AIFUL Corporation
Annual Report 2000

Profile

In fiscal 1999, ended March 31, 2000, AIFUL Corporation was listed on the first sections of theTokyo and Osaka stock exchanges. AIFUL ranks fourth in Japan’s consumer finance industry, withbalance of loans outstanding of ¥1,001,080 million (US$9,444 million) at March 31, 2000.
AIFUL was originally established as a small business in 1967. In 1982, that company mergedwith three affiliates to form AIFUL. Throughout its history, AIFUL has sought community support
by enhancing the image of the consumer finance industry.
Today, AIFUL serves two million customers through 1,311 branches and 16,631 allied cash
dispensers and automated teller machines.

Financial Highlights
AIFUL Corporation
Years ended March 31

Millions of Yen% Change

Thousands of
U.S. Dollars

2000/99

2000

2000

1999

¥239,200
154,490
84,71044,104¥205,536
140,777
64,75928,448

16.4
9.7
30.8
55.0

$2,256,604
1,457,453
799,151
416,075

At Year-End:Balance of loans outstanding ................................................ 1,001,080
837,982
Total assets ........................................................................... 1,182,468
996,524
Long-term debt, including current portion thereof ..............
863,469
704,275
Total shareholders’ equity .....................................................
252,903
203,749
Number of shares outstanding ............................................. 56,103,000 46,752,500

19.5
18.7
22.6
24.1
20.0

9,444,151
11,155,358
8,145,934
2,385,877% Change

U.S. Dollars

For the Year:
Total income ........................................................................
Total expenses .....................................................................
Income before income taxes .................................................
Net income ..........................................................................

Per Share Data:
Net income .........................................................................
Cash dividends ....................................................................

Yen¥ 786.1360¥ 610.63
60

28.7
0.0

$

7.42
0.57

Notes: 1. The U.S. Dollar amounts have been translated for convenience only at ¥106=$1, the rate of exchange at March 31, 2000.
2. Net income per share has been computed based on the weighted average number of shares outstanding during each period, after retroactive
adjustment for stock splits.

Contents
Noteworthy Events.................................................................. 1
Message from the President ................................................... 2
Special Feature ....................................................................... 4
Review of Operations ..............................................................13
Financial Section ....................................................................17
Independent Auditors’ Report ................................................41
Board of Directors ...................................................................42
Investor Information ...............................................................43

Cautionary Remark Regarding Forward-Looking Statements
Statements made in this document with respect to AIFUL’s plans, strategies and beliefs and other statements that are not historicalfacts are forward-looking statements based on the assumptions and beliefs of the Company’s management in light of the information
currently available to it and involve risks and uncertainties which may affect the Company’s future performance. Potential risks anduncertainties in AIFUL’s areas of business include, without limitation, social conditions, economic conditions and financial conditions.

Noteworthy Events

1999

1999

1999

1999

1999

2000
AIFUL Corporation

1

5

Non-Bank Bond Law is implemented (May 20)
Deregulation enabled AIFUL to lend funds procured
directly from capital markets.
Loan-screening operations obtain ISO 9001 certification(May 25)

7

AIFUL’s acquisition of Nippon Benefit Co., Ltd., isannounced (July 22)
In line with its mergers and acquisitions strategy, AIFULsought to expand its operations by acquiring the operations and assets of Nippon Benefit, a medium-sizedfinance company primarily active in the Kanto region.

8

Centralised loan processing centers installed(September 1)
AIFUL installed 16 centralised loan processing centers, toreplace automatic loan application machines at local
branches.

10

Sales of shares announced (October 1)
In advance of AIFUL’s listing on the first section of theTokyo Stock Exchange (TSE) and the Osaka Securities
Exchange (OSE), president Fukuda and relatives sold two
million of their existing shares in AIFUL to investors
worldwide.

12

Revised ACMI Law is passed (December 13)
In response to the Shoko (commercial and industrial) loan
problem, the Diet passed a revised ACMI Law that
included a lowering of maximum interest rates to 29.2%,
from 40.004%. This law will be implemented on June, 1,
2000.

3

AIFUL lists on the first section of the TSE and OSE(March 1)
AIFUL’s listing on the first sections of the TSE and OSE
enhanced public awareness of AIFUL’s services andrecognition of its name.

Message from the President

the Japanese government implemented several
economic-stimulus packages. These measures
helped halt Japan’s economic slide but failed toencourage consumer spending, as unemployment
continued to rise amid corporate restructuring.
Nonetheless, there were some bright spots inthe consumer finance industry. For example, theincrease in bad loans began to level off and aggregated transaction volume rose for the top four
consumer finance companies.
At the same time, new legislation transformed
the consumer finance industry, including theimplemention of the Non-Bank Bond Law and therevision of the Acceptance of Capital, Money
Deposits and Interest (ACMI) Law to lower maximum interest rates. Such changes are increasing
the industry’s oligopolization by encouraging
acquisitions of small and mid-tier players as wellas mergers and alliances between consumer
finance firms or with banks and companies
outside the financial sector.

A

IFUL will draw on its listings on the first sections of the Tokyo Stock Exchange (TSE) andOsaka Securities Exchange (OSE) on
March 1, 2000, and continue developing
an array of products that match diverse consumer
needs. At the same time, we will make AIFUL a
better company by operating more efficiently andbolstering services.
Operating Environment
In fiscal 1999, ended March 31, 2000, the Bank ofJapan maintained its zero interest rate policy, while

AIFUL Corporation2

Responding to Change
AIFUL responded to these developments by
expanding in line with the management’s mission
to win community support for its business. During
the term, we tackled the management issues highlighted in last year’s annual report. These included
reinforcing product development, increasing market share and pursuing management efficiency.
These issues are key elements of our seventh
Medium-Term Management Plan for April 1999
through March 2002.
In terms of reinforcing product development,
we have expanded loan balances by 20%—thehighest growth in our industry—by pursuing adiversification strategy that augments core unsecured loans with secured and small business loans.
During the term, we expanded our market shareby opening another 302 branches, bringing the total
network to 1,311. Customers now enjoy access toour services through 16,631 cash dispensers andautomated teller machines. In addition, we
enhanced our “Reliable Creative Company” brandimage in the second half of the year through a new
television commercial campaign. Also during theterm, we made several key acquisitions. In August
1999, we bought Nippon Benefit Co., Ltd., amidranked consumer finance company. In March
2000, we took over Happy Credit Corporation and
Sky Corporation. One month later, we purchased
Shinwa Corporation. We will continue to emphasize
acquisitions as a vehicle for building scale, quickly
and cheaply.
We bolstered efficiency during the year by
pursuing a scrap-and-build policy, centralizing
the operation of lending machines and forming
alliances to secure more customers. In addition,
we diversified funding to cut costs and otherwise
constrained the costs normally incurred during
growth periods.
Finally, we are starting to take advantage of theInternet and the credit card system to enhance our
cashing services, at the same time eliminating thestigmas related to consumer finance companies anddispelling the aversion people may have to them.
Performance
In the year under review, we significantly
improved our operating performance. We
increased the number of new accounts of unsecured loans 4.6%, to 425,142 thus reversing a

AIFUL Corporation

3

decline that began in fiscal 1996, while the percentage of bad loans remained stable. At year-end,loans outstanding were up 19.5% from the close of
fiscal 1998, to ¥1,001,080 million. Unsecured
loan volume rose 17.2%, to ¥809,362 million.
Secured loans soared 31.7%, to ¥181,429 million.
Guaranteed loans, those loans to self-employedindividuals and small businesses, rose 8.1%, to¥10,289 million.
As a result of these factors, total income
advanced 16.4%, to ¥239,200 million. Net income
rocketed 55.0%, to ¥44,104 million.
Looking Ahead
AIFUL expects a slowdown in the growth of theunsecured loan market in 2005 or 2006. The
regulatory changes created by new legislation
will lead to greater domination by a handful ofconsumer finance firms that will compete more
intensely for customers, not just between themselves but against other industry entrants.
AIFUL will nonetheless strive to become theindustry leader in lendings and profits, as well as
customer growth. We will aggressively enhance
operations and broaden our customer base throughtwo key strategies. First, we will continue to promote our conventional strategy of product diversification. We are also adding several strategies:
mergers and acquisitions (M&A), businessalliances, the Internet, and credit cards. We believethese endeavors will further support our efforts inreaching new customers.

Yoshitaka Fukuda
President
June 29, 2000

Special Feature

A Management Strategy th
The Growth Leader among
Japan’s Top Consumer Finance Companies

In terms of loans outstanding, theconsumer finance market was worth

the three basic strategies that have

¥7.1 trillion at the end of 1998, com-

supported our unmatched expansion

pared with just ¥2.0 trillion a decade

to date, as well as the several new

earlier. During that time, the top five

strategies that currently guide ourconsumer finance firms increasingly

operations.

oligopolized the market, with theiraggregate share expanding from
45.3%, to 62.2%.
AIFUL has grown the fastest
among the market leaders. Our market share was just 2.8% in 1988,
reached 10.8% in 1998, and is now
about 12%.

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4

In this special feature, we outline

at Delivers Consistently High GrowthalotentintialPht
Grow ility Poteab
Profitket Share

Expansion of Mar
AIFUL CORPORATION

5

Basic Strategy 1:
Profiting from Unsecured
Loan Market Forecasts

Basic Strategy 2:
Credit Management

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6

Innovative Projections
AIFUL’s prime management strategy
as it has grown has been to formulate and draw on unsecured loan
market forecasts.
We base these projections on
demographics, usage frequencies
and average loan amounts for eachof the age groups in the target
market of the working population
between 20 and 60 years of age. To
date, these forecasts have been
almost totally accurate, allowing
AIFUL to aggressively expand loans.

In April 1999, AIFUL was first inJapan’s consumer finance industry
to issue a market forecast (asdescribed in last year’s annual
report). We projected 6% or 7%
annual growth in unsecured loans
nationwide until they peak at ¥11
trillion between 2005 and 2007 andthen gradually mature.
All AIFUL’s new strategies draw
on the Company’s market forecasts.
These initiatives, which we will
detail later, include product diversification, mergers and acquisitions
and alliances.

Ranking a Massive Customer
Database
AIFUL has boosted loan balances byan average of more than 20% annually
over the past five years. Our scoring
system has greatly assisted suchprogress.
Our scoring system ranks individuals as rating agencies would evaluate
companies. We maintain data on
around three million people whohave borrowed from AIFUL. Our system uses advanced analytical techniques to project delinquency rates inline with a set of customer attributes.
The system ranks each loan
applicant between 0 and 13—withzero indicating maximum risk and arejection. Based on the ratings, welend successful applicants between¥50,000 and ¥2 million at rates
between 21.5% and 28.835%.
Our scoring system covers both
new and existing customers. Anotherimportant capability of this system isthat it automatically screens borrowers every three months for the number and sizes of loans obtained fromother consumer finance companies.
We reflect any anomalies in ourrankings by, for example, changing
lending limits.
In endeavoring to serve all its customers well, AIFUL is fully aware
such efforts can lead to higher delinquency rates. Our scoring system
helps us tackle this issue at its roots
by allowing us to lend small amounts
to high-risk customers at high interest
rates while lending large amounts to
low-risk clientele at lower rates. We
can thus balance our loans portfolio
to optimize risks and returns.
Our scoring system dates to 1985.
We have since revised it every two or
three years to reflect data trends. We
launched our sixth-generation version
in December 1998. Simulation underBasic Strategy 3:
Product Diversification

the new scoring system shows that we
can raise lending volumes by 5% andcut credit losses by 4%.
The scoring system is notdesigned to completely eliminate

such losses. Rather, it aims to ensurethat AIFUL can maintain high growthby lending to as many people as possible while keeping delinquencies
within defined constraints.

AIFUL’s product diversification strategy has fueled its fast expansion over
the years. Such diversification concentrates on three core lines. These
are unsecured loans (as of March 31,
2000, the balance was ¥809.4 billion), secured (home equity) loans(¥181.4 billion), and guaranteed(small business) loans (¥10.3 billion).
Our strategy draws on three priorities. The first is to deliver consistently
high long-term growth. Based on our
unsecured loan market forecast, we
expect this market to gradually mature
between 2005 and 2007. This information has prompted us to employ
secured and small business loans tomaintain our overall expansion.

Our second priority is to attract a
broad range of customers by serving
people who need larger loans, as ourcurrent limit for unsecured loans is¥2 million. We can increase lending
limits significantly by offering
secured loans.
Our third priority is to spread
portfolio risk and minimize overallrisks by providing a broad lineup
of unsecured, secured and small
business loans.

Seventh Medium-Term Management Plan
March 1999

March 2000

(Billions of Yen)

March 2002
(Growth rate compared to March 1999)

Loans Outstanding:Unsecured Loans
Secured Loans
Small Business Loans¥838.0¥690.7¥137.8¥ 9.5¥1,001.1 (+19.5%)¥ 809.4 (+17.2%)¥ 181.4 (+31.7%)¥ 10.3 (+8.1%)¥1,300 (+55%)¥ 990 (+43%)¥ 300 (+118%)¥ 20 (+111%)

Branches
Ordinary Income

1,009¥ 68.81,311 (+29.9%)¥ 85.0 (+23.5%)

1,500 (+49%)¥ 100.0 (+45%)

12%12.54%

14%
12.00%

10%
13.20%

Market Share
Operating Efficiency ** SG&A ÷ Loans Outstanding
AIFUL Corporation

7

The Three Product Areas
Central to AIFUL’s
Diversification Strategy

Superior Product Development
The products behind our diversification strategy reflect careful market
analysis. We consistently beat our
rivals in developing and commercializing products based on new concepts. A good example is the second
mortgage option in our secured loans.

Product development is the key toprogress in all industries. We willcontinue to focus on all three productcategories—unsecured, secured andsmall business loans—to bring out
innovative products.

Unsecured Loans
Four concepts underlie our mainstay
unsecured loans. These loans are
unsecured and nonguaranteed, andfeature low balances—¥10,000 to ¥2
million (up to ¥0.5 million without
an individual income statement). We
typically process applications within
30 minutes. We lend through around
1,300 branches nationwide. At March
31, 2000, unsecured loans outstanding stood at ¥809.4 billion. The average balance for 1.9 million customer
accounts was ¥422,199.

Secured Loans
Strong Growth
In this category, we finance individuals who offer land or buildings as
collateral. At the close of the year
under review, 49,968 customers held
secured loan accounts. Secured loans
outstanding were an average ¥3.6
million per account, for a total of¥181.4 billion. The latter figure was
31.7% higher than a year earlier, yet
the credit losses remained less than
1%. Such progress reflects AIFUL’s
superior, innovative product range.
Proprietary Expertise
AIFUL’s 534 staffed branches and fourthat specialize in secured loans draw
on the Company’s expertise and uniform systems and operating manuals.
Most rivals do not offer secured loans,so we can pursue above average
growth by tailoring our products tocustomer needs.

AIFUL Corporation

8

Careful Risk Management
We excel in risk management forseveral crucial reasons. The averagebalance of secured loans is around¥3.6 million per person. Borrowers
are dispersed evenly around Japan,
without concentrations in metropolitan areas. As a result, we haverestricted the default rate on theseloans to just 0.74% despite falling
real estate prices. In addition, we
maintain a very prudent portfolio—
34% of secured loans are against
40% or less of collateral value, 44%
against between 40% and 70% of
this value, and 22% against between
70% and 100%. Interest rates onthese loans range between 9.2% and24.5%, depending on the risk. The
average rate is 17.2%. We verify
property values through allianceswith more than 200 realtors and realestate appraisers nationwide. Suchpartners allow us to gather current
information swiftly and maintain aunique, high-growth product range.

AIFUL Corporation

9

Small Business Loans
A Relatively New Business Area
We started to offer small businessloans nationwide through our staffedbranches in October 1997. At March
31, 2000, we had 8,084 small businessloan accounts totaling ¥10.3 billion.
Small business loans range from
¥10,000 to ¥2 million. Interest rates
are a uniform 28.835%. These loans
require at least one guarantor but are
free of blanket guarantees, called
ne-hosho, and loan fees; borrowers
should also be business owners, notcompanies.
Small Business Loan Market
Japan has around 6.5 million small
businesses, but the low volume ofloans extended to these enterprises
suggests that lenders have been
unable to cultivate new opportunities.
We apply the risk management
expertise we have accumulated in
unsecured loans, which is helping us
swiftly raise our presence in small
business loans.
We have tightened our credit
requirements because Japan’s recession has hit many proprietors hard.
In the years ahead, we will makesmall business loans an important
operation by developing nextgeneration offerings, further cultivating our expertise and making ourcredit requirements even more
precise.

In addition to its existing strategies
in the period under review, AIFUL introduced
several new management strategies.
New Management
Strategy 1:

Mergers and Acquisitions
Foreign acquisitions of Japanese consumer finance firms have picked up
in recent years. In 1998, for example,
America’s GE Capital Group acquired
Lake Co., Ltd., and Koei Credit Co.,
Ltd. In the same year, another
American player, Associates First
Capital Corporation, bought DIC
Finance Co., Ltd.
AIFUL has also become a buyer.
We were the first big player in thelocal industry to launch an M&A
strategy. In August 1999, we took
over Nippon Benefit Co., Ltd., whoseloans outstanding were ¥8.2 billion.
Since then, we have made several
further purchases. In March 2000, we
announced the acquisition of ¥16.9
billion in loan assets from Happy
Credit Corporation and ¥5.5 billion
in loan assets from Sky Corporation.
Both firms were mid-ranked Kansai
region affiliates of the defunctKofuku Bank, Ltd., and were placed
under the control of the Financial
Reconstruction Commission. In April
2000, we announced the acquisitionof Shinwa Corporation, a company
with ¥13.9 billion in loan assets, andwhich is based in the Chubu region.
Happy Credit and Shinwa both
became wholly owned AIFUL subsidiaries in June 2000.
Three factors underlie ouremphasis on M&A.
First, economies of scale work in
the consumer finance business.

Taking Advantage of
Economies of Scale

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10

Advertising and other costs, such aslabor and computer systems, remain
generally stable as operations expand.
Stability translates into greater costefficiency. We still rank fourth in theindustry, so we have yet to match ourlarger rivals in taking advantage of
economies of scale and improving our
profitability.
Second, we have merged with or
acquired more than 10 companies todate in our drive to become a leading
player. This experience has given us
skills in assessing the credit standingof the companies we buy and in subsequently managing credit. The initialchallenge in M&As is obviously to
decide what to pay. We can accurately
calculate acquisition prices based on
in-house standards like cannibalization ratios, average loan sizes, nonperforming loans and customer
borrowing transactions volume withother companies. We also consider
valuations based on the discount cash
flow-based return on investment.
The third factor is a changing
operating environment. In fiscal
1999, two major legal revisions transformed our industry. These were the
Non-Bank Bond Law of May 1999,
and the revised ACMI Law ofDecember 1999 (implemented in calendar 2000). The Non-Bank Bond
Law allows major corporations to go
directly to the capital markets by issuing corporate bonds for operatingloans. The new law does not benefit

New Management
Strategy 2:
Broadening AIFUL’s
Customer Basesmall and medium-sized consumer
loan companies that cannot issue corporate bonds. The revised ACMI Law
does not affect corporations lendingat interest rates below 29.2%, but
forces smaller players to reduce theirrates. The gap between the top andlow ends of the industry is widening.
As this process continues and themarket matures, some small andmedium-sized players will probably
seek to sell out.

