading

Shareholder

Management Team

Seated from left:

Sadafumi Abe
Koichi Nishiyama
Standing from left:

Sadao Kamiyama
Akira Nishizawa
Hideo Fukazawa
Hatsuo Komatsu

Executive Directors

Name

Background Summary

Sadafumi Abe

Appointed Executive Director of NBF in March 2005 after serving as Corporate Auditor of
Mitsui Fudosan Co., Ltd.
Representative Director of Nippon Building Fund Management Ltd. Executive Director of
NBF since August 2001.
Appointed Supervisory Director of NBF in August 2001. Real estate appraiser. Tokyo
District Court Appraisal Committee member.
Appointed Supervisory Director of NBF in March 2005 after serving as a deputy director of
the Ministry of Land, and director of the Government Housing Loan Corporation.
Attorney. Appointed Supervisory Director of NBF in March 2007.
Certified Public Accountant. Certified Public Tax Accountant. Appointed Supervisory
Director of NBF in March 2007.

Koichi Nishiyama
Supervisory Directors Akira Nishizawa
Hideo Fukazawa
Hatsuo Komatsu
Sadao Kamiyama

vising the performance of the executive directors. Resolutions by thetwo years from the time they assume office. The terms of executive direc-

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

members of the Board in attendance.

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

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

two executive directors and all four supervisory directors were elected atvested interest. Executive and supervisory directors with such financial

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

assumed office on March 17, 2007.

directors in attendance for such decisions.
The terms of office of executive directors and supervisory directors are

NBF Report January-June 200825

Nippon Building Fund Management Ltd.

Management Structure
General Meeting of Unitholders

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

AuditorBoard of Directors
Internal Audit Organization

Matters Entrusted to

Executive Board

CEO

Nippon Building Fund Management Ltd.

Accounting Auditor

As the asset management company required by the Investment Trust

Investment
Review Board

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

Investment & Finance Group

Risk
Management
Board

Corporate Operation Group

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

Real EstateManagement
Team

Real Estate
Investment
Team

Research
Team

Financial
Team

Fund
Operation
Team

Corporate
Risk
Planning &Management
Administration & Compliance
Team
Team

Building Fund Management Ltd. also executes certain responsibilities inconnection with the operation of the General Meeting of Shareholders andthe Board of Directors as manager of general administration.

Building Fund Management Ltd. The heads of the Investment & FinanceGroup and the Corporate Operation Group also serve as directors, andoversee their respective divisions under the direction and oversight of theManagement Structure of
Nippon Building Fund Management Ltd.
The Board of Directors makes decisions on the basic management
policies of Nippon Building Fund Management Ltd. and oversees executionof the duties of the representative director. The president, who is the rep-president. Corporate auditors conduct accounting audits and operational
audits of Nippon Building Fund Management Ltd. An internal audit unit
conducts internal audits covering the operations and departments of
Nippon Building Fund Management Ltd. at the request of the Board of
Directors.

resentative director, supervises and executes the operations of Nippon

Nippon Building Fund Management Ltd. Management Team
Name

Title

Career Summary

Koichi Nishiyama

President and CEO
and Representative
Director

Yasushi Nakayama

Director, Head ofInvestment& Finance GroupRiichi Morihiro

Director, Head ofCorporate Operation
Group

Tamotsu Shinyama
Hiroshi Matsumoto
Noriaki Moromachi

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

April 1974 Joined Mitsui Fudosan Co., Ltd.
April 2000 Manager of Building Fund Office, Building Division of Mitsui Fudosan
Sept. 2000 President and representative director of MF Asset Management Co., Ltd.
(now Nippon Building Fund Management Ltd.) (current position)
Aug. 2001 Became Executive Director of NBF (current position)
April 1981 Joined Mitsui Fudosan Co., Ltd.
April 2001 Head of Building Business Division, Building Department of Mitsui Fudosan
April 2006 Manager of Building Department, Chiyoda Development Division of Mitsui Fudosan
April 2007 Became Director of Nippon Building Fund Management Ltd. (current position)
April 1978 Joined Sumitomo Life Insurance Company
Oct. 2002 Assistant Manager, Financial Corporation Division of Sumitomo Life Insurance
April 2005 Director and Manager of Residential Planning Division, Eisen Realty Co., Ltd.
April 2006 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2002 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2008 Became Director of Nippon Building Fund Management Ltd. (current position)
April 2003 Became Auditor of Nippon Building Fund Management Ltd. (current position)

Toru Suzuki

26 NBF Report January-June 2008

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

Management Team and Management Structure

Compliance Initiatives

fund procurement and management policies; accounting guidelines for tax
accounting and dividend distribution policies; and guidelines on transac-

The management of NBF and Nippon Building Fund Management Ltd.

tions with potential conflicts of interest.

conduct honest and appropriate business activities while maintaining rigorous compliance by adhering to all relevant laws and regulations, based

Policy and Management System foron a high level of corporate ethics.

Dealing with Conflict of Interest Transactions

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

Directors meetings are to be held at least once every three months. In
practice, NBF holds such meetings once a month. At Board meetings,
executive directors report on their execution of their duties and supervisory
directors ensure that oversight and check-and-balance systems are functioning properly.
Nippon Building Fund Management Ltd. views compliance as a man-

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

agement strategy, with a fundamental compliance policy of conducting
operations honestly and fairly while maintaining a rigorous compliancesystem based on a high level of corporate ethics. Specifically, Nippon
Building Fund Management Ltd. requires that a compliance officer be
assigned to the Corporate Operation Group, and has establishedCompliance Rules and a Compliance Manual. In addition, a Compliance
Program is formulated each year to verify the progress of the execution
plan for that year and identify any problem areas.

Fundamental Policy on Conflict of Interest Transactions

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

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

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

NBF

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

Nippon Building Fund Management Ltd.

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

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

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

NBF Report January-June 200827

Management’s Discussion and Analysis
Summary of Selected Financial Data
14th Period
from January 1, 2008 toJune 30, 2008

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

12th Period
from January 1, 2007 toJune 30, 2007

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

Operating revenues
Note 2
Revenue from property leasing
Revenue from capital gain
Operating expenses
Rental expenses
Income before income taxes
Net income(a)Funds from operations
Note 3
Net operating income from property leasing activities Note 3
Total amount of cash distribution(b)
Depreciation and amortization
Capital expenditures
Total assets(c)Interest-bearing debt
Net assets(d)Total number of common shares issued (shares)(e)
Net assets per share (Yen)(d) / (e)Distribution per share (Yen)(b) / (e)Funds from operations per share (Yen)
Note 3
ROA
Note 3(Annual rate)
ROE
Note 3(Annual rate)
LTV (Loan to Value)
Note 3
Capital ratio(d) / (c)Payout ratio(b) / (a) Note 4
Number of days
Number of investment properties
Note 5
Number of tenants
Note 5
Total rentable area (m2)Occupancy rate
Note 5¥ 30,088
29,220868
15,55914,178
12,223
12,222
16,63020,318
12,222
5,276
1,620
725,627
280,500
398,398
542,000
735,050
22,54931,066
1.7%(3.5%)
3.2%(6.5%)
42.8%
54.9%
99.9%
182
58
931
750,701
97.4%¥ 27,814
27,814—
15,357
14,077
10,227
10,226
15,39418,905
10,226
5,168
1,193
672,195
272,500
356,672
508,000
702,110
20,12930,3031.5%(3.0%)
2.9%(5.7%)
44.3%
53.1%
99.9%
184
56
897
692,286
98.6%¥ 26,641
26,641—
14,52913,323
10,064
10,063
15,18818,442
10,0635,125
1,210
680,266
281,500
356,509508,000
701,790
19,80929,8971.5%(3.1%)
2.8%(5.7%)
44.9%
52.4%
100.0%
181
56
910
692,22299.0%

