ANNUAL REPORT 2015
The year ended March 31, 2015

Corporate Philosophy
Earn the trust of society through corporate activity based in integrity
AIFUL was founded by President and CEO Yoshitaka
Fukuda in 1967 as a sole proprietorship consumer financebusiness and established as a corporation in 1978 to bolster its
creditworthiness. In 1982 the corporate name was changed tothe current AIFUL CORPORATION. AIFUL has grown into acomprehensive 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
through corporate activity based in integrity” AIFUL aims to be
a company that is truly trusted by society.

Content s
1 Five-Year Summary
2 Message from President and CEO,Yoshitaka Fukuda
4 AIFUL Group at a Glance
5 Current Business Environment
10 Business Data
12 Corporate Governance
15 Board of Directors andExecutive Officers
16 Consolidated Financial Statements
46 Independent Auditor’s Report
47 History
48 Group Network
49 Investor Information

Forward-Looking Statements
The figures contained in this Annual Report with respect to AIFUL’s plans
and strategies and other statements that are not historical facts are forwardlooking statements about the future performance of AIFUL, which are
based on management’s assumptions and beliefs in light of the information
currently available to it and involve risks and uncertainties 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 and changes in the overall market for
consumer loans, the rate of default by customers, and the level of interest
rates charged by AIFUL.

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2015, 2014, 2013, 2012 and 2011
Thousands of
U.S. Dollars

Millions of Yen

2015

2014

2013

2012

2011

2015

Total income¥90,131¥100,541¥108,863¥120,034¥145,215¥751,092

Total expenses

125,985

69,43385,082

101,940

178,239

1,049,875

Charge-offs and provision for
doubtful accounts

2,276

10,931

8,177

32,93765,06918,967

Income (loss) before income taxes
and minority interests(35,854)

31,10823,601

18,094(33,024)(298,783)

Net income (loss)(36,500)

30,462

22,706

17,392(31,936)(304,167)¥350,017¥348,011¥390,635¥455,012¥594,527¥2,916,808

70,41979,223

98,628131,807

182,607586,825

Loans in legal bankruptcy

32,90935,13537,59843,033

44,136274,242

Nonaccrual loans

23,81927,29036,90655,42788,221

198,492

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

2,830

2,445

2,610

4,475

9,489

23,583

Restructured loans

10,861

14,35321,51428,872

40,76190,508

Total assets

560,324

577,339

607,181665,185

858,017

4,669,367

Allowance for doubtful accounts

79,708102,522

119,428

156,346

192,434

664,233

Total liabilities

462,848443,797502,173583,541

794,4123,857,067

Interest-bearing debt

227,538

253,953

308,747

360,569

492,610

1,896,149

Total equity

97,476

133,542

105,008

81,64463,605

812,300

—

—

2,305

1,854

2,757

—

¥(75.74)¥63.34¥47.21¥72.49¥(134.05)¥(0.63)

—

63.00

47.02

—

—

—

200.45276.80213.41331.59255.32

1.67

Equity ratio

17.3

23.1

16.9

12.0

7.1

—

ROE

(31.8)

25.8

24.9

24.7

(41.4)

—

ROA

(6.4)

5.1

3.6

2.3

(3.2)

—

483,506,536

481,867,836

481,867,836

240,933,918

238,685,568

—

1,350

1,369

1,437

1,898

2,073

—

For the Year:At Year-End:Loans (Note 2)
Nonperforming loans

Minority interests

Per Share Data (Yen/U.S. dollars)(Note 3)
Net income (loss), basic
Diluted net income
Total equity

Ratios (%):

Other Data:
Number of shares outstandingat year-end (Note 4)
Number of employees at year-end

Notes: 1. Figures in the financial section are based on audited English-language statements.
2. Managed-asset basis
3. The U.S. dollar amounts have been translated, for convenience only, at ¥120=$1, the approximate rate of exchange at March 31, 2015.
4. The Company implemented a stock split of 2 shares for each 1 share of common stock on October 1, 2013.

AIFUL CORPORATION Annual Report 20151

Message from President and CEO, Yoshitaka Fukuda
I would like to take this opportunity to express my gratitude to ourstakeholders for their support. I’m pleased to report our financial results
for the fiscal year ended March 31, 2015.

Message from President and CEO Yoshitaka Fukuda

Financial Results for the Fiscal Year Ended March 31, 2015
The AIFUL Group’s consolidated operating revenue for the fiscal year ended March 31, 2015 fell 6% fromthe previous fiscal year, to 86.3 billion yen.
In the loan business, theI operating
forinthetimeforinthe
nine
years
onI anoperatingthank you forloan
your balance
continuingroseinterest
andfirst
supportAIFULGroup.
would
like tothe financial
resultsof AIFUL
andandits consolidated
subsidiaries
theprincipal basis as a resultpresent
of increases
in thenumberofCORPORATION
new contracts
loans on theback offoractive
fiscal
year
ended
March
2011.
In
addition,I
will
explain
the
steps
we
have
taken
to
restructuretransactions through unstaffed branches in addition to effective advertisements, mainly on TV and theour business.
Internet. On the other hand,average loan balances during the fiscal year declined year on year, andsome loans were posted as off-balance sheet receivables for capital procurement through liquidation.
Financial
Results
for theFiscal 13%
Yearfrom
Ended
March
Consequently, interest income
on loans
to customers
decreased
one yearago, to2011
43.7 billion
yen. Operating revenue fromthe credittotal
guarantee
businessthe previous
year, toConsolidated
income decreased
34%roseyear43%on yearfrom
to ¥144.9
billion. Full fiscal
enforcement
the Money
Lending
resultedin reduced
lending, andwaivers11.3 billion yen, while ofrevenue
from
theBusinesscreditAct
cardbusinessincreased
1%debtfromoneassociatedyear ago, towith interesttransaction
refund claims volume.
remained at a high level. As a result, total loans outstanding
13.6 billion yen, due to increased
decreased¥262.2or claims
31%, fromyear earlier.
In addition, interest
loans continued
to level,In terms of operating
expenses,in billion,
light offora interest
repayments,
whichonremain
at a highdecreaseduetotheeffectofreductionsininterest
rates.
the Group provided an allowance for losses on interest repayments of 63.7 billion yen, and recorded aon theaccounts
Business Revitalization
Plan approved
under thetoADR
reversal of the allowance forBaseddoubtfulof 11.5 billion
yen in relation
theprocess,waivertheofAIFUL
principal
Group
reducedfixed
costs
includingpersonnel
andrentalexpensesthroughvoluntary
retirement
accompanying interest repayments. As a result, operating expenses increased 82% from one year ago,
other businessGroup
also(comparedscaled back loans
other assets
toto 125.9 billion yen andandoperatingloss restructuring
amountedinitiatives.
to 39.5 The
billionyen
withandoperatingincomereduce variable costs. As a result, general and administrative expenses decreased ¥23.8 billion,of 22.4 billion yen in the previous period).
or 28%, year on year to ¥61.8 billion.
Although the Group recorded non-operating income of 3.1 billion yen, it posted an ordinary loss of
On the other hand, AIFUL CORPORATION expects that interest refund claims will rise to
36.4 billion yen (compared with ordinary income of 24.7 billion yen in the previous period), and recordeda certain degree because a major consumer finance company is undergoing corporatea net loss of 36.4 billion yen (compared with net income of 30.4 billion yen in the previous period).
reorganization proceedings, and therefore recognized charge-offs and provision for doubtful
accounts related to interest refunds of ¥49.7 billion and provision for losses on interest
refunds of ¥27.2
together¥76.9 Marchbillion. As a31,
result,operating loss was
Consolidated Forecast
forbillion,
the whichFiscalYeartotaled
Ending2016¥24.1 billion, and ordinary loss was ¥24.9 billion.

Regarding consolidated operating results for the fiscal year ending March 31, 2016, even though there
Further, AIFUL recognized losses from a natural disaster of ¥6.6 billion to cover theis continued uncertainty concerning claims for interest repayments, the AIFUL Group expects operating
estimated impact of the Great East Japan Earthquake. Consequently, net loss was ¥31.9 billion.
revenue to grow by 1.2 billion yen, to 87.6 billion yen. On the other hand, operating expenses areprojected to soar to 80.4 billion yen because of
anticipated expenditures related to advertising,which is intended to further increase thenumber of new contracts concluded and theoperating loan balance.
As a result, the operating income forecast
is 7.1 billion yen, with ordinary income of 7.3
billion yen and net income of 7.1 billion yen.
Yoshitaka Fukuda
President and CEO

2

AIFUL CORPORATION Annual Report 20152

Current Business Environment
The consumer finance industry’s business environment has been steadily moving toward recovery,
demonstrated mainly by the operating loan balance, which has clearly bottomed out. This development ispartly the result of the general economic recovery driven by the government’s economic policies, as well as
the aggressive advertising campaigns conducted by companies.
On the other hand, although the industry’s biggest risk, interest repayment claims, is steadily trending
downwards from the peak period, the number of claims has recently remained almost unchanged, leaving
the future outlook still unpredictable.
In this business environment, the Group reached the end of the Business Revitalization Plan period on
July 10, 2014. Following the repayment and repurchase of certain relevant loans, along with the exchangeof corporate bonds undertaken on the same day, the Group continues to receive financial assistance forthe residual debt.
In addition, the Group is steadily restoring the loan business in a similar manner as the overall industry
recovers, largely indicated by the operating loan balance returning to positive growth, thanks to theincrease in the number of new contracts concluded and the loan volume.
Going forward, while dealing with the principal management issue of interest repayment claims, theAIFUL Group will steadily carry out the repayment plan set forth in the new business plan. Moreover, theGroup will strive to streamline its business efficiency across the Group, work to improve the quality of its
credit portfolio by acquiring sound credit, and aim to bolster the top line. The Group will do its best to
respond to the support and expectations of all stakeholders.

Yoshitaka Fukuda
President and CEO
Representative Director

Important Matters
The AIFUL Group has traditionally raised short-term and long-term funds through various methods, including borrowings fromfinancial institutions, issuing bonds, and securitizing loan receivables. However, the AIFUL Group’s fund-raising capacity has been
confronted by difficult conditions in the market environment due to a variety of reasons including increased expenses as the resultof rising demands for interest refunds in accordance with a ruling by Japan’s Supreme Court in 2006 as well as the rapid and sharp
deterioration in the fund-raising environment. Accordingly, there have been concerns that the AIFUL Group may have difficulty inraising sufficient new funds to sustain its business.
As a result, since the fiscal year ended March 31, 2010, conditions have arisen to cast a substantial doubt about the AIFULGroup’s ability to continue as a going concern.
In order to resolve this situation, the AIFUL Group applied on September 24, 2009 for Business Revitalization Procedures using
the Alternative Dispute Resolution (the “ADR”) process in order to improve its earning capacity and financial strength with the goalof revitalizing and reinforcing its business. At the meeting of participating creditors held on December 24, 2009, the AIFUL Groupobtained an approval for its Business Revitalization Plan, that includes the provision of financial support. As a result, Business
Revitalization Procedures using the ADR process were adopted. The AIFUL Group had repaid cumulative amount of ¥110,391
million ($919,925 thousand) to creditors in accordance with its Business Revitalization Plan since adoption of the plan, and theexpiration of the ADR had come on July 10, 2014 .
At the meeting of participating creditors held on June 13, 2014, the participating creditors decided to approve the proposal
regarding continuous financial assistance, which includes the provision on the partial repayment of the remaining obligations of¥161,741 million ($1,347,833 thousand) as further detailed below.
By implementing concrete measures stipulated under the New Business Plan, the AIFUL Group considers that there is no
substantial uncertainty about its ability to continue as a going concern.
Summary of financial assistance
The Company executed the partial repayment on July 10, 2014, by new borrowing from financial institutions.
Regarding the obligations that were left after the above repayment, the Company advanced to:(a) reschedule the obligations of ¥52,700 million ($439,167 thousand)(b) immediately pay back the obligations in a lump sum at a discount(c) switch from the obligations to the corporate bond, bearing interest of 8% per annum and with maturity date of April 30, 2020.

AIFUL CORPORATION Annual Report 2015

3

REVIEW OF OPERATIONSAIFUL Group at a Glance
AIFUL CORPORATION

Balance of operatingreceivables
AIFUL
CORPORATION
providesconsumer financing and consumer
credit services, which play a central
role in the AIFUL Group’s overallbusiness. The Company’s principal
services include unsecured loans,mortgage loans and small businessloans. In addition, the Company
handles credit guarantee services intie-ups with commercial banks.

Operating revenue

Net income(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

375,000

80,00030,000

325,000

70,00020,00060,00010,000275,000

50,000040,000-10,000

30,000-20,000

20,000-30,000

75,00010,000-40,000

25,0000

225,000
175,000
125,000

FY2012FY2013

FY2014FY2012FY2013

FY2014-50,000

FY2012FY2013

FY2014

LIFECARD CO., LTD.

Balance of operatingreceivables
LIFECARD CO., LTD. is primarily
engaged in the credit card business.
The Company also handles the
V-Preca or prepaid Visa card, thefirst of its kind in Japan, designed
exclusively for Internet users. Other
services include collection agency
services, credit guarantees andinsurance services.

Operating revenue

Net income(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

160,000

30,0005,000

150,000

25,000140,000

20,000130,000

15,000120,000

10,000110,000

5,000

100,000

FY2012FY2013

FY2014

0

4,000
3,000
2,000
1,000

FY2012FY2013

FY20140

FY2012FY2013

FY2014

BUSINEXT CORPORATION

Balance of operatingreceivables
BUSINEXT CORPORATION provides
financial services to private businessowners and small and medium-sizedenterprises (SMEs). The Company
handles a wide range of products
including card loans, businessloans, mortgage loans, and medical
institution loans.

(Millions of Yen)

(Millions of Yen)

60,00010,000

1,400

9,000

1,200

8,000

1,000

7,000

800

6,000

600

5,000

400

4,000

200

50,00040,00030,00020,000

0

AIFUL CORPORATION Annual Report 2015

Net income(Millions of Yen)

10,0004

Operating revenue

FY2012FY2013

FY2014

3,000

0

2,000

-200

1,000

-400

0

FY2012FY2013

FY2014-600

FY2012FY2013

FY2014

Current Business Environment
Japan’s consumer finance industry has undergone a radical
restructuring due to the combined impact of interest
repayment claims triggered by the 2006 Supreme Court rulingand tighter regulations based on the Money Lending BusinessAct and Capital Subscription Law implemented in 2010.
Interest repayment claims pose the greatest business risk to
the industry, adding financial pressure on consumer financecompanies. Consumer loans outstanding have decreased 80%
from the peak in around 2006 to 2.6 trillion yen, while thenumber of registered lenders has also diminished by 80% toaround 2,000.

Trends in market scale(Billion yen)

20,00018,000Bank guarantees outstanding
Loans for consumers (pure-play, credit)

17 trillion yen

Lehman ShockApplication for
ADR (Aiful)
Money Lending
Business Act
TakefujiCorporation’sbankruptcy

16,00014,00012,00010,0008.5 trillion yen
8 trillion yen

8,000
6,000
4,000
2,000
0

07/4

08/4

09/3

10/3

11/3

12/3

13/3

14/3

15/3

Source : Monthly market survey by the Japan Financial Services Association

In spite of this prolonged unfavorable climate, the decline
in the loan balance is coming to an end and there are signsof recovery, thanks to bold economic measures by thegovernment and aggressive advertising and marketing bymajor companies.
In addition to consumer loans provided by consumer
finance companies (loan business), major companies areseeing steady growth in the balance of guarantees for loans
provided by financial institutions (credit guarantee business).
As a result, the total combined market size for the loanbusiness and credit guarantee business was 8.5 trillion yen at
the end of fiscal year 2014.
Meanwhile, interest repayment claims continue to posethe greatest business risk. While the number of claims has
peaked, the current trend is still flat and the future remains
unpredictable.

