Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

MARUI GROUP CO., LTD. and Its Consolidated Subsidiaries
As of and for the fiscal years ended March 31, 2017 and 2018

1. BASIS OF PRESENTATION(4) Investment securities

The accompanying consolidated financial statements of MARUI GROUP CO., LTD. (“the Company”) and its consolidated subsidiaries (collectively, “the Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments andExchange Act of Japan and its related accounting regulations as well as in conformity with accounting principles generally
accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2017 consolidated financial statements to conform to theclassifications used in 2018.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and operates.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements in Japanese yen
do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto were translated
from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥106 = $1, the approximate rate of exchange
at March 31, 2018, and were then rounded down to the nearest thousand. As a result, the totals shown in the accompanying
consolidated financial statements in U.S. dollars do not necessarily agree with the sums of the individual amounts. This translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan. Suchtranslation should not be construed as a representation that Japanese yen could be converted into U.S. dollars at that or any
other rate.

Investment securities held by the Group are all classified as available-for-sale securities.
Available-for-sale securities with a determinable market value are stated at fair value based on the market value at the balance sheet date, and unrealized gains or losses, net of applicable income taxes, are reported as a separate component of net
assets. Cost of securities sold is computed based on the moving-average method. Available-for-sale securities without a determinable market value are stated at cost, principally determined by the moving-average method.
Investments in unconsolidated subsidiaries and affiliates are stated at cost determined by the moving-average method.

(5) Inventories
Inventories are measured at the lower of cost determined by the monthly weighted-average method or net selling value.

(6) Depreciation and amortization
Property and equipment (excluding leased assets) are depreciated by the straight-line method.
Intangible assets are amortized by the straight-line method. Capitalized computer software costs for internal use are amortized by the straight-line method over the estimated useful lives (within five years).
For finance leases that do not transfer ownership of the leased assets to the lessee, leased assets are depreciated by thestraight-line method over the lease terms with no residual value.

(7) Allowance for doubtful accounts
The allowance for doubtful accounts is stated at the amount determined based on the historical experience of bad debt withrespect to ordinary receivables (“general reserve”), plus an estimate of uncollectible amounts determined by reference to specificdoubtful receivables of customers experiencing financial difficulties (“specific reserve”).

(8) Provision for bonuses

2. SIGNIFICANT ACCOUNTING POLICIESThe provision for bonuses is accrued at the fiscal year-end to which such bonuses are attributable.

(1) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements as of and for the fiscal years ended March 31, 2017 and 2018, include the accounts of
the Company and its nine significant subsidiaries.
Under the control or influence concept, those companies in which the Company, either directly or indirectly, is able to exercise control over operations are consolidated, and those companies over which the Company has the ability to exercise
significant influence are accounted for using the equity method. For the fiscal years ended March 31, 2017 and 2018, there
was no subsidiary or affiliate accounted for using the equity method. Investments in the remaining unconsolidated subsidiaries
and affiliates are stated at cost. If the equity method of accounting was applied to the investments in these companies, the effecton the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions have been eliminated in consolidation.
The fiscal year-end of all consolidated subsidiaries is March 31, the same as that of the Company.

(9) Provision for point card certificates
Credit points are awarded to customers when they make purchases using EPOS cards and, upon request, the Company will
issue gift certificates or allow customers to use their accumulated credit points for their payment.
The provision for point card certificates is accrued to the estimated amount required based on the balance of credit points
awarded to cardholders outstanding at the fiscal year-end.

(10) Provision for loss on redemption of gift certificates
The monetary value of gift certificates and other certificates that have not been redeemed for a set period of time after issuanceis recognized as income. However, some gift certificates and other certificates can be redeemed after the recognition of income.
The provision for loss on redemption of gift certificates is provided at the estimated amount to be redeemed in the future
based on historical experience.

(2) Foreign currency translation
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rates
prevailing at the consolidated balance sheet dates. All revenues and expenses associated with foreign currencies are translated
into Japanese yen at the exchange rates prevailing when such transactions were made. The resulting exchange gains or losses
are credited or charged to income.

(11) Provision for loss on interest repayment
The provision for loss on interest repayment is provided to the estimated amount of repayment claims on consumer loaninterests at the fiscal year-end.

(12) Provision for loss on guarantees(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, the Group considers cash on hand, readily available deposits, and highly
liquid short-term investments with maturities of three months or less when purchased that are exposed to an insignificant risk ofchanges in value to be cash and cash equivalents.

118

The provision for loss on guarantees is provided at the estimated amount of loss arising from the Group’s guarantee obligationsof customers’ liabilities in relation to loans to individuals from financial institutions with which the Group has guarantee service
arrangements.

119Notes to Consolidated Financial Statements(13) Provision for stock benefits
The provision for stock benefits is provided at the estimated amount for stock benefits to directors and employees at the fiscal
year-end in accordance with the internal rule for stock delivery.

(14) Basis for revenue recognition

Notes to Consolidated Financial Statements

The following standard and guidance were issued but not yet applied.
• “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 30, 2018)• “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 30, 2018)(15) Hedge accounting(1) Overview
The above standard and guidance provide comprehensive principles for revenue recognition. Under the standard and guidance,
revenue is recognized by applying the following five steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.

The Group utilizes interest rate swaps to mitigate the fluctuation risk of interests on loans payable.
The Group applies the special accounting treatment for interest rate swaps as all requirements for this treatment are fulfilled. The Group omits the evaluation of hedge effectiveness for interest rate swaps under the special accounting treatment.

Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

(16) Consumption taxes(2) Scheduled date of application
The Company plans to apply the aforementioned standard and guidance from the beginning of the fiscal year ending March
31, 2022.

The charges for installment sales and interest income on consumer loans are recognized on an accrual basis based on theremaining loan balances.

National and local consumption taxes are accounted for by the tax-excluded method. Non-deductible consumption tax andother taxes imposed on fixed assets are recorded as expenses as incurred.

