ANNUAL REPORT 2017
The year ended March 31, 2017

Corporate Philosophy

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

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

Contents
To Our Investors and Shareholders2Five-Year Summary

4

AIFUL Group at a Glance5Management’s Discussion and 
Analysis of Operations

6

Consolidated Financial Statements20

Business Data

10

Independent Auditor’s Report50

Corporate Governance

12

Investor Information51

Board of Directors and
Executive Officers

16

History18
Group Network19

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

Long-term Vision

Our aim is to become a “leading company in comprehensive
retail financial services,” trusted by our customers for delivering
tailored products and services that meet their needs.
Aiming to become a leading company in comprehensive retail financial services:

The AIFUL Group acts in line with its corporate philosophy and the essence of its businessOur corporate philosophy charts the direction the AIFUL Group consistently pursues. In following thisphilosophy, the Group always acts to win the long-lasting support and trust of individuals, corporate andbusiness customers by delivering products and services tailored to their needs.
The essence of business is risk management. The AIFUL Group’s business follows this principle bybalancing the four pillars of profitability, reliability, growth potential and our human resources capabilities.
This approach makes the Group more flexible, allowing it to respond to changes in the business environment
and move forward in a sustainable manner.

Basic policy and targets that the AIFUL Group aspires to achieve:

Corporate Philosophy
Commit to full
implementation oflegal compliance

Sustaining
Profitability

Satisfy demands
and expectations ofcustomers (society)

CustomerFirst Policy

Deliver products andservices tailored toeach customer

Reform theearnings structure

Securing
GrowthPotential

Strengthen thecorporate business

Develop new
businesses

Utilize Group’s
resources

Enhancing
Reliability

Internet financebusiness

Establish corebusinesses

Improve theproduct lineup

Increase capital andachieve steadyfinancing

Enhance the qualityof services

Reorganize thebusiness portfolio

Strengthening
Human
Resources
Capabilities

Develop humanresources

Overseas business development /Domestic and overseas investments

Basic Policy

Compliance

Essence of BusinessAppoint external
human resources

The AIFUL Group aims to become a company of five key attributes:
A leading company
with the largest customer base and an outstanding balance in the Japanese consumer finance sector
A unique company
with a one-of-a-kind model for online settlement in the credit sector
A development company
that creates a new market in the business finance sector
An invention company
that develops new products in the guarantee, factoring and debt-collection sectors
A global company
that expands businesses in Asia by applying the know-how it has developed in Japan

AIFUL CORPORATION Annual Report 20171

To Our Investors and Shareholders
Thank you very much for your continued support.
AIFUL celebrated its 50th anniversary in April 2017.
We would like to take this opportunity to convey our deep appreciation to
all AIFUL shareholders and other stakeholders for their role in helping us
to achieve this milestone.
Financial Results for the Fiscal Year Ended March 31, 2017
The consumer finance industry saw a sustained increase in the number of new contracts,
thanks to aggressive advertising by major operators. This was accompanied by a steadyrecovery in the operating loan balance.
While interest repayment claims have decreased steadily from their peak, we remain
cautious as they still pose the greatest current risk to the industry.
Given these conditions, the AIFUL Group worked toward strengthening its revenue base by
focusing on its core loan business and diversifying its financial services into credit cards, credit
guarantee, and other businesses by exploiting its credit capacity. At the same time, the Group
took action to tackle the challenge posed by interest repayment claims.
Operating revenue for the fiscal year ended March 31, 2017, was 91.5 billion yen, up 4%
year on year. In the loan business, effective TV and online advertising and improved customer
service helped boost the number of new contracts for unsecured loans and lending volumes.
As a result, the operating loan balance, in terms of operating receivables, rose by 10% from theend of the previous fiscal year, to 412.6 billion yen, and interest income on loans to customers
grew 8% year on year, to 47.9 billion yen. In the credit card business, LIFECARD’s transaction
volumes continued to move upward and, as a result, revenue from the Group’s credit cardbusiness rose 6% year on year, to 15.5 billion yen; revenue from it’s credit guarantee businessheld steady from a year earlier, at 12.5 billion yen; and the recovery of loans previously charged
off was reduced 6% year on year, to 5.7 billion yen. AsTry’s collection of purchased receivables
decreased 2% year on year, to 2.1 billion yen.
Operating expenses grew 4% year on year, to 84.4 billion yen. Credit cost rose by 29% year
on year, to 20.7 billion yen, due to an increase in operating assets; financial expenses grew by
3%, to 8.0 billion yen; and SG&A expenses increased 3% year on year, to 55.6 billion yen.
As a result, operating income stood at 7.0 billion yen, up 5% year on year; ordinary income
at 7.4 billion yen, up 8% year on year; and net income attributable to owners of the parent at
7.3 billion yen, up 3% year on year.

2

AIFUL CORPORATION Annual Report 2017

Forecast for the Fiscal Year Ending March 31, 2018
Ongoing caution is warranted in relation to interest repayment claims. Such claims will remain
the most serious challenge to business management going forward, notwithstanding theirrecent downward trend. However, the consumer finance industry will continue its steadyrecovery.
Given these conditions, we expect that the Group’s core segments such as the loan businessand credit card business will continue their strong performance. As such, our consolidated
financial forecasts for the fiscal year ending March 31, 2018, include a 10% year-on-yearincrease in operating revenue, to 100.6 billion yen.
Meanwhile, operating expenses are set to rise by 7% year on year, to 90.0 billion yen, as aresult of an increase in credit cost and personnel expenses due to growing operating assets.
As a consequence, operating income for the fiscal year ending March 31, 2018, is expected
to be 10.6 billion yen, a 51% year-on-year leap; ordinary income to be 10.0 billion yen, a jumpof 35% year on year; and net income attributable to owners of the parent to be 9.3 billion yen,
up 28% year on year.
We will continue our strategy to bolster andboost our top line by expanding operating
assets, while responding to interest repayment
claims and enhancing the Group’s businessefficiency, as part of our efforts to meet the
expectations of all our stakeholders.
In doing so, we hope to count on thecontinued support and encouragement of ourshareholders.

Yoshitaka Fukuda
President and CEO
Representative Director

AIFUL CORPORATION Annual Report 2017

3

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2017, 2016, 2015, 2014 and 2013

Thousands of
U.S. Dollars

Millions of Yen

2017

2016

2015

2017

2014

2013

90,131¥ 100,541¥ 108,863$ 821,500

For the Year:
Total income¥

92,008¥87,929¥84,60981,068125,985

69,43385,082755,437

Provision for doubtful accounts

20,745

16,127

2,276

10,931

8,177

185,223

Income (loss) before income taxes

7,399

6,861

(35,854)

31,10823,601

66,063

Net income (loss) attributable toowners of the parent

7,277

7,045

(36,500)

30,462

22,70664,973412,649¥ 376,225¥ 350,018¥ 348,011¥ 390,635$ 3,684,366

66,401

66,15870,41979,223

98,628592,866

Loans in legal bankruptcy

28,712

31,10532,90935,13537,598256,357

Nonaccrual loans

25,531

22,264

23,81927,29036,906

227,955

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

4,408

3,349

2,830

2,445

2,610

39,357

Restructured loans

7,750

9,440

10,861

14,35321,514

69,197

Total assets

616,651

567,514560,324

577,339

607,1815,505,813

Allowance for doubtful accounts

70,172

72,64379,708102,522

119,428

626,536

Total liabilities

505,002463,264

462,848443,797502,173

4,508,947

Interest-bearing debt

300,859

249,533

227,538

253,953

308,747

2,686,241

Total equity

111,649

104,250

97,476

133,542

105,008

996,866

—

—

—

—

2,305

—

Total expenses

At Year-End:Loans (Note 2)¥

Nonperforming loans

Noncontrolling interests

Per Share Data (Yen/U.S. dollars)(Note 3)
Basic net income (loss)

¥

15.05

¥

14.59

¥

(75.74)

¥

63.34

¥

47.21

0.13

Diluted net income

15.04

14.57

—

63.00

47.02

0.13

Total equity

228.94214.16200.45276.80213.412.04

Equity ratio

18.0

18.2

17.3

23.1

16.9

ROE

6.8

7.0

(31.8)

25.8

24.9

ROA

1.2

1.2

(6.4)

5.1

3.6

Ratios (%):

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

484,619,136 483,794,536 483,506,536 481,867,836 481,867,836
1,473

1,433

1,350

1,369

1,437

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 ¥112=$1, the approximate rate of exchange at March 31, 2017.
4. The Company implemented a stock split of 2 shares for each 1 share of common stock on October 1, 2013.

4$

AIFUL CORPORATION Annual Report 2017

REVIEW OF OPERATIONSAIFUL Group at a Glance
AIFUL CORPORATION

Share of receivables

Operating revenue(Millions of Yen)

AIFUL CORPORATION provides
consumer 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 financial instituitions.

(Millions of Yen)

70,00020,00058.3 bn yen

60,00069.0%
FY2017408.3 billion yen

Net income

10,00050,000040,000-10,000

30,000-20,000

20,000-30,000

10,000-40,000

0

FY2015FY2016FY2017-50,000

4.8 bn yen

FY2015FY2016FY2017

LIFECARD CO., LTD.
Share of receivables

Operating revenue(Millions of Yen)

LIFECARD CO., LTD. is primarily
engaged in the credit card business.
LIFECARD also handles credit
guarantee business, the V-Preca or
prepaid Visa card etc., while
responding to the needs ofcustomers by providing independentand unique products and services
under the “Be Unique” concept.
It began supporting Apple Pay in the
FY 2017.

(Millions of Yen)
28.9 bn yen

30,00025,000

5,000
4,000

27.7%
20,000FY2017163.6 billion yen

Net income

3.0 bn yen

3,000

15,0002,000

10,000

1,000

5,000
0

FY2015FY2016FY20170

FY2015FY2016FY2017

BUSINEXT CORPORATION
Share of receivables

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, business loans,mortgage loans, and medical
institution loans.

Operating revenue(Millions of Yen)

(Millions of Yen)

3,000
7.6%

800
700

2,500

2.2 bn yen

2,000
FY201745.0 billion yen

Net income

600
500

1,500

400
300

1,000

200
500
0

0.1 bn yen

100
FY2015FY2016FY20170

FY2015FY2016FY2017

Note: Receivable outstanding are in managed asset basis.

AIFUL CORPORATION Annual Report 20175

Management’s Discussion and Analysis of Operations
Current Business Environment
Consumer finance market scale(Billion yen)

20,00015,00010,000

LehmanShockApplication for
15.7
tr yen ADR (AIFUL)
Money Lending
Business Act
Bankruptcy ofTakefuji Corporation

Unsecured consumer loans ofconsumer finance companies andcredit card companies
Bank guarantees
outstanding
8.6
tr yen9.3
tr yen10.0
tr yen

15/3

16/3

17/3

5,000
0

08/4

09/3

10/3

11/3

12/3

13/3

14/3

In the unsecured loans market in Japan, many money lenders
were forced to close their businesses due to the amendmentof the Money Lending Business Act and claims for interest
repayments triggered by the 2006 Supreme Court decision.
As a consequence, the market, once worth 16 trillion yen,
had by 2014 contracted significantly to 8 trillion yen. The
market has since recovered, however, expanding to 10 trillion
yen, mainly thanks to active advertising by majormoneylenders and banks, etc.

Source: Japan Financial Services Association

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

1.0
tr yen1,200

Waiver of principal

1,000
800
600
310
303
298
bn yen bn yen bn yen

400
200
0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015

Source: Japan Financial Services Association

Interest repayments claims at three major companies(ACOM, SMBC-CF and AIFUL)(Thousand)Number of Interest Repayment Claims

500
400
300

157k
(YOY: -22%)

200

200k
(YOY: -9%)100
0FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016

Source: Compiled by AIFUL from financial data of each company

Of this amount, the balance of unsecured loans to
consumers by money lenders turned positive for the firsttime in nine years, rising 4% year on year, to around 2.6
trillion yen in 2017. The balance of unsecured loans by the
major three money lenders also remained steady and in stepwith the market, increasing 2% year on year, to 1.8 trillion
yen. New contracts also remained stable, with the number ofapplications rising 3% year on year, to 1,362,000, and thenumber of contracts concluded increasing 2% year on year,
to 619,000.
In addition, major companies are seeing steady growth in
the balance of guarantees for consumer loans provided byfinancial institutions (credit guarantee business) with themarket expanding to 6 trillion yen.
Meanwhile, claims for interest repayments, still thelargest business risk for money lenders, have declined
significantly from their peak, with the number of claims forinterest repayments at the major three money lenders down
22% year on year, to 157,000 in the fiscal year ended March
31, 2017. While the number of claims has entered a fullfledged downward trend, the situation continues to require
close monitoring, given that some law firms are running
active advertising campaigns.

Business Overview of AIFUL Group(Loan Business)
Number of applications and new accounts (AIFUL)(Thousand)

500
403k

389k

400
300

181k

200

183k

100
0

FY2012FY2013

FY2014

Applications

6

AIFUL CORPORATION Annual Report 2017

FY2015

New accounts

FY2016The loan business is at the core of AIFUL Group’s business,and the Group is implanting effective advertising andworking to develop and introduce products that can quickly
meet customers’ funding needs. As a result, the operating
loan balance for fiscal year 2016 was 412.6 billion yen (up
10% from the end of the previous fiscal year), showing a
steady recovery.
As for the unsecured loan business, AIFUL is working to
improve customer satisfaction through efficient advertising
run mainly on television and the Internet, and a campaign
promoting interest-free loans.

