W h a t’ s t h e

Goal?

CREDIT SAISON CO., LTD. ¦ ANNUAL REPORT 2005

At Credit Saison,
we do not simply set goals
that imply a final destination.
For us, the “goal” isthe process of constantly achieving
customer satisfaction, while our mission is tobring happiness and joy to our customers
through the quality of our services,and doing it again, and again.
Improving customer satisfaction
provides us with the momentum
and motivation to work
toward yet another new goal.

The Goal is Satisfaction
Over the past year,
Credit Saison establishedmany goals in line with our aim ofachieving steady growth.
The achievement of those goals
provided us with new foundationsindispensable to moving forward.
It is our greatest pleasure
to announce and share
the results with you.
We aim to renew our goals
while valuing the successes
achieved in this fiscal year.

CONTENTS
Fiscal 2004 Business Highlights................................ Inside CoverFinancial Highlights..................................................................... 2
To Our Stakeholders ................................................................... 3
What’s the Goal?......................................................................... 8
Major Group Companies .......................................................... 16
Corporate Governance ............................................................. 18
Board of Directors and Auditors.............................................. 19
Card Tie-Ups .............................................................................. 20
Financial Section........................................................................ 21
Corporate History...................................................................... 50
Corporate Information ............................................................. 52

CREDIT SAISON CO., LTD.

1

Reached a basic agreement withTakashimaya Company, Limited on a
strategic alliance in the credit card business.
Started issuing “TAKASHIMAYA SAISONCARD” from September 2004

Alliance with Resona Holdings, Inc.
Started providing commissioned
processing services for “Resona
Card+S (Resona Card SAISON)” in
October 2004

Achieve Goals
Fiscal 2004 Business Highlights

Credit Saison aims to be a leading-edge service provider and takes a totally customer-oriented approach to constantly
undertaking innovative challenges. As the Japanese credit card industry undergoes further reorganization, our Group isaggressively promoting strategic alliances in the credit card business with companies including Idemitsu Kosan Co., Ltd.,
Takashimaya Company, Limited, Resona Holdings, Inc. and Mizuho Financial Group, Inc. to strengthen our position as aleading company in the industry. Credit Saison received 2.41 million new card applications during the past fiscal year andtotal cardholders reached 16.9 million. The number of active cardholders increased 420 thousand compared to the endof the preceding term to 8.83 million. Looking forward, we are fully deploying our strengths as we strive to gain top
market share in the industry by expanding our credit card business through numerous channels.

Started providing commissioned processing
services for the “Idemitsu Card Mydo Plus”
from April 2004. The number of credit cards
issued totaled 800 thousand.

Started securities brokerage businessthrough an alliance with Monex Beans
Holdings, Inc.

Reached a basic agreement to forma strategic business alliance in thecredit card business with Mizuho
Financial Group, Inc. Started issuing“Mizuho Mileage Club Card
SAISON” from April 2005.

With the aim of creating a newrevenue source, Credit Saison launcheda real estate mortgage loan businesswith the use of its unique expertise.

by Innovating

Completion of the newcredit center “Ubiquitous,”
which began full-scale
operations from April 2005.

Expansion of card
usage to include
payment of utility
bills such as
electricity and gas.

Financial Highlights
CREDIT SAISON CO., LTD. and Consolidated Subsidiaries
As of and for the years ended March 31% change

Thousands of
U.S. dollars(Note 3)

2005

2004

2003

2005/2004

2005

Consolidated:
Operating revenues (Note 1) ..................................................
Selling, general and administrative expenses.......................
Financial cost......................................................................
Operating income...............................................................
Net income (loss) ................................................................

¥ 240,385
172,024
9,771
58,59031,818¥ 220,332
156,502
9,825
54,00522,420¥ 212,242
147,018
12,81052,414(6,027)

9.1
9.9
(0.5)
8.5
41.9

$ 2,238,014
1,601,565
90,969545,480
296,234

Total shareholders’ equity (Note 2).........................................
Total assets.........................................................................
Return on shareholders’ equity (ROE) (%) ...........................
Return on assets (ROA) (%) ................................................
Shareholders’ equity ratio (%) ............................................

301,3101,512,949
11.4
2.2
19.9

258,253
1,352,710
9.1
1.7
19.1

236,028
1,280,823
—
—
18.4

16.7
11.8

2,805,228
14,085,739

Per share data (in yen and U.S dollars) (Note 2):
Net income (loss) per share.............................................
Shareholders’ equity per share........................................

185.001,721.35

130.55
1,519.13(36.57)
1,380.26

41.7
13.3

1.72
16.03

Credit Card Business Data (Non-consolidated):
Card transaction volume.....................................................
Credit-card-related shopping services .............................
Cash advances ...............................................................
Total cardholders (Millions) .................................................
Active cardholders (Millions) ...............................................
New cardholders (Millions)..................................................

¥2,596,186
2,078,117
518,069
16.90
8.83
2.09

¥2,408,698
1,912,211
496,489
15.87
8.41
1.86

¥2,342,865
1,808,625
534,241
14.90
8.07
2.30

7.8
8.7
4.3
6.5
5.0
12.4

$24,170,801
19,347,515
4,823,285

Millions of yen

Notes: 1. “Operating revenues” does not include consumption taxes etc.
2. Treasury stock is deducted from capital. In addition, treasury stock is subtracted from the total number of shares outstanding in computing per share data.
3. Japanese yen amounts have been translated into U.S. dollars at the rate of ¥107.41 = U.S.$1, the approximate exchange rate on March 31, 2005, for theconvenience of the reader.

Operating Revenues

Net Income (Loss) and ROE

Total Assets and ROA(Billions of yen)(Billions of yen / %)(Billions of yen / %)

250

32

200

24

Net Income (Loss) (left scale)ROE (right scale)

12

2,000

Total Assets (left scale)
ROA (right scale)

2.5

9

2.0
1,500

150

16

6

1.5
1,000

100

8

3

50

0

0

1.0

500

0

-8

0

01

02

03

04

05

0.5

01

02

03

04

05

0

01

02

03

04

05

Note: As a result of non-operating losses due to its agreement to a rehabilitation plan for The Seibu Department Stores, Ltd., which entailed a loss on revaluation of
investment securities, the Company recorded a net loss of ¥6,027 million for the year ended March 31, 2003, and ROE and ROA for that year are not presented.

Forward-looking Statements
This annual report contains discussions including management plans, projections, strategies and estimates that are not historical facts. Projections of future performance arebased on management extrapolations from current data, but actual future performance may differ materially from projections.

2

CREDIT SAISON CO., LTD.

Stakeholder
Satisfaction
Matters!
To Our Stakeholders
The Credit Saison Group is adding to thevarious lifestyle support services it
provides to customers while aggressively
implementing changes based on its
corporate culture of intensely focusing on
customer satisfaction.
“Our goal is to increase corporate value
by maximizing stakeholder satisfaction.”

Hiroshi Rinno
President and CEO

CREDIT SAISON CO., LTD.

3

Overview of Fiscal 2004

Revenues and income increased due to successful growth in the credit & finance and realestate businesses. Net income reached a record ¥31.8 billion.
During fiscal 2004, the year ended March 31, 2005, operating revenues increased 9.1
percent year-on-year to ¥240.4 billion because of growth in our credit card business and robust
performance in our real estate and leasing businesses. Exemplifying the stable earnings base we arebuilding, new credit card applicants totaled 2.41 million for the fiscal year, total cardholders
increased 1.03 million to 16.90 million as of March 31, 2005, and active cardholders increased by
420 thousand to 8.83 million.
Operating income increased 8.5 percent year-on-year to ¥58.6 billion. We countered theimpact of increases in advertising expenses, fees and allowance for losses on receivables in ourconsumer credit and finance businesses by executing an effective total cost control program.
Income before income taxes increased 34.3 percent to ¥54.4 billion. A reduction in impairment
loss of property and equipment compared to the previous fiscal year, in which we executed theearly implementation of new impairment accounting standards, offset a loss on evaluation of
investment securities. As a result, net income increased a strong 41.9 percent year-on-year to¥31.8 billion.

Strategic Alliances Drive Dramatic Expansion

We are promoting major alliances and strengthening our operating base, which
positions us as a clear leader in the rapidly changing credit card industry.

Percentage of Credit Card Usein Personal Consumption(Japan – U.S. Comparison)
(%)

U.S.
Japan

30

25

23.8 23.7 23.9 23.9
22.5
21.4
20.6 21.0

20

15

10
5.9

6.3

6.6

96

97

98

7.0

99

7.6

8.2

8.5

01

02

9.4

5

0

U.S.:

00

03

Estimated figures based on the
Nilson ReportJapan: Estimated figures based on
Consumer Credit Statistics inJapan, Japan Consumer Credit
Industry Association

The restructuring of the retail credit industry in Japan gathered momentum during the past fiscal
year, and the competitive landscape of the credit card industry has changed significantly.
Credit Saison concluded a comprehensive alliance with Mizuho Financial Group, Inc., and we plan
to integrate our issuer operations with UC CARD Co., Ltd. as part of this alliance during fiscal 2005.
Other companies are also forming alliances, such as the integration of Nippon Shinpan Co., Ltd.
and UFJ Card Co., Ltd., which has accelerated the consolidation of the credit card industry. We
expect that three companies will come to dominate the credit card industry, and we intend to be
one of them. Large-scale mergers and acquisitions are taking place that would have been
unimaginable five years ago. As a leading company in the credit card industry, Credit Saison isplaying a key role as our industry restructures.
In this setting, Credit Saison’s operating environment improved as consumer spending
recovered and the number of personal bankruptcies stabilized. In addition, credit card usage
channels expanded rapidly. Fresh markets have opened as the use of credit cards has gained
momentum in new areas such as paying for utilities and medical expenses. Moreover, evensmall payments for which the use of cash has been the norm are changing dramatically. Forms ofelectronic money such as Suica® offered by East Japan Railway Company and Osaifu-Keitai® (Mobile
Wallet) offered by NTT DoCoMo, Inc. are representative of the change in Japanese attitudes
concerning payment.
Credit Saison looked at its changing operating environment and aggressively formed major
alliances to enhance its competitive advantage as a leading company in the credit card industry. In
September 2004, we began issuing affinity cards on behalf of Takashimaya Company, Limited, thesales leader of Japan’s department store industry. We also expanded our network of Saison
counters to approximately 170 locations during fiscal 2004 by opening “Takashimaya Saison

Card Transaction Volume and Total Number of Cardholders
Card transaction volume(Billions of yen)
Total cardholders(Millions)

4

CREDIT SAISON CO., LTD.

2005

2004

2003

2002

2001

2,596.2

2,408.7

2,342.9

2,121.6

1,855.8

16.90

15.87

14.90

13.40

11.40

Operation Center
Credit Guarantee
Business Center

Promotion Center

For theCustomer

Screening Center

Information Center

Counters” inside 19 Takashimaya department stores throughout Japan. Moreover, in April 2005 webegan issuing cards that function as both a cash card for Mizuho Bank, Ltd. and a SAISON CARD,
based on the comprehensive alliance agreement with Mizuho Bank we concluded in December 2004.
In fiscal 2005, we have established the Mizuho UC Alliance Promotion Office and are focusing on
promoting our strategic alliance with the Mizuho Financial Group, including integration of the
management of UC CARD’s Issuer Division.
In addition, Credit Saison has been concentrating on expanding the processing business tomaximize the use of our assets and many years of know-how. We structure strong partnerships with
our alliance clients by investing capital, people and expertise. As a result, improvement in Credit Saison’s
corporate value is ultimately linked to enhancing the corporate value of our clients as we work together
in the credit card business. We began jointly issuing the “Idemitsu Card Mydo Plus” in April
2004, and the “Resona Card+S (Resona Card SAISON)” in October 2004. Credit Saison is also
providing commissioned processing services for these alliances.

Fiscal 2005 Management Strategy

As industry restructuring progresses, we will reaffirm our strong growth trajectory bytargeting fiscal 2005 increases in credit card applications to 2.7 million, total
cardholders to 18.2 million, and active cardholders to 10.0 million.
Credit card industry restructuring is projected to peak during fiscal 2005. Amid dramaticchanges in the structure of our industry, the Credit Saison Group will emphasize the following four
policies to build a powerful management foundation that can generate success regardless of theoperating environment.
Stronger Marketing
Three divisions are working together as one with the aim of making Credit Saison number one
in the credit card industry. They are the Sales Division, which manages 12 branches throughout Japan;
the Credit Card Division, which has been reorganized into six separate divisions associated withparticular alliances; and the Credit Division, which manages the new credit center we havenamed “Ubiquitous.”
Ubiquitous is at the core of the Credit Division and has industry-leading scale and functions thatgive concrete expression to the Credit Saison Group’s management philosophy of being aleading-edge service provider. It not only enhances our operational infrastructure, but is also
designed to expand our intangible infrastructure by providing the best customer relationshipmanagement in Japan. We are proud that we have created one of the industry’s best credit
centers. Looking forward, Ubiquitous will be positioned as one of Credit Saison’s sales bases as we
CREDIT SAISON CO., LTD.

5

promote branch-centered area marketing that makes use of the unique characteristics of each region
we serve. The Credit Card Division will also conduct sales in unison with clients as we work to makethe SAISON CARD the number-one credit card in each region of Japan.
While making organizational changes, we are also expanding the services we offer with the goalof fulfilling customer expectations. Conventionally, credit card companies have set parametersthat limited card usage among customers. However, companies have now begun to emphasize
customer needs and lift these parameters to allow greater freedom of use for shopping. Building on
SAISON Permanent Points (“Eikyufumetsu Point”), we are developing features that are notavailable at other companies to raise the value of the SAISON CARD with the goal of increasingtransaction volume and total cardholders.
We strongly believe that the SAISON CARD will become our customers’ most powerful card. To
make it our customers’ card of choice, we have focused on making the SAISON CARD strongly
appealing by introducing innovative services such as no annual fees, bonus points that never
expire and bonus offers from our clients, as well as by allowing customers to set their own credit limits
and adding the services provided by our Ubiquitous credit center.

Market Share of Shopping-Related
Credit Card Transactions Volume(Company’s own estimate excluding duplicate
transactions posted by affiliated stores)

Credit Saison 8.5%
Equityparticipation
alliances 8.2%

Stronger Alliance Businesses
During fiscal 2005 we will make maximum use of our network of alliances with the aim ofachieving our sales targets of 2.7 million new card applicants, 18.2 million total cardholders and 10.0
million active cardholders.
We will strengthen marketing so that joint sales with clients will stimulate new card applications
and card usage. We will also provide capital, people and know-how to build strong partnerships withthe companies for which we issue affinity cards with the goal of expanding our credit business. We
have five affiliated companies, and the total number of credit cards issued reached approximately 13
million. The number of credit cards issued by these companies and Credit Saison totaled
approximately 30 million, and our Group’s card transaction volumes gained top market share of
approximately 16 percent. Specifically, the “Idemitsu Card Mydo Plus” which was launched in April
2004, showed remarkably favorable growth and acquired 800 thousand cardholders during the year.
This performance also contributed to Credit Saison’s commissioned processing business.
In addition, in fiscal 2005 we will concentrate on banking channels in the credit card business,with emphasis on Mizuho Bank. We will also use the complementary strengths of UC CARD in
integrating and restructuring operations to strengthen competitiveness and raise operating
efficiency. Looking forward, we will add capital participation and business acquisitions to ourpurview and further expand our alliance strategy with the goal of acquiring a 30 percent market shareover the long term.

Results of Alliance Strategy
New credit card
applicants(Millions)

Other credit cardcompanies

Total number ofcredit cards issued(Millions)

Shopping-related
credit card transactions
by volume (Billions of yen)

2.41

16.9

2,078

Equity participation total*

approx. 2.0

approx. 13

approx. 1,700

Total

approx. 4.4

approx. 30

3,800

Credit Saison*Notes: Estimated figures excluding transaction volume of Group companies and use of other companies’ credit cards at
Credit Saison’s affiliated stores

Mobilizing Comprehensive Group Strengths
During fiscal 2005, we will deploy our extensive know-how to strengthen our businessfoundation as a comprehensive financial services company. We will also make maximum use of humanresources and physical assets in promoting the development of a diverse array of businesses. With
credit cards as our core business, we intend to raise the corporate value of the Credit Saison
Group by strengthening synergy among Group companies to build organic linkage among the threebusinesses of credit cards, finance and increasing asset value.
In the credit card business, we will strengthen the foundation we will require to be thecompany with the top market share of cards issued. At the same time, we will participate in
6

CREDIT SAISON CO., LTD.

securities brokerage, investment product development and other businesses as we work tostrengthen our efforts to add value to our credit cards. In the securities brokerage business, since
December 2004 we have been working as an agent opening accounts for Monex Beans, Inc. at Saison
Counters and over the Internet, and have been marketing Japanese government bonds toindividuals. Our alliance with an Internet-based securities company represents a bold new
direction for Credit Saison given our traditional emphasis on face-to-face counter sales. In the areaof investment, we established the Investment Business Planning Department within the Strategy Division
to provide educational seminars for cardholders on investing and to study the development of
new services. In the future, we expect to expand the products we handle and the locations at which
we offer services to broaden our ability to provide services that meet customer needs.
In the finance business, we will use our financial know-how in the leasing, credit guarantee andmortgage loan businesses, as well as the consumer finance business. We intend to develop an arrayof businesses that meet the market needs of both individuals and corporations.
The business of increasing asset value involves using Credit Saison Group assets including
human resources, physical assets and expertise to structure a business portfolio that generates growthin each business sector and that exhibits compatibility with our finance businesses, including the credit
card business. Moreover, we will promote alliances and mergers and acquisitions that strengthen
operations from the perspective of maintaining a sound balance sheet. We will also use initial public
offerings in structuring growth strategies for affiliates in each area of operations.
Personnel System Innovations
We have introduced a new personnel system that provides horizontal coverage of all types of
employment status, and we are promoting the regular use of specialists to scout for qualified
personnel, as well as personnel training for self-development. The Credit Saison Group takes
positive steps to make use of the skills of female and younger employees, and we will continue
working to develop strongly competent personnel with the spirit and knowledge that will serve themeven outside the Company.