3. ACCOUNTING STANDARD ISSUED BUT NOT YET APPLIED
The following guidance was issued but not yet applied.
• “Implementation Guidance on Tax Effect Accounting” (the Accounting Standards Board of Japan (“ASBJ”) Guidance No. 28,
February 16, 2018)• “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, February 16, 2018)(1) Overview
The above guidance was revised in regard to the treatments for taxable temporary differences for investments in subsidiaries
within the context of non-consolidated financial statements, and to clarify the treatments in determining recoverability ofdeferred tax assets in a company which was categorized as “Type 1” according to the guidance.
(2) Scheduled date of application
The Company plans to apply the aforementioned guidance from the beginning of the fiscal year ending March 31, 2019.

(3) Effect of application
The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these newstandard and guidance on the consolidated financial statements.

4. CHANGE IN PRESENTATION
Consolidated Balance Sheets
From the fiscal year ended March 31, 2018, the account “Investments in unconsolidated subsidiaries and affiliates,” which
was previously shown as a separate line item under “Investments and other assets,” was reclassified into “Investment securities”
or “Other” for the clearer presentation of the consolidated balance sheets. The balance in the previous fiscal year has been
reclassified to conform to the current year’s presentation. As a result, the amount of ¥872 million presented as “Investments inunconsolidated subsidiaries and affiliates” was reclassified and included in “Investment securities” and “Other” in the amounts of¥740 million and ¥132 million, respectively.

Consolidated Statements of Cash Flows(3) Effect of application
The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of the aforementioned guidance on the consolidated financial statements.

120

The account “Impairment loss,” which was previously included in “Other, net” under “Cash flows from operating activities,” is shown
separately for the fiscal year ended March 31, 2018. The balance in the previous fiscal year has been reclassified to conform to thecurrent year’s presentation. As a result, the amount of ¥4,505 million presented as “Other, net” in the previous fiscal year’s consolidated statement of cash flows is reclassified as “Impairment loss” of ¥291 million and “Other, net” of ¥4,213 million.

121

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

5. ADDITIONAL INFORMATION

6. ACCOUNTS RECEIVABLE–INSTALLMENT

Stock Benefit Employee Stock Ownership Plan Trust

The following balances for lump sums receivable and revolving receivable are securitized and are therefore excluded from theconsolidated balance sheets as of March 31, 2017 and 2018:

The Company has an incentive plan using the “Stock Benefit Employee Stock Ownership Plan Trust (“ESOP Trust”)” to provide
an incentive to the Group’s employees holding senior management positions (hereinafter the “Senior Managers”), aiming toenhance their commitment to further improve the business performance and corporate value over the medium-to-long term.

Millions of yen
2017(1) Overview of the plan
The Company sets up a trust with the Senior Managers who fulfill certain requirements as beneficiaries, by contributing funds toacquire the Company’s stock. The trust acquires the Company’s own stock from the stock market for the number of shares requiredfor delivering to the Senior Managers based on the prescribed internal rule for stock delivery. Then, in accordance with the internal
rule, the Company makes a delivery or payment of its shares and cash equivalents to the amount obtained by converting a part ofthe shares into cash based on the rank of each Senior Manager and degree of achievement of the performance target.
The Company applies the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.
through Trusts” (PITF No. 30, March 26, 2015) for the accounting treatment of the plan.
(2) The Company’s shares held at the trust
The Company’s shares held at the trust are carried at their book value at the trust (excluding incidental expenses) and accounted
for as treasury stock under net assets. The book value of applicable treasury stock is ¥479 million ($4,518 thousand), and thenumber of shares is 340,800 shares as of March 31, 2017 and 2018.

Officer Remuneration Board Incentive Plan Trust
The Company also has an incentive plan using the “Officer Remuneration Board Incentive Plan Trust (“BIP Trust”)” to provide an
incentive to (i) Directors and Executive Officers (excluding External Directors and non-residents in Japan) of the Company and(ii) Directors of 11 subsidiaries of the Group (excluding External Directors and non-residents in Japan; collectively, with the
Directors and Executive Officers of the Company, the “Executives”).

Card shopping:
Lump sums receivable
Revolving receivable¥55,000
9,290

Thousands of
U.S. dollars (Note 1)

2018

2018

¥69,973
2,776$660,122
26,188

7. LOAN COMMITMENTS
Certain consolidated subsidiaries that operate in the credit card business provide consumer loan services to customers.
The unused balance of loans contingent with the loan commitments is as follows:
Millions of yen

Total loan limits
Amount executed as loans
Unused balance

Thousands of
U.S. dollars (Note 1)

2017

2018

2018

¥1,139,270
140,569¥  998,701¥1,188,248
146,011¥1,042,237$11,209,886
1,377,462$ 9,832,424

Under the provisions of the loan service contract, the Group is able to decline a loan request or decrease a loan limit when acustomer’s financial condition or other circumstances change. Thus, the total unused balance will not necessarily be executed as loans.

8. INVESTMENTS IN STOCKS OF UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
The balance of “Investment securities” includes the investments in stocks of unconsolidated subsidiaries and affiliates as follows:(1) Overview of the plan
The Company sets up a trust with the Executives who fulfill certain requirements as beneficiaries, by contributing funds to acquire
the Company’s stock. The trust acquires the Company’s own stock from the stock market for the number of shares required fordelivering to the Executives based on the prescribed internal rule for stock delivery. Then, in accordance with the internal rule,
the Company makes a delivery or payment of its shares and cash equivalents to the amount obtained by converting a part of theshares into cash based on the rank of each Executive and degree of achievement of the performance target. The Company
applies the “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc. through Trusts” (PITF
No. 30, March 26, 2015) for the accounting treatment of the plan.
(2) The Company’s shares held at the trust
The Company’s shares held at the trust are carried at their book value at the trust (excluding incidental expenses) and accounted
for as treasury stock under net assets. The book value of applicable treasury stock is ¥217 million ($2,047 thousand) and thenumber of shares is 161,500 shares as of March 31, 2017 and 2018.

