ANNUAL REPORT 2018
The year ended March 31, 2018

Corporate Philosophy

Earn the trust of society throughcorporate activity based in integrity
AIFUL was founded by President and CEO Yoshitaka Fukuda in 1967 as a sole
proprietorship consumer finance business and established as a corporation in1978 to bolster its creditworthiness. In 1982 the corporate name was changed
to the current AIFUL CORPORATION. AIFUL has grown into a comprehensive
financial group handling such diverse businesses as credit cards, small business
lending, credit guarantees, loan servicing and venture capital in addition to
consumer finance.
Based on the corporate philosophy “Earn the trust of society throughcorporate activity based in integrity” AIFUL aims to be a company that is truly
trusted by society.

Origin of our company name AIFULWe chose AIFUL as our company name after asking our employees for theirsuggestions. The winning idea takes the first letter from each of the key words inthe following sentence:“A company with Affection, Improvement, and Faithfulness in carrying out its
operations, filled with the spirit of Unity and Liveliness.”

Contents
To Our Investors and Shareholders

2

Five-Year Summary

4

AIFUL Group at a Glance

5

Management’s Discussion andAnalysis of Operations

Board of Directors andExecutive Officers

16

History

18

Group Network

20

6

Consolidated Financial Statements

21

Business Data

10

Investor Information

65

Corporate Governance

12

Forward-Looking Statements
The figures contained in this Annual Report with respect to AIFUL’s plans and strategies and other statements thatare not historical facts are forward-looking statements about the future performance of AIFUL, which are basedon management’s assumptions and beliefs in light of the information currently available to it and involve risks anduncertainties and actual results may differ from those in the forward-looking statements as a result of various factors.
Potential risks and uncertainties include, without limitation, general economic conditions in AIFUL’s market andchanges in the overall market for consumer loans, the rate of default by customers, and the level of interest rates
charged by AIFUL.

AIFUL Group Long-Term Vision
Our aim is to become a global financial group that provides products
and services surpassing customer expectations, and is trusted andneeded in Japan and around the world.
By practicing management consistent with its corporate philosophy and the essence of the finance business, the AIFULGroup strives to become a global financial group that is trusted and needed domestically and around the world.

We practice management based on our corporate philosophy.
The corporate philosophy, conscience guidelines, conduct guidelines and mindset of the AIFUL Group incorporates adirection to be continually pursued.
To achieve the corporate philosophy, we will continue to provide products and services that surpass customer
expectations and strive to be a global financial group that is trusted and needed by customers in Japan and overseas.

We practice management based on the essence of the finance business.
The essence of the finance business lies in business risk management.
Risk management in the finance industry means striking a balance between profitability, safety, growth potential andworkforce, so as to continually adapt to environmental changes.
To achieve this, the AIFUL Group pursues financial diversification and actively expands overseas in an effort to establish
a global financial group.

The future vision of a global financial group

Establishingmanagement based on
robust Group unity

Vision for Stakeholders
Customer

We will continue to provide customers in Japan and overseas with products and services
that exceed their expectations, earning ‘trust’ and ‘need’, and attaining the No. 1
customer satisfaction in the industry.

Society

As a company that satisfies consumption and funding demands, we will fulfill our
mission as a financial system that supports the consumption and economic activities ofindividuals and the self-employed.

Business Partners

Through fair and honest trade, we will build a relationship conducive to prosperous
coexistence with all business partners.

Shareholders andInvestors

We will achieve sustainable profit growth and shareholder return, and strive to enhance
corporate value.

Employees

We will achieve a workplace in which employees experience both company and personal
growth, and can enjoy a purpose in life through their day-to-day work.

AIFUL CORPORATION Annual Report 20181

To Our Investors and Shareholders
The AIFUL Group implements business management in line with thecorporate philosophy of “Earn the trust of society through corporate
activity based in integrity.” It aspires to be a global financial services
group that is trusted and needed by international society through thediversification of its financial business portfolio and further expansionof its operating assets.
We are truly grateful to our stakeholders for their continued support.
Below please find a report on the business overview and financial results for the fiscal year ended
March 31, 2018.

Financial results for the fiscal year ended March 31, 2018
In the consumer finance industry, the number of new contracts remained at stable levels, thanks mainly
to aggressive advertising by major operators. This was accompanied by a gradual increase in theoperating loan balance.
While interest repayment claims have decreased significantly from their peak and their downward trend has
become more distinct recently, we remain cautious as they still pose the greatest current risk to the industry.
Given
en these conditions, the AIFUL Group has worked to strengthen
its revenue base through the diversification of its financial services
business and the expansion of operating assets, and to enhance
its financial ground through the broadening of funding
sources and improving business efficiency. At the sametime, the Group took steps to tackle the mostimportant management issue of response to interest
repayment claims.
Operating revenue for the AIFUL Group as awhole for the fiscal year ended March 31, 2018 was
115.3 billion yen, up 26% year on year.
In our mainstay loan business, we have continued
to focus on effective advertising, primarily online, andimprovements in customer service. In the fiscal year
under review, the Group started to consolidate theresults of AIRA & AIFUL Public Company Limited(A&A), a consumer finance business operator in
Thailand. As a result, the operating loans outstandingrose by 59.3 billion yen (up 14% year on year) fromthe end of the previous fiscal year, to 472.0 billion
yen, and interest income on loans to customers grew
18% year on year, to 56.3 billion yen.

2

AIFUL CORPORATION Annual Report 2018

In the credit card business, transaction volumes continued to move upward and, as a result, revenue
from the Group’s credit card business rose 3% year on year, to 16.0 billion yen and revenue from its credit
guarantee business increased 4% year on year, to 12.9 billion yen. In addition, sales from softwaredevelopment came to 12.8 billion yen, and the recoveries of charged off claims rose 13% year on year, to
6.4 billion yen, while collection from purchased receivables decreased 1% year on year, to 2.0 billion yen.
Operating expenses increased 34% year on year, to 112.8 billion yen. The main factors driving theincrease included the posting of cost of sales of 11.2 billion yen for software development and expenses
in association with interest repayments of 8.6 billion yen, which comprised a provision for loss caused byinterest repayment of 12.3 billion yen, in consideration of the recent status of interest repayment, andthe reversal of the allowance for doubtful accounts of 3.7 billion yen as a result of interest repayments inconjunction with debt waivers. In addition, financial expenses decreased by 6% year on year, to 7.5
billion yen and other operating expenses increased 10% year on year, to 59.6 billion yen.
As a result, operating profit stood at 2.4 billion yen, down 64% year on year and ordinary profit was
2.8 billion yen, down 62% year on year. Profit attributable to owners of parent came to 3.9 billion yen, down
46% year on year, due to the posting of an extraordinary income from reversal in association with thestock option scheme of 0.7 billion yen, and a loss attributable to non-controlling interests of 1.0 billion yen.

Forecast for the Fiscal Year Ending March 31, 2019
The consumer finance industry has seen a steady recovery in loans outstanding, although the situationof the most important management issue of responding to interest repayment claims demands
continued vigilance despite the recent downward trend. Given these conditions, we expect that theGroup’s mainstay loan business as well as credit card business, credit guarantee business and overseas
business will continue their strong performance.
As such, our consolidated financial forecasts for the fiscal year ending March 31, 2019 include
operating revenue of 115.4 billion yen, on a par with the level of the previous fiscal year, and operating
expenses of 98.9 billion yen, down 12% year on year. As a consequence, operating profit for the fiscal
year ending March 31, 2019 is expected to be 16.4 billion yen, up 558% year on year, ordinary profit isexpected to be 16.9 billion yen, up 499% year on year, and profit attributable to owners of parent is
expected to be 15.6 billion yen, up 294% year on year.
Looking at the business environment ahead, we anticipate stable growth in all businesses operated
by the Group, reflecting the expansionary phase in the market for retail financing such as loans andcredit cards and in the overseas market mainly in ASEAN. We will continue working to expand operating
assets on a group-wide basis, to diversify the financial services business and to manage our businesswith an emphasis on balancing safety, profitability and growth, while continuing to respond to interest
repayment claims. We are committed to meeting the expectations of all our stakeholders.
In doing so, we hope to count on the continued support and encouragement of our stakeholders.

Yoshitaka Fukuda
President and CEO
Representative Director

AIFUL CORPORATION Annual Report 20183

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2018, 2017, 2016, 2015 and 2014

Thousands of
U.S. Dollars

Millions of Yen

2018

2017

2016

2015

2018

2014

For the Year:
Operating revenue¥

115,389¥

91,450¥87,708¥86,352¥91,858$ 1,088,575

112,897

84,44081,032125,91469,3601,065,066

20,497

20,744

16,126

2,234

10,930

193,368

Ordinary profit (loss)

2,823

7,399

6,860

(36,498)

24,752

26,632

Net income (loss) attributable toowners of the parent

3,958

7,276

7,044

(36,499)

30,461

37,340472,018¥ 412,649¥ 376,224¥ 350,017¥ 348,010$ 4,453,000

71,51566,401

66,15870,41879,222

674,670

Loans in legal bankruptcy

27,14728,712

31,10532,90835,134

256,104

Nonaccrual loans

28,31425,53022,263

23,81927,289267,113

Accruing loans contractually past
due three months or moreas to principal or interest
payments

5,792

4,407

3,349

2,829

2,445

54,642

Restructured loans

10,261

7,750

9,439

10,861

14,35296,802

Total assets

682,645616,651

567,514560,323

577,3396,440,047

Allowance for doubtful accounts

66,95970,172

72,64379,708102,522631,689

Total liabilities

563,238

505,002463,263

462,848443,797

5,313,566

Interest-bearing debt

365,836

300,223

249,060

226,955

253,915

3,451,283

Total equity

119,407

111,649

104,250

97,475133,541

1,126,481

Operating expenses
Provision for doubtful accounts

At Year-End:Loans (Note 1)¥

Nonperforming loans

Per Share Data
(Yen/U.S. dollars (Note 2)):
Basic net income (loss)

¥

8.18

¥

15.05

¥

14.59

¥

(75.74)

¥

63.34

0.08

—

15.04

14.57

—

63.00

—

236.13228.94214.16200.45276.80

2.23

—

—

—

—

—

—

Equity ratio

16.7

18.0

18.2

17.3

23.1

ROE

3.5

6.8

7.0

(31.8)

25.8

ROA

0.4

1.2

1.2

(6.4)

4.2

Diluted net income
Total equity
Cash dividends

Ratios (%):

Other Data:
Number of shares outstandingat year-end (Note 3)
Number of employees
at year-end

484,620,136 484,619,136 483,794,536 483,506,536 481,867,836
2,503

1,473

1,433

1,350

1,369

Notes: 1. Receivables outstanding including off-balance sheet amount
2. The U.S. dollar amounts have been translated, for convenience only, at ¥106=$1, the approximate rate of exchange at March 31, 2018.
3. The Company implemented a stock split of 2 shares for each 1 share of common stock on October 1, 2013.
Figures in the financial section are based on Japanese GAAP.

4$

AIFUL CORPORATION Annual Report 2018

REVIEW OF OPERATIONSAIFUL Group at a Glance(As of March 31, 2018)

Loan Business

Credit Card BusinessCompanies

Companies

Share of receivable

Share of receivable

68.5%

15.1%

2018

2018

455.9

100.4

billion yen

billion yen

Key numbers

Key numbers

Unsecured loan outstanding

388.0 billion yen

Number of new card issue

517 thousand+12%

Small business loan outstanding

47.0 billion yen+1%

Transaction volume696.4 billion yen+11%

Credit Guarantee Business+2%

Overseas BusinessCompanies

Companies

Share of receivable

Share of receivable

13.0%

2.4%

2018

2018

86.4

16.0

billion yen

billion yen

Key numbers

Key numbers

Credit guarantee for individuals

Number of customer accounts

75.1 billion yen+15%

Credit guarantee for small business operator

11.3 billion yen+10%

300 thousand+235%

Loan outstanding

16.0 billion yen+238%

AIFUL CORPORATION Annual Report 20185

Management’s Discussion and Analysis of Operations
Current Business Environment
In Japan’s consumer finance industry, many lenders havebeen forced to close their businesses and declare bankruptcy
as interest repayment claims jumped following the Supreme
Court’s 2006 judgment and revisions to the Money Lending
Business Act. While the environment worsened for a time
and the market shrank significantly, it has improved
significantly in recent years.
With respect to interest repayment claims, which have
had by far the biggest impact on the industry in the past
decade, the number of claims on the three leading lenders
for the fiscal year ended March 31, 2018 (fiscal year 2017)
plummeted 42% year on year, to 90,000, or a fifth of its
peak. We expect this trend of real decreases to persist going
forward.
The unsecured loans market, which is our main business,
expanded to 10.5 trillion yen in March 2018 mainly due toimproved business sentiment in Japan and active advertisingby the leading lenders. We expect the unsecured loans
market to continue expanding after bottoming out in March2014.

In terms of the main players in the 10.5 trillion yen
unsecured loans market, consumer finance businesses
account for 2.4 trillion yen, credit card companies 1.7 trillion
yen and financial institutions 6.4 trillion yen. In consumer
finance, the leading consumer-finance only companies
continue to dominate as a result of the oligopoly they havecreated.
In fiscal 2017, new unsecured loan applications for thethree leading lenders rose 8% year on year, to 1,469,000,
while new contracts moved 7% higher year on year, to665,000. The balance of unsecured loans increased 4%, to18.9 billion yen and business performance remained strong.

Unsecured consumer loans market
Consumer finance(Trillion yen)

Credit card companies

Financial institutions

20.0
17.3
Money Lending
Business Act

15.0

Bottom
out

10.0

9.2

9.7

10.2

10.5

6.4

5.0
1.7

0

2.4
2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: Consumer finance and Credit card companies: Statistics by the Japan Financial Services Association
Financial institutions: Statistics by The Bank of Japan (Consumer loan outstanding at domestic banks and credit unions)Interest repayments claims at three major companies (ACOM, SMBC-CF and AIFUL)(Number)Number of interest repayment claims

60,000Feb 2011:
47,20060,00040,00030,000FY2017: 90k(YOY -42%)
Mar 2018:
5,600

20,00010,000
0

2008

2009

2010

2011

2012

Source: Complied by AIFUL from financial data of each company

6

AIFUL CORPORATION Annual Report 2018

2013

2014

2015

2016

2017

2018

Management’s Discussion and Analysis of Operations

AIFUL Group Business Overview
Loan business

Credit card businessIn the loan business, which is the AIFUL Group’s corebusiness, we are making efforts to develop products thatquickly meet customers’ funding needs and to effectively
promote these products. In fiscal year 2017, loans
outstanding for the AIFUL Group rose 14% year on year, to472.0 billion yen .

In the credit card business, we actively used affiliate
advertising, and launched new tie-up cards and businesscredit cards affiliated with university hospitals to boost new
credit card applications.
In addition, we increased credit limits for existing card
members and implemented a points program and otherinitiatives to improve convenience for card users.
As a result, in fiscal year 2017, new credit card issuanceexceeded 500,000 cards for the third consecutive year.
Credit card transaction volumes rose 2% year on year, to696.4 billion yen, while the balance of installment accounts
receivable increased 3% year on year, to 100.4 billion yen.

Unsecured loan businessIn the unsecured loan business, in addition to effective
advertising by television, websites and other media, AIFULrevamped its websites, developed a smartphone applicationand pursued other efforts designed to improve the customer
service experience. These activities were conducted toincrease the balance of operating loans.
As a result, in fiscal year 2017, new unsecured loan
applications for AIFUL moved 7% higher year on year, to433,000, and new contracts rose 8% year on year, to
197,000. The balance of unsecured loans for AIFUL alone
jumped 14% year on year, to 341.7 billion yen, while thebalance of unsecured loans for the entire Group increased
17% year on year, to 404.0 billion yen.

Credit card transaction volume (Consolidated)(Billion yen)

800

696.4

2017

2018

400
200
0

Small business loans
In our small business loans operations, we provide products
and services tailored to the needs of sole proprietors andsmall and medium-sized companies by using the Group’s
credit know-how for business operators mainly at BUSINEXTCORPORATION and AIFUL. As a result, in fiscal year 2017,
the balance of small business loans for BUSINEXT increased
9% year on year, to 40.7 billion yen, while the balance ofsmall business loans for AIFUL surged 28% year on year, to
5.8 billion yen. The balance for small business loans for theentire Group rose 12% year on year, to 47.0 billion yen.

681.4

600

2014

2015

2016

Installment receivable (Consolidated)(Billion yen)

120

111.3
97.1

100.4

2017

2018

80

40

0

2014

2015

2016

2019
(Estimated)

Number of applications and new accounts (AIFUL)

Credit guarantee business(Thousands)

500
433

403

400
300

197

183

200
100
0

2014

2015

2016

2017

Applications

2018

New accounts

Loans outstanding (Consolidated)(Billion yen)

600
515.6

472.0

450

412.6

404.0

442.1

346.4

300
150
0

2014

2015

2016

Loans outstanding

2017

In the credit guarantee business, we aim to increase theguarantee balance by utilizing our strengths, such as our
know-how in private and business-related credit, and our
flexibility and speed as an independent company. We arealso working to extend our sales activities to potential
guarantee partners, as well as proposing new products andoffering support for marketing promotions in the businessrelated loan segment.
As a result, in fiscal year 2017, AIFUL and LIFECARD
entered into new tie-ups with one and five financial
institutions, respectively. The balance of credit guarantees forindividuals for the entire Group increased 15% year on year,
to 75.1 billion yen. The balance of credit guarantees forbusiness operators rose 10% year on year, to 11.3 billion yen.
The total balance for credit guarantees moved 14% higher
year on year, to 86.4 billion yen.

2018

2019
(Estimated)
Unsecured loans outstanding

AIFUL CORPORATION Annual Report 20187

Management’s Discussion and Analysis of Operations

general bad debts to loans outstanding stood at 3.0%,
remaining at a low and stable level.

Credit guarantee outstanding (Consolidated)(Billion yen)160

Total receivables write-offs (Consolidated)
117.1

120
75.7

80

86.4

(%)

60

6.0
4.5

45

40
0

(Billion yen)

30
2014

2015

2016

2017

2018

2019
(Estimated)

0

The AIFUL Group engages in the consumer finance businessin Thailand, the used car auto loan business in Indonesia andthe leasing business in China.

Indonesia: REKSA FINANCEIn May 2017, AIFUL Group acquired a 40% stake in REKSAFINANCE, which manages the used car auto loan business inIndonesia. At the same time, AIFUL has taken an active rolein the company’s management.

3.4%

2.9%

3.0%

2014

2015

2016

2017

2018

Bad debt

Write-offs due
to interest repayment

Ratio to operating loan

Bad debt ratio except write-offs
related to interest repayment

Claims for interest repayment have dropped significantly
from their February 2011 peak, falling 40% year on year infiscal year 2017 to 25,000 claims, which signals the likely
continuation of the decreasing trend.
Interest repayments for fiscal year 2017 slid 21% year on
year, to 22.6 billion yen, and the waiver of principal due tointerest repayments plummeted 29% year on year, to 2.6
billion yen, totaling 25.3 billion yen, or a decrease of 22%
from the previous fiscal year.
In addition, the Group posted 8.6 billion yen in expenses
related to interest repayments because it made an additional
provision for loss on interest repayments of 12.3 billion yen
and the reversal of allowances for doubtful accounts
associated with interest repayments of 3.7 billion yen in lightof the current situation of interest repayments.
As a result, for fiscal year 2017, the balance of theallowances for losses on interest repayments for the AIFULGroup stood at 24.3 billion yen, while the waiver due tointerest repayments was 2.2 billion yen. Therefore, the total
amount of allowances related to interest repayments was
26.5 billion yen.

(Thousands)

90
YOY‐13.5%

YOY
-2.1%

60

YOY
‐11.8%
YOY-29.2%
43.2

Branch of A&A
30

Bad debts

8

AIFUL CORPORATION Annual Report 2018

0.0

Interest repayment claims

Interest repayment claims (Consolidated)

In fiscal year 2017, amount of bad debt rose 8% year on
year, to 22.5 billion yen, while the ratio of bad debts to loans
outstanding fell 0.1% year on year, to 3.4%. So-called‘general’ bad debts, which exclude the waiver of principal
due to interest repayment claims, jumped 16% year on year
to 19.9 billion yen as operating assets increased. The ratio of

3.0
1.5

15

Overseas business

Thailand: AIRA & AIFUL Public Company Limited (A&A)
In December 2014, the joint venture A&A was established in
Thailand. From October 2015, the consumer finance business
was conducted under the “A Money” brand.
In fiscal year 2017, A&A achieved steady growth on the backof brisk demand for funds against the backdrop of economic
growth and rising consumption in Thailand. At the end of
fiscal year 2017, the number of accounts grew 235% year on
year, to 300,000 and the operating loan balance increased
238% year on year, to 16.0 billion yen. (A&A’s fiscal year-end
is December, thus accounts/loans outstanding are as at
end-December 2017.)

3.5%

0

2014

2015

2016

2017

YOY
-40.3%
25.8

2018

Management’s Discussion and Analysis of Operations

Assets, liabilities and net assets
Total assets on a consolidated basis increased 65.9 billion
yen, or 11%, compared to the previous fiscal year-end to682.6 billion yen at the end of fiscal year 2017. This wasprimarily due to a 60.0 billion yen increase in operating loans.
Total liabilities increased 58.2 billion yen, or 12% fromthe end of the previous fiscal year, to 563.2 billion yen. The
major factor for the increase was a rise of 89.8 billion yen
from the end of the previous fiscal year in interest-bearing
debt as a result of diversifying financing into the
procurement of funds by liquidation and borrowing fromfinancial institutions, etc. The average funding rate including
the amount of funds raised by the liquidation of receivables
was 1.87%, down 0.50 percentage points from the previous
fiscal year as a result of early redemption of 8% high interest
rate bonds etc.
Net assets increased 7.7 billion yen, or 7%, compared tothe previous fiscal year-end, to 119.4 billion yen. This waslargely attributable to the increase in retained earnings andnon-controlling interests.
Interest bearing liabilities (Consolidated)(%)(Billion yen)

700.0
600.0

4.00

3.20%
2.77%
2.30%

3.00

2.37%
1.87%

500.0

2.00

435.5
400.0

1.00

369.4

0

300.0
200.0
100.0
0.0

2014

2015

2016

2017

2018

ADR/Rescheduled loans

Bonds

Liquidation

Syndicated loan

Other

Funding rate

Cash flows
Cash and cash equivalents (“funds”) declined 4.2 billion yen,or 13%, compared with the end of the previous fiscal year,
to 29.3 billion yen.

(Cash flows from financing activities)
Net cash provided by financing activities amounted to 67.5
billion yen, a rise of 32% compared with the previous fiscal
year. This was mainly attributable to the increase in funds
reflecting a rise in loans payable.