Achieving Profitable Growth

In the current fiscal year, we will mobilize our comprehensive Group strengths inworking to increase the Group’s corporate value. Fiscal 2005 is also the final year of our
medium-term management plan, so we will also be working to achieve the plan’s
objectives while formulating an effective new medium-term management plan.
During fiscal 2004, we achieved gains in revenues and income, and the primary indicators in thecredit card business point to success. I am not satisfied with things as they stand, however. Credit
Saison has become a leading company in the credit card industry, but examples of complacency
following success are common in business. We cannot let our successes make us complacent. Rather,
we must constantly employ innovative ideas and strategies to generate profitable growth. Our mostimportant strategy is simply to be a company that is supported by its customers.
The Credit Saison Group is working to increase its corporate value. We plan to return to a highgrowth trajectory by achieving our targets for the end of March 2006 of operating revenues of ¥252
billion, operating income of ¥60 billion and net income of ¥34 billion. Moreover, we areemphasizing the involvement of younger executives as we formulate our next medium-term
management plan. My role as a manager is to steer the Group as it works to implement the plansthat its own people created. Look for the Credit Saison Group to take on new challenges andachieve new breakthroughs.
June 25, 2005

Hiroshi Rinno
President and CEO
CREDIT SAISON CO., LTD.

7

Industry leadership is our goal.
Intelligent alliances are driving thevalue creation that we need to achieve
our objective — and that our partners
need to achieve theirs.

Aim High

8

CREDIT SAISON CO., LTD.

What’s the Goal?

The Credit Saison Group is achieving further growth with the aimof being the strongest group in the industry and a winner in thetwenty-first century.
Taking Up the Challenge of Industry Market Share Leadership
Credit Saison has always promoted strategic alliances with theobjective of issuing new cards and stimulating card use. Since 2002, wehave been promoting comprehensive alliances, which are an
innovation in Japan’s credit card industry. Comprehensive alliances
extend beyond the simple issuance of affinity cards. They also
involve providing capital, human resources and know-how, and are
therefore clearly differentiated from the alliances other companies form.
As such, they completely overturn the conventional wisdom of
forming alliances with the sole objective of expanding bases for
issuing credit cards. Credit Saison has begun taking the first steps
toward generating further growth by building strong partnerships
in comprehensive alliances with LAWSON, INC.; Idemitsu Kosan
Co., Ltd.; Resona Holdings, Inc.; Takashimaya Company, Limited;

and Mizuho Financial Group, Inc.
The alliance with the Mizuho Financial Group is particularly
meaningful. Our strength at generating new cardholders, marketing
capabilities and powerful brand has enabled us to establish apartnership with the Mizuho Financial Group rather than asubsidiary relationship within this megabank’s group of companies.
As a result, Credit Saison has built the foundation for taking theinitiative as the credit card industry restructures in the future.
As a result of our alliances, the Credit Saison Group’s share oftransaction volume in the credit card market leads the industry at about
16 percent, when including alliances in which we have a capital
relationship. And we’re aiming higher in the future — our target is a
30 percent industry share over the long term.

Comprehensive alliances in the credit card business
MizuhoFinancial Group

Resona Holdings

Takashimaya

LAWSON

Idemitsu Kosan

Working toward Top Industry Share
The objective of the alliance with the Mizuho Financial Group is not
issuing cards for Mizuho Bank, Ltd. to generate large increases in
cardholders. Instead, we are working to expand the number ofcardholders by integrating the SAISON CARD and the UC Card
while making customer service even better. Specifically, in April
2005 we began issuing the “Mizuho Mileage Club Card SAISON,”
which functions as a Mizuho Bank ATM card and a credit card with noannual fee. Looking forward, we intend to energize the bankchannel in the credit card business, and plan to issue 3 million of thesecards over three years.
Another pillar of this alliance is the integration with andrestructuring of UC CARD Co., Ltd. to achieve unprecedented
dynamic business development. Credit Saison plans to integrate its

issuance operations with those of UC CARD in the present period,
with the aim of making Credit Saison the number-one issuer in theindustry. We will handle the SAISON CARD and the UC Card, and plan
to make maximum use of their brand value in the retail and banking
fields in order to execute sales development that is far superior to thatof other companies. Moreover, the collaboration with Credit Saison will
make the restructured UC CARD the industry’s strongest processing
company, as a specialist in its areas of strength in member store
administration and processing operations. The new company will
construct a new business model that can offer processing services to awide range of credit card companies, and also plans to build a nextgeneration joint system that will be a shared infrastructure available foruse by numerous credit card companies.

CREDIT SAISON CO., LTD.

9

Do More
We refuse to sit still. We refuse to
become complacent. We will never stop
innovating to delight our customers.
This drive has made us a leader.

10

CREDIT SAISON CO., LTD.

What’s the Goal?

Customer Service Created from New Ideas
We believe that earning customer trust and support is thesource of growth. Our service is founded on five core concepts: noannual fees; SAISON Permanent Points (“Eikyufumetsu Point”);
preferred services linked to affiliated corporation clients; added
responsiveness from the start of operations of the new Ubiquitous
credit center; and allowing customers to set their own credit limits. Eachof these is a service developed from the perspective of customers using
original Credit Saison ideas.
Among these five core concepts, SAISON Permanent Points,
which never expire, represent a total break with conventional
wisdom. This point program has generated enthusiastic customer
support because customers can collect bonus points indefinitely and use
as many of them as they want, whenever they want. It therefore
attracts new cardholders and energizes card use. It also makes
collecting and using points fun. The program offers more than 300
items, ranging from those that require the exchange of only 200

points to dream items such as a trip to Hawaii on a private jet, a triparound the world, and the reservation of a movie theater exclusively fortwo people.
Credit Saison has also
introduced a new service thatallows customers to set their own
shopping credit limits. Only Credit
Saison could make this bold newservice a reality, and it has
captured attention both insideand outside the credit card
industry. Looking forward, we willcontinue to overturn conventional
industry wisdom in working to
The poster ”The Giant Swing”
develop products and services that ranked No.1 in the survey ofawareness of commercial messages
truly satisfy customers.
released in August 2004.

Providing appealing services requires keeping pace with rapidlychanging customer sensibilities. Credit Saison is aggressive inoffering products and services that other companies cannot match.
Efforts to Stimulate Card Usage
On a non-consolidated basis, card shopping transaction volume forfiscal 2004 increased 8.7 percent year-on-year to ¥2,078.1 billion
due to the increase in active cardholders and greater card use
overseas and for transactions such as paying mobile phone, gas,
electric and other utility bills. The range of transactions where cards
can be used is expanding every year, and now includes hospital bills
and relatively small payments in the food sections of department
stores and for electronic toll collection on highways. These types oftransactions also build up SAISON Permanent Points, and that’s a
key factor in making the SAISON CARD our customers’ main card.

Expansion of Credit Card Usage・ Utilities(Tokyo Gas, Kansai Electric Power, Chugoku Electric Power,
CHUBU Electric Power, Tokyo Electric Power, and others)

・ Life Insurance(AIG Edison Life Insurance)

・ General Insurance(Saison Automobile and Fire Insurance, Sompo Japan Insurance,
Tokio Marine Nichido Fire Insurance, and others)

・ Mobile phones(DoCoMo, au, Vodafone, TU-KA Cellular, and others)

・ Contracts with ISPs
(Yahoo!, DION, POWERDCOM, So-net, OCN)

・ Subscriptions(Nihon Keizai Shimbun, The Yomiuri Shimbun, The Sankei
Shimbun, The Asahi Shimbun, The Mainichi Shimbun)

・ Hospitals(National hospitals, 150 clinics, St. Luke’s International Hospitaland others)

・ ETC (Electronic Toll Collection) payments

CREDIT SAISON CO., LTD.

11

New ways, better ways, smarter ways tosatisfy customers. That’s why our customers
rate Credit Saison as one of Japan’s strongest
brands. And that’s how we generate strong
earnings growth.

Play Smarter

12

CREDIT SAISON CO., LTD.

What’s the Goal?

Target: Raise Customer and Employee Satisfaction
Credit Saison has consolidated the functions of five centers into
one in creating the Ubiquitous credit center. It started operations in
April 2005 and provides a single source for all customer credit cycle
functions: application and registration, credit screening, billing,
response to customer inquiries and collection.
Ubiquitous embodies the concept of raising customer andemployee satisfaction. We believe that dissatisfied employees
cannot provide the information and services that raise customer
satisfaction, so Ubiquitous provides employees with the optimal
working environment. Staff members can get away from work at theon-site cafe, or improve themselves in the Education Room. These andother features make Ubiquitous a pleasant place to work for
women, who make up a majority of its staff.
Ubiquitous strengthens communication with our approximately 9
million active cardholders. It allows more detailed analysis ofcustomer information such as usage and inquiry history, andimproves not only inbound information initiated by customers, but also
outbound communication in which Credit Saison contacts
customers. It also consolidates the analysis systems of the former

five centers into a new communication system, creating a single
source for customer response and the ability to share customer
response records.
Thus, Ubiquitous consolidates credit center functions to raise
operating efficiency. We project that it will achieve significant
cost reductions.

“Ubiquitous” is a new credit center that provides a balance between robust
security and ease of use.

Ubiquitous is one of the finest credit centers in the industry.
It integrates hard assets such as operational infrastructure andsoft assets such as the strengths of our people to create customer
satisfaction. This maintains and expands our base of loyal customers.
Concept of the new credit center “Ubiquitous”

CS
●

ES

(Customer Satisfaction)
Number of active cardholders
reaches 10 million
Developing lifetime
relationships withcustomers
Management●

RISK(Optimal information
management)
Maintaining the best
profit-risk balancein the industry●●(Employee Satisfaction)
High employee satisfaction
High-level standardizationof human resources●

philosophyof being aleading-edge
service provider

Reliable Security Systems
Against the backdrop of society’s increasing use of information
technology (IT), we are ensuring that customers can rely on ourcredit cards by placing the highest priority on safety and reliability insystems operation. At Ubiquitous, Credit Saison protects its
customers’ personal information with the most advanced IT security
systems. In addition, the configuration, use and workflow for theentire facility are divided into clearly defined zones, each with thesystems most suited to its operations. This allows us to achieve abalance between robust security and ease of use.

COST●

(Cost Reduction)
The lowest cost operationin the industry
Strong laborproductivity●

CREDIT SAISON CO., LTD.

13

Our people are our power. Our people
are empowered. We have the freedom
and the responsibility to grow, toinnovate, to succeed.

Jump Higher

14

CREDIT SAISON CO., LTD.

What’s the Goal?

Credit Saison aims for innovative, twenty-first century
management.
Personnel System Innovations
Based on a corporate culture that embraces creativity andinnovation, Credit Saison has successively introduced personnel
systems that emphasize employee capabilities and theirdeployment. Our corporate culture encourages employee
development through friendly rivalry, creating an indispensable
asset in prevailing against our competitors. We believe this is theforce driving Credit Saison forward.
Human resources are our greatest asset. We constantly
innovate our personnel system, searching for the best way to train our
employees and bring out their capabilities. We employ systems such as
the Job Entry System of internal recruiting and the Job Competition
System that allows anyone who feels qualified to apply for positions at
the section leader level and higher. Both encourage employees toembrace a spirit of challenge. Moreover, Credit Saison devotes
energy to self-development programs. The C-BOARD System allows
younger employees to engage in direct discussion with senior
management, including the president and CEO, and to participate
in resolving management issues, and the Dream Plan System
encourages the proposal of ideas in areas such as new productdevelopment and new business planning. We will continue working
to develop strongly professional personnel with “the spirit andknowledge” that will serve them even outside the company.

Management Track Profile

Creating a True Meritocracy

Male/Female Ratio at Department
Manager Level

Male/Female Ratio at Section
Manager Level(Age)
50 – 59

2.3%

(Age)
50 – 59

68.7%

4.1%

40 – 49

64.3%

7.1%
92.9%

31.3%
5.3%

18.5%
40 – 49

81.5%

35.7%
4.8%

12.5%
30 – 39

87.5%

Total

86.0%

19.8%
5.4%

30 – 39

80.2%

3.2%

Total

75.7%

5.9%

14.0%
0

20

40

60

24.3%

80 1000Overall percentage of womenat Department Manager Level inJapanese companies

20

5.5%
60

80 100(Number of employees)

4 0

Female

57

Male

11

89

Credit Saison’s goal is an open, frank and innovative corporate
culture, and our personnel evaluation system is part of our efforts toimplement a dynamic meritocracy. Seniority and gender are
irrelevant; achievement drives pay and benefits. Moreover, wehave created mechanisms for job assignment and recruiting forcontract employees.
Credit Saison also has a high ratio of women in middlemanagement positions. All of the Shop Masters, or managers,
at SAISON Counters are women, and 30% of the women arecontract employees.

28
64

96
30

29
14
7
1

266

40

Overall percentage of womenat Section Manager Level inJapanese companies

Age of Employees at Supervisor Level and Higher(Age)
20 – 24
25– 2930 – 34
35 – 39
40 – 4445 – 49
50 – 54
55 – 59
Total

Employees’ “spirit and knowledge” support our innovative management

16
19
17
216

(As of March 31, 2005)

CREDIT SAISON CO., LTD.

15

Major Group Companies(As of March 31, 2005)

Saison Fundex Group

Atrium Group●House Planning Co., Ltd.
Real estate transactions: The company promptly
evaluates business operations and provides a full range of
support, from land acquisition to property development.
It offers contract construction services and land/singlehouse development business for housing providers.

●SAISON FUNDEX CORPORATION●●Atrium Co., Ltd.

Loans and mortgage securities business:
The company’s core business is to develop
personal loan products. The individual loanbusiness, real estate mortgage loan business,
as well as card loan businesses such as C-plan
Card and Cash Reserve continue to show
favorable growth.

Real estate transactions/Credit and financial
services: As a core member of the Atrium Group, thecompany aims to revitalize real estate in Japan, andhas renovated approximately 10,000 properties inthirteen years since its foundation. Focusing on the
integration of real estate and finance, the company
revitalizes properties with its unique expertise andvalue-added business model.

CREDIT SAI
Positioning the credit card business as our corebusiness, Credit Saison works toward enhancementof the Group’s corporate value by strengthening
synergies among Group companies.

OPERATION SEGMENTS● Credit & Finance● Entertainment● Real Estate● Other

Equity Method Affiliates

Other Companies●JPN Servicer Co., Ltd.
Servicer (loan collection agency): An expert incollecting small unsecured loans, the company
provides effective business solutions by offering highquality automation systems. The company has
established commission contracts with more than 150
companies, and is actively expanding its business.

●LAWSON CS Card, Inc.

●●Uraku Aoyama Co., Ltd.
Membership club management/Property
management: The company operates amembership club named uraku AOYAMA andleases 25 properties. The membership clubprovides an elegant and comfortable space which
includes fitness facilities, a restaurant and a hotel,
while the property management business plansand develops attractive, community-based
utilization of properties.

16

CREDIT SAISON CO., LTD.

Credit and financial services: The company began
issuing “LAWSON PASS” in August 2002 using
Lawson’s sales network and Credit Saison’s expertisein the credit card business. This point card, which alsofunctions as a credit card, became the first in theconvenience store industry to acquire over 2 million
users since its launch three years ago.

Vivre Group●Atrium Servicing Co., Ltd.
Servicer (loan collection agency): Specializing in
disposal of real estate mortgage loans, the company offers
highly competitive sourcing and servicing strength basedon knowledge and experience in the property businessaccumulated in Atrium Co., Ltd., the parent company.

●NOA Planning Co., Ltd.

●Vivre Co., Ltd. / A&A Co., Ltd.
Amusement services: Focusing on the concept of“comfortable amusement spaces” that satisfy
customers, the companies operate 33 amusement
facilities in Japan. They strive to develop amusement
facilities that satisfy customers by offering a
comfortable, sound and relaxing experience withhigh-quality service.

Consultancy: The company develops
attractive amusement facilities, operated by
Vivre Co., Ltd., that stay one step ahead ofcustomers’ needs, while meeting the highstandards of surrounding communities.

S O N G RO U P●Idemitsu Credit Co., Ltd.
Credit and financial services: As the only
credit company in the oil industry, thecompany aggressively expanded its businessat gas stations, and the number of credit cards
issued exceeded two million. The company isworking toward further business expansion bylaunching a new type of credit card that
integrates Credit Saison’s expertise into their
existing card.

●UC CARD Co., Ltd.
Credit and financial services: As a core credit
card company in the Mizuho Financial Group,
the company issues two major international
credit cards, VISA and Master. It is in theprocess of establishing the industry’s top credit
card business group through a strategic
business alliance with Credit Saison.

●Saison Information
Systems Co., Ltd.
Information processing services:
The company develops communications
middleware packages such as HULFT,
and conducts information system
planning and operations in the credit
card and retail distribution businesses.
The company is implementing “Fivereforms” based on the middle-term
management policy,“Challenge tochanges.”●Saison Automobile andFire Insurance Co., Ltd.
Non-life insurance: Operates businesscentered on insurance for individuals. Afterconcluding an alliance with Sompo Japan
Insurance Inc., the company is implementing
structural reforms of business operations
focused on developing new businesstargeting Saison cardholders and enhancing
direct marketing.

CREDIT SAISON CO., LTD.