122

Millions of yen
2017

Stocks of unconsolidated subsidiaries and affiliates

¥740

2018

¥840

Thousands of
U.S. dollars (Note 1)
2018$7,924

9. INVESTMENTS IN UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES
The balance of “Other” includes the investments in stocks of unconsolidated subsidiaries and affiliates as follows:
Millions of yen
2017

Investments in unconsolidated subsidiaries and affiliates

¥132

2018

¥132

Thousands of
U.S. dollars (Note 1)
2018$1,245123

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

10. FINANCIAL INSTRUMENTS

Thousands of U.S. dollars (Note 1)
2018(1) Status of financial instruments(a) Policy on financial instruments

Carrying value

The Group raises necessary funds for business operations through bank loans and corporate bond issuance. Temporary surplus
funds are invested in highly safe short-term deposits. Derivative transactions are utilized to avoid the interest rate fluctuation risk
on loans. The Group does not use derivative transactions for speculative purposes.

(b) Financial instruments, their risks, and the risk management system
Accounts receivable–installment and operating loans are exposed to the credit risk of customers. In accordance with the internalrisk management rules, the Group mitigates such risk by monitoring and evaluating the credit status of each customer by meansof third-party personal credit information agencies and the Group’s own credit monitoring system.
Investment securities primarily consist of shares issued by business partners and are exposed to both credit risk and market
risk. The Group mitigates such risks by regularly monitoring the share price and the financial condition of the issuers.
Leasehold and other deposits consist of security deposits to rent properties for stores.
Accounts payable–trade is settled in the short term.
Long-term loans payable with a floating interest rate is exposed to interest rate fluctuation risk. The Group utilizes interest
rate swaps to avoid such risk by fixing the future interest rate.

(2) Estimated fair value of financial instruments
Carrying value, fair value, and the difference between them as of March 31, 2017 and 2018, are summarized below.
Financial instruments for which the fair value is extremely difficult to determine are excluded from the following table(see Note 2 on page 118).
Millions of yen
2017(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts*1(4) Operating loans
		 Allowance for doubtful accounts*2(5) Investment securities:
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) Short-term loans payable and current
portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total(1) Cash and deposits(2) Notes and accounts receivable–trade(3) Accounts receivable–installment
		 Allowance for doubtful accounts(4) Operating loans
		 Allowance for doubtful accounts(5) Investment securities
		Available-for-sale securities(6) Leasehold and other deposits
Assets, total(1) Accounts payable–trade(2) Short-term loans payable and current portion of long-term loans payable(3) Current portion of bonds payable(4) Commercial paper(5) Income taxes payable(6) Bonds payable(7) Long-term loans payable
Liabilities, total

Fair value

Difference$  428,754 $  428,754
66,09466,094
3,792,735(75,698)
3,717,028 4,103,226
1,377,462(26,141)
1,351,311 1,533,490$     ——

122,207122,207
58,23558,830$5,743,669 $6,312,632$  116,613 $  116,613
710,669
710,669
94,33994,339——56,23556,235896,226
897,547
2,877,358 2,873,556$4,751,452 $4,748,981—
584$568,962$     —
—
—
—
—
1,320
(3,792)$  (2,462)

386,198

182,169

Note 1. Calculation method for fair value of financial instruments and information on securities and derivative transactions

2018

Carrying value

Fair value

Difference

Carrying value

Fair value

Difference¥ 36,257
4,840
348,191(6,236)
341,955
140,569(2,349)138,219¥ 36,257
4,840¥     ——

¥ 45,448
7,006¥    ——

385,860

43,904434,942

40,937

157,324

19,105¥ 45,448
7,006
402,030(8,024)
394,005
146,011(2,771)
143,239

162,550

19,31017,4296,993¥545,695¥ 15,850

17,4296,902¥608,615¥ 15,850—(90)¥62,919¥     —

12,954
6,173¥608,829¥ 12,361

12,954
6,236¥669,139¥ 12,361—
62¥60,310¥    —

50,82720,0005,000
7,214
85,000273,500¥457,391

50,82720,0005,000
7,214
85,049272,556¥456,498

—
—
—
—
49
(943)
¥     (893)

75,331
10,000—5,961
95,000305,000¥503,654

75,331
10,000—5,961
95,140304,597¥503,392

—
—
—
—
140
(402)
¥  (261)

Assets:		 (1) Cash and deposits and (2) Notes and accounts receivable–trade		 The fair value approximates their carrying value because of their short maturities.
		 (3) Accounts receivable–installment and (4) Operating loans		The fair value is determined as their present value by discounting, using the risk-free rate, future cash flows adjusted
for their credit risk identified in the credit control process. With regard to bad receivables and loans, allowance for
doubtful accounts is estimated based on the present value of their estimated future cash flows. The fair value approximates the amount of carrying value less allowance for doubtful accounts. Thus, the amount of carrying value lessallowance for doubtful accounts is used as fair value.
		 (5) Investment securities
		 The fair value is based on quotes on an exchange.
		 (6) Leasehold and other deposits		The fair value is determined as their present value by discounting future cash flows at the risk-free rate adjusted for
credit risk premium. The amount includes the current portion of leasehold and other deposits.

*1 The amount presents the total of general reserve and specific reserve for accounts receivable–installment.
*2 The amount presents the total of general reserve and specific reserve for operating loans.

124

125

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Liabilities:		(1) Accounts payable–trade, (2) Short-term loans payable and current portion of long-term loans payable, (3) Current
portion of bonds payable, (4) Commercial paper, and (5) Income taxes payable		 The fair value approximates their carrying value because of their short maturities.
		 (6) Bonds payable		The fair value is based on the present value calculated by discounting the sum of principal and interests using aninterest rate, for which credit risk and redemption periods are taken into account.
		 (7) Long-term loans payable		The carrying value of long-term loans payable with a floating interest rate approximates its fair value since the interest
rate reflects the market rate in the short term. Thus, carrying value is used as its fair value. The fair value of long-termloans payable hedged by interest rate swaps under special accounting treatment is calculated by discounting the sumof principal and interests accounted for together with interest rate swaps using a reasonably estimated interest rateapplied to similar borrowings. The fair value of long-term loans payable with fixed interest rates is calculated bydiscounting the sum of principal and interests using an interest rate that would be applied to similar new borrowings.
		 Derivative transactions
		 See Note 12, “DERIVATIVE TRANSACTIONS,” for details.

