Hang In There, Japan!—Charity Match to Assist Great East Japan Earthquake Recovery August 19, 2011
Nadeshiko Japan (Japan Women’s National Soccer Team) vs. Nadeshiko (Japan Women’s) League XI ©J.LEAGUE PHOTOS INC.

Breaking the dominance of the cash
market to be the No. 1 company
in the cashless settlement market

CONTENTS
01

To Our Stakeholders

02

The Strengths of Credit Saison04

Six-year Summary of Selected Financial Data

05

Business Portfolio

13

Corporate Social Responsibility (CSR)

14

Corporate Governance

16

Board of Directors and Auditors

17

Financial Section
17
Management’s Discussion and Analysis
24
Consolidated Balance Sheets
26	Consolidated Statements of Income/Consolidated Statement of Comprehensive Income
27
Consolidated Statements of Changes in Equity
28

Consolidated Statements of Cash Flows

29

Notes to Consolidated Financial Statements

51

Independent Auditors’ Report

52

Corporate History

54

Card Tie-Ups/Donations Using Points

56

Major Group Companies

57

Corporate Information

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.

TO OuR STAkEhOlDERS

SIx-YEAR SuMMARY Of SElECTED fINANCIAl DATA
As of and for the years ended March 31

The Japanese credit industry is currently experiencing achallenging business environment due to various regulatorychanges, including the revision of the Money-lending BusinessControl and Regulation law, and the Installment Sales law. In theface of these challenges, Credit Saison is harnessing its customer
base of 35.7 million people, network of alliances spanning a wealthof industries, and innovative products and services, and combining
these advantages to create a unique and powerful strategy called“Collaborative Management.” By executing this strategy, we aredetermined to become No. 1 in the cashless settlement market.

2008

2007

Millions of yen
2006

Thousands of
U.S. dollars(Note 6)2011

¥ 306,856
246,306
24,37736,173
18,680¥ 327,089 ¥ 345,587
268,658
265,494
23,88322,902
34,54857,191(55,514)26,756¥ 333,683
242,149
16,33375,201
14,822¥ 274,666
193,126
11,96569,57542,220$ 3,436,112
2,835,338
271,523
329,251
154,294¥ 341,405
2,374,130
1,776,827¥ 320,594
2,407,064
1,893,017¥ 399,828
2,299,607
1,608,307¥ 377,127
2,062,612
1,480,380$ 4,184,197
26,833,997
19,938,461¥¥ (308.25) ¥ 148.78
1,766.95
2,147.04

¥

¥

$

2011

We would like to express our heartfelt sympathy to all those affected by the Great East Japan Earthquake,and our hopes for the earliest possible recovery of the disaster-stricken areas.
Working with customers, we were able to raise about ¥600 million in financial donations for the disasterappeal. We would like to thank our customers for their generosity.
The dominance of the cash market remains unbroken in Japan. Although the share of total consumption
settled by credit card in Japan continues to increase each year, to about 11% currently, cash payment is still
strongly entrenched and accounts for some 60% of consumption. The credit card industry faces a structural
slump with poor medium-term prospects for profits, which have been depressed by the impact of stricter
regulations in the Money-Lending Business Control and Regulation Law and the Installment Sales Law.
We recognize that business model reform is essential to create the additional growth required to overcome
these difficult sector conditions.
Credit Saison has grown into one of the Japan’s largest credit card companies with a customer base of
35.7 million people by pursuing an independent course of business expansion relatively free of capital affiliations. Collaborative alliances to leverage the size of our customer base—our greatest asset—form the core ofour business strategy for fiscal 2011 and beyond, which we refer to as “Collaborative Management.” This
collaborative approach entails building high-quality networks across traditional industry lines to develop
innovative services such as our Eikyufumetsu Points program. Besides credit card operations, we also aim tobuild a wide range of non-bank financial services, including leases, credit guarantee and long-term fixed-rate
mortgage loans such as “Flat 35.” Collaborating with strategic partners that have settlement capabilities also
helps us marshal the resources of the Credit Saison Group to seize growth opportunities by making themost of the expertise that we have cultivated over many years. We see important medium-to-long-term
growth opportunities through our alliance with American Express®, which is developing our credit card
services portfolio by creating a status card channel; second, development of fast-growth online shopping
businesses such as Eikyufumetsu.com; and, third, joint ventures with the Seven & i Group. Our goal is tobecome Japan’s leader in cashless settlement with a 30% share of the card shopping market.
We are promoting business model reforms to employees as the Group’s “rebirth.” We aim to meet the
expectations of stakeholders by maximizing corporate value through this new growth trajectory for
Credit Saison.

CONSOLIDATED
For the year:
Operating revenues (Note 1)¥ 285,713
Selling, general and administrative expenses
235,759
Financial cost
22,577
Operating income
27,377
Net income (loss)
12,830At year-end:
Total equity (Note 2)¥ 347,916
Total assets
2,231,247
Interest-bearing debt (Note 3)
1,657,832
Per share data (in yen and U.S. dollars):
Net income (loss) per share¥
69.86
Equity per share
1,879.98
Key financial ratios (%):
Return on shareholders’ equity (ROE)
3.8
Return on assets (ROA)
0.6
Shareholders’ equity ratio
15.5
NON-CONSOLIDATED
For the year:
Operating revenues (Note 1)¥ 239,657
Selling, general and administrative expenses
194,194
Financial cost
19,977
Operating income
25,484
Net income (loss)
7,596
At year-end:
Total equity (Note 2)¥ 320,303
Total assets
2,097,773
Interest-bearing debt (Note 3)
1,571,610
Per share data (in yen and U.S. dollars) (Note 2):
Net income (loss) per share¥
41.34
Equity per share
1,743.50
Dividends per share
30.00
Key financial ratios (%):
Return on equity (ROE)
2.4
Return on assets (ROA)
0.4
Equity ratio
15.3
NON-CONSOLIDATEDTransaction Volume:
Card shopping
Cash advances (Note 4)
Shopping loans
Guarantees
Specialty loans
Agency services (Note 5)
LeasesOthersTotal volume of new contracts¥3,953,411
371,403
4,286
73,37536,514
1,362,275
92,70918,608¥5,912,587

2010

102.48
1,845.82
5.7
0.8
14.3

2009

82.79
2,077.69

237.292,013.85

0.84
22.61

7.1
1.1
15.8

4.0
0.7
16.2

12.8
2.4
17.5

¥ 257,925
205,042
22,221
30,661
16,138¥ 270,901 ¥ 277,741
220,709
223,816
21,531
20,322
28,66133,603(44,973)
24,579¥ 270,275
204,765
14,06751,442
10,221¥ 216,453
156,887
9,700
49,88627,131$ 2,882,224
2,335,477
240,255
306,492
91,358¥ 319,712
2,200,460
1,645,207¥ 304,231
2,220,792
1,748,246¥ 349,754
1,962,996
1,350,134¥ 341,423
1,761,666
1,239,043$ 3,852,117
25,228,786
18,900,912¥¥ (249.40) ¥ 136.51
1,686.70
2,006.89
30.00
28.00

¥

¥

$

88.40
1,738.31
30.00

—
—
13.2

¥ 418,661
2,450,637
1,854,057¥ 361,520
2,066,514
1,554,630

57.03
1,945.22
28.00

152.21
1,904.13
26.00

5.2
0.7
14.5

—
—
13.7

7.0
1.2
17.5

3.0
0.6
17.8

8.5
1.8
19.4

¥3,844,671
604,348
5,617
85,63743,7681,310,420
100,893
17,764¥6,013,118¥3,891,076
765,385
5,785
107,532
326,170
1,347,261
100,272
16,692¥6,560,174¥3,758,545
836,623
6,092
103,303279,970
1,269,579
88,273
16,187¥6,358,573¥3,433,872—
5,693
85,431
1,058,335
809,992
87,48810,700¥5,491,515¥2,527,808—
6,952
62,097739,038
747,998
90,011
9,794¥4,183,698

0.49
20.96
0.36

$47,545,539
4,466,674
51,545882,450
439,134
16,383,354
1,114,972
223,788$71,107,480

Notes: 1. Operating revenues do not include consumption taxes.
2. Effective from the year ended March 31, 2007, the Company adopted “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Statement
No. 5) and “Implementation Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).
3. Interest-bearing debt includes asset-backed securities.
4. Transaction volumes for cash advances for 2006 to 2007 are included under specialty loans.
5. Agency services shows transactions handled on behalf of other companies’ cards.
6. Japanese yen amounts have been translated into U.S. dollars at the rate of ¥83.15 = U.S.$1, the approximate exchange rate on March 31, 2011, for the convenienceof the reader.

September 2011
Hiroshi Rinno, President and CEO

CREDIT SAISON ANNuAl REpORT 2011

01

04

CREDIT SAISON ANNuAl REpORT 2011

ThE STRENgThS Of CREDIT SAISONIn the credit card industry, it’s no exaggeration to say that many of the new services wehave come to take for granted in Japan were pioneered by Credit Saison. The source ofinnovation for these new services has always been our desire to create customer
satisfaction as a leading-edge service company. Amid harsher conditions in the Japanesecredit industry due to the December 2006 revisions to the legislation governing moneylending businesses, Credit Saison has continued to focus on providing innovative anddifferentiated services for customers and business partners. Moreover, Credit Saison
promotes its business by collaborating with leading companies in their fields. We provide
our partners with retail credit card know-how which helps to enhance their customer
services and expand their sales. Combining the experience and wisdom of our partners with
our own generates exciting chemical reactions. It produces the kind of innovation that has
made Credit Saison the credit industry leader.

using Neutrality as Advantage in Collaborative Management
Development of Saison
American Express Card channel
Companies with affluent customer baseInnovative Services pioneered by Credit Saison
1982: first cards issued with no annual fee

1997: Cards issued with 4 international brands

1982: Instant credit screening and card issuance
1991: Introduced OCR-processedcard applications

2002: Eikyufumetsu points (points thatnever expire) program started

2006: The Eikyufumetsu.com online shopping mall opened

1992: Signature-lesssettlement introduced

2010: Cards issued with new
American Express centurion design

Environment conservation
Supporting sports andcultural activities
Environment: Akagi Nature park
Sports: Japan football Association
Culture: José Carreras

group Management partners
Real estate
Cash advancesloans
Servicing and temporary staffing
Systems
processing
Entertainment

Strategic Investment partners
Investment banks, securities companies

grow to be the No. 1 company
in the cashless
settlement market

Internet Business partners
EC Sites

Auctions
Videos/music
Marketing research
Coupons
Compare & search sites
games
healthfinance Business partners
Retailers offering lease service contracts
Credit guarantee service providers
Affiliated “flat 35” mortgage lenders

Credit Card Joint Ventures
Idemitsu kosan Co., ltd.
Resona holdings, Inc.
Takashimaya Company, limited
Shizuoka Bank, ltd.
Daiwa house Industry Co., ltd.
Yamada Denki Co., ltd.
Seven & i group

Settlement platform partners

Card Issuing partners

Mobile phone
prepaid card
E-money
Settlement services

Service partners
Mileage services
Insurance
T&E services
Asset management

02

CREDIT SAISON ANNuAl REpORT 2011

Department stores
Supermarkets and specialty retailers
Developers
Consumer electronics stores
Convenience stores
financial institutions
Corporations, telecommunications, broadcasting
Airlines, railways, automakers
TravelSportsEnvironment, culture
Education
BeautyCREDIT SAISON ANNuAl REpORT 201103

ThE STRENgThS Of CREDIT SAISONIn the credit card industry, it’s no exaggeration to say that many of the new services wehave come to take for granted in Japan were pioneered by Credit Saison. The source ofinnovation for these new services has always been our desire to create customer
satisfaction as a leading-edge service company. Amid harsher conditions in the Japanesecredit industry due to the December 2006 revisions to the legislation governing moneylending businesses, Credit Saison has continued to focus on providing innovative anddifferentiated services for customers and business partners. Moreover, Credit Saison
promotes its business by collaborating with leading companies in their fields. We provide
our partners with retail credit card know-how which helps to enhance their customer
services and expand their sales. Combining the experience and wisdom of our partners with
our own generates exciting chemical reactions. It produces the kind of innovation that has
made Credit Saison the credit industry leader.

using Neutrality as Advantage in Collaborative Management
Development of Saison
American Express Card channel
Companies with affluent customer baseInnovative Services pioneered by Credit Saison
1982: first cards issued with no annual fee

1997: Cards issued with 4 international brands

1982: Instant credit screening and card issuance
1991: Introduced OCR-processedcard applications

2002: Eikyufumetsu points (points thatnever expire) program started

2006: The Eikyufumetsu.com online shopping mall opened

1992: Signature-lesssettlement introduced

2010: Cards issued with new
American Express centurion design

Environment conservation
Supporting sports andcultural activities
Environment: Akagi Nature park
Sports: Japan football Association
Culture: José Carreras

group Management partners
Real estate
Cash advancesloans
Servicing and temporary staffing
Systems
processing
Entertainment

Strategic Investment partners
Investment banks, securities companies

grow to be the No. 1 company
in the cashless
settlement market

Internet Business partners
EC Sites

Auctions
Videos/music
Marketing research
Coupons
Compare & search sites
games
healthfinance Business partners
Retailers offering lease service contracts
Credit guarantee service providers
Affiliated “flat 35” mortgage lenders

Credit Card Joint Ventures
Idemitsu kosan Co., ltd.
Resona holdings, Inc.
Takashimaya Company, limited
Shizuoka Bank, ltd.
Daiwa house Industry Co., ltd.
Yamada Denki Co., ltd.
Seven & i group

Settlement platform partners

Card Issuing partners

Mobile phone
prepaid card
E-money
Settlement services

Service partners
Mileage services
Insurance
T&E services
Asset management

02

CREDIT SAISON ANNuAl REpORT 2011

Department stores
Supermarkets and specialty retailers
Developers
Consumer electronics stores
Convenience stores
financial institutions
Corporations, telecommunications, broadcasting
Airlines, railways, automakers
TravelSportsEnvironment, culture
Education
BeautyCREDIT SAISON ANNuAl REpORT 201103

TO OuR STAkEhOlDERS

SIx-YEAR SuMMARY Of SElECTED fINANCIAl DATA
As of and for the years ended March 31

The Japanese credit industry is currently experiencing achallenging business environment due to various regulatorychanges, including the revision of the Money-lending BusinessControl and Regulation law, and the Installment Sales law. In theface of these challenges, Credit Saison is harnessing its customer
base of 35.7 million people, network of alliances spanning a wealthof industries, and innovative products and services, and combining
these advantages to create a unique and powerful strategy called“Collaborative Management.” By executing this strategy, we aredetermined to become No. 1 in the cashless settlement market.

2008

2007

Millions of yen
2006

Thousands of
U.S. dollars(Note 6)2011

¥ 306,856
246,306
24,37736,173
18,680¥ 327,089 ¥ 345,587
268,658
265,494
23,88322,902
34,54857,191(55,514)26,756¥ 333,683
242,149
16,33375,201
14,822¥ 274,666
193,126
11,96569,57542,220$ 3,436,112
2,835,338
271,523
329,251
154,294¥ 341,405
2,374,130
1,776,827¥ 320,594
2,407,064
1,893,017¥ 399,828
2,299,607
1,608,307¥ 377,127
2,062,612
1,480,380$ 4,184,197
26,833,997
19,937,847¥¥ (308.25) ¥ 148.78
1,766.95
2,147.04

¥

¥

$

2011

We would like to express our heartfelt sympathy to all those affected by the Great East Japan Earthquake,and our hopes for the earliest possible recovery of the disaster-stricken areas.
Working with customers, we were able to raise about ¥600 million in financial donations for the disasterappeal. We would like to thank our customers for their generosity.
The dominance of the cash market remains unbroken in Japan. Although the share of total consumption
settled by credit card in Japan continues to increase each year, to about 11% currently, cash payment is still
strongly entrenched and accounts for some 60% of consumption. The credit card industry faces a structural
slump with poor medium-term prospects for profits, which have been depressed by the impact of stricter
regulations in the Money-Lending Business Control and Regulation Law and the Installment Sales Law.
We recognize that business model reform is essential to create the additional growth required to overcome
these difficult sector conditions.
Credit Saison has grown into one of the Japan’s largest credit card companies with a customer base of
35.7 million people by pursuing an independent course of business expansion relatively free of capital affiliations. Collaborative alliances to leverage the size of our customer base—our greatest asset—form the core ofour business strategy for fiscal 2011 and beyond, which we refer to as “Collaborative Management.” This
collaborative approach entails building high-quality networks across traditional industry lines to develop
innovative services such as our Eikyufumetsu Points program. Besides credit card operations, we also aim tobuild a wide range of non-bank financial services, including leases, credit guarantee and long-term fixed-rate
mortgage loans such as “Flat 35.” Collaborating with strategic partners that have settlement capabilities also
helps us marshal the resources of the Credit Saison Group to seize growth opportunities by making themost of the expertise that we have cultivated over many years. We see important medium-to-long-term
growth opportunities through our alliance with American Express®, which is developing our credit card
services portfolio by creating a status card channel; second, development of fast-growth online shopping
businesses such as Eikyufumetsu.com; and, third, joint ventures with the Seven & i Group. Our goal is tobecome Japan’s leader in cashless settlement with a 30% share of the card shopping market.
We are promoting business model reforms to employees as the Group’s “rebirth.” We aim to meet the
expectations of stakeholders by maximizing corporate value through this new growth trajectory for
Credit Saison.

CONSOLIDATED
For the year:
Operating revenues (Note 1)¥ 285,713
Selling, general and administrative expenses
235,759
Financial cost
22,577
Operating income
27,377
Net income (loss)
12,830At year-end:
Total equity (Note 2)¥ 347,916
Total assets
2,231,247
Interest-bearing debt (Note 3)
1,657,832
Per share data (in yen and U.S. dollars):
Net income (loss) per share¥
69.86
Equity per share
1,879.98
Key financial ratios (%):
Return on shareholders’ equity (ROE)
3.8
Return on assets (ROA)
0.6
Shareholders’ equity ratio
15.5
NON-CONSOLIDATED
For the year:
Operating revenues (Note 1)¥ 239,657
Selling, general and administrative expenses
194,194
Financial cost
19,977
Operating income
25,484
Net income (loss)
7,596
At year-end:
Total equity (Note 2)¥ 320,303
Total assets
2,097,773
Interest-bearing debt (Note 3)
1,571,610
Per share data (in yen and U.S. dollars) (Note 2):
Net income (loss) per share¥
41.34
Equity per share
1,743.50
Dividends per share
30.00
Key financial ratios (%):
Return on equity (ROE)
2.4
Return on assets (ROA)
0.4
Equity ratio
15.3
NON-CONSOLIDATEDTransaction Volume:
Card shopping
Cash advances (Note 4)
Shopping loans
Guarantees
Specialty loans
Agency services (Note 5)
LeasesOthersTotal volume of new contracts¥3,953,411
371,403
4,286
73,37536,514
1,362,275
92,70918,608¥5,912,587

2010

102.48
1,845.82
5.7
0.8
14.3

2009

82.79
2,077.69

237.292,013.85

0.84
22.61

7.1
1.1
15.8

4.0
0.7
16.2

12.8
2.4
17.5

¥ 257,925
205,042
22,221
30,661
16,138¥ 270,901 ¥ 277,741
220,709
223,816
21,531
20,322
28,66133,603(44,973)
24,579¥ 270,275
204,765
14,06751,442
10,221¥ 216,453
156,887
9,700
49,88627,131$ 2,882,224
2,335,477
240,255
306,492
91,358¥ 319,712
2,200,460
1,645,207¥ 304,231
2,220,792
1,748,246¥ 349,754
1,962,996
1,350,134¥ 341,423
1,761,666
1,239,043$ 3,852,117
25,228,786
18,900,912¥¥ (249.40) ¥ 136.51
1,686.70
2,006.89
30.00
28.00

¥

¥

$

88.40
1,738.31
30.00

—
—
13.2

¥ 418,661
2,450,637
1,854,057¥ 361,520
2,066,514
1,554,630

57.03
1,945.22
28.00

152.21
1,904.13
26.00

5.2
0.7
14.5

—
—
13.7

7.0
1.2
17.5

3.0
0.6
17.8

8.5
1.8
19.4

¥3,844,671
604,348
5,617
85,63743,7681,310,420
100,893
17,764¥6,013,118¥3,891,076
765,385
5,785
107,532
326,170
1,347,261
100,272
16,692¥6,560,174¥3,758,545
836,623
6,092
103,303279,970
1,269,579
88,273
16,187¥6,358,573¥3,433,872—
5,693
85,431
1,058,335
809,992
87,48810,700¥5,491,515¥2,527,808—
6,952
62,097739,038
747,998
90,011
9,794¥4,183,698

0.49
20.96
0.36

$47,545,539
4,466,674
51,545882,450
439,134
16,383,354
1,114,972
223,788$71,107,480

Notes: 1. Operating revenues do not include consumption taxes.
2. Effective from the year ended March 31, 2007, the Company adopted “Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Statement
No. 5) and “Implementation Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (ASBJ Guidance No. 8).
3. Interest-bearing debt includes asset-backed securities.
4. Transaction volumes for cash advances for 2006 to 2007 are included under specialty loans.
5. Agency services shows transactions handled on behalf of other companies’ cards.
6. Japanese yen amounts have been translated into U.S. dollars at the rate of ¥83.15 = U.S.$1, the approximate exchange rate on March 31, 2011, for the convenienceof the reader.

September 2011
Hiroshi Rinno, President and CEO

CREDIT SAISON ANNuAl REpORT 2011

01

04

CREDIT SAISON ANNuAl REpORT 2011

Business Portfolio

Credit serviCe
segment

BreAkdown ofoPerAting revenues

80%

Credit Card shopping
Business
Cash Advance Business
Processing Agency Businessservicing BusinessThis segment consists of the credit card-related, servicing(loan collection agency) and other businesses. We have twobrands, SAISON and UC, and our combined customer base,including processing agency service customers, reached 35.7
million as of March 31, 2011.
mAin ComPAnies

Qubitous Co., Ltd.
SAISON FUNDEX CORPORATION
JPN Holdings Co., Ltd.

BreAkdown ofoPerAting revenues

5%

Operations in this segment include handling vendor leases
for office equipment, mainly targeting SME clients. We arefocused on reinforcing ties with existing partners while also
expanding the business with new vendor companies.

6%

Activities in this segment include the credit guarantee business, and the finance business. In the credit guarantee business, we are working closely with 265 separate financial
institutions in providing a range of products, with a particularfocus on unsecured free-loans to individual customers, andsole business proprietors. In the finance-related business,transaction volumes are increasing for “Flat 35” long-term
fixed-rate mortgage loans (the receivable of which is
acquired and securitized by Japan Housing Finance Agency).

leAse segment
lease
rentalfinAnCe segment

BreAkdown ofoPerAting revenues

Credit guarantee Businessloans collateralized by realestate properties

mAin ComPAnies

SAISON FUNDEX CORPORATION

reAl estAte
relAted segment

BreAkdown ofoPerAting revenues

4%

real estate liquidation
Business
special servicing Businessreal estate leasing
BusinessmAin ComPAnies

Atrium Co., Ltd.
House Planning Co., Ltd.