Going forward
With respect to the future business environment surrounding
the AIFUL Group, the retail finance market such as loans andcredit cards and the overseas markets mainly in ASEAN are in
the expansion phase. Stable growth is expected in all thebusinesses conducted by the AIFUL Group. In addition, in
future, the Group will continue to respond to interest
repayment claims and at the same time work on the
expansion of operating assets as a whole. Also, the Groupwill endeavor to diversify the finance business and will placeemphasis on the balance of “safety,” “profitability” and“growth” in business management.
In addition, the AIFUL Group is seeking to improve its
return on assets (ROA), as this is one of the most importantmeasures of profitability and stability in business
management. The average total assets during theconsolidated fiscal year under review increased 57.5 billion
yen, to 649.6 billion yen, due to an increase in operating
assets. On the other hand, ordinary income decreased 4.5
billion yen, to 2.8 billion yen, mainly due to the posting ofexpenses relating to interest repayment claims. As a result,
ROA for the consolidated fiscal year under review came to
0.4%. However, we will aim to improve the stability of ROA
in the future by changing the structure of revenues and costs
through the diversification of business portfolios.
In fiscal year ending March 31, 2019, we expect thebalance of loans to increase by 9% from the previous period,
to 515.6 billion yen. Installment accounts receivable are
expected to move higher by 11% from the previous period,
to 111.3 billion yen. Credit guarantees outstanding are
anticipated to surge 35% from the previous period, to 117.1
billion yen.
As a result, we expect that operating revenue will top
115.4 billion yen, ordinary income will leap 499% year on
year, to 16.9 billion yen, while net income attributable toowners of the parent will charge higher by 294% year on
year, to 15.6 billion yen.

Cash flows from operating activities
Net cash used for operating activities stood at 70.2 billion
yen, an increase of 37% compared with the previous fiscal
year. This was mainly attributable to the decline in funds
reflecting an increase in total receivables outstanding such as
operating loans.
(Cash flows from investing activities)
Net cash used for investing activities stood at 3.5 billion yen,a decrease of 43% compared with the previous fiscal year.
This was mainly attributable to the purchase of property,
plant and equipment, and intangible assets.

AIFUL CORPORATION Annual Report 20189

Business Data
AIFUL GROUPTOTAL RECEIVABLES OUTSTANDING (Including off-balance outstanding) FUNDING COST
(Millions of yen/%)

2016

2017

2018

YOY

(%)

2016

2017

2018

YOY
-0.50 ppt

545,569

591,528

665,669

12.5

2.77

2.37

1.87

376,224

412,649

472,018

14.4

Indirect

2.19

2.08

2.17

0.09 ppt

Unsecured306,601

346,411404,056

16.6

Direct

3.54

2.69

1.50

-1.19 ppt

Secured28,13924,04420,923(13.0)

0.95

0.95

1.00

0.05 ppt

Small Business

41,48342,19247,037

11.5

Installment Receivables

90,166

97,134100,460

3.4

Credit Guarantee

73,41175,74786,465

14.1

Other

5,767

5,997

6,725

12.1

Total Receivable Outstanding
Loans

Average Funding Cost

Long-term prime rate (reference)

NUMBER OF CUSTOMER ACCOUNTS
2017

2018

YOY

861

916

1,299

41.7

Unsecured

821

879

1,259

43.3

Secured

119

7(16.9)

Number of Customer Accounts

OPERATING REVENUE/PROFIT(Millions of yen/%)

2016

2017

2018

YOY

Operating revenue

87,70891,450115,389

26.2

Interest on Loans

44,25547,86956,305

17.6

Unsecured

37,70542,892

51,94921.1

Secured

4,483

3,206

2,597

(19.0)

Small Business

2,066

1,769

1,758

(0.6)

14,706

15,531

16,0383.3

Installment Receivables
Credit Guarantees
Other
Profit attributatable to ownersof parent

12,491

12,494

12,992

Small Business

28

28

32

12.3

Credit Card Holders

6,291

5,883

5,771

(1.9)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

4.0

Total Assets
ROA (%)

16,254

15,55530,052

93.2

7,044

7,276

3,958

(45.6)(Thousands/%)

2016

Total Equity
ROE (%)(Millions of yen/%)

2016

2017

2018

567,514616,651

682,645

YOY

1.2

1.2

0.4

104,250

111,649

119,407

7.0

6.8

3.5

2016

2017

2018

YOY

664

721

802

11.2

10.7
-0.8 ppt
6.9-3.3 ppt

Note: Italic Font = Increase or Decrease

AIFUL CORPORATIONTOTAL RECEIVABLES OUTSTANDING (Including off-balance outstanding) NUMBER OF CUSTOMER ACCOUNTS(Millions of yen/%)(Thousands/%)

2016

2017

2018

YOY

374,362

408,259454,316

11.3

289,565

322,087

360,031

11.8

Unsecured

647

707

788

11.4

Unsecured262,655

301,063341,777

13.5

Secured108

6(19.1)

Secured21,83916,447

12,403(24.6)

Small Business

5

5

6

32.1

Small Business

5,070

4,575

5,850

27.9
(41.3)

2016

2017

2018

YOY

15.2

14.7

14.7

0.0 ppt

Total Receivables Outstanding
Loans

Installment Receivables

1,194

857

503

Credit Guarantees

78,46680,03987,970

9.9

Other

5,136

5,275

5,811

10.2

Number of Customer Accounts

AVERAGE YIELD
Average yield

OPERATING REVENUE/PROFIT

10(Millions of yen/%)

2016

2017

2018

YOY

Operating revenue

55,12058,33964,663

10.8

Interest on Loans

36,85640,29245,881

13.9

Unsecured

32,08637,31843,510

16.6

Secured

3,918

2,547

1,862

(26.9)

Small Business

852

426

507

18.9

Credit Guarantees

11,221

11,106

10,976

(1.2)

Other

6,926

6,825

7,694

12.7

5,281

4,823

2,437

(49.5)

ProfitAIFUL CORPORATION Annual Report 2018(%)

AMOUNT OF WRITE-OFFS/RATIO OF WRITE-OFFS(Millions of yen/%)

2016

2017

2018

YOY

14,956

14,591

14,6480.4

12,683

13,071

13,909

6.4

Ratio of Total Receivables
Write-offs (%)

5.17

4.53

4.07

-0.46 ppt

Ratio of Unsecured Loans
Write-offs (%)

4.83

4.34

4.07

-0.27 ppt

Total Receivables Write-offs
Unsecured Loans Write-offs

Business Data

AIFUL CORPORATIONNEW ACCOUNTS
New Accounts
Unsecured Loans
Contract Rate of Unsecured
Loans (%)

(Accounts/%)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2016

2017

2018

YOY

180,805

182,778

197,826

8.2

Total Assets

180,666

182,604

197,565

8.2

ROA (%)

46.5

45.3

45.6

0.3 ppt

Total Equity(Millions of yen/%)

2016

2017

2018

407,139439,840

500,262

1.2

1.0

0.2

78,883

83,91985,548

7.0

6.0

2.9

ROE (%)

YOY
13.7-0.8 ppt
1.9-3.1 ppt

Note: Italic Font = Increase or Decrease

LIFECARD CO., LTD.
TOTAL RECEIVABLES OUTSTANDING (Including off-balance outstanding) TRANSACTION VOLUME(Millions of yen/%)(Millions of yen/%)

2016

2017

2018

YOY

2016

2017

2018

YOY

154,950

163,571

169,632

3.7

Transaction Volume636,901

681,362

696,435

2.2

Installment Receivables

88,971

96,27699,956

3.8

Card Shopping

595,922

640,598

655,990

2.4

Loan (Cash Advance)

44,16945,56446,728

2.6

Cashing

40,97940,76340,444(0.8)

Credit Guarantees

21,17821,00722,032

4.9

631

722

914

26.5

2016

2017

2018

YOY

6,291

5,883

5,771

(1.9)

Proper Card

1,813

1,795

1,739

(3.1)

Affinity Cards

4,477

4,088

4,032

(1.4)

Total Receivables

Other

Number of Cardholders

OPERATING REVENUE/PROFIT(Millions of yen/%)

2016

2017

2018

YOY

28,35828,89042,991

48.8

Installment Receivables

14,55915,361

15,960

3.9

Loan (Cash Advance)

5,645

5,603

5,649

0.8

Credit Guarantees

1,270

1,272

1,348

6.0

Other

6,884

6,653

20,033

201.1

1,858

3,031

2,746

(9.4)

Operating Revenue

ProfitNUMBER OF CARDHOLDERS(Thousands/%)

AMOUNT OF WRITE-OFFS/ RATIO OF WRITE-OFFS(Millions of yen/%)

2016

2017

2018

YOY

Total Receivables Write-offs

3,120

3,090

3,345

8.2

Ratio of Total Receivables
Write-offs (%)

2.01

1.89

1.97

0.08 ppt

Note: Italic Font = Increase or Decrease

AIFUL CORPORATION Annual Report 201811

Corporate Governance
1. Basic Views and Basic Policy on
Corporate Governance
The AIFUL Group understands that a key objective ofcorporate governance is to achieve corporate managementwith transparency, impartiality, and efficiency by conducting
corporate activities premised on compliance in accordancewith our management philosophy of “Earn the trust of society
through corporate activity based in integrity” to contribute to
the development of the economy and society and thereby togain the trust of society.
In line with the basic views on corporate governance,
AIFUL will undertake enhancements to upgrade our corporate
governance in accordance with the Basic Policy on Corporate
Governance set out below in a bid to achieve continued
growth and a medium- and long-term increase in corporate
value through transparent, impartial, prompt and bold decision
making.

Board of Directors and Directors

2. Corporate Governance Structure

The Board of Directors consists of 11 directors (as of June 27,2018): eight directors who are not members of the Audit andSupervisory Committee, and three directors who are membersof the Audit and Supervisory Committee. It discusses andmakes decisions on matters that cannot be delegated todirectors or others under laws and regulations and the Articles
of Incorporation, such as basic management policies and basic
policies associated with the internal control system, and otherimportant matters for execution of operations under the rulesof the Board of Directors, including business plans, personnel
policies, and capital policies. The Board of Directors delegatesauthority over the execution of operations in line with thepolicies on which the Board of Directors has made resolutions,and the disposal of property worth less than a specified amountto executive officers and others within an appropriate range inaccordance with regulations for administrative authority andother rules. In addition to delegating this authority, it supervises
the execution of operations. It generally holds semimonthly
meetings and extraordinary meetings when necessary. The
Company’s Articles of Incorporation also stipulate that there be
no more than 15 directors (excluding directors on the Audit andSupervisory Committee) and no more than five directors on the
Audit and Supervisory Committee.

(1) Overview of the Corporate Governance Structure

Outside Directors

In order to strengthen the supervisory function of the Boardof Directors and to enhance corporate governance, we madethe change from a company with a Board of Auditors to acompany with an Audit and Supervisory Committee. Thischange went into effect on June 23, 2015.

Two of the three directors in the Audit and Supervisory
Committee are outside directors (as of June 27, 2018). We
have developed a structure in which they can attend
management meetings and other important meetings andcommittees to express their views.

Audit and Supervisory Committee and Directors
Belonging to the Committee

Executive Officers(1) We will respect the rights of shareholders and ensure theirequality.
(2) We will work on appropriate collaboration with all
stakeholders including shareholders.
(3) We will appropriately disclose our financial, non-financial,and other corporate information to ensure transparency.
(4) Our Board of Directors will recognize its fiduciary
responsibility to shareholders and fulfill its roles and duties,
including making and keeping its function of effectively
supervising business execution.
(5) We will hold constructive dialogues with shareholders forthe sake of achieving continued growth and a medium andlong-term increase in corporate value.

The Audit and Supervisory Committee consists of three
directors (including two directors who are outside members).
It determines items such as the audit policy and plan, anddiscusses and decides on important audit matters based on
the reports it receives. In addition to performing these duties,
it also audits legitimacy and appropriateness through the useof the internal control system. A meeting will generally be held
every month, with extraordinary meetings held whennecessary.
The directors who are members of the Audit andSupervisory Committee will cooperate with the Internal
Auditing Department and the accounting auditors to enhance
management’s supervisory functions. They will also share
information with the auditors of affiliated companies in aneffort to strengthen the auditing structure for the operations
12of the entire Group.
To improve these audit functions, the Group will establish
an Audit and Supervisory Committee Office (Audit Office) as
the exclusive body for supporting the duties of directors who
belong to the Audit and Supervisory Committee. It will also
take the necessary steps to secure independence, such as byrequiring that the Audit Office does not follow any directions
or orders from directors (other than directors belonging to the
Audit and Supervisory Committee) when carrying out theirduties.

AIFUL CORPORATION Annual Report 2018

The Company introduced an executive officer system to speed
up the decision-making process and the performance of
duties, and enhance the separation of supervisory andexecutive functions. The Board of Directors appoints executive
officers and delegates its business by establishing the divisionof duties and authority.
Management Committee
The Management Committee comprises all the directors andexecutive officers. It strives to promote information sharing
and consensus on matters to be submitted to the Board of
Directors, as well as on issues and strategies, etc. based onpolicies resolved at Board of Directors meetings. The
committee aims to ensure that disagreements do not arise
regarding decisions or the performance of duties. It generally
holds meetings on a weekly basis.

Corporate GovernanceCompliance Committee
The Compliance Committee is placed as an advisory bodyunder the direct control of the Board of Directors. The headof this committee is the officer in charge of the compliancedepartment and the Compliance Committee comprises
outside experts, directors also serving as members of the
Audit and Supervisory Committee, and executive officers ofrelated organizations.
Its objectives are to create a corporate culture in which
compliance is emphasized, to establish corporate ethics, andto draw up compliance programs. It develops programs forthe verification of issues and educational programs, anddelivers reports to the Board of Directors as required. In
addition to general bimonthly meetings, it holds
extraordinary meetings as necessary.
Risk Management Committee
AIFUL has a Risk Management Committee, which is under the
direct control of the Board of Directors. Headed by thepresident and representative director, it comprises all the
directors. For the purposes of preventing risks and mitigating
losses in the event of a crisis by constructing a reasonable risk
management structure, it regularly receives risk status reports
to enable it to be constantly aware of risks and continuously
review the risk management system to submit reports todirectors. In addition to general quarterly meetings, it holds
extraordinary meetings as necessary.
(2) Reasons for the Current Structure
As we have an auditor system, we appoint two outside
directors for our three directors who are members of the
Audit and Supervisory Committee. We have ensured
independent audits by developing a system where all directors
who are members of the Audit and Supervisory Committee
attend Board of Directors meetings and other important
meetings and committee meetings, including Management
Committee meetings, to express their opinions. We have also
ensured the independence of audits by establishing an Audit
Office as the exclusive body for supporting the duties of
directors also serving as members of the Audit and Supervisory
Committee.
Further, we separate management’s supervisory andbusiness execution functions by implementing an executive
officer system and strengthening supervisory functions by
establishing a Compliance Committee including outside
experts and a Risk Management Committee, etc. We haveadopted our current system to achieve transparent, fair, andefficient corporate management.

3. Enhancement of Corporate Governance(1) Development of a Compliance Framework
A Compliance Committee (meeting on a regular basis), withan outside member (a lawyer), has been set up to establish
and manage compliance programs, engage both analysis anddiscussion to improve the internal control system, collectinformation and implement other preventative measures, anddetermine policies for employee training. In addition, theAIFUL Group Compliance Committee has been established todisseminate a set of unified corporate ethics throughout theentire Group and form a compliance framework for the Group
as a whole. In addition, the Group has launched both internaland external hotlines offering consultations on any violationsof the Group’s management principles, norms, and otherstandards, as well as an internal whistle-blowing system, in aneffort to develop a corporate environment that encourages
reporting and discussion of violations.
(2) Development of a Risk Management Framework
A Risk Management Committee has been set up to gain anunderstanding of the Group’s risk factors and hold discussions
to determine responses. The Risk Management Committee
has a system in place whereby it collects risk information fromthe Compliance Committee and other divisions on a regularbasis and conducts crisis management in coordination withdirectors and other relevant divisions. AIFUL CORPORATION
and AIFUL Group have established an action plan and manualin preparation for large-scale disasters and failure of core IT
system, issues relating to personal or corporate information,and other risk events so as to be able to respond to potential
emergencies appropriately and promptly.
(3) Maintenance of Accuracy in Disclosure of Financial
Information and Status of Internal Controls
As a system for maintaining the accuracy of financial
information, the AIFUL Group has developed an effective
mutual check system where the division in charge ofinstitutional accounting (the Accounting Department) and thedivision in charge of management accounting (theManagement Planning Department) are separate, in addition
to a system of checks established by the Accounting
Department and accounting audits by independent auditors inaccordance with the Companies Act and the Financial
Instruments and Exchange Act. The Group also implements
initiatives for maintaining the accuracy of information
disclosure in the preparation and announcement of financial
reports by having the Accounting Department, the IR Sectionof the Finance Department, and other relevant divisions(including certain affiliated companies) apply a process ofchecks.
(4) Improvement of Disclosure and Status of Internal
Controls
To enhance the transparency of management and achieveeffective corporate governance through the activation of
external checking functions, the Group endeavors to maketimely and straightforward disclosures in news releases,
account settlement data, annual reports, and other materials,
as well as holding briefing sessions for domestic and overseas
investors, analysts, and so forth, as appropriate. In addition,
we have a system in place whereby investors’ opinions andinquiries about management can be relayed back to thepresident, the Board of Directors, and the head of eachdivision on a regular basis.
The diagram below illustrates our Group’s structures forbusiness execution, management supervision, internal control,
and risk management (as of June 27, 2018).

AIFUL CORPORATION Annual Report 201813

Corporate Governance

4. Relationships between Outside Directors
and the Company

accounting. Deeming him to be qualified as an outside
director and Audit and Supervisory Committee member, theCompany appointed him an outside director. Although heholds common shares of the Company as stated in the
Securities Report of the Company for FY2017, “IV. Status of
the filing Company, 5. Member of Executives”, there is no
personal, capital, business or other relationship between Mr.
Toda and the Company.
The Company also deemed Audit and Supervisory
Committee Member, Haruichi Suzuki, to be qualified as an
outside director, and thus has appointed him as such,expecting him to provide advice as an outside director from afair and neutral standpoint by drawing upon his extensive
knowledge and considerable experience as a lawyer. The
Company has concluded a contract on the limitation of liability(1) Functions and Roles of Outside Directors
The Company has two outside directors who express opinions
and provide advice from a perspective outside the Company,
drawing upon their considerable experience and extensive
knowledge, to maintain an objective and neutral oversightfunction from an external perspective.
(2) Relationships between Outside Directors and theCompany
Audit and Supervisory Committee Member, Satoru Toda, waspreviously engaged in tax affairs at the National Tax Agency,
and has considerable knowledge about finance andGeneral Meeting of Shareholders
Audit and supervisory committee

Board of Directors
auditing

3 Directors who serve as audit
and supervisory committee members(Including 2 outside directors)

Audit and supervisory committee Office

11 Directors
8 Directors other than who serve as audit
and supervisory committee members
3 Directors who serve as audit andsupervisory committee members(advisory body under the
direct control of Board of
Directors)

reportingauditing

Independent
Auditing Firm

auditing(under directcontrol ofBoard of Directors)

reportingsharing information

Group Compliance Committee
Compliance Committee

Risk Management Committee

Chairperson: Executive Officer in charge of theCompliance Dep.
Members: Directors who also serve as members of the
Audit and Supervisory Committee, and Outside experts,
executive officers of related organizations

Chairperson: Representative Director(President)
Members: All directors

reportingreportingExternal Compliance Reporting Desk

reportingadvising/replying

Managementof Operations

Attorneys andOthersManagement Committee(Directors and Executive Officers)
reportingdirection

direction
direction

cooperation

Compliance Dep.
(Internal Control Department, Information Management Office)Subsidiary Management Dep.

cooperation

sharing Information

In-house
Compliance
Reporting Desk
gathering and sharing
informationquestions/advice/complaints

Compliance Dep.
(Customer Service Center)

Customers

Finance Dep.
(P.R. and I.R. section)

Investors andOthersdiscloseInternal Auditing
Internal Auditing Dep.
(including Group Auditing)reportingInternal Auditing
Subsidiaries
cooperation

auditing

Subsidiaries Auditors

14

AIFUL CORPORATION Annual Report 2018

Corporate Governancefor damages under Article 423, Paragraph 1 of the Companies
Act with Mr. Suzuki. The maximum amount of liability fordamages under the contract is the minimum amountstipulated in Article 425, Paragraph 1 of the Companies Act.
There are no special interests between him and the Company.
Both of them satisfy the AIFUL’s standards for independent
directors and are registered with the Tokyo Stock Exchange as
independent directors.
(Standards for independent outside directors) AIFUL’s
standards for independent outside directors are prescribed asfollows:
1. A person who falls under none of the items below andpermanently and substantially has no potential conflict ofinterest for any other reasons shall be deemed to havesufficient independence from AIFUL.
(1) The person is an executive director, etc.*1 at AIFUL or anyof its subsidiaries (hereinafter collectively referred to as“the AIFUL Group”), or the person served as an
executive director, etc. at the AIFUL Group during the
10-year period before assuming the post or, if theperson used to be a non-executive director*2 or a
corporate auditor at any time within the 10-year period
before assuming the post.
(2) The person is currently a major shareholder*3 of AIFUL,or if the major shareholder is a juridical person, is or wasa director, corporate auditor, accounting advisor,
executive officer, manager or other employee at the
major shareholder, its parent company or any of its
significant subsidiaries in the past five years.
(3) The person is currently a director, corporate auditor,
accounting advisor, executive officer, manager or other
employee at a company of which AIFUL is a major
shareholder*3.
(4) The person is or was an executive director, executive
officer, manager or other employee of a party of which
the AIFUL Group is or was a major business partner*4,of its parent company, or of any of its significant
subsidiaries, whether or not it is a company.
(5) The person is or was an executive director, executive
officer, manager or other employee of a party that is amajor business partner*4 of AIFUL, its parent company or
any of its significant subsidiaries, whether or not it is acompany.
(6) The person is a director, limited to a person engaging inbusiness execution, or another person such as an officer,
member or employee engaging in business execution of
any organization, e.g., a public interest incorporated
foundation or association and a not-for-profit
corporation, which receives donations or financial
support exceeding a predetermined level*5 from the
AIFUL Group.
(7) The person is a director, corporate auditor, accounting
advisor or executive officer of a company, its parent
company or any of its subsidiaries that accepts a full-timeor part-time director from the AIFUL Group.
(8) The person is a director, corporate auditor, accounting
advisor, executive officer, manager or other employee ata financial institution or any other large creditor that is
indispensable to AIFUL in fund procurement and on

which AIFUL is so dependent that it is irreplaceable(hereinafter “large creditor, etc.”), or was, in the past
three years, a director, corporate auditor, accounting
advisor, executive officer, manager or other employee ata large creditor, etc., or its parent company or any of its
significant subsidiaries.
(9) The person is currently an accounting auditor, or amember, partner or employee of the auditing
corporation or the tax accountant corporation for the
AIFUL Group, or was an accounting auditor, or amember, partner or employee of the auditing
corporation or the tax accountant corporation for the
AIFUL Group in the past three years who actually did
auditing work, excluding assisting involvement, for the
AIFUL Group, irrespective of whether the person stillworks for, or in, or has already retired from any of thecorporations mentioned above.
(10) The person is a lawyer, certified public accountant, tax
accountant or other consultant who does not fall underitem (9) above who (a) has received a monetary or otherproperty benefit worth 10 million yen or more per year
on average over the past three years from the AIFULGroup in addition to the offer remuneration, or who (b)is a member, partner, associate or employee of a firm ofwhich the AIFUL Group is a major business partner(which refers to a firm that receives a payment from the
AIFUL Group that has made up at least two percent of
its average consolidated total sales over the past threebusiness years).
(11) The person is a close relative*6 of the person that falls
under any of items (1) to (10) above.
2. Even if he or she falls under any of the items in 1. above,a person deemed by AIFUL to be appropriate in terms of
personality, views, and suchlike as an independent director
for AIFUL may be appointed as such on the condition thatthe person fulfills the requirements for outside directors
under the Companies Act and that the grounds forregarding the person as appropriate as an independent
director for AIFUL are explained externally.
*1 An executive director, etc. refers to an executive director, executive
officer, manager or other employee.
*2 A non-executive director refers to any director who is not an
executive director.
*3 A major shareholder refers to a shareholder who holds at least 10
percent of the voting rights.
*4 A major business partner refers to a party receiving an amount thatis two percent or more of its annual consolidated sales for its mostrecent business year from the AIFUL Group, either in the mostrecent business year or in the three business years before the mostrecent year (i.e., a party of which the AIFUL Group is a major
business partner) or a party that paid an amount that is two percent
or more of AIFUL’s annual total sales for its most recent businessyear either in the most recent business year or in the three businessyears before the most recent one (i.e., a party that is a major
business partner of the AIFUL Group).
*5 A predetermined level refers to either the average amount of 10
million yen per year over the past three business years or theamount equivalent to 30 percent of the average annual total
expenses of the organization in question, whichever is the larger.
*6 A close relative refers to either a spouse or a relative within thesecond degree of consanguinity; provided, however, that item (1) in
1. applies to those that fall thereunder within the last five years.

