28th Fiscal Period
Repor t on Performance andManagement Status (Semiannual Report)
March 1, 2018 to August 31, 2018

Fukuoka REIT
Corporation

Security Code 8968

8968

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

ProfileTo Our Unitholders

Status of the Investment Corporation

We would like to express our sincere appreciation to all unitholders
for your continued support of Fukuoka REIT Corporation (FRC).
We are pleased to report on the performance results andmanagement status of FRC for the twenty-eighth fiscal period (March
1, 2018 to August 31, 2018).
FRC was listed in June 2005 and started as Japan's first REIT
specializing in regional properties. Since then, we have exhibited
consistent growth and achieved stable performance through thesupport of our unitholders and sponsor companies.
The business conditions of the Fukuoka and Kyushu area are
expanding moderately at a solid pace.
Consumer spending in the Fukuoka and Kyushu area is increasing
moderately, given improvements in the employment and income
environments. Looking ahead, a virtuous cycle is expected to continue,
bolstered by demand in and outside Japan.
According to the government’s Prefectural Land Price Survey
announced in September 2018, the commercial land price in Fukuoka
City rose 11.1% year-on-year, as it showed a similar increase in the2018 Land Market Value Publication announced in March 2018. The
figure for residential land also rose 4.4% year-on-year.
FRC acquired two properties in the 28th fiscal period.
As of March 1, 2018, FRC acquired Konoha Mall Hashimoto,a retail property (acquisition price: 10 billion yen) and Higashi
Hie Business Center II, an office building (acquisition price: 4.23
billion yen). Located in an area with ample trade zone population,
Konoha Mall Hashimoto is a community-based retail facility deeply
rooted in people’s daily lives. To further reinforce this strength, we
implemented measures to enhance customer satisfaction at theproperty, such as newly installing playground equipment with whichpreschoolers and pupils can play at ease and reducing congestion
on weekends by renewing the parking lot control system. Meanwhile,
Higashi Hie Business Center II is directly connected with a subway
station and features superior location characteristics and high traffic
convenience. As such, the property has been fully occupied since it
was incorporated into our portfolio. The acquisitions have expanded
the asset size of FRC to 193.1 billion yen.
An original Godzilla show was introduced for Canal Aqua
Panorama, its sixth show, at Canal City Hakata.

Panorama introduced an interactive game in which visitors canparticipate, its first such game, in June 2018. The game, wherevisitors launch missiles from their own smartphones to freeze Godzillaand protect Canal City Hakata, provides entertainment not foundanywhere else as an activity that both domestic and inbound visitors
can enjoy. Through facility operations that create experiential value
and emotional consumption, including water shows and projection
mapping, Canal City Hakata aims to become an international
shopping center offering the greatest joy in Asia.
Moreover, Canal City Hakata was granted the 6th Green Social
Contribution Award sponsored by the Organization for Landscapeand Urban Green Infrastructure. The Award acknowledged theinitiatives on environmental improvement and contributions to local
communities that we have promoted at the facility since its opening,
including creation of spaces around artificial canals for visitors to rest
and relax, and installation of rooftop gardens at the hotels within thefacility.
In terms of financing, we issued the 3rd Unsecured Investment
Corporation Bonds
In the fiscal period under review, we issued unsecured investment
corporation bonds totaling 1 billion yen, the third of such bonds
for FRC, in an effort to diversify financing methods and extend theaverage remaining years to maturity. The issuance brought FRC
a super long-term fund with debt maturity of 20 years and at aninterest rate of 1.2%. In refinancing and other financial operations,
we successfully reduced interest costs, extended debt duration anddispersed debt repayment dates.
Going forward, FRC will continue to exert its strengths as a REIT
specializing in regional properties and quickly respond to market
changes, while receiving support and cooperation from powerfulsponsors leading the Kyushu business world. As we do so, we will
strive to achieve growth of our portfolio in the medium to long termand secure stable earnings through steady asset management. We
at FRC will also pursue our mission of maximizing unitholder interests
over the medium to long term based on our management philosophyof "Act Local, Think Global."
We greatly appreciate your continued
support and cooperation.

FRC is Japan's first REIT specializing in regional properties. FRC manages a portfolio centering on retail facilities featuring
excellent design and entertainment qualities and superior office buildings throughout all of Kyushu. With a central focus
on Fukuoka, and in Yamaguchi Prefecture and Okinawa Prefecture, we are utilizing our strength of knowing the local
characteristics of real estate, which is a very regional-specific business.

Overview of the Investment Corporation
Fukuoka REIT Corporation

Name:

Representative: Etsuo Matsuyuki, CEO & Representative Director
Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10)
Listed date:June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange)

Sponsors

5%

5%

5%

5%

THE BANK OFFUKUOKA, LTD.

THE NISHI-NIPPONCITY BANK, LTD.

Development Bank of Japan Inc.

SAIBU GAS CO., LTD.

50%

Etsuo Matsuyuki

I.

II.

Overview of Fukuoka REIT Corporation
To Our Unitholders
ProfileTrend of Growth in Asset Size of FRC / Financial Summary
Portfolio Overview
Achievements in Environment, Society, and Governance (ESG) Initiatives
Semiannual Report

Kyushu Electric Power Co., Inc.

(Asset Manager)

5%

5%

5%

5%

Kyudenko Corporation

Nishi-Nippon Railroad Co., Ltd.

Kyushu Railway Company

ROYAL HOLDINGS Co., Ltd.

(Note 1) Concluded MOU with Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd. concerning pipeline support.

Overview of the Asset Manager
Name:

Fukuoka Realty Co., Ltd.

TEL:

+ 81- 92- 272- 3900

Representative:

Etsuo Matsuyuki CEO & Representative Director

Established:

December 26, 2003

Address:

2- 25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka City

Capital:200, 000, 000 yen

Investment type (based on acquisition price)
Office buildings

Retail

CEO & Representative Director,
Fukuoka REIT Corporation

27.3%

60.1%

CONTENTS

10%

Outsidedirector

Fukuoka Realty Co., Ltd.

FUKUOKA JISHO
CO., LTD. (Note 1)

PortfolioWith a continued upward trend in the number of inboundtourists visiting Canal City Hakata, the flagship of FRC, Canal Aqua

Director

Others12.6%

Investment area (based on acquisition price)
1
2
3
5
7
8

III. Independent Auditor's Report
IV. Balance Sheet
V. Statement of Income
VI. Statement of Changes in Net Assets
VII. Cash Flow Statement
VIII. Notes to Financial Statements

FUKUOKA REIT CORPORATION

1

25
26
28
29
30
31

Other
Kyushu areas

Fukuoka metropolitan area

78.4%

21.6%

Total leasable floor space

Occupancy rate at end of period

576, 907. 98 m 2

99. 6%*Figures are based on properties owned as of August 31, 2018.

FUKUOKA REIT CORPORATION

2

I. Overview of Fukuoka REIT Corporation

Trend of Growth in Asset Size of FRC
Since Listing

FRC More than Doubled Asset Size and Diversified Investment Types
Retail (total acquisition price, left axis)

Office buildings (total acquisition price, left axis)

Number of investment properties (right axis)

Others (total acquisition price, left axis)

Occupancy Rate (right axis)(mm yen)

99.6

200,000

99.8

99.0

99.7

99.4

99.4

98.8

99.4

98.6
99.2

99.1

98.8

99.6
98.8

98.1

99.0

99.3

97.0

98.1

99.6

99.5

99.4

99.5

99.8

99.6

99.6

100.0%

99.3

24,331
22,081
3,171

150,000

43,100

3,171

2,060

100,000

25,80030,20037,20037,20037,200

3,171

2,060

37,20037,200

14

3,171

3,171

37,20037,200

15

3,171

3,171

3,171

43,100

7,251

7,251

45,70043,100

11,581

48,500

11,581

48,50043,10043,10043,100

15

16

16

17

16

48,50048,50048,5002727

2748,50019,281

48,50025

24

23

22,081

24,331

24,331(properties)

48,50048,500

26

26

30
90.0%

52,730
28

25

20

19
16

48,5003,171
2343,10012,831

22,081

13,93120

17116,083
50,0005
54,3330

11

11

755,073

8
55,07362,77362,773103,323

67,44371,07374,62374,62374,62374,62374,623103,323

103,323

103,323

103,323

103,323

103,323

103,323

109,163

109,163

109,163

105,223

105,223

105,223
10

74,623

2nd
3rd
4th
5th
6th
7th
8th
9th
10th
11th
12th
13th
(Aug 2005) (Feb 2006) (Aug 2006) (Feb 2007) (Aug 2007) (Feb 2008) (Aug 2008) (Feb 2009) (Aug 2009) (Feb 2010) (Aug 2010) (Feb 2011)

14th
15th
(Aug 2011) (Feb 2012)

16th
17th
18th
19th
20th
21st
22nd
23rd
24th
25th
26th
27th
(Aug 2012) (Feb 2013) (Aug 2013) (Feb 2014) (Aug 2014) (Feb 2015) (Aug 2015) (Feb 2016) (Aug 2016) (Feb 2017) (Aug 2017) (Feb 2018)

0

28th(Aug 2018)

Financial Summary
Financial Highlights for 28th Fiscal Period and Business Forecasts for 29th
and 30th Fiscal Periods
Category

28th fiscal period

29th fiscal period

30th fiscal period(March 1, 2018 to August 31, 2018)(September 1, 2018 to February 28, 2019)(March 1, 2019 to August 31, 2019)

ActualForecast

Forecast

Operating revenues

mm yen

9,178

9,121

9,160

Leasing NOI (Note 1)

mm yen

5,493

5,503

5,488

Depreciation and amortization expenses

mm yen

1,602

1,611

1,625

Operating income

mm yen

3,238

3,234

3,200

Ordinary income

mm yen

2,861

2,866

2,826

Profitmm yen

2,860

2,865

2,825

Dividend per unityen (1)

3,593

–

–

Latest dividend forecast per unityen (2)

3,570

3,600

3,550

yen (1)-(2)

+23

–

–

units

796,000

796,000

796,000

Difference from forecast
Total number of investment units
outstanding (at end of period)(Note 1) “Leasing NOI” is calculated using "Leasing business revenues − Expenses related to leasing business + Depreciation and amortization expenses."

FUKUOKA REIT CORPORATION

3

Dividend Performance
28th fiscal period end

August 31, 2018

28th fiscal period dividend

3,593 yen per unit

(semiannual periods ending every February and August)28th fiscal period days

184 days

Dividend yield

4.2% {(Dividend / Days × 365) / Unit price (as of August 31, 2018)}

（yen）

3,802
4,000 （19,014）3,687 3,726

3,672 3,699 3,674

3,609（18,632）（18,438）（18,373）3,468（18,360）（18,499）（18,049）3,475 3,479
3,563 3,574（17,377）（17,397）3,356 3,293 3,384 3,324 3,238 3,257 3,291 3,243（17,341）
3,435（16,922）（16,783）（16,621）（16,465）（16,458）（16,193）（16,289）（16,219）3,278

3,479

3,398 3,422

24th

25th

3,512

3,593 3,600 3,550

27th

28th

3,000

2,000

1,000

0

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

17th

18th

19th

20th

21st 22nd 23rd

26th

29th

30th

(Forecast) (Forecast)*FRC implemented a 5-for-1 split of its investment units with March 1, 2014 as the effective date. Dividend per unit indicates the value after the 5-for-1 split. Figures in parentheses indicate the value before
the 5-for-1 split.
FUKUOKA REIT CORPORATION

4

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Purchase of earthquake
insurance

Portfolio Overview
1 Retail

2 Retail

FRC has purchased earthquake insurance
for all the properties it owns.

3 Retail

4 Retail

21 Others(residence)

22 Others(residence)

23 Others(residence)

24 Others(residence)

Canal City Hakata

Canal City Hakata・B

Park Place Oita

One of the largest entertainmenttype retail facilities in Japan andcomprising United Cinemas andothersOne of the largest entertainmenttype retail facilities in Japan andcomprising Grand Hyatt Fukuoka
and others

A leading retail facility in the Oita
area, providing park entertainment
for families

One of the largest malls in
Kitakyushu and anchored by a
SunLive supermarket chosen by
local consumers

A high-quality rental condominium
in a popular residential area of
Fukuoka, featuring traffic and living
convenience

A rental condominium comprisedof units mainly for singles andsmall families to match the local
characteristics

A large, high-rise (20-story) rental
condominium, approximately aseven-minute walk from Tenjin
subway station

A rental condominium in the Yakuin/
Hirao area that is popular among
younger generations and has
plentiful bus networks

5 Retail

6 Retail

7 Retail

8 Retail

25 Others(hotel)26 Others(logistics)

27 Others(logistics)

28 Others(logistics)

Square Mall Kagoshima Usuki

Kumamoto Intercommunity SC

Hanahata SC

A community-based retail facility
with SunLive as its anchor tenantand directly connected to Hashimoto
Station via a pedestrian bridge

A retail facility in Kagoshima,
designed by John Jerde who
designed Canal City Hakata andRoppongi Hills

Located along a major arterial roadand comprising Sports Depo, Golf 5
and Starbucks coffee

Located in a new residential area
and comprising BON REPAS
supermarket and Matsumoto Kiyoshi
drug store

9 Retail

10 Retail11 Retail12 Office Building

Hotel FORZA Oita
A business hotel located walking
distance from Oita Station andspecialized for lodging to meetbusiness needs

Located east of Marinoa
City Fukuoka and has stableattractiveness through synergy with
the Outlet building

An office building expected to exert
synergy with Canal City Hakata, withshowroom functions

LOGICITY Minato Kashii

LOGICITY Hisayama

A logistics facility located in theGreen Logistics Park Tosu, operatingaround the clock and with threetemperature zones

A logistics facility among the largest
in the Fukuoka area, with a location
featuring traffic convenience andconcentration of such facilities

Approximately 5 km from the
Fukuoka Interchange featuring traffic
convenience, and has good generalpurpose capabilities

Island City

Fukuoka

Nagasaki

28

27

4
26
9

Oita

25
3

7

22

Kumamoto
Miyazaki3

Kagoshima

13 Office Building

14 Office Building

15 Office Building

16 Office Building

ssway
Kyushu Expre

Having a large floor area andtenanted by an electric appliancestore widely attracting customers
from nearby cities

Canal City Business Center
Building

Tosu Logistics Center

KyushuArea

Fukuoka IC

Fuku
R o u o ka E x
te 4p
K a sr e s s w a y
u ya
Line,

3

6
10

e
Lin

Located on a corner of a heavytraffic intersection and comprising
Sports Depo and Golf 5

Marinoa City Fukuoka(Marina Side Building)Granfore Yakuin Minami

ii
sh
Ka
JR

Saga

K s Denki Kagoshima

D-Wing Tower◉ Portfolio Map
Fukuoka
Metropolitan Area

Kurume Higashi Kushiwara SC

Aqualia Chihaya

Sh
in
ka
ns
en

Konoha Mall Hashimoto

City House Keyaki Dori

Sa
ny
o

Property acquiredin the 28 th
fiscal period

SunLive City Kokura

Hakata Bay

JR Sasaguri

Gofukumachi Business Center

Sanix Hakata Building

Taihaku Street Business Center

Higashi Hie Business Center

An office building facing major arterial
roads Meiji-dori Street and Taihakudori Street, and directly connected to
Gofukumachi Station on the city subway

A highly-convenient, station-front
office building that is a two-minute
walk from Hakata Station

Good location along Taihaku-doriStreet, a two-minute walk from Gion
subway station and ten-minute walkfrom Hakata Station

Directly connected to Higashi Hie
subway station, a two-minute ride to
Hakata Station and three-minute rideto Fukuoka Airport

Fukuoka Expressway,
Route 1 (Loop Line)11

SubwayKuko Line

17 Office Building

18 Office Building

19 Office Building

Property acquiredin the 28 th
fiscal period

202

3

SubwayNanakuma
Line

Ni
sh
Omitetut su
a Te
Lin nj
e in

263

5

1km

Fukuoka
E

ne
Li

202

0

xpr
ess
wa

5
y R oute

Line)
(Loop

8
FUKUOKA REIT CORPORATION

5

ifu
za
Da

385

ay
sw
es
pr
Ex

Amex Akasakamon Tower
A tower-type rental condominium
near downtown Fukuoka, with traffic
convenience and environment thatmatches a wide range of generations

Fukuoka Airport

16

an
rb
U

Higashi Hie Business Center II
Directly connected to Higashi Hie subway
station, a two-minute ride to Hakata
Station and highly recognized for its
excellent business continuity plan (BCP)

Tenjin

19

ine
aL
im
sh
go
Ka

Tenjin North Front Building

Hakata
1
12
14
2

17

21

15

JR

202

A relatively new office building
scarce in the Tenjin area that features
Kyushu s largest integration of urban
functions

18

24
202

Tenjin Nishi-Dori Center Building

20 23

Ohori Park

20 Others(residence)

An office building facing Tenjin
Nishi-dori Street where commercial
facilities are concentrated

13

FUKUOKAYAHUOKU!DOMELine

FUKUOKA REIT CORPORATION

6

Fukuoka
Metropolitan
Area

Achievements in Environment, Society,and Governance (ESG) Initiatives

II. Semiannual Report
Overview of Asset Management

DBJ Green Building Certification• DBJ Green Building

Fukuoka REIT has obtained DBJ Green Building Certification, a system by Development Bank of Japan Inc.(DBJ) to certify realestate properties evincing high environmental and social awareness, for the following properties as "a property withexceptionally high (or excellent) environmental & social awareness."◦Konoha Mall
Hashimoto◦LOGICITY Hisayama◦Higashi Hie Business Center II◦Canal City Hakata◦Canal City Hakata • B◦Park Place Oita
◦Canal City Business Center Building• BELS (Building-Housing Energy-efficiency Labeling System)◦Gofukumachi BusinessCenter◦Higashi Hie BusinessCenter◦Higashi Hie Business Center

This is a system in which a third party evaluates and announces the energy-conservation
performance of non-residential buildings based on the "Guidelines for Evaluation of Energy
Conservation Performance of Non-residential Buildings (2013)". Four properties owned by the
Fukuoka REIT corporation were certified.