BreAkdown ofoPerAting revenues

entertAinment
segment

Our activities in this segment are divided between the realestate and real estate leasing businesses. In line with our plan
for rebuilding the Atrium Group’s business, we are reducing
assets at the same time as developing specialized businesses
for the liquidation and servicing sectors.

5%

Activities in this segment include the amusement business.
Our initiatives for creating sound, safe and enjoyable amusement facilities that are welcomed by communities haveresulted in stable earnings in this segment.
mAin ComPAnies

Concerto Inc.

Amusement Business

Further information about major group companies

See page 56

Credit sAison AnnuAl rePort 201105

review of oPerAtions

results for fiscal 2010
The credit industry experienced a severe businessenvironment in the fiscal year ended March 31, 2011.
Amid continued economic sluggishness, the employment and wage environments failed to recover, while
the yen appreciation, high resources prices, and thenthe Great East Japan Earthquake created a drag on theeconomy which slowed recovery momentum. The
strengthening of the Money-Lending Business Control and Regulation Law and other regulations added
to the industry’s challenges.
In this environment, in our core credit card business,
we had 2.57 million new card applications to increase
our total number of cardmembers to 28.34 million. We
promoted an increase in active cardmembers, which
expanded the active customer base by 370,000 to 14.7
million cardmembers. We strengthened our alliancewith American Express and took other measures toresults BY Business segment(Billions of yen)

Operating revenues

Operating income (loss)

2011% change

2011

Credit Service

230.8

92.3

15.9

62.3

Lease
Finance
Real Estate Related
Entertainment
Total
Inter-segment transactions
Consolidated

14.4
15.5
12.3
13.9
287.1
(1.4)
285.7

114.9
92.6
82.0
95.2
92.9
–
93.1

5.0
6.7
(2.1)
1.7
27.3
0.0
27.3

236.7
135.6
–
100.4
75.3
–
75.7

% change(Year ended March 31)

keY indiCAtors (non-ConsolidAted)
Figures in parentheses are year-on-yearcomparisons.
2011% change

New applications (millions)
New cards issued (millions)

2.57
2.12

84.3
81.9

Total cardmembers (millions)28.34(+0.05)14.70(+0.37)
4,324.8
3,953.4
371.4

100.2

Active cardmembers (millions)
Transaction volume (¥ billion)
Card shopping (¥ billion)
Cash advances (¥ billion)

102.6
97.2
102.8
61.5
(Year ended March 31)

06

Credit sAison AnnuAl rePort 2011prioritize the expansion of the Saison American Express
Card, which enjoys a high brand status and usage rate.
In credit card-related shopping services, transaction
volume grew 2.8% over the previous year as usage
frequency continued to increase. Credit card usage
continues to become more prevalent in daily shopping
and payments as more people use their cards for settlingrunning accounts such as public utilities, mobile phone
fees, and Internet shopping. Usage scope has also
increased, including for medical and tax payments.
In cash advances, the balance of cash advances
declined 25.0% compared to the previous year. Cashadvance transaction volume fell due mainly to the fullenactment of the Money-Lending Business Control andRegulation Law in June 2010, which included provisions restricting total loans per individual, and the weakeconomy, which dented demand for cash advances.
We continued to diversify sources of revenue outside the core credit card business, with healthy expansion in our lease and rental business, our “Flat 35”
long-term, fixed-rate mortgage loan in our financerelated business, and the credit guarantee business,
which guarantees loans to customers through tie-ups
with financial institutions.
In terms of costs, we increased the provision for loss
on interest repayment by ¥11.0 billion to cover potential losses from the failure of large consumer credit
companies and the impact of the Great East Japan
Earthquake. Overall, however, the credit portfolio
improved and costs of uncollected receivables remained
within estimates, as a result of a decline in new claims
handled by lawyers and the strengthening of our credit
management. We also bolstered our business structureby using IT to improve efficiency, through such measures as promoting Web-based usage statements andreviewing outsourcing contracts, while also raisingawareness of cost-benefits in carrying out initiatives.
As a result, our operating revenues declined 6.9%
compared to the previous year to ¥285.7 billion, primarily as a result of the decline in profits from cash advances,while our ordinary income declined 13.7% to ¥33.7
billion. Moreover, our net income declined 31.3% year
on year to ¥12.8 billion due to a conservative approach
to expensing the impact of the Great East Japan Earthquake, for which we booked a loss of ¥9.9 billion.

medium-term management strategy
We have established “Collaborative Management” as
our medium-term management strategy. The entire
company is striving to execute the strategy.
One of the advantages of Credit Saison is its highly
independent position in the finance industry, as we are
not a part of any of the major Japanese banking groups.
This independence has enabled us to create a rich network of alliances with leading companies in suchdiverse industries as retail, including department stores,
supermarkets, consumer electronics chains, and convenience stores, along with financial institutions, corporate
and industry associations, Internet and IT companies,
telecommunications carriers, transport firms, and service providers. In addition, we have successfully diversified our business to ensure stable flow of revenues overthe long term, using strategic investments to bolster thelease and rental, credit guarantee, finance, insurance,
Internet and other non-card businesses.

Over the decades, Credit Saison has fostered an
overwhelming number of alliance partners, a richly
diversified business domain, the Eikyufumetsu.com
point program, a lineup of four distinct American
Express brand credit cards, and a host of other uniqueproducts and services that set us apart from the competition in the credit industry. Add to this the processing
and agency services for the Saison Card and UC Card,
and we boast an unrivaled customer base of 35.7
million people. We are prepared to fully leverage thesestrategic advantages in our fight with the competition,
unifying the company around the goal of expanding
revenues over the medium term.
By tenaciously promoting “Collaborative Management,” we will strive to become No. 1 in the cashless
settlement market.

using neutrality as Advantage in Collaborative management
development ofsaison American
express Card channel

environment conservation
supporting sports andcultural activities

Companies with affluent
customer baseenvironment: Akagi nature Park
sports: Japan football Association
Culture: José Carreras

strategic investment Partners
investment banks,
securities companies

finance Business Partners
retailers offering lease service
contracts
Credit guarantee service providers
Affiliated “flat 35” mortgage
lenders

group management Partners
real estate
Cash advancesloans
servicing and temporary staffing
systems
Processing
entertainment

grow to be theno. 1 company
in the cashless
settlement market

internet Business Partners
eC sites
Auctions
videos/music
marketing research
Coupons
Compare & search sites
games
Healthsettlement Platform Partners
mobile phone
Prepaid card
e-money
settlement services

service Partners

Card issuing Partners

Credit Card Joint ventures

mileage services
insurance
t&e services
Asset management

department storessupermarkets andspecialty retailers
developers
Consumer electronics stores
Convenience stores
financial institutions
Corporations,telecommunications, broadcasting
Airlines, railways, automakers
travelsportsenvironment,
cultureeducation
Beautyidemitsu kosan Co., ltd.
resona Holdings, inc.
takashimaya Company, limited
shizuoka Bank, ltd.
daiwa House industry Co., ltd.
Yamada denki Co., ltd.
seven & i group

Credit sAison AnnuAl rePort 201107

strAtegiC Priorities

saison American express® Card
innovation in the Card BusinessIn 1997, we launched the Saison American Express
Card, which added new brand status to the familiar
Saison Card. Since then, we have expanded thelineup with a Platinum Card in 2005 and a Gold
Card in 2007.
In June 2010, we strengthened our alliance with
American Express by renewing the lineup with fourinnovative Saison American Express Cards featuring
the well-known American Express Centurion image:the Platinum, Gold, Blue, and Pearl Cards.
Customers in the higher income bracket, babyboomer customers just starting retired life, andwomen active in society present a need for cards thatoffer genuine status and service a cut above the rest.
To meet this need, we have focused on sales of our
Saison American Express Cards that offer a unique
combination of status and service (a balance between
the levels of service and the annual fees). With thisinitiative, we are aiming to both spark new innovation in the market and raise customer satisfaction.
Credit Saison will expand channels for theAmerican Express® Card by collaborating with companies whose customer base is highly compatible
with the card. One of the unique features of theAmerican Express Card is that usage rates among
cardholders is typically higher than other cards.
Since annual transaction volume for shopping istypically four times higher than other cards, a significant increase in the number of cardholders canbe expected to produce a leap in transaction volume.
Our target is to expand transaction volume for
American Express brand cards to ¥1 trillion in five
years. In addition, we will strive to increase thesecards’ share of our shopping transaction volume fromthe current level of 8% of our overall transaction
volume to 30% in the future.

innovative lineup of High level services and outstanding Points Programs

Annual fees

Annual fees

Annual fees

Annual fees

21,000 yen (incl. tax)

3,150 yen (incl. tax)

08

Credit sAison AnnuAl rePort 2011

10,500 yen (incl. tax)

1,050 yen (incl. tax)

Combining the internet and our Customer Basetransformation from a Credit Card Company to an internet Company
The Internet is another strategic pillar of Credit Saison’s
credit card business, as we aim to leverage the Internet
and IT to both expand revenues and promote efficiency
throughout our operations.
The Internet marketplace is expected to continue togrow by leaps and bounds into the future, and we are
actively promoting the expansion of our Internet members to take advantage of the opportunities. At the endof March 2011, the number of members of our Internet
site was 5.57 million, an increase of 1.31 million compared to the end of the previous year. We are operating
the Eikyufumetsu.com site by capitalizing on our customer base of 28 million people and the uniqueEikyufumetsu point service with no expiration. In
September 2010, we eliminated the cardholder restriction for using Eikyufumetsu.com point services, thereby
allowing anyone over the age of 16 to make use ofthem. This has opened the way for new alliances withleading Internet businesses like DeNA Co., Ltd.,
GREE, Inc., and CyberAgent, Inc., which will support
the growth of our Internet business.
We provide an Eikyufumetsu.com toolbar,“Eikyufumetsu Plus” to enhance the convenience ofInternet users.We have also complemented our Internet

shopping with various other new services generated
through alliances with coupon site Groupon Japan Inc.,the brand goods buying and overseas auction site netprice.
com, and the dining reservation service Gurunavi, Inc.
We have also introduced point exchange services
which enable customers to make effective use of theiraccumulated Eikyufumetsu Points. Customers can
exchange points for shopping vouchers, limited-edition
items available only to Internet members, and more.
Credit Saison will continue to take on the challengeof building innovative Internet-based businesses. Specifically, we will target marketing businesses which analyze
and sell the latest in accumulated marketing data on
customer attributes, behavior, and buying histories alongwith advertising businesses which leverage Internet
media data on what Internet members frequently view
such as their online credit card usage statements.
By executing our current initiatives and broadening
our business with new challenges, we will aim to establish fee-based Internet business models which support
enhanced efficiency and higher revenues. These initiatives will move us beyond our traditional credit cardbusiness and transform Credit Saison into a company
geared for the Internet age.

Concept diagram of internet-Based Businessshopping

Auctions

surveysmusic andmoviessearchCoupons

word of mouth

net members

net business alliances· obtain net members
from leadinginternet companies

save points

Membership
type change to
Net member(5.57 million)

DeNA, GREE and other companies
with points systems

nonCardmembers
cardmembers

expansion of profits

update and enhancecustomer information· Affiliate revenue· sale of marketing data
· Advertising businessusing Credit saison
internet media

Allocate for shopping payments

new services,

toolbar (improve
convenience)use points

Cardmembers
Membership
type change tocardmember

Membership
type change to
Net member

expansion of new card
applications through theinternet, tablets and PCs

Cost reduction
weB statementsinternet news
Changes incustomer informationexchange for items available
only on the internet

Credit sAison AnnuAl rePort 201109

finance related Businessdiversification of revenue sources
long-term fixed-rate mortgage loan “flat 35”

Credit guarantees

Our Flat 35 long-term, fixed-rate mortgage loan business expanded strongly during fiscal 2010 thanks to
special incentives we offered to credit card members
and a sense of trust and security instilled through ourcard business experience, along with a 1-point interest
rate reduction offered through a government stimulus
program. The number of new loans in fiscal 2010 grew
3.5 times to 1,957, while the loan balance surged aboutfour times to ¥55.3 billion. In fiscal 2011, we plan tosign up 3,500 new mortgage loan customers bystrengthening relations with alliance partners andadding an agent model to the marketing mix.

Credit Saison has expanded its credit guarantee businessby collaborating closely with financial institutions tobuild up a portfolio of strongly performing loans, with afocus on unsecured free-loans to individual customers.
Regional banks and credit unions are currently active inoffering non-collateral loans to sole proprietorships, andgoing forward we will expand our guarantee services
for non-collateral loans tailored to the viability of suchcustomers by leveraging our loan review capabilities
and strong relations with financial institutions.

new initiatives
seven & i group
Based on the comprehensive alliance with Seven
Financial Service Co., Ltd. and Sogo & Seibu Co., Ltd.,the Millennium Card and Club On Card Saison operations were spun off and transferred to a newly established joint venture, Seven CS Card Service Co., Ltd.,on April 1, 2011. This move enables Credit Saison toprovide its customers with a range of attractive services
from Seven & i Group companies.
Working in collaboration with Seven Card Service
Co., Ltd., the new joint venture will offer an integrated
package of card-related services, including electronicmoney and a shared points program. By playing a rolein Seven & i Group customer marketing, the joint venture aims with Seven Card Service to generate shopping transactions in excess of ¥2 trillion from a total
membership base of at least 10 million.
As part of our efforts to enhance customer services,from July 2011, customers using our credit cards atnationwide Seven Eleven convenience stores and Ito
Yokado department stores and supermarkets have beenable to register for a new service to receive “nanaco”
points in addition to the usual Eikyufumetsu points.

Alliance strategy with seven & i groupAffiliated card operations spun off into seven Cs Card service Jv on April 1, 2011
Credit saison

Pursue new growth opportunitiesin credit card business
upgraded services for sogo &seibu cardmembers

1. issuance of sogo & seibu
affiliated cards transferred to Jv
2. development of seven & i groupcard operations
3. strategic collaboration

seven & i group

Creation of new business model
merging finance and retail
Assists marketing initiatives bygroup retail firms

targets: together with seven Card service, generate aggregate
shopping transactions of ¥2 trillion from membership base of at least 10 million
from July 2011, a new service will enable customers using a saison Card or uC Card at any seven-eleven
Japan or ito Yokado store to gain “nanaco” points for those purchases.

10

Credit sAison AnnuAl rePort 2011

new settlement methods
Prepaid card

Alliance with China unionPay (CuP)

Credit Saison is striving to become No. 1 in Japan’s
cashless settlement market. To do this, we will add prepaid settlement, money transfer and other services tocomplement our credit card and financial services businesses, with the ultimate goal of becoming a “Comprehensive Settlement Solutions Company.”
In August 2010, in collaboration with Visa
Worldwide, we began issuing the Uniqlo Online Gift
Card, which represents Japan’s first prepaid card using
the Visa processing service. Also, in May 2011, Credit
Saison became the first credit card company in Japan tobe registered as a fund transfer agent, and with this new
status, we began in August 2011 to issue the NEO
Money international prepaid card targeting tourists,business travelers, exchange students and others traveling out of Japan.

In August 2011, Credit Saison concluded an alliancewith China UnionPay and began signing up affiliatedstores to accept CUP cards. The CUP card brand has
grown fast, with global settlement of some ¥139
trillion. Working in partnership with Mizuho Bank,
Ltd. and UC Card Co., Ltd., Credit Saison aims overthe next three years to build a network of 50,000
affiliated stores across Japan that accept CUP cards togenerate an additional revenue stream from card
commissions.
During fiscal 2011, Credit Saison plans to begin
issuing prepaid cards that Japanese travelers can use atoverseas CUP member stores in China and other countries. Future plans also call for issuance of CUP-brandedcredit cards.

return of Profits to shareholders
Credit Saison has a basic policy of continuing to provide a stable return of profits to shareholders over thelong term. Though regulatory change has significantly
impacted our revenues and we continue to experience achallenging business environment, we have enhanced

efficiency through structural reforms to maintain our
profit level and built a stronger foundation to support
future growth. In view of this, we will continue to pay a
dividend of ¥30 per share for fiscal 2011. We also plan
to pay ¥30 per share for fiscal 2012.

environmental Protection and social Contribution Activities
Addressing environmental issues
Credit Saison is working to reduce paper consumption
and increase the use of recycled materials in its credit
card operations. This includes using eco-friendly materials for the statements and other printed materials sent
to customers, and encouraging customers to use electronic statements or Internet-based services.
As part of in-house initiatives to help combat global
warming, Credit Saison has promoted the Japanese
government’s “Cool Biz” program as well as measures tosave electricity, reduce paper usage and ensure complete
recycling of waste throughout office operations.

supporting social Contribution Activities
through Card usage
Our customers can participate in social contribution
activities with their cards. For example, points earned
through cards use can be used to make donations tocharities, including the World Terakoya Movement of the
National Federation of UNESCO Associations in Japan,
guide dog training by the Japan Guide Dog Association,
and activities to support protection and education ofchildren by the Japan Committee for UNICEF.

Credit sAison AnnuAl rePort 201111

Activities for Passing nature’s Bounty on to
the next generation
In 2009 Credit Saisonbought and became theoperator of Akagi Nature
Park, an expansive forest
preserve of about 120 hectares on the southwest foothillsof Mount Akagi in Gunma Prefecture. The park is areclaimed forest that was once a man-made secondary
growth of haphazardly planted pine. The forest wasreclaimed over the course of more than 20 years, taking
pains to select flora for restoring the primal beauty ofnature. Restoration took place under a policy of establishing a nurturing environment for flowers to grow,rather than planting a garden. Today the park is home toa variety of insects, animals, wild flowers and trees,
including rare plants. It is a great place to encounter the
beauty of Japan’s four seasons firsthand.

The park operated for 152 days and attracted about
24,000 visitors in the first year under Credit Saison’s
management in fiscal 2010. Through various programs
including guided tours of the grounds and natureobservation events, we offered park visitors the opportunity to appreciate the wonder of nature and theimportance of environmental conservation.
Credit Saison operates Akagi Nature Park in thehope of providing children a chance to visit and enjoy
the wonder of nature firsthand; an increasingly rareopportunity in today’s modern world. We hope thatthrough this we can contribute in a small way to passing
on the abundant natural treasures of Japan to future
generations. With the help of other companies who
support our efforts, we look to continue our patronageof this activity on a long-term basis.

Akagi nature Park Profile

Plants and Animals found in Akagi nature Park

Area: About 120 hectares, of which about 60 hectares is open to
the public.
Elevation: 600 to 700m

Animals: 1,810 species of insects, 77 species of birds and 15 species
of mammals.
Plants: 152 species of trees and 510 species of grasses

The following companies support
our activities to preserve nature at
Akagi Nature Park.
(As of August 31, 2011)

support of sports and Cultural Activities
Credit Saison is also passionately involved in social
contribution through its support of sports and culturalactivities. In sports, we have been a supporting company
and corporate sponsor of the various Japanese nationalsoccer teams, including
the Nadeshiko Japan
Women’s National Team,
who made history bywinning the 2011 Women’s World Cup in July,and the Samurai Blue
Men’s National Team.

クレディセゾンは、
サッカー日本代表を応援しています。

12

Credit sAison AnnuAl rePort 2011

In cultural activities, we are a corporate sponsor of
the musical career of José Carreras, an opera singer andone of The Three Tenors famous throughout the world,
as well as a corporate endorser of and donor to the José
Carreras Leukemia Foundation.

（ C ）J.LEAGUE PHOTOS ／国際親善試合対韓国女子代表戦（2011.6.18）

CorPorAte soCiAl resPonsiBilitY (Csr)

our vision is to become a leading-edge service company. under a framework in which we regard ourcustomers, business partners, employees and society at large as our stakeholders, we aim to fulfill our social
responsibilities deemed vital to our management philosophy by providing returns to our shareholders throughactivities that satisfy customers, based on mutual respect for our interests and those of our business partners,
and instill shared ideals and goals in our employees. we will also build a reputation for reliability by adapting
flexibly to a changing business environment, and by ensuring regulatory compliance in all business activities.

the Credit saison Approach to Csr
Our concept of CSR is not limited simply to regulatory compliance and the creation of profit. We believe that CSR also means
responding to the needs of citizens, communities and society, anddeveloping business methods and activities that meet and surpass
these needs. This concept guides our CSR activities, which are
based on three perspectives:(1) Activities that are essential to our corporate survival
and the interests of our customers, employees, shareholders and stakeholders.
Our corporate mission is to conduct our business activities in asound, appropriate and timely manner. This requires continual
effort to improve management transparency and strengthen thesystems used to monitor the achievement of management targets.

leased lines, limited access authorization, encryption, andrestricted access to data terminals.
Since May 2006, Credit Saison has been authorized to use thePrivacy Mark, a certification given to businesses with appropriate
systems for handling personal information, which has since beencertified for renewal twice, as a mark of its effort to maintain andenhance the protection level of personal information.

(2) Activities that contribute to society and the fulfillment of our responsibilities through our core businessactivities in the areas of credit cards and financing
In addition to being convenient, credit cards drive economic
activity as extremely effective tools for settlements. Our priority
is to prevent excessive use leading to heavy indebtedness, while
ensuring that credit cards help to enrich the lives of our customers and contribute to economic development. As a finance company, we are entrusted with personal credit information. We
carefully manage this information in accordance with the Private
Information Protection Law, and use it to prevent excessive
indebtedness through the prudent provision of credit and appropriate monitoring after credit is provided.

n Preventing excessive indebtedness
We recognize the risks of credit, and strive to prevent excessive
borrowing by monitoring borrowers’ credit status after loans havebeen issued. Assistance for customers includes changes to contract
terms and repayment amounts.

n Appropriate management of personal information
We manage personal information in accordance with laws, regulations and other requirements, including guidelines and industry
rules. We have established internal corporate rules, and give our
employees training in ethics. Our efforts to raise awareness of
information management include the use of the “private information manager” qualification established by the Japan Consumer
Credit Industry Association. This qualification is now basicallycompulsory for employees who handle personal information.
Security measures have also been strengthened, with the use of(3) Activities that contribute to society in ways that are
unique to Credit saison
Tens of thousands of people, including our employees and theirfamilies, depend on the Credit Saison Group. We recognize our
responsibilities as an employer, and work constructively to resolve
any employment issues.
As a distribution sector credit card company, we aim to use
our business activities to provide services exceeding customer
expectations in attention to detail and contribute to society.
n resolving employment issues
Credit Saison aims to provide amenable working environments
for all employees, regardless of age or gender. We have madeseveral workplace improvements in response to changes caused by
Japan’s falling birthrate and aging population. These include systems to help enable female employees to continue working after
marriage and childbirth, as well as more flexibility for employees
caring for older relatives. We also actively re-employ retirees.

