ANNUAL REPORT2010
The year ended March 31, 2010

Corporate Profile

AIFUL was founded by President and CEO Yoshitaka Fukuda in 1967 as a sole
proprietorship consumer finance business and established as a corporation in 1978 tobolster its creditworthiness. In 1982 the corporate name was changed to the current
AIFUL CORPORATION. AIFUL has grown into a comprehensive financial group handlingsuch 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 support of the public with sincerity andhard work,” AIFUL aims to be a company that is truly trusted by society.

1

Financial Highlights

2

Message from President and CEO Yoshitaka Fukuda

4

Eleven-Year Summary

6

Business Data

8

Management’s Discussion and Analysis of Finances10		

Consolidated Financial Statements37		

Independent Auditors’ Report38		Group Network

39		

Investor Information

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

Financial Highlights
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010, 2009 and 2008

Percentage
ChangeThousands of
U.S. Dollars

2010/20092010(31.1)%
64.4
67.5
—
—

$ 2,346,527
5,458,678
1,787,828(3,112,151)(3,173,559)

Millions of Yen

2010

For the Year:
Total income
Total expenses     Charge-offs and provision for doubtful accounts
Income (loss) before income taxes and minority interests
Net income (loss)¥ 218,227
507,657
166,268(289,430)(295,141)

2009

2008

¥316,542
308,826
99,2737,716
4,247¥402,389
371,491
155,930
30,89827,434

At Year-End:Loans¥ 835,928¥1,290,354 ¥1,598,706
Installment accounts receivable
125,990
142,017
148,490
Nonperforming loans
256,713
322,058
343,768
Total
Net Income (Loss)
AssetsTotalIncome
assets1,152,945 Total
1,644,744
2,041,128(Billions of Yen)
(Billions of Yen)
(Billions of Yen)
Allowance for doubtful accounts
236,303237,820
330,415
66
549
2,791
Long-term
debt, including current portion thereof
587,363805,651
1,190,159
501
Total equity
97,306393,334
324,5212,215
2,041 2,041
402
402
27
27 238,685,568
Number of shares issued
238,685,568 167,475,000(35.2)% $ 8,988,473(11.3)
1,354,731(20.3)
2,760,354
Total(29.9)Equity 12,397,258(Billions of Yen)
(0.6)
2,540,892
325
325(27.1)
6,315,731
2,791(75.3) 257 1,046,301——

Per Share Data (Yen/U.S. Dollars):
Net income (loss), basic
Diluted net income
Total equity
2006
2007 2008 2009
Cash dividends—$(13.32)——(75.9)%
4.22
2006— 2007 2008 2009—

Yers ended arch 31¥(1,238.90)—(411)
392.302006 2007 2008 2009 —Yers ended arch 31

Ratios (%):
Equity ratio
ROE
ROA

¥

24.77
¥ 190.77—
186.86
1,626.89
1,909.46
2006 15.00
2007 2008 2009
40.00
Yers ended arch 31

8.1(122.7)(21.1)

23.6
1.2
0.2

Yers ended arch 31(15.5) pts(123.9) pts(21.3) pts

15.6
9.6
1.3

—
—
—

Note: The U.S. dollar amounts have been translated, for convenience only, at ¥93 = $1, the approximate rate of exchange at March 31, 2010.

Total Income

Net Income (Loss)

Total Assets

Total Equity(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

27.4

501.0
402.4

2,214.6
2,041.1

4.2
316.5

1,644.7
218.3

1,153.0

257.1

324.5

393.3

97.4

(295.2)
2007 2008 2009 2010
(Years ended March 31)(411.3)2007 20082009 2010(Years ended March 31)

2007

2008

2009 20102007(As of March 31)

AIFUL CORPORATION

2008

2009 2010(As of March 31)

Annual Report 20101

Message from President and CEO Yoshitaka Fukuda

Business Revitalization Procedures
AIFUL CORPORATION and its subsidiaries LIFE Co., Ltd., Marutoh KK, and City’s Corporation
applied for Business Revitalization Procedures using alternative dispute resolution (ADR) on
September 24, 2009 because of the increasing pressure on capital from interest refund claims anddifficulties procuring funds since the collapse of Lehman Brothers. The AIFUL Group petitioned
participating creditors for financial support that primarily involves a new schedule for loan
repayment over a specified period. Following discussions with participating creditors, theAIFUL Group’s Business Revitalization Plan was approved at a meeting of creditors held on
December 24, 2009.
The fundamental restructuring policy of the Business Revitalization Plan has three points:
reduction of loans and other assets to a level commensurate with the current ability to procure
funds; reduction of costs in response to reduced income and scale of operations; and Groupreorganization that includes withdrawal from unprofitable businesses. Based on this fundamental
policy, the AIFUL Group has reduced assets by scaling back lending, consolidated its network ofsales branches, and reduced personnel through voluntary retirement. Looking ahead, the AIFULGroup intends to move forward with business restructuring through Group reorganization while
paying close attention to trends in the consumer finance market following stage four of
enforcement of the Money Lending Business Act.

Yoshitaka Fukuda
President and CEO

2

Financial Results for the Fiscal Year Ended March 2010
For the fiscal year ended March 2010, consolidated total income decreased 31% year on year to¥218.3 billion. Interest on loans continued to decrease, due to factors including a decrease in thebalance of outstanding loans and reductions in interest rates. The total of loans, installment accounts
receivable and other receivables decreased ¥476.9 billion from a year earlier due to tighter credit
and reduced lending ahead of stage four of enforcement of the Money Lending Business Act.
Total expenses increased 64% year on year to ¥507.7 billion. The AIFUL Group reduced thetotal of interest on borrowings, salaries and other employees’ benefits, advertising expenses,
rental expenses, and commissions and fees by ¥30.2 billion. However, provision for losses oninterest refunds increased to ¥206.9 billion as a result of the high level of claims for interest
refunds; including loans abandoned, it totaled ¥257.4 billion. In addition, provision for doubtful
accounts other than losses on interest refunds totaled ¥115.8 billion. The Group also incurred loss
from and provision for business restructuring totaling ¥13.2 billion that included the costs
associated with branch closures and the voluntary retirement program, and loss on transfer ofbusiness resulting from the sale of four consumer finance subsidiaries. As a result, loss before
income taxes and minority interests was ¥289.5 billion, compared to income before income taxes
and minority interests of ¥7.8 billion for the previous fiscal year, and net loss was ¥295.2 billion,
compared to net income of ¥4.3 billion for the previous fiscal year.

Management Stance
The AIFUL Group forecasts that challenging conditions will continue for the consumer financeindustry. Among other issues, income is likely to decrease substantially because of lower interest
rates and reduced lending resulting from tighter credit standards due to the burden of interest
refund claims and stage four of enforcement of the Money Lending Business Act.
Given these conditions, the AIFUL Group will strengthen its finances and improve
profitability by continuing to prudently extend credit while developing new products and a new
credit-scoring model as it works to build a portfolio of quality loans with no risk of interest refund
claims. The AIFUL Group expects to refocus management resources for consumer financebusinesses operating under the “AIFUL” brand and consumer credit businesses operating underthe “LIFE” brand. In making these changes, we expect to enhance our consumer finance businessby taking fuller advantage of the “AIFUL” brand and enhance our consumer credit businessthrough broader use of the “LIFE” brand.
The AIFUL Group sincerely requests that its shareholders understand its situation andstrategies and continue to provide their support.
August 2010

Yoshitaka Fukuda
President and CEO
AIFUL CORPORATION

Annual Report 20103

Eleven-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010, 2009, 2008, 2007, 2006, 2005, 2004, 2003, 2002, 2001 and 2000
For the Year:
Total income
Total expenses
		 Charge-offs and provision for doubtful accounts
Income (loss) before income taxes and		 minority interests
Net income (loss)

2010

2009

2008

2007

218,227
507,657
166,268

316,542
308,826
99,273402,389
371,491
155,930

501,009873,272
447,375(289,430)(295,141)

7,716
4,247

30,89827,434(372,263)(411,251)

At Year-End:
Loans
Nonperforming loans
		 Loans in legal bankruptcy
		 Nonaccrual loans
		 Accruing loans contractually past			 due three months or more as to			 principal or interest payments
Restructured loans
Total assets
Allowance for doubtful accounts
Total liabilities
Interest-bearing debt
Total equity
Minority interests

835,928
256,71348,849137,0211,290,354
322,058
41,282
181,825

1,598,706
343,768
46,895
189,721

1,912,689
328,046
43,008
180,819

15,56655,277
1,152,945
236,303
1,055,639
648,557
97,306
3,849

25,97972,972
1,644,744
237,820
1,251,410
917,792
393,334
5,761

29,35177,801
2,041,128
330,415
1,716,608
1,354,089
324,5215,604

36,66567,5542,214,559
407,573
1,957,415
1,530,262
257,145
5,420

Per Share Data (Yen):
Net income (loss), basic
Diluted net income
Total equity
Cash dividends(1,238.90)—
392.30—24.77—
1,626.89
15.00

190.77186.86
1,909.46
40.00(2,903.85)—
1,777.44
60.00

8.1(122.7)(21.1)
—

23.6
1.2
0.2
60.6

15.6
9.6
1.3
21.0

11.4
(88.1)(16.4)—

238,685,568
2,514

238,685,568
4,895

167,475,000
5,138

142,035,000
6,477

Ratios (%):
Equity ratio
ROE
ROA
Payout ratio
Other Data:
Number of shares outstanding at year-end
Number of employees at year-end

Notes: 1. Figures in the financial section are based on audited English-language statements.
2. Financial statements have been prepared on a consolidated basis from the year ended March 31, 2001. Figures for earlier fiscal years are non-consolidated.
3. In accordance with the provisions of Article 218 of the Commercial Code of Japan, AIFUL CORPORATION conducted splits of its common shares of 1.5 to 1 on May 22,2000 and 1.5 to 1 on May 23, 2005.

4

AIFUL CORPORATION

Annual Report 2010

(Millions of yen)

2006

2005

2004

2003

2002

2001

2000

548,818
436,045
166,047

520,737
391,295
155,466

479,473375,659
157,349

451,168
343,715
138,479

400,014338,166
92,576

281,719
189,145
59,194

239,200
154,490
40,307112,773
65,827

129,442
75,723103,81462,548

107,453
59,911

61,84835,064

92,574
48,25384,71044,104

2,124,017
203,800
33,44680,721

1,995,622
175,136
31,02060,283

1,786,940
149,826
28,63752,452

1,670,782
120,399
20,83039,897

1,482,796
94,854
16,45728,723

1,261,042
79,913
13,07125,6441,001,080
57,68816,29915,79727,56462,0692,790,969
171,715
2,102,310
1,792,746
681,694
6,965

21,04962,784
2,574,286
159,483
1,951,548
1,673,458
617,353
5,385

17,82050,9172,332,761
145,757
1,780,575
1,513,812
547,504
4,682

16,503
43,1692,282,113
132,130
1,792,093
1,504,969
485,991
4,029

11,94537,7292,029,634
109,337
1,604,780
1,344,273
421,343
3,511

7,196
34,002
1,865,537
98,395
1,557,838
1,239,265
306,550
1,149

5,521
20,321
1,182,468
56,720929,565
892,169
252,903—464.84464.694,813.45
60.00

800.36800.306,538.03
60.00

660.98—5,794.58
60.00

637.59—5,143.45
60.00

390.00—4,523.01
50.00

569.32—
3,611.74
50.00

786.13—
4,507.83
60.00

24.4
10.1
2.5
12.9

24.0
13.0
3.1
7.5

23.5
12.1
2.7
9.1

21.3
13.2
2.8
9.4

20.7
9.6
1.8
12.8

16.4
15.7
2.6
8.8

21.4
19.3
4.0
7.6

142,035,000
6,675

94,690,000
6,510

94,690,000
5,969

94,690,000
6,123

93,376,000
5,810

84,876,000
5,750

56,103,000
3,263

AIFUL CORPORATION

Annual Report 20105

Business Data

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

2006

2007

2008

2009



Total Income
Interest on Loans
		 Unsecured
		 Secured
		 Small Business
Credit Card Business*
Installment Sales
		 Finance Business
Credit Guarantees
Other
Net Income (Loss)



2010

Total Receivables Outstanding 2,681,746 2,369,586 1,999,414 1,636,320 1,105,056
Loans
2,232,418 1,985,263 1,665,682 1,334,196 856,763
		 Unsecured
1,708,119 1,537,905 1,278,001 1,015,647 634,249
		 Secured
357,025 291,716 246,520 206,941 138,650
		 Small Business
167,274 155,642 141,161 111,608
83,864Credit Card Business*
101,135 127,222 127,678 136,763 121,995
Installment Sales
		 Finance Business
183,907 112,518
62,80833,791
13,856
Credit Guarantees
153,767 141,930 129,713 118,207 100,153
Other
10,52012,652
13,534
13,364
12,288TOTAL INCOME/NET INCOME (LOSS)AVERAGE RATE OF BORROWINGS(Millions of Yen)

2006

2007

2008

2009

2010

548,818
491,358
405,308
56,14429,904
11,275501,009448,662
374,839
43,57530,247
12,754402,389
356,435
300,887
31,95923,59014,948316,542
263,797
219,969
25,32718,501
16,881

218,227
170,662
137,394
20,027
13,24017,824

17,676
12,998
8,668
9,187
19,841
17,40865,827 (411,251)

6,912
8,548
15,54627,434

3,631
8,021
24,212
4,247

1,726
7,035
20,980(295,141)

Average Rate of Borrowings
Indirect
DirectLong-term Prime Rate
(Reference)

(%)

2006

2007

2008

2009

2010

1.55
1.71
1.33

1.80
2.03
1.51

1.78
2.15
1.44

2.03
2.25
1.84

2.01
2.15
1.84

2.10

2.20

2.10

2.25

1.60

NUMBER OF CUSTOMER ACCOUNTS


Number of Customer Accounts
Unsecured
SecuredSmall Business
Credit Card Holders
Accounts of Installment
Sales Finance Business(Thousands)

2006

2007

2008

2009

2010

3,899
3,696
105
99
13,096

3,548
3,367
87
93
14,066

3,067
2,911
73
83
14,819

2,629
2,499
62
68
15,252

1,966
1,867
46
54
12,719

634

459

292

178

87

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2006
Total Assets
ROA (%)
Total Equity
ROE (%)

2007(Millions of Yen)

2008

2009

2010

2,790,969 2,214,559 2,041,128 1,644,744 1,152,945
2.5(16.4)
1.3
0.2(21.1)
681,694 257,145 324,521 393,334
97,30610.1(88.1)
9.6
1.2(122.7)* “Credit Card Business” (hokatsu shinyo konyu assen in Japanese) consists of credit card
shopping loans.

AIFUL CORPORATION
LOANS OUTSTANDING
(Millions of Yen)

2008

2009

2010

1,512,717 1,298,612 1,058,880
1,133,083 995,077 817,825
341,153 274,787 221,577
38,481
28,747
19,478

842,786
648,123
181,394
13,269553,476
423,733
120,821
8,922

2006
Loans Outstanding
Unsecured
SecuredSmall Business

2007

TOTAL INCOME/NET INCOME (LOSS)

Total Income
Interest on Loans
		 Unsecured
		 Secured
		 Small Business
Other
Net Income (Loss)

6(Millions of Yen)

2006

2007

2008

2009

2010

350,933
333,541
269,986
54,5608,994
17,39250,382309,698 239,629
292,669 224,707
243,614 190,230
41,42429,809
7,631
4,668
17,02914,922(359,399) 27,069

189,682
167,415
142,010
22,5462,859
22,267
9,658

130,278
113,069
92,854
18,353
1,862
17,209(261,496)

AIFUL CORPORATION

Annual Report 2010

NUMBER OF CUSTOMER ACCOUNTS


Number of Customer Accounts
Unsecured
SecuredSmall Business(Thousands)

2006

2007

2008

2009

2010

2,187
2,058
102
28

1,894
1,789
84
22

1,593
1,509
70
15

1,351
1,281
59
11

1,061
1,009
44
7

AVERAGE LENDING INTEREST RATE

Average Lending
Interest Rate
Unsecured
SecuredSmall Business

(%)

2006

2007

2008

2009

2010

22.4
24.2
15.9
25.2

20.8
22.9
13.5
22.7

19.1
21.0
12.0
19.4

17.6
19.4
11.2
17.5

16.2
17.3
12.1
16.8

DOUBTFUL ACCOUNTS CHARGE-OFFS/RATIO OF DOUBTFUL ACCOUNTS CHARGE-OFFSDoubtful Accounts Charge-offs
Unsecured
Ratio of Doubtful Accounts
Charge-offs (%)
Unsecured(Millions of Yen)

2006

2007

2008

2009

2010

98,256
83,143

138,602
121,558

160,168
138,799

119,068
103,473

111,651
89,451

6.50
7.34

10.67
12.22

15.13
16.97

14.13
15.97

20.17
21.11

2008

2009

2010

2,204,483 1,660,827 1,535,958 1,241,766
2.4(18.6)
1.7
0.7
632,917 255,005 322,016 396,233
8.3(81.0)
9.4
2.7

858,532(24.9)
135,536(98.3)TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2006
Total Assets
ROA (%)
Total Equity
ROE (%)

2007

NEW ACCOUNTS(Accounts)

New Accounts
Unsecured*
Acceptance Ratio ofUnsecured* (%)

2006

2007

2008

2009

2010

370,593334,141

156,350
149,549

115,629
112,693

87,392
85,91651,75751,757

64.3

48.3

34.7

28.6

21.9

2006

2007

2008

2009

2010

107,974
706,274
470,896
235,378

32,528796,600
561,299
235,301

11,341
877,126
664,791
212,335

7,842
963,926
775,779
188,147526
863,975
796,376
67,599

2006

2007

2008

2009

2010

13,096
1,820
11,276

14,065
1,961
12,103

14,8192,071
12,74815,252
2,239
13,013

12,7192,219
10,499*Affinity cards are not included.

(Millions of Yen)

LIFE Co., Ltd. (Managed Asset Basis)
TOTAL RECEIVABLES OUTSTANDING
2006
Total Receivables Outstanding
Installment Receivables
Loans (Cash Advance)
Credit Guarantees
Other779,560
285,018
394,776
91,4508,315

2007
717,884
229,735
396,260
83,013
8,876(Millions of Yen)

2008
653,045
190,485
380,191
73,4868,882

2009
570,668
170,553
327,493
64,0388,582



410,315
135,852
211,632
54,904
7,926(Millions of Yen)

2006

2007

2008

2009

2010

133,936
29,49391,305
4,241
8,894
14,028129,479 120,667
26,61822,516
91,34286,436
4,134
3,809
7,383
7,904
(43,313)3,427

100,356
21,612
67,154
3,384
8,205
217

73,371
19,95541,265
2,899
9,252(27,750)

AVERAGE YIELD

Average Yield
Installment Receivables
Loans (Cash Advance)
Credit Guarantees



2010
Installment Sales
		 Finance Business
Credit Card
		 Credit Card Shopping Loans
		 Credit Card Cashing Loans(Millions of Yen)

NUMBER OF CARDHOLDERSOPERATING REVENUE/NET INCOME (LOSS)

Operating Revenue
Installment Receivables
Loans (Cash Advance)
Credit Guarantees
Other
Net Income (Loss)

PURCHASE RESULTS

(%)

2006

2007

2008

2009

2010

17.3
9.8
24.0
4.5

17.1
9.9
23.0
4.7

17.4
10.5
21.7
4.9

16.1
11.2
18.4
4.9

14.6
11.5
15.4
4.8



Number of Cardholders
LIFE Proper Card
Affinity Cards(Thousands)

DOUBTFUL ACCOUNTS CHARGE-OFFS/RATIO OF DOUBTFUL ACCOUNTS CHARGE-OFFS(Millions of Yen)

2006

2007

2008

2009

2010

Doubtful Accounts Charge-offs 37,266
Credit Card Shopping Loans
1,978
Credit Card Cashing Loans 12,636
Installment Sales
		 Finance Business
5,363
LIFE Cash Plaza
		 (Unsecured Loans)
12,182
Ratio of Doubtful Accounts
Charge-offs (%)
4.78
Credit Card Shopping Loans
1.96
Credit Card Cashing Loans
5.72
Installment Sales
		 Finance Business
2.92
LIFE Cash Plaza(Unsecured Loans)
7.03

44,4982,451
15,22048,275
2,986
19,49443,064
3,132
18,16538,716
3,401
15,632

7,029

4,026

2,370

2,609

15,302

18,814

16,574

14,768

6.20
2.09
6.62

7.39
2.34
8.79

7.55
2.29
9.00

9.44
2.79
12.00

6.25

6.41

7.02

18.83

9.28

12.01

13.36

18.44

AIFUL CORPORATION

Annual Report 20107

Management’s Discussion and Analysis of Finances

Consolidated Results of Operations
During the year ended March 31, 2010, total income for
the AIFUL Group decreased 31% year on year to ¥218,227
million. Interest on loans decreased 35% year on year to¥170,662 million. Revenue from the credit card businessincreased 6% year on year to ¥17,824 million. Revenue fromcredit guarantees decreased 12% year on year to ¥7,035
million. Recovery of loans previously charged off increased
55% year on year to ¥11,253 million.
Total expenses increased 64% year on year to ¥507,657
million. The AIFUL Group reduced general and administrative
expenses, including salaries and other employees’ benefits,
26% by implementing management rationalization measures
to reform its cost structure. However, provision for losses oninterest refunds increased 255% year on year to ¥206,887
million and charge-offs and provision for doubtful accounts
increased 67% year on year to ¥166,268 million.
In addition, the AIFUL Group also incurred non-recurring
losses that included loss from and provision for businessrestructuring, which included cost related to closure ofoutlets and special severance payments for employees who
have accepted voluntary retirement, and loss on transfer ofbusiness resulting from the divestiture of four consumer
finance subsidiaries.
As a result of the above, for the year ended March 31,
2010 loss before income taxes and minority interests for the
AIFUL Group was ¥289,430 million, and net loss was¥295,141 million.

Unsecured Loans
During the year ended March 31, 2010, AIFUL
Corporation and subsidiary LIFE Co., Ltd. prepared for stage
four of enforcement of the Money Lending Business Act bycontinuing their systematic response that included shifting
to lower interest products for quality customers andtightening credit. As a result, the number of new accounts
approved during the year ended March 31, 2010 decreased
41% year on year to 52 thousand, and the acceptance ratio
decreased 7 percentage points to 22%.
Moreover, as of March 31, 2010 the balance of
unsecured loans outstanding fell 38% from a year earlier to¥634,249 million. This figure includes ¥20,834 million inloans removed from the balance sheet though securitization.

8

AIFUL CORPORATION

Annual Report 2010

Secured Loans and Small Business Loans
In April 2009, the AIFUL Group temporarily suspended
sales of personal home equity loans that it had beenhandling to comply with the introduction of restrictions on
total lending. BUSINEXT CORPORATION remained cautious
when providing small business loans because ofdeteriorating economic conditions for small and mediumsized companies.
As a result, as of March 31, 2010 the balance of securedloans decreased 33% from a year earlier to ¥138,650 million
and the balance of small business loans decreased 25% froma year earlier to ¥83,864 million.
In addition to the above measures, loans abandoned
because of the continued high level of interest refund claims
also impacted results. Consequently, the balance ofoutstanding loans decreased 36% from a year earlier to¥856,763 million. This figure includes ¥20,834 million inloans removed from the balance sheet though securitization.

Credit Card BusinessIn the credit card business (credit card shopping), in
order to meet diverse customer needs, LIFE Co., Ltd.
established the online shopping mall “L-Mall” as part of its
efforts to further enhance customer convenience.
Credit card transaction volume increased 2% year on
year to ¥809,253 million, supported by special demandassociated with government-led measures such as
expanding electronic toll collection (ETC) discounts forexpressway tolls and offering “eco-points” for purchases of
products that combat global warming, as well as by robust
use of credit cards to pay for utility bills and electronicmoney.
As a result, credit card receivables decreased 11% from ayear earlier to ¥121,995 million. This figures includes ¥8,265
million in receivables removed from the balance sheet
though securitization.

Credit Guarantees
AIFUL CORPORATION and LIFE Co., Ltd. conducted sales
for continued expansion of guarantee agreements while
proposing new products and supporting sales promotions forexisting clients.
As of March 31, 2010, the AIFUL Group provided
guarantees of unsecured loans to individuals for 182

companies. Impacted by intensifying competition, the balanceof guarantees of unsecured loans to individuals decreased
14% from a year earlier to ¥81,401 million. Moreover, theAIFUL Group provided guarantees of unsecured business loans
to 103 companies, and the balance of guarantees of
unsecured business loans decreased 19% from a year earlier
to ¥18,750 million.

Loan Servicing
AsTry Loan Services Corporation operates the AIFULGroup’s loan servicing business. Its operating environment
remained difficult due to factors including concerns about
longer collection periods due to the deteriorating economic
environment. As a result, the balance of purchased claims asof March 31, 2010 decreased 49% from a year earlier to¥5,579 million.

in allowance for losses on interest refunds was a non-cash
accrual to income before income taxes and therefore did notuse cash.

Net Cash Provided by Investing Activities
Net cash provided by investing activities totaled ¥10,913
million. In the previous fiscal year, investing activities used net
cash totaling ¥37 million. Proceeds from transfer ofinvestments in and advances to associated companies andproceeds from sales of investment securities more than offset
capital expenditures.

Net Cash Used in Financing Activities
Net cash used in financing activities decreased 26% year
on year to ¥270,477 million, primarily because of repaymentsof long-term debt.

Financial Position
As of March 31, 2010, total assets decreased ¥491,799
million, or 30%, from a year earlier to ¥1,152,945 million. Thiswas primarily due to a ¥454,426 million decrease in loans due
to tighter lending.
Total liabilities decreased ¥195,771 million, or 16%, froma year earlier to ¥1,055,639 million. Key factors included a
decrease of ¥269,235 million in interest-bearing debt as aresult of repayment of loans and redemption of bonds, whichmore than offset an increase of ¥113,744 million in theallowance for losses on interest refunds.
Total equity decreased ¥296,028 million, or 75%, from ayear earlier to ¥97,306 million. This was primarily due to the
net loss for the year ended March 31, 2010.

Cash Flows
As of March 31, 2010, cash and cash equivalents
decreased ¥2,850 million, or 2%, from a year earlier to¥128,748 million.

Net Cash Provided by Operating Activities
Net cash provided by operating activities increased 7%
year on year to ¥256,675 million. Decreases in loans and otherreceivables provided cash that more than offset the loss
before income taxes and minority interests. Moreover, increase

AIFUL CORPORATION

Annual Report 20109

Consolidated Financial Statements

Consolidated Balance Sheets
AIFUL CORPORATION and Consolidated Subsidiaries
March 31, 2010 and 2009

						Millions of Yen		ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 17)
Time deposits (Note 17)
Operational investment securities (Notes 7 and 17)
Allowance for investment loss
Loans, credit guarantees and receivables:
		 Loans (Notes 4, 10 and 17)
		 Installment accounts receivable (Notes 5, 10 and 17)
		 Credit guarantees (Note 6)
		 Other receivables
		 Allowance for doubtful accounts (Notes 2.l and 17)
Prepaid expenses
Deferred tax assets (Note 15)
Other current assets (Note 10)
			 Total current assets
PROPERTY AND EQUIPMENT (Note 10):Land (Notes 8 and 10)
Buildings and structures (Notes 8 and 10)
Machinery, equipment and vehicles (Notes 8 and 10)
Furniture and fixtures (Note 8)
Lease assets
Construction in progress			 Total
Accumulated depreciation
			 Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 7, 10 and 17)
Allowance for investment loss
Investments in and advances to unconsolidated
subsidiaries and associated companies (Note 17)
Claims in bankruptcy (Notes 4 and 17)
Software, net (Note 8)
Lease and guarantee deposits
Long-term prepayments
Deferred tax assets (Note 15)
Other assets (Note 8)
Allowance for doubtful accounts (Note 17)
			 Total investments and other assets
TOTAL
See notes to consolidated financial statements.

10

AIFUL CORPORATION

Annual Report 2010

Thousands of
U.S. Dollars (Note 3)

2010

2009

2010

¥ 128,748
7
788
(75)

¥ 131,598
1,228
899

$ 1,384,387
75
8,473
(806)

835,928
125,990
100,153
17,868(203,478)
1,786

8,988,473
1,354,731
1,076,914
192,129(2,187,935)
19,204 	

1,290,354
142,017
118,20724,300(209,317)
2,305
6,784
42,5981,550,973

536,882
11,372,527 	

13,96937,461
343
24,039341
116
76,269(37,623)
38,646

143,129
350,602
3,634
185,2693,667
269
686,570(362,839)
323,731

7,088
(628)

 	

7,237

76,215(6,753)

2,725
50,401
16,13820,219
853

 	

3,920
41,873
19,550
5,659
1,797
1,835
1,757
(28,503)55,125¥1,644,744

29,301
541,946
173,527
217,409
9,172

49,9301,057,645

13,311
32,606338
17,230341
25
63,851(33,744)
30,107

1,222(32,825)
65,193¥1,152,945 	 	

13,140(352,957)
701,000$12,397,258

				
		
Millions of Yen		

2010
LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term borrowings (Notes 10 and 17)
Current portion of long-term debt (Notes 10 and 17)
Trade notes payable
Trade accounts payable
Obligation under credit guarantees (Note 6)
Income taxes payable
Accrued expenses
Allowance for credit card point redemption
Allowance for losses from business restructuring (Note 14)
Other current liabilities (Notes 5 and 6)
			 Total current liabilities

LONG-TERM LIABILITIES:Long-term debt (less current portion) (Notes 10 and 17)
Allowance for losses on interest refunds (Note 2.l)
Interest rate swaps
Negative goodwill, net
Deferred tax liabilities (Note 15)
Other long-term liabilities
			 Total long-term liabilities

EQUITY (Note 12):
Common stock,		 authorized, 568,140,000 shares;		 issued, 238,685,568 shares
Capital surplus:
		 Additional paid-in capital
Retained earnings
Unrealized loss on available-for-sale securities
Deferred loss on derivatives under hedge
accounting
Treasury stock, at cost
457,058 shares in 2010 and 456,724 shares in 2009			 Total
Minority interests
			 Total equity
TOTAL

¥

Thousands of
U.S. Dollars (Note 3)

2010

2009

61,205150,906
704
33,111
100,153
644
3,421
1,456
1,324
24,261
377,185¥ 112,140
324,946709
37,778118,207
917
7,802
1,103
365
35,681
639,648436,712
237,909

481,023
124,165
2,062
1,088

$

658,118
1,622,645
7,570
356,032
1,076,914
6,925
36,785
15,656
14,237
260,871
4,055,753

4,695,828
2,558,161

3,424
611,762

9,365
2,968
28,882
7,295,204

143,325

143,325

1,541,129

164,134(210,276)(616)

164,134
86,056(733)

1,764,882(2,261,032)(6,624)

871
276
2,686
678,454(2,099)(3,110)93,457
3,849
97,306¥1,152,945(3,110)387,573
5,761
393,334¥1,644,744(33,441)
1,004,914
41,387
1,046,301$12,397,258

AIFUL CORPORATION

Annual Report 201011

Consolidated Financial Statements

Consolidated Statements of Operations
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

						Millions of Yen		INCOME:Interest on loans
Revenue from credit card business
Revenue from installment sales finance business
Revenue from credit guarantees
Interest on deposits, securities and other
Recovery of loans previously charged off
Gain on retirement of bondGain on sale of investment securities
Reversal of provision for bonuses
Other income
			 Total income
EXPENSES:Interest on borrowings
Charge-offs and provision for doubtful accounts
Provision for losses on interest refunds
Salaries and other employees' benefits
Net periodic benefit costs (Note 11)
Advertising expenses
Provision for credit card point redemption
Rental expenses (Note 16)
Commissions and fees
Depreciation and amortization (Note 2.a)Provision for investment loss
Loss on impairment of long-lived assets (Note 8)
Loss from and provision forbusiness restructuring (Note 14)
Loss on transfer of business (Note 21)
Loss on disposal of property and equipment
Other expenses
			 Total expenses
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTERESTS

2010

2009

2010

¥ 170,662
17,824
1,726
7,035
319
11,253¥263,797
16,881
3,631
8,021
1,327
7,256
5,382
967

$ 1,835,075
191,656
18,55975,6453,430
121,000

1,161
580
7,667
218,227

9,280
316,542

12,484
6,237
82,441
2,346,527

188,721
1,787,828
2,224,591
292,785
11,78523,774
15,656
73,161
176,785
97,452
7,559
52,25817,551
166,268
206,887
27,229
1,096
2,211
1,456
6,804
16,441
9,063
703
4,860

25,36499,27358,31538,201
1,223
6,715
1,103
9,539
20,602
14,576

13,1506,142
639
27,157
507,657

1,905
949
30,412308,826

141,398
66,0436,871
292,0115,458,678(289,430)

7,716(3,112,151)

159

646
(7,527)

1,710

649

INCOME TAXES (Note 15):
Current
RefundPrior periods
Deferred			 Total income taxes

104
7,369
7,632

10,1883,307

1,118
79,23682,064MINORITY INTERESTS IN NET INCOME (LOSS)(1,921)

162(20,656)

4,247$(3,173,559)¥ (295,141)

NET INCOME (LOSS)		AMOUNTS PER COMMON SHARE (Notes 2.u and 20):
Basic net income (loss)
Cash dividends applicable to the year
See notes to consolidated financial statements.

12

Thousands of
U.S. Dollars (Note 3)

AIFUL CORPORATION

Annual Report 2010¥(1,238.90)

¥

Yen		

¥24.77
15.00

U.S. Dollars$(13.32)

Consolidated Financial Statements

Consolidated Statements of Changes in Equity
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands			
Number of		
Shares of		CommonCommonStock Issued
Stock

Balance at APRIL 1, 2008		 167,475

Capital		Surplus		
Additional		
Paid-in
Retained
CapitalEarnings

Millions of Yen
Unrealized
DeferredGain (Loss) Gain (Loss) on			on Available- Derivatives				for-sale under Hedge Treasury		
Minority
Securities Accounting
Stock
Total
Interests¥108,325 ¥129,134 ¥ 86,820 ¥ 2,080¥(4,332)

Total
Equity¥(3,110) ¥ 318,917 ¥ 5,604 ¥ 324,521

Net income					4,247				4,247		

4,247

Cash dividends paid,¥30 per share					(5,011)				

(5,011)		

(5,011)

Net increase in treasury stock(1,007 shares)											Conversion of convertible
bonds (Note 12)
Net change in the year

71,21135,000					(423)387,573

5,761

393,334				 (295,141)				 (295,141)		

(295,141)

164,134

86,056

Cash dividends paid, ¥5 per share 				(733)2,233		

70,000157

143,325(2,813)70,000		
(580)

BALANCE AT MARCH 31, 2009		 238,686
Net loss

35,000				

(2,099)(3,110)(1,191)				

(1,191)		

(1,191)

Net increase in treasury stock(334 shares)
Net change in the year		
BALANCE AT MARCH 31, 2010		 238,686

				

		
			
			
			
		
Common		
Stock

BALANCE AT MARCH 31, 2009

2,099		
¥

Nil

2,216

(1,912)$(7,882)$(22,570)

304¥(3,110) ¥ 93,457 ¥ 3,849 ¥ 97,306

Thousands of U.S. Dollars (Note 3)
Capital		
Unrealized
DeferredSurplus		
Gain (Loss) Gain (Loss) on			
Additional		
on Available- Derivatives				Paid-in
Retainedfor-sale under Hedge Treasury		
Minority
CapitalEarnings
Securities Accounting
Stock
Total
Interests$1,541,129 $1,764,882 $ 925,333

Total
Equity$(33,441) $ 4,167,451 $ 61,946 $ 4,229,397(3,173,559)				 (3,173,559)		 (3,173,559)

Net loss
Cash dividends paid, $0.05 per share		

Net increase in treasury stock(334 shares)		

Net change in the year		Balance at March 31, 2010

117

¥143,325 ¥164,134 ¥(210,276) ¥ (616)(12,806)				

		

1,258

$1,541,129 $1,764,882 $(2,261,032) $(6,624)

22,570		$Nil(12,806)		

23,828(12,806)(20,559)

3,269$(33,441) $ 1,004,914 $ 41,387 $ 1,046,301

See notes to consolidated financial statements.

AIFUL CORPORATION

Annual Report 201013

Consolidated Financial Statements

Consolidated Statements of Cash FlowsAIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009						 Millions of Yen		

2010		OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests
Adjustments for:		 Income taxes – paid
		 Income taxes – refund		 Depreciation and amortization
		 Impairment loss
		 Increase in allowance for investment loss
		 Increase (decrease) in allowance for doubtful accounts
		 Increase in provision for point card certificates		 Increase (decrease) in allowance for losses on interest refunds
		 Decrease in liability for retirement benefits		 Increase in allowance for losses from business restructuring
		 Gain on sale of investments in securities, net
		 Loss on disposal of property and equipment
		 Gain on retirement of bonds
		 Loss on transfer of business		 Changes in assets and liabilities:
			 Decrease in loans
			 Decrease in installment accounts receivable
			 Decrease in operational investment securities
			 Decrease in purchased receivables
			 Decrease in other operating receivables			 (Increase) decrease in claims in bankruptcy
			 Increase in operating guarantee deposits			 (Increase) decrease in other current assets			 (Decrease) increase in other current liabilities
		 Other, net				 Total adjustments				 Net cash provided by operating activities
INVESTING ACTIVITIES:Capital expenditures
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from transfer of investments in and advances to associated companies
Payment for sales of investments in subsidiaries resulting in change in scope of consolidation
Other, net				 Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:Net decrease in short-term borrowings
Proceeds from long-term debt (net of bond issue costs)
Repayments of long-term debt
Cash dividends paid
Other, net				 Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEARNONCASH INVESTING AND FINANCING ACTIVITIES:
Subordinated zero-coupon yen convertible bonds converted into common stock¥(289,430)
(605)
568
9,063
4,860
703
9,990
353
121,178980(1,161)
639

2009
¥

Thousands of
U.S. Dollars (Note 3)

2010

7,716

$(3,112,151)(2,141)
7,154
14,576649(6,505)
6,108
97,452
52,258
7,559
107,4193,796
1,302,989(92,595)
439(19,586)(1,063)
171
(961)
949
(5,382)

6,142

10,538(12,484)
6,871
66,043423,149
16,027
136
5,357
1,075
(9,937)(17,071)(8,723)(17,696)
1,078
546,105
256,675

308,352
6,473
280
1,910
171
4,477

(3,813)
(51)
1,391
9,628
(432)
4,190
10,913(5,911)(1,068)
2,341
4,601
(37)

(41,000)(548)
14,957
103,527(4,645)45,053
117,344(50,045)
24,200(243,378)(1,191)(63)(270,477)
39(2,850)131,598¥ 128,748(51,790)
89,400(398,533)(5,011)(408)(366,342)
74(125,713)
257,311¥ 131,598(538,118)
260,215(2,616,968)(12,806)(678)(2,908,355)
420(30,645)
1,415,032$ 1,384,387

301
5,456
3,246
232,876
240,592

4,549,989
172,333
1,462
57,602
11,559(106,849)(183,559)(93,796)(190,280)
11,592
5,872,097
2,759,946¥ 70,000(Supplemental Disclosure of Cash Flow Information)
For the year ended March 31, 2010, Wide Corporation, TRYTO CORPORATION, TCM. Co. Ltd. and Passkey Co., Ltd. were excluded fromconsolidation due to sale of shares. Assets and liabilities of these companies at the time of consolidation exclusion were as follows:							 Millions of Yen

		 Assets sold		 Liabilities relinquished		 Gain on sale		 Sale value
		 Cash relinquished		 Cash paid in sales of subsidiaries
See notes to consolidated financial statements.