17

Corporate Governance
Credit Saison realizes the importance of strengthening supervisory functions to increasetransparency in management and achieve business objectives. The Company is taking various
measures aimed at enhancing corporate governance.
Organizational Details and Internal Control System
The Board of Directors consists of seventeen members who set basic policies for the Company’sbusiness execution and supervise directors’ execution of their duties. Two directors are fromoutside Credit Saison.
Credit Saison applies the auditor system, with a Board of Auditors consisting of four auditors. Threeof the four auditors are from outside Credit Saison. In accordance with the auditing policies decided by
the Board of Auditors, each auditor conducts rigorous audits by attending meetings of the Board of
Directors and other important meetings, listening to reports on business activities from directors andothers, reviewing documents containing important decisions, and examining the condition of theCompany’s business operations and assets.
In addition, the internal Audit Office conducts audits of compliance, risk management, internal
control systems, governance and other matters in the organizational operations and businessactivities of Credit Saison and its group companies, and makes evaluations and recommendations basedon these audits.
Credit Saison will continue to consider the most suitable management structure, taking into
consideration factors including international trends in corporate governance and Commercial
Code revisions.
Promotion of Highly Transparent Business
Credit Saison has internal rules for corporate governance in the four areas of complianceprogram, crisis management, personal information management, and insider trading management. As
leakage of personal information has become an issue of public concern, Credit Saison has
supplemented its information management rules by devising and implementing a privacy policy in March
2002 for the control of personal information.
In addition, approximately one-third of Credit Saison’s employees have received the highest
certification from the Japan Consumer Credit Industry Association for handling personal
information. All employees fully recognize the importance of protecting personal information as
managers and handlers of such information, and Credit Saison is working to increase theirawareness and skills in this regard. Moreover, Credit Saison works to prevent leaks, unauthorized accessand other problems in ways such as restricting access, managing passwords and using dedicated lines.
These are part of efforts to strengthen security throughout the Company.
Promoting Compliance Awareness among Employees
Credit Saison has established the Compliance Committee to ensure legal compliance, fairness andethical conduct in its corporate activities. Toshiharu Yamamoto, Senior Managing Director, serves as thecommittee chairman. The committee convenes several times each year, and its secretariat meets
more than 20 times annually, to carry out initiatives such as drawing up a code of ethics andstandards of conduct, and creating a unit to promote compliance. The committee also produces anddistributes a compliance handbook for employees and contract employees.
A compliance consultation desk has been set up in the company, and inquiries are also accepted
through telephone and fax hotlines, a company intranet, a special Internet address and postal mail. In
addition, the General Affairs Division uses outside guest lecturers to conduct compliance training forexecutives, which include directors and division managers, as well as for general employees.
Employees in charge of compliance are assigned to each division and conduct training programs at thedivision’s initiative.

18

CREDIT SAISON CO., LTD.

Board of Directors and Auditors(As of June 30, 2005)

From left:

Teruyuki Maekawa*Executive Vice President
General Manager of Management Division in
charge of Public Relations Office and Audit
Office and Mizuho UC Alliance Promotion Office

Hiroshi Rinno*
President and CEO

Atsushige Takahashi*
Senior Managing Director
General Manager of Business Division

From left:

From right:

Naoki Takahashi

Terutaka Hasuda

Managing Director
In charge of Sales and Credit Card
Division

Senior Managing Director
General Manager of Sales Division

Hidetoshi Suzuki

Senior Managing Director
General Manager of Credit Division

Toshiharu Yamamoto

Managing Director
General Manager of Strategy Division

Hiromichi Sato

Kazuhusa Inada

Managing Director
In charge of Lease Dept. and Credit
Guarantee Dept.

Managing Director
General Manager of Credit Card Division

From left:

From right:

Mitsusuke Yamamoto **Kenzo Tada

Director
Representative Director and Vice Presidentof UC CARD Co., Ltd.

Director
General Manager of East-Japan
Business Dept.

Akira Kuramitsu

Yoshiro Yamamoto **Director
General Manager of Credit Planning Dept.

Director

Kyosuke Togano

Director
General Manager of West-Japan
Business Dept.

Takayoshi Yamaji

Director
General Manger of System Planning Dept.
and in charge of Systems Promotion Dept.
and General Manager of Mizuho UC
Alliance Promotion Office

Shinji Hojo
Director
In charge of Related Business Dept.
and Finance & Accounting Dept.

Hisayuki Kurata
Director
General Manager of Administration Division

From left:

From right:

Atsushi Toki **Isamu Sato **AuditorStanding Statutory Auditor

Toshio Sakai

Junichi Yamamoto **Standing Statutory Auditor

Standing Statutory Auditor* Representative Director** Outside director or auditor
CREDIT SAISON CO., LTD.

19

Card Tie-Ups
Shopping

Sogo Co., Ltd.

The Seibu Department Stores, Ltd.

Parco Co., Ltd.

The Loft Co., Ltd.

Ryohin Keikaku Co., Ltd.

Takashimaya Company, Limited

Toys“R”Us-Japan, Ltd.

MARUI Co., Ltd.

Mitsui Fudosan Co., Ltd.

BALS Corporation

LaOX Co., Ltd.

Mitsukoshi, Ltd.

Kokudo Co., Ltd.

Kagoshima Terminal Building Inc.

Meitetsu Department Store Co., Ltd.
Kanazawa Meitetsu Marukoshi Department Store

L.L. Bean, Inc.

Senshukai General Service Co., Ltd.

POWER’S Co., Ltd.

YEBISU GARDEN PLACE Co., Ltd.

Katakura Industries Co., Ltd.

PRINCE HOTELS, INC.

Mori Kanko Trust Co., Ltd.

United Airlines, Inc.

NIPPON ANIMATION Co., Ltd.

TOHO Cinemas Ltd.

Japan Football Association

SEIBU LIONS, Inc.

PADI, Inc.

Yama-Kei Publishers Co., Ltd.

ThirdAgeStyle Corporation

N.S. SHOJI CO., LTD.

FEG INC.

RHSJ ENTERPRISES CO., LTD.

Mizuho Bank, Ltd.

JAPAN POST

Monex Beans, Inc.

The Shonai Bank, Ltd.

The Kyoto Shinkin BankNTT DoCoMo, Inc.

eAccess Ltd.

NIFTY Corporation

WOWOW Inc.

Travel &Entertainment

Financial
Institutions

Internet andCommunications

Automotive

Processing
Business

Mazda Motor Corporation

Japan Automobile Federation

Japan Leukaemia Research FundTokyo Gas Energy Co., Ltd.

Japan Highway Public
Corporation

Resona Card Co., Ltd.

SocialContribution

20

CREDIT SAISON CO., LTD.

LAWSON CS Card, Inc.

Idemitsu Credit Co., Ltd.

Financial Section

CONTENTSManagement’s Discussion and Analysis...................... 22
Six-year Summary of Selected Financial Data ........ 22
Consolidated Balance Sheets ....................................... 30
Consolidated Statements of Income........................... 32
Consolidated Statements of Shareholders’ Equity .... 33
Consolidated Statements of Cash Flows..................... 34
Notes to Consolidated Financial Statements.............. 35
Report of Independent Accountants .......................... 49

CREDIT SAISON CO., LTD.

21

Management’s Discussion and Analysis
Six-year Summary of Selected Financial Data
As of and for the years ended March 31
Thousands of
U.S. dollars(Note 4)

Millions of yen
As of and for the years ended March 31

2005

CONSOLIDATED
For the year:
Operating revenues (Note 1) ................... ¥ 240,385
Selling, general andadministrative expenses.....................
172,024
Financial cost........................................
9,771
Operating income ................................
58,590Net income (loss)..................................
31,818At year-end:
Total shareholders’ equity (Note 2) ........... ¥ 301,310
Total assets ............................................
1,512,949
Interest-bearing debt (Note 3)...................
1,146,928
Per share data (in yen and U.S. dollars) (Note 2):
Net income (loss) per share.................... ¥ 185.00
Shareholders’ equity per share...............
1,721.35
Key financial ratios (%):
Return on shareholders’ equity (ROE).....
11.4
Return on assets (ROA) ..........................
2.2
Shareholders’ equity ratio ......................
19.9
NON-CONSOLIDATED
For the year:
Operating revenues (Note 1) ..................... ¥ 190,248
Selling, general andadministrative expenses.....................
135,403
Financial cost .........................................
8,186
Operating income..................................
46,659Net income (loss) ...................................
25,798At year-end:
Total shareholders’ equity (Note 2) ........... ¥ 298,502
Total assets ............................................
1,290,067
Interest-bearing debt (Note 3)...................
948,561
Per share data (in yen and U.S. dollars) (Note 2):
Net income (loss) per share.................... ¥ 149.78
Shareholders’ equity per share...............
1,703.39
Dividends per share ...............................
20.00
Key financial ratios (%):
Return on shareholders’ equity (ROE).....
9.2
Return on assets (ROA) ..........................
2.1
Shareholders’ equity ratio ......................
23.1
TRANSACTION VOLUME: NON-CONSOLIDATED
Credit-card-related shopping services... ¥2,078,117
Shopping loans ..................................
9,440
Guarantees ........................................
36,179Cash advances and specialty loans .....
592,359
Agency services..................................
576,270
Leases ................................................
82,999Merchandise sales..............................
—
Others................................................
8,317
Total volume of new contracts...............
3,383,681

2004

2003

2002

2001

¥ 220,332¥ 212,242¥ 214,838¥ 188,061

156,502
9,825
54,00522,420147,018
12,81052,414(6,027)

141,795
13,37059,673
18,225

128,187
15,747
44,125
13,548¥ 258,253
1,352,710
1,011,563¥ 236,028
1,280,823
965,082¥ 242,594
1,256,899
885,270¥ 225,947
1,719,109
833,076¥ 212,933 $ 2,805,228
1,769,690 14,085,739
876,708 10,678,037

¥

¥

¥

¥

130.55
1,519.13(36.57) ¥ 108.56
1,380.26
1,436.58

81.04
1,351.19

2000

2005

¥ 177,603 $ 2,238,014
123,074
14,91839,61016,995102.81 $
1,274.06

1,601,565
90,969545,480
296,234

1.72
16.03

9.1
1.7
19.1

—
—
18.4

7.8
1.2
19.3

6.2
0.8
13.1

¥ 175,725¥ 171,843¥ 154,204¥ 133,777

123,746
7,154
44,82524,396

121,111
7,607
43,124(5,026)

105,555
7,402
41,24812,28687,371
8,605
37,80016,522¥ 261,793
1,155,776
828,639¥ 237,175
1,085,349
779,451¥ 243,492
1,057,841
698,510¥ 232,393
1,031,360
659,099¥ 220,284 $ 2,779,093
931,518 12,010,676
603,599
8,831,213

¥

¥

¥

¥

142.001,536.51
18.00(30.34) ¥72.50
1,383.04
1,436.80
18.00
18.00

97.49
1,371.30
18.00

9.8
2.2
22.7

—
—
21.9

5.2
1.2
23.0

7.3
1.7
22.5

¥1,912,211
13,36831,684555,984
328,120
73,6652,763
6,605
2,924,399¥1,808,625
17,37053,434600,447
398,725
71,9609,445
9,789
2,969,794¥1,629,199
19,26756,317555,132
400,026
51,7899,282
9,427
2,730,438¥1,420,243
20,771
14,646500,645
401,084
35,192
11,6788,914
2,413,174

8.5
1.0
12.0

¥ 126,030 $ 1,771,235
83,1199,347
33,563
14,27585.21 $
1,299.85
18.00

1,260,618
76,215434,403240,183

1.39
15.86
0.19

6.8
1.6
23.6

¥1,278,719 $19,347,515
24,25687,891
25,628336,833
414,660
5,514,930
400,495
5,365,145
23,919772,728
13,729—8,331
77,4302,189,740 31,502,473

Notes: 1. “Operating revenues” does not include consumption taxes.
2. Treasury stock is deducted from capital. In addition, treasury stock is subtracted from the total number of shares outstanding in computing per share data.
3. “Interest-bearing debt” includes asset-backed securities.
4. Japanese yen amounts have been translated into U.S. dollars at the rate of ¥107.41 = U.S.$1, the approximate exchange rate on March 31, 2005, for the convenience ofthe reader.

22

CREDIT SAISON CO., LTD.

The Credit Saison Group generates operating revenues in fivesegments: Credit & Finance, Entertainment, Real Estate, Lease andOther. Credit & Finance is the largest of these segments. It consists
primarily of the consumer credit businesses of credit cards and loans to
individuals, and accounted for approximately 80 percent of operating
revenues in fiscal 2004, the year ended March 31, 2005.
Operating revenues consist primarily of fees from affiliated stores
generated by credit card and installment purchases, and customer fees
generated by revolving accounts, card cash advance transactions,speciality loans and other transactions. Operating expenses consist
primarily of advertising expenses, losses on accounts receivable,
personnel expenses, fees and financial costs. Advertising andpersonnel expenses represent a significant percentage of operating
expenses. Overall, these costs are directly related to acquiring new
cardholders to generate future revenue growth.

Changes in the Scope of Consolidation
The Credit Saison Group consisted of Credit Saison Co., Ltd. and 10
consolidated subsidiaries as of March 31, 2005. No subsidiaries wereadded or removed from the scope of consolidation during fiscal 2004. The
Credit Saison Group had five affiliates accounted for using the equity
method as of March 31, 2005, an increase of two from a year earlier.
The additional equity method affiliates are Idemitsu Credit Co., Ltd.
and UC CARD Co., Ltd. both of which are affiliates associated withstrategic alliances. In addition, Health Park Co., Ltd. changed its name to
Uraku Aoyama Co., Ltd. effective from August 1, 2004.

Analysis of Income Statements
During fiscal 2004, the United States, China and other countries
supported a recovery in the global economy, which benefited exporters
and other companies in Japan. Indicators such as improvement in
employment conditions and consumer sentiment suggested recovery inJapan’s economy.
Operating revenues increased 9.1 percent year-on-year to¥240,385 million. Operating income increased 8.5 percent year-onyear to ¥58,590 million. Net income increased 41.9 percent year-on-yearto ¥31,818 million.

For fiscal 2004, operating revenues increased 9.1 percent, or¥20,053 million, year-on-year to ¥240,385 million. Expansion in
operating revenues centered on the consumer credit businesses ofcredit cards and loans to individuals in the Credit & Finance segment.
Operating revenues also increased in the Real Estate and Lease
segments.
Total Operating Revenues

Breakdown of Selling, General and
Administrative (SG&A) Expenses
Years ended March 31

Cost of uncollectible receivables
Included in above:
Allowance for losses on
accounts receivable
Losses on accounts
receivable
Allowance for losses on
guarantees
SG&A expenses excluding costof uncollectible receivables
Included in above:
Advertising expenses
Personnel expenses
Fees paid(Millions of yen / %)

2005

2004

¥ 43,861 ¥ 41,207% change

6.4%

38,78332,176

20.5

3,825

8,096

(52.8)

1,253

934

34.2

128,162

115,295

11.2

24,69932,85328,066

21,726
31,56324,123

13.7
4.1
16.3

¥172,024 ¥156,502

9.9%

Financial cost decreased 0.5 percent year on year to ¥9,771
million. While the balance of interest-bearing debt increased, theCredit Saison Group worked to reduce funding costs.
As a result, operating income for fiscal 2004 increased 8.5
percent, or ¥4,585 million, compared to the previous fiscal year to¥58,590 million.

(Millions of yen)05

240,38504

220,332

03

212,24202

214,838

01

Operating expenses increased 9.3 percent, or ¥15,468 million,
compared with the previous fiscal year to ¥181,795 million. Primaryfactors included a 13.7 percent increase in advertising expenses to¥24,699 million, as higher transaction volume increased expenses
associated with SAISON Permanent Points (“Eikyufumetsu Point”: apoint program that allows customers to accumulate unlimited credit
card points and exchange them at any time), and the Credit Saison
Group launched a new television commercial, “The Giant Swing,” thatwas favorably received. In addition, fees paid increased 16.3 percent yearon-year to ¥28,066 million because of expansion in credit card
commissioned operations.
The cost of uncollectible receivables, which is included in selling,
general and administrative (SG&A) expenses, increased 6.4 percent
year-on-year. This increase reflected growth in credit card installment
accounts receivable, which resulted in increases in the allowance for losseson accounts receivable and the allowance for losses on guarantees.
However, the decrease in personal bankruptcies in Japan and theintroduction of a new credit screening system strengthened initial
lending and credit extension, which resulted in a substantial year-on-year
decrease in losses on accounts receivable.

Total SG&A expenses

Operating Revenues(Years ended March 31)

Operating Income and Expenses

188,061

Non-Operating Expenses and Net Income
Non-operating loss decreased to ¥4,168 million from ¥13,496
million for the previous fiscal year. Non-operating revenues increased bynearly four times to ¥7,398 million because the Credit Saison Group
increased proceeds from sales of investment securities and recorded
net gain on changes in equity interest due to an increase in value of equity
interest. Non-operating expenses decreased 25.3 percent year-on-year to
CREDIT SAISON CO., LTD.

23¥11,566 million, due largely to a substantial decrease in impairment
loss of property and equipment, other assets to ¥1,156 million from
¥7,570 million for the previous fiscal year. While impairment losses
result from a number of unpredictable factors, Credit Saison believes
that the process of implementing new impairment accounting
standards begun in the previous fiscal year is largely complete, andexpects impairment losses to decrease significantly as a factor
influencing income.
As a result, income before income taxes increased 34.3 percent
year-on-year to ¥54,422 million. Provision for income taxes increased to¥21,825 million from ¥18,022 million for the previous fiscal year.
Consequently, net income increased 41.9 percent year-on-year to¥31,818 million. Net income per share increased to ¥185.00 from¥130.55 for the previous fiscal year.

Shareholder Returns Policy
Dividend Policy
The Credit Saison Group considers strengthening its corporate
structure and working to achieve sustainable growth in its businesses to be
critical to increasing shareholder value. The Credit Saison Group’s
fundamental policy regarding distribution of profits is to securesufficient internal capital resources for the above purposes whileproviding appropriate, stable and sustainable dividends to shareholders.

Dividends per Share
Based on the above dividend policy, Credit Saison Co., Ltd.
increased cash dividends by ¥2.00 to ¥20.00 per share for fiscal 2004.
Credit Saison’s policy is to invest internal funds efficiently to achieve lowcost operations and promote continuous business expansion.
In addition, the Credit Saison Group gave complimentary SAISONPermanent Points to shareholders who are SAISON CARD cardholders inproportion to the number of shares held.

