24th Fiscal Period

Report on Performance andManagement Status (Semiannual Report)
March 1, 2016 to August 31, 2016

Fukuoka REIT
Corporation

2-25, 1-Chome, Sumiyoshi, Hakata Ward, Fukuoka City
http://www.fukuoka-reit.jp/eng/

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Financial Summary(as of August 31, 2016)

To Our Unitholders

Financial Highlights

Stable Dividend

Steady Growth

LTV

Dividend per unit

Total assets

3,479 yen

179,513 mm yen

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 and management status of FRC for the twenty-fourth fiscal period (March 1, 2016 toAugust 31, 2016).
FRC started as Japan's first REIT specializing in regional properties. Its mission is to raise capital for the
Fukuoka and Kyushu areas from Japanese and overseas prime investors by incorporating high quality properties
into its portfolio, and thus contribute to the vitalization and enhancement of the attractiveness of the urban
landscape of the areas. Since our listing in June 2005, we have exhibited consistent growth and achieved stableperformance through the support of our unitholders and sponsor companies.
During the fiscal period under review, the Japanese economy remained on course for a modest recovery
although weakness can be identified. Looking ahead, with the employment and income environment continuing
to improve, the economy is expected to head for a moderate recovery due to various political measures proving
effective. In the Fukuoka and Kyushu area, the core investment target area for FRC, the economy was rapidly
pressed downward, primarily in the production and tourism sectors, due to restricted supply and reduced
demand resulting from the Kumamoto Earthquake (Note 1). As the impact of the Kumamoto Earthquake is
mitigated, however, the economy is picking up moderately. While consumers still keep cautious sentiment, theimpact of the earthquake on business activities is softening. The tourism sector is also picking up as a whole,with a variety of measures to support and encourage tourism starting to prove effective.

40.1 %

Latest dividend forecast per unit 3,560 yen

Credit ratings●Highlights for 24th

Number of investment
properties at end of period

Fiscal Period

A-

S&P

・Impact of the 2016 Kumamoto Earthquake

27 properties(Positive)
Etsuo Matsuyuki
CEO & Representative Director,
Fukuoka REIT Corporation

As for land price trends, the national average over the past year from July 2015 showed a slower rate ofdecrease in terms of the combined average for residential and commercial land, according to the Land Price
Survey announced in September 2016. By land type, the residential land price decreased at a decelerated pace, and the commercial land priceshifted from a decrease that had continued through last year to a level-off. In Fukuoka City, the central area of FRC's investment targets, land
prices continued rising for the fourth consecutive year, up 7.3% year-on-year for commercial land and up 2.9% year-on-year for residential land,marking higher rates of increase.

R&I

A+

(Stable)JCR

Under such circumstances, FRC was affected by the Kumamoto Earthquake since we invest primarily in the Fukuoka and Kyushu area.

Occupancy rate (at end of period)

・Change in consumption trends of inbound visitors

AA-

99.5 %(Stable)Kumamoto Intercommunity SC, a property owned by FRC and located in Kumamoto City, Kumamoto Prefecture, had suspended operations
following the earthquake, and FRC exempted part of the real estate rental business revenues from the property during the suspension period.
The property has already resumed operations. In addition, FRC allocated 90 million yen as repair expenses for the property's physical damages
from the Kumamoto Earthquake. However, as most part of the expenses was covered by the earthquake insurance, the amount FRC bore ineffect amounted to approximately 15 million yen.
With regard to office buildings, the vacancy rate in the business districts of Fukuoka City dropped to as low as 5.19% (Note 2) as of the end of
August 2016, despite supply of a large-scale office building in front of Hakata Station in April 2016. Thanks to such a solid market condition anddue to our network-based leasing activities, the average occupancy rate of FRC's office buildings stood at 99.96% (Note 3) as of August 31, 2016.
Through these events and asset management operations, net income for the fiscal period fell below the forecast, bringing the dividend per unit to
3,479 yen.
Moreover, in August 2016, FRC decided to dispose AEON Hara Shopping Center, for which the lease agreement would mature in less than 3
years. By selling it at this time when the real estate market is still brisk, FRC intends to avoid future risks related to the property. At the same time,
FRC decided on the disposal of Aqualia Kego for a price that significantly surpasses the book value and generates gain on sale. With the gain,
FRC will set off the loss on sale from the disposition of AEON Hara Shopping Center, minimizing the impact of the dispositions on the operating
results of the twenty-fifth fiscal period.
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 powerful sponsors leading the Kyushu business world. As we do so, we will strive to achieve
growth of our portfolio in the medium to long term and secure stable earnings through steady asset management. We at FRC are also resolved
to pursue our mission of maximizing investor interests based on our management philosophy of "Act Local, Think Global."
We greatly appreciate your continued support and cooperation.

Investment unit price (left axis) (Note 1)(yen)
300,000

II. Semiannual Report
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

30,00025,000June 21, 2005

March 1, 2013

Listing

3rd PO since listing

200,000

20,000March 1, 2011

2nd PO since listing

150,000

15,000・Unit price: 186,100 yen
・Total number of investment units outstanding: 747,000 units
・Market capitalization: 139,016 mm yen
・Net assets value per unit: 123,267 yen
・Market net assets value per unit: 155,738 yen

1st PO since listing

10,000(as of August 31, 2016)

50,000

1
2
3
5
6
7

24th

4th PO since listing

250,000

100,000

CONTENTS
Overview of Fukuoka REIT Corporation
To Our Unitholders
Financial Summary
Trend of Growth in the Asset's Size of FRC / Financial Summary
ProfileFRC's Policy on Compliance / Highlights for the 24th Fiscal Period
Property Disposition and Acquisition / Kumamoto Earthquake / Inbound Visitor Situation

Trading volume (right axis) (Note 2) (units)
April 27, 2015

September 7, 2006

(Note 1) The earthquake refers to the 2016 Kumamoto Earthquake, named by the Japan Meteorological Agency, in April 2016. The same shall apply hereafter.
(Note 2) The vacancy rate in the business districts of Fukuoka City is 4.96% as of today. These figures are based on the data publicized by Miki Shoji Co., Ltd.
(Note 3) The figure has been rounded to the second decimal place. For Taihaku Street Business Center, the occupancy rate does not include the property's residential portion.

I.

Changes in Investment Unit Price
69,890 units

8
24
25
27
28
29
30

0

5,000

0
Aug 31, Feb 28, Aug 31, Feb 28, Aug 31, Feb 29, Aug 31, Feb 28, Aug 31, Feb 28, Aug 31, Feb 28, Aug 31, Feb 29, Aug 31, Feb 28, Aug 31, Feb 28, Aug 31, Feb 28, Aug 31, Feb 29, Aug 31,
2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016

*Each figure is as of the end of each month.
*FRC implemented a 5-for-1 split of its investment units with March 1, 2014 as the effective date.
(Note 1) The investment unit prices through February 25, 2014 have been modified to the figures after the 5-for-1 split.
(Note 2) The trading volumes through February 25, 2014 have been modified to the figures obtained by multiplying the original figures by 5.
FUKUOKA REIT CORPORATION

2

I. Overview of Fukuoka REIT Corporation

I. Overview of Fukuoka REIT Corporation

Trend of Growth in the Asset’s Size of FRC
Since listing, FRC has expanded its asset’s size by more than double,
while diversifying its investment types
OfficeOfficebuildings
buildings(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)

RetailRetail(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)
NumberNumberofofinvestment
investmentproperties
properties(right(rightaxis)
axis)

OthersOthers(total(totalacquisitionacquisitionprice,
price,leftleftaxis)
axis)

Occupancy
OccupancyRate
Rate

(mm
(mmyen)yen)

99
99.6.699
99.4.4300
300,000,000

99
99.8.899
99.4.499
99.0.099
99.4.499
99.3.398
98.6.699
99.7.799
99.2.298
98.8.898
98.8.899
99.1.199
99.0.097
97.0.0

23
23

19
19

15
15

14
14
,060
22,060,800
2525,800,333
5454,333

77

66

55

,000
50
50,00000,200
30
30,200,200
3737,20016
16,171
33,171,171
33,171,171
33,171,171
33,171,171
33,171,171
33,171,200
37
37,200,200
3737,200,200
3737,200,200
3737,200,100
4343,100,100
4343,100,100
4343,100,100
4343,100,443
67
67,443,073
71
71,073,623
74
74,623,623
74
74,623,623
74
74,623,623
74
74,623,623
74
74,623,623
74
74,623

11
11

10
10
,200
37
37,20016
16,171
33,171,060
22,060,000
100
100,000

15
15

16
16

17
17

17
17

,171
33,171,171
33,171,100
43
43,100,333
5454,333,333
54
54,333

22nd
nd
33rd
rd
44th
th
55th
th
66th
th
77th
th
88th
th
99th
th
10
10th
th
11
11th
th
12
12th
th
13
13th
th
(Aug
(Aug2005(Feb2006(Aug2006(Feb2007(Aug2007(Feb2008(Aug2008(Feb2009(Aug2009(Feb2010(Aug2010(Feb2011
2005) ) (Feb
2006) ) (Aug2006) ) (Feb
2007) ) (Aug2007) ) (Feb2008) ) (Aug2008) ) (Feb2009) ) (Aug2009) ) (Feb2010) ) (Aug2010) ) (Feb2011) )

,251
77,251

99
99.5.5

27
27

27
27

27
27

(properties)(properties)

100.0.0%
%
30
30100

25
25

24
24

23
23

25
25

25
25 95
95.0.0%%90.0.0%
%
20
20 90

,251
77,251,581
11
11,581,581
11
11,581,831
12
12,831,931
13
13,931,500
48
48,500,500
48
48,500,500
48
48,500,500
48
48,500,081
22
22,081,081
22
22,081,081
22
22,081,500
48
48,500,500
48
48,500,500
48
48,500,281
1919,281

15
15

,100
43
43,100,100
4343,100,700
4545,700,500
48
48,500

10
10

,323
103
103,323,033
62
62,03399
99.6.6

20
20

,000
200
200,000

16
16

99
99.5.598
98.1.1,000
250
250,000,000
150
150,000

99
99.6.699
99.3.398
98.8.898
98.1.1,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,323
103
103,323,163
109
109,163,163
109
109,163,163
109
109,163,223
105
105,223

14
14th
th
15
15th
th
16
16th
th
17
17th
th
18
18th
th
19
19th
th
20
20th
th
21
21stst
22
22nd
nd
23
23rd
rd
24
24th
th
29, ,
As
Asof
ofNov
Nov29
(Aug
(Aug2011(Feb2012(Aug2012(Feb2013(Aug2013(Feb2014(Aug2014(Feb2015(Aug2015(Feb2016(Aug2016
2011) ) (Feb2012) ) (Aug2012) ) (Feb2013) ) (Aug2013) ) (Feb2014) ) (Aug2014) ) (Feb2015) ) (Aug2015) ) (Feb
2016) ) (Aug2016) ) 2016
2016(Note(Note11) )55

00*Kominedai Community Mall, acquired in the 3rd fiscal period and sold in the 6th fiscal period, was omitted from the figures in the graph above(Note 1) The figure reflects disposition of AEON Hara Shopping Center and Aqualia Kego as well as acquisition of Sports Club NAS Park Place Oita, all of which were determined on August 30, 2016
(Sports Club NAS Park Place Oita is to be handled as additional acquisition of part of Park Place Oita.)