14

AIFUL CORPORATION

Annual Report 2010

¥ 24,088(55,927)
31,8390(432)¥ (432)Thousands of
U.S. Dollars (Note 3)$ 259,011(601,366)
342,355
0(4,645)$ (4,645)

Consolidated Financial Statements

Notes to Consolidated Financial Statements
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009		
1 BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Act and its
related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese
GAAP”), which are different in certain respects as toapplication and disclosure requirements of International
Financial Reporting Standards and accounting principles
generally accepted in the United States of America.

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 which is more familiar to readers
outside Japan.
In addition, certain reclassifications have been made in the2009 financial statements to conform to the classification usedin 2010.

		
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements
include the accounts of Aiful Corporation (the“Company”) and its seven (eleven in 2009) significant
subsidiaries (together, the “Group”). Consolidation of theremaining sixteen (eighteen in 2009) unconsolidated
subsidiaries would not have a material effect on theaccompanying consolidated financial statements.
The Company sold all its shares of Wide Corporation,
TRYTO CORPORATION, TCM. Co. Ltd. and Passkey Co., Ltd.
on September 30, 2009. Accordingly, these four companies
were eliminated from the scope of consolidation as of March
31, 2010. The results of these four companies’ operations
up to the sale date of September 30, 2009 were included in
the consolidated statements of operations for the year
ended March 31, 2010.
In March, 2007, the Accounting Standards Board ofJapan (the “ASBJ”) issued ASBJ Implementation GuidanceNo. 15, “Implementation Guidance on Disclosures about
Certain Special Purpose Entities”. This standard permits
companies to avoid consolidation of certain special purpose
entities which were established and are being operated forthe purpose of securitization of receivables.
A consolidated subsidiary securitizes its trust beneficiary
backed by installment accounts receivable and loans todiversify its funding sources and ensure stable funding. In
the securitization structures, the consolidated subsidiary uses
special purpose entities, which include special purpose
entities and other entities under the Asset Securitization Law(SPC Law). The consolidated subsidiary transfers thepreferred portion of the trust beneficiary to the special
purpose entities in the securitization structures. The special
purpose entities raise funds by issuing corporate bonds
backed by the transferred preferred assets and these funds
flow back to the consolidated subsidiary as sales proceeds ofthe transferred assets. The consolidated subsidiary also
provides collection services to the special purpose entities.
The consolidated subsidiary retains the subordinated portionof the trust beneficiary, and an allowance is provided for theestimated uncollectable amount.
As a result of such securitizations, the Company had five(six in 2009) special purpose entities which are notconsolidated under Guidance No. 15 as of March 31, 2010
and 2009. The total assets and liabilities of such special
purpose entities as of March 31, 2010 and 2009 were
¥63,850 million ($686,559 thousand) and ¥93,917 million,¥63,828 million ($686,323 thousand) and ¥93,879 million,
respectively. Total amount of the preferred portion of thetrust beneficiary transferred from the Company to the special
purpose entities in the year ended March 31, 2009 was¥15,000 million with a loss on the transfer of such preferred
portion of ¥133 million. Such total amounts are stated at thecarrying amount of the transferred assets as of the date oftransfer. Loss on the transfer is directly deducted from therelated income of the transferred asset. There were notransactions between the Company and the special purpose
entities in the year ended March 31, 2010. The Company
retains no shares with shareholder voting rights of these
special purpose entities nor provides directors or employees.
Under the control or influence concept, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investments in six unconsolidated subsidiaries (and one
associated company in 2009) are stated at cost. Investmentsin the remaining ten unconsolidated subsidiaries (twelve in2009), which are 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. If the equity method of accounting had been
applied to the investments in these companies, the effect on
the accompanying consolidated financial statements would
not be material.
The difference between the cost of an acquisition and thefair value of the net assets of the acquired subsidiary at thedate of acquisition is reported as goodwill or negative
goodwill in the accompanying consolidated balance sheets.
Goodwill or negative goodwill on acquisition ofsubsidiaries is amortized using the straight-line method overthe estimated period (not to exceed 20 years) in which
AIFUL CORPORATION

Annual Report 201015

economic benefits are expected to be realized. However,when the excess of cost over net assets of subsidiaries
acquired is not material, it is charged to income whenincurred. Accounting for impairment on long-lived assets as
discussed in Note 2.f also applies to goodwill. As theCompany determined that it would be difficult to obtainfuture excess earnings as initially assumed, the Group
recorded an impairment charge related to goodwill of¥2,521 million for the year ended March 31, 2009, which
was included in “Depreciation and amortization”.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material
unrealized profit included in assets resulting fromtransactions within the Group is eliminated.
b. Business Combination — In October 2003, the BusinessAccounting Council (the “BAC”) issued a Statement of
Opinion, “Accounting for Business Combinations”, and in
December 2005, the ASBJ issued ASBJ Statement No. 7,“Accounting Standard for Business Divestitures” and ASBJ
Guidance No. 10, “Guidance for Accounting Standard forBusiness Combinations and Business Divestitures”. The
accounting standard for business combinations allows
companies to apply the pooling of interests method of
accounting only when certain specific criteria are met suchthat the business combination is essentially regarded as auniting-of-interests. For business combinations that do notmeet the uniting-of-interests criteria, the businesscombination is considered to be an acquisition and thepurchase method of accounting is required. This standard
also prescribes the accounting for combinations of entities
under common control and for joint ventures.
c. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and that are
exposed to insignificant risk of changes in value. Cashequivalents include time deposits which mature or becomedue within three months of the date of acquisition andsecurities purchased under resale agreements.
d. 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
in a separate component of equity. The cost of securities
sold is determined based on the moving-average cost
method. Non-marketable available-for-sale securities arestated at cost determined by the moving-average method.
For other than temporary declines in fair value, operational
investment securities and investment securities are reduced
to net realizable value by a charge to income.
Investments in limited liability investment partnerships
and similar 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.

16

AIFUL CORPORATION

Annual Report 2010

e. Property and Equipment — Property and equipment arestated at cost. Depreciation of property and equipment of
the Company and its consolidated subsidiaries is computedby the declining-balance method except that the straightline method is applied to the buildings of the Company’s
consolidated subsidiaries acquired on and after April 1,
1998. The range of useful lives is principally from 2 to 62
years for buildings and structures, from 3 to 17 years formachinery, equipment and vehicles, 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 would be recognized
if the carrying amount of an asset or asset group exceeds thesum of the undiscounted future cash flows expected to result
from the continued use and eventual disposition of the asset
or asset group. The impairment loss would be measured as
the amount by which the carrying amount of the asset
exceeds its recoverable amount, which is the higher of the
discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.
g. Software — Expenditures for the purchase of software,
which meet certain future-tests, are capitalized as softwareand amortized by the straight-line method over theestimated 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 on nonmarketable 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
the usage of cards.
k. Allowance for Losses from Business Restructuring — The
allowance for losses from business restructuring is provided
at an estimated amount of future costs related to closure ofoutlets and other restructuring activities.
l. Allowance for Losses on Interest Refunds — The limit ofinterest rates is regulated by two laws – “Contributions
Law” and “Interest Rate Restriction Law”. Under the former
law, interest rates on loans should not exceed 29.2%(20.0% for customers who get loans after June 18, 2010)
and the violation of law is considered to be 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 principals notless than ¥100 thousand and under ¥1 million and 15.0%

Notes to Consolidated Financial Statementsfor principals not less than ¥1 million) are void. However,under the “Money Lending Business Control and Regulation
Law”, such interest payments are nonetheless considered to
be valid if money lenders issue notices as prescribed by thelaw to debtors and debtors pay voluntarily. (For customers
who get loans after June 18, 2010, such system isabolished.) Strict interpretation by the courts of theserequirements has led to decisions against money lenders andresulted in more debtors claiming for the return of excessinterest payments.
The Company and certain consolidated subsidiaries haveloaned money at rates between the limits set by the twolaws. Allowance for losses on interest refunds is stated inamounts considered to be appropriate based on the
Company’s and certain consolidated subsidiaries’ past refund
loss experience, the recent situation regarding interest
refunds and other factors.
At March 31, 2010 and 2009, the Group recorded anallowance of ¥237,909 million ($2,558,161 thousand) and¥124,165 million, respectively, as “Allowance for losses oninterest refunds”. In addition, the estimated amount ofinterest refunds of ¥76,991 million ($827,860 thousand) and¥88,490 million which were expected to be preferentially set
off against loans was recorded as “Allowance for doubtful
accounts” for the Company and certain consolidated
subsidiaries at March 31, 2010 and 2009, respectively.
m. Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions”,
which revised the previous accounting standard for leasetransactions issued in June 1993. The revised accounting
standard for lease transactions is effective for fiscal years
beginning on or after April 1, 2008 with early adoption
permitted for fiscal years beginning on or after April 1, 2007.
Under the previous accounting standard, finance leases
that deemed to transfer ownership of the leased property to
the lessee were to be capitalized. However, other financeleases were permitted to be accounted for as operating leasetransactions if certain “as if capitalized” information wasdisclosed in the note to the lessee’s financial statements. The
revised accounting standard requires that all finance leasetransactions be capitalized to recognize lease assets andlease obligations in the balance sheet. In addition, theaccounting standard permits leases which existed at thetransition date and do not transfer ownership of the leased
property to the lessee to continue to be accounted for as
operating lease transactions.
The Group applied the revised accounting standard
effective April 1, 2008. In addition, the Group accounts forleases which existed at the transition date and do nottransfer ownership of the leased property to the lessee as
operating lease transactions.
Lease assets related to finance lease transactions without
title transfer are depreciated on a straight-line basis, over theleased periods as their useful lives and with no residual value.
All other leases are accounted for as operating leases.
n. Income Taxes — The provision for income taxes iscomputed based on the pretax income included in the
consolidated statements of operations. The asset and liability
approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of
temporary differences between the carrying amounts andthe tax bases of assets and liabilities. Deferred taxes aremeasured by applying currently enacted tax laws to thetemporary differences.
o. 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 foreignexchange gains and losses from translation are recognized in
the consolidated statements of operations to the extent thatthey are not hedged by forward exchange contracts.
p. Revenue Recognition:
Interest on Loans — Interest on loans is recorded on an
accrual basis. In accordance with the practice prevailing in
the industry, the Company records accrued interest at either
the interest rate stipulated in the Interest Rate Restriction
Law or the contracted interest rate, whichever is lower.
Revenue from Credit Card Business, Revenue from
Installment Sales Finance Business — Fees from customers
and member stores applying the add-on method are
generally recorded collectively as unearned income whencredit contracts become effective and are recognized inequal installments over the lives of contracts. Fees from
customers applying the remaining principal method or
revolving method are generally recognized in equal
installments over the lives of contracts.
Revenue from Credit Guarantees — Revenue from credit
guarantees is recorded by the remaining principal method.
q. Interest on Borrowings — Interest on financial liabilities isaccounted for as operating expenses while other interest is
included in other expenses.
r. Stock Issue Costs — Stock issue costs are charged toincome as incurred.
s. Bond Issue Costs — Amortization is calculated by thestraight-line method over the term of the related bond issue.
Bond issue costs are included in other assets.
t. Derivatives and Hedging Activities — The Group uses
derivative financial instruments to manage its exposures tofluctuations in interest rates and foreign exchange. Interest
rate swaps, interest rate caps and currency swaps contracts
are utilized by the Group to reduce interest rate and foreign
currency exchange risks. The Group does not enter into
derivatives for trading or speculative purposes. The
accounting standard for derivative financial instruments
requires that: a) all derivatives be recognized as either assets
or liabilities and measured at fair value, and gains or losses
on derivative transactions be recognized in the consolidated
statements of operations, and b) for derivatives used forhedging purposes, if derivatives qualify for hedge
accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items,
gains or losses on derivatives be deferred until maturity of

AIFUL CORPORATION

Annual Report 201017

the hedged transactions.
Currency swaps contracts are utilized to hedge foreign
currency exposure in principal and interest payments of U.S.
dollar straight bonds. U.S. dollar straight bonds aretranslated at the contracted rates.
The interest rate swaps and caps which qualify for hedge
accounting and meet specific matching criteria are notremeasured at market value but the differential paid or
received under the swap or cap contracts is recognized andincluded in interest expenses or income.
u. Per Share Information — Basic net income per share iscomputed by dividing net income available 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
the potential dilution that could occur if securities wereconverted into common stock and assumes full conversionof the outstanding convertible bonds at the time of issuanceand full exercise of outstanding stock options.
Cash dividends per share presented in the accompanying
consolidated statements of operations are dividends
applicable to the respective years including dividends to be
paid after the end of the year and have not been
retroactively adjusted for stock splits.
v. New Accounting Pronouncements:
Business Combinations — In December, 2008, the ASBJ
issued a revised accounting standard for businesscombinations, ASBJ Statement No. 21, “AccountingStandard for Business Combinations”. Major accountingchanges under the revised accounting standard are as
follows;(1) The current accounting standard for business combinations allows companies to apply the pooling of interests
method of accounting only when certain specific criteria
are met such that the business combination is essentiallyregarded as a uniting-of-interests. The revised standard
requires accounting for such business combination by thepurchase method and the pooling of interests method of
accounting is no longer allowed.
(2) The current accounting standard requires research anddevelopment costs to be charged to income as incurred.
Under the revised standard, in-process research anddevelopment (IPR&D) acquired in a business combination
is capitalized as an intangible asset.
(3) The current accounting standard requires a bargain
purchase gain (negative goodwill) to be systematicallyamortized within 20 years. Under the revised standard,
the acquirer recognizes a bargain purchase gain in profit
or loss on the acquisition date after reassessing whether
it has correctly identified all of the assets acquired and allof the liabilities assumed with a review of suchprocedures used.
This standard is applicable to business combinations
undertaken on or after April 1, 2010 with early adoption
permitted for fiscal years beginning on or after April 1, 2009.