Management’s Discussion and Analysis of Operations

As a result, the number of new applications was 403,000(up 4% year on year), the number of new contracts
concluded was 183,000 (up 1% year on year), the numberof accounts totaled 879,000 (up 7% year on year) and theunsecured loan balance was 346.4 billion yen (up 13% year
on year), which contributed largely to the growth of the loanbusiness’s operating loan balance.
In our small business loans operations, we provide
products and services tailored to the needs of sole
proprietors and small companies by using the credit knowhow for business operators at BUSINEXT Corporation.
As a result, the balance of small business loans in thefiscal year ended March 31, 2017 amounted to 42.2 billion
yen (up 2% year on year), marking the first movement
upward in 11 fiscal years.

Loan volume (AIFUL)（Billion yen）

200

100

0

FY2012FY2013

FY2014(Billion yen)(Thousand)

600

707k

647k

In the credit guarantee business, we aim to increase theguarantee balance by utilizing our strengths, such as our
know-how in private and business-related credit, and our
flexibility and speed as an independent company. We arealso working to extend our sales activities to potential
guarantee partners, as well as proposing new products andoffering support to promote sales.
As a result, in fiscal year 2016, AIFUL and LIFECARD
began partnerships with five and three financial institutions,
respectively, and commenced sales. The outstanding credit
guarantee was 75.7 billion yen (up 3% year on year).

150

As a benefit of the restrictions on total lending limits, boththe non-performing loans (NPL) ratio and the write-offs ratio
remained at low and stable levels.
In fiscal year 2016, the unsecured loan NPL balance
increased 19% year on year to 30.2 billion yen due to the
expansion of the loan balance outstanding. However, theratio of unsecured loan NPL remained relatively flat at 8.7%
compared to 8.3% in the previous fiscal year.
In addition, the write-off ratio stood at 3.5%, down 0.5
percentage point year on year. The so-called general writeoffs, which exclude the waiver of principal due to interest
repayment claims, were 2.9%, down 0.2 percentage point
year on year, also remaining at a low and stable level.

FY2016Loans to new accounts

Loans outstanding (AIFUL)

300(Non-Performing Loans and Write-offs)

FY2015Loans to existing accounts(Credit Guarantee Business)

In the credit card business, we worked to expand the numberof new applications through issuing new tie-up cards. Also,
we released a smartphone application and increased thecredit limits for the purpose of enhancing our card member’s
convenience.
As a result, transaction volumes at the end of fiscal year
2016 were 681.4 billion yen (up 7% year on year) and thebalance of installment receivables stood at 97.1 billion yen (up
8% year on year).

144.4
bn yen128.4
bn yen50450(Credit Card Business)

26.7
bn yen25.1
bn yen

150

0

322.1
289.6
bn yen 301.1
bn yenbn yen 262.7
bn yen

800
600
400
200

FY2012FY2013Loansoutstanding

FY2014FY2015

Unsecuredloans outstanding

FY20160

Number ofaccounts

Credit card transaction volume (LIFECARD)(Billion yen)

800

681.4
bn yen636.9
bn yen

600
400
200
0

FY2012FY2013

FY2014FY2015FY2016

Non-performing loans (NPL) (Consolidated)(Billion yen)

(%)

150

15

100

8.7%

8.3%
66.2
bn yen50

025.3
bn yenFY2012FY2013

Non-performing
loans (NPL)FY2014FY2015

Unsecuredloans NPL

66.4
bn yen30.2
bn yenFY201610

50

Ratio of unsecuredloans NPL

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

(%)

60

8.0
6.0

45
4.0%

30

3.5%

2.0

15
0

4.0

FY2012FY2013

Write-offs

FY2014FY2015

Write-offs due tointerest repayments

FY2016

0.0

Ratio of write-offs

AIFUL CORPORATION Annual Report 20177

Management’s Discussion and Analysis of Operations(Interest Repayment Claims)
Interest repayments and waiver of principal (Consolidated)(Billion yen)

40

32.9
bn yen28.8
bn yen

30

20

10

0

5.0
bn yenFY2012FY2013

Interest repayments

FY2014

3.8
bn yenFY2015FY2016

Waiver of principal related to interest repayment*Reversal of doubtful account at LIFECARD is included inreversal of interest repayment

Interest repayment claims (Consolidated)(Thousand)

90

61 k
60
43 k
30

0

(Assets, Liabilities and Net Assets)
FY2012FY2013

FY2014FY2015FY2016

Interest bearing liabilities (Consolidated)(%)(Billion yen)

400.0

355.0
bn yen369.4
bn yen

300.0

4.00

3.00
2.48%

2.37%

200.0

2.00

100.0

1.00

0.0

Claims for interest repayments, our largest business challenge,
have declined significantly from their peak, falling to 43,000
cases (down 30% year on year) in the fiscal year ended March
31, 2017. This suggests that claims for interest repayments
have entered a full-fledged downward trend in the AIFULGroup, as at other companies. However, the situation
continues to require close monitoring, given that some law
firms are still running active advertising campaigns.
In addition, with respect to the reversal of allowances
related to interest repayments, interest repayments decreased
to 28.8 billion yen (down 12% year on year), and the waiverof principal related to interest repayments fell to 3.8 billion yen(down 24% year on year). The total of interest repayments
and the waiver of principle was 32.6 billion yen (down 14%
year on year), and the balance of allowances related to interest
repayments was 43.3 billion yen.
We made the provision for a large amount of allowancesin the fiscal year ended March 31, 2015 by predicting theentire amount of interest repayments that could arise in the
future, and interest repayments have since remained in the
expected range. Therefore, there is no additional provision in
the fiscal year ended March 31, 2017.

15/3

15/9

Rescheduled loans

16/3
Bonds

Funding rate

16/9

17/3

Liquidation

0.00
Loans

Total assets on a consolidated basis increased 49.1 billion yen,or 9%, compared to the previous fiscal year-end to 616.7
billion yen at the end of fiscal year 2016. This was primarily
due to a 37.1 billion yen increase in operating loans.
Total liabilities increased 41.7 billion yen, or 9% from theend of the previous fiscal year, to 505.0 billion yen. The major
factor for the increase was a rise of 49.9 billion yen from theend of the previous fiscal year in interest-bearing debt as aresult of diversifying financing into the procurement of funds
by liquidation and borrowing from financial institutions, etc.
The average funding rate including the amount of funds raisedby the liquidation of receivables was 2.37%, down 0.40
percentage points from the previous fiscal year.
Net assets increased 7.4 billion yen, or 7%, compared tothe previous fiscal year-end, to 111.6 billion yen. This waslargely attributable to the posting of net income attributableto owners of parent.

(Cash Flows)
Cash and cash equivalents (“funds”) declined 6.3 billion yen,or 16%, compared with the end of the previous fiscal year, to33.6 billion yen.
Cash flows from operating activities
Net cash used for operating activities amounted to 51.2 billion
yen, an increase of 62% compared with previous fiscal year.
This was mainly attributable to the decline in funds due to anincrease in total receivables outstanding, including loans tocustomers and the decline in funds due to the drop in theallowance for losses on interest repayment.

8

AIFUL CORPORATION Annual Report 2017

Management’s Discussion and Analysis of Operations

Cash flows from investing activities
Net cash used for investing activities stood at 6.2 billion yen, an increase of 103% compared with the previous fiscal year. This was
mainly attributable to the purchase of tangible fixed assets, intangible fixed assets and investment securities.
Cash flows from financing activities
Net cash provided by financing activities amounted to 51.1 billion yen, an increase of 132% compared to the previous fiscal year. Thiswas mainly attributable to an increase in long-term loans payable.

(Going Forward)
The loan business and the credit card business, the core operations of the AIFUL Group, are expected to remain strong. The
operating loan balance at the end of the fiscal year ending March 31, 2018 is expected to increase 9% year on year, to 448.1 billion
yen, and the installment receivable balance is expected to rise 15% year on year, to 111.9 billion yen. The credit guarantee balance isforecast to increase 16% year on year, to 87.6 billion yen. As a result, we expect that operating revenue will be up 10% year on year,
to 100.6 billion yen.
Meanwhile, operating expenses are expected to rise 7% year on year, to 90.0 billion yen mainly due to increases in credit costs
and personnel expenses associated with an increase in operating assets.
As a result, we expect to record operating income of 10.6 billion yen (up 51% year on year), ordinary income of 10.0 billion yen (up
35% year on year), and net income attributable to owners of parent of 9.3 billion yen (up 28% year on year).
Looking forward, while dealing with interest repayment claims, we will continue to work on further growing our operating asset
to increase the top line. At the same time, we will strive to streamline business efficiency across the Group.

Cash Flows and Funding (Consolidated)
Cash flows fromoperating activities① −¥51.3 bn
Loan Collection

Cash flows frominvesting activities② −¥6.2 bn＋

Cash flows fromfinancing activities＋③ ＋¥51.1 bn＝ −¥6.3 bn

Loans to Customer

Write-offs etc.
*Managed Asset Basis¥ 16.8 bn¥ 194.2 bn
Loan
Collection etc.

¥ 247.4 bn③

Loan toCustomer

Increase in loans
to customer①

Income before
taxes

Increase inloans tocustomers¥37.1 bn

¥7.4 bn

Short-term
Borrowing,
etc.

Loan
repayment
and bonds
redemption,
etc.

¥931.2 bn¥880.1 bn

Cash inflow

Cash outflow¥36.4 bn

Increase by decreasein liquidation¥0.7 bn

Depreciation
expenses¥2.3 bn

Decrease inallowances
Increase inother current
liabilities

Other¥16.8 bn

¥2.8 bn
Cash and Cash
Equivalents¥39.9 bn

At the beginning of
FY2016

Increase¥31.4 bn

Other

Expenses due topurchase of asset, etc.

¥6.2 bn¥11.9 bn②

Decrease

Cash inflow

Cash outflow

Cash and Cash
Equivalents¥33.6 bn

At the end of
FY2016

AIFUL CORPORATION Annual Report 20179

Business Data
AIFUL GROUPTOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of yen/%)
2015

2016

2017

YOY

514,220545,570

591,5298.4

350,018

376,225

412,649

9.7

Unsecured273,628

306,602346,412

13.0

Secured34,90428,13924,045(14.6)

Small Business

41,48541,48442,193

1.7

Installment Receivables

84,33390,166

97,135

7.7

Credit Guarantees

73,87573,41275,747

3.2

Other

5,995

5,767

5,998

4.0

Total Receivables Outstanding
Loans

FUNDING COST

2015

(Millions of yen/%)

2016

2017

YOY

2.77

2.37

(0.40)

2.32

2.19

2.08

(0.11)

Direct

4.47

3.54

2.69

(0.85)

1.15

0.95

0.95

0.00

Long-term prime rate(reference)

NUMBER OF CUSTOMER ACCOUNTS
2015(Thousands/%)

2017

2016

YOY

824

861

917

6.4

Unsecured

782

822

879

7.0

Secured1411

9(18.8)

Small Business

28

28

29

0.7

Credit Card Holders

6,023

6,292

5,884

(6.5)

90,131

87,92992,00843,762

44,25647,8698.2

Unsecured

35,85537,70542,893

13.8

Secured

5,567

4,484

3,207

(28.5)

Small Business

2,339

2,066

1,769

(14.4)

Total Assets

Installment Receivables

13,67814,707

15,531

5.6

ROA (%)

Credit Guarantees

11,382

12,491

12,4940.0

Total Equity

Other

21,31016,475

16,114(2.2)

ROE (%)(36,500)

7,045

7,277

3.3

Net income (loss)

YOY

3.20

Interest on Loans

Total Income

2017

2016

IndirectAverage Funding Cost

Number of Customer Accounts

TOTAL INCOME/NET INCOME (LOSS)

(%)

2015

4.6

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE(Millions of yen/%)

2015

2016

2017

YOY

560,324

567,514616,651

8.7

(6.4)

1.2

1.2

0.0

97,476104,258

111,649

7.1(31.8)

7.0

6.8

(0.2)

Note: Italic font indicates increase or decrease.