Financial Summary
Dividend Performance

Financial
Financial Highlights
Highlights forfor 24th
24th Fiscal
Fiscal Period
Period andand BusinessBusiness Forecasts
Forecasts forfor 25th
25th andand 26th
26th Fiscal
Fiscal Periods
Periods
FRC aims to bring dividend per unit back to the 3,400 yen level as early as possible.
Category

24th fiscal period

25th fiscal period

26th fiscal period(March 1, 2016 to August 31, 2016)(September 1, 2016 to February 28, 2017)(March 1, 2017 to August 31, 2017)(unit)

Results

Forecast

Forecast

Operating revenues

mm yen

8,234

9,707

8,008

Leasing NOI (Note 2)

mm yen

5,164

4,959

4,894

Depreciation and amortization expenses mm yen

1,470

1,465

1,474

Operating income

mm yen

3,069

4,517

2,820

Ordinary income

mm yen

2,616

4,127

2,466

Profit (Note 3)

mm yen

938

4,126

2,465

Total dividend (including dividend inexcess of earnings) (Note 3)

mm yen

2,598

2,465

2,465

Dividend per unit (Note 3)

yen (1)

3,479

–

–

yen (2)

Latest dividend forecast per unit
Difference from forecast
Total number of investment units
outstanding (at end of period)

3,560 (Note 4)

3,300

3,300

yen (1)-(2)

(81)

–

–

units

747,000

747,000

747,000(Note 2) “Leasing NOI” is calculated using "Leasing business revenues − Expenses related to leasing business + Depreciation and amortization expenses."(Note 3) In accordance with transfer of properties, FRC has recorded and reversed reserve for temporary difference adjustment.
(Note 4) In accordance with transfer of properties, FRC recorded and reversed reserve for temporary difference in adjustment. FRC revised its forecast dividend per unit to 3,430 yen in the “Notice on Revision
to Forecast of Performance for Fiscal Period Ending August 2016 and February 2017” dated August 30, 2016.
FUKUOKA REIT CORPORATION

3

24th fiscal period end

August 31, 2016

24th fiscal period dividend

3,479 yen per unit

（yen）

3,802

(semiannual periods ending every February and August)

3,726
4,000 （19,014）3,687（18,632）

24th fiscal period days

184 days

Dividend yield

3.7% {(Dividend / Days × 365) / Unit price (as of August 31, 2016)}

3,672 3,699 3,674 3,609（18,499）（18,373）3,468（18,360）（18,049）3,475 3,479
3,563 3,574 3,479（17,377）（17,397）3,356 3,293 3,384 3,324（17,341）
3,238 3,257 3,291 3,243
3,435（16,922）（16,783）（16,621）（16,465）（16,458）（16,219）3,278（16,289）（16,193）（18,438）

3,000

2,000

1,000

0

2nd

3rd

4th

5th

6th

7th

8th

9th

10th

11th

12th

13th

14th

15th

16th

*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

17th

18th

19th

20th

21st

22nd

23rd

24th

I. Overview of Fukuoka REIT Corporation

ProfileFRC’s Policy on ComplianceManagement Structure and System

Status of the Investment Corporation
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

Asset manager: Fukuoka Realty Co., Ltd. (Fukuoka Local Finance Branch Bureau (financial instruments) No. 10)
June 21, 2005 (Tokyo Stock Exchange, and Fukuoka Stock Exchange)

Sponsors

5%
The Bank of Fukuoka, Ltd.

5%

5%

Director

Fukuoka Jisho Co., Ltd. (Note 1)

Address:

5%

5%

5%

Nishi-Nippon Railroad Co., Ltd.

KYUSHU RAILWAY COMPANYRoyal Holdings Co., Ltd.

TEL:

+81-92-272-3900

Established:

December 26, 2003

Capital:200,000,000 yen

Compliance
Assessment
Committee

Board ofDirectors’Meeting

A lawyer is
employed asa ComplianceDepartment
General Manager

Discusses theappropriatenessof eachinvestment andmanagement
project, etc.

Discusses law
abidance of each
investment andmanagement
project, etc.

Held legally andadequately as thegoverning body of theasset managementcompany.
Conducts substantial
discussion and makes
judgements

Kyushu Electric Power Co., Inc.

5%

Fukuoka REIT Corporation
Board of Directors’ Meeting
Builds an appropriate system for supervising the asset managementcompany

Yasuo Kawasho

Etsuo Matsuyuki

Hiroyasu ShindoSupervisory Director
Appointed in May 2016CEO and Representative
Director
Appointed in May 2014

Supervisory Director
Appointed in November
20101) We recognize our corporate social responsibility and the social responsibility and public
mission of the Company's business and will engage in sound business operation.
2) We will observe both the letter and the spirit of the law.
3) We engage in fair and transparent business based on the principle of self-responsibility.
4) We respect the character of all other stakeholders and contribute to the sounddevelopment of economic society.
5) We unhesitatingly choose ethics when profit and ethics conflict.
6) We maintain an unyielding stance toward antisocial forces.
7) We strive to leave a more prosperous and fair society to future generations.
8) We will actively create solutions satisfactory to everyone when confronted with difficult
ethical problems.

Highlights for the 24th Fiscal Period
Dividend Trends
・The dividend decreased due to the Kumamoto Earthquake, change in inbound consumption trends, and the sale of properties.
・Aim for rapid recovery to the 3,400 yen range mainly through acquisition of properties.

Portfolio (Note)

The Kumamoto Earthquake, change in
inbound consumption trends

Investment type (based on acquisition price)

Dividends (yen)

27.0%

60.7%
Investment area (based on acquisition price)
Fukuoka metropolitan area

78.1%

Dividends

Number of properties

3,600

Office buildings

Retail2-25, 1-Chome, Sumiyoshi,
Hakata Ward, Fukuoka
City

Investment
Management
Committee

Basic Policy on Compliance

Kyudenko Corporation

Fukuoka Realty Co., Ltd.

・Law abidance and earthquake resistance・Check of soil contamination, toxic substances and use
status・Replacement market place, expenses for long-term
maintenance and repairs, etc.

Preliminary
reviewing by
ComplianceDepartment

10%(Asset Manager)

Representative: Etsuo Matsuyuki
CEO & Representative
Director[Market reports]
・Analysis on trade areas and competition situation
・Adequate rent levels, etc.

Fukuoka REIT Corporation and Fukuoka Realty Co., Ltd. have established abasic compliance policy setting forth the basic mindset that executive directors,
supervisory directors, executives, and employees must observe, have set forth thefollowing matters as the fundamental principles of the basic compliance policy,
and aim to realize fair and appropriate management and discharge the social
responsibilities attached to this business.

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

Name:

Real estate appraisals(Records of outsourcing)・Field studies on properties
・Research on the actual market prices and market trends in neighboring areas
・Profitability evaluation
・Research on trade areas
・Calculation of estimated prices

Saibu Gas Co., Ltd.

Outsidedirector

Fukuoka Realty Co., Ltd.

Overview of the AssetManager・Japan Real Estate Institute・The Tanizawa Sogo Appraisal Co., Ltd.
・Daiwa Real Estate Appraisal Co., Ltd.

5%The Nishi-Nippon City Bank, Ltd. Development Bank of Japan Inc.

50%

Detailed assessment by the Company’s qualified staff and staff with investment
experience / various investigations and assessment based on the investment policy

Decision-making on matters regarding Fukuoka REIT

Representative: Etsuo Matsuyuki, CEO & Representative Director
Listed date:

External specialists[Engineering reports]

Fukuoka REIT Corporation

Name:

Fukuoka Realty Co., Ltd.: Organization and preparation plans forinvestment and management projects

3,400

Number ofproperties

Disposition assets (two properties)

27

27
24

Rapid recovery to the 3,400 yen range

27

25

25 (Note)

30

25
25

3,200

Others 12.3%

Other
Kyushu areas

21.9%

20

3,000
2,800

3,278

3,435

3,563

3,574

3,479

3,300

3,300

2,600

15

10

2,400
5

Total leasable floor space

Occupancy rate at end of period

2,200

554,541.30m2

99.5%

2,000

*Figures are based on properties owned as of August 31, 2016.

0

20th results~August 2014

21st results~February 2015

22nd results~August 2015

23rd results~February 2016

24th results~August 2016

*Sports Club NAS Park Place Oita is to be handled as additional acquisition of part of Park Place Oita.
FUKUOKA REIT CORPORATION5FUKUOKA REIT CORPORATION

6

25th forecast~February 2017

26th forecast~August 2017

I. Overview of Fukuoka REIT Corporation

Property Disposition and Acquisition
Summary

II. Semiannual Report

・Disposed AEON Hara Shopping Center, in the current booming real estate market and avoided future risks.
・Disposed Aqualia Kego at a price substantially exceeding unrealized gains in the same timeframe as the sale of
AEON Hara Shopping Center, minimizing impact on the financial results.
・Acquired Sports Club NAS Park Place Oita utilizing the sponsor pipeline.

Overview of Asset Management
1. Changes in operating results and financial position

Property Disposition

Acquired a Sponsor's Property

AEON Hara Shopping Center

Aqualia Kego

20th fiscal period

Gain on sale: 1,653 million yen (Note 2)(including 113 million yen of estimated disposition expenses)(including 45 million yen of estimated disposition expenses)

Disposition date: September 30, 2016

Disposition date: November 29, 2016

Acquisition price: 1,470 million yen
Seller: Fukuoka Jisho Co., Ltd.
Acquisition date: September 1, 2016
Acquisition cap: 6.1% (Note 3)(Note 1) This has been recorded as an impairment loss in the 24th fiscal period.
(Note 2) This is expected to be recorded as operating revenue in the 25th period.
(Note 3) Calculated by driving net cash flow (NCF) by direct capitalization method in the appraisal report conducted at the time of acquisition price.

Operating expenses

mm yen[Expenses related to leasing business]

mm yenOperating income
Ordinary income
ProfitTotal assets

mm yenTotal number of investment
units outstanding
Net assets per unit
Total dividend
Dividend per unit

Kumamoto Earthquake / Inbound Visitor Situation
Kumamoto Intercommunity SC Resumes Business
Inbound Visitor Trends

Kumamoto Intercommunity SC

Year-on-Year Comparison of the Number of Foreign Visitors to Fukuoka Prefecture (2016)(%)
200

mm yen(a)

mm yen(b)

mm yen(c)

mm yen%%(September 1, 2014 to
February 28, 2015)

8,234[8,234]5,165[4,540]
3,069
2,616
938
179,513[(1.1)]
92,081[(1.8)]
91,142(March 1, 2015 toAugust 31, 2015)

(d)

units

690,000

690,000

747,000

747,000

747,000(c)/(d)yen(e)

mm yen118,567
2,370
3,435[3,435][–]125,574
2,661
3,563[3,563][–]

125,585
2,669
3,574[3,574][–]

123,2672,598
3,479[1,256][2,223](e)/(d)yen[Earnings dividend per unit]

yen[Dividend in excess of earnings per unit] (Note 3)

yen

118,4102,261
3,278[3,278][–](Note 4)%

1.3 [2.7]

1.4 [2.9]

1.5 [3.0]

1.5 [3.0]

1.4 [2.9](Note 4)%

2.8 [5.5]

2.9 [5.8]

3.0 [6.0]

2.8 [5.7]

1.0 [2.0](c)/(b)

%

48.7

48.9

51.7

51.7

51.3

%
%

[(0.1)]
100.0

[0.2]
100.0

[2.8]
100.0

[0.0]
100.0

[(0.4)]
100.0

properties

Ratio of ordinary income tototal assets
Return on net assets
Ratio of net assets to total
assets[Change from previous period]

Payout ratio

180

8,343
[8,343]
5,201[4,577]
3,141
2,670
2,669
181,445[(0.1)]
93,812[0.0]
91,142mm yenmm yen[Change from previous period]

8,423[8,423]
5,256[4,651]
3,167
2,663
2,661
181,597[8.5]
93,804[14.7]
91,142

7,789[7,789]4,928[4,350]
2,860
2,370
2,369
167,369[(0.3)]
81,811[0.1]
79,441mm yen[Leasing business revenues]

Unitholders’ equity

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

7,779[7,779]4,955[4,366]
2,824
2,263
2,262
167,824[0.2]
81,703[0.0]
79,441

Operating revenues

Net assets

23rd fiscal period

22nd fiscal period(March 1, 2014 toAugust 31, 2014)(unit)[Change from previous period]

Loss on sale: 1,659 million yen (Note 1)(September 1, 2015 toFebruary 29, 2016)

21st fiscal period

Fiscal PeriodSports Club NAS Park Place Oita

(Note 4)160

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

140
120
100
80
60
40

Occupancy rate0

(at end of period)

January

February

March

April

May

June

(1) Fukuoka

143.0 %

142.9 %

127.4 %

94.9 %

77.0 %

110.4%(2) Fukuoka

176.3 %

160.5 %

172.8 %

123.0 %

111.5 %

114.0%((1) +cruise ship tourist landing)

Source: Prepared by Fukuoka Realty based on data from Statistics on Legal Migrants (Ministry ofJustice)Acquisition timing

November 2006

Construction period

November 2006
1-Chome, Kozono, Higashi
Ward, Kumamoto City
Sports Depo/Golf 5Starbucks Coffee

Acquisition price2,400 million yen

Address

Investment ratio

1.3%

Tenants

Disaster damage from the Kumamoto Earthquake and earthquake insurance

Earthquake insurance compensated for most of the physical damage to
FRC's owned properties (mainly Kumamoto Intercommunity SC) incurredfrom the Kumamoto Earthquake.

Travel Expenditures per Foreign Visitor to Japan (shopping cost)
Country/
Region2015 (annual)Year-on-yearchangeAllcountries/
regions

73,662

38.3％

Korea
China
TaiwanHong Kong

22,195
161,973
59,50072,145

10.2％
27.1％
28.0％
39.9％

(yen)

Depreciation and amortization
expensesCapital expenditures
Leasing NOI
Days in fiscal period

25

27

27

27

475,682.05

478,197.10

554,464.84

554,549.65

554,541.30

%

99.3

99.6

99.5

99.6

99.5

mm yen

1,387

1,390

1,458

1,471

1,470

mm yen

740
4,800
184

328
4,829
181

445
5,229
184

630
5,237
182

665
5,164
184

m

(at end of period)

20

24

2

(Note 4) 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) The dividend in excess of earnings for the period ended August 2016 came from reserve for temporary difference adjustments.
(Note 4) 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.