◦Higashi Hie Business Center II◦LOGICITY Minato Kashii◦LOGICITY Hisayama

1. Changes in operating results and financial position

Asset Management Company's Work Style Reform

Recognized Initiatives• A training system for employees• A support system for self-development initiatives• A system to support employees to establish their career goals and consult on careerdevelopment• A support system for employees to develop skills such as professional qualifications,25th fiscal period (Note 6)

26th fiscal period

8,234[8,234]5,165[4,540]
3,069
2,616
938
179,513[(1.1)]
92,081[(1.8)]
91,142

9,730[8,072]
5,145[4,517]
4,585
4,199
4,198
175,063[(2.5)]
93,681[1.7]
91,142

8,122[8,117]5,202[4,593]
2,920
2,562
2,556
178,063[1.7]
93,699[0.0]
91,1428,194[8,194]
5,228[4,614]
2,965
2,624
2,623
177,283[(0.4)]
93,766[0.1]
91,142

9,178[9,178]5,940[5,287]
3,238
2,861
2,860
193,112[8.9]
101,799[8.6]
98,938units

747,000

747,000

747,000

747,000

796,000(c)/(d)yen(e)

mm yen(e)/(d)yen
yen

123,2672,598
3,479[1,256][2,223]

125,4102,538
3,398[3,398][–]125,434
2,556
3,422[3,422][–]

125,5242,623
3,512[3,512][–]

127,888
2,860
3,593[3,593][–]%

1.4 [2.9]

2.4 [4.8]

1.5 [2.9]

1.5 [3.0]

1.5 [3.1]%

1.0 [2.0]

4.5 [9.1]

2.7 [5.4]

2.8[5.6]

2.9 [5.8]

%

51.3

53.5

52.6

52.9

52.7

%
%

[(0.4)]
100.0

[2.2]
60.5

[(0.9)]
100.0

[0.3]
100.0

[(0.2)]
100.0

properties

27

25

26

26

28

m2

554,541.30

523,817.31

548,564.96

548,564.93

576,907.98

%

99.5

99.4

99.8

99.6

99.6

mm yen

1,470

1,455

1,474

1,500

1,602

mm yen

665
5,164
184

1,789
5,010
181

741
4,998
184

600
5,079
181

657
5,493
184

(unit)

Operating revenues

mm yen[Leasing business revenues]

mm yenOperating expenses

mm yen[Expenses related to leasing business]

mm yenOperating income
Ordinary income
ProfitTotal assets

mm yenmm yen(a)

mm yen(b)

mm yen(c)

mm yen[Change from previous period]

Net assets

On August 28, 2018, Fukuoka Realty Co., Ltd. was certified as a "Fukuoka 'Work Style Reform' Promotion Company". This is a system to recognize
companies that have implemented a certain number of initiatives selected by Fukuoka City as an indicator to advance work style reform.

24th fiscal period

Fiscal Period%[Change from previous period]

Unitholders’ equity
Total number of investment
units outstanding
Net assets per unit
Total dividend
Dividend per unit%
(Note 3) mm yen(d)[Earnings dividend per unit][Dividend in excess of earnings per unit]yen(Note 4)

(March 1, 2016 toAugust 31, 2016)(September 1, 2016 to
February 28, 2017)(March 1, 2017 toAugust 31, 2017)27th fiscal period(September 1, 2017 to
February 28, 2018)

28th fiscal period(March 1, 2018 toAugust 31, 2018)

an English proficiency program, and a bookkeeping course• The company has measures in place to encourage the shortening of working hours• A system allowing employees to take time off in increments of hours and half-daysAwarded by the Fukuoka City Economy,
Tourism & Culture Bureau chief• A personnel development system, including training that contributes to careerdevelopment

GovernanceRatio of ordinary income to total (Note 5)
assets(Note 5)Return on net assets
Ratio of net assets to total(c)/(b)assets[Change from previous period]

Formulation of a Basic Policy on Customer-oriented
Business Conduct
Fukuoka Realty Co., Ltd. has adopted all seven principles set forth in the
Principles for Customer-Oriented Business Conduct, announced by the
Financial Services Agency on March 30, 2017, and formulated a basic
policy to realize customer-oriented business operations on September
20, 2017.
Fukuoka Realty's Basic Policy
1. Fukuoka Realty is a financial business operator that operates listed
REITs. We will constantly strive to provide high-quality services so that
we can meet the investment needs of unitholders.

Payout ratio

Governance Structure【Other reference information】
Number of investment
properties (at end of period)
Total leasable floor space(at end of period)

Supervisory Director CEO and Representative Director Supervisory Director
Yasuo Kawasho
Etsuo Matsuyuki
Hiroyasu Shindo

Fukuoka REIT Corporation

Ordinary Board of Executive
Officers meeting: 10 times(total of the 27th FP and the 28th FP)

2. Fukuoka Realty, as an asset management company knowledgeable
about the particular circumstances of the region, strives to maximize theprofit of our unitholders by utilizing information and expertise, to provide
investors with stable earnings over the medium to long term.
3. Fukuoka Realty will make the fiduciary duty entrusted to us byunitholders the primary consideration and appropriately manage conflictsof interest.
4. Fukuoka Realty’s executives and employees daily engage in honest andfair operation and act responsibly toward the Company’s investors andother stakeholders.
5. Fukuoka Realty will proactively engage in voluntary IR activities in
addition to statutory disclosure and timely disclosure and increase thefairness and transparency of information disclosure.

(Note 5)

Director(Non-Executive)
Hidenori Hara
Director(Non-Executive)
Yoshiro Watanabe

CEO and Executive Managing Director
Representative Director
Etsuo Matsuyuki
Executive Managing Director
and General Manager of Planning Dept.
Akira Eguchi

Fukuoka Realty Co., Ltd.

FUKUOKA REIT CORPORATION

7

Director(Non-Executive)
Hiroshi Shimuta
Auditor(Non-Executive)
Masanori Tasaka

Ordinary Board of Directors
meeting: 12 times(total of FY 2017)

Occupancy rate
(at end of period)

Depreciation and amortization
expensesCapital expenditures
Leasing NOI
Days in fiscal period(Note 5) mm yen
days(Note 1) Consumption tax is not included in operating revenues, etc.
(Note 2) In the above table, monetary amounts are rounded down to the nearest specified unit and percentage figures are rounded off to one decimal place.
(Note 3) No consideration has been given to the change in unitholders’ equity due to distribution of dividend in excess of earnings that came from reserve for temporary difference adjustments. The same shallapply hereafter.
(Note 4) The dividend in excess of earnings per unit for the 24th fiscal period came from the reserve for temporary difference adjustments.
(Note 5) The indicators are calculated by using the following methods. Furthermore, the figures in square brackets represent annualized value based on the number of days in each fiscal period.
Ratio of ordinary income to total assets
Return on net assets
Payout ratio
Leasing NOI

Ordinary income / average total assets
Average total assets = (Total assets at beginning of period + total assets at end of period) / 2
Profit / average net assets
Average net assets = (Net assets at beginning of period + net assets at end of period) / 2
Dividend per unit (excluding dividend in excess of earnings) / profit per unit
Profit per unit = Profit / total number of investment units outstanding
Leasing business revenues – expenses related to leasing business + depreciation and amortization expenses(Note 6) For the 25th fiscal period, profit amounted to 4,198 million yen as a result of recording 1,657 million yen from gain on sales of real estate. However, because 1,660 million yen in reserve fortemporary difference adjustments was reversed, the total dividend obtained by deducting the amount of the reserve for temporary difference adjustments from unappropriated surplus of 4,199 million
yen came to 2,538 million yen. The payout ratio after taking into account the reversal of the reserve for temporary difference adjustments stands at 100.0%.
FUKUOKA REIT CORPORATION

8

II. Semiannual Report

II. Semiannual Report

Overview of Asset Management
2. Management assessment

Overview of Asset Management
Moreover, the credit ratings assigned to FRC as of the end of the 28th fiscal period are as follows:
Credit Rating Agency(1) Brief history of the investment corporation
Fukuoka REIT Corporation (hereinafter “FRC”) was established on July 2, 2004 based on the “Act on Investment Trusts andInvestment Corporations” (Act No. 198 in 1951 including later revisions, hereinafter the “Investment Trusts Act”) and listed on
the Tokyo Stock Exchange, Inc. and the Fukuoka Stock Exchange on June 21, 2005 as the nation’s first real estate investment
trust specializing in regional properties (code number: 8968). FRC invests in real estate throughout Kyushu (including Okinawa
Prefecture), with a central focus on Fukuoka City, and Yamaguchi Prefecture (hereinafter the “Fukuoka and Kyushu areas”) byusing expertise in regional characteristics, a strength in the real estate industry.
FRC started asset management activities on November 9, 2004 after acquisition of four properties such as Retail in Canal
City Hakata (excluding some areas of specialty shops, hotels, theaters, offices and common space), a commercial complex
where specialty shops, cinema complex, theaters, amusement facilities, hotels and offices are integrally developed (hereinafter“Canal City Hakata”). As of the end of the 28th fiscal period (August 31, 2018), FRC manages a total of 28 properties
comprising 11 Retail, 8 Office buildings and 9 Others.

(2) Investment environment and portfolio performance
During the fiscal period under review (the 28th fiscal period), the Japanese economy showed a modest recovery. Looking
ahead, with the employment and income environment continuing to improve, the economy is expected to continue recoveringmoderately due to various political measures proving effective, among other factors.
In the Fukuoka and Kyushu area, the core investment target area for FRC, the economy is expanding moderately at a solid
pace. With regard to the outlook, a virtuous cycle is expected to continue, bolstered by demand in and outside Japan.
As for land price trends, the national average for average land prices of all land types took an upward turn for the first timein 27 years, according to the 2018 Land Market Value Publication. By land type, residential land price continued to show adecelerating pace of decrease and commercial land price rose for the second consecutive year, reinforcing its upward trend.
In Fukuoka City, the central area of FRC's investment targets, land prices continued rising for six consecutive years, up 11.1%
year-on-year for commercial land and up 4.4% year-on-year for residential land, marking higher rates of increase than the lastyear.
Under such circumstances, FRC acquired Konoha Mall Hashimoto and Higashi Hie Business Center II on March 1, 2018 as
well as Park Place Oita Daiichi Parking on July 6, 2018. Park Place Oita Daiichi Parking is part of the parking lots for customers
at Park Place Oita, a property already owned by FRC, and is located nearest to the center of Park Place Oita among theparking lots outside the property’s premises.
As for existing properties, FRC continued its efforts to reinforce competitive advantages and customer drawing ability at
Canal City Hakata and other major retail properties, and focused on maintaining and increasing the occupancy rate of its
owned properties. As a result of these endeavors, the average occupancy rate of all properties FRC owns was 99.6% at theend of the 28th fiscal period.
When analyzing FRC’s portfolio (on an acquisition price basis) as of the end of the 28th fiscal period by investment target
area, the investment ratio in the Fukuoka urban area accounted for 78.4%; when analyzing by property type, Retail, Officebuildings, and Others accounted for 60.1%, 27.3% and 12.6%, respectively.

(3) Summary of fundraising
In the 28th fiscal period, FRC issued new investment units (49,000 units) on March 1, 2018 to raise 7,795 million yen. FRC
also borrowed funds to acquire the above-mentioned properties, among other purposes, and conducted refinancing. As aresult, the balance of its interest-bearing debt outstanding (including investment corporation bonds) at the end of the period
totaled 75,500 million yen, with the loan-to-value ratio (ratio of interest-bearing debt (including investment corporation bonds)
to total assets) at 39.1% and the ratio of fixed-interest rate debt (ratio of interest-bearing debt with fixed interest rates (including
investment corporation bonds) to total interest-bearing debt) at 90.9% as of the same date.

Rating Type

RatingRating Outlook

Issuer Rating

A+

StableLong-term Issuer Rating

AA−

StableRating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)

Furthermore, as announced in the “Notification Concerning the Withdrawal of Credit Rating” dated August 31, 2018, FRC
requested S&P Global Ratings Japan Inc. (S&P) to withdraw the long-term issuer rating and short-term issuer rating granted to
FRC by the agency.

(4) Summary of performance and dividend
As a result of these management efforts, operating revenues totaled 9,178 million yen and operating income after excluding
operating expenses such as expenses related to leasing business and asset management fees totaled 3,238 million yen.
Ordinary income was 2,861 million yen and profit amounted to 2,860 million yen. Management decided to make a dividend of
3,593 yen per investment unit to meet the requirements of special tax measures for an investment corporation (as stipulated
in Article 67-15 of the Act on Special Measures Concerning Taxation of Japan [Act No. 26 in 1957 including later revisions]).
Under this act, an investment corporation is allowed to deduct the maximum amount of dividends paid to investors from its
taxable income.

3. Change in the number of investment units issued

Changes in unitholders’ capital from the incorporation of FRC to the end of the 28th fiscal period are as follows:
Date
July 2, 2004
November 8, 2004
June 20, 2005
July 21, 2005
September 7, 2006
March 1, 2011
March 1, 2013
March 1, 2014
April 27, 2015
March 1, 2018

Item
Established through private placement
Additional issue of investment units through private offering
Additional issue of new investment units through public offering
Additional issue of new investment units through third-party allotment
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering
Split of investment units
Additional issue of new investment units through public offering
Additional issue of new investment units through public offering

Number of investment units
issued (units)
Increase
Balance250
250
82,80083,0507,000
90,0502,000
92,05015,000107,050
16,000123,050
14,950138,000
552,000
690,000
57,000747,000
49,000796,000

9(mm of yen)

Increase
125
41,4005,944
1,698
11,096
8,913
10,263–
11,701
7,795

Balance
125
41,52547,46949,16760,264
69,17779,441
79,441
91,142
98,938Remarks(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(Note 10)(Note 1) FRC was established with an issue of investment units at 500,000 yen per unit.
(Note 2) New investment units were issued through private offering at the issue price of 500,000 yen per unit for the purpose of procuring funds for acquiring new properties, etc.
(Note 3) New investment units were issued through public offering at the issue price of 880,000 yen per unit (purchase price of 849,200 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 4) New investment units were issued through third-party allotment at the purchase price of 849,200 yen per unit.
(Note 5) New investment units were issued through public offering at the issue price of 766,360 yen per unit (purchase price of 739,772 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 6) New investment units were issued through public offering at the issue price of 576,083 yen per unit (purchase price of 557,078 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 7) New investment units were issued through public offering at the issue price of 710,580 yen per unit (purchase price of 686,529 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 8) FRC implemented a 5-for-1 split of its investment units.
(Note 9) New investment units were issued through public offering at the issue price of 212,257 yen per unit (purchase price of 205,290 yen) for the purpose of procuring funds for acquiring new properties, etc.
(Note 10) New investment units were issued through public offering at the issue price of 164,414 yen per unit (purchase price of 159,102 yen) for the purpose of procuring funds for acquiring new properties, etc.