Millions of yen
2017

2018

¥ 1,421—
27,796¥ 1,788256
28,225

Thousands of
U.S. dollars (Note 1)
2018$ 16,867
2,415
266,273

The items above are not included in (5) Investment securities or (6) Leasehold and other deposits in the table on page 125,
as it is extremely difficult to determine the fair value since there were no market prices available and their future cash flows
cannot be estimated.
Note 3. Redemption schedule for monetary claims and securities with maturities
Millions of yen
2017

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

126

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 45,448
7,006
217,645
69,434799¥340,334¥     ——
124,80976,414
3,244¥204,468¥    ——
33,372111
436¥33,920¥    ——
26,20350
1,693¥27,947

Thousands of U.S. dollars (Note 1)
2018

Cash and deposits
Notes and accounts receivable–trade
Accounts receivable–installment
Operating loans
Leasehold and other deposits
Total

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years$  428,754
66,094
2,053,254
655,037
7,537$3,210,698$       —
—1,177,443
720,886
30,603$1,928,943$     ——
314,830
1,047
4,113$320,000$     ——
247,198
471
15,971$263,650

See Note 14, “SHORT–TERM LOANS PAYABLE AND LONG–TERM DEBT,” for the schedule of aggregate annual maturities oflong-term loans payable and long-term debt.

Note 2. Financial instruments whose fair value is extremely difficult to determine

Unlisted stocks
Contributions to investment limited partnerships
Part of security deposits

Millions of yen
2018

Due in one year
or less

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥ 36,257
4,840
186,538
66,131
745¥294,512¥     ——
107,079
74,2433,770¥185,094¥    ——
29,073138
721¥29,932¥    ——
25,50056
1,755¥27,312

11. INVESTMENT SECURITIES(1) Information on available-for-sale securities as of March 31, 2017 and 2018, is as follows:
Millions of yen
2017Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

2018

Carrying value

Acquisition cost

Difference

Carrying value

Acquisition cost

Difference¥10,633
10,633¥ 9,956
9,956¥  677677¥12,555
12,555¥10,149
10,149¥2,406
2,406

6,795
6,795
¥17,429

8,959
8,959
¥18,915(2,164)(2,164)¥(1,486)

398
398¥12,954564
564¥10,713

(165)
(165)
¥2,241127

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars (Note 1)

12. DERIVATIVE TRANSACTIONS

2018

Carrying value exceedingacquisition cost:
StocksSubtotalCarrying value not exceedingacquisition cost:
StocksSubtotal
Total

Carrying value

Acquisition cost

Difference$118,443
118,443$ 95,745
95,745$22,698
22,6983,754
3,754$122,207

5,320
5,320
$101,066(1,556)(1,556)$21,141

For the fiscal years ended March 31, 2017 and 2018, the Group’s derivative transactions were limited to interest rate swaps
that qualified for hedge accounting and met the requirements for the special accounting treatment for interest rate swaps as
described below. There were no derivative transactions for which hedge accounting was not applied.
Hedge accounting method:
Special treatment for interest rate swaps
Type of derivative transactions:Interest rate swaps, receive floating / pay fixed
Hedged item:
Long-term loans payable
Millions of yen
2017
Contract amountUnlisted stocks in the amount of ¥681 million and ¥948 million ($8,943 thousand) as of March 31, 2017 and 2018,
respectively, and contributions to investment limited partnerships in the amount of ¥256 million ($2,415 thousand) as of March
31, 2018, are not included in the table above as it is extremely difficult to determine the fair value since their market price is notreadily available and their future cash flows cannot be estimated.
(2) Information on sale of available-for-sale securities for the fiscal years ended March 31, 2017 and 2018, is as follows:
Millions of yen
2017
Proceeds
from sales

StocksTotal¥2,016¥2,016

Gains

¥208
¥208

2018
Losses¥330¥330

Proceeds
from sales¥8,562¥8,562

Gains

¥429
¥429

LossesTotal

Due after one year

¥22,000¥17,000

Thousands of U.S. dollars (Note 1)

2018

2018

Contract amount
Fair value

*

Total

Due after one year

¥17,000¥10,000

Contract amount
Fair value

*

Total

Due after one year

$160,377$94,339

13. LEASES(As a Lessee)
The Group capitalizes leased assets under finance leases that do not transfer ownership. These assets mainly comprise buildings and properties in connection with the Retailing segment.
The future minimum lease payments under non-cancellable operating leases are as follows:
Millions of yen
2017

2018

Stocks
Total

Proceeds
from sales

Gains

Losses$80,773$80,773$4,047$4,047$12,584$12,584** Interest rate swaps under the special accounting treatment are accounted for as an integral component of the long-term loans payable designated as hedged items. Thus,
their fair value is included in that of long-term loans payable.

¥1,334¥1,334

Thousands of U.S. dollars (Note 1)

Fair value

Within one year
Over one year
Total

¥ 3,861
21,275¥25,1362018¥ 3,728
17,818¥21,546

Thousands of
U.S. dollars (Note 1)
2018$ 35,169
168,094$203,264(As a Lessor)
The future minimum lease receipts under non-cancellable operating leases are as follows:(3) When the fair value of investment securities declines by 30% to 50%, the Group recognizes an impairment loss after comprehensively evaluating the recoverability of the market price. For the fiscal year ended March 31, 2018, the disclosure of
impairment loss on investment securities was omitted due to insignificance of the amount. For the fiscal year ended March
31, 2017, no impairment loss on investment securities was recognized.

Millions of yen
2017

Within one year
Over one year
Total

¥12,058
8,881¥20,9392018¥10,038
6,554¥16,592

Thousands of
U.S. dollars (Note 1)
2018$ 94,698
61,830$156,528

14. SHORT-TERM LOANS PAYABLE AND LONG-TERM DEBT
Short-term loans payable and current portion of long-term loans payable as of March 31, 2017 and 2018, consist of thefollowing:
Millions of yen
2017

Short-term loans payable
Current portion of long-term loans payable
Total¥40,827
10,000¥50,8272018¥44,331
31,000¥75,331

Thousands of
U.S. dollars (Note 1)
2018$418,216
292,452$710,669

Annual weighted-average interest rates of short-term loans payable were 0.27% and 0.28% and those of current portion of
long-term loans payable were 0.65% and 0.43% for the fiscal years ended March 31, 2017 and 2018, respectively.
128

129

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

15. DEFERRED TAX ACCOUNTING

Long-term debt as of March 31, 2017 and 2018, consist of the following:
Millions of yen

0.27% long-term loans from banks and others due through 2028,
excluding current portion
20th series unsecured 0.79% corporate bond, due 2017
21st series unsecured 0.57% corporate bond, due 2017
22nd series unsecured 0.85% corporate bond, due 201924th series unsecured 0.582% corporate bond, due 2018
25th series unsecured 0.344% corporate bond, due 2019
26th series unsecured 0.562% corporate bond, due 2021
27th series unsecured 0.337% corporate bond, due 2020
28th series unsecured 0.543% corporate bond, due 2022
29th series unsecured 0.050% corporate bond, due 201930th series unsecured 0.130% corporate bond, due 2021
31st series unsecured 0.190% corporate bond, due 2022
32nd series unsecured 0.300% corporate bond, due 2024
Lease obligation
Less: Current portion of corporate bond and lease obligation
Total

Thousands of
U.S. dollars (Note 1)

2017

2018

2018

¥273,500
10,00010,0005,000
10,00010,00010,00015,00010,00015,00010,000——¥305,000——
5,000
10,00010,00010,00015,00010,00015,00010,00010,00010,000$2,877,358——
47,16994,33994,33994,339141,509
94,339141,509
94,33994,33994,3391,719
380,219
20,149¥360,070

1,570
411,570
10,149¥401,420

14,8113,882,735
95,745$3,786,981

Millions of yen
Year ending March 31

Bonds payable

2019
2020
2021
2022
2023 and thereafter
Total¥ 31,000
42,00051,00035,000177,000¥336,000¥ 10,000
30,00015,00020,00030,000¥105,000Millions of yen
2017

The aggregate annual maturities of long-term debt subsequent to March 31, 2018, are as follows:
Long-termloans payable

Major components of deferred tax assets and deferred tax liabilities as of March 31, 2017 and 2018, are as follows:

Thousands of U.S. dollars (Note 1)
Long-termloans payable

Bonds payable¥  149 $  292,452
149
396,226
149
481,132
149
330,188971 1,669,811¥1,570 $3,169,811$ 94,339
283,018
141,509
188,679
283,018$990,566

Lease obligation

Deferred tax assets:
Depreciation
Impairment loss
Provision for loss on interest repayment
Provision for point card certificates
Net unrealized loss on non-current assets
Provision for bonuses
Net operating loss carried forward
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for special account for advanced depreciation of non-current assets
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Deferred tax assets, net

2018¥ 5,741
5,073
3,982
3,194
1,353
1,263
315
6,034
26,958(6,969)¥19,988¥ 5,597
5,384
1,860
3,286
1,191
1,240
523
5,593
24,678(5,630)¥19,047$ 52,801
50,792
17,54731,000
11,235
11,698
4,933
52,764
232,811(53,113)$179,688¥9,90023
263¥10,187¥ 9,801¥11,25961
221¥11,542¥ 7,505$106,216
575
2,084$108,886$ 70,801

Income taxes consist of corporation, inhabitants’, and enterprise taxes. Reconciliations between the statutory tax rate andthe effective tax rate reflected in the consolidated statements of income are as follows:

Lease obligation$ 1,405
1,405
1,405
1,405
9,160
$14,8112018

Thousands of
U.S. dollars (Note 1)

Statutory tax rate
Adjustments:
Permanent differences such as entertainment expenses, etc.
Permanent differences such as dividends, etc.
Change in valuation allowance
Inhabitants’ tax
Difference in tax rates of consolidated subsidiaries
Tax creditAdjustments to deferred tax assets in connection with application of
pro forma standard taxation*
Other
Effective tax rate

2017

2018

30.9%

30.9%

0.3
(0.1)
(0.9)
0.5
3.6
(1.5)

0.2
(0.1)
(4.2)
0.5
3.3
0.0

—
0.3
33.1%

3.5
0.3
34.4%

* A certain consolidated subsidiary became subject to pro forma standard taxation due to an increase in its capital amount. This is the effect of application of such taxation.

130

131

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

16. ASSET RETIREMENT OBLIGATIONS

18. SUBSCRIPTION RIGHTS TO SHARES(1) Asset retirement obligations recognized on the consolidated balance sheets

The outline of stock options of the Company is as follows:

The Group’s asset retirement obligations mainly include the cost of restoring the store sites to their original condition under thereal estate lease contracts of stores. The Group calculated its asset retirement obligations by assuming the lease period as the
expected period of use and applying discount rates of 0.00% to 1.38%.
Asset retirement obligations as of March 31, 2017 and 2018, consist of the following:

Date of resolution

Millions of yen
2017

Beginning balance
Increase due to acquisition of property and equipment
Adjustments due to passage of time
Decrease due to fulfillment of obligation
Ending balance

¥974
7
4
(93)
¥892

2018

¥892
—
4
—
¥897

Thousands of
U.S. dollars (Note 1)
2018$8,415—37—$8,462

2016

Title and number of granteesType and number of shares to be issued upon exercise of stock options
Granted date
Vesting conditions
Eligible service period
Exercise period

June 25, 2015
4 Directors and 12 Executive Officersof the Company
Common stock 32,000 shares
July 10, 2015
No provision
No provision
From April 1, 2016 to March 31, 2026

The following table describes the scale and changes in stock options that existed during the fiscal year ended March 31,
2018. The number of stock options is translated into the number of shares.
Number of shares(2) Asset retirement obligations other than those recognized on the consolidated balance sheets

2016

While the Group estimates asset retirement obligations based on the real estate lease contracts of stores, it is not possible toreasonably estimate the cost of restoring the store sites to their original condition under the general lease contracts since theperiod of use is not clearly determined. Therefore, the Group does not recognize the asset retirement obligations for stores otherthan those that are planning to be closed.