2016Year-on-year(Jan – Mar)change2016(Apr – Jun)

Year-on-yearchange66,885（7.0）%

60,440（21.5）%

Ratio of ordinary income to total assets

20,038151,293
52,487
68,675（6.9）%（14.5）%（5.2）%（4.5）%

19,611
123,597
47,15858,675（17.2）%（28.7）%（24.2）%（6.8）%

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

Source: Prepared by Fukuoka Realty based on data from Consumption Trend Survey for Foreigners
Visiting Japan (Japan Tourism Agency)

FUKUOKA REIT CORPORATION7FUKUOKA REIT CORPORATION

8

II. Semiannual Report

Overview of Asset Management

II. Semiannual Report

Overview of Asset Management
Moreover, the credit ratings assigned to FRC as of the end of the 24th fiscal period are as follows:

2. Management situation

Credit Rating Agency
Standard & Poor's Ratings Japan K.K. (S&P)(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 24th fiscal period (August 31, 2016), FRC manages a total of 27 properties
comprising 11 Retail, 7 Office buildings and 9 Others.

(2) Investment environment and portfolio performance
During the fiscal period under review, the Japanese economy remained on course for a modest recovery although weakness
can be identified. Looking ahead, with the employment and income environment continuing to improve, the economy isexpected to head for a moderate recovery due to various political measures proving effective. In the Fukuoka and Kyushu
area, the core investment target area for FRC, the economy was rapidly pressed downward, primarily in the production andtourism sectors, due to restricted supply and reduced demand resulting from the 2016 Kumamoto Earthquake (hereinafter
the “Kumamoto Earthquake”). However, the economy is picking up, as the impact of the Kumamoto Earthquake has been
mitigated. Specifically, while consumers still remain cautious, the impact of the Kumamoto Earthquake on business activities isdiminishing. The tourism sector is also picking up as a whole, as a variety of measures to support and encourage tourism arestarting to prove effective.
As for land price trends, the national average over the past year from July 2015 showed a slower rate of decrease in termsof the combined average for residential and commercial land, according to the 2016 Land Price Survey. By land type, theresidential land price decreased at a decelerated pace, and the commercial land price shifted from a decrease that had
continued through last year to a level-off. In Fukuoka City, the central area of FRC's investment targets, land prices continued
rising for the fourth consecutive year, up 7.3% year-on-year for commercial land and up 2.9% year-on-year for residential land,marking higher rates of increase.
Under such circumstances, FRC continued its efforts to reinforce competitive advantages and customer drawing ability at
Canal City Hakata and other major retail facilities, 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 99.5% at the end of
the 24th fiscal period.
When analyzing FRC’s portfolio (on an acquisition price basis) by investment target area, the investment ratio in the Fukuoka
urban area accounted for 78.1%; when analyzing by property type, Retail, Office buildings, and Others accounted for 60.7%,
27.0% and 12.3%, respectively.

(3) Summary of fundraising
In the 24th fiscal period, Using cash on hand, FRC repaid 300 million yen in long-term debt that matured in the period (totaling
5,000 million yen). As a result, the balance of interest-bearing debt outstanding (including investment corporation bonds)
at the end of the 24th fiscal period totaled 71,950 million yen, with the loan-to-value ratio (ratio of interest-bearing debt(including investment corporation bonds) to total assets) at 40.1% and the ratio of fixed-interest rate debt (including investment
corporation bonds) at 80.0% as of the same date. Going forward, FRC will continue its efforts to reduce refinancing risks bydispersing the debt repayment dates and increasing the average length of time until debt maturity, and to mitigate risks ofrising interest rates by shifting to fixed-interest rate borrowings and through other measures.

FUKUOKA REIT CORPORATION

9

Rating Type

RatingRating Outlook

Long-term Corporate Credit Rating
Short-term Corporate Credit Rating

A−
A−2

Positive−

Issuer Rating

A+

StableLong-term Senior Debts Rating

AA−

StableRating and Investment Information, Inc. (R&I)
Japan Credit Rating Agency, Ltd. (JCR)(4) Summary of performance and dividend
As a result of these management efforts, operating revenues totaled 8,234 million yen and operating income after excluding
operating expenses such as expenses related to the leasing business and asset management fees totaled 3,069 million yen.
Ordinary income was 2,616 million yen.
Due to the occurrence of the Kumamoto Earthquake, FRC recorded the insurance benefit (totaling 75 million yen) for the loss
on disaster at its owned properties (mainly Kumamoto Intercommunity SC) as “insurance income” under extraordinary income.
At the same time, FRC recorded 90 million yen of costs for restoration work in accordance with the loss on disaster as “losson disaster” under extraordinary losses.
Moreover, for the AEON Hara Shopping Center that was disposed on September 30, 2016, FRC reduced its book value
to a recoverable amount in the 24th fiscal period and recorded the reduced amount as impairment loss (1,660 million yen)under extraordinary losses. The recoverable amount was estimated based on the net sale price, and the net sale price wascalculated by deducting the estimated disposal expenses from the actual sale price. The impairment loss consists of land intrust totaling 1,660 million yen.
As a result, profit was 938 million yen for the period ended August 31, 2016.
Moreover, based on the policy of paying dividends in excess of earnings as set forth in its Articles of Incorporation, FRC set
reserve for temporary difference adjustments (as set forth in Article 2-2-30 of the Regulations on Calculations of Investment
Corporations; the same shall apply hereafter) at 1,660 million yen and dividend in excess of earnings per unit at 2,223 yen.
Accordingly, dividend per unit came to 3,479 yen.

3. Change in the number of investment units issued
Changes in unitholders’ capital from the incorporation of FRC to the end of the 24th fiscal period are as follows:
Number of investment units
issued (units)
Increase
Balance
July 2, 2004
Established through private placement250
250November 8, 2004 Additional issue of investment units through private offering
82,80083,050June 20, 2005
Additional issue of new investment units through public offering
7,000
90,050July 21, 2005
Additional issue of new investment units through third-party allotment
2,000
92,050
September 7, 2006 Additional issue of new investment units through public offering
15,000107,050
March 1, 2011
Additional issue of new investment units through public offering
16,000123,050
March 1, 2013
Additional issue of new investment units through public offering
14,950138,000
March 1, 2014
Split of investment units
552,000
690,000
April 27, 2015
Additional issue of new investment units through public offering
57,000747,000
Date

Item

Unitholders’ capital(mm of yen)

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

Balance
125
41,52547,46949,16760,264
69,17779,441
79,441
91,142

Remarks(Note 1)
(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)(Note 9)(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.

[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
HighestLowest20th fiscal period(March 1, 2014 toAugust 31, 2014)

199,000 yen
157,100 yen

21st fiscal period

22nd fiscal period

23rd fiscal period

24th fiscal period

244,400 yen
186,200 yen

226,000 yen
187,100 yen

209,000 yen
171,300 yen

214,500 yen
186,100 yen(September 1, 2014 to
February 28, 2015)(March 1, 2015 toAugust 31, 2015)(September 1, 2015 toFebruary 29, 2016)

FUKUOKA REIT CORPORATION

10(March 1, 2016 toAugust 31, 2016)

II. Semiannual Report

Overview of the Investment Corporation

Overview of Asset Management
4. Results of dividend, etc.

1. Summary of unitholders’ capitalWith respect to the dividend (excluding dividend in excess of earnings) for the 24th 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 1,256 yen.
Moreover, FRC provided dividend in excess of earnings equivalent to the amount of impairment loss for the 24th fiscal period,
setting distribution per unit from reserve for temporary difference adjustments at 2,223 yen.
Accordingly, dividend per unit came to 3,479 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 perunit, distribution per unit of thereserve for temporary 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)

20th fiscal period

21st fiscal period(March 1, 2014 toAugust 31, 2014)

22nd fiscal period(September 1, 2014 to
February 28, 2015)

2,262,068
2,262,134
314
2,261,820[3,278 yen]
2,261,820[3,278 yen]

–

[–]

–

[–]

II. Semiannual Report

23rd fiscal period(March 1, 2015 toAugust 31, 2015)

2,369,872
2,370,18737
2,370,150[3,435 yen]
2,370,150[3,435 yen]

2,661,683
2,661,720
159
2,661,561[3,563 yen]
2,661,561[3,563 yen]

–

–

[–]

[–]

–

–

[–]

24th fiscal period(September 1, 2015 toFebruary 29, 2016)[–](March 1, 2016 toAugust 31, 2016)

2,669,627
2,669,786
8
2,669,778[3,574 yen]
2,669,778[3,574 yen]

–

[–]

–

[–]

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

21st fiscal period

22nd fiscal period

10,000,000 units

10,000,000 units

690,000 units

690,000 units

7,386

7,350

20th fiscal period
as of August 31, 2014

as of February 28, 2015

23rd fiscal period

24th fiscal period

10,000,000 units

10,000,000 units

10,000,000 units

747,000 units

747,000 units

747,000 units

10,524

10,3309,722

as of August 31, 2015

as of February 29, 2016as of August 31, 2016

2. Matters related to investment units
The following table sets forth the major unitholders of FRC as of August 31, 2016.

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

1,660,581[2,223 yen]

Investment units held (units)

NameJapan Trustee Service Bank, Ltd. (Trust account)
Fukuoka Jisho Co., Ltd.
The Master Trust Bank of Japan, Ltd. (Trust account)
Trust & Custody Service Bank, Ltd. (Securities investment trust account)
The Nomura Trust and Banking Co., Ltd. (Investment trust account)
Kazuhiko Enomoto
MetLife, Inc.
STATE STREET BANK AND TRUST COMPANY 505223
THE BANK OF NEW YORK MELLON SA/NV 10
Shikoku Railway Company
Total

249,253
66,07539,766
39,612
25,41011,985
11,872
11,04010,1739,130474,316

Percentage of total number ofinvestment units outstanding (%) (Note)
33.36
8.84
5.32
5.30
3.40
1.60
1.58
1.47
1.36
1.22
63.49

(Note) Percentage of total number of investment units outstanding is rounded down to the nearest specified unit.

–

[–]

–

–

[–]

[–]

–

[–]

–

[–]

3. Matters related to directors(1) The names of FRC’s directors, etc. and their fees for the 24th fiscal period are as
follows:

5. Future portfolio management policy and vital issues
FRC will further reinforce management and leasing capabilities by cooperating with property management companies including
sponsor companies even in a weak consumer spending environment, and secure and maintain the stable operation of theproperties by making the most use of their advantages.
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 24th fiscal period
No relevant items.
(Reference Information)
FRC acquired Sports Club NAS Park Place Oita on September 1, 2016 and disposed AEON Hara Shopping Center on
September 30, 2016. Moreover, FRC disposed Aqualia Kego on November 29, 2016.
FUKUOKA REIT CORPORATION

11

Title

Name of directors, etc.

Major concurrent assignments

Total fee for each title for the
24th fiscal period(thousands of yen) (Note 3)

CEO and Representative Director

Supervisory Directors

CEO and Representative Director, Fukuoka Realty
Co., Ltd.
Representative Partner, Shinohara CPA Office
Representative Council, Shindo Law Firm
Representative Partner, Kawasho Authorize
Accountant OfficeEtsuo Matsuyuki
Takashi Shinohara
Hiroyasu Shindo
Yasuo Kawasho

Independent Auditor

PricewaterhouseCoopers
Aarata LLC (Note 4)

–

6,000

3,600

8,500

(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) Appointments of CEO & Representative Director and Supervisory Directors of FRC due to the expiration of their terms of office were made at the Seventh General Meeting of Unitholders held on May
25, 2016. Etsuo Matsuyuki was reappointed as CEO & Representative Director. For Supervisory Directors, Hiroyasu Shindo was reappointed while Yasuo Kawasho was newly appointed to the post asof May 29, 2016 following the resignation of Takashi Shinohara from the post due to expiration of term of office as of May 28, 2016.
(Note 3) The fees for the CEO and Representative Director and Supervisory Directors are the amounts paid to them in the 24th fiscal period, and the fee to the Independent Auditor is the amount payable to it(estimate) for audits pertaining to the 24th fiscal period.
(Note 4) The corporate name of the Independent Auditor was changed from PricewaterhouseCoopers Aarata to PricewaterhouseCoopers Aarata LLC, effective as of July 1, 2016.

(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.