Business Alliances
Alliances are crucial to accelerating
growth.
In 1995, our introduction of automated lending machines led to a surge
in new borrowers. Convenience obviously contributed to this rise. Moresignificantly, we were able to breakthrough a psychological barrier:namely that the Japanese people havebeen traditionally reluctant to seek
consumer loans, considering it something shameful. These people prefer toavoid asking in person for a loan.
We believe that alliances with companies in other fields will have thesame impact as the lending machines
in that we can leverage their customer
bases and further encourage people touse our services by issuing tieup cards.

Tieups can also improve ouroperating efficiency and lower selling
costs. For instance, we can open new
branches with partners or deploy
joint advertising campaigns.
Our first such tieup started in
December 1999, when we issued theClub Hit Card for customers of Hikari
Tsushin, Inc. This alliance simply covers the issue of loan cards and does
not involve capital tieup. Through thistieup, AIFUL has been able to secure
customers who have never before usedconsumer finance.
In April 2000, we established theBusiness Development Department tocultivate new alliances and M&A
strategies.

Guarantee Business
E-commerce is booming in Japan,
and while it can broaden marketingand customer base horizons, it also
poses new challenges, particularly
creditworthiness.
E-commerce lets individuals, small
and medium-sized enterprises, andmajor corporations operate in thesame ring. They all need to assess thecredibility of customers or partners
accurately and quickly. As a conAIFUL Corporation

11

sumer finance operation, AIFUL isespecially skilled in both respects.
In contrast, regular companies or
emerging dot-coms do not have credit
analysis expertise and related administrative systems. They could lose precious business opportunities if theycannot determine whether or when apartner or customer will pay them.
To serve such companies, AIFUL
started an administrative andguarantee business from February
2000. We assess the ability of partners, such as Internet businesses andtravel agents, to settle their bills. We
then guarantee payments in exchange
for guarantee fees from those partners. We issue invoices to customer
businesses and receive fees based on
those amounts for partners. This
operation lets partners cultivate customers without worrying about
paperwork or the customers’ ability
to pay. We gain fee income bydrawing on our existing resources—
we do not need to make additional
investments. We will promote thisoperation heavily in the years ahead.

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12

Cash over the Web
In April 2000, AIFUL started its
e-cashing service. We were among
the first in our field to set up a Web
site, at the end of 1996. Since then,we have provided customers withinformation on loan eligibility. Our
e-cashing service now lets people
apply for and receive a loan without
setting foot in a branch. Japan has
yet to implement a law on verification in e-commerce, so we post loan
agreements. We will handle this task
on the Internet once a new law ispromulgated.

Review of Operations

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13

Loan BusinessIn fiscal 2000, AIFUL’s total loans
outstanding jumped 19.5%, to¥1,001.1 billion. Interest on loans tocustomers expanded 16.9%, to¥229.7 billion. At year-end, the number of customer accounts was up
8.4%, to 1,975,068.

Unsecured Loans
Unsecured loans outstanding
increased 17.2% from the end of theprevious term, to ¥809.4 billion, or
80.9% of total loans outstanding.
Interest on unsecured loans rose
13.9%, to ¥199.2 billion, constituting 83.5% of total income. The number of unsecured loan accounts at theend of fiscal 2000 was 1,917,016
million, a 7.9% gain.

Total Balance of Loans
Outstanding(Millions of Yen)

Secured Loans
Secured loans are home equity loans
collateralized with real estate. At yearend, secured loans outstanding were¥181.4 billion, up 31.7%, or 18.1% of
total loans outstanding. Consequently,interest received on secured loans
soared 38.8%, to ¥27.5 billion, andrepresented 11.5% of total income.
The write-off ratio was just 0.74%—alevel that has remained low since
Japan’s bubble economy burst—
underscoring the high growth andstability of such instruments. We willcontinue to exploit our unmatchedexpertise and performance to achieveeven better results in the years ahead.

1,000,000

800,000

600,000

400,000

200,000

0

96

97

98

99

00

Guaranteed Loans
Secured Loans
Unsecured Loans

AIFUL Corporation

14

Guaranteed Loans (Small
Business Loans)
This is our third major product category. At the end of fiscal 2000, small
business loans outstanding increased
8.1%, to ¥10.3 billion, or 1.0% of
total loans outstanding. Interest fromthis source surged 62.4%, to ¥3.0
billion, or 1.3% of total income.
We continued to focus on
research and product development
during the term for this highly promising market.

Other Activities
We will continue to center our operations around consumer finance inthe years ahead. At the same time,
we will diversify to prepare forslower growth in this market.
As part of this drive, we concluded our first backup servicer contract
in 1999. Backup servicers manage andseek to recover alternative debt if an
originator becomes bankrupt. We
expect this business to expand dramatically in line with the growing
popularity of debt securitization. We
will aggressively increase our involvement in this market, drawing on our
debt management and recovery
expertise from consumer finance.

Number ofCustomer Accounts(Thousands)
2,000

1,600

1,200

800

400

0

96

97

98

99

00

Guaranteed Loans
Secured Loans
Unsecured Loans

AIFUL Corporation

15

In the service sector, we operate
the Alisan chain of Taiwanese restaurants. In addition, we are involvedin the amusement industry throughour Mogura no Uta karaoke parlors
in Kyoto. We also offer real estateservices.
In fiscal 2000, total income fromthese other activities improved 3.6%,
to ¥8.6 billion, representing 3.6% of
total income.

Corporate Citizenship
AIFUL supports various sporting
events and community activities inJapan to contribute to society andenhance its corporate image.
In July 1999, we hosted the fourday AIFUL Cup JGTO (Japan Golf
Tour Organization) Golf Tournament
1999 at the Ajigasawa Country Clubin Aomori Prefecture. This was the
16th stop on the JGTO tour ofJapan. We used this tournament tocement ties with the community by
involving prefectural athletics organizations in its overall management.
Also during the term, we sponsored the Ninth Fukuchiyama
Marathon. Entries were open to thegeneral public. This marathon in
Fukuchiyama, Kyoto Prefecture,
Number of Branches

1,500

1,200

900

600

300

0

96

97

98

99

00

Unstaffed Branches
Staffed Branches
Unmanned Loan-Contracting
Machines

AIFUL Corporation

16

attracted 10,000 participants, making
it one of Japan’s largest such competitions. Over the years, many runners
have attracted strong followings fromenthusiastic crowds.
AIFUL will continue to promote
sports and other events in the years
ahead in keeping with its desire to
maintain close contact with regional
communities.

Financial Section

Contents
Management’s Discussion and Analysis .................................. 18
Non-Consolidated Six-Year Summary ..................................... 22
Non-Consolidated Balance Sheets ........................................... 24
Non-Consolidated Statements of Income................................. 26
Non-Consolidated Statements of Shareholders’ Equity ............ 27
Non-Consolidated Statements of Cash Flows .......................... 28
Notes to Non-Consolidated Financial Statements .................... 29
Independent Auditors’ Report ................................................. 41
AIFUL
AIFULCorporation
Corporation

17
17

Management’s Discussion and Analysis

Results ofOperations

AIFUL Corporation

IncomeIn fiscal 2000, ended March 31, 2000,
AIFUL boosted total income 16.4%, to¥239.2 billion (US$2,257 million), a risestemming from a 16.9% increase in interest on loans, to ¥229.7 billion (US$2,167
million). The Company recorded strong
gains in all three primary lending
categories. Unsecured loans outstanding
represented 80.8% of total loans outstanding, down from 82.4%, but stilladvanced 17.2%, to ¥809.4 billion(US$7,635 million). Secured loans outstanding surged 31.7%, to ¥181.4 billion(US$1,712 million), and represented
18.1% of total loans outstanding, up 1.7
percentage points.
Guaranteed loans outstanding
advanced 8.1%, to ¥10.3 billion (US$97
million), representing 1.0% of total loans
outstanding, from 1.1% in the preceding
fiscal year.
Interest on deposits, securities andother fell 12.5%, to ¥0.5 billion (US$5
million). Sales of property for sale gained
5.4%, to ¥1.1 billion (US$10 million).
Other income climbed 6.9%, to ¥7.9
billion (US$75 million).
Income before income taxes soared
30.8%, to ¥84.7 billion (US$799 million). Income taxes increased 11.8%, to¥40.6 billion (US$383 million), including adjustment on corporation tax, etc.
As a result of these factors, net income
rocketed 55.0%, to ¥44.1 billion(US$416 million). Net income per common share was ¥786.13 (US$7.42), from¥610.63 in fiscal 1999.

18

Expenses
Total expenses rose 9.7%, to ¥154.5
billion (US$1,457 million). This was
mainly because of an 18.7% increase incharge-offs and provisions for doubtful
loans, advances to subsidiary and claims
in bankruptcy, to ¥40.3 billion (US$380
million). The ratio of total expenses tototal income fell from 68.5%, to 64.6%.
Charge-offs and provisions for doubtful
loans, advances to subsidiary and claims
in bankruptcy increased to cover individual bankruptcies amid the domestic
recession.
Interest on borrowings was up 15.0%,
to ¥24.3 billion (US$229 million). The
ratio of interest on borrowings to total
income decreased from 10.3%, to 10.1%.
Salaries and other employee benefits rose
12.8%, to ¥25.0 billion (US$236 million), in keeping with AIFUL’s ongoing
expansion. Other expenses increased
1.8%, to ¥27.8 billion (US$263 million).