17. INVESTMENT AND RENTAL PROPERTY
Certain consolidated subsidiaries hold commercial properties, including land, for rental in the Tokyo metropolitan area and otherareas. The net rental income in connection with these properties for the fiscal years ended March 31, 2017 and 2018, was¥10,929 million and ¥17,509 million ($165,179 thousand), respectively. For the fiscal years ended March 31, 2017 and 2018,
the Group recognized ¥13,659 million and ¥1,121 million ($10,575 thousand) of gain on sale of property and equipment,
primarily land. The rental income was included in revenue and the associated rental expenses were included in cost of sales andselling, general and administrative expenses. The carrying value and the fair value of such assets are as follows:
Millions of yen

Carrying value*1:
Beginning balance
Changes during the year*2
Ending balance
Fair value*3

Thousands of
U.S. dollars (Note 1)

2017

2018

2018

¥ 45,240
41,008¥ 86,249¥159,321¥ 86,249
17,679¥103,928¥215,080$  813,669
166,783$  980,452$2,029,056

Before vested:
As of March 31, 2017
GrantedForfeited
VestedAs of March 31, 2018
After vested:
As of March 31, 2017
VestedExercised
Forfeited
As of March 31, 2018

—
—
—
—
—
1,400
—
1,400
—
—
Yen

Exercise price
Average exercise price
Fair value at granted date

¥   1
1,482
1,589

U.S. dollars (Note 1)$0.00913.98
14.99

Since it is difficult to reasonably estimate the number of stock options that will expire in the future, the number of stock
options that were forfeited is shown as the number of vested options.

*1 Carrying value represents the amount on the consolidated balance sheets that is carried at the acquisition cost less accumulated depreciation.
*2 Major items are the increases due to reclassification of holding purposes of properties in the amounts of ¥37,267 million and ¥18,530 million ($174,811 thousand) for
the fiscal years ended March 31, 2017 and 2018, respectively.
*3 Fair value is based on the appraised value provided by third-party real estate appraisers.

132

133

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

19. NET ASSETS

The following table summarizes the number of shares of common stock, issued and outstanding, and treasury stock:

Under the Companies Act of Japan (“the Act”), the entire amount paid for new shares is required to be designated as capitalstock. However, a company may, by resolution of the Board of Directors, designate an amount not exceeding one-half of theprice of the new shares as additional paid-in capital, which is included in capital surplus. The legal earnings reserve is included
in retained earnings in the accompanying consolidated balance sheets.
The Act provides that an amount equal to at least 10% of the amount to be disbursed as distributions of capital surplus(other than additional paid-in capital) and retained earnings (other than legal earnings reserve) be transferred to additional
paid-in capital and the legal earnings reserve, respectively, until the total of additional paid-in capital and the legal earnings
reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders’ meeting, or by resolution of the Board of
Directors if certain conditions are met.
Under the Act, additional paid-in capital and the legal earnings reserve may not be distributed as dividends; the Act allows
all additional paid-in capital and all legal earnings reserve to be transferred to other capital surplus and retained earnings,
respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the unconsolidated financial
statements of the Company in accordance with Japanese laws and regulations.

Number of shares
2017

2018

Common stock, issued and outstanding:At the beginning of the year
		 Decrease due to retirement of treasury stock
At the end of the year

278,660,417(45,000,000)
233,660,417

233,660,417—
233,660,417

Treasury stock:
At the beginning of the year
		 Increase due to purchase of treasury stock in the stock market
		 Increase due to acquisition of stock through BIP Trust and ESOP Trust		 Increase due to purchase of odd lot shares
		 Decrease due to retirement of treasury stock
		 Decrease due to exercise of stock options
		 Decrease due to sale of stock to odd lot shareholders
At the end of the year

36,270,334
12,966,300
502,300
1,178(45,000,000)(35,300)(62)
4,704,750

4,704,750
8,564,700—
1,473—(1,400)(17)
13,269,506

The following tables summarize the dividends paid for the fiscal years ended March 31, 2017 and 2018:2017
Resolution

Class ofshare

Ordinary General Meeting ofCommonShareholders held on June 29, 2016 stockBoard of Directors’ meeting held on
CommonNovember 4, 2016
stock

Total amount of dividends(Millions of yen)

Dividends per share (Yen)¥2,666

¥11

3,719

16

Record date

Effective date

March 31,
June 30,2016
2016
September 30, December 5,
2016
2016

20. CONTINGENT LIABILITIESThe Group has commitments to guarantee customers’ liabilities in relation to personal loans to individuals from financial institutions with which the Group has guarantee service arrangements.
As of March 31, 2017 and 2018, the amounts of the Group’s guarantee obligations were ¥25,428 million and ¥24,616
million ($232,226 thousand), respectively.

Note: The amount of dividends resolved at the Board of Directors’ meeting held on November 4, 2016, includes ¥8 million of dividends for the BIP Trust and ESOP Trust.

21. COST OF SALES

2018
Total amount of dividends
Resolution

Class ofshare

Ordinary General Meeting ofCommonShareholders held on June 26, 2017 stockBoard of Directors’ meeting held on
CommonNovember 9, 2017
stock

(Millions ofyen)(Thousands of
U.S. dollars)(Note 1)Dividends per share(Yen)(U.S. dollars)(Note 1)

¥3,900 $36,792

¥17

$0.16

4,052

18

0.16

38,226

Record date

Effective date

March 31,2017
September 30,
2017

June 27,2017
December 4,
2017

Note 1: T he amount of dividends resolved at the Ordinary General Meeting of Shareholders held on June 26, 2017, includes ¥8 million ($75 thousand) of dividends for the
BIP Trust and ESOP Trust.
Note 2: T he amount of dividends resolved at the Board of Directors’ meeting held on November 9, 2017, includes ¥9 million ($84 thousand) of dividends for the BIP Trustand ESOP Trust.

Dividends with a record date during the fiscal year ended March 31, 2018, but with an effective date subsequent to thefiscal year ended March 31, 2018, are as follows:
Total amount of dividends
Resolution

Class ofshare

Ordinary General Meeting ofCommonShareholders held on June 25, 2018 stock

Dividends per share(U.S.
dollars)(Note 1)

Record date

Effective date

¥4,417 $41,669 Retained ¥20 $0.18
earnings

March 31,2018

June 26,
2018(Thousands of(Millions of
U.S. dollars)yen)(Note 1)

Source(Yen)

For the fiscal years ended March 31, 2017 and 2018, cost of sales included the revaluation loss on inventories in the amountsof ¥48 million and ¥24 million ($226 thousand), respectively.

22. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended March 31, 2017 and 2018, are as follows:
Millions of yen

Advertisement
Provision for point card certificates
Provision for allowance for doubtful accounts
Salaries and allowances
Provision for bonuses
Rent
Depreciation and amortization
Other

Thousands of
U.S. dollars (Note 1)

2017

2018

2018

¥ 12,425
9,181
9,610
32,0233,441
16,3088,960
42,760¥134,711¥ 12,168
11,445
12,344
31,386
3,604
15,8888,899
43,425¥139,162$  114,792
107,971
116,452
296,094
34,000149,886
83,952409,669$1,312,849

Note: The amount of dividends resolved at the Ordinary General Meeting of Shareholders held on June 25, 2018, includes ¥10 million ($94 thousand) of dividends for the
BIP Trust and ESOP Trust.

134

135

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

23. LOSS ON RETIREMENT OF PROPERTY AND EQUIPMENT AND LOSS ON CLOSING OF STORES

26. COMPREHENSIVE INCOME

Loss on retirement of property and equipment for the fiscal years ended March 31, 2017 and 2018, consisted of the following:
Millions of yen

Buildings and structures
Furniture and fixtures

Thousands of
U.S. dollars (Note 1)

2017

2018

2018

¥  9881,930¥2,918¥  535
1,108¥1,643$ 5,047
10,452$15,500

For the fiscal years ended March 31, 2017 and 2018, the Group recognized ¥1,310 million and ¥604 million ($5,698
thousand) of loss on closing of stores, which primarily consisted of restoration costs involved in the closing of stores.

24. IMPAIRMENT LOSS
The impairment loss recognized for the fiscal year ended March 31, 2017, is as follows:
Use

StoresLocation

Kawasaki store
Kawasaki, Kanagawa, etc.

Type of assets

Buildings and structures
Other
Total

StoresLocation

Mito store
Mito, Ibaraki, etc.

Type of assets

Land
Other
Total

¥278
12
¥291

2018

2018

¥116
122
238
343
581

¥ 2,847904
3,751(1,154)
2,597$ 26,858
8,528
35,386(10,886)
24,500

—
—
—
¥581

(2)
0
(1)
¥ 2,596(18)
0(9)$ 24,490

27. CASH FLOW STATEMENTS
Reconciliations of cash and cash equivalents in the consolidated statements of cash flows to accounts and amounts in theaccompanying consolidated balance sheets as of March 31, 2017 and 2018, are as follows:

Thousands ofMillions of yen U.S. dollars (Note 1)¥  738446¥1,184$ 6,962
4,207$11,169

The Group has grouped its fixed assets by either store or rental property, which is the minimum cash-generating unit.
The carrying value of each asset group is written down to its respective recoverable amount and in doing so is recognized as
an impairment loss.
The Group estimated the recoverable amount of each asset group based on value in use or fair value less costs to sell. If a
store reports continuous operating losses, the Group evaluates that the value in use of the store is zero since positive cash flows
cannot be expected in the future. If a store is planned to be closed or disposed of, the Group evaluates that the fair value lesscosts to sell is zero.

25. PROVISION FOR LOSS ON INTEREST REPAYMENTFor the fiscal year ended March 31, 2017, the Company re-examined the amount of provision based on the situation in which
repayment claims continue although the actual repayments decreased compared with the previous fiscal year, and recorded thenecessary amount at the fiscal year-end.

136

2017

Valuation difference on available-for-sale securities:
Amounts incurred for the year
Reclassification adjustments
Before tax effect adjustment
Tax effect
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:
Amounts incurred for the year
Tax effect
Deferred gains or losses on hedges
Total other comprehensive income

Thousands of
U.S. dollars (Note 1)

Millions of yen

The impairment loss recognized for the fiscal year ended March 31, 2018, is as follows:
Use

Millions of yen

Millions of yen
2017

Cash and deposits
Time deposits with maturity in excess of three months
Cash and cash equivalents¥36,257(11)¥36,2452018¥45,448(11)¥45,437

Thousands of
U.S. dollars (Note 1)
2018$428,754(103)$428,650

28. SEGMENT INFORMATION(1) Overview of reportable segments
The Group defines its reportable segments as a component of the Group for which separate financial information is available
and whose operating results are regularly evaluated by the Board of Directors to make decisions about how resources are to beallocated among the Group and assess their performance.
The Group consists of the following two reportable segments identified by products and services: “Retailing” and “FinTech.”
The Retailing segment engages in management of commercial property rental, retailing operations of clothes and accessories, store design, advertising, apparel distribution maintenance, and management of buildings and other facilities. The
FinTech segment engages in the credit card services, the consumer loans, and the rent payment guarantee businesses; IT systems; and real estate rental.

137

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Thousands of U.S. dollars (Note 1)(2) B asis of measurement for the amounts of segment revenue, segment income or loss, segment assets, andother items
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “SIGNIFICANT ACCOUNTINGPOLICIES.”
Segment income is measured on the basis of operating income. Intersegment sales and transfers are accounted for basedon the prevailing market price.
Millions of yen
2017

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

Retailing

Reportable segment
FinTechTotal¥142,113
5,975¥148,089¥  7,759¥297,606¥ 94,909
2,192¥ 97,101¥ 27,111¥536,050¥  8,422
14,376

Adjustment *1

Consolidated *2¥237,022
8,168¥245,190¥ 34,870¥833,656¥     —
(8,168)¥ (8,168)¥ (3,616)¥(27,081)¥237,022—¥237,022¥ 31,253¥806,575¥  1,759¥ 10,182¥    (61)¥ 10,121

2,040

16,416(719)

15,696*1 Adjustment to segment income consists of intersegment elimination of ¥2,037 million and corporate expenses of ¥(5,654) million that are not allocated to eachreportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(362,554) million and corporate assets of ¥335,571 million, whichmainly present the Company’s loans in connection with the Group’s cash management system.
*2 Segment income is reconciled to operating income in the consolidated statements of income.
Millions of yen
2018

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

Retailing

Reportable segment
FinTechTotal¥132,241
5,839¥138,081¥  8,826¥297,199¥106,758
2,187¥108,945¥ 30,310¥595,844¥  8,484
9,030