Credit sAison AnnuAl rePort 201113

Corporate Governance

The Credit Saison Group is expanding and strengthening its business infrastructure to support its role as aleading-edge service company with the credit card business as its core segment. We recognize that, alongwith the achievement of business objectives, the reinforcement of corporate governance is vital for
obtaining the understanding and support of all our stakeholders—our customers, business partners,
employees and society. To increase management transparency and strengthen management supervisionfunctions, the Company is developing internal control systems and strengthening compliance.

Corporate Governance System
The Board of Directors consists of 14 directors. It decides importantmanagement matters and supervises the directors’ performance.
To ensure that business is conducted properly and soundly and tostrengthen corporate governance, the Board has acted to develop effective
internal control systems and establish and maintain a framework to ensure
Group-wide compliance with laws, regulations and the Articles of Incorporation. To ensure that directors perform their duties appropriately, theBoard operates in accordance with the Board of Directors Regulations.
Moreover, each director performs his or her duties in accordance with
the Corporate Law, and properly manages the divisions under his or her
control in accordance with the Organizational and Segregation of Duties
Regulations to ensure that business activities are executed appropriately
and efficiently.
Directors serve a one-year term of office. This policy allows us tobuild a flexible management structure capable of adapting to a changing
business environment, while also requiring management to earn theconfidence of shareholders every year.
The Company has introduced a statutory auditor system. The Boardof Corporate Auditors consists of four statutory auditors, three beingfrom outside the company and two being independent executives who
are not likely to have a conflict of interest with general shareholders. The
statutory auditors conduct rigorous audits by attending Board of Directors meetings and other important meetings, reading important resolution

documents, and examining the conduct of business and the state of theCompany’s assets.
The Board of Corporate Auditors also audits the effectiveness andfunctioning of internal control systems and strives to ensure the early
detection of problems and improvement of accuracy.
To assist the statutory auditors in their duties, the Company has established the Auditors’ Secretariat, which retains independence from the operating divisions (members serve concurrently in the Internal Control Division).
The Company plans and implements compliance measures including
education and awareness-raising activities, and engages in risk management.
To that end, the Company has established the Compliance Department as a
dedicated department to ensure the observance of laws, regulations andcorporate ethics; the Corporate Risk Management Office of the Corporate
Planning Department as the dedicated risk management department; andthe Compliance Committee and Risk Management Committee as dedicated organizations to ensure compliance and risk management.
The Internal Audit Office audits compliance, risk management, internal control systems and corporate governance in the organizational operations and business activities of Credit Saison and its affiliates, and makes
evaluations and recommendations based on the results.
We will continue to expand information sharing among Group Companies and strengthen our Group management systems, and to study
approaches to management that meet the needs of the Credit Saison
Group and contribute to the improvement of consolidated value.

Corporate Governance StructureManagement Monitoring System

General Shareholders’ Meeting
Election

Auditors

Board of Corporate
Auditors

Monitoring/(Including 3 outside auditors) Inspection

Board of Directors

Election/Delegation/Supervision

Cooperation
Guidance

Representative
Director

Important Committees(Risk Management Committee,
Compliance Committee,
Disclosure Committee, etc.)

Delegation of Management Authority

Departments
Monitoring

14

CREDIT SAISON Annual Report 2011

Corporate Planning Department/
Compliance Department/
Corporate Risk Management Office

Guarantee of effectiveness

Audit

Audit OfficeTimely disclosure and provision of materials

Management
Function

Election

Election

Remuneration for Directors and Statutory Auditors
To clarify their responsibility for business execution and results and increase
the independence of statutory auditors, the Company has eliminated theprevious retirement bonus system and unified compensation for the performance of duties, including directors’ bonuses, and worked to increaseawareness of the importance of business performance.
Remuneration, etc., paid to directors and statutory auditors in fiscal
2010 is as follows:<Details of Remuneration for Directors>
Position

Directors(Excluding
outside directors)
Statutory auditors(Excluding outside
statutory auditors)
Outside executives

Total
remuneration
amount(Millions of yen)

Total amount of
remuneration by type(Millions of yen)Basicremuneration Bonuses

Numberof persons

413

324

88

14

–
59

–
59

–
–

–
5

Notes 1.	Remuneration paid to directors does not include the employee salary amount in
the case of employees who serve concurrently as directors.
2.	As of March 31, 2011 the Company had 13 directors and 4 statutory auditors.

<Remuneration for Independent Auditors>
Remuneration based on duties performed pursuant to Article 2,
Paragraph 1 of the Certified Public Accountants Law:
¥109 million
Other remuneration:
¥0 million

Overview of Internal Control Systems
As per the Corporate Law, the Board of Directors has set basic policies
for directors to build a system that ensures compliance with laws, regulations and the Articles of Incorporation and the adequacy and efficiency ofits business.
These policies are based on the philosophy of “Always realize profitable growth and maximize the satisfaction of customers and other stakeholders by pursuing innovative ideas and strategies.”
With regard to internal control over financial reporting, (known as“J-SOX”), our efforts centered around the Corporate Risk Management
Office, through which we coordinate the development of internal control
systems by the Company, and by companies included in the consolidation.
Independent monitoring is carried out by specialist staff from the Internal
Audit Office. On this basis, we are able to report to the authorities that
our internal control systems are working effectively.
In building our internal control systems we aim to build highly efficient and effective systems that will help to maximize the benefits for our
stakeholders by maintaining appropriate business processes while increasing business results and strengthening earnings.

Rigorous Implementation and Enhancementof Compliance
Based on this reinforcement of corporate governance and internal controls, the Compliance Committee and Compliance Department are
taking the lead in ensuring compliance with laws and regulations, andfairness and morality in business activities.
A Managing Director chairs the Compliance Committee, which
reports to the Board of Directors. To discuss compliance-related matters,
the Committee convenes several times a year.
To ensure familiarity and observance with Company rules, regulations
and ethics, we have published these standards and guidelines in Our
Compliance, a pamphlet distributed to regular and contract employees.

The Company is working to prevent misconduct and scandals by
publicizing its compliance consultation desk. The consultation desk strives
to create a user-friendly environment by maintaining systems inside andoutside the Company for accepting inquiries, including dedicatedaddresses on the Company intranet and the Internet. When a report isreceived, the Compliance Department cooperates closely with an attorney and aims to quickly resolve the matter, reports to the Compliance
Committee, and then takes action to prevent reoccurrence.
In addition, the Compliance Department invites outside lecturers to
conduct compliance training for executives, and training for senior management including division managers. The Company appoints complianceofficers and compliance coordinators in each division, and the divisions
take the initiative in conducting compliance training in cooperation with
the Compliance Department.
In addition, our compliance officers and compliance coordinators also
play a role in controlling the Company’s administrative risks.

Security and Reliability of Information Systems
As the use of IT grows, maintaining the security and stability of information systems is becoming increasingly important to ensure that customers
can rely on the Company’s credit cards.
Here, we have implemented countermeasures against system disruptions, which may be caused by a wide variety of factors, including natural
disasters, accidents or computer viruses, and higher systems efficiency wasachieved by centralizing clerical work. Credit Saison will continue efforts
to keep its systems secure, reliable and efficient.

Risk Management
To prevent and appropriately respond to risk, the Company has formulated Risk Management Regulations and Regulations Concerning Management of Risk of Loss and, through the Risk Management Committee
and the Corporate Risk Management Office of the Corporate Planning
Department, works to prevent risks from materializing and to minimize
the effect on the Company when risks become apparent. To this end theCompany conducts periodic internal education and training for people
working with the Risk Management Regulations, Regulations Concerning Management of Risk of Loss and Crisis Management Regulations,and the Board of Directors periodically examines the regulations andissues revisions and improvements. In this way the Company strives tomaintain its risk management systems.
We maintain control over factors within the Credit Saison Group thathave the potential to create serious risks by monitoring the operations ofGroup companies under the Affiliated Company Regulations, which areadministered primarily by the Group Strategy Office of the Corporate
Planning Department. Our risk management systems are further
enhanced through information-sharing with the management organizations of Group companies.
Moreover, in the event that a risk occurs, the Company works to
respond swiftly based on the Crisis Management Regulations, mainly
through the Crisis Management Committee.

Proactive Disclosure of Information
The Company proactively discloses financial information through management reports, investment conferences, IR meetings and other events,and strives to ensure highly transparent management by posting financial
result summaries, IR activities and other information on its website.
URL for corporate and IR information:
http://corporate.saisoncard.co.jp/en

CREDIT SAISON Annual Report 201115

Board of Directors and Auditors(As of June 30, 2011)

Hiroshi Rinno

Teruyuki Maekawa

Naoki Takahashi

President and CEO

Executive Vice President

Senior Managing Director

Head of Audit Office and Credit Card
Division

Head of Public Relations Office, Treasury& Account Dept., General Affairs Dept.,
Human Resources Dept. and System
Planning Dept.

Head of Corporate Planning Dept.,
Strategic Investment Dept. and Internet
Business Division

Haruhisa Kaneko

Takayoshi Yamaji

Hiroshi Yamamoto

Junji Kakusho

Masahiro Yamashita

Managing Director

Managing Director

Managing Director

Director

Director

Head of Overseas
Development Dept. andSales Development Division

Head of Customer Satisfaction
Promotion Office and Credit
Division
General Manager, Credit
Division

Head of Compliance Dept. andFinance Division
General Manager, Finance
Division

General Manager, Business
Planning Dept. and Internet
Business Division

General Manager, Credit Card
Division

Kazuhiro Hirase

Sadamu Shimizu

Akihiro Matsuda

Teruhisa Aoyama

Yoshihisa Yamamoto Tatsunari Okamoto

Director

Director

Director

Director

Director

Director

T&E/Service Business Dept.
and Leasing & Rental Business
Dept.

General Manager, Sales
Development Division

Card Finance Dept.

General Manager, Treasury &Account Dept.

General Manager, System
Planning Dept.

Retail Business Dept. No. 1,
Retail Business Dept. No. 2 andFinancial & Corporate
Business Dept.

Masaru Sakurai

Yoshitaka Murakami Atsushi Toki

Yoshiro Yamamoto

Standing Auditor(External)

Standing Auditor(External)

Auditor

16

CREDIT SAISON Annual Report 2011

Auditor (External)

Financial Section Management’s Discussion and Analysis
I. The Credit Saison GroupThe Credit Saison Group has five business segments: Credit Service, Lease,
Finance, Real Estate related and Entertainment. The Credit ­Service­Segment is the Credit Saison Group’s most important segment, and­generated approximately 80% of total operating revenues in fiscal 2010.
The Credit Saison Group’s operating revenues consist primarily of feesfrom affiliated stores generated via credit card and interest and fees from
customers generated via revolving credit, cash advances, specialty loans
and other transactions. Both of these are earned in our mainstay Credit
Service Segment.
Operating expenses mainly comprise advertising expenses, point
redemption costs, costs of uncollectible receivables, personnel expenses,
fees and financial costs.

II. Analysis of Income Statements
1. Market Environment
In fiscal 2010, the Japanese economy showed signs of an upturn in business conditions, buoyed by economic stimulus measures taken by thegovernment of Japan. However, the outlook is highly uncertain due tothe yen’s appreciation and weak stock markets, as well as a downturn ineconomic activity caused by the impact of the Great East Japan Earthquake that struck on March 11, 2011.
In the non-banking sector, many consumer finance and credit cardbusiness companies have lost commercial viability due to the tighteningof regulations. Many of these companies have had no choice but to either
join Japan’s megabanks or delist their shares. Publicly listed companies in
the non-banking sector are also finding it difficult to survive.

2. Operating Revenues
In fiscal 2010, operating revenues declined by 6.9% year on year to¥285,713 million. During the fiscal year, the Credit Service Segment,
our core segment, worked to increase shopping transaction volume bystrengthening its alliance strategy. Measures included upgrading andexpanding premium cards, which offer prospects for high utilization andhigh spending per transaction, and issuing a new affiliated card with theWal-mart Group. The Company also worked to expand and strengthen
its earnings structure. These efforts included opening the Company’s

Total Operating Revenues

Web-based shopping point site Eikyufumetsu.com to all Internet users
16 years or older. This site features “Eikyufumetsu Points,” a point program allowing customers to economically save shopping points whichhave no expiry date. At the same time, the Company worked to boost
affiliate revenue by increasing Net members through mutual exchange ofcustomers with prominent online companies. However, cash advancerevenues decreased, primarily due to the impact of total lending restrictions (caps on total borrowings from moneylenders at 1/3 of annual
income). Consequently, overall operating revenues in the Credit Service
Segment decreased year on year. In the Lease Segment, overall operating
revenues increased, mainly due to the positive impact of the adoption of
new lease accounting standards, but were partly offset by a drop in business volume as companies curtailed capital investment. Meanwhile, in
the Finance Segment, overall operating revenues decreased due to a
decline in the balance of real estate loans, despite higher revenues mainly
from Flat 35 long-term, fixed-rate mortgage loans (the receivables ofwhich are acquired and securitized by Japan Housing Finance Agency).
In the Real Estate Related Segment and Entertainment Segment, operating revenues declined because of a drop in net sales.

3. Operating Expenses and Operating Income
The Credit Saison Group controlled advertising and personnel expenses
in fiscal 2010 by implementing cost cutting measures with a priority on
improving efficiency. As a result, selling, general and administrative(SG&A) expenses contracted by ¥10,547 million, or 4.3%, to ¥235,759
million. This reflected declines in major SG&A expenses: the provision
for point programs was ¥13,729 million, down ¥148 million, or 1.1%,
year on year; advertising expenses decreased ¥1,694 million, or 10.4%
year on year, to ¥14,557 million; fees paid were down ¥1,852 million, or
3.7% year on year, to ¥47,564 million; and personnel expenses declined¥2,342 million, or 5.2% year on year, to ¥42,767 million. The Company
reduced credit costs by striving for better management of receivables.
The decrease in these costs also reflected a decline in the number ofclaims handled by lawyers and other proxies, compared with an increasein such claims in the previous year. Financial cost decreased ¥1,800
million, or 7.4% year on year, to ¥22,577 million, on account of a reduction in interest-bearing debt. Overall, operating income for fiscal 2010
decreased by ¥8,796 million, or 24.3%, from the previous fiscal year to

Breakdown of Selling, General and Administrative (SG&A) Expenses(Millions of yen)

(Millions of yen)

350,000
285,713280,000

210,000

140,000

70,00002007 2008 2009 2010 2011

(Years ended March 31)

Cost of uncollectible receivables
Included in the above:
Allowance for losses on accounts receivable
Losses on accounts receivable
Provision for losses on interest repayment
Allowance for losses on guarantees
SG&A expenses excluding cost of uncollectible receivables
Included in the above:
Advertising expenses
Provision for point program
Personnel expenses
Fees paid
Total SG&A expenses

2011

2010

% change

66,217

67,379(1.7)

44,115
5
18,445
3,651
169,540

53,784
0
9,109
4,486
178,925(18.0)
5,980.9
102.5(18.6)(5.2)

14,557
13,72942,76747,564
235,759

16,251
13,877
45,10949,416
246,306(10.4)
(1.1)
(5.2)
(3.7)
(4.3)

(Years ended March 31)

CREDIT SAISON Annual Report 201117¥27,377 million. Additionally, the Company sharply reduced communication costs by increasing the number of Net members who are able tocheck their usage statements at any time over the Internet. The Company
is encouraging members to switch to these statements as a means ofconserving the environment and offering better customer convenience.

To raise shareholder value, Credit Saison places high importance on
initiatives to reinforce our corporate structure and to continuously
expand our businesses. Our fundamental policy for shareholder returns
calls for steady enlargement of internal reserves to realize the initiatives
described above, while delivering appropriate, stable and continuous
dividend payments to our shareholders.

In the credit card sector, credit card usage has continued to grow becauseof the increased use of credit cards in people’s daily lives for small-amountsettlements and settlement of public utility bills and hospital and medical
clinic bills and because of the expansion in the online shopping anddigital content markets. However, the full enforcement in Japan of the
Money-Lending Business Control and Regulation Law and revisions to
the Installment Sales Law have shrunk the cash advance services market
and have driven up various costs to comply with the revised law. Therefore, it is expected that the business environment will continue to bechallenging for all companies in this business sector.
In this business climate, Credit Saison endeavored to strengthen its
earnings structure by expanding its issuance of high-status premium cards
and bolstering its alliance strategy, as well as expanding its presence in thepayment settlement domain and strengthening efforts to build up Internet
businesses. Efforts were also focused on improving business efficiency,such as by reducing credit risks, and revising our cost structure based on a
cost-benefit analysis.
The total number of cardmembers as of March 31, 2011 increased by
0.2% from the previous fiscal year-end to 28.34 million, adding a total of
2.12 million new cardmembers.
The card shopping transaction volume amounted to ¥3,953.4 billion, a
year-on-year increase of 2.8%, while the shopping-related revolving credit
balance advanced by 0.6% to ¥299.9 billion. The number of active cardmembers also increased, up by 2.6% to 14.70 million. On the other hand,cash advances on cards decreased by 25.0% to ¥447.6 billion.

1. Dividend per Sharen Key Initiatives in the Credit Card Shopping Business4. Non-Operating Revenues and Expenses andNet Income
Non-operating revenues increased 50.2% year on year to ¥6,948 million,
while non-operating expenses increased 163.4% from the previous fiscal
year to ¥12,868 million. The main factor behind the changes was theCompany’s recording of equity in earnings of equity-method affiliatedcompanies of ¥2,010 million and this mainly reflected an extraordinary
loss of ¥9,986 million incurred due to the impact of the Great East Japan
Earthquake, which struck on March 11, 2011. As a result of the above, theCredit Saison Group posted net income of ¥12,830 million.

III. Policy for Return to Shareholders

Based on its dividend policy, Credit Saison allocated annual dividends of¥30 per share in fiscal 2010.

IV. Review of Operations by Segment
1. Credit Service Segment
This segment consists of the credit card shopping business, servicing (loancollection agency) business and other businesses. Segment operating revenues for fiscal 2010 declined by 7.7% year on year to ¥230,873 ­million,
while segment operating income decreased by 37.7% to ¥15,973 million.

1) Credit Card Shopping Business

During Fiscal 2010
Alliance Network Expansion
One of our priority strategies is to focus on premium cards offering
prospects for high utilization and high spending per transaction. Accordingly, we continued to strengthen cardmember enrollment activities for
Saison American Express® Card, which features a lineup of four highstatus premium cards.
Furthermore, Credit Saison formed a new alliance with Walmart Japan
Holdings LLC. and Seiyu LLC. to issue the Walmart Card SAISON
American Express® Card, which provides “1% discounts everyday, anytime” at Seiyu and certain other stores nationwide. We strove to increasetransaction amounts and revenues by making this the first credit card of

Operating Revenues and Operating Income by Segment(Millions of yen)

Operating Revenues

Credit Service
Lease
Finance
Real Estate Related
Entertainment
Total
Eliminations or corporate
Consolidated

2011

2010

% growth

2011

2010

% growth

230,873
14,451
15,58012,322
13,940287,166(1,453)285,713250,175
12,574
16,82915,021
14,648309,247(2,391)
306,856

(7.7)
14.9
(7.4)
(18.0)
(4.8)
(7.1)
–
(6.9)

15,973
5,038
6,796(2,182)
1,737
27,362
15
27,37725,627
2,128
5,011
1,825
1,730
36,321(148)
36,173(37.7)
136.7
35.6
–
0.4
(24.7)–(24.3)

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

18

CREDIT SAISON Annual Report 2011

Operating Income (Loss)(Years ended March 31)

new cardmembers. Elsewhere, in an initiative to expand the payment
settlement domain, Credit Saison developed a new cardless B2B bill
payment agency service offering a complete online application process.
Through a business alliance with Yahoo Japan Corporation, we beganproviding this new payment settlement services to businesses participatingin Yahoo! Japan Shopping and Yahoo! Japan Auction.
Furthermore, Credit Saison entered the prepaid card business with theissuance of the UNIQLO Online Gift Card, a house gift card that can beused at Internet shopping sites UNIQLO/g.u. Online Stores.
Enhancement of Internet Strategies
The total number of Net members reached 5.57 million as of March 31,
2011, a 30.7% year-on-year increase. The number of members registeredto view Web-based usage statements, which enable users to easily checktheir usage statements at any time over the Internet, was 2.33 million, an
increase of 164.8% year on year.
Credit Saison operates Eikyufumetsu.com, an online shopping mall,using two powerful tools at our disposal: our more than 28.0 million
membership base and the non-expiring Eikyufumetsu Points. In theapproximately four and a half years since its opening, this online mall has
grown to have 580 tenants and around ¥3.5 billion in monthly sales, andset a daily sales record of about ¥160 million. Furthermore, from fiscal
2010, Eikyufumetsu.com services were made available to all Internet
users aged 16 or over, including those who do not have a SAISON Cardor UC Card, who may now register as Net members.
In addition, Credit Saison worked to increase Net members throughthe mutual exchange of customers with prominent online companies
such as DeNA Co., Ltd. and GREE, Inc., which have large customer
bases and strong brands. Credit Saison also worked to create new revenue
streams by adding various services to Eikyufumetsu.com. Examples
include enabling customers to accumulate shopping points when usinggroup coupon purchasing services, as well as when using brand merchandise trade-in services and making successful bids or purchases throughoverseas auctions.
Going forward, we remain determined to reinforce our initiatives in
new Internet businesses. We intend to grow fee businesses based on commissions from a variety of Internet-based services into major revenue
sources, while reducing costs through the use of the Internet.
Ensuring Credit Risk Management
Although the growth trend previously observed in the number of receivables intervened for by third parties, including attorneys and certified
judicial scriveners, had diminished in fiscal 2010, interest repayment
claims have remained at high levels.
In addition, Credit Saison will flexibly address payment consultations
and other needs of cardmembers personally affected by the Great East
Japan Earthquake. We also believe it is essential to closely monitor the
impact of disruptions in economic activity in our exposure to credit risk.
We will continue to focus on improving the quality of receivables by
establishing measures to limit our risk exposure. Specifically, we will
employ excessive borrowing management and strengthen our servicing
system. In addition, we will maintain thorough credit control that balances returns and risks through appropriate offers of credit.

n New Developments and Future Initiatives

Credit Saison has made a comprehensive agreement with SEVEN & i
FINANCIAL GROUP CO., LTD. (currently Seven Financial Service
Co., Ltd.) and Sogo & Seibu Co., Ltd. Under the agreement, Credit
Saison has spun off its affinity card business with Sogo & Seibu to Seven
CS Card Service Co., Ltd., which was established on September 17, 2010.
After the split from Credit Saison, the affinity card business will provide customers with the Seven & i Group’s attractive services, in addition
to existing card operations. Furthermore, as a result of a merger with
Seven Card Service Co., Ltd., the card business will be expanded to cover
the entire Seven & i Group. The expansion in business size should enable
Credit Saison to formulate medium- to long-term growth strategies not
only for expanding the earnings of the joint venture, but also for increasing Credit Saison’s processing fees, referring customers to the Seven & i
Group, and developing new services.
Furthermore, Credit Saison has commenced field trials of settlement
services using Near Field Communication (NFC), a next-generation
non-contact IC technology, together with KDDI CORPORATION,SOFTBANK MOBILE Corp. and other partners. In these field trials,
NFC-equipped mobile phones will be used to download MasterCard®
PayPass™ and make payments through mobile phones over readers set up
at MasterCard-affiliated merchants in Japan, South Korea and Europe.
This is the world’s first example of a field trial of mobile settlement services spanning multiple countries.
Going forward, Credit Saison will continue to innovate in response tochanges in the operating environment through these sorts of large-scalealliances and new business initiatives utilizing mobile phones, with theaim of becoming the industry No. 1.