FUKUOKA REIT CORPORATION

12

II. Semiannual Report

Overview of the Investment Corporation

Status of FRC’s Assets under Management

4. Names of asset management company, asset custodian and generaladministrators as of the end of the 24th fiscal period
The following table sets forth the asset management company, asset custodian and general administrators of FRC as ofAugust 31, 2016.
Category of entrustment

II. Semiannual Report

2. Major assets owned by FRC
The following is an overview of the major assets (top ten properties on a book value basis) owned by FRC as of August 31,
2016.
Real estate property name (Note 1)

Book value(mm of yen)

Name

Asset Management Company

Fukuoka Realty Co., Ltd.

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

30,36846,602.94

46,602.94

100.0

15.5

Retail

28,426

68,820.39

68,397.87

99.4

19.4

RetailAsset Custodian

Mitsubishi UFJ Trust and Banking Corporation

Canal City Hakata·B

General Administrator (accounting matters, etc.)

Mitsubishi UFJ Trust and Banking Corporation

Park Place Oita

17,740109,590.83

109,282.25

99.7

13.8

RetailGeneral Administrator (administration of unitholders’ list)

Sumitomo Mitsui Trust Bank, Limited

Canal City Business Center Building

13,44023,030.98

23,030.98

100.0

7.6

Office building

General Administrator (administration of investment corporation bonds registry)

Sumitomo Mitsui Banking Corporation

Gofukumachi Business Center

9,368

19,905.34

19,806.06

99.5

6.5

Office building

LOGICITY Minato Kashii (Note 4)

8,081

43,233.72

43,233.72

100.0

Undisclosed (Note 5)

Taihaku Street Business Center

6,332

14,677.27

14,554.68

99.2

3.6

Office building

SunLive City Kokura

5,864

61,450.22

61,450.22

100.0

3.6

RetailMarinoa City Fukuoka (Marina Side Building)

5,286

33,069.82

33,069.82

100.0

2.2

RetailHigashi Hie Business Center

4,792

13,614.59

13,614.59

100.0

4.0

Office building

Total

129,702433,996.10

433,043.13

99.8

Status of FRC’s Assets under Management
1. FRC’s asset structure
23rd fiscal period

Type of asset

Real estate trust
beneficiary interest

Office buildings

Othersas of August 31, 2016

Total value of
properties held

Percentage of
total assets

Fukuoka urban area

70,567

Other Kyushu areas
Fukuoka urban area

(Note 1)

Total value of
properties held

Percentage of
total assets

38.9

68,692

38.3

35,86919.8

35,581

19.8

43,63624.0

43,29224.1(mm of yen) (Note 2)

Retail24th fiscal period

as of February 29, 2016

Area

Use

(%) (Note 3)(mm of yen) (Note 2)(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) The property was renamed from LOGIPORT Island-city Hakata as of March 1, 2016. The same shall apply hereafter.
(Note 5) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

(%) (Note 3)

Other Kyushu areas

–

–

−

−

Fukuoka urban area

18,764

10.3

18,640

10.4

Other Kyushu areas

2,717

1.5

2,696

1.5

Deposits and other assets

9,890

5.5

10,6105.9

Total amount of assets (Note 4)

181,445[171,575]

100.0[94.6]

179,513[169,109]

100.0[94.2](Note 1) “Fukuoka urban 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 2010 census, which states “the numberof 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” conducted by
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.

FUKUOKA REIT CORPORATION13FUKUOKA REIT CORPORATION

14–Others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

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
2-18, 2-Chome, Usuki,
Square Mall Kagoshima Usuki
Kagoshima City, Kagoshima
1-5, 1-Chome, Kozono, HigashiKumamoto Intercommunity SC
Ward, Kumamoto City
27-52, 6-Chome, Hara, Sawara
AEON Hara Shopping Center
Ward, Fukuoka 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
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
13-17, 2-Chome, Kego, Chuo
Aqualia Kego
Ward, 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
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

24th fiscal period

23rd fiscal period(September 1, 2015 to February 29, 2016)

The following table provides details of the real estate properties owned by FRC as of August 31, 2016.
Total leasable
floor space (m2)Period-end
appraisal
valueBook value
at end ofperiod(mm of yen)
(Note 1)(mm of yen)
(Note 2)

46,602.94

33,30030,368

Real estate property nameReal estate appraiser
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

68,820.39

30,20028,426

109,590.83

17,73817,740Japan Real Estate Institute61,450.22

7,890

5,864

Japan Real Estate Institute14,602.88

5,290

4,599

Japan Real Estate Institute6,968.66

2,650

2,072

27,313.53

3,700

3,588

2,801.15

1,240

1,022

6,467.80

2,750

2,163

7,296.17

3,680

3,141

33,069.82

5,600

5,286

384,984.39

114,038

104,274

23,030.98

15,20013,44019,905.34

13,4009,368Japan Real Estate Institute–Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.
Tanizawa Sogo Appraisal
Co., Ltd.

6,293.75

5,370

3,959

Japan Real Estate Institute

14,677.27

7,280

6,332

Japan Real Estate Institute

Canal City Hakata
Canal City Hakata·B
Park Place Oita
SunLive City Kokura
Square Mall Kagoshima Usuki
Kumamoto Intercommunity SC (Note 2)
AEON Hara Shopping Center
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
Office buildings subtotal:

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 4)(Note 1)(%) (Note 4)(mm of yen)(%) (Note 5)(mm of yen)(%) (Note 5)

1 [47]
1 [47]
1 [105]
1
13
2
1
2
1
1

99.7
98.6
99.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1,325
1,618
1,127
295
262
90
212
40
88
111

15.9
19.4
13.5
3.5
3.1
1.1
2.5
0.5
1.1
1.3

1

100.0

177

25 [221](Note 3)

1 [61]
36
16
1 [69]
1 [22]
1
11
67 [216]

7,415.36

4,320

2,632

–

5,619.69

1,600

1,208

Japan Real Estate Institute7,187.58

3,320

2,780

2,496.06

1,260

1,166

5,785.44

1,810

1,454

4,173.29

1,370

1,242

Japan Real Estate InstituteTanizawa Sogo Appraisal
Co., Ltd.

43,233.72

8,590

8,081

83,443.25
554,541.30

25,190
193,478

21,336
168,902

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

7.8
6.3
2.3
3.6
4.0
1.0
1.6

1 [61]
35
16
1 [70]
1 [25]
1
11
66 [219](Note 3)(Note 6)(Note 6)

100.0

Undisclosed(Note 6)(Note 6)

99.0

776

9.3

10 [566]

99.6

8,343

100.0

100 [997]

Japan Real Estate Institute

969

64.1

649
524
193
297
333
86
133

Undisclosed

102 [1,003]

1,050

5,349

100.0

Total

2,710.86

99.7
100.0
100.0
100.0
98.6
100.0
100.0
100.0

1

10 [566]

Daiwa Real EstateAppraisal Co., Ltd.
Daiwa Real EstateAppraisal Co., Ltd.

2.2

Tosu Logistics Center

Others subtotal:

1,800

182

0.8
0.5
1.4
0.7
1.3
0.5
0.8
Undisclosed

Japan Real Estate Institute

1,870

100.0

26.6

2,723

4,821.25

1
24 [222]

65
37
114
58
109
38
63
Undisclosed

2,990

2,674

2.1

2,217

3,339.32

43,292

15.5
19.4
13.8
3.6
3.3
0.4
2.6
0.5
1.1
1.4

99.8

4,792

3,490

1,273
1,598
1,138
292
269
32
212
41
88
111

94.2
100.0
96.3
99.3
97.0
98.0
100.0

(Note 3)

6,520

54,250

100.0
99.4
99.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0

1 [63]
1 [42]
1 [124]
1 [104]
1 [132]
1 [97]
1

13,614.59

5,252.41

1 [48]
1 [49]
1 [104]
1
12
2
1
2
1
1

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

Tanizawa Sogo Appraisal
Co., Ltd.

86,113.66(March 1, 2016 to August 31, 2016)

LOGICITY Minato Kashii

2(Note 3)(Note 3)

99.8

5,240

63.6

100.0
99.5
100.0
99.2
100.0
100.0
100.0

628
533
197
297
327
86
136

7.6
6.5
2.4
3.6
4.0
1.1
1.7

99.7

2,207

26.8

1 [63]
1 [39]
1 [124]
1 [99]
1 [131]
1 [96]
1

92.8
91.7
95.7
93.6
96.0
97.0
100.0

1

100.0

67
36
118
57
114
39
63
Undisclosed

0.8
0.4
1.4
0.7
1.4
0.5
0.8
Undisclosed(Note 6)(Note 6)2

100.0

Undisclosed

Undisclosed(Note 6)(Note 6)

98.1

786

9.6

99.5

8,234

100.0

(Note 3)(Note 3)(Note 3)(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 13 for the office building and 57 for the residence in the 24th fiscal period (13 for the office building and 56 for the residence in the 23rd fiscal period).
(Note 2) As the property suspended operations due to the Kumamoto Earthquake, FRC reduced rents for the suspension period based on the lease contracts with the tenants.
(Note 3) 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 4) “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 5) “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 6) The figures are not disclosed as no consent to disclosure has been obtained from the tenants.

4. Details of renewable energy generation facilities in the portfolio
No relevant items.

Japan Real Estate Institute(Note 1) "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. For AEON Hara Shopping Center and Aqualia Kego, the transfer prices stated in the sales agreements dated August 31, 2016 are indicated.
(Note 2) The book value at end of period of AEON Hara Shopping Center indicates the amount after declaring impairment.
FUKUOKA REIT CORPORATION 15

5. Details of the rights to operate public facilities, etc. in the portfolio
No relevant items.

6. Securities incorporated in the portfolio
No relevant items.
FUKUOKA REIT CORPORATION

16

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

2. Capital expenditures during the 24th fiscal period

The following table provides the contract amount of FRC’s specific transactions and the status of its fair value as of August 31,
2016.
Contract amount, etc. (mm of yen)
Of which, exceeding 1 year

CategoryType

Off-market transaction

Interest rate swap transaction(Payable fixed; Receivable
floating)

Fair value(mm of yen) (Note 2)(Note 1)Total

II. Semiannual Report

The following table provides the overview of major construction work that was completed in the 24th fiscal period out of thecapital expenditures totaling 665 million yen. Furthermore, FRC incurred construction costs of 920 million yen in total in the
24th fiscal period, including 148 million yen in repair and maintenance expenses classified as expenses on the statement ofincome and 15 million yen and 90 million yen in expenses for restoration to former state and loss on disaster, respectively.
Real estate property name24,50018,500(292)

24,50018,500(292)(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.

Canal City Hakata

Location

PurposeHakata Ward, Fukuoka City

Canal City Hakata·B

Hakata Ward, Fukuoka City

Construction cost

Period(mm of yen)

Renewal of signboards

From May 2016
To August 2016

39

Renewal of signboards

From May 2016
To August 201678
26

Park Place Oita

Oita City, Oita

Renovation of exteriors

From March 2016
To April 2016

8. Status of other assets

Park Place Oita

Oita City, Oita

Renovation of toilets

From May 2016
To June 201635

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 24th fiscal period.

Amex Akasakamon Tower

Chuo Ward, Fukuoka City

Renovation of multilevel mechanical parking
equipment repair

August 2016

26

3. Reserves for long-term repair and maintenance plans

9. Status of owned assets by country and region
As of the end of the 24th fiscal period, no overseas real estate properties in countries or regions other than Japan areincorporated into FRC’s portfolio.

FRC has deposited the following amounts from the cash flows generated during the 24th 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.
(millions of yen)

Capital Expenditures for Owned Real Estate

Fiscal period

20th fiscal period(March 1, 2014 toAugust 31, 2014)

21st fiscal period(September 1, 2014 to
February 28, 2015)

22nd fiscal period(March 1, 2015 toAugust 31, 2015)

23rd fiscal period(September 1, 2015 toFebruary 29, 2016)

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

Balance of deposits at beginning of period

700

800

800

800

800

1. Planned capital expenditures

Deposits during the period

100

–

–

–

–

Amounts used from deposits during the period

–

–

–

–

–

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.