AIFUL CORPORATION Annual Report 201815

Board of Directors and Executive Officers(As of July 1, 2018)

Directors
Yoshitaka Fukuda
President and Representative Director
Chief Executive Officer

Apr. 2018: Director and Senior Managing Executive Officer, Senior General
Manager of Accounting Division, In charge of General Affairs
Department, Personnel Department and Credit Assessment
Department (Current position)

Apr. 1967: Founded Matsubara Sangyo as a sole proprietorship consumer
finance company

Mitsuhide Fukuda

Apr. 1980: Director of Marutaka, Inc.
(established in 1978, currently AIFUL CORPORATION)

Director

May 1982: President and Representative Director of the Company due to mergerof three related companies(Oasa, Inc., Yamakatsu Sangyo, Inc., Maruto, Inc.)

Senior Managing Executive Officer
Apr. 2003: Joined Daiwa Securities Co. Ltd.
Apr. 2009: Joined OGI Capital Partners, Ltd.

Jun. 2007: President and Representative Director, Chief Executive Officer

Jun. 2011: Executive Officer of the Company

Jun. 2011: Chairman and Representative Director of LIFECARD CO., LTD.
(Current position)

Jun. 2012: Director and Executive Officer

Oct. 2017: President and Representative Director, Chief Executive Officer,
Chairperson of Risk Management Committee, In charge of
Administrative Information Office and Internal Auditing Department(Current position)

Jun. 2016: Director and Senior Managing Executive Officer

Jun. 2014: Director and Managing Executive Officer
Apr. 2018: Director and Senior Managing Executive Officer, Senior General
Manager of Loan Business Division, In charge of Guarantee Business
Department, Marketing Department and IT Planning Department(Current position)

Masayuki Sato
Representative Director
Senior Managing Executive Officer
Aug. 1982: Joined AIFUL CORPORATION
Jun. 1999: Director of the Company
Jun. 2008: Director and Managing Executive Officer
Jun. 2011: Director and Senior Managing Executive Officer

Director
Executive Officer
Apr. 1983: Joined The Sumitomo Trust & Banking Co., Ltd.
(currently Sumitomo Mitsui Trust Bank, Limited)

Jun. 2014: Representative Director and Senior Managing Executive Officer

Sep. 2006: Sales Manager, Division 6, Tokyo Branch of The Sumitomo Trust &Banking Co., Ltd.

Jan. 2015: Authorized Director of AIRA & AIFUL Public Company Limited(Current)

Apr. 2012: Sales Manager, Division 6, the Main Branch of The Sumitomo Trust &Banking Co., Ltd.

Apr. 2018: Representative Director and Senior Managing Executive Officer,
Senior General Manager of Management Planning Division(Current position)

Apr. 2015: Executive Officer of the Company

Kazumitsu Oishi
Director
Senior Managing Executive Officer
Mar. 1979: Joined Marutaka, Inc. (currently AIFUL CORPORATION)
Jun. 2001: Director of the Company

Jun. 2015: Director and Executive Officer
Apr. 2018 Director and Executive Officer, Responsible for Management Planning
Department and Business Process Management Department(Current position)

Hiroshi Uemura
Director
Executive Officer

Jun. 2007: Executive Officer

Apr. 1985: Joined The Nippon Credit Bank, Limited. (currently Aozora Bank, Ltd.)

Jun. 2011: Managing Executive Officer

Sep. 2005: Senior Relationship Manager of Group 11 of Corporate Business
Division 1 of Corporate Banking Division, Senior RelationshipManager of Corporate Business Department 1, Sapporo Branch,
Corporate Banking Division of Aozora Bank, Ltd.

Jun. 2012: Director and Managing Executive Officer
Jun. 2016: Director and Senior Managing Executive Officer
Jul. 2018: Director and Senior Managing Executive Officer, Chairperson ofCompliance Committee, Senior General Manager of Credit
Management Division, In charge of Compliance Department(Current position)

Tsuguo Nakagawa
Director
Senior Managing Executive Officer
Mar. 1976: Joined Oasa Inc. (Yoshitaka Fukuda’s sole proprietorship)
Jun. 2006: Director of the Company
Jun. 2007: Executive Officer
Jun. 2011: Managing Executive Officer
Jun. 2012: Director and Managing Executive Officer
Jun. 2016: Director and Senior Managing Executive Officer
Apr. 2018: President of BUSINEXT CORPORATION (Current position)

16

Yoshiaki Tanaka

AIFUL CORPORATION Annual Report 2018

Aug. 2010: General Manager of Workout Division of Aozora Bank, Ltd.
Apr. 2015: Executive Officer of the Company
Jun. 2015: Director and Executive Officer
Jun. 2016: Director and Executive Officer, In charge of Finance Department(Current position)

Keiji Masui
Director
Executive Officer
Aug.1983: Joined AIFUL CORPORATION
Apr. 2014: Executive Officer of the Company
Jun. 2016: Director and Executive Officer (Current position)

Board of Directors and Executive Officers

Directors, Audit and Supervisory Committee Members
Satoru Toda

Haruichi Suzuki

Director (outside)

Director (outside)

Audit and Supervisory Committee Member

Audit and Supervisory Committee Member

Apr. 1978: Joined Ministry of Finance

Apr. 1997: Joined the SHIGEKAZU UEMATSU Law Office(currently UEMATSU/ SUZUKI Law Office)Jul. 2007: Regional Commissioner, Fukuoka Regional Taxation Bureau, National
Tax Agency
Jul. 2008: Deputy Director-General of National Tax Tribunal National Tax
AgencyJun. 2009: Full-time Auditor of Tokyo Metro Co., Ltd.
Jun. 2017: Corporate Auditor of LIFECARD CO., LTD. (Current position)
Jun. 2017: Director of the Company (Audit and Supervisory Committee member)(Current position)

Sep. 1999: Lecturer at Ritsumeikan University Graduate School of Law
Jan. 2008: Director of UEMATSU/ SUZUKI Law Office (Current position)
Jun. 2015: Director of the Company (Audit and Supervisory Committee member)(Current position)
Jun. 2019: Outside Director of KYOTO TOOL CO., LTD. (Audit and Supervisory
Committee member) (Current position)

Minoru Shimamura
Director
Audit and Supervisory Committee Member
Oct. 1983: Joined AIFUL CORPORATION
Apr. 2016: General Manager of the Audit and Supervisory Committee Office
Apr. 2016: Corporate Auditor of LIFECARD CO.,LTD. (Current position)
Jun. 2016: Director of the Company (Audit and Supervisory Committee member)(Current position)

Executive Officers
Katsumi Amano

Hideaki Minamizawa

Senior Managing Executive Officer

Executive Officer

In charge of Group Digital Promotion Department,

Responsible for Personnel Department,

General manager of Group Digital Promotion Department

General Manager of Personnel Department

Shinichiro Okuyama

Toshiaki AndoManaging Executive Officer

Executive Officer

Responsible for Marketing Department and IT Planning Department,

Assistant Senior General Manager of Loan Business Division,

General Manager of Marketing Department

General Manager of Loan Business Promotion Department

Kazuhiko Tsuda

Ikuo Yamauchi

Managing Executive Officer

Executive Officer

Responsible for Administrative Information Office,Responsible for Subsidiary Management Department and Overseas BusinessAccounting Department and General Affairs Department,

Department, General Manager of Overseas Business Department

General Manager of Accounting Department

Katsuhiko Nagasue

Takayuki Nakata
Executive Officer

Executive Officer

Assistant Senior General Manager of Group Systems Division,

Senior General Manager of Group Systems Division

General Manager of Information Systems
Development Department

Atsushi Suda
Executive Officer
Responsible for Compliance Department,
General Manager of Compliance Department
President of AsTry Loan Services Corporation

AIFUL CORPORATION Annual Report 201817

History
1967
Apr

2000
Yoshitaka Fukuda, AIFUL CORPORATION’s
current president, established sole
proprietorship as a consumer finance company

1978
Feb

Mar

Listed on the First Section of the Tokyo Stock
Exchange, and the First Section of the Osaka
Securities Exchange

2001
Established Marutaka, Inc. (now AIFULCORPORATION) with capital of 9.0 million yen,in Sakyo-ku, Kyoto
Began unsecured consumer loan businessJan

Established business finance company BUSINEXTCORPORATION

Feb

Completed new headquarters building

Mar

Converted LIFE Co., Ltd.
into 100% subsidiary

Jul

Issued LIFE ETC CARD

Nov

Established servicer company AsTry Loan
Services Corporation

Nov

Changed the form of invoicing (statement ofcharges) sent to cardholders to electronic andlaunched the LIFE-Web
Desk service
for card holders

1982
May

Marutaka, Inc. absorbs three related companies(Oasa, Inc., Yamakatsu Sangyo, Inc., andMaruto, Inc.) and increases its equity capital to500.0 million yen
Name simultaneously changed to
AIFUL CORPORATIONJul

Began providing unsecured loans to sole
proprietors

1984
Feb

Start of ATM operations

Mar

Registration of money lenders based onenactment of the Money-Lending BusinessControl Law

Oct

Began sales of real estate-secured loans

1994
Nov

Opened Heartful Center

1995
Mar

Installed automatic contract acceptancemachine, “Ojido-san”

Nov

Started a website

1997
Jul

Oct

Over-the-counter registration of company’s
stock with the Japan Securities Dealers
Association
Began full-scale sales of commercial loans to
consumers

18

Apr

Established Compliance Committee

Sep

Opened a contact center

Oct

Converted business finance company,
City’s Co. Ltd., into 100% subsidiary

2003
Jan

Registered as certified finance corporation
based on the Law Concerning the Issuance ofCorporate Bonds in the Financial Industry Loan
Business

AIFUL CORPORATION Annual Report 2018

Received Listed Company Disclosure
Commendation from the Tokyo Stock Exchange

2004
Mar

Converted KOKUSAI Capital Co., Ltd. into 100%
subsidiary (currently AG Capital Corporation)

2006
Apr

1999
May

2002

Issued LIFECARD GOLD ;issued LIFECARD
exclusively for students

2007

2015

Apr

Revised management philosophy. The new
management philosophy becomes “Earn the trustof society through corporate activity based in
integrity”

Apr

Established Risk Management Committee

Oct

AIRA&AIFUL Public Company Limited (A&A)
commences the consumer finance business inThailand with the A Money brand

Nov

Shares of Anshin Guarantor Service Co., Ltd.,a group company, are listed on the Tokyo
Stock Exchange Mothers

2009
Aug

Opened a shopping mall for members, L–Mall

2016
Apr

2010
Jul

Established LIFECARD Co., Ltd. (now aconsolidated subsidiary) to operate credit cardand credit guarantee businesses, wholly fundedby AIFUL subsidiary LIFE Co., Ltd. (now aconsolidated subsidiary)

2011
Jun

Jul

2017
Apr

The 50th anniversary of its establishment

May

Acquired 40% of shares of REKSA FINANCE,
which manages used cars loan business inIndonesia

Issued V-Preca, Japan’s first prepaid Visa card
available exclusively online

Under the Group’s reorganization, the credit sales
business and the credit guarantee and insurance
businesses of LIFE Co., Ltd., were transferred to
LIFECARD Co., Ltd. by way of corporate spinoff
and merger. Also, four consolidated subsidiaries(LIFE Co., Ltd. (following its spin-off), City’s
Corporation, City Green Corporation andMarutoh KK) were merged with AIFUL

2014
Dec

New Frontier Partners Co., Ltd. changed its
corporate name to AG Capital Corporation

2018
Apr

Established AsTry Partners Corporation, which
manages corporate turnaround & restructuringbusiness

AIRA&AIFUL Public Company Limited, a joint
venture, is established with AIRA Capital, an
overseas subsidiary in Thailand

2015
Apr

SANSHU Finance Corporation, which manages
the lease business in Shanghai, China, becomes a
member of the GroupAIFUL CORPORATION Annual Report 201819

Group Network(As of April 30, 2018)

Domestic
Group Companies
AIFUL CORPORATION

LIFECARD CO.,LTD.

BUSINEXT CORPORATIONBusiness Classification*Unsecured loans*Secured loans*Small business loans*Credit guarantees(for financial institutions)

Date of theestablishment

Location

WebsiteTop page:https://www.aiful.co.jp/

1978 Feb

Kyoto, Japan*Credit card
*Prepaid card
*Credit guarantees(for financial institutions)2010 Jul

Kanagawa,
Japan*Secured loans*Small business loans*Factoring

2001 JanTokyo, Japan

http://www.businext.co.jp/*Loan servicing

2001 Nov

Tokyo, Japan

http://www.astry-s.co.jp/*Venture capital

1985 Dec

Tokyo, Japan

http://www.nf-partners.co.jp/*Individual credit purchasing
agency business*Guarantee (in-houseinstallment)2013 Apr

Kyoto, Japan

http://www.lifeguarantee.co.jp/*Corporate turnaround &restructuring

2018 Apr

Tokyo, Japan*Guarantee (rent liabilities)

2002 Dec

Tokyo, Japan

Business Classification

Date of theestablishment

Location*Consumer finance2014 Dec

Bangkok,Thailandhttp://www.aira-aiful.co.th/*Auto loan

1984 Oct

Jakarta,Indonesia

https://reksafinance.co.id/*Leasing2012 Jul

Shanghai,
China

https://www.sanshu-sh.com/

Investor relations:
https://www.ir-aiful.com/
Top page:
http://www.lifecard.co.jp/
V-preca:
http://vpc.lifecard.co.jp/

AsTry Loan Services Corporation

AG Capital Co.,Ltd

LIFE GUARANTEE CO.,LTD

AsTry Partners Corporation

Anshin Guarantor Service Co.,ltd.
https://anshin-gs.co.jp/

Overseas
Group Companies

Homepage

AIRA & AIFUL Public Company Limited

REKSA FINANCE

SANSHU Finance Corporation

20

AIFUL CORPORATION Annual Report 2018

Consolidated Financial
Statements and Others

Contents
Method of preparation of consolidated financial statements

22

Regarding details of analysis/consideration relating to the operating results

22

Regarding dividend policy

23

Regarding the risk of business, etc.

23

Regarding the audit certificate

27

Consolidated balance sheets

28

Consolidated statements of income andconsolidated statements of comprehensive income

30

Consolidated statements of change in shareholders’ equity

32

Consolidated statements of cash flows

34

Notes to consolidated financial statements

35

Method of preparation of consolidated
financial statements
The consolidated financial statements and notes of AIFUL
Corporation (“AIFUL”) conform to the Financial Instruments
and Exchange Act and the related laws of Japan and thegenerally accepted accounting standards of Japan (“Japanese
GAAP”).
These standards are different from the accounting
processing and the matters of disclosure required by theInternational Accounting Standards in some respects.
In addition, with respect to the consolidated financial
statements and notes of the Annual Report in English for andbefore 2017, the consolidated financial statements prepared inJapan were reclassified into the form that is familiar tooverseas. In the 2018 Annual Report, however, the statements
were changed to those of the consolidated financial
statements and notes in the Securities Report createdaccording to the generally accepted accounting standards ofJapan.
Accordingly, the figures in the consolidated financial
statements and the notes for the fiscal year ended March 2017
were changed in accordance with the method of presentationof the Securities Report.

Regarding details of analysis/consideration
relating to the operating results and othersituations from the perspective of the
management
Details of recognition and analysis/consideration relating tothe operating results and other situations of the Group fromthe perspective of the management are as described below. In
this regard, the matters regarding the future included in thesentences were judged as of the end of the consolidated fiscal
year under review.
Details of recognition and analysis/consideration
relating to the operating results and other situations forthe consolidated fiscal year under review
The analysis relating to the operating results, etc. of theGroup for the consolidated fiscal year under review is as
described below.
In the consumer finance industry during theconsolidated fiscal year under review, the number of newcontracts at major players remained stable, and theoperating loan balance increased moderately. On the other
hand, interest repayment claims, the industry’s biggest
risk, have declined significantly from their peak, and the
downward trend became more apparent in current fiscal
year. The situations to which attention should be paid still
continued.
In this environment, while dealing with interest
repayment claims as the principal management issue, theAIFUL Group united its efforts to diversify the financial
business and increase operating assets to bolster its
revenue base. The Group also worked to diversify funding

22

AIFUL CORPORATION Annual Report 2018

channels to strengthen its financial base and improvebusiness efficiency across the Group.
During the consolidated fiscal year under review,
operating assets increased steadily mainly in the loanbusiness, which is AIFUL’s main business, and operating
revenue increased. With respect to expenses, however,considering the recent movement of interest repayment
claims, the expenses related to interest repayment wereposted and thus various profits decreased. Meanwhile, thefuture business management environment surrounding the
AIFUL Group is in the phase of the expansion of the retailfinance market such as loans and credit cards and theoverseas market, mainly in ASEAN. Stable growth isexpected in all the business conducted by the AIFULGroup. The AIFUL Group will continue to work on
expanding its operating assets on a group-wide basis while
responding to interest repayment claims. In addition, theAIFUL Group will endeavor to diversify its financial businessand place emphasis on the balance of “safety,”“profitability” and “growth” in business management.
In addition, the AIFUL Group sets the increase of theratio of ordinary profit to total assets (return on assets:
ROA) as one of the important indexes from theperspectives of management profitability and stability. The
average total assets during the consolidated fiscal year
under review increased 57,565 million yen, to 649,648
million yen, due to an increase in the operating assets. On
the other hand, ordinary profit decreased 4,575 million
yen, to 2,823 million yen, mainly due to the posting of theexpenses related to interest repayment. As a result, ROA
for the consolidated fiscal year under review was 0.4%.
However, the AIFUL Group will aim to improve the stabilityof ROA through structural changes in revenues and costs
through the diversification of the business portfolio in the
future.
(Operating revenue)
In the consolidated fiscal year under review, the AIFULGroup’s consolidated operating revenue increased 23,938
million yen from the previous consolidated fiscal year, to115,389 million yen (up 26.2% year on year). In the loanbusiness, which is AIFUL’s main business, the balance of
operating loans both in Japan and overseas continued toincrease steadily, and thus interest income on loans tocustomers increased 17.6% year on year, to 56,305 million
yen. In addition, in the credit card business, revenue
increased 3.9% year on year, to 16,025 million yen. In theguarantee business, revenue increased 4.0%, to 12,992
million yen. The results of each business were strong. With
respect to others, sales related to orders for systemdevelopment of 12,803 million yen were recorded.
(Operating expenses)
In the consolidated fiscal year under review, operating
expenses increased 28,456 million yen, or 33.7%
compared with the previous fiscal year, to 112,897 million
yen. The main factors for the increase were the posting ofcosts of 11,244 million yen related to orders for systemdevelopment as described above and expenses of 8,625
million yen related to interest repayment because theCompany made an additional provision for loss on interest
repayment of 12,384 million yen based on the recent
situations of interest repayment claims and the reversal of
the allowance for doubtful accounts associated withinterest repayment’s waiver of principal of 3,759 million
yen. With respect to other expenses, the expenses related
to advertising necessary to attract customers, such as
advertising expenses and sales promotion expenses, were
12,434 million yen (up 13.3% year on year), and the laborcosts were 15,680 million yen (up 9.9% year on year).
(Operating profit)
As a result of the above factors, for the consolidated fiscal
year under review, the AIFUL Group recorded an operating
profit of 2,492 million yen, which was a decrease of 4,517
million yen from the previous consolidated fiscal year
(down 64.4% year on year).
(Ordinary profit)
In the consolidated fiscal year under review, ordinary profit
decreased 4,575 million yen from the previous
consolidated fiscal year, to 2,823 million yen (down 61.8%
year on year). The main factor for the decrease was adecrease of operating profit by 4,517 million yen. With
respect to others, non-operating income of 359 million
yen was recorded (down 35.5% year on year) and nonoperating expenses of 28 million yen were posted (down
83.0% year on year).
(Profit attributable to owners of parent)
In the consolidated fiscal year under review, profit
attributable to owners of parent decreased 3,318 million
yen from the previous consolidated fiscal year, to 3,958
million yen (down 45.6% year on year). The main factor
for the decrease was a decrease of ordinary profit by 4,575
million yen. With respect to others, a gain on reversal ofshares acquisition rights of 703 million yen was recorded
as extraordinary income, and a loss attributable to noncontrolling interests related to AIRA & AIFUL PublicCompany Limited of 1,012 million yen was posted.
(Assets)
Total assets on a consolidated basis increased 65,994
million yen or 10.7% compared to the end of the previous
fiscal year, to 682,645 million yen at the end of the fiscal
year ended March 2018. This was primarily due to anincrease of 60,077 million yen in operating loans.
(Liabilities)
Total liabilities at the end of fiscal year ended March 2018
were 563,238 million yen, an increase of 58,236 million
yen or 11.5% compared with the previous fiscal year-end.
The principal factor contributing to this increase was anincrease of 89,813 million yen in loans payable.