Credit & FinanceThis segment consists of the credit, lending and servicer (loancollection agency) businesses. Segment operating revenues increased 7.8
percent year-on-year to ¥196,221 million. Segment operating income
increased 3.0 percent year-on-year to ¥48,201 million.

1. Credit Card BusinessIn the credit card industry, full-scale restructuring of the retailfinance industry has become more pronounced, and the landscape ofthe credit card industry is changing significantly. Amid these
conditions, consumer spending recovered and personal bankruptcies
trended downward. At the same time, the use of credit cards tomake payments expanded to areas such as utilities and medical bills.
These and other factors created a favorable operating environment in
the credit card industry.
Given this operating environment, the Credit Saison Groupaggressively conducted sales activities. As a result, new credit card
holders totaled 2.09 million, the number of cardholders increased
1.03 million to 16.90 million and the number of active cardholders
increased 420 thousand to 8.83 million.
In addition, card shopping transaction volume increased 8.7
percent year-on-year to ¥2,078.1 billion. Cash advance transaction
volume increased 4.3 percent year-on-year to ¥518.0 billion. The
volume of shopping-related revolving credit contracts increased 6.9
percent year-on-year to ¥177.6 billion. The Credit Saison Groupliquidated ¥40.0 billion of these contracts, resulting in a balance ofrevolving credit contracts receivable totaling ¥137.2 billion as ofMarch 31, 2005. Cash advance and Cash Plus Loan receivables
totaled ¥413.9 billion, an increase of 8.1 percent from a year earlier. The
Credit Saison Group liquidated ¥30.0 billion of these contracts,
resulting in a balance of cash advance and Cash Plus Loan
receivables totaling ¥385.1 billion as of March 31, 2005.
Key Initiatives in the Credit Card Business during Fiscal 2004

Review of Operations by Segment
Beginning with fiscal 2004, the Credit Saison Group has changed its
segment reporting to present operating activities more accurately. The
Credit Saison Group’s segments are now Credit & Finance,
Entertainment, Real Estate, Lease and Other. Figures for previous fiscal
years have been restated in accordance with this change to permit
year-on-year comparison.

Alliance Network Expansion and Acquisition of Cardholders◆ Promotion of Strategic Alliances
Amid the ongoing restructuring of Japan’s credit card industry,
the Credit Saison Group has been strengthening its position as aleading company in the industry by promoting various alliances.
The Credit Saison Group began issuing affinity cards for four

Operating Revenues and Operating Income by Segment

Credit & FinanceEntertainment
Real Estate
Lease
Other
Total
Eliminations or corporate
Consolidated(Millions of yen)

2005

Operating Revenues
2004% change¥196,221
17,02813,3726,854
8,359
241,834(1,449)¥240,385¥182,005
15,632
10,961
5,610
7,621
221,829(1,497)¥220,332

7.8%
8.9
22.0
22.2
9.7
9.0
—
9.1%

Note: Operating revenues and operating income of each segment include intersegment operating revenues.

24

CREDIT SAISON CO., LTD.

2005

Operating Income
2004% change¥48,201
1,358
5,536
2,636
4,404
62,135(3,545)¥58,590¥46,800
1,331
4,229
1,930
2,859
57,149(3,144)¥54,005

3.0%
2.0
30.9
36.6
54.0
8.7
—
8.5%

new companies, bringing the total number of alliance partners to
77 companies.
• In September 2004, the Credit Saison Group began issuingaffinity cards for Takashimaya Company, Limited, the leader ofJapan’s department store industry. Moreover, “Takashimaya
Saison Counters” began operating at 19 Takashimaya
department stores throughout Japan, which increased thenumber of counters in the Credit Saison Group’s network to 173(as of August 31, 2005).
• In December 2004, the Credit Saison Group concluded acomprehensive alliance with Mizuho Financial Group, Inc.,
Mizuho Bank, Ltd. and UC CARD Co., Ltd. In April 2005, theCredit Saison Group began issuing a card that functions as bothan ATM card for Mizuho Bank, Ltd. and a SAISON CARD.
During fiscal 2005, the Credit Saison Group plans to integrate
the card issuance operations of UC CARD, which should
significantly expand the Credit Saison Group’s number ofcardholders and share of transaction volume.

strengthening management of receivables risk. At the sametime, the delinquency ratio has begun trending downward,
indicating Credit Saison’s progress in responding to customer
needs to the greatest possible extent by relentlessly working toadminister credit in a manner that balances revenues and risk.
New Developments and Initiatives◆ Progress in the Processing BusinessIn the commissioned processing business, Credit Saison beganproviding commissioned processing services for the “Idemitsu
Card Mydo Plus” from April 2004, and also began providing
commissioned processing services for the “Resona Card+S(Resona Card SAISON)” issued by Resona Card Co., Ltd. from
October 2004.
◆ Start of Securities Brokerage
Credit Saison became a registered securities broker and began
opening accounts on behalf of Monex, Inc. (currently Monex
Beans Holdings, Inc.) over the Internet and at selected SAISONCounters, and also began selling Japanese government bonds.

Strengthening Our Business Foundation◆ Brand Awareness and Diffusion
The Credit Saison Group worked to enhance awareness anddiffusion of SAISON Permanent Points, which never expire,through a popular new television commercial “The Giant Swing,”
which was timed to coincide with the Athens Olympics andfeatured an elderly athlete performing on the horizontal bars.
This initiative to acquire new cardholders and promote usage
among existing cardholders gave added prominence to themessage that cardholders can use the SAISON CARD for many
years to come.
◆ Measures to Stimulate Card Usage
The Credit Saison Group moved to stimulate card use by
expanding the use of credit cards to include transactions such as
payment of gas, electricity and other utility bills, as well as
medical expenses. In addition, the Credit Saison Groupaggressively promoted customer use of credit cards for recurring
monthly payments for utilities and cellular phone charges, andfor relatively small payments such as in the food sections ofdepartment stores and for electronic toll collection on highways.
◆ Building a System for Rapid Issuance
The Credit Saison Group is responding to the needs ofcustomers who want to receive and start using their SAISONCARD right away by building a system for rapidly issuing the
SAISON CARD. In addition to accepting applications via theInternet, Credit Saison has established “SAISON STATION”
information terminals that permit rapid application and issuance ofcards at key SAISON Counters nationwide. Moreover, Credit
Saison is expanding application channels such as “SAISONCARD MAKER” automated card issuing machines to enhanceservice by significantly increasing the variety of cards that canbe issued rapidly.
◆ Thorough Credit Administration
Credit Saison has introduced the new HEART credit screening
system covering initial lending and credit extension as part of a focus
on continuously enhancing the soundness of receivables by

2. Card Loan Business
The Credit Saison Group provides card loans through the C-Plan Cardand Cash Reserve Card dedicated loan cards. The number of loancards issued increased 9.3 percent year-on-year to 180 thousand, and thebalance of card loans receivable increased 9.8 percent year-on-year to¥60.1 billion.

3. Other Consumer Loans
In addition to card loans, Credit Saison provides a variety of
unsecured consumer loans. These include the Member’s Loan for
SAISON CARD cardholders. Other consumer loans receivable increased
20.3 percent year-on-year to ¥60.4 billion.

4. Loans
Credit Saison entered the real estate mortgage loan business in
September 2004. Using real estate evaluation capabilities, know-how
related to real estate liquidation and a network acquired through the realestate distribution business, the Credit Saison Group has created alineup of three products: loans for individuals, loans for businesses andnon-recourse loans. The balance of loan receivables totaled ¥43.2
billion as of March 31, 2005.

5. Credit Guarantee Business
Credit Saison uses close relationships spanning sales andadministration in its growing number of alliances with financial
institutions to concentrate on acquiring quality contracts. Credit
guarantee contract volume increased 14.2 percent year-on-year to¥36.1 billion.

6. Servicer (Loan Collection Agency) Business
Licensed by the Minister of Justice, the Credit Saison Group
provides commissioned collection services for a broad spectrum ofdebt receivables ranging from those in initial delinquency to those thathave been written off. This business has been expanding steadily, and theCredit Saison Group has been working to raise the efficiency of loancollection operations in ways such as installing a new loan collection
administration system to maintain a high collection rate.
CREDIT SAISON CO., LTD.

25

Entertainment
This segment consists of the amusement business and otheroperations. In the amusement business, facilities have become
increasingly large and upmarket, while the operating environmenthas become intensely competitive. Operating revenues and income
increased as a result of emphasis on creating sound, stable andcomfortable facilities that have the support of the regions in which they
are located. Operating revenues rose 8.9 percent year-on-year to¥17,028 million, and operating income increased 2.0 percent year-onyear to ¥1,358 million.

business was not profitable, however, because of intense pricecompetition. At the same time, systems development and othercomponents of the commissioned administration business generated
operating revenues. Segment operating revenues therefore increased 9.7
percent year-on-year to ¥8,359 million, and segment operating
income increased 54.1 percent year-on-year to ¥4,404 million.
* The Credit Saison Group does not present geographic segment information because no
consolidated subsidiaries or branches are located outside Japan.

Liquidity and Financial Position

Real Estate

Fund Procurement and Liquidity Management

This segment consists of real estate distribution and property
management. During fiscal 2004, the contribution of large-scale
projects and solid performance in the special servicer businesssupported the real estate distribution business. In addition, theproperty management business remained stable. As a result, segment
operating revenues increased 22.0 percent year-on-year to ¥13,372
million, segment operating income increased 30.9 percent year-on-yearto ¥5,536 million.

The Credit Saison Group emphasizes low cost and stability inprocuring funds, and works to diversify fund procurement methods. The
Group primarily procures funds from banks, farming- and forestryrelated financial institutions, life insurance companies and non-life
insurance companies. In addition, the Credit Saison Group procures
funds indirectly through syndicated loans and committed lines ofcredit. The Group also procures funds directly by issuing corporate
bonds, convertible bonds and commercial paper (CP), and also
liquidates card shopping receivables, cash advance receivables andlease receivables.
As of March 31, 2005, interest-bearing debt, including ¥120.0
billion in asset-backed securities accounted for as off-balance-sheettransactions, totaled ¥1,146.9 billion. Of this total, loans accounted for65.6 percent, bonds accounted for 16.1 percent, CP accounted for 5.0
percent, and asset-backed securities accounted for 13.3 percent.
While continuing to maintain relationships with existing lenders, theCredit Saison Group is working to lower refinancing risk and reduce
costs in ways such as initiating relationships with new lenders todiversify funding sources. In addition, the Credit Saison Group is also
reducing liquidity risk and lowering costs by employing new directfund procurement methods other than bonds and CP. Thesemethods include liquidating receivables, an approach that is not
influenced by the Group’s financial condition.

1. Real Estate Distribution Business
The Credit Saison Group renovates real estate assets acquired at
auction, and adds value to them in ways such as providing a five-year
warranty against defects. We also specialize in the servicer business,
which entails acquiring nonperforming loans collateralized by realestate and real estate that collateralized such loans, adding value tothem and then selling them. The Credit Saison Group also focuses onbuilding and marketing properties in central Tokyo, where theproperty turnover rate is high.

2. Property Management Business
The Credit Saison Group leases space to tenants in properties
that it owns, and subleases properties that it manages andadministers on behalf of property owners.

Lease
The overall leasing market remained weak during fiscal 2004.
However, amid the increasing popularity of mobile communications andbroadband, Credit Saison emphasized small-ticket vendor leases,
particularly in the steadily expanding communications and businessequipment sectors. Lease transaction volume therefore increased
12.7 percent year-on-year to a record ¥82.9 billion. Segment
operating revenues increased 22.2 percent year-on-year to ¥6,854
million, and segment operating income increased 36.6 percent year-onyear to ¥2,636 million.

Other
This segment consists of mail-order sales and other operations. In
the mail-order sales business, the Credit Saison Group issued new
catalogs eight times during the fiscal year and enhanced programs forpromoting sales to SAISON CARD cardholders while also working to
improve the profit structure of this business by reducing expenses. This

26

CREDIT SAISON CO., LTD.

Composition of Interest-Bearing Debt

(Billions of yen)
65.6%

16.1% 5.0%

13.3%

05

1,146.9
63.9

12.5

7.0

16.6

04

1,011.5
59.4

10.8

14.9

14.9

965.0

03
7.6

13.0

17.5

62.2 2.5

19.6

15.7

61.9

02

885.2
833.0

01
(Years ended March 31)

Loans

Asset-backed securities

Commercial paper

Bonds

Credit Saison Co., Ltd. has obtained credit ratings to support
smooth fund raising. Rating and Investment Information, Inc., aJapanese credit rating agency, maintains an A+ issuer rating on
Credit Saison, and a credit rating of a-1 on Credit Saison’s shortterm debt. In addition, although we did not request it, Standard &Poor’s (S&P) gave Credit Saison an A- rating.
Receivables, primarily associated with the credit card business,account for 68.5 percent of the Credit Saison Group’s assets. With anaverage annual receivables turnover rate of 3 times, the Credit
Saison Group maintains a high level of liquidity.

Cash Flow
As of March 31, 2005, cash and cash equivalents decreased¥19,113 million from a year earlier to ¥54,308 million. The Credit
Saison Group continued to enhance internal capital resources, which it
used to fund the growth opportunities presented by major strategic
alliances.

Net Cash Used in Operating Activities
Net cash used in operating activities totaled ¥24,714 million. In theprevious fiscal year, operating activities provided net cash totaling¥55,046 million. Favorable business conditions resulted in income
before income taxes of ¥54,422 million. Depreciation andamortization, a non-cash item, totaled ¥43,272 million, while
proceeds from the liquidation of card shopping receivables, which
are trade receivables, provided cash of ¥30,000 million. However,trade receivables increased ¥146,655 million due to growth intransaction volume in the credit card business.

Net Cash Used in Investing Activities
Net cash used in investing activities increased 65.4 percent year-onyear to ¥113,648 million. Payments for purchases of property andequipment and other assets used cash totaling ¥91,698 million forreasons including the acquisition of lease assets. In addition, net
payments for purchases of investment securities totaled ¥24,592
million as the Credit Saison Group used cash to acquire shares in UC
CARD Co., Ltd. and other investment securities.

was an increase of ¥17,946 million in lease assets compared to theprevious fiscal year-end.
Investments and other assets increased ¥22,961 million, or 15.3
percent, from a year earlier to ¥172,685 million. The primary factor
was an increase of ¥30,143 million in investment securities resulting
from investment in shares of UC CARD Co., Ltd. as a result of thestrategic alliance.
As of March 31, 2005, total liabilities increased ¥113,689
million, or 10.4 percent, from a year earlier to ¥1,207,715 million.
Current liabilities increased ¥53,311 million, or 8.1 percent,from a year earlier to ¥710,722 million. A primary factor was theincrease in the current portion of long-term debt scheduled to be
repaid within one year.
Long-term liabilities increased ¥60,378 million, or 13.8 percent,from a year earlier to ¥496,993 million. Long-term debt increased¥60,472 million, or 14.4 percent, from a year earlier to ¥481,098
million.
As a result, interest-bearing debt on the balance sheet increased¥105,365 million, or 11.4 percent, from a year earlier to ¥1,026,928
million. Including ¥120.0 billion in asset-backed securities accounted foras off-balance-sheet transactions, interest-bearing debt totaled¥1,146,928 million.
Shareholders’ equity increased ¥43,057 million, or 16.7 percent,from a year earlier to ¥301,310 million. The ratio of shareholders’equity to total assets increased to 19.9 percent from 19.1 percent a year
earlier. Return on average total shareholders’ equity (ROE) increased to11.4 percent from 9.1 percent a year earlier.
Total Shareholders’ Equity and Equity Ratio(Millions of yen / %)05

301,310
19.9

Net Cash Provided by Financing Activities

04

Net cash provided by financing activities was ¥119,261 million. As
a result of the Credit Saison Group’s emphasis on stable mediumand long-term fund raising, proceeds from long-term debts totaled¥117,020 million, and proceeds from issuance of bonds totaled¥43,968 million. Repayment of long-term debts used cash of¥23,817 million, and repayment of bonds used cash totaling¥20,462 million.

03

Assets, Liabilities and Shareholders’ Equity
As of March 31, 2005, total assets increased ¥160,239 million, or
11.8 percent, from a year earlier to ¥1,512,949 million.
Current assets increased ¥114,252 million, or 11.0 percent, from ayear earlier to ¥1,154,527 million, primarily due to an increase intrade receivables resulting from the increase in credit cardtransaction volume. The Credit Saison Group liquidated ¥50.0 billion incard shopping single-payment receivables, ¥40.0 billion in revolving
credit receivables and ¥30.0 billion in cash advance receivables,
which moved them off the balance sheet.
Property and equipment increased ¥23,026 million, or 14.2
percent, from a year earlier to ¥185,737 million. A primary factor

258,253
19.1
236,02818.4

02242,59419.3

01(Years ended March 31)

225,947
13.1
Total shareholders’ equity

Equity ratio

Credit Risk
Receivables (the balance of installment accounts receivable plus thebalance of contingent liabilities related to the credit and financebusinesses and leasing receivables due before the balance sheetdate) overdue by more than 90 days increased 24.7 percent
compared to a year earlier to ¥41,495 million. The allowance forlosses on receivables increased 19.9 percent from a year earlier to¥41,484 million. Consequently, the ratio of allowance for losses onreceivables to receivables overdue by more than 90 days (excluding thecollateralized portion) included in current assets was 121.9 percent,compared to 111.5 percent at the previous fiscal year-end.

CREDIT SAISON CO., LTD.

27

Comparison of Overdue Receivables and Allowance for Losses on
Receivables to Receivables(Millions of yen / %)2005

As of March 31(1) Receivables(2) Receivables overdueby more than 90 days
(3) Collateralized portion
included in (2)(4) Allowance for losses onreceivables included incurrent assets(5) Receivables overdue by
more than 90 days as apercentage of receivables[(2) ÷ (1)]Ratio of allowance of losses onreceivables to receivables
overdue by more than
90 days [(4) ÷ ((2) – (3))](Reference) Receivables overdueby more than 90 days
excluding collateralized
portion as a percentage ofreceivables [((2) – (3)) ÷ (1)]2004

% change¥1,413,266 ¥1,249,508

13.1%

41,49533,277

24.7

7,476

2,237

234.2

Risk Information
The following presents an overview of operating, accounting andother issues that exert or could exert a significant influence on investor
decisions. Forward-looking statements are Credit Saison Groupestimates as of March 31, 2005.