Deposits carried forward to the next period

800

800

800

800

800

Planned construction cost
(mm of yen)

Real estate property
nameLocation

PurposeSchedule
Total

Conduction
cost

Amountalready paid

Canal City Hakata

Hakata Ward,
Fukuoka City

Introduction of attraction devices for new
customers

From May 2016
To November 2016

424

57

62

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Introduction of attraction devices for new
customers

From May 2016
To November 2016

842

114

124

Canal City Hakata·B

Hakata Ward,
Fukuoka City

Renovation of external walls

From February 2016
To May 2017

242

–

–

Park Place Oita

Oita City, Oita

Improvement of food terrace environment

From February 2017
To March 2017

75

–

–

Canal City BusinessCenter Building

Hakata Ward,
Fukuoka City

Introduction of attraction devices for new
customers

From May 2016
To November 2016

107

14

15

Renovation of external walls

From May 2016
To November 2016

137

–

–

Gofukumachi Business Hakata Ward,
CenterFukuoka CityFUKUOKA REIT CORPORATION17FUKUOKA REIT CORPORATION

18

II. Semiannual Report

Expenses and Liabilities

II. Semiannual Report

Expenses and Liabilities
Category

1. Details of expenses related to asset management

Lender(thousands of yen)
23rd fiscal period

Item(a) Asset management fees(b) Asset custody fees(c) Administrative service fees(d) Directors’ compensations(e) Other operating expenses
Total(March 1, 2016 toAugust 31, 2016)

493,021
6,772
52,472
9,600
62,612
624,478

492,164
6,841
54,5379,600
61,153624,297

Category
LenderShort-term
debt

The Bank of Fukuoka (Note 2)
Resona Bank (Note 2)
The Nishi-Nippon City Bank
(Note 2)
Resona Bank (Note 2)
The Bank of Nagasaki (Note 2)
The Oita Bank (Note 2)
The Bank of Saga (Note 2)
Subtotal
Development Bank of Japan
Shinsei Bank

Averageinterest
rate (%)

Balance asof March 1,
2016

Balance as ofAugust 31,
2016

–
–

1,500
300

–

1,571

–
–
–
–
–

220
157
157
94
4,000

August 31, 2009

4,000

–

2.170

Drawdown
date(mm of yen)August 31, 2016

August 31, 2016

(mm of yen)

Repayment
date

Repayment
methodSeptember 30, 2016

Lump-sum uponmaturity

0.382

0.382

September 30, 2016

August 31, 2016

July 29, 2011

1,000

–

1.208

July 29, 2016

December 30, 2010

1,500

1,500

0.548

December 30, 2016

The Hiroshima Bank

December 30, 2011

500

500

1.182

December 30, 2016The Oita Bank

December 30, 2011

500

500

1.182

December 30, 2016

The Eighteenth Bank

December 30, 2011

500

500

1.182

December 30, 2016

The Shinwa Bank

December 30, 2011

500

500

1.182

December 30, 2016

The Kitakyushu Bank

December 30, 2011

500

500

1.182

December 30, 2016

The Kagoshima Bank

January 31, 2012

100

100

1.168

January 31, 2017

Resona Bank

January 31, 2012

400

400

1.218

January 31, 2017

Sumitomo Mitsui Trust Bank

September 28, 2012

600

600

0.498

September 30, 2016

June 30, 2009

–

1,950

2.200

June 30, 2017

Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation

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
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity
Lump-sum uponmaturity(Note 3)

Refinance fund

Refinance fundAcquisition fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund

July 29, 2011

–

2,000

1.305

July 31, 2017

July 29, 2011

–

2,000

1.305

July 31, 2017

March 1, 2012

–

2,000

1.170

March 31, 2017

Lump-sum uponmaturity

March 31, 2017

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

Refinance fundLump-sum uponmaturity

Refinance fundMarch 30, 2012
March 30, 2012

The Higo Bank

March 30, 2012

June 29, 2012

–
–

500

1.203

600

1.253

March 31, 2017

1.203

March 31, 2017

0.858

June 30, 2017

–

300

–

1,000

–

1,000

–

700

–

700

–

600

–

500

–

500

–

500

–

500

10,10020,450FUKUOKA REIT CORPORATION

19

Refinance fund

Refinance fundNo collateral/
No guarantee
No collateral/
No guarantee

Long-term
debt

Repayment
date

2,025

–

2.200

(mm of yen)

(mm of yen)

Repayment
methodUse offunds

June 30, 2017

(Note 3)

Refinance fund
Refinance fundDescription(Note 1)

July 29, 2011

2,000

–

1.305

July 31, 2017

The Nishi-Nippon City Bank

July 29, 2011

2,000

–

1.305

July 31, 2017

The Dai-Ichi Life Insurance
Company

July 29, 2011

1,000

1,000

1.800

July 31, 2018

Lump-sum uponmaturity

Refinance fundDecember 30, 2011

1,500

1,500

0.698

December 30, 2017

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Refinance fundNo collateral/
No guarantee

June 30, 2009

Refinance fundJanuary 31, 2012

500

500

1.338

January 31, 2019

Lump-sum uponmaturity

March 1, 2012

2,000

–

1.170

March 31, 2017

Lump-sum uponmaturity

Acquisition fundNo collateral/
No guarantee

March 31, 2017

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

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

Refinance fundNo collateral/
No guarantee

March 30, 2012

Resona Bank

March 30, 2012

The Higo Bank

March 30, 2012

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

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

Refinance fundLump-sum uponmaturity
Lump-sum uponmaturity

Resona Bank

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

Description(Note 1)The Bank of Fukuoka

Development Bank of Japan
Current
maturities
of long-term The Bank of Fukuoka
debt
The Nishi-Nippon City Bank

Use offunds

Averageinterest
rate (%)

The Bank of Fukuoka

Sumitomo Mitsui Banking
Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Sumitomo Mitsui Banking
Corporation

As of the end of the 24th fiscal period (August 31, 2016), FRC has the following debt from respective financial institutions.

Balance as ofAugust 31,
2016

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

The Bank of Fukuoka

2. Status of debt

Balance asof March 1,
2016

Lump-sum uponmaturity
Lump-sum uponmaturity

Development Bank of Japan

24th fiscal period(September 1, 2015 toFebruary 29, 2016)

Drawdown
dateJune 29, 2012

500

–

1.203

–

1.253

March 31, 2017

300

–

1.203

March 31, 2017

Lump-sum uponmaturity
Lump-sum uponmaturity

1,000

–

0.858

June 30, 2017

Lump-sum uponmaturity

600

1,000

–

700

–

700

–

600

–

500

–

500

–

500

–

500

–
Lump-sum uponmaturity
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
No collateral/
No guarantee

Resona Bank

September 28, 2012

2,000

2,000

1.033

September 29, 2017

The Nishi-Nippon City Bank

February 1, 2013

2,500

2,500

0.775

February 29, 2020

The Nishi-Nippon City Bank

February 28, 2013

1,900

1,900

0.581

February 28, 2018

Mizuho Bank

February 28, 2013

1,700

1,700

0.581

February 29, 2020

Sumitomo Mitsui Trust Bank

February 28, 2013

1,100

1,100

0.631

February 28, 2018

Mitsubishi UFJ Trust and Banking
February 28, 2013
Corporation

1,500

1,500

0.431

February 28, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

February 28, 2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

March 30,2018

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

0.498

June 30,2020

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

0.538

July 31, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

0.835

July 30, 2021

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Aozora Bank
Mitsubishi UFJ Trust and Banking
Corporation
Aozora Bank

February 28, 2013
March 29, 2013
June 28, 2013

Mizuho Bank
The Norinchukin Bank

July 31, 2014

The Bank of Saga

600
600

600
600

1,000

1,000

200

200

3,000

3,000

500

500

2,300

2,300

1,000

1,000

1,400

1,400

800

800

500

500

0.431
0.448

Refinance fundAcquisition fund
Refinance fund
Refinance fund
Refinance fundMizuho Bank
The Norinchukin Bank
The Hiroshima Bank
The Kitakyushu BankThe Iyo Bank
The Higo Bank

July 31, 2014

300

300

Development Bank of Japan

August 29, 2014

4,000

4,000

1.010

August 31, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

The Bank of Tokyo- Mitsubishi
UFJ

September 25, 2014

500

500

0.520

September 25, 2019

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

FUKUOKA REIT CORPORATION

20

II. Semiannual Report

Expenses and Liabilities
Balance as ofAugust 31,
2016

Averageinterest
rate (%)

Repayment
date

Repayment
methodUse offunds

Description

June 30, 2015

1,600

1,600

0.790

June 30, 2022

Lump-sum uponmaturity

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Trust Bank

July 31, 2015

1,500

1,500

0.586

July 31, 2023

August 31, 2015

4,000

4,000

0.880

August 31, 2023

The Bank of Fukuoka

August 31, 2015

400

400

0.431

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

0.431

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

Mizuho Bank

February 29, 2016

500

500

0.440

February 29, 2024

0.400

July 31, 2024

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

Refinance fundDevelopment Bank of Japan

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

Drawdown
dateLender(mm of yen)

Sumitomo Mitsui Banking
Corporation

Long-term
debt

Acquisitions and Sales during the 24th Fiscal Period

Balance as ofMarch 1,
2016

Category

Shinsei Bank

July 29, 2016

Subtotal
Total(mm of yen)–

700

60,22545,50070,32569,950(Note 1)

Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund
Refinance fund

As of August 31, 2016, FRC has the following investment corporation bonds outstanding.
Balance as of Decrease during Balance as ofMarch 1,the fiscal period August 31,
2016
2016
(mm of yen)
(mm of yen)First Series ofUnsecured Bonds

December 30, 2013

2,000

2. Acquisition and sale of other assets
No relevant items.

3. Survey on prices of specified assets, etc.
(1) Real estate, etc.
No relevant items.

(2) Other
FRC carried out no transaction that was required to have the value, etc. reviewed pursuant to the provisions of Article 201 of
the Investment Trusts Act.

4. Transactions with interested parties, etc.
(1) Transaction status
No relevant items.

3. Investment corporation bonds
Issue date

1. Acquisition and sale of real estate, asset-backed securities,
infrastructure assets, etc. and infrastructure-related assets, etc.
No relevant items.

(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) The debts were made based on the commitment line agreements between FRC and respective banks.
(Note 3) The debt is subject to repayment of 75 million yen on the final day of every 6 months following the final day of December 2009 as the initial repayment date, with 1,875 million yen to be repaid on the
final repayment date.

Issue

II. Semiannual Report(2) Amount of fees paid, etc.

Maturitydate

Maturity
methodUse

Description

December 29, 2023

Lump-sumupon maturity(Note 1)

Repayment of debt

No collateral/
No guarantee(Note 2)

Coupon(%)

FRC paid the following fees to the interested parties, etc. during the 24th fiscal period.

(mm of yen)

–

2,000

1.32

(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.

Category(thousands of yen)

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

4. Short-term investment corporation bonds
No relevant items.

Outsourcing fees (Note 2) (Note 6)

5. Subscription rights to shares
Other operating expenses (Note 2)

No relevant items.

Total paid fees(A)

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

Fukuoka Jisho Co., Ltd.
Park Place Oita Co., Ltd.
Fukuoka Jisho Co., Ltd.
287,702
Park Place Oita Co., Ltd.
Fukuoka Jisho Co., Ltd.
1,313,484 Park Place Oita Co., Ltd.
Sunlife Co., Ltd.
Fukuoka Jisho Co., Ltd.
1,251,773 Park Place Oita Co., Ltd.
Sunlife Co., Ltd.

15,568488
178,298
96,954
948,356
202,751
62,162
243,116
196,293250

26,520

58.7
1.8
62.0
33.7
72.2
15.4
4.7
19.4
15.7
0.0

(Note 1) Interested parties, etc. refer to the interested parties, etc. of the asset management company who has concluded an asset management agreement with FRC, as 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 paid parties to which FRC paid fees during the 24th
fiscal period.
(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 are includedin the acquisition cost of the relevant real estate.
Fukuoka Jisho Co., Ltd.
11,517 thousand yen
Park Place Oita Co., Ltd.
4,416 thousand yen(Note 4) Aside from the paid fees shown above, FRC paid the following amounts for repairs, etc. that were ordered to interested parties, etc. during the 24th fiscal period. The amounts include construction
work fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
610,835 thousand yen
Park Place Oita Co., Ltd.
103,250 thousand yen
Sunlife Co., Ltd.
77,524 thousand yen(Note 5) Aside from the paid fees shown above, FRC paid the following amounts for disaster repairs, etc. that were ordered to interested parties, etc. during the 24th fiscal period. The amounts include
construction work fees paid to third parties through interested parties, etc.
Fukuoka Jisho Co., Ltd.
90,561 thousand yen(Note 6) 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.

FUKUOKA REIT CORPORATION21FUKUOKA REIT CORPORATION

22

II. Semiannual Report

Acquisitions and Sales during the 24th Fiscal Period

III. Independent Auditor's Report

5. Transactions with the asset management company regarding
concurrent work conducted by the asset management company
The asset management company (Fukuoka Realty Co., Ltd.) concurrently conducts land and building transaction business but
there was no relevant transaction conducted in the 24th fiscal period. Moreover, the asset management company does notconcurrently conduct any class 1 financial instruments transaction business, class 2 financial instruments transaction businessor real estate syndication business, and has no such transactions with FRC.

Overview of Accounting
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. 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

IV. Balance Sheet

IV. Balance Sheet(thousands of yen)
23rd fiscal period(as of February 29, 2016)

Account(thousands of yen)

24th fiscal period(as of August 31, 2016)

Account

Assets23rd fiscal period(as of February 29, 2016)

24th fiscal period(as of August 31, 2016)

Liabilities

Current assets

Current liabilities

Cash and deposits

3,513,400

4,165,198

Operating accounts payable

Cash and deposits in trust

4,905,852

4,775,377

Short-term debt

Operating accounts receivable

372,912491,196

Current maturities of long-term debt

Prepaid expenses

284,075

262,218

Accounts payable - other

23,963

12,451

Deferred tax assets

826

Accrued expenses

353,001

348,865

6,442

7,859

Income taxes payable

9,082,690

9,701,876

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

84,421,663(20,966,851)

Structures in trust

1,477,663

Accumulated depreciation(559,477)

Machinery and equipment in trust

638,321

Accumulated depreciation(284,920)

Vehicles and transport equipment in trust

747

Accumulated depreciation(246)

Tools and fixtures in trust

1,274,834

Accumulated depreciation(973,210)

Lands in trust*1

63,454,811(22,332,561)

62,483,734

918,185(597,379)

353,400(308,433)

500

(294)

889,187

674,893

301,623(1,014,927)

298,456*1

103,095,432
206,478

169,804,490

167,340,202

Intangible assets
Leasehold right in trust
Total intangible assets

20,450,000

736

1,242
107,177

Advances received

1,004,199

1,070,989

Deposits received

777,866

1,202,954

13,398,803

27,833,167

Non-current liabilities
Investment corporation bonds

2,000,000

2,000,000

Long-term debt

60,075,000

45,500,000

Tenant leasehold and security deposits received in trust

331,243*1

Total liabilities

11,828,272

1,765,318

1,765,318

5,633

3,610

1,770,951

1,768,928

Lease and guarantee deposits

10,00010,000

Lease and guarantee deposits in trust

110,000

110,000

Long-term prepaid expenses

628,962

549,999

Total investment and other assets

748,962

669,999

172,324,405

169,779,131

59,598,846

87,633,318

87,432,014

91,142,766

91,142,766

Unitholders’ equity
Unitholders’ capital
Surplus
Unappropriated surplus

2,669,786

938,409

Total surplus

2,669,786

938,409

Total unitholders’ equity
Total net assets

93,812,553*3

Total liabilities and net assets

93,812,553
181,445,872

Investment corporation bond issuance expenses

15,392

14,410Investment unit issuance expenses

23,383

17,771

Total deferred assets

38,77632,181

181,445,872

179,513,189

Deferred assets

Total assets

FUKUOKA REIT CORPORATION

25

11,727,080

74,234,515

Investment and other assets

Total non-current assets

371,765*1

Net assets

19,571Other intangible assets in trust

10,250,000

321,550

Total non-current liabilities452

1,313,384
104,756,397

4,000,000

Tenant leasehold and security deposits
366,459747*1

639,486–

Accrued consumption taxes

Total current liabilities

1,486,567

Construction in progress in trust
Total property, plant and equipment

84,816,296

667,486

FUKUOKA REIT CORPORATION

26

92,081,175*3

92,081,175
179,513,189

V. Statement of Income

VI. Statement of Changes in Net Assets(thousands of yen)

23rd fiscal period(September 1, 2015 toFebruary 29, 2016)

Account

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

23rd fiscal period (September 1, 2015 to February 29, 2016)

Item

Operating revenues
Leasing revenues - real estate*1

7,864,570

Other leasing revenues - real estate*1478,927*1, *2

4,577,406

8,343,498*1

7,701,123*1

533,1078,234,231

Operating expenses
Expenses related to leasing business
Asset management fees

*1, *2493,021

4,540,803
492,164

Asset custody fees

6,772

6,841

Administrative service fees

52,47254,537

Director’s compensations

9,600

9,600

Other operating expenses

62,612

Operating income

5,201,885

61,153

3,141,613

5,165,100
3,069,130

Others

780

114

2,566

3,346

893

1,007

Non-operating expenses
Interest expenses

345,071

333,165Interest expenses on investment corporation bonds

13,20013,200

Amortization of investment corporation bond issuance
expenses982

982

Amortization of investment unit issuance expenses

11,154

5,612

Financing related expenses

104,000

Others

91,142,766

93,804,487

93,804,487–
91,142,766(2,661,561)
2,669,627
8,066
2,669,786(2,661,561)
2,669,627
8,066
93,812,553(2,661,561)
2,669,627
8,066
93,812,553

Item
Balance as of March 1, 2016
Changes in the current fiscal period
Dividend of surplus
ProfitTotal of changes in the current fiscal period
Balance as of August 31, 2016

474,42315

2,670,536(thousands of yen)
Total unitholders’ equity

91,142,766

93,812,553

93,812,553–
91,142,766(2,669,778)
938,400(1,731,377)
938,409(2,669,778)
938,400(1,731,377)
92,081,175(2,669,778)
938,400(1,731,377)
92,081,175

Unitholders’ capital

453,938
2,616,200

Extraordinary income
Insurance income

–

–

*3

75,052*4

1,660,964

75,052Extraordinary losses
Impairment loss–

Loss on disaster–

Net income before income taxes–*2, *590,6462,670,536

Income taxes-current

855

Income taxes-deferred

53

Profit

1,751,611
939,641

1,259
908
2,669,627

(18)

1,241
938,400

Surplus brought forward

159

8

Unappropriated surplus

2,669,786

938,409

FUKUOKA REIT CORPORATION

27

Total net assets

Unitholders’ Equity
Surplus
Unappropriated surplus
2,669,786

100,963

15

Ordinary income

Total unitholders’ equity

Unitholders’ capital

24th fiscal period (March 1, 2016 to August 31, 2016)

Non-operating revenues
Interest received

Balance as of September 1, 2015
Changes in the current fiscal period
Dividend of surplus
ProfitTotal of changes in the current fiscal period
Balance as of February 29, 2016

(thousands of yen)
Unitholders’ Equity
Surplus
Unappropriated surplus
2,661,720

FUKUOKA REIT CORPORATION

28

Total net assets

VII. Cash Flow Statement

VIII. Notes to Financial Statements(thousands of yen)
23rd fiscal period

Account

24th fiscal period(September 1, 2015 toFebruary 29, 2016)(March 1, 2016 toAugust 31, 2016)(Significant accounting policies)
1. Depreciation method for non-current assets(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:
10 – 50 years
Structures in trust:
15 – 50 years
Machinery and equipment in trust:
15 – 17 years
Vehicles and transport equipment in trust:
7 years
Tools and fixtures in trust:5 – 15 years(2) 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.

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
the financial 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.

Net cash provided by (used in) operating activities
Net income before income taxes

2,670,536

939,641

Depreciation and amortization expenses

1,471,072

1,470,912

Amortization of investment corporation bond issuance expenses

982

982

11,154

5,612

Impairment loss–

1,660,964

Interest received

(780)

(114)

Interest expenses

358,271346,365

Insurance income–(75,052)

Loss on disaster–

90,646

Decrease (increase) in operating accounts receivable

61,654(43,230)

Decrease (increase) in consumption taxes receivable

246,657–

Increase (decrease) in accrued consumption taxes

321,550(214,372)

Increase (decrease) in operating accounts payable(145,288)(76,677)

9,219(11,623)

Amortization of investment unit issuance expenses

Increase (decrease) in accounts payable-other
Increase (decrease) in accrued expenses

1,824(3,346)

Increase (decrease) in advances received(10,644)

66,789

Increase (decrease) in deposits expenses(271,423)

425,087

Decrease (increase) in prepaid expenses(16,137)

22,919Decrease (increase) in long-term prepaid expenses(172,080)

83,034

Others, net
SubtotalInterest income received
Interest expenses paid
Payments for loss on disaster
Income taxes paid
Net cash provided by (used in) operating activities(2,806)(2,310)4,533,761

4,686,229

780

114

(358,527)(347,154)–(1,857)(1,863)(753)

4,174,151

4,336,578(549,764)(710,811)

Net cash provided by (used in) investment activities
Purchase of property, plant and equipment in trust
Proceeds from tenant leasehold and security deposits

30

87,129

Repayments of tenant leasehold and security deposits(30)(46,606)

Proceeds from tenant leasehold and security deposits in trust

74,447124,063

Repayments of tenant leasehold and security deposits in trust(131,849)(225,255)

Proceeds from restricted trust deposits

5,507

5,569

Payments for restricted trust deposits(5,065)(6,972)(606,723)(772,883)

Proceeds from short-term debt payable–

4,000,000

Proceeds from long-term debt payable

6,500,000

700,000

Repayments of long-term debt payable(6,575,000)(5,075,000)(11,411)–

Dividends paid

(2,661,169)(2,668,773)

Net cash provided by (used in) financial activities(2,747,581)(3,043,773)

Net increase (decrease) in cash and cash equivalents

819,846

519,920

7,533,380

8,353,226

Net cash provided by (used in) investment activities[Additional Information]

Net cash provided by (used in) financial activities

Payment of investment unit issuance expenses

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

8,353,226*1

FUKUOKA REIT CORPORATION

29*1(Notes to provision and reversal of reserve for temporary difference adjustments)
FRC incurred reserve for temporary difference adjustments (1,660,581 thousand yen) in accordance with the recording of impairment loss for land in trust of AEON Hara Shopping Center.
For the reserve for temporary difference adjustments, FRC plans to reverse the due amount upon the transfer of the said property as of September 30, 2016.

8,873,147

FUKUOKA REIT CORPORATION

30

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Notes to statement of income)*1. Breakdown of revenues and expenses related to real estate leasing business.
(thousands of yen)
23rd fiscal period(Notes to balance sheet)(September 1, 2015 toFebruary 29, 2016)*1. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:(thousands of yen)
23rd fiscal period

24th fiscal period

as of February 29, 2016

Buildings in trust
Lands in trust

as of August 31, 2016

6,579,940
16,101,020
22,680,961

Total

6,459,725
16,101,020
22,560,746

Secured liabilities are as follows:(thousands of yen)
23rd fiscal period

24th fiscal period

as of February 29, 2016

Tenant leasehold and security deposits
received in trust

as of August 31, 2016

1,949,584

1,803,529

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.

442,763
36,1646,000,000
1,800,000

6,000,000

4,200,000

Expenses related to real estate leasing business
Loss on disaster*3. Insurance Income*4. Impairment loss

[Committed line of credit agreement 2](thousands of yen)
23rd fiscal period

24th fiscal period

as of February 29, 2016

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
periodas of August 31, 2016

7,000,000–

7,000,000
2,200,000

7,000,000

4,800,000

481,292
51,814478,927
8,343,498

1,568,436
298,942596,494
57,757423,772
1,471,072
160,931

1,601,187
148,457
650,839
58,054
437,664
1,470,912
173,687

4,577,406
4,577,406
3,766,091

FRC recorded the insurance claim settled for the damage caused by the Kumamoto Earthquake as insurance income.

Use
RetailLocation
Sawara Ward, Fukuoka City

(thousands of yen)
Type
Land in trust

Impairment loss
1,660,964

In calculating impairment loss, each property is classified as a single asset group. For the single asset group that FRC plans to dispose, RRC reduced the book value to a recoverable amount and recorded
an impairment loss on the land in trust under extraordinary losses. The recoverable amount was estimated based on the net sale price, which is calculated by deducting the estimated disposal expenses
from the actual sale price.

*5. Loss on disaster FRC recorded the costs for restoration work for the assets damaged by the Kumamoto Earthquake as loss on disaster.

Total number of authorized investment units and total number of investment units issued.
24th fiscal period

23rd fiscal period(March 1, 2016 toAugust 31, 2016)(September 1, 2015 toFebruary 29, 2016)as of August 31, 2016

Total number of authorized investment units
Total number of investment units issued

10,000,000 units
747,000 units

10,000,000 units
747,000 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)
23rd fiscal period

24th fiscal period(September 1, 2015 toFebruary 29, 2016)

Cash and deposits
Cash and deposits in trust
Restricted trust deposits (Note)
Cash and cash equivalents(March 1, 2016 toAugust 31, 2016)

3,513,400
4,905,852(66,025)
8,353,226

4,165,198
4,775,377(67,428)
8,873,147(Note) Restricted trust deposits are trust deposits reserved for refunding tenant leasehold and security deposits deposited by tenants and for other purposes.

FUKUOKA REIT CORPORATION

31

4,540,803
4,540,803
3,693,427

1,470,349
90,561

Real estate property name: AEON Hara Shopping Center

24th fiscal period
50,000533,1078,234,231(March 1, 2016 toAugust 31, 2016)

1,528,328–(Notes to statement of changes in net assets)*3. Minimum net assets designated in Article 67- 4 in the Act on Investment Trusts and Investment Corporations.
(thousands of yen)

7,701,123

24th fiscal period(September 1, 2015 toFebruary 29, 2016)as of August 31, 2016

6,000,000–

6,197,134
1,072,028
431,9617,864,570

23rd fiscal period

24th fiscal period

as of February 29, 2016

Credit limit
Outstanding debt at end of period
Unused committed line of credit at end of
period50,0006,381,060
1,065,731
417,778(March 1, 2016 toAugust 31, 2016)(thousands of yen)(thousands of yen)
23rd fiscal period

23rd fiscal period

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)
*2. Transactions with affiliated companies.