[Changes in market price of investment certificates]
The highest and lowest (closing price) market prices on the Real Estate Investment Trust Section of the Tokyo Stock
Exchange, Inc., on which FRC’s investment certificates are listed, in each fiscal period are as follows:
Fiscal period
HighestLowest24th fiscal period

25th fiscal period

26th fiscal period

27th fiscal period

28th fiscal period

214,500 yen
186,100 yen

192,000 yen
169,000 yen

182,800 yen
162,100 yen

183,400 yen
157,500 yen

177,600 yen
162,600 yen(March 1, 2016 toAugust 31, 2016)(September 1, 2016 to
February 28, 2017)(March 1, 2017 toAugust 31, 2017)(September 1, 2017 to
February 28, 2018)

In the fiscal period under review, FRC issued its third series of investment corporation bonds with debt maturity of 20
years, in pursuit of dispersion of debt repayment dates and extension of the average remaining years to maturity. In likemanner, FRC will continue its endeavors going forward to reduce refinancing risks by dispersing debt repayment dates
and extending debt duration. At the same time, FRC will work to mitigate risks of rising interest rates by shifting to fixedinterest rate borrowings and through other measures.
FUKUOKA REIT CORPORATION

Unitholders’ capital

FUKUOKA REIT CORPORATION

10(March 1, 2018 toAugust 31, 2018)

II. Semiannual Report

II. Semiannual Report

Overview of the Investment Corporation

Overview of Asset Management

1. Summary of unitholders’ capital

4. Results of dividend, etc.
With respect to the dividend (excluding dividend in excess of earnings) for the 28th fiscal period, FRC determined to distributethe whole unappropriated surplus (except for the fraction amount, which is the dividend per unit of less than 1 yen) to be eligible
for special tax measures for an investment corporation (as stipulated in Article 67-15-1 of the Special Taxation Measures Act)
that allow FRC to deduct the maximum amount of earnings dividend from its taxable income. Accordingly, dividend per unit for
the fiscal period was 3,593 yen.
(thousands of yen)
Fiscal period
ProfitUnappropriated surplus
Undistributed earnings
Total dividends[Dividend per unit]

Earnings dividends[Earnings dividend per unit]

Contribution refund[Contribution refund per unit]

Of the contribution refund,
distribution of the reserve
for temporary difference
adjustments(Of the contribution refund per unit,
distribution per unit of the reserve fortemporary difference adjustments)

Of the contribution refund,
distribution through the
reduction in unitholders’capital for tax purposes(Of the contribution refund per unit,
distribution per unit through the
reduction in unitholders’ capital fortax purposes)

24th fiscal period

25th fiscal period(March 1, 2016 toAugust 31, 2016)

26th fiscal period(September 1, 2016 to
February 28, 2017)27th fiscal period(March 1, 2017 toAugust 31, 2017)(March 1, 2018 toAugust 31, 2018)

938,400
938,409177
2,598,813[3,479 yen]
938,232[1,256 yen]
1,660,581[2,223 yen]

4,198,931
4,199,108
221
2,538,306[3,398 yen]
2,538,306[3,398 yen]
[–]

[–]

1,660,581[2,223 yen]

–
[–]

[–]

[–]

[–]

–
[–]

–
[–]

–
[–]

–
[– ]

–
[–]

–

–

–

Total number of authorized
investment units
Total number of investment units
outstanding
Number of unitholders

25th fiscal period

26th fiscal period

10,000,000 units

10,000,000 units

747,000 units
9,722

24th fiscal period
as of August 31, 2016

27th fiscal period

28th fiscal period

10,000,000 units

10,000,000 units

10,000,000 units

747,000 units

747,000 units

747,000 units

796,000 units

10,25910,1909,897

10,499as of February 28, 2017as of August 31, 2017

2,623,635
2,623,917
453
2,623,464[3,512 yen]
2,623,464[3,512 yen]

2,860,088
2,860,542
514
2,860,028[3,593 yen]
2,860,028[3,593 yen]

–

[–]

–

–

[–]

–

The following table sets forth the major unitholders of FRC as of August 31, 2018.
Investment units held (units)

NameJapan Trustee Service Bank, Ltd. (Trust account)
The Master Trust Bank of Japan, Ltd. (Trust account)
Fukuoka Jisho Co., Ltd.
The Nomura Trust and Banking Co., Ltd. (Investment trust account)
Trust & Custody Service Bank, Ltd. (Securities investment trust account)
MetLife, Inc.
NORTHERN TRUST CO.(AVFC) RE HCR00
STATE STREET BANK WEST CLIENT – TREATY 505234
Shikoku Railway Company
Aozora Bank, Ltd.
Total

177,674
94,106
68,07531,995
24,139
11,217
10,932
9,669
9,130
9,099
446,036(Note) Percentage of total number of investment units outstanding is rounded down to the nearest specified unit.

FRC will further reinforce management and leasing capabilities by cooperating with property management companies
including sponsor companies, and secure and maintain the stable operation of the properties by making the most use of theiradvantages.
FRC will continue to make investments based on the basic policy stipulated in its Articles of Incorporation and its basic
philosophy: focusing on “specialized areas in which FRC can demonstrate its competitive edge” that are in “high growthpotential markets.” By geographic location, of the Fukuoka and Kyushu areas, FRC will invest 60% to 90% of its assets in the
Fukuoka urban area, since the Fukuoka urban area is expected to have a high population growth rate in the future. In addition
to the Fukuoka urban area, management has decided to actively acquire properties in major cities, if there are regions orproperties where FRC can generate investment merits through its knowledge of the local land. FRC will acquire high quality
properties through use of its advantages, such as information gathering ability in the areas, good knowledge of regional
properties and close relations with the local business community and governments, so that investors can continue to invest in
FRC with assurance.
Meanwhile, FRC will build stronger relationships with financial institutions to realize stable fundraising and try to maintain asolid financial structure.

6. Significant events that have occurred after the end of the 28th fiscal period
No relevant items.

11

as of August 31, 2018

2. Matters related to investment units

5. Future portfolio management policy and vital issues

FUKUOKA REIT CORPORATION

as of February 28, 2018

28th fiscal period(September 1, 2017 to
February 28, 2018)

2,556,294
2,556,515
281
2,556,234[3,422 yen]
2,556,234[3,422 yen]

Fiscal period

FUKUOKA REIT CORPORATION

12

Percentage of total number ofinvestment units outstanding (%) (Note)
22.32
11.82
8.55
4.01
3.03
1.40
1.37
1.21
1.14
1.14
56.03

II. Semiannual Report

II. Semiannual Report

Overview of the Investment Corporation

Status of FRC’s Assets under Management

3. Matters related to directors

1. FRC’s asset structure(1) The names of FRC’s directors, etc. and their fees for the 28th fiscal period are as
follows:
Title

Name of directors, etc.

Major concurrent assignments

27th fiscal period

Type of asset

Percentage of
total assets

Fukuoka metropolitan area

65,88637.2

75,833

39.3

Hiroyasu Shindo

Other Kyushu areas

36,33820.5

36,88919.1

Supervisory Directors

Yasuo Kawasho

Fukuoka metropolitan area

42,49724.0

46,35724.0

PricewaterhouseCoopers
Aarata LLC

−

−

−

−

Independent Auditor

Fukuoka metropolitan area

20,77011.7

20,639

10.7

Other Kyushu areas

2,645

1.5

2,632

1.4

Deposits and other assets

9,145

5.2

10,759

5.6

Total amount of assets (Note 4)

177,283[168,145]

100.0[94.8]

193,112[182,465]

100.0[94.5]–(mm of yen) (Note 2)

Retail

6,000
3,600

Real estate trust
beneficiary interest

Office buildings

14,000

Others(Note 1) The CEO and Representative Director and Supervisory Directors do not possess investment units of FRC under their own name or under another person’s name. Although there are cases where theSupervisory Directors may be directors of companies other than those stated above, none of the companies or those stated above have vested interest in FRC.
(Note 2) The fees for the CEO and Representative Director and Supervisory Directors are the amounts paid to them in the 28th fiscal period, and the fee to the Independent Auditor is the amount payable to it(estimate) for audits pertaining to the 28th fiscal period.
(Note 3) Appointments of CEO & Representative Director and Supervisory Directors of FRC due to the expiration of their terms of office were made at the Eighth General Meeting of Unitholders held on May 24,
2018. Etsuo Matsuyuki was reappointed as CEO & Representative Director, and Hiroyasu Shindo and Yasuo Kawasho were reappointed as Supervisory Directors.

(2) Policy on deciding to dismiss and not to reappoint the Independent Auditor
FRC will review at its Board of Directors meetings decisions regarding the dismissal of the Independent Auditor in accordancewith the provisions of the Investment Trusts Act, and review decisions not to reappoint the Independent Auditor following thecomprehensive consideration of the audit quality, audit fee and other various conditions.

4. Names of asset management company, asset custodian and generaladministrators as of the end of the 28th fiscal period
The following table sets forth the asset management company, asset custodian and general administrators of FRC as ofAugust 31, 2018
Category of entrustment(Note 1)

Total fee for each title for the
28th fiscal period

CEO and Representative Director, Fukuoka Realty
Co., Ltd.
Representative Council, Shindo Law Firm
Representative Partner, Kawasho Authorize
Accountant OfficeEtsuo Matsuyuki

Other Kyushu areas

Fukuoka Realty Co., Ltd.

Asset Custodian

Mitsubishi UFJ Trust and Banking Corporation

General Administrator (accounting matters, etc.)

Mitsubishi UFJ Trust and Banking Corporation

General Administrator (administration of unitholders’ list)

Sumitomo Mitsui Trust Bank, Limited

General Administrator (administration of investment corporation bonds registry)

Sumitomo Mitsui Banking Corporation

General Administrator (administration of investment corporation bonds registry)

Mizuho Bank, Ltd.

(%) (Note 3)(mm of yen) (Note 2)

The following is an overview of the major assets (top ten properties on a book value basis) owned by FRC as of August 31,
2018.
Real estate property name (Note 1)

Book value(mm of yen)

Total leasable floor Total leased floor
space (m2)space (m2)Occupancy rate(%) (Note 2)

Percentage of total
leasing businessrevenues (%) (Note 3)

Main use

Canal City Hakata

30,16946,604.75

46,567.92

99.9

13.7

RetailCanal City Hakata·B

28,977

68,828.79

68,129.95

99.0

17.2

RetailPark Place Oita (Note 4)

19,611

113,834.59

113,657.62

99.8

13.2

RetailCanal City Business Center Building

13,25523,031.09

22,821.31

99.1

6.9

Office buildings

Konoha Mall Hashimoto

10,25022,121.03

22,121.03

100.0

9.1

RetailGofukumachi Business Center

9,132

19,905.34

19,905.34

100.0

5.9

Office buildings

LOGICITY Minato Kashii

7,934

43,233.72

43,233.72

100.0

Undisclosed (Note 5)

Taihaku Street Business Center

6,071

14,677.30

14,420.16

98.2

3.3

Office buildings

SunLive City Kokura

5,675

61,450.22

61,450.22

100.0

3.2

RetailMarinoa City Fukuoka (Marina Side Building)

5,440

33,069.82

33,069.82

100.0

1.9

Retail

136,519446,756.65

445,377.09

99.7

−

−

Total

13

(%) (Note 3)

2. Major assets owned by FRC(Note 1) The properties listed above are owned in the form of trust beneficiary interest.
(Note 2) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 3) “Percentage of total leasing business revenues” is rounded off to one decimal place.
(Note 4) Park Place Oita Daiichi Parking, which FRC acquired on July 6, 2018, is included. The same shall apply hereafter.
(Note 5) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

FUKUOKA REIT CORPORATION

Percentage of
total assets(Note 1) “Fukuoka metropolitan area” refers to cities, towns and villages where 10% or more of the population commute to Fukuoka City for school and work, according to the 2015 census, which states “thenumber of workers and students aged 15 years or older (students including those aged 14 years or younger: particular reference) commuting between their homes and places of work or school” conductedby Fukuoka City and the Statistics Bureau of the Ministry of Internal Affairs and Communications. “Other Kyushu areas” refers to the Fukuoka and Kyushu area excluding the Fukuoka urban area.
(Note 2) “Total value of properties held” is based on the value on the balance sheet (the value of real estate trust beneficiary interest is the book value after depreciation).
(Note 3) Concerning the “Percentage of total assets,” the numbers are rounded off to one decimal place. The total of individual percentages in the above table may not equal 100%.
(Note 4) Figures in square brackets for “Total amount of assets” refer to the value and percentage of real estate held in effect to the total amount of assets.

Name

Asset Management Company

as of August 31, 2018

Total value of
properties held

Total value of
properties held

(thousands of yen) (Note 2)

CEO and Representative Director

Area

Use

28th fiscal period

as of February 28, 2018

FUKUOKA REIT CORPORATION

14OthersII. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Status of FRC’s Assets under Management
3. Details of real estate properties in the portfolio

27th fiscal period

The following table provides details of the real estate properties owned by FRC as of August 31, 2018.

Real estate property nameLocation

2-22, 1-chome, Sumiyoshi,
Hakata Ward, Fukuoka City
2-1, 1-chome, Sumiyoshi,
Canal City Hakata·B
Hakata Ward, Fukuoka City1, 2-chome, Koen Dori Nishi,
Park Place Oita
Oita City, Oita
14-1, 2-chome, Kami Kuzuhara,
SunLive City Kokura
Kokura Minami Ward, Kitakyushu City
27-2, 2-chome, Hashimoto,Konoha Mall Hashimoto
Nishi Ward, Fukuoka City
2-18, 2-chome, Usuki,
Square Mall Kagoshima Usuki
Kagoshima City, Kagoshima
1-5, 1-chome, Kozono, HigashiKumamoto Intercommunity SC
Ward, Kumamoto City
9-12, 4-chome, Hanahata,
Hanahata SC
Minami Ward, Fukuoka City
370-3 Higashi Kushiwara,
Kurume Higashi Kushiwara SC
Kurume City, Fukuoka
4-12, Tokai-cho, Kagoshima
K’s Denki Kagoshima
City, Kagoshima
Marinoa City Fukuoka (Marina Side 12-30, 2-chome, Odo, Nishi
Building)
Ward, Fukuoka City
Retail subtotal:
2-25, 1-chome, Sumiyoshi,
Canal City Business Center Building
Hakata Ward, Fukuoka City
10-10, Kami Gofukumachi,
Gofukumachi Business Center
Hakata Ward, Fukuoka City
1-23, 2-chome, Hakataeki Higashi,
Sanix Hakata Building
Hakata Ward, Fukuoka City
3-21 Gokushomachi, Hakata
Taihaku Street Business Center
Ward, Fukuoka City
1-2, 3-chome, Higashi Hie,
Higashi Hie Business Center
Hakata Ward, Fukuoka City
5-28, 2-chome, Tenjin, Chuo
Tenjin Nishi-Dori Center Building
Ward, Fukuoka City
4-20, 4-chome, Tenjin, Chuo
Tenjin North Front Building
Ward, Fukuoka City
5-13, 1-chome, Higashi Hie,
Higashi Hie Business Center II
Hakata Ward, Fukuoka City
Office buildings subtotal:
4-23, 2-chome, Maizuru, Chuo
Amex Akasakamon Tower
Ward, Fukuoka City
16-21, 2-chome, Kego, Chuo
City House Keyaki DoriWard, Fukuoka City
3-12, 4-chome, Chihaya,
Aqualia Chihaya
Higashi Ward, Fukuoka City
10-38, 2-chome, Daimyo, Chuo
D-Wing Tower
Ward, Fukuoka City
11-20, 1-chome, Hirao, Chuo
Granfore Yakuin Minami
Ward, Fukuoka City
5-18, 1-chome, Chuo-cho, Oita
Hotel FORZA Oita
City, Oita
1607 Momota, Himekata-cho
Tosu Logistics Center
Aza, Tosu City, Saga
3-4, 2-chome, Minato Kashii,
LOGICITY Minato Kashii
Higashi Ward, Fukuoka City
2335-3 Oaza Yamada,
LOGICITY Hisayama
Hisayama-machi, Kasuya
County, Fukuoka
Others subtotal:
Total
Canal City Hakata

Form ofownership
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest
Trust beneficiaryinterest

Total leasable
floor space (m2)Period-end
appraisalvalue(mm of yen)
(Note)

Book value
at end ofperiodReal estate property nameReal estate appraiser(mm of yen)

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

46,604.75

32,00030,16968,828.79

30,00028,977

113,834.59

19,90019,611

Japan Real Estate Institute61,450.22

8,160

5,675

Japan Real Estate Institute22,121.03

10,500

10,250

Tanizawa Sogo Appraisal
Co., Ltd.