18

AIFUL CORPORATION

Annual Report 2010

Asset Retirement Obligations — In March 2008, the ASBJ
published a new accounting standard for asset retirement
obligations, ASBJ Statement No. 18 “Accounting Standard
for Asset Retirement Obligations” and ASBJ Guidance
No. 21 “Guidance on Accounting Standard for Asset
Retirement Obligations”. Under this accounting standard, an
asset retirement obligation is defined as a legal obligation
imposed either by law or contract that results from theacquisition, construction, development and the normal
operation of a tangible fixed asset and is associated with theretirement 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 a reasonable estimate of the asset retirement obligation
cannot be made in the period the asset retirement obligation
is incurred, the liability should be recognized when areasonable estimate of 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 amount of the liability. The asset retirement cost is
subsequently allocated to expense through depreciation over
the remaining useful life of the asset. Over time, the liability
is accreted to its present value each period. Any subsequent
revisions to the timing or the amount of the original
estimate of undiscounted cash flows are reflected as anincrease or a decrease in the carrying amount of the liability
and the capitalized amount of the related asset retirementcost. This standard is effective for fiscal years beginning on
or after April 1, 2010 with early adoption permitted for fiscal
years beginning on or before March 31, 2010.
Accounting Changes and Error Corrections — In
December 2009, ASBJ issued ASBJ Statement No. 24“Accounting Standard for Accounting Changes and Error
Corrections” and ASBJ Guidance No. 24 “Guidance on
Accounting Standard for Accounting Changes and Error
Corrections”. Accounting treatments under this standard
and guidance are as follows;(1) Changes in Accounting Policies
When a new accounting policy is applied with revision of
accounting standards, a new policy is applied
retrospectively unless the revised accounting standards
include specific transitional provisions. When the revised
accounting standards include specific transitional
provisions, an entity shall comply with the specifictransitional provisions.
(2) Changes in Presentations
When the presentation of financial statements ischanged, prior period financial statements are reclassified
in accordance with the new presentation.
(3) Changes in Accounting Estimates
A change in an accounting estimate is accounted for in
the period of the change if the change affects that period
only, and is accounted for prospectively if the change

Notes to Consolidated Financial Statements

affects both the period of the change and future periods.
(4) Corrections of Prior Period Errors
When an error in prior period financial statements is
discovered, those statements are restated.
This accounting standard and the guidance are applicableto accounting changes and corrections of prior period errors
which are made from the beginning of the fiscal year thatbegins on or after April 1, 2011.
Segment Information Disclosures — In March 2008, the
ASBJ revised ASBJ Statement No. 17 “Accounting Standard
for Segment Information Disclosures” and issued ASBJ
Guidance No. 20 “Guidance on Accounting Standard for
Segment Information Disclosures”. Under the standard andguidance, an entity is required to report financial anddescriptive information about its reportable segments.
Reportable segments are operating segments oraggregations of operating segments that meet specified
criteria. Operating segments are components of an entity
about which separate financial information is available andsuch information is evaluated regularly by the chief
operating decision maker in deciding how to allocate
resources and in assessing performance. Generally, segment
information is required to be reported on the same basis as
is used internally for evaluating operating segment
performance and deciding how to allocate resources tooperating segments. This accounting standard and theguidance are applicable to segment information disclosures
for the fiscal years beginning on or after April 1, 2010.

3 TRANSLATION INTO UNITED STATES DOLLARS		The consolidated financial statements are stated in Japaneseyen, the currency of the country in which the Company isincorporated and operates. The translation of Japanese yenamounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan and have been made at

the rate of ¥93 to $1, the approximate rate of exchange at
March 31, 2010. 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.

4 LOANS		
Loans at March 31, 2010 and 2009 consisted of the following (before allowance for doubtful accounts):
					
				
Millions of Yen				

Unsecured
SecuredSmall business loans
Total		Off-balance sheet securitized loans
Net		

Thousands of
U.S. Dollars

2010

2009

2010

¥634,249
138,650
83,864¥856,763(20,835)¥835,928¥1,015,647
206,941
111,608¥1,334,196(43,842)¥1,290,354$6,819,882
1,490,860
901,763$9,212,505(224,032)$8,988,473

Registered money lenders are required to disclose the following information under the Non-Bank Bond Issuing Law.
					
				
Millions of Yen				Loans in legal bankruptcy
Nonaccrual loans
Accruing loans contractually past due three months ormore as to principal or interest payments
Restructured loans
Total		Loans in legal bankruptcy are loans in which accrual ofinterest is discontinued (excluding the portion recognized as
bad debts), based on management’s judgment as to thecollectability of principal or interest resulting from the past
due payment of interest or principal and other factors.
Allowances for claims in bankruptcy are stated at suchamount less net realizable value of collateral.

Thousands of
U.S. Dollars

2010

2009

2010

¥ 48,849
137,021¥ 41,282
181,825$ 525,258
1,473,344

15,56655,277¥256,713

25,97972,972¥322,058

167,376594,376$2,760,354

Nonaccrual loans are loans in 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 of interest payment to the debtors in financial
difficulties to assist them in their recovery.
Accruing loans contractually past due three months ormore as to principal or interest payments are loans for which
AIFUL CORPORATION

Annual Report 201019

payments of principal or interest have not been received for aperiod of three months or more beginning with the next
business day following the last due date for such payments.
Loans classified as loans in legal bankruptcy and nonaccrualloans are excluded from accruing loans contractually past due
three months or more.
Restructured loans are loans on which creditors grantconcessions (e.g., reduction of the stated interest rate, deferralof interest payment, extension of maturity date, waiver of theface amount, or other concessive measures) to the debtors infinancial difficulties to assist them in their recovery andeventually enable them to pay creditors. Loans classified asloans in legal bankruptcy, nonaccrual loans and accruing loans
contractually past due three months or more are excluded.
The securitized loans, which are not recognized on thebalance sheets, amounted to ¥20,835 million ($224,032
thousand) and ¥43,842 million at March 31, 2010 and 2009,
respectively.
At March 31, 2010 and 2009, the Group had balances
related to revolving loan contracts aggregating ¥790,012
million ($8,494,753 thousand) and ¥1,235,686 million,
respectively, whereby the Group is obligated to advance funds
up to a predetermined amount upon request. At March 31,
2010 and 2009, the balances of unadvanced commitments
were ¥836,316 million ($8,992,645 thousand) and¥2,781,803 million, respectively. The loan contract contains
provisions that allow the Group to reduce the contract
amount of the commitment or refuse to advance funds toloan customers under certain conditions.

5 INSTALLMENT ACCOUNTS RECEIVABLE
		
Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2010 and 2009 consistedof the following:
					
				
Millions of Yen

Thousands of
U.S. Dollars

2010

				
				
			
Receivables

2010

2009
Unearned		
IncomeReceivables

Unearned		
IncomeReceivables

Unearned
IncomeCredit card business
Installment sales finance business
Total¥121,995
13,857¥135,852¥ 789
503¥1,292¥136,763
33,791¥170,554

¥ 681
1,772
¥2,453$1,311,774
149,000$1,460,774$ 8,484
5,409$13,893

Off-balance sheet securitizedinstallment accounts receivableNet(9,862)¥125,990¥1,292(28,537)		
¥142,017¥2,453(106,043)$1,354,731$13,893

In addition, the Group had unearned income of immaterial amounts at March 31, 2010 and 2009 which was included in othercurrent liabilities, related to loans other than those shown in the above table.

6 CREDIT GUARANTEES AND OBLIGATIONS UNDER CREDIT GUARANTEES		The Group, as guarantor, recorded credit guarantees as acontra account of obligations under credit guarantees.
Unearned income relating to credit guarantees was ¥80 million($860 thousand) and ¥105 million at March 31, 2010 and2009, respectively, which was included in other current
liabilities.

7 OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIES		Operational investment and investment securities at March 31, 2010 and 2009 consisted of the following:
					
				
Millions of Yen				Current –Equity securities
Non-current:
Equity securities
Other
Total		

20

AIFUL CORPORATION

Annual Report 2010

Thousands of
U.S. Dollars

2010

2009

2010

¥ 788

¥ 899

$ 8,473¥6,799289¥7,088¥6,795442¥7,237$73,1073,108$76,215

Notes to Consolidated Financial Statements

The cost and aggregate fair values of operational investment and investment securities at March 31, 2010 and 2009 were as follows:			Millions of Yen

			

2010

				
			
Cost

Securities classified as:
Available-for-sale-Equity securities¥6,085

Unrealized
Gains

Unrealized
Losses

Fair
Value

¥698

¥1,151¥5,632			Millions of Yen

			

2009

				
			
Cost

Securities classified as:
Available-for-sale-Equity securities¥6,148			

Unrealized
Gains

Unrealized
Losses

Fair
Value

¥86

¥729

¥5,505

Thousands of U.S. Dollars

			

2010

				
			
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Securities classified as:
Available-for-sale-Equity securities$7,505$12,376$60,559$65,430

Available-for-sale securities whose fair value is not readily determinable as of March 31, 2009 were as follows. The similar
information for 2010 is disclosed in Note 17.
				Carrying AmountMarch 31, 2009

Millions of Yen

Available-for-sale:
Equity securities
Investments in limited liability investment partnerships
Total		

Proceeds from sales of available-for-sale securities for theyears ended March 31, 2010 and 2009 were ¥1,221 million($13,129 thousand) and ¥2,139 million, respectively. Grossrealized gains on these sales, computed on the moving-average
cost basis, were ¥1,206 million ($12,968 thousand) and ¥967
million for the years ended March 31, 2010 and 2009,¥2,189442¥2,631

respectively, and gross realized losses were immaterial and ¥6
million for the years ended March 31, 2010 and 2009,
respectively.
The impairment losses on available-for-sale equity securities
for the years ended March 31, 2010 and 2009 were ¥159
million ($1,710 thousand) and ¥119 million, respectively.

8 LONG-LIVED ASSETS		Year ended March 31, 2010
The following table summarizes the Group’s asset grouping:				Business Classification

Asset Grouping

Financial services and venture capitalEach business entity is the minimum unit. For assets related tobusiness restructuring, each outlet which each company has
decided to close or each branch which each company has
decided to transfer is the minimum unit.

Real estate business

Each real estate for rent is the minimum unit.

Works of art

Each work of art is the minimum unit.

The Group reviewed its long-lived assets for impairment for the three months ended September 30, 2009. As a result, the Group
recognized an impairment loss for rental properties, works of art which were intended to be sold and outlets which the Groupdecided to close. The carrying amount of the relevant assets was written down to the estimated recoverable amount. The estimatedrecoverable amount of each asset grouping was measured as follows:

AIFUL CORPORATION

Annual Report 201021

Rental properties — Quotation from a real-estate appraiser
Works of art — Quotation from a third party appraiser
Outlets which the Group decided to close — The asset group was measured at its value in use, which is the aggregateddepreciation expense up to the point of disposal.
				Impairment Loss					
Thousands of		
Description
Classification
Millions of Yen
U.S. Dollars

Rental properties
Outlets which the Group decided to close				Works of art

Buildings and structures, land and other
Buildings and structures, furniture andfixtures and otherFurniture and fixtures¥ 448$ 4,817

817
3,397

8,785
36,527

The Group reviewed its long-lived assets for impairment for the three months ended March 31, 2010. As a result, the Group
recognized an impairment loss for branch offices and other which were planned to be transferred. The carrying amount of therelevant assets was written down to the estimated recoverable amount. The estimated recoverable amount was measured as follows:
Branch offices and other — The estimated recoverable amount of the assets was measured at its value in use, which reflects theaggregated depreciation expense up to the point of disposal.
				Impairment Loss					
Thousands of		
Description
Classification
Millions of Yen
U.S. Dollars

Branch offices and other¥198

Buildings and structures, and other$2,129The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March
31, 2010:
					
				
Millions of Yen

¥ 990
4
3,614
214
38
¥4,860

Buildings and structures
Machinery, equipment and vehicles
Furniture and fixtures
Land			Other			Total			Thousands of
U.S. Dollars$10,64543
38,8602,301
409$52,258

Year ended March 31, 2009
The Group reviewed its long-lived assets for impairment as of March 31, 2009. As a result, the Group recognized an impairment
loss for a business system which was planned to be retired and other assets related to the “Center” which the Company decided toclose. The carrying amount of the relevant assets was written down to the recoverable amount. The recoverable amount of theassets was measured at its value in use, which is the aggregated depreciation expense up to the point of disposal.
						Description
Classification

Business system which the Company
decided to retire and other

Impairment Loss
Millions of Yen

Buildings and structures, furniture andfixtures, software and other¥649

The following table summarizes the Group’s asset grouping:				Business Classification

Asset Grouping

Financial services and venture capital	Each business entity except for idle real estate and real estate
held for sale is the minimum unit. Outlets which the Grouphas decided to close are grouped in another unit.
Real estate business22

AIFUL CORPORATION

Each real estate for rent is the minimum unit.

Annual Report 2010

Notes to Consolidated Financial Statements

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended
March 31, 2009:
				

Millions of Yen

Buildings and structures
Furniture and fixtures
Software
Other			Total			

¥198
257
154
40
¥649

9 INVESTMENT PROPERTY		On November 28, 2008, the ASBJ issued ASBJ Statement
No. 20 “Accounting Standard for Investment Property and
Related Disclosures” and issued ASBJ Guidance No. 23“Guidance on Accounting Standard for Investment Property
and Related Disclosures”. This accounting standard and theguidance are applicable to investment property and related
disclosures at the end of the fiscal years ending on or after

March 31, 2010. The Group applied the new accounting
standard and guidance effective March 31, 2010.
The Group held some investment property for the fiscal year
ended March 31, 2010, but related disclosures were omitted
due to immateriality.

10 SHORT-TERM BORROWINGS AND LONG-TERM DEBT		
Short-term borrowings at March 31, 2010 and 2009 consisted of the following:
					
				
Millions of Yen

				

2010

Commercial paper (2.50% to 2.80% at March 31, 2009)		
Loans from banks (2.12% at March 31, 2009)		
Other (principally from factoring companies and securitized loan),
1.80% to 4.66% (2.45% to 4.53% at March 31, 2009)¥61,205
Total		
¥61,205

Thousands of
U.S. Dollars

2009

2010

¥ 10,000
960
101,180¥112,140

AIFUL CORPORATION$658,118$658,118

Annual Report 201023

Long-term debt at March 31, 2010 and 2009 consisted of the following:
					
				
Millions of Yen

2010

				

Loans from banks, 1.90% to 3.58%*(1.18% to 4.64%, due serially to 2013 at March 31, 2009)¥ 250,002
Loans from other financial institutions, 1.90% to 2.92%*(1.35% to 2.92%, due serially to 2013 at March 31, 2009)
55,323
Unsecured 1.01% to 3.28% yen straight bonds, due 2009 		
Unsecured 0.80% to 2.93% yen straight bonds, due 2010
(0.80% to 3.00%, due serially to 2010 at March 31, 2009)
50,000Unsecured 1.50% to 1.58 % yen straight bonds, due 2011
20,000Unsecured 1.20% to 1.99% yen straight bonds, due 2012
40,000Unsecured 1.74% yen straight bonds, due 2013
10,000Unsecured 1.99% yen straight bonds, due 2015
10,000Unsecured 5.00% U.S. dollar straight bonds, due 2010
(4.45% to 5.00%, due serially to 2010 at March 31, 2009)
55,610Unsecured 6.00% U.S. dollar straight bonds, due 2011
57,600Unsecured 3.50% medium-term notes, due 2015
15,000
Other (principally from leasing companies and securitized loan),
0.76% to 2.30%* (1.09% to 2.30%, due serially to 2012 at
March 31, 2009)
23,828
Obligations under finance leases
255
Total		
¥ 587,618
Less current portion(150,906)
Long-term debt, less current portion¥ 436,712

Thousands of
U.S. Dollars

2009

2010

¥ 331,779$ 2,688,194

69,26741,400594,871

58,60020,00040,00010,00010,000537,634
215,054430,108
107,527
107,527

100,459
57,60015,000597,957
619,355
161,290

51,546318¥ 805,969(324,946)¥ 481,023

256,2142,742$ 6,318,473(1,622,645)$ 4,695,828* The Company and certain consolidated subsidiaries receive financial assistance based on consensual business revitalization alternative dispute resolution
procedures prescribed in the Act on Special Measures for Industrial Revitalization (the “Business Revitalization Procedures”). Financial assistance is obtained
through modification to repayment schedules for loan obligations, the content of which will be to make partial payments until June 10, 2014, and withregard to the obligations remaining after June 10, 2014, to receive refinancing by no later than July 10, 2014 or to make a proposal to the participating
creditors regarding the payment method in the period after July 10, 2014 and to reach an agreement thereon.
Therefore, the final due dates for long-term debts subject to financial assistance mentioned above cannot be identified.
At March 31, 2010, long-term debts subject to the financial assistance of ¥200,892 million ($2,160,129 thousand) were included in “Loans from banks”,¥55,323 million ($594,871 thousand) were included in “Loans from other financial institutions”, and ¥15,917 million ($171,151 thousand) were included in“Other” in the table above.
The final due date for “Loans from banks” other than those subject to financial assistance is 2013. The final due date for “Other” other than those subject
to financial assistance is 2010.

Annual maturities of long-term debt, excluding finance leases (see Note 16) at March 31, 2010 were as follows:					Year Ending March 31
Millions of Yen

Thousands of
U.S. Dollars¥150,841
129,370
43,02026,50016,50025,000¥391,231$1,621,946
1,391,075
462,581284,946
177,420
268,817$4,206,785

2011
2012
2013
2014
2015
2016 and thereafter
Total

Long-term debt whose repayment schedule is determined is included in the table above.
Long-term debt of ¥196,132 million ($2,108,946 thousand) whose repayment schedule is undetermined, such as obligations
remaining after June 10, 2014, is not included in the table above.

24

AIFUL CORPORATION

Annual Report 2010

Notes to Consolidated Financial Statements

At March 31, 2010, the following assets were pledged as collateral for short-term borrowings and long-term debt (including
current portion of long-term debt):
					
				
Millions of Yen

Thousands of
U.S. Dollars

Loans
Installment accounts receivable
Other current assets
Land
Buildings and structures
Machinery, equipment and vehicles
Investment securities
Total¥488,669
50,900
82
9,815
9,528
80
4,743
¥563,817$5,254,505
547,312882
105,538
102,451860
51,000$6,062,548

Related liabilities:
Short-term borrowings
Long-term debt (including current portion of long-term debt)
Total¥ 61,205
279,855¥341,060$ 658,118
3,009,194$3,667,312

The above table includes loans related to securitized loans of ¥146,463 million ($1,574,871 thousand), and related liabilities(short-term borrowings and long-term debt including current portion) of ¥18,848 million ($202,667 thousand).
If requested by lending financial institutions, the Group has committed to pledge loans of ¥58,471 million ($628,720 thousand)as collateral in addition to those shown in the above table. At March 31, 2010, lending financial institutions can request the Groupto pledge additional collateral for long-term debt (including current portion of long-term debt) of ¥51,566 million ($554,473
thousand). In this amount, ¥2,456 million ($26,409 thousand) of related liabilities shown in the above table is included.
At March 31, 2010, other current assets amounting to ¥20,860 million ($224,301 thousand) were pledged as collateral for thecurrency swap contracts in addition to those shown in the above table.

11 RETIREMENT AND PENSION PLANS		The Company and certain consolidated subsidiaries have a defined contribution pension plan and a prepaid retirement benefits
plan. Contributions to the defined contribution plan and payments to the prepaid retirement benefits plan are charged to income
when made.
The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 were as follows:
					
				
Millions of Yen

Thousands of
U.S. Dollars

				

2010

Payments for prepaid retirement benefits plan
Premiums for defined contribution pension plan
Other		Net periodic benefit costs

¥ 485
¥ 530
595
693
16		
¥1,096¥1,2232009

AIFUL CORPORATION2010$ 5,215
6,398
172$11,785

Annual Report 201025

		
12 EQUITY
Japanese companies are subject to the Companies Act ofJapan (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. For
companies that meet certain criteria such as; (1) having theBoard of Directors, (2) having independent auditors, (3) having
the Board of Corporate Auditors, and (4) the term of service ofthe directors is prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of
Directors of such company may declare dividends (except for
dividends in kind) at any time during the fiscal year if thecompany has prescribed so in its articles of incorporation. The
Company meets all the above criteria.
The Companies Act permits companies to distributedividends-in-kind (non-cash assets) to shareholders subject to acertain limitation and additional requirements.
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 fordividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.
(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 (a26

AIFUL CORPORATION

Annual Report 2010

component of retained earnings) or as additional paid-in capital(a component of capital surplus) depending on the equity
account charged upon the payment of such dividends until the
total of the aggregate amount of legal reserve and additional
paid-in capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-in capitaland legal reserve may be reversed without limitation. The
Companies Act also provides that common stock, legal reserve,
additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain
conditions upon resolution of the shareholders.
(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 resolutionof the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution
to the shareholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights arepresented as a separate component of equity. The Companies
Act also provides that companies can purchase both treasury
stock acquisition rights and treasury stock. Such treasury stockacquisition rights are presented as a separate component ofequity or deducted directly from stock acquisition rights.
In March 2009, holders of subordinated zero-coupon yen
convertible bonds exercised their rights to convert their bonds
into 71,211 thousand shares of common stock. The conversion
price of the convertible bonds was ¥983 per share and total
amounts of the conversion were ¥70,000 million. Recorded
amounts as common stock and additional paid-in capital were¥35,000 million and ¥35,000 million, respectively.

Notes to Consolidated Financial Statements

13 STOCK OPTION		
The stock options outstanding as of March 31, 2010 are as follows:
Stock		OptionPersons Granted

2005
Stock Option

Number of
Options Granted

Date of Grant

31 Company’s and subsidiaries’		
directors
374,400		
June 24, 2005
454 Company’s and subsidiaries’
shareskey employees

Exercise Price

Exercise Period¥8,420($90.54)

From July 1, 2007
to June 30, 20102004
Stock Option

2005
Stock Option

The stock option activity is as follows:

For the year ended March 31, 2009Non-vested
March 31, 2008 - Outstanding
		 Granted
		 Canceled
		 Vested
March 31, 2009 - Outstanding
VestedMarch 31, 2008 - Outstanding
		 Vested		 Exercised		 Canceled
March 31, 2009 - Outstanding
Exercise price(Shares)

252,000

276,600

5,400
246,600¥7,7746,600
270,000¥8,420For the year ended March 31, 2010
Non-vested
March 31, 2009 - Outstanding
		 Granted
		 Canceled
		 Vested
March 31, 2010 - Outstanding
VestedMarch 31, 2009 - Outstanding				 Vested		 Exercised		 Canceled 		
March 31, 2010 - Outstanding		
Exercise price							

AIFUL CORPORATION

270,000

6,600
263,400¥8,420($90.54)

Annual Report 201027

14 LOSS FROM AND PROVISION FOR BUSINESS RESTRUCTURING		
The following table summarizes the components of the Group’s loss from business restructuring for the year ended March 31,
2010.
					
			
Millions of Yen

Thousands of
U.S. Dollars

				

2010

2010

Loss from business restructuring:Special severance payments
Cost related to closure of outlets
Other
Total

¥ 8,887
1,585
1,354¥11,826$ 95,559
17,043
14,559$127,161

The following table summarizes the components of the Group’s provision for business restructuring for the year ended March 31,
2010.
					