[Committed line of credit agreement 1]

as of February 29, 2016

24th fiscal period

FUKUOKA REIT CORPORATION

32

VIII. Notes to Financial Statements(Notes to leases)

VIII. Notes to Financial Statements

2. Matters concerning fair value of financial instruments

The future lease revenues under the non-cancellable operating leases are as follows:(thousands of yen)

23rd fiscal period

24th fiscal period

as of February 29, 2016

Due within 1 year
Due after 1 year

as of August 31, 2016

5,817,702
26,099,897
31,917,600

Total

5,614,647
26,684,202
32,298,850(Notes to financial instruments)
1. Matters concerning status of financial instruments(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.
FUKUOKA REIT CORPORATION

33

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 29, 2016. 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
3,513,400
4,905,852
8,419,252–
10,250,000
2,000,000
60,075,000
1,199,566
73,524,566––

Fair value(Note 1)

Difference

3,513,400
4,905,852
8,419,252–
10,352,631
2,120,088
60,712,714
1,197,970
74,383,404
–
–

–
–
–
–
102,631
120,088637,714(1,596)
858,838––

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, 2016. 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
4,165,198
4,775,377
8,940,576
4,000,000
20,450,000
2,000,000
45,500,000
1,045,178
72,995,178––

Fair value(Note 1)

4,165,198
4,775,377
8,940,576
4,000,000
20,576,623
2,115,549
45,927,020
1,043,654
73,662,847––

Difference––––
126,623
115,549
427,020(1,523)
667,670––(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)

FUKUOKA REIT CORPORATION

34

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Note 2) Financial instruments for which determination of fair value is considered extremely difficult.

24th fiscal period

as of February 29, 2016

Tenant leasehold and security deposits
received in trust(Notes to derivative transactions)(thousands of yen)

23rd fiscal period

1. Derivatives to which hedge accounting is not applied

as of August 31, 2016

10,628,705

23rd fiscal period (as of February 29, 2016)

10,681,902

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 thefair 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 the possibility ofcancellation, renewal and re-execution of lease contracts by lessees even if the contract terms are fixed, and because the past rate of tenants moving out of theproperties owned by FRC may not be indicative of future move out rates as they are too specific to individual circumstances.
(Note 3) Amount of redemption of monetary claims scheduled to be due after closing of accounts (February 29, 2016).
(thousands of yen)

24th fiscal period (as of August 31, 2016)
Not applicable.

2. Derivatives to which hedge accounting is applied
23rd fiscal period (as of February 29, 2016)

Due in 1 year or less
3,513,400
4,905,852
8,419,252

Cash and deposits
Cash and deposits in trust
Total

Not applicable.

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.


Amount of redemption of monetary claims scheduled to be due after closing of accounts (August 31, 2016)(thousands of yen)

Method of hedge accounting

Due in 1 year or less
4,165,198
4,775,377
8,940,576

Cash and deposits
Cash and deposits in trust
Total(thousands of yen)

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
Payable fixed; Receivable floating

Long-term debt

24,500,000

24,500,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt payable for accounting purposes. Accordingly, their fair value is included in the fair value of therelevant long-term debt payable (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

24th fiscal period (as of August 31, 2016)(Note 4) Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of February 29, 2016).
(thousands of yen)
Long-term debt
Investment
corporation bonds

Due in 1 year or less
10,250,000–

1 to 2 years
23,875,000–

2 to 3 years
2,100,000

3 to 4 years
8,400,000––

4 to 5 years
1,000,000–

Due after 5 years
24,700,000
2,000,000

Amount of repayment of long-term debt and investment corporation bonds scheduled to be due after closing of accounts (as of August 31, 2016)(thousands of yen)
Long-term debt
Investment
corporation bonds

Due in 1 year or less
20,450,000–

1 to 2 years
10,200,000–

2 to 3 years
4,200,000

3 to 4 years
5,700,000––

4 to 5 years
6,300,000–

Due after 5 years
19,100,000
2,000,000

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.

(thousands of yen)

Method of hedge accounting
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
Payable fixed; Receivable floating

Long-term debt

24,500,000

18,500,000(*)–(*) Transactions for which special accounting for interest rate swaps is applied are combined with long-term debt payable for accounting purposes. Accordingly, their fair value is included in the fair value of therelevant long-term debt payable (refer to Notes to financial instruments, 2. Matters concerning fair value of financial instruments, (Note 1) (6)).

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

23rd fiscal period

24th fiscal period

as of February 29, 2016

Deferred tax assets
Amount of accrued business taxes not deductible from taxable income
Impairment loss
Subtotal deferred tax assets
Valuation reserve
Total deferred tax assets
Deferred tax assets, net

as of August 31, 2016

8–

26
520,7478–8
8

520,774(520,747)26
26

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.
(%)
23rd fiscal period

24th fiscal period

as of February 29, 2016

Effective statutory income tax rate
Deductible dividend amount
Increase (decrease) in valuation reserve
Other
Effective income tax rate after application of tax effect accounting

FUKUOKA REIT CORPORATION35FUKUOKA REIT CORPORATION

as of August 31, 2016

32.11
(32.10)
–
0.02
0.03

36

32.11
(88.79)
56.75
0.07
0.13

VIII. Notes to Financial Statements

3. Adjustment to the Amounts of Deferred Tax Assets and Deferred Tax Liabilities due to Changes in Income Tax Rate.
With the Act Concerning Partial Amendment of the Income Tax Act, Etc. (Act No. 15 of 2016) and the Act Concerning Partial Amendment of the Local Tax Act, Etc. (ActNo. 13 of 2016) promulgated on March 31, 2016, the income tax rate will be lowered, effective for the fiscal period starting on or after April 1, 2016. In accordance with
this, the effective statutory tax rate used to calculate deferred tax assets and deferred tax liabilities concerning temporary differences that are expected to be reversed inand after the fiscal period starting September 1, 2016 will be changed from 32.11% to 31.35%. The tax rate change will have only a minor impact on FRC.

VIII. Notes to Financial Statements(3) Sister companies
23rd fiscal period (from September 1, 2015 to February 29, 2016)(thousands of yen)Classification

Name

Location

CapitalBusiness
description(Notes to transactions with related parties)
1. Transactions with related parties(1) Parent company and major corporate unitholders
23rd fiscal period (from September 1, 2015 to February 29, 2016)(thousands of yen)Classification

Name

Location

Capital

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

Generalreal estatebusiness

FRC’s share of
voting rights,
etc.
[or ownership ofsuch in FRC]

Ownership in
FRC
Direct[8.85%]

IndirectDescription ofrelationship

Description of Transaction
Categorytransaction
amountConsignment
Consignmentof real estateof real estate
management,
management, etc. etc. (Note 1)

1,528,328(Note 3)Operatingaccounts
payableBalanceat end ofperiod145,722

FRC’s share of
voting rights,
etc.
[or ownership ofsuch in FRC]

Description ofrelationship

Description of Transaction
Categorytransaction
amountSubsidiaries of Park Place Oita
Oita City, Oita
Co., Ltdother affiliates(Note 2)400,000

Real estatebusiness–

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

534,780

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

200,000

Asset
managementof FRCand otherbusinesses

–

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

493,021(Note 5)(Note 5)

Balanceat end ofperiodOperatingaccounts
payable103,766

Accruedexpenses

239,080(Note 5)(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 Park Place Oita Co., Ltd. for Park Place Oita. 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 the property covered by the said type of agreement, 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 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.

(Note 3)[1.00%](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 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.

(thousands of yen)Classification

Name

Location

Capital

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

Generalreal estatebusiness[or ownership ofsuch in FRC]

Ownership in
FRC
Direct[8.85%]

IndirectDescription ofrelationship(thousands of yen)Classification

24th fiscal period (from March 1, 2016 to August 31, 2016)
FRC’s share of
voting rights,
etc.

24th fiscal period (from March 1, 2016 to August 31, 2016)

Description of Transaction
Categorytransaction
amountConsignment
Consignmentof real estateof real estate
management,
management, etc. etc. (Note 1)

Operating
1,560,911 accounts(Note 3)
payableBalanceat end ofperiod197,206(Note 3)[1.00%](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 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.

Name

Location

CapitalBusiness
description

Subsidiaries of Park Place Oita
Oita City, Oita
Co., Ltdother affiliates(Note 2)400,000

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

Asset
management
200,000of FRCand otherbusinesses

Real estatebusiness

FRC’s share of
voting rights,
etc.
[or ownership ofsuch in FRC]

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

–

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

23rd fiscal period (September 1, 2015 to February 29, 2016)

23rd fiscal period (from September 1, 2015 to February 29, 2016)
Not applicable.

Not applicable.

24th fiscal period (from March 1, 2016 to August 31, 2016)

24th fiscal period (from March 1, 2016 to August 31, 2016)

Not applicable.

Not applicable.

FUKUOKA REIT CORPORATION

37

531,305(Note 5)492,164(Note 5)

Balanceat end ofperiodOperatingaccounts
payable109,567

Accruedexpenses

235,178(Note 5)(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 Park Place Oita Co., Ltd. for Park Place Oita. 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 the property covered by the said type of agreement, 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 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.

(4) Directors and major individual unitholders(2) Affiliated companies, etc.

Description of Transaction
Categorytransaction
amountFUKUOKA REIT CORPORATION

38

VIII. Notes to Financial Statements

2. Parent company and major affiliated companies

VIII. Notes to Financial Statements

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

23rd fiscal period (September 1, 2015 to February 29, 2016)
Not applicable.

Use

24th fiscal period (from March 1, 2016 to August 31, 2016)

RetailNot applicable.

(Notes to properties for lease)

Office buildings

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.
(thousands of yen)
23rd fiscal period

Use

Retail(September 1, 2015 toFebruary 29, 2016)

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

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

23rd fiscal period

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

Others24th fiscal period(March 1, 2016 toAugust 31, 2016)

106,792,608(337,924)
106,454,683
113,936,000

106,454,683(1,992,971)
104,461,711
114,038,000

43,983,967(345,509)
43,638,457
53,280,000

43,635,457(330,267)
43,308,190
54,250,000

21,639,782(157,481)
21,482,301
24,170,000

21,482,301(143,071)
21,339,229
25,190,000

172,416,358(840,915)
171,575,442
191,386,000

171,575,442(2,466,311)
169,109,131
193,478,000(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 23rd fiscal period, the amount of increase is primarily attributable to capital expenditures (630 million yen), and the amount of decrease is primarily attributable todepreciation and amortization expenses (1,471 million yen). Of the amount of change during the 24th fiscal period, the amount of increase is primarily attributable to capital expenditures (665 millionyen), and the amount of decrease is primarily attributable to depreciation, amortization expenses (1,470 million yen) and impairment loss (1,660 million yen).
(Note 3) The fair value at end of period is the appraisal value provided by outside real estate appraisers. The fair values of AEON Hara Shopping Center and Aqualia Kego for the 24th fiscal period are based on
the transfer prices stated in the sales agreements dated August 31, 2016.

Total(September 1, 2015 toFebruary 29, 2016)

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 business24th fiscal period(March 1, 2016 toAugust 31, 2016)

5,349,509
3,056,023
2,293,485

5,240,380
3,002,665
2,237,714

2,217,378
1,190,348
1,027,029

2,207,157
1,162,679
1,044,477

776,609
331,033
445,575

786,693375,458
411,235

8,343,498
4,577,406
3,766,091

8,234,231
4,540,803
3,693,427(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.

(Notes to segment information)[Segment information]
Descriptions omitted as FRC has a single business segment of real estate leasing business.

23rd fiscal period (from September 1, 2015 to February 29, 2016)(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
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.

24th fiscal period (from March 1, 2016 to August 31, 2016)(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.
FUKUOKA REIT CORPORATION39FUKUOKA REIT CORPORATION

40

VIII. Notes to Financial Statements(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)
23rd fiscal period(September 1, 2015 to February 29, 2016)

Net assets per unit (yen)Profit per unit (yen)(Schedule of securities)
No relevant items.