Interest repayments and waiver of principal(for the industry)(Billion yen)

Waiver of principal
Interest repayments

1,200
1,000
800
600
400
200
0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013
Source: Survey on Business Conditions, etc., of Money Lenders by the Japan Financial Services

Number of interest repayments for top three firms(Thousand)500

The same trend applies to all three major companies in theindustry, and the future of interest repayment claims remains
unclear. However, the loan business is recovering steadily, withthe total number of unsecured loan applications for the threecompanies at the end of fiscal year 2014 increasing 13% year
on year to 1,260,000, and the total number of new contracts
concluded increasing 14% year on year to 560,000. Thebalance of operating loans bottomed out in fiscal year 2013 at
1.7 trillion yen, increasing 2% year on year, clearly indicatingthat the three major companies are experiencing a recovery.
The loan business is at the core of AIFUL Group’sbusiness, and the Group is working to develop and introduce
products that can quickly meet customers’ funding needs.
The Group has supplemented these efforts witheffective advertisements run mainly on television and theInternet, and the active development of branches with anemphasis on unstaffed branches.
As a result, in fiscal year 2014 the number of new
applications was 340,000 (up 31% year on year), and thenumber of new contracts concluded was 153,000 (up 31%
year on year). The increase in the number of new contracts
concluded led to a rise in the amount of loans, and along with

450
400
350
300
250
200
150
100

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014

Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

Number of applications and new accounts for top
three firms(Thousand)

1,800
1,600

Applications (left scale)
New accounts (left scale)Contract rate (right scale)

(%)

90
80

1,400

70

1,200

60

1,000

50

800

40

600

30

400

20

200

10

0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

0

Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

AIFUL CORPORATION Annual Report 20155

Current Business Environment

Loans outstanding for top three firms(Billion yen)

Loans outstanding(left scale)
Number of accounts(right scale)

9,000
8,000
7,000

(Thousand)

4,500
4,000
3,500

6,000

3,000

5,000

2,500

4,000

2,000

3,000

1,500

2,000

1,000

1,000

500

0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

0

Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

Number of applications and new accounts (AIFUL)（Thousand）

Applications(left scale)
New accounts(left scale)Contract rate(right scale)

400
350
300

(%)

50
40

250

30

200
20

150
100

10

50
0

FY2009FY2010FY2011FY2012FY2013

FY20140Loan volume (AIFUL)(Billion yen)

1,400

Loans to a accounts
Loans to existing accounts

1,200
1,000
800
600

a rise in the amount of loans to existing customers, resulted in
an increase in the operating loan balance. The total amountof loans was 123,451 million yen (up 19% year on year), andthe operating loan balance for fiscal year 2014 was 264,557
million yen (up 1% from the end of the previous fiscal year).
This marked the first increase in nine terms since fiscal year
2005.
In the credit guarantee business, we aim to increase
the guarantee balance by utilizing our strengths, such as our
know-how in private and business-related credit, the strengthsof our two guarantee-business brands AIFUL and LIFECARD,
and our flexibility and speed as an independent company.
We are also working to extend our sales activities to potential
guarantee partners, as well as proposing new products andoffering support to promote sales.
In fiscal year 2014, AIFUL and LIFECARD began
partnerships with four and six financial institutions,
respectively, and commenced sales. However, due to thehighly competitive market, among other factors, guarantees
for outstanding loans based on operating receivables were
73,874 million yen, decreasing 2% from the end of theprevious fiscal year.
In the credit card business, we promoted card
membership mainly for LIFECARD by expanding the card
lineup through the addition of cards for female customers
and limited-edition designs for the web-marketing channel.
We also undertook initiatives to improve convenience for card
members, focusing mainly on improving the functions of the
web-marketing channel and providing anti-phishing software
for improved security.
As a result of the above efforts, card membershipincreased 4% year on year to 6,020,000 members,
transactions increased to 584,733 million yen (up 9% year onyear), and the balance of installment receivables decreased 1%
year on year to 84,332 million yen.

400
200
0

FY2009FY2010FY2011FY2012FY2013

FY2014Loans outstanding (AIFUL)(Billion yen)Unsecured loans outstanding (left scale)
Number of accounts (right scale)

500

1,200
1,000

400

800

300

600

200

400

100

200

0

6

(Thousand)

Loans outstanding (left scale)600

FY2009FY2010FY2011AIFUL CORPORATION Annual Report 2015

FY2012FY2013

FY20140

As a benefit of the restrictions on total lending limits,
the quality of our credit portfolio continued to improve,and the non-performing loan (NPL) ratio and write-off ratio
continued to decrease.
In fiscal year 2014, the balance of NPL decreased 11%
year on year to 70,418 million yen, and the ratio of unsecuredloans also fell one point year on year to 8.7%, making forsteady improvement.
In addition, the write-off ratio stood at 4.5%, down
0.6 point year on year. The so-called general write-offs, which
exclude the waiver of principal due to interest repayment
claims, were 3.2%, showing continued improvement.
While the primary management issue continues to beinterest repayment claims, the number of claims has alreadyCurrent Business Environment

peaked. However, the decrease was marginal in fiscal year
2014, with repaid interest falling 10% year on year to 29,903
million yen, and debt waived due to interest repayment falling
16% to 6,612 million yen, totaling 36,515 million yen, or an
11% fall year on year.
In light of this situation, we recalculated our estimate of
all expected interest repayments in the future and provided anallowance for losses on interest repayments of 63,733 million
yen. We also recorded a reversal of the allowance for doubtful
accounts of 11,597 million yen in relation to the waiver ofprincipal accompanying interest repayments. Thus, we posted
52,100 million yen as expenses related to interest repayments.
As a result, the balance of allowance for losses oninterest repayments for fiscal year 2014 increased 33,524
million yen year on year to 93,405 million yen, and thebalance of allowance for doubtful accounts in relation to thewaiver of principal accompanying interest repayments was
17,388 million yen. The total allowance related to interest
repayments increased 15,621 million yen from the end of theprevious fiscal year to 110,793 million yen.
The 2006 Supreme Court ruling triggered a rise ininterest repayment claims, leading to increased cash-outs,
while the global financial crisis caused the financing market
to rapidly deteriorate. These developments and other factors
led to financial difficulties for the AIFUL Group. To resolve thesituation, a Business Revitalization Plan that included financial
support was approved in 2009, and the alternative dispute
resolution (ADR) process for business revitalization wasformalized.
Based on the basic policy of restructuring our businessin accordance with the Business Revitalization Plan, in thisprocess we closed and integrated offices and divisions, as well
as revised the Group’s organizational structure to streamline
business operations throughout the Group. Of the 272,100
million yen debt included in the Business Revitalization Plan,
we have repaid 110,300 million yen, exceeding our initial plan
to repay 76,000 million yen.
In regard to the debt of 161,700 million yen as of July
2014, which marked the end of the Business Revitalization
Plan period, we made partial repayments or purchased theclaims for the debt and swapped them with corporate bonds.
Financial assistance has been extended for the outstanding
52,700 million yen.
As stated in the “Notice Concerning Agreement forCompletion of Payment of Debts Pertaining to Credit under
Financial Support” released on July 10, 2015, we have agreed
with the creditors to change the final payment date of thedebt and to borrow funds from major banks and otherfinancial institutions to fully repay the debt.
In general, the business environment for the AIFULGroup is steadily improving in line with the consumer finance

Credit guarantees (Consolidated)(Billion yen)

Credit guarantees(left scale)Tie-up banks (AIFUL)(right scale)

160
140

160
140

120

120

100

100

80

80

60

60

40

40

20

20

0

FY2009FY2010FY2011FY2012FY2013

FY20140Credit card (LIFECARD)(Billion yen)

Installments receivable(left scale)
Number of card holders(right scale)

1,400
1,200

14
12

1,000

10

800

8

600

6

400

4

200

2

0

FY2009FY2010FY2011FY2012FY2013

FY20140

Non-performing loans (NPL) (Consolidated)
Non-performing loans (NPL)(left scale)
Unsecured loans NPL(left scale)
Ratio of unsecured loans NPL(right scale)(Billion yen)

300
250

(%)

30
25

200

20

150

15

100

10

50

5

0

FY2009FY2010FY2011FY2012FY2013

FY20140Total receivables write-offs (Consolidated)(Billion yen)

Write-offs(left scale)Write-offs due to interest
repayments (left scale)
Ratio of write offs
(right scale)

160
140
120

(%)

16
14
12

100

10

80

8

60

6

40

4

20

2

0

FY2009FY2010FY2011FY2012FY2013

FY20140

AIFUL CORPORATION Annual Report 20157

Current Business Environment

industry, with increases in both the number of new contracts
concluded and the amount of operational loans.
Looking forward, we will continue to place primaryemphasis on responding to interest repayment claims,
while working to improve our credit portfolio through theacquisition of sound credit and aiming to build up our top line
through Groupwide efforts to expand our sales assets. We will
also strive to do our part toward a healthy consumer financemarket and contribute to society as a consumer financecompany.

Interest repayments and waiver of principal(Consolidated)(Billion yen)

100

Interest repayments
Waiver of principal

80
60
40
20
0

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

Interest repayment claims(Numberof claims)

140,000
Interest repayment claims
Attorney involvement

120,000
100,000(May 2007 = 100%)

80,00010,000

(%)
50

8,000

40

60,0006,000

30

40,000

4,000

20

2,000

10

20,00000

Oct Nov Dec Jan Feb Mar

0FY FY FY FY FY FY FY2008 2009 2010 2011 2012 2013 2014

Trends in interest bearing liabilities and ADR(Billion yen)

300
250

ADR wasterminatedin July 2014

200
150

Some of the debts were
paid off and exchanged
for corporate bonds,
and also non-performing
loans were purchased.
As for the remaining
52.7 billion yen, financial
support continued.

100
50
0

2010 - 2014

June 30,
2014*As of March 31

8

Continued
financialsupportAIFUL CORPORATION Annual Report 2015

Reachedagreement
to extend
repaymentof 52.7
billion to
Sept. 30,
2015

July 31,2014

Total assets on a consolidated basis declined 17,015 million
yen, or 3%, compared to the end of the previous fiscal year to560,323 million yen at the end of fiscal year 2014. The result
was primarily due to a 33,499 million yen decline in operatingloans. (This included a decline in operating loans that became
off-balance as a result of the securitization of claims.)
Total liabilities at the end of fiscal year 2014 were462,848 million yen, an increase of 19,051 million yen, or
4%, compared with the end of the previous fiscal year. The
principal factors contributing to this increase were an increaseof 33,523 million yen in the allowance for losses on interest
repayments due to the additional provision of an allowance
for losses on interest repayments and an increase of 28,800
million yen in bonds, offsetting a decline of 55,761 million yen
in debts.
Net assets edged down 36,066 million yen, or 27%,compared with the end of the previous fiscal year to 97,475
million yen. This was primarily due to the posting of net loss.
Cash Flows
Cash and cash equivalents (“funds”) declined 14,290
million yen, or 21%, compared with the end of the previous
fiscal year, to 52,586 million yen.
Cash flows from operating activities
Net cash provided by operating activities amounted to18,503 million yen, a decrease of 66% compared with thecorresponding period of the previous fiscal year. This mainlyreflected the fact that an increase in funds, an increase in theallowance for losses on interest repayments and a decline inoperating receivables, including loans to customers, exceededa decline in funds due to the recording of a loss before taxes.
Cash flows from investing activities
Net cash used in investing activities stood at 6,385 million
yen, compared with net cash provided of 1,524 million yen in
the corresponding period of the previous fiscal year. This was
mainly attributable to the purchase of tangible fixed assets
and intangible fixed assets.
Cash flows from financing activities
Net cash used in financing activities amounted to 26,588
million yen, down 48% year on year, primarily due to therepayment of borrowings.

Current Business Environment

Cash Flows and Funding (Consolidated)
Cash flows fromoperating activities

Cash flows frominvesting activities＋＋¥18.5 bn−¥6.3 bn

Cash flows fromfinancing activities＋−¥26.5 bn＝ −¥14.3 bn
Breakdown
Repayment of
ADR-related
dept obligations¥125.2 bn

Repayment ofother debt, etc.

¥610.2 bn

Financial expenses¥8.6 bn
Interest
income, etc.

¥86.3 bn

SG&A, etc.

¥41.3 bn

Losses on interest
repayments¥28.9 bn

Securitization ofclaims¥36.7 bnLoancollection¥142.7 bn

Loans tocustomers¥168.3 bn

Short-termborrowings,
etc.

Loan
repayment
and bond
redemption,
etc.

¥708.8 bn¥735.4 bn

Expenses due topurchase of assets, etc.

¥6.9 bn

Income due tosales of assets, etc.

¥0.5 bn

Cash and cash
equivalents¥66.8 bn
At the beginningof FY2014

Cash and cash
equivalents¥52.5 bn

At the end of
FY2014

AIFUL CORPORATION Annual Report 20159

Business Data
AIFUL GROUPTOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of Yen)

AVERAGE RATE OF BORROWINGS

2011

2012

2013

2014

2015

768,342618,220

556,032

515,960

514,220594,527455,012

390,635

348,011350,018

Indirect

Unsecured

425,400

318,758

272,980

261,222273,628

DirectSecured

99,65077,11564,34541,26834,904

Small Business

69,47859,11253,31045,521

41,485

Installment Receivables

80,99080,614

83,88585,26484,333Credit Guarantees

82,134

74,14874,44175,55973,875

Other

10,690

8,446

7,071

7,126

5,995

Total Receivables Outstanding
Loans

Average Rate of Borrowings

Long-term Prime Rate
(Reference)

2012

2013

2014

2015

2.18

2.09

2.05

2.31

3.20

2.15

2.07

1.99

1.98

2.32

2.26

2.19

2.60

3.72

4.47

1.60

1.35

1.15

1.20

1.15

NUMBER OF CUSTOMER ACCOUNTS(Thousands)

2015

2011

2012

2013

2014

1,515

1,130

888

817

824

Unsecured

1,432

1,062

830

769

782

Number of Customer Accounts

TOTAL INCOME/NET INCOME (LOSS)

(%)

2011

Secured

36

28

23

18

14

(Millions of Yen)

Small Business

47

40

36

31

28

Credit Card Holders

6,746

6,357

5,811

5,818

6,023

2011

2012

2013

2014

2015

Total Income
145,215Interest on Loans
103,784
Unsecured
79,543
Secured13,976
Small Business
10,265
Installment Receivables 13,021
Credit Guarantees
5,759
Other
22,652Net Income (Loss)(31,936)

120,034
75,99356,886
10,581
8,526
11,7194,798
21,493
17,392

108,683
61,60745,028
8,690
7,889
12,746
4,610
20,65622,706

100,541
50,57840,717
7,064
2,797
13,613
7,950
19,71930,462

90,131
43,76235,855
5,567
2,339
13,678
11,382
17,531(36,500)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE
Total Assets(Millions of Yen)

2015

2011

2012

2013

2014

858,017665,185

607,181

577,339 560,324

ROA (%)

(3.2)

2.3

3.6

5.1

(6.4)

Total Equity

63,60581,644

105,008

133,542

97,476

ROE (%)(41.4)

24.7

24.9

25.8

(31.8)AIFUL CORPORATION
LOANS OUTSTANDING(Millions of Yen)

2011

2012

2013

2014

2015

422,004

408,167

348,353

350,681349,952

381,368

344,455

286,316

260,776

264,557

Unsecured289,361

265,617

224,669

216,072

Secured83,422

66,60752,708Small Business

8,585

12,231

8,939

Total Receivables Outstanding
Loans

2012

2013

2014

2015

815

805

631

590

613

Unsecured

772

767

601

565

593

229,392

Secured

34

27

22

17

14

37,611

29,275

Small Business

9

12

9

7

6

7,093

5,890

–

7,202

4,433

2,846

1,821

36,96948,39751,07880,48978,134

Other

3,667

8,113

6,526

6,570

5,441

Number of Customer Accounts

AVERAGE LENDING INTEREST RATE
Average Lending
Interest RateTOTAL INCOME/NET INCOME (LOSS)
2012

2013

2014

2015

90,75179,75769,655

63,77957,577

Interest on Loans

74,02057,65747,402

42,06636,150Unsecured60,194

46,374

38,12634,47229,938

Secured

12,511

9,554

7,655

6,233

5,148

Small Business

1,315

1,729

1,621

1,361

1,065

Credit Guarantees

3,349

3,051

3,215

6,654

10,136

Installment Receivables
Other
Net Income (Loss)