AIFUL CORPORATION
LOANS OUTSTANDING (Managed Asset Basis)(Millions of yen/%)

2015

2016

2017

YOY

349,952

374,363408,259

9.1

264,557

289,566

322,087

11.2

Unsecured229,392

262,655

301,063

Secured29,275

21,839Small Business

5,890

5,071

Total Receivables Outstanding
Loans

NUMBER OF CUSTOMER ACCOUNTS
2015

664

722

Unsecured

593

648

708

9.3

14.6

Secured14

11

9(20.1)

16,448(24.7)

Small Business

6

5

5

(3.2)

4,576

(9.8)

1,821

1,195

858

(28.2)

Credit Guarantees

78,13478,46680,039

2.0

Other

5,441

5,136

5,275

2.7

Number of Customer Accounts

TOTAL INCOME/NET INCOME(LOSS)
2017

55,12058,3405.8

Interest on Loans

36,15036,85740,293

9.3

Unsecured

29,93832,08637,318

16.3

Secured

5,148

3,919

2,547

(35.0)

Small Business

1,065

852

427

(49.9)

Credit Guarantees

10,136

11,221

11,107(1.0)

Installment Receivables
Other
Net income (loss)

143

116

115

(1.0)

8,492

6,927

6,825

(1.5)

(41,434)

5,281

4,824

(8.7)

AIFUL CORPORATION Annual Report 2017

(%)

2015
14.8

2016

2017

2015
Total Receivables Write-offs
Unsecured Loans Write-offs
Ratio of Total Receivables
Write-offs (%)
Ratio of Unsecured Loans
Write-offs (%)

2016

YOY

14.7

15.2

AMOUNT OF WRITE-OFFS/ RATIO OF WRITE-OFFS

YOY

54,922

Total Income

10(Millions of yen/%)

8.7

AVERAGE YIELD
Average yield

2016

YOY

613

Installment Receivables

2015(Thousands/%)

2017

2016

(0.5)

(Millions of yen/%)

2017

YOY

15,374

14,957

14,591(2.4)

11,353

12,683

13,072

3.1

5.81

5.17

4.53

(0.64)

4.95

4.83

4.34

(0.49)

Business Data

AIFUL CORPORATIONNEW ACCOUNTS
New Accounts
Unsecured Loans(Accounts/%)

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2015

2016

2017

YOY

153,197

180,805

182,778

1.1

Total Assets

153,135

180,666

182,604

1.1

45.0

46.5

45.3

(1.2)

Contract Rate of Unsecured
Loans (%)

(Millions of yen/%)

2015

2016

2017

444,737

407,140

439,841

YOY
8.0

ROA (%)

(9.1)

1.2

1.1

(0.1)

Total Equity

73,72278,884

83,919

6.4

ROE (%)(44.2)

7.0

6.0

(1.0)

Note: Italic font indicates increase or decrease.

LIFECARD CO., LTD.
TOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of yen/%) TRANSACTION VOLUME
2015

2016

2017

YOY

148,933

154,951

163,572

5.6

Installment Receivables

82,512

88,972

96,277

Loan (Cash Advance)

44,51844,169Credit Guarantees

21,349554

Total Receivables

Other

2016

2017

YOY

Transaction Volume584,734

636,902681,362

7.0

8.2

Card Shopping

543,710595,922

640,599

7.5

45,564

3.2

Cash Advance

41,02340,97940,764(0.5)

21,17821,008

(0.8)

631

723

14.5

(Millions of yen/%)

2016

2017

Number of Cardholders

2017

YOY

6,023

6,292

5,884

(6.5)

Proper Card

1,855

1,814

1,796

(1.0)

1.9

Affinity Cards

4,169

4,478

4,088

(8.7)

28,35928,890Installment Receivables

13,534

14,55915,361

5.5

Loan (Cash Advance)

5,944

5,645

5,603

(0.7)

Credit Guarantees

1,246

1,270

1,272

0.2

Other

6,590

6,884

6,654

(3.3)

Net Income

3,530

1,859

3,032

63.1

AVERAGE YIELDAMOUNT OF WRITE-OFFS/ RATIO OF WRITE-OFFS
2015

2016

(Millions of yen/%)

2017

YOY

Total Receivables Write-offs

3,042

3,121

3,091

(1.0)

Ratio of Total Receivables
Write-offs (%)

2.04

2.01

1.89

(0.12)(%)

2015
Average yield(Thousands/%)

2016

YOY

27,314

Operating Revenue

NUMBER OF CARDHOLDERS
2015

OPERATING REVENUE/NET INCOME
2015(Millions of yen/%)

2015

2016

18.5

18.8

2017
18.3

YOY
(0.5)

Note: Italic font indicates increase or decrease.

AIFUL CORPORATION Annual Report 201711

Corporate Governance
1. Basic Views and Basic Policy on
Corporate Governance
The AIFUL Group understands that a key objective ofcorporate governance is to achieve corporate managementwith transparency, impartiality, and efficiency by conducting
corporate activities premised on compliance in accordancewith our management philosophy of “Earn the trust of society
through corporate activity based in integrity” to contribute to
the development of the economy and society and thereby togain the trust of society.
AIFUL will undertake enhancements to upgrade ourcorporate governance in accordance with the Basic Policy on
Corporate Governance set out below.
(1) We will respect the rights of shareholders and ensure theirequality.
(2) We will work on appropriate collaboration with all
stakeholders including shareholders.
(3) We will appropriately disclose our financial, non-financial,and other corporate information to ensure transparency.
(4) Our Board of Directors will recognize its fiduciary
responsibility to shareholders and fulfill its roles and duties,
including making and keeping its function of effectively
supervising business execution.
(5) We will hold constructive dialogues with shareholders forthe sake of achieving continued growth and a mediumand long-term increase in corporate value.

2. Corporate Governance Structure(1) 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
Belonging to the Committee
The Audit and Supervisory Committee consists of three
directors (including two directors who are outside members).
It determines items such as the audit policy and plan, anddiscusses and decides on important audit matters based on
the reports it receives. In addition to performing these duties,
it also audits legitimacy and appropriateness through the useof the internal control system. A meeting will generally be held
every month, with extraordinary meetings held whennecessary.
The directors who are members of the Audit andSupervisory Committee will cooperate with the Internal
Auditing Department and the accounting auditors to enhance
management’s supervisory functions. They will also share
information with the auditors of affiliated companies in aneffort to strengthen the auditing structure for the operationsof the entire Group.
To improve these audit functions, the Group will establish
an Audit and Supervisory Committee Office (Audit Office) as
the exclusive body for supporting the duties of directors who
12

AIFUL CORPORATION Annual Report 2017

belong to the Audit and Supervisory Committee. It will also
take the necessary steps to secure independence by forexample requiring that the Audit Office not follow any
directions or orders from directors (other than directors
belonging to the Audit and Supervisory Committee) whencarrying out their duties.
Board of Directors and Directors
The Board of Directors consists of eleven directors (as of thedate the Annual Securities Report was submitted): eight
directors who are not members of the Audit and Supervisory
Committee, and three directors who are members of the
Audit and Supervisory Committee. It discusses and makes
decisions on matters that cannot be delegated to directors orothers under laws and regulations and the Articles ofIncorporation, such as basic management policies and basic
policies associated with the internal control system, and otherimportant matters for execution of operations under the rulesof the Board of Directors, including business plans, personnel
policies, and capital policies. The Board of Directors delegatesauthority over the execution of operations in line with thepolicies on which the Board of Directors has made resolutions,and the disposal of property worth less than a specified
amount to executive officers and others within an appropriate
range in accordance with regulations for administrative
authority and other rules. In addition to delegating thisauthority, it supervises the execution of operations. It generally
holds semimonthly meetings and extraordinary meetings
when necessary. The Company’s Articles of Incorporation also
stipulate that there be no more than fifteen directors(excluding directors on the Audit and Supervisory Committee)
and no more than five directors on the Audit and Supervisory
Committee.
Outside Directors
Two of the three directors in the Audit and Supervisory
Committee are outside directors (as of the date the Annual
Securities Report was submitted). We have developed astructure whereby they can attend management meetings andother important meetings and committees to express theirviews.
Executive Officers
The Company introduced an executive officer system in June2007 to speed up the decision-making process and theperformance of duties, and enhance the separation ofsupervisory and executive functions. The Board of Directors
appoints executive officers and delegates its business by
establishing the division of duties and authority.
Management Committee
The Management Committee comprises all the directors andexecutive officers. It strives to promote information sharing
and consensus on matters to be submitted to the Board of
Directors, as well as on issues and strategies, etc. based onpolicies resolved at Board of Directors meetings. The
committee aims to ensure that disagreements do not arise
regarding decisions or the performance of duties. It generally
holds meetings on a weekly basis.

Corporate GovernanceCompliance Committee
The Compliance Committee is an advisory body under the
direct control of the Board of Directors. The head of thiscommittee is the executive officer in charge of the compliancedepartment. The Compliance Committee comprises outside
experts, directors also serving as members of the Audit andSupervisory Committee, and executive officers of related
divisions. Its objectives are to create a corporate culture inwhich compliance is emphasized, to establish corporate ethics,
and to draw up compliance programs. It develops programsfor the verification of issues and educational programs, anddelivers reports to the Board of Directors as required. In
addition to general bimonthly meetings, it holds extraordinary
meetings as necessary.
Risk Management Committee
AIFUL has a Risk Management Committee, which is under the
direct control of the Board of Directors. Headed by thepresident and representative director, it is made up of all the
directors. The committee’s purpose is to prevent risks andmitigate losses in the event of a crisis, which it achieves byconstructing an appropriate risk management framework.
It regularly receives risk status reports, which enable it toconstantly monitor risks and continuously review the risk
management system, and submits its findings to directors.
In addition to general quarterly meetings, it holds
extraordinary meetings as necessary.
(2) Reasons for the Current Structure
As we have an auditor system, we appoint two outside
directors for our three directors who are members of the
Audit and Supervisory Committee. We have ensured
independent audits by developing a system where all directors
who are members of the Audit and Supervisory Committee
attend Board of Directors meetings and other important
meetings and committee meetings, including Management
Committee meetings, to express their opinions. We have also
ensured the independence of audits by establishing an Audit
Office as the exclusive body for supporting the duties of
directors also serving as members of the Audit and Supervisory
Committee.
Further, we separate management’s supervisory andbusiness execution functions by implementing an executive
officer system and strengthening supervisory functions by
establishing a Compliance Committee, which includes outside
experts, and a Risk Management Committee, etc. We haveadopted our current system to achieve transparent, fair, andefficient corporate management.

3. Enhancement of Corporate Governance(1) Development of a Compliance Framework
A Compliance Committee (meeting on a regular basis), withan outside member (a lawyer), has been set up to establish
and manage compliance programs, engage both analysis anddiscussion to improve the internal control system, collectinformation and implement other preventative measures, anddetermine policies for employee training. In addition, theAIFUL Group Compliance Committee has been established todisseminate a set of unified corporate ethics throughout theentire Group and form a compliance framework for the Group
as a whole. In addition, the Group has launched both internaland external hotlines offering consultations on any violationsof the Group’s management philosophy, norms, and otherstandards, as well as an internal whistle-blowing system, in aneffort to develop a corporate environment that encourages
reporting and discussion of violations.
(2) Development of a Risk Management Framework
A Risk Management Committee has been set up to gain anunderstanding of the Group’s risk factors and hold discussions
to determine responses. The Risk Management Committee
has a system in place whereby it collects risk information fromthe Compliance Committee and other divisions on a regularbasis and conducts crisis management in coordination withdirectors and other relevant divisions. AIFUL CORPORATION
and AIFUL Group have established an action plan and manualin preparation for large-scale disasters and a failure of core IT
systems, issues relating to personal or corporate information,and other risk events so as to be able to respond to potential
emergencies appropriately and promptly.
(3) Maintenance of Accuracy in Disclosure of Financial
Information and Status of Internal Controls
As a system for maintaining the accuracy of financial
information, the AIFUL Group has developed an effective
mutual check system where the division in charge ofinstitutional accounting (the Accounting Department) and thedivision in charge of management accounting (theManagement Planning Department) are separate, in addition
to a system of checks established by the Accounting
Department and accounting audits by independent auditors inaccordance with the Companies Act and the Financial
Instruments and Exchange Act. The Group also implements
initiatives for maintaining the accuracy of information
disclosure in the preparation and announcement of financial
reports by having the Accounting Department, the Public
Relations and Investor Relations Section of the Finance
Department, and other relevant divisions (including certain
affiliated companies) apply a process of checks.
(4) Improvement of Disclosure and Status of Internal
Controls
To enhance the transparency of management and achieveeffective corporate governance through the activation of
external checking functions, the Group endeavors to maketimely and straightforward disclosures in news releases,
account settlement data, annual reports, and other materials,
as well as holding briefing sessions for domestic and overseas
investors, analysts, and so forth, as appropriate. In addition,
we have a system in place whereby investors’ opinions andinquiries about management can be relayed back to thepresident, directors, and the head of each division on a regularbasis.
The diagram below illustrates our Group’s structures forbusiness execution, management supervision, internal control,
and risk management (as of the date the Annual Securities
Report was submitted).
AIFUL CORPORATION Annual Report 201713

Corporate Governance

4. Relationships between Outside Directors
and the Company

Hidaka, was previously engaged in tax affairs at the National
Tax Agency, and has considerable knowledge about financeand accounting. Deeming him to be qualified as an outside
director and Audit and Supervisory Committee member, theCompany appointed him an outside director. The Company
also deemed Audit and Supervisory Committee Member,
Haruichi Suzuki, to be qualified as an outside director, andthus has appointed him as such, expecting him to provide
advice as an outside director from a fair and neutral standpointby drawing upon his extensive knowledge and considerable
experience as a lawyer. The Company has concluded acontract on the limitation of liability for damages under Article
423, Paragraph 1 of the Companies Act with Mr. Suzuki. The
maximum amount of liability for damages under the contract(1) Functions and Roles of Outside Directors
The Company has two outside directors who express opinions
and provide advice from a perspective outside the Company,
drawing upon their considerable experience and extensive
knowledge, to maintain an objective and neutral oversightfunction from an external perspective.
(2) Relationships between Outside Directors and theCompany
Audit and Supervisory Committee Member, Masanobu

General Meeting of Shareholders
Audit and supervisory committee

Board of Directors
auditing

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

Audit and supervisory committee Office

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

reportingauditing

Independent
Auditing Firm

auditing(under directcontrol ofBoard of Directors)

reportingsharing information

Group Compliance Committee
Compliance Committee

Risk Management Committee

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

reportingdemandreportingsupervision

Compliance and Risk Subcommittee.
Chairperson: Executive Officer in charge of the Compliance Dep.

direction

External Compliance Reporting Desk

Chairperson: President andRepresentative Director
Members: All directors

reportingdirection
advising/replying

Managementof Operations

Management Committee(Directors and Executive Officers)

Attorneys andOthersreportingdirection
direction
cooperation

Compliance Dep.
cooperation

Subsidiary Management Dep.