			
Millions of Yen

Thousands of
U.S. Dollars

				

2010

2010

Provision for business restructuring:
Cost related to headquarter restructuring
Cost related to closure of outlets
Voluntary retirement cost
Termination fee
Other
Total

¥ 303
19
217
771
14
¥1,324$ 3,258
205
2,333
8,290
151
$14,237

15 INCOME TAXES		The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in a normal effective statutory tax rate of approximately 40.9% for the years ended March 31, 2010 and 2009.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities
at March 31, 2010 and 2009 were as follows:
					
				
Millions of Yen

2010

2009

¥ 57,269
97,226
19,503
4,044
109,990
3,338
10,326
301,696(301,696)¥
Nil¥ 42,464
50,687
18,565
5,838
58,0282,196
10,906
188,684(179,970)¥ 8,714				

Deferred tax assets:
Allowance for doubtful accounts
Allowance for losses on interest refunds
Charge-offs for doubtful accounts
Accrued interest on loans
Tax loss carryforwards
Interest refunds payable
Other
		 TotalLess valuation allowance
Total deferred tax assets

Thousands of
U.S. Dollars

Deferred tax liabilities:
Income taxes receivable		¥(95)
Exchange differences related to lease deposits¥(200)		Unrealized gain on available-for-sale securities(76)		
Total deferred tax liabilities
¥
(276)
¥
(95)
¥

Net deferred tax assets

28

AIFUL CORPORATION

Annual Report 2010

(276)

¥

8,619

2010

$

615,796
1,045,441
209,710
43,484
1,182,688
35,892
111,032
3,244,043(3,244,043)
$
Nil

$
$

(2,151)(817)(2,968)$(2,968)

Notes to Consolidated Financial Statements

Net deferred tax assets included in the consolidated balance sheet at March 31, 2009 are as follows:				Millions of Yen

				

2009

Current assets - Deferred tax assets
Investment and other assets - Deferred tax assets¥6,784
1,835

A valuation allowance is established to reduce certain
deferred tax assets with respect to deductible temporary
differences and net operating loss carryforwards where it ismore likely than not that they will not be realized.
A reconciliation between the normal effective statutory tax
rate and the actual effective tax rate reflected in theaccompanying consolidated statement of operations for theyear ended March 31, 2010 has not been disclosed because of
the Group’s net loss position.
As the difference between the normal effective statutory tax
rate and the actual effective tax rate reflected in theaccompanying consolidated statement of operations for the year
ended March 31, 2009 is not more than 5% of the normal
effective statutory tax rate, a reconciliation has not been disclosed.

At March 31, 2010, the Company and certain consolidated subsidiaries had tax loss carryforwards aggregating approximately¥271,432 million ($2,918,624 thousand) which were available for offset against taxable income of the Company and such
subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:					Year Ending March 31
Millions of Yen

2011
2012
2013
2014
2015
2016 and thereafter
Total

Thousands of
U.S. Dollars

¥

67
238
29
39,866231,232¥271,432

$

720
2,559
312
428,667
2,486,366$2,918,624

16 LEASES		The Group leases machinery and equipment, furniture and fixtures, buildings and structures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2010 and 2009 were ¥6,804
million ($73,161 thousand) and ¥9,539 million, respectively.
Obligations under finance leases at March 31, 2010 were as follows:
					
			
Millions of Yen

Thousands of
U.S. Dollars

2010

				

2010

¥ 65
190
¥255

Due within one year
Due after one year
Total

$ 699
2,043
$2,742The minimum rental commitments under noncancellable operating leases at March 31, 2009 were as follows:				Millions of Yen

				

2009

Due within one year
Due after one year
Total		

¥26
32
¥58

Information regarding the minimum rental commitments under noncancellable operating leases at March 31, 2010 is omitted
due to immateriality.
Pro forma information of leased property whose lease
inception was before March 31, 2008
ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions” requires that all finance lease transactions should
be capitalized to recognize lease assets and lease obligations in
the balance sheet. However, the ASBJ Statement No. 13 permits

leases without ownership transfer of the leased property to thelessee whose lease inception was before March 31, 2008 to beaccounted for as operating lease transactions if certain “as if
capitalized” information is disclosed in the notes to the financial
statements. The Company applied the ASBJ Statement No. 13
effective April 1, 2008 and accounted for such leases as
AIFUL CORPORATION

Annual Report 201029

operating lease transactions. Pro forma information of leased
property whose lease inception was before March 31, 2008
such as acquisition cost, accumulated depreciation,
accumulated impairment loss, obligations under finance leases,

depreciation expense, interest expense and other information offinance leases that do not transfer ownership of the leased
property to the lessee on an “as if capitalized” basis was asfollows:			

As of March 31, 2010

			Millions of Yen

					
					

Furniture and
Fixtures

¥734
522
¥212

Acquisition cost		
Accumulated depreciation		Net leased property					

As of March 31, 2009

			Millions of Yen

				
				

Acquisition cost		
Accumulated depreciation		Net leased property		Machinery,
Equipment and Vehicles

Furniture and
Fixtures

Total

¥980
579
¥401

¥1,004
598
¥ 406

¥24
19
¥ 5

			

As of March 31, 2010			Thousands of U.S. Dollars

					
					

Furniture and
Fixtures$7,893
5,613$2,280Acquisition cost		
Accumulated depreciation		Net leased property		Obligations under finance leases as of March 31:
					
				
Millions of Yen

Thousands of
U.S. Dollars

				

2010

2009

2010

Due within one year
Due after one year
Total		

¥143
87
¥230

¥202
221
¥423

$1,538935$2,473

Depreciation expense and interest expense under finance leases and other information under finance leases:
					
				
Millions of Yen

Thousands of
U.S. Dollars

				

2010

2009

2010

Depreciation expense
Interest expense
Total		Lease payments

¥221
8
¥229
¥232

¥352
17
¥369
¥369

$2,37686$2,462$2,495

Depreciation expense and interest expense, which are not reflected in the accompanying consolidated statements of operations,are computed by the straight-line method and the interest method, respectively.

30

AIFUL CORPORATION

Annual Report 2010

Notes to Consolidated Financial Statements		
17 FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESIn March 2008, the ASBJ revised ASBJ Statement No. 10“Accounting Standard for Financial Instruments” and issued
ASBJ Guidance No. 19 “Guidance on Accounting Standard for
Financial Instruments and Related Disclosures”. This accounting
standard and the guidance are applicable to financial
instruments and related disclosures at the end of the fiscal years
ending on or after March 31, 2010 with early adoption
permitted from the beginning of the fiscal years ending before
March 31, 2010. The Group applied the revised accounting
standard and the new guidance effective March 31, 2010.
(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,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 andloan securitization are used. The Group enters into derivativetransactions as means of managing its interest rate exposuresand foreign currency exposures on certain liabilities. Suchderivative transactions are entered into to hedge interest
exposures and foreign currency exposures inherent within its
business. The Group does not hold or issue derivatives for
trading or speculative purposes.
(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 Group and are exposed to credit risk through default ofcontract by customers. Other financial assets such as
operational investment securities and investment securities aremainly stock and investments in limited liability investment
partnerships. The Group holds these securities to develop thesebusinesses. The securities are exposed to the issuer’s credit risk
and the risk of market price fluctuations.
Borrowings and debt including bonds are the main financial
liabilities of the Group. The Group also raises funds by loan
securitization. These liabilities are exposed to liquidity risks, orrisk 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 in 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 swaps and currency swaps
which are applicable to hedge accounting, and interest rate
swaps and caps which are not applicable to hedge accounting.
These derivatives are exposed to the market risks of fluctuation
in interest rates and foreign currency exchange rates, andcounterparty risks. See Note 18 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 risks according
to internal guidelines. In relation to loans, installments accounts
receivable and credit guarantees which are the Group’s major
financial assets, the Group conducts credit checks for eachcontract based on data of the consumer data industry and its
own credit standards, maintaining its system to modify credit
ceilings, set guarantees or collateral. The Group manages its
credit risks of issuers of securities by checking credit informationand market prices periodically.
Because the counterparties to derivatives are limited tomajor financial institutions, the Group does not anticipate any
losses arising from credit risk. The Group manages such credit
risks by relevant sections evaluating, analyzing and deliberating
countermeasures and reporting to the board of directors
accordingly.
See Note 18 for details regarding derivatives.
Market risk management (foreign exchange risk and interest
rate risk)
The Group manages foreign exchange risk and interest raterisk based on a “risk management manual” which wasendorsed by the Group’s risk management committee. The risk
management committee is directly controlled by the board of
directors. The finance department reports the conditions offoreign exchange risk and interest rate risk to the internal
control department. The internal control department examines
the reasonability and adequacy of the finance department’s risk
evaluation and countermeasures, and reports to the board of
directors. Also, the Group utilizes interest rate swaps in order tohedge exposure to risks from changes in interest rates andcurrency swaps to manage exposure to risks from changes inforeign currency.
Market risk management (stock price volatility risk)
Most of the operational investment securities andinvestment securities the Group holds are intended to develop
business including business alliances and capital alliances.
Relevant sections monitor the market environment and thefinancial situation of the issuers, deliberate countermeasuresand report to the board of directors accordingly. The Group
does not hold trading securities, which are held for the purposeof earning capital gains in the near term.
Market risk management (derivatives)
The Group manages market risk of derivatives according tointernal guidelines. Relevant sections conduct internal checks tomake sure that transactions, valuations of effectiveness ofhedging and management of affairs are performed inaccordance with internal guidelines.
Liquidity risk management regarding fund-raising
The Group manages liquidity risk by adequate financial
planning of the Group on a timely basis, diversifying means of

AIFUL CORPORATION

Annual Report 201031

fund-raising and adjusting the ratio of long-term and shortterm debt in the light of 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, otherrational valuation techniques are used. There are possibilities
that fair value calculation results may differ when different
assumptions are used. Also please see Note 18 for details of fairvalue for derivatives.

(a) Fair value of financial instruments
Note that the following table does not include non-listed equity securities and certain other securities for which fair value isdifficult to determine (see Note 4 (b) below).
			Millions of Yen				March 31, 2010		

Cash and cash equivalents		
Time deposits
Loans				Allowance for doubtful accounts and losses on interest refunds *1
					Installment accounts receivable		
Unearned income *2		Allowance for doubtful accounts *3							
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries andassociated companies		
Claims in bankruptcy 		Allowance for doubtful accounts *3							
Total				Short-term borrowings 		
Long-term debt *4 *5		Total				Derivative transactions: *5
to which hedge accounting is applied
to which hedge accounting is not applied		
Total				

32AIFUL CORPORATION

Annual Report 2010

Carrying		
AmountFair Value¥128,7487
835,928(200,336)
635,592
125,990(1,099)(7,333)
117,558

Unrealized
Gain (Loss)¥ 128,748
7

758,107¥122,515

		
120,186
2,628

5,632
5,632		50,401			
(32,797)
17,604
17,604¥905,141¥1,030,284¥125,143¥61,205¥ 61,205
315,231249,339¥ 65,892¥376,436¥ 310,544¥ 65,892
¥
¥

(9)
(9)

¥
¥

(9)
(9)

Notes to Consolidated Financial Statements			

Thousands of U.S. Dollars

				March 31, 2010		

Carrying		
AmountFair Value

Cash and cash equivalents		
Time deposits
Loans				Allowance for doubtful accounts and losses on interest refunds *1
					Installment accounts receivable		
Unearned income *2		Allowance for doubtful accounts *3							
Operational investment securities, investment securities
and investments in unconsolidated subsidiaries andassociated companies		
Claims in bankruptcy 		Allowance for doubtful accounts *3							
Total				Short-term borrowings 		
Long-term debt *4 *5		Total				Derivative transactions: *5
to which hedge accounting is applied
to which hedge accounting is not applied		
Total				$ 1,384,387
75
8,988,473(2,154,150)
6,834,323
1,354,731(11,817)(78,849)
1,264,065

Unrealized
Gain (Loss)$ 1,384,387
75

8,151,689$1,317,366

1,292,323

28,25860,55960,559541,946		
(352,656)
189,290
189,290$ 9,732,699$11,078,323$ 658,118$ 658,118
3,389,581
2,681,065$ 4,047,699$ 3,339,183
$
$

(97)
(97)

$
$

$1,345,624$ 708,516$ 708,516

(97)
(97)

*1. Allowance for doubtful accounts which correspond to loans and allowance for losses on interest refunds which is expected to be preferentially set off
against loans is deducted.
*2. Unearned income of installment accounts receivable, included in other current liabilities, is deducted.
*3. Allowance for doubtful accounts which correspond to installment accounts receivable or claims in bankruptcy is deducted.
*4. Long-term debt which is subject to the financial assistance based on the Business Revitalization Procedures is excluded. Obligations under finance leases are
excluded.
*5. Assets and liabilities generated from derivatives transactions are indicated on a net basis, and those items which turn out to be liabilities on a net basis arebracketed. Also, the fair value of derivatives transactions which qualify for hedge accounting is included in the fair value of the hedged item (i.e. long-termdebt).

Cash and cash equivalents
The carrying values of cash and cash equivalents
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 flow, which consists of expectedinflows of principal and interest which is adjusted to reflectcollectability and outflows of costs of collection. The expected
future cash flow is discounted at a low-risk interest rate basedon maturity length.
Installment accounts receivable
The carrying values of installment accounts receivables
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 is determined based on thepresent value of expected future cash flow, which consists of
expected inflows of principal and fees which is adjusted toreflect collectability and outflows of costs of collection. The
expected future cash flow is discounted at a low-risk interest
rate based on maturity length.

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries
The fair value of operational investment securities,
investment securities and investments in unconsolidated
subsidiaries are measured at the quoted market price of thestock exchange.
Claims in bankruptcy
The carrying values of claims in bankruptcy less allowances
for claims in bankruptcy approximate fair value because
allowances for claims in bankruptcy are stated taking net
realizable value of collateral into account.
Short-term borrowings
The carrying values of short-term borrowings approximate
fair value because of their short maturities.
Long-term debt
The fair values of marketable bonds issued by the Company
are measured at the quoted market price and those ofnonmarketable bonds issued by the Company are determinedby discounting cash flows of principal and interest, discounted
at the rate which reflects credit risk and the maturities of the
AIFUL CORPORATION

Annual Report 201033

bond. The fair values of certain bonds are determined as fixedinterest rate, yen-denominated bonds, because forward
exchange contracts and interest rate swaps qualify for hedge
accounting and are assigned to the associated bond. Carrying
values of the current portion of long-term debt approximate
fair value because of their short maturities. The carrying valuesof long-term debt other than the current portion of long-term
debt approximate fair value because the variable rate reflects
the market interest rate in a short period of time and also all of

the debt are those of a consolidated subsidiary whose credit
conditions has not significantly changed since the initial dateof borrowing.
Derivatives
The fair values of derivatives are measured at prices indicatedby the correspondent financial institution because all derivatives
transactions are nonmarketable. The information regarding thefair value for derivatives is included in Note 18.

(b) Financial instruments whose fair value cannot be reliably determined					Carrying Amount					
March 31, 2010
Millions of Yen

Thousands of
U.S. Dollars

Operational investment securities, investment securities and investments inunconsolidated subsidiaries: *1
Unlisted stocks
Investments in limited liability investment partnerships
Long-term debt *2

$

¥

2,804
2,057
272,132

30,151
22,1182,926,151

Since the fair values of the items in the table above 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).
*1. Unlisted stocks and investments in limited liability investment partnerships do not have a quoted market price in an active market and their fair values
cannot be reliably determined, so they are not subject to fair value disclosure.
*2. The Company and certain consolidated subsidiaries receive financial assistance based on the Business Revitalization Procedures. Financial assistance isobtained through modification to repayment schedules for loan obligations, the content of which will be to make partial payments until June 10, 2014,
and with regard to the obligations remaining after June 10, 2014, to receive refinancing by no later than July 10, 2014 or to make a proposal to theparticipating creditors regarding the payment method in the period after July 10, 2014 and to reach an agreement thereon. Under such circumstances,long-term borrowings which are subject to the financial assistance have significant uncertainties in estimates of future repayment plans. Also, increased
credit risks and long repayment periods have substantial impact on discounted cash flows. Since it is difficult to make reasonable fair value calculations forsuch long-term borrowings, they are not subject to fair value disclosure.

(5) Maturity analysis for financial assets with contractual maturities			Millions of Yen				March 31, 2010		

Due in One
Year or Less

Due after One Yearthrough Five Years

Due after
Five Years

Cash and cash equivalents		
Time deposits		
Loans *1			
Installment accounts receivable		Total				¥128,7487
288,232
118,217¥535,204¥532,879
7,771¥540,650¥14,8172¥14,819			

Thousands of U.S. Dollars

				March 31, 2010		

Cash and cash equivalents		
Time deposits		
Loans *1			
Installment accounts receivable		Total				Due in One
Year or Less

Due after One Yearthrough Five Years

Due after
Five Years$1,384,387
75
3,099,269
1,271,151$5,754,882$5,729,882
83,559$5,813,441$159,322
21$159,343*1. Loans of ¥50,400 million ($541,935 thousand) whose amount of redemption cannot be determined, such as claims in bankruptcy, are not included in thetable above.

Please see Note 10 for annual maturities of short-term borrowings and long-term debt and Note 16 for obligations under financeleases, respectively.

34

AIFUL CORPORATION

Annual Report 2010

Notes to Consolidated Financial Statements		
18 DERIVATIVESThe Group enters into interest rate swap and cap, andcurrency swap contracts as a means of managing its principal
and interest rate exposures and foreign currency exposures oncertain liabilities.
Such derivative transactions are entered into to hedge
interest exposures and foreign currency exposures inherent
within its business. Accordingly, market and foreign exchangerisks in these derivatives are theoretically offset by opposite
movements in the value of hedged liabilities. The Group does
not hold or issue derivatives for trading or speculative purposes.
Because the counterparties to these derivatives are limited tomajor financial institutions, the Group does not anticipate any

losses arising from credit risk.
Derivative transactions entered into by the Group have been
made in accordance with internal policies, which regulate theauthorization process and credit limit amount.
As noted in Note 17, the Group applied ASBJ Statement No.
10 “Accounting Standard for Financial Instruments” and ASBJ
Guidance No. 19 “Guidance on Accounting Standard for
Financial Instruments and Related Disclosures”. The accounting
standard and the guidance are applicable to financial
instruments and related disclosures at the end of the fiscal years
ending on or after March 31, 2010; therefore, the required
information is disclosed only for 2010.

Derivative transactions to which hedge accounting is not applied at March 31, 2010
			Millions of Yen				
At March 31, 2010
Contract AmountInterest rate swaps:(fixed rate payment, floating rate receipt)
Interest rate caps agreements:(Buying)
Total			

¥3,615		

144,000¥147,615

			¥94,000¥94,000

Unrealized
Gain (Loss)¥(13)¥ (13)

4
¥ (9)

(538)
¥(551)

Thousands of U.S. Dollars

				
At March 31, 2010
Contract AmountInterest rate swaps:(fixed rate payment, floating rate receipt)
Interest rate caps agreements:(Buying)
Total			Contract Amount 		
due after One Year
Fair Value$Contract Amount 		
due after One Year
Fair Value

38,871		

1,548,387$1,587,258$1,010,753$1,010,753

Unrealized
Gain (Loss)$(140)$ (140)43$ (97)(5,785)$(5,925)

The fair value of derivative transactions is measured at the quoted price obtained from the correspondent financial institution.
Derivative transactions to which hedge accounting is applied at March 31, 2010
			Millions of Yen				
At March 31, 2010
Hedged Item

Contract AmountContract Amountdue after One Year

Fair Value

Long-term debt

¥ 11,520¥11,520*

Currency swap contracts
Long-term debt
Total				113,210¥124,730

57,600¥69,120**

Interest rate swaps:(fixed rate payment, floating rate receipt)			

Thousands of U.S. Dollars

				
At March 31, 2010
Hedged Item

Contract AmountContract Amountdue after One Year

Fair Value

Interest rate swaps:(fixed rate payment, floating rate receipt)

Long-term debt

$ 123,871$123,871*

Currency swap contracts
Long-term debt
Total				1,217,312$1,341,183

619,355$743,226**

Note * T he above interest rate swaps and currency swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value but the differential paid or received under the swap agreements is recognized and included in interest expense or income. In addition, the fairvalue information of such interest rate swaps and currency swaps in Note 17 is included in that of the hedged items (i.e. long-term debt).

AIFUL CORPORATION

Annual Report 201035

Notes to Consolidated Financial Statements

Market value information about derivative instruments at March 31, 2009 was as follows:
The following is the fair value information for interest rate cap agreements to which hedge accounting is not applied at March
31, 2009. The fair value of derivative transactions is measured at the quoted price obtained from the correspondent financial
institution. Interest rate swaps, currency swaps and interest rate caps which qualify for hedge accounting are excluded from theinformation below.
			Millions of Yen				 Notional Amount					Interest rate caps agreements – Buying

Total

Due after One Year

¥119,000¥69,000

Fair Value

Unrealized Gain (Loss)¥5¥(332)

The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by
the parties and do not measure the Group’s exposure to credit or market risk.

19 CONTINGENT LIABILITIES		At March 31, 2010, the Group was contingently liable for guarantees and items for a similar nature of loans of an
unconsolidated subsidiary, Sumishin Life Card Company, Limited, amounting to ¥470 million ($5,054 thousand) .

20 NET INCOME (LOSS) PER SHARE		Basic net income (loss) per share (“EPS”) for the years ended March 31, 2010 and 2009 is as follows:		Millions of Yen

Thousands ofShares		Net Income (Loss)

Weighted
Average Shares

For the year ended March 31, 2010:
Basic EPS		 Net loss attributable to common shareholders
For the year ended March 31, 2009:
Basic EPS		 Net income available to common shareholders

Yen
EPS

¥(295,141)

238,229¥(1,238.90)¥

171,495¥

4,247

Dollars$(13.32)

24.77

Diluted net loss per share for the year ended March 31, 2010 was not disclosed because of the Company’s net loss position andalso because no dilutive securities were outstanding.
Diluted EPS for the year ended March 31, 2009 was not disclosed because no dilutive securities were outstanding.

21 BUSINESS DIVESTITURES		On September 30, 2009, the Company divested Wide Corporation, TRYTO CORPORATION, TCM. Co. Ltd. and Passkey Co., Ltd.
to NEOLINE CAPITAL Co., Ltd. These divestitures were conducted by selling all the shares the Company owned in the four divested
companies and by selling investments in and advances to the four divested companies. Due to these divestitures, the Company
realized ¥31,839 million ($342,355 thousand) as gain on sales of shares of subsidiaries, which is the difference between the bookvalue of the four divested companies and the sale value according to the transfer contract entered into with NEOLINE CAPITAL Co.,
Ltd. and ¥37,981 million ($408,398 thousand) as loss on transfer of business, which is the difference between the book value ofinvestments in and advances to the four divested companies and the sale value according to the transfer contract entered into withNEOLINE CAPITAL Co., Ltd. As a result, the Group recognized ¥6,142 million ($66,043 thousand) as “Loss on transfer of business” inthe consolidated statements of operations for the year ended March 31, 2010, which was the difference from offsetting gain andloss mentioned above.

22 SEGMENT INFORMATION		Most of the Group’s business is related to a single segment, lending. The Group does not operate outside Japan. Accordingly,
information about industry and geographic segments is not presented.

36

AIFUL CORPORATION

Annual Report 2010

Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORTTo the Board of Directors and Shareholders of
AIFUL CORPORATION:
We have audited the accompanying consolidated balance sheets of AIFUL CORPORATION (the”Company”) and consolidated subsidiaries as of March 31, 2010 and 2009, and the related
consolidated statements of operations, changes in equity, and cash flows for the years then ended, allexpressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonablebasis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of AIFUL CORPORATION and consolidated subsidiaries as ofMarch 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for theyears then ended in conformity with accounting principles generally accepted in Japan.
Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and,in our opinion, such translation has been made in conformity with the basis stated in Note 3. Such U.S.
dollar amounts are presented solely for the convenience of readers outside Japan.

June 22, 2010

AIFUL CORPORATION

Annual Report 201037

Group Network(As of March 31, 2010)

AIFUL CORPORATION

http:/ /aiful.jp (Japanese only)
Business Classification
Unsecured loans / Secured loans
Small business loans / Credit guarantees

Investor Relations Website
http://www.ir-aiful.com/english

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

LIFE Co., Ltd.

Business Classification
Credit card shopping /Installment sales finance /Unsecured loans / Secured loans
Credit guarantees
Voting Rights Held
95.9%

BUSINEXT CORPORATION

http:// www.businext.co.jp (Japanese only)
Business Classification
Secured loans / Small business loans
Voting Rights Held
60.0%

Companies

Business Classification

City’s Corporation
AsTry Loan Services Corporation
New Frontier Partners Co., Ltd.
Marutoh KK

38

AIFUL CORPORATION

Secured loans / Small business loans
Debt collection (Servicer)
Venture capital
Real estate businessAnnual Report 2010

Voting Rights Held (%)

100.0
100.0
100.0
100.0

Investor Information(As of March 31, 2010)

Corporate Profile

Principal Shareholders

Corporate NameAIFUL CORPORATION

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

		
		
		

Number of
Shares(Thousands)

Percentage ofTotal Shares
Outstanding

Yamakatsu Co., Ltd.

37,211

15.59

Yoshitaka Fukuda

29,603

12.40

J.P. MORGAN CLEARING CORP-SEC

12,419

5.20

Marutaka Co., Ltd.

12,271

5.14

Date of Establishment

April 1967

Erio Lease Co., Ltd.

10,195

4.27

Common Stock¥143,324 million

GOLDMAN, SACHS & CO. REG

Number of Employees

Non-consolidated: 1,191
Consolidated: 2,514

Corporate Officers (As of June 25, 2010)
President andRepresentative Director

Yoshitaka Fukuda

Representative Director

Taichi Kawakita

Directors

Masayuki Sato
Tsuneo Sakai
Nobuyuki Wakuta

Standing Corporate
Auditors

Masanobu Hidaka (outside)
Norio Onishi (outside)
Kenichi Kayama

8,923

3.74

MORGAN STANLEY &CO. INTERNATIONAL PLC

5,517

2.31

Japan Securities Finance Co., Ltd.

4,806

2.01

Yasutaka Fukuda

3,639

1.52

ML INTL EQUITY DERIVATIVES

3,046

1.28

Composition of Shareholders
Domestic Financial
Institutions
6.01%
Financial
Instruments
Firms
1.60%
Other
Companies
25.50%

Individuals
and Other
41.61%

ForeignInvestors
25.28%

Stock Listing
Tokyo Stock Exchange

The First Section

Securities Code8515

Shareholder Information
Number of Shares of Common Stock
Authorized

568,140,000 shares

Issued and Outstanding

238,685,568 shares

Number of Shareholders

33,379

Independent Auditors

Deloitte Touche
Tohmatsu LLC

Transfer Agentand Registrar

The Sumitomo Trust &Banking Co., Ltd.

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

AIFUL CORPORATION

Annual Report 201039