(Net assets)
Net assets increased 7,757 million yen compared with theprevious fiscal year-end, to 119,407 million yen. This waslargely attributable to an increase in retained earnings andnon-controlling interests. The shareholders’ equity ratio
became 16.7%.

Regarding dividend policy
The return of profits to shareholders is a management priority
for the AIFUL Group. The Group’s basic policy calls for theconsistent return of profits in line with business results. The
Group aims to maximize shareholder returns and shareholder
value while simultaneously securing stable internal reserves
through medium- to long-term profit growth.
However, the financial burden associated with claims forinterest repayments is still heavy, creating difficult conditions
for the distribution of profits. In addition, losses in the
distributable amount continue. The Group therefore regretted
to announce that we were unable to pay any dividends for the
fiscal year under review.
The AIFUL Group has been dealing with the principal
management issue of interest repayment claims. At the sametime, it is taking measures to diversify the financial businessand increase operating assets, and is also working to diversify
funding channels. The Group is determined to return to thebasic policy outlined above by improving its financial positionand profitability.
The Company stipulates in its Articles of Incorporation thatthe dividend of surplus may be paid by resolution of the Boardof Directors, and that interim dividends may be paid.

Regarding the risk of business, etc.
Of the matters relating to the business situation and theaccounting situation, etc., the major matters that may have asignificant impact on the judgment of investors include thosedescribed below. The policy of the AIFUL Group is to recognize
the possibility that these risks may arise, and to endeavor to
avoid their occurrence and respond to them if they do arise. In
addition, the statements described below do not include all
the risks of the AIFUL Group’s business, etc. There is apossibility that a new business risk, etc. may arise due tovarious uncertain causes in the future.
In addition, the matters relating to the future included in
the sentences were judged by the AIFUL Group as of the dateof submission of the Securities Report.
Risk due to the causes relating to the management
environment
The financial position and operating results of the AIFULGroup rely to a significant extent on multiple factors. Of thesefactors, the main assumed factors are as follows.
(1) Economic circumstances and market trends of Japan,
especially the trends of the consumer credit market(2) Intensifying competition with other companies in the

AIFUL CORPORATION Annual Report 201823

consumer finance market(3) Trend of change in persons with multiple debts(4) Change in the related laws and regulations surrounding
the consumer credit market, especially the legal framework
relating to the statutory maximum interest rate, and thesituations of the enforcement of such laws and regulations
and the judicial judgment relating to the said related laws
and regulations, change in the accounting standards
following them and other situations of lawsuits regarding
interest repayment claims, etc.
(5) Trend of the market interest rate, trend of the corporate
bond/securitization markets, and change in the ability toraise funds due to change in the credit strength of AIFUL(6) Change in the capability of the AIFUL Group to provide
credit as well as number of accounts, average balance ofuse per account, average contracted interest rate and rateof default(7) Change in expenses including various fees, advertisingexpenses and labor costs, or losses(8) Occurrence of negative reports and deplorable events
against the AIFUL Group and the consumer financeindustry
AIFUL established the risk management committee as theorgan under the direct control of the Board of Directors from
April 2007 and established a system to control and supervise
the risk arising in each department and the risk threatening
the corporate activities in a cross-sectional manner, preventthe realization of risk and respond to an emergency. Despite
these actions, however, due to changes in the management
environment, including the strengthening or easing of thelegal regulations, the competition situation, changes in theeconomy and other causes, the financial position andoperating results of the AIFUL Group may be affected. In
addition, there is a possibility that the AIFUL Group may beforced to review its strategies.
Legal regulations, etc.
1.System for compliance with laws and regulations
AIFUL established the compliance committee as theadvisory body under the direct control of the Board of
Directors to prevent the violation of laws and regulations
related to the money lending business, information leaks
and other deplorable events. By gathering information
regarding compliance and taking preventive measuresagainst the violation of laws and regulations, thecompliance system is verified/ascertained on a companywide basis. In addition, the AIFUL Group compliancecommittee is established to share the unified corporate
ethics in the entire Group and establish the compliancesystem of the whole Group. Moreover, in April 2007, theinternal control functions were strengthened, including theunified control of the hotline (internal reporting system),the strengthening of the function for gathering
information regarding compliance and the unification of
the function relating to awards and punishment tostrengthen the system for compliance with laws andregulations.

24

AIFUL CORPORATION Annual Report 2018

With respect to others, business rules with the functionof enhancing compliance with laws and regulations were
established, knowledge of laws and regulations was
obtained through internal education, the spread of theawareness of compliance with laws and regulations wasstrengthened, the effectiveness of internal audits such as
call monitoring was strengthened, and other similar
measures were taken. In addition, the system for reviewing
such measures, etc. from time to time was established.
Despite these actions, if any wrongdoing or deplorable
event occurs, including acts in violation of laws andregulations, by employees, etc. of the AIFUL Group,
administrative disposition and other legal measures will be
executed and the financial position and operating resultsof the AIFUL Group may be affected.
2. Business regulations, etc.
(1) Business regulations of the Money Lending Business
Act/the Installment Sales Act
With respect to the legal regulations on business, theMoney Lending Business Act is applied to the loanbusiness, including the consumer finance business, whichis the main business of the AIFUL Group. The Money
Lending Business Act imposes various types of businessregulations (prohibited acts, restrictions relating to interest/
guarantee fees, etc., investigation of repayment ability,
prohibition of excessive loans, etc., posting of a notice ofloan conditions, etc., prohibition of the advertisement ofloan conditions and other extravagant advertisements,
delivery of a document before the conclusion of anagreement, delivery of a document at the time of
concluding an agreement, delivery of evidence of receipt,
maintenance of books, inspection of books, regulations on
acts of collection, return of claim deeds, posting of a sign,
regulations on transfer of receivables, etc., duty of
disclosure of the record of transactions, placement ofheads of money lending operations, regulations on
carrying the certificate, etc.).
With respect to others, the credit card business andthe installment sales finance business of the AIFUL Groupare subject to a variety of business regulations(presentation of transaction conditions, delivery of adocument, restriction on the amount of damages, etc. due
to cancellation of the agreement and other causes,
defense against the provider of installment sales finance,
investigation of the estimated amount that can be paid,prohibition of credit exceeding the estimated amount thatcan be paid, prevention of consumer issues related tocontinual service, etc.) because the Installment Sales Act isapplied.
(2) Self-regulation by the Japan Financial Service
Association
The Japan Financial Service Association was established in
December 2007 as the self-regulatory organization set
forth in the Money Lending Business Act that established
the basic rules for self-regulation and stipulated the rules
relating to the prevention of excessive loans, etc. and therules relating to advertisements and solicitation. Inaddition, in the rules for operations relating to audits of
the Japan Financial Service Association, to enhance theireffectiveness, the authority of investigation/audit ofmembers of the Association and the authority ofpunishment, such as the imposition of fines for default/
disposition of expulsion on members of the Association
who do not comply with the self-regulations are granted
to the Japan Financial Service Association. AIFUL is amember of the Japan Financial Service Association and istherefore subject to these regulations.
The AIFUL Group endeavors to strengthen thecompliance system through the establishment of its
internal rules and the thorough training of employees
under the laws and regulations described in (1) above andthe matters set forth in various rules established by theJapan Financial Service Association.
However, if administrative disposition is imposed
because of the violation of laws and regulations by
employees, and business regulations are strengthened
through new laws and regulations and the revision ofrules, the financial position and operating results of the
AIFUL Group may be affected.
3. Loan interest rate
On June 18, 2010, the revised Money Lending Business Act
was enforced in full, and the upper limit of the interest rate
under the Act Regulating the Receipt of Contributions, theReceipt of Deposits and Interest Rates (capital subscriptionlaw) was thereby lowered from 29.2% per annum to 20%
per annum, and the deemed repayment system under the
Money Lending Business Act as described below wasabolished.
In response, AIFUL lowered the upper limit of theinterest rate of loans to customers who enter into a new
agreement and customers who can enter into anagreement according to the new standards for loans on
and after August 1, 2007 before the said enforcement infull of the revised Act. The current upper limit of theinterest rate is 18.0% or less per annum. If the upper limitof the interest rate of the Interest Rate Restriction Act andthe Act Regulating the Receipt of Contributions, theReceipt of Deposits and Interest Rates (capital subscriptionlaw) is lowered further as a result of revisions to the laws
and regulations in future, and if the interest rate withrespect to the interest rate agreement with customers who
have already concluded the agreement has to be lowered
further because of the economic situation and social issueof an increase in consumers who demand protection underlaws, among other cases, there is a possibility that thefinancial position and operating results of the AIFUL Groupmay be affected.
4. Losses from interest repayment
In Paragraph 1, Article 1 of the Interest Rate Restriction
Act, the agreement on interest for loans for consumption
for the purpose of money shall be null and void for thepart exceeding the maximum limit of interest (an amountcalculated at the following interest rates: when theprincipal is less than 100,000 yen, 20% per annum; when
the principal is not less than 100,000 yen and less than 1
million yen, 18% per annum; when the principal is not lessthan 1 million yen, 15% per annum). However, under theInterest Rate Restriction Act before the enforcement in fulldescribed above, when a debtor voluntarily pays the said
excess part, the return thereof may not be demanded.
In addition, in Article 43 of the Money Lending
Business Act before the said enforcement in full describedabove, when the document, etc. set forth in Article 17 of
the Money Lending Business Act is delivered to a debtor,
etc. at the time of the loan of money and the debtor
voluntarily pays the said excess part as interest, if the
document set forth in Article 18 of the Money Lending
Business Act is delivered immediately at the time of
payment and the said payment is the payment under theagreement whose document, etc. as set forth in Article 17of the Money Lending Business Act is delivered,irrespective of the provisions of Paragraph 1, Article 1 ofthe Interest Rate Restriction Act, it shall be deemed as
being the effective repayment of interest obligations (thepayment according to the said provisions shall behereinafter referred to as the “deemed repayment”).
However, in the judgment of the Supreme Court ofJanuary 13, 2006, the special provisions that demand the
lump-sum repayment of the remaining obligations when
the repayment of the agreed interest including the partexceeding the upper limit of the interest rate of the Interest
Rate Restriction Act is delayed is practically forcing thepayment of the part exceeding the maximum limit of theinterest rate set forth in Paragraph 1, Article 1 of theInterest Rate Restriction Act, and is not the case that a
debtor voluntarily makes payment unless there are special
circumstances. In addition, in the said judgment, Paragraph
2, Article 15 of the Ordinance for Enforcement of the
Money Lending Business Act, whereby the statement of
the date of the agreement, etc. in the evidence of receipt
may be replaced with the agreement number, is null andvoid because it exceeds the scope of delegation by an act.
The AIFUL Group accepted the said judicial judgmentwith sincerity and took actions such as switching to theagreement reflecting it. The agreed interest rate of someof the loan products that the AIFUL Group currently
provides includes the part exceeding the maximum limit of
the interest rate set forth in the Interest Rate Restriction
Act. In this regard, in our industry, multiple lawsuits
demanding the return of such excess part were brought
due to deficiency in the matters stated in the agreement
as set forth in the Money Lending Business Act, among
other reasons, and the judgment approving it was also
rendered.
Such multiple lawsuits demanding the return of excessinterest were brought against the AIFUL Group. There is acase where the claim of the plaintiff that the AIFUL Group,
which engages in the money lending business, does notmeet the requirements necessary for the application of thedeemed repayment under the Money Lending Business
Act, was approved, or that an excess rate was returned by

AIFUL CORPORATION Annual Report 201825

settlement. Such interest repayment claims have decreased
steadily from their peak; however, uncertainty still
continues. If interest repayment claims increase beyond theassumptions of the AIFUL Group in the future or if a
judicial judgment that is disadvantageous to the money
lenders is rendered, there is a possibility that the financial
position and operating results of the AIFUL Group may beaffected.
In addition, on October 13, 2006, the JapaneseInstitute of Certified Public Accountants publicly
announced “treatment in audit relating to the posting ofprovisions related to losses from interest repayment claimsof consumer finance companies, etc.” (Industry-SpecificCommittee Report No. 37 (hereinafter referred to as the“No. 37 report”)), which would be applied to the audits
for the interim consolidated fiscal period and the interim
fiscal period ending on and after September 1, 2006
(including the audits for the consolidated fiscal year andthe business year that includes the said interim
consolidated fiscal period and the said interim fiscal
period).
The AIFUL Group also posted the provisions for losses
on interest repayment according to the No. 37 report(including the estimated amount of return included in theallowance for doubtful accounts because preferential
appropriation to operating loans was estimated).
However, accounting estimates were made based on
the actual records of repayment in the past and the recent
situations of repayment, and thus if repayment beyond thelevel of the assumptions of those estimates is claimed,
there is a possibility that the financial position andoperating results of the AIFUL Group may be affected.
5. Restrictions on total lending
On June 18, 2010, the revised Money Lending Business Act
was enforced in full and the so-called restrictions on total
lending were introduced. It prohibited loans beyond
repayment ability, such as loans whose total loan balanceexceeds one third of annual income, in principle. AIFUL
extended loans according to the loan standards that weremade stricter with the introduction of the restrictions on
total lending in sight before the said enforcement in full of
the revised Act. However, if the interest income and loanbalance decrease beyond the assumption, there is apossibility that the financial position and operating resultsof the AIFUL Group may be affected.
6. Other legal relations(1) The Act on the Protection of Personal Information andtreatment of personal information
On April 1, 2005, the Act on the Protection of Personal
Information (hereinafter referred to as the “Personal
Information Protection Act”) and various guidelines
relating to the protection of personal information
established by each ministry and government officeaccording to the said Act (hereinafter referred to as the“Guidelines”) were enforced. In the Personal Information
Protection Act, a certain duty to report when it is judged

26

AIFUL CORPORATION Annual Report 2018

necessary is imposed on business operators handlingpersonal information, and if a certain duty of the said Act
is violated and the necessity is approved to protect therights and interests of individuals, the competent ministermay recommend or order that the necessary actions
should be taken. In addition, in the Guidelines, to notify/
clearly indicate/publicly announce the purpose of use of
personal information, to obtain consent relating to thehandling, etc. of personal information from debtors
according to necessity, to supervise the persons to whom
the handling of personal information is contracted out, if
any, to establish the system as safety control measuresfrom organizational/human/technological perspectives,
and to publicly announce the basic policy relating to thehandling of personal information, among others, arerequired.
According to these requirements, the AIFUL Group
conducted a review, etc. of the situation of handling of
personal information, among others, and established theprivacy policy. It also took measures to prevent any leak of
personal information from the AIFUL Group. However, if aleak of personal information should occur due to any
reasons and if it receives a recommendation or order fromthe competent minister, there is a possibility that thefinancial position and operating results of the AIFUL Groupmay be affected.
(2) Other impact of revision to laws
If the Bankruptcy Act, the Civil Rehabilitation Act, the Act
on Special Conciliation for Expediting Arrangement ofSpecified Debts and other various laws and regulations arerevised, depending on what is revised, there is a possibility
that the financial position and operating results of the
AIFUL Group may be affected.
Risk of fund raising
The AIFUL Group conducts fund raising by loans fromfinancial institutions, syndicate loans, corporate bonds, theliquidation of receivables and other means. However, if itcannot raise funds due to a decline in the credit capability
and a change in the ratings of AIFUL, there is a possibility
that the financial position and operating results of the
AIFUL Group may be affected.
In addition, the procurement interest rate related tofund raising may change according to the market
environment, etc. Against it, the risk of the fluctuation of
the interest rate is mitigated. However, depending on the
degree of any increase in the interest rate in future, thefund raising of the AIFUL Group may be affected, andaccordingly there is a possibility that the financial positionand operating results of the AIFUL Group may also beaffected.
Risk of bad debts, etc.
In the AIFUL Group, investigation of the repayment ability
based on the data of the personal credit information
agencies and its unique credit system (including credit limit
monitoring during the period of transactions withcustomers) and the credit standards were made stricter.

Despite these measures, however, if the financing ofmany customers worsens due to the future economic
circumstances and the establishment of any legal system,
among other causes, the market scale of our industry will
shrink and the credit costs, such as bad debts written off,
will increase, and accordingly there is a possibility that thefinancial position and operating results of the AIFUL Groupmay be affected.
Regarding confusion, failures and other damage caused
to the information network system, the Internet service,
etc. or the technological system
The AIFUL Group relies on the information/technology
systems either inside or outside to manage business. To
manage various kinds of information that constitute thebusiness of the AIFUL Group, including the network ofoffices and stores and data of accounts, reliance on
software, systems and networks has been deepening.
There is a possibility that hardware and software used by
the AIFUL Group may be affected by damage orsuspension, etc. due to human error, natural disaster,
power failure, computer virus, external cyber-attack orsimilar events or the suspension, etc. of support services
from telephone companies, Internet providers and otherthird parties.
Such confusion, faults, delays or any other failures of
the information/technology systems may cause a decreasein the number of accounts opened and a delay in therepayment of the outstanding balance, and the trust of
consumers in the business of the AIFUL Group may
therefore decrease. As a result, there is a possibility thatthe financial position and operating results of the AIFULGroup may be affected.

In addition, these shareholders have maintained stableshareholdings; however, if they dispose of part of theirshares in the future, the supply of the shares of AIFUL on
the market will increase. As a result, there is a possibility
that the stock price of AIFUL may be affected.
Regarding the occurrence of a disaster, etc.
The AIFUL Group endeavors to perform the maintenanceof facilities and implement measures at normal times sothat the business can be operated in a stable manner if a
disaster or emergency occurs. However, if a disasterbeyond the forecast occurs and the facilities cannot be
used in a normal manner, and if the expenses for bad
debts written off increase because the situations ofcustomers who incur damage due to a disaster worsened,
among other similar cases, there is a possibility that thefinancial position and operating results of the AIFUL Groupmay be affected.

Regarding the audit certificate
The consolidated financial statements and notes presented inthis Annual Report are the changed forms of the statementsof the Securities Report and are not audited by the accounting
auditor.
In addition, the Securities Report is audited with respect tothe consolidated financial statements for the consolidated
fiscal year (from April 1, 2017 to March 31, 2018) by Deloitte
Touche Tohmatsu LLC according to the provisions of Paragraph
1, Article 193-2 of the Financial Instruments and Exchange
Act.

Risk in the overseas business
The AIFUL Group is expanding its business not only inJapan, but also in Southeast Asia. In business expansion
into this overseas market, there are inherent risks of an
unexpected change in laws or regulations that differ fromthose in Japan, an economic downturn, a drop in
consumer demand, the disorder of the political situation,and the fluctuation of exchange rates. If such a situationarises, there is a possibility that the financial position andoperating results of the AIFUL Group may be affected.
Regarding holding and disposal of the shares of AIFULby the representative director and his relatives, etc.
As of the end of the fiscal year under review, AIFUL’srepresentative director, Yoshitaka Fukuda and his founding
families are the shareholders with about 39% of the issued
shares of AIFUL, together with those of the affiliatedcorporations. As a result, they can exercise an influence on
important decision-making that affects the businessactivities of AIFUL, including important corporatetransactions, such as the transfer of the right of control of
AIFUL, business reconstruction and reorganization,
investment in other business or assets, and conditions for
future fund raising.