2) Servicing (Loan Collection Agency) Business
JPN Holdings Co., Ltd., which is mainly involved in contract-based
servicing of small unsecured loans, entered the nursing school business byacquiring in November 2010 the shares of KINDER NURSERY Co.,
Ltd. which operates 27 private-sector nursing schools.
In fiscal 2010, JPN Holdings’ operating revenues decreased year on
year, despite the addition of net sales of humanplus Corporation and
KINDER NURSERY which were integrated into JPN ­Holdings. Thisdecrease was mainly due to the negative impact of revised business conditions with customers in the servicing business.

2. Lease Segment
According to statistics issued by the Japan Leasing Association, overall lease
contract volume for the entire leasing industry in fiscal 2010 (preliminary
figure) was ¥4,546.2 billion (down 7.5% year on year). Credit Saisonrecorded lease contract volume of ¥90.1 billion for fiscal 2010, down
10.2% year on year, mainly due to the curtailment of capital investment bycompanies. However, for fiscal 2010, operating revenues rose 14.9% year
on year to ¥14,451 million, and operating income increased 136.7% year
on year to ¥5,038 million. This was mainly the result of the Company’s
continuing efforts to strengthen ties and revise business conditions withexisting customers and increase the number of partner merchants. Other
factors included a reduction in the cost of uncollectible receivables
through efforts to enhance the soundness of receivables as well as the
positive impact of the adoption of new accounting standards for leases.

CREDIT SAISON Annual Report 201119

In the rental business, transaction volume was ¥2.5 billion, up 496.5%
year on year. This increase primarily reflected efforts to strengthen agency
channels and increase B2B2C rental transactions, in addition to higher
sales of digital terrestrial TV sets in response to surging demand ahead ofchanges in the Japanese government’s eco-point program effective
November 2010.

4. Real Estate Related Segment
The Real Estate Related Segment consists of the real estate business, realestate leasing business and other businesses. Credit Saison generated steadyrevenues from the real estate leasing business; however, real estate sales
declined in the real estate business. As a result, in fiscal 2010 operating
revenues of the segment decreased 18.0% year on year to ¥12,322 million.
Credit Saison recorded an operating loss of ¥2,182 million in this segment.

3. Finance Segment
The Finance Segment consists of the credit guarantee business and otherfinance-related businesses. In fiscal 2010, the Company posted higher
revenues from the “Flat 35” long-term, fixed interest rate mortgage loan
service (the receivables of which are acquired and securitized by the Japan
Housing Finance Agency), which is one of the Company’s finance-related
businesses. However, the balance of loans, including real estate loans,decreased. In the credit guarantee business, the cost of uncollectible
receivables decreased as the Company focused on improving the qualityof receivables. As a result of the foregoing, operating revenues were
¥15,580 million, down 7.4% year on year, while operating income was¥6,796 million, up 35.6% from the previous year.

5. Entertainment Segment
This segment consists of the amusement business and other operations. In
this segment, Credit Saison worked to create sound, safe and enjoyablefacilities that have the support of their communities, while striving toincrease administrative efficiency. As a result, although operating revenuesof the segment decreased by 4.8% year on year to ¥13,940 million, operating income increased by 0.4% year on year to ¥1,737 million.

V. Liquidity and Financial Position
1. Fund Procurement and Liquidity Management
Fund Procurement

1) Credit Guarantee Business
Credit Saison focused on obtaining high-quality items by utilizing its closebusiness relationships with affiliated financial institutions in both sales andmanagement, particularly in the guarantee business for unsecured free loans
to individual customers.
In addition, in fiscal 2010 we endeavored to increase our transaction
volume by entering into a total of 49 new alliances with regional financial institutions, expanding the network to a total of 265 financial institutions, an increase of 47 institutions from fiscal 2009. However, the grossguarantee balance before recording an allowance for losses on guarantees
decreased by 8.1% from the previous fiscal year to ¥157.3 billion.

2) Other Finance-Related Business
Credit Saison engages in financing collateralized by real estate properties
with individuals and corporations.
In March 2009, we started to offer a long-term fixed-rate mortgage
loan called Flat 35 (the receivable of which is acquired and securitized by
Japan Housing Finance Agency). This mortgage loan service was popular
because of the special benefits offered to card members and the accumulated sense of trust and security among customers built over the years byour credit card business. As a result, in fiscal 2010 our Flat 35 service
made 1,957 loans with a total balance of ¥55.3 billion. Since the launchof the Flat 35 service, Credit Saison has extended a total of 2,507 loans
with a total balance of ¥69.2 billion.
Furthermore, in July 2010, Credit Saison began offering the Flat 35
Tsunagi (Bridge) Loan, which provides funds for borrowers to use before
they receive Flat 35 funds, for purposes such as down payments for landacquisitions, as well as payments for the start of construction or construction in progress.
In fiscal 2010, the total balance of receivables in the other-finance related
business was ¥79.8 billion, an increase of 9.6% from the previous year.

20

CREDIT SAISON Annual Report 2011

The Credit Saison Group emphasizes stability and low cost in the procurement of funds, and is actively working to diversify fund procurement
methods. Key procurement methods include negotiated transactions withbanks, related financial institutions, life insurance companies and non-life
insurance companies. In addition, the Group procures funds indirectly
through syndicated loans and committed lines of credit, and directly by
issuing commercial paper and by securitizing receivables. Consolidated
interest-bearing debt (including debt incurred through off-balance-sheet
securitizations in the amount of ¥113,400 million and lease obligations of¥5,500 million) totaled ¥1,657.8 billion as of March 31, 2011. Of thistotal, bank loans, corporate bonds, commercial paper, and asset-backed
securities accounted for 65.1%, 15.4%, 6.6%, and 12.9%, respectively.
With regard to indirect fund procurement, in an effort to mitigate
refinance risks and reduce costs, Credit Saison is working to strengthen its
relations with existing lenders. We also aim to diversify sources of procurement and examine new counterparties, targeting financial institutions
with which we can expect long-term stable transactions. In terms of
direct fund procurement, in an effort to mitigate liquidity risk and reduce
costs, Credit Saison not only utilizes straight corporate bonds and commercial paper, but is also setting up new fund procurement schemes,
including securitization of receivables that will be unaffected by thecreditworthiness of Credit Saison.
To support smooth fund procurement from the capital market, Credit
Saison has obtained credit ratings for the bonds it issues. We have been
given an A+ rating for domestic unsecured corporate bonds, and an a-1
rating for domestic commercial paper by Rating and Investment Information, Inc. (R&I).

Liquidity Management
Of the total assets held by the Credit Saison Group, installment accounts
receivable centered on the Credit Service Segment accounted for 68.8%.
Their annual average turnover was more than three times, helping Credit
Saison maintain a high level of liquidity.

2. Cash Flows

Total equity rose by ¥6,511 million from a year earlier to ¥347,916
million at the end of fiscal 2010. This increase included an increase of¥6,392 million in retained earnings.

Net Cash Provided by Operating Activities
Net cash provided by operating activities amounted to ¥152,063 million,
compared with ¥99,135 million in the previous fiscal year.
The main cash inflow was a decrease in trade receivables of¥198,048 million, consisting mainly of installment accounts receivable.
The main cash outflow was a decrease in notes and accounts payableof ¥35,691 million.

VI. Credit Risks
Of total receivables (i.e. the balance calculated by adding up the balanceof installment accounts receivable and lease investment assets with thebalance of contingent liabilities), receivables overdue by more than 90days amounted to ¥169,770 million, a decrease of 23.6% year on year.
The balance of the allowance for uncollectible receivables (current assets)
as of March 31, 2011 was ¥118,625 million, a 2.3% year-on-year decrease.
Consequently, the ratio of the allowance to the receivables overdue formore than 90 days increased to 175.8% from 156.2% at the previous fiscal
year-end.

Net Cash Used in Investing Activities
Net cash used in investing activities amounted to ¥35,269 million, compared with ¥14,043 million in the previous fiscal year.
The main cash outflow was ¥37,272 million in payments for purchasesof property and equipment, and other assets, primarily related to thedevelopment of a next-generation information system.

Comparison of Delinquent Receivables andthe Allowance for Receivables

Net Cash Used in Financing Activities
Net cash used in financing activities amounted to ¥117,420 million,
compared with ¥80,243 million in the previous fiscal year.
The main cash outflows were payments of payables under securitizedaccount receivables and lease investment assets of ¥54,962 million and adecrease in short-term debts of ¥48,895 million.
As a result of the above, cash and cash equivalents at the end of fiscal
2010 amounted to ¥72,527 million, mainly reflecting a decrease of ¥661
million in cash and cash equivalents from the previous fiscal year-end,
partly offset by an increase in cash and cash equivalents of newly consolidated subsidiaries of ¥57 million.

(Millions of yen)

(1) Receivables(2) Receivables overdue by
more than 90 days(3) Collateralized portion includedin (2)(4) Allowance for losses on receivables
included in current assets
Receivables overdue by more than
90 days as a percentage ofreceivables [(2) ÷ (1)]Ratio of allowance of losses onreceivables to receivables overdueby more than 90 days [(4) ÷ ((2) – (3))](Reference) Receivables overdue by
more than 90 days excluding
collateralized portion as a percentageof receivables [((2) – (3)) ÷ (1)]

3. Assets, Liabilities and Equity
Total assets at the end of fiscal 2010 decreased by ¥142,883 million from ayear earlier, to ¥2,231,247 million. The contraction in assets can be primarily attributed to a decline in cash advance balances because of amendments to the Money-Lending Business Control and Regulation Law.
Total liabilities as of the end of fiscal 2010 stood at ¥1,883,331 million,a decrease of ¥149,394 million from a year earlier. This decrease included
a decline in interest-bearing debt of ¥118,995 million, mainly reflecting
the repayment of loans to financial institutions and the redemption of
securitized receivables.

Total equity and
SHAREHOLDERS’ equITy Ratio(%)(Millions of yen/%)

15.4
6.6

75

% change

1,981,604

2,199,237(9.9)

169,770

222,273(23.6)

102,311

144,517(29.2)

118,625

121,458

(2.3)

8.6%

10.1%

–

175.8%

156.2%

–

3.5%

–

3.4%

Delinquency Ratio (Over 90 days) andWrite-off Ratio (Non-consolidated basis)(%)

500,000

25

400,000

347,916

12.9

15.5

300,000

20

4.0

3.5

3.55
3.40

15
3.0

50
65.1
25

0

2010

(Years ended March 31)

Composition ofInterest-Bearing Debt
100

2011

2007 2008 2009 2010 2011n Bondsn Asset-backed securities
n Commercial paper n Loans(Years ended March 31)

200,000

10

100,000

5

0 2007 2008 2009 2010 2011

0n Total equity
Shareholders’ equity ratio(Years ended March 31)

2.5

2.0

2007 2008 2009 2010 2011

Delinquency ratio (over 90 days)
Write-off ratio (non-consolidated basis)(Years ended March 31)
CREDIT SAISON Annual Report 201121

Changes in the Allowance for Uncollectible
Receivables

3. Competitive Environment(Millions of yen)

Allowance for losses on receivablesat the beginning of the year
Increase
Decrease
Allowance for losses on receivablesat the end of the year
(Reference) Losses on receivables

2011

2010

% change

126,496
55,936
58,838

121,886
60,06255,451

3.8
(6.9)
6.1

123,5945

126,4960(2.3)
5,980.9(Years ended March 31)
Note: The increase in the fiscal year ended March 31, 2011 includes a provision of¥8,156 million to the allowance for uncollectible receivables recorded in responseto the Great East Japan Earthquake of March 11, 2011.

VII. Risk Information
The following presents an overview of operating, accounting and otherissues that exert or could exert a significant influence on investor decisions.
Forward-looking statements are Credit Saison Group estimates as ofMarch 31, 2011.

1. Operating Conditions
Results and financial position in the Credit Saison Group’s primaryCredit Service, Finance and Real Estate Related businesses are subject tothe 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
affect transaction 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 the cost of uncollectible receivables.
Small and medium-sized companies are the principal customer groupof the lease business. Factors contingent upon economic conditions,
including contraction in capital expenditures and deteriorating corporate
performance accompanying an economic recession, have the potential tonegatively impact operating revenues, losses on uncollectible receivables
and other results as well as financial position.

2. Changes in Cost of Funds
The Group utilizes interest rate swaps and other means as a hedge against
rises in interest rates, in addition to issuing corporate bonds and borrowing from financial institutions to secure stable and fixed funding. Nevertheless, 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 in interest rates onloans and other instruments are impacted by a wide array of considerations. These include changes in the terms of customer contracts andinterest rates applicable to other companies in the consumer credit business. The Credit Saison Group may be unable to price its products andservices to reflect higher interest rates on the capital it procures, which
would have the potential to reduce the group’s interest margin.

22

CREDIT SAISON Annual Report 2011

The financial system has undergone substantial deregulation in recent
years, which has resulted in energetic restructuring of the retail financial
services industry in Japan. Large mergers in the credit card industry, theentry of competitors from other industries and other events have caused
competition to intensify. In this changing market, the results and financial
position of the Credit Saison Group may be negatively impacted by theoccurrence of events such as reduced profitability due to a decrease in fee
rates from member stores or changes in the terms of transactions withbusiness partners.

4. Unfavorable Performance Among Primary
Alliance Partners
In the credit services 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 to negatively impact the Credit Saison
Group’s performance and financial position. For example, the Credit
Saison Group acquires many of its new cardmembers through the outletsof alliance partners in the retailing industry. Reduced ability to attract
customers or lower sales among these companies has the potential tonegatively impact the Credit Saison Group’s operating revenues.
In addition, the Credit Saison Group has capital relationships withsome of its alliance partners. Unfavorable performance among such alliance partners has the potential to incur impairment losses on investment
securities in the Credit Saison Group’s portfolio.

5. System Operation Problems
The Credit Saison Group relies heavily on computer systems and communication networks in numerous aspects of its main businesses, including the credit service business. A number of situations could compromise
the Credit Saison Group’s sales capabilities, damage its credibility andcause other problems that would have the potential to negatively impact
the Credit Saison Group’s performance and financial position. Thesesituations include Group and counterparty system inoperability resulting
from temporary system overload due to factors such as 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 and accidents; 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 cardmembers and others, and implements appropriate
controls throughout the group. However, if an incident such as leakage orillegal use of this information were to occur, the Group may be subject toadministrative guidance, orders, or fines for violation of business processregulations under the Private Information Protection Law. This would
damage the Credit Saison Group’s credibility and cause other problems
that would have the potential to negatively impact the Credit Saison
Group’s performance and financial 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, the Money-Lending
Business Control and Regulation Law and other laws. Circumstances
arising from future amendments to these laws, or changes or tighteningof their interpretation, or new legal restrictions, would have the potential
to negatively impact on the Credit Saison Group’s operations, performance and financial position.
Moreover, a portion of interest that was higher than the interest rateceiling set by the interest rate restriction law can be deemed invalid andmay be subject to claims for reimbursement. Credit Saison is booking anallowance for losses on interest repayments in preparation for future
claims for reimbursements of this type, but future regulatory revisions or
regulatory trends that unexpectedly expanded such reimbursement claims
would have the potential to negatively impact on the Credit Saison
Group’s performance and financial position.
The type, content and degree of potential regulatory revisions are
difficult to predict, and the Credit Saison Group has no control over theirpotential impact on its operations.

8. Inventories and Impairment Loss of Property and­Equipment and Evaluation Losses
A material decline in the fair value of the Credit Saison Group’s land andbuildings, or a projected decline in operating income in businesses
employing such assets that is not deemed to be temporary, will result in
impairment losses that have the potential to negatively impact the Credit
Saison Group’s results and financial position. Moreover, a material decline
in the fair value of investment securities and investments and loans toaffiliates, or unfavorable performance among investees, has the potential
to result in evaluation losses.

9. Retirement Benefit Obligations

VIII. Outlook for the Fiscal Year Ending
March 31, 2012
The business environment for the Credit Saison Group in the fiscal year
ending March 31, 2012 is defined by a highly uncertain outlook withrespect to economic activity, business conditions and other factors,
mainly on account of the tremendous impact that the Great East Japan
Earthquake has had on Japan as a whole. In the credit card sector, theGroup should continue to face challenging conditions, includingchanges in the earnings structure of the Group’s business due to revisions
to the Money-Lending Business Control and Regulation Law and theInstallment Sales Law.
In response to these conditions, Credit Saison will take bold action in
the following key areas to lay future business foundations that will drive
sustainable growth.
• Achieve top-line revenue growth centered on the card business throughinitiatives to compete successfully with the cash payment services
market• Expand fee-based businesses by enhancing Internet businesses anddevelop the marketing business utilizing customer bases• Diversify revenue sources by strengthening the leases and financebusinesses• Improve the quality of loan receivables by enhancing credit control andcollection systems and develop lean operations by transforming the cost
structure• Rebuild the Group business portfolio by strengthening corporate
governance
Based on the activities described above, Credit Saison’s forecasts for its
consolidated results for the period ending March 31, 2012 are operating
revenues of ¥261.0 billion, operating income of ¥24.5 billion and net
income of ¥17.0 billion. In its non-consolidated results, Credit Saison
expects operating revenues of ¥216.0 billion, operating income of ¥20.5
billion and net income of ¥13.0 billion.

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

CREDIT SAISON Annual Report 201123

Consolidated Balance Sheets
Credit Saison Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2011 and 2010ASSETS
Current Assets:
Cash and deposits (Note 11)
Receivables and lease investment assets:   Accounts receivable—installment (Notes 4, 6 and 11)   Lease investment assets (Notes 5, 6, 10 and 11)   Short-term loans receivable (Note 11)   Less: Allowance for doubtful accounts
Operational investment securities (Notes 11 and 12)
Securities (Notes 11 and 12)
Inventories (Note 7)
Deferred tax assets (Note 14)
Prepaid expenses and other current assets (Note 24)
Total current assets

Property and Equipment, at Cost:
Lease assets (Note 10)
Buildings and improvements
Fixtures and equipment
Total
Less: Accumulated depreciation
Net property and equipment
Land
Construction in progress
Total property and equipment

Investments and Other Assets:
Investment securities (Notes 11 and 12)
Investments in unconsolidated subsidiaries and affiliated companies (Note 11)Long-term loans receivable (Note 11)
Intangible assets
Lease deposits
Deferred tax assets (Note 14)
OthersLess: Allowance for doubtful accounts
Total investments and other assets
Total assets
The accompanying notes are an integral part of these statements.

24

CREDIT SAISON Annual Report 2011

Millions of yen
2011
2010

Thousands of
U.S. dollars(Note 2)2011¥    64,112¥    64,232$   771,035

1,491,108
219,895
10,144(118,626)
1,602,521
7,219
5,982
243,849
23,55825,8001,973,041

1,688,748
214,232
14,301(121,458)
1,795,823
227
298
221,606
24,376
25,6802,132,242

17,932,751
2,644,558
122,001(1,426,649)
19,272,661
86,824
71,9442,932,635
283,320
310,278
23,728,697

7,072
41,932
27,76876,772(42,083)
34,68924,237644
59,5703,971
40,99929,84674,816(38,849)
35,967
24,54585
60,59785,052504,298
333,949
923,299(506,104)
417,195
291,480
7,741
716,416

40,241
43,98229,39026,81815,166
15,334
76,63357,6956,225
6,671
32,454
31,255
3,496
4,574(4,969)(5,038)
198,636
181,291¥2,231,247 ¥2,374,130

483,952
353,454
182,394
921,62174,859390,307
42,057(59,760)
2,388,884$26,833,997

LIABILITIES AND EQUITYCurrent Liabilities:
Notes and accounts payable (Notes 11 and 24)
Short-term loans (Notes 9 and 11)
Current portion of long-term debt (Notes 6, 9 and 11)
Commercial paper (Notes 9 and 11)
Current portion of long-term lease obligations (Notes 9 and 11)
Accrued income taxes
Unearned income
Accrued employees’ bonuses
Accrued directors’ bonuses
Allowance for losses on interest repayments
Allowance for losses on collecting gift tickets
Accrued expenses and other current liabilities
Total current liabilities
Long-Term Liabilities:
Long-term debt (Notes 6, 9 and 11)Long-term lease obligations (Notes 9 and 11)
Accrued pension and severance costs (Note 13)
Accrued retirement benefits to directors and corporate auditors
Allowance for losses on guarantees
Allowance for losses on warranty for defects
Allowance for losses on point program
Allowance for losses on interest repayments
Asset retirement obligations
Negative goodwill
Others (Note 14)
Total long-term liabilities
Commitments and Contingent Liabilities (Notes 8 and 18)
Equity (Note 20):
Common stock
Capital surplus
Stock acquisition rights
Retained earnings
Less: Treasury stock, at cost
Accumulated other comprehensive income:   Net unrealized gain on available-for-sale securities   Deferred loss on derivatives under hedge accounting
Total
Minority interests
Total equity
Total liabilities and equity

Millions of yen
2011
2010

Thousands of
U.S. dollars(Note 2)2011¥  171,066
248,029200,036
110,000
1,599
1,536
6,148
2,018
89
19,612
192
37,341
797,666¥  206,656
296,923
134,641
133,000
915
10,975
6,253
2,234
93
16,317
187
38,383
846,577$ 2,057,314
2,982,910
2,405,725
1,322,910
19,226
18,46973,94324,264
1,069
235,8632,306
449,100
9,593,099

980,840
3,929
2,179
74
5,464
19
65,88015,569835
706
10,1701,085,665

1,084,459
2,890
3,253
109
4,486
59
61,23819,278
–
1,049
9,327
1,186,148

11,796,036
47,251
26,211884
65,713
229
792,303
187,245
10,0408,485
122,304
13,056,701

75,92984,8380
185,629(6,114)75,92984,861
0
179,237(6,106)913,161
1,020,304
02,232,457(73,535)

6,570
6,812
(1,623)(1,762)345,229
338,9712,687
2,434
347,916
341,405¥2,231,247 ¥2,374,130

79,008(19,511)
4,151,884
32,313
4,184,197$26,833,997

CREDIT SAISON Annual Report 201125

Consolidated Statements of Income
Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2011 and 2010

Millions of yen
2011
2010

Thousands of
U.S. dollars(Note 2)
2011

Operating Revenues (Note 16):
Income from the credit service business
Income from the lease business
Income from the finance business
Income from the real estate related business
Income from the entertainment business
Financial income
Total operating revenues¥229,536
14,437
15,261
12,11813,928433
285,713¥248,323
12,572
15,955
14,073
14,638
1,295
306,856$2,760,508
173,629
183,539
145,732
167,493
5,211
3,436,112

Operating Expenses:
Selling, general and administrative expenses
Financial cost
Total operating expenses

235,759
22,577258,336

246,306
24,377
270,6832,835,338
271,523
3,106,861

Operating Income

27,37736,173329,251

189
–
–
–
2,190
2,010
2,559
6,948

–
59
46
297
985
598
2,641
4,626

2,275
–
–
–
26,33324,17130,781
83,560

551
156
–
–
–
1,177
9,986
998
12,868(5,920)21,457

827
265
394
1,500
0
–
–
1,899
4,885
(259)
35,914

6,626
1,879
–
–
–
14,156
120,102
11,995
154,758(71,198)
258,053

7,988
365
13,104274¥ 12,830

12,392
4,636
18,886206¥ 18,680

96,068
4,388
157,5973,303$ 154,294

2011¥1,879.98
69.86
69.41
30.00

Yen
2010
¥1,845.82
102.48102.3030.00

U.S. dollars(Note 2)
2011
$22.610
0.840
0.835
0.361

Non-Operating Revenues:
Gain on sales of property and equipment and intangible assets
Gain on sales of investment securities
Gain on redemptions of investment securities
Gain on changes in equity interest
Dividend income
Equity in earnings of equity method-affiliated companies
Other
Total non-operating revenues
Non-Operating Expenses
Loss on devaluation of investment securities
Impairment loss
Loss on business restructuring of subsidiaries
Provision of allowance for doubtful accounts
Loss on changes in equity interest
Loss on adjustment for changes of accounting standard for asset retirement obligations (Note 3 (X))
Losses from a natural disaster (Note 15)
Other
Total non-operating expenses
Non-Operating Expenses, net
Income before Income Taxes and Minority Interests
Income Taxes (Note 14):
Current
Deferred
Net Income before Minority Interests
Minority interest in net income
Net Income

Per Share Data (Notes 3 (U) and 22)
EquityNet income, basic
Net income, diluted
Cash dividends
The accompanying notes are an integral part of these statements.

Consolidated Statement of Comprehensive Income
Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Year ended March 31, 2011

Net Income before Minority Interests
Other Comprehensive Income (loss) (Note 19)
Unrealized loss on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Share of other comprehensive income in affiliated companies
Total other comprehensive loss
Comprehensive Income (Note 19)
Comprehensive income attributable to (Note 19):
Owners of the parent
Minority interests
The accompanying notes are an integral part of these statements.

26

CREDIT SAISON Annual Report 2011

Millions of yen
2011¥13,104

Thousands of
U.S. dollars(Note 2)
2011
$157,597(1,193)
108
985
(100)
¥13,004(14,350)
1,299
11,848(1,203)$156,394¥12,730
274$153,096
3,298

Consolidated Statements of Changes In Equity
Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2011 and 2010
Millions of yen

Balance at April 1, 2009
Increase by shareexchanges

Issuednumber ofshares ofcommonstock(thousands)

Commonstock

181,885¥75,929

3,560

CapitalsurplusStockacquisitionrightsRetainedearnings

Treasurystock¥81,573¥0¥165,291¥(6,098)

3,164(5,406)

Net income for the year
ended March 31, 2010

18,680

Increase in treasury stock
124

Change of scope of equity
method

¥(1,236)¥75,929¥84,861¥0Change of scope of
consolidation¥179,237

Minority
interests

Total
equity¥318,301¥2,293¥320,594

3,159

3,159

(5,406)(5,406)

18,68018,680

(12)

(12)

9

133

133

672
185,445

Total

(12)

672

Net changes in the year
Balance at March 31, 2010

¥2,842(5)

Cash dividends

Decrease in treasury stock

Accumulated othercomprehensive income
Net
Deferred
unrealized
loss ongain onderivaavailable- tives underfor-salehedge
securities accounting¥(6,106)

672

3,970

(526)

3,444

141

3,585

¥6,812¥(1,762)¥338,971¥2,434¥341,405

(774)

(774)

(774)

Cash dividends(5,511)(5,511)(5,511)

Net income for the year
ended March 31, 2011

12,830

Increase in treasury stock
Decrease in treasury stock(1)

Adjustment of retained
earnings due to adoption of
PITF No. 24 (Note 3 (w))

12,83012,830

(3)

(3)

(3)

1

0

0

(153)

(153)

(153)

Acquisition of treasury
stock from consolidated
subsidiary

(22)

(6)

Net changes in the year
Balance at March 31, 2011

185,445¥75,929¥84,838¥0¥185,629¥(6,114)

(28)

(28)

(242)

139

(103)

253

150

¥6,570¥(1,623)¥345,229¥2,687¥347,916

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2010

Issuednumber ofshares ofcommonstock(thousands)

Commonstock

185,445$913,161

Stock
Capital acquisitionrightssurplus$1,020,574$0Retainedearnings

Treasurystock$2,155,587$(73,431)

Accumulated othercomprehensive income
DeferredNet
loss onunrealized
gain on derivatives
underavailablehedge
for-salesecurities accounting$81,927

Total

Minority
interests

Total
equity$(21,201) $4,076,617$29,276$4,105,893

Change of scope of
consolidation(9,305)(9,305)(9,305)

Cash dividends(66,285)(66,285)(66,285)

Net income for the year
ended March 31, 2011

154,294

Increase in treasury stock
Decrease in treasury stock(7)

Adjustment of retained
earnings due to adoption of
PITF No. 24 (Note 3 (w))

154,294

154,294

(38)

(38)

(38)

12

5

5

(1,834)(1,834)(1,834)

Acquisition of treasury
stock from consolidated
subsidiary

(263)

(78)

Net changes in the year
Balance at March 31, 2011(341)
(2,919)185,445$913,161$1,020,304$0$2,232,457$(73,535)$79,008

1,690

(341)

(1,229)

3,037

1,808

$(19,511) $4,151,884$32,313$4,184,197

The accompanying notes are an integral part of these statements.

CREDIT SAISON Annual Report 201127

Consolidated Statements of Cash Flows
Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2011 and 2010

Millions of yen
2011
2010
Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority interests to net
cash provided by operating activities:   Income taxes refunded   Income taxes paid   Depreciation and amortization   Loss on adjustment for changes of accounting standard for asset retirement obligations   Losses from a natural disaster   Loss on business restructuring of subsidiaries   Increase (decrease) in allowance for doubtful accounts   Increase (decrease) in accrued pension and severance costs   Increase in allowance for losses on point program   Decrease in allowance for losses on interest repayments   Decrease in allowance for other reserves   Interest and dividends income   Interest expenses   Equity in earnings of equity method-affiliated companies   Foreign currency exchange (gain) loss   Loss on sales of investment securities   Loss on devaluation of investment securities   Net gain on changes in equity interest   Impairment loss   Loss on disposal of property and equipment, and other assets   (Increase) decrease in operational investment securities   Decrease in trade receivables   Increase in lease investment assets   Increase in inventories   Decrease in other assets   Interest and dividends received   Interest paid   Increase (decrease) in notes and accounts payable   Increase (decrease) in other liabilities   Other—net   Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:   Payments into time deposits   Payments for purchases of investment securities   Proceeds from sales or redemption of investment securities (Note 21(C))   Proceeds from purchases of investments in subsidiaries resulting in change in scope    of consolidation (Note 21(D))   Payments for purchases of property and equipment, and other assets   Proceeds from sales of property and equipment, and other assets   Payments for short-term and long-term loans   Proceeds from short-term and long-term loans   Decrease in other assets   Net Cash Used in Investing Activities
Cash Flows from Financing Activities:   Decrease in short-term debts   Decrease in commercial paper   Proceeds from long-term debts   Repayments of long-term debts   Proceeds from issuance of bonds   Repayment of bonds   Proceeds from securitized account receivables and lease investment assets   Payments of payables under securitized account receivables and lease investment assets   Repayments of lease obligations   Proceeds from minority shareholders   Proceeds from sales of treasury stock   Purchases of treasury stock   Cash dividends paid   Cash dividends paid to minorities   Net Cash Used in Financing Activities
Translation 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 of Newly Consolidated Subsidiaries
Cash and Cash Equivalents at the End of Year (Note 21(A))
The accompanying notes are an integral part of these statements.

28

CREDIT SAISON Annual Report 2011

Thousands of
U.S. dollars(Note 2)2011

¥ 21,457¥ 35,914$ 258,053–(16,867)
15,568
1,177
9,986
–
(11,059)(1,073)
4,642
(414)
(735)
(2,602)
21,485(2,010)
38
139
551
–
156
898
(6,860)198,048(5,662)(22,213)
1,066
2,952
(21,804)(35,691)940(50)
152,0636,202(7,074)
16,826
–
–
394
4,608
15
7,700
(9,089)(111)(1,451)
23,115
(598)
(4)
34
827
(297)
265
875
986
40,275(18,478)(7,258)28,7391,875(23,435)
1,280(2,848)(152)
99,135–(202,852)
187,226
14,156
120,102–(133,003)(12,910)55,827(4,982)(8,837)(31,289)
258,383(24,171)
460
1,671
6,626
–
1,879
10,796(82,496)
2,381,813(68,100)(267,143)
12,81535,502(262,228)(429,236)
11,308(592)
1,828,778(500)(1,063)
1,176
69

–
(337)
11,744546(6,013)(12,790)
14,144824(37,272)
2,701(1,318)167
771(35,269)(25,866)
112(1,837)34
1,561(14,043)(448,256)
32,483(15,851)
2,014
9,283
(424,162)(48,895)(23,000)
106,000(109,037)
44,770(25,225)–(54,962)(1,529)–0(3)(5,511)(28)(117,420)
(35)
(661)
73,13157¥ 72,527(101,269)(27,000)
158,529(129,473)–(45,225)
79,500(9,388)
(569)
0
133
(12)
(5,406)(63)(80,243)(0)
4,849
68,282–¥ 73,131(588,022)(276,609)
1,274,805(1,311,323)
538,423(303,367)–(661,003)(18,393)–4(38)(66,283)(340)(1,412,146)(425)(7,955)879,505691$ 872,241

Notes to Consolidated Financial Statements
Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years Ended March 31, 2011 and 2010

1. BASIS OF PRESENTING CONSOLIDATED 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 (together the “Companies”) in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
Under Japanese GAAP, a “consolidated statements of income and comprehensive income” is required from the fiscal year ended
March 31, 2011, and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet and consolidated statement of changes in equity. Information with respect to other comprehensive income forthe year ended March 31, 2010 is disclosed in Note 19. In addition, “income before minority interests” is disclosed in the consolidated statement of income from the year ended March 31, 2011.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.
In addition, certain reclassifications have been made in the 2010 consolidated financial statements to conform to the classifications
used in 2011.

2. U.S. DOLLAR AMOUNTSJapanese yen amounts have been translated into U.S. dollars at the rate of ¥83.15=US$1, the approximate exchange rate on March
31, 2011, for the convenience of the reader. These translations should not be construed as representations that Japanese yenamounts actually represent, have been or could be converted into U.S. dollars at that or any other rate.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(A) Basis of consolidation and accounting for investments in affiliated companies
As at March 31, 2011, the consolidated financial statements include the accounts of the Company and its eighteen (fourteen for2010) significant subsidiaries.
(New)
ARS, LLC.
PAM·J Inc.
Hayabusa Trust Co., Ltd.
KINDER NURSERY Co., Ltd.
(In the current fiscal year, ARS, LLC. and PAM·J Inc., which increased in their significance, Hayabusa Trust Co., Ltd., which was
newly established, and KINDER NURSERY Co., Ltd., whose shares the consolidated subsidiary acquired, were newly included as
consolidated subsidiaries effective from the current fiscal year.)All significant intercompany balances and transactions and unrealized profit among the Companies, if any, have been eliminatedin consolidation. Unconsolidated subsidiaries would have no material effect on the consolidated financial statements of the­Companies and have therefore been excluded from consolidation.
Investments in seven (seven for 2010) significant affiliates are accounted for by the equity method.
Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are stated at cost, due to theirimmaterial effects on the consolidated financial statements of the Companies.
The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition is
being amortized over a period of 20 years. However, if the amount is not material, it is charged to income when incurred.

(B) Inventories
Inventories are stated at the lower of cost, determined principally by the specific identification method, or net selling value. But
supplies are stated at cost determined by the latest purchase cost method.

(C) Financial instruments
i. Derivatives
All derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions
are recognized in the consolidated statements of income except for derivatives that are designated as “hedging instruments”(see iii. Hedge accounting).

ii. Securities
Securities held by the Companies are classified into four categories:
Trading securities, which are held for the purpose of generating profits on short-term differences in prices, are measured at fairvalue, with changes in fair value included in profit or loss for the period in which they arise.
Held-to-maturity debt securities that the Companies intend to hold to maturity with such ability are reported at amortized cost.
Investments 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 “available-for-sale securities.” Available-for-sale securities that havemarket prices are measured at fair value, and unrealized gains or losses on these securities are reported as accumulated other comprehensive income in equity at a net-of-tax amount other than the amounts related to gains or losses on embedded derivatives.
Available-for-sale securities that do not have market prices are stated at cost using the moving-average method. Equities oflimited liability partnerships for investment business and of other similar partnerships (defined as “securities” by Article 2, Section 2 of
the Financial Instruments and Exchange Act) are valued at the net equity equivalents based on the recently available financial statements of the partnership corresponding to the reporting dates of the financial statements defined by the partnership agreements.

CREDIT SAISON Annual Report 201129

In cases where the fair value of held-to-maturity debt securities, equity securities issued by unconsolidated subsidiaries andaffiliates, or available-for-sale securities has declined significantly and such decline in the value is not deemed temporary, thosesecurities are written down to fair value, and the resulting loss is included in profit or loss for the period.

iii. Hedge accounting
Derivatives used as hedging instruments by the Companies are interest rate swaps. The related hedged items are bank loans andbonds issued by the Companies.
The Companies use interest rate swaps to manage their exposure to fluctuations in interest rates. The Companies do not enter
into derivatives for speculative purposes.
As per the accounting standard for derivative financial instruments, a) all derivatives except those which qualify for hedge
accounting, are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the consolidated statements of income, and b) for derivatives used for hedging purposes, if derivatives qualify forhedge accounting because of high correlation and effectiveness between the hedging instruments and hedged items, gains or losses
on derivatives are deferred until maturity of the hedged transactions.
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.

(D) Property and equipment
Depreciation of property and equipment is computed principally by the straight-line method over the estimated useful lives of
the assets.
Lease assets are depreciated by the straight-line method over their lease term with zero residual value.

(E) Lease
In March 2007, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions,” which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting
standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008. The Companies applied the revised
accounting standard effective April 1, 2008.

(lessee)
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee
were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information was disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that
all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition,
the revised accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased
property to the lessee to continue to be accounted for as operating lease transactions with certain “as if capitalized” information
disclosed in the notes to the lessee’s financial statements.

(lessor)Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee
were treated as sales. The revised accounting standard requires that all finance leases that are deemed to transfer ownership of theleased property to the lessee should be recognized as lease receivables, and that all finance leases that are not deemed to transfer
ownership of the leased property to the lessee should be recognized as lease investment assets. In addition, the revised accounting
standard permits the value of lease investment assets of leases which existed at the transition date and do not transfer ownership ofthe leased property to the lessee to take over the appropriate book value (net of accumulated depreciation) of the leased property
as of March 31, 2008, and after the adoption of the revised accounting standard, the aggregate amount equivalent to interest isallocated over the lease term based on the straight-line method.

(F) Intangible assets
Intangible assets are amortized by the straight-line method over the useful lives.

(G) Long-lived assets
The Companies review their long-lived assets for impairment whenever events or changes in circumstance indicate the carrying
amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of anasset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual
disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of
the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.

(H) Bond issue costs
Bond issue costs are amortized by the straight-line method over the bond term.

(I) Allowance for doubtful accounts
Receivables and lease investment assets 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 basedon the Companies’ past credit loss experience.

(J) Accrued employees’ bonuses
Accrued employees’ bonuses are provided at the estimated amounts, which are to be paid for services rendered through the year.

(K) Accrued directors’ bonuses
Accrued directors’ bonuses are maintained at the amount accrued at the end of the fiscal year, based on the estimated future payments and service period.

30

CREDIT SAISON Annual Report 2011

(L) Allowance for losses on collecting gift tickets
Allowance for losses on collecting gift tickets, etc., issued by the Company takes into account its registration of collected tickets inorder to prepare for the possible future use of those tickets that had been recorded as revenue after the passage of the constant period.

(M) Allowance for losses on interest repayments
Allowance for losses on interest repayments is provided at the estimated amount based on payment experience, required to berefunded upon customers’ legal claims.

(N) Accrued pension and severance costs
Accrued pension and severance costs are provided for employees’ retirement benefits based on the projected benefit obligations andthe fair value of pension plan assets at the end of the fiscal year.
Unrecognized past service costs and actuarial differences of the plans are amortized over a period of nine to eleven years, within
the average remaining service period at the time of occurrence. Amortization of unfunded past service costs and amortization of
actuarial differences start from occurrence and from the following fiscal year, respectively.

(O) Accrued retirement benefits to directors and corporate auditors
Directors and corporate auditors customarily receive lump-sum payments upon termination of services, subject to shareholders’ approval.
Consolidated subsidiaries with such plans accrued retirement benefits in an amount based on the unfunded retirement plan forthe directors and corporate auditors.

(P) Allowance for losses on guarantees
An allowance for losses on guarantees is provided for potential losses arising from the Companies’ guarantee obligations of­customers’ 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 Companies’ loss experience to the balance ofguarantees outstanding at year-end.

(Q) Allowance for losses on warranty for defects
Allowance for losses on warranty for defects is provided for the potential repair costs on sold real estate due to the Companies’
warranty for defects. The allowance is provided at the amount estimated based on the past experience of repair costs.

(R) Allowance for losses on point program
To stimulate card usage, the Company provides cardholders with credit card points, which can be exchanged for various commodities and services. Allowance for losses on a point program is provided based on estimated usage of card points outstanding at
the year-end and exchange experience.

(S) Recognition of operating revenue
The operations of the Companies are mainly comprised of the following business areas, and the recognition of operating revenues
differs for each business.

i. Credit card contracts and personal credit contracts for shopping
Fees for collection and administrative services to be received from the affiliated stores are recognized when payments are received.
Fees from customers are recognized by the interest method or the sum-of-the-digits method.

ii. Loan contracts and guarantee contracts
Fees from customers under loan contracts or guarantee contracts are recognized by the interest method.

iii. Lease contracts
The aggregate amount equivalent to interests is allocated to each period.

(T) Income taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income.
Deferred taxes are recorded to reflect the impact of temporary differences between assets and liabilities recognized for financial
reporting purposes and such amounts recognized for tax purposes.

(U) Per share information
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average
number of common shares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into
common stock. Diluted net income per share of common stock assumes full exercise of the stock options at the beginning of theyear (or at the time of issuance).
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to therespective years including dividends to be paid after the end of the year.

(V) Cash and cash equivalents
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 a low risk of fluctuation in value that are scheduled to mature within three months of acquisition.

CREDIT SAISON Annual Report 201131

(W) Unification of Accounting Policies Applied to associated Companies for the
Equity Method
In March 2008, the ASBJ issued ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting forInvestments”and ASBJ Practical Issues Task Force (PITF) No. 24, “Practical Solution on Unification of Accounting Policies Applied
to Associates Accounted for Using the Equity Method”. The new standard requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when theassociate’s financial statements are used in applying the equity method unless it is impracticable to determine the adjustments. This
standard was applicable to the equity method of accounting for fiscal years beginning on or after April 1, 2010.
The Company applied this accounting standard effective April 1, 2010. The effect of this change was to decrease retained earnings at the beginning of the year by ¥153 million ($1,834 thousand). The impact on earnings, furthermore, was minimal.

(X) Asset Retirement Obligations
In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No. 18 “AccountingStandard for Asset Retirement Obligations” and ASBJ Guidance No. 21 “Guidance on Accounting Standard for Asset Retirement
Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by
law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset
and is associated with the retirement of such tangible fixed asset. This standard was effective for fiscal years beginning on orafter April 1, 2010.
The Companies applied this accounting standard effective April 1, 2010. The effect of this change was to decrease operating income by ¥101 million ($1,210 thousand) and income before income taxes and minority interests by ¥1,278 million($15,366 thousand), respectively.

4. ACCOUNTS RECEIVABLE—INSTALLMENT
As of March 31, 2011 and 2010, liquidated receivables were as follows, and the following amounts of trust beneficiary rights andother receivables generated from liquidation or operational transactions were included in accounts receivable—installment.
Millions of yen
2011
2010

Liquidating receivables:
Single-payment card shopping, etc.
Trust beneficiary rights and other receivables include:
Single-payment card shopping, etc.
Acquisition from operational transaction

Thousands of
U.S. dollars
2011¥112,000¥118,000$1,346,963

12,7442

13,11932

153,25923

5. LEASE INVESTMENT ASSETS
As of March 31, 2011 and 2010, liquidated lease investment assets were as follows, and the following amounts of trust beneficiaryrights were included in lease investment assets.
Millions of yen
2011
2010

Liquidating receivables
Trust beneficiary rights¥1,400
6,881

Thousands of
U.S. dollars
2011¥ 6,000
12,030$16,837
82,759Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

6. PLEDGED ASSETS
As of March 31, 2011 and 2010, pledged assets and liabilities related to pledged assets were as follows:

Pledged assets:
Accounts receivable—installment
Lease investment assets
Liabilities related to pledged assets:
Current portion of long-term debt
Long term debt

32

CREDIT SAISON Annual Report 2011

¥47,500
46,669¥ 87,500
61,631$571,257
561,261

15,851
78,31813,221
135,910

190,631
941,887

7. INVENTORIESInventories at March 31, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010

Receivable by purchase
Real estate for sale
Other
Total

¥ 12,738
229,997
1,114¥243,849

Thousands of
U.S. dollars
2011¥ 15,409
204,800
1,397¥221,606$ 153,192
2,766,046
13,397$2,932,635

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

8. LOAN COMMITMENTS(a) Lender
The Companies 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:

Total loan limits
Loan executions¥5,710,496
443,428¥5,267,068¥6,623,538
584,560¥6,038,978$68,677,038
5,332,866$63,344,172

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.

(b) Borrower
The Companies have concluded loan commitment contracts with 5 banks for efficient procurement of working capital.
The portion of the credit line that had not been exercised under these contracts as of March 31, 2011 and 2010 was as follows.
Millions of yen
2011
2010

Total loan limits
Loan executions¥125,000–¥125,000¥125,000–¥125,000Thousands of
U.S. dollars
2011$1,503,307–$1,503,307

9. 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 0.81% and 1.00% as ofMarch 31, 2011 and 2010, respectively.
Commercial paper is issued by the Companies, with an average interest rate of 0.14% and 0.16% as of March 31, 2011 and2010, respectively.
Long-term debt and lease obligations as of March 31, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010

Average 1.47% (2011) and 1.54% (2010) unsecured loans from banks, insurancecompanies and other financial institutions, due in installments through 2021
0.47% to 2.41% (2011) and 0.60% to 2.41% (2010) bonds,
due in installments through 2017
Lease obligations*1
Average 1.39% (2011) and 1.07% (2010) payables on under-securitized loans*2
Subtotal
Less: Current portion¥ 830,595
256,112

Thousands of
U.S. dollars
2011¥ 833,632
236,338$ 9,989,117
3,080,126

5,528
3,804
94,169149,1311,186,404
1,222,905(201,635)(135,556)¥ 984,769 ¥1,087,349

66,477
1,132,518
14,268,238(2,424,951)$11,843,287*1 Because interest is included in lease obligations, presentation of the average interest rate is omitted.
*2 Payables under securitized lease receivables and loans result from liquidation.

The aggregate annual maturities of long-term debt subsequent to March 31, 2011 are as follows:Year ending March 31

Millions of yen

Thousands of
U.S. dollars

2012
2013
2014
2015
2016 and thereafter¥201,635
248,525
184,339
218,881333,024$2,424,951
2,988,878
2,216,944
2,632,360
4,005,105

As is customary in Japan, short-and long-term bank loans are made under general agreements that provide that additional security
and guarantees for present and future indebtedness will be given upon request of the bank under certain circumstances, and thatany collateral so furnished will be applicable to all indebtedness to the bank. To date, the Companies have not received any such
requests from their banks.

CREDIT SAISON Annual Report 201133

10. LEASE TRANSACTIONS(A) Finance leases that do not transfer ownership (lessee)
i. Lease assets
Property and equipment—mainly servers and other equipment
Intangible assets—mainly software used in the credit service businessii. Depreciation
Depreciation equivalent is computed by the straight-line method under the assumption that the lease term equals the useful life,
and that there is no residual value.
iii. As discussed in Note 3(E), the Companies accounts for leases which existed at the transition date (March 31, 2008) and do nottransfer ownership of the leased property to the lessee as operating lease transactions.
Pro forma information of such leases existing at the transition date, such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense, interest expense, on an “as if capitalized” basis for the years ended March 31, 2011
and 2010 is as follows:

Pro forma capitalization of leased items
Millions of yen
2011
2010

Building:
Acquisition cost
Accumulated depreciation
Net leased property value
Other (fixtures and equipment):
Acquisition cost
Accumulated depreciation
Net leased property value
Total:
Acquisition cost
Accumulated depreciation
Net leased property value

Thousands of
U.S. dollars
2011

¥157
(111)
46

¥ 285(194)91$1,882(1,332)
550

487
(377)
110

1,265
(969)
296

5,860
(4,532)
1,328

644
(488)
¥156

1,550
(1,163)¥ 387

7,742(5,864)$1,878

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Obligations under finance leases

Due within one year
Due after one year
Total

¥113
67
¥180

¥238
194
¥432

$1,359800$2,159Allowance for impairment loss on leased property of ¥1 million ($22 thousand) as of March 31, 2011 and ¥3 million as of March
31, 2010 is not included in the obligations under finance leases.
Lease payments, depreciation equivalent and interest equivalentMillions of yen
2011
2010

Lease payments
Reversal of allowance for impairment loss on leased property
Depreciation equivalentInterest payable equivalent
Impairment loss

¥217
1
189
8
–

¥398
4
362
18
1

Thousands of
U.S. dollars
2011$2,604
12
2,271
97
–

Depreciation equivalent is computed by the straight-line method over its lease term determined by its useful life, with zero
residual value.
Interest equivalent, which represents the aggregate lease payments less the acquisition cost equivalent, is allocated over the leaseterm based on the interest method.

(B) Finance leases that do not transfer ownership (lessor)
i. Lease investment assets
Lease investment assets at March 31, 2011 and 2010 consisted of the following:
Millions of yen
2011
2010

Gross lease receivables
Residual value
Unearned interest income
Lease investment assets

34

CREDIT SAISON Annual Report 2011

¥252,134–(32,239)¥219,895¥249,354–(35,122)¥214,232

Thousands of
U.S. dollars
2011$3,032,273–(387,715)$2,644,558

ii. Collection schedule for the amount of lease payments related to lease investment assets after March 31, 2011 and 2010
Millions of yen
2010

2011

Due within one year
Due within two years and after one year
Due within three years and after two years
Due within four years and after three years
Due within five years and after four years
Due after five years
Total

Lease
investment
assetsGross leasereceivables

Lease
investment
assetsGross leasereceivables¥ 56,081
52,43445,41934,66821,095
10,198¥219,895¥ 68,574
61,652
51,33937,71822,287
10,563¥252,133¥ 52,427
50,10343,86434,312
21,693
11,833¥214,232¥ 64,859
59,96950,764
38,23023,256
12,277¥249,355

Thousands of U.S. dollars
2011
Lease
investment
Gross leaseassetsreceivables$  674,448
630,599546,235
416,939
253,695
122,642$2,644,558$  824,707
741,457
617,421453,609
268,032
127,047$3,032,273

iii. The Companies account for the value of lease investment assets of leases which existed at the transition date (March 31, 2008)
and do not transfer ownership of the leased property to the lessee to take over the appropriate book value (net of accumulated
depreciation) of the leased property as of March 31, 2008, and after the adoption of the revised accounting standard, the aggregate
amount equivalent to interest is allocated over the lease term based on the straight-line method.
As a result, Income before income taxes and minority interests as of March 31, 2011 was increased by ¥2,687 million (US$32,310
thousand) more than it would have been if the revised accounting standard had been retroactively adopted starting from the leasetransaction commencement dates.

(C) Operating leases
i. Lessee
The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010 were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2011

2010

2011

¥1,591399¥1,990¥2,4402,025¥4,465$19,128
4,806$23,934

ii. Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2011 were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2011

2011

¥ 87
41
¥128

$1,042495$1,537

11. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESIn March 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments” and issued ASBJ
­Guidance No. 19 “Guidance on Accounting Standard for Financial Instruments and Related Disclosures.” This accounting standard
and the guidance are applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after
March 31, 2010. The Companies applied the revised accounting standard and the new guidance effective March 31, 2010.

The conditions of financial instruments(A) Policy for financial instruments
The Companies engage in the credit service business; lease business; finance business including guarantees and loans businesses; realestate related business; and entertainment business. To conduct such businesses, the Companies, by observing the market circumstances and adjusts the balance of long-term and short-term debts, seek finance through indirect financing such as bank loans andthrough direct financing such as issuance of corporate bonds and commercial paper and securitized receivables. Through suchactivities, the Companies hold financial assets and financial liabilities that are mostly accompanied by interest rate risk, and theCompany conducts asset and liability management (ALM) to prevent disadvantageous effects from such interest rate risk. As part ofits ALM, the Company also conducts derivative transactions that leverage interest rate swaps, etc.

(B) Nature and extent of risks arising from financial instruments
The financial assets held by the Companies are mainly accounts receivable—installments from credit card members, and the Companies are exposed to credit risk such as the potential deterioration of the member’s repayment situation. As of the end of thecurrent fiscal year, the accounts receivable—installment included a large component of receivables related to credit service businessand credit card repayments by members according to the contract depend on changes of business circumstances including the
economic environment surrounding said business (employment environment in the fallout of the economic recession, household
disposable income and personal consumption).
Also, (operational) investment securities are mainly stocks, bonds, investment trusts and partnership investments. Such securities
are held for the purpose of either trading or business promotion. Each of these securities is exposed to the issuer’s credit risks,interest rate fluctuation risks and market price fluctuation risks.
The Companies are exposed to liquidity risks relating to interest-bearing debts such as loans, corporate bonds and commercial
paper whereby it may be unable to execute payments of such liabilities on the payment dates in cases, for example, where the­Companies are unable to use the market under certain circumstances such as a greater-than-expected fluctuation in financial condition or a downgrading of the Companies’ credit rating. Furthermore, the Companies also borrow funds by variable interest loans,
and although they are exposed to interest fluctuation risks, those risks are partly mitigated by conducting interest swap transactions.
CREDIT SAISON Annual Report 201135

Among the derivative transactions conducted by the Companies are interest swap transactions conducted as part of ALM. Using
these interest swap transactions as the hedge instruments, the Company applies hedge accounting to interest fluctuation risk related
to borrowings that are the hedged item. The hedge is assessed based on the cumulative total of cash flow fluctuation and determined to actually have been highly effective throughout the financial reporting periods for which the hedge is designated.
In addition, the interest rate swaps which qualify for hedge accounting of long-term loans and meet specific matching criteria
are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included ininterest expense or income.

(C) Risk management for financial instruments
i. Credit risk management
The Companies manage their credit risk in accordance with the Companies credit risk management rules by ensuring the ongoing soundness of receivables and maintaining a system for credit risk management including credit limit, management of creditworthiness information, and internal ratings. The Company holds regular Board of Directors meetings in order to discuss andreport matters relating to this credit risk management. (Operational) investment securities are managed by periodically ascertaining
creditworthiness information and fair values at ALM committee meetings.
Also, with regard to long-term loans receivable, the relevant departments periodically monitor the credit risk of the obligors. With
regard to counterparty risk of derivative transactions, in order to avoid credit risk arising from defaults on contractual obligations, theCompany chooses Japanese and overseas banks and securities firms with high creditworthiness as the counterparty to contracts.

ii. Market risk management
Management of fluctuation risk of interest rates
The Companies manage interest rate fluctuation risks by applying ALM. The rules related to ALM state the details of risk management methods, procedures and so forth. Based on policies determined at the ALM committee meetings, the Board of Directors
ascertains the status of implementation and discusses matters concerning future response at the meetings. As part of its regularroutine, the Treasury & Account Department maintains an overall grasp of the interest rates and terms of financial assets and liabilities and conducts monitoring such as by interest rate gap analysis. When conducting interest rate swap derivative transactions forthe purpose of hedging interest rate variable risk, the Companies apply ALM to this also.

Management of fair value fluctuation risk
With regard to financial investment products including (operational) investment securities, pursuant to ALM policy, in addition to
examining each investment project before investment and establishing limit amounts for investment, continuous monitoring is also
conducted for the purpose of mitigating the price fluctuation risk. Moreover, with regard to stock held for the purpose of businesspromotion, including business and capital tie-ups, the market environment and the financial condition of the transaction counterparty are also monitored through relevant departments.
This information is periodically reported through the relevant departments to the ALM committee meetings and other meetings.

Derivatives
The Treasury & Account Department executes derivative transactions in accordance with internal management regulations set by
the Board of Directors, keeping within the scope of the overall transaction framework and hedge ratio approved beforehand by the
Board of Directors. The status of the derivative transactions is reported to the Board of Directors on a quarterly basis.
The derivative transactions of consolidated subsidiaries are conducted in accordance with the internal management regulations
that have been set by the respective company. During the term of the transactions, the subsidiary reports to the Company on aquarterly basis the status of hedges between the derivative transactions and corresponding assets or liabilities, the counterparty tocontracts, the transaction amounts, the period remaining in the terms, and the transaction fair values.

Quantitative information regarding market risk
The main financial instruments of the Companies exposed to interest rate risk as the main risk are accounts receivable—
installment, short-term loans, long-term debts, corporate bonds, securitized receivables, and interest rate swap transactions.
The Companies estimate the impact of a reasonable fluctuation in interest rate on profit and loss a year or so from the end of an
accounting period for the purpose of quantitative analysis in managing its variable risk on interest rates. In estimating this impact,
the financial assets and financial liabilities subject to the analysis are grouped into subsets of fixed-interest assets and liabilities andvariable-interest assets and liabilities. The Companies then calculate the net estimated impact of interest rate fluctuation on­variable-interest assets and variable-interest liabilities as the interest rate gap.
As of March 31, 2011, the Companies calculated that their income before income taxes and minority interests would decrease¥44 million ($532 thousand) if the benchmark interest rate rose 1 basis point (0.01 percentage point), and increase ¥44 million($532 thousand) if this interest rate fell 1 basis point. The impact was calculated holding risk variables other than the interest rate
constant, and in the absence of correlations between the other risk variables and interest rate. Fluctuations in interest rates greaterthan those reasonably estimated may result in an impact larger than the aforementioned calculations.

iii. Liquidity risk management
The Companies manage their liquidity risk by applying ALM. In addition to ensuring fund management is conducted with appropriate timeliness, it ensures a multiplicity of fund procurement methods, secures commitment lines from multiple financial institutions and maintains a balance of long-term and short-term procurement that is adjusted to reflect the current market environment.

(D) S upplementary explanation relating to fairvalue of financial instruments and others
The fair value of financial instruments is either an amount based on market prices or, in the case of no market value, the value
calculated based on rational grounds. In the case of the latter, established assumptions and conditions are adopted. Accordingly, if
different assumptions and preconditions are adopted, the calculated amount may also be different. Moreover, with regard to contractual value or the national principal amount that relate to derivative transactions in Note 17 the amount itself does not reflectmarket risk related to the derivative transaction.

Fair value of financial instruments and others
The following presents the amount presented in the consolidated balance sheet for the years ended March 31, 2011 and 2010, thefair value, and the difference between the carrying amount and fair value. Immaterial amounts in the consolidated balance sheet
have been omitted from disclosure.

36

CREDIT SAISON Annual Report 2011

Assets
Millions of yen
2011

Cash and deposits
Accounts receivable—installment
Lease investment assets
Short-term loans receivable
Operational investment securities
Securities
Investment securities
Investments in unconsolidated subsidiaries andaffiliated companies
Long-term loans receivable

Carrying
amountAllowance for
doubtfulaccounts

Total

Fair value

Difference¥ 64,112
1,491,108
219,895
10,144865
982
30,1045,722¥
–(103,807)(13,527)
(483)
–
–
–
–

¥ 64,112
1,387,301
206,368
9,661
865
982
30,1045,722¥ 64,112
1,452,058
219,894
9,661
865
982
30,1049,333¥
–64,757
13,526
–
–
–
–
3,611

15,166(4,426)

10,74010,740–Millions of yen
2010

Cash and deposits
Accounts receivable—installment
Lease investment assets
Short-term loans receivable
Securities
Investment securities
Investments in unconsolidated subsidiaries andaffiliated companies
Long-term loans receivable

Carrying
amountAllowance for
doubtfulaccounts

Total

Fair value

Difference¥ 64,232
1,688,748
214,232
14,301
298
33,3765,572¥
–(108,173)(12,565)
(324)
–
–
–

¥ 64,232
1,580,575
201,667
13,977298
33,3765,572¥ 64,232
1,655,668
217,703
13,977298
33,3764,856¥
–75,093
16,036–––(716)

15,334(4,333)

11,001

11,001–Thousands of U.S. dollars
2011
Carrying
amountCash and deposits
Accounts receivable—installment
Lease investment assets
Short-term loans receivable
Operational investment securities
Securities
Investment securities
Investments in unconsolidated subsidiaries andaffiliated companies
Long-term loans receivable$ 771,035
17,932,751
2,644,558
122,001
10,40011,812362,039
68,818
182,394

Allowance for
doubtfulaccounts

Total

Fair value

Difference$– $ 771,035(1,248,439) 16,684,312(162,685)
2,481,873(5,810)116,191–
10,400–11,812–362,039–
68,818$ 771,035
17,463,112
2,644,540
116,191
10,40011,812362,039
112,246$
–778,800
162,667––––
43,428129,162–(53,232)

129,162(A) Cash and deposits
For deposits with no maturity, as fair value approximates the carrying value, the carrying value is deemed to be the fair value.

(B) Accounts receivable—installment
Accounts receivable—installment items with variable interest rates have interest rates that reflect the market interest rate in the
short term, and because the fair value approximates the carrying value providing that the creditworthiness of the obligor does
not significantly change after a loan is executed, the carrying value is deemed to be the fair value. The fair value of accounts
receivables—installment with fixed interest rate is determined by discounting the cash flow related to the financial assets
reflecting credit risk at the risk-free rate. With respect to doubtful claims, because the amount obtained by deducting thecurrent estimated irrecoverable balance from the amount stated on the balance sheet as of the end of the current year isassumed to approximate the fair value, this amount is deemed to be the fair value.
Because the fair value of a part of accounts receivables—installment is assumed to approximate the carrying value from reasons
such as the estimated repayment period and the interest rate conditions, the carrying value is deemed to be the fair value.
Note that the fair value calculations stated above do not reflect future interest repayments.

(C) Lease investment assets
The fair value of lease investment assets is determined by discounting the cash flows reflecting credit risk at the risk-free rate.

CREDIT SAISON Annual Report 201137

(D) O perational investment securities, Securities, Investment securities andinvestments in unconsolidated subsidiaries and affiliated companies
The fair value of listed stock depends on the listed price on the stock exchange, and the fair value of debentures depends on theprice disclosed by the listed price on the stock exchange or the price made available by the transacting financial institutions. The
fair value of investment trusts is based on a reference price that has been publicly released. Concerning the investments in investment limited partnerships or similar associations, the fair value of the association’s assets shall be the fair value appraisal in cases
where fair value appraisal of the association’s assets is possible and the corresponding equity share of the aforesaid fair value shallbe deemed to be the fair value of the investment in the association.
Financial instruments with no market price such as unlisted stocks whose fair values cannot be reliably determined are indicatedin the table below and are not included in fair value disclosure.

Unlisted stocks
Investments in unconsolidated subsidiaries and affiliated companies
Unlisted debentures
Other

Millions of yen

Thousands of
U.S. dollars

2011
Carrying
amount2010
Carrying
amount2011
Carrying
amount¥10,485
23,6682,800
8,206¥ 9,984
21,246–849$126,096
284,636
33,674
98,699For notes concerning available-for-sale securities for each holding purpose, refer to “12. AVAILABLE-FOR-SALE SECURITIES.”(E) Short-term loans receivable
Because short-term loans receivable will be settled within the short term, the fair value approximates the carrying value and thecarrying value is deemed to be the fair value.

(F) Long-term loans receivable
Long-term loans receivable items with variable interest rates have interest rates that reflect the market interest rate in the shortterm, and because the fair value approximates the carrying value providing that the creditworthiness of the obligor does not significantly change after a loan is executed, the carrying value is deemed to be the fair value. With respect to doubtful claims, because
the amount obtained by deducting the current estimated irrecoverable balance from the amount stated on the balance sheet as ofthe end of the current year is assumed to approximate the fair value, this amount is deemed to be the fair value.

Liabilities
Millions of yen
2011

Notes and accounts payable
Short-term loans
Commercial paper
Long-term debt:
Long-term loans payable
Bonds
Long-term loans  payable on undersecuritized loans
Lease obligations
Guarantee contracts

Carrying
amountFair value¥171,066
248,029
110,000¥171,066
248,029
110,000

Carrying
amount¥

Fair value–––¥206,656
296,923
133,000¥206,656
296,923
133,000¥

830,595
256,112

837,532
259,713(6,937)(3,601)

833,632
236,338

94,1695,528–

94,800
5,528
6,508

(631)
–
6,508

149,131
3,804–

Difference

Thousands of U.S. dollars

2010

2011
Carrying
amountFair value–––$2,057,314
2,982,910
1,322,910$2,057,314
2,982,910
1,322,910$

831,475
231,249

2,157
5,089

9,989,117
3,080,126

10,072,549
3,123,422(83,432)(43,296)

149,874
3,804
8,259

(743)
–
8,259

1,132,518
66,477–1,140,107
66,47778,264(7,589)–78,264

Difference

Difference–––(A) Notes and accounts payable, Short-term loans, and Commercial paper
Because these items will be settled within the short term, the fair value approximates the carrying value and the carrying value isdeemed to be the fair value.

(B) Long-term loans payable
Because the rate of long-term loans payable at the variable interest rate reflects the market interest rate, long-term loans payable at thevariable interest rate is valued considering only the fluctuation of credit spreads.The fair value of long-term loans payable with fixedinterest rate is determined by discounting the cash flow related to debt at the rate assumed for the same borrowing.

(C) Bonds
For corporate bonds issued by the Company as public-offering bonds, the fair value is decided by the market price (over-the-counter
selling and buying reference statistics for public and corporate bonds decided by the Japan Securities Dealers Association). Private placement bonds issued by the Company are underwritten by the Company’s major banks based on negotiated transactions, and the fairvalue of such items is calculated using the same method as for (B) long-term loans payable.

(D) Long-term loans payable on under-securitized loans
Because the rate of long-term loans payable on under-securitized loans with a variable interest rate is not affected by changes in
the Companies’ credit worthiness, the items are valued at changes in the market interest rate. The fair value of long-term loans
payable on under-securitized loans with a fixed interest rate is determined by discounting the cash flow related to debt at the rate
assumed for the same borrowing.

38

CREDIT SAISON Annual Report 2011

(E) Lease obligations
As the fair value of lease obligations approximate the carrying values, the carrying value is deemed to be the fair value.

(F) Guarantee contracts
The fair value of guarantee contracts is determined by discounting the cash flow related to a contract reflecting credit risk at therisk-free rate.
As of March 31, 2011 the guarantee contract amount of contingent liabilities is ¥157,791 million (US$1,897,668 thousand) andthe amount that was recorded as allowance for losses on guarantees in the consolidated balance sheet was ¥5,464 million(US$65,713 thousand).
Note: Maturity analysis for financial assets and securities with contractual maturities subsequent to March 31, 2011 is as follows:
Millions of yen
2011Year ending March 31

Cash and deposits
Accounts receivable—installment
Lease investment assets
Short-term loans receivable
Investment securities
Available-for-sale securities with   contractual maturities
Long-term loans receivable

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after
three years
through fouryears

¥ 64,112
965,453
54,685
10,144¥
–
231,983
51,433–¥
–55,76744,788–¥
–
14,59834,335
–

5,982
18

500
18

–
18

1,700
18

Due after four
years throughfive years

Due after five
years

¥

–
8,069
20,962–¥
–29,142
10,169
–

600
18

969
147

Thousands of U.S. dollars
2011Year ending March 31

Cash and deposits
Accounts receivable—installment
Lease investment assets
Short-term loans receivable
Investment securities
Available-for-sale securities with   contractual maturities
Long-term loans receivable

Due in one
year or lessDue after one
year throughtwo years

Due after two
years throughthree years

Due after
three years
through fouryears$ 771,035
11,610,985
657,667
122,001$
–2,789,928
618,551–$
–
670,685538,637–$
–
175,557
412,934–

71,944
216

6,013
216

–
216

20,445216

Due after four
years throughfive years

Due after five
years

$

–
97,041
252,094–$
–350,480
122,302
–

7,216
216

11,652
1,767

The amount of ¥204,549 million (US$2,459,996 thousand) estimated uncollectible is not included. Please see Note. 9 for annual
maturities of long term debt.