41,484

34,613

19.9

2.9%

2.7%

—

121.9%

111.5%

—

2.4%

2.5%

—

Overview of Allowance for Losses on Receivables (Millions of yen / %)As of March 31

Allowance for losses onreceivables at the
beginning of the year
Increase
Decrease (Reversal)
Allowance for losses onreceivables at theend of the year
(Reference) Losses
on receivables

2005

2004

% change¥39,246
39,87032,147¥35,677
33,47829,909

10.0%
19.1
7.5

46,96939,246

19.7

3,825

8,096

(52.8)

Delinquency Ratio (More than 90 Days) and Write-off Ratio:
Non-consolidated

2.04

04

3.50
2.12

03

2.54
1.64

02
01
(Years ended March 31)

(%)

2.98

2.01

05

2.15
1.31
2.17
Delinquency ratio (more than 90 days)

Write-off ratio

Pension System
Credit Saison Co., Ltd. and some of its consolidated subsidiaries
have defined-benefit plans composed of a corporate pension fundplan and a lump-sum payment plan, and formerly subscribed to the
Palette Corporate Pension Fund. As of June 1, 2004, Credit Saison
Co., Ltd. and its consolidated subsidiaries terminated their relationship with
Palette and established Credit Saison Group Corporate Pension Fund.

28

CREDIT SAISON CO., LTD.

Effective October 1, 2004, Credit Saison Co., Ltd. and some of its
consolidated subsidiaries changed their former defined pension
benefit plans to cash balance plans. Moreover, as per the DefinedContribution Pension Law, a certain portion of future benefits wasshifted to either contribution plans or to prepaid retirement benefit
payment plans at the option of employees.

1. Operating Conditions
Results and financial position in the Credit Saison Group’s primaryCredit and Finance business are subject to the influence of domestic
economic conditions. Factors contingent upon economic conditions,
including worsening of the employment environment, disposable
household income or consumer spending, affect or may affecttransaction volume and repayment in Group businesses including
credit cards, loans, credit guarantees, and real estate mortgage loans, andtherefore have the potential to negatively impact Group operating
revenues and cost of uncollectible receivables. Recently, an increasing
number of individuals have assumed substantial loan and credit card
obligations from multiple financial institutions. This problematic
economic situation also has the potential to affect Group results.
Small and medium-sized companies are the principal customer
group of the Lease segment. Factors contingent upon economic
conditions, including contraction in capital expenditures anddeteriorating corporate performance, have the potential to negatively
impact operating revenues, losses on receivables and other results as wellas financial position.

2. Changes in Cost of Funds
Changes in financial conditions and reduction in the Credit Saison
Group’s credit rating may increase interest rates on funds the Groupprocures and have the potential to negatively impact operating
revenues and other results as well as financial position. Changes ininterest rates on loans and other instruments are impacted by a wide arrayof considerations. These include the maximum interest rates and fees asprescribed by the Law Concerning the Regulation of Receiving ofCapital Subscription, Deposits and Interest on Deposits (the Capital
Subscription Law) and other regulations, which may mandate that theCredit Saison Group operate below the maximum allowable limits;changes in the terms of customer contracts; and interest rates
applicable to other companies in the consumer credit business. The
Credit Saison Group may be unable to price its products and services toreflect higher interest rates on the capital it procures, which would
have the potential to reduce the Group’s interest margin.

3. Competitive Environment
Japan’s financial system has undergone substantial deregulation inrecent years, which has encouraged restructuring of the retailfinancial services industry. Large mergers in the credit card industry
and other events have caused competition to intensify. The results
and financial position of the Credit Saison Group may be negatively
impacted if the Group is unable to maintain its competitive position in thisenvironment.

4. Unfavorable Performance among Primary AlliancePartners
In the credit card business, the Credit Saison Group has
agreements including affinity card issuance and member store
contracts with numerous companies and organizations. Unfavorable
performance among these alliance partners has the potential tonegatively impact the Credit Saison Group’s performance and financial
position. For example, the Credit Saison Group acquires approximately 70
percent of new cardholders through the outlets of alliance partners in theretailing industry. Reduced ability to attract customers or lower sales
among these companies has the potential to negatively impact theCredit Saison Group’s operating revenues.
In addition, the Credit Saison Group has capital relationships with anumber of its alliance partners. Unfavorable performance among suchalliance partners has the potential to incur impairment losses oninvestment securities in the Credit Saison Group’s portfolio.

5. System Operation Problems
The Credit Saison Group relies heavily on computer systems andcommunication networks in numerous aspects of its main businesses,
including the credit card business. A number of situations could
compromise the Credit Saison Group’s sales capabilities, damage its
credibility and cause other problems that would have the potential tonegatively impact the Credit Saison Group’s performance and financial
position. These situations include Group and counterparty system
inoperability resulting from temporary system overload due to factors suchas system errors or spikes in access caused by Group or counterparty
hardware or software problems; breakdown in communication
networks resulting from factors including natural disasters andaccidents; and illegal or inappropriate system operation.

6. Leakage of Personal Information and Other Issues
The Credit Saison Group maintains a large volume of personal
information concerning its cardholders and others, and implements
appropriate controls throughout the Group. However, incidents such asleakage or illegal use of this information would damage the Credit
Saison Group’s credibility and cause other problems that would have thepotential to negatively impact the Credit Saison Group’s performance andfinancial position.

7. Regulatory Changes
The Credit Saison Group operates in accordance with current
regulations and the risks that result from these regulations. The
Group’s businesses are subject to the Installment Sales Law, theMoney-Lending Business Control and Regulation Law, the Capital
Subscription Law and other laws. Amendments to or changes in theinterpretation of these laws in the future would have the potential tonegatively impact the Credit Saison Group’s operations, performance andfinancial position. The type, content and degree of potential regulatory
revisions are difficult to predict, and the Credit Saison Group has nocontrol over their potential impact on its operations.
Recently, regulatory changes have had a material impact on theCredit Saison Group’s performance. Issues include, but are not limited to,amendments to the Civil Rehabilitation Law, the Practicing Attorney
Law and the Judicial Scrivener Law as well as changes in small-claims
receivership proceedings resulting from revisions to bankruptcy
proceedings. Amendments to related statutes and proceedings haveincreased the options available for restructuring debt, and are directly related
to increased losses on receivables in the credit and financial industries. In
addition, there has been an increase in the number of cases in which
debtors paying a rate of interest in excess of the upper limit specified by theInterest Rate Restriction Law file claims seeking recovery of excessive
profit from lenders. While this trend has not had a material impact on theoperations of the Credit Saison Group, increased ease of access to legal
recourse may exert a material impact in the future. A related
phenomenon is the increasing number of attorneys that is resulting
from reform of the legal system, and this may have a material impact of theCredit Saison Group’s performance in the future.

8. Impairment Loss of Property and Equipment and
Evaluation Losses
A material decline in the fair value of the Credit Saison Group’s landand buildings, or a projected decline in operating income in businesses
employing such assets that is not deemed to be temporary, will incur
impairment losses that have the potential to negatively impact theCredit Saison Group’s results and financial position. Moreover, amaterial decline in the fair value of investment securities andinvestments and loans to affiliates, or unfavorable performance
among investees, has the potential to incur evaluation losses.

9. Retirement Benefit Obligations
A decrease in the fair value of the assets in the pension plans of theCredit Saison Group and changes in the actuarial assumptions used to
calculate retirement benefit obligations have the potential to negatively
impact the Credit Saison Group’s results and financial position.

Outlook for the Year Ending March 31, 2006
The Credit Saison Group is working to increase the services it
provides to support various customer lifestyles, and is stimulating
customer card use by energetically promoting innovation based on athorough commitment to customer satisfaction. The Group is also
developing strategies for adapting to market changes in working toincrease corporate and shareholder value.
Based on the above, the Credit Saison Group’s consolidated
performance objectives for the year ending March 31, 2006 areoperating revenues of ¥252.0 billion, operating income of ¥60.0
billion and net income of ¥34.0 billion. Credit Saison Co. Ltd.’s nonconsolidated performance objectives for the year ending March 31,
2006 are operating revenues of ¥203.0 billion, operating income of¥49.0 billion and net income of ¥30.0 billion.

CREDIT SAISON CO., LTD.

29

Consolidated Balance Sheets
CREDIT SAISON CO., LTD. and Consolidated Subsidiaries
As of March 31, 2005 and 2004
Thousands of
U.S. dollars (Note 2)

Millions of yen

2005

2004

2005

ASSETS
Current Assets:
Cash and deposits ...........................................................................................

¥

54,308¥73,421$

505,612

Receivables:
Notes and installment accounts receivable (Note 4)......................................

1,038,116

922,262

Short-term loans..........................................................................................

15,126

10,5199,664,988
140,820

Less: Allowance for losses on receivables .....................................................

(41,484)(34,613)(386,219)................................................................................................................

1,011,758

898,168

9,419,589

Inventories.......................................................................................................

54,17537,765504,380

Deferred income taxes (Note 10) .....................................................................

17,902

15,613

166,672

Prepaid expenses and other current assets .......................................................

16,38415,308

152,534

Total current assets..........................................................................................

1,154,527

1,040,275

10,748,787

Equipment for lease (Note 7) ...........................................................................

232,246

199,361

2,162,240

Buildings and improvements............................................................................

36,66733,767341,377

Fixtures and equipment ...................................................................................

27,27125,896

253,896

Property and Equipment, at Cost:................................................................................................................

296,184

259,024

2,757,513

Less: Accumulated depreciation.......................................................................

(116,823)(103,344)(1,087,637)
1,669,876................................................................................................................

179,361

155,680Land................................................................................................................

6,376

7,031

59,359Total property and equipment .........................................................................

185,737

162,711

1,729,235

Investment securities (Note 8) ..........................................................................

98,612

68,469918,092

Long-term loans ..............................................................................................

29,32436,987

273,010Investments and Other Assets:

Lease deposits .................................................................................................

8,606

8,915

80,124

Deferred income taxes (Note 10) .....................................................................

5,223

7,808

48,630

Other .............................................................................................................

36,40632,179338,937

Less: Allowance for losses on receivables .........................................................

(5,486)(4,634)(51,076)

Total investments and other assets ..................................................................

172,685

149,724

1,607,717

Total assets......................................................................................................

¥1,512,949¥1,352,710$14,085,739

The accompanying notes are an integral part of these statements.

30

CREDIT SAISON CO., LTD.

Thousands of
U.S. dollars (Note 2)

Millions of yen

2005

2004

2005

Short-term loans (Note 6) ................................................................................

¥ 389,526¥ 377,293$ 3,626,534

Current portion of long-term debt (Note 6) .....................................................

99,30452,644

924,534

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities:

Commercial paper ...........................................................................................

57,00071,000530,677

Notes and accounts payable ............................................................................

102,511

94,228954,388

Accrued taxes on income ................................................................................

13,21323,530123,016

Unearned income ............................................................................................

3,388

3,446

31,545

Allowance for bonuses ....................................................................................

1,740

1,734

16,202

Accrued expenses and other current liabilities..................................................

44,04033,536410,014

Total current liabilities......................................................................................

710,722

657,4116,616,910

Long-term debt (Note 6)..................................................................................

481,098

420,626

4,479,078

Accrued pension and severance costs (Note 9).................................................

7,121

7,399

66,301

Accrued retirement benefits to directors and statutory auditors .......................

796

645

7,413

Allowance for losses on guarantees .................................................................

1,253

934

11,666

Allowance for losses on warranty of defects ....................................................

59

33

549

Long-Term Liabilities:

Consolidated reconciliation..............................................................................

488

746

4,542

Other ..............................................................................................................

6,178

6,232

57,517

Total long-term liabilities .................................................................................

496,993436,615

4,627,066

Minority Interests in Consolidated Subsidiaries ............................................

3,924

431

36,535

Commitments and Contingent Liabilities (Note 14)
Shareholders’ Equity:
Common stock................................................................................................

69,526

63,668647,298

Additional paid-in capital.................................................................................

73,14867,134

681,018

Retained earnings............................................................................................

155,101

126,719

1,444,009

Unrealized gains (losses) on other securities .....................................................

7,264

4,686

67,625................................................................................................................

305,039262,2072,839,950

Less: Treasury stock, at cost .............................................................................

(3,729)(3,954)(34,722)

Total shareholders’ equity................................................................................

301,310258,253

2,805,228

Total liabilities and shareholders’ equity ...........................................................

¥1,512,949¥1,352,710$14,085,739

CREDIT SAISON CO., LTD.

31

Consolidated Statements of Income
CREDIT SAISON CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004
Thousands of
U.S. dollars (Note 2)

Millions of yen

2005

2004

2005

Financing and administration fees....................................................................

¥183,618¥174,963$1,709,507

Income from entertainment business ...............................................................

16,99015,605

158,175

Income from real estate business .....................................................................

12,632

10,180117,604

Income from lease business .............................................................................

6,803

5,526

63,338Other income ..................................................................................................

8,083

7,487

75,262Financial income..............................................................................................

12,2596,571

114,128

Total operating revenues .................................................................................

240,385

220,332

2,238,014

Selling, general and administrative expenses....................................................

172,024

156,502

1,601,565

Financial cost...................................................................................................

9,771

9,825

90,969Total operating expenses .................................................................................

181,795

166,327

1,692,534

Operating Income ............................................................................................

58,59054,005545,480

Net gain on changes in equity interest .............................................................

2,371

—

22,075

Other ..............................................................................................................

5,027

1,992

46,797

Total non-operating revenues ..........................................................................

7,398

1,992

68,872

Loss on evaluation of investment securities ......................................................

4,783

999

44,530

Impairment loss of property and equipment, other assets (Note 11)...................

1,156

7,570

10,761Equity in losses of affiliated companies....................................................................

1,840

1,069

17,131Other ..............................................................................................................

3,787

5,850

35,257

Total non-operating expenses..........................................................................

11,566

15,488

107,679

Non-Operating Income (Loss)..........................................................................

(4,168)(13,496)(38,807)

Operating Revenues (Note 12):

Operating Expenses:

Non-Operating Revenues:

Non-Operating Expenses:

Income before Income Taxes...........................................................................

54,42240,509506,673

Provision for income taxes (Note 10) ....................................................................

(21,825)(18,022)(203,192)

Income before Minority Interests ...................................................................

32,59722,487

303,481

Minority interest in income (loss) of consolidated subsidiaries ..............................

779

67

7,247

Net Income........................................................................................................

¥ 31,818¥ 22,420$ 296,234

Yen

U.S. dollars (Note 2)

2005

2004

2005

Per Share Data
Net assets........................................................................................................

¥1,721.35¥1,519.13$16.03

Net income, primary ........................................................................................

185.00130.55

1.72

Net income, fully diluted..................................................................................

180.21127.79

1.68

Dividends ........................................................................................................

20.00

18.00

0.19

The accompanying notes are an integral part of these statements.

32

CREDIT SAISON CO., LTD.

Consolidated Statements of Shareholders’ Equity
CREDIT SAISON CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004
Millions of yen

Balance at March 31, 2003 .....................................
Net income for the year ended March 31, 2004 ........
Cash dividends ..........................................................
Directors’ and statutory auditors’ bonuses .................
Decrease resulting from inclusion ofsubsidiaries in the scope of consolidation.................
Gain on sale of treasury stock ....................................
Conversion of convertible bonds................................
Accumulated changes in fair value.............................
Net increase in treasury stock ....................................
Balance at March 31, 2004 .....................................
Net income for the year ended March 31, 2005 ........
Cash dividends ..........................................................
Directors’ and statutory auditors’ bonuses .................
Decrease resulting from inclusion of affiliatedcompanies in the scope of consolidation..................
Gain on sale of treasury stock ....................................
Conversion of convertible bonds................................
Execution of stock option ..........................................
Accumulated changes in fair value.............................
Net decrease in treasury stock ...................................
Balance at March 31, 2005 .....................................

Number ofshares ofcommon stock
issued (thousands)

Commonstock

Additional
paid-in capital

Retainedearnings

Unrealized
gains (losses) onother securities

Treasurystock

171,410———¥63,337———¥66,788———¥107,687
22,420(3,076)(160)¥ (938)———¥ (846)
—
—
—

—
—
315
—
—
171,725
—
—
—

—
—
331
—
—
63,668
—
—
—

—
16
330
—
—
67,134
—
—
—

(152)
—
—
—
—
126,719
31,818(3,058)
(171)

—
—
—
5,624
—
4,686
—
—
—

—
—
—
—
(3,108)(3,954)
—
—
—

—
—
3,238
1,656
—
—
176,619

—
—
3,393
2,465
—
—
¥69,526

—
160
3,389
2,465
—
—
¥73,148

(207)
—
—
—
—
—
¥155,101

—
—
—
—
2,578
—
¥7,264

—
—
—
—
—
225
¥(3,729)

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2004 .....................................
Net income for the year ended March 31, 2005 ........
Cash dividends ..........................................................
Directors’ and statutory auditors’ bonuses .................
Decrease resulting from inclusion of affiliatedcompanies in the scope of consolidation..................
Gain on sale of treasury stock ....................................
Conversion of convertible bonds................................
Execution of stock option ..........................................
Accumulated changes in fair value.............................
Net decrease in treasury stock ...................................
Balance at March 31, 2005 .....................................

Number ofshares ofcommon stock
issued (thousands)

Commonstock

Additional
paid-in capital

Retainedearnings

Unrealized
gains (losses) onother securities

Treasurystock

171,725———$592,754———$625,024———$1,179,771
296,234(28,471)(1,597)$43,627———$(36,806)
—
—
—

—
—
3,238
1,656
—
—
176,619——
31,58922,955——$647,298—
1,487
31,552
22,955——$681,018(1,928)—————$1,444,009————
23,998—$67,625

—
—
—
—
—
2,084
$(34,722)

The accompanying notes are an integral part of these statements.

CREDIT SAISON CO., LTD.

33

Consolidated Statements of Cash FlowsCREDIT SAISON CO., LTD. and Consolidated Subsidiaries
For the years ended March 31, 2005 and 2004
Thousands of
U.S. dollars (Note 2)

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes ............................................................................................
Adjustments to reconcile income before income taxes to net
cash provided by (used in) operating activities:
Depreciation and amortization ................................................................................
Increase (decrease) in allowance for losses on accounts receivable ...........................
Increase (decrease) in accrued pension and severance costs .....................................
Increase (decrease) in allowance for other reserves ..................................................
Interest and dividends receivable .............................................................................
Interest expenses.....................................................................................................
Equity in (earnings) losses of affiliated companies ....................................................
Foreign currency exchange (gain) loss......................................................................
Realized (gain) loss on investment securities ............................................................
(Gain) loss on evaluation of investment securities ....................................................
Net (gain) loss on changes in equity interest ............................................................
Impairment loss of property and equipment, other assets ..............................................
Loss on disposal of property and equipment, other assets........................................
Changes in operating assets and liabilities:(Increase) decrease in trade receivables....................................................................
Proceeds from liquidation of trade receivables .........................................................
(Increase) decrease in inventories.............................................................................
(Increase) decrease in other assets ...........................................................................
Increase (decrease) in payables ................................................................................
Increase (decrease) in other liabilities .......................................................................
Directors’ and statutory auditors’ bonuses ...............................................................
Subtotal ..............................................................................................................
Interest and dividends received................................................................................
Interest paid ............................................................................................................
Income taxes paid ...................................................................................................
Net Cash Provided by (Used in) Operating Activities ........................................
Cash Flows from Investing Activities:
Payments for purchases of investment securities......................................................
Proceeds from sales or redemption of investment securities.....................................
Payments for purchases of property and equipment, other assets ................................
Proceeds from sales of property and equipment, other assets ......................................
Payments for short-term and long-term loans..........................................................
Proceeds from short-term and long-term loans........................................................
(Increase) decrease in other assets ...........................................................................
Net Cash Provided by (Used in) Investing Activities..........................................
Cash Flows from Financing Activities:
Increase (decrease) in short-term debts....................................................................
Increase (decrease) in commercial paper ..................................................................
Proceeds from long-term debts ...............................................................................
Repayment of long-term debts ................................................................................
Proceeds from issuance of bonds.............................................................................
Repayment of bonds ...............................................................................................
Repayment of payables under securitized lease receivables ......................................
Proceeds from issuance of new stock ......................................................................
Proceeds from minority shareholders .......................................................................
Proceeds from sales of treasury stock ......................................................................
Purchases of treasury stock......................................................................................
Cash dividends paid ................................................................................................
Cash dividends paid to minorities ............................................................................
Net Cash Provided by (Used in) Financing Activities ........................................
Translation Gain (Loss) on Cash and Cash Equivalents .............................................
Increase (Decrease) in Cash and Cash Equivalents.....................................................
Cash and Cash Equivalents at the Beginning of Year................................................
Increase in Cash and Cash Equivalents Resulting from
Addition of Subsidiaries to the Scope of Consolidation .........................................
Cash and Cash Equivalents at the End of Year ..........................................................
The accompanying notes are an integral part of these statements.

34

CREDIT SAISON CO., LTD.

2005

2004

2005

¥ 54,422¥ 40,509

43,272
7,723
(277)
503
(10,778)
10,448
1,840
(135)
(725)
4,783
(2,371)
1,156
17,51337,5013,510
929
43(5,978)
9,892
1,069
(22)
92
999
—
7,570
13,920402,863
71,902(2,582)
4,688(100,342)
97,26917,131(1,255)(6,752)
44,530(22,075)
10,761
163,049(146,655)
30,000(16,397)
(762)
8,323
7,414
(174)
9,123
10,545(10,091)(34,291)(24,714)(88,980)
30,000(6,065)
10,945(2,305)
6,738(163)
60,204
5,962(10,026)(1,094)55,046(1,365,371)
279,304(152,660)(7,097)
77,48969,026(1,616)
84,93598,171(93,948)(319,253)(230,095)(29,504)
4,912(91,698)
1,467(4,701)
7,757(1,881)(113,648)(7,965)22,618(74,047)
1,937(9,761)679(2,164)(68,703)(274,685)
45,732(853,722)
13,662(43,766)
72,222(17,521)(1,058,078)

12,402(14,000)
117,020(23,817)
43,968(20,462)(3,127)
4,931
5,003
428
(22)
(3,058)(5)
119,261(12)(19,113)73,421

30,764(73,000)
68,795(26,059)
64,724(40,200)(8,217)—62
110(3,089)(3,076)—
10,814(91)(2,934)75,725

115,460(130,342)
1,089,470(221,739)
409,356(190,504)(29,116)
45,911
46,5773,983(208)(28,471)(44)
1,110,333(110)(177,950)
683,562—¥ 54,308

630¥ 73,421$$

506,673—505,612

Notes to Consolidated Financial Statements
CREDIT SAISON CO., LTD. and Consolidated Subsidiaries

1. BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared based on the accounts maintained by CREDIT SAISON CO.,LTD. (the “Company”) and its consolidated subsidiaries (the “Companies”) in accordance with the provisions set forth in theCommercial Code of Japan and the Securities and Exchange Law, and in conformity with accounting principles and practices generally
accepted in Japan and Financial Statement Regulations (ordinances promulgated by the Ministry of Finance), which are different fromInternational Accounting Standards in certain respects as to application and disclosure requirements.
Certain items presented in the consolidated financial statements filed with the Ministry of Finance have been reclassified in theseaccounts for the convenience of readers outside Japan. The consolidated financial statements are not intended to present theconsolidated financial positions, results of operation and cash flows in accordance with accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
2. U.S. DOLLAR AMOUNTSJapanese yen amounts have been translated into U.S. dollars at the rate of ¥107.41=U.S.$1, the approximate exchange rate on March
31, 2005, for the convenience of the reader. These translations should not be construed as representations that Japanese yen amounts
actually represent, have been or could be converted into, U.S. dollars at this or any other rate.
3. SIGNIFICANT ACCOUNTING POLICIES(a) Basis of consolidation and accounting for investments in affiliated companies
As at March 31, 2005, the consolidated financial statements include the accounts of the Company and its ten (ten for 2004) material
subsidiaries. Effective from the beginning of the year ended March 31, 2004, Atrium Servicing Co., Ltd. and Uraku Aoyama Co., Ltd.
(formerly named Health Park Co., Ltd. until August 1, 2004) have been included in the scope of consolidation in light of the increasedmateriality to the overall group of these companies. United Vacations Japan Inc., previously consolidated, has been excluded from thescope of consolidation as this company had been liquidated. Lira Corporation, previously consolidated, has been excluded due to its
merger with a consolidated subsidiary, Vivre Co., Ltd.
All significant intercompany accounts and transactions and unrealized profit among the Companies, if any, have been eliminated on
consolidation. Unconsolidated subsidiaries would have no material effect on the consolidated financial statements of the Companies
and have therefore been excluded from consolidation.
The investments in five (three for 2004) material affiliates are accounted for by the equity method. Effective from the beginning of
the year ended March 31, 2004, Idemitsu Credit Co., Ltd. and UC CARD Co., Ltd. have been included in these affiliates in light of theincreased materiality and the acquisition of equity, respectively. Investments in unconsolidated subsidiaries and affiliates not accounted
for by the equity method are stated at cost, due to their immaterial effect on the consolidated financial statements of the Companies.
The full portion of the assets and liabilities of the consolidated subsidiaries is marked to fair value as of the acquisition of control,
and any differences between net assets at fair value and the investment amounts are recognized as goodwill (consolidated
adjustments), which is amortized equally over five years on a straight-line basis.
(b) Financial instruments
The Company and its consolidated subsidiaries adopted Japanese accounting standards for financial instruments.
i. Derivatives
All derivatives are stated at fair value, with changes in fair value included in net profit or loss for the period in which they arise, except
for derivatives that are designated as “hedging instruments” (see iii. Hedge accounting).
ii. Securities
Securities held by the Company and its consolidated subsidiaries are classified into four categories:
Trading securities, which are held for the purpose of generating profits on short-term differences in prices, are stated at fair value,with changes in fair value included in net profit or loss for the period in which they arise.
Held-to-maturity debt securities that the Company and its consolidated subsidiaries intend to hold to maturity are stated at cost after
accounting for premiums or discounts on acquisition, which are amortized over the period to maturity.
Investments of the Company in equity securities issued by unconsolidated subsidiaries and affiliates are accounted for by the equity
method. Exceptionally, investments in certain unconsolidated subsidiaries and affiliates are stated at cost.
Securities not included in the above categories are defined as “other securities.” Other securities that have market prices are stated
at fair value, and the cumulative change in fair value is not credited or charged to income, but net unrealized gains or losses on thesesecurities are reported as a separate item in shareholders’ equity at a net-of-tax amount.

CREDIT SAISON CO., LTD.

35

Other securities that do not have market prices are stated at cost using the moving-average method. Equities of limited liability
partnerships for investment business and of other similar partnerships (defined as “securities” by Article 2 Section 2 of the Securities
and Exchange Law) are valued at the net equity equivalent based on the recently available financial statements of the partnerships
corresponding to the reporting dates of the financial statements defined by the partnership agreements.
In cases where the fair value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries and affiliates,or other securities has declined significantly and such impairment of the value is not deemed temporary, those securities are written
down to fair value, and the resulting loss is included in net profit or loss for the period.
All other securities are presented as “non-current.”
iii. Hedge accounting
Derivatives used as hedging instruments by the Company are principally interest rate swaps and currency swaps. The related hedged
items are bank loans and debt securities issued by the Company.
The Company uses derivative financial instruments to manage its exposure to fluctuations in interest rates. The Company uses
interest rate swaps and currency swaps to reduce interest rate risk. The Company does not enter into derivatives for trading or
speculative purposes.
As per the accounting standard for derivative financial instruments, a) all derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statements of income, and b)
for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market value
but the differentials paid or received under the swap agreements are recognized and included in interest expense or income.
(c) Inventories
Merchandise is stated at cost determined principally by the specific identification method.
Supplies are stated at cost determined principally by the latest purchase cost method.
(d) Depreciation of property and equipment
Depreciation of property and equipment is computed principally by the straight-line method over the estimated useful lives of theassets, except for equipment for lease, which is depreciated over the lease term.
Buildings on leased land subject to limited-term lease agreements for business purposes are required to be demolished and the land
required to be returned as vacant lots upon the expiration of terms under the lease agreements.
(e) Leased properties
Finance leases are accounted for as operating leases, except where the lease is deemed to transfer ownership of the leased property to
the lessee at the end of lease term.
(f) Allowance for losses on accounts receivables
Receivables are classified into four risk categories: bankrupt, doubtful, substandard and normal.
The Companies individually provide a specific reserve for bankrupt and doubtful receivables based on the fair value of any underlying
collateral.
The Companies provide collectively a general reserve for substandard and normal receivables, applying a ratio determined based on
the Companies’ loan loss experience.
(g) Allowance for losses on guarantees
Allowance for losses on guarantees is provided for potential losses arising from the Companies’ guarantee obligations of customers’
liabilities (personal loans to individuals from the banks with which the Companies have guarantee service arrangements).
The allowance is provided at an amount determined by applying the ratio of the Company’s loss experience to the balance ofguarantees outstanding at each year-end.
(h) Allowance for losses on warranty of defects
Allowance for losses on warranty of defects is provided for the potential repair costs on sold real estate (detached houses and storecombined houses) due to the Companies‘ warranty of defects. The allowance is provided at the amount estimated based on the pastexperience of repair costs.

36

CREDIT SAISON CO., LTD.

( j ) Allowance for bonuses
The Company records the amount that it expects to pay for employee bonuses for the year in the allowance for bonuses.
(k) Accrued pension and severance costs
Accrued pension and severance costs are provided for employees’ retirement benefits based on the projected benefit obligation andthe fair value of pension plan assets at the end of the fiscal year.
Unfunded past service cost and actuarial differences of the plans are being amortized over a period of nine to eleven years for the
fiscal years ended March 31, 2005 and 2004, within the average remaining service period at the time of occurrence. Amortization of
unfunded past service cost and amortization of actuarial differences start from occurrence and from the following fiscal year,
respectively.
( l ) Accrued retirement benefits to directors and statutory auditors
Directors and statutory auditors customarily receive lump-sum payments upon termination of services, subject to shareholders’ approval.
The Companies provide for retirement allowances in an amount equal to the total benefits calculated based on the unfunded
retirement plan for the directors and statutory auditors.
(m) Income taxes
The Company adopted deferred tax accounting in conformity with Japanese accounting standards. As required by the standards,
deferred tax assets and liabilities are recorded based on the temporary differences between the financial statements and the tax basesof assets and liabilities.
(n) Appropriation of retained earnings
Cash dividends and bonuses to directors and statutory auditors are recorded in the financial year that a proposed appropriation ofretained earnings is approved by the General Meeting of Shareholders of the Company.
(o) Changes in presentation of loss on disposal of property and equipment, other assets
Formerly, loss on disposal of casino machines held by the consolidated subsidiary operating Entertainment business was included in
non-operating expenses in the consolidated statements of income. Considering recent frequent occurrence of replacement of themachines, the loss is included in selling, general and administrative expenses in the consolidated statements of income, effective fromthe year ended March 31, 2004. As a result, operating income decreased by ¥1,865 million for the year ended March 31, 2004, but
had no effect on income before income taxes.
(p) Impairment loss of property and equipment, other assets
Effective from the year ended March 31, 2004, the Companies adopted “Accounting Standard for Impairment of Fixed Assets.” The
standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate material change
in the carrying amount of an asset. Impairment loss on property and equipment and other assets amounted to ¥7,570 million for theyear ended March 31, 2004 and was recorded as a non-operating expense.
(q) Change in presentation on the consolidated balance sheet
In conformity with “A Partial Revision of the Securities and Exchange Law,” promulgated on June 9, 2004 and enforced on December
1, 2004, followed by a revision of “Practical Guideline of Financial Instruments Accounting” on February 2, 2005, equities of limited
liability partnerships for investment business and of other similar partnerships (defined as “securities” by Article 2 Section 2 of the
Securities and Exchange Law), formerly included in Investments and other assets: ‘Other,’ are presented as investment securities
effective from the year ended March 31, 2005. Equities of such partnerships amounted to ¥7,313 million (US$68,084 thousand) and¥5,630 million as of March 31, 2005 and 2004, respectively.

CREDIT SAISON CO., LTD.

37

(r) Supplementary cash flow information
Cash and cash equivalents in the consolidated statements of cash flows comprise cash on hand, demand deposits in banks and highly
liquid, short-term investments with low risk of fluctuation in value that are scheduled to mature within three months from acquisition.
The balances of cash and cash equivalents as of March 31, 2005 and 2004 are reconciled with the respective consolidated balance
sheets as follows:
Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Consolidated balance sheet:
Cash and deposits................................................................................................................

¥54,308¥73,421$505,612

Cash and cash equivalents at end of year .............................................................................

¥54,308¥73,421$505,612

Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Non-cash financing activities are as follows:
Conversion of convertible bonds
Common stock increased due to conversion of convertible bonds ....................................

¥ 3,393¥ 331$31,589

Additional paid-in capital increased due to conversion of convertible bonds .....................

3,389

330

31,552

Convertible bonds decreased due to conversion ...............................................................

6,782

661

63,141

Acquisition of investment securities by debt to equity swaps ..............................................

—

9,772

—

Acquisition of investment securities by investment in kind and stock to stock exchange .......

10,231—$95,251(s) Reclassification
Certain reclassifications of previously reported figures have been made to conform with the current classification.
4. NOTES AND INSTALLMENT ACCOUNTS RECEIVABLE
As of March 31, 2005 and 2004, liquidated revolving receivables and single-payment card shopping receivables amounted to ¥40,400
million (US$376,135 thousand) and ¥50,000 million (US$465,506 thousand), respectively. Liquidated revolving card cashing receivables
amounted to ¥28,750 million (US$267,268 thousand) as of March 31, 2005.
The outstanding balance of notes and installment accounts receivable includes receivables generated from such liquidation of singlepayment card shopping receivables, amounting to ¥98,326 million (US$915,427 thousand) and ¥93,628 million as of March 31, 2005
and 2004, respectively.
The outstanding balance of notes and installment accounts receivable includes trust beneficiary rights generated from such liquidationof revolving card shopping receivables amounting to ¥15,811 million (US$147,206 thousand) and ¥15,267 million as of March 31, 2005
and 2004, respectively.
The outstanding balance of notes and installment accounts receivable includes trust beneficiary rights generated from such liquidationof revolving card cashing receivables amounting to ¥15,515 million (US$144,451 thousand) as of March 31, 2005.
5. LOAN COMMITMENTS
The Company and its consolidated subsidiaries provide cashing and card loan services that supplement their credit card operations. The
unexercised loans contingent with the loan commitments in these businesses were as follows:
Millions of yen

Thousands of
U.S. dollars

2005

2004

2005

Total loan limits .....................................................................................................
Loan executions .....................................................................................................

¥5,835,727
467,085¥5,474,846
439,215$54,331,321
4,348,622......................................................................................................................

¥5,368,642¥5,035,631$49,982,699

Most of the contracts for the above loan commitments were for cashing services supplementary to credit card services furnished to
the Company’s cardholders, such that not all unexecuted loans will be exercised.
The above amounts include the commitments connected with the liquidated revolving receivables on card cashing.

38

CREDIT SAISON CO., LTD.

6. SHORT-TERM LOANS AND LONG-TERM DEBT
Short-term loans are represented principally by 30 to 365 day notes to banks, with an average interest rate of 0.77% as of March 31,
2005.
Long-term debt as of March 31, 2005 and 2004 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Average 1.26% mortgage or secured loans from banks, insurance companies
and other financial institutions, due in installments through 2013 ........................
0.60% domestic convertible bonds, due on March 31, 2005..................................
0.39625% (variable) to 1.85% bonds, due in installments through 2014 ...............
Average 0.62% payables on under-securitized lease receivables*...........................

¥362,562—
184,840
33,000¥269,359
6,784
161,000
36,127$3,375,496—
1,720,882
307,234

Subtotal.............................................................................................................
Less: Current portion .............................................................................................

580,402(99,304)

473,270(52,644)

5,403,612(924,534)......................................................................................................................

¥481,098¥420,626$4,479,078*Payables on under-securitized lease receivables are incurred under the regulation for securitization of specific credit.

The aggregate annual maturities of long-term debt subsequent to March 31, 2005 are as follows:
Years ending March 31

Millions of yen

Thousands of
U.S. dollars

2006.....................................................................................................................................................
2007.....................................................................................................................................................
2008.....................................................................................................................................................
2009.....................................................................................................................................................
2010 and thereafter .............................................................................................................................

¥ 99,304
85,26198,09040,877
256,870$ 924,534
793,792
913,226
380,570
2,391,490

The following is a summary of the terms of convertible bonds as of March 31, 2005:
0.60% domestic convertible bonds due 2005

Exercise price per share ......................................................................................................
..................................................................................................................................

¥2,094.8
US$19.50

Number of shares of common stock issuable as of March 31, 2005....................................

—The exercise prices are subject to adjustments for subsequent stock splits and shares issued at less than market value to be made in
the future.
As is customary in Japan, short- and long-term bank loans are made under general agreements which provide that additional
security and guarantees for present and future indebtedness will be given upon request of the bank under certain circumstances, andthat any collateral so furnished will be applicable to all indebtedness to that bank. To date, the Companies have not received any such
requests from their banks.

CREDIT SAISON CO., LTD.

39

7. LEASE TRANSACTIONS(a) Finance leases (lessee)
Finance leases as of March 31, 2005 and 2004 and for the years then ended are summarized as follows:i. Pro forma capitalization of leased items
Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Buildings:
Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

¥ 1,514(603)¥ 1,576(511)$ 14,100(5,618)Net book value ..................................................................................................

911

1,065

8,482

Software:Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

100
(57)

98
(36)

927
(529)

Net book value ..................................................................................................

43

62

398

Other (fixtures and equipment):
Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

3,582(1,158)

2,611
(839)

33,346(10,779)

Net book value ..................................................................................................

2,424

1,772

22,567

Total:
Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

5,196(1,818)4,285(1,386)

48,373(16,926)

Net book value ..................................................................................................

¥ 3,378¥ 2,899$ 31,447

ii. Minimum future lease payments
Millions of yen

Thousands of
U.S. dollars

2005

2004

2005

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

¥ 959
2,568

¥ 825
2,146

$ 8,935
23,906

Total ......................................................................................................................

¥3,527¥2,971$32,841

Impairment loss account of leased assets amounted to ¥37 million (US$349 thousand) as of March 31, 2005
iii. Lease payments, depreciation equivalent and interest equivalentMillions of yen

Lease payments......................................................................................................
Reversal of impairment loss account of leased assets ..............................................
Depreciation equivalent..........................................................................................
Interest equivalent..................................................................................................
Impairment loss......................................................................................................

Thousands of
U.S. dollars

2005

2004

2005

¥1,004
—
936
108
37

¥1,057—981
94—$9,344
—
8,712
1,004
349

Depreciation equivalent is computed by the straight-line method under the assumption that the lease term equals the useful life, andthat there is no residual value.
Interest equivalent, which represents aggregate lease payments less the acquisition cost equivalent, is allocated over the lease term
based on the interest method.

40

CREDIT SAISON CO., LTD.

(b) Equipment for lease (lessor)
Equipment for lease as of March 31, 2005 and 2004 and for the years then ended is summarized as follows:i. Acquisition cost and accumulated depreciation
Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Equipment:
Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

¥232,246(86,965)¥199,361(72,026)$2,162,240(809,653)

Net book value ..................................................................................................

145,281

127,335

1,352,587

Software:Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

6,140(1,352)

2,445
(570)

57,159(12,587)

Net book value ..................................................................................................

4,788

1,875

44,572

Total:
Acquisition cost .................................................................................................
Accumulated depreciation .................................................................................

238,386(88,317)

201,806(72,596)2,219,399(822,240)

Net book value ..................................................................................................

¥150,069¥129,210$1,397,159

ii. Minimum future lease revenue
Millions of yen

Thousands of
U.S. dollars

2005

2004

2005

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

¥ 34,773
121,882¥ 29,281
105,345$ 323,743
1,134,734

Total ......................................................................................................................

¥156,655¥134,626$1,458,477

The above amounts include lease obligations which were sold under the Regulation for Securitization of Specific Credit.
iii. Lease revenue, depreciation equivalent and interest equivalentMillions of yen

Lease revenue ........................................................................................................
Depreciation equivalent..........................................................................................
Interest equivalent..................................................................................................

Thousands of
U.S. dollars

2005

2004

2005

¥40,597
34,2898,471¥34,315
28,6687,279$377,961
319,239
78,867

Interest equivalent, which is aggregate lease revenues less acquisition cost, is allocated over the lease term based on the interest
method.
(c) Operating leases (lessee)
Minimum future lease payments as of March 31, 2005 and 2004 are as follows:
Millions of yen

Thousands of
U.S. dollars

2005

2004

2005

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

¥182
76

¥325
258

$1,694711

Total ......................................................................................................................

¥258

¥583

$2,405

CREDIT SAISON CO., LTD.

41

8. OTHER SECURITIESAs of March 31, 2005 and 2004 acquisition cost amounts on the consolidated balance sheets of other securities that have market
prices are summarized below:
Millions of yen

Balance sheet amountexceeding acquisition cost:
Equity shares....................................
Other ...............................................
Subtotal...................................
Balance sheet amount notexceeding acquisition cost:
Equity shares....................................
Bonds
Corporate ....................................
Other ...............................................

Thousands of U.S. dollars

2005

2004

2005

Acquisition
cost

Balancesheet
amountBalancesheet
amountDifference

Acquisition
cost

Balancesheet
amount¥ 7,178
40¥19,799 ¥12,621
41
1¥ 5,777 ¥14,605
21
23¥8,8282$ 66,825 $184,334 $117,509
372
380
8

Difference

Acquisition
cost

Difference

7,218

19,84012,622

5,798

14,6288,830

67,197

184,714

117,517

5,624

5,547

(77)

8,704

8,361

(343)

52,362

51,647

(715)

129
3,724

117
3,053

(12)
(671)

31
4,954

28
4,172

(3)
(782)

1,205
34,6691,088
28,421(117)(6,248)

8,717

(760)

13,68912,561(1,128)88,236

81,156(7,080)¥19,487 ¥27,189¥7,702

Subtotal...................................

9,477

Total........................................

¥16,695¥28,557 ¥11,862$155,433 $265,870 $110,437

9. RETIREMENT BENEFIT PLANS
The Company and some of its consolidated subsidiaries had defined benefit plans composed of a corporate pension plan and a lumpsum payment plan.
Effective October 1, 2004 the Company and a part of its consolidated subsidiaries changed the former defined benefit pension plans
to cash balance plans. Moreover, as per the Defined Contribution Pension Plan Law, a certain portion of future benefits was shifted
either to defined contribution plans or to prepaid retirement benefit payment plans at employees’ option.
Reflecting these changes, the Companies recognized “Gains on revisions of pension plans,” which is included in other nonoperating revenues for the year ended March 31, 2005, in conformity with “Accounting for Transfer between Different Pension Plans”(Application Guide No. 1 issued by the Accounting Standard Board of Japan) and prior service obligation was incurred.
In the year ended March 31, 2004, prior service obligation was incurred due to a change in the method of payment of basic
retirement benefits as a result of the change from a contributory trusteed employee pension plan to a defined benefit corporate
pension plan.
(a) Accrued pension and severance costs
Accrued pension and severance costs as of March 31, 2005 and 2004 are as calculated below:
Millions of yen

Retirement benefit obligations ...............................................................................
Plan assets .............................................................................................................
Funded status ........................................................................................................
Unrecognized actuarial differences.........................................................................
Unrecognized prior service obligations ...................................................................
Accrued pension and severance costs.....................................................................

42

CREDIT SAISON CO., LTD.

Thousands of
U.S. dollars

2005

2004

2005

¥(9,891)
3,889(6,002)
4,412(5,531)(7,121)¥(16,006)
5,004(11,002)
5,400(1,797)(7,399)$(92,083)
36,208(55,875)
41,071(51,497)(66,301)

(b) Retirement benefit expenses
Retirement benefit expenses for the year ended March 31, 2005 and 2004 are as stated below:
Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Service costs...........................................................................................................
Interest costs..........................................................................................................
Expected return on plan assets ...............................................................................
Actuarial difference recognized as expense ............................................................
Prior service obligations recognized as expenses .....................................................

¥ 767
264
(67)
652
(479)

¥

965
362
(86)
678
(119)

$ 7,140
2,454
(627)
6,069
(4,455)Retirement benefit expenses ..................................................................................
Gains on revisions of pension plans ........................................................................

1,137
(283)

1,800
—

10,581(2,632)

Total ......................................................................................................................

¥ 854¥1,800$ 7,949

The principal assumptions used in determining retirement benefit obligations and other components for the Companies plans arecalculated below:
2005
2004
Discount rate ........................................................................................................................................
Expected return on plan assets..............................................................................................................
Period of recognition of prior service obligation ....................................................................................
Period of recognition of actuarial differences ........................................................................................

2.0%
1.5%
9–11 years
evenly9–11 years
evenly2.0%
1.5%
9–11 years
evenly9–11 years
evenly10. DEFERRED TAX ASSETS AND LIABILITIES(a) Effective tax rate
The effective income tax rates of the Companies differ from the statutory tax rates for the years ended March 31, 2005 and 2004 forthe following reasons:
2005
2004
Statutory tax rate ..................................................................................................................................
Reconciliation:
Expenses not deductible for tax purposes..........................................................................................
Non-taxable dividend income............................................................................................................
Inhabitants taxes per capita...............................................................................................................
Amortization of consolidated reconciliation.......................................................................................
Equity in net earnings (losses) of affiliated companies........................................................................
Increase of evaluation allowance.......................................................................................................
Reduction of deferred tax assets resulting from tax rate revision........................................................
Net gain on changes in equity interest ..............................................................................................
Income tax credit ..............................................................................................................................
Other....................................................................................................................................................

40.70%

42.05%

0.22(0.09)
0.30(0.15)
1.38
0.55
0.29
(1.77)(1.31)(0.02)

0.22(1.17)
0.34(0.19)
1.11
1.30
1.33
.—
(1.14)
0.64

Effective tax rate ...................................................................................................................................

40.10%

44.49%CREDIT SAISON CO., LTD.

43

(b) Deferred income taxes
Deferred income taxes as of March 31, 2005 and 2004 comprised the following:
Millions of yen

2005
Deferred tax assets:
Inventories .........................................................................................................
Accumulated impairment losses of property and equipment, other assets ..........
Investment securities ..........................................................................................
Allowance for losses on receivables ....................................................................
Accrued expenses .............................................................................................
Accrued enterprise taxes ....................................................................................
Accrued pension and severance costs.................................................................
Other allowance ................................................................................................
Accumulated tax loss carryforwards ...................................................................
Unrealized losses on other securities ..................................................................
Other.................................................................................................................

¥

Thousands of
U.S. dollars

2004

2005

742
2,879
1,920
5,987
8,842
1,080
2,898
1,543
1,464
231
1,655

¥

360
3,081
171
5,774
6,063
2,155
2,987
1,334
4,041
293
1,333

$

6,906
26,804
17,87355,73882,325
10,052
26,982
14,37013,6282,153
15,405

Subtotal .................................................................................................................
Less evaluation allowance ......................................................................................

29,241(824)

27,592(517)

272,236(7,673)

Total deferred tax assets.........................................................................................
Deferred tax liabilities:
Capital gains deferred for tax purposes ..............................................................
Unrealized gains on other securities ...................................................................
Other.................................................................................................................

28,417

27,075

264,563(212)(5,060)(36)(212)(3,418)(47)(1,971)(47,110)(339)

Total deferred tax liabilities.....................................................................................

(5,308)(3,677)(49,420)

Net deferred tax assets...........................................................................................

¥23,109¥23,398$215,143

On March 31, 2003, the National Diet of Japan approved various changes to the calculation of the statutory local enterprise tax,
effective April 1, 2004. As a result of this amendment, for years commencing April 1, 2004 the income tax rate for enterprise taxes was
reduced as a result of introducing the assessment by estimation on the basis of the size of business.
The Company and its consolidated subsidiaries used the revised tax rate to calculate deferred income tax assets and liabilities as ofMarch 31, 2004. The effect of the change was to decrease deferred tax assets, net of deferred tax liabilities, by ¥565 million and toincrease provision for deferred income taxes and unrealized gains on other securities by ¥539 million and ¥26 million, respectively.
11. IMPAIRMENT LOSS OF PROPERTY AND EQUIPMENT, OTHER ASSETSFor the year ended March 31, 2005, the Companies wrote down the book value of amusement facilities, mail-order sales facilities andoperating facilities from which operating income had deteriorated and was not expected to recover in the short term.
The Companies recorded impairment losses for the year on the following assets:
March 31, 2005

Asset

Description

Location

Certain amusement facilities
Mail-order sales facilities
Operating facilities

Buildings, Other (Fixtures, furniture, other)
Buildings, Software, Other (Fixtures, furniture, other)
Buildings, Other (Fixtures, furniture, other)

Kanto region
Tokyo
Tokyo

For the year ended March 31, 2004 the Companies wrote down the book value of real estate beneficiary rights, and non-operating
properties for which recovery in value was not likely because of the decrease in domestic real estate prices.
Moreover, the Companies wrote down the book value of operating facilities and amusement facilities from which operating income
had deteriorated and was not expected to recover in the short term.
The Companies recorded impairment losses for the year on the following assets:
March 31, 2004

44

Asset

Description

Location

Real estate for lease
Real estate beneficiary rights
Operating facilities
Certain amusement facilities
Idle assets

Land, Buildings
Investments and other assets
Buildings, Other (Fixtures, furniture, other)
Buildings, Other (Fixtures, furniture, other)
Land, Buildings, Other

Tokyo
Osaka
Tokyo
Kanto region
Tokyo

CREDIT SAISON CO., LTD.

Accumulated impairment losses were subtracted directly from individual assets. Impairment loss on property and equipment, otherassets recognized for the years ended March 31, 2005 and 2004 are as follows:
Thousands of
U.S. dollars

Millions of yen

Property and equipment:
Buildings and improvements ..............................................................................
Land ..................................................................................................................
Other (fixtures and equipment, other assets) ......................................................
Investment and other assets:
Other.................................................................................................................
Current liabilities:
Other.................................................................................................................
Total ......................................................................................................................

2005

2004

2005

¥ 551
—
515

¥3,1252,114
601$ 5,129
—
4,790

53

1,730

493

37

—

349

¥1,156¥7,570$10,761

Regarding operating facilities, real estate for lease, real estate beneficiary rights, and idle assets, the recoverable amount is measured
at the net selling price, which is principally determined by real estate appraisers or other independent third parties.
Regarding certain amusement facilities and mail-order sales facilities, the recoverable amount is measured at value in use, which isthe present value of net cash flows discounted at 5.0 percent.
The assets of the Companies are grouped by the operation unit that is able to control income efficiently. However, real estate forlease and idle assets are grouped by the physical unit, and operating facilities and amusement facilities is grouped by site.
12. OPERATING REVENUES
Operating revenues for the years ended March 31, 2005 and 2004 comprised the following revenues and expenses:
Thousands of
U.S. dollars

Millions of yen

2005

2004

2005

Financing and administration fees ..........................................................................
Entertainment sales:
Net sales ............................................................................................................
Cost of sales ......................................................................................................

¥183,618¥174,963$1,709,507

108,546
91,556

95,586
79,981

1,010,580
852,405

Income from entertainment sales .......................................................................

16,99015,605

158,175

Real estate business:
Net sales ............................................................................................................
Costs of sales.....................................................................................................

52,17939,547

52,116
41,936

485,792
368,188

Income from real estate business .......................................................................

12,632

10,180117,604

Lease business:
Net sales ............................................................................................................
Costs of sales.....................................................................................................

57,53550,732

46,33240,806535,661472,323

Lease income .....................................................................................................

6,803

5,526

63,338Other business:
Net sales ............................................................................................................
Cost of sales ......................................................................................................

13,432
5,349

14,8007,313

125,057
49,795

Other income....................................................................................................

8,083

7,487

75,262Financial income ....................................................................................................

12,2596,571

114,128

Total operating revenues........................................................................................

¥240,385¥220,332$2,238,014

CREDIT SAISON CO., LTD.

45

13. DERIVATIVES
Contractual values or notional principal amounts and unrealized profits (losses) on derivative transactions as of March 31, 2005 and2004 are summarized below:(a) Interest rate transactions
Millions of yen

2005
Contractual value or
notional principal amount
Total

Over 1 year

Over-the-counter interest rate swaps:
Floating-rate receipt / Fixed-rate payment .................
Fixed-rate receipt / Floating-rate payment .................

¥24,267—¥21,867—

Total ............................................................................

¥24,267¥21,867

2004
Unrealized
profit (loss)

Contractual value or
notional principal amount

Unrealized
profit (loss)

Total

Over 1 year¥(702)—¥49,3153,000¥27,315—¥(1,117)40¥(702)¥52,315¥27,315¥(1,077)

Thousands of U.S. dollars

2005
Contractual value or
notional principal amount

Unrealized
profit (loss)

Total

Over 1 year

Over-the-counter interest rate swaps:
Floating-rate receipt / Fixed-rate payment .................
Fixed-rate receipt / Floating-rate payment .................

$255,929—$203,584—$(6,534)—

Total ............................................................................