Adjustment *1

Consolidated *2¥238,999
8,026¥247,026¥ 39,137¥893,044¥     —
(8,026)¥ (8,026)¥ (3,894)¥(25,893)¥238,999—¥238,999¥ 35,243¥867,150¥  1,819¥ 10,303¥    (29)¥ 10,274

1,874

10,905(654)

10,2502018

Revenue:
Outside customers
Intersegment
Total
Segment income
Segment assets
Other items:
Depreciation and amortization
Increase in property and	  equipment and intangible assets

Retailing

Reportable segment
FinTechTotal$1,247,556
55,084$1,302,650$   83,264$2,803,764$1,007,150
20,632$1,027,783$  285,943$5,621,169$   80,037
85,188Adjustment *1

Consolidated *2$2,254,707
75,716$2,330,433$  369,216$8,424,943$      —
(75,716)$ (75,716)$ (36,735)$(244,273)$2,254,707—$2,254,707$  332,481$8,180,660$   17,160$   97,198$    (273)$   96,924

17,679102,877(6,169)96,698*1 Adjustment to segment income consists of intersegment elimination of ¥2,534 million ($23,905 thousand) and corporate expenses of ¥(6,428) million ($(60,641)
thousand) that are not allocated to each reportable segment. Adjustment to segment assets mainly consists of intersegment elimination of ¥(416,031) million($(3,924,820) thousand) and corporate assets of ¥390,674 million ($3,685,603 thousand), which mainly present the Company’s loans in connection with the Group’s
cash management system.
*2 Segment income is reconciled to operating income in the consolidated statements of income.

Disclosures on related information with regard to the concentration of products and services, location, and major customers
have been omitted since there was no relevant information to be disclosed.
For the fiscal years ended March 31, 2017 and 2018, an impairment loss of ¥291 million and ¥1,184 million ($11,169
thousand), respectively, was reported by the Retailing segment.

29. RELATED PARTY INFORMATION
Related party information where directors and their close relatives substantially own a majority of the voting rights is as follows:
2017
Name ofcompany

Nakano Co., Ltd.

Seiwa Kogyo
Co., Ltd.

Location

Capital(Millions of yen)

Shinjuku,
Tokyo

¥10

Shinjuku,
Tokyo

10

Business

VotingrightsRelationshipTransaction

RealestaterentalDirect Property
1.0% rental
Concurrent
position as
director

Property
rentalRealestaterentalDirect Property
0.7% rental
Concurrent
position as
director

Property
rentalstoresAmount(Millions of yen)Account name

Balance(Millions of yen)

¥42

Leasehold andother deposits¥41

Other current
liabilities

1

Leasehold andother deposits

191

32

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are determined similarly to those of third-party transactions.
2018
Name ofcompany

Location

Capital(Millions of yen)

Business

VotingrightsRelationshipTransaction

Amount(Millions of yen)Account nameNakano Co., Ltd.

Shinjuku,¥10 RealTokyo($94 thousand) estate(Note 1) rental

Direct Property
1.0% rental
Concurrent
position as
director

Property
rental¥45 Leasehold and($424 thousand) other deposits(Note 1)Other current
liabilities

Seiwa Kogyo
Co., Ltd.

Shinjuku,
10 RealTokyo($94 thousand) estate(Note 1) rental

Direct Property
0.8% rental
Concurrent
position as
director

Property
rental32 Leasehold and($301 thousand) other deposits(Note 1)

Balance(Millions of yen)

¥41($386 thousand)(Note 1)
1($9 thousand)(Note 1)191($1,801 thousand)(Note 1)

The monetary amounts above do not include consumption taxes. Terms and conditions for rental agreements are determined similarly to those of third-party transactions.
138

139

Notes to Consolidated Financial Statements

30. PER SHARE INFORMATION
Net income per share, both basic and diluted, for the fiscal years ended March 31, 2017 and 2018, is as follows:Yen

Net income per share
Diluted net income per share

2017

2018

¥80.2480.24¥93.18
93.18

U.S. dollars (Note 1)
2018

$0.87
0.87

Thousands of shares

Weighted-average number of outstanding shares
Diluted shares:
Assumed exercise of stock options

2017

2018

233,346

224,38180

Net income per share is computed based on the net income attributable to shareholders of common stock and theweighted-average number of outstanding shares.
For the computation of net income per share and diluted net income per share, the number of shares held by BIP Trust and
ESOP Trust is deducted from the weighted-average number of outstanding shares (293 thousand shares and 502 thousand
shares for the fiscal years ended March 31, 2017 and 2018, respectively).

31. SUBSEQUENT EVENTAt the Board of Directors’ meeting held on May 10, 2018, the Company resolved to acquire treasury stock in accordance with
Article 156 of the Companies Act as applied with relevant changes in interpretation pursuant to the provisions of Article 165,
paragraph (3), and also resolved to retire treasury stock in accordance with Article 178 of the Act.
Reason for acquisition and retirement
Based on the medium-term management plan to be achieved by the fiscal year ending March 31, 2021, the Group aims toachieve profitable growth by innovating Group business and integrating operations in light of potential changes in the businessenvironment. As its financial strategy, the Group will effectively utilize basic operating cash flows that will be generated in thenext five years in order to optimize capital structure for the business; thus, the Group will enhance investment growth and shareholder return. As part of the plan, the Company will execute acquisition and retirement of treasury stock to improve its corporate
value by achieving the following targets: an ROE of 10%, an ROIC of 4%, and an EPS of ¥130.
Based on these Group strategies, the Company resolved to acquire and retire treasury stock as follows:(Acquisition of treasury stock)(i) Class of shares(ii) Maximum number of shares to acquire(iii) Maximum amount for acquisition(iv) Acquisition period

Common stock
4 million shares (1.81% of total outstanding shares)¥7,000 million ($66,037 thousand)From May 11, 2018 to March 31, 2019

(Retirement of treasury stock)(i) Class of shares(ii) Number of shares to be retired(iii) Number of total outstanding shares after retirement(iv) Date of retirement

Common stock
10 million shares (4.28% of total outstanding shares)
223,660,417 shares
May 31, 2018140