(Schedule of contract amount, etc. and fair value of derivative transactions
and forward exchange transactions)24th fiscal period(March 1, 2016 to August 31, 2016)

125,585
3,573

VIII. Notes to Financial Statements

123,267
1,256(thousands of yen)

(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:

23rd fiscal period(September 1, 2015 to February 29, 2016)

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)

24th fiscal period

938,400–
938,400
747,000(Notes to cash distributions)
Account(thousands of yen)
24th fiscal period

23rd fiscal period(September 1, 2015 to February 29, 2016)

I. Unappropriated surplus

Category

Type

Special accounting for interest rate swaps

Interest rate swap transaction
Payable fixed; Receivable floating(March 1, 2016 to August 31, 2016)

2,669,627–
2,669,627
747,000

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

Total

Balance as ofMarch 1,2016–

1,660,581

Buildings in trust

8,4421,663

394,632

III. Total dividend[Dividend per investment unit]
Of which, earnings dividend[Of which, earnings dividend per unit]
Of which, dividend in excess of earnings[Of which, dividend in excess of earnings perunit (using reserve for temporary difference
adjustments)]

2,669,778

2,598,813

Structures in trust

1,477,663

8,904[3,574 yen]

[3,479 yen]

Machinery andequipment in trust

638,32136,572

747

–

[–]

[2,223 yen]

IV. Surplus brought forward

Method for calculating dividends

8177

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 67-15
of the Act on Special Taxation Measures.
Following the above policy, FRC proposed to distribute
2,669,778 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 shall exceed 90%
of FRC’s distributable profits as stipulated in Article 6715-1 of the Special Taxation Measures Act. Following
the above policy, FRC proposed to distribute 938,232
thousand yen, which is almost the entire amount of
unappropriated surplus, as earnings dividends.
Moreover, FRC proposed to provide dividend in excessof earnings as stipulated in Article 38-2 of its Articles
of Incorporation, using reserve for temporary difference
adjustments totaling 1,660,581 thousand yen, whichis the maximum value arrived at when the total numberof investment units outstanding (747,000 units) is
multiplied by an integer, to the extent not surpassing theamount equivalent to the impairment loss recorded forthe fiscal period.

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

Type of asset

Vehicles andTotal property, transport
plant and equipment in trust
equipment Tools and fixturesin trust

Land in trust
Construction inprogress in trust
Subtotal

Total
intangible
assetsLeasehold right intrust
Other intangible
assets in trust
Subtotal
Total

Balance as ofAugust 31,
2016

Accumulated
depreciation–

84,816,296

22,332,561

1,365,709–

1,486,567

597,379

37,902

889,187–

674,893

308,433

23,512366,459

–

747

294

47

452

Decrease

Increase

1,660,581

1,660,581(292,908)(thousands of yen)––

18,500,000II. Addition of dividend in excess of earnings
Of which, reserve for temporary difference
adjustments

938,232

24,500,000(Schedule of property, plant and equipment, and intangible assets)

938,409[1,256 yen]

(292,908)(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.

2,669,786

2,669,778

18,500,000(Note 1) The contract amount, etc. of the interest rate swap transaction is based on the notional principal amount.

(March 1, 2016 to August 31, 2016)[3,574 yen]

24,500,000(Note 1)

(Note 2)

Depreciation for Net property andthe period
equipment

1,274,834

38,549–1,313,384

1,014,927

41,716

298,456

104,756,397–

1,660,964

103,095,432––

103,095,432

19,571

189,709

2,802

206,478––

206,478

192,589,198

668,368

1,663,767

191,593,799

24,253,597

1,468,889

167,340,202

1,765,318––

1,765,318––

1,765,318

33,426––33,42629,815

2,022

3,610

1,798,744––

1,798,744

29,815

2,022

1,768,928

194,387,942

668,368

1,663,767

193,392,544

24,283,412

1,470,912

169,109,131(Note 1) The main increase in the 24th fiscal period are due to construction work at properties.
(Note 2) The main decrease in the 24th fiscal period is due to impairment loss.

(Schedule of other specified assets)
No relevant items.

(Schedule of investment corporation bonds)(Notes to significant subsequent events)

Issue

No relevant items.

First Series ofUnsecured Bonds

Issue date

December 30,
2013

Balance as
Decrease
Balance as ofof March 1, during the fiscal August 31,
2016
period2016

Coupon(%)

Maturity date

Maturity
methodUse

Description(thousands of yen)(thousands of yen)(thousands of yen)

2,000,000–

2,000,000

1.32

December 29,
2023

Lump-sumupon maturity

Repayment ofdebt

No collateral/
No guarantee(Note 1)

(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

62,483,734

41

FUKUOKA REIT CORPORATION

42(Note 2)

VIII. Notes to Financial Statements

VIII. Notes to Financial Statements(Schedule of debt)
Category
LenderBalance as

Balance as of
Average
Increase
Decrease of August 31,
March 1, 2016 (thousands of yen) (thousands of yen)interest rate Repayment date2016

(thousands of yen)(thousands of yen)

The Bank of Fukuoka(Note 2)–1,500,000–

1,500,000

Resona Bank (Note 2)–

300,000–

300,000

The Nishi-Nippon City
Bank (Note 2)–

1,571,428–

1,571,428

Resona Bank (Note 2)

Short-term
The Bank of Nagasaki
debt–

220,000–

220,000(Note 2)–

157,142–

157,142The Oita Bank (Note 2)–

157,142–

157,142

The Bank of Saga
(Note 2)–

94,285–94,285

Subtotal–

4,000,000–

4,000,000

4,000,000–

4,000,000–

Development Bank ofJapan

Current
maturities
of longterm debt

Category
Use of funds

Description(%) (Note 1)

0.382

0.382

2.170

September 30, 2016

September 30, 2016

LenderRefinance fund

Refinance fundNo collateral/
No guarantee

No collateral/
No guarantee

Balance as of
Balance as
Average
March 1,
Increase
Decrease of August 31,
interest rate Repayment date(thousandsofyen)(thousands
of
yen)
2016
2016
(%) (Note 1)(thousands of yen)

Use of funds

Description(thousands of yen)

Development Bank of
Jap an2,025,000–

2,025,000

–

2.200

(Note 3)

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

2,000,000–

2,000,000

–

1.305

July 31, 2017

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
The Dai-Ichi Life
Insurance Company

2,000,000–

2,000,000

–

1.305

July 31, 2017

Refinance fundNo collateral/
No guarantee

1,000,000––

1,000,000

1.800

July 31, 2018

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

1,500,000––

1,500,000

0.698

December 30, 2017

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Banking
Corporation

500,000––

500,000

1.338

January 31, 2019

Refinance fundNo collateral/
No guarantee

2,000,000–

2,000,000

–

1.170

March 31, 2017

Acquisition fundNo collateral/
No guarantee

500,000–

500,000–

1.203

March 31, 2017

Refinance fundNo collateral/
No guarantee

600,000–

600,000–

1.253

March 31, 2017

Refinance fundNo collateral/
No guarantee

1.203

March 31, 2017

Refinance fundNo collateral/
No guarantee

0.858

June 30, 2017

Refinance fundNo collateral/
No guarantee

August 31, 2016

Refinance fundNo collateral/
No guarantee

Resona Bank

Shinsei Bank

1,000,000–

1,000,000

–

1.208

July 29, 2016

Refinance fundNo collateral/
No guarantee

The Higo Bank

300,000–

300,000–

The Bank of Fukuoka

1,500,000––

1,500,000

0.548

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka

1,000,000–

1,000,000–

The Hiroshima Bank

500,000––

500,000

1.182

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank

1,000,000–

1,000,000–

The Oita Bank

500,000––

500,000

1.182

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Oita Bank

700,000–

700,000–

The Eighteenth Bank

500,000––

500,000

1.182

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Miyazaki Bank

700,000–

700,000–

The Shinwa Bank

500,000––

500,000

1.182

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Shinwa Bank

600,000–

600,000–

The Kitakyushu Bank

500,000––

500,000

1.182

December 30, 2016

Refinance fundNo collateral/
No guarantee

The Iyo Bank

500,000–

500,000–

The Kagoshima Bank

100,000––

100,000

1.168

January 31, 2017

Refinance fundNo collateral/
No guarantee

The Bank of Saga

500,000–

500,000–

Resona Bank

400,000––

400,000

1.218

January 31, 2017

Refinance fundNo collateral/
No guarantee

The Eighteenth Bank

500,000–

500,000–

Sumitomo Mitsui TrustBank
Development Bank ofJapan

600,000––

600,000

0.498

September 30, 2016

Refinance fundNo collateral/
No guarantee

The Kitakyushu Bank

500,000–

500,000––

1,950,000–

1,950,000

2.200(Note 3)

Refinance fundNo collateral/
No guarantee

Resona Bank

2,000,000––

2,000,000

1.033

September 29, 2017

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka–

2,000,000–

2,000,000

1.305

July 31, 2017

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
The Nishi-Nippon CityBank

2,500,000––

2,500,000

0.775

February 29, 2020

Acquisition fundNo collateral/
No guarantee

1,900,000––

1,900,000

0.581

February 28, 2018

Refinance fundNo collateral/
No guarantee

Mizuho Bank

1,700,000––

1,700,000

0.581

February 29, 2020

Refinance fundNo collateral/
No guarantee

1,100,000––

1,100,000

0.631

February 28, 2018

Refinance fundNo collateral/
No guarantee

1,500,000––

1,500,000

0.431

February 28, 2018

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
Mitsubishi UFJ Trust andBanking Corporation
Sumitomo Mitsui Banking
Corporation

Long-term
debt–

2,000,000–

2,000,000

1.305

July 31, 2017

Refinance fundNo collateral/
No guarantee–

2,000,000–

2,000,000

1.170

March 31, 2017

Acquisition fundNo collateral/
No guarantee–

500,000–

500,000

1.203

March 31, 2017

Refinance fundNo collateral/
No guarantee

Resona Bank–

600,000–

600,000

1.253

March 31, 2017

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui TrustBank
Mitsubishi UFJ Trust andBanking Corporation

The Higo Bank–

300,000–

300,000

1.203

March 31, 2017

Refinance fundNo collateral/
No guarantee

Aozora Bank

600,000––

600,000

0.431

February 28, 2018

Refinance fundNo collateral/
No guarantee

The Bank of Fukuoka–

1,000,000–

1,000,000

Mitsubishi UFJ Trust andBanking Corporation

600,000––

600,000

0.448

March 30, 2018

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank–

1,000,000–

1,000,000

Aozora Bank

1,000,000––

1,000,000

0.498

June 30, 2020

Refinance fundNo collateral/
No guarantee

The Oita Bank–

700,000–

700,000

Mizuho Bank

200,000––

200,000

The Miyazaki Bank–

700,000–

700,000

The Norinchukin Bank

3,000,000––

3,000,000

0.538

July 31, 2019

Refinance fundNo collateral/
No guarantee

The Shinwa Bank–

600,000–

600,000

500,000––

500,000

The Iyo Bank–

500,000–

500,000

Mizuho Bank

2,300,000––

2,300,000

The Bank of Saga–

500,000–

500,000

The Norinchukin Bank

1,000,000––

1,000,000

The Eighteenth Bank–

500,000–

500,000

The Hiroshima Bank

1,400,000––

1,400,000–

500,000

The Kitakyushu Bank–

800,000

Refinance fund

500,000–

July 30, 2021–

800,000

0.835

The Kitakyushu Bank

No collateral/
No guarantee

10,100,000

15,350,000

5,000,000

20,450,000

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

Subtotal

0.858

June 30, 2017

Refinance fundNo collateral/
No guarantee

The Bank of Saga

Development Bank ofJapan

FUKUOKA REIT CORPORATION43FUKUOKA REIT CORPORATION

44

VIII. Notes to Financial Statements

Category
LenderThe Bank of TokyoMitsubishi UFJ(thousands of yen)

Use of funds

Description

Refinance fundNo collateral/
No guarantee(thousands of yen)

500,000––

500,000

0.520

September 25, 20191,600,000––

1,600,000

0.790

June 30, 2022

Refinance fundNo collateral/
No guarantee

1,500,000––

1,500,000

0.586

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

0.431

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

0.431

February 29, 2024

Refinance fundNo collateral/
No guarantee

The Nishi-Nippon CityBank
Development Bank ofJapan

2,000,000––

2,000,000

0.440

February 29, 2024

Refinance fundNo collateral/
No guarantee

Sumitomo Mitsui Banking
Corporation
Sumitomo Mitsui TrustBank
Development Bank ofJapan

Long-term
debt

Balance as of
Balance as
Average
March 1,
Increase
Decrease of August 31,
interest rate Repayment date(thousands of yen) (thousands of yen)
2016
2016
(%) (Note 1)

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

60,225,000

700,000

15,425,000

45,500,000

70,325,000

20,050,000

20,425,000

69,950,000

Subtotal
Total(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) The debt is subject to repayment of 75 million yen on the final day of every 6 months following the final day of December 2009 as the initial repayment date, with 1,875 million yen to be repaid on
June 30, 2017, the final repayment date.
(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

1 to 2 years
10,200,000

2 to 3 years
4,200,000

3 to 4 years
5,700,000

FUKUOKA REIT CORPORATION

4 to 5 years
6,300,00045