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

Compliance Dep.
(Customer Service Center)

Customers

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

Investors andOthersCompany’s Divisions
Compliance Officers

discloseInternal Auditing
cooperation

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

auditing

Subsidiaries Auditors

14

AIFUL CORPORATION Annual Report 2017

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

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

AIFUL CORPORATION Annual Report 201715

Board of Directors and Executive Officers(As of June 27, 2017)

Directors
Yoshitaka Fukuda

Mitsuhide Fukuda

President and Representative Director

Director

Chief Executive Officer

Senior Managing Executive Officer

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

Apr. 2003: Joined Daiwa Securities Co. Ltd.

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

Jun. 2011: Executive Officer of the Company

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

Apr. 2014: President of BUSINEXT CORPORATION (Current)

Jun. 2007: President and Representative Director, Chief Executive Officer
Jun. 2011: Chairman and Representative Director of LIFECARD Co., Ltd (Current)
Jun. 2016: President and Representative Director, Chief Executive Officer,
Chairperson of the Risk Management Committee,
In charge of the Internal Auditing Department (Current)

Masayuki Sato
Representative Director

Jun. 2012: Director and Executive Officer
Jun. 2014: Director and Managing Executive Officer
Apr. 2016: President of AsTry Loan Services Corporation (Current)
Apr. 2017: Director and Senior Managing Executive Officer,
In charge of the Guarantee Business Department (Current)

Yoshiaki Tanaka
Director
Executive Officer

Senior Managing Executive Officer

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

Aug. 1982: Joined AIFUL CORPORATION

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

Jun. 1999: Director of the Company
Jun. 2008: Director and Managing Executive Officer

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

Jun. 2011: Director and Senior Managing Executive Officer

Apr. 2015: Executive Officer of the Company

Jun. 2014: Representative Director and Senior Managing Executive Officer

Jun. 2015: Director and Executive Officer

Jun. 2016: Representative Director and Senior Managing Executive Officer,
Senior General Manager of the Management Planning Division,
In charge of the Personnel Department (Current)

Apr. 2017: Director and Executive Officer,
In charge of the Management Planning Department and theBusiness Process Management Department,
General Manager of the Management Planning Department(Current)

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

Hiroshi Uemura
Director
Executive Officer

Jun. 2007: Executive Officer

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

Jun. 2011: Managing Executive Officer

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

Jun. 2012: Director and Managing Executive Officer
Apr. 2017: Director and Senior Managing Executive Officer,
Chairperson of the Compliance Committee,
Senior General Manager of the Credit Management Division and
the Accounting Division,
In charge of the Information Systems Development Department, theInformation Systems Operation Department, the ComplianceDepartment and the General Affairs Department (Current)

16

Apr. 2009: Joined OGI Capital Partners, Ltd.

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

Tsuguo Nakagawa

Keiji Masui

Director

Director

Senior Managing Executive Officer

Executive Officer

Mar. 1976: Joined Oasa Inc. (Yoshitaka Fukuda’s sole proprietorship)
Jun. 2006: Director of the Company
Jun. 2007: Executive Officer
Jun. 2011: Managing Executive Officer
Jun. 2012: Director and Managing Executive Officer
Apr. 2017: Director and Senior Managing Executive Officer,
Senior General Manager of the Loan Business Division,
In charge of the Marketing Department, IT Planning Department
and Credit Assessment Department (Current)

Aug. 1983: Joined AIFUL CORPORATIONAIFUL CORPORATION Annual Report 2017

Apr. 2014: Executive Officer of the Company
Apr. 2015: Executive Officer of the Company
Director and Managing Executive Officer of LIFECARD (current)
Jun. 2016: Director and Executive Officer (Current)

Board of Directors and Executive Officers

Directors, Audit and Supervisory Committee Members
Satoru Toda

Haruichi Suzuki

Director (outside)

Director (outside)

Audit and Supervisory Committee Member

Audit and Supervisory Committee Member

Apr. 1978 Joined Ministry of Finance

Apr. 1997 Joined the SHIGEKAZU UEMATSU Law Office(currently UEMATSU/ SUZUKI Law Office)Jul. 2007 Regional Commissioner, Fukuoka Regional Taxation Bureau,
National Tax Agency
Jul. 2008 Deputy Director-General of National Tax Tribunal, National Tax
AgencySep. 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)

Jun. 2009 Full-time Auditor of Tokyo Metro Co., Ltd.
Jun. 2017 Corporate Auditor of the LIFECARD Co., Ltd. (Current)
Jun. 2017 Director (Audit and Supervisory Committee Member) (Current)

Minoru Shimamura
Director
Audit and Supervisory Committee Member
Oct. 1983 Joined AIFUL CORPORATION
Apr. 2016 General Manager of the Audit and Supervisory Committee Office
Apr. 2016 Corporate Auditor of LIFECARD Co.,Ltd (Current)
Jun. 2016 Director (Audit and Supervisory Committee Member) (Current)

Executive Officers
Kazuyoshi Wakamatsu

Hideaki Minamizawa

Executive Officer

Executive Officer

Responsible for the Internal Auditing Department

Responsible for the Personnel Department,
General Manager of the Personnel Department

Shinichiro Okuyama
Executive Officer

Toshiaki Ando

Responsible for the Marketing Department and the IT Planning Department,

Executive Officer

General Manager of the Marketing Department

Assistant Senior General Manager of the Loan Business Division,
General Manager of the Loan Business Promotion Department

Kazuhiko Tsuda
Executive Officer

Ikuo Yamauchi

Responsible for the Accounting Department and the General Affairs

Executive Officer

Department,

Responsible for the Subsidiary Management Department and the Overseas

General Manager of the Accounting Department

Business Department,
General Manager of the Overseas Business Department

Atsushi Suda
Executive Officer
Responsible for the Compliance Department

Katsuhiko Nagasue
Executive Officer
Responsible for the Information Systems Development Department andthe Information Systems Operation Department

AIFUL CORPORATION Annual Report 201717

History
1967
Apr

1978
Feb

1982
May

Jul
1984
Feb
Mar

Established Marutaka, Inc. (now AIFULCORPORATION) with capital of 9.0 million yen,in Sakyo-ku, Kyoto
Began unsecured consumer loan business
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 CORPORATION
Began providing unsecured loans to sole proprietors

2004
Mar
2006
Apr

2007
Apr

Apr
2009
Aug
2010
Jul

Oct

Start of ATM operations
Registration of money lenders based on enactmentof the Money-Lending Business Control Law
Began sales of real estate-secured loans

1994
Nov

Opened Heartful Center

2011
Jun

Installed automatic contract acceptance machine,“Ojido-san”
Started a website

Jul

1995
Mar
Nov
1997
Jul
Oct
1999
May

2000
Mar

2001
Jan

Feb
Mar
Jul
Nov
Nov

2002
Apr
Sep
Oct
2003
Jan

18

Yoshitaka Fukuda, AIFUL CORPORATION’s current
president, established sole proprietorship as aconsumer finance company

Over-the-counter registration of company’s stockwith the Japan Securities Dealers Association
Began full-scale sales of commercial loans to
consumers
Registered as certified finance corporation based on
the Law Concerning the Issuance of Corporate Bonds
in the Financial Industry Loan Business
Listed on the First Section of the Tokyo Stock
Exchange, and the First Section of the Osaka
Securities Exchange
Established business finance company BUSINEXTCORPORATION through a joint venture with
Sumitomo Trust andBanking Co., Ltd.
Completed new headquarters building
Converted LIFE Co., Ltd. into 100% subsidiary
Issued LIFE ETC CARD
Established servicer company AsTry Loan Services
Corporation in joint venturewith Aozora Bank, Ltd.
Changed the form of invoicing (statement ofcharges) sent to cardholders to electronic andlaunched the LIFE-Web Desk
service for card holders
Established Compliance Committee
Opened a contact center
Converted business finance company,
City’s Co. Ltd., into 100% subsidiary
Received Listed Company Disclosure Commendationfrom the Tokyo Stock Exchange

AIFUL CORPORATION Annual Report 2017

2013
Apr

2014
Dec

2015
Apr

2015
Oct

2015
Nov

2016
Apr

Converted KOKUSAI Capital Co., Ltd. into 100%
subsidiary (currently AG Capital Corporation)
Issued LIFECARD GOLD ;issued LIFECARD
exclusively for students
Revised management philosophy. The new
management philosophy becomes “Earn the trustof society through corporate activity based in
integrity”
Established Risk Management Committee
Opened a shopping mallfor members, L–Mall
Established LIFE CARD Co., Ltd. (now a consolidated
subsidiary) to operate credit card and credit
guarantee businesses, wholly funded by AIFULsubsidiary LIFE Co., Ltd. (now a consolidated
subsidiary)
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 andmerger. Also, four consolidated subsidiaries (LIFE
Co., Ltd. (following its spin-off), City’s Corporation,
City Green Corporation and Marutoh KK) weremerged with AIFULNew Frontier Partners Co., Ltd. (currently aconsolidated subsidiary), a wholly owned subsidiary of
the Company, acquired all shares of BUSINEXTCORPORATION (currently a consolidated subsidiary)
owned by the Company and Sumitomo Mitsui
Trust Bank Limited and made it a wholly owned
subsidiary
AIRA&AIFUL Public Company Limited, a joint
venture, is established with AIRA Capital, an
overseas subsidiary in Thailand
SANSHU Finance Corporation,
which manages the lease business in Shanghai,
China, becomes a member of the Group
AIRA&AIFUL Public Company Limited (A&A)
commences the consumer finance business inThailand with the A Money brandShares of Anshin Guarantor Service Co., Ltd.,a group company, are listed on the Tokyo
Stock Exchange Mothers
New Frontier Partners Co., Ltd. changed its
corporate name to AG Capital Corporation

Group Network(As of March 31, 2017)

AIFUL CORPORATION(Location: Kyoto, Japan)

Top page (Japanese only)

Investor Relations

http://www.aiful.co.jp

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

Business Classification
Unsecured loans
Small business loans
Secured loans
Credit guarantees(for financial institutions)

LIFECARD CO.,LTD.

BUSINEXT CORPORATION(Location: Kanagawa, Japan)(Location: Tokyo, Japan)

http://www.lifecard.co.jp (Japanese only)

http://www.businext.co.jp (Japanese only)

Business Classification
Credit card
Prepaid card
Credit guarantees (for financial institutions)

Business Classification
Secured loans
Small business loans
FactoringGroup Companies

Business Classification

Location

AsTry Loan Services Corporation

Loan servicing

Tokyo, Japan

AG Capital Co.,Ltd

Venture capitalTokyo, Japan

LIFE GUARANTEE CO., LTD

Individual credit purchasing agency business
Guarantee (in-house installment)

Kyoto, Japan

Anshin Guarantor Service Co.,ltd.

Guarantee (rent liabilities)

Tokyo, Japan

AIRA & AIFUL Public Company Limited

Consumer finance

Bangkok, Thailand

SANSHU Finance Corporation

LeasingShanghai, China

AIFUL CORPORATION Annual Report 201719

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen

ASSETS

2017

2017

2016

CURRENT ASSETS:¥ 33,561¥ 39,906

Time deposits (Note 13)

84

4

750

Operational investment securities (Notes 6 and 13)

694

547

6,196

(2)

(5)

(18)

352,628

315,547

3,148,464

Cash and cash equivalents (Note 13)

Allowance for investment losses$

299,652

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

94,272

89,202

841,714Credit guarantees (Note 5)

114,453

111,634

1,021,902

Other receivables
Allowance for doubtful accounts (Notes 2.k and 13)
Work in process

8,939

8,622

79,813(42,972)(43,188)(383,679)

7,305

1,698

65,223

796

485

7,107

Other current assets

11,842

11,569105,734

Total current assets

581,600

536,021

5,192,858

Deferred tax assets (Note 11)

PROPERTY AND EQUIPMENT:Land (Note 7)

8,900

8,908

79,464

Buildings and structures (Note 7)

24,13224,013

215,464

Machinery and equipment (Note 7)

393

392

3,509

6,499

6,509

58,027

874

564

7,804

Furniture and fixtures (Note 7)
Lease assets

88

72

786

Total

40,88640,458365,054

Accumulated depreciation(23,222)(22,767)(207,340)

Net property and equipment

17,664

17,691

157,714

1,622

1,646

14,482

Construction in progress

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 13)
Investments in and advances to unconsolidated subsidiaries
and affiliated companies (Note 13)

7,394

3,775

66,018Claims in bankruptcy (Notes 3 and 13)

29,32431,947

261,821

Software, net

3,010

3,057

26,875

Lease and guarantee deposits

1,605

1,629

14,330

Other assets

1,632

1,203

14,572

Allowance for doubtful accounts (Note 13)(27,200)(29,455)(242,857)

Total investments and other assets

17,387

13,802

155,241¥ 616,651¥ 567,514$ 5,505,813

TOTAL
See notes to consolidated financial statements.