AIFUL CORPORATION Annual Report 201827

Consolidated Financial Statements and Others

Consolidated Balance Sheets
As of March 31
AIFUL CORPORATION and Consolidated Subsidiaries(Millions of yen)
2018

2017

AssetsCurrent assets
Cash and deposits¥ 29,327¥ 33,644

Operating loans

412,706

352,628

Accounts receivables - installment

97,252

94,272

Operational investment securities

940

694

Customers’ liabilities for acceptances and guarantees

124,883

114,452

Other operating receivables

6,725

5,997

Purchased receivables

2,874

2,941

Work in process

—

7,305

Deferred tax assets

627

796

14,688

11,839Other
Allowance for doubtful accounts(41,344)(42,971)

Total current assets

648,681581,600

24,357

24,132

Accumulated depreciation(17,933)(17,655)

Buildings and structures, net

6,424

6,476

Non-current assets
Property, plant and equipment
Buildings and structures

Machinery and equipment

419

392

Accumulated depreciation

(305)

(283)

Machinery and equipment, net

113

109

Furniture and fixtures

6,993

6,499

Accumulated depreciation(5,261)(5,006)

Furniture and fixtures, net

1,732

1,492

Land

8,899

8,899

Leased assets

1,378

873

Accumulated depreciation

(508)

(277)

Leased assets, net

870

596

Construction in progress

93

88

18,133

17,664

3,094

3,009

Total property, plant and equipment
Intangible assets
Software
Other
Total intangible assets

103

104

3,198

3,113

Investment and other assets
Investment securities

4,052

7,524

Claims provable in bankruptcy

27,787

29,323

Lease and guarantee deposits

1,911

1,605

Other

4,496

3,019

Allowance for doubtful accounts(25,614)(27,200)

Total investments and other assets

12,633

14,27233,96435,050¥ 682,645¥ 616,651

Total non-current assets
Total assets

28

AIFUL CORPORATION Annual Report 2018

Consolidated Balance Sheets(Millions of yen)
2018

2017

Liabilities
Current liabilities
Notes & accounts payable—trade¥ 16,196¥ 15,620

Acceptances and guarantees

124,883

114,452

Short-term loans payable

83,32573,610Current portion of bonds

1,300

2,600

Current portion of long-term loans payable

53,482

32,138

Income taxes payable

544

661

Allowance for bonuses

991

913

2,807

3,300

440

423

Other

23,36831,153

Total current liabilities

307,340

274,873

7,200

30,100220,529

161,774334

252

Provision for loss on interest repayment

24,331

34,640

Other

3,503

3,360

255,898

230,128

563,238

505,002

Capital stock

143,454

143,454

Capital surplus

13,948

13,953Retained earnings(40,208)(43,332)

Treasury shares(3,110)(3,110)114,083

110,964

(184)

(225)

Provision for point card certificatesDeferred installment income

Non-current liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities

Total non-current liabilities
Total liabilities
Net Assets
Shareholders’ equity

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment

315—

Total accumulated other comprehensive income

130

(225)

234

910

Shares acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

4,957

—

119,407

111,649¥ 682,645¥ 616,651

AIFUL CORPORATION Annual Report 201829

Consolidated Financial Statements and Others

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Years ended March 31
AIFUL CORPORATION and Consolidated Subsidiaries

Consolidated Statements of Income(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)2017(Apr. 1, 2016 to Mar. 31, 2017)

Operating revenue
Interest on loans receivable¥ 56,305¥ 47,869

Revenue from credit card business

16,025

15,422

Revenue from credit guarantee

12,992

12,494

13

1

Other financial revenue
Other operating revenue
Collection from purchased receivable

2,074

2,096

Recoveries of written off claims

6,411

5,678

Sales of software development

12,803

—

Other

8,761

7,887

Total other operating revenue

30,052

15,662

115,389

91,450Total operating revenue
Operating expenses
Financial expenses
Interest expenses

5,783

4,762

Interest on bonds

813

2,385

Other

963

882

7,560

8,030

Cost of purchased receivable

1,497

1,476

Cost of sales of software development

11,244—73

61

12,815

1,537

Provision for point card certificates

2,807

3,300

Commissions

12,962

11,835(2)(2)

Provision of allowance for doubtful accounts

20,02020,744

Provision for loss on interest repayment

12,384—

Employees’ salaries and bonuses

11,40910,232

Total financial expenses
Cost of sales

Other
Total cost of sales
Other operating expenses

Provision of allowance for investment loss

Provision for bonuses

972

895

Retirement benefit expenses

474

470

Sales promotion expenses

8,841

7,522

Other

22,65019,875

Total other operating expenses

92,52074,872

Total operating expenses
Operating profit

30

AIFUL CORPORATION Annual Report 2018

112,897¥

2,492

84,440¥7,009

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)2017(Apr. 1, 2016 to Mar. 31, 2017)

Non-operating income
Interest on loans receivable

¥

65

¥

25

Foreign exchange gains

68—

Rent on real estate

73

55

Other

152

476

Total non-operating income

359

557

Interest expenses

1—

Foreign exchange losses—

86

Non-operating expenses

Provision for doubtful accounts

8

—

Other

17

82

Total non-operating expenses

28

168

2,823

7,399

Gain on reversal of shares acquisition rights

703—

Total extraordinary income

703

—

3,527

7,399

Ordinary profit
Extraordinary income

Profit before income taxes
Income taxes - current

437

440

Income taxes - deferred

144

(318)

Total income taxes

581

122

Profit

2,945

7,276

Profit (Loss) attributable to non-controlling interests(1,012)—

Profit attributable to owners of parent

¥

3,958

Consolidated Statements of Comprehensive Income

7,276(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)

Profit

¥

¥

2,945

2017
(Apr. 1, 2016 to Mar. 31, 2017)
¥

7,276

Other Comprehensive income
Valuation difference on available-for-sale securities

40

(29)

Foreign currency translation adjustment

583—

Total other comprehensive income

623

(29)

3,569

7,246

4,289

7,246

(719)

—

Comprehensive income
Comprehensive income attributable to
Owners of parent
Non-controlling interests¥

AIFUL CORPORATION Annual Report 201831

Consolidated Financial Statements

Consolidated Statements of Change in Shareholders’ Equity
Years ended March 31
AIFUL CORPORATION and Consolidated Subsidiaries

2018(Millions of yen)
Shareholders’ equity

Balance at April 1, 2017

Capitalstock

CapitalsurplusRetainedearnings

Treasuryshares¥ 143,454¥ 13,953¥ (43,332)¥ (3,110)

0

0

Total
shareholders’equity¥ 110,964

Changes during the period
Issuance of new shares-exercise ofshares acquisition rights
Profit attributable to owners of parent

0
3,958

Purchase of treasury shares

3,958
(0)

Change of scope of consolidation(1)

Capital increase of consolidated subsidiaries

(3)

(834)

(0)
(835)
(3)

Net changes in accounts other thanshareholders’ equity
Total change during fiscal year
Balance at March 31, 2018

0

(4)

3,123

(0)

3,119

¥ 143,454¥ 13,948¥ (40,208)¥ (3,110)¥ 114,083(Millions of yen)
Accumulated other comprehensive income

Balance at April 1, 2017

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment¥ (225)—Total¥ (225)

Sharesacquisitionrights

Noncontrollinginterests

Total
net assets

¥ 910

—

¥ 111,649

Changes during the period
Issuance of new shares-exercise ofshares acquisition rights

0

Profit attributable to owners of parent

3,958

Purchase of treasury shares(0)Change of scope of consolidation(835)

Capital increase of consolidated subsidiaries
Net changes in accounts other thanshareholders’ equity

32

(3)
40

315

356

(675)

4,957

4,638

Total change during fiscal year

40

315

356

(675)

4,957

7,757

Balance at March 31, 2018

¥ (184)

¥ 315

¥ 130

¥ 234

¥ 4,957¥ 119,407

AIFUL CORPORATION Annual Report 2018

Consolidated Statements of Change in Shareholders’ Equity

2017(Millions of yen)
Shareholders’ equity

Balance at April 1, 2016

Capitalstock

CapitalsurplusRetainedearnings

Treasuryshares¥ 143,415¥ 13,914¥ (50,609)¥ (3,110)

38

38

Total
shareholders’equity¥ 103,609

Changes during the period
Issuance of new shares-exercise ofshares acquisition rights
Profit attributable to owners of parent

77
7,276

Purchase of treasury shares

7,276
(0)

(0)

Change of scope of consolidation—

Capital increase of consolidated subsidiaries—

Net changes in accounts other thanshareholders’ equity
Total change during fiscal year
Balance at March 31, 2017

38

38

7,276

(0)

7,354

¥ 143,454¥ 13,953¥ (43,332)¥ (3,110)¥ 110,964(Millions of yen)
Accumulated other comprehensive income

Balance at April 1, 2016

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment¥ (195)—Total¥ (195)

Sharesacquisitionrights

Noncontrollinginterests

Total
net assets

¥ 836

—

¥ 104,250

Changes during the period
Issuance of new shares-exercise ofshares acquisition rights

77

Profit attributable to owners of parent

7,276

Purchase of treasury shares(0)Change of scope of consolidation—

Capital increase of consolidated subsidiaries—

Net changes in accounts other thanshareholders’ equity

(29)

—

(29)

74

—

44

Total change during fiscal year

(29)

—

(29)

74

—

7,398

Balance at March 31, 2017

¥ (225)—¥ (225)¥ 910—¥ 111,649

AIFUL CORPORATION Annual Report 201833

Consolidated Financial Statements

Consolidated Statements of Cash Flows
Years ended March 31
AIFUL CORPORATION and Consolidated Subsidiaries(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)2017(Apr. 1, 2016 to Mar. 31, 2017)

Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for investment loss
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for point card certificates
Increase (decrease) in allowance for loss on interest repayment
Interest and dividend income
Interest expenses
Gain on reversal of shares acquisition rights
Decrease (increase) in interest on loans receivable
Decrease (increase) in accounts receivable – installment
Decrease (increase) in other operating receivable
Decrease (increase) in purchased receivable
Decrease (increase) in claims provable in bankruptcy
Decrease (increase) in work in process
Decrease (increase) in other current assets
Increase (decrease) in other current liabilities
Other
SubtotalInterest and dividend income
Interest expenses paid
Income taxes refund
Income taxes paid
Cash flow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Other
Cash flows from investing activities
Cash flows from financing activities
Increase in short-term loans payable
Decrease in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from issuance of common shares
Proceeds from share issuance to non-controlling shareholders
Purchase of treasury shares
Other
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from merger
Cash and cash equivalents at end of period

34

AIFUL CORPORATION Annual Report 2018

¥

3,527
2,384
(2)
(3,667)78(493)(10,308)
(101)
1
(703)
(54,585)(2,979)
(728)
67
1,536
7,305
(2,789)(7,639)(671)(69,769)
101
(2)
6
(558)
(70,221)

¥

7,399
2,338
(2)
(2,471)(1)(80)(28,798)(52)——(37,081)(5,070)
(230)
(87)
2,622
(5,607)(380)
16,764(518)(51,256)
52
—
118
(136)
(51,222)(1,189)
(983)
(417)
(956)
(3,546)(1,170)(1,043)(2,175)(1,802)(6,192)898,299(888,878)
127,758(47,659)
7,200(31,400)
0
2,460
(0)
(219)
67,560244(5,963)33,5601,726¥ 29,323

853,380(847,760)
76,450(32,207)
1,300
—
52
—
(0)
(160)
51,05414(6,345)39,906—¥ 33,560

Notes to Consolidated Financial Statements
AIFUL CORPORATION and Consolidated Subsidiaries

Basic important matters for the preparation of the consolidated financial statements
1. Matters regarding the scope of consolidation(1) Number of consolidated subsidiaries: five companies
Names of consolidated subsidiaries
LIFECARD CO., LTD., BUSINEXT CORPORATION, AsTry Loan
Services Corporation, AIRA & AIFUL Public Company Limited,and one other company
AIRA & AIFUL Public Company Limited, which was a
non-consolidated subsidiary in the previous consolidated fiscal
year, is included in the scope of consolidation from theconsolidated fiscal year under review because its importancehas increased.
(2) Name, etc. of the non-consolidated subsidiaries
Sumishin Life Card Company, Limited. and seven othercompanies(Reasons for exclusion from the scope of consolidation)
Each non-consolidated subsidiary is small in scale and each of
the total assets, operating revenue, profit or loss
(corresponding to equity) and retained earnings(corresponding to equity) of those eight companies inaggregate has an insignificant impact on the consolidated
financial statements, and thus those subsidiaries are excluded
from the scope of consolidation.
2. Matters regarding application of the equity method
Each of the eight non-consolidated subsidiaries and two affiliatedcompanies to which the equity method is not applied are small inscale and each of the total profit or loss (corresponding to equity)and retained earnings (corresponding to equity) of those tencompanies has an insignificant impact on the consolidated
financial statements, and thus those subsidiaries and affiliatedcompanies are excluded from the scope of application of theequity method.
3. Matters regarding the fiscal year, etc. of the consolidated
subsidiaries
Of the consolidated subsidiaries, the closing date of AIRA & AIFUL
Public Company Limited is December 31.
In the preparation of the consolidated financial statements,
the financial statements as of the said date were used, and forimportant transactions occurring between the said date and theclosing date on a consolidated basis, the adjustments necessary
for consolidation were made.
4. Matters regarding the accounting policy(1) Valuation standards and valuation method for important
assets(i) Securities
Other securitiesThose that have a market value
The market value method based on the market value, etc.
on the consolidated closing date (The valuation difference isposted directly into net assets, and the cost of securities

sold is calculated using the moving average method).
Those that do not have a market value
Moving average cost method
In addition, with respect to investments in capital ofinvestment limited partnerships and other similar
partnerships (those that are deemed to be securities underParagraph 2, Article 2 of the Financial Instruments andExchange Act), they are based on the latest statements ofaccounts available according to the date of the report of thefinancial statements set forth in the partnership agreement,
and the method of incorporating the net value
corresponding to the equity is applied.
(ii) Derivatives
Market value method(iii) Purchased receivables
Cost method based on the actual cost method(2) Method of depreciation of significant depreciable assets(i) Property, plant and equipment (exclusive of leased assets)
AIFUL and its consolidated subsidiaries adopted thedeclining balance method.
However, the consolidated subsidiaries adopted thestraight-line method for the buildings (excluding
appurtenant facilities) acquired on and after April 1, 1998.
In addition, the main service life is as shown below.
Buildings and structures
2 to 62 years
Machinery and equipment
4 to 17 years
Furniture and fixtures
2 to 20 years(ii) Intangible assets (exclusive of leased assets)
The straight-line method is adopted.
In addition, with respect to software for internal use,
amortization is based on the internal usable period (fiveyears).
(iii) Leased assets
Leased assets in relation to the finance lease transaction
with transfer of the ownership right
The method of depreciation applied to self-owned property,
plant and equipment is used.
Leased assets in relation to the finance lease transaction
without transfer of the ownership right
The lease period is treated as the service life, and thestraight-line method in which the residual value is madezero is adopted.
(3) Standards for posting significant provisions(i) Allowance for doubtful accounts
To prepare for loans and other uncollectible receivables, forgeneral accounts receivable, the amount considerednecessary taking into account the loan loss ratio, etc. is
examined, and for doubtful accounts receivable and otherspecific receivables, recoverability is examined individuallyand then the estimated uncollectible amount is posted.
(ii) Allowance for bonuses
To prepare for the payment of the bonus payable to staff

AIFUL CORPORATION Annual Report 201835

workers, of the estimated future payment amount, theamount of the burden for the consolidated fiscal year underreview is posted.
(iii) Provision for point card certificates
Under the point system for the purpose of the promotion of
the use of cards, the estimated amount of future use for the
consolidated fiscal year under review is posted to prepare
for the use of points granted to the card members.
(iv) Provision for loss on interest repayment
To prepare for future interest repayment, the amount of
repayment is reasonably estimated and posted based on theactual repayments in the past and considering the latest
repayment situation.
(4) Standards for posting important revenues and expenses(i) Interest on loans receivable
Interest on loans receivable is recorded on an accrual basis.
In addition, with respect to the accruals of interest in
relation to “Operating loan,” either the interest rate underthe Interest Rate Restriction Act or the contract interest
rate, whichever is lower, is used in posting.
(ii) Standards for posting revenue in relation to installment
salesWith respect to the add-on type of customer fees andmember store commissions, they are collectively posted in“Deferred installment income” in a lump sum, and revenue
is posted when the time for charging the fee occurs. With
respect to the customer fees that are charged on the
declining balance and the revolving-type customer fees,
revenue is posted when the time for charging the fee
occurs. In addition, the method of the allocation of revenueof the department using the add-on type is the method
called the 78 allocation method.
(iii) Revenue from credit guarantee
Revenue is posted according to the method of charging on
the declining balance.
(iv) Standards for posting revenues and expenses in relation to
the development of software to be produced on a built-toorder basis
The completed contract basis is applied.
(v) Account processing of interest on loans
With respect to interest on loans, the portion corresponding
to financial credits is processed as “Operating expenses”(financial expenses), and the rest is processed as “Nonoperating expenses” (interest expenses).

36

AIFUL CORPORATION Annual Report 2018(5) Standards for translation of important assets or liabilities
denominated in foreign currency into the currency of Japan
Monetary claims and liabilities denominated in foreign
currency are translated into Japanese yen at the spot exchange
rate on the consolidated closing date, and translation
adjustments are processed as gains or losses. In addition, theassets and liabilities of controlled foreign corporations, etc. aretranslated into Japanese yen at the spot exchange rate on the
consolidated closing date, their revenues and expenses aretranslated into Japanese yen at the average rate during the
fiscal period, and the translation adjustments are included in
the foreign currency translation adjustment and noncontrolling interests under net assets.
(6) Important hedge accounting method- Method of hedge accounting
With respect to the interest cap trading, the requirements
for special treatment are met and thus the special
treatment is adopted.
- Means of hedge and items to be hedged
Means of hedge --- interest cap trading
Items to be hedged --- loans with variable interest rates- Policy for hedge
With respect to the interest cap trading, according to the
management rules of AIFUL, the risk of interest rate
fluctuations in relation to the items to be hedged is hedged.
- Method of evaluation of the effectiveness of the hedge
With respect to the interest cap trading for which thespecial treatment is applied, the evaluation of theeffectiveness is omitted.
(7) Scope of cash in the consolidated statement of cash flows
With respect to the scope of cash in the consolidated
statement of cash flows, it consists of cash on hand, demand
deposits and short-term investments whose liquidity is high,since the date of maturity occurs within three months from thedate of acquisition, which can be easily realized and which
involves little risk of a change in value.
(8) Account processing of consumption taxes, etc.
In the account processing of consumption taxes, etc., taxes are
not included. However, the consumption taxes, etc. not to be
deducted that are related to assets are posted in “Other”
under “Investments and other assets” and are amortizedaccording to the equal installment method over five years.
(9) Application of the consolidated tax return filing system
The consolidated tax return filing system is applied.

Notes to Consolidated Financial Statements

Accounting standards, etc. not applied- ASBJ Statement No. 29 Accounting Standard for Revenue Recognition, etc. (March 30, 2018)- ASBJ Guidance No. 30 Implementation Guidance on Accounting Standard for Revenue Recognition (March 30, 2018)(1) Outline
They are comprehensive accounting standards in relation to
the recognition of revenues. Revenues are recognized byapplying the following five steps.
Step 1: Identify agreements with customers.
Step 2: Identify the obligation of performance under theagreement.
Step 3: Calculate the transaction price.
Step 4: Allocate the transaction price to the obligation of
performance under the agreement.
Step 5: Recognize revenues when the obligation of
performance is fulfilled or according to theprogress of such fulfilment.

(2) Scheduled date of application
The accounting standards above are planned to be applied
from the beginning of the fiscal year ending March 31, 2022.
(3) Impact of application of those accounting standards, etc.
The amount of impact is assessed at the time of the
preparation of these consolidated financial statements.

Changes in disclosure method
Consolidated Balance Sheets“Allowance for investment loss” under “Current assets,” which waspresented as a separate item in the previous fiscal year, is included
in “Other” under “Current assets” in the presentation because it
was not posted in the fiscal year under review. To reflect thischange in the presentation, the consolidated financial statements
for the previous consolidated fiscal year have been reclassified.
As a result, the loss of 2 million yen presented in “Allowance
for investment loss” on the consolidated balance sheet for theprevious fiscal year was reclassified as “Other” (11,839 million
yen) under “Current assets.”“Machinery, equipment,” which was presented as a separate
item in the previous fiscal year, has been renamed as “Machinery,equipment and vehicles” from the current fiscal year under review
due to the subsidiary company that owns the vehicles being
newly included within the scope of consolidation. To reflect thischange in the presentation, the consolidated financial statements
for the previous consolidated fiscal year have been reclassified.
Consolidated Statements of Income
In the previous consolidated fiscal year, “Revenue from installment
sales finance business” was listed as individual items within“Operating revenue.” This item has been included in “Other” in“Operating revenue” from the current fiscal year because its
monetary significance has decreased. To reflect this change in thepresentation, the consolidated financial statements for theprevious consolidated fiscal year have been reclassified.
As a result, the Consolidated Statements of Income for theprevious consolidated fiscal year have been reclassified so that the
108 million yen presented as “Revenue from installment sales
finance business” is recalculated into 7,887 million yen under“Other” in “Operating revenue.”

In the previous consolidated fiscal year, the “Other” item of“Non-operating income” included “Interest on operating loans”
and “Rent on real estate,” but as these items now exceed 10% of
Non-operating income, they have been noted independently fromthe consolidated fiscal year under review. In addition, “Gains onreversal of guarantee deposits received” under “Non-operating
income,” which was presented as a separate item in the previous
fiscal year, is included in “Other” in the presentation from thefiscal year under review because the gains were not accrued in
the fiscal year under review. To reflect this change in thepresentation, the consolidated financial statements for theprevious consolidated fiscal year have been reclassified.
As a result, the Consolidated Statements of Income for theprevious consolidated fiscal year have been reclassified so that the
322 million yen presented as “Gains on reversal of guarantee
deposits received” and 235 million yen in “Other” in Nonoperating income is recalculated into 25 million yen in “Intereston operating loans,” 55 million yen in “Rent on real estate” and476 million yen in “Other” in Non-operating income.
“Burden of payment” under Non-operating expenses, which
was presented as a separate item in the previous fiscal year, is
included in “Other” in the presentation from the fiscal year underreview because it was not incurred in the fiscal year under review.
To reflect this change in the presentation, the consolidated
financial statements for the previous consolidated fiscal year havebeen reclassified.
As a result, the Consolidated Statements of Income for theprevious consolidated fiscal year have been reclassified so that the
61 million yen presented as “Burden of payment” and 20 million
yen in “Other” in Non-operating expenses is recalculated into 82
million yen in “Other” in Non-operating expenses.

AIFUL CORPORATION Annual Report 201837

Consolidated Balance Sheets
1. An increase of ¥18,693 million (includes ¥13,900 million in recognized evaluation differences for shares of subsidiaries during the processof capital consolidation) in legal capital surplus were included in capital surplus which was resulted from a simple exchange of shares.
2. Assets pledged as collateral and corresponding liabilities(1) Assets pledged as collateral(1) Assets pledged as collateral(Millions of yen)

(Millions of yen)

As of March 31, 2018

As of March 31, 2017
¥ 311,939

Operating loans

Operating loans¥ 252,596

Accounts receivable - installment

61,264

Accounts receivable - installment

68,979Buildings and structures

4,244

Buildings and structures

4,353

Machinery and equipment

14

Machinery and equipment

17

Furniture and fixtures

32

Furniture and fixtures

41

Land

8,523

Land

8,523

Total

¥ 386,018

Total¥ 334,511(2) Corresponding liabilities(2) Corresponding liabilities(Millions of yen)

(Millions of yen)

As of March 31, 2018
Short-term loans payable

As of March 31, 2017
¥ 68,580

Short-term loans payable¥ 67,810

Current portion of long-term loans
payable36,351

Current portion of long-term loans
payable24,486Long-term loans payable

182,742

Long-term loans payable

150,673

Total¥ 287,674i) The amounts above at the end of the fiscal year under review
include amounts associated with the securitization of receivables(operating loans of 140,294 million yen and long-term loans
payable of 116,303 million yen).
ii) Parts of operating loans and installment receivables are amounts
at the time of registration of the transfer of receivables.

Total¥ 242,970

i) The amounts above at the end of the fiscal year under review
include amounts associated with the securitization of receivables(operating loans of 89,073 million yen and long-term loans
payable of 75,000 million yen).
ii) Parts of operating loans and installment receivables are amounts
at the time of registration of the transfer of receivables.