Total Balance of Loans
Outstanding

Number ofCustomer Accounts

Income before
Income Taxes(Millions of Yen)

(Thousands)(Millions of Yen)

1,000,000

2,000

100,000

50 (%)

800,000

1,600

80,00040

600,000

1,200

60,00030

400,000

800

40,00020

200,000

400

20,000

10

0

96

97

98

99

0

00

96

97

98

99

96

97

98

Unsecured Loans

Unsecured Loans

Ratio of Income before Income Taxes
to Total Income (%)(Right Scale)

Net Income per ShareTotal Expenses(Yen)(Millions of Yen)

50,00020 (%)

40,000

16

8,000

800

6,000

600

12
4,000

20,0008

10,000

4

97

98

99

00

Net Income (Left Scale)
Ratio of Net Income toTotal Income (%) (Right Scale)00200,000

100 (%)

160,000

80

120,000

60

80,00040

40,000

20

400

2,000

19

0

Income before Income Taxes(Left Scale)(Millions of Yen)

96

00

Guaranteed Loans
Secured Loans

Net Income

099Guaranteed Loans
Secured Loans

30,000

AIFUL Corporation

0

00

200

96

97

98

99

00

0

Net Income per Share (Left Scale)
Adjusted Net Income
per Share (Right Scale)

0

96

97

98

99

00

Total Expenses (Left Scale)
Ratio of Total Expenses toTotal Income (%) (Right Scale)0Management’s Discussion and Analysis

Financial Position

AssetsAt the close of fiscal 2000, total current
assets were up 19.5% from a year earlier,at ¥1,072.4 billion (US$10,117 million).
This was due primarily to a 19.5% rise in
outstanding loans, to ¥163.1 billion(US$1,539 million).
Net property, plant and equipment
was up 1.1%, to ¥67.5 billion (US$636
million). Consequently, total assets at theclose of the term were up 18.7%, to¥1,182.5 billion (US$11,155 million).
Liabilities
Total current liabilities rose 2.7%, to¥355.0 billion (US$3,349 million). Thiswas mainly because of a 12.2% increasein the current portion of long-term debt,
to ¥290.3 billion (US$2,739 million),
which offset a halving in short-term borrowings, to ¥28.7 billion (US$271 million). Total long-term liabilities increased
28.5%, to ¥574.6 billion (US$5,420 million). This rise was mainly due to a
28.6% increase in long-term debt, to¥573.2 billion (US$5,407 million).
AIFUL endeavors to diversify funding
to stabilize operations. As part of thisdrive, we issued ¥89 billion (US$840 million) in straight bonds during fiscal 2000.
Our main source of funds is long-term
debt from financial institutions. Longterm debt, including the current portion,
represents 96.8% of total borrowings,
including commercial paper. Of thistotal, 71.5% is covered by fixed interest
rates through the use of fixed-rate loans
and caps and swaps. These vehicles
have helped us hedge effectively againstinterest rate risk.

AIFUL Corporation

20

Shareholders’ Equity
Total shareholders’ equity was up 24.1%,
or ¥49.2 billion (US$464 million), at
year-end, to ¥252.9 billion (US$2,386
million). During the term, we made asecondary offering of two million sharesto prepare for our listing on the Tokyo
Stock Exchange in October 1999 byimproving equity liquidity and reinforcing our financial position. Higher
retained earnings, however, drove thegain in shareholders’ equity.
The greater resulting operating stability translated into a 1.0 percentage point
rise in the equity ratio, to ¥21.4%.
Return on equity rose 3.0 percentage
points, to 19.3%, while return on assets
was up 1.0 percentage point, to 4.0%.
Efficiency
During the year, AIFUL continued to systematize marketing and administration tobolster productivity and constrain costs.
In line with this effort, we establishedcenters at 16 locations nationwide tomonitor unstaffed branches and consolidated our operations at such branches.
These endeavors helped us reduce theratio of costs, excluding financial
expenses, to loans outstanding, by 0.7
percentage point, to 12.5%. Total income
per employee climbed 12.1%, to ¥73.3
million (US$0.7 million). Net income per
employee was up 49.2%, to ¥13.5 million (US$0.1 million). Loans outstanding
per employee totaled ¥306.8 million(US$2.9 million), up 15.0%.

Total Assets

Balance of Borrowings

Total Shareholders’ Equity(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

100 (%)

250,000

25 (%)

800,000

80

200,000

20

600,000

60

150,000

15

400,000

40

100,000

10

200,000

20

50,0005001,000,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

96

97

98

99

0

00

96

97

98

99

00

0

96

Balance of Borrowings (Left Scale)
Ratio of Long-term Debt toTotal Borrowings (%) (Right Scale)

ROE/ROANet Income per Employee(%)(Thousands of Yen)

98

99

00

Shareholders’ Equity (Left Scale)
Shareholders’ Equity Ratio (%)(Right Scale)

Number of Branches/
Balance of Loans Outstanding
per Branch (Millions of Yen)

50

5.0

15,000

1,500

1,000

40

4.0

12,000

1,200

800

30

3.0

9,000

900

600

20

2.0

6,000

600

400

10

1.0

3,000

300

200

0

96

97

98

99

00

Return on Equity (Left Scale)
Return on Assets (Right Scale)

AIFUL Corporation

97

21

0

0

96

97

98

99

00

0

96

97

98

99

00

0

Number of Branches (Left Scale)
Balance of Loans Outstanding
per Branch (Right Scale)Non-Consolidated Six-Year Summary
AIFUL Corporation
Years ended March 31

Millions of Yen
2000

1999

1998

Result for the Fiscal Year:
Total income .....................................................................
Total expenses ...................................................................
Income before income taxes ..............................................
Income taxes .....................................................................
Adjustment on corporation tax, etc. ..................................
Net income .......................................................................

¥ 239,200
154,490
84,71042,3991,793
44,104¥205,536
140,777
64,75936,311–
28,448¥180,181
117,080
63,101
38,097–25,004

At Year-End:Balance of loans outstanding .............................................
Total assets ........................................................................
Short-term borrowings ......................................................
Long-term debt, including current portion thereof ............
Total shareholders’ equity ..................................................

¥1,001,080
1,182,468
28,700863,469
252,903¥837,982
996,524
58,900704,275
203,749¥702,446
876,727
98,000600,505
146,255¥¥¥

Per Share Data (Yen):
Net income .......................................................................
Adjusted for stock splits .................................................
Shareholders’ equity...........................................................
Adjusted for stock splits .................................................
Cash dividends .................................................................
Adjusted for stock splits .................................................
Other Data:
Number of shares outstanding at year-end ........................
Number of customer accounts at year-end .........................
Number of branches at year-end ........................................
Number of employees at year-end .....................................

AIFUL Corporation

22

786
–
4,508
–
60
–

56,103,000
1,975,068
1,311
3,263

611
509
4,358
3,632
60
50

46,752,500
1,822,261
1,009
3,141

602
502
3,421
2,851
60
50

42,752,500
1,706,030
807
2,731

Millions of Yen
1997

1996

1995

¥150,176
94,27655,90033,095–22,805¥122,695
97,411
25,284
15,197–
10,087¥ 94,024
75,794
18,23010,218–8,012¥591,630
724,31439,548557,963
93,055¥465,656
589,539
31,758473,62165,447¥348,209
472,791
38,200365,449
55,524

¥

¥

¥

1,548
516
5,957
1,986
10
3

15,621,000
1,530,094
654
2,521

AIFUL Corporation

7,308
244
47,4141,580
100
31,380,300
1,217,649
458
2,411

23

6,472
216
40,2261,341
100
31,380,300
940,924
360
1,951

Notes
1. Net income per share has been computed based on theweighted average number of shares outstanding during
each period and shareholders’ equity per share is basedon the number of shares outstanding at the end of eachperiod.
2. Capital increased through issuance of shares to third
parties on March 31, 1995 (142,800 shares, ¥76,900).
3. Stock split (10 for 1) on August 1, 1996.
4. Warrant exercised on September 27, 1996 (1,818,000
shares, ¥2,750).
5. Stock split (2.5 for 1) on May 20, 1997.
6. On June 18, 1997, by resolution of the Shareholders’
General Meeting, the number of common shares issued
was increased from 55 million to 150 million.
7. Capital increased through issuance of shares by public
offering on July 30, 1997 (3,700,000 shares, ¥56,832).
8. On April 16, 1998, the Company issued 4,000,000
shares of common stock to the amount of ¥33,084 million, in offshore transactions under regulations of theUnited States Securities Act of 1993 (“the SecuritiesAct”), and in the United States in accordance with Rule
144A of the Securities Act. Of the total, ¥16,544 million and ¥16,540 million were credited to common
stock and additional paid-in capital, respectively.
9. Stock split (1.2 for 1) on May 20, 1999.

Non-Consolidated Balance Sheets
AIFUL Corporation
March 31, 2000 and 1999

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

ASSETS
Current Assets:
Cash and cash equivalents .......................................................
Time deposits (Note 7) ............................................................
Loans (Notes 4 and 7) ..............................................................
Allowance for doubtful loans ...................................................
Net loans ............................................................................
Inventories (Note 5) .................................................................
Investment in trust ...................................................................
Prepaid expenses .....................................................................
Deferred tax assets (Notes 2.i and 8) ........................................
Other current assets .................................................................
Total current assets ............................................................
Property, Plant and Equipment (Note 7):
Land ........................................................................................
Buildings and structures ...........................................................
Machinery, vehicles and equipment .........................................
Construction in progress ..........................................................
Total ....................................................................................
Accumulated depreciation .......................................................
Net property, plant and equipment ...................................
Investments and Other Assets:
Investment securities (Notes 6 and 7) ......................................
Investments in and advances to subsidiary
and associated company (Note 9).........................................
Claims in bankruptcy (Note 4) .................................................
Allowance for advances to subsidiaryand claims in bankruptcy.....................................................
Long-term loans (less current portion) .....................................
Lease deposits ..........................................................................
Long-term prepayments ...........................................................
Software ...................................................................................
Deferred tax assets (Notes 2.i and 8) ........................................
Other assets .............................................................................
Total investments and other assets ..................................
Total ....................................................................................
See notes to non-consolidated financial statements.
AIFUL Corporation

24

2000

1999

81,013868
1,001,080(37,625)
963,455
2,158
2,000
4,607
9,006
9,337
1,072,444¥ 71,850
868
837,982(29,061)
808,921
3,143
1,000
4,294
7,451
897,527

764,2748,189
9,444,151(354,953)
9,089,198
20,35818,86843,462
84,962
88,085
10,117,396

42,97430,584
10,262
1,080
84,900(17,448)
67,45243,09828,1339,971
110
81,312(14,587)
66,725405,415
288,528
96,811
10,189800,943(164,603)
636,340

6,001

6,575

56,613

3,832
16,011

3,475
16,611

36,151
151,047(19,095)
14,724
8,475
1,616
3,289
998
6,721
42,572¥1,182,468(18,948)
6,182
8,038
2,135
4,210

(180,142)
138,906
79,953
15,24531,028
9,415
63,406401,622$11,155,358

¥

3,994
32,272¥996,524

2000$

Millions of Yen

Thousands of
U.S. Dollars (Note 3)

2000

1999

28,700290,307
2,482
3,639
25,1413,909
830
355,008¥ 58,900
258,663
2,229
3,006
19,477
2,706
736
345,717Long-Term Liabilities:
Long-term debt (less current portion)(Note 7) .........................
Retirement benefits ..................................................................
Other long-term liabilities ........................................................
Total long-term liabilities ..................................................

573,1621,035
360
574,557445,6121,060
386
447,058

5,407,189
9,764
3,396
5,420,349

Shareholders’ Equity (Notes 10 and 13):
Common stock,¥50 par value, authorized, 224,000,000 shares at March 31,
2000 and 150,000,000 shares at March 31, 1999;
issued and outstanding, 56,103,000 shares
at March 31, 2000 and 46,752,500 shares
at March 31, 1999 ...........................................................
Additional paid-in capital ........................................................
Legal reserve ............................................................................
Retained earnings ....................................................................
Total shareholders’ equity .................................................
Total ...................................................................................

39,752
41,913
952
170,286
252,903¥1,182,468

39,752
41,913
636
121,448
203,749¥996,524

375,019395,406
8,981
1,606,471
2,385,877$11,155,358

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities:
Short-term borrowings (Note 7) ...............................................
Current portion of long-term debt (Note 7) .............................
Trade notes payable ..................................................................
Trade accounts payable ............................................................
Income taxes payable ...............................................................
Accrued expenses ....................................................................
Other current liabilities ............................................................
Total current liabilities .....................................................

See notes to non-consolidated financial statements.
AIFUL Corporation

25

¥

2000

$

270,755
2,738,745
23,41534,330237,179
36,8787,830
3,349,132

Non-Consolidated Statements of Income
AIFUL Corporation
Years ended March 31, 2000 and 1999

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

Income:Interest on loans.......................................................................
Interest on deposits, securities and other..................................
Sales of property for sale ..........................................................
Other income ...........................................................................
Total income .......................................................................
Expenses:
Interest on borrowings .............................................................
Cost of sales of property for sale ..............................................
Charge-offs and provision for doubtful loans,advances to subsidiary and claims in bankruptcy .................
Salaries and other employee benefits ........................................
Advertising expenses ................................................................
Rental expenses ........................................................................
Supplies ...................................................................................
Depreciation and amortization .................................................
Provision for retirement benefits to directors
and corporate auditors .........................................................
Write-down of investment securities ........................................
Write-down of inventories .......................................................
Stock issue costs ......................................................................
Other expenses ........................................................................
Total expenses ....................................................................
Income Before Income Taxes .....................................................
Income Taxes (Notes 2.i and 8):
Current ....................................................................................
Deferred ...................................................................................
Net Income .........................................................................

2000

1999

2000

¥229,693
498
1,087
7,922
239,200¥196,526
569
1,031
7,410
205,536$2,166,915
4,698
10,25574,7362,256,604

24,2591,208

21,088
1,002

228,859
11,39640,30725,027
13,303
14,874
1,791
4,631

33,96722,185
12,814
13,3391,686
4,431

380,255
236,104
125,500
140,321
16,896
43,688

90
811
358

76
414
562
1,863
27,350140,777
64,759

849
7,651
3,377

27,831
154,490
84,71042,3991,793¥ 44,104

36,311¥ 28,448

Yen

262,557
1,457,453
799,151
399,991
16,915$ 416,075

U.S. Dollars

Amounts per Common Share (Note 2.p):
Net income ..............................................................................

¥ 786.13¥ 610.63

Cash dividends applicable to the year ......................................

60.00

60.00

See notes to non-consolidated financial statements.

AIFUL Corporation

26

$

7.42
0.57

Non-Consolidated Statements of Shareholders’ Equity
AIFUL Corporation
Years ended March 31, 2000 and 1999

Thousands
Number of
Shares of Common Stock
Issued andOutstanding

Balance at April 1, 1998 ..................................
Net income ....................................................
Cash dividends paid, ¥90 per share ...............
Transfer to legal reserve ..................................
Bonuses to directors and corporate auditors ...
Public offering (Note 10)................................
Balance at March 31, 1999...............................
Adjustment of retained earnings for
newly applied accounting fortax allocation (Note 2.i)..............................
Net income ....................................................
Cash dividends paid, ¥60 per share ...............
Transfer to legal reserve ..................................
Bonuses to directors and corporate auditors ...
Stock split (Note 10) ......................................
Balance at March 31, 2000 ..............................

42,753

Millions of Yen
CommonStock

Additional
Paid-in
CapitalLegal
Reserve

Retained
Earnings¥23,208¥25,373¥232¥ 97,442
28,448(3,967)
(404)
(71)

404
4,000
46,753

16,54439,752

16,54041,913

636

316
9,350
56,103¥39,752¥41,913¥952

Thousands of U.S. Dollars (Note 3)
Additional
CommonPaid-in
Legal
Stock
CapitalReserve

Balance at March 31, 1999...............................
Adjustment of retained earnings for
newly applied accounting fortax allocation (Note 2.i)..............................
Net income ....................................................
Cash dividends paid, $0.57 per share.............
Transfer to legal reserve .................................
Bonuses to directors and corporate auditors ...
Balance at March 31, 2000 ..............................
See notes to non-consolidated financial statements.

AIFUL Corporation

27

121,448

8,211
44,104(3,085)(316)(76)¥170,286

Retained
Earnings$375,019 $395,406$6,000 $1,145,736$375,019 $395,406

77,462416,075(29,104)
2,981(2,981)(717)$8,981 $1,606,471

Non-Consolidated Statements of Cash FlowsAIFUL Corporation
Years ended March 31, 2000 and 1999

Thousands of
U.S. Dollars (Note 3)

Millions of Yen

Operating Activities:
Income before income taxes ..........................................................
Adjustments for:
Income taxes—paid ..................................................................
Depreciation and amortization..................................................
Provision for doubtful loans, advances tosubsidiary and claims in bankruptcy ....................................
Stock issue costs ......................................................................
Bonds issue costs .....................................................................
Write-down of investment securities ........................................
Write-down of inventories .......................................................
Loss on disposal of property, plant and equipment...................
Loss on investment in anonymous association .........................
Changes in assets and liabilities:
Increase in loans ..................................................................
Decrease in claims bankruptcy .............................................
Decrease in inventories.........................................................
Decrease (increase) in prepaid expenses ..............................
Decrease in long-term prepaid expenses ..............................
Increase in other current assets ............................................
Increase (decrease) in trade notes payable ...........................
Increase in trade accounts payable .......................................
Increase in other current liabilities .......................................
Other—net ..............................................................................
Total adjustments ....................................................................
Net cash provided by operating activities .................................
Investing Activities:
Capital expenditures .....................................................................
Increase in long-term loans ...........................................................
Purchases of marketable and investment securities........................
Purchases of investments ..............................................................
Decrease (increase) in investment in trust .....................................
Other—net....................................................................................
Net cash used in investing activities ..........................................
Financing Activities:
Net decrease in short-term borrowings .........................................
Proceeds from long-term debt (Net of bonds issue costs) ..............
Repayments of long-term debt ......................................................
Proceeds from public offering (Net of stock issue costs) ................
Cash dividends paid .....................................................................
Net cash provided by financing activities .................................
Net Increase (decrease) in Cash and Cash Equivalents.......................
Cash and Cash Equivalents, Beginning of Year ..................................
Cash and Cash Equivalents, End of Year ...........................................
Noncash Investing Activities—
Capital expenditures by incurring liabilities ..................................
See notes to non-consolidated financial statements.

AIFUL Corporation

28

2000

1999

2000

¥ 84,710¥ 64,759$ 799,151(36,776)
4,631(37,960)
4,431(346,943)
43,688

8,711

82,179

386
811
358
213

6,681
1,863
182
414
562
249
2,000

(163,098)
600
778
(313)
519
(1,824)
253
633
1,306
(18)
(182,830)(98,120)(135,536)
1,607
558
59
759
(1,196)(1,265)
112
604
1,196
(154,680)(89,921)(1,538,660)
5,660
7,340
(2,953)
4,896(17,207)
2,387
5,972
12,320(170)(1,724,811)(925,660)(4,840)(8,584)(600)(3,000)(1,000)9(18,015)(4,678)(2,940)(4,967)(45,661)(80,981)(5,660)(28,302)(9,434)85(169,953)(28,800)
450,275(293,092)(3,085)125,298
9,163
71,850¥ 81,013(39,100)
383,086(279,794)
31,221(3,967)91,446(7,278)79,128¥ 71,850(29,104)
1,182,057
86,444
677,830$ 764,274

¥

¥

$

181

3,642
7,651
3,377
2,010

4,000
(218)
(8,803)

175(271,698)
4,247,877(2,765,018)

1,708

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

1. Basis of Presenting
Non-Consolidated
Financial Statements

The accompanying non-consolidated financial statements of Aiful Corporation (the“Company”) have been prepared from the Company’s non-consolidated financial statements
issued for domestic reporting purposes in accordance with the provisions set forth in theJapanese Securities and Exchange Law. The Company maintains its accounts and records inaccordance with the provisions set forth in the Commercial Code of Japan (the “Code”) andin conformity with accounting principles and practices generally accepted in Japan, which
are different in certain respects as to application and disclosure requirements of International
Accounting Standards. The non-consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting
principles and practices generally accepted in countries and jurisdictions other than Japan.
Effective April 1, 1999, the non-consolidated statements of cash flows are required to beprepared under Japanese accounting standards, and such statements for the years ended
March 31, 2000 and 1999 are presented herein.
In preparing these non-consolidated financial statements, certain reclassifications andrearrangements have been made to the Company’s financial statements issued domesticallyin order to present them in a form which is more familiar to readers outside Japan.
Certain reclassifications have been made to the prior year’s non-consolidated financial
statements to conform to the classifications used in 2000.

2. Summary of Significant
Accounting Policies

a. Non-Consolidation - The non-consolidated financial statements do not include the accountsof subsidiaries. Investments in subsidiaries and associated companies are stated at cost.
Consolidation of the Company’s subsidiaries would not significantly change the total
assets, retained earnings, total income, or net income reported in the accompanying nonconsolidated financial statements.
b. Cash Equivalents - Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cashequivalents include time deposits and money management fund, all of which mature or
become due within three months of the date of acquisition. The scope of cash and cash
equivalents in 1999 was changed from ¥72,218 million to ¥71,850 million to conformwith the presentation in 2000.
c. Inventories - Property for sale is stated at the lower of cost or market, cost being determined by the specific identification method. Depreciation of property currently to be used
for rental is computed by the same method, as applied to property, plant and equipment.
Property for sale under construction is stated at cost, cost being determined by the
specific identification method.
Supplies are stated at the most recent purchase price which approximates cost
determined by first-in, first-out method.
d. Investment Securities - Investment securities listed on a stock exchange are valued at thelower of cost or market, cost being determined by the moving-average method. All othersecurities are stated at cost, which is determined by the moving-average method, exceptthat write-downs are recorded for securities with values considered to be significantly
impaired.
e. Property, Plant and Equipment - Property, plant and equipment are stated at cost.
Depreciation is computed by the declining-balance method at rates based on the useful
lives prescribed under the tax regulations. The range of useful lives is principally from 20
to 50 years for buildings, from 3 to 20 years for machinery, equipment and others.

AIFUL Corporation

29

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

f. Software - Effective April 1, 1999, a new accounting method for software costs for internal
use was applied. Expenditure for the purchase of software, which meet certain criteria, arecapitalized as software and amortized by the straight-line method over the useful lives
internally determined (five years).
g. Retirement Benefits - Effective April 1, 1995, the Company amended severance andretirement plans and established a contributory funded pension plan, transferring all
prior plans’ obligations for employees’ retirement benefits (including all plan assets of thetrusteed pension plan) to the new pension plan. Also, reversals of the excess portion of
liability for employees’ retirement benefits are credited to income equally over sevenyears beginning with the fiscal year ended March 31, 1997 pursuant to the applicable tax
regulations. Under the plan, prior service costs are charged to income over ten years.
The net assets in the fund, including a government pension fund required by Japanese
law in the amount of ¥635 million, were ¥1,997 million at March 31, 1999 (the mostrecent date of available information).
Balances of liability for retirement benefit include those to directors and corporate
auditors as follows:
At March 31:

2000
1999

Millions of Yen

¥909
892

Thousands of
U.S. Dollars$8,575h. Allowances for Doubtful Loans, Advances to Subsidiary and Claims in Bankruptcy Allowances for doubtful loans, advances to a subsidiary and claims in bankruptcy arestated at the higher of either management’s estimate or the maximum amount which isallowed under tax regulations (the actual rate of past charge-offs).
i. Income Taxes - Income taxes are provided for at the amounts currently payable for eachyear. The tax effect of temporary difference between assets and liabilities recognized forfinancial reporting purposes and those for tax purposes is not recorded for the year
ended March 31, 1999.
Effective April 1, 1999, the Company adopted accounting for allocation of income
taxes based on the asset and liability method. The cumulative effect of the application ofinterperiod tax allocation in prior years in the amount of ¥8,211 million ($77,462 thousand) is included as an adjustment to retained earnings as of April 1, 1999. Deferredincome taxes are recorded to reflect the impact of temporary differences between assets
and liabilities recognized for financial reporting purposes and such amounts recognized
for tax purposes. These deferred taxes are measured by applying currently enacted tax
laws and the temporary differences.
j. Interest on Loans - Interest on loans is recorded on an accrual basis. In accordance withthe practice prevailing in the industry, the Company records accrued interest to theextent that the realization of such income is considered to be certain.
k. Stock Issue Costs - Stock issue costs are charged to income as incurred.
l. Bonds Issue Costs - Bonds issue costs, which are included in other assets, are amortized
ratably over periods up to three years.
m. Leases - All leases are accounted for as operating leases. Under Japanese accounting
standards for leases, finance leases that deem to transfer ownership of the leased property
to the lessee are to be capitalized, while other finance leases are permitted to beaccounted for as operating lease transactions if certain “as if capitalized” information isdisclosed in the notes to the lessee’s non-consolidated financial statements.
AIFUL Corporation

30

n. Foreign Currency Transactions - Short-term receivables and payables denominated inforeign currencies are translated into Japanese yen at the current exchange rates at thebalance sheet date.
Long-term receivables and payables denominated in foreign currencies are translated
into Japanese yen at historical rates except for those hedged by forward exchange contracts
or currency swap agreement which are translated at such fixed exchange rates. In the casewhere there is a significant fluctuation of currencies with possible exchange losses, longterm receivables or payables denominated in foreign currencies are translated at the current exchange rates as of each balance sheet date.
o. Leveraged Lease - The Company initially records, as other assets, an investment of ¥100
million in an anonymous association which is engaged in aircraft leasing, at cost, andadjusts the carrying amount of such investment to recognize the Company’s interests inthe earnings or losses of such association. If accumulated losses attributable to theCompany exceed ¥100 million, the excess amount is accounted for as other long-term
liabilities and the current losses as other expenses. Other long-term liabilities were ¥127
million ($1,198 thousand) and ¥129 million, and other income and expenses were ¥2
million ($19 thousand) and ¥2 million for the years ended March 31, 2000 and 1999,
respectively.
p. Per Share Information - The computation of net income per share is based on theweighted average number of shares of common stock outstanding during each year,
retroactively adjusted for stock splits. The average number of common shares used in thecomputation was as follows:Year Ended March 31:

2000
1999

Average
Number of
Shares56,103,000
46,588,116

Cash dividends per share presented in the accompanying non-consolidated statements ofincome are dividends applicable to the respective years including dividends to be paid after
the end of the year without giving retroactive adjustment for any subsequent stock split.
Fully diluted net income per share is not presented in 2000 and 1999 because no dilutive
securities were outstanding for the years ended March 31, 2000 and 1999, respectively.
3. Translation into
United States Dollars

AIFUL Corporation

The non-consolidated financial statements are stated in Japanese yen, the currency of thecountry in which the Company is incorporated and operates. The translation of Japanese
yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥106 to US$1, the approximate rate ofexchange at March 31, 2000. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

31Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

Loans at March 31, 2000 and 1999 consisted of the following (before allowance for doubtful
loans):

4. LoansMillions of Yen

2000

Unsecured (1) ..........................................
Secured (2)................................................
Guaranteed (3) ..........................................
Total ..................................................

¥ 809,362
181,429
10,289¥1,001,080

Thousands of
U.S. Dollars

1999

2000

¥690,704
137,755
9,523¥837,982$7,635,491
1,711,594
97,066$9,444,151(1) Loans to individuals without offering security or providing a third-party guarantee. The
credit limit is generally ¥500,000 per customer.
(2) Loans to individuals or corporations with real estate as collateral. Credit limits are subject to an evaluation of the real estate, creditworthiness of the borrower, and approval of
the Credit Department of the Company.
(3) Loans up to ¥2.4 million to self-employed individuals, small business loans, subject to theprovision of a third-party guarantee by an individual with regular occupation and income.
Loans and claims in bankruptcy in non-consolidated balance sheets included loans inlegal bankruptcy of ¥16,299 million ($153,764 thousand), nonaccrual loans of ¥15,797
million ($149,028 thousand), accruing loans contractually past due three months ormore as to principal or interest payments of ¥5,251 million ($49,538 thousand) and
restructured loans of ¥20,321 million ($191,708 thousand) at March 31, 2000.
Loans in legal bankruptcy are loans in which accruals of interest are discontinued(excluding the portion recognized as bad debts), based on management’s judgment as tothe collectibility of principal or interest resulting from the past due payment of interest or
principal and other factors. Allowances for claims in bankruptcy are stated at suchamount less net realizable value of collateral. Nonaccrual loans are loans in which accruals of interest are discontinued and those other than loans in legal bankruptcy and loans
granting deferral of interest payment to the debtors in financial difficulties to assist themin their recovery. Loans classified as loans in legal bankruptcy and past due loans are
excluded. Restructured loans are loans on which creditors grant concessions (e.g.,
reduction of the stated interest rate, deferral of interest payment, extension of maturity
date, waiver of the face amount, or other concessive measures) to the debtors in financial
difficulties to assist them in their recovery and eventually enable them to pay thecreditors. Loans classified as loans in legal bankruptcy, nonaccrual loans and accruingloans contractually past due three months or more are excluded.
5. Inventories

Inventories at March 31, 2000 and 1999 consisted of the following:
Millions of Yen

Property for sale........................................
Property for sale under construction .........
Supplies ....................................................
Total ...................................................