20

AIFUL CORPORATION Annual Report 2017

Consolidated Balance Sheet

Thousands of
U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND EQUITY

2017

2016

2017

¥ 73,610¥ 67,990

34,92422,440311,821929

80

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

657,232

Trade accounts payable

28,01623,287250,143

Obligation under credit guarantees (Note 5)

114,453

111,634

1,021,902

661

119

5,902

Accrued expenses

2,408

2,398

21,500Allowance for credit card point redemption

3,300

3,380

29,464

Income taxes payable

Other current liabilities (Notes 4 and 5)

17,493

5,875

156,189

Total current liabilities

274,874

237,152

2,454,233

Long-term debt (less current portion) (Notes 7, 12, 13 and 14)

192,325

159,103

1,717,188

Allowance for losses on interest refunds (Note 2.k)34,64063,439309,286

LONG-TERM LIABILITIES:

253

281

2,259

Other long-term liabilities

2,910

3,289

25,981

Total long-term liabilities

230,128

226,1122,054,714

Common stock - authorized, 1,136,280,000 shares;
issued, 484,619,136 shares in 2017 and 483,794,536 shares in 2016

143,455

143,416

1,280,848

Capital surplus

13,953

13,914

124,580

910

836

8,126

Retained earnings(43,333)(50,610)(386,902)

Treasury stock - at cost; 916,964 shares in 2017 and 916,890 shares in 2016

(3,111)(3,111)(27,777)

Deferred tax liabilities (Note 11)

EQUITY (Notes 9 and 10):Stock acquisition rights

Accumulated other comprehensive income:
(225)

(195)

(2,009)Total

111,649

104,250

996,866

Total equity

111,649

104,250

996,866¥ 616,651¥ 567,514$ 5,505,813

Unrealized loss on available-for-sale securities

TOTAL

AIFUL CORPORATION Annual Report 201721

Consolidated Financial Statements

Consolidated Statement of Income
Year Ended March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
INCOME:
Operating revenue (Note 17):
Interest on loans
Revenue from credit card business
Revenue from credit guarantee
Recovery of loans previously charged off
Other operating revenue (Note 6)
Total operating revenue
Foreign exchange gain (Note 17)
Reversal of membership deposits (Note 17)
Rent income of real estate (Note 17)
Other income (Notes 10 and 17)
Total income

2017

2016

2017

¥ 47,869
15,423
12,494
5,678
9,986
91,450¥ 44,256
14,592
12,491
6,021
10,34887,70816$ 427,402
137,705
111,554
50,696
89,161
816,518

322

2,875
52
153
87,929236
92,008EXPENSES:Interest on borrowings and bonds
Provision for credit card point redemption (Note 17)
Provision for doubtful accounts (Note 17)
Provision for losses on interest refunds (Note 17)
Provision for accrued bonuses (Note 17)
Salaries and other employees’ benefits
Net periodic benefit costs (Note 8)Advertising expenses
Promotion expenses
Rental expenses (Note 12)
Commissions and fees
Depreciation and amortization (Note 17)
Foreign exchange losses
Burden charge payment (Note 17)
Other expenses (Notes 6, 10 and 17)
Total expenses
INCOME BEFORE INCOME TAXES

7,148
3,300
20,74563,821
29,464
185,223

6,885
3,221
16,127
2,897
899
12,071
471
3,638
7,453
2,315
11,182
2,362

895
12,621
470
3,451
7,522
2,429
11,8352,339
86
61
11,70784,6097,399

11,54781,0686,861

7,991
112,688
4,196
30,813
67,161
21,688105,670
20,884768
545
104,525755,437
66,063

INCOME TAXES (Notes 11 and 17):
Current
Deferred
Total income taxes

441
(319)
122

180
(364)
(184)

3,938
(2,848)1,090

NET INCOME

7,277

7,045

64,973

7,045$ 64,973

NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

¥

7,277

¥

U.S. Dollars(Note 1)Yen
AMOUNTS PER COMMON SHARE (Note 16):
Basic net income
Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

22

2,107
821,500

AIFUL CORPORATION Annual Report 2017

2017

2016

2017

¥

¥

$

15.05
15.04
nil

14.59
14.57
nil

0.13
0.13
nil

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2017

2016

2017

¥ 7,277¥ 7,045$ 64,973

Unrealized loss on available-for-sale securities

(30)

(324)

(268)

Total other comprehensive loss

(30)

(324)

(268)

COMPREHENSIVE INCOME¥ 7,247¥6 ,721$ 64,705

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLETO OWNERS OF THE PARENT¥ 7,247¥ 6,721$ 64,705

NET INCOME
OTHER COMPREHENSIVE LOSS (Note 15):

See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 201723

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
Year Ended March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands

BALANCE AT APRIL 1, 2015

Millions of Yen
Accumulated
Other
Comprehensive
Income (Loss)

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplus

Stock
Acquisition
Rights483,507¥ 143,402¥ 164,469¥ 739

Net income attributable to owners of the parent

Retained
Earnings

TreasuryStock¥ (208,152)¥ (3,111)

Unrealized
Gain (Loss) on
Available-forsale Securities

Total Equity¥ 129¥ 97,476

7,045

7,045

Purchase of treasury stock (194 shares)
Disposal of treasury stock (26 shares)
Exercise of stock options

288

14

14

Deficit disposition

28(150,569)

150,569

Decrease due to the merger of non-consolidated
subsidiaries with consolidated subsidiaries(72)

Net change in the year
BALANCE AT MARCH 31, 2016

(72)

97
483,795

143,416

13,914836

Net income attributable to owners of the parent(50,610)(3,111)

(324)

(227)

(195)

104,250

7,277

7,277

Purchase of treasury stock (74 shares)
Exercise of stock options

824

39

39

Net change in the year

BALANCE AT MARCH 31, 2017

7874

484,619¥ 143,455¥

13,953¥ 910¥ (43,333)¥ (3,111)

(30)

44

¥ (225)¥ 111,649

Thousands of U.S. Dollars (Note 1)
Accumulated
Other
Comprehensive
Income (Loss)

BALANCE AT MARCH 31, 2016

CommonStockCapitalSurplus

Stock
Acquisition
Rights$ 1,280,500$ 124,232$ 7,465

Net income attributable to owners of the parent

Retained
Earnings

TreasuryStock$ (451,875)$ (27,777)

Unrealized
Gain (Loss) on
Available-forsale Securities

Total Equity$ (1,741)$ 930,804

64,97364,973Purchase of treasury stock (74 shares)
Exercise of stock options

348

348

Net change in the year

BALANCE AT MARCH 31, 2017

See notes to consolidated financial statements.

24

AIFUL CORPORATION Annual Report 2017

696
661

$ 1,280,848$ 124,580$ 8,126$ (386,902)$ (27,777)

(268)

393

$ (2,009)$ 996,866

Consolidated Financial Statements

Consolidated Statement of Cash Flows
Year Ended March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2017

2016

¥

¥

2017

OPERATING ACTIVITIES:
Income before income taxes

7,399

6,861

$

66,063Adjustments for:
Income taxes - paid

(137)

(615)

(1,223)

118

128

1,054

2,339

2,362

20,884

Decrease in allowance for investment losses

(3)

(8)

(27)

Decrease in allowance for doubtful accounts(2,471)(7,097)(22,063)

Increase (decrease) in allowance for bonuses

(1)

12

(9)

Income taxes - refund
Depreciation and amortization

(80)

20

(714)

(28,799)(29,966)(257,134)

Increase in loans(37,081)(26,830)(331,080)

Increase in installment accounts receivable(5,070)(4,869)(45,268)

(152)

60

(1,357)

Increase in purchased receivables

(87)

(664)

(777)

(Increase) decrease in other operating receivables

(230)

227

(2,054)

Increase in work in process(5,607)(1,698)(50,063)

Decrease in claims in bankruptcy

2,623

2,038

23,42024

18,635214

Increase (decrease) in allowance for credit card point redemption(Decrease) in allowance for losses on interest refunds
Changes in assets and liabilities:(Increase) decrease in operational investment securities

Decrease in lease and guarantee deposits(Increase) decrease in other current assets
Increase in other current liabilities

(380)

1,541

(3,393)

16,765

8,048

149,688

(393)

142

(3,509)(58,622)(38,534)(523,411)(51,223)(31,673)(457,348)

Capital expenditures(2,215)(2,634)(19,777)

Purchases of investment securities(2,175)(320)(19,420)

Other, net(1,802)(90)(16,089)

Net cash used in investing activities(6,192)(3,044)(55,286)

Other, net
Total adjustments
Net cash used in operating activities
INVESTING ACTIVITIES:(Continued)

AIFUL CORPORATION Annual Report 201725

Consolidated Statement of Cash Flows

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2017

2016

2017

FINANCING ACTIVITIES:¥ 5,620¥ 16,530$ 50,179

Proceeds from long-term debt

77,750111,200

694,196

Repayments of long-term debt

(32,368)(105,746)(289,000)

Net increase in short-term borrowings

Other, net
Net cash provided by financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS

53

18

473

51,05522,002455,848

15

(13)

134

(6,345)(12,680)(56,652)

CASH AND CASH EQUIVALENTS INCREASED BY MERGER OFNON-CONSOLIDATED SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIESNET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

26

AIFUL CORPORATION Annual Report 2017

39,90652,586356,304¥ 33,561¥ 39,906$ 299,652

Consolidated Financial Statements

Notes to Consolidated Financial Statements
Year Ended March 31, 2017
AIFUL CORPORATION and Consolidated Subsidiaries

1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related
accounting regulations, and in accordance with accounting
principles generally accepted in Japan (“Japanese GAAP”), which
are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain
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

Japan. In addition, certain reclassifications have been made in the2016 consolidated financial statements to conform to theclassifications used in 2017.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which AIFUL CORPORATION(the “Company”) is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥112 to $1, the approximate rate ofexchange at March 31, 2017. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as ofMarch 31, 2017, include the accounts of the Company and its
four (four in 2016) significant subsidiaries (together, the“Group”). Consolidation of the remaining nine (nine in 2016)
unconsolidated subsidiaries would not have had a material
effect on the accompanying consolidated financial statements.
Under the control and influence concept, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investments in seven unconsolidated subsidiaries (seven in2016) and an affiliated company (one in 2016) are stated atcost. Investments in the remaining two unconsolidated
subsidiaries (two in 2016), which are limited liability investment
partnerships and similar partnerships, are initially recorded atcost, 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.
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. Cash Equivalents — Cash equivalents are short-term
investments that are readily convertible into cash and 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.
c. Operational Investment Securities Held by Venture
Capital Subsidiary and Investment Securities —Operational investment securities held by a venture capitalcompany and investment securities, all of which are classified
as available-for-sale securities, are reported at fair value, withunrealized gains and losses, net of applicable taxes, reported ina separate component of equity. The cost of securities sold isdetermined based on the moving-average cost method.
Nonmarketable available-for-sale securities are stated at cost
determined by the moving-average method. For other-thantemporary declines in fair value, operational investment
securities and investment securities are reduced to net
realizable value by a charge to income.
Investments in limited liability investment partnerships andsimilar partnerships are initially recorded at cost, and thecarrying amount is adjusted to recognize the Company’s
interests in earnings or losses in such partnerships based on
the most recent available financial statements of thepartnerships.
d. Work in Process — Work in process relevant to the made-toorder software development contract is stated at the lower ofcost, determined by the specific identification method, or net
selling value. And revenue and cost relevant to the contract arerecognized by the completed-contract method.
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 sum of
the undiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amount

AIFUL CORPORATION Annual Report 201727

Notes to Consolidated Financial Statements

by which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted
cash flows from the continued use and eventual disposition of
the asset or the net selling price at disposition.
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 beappropriate based on the Group’s past credit loss experienceand an evaluation of potential losses in the accounts
outstanding.
i. Allowance for Investment Losses — The allowance forinvestment losses is stated in amounts considered to beappropriate based on the financial position of the investment
destination and an evaluation of potential losses onnonmarketable investment securities.
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
the former law, interest rates on loans should not exceed
29.2% (20.0% for customers who originate loans after June18, 2010) and violation of the law is subject to a criminal
penalty. The latter law stipulates that interest payments forinterest 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 andRegulation Law”, such interest payments are nonethelessconsidered to be valid if moneylenders issue notices asprescribed 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 theSupreme 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 the twolaws. 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, 2017 and 2016, the Group recorded
allowances of ¥34,640 million ($309,286 thousand) and¥63,439 million, respectively, as “Allowance for losses oninterest refunds”. In addition, the estimated amount of interest
refunds of ¥8,663 million ($77,348 thousand) and ¥12,435
million, which were expected to be preferentially set off
against loans, was recorded as “Allowance for doubtful

28

AIFUL CORPORATION Annual Report 2017accounts” for the Company and certain of its consolidated
subsidiaries at March 31, 2017 and 2016, respectively.
l. Asset Retirement Obligations — An asset retirement
obligation is recorded for a legal obligation imposed either by
law or contract that results from the acquisition, construction,
development and 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 the sumof 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 areasonable estimate of the asset retirement obligation cannot
be made in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonableestimate of the asset retirement obligation can be made. Upon
initial recognition of a liability for an asset retirement
obligation, an asset retirement cost is capitalized by increasing
the carrying amount of the related fixed asset by the amountof 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 thetiming or the amount of the original estimate of undiscounted
cash flows are reflected as an adjustment to the carrying
amount of the liability and the capitalized amount of therelated asset retirement cost.
m. Stock Options — The cost of employee stock options ismeasured based on the fair value at the date of grant andrecognized as compensation expense over the vesting period
as consideration for receiving goods or services. In the
consolidated balance sheet, stock options are presented as
stock acquisition rights as a separate component of equity until
exercised.
n. Leases — Finance lease transactions are capitalized byrecognizing lease assets and lease obligations in the balance
sheet.
o. Income Taxes — The provision for income taxes is computed
based on the pretax income included in the consolidated
statement of income. 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
payments on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.
The Group applied ASBJ Guidance No. 26, “Guidance on
Recoverability of Deferred Tax Assets”, effective April 1, 2016.
There was no impact from this guidance for the year ended
March 31, 2017.
p. Foreign Currency Transactions — All short-term and longterm monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at theexchange rates at the balance sheet date. The foreign exchange
gains and losses from translation are recognized in theNotes to Consolidated Financial Statements

consolidated statement of income to the extent that they are
not hedged 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 the lower ofthe interest rate stipulated in the Interest Rate Restriction Act
or the contractual interest rate.
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 overthe contractual term. Fees from customers applying the interest
method or revolving method are generally recognized in equal
installments over the contractual term.
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 iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
Diluted net income per share of common stock reflects thepotential dilution that could occur if stock acquisitions rights
were converted into common stock and assumes full exerciseof outstanding stock options.
Cash dividends per share presented in the accompanying
consolidated statement of income are dividends applicable to
the respective years including dividends to be paid after theend of the year.