14,602.88

5,550

4,450

Japan Real Estate Institute6,968.66

2,810

2,017

2,801.15

1,250

996

6,467.80

2,790

2,091

7,296.17

3,710

3,042

33,069.82

6,060

5,440

384,045.86

122,730

112,72228th fiscal period(September 1, 2017 to February 28, 2018)

Japan Real Estate InstituteTanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Konoha Mall Hashimoto
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC
Hanahata SC
Kurume Higashi Kushiwara SC
K’s Denki Kagoshima
Marinoa City Fukuoka (Marina Side Building)Retail subtotal:
Canal City Business Center Building
Gofukumachi Business Center
Sanix Hakata Building
Taihaku Street Business Center
Higashi Hie Business Center
Tenjin Nishi-Dori Center Building
Tenjin North Front Building
Higashi Hie Business Center II
Office buildings subtotal:

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

23,031.09

15,40013,255

19,905.34

14,0009,132

6,293.75

5,840

3,871

Japan Real Estate Institute

14,677.30

8,180

6,071

Japan Real Estate Institute13,614.59

7,400

4,530

Tanizawa Sogo Appraisal
Co., Ltd.

3,339.32

3,030

2,692

Japan Real Estate Institute5,252.41

3,880

2,573

Japan Real Estate Institute6,214.77

4,340

4,228

Tanizawa Sogo Appraisal
Co., Ltd.

92,328.57

62,07046,357

4,821.25

1,940

1,737

2,710.86

1,110

937

5,619.69

1,680

1,189

7,187.59

3,550

2,717

2,496.06

1,310

1,136

5,785.44

1,870

4,173.29
43,233.72

Daiwa Real EstateAppraisal Co., Ltd.
Daiwa Real EstateAppraisal Co., Ltd.
Japan Real Estate Institute(March 1, 2018 to August 31, 2018)

Total leasing
Percentage ofTotal leasing
Percentage of
Number of tenants Occupancy rate
Number of tenants Occupancy ratebusiness revenues total leasing
business revenues total leasingat end of period at end of period
at end of period at end of period
during period business revenues
during periods business revenues(Note 1)(%) (Note 3)(Note 1)(%) (Note 3)(mm of yen)(%) (Note 4)(mm of yen)(%) (Note 4)

1 [49]
1 [47]
1 [104]
1
−
12
2
2
1
1
1
23 [220](Note 2)

1 [59]
35
16
1 [69]
1 [25]
1
11−
66 [216](Note 2)

99.1
99.4
99.7
100.0
−
100.0
100.0
100.0
100.0
100.0
100.0

1,275
1,638
1,191
292
−
254
90
40
88
111
177

15.6
20.0
14.5
3.6
−
3.1
1.1
0.5
1.1
1.4
2.2

99.7

5,160

63.0

98.0
100.0
100.0
99.2
100.0
100.0
100.0
−

624
537
198
300
333
86
140
−

7.6
6.6
2.4
3.7
4.1
1.1
1.7
−

99.3

2,221

27.1
0.8
0.5
0.7
1.4
0.5
0.8
Undisclosed

Amex Akasakamon Tower
City House Keyaki Dori
Aqualia Chihaya
D-Wing Tower
Granfore Yakuin Minami
Hotel FORZA Oita

1 [66]
1 [42]
1 [97]
1 [134]
1 [99]
1

96.7
100.0
92.9
97.6
100.0
100.0

Tosu Logistics Center

1

100.0

69
38
58
116
38
63
Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)LOGICITY Minato Kashii
LOGICITY Hisayama

2
1

Others subtotal:

10 [443]

Total

99 [879](Note 2)
(Note 2)

99.3
99.6

99.9
99.0
99.8
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,256
1,576
1,207
292
838
257
90
40
88
111
177

13.7
17.2
13.2
3.2
9.1
2.8
1.0
0.4
1.0
1.2
1.9

99.8

5,937

64.7

99.1
100.0
100.0
98.2
100.0
100.0
100.0
100.0

633
544
201
300
338
86
143
167

6.9
5.9
2.2
3.3
3.7
0.9
1.6
1.8

99.5

2,415

26.3

1 [64]
1 [40]
1 [103]
1 [131]
1 [94]
1

93.7
95.5
98.6
95.1
95.0
100.0

1

100.0

66
37
60
116
38
63
Undisclosed

0.7
0.4
0.7
1.3
0.4
0.7
Undisclosed(Note 5)(Note 5)2

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

100.0

Undisclosed

Undisclosed(Note 5)(Note 5)

99.0

824

9.0

99.6

9,178

100.0

(Note 2)

1 [61]
35
16
1 [67]
1 [25]
1
11
2
68 [218](Note 2)

1

9.9

10 [437]

100.0

102 [1,003]

812
8,194

1 [50]
1 [47]
1 [104]
1
1 [127]
12
2
2
1
1
1
24 [348](Note 2)
(Note 2)

(Note 1) “Number of tenants” is based on the total number of sections stipulated in the tenancy agreements for retail and office buildings among relevant properties. For the number of tenants in pass-throughmaster leasing properties, the number of sections stipulated in the tenancy agreements with end tenants is shown in square brackets. The Taihaku Street Business Center is an office building with aresidential tower. Its number of tenants comprises 12 for the office building and 55 for the residence in the 28th fiscal period (12 for the office building and 57 for the residence in the 27th fiscal period).
(Note 2) The total of all the tenants in other than pass-through master leasing properties and the total number of sections stipulated in the tenancy agreements with end tenants for pass-through master leasing
properties is shown in square brackets in the subtotal and total columns for “Number of tenants.”(Note 3) “Occupancy rate” refers to the percentage of leased floor space to leasable floor space and the numbers are rounded off to one decimal place.
(Note 4) “Percentage of total leasing business revenues” is rounded off to one decimal place, and the total of individual percentages in the above table may not equal 100%.
(Note 5) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

4. Details of renewable energy generation facilities in the portfolio

1,427Japan Real Estate Institute

5. Details of the rights to operate public facilities, etc. in the portfolio

1,430

1,205

Japan Real Estate Institute

8,880

7,934

Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

24,505.65

5,250

4,986

100,533.55
576,907.98

27,020211,820

23,272
182,352(Note) "Period-end appraisal value” refers to the evaluation value based on appraisals by a real estate appraiser in conformity with the method and standards for asset evaluation stipulated in FRC’s Articles of Incorporation
and rules stipulated by The Investment Trusts Association, Japan.
FUKUOKA REIT CORPORATION 15

No relevant items.
No relevant items.

6. Securities incorporated in the portfolio
No relevant items.

FUKUOKA REIT CORPORATION

16

II. Semiannual Report

II. Semiannual Report

Status of FRC’s Assets under Management

Capital Expenditures for Owned Real Estate

7. List of specific transaction and forward exchange transaction contract
amount and status of fair value
The following table provides the contract amount of FRC’s specific transactions and the status of its fair value as of August 31, 2018.
Contract amount, etc. (mm of yen)
Of which, exceeding 1 year

CategoryType

Off-market transaction

Interest rate swap transaction(Receivable floating; Payable fixed)(Note 1)

Fair value(mm of yen) (Note 2)

25,00021,300(64)

25,00021,300(64)

2. Capital expenditures during the 28th fiscal period
Capital expenditures for the real estate properties owned by FRC totaled 657 million yen in the 28th period. Furthermore,
FRC incurred construction costs of 889 million yen in total in the period, including 220 million yen in repair and maintenanceexpenses classified as expenses on the statement of income and 12 million yen in expenses for restoration to former state.
The following table provides the overview of major construction work that was completed in the 28th fiscal period.
Real estate property nameLocation

PurposeConstruction cost

Period(mm of yen)

Canal City Hakata

Hakata Ward, Fukuoka City

Replacement of emergency telephone facilities

From October 2017 toMarch 201827

Canal City Hakata

Hakata Ward, Fukuoka City

Formation of tenant sections

From March 2018 to May
2018

14

8. Status of other assets

Park Place Oita

Oita City, Oita

Replacement of wood deck

April 201831

All real estate trust beneficiary interests owned by FRC have been entered under “3. Details of real estate properties in theportfolio” on page 15. There is no incorporation of other specified assets as of the end of the 28th fiscal period.

Canal City Hakata·B

Hakata Ward, Fukuoka City

Replacement of emergency telephone facilities

From October 2017 toMarch 201855

Konoha Mall Hashimoto

Nishi Ward, Fukuoka City

Work on parking lot control systems

From April 2018 to July
2018

71

Konoha Mall Hashimoto

Nishi Ward, Fukuoka City

Renovation of Garden Court

From May 2018 to August
2018

114

Total

(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

9. Status of owned assets by country and region
As of the end of the 28th fiscal period, no overseas real estate properties in countries or regions other than Japan areincorporated into FRC’s portfolio.

3. Reserves for long-term repair and maintenance plans
FRC has deposited the following amounts from the cash flows generated during the 28th fiscal period in order to fund largescale repair and maintenance work in the medium- to long-term, based on long-term repairs and maintenance plans preparedfor respective properties.

Capital Expenditures for Owned Real Estate(millions of yen)
Fiscal period

1. Planned capital expenditures
The following table provides major items of capital expenditures associated with currently planned renovations, etc. for realestate properties owned by FRC as of the date of this Semiannual Report. The planned construction costs indicated below
may be partly classified as expenses. In addition, FRC will implement renewal construction work in order to maintain andimprove the competitiveness of properties in the market as well as tenant satisfaction, on top of the construction, facilities andreplacement work for which expenditures will be made regularly.

Balance of deposits at beginning of period

24th fiscal period(March 1, 2016 toAugust 31, 2016)

25th fiscal period(September 1, 2016 to
February 28, 2017)

26th fiscal period(March 1, 2017 toAugust 31, 2017)

PurposeSchedule
Total

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

130

27

28

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

259

55

56

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Formation of tenant sections

From January 2019 to February
2019

30

–

–

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Formation of tenant sections

From February 2019 to March
2019

19

–

–

Park Place Oita

Oita City, Oita

Introduction of parking lot control systems

From November 2018 to
February 2019

52

1

1

Park Place Oita

Oita City, Oita

Enhancement of air conditioning units

From March 2019 to April
2019

57

–

–

Canal City BusinessCenter Building

Hakata Ward,
Fukuoka City

Renovation of external walls of South Building

From October 2017 to February
2019

33

7

7

53

–

–

Gofukumachi Business Hakata Ward,
CenterFukuoka City

Enhancement of multilevel mechanical parking From December 2018 toequipment
May 2019

FUKUOKA REIT CORPORATION

17(March 1, 2018 toAugust 31, 2018)

1,000

1,000

1,000

Deposits during the period

–

200

–

–

–

Amounts used from deposits during the period

–

–

–

–

–

Deposits carried forward to the next period

800

1,000

1,000

1,000

1,000

Construction
Amountcost
already paid

Canal City Hakata

28th fiscal period

800(mm of yen)

Location(September 1, 2017 to
February 28, 2018)

800

Planned construction cost
Real estate property
name27th fiscal period

FUKUOKA REIT CORPORATION

18

II. Semiannual Report

II. Semiannual Report

Expenses and Liabilities

Expenses and Liabilities

1. Details of expenses related to asset management
28th fiscal period

27th fiscal periodItem(thousands of yen)

(September 1, 2017 to
February 28, 2018)

Category(March 1, 2018 toAugust 31, 2018)(a) Asset management fees

482,350

520,829(b) Asset custody fees(c) Administrative service fees

6,622
51,813

6,702
53,872(d) Directors’ compensations

9,600

9,600

(e) Other operating expenses

63,61061,761

Total

613,997652,766

Lender

2. Status of debt

As of the end of the 28th fiscal period (August 31, 2018), FRC has the following debt from respective financial institutions.

LenderBalance as of Average
Balance as ofDrawdown date March 1, 2018 August 31, interest
2018
rate
(mm of yen)

The Dai-ichi Life Insurance
Company
Mitsubishi UFJ Trust andCurrent
Banking Corporation
maturities Sumitomo Mitsui Bankingof long-term Corporation
Mizuho Bank
debt
The Norinchukin Bank
The Bank of Saga
SubtotalJanuary 31, 2012

The Nishi-Nippon City Bank

March 29, 2013

1,000
600

Repayment
methodUse offunds

Description

July 31, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

March 30, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

1.338

January 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

0.538

July 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee(mm of yen)(%) (Note 1)

–

1.800

–

0.417

500

500

–
–
–
2,100

200
3,000
500
4,200

February 1, 2013

2,500

2,500

0.775

February 29, 2020

Mizuho Bank

February 28, 2013

1,700

1,700

0.569

February 29, 2020

Aozora Bank

June 28, 2013

1,000

1,000

0.469

June 30, 2020

200
3,000
500
2,300
1,000
1,400
800
500

–
–
–
2,300
1,000
1,400
800
500

0.538

July 31, 2019

300

300

Mizuho Bank
The Norinchukin Bank
The Bank of Saga
Mizuho Bank
The Norinchukin Bank
The Hiroshima Bank
The Kitakyushu BankThe Iyo Bank

Long-term
debt

July 29, 2011

Repayment
date

July 31, 2014

July 31, 2014

July 31, 2014

The Higo Bank

0.835

July 30, 2021

Refinance fundLump-sum uponmaturity

Refinance fundLump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

September 25, 2019

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee

June 30, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

4,000

4,000

1.010

August 31, 2022

MUFG Bank

September 25, 2014

500

500

0.520

June 30, 2015

1,600

1,600

0.790

Sumitomo Mitsui Trust Bank

July 31, 2015

1,500

1,500

0.564

July 31, 2023

Development Bank of Japan

August 31, 2015

4,000

4,000

0.880

August 31, 2023

The Bank of Fukuoka

August 31, 2015

400

400

0.419

August 31, 2022

The Nishi-Nippon City Bank

August 31, 2015

400

400

0.870

August 31, 2023

The Bank of Fukuoka

February 29, 2016

2,000

2,000

0.419

February 29, 2024

The Nishi-Nippon City Bank

February 29, 2016

2,000

2,000

0.440

February 29, 2024

Development Bank of Japan

February 29, 2016

2,000

2,000

0.620

February 28, 2025

19

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Refinance fundAugust 29, 2014

FUKUOKA REIT CORPORATION

Acquisition fundLump-sum uponmaturity
Lump-sum uponmaturity

Development Bank of Japan
Sumitomo Mitsui Banking
Corporation

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundRepayment
date

Repayment
methodUse offunds
Refinance fund

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Long-term
debt

Description

300

300

0.413

September 30, 2025

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

December 30, 2016

1,500
100
100
100
100
100
100

1,500
100
100
100
100
100
100

0.718

December 30, 2025

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

December 30, 2016

1,500

1,500

0.419

December 30, 2026

Refinance fund

MUFG Bank (Note 2)

March 31, 2017

800

800

0.481

March 31, 2025

Resona Bank

March 31, 2017

600

600

0.658

March 31, 2027

The Higo Bank

March 31, 2017

300

300

0.481

March 31, 2025

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

The Bank of Fukuoka
The Nishi-Nippon City BankThe Oita Bank
The Kitakyushu Bank
The Miyazaki BankThe Shinwa BankThe Iyo BankThe Eighteenth Bank

June 30, 2017

1,300
1,000
700
700
700
600
500
500

1,300
1,000
700
700
700
600
500
500

0.777

June 30, 2026

Development Bank of Japan

June 30, 2017

1,800

1,800

0.650

December 31, 2026

The Bank of Fukuoka

July 31, 2017

2,000

2,000

0.792

July 31, 2027

The Nishi-Nippon City Bank

Mizuho Bank

February 29, 2016

500

500

0.440

February 29, 2024

Shinsei Bank

July 29, 2016

700

700

0.400

July 31, 2024

Sumitomo Mitsui Trust Bank September 30, 2016

(Note) Aside from the amounts of the asset management fees shown above, 37,725 thousand yen was paid in the 28th fiscal period for asset management, capitalized in the acquisition costs, related to theacquisition of Konoha Mall Hashimoto, Higashi Hie Business Center II and Park Place Oita Daiichi Parking.

Category

Balance as of Balance as of Average
Drawdown date March 1, 2018 August 31, interest
rate
2018
(mm of yen)
(mm of yen)(%) (Note 1)

Development Bank of JapanThe Oita Bank
The Kagoshima Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

Lump-sum uponmaturity

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

July 31, 2017

2,000

2,000

0.892

July 31, 2027

The Nishi-Nippon City Bank
The Bank of Fukuoka
The Oita Bank
The Kitakyushu BankThe Eighteenth BankThe Shinwa Bank
The Hiroshima Bank

August 31, 2017

500
500
100
100
100
100
100

500
500
100
100
100
100
100

0.850

August 31, 2027

Resona Bank

September 29, 2017

2,000

2,000

0.494

September 30, 2027

The Bank of Fukuoka

December 29, 2017

1,500

1,500

0.812

December 30, 2027

Development Bank of Japan

December 29, 2017

500

500

0.680

December 30, 2027

The Nishi-Nippon City Bank

February 28, 2018

1,900

1,900

0.750

February 29, 2028

Sumitomo Mitsui Trust Bank

February 28, 2018

1,100

1,100

0.600

February 26, 2027

MUFG Bank (Note 2)

February 28, 2018

1,500

1,500

0.500

February 27, 2026

Resona Bank

February 28, 2018

600

600

0.567

February 29, 2028

Development Bank of Japan

March 1, 2018

–

2,500

0.720

March 1, 2028

MUFG Bank (Note 2)

March 30, 2018

–

600

0.480

March 31, 2026

The Nishi-Nippon City Bank

March 30, 2018

–

600

0.802

March 31, 2028

The Bank of Fukuoka

March 30, 2018

–

500

0.802

March 31, 2028

Mizuho Bank

March 30, 2018

–

500

0.630

March 31, 2028

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

Sumitomo Mitsui Banking
Corporation

March 30, 2018

–

500

0.504

March 31, 2025

Lump-sum uponmaturity

FUKUOKA REIT CORPORATION

20

Lump-sum uponmaturity

Refinance fund

Refinance fund
Refinance fund
Refinance fund

Refinance fund

Refinance fund
Refinance fund
Refinance fund

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

No collateral/
No guarantee

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee
No collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fundAcquisition fund
Refinance fund
Refinance fund
Refinance fundII. Semiannual Report

II. Semiannual Report

Expenses and Liabilities
Balance as of Balance as of Average
August 31, interest Repayment date
Drawdown date March 1,
2018
2018
rate (%)

Category
LenderLong-term
debt

Acquisitions and Sales during the 28th Fiscal Period(mm of yen)

(mm of yen)March 30, 2018

–

500

0.490

March 31, 2027

Sumitomo Mitsui Trust Bank

March 30, 2018

–

400

0.576

March 31, 2027

The Oita Bank

March 30, 2018

–

400

0.646

March 31, 2028

The Hiroshima Bank

March 30, 2018

–

400

0.646

March 31, 2028–

300

62,80064,90066, 300
70, 500

March 30, 2018

Subtotal
Total

0.400

March 31, 2025

Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity

1. Acquisition and sale of real estate, asset-backed securities,
infrastructure assets, etc. and infrastructure-related assets, etc.

Use offunds

Description

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Konoha Mall
Hashimoto

March 1, 2018

10,000––––Refinance fundNo collateral/
No guarantee

Higashi Hie
Business Center II

March 1, 2018

4,230

–

–

–

–

July 6, 2018

860

–

–

–

–

–

15,090––––(Note 1)

MUFG Bank

Shinsei Bank

Repayment
method(Note 1) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conductedinterest rate swap transactions in order to hedge against interest rate fluctuation risks is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps.
(Note 2) MUFG Bank, Ltd. concluded an absorption and split agreement with Mitsubishi UFJ Trust and Banking Corporation to succeed the latter’s lending operations for domestic corporations, and succeeded
the position, rights and obligations of the latter as of April 16, 2018.

Acquisition
Property nameAcquisition price(mm of yen)

Acquisition date

Park Place Oita
Daiichi Parking
Total

Disposition
Disposition price(mm of yen)

Disposition date

Book value(mm of yen)

Gain or loss on sale
(mm of yen)

(Note) Acquisition price is the amount (transaction price indicated in the sales agreement) excluding expenses (transaction brokerage fees, taxes and other public charges, etc.) required for the acquisition of
the relevant real estate trust beneficiary interest.

2. Acquisition and sale of other assets
3. Investment corporation bonds

No relevant items.

As of August 31, 2018, FRC has the following investment corporation bonds outstanding.
Issue

Issue date

Balance as of Decrease during Balance as ofAugust 31,
March 1,the fiscal period
2018
2018
(mm of yen)
(mm of yen)First Series ofUnsecured Bonds
Second Series ofUnsecured Bonds
Third Series ofUnsecured Bonds

Maturity
date

Coupon(%)

Use

Description(1) Real estate, etc.

(mm of yen)

December 30, 2013

2,000

–

2,000

1.32

December 29, 2023

July 31, 2017

2,000

–

2,000

1.00

July 30, 2032

July 31, 2018

–

–

1,000

1.20

July 30, 2038

4,000

–

5,000

Total

3. Survey on prices of specified assets, etc.
Maturity
methodLump-sumupon maturity(Note 1)
Lump-sumupon maturity(Note 1)
Lump-sumupon maturity(Note 1)

Repayment of debt
Repayment of debt
Repayment of debt

(Note 1) The Bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.

4. Short-term investment corporation bonds

Acquisition or
disposition

Property name

Type of asset

Transaction date

Acquisition price ordisposition price(Note 1)(mm of yen)

Real estateappraisal value(Note 2)(mm of yen)

Real estateappraiser

Appraisal date

Acquisition

Konoha Mall
Hashimoto

Real estate in trust

March 1, 2018

10,00010,000

Tanizawa Sogo
December 1, 2017
Appraisal Co., Ltd.

Acquisition

Higashi Hie
Business Center II

Real estate in trust

March 1, 2018

4,230

4,230

Tanizawa Sogo
December 1, 2017
Appraisal Co., Ltd.

Acquisition

Park Place Oita
Daiichi Parking

Real estate in trust

July 6, 2018

860

867

Japan Real Estate
InstituteJune 1, 2018

(Note 1) Acquisition price is the amount (transaction price indicated in the sales agreement) excluding related expenses (transaction brokerage fees, taxes and other public charges, etc.) required for theacquisition of the relevant real estate trust beneficiary interest.
(Note 2) The above appraisals were valuated by applying the “Real Estate Appraisal Standards, Chapter 3: Valuation for price of real estate for securitization.”

No relevant items.

(2) Other

5. Subscription rights to shares

Other than the transactions described in "( 1) Real estate, etc." above, FRC carried out no transaction that was required tohave the value, etc. reviewed pursuant to the provisions of Article 201 of the Investment Trusts Act.

No relevant items.

FUKUOKA REIT CORPORATION

No collateral/
No guarantee(Note 2)
No collateral/ No
guarantee(Note 2)
No collateral/ No
guarantee(Note 2)21

FUKUOKA REIT CORPORATION

22

II. Semiannual Report

II. Semiannual Report

Acquisitions and Sales during the 28th Fiscal Period

Acquisitions and Sales during the 28th Fiscal Period
4. Transactions with interested parties, etc.

5. Transactions with the asset management company regarding
concurrent work conducted by the asset management company(1) Transaction status

The asset management company (Fukuoka Realty Co., Ltd.) does not concurrently conduct any class 1 financial instruments
transaction business, class 2 financial instruments transaction business, land and building transaction business or real estatesyndication business, and has no such transactions with FRC.

Transaction amount, etc.
Category
Total
Breakdown of transactions with interested parties, etc.
Fukuoka Jisho Co., Ltd.
Total

Purchase amount, etc.
(thousands of yen)

Sale amount, etc.
(thousands of yen)

15,090,000 (100.0%)–(–)

15,090,000 (100.0%)
15,090,000 (100.0%)

–
–

(–)
(–)

(Note 1) The figures in the above table refer to the amounts shown in the sales contracts.
(Note 2) Interested parties, etc. refer to the interested parties of the asset management company who have concluded an asset management agreement with FRC and are designated in Article 123 of the
Enforcement Order of the Act on Investment Trusts and Investment Corporations. Of these interested parties, etc., the above table indicates the business partner with which FRC conducted transaction
during the 28th fiscal period.

FRC paid the following fees to the interested parties, etc. during the 28th fiscal period. Furthermore, interested parties, etc.
refer to the interested parties of the asset management company who have concluded an asset management agreement with
FRC and are designated in Article 123 of the Enforcement Order of the Act on Investment Trusts and Investment Corporations.
Of these interested parties, etc., the below table indicates the business partners to which FRC paid fees, etc. during the 28th
fiscal period.
Category

Property leasing brokerage fees (Note 2)
Property management fees (Note 3)
Outsourcing fees (Note 2) (Note 4)

Other operating expenses (Note 2)(thousands of yen)
(Note 1)

1. Assets, liabilities, principal and profits/loss
Please refer to the IV. Balance Sheet, V. Statement of Income, VI. Statement of Changes in Net Assets, VII. Cash Flow
Statement, and VIII. Notes to Financial Statements on later pages of this report.

(2) Amount of fees paid, etc.

Total paid fees(A)

Overview of Accounting

Breakdown of transactions with interested parties, etc.
Paid amount (B)Paid party(thousands of yen)

Fukuoka Jisho Co., Ltd.
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
353,231
FJ. Entertainment Works Ltd.
Fukuoka Jisho Co., Ltd.
1,560,023 FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.
Fukuoka Jisho Co., Ltd.
1,514,332 FJ. Entertainment Works Ltd.
Sunlife Co., Ltd.

Percentage of total
amount(B)/(A)
(%)

7,923
1,891
177,676
166,359
942,732
444,387
113,040
262,859
322,497
2,540

15,815(Note 1) Aside from the paid fees shown above, FRC paid the following amounts for repairs, etc. that were ordered to interested parties, etc. during the 28th fiscal period. The amounts include
construction work fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
444,445 thousand yen
FJ. Entertainment Works Ltd.
329,040 thousand yen
Sunlife Co., Ltd.
47,117 thousand yen(Note 2) The property leasing brokerage fees, outsourcing fees and other operating expenses include property leasing brokerage fees, etc. paid to third parties through interested parties, etc.
(Note 3) The property management fees do not include the following construction supervision fees. In addition, of the fees below, the construction supervision fees paid upon acquiring real estate areincluded in the acquisition cost of the relevant real estate.
Fukuoka Jisho Co., Ltd.
8,338 thousand yen
FJ. Entertainment Works Ltd.
15,707 thousand yen(Note 4) The outsourcing fees shown above are paid fees, etc. regarding building management outsourcing fees, and do not coincide with the outsourcing fees described in VIII. Notes to Financial
Statements (Notes to statement of income) that include property management fees and others.

50.1
12.0
50.3
47.1
60.4
28.5
7.2
17.4
21.3
0.2

2. Changes in calculation method of depreciation
No relevant items.

3. Changes in valuation method of real estate and infrastructure assets,
etc.
No relevant items.

4. Overview of self-managed investment trust beneficiary certificatesNo relevant items.

5. Disclosure on corporation owning foreign real estate
No relevant items.

6. Disclosure on real estate owned by corporation owning foreign realestateNo relevant items.

Other
1. Handling of fractions of monetary amounts and percentage figures
Unless otherwise stated, the figures less than the specified unit are rounded down for monetary amounts and rounded off to
one decimal place for percentage figures throughout this Semiannual Report.

FUKUOKA REIT CORPORATION23FUKUOKA REIT CORPORATION

24

III. Independent Auditor's Report

IV. Balance Sheet(thousands of yen)Account

27th fiscal period(as of February 28, 2018)

28th fiscal period(as of August 31, 2018)

AssetsCurrent assets
Cash and deposits

2,924,449

2,609,937

Cash and deposits in trust

4,514,534

5,386,980

Operating accounts receivable

459,948542,640

Prepaid expenses

260,790

254,144–598,560

Consumption taxes receivable
Deferred tax assets

16

15

40,8634,737

8,200,604

9,397,015

OthersTotal current assets
Non-current assets
Property, plant and equipment
Buildings in trust*1

88,537,835*1

98,000,220

Accumulated depreciation(25,801,859)(27,296,476)

Buildings in trust, net

62,735,975

70,703,743

Structures in trust

1,583,500

1,855,414

Accumulated depreciation(667,932)(700,178)

Structures in trust, net

915,568

1,155,236

Machinery and equipment in trust

1,273,527

1,295,492

Accumulated depreciation(383,133)(422,173)

Machinery and equipment in trust, net

890,394

873,319

Vehicles and transport equipment in trust

747

747

Accumulated depreciation

(437)

(485)

Vehicles and transport equipment in trust, net

309

261

Tools and fixtures in trust

1,319,583

1,328,883

Accumulated depreciation(1,050,837)(1,083,830)

Tools and fixtures in trust, net

268,745

245,052

Lands in trust*1

101,545,140

103,814,610

6,780

113,234

166,362,914

176,905,458

1,765,318

5,545,883

16,97014,3901,782,289

5,560,273

Construction in progress in trust
Total property, plant and equipment*1

Intangible assets
Leasehold right in trust
Other intangible assets in trust
Total intangible assets
Investment and other assets
Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

110,000

327,135

Long-term prepaid expenses

786,412850,645

Total investment and other assets
Total non-current assets

906,412

1,187,780

169,051,616

183,653,513

Deferred assets
Investment corporation bond issuance expenses

30,61242,551

935

19,17731,54861,728177,283,768

193,112,257

Investment unit issuance expenses
Total deferred assets
Total assets

FUKUOKA REIT CORPORATION25FUKUOKA REIT CORPORATION

26

IV. Balance Sheet

V. Statement of Income(thousands of yen)(thousands of yen)Account

27th fiscal period(as of February 28, 2018)

28th fiscal period(as of August 31, 2018)

Account

27th fiscal period(September 1, 2017 to February 28, 2018)

28th fiscal period(March 1, 2018 to August 31, 2018)

Operating revenues

Liabilities
Current liabilities

Leasing revenues – real estate*1

7,725,449*1

8,478,614

Operating accounts payable

Other leasing revenues – real estate*1468,871*1

699,815602,374

649,469

2,100,000

4,200,000

Accounts payable-other

21,34518,856

Accrued expenses

328,477

363,618

772

992

Asset management fees

Current maturities of long-term debt

Income taxes payable

Total operating revenues

8,194,321

9,178,430

Operating expenses
Expenses related to leasing business*1*2

4,614,437*1*2

5,287,625

482,350

520,829

Accrued consumption taxes

298,500–

Asset custody fees

6,622

6,702

Advances received

990,174

1,049,850

Administrative service fees

51,81353,872

Deposits received

768,735

1,327,250

Director’s compensations

9,600

9,600

5,110,380

7,610,038

Other operating expenses

63,61061,761

Total operating expenses

5,228,434

5,940,392

Investment corporation bonds

4,000,000

5,000,000

Operating income

2,965,887

3,238,038

Long-term debt

62,800,000

66,300,000

Non-operating revenues

375,422

Interest received

Total current liabilities
Non-current liabilities

Tenant leasehold and security deposits
Tenant leasehold and security deposits received in trust

373,423*1

Total non-current liabilities
Total liabilities

36

37

12,027,489

Others2,426

531

78,406,704

83,702,912

Total non-operating revenues

2,463

569

83,517,084

91,312,950

11,233,280*1

Net assets

Non-operating expenses
Interest expenses

228,998

254,894

Unitholders’ equity

Interest expenses on investment corporation bonds

23,20024,200Unitholders’ capital

Amortization of investment corporation bond issuance
expenses

1,646

1,722

Amortization of investment unit issuance expenses

5,612

4,770

Financing related expenses

84,211

91,90130

30

343,698

377,518

Ordinary income

2,624,651

2,861,088

Profit before income taxes

91,142,766

98,938,764

Unappropriated surplus

2,623,917

2,860,542

Total surplus

2,623,917

2,860,542

Total unitholders’ equity

93,766,684

101,799,306

Surplus

Total net assets*3

Total liabilities and net assets

93,766,684
177,283,768*3

101,799,306
193,112,257

OthersTotal non-operating expenses

2,624,651

2,861,088

Income taxes-current

1,032

998

Income taxes-deferred

(16)

1

Total income taxes

1,015

1,000

2,623,635

2,860,088

Surplus brought forward

281

453

Unappropriated surplus

2,623,917

2,860,542

ProfitFUKUOKA REIT CORPORATION27

FUKUOKA REIT CORPORATION

28

VI. Statement of Changes in Net Assets
27th fiscal period (September 1, 2017 to February 28, 2018)
Item
Balance as of
September 1,
2017
Changes in thecurrent fiscal
periodDividend of
surplusProfitTotal of changes
in the current
fiscal period
Balance as ofFebruary 28,
2018

Unitholders’ capital
91,142,766–
91,142,766

Unitholders’ Equity
Surplus
Unappropriated surplus
2,556,515

Total unitholders’ Total net assets
equity93,699,282(2,556,234)(2,556,234)

2,623,635

2,623,635

2,623,635

67,401

67,401

67,401

93,766,684

28th fiscal period (March 1, 2018 to August 31, 2018)
Item
Balance as ofMarch 1, 2018
Changes in thecurrent fiscal
periodIssuance of new
investment units
Dividend of
surplusProfitTotal of changes
in the current
fiscal period
Balance as ofAugust 31,
2018

Unitholders’ capital
91,142,766

93,699,282

Unitholders’ Equity
Surplus
Unappropriated surplus
2,623,917

93,766,684(thousands of yen)
Total unitholders’ Total net assets
equity93,766,684

93,766,684(thousands of yen)

27th fiscal period(September 1, 2017 to
February 28, 2018)

Account(thousands of yen)

(2,556,234)

2,623,917

VII. Cash Flow Statement
Net cash provided by (used in) operating activities
Profit before income taxes

2,624,651

2,861,088

Depreciation and amortization expenses

1,500,084

1,602,568

Amortization of investment corporation bond issuance expenses

1,646

1,722

Amortization of investment unit issuance expenses

5,612

4,770

Interest received

(36)

(37)

Interest expenses

252,198

279,094

Decrease (increase) in operating accounts receivables(28,531)(82,691)

Decrease (increase) in consumption taxes refund receivable

258,416(598,560)

Increase (decrease) in accrued consumption taxes

298,500(298,500)

Increase (decrease) in operating accounts payable

24,657

61,299

Increase (decrease) in accounts payable-other

(233)

(638)

Increase (decrease) in accrued expenses

2,954

27,103

Increase (decrease) in advances received(7,240)59,676

Increase (decrease) in deposits expenses(286,022)

558,514

Decrease (increase) in prepaid expenses(12,764)6,646

Decrease (increase) in long-term prepaid expenses(65,668)(64,233)

Others, net(20,758)

3,314

Subtotal

4,547,465

4,421,137

Interest income received

36

37(254,559)(271,057)

Income taxes paid

(1,311)(778)

Income taxes refund

517

428

4,292,149

4,149,768(409,429)(12,130,191)

Interest expenses paid

7,795,998

7,795,998

7,795,998(2,623,464)(2,623,464)(2,623,464)

2,860,088

2,860,088

2,860,088

7,795,998

236,624

8,032,622

8,032,622

98,938,764

2,860,542

101,799,306

101,799,306

28th fiscal period(March 1, 2018 toAugust 31, 2018)

Net cash provided by (used in) operating activities
Net cash provided by (used in) investment activities
Purchase of property, plant and equipment in trust
Purchase of intangible assets in trust–(3,775,257)

Proceeds from tenant leasehold and security deposits

34,621

8,534

Repayments of tenant leasehold and security deposits(30,035)(6,536)

Proceeds from tenant leasehold and security deposits in trust

42,265

1,023,194

Repayments of tenant leasehold and security deposits in trust(114,867)(228,985)–(217,135)

Payments of tenant leasehold and security deposits in trust
Proceeds from restricted trust deposits

3,058

2,872

Payments for restricted trust deposits(3,938)(2,751)(478,325)(15,326,254)

Net cash provided by (used in) investment activities
Net cash provided by (used in) financial activities
Proceeds from short-term debt

4,500,000

4,100,000

Repayments of short-term debt

(6,000,000)(4,100,000)

Proceeds from long-term debt

9,100,000

7,200,000

Repayments of long-term debt

(8,600,000)(1,600,000)

Proceeds from issuance of investment corporation bonds–

1,000,000

Proceeds from issuance of investment units–

7,795,998

Payments of investment corporation bond issuance expenses–(13,660)

Payment of investment unit issuance expenses–(23,013)

Dividends paid

(2,555,413)(2,624,781)

Net cash provided by (used in) financial activities(3,555,413)

11,734,542

Net increase (decrease) in cash and cash equivalents

258,410558,055

Balance of cash and cash equivalents at beginning of period
Balance of cash and cash equivalents at end of period

FUKUOKA REIT CORPORATION

29

7,134,506
7,392,916*1

FUKUOKA REIT CORPORATION

30

7,392,916*1

7,950,972

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Significant accounting policies)
1. Depreciation method for non-current assets(Notes to accounting standards not yet adopted)(1) Property, plant and equipment
Depreciation is calculated using the straight-line method.
The useful lives of major categories of property, plant and equipment are as follows:
Buildings in trust (Note):
10 – 65 years
Structures in trust:
15 – 60 years
Machinery and equipment in trust:
15 – 30 years
Vehicles and transport equipment in trust:
7 years
Tools and fixtures in trust:5 – 20 years(Note) maximum limit of 65 years is specified in the internal rules that took effect on March 1,
2018.
(2) Intangible assets
Intangible assets are amortized utilizing the straight-line method.
(3) Long-term prepaid expenses
Long-term prepaid expenses are amortized utilizing the straight-line method.

2. Accounting for deferred assets

Investment unit issuance expenses
Investment unit issuance expenses are amortized utilizing the straight-line method over three years.
Investment corporation bond issuance expenses
Investment corporation bond issuance expenses are amortized utilizing the straight-line method overthe period through redemption.

3. Standards for recognition of revenues and expenses

Accounting treatment of property taxes, etc.
In connection with property taxes, city planning taxes and depreciated asset taxes, FRC uses themethod of charging the corresponding amounts of assessed taxes to the current fiscal period as
expenses related to leasing business.
The amount equivalent to property taxes, etc. for the initial fiscal year paid to the seller as settlementmoney upon acquisition of real estate or trust beneficiary interests in real estate as entrusted property
are not expensed but capitalized as part of the acquisition cost of the relevant property.
No amount equivalent to property taxes, etc. was capitalized in the acquisition cost of real estate, etc.
for the 27th fiscal period. The amount equivalent to property taxes, etc. capitalized in the acquisition
cost of real estate, etc. was 89,171 thousand yen for the 28th fiscal period.

4. Method of hedge accounting(1) Method of hedge accounting
Deferred hedge accounting is applied for interest rate swap transactions. However, special accounting
is applied for interest rate swap transactions that satisfy the requirements for special accounting.
(2) Hedging instruments and hedged items
Hedging instrument: interest rate swap transactions
Hedged items: interest rates of borrowings(3) Hedging policy
FRC conducts derivative transactions to hedge interest rate fluctuation risks for floating-rate borrowings
based on FRC’s Articles of Incorporation.
(4) Method for assessing the effectiveness of hedging
Assessment of the effectiveness of hedging is omitted as requirements are satisfied for special
accounting for interest rate swap transactions.

5. Scope of funds (cash and cash equivalents) in cash
flow statement

The funds (cash and cash equivalents) in the cash flow statement consist of cash on hand and cash intrust; deposits that can be withdrawn at any time and deposits in trust; and short-term investments witha maturity of 3 months or less from the date of acquisition, which are readily convertible to cash and bear
only an insignificant risk of value fluctuation.

6. Other significant items fundamental to preparing thefinancial statements(1) Accounting methods for trust beneficiary interests in real estate as entrusted property
Regarding trust beneficiary interests in owned real estate as entrusted property, all asset and liability
accounts of the entrusted properties as well as all revenue and expense accounts generated by theentrusted properties are recorded in relevant accounts on the balance sheet and statement of income.
Furthermore, the following material accounts are separately stated on the balance sheet for entrusted
properties recorded in relevant accounts.
① Cash and deposits in trust② Buildings in trust, structures in trust, machinery and equipment in trust, vehicles and transport
equipment in trust, tools and fixtures in trust, lands in trust and construction in progress in trust③ Leasehold right in trust④ Other intangible assets in trust⑤ Lease and guarantee deposits in trust⑥ Tenant leasehold and security deposits received in trust(2) Accounting for consumption taxes
National and local consumption taxes are accounted with the consumption taxes excluded.

FUKUOKA REIT CORPORATION

31• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 issued by the Accounting Standards Board of Japan (ASBJ) on March 30, 2018)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30 issued by ASBJ on March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) jointly
developed a comprehensive accounting standard for revenue recognition, and issued it as Revenue from Contracts with
Customers (IFRS 15 issued by IASB and Topic 606 issued by FASB) in May 2014. IFRS 15 is applicable for accounting
periods beginning on January 1, 2018 and thereafter, and Topic 606 is applicable for accounting periods beginning after
December 15, 2017. In accordance with this, the ASBJ has developed a comprehensive accounting standard for revenue
recognition and issued it together with its implementation guidance. In developing the accounting standard for revenue
recognition, the ASBJ made it a basic policy to adopt the basic principles of IFRS 15 as a starting point. By doing so, the
ASBJ established the accounting standard from the viewpoint of comparability, which is a benefit for securing consistency
with IFRS 15, between financial statements based on Japanese GAAP and those based on other accounting standards.
Alternative treatments were also added, to the extent that they do not harm the comparability, in cases where there areitems to be considered in the actual practices conducted in Japan to date.
(2) Scheduled date of adoption
FRC will adopt the Accounting Standard and Implementation Guidance from the beginning of the fiscal period ending
February 2022.
(3) Impact of adoption of the accounting standard and implementation guidance
The amount of impact on the financial statements by the adoption of the Accounting Standard and Implementation Guidancefor Revenue Recognition is being assessed at present.

FUKUOKA REIT CORPORATION

32

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to balance sheet)(Notes to statement of income)*1. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:*1. Breakdown of revenues and expenses related to real estate leasing business.

(thousands of yen)(thousands of yen)
27th fiscal period

28th fiscal period

as of February 28, 2018

Buildings in trust
Lands in trust

as of August 31, 2018

6,320,513
16,101,020
22,421,534

Total

6,175,454
16,101,020
22,276,475

Secured liabilities are as follows:(thousands of yen)
27th fiscal period

28th fiscal period

as of February 28, 2018

Tenant leasehold and security deposits
received in trust

as of August 31, 2018

1,592,726

1,446,671

2. Balance of unused committed line of credit
FRC has executed committed line of credit agreements with its banks primarily to conduct efficient and dynamic cash management.
[Committed line of credit agreement 1](thousands of yen)
27th fiscal period

28th fiscal period

as of February 28, 2018

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
periodas of August 31, 2018

6,000,000－

6,000,000－

6,000,000

6,000,000

27th fiscal period

28th fiscal period(September 1, 2017 to February 28, 2018)(March 1, 2018 to August 31, 2018)

A. Real estate leasing business revenues
Leasing revenues - real estate
Rents
Common charges
Parking revenues
Other leasing revenues - real estate
Incidental income
Other miscellaneous income
Total real estate leasing business revenues
B. Expenses related to real estate leasing business
Expenses related to leasing businessOutsourcing fees
Repair and maintenance expenses
Taxes and other public charges
Insurance premiums and trust compensation
Utilities expenses
Depreciation and amortization expenses
Other expenses related to real estate leasing businessTotal expenses related to real estate leasing business
C. Revenues and expenses related to real estate leasing business (A - B)

6,242,829
1,063,286
419,333

7,725,449

450,332
18,538(thousands of yen)
27th fiscal period

28th fiscal period

as of February 28, 2018

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
period

1,576,631
251,107644,21256,825
430,6091,500,084
154,966

7,000,000－

7,000,000－

7,000,000

7,000,000

27th fiscal period

28th fiscal period

as of February 28, 2018as of August 31, 2018

50,00050,0001,913,254
220,275
661,889
58,540595,918
1,602,568
235,179

4,614,437
4,614,437
3,579,884(thousands of yen)
27th fiscal period

28th fiscal period(September 1, 2017 to February 28, 2018)(March 1, 2018 to August 31, 2018)

Expenses related to real estate leasing businessas of August 31, 2018

*3. Minimum net assets designated in Article 67- 4 in the Act on Investment Trusts and Investment Corporations.
(thousands of yen)Item674,484
25,331

468,871
8,194,321*2. Transactions with affiliated companies.
[Committed line of credit agreement 2]

6,883,299
1,123,477
471,838

1,431,544

1,474,309(Notes to statement of changes in net assets)
27th fiscal period

28th fiscal period(September 1, 2017 to February 28, 2018)

Total number of authorized investment units andtotal number of investment units issued
Total number of authorized investment units
Total number of investment units issued(March 1, 2018 to August 31, 2018)

10,000,000 units
747,000 units

10,000,000 units
796,000 units(Notes to cash flow statement)*1. Relationship between the balance of cash and cash equivalents at end of period and the amounts of the corresponding accounts on the balance sheet.
(thousands of yen)
27th fiscal period

28th fiscal period(September 1, 2017 to February 28, 2018)

Cash and deposits
Cash and deposits in trust
Restricted trust deposits (Note)
Cash and cash equivalents(March 1, 2018 to August 31, 2018)

2,924,449
4,514,534(46,066)
7,392,916

2,609,937
5,386,980(45,945)
7,950,972(Note) Restricted trust deposits are trust deposits reserved for refunding tenant leasehold and security deposits deposited by tenants and for other purposes.

(Notes to leases)
The future lease revenues under the non-cancellable operating leases [as lessor] are as follows:(thousands of yen)
27th fiscal period

28th fiscal period(as of February 28, 2018)

Due within 1 year
Due after 1 year
Total

FUKUOKA REIT CORPORATION

33(as of August 31, 2018)

5,869,564
22,529,430
28,398,994

FUKUOKA REIT CORPORATION

5,460,765
20,411,538
25,872,304

34

8,478,614

699,815
9,178,430

5,287,625
5,287,625
3,890,804

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to financial instruments)

2. Matters concerning fair value of financial instruments

1. Matters concerning status of financial instruments

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding
fair values and the difference between these amounts as of February 28, 2018. Please note that the following table does notinclude those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).

(1) Policy on handling financial instruments
In order to secure stable earnings and steady growth of assets under management, FRC procures funds primarily throughborrowings from financial institutions, issuance of investment corporation bonds or issuance of investment units forproperty acquisitions, repair and maintenance work, repayment of interest-bearing debt and other purposes.
In procuring interest-bearing debt, FRC borrows funds primarily in long-term, fixed interest debt based on the policy of
establishing a solid financial structure, and conducts conservative operations intended to secure financial stability andliquidity by dispersing debt payment dates and utilizing committed lines of credit and through other measures.
With regard to surplus funds, FRC manages them as various deposits and savings, etc. to support efficient management
while considering security.
FRC conducts derivative transactions only for the purpose of hedging the risk of future interest rate fluctuation, and not
for the purpose of speculation.
(2) Description of financial instruments and associated risks, and risk management structure
Debt and investment corporation bonds are funds procured primarily for acquiring real estate trust beneficiary interests andrefinancing of borrowings. Borrowings and investment corporation bonds are exposed to liquidity risks upon debt payment
dates, but FRC works to mitigate these risks by such measures as appropriately controlling the ratio of interest-bearing
debt to total assets and executing commitment line agreements with local financial institutions that are lenders to secure
on-hand liquidity.
In addition, borrowings with floating interest rates are exposed to interest rate fluctuation risks. However, FRC works
to reduce the risks by such measures as adjusting the ratio of the balance of borrowings with floating interest rates tototal borrowings in accordance with the financial environment and other factors. FRC conducts derivative transactions(specifically interest rate swap transactions) for part of its borrowings with floating interest rates in order to hedge the risk
of future fluctuations in the rates of interest payable. Furthermore, assessment of the effectiveness of these interest rate
swaps is omitted as it has been determined that they have met the requirements for special accounting. FRC executes andmanages its derivative transactions in accordance with its financial derivative transaction management policies and, it does
so only with financial institutions it determines to have a certain level of creditworthiness, by reference to their credit ratings,
to reduce counterparty risks.
FRC manages surplus funds in large time deposits. Such deposits are subject to the risks of failure of the financial
institutions holding the deposits as well as other credit risks. FRC mitigates the risks by limiting its deposits to financial
institutions with a certain level of creditworthiness, by reference to their credit ratings, as well as by setting short durations
for these deposits.
Tenant leasehold and security deposits received in trust are deposits from tenants and are exposed to liquidity risks if
tenants move out before the contracts expire. FRC mitigates this risk by such measures as securing on-hand liquidity.
(3) Supplementary explanation on matters concerning fair value of financial instruments
The fair value of financial instruments, aside from values based on market price, may include values based on reasonablecalculations when there is no market price. Certain assumptions are made in calculating those values, and there may becases where the values will vary when different assumptions are used.
As for the contract value and other conditions of derivative transactions indicated in “2. Matters concerning fair value offinancial instruments,” the contract value is not an indicator of the market risks related to such transactions.

(thousands of yen)

(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
2,924,449
4,514,534
7,438,983–
2,100,000
4,000,000
62,800,000
809,375
69,709,375––

Fair value

Difference(Note 1)2,924,449
4,514,534
7,438,983–
2,112,506
4,270,268
63,751,736
809,100
70,943,612
–
–

–
–
–
–
12,506
270,268
951,736(275)
1,234,237––

The following table includes the book values for financial instruments as recorded on the balance sheet, the corresponding
fair values and the difference between these amounts as of August 31, 2018. Please note that the following table does notinclude those financial instruments for which determination of fair value is considered to be extremely difficult (refer to (Note 2)).
(thousands of yen)

(1) Cash and deposits(2) Cash and deposits in trust
Total of assets(3) Short-term debt
(4) Current maturities of long-term debt
(5) Investment corporation bonds(6) Long-term debt
(7) Tenant leasehold and security deposits received in trust
Total of liabilities(8) Derivative transactions
Total of derivative transactions

Book value recorded on thebalance sheet
2,609,937
5,386,980
7,996,917–
4,200,000
5,000,000
66,300,000
654,987
76,154,987––

Fair value

Difference(Note 1)

2,609,937
5,386,980
7,996,917–
4,202,876
5,218,003
66,438,703
653,918
76,513,502
–
–

–
–
–
–
2,876
218,003138,703(1,068)358,515––(Note 1) Calculation method for fair value of financial instruments(1) Cash and deposits, (2) Cash and deposits in trust and (3) Short-term debt
As these are settled within a short period of time, the fair value is approximately the same as the book value and is thus stated at that book value.
(4) Current maturities of long-term debt, (5) investment corporation bonds and (6) Long-term debt
The fair value of long-term debt with fixed interest rates (including debt with practical fixed interest rates through interest rate swaps) and investment corporation bonds (the “debt, etc.”) is
calculated by discounting the total amount of principal and interest by the rate assumed as being applicable in the event of a new drawdown of similar debt, etc.
The fair value of long-term debt with floating interest rates is based on the book value, as the contract terms require the interest rates to be revised in a certain period of time (within six months)
and thus is considered to be nearly equal to the book value.
(7) Tenant leasehold and security deposits received in trust
The fair value of tenant leasehold and security deposits received in trust, which are deposited by the lessees, is calculated by discounting the future cash flows of such deposits by a reasonably
estimated rate that takes into account the term remaining until the reimbursement deadline and credit risks.
(8) Derivative transactions
Please refer to (Notes to derivative transactions)(Note 2) Financial instruments for which determination of fair value is considered extremely difficult.

(thousands of yen)
27th fiscal period

28th fiscal period(as of February 28, 2018)

Tenant leasehold and security deposits
received in trust(*)(as of August 31, 2018)

10,423,904

11,372,502* Tenant leasehold and security deposits received in trust are not subject to the requirement to disclose fair value, as it is considered extremely difficult to determine
the fair value. This is because future cash flows cannot be estimated since there is no market price and it is difficult to assume the reimbursement dates due to thepossibility of cancellation, renewal and re-execution of lease contracts by lessees even if the contract terms are fixed, and because the past rate of tenants moving outof the properties owned by FRC may not be indicative of future move out rates as they are too specific to individual circumstances.

( )FUKUOKA REIT CORPORATION35FUKUOKA REIT CORPORATION

36

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to derivative transactions)(Note 3) Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of February 28, 2018)(thousands of yen)

1. Derivatives to which hedge accounting is not applied

Due in 1 year or less
2,924,449
4,514,534
7,438,983

Cash and deposits
Cash and deposits in trust
Total

27th fiscal period (as of February 28, 2018)
Not applicable.

Amount of redemption of monetary claims scheduled to be due after closing of accounts (as of August 31, 2018)(thousands of yen)

28th fiscal period (as of August 31, 2018)
Not applicable.

Due in 1 year or less
2,609,937
5,386,980
7,996,917

Cash and deposits
Cash and deposits in trust
Total

2. Derivatives to which hedge accounting is applied
27th fiscal period (as of February 28, 2018)(Note 4) Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of February 28, 2018)(thousands of yen)

Long-term debt
Investment
corporation bonds

Due in 1 year or less
2,100,000–

1 to 2 years
8,400,000–

2 to 3 years
1,000,000

3 to 4 years
6,300,000––

4 to 5 years
6,000,000–

Due after 5 years
41,100,000

Due in 1 year or less
4,200,000–

1 to 2 years
5,700,000–

2 to 3 years
6,300,000

3 to 4 years
6,000,000––

4 to 5 years
5,900,000–

(thousands of yen)

Method of hedge accounting

4,000,000

Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of August 31, 2018)(thousands of yen)

Long-term debt
Investment
corporation bonds

The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing ofaccounts for each method of hedge accounting.

Due after 5 years
42,400,000
5,000,000

Special accounting for interest rate swaps

Contract amount, etc.
Calculation
Fair value method for theOf which,fair value
exceeding 1 year

Type of derivative transactions, etc. Main hedged item
Interest rate swap transaction
Receivable floating; Payable fixedLong-term debt

24,100,000

24,100,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

28th fiscal period (as of August 31, 2018)
The following is the contract amount or amount equivalent to the principal provided in the contract as of the closing ofaccounts for each method of hedge accounting.

(Notes to investment securities)



27th fiscal period (as of February 28, 2018)(thousands of yen)
Method of hedge accounting

Contract amount, etc.
Calculation
Fair value method for theOf which,fair value
exceeding 1 year

Type of derivative transactions, etc. Main hedged item

Not applicable.
Special accounting for interest rate swaps

28th fiscal period (as of August 31, 2018)

Interest rate swap transaction
Receivable floating; Payable fixedLong-term debt

25,000,000

21,300,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt for accounting purposes. Accordingly, their fair value is included in the fair value of the relevant
long-term debt (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

Not applicable.

(Notes to retirement benefits)
27th fiscal period (as of February 28, 2018)
Not applicable as FRC does not have any retirement benefit system.

28th fiscal period (as of August 31, 2018)
Not applicable as FRC does not have any retirement benefit system.

(Notes to tax effect accounting)
1. Breakdown of primary causes for occurrence of deferred tax assets and deferred tax liabilities.

(thousands of yen)

27th fiscal period

28th fiscal period(as of February 28, 2018)

Deferred tax assets
Amount of accrued business taxes not deductible from taxable income
Total deferred tax assets
Deferred tax assets, net

FUKUOKA REIT CORPORATION37FUKUOKA REIT CORPORATION(as of August 31, 2018)

16
16
16

38

15
15
15

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements

2. Breakdown of significant causes of the difference between the effective statutory income tax rate and the effective income tax rate after application of tax effectaccounting.
(%)
27th fiscal period

28th fiscal period(as of February 28, 2018)

Effective statutory income tax rate (Note)
Deductible dividend amount
Other
Effective income tax rate after application of tax effect accounting

27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable.

(as of August 31, 2018)31.53(31.52)(0.00)
0.01(2) Affiliated companies, etc.

31.53
(31.52)0.02
0.03

28th fiscal period (from March 1, 2018 to August 31, 2018)
Not applicable.

(3) Sister companies(Notes to equity method income and earnings)

27th fiscal period (from September 1, 2017 to February 28, 2018)

27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable as FRC does not have any affiliated companies.

28th fiscal period (from March 1, 2018 to August 31 2018)

Classification

Not applicable as FRC does not have any affiliated companies.

(Notes to transactions with related parties)

Other affiliates

Name

Location

Capital

Fukuoka Jisho Hakata Ward,
4,000,000
Co., Ltd.
Fukuoka City
(Note 2)Business
description

Generalreal estatebusiness[or ownership ofsuch in FRC]

CapitalBusiness
description

20,000Real estatebusiness–

Consignment
Consignmentof real estateof real estate
management,
management, etc. etc. (Note 1)

553,691–

Asset
Payment
management ofof asset
FRC, etc. andmanagement
concurrent service fees (Note 4)of officer (Note 3)

482,350(Note 2)

Subsidiaries of Fukuoka Realty Hakata Ward,other affiliates
Co., Ltd.
Fukuoka City

27th fiscal period (from September 1, 2017 to February 28, 2018)

Classification

Location

FJ.
Subsidiaries of Entertainment Hakata Ward,other affiliates Works Ltd. Fukuoka City

1. Transactions with related parties(1) Parent company and major corporate unitholders

FRC’s share of
voting rights,
etc.

Name

FRC’s shareof votingrights, etc. [orownership ofsuch in FRC]

Description ofrelationship(thousands of yen)

Description of Transaction
Categorytransaction
amountOwnership in
Consignment
Consignment
FRC Directof real estate 1,431,544
of real estate
management,(Note 3)[8.85%]
management, etc. etc. (Note 1)
Indirect [1.00%]

Operatingaccounts
payableBalanceat end ofperiod108,885Classification

Other affiliates

Name

Location

Capital(thousands of yen)

Fukuoka Jisho Hakata Ward,
4,000,000
Co., Ltd.
Fukuoka City
(Note 3)Generalreal estatebusiness

FRC’s share of
voting rights, Description of Description ofetc.
relationshiptransaction

Transaction
amountCategory

Balanceat end ofperiodPurchase ofreal estate

15,090,000––

Consignmentof real estate
management,
etc. (Note 2)

1,474,309

Operatingaccounts
payable112,812[or ownership ofsuch in FRC]

Ownership in
Consignment
FRC Directof real estate[8.55%]
management,
Indirect [0.94%]
etc.

(Note 1)

(Note 4)(Note 4)(Note 4)(Note 1) Transaction terms and conditions are determined in reference to appraisal values by third parties and after negotiating on prices.
(Note 2) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 3) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata・B, Canal City Business Center and Taihaku
Street Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC's
revenues for more details, please refer to Chapter 1 Fund Information, I. Fund Status, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, F. Status of Major Tenants in
FRC’s securities report for the 28th fiscal period (Yuuka Shouken Houkokusho, Japanese only). For properties covered by the said type of agreements, the above table shows figures that regard end
tenants as direct lessees.
(Note 4) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

FUKUOKA REIT CORPORATION

39(Note 5)(Note 5)

Operatingaccounts
payableAccruedexpenses

Balanceat end ofperiod101,649(Note 5)

234,846(Note 5)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded a real estate lease and management consignment agreement with FJ. Entertainment Works Ltd. for Park Place Oita. The lease contract is a master lease type with pass-throughrent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s revenues. For the property covered by the said type of agreement, the above tableshows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

28th fiscal period (from March 1, 2018 to August 31, 2018)

Classification

Name

Location

FJ.
Subsidiaries of Entertainment Hakata Wardother affiliates Works Ltd. Fukuoka City

CapitalBusiness
description

FRC’s shareof votingrights, etc. [orownership ofsuch in FRC]

20,000Real estatebusiness–

Consignment
Consignmentof real estate 1,021,869
of real estate
management,(Note 5)management, etc. etc. (Note 1)

Operatingaccounts
payable–Asset
Payment
management ofof asset
FRC, etc. andmanagement
concurrent service fees (Note 4)of officer (Note 3)

Accruedexpenses(Note 2)Business
description

Description of Transaction
Categorytransaction
amount(Note 3)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded a building lease and management consignment agreement with Fukuoka Jisho Co., Ltd. for Canal City Hakata, Canal City Hakata・B, Canal City Business Center and Taihaku
Street Business Center. The lease contract is a master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC's
revenues for more details, please refer to Chapter 1 Fund Information, I. Fund Status, 5. Management Status, (2) Investment Assets, 3) Other Major Investment Assets, F. Status of Major Tenants in
FRC’s securities report for the 28th fiscal period (Yuuka Shouken Houkokusho, Japanese only). For properties covered by the said type of agreements, the above table shows figures that regard end
tenants as direct lessees.
(Note 3) Consumption taxes are not included in the transaction amount but are included in the balance at end of period.

28th fiscal period (from March 1, 2018 to August 31, 2018)

Asset
management
200,000of FRCand otherbusinesses

Description ofrelationship

Subsidiaries of Fukuoka Realty Hakata Ward,other affiliates
Co., Ltd.
Fukuoka City

Asset
management
200,000of FRCand otherbusinesses

Description ofrelationship

Balance
Description of Transaction
Category at end oftransaction
amountperiod(thousandsof yen)520,829(Note 5)

211,411(Note 5)

261,314(Note 5)(Note 1) Transaction terms and conditions are determined in reference to market prices, etc. and by concluding business consignment agreements after negotiating on prices.
(Note 2) FRC has concluded with FJ. Entertainment Works Ltd. a real estate lease and management consignment agreement for Park Place Oita and a building lease and management consignment agreementfor Konoha Mall Hashimoto. The agreements are master lease type with pass-through rent, in which rents and other proceeds from end tenants are directly related to an increase or decrease of FRC’s
revenues. For the properties covered by the said type of the agreements, the above table shows figures that regard end tenants as direct lessees.
(Note 3) Etsuo Matsuyuki, CEO & Representative Director of FRC, concurrently serves as a CEO & Representative Director of Fukuoka Realty Co., Ltd.
(Note 4) The amount of the asset management fees is decided based on the asset management consignment agreement following discussion between the concerned parties.
(Note 5) Consumption taxes are not included in the transaction amount but are included in the balance at end of period

FUKUOKA REIT CORPORATION

40

VIII. Notes to Financial Statements(4) Directors and major individual unitholders

The following table provides the income (loss) from properties for lease.

(thousands of yen)

27th fiscal period (from September 1, 2017 to February 28, 2018)
Use

Not applicable.

28th fiscal period (from March 1, 2018 to August 31, 2018)

RetailNot applicable.

2. Parent company and major affiliated companies

Office buildings

27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable.

28th fiscal period (from March 1, 2018 to August 31, 2018)

OthersNot applicable.

(Notes to asset retirement obligations)Total

27th fiscal period (from September 1, 2017 to February 28, 2018)
Not applicable.

27th fiscal period

28th fiscal period(September 1, 2017 to
February 28, 2018)(March 1, 2018 toAugust 31, 2018)

Amount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessAmount recorded on the statement of income
Real estate leasing business revenues
Expenses related to real estate leasing business
Revenues and expenses related to real estate leasing businessNot applicable.

(Notes to segment information)(Notes to properties for lease)[Segment information]

FRC owns retail, office buildings and residential properties for lease in the Kyushu area centering on Fukuoka Prefecture. The
following table provides the book value recorded on the balance sheet, amount of change during the period and fair value ofthese properties for lease.

Descriptions omitted as FRC has a single business segment of real estate leasing business.

(thousands of yen)

RetailAmount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

Office buildings

Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

OthersAmount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

Total

Amount recorded on the balance sheet
Balance at beginning of period
Amount of change during period
Balance at end of period
Fair value at end of period

27th fiscal period

28th fiscal period(September 1, 2017 to
February 28, 2018)(March 1, 2018 toAugust 31, 2018)

102,701,692(472,865)
102,228,826
110,940,000

102,228,826
10,580,536
112,809,363
122,730,000

42,798,818(301,593)
42,497,225
56,000,000

42,497,225
3,867,209
46,364,435
62,070,000

23,552,778(133,627)
23,419,151
26,740,000

23,419,151(127,217)
23,291,933
27,020,000

169,053,289(908,086)
168,145,203
193,680,000

168,145,203
14,320,528
182,465,732
211,820,000(Note 1) Amount recorded on the balance sheet is the cost of acquisition less accumulated depreciation.
(Note 2) Of the amount of change during the 27th fiscal period, the amount of increase is primarily attributable to capital expenditures (600 million yen), and the amount of decrease is primarily attributable todepreciation and amortization expenses (1,500 million yen). Of the amount of change during the 28th fiscal period, the amount of increase is primarily attributable to acquisition of three properties (Konoha
Mall Hashimoto, Higashi Hie Business Center II and Park Place Oita Daiichi Parking) (15,265 million yen in total) and capital expenditures (657 million yen), and the amount of decrease is primarily
attributable to depreciation and amortization expenses (1,602 million yen).
(Note 3) The fair value at end of period is the appraisal value provided by outside real estate appraisers.

FUKUOKA REIT CORPORATION

41

5,937,957
3,679,834
2,258,123

2,221,589
1,195,385
1,026,203

2,415,877
1,240,489
1,175,387

812,016
371,896
440,120824,595
367,301
457,294

8,194,321
4,614,437
3,579,884

9,178,430
5,287,625
3,890,804(Note) Real estate leasing business revenues and expenses related to real estate leasing business are comprised of leasing business revenues and accompanying expenses (outsourcing fees, depreciation
and amortization expenses, taxes and other public charges, etc.), and are recorded as Leasing revenues - real estate, Other leasing revenues - real estate and Expenses related to leasing business,
respectively.

28th fiscal period (from March 1, 2018 to August 31, 2018)

Use

5,160,714
3,047,155
2,113,559

FUKUOKA REIT CORPORATION

42

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to cash distributions)[Related information]

27th fiscal period (from September 1, 2017 to February 28, 2018)

Account(1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers
exceed 90% of operating revenues recorded in the statement of income.

(2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating
revenues recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of
property, plant and equipment recorded on the balance sheet.

(3) Information by major customer(September 1, 2017 to February 28, 2018)(March 1, 2018 to August 31, 2018)

I. Unappropriated surplus

2,623,917

2,860,542

II. Total dividend[Dividend per investment unit]

2,623,464

2,860,028[3,512 yen]

[3,593 yen]

III. Surplus brought forward

Method for calculating dividends

Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

28th fiscal period (from March 1, 2018 to August 31, 2018)(thousands of yen)
28th fiscal period

27th fiscal period

453

514

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and shall exceed 90% of
FRC’s distributable profits as stipulated in Article 67-151 of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,623,464 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

The amount of dividends shall be decided in accordancewith the dividend policy stipulated in Article 38-1-1 of
FRC’s Articles of Incorporation and must exceed 90% of
FRC’s distributable profits as stipulated in Article 67-151 of the Special Taxation Measures Act.
Following the above policy, FRC shall decide to distribute
2,860,028 thousand yen, which is almost the entire
amount of unappropriated surplus, as earnings dividends.
Moreover, dividend in excess of earnings as stipulated in
Article 38-2 of FRC’s Articles of Incorporation will not beprovided.

(Note) Amounts other than the amounts of dividend per unit are rounded down to the nearest thousand yen.

( 1) Information by product and service
Descriptions are omitted as FRC’s operating revenues under single product/service classification for outside customers
exceed 90% of operating revenues recorded in the statement of income.

(Notes to significant subsequent events)
No relevant items.

( 2) Information by region(a) Operating revenues
Descriptions are omitted as FRC’s operating revenues for outside customers in Japan exceed 90% of operating
revenues recorded in the statement of income.
(b) Property, plant and equipment
Descriptions are omitted as the amount of FRC’s property, plant and equipment located in Japan exceeds 90% of
property, plant and equipment recorded on the balance sheet.

( 3) Information by major customer
Descriptions are omitted as FRC’s operating revenues for an individual outside customer are less than 10% of operating
revenues recorded in the statement of income.

(Notes to per unit information)
27th fiscal period(September 1, 2017 to February 28, 2018)

Net assets per unit (yen)Profit per unit (yen)28th fiscal period(March 1, 2018 to August 31, 2018)

125,5243,512

127,888
3,593(Note 1) Profit per unit was calculated by dividing the profit by the daily weighted average number of investment units. Diluted profit per unit is not stated as there are no dilutive investment units.
(Note 2) Profit per unit was calculated based on the following data:

27th fiscal period(September 1, 2017 to February 28, 2018)

Profit (thousands of yen)Amounts not attributable to ordinary unitholders (thousands of yen)
Profit attributable to ordinary investment units (thousands of yen)
Average number of units during the fiscal period (units)

FUKUOKA REIT CORPORATION

2,623,635–
2,623,635
747,000

43

28th fiscal period(March 1, 2018 to August 31, 2018)

2,860,088–
2,860,088
796,000

FUKUOKA REIT CORPORATION

44

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Schedule of debt)(Schedule of securities)

Category

Not applicable.

Lender(Schedule of contract amount, etc. and fair value of derivative transactions
and forward exchange transactions)(thousands of yen)

Balance as of
Balance as of
Average
Increase
Decrease
March 1, 2018 (thousands of yen) (thousands of yen) August 31, 2018 interest rate Repayment date(thousands of yen)(thousands of yen)

The Bank of Fukuoka(Note2)–

1,583,333

1,583,333–

Resona Bank (Note2)–

316,666

316,666–

The Nishi-Nippon City
Bank (Note2)–

1,571,428

1,571,428–

Short-term Resona Bank (Note2)
The Bank of Nagasaki
debt–

220,000

220,000–(Note2)–

157,142

157,142–The Oita Bank (Note2)–

157,142

157,142–(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.
(Note 2) The fair value is calculated by the counterparty of the transaction contract based on the actual interest rate on the market and other factors.

The Bank of Saga (Note2)–

94,28594,285–

Subtotal–

4,100,000

4,100,000–(Schedule of property, plant and equipment, and intangible assets)

The Dai-ichi Life
Insurance Company
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Banking
Corporation

1,000,000–

1,000,000

600,000–

500,000

Mizuho Bank

Category

Contract amount, etc.
Fair value
Of which,(Note 1)
(Note 2)exceeding 1 year

Type
Interest rate swap transaction
Receivable floating; Payable fixed

Off-market transaction
Total

25,000,000

21,300,000(64,715)

25,000,000

21,300,000(64,715)(thousands of yen)Type of asset

Balance as ofMarch 1, 2018

Decrease

Increase(Note 1)

(Note 2)

Balance as ofAugust 31,
2018

Accumulated
depreciation

Depreciation for Net property andthe period
equipment

Buildings in trust

88,537,835

9,462,728

343

98,000,220

27,296,476

1,494,910

70,703,743

Structures in trust

1,583,500

271,913–

1,855,414

700,178

32,245

1,155,236

Machinery andequipment in trust

1,273,527

21,965–

1,295,492

422,173

39,040873,319

Current
maturities
of longterm debt

March 30, 2018

Acquisition fundNo collateral/
No guarantee

0.405

March 30, 2018

Acquisition fundNo collateral/
No guarantee

–

1.800

July 31, 2018

Refinance fundNo collateral/
No guarantee

600,000–

0.417

March 30, 2018

Refinance fundNo collateral/
No guarantee––

500,000

1.338

January 31, 2019

Refinance fundNo collateral/
No guarantee–

200,000–

200,000

The Norinchukin Bank–

3,000,000–

3,000,000

0.538

July 31, 2019

Refinance fundNo collateral/
No guarantee

The Bank of Saga–

500,000–

500,000

Subtotal

2,100,000

3,700,000

1,600,000

4,200,000

The Nishi-Nippon CityBank

2,500,000––

2,500,000

0.775

February 29, 2020

Acquisition fundNo collateral/
No guarantee

Mizuho Bank

1,700,000––

1,700,000

0.569

February 29, 2020

Refinance fundNo collateral/
No guarantee

0.469

June 30, 2020

Refinance fundNo collateral/
No guarantee

0.538

July 31, 2019

Refinance fundNo collateral/
No guarantee

0.835

July 30, 2021

Refinance fundNo collateral/
No guarantee

747

–

–

747

485

47

261

Tools and fixturesin trust

1,319,583

10,255955

1,328,883

1,083,830

33,744

245,052

Aozora Bank

1,000,000––

1,000,000

101,545,140

2,269,469–

103,814,610––

103,814,610

Mizuho Bank

200,000–

200,000–

6,780

109,4132,960

113,234––

113,234

3,000,000–

3,000,000–

194,267,115

12,145,745

4,258

206,408,602

29,503,144

1,599,988

176,905,458

500,000–

500,000–

Leasehold right in
trust

1,765,318

3,780,564–

5,545,883––

5,545,883

Mizuho Bank

2,300,000––

2,300,000

Total intangible Other intangible
assetsassets in trust

The Norinchukin Bank

1,000,000––

1,000,000

46,871––

46,871

32,4802,579

14,390

The Hiroshima Bank

1,400,000––

1,400,000

1,812,189

3,780,564–

5,592,754

32,4802,579

5,560,273

The Kitakyushu Bank

800,000––

800,000

196,079,305

15,926,310

4,258

212,001,357

29,535,624

1,602,568

182,465,732

Land in trust
Construction inprogress in trust
Subtotal

Subtotal
Total

The Norinchukin Bank
The Bank of Saga

(Note 1) The main increase in the 28th fiscal period is due to acquisition of Konoha Mall Hashimoto, Higashi Hie Business Center II and Park Place Oita Daiichi Parking, and construction work at properties.
(Note 2) The main decrease in the 28th fiscal period is due to disposal.

Long-term
debt(Schedule of other specified assets)
Not applicable.

Issue

The Iyo Bank

500,000––

500,000

The Higo Bank

300,000––

300,000

4,000,000––

4,000,000

1.010

August 31, 2022

Refinance fundNo collateral/
No guarantee

500,000––

500,000

0.520

September 25, 2019

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui
Banking Corporation
Sumitomo Mitsui TrustBank
Development Bank ofJapan

1,600,000––

1,600,000

0.790

June 30, 2022

Refinance fundNo collateral/
No guarantee

1,500,000––

1,500,000

0.564

July 31, 2023

Refinance fundNo collateral/
No guarantee

4,000,000––

4,000,000

0.880

August 31, 2023

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

400,000––

400,000

0.419

August 31, 2022

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City
Bank

400,000––

400,000

0.870

August 31, 2023

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000––

2,000,000

0.419

February 29, 2024

Refinance fundNo collateral/
No guarantee

2,000,000––

2,000,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

2,000,000––

2,000,000

0.620

February 28, 2025

Refinance fundNo collateral/
No guarantee

Mizuho Bank

500,000––

500,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

Shinsei Bank

700,000––

700,000

0.400

July 31, 2024

Refinance fundNo collateral/
No guarantee

Development Bank ofJapan
MUFG Bank(Schedule of investment corporation bonds)
Issue date

Balance as of
Decrease
Balance as
March1,during the fiscal of August 31,
2018
period2018(thousands of yen)First Series of December 30,
Unsecured Bonds
2013

2,000,000(thousands of yen)–

Maturity date

Maturity
methodUse

Description

1.32

December 29,
2023

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

July 30,2032

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee

July 30,
2038

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee(thousands of yen)

2,000,000

Second Series ofUnsecured Bonds July 31, 2017

2,000,000

Third Series ofJuly 31, 2018
Unsecured Bonds––

1,000,000

Total

4,000,000–

5,000,000–

Coupon(%)

2,000,000

1.00

1.20

(Note 1)

(Note 1)

(Note 1)

(Note 2)

(Note 2)

(Note 2)The Nishi-Nippon CityBank
Development Bank ofJapan(Note 1) The bonds may be repurchased and cancelled by FRC at any time on and after the date following the payment date, unless otherwise determined by the book-entry transfer agent.
(Note 2) The bonds are subject to the limited pari passu clause among specified investment corporation bonds.

FUKUOKA REIT CORPORATION

45

Description

0.405

Vehicles andTotal property, transport
plant and equipment in trust

equipment

Use of funds(%) (Note 1)

FUKUOKA REIT CORPORATION

46

VIII. Notes to Financial Statements

Category
Lender(thousands of yen)
300,000––

300,000

Development Bank of Japan

1,500,000––

1,500,000

100,000––

100,000

The Kagoshima Bank

100,000

Category
Use of funds

Description
Lender(thousands of yen)

Sumitomo Mitsui TrustBankThe Oita Bank

–

–

0.413

September 30, 2025

Refinance fundNo collateral/
No guarantee

100,000

The Kitakyushu Bank

100,000––

100,000

The Eighteenth Bank

100,000––

100,000

The Shinwa Bank

100,000––

100,000

0.718

December 30, 2025

Refinance fundNo collateral/
No guarantee

The Hiroshima Bank

100,000––

100,000

1,500,000––

1,500,000

0.419

December 30, 2026

Refinance fundNo collateral/
No guarantee

MUFG Bank (Note3)

800,000––

800,000

0.481

March 31, 2025

Refinance fundNo collateral/
No guarantee

Resona Bank

600,000––

600,000

0.658

March 31, 2027

Refinance fundNo collateral/
No guarantee

The Higo Bank

300,000––

300,000

0.481

March 31, 2025

Refinance fundNo collateral/
No guarantee

1,300,000––

1,300,000

The Nishi-Nippon City Bank

1,000,000––

1,000,000

The Oita Bank

700,000––

700,000

The Kitakyushu Bank

700,000––

700,000

The Miyazaki Bank

700,000––

700,000(thousands of yen)–

500,000

0.504

March 31, 2025

Refinance fundNo collateral/
No guarantee

MUFG Bank–

500,000–

500,000

0.490

March 31, 2027

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui TrustBank–

400,000–

400,000

0.576

March 31, 2027

Refinance fundNo collateral/
No guarantee

The Oita Bank–

400,000–

400,000

0.646

March 31, 2028

Refinance fundNo collateral/
No guarantee

The Hiroshima Bank–

400,000–

400,000

0.646

March 31, 2028

Refinance fundNo collateral/
No guarantee

Shinsei Bank–

300,000–

300,000

0.400

March 31, 2025

Refinance fundNo collateral/
No guarantee

62,800,000

7,200,000

3,700,000

66, 300,000

64,900,000

15,000,000

9,400,000

70, 500,000(Note 1) The average interest rate is a weighted-average figure during the fiscal period and is rounded to the third decimal place. Furthermore, the average interest rate of debt for which FRC conductedinterest rate swap transactions is the weighted-average figure during the fiscal period taking into consideration the effect of interest rate swaps.
(Note 2) The debts were made based on the commitment line agreements between FRC and respective banks.
(Note 3) MUFG Bank, Ltd. concluded an absorption and split agreement with Mitsubishi UFJ Trust and Banking Corporation to succeed the latter’s lending operations for domestic corporations, and succeeded
the position, rights and obligations of the latter as of April 16, 2018.
(Note 4) Amount of repayment of long-term debt scheduled to be due within 5 years after period end.

(thousands of yen)
Category
Long-term debt

0.777

June 30, 2026

Refinance fundNo collateral/
No guarantee

600,000––

600,000

500,000––

500,000

The Eighteenth Bank

500,000––

500,000

Development Bank of Japan

1,800,000––

1,800,000

0.650

December 31, 2026

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000––

2,000,000

0.792

July 31, 2027

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City Bank

2,000,000––

2,000,000

0.892

July 31, 2027

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City Bank

500,000––

500,000

The Bank of Fukuoka

500,000––

500,000

The Oita Bank

100,000––

100,000

The Kitakyushu Bank

100,000––

100,000

0.850

August 31, 2027

Refinance fundNo collateral/
No guarantee

The Eighteenth Bank

100,000––

100,000

The Shinwa Bank

100,000––

100,000

The Hiroshima Bank

100,000––

100,000

Resona Bank

2,000,000––

2,000,000

0.494

September 30, 2027

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

1,500,000––

1,500,000

0.812

December 30, 2027

Refinance fundNo collateral/
No guarantee

Development Bank of Japan

500,000––

500,000

0.680

December 30, 2027

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City Bank

1,900,000––

1,900,000

0.750

February 29, 2028

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Trust Bank

1,100,000––

1,100,000

0.600

February 26, 2027

Refinance fundNo collateral/
No guarantee

MUFG Bank (Note3)

1,500,000––

1,500,000

0.500

February 27, 2026

Refinance fundNo collateral/
No guarantee

600,000––

600,000

0.567

February 29, 2028

Refinance fundNo collateral/
No guarantee

Development Bank of Japan–

2,500,000–

2,500,000

0.720

March 1, 2028

Acquisition fundNo collateral/
No guarantee

MUFG Bank (Note3)–

600,000–

600,000

0.480

March 31, 2026

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon City Bank–

600,000–

600,000

0.802

March 31, 2028

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka–

500,000–

500,000

0.802

March 31, 2028

Refinance fundNo collateral/
No guarantee

Mizuho Bank–

500,000–

500,000

0.630

March 31, 2028

Refinance fundNo collateral/
No guarantee

47

Description

500,000The Shinwa BankFUKUOKA REIT CORPORATION(thousands of yen)

Use of funds

–

Total

The Iyo Bank

Resona Bank

Long-term
debt

Balance as of
Balance as of
Average
March 1,
August 31,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2018,
2018
(%) (Note 1)

Sumitomo Mitsui Banking
Corporation

Subtotal

The Bank of Fukuoka

The Bank of Fukuoka

Long-term
debt

Balance as of
Balance as of
Average
March 1,
August 31,
Increase
Decreaseinterest rate Repayment date(thousands of yen) (thousands of yen)
2018
2018
(%) (Note 1)

1 to 2 years
5,700,000

2 to 3 years
6,300,000

3 to 4 years
6,000,000

FUKUOKA REIT CORPORATION

4 to 5 years
5,900,000

48