AIFUL Corporation

32

Thousands of
U.S. Dollars

2000

1999

2000

¥ 901
1,243
14
¥2,158¥2,998132
13¥3,143$ 8,500
11,726132$20,358

6. Investment Securities

Carrying value and market value of marketable securities included in investment securities at
March 31, 2000 and 1999 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2000
Carrying Market
Value
Value

Investment securities ................. ¥3,966¥5,255

1999
Carrying Market
Value
Value

2000
Carrying Market
Value
Value

¥4,753 ¥5,308$37,415 $49,575

The difference between the above carrying amounts and the amounts shown in the accompanying non-consolidated balance sheets principally consist of non-marketable securities forwhich there is no readily-available market from which to obtain or calculate the market value
thereof.
7. Short-Term Borrowings andLong-Term Debt

Short-term borrowings substantially consisted of commercial paper and notes payable,
generally due in one year.
Short-term borrowings at March 31, 2000 and 1999 consisted of the following:

Millions of Yen

Commercial Paper, 0.9% (0.9% in 1999) ..................
Loans from banks, 1.2% to 2.4%
(1.7% to 3.6% in 1999) ........................................
Loans from other financial institutions,
1.9% to 2.7% (3.4% in 1999) ...............................
Syndicated Loans (2.0% in 1999)..............................
Other (principally from leasing and factoring
companies), 3.4% (2.5% to 3.8% in 1999) ...........
Total ....................................................................

AIFUL Corporation

33

Thousands of
U.S. Dollars

2000

1999

2000

¥15,000¥30,000$141,509

11,50013,500108,491

1,200
–

500
10,50011,321–

1,000¥28,700

4,400¥58,900

9,434$270,755

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

Long-term debt at March 31, 2000 and 1999 consisted of the following:
Millions of Yen

2000

1999

Thousands of
U.S. Dollars

2000

Loans from banks, 1.1% to 4.2% (1.5% to 5.1%
in 1999), due serially to 2005 ................................. ¥331,065 ¥232,604 $3,123,255
Loans from other financial institutions, 2.2% to4.7%(2.2% to 4.7% in 1999), due serially to 2005 ......... 255,705 256,527
2,412,311
Syndicated Loans, 1.7%, to 2.6%
(2.0% to 2.6% in 1999), due to 2001......................
30,58029,241
288,491
Unsecured 2.0% yen straight bonds, due 2000 ...........
30,00030,000283,019
Unsecured 2.6% yen straight bonds, due 2001............
6,000
6,000
56,604
Unsecured 2.35% to 2.425% yen straight bonds,
due 2002 ................................................................
40,00030,000377,358
Unsecured 3.2% yen straight bonds, due 2003 ...........
5,000
5,000
47,170Unsecured 2.09% to 2.53% yen straight bonds,
due 2004 ................................................................
25,000235,849
Unsecured 3.27% yen straight bonds, due 2006 .........
15,000141,509
Unsecured 3.28% yen straight bonds, due 2009 .........
8,000
75,472
Unsecured 3.0% yen straight bonds, due 2010 ...........
10,00094,340Unsecured 3.65% Euro-yen straight bonds,
due 2003.................................................................
9,500
9,500
89,623
Unsecured variable rate Euro-yen straight bonds,
due 2006 (1.88% at March 31, 2000) .....................
15,000141,509
Unsecured 1.73% medium-term notes, due 2002 .......
3,000
28,302
Unsecured 1.75% medium-term notes, due 2002 .......
3,000
28,302Other (principally from leasing and factoring
companies), 2.2% to 6.5% (2.6% to 6.9%
in 1999), due serially to 2003 .................................
76,619 105,403
722,820
Total....................................................................... 863,469 704,275
8,145,934
Less current portion ................................................ (290,307) (258,663) (2,738,745)
Long-term debt, less current portion .................. ¥573,162 ¥445,612 $5,407,189
The Company has an interest rate swap agreement that effectively converts variable rate interest payable on ¥3,000 million of medium-term notes, due 2002, to a fixed rate of 1.75%.
The aggregate annual maturities of long-term debt at March 31, 2000 were as follows:Year ending March 31

2001 .......................................................................
2002 .......................................................................
2003 .......................................................................
2004 .......................................................................
2005 .......................................................................
2006 and thereafter .....................................................
Total.......................................................................
AIFUL Corporation

34

Millions of Yen

Thousands of
U.S. Dollars¥290,307
251,429
160,570
64,23048,93348,000¥863,469$2,738,745
2,371,972
1,514,811
605,943
461,632
452,831$8,145,934

At March 31, 2000, the following assets were pledged as collateral for short-term borrowings
and long-term debt (including current portion of long-term debt).

Time deposits .................................................................
Loans ..........................................................................
Investment securities ......................................................
Property, plant and equipment, net ofaccumulated depreciation...........................................
Total .........................................................................
Related liabilities:
Short-term borrowings ..............................................
Long-term debt(including current portion of long-term debt) .......

Millions of Yen

Thousands of
U.S. Dollars¥
820
370,898
147

$
7,736
3,499,038
1,386

16,386¥388,251

154,585$3,662,745

¥

$

1,200

¥342,341

11,321$3,229,632

In addition, the Company has committed to pledge as collateral for loans other than thoseshown in the above table, if requested by lending financial institutions.
At March 31, 2000, related liabilities for which lending financial institutions can request
to pledge collateral consisted of the following:

Short-term borrowings ...................................................
Long-term debt(including current portion of long-term debt) ...........

AIFUL Corporation

35

Millions of Yen

Thousands of
U.S. Dollars¥ 11,000$ 103,774¥111,434$1,051,264

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

8. Income Taxes

The Company is subject to Japanese national and local income taxes which, in the aggregate,
resulted in normal effective statutory tax rates of approximately 41.9% and 47.6% for the years
ended March 31, 2000 and 1999, respectively. The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March 31, 2000 are as follows:Year ended March 31, 2000
Thousands ofMillions of Yen
U.S. Dollars

Current Deferred Tax Assets:
Charge-offs for doubtful loans ...................................
Provision for doubtful loans ......................................
Write-down of property for sale .................................
Accrued interest on loans not recorded.......................
Accrued bonuses .......................................................
Enterprise tax payable ................................................
Other..........................................................................
Current deferred tax assets ................................
Non-current Deferred Tax Assets:
Depreciation and amortization....................................
Interest loss on liabilities for land ..............................
Provision for retirement benefits to directors
and corporate auditors ..........................................
Other..........................................................................
Non-current deferred tax assets .........................

¥ 431
6,329
54
108
277
1,764
43
¥9,006$ 4,066
59,708
509
1,019
2,613
16,641
406$84,962¥ 363
177$ 3,425
1,670

381
77
¥ 998

3,594
726
$ 9,415

A reconciliation between the normal effective statutory tax rate for the year ended March 31,
2000 and the actual effective tax rates reflected in the accompanying non-consolidated statement of income is as follows:Year ended March 31

Normal effective statutory tax rates ................................
Increase in tax rate resulting from:
Temporary difference between tax
and financial reporting ..............................................
Additional taxation on undistributed income .............
Other, net...................................................................
Actual effective tax rates..................................................

2000

1999

41.9%

47.6%

–
4.7
1.3
47.9%

3.9
3.7
0.9
56.1%

The normal effective tax rate reflected in the accompanying non-consolidated statement ofincome for the year ended March 31, 1999 differs from the actual effective tax rate, primarily
due to the effect of permanently non-deductible expenses and temporary differences in therecognition of asset and liability items for tax and financial reporting purposes.

AIFUL Corporation

36

9. Related Party Transaction

Advances to a subsidiary at March 31, 2000 and 1999 were ¥3,403 million ($32,104 thousand), and ¥3,403 million, respectively.
The Company exempts interest from such advances in consideration of the subsidiary’s
financial condition.

10. Shareholders’ Equity

Under the Japanese Commercial Code (the “Code”), at least 50% of the issue price of newshares, resolved by the Board of Directors with a minimum of the par value, is to be designated as stated capital. The portion which is to be designated as stated capital is determinedby resolution of the Board of Directors. Proceeds in excess of the amounts designated asstated capital are credited to additional paid-in capital. The Company may transfer portionsof additional paid-in capital to stated capital by resolution of the Board of Directors.
Under the Code, the Company is required to appropriate as a legal reserve portions ofretained earnings in the amount equal to at least 10% of cash payments appropriated in eachfinancial period, including cash dividends and bonuses to directors and corporate auditors,
until the reserve equals 25% of the stated capital. This reserve is not available for cash dividends but may be used to reduce a deficit by resolution of the shareholders or transferred tothe stated capital by resolution of the Board of Directors.
The Company may also transfer portions of unappropriated retained earnings to statedcapital by resolution of the shareholders.
Under the Code, the Company may issue new shares of its common stock to the existing
shareholders without consideration pursuant to resolution of the Board of Directors as astock split. The Company may make such a stock split to the extent that the amount calculated by multiplying the number of issued shares after the stock split by par value per share
does not exceed the stated capital and that the amount calculated by dividing the total
amount of shareholders’ equity by the number of issued shares after the stock split shall not
be less than ¥1,000.
On April 16, 1998, the Company issued 4,000,000 shares of stock and received grossproceeds totalling to ¥33,084 million. The offering was made to certain persons in offshoretransactions according to Regulation under the United States Securities Act of 1993 as
amended (the “Securities Act”), and in the United States to qualified institutional buyers inaccordance with Rule 144A under the Securities Act. Of the proceeds from the offering,¥16,544 million and ¥16,540 million were credited to common stock and additional paid-in
capital, respectively.
On January 13, 1999, the Board of Directors declared a six-for-five stock split to be distributed on May 20, 1999 to shareholders of record on March 31, 1999. As a result, thenumber of shares issued increased by 9,350,500 shares.
At the Shareholders’ General Meeting held on June 29, 1999 the number of commonshares the Company is authorized to issue was increased from 150 million to 224 million.
Dividends are approved at the Shareholders’ General Meeting held subsequent to thefiscal year to which the dividends are applicable. Semiannual interim dividends may also
be paid upon resolution of the Board of Directors, subject to certain limitations imposedby the Code.