AIFUL CORPORATION Annual Report 201729

Notes to Consolidated Financial Statements

3 LOANS
Loans at March 31, 2017 and 2016, consisted of the following (before allowance for doubtful accounts):

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Unsecured¥ 346,412¥ 306,602$ 3,092,964

Secured

24,04428,139214,679

Small-business loans

42,193

41,484

376,723

Total

412,649

376,225

3,684,366

Off-balance-sheet securitized loans(60,021)(60,678)(535,902)¥ 352,628¥ 315,547$ 3,148,464

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
2016

2017

¥ 28,712¥ 31,105$ 256,357

Nonaccrual loans

25,531

22,264

227,955

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

4,408

3,349

39,357Loans in legal bankruptcy

Restructured loans
Total
Loans in legal bankruptcy are loans on which accrual of interest is
discontinued (excluding the portion recognized as bad debts),
based on management’s judgment as to the collectability ofprincipal or interest resulting from the past-due payment ofinterest or principal and other factors. Allowances for claims inbankruptcy are stated at such amount less net realizable value ofcollateral.
Nonaccrual loans are loans on which accrual of interest is
discontinued, other than loans in legal bankruptcy as well as loans
receiving regular payments in the case of granting deferral ofinterest payment to the debtors in financial difficulties to assist
them in their recovery.
Accruing loans contractually past due three months or moreas to principal or interest payments are loans for which payments
of principal or interest have not been received for a period of
three months or more beginning with the next business day
following the last due date for such payments. Loans classified asloans in legal bankruptcy and nonaccrual loans are excluded from
accruing loans contractually past due three months or more.

30

2017

AIFUL CORPORATION Annual Report 2017

7,750

9,440

69,197¥ 66,401¥ 66,158$ 592,866

Restructured loans are loans on which creditors grantconcessions (e.g., reduction of the stated interest rate, deferral ofinterest payment, extension of maturity date, waiver of the face
amount, or other concessive measures) to the debtors in financial
difficulties to assist them in their recovery and eventually enable
them to pay creditors. Loans classified as loans in legal
bankruptcy, nonaccrual loans and accruing loans contractuallypast due three months or more are excluded.
At March 31, 2017 and 2016, including securitized loans, theGroup had balances related to revolving loan contracts
aggregating ¥317,615 million ($2,835,848 thousand) and¥287,989 million, respectively, whereby the Group is obligated toadvance funds up to a predetermined amount upon request. At
March 31, 2017 and 2016, the balances of unadvanced
commitments were ¥744,944 million ($6,651,286 thousand) and¥721,183 million, respectively. The loan contract contains
provisions that allow the Group to reduce the contract amount of
the commitment or refuse to advance funds to loan customers
under certain conditions.

Notes to Consolidated Financial Statements

4 INSTALLMENT ACCOUNTS RECEIVABLE
Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2017 and 2016, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen
2017

Credit card business
Installment sales finance business
Total
Off-balance sheet securitizedinstallment accounts receivable
Net

2017

2016

Receivables

Unearned
IncomeReceivables

Unearned
IncomeReceivables

Unearned
Income¥ 96,690¥ 408¥ 89,642¥ 368$ 863,304$ 3,643¥ 408¥ 90,166¥ 368$ 867,268

444¥ 97,134(2,862)¥ 94,272

3,964

524

(25,554)

(964)
¥ 408

$ 3,643¥ 89,202¥ 368$ 841,714$ 3,643

5 CREDIT 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 ¥16 million ($143 thousand) and ¥20 million at March 31, 2017 and 2016, respectively, which was included inother current liabilities.
And the consolidated subsidiary “LIFECARD CO., LTD.” guarantees the credit-card transactions by the unconsolidated subsidiary“Sumishin Life Card Co., Ltd.”. The guaranteed amount was ¥2,860 million ($25,536 thousand) and ¥3,400 million at March 31, 2017 and2016, respectively.

6 OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIESOperational investment and investment securities at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017
Current:
Equity securities

¥

2017

2016
694

547

$ 6,196¥ 1,547¥ 1,554$ 13,812

75

92

670

¥ 1,622¥ 1,646$ 14,482¥

Non-current:
Equity securities
Other
Total

AIFUL CORPORATION Annual Report 201731

Notes to Consolidated Financial Statements

The costs and aggregate fair values of available-for-sale securities included in operational investment securities and investment securities
with reliably determinable fair value at March 31, 2017 and 2016, were as follows:

Millions of Yen
2017
Cost
Securities classified as:
Available-for-sale securities

Unrealized
Gains

Unrealized
LossesFair Value

¥ 218

¥ 356

¥ 1,191

Unrealized
Gains

Unrealized
LossesFair Value

¥ 423

¥ 556

¥ 1,215¥ 1,329

Millions of Yen
2016
Cost
Securities classified as:
Available-for-sale securities¥ 1,348

Thousands of U.S. Dollars
2017

Securities classified as:
Available-for-sale securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value$ 11,866$ 1,947$ 3,179$ 10,634

Unlisted stocks whose fair value cannot be reliably determined were ¥1,125 million ($10,044 thousand) and ¥978 million at March 31, 2017and 2016, respectively.
Proceeds from sales of available-for-sale securities for the years ended March 31, 2017 and 2016, were ¥60 million ($536 thousand)and ¥265 million, respectively. Gross realized gains on these sales, computed on the moving-average cost basis, were ¥41 million ($366
thousand) and ¥219 million for the years ended March 31, 2017 and 2016, respectively, and gross realized losses were ¥9 million ($80
thousand) and ¥2 million for the years ended March 31, 2017 and 2016, respectively.
Impairment losses on available-for-sale securities, included in other expenses, for the years ended March 31, 2017 and 2016, were ¥9million ($80 thousand) and ¥13 million, respectively.

7 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2017 and 2016, consisted of the following:

Millions of Yen
Borrowings principally from a certain credit card company,
1.15% to 2.16% (1.15% to 2.95% at March 31, 2016)32

AIFUL CORPORATION Annual Report 2017

Thousands of
U.S. Dollars

2017

2016

2017

¥ 73,610¥ 67,990$ 657,232

Notes to Consolidated Financial Statements

Long-term debt at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2017

2016

¥ 54,663¥ 23,593

Loans from other financial institutions,
1.90% to 3.75% (1.48% to 3.75% at March 31, 2016)

12,48622,852

111,482

28,800257,143

Loans from banks, 1.48% to 3.30%(1.60% to 3.30% at March 31, 2016)2017$

488,063

Unsecured 8.00% yen straight bonds, due 2020

28,800Unsecured 2.00% yen straight bonds, due 2018

1,300

Unsecured 2.90% yen straight bonds, due 2017

2,600

2,600

23,214

126,764

103,225

1,131,821

Other debt (principally by securitized loans),
0.48% to 3.27% (0.52% to 3.32% at March 31, 2016) *1

11,607

636

473

5,679

Total

227,249

181,5432,029,009

Less current portion(34,924)(22,440)(311,821)¥ 192,325¥ 159,103$ 1,717,188

Obligations under finance leases

Long-term debt, less current portion*1 The Company has an outstanding syndicated loan which is subject to a financial covenant requiring maintenance of a minimum net asset balance. The
Company was in compliance with such financial covenant, respectively, as of March 31, 2017 and 2016.

Annual maturities of long-term debt, excluding finance leases (see Note 12) at March 31, 2017, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
Year Ending March 31
2018¥ 34,738$ 310,160

2019

33,220296,6072020

45,657

407,6522021

93,793

837,437

2022

12,452

111,1782023 and thereafter

6,753

60,296¥ 226,613$ 2,023,330

Total

At March 31, 2017, the following assets were pledged as collateral for short-term borrowings and long-term debt (including current portionof long-term debt):

Thousands of
U.S. Dollars

Millions of Yen¥ 252,596$ 2,255,321

Installment accounts receivable

68,980615,893

Land

8,523

76,098

Buildings and structures

4,354

38,875

Machinery and equipment

17

152

Loans

42

375

Total

¥ 334,512$ 2,986,714

Related liabilities:
Short-term borrowings¥ 67,810$

Furniture and fixtures

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

605,446

175,160

1,563,929¥ 242,970$ 2,169,375

The above table includes loans related to securitized loans of ¥89,073 million ($795,295 thousand) and related liabilities of ¥75,000 million($669,643 thousand).

AIFUL CORPORATION Annual Report 201733

Notes to Consolidated Financial Statements

8 RETIREMENT AND PENSION PLANS
The Company and certain of its 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 expense when made.
The components of periodic benefit costs for the years ended March 31, 2017 and 2016, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2017

2017

2016

Payments for the prepaid retirement benefits plan

¥ 173

¥ 198

$ 1,544

Premiums for the defined contribution pension plan

297

273

2,652

¥ 470

¥ 471

$ 4,196

Periodic benefit costs

9 EQUITY
Japanese companies are subject to the Companies Act of Japan(the "Companies Act"). The significant provisions in the
Companies Act that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders' meeting. Additionally, forcompanies that meet certain criteria including (1) having a Boardof Directors, (2) having independent auditors, (3) having an Audit& Supervisory Board, and (4) the term of service of the directors
being prescribed as one year rather than the normal two-year
term by its articles of incorporation, the Board of Directors may
declare dividends (except for dividends-in-kind) at any time during
the fiscal year if the company has prescribed so in its articles ofincorporation. With respect to the third condition above, theBoard of Directors of companies with (a) board committees(namely, appointment committee, compensation committee andaudit committee), or (b) an audit and supervisory committee (asimplemented under the Companies Act effective May 1, 2015)
may also declare dividends at any time because such companies,
by nature, meet the criteria under the Companies Act. The
Company is organized as a company with an audit andsupervisory committee effective on June 23, 2015. The Company
meets all the above criteria, and accordingly, the Board of
Directors may declare dividends (except for dividends-in-kind) at
any time during the fiscal year.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Companies Act
provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but theamount of net assets after dividends must be maintained at noless than ¥3 million.

34

AIFUL CORPORATION Annual Report 2017(b) Increases/Decreases and Transfer of Common Stock,
Reserve and Surplus
The Companies Act requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (a componentof capital surplus), depending on the equity account charged
upon the payment of such dividends, until the aggregate amountof legal reserve and additional paid-in capital equals 25% of thecommon stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed
without limitation. The Companies Act also provides that
common stock, legal reserve, additional paid-in capital, othercapital surplus and retained earnings can be transferred among
the accounts within equity under certain conditions upon
resolution of the shareholders.
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolution of
the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to theshareholders which is determined by specific formula. Under theCompanies Act, stock acquisition rights are presented as aseparate component of equity. The Companies Act also provides
that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights
are presented as a separate component of equity or deducted
directly from stock acquisition rights.

Notes to Consolidated Financial Statements

10 STOCK OPTIONSThe stock options outstanding as of March 31, 2017, are as follows:

Number of
Options Granted

Date of Grant

2,206 Company’s andSubsidiaries’ key employees

4,385,300 shares2013 Stock Options

1,480 Company’s andSubsidiaries’ key employees

2015 Stock Options

1,383 Company’s andSubsidiaries’ key employees

Stock Option

Persons Granted2010 Stock Options

Exercise
Price

Exercise Period

July 1, 2010

¥ 64($0.57)

From August 1, 2014
to July 31, 2016

2,947,100 shares

May 27, 2013

¥ 501($4.47)

From May 1, 2015 toApril 30, 2017

1,583,850 shares

June 30, 2015

¥ 407($3.63)

From July 1, 2017 toJune 30, 2019

The stock option activity is as follows:

For the year ended March 31, 2016
Non-vested
April 1, 2015 - Outstanding
GrantedCanceled
VestedMarch 31, 2016 - Outstanding
VestedApril 1, 2015 - Outstanding
VestedExercised
Canceled
March 31, 2016 - Outstanding
Exercise price
Average stock price at exercise
Option fair value at grant date2010 Stock Option2013 Stock Option

2015 Stock Option(Shares)(Shares)(Shares)

2,947,100
1,583,850
2,947,100
1,583,850
2,746,600
2,947,100
288,000¥¥¥

2,458,600
64
405
31

¥

2,947,100
501

¥

407

¥

261

¥

157

AIFUL CORPORATION Annual Report 201735

Notes to Consolidated Financial Statements

2010 Stock Option2013 Stock Option

2015 Stock Option(Shares)(Shares)(Shares)

For the year ended March 31, 2017
Non-vested
April 1, 2016 - Outstanding
GrantedCanceled
VestedMarch 31, 2017 - Outstanding
VestedApril 1, 2016 - Outstanding
VestedExercised
Canceled
March 31, 2017 - Outstanding
Exercise price¥

Average stock price at exercise¥

Option fair value at grant date¥

1,583,850

1,583,850
2,458,600

2,947,100

824,600
1,634,00064($0.57)322($2.88)31($0.28)¥¥2,947,100
501($4.47)261($2.33)¥407($3.63)¥157($1.40)

The assumptions used to measure fair value of 2010 Stock Options
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:

Black-Scholes option pricing model
77.936%5.08 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.3577%

The assumptions used to measure fair value of 2013 Stock Options
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:
Estimated dividend:
Risk free interest rate:

Black-Scholes option pricing model
82.512%2.93 years¥0 per share
0.171%

The assumptions used to measure fair value of 2015 Stock Options
Estimate method:Black-Scholes option pricing model

Volatility of stock price:61.550%Estimated remaining outstanding period:

3.00 years

Estimated dividend:
Risk free interest rate:¥0 per share
0.012%The stock compensation expense, included in other expenses, for the years ended March 31, 2017 and 2016, were ¥117 million ($1,045
thousand) and ¥106 million, respectively.
Gain on reversal of stock acquisition rights, included in other income, for the years ended March 31, 2017 and 2016, were ¥17 million($152 thousand) and nil, respectively.

36

AIFUL CORPORATION Annual Report 2017

Notes to Consolidated Financial Statements

11 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 33.0% and 30.8% for the years ended March 31, 2017 and 2016, respectively.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets and liabilities at
March 31, 2017 and 2016, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2017

2016

2017

Deferred tax assets:¥ 10,138¥ 11,883

Allowance for losses on interest refunds

9,851

19,56587,955Charge-offs for doubtful accounts

1,438

1,717

12,839Accrued interest on loans

1,172

1,267

10,464

Allowance for doubtful accounts$

90,518Tax loss carryforwards

178,157

170,249

1,590,688

Interest refunds payable

2,196

1,852

19,607

Other

3,575

3,786

31,920Total

206,527

210,319

1,843,991

Less valuation allowance(205,731)

Total deferred tax assets¥(1,836,884)(209,834)

796

¥

(54)

¥

485

$

(75)

$

7,107

Deferred tax liabilities:
Unrealized gain on available-for-sale securities

¥

(199)

Costs of removal related to asset retirement obligations(482)(1,777)(206)

Total deferred tax liabilities

¥

(253)

¥

(281)

$

(2,259)Net deferred tax assets (liabilities)

¥

543

¥

204

$

4,848

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

A reconciliation between the statutory tax rates and the effective tax rates reflected in the accompanying consolidated statement ofincome for the years ended March 31, 2017 and 2016, is as follows:

2017

2016

Normal effective statutory tax rate

30.8%

Less valuation allowance(32.0)(211.5)

Effect of tax rate reduction

0.6

171.9

Income not taxable for income tax purposes

1.7

0.8

Others, net

0.6

3.1

Actual effective tax rate

1.7%(2.7)%

33.0%

New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate 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, 2017 is immaterial.

AIFUL CORPORATION Annual Report 201737

Notes to Consolidated Financial Statements

At March 31, 2017, the Company and its wholly owned domestic subsidiaries had tax loss carryforwards aggregating approximately¥576,683 million ($5,148,955 thousand) which were available for offset against taxable income of the Company and such subsidiaries infuture years. These tax loss carryforwards, if not utilized, will expire as follows:

Millions of Yen

Thousands of
U.S. Dollars

Year Ending March 31
2018¥ 59,408$ 530,428

2019

155,254

1,386,196

2020

113,429

1,012,759

2021

95,484

852,536

2022

45,392405,2862023 and thereafter
Total

107,716

961,750¥ 576,683$ 5,148,955

12 LEASES
The Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2017 and 2016, were ¥2,429 million($21,688 thousand) and ¥2,315 million, respectively.
Obligations under finance leases at March 31, 2017 were as follows:

Millions of Yen
Due within one year
Due after one year
Total

38

AIFUL CORPORATION Annual Report 2017

¥ 186

Thousands of
U.S. Dollars$ 1,661

450

4,018

¥ 636

$ 5,679

Notes to Consolidated Financial Statements

13 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group policy for financial instruments
The main business of the Group is finance. The Group is engaged
in the provision of unsecured loans for individual consumers,
secured loans, small business loans, shopping loans, credit
guarantee, debt collection and so on. To run these businesses,
the Group raises funds domestically and internationally. Indirect
financing by loans from banks and direct financing by bond issue
are used.
(2) Nature and extent of risks arising from financial
instruments
Loans and installment accounts receivable for domestic consumers
and small businesses are the main financial assets of the Groupand are exposed to credit risk through default of contract bycustomers. Other financial assets such as operational investment
securities and investment securities are mainly stock andinvestments in limited liability investment partnerships. The Groupholds these securities to develop these businesses. The securities
are exposed to the issuer’s credit risk and the risk of market pricefluctuations.
Borrowings and debt including bonds are the main financial
liabilities of the Group. These liabilities are exposed to liquidity
risks, or risk that liabilities cannot be met when they fall due if theGroup is unable to participate in fund-raising markets in certain
circumstances. In addition, the Group raises funds at variableinterest rates or by bonds in foreign currency, and these areexposed to the market risks of fluctuation in interest rates andforeign currency exchange rates.
Derivatives include interest rate caps which are applicable tohedge accounting. See Note 14 for more details about derivatives
and hedging activities.
(3) Risk management for financial instruments
Credit risk management
Credit risk is the risk of economic loss arising from acounterparty’s failure to repay or service debt according to thecontractual terms. The Group manages its credit risk according tointernal 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 thecredit risk of issuers of securities by checking credit informationand market prices periodically.
Because the counterparties to derivatives are limited tomajor financial institutions, the Group does not anticipate any
significant losses arising from credit risk. The Group manages
such credit risk by relevant departments evaluating, analyzing anddeliberating countermeasures and reporting to the board of
directors accordingly.
See Note 14 for more details about derivatives.

Market risk management (foreign exchange risk and interest
rate risk)
The Group manages foreign exchange risk and interest rate risk
based on a “risk management manual” that was endorsed by theGroup’s risk management committee. The risk management
committee reports directly to the board of directors. The financedepartment reports the conditions of foreign exchange risk andinterest rate risk to the internal control department. The internal
control department examines the reasonableness and adequacyof the finance department’s risk evaluation and countermeasures,and reports to the board of directors. Also, the Group utilizes
interest rate caps in order to hedge exposure to risks fromchanges in interest rates.
Market risk management (stock price volatility risk)
Most of the operational investment securities and investment
securities the Group holds are intended to develop businessincluding business alliances and capital alliances. Relevant
departments monitor the market environment and the financial
situation of the issuers, deliberate countermeasures and report tothe board of directors accordingly. The Group does not holdtrading securities, which are held for the purpose of earning
capital gains in the near term.
Market risk management (quantitative information)
A change in interest rate impacts the fair values of loans,installment accounts receivable, short-term borrowings, andlong-term debt (including bonds). An increase of 1 basis point(0.01%) in interest rates is estimated to decrease the fair value ofthese financial (net) assets by ¥48 million ($429 thousand).
Conversely, a 1 basis point (0.01%) decrease in interest rates is
estimated to increase the fair value of these financial (net) assetsby ¥48 million ($429 thousand).
Market risk management (derivatives)
The Group manages market risk of derivatives according tointernal guidelines. Relevant departments conduct internal checks
to ensure that transactions, evaluations of hedge effectivenessand management of affairs are performed in accordance withinternal guidelines.
Liquidity risk management regarding fund-raising
The Group manages liquidity risk by adequate financial planningof the Group on a timely basis, diversifying the means of fundraising and adjusting the ratio of long-term and short-term debt
in light of the market environment.
(4) Fair value of financial instruments
Fair values of financial instruments are based on quoted prices in
active markets. If a quoted price is not available, other valuation
techniques are used. Fair value calculation results may differ whendifferent assumptions are used.

AIFUL CORPORATION Annual Report 201739

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

March 31, 2017
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts and allowance forlosses on interest refunds

Carrying AmountMillions of Yen
Fair Value¥ 33,561¥ 33,561

84

84

352,628(31,528)
321,100

374,286¥ 53,186

89,642

91,273

1,631

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

1,568

5,608

4,040

Claims in bankruptcy

29,324

Installment accounts receivable
Unearned income
Allowance for doubtful accounts

Allowance for doubtful accounts

94,272(374)(4,256)(27,101)
2,223

2,223

Total

¥ 448,178¥ 507,035

Short-term borrowings¥ 73,610¥ 73,610

226,613226,736¥(123)¥ 300,223¥ 300,346

¥

(123)

Carrying AmountMillions of Yen
Fair Value¥ 39,906¥ 39,906

44Long-term debt (excluding finance leases)
Total

March 31, 2016
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts and allowance forlosses on interest refunds¥ 58,857

Unrealized Gain

315,547(32,057)
283,490

336,412¥ 52,922

84,89686,185

1,289

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

1,592

3,154

1,562

Claims in bankruptcy

31,947Installment accounts receivable
Unearned income
Allowance for doubtful accounts

Allowance for doubtful accounts

89,202(336)(3,970)(29,351)
2,596

2,596

Total

¥ 412,484¥ 468,257

Short-term borrowings¥ 67,990¥ 67,990

Long-term debt (excluding finance leases)

181,070

181,214¥ (144)¥ 249,060¥ 249,204¥ (144)

Total

40

Unrealized Gain

AIFUL CORPORATION Annual Report 2017

¥ 55,773

Notes to Consolidated Financial Statements

March 31, 2017
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts and allowance forlosses on interest refunds

Carrying AmountThousands of U.S. Dollars
Fair Value$ 299,652$ 299,652

750

750

Unrealized Gain

3,148,464(281,500)
2,866,964

3,341,839$ 474,875

800,375

814,938

14,563Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

14,00050,071

36,071Claims in bankruptcy

261,821

Installment accounts receivable

841,714

Unearned income(3,339)Allowance for doubtful accounts(38,000)

Allowance for doubtful accounts(241,973)
19,848

19,848$ 4,001,589$ 4,527,098

Short-term borrowings$ 657,232$ 657,232

Long-term debt (excluding finance leases)

2,023,330

2,024,429$ (1,099)$ 2,680,562$ 2,681,661$ (1,099)

Total

Total

$ 525,509

Cash and cash equivalents
The carrying values of cash and cash equivalents approximate fair value because of their short maturities.
Time deposits
The carrying values of time deposits approximate fair value because of their short maturities.
Loans
The fair value of loans is determined based on the present value of expected future cash flows, which consist of expected inflows ofprincipal and interest which are adjusted to reflect collectability and outflows of costs of collection. The expected future cash flows are
discounted at a low-risk interest rate based on maturity length.
Installment accounts receivable
The carrying values of installment accounts receivable related to the credit card business approximate fair value because most transactions
are single payments in the following month. The fair value of installment accounts receivable related to installment sales finance business isdetermined based on the present value of expected future cash flows, which consist of expected inflows of principal and fees that are
adjusted to reflect collectability and outflows of costs of collection. The expected future cash flows are 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 measured at thequoted market price of the stock exchange.
Claims in bankruptcy
The carrying values of claims in bankruptcy less allowances for claims in bankruptcy approximate fair value because allowances for claims inbankruptcy are stated taking net realizable value of collateral into account.

AIFUL CORPORATION Annual Report 201741

Notes to Consolidated Financial Statements

Short-term borrowings
The carrying values of short-term borrowings approximate fair value because of their short maturities.
Long-term debt
The carrying values of current portion of long-term debt approximate fair value because of their short maturities.
The fair values of marketable bonds (issued by the Company) are measured at the quoted market price. The fair values of nonmarketablebonds (issued by the Company) and fixed-rate long-term debt are determined by discounting cash flows of principal and interest, at a ratethat reflects credit risk and maturity period. The carrying values of variable-rate long-term debt approximate fair value because the variable
rate reflects the market interest rate and credit risk in a short period of time.