2012

2013

2014

2015

15.8

15.9

15.0

15.4

14.8

–

316

306

226

143

13,382

18,732

18,733

14,834

11,148(70,169)

13,407

10,64924,046(41,434)AMOUNT OF WRITE-OFFS/RATIO OF WRITE-OFFS(Millions of Yen)

2011

2012

2013

2014

2015

81,666

68,352

31,591

19,264

15,374

Unsecured Loans
Write-offs

63,77946,37425,464

14,933

12,616

Ratio of Total Receivables
Write-offs (%)

21.41

19.84

11.03

7.39

5.81

Ratio of Unsecured
Loans Write-offs (%)

22.04

17.46

11.33

6.91

5.50

Total Receivables Write-offs*On July 1, 2011, Group companies, formerly known as Life Co., Ltd. and Cities Co., Ltd., were absorbed by merger into AIFUL

10

AIFUL CORPORATION Annual Report 2015

(%)

2011

(Millions of Yen)

2011
Total Income(Thousands)

2011

Credit Guarantees

Installment Receivables

NUMBER OF CUSTOMER ACCOUNTS

Business Data

NEW ACCOUNTS
New Accounts
Unsecured Loans
Contract Rate of
Unsecured Loans (%)(Accounts)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2011

2012

2013

2014

2015

60,43463,296

87,575

117,072

153,197

Total Assets

55,986

61,73487,515

117,008

153,135

ROA (%)

27.3

29.9

38.0

45.0

45.0

Total Equity
ROE (%)(Millions of Yen)

2011

2012

2013

2014

2015

578,153

533,713466,542463,792

444,737

(9.8)

2.4

2.1

5.2

(9.1)

64,83579,761

90,411

114,80773,722(70.0)

18.6

12.5

23.5

(44.2)

LIFECARD CO., LTD.
TOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of Yen)
2011

2012

2013

2014

2015

Total Receivables Outstanding

270,201

152,663

151,736

150,228

148,933

Installment Receivables

80,99073,41279,45282,41882,512Loans (Cash Advance)

137,023

53,16848,37545,32244,518Credit Guarantees

45,16525,75023,363

21,931

21,349

7,023

333

545

556

554

Other

2012

2013

2014

2015

491,804

341,491

496,088

539,051584,734

Credit Card Shopping Loans

446,540

310,754454,181498,756

543,710Credit Card Cashing Loans

45,26330,73740,90640,29541,023

2012

2013

2014

Credit Card

(Millions of Yen)

2011

2012

2013

2014

2015

44,675

19,711

26,402

27,34727,314

Installment Receivables

13,267

8,657

12,50913,387

13,534Loans (Cash Advance)

19,559

6,084

6,904

6,260

5,944

Credit Guarantees

2,410

1,240

1,395

1,296

1,246

Other

9,439

3,730

5,593

6,403

6,590

(31,148)

2,207

3,320

2,419

3,530

Net Income (Loss)(Millions of Yen)

2011

NUMBER OF CARDHOLDERSOPERATING REVENUE/NET INCOME (LOSS)
Operating Revenue

PURCHASE RESULTS

2011(Thousands)

2015

6,746

6,357

5,811

5,818

6,023

LIFE Proper Card

2,762

2,489

2,021

1,911

1,855

Affinity Cards

3,984

3,869

3,790

3,907

4,169

Number of Cardholders

AMOUNT OF WRITE-OFFS/RATIO OF WRITE-OFFS(Millions of Yen)

AVERAGE YIELD
Average Yield

(%)

2011

2012

2013

2014

2015

13.4

17.1

17.5

18.2

18.5

2011

2012

2013

2014

2015

Total Receivables Write-offs

30,308

1,665

2,961

3,178

3,042

Ratio of Total Receivables
Write-offs (%)

11.22

1.09

1.95

2.08

2.04

*LIFECARD CO., LTD. commenced business on July 1, 2011. As a result, performance figures for the fiscal year ended March 31, 2012 are for a nine-month period.
*Figures prior to the fiscal year ended March 31, 2011 are for Life Co., Ltd.

AIFUL CORPORATION Annual Report 201511

Corporate GovernanceReinforcement of Corporate Governance
The AIFUL Group’s basic concept for corporate governance isto improve the transparency of its management based on its
management principle of “Earn the trust of society throughcorporate activity based in integrity.” To that end, the Grouphas developed a management organizational structure andimplemented the necessary measures to build a trustworthy
relationship with all of its stakeholders, including customers,
shareholders, and investors, and discloses information
appropriately.
(i) Overview of the corporate governance structure
In order to strengthen the supervisory function of the Boardof Directors and to enhance corporate governance, we havemade the change from a company with a Board of Auditors
to a company with an Audit and Supervisory Committee. Thischange went into effect on June 23, 2015.
Audit and Supervisory Committee and Directors on
the Committee
The Audit and Supervisory Committee consists of three directors (including two who are outside directors). The committee 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 these duties, the committee also audits for legitimacy and appropriateness throughthe use of the internal control system. A meeting will generally
be held every month, with extraordinary meetings held whennecessary.
Directors who are members of the Audit and Supervisory
Committee cooperate with the Internal Auditing Department
and accounting auditors to enhance management’s supervisory functions. They also share information with the auditorsof affiliated companies in an effort to strengthen the auditing
structure in the operations of the entire Group.
To improve 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 areon the Audit and Supervisory Committee. The Group will also
take the necessary steps to secure independence, such as byrequiring that the Audi Office does not follow any directives
or orders from directors (other than directors on the Audit andSupervisory Committee) when carrying out its duties.
Board of Directors and Directors
The Board of Directors consists of eleven directors in total (asof the date of submission of the Annual Securities Report),
with eight directors (directors who are not on the Audit
and Supervisory Committee) and three directors who areon the Audit and Supervisory Committee. It deliberates anddecides on matters that cannot be delegated to directors
pursuant to the provisions of laws, regulations, and the
Articles of Incorporation, as well as important matters such as
management strategies, and monitors these matters regularly.
It generally holds semimonthly meetings and extraordinary
meetings when necessary. The Company’s Articles ofIncorporation also stipulate that there be no more than fifteen

12

AIFUL CORPORATION Annual Report 2015

directors (excluding directors on the Audit and Supervisory
Committee) and no more than five directors on the Audit andSupervisory Committee.
Outside Directors
Two of the three directors on the Audit and Supervisory
Committee are outside directors (as of the date the Annual
Securities Report was submitted). A structure is in place
whereby outside directors can attend management meetingsand other important meetings and committees to express
their views.
Executive Officers
The Company introduced an executive officer system inJune 2007 to speed up the decision-making process andthe execution of duties, and to enhance the separation ofsupervisory and executive functions. The Board of Directors
appoints executive officers and delegates tasks according to adivision of duties and authority.
Management Committee
The Management Committee comprises all directors andexecutive officers. It strives to promote the sharing of
information and mutual verification of matters to be submitted
to the Board of Directors, and issues and strategies, among
others, based on the policies agreed upon at Board of Directors’
meetings, so that disagreements do not arise regarding
decisions or the execution of duties. It holds meetings on a
weekly basis, in general.
Compliance Committee
A Compliance Committee has been established as aconsultative body under the direct control of the Board of
Directors. It is composed of the executive officer who oversees
the compliance department as chairman, outside experts, andexecutive officers in relevant divisions. It examines complianceissues, designs training programs, and submits reports to
the Board of Directors to create a corporate culture thatstresses compliance, sets rules of corporate ethics, and createscompliance programs. In addition to bimonthly meetings in
general, it holds extraordinary meetings as necessary.

Risk Management Committee
A Risk Management Committee has been established as
an organization under the direct control of the Board of
Directors. Consisting of all directors, it determines ongoingrisks based on the regular reports it receives on the statusof risks, continually reviews the risk management system,and submits reports to the Board of Directors with the aimof preventing risks and curbing losses in times of crisis bycreating an appropriate risk management system. In addition
to quarterly meetings in general, it holds extraordinary
meetings as necessary.
(ii) Reasons for the current structure
As we have an auditor system, we appoint two outside
corporate auditors for a total of three corporate auditors.

Corporate GovernanceWe ensure independent audits with a system whereby all
corporate auditors attend Board of Directors meetings andother important meetings and committee meetings, including
Management Committee meetings, to express their opinions.
We also ensure audits by having an Audit Office as the
exclusive body for supporting the duties of corporate auditors.
Some of our directors (excluding directors who are
Audit and Supervisory Committee members) are from othercompanies, including financial institutions, although they do not
fall into the category of outside directors stipulated in Article 2,
item (xv) of the Companies Act. This ensures a businessadministration that incorporates the perspectives of outsiders.

Furthermore, we separate management’s supervisory
functions and business execution functions by implementing an
executive officer system and strengthen supervisory functions by
establishing a Compliance Committee, which includes outside
experts, and a Risk Management Committee, among others.
We have adopted the current system to achieve corporate
management that is transparent, fair, and efficient.
The diagram below illustrates our Group’s structure forbusiness execution, management supervision, internal control
and risk management as of the date of submission of theAnnual Securities Report.

GeneralMeeting
Meetingof
ofShareholders
Shareholders
GeneralAudit and Supervisory Committee

Board of Directors
Auditing

Directors who serve as Audit andSupervisory Committee members (3)(2 outside directors)

Directors (11)Directors (other than Audit andSupervisory Committee members) (8)Directors who serve as Audit and Supervisory
Committee members (3)Audit and Supervisory Committee
OfficeAuditing

Independet
auditing firm

Auditing

Reporting

Sharing information
ReportingGroup Compliance Committee
Risk Management Committee

Compliance Committee
Chairperson: executive officer who overees thecompliance department
Members include outside attorney

Chairperson: representative
director (president)

Reporting

Reporting

RequestReporting

Supervision

Risk Compliance Subcommittee

Direction

Direction

Advising/Replying

External Compliance Reporting DeskManagement ofoperations

Management Committee(directors and executive officers)

Attorneys andothersReportingDirection

Cooperation

Direction

Compliance department(internal control department, information management office)Cooperation

Corporate Management Department

In-house
Compliance
Reporting Desk

Sharing information
Gathering and sharing
information

Questions/advice/complaints

Compliance department(Customer Support Center)

Customers

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

Shareholders
and others

Each division
Compliance officers

Interaction

Internal auditing
Cooperation

Internal Auditing Department(including Group auditing)
ReportingInternal auditing
Subsidiaries
Cooperation

Auditing

Subsidiaries' auditors

AIFUL CORPORATION Annual Report 201513

Corporate Governance

Enhancement of Corporate Governance(i) Development of a compliance framework
A Compliance Committee (meeting on a regular basis) with anoutside member (a lawyer) has been set up to establish andmanage compliance programs, conduct ongoing management
led by the person responsible for compliance in each division,collect information and implement other preventative
measures, and determine policies for employee training. In
addition, the AIFUL Group’s Compliance Committee has
been established to disseminate a set of unified corporate
ethics throughout the entire Group and form a complianceframework for the Group as a whole. In addition, the Group
has launched both internal and external hotlines offering
consultations on any violations of the Group’s management
principles, norms and other standards, as well as an internal
whistleblowing system, in an effort to develop a corporate
environment that encourages reporting and discussion ofviolations.
(ii) Development of a risk management framework
A Risk Management Committee has been set up to gain
an understanding of the Group’s risk factors and to holddiscussions to determine responses. The Risk Management
Committee has a system in place whereby it collects risk
information from the Compliance Committee and otherdivisions on a regular basis and conducts crisis management
in coordination with directors and other relevant divisions.
AIFUL CORPORATION and the AIFUL Group have establishedan action plan and manual in preparation for large-scaledisasters, issues relating to personal or corporate information,and other risk events so as to be able to respond to potential
emergencies appropriately and promptly.
(iii) 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 the division in charge of management accounting(the Management Planning Department) are separate, in
addition to a system of checks established by the Accounting
Department and accounting audits by independent auditorsin accordance with the Companies Act and the Financial
Instruments and Exchange Act. The Group also implements
initiatives for maintaining the accuracy of information
disclosed 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.
(iv) Improvement of disclosure and status of internal
controls
To enhance the transparency of management and achieveeffective corporate governance through the activation of

14

AIFUL CORPORATION Annual Report 2015

external checking functions, the Group endeavors to maketimely and straightforward disclosures in news releases,
account settlement data, annual reports, and other materials,
and holds 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.

Relationships Between Outside Directors
and the Company(i) Functions and roles of outside directors
The Company has two outside directors and maintains asystem that enables the constant and full implementationof management surveillance from an external perspective.
It also endeavors to invite directors (excluding directors who
are members of the Audit and Supervisory Committee)
from outside the Company, and three of the eight directors(excluding directors who are members of the Audit andSupervisory Committee) fall under this category. The Company
strives to strengthen its corporate governance by developinga system that ensures objective and neutral supervisory
functions based on an external perspective.
(ii) Relationships between outside directors and theCompany
The Company has appointed two outside directors.
Mr. Masanobu Hidaka, who is a member of the Audit andSupervisory Committee, has worked for the National Tax
Agency in the field of taxation, and has extensive knowledgeof finance and accounting. Accordingly, the Company believes
that he is suitable to serve as outside director of the Company.
The Company has registered Mr. Hidaka as an Independent
Officer with the Tokyo Stock Exchange.
The Company also believes that Mr. Haruichi Suzuki, who
is a member of the Audit and Supervisory Committee, issuitable to serve as outside director of the Company basedon his record of audit implementations from a fair and neutral
standpoint, leveraging a wide range of knowledge, extensive
insight, and abundant experience as a lawyer. The Company
has registered Mr. Suzuki as an Independent Officer with
the Tokyo Stock Exchange. The Company has concluded acontract on the limitation of liability for damages with Mr.
Suzuki concerning the liability for damages under Article 423,
Paragraph 1, of the Companies Act. The maximum amountof liability for damages in accordance with said contract is theminimum amount stipulated in Article 425, Paragraph 1, of
the Companies Act.
There are no special financial relationships between theoutside directors named above and the Company. Although,in appointing outside directors, the Company currently
does not have a detailed standard or policy regarding their
independence from the Company, it uses the Guidelines
Concerning Listing Examination, etc., of the Tokyo Stock
Exchange as a reference.