AIFUL Corporation

37

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

11. Leases

The Company leases certain vehicles, computer equipment, furniture and fixtures, officespace and other assets.
Total rental expenses including lease payments under finance leases, for the years ended
March 31, 2000 and 1999 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Total Rental
Expenses

Lease Payments
Under FinanceLeases¥14,874
13,339¥6,352
5,820

Years ended March 31:
2000 ...................................
1999 ...................................

Lease Payments
Total Rental Under FinanceExpenses
Leases$140,321$59,925

Pro forma information of leased property such as acquisition cost, accumulated depre
ciation, obligation under finance lease, depreciation expense, and interest expense offinance leases that do not transfer ownership of the leased property to the lessee on an “asif capitalized” basis for the years ended March 31, 2000 and 1999 were as follows:

Millions of Yen
Machinery, vehicles
and equipment

Acquisition cost ..........................................
Accumulated depreciation ..........................
Net leased property .............................

Thousands of
U.S. Dollars
Machinery, vehicles
and equipment

2000

1999

2000

¥27,497
18,710¥ 8,787¥23,439
15,640¥ 7,799$259,405
176,509$ 82,896

Obligations under finance leases:

Millions of Yen

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

Thousands of
U.S. Dollars

2000

1999

2000

¥ 5,309
6,379¥11,688¥ 5,188
5,809¥10,997$ 50,085
60,179$110,264

Depreciation expense and interest expense, which are not reflected in the accompanying nonconsolidated statements of income, computed under a declining-balance method and theinterest method, respectively for the years ended March 31, 2000 and 1999 were as follows:

Millions of Yen

Depreciation expense ..................................
Interest expense ..........................................

AIFUL Corporation

38

Thousands of
U.S. Dollars

2000

1999

2000

¥5,605493¥5,656487$52,877
4,651

12. Derivatives

The Company enters into interest rate swap and interest rate cap contracts as a means ofmanaging its interest rate exposure on certain liabilities.
Such derivative transactions are entered into to hedge interest exposures incorporated
with the Company’s business. Accordingly, market risk in these derivatives is theoreticallyoffset by opposite movements in the value of hedged liabilities. The Company does not holdor issue derivatives for trading and speculative purposes.
Because the counterparties to these derivatives are limited to major domestic financial
institutions, the Company does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Company have been made in accordance withinternal policies which regulate the authorization and credit limit amounts.
At March 31, 2000 and 1999 the Company had outstanding derivatives contracts as follows:
Millions of Yen

2000
Contract or
Notional Amount

1999

Unrealized
Fair Value Gain (Loss)

Contract or
Notional AmountInterest Rate Swaps:
Fixed rate payment,
floating rate receipt ¥207,880 ¥(7,351) ¥(7,351)
Interest Rate Caps:
Purchased interest
rate caps ............... 240,000
330 (1,255)

Fair Value

Unrealized
Gain (Loss)¥109,460 ¥ (608)¥ (608)260,000(1,325)850

Thousands of U.S. Dollars

2000
Contract or
Notional Amount

Fair Value

Unrealized
Gain (Loss)

Interest Rate Swaps:
Fixed rate payment,
floating rate receipt $1,961,132 $(69,349) $(69,349)
Interest Rate Caps:
Purchased interest
rate caps................ 2,264,151
3,113 (11,830)
Estimated fair values were obtained from banks.
Fees paid on purchased interest rate caps are deferred and amortized over the life of therelated contract as adjustments to interest expense on the related liabilities.
Unamortized deferred fees at March 31, 2000 were ¥1,585 million ($14,953 thousand).
Unrealized loss represents the difference between fair value and unamortized deferred fees.
The contract or notional amounts of derivatives which are shown in the above table do
not represent the amounts exchanged by the parties and do not measure the Company’s
exposure to credit or market risk.

AIFUL Corporation

39

Notes to Non-Consolidated Financial Statements
AIFUL Corporation
Years ended March 31, 2000 and 1999

13. Subsequent Events

a. On February 21, 2000, the Board of Directors declared a three-for-two stock split toshareholders of record on March 31, 2000. As a result, the number of issued and outstanding common stock increased by 28,051,500 shares effective May 22, 2000. This
stock split has not been reflected in the accompanying non-consolidated statements ofincome. The amounts per common share, adjusted for this stock split, for the years
ended March 31, 2000 and 1999 were ¥524.09 ($4.94) and ¥339.24, respectively.
b. On June 1, 2000, the Company acquired all 650,000 shares of the common stock of
Kabushiki Kaisha Shinwa in exchange for 721,500 shares of the Company’s common
stock, according to an agreement dated April 27, 2000. As a result, Kabushiki Kaisha
Shinwa became a wholly owned subsidiary of the Company.
The summary of Kabushiki Kaisha Shinwa is as follows:
Corporate Name .................................
Corporate Headquarters .....................
President / Representative Director .....
Date of Establishment.........................
Main Operations.................................
Total Assets ........................................
Shareholders’ Equity...........................
Common Stock ..................................

Kabushiki Kaisha Shinwa
Nakamura-ku, Nagoya, Japan
Kenji Niwa
April 1976
Consumer finance¥16,567 million as of May 31, 1999
¥3,832 million as of May 31, 1999
¥325 millionc. On May 22, 2000, the Board of Directors resolved to propose the following plan of appropriations of retained earnings for the year ended March 31, 2000 for approval at the
Shareholders’ General Meeting held on June 29, 2000:

Cash dividends, ¥30 ($0.28) per share ...........................
Transfer to legal reserve ..................................................
Bonuses to directors and corporate auditors....................

AIFUL Corporation

40

Millions of Yen

Thousands of
U.S. Dollars¥1,683180
99$15,8771,698
934

Independent Auditors’ Report

To the Board of Directors of
Aiful Corporation:
We have examined the non-consolidated balance sheets of Aiful Corporation as of March 31,
2000 and 1999, and the related non-consolidated statements of income, shareholders’ equity,and cash flows for the years then ended, all expressed in Japanese yen. Our examinations weremade in accordance with auditing standards, procedures and practices generally accepted
and applied in Japan and, accordingly, included such tests of the accounting records andsuch other auditing procedures as we considered necessary in the circumstances.
In our opinion, the non-consolidated financial statements referred to above present fairly thefinancial position of Aiful Corporation as of March 31, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with accounting principles
and practices generally accepted in Japan applied on a consistent basis.
As described in Note 2, effective April 1, 1999, the non-consolidated financial statements
have been prepared in accordance with the new accounting standards for interperiod allocationof income taxes.
Our examinations also comprehended the translation of Japanese yen amounts into U.S. dollar
amounts and, in our opinion, such translation has been made in conformity with the basis
stated in Note 3. Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

DELOITTE TOUCHE TOHMATSU
Kyoto, Japan
June 29, 2000

AIFUL Corporation

41

SHIMBASHI & CO.
Osaka, JapanBoard of Directors
AIFUL Corporation
As of June 29, 2000

President / Representative Director

Yoshitaka Fukuda

Senior Managing Director / Representative Director

Taichi Kawakita

Restaurant & Entertainment Department
Real Estate Department

Senior Managing Directors

Takashi Noda

General Manager – Finance Division
General Manager – Business Development Department
Information Systems Department
Administration Office

Sadatoshi Kobayashi
Managing Director

Yuji Kataoka

General Manager – Management Planning Division

Directors

Yasutaka Fukuda

Deputy General Manager – Finance Division
General Manager – Finance Department

Yoshimasa Nishimura

Inspection Department

Koji Imada

General Manager – Personnel Division

Shintaro Hashima

General Affairs Department
Legal Department

Takashi Koumoto

General Manager – Accounting Department

Yoshinori Sogabe

Public Relations Department

Masami Munetake

Administration Department
Credit Risk Management Department
Operation Department

Yasuo Yanagibashi

General Manager – Loan Business Division

Masayuki Sato

Deputy General Manager – Loan Business Division
General Manager – Sales Finance Department

Hiroshi Abe

Deputy General Manager – Personnel Division
General Manager – Personnel Department

Standing Corporate Auditors

Tadao Mushiake
Yoshitaka Ebisuzaki

Corporate Auditor

AIFUL Corporation

Yoshinobu Azuma

42

Investor Information
AIFUL Corporation
As of March 31, 2000

Corporate Name .................................... AIFUL Corporation
Date of Establishment ........................... April 1967
Financial Year ........................................ April 1 to March 31
Independent Auditors ........................... Deloitte Touche Tohmatsu / Shimbashi & Co.
Transfer Agent and Registrar ................ The Sumitomo Trust & Banking Co., Ltd.
Paid-in Capital ....................................... ¥39,752 million
Number of Shares of Common Stock ... Authorized: 224,000,000 shares
Issued and Outstanding: 56,103,000 shares
Number of Shareholders ....................... 4,959
Number of Employees ........................... 3,263

Corporate Headquarters
31 Higashikaigawa-cho, Saiin Ukyo-ku, Kyoto 615-0057, Japan
Phone 075-321-1701
For further information and additional copies of thisAnnual Report, please contact:
Investor Relations Section
Tokyo Office
Tokyo-Ekimae Bldg. / 5th Floor
1-5, 2-chome Yaesu, Chuo-ku, Tokyo 104-0028, Japan
http://www.ir-aiful.com
e-mail: ir-aiful@oak.ocn.ne.jp

Common Stock Price Range (¥)
25,00020,00015,00010,0005,000

Fiscal year

’98 3rd’98 4th’99 1st’99 2nd’99 3rd’99 4thHigh (¥)
Low (¥)

7,400
5,080

9,700 14,820
6,490 8,270

20,90014,90018,75012,50023,110 12,450
9,500 8,840’00 1st*Stock split (1.2 for 1) on May 20, 1999.
*Stock split (1.5 for 1) on May 22, 2000.
AIFUL Corporation

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Copyright © 2000 AIFUL Corporation

AIFUL Corporation
31 Higashikaigawa-cho, Saiin Ukyo-ku, Kyoto 615-0057, Japan