(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, 2017

Millions of Yen

Thousands of
U.S. Dollars¥ 5,326$47,554

1,325

11,830Operational investment securities, investment securities and investments inunconsolidated subsidiaries:
Unlisted stocks
Investments in limited liability investment partnerships

Carrying AmountMarch 31, 2016

Millions of Yen

Operational investment securities, investment securities and investments inunconsolidated subsidiaries:
Unlisted stocks¥ 2,985

Investments in limited liability investment partnerships

1,389(5) Maturity analysis for financial assets with contractual maturities

March 31, 2017
Cash and cash equivalents
Time deposits

Millions of Yen
Due after One Yearthrough Five Years

Due after FiveYears

¥ 13,078¥ 33,561
84

Loans

140,107¥ 199,443

Installment accounts receivable

90,6773,595¥ 264,429¥ 203,038

Total

42

Due in One
Year or Less

AIFUL CORPORATION Annual Report 2017

¥ 13,078

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
Due in One
Year or LessMarch 31, 2017

Due after One Yearthrough Five Years

Due after FiveYears

1,250,955$ 1,780,741$ 116,768

809,616

32,098$ 2,360,973$ 1,812,839$

Cash and cash equivalents

299,652750

Time deposits
Loans
Installment accounts receivable
Total$ 116,768

Claims in bankruptcy of ¥29,324 million ($261,821 thousand) whose amount of redemption cannot be determined are not included in thetable above.
See Note 7 for annual maturities of long-term debt and Note 12 for obligations under finance leases.

14 DERIVATIVESThe Group enters into interest rate cap contracts as a means of managing its principal and interest rate exposures on certain liabilities.
Such derivative transactions are entered into to hedge interest exposures inherent within the business. Accordingly, market risks in thesederivatives are offset by opposite movements in the value of hedged liabilities. The Group does not hold or enter into derivatives for tradingor speculative purposes.
Because the counterparties to these derivatives are limited to major financial institutions, the Group does not anticipate any significant
losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies, which regulate the authorization
process and credit limit amount.
Year ended March 31, 2017
Derivative transactions to which hedge accounting is applied

Millions of Yen
At March 31, 2017

Hedged Item

Interest rate cap

Long-term debt

Contract AmountContract AmountDue after One Year¥ 30,000¥ 30,000Fair Value*1

Millions of Yen
At March 31, 2016

Hedged Item

Interest rate cap

Long-term debt

Contract Amount¥ 20,000

Contract AmountDue after One Year¥ 20,000Fair Value*1

Thousands of U.S. Dollars
At March 31, 2017

Hedged Item

Interest rate cap

Long-term debt

Contract Amount$ 267,857

Contract AmountDue after One Year$ 267,857

Fair Value*1*1 The above interest rate cap which qualifies for hedge accounting and meets specific matching criteria is not remeasured at fair value. In addition, the fairvalue information of interest rate caps is included in that of the hedged items (i.e. long-term debt) in Note 13.

There were no derivative transactions to which hedge accounting is not applied at March 31, 2017 and 2016.

AIFUL CORPORATION Annual Report 201743

Notes to Consolidated Financial Statements

15 OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2017 and 2016, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2017

2017

2016

Unrealized (loss) gain on available-for-sale securities:¥ (24)¥ (43)$ (215)

Reclassification adjustments to profit or loss

(27)

(206)

(241)

Amount before income tax effect

(51)

(249)

(456)

Income tax effect

21

(75)

188

Total

¥ (30)¥ (324)$ (268)

Total other comprehensive loss

¥ (30)¥ (324)$ (268)Loss arising during the year

16 NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2017 and 2016, is
as follows:Year ended March 31, 2017
Basic EPS - Net income available tocommon shareholders

Millions of Yen

Thousandsof Shares

Net Income

Weighted- Average
Shares¥ 7,277

Effect of dilutive securities
Stock acquisition rights
Diluted EPS - Net income for computation

483,500

Yen
EPS¥ 15.05$ 0.13$ 0.13191¥ 7,277

483,691¥ 15.04¥ 7,045482,742¥ 14.59

Year ended March 31, 2016
Basic EPS - Net income available tocommon shareholders
Effect of dilutive securities
Stock acquisition rights
Diluted EPS - Net income for computation

44

AIFUL CORPORATION Annual Report 2017

Dollars887¥ 7,045

483,629¥ 14.57

Notes to Consolidated Financial Statements

17 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 decisionmaker 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's
reportable segments consist of its 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 in thecredit card business and the credit guarantee business.
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 201745

Notes to Consolidated Financial Statements

Millions of Yen
2017
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total¥ 1,973¥ 47,869

Reconciliations

Consolidated

Operating revenue:
Interest on loans¥ 40,293

Revenue from credit card business
Revenue from credit guarantee

5,603¥ 45,896

9¥15,414

15,423

11,107

1,272

12,379115¥ 47,869

15,423

15,423

12,494

12,494

Recovery of loans previously charged off

5,415

255

5,670

8

5,678

5,678

Other operating revenue

1,506

6,147

7,653

2,333

9,986

9,986

Operating revenue from externalcustomers

58,33028,69187,021

4,429

91,45091,450Intersegment operating revenue ortransfers
Total
Segment profit (loss)

10

189

199

56

255

¥

¥ 58,340¥ 28,880¥ 87,220¥ 4,485¥ 91,705¥(255)¥ 91,450

¥

¥

¥

¥

¥

¥

(526)*2

¥

4,824

3,032

7,856

(53)

7,803

(255)
7,277

*3

616,651
505,002

Segment assets

439,841

188,889

628,730

30,722

659,452(42,801)

Segment liabilities

355,921148,064

503,985

12,146516,131(11,129)*4

Other:
322

322

322

132

132

27

27

27

2

2

2

2

239

239

Reversal of membership deposits
Rent income of real estate

132

Dividend income

16

Reversal of allowance for doubtful
accounts
Interest on advances to subsidiaries andotherProvision for credit card point redemption
Provision for doubtful accounts

16,724

11

322
(77)

93

332
3,300

3,300

20,74520,745

3,300

3,300

3,669

20,393

352

(306)

55

Provision for accrued bonuses

563

15

578

20

598

Depreciation and amortization

1,264

1,071

2,335

4

2,339

2,339

61

61

61

61
3

Burden charge payment
Reversal of allowance for investment
losses3

3Interest on advances from parent
company and other

39

39

125

441

298

26

895

(39)

Income taxes:
Current

(726)

1,042

316

Deferred

(8)

(837)

(845)

1,157

1,202

2,359

Increase in property and equipment andintangible assets

(845)
18

2,377

441
526

(319)
2,377

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

46

AIFUL CORPORATION Annual Report 2017

Notes to Consolidated Financial Statements

Millions of Yen
2016
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total¥ 1,754¥ 44,256

Reconciliations

Consolidated

Operating revenue:
Interest on loans¥ 36,857

Revenue from credit card business
Revenue from credit guarantee

5,645¥ 42,502

3¥

14,58914,592

14,592¥ 44,256
14,592

11,221

1,270

12,491

12,491

12,491

Recovery of loans previously charged off

5,789

217

6,006

15

6,021

6,021

Other operating revenue

1,240

6,253

7,493

2,855

10,348

10,348Operating revenue from externalcustomers

55,11027,974

83,084

4,624

87,70887,708Intersegment operating revenue ortransfers
Total
Segment profit (loss)

10

374

384

77

461

¥

(461)

¥ 55,120¥ 28,348¥ 83,468¥ 4,701¥ 88,169¥(461)¥ 87,708

¥

¥

¥

¥

¥

¥

(752)*2

¥

5,281

1,859

7,140

657

7,797

7,045

*3

567,514463,264

Segment assets

407,140

173,085

580,225

28,962609,187(41,673)

Segment liabilities

328,256

135,292

463,548

10,381

473,929(10,665)*4

Other:
Foreign exchange gain
Rent income of real estate

19
128

19

(3)

16

128

(76)

52

Dividend income

7

Reversal of allowance for doubtful
accounts

1010Interest on advances to subsidiaries and
other

918

918

Provision for credit card point redemption
Provision for doubtful accounts

14,171

Provision for losses on interest refunds

10

19
128
17

3,221

3,221

1,939

16,110

1

18

18

10

10

135

1,053

40

16,15018(23)

16,127

3,221

2,897

2,897

Provision for accrued bonuses

565

12

577

19

596

Depreciation and amortization

1,391

967

2,358

4

2,362

40

40

Interest on advances from parent
company and other(1,035)

3,221

2,897

2,897
303

899
2,362

(40)

Income taxes:
Current

(250)

356

106

Deferred(19)(1,075)(1,094)

1,004

1,968

2,972

Increase in property and equipment andintangible assets

74

180(1,094)

1

2,973

180
730

(364)
2,973

*1 “Other” items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
*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 201747

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
2017
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total$ 17,616$ 427,402

Reconciliations

Consolidated

Operating revenue:
Interest on loans$ 359,759

Revenue from credit card business
Revenue from credit guarantee

50,027$ 409,786

80$

137,625

137,705

99,17011,357

110,5271,027$ 427,402

137,705

137,705

111,554

111,554

Recovery of loans previously charged off

48,3482,277

50,62571

50,696

50,696

Other operating revenue

13,44754,884

68,331

20,83089,161

89,161

Operating revenue from externalcustomers

520,804

256,170776,974

39,554

816,518

816,518

Intersegment operating revenue ortransfers
Total
Segment profit (loss)

89

1,688

1,777

500

2,277

$

$ 520,893$ 257,858$ 778,751$ 40,044$ 818,795$(2,277)$ 816,518

$

$

$

$

$

$

(4,696)*2$

43,071

27,071

70,142(473)

69,669(2,277)64,973*35,505,813
4,508,946

Segment assets

3,927,152

1,686,509

5,613,661

274,304

5,887,965(382,152)

Segment liabilities

3,177,866

1,322,000

4,499,866

108,446

4,608,312(99,366)*4

Other:
2,875

Reversal of membership deposits
Rent income of real estate

1,179

2,875
1,179

241

241

241

18

18

Dividend income

143

Reversal of allowance for doubtful
accounts

18

18

2,134

2,134

Interest on advances to subsidiaries andotherProvision for credit card point redemption
Provision for doubtful accounts

149,321

98

2,875
1,179

2,875
(688)

830

2,964
29,46429,464

185,223

185,223

29,46429,46432,759182,080

3,143(2,732)

491

Provision for accrued bonuses

5,027

134

5,161

178

5,339

Depreciation and amortization

11,286

9,563

20,84935

20,884

20,884

545

545

545

545
27

Burden charge payment
Reversal of allowance for investment
losses27

27

Interest on advances from parent
company and other

348

348

1,116

3,938

2,652

232

7,991

(348)

Income taxes:
Current(6,482)

9,304

2,822

Deferred(71)(7,473)(7,544)

10,33010,732

21,062

Increase in property and equipment andintangible assets(7,544)160

21,222

3,938
4,696

(2,848)21,222*1 “Other” items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
*2 “Reconciliations” are eliminations of intersegment transactions.
*3 “Reconciliations” are eliminations of intersegment assets.
*4 “Reconciliations” are eliminations of intersegment liabilities.

48

AIFUL CORPORATION Annual Report 2017

Notes to Consolidated Financial Statements

Related Information
1. Information about products and services

Millions of Yen
2017

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

¥ 52,672¥ 15,950¥ 12,788¥ 10,040¥ 91,450

Millions of Yen
2016

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

¥ 49,341¥ 15,203¥ 12,830¥ 10,334¥ 87,708

Other

Total

$ 89,642$ 816,518

Thousands of U.S. Dollars
2017

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business$ 470,286$ 142,411$ 114,179

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, 2017 and2016.
(2) Property and equipment
Information about geographic area is omitted, as no property and equipment were located outside Japan for the years ended March 31,2017 and 2016.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating revenue forthe years ended March 31, 2017 and 2016.

AIFUL CORPORATION Annual Report 2017

49

50

AIFUL CORPORATION Annual Report 2017

Investor Information(As of March 31, 2017)

Corporate Overview
Corporate NameAIFUL CORPORATION

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

Date of Establishment

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

94,81419.56

Mitsuhide Fukuda

62,155

12.83

Marutaka Co., Ltd.

24,543

5.06

GOLDMAN, SACHS& CO. REG

22,478

4.64

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

13,594

2.81

Japan Trustee Services Bank, Ltd.
(trust account)

11,171

2.31

CHASE MANHATTAN BANK GTS CLIENTSACCOUNT ESCROW

7,004

1.45

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

6,076

1.25

DEUTSCHE BANK AG LONDON–PB NON–
TREATY CLIENTS 613

5,010

1.03

BNY GCM CLIENT ACCOUNT JPRD AC ISG(FE-AC)

4,715

0.97

April 1967

Paid-in Capital¥143,454 million

Number of Employees

Non-consolidated: 1,019
Consolidated: 1,473

Stock Information
Stock Listing

The First Section of
the Tokyo Stock Exchange

Securities Code8515

Composition of Shareholders

Number of Shares

Financial
Institutions
11.4%

Authorized: 1,136,280,000 shares
Issued and Outstanding: 484,619,136 shares
Number of Shareholders

35,914

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
LimitedIndependent Auditor

Deloitte Touche Tohmatsu LLC

Individuals
and Others
40.9%
Securities Companies
and Other Corporations
29.5%
Foreign Investors
18.2%

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 201751