Board of Directors and Executive Officers(As of June 23, 2015)

Directors
Yoshitaka Fukuda

Kazumitsu Oishi

President and Representative Director

Director

Chief Executive Officer

Managing Executive Officer

Apr. 1967: Founded Matsubara Sangyo as a sole proprietorship consumer financecompany
Apr. 1980: Director of Marutaka, Inc. (established in 1978, currently AIFULCORPORATION)
May 1982: President and Representative Director after merger of three relatedcompanies
Jun. 2011: Chairman and Representative Director of LIFECARD Co., Ltd. (Current)
Apr. 2014: President Representative Director and Chief Executive Officer
Chairperson of the Risk Management Committee, overseeing the Internal
Auditing Department (Current)

Mar. 1979: Joined Marutaka, Inc. (currently AIFUL CORPORATION)
Jun. 2001: Director
Jun. 2007: Executive Officer
Senior General Manager of the Loan Business DivisionJun. 2011: Managing Executive Officer
Senior General Manager of the Loan Business Division
Apr. 2015: Director and Managing Executive Officer
Senior General Manager of the Credit Management Division, overseeing
the Guarantee Business Department 1 and the Guarantee Business
Department 2 (Current)
Apr. 2015: President of Astry Loan Services Corporation (Current)

Masayuki Sato

Tsuguo Nakagawa

Representative Director

Director

Senior Managing Executive Officer
Aug.1982: Joined AIFUL CORPORATION
Jun. 1999: Director
Assistant General Manager of the Loan Business Division and General
Manager of the Promotion Department
Jun. 2008: Director and Managing Executive Officer
In charge of the Business Development Department
Jun. 2011: Director and Senior Managing Executive Officer
Senior General Manager of the Management Planning Division, overseeing the
Personnel Department and General Manager of the Personnel Department
Jun. 2014: Representative Director and Senior Managing Executive Officer
Senior General Manager of the Management Planning Division, overseeing
the Personnel Department (Current)

Nobuyuki Wakuta
Director
Managing Executive Officer
Apr. 1975: Joined The Sumitomo Trust & Banking Co., Ltd. (currently Sumitomo Mitsui
Trust Bank, Limited)
Jun. 2004: Executive Officer
Sales Manager, Division 1, the Main Branch of The Sumitomo Trust & Banking
Co., Ltd.
Jun. 2006: Managing Director
Senior General Manager of the Management Planning Division,in charge of the IT Planning DivisionJun. 2007: Director and Managing Executive Officer
Apr. 2015: Director and Managing Executive Officer
Chairperson of the Compliance Committee Senior General Manager ofthe Accounting Division, overseeing the Compliance Department andthe Information Systems Department, supervising the General Affairs
Department and the Credit Assessment Department (Current)Managing Executive Officer
Mar. 1976: Joined Oasa Inc. (Yoshitaka Fukuda’s sole proprietorship)
Jun. 2006: Director
In charge of the Inspection Department and the Credit Assessment Department
Jun. 2007: Executive Officer
Senior General Manager of the Credit Management DivisionJun. 2011: Managing Executive Officer
Senior General Manager of the Credit Management DivisionJun. 2012: Director and Managing Executive Officer
Senior general manager of the Credit Management Division (Current)
Apr. 2015: Director and Managing Executive Officer
Senior general manager of the Loan Business Division (Current)

Mitsuhide Fukuda
Director
Managing Executive Officer
Apr. 2003: Joined Daiwa Securities Co. Ltd.
Apr. 2009: Joined OGI Capital Partners, Ltd.
Jun. 2011: Executive Officer
In charge of the Corporate Management Department
Jun. 2012: Director and Executive Officer
In charge of the Corporate Management Department
Apr. 2014: President of BUSINEXT CORPORATION (Current)
Jun. 2014: Director and Managing Executive Officer (Current)

Yoshiaki Tanaka
Director
Executive Officer

Masanobu Hidaka

Apr. 1983: Joined The Sumitomo Trust & Banking Co., Ltd. (currently Sumitomo Mitsui
Trust Bank, Limited)
Sep. 2006: Sales Manager, Division 6, Tokyo Branch of The Sumitomo Trust & Banking
Co., Ltd.
Apr. 2012: Sales Manager, Division 6, the Main Branch of The Sumitomo Trust & Banking
Co., Ltd.
Apr. 2015: Executive Officer
In charge of the Management Planning Department, General Manager ofManagement Planning Department
Jun. 2015: Director and Executive Officer
In charge of the Management Planning Department, General Manager ofManagement Planning Department (Current)

Director (outside)

Hiroshi Uemura

Directors, Audit and Supervisory Committee members

Audit and Supervisory Committee member
Jul. 1969: Joined the Ministry of FinanceJul. 1996: President of the National Tax College
Jun. 2002: Full-time Corporate Auditor
Jun. 2015: Director (Audit and Supervisory Committee member) (Current)

Minoru Kobayashi
Director
Audit and Supervisory Committee member
Oct. 1981: Joined Marutaka, Inc. (currently AIFUL CORPORATION)
Apr. 2010: Corporate Advisor
Jun. 2012: Full-time Corporate Auditor
Jun. 2015: Director (Audit and Supervisory Committee member) (Current)

Haruichi Suzuki
Director (outside)
Audit and Supervisory Committee member
Apr. 1997: Joined the SHIGEKAZU UEMATSU Law Office (currently UEMATSU/ SUZUKILaw Office)Sep. 1999: Lecturer at Ritsumeikan University Graduate School of Law
Jan. 2008: Director of UEMATSU/ SUZUKI Law Office (Current)
Jun. 2015: Director (Audit and Supervisory Committee member) (Current)

Director
Executive Officer
Apr. 1985: Joined The Nippon Credit Bank, Limited. (currently Aozora Bank, Ltd.)
Oct. 2007: Senior Relationship Manager of Group 11 of Corporate Business Division 1of the Corporate Banking Division of Aozora Bank, Ltd.
Aug. 2010: General Manager of the Workout Division of Aozora Bank, Ltd.
Apr. 2015: Executive Officer
In charge of the Finance Department
Jun. 2015: Director and Executive Officer
In charge of the Finance Department (Current)

Executive Officers
Kazuyoshi Wakamatsu
Executive Officer
In charge of the Credit Assessment
Department

Shinichiro Okuyama

Executive Officer
In charge of the Marketing Department,
General Manager of Marketing
Department

Kazuhiko Tsuda

Executive Officer
In charge of the Accounting Department
and the General Affairs Department,
General Manager of General Affairs
Department

Keiji Masui

Executive Officer
In charge of LIFECARD CO., LTD.

AIFUL CORPORATION Annual Report 201515

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

ASSETS

2015

2014

2015

¥ 52,586¥ 66,877$ 438,217

CURRENT ASSETS:
Cash and cash equivalents (Note 13)

4

4

33

Operational investment securities (Notes 6 and 13)

688

825

5,733

Allowance for investment losses

(10)

(19)

(83)

287,651

321,150

2,397,092

Time deposits (Note 13)

Loans, credit guarantees and receivables:
Loans (Notes 3, 7 and 13)
Installment accounts receivable (Notes 4, 7 and 13)

84,33385,264

702,775

Credit guarantees (Note 5)

111,472

102,420928,933

Other receivables
Allowance for doubtful accounts (Notes 2.h, 2.k and 13)
Deferred tax assets (Note 11)

8,185

9,360

68,208(48,757)(69,540)(406,308)

141

148

1,175

Other current assets (Note 7)

13,085

11,985

109,042

Total current assets

509,378

528,474

4,244,817

Land (Note 7)

8,895

8,895

74,125

Buildings and structures (Note 7)

23,74523,287

197,875

Machinery and equipment (Note 7)

392

404

3,267

5,992

7,487

49,933

Lease assets

554

335

4,617

Construction in progress

131

40

1,091

Total

39,70940,448330,908

Accumulated depreciation(22,031)(23,340)(183,591)

Net property and equipment

17,678

17,108147,317

1,657

779

13,808

(4)

(9)

(33)

Investments in and advances to unconsolidated subsidiaries (Note 13)

4,722

1,349

39,350Claims in bankruptcy (Notes 3 and 13)

33,98436,854283,200

Software, net

2,472

2,953

20,600

Lease and guarantee deposits

20,291

21,927

169,092

PROPERTY AND EQUIPMENT:

Furniture and fixtures

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 13)
Allowance for investment losses

1,097

886

9,141

Allowance for doubtful accounts (Note 13)(30,951)(32,982)(257,925)

Total investments and other assets

33,26831,757277,233¥ 560,324¥ 577,339$ 4,669,367

Other assets

TOTAL
See notes to consolidated financial statements.

16

AIFUL CORPORATION Annual Report 2015

Consolidated Balance Sheet

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2015

2014

2015

¥ 51,460¥ 49,250$ 428,833

32,833

16,837

273,608

30

46

250

CURRENT LIABILITIES:
Short-term borrowings (Notes 7 and 13)
Current portion of long-term debt (Notes 7, 12 and 13)
Trade notes payable
Trade accounts payable

17,412

14,734145,100

Obligation under credit guarantees (Note 5)

111,472

102,420928,933

556

619

4,633

Accrued expenses

2,561

1,612

21,342

Allowance for credit card point redemption

3,360

3,200

28,000

Income taxes payable

3,186

3,780

26,551

222,870

192,498

1,857,250

Long-term debt (less current portion) (Notes 7 and 13)

143,245

187,866

1,193,708

Allowance for losses on interest refunds (Note 2.k)93,40559,882

778,375

225

172

1,875

Other current liabilities (Notes 4 and 5)
Total current liabilities
LONG-TERM LIABILITIES:Deferred tax liabilities (Note 11)
Other long-term liabilities

3,103

3,379

25,859Total long-term liabilities

239,978

251,299

1,999,817

issued, 483,506,536 shares in 2015 and 481,867,836 shares in 2014

143,402143,325

1,195,017

Capital surplus

164,469

164,392

1,370,575

739

413

6,158

(208,152)(171,652)(1,734,600)(3,111)(3,110)(25,925)

129

174

1,075

97,476

133,542

812,300

EQUITY (Notes 9 and 10):
Common stock - authorized, 1,136,280,000 shares;

Stock acquisition rights
Retained earnings
Treasury stock - at cost 916,722 shares in 2015 and 916,568 shares in 2014
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Total
Total equity
TOTAL

97,476

133,542

812,300¥ 560,324¥ 577,339$ 4,669,367

AIFUL CORPORATION Annual Report 201517

Consolidated Financial Statements

Consolidated Statement of Operations
Year Ended March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2015

2014

2015

¥ 43,762¥ 50,578$ 364,683

Revenue from credit card business

13,54913,427112,908

Revenue from credit guarantee

11,382

7,950

94,850Recovery of loans previously charged off

7,741

9,663

64,508Other operating revenue (Note 6)

9,918

10,241

82,65186,35291,859719,600

INCOME:
Operating revenue:
Interest on loans

Total operating revenue
Amortization of negative goodwill (Note 18)

218
2,885

1,697

24,042Gain on sale of investment securities (Note 6)

325

165

2,708

Gain on purchase of borrowings (Note 18)

320

3,840

2,667

Foreign exchange gain (Note 18)

2,305

Gain on negative goodwill (Note 18)

249

457

2,075

90,131

100,541

751,092

Interest on borrowings and bonds

6,483

5,449

54,025

Provision for credit card point redemption (Note 18)

2,863

2,666

23,858Provision for doubtful accounts (Note 18)

2,276

10,931

18,967

Provision for losses on interest refunds (Note 18)

63,734

1,885

531,117

Salaries and other employees' benefits

12,943

13,041

107,858

474

477

3,950

Advertising expenses

3,464

3,294

28,867

Rental expenses (Note 12)

2,212

2,260

18,433

Commissions and fees

10,306

10,46885,883

Depreciation and amortization (Note 18)

2,753

3,761

22,942Other income (Note 16)
Total income
EXPENSES:

Net periodic benefit costs (Note 8)

Loss on sale of investment securities (Note 18)

33

Loss from business restructuring (Note 18)

10

Other expenses (Note 6)
Total expenses(LOSS) INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

18,47715,158

153,975

125,985

69,433

1,049,875(35,854)

31,108(298,783)

584

764

4,867

INCOME TAXES (Notes 11 and 18):
Current
Deferred
Total income taxes
NET (LOSS) INCOME BEFORE MINORITY INTERESTS
NET (LOSS) INCOME

62

(118)

517

646

646

5,384

(36,500)

30,462(304,167)¥ (36,500)¥ 30,462$ (304,167)
U.S. Dollars(Note 1)Yen
AMOUNTS PER COMMON SHARE (Notes 2.s and 15):
Basic net (loss) income¥ (75.74)¥ 63.34($0.63)

Diluted net (loss) income

-

63.00

-

Cash dividends applicable to the year

nil

nil

nil

*Per share figures have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013 (Note 2.s).

See notes to consolidated financial statements.

18

AIFUL CORPORATION Annual Report 2015

Consolidated Financial Statements

Consolidated Statement of Comprehensive (Loss) Income
Year Ended March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2015

2014

2015

¥ (36,500)¥ 30,462$ (304,167)

Unrealized (loss) gain on available-for-sale securities

(45)

26

(375)

Total other comprehensive (loss) income

(45)

26

(375)

¥ (36,545)¥ 30,488$ (304,542)¥ (36,545)¥ 30,488

NET (LOSS) INCOME BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 14):COMPREHENSIVE (LOSS) INCOME
TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests-$(304,542)--

See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 201519

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
Year Ended March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands

BALANCE AT APRIL 1, 2013

Millions of Yen

Number of
Shares ofCommonStock Issued*

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

TreasuryStock481,868¥ 143,325¥ 164,392¥ 62¥(202,114)¥ (3,110)

Net income(0)

Net change in the year351
481,868

143,325

164,392

413(171,652)(3,110)¥ 102,703

77

30,462

(0)

(0)

26

377

(2,305)(1,928)

133,542-

133,542(36,500)(36,500)

(1)

(1)

154

154

(45)

281

281

¥ 129

¥ 97,47677

Net change in the year326

483,507¥ 143,402¥ 164,469¥ 739¥(208,152)¥ (3,111)¥ 105,008

30,462(1)
1,639¥ 2,305

174(36,500)

Purchases of treasury
stock (154 shares)

BALANCE AT MARCH 31, 2015

¥ 148

Minority
Total Equity
Interests

Total

(0)

Net loss

Exercise of stock options

Unrealized
Gain (Loss) on
Available-forsale Securities

30,462

Purchases of treasury
stock (636 shares)

BALANCE AT MARCH 31, 2014

Accumulated
Other
Comprehensive
Income (Loss)-¥ 97,476

Thousands of U.S. Dollars (Note 1)

BALANCE AT MARCH 31, 2014

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

Treasury
Stock$1,194,375$1,369,933$3,442$ (1,430,433)$ (25,917)

Net loss$ 1,450642$1,112,850- $1,112,850(304,167)(304,167)

(8)

(8)

1,284

1,284

(375)

2,341

2,341

$ 1,075$812,300

642
2,716

$1,195,017$1,370,575$6,158$ (1,734,600)$ (25,925)*Shares and per share figures have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013 (Note 2.s).

See notes to consolidated financial statements.

20

AIFUL CORPORATION Annual Report 2015

Minority
Total Equity
Interests

Total

(8)

Net change in the year

BALANCE AT MARCH 31, 2015

Unrealized
Gain (Loss) on
Available-forsale Securities(304,167)

Purchases of treasury stock(154 shares)
Exercise of stock options

Accumulated
Other
Comprehensive
Income (Loss)-$812,300

Consolidated Financial Statements

Consolidated Statement of Cash Flows
Year Ended March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2015

2014

2015

¥ (35,854)¥ 31,108$ (298,783)(764)(1,476)(6,367)OPERATING ACTIVITIES:(Loss) income before income taxes and minority interests
Adjustments for:
Income taxes - paid
Income taxes - refund
Depreciation and amortization

369

71

3,075

2,753

3,761

22,942

Amortization of negative goodwill(218)(2,305)Gain on negative goodwill
Decrease in allowance for investment losses

(14)

(8)

(117)

Decrease in allowance for doubtful accounts(22,814)(16,906)(190,117)

Increase (decrease) in allowance for bonuses

3

(4)

25

Increase in allowance for credit card point redemption
Increase (decrease) in allowance for losses on interest refunds

160

370

1,333

33,523(31,540)

279,358(2,708)Gain on sale of investments in securities, net(325)

Gain on purchase of borrowings(320)(3,840)(2,667)33,49969,485279,158931(1,379)7,758

Changes in assets and liabilities:
Decrease in loans
Decrease (increase) in installment accounts receivable

43

910

358

Decrease (increase) in other operating receivables

1,132

(55)

9,433

Decrease in claims in bankruptcy

2,870

2,978

23,917

Decrease (increase) in lease and guarantee deposits

1,636(1,745)

13,633(Increase) decrease in other current assets(1,346)

5,620(11,217)

Increase in other current liabilities

3,083

34

25,692

(62)

206

(514)

Total adjustments

54,357

23,959452,975

Net cash provided by operating activities

18,50355,067

154,192(2,219)(1,272)(18,492)

141

1,270

1,175

Decrease in purchased receivables

Other, net

INVESTING ACTIVITIES:Capital expenditures
Proceeds from sales of property, and equipment
Purchases of investment securities(36,550)(4,386)

Proceeds from sales of investment securities

376

667

3,133

Other, net

(297)

860

(2,474)(6,385)

1,525(53,208)¥ 12,118¥ 56,592$ 100,984

Net cash (used in) provided by investing activities
FORWARD(Continued)

AIFUL CORPORATION Annual Report 201521

Consolidated Statement of Cash Flows

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2015

2014

2015

¥ 12,118¥ 56,592$100,984

Net increase in short-term borrowings

2,210

8,350

18,417

Proceeds from long-term debt

96,9001,500

807,500

Repayments of long-term debt

(125,803)(60,804)(1,048,358)

FORWARD
FINANCING ACTIVITIES:Other, net
Net cash used in financing activities

866(26,589)(50,954)(221,575)

180

41

1,500

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(14,291)

5,679(119,091)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

66,877

61,198557,308¥ 52,586¥ 66,877$438,217

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH
EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

22

104

AIFUL CORPORATION Annual Report 2015

Consolidated Financial Statements

Notes to Consolidated Financial Statements
Year Ended March 31, 2015
AIFUL CORPORATION and Consolidated Subsidiaries

1

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been

Japan. In addition, certain reclassifications have been made inprepared in accordance with the provisions set forth in thethe 2014 consolidated financial statements to conform to theJapanese Financial Instruments and Exchange Act and its relatedclassifications used in 2015.

accounting regulations, and in accordance with accounting

The consolidated financial statements are stated in Japaneseprinciples generally accepted in Japan, which are different inyen, the currency of the country in which the Company iscertain respects as to application and disclosure requirements ofincorporated and operates. The translations of Japanese yen

International Financial Reporting Standards. The consolidated

amounts into U.S. dollar amounts are included solely for thefinancial statements are not intended to present the financial

convenience of readers outside Japan and have been made at

position, results of operations and cash flows in accordance

the rate of ¥120 to $1, the approximate rate of exchange atwith accounting principles generally accepted in countries andMarch 31, 2015. Such translations should not be construed

jurisdictions other than Japan.

as representations that the Japanese yen amounts could be

In preparing these consolidated financial statements, certain

converted into U.S. dollars at that or any other rate.

reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form that is more familiar to readers outside

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as ofMarch 31, 2015, include the accounts of AIFUL CORPORATION(the "Company") and its four (four in 2014) significant subsidiaries (together, the "Group").
Under the control or influence concept, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
Investments in six unconsolidated subsidiaries (six in 2014)
are stated at cost. Investments in the remaining six unconsolidated subsidiaries (six in 2014), which are limited liability investment partnerships and similar partnerships, are initially recorded at cost, and the carrying amount is adjusted to recognize theCompany's interests in earnings or losses in such partnerships
based on the most recent available financial statements of thepartnerships.
The difference between the cost of an acquisition and thefair value of the net assets of the acquired subsidiary at thedate of acquisition is reported as goodwill or negative goodwill
in the accompanying consolidated balance sheet.
Goodwill on acquisition of subsidiaries is amortized using the straight-line method over the estimated period (not toexceed 20 years) in which economic benefits are expected tobe realized. However, when the excess of cost over net assetsof subsidiaries acquired is not material, it is charged to income
when incurred.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit(loss) included in assets (liabilities) resulting from transactions
within the Group is eliminated.
b. Business Combinations — In October 2003, the Business Accounting Council issued a Statement of Opinion, "Accountingfor Business Combinations", and in December 2005, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ
Statement No. 7, "Accounting Standard for Business Divestitures" and ASBJ Guidance No. 10, "Guidance for AccountingStandard for Business Combinations and Business Divestitures".
The accounting standard for business combinations allowed
companies to apply the pooling-of-interests method of accounting only when certain specific criteria are met such thatthe business combination is essentially regarded as a unitingof-interest. For business combinations that do not meet theuniting-of-interests criteria, the business combination is considered to be an acquisition and the purchase method of accounting is required. This standard also prescribes the accounting for
combinations of entities under common control and for joint
ventures.
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No.
21, "Accounting Standard for Business Combinations". Major
accounting changes under the revised accounting standard
are as follows: (1) The revised standard requires accounting
for business combinations only by the purchase method. As
a result, the pooling of interests method of accounting is nolonger allowed. (2) The previous accounting standard accounts
for research and development costs to be charged to income as
incurred. Under the revised standard, in-process research anddevelopment costs acquired in the business combination are
capitalized as an intangible asset. (3) The previous accounting
standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding
20 years. Under the revised standard, the acquirer recognizes
the bargain purchase gain in profit or loss immediately on theacquisition date after reassessing and confirming that all of
the assets acquired and all of the liabilities assumed have been

AIFUL CORPORATION Annual Report 201523

Notes to Consolidated Financial Statements

identified after a review of the procedures used in the purchaseprice allocation. This standard was applicable to business combinations undertaken on or after April 1, 2010.
c. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents
include time deposits that mature or become due within threemonths of the date of acquisition.
d. Operational Investment Securities Held by Venture
Capital Subsidiary and Investment Securities — Operational investment securities held by a venture capital company andinvestment securities, all of which are classified as availablefor-sale securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate
component of equity. The cost of securities sold is determinedbased on the moving-average cost method. Nonmarketableavailable-for-sale securities are stated at cost determined by themoving-average method. For other-than-temporary declines
in fair value, operational investment securities and investment
securities are reduced to net realizable value by a charge toincome.
Investments in limited liability investment partnerships andsimilar partnerships are initially recorded at cost, and the carrying amount is adjusted to recognize the Company's interestsin earnings or losses in such partnerships based on the mostrecent available financial statements of the partnerships.
e. Property and Equipment — Property and equipment arestated at cost. Depreciation of property and equipment of theCompany and its consolidated subsidiaries is computed by the
declining-balance method except that the straight-line method
is applied to the buildings of the Company's consolidated
subsidiaries acquired on or after April 1, 1998. The range ofuseful lives is principally from 2 to 62 years for buildings andstructures, from 4 to 17 years for machinery and equipment,
and from 2 to 20 years for furniture and fixtures.
f. Long-lived Assets — The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amountby which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows
from the continued use and eventual disposition of the asset or
the net selling price at disposition.
g. Software — Expenditures for the purchase of software arecapitalized as software and amortized by the straight-line method over the estimated useful lives of five years.
h. Allowance for Doubtful Accounts — The allowance for
doubtful accounts is stated in amounts considered to be appropriate based on the Group's past credit loss experience andan evaluation of potential losses in the accounts outstanding.
i. Allowance for Investment Losses — The allowance forinvestment losses is stated in amounts considered to be appropriate based on the financial position of the investment destination and an evaluation of potential losses on nonmarketable
investment securities.

24

AIFUL CORPORATION Annual Report 2015

j. Allowance for Credit Card Point Redemption — The
allowance for credit card point redemption is provided at an
estimated amount of future costs related to credit card point
redemption. These points are granted to card members according to the point system that is intended to promote theusage of cards.
k. Allowance for Losses on Interest Refunds — The limit oninterest rates in Japan is regulated by two laws - "Capital Subscription Law" and "Interest Rate Restriction Act". Under theformer law, interest rates on loans should not exceed 29.2%(20.0% for customers who originate loans after June 18, 2010)and violation of the law is subject to a criminal penalty. The
latter law stipulates that interest payments for interest rates
that exceed the legal limit (20.0% for principal amounts under¥100 thousand, 18.0% for principal amounts not less than¥100 thousand and under ¥1 million, and 15.0% for principal
amounts not less than ¥1 million) are void. However, under the"Moneylending Business Control and Regulation Law", suchinterest payments are nonetheless considered to be valid ifmoneylenders issue notices as prescribed by the law to debtors
and debtors pay the interests voluntarily (for customers who
originate loans after June 18, 2010, such system is abolished.).
Strict judgment by the Supreme Court of these requirements
has led to decisions against moneylenders and resulted in more
debtors claiming for the return of excess interest payments.
The Company and certain of its consolidated subsidiaries have loaned money at rates between the limits set by thetwo laws. Allowance for losses on interest refunds is stated
at amounts considered to be appropriate based on the Company's and respective consolidated subsidiaries' past refund loss
experience, the recent situation regarding interest refunds andother factors.
At March 31, 2015 and 2014, the Group recorded an allowance of ¥93,405 million ($778,375 thousand) and ¥59,882
million, respectively, as "Allowance for losses on interest
refunds". In addition, the estimated amount of interest refundsof ¥17,388 million ($144,900 thousand) and ¥35,291 million
which were expected to be preferentially set off against loans
was recorded as "Allowance for doubtful accounts" for theCompany and its certain consolidated subsidiaries at March 31,
2015 and 2014, respectively.
l. Asset Retirement Obligations — In March 2008, the ASBJ
published ASBJ Statement No. 18 "Accounting Standard for
Asset Retirement Obligations" and ASBJ Guidance No. 21"Guidance on Accounting Standard for Asset Retirement
Obligations". Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either
by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed
asset and is associated with the retirement of such tangible
fixed asset. The asset retirement obligation is recognized as thesum of the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation
is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot bemade in the period the asset retirement obligation is incurred,
the liability should be recognized when a reasonable estimateof the asset retirement obligation can be made. Upon initialrecognition of a liability for an asset retirement obligation, anNotes to Consolidated Financial Statements

asset retirement cost is capitalized by increasing the carrying
amount of the related fixed asset by the amount of the liability.
The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset.
Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of
the original estimate of undiscounted cash flows are reflected
as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.
m. Stock Options — ASBJ Statement No. 8, "Accounting Standard for Stock Options" and related guidance are applicableto stock options granted on and after May 1, 2006. This
standard requires companies to measure the cost of employee
stock options based on the fair value at the date of grant andrecognize compensation expense over the vesting period as
consideration for receiving goods or services. The standard
also requires companies to account for stock options granted
to non-employees based on the fair value of either the stock
option or the goods or services received. In the balance sheet,the stock option is presented as a stock acquisition right as aseparate component of equity until exercised. The standard
covers equity-settled, share-based payment transactions, butdoes not cover cash-settled, share-based payment transactions.
In addition, the standard allows unlisted companies to measure
options at their intrinsic value if they cannot reliably estimate
fair value.
n. Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, "Accounting Standard for Lease Transactions", whichrevised the previous accounting standard for lease transactions.
The revised accounting standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases
that were deemed to transfer ownership of the leased property
to the lessee were capitalized. However, other finance leases
were permitted to be accounted for as operating lease transactions if certain "as if capitalized" information was disclosed
in the note to the lessee's financial statements. The revised
accounting standard requires that all finance lease transactions
be capitalized by recognizing lease assets and lease obligationsin the balance sheet.
The Group applied the revised accounting standard effective April 1, 2008.
Lease assets related to finance lease transactions withownership transfer are depreciated on the methods that are
applied to the assets owned by the Group. Lease assets related
to finance lease transactions without ownership transfer are
depreciated over the leased periods on a straight-line basis,
with no residual value.
All other leases are accounted for as operating leases.
o. Income Taxes — The provision for income taxes is computed
based on the pretax income included in the consolidated statement of operations. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted tax
laws to the temporary differences.
The Group files a tax return under the consolidated corporate tax system, which allows companies to base tax paymentson the combined profits or losses of the parent company andits wholly owned domestic subsidiaries.
p. Foreign Currency Transactions — All short-term and longterm monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange
gains and losses from translation are recognized in the consolidated statement of operations to the extent that they are nothedged by forward exchange contracts.
q. Revenue Recognition:
Interest on Loans - Interest on loans is recorded on an
accrual basis. In accordance with the practice prevailing in theindustry, the Company records accrued interest at either theinterest rate stipulated in the Interest Rate Restriction Act or thecontracted interest rate, whichever is lower.
Revenue from Credit Card Business and Revenue from
Installment Sales Finance Business - Fees from customers
and member stores applying the add-on method are generally
recorded collectively as unearned income when credit contracts
become effective and are recognized in equal installments
over the lives of contracts. Fees from customers applying theremaining principal method or revolving method are generally
recognized in equal installments over the lives of contracts.
Revenue from Credit Guarantees - Revenue from credit
guarantees is recorded by the remaining principal method.
r. Interest on Borrowings — Interest on financial liabilities isaccounted for as operating expenses while other interest is
included in other expenses.
s. Per Share Information — Basic net income per share is computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share of common stock reflects thepotential dilution that could occur if securities were converted
into common stock and assumes full exercise of outstanding
stock options.
Cash dividends per share presented in the accompanying
consolidated statement of operations are dividends applicableto the respective years including dividends to be paid after theend of the year.
On October 1, 2013, the Company effected a two-for-one
stock split by way of a free share distribution based on the resolution of the Board of Directors meeting held on July 8, 2013.
All prior year share and per share figures have been restatedto reflect the impact of the stock split, and to provide data on
a basis comparable to the year ended March 31, 2015. Such
restatements include calculations regarding the Company's
weighted-average number of common shares, basic net income
per share, diluted net income per share, and stock option dataof the Company's common stock.
t. Accounting Changes and Error Corrections — In December
2009, ASBJ issued ASBJ Statement No. 24 "Accounting Standard for Accounting Changes and Error Corrections" andASBJ Guidance No. 24 "Guidance on Accounting Standard for
Accounting Changes and Error Corrections". Accounting treatments under this standard and guidance are as follows:(1) Changes in Accounting Policies - When a new accounting
policy is applied following revision of an accounting standard,
the new policy is applied retrospectively unless the revised

AIFUL CORPORATION Annual Report 201525

Notes to Consolidated Financial Statements

accounting standard includes specific transitional provisions, inwhich case the entity shall comply with the specific transitional
provisions. (2) Changes in Presentation - When the presentation of financial statements is changed, prior-period financial
statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates - A change inan accounting estimate is accounted for in the period of thechange if the change affects that period only, and is accounted
for prospectively if the change affects both the period of thechange and future periods. (4) Corrections of Prior-Period
Errors - When an error in prior-period financial statements is
discovered, those statements are restated.
u. New Accounting Pronouncements
Accounting Standards for Business Combinations andConsolidated Financial Statements - In September 2013,
the ASBJ issued revised ASBJ Statement No. 21, "AccountingStandard for Business Combinations", revised ASBJ GuidanceNo. 10, "Guidance on Accounting Standards for Business Combinations and Business Divestitures", and revised ASBJ Statement No. 22, "Accounting Standard for Consolidated Financial
Statements". Major accounting changes are as follows:(a) Transactions with noncontrolling interest - A parent's
ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The
carrying amount of minority interest is adjusted to reflect thechange in the parent's ownership interest in its subsidiary while
the parent retains its controlling interest in its subsidiary. Under
the current accounting standard, any difference between thefair value of the consideration received or paid and the amountby which the minority interest is adjusted is accounted for as an
adjustment of goodwill or as profit or loss in the consolidated
statement of operations. Under the revised accounting standard, such difference shall be accounted for as capital surplus
as long as the parent retains control over its subsidiary.
(b) Presentation of the consolidated balance sheet - In the
consolidated balance sheet, "minority interest" under the current accounting standard will be changed to "noncontrollinginterest" under the revised accounting standard.
(c) Presentation of the consolidated statement of operations - In the consolidated statement of operations, "income
before minority interest" under the current accounting standard
will be changed to "net income" under the revised accounting standard, and "net income" under the current accounting
standard will be changed to "net income attributable to ownersof the parent" under the revised accounting standard.
(d) Provisional accounting treatments for a business combination - If the initial accounting for a business combination
is incomplete by the end of the reporting period in which
the business combination occurs, an acquirer shall report inits financial statements provisional amounts for the items forwhich the accounting is incomplete. Under the current accounting standard guidance, the impact of adjustments toprovisional amounts recorded in a business combination on
profit or loss is recognized as profit or loss in the year in which
the measurement is completed. Under the revised accounting
standard guidance, during the measurement period, which shallnot exceed one year from the acquisition, the acquirer shallretrospectively adjust the provisional amounts recognized at

26

AIFUL CORPORATION Annual Report 2015

the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date
and that would have affected the measurement of the amounts
recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had
been completed at the acquisition date.
(e) Acquisition-related costs - Acquisition-related costs
are costs, such as advisory fees or professional fees, which anacquirer incurs to effect a business combination. Under thecurrent accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costsof the investment. Under the revised accounting standard,acquisition-related costs shall be accounted for as expenses in
the periods in which the costs are incurred.
The above accounting standards and guidance for (a)transactions with noncontrolling interest, (b) presentation of theconsolidated balance sheet, (c) presentation of the consolidated
statement of operations, and (e) acquisition-related costs are
effective for the beginning of annual periods beginning on orafter April 1, 2015. Earlier application is permitted from the
beginning of annual periods beginning on or after April 1, 2014,
except for (b) presentation of the consolidated balance sheet
and (c) presentation of the consolidated statement of operations. In the case of earlier application, all accounting standards
and guidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated
statement of operations, should be applied simultaneously.
Either retrospective or prospective application of therevised accounting standards and guidance for (a) transactions
with noncontrolling interest and (e) acquisition-related costs ispermitted. In retrospective application of the revised standards
and guidance, the accumulated effects of retrospective adjustments for all (a) transactions with noncontrolling interest and(e) acquisition-related costs that occurred in the past shall bereflected as adjustments to the beginning balance of capitalsurplus and retained earnings for the year of the first-time
application. In prospective application, the new standards andguidance shall be applied prospectively from the beginning of
the year of the first-time application.
The revised accounting standards and guidance for (b)presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of operations shall be applied to all periods presented in financial statements containing
the first-time application of the revised standards and guidance.
The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective
for a business combination that occurs on or after the beginning of annual periods beginning on or after April 1, 2015.
Earlier application is permitted for a business combination that
occurs on or after the beginning of annual periods beginningon or after April 1, 2014.
The Company expects to apply the revised accounting
standards and guidance for (a), (b), (c) and (e) above from
April 1, 2015, and for (d) above for a business combinationthat will occur on or after April 1, 2015, and is in the process
of measuring the effects of applying the revised accounting
standards and guidance in future applicable periods.