3. Unsecured personal loans included in operating loans(Millions of yen)

(Millions of yen)

As of March 31, 2018

As of March 31, 2017
¥ 376,504¥ 315,358

4. Shares and other securities issued by non-consolidated subsidiaries and affiliated companies(Millions of yen)

As of March 31, 2018

(Millions of yen)

As of March 31, 2017

Investment securities (shares)¥ 1,097

Investment securities (shares)¥ 4,652

Investment securities (other securities)¥ 1,212Investment securities (other securities)¥ 1,250

5. Accounts receivable - installment(Millions of yen)

(Millions of yen)

As of March 31, 201838

As of March 31, 2017

Credit card business¥ 97,044

Installment sales finance business

¥

Total

¥ 97,252

AIFUL CORPORATION Annual Report 2018

207

Credit card business¥ 93,828

Installment sales finance business

¥

Total

¥ 94,272

443

Notes to Consolidated Financial Statements

6. Deferred installment income(Millions of yen)

(Millions of yen)

As of March 31, 2018

As of March 31, 2017
Balance atthebeginningof FY

Current
fiscal year
receipts

Actualcurrent
fiscal year
balance¥ 367¥ 15,102¥ 15,062

¥ 407
(33)

Installment
sales finance

0

—

0

—
(—)

12
(—)

Creditguarantee

20

1,289

1,294

15
(—)

—
(—)

—

5,919

5,919

Loans

—
(—)

¥ 388

¥ 22,311¥ 22,276

¥ 423
(33)

Balance atthebeginningof FY

Current
fiscal year
receipts

Actualcurrent
fiscal year
balance¥ 407¥ 15,691¥ 15,670

¥ 427
(30)

Credit card
shopping

Installment
sales finance

—

—

—

—
(—)

Creditguarantee

15

5,618

5,621

—

1,621

1,621

Credit card
shopping

Balance atthe end of
FY

Loans
Total

¥ 423

¥ 22,930¥ 22,913

¥ 440
(30)

Total

Balance atthe end of
FY

Note: Figures in parenthesis indicate member store commissions.

7. Securitization of claims removed from the balance sheet(Millions of yen)

(Millions of yen)

As of March 31, 2018

As of March 31, 2017

Operating loans outstanding¥ 59,311

Operating loans outstanding¥ 60,020

Accounts receivable - installment¥ 3,208

Accounts receivable - installment¥ 2,862

8. Contingent liability
Guarantee obligation
The Company’s consolidated subsidiary, LIFECARD CO., LTD guarantees obligations related to the credit card payment operations, etc. for
the Company’s non-consolidated subsidiary, Sumishin Life Card Company, Limited.
(Millions of yen)
(Millions of yen)

As of March 31, 2018

As of March 31, 2017

Sumishin Life Card Company, Limited¥ 2,385

Sumishin Life Card Company, Limited¥ 2,860

Total¥ 2,385

Total¥ 2,860

9. Non-performing loans
Status of Non-performing loans (NPL) of operating loans and claims in bankruptcy are as follows(Millions of yen)

(Millions of yen)

As of March 31, 2018

Loans in legal bankruptcy
Nonaccrual loans

As of March 31, 2017

Unsecuredloans

Other thanunsecured
loans

Total

¥

531

¥ 26,616¥ 27,147

22,4095,904

28,314

Unsecuredloans

Other thanunsecured
loans

Total

¥

361

¥ 28,351¥ 28,712

Nonaccrual loans

18,8196,711

25,530

4,142

264

4,407

6,884

866

7,750

¥ 30,207¥ 36,193¥ 66,401

Loans in legal bankruptcy

Loans in 3-months+ inarrears

5,589

203

5,792

Loans in 3-months+ inarrears

Restructured loans

9,374

887

10,261

Restructured loans¥ 37,904¥ 33,611¥ 71,515

Total

Total

AIFUL CORPORATION Annual Report 2018

39

The loan categories in the table above are as follows.
(Loans in legal bankruptcy)
Loans in legal bankruptcy are loans in which payment of principal or interest remain past due for a considerable period and accruals ofinterest are discontinued, with the conditions stipulated under (a) through (e) of sub-paragraph 3, paragraph 1, Article 96 or sub-paragraph
4 of the same paragraph of the Corporation Tax Law Enforcement Ordinance (Enforcement Ordinance No. 97 of 1965) arise. Any amounts
deemed necessary to cover possible losses on an individual accounts basis of the claims in bankruptcy is posted in the allowances for
doubtful accounts.
(Nonaccrual loans)
Nonaccrual loans are loans in which accruals of interest is discontinued, other than loans in legal bankruptcy, as well as loans receiving
regular payments in the case of granting deferral of interest payment to the debtors in financial difficulties to assist them in their recovery.
(Loans three months or more in arrears)
Loans three months or more in arrears are loans for which payments of principal or interest have not been received for a period of threemonths or more beginning with the next business day following the last due date for such payments. Loans classified as loans in legal
bankruptcy and nonaccrual loans are excluded from loans three months or more in arrears.
(Restructured loans)
Restructured loans are loans on which creditors grant concessions (e.g., reduction of the stated interest rate, deferral of interest payment,
extension of maturity date, waiver of the face amount, or other concessive measures) to the debtors in financial difficulties to assist them intheir recovery and eventually enable them to pay creditors. Loans classified as loans in legal bankruptcy, nonaccrual loans and loans threemonths or more in arrears are excluded.
10. Loan commitments related to operating loans(Previous fiscal year)
Of operating loans including off-balance sheet loans resulting from securitization, 317,614 million yen is loans under revolving credit
agreements. Under revolving credit agreements, customers may get additional loans up to a specified maximum amount that does notexceed an amount requested by them.
Outstanding loan commitments under revolving credit agreements were 744,943 million yen (including 10,260 million yen under secured
revolving credit agreements and revolving credit agreements with businesses).
The Group reviews revolving credit agreements and takes steps to preserve credit after the conclusion of revolving credit agreements if itconsiders that taking steps are necessary due to changes in customers’ credit standing and other reasons.
Outstanding loan commitments include commitments to customers who do not have any outstanding loan commitments and who have
not requested any loans after the conclusion of credit agreements. Many revolving credit agreements expire with no loans being given.
Outstanding loan commitments themselves therefore do not necessarily affect the Group’s future cash flows.
(Fiscal year under review)Of operating loans including off-balance sheet loans resulting from securitization, 372,237 million yen is loans under revolving credit
agreements. Under revolving credit agreements, customers may get additional loans up to a specified maximum amount that does notexceed an amount requested by them.
Outstanding loan commitments under revolving credit agreements were 760,837 million yen (including 12,305 million yen under secured
revolving credit agreements and revolving credit agreements with businesses).
The Group reviews revolving credit agreements and takes steps to preserve credit after the conclusion of revolving credit agreements if itconsiders that taking steps are necessary due to changes in customers’ credit standing and other reasons.
The outstanding loan commitments include commitments to customers who do not have any outstanding loan commitments and who
have not requested any loans after the conclusion of credit agreements. Many revolving credit agreements expire with no loans being
given. Outstanding loan commitments themselves therefore do not necessarily affect the Group’s future cash flows.
11. Of the allowances for doubtful accounts, following amount in estimated interest repayment is expected to have priority application in
operating loans.
(Millions of yen)
(Millions of yen)

As of March 31, 2018

As of March 31, 2017
¥ 2,238

40

AIFUL CORPORATION Annual Report 2018

¥ 8,663

Notes to Consolidated Financial Statements

Consolidated Statements of Comprehensive Income
Reclassification adjustment and tax effect of other comprehensive income(Millions of yen)
2017
(Apr. 1, 2016 to Mar. 31, 2017)2018(Apr. 1, 2017 to Mar. 31, 2018)
Valuation difference on available-for-sale securities
Amount arising during the fiscal year

¥ 169

¥ (23)(21)(27)

Before tax effect adjustment

147

(50)

Tax effects

(106)

20

40

(29)

583

—

¥ 623

¥ (29)

Reclassification adjustment

Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Amount arising during the fiscal year
Total other comprehensive income

Consolidated Statements of Change in Shareholders’ Equity
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
1. Matters regarding class and total number of issued shares and class and number of treasury shares

Number of shares at
Decrease in the
Increase in the
Number of shares atthe beginning of the number of shares for number of shares for the end of the fiscal
year under review
the fiscal year under the fiscal year underfiscal year under(shares)review (shares)
review (shares)
review (shares)
Issued shares
Common stock

483,794,536

824,600—

484,619,136

Total

483,794,536

824,600—

484,619,136

916,89074—

916,964

916,89074—

916,964

Treasury shares
Common stock (Note)
Total(Outline of the causes for change)
1. The increase in the number of common stock of the issued shares, which is 824,600 shares, resulted from the exercise of the rights inrelation to the share acquisition rights.
2. The increase in the number of common stock of the treasury shares, which is 74 shares, resulted from the purchase of shares of less than
one unit.
2. Matters regarding the share acquisition rights

Number of subject shares (shares)

Category

Submitting
company

Breakdown

Beginningof the fiscal
year underClass ofreviewsubject shares

Increase forthe fiscal
year underreview

Decreasefor thefiscal year
under
review

End of the
fiscal year
under
review

Balance atthe end of
the fiscal year
under review(million yen)

Share acquisition rights
as stock options for 2010

—

—

—

—

—

¥ —
(—)

Share acquisition rights
as stock options for 2013

—

—

—

—

—

700
(49)

Share acquisition rights
as stock options for 2015

—

—

—

—

—

209
(3)

—

—

—

—

¥ 910
(53)

Total

Notes: 1. With respect to the share acquisition rights as stock options for 2015, the first day of the period of the exercise of the rights has not occurred yet.
2. With respect to the treasury stock acquisition rights, they are shown in parentheses.

AIFUL CORPORATION Annual Report 201841

3. Matters regarding dividends
Not applicable
Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)
1. Matters regarding class and total number of issued shares and class and number of treasury shares

Number of shares at
Decrease in the
Increase in the
Number of shares atthe beginning of the number of shares for number of shares for the end of the fiscal
year under review
the fiscal year under the fiscal year underfiscal year under(shares)review (shares)
review (shares)
review (shares)
Issued shares
Common stock484,619,136

1,000

—

484,620,136

Total

484,619,136

1,000

—

484,620,136

916,964

174—

917,138

916,964

174—

917,138

Treasury shares
Common stock (Note)
Total(Outline of the causes for change)
1. The increase in the number of common stock of the issued shares, which is 1,000 shares, resulted from the exercise of the rights inrelation to the share acquisition rights.
2. The increase in the number of common stock of the treasury shares, which is 174 shares, resulted from the purchase of shares of lessthan one unit.
2. Matters regarding the share acquisition rights

Number of subject shares (shares)

Category
Submitting
company

Breakdown

Beginningof the fiscal
year underClass ofreviewsubject shares

Increase forthe fiscal
year underreview

Decreasefor thefiscal year
under
review

End of the
fiscal year
under
review

Balance atthe end of
the fiscal year
under review(million yen)

Share acquisition rights
as stock options for 2010

—

—

—

—

—

¥ —
(—)

Share acquisition rights
as stock options for 2015

—

—

—

—

—

234
(3)

—

—

—

—

¥ 234
(3)

Total

Note: With respect to the treasury stock acquisition rights, they are shown in parentheses.

3. Matters regarding dividends
Not applicable

Consolidated Statements of Cash Flows
1. Relationships between the balance of cash and cash equivalents at the end of the consolidated fiscal year and the amounts of accounttitles shown on the consolidated balance sheet(Millions of yen)

2018
(Apr. 1, 2017 to Mar. 31, 2018)
Cash and deposits accountTime deposit with maturity over three months
Cash and cash equivalents

42

AIFUL CORPORATION Annual Report 20182017
(Apr. 1, 2016 to Mar. 31, 2017)¥ 29,327¥ 33,644

(3)

(83)

¥ 29,323¥ 33,560

Notes to Consolidated Financial Statements

Financial instruments
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
1. Matters regarding the situations of financial instruments(1) Business policy for financial instruments
The AIFUL Group mainly engages in the financial business;
specifically, the consumer finance business, the real estate
mortgage finance business, the business operator financebusiness, the credit sales business, the credit guarantee
business, the receivables management and collection business,
etc. Direct finance by corporate bonds is used in raising funds
to conduct these businesses by adjustment to the market
situation and the long-term and short-term balance, in
addition to indirect finance by bank loans. In this way, AIFUL
has financial liabilities that involve interest rate fluctuations
and thus conducts derivative transactions to prevent any
disadvantageous impact of interest rate fluctuations. In
addition, when a derivative transaction is conducted, it islimited to the transaction that involves actual demand, inprinciple, and the policy of AIFUL is not to use derivativetransactions solely in order to gain trading profits in the shortterm.
(2) Types of financial instruments and their risks
The financial assets of the AIFUL Group are mainly loans andinstallment accounts receivable against individuals andcorporations, and these are both exposed to credit risk thatwill be caused by customers defaulting on the agreement. In
addition, operational investment securities and investment
securities are mainly stocks and investments in partnership
capital, which are held mainly for the purpose of businesspromotion. Each of them involves the risk of the credit ofissuers and the risk of market price fluctuations.
Financial liabilities such as loans and corporate bonds are
exposed to the risk of liquidity where payment may not beable to be made on the due date under certain circumstances,including the case where the AIFUL Group cannot use themarket. In addition, funds are raised at a variable interest rate,
which is exposed to the risk of interest rate fluctuations.
Derivative transactions involve the risk of market interest
rate fluctuations and counterparty risk.
(3) System for management of risk in relation to financial
instruments(i) Management of credit risk
The AIFUL Group manages the credit risk according to thevarious management rules of AIFUL. With respect to themajor financial assets, such as loans, accounts receivable- installment and customers’ liabilities for acceptances andguarantees, a credit examination is conducted for each case
based on the data of the personal credit bureaus and
AIFUL’s own credit system, and the system relating to credit
management is established and operated, including thechange of the limit amount and the creation of guarantees
and security. In addition, with respect to the credit risk ofissuers of securities, it is managed by regularly ascertaining
credit information and the market values.
With respect to the counterparty risk of derivativetransactions, the party to the contract is financial

institutions in and outside Japan. It is recognized that thecredit risk is low. In addition, the management of such risks
is evaluated/analyzed/measures are considered by eachdepartment in charge, and they are reported to the boardof directors as appropriate.
(ii) Management of market riski) Management of interest rate risk and exchange risk
The AIFUL Group manages the interest rate risk according
to the risk management manual that was developed byobtaining approval at the meeting of the Risk
Management Committee, which is an organ directly
under the board of directors. Toward this risk, a report isprovided from the Finance Department, which is thedepartment in charge, to the Internal Auditing
Department, and the risk assessment and the adequacy
and appropriateness of the countermeasures are verified
and a report is provided to the board of directors as
appropriate. In addition, derivative transactions are used
to hedge the risk of interest rate fluctuations.
ii) Management of price fluctuation risk
Many of the shares held by the AIFUL Group are held forthe purpose of business promotion, including business/
capital alliances. The market environment and financial
position of customers, among others, are monitored andmeasures are considered in the department in charge,
and a report is provided to the board of directors as
appropriate.
In addition, the AIFUL Group does not have financial
instruments for the purpose of trading.
iii) Derivative transactions
With respect to derivative transactions, the risk ismanaged according to the various management rules of
AIFUL.
An internal check is conducted, specifically theappropriate execution of transactions, the evaluation of
the effectiveness of hedges and administration in thedepartment in charge, and a report is made to the
Accounting Department.
iv) Quantitative information relating to the market risk
The AIFUL Group does not conduct quantitative analysis.
(Interest rate risk)
For the AIFUL Group, the major financial instruments
whose market value changes due to fluctuations in theinterest rate, which is the major risk variable, are loans,installment accounts receivable, loans payable andcorporate bonds.
In addition, AIFUL has ascertained that in the accounttitles whose market value is calculated at the market
interest rate, the estimated amount of impact on the net
value (of assets) after setting off the financial assets inquestion against the financial liabilities in question whenthe market interest rate at the end of the consolidated
fiscal year changes by 1 basis point (0.01%) is a decreaseof 48 million yen in the present value of the financial

AIFUL CORPORATION Annual Report 201843

instruments that are affected by the interest rate
fluctuations when it is assumed that the interest rate for
the Japanese yen increases by 1 basis point (0.01%) and anincrease of 48 million yen in the said value when it isassumed that the interest rate for the Japanese yen falls by
1 basis point (0.01%). However, in the trial calculation of
the amount of the impact, it is assumed that there is nochange in the risk variables other than the market interest
rate.
(iii) Management of the liquidity risk relating to fund raising
The AIFUL Group manages the liquidity risk mainly byadjusting the balance of procurement between the long term

and the short term considering diversification of the means ofraising funds and the market environment, in addition to thetimely funds management of the entire Group.
(4) Supplementary explanation about the matters regarding themarket value, etc. of financial instruments
The market value of financial instruments includes the value
based on the market value and the value that is reasonably
calculated when the market value is not available. In thecalculation of such values, certain assumptions and otherconditions are adopted, and thus if any different assumptions
and other conditions are used, such values may vary.

2. Matters regarding the market value, etc. of financial instruments
The amounts recorded on the consolidated balance sheet, the market values and the differences between them on March 31, 2017 are asshown below. In addition, cases where it is considered extremely difficult to ascertain the market value are not included in the table below(refer to Note 2).
(Millions of yen)

Category

Amount recorded on
the consolidatedbalance sheet(1) Cash and deposits¥ 33,644(2) Operating loans

352,628

Allowance for doubtful accounts and provision for loss oninterest repayment (*1)

Market value¥ 33,644

Difference¥—(31,527)
321,100

374,285

53,184

89,641

91,272

1,631(4) Operational investment securities and investment securities(including the shares of affiliated companies)

1,567

5,608

4,040

(5) Claims provable in bankruptcy

29,323
2,223

2,223

—

¥ 448,178¥ 507,034¥ 58,856(1) Short-term loans payable

73,61073,610—(2) Bonds payable

32,70032,700—(3) Accounts receivable - installment

94,272

Deferred installment income (*2)(374)

Allowance for doubtful accounts (*3)

(4,256)

Allowance for doubtful accounts (*3)
Total assets(27,100)(3) Long-term loans payable (*4)

193,913

194,036122¥ 300,223¥ 300,346¥ 122(1) Those to which hedge accounting is applied

—

—

—

(2) Those to which hedge accounting is not applied

—

—

—

Total liabilities
Derivative transactions (*4)

Total derivative transactions

¥

—

¥

—

¥

—

(*1) The estimated amount of interest repayment that is expected to be preferentially appropriated to operating loans, which is included in the allowance for
doubtful accounts in relation to operating loans and the provision for loss on interest repayment, is deducted.
(*2) The deferred installment income (liability account) in relation to installment accounts receivable is deducted.
(*3) Installment accounts receivable and claims provable in bankruptcy and the allowance for doubtful accounts corresponding to them respectively are
deducted.
(*4) The derivative transactions to which hedge accounting is applied are processed together with the long-term loans payable to be hedged as one, andthus their market values are included in the market value of the said long-term loans payable in the statement.

44

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

Notes: 1. Matters regarding the method of calculation of the market value of financial instruments
Assets(1) Cash and deposits
Deposits are all short term, and thus the market value is close to the book value. Accordingly, the said book value is used.
(2) Operating loans
In the calculation of the market value of operating loans, such present value of the amount obtained by deducting the estimated amount ofcollection expenses from the estimated amount of principal and interest to be received, which reflects the recoverability as discounted at anextremely safe interest rate corresponding to the remaining period, is used.
(3) Installment accounts receivable
With respect to the credit card business included in installment accounts receivable, most transactions are a one-time payment in the following
month and the market value is close to the book value, and thus the said book value is used. In addition, the market value of the installment sales
finance business is calculated using this present value of the amount obtained by deducting the estimated amount of collection expenses from theestimated amount of principal and fees to be received, which reflects the recoverability as discounted at an extremely safe interest rate
corresponding to the remaining period.
(4) Operational investment securities and investment securities (including the shares of affiliated companies)
With respect to the market value of these securities, for stocks and bonds, the price on the exchange is used.
(5) Claims provable in bankruptcy
With respect to the claims provable in bankruptcy, the estimated amount of bad debts is calculated based on the estimated amount of collection
by security, etc., and thus the market value is close to the amount obtained by deducting the current estimated amount of bad debts from thevalue on the balance sheet on the consolidated closing date. Accordingly, the said value is used in calculation.
Liabilities(1) Short-term loans payable
They are settled in the short term, and thus the market value is close to the book value. Accordingly, the said book value is used.
(2) Bonds payable
Of those whose market value is calculated, the calculation is undertaken based on the market price if the market price is available and, for those
whose market value is not available, using the present value of the total sum of principal and interest that is discounted at the interest rate taking
into account the remaining period and credit risk of the bonds in question.
(3) Long-term loans payable
Of those whose market value is calculated, the market value of loans payable that are settled within one year is close to the book value, and thesaid book value is used. Of the other loans payable, for those to which the fixed interest rate is applied, the present value of the total sum of
principal and interest that is discounted at an interest rate assumed in the case of a new loan under the same conditions is used in the calculation.
For those to which the variable interest rate is applied, the market interest rate and the credit risk are reflected in a short period of time, and thus
the market value is considered to be close to the book value. Accordingly, the said book value is used.
2. Financial instruments whose market value is considered extremely difficult to ascertain(Millions of yen)
Category

Amount recorded on the consolidated balance sheet

Operational investment securities and investment securities(1) Unlisted stock¥ 5,326(2) Investment in capital of investment limited partnership, etc.

1,325

Total

¥ 6,651

With respect to these financial instruments, it is considered extremely difficult to ascertain the market value, and thus they are not included in “assets(4) operation investment securities and investment securities.”
3. Estimated amount of redemption of monetary claims and securities with maturity after the consolidated closing date(Millions of yen)
Category

Due in one year or less

Cash and deposits¥ 33,644

Operating loans

140,107

Due after 5 years

—

¥

—

¥

199,442

13,07890,676

3,595—¥ 264,428¥ 203,038¥ 13,078

Installment accounts receivable
Total

Due after one year
through five years

The amount of 29,323 million yen is not included because the estimated amount of redemption is not expected, such as claims provable inbankruptcy.
4. Plan for repayment of bonds payable, long-term loans payable, lease obligations and other interest-bearing debts after the consolidated closing
date(Millions of yen)

Category
Bonds payable
Finance lease obligations

Due in one year
or less

Due after one
year throughtwo years¥ 2,600¥ 1,300

186

186

Due after two
years throughthree years¥

Due after three
years throughfour years—¥ 28,800

17165

Due after four
years throughfive years¥—
27

Due after five
years
¥

—
—

Long-term loans payable

32,13831,92045,65664,992

12,451

6,753

Total

¥ 34,924¥ 33,406¥ 45,827¥ 93,858¥ 12,478¥ 6,753

AIFUL CORPORATION Annual Report 201845

Fiscal year ended March 31, 2018 (from April 1, 2017 to March
31, 2018)
1. Matters regarding the situations of financial instruments(1) Business policy for financial instruments
The AIFUL Group mainly engages in the financial business;
specifically, the consumer finance business, the real estate
mortgage finance business, the business operator financebusiness, the credit sales business, the credit guarantee business,the receivables management and collection business, etc. Direct
finance by corporate bonds is used in raising funds to conduct
these businesses by adjustment to the market situation and thelong-term and short-term balance, in addition to indirect financeby bank loans. In this way, AIFUL has financial liabilities thatinvolve interest rate fluctuations and thus conducts derivativetransactions to prevent any disadvantageous impact of interest
rate fluctuations. In addition, when a derivative transaction isconducted, it is limited to the transaction that involves actual
demand, in principle, and the policy of AIFUL is not to use
derivative transactions solely in order to gain trading profits inthe short term.
(2) Types of financial instruments and their risks
The financial assets of the AIFUL Group are mainly loans andaccounts receivable - installment against individuals andcorporations, and these are both exposed to credit risk that will
be caused by customers defaulting on the agreement. In
addition, operational investment securities and investment
securities are mainly stocks and investments in partnership
capital, which are held mainly for the purpose of businesspromotion. Each of them involves the risk of the credit of issuers
and the risk of market price fluctuations. In addition, financial
assets denominated in foreign currency are exposed to the riskof exchange rate fluctuations.
Financial liabilities such as loans and corporate bonds are
exposed to the risk of liquidity where payment may not be able
to be made on the due date under certain circumstances,including the case where the AIFUL Group cannot use themarket. In addition, funds are raised at a variable interest rate,
which is exposed to the risk of interest rate fluctuations.
Derivative transactions involve the risk of market interest rate
fluctuations and counterparty risk.
(3) System for management of risk in relation to financial
instruments(i) Management of credit risk
The AIFUL Group manages the credit risk according to thevarious management rules of AIFUL. With respect to themajor financial assets, such as loans, accounts receivable- installment and customers’ liabilities for acceptances andguarantees, a credit examination is conducted for each case
based on the data of the personal credit bureaus and AIFUL’s
own credit system, and the system relating to credit
management is established and operated, including thechange of the limit amount and the creation of guarantees
and security. In addition, with respect to the credit risk ofissuers of securities, it is managed by regularly ascertaining
credit information and the market values.
With respect to the counterparty risk of derivativetransactions, the party to the contract is financial institutions

46

AIFUL CORPORATION Annual Report 2018

in and outside Japan. It is recognized that the credit risk islow. In addition, the management of such risks is evaluated/
analyzed/measures are considered by each department incharge, and they are reported to the board of directors as
appropriate.
(ii) Management of market riski) Management of interest rate risk
The AIFUL Group manages the interest rate risk according
to the risk management manual that was developed byobtaining approval at the meeting of the Risk Management
Committee, which is an organ directly under the board of
directors. Toward this risk, a report is provided from the
Finance Department, which is the department in charge, tothe Internal Control Department, and the risk assessment
and the adequacy and appropriateness of thecountermeasures are verified and a report is provided tothe board of directors as appropriate. In addition, derivativetransactions are used to hedge the risk of interest rate
fluctuations.
ii) Management of price fluctuation risk
Many of the shares held by the AIFUL Group are held forthe purpose of business promotion, including business/
capital alliances. The market environment and financial
position of customers, among others, are monitored andmeasures are considered in the department in charge, anda report is provided to the board of directors as
appropriate.
In addition, the AIFUL Group does not have financial
instruments for the purpose of trading.
iii) Derivative transactions
With respect to derivative transactions, the risk is managed
according to the various management rules of AIFUL.
An internal check is conducted, specifically theappropriate execution of transactions, the evaluation of theeffectiveness of hedges and administration in thedepartment in charge, and a report is made to the
Accounting Department.
iv) Quantitative information relating to the market risk
The AIFUL Group does not conduct quantitative analysis.
(Interest rate risk)
For the AIFUL Group, the major financial instruments
whose market value changes due to fluctuations in theinterest rate, which is the major risk variable, are loans,installment accounts receivable, loans payable andcorporate bonds.
In addition, AIFUL has ascertained that in the accounttitles whose market value is calculated at the market
interest rate, the estimated amount of impact on the net
value (of assets) after setting off the financial assets inquestion against the financial liabilities in question whenthe market interest rate at the end of the consolidated fiscal
year changes by 1 basis point (0.01%) is a decrease of 52
million yen in the present value of the financial instrumentsthat are affected by the interest rate fluctuations when it isassumed that the interest rate for the Japanese yen
increases by 1 basis point (0.01%) and an increase of 52
million yen in the said value when it is assumed that theNotes to Consolidated Financial Statementsinterest rate for the Japanese yen falls by 1 basis point(0.01%). However, in the trial calculation of the amountof the impact, it is assumed that there is no change in therisk variables other than the market interest rate.
(iii) Management of the liquidity risk relating to fund raising
The AIFUL Group manages the liquidity risk mainly byadjusting the balance of procurement between the longterm and the short term considering diversification of themeans of raising funds and the market environment, in
addition to the timely funds management of the entire
Group.

(4) Supplementary explanation about the matters regarding themarket value, etc. of financial instruments
The market value of financial instruments includes the value
based on the market value and the value that is reasonably
calculated when the market value is not available. In thecalculation of such values, certain assumptions and otherconditions are adopted, and thus if any different assumptions
and other conditions are used, such values may vary.

2. Matters regarding the market value, etc. of financial instruments
The amounts recorded on the consolidated balance sheet, the market values and the differences between them on March 31, 2018 are asshown below. In addition, cases where it is considered extremely difficult to ascertain the market value are not included in the table below(refer to Note 2).

(Millions of yen)

Category

Amount recorded on
the consolidatedbalance sheet(1) Cash and deposits¥ 29,327(2) Operating loans

412,706

Allowance for doubtful accounts and provision for loss oninterest repayment (*1)

Market value¥ 29,327—

446,026

61,821

92,32093,110

789

1,746

3,594

1,848

2,246

2,246

—

¥ 509,846¥ 574,306¥ 64,459

83,32583,325—(3) Installment accounts receivable

97,252

Deferred installment income (*2)(397)

Allowance for doubtful accounts (*3)

(4,534)(4) Operational investment securities and investment securities(including the shares of affiliated companies)(5) Claims provable in bankruptcy

27,787

Allowance for doubtful accounts (*3)

(25,541)(1) Short-term loans payable(2) Bonds payable

8,500

8,500

—

274,011

273,866(145)¥ 365,836¥ 365,691——(3) Long-term loans payable (*4)
Total liabilities¥(28,500)
384,205

Total assets

Difference

¥

(145)

Derivative transactions (*4)
(1) Those to which hedge accounting is applied(2) Those to which hedge accounting is not applied
Total derivative transactions

—
¥

—

—

—
¥

—

—
¥

—

(*1) The estimated amount of interest repayment that is expected to be preferentially appropriated to operating loans, which is included in the allowance for
doubtful accounts in relation to operating loans and the provision for loss on interest repayment, is deducted.
(*2) The deferred installment income (liability account) in relation to installment accounts receivable is deducted.
(*3) Installment accounts receivable and claims provable in bankruptcy and the allowance for doubtful accounts corresponding to them respectively are
deducted.
(*4) The derivative transactions to which hedge accounting is applied are processed together with the long-term loans payable to be hedged as one, andthus their market values are included in the market value of the said long-term loans payable in the statement.

AIFUL CORPORATION Annual Report 201847

Notes: 1. Matters regarding the method of calculation of the market value of financial instruments
Assets(1) Cash and deposits
Deposits are all short term, and thus the market value is close to the book value. Accordingly, the said book value is used.
(2) Operating loans
In the calculation of the market value of operating loans, such present value of the amount obtained by deducting the estimated amount ofcollection expenses from the estimated amount of principal and interest to be received, which reflects the recoverability as discounted at anextremely safe interest rate corresponding to the remaining period, is used.
(3) Installment accounts receivable
With respect to the credit card business included in installment accounts receivable, most transactions are a one-time payment in the following
month and the market value is close to the book value, and thus the said book value is used. In addition, the market value of the installment sales
finance business is calculated using this present value of the amount obtained by deducting the estimated amount of collection expenses from theestimated amount of principal and fees to be received, which reflects the recoverability as discounted at an extremely safe interest rate
corresponding to the remaining period.
(4) Operational investment securities and investment securities (including the shares of affiliated companies)
With respect to the market value of these securities, for stocks and bonds, the price on the exchange is used.
(5) Claims provable in bankruptcy
With respect to the claims provable in bankruptcy, the estimated amount of bad debts is calculated based on the estimated amount of collection
by security, etc., and thus the market value is close to the amount obtained by deducting the current estimated amount of bad debts from thevalue on the balance sheet on the consolidated closing date. Accordingly, the said value is used in calculation.
Liabilities(1) Short-term loans payable
They are settled in the short term, and thus the market value is close to the book value. Accordingly, the said book value is used.
(2) Bonds payable
Of those whose market value is calculated, the calculation is undertaken based on the market price if the market price is available and, for those
whose market value is not available, using the present value of the total sum of principal and interest that is discounted at the interest rate taking
into account the remaining period and credit risk of the bonds in question.
(3) Long-term loans payable
Of those whose market value is calculated, the market value of loans payable that are settled within one year is close to the book value, and thesaid book value is used. Of the other loans payable, for those to which the fixed interest rate is applied, the present value of the total sum of
principal and interest that is discounted at an interest rate assumed in the case of a new loan under the same conditions is used in the calculation.
For those to which the variable interest rate is applied, the market interest rate and the credit risk are reflected in a short period of time, and thus
the market value is considered to be close to the book value. Accordingly, the said book value is used.
2. Financial instruments whose market value is considered extremely difficult to ascertain(Millions of yen)
Category

Amount recorded on the consolidated balance sheet

Operational investment securities and investment securities(1) Unlisted stock¥ 2,001(2) Investment in capital of investment limited partnership, etc.

1,244

Total

¥ 3,246

With respect to these financial instruments, it is considered extremely difficult to ascertain the market value, and thus they are not included in “assets(4) operation investment securities and investment securities.”
3. Estimated amount of redemption of monetary claims and securities with maturity after the consolidated closing date(Millions of yen)
Category

Due in one year or lessDue after one year
through five years

Due after 5 years—¥ 29,327

Operating loans

159,228

241,341

12,135

Installment accounts receivable

93,5643,665

21¥ 282,121¥ 245,007¥ 12,157

Total

¥

—

Cash and deposits¥

The amount of 27,787 million yen is not included because the estimated amount of redemption is not expected, such as claims provable inbankruptcy.
4. Plan for repayment of bonds payable, long-term loans payable, lease obligations and other interest-bearing debts after the consolidated closing
date(Millions of yen)

Category
Bonds payable
Finance lease obligations48

Due in one year
or less

Due after one
year throughtwo years¥ 1,300¥ 7,200300

285

Due after two
years throughthree years
¥

—
179

Due after three
years throughfour years
¥

—
140

Due after four
years throughfive years¥—
34

Due after five
years
¥

—
7

Long-term loans payable

53,482

67,112

91,37037,59721,092

3,355

Total

¥ 55,083¥ 74,597¥ 91,549¥ 37,737¥ 21,127¥ 3,363

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

Securities
Fiscal year ended March 31, 2017 (as of March 31, 2017)
1. Other securities(Millions of yen)

Category

Amount recorded on
the consolidatedbalance sheet

Acquisition cost¥¥

Difference

Those whose amount recorded on the consolidated balance sheet
exceeds the acquisition cost
SharesSubtotal

278

61

¥ 217

278

61

217

911

1,267

(355)

Those whose amount recorded on the consolidated balance sheet
does not exceed the acquisition cost
SharesSubtotal

911

1,267

(355)

Total

¥ 1,190¥ 1,328¥ (138)

Note: With respect to unlisted stocks, etc. (whose amount recorded on the consolidated balance sheet is 2,376 million yen), the market price is not available
and it is considered extremely difficult to ascertain the market value, and thus they are not included in the table above.

2. Other securities sold during the consolidated fiscal year under review (from April 1, 2016 to March 31, 2017)(Millions of yen)

SharesAmount of sale

Total amount ofgains on sale

¥

¥

60

41

Total amount oflosses on sale¥(8)

3. Other securities whose impairment loss is processed
In the consolidated fiscal year under review, for other securities, there was an impairment loss of 8 million yen.
In addition, in the impairment of securities, when the market value falls 50% or more below the acquisition cost, impairment is declared
when it is not considered to be likely to recover to the acquisition cost level, and when the market value falls 30% or more but less than
50% below the acquisition cost, an amount judged necessary is processed as impairment loss, considering the financial position, operating
results and trends of stock prices, among others.
Fiscal year ended March 31, 2018 (as of March 31, 2018)
1. Other securities(Millions of yen)

Category

Amount recorded on
the consolidatedbalance sheet

Acquisition cost¥¥

Difference

Those whose amount recorded on the consolidated balance sheet
exceeds the acquisition cost
SharesSubtotal

569

67

¥ 502

569

67

502

Those whose amount recorded on the consolidated balance sheet
does not exceed the acquisition cost
Shares

799

1,260

(460)

Subtotal

799

1,260

(460)

Total

¥ 1,369¥ 1,327¥

41

Note: With respect to unlisted stocks, etc. (whose amount recorded on the consolidated balance sheet is 2,526 million yen), the market price is not available
and it is considered extremely difficult to ascertain the market value, and thus they are not included in the table above.

AIFUL CORPORATION Annual Report 201849

2. Other securities sold during the consolidated fiscal year under review (from April 1, 2017 to March 31, 2018)(Millions of yen)

SharesAmount of sale

Total amount ofgains on sale

Total amount oflosses on sale

¥ 26

¥4

¥ (5)

Derivative transactions
Fiscal year ended March 31, 2017 (as of March 31, 2017)
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(Millions of yen)
Method of hedge
accounting

Types, etc. of
derivativetransactions

Special treatment ofinterest rate cap

Interest rate cap
transaction

Main items to behedgedContract amount,etc.

Contract amount,etc. over 1 year

¥ 30,000¥ 30,000

Long-term loans
payableMarket value(Note)

Note: The interest rate cap treated in the special manner is processed together with the long-term loans payable to be hedged as one, and thus its market
value is included in the market value of the said long-term loans payable in the statement.

Fiscal year ended March 31, 2018 (as of March 31, 2018)
1. Derivative transactions to which hedge accounting is not applied
Not applicable
2. Derivative transactions to which hedge accounting is applied(Millions of yen)
Method of hedge
accounting

Types, etc. of
derivativetransactions

Special treatment ofinterest rate cap

Interest rate cap
transaction

Main items to behedgedLong-term loans
payableContract amount,etc.

Contract amount,etc. over 1 year

¥ 41,300¥ 41,300

Market value(Note)

Note: The interest rate cap treated in the special manner is processed together with the long-term loans payable to be hedged as one, and thus its market
value is included in the market value of the said long-term loans payable in the statement.

Retirement benefits
1. Outline of the retirement benefit plan adopted
The AIFUL Group, except for some consolidated subsidiaries, uses both the defined contribution pension plan and the prepaid retirement
benefits plan.
In addition, the overseas consolidated subsidiaries adopt the defined benefit plan.
The overseas consolidated subsidiaries apply the International Financial Reporting Standards and apply IAS No. 19 “Employee Benefits”
in account processing.

50

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

2. Defined benefit pension plan
(1) Table for adjustment of beginning balance and ending balance of retirement benefit obligations(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)¥2017(Apr. 1, 2016 to Mar. 31, 2017)2¥ —Service cost

3—

Interest expense

0—

Actuarial gain or loss

4—

Foreign currency translation adjustment

0—

Beginning balance of retirement benefit obligations

(0)

—

¥ 11

¥ —

OthersEnding balance of retirement benefit obligations(2) Table for adjustment of the ending balance of retirement benefit obligations and pension assets and the retirement benefit liabilities andassets recorded on the consolidated balance sheet(Millions of yen)

As of March 31, 2018

As of March 31, 2017

¥ —

¥ —

—

—

—

—

Retirement benefit obligations under the funded type plan
Pension assets

11

—

¥ 11

¥ —

Retirement benefit liabilities

11—

Retirement benefit assets

—

—

¥ 11

¥ —

Retirement benefit obligations under the unfunded type plan
Net value of liabilities and assets recorded on the consolidated balance sheet

Net value of liabilities and assets recorded on the consolidated balance sheet(3) Amount of retirement benefit expenses and their sub-items(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)¥2017(Apr. 1, 2016 to Mar. 31, 2017)3¥ —Interest expense

0—

Others

(0)

—

3

¥ —

Service cost¥

Retirement benefit expenses relating to the defined benefit plan(4) Matters regarding the assumptions in actuarial computation
Major assumptions in actuarial computation

2018(Apr. 1, 2017 to Mar. 31, 2018)
3.1%

Discount rate

2017
(Apr. 1, 2016 to Mar. 31, 2017)—

3. Defined contribution pension plan and prepaid retirement benefits plan

(Millions of yen)
2018
(Apr. 1, 2017 to Mar. 31, 2018)
Amount of prepaid retirement benefits
Amount of contribution paid to the defined contribution pension plan
Retirement benefit expenses

2017(Apr. 1, 2016 to Mar. 31, 2017)

¥ 124

¥ 173

346

296

¥ 470

¥ 470

AIFUL CORPORATION Annual Report 201851

Stock options, etc.
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
1. Amount and account title of expenses posted during the consolidated fiscal year under review
Other operating expenses 116 million yen
2. Amount posted as income due to the lapse from the non-exercise of the right during the consolidated fiscal year underreview
Non-operating income
17 million yen
3. Details, scale and changes of stock options(1) Details of stock options

2010 stock options

2013 stock options

2015 stock options

Title and number of grantees

Employees of AIFUL: 1,279
persons
Employees of the consolidated
subsidiaries: 927 persons

Employees of AIFUL: 1,418
persons
Employees of the consolidated
subsidiaries: 44 persons
Employees of the nonconsolidated subsidiaries: 18
persons

Employees of AIFUL: 1,352
persons
Employees of the consolidated
subsidiaries: 31 persons

Number of stock options

Common stock 4,385,300
sharesCommon stock 2,947,100
sharesCommon stock 1,583,850
sharesGrant dateJuly 1, 2010

May 27, 2013

June 30, 2015

Conditions for vesting

The fact of working continually
after the date of the grant (July
1, 2010) until the date when
the rights became final andbinding (July 31, 2014);
however, in the case ofretirement at the mandatory
retirement age, any othertreatment may be applied.

The fact of working continually
after the date of the grant (May27, 2013) until the date when
the rights became final andbinding (April 30, 2015);
however, in the case ofretirement at the mandatory
retirement age, any othertreatment may be applied.

The fact of working continually
after the date of the grant (June30, 2015) until the date when
the rights became final andbinding (June 30, 2017);
however, in the case ofretirement at the mandatory
retirement age, any othertreatment may be applied.

Requisite service period

From July 1, 2010
To July 31, 2014

From May 27, 2013
To April 30, 2015

From June 30, 2015
To June 30, 2017

Exercise period

From August 1, 2014
To July 31, 2016

From May 1, 2015
To April 30, 2017

From July 1, 2017
To June 30, 2019

Note: For the share acquisition rights according to the resolution passed at the meeting of the board of directors held on June 7, 2010, the period of exerciseof the rights expired on July 31, 2016.

(2) Scale of stock options and situations of their changes
The stock options that existed in the consolidated fiscal year (ended March 31, 2017) are included in the scope here. With respect to thenumber of stock options, they are translated into the number of shares in a statement.
(i) Number of stock options

2010 stock options

2013 stock options

2015 stock options

Before vesting (shares)
Previous consolidated fiscal year-end——

1,583,850

Granted———Forfeited———

Vested———Unvested——

1,583,850

2,458,600

2,947,100—

After vesting (shares)
Previous consolidated fiscal year-end
Vested———Exercised824,600——

Forfeited

1,634,000———

2,947,100—

Unexercised

52

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements(ii) Information on unit price2010 stock options

2013 stock options

2015 stock options

Exercise price (yen)

¥ 64

¥ 501

¥ 407

Average stock price at the time of exercise (yen)

¥ 322

¥ —

¥ —

Unit fair value (date of grant) (yen)

¥ 30

¥ 261

¥ 157

4. Method of estimating the number of the stock options vested
Basically, it is difficult to make a reasonable estimate of the number of future lapses, and thus the method reflecting only the number ofactual lapses is adopted.
Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)
1. Amount and account title of expenses posted during the consolidated fiscal year under review
Other operating expenses
28 million yen
2. Amount posted as income due to the lapse from the non-exercise of the right during the consolidated fiscal year underreview
Gain on reversal of share acquisition rights 703 million yen
3. Details, scale and changes of stock options(1) Details of stock options

2013 stock options

2015 stock options

Title and number of grantees

Employees of AIFUL: 1,418 persons
Employees of the consolidated subsidiaries:
44 persons
Employees of the non-consolidated
subsidiaries: 18 persons

Employees of AIFUL: 1,352 persons
Employees of the consolidated subsidiaries:
31 persons

Number of stock options

Common stock 2,947,100 shares

Common stock 1,583,850 shares

Grant date

May 27, 2013

June 30, 2015

Conditions for vesting

The fact of working continually after thedate of the grant (May 27, 2013) until thedate when the rights became final andbinding (April 30, 2015); however, in thecase of retirement at the mandatory
retirement age, any other treatment may
be applied.

The fact of working continually after thedate of the grant (June 30, 2015) until thedate when the rights became final andbinding (June 30, 2017); however, in thecase of retirement at the mandatory
retirement age, any other treatment may
be applied.

Requisite service period

From May 27, 2013
To April 30, 2015

From June 30, 2015
To June 30, 2017

Exercise period

From May 1, 2015
To April 30, 2017

From July 1, 2017
To June 30, 2019

Note: For the share acquisition rights according to the resolution passed at the meeting of the board of directors held on April 26, 2013, the period of
exercise of the rights expired on April 30, 2017.

AIFUL CORPORATION Annual Report 201853

(2) Scale of stock options and situations of their changes
The stock options that existed in the consolidated fiscal year (ended March 31, 2018) are included in the scope here. With respect to thenumber of stock options, they are translated into the number of shares in a statement.
(i) Number of stock options

2013 stock options

2015 stock options

Before vesting (shares)
Previous consolidated fiscal year-end—

1,583,850

Granted——Forfeited——

Vested

—1,583,850

Unvested——

2,947,100——

1,583,850

Exercised

—

1,000

Forfeited

2,947,100——

1,582,850

After vesting (shares)
Previous consolidated fiscal year-end
VestedUnexercised(ii) Information on unit price2013 stock options

2015 stock options

Exercise price (yen)

¥ 501

¥ 407

Average stock price at the time of exercise (yen)

¥ —

¥ 396

Unit fair value (date of grant) (yen)

¥ 261

¥ 157

4. Method of estimating the number of the stock options vested
Basically, it is difficult to make a reasonable estimate of the number of future lapses, and thus the method reflecting only the number ofactual lapses is adopted.