$225,929$203,584$(6,534)

Notes: 1. Fair value is calculated based on prices and other information presented by financial and other institutions with which the Company has
concluded derivatives agreements.
2. Hedged derivatives transactions are excluded.

(b) Foreign exchange transactions
Millions of yen

2005
Contractual value or
notional principal amount2004
Unrealized
profit (loss)

Contractual value or
notional principal amount
Total

Unrealized
profit (loss)

Total

Over 1 year

Currency swaps:
Yen received/U.S. dollars paid ......................................

Over 1 year

¥1,028¥—¥(8)¥1,199¥—¥141

Total ............................................................................

¥1,028¥—¥(8)¥1,199¥—¥141

Thousands of U.S. dollars

2005
Contractual value or
notional principal amount

Unrealized
profit (loss)

Total

Over 1 year

Currency swaps:
Yen received/U.S. dollars paid ......................................

$9,574$—$(74)

Total ............................................................................

$9,574$—$(74)

Notes: 1. Fair value at year-end is calculated based on prices and other information presented by financial and other institutions with which theCompany has concluded derivatives agreements.
2. Foreign exchange forward contracts created for foreign currency denominated monetary assets and liabilities, from which yen amounts are
excluded and shown in the consolidated balance sheets, are excluded from the scope of above disclosure.
3. Hedged derivatives transactions are excluded.

46

CREDIT SAISON CO., LTD.

14. COMMITMENTS AND CONTINGENT LIABILITIESAs of March 31, 2005, the Companies were contingently liable as credit guarantee for customers borrowing from the alliance banks and
LAWSON CS Card Inc., amounting to ¥77,956 million (US$725,782 thousand) and ¥7,185 million (US$66,893 thousand), respectively.
15. SEGMENT INFORMATION(a) Business segments
Segment information by business segment for the years ended March 31, 2005 and 2004 is as follows:
Millions of yen
Operating revenues
Year ended March 31, 2005

Outsidecustomers

Intersegment

Total

Operatingexpenses

OperatingincomeCredit & Finance .....................
Entertainment .........................
Real estate ..............................
Lease ......................................
Other ......................................

¥195,877
16,99012,632
6,803
8,083

¥ 344
38
740
51
276

¥196,221
17,02813,372
6,854
8,359¥148,020
15,670
7,836
4,218
3,955

¥48,201
1,358
5,536
2,636
4,404

¥1,094,936 ¥ 4,293
33,925
3,084
108,883271
154,655 34,603
7,509
68

¥

—
951
—
—
205

¥18,106
6,331
381
69,95317

Total ......................................
Eliminations or corporate ........

240,385—

1,449(1,449)241,834(1,449)179,699
2,096

62,135(3,545)

1,399,908
113,041

42,319
121

1,156
—

94,78892

Consolidated...........................

¥240,385¥¥240,385¥181,795¥58,590¥1,512,949 ¥42,440¥1,156¥94,880—

AssetsLoss onCapitalDepreciation impairment expenditures

Thousands of U.S. dollars
Operating revenues
Year ended March 31, 2005

Outsidecustomers

Intersegment

Credit & Finance.......................
Entertainment...........................
Real estate ................................
Lease ........................................
Other ........................................

$1,823,635
158,175
117,604
63,33875,262$ 3,204
354
6,889
472
2,565

$1,826,839 $1,378,087
158,529
145,885
124,493
72,95463,81039,27077,82736,823$448,752 $10,193,989 $ 39,967
12,644
315,849
28,712
51,539
1,013,714
2,520
24,5401,439,856 322,162
41,00469,906
635

$

—
8,851
—
—
1,910

$168,566
58,9463,544
651,271
157

Total ........................................
Eliminations or corporate.........

2,238,014—

13,484(13,484)

2,251,498 1,673,019(13,484)
19,515

578,479(32,999)

393,996
1,125

10,761—

882,484855

Consolidated ............................

$2,238,014$$2,238,014 $1,692,534$545,480 $14,085,739 $395,121$10,761$883,339—

Total

Operatingexpenses

OperatingincomeAssets13,033,314
1,052,425

Loss onCapitalDepreciation impairment expenditures

Millions of yen
Operating revenues
Year ended March 31, 2004

Outsidecustomers

Intersegment

Total

Operatingexpenses

OperatingincomeCredit & Finance .....................
Entertainment .........................
Real estate ..............................
Lease ......................................
Other ......................................

¥181,534
15,605
10,180
5,526
7,487

¥ 471
27
781
84
134

¥182,005
15,632
10,9615,610
7,621¥135,205
14,301
6,732
3,680
4,762

¥46,800
1,331
4,229
1,930
2,859

¥1,002,827 ¥ 3,468
37,916
3,202
78,598333
134,737 29,467
6,282
66

¥3,8793,691———¥ 6,345
5,972
349
61,810179

Total ......................................
Eliminations or corporate ........

220,332—

1,497(1,497)

221,829(1,497)

164,680
1,647

57,149(3,144)

1,260,360
92,35036,536
144

7,570
—

74,655137

Consolidated...........................

¥220,332—¥220,332¥166,327¥54,005¥1,352,710 ¥36,680¥7,570¥74,792¥

AssetsLoss onCapitalDepreciation impairment expenditures

Notes: 1. Business segments are defined in consideration of the operations of the companies.
2. Change of business segments
Effective from the year ended March 31, 2005 the Companies changed the former segmentation to the following items in order to make theinformation more useful:(a) Credit & finance: Shopping loans, finance and collection of receivables(b) Entertainment: Amusement(c) Real estate: Sales of real estate and real estate leasing(d) Lease: Equipment leasing(e) Other: Mail-order sales

CREDIT SAISON CO., LTD.

47

3. Significant components of “Eliminations or corporate” are as follows:
Thousands of
U.S. dollars

Millions of yen

Non-allocable operating expenses.........................................
Corporate assets...................................................................

2005

2004

2005

¥ 3,242
120,693¥ 2,560
109,987$ 30,186
1,123,663

Non-allocable operating expenses include administrative expenses incurred by the management control department of the Company.
Corporate assets include surplus funds, long-term investments (investment securities) and assets used by the management control
department of the Company.
4. Change in presentation of loss on disposal of properties:
As described in Note 3 (o), formerly the loss on disposal of casino machines held by the consolidated subsidiary operating Entertainment business
was included in non-operating expenses in the consolidated statements of income. Considering recent frequent occurrence of replacement of themachines, the loss is included in selling, general and administrative expenses in the consolidated statements of income, effective from the year
ended March 31, 2004. This change caused operating income of Entertainment business to decrease by ¥1,865 million for the year ended March
31, 2004.
5. Accounting standards for impairment of fixed assets
As described in ‘Note 3 (p) Impairment loss of property and equipment, other assets,‘ the Companies adopted “Accounting Standard for
Impairment of Fixed Assets” effective from the year ended March 31, 2004. The effect of the adoption was to recognize impairment losses on
the credit and finance business, Entertainment business, amounting to ¥3,879 million and ¥3,691 million, respectively. Operating assets of thesebusiness decreased by ¥3,879 million and ¥3,658 million, respectively.

(b) Geographic information
The Company is not required to prepare information for geographic segment since no consolidated subsidiaries or branches are locatedoutside Japan.
(c) Overseas sales
The Company is not required to prepare information for overseas sales since the aggregated amounts of overseas sales of theCompanies are not material (less than 10% of consolidated sales).

48

CREDIT SAISON CO., LTD.

Report of Independent Accountants

To the Board of Directors and Shareholders of
CREDIT SAISON CO., LTD.
We have audited the accompanying consolidated balance sheets of CREDIT SAISON CO., LTD. and its
consolidated subsidiaries as of March 31, 2005 and 2004, and the related consolidated statements of income,shareholders’ equity, and cash flows for the years then ended, all expressed in Japanese Yen. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. These standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of CREDIT SAISON CO., LTD. and its consolidated subsidiaries as of March 31,
2005 and 2004, and the consolidated results of their operations and their cash flows for the years then ended inconformity with accounting principles generally accepted in Japan.
As described in Note 3, the consolidated subsidiary operating Entertainment business changed the classificationof loss on disposal of casino machines from non-operating expenses to selling, general and administrative
expenses in the consolidated statements of income, effective from the year ended March 31, 2004.
As described in Note 3, CREDIT SAISON CO., LTD. and its consolidated subsidiaries had adopted the newJapanese accounting standards for impairment of fixed assets from the year ended March 31, 2004.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have beentranslated on the basis set forth in Note 2 to the accompanying consolidated financial statements.

ChuoAoyama PricewaterhouseCoopers
Tokyo, Japan
June 25, 2005

CREDIT SAISON CO., LTD.

49

Corporate History
Management Topics
2005

2004

2003

2002

May

Formed an equity and business tie-up with the Mitsubishi
Corporation in the mail-order business and transferred direct
marketing business operations of Saison Direct Marketing Co., Ltd.
Apr. Started operations of the new credit center “Ubiquitous”
Mar. Equity participation in UC CARD Co., Ltd.

Dec.

Entered into a comprehensive business alliance master agreement with theMizuho Financial Group, Inc., Mizuho Bank, Ltd., and UC CARD Co., Ltd.
Sept. Launched a real estate mortgage loan businessAug. Equity participation in Takashimaya Credit Co., Ltd.
Concluded a basic agreement on forming a strategic business alliance in thecredit card business with the Mizuho Financial Group, Inc., Mizuho Bank, Ltd.,and UC CARD Co., Ltd.
Equity participation in Resona Card Co., Ltd.
Apr. Reached basic agreement with Takashimaya Company, Limited on strategic
alliance in the credit card businessFeb. Decided to form a strategic equity and business tie-up with Resona Holdings, Inc.

Oct. Equity participation in Idemitsu Credit Co., Ltd.
Aug. Reached agreement on a comprehensive alliance with the card division ofIdemitsu Kosan Co., Ltd.
Mar. Introduced a special benefit plan for shareholders

June Granted stock options to all employees for the first time in the company’s history
May Formed business alliance with Saison Automobile and Fire Insurance Co., Ltd.
and The Yasuda Fire & Marine Insurance Co., Ltd. (currently Sompo Japan Insurance Inc.)
Feb. Transferred shares of Saison Life Insurance Co., Ltd. to GE Edison Life Insurance Co.
(currently AIG Edison Life Insurance Company)
Equity participation in LAWSON CS Card, Inc.
Jan. Reached agreement to establish LAWSON CS Card, Inc., jointly with
LAWSON, INC., and the Mitsubishi Corporation

1999
Total transaction volume
surpassed 2 trillion yen

2001

1989

Oct.

1998

Apr.

Exchanged shares of Saison Securities Co., Ltd. for shares of Monex, Inc.
(currently Monex Beans Holdings, Inc.)
Mar. Selected for inclusion in the Nikkei Stock Average (Nikkei 225)

Transaction volume of creditcard-related shopping services
exceeded 1 trillion yen

1992

The Company name was changed to Credit Saison Co., Ltd.

Total number of cardholders
surpassed 10 million

1980
1976
1968
1951

50

Aug. The Company name was changed from Midoriya Department
Stores to Seibu Credit Co., Ltd.
Mar. The Seibu Department Stores, Ltd. and the Company established a shareholding
relationship and developed a consumer credit system for the Saison Group

June Listed on the first section of the Tokyo Stock Exchange

May

The Company was established as a retailer specializing in installment sales

CREDIT SAISON CO., LTD.

1991
Total transaction volume
surpassed 1 trillion yen

2005

Business Topics

2004

Dec.
Oct

Sept.
Aug.
June
Apr.
Mar.

2003

2002

2001
2000

1999

1997
1995

1991
1988
1983

July

Sept. Formed alliance with The Tokyo Electric Power Company, Incorporated enabling card paymentof electricity bills
Jul. Began sale of a second auto insurance product exclusively for cardholders developed inalliance with Saison Automobile and Fire Insurance Co., Ltd.
Launched “SAISON Wedding Story,” a Web-based comprehensive wedding information service
Issued “K-1 SAISON Card” through alliance with FEG INC.
Apr. Issued “Mizuho Mileage Club Card SAISON”
Issued the new “Prince Card” through an alliance with PRINCE HOTELS, INC.
Feb. Issued “SAISON Postal Savings Gold Visa Card”

Launched securities brokerage service in alliance with Monex Beans Holdings, Inc.
Formed alliance with Tokyo Gas Co., Ltd. enabling card payment of city gas bills
Issued “Resona Card+S (Resona Card SAISON)”
Enhanced travel and entertainment services for “SAISON American Express Card”
Issued “TAKASHIMAYA SAISON CARD”
Start of “SAISON MILE CLUB,”(new frequent flyer program)
Launched “SAISON Housing Information,” a Web-based real estate information service
Issued the “Idemitsu Card Mydo Plus”
Formed business alliance with ORIX Corporation in automobile leasing businessfor individuals

Dec. Enhanced “Gold SAISON CARD” preferred services
Sept. Start of “SAISON STATION,”(an information terminal for rapid application and issuance of cards)
Began issuing “Super Value Plus,” an insurance product exclusively for cardholders, through abusiness alliance among Credit Saison, Saison Automobile and Fire Insurance Co., Ltd. andSompo Japan Insurance Inc.
July Began publishing tour catalog, “SAISON Tabimonogatari,” in cooperation with JTB Corp.
May Began electricity bill credit card payment service for The Kansai Electric Power Co., Inc.
Mar. Began “SAISONPASS” account aggregation service for SAISON CARD holders
Feb. Issued “SAISON Four Beat Card”
Jan. Began using “SAISON CARD EXPRESS” for speedy online card issuance

Sept. Issued “SAISON Japanese Postal Savings Check Card,” which allows users to set their own
usage limits
Mar. Introduced “SAISON CARD MAKER,” a speedy, automatic card issuing machine
Feb. Started new membership point service “SAISON Dream”(currently “Eikyufumetsu Point,” or “SAISON Permanent Points” in English)

Nov. Concluded a supporting company contract for the Japan national soccer teamNov. Overseas travel services expanded through an alliance with U.K. travel and financial
service company Travelex plc.
Aug. Started “Net Answer,” a web site for cardholders

Sept. Issued combined credit/cash cards with regional banks
Mar. Started “SAISON Postal Savings Global Service,” with a card offering credit, debit and cashing
functions in Japan and overseas

Oct. “SAISON American Express Card” issued through an affiliation withAMERICAN EXPRESS®

June Issued “SAISON JCB CARD” in cooperation with JCB Co., Ltd.

June. Started the affinity card business

Reached agreements with VISA and MasterCard and issued “SAISON Visa Card” and“SAISON MasterCard”

Mar. The name of Seibu Card was changed to SAISON CARDCREDIT SAISON CO., LTD.

51

Corporate Information(As of March 31, 2005)

CREDIT SAISON CO., LTD.

Number of Shareholders:

Head Office:Composition of Shareholders:

52F Sunshine 60 Bldg., 1-1,
Higashi-Ikebukuro 3-chome,
Toshima-ku, Tokyo 170-6073, Japan
Telephone: 81-3-3988-2111
www.saisoncard.co.jp

Incorporated:

May 1, 1951

Paid-in Capital:¥69,526 million

Individuals and Others

3.83%

Financial Institutions

33.58%

Foreign Investors

51.99%

Securities Companies

1.36%

Other Corporations

9.24%

Major Shareholders:Number of
Shares(Thousands)

Name

Number of
Employees:

Consolidated: 2,422
Non-consolidated: 1,507

Closing of Accounts:

March 31

Stock Listing:Tokyo Stock Exchange, First Section

Ticker No.:

8253

The Master Trust Bank of Japan, Ltd.
(trust account)
15,918Japan Trustee Services Bank, Ltd. (trust account) 13,289
The Seibu Department Stores, Ltd.
11,600State Street Bank and Trust Company
9,940
State Street Bank and Trust Company 505103
6,192
Mizuho Corporate Bank, Ltd.
4,675
Mellon Bank N.A. as agent for its client Mellon
Omnibus US Pension
3,809
Barclays Bank plc Barclays Capital Securities
3,033
OM04 SSB Client Omnibus
2,802
BNP Paribas Securities (Japan) Limited(BNP Paribas Securities Company)
2,647

Independent Auditor: ChuoAoyama PricewaterhouseCoopers
Transfer Agent:

The Sumitomo Trust & Banking Co., Ltd.
Stock Transfer Agency Department
1-1-4, Marunouchi, Chiyoda-ku, Tokyo

Common Stock
Authorized:

176,618 thousand shares

Monthly Stock Price Range:

Artisan Partners Limited Partnership
Fidelity Investments Japan Ltd.
Nomura Asset Management Co., Ltd.

13,369
9,760
8,146

7.57
5.53
4.61

Tokyo stock price index (Right scale)

3,200

2,000

2,400

1,500

1,600

1,000
High
High
Opening
Closing

500

Closing
Opening
Low
Low

01/1

02/1

Yearly High and Low Prices:

52

03/1

(Yen)

2001

2002

2003

2004

2005

High

3,100

3,320

2,680

3,840

4,070

Low

2,125

1,821

1,881

2,420

3,420

Note: Stock prices for 2005 are for the period from January 1 to July 31.
CREDIT SAISON CO., LTD.

1.50

Percentage ofOwnership(%)

Common stock price range (Left scale)

00/1

2.16
1.72
1.59

Number of
Shares(Thousands)

2,500

0

9.01
7.52
6.57
5.63
3.51
2.65

Name

4,000

800

Percentage ofOwnership(%)

Note: During the year under review, the following companies filed reports of major
shareholdings, stating that they held shares as below. We were not able toconfirm the numbers of shares that these companies actually held in their own
names as of the close of the term; thus, they are not included in the above list ofmajor shareholders.

300,000 thousand shares

Common Stock
Outstanding:

(Yen)

6,301

04/1

05/1

0

52F Sunshine 60 Bldg., 1-1, Higashi-Ikebukuro 3-chome,
Toshima-ku, Tokyo 170-6073, Japan
Telephone: 81-3-3988-2111
www.saisoncard.co.jp

TM

Printed in Japan with soy ink on recycled paper.