Notes to Consolidated Financial Statements

3

LOANS

Loans at March 31, 2015 and 2014, consisted of the following (before allowance for doubtful accounts):
Thousands of
U.S. Dollars

Millions of Yen

2015

2014

2015

Unsecured¥ 273,628¥ 261,222$ 2,280,233

Secured34,904

41,268290,867

Small-business loans

41,48545,521

345,708

Total

350,017

348,0112,916,808

Off-balance-sheet securitized loans(62,366)(26,861)(519,716)¥ 287,651¥ 321,150$ 2,397,092

Net

Registered moneylenders are required to disclose the following information under the Non-Bank Bond Issuing Law:
Thousands of
U.S. Dollars

Millions of Yen

2015

2014

2015

¥ 32,909¥ 35,135$ 274,242

Nonaccrual loans

23,81927,290

198,492

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

2,830

2,445

23,583Loans in legal bankruptcy

Restructured loans
Total

10,861

14,35390,508¥ 70,419¥ 79,223$ 586,825

Loans in legal bankruptcy are loans in which accrual of

Restructured loans are loans on which creditors grantinterest is discontinued (excluding the portion recognized as badconcessions (e.g., reduction of the stated interest rate, deferral

debts), based on management's judgment as to the collectibilityof interest payment, extension of maturity date, waiver of theof principal or interest resulting from the past-due payment offace amount, or other concessive measures) to the debtors ininterest or principal and other factors. Allowances for claims infinancial difficulties to assist them in their recovery and eventuallybankruptcy are stated at such amount less net realizable value of

enable them to pay creditors. Loans classified as loans in legal

collateral.

bankruptcy, nonaccrual loans and accruing loans contractually

Nonaccrual loans are loans in which accrual of interest is
discontinued, other than loans in legal bankruptcy as well as

past due three months or more are excluded.
At March 31, 2015 and 2014, including securitized loans,loans receiving regular payments in the case of granting deferral

the Group had balances related to revolving loan contracts

of interest payment to the debtors in financial difficulties to assist

aggregating ¥268,315 million ($2,235,958 thousand) andthem in their recovery.

¥267,679 million, respectively, whereby the Group is obligatedAccruing loans contractually past due three months or more

to advance funds up to a predetermined amount upon request.

as to principal or interest payments are loans for which payments

At March 31, 2015 and 2014, the balances of unadvancedof principal or interest have not been received for a period ofcommitments were ¥697,573 million ($5,813,108 thousand)three months or more beginning with the next business dayand ¥682,314 million, respectively. The loan contract contains

following the last due date for such payments. Loans classified asprovisions that allow the Group to reduce the contract amountloans in legal bankruptcy and nonaccrual loans are excluded fromof the commitment or refuse to advance funds to loan customers

accruing loans contractually past due three months or more.

under certain conditions.

AIFUL CORPORATION Annual Report 201527

Notes to Consolidated Financial Statements

4

INSTALLMENT ACCOUNTS RECEIVABLE

Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2015 and 2014, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

2015

Credit card business

Receivables¥ 83,681¥ 84,333

52015

Receivables

Unearned
IncomeReceivables

Unearned
Income¥ 367¥ 84,382¥ 341$697,342$3,058

882

1

5,433

¥ 367

¥ 85,264¥ 342$702,775

652

Installment sales finance business
Total

2014
Unearned
Income$3,058CREDIT GUARANTEES AND OBLIGATION UNDER CREDIT GUARANTEESThe Group, as guarantor, recorded credit guarantees as a contra account of obligations under credit guarantees. Unearned income relatingto credit guarantees was ¥26 million ($217 thousand) and ¥32 million at March 31, 2015 and 2014, respectively, which was included inother current liabilities.

6

OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIESOperational investment and investment securities at March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Current:
Equity securities

2015

2014

2015

¥ 688

¥ 825

$5,733¥ 1,508¥ 603$12,567

149

176

1,241

¥ 1,657¥ 779$13,808

Non-current:
Equity securities
Other
Total

The costs and aggregate fair values of available-for-sale securities included in investment securities with reliably determinable fair value
at March 31, 2015 and 2014, were as follows:
Millions of Yen

2015

Securities classified as:
Available-for-sale securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value¥ 1,270

¥ 225

¥ 142

¥ 1,353

Millions of Yen

2014

Securities classified as:
Available-for-sale securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value

¥ 111

¥ 203

¥3

¥ 311

Thousands of U.S. Dollars

2015

Securities classified as:
Available-for-sale securities

28

AIFUL CORPORATION Annual Report 2015

Cost

Unrealized
Gains

Unrealized
LossesFair Value$ 10,583$ 1,875$ 1,183$ 11,275

Notes to Consolidated Financial Statements

Proceeds from sales of available-for-sale securities for the years ended March 31, 2015 and 2014, were ¥1,004 million ($8,367
thousand) and ¥750 million, respectively. Gross realized gains on these sales, computed on the moving-average cost basis, were ¥760
million ($6,333 thousand) and ¥325 million for the years ended March 31, 2015 and 2014, respectively, and gross realized losses were
¥7 million ($58 thousand) and ¥39 million for the years ended March 31, 2015 and 2014, respectively.
The impairment losses on available-for-sale securities, included in other expense, for the years ended March 31, 2015 and 2014, were
¥15 million ($125 thousand) and ¥41 million, respectively.

7

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings at March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Borrowings principally from a certain credit card company,
1.23% to 2.95% (1.40% to 2.95% at March 31, 2014)

2015

2014

2015

¥ 51,460¥ 49,250$ 428,833

Long-term debt at March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015

2014

2015

¥ 53,975¥ 106,197$449,792

Loans from other financial institutions, 1.90% to 3.75%1

12,49520,986104,125

Unsecured 1.99% yen straight bonds, due 2015

10,00010,00083,333

Unsecured 8.00% yen straight bonds, due 2020

28,800Unsecured 3.50% medium-term notes, due 2015

15,00015,000125,000

Other debt (principally by syndicated loan), 2.575% to 3.417%1, 2

55,22552,483

460,208

583

37

4,858

Total

176,078

204,703

1,467,316

Less current portion(32,833)(16,837)(273,608)¥ 143,245¥ 187,866$1,193,708

Loans from banks, 1.90% to 3.30%1

Obligations under finance leases

Long-term debt, less current portion

240,000

1. The final due dates for long-term debts subject to financial assistance cannot be determined.
Long-term debts subject to the financial assistance of ¥45,100 million ($375,833 thousand) and ¥106,197 million, at March 31, 2015 and 2014,
respectively, were included in "Loans from banks", ¥7,600 million ($63,333 thousand) and ¥19,561 million, at March 31, 2015 and 2014, respectively,
were included in "Loans from other financial institutions", and nil and ¥52,483 million at March 31, 2015 and 2014, respectively, were included in "Other
debt" in the table above.
The final due date for "Loans from banks" other than those subject to financial assistance is 2020 (2018 at March 31, 2014).
The Company has continued to receive financial assistance, and the repayment schedule and method of some long-term debt remain partially undefined.
Therefore, long-term debt of ¥39,525 million ($329,375 thousand) is excluded from the annual maturity table below.
2. The Company has an outstanding syndicated loan which is subject to a financial covenant requiring maintenance of a minimum net asset balance.
Although the required minimum was not met as of March 31, 2015, the Company obtained from the relevant financial institutions consents to waive thecovenant requirement for March 31, 2015. Therefore repayments were not accelerated and the debt agreement was maintained.

Annual maturities of long-term debt, excluding finance leases (see Note 12) at March 31, 2015, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2016¥ 32,713$272,608

2017

9,638

80,317

2018

7,559

62,992

2019

6,420

53,500

2020

9,590

79,9162021 and thereafter

70,050583,750¥ 135,970$1,133,083

Year Ending March 31

Total

AIFUL CORPORATION Annual Report 201529

Notes to Consolidated Financial Statements

At March 31, 2015, the following assets were pledged as collateral for short-term borrowings and long-term debt (including current portionof long-term debt):
Millions of Yen

Thousands of
U.S. Dollars¥ 225,453$ 1,878,775

64,439536,992

47

392

Land

8,523

71,025

Buildings and structures

4,764

39,700Loans
Installment accounts receivable
Other current assets

87

725

¥ 303,313$ 2,527,609

Short-term borrowings¥ 51,460$428,833

Long-term debt (including current portion of long-term debt)

117,695

980,792¥ 169,155$ 1,409,625

Machinery and equipment
Total
Related liabilities:

Total

The above table includes loans related to securitized loans of ¥14,896 million ($124,133 thousand), and related liabilities of ¥3,000 million($25,000 thousand).

8

RETIREMENT AND PENSION PLANS

The Company and its certain consolidated subsidiaries have a defined contribution pension plan and a prepaid retirement benefits plan.
Contributions to the defined contribution plan and payments to the prepaid retirement benefits plan are charged to income when made.
The components of periodic benefit costs for the years ended March 31, 2015 and 2014, were as follows:

Thousands of
U.S. Dollars

Millions of Yen

Payments for the prepaid retirement benefits plan
Premiums for the defined contribution pension plan
Periodic benefit costs

30

AIFUL CORPORATION Annual Report 2015

2015

2014

2015

¥ 207

¥ 206

$ 1,725

267

271

2,225

¥ 474

¥ 477

$ 3,950

Notes to Consolidated Financial Statements

9

EQUITYJapanese companies are subject to the Companies Act of(b) Increases/Decreases and Transfer of Common Stock,

Japan (the "Companies Act"). The significant provisions in the

Reserve and Surplus

Companies Act that affect financial and accounting matters are

The Companies Act requires that an amount equal to 10% ofsummarized below:

dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a(a) Dividends

component of capital surplus), depending on the equity accountUnder the Companies Act, companies can pay dividends at any

charged upon the payment of such dividends, until the aggregate

time during the fiscal year in addition to the year-end dividend

amount of legal reserve and additional paid-in capital equals

upon resolution at the shareholders' meeting. For companies

25% of the common stock. Under the Companies Act, the totalthat meet certain criteria including (1) having a Board ofamount of additional paid-in capital and legal reserve may be

Directors, (2) having independent auditors, (3) having an Audit

reversed without limitation. The Companies Act also provides& Supervisory Board, and (4) the term of service of the directorsthat common stock, legal reserve, additional paid-in capital,

being prescribed as one year rather than the normal two-years byother capital surplus and retained earnings can be transferred

its articles of incorporation, the Board of Directors may declareamong the accounts within equity under certain conditions upon

dividends (except for dividends-in-kind) at any time during theresolution of the shareholders.

fiscal year if the company has prescribed so in its articles ofincorporation. The Company meets all the above criteria.

(c) Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act permits companies to distribute

The Companies Act also provides for companies to purchase

dividends-in-kind (noncash assets) to shareholders subject to atreasury stock and dispose of such treasury stock by resolution ofcertain limitation and additional requirements.

the Board of Directors. The amount of treasury stock purchased

Semiannual interim dividends may also be paid once acannot exceed the amount available for distribution to theyear upon resolution by the Board of Directors if the articles

shareholders which is determined by specific formula. Underof incorporation of the company so stipulate. The Companies

the Companies Act, stock acquisition rights are presented as a

Act provides certain limitations on the amounts available forseparate component of equity. The Companies Act also provides

dividends or the purchase of treasury stock. The limitationthat companies can purchase both treasury stock acquisition rights

is defined as the amount available for distribution to theand treasury stock. Such treasury stock acquisition rights areshareholders, but the amount of net assets after dividends must

presented as a separate component of equity or deducted directly

be maintained at no less than ¥3 million.

from stock acquisition rights.
On October 1, 2013, the Company effected a two-for-one
stock split by way of a free share distribution based on the
resolution of the Board of Directors meeting held on July 8, 2013.

AIFUL CORPORATION Annual Report 201531

Notes to Consolidated Financial Statements

10

STOCK OPTIONSThe stock options outstanding as of March 31, 2015, are as follows:

Stock Option
2010
Stock Option
2013
Stock Option

Persons Granted
2,206 Company's andSubsidiaries' key employees
1,480 Company's andSubsidiaries' key employees

Numberof Options
Granted*Date of Grant

4,385,300 shares

July 1, 2010

2,947,100 shares

May 27, 2013

Exercise
Price*

Exercise Period¥64($0.53)¥501($4.18)From August 1, 2014
to July 31, 2016
From May 1, 2015
to April 30, 2017

*Number of options granted and exercise price have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

The stock option activity is as follows:2010 Stock Option(shares)2013 Stock Option(shares)

For the year ended March 31, 2014*

Non-vested
April 1, 2013 - Outstanding
GrantedCanceled
VestedMarch 31, 2014 - Outstanding
VestedApril 1, 2013 - Outstanding
VestedExercised
Canceled
March 31, 2014 - Outstanding
Exercise price
Option fair value at grant date

4,385,300
2,947,100

4,385,300

2,947,100

¥ 64
¥ 31

¥ 501
¥ 261

2010 Stock Option2013 Stock Option(shares)(shares)

4,385,300

2,947,100

For the year ended March 31, 2015*

Non-vested
March 31, 2014 - Outstanding
GrantedCanceled
VestedMarch 31, 2015 - Outstanding
VestedMarch 31, 2014 - Outstanding
VestedExercised
Canceled
March 31, 2015 - Outstanding
Exercise price
Average stock price at exercise
Option fair value at grant date

4,385,300
2,947,100

4,385,300
1,638,700
2,746,600¥ 64($ 0.53)¥ 479($ 3.99)¥ 31($0.26)*Shares and prices have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

32

AIFUL CORPORATION Annual Report 2015

¥ 501($ 4.18)¥ 261($2.18)

Notes to Consolidated Financial Statements

The assumptions used to measure fair value of 2010 Stock Option
Estimate method:Black-Scholes option pricing model

Volatility of stock price:

77.936%

Estimated remaining outstanding period:

5.08 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.3577%

The assumptions used to measure fair value of 2013 Stock Option
Estimate method:Black-Scholes option pricing model

Volatility of stock price:82.512%Estimated remaining outstanding period:

2.93 years

Estimated dividend:¥0 per share

Risk free interest rate:110.171%

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted innormal effective statutory tax rates of approximately 36% for the years ended March 31, 2015 and 2014, respectively.
The tax effects of significant temporary differences and tax loss carry forwards that resulted in deferred tax assets and liabilities at March
31, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015

2014

2015

¥ 17,849¥ 23,563$148,742

Allowance for losses on interest refunds

30,196

21,339251,633

Charge-offs for doubtful accounts

5,508

7,026

45,900Accrued interest on loans

1,489

1,968

12,408Tax loss carry forwards

164,775

189,241

1,373,125

Interest refunds payable

844

357

7,033

Other

4,778

5,960

39,817

Total

225,439

249,454

1,878,658

Less valuation allowance(225,298)(249,306)(1,877,483)

Total deferred tax assets

¥ 141

¥ 148

$1,175

Deferred tax assets:
Allowance for doubtful accounts

Deferred tax liabilities:¥ (1)Unrealized gain on available-for-sale securities
Costs of removal related to asset retirement obligations¥ (225)(171)$ (1,875)

Total deferred tax liabilities¥ (225)¥ (172)$ (1,875)¥ (84)¥ (24)$ (700)Net deferred tax liabilities

A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary differences and net operating
loss carry forwards where it is more likely than not that they will not be realized.

AIFUL CORPORATION Annual Report 201533

Notes to Consolidated Financial Statements

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statement of operations for the year ended March 31, 2014 is as follow:

2014
Normal effective statutory tax rate

36%

Less valuation allowance(32)

Income not taxable for income tax purposes(2)

Others, net

0Actual effective tax rate2%

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying consolidated
statement of operations for the year ended March 31, 2015 has not been disclosed because of the Group's net loss position.
On March 31, 2015, new tax reform laws were enacted in Japan, which changed the normal effective statutory tax rate fromapproximately 36% to approximately 33% for the fiscal year beginning on or after April 1, 2015, and to approximately 32% for the fiscal
year beginning on or after April 1, 2016. The effect of this change on deferred taxes in the consolidated financial statements for the year
ended March 31, 2015 is immaterial.
At March 31, 2015, the Company and its wholly owned domestic subsidiaries had tax loss carry forwards aggregating approximately¥506,453 million ($4,420,442 thousand) which were available for offset against taxable income of the Company and such subsidiaries infuture years. These tax loss carry forwards, if not utilized, will expire as follows:
Millions of Yen

Thousands of
U.S. Dollars

2018¥ 59,408$ 495,067

2019

155,254

1,293,783

2020

113,429945,2422021

95,484

795,700

2022

45,392378,2672023 and thereafter

37,486

312,383¥ 506,453$ 4,220,442

Year Ending March 31

Total

12

LEASESThe Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2015 and 2014, were ¥2,212 million($18,433 thousand) and ¥2,260 million, respectively.
Obligations under finance leases at March 31, 2015 were as follows:

Millions of Yen

Thousands of
U.S. Dollars

Due within one year

¥ 120

$ 1,000

Due after one year

463

3,858

¥ 583

$ 4,858

Total

34

AIFUL CORPORATION Annual Report 2015

Notes to Consolidated Financial Statements

13

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments

Market risk management (foreign exchange risk and

The main business of the Group is finance. The Group is engaged

interest rate risk)in the provision of unsecured loans for individual consumers,

The Group manages foreign exchange risk and interest rate risk

secured loans, small business loans, shopping loans, credit

based on a "risk management manual" that was endorsed byguarantee, debt collection and so on. To run these businesses,

the Group's risk management committee. The risk management

the Group raises funds domestically and internationally. Indirectcommittee is directly controlled by the board of directors. The

financing by loans from banks and direct financing by bond issue

finance department reports the conditions of foreign exchange

are used.

risk and interest rate risk to the internal control department.
The internal control department examines the reasonability(2) Nature and extent of risks arising from financial
instruments

and adequacy of the finance department's risk evaluation andcountermeasures, and reports to the board of directors.

Loans and installment accounts receivable for domestic
consumers and small businesses are the main financial assets

Market risk management (stock price volatility risk)of the Group and are exposed to credit risk through default of

Most of the operational investment securities and investment

contract by customers. Other financial assets such as operational

securities the Group holds are intended to develop business

investment securities and investment securities are mainly stockincluding business alliances and capital alliances. Relevant

and investments in limited liability investment partnerships. The

sections monitor the market environment and the financial

Group holds these securities to develop these businesses. The

situation of the issuers, deliberate countermeasures and reportsecurities are exposed to the issuer's credit risk and the risk ofto the board of directors accordingly. The Group does not holdmarket price fluctuations.

trading securities, which are held for the purpose of earning
capital gains in the near term.

Borrowings and debt including bonds are the main financial
liabilities of the Group. These liabilities are exposed to liquidity

Liquidity risk management regarding fund-raisingrisks, or risk that liabilities cannot be met when they fall due if the

The Group manages liquidity risk by adequate financial planningGroup is unable to participate in fund-raising markets in certainof the Group on a timely basis, diversifying means of fund-raising

circumstances. In addition, the Group raises funds at variable

and adjusting the ratio of long-term and short-term debt in theinterest rates or by bonds in foreign currency, and these arelight of market environment.

exposed to the market risks of fluctuation in interest rates andforeign currency exchange rates.

(4) Fair value of financial instruments
Fair values of financial instruments are based on quoted prices in(3) Risk management for financial instruments

active markets. If a quoted price is not available, other rational

Credit risk management

valuation techniques are used. There are possibilities that fair

Credit risk is the risk of economic loss arising from avalue calculation results may differ when different assumptions

counterparty's failure to repay or service debt according to theare used.

contractual terms. The Group manages its credit risks according
to internal guidelines. In relation to loans, installments accounts
receivable and credit guarantees which are the Group's major
financial assets, the Group conducts credit checks for eachcontract based on data of the consumer data industry and its
own credit standards, maintaining its system to modify credit
ceilings, set guarantees or collateral. The Group manages its
credit risks of issuers of securities by checking credit informationand market prices periodically.
The Group manages such credit risks by relevant sections
evaluating, analyzing and deliberating countermeasures andreporting to the board of directors accordingly.

AIFUL CORPORATION Annual Report 201535

Notes to Consolidated Financial Statements(a) Fair value of financial instruments
Millions of Yen

March 31, 2015
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value¥ 52,586¥ 52,586

4

4

Unrealized Gain

287,651(37,012)250,639

298,811¥ 48,172

79,31580,9191,604

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

1,353

1,353

Claims in bankruptcy

33,984

Installment accounts receivable
Unearned income
Allowance for doubtful accounts

Allowance for doubtful accounts

84,333(327)(4,691)(30,821)
3,163

3,163

Total

¥ 387,060¥ 436,836

Short-term borrowings¥ 51,460¥ 51,460

Long-term debt

122,795

122,776¥ 19¥ 174,255¥ 174,236

¥ 19

Total

¥ 49,776

Millions of Yen

March 31, 2014
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value¥ 66,877¥ 66,8774

4

321,150(56,541)
264,609

Installment accounts receivable
Unearned income
Allowance for doubtful accounts
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
Claims in bankruptcy
Allowance for doubtful accounts

317,143¥ 52,534

80,012

81,121

1,109

311

311

85,264(306)(4,946)36,854(32,886)
3,968

3,968

Total

¥ 415,781¥ 469,424

Short-term borrowings¥ 49,250¥ 49,250

26,42525,728¥ (697)¥ 75,675¥ 74,978¥ (697)Long-term debt

Total

36

Unrealized Gain

AIFUL CORPORATION Annual Report 2015

¥ 53,643

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars

March 31, 2015
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value$ 438,217$ 438,217

33

33

2,397,092(308,433)
2,088,659

Installment accounts receivable

2,490,092$ 401,433

660,958

674,325

13,367

11,275

11,275

702,775

Unearned income(2,725)

Allowance for doubtful accounts(39,092)

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
Claims in bankruptcy
Allowance for doubtful accounts

Unrealized Gain

283,200(256,842)
26,35826,358$ 3,225,500$ 3,640,300

Short-term borrowings$ 428,833$ 428,833

Long-term debt

1,023,292

1,023,133$ 159$ 1,452,125$ 1,451,966

$ 159

Total

Total
Cash and cash equivalents$ 414,800

measured at the quoted market price of the stock exchange.

The carrying values of cash and cash equivalents approximate fairvalue because of their short maturities.

Claims in bankruptcy
The carrying values of claims in bankruptcy less allowances forTime deposits

claims in bankruptcy approximate fair value because allowances

The carrying values of time deposits approximate fair value

for claims in bankruptcy are stated taking net realizable value of

because of their short maturities.

collateral into account.

Loans

Short-term borrowings

The fair value of loans is determined based on the present value

The carrying values of short-term borrowings approximate fairof expected future cash flow, which consists of expected inflows

value because of their short maturities.

of principal and interest that is adjusted to reflect collectibility andoutflows of costs of collection. The expected future cash flow is

Long-term debt

discounted at a low-risk interest rate based on maturity length.

The carrying values of current portion of long-term debt
approximate fair value because of their short maturities.

Installment accounts receivable

The fair values of nonmarketable bonds (issued by the

The carrying values of installment accounts receivable related

Company) and fixed-rate long-term debt are determined byto the credit card business approximate fair value because most

discounting cash flows of principal and interest, discounted at thetransactions are single payments in the following month. The

rate that reflects credit risk and the maturities. The carrying values

fair value of installment accounts receivable related to installmentof variable-rate long-term debt approximate fair value because thesales finance business is determined based on the present value

variable rate reflects the market interest rate and credit risk in aof expected future cash flow, which consists of expected inflows

short period of time.

of principal and fees that is adjusted to reflect collectibility andoutflows of costs of collection. The expected future cash flow is
discounted at a low-risk interest rate based on maturity length.
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
The fair value of operational investment securities, investment
securities and investments in unconsolidated subsidiaries are

AIFUL CORPORATION Annual Report 201537

Notes to Consolidated Financial Statements(b) Financial instruments whose fair value cannot be reliably determined
Since the fair values of the items in the table below cannot be reliably determined, they are not included in operational investment securities,
investment securities and investments in unconsolidated subsidiaries and long-term debt in (4) (a).
Carrying AmountMarch 31, 2015

Millions of Yen

Thousands of
U.S. Dollars¥ 3,386$ 28,217

1,484

12,36752,700439,167

Operational investment securities, investment securities and investments inunconsolidated subsidiaries:1
Unlisted stocks
Investments in limited liability investment partnerships
Long-term debt2

Carrying AmountMarch 31, 2014

Millions of Yen

Operational investment securities, investment securities and investments inunconsolidated subsidiaries:1¥ 1,693

Unlisted stocks

272

Investments in limited liability investment partnerships

Long-term debt2

178,241

1. Since unlisted stocks and investments in limited liability investment partnerships do not have a quoted market price in an active market and their fair values
cannot be reliably determined, they are not subject to fair value disclosure.
2. Long-term debt which continues to be subject to financial assistance after the end of the Business Revitalization Plan has significant uncertainties in
estimates of future repayment plans. Since it is difficult to make reasonable fair value calculations for such long-term debt, they are not subject to fair value
disclosure.
3. The Company and certain of its consolidated subsidiaries had received financial assistance based on the Business Revitalization Plan subsequent to March
31, 2014. The participating creditors decided to approve the proposal regarding continuous financial assistance, which includes the provision on the partial
repayment of the remaining obligations of ¥ 161,741 million ($1,570,301 thousand), at the meeting of participating creditors held on June 13, 2014.
However, the repayment schedule and method remain partially undefined. Under such circumstances, long-term debt which is subject to the financial
assistance has significant uncertainties in estimates of future repayment plans. Also, increased credit risks of the Company and long repayment periods
have substantial impact on discounted cash flows. Since it is difficult to make reasonable fair value calculations for such long-term debt, it is not subject tofair value disclosure.

(5) Maturity analysis for financial assets with contractual maturities
Millions of Yen

March 31, 2015
Cash and cash equivalents
Time deposits

Due in One Yearor Less

Due after One Yearthrough Five Years

Due after FiveYears

¥ 15,136¥ 52,586
4

Loans

105,838¥ 166,677

Installment accounts receivable

81,5752,758¥ 240,003¥ 169,435

Total¥ 15,136

Thousands of U.S. Dollars

March 31, 2015
Cash and cash equivalents
Time deposits

Due in One Yearor Less

Due after One Yearthrough Five Years$ 438,217
33

Loans

881,983$ 1,388,975

Installment accounts receivable

679,792

22,983$ 2,000,025$ 1,411,958

Total

Due after Five
Years

$ 126,134$ 126,134

Claims in bankruptcy of ¥ 33,984 million ($283,200 thousand) whose amount of redemption cannot be determined are not included in thetable above.
Please see Note 7 for annual maturities of long-term debt and Note 12 for obligations under finance leases.

38

AIFUL CORPORATION Annual Report 2015

Notes to Consolidated Financial Statements

14

OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income for the years ended March 31, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2015

2014

2015

Gains arising during the year

¥ 308

¥ 311

$2,567

Reclassification adjustments to profit or loss

(354)

(293)

(2,950)

Amount before income tax effect

(46)

18

(383)

1

8

8

Total

¥ (45)¥ 26$ (375)

Total other comprehensive (loss) income¥ (45)¥ 26$ (375)

Unrealized (loss) gain on available-for-sale securities:

Income tax effect15

NET INCOME PER SHARE

Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March 31, 2015 and 2014, is
as follows:Year ended March 31, 2015
Basic EPS - Net loss available tocommon shareholders

Millions of Yen

Thousandsof Shares

Net Income

Weighted-Average
Shares¥ (36,500)

481,898¥ (75.74)¥ 30,462

480,952¥ 63.34

Yen

Dollars
EPS$ (0.63)

Year ended March 31, 2014
Basic EPS - Net income available tocommon shareholders
Effect of dilutive securities Stock acquisition rights
Diluted EPS - Net income forcomputation

2,550¥ 30,462

483,502¥ 63.00

Diluted net income per share for the year ended March 31, 2015 is not disclosed because of the Company's net loss position.
*Shares and per share figures have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

AIFUL CORPORATION Annual Report 201539

Notes to Consolidated Financial Statements

16

RELATED PARTY DISCLOSURES

Year ended March 31, 2015
There were no transactions with related parties for the year ended March 31, 2015.
Year ended March 31, 2014
The Company's related party consists of "AMG Co., Ltd." which is wholly owned by directors of the Company and their family members.
Transactions of the Company with a related party for the year ended March 31, 2014, were as follows:
Millions of Yen¥ 1,272

Fine art sales
The income from a related party at March 31, 2014, was as follows:

Millions of Yen¥ 88

Other income

17

SUBSEQUENT EVENTSReduction of additional paid-in capital and legal reserve, and appropriation of general reserve1, etc.
The Company' resolution for reduction of additional paid-in capital and legal reserve, and appropriation of general reserve, etc., has been
approved by the Board of Directors on May 18, 2015.
(1) The purpose of the reduction of additional paid-in capital and legal reserve, and appropriation of general reserve, etc.
For the purpose of bringing about a faster restoration of the Company's financial standing by covering for the loss in retained earnings,
the Company reduced additional paid-in capital and legal reserve, and appropriation of general reserve, etc.
(2) Overview of reduction of additional paid-in capital and legal reserve
Pursuant to provisions of Article 448, Paragraph 1, of the Companies Act, the Company will reduce the total amount of additional paidin capital and transfer these funds to other capital surplus, and reduce the total amount of legal reserves and transfer these funds to retained
earnings.
1 ①Items and the amount of the reserve to be reduced

Additional paid-in capital:¥150,310 million ($1,252,583 thousand)Legal reserve:¥1,566 million ($13,050 thousand)

2 ②Items and the amount of the reserve to be increased

Other capital surplus:¥150,310 million ($1,252,583 thousand)

Retained earnings:¥1,566 million ($13,050 thousand)(3) Overview of appropriation of general reserve, etc.
Pursuant to provisions of Article 452, of the Companies Act, the total amount of other capital surplus and general reserve transfer thesefunds to retained earnings.
1 ①Items and the amount of the reserve to be reduced

Other capital surplus:¥150,569 million ($1,254,742 thousand)General reserve:¥102,230 million ($851,917 thousand)

2 ②Items and the amount of the reserve to be increased

Retained earnings:¥252,799 million ($2,106,658 thousand)(4) The date of reduction of additional paid-in capital and legal reserve, and appropriation of general reserve, etc.
Board of Directors' resolution:

May 18, 2015

Effective date:

May 18, 2015

1 The general reserve consists of the Company's discretionary appropriations from retained earnings, as internal reserve funds which cannot be used for
dividend payments.

40

AIFUL CORPORATION Annual Report 2015

Notes to Consolidated Financial Statements

21

SEGMENT INFORMATION

Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures" and ASBJ Guidance No. 20, "Guidance on
Accounting Standard for Segment Information Disclosures", an entity is required to report financial and descriptive information about its
reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria.
Operating segments are components of an entity about which separate financial information is available and such information is evaluatedregularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding
how to allocate resources to operating segments.

1. Description of reportable segments
The Group's reportable segments are those for which separate financial information is available and regular evaluation by theCompany's management is being performed in order to decide how resources are allocated among the Group. Therefore,
the Group consists of the Group's major operating companies, "AIFUL CORPORATION" and "LIFECARD Co., Ltd." AIFULCORPORATION engages mainly in the loan business and the credit guarantee business. LIFECARD Co., Ltd. engages mainly inthe credit card business and the credit guarantee business.
Effective April 1, 2014, the Group changed its operating segments from "AIFUL CORPORATION" and "LIFECARD Co.,Ltd." and "NEW FRONTIER PARTNERS Co., Ltd." to "AIFUL CORPORATION" and "LIFECARD Co., Ltd." because quantitative
materiality of NEW FRONTIER PARTNERS Co., Ltd. to segment profit (loss) decreased.
The segment information for the year ended March 31, 2014, is also disclosed using the new operating segments.
2. Methods of measurement for the amounts of sales, profit (loss), assets, liabilities and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those disclosed in Note 2, "Summary of Significant
Accounting Policies".
3. Information about sales, profit (loss), assets, liabilities and other items is as follows.

AIFUL CORPORATION Annual Report 201541

Notes to Consolidated Financial Statements

Millions of Yen
2015
Reportable Segment
AIFUL

LIFECARD

Total

Other1

Total

Reconciliations

Consolidated¥ 36,151¥ 5,944¥ 42,095¥ 1,667¥ 43,762¥ 43,762

Operating revenue:
Interest on loans

17

13,532

13,54913,54913,549

Revenue from credit guarantee

10,136

1,246

11,382

11,382

11,382

Recovery of loans previously charged off

7,542

181

7,723

18

7,741

7,741

Other operating revenue

1,068

6,006

7,074

2,844

9,918

9,918

Operating revenue from external customers

54,914

26,90981,823

4,529

86,35286,352

8

393

401

2

403

¥ (403)

Revenue from credit card business

Intersegment operating revenue ortransfers¥ 54,922¥ 27,302¥ 82,224¥ 4,531¥ 86,755¥ (403)¥ 86,352

Segment profit (loss)¥ (41,434)¥ 3,530¥ (37,904)¥ 919¥ (36,985)¥ 4852(¥ 36,500)

Segment assets

444,737

177,181621,918

28,009649,927(89,603)3

560,324

Segment liabilities

371,015

141,247

512,262

10,126522,388(59,540)4

462,848

2,863

2,863

2,863

489

489

Total

Other:
Provision for credit card point redemption
Provision of allowance for investment
losses489

Provision for doubtful accounts(841)

Provision for losses on interest refunds

3,151

63,734

2,310

(34)

63,734
7

548

18

566

Depreciation and amortization

1,532

1,214

2,746

7

2,753

Interest on advances to subsidiaries and
other

1,892

1,892

96

1,988

12

17

1

18

2,921

2,921

10

Reversal of allowance for investment losses
Foreign exchange gain
Interest on advances from parent company
and other

1
322

Gain on sale of investment securities
Gain on purchase of borrowings

320

2,276

63,734

541

5

(489)

2,276

Provision for accrued bonuses

Dividend income

2,863

63,734
304

870
2,753

(1,963)

25
18

10

10

2,921

(36)

2,885

(29)

1

1

29

30

322

3

325

325

320

320

320

Income taxes:
Current(801)

Deferred55

Increase in property and equipment andintangible assets

1,936

1,413

612

(28)

55
1,046

2,982

584
55

1

2,983

584
7

62
2,983

1 "Other" items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION and AsTry Loan Services Corporation.
2 "Reconciliations" are eliminations of intersegment transactions.
3 "Reconciliations" are eliminations of intersegment assets.
4 "Reconciliations" are eliminations of intersegment liabilities.

42

AIFUL CORPORATION Annual Report 2015

Notes to Consolidated Financial Statements

Millions of Yen
2014
Reportable Segment
AIFUL

LIFECARD

Total

Other1

Total

Reconciliations

Consolidated¥ 42,066¥ 6,260¥ 48,326¥ 2,252¥ 50,578¥ 50,578

Operating revenue:
Interest on loans

47

13,38013,427

13,427

13,427

Revenue from credit guarantee

6,654

1,296

7,950

7,950

7,950

Recovery of loans previously charged off

9,536

100

9,636

27

9,663

9,663

884

5,950

6,834

3,407

10,241

10,241

59,187

26,986

86,173

5,686

91,85991,859

10

346

356

¥ 59,197¥ 27,332¥ 86,529

Segment assets¥ 24,046¥ 2,419

Segment liabilities

463,792

Other:

348,984

Revenue from credit card business

Other operating revenue
Operating revenue from external customers
Intersegment operating revenue ortransfers
Total

356

¥ (356)¥ 5,686¥ 92,215¥ (356)¥ 91,859¥ 26,465¥ 2,755¥ 29,220¥ 1,2422¥ 30,462

181,814645,606

26,380671,986(94,647)3

577,339

149,410498,394

9,504

507,898(64,101)

443,797

2,666

2,666

2,997

11,576

Segment profit (loss)

4

Provision for credit card point redemption
Reversal of allowance for investment losses
Provision for doubtful accounts
Provision for losses on interest refunds

8,579

2,666
4

4

960

12,536

1,885

1,885

547

5

552

18

570

Interest on advances to subsidiaries and
other

2,099

1,641

3,740

21

3,761

Dividend income

1,346

1,346

118

1,464

Provision for accrued bonuses
Depreciation and amortization

Reversal of allowance for doubtful
accounts

6

Amortization of negative goodwill

2,636

15

21

21

2,636

2,636

Foreign exchange gain

1,697

Gain on sale of investment securities

2

Gain on purchase of borrowings

2

1,697
2

28

30

Loss on sale of investment securities
Loss from business restructuring

26

5

39

41

867
3,761

(1,461)3
21(2,600)

36

218

218

2,305

2,305
1,697

(38)

3

135

165

165

3,840

3,840

3,840

31

2

33

10

10

10
764

Current(1,677)

1,229

(448)

1,212

764

Deferred

33

(405)

(372)

(2)

(374)

839

701

1,540

4

1,544

Increase in property and equipment andintangible assets

10,931
1,885

297

1,697

31

Income taxes:

4(1,605)

1,885

Gain on negative goodwill
Interest on advances from parent company and
other

2,666

256

(118)
1,544

1 "Other" items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION and AsTry Loan Services Corporation.
2 "Reconciliations" are eliminations of intersegment transactions.
3 "Reconciliations" are eliminations of intersegment assets.
4 "Reconciliations" are eliminations of intersegment liabilities.

AIFUL CORPORATION Annual Report 201543

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
2015
Reportable Segment
AIFUL

LIFECARD

Total

Other1

Total

Reconciliations

Consolidated$ 301,258$ 49,534$ 350,792$ 13,891$ 364,683$ 364,683

Operating revenue:
Interest on loans

142

112,766

112,908

112,908

112,908

Revenue from credit guarantee

84,467

10,383

94,85094,85094,850Recovery of loans previously charged off

62,8501,508

64,358150

64,50864,508Other operating revenue

8,900

50,051

58,951

23,70082,651

82,651

457,617

224,242681,859

37,741

719,600

719,600

Revenue from credit card business

Operating revenue from external customers

66

3,275

3,341

17

3,358

$ (3,358)$ 457,683$ 227,517$ 685,200$ 37,758$ 722,958$ (3,358)$ 716,600

Segment profit (loss)$ (345,284)$ 29,417$ (315,867)$ 7,659$ (308,208)2$ 4,041$ (304,167)

Segment assets

3,706,142

1,476,508

5,182,650

233,408

5,416,058(746,691)3

4,669,367

Segment liabilities

3,091,792

1,177,058

4,268,850

84,383

4,353,233(496,166)4

3,857,067

23,85823,85826,25819,250Intersegment operating revenue or transfers
Total

Other:
Provision for credit card point redemption
Provision of allowance for investment losses

4,075

Provision for doubtful accounts(7,008)Provision for losses on interest refunds

531,117

23,858

4,075

4,075
(283)

531,117

23,858(4,075)

18,967

18,967531,117531,117

Provision for accrued bonuses

4,509

58

4,567

150

4,717

Depreciation and amortization

12,766

10,11722,88359

22,942

Interest on advances to subsidiaries and other

15,767

15,767800

16,567

142

8

150

150

83

83

83

Dividend income

42

100

Reversal of allowance for investment losses

24,342Foreign exchange gain
Interest on advances from parent company
and other

8
2,683

Gain on sale of investment securities
Gain on purchase of borrowings

2,667

24,342
8

242

2,683

25

2,667

2,533

7,250
22,942(16,359)

208

24,342(300)

24,042

250

(242)

8

2,708

2,708

2,667

2,667

Income taxes:
Current(6,675)

Deferred458

Increase in property and equipment andintangible assets

16,133

11,775

5,100

(233)

458
8,717

24,850

4,867
458

8

24,858

4,867
59

517
24,8581 "Other" items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION and AsTry Loan Services Corporation.
2 "Reconciliations" are elimination of intersegment transactions.
3 "Reconciliations" are elimination of intersegment assets.
4 "Reconciliations" are elimination of intersegment liabilities.

44

AIFUL CORPORATION Annual Report 2015

Notes to Consolidated Financial Statements

Related Information
1. Information about products and services
Millions of Yen

2015

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

¥ 50,268¥ 13,997¥ 11,824¥ 10,263¥ 86,352

Millions of Yen

2014

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

¥ 59,032¥ 13,930¥ 8,327¥ 10,570¥ 91,859

Thousands of U.S. Dollars

2015

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

$ 418,900$ 116,642$ 98,533$ 85,525$ 719,600

2. Information about geographical areas(1) Operating revenue
Information about geographic area is omitted, as the Group did not operate outside Japan for the years ended March 31, 2015 and2014.
(2) Property, and equipment
Information about geographic area is omitted, as no property, and equipment were located outside Japan for the years ended March 31,
2015 and 2014.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating revenue for theyears ended March 31, 2015 and 2014.
4. Information regarding amortization of negative goodwill and unamortized amount of each reportable segment.
Year ended March 31, 2015
There was no amortization of negative goodwill or gain on negative goodwill for the year ended March 31, 2015.
Year ended March 31, 2014
Millions of Yen

2014
AIFUL
Amortization of negative goodwill
1

Gain on negative goodwill

LIFECARD

Other

Elimination/
Corporate

Total

¥ 218

¥ 218

2,305

2,305

1 Gain on negative goodwill arose when the Company transferred BUSINEXT CORPORATION securities to NEW FRONTIER PARTNERS Co., Ltd. on April 3,
2013.

AIFUL CORPORATION Annual Report 2015

45

46

AIFUL CORPORATION Annual Report 2015

History
1967
Apr Yoshitaka Fukuda, AIFUL CORPORATION’s
current president, established sole proprietorshipas a consumer finance company

Nov

1978
Feb Established Marutaka, Inc. (now AIFULCORPORATION) with capital of 9.0 million yen,in Sakyo-ku, Kyoto
Began unsecured consumer loan business

2002
Apr Established Compliance Committee
Sep Opened a contact center
Oct
Converted business finance company,
City’s Co. Ltd., into 100% subsidiary

1982
May Marutaka, Inc. absorbs three related companies(Oasa, Inc., Yamakatsu Sangyo, Inc., and Maruto,Inc.) and increases its equity capital to 500.0
million yen
Name simultaneously changed to
AIFUL CORPORATIONJul
Began providing unsecured loans to sole
proprietors

2003
Jan
Received Listed Company Disclosure
Commendation from the Tokyo Stock Exchange

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 acceptance machine,“Ojido-san”
Nov Started a website
1997Jul
Over-the-counter registration of company’s stockwith the Japan Securities Dealers Association
Oct
Began full-scale sales of commercial loans to
consumers
1999
May Registered as certified finance corporation
based on the Law Concerning the Issuance ofCorporate Bonds in the Financial Industry Loan
Business

2004
Mar Converted KOKUSAI Capital Co., Ltd. into 100%
subsidiaryJul
KOKUSAI Capital Corporation changed its
name to New Frontier Partners Co., Ltd.
2006
Apr Issued LIFECARD GOLDissued LIFECARD
exclusively for students

Jul
Nov

Issued LIFE ETC CARD
Established servicer company AsTry Loan Services
Corporation in joint venturewith Aozora Bank, Ltd.

;2007
Apr Revised management philosophy. The new
management philosophy becomes “Earn thetrust of society through corporate activity based
in integrity”
Apr Established Risk Management Committee2009
Aug Opened a shopping mallfor members, L–Mall
2010
Jul
Established LIFE CARD Co., Ltd. (now aconsolidated subsidiary) to operate credit
card and credit guarantee businesses, wholly
funded by AIFUL subsidiary LIFE Co., Ltd. (now aconsolidated subsidiary)
2011
Jun
Jul

2000
Mar Listed on the First Section of the Tokyo Stock
Exchange, and the First Section of the Osaka
Securities Exchange
2001
Jan
Established business finance company BUSINEXTCORPORATION through a joint venture with
Sumitomo Trust andBanking Co., Ltd.
Feb Completed new headquarters building
Mar Converted LIFE Co., Ltd. into 100% subsidiary

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

2013
Apr

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 LIFE CARD 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 AIFULNew Frontier Partners Co., Ltd. (currently aconsolidated subsidiary), a wholly owned
subsidiary of the Company, acquired all sharesof BUSINEXT CORPORATION (currently aconsolidated subsidiary) owned by the Company
and Sumitomo Mitsui Trust Bank Limited andmade it a wholly owned subsidiary

AIFUL CORPORATION Annual Report 201547

Group Network(As of March 31, 2015)

AIFUL CORPORATION
http://aiful.jp (Japanese only)
Business Classification
Unsecured loans
Secured loans
Small business loans
Credit guarantees
Investor Relations Website

http://www.ir-aiful.com/english

LIFECARD CO., LTD.
http://www.lifecard.co.jp (Japanese only)
Business Classification
Credit card shopping
Credit guarantees

AsTry Loan Services Corporation
http://www.astry-s.co.jp (Japanese only)
Business Classification
Debt collection (Servicer)

48

AIFUL CORPORATION Annual Report 2015

BUSINEXT CORPORATION
http://www.businext.co.jp (Japanese only)
Business Classification
Secured loans
Small business loans

New Frontier Partners Co., Ltd.
http://www.nf-partners.co.jp (Japanese only)
Business Classification
Venture capitalInvestor Information(As of March 31, 2015)

Corporate Data

Principal Shareholders

Corporate NameAIFUL CORPORATION

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

Date of Establishment

April 1967

Common Stock¥143,401 million

Number of Employees

Non-consolidated: 903
Consolidated: 1,350

Stock Listing

Number of Percentage ofSharesTotal Shares(Thousands) Outstanding

AMG Co., Ltd.

94,81419.61

Mitsuhide Fukuda

62,155

12.86

Marutaka Co., Ltd.

24,543

5.09

Japan Trustee Services Bank, Ltd.
(trust account)

17,486

3.62

CHASE MANHATTAN BANKGTS CLIENTS ACCOUNT ESCROW

12,4592.58

Composition of Shareholders

Tokyo Stock Exchange

The First Section

Securities Code8515

Financial
Institutions
11.6%

Shareholder Information
Number of Shares of Common Stock
Authorized

1,136,280,000 shares

Issued and Outstanding

483,506,536 shares

Number of Shareholders

42,863

Independent Auditors

Deloitte Touche Tohmatsu LLC

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
LimitedIndividuals
and Others
43.8%

Securities Companies
and Other Corporations
32.3%
Foreign Investors
12.3%

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 201549