12. AVAILABLE-FOR-SALE SECURITIES(A) As of March 31, 2011 and 2010 acquisition costs and carrying amounts on the consolidated balance sheets of available-for-salesecurities that have market value are summarized below:

Acquisition
cost

Carrying
amountDifference

Acquisition
cost

Millions of yen
2010
Carrying
amount Difference¥18,526¥26,311¥  7,785¥18,147¥27,461¥9,314$222,798 $316,425 $  93,627–
958
19,484–993
27,304

–
35
7,820

47
1,162
19,35647
1,249
28,757

–
87
9,401

–
11,525234,323–
11,943328,368–418
94,045

4,893

3,554

(1,339)

4,624

3,883

(741)

58,84642,741(16,105)

147
900
154
6,094
¥25,578

104
865
124
4,647
¥31,951

(43)
(35)
(30)
(1,447)¥  6,373

100
–
983
5,707
¥25,063

78
–
956
4,917
¥33,6742011

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

Thousands of U.S. dollars
2011
Acquisition
Carrying
cost
amount Difference

(22)
1,766
1,252
(514)
–
10,824
10,400
(424)
(27)
1,853
1,490
(363)
(790)
73,28955,883 (17,406)¥8,611 $307,612 $384,251 $  76,639

CREDIT SAISON Annual Report 201139

(B) Proceeds from sales of available-for-sale securities for the years ended March 31, 2011 and 2010 were ¥1,672 million(US$20,107 thousand) and ¥76 million, respectively.
Gross realized gains and losses on these sales, computed on the moving-average cost basis, were ¥2 million (US$18
thousand) and ¥100 million (US$1,200 thousand), respectively, for the year ended March 31, 2011 and ¥59 million and¥1 million, respectively, for the year ended March 31, 2010.
(C) As of March 31, 2011, the carrying values of debt securities by contractual maturities for securities classified as available-forsale securities were as follows:
Millions of yen
2011

Thousands of
U.S. dollars
2011¥5,9822,800–
969¥9,751$ 71,944
33,674–
11,651$117,269

Due in one year or lessDue in one to five years
Due in five to ten years
Due after ten years
Total

13. RETIREMENT BENEFIT PLANS
The Company and some of its consolidated subsidiaries had defined benefit plans composed of a corporate pension plan and a
lump-sum payment plan.
Effective October 1, 2004, the Company and certain 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 wasshifted either to defined contribution plans or to prepaid retirement benefit payment plans at the employee’s option.

(A) ACCRUED PENSION AND SEVERANCE COSTS
Accrued pension and severance costs as of March 31, 2011 and 2010 are calculated below:
Millions of yen
2011
2010

Projected benefit obligation
Fair value of plan assets
Funded status
Unrecognized actuarial differences
Unrecognized prior service costs
Accrued pension and severance costs¥(10,260)
7,035(3,225)
3,013(1,967)¥ (2,179)

Thousands of
U.S. dollars
2011¥(10,628)
6,667(3,961)
3,289(2,581)¥ (3,253)$(123,398)
84,612(38,786)
36,230(23,655)$ (26,211)

Millions of yen
2011
2010

Thousands of
U.S. dollars
2011(b) Retirement benefit expenses
Retirement benefit expenses for the years ended March 31, 2011 and 2010 are stated below:

Service costs
Interest costs
Expected return on plan assets
Actuarial differences recognized as expenses
Prior service costs recognized as expenses
Other*
Retirement benefit expenses¥  490
212
(268)
838
(613)
319
¥  978¥  513
217
(151)
907
(623)
323
¥1,186$ 5,896
2,556(3,227)
10,073(7,376)
3,845$11,767* Other represents payments to defined contribution pension fund, and other items.

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

40

CREDIT SAISON Annual Report 2011

2011

2010

2.0%
4.0%
9–11 years evenly
9–11 years evenly

2.0%
2.5%
9–11 years evenly
9–11 years evenly

14. DEFERRED TAX ASSETS AND LIABILITIESThe Company and consolidated subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately 40.7% for the years ended March 31, 2011 and 2010.

(A) Effective tax rate
The effective income tax rate of the Companies differs from the statutory tax rates for the year ended March 31, 2010 for thefollowing reasons:
2010

Statutory tax rate
Reconciliation:
Expenses not deductible for tax purposes
Non-taxable dividend income
Inhabitants’ taxes per capita
Amortization of negative goodwill
Equity in net earnings of affiliated companies
Increase of valuation allowance
Gains on changes in equity interest
Income tax credit
Other
Effective tax rate

40.70%
0.34(0.35)
0.53(0.47)(0.68)
9.79(0.34)(0.02)(2.09)
47.41%

A difference of 5% or less between the effective income tax rate of the Companies and the statutory tax rate has been omitted
from the 2011 column above.

(B) Deferred tax assets and liabilities
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2011 and 2010 are as follows:

Deferred tax assets:
Inventories
Accumulated impairment loss
Accumulated depreciation expense
Asset retirement obligations
Operational investment securities
Investment securities
Allowance for doubtful accounts
Allowance for losses on interest repayments
Accrued expenses
Accrued enterprise taxes
Accrued pension and severance costs
Allowance for losses on point program
Allowance for losses on guarantees
Other allowance
Long-term unearned revenue
Tax loss carryforwards
Unrealized loss on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Other
SubtotalLess valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Capital gains deferred for tax purposes
Unrealized gain on available-for-sale securities
Deferred gain on derivatives under hedge accounting
Adjustment account of retirement debt
Adjustment account of debt
Other
Total deferred tax liabilities
Net deferred tax assets

Millions of yen

Thousands of
U.S. dollars

2011

2010

2011

¥ 16,807
2,077
1,476
601
–
3,416
28,504
14,319
313
157
1,069
26,813
2,223
965
228
19,473
43
1,104
4,172
123,760(61,325)
62,435¥ 18,463
2,130
1,762
–
6,414
3,597
29,75814,487
481
923
1,393
24,924
1,826
1,108
311
9,421
6
1,178
2,238
120,420(60,049)
60,371$  202,129
24,98417,7507,231–
41,086
342,805
172,205
3,768
1,883
12,852
322,467
26,735
11,604
2,745
234,188522
13,27450,172
1,488,400(737,531)
750,869(212)(2,682)
–
(162)
(407)
(2,962)(6,425)¥ 56,010(212)(2,418)
(0)
(429)
(266)
(1,419)(4,744)¥ 55,627(2,545)(32,253)–(1,954)(4,896)(35,625)(77,273)$  673,596

CREDIT SAISON Annual Report 201141

Net deferred tax assets are presented on the consolidated balance sheets as of March 31, 2011 and 2010 as follows:
Millions of yen

Current assets
Investment and other assets
Current liabilities—other
Long-term liabilities—otherThousands of
U.S. dollars

2011

2010

2011

¥23,558
32,454–2¥24,376
31,255–
4$283,320
390,307–30

15. LOSSES FROM A NATURAL DISASTER
Losses from a natural disaster recorded as a result of the Great East Japan Earthquake in March 2011 consisted of the following:
Millions of yen
2011

Thousands of
U.S. dollars
2011¥8,1561,417
401
12¥9,986$ 98,093
17,0424,817
150$120,102

Provision for allowance for doubtful accounts
Provision for allowance for losses on guarantees
Restoration costs
Other
Total

16. OPERATING REVENUES
Operating revenues for the years ended March 31, 2011 and 2010 comprised of the following revenues and expenses:
Millions of yen
2011
2010

Income from the credit service business
Income from the lease business
Income from the finance business
Real estate related business:
Sales
Costs of sales
Income from the real estate related businessEntertainment business:
Sales
Costs of sales
Income from the entertainment business
Financial income
Total operating revenues

Thousands of
U.S. dollars
2011¥229,536
14,437
15,261¥248,323
12,572
15,955$2,760,508
173,629
183,539

44,46932,351
12,11861,176
47,103
14,073534,802
389,070
145,732

79,67465,746
13,928433¥285,713

83,522
68,884
14,6381,295¥306,856

958,185
790,692
167,493
5,211$3,436,112

17. DERIVATIVES(A) As of March 31, 2011 and 2010, non-hedged derivative transactions were summarized below:
i. Interest rate transactions
Millions of yen
2011
Contractual value or
notional principal amount

Over-the-counter interest rate swaps:
Floating-rate receipt/fixed-rate payment
Total

Total

Over 1 year

Unrealized
profit (loss)¥25,500¥25,500¥13,500¥13,500¥(241)¥(241)

2010
Contractual value or
notional principal amount
Total

Over 1 year

Unrealized
profit (loss)¥4,000¥4,000¥4,000¥4,000

¥(10)
¥(10)

Thousands of U.S. dollars
2011
Contractual value or
notional principal amount

Over-the-counter interest rate swaps:
Floating-rate receipt/fixed-rate payment
Total

Total

Over 1 year

Unrealized
profit (loss)$306,675$306,675$162,357$162,357$(2,899)$(2,899)

Note: Fair value is measured at prices and through other information presented by financial institutions with which the Companies has concluded­derivatives agreements.

42

CREDIT SAISON Annual Report 2011

ii. Other
Millions of yen
2011
Contractual value or
notional principal amount

Over-the-counter credit derivatives:
Selling of protection
Total

Total

Over 1 year

Unrealized
profit (loss)¥3,000¥3,000¥3,000¥3,000

¥(31)
¥(31)

2010
Contractual value or
notional principal amount
Total

Over 1 year

Unrealized
profit (loss)¥3,000¥3,000¥3,000¥3,000¥662¥662

Thousands of U.S. dollars
2011
Contractual value or
notional principal amount

Over-the-counter credit derivatives:
Selling of protection
Total

Total

Over 1 year

Unrealized
profit (loss)$36,079$36,079$36,079$36,079$(368)$(368)

Note: Fair value is measured at prices and through other information presented by financial institutions with which the Companies have concluded­derivatives agreements.

(B) As of March 31, 2011 and 2010, hedged derivative transactions were summarized below:
Millions of yen
2011
Contractual value or
notional principal amount
Mainly hedged objects

Interest rate swaps recognizedin general rule:
Floating-rate receipt/   fixed-rate payment
Interest rate swaps recognizedin specific rule:
Floating-rate receipt/   fixed-rate payment
Fixed-rate receipt/   floating-rate payment
Total

2010
Contractual value or
notional principal amount

Total

Over 1 year

Fair value

Total

Over 1 year

Fair value

Long-term debt

¥136,716¥122,026¥ (2,712) ¥186,585¥132,580¥ (3,084)

Long-term debt

365,881

312,041

369,483

355,359(9,891)Long-term debt

10,000¥512,597

10,000¥444,06736
10,000¥(11,796) ¥566,068

10,000¥497,939

3¥(12,972)(9,120)Thousands of U.S. dollars
2011
Contractual value or notional
principal amount
Mainly hedged objects

Interest rate swaps recognizedin general rule:
Floating-rate receipt/   fixed-rate payment
Interest rate swaps recognizedin specific rule:
Floating-rate receipt/   fixed-rate payment
Fixed-rate receipt/   floating-rate payment
Total

Total

Over 1 year

Fair value

Long-term debt

$1,644,209$1,467,541$ (32,614)

Long-term debt

4,400,252

3,752,747(109,687)

Long-term debt

120,265$6,164,726

120,265$5,340,553

434$(141,867)

Note: Fair value is measured at prices and through other information presented by financial institutions with which the Companies have concluded­derivatives agreements.

18. COMMITMENTS AND CONTINGENT LIABILITIESAs of March 31, 2011, the Companies were contingently liable as credit guarantors for customers borrowing from our alliance banks
amounting to ¥152,327 million (U.S.$1,831,955 thousand).

CREDIT SAISON Annual Report 201143

19. COMPREHENSIVE INCOME
Other comprehensive income (loss) for the year ended March 31, 2010 consisted of the following:
Millions of yen
2010

Other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Share of other comprehensive income in affiliated companies
Total other comprehensive income¥2,115(546)
1,990¥3,559Total comprehensive income for the year ended March 31, 2010 comprised the following:
Millions of yen
2010

Total comprehensive income attributable to:
Owners of the parent
Minority interests
Total comprehensive income¥22,239205¥22,444

20. EQUITY(A) Equity
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”).
The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

i. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders’ meeting. For companies that meet certain criteria, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company cannot do so because it does not meet all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate.
The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends
must be maintained at no less than ¥3 million.

ii. Increases/decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component ofretained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account that was
charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and additional paid-in capitalequals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of
the shareholders.

iii.Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of theBoard of Directors.
The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also
provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisitionrights are presented as a separate component of equity or deducted directly from stock acquisition rights.

(B) Common stock
The Company has 300,000,000 authorized shares of which 185,444,772 shares as of March 31, 2011 and 185,444,772 shares as ofMarch 31, 2010 were issued.

44

CREDIT SAISON Annual Report 2011

Type and number of shares issued and treasury stockThousands of shares
Issued shares(Common stock)

Balance at April 1, 2009
Number of shares increase
Number of shares decrease
Balance at March 31, 2010
Number of shares increase
Number of shares decrease
Balance at March 31, 2011

Treasury stock(Common stock)

181,885
3,560*1–
185,445––
185,445

1,743
177*2
118*3
1,802
8*4
0*5
1,810

Notes: 1. I ncrease in number of issued shares
Issuance of new shares by share exchanges: 3,560 thousand shares
2. I ncrease in treasury stock
Acquisition of fractional shares by share exchanges: Less than a thousand shares
Acquisition of treasury stock by consolidated subsidiaries because of share exchanges: 167 thousand shares
Acquisition of any number of shares less than a full trading unit: 9 thousand shares
3. D etail of decrease
Sales of treasury stock acquired by consolidated subsidiaries because of share exchanges: 117 thousand shares
Sales of any number of shares less than a full trading unit:1 thousand shares
4. Increase in treasury stock
Acquisition from consolidated subsidiary: 6 thousand shares
Acquisition of any number of shares less than a full trading unit: 2 thousand shares
5. Detail of decrease
Sales of any number of shares less than a full trading unit: Less than a thousand shares(C) Stock option plans
The Company has the following option plans for directors, corporate auditors, officers, employers and corporate counselors of theCompanies as of March 31, 2011, which were approved at the General Shareholders’ Meetings:
Date of approval

Number of stockacquisition rights
unexercised

June 25, 2005

14,903

Type and number oftargeted shares

Common stock
1,490,300 shares

Exercise priceEffective period

Issue price

Per share addition tocommon stock¥3,740 per share

June 30, 2007 toJune 29, 2010

¥3,740¥1,870Notes: 1. C onditions of execution
In the event a granted person retires or resigns under the regulations, stock acquisition rights may be exercised within two years after that.
In the event a granted person retires voluntarily or dies, stock acquisition right will be canceled.
2. Transfer of stock option
Transfer of stock option to a third party needs the approval of the Board of Directors’ Meeting.

(D) Dividend
i. Dividend payment
Resolution

Type of share

General Meeting of
Shareholders on June 25, 2010

Commonstock

Total amountMillion of Thousands ofyen
U.S. dollars¥5,511$66,283

Dividend per share
Yen

U.S. dollars¥30.00$0.361

Record date Effective date

March 31,2010

June 28,
2010

ii. For dividend payments with an effective date in the year ended March 31, 2011, the record date occurred in the year ended March 31, 2010
Type of share

Source ofpayment

General Meeting ofCommonShareholders on June 21, 2011 stock

Retainedearnings

Expected Resolution

Total amountMillion of Thousands ofyen
U.S. dollars¥5,511$66,283

Dividend per share
Yen

U.S. dollars¥30.00$0.361

Record date Effective date

March 31,2011

June 22,2011

21. CASH FLOW INFORMATION(A) The balances of cash and cash equivalents as of March 31,2011 and 2010 are reconciled with the respective consolidatedbalance sheet items as follows:
Millions of yen
2011
2010

Thousands of
U.S. dollars
2011

Consolidated balance sheet:
Cash and deposits
Securities
Short-term loans
Time deposits with a maturity of over 3 months of the data of acquisition
Segregated trustee deposits
Cash and cash equivalents at end of year

¥64,112
5,000
3,999
(500)
(84)
¥72,527¥64,232
–
8,999
0
(100)
¥73,131$771,035
60,13248,099(6,013)(1,012)$872,241

CREDIT SAISON Annual Report 201145

(B) Non-cash investing and financing activities as of March 31, 2011 and 2010 are as follows:

Assets and liabilities to finance leases recorded at the current fiscal year
Increase in capital surplus by share exchanges

2011

Millions of yen
2010

Thousands of
U.S. dollars
2011¥3,243–¥3,3073,164$39,003–(C) Description of proceeds from sales or redemption of investment securities

Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Proceeds from distribution of limited liability partnerships andother similar partnerships or return of capital
Total proceeds from sales or redemption of investment securities

2011

Millions of yen
2010

Thousands of
U.S. dollars
2011¥  104
1,042¥11,71211$ 1,249
12,53330¥1,176

21¥11,744362$14,144(D) B reakdown of major assets and liabilities of subsidiaries newly added tothe consolidation through share acquisition
The following is a breakdown of assets and liabilities of newly consolidated subsidiaries at the time of the first consolidation,acquisition costs of these subsidiaries, and net revenues from or net payments for acquisitions.
Millions of yen
2010

Value Balance Silent Partnership operated by Value Balance Inc.

Current assets
Noncurrent assets
Current liabilities
Long-term liabilities
Negative goodwill
Equity in purchase
Total
Cash and cash equivalents
Net increase in purchase¥  17,680
136(899)(14,273)
(69)
(800)
1,775
(2,319)¥     544

22. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2011 and2010 is as follows:

Net income

Thousands ofshares
Weighted
average shares¥12,830

183,636¥69.86$0.840183,636

69.41

0.835

Yen

U.S. dollars

Millions of yen
For the year ended March 31, 2011:

Basic EPS
Net income available to common shareholders
Effect of dilutive securities
Securities issued by a consolidated subsidiary
Diluted EPS
Net income for computation

Basic EPS
Net income available to common shareholders
Effect of dilutive securities
Securities issued by a consolidated subsidiary
Diluted EPS
Net income for computation

46

CREDIT SAISON Annual Report 2011

U.S. dollars

EPS

(84)
12,746

Net income

Thousands ofshares
Weighted
average shares¥18,680

182,271¥102.48$1.101

182,271

102.301.100

Millions of yen
For the year ended March 31, 2010

Yen

EPS

(33)
18,647

23. SEGMENT INFORMATION
For the years ended March 31, 2011 and 2010
In March 2008, the ASBJ revised ASBJ Statement No. 17 “Accounting Standard for Segment Information Disclosures” andissued ASBJ Guidance No. 20 “Guidance on Accounting Standard for Segment Information Disclosures.” Under the standard andguidance, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments
are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components ofan entity about which separate financial information is available and such information is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required tobe reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate
resources to operating segments. This accounting standard and the guidance are applicable to segment information disclosures forthe fiscal years beginning on or after April 1, 2010.
The segment information for the year ended March 31, 2010 under the revised accounting standard is also disclosed hereunderas required.

(A) Description of reportable segments
The Companies’ reportable segments are those for which separate financial information is available and regular evaluations by the
Board of Directors meeting are being performed in order to decide how resources are allocated among the Companies.
The Companies conduct business activities directly with customers based on the services they segment by market and target
customer. Accordingly, Credit Service Business, Lease Business, Finance Business, Real Estate Related Business and Entertainment
Business comprise the Companies’ reporting segments.
The Credit Service Business segment consists of the Companies’ core credit card business and various peripheral businesses
closely linked with the credit card business.
The Lease Business segment consists mainly of the leasing of office equipment and other assets.
The Finance Business segment consists of the credit guarantee business and other finance-related businesses.
The Real Estate Related Business segment consists of the real estate business, real estate lease business and other businesses.
The Entertainment Business segment consists of amusement businesses mainly indoor recreation facilities.

(B) M ethods of measurement for the amounts of OPERATING REVENUES, profit (loss),
assets, and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of Significant
Accounting Policies.”(C) Information about operating revenues, profit (loss), assets, and other items is as follows:

Operating revenues
Year ended
March 31, 2011
Reportable segment

OutsidecustomersInter
segment

Total

Segment
profit(loss)

Credit service
Lease
Finance
Real Estate related
Entertainment
Total
Reconciliations
Consolidated¥229,925
14,43715,305
12,11813,928285,713–¥285,713¥ 948
14
275
204
12
1,453
(1,453)¥ –¥230,873
14,451
15,58012,322
13,940287,166(1,453)¥285,713¥15,973
5,038
6,796(2,182)
1,737
27,362
15¥27,377

Segment
assets Depreciation¥1,493,232
241,474
121,795
365,522
20,0972,242,120(10,873)¥2,231,247¥11,575
226
255
787
2,978
15,821(4)¥15,817

Financial
cost

Creditcost¥13,953
2,957
1,220
4,679
44
22,853(276)¥22,577¥56,577
3,569
4,108
1,976
–
66,230(12)¥66,218

Operating revenues
Year ended
March 31, 2010
Reportable segment

OutsidecustomersInter
segment

Total

Segment
profitCredit service
Lease
Finance
Real Estate related
Entertainment
Total
Reconciliations
Consolidated¥249,243
12,572
16,33014,073
14,638306,856–¥306,856¥ 932
2
498
948
11
2,391
(2,391)¥ –¥250,175
12,574
16,82915,021
14,648309,247(2,391)¥306,856¥25,627
2,128
5,011
1,825
1,730
36,321(148)¥36,173

Segment
assets Depreciation¥1,652,535
227,654
106,971
380,172
18,6102,385,942(11,812)¥2,374,130¥13,077
214
335
521
2,996
17,143(3)¥17,140

Financial
cost

Creditcost¥14,350
3,271
1,936
5,064
53
24,674(297)¥24,377¥57,520
5,005
5,701
(787)
–
67,439(59)¥67,380

Millions of yen
Increase in
Investment
property,in equity
plant andmethodequipment
affiliated and intangible
companies
assets¥24,785––––
24,785–¥24,785¥31,261
300
133
2,797
3,576
38,067–¥38,067

Millions of yen
Increase in
Investment
property,in equity
plant andmethodequipment
affiliated and intangible
companies
assets¥22,291––––
22,291–¥22,291¥28,478
84
168
13,5693,229
45,528–¥45,528

CREDIT SAISON Annual Report 201147

Operating revenues
Year ended
March 31, 2011
Reportable segment

Outsidecustomers

Credit service$2,765,187
Lease
173,629
Finance
184,071
Real Estate related
145,732
Entertainment
167,493
Total
3,436,112
Reconciliations–
Consolidated$3,436,112

Inter
segment

Total

Segment
profit(loss)

Segment
assets Depreciation

Financial
cost

Creditcost

Thousands of U.S. dollars
Increase in
Investment
property,in equity
plant andmethodequipment
affiliated and intangible
companies
assets$11,396 $2,776,583 $192,096 $17,958,288 $139,203 $167,802 $680,418 $298,081
164
173,793
60,5862,904,075
2,718
35,562
42,921–
3,313
187,384
81,735
1,464,765
3,071
14,67049,403–
2,459
148,191(26,241)
4,395,935
9,468
56,27323,769–148
167,641
20,891
241,698
35,811529
0–17,480 3,453,592
329,067
26,964,761
190,271
274,836
796,511
298,081(17,480)(17,480)
184(130,764)(44)(3,313)(145)–$– $3,436,112 $329,251 $26,833,997 $190,227 $271,523 $796,366 $298,081$375,957
3,608
1,604
33,64443,000457,813–$457,813

RELATED INFORMATION(A) Information ABOUT products and services
Years ended March 31, 2011 and 2010 is as follows:
The Company omitted this disclosure because the information is similar to the information disclosed under the segment
information.