54

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

Relating to tax effect accounting
1. Breakdown of deferred tax assets and deferred tax liabilities by major cause(Millions of yen)
As of March 31, 2018

As of March 31, 2017¥¥

Deferred tax assets
Allowance for doubtful accounts

8,723

10,137

Provision for loss on interest repayment

6,996

9,851

Bad debt loss

1,403

1,437

Accrued income
Loss carried forward

1,174

1,171

165,701

180,335

3,342

3,576

Subtotal of deferred tax assets

187,341

206,509

Valuation reserve(186,713)(205,713)

Other

Total deferred tax assets

¥

627

¥

796

Deferred tax liabilities(154)

Valuation difference on available-for-sale securities

(53)

(180)

Retirement cost corresponding to asset retirement obligations(198)

Total deferred tax liabilities

¥

(334)

¥

(252)

Net value of the deferred tax assets (liabilities)

¥

292

¥

543

The net value of the deferred tax assets (liabilities) is included in the following items on the consolidated balance sheet.
Current assets—Deferred tax assets

627

796

Non-current liabilities—Deferred tax liabilities

(334)

(252)

2. Breakdown of each major item that caused a significant difference between the effective statutory tax rate and the rate ofburden of income taxes, etc. after the application of tax effect accounting

As of March 31, 2018

As of March 31, 2017

30.8%

30.8%

1.8

0.9

Entertainment expenses and other items permanently excluded from loss

0.4

0.5

Stock-based compensation expenses

(5.9)

0.4

(536.3)(32.3)

Effective statutory tax rate
(Adjustment)
Inhabitant tax on a per capita basis

Valuation reserve
Downward revision to the ending deferred tax assets due to a change ofthe tax rate

3.8

0.6

512.6

—

Difference in tax rate from that of the parent company

9.9

1.5

Other

(0.6)

(0.7)

Rate of burden of income taxes, etc. after the application of tax effectaccounting

16.5

1.7

Expiry of the period of loss carried forward

AIFUL CORPORATION Annual Report 201855

Notes to Segment information
Segment Information
1. Overview of reportable segments(1) Determination of reportable segments
The Company’s reportable segments are the Group’s structural units, for which separate financial information is available. The financial
results for all business segments are periodically reviewed by the Company’s Board of Directors in order to make decisions on the proper
allocation of business resources and to evaluate the business performance of the respective segments.
The Group draws up strategies for the Company and each of its consolidated subsidiaries and conducts business activities
accordingly.
As a result, the AIFUL Group has three reportable segments: the core company AIFUL Corporation, LIFECARD Co., Ltd. and AIRA &AIFUL Public Company Limited.
(2) Types of products and services belonging to each reportable segment“AIFUL Corporation” is mainly involved in the loan business and credit guarantee business, while “LIFECARD Co., Ltd.” is mainly involvedin the credit sales business and the credit guarantee business. “AIRA & AIFUL Public Company Limited” is mainly involved in the loanbusiness.
(3) Notes relating to changes in reportable segments
AIRA & AIFUL Public Company Limited, which was a non-consolidated subsidiary of the Company, has been included in the scope of
consolidation from the fiscal year under review because its importance has increased. As a result, there are three reportable segments:
AIFUL Corporation, LIFECARD Co., Ltd. and AIRA & AIFUL Public Company Limited.
2. Calculation of operating revenue, profit or loss, assets, liabilities, and other items by reportable segment
The accounting methods applied to the reportable segments are the same as those described in “Basic important matters for the
preparation of the consolidated financial statements.” Profit (Loss) for reportable segments is net income (loss).
Inter-segment operating revenue and transfers are calculated based on the amount equal to the cost to the submitting company.

56

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

3. Information relating to operating revenue, profit or loss, assets, liabilities and other amounts for each reportable segment
For the Prior Fiscal year (From April 1, 2016 to March 31, 2017)(Millions of yen)

Reportable segments

AIFUL

LIFECARD

AIRA & AIFUL
PublicCompany
Limited¥ 58,330¥ 28,690¥

Subtotal

Other *1

Total

¥ 87,020

¥

4,430
55

254

¥

4,485

¥ 91,704

Operating revenue
Operating revenue from third
parties—¥ 91,450

—

198

—

¥ 87,219

3,031

—

7,855

(53)

7,802

439,840

188,889—

628,730

30,721

659,451355,921148,064—

503,985

12,145516,131

—

3,300

—

3,300

—

3,300

16,724

3,669—

20,393351

20,744

Inter-segment sales

9

189

Total

¥ 58,339¥ 28,879

Segment profit (loss)

4,823

Segment assets
Segment liabilities¥

Other items
Provision for point card certificates
Provision of allowance for doubtful
accounts *2
Provision for loss on interest
repayment

—

—

—

—

—

—

Provision for bonuses

563

14

—

577

20

597

1,263

1,071

—

2,335

3

2,338

Depreciation
Interests on loans

239

—

—

239

92

331

Dividends received

15

10

—

26

0

26

Reversal provision of allowance for
doubtful accounts

1

—

—

1

—

1

Reversal provision for investment
loss

—

—

—

—

2

2

Rent expenses on real estates

131

—

—

131

—

131

Interest expenses *3

—

—

—

—

39

39

Extraordinary income

—

—

—

—

—

—

(Gain on reversal of sharesacquisition rights)

(—)

(—)

(—)

(—)

(—)

(—)

Income taxes - current

(725)

1,042

—

316

124

440

Income taxes - deferred

(7)

(836)

—

(844)

—

(844)

Increase/decrease in property,
plant and equipment, andintangible assets

¥

1,156

¥

1,201

¥

—

¥

2,357

¥

18

¥

2,376

*1. The other classification comprises businesses not included in reporting segments and encompasses the activities of BUSINEXT CORPORATION, AsTry Loan
Services Corporation and related companies.
2. Provision of allowance for doubtful accounts is the sum total of operating expenses and non-operating expenses.
3. Interest expenses is the amount that is not included in operating expenses but is noted as non-operating expenses.

AIFUL CORPORATION Annual Report 201857

For the Current Fiscal year (From April 1, 2017 to March 31, 2018)(Millions of yen)
Reportable segments

AIFUL

LIFECARD

AIRA & AIFUL
PublicCompany
Limited¥ 64,652¥ 42,855¥ 2,977

Subtotal

Other *1

Total

¥ 110,485¥ 4,902¥ 115,388

Operating revenue
Operating revenue from third
partiesInter-segment sales

10

123

—

134

58

192

Total

¥ 64,663¥ 42,979¥ 2,977¥ 110,619¥ 4,962¥ 115,582

Segment profit (loss)

2,437

2,746

(2,013)

3,170

(608)

2,562

Segment assets

500,262

179,419

17,568697,250

33,278730,529

Segment liabilities

414,714

135,848

7,702

558,265

15,193

573,458

—

2,807

—

2,807

—

2,807

accounts *2

13,290

4,129

1,346

18,766

1,262

20,029Provision for loss on interest
repayment

12,384——

12,384—

12,384

643

14

—

657

23

681

Other items
Provision for point card certificates
Provision of allowance for doubtful

Provision for bonuses
Depreciation

1,250

1,020

108

2,380

3

2,384

Interests on loans

247

—

—

247

39

286

Dividends received

23

12

—

35

0

35

Reversal provision of allowance for
doubtful accounts

—

—

—

—

—

—

Reversal provision for investment
loss

—

—

—

—

2

2

Rent expenses on real estates

149

—

—

149

2

151

Interest expenses *3

—

—

—

—

34

34

Extraordinary income

703

—

—

703

—

703

(Gain on reversal of sharesacquisition rights)

(703)

(—)

(—)

(703)

(—)

(703)

Income taxes - current

(736)

992

—

255

181

437

Income taxes - deferred

(17)

523

—

505

—

505

Increase/decrease in property,
plant and equipment, andintangible assets

¥

1,034

¥

1,394

¥

131

¥

2,560

¥

0

¥

2,561

*1. The other classification comprises businesses not included in reporting segments and encompasses the activities of BUSINEXT CORPORATION, AsTry Loan
Services Corporation and related companies.
2. Provision of allowance for doubtful accounts is the sum total of operating expenses and non-operating expenses.
3. Interest expenses is the amount that is not included in operating expenses but is noted as non-operating expenses.

58

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

4. The amount and principal details of the difference between the total amount of reporting segments and amounts postedon the Company’s financial statements(Millions of yen)

Operating revenue
Reportable segment total

2018(Apr. 1, 2017 to Mar. 31, 2018)¥ 110,619¥ 87,219

4,962

4,485

Operating revenue categorized in “Other”

(192)

(254)

¥ 115,389¥ 91,450Inter-segment eliminations
Operating revenue posted in consolidated financial statements

Profit / Loss

2018
(Apr. 1, 2017 to Mar. 31, 2018)¥

Reportable segment total

2017(Apr. 1, 2016 to Mar. 31, 2017)

3,170

2017
(Apr. 1, 2016 to Mar. 31, 2017)
¥

7,855

Profit (loss) categorized in “Other”

(608)

(53)

Inter-segment eliminations

1,396

(526)

Profit (loss) attributable to owners of parent posted in consolidated financial
statements

AssetsReportable segment total
Profit categorized in “Other”
Inter-segment eliminations
Total assets posted in consolidated financial statements

Liabilities

¥

3,958

2018
(Apr. 1, 2017 to Mar. 31, 2018)

¥

7,276

2017
(Apr. 1, 2016 to Mar. 31, 2017)¥ 697,250¥ 628,730

33,27830,721(47,883)(42,800)¥ 682,645¥ 616,651

2018(Apr. 1, 2017 to Mar. 31, 2018)2017(Apr. 1, 2016 to Mar. 31, 2017)¥ 558,265¥ 503,985

Profit categorized in “Other”

15,193

12,145Inter-segment eliminations(10,219)(11,129)¥ 563,238¥ 505,002

Reportable segment total

Total liabilities posted in consolidated financial statements

AIFUL CORPORATION Annual Report 2018

59

(Millions of yen)
Total of reportablesegment
Other Items

Other

Amount posted in
Consolidated Financial
statements

Adjustment

2018

2017

2018

2017

2018

2017

2018

2017

2,807

3,300

—

—

—

—

2,807

3,300

Other items
Provision for point cardcertificates

—

—

—

—

(2)

(2)

(2)

(2)

Provision of allowance for
doubtful accounts *1

18,766

20,393

1,262

351

—

—

20,02920,744

Provision for loss on interest
repayment

12,384

—

—

—

—

—

12,384

—

657

577

23

20

291

297

972

895

2,380

2,335

3

3

—

—

2,384

2,338

Provision for investment loss

Provision for bonuses
Depreciation
Interests on loans

247

239

39

92

(221)

(305)

65

25

Dividends received

35

26

0

0

—

—

35

26

Reversal provision ofallowance for doubtful
accounts

—

1

—

—

—

—

—

1

Reversal provision forinvestment loss

—

—

2

2

(2)

(2)

—

—

Rent expenses on real estates

149

131

2

—

(78)

(76)

73

55

Interest expenses *2

—

—

34

39

(32)

(39)

1

—

Extraordinary income

703

—

—

—

—

—

703

—

(Gain on reversal of sharesacquisition rights)

(703)

(—)

(—)

(—)

(—)

(—)

(703)

(—)

Income taxes - current

255

316

181

124

—

—

437

440

Income taxes - deferred

505

(844)

—

—

(361)

526

144

(318)

2,560

2,357

0

18

—

—

2,561

2,376

Increase/decrease in property,
plant and equipment, andintangible assets*1. Provision of allowance for doubtful accounts is the sum total of operating expenses and non-operating expenses.
2. Interest expenses is the amount that is not included in operating expenses but is noted as a non-operating expenses.

60

AIFUL CORPORATION Annual Report 2018

Notes to Consolidated Financial Statements

Related information
Fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017)
1. Information for each product and service(Millions of yen)

Operating revenue from outside
customers

Loan business

Credit sales
business

Creditguarantee
business

Softwarebusiness

Other

Total

¥ 52,671¥ 15,949¥ 12,787¥¥ 10,041¥ 91,450—

2. Information for each region(1) Operating revenue
There is no operating revenue from outside customers other than those of Japan, and there are therefore no applicable matters.
(2) Property, plant and equipment
There is no property and equipment in any locations other than Japan, and thus there are no applicable matters.
3. Information for each major customer
Of the operating revenue from outside customers, there is no transaction partner accounting for not less than 10% of the operating
revenue shown on the consolidated statements of income, and thus there is no statement.

Fiscal year ended March 31, 2018 (from April 1, 2017 to March 31, 2018)
1. Information for each product and service(Millions of yen)

Operating revenue from outside
customers

Loan business

Credit sales
business

Creditguarantee
business

Softwarebusiness

Other

Total

¥ 61,791¥ 16,643¥ 13,299¥ 12,803¥ 10,849¥ 115,389

2. Information for each region(1) Operating revenue
The operating revenue of outside customers of Japan exceeds 90% of the operating revenue shown on the consolidated statements ofincome, and thus the statement is omitted.
(2) Property, plant and equipment
The value of property and equipment located in Japan exceeds 90% of the value of property and equipment shown on the consolidatedbalance sheet, and thus the statement is omitted.
3. Information for each major customer
Of the operating revenue from outside customers, there is no transaction partner accounting for not less than 10% of the operating
revenue shown on the consolidated statements of income, and thus there is no statement.
Information relating to impairment loss of non-current assets for each reportable segment
Not applicable
Information relating to amortization of goodwill and unamortized balance for each reportable segment
Not applicable
Information relating to gain on negative goodwill for each reportable segment
Not applicable

AIFUL CORPORATION Annual Report 201861

Information on related parties
1. Transactions with related parties(1) Transactions between the company submitting the consolidated financial statements and the related parties(i) Officers and major shareholders (limited to individuals) of the company submitting the consolidated financial statements, etc.
Fiscal year ended March 31, 2017
Not applicable
Fiscal year ended March 31, 2018

Type
Company
whose
officers
and their
close
relatives
have amajorityof thevotingrightsName ofcompany,etc.

Address

Kabushiki Kita-ku,
Kaisha NK Osaka-shi
Kikaku(Note 1)

Ratio ofCapitalDescription ownershipstock orof business of voting Relationship Description Transaction
investmentsorrights, etc. with relatedofamount(Million yen) occupation(%)
partiestransaction (Million yen)¥

2

Real estatebusiness

None

Borrowing Borrowingof fundsof funds(Note 2)
Interest
expenses(Operating
expenses)(Note 2)Endingbalance(Millionyen)

Accounttitle¥ 3,310

Short-termloanspayable¥ 3,450¥

Othercurrent
liabilities

¥

32

33

Notes: 1. The close relatives of officers have 100% of the voting rights.
2. Transaction conditions and policy for decisions on the transaction conditions
With respect to the interest rate of loans payable, the interest rate is determined in consideration of the market interest rate.

Per Share Information
2018(from April 1, 2017 to March 31, 2018)
Net assets per share
Profit per share
Diluted profit per share

2017(from April 1, 2016 to March 31, 2017)236.13 yen
8.18 yen—

Net assets per share

228.94 yen

Profit per share

15.05 yen

Diluted profit per share

15.04 yen

Notes: 1. Diluted profit per share omitted because there were no latent shares with a dilutive effect.
2. Basis of calculation of net assets per share is as follows.
(Millions of yen)
2018
(from April 1, 2017 to March 31, 2018)
Total net assets¥ 111,649

Amount deducted from total net assets

5,192

910

(Of which shares acquisition rights)

(234)

(910)

(Of which non-controlling interests)
Net assets related to capital stock at end of fiscal year
Number of shares of capital stock at the end of the fiscal year used in thecalculation of net assets per share62¥ 119,407

2017(from April 1, 2016 to March 31, 2017)

AIFUL CORPORATION Annual Report 2018

(4,957)—¥ 114,214¥ 110,738

483,702,998 shares

483,702,172 shares

Notes to Consolidated Financial Statements

Note 3: Basis for calculation of profit per share and diluted profit per share is as follows.
2018(from April 1, 2017 to March 31, 2018)

Item

2017
(from April 1, 2016 to March 31, 2017)

Profit per share
Profit attributable to owners of parent

3,958 million yen

7,276 million yen

3,958 million yen

7,276 million yen

483,702,876 shares

483,499,857 shares

Amount not attributable to capital stock shareholders
Profit attributable to owners of parent related to common stock
Average number of shares of capital stock during the period
Diluted profit per share
Adjusted profit attributable to owners of parent——

Increase in number of capital stock—

191,195 shares(—)(of which shares acquisition rights)
Outline of stock not included in diluted profit per share due to lack of dilutive
effect(191,195) shares

New shares acquisition rights
of Stock options is issued byboard of directors in June 15,2015 (1,494,850 shares).

New shares acquisition rights ofStock options is issued by boardof directors in April 26, 2013
(2,685,100 shares).
New shares acquisition rights ofStock options is issued by boardof directors in June 15, 2015
(1,520,850 shares).

(5) Consolidated supplementary detailed statements
Detailed statements of corporate bonds

Date of issue

Beginningbalance(Million yen)

54th unsecured straightbondJuly 10, 2014

¥ 28,800

55th unsecured straightbond

September
28, 2015

56th unsecured straightbond
57th unsecured straightbondCompany
name

AIFUL

Issue

Total

Endingbalance(Million yen)Interest rate(%)

Security

Date ofmaturity—

8.000 perannum

Unsecured

April 30,
2020

2,600

—

2.900 perannum

Unsecured

June 28,
2017

October 11,
2016

1,300

1,300
(1,300)2.000 perannum

Unsecured

October 11,
2018

July 14, 2017

—

7,200

2.400 perannum

Unsecured

January 14,
2020¥ 32,700

8,500¥ (1,300)

—

—

—

—

¥

Notes: 1. The amount of the ending balance shown in parentheses is included in the amount shown without parentheses. The said amount is scheduled tobe redeemed within one (1) year from the day immediately following the date of the consolidated balance sheet. In the consolidated balance sheet,the said amount is stated in current liabilities.
2. For the 54th unsecured straight bond, it was fully redeemed on July 10, 2017 before the date of maturity.
3. The scheduled amount of redemption for each year within five years after the consolidated closing date is as shown below.
(Millions of yen)Due in one year or less
1,300

Due after one year throughtwo years
7,200

Due after two years throughthree years—

Due after three years
through four years—

Due after four years
through five years—

AIFUL CORPORATION Annual Report 2018

63

Detailed statements of loan payable, etc.

Category

Beginning balance(Million yen)Ending balance(Million yen)

¥ 73,610¥ 83,325

1.70—

32,13853,482

2.11

—

186

300

—

—

Short-term loans payable
Current portion of long-term loans payable
Current portion of lease obligations

Average interest rate(%)
Repayment due dateLong-term loans payable(excluding the current portion)

161,774

220,529

1.70

From April 2019 to
October 2028

Lease obligations(excluding the current portion)

449

646

—

From April 2019 toJanuary 2024

¥ 268,158¥ 358,284

—

—

Total

Notes: 1. With respect to the “average interest rate,” the average weighted interest rate on the balance of loans payable at the end of the fiscal year isstated.
2. With respect to the average interest rate of lease obligations, the amount of lease obligations before the deduction of the amount equivalent to theinterest included in the total lease fees is recorded on the consolidated balance sheet, and thus the said interest rate is not stated.
3. The scheduled repayment amount of long-term loans payable and lease obligations (excluding the current portion) for each year within five years
from the date of the consolidated balance sheet is as shown below.
Category

Due after one year throughtwo years

Long-term loans payable

Due after two years throughthree years

Due after three years
through four years

Due after four years throughfive years

67,112

91,37037,59721,092

285

179

140

34

Lease obligations

Detailed statement of asset retirement obligations
The amounts of asset retirement obligations at the beginning of the consolidated fiscal year under review and at the end of theconsolidated fiscal year under review are not more than one hundredth (1/100) of the total sums of liabilities and net assets at the
beginning of the consolidated fiscal year under review and at the end of the consolidated fiscal year under review, and thus the statement
is omitted.

OthersQuarterly information for the consolidated fiscal year under review(Millions of yen)First three months(First quarter)

First six months(Second quarter)

First nine months(Third quarter)¥ 24,224¥ 49,252¥ 75,952¥ 115,389

Profit before income taxes

1,930

3,084

5,973

3,527

Profit attributable to owners of the parent

1,976

3,402

6,408

3,958

7.03

¥ 13.25First quarter

Second quarter

Third quarter

¥

¥

¥

(Cumulative period)
Operating revenue

Net income per share(yen)(Fiscal period)
Net income (loss) per share

64

AIFUL CORPORATION Annual Report 2018

(yen)

¥

4.09

4.09

¥

2.95

6.22

Full year (Fiscal year
under review)

¥

8.18

Fourth quarter¥(5.07)

Investor Information(As of March 31, 2018)

Corporate Overview
Corporate NameAIFUL CORPORATION

Date of Establishment

April 1967

Address of Head Office381-1, Takasago-cho,
Gojo-Agaru, Karasuma-Dori,
Shimogyo-ku,
Kyoto 600-8420, Japan

Paid-in Capital¥143,454 million

Fiscal Year

April 1 to March 31

Number of Employees

Number of Branches

Non-consolidated: 1,057
Consolidated: 2,503
900 branches throughout Japan

Principal Shareholders
Number of Percentage ofTotal Shares
Shares(Thousands) Outstanding
AMG Co., Ltd.

94,81419.56

Mitsuhide Fukuda

62,155

12.83

Marutaka Co., Ltd.

24,543

5.06

GOLDMAN, SACHS& CO. REG

21,534

4.44

The Master Trust Bank Of Japan ,Ltd.
(trust account)

19,458

4.02

Japan Trustee Services Bank, Ltd.
(trust account)

11,5692.39

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/HENDERSON HHF SICAV

10,340

2.13

Japan Trustee Services Bank, Ltd.
(trust account 5)

6,322

1.30

HSBC BANK PLC A/C IB MAIN ACCOUNT

5,228

1.08

Japan Trustee Services Bank, Ltd.
(trust account 1)

4,692

0.97

Stock Information
Composition of Shareholders
Stock Listing

The First Section of
the Tokyo Stock Exchange

Securities CodeFinancial
Institutions
13.51%

8515

Number of Shares

Authorized: 1,136,280,000 shares
Issued and Outstanding: 484,620,136 shares
Number of Shareholders

30,167

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
LimitedIndependent Auditor

Deloitte Touche Tohmatsu LLC

Individuals
and Others
37.89%
Securities Companies
and Other Corporations
29.04%
Foreign Investors
19.56%

Contact Address
P.R. and I.R. Section
Tokyo Office
2-31-19 Shiba, Minato-ku, Tokyo 105-0014, Japan
E-mail: spokesperson@aiful.co.jp

AIFUL CORPORATION Annual Report 201865