14th Period
from January 1, 2008 toJune 30, 2008
U.S. dollars in thousands
except per share data (Note 1)$ 283,393
275,216
8,177
146,544
133,539
115,124
115,124
156,633
191,372
115,11349,695
15,2596,834,575
2,641,989
3,752,449
—
6,923
212
293

Notes: 1. U.S. dollar amounts are translated from yen, for convenience only, at the rate of ¥106.17 = U.S. $1.00, the approximate exchange rate on June 30, 2008.
2. Operating revenues do not include consumption tax.
3. All valuations are calculated through the following formulas. The figures in parentheses are annualized based on the 6-month figures for the period.
ROA: Income before income taxes / (Initial total assets + Total assets at end of period) ÷ 2
ROE: Net income / (Initial net assets + Net assets at end of period) ÷ 2
Net operating income from property leasing activities: (Revenue from property leasing – Rental expenses) + Depreciation and amortization
Funds from operations: Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization
Funds from operations per share: (Net income (excluding Gain on sale of investment properties + Gain on exchange of investment properties) + Depreciation and amortization) / Weighted average
number of common shares issued and outstanding during the period.
Loan to value: (Interest-bearing debt + Deposits under management) / Total assets
4. Payout ratio figures are calculated to one decimal place only.
5. Number of investment properties means units generally perceived to be one office building. Number of tenants means gross number of tenants by building. Occupancy rate is the ratio of grossleased area to total rentable area at the end of the period.

28 NBF Report January-June 2008

Operating Environment and Results
During the six months ended June 30, 2008 (the “14th Period”), Japan’s economic recovery showed signs of slowing somewhat, due
to the impact on consumer spending and capital investment of turmoil in global financial markets caused by the U.S. subprime loan crisisand the rising price of resources.
In the office building leasing market, firm demand continued for office space particularly in the central business districts (CBDs) ofTokyo and elsewhere in Greater Tokyo. Occupancy rates and rents for new tenants remained at high levels. In other cities, outstanding
high-spec properties in desirable locations maintained a steady occupancy rate.
In the real estate acquisition market, strong competition for outstanding properties in the Tokyo CBDs continued.
Under these conditions, NBF continued to manage its assets in accordance with its basic policy of investing in high-quality office buildings which are highly competitive in terms of their location, size, facilities and infrastructure and are expected to have relatively stable cash
flow from rents based on excellent tenants as well as minimal risk of depreciation as assets.
During the 14th Period, NBF made the most of its accumulated expertise and original information channels such as the Mitsui FudosanGroup to conduct rigorous screening of information and careful deliberation in accordance with this policy. As a result, in March 2008 NBF
increased its stake in Nakanosakaue Sunbright Twin (additional acquisition, acquisition price: ¥156 million), acquired the NBF Kumamoto
Building (acquisition price: ¥4,500 million) and the Shin-Urayasu Center Building (acquisition price: ¥15,700 million), and decided toacquire the Surugadai Project (tentative name) (acquisition price: ¥20,840 million, scheduled date of transfer: April 2009). Moreover, inJanuary 2008 NBF received the transfer of NBF Shibuya East (acquisition price: ¥8,000 million), for which it had entered into a sale andpurchase agreement in December 2007; in March 2008 NBF received the transfer of the NBF Nagoya Hirokoji Building (expansion, acquisition price: ¥1,826 million), for which it had entered into a sale and purchase agreement in December 2006; and in March 2008 NBF
received the transfer of NBF Toyosu Garden Front (acquisition price: ¥25,018 million) for which it had entered into a sale and purchaseagreement in September 2006. In addition, as a result of a comprehensive review in light of the structure of its asset portfolio and in construction policy, NBF sold the Daido Seimei Omiya Building (sale price: ¥2.7 billion) and NBF Tanimachi Building (sale price: ¥2.4 billion) in
June 2008.
For its portfolio properties, NBF worked to expand internal growth by conducting property management, scheduled renovations andnew construction of facilities to increase tenant satisfaction. At the same time, NBF increased rents for existing tenants who renewed theirlease contracts.
As a result of these efforts, NBF’s real estate portfolio as of June 30, 2008 totaled 58 buildings. Total investment on an acquisition
price basis was ¥725,249 million. Total rentable area was 750,701m2 (227,087 tsubo). The occupancy rate declined 1.2 percentage
points from December 31, 2007 to 97.4 percent. Tenants totaled 931.

Occupancy rate

Total investment(Yen in billions)

June 30,
2008¥69.1 billion(contract completed)*

December 31,
2007

(%)

June 30,
2008
December 31,
2007

June 30,
2007

June 30,
2007

December 31,
2006

December 31,
2006

June 30,
2006

June 30,2006
0

100 200 300 400 500 600 700 800 900

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

NBF Report January-June 200829

Overview of Performance
Operating revenues for the six months ended June 30, 2008 increased 8.2 percent, or ¥2,274 million, compared with the previous sixmonth period to ¥30,088 million. Operating income in the property leasing business increased 9.5 percent, or ¥1,305 million, to ¥15,042
million. Operating income increased 16.6 percent, or ¥2,072 million, to ¥14,529 million.
Operating income rose due to factors including an increase in operating revenues resulting from new occupancy in the six properties
acquired during the period (including expansion and additional acquisition), rent increases for existing tenants, and the gain on sales associated with the transfer of properties.

Operating revenues(Yen in millions)Operating income from property
leasing activities(Yen in millions)

14th

14th
PeriodPeriod13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th
Period10th
Period005,000 10,000 15,000 20,000 25,000 30,000 35,000

5,000

10,00015,00020,000Distribution for the Current Period
Distribution per share for the current period was ¥22,549. NBF expected to distribute almost all taxable income for the current period
to be eligible for special tax treatment (Special Taxation Measures Law of Japan Article 67-15) that allows NBF to deduct its cash dividends of profits from taxable income.
For the six months ended
June 30, 2008

For the six months ended
December 31, 2007

For the six months ended
June 30, 2007

(Yen in thousands, except per share amounts)

Retained earnings
Undistributed earnings
Total cash distribution(Cash distribution per share)
Distribution of accumulated earnings(Distribution of accumulated earnings per share)
Cash distribution in excess of accumulated earnings(Per share)¥12,221,797
239
12,221,558
22,54912,221,558
22,549——¥10,225,655
123
10,225,532
20,12910,225,532
20,129——¥10,063,002
30
10,062,972
19,80910,062,972
19,809——Note: Above cash distributions were paid after the period end.

Distribution per share

Total cash distribution
(Yen)

14th

(Yen in millions)

14th

PeriodPeriod13th
Period13th
Period12th
Period12th
Period11th
Period11th
Period10th
Period10th
Period0

5,000

10,00015,00030 NBF Report January-June 2008

20,00025,000

0

5,000

7,500

10,00012,500Management’s Discussion and Analysis

Changes in Assets, Liabilities and Net Assets
Assets
As of June 30, 2008, total assets increased ¥53,432 million to ¥725,627 million compared with December 31, 2007. Return on average total assets (ROA) for the six months ended June 30, 2008 increased to 1.75 percent from 1.51 percent for the previous six-month
period.
Current assets increased ¥4,767 million to ¥32,898 million compared with December 31, 2007. Investment properties increased¥48,542 million to ¥688,357 million compared with December 31, 2007.

Liabilities
Current liabilities decreased ¥11,329 million to ¥54,288 million compared with December 31, 2007, primarily because of a decreasein long-term debt due within one year compared with December 31, 2007.
Long-term debt increased ¥19,000 million to ¥234,000 million compared with December 31, 2007.
As a result, total interest-bearing liabilities increased ¥8,000 million to ¥280,500 million compared to December 31, 2007. However
the ratio of fixed-rate long-term debt to total interest-bearing liabilities increased to 83.4 percent from 78.9 percent as of June 30, 2008.
The loan-to-value ratio, calculated as the ratio of interest-bearing liabilities plus deposits under management to total assets, decreased to42.8 percent from 44.3 percent as of June 30, 2008.
In addition, NBF worked to diversify funding sources. In January 2007, NBF submitted a shelf registration to publicly offer up to ¥200
billion in bonds. As of June 30, 2008, NBF had issued bonds totaling ¥30 billion under this shelf registration.

Net Assets
Net assets increased ¥41,725 million to ¥398,398 million compared with December 31, 2007.

Total assets

Net assets(Yen in millions)

14th
Period(Yen in millions)

14th
Period13th
Period13th
Period12th

12th
PeriodPeriod11th

11th
PeriodPeriod10th
Period0400,000

600,000

800,000

10th
Period0100,000

200,000

300,000

400,000

Funding
Balance of Paid-in Capital
NBF was established on March 16, 2001 with initial paid-in capital of ¥100 million. NBF began investing activities in May 2001 after¥98,800 million was raised through private placements. As of June 30, 2008, NBF had issued 542,000 common shares out of 2,000,000
total authorized shares. NBF’s common shares were listed on the J-REIT section of the Tokyo Stock Exchange in September 2001 upon thecompletion of a public offering. As the Investment Trust Law of Japan does not contain any provision for the issue of more than one classof shares, NBF’s common shares comprise the sole class of shares authorized and issued by NBF.

NBF Report January-June 200831

Issue dateCommon shares outstanding
Increase
Balance(Shares)

Remarks

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

200

200

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

4,000

Paid-in capital
Increase

Balance

Notes(Yen in millions)

¥

100

¥

100

Note 1

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

Note 2
Note 3Note 4

364,700

2,942

210,679

Note 558,00080,000422,700
502,700

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

508,000

5,236

346,446

Note 831,800539,800

37,159383,605

Note 92,200

542,000

2,571

386,176

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

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

High
Low

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen)

For the six months ended
June 30, 2007

¥1,560,000
1,070,000¥1,790,000
1,340,000¥1,990,000
1,550,000

Borrowings
Borrowings from financial institutions as of June 30, 2008 are shown below.
Short-term loans
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

Repayment
methodUse of
funds

Notes

(Yen in millions)

The Sumitomo Trust and Banking¥10,000
Company, Limited
Mizuho Corporate Bank, Ltd.
8,000
Shinkin Central Bank
5,000
Mitsubishi UFJ Trust and Banking Corporation
3,000
The Hachijuni Bank, Ltd.
2,000
THE KAGOSHIMA BANK, LTD.
2,000
The Gunma Bank, Ltd.
1,000
The Iyo Bank, Ltd.
1,000
The Yamaguchi Bank, Ltd.
1,000
THE SHIZUOKA BANK, LTD.
1,000
The Chugoku Bank, Limited
1,000
The Joyo Bank, Ltd.
1,000
The Yamanashi Chuo Bank, Ltd.
500

Total short-term loans

32 NBF Report January-June 2008

¥36,500

0.9%
0.9%
0.9%
0.9%
1.1%
1.0%
1.1%
1.1%
1.1%
1.1%
1.1%
1.1%
1.1%

July 31, 2008
July 31, 2008
July 31, 2008
July 31, 2008
September 26, 2008
July 31, 2008
July 31, 2008
July 31, 2008
July 31, 2008
August 29, 2008
September 26, 2008
August 29, 2008
September 26, 2008

Bulletpayment(Note 2)

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

Management’s Discussion and Analysis

Long-term debt
LenderBalance

Averageinterest rate (%)

Due on(Note 1)

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

November 28, 2014
September 11, 2015
September 27, 2017
February 15, 2016
May 30, 2018
July 16, 2009
July 19, 2011
February 3, 2010
May 23, 2018
May 23, 2016
June 1, 2011
September 11, 2015
May 30, 2016
February 13, 2012
March 30, 2012
November 1, 2012
December 13, 2013
May 30, 2013
June 30, 2009
April 30, 2013
June 27, 2013
December 21, 2011
April 27, 2012
May 23, 2012
February 26, 2010
November 20, 2008
October 30, 2009
April 1, 2010
October 19, 2010
March 30, 2011
March 30, 2009
February 3, 2010
March 30, 2012
October 31, 2014
October 4, 2013
February 12, 2010
December 15, 2014
July 11, 2014
July 12, 2012
June 27, 2013
February 7, 2012

Repayment
methodUse of
funds

Notes

(Yen in millions)¥ 4,000
10,00010,00010,00010,000Sumitomo Life Insurance Company
5,000
5,000
3,000
7,000
5,000
Zenkyoren
1,000(The National Mutual Insurance
10,000Federation of Agricultural Cooperatives) 10,000
MITSUI LIFE INSURANCE COMPANY,
2,000
LIMITED
4,000
2,000
3,000
2,000
Sumitomo Mitsui Banking Corporation
1,000
5,000
5,000
Meiji Yasuda Life Insurance Company
3,000
4,000
1,000
2,000
The Norinchukin Bank
8,000
Nippon Life Insurance Company
3,000
2,000
2,000
The Chuo Mitsui Trust and
5,000Banking Co., LIMITED
1,000
DAIDO LIFE INSURANCE COMPANY
2,000
1,000
1,000
1,000
TAIYO LIFE INSURANCE COMPANY
1,000
1,000
2,000
THE BANK OF FUKUOKA, Ltd.
4,000
Shinkin Central Bank
4,000
Mizuho Corporate Bank, Ltd.
2,000
Total long-term debt
¥164,000
Total borrowings (Note 4)¥200,500
Development Bank of Japan

Bulletpayment(Note 2)

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

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

NBF Report January-June 2008

33

(Yen in millions)

Amount Borrowed

1 to 2 years

2 to 3 years

3 to 4 years

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

NBF Bonds
Issue date

Balance as ofJune 30, 2008
(Yen in millions)

CouponNo. 3 Unsecured Bonds
No. 4 Unsecured Bonds

June 12, 2003
September 22, 2004

¥10,000
10,000

2.00%
1.04%

No. 5 Unsecured Bonds

September 22, 2004

10,0001.60%

No. 6 Unsecured Bonds
No. 7 Unsecured Bonds

March 9, 2005
November 9, 2005

10,00010,000

0.80%
1.85%

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

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

10,00010,00010,000

1.48%
1.74%
2.04%

Issue

Total (Note 6)

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

Redemption

Use ofproceeds

Notes

Bullet payment
Bullet payment

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

Bullet payment

Note 1 Notes 2 and 4

Bullet payment
Bullet payment

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

Bullet payment
Bullet payment
Bullet payment

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

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

Amount Borrowed—

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years¥20,000—¥20,000—

Others
NBF had security deposits totaling ¥38,882 million as of June 30, 2008.

34 NBF Report January-June 2008

Management’s Discussion and Analysis

Capital Expenditures
Planning
As of June 30, 2008, NBF is planning the following capital expenditures for the renovation of its properties. The amounts below include
repairs and maintenance costs that will be expensed as incurred. Moreover, in addition to a steady program of expenditures for construction, repair and renovation of facilities, a program of renewal construction is being implemented in order to increase competitive power inthe market as well as to increase the level of tenant satisfaction based on the results of tenant satisfaction surveys and neighboring competitive building specification surveys, etc.

Name of property

Objective

NBF Toyosu Canal Front

Renovation of exterior

Yokohama ST Bldg.

Renovation of exterior

Aqua Dojima NBF Tower

Renovation of central
monitoring facilities
GSK Bldg.
Install new
main control panel
Shin-Kawasaki Mitsui Bldg. Renovation of communal
area bathrooms
Shinjuku Mitsui Bldg. No.2 Install fire
prevention equipment
NBF Nihonbashi
Renovation of bathrooms
Muromachi Center Bldg. (3rd Period)
Shinanobashi Mitsui Bldg. Install security system
NBF Ikebukuro Tower
NBF Matsudo Bldg.

Renovation of HVAC
equipment (1st Period)
Exterior wall renovation

NBF Hiroshima
Renewal of air conditioning
Tatemachi Bldg.
(2nd Period)
NBF Shijo Karasuma Bldg. Renovation of air conditioning(4th, 5th, 6th, 7th floor systems)
Parale Mitsui Bldg.
Renewal of lighting
equipment (1st Period)
NBF Shijo Karasuma Bldg. Renovation of air conditioning(1st, 2nd, 3rd floor systems)

Estimated
duration

From January 2008
to July 2008
From November 2007
to July 2008
From July 2008
to December 2008
From July 2008
to December 2008
From October 2008
to February 2009
From April 2008
to December 2008
From July 2008
to October 2008
From March 2008
to August 2008
From January 2009
to May 2009
From July 2008
to November 2008
From July 2008
to October 2008
From January 2009
to May 2009
From July 2008
to December 2008
From April 2009
to May 2009

Total amounts

Estimated amounts
Payment for thecurrent period(from January 1, 2008
to June 30, 2008)(Yen in millions)

Cumulative
amount paid

¥299

¥30

¥30

¥255

¥—

¥—

¥180

¥—

¥—

¥158

¥—

¥—

¥158

¥—

¥—

¥131

¥—

¥—

¥114

¥—

¥—

¥108

¥—

¥—

¥59

¥—

¥—

¥53

¥—

¥—

¥52

¥—

¥—

¥38

¥—

¥—

¥34

¥—

¥—

¥27

¥—

¥—

NBF Report January-June 200835

Capital Expenditures for the Current Period
The following table sets forth the capital expenditures for the current period. NBF posted ¥1,620 million in capital expenditures together
with ¥781 million for repairs and maintenance expenses.
Name of property

Objective

PeriodNBF Nagoya Hirokoji Bldg.

Renovation of building facilities at time of addition,
restoration construction work on 9th floor,
installation of smoking area, etc.
NBF Nihonbashi Muromachi Renovation of bathrooms (2nd Period), construction
Center Bldg.
work on 4th floor, OA flooring on 4th floor,
tile & carpet restoration, etc.
Yokohama ST Bldg.
Updated crime prevention equipment, repaired
electrical power for emergency lighting,renovation of corridor; tile, carpet and additionalrenovations on 8th, 12th, and 15th floors
NBF Shibuya East Bldg.
Upgrade/replace air conditioning and heating
equipment throughout the building
Tsukuba Mitsui Bldg.
Replace items associated with ventilationequipment, renovation of rooftop water pipes, etc.
NBF Utsunomiya Bldg.
Renovation of bathrooms (1st Period), repair
outdoor electrical machinery (1st Period),
repair outdoor compressor (1st Period), etc.
NBF Hiroshima Tatemachi Bldg.Renovation of air conditioning (1st Period),
repair air conditioning on part of 4th floor,
repair air conditioning on part of 5th floor, etc.
NBF Sendai Honcho Bldg.
OA flooring construction on 7th, 8th, 10th and11th floors, replace faulty lighting equipment, etc.
NBF Shijo Karasuma Bldg.
Renovation of air conditioning (8th and 9th floors),
install automated door entrance, replaced air
conditioning charge control board, etc.
Other buildings
Asset preservation construction and other renewal
construction to improve tenant satisfaction

Expenditure(Yen in millions)

¥332

229

133

122
87

From January 2008
to June 2008

41

38

38
32

568

Total

¥1,620Cash Reserve for Capital Improvements
NBF accumulates cash reserves from cash flows to prepare for large-scale mid-term to long-term capital improvements and repairs
and maintenance that will be conducted in accordance with NBF’s business plan for each property.
As of June 30, 2008

As of December 31, 2007
(Yen in millions)

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

¥ 538
2,717
2,307
¥ 948

¥ 586
1,853
1,901
¥ 538

Notes: 1. The reserve figures represent only the amount of reserves attributable to NBF’s ownership interest; the amount of reserves attributable to other owners has been
excluded.
2. In addition to the above reserves, there are other reserves set up, based on maintenance needs and contracts with organizations responsible for management of properties, for the purpose of retaining funds to be used for future repair and maintenance. This reserve is not included in the above reserves and accumulated to ¥3,906 million as of June 30, 2008.

36 NBF Report January-June 2008

Management’s Discussion and Analysis

Expenses regarding Entrustment, etc.
The following table sets forth the breakdown of entrustment fees, etc. paid by NBF.
For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen in millions)

For the six months ended
June 30, 2007

¥1,10932¥1,012
32

¥ 977
30

54
19
13
155
¥1,382

48
19
13
155
¥1,279

58
19
13
108
¥1,205Item

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

Note: In addition to the amounts stated above, there are asset management fees of ¥214 million for the period from January 1, 2008 to June 30, 2008 and ¥161 million for the period
from January 1, 2007 to June 30, 2007 related to investment properties which were booked on each property.

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

NBF Shibuya East
Nakanosakaue Sunbright Twin
NBF Nagoya Hirokoji Bldg.
NBF Kumamoto Bldg.
Shin-Urayasu Center Bldg.
NBF Toyosu Garden Front
Total

Date

Acquisition price (Note 1)

January 9, 2008
March 14, 2008
March 17, 2008
March 24, 2008
March 27, 2008
March 31, 2008

¥ 8,000
156
1,826
4,500
15,70025,018¥55,200

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

Daido Life Omiya Bldg.
NBF Tanimachi Bldg.
Total

Date

Sale price

June 20, 2008
June 20, 2008

¥2,707
2,400¥5,107

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

NBF Report January-June 200837

Management’s Discussion and Analysis

3. Transactions with Related Parties and Transactions with Major Shareholders of Asset Management Company(1) Ongoing Transactions
Amount of purchase price, etc. (Note 2) (Note 3)
Category

Total amount

Purchase price, etc. (Yen in millions)

Sale price, etc. (Yen in millions)¥55,200
Amount of purchases from
related parties, etc.
23,700 (42.9)¥5,107
Amount of sales from
related parties—(—)

8,000 (14.5)—(—)

15,700 (28.4)¥23,700 (42.9)

—(—)
—(—)

Breakdown of transactions with related parties, etc.
K.Y. Property Co., Ltd.
Shin-Urayasu Twins TMK(special purpose company)
Total(2) Fees Paid for the Period from January 1, 2008 to June 31, 2008

Description of transactions with related parties (Note 1)
Category

Total fees paid(A)
(Yen in millions)

Office management fees, etc.
(Note 4)

¥1,184

Property maintenance fees

2,413

Leasing related service fees

84

Paid toMitsui Fudosan Co., Ltd.
NBF Office Management Co., Ltd.
First Facilities Co., Ltd.
Mitsui Fudosan Co., Ltd.
First Facilities West Co., Ltd.
Mitsui Fudosan Building Management Co., Ltd.
First Facilities Yokohama Co., Ltd.
Mitsui Fudosan Housing Lease Co., Ltd.
NBF Office Management Co., Ltd.
Mitsui Fudosan Co., Ltd.
Mitsui Real Estate Sales Co., Ltd.

Amount ofpayment (B)(Yen in millions)

B/A(Note 3)

¥1,148
28
373
330
133
102
11
1
32
6
1

97.0%
2.4%
15.4%
13.7%
5.5%
4.2%
0.5%
0.1%
38.0%
7.0%
0.7%

Notes: 1. “Related parties” are defined as related parties of asset management companies under asset management agreement with NBF as defined in Article 123 of Order for
Enforcement of the Law Concerning Investment Trusts and Investment Corporations, and Article 26, Section 26 of the Regulations regarding management report of theInvestment trusts and Investment corporations set by the Investment Trusts Association, Japan. “Major shareholders” are the major shareholders of asset managementcompanies as defined in Article 29, Section 4, Paragraph 2 of the Financial Instruments and Exchange Law. During the 14th Period, transactions with and fees paid to
K.Y. Property Co., Ltd., Shin-Urayasu Twins TMK (special purpose company), Mitsui Fudosan Co., Ltd., NBF Office Management Co., Ltd., First Facilities Co., Ltd., First
Facilities West Co., Ltd., Mitsui Fudosan Building Management Co., Ltd., First Facilities Yokohama Co., Ltd., Mitsui Fudosan Housing Lease Co., Ltd. and Mitsui Real
Estate Sales Co., Ltd. are as described above.
2. Figures indicate contractual sales prices.
3. Figures indicate percentages of total prices.
4. NBF leases Nishi-Shinjuku Mitsui Bldg., Gate City Ohsaki, Naka-Meguro GT Tower, Toranomon Kotohira Tower, NBF Ogawamachi Bldg., Shin-Kawasaki Mitsui Bldg.,
Parale Mitsui Bldg. and Shinanobashi Mitsui Bldg. to Mitsui Fudosan Co., Ltd., which sub-leases them to sub-lessees. Further, Sumitomo Trust & Banking Co., Ltd., astrustee, also leases the Yotsuya Medical Bldg. to Mitsui Fudosan Co., Ltd., which sub-leases it to sub-lessees. Accordingly, NBF does not entrust the office managementbusiness for those properties to Mitsui Fudosan. Instead, NBF Office Management Co., Ltd. has been entrusted to undertake such business on behalf of NBF, the ownerand lessor of those properties.
5. In addition to the above fees paid, the following have been paid to related parties for repair and maintenance work.
(Yen in millions)

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

38 NBF Report January-June 2008

¥242
185
159
153
8
7
1
0

NBF Report January-June 2008

FINANCIAL STATEMENTS

NBF Report January-June 200839

Balance Sheets
NIPPON BUILDING FUND INC.
As of June 30, 2008 and December 31, 2007

As ofJune 30, 2008

As of
December 31, 2007
(Yen in millions)

AssetsCurrent Assets:
Cash and cash equivalents
Tenant receivables
Consumption tax refund receivables and other current assets
Total current assets
Investment Properties:
Land including trust accounts (Note 3)
Buildings and improvements including trust accounts (Note 3)
Other tangible assets (Note 3)
Less: accumulated depreciation (Note 3)
Leasehold rights in trust accounts and other intangible assets
Total investment properties, net
Other assets
Total Assets
Liabilities
Current Liabilities:
Short-term loans (Note 5)Long-term debt due within one year (Note 5)
Accounts payable
Rents received in advanceAccrued expenses and other liabilities
Total current liabilities
Long-term debt (Note 5)
Tenant security deposits
Other liabilities
Total Liabilities
Net Assets (Note 4)
Shareholders’ equity
Common shares, non-par value
Shares authorized: 2,000,000 shares
Shares issued and outstanding: 542,000 shares
Retained earnings
Total Net Assets
Total Liabilities and Net Assets
The accompanying notes to financial statements are an integral part of these balance sheets.

40 NBF Report January-June 2008

¥ 31,324
461
1,113
32,898¥ 27,381
324
427
28,131

425,367
264,834
7,206(44,713)35,663688,357
4,372¥725,627

390,824
247,073
6,215(39,963)
35,665
639,8144,250¥672,195¥ 36,500
10,000
3,112
3,603
1,073
54,288234,000
38,882
59
327,229¥ 34,500
23,000
3,014
3,210
1,893
65,617215,000
34,84858
315,523

386,176

346,446

12,222
398,398¥725,627

10,226356,672¥672,195

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

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen in millions)

For the six months ended
June 30, 2007

¥26,708
2,512
868
30,088¥25,056
2,758—
27,814¥23,992
2,649—
26,641

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

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

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

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

NBF Report January-June 2008

41

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

(Yen in millions)

Balance as of December 31, 2006
Cash dividends declared
Net income
Balance as of June 30, 2007
Cash dividends declared
Net income
Balance as of December 31, 2007

Number ofCommonSharesCommonSharesRetained
Earnings

Total

508,000¥346,446¥ 9,767¥356,213————(9,767)
10,063(9,767)
10,063508,000

346,446

10,063356,509————(10,063)
10,226(10,063)
10,226

508,000

346,446

10,226356,672

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

(10,226)(10,226)

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

2,200

2,571

—

2,571

—

—

12,222

12,222542,000¥386,176¥ 12,222¥398,398

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

42 NBF Report January-June 2008

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

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen in millions)

For the six months ended
June 30, 2007

¥ 12,223
5,276
38
2,193
(137)
100
393
4,080
(2,200)(510)(893)
20,563¥ 10,227
5,168
47
2,178
185
(247)
29
—
(2,194)190
797
16,381¥ 10,064
5,125
64
1,944
(173)
818
193
—
(1,889)(190)(1,400)14,556(57,893)—
6,615(2,581)—(3)(184)(54,046)(1,523)—2,014(1,681)—(2)(131)(1,323)(44,515)(6,936)
3,167(2,187)9(14)(1,877)(52,380)

2,000
21,000(15,000)
39,649—(10,223)
37,426
3,943
27,381¥ 31,324(3,000)11,000(17,000)—(0)(10,060)(19,060)(4,002)
31,383¥ 27,381

26,00032,000(13,000)—(164)(9,760)35,076(2,748)34,131¥ 31,383

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

NBF Report January-June 200843

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

Note 1 – Organization and Basis of Presentation
Organization
Nippon Building Fund Inc. (hereinafter “NBF”) was formed on March 16, 2001 as an investment corporation under the Law Concerning
Investment Trusts and Investment Corporations of Japan, or the Investment Trust Law of Japan with Mitsui Fudosan Co., Ltd., The Chuo Mitsui
Trust and Banking Co., Ltd., and Nippon Building Fund Management Ltd. (hereinafter “NBFM”) acting as sponsors. Registration with the Kanto
Local Finance Bureau of the Ministry of Finance was completed on May 10, 2001 and NBF started acquisition of office properties on May 23,
2001.
NBF is an externally managed real estate fund, formed as an investment corporation. NBFM, as NBF’s asset management company, isengaged in acquiring, managing, leasing, and renovating office properties. Mitsui Fudosan Co., Ltd. currently owns 43% of NBFM while
Sumitomo Life Insurance Company owns 35% and the remaining 22% is mainly owned by financial institutions.
On September 10, 2001, NBF had raised approximately ¥50,000 million through an initial public offering of common shares. Those common shares are listed on the J-REIT section of the Tokyo Stock Exchange.
As of June 30, 2008, NBF had ownership or beneficiary interests in 58 office properties containing approximately 750,701 rentable square
meters of office space. As of June 30, 2008, NBF had leased office space to 931 tenants engaged in a variety of businesses. The occupancy
rate for the office properties was approximately 97.4%.

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

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

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

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

44 NBF Report January-June 2008

2-50 years
2-52 years
2-17 years
2-19 years

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

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

New Investment Shares Issue Cost
The issue costs of new investment shares are expensed when incurred.

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

Real Estate Taxes
Real estate taxes are imposed on properties on a calendar year basis. In terms of newly purchased properties, NBF capitalizes a portion of
the real estate taxes that relate to the purchase date of each property until the end of the calendar year as part of the acquisition cost of therelevant property. Capitalized real estate taxes amounted to ¥205 million for the period ended June 30, 2008 and ¥28 million for the period
ended December 31, 2007 and ¥166 million for the period ended June 30, 2007.

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

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

Reclassifications
Certain reclassifications have been made to prior periods’ financial statements to conform with the presentation used for the period ended
June 30, 2008.

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

NBF Report January-June 200845

Note 3 – Schedule of Tangible Assets of Investment Properties
Tangible assets as of June 30, 2008 and December 31, 2007 consisted of the following:
As of June 30, 2008

As of December 31, 2007
(Yen in millions)

Accumulated
Depreciation

Acquisition
Costs

Acquisition
Costs

—
—
—

¥174,259
251,108425,367¥137,674
253,150
390,824

Land
Land in trust
Land including trust total¥174,259
251,108425,367

Buildings and improvements
Buildings and improvements in trust

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

118,311104,000

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

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

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

7,206
¥697,407

Other tangible assets total
Total

¥

Book Value

Accumulated
Depreciation¥

Book Value———¥137,674
253,150
390,824

113,449
133,624(11,986)(26,051)

101,463
107,573

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

247,073
1,594
829
364
1,369
1,303
721
29
6

(38,037)
(409)
(231)
(141)
(354)
(481)
(310)
—
—

209,036
1,185
598
223
1,015
822
411
29
6

(2,190)

5,016

6,215

(1,926)

4,289¥(44,713)¥652,694¥644,112¥(39,963)¥604,149

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

46 NBF Report January-June 2008

Notes to Financial Statements

Note 5 – Short-Term Loans and Long-Term Debt
Short-term loans consist of short-term notes and short-term borrowings under loan agreements. The annual interest rates on short-termloans outstanding are floating rates and on June 30, 2008 and December 31, 2007 ranged from 0.86% to 1.12% and from 0.95% to 1.15%,
respectively. Long-term debt is at fixed rates and as of June 30, 2008 and December 31, 2007 consisted of the following:(Yen in millions)

Unsecured loans due 2008 to 2018 principally from banks and insurancecompanies with interest rates mainly ranging from 0.8% to 2.4%
1.04% unsecured bonds due 2009
0.80% unsecured bonds due 2010
1.60% unsecured bonds due 2011
1.48% unsecured bonds due 2012
1.74% unsecured bonds due 2014
1.85% unsecured bonds due 2015
2.04% unsecured bonds due 20172.00% unsecured bonds due 2018
Less: amount due within one year

As of June 30, 2008

As of December 31, 2007

¥164,000
10,00010,00010,00010,00010,00010,00010,00010,000¥158,000
10,00010,00010,00010,00010,00010,00010,00010,000244,000

238,000

10,00023,000¥234,000¥215,000

The annual maturities of long-term loans as of June 30, 2008 were as follows:(Yen in millions)

2008
2009
2010
2011
2012
Thereafter¥ 8,000
10,00012,00014,00020,000100,000

During the period ended June 30, 2008, NBF obtained committed credit lines of ¥30 billion with certain financial institutions to reduce refinancing risk. The unused amount of such committed credit lines was ¥30 billion on June 30, 2008.

NBF Report January-June 200847

Note 6 – Rental Revenues and Expenses
Rental revenues and expenses for the periods ended June 30, 2008, December 31, 2007 and June 30, 2007 were as follows:

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

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen in millions)

For the six months ended
June 30, 2007

¥23,626
2,957
125
26,708¥22,157
2,776
123
25,056¥21,099
2,770
123
23,992

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

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

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

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

3,613
2,157
721
34
2,384
5,168
14,078

3,327
2,178
618
35
2,041
5,125
13,324¥15,042¥13,736¥13,317

Note 7 – Gain on Sale of Investment Properties
Gain on sale of investment properties for the period ended June 30, 2008 was as follows:

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

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

48 NBF Report January-June 2008

¥2,707
2,191
84
¥ 432

¥2,400
1,889
75
¥ 436

Notes to Financial Statements

Note 8 – Income Taxes
NBF is subject to income taxes in Japan. The effective tax rate on NBF’s income based on applicable Japanese tax law was 0.01% for theperiods ended June 30, 2008, December 31, 2007 and June 30, 2007. The following table summarizes the significant differences between
the statutory tax rates and NBF’s effective tax rates for financial statement purposes.

Statutory effective tax rate
Deductible dividends paid
Others
Effective tax rate

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007

For the six months ended
June 30, 2007

39.39%(39.39)0.01
0.01%

39.39%(39.39)0.01
0.01%

39.39%(39.39)0.01
0.01%

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

Note 9 – Per Share Information
Information about earnings per share for the periods ended June 30, 2008, December 31, 2007 and June 30, 2007 and net assets per
share as of June 30, 2008, December 31, 2007 and June 30, 2007 were as follows.
The computation of earnings per share is based on the weighted average number of common shares outstanding during the period. The
computation of net assets per share is based on the number of common shares outstanding at each period end.

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

Net Assets per Share

For the six months ended
June 30, 2008

For the six months ended
December 31, 2007
(Yen)

For the six months ended
June 30, 2007

¥22,831¥20,129¥19,808535,298

508,000

508,000

As of June 30, 2008

As of December 31, 2007

As of June 30, 2007

¥735,050¥702,110¥701,790

NBF Report January-June 200849

Note 10 – Leases
Under Japanese accounting standards for leases, finance leases that have been deemed to transfer ownership of the leased property to
the lessee (“ownership-transfer finance leases”) are capitalized by the lessee, while other finance leases (“non-ownership-transfer financeleases”) are permitted to be accounted for as operating lease transactions.
NBF treats all non-ownership-transfer finance leases as operating leases. Accordingly, leased assets with respect to non-ownership-transfer
finance leases where NBF is the lessee are not recognized in the accompanying balance sheets and lease payments are charged to income
when incurred.

As Lessee
Pro forma information of non-ownership-transfer finance leases contracted as a lessee, such as acquisition cost and related accumulated
depreciation of leased assets, obligation under finance leases and depreciation expense of finance leases, which is required under Japanese
accounting standards for leases for the six months ended June 30, 2008 and December 31, 2007 is summarized as follows:(Tools, furniture and fixtures)
As of June 30, 2008
As of December 31, 2007
(Yen in thousands)

Acquisition cost
Accumulated depreciation
Net book value¥3,0272,926
101¥3,0272,623
403

Obligations under finance leases as of June 30, 2008 and December 31, 2007 are as follows:
As of June 30, 2008

Due within one year
Due after one year
Total

As of December 31, 2007
(Yen in millions)

¥ 1
—
¥ 1

¥ 1
—
¥ 1

The amount of obligations under finance leases includes the imputed interest expense portion.
Total payment for non-ownership-transfer finance leases for the six months ended June 30, 2008 was ¥303 thousand.
Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method over therespective lease period. The residual value at the end of the lease period is not considered for the calculation of depreciation. Depreciation
expense for the six months ended June 30, 2008 was equal to the above total payment for finance leases.

As Lessor
NBF leases some of its investment properties to outside parties under non-cancelable operating leases. As of June 30, 2008 andDecember 31, 2007 future minimum rental revenues under the non-cancelable operating leases are as follows:
As of June 30, 2008

Due within one year
Due after one year
Total

50 NBF Report January-June 2008

¥12,208
18,220¥30,428

As of December 31, 2007
(Yen in millions)¥ 7,920
13,027¥20,947

Notes to Financial Statements

Note 11 – Transactions with Related Parties(January 1, 2008 – June 30, 2008)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

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

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

Accounts
payable¥1(Note 4)

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

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

(July 1, 2007 – December 31, 2007)(1) Parent Company and Major Corporate Shareholders
None applicable.
(2) Directors and Major Individual Shareholders
Classification

Director
and/or close
relative

Name

Koichi
Nishiyama

Principal business or
occupation

Nature of transaction

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

Amount oftransaction
Yen in millions

Account

Balance at
end of period
Yen in millions¥1,012(Note 3)

Accounts
payable¥354(Note 3)¥2
(Note 3)

Accounts
payable¥1(Note 3)

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

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

Note 12 – Significant Subsequent Events
None applicable.

NBF Report January-June 200851

Independent Auditors’ Report

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

We have audited the accompanying balance sheets of Nippon Building Fund Inc. (a Japanese Real Estate
Investment Trust) as of June 30, 2008 and December 31, 2007, and the related statements of income, shareholders’ equity and cash flows for each of the six months ended June 30, 2008, December 31, 2007 and June30, 2007 expressed in Japanese yen. These financial statements are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Nippon Building Fund Inc. as of June 30, 2008 and December 31, 2007, and the results of its operations and its cash flows for each of the six months ended June 30, 2008, December 31, 2007 and June 30,
2007 in conformity with accounting principles generally accepted in Japan.

Tokyo, Japan
September 25, 2008

52 NBF Report January-June 2008

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

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

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

and undertakes management of the institutions of NBF. As of June 30,

equivalent to the total amount of the acquisition price of said Real2008, NBFM has been entrusted as an asset management company

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

only by NBF.

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

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

NBFM, is concurrently an executive director of NBF.

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

Operation■

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

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

Management Entrustment Agreement based on an entrustment from●

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

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

The portion exceeding ¥10,000 million up to andincluding ¥30,000 million ............................................................ 0.2%●

The portion exceeding ¥30,000 million up to andincluding ¥50,000 million ............................................................ 0.05%●

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

Investment Objects and Policies set forth therein.
■

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

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

Management Fees 2
The amount equivalent to 3% of income before income tax (provided,
however, that in the event a loss is carried forward, then the amount ofincome before income taxes remaining after such loss has been covered) prior to deduction of Management Fees 2 as calculated on eachclosing date will be payable.

NBF Report January-June 200853

Appendix

History of NBFM

Directors and Staff

NBFM is an Asset Management Company which is a limited liability

As of June 30, 2008, the directors and corporate auditors of NBFM

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

comprised of 16 persons.

September 19, 2000 Established

Name of Directors and Auditors

Title

November 17, 2000

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

Koichi Nishiyama

President & CEO (standing)

Yasushi Nakayama

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

Riichi Morihiro

Director, Head of Administration Group(standing)

Tamotsu Shinyama

Director

Hiroshi Matsumoto

Director

Noriaki Moromachi

Corporate Auditor

Toru Suzuki

Corporate Auditor

January 29, 2001

February 15, 2001

March 7, 2001

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

March 22, 2001

Increased capital from ¥100 million to ¥198 million

May 23, 2001

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

June 16, 2001

Increased capital from ¥198 million to ¥495 million

March 14, 2003

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

September 30, 2007

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

List of Shareholders (as of June 30, 2008)
Name

Numberof Shares Owned

Percent

Mitsui Fudosan Co., Ltd.

4,257

43.0%

Sumitomo Life Insurance Company

3,465

35.0

The Chuo Mitsui Trust andBanking Co., Ltd.

495

5.0

Sumitomo Mitsui Banking
Corporation

495

5.0

Daido Life Insurance Company

297

3.0

Mitsui Sumitomo InsuranceCo., Ltd.

297

3.0

Mitsui Mutual Life Insurance
Company297

3.0

Britel Fund Trustees Limited
Total

54 NBF Report January-June 2008

297

3.0

9,900

100.0%

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

(Yen in thousands)

Total Assets¥2,030,749

Total Liabilities

350,604

Total Net Assets¥1,680,145

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

(Yen in thousands)

Operating Income¥2,308,792

Ordinary Profit

1,584,200

Net Income

964,493

Investment and Distribution Policies
Investment Policies of NBF

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

Area and Allocation Ratio

Area Analysis

Tokyo CBDs■

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

■

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

■

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

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

Other Greater Tokyo

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

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

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

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

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

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

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

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

■

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

■

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

■

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

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

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

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

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

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

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

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

NBF Report January-June 200855

ures responding to risks of deterioration and obsolescence, insurability

Uncompleted or Unleasable Properties

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

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

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

Incorporation).

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

Though such consideration will involve the study of the criteria

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

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

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

be satisfied.

amount of any such unleasable asset combined with the total contract

Item

Points to be reviewed

Scale of building■

Construction type andspecifications of facilities■

Earthquake resistance■

Measures regarding
status of legal title

■

●

●

Tenancy characteristics

Environmental;
condition of land, etc.

■■

amount of previously acquired unleasable assets (but excluding

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

unleasable assets which thereafter become operational) will not exceed

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

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

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

scale renovation of a building).

In cases such as co-ownership, divided
condominium ownership, a building erected
on leased land, etc. where NBF will not
obtain complete ownership of a building, thefollowing matters are appropriately treated.
measures to protect security deposits, policies and measures regarding cash reserves
for long-term renovation plans.
appropriate measures regarding demands fordivision of co-owned interests or the sale ofa co-owner’s interest, etc.
Acceptable creditworthiness of tenants, purposes of use by tenants, configuration, andcondition of collectibility of rents, etc.
Absence of harmful substances such as
asbestos, (or countermeasures can be implemented for any such substances), non-existence of soil pollution, etc.

10% of the total assets indicated on the most recent balance sheet of
NBF. For this purpose, “leased/leasable assets” shall mean property withrespect to which the construction of the building has been completed
NBF and have become operational at some point shall be deemed“leasable” thereafter (including such cases as reconstruction or large-(3) Management and Disposition Policies
Regarding acquired operating properties, the goal is to obtain steady
growth of operating profits on a mid-term to long-term basis by planningto maintain and improve asset value and competitive ability throughinvestment in facilities and by expanding income (increasing rents, etc.,
increasing occupancy rates, extending the term of leases and rendering
them more stable, etc.) and reducing property-related expenses.
NBF will, in principle, for the purpose of assuring stable income on a
mid-term to long-term basis, lease out all operating properties included
in operating assets (including installation of parking lots, billboards, etc.).
When conducting such leasing, security deposits, etc. and other similar
monies may be received and said monies will be managed in accordance with the requirements of “Investment Objectives and Policies” ofthe Articles of Incorporation (“Investment Objectives and Policies,”
Articles of Incorporation).
NBF is entitled to establish reserves for long-term renovations
required to maintain and enhance the value of operating properties,
reserves for payables, reserves for cash distributions and any other similar reserves, etc. (Articles of Incorporation).

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

56 NBF Report January-June 2008

Investment and Distribution Policies

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

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

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

Item

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

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

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

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

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

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

Debt Financing
Measures to Avoid Reductions and Fluctuations in
Operating Income

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

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

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

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

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

such as area diversification and obtaining adequate fire and casualty

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

insurances, etc., will be exerted.

(“Investment Objectives and Policies,” Articles of Incorporation).
Borrowings are limited to those from Qualified Institutional Investors

Appraisal Value, etc.

as specified in Article 2.3.1 of the Securities and Exchange Law ofIn the event that valuation of real estate, land leasehold rights andJapan, in case capital is borrowed. Further, the total limit on all suchsuperficies (including beneficiary certificates, securities and tokumei-

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

undertaking borrowings or when issuing NBF bonds, NBF may provide

undertaken for the purpose of disclosure in Performance Information

operating assets as collateral (Articles of Incorporation).

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

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

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

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

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

term operating asset management policy and annual management plan

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

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

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

Disposition

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

In disposing of individual operating properties, selections will be

option transactions, swap transactions and forward rate transactions

made through comprehensive research and analysis based on the fore-

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

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

NBF Report January-June 200857

Distribution Policies of NBF
A. Distributions of Profits

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

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

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

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

Incorporation).

those requirements.

■

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

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

lowing policies (Articles of Incorporation).

Available for Dividends

Earnings Available for Distributions■

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

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

Securities and Exchange Law of Japan and in conformity with generally

economic environments, real estate markets and leasing markets

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

NBF’s Current Policy on Distributions in Excessof Profits

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

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

erally deemed to be fair and appropriate.

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

Cash Distribution of Profits

profits in accordance with the distribution policies stated above in order

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

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

necessary by the Board of Directors of NBF.

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

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

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

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

sary for maintenance or appreciation of the assets of NBF.

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

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

D. Prescription for Cash Distributions, etc.

its shareholders in excess of retained earnings under the Investment

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

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

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

58 NBF Report January-June 2008

Investment and Distribution Policies

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

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

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

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

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

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

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

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

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

invested and Managed Assets principally referred to in paragraphs

Designated Assets under the Investment Trust Law of Japan).

(1) and (2) above).

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

Designated Assets under the Investment Trust Law of Japan).

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

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

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

invested and Managed Assets principally referred to in paragraphs

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

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

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

NBF Report January-June 2008

59

C. Assets Other than Designated Assets

Investment Restrictions

NBF may, in the course of efficiently managing funds or in othercases as necessary, invest in the following assets.
(1) Certificates of deposit issued by Japanese legal entities(2) Equity interests of partnerships defined under Article 667 of the Civil
Code (limited to such partnerships established by contribution of realestate, real estate leasehold rights and superficies for the purpose ofleasing, operating or managing, etc., of the same; hereafter,“Voluntary Partnership Equity Interests”)(3) Trademark rights(4) Copyrights

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

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

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

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

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

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

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

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

60 NBF Report January-June 2008

Investment and Distribution Policies

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

While a registered investment corporation must entrust business

related to the business of managing the assets of said investment cor-Other Transactions Specified in the Government
Ordinance regarding the Investment Trust Law ofJapan (§ 34.3.1.8)

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

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

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

provisions of the Investment Trust Law of Japan) besides restrictions

tain acts committed by an asset management company that would result

applied to a registered investment corporation. NBF will naturally comply

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

the management of the assets of NBF, and pose a risk of damaging therelated to asset management to an asset management company, anasset management company is prohibited from performing certain acts

good public reputation of NBF are prohibited.

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

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

are managed by an asset management company, are prohibited except

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

said issued and outstanding shares.

to result in failure to protect the interests of shareholders.

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

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

assets subject to asset management are prohibited except for certain

by itself in the following cases:

cases specified in the provisions of the government ordinance regarding●

when acquired as the result of merger;

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

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

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

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

amount of consideration related to transactions in the assets of an

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

not acquire the shares of such parent investment corporation except in

An asset management company may not undertake transactions in

the following cases:

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

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

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

NBF Report January-June 200861

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

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

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

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

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

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

62 NBF Report January-June 2008

Investment and Distribution Policies

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

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

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

said asset management company, other investment corporations (which

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

said trust beneficiary interests to said distributor of trust beneficiary

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

Investment Trust Law.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

duties similar to directors or auditors of an asset management company

poration the assets of which are managed by said asset management

who perform asset management.

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

NBF Report January-June 200863

Corporate Data
As of June 30, 2008

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

Date of Inception:

March 16, 2001

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

Shareholders:

14,401

Transfer Agent:

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

Business Office of the Transfer Agent:

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

Independent Public Accountants:

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

Investor Relations:

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

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

Securities Report (Yuka shoken hokokusho) filed on September 26, 2008 pursuant tohas been authorized to give any information or make any representations other than as

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

Performance Information Report for the period from January 1, 2008 to June 30, 2008,

given or made, such information or representation must not be relied upon as havingof Nippon Building Fund Inc. prepared pursuant to the Investment Trust Law of Japan.

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

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

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

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

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

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

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

which may materially differ in certain respects from generally accepted accounting

ment.

principles in other jurisdictions.

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

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

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

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

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

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

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

nal Japanese documents and English statements contained herein, the original

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

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

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

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

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

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

64 NBF Report January-June 2008

Investors’ Information
As of June 30, 2008

Fiscal Period

Shareholders

Six months ending June 30 and December 31

Other domestic corporations
322 (2.2%)

Overseas investors 395 (2.8%)
Financial institutions(Including securities companies)

Total Number of Common Shares Issued

199 (1.4%)

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

542,000 shares

13th Period (From July 1, 2007 to December 31, 2007)

508,000 shares

Individuals and others
13,485 (93.6%)

Distributions
Total number of shareholders:Confirmed distribution for the 14th Period (ended June 2008)
For the operating period from January 1, 2008 to June 30, 2008 (6 months)

14,401¥22,549 per share

Expected distribution for the 15th Period (ending December 2008)
For the operating period from July 1, 2008 to December 31, 2008 (6 months)¥21,100 per share

Overseas investors
181,054 (33.4%)

Other domestic corporations
44,868 (8.3%)
Individuals and others
32,047 (5.9%)
Financial
institutions(Including
securities
companies)

284,031(52.4%)

Total number of shares:

542,000

Major Shareholders
Name

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

Number of Shares Held

Percentage of Total

40,70038,53632,57932,362
19,735
17,46915,942
12,256
10,589
8,954

7.50%
7.10
6.01
5.97
3.64
3.22
2.94
2.26
1.95
1.65

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

Trading Volume (Right scale)
90,000

Closing Price (Left scale)

1,600,000

80,0001,400,000

70,0001,200,000

60,0001,000,000

50,000800,000

40,000600,000

30,000400,000

20,000200,000

10,0000

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2003
2004
2005
2006
2007
2008

0

NBF Report January-June 200865

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

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

Printed in Japan