(B) Information ABOUT geographic region
i. Operating Revenues
Years ended March 31, 2011 and 2010 is as follows:
The Company omitted this disclosure because operating revenues to external customers within Japan account for more than 90%
of operating revenues reported in the consolidated statements of income.

ii.Tangible Property and Equipment
The Company omitted this disclosure because property and equipment within Japan account for more than 90% of the property
and equipment reported in the consolidated balance sheets.

(C) Information ABOUT major customer
Years ended March 31, 2011 and 2010 is as follows:
The Company omitted this disclosure because no operating revenues to any specific external customer represents 10% or more ofoperating revenues reported in the consolidated statements of income.

INFORMATION REGARDING IMPAIRMENT LOSS ON PROPERTY AND EQUIPMENT
Years ended March 31, 2011 and 2010 is as follows:
Millions of yen
2011
2010
Loss onLoss onimpairment
impairment

Credit service
Lease
Finance
Real Estate related
Entertainment
Total
Reconciliations
Consolidated

¥   –
–
–
88
68
156
–
¥156

¥   –
–
–
29
236
265
–
¥265

INFORMATION REGARDING AMORTIZATION OF GOODWILL AND UNAMORTIZED BALANCEOF GOODWILL
Years ended March 31, 2011 and 2010 is as follows:
There was no significant amortization of goodwill or unamortized balance of goodwill.

INFORMATION REGARDING GAINS ARISING FROM NEGATIVE GOODWILL
Years ended March 31, 2011 and 2010 is as follows:
There were no significant gains from negative goodwill.

48

CREDIT SAISON Annual Report 2011

Thousands of
U.S. dollars
2011
Loss onimpairment$     –
–
–
1,056
823
1,879
–
$1,879

For the year ended March 31, 2010

Business segments
Segment information by business segment for the year ended March 31, 2010 is as follows:
Millions of yen

Year ended March 31, 2010

Outsidecustomers

Operating revenues
Inter
segment
Total

Credit service
Finance
Real Estate related
Entertainment
Other
Total
Eliminations or corporate
Consolidated¥244,188
31,882
14,073
14,6382,075
306,856–¥306,856¥ 932
500
948
11
–
2,391
(2,391)¥–¥245,120
32,382
15,021
14,6492,075
309,247(2,391)¥306,856

Operatingexpenses

OperatingincomeAssetsDepreciation

Loss onimpairment

Capitalexpenditures¥217,405
24,27013,197
12,919530
268,3212,362¥270,683¥27,715
8,112
1,824
1,730
1,545
40,926(4,753)¥36,173¥1,503,255
341,352
379,181
18,3581,606
2,243,752
130,378¥2,374,130¥12,837
439
517
2,996
15
16,804336¥17,140

¥ –
–
29
236
–
265
–
¥265

¥28,102220
13,5693,229–
45,120408¥45,528

Notes: 1. Business segments are defined in consideration of the operations of the Companies.
2. Significant operations of each segment are as summarized below.
		 (a) Credit service: credit cards and collection of receivables
		 (b) Finance: guarantees, loans and equipment leasing		 (c) Real estate related: real estate and rental
		 (d) Entertainment: amusement
		 (e) Other: insurance agency business
3. Significant components of “eliminations or corporate” are as follows:

Non-allocatable operating expenses
Corporate assets

Millions of yen
2010¥   4,606
142,190

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.

24. RELATED PARTY DISCLOSURES
Transactions and balances of the Company with its affiliated company, UC Card Co., Ltd., for the years ended March 31, 2011
and 2010 were as follows.

Transactions:
Volume of new contracts
Balances:
Accounts payable
Prepaid expenses and other assets (other receivable)

Millions of yen

Thousands of
U.S. dollars

2011

2010

2011

¥1,102,062¥1,142,412$13,253,899

58,5996,750

72,018
6,754

704,738
81,179Transaction terms and decision-making policy for the transaction terms
1. Transaction amounts exclude consumption tax, among others.
2. Commissions in the recovery of accounts receivable—installment and from member store liquidations are determined based onmarket prices and other factors.

25. SUBSEQUENT EVENTAt the Board of Directors meeting held on December 22, 2010, the Company resolved to implement an absorption-type company
split of the Company’s affinity card business (the “card business”) to Seven CS Card Service Co., Ltd. (“Seven CS Card”), a wholly
owned subsidiary of the Company, effective April 1, 2011, based on a comprehensive business partnership contract with Seven
Financial Service Co., Ltd. (“Seven Financial Service”) and Sogo & Seibu Co., Ltd. (“Sogo & Seibu”) on September 10, 2010. The
Company has issued the affinity card with Sogo & Seibu.
Furthermore, on April 1, 2011, the Company transferred 51% of shares in Seven CS card to Seven Financial Service.

(A) Purpose OF THE COMPANY SPLIT
The Company decided to do this split after considering the many benefits that will result from the new business, including the ability
to offer existing holders of Sogo & Seibu affinity cards access to all of the attractive services provided by Seven Financial Service.
In addition, the business integration with IY Card Service Co., Ltd. and Seven CS Card, which has been tentatively scheduled
for March 2013, will dramatically expand the scale of the business compared with its present level, and allow the Company todevelop a strategy for growth over the medium- to long-term, including increased processing revenues and other income fromSeven CS Card.

(B) EFFECTIVE DATE OF COMPANY SPLIT
April 1, 2011

(C) TYPE OF SPLIT
Part of the Company was split for absorption by Seven CS Card as the succeeding company.

CREDIT SAISON Annual Report 201149

(D) DETAILS OF ALLOTMENTS WITH REGARD TO THE SPLIT
i. Allotment of stock
Upon execution of this absorption-type company split, the succeeding company issued one new share of common stock, which
was allotted to the Company.
As a result, the Company came to own a total of 1,000 shares in the succeeding company.
Of those shares, 510 shares were transferred to Seven Financial Service effective April 1, 2011 in accordance with a stock transfer
contract concluded with Seven Financial Service on September 10, 2010.

ii. Payment of cash
The succeeding company made interest payments at a rate of 0.8% per year on the amount that was calculated based on the net
assets transferred from the Company in the split and deducted ¥22.0 billion (total equity of the succeeding company), prorated forthe actual number of days from the day after April 1, 2011 (including such date) until the payment date (counting such date) of
the split.

(E) D ETAILS OF THE NUMBER AND VALUE OF SHARES IN THE SUCCEEDING COMPANY THAT the
COMPANY TRANSFERRED, AND the COMPANY’S REMAINING SHARES AFTER THE TRANSFER.
Number of shares transferred: 510 shares
Value of the shares transferred: ¥18,360 million ($220,806 thousand)Company’s remaining shares after the transfer (shareholding ratio): 490 shares (49%)(F) RIGHTS AND OBLIGATIONS TAKEN OVER BY THE SUCCEEDING COMPANY
The succeeding company took over the assets, liabilities and contractual status of the affinity credit card business from the Company.
Excluded were obligations arising out of unlawful actions or regulatory infringements on or before April 1, 2011 (including theobligation to refund excess interest payments—received on cash advances and other loans).

(G) Details of the assets and liabilities acquired by the succeeding company
Year ended March 31 , 2011

Current Assets
Non Current Assets
Total Assets
Current Liabilities
Long-term Liabilities
Total Liabilities

Millions of yen

Thousands of
U.S. dollars¥158,28849¥158,337¥ 742–¥ 742$1,903,643
588$1,904,231$ 8,927–$ 8,927(H) OUTLINE OF THE ACCOUNTING TREATMENT IMPLEMENTED
This transaction was accounted for as a transaction under common control in accordance with the Accounting Standard forBusiness Combinations issued by the Business Accounting Council in Japan and Guidance on Accounting Standard for Business
Combinations, and Accounting Standard for Business Divestitures issued by the ASBJ.

(I) OUTLINE OF THE SUCCEEDING COMPANY(As of March 31, 2011)
Name
Representative
Address
Establishment date
Business activities
Fiscal year-end
Employee headcountTotal assets
Total liabilities
Capital
Total shares issued
Composition and equity ratio of major shareholders

50

CREDIT SAISON Annual Report 2011

Seven CS Card Service Co., Ltd.
Toshiharu Yamamoto, Representative Director and President
8-8 Nibancho, Chiyoda-ku, Tokyo
September 17, 2010
Credit card issuance and related activities
End of February
464 employees¥382 million¥255 million¥100 million
999 shares
Credit Saison Co., Ltd. 100%

Independent auditors’ report

CREDIT SAISON Annual Report 201151

Corporate History

1951

May The Company is established as a retailer
specializing in installment sales.

2000

Aug. Net Answer, a web site for cardmembers,
is started.

1968

Jun. The Company is listed on the First Section of
the Tokyo Stock Exchange.

2001

Mar. Nominated for inclusion in the Nikkei Stock
Average (Nikkei 225).

1976

Mar. The Seibu Department Stores, Ltd. and theCompany establish a shareholding relationshipand develop a consumer credit system for the
Saison Group.

1980

Aug. The Company’s name is changed from
Midoriya Department Stores to Seibu Credit
Co., Ltd.

1982

Aug. Credit Saison begins to build a nationwide

Nov. A supporting company contract for the Japannational soccer team is concluded.
2002

network of Saison Counters to process
Seibu Card issues, and to install automatedcash dispensers.

1983

Mar. The name Seibu Card is changed to SAISON
CARD.

1988

Jul. Developed an international credit card withno membership fees through a tie-up with
Visa and MasterCard

1989

Oct. The Company’s name is changed to Credit
Saison Co., Ltd.

1991

Jan. The affinity card business is started.

Became top credit card issuer
in Japan.
2003

Apr. Credit Saison begins to issue Saison Postal

Savings Cards, the first cards in Japan tosupport signature-less transactions (in Seiyu
food outlets).

Total number of cardmembers
surpasses 10 million.
1995

Jun. SAISON JCB CARD is issued in cooperation
with JCB Co., Ltd.

1997

Oct. SAISON American Express® Card is issued

through an affiliation withAMERICAN EXPRESS®.

1999

Sep. Issues 2 combined credit/cash cards with
regional banks, Shonai SAISON cards andSuruga SAISON card.

Total transaction volume
surpasses ¥2 trillion.
52

CREDIT SAISON Annual Report 2011

Jan. Begins using SAISON CARD EXPRESS for
speedy online card issuance.
Aug. An agreement is reached on a comprehensive
alliance with the card division of Idemitsu Kosan
Co., Ltd. (Idemitsu Card mydoplus is issued in
April 2004.)
Sep. Super Value Plus, an insurance productexclusively for cardmembers, is issued through abusiness alliance between Credit Saison, Saison
Automobile and Fire Insurance Co., Ltd. andSompo Japan Insurance Inc.

Total transaction volume
surpasses ¥1 trillion.
1992

Feb. Transfers shares of Saison Life Insurance Co.,
Ltd. to GE Edison Life Insurance Co., Ltd.
(currently AIG Edison Life Insurance Company).
New membership point service SAISON Dream
is started (currently Eikyufumetsu Points, or
SAISON Permanent Points in English).
Started “Saison Eikyufumetsu Points” (“Saison
Permanent Points” in English.)2004

Feb. A decision is made to form a strategic equity
and business tie-up with Resona Holdings, Inc.
(Resona Card+S (Resona Card SAISON) isissued in October 2004.)
Apr. A basic agreement is reached withTakashimaya Company, Limited on a
strategic alliance in the credit card business.
(TAKASHIMAYA SAISON Card is issued
in September 2004.)

Aug. A basic agreement on forming a strategic

alliance in the credit card business isconcluded with the Mizuho Financial
Group, Inc., Mizuho Bank, Ltd. and UC
CARD Co., Ltd.

2005

Apr. The new credit center Ubiquitous starts

operation.

2007 Jun./Jul. The maximum interest rate for cash

advances is reduced to 18%.

Oct. Establishment of Qubitous Co., Ltd., theindustry’s first comprehensive processing
service specialist.

(Qubitous is made a consolidated subsidiary in
April 2008.)

Mizuho Mileage Club Card SAISON is issued.

Integration of SAISON and UC point services(application of SAISON Permanent Points to the
UC Card point system).

Oct. SAISON Platinum American Express Cardis issued.
Dec. Credit Saison acquires additional shares ofResona Card Co., Ltd., making this company anequity-method affiliate.
2006

Jan.

Credit Saison merges withUC Card Co., Ltd.
(card issuance business.)
Total number of cardmembers
surpasses 20 million.

Mar. A new loan product, SAISON Card Loan,
is issued.

Issuance of the SAISON NEXT Card, successor
to the Postal Savings Card.
2008

Sep. Absorption by merger of
LAWSON CS Card, Inc.
Oct. Launch of the new credit operation center“Kansai Ubiquitous.”
2009

Oct. Affiliation with Kyushu Railway Company,
issue of a common card for the whole of
JR Kyushu Group “JQ CARD Saison.”

Yamada Denki Co., Ltd. in the credit cardbusiness. (Yamada LABI Card launched inJuly of the same year.)2010(2011 Feb. Sogo & Seibu Card business is split
off into a new joint venture.)
Jun. Strengthened alliance with

Oct. The Eikyufumetsu.com online shopping

AMERICAN EXPRESS®.

mall is opened.

JPN COLLECTION SERVICE CO., LTD. islisted on the Hercules Section of the Osaka
Securities Exchange.

Aug. Issued first prepaid card for domestic use inconjunction with Visa.

Nov. A shareholder agreement is signed with
Daiwa House Industry Co., Ltd. and a joint
venture is established. (Heart One Card is issued
in May 2007.)

2007

Mar. Saison Asset Management Co., Ltd. launches its
own investment trusts.

Mar. Basic agreement reached on comprehensive

business alliance with SEVEN & i
FINANCIAL GROUP CO., LTD.

with The Shizuoka Bank, Ltd.
(Shizugin Saison Card Co., Ltd. isestablished in October 2006 and the
ALL-S Card is issued in April 2007.)

Total transaction volume
surpasses ¥5 trillion.
(non-consolidated.)

Apr. Began to accept applications for Mitsui

Shopping Park Card Saison.

Jun. A comprehensive alliance is formed with

Jul. Agrees to form a business allianceJun. Launch of the rental business (commencementof home appliance rental in an alliance with
Yamada Denki).

Sep. Eikyufumetsu.com services opened up to all
customers aged 16 or over.
Sep. Formed partnership with Walmart Japan
Holdings G.K., and began to accept applications
for Walmart Card SAISON.
2011

Jul. Issued the NEO Money international prepaid cardtargeting Japanese residents traveling outside Japan.
Aug. Tie-up with China UnionPay for affiliated store
operations in Japan.

Reached agreement for comprehensive alliancewith Yamaguchi Financial Group, Inc. (YM
Saison Card issued in October 2007)

CREDIT SAISON Annual Report 2011

53

CarD tie-ups/DoNatioNs usiNg poiNts
Credit saison has expanded its affinity card range across wide-ranging sectors. With a cardmember base of 28.3 million (35.7 million including cardmembers of affiliates), it issues morethan 200 affinity cards under the saisoN and uC brands.

staNDarD
SAISON CARD International

Gold Card SAISONSAISON Platinum
American Express® Card

SAISON Gold
American Express® Card

UC CardUC Card GoldSAISON Blue
American Express® Card

SAISON Pearl
American Express® Card

MONEY CARD (Loan Card)

MONEY CARD GOLD (Loan Card)

Seiyu G.K.
Walmart Japan Holdings G.K.

PARCO CO., LTD.

sHoppiNg

Yamada Denki Co., Ltd.
All Nippon Airways Co., Ltd.

THE PRINTEMPS GINZA CO., LTD

Mitsui Fudosan Co., Ltd.
LaLaport Management Co., Ltd.

Mitsui Fudosan Co., Ltd.

Takashimaya Company, Limited

Takashimaya Company, Limited

Sogo & Seibu Co., Ltd.

Sogo & Seibu Co., Ltd.

LAWSON, INC.
Japan Airlines Co., Ltd.

Ryohin Keikaku Co., Ltd.

THE LOFT CO., LTD.

Daiwa House Financial Co., Ltd.

54

CreDit saisoN aNNual report 2011

FiNaNCial iNstitutioNs

KDDI CORPORATION

Resona Card Co., Ltd.

Mizuho Bank, Ltd.

Mizuho Bank, Ltd.

Shizugin Saison Card Co., Ltd.

Yamaguchi Financial Group, Inc.

SOFTBANK MOBILE Corp.

Jupiter Telecommunications Co., Ltd.

travel & eNtertaiNMeNt

Kyushu Railway Company

Tokyo Metro Co., Ltd.

United Air Lines, Inc.

Nishi-Nippon Railroad Co., Ltd.

SEIBU HOLDINGS INC.

TOHO CINEMAS LTD.

Japan Football Association

PADI

IDEMITSU CREDIT CO., LTD.

Japan Automobile Federation

YANASE & CO., LTD.

great east Japan
earthquake Charity

akagi Nature park

Japan Football association

autoMotive

DoNatioNs
usiNg poiNts

東日本大震災義援金
日本赤十字社

A portion of points
exchanged forposters or T-shirts
are donated to theNadeshiko Support Fund for theJapan Women’s
Soccer Team

Donations can also be made to thefour prefectures of northeastern Japan

CreDit saisoN aNNual report 2011

55

Major Group Companies(As of March 31, 2011)

Atrium GroupReal estate liquidation andservicing businessWe will rapidly and flexibly implement a
package of radical business restructuring
measures that will take the Atrium Groupback to its original structure as a specialist in
two core activities: short-term, high-turnoverreal estate liquidation for small and mediumsized properties, and the special servicing
business. We will also further refine andenhance the knowledge and skills that the
Atrium Group has developed through its
involvement in the real estate business.
Atrium produces value by regenerating
real estate assets. We aim to build customer
confidence and support by focusing on customer satisfaction and implementing effective
compliance and corporate governance.

n

Qubitous Co., Ltd.
Processing business
Qubitous provides processing services in theareas of credit card application screening,monitoring, call center operation, and otherprocessing operations, with a focus on credit
services. The company engages in contracted
processing for more than 80 client companies, primarily for Saison brand and UC
brand credit cards.
The company will seek active expansionof its contracted processing business with theaim of being the no. 1 comprehensive processing company in both quality and quantity by providing high-quality services andattaining cost leadership.

nConcerto Inc.
Amusement business
Concerto aims to create optimal amusement
spaces for the enjoyment of its customers
and has established 26 pachinko parlors ineastern Japan. As an organization with strong
regional links, it contributes to local communities by combining spacious facilities
with fine-tuned services.

n

Saison Fundex Group
Personal/Business/Mortgage loans,guarantee business
Under SAISON’s Loan Hyakusen brand,
Saison Fundex offers card loan products,
such as the Cash Reserve Loan and VIPloans (for both individuals and businesses), as
well as the contract-type loan products­Lifestyle Support Loans and Real Estate
Mortgage Loans. Development in the credit
guarantee business through business cooperation with various financial institutions will
cover loans collateralized by real estate properties. The company also provides projectloans to companies that operate real estatebusinesses. In this business, it focuses onproviding reliable products that meet wideranging funding requirements. Going forward, the company intends to further
improve the quality of its services to better
meet these requirements.

nReal estate development andconstruction
Our goal is to supply comfortable, reliable
and safe residential properties, especiallydetached houses, on high-quality land.
Going forward, we aim to supply housing and other properties that give true
customer satisfaction.

n

56

CREDIT SAISON Annual Report 2011

Real estate rental business
Concerto lets nine commercial buildings,
especially its “The Prime” properties in
Shibuya and other central Tokyo locations. It
is working to develop new properties andexpand its leasing business under a conceptthat calls for utilization and development ofproperties that enhance local communities.

nMembership club management
The concept for Concerto’s uraku
AOYAMA membership club is to provide“the ultimate in hospitality.” With facilities
that include a fitness gym, restaurant, guest
rooms and ­banquet halls, this luxurious
complex provides superb service and theideal environment in which to enjoy thebenefits of club membership.

n

JPN Holdings Group
Servicing business
Powerful infrastructure in the form of a­large-scale call center gives the JPN H­ oldings
Group an important advantage in this business area. The company provides services
meeting a wide range of needs, from the
management and recovery of small, unsecured
receivables to the purchase of receivables fromfinancial institutions and non-banks. The JPN
Holdings Group also provides services tolocal authorities, including collection of loan
claims, research services and back-up services.

n

Temporary staffing business
The JPN Holdings Group provides totalsolutions centered on collection services.
Through its temporary staffing services, it
helps to improve the operational efficiency
and performance of client operations andcollection divisions, especially financial institutions and non-banks.

nTelemarketing business
Various telemarketing, processing agency andoutsourcing businesses through the operationof the company’s call centers.

nChildcare businessComprehensive school education services withthree departments: “Child” (nursery school),“Academy” (kindergarten) and “Junior”­(afterschool program).The goal is to provide
childcare services that meet a diverse spectrumof needs by combining the academic andphysical education of ­kindergarten-age andolder children with daycare services that safely
look after children for extended hours.

nSaison Information Systems
Co., Ltd.
Information processing services
Saison Information Systems engages insystems construction and operation
grounded in a wealth of business processexpertise developed in fields such as financeand distribution. The company also actively
engages in payroll outsourcing and communications middleware based on HULFT
technology. It aims to be a company thatenjoys the complete trust of customers byproviding a one-stop service for everythingfrom systems construction to outsourcing
and package products.

nCorporate Information(As of March 31, 2011)

CREDIT SAISON CO., LTD.
Head Office:

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:¥75,929 million

Number of Employees:

Consolidated: 3,970
Non-consolidated: 2,265

Closing of Accounts:

March 31

Stock Listing:Tokyo Stock Exchange, First Section

Ticker No.:

8253

Independent Auditor:

Deloitte Touche Tohmatsu LLC

Transfer Agent:

The Sumitomo Trust & Banking Co., Ltd.
Stock Transfer Agency Department

Common Stock Authorized:

300,000 thousand shares

Common Stock Outstanding: 185,444 thousand shares

CREDIT SAISON Annual Report 201157

Credit Saison is engaged in various social contribution activities,
such as sponsorship of Japan’s national soccer team, as well as environmental
protection activities through operation of the Akagi Nature Park.