ANNUAL REPORT 2016
The year ended March 31, 2016

Corporate Philosophy

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

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

Contents
To Our Investors and Shareholders..........2
Five-Year Summary......................................... 4
AIFUL Group at a Glance. ............................5
Management’s Discussion and ................6
Analysis of Operations

Board of Directors and.............................. 16
Executive Officers
History. .............................................. 18Group Network........................................... 19
Consolidated Financial Statements....... 20

Business Data............................................... 10

Independent Auditor’s Report................ 50

Corporate Governance.............................. 12

Investor Information............................51

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

Long-term Vision

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

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

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

Corporate Philosophy
Commit to full
implementation oflegal compliance

Sustaining
Profitability

Satisfy demands
and expectations ofcustomers (society)

CustomerFirst Policy

Deliver products andservices tailored toeach customer

Reform theearnings structure

Securing
GrowthPotential

Strengthen thecorporate business

Develop new
businesses

Utilize Group’s
resources

Enhancing
Reliability

Internet financebusiness

Establish corebusinesses

Improve theproduct lineup

Increase capital andachieve steadyfinancing

Enhance the qualityof services

Reorganize thebusiness portfolio

Strengthening
Human
Resources
Capabilities

Develop humanresources

Overseas business development /Domestic and overseas investments

Basic Policy

Compliance

Essence of BusinessAppoint external
human resources

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

AIFUL CORPORATION Annual Report 2016

1

To Our Investors and Shareholders
I would like to take this opportunity to express my gratitude to ourstakeholders for their support. I'm pleased to report our financial results
for the fiscal year ended March 31, 2016.
Financial Results for the Fiscal Year Ended March 31, 2016
Looking at the consumer finance industry’s business environment, the number of new contracts
remains brisk following positive advertising campaigns by major operators. The operating loanbalance continued to rally steadily, but uncertainty remains around interest repayment claims,
which constitute the greatest risk to the industry, although they are steadily declining fromtheir peak.
Against this backdrop, the AIFUL Group ran a number of effective advertisements, mainly
on TV and online, and sought to increase customers’ convenience by, for example, launching
unmanned branches and revamping the smartphone site (called the ‘smartphone branch’).
Given that financial support ended in August 2015, we are aiming to further increase ouroperational efficiency and diversify fund procurement with an eye towards strengthening our
future financial foundations.
For the fiscal year ended March 31, 2016, operating revenue rose 1.3 billion yen, or 2%, year
on year to 87.7 billion yen. This achievement marked our first revenue increase in over a decade.
As the operating loan balance surged 26.2 billion yen from the end of the preceding fiscal year,
to 376.2 billion yen, operating loan interest revenue advanced by 0.5 billion yen year on year,
to 44.2 billion yen. Meanwhile, revenue from installment receivables and revenue from credit
guarantee to financial institutions stood at 14.7 billion yen and 12.5 billion yen, respectively.
Operating expenses plummeted 44.9 billion yen, or 36%, year on year, to 81.0 billion
yen, chiefly due to a 60.8 billion yen contraction in expenses for interest repayment from thepreceding year’s level, to 2.9 billion yen.
Operating expenses also included financial expenses of 7.8 billion yen, credit costs worth 16.1
billion yen, and other operating expenses
including SG&A of 54.2 billion yen.
As a result, operating income stoodat 6.6 billion yen, ordinary income at 6.8
billion yen, and net income attributable toowners of the parent at 7.0 billion yen.

2

AIFUL CORPORATION Annual Report 2016

Consolidated Forecast for the Fiscal Year Ending March 31, 2017
Regarding consolidated operating results for the fiscal year ending March 31, 2017, while claims
for interest repayments are still a top priority for management uncertainty remains. However,operating assets, such as the operating loan balance and the balance of installment receivables,
are expected to continue to move higher in the coming fiscal year.
Operating revenue is expected to grow 4.7 billion yen from the previous year, to 92.4 billion
yen, while operating expenses will likely fall 4.3 billion yen year on year, to 85.4 billion yen, after arise in credit cost and in personnel expenses following an increase in operating assets.
As a result, the operating income forecast is 7.0 billion yen, with ordinary income of 7.0 billion
yen and net income attributable to owners of the parent of 6.8 billion yen.
Going forward, we aim to increase new contracts and the operating loan balance to boost our
top line while responding to interest repayment claims as a priority management issue. We will bemaking every effort to achieve real profitability at an early date and to meet the expectations of
all stakeholders.
We are looking forward to the continued support of our shareholders.

Yoshitaka Fukuda
President and CEO
Representative Director

Important Matters
The AIFUL Group’s fund-raising capacity has been hampered by difficult market conditions including rising interest repayment
demands in accordance with a 2006 ruling by Japan’s Supreme Court, which increased expenses, as well as the rapid and sharp
deterioration in the fund-raising environment.
Accordingly, there have been concerns that the AIFUL Group may have difficulty raising sufficient new funds to sustain its
business. The Group has noted these concerns in its annual report under Important Matters since the consolidated fiscal year ended
March 31, 2010.
To improve its earning capacity and financial strength with the goal of revitalizing and reinforcing its business, the AIFUL Groupapplied for Business Revitalization Procedures using the Alternative Dispute Resolution (the “ADR”) process on September 24, 2009and obtained approval on December 24, 2009.
Execution of the Group’s subsequent Business Revitalization Plan, which was based on the aforementioned procedures, ended
on July 10, 2014, but it continued to receive financial support in connection with 52.7 billion yen worth of remaining debt.
The AIFUL Group completed repayment of this debt on August 25, 2015, using fresh borrowing from financial institutions.
It announced the repayment in the Notice Concerning Completion of Payment of Debts Pertaining to Credit under Financial Support
and the End of Financial Support.
This repayment concludes the AIFUL Group’s need for financial support. As such, the company considers that any uncertainty
about its ability to continue as a going concern no longer exists as of the second quarter of the consolidated fiscal year ended
March 31, 2016.

AIFUL CORPORATION Annual Report 2016

3

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2016, 2015, 2014, 2013 and 2012

Thousands of
U.S. Dollars

Millions of Yen

2016

2015

2014

2013

2016

2012

For the Year:¥

Total income

87,929¥90,131¥

100,541¥

108,863¥

116,666$

778,133

		

81,068 		

125,985 		

69,433 		

85,082 		

98,572 		 717,416

Provision for doubtful accounts 		

16,127 		

2,276 		10,931 		

8,177 		32,937 		 142,717

Income (loss) before income taxes 		

6,861 		

(35,854) 		

31,108 		

23,601 		

18,094 		

60,717

Net income (loss) attributable toowners of the parent

7,045 		

(36,500) 		

30,462 		

22,706 		

17,392 		

62,345

348,011

390,635

Total expenses

		

At Year-End:¥Loans (Note 2)

376,225¥

350,017¥¥¥455,012

		

66,158 		

70,419 		

79,223 		

98,628 		

131,807 		 585,469

Loans in legal bankruptcy

		31,105 		

32,909 		

35,135 		

37,598 		

43,033 		 275,265

Nonaccrual loans		22,264 		

23,819 		

27,290 		

36,906 		

55,427 		 197,027

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

3,349 		2,830 		2,445 		2,610 		4,475 		29,637

		

9,440 		10,861 		

14,353 		

21,514 		

28,872 		

83,540		

567,514 		

560,324 		

577,339 		

607,181 		

665,185 		5,022,248

Allowance for doubtful accounts 		

72,643 		

79,708 		

102,522 		

119,428 		

156,346 		 642,859

Total liabilities		463,264 		

462,848 		

443,797 		

502,173 		

583,541 		4,099,682

Interest-bearing debt

		249,533 		

227,538 		

253,953 		

308,747 		

360,569 		2,208,256

Total equity

		104,250 		

97,476 		

133,542 		

105,008 		

81,644 		 922,566

Noncontrolling interests

		

— 		

— 		

— 		

2,305 		Nonperforming loans

Restructured loans
Total assets

1,854 		Per Share Data (Yen/U.S. dollars)(Note 3)—		¥

Basic net income (loss)

14.59

¥

(75.74)

¥

63.34

¥

47.21

¥

72.49

$

0.13

Diluted net income		

14.57 		

— 		63.00 		47.02 		

— 		

0.13

Total equity

		214.16 		

200.45 		

276.80 		

213.41 		

331.59 		

1.90

Equity ratio		

18.2 		

17.3 		

23.1 		

16.9 		

12.0

ROE

		

7.0 		

(31.8) 		

25.8 		

24.9 		

24.7

ROA

		

1.2 		

(6.4) 		5.1 		

3.6 		

2.3

Ratios (%):

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

483,794,536

Number of employees at year-end 		483,506,536

1,433 		481,867,836

1,350 		481,867,836

1,369 		1,437240,933,918
1,898

Notes: 1. Figures in the financial section are based on audited English-language statements.
2. Managed-asset basis
3. The U.S. dollar amounts have been translated, for convenience only, at ¥113=$1, the approximate rate of exchange at March 31, 2016.
4. The Company implemented a stock split of 2 shares for each 1 share of common stock on October 1, 2013.

4$ 3,329,425

AIFUL CORPORATION Annual Report 2016

REVIEW OF OPERATIONSAIFUL Group at a Glance
AIFUL CORPORATION

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

Operating revenue(Millions of Yen)

(Millions of Yen)

70,00030,00060,00068.6%
FY2015374.3 billion yen

Net income

55.1 bn yen

10,00050,000

5.3 bn yen

040,000-10,000

30,000-20,000

20,000-30,000

10,0000

20,000-40,000
FY2013

FY2014FY2015-50,000

FY2013

FY2014FY2015

LIFECARD CO., LTD.

Share of receivables

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

Operating revenue(Millions of Yen)

(Millions of Yen)

30,00028.3 bn yen

25,000

5,000
4,000

28.4%
20,000FY2015154.9 billion yen

Net income

3,000

15,000

1,000

5,000
0

1.8 bn yen

2,000

10,000FY2013

FY2014FY20150

FY2013

FY2014FY2015

BUSINEXT CORPORATION

Share of receivables

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

Operating revenue(Millions of Yen)

(Millions of Yen)

3,000
7.8%

800
600

2,500
1.9 bn yen

2,000
FY201542.5 billion yen

Net income

0.4 bn yen

400
200

1,500
0
1,000

-200

500
0

-400
FY2013

FY2014FY2015-600

FY2013

FY2014FY2015

Note: Receivable outstanding are in managed asset basis.

AIFUL CORPORATION Annual Report 20165

Management’s Discussion and Analysis of Operations
Current Business Environment
Japan’s consumer finance industry has undergone radical restructuring due to the combined impact of interest repayment claims
triggered by the 2006 Supreme Court ruling and tighter regulations based on the Money Lending Business Act and Capital
Subscription Law implemented in 2010. As a result, the number of outstanding unsecured consumer loans provided by consumer
finance companies has decreased 78% from its peak in around 2006 to 2.5 trillion yen at the end of fiscal year 2014 (Source:
Financial Services Agency).
In spite of this prolonged unfavorable climate, the loanbalance at consumer finance companies has finally bottomedout and is now recovering steadily, thanks to bold economic
measures by the government and aggressive advertising andmarketing by major companies.
The total number of unsecured loan applications for the
major three companies at the end of fiscal year 2015 increased
4% year on year to 1,323,000, and the total number of newcontracts concluded increased 8% year on year to 608,000.
The balance of operating loans was 1.8 trillion yen, a 4%
year on year increase, clearly indicating that the three major
companies are experiencing a recovery (Source: Compiled by
AIFUL from the financial data of each company).

Trends in market scale(Billion yen)

20,00018
tr yen16,00012,000

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

8.6
8.2 tr yen
tr yen9.3
tr yen

14/3

16/3

8,000
4,000
0

07/4

08/4

09/3

10/3

Bank guarantees
outstanding

11/3

12/3

13/3

15/3

Unsecured consumer loans ofconsumer finance companies andcredit card companies

Source: Japan Financial Services Association

In addition, major companies are seeing steady growthin the balance of guarantees for consumer loans provided
by financial institutions (credit guarantee business). As aresult, the total combined market size for consumer financecompanies, the credit card loan business and the credit
guarantee business was 9.3 trillion yen at the end of fiscal year
2015 (Source: Japan Financial Services Association).

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

1,200

1.0
tr yen1,000

Meanwhile, interest repayment claims remain the greatest
business risk. While the number of claims has peaked, thedecline in fiscal year 2014 was only 7%, compared to 38% in
fiscal year 2013, and the future remains unclear (Source: Japan
Financial Services Association).

800
600
298
276
bn yen bn yen

400
200
0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014
Waiver of principal

Interest repayments

Source: Japan Financial Services Association

Business Overview of AIFUL Group(Loan Business)

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

500

45.0%

46.5%
389 k

400

30

200

153 k

181 k 20
10100

FY2011FY2012

Applications

6

50
40

340 k

300

0

(%)

FY2013
New accounts

AIFUL CORPORATION Annual Report 2016

FY2014FY2015Contract rate

0

The loan business is at the core of AIFUL Group’s business,and the Group is working to develop and introduce productsthat can quickly meet customers’ funding needs.
The Group has supplemented these efforts with efficient
advertisements run mainly on television and the Internet, as
well as the vigorous development of unstaffed branches, theextension of business hours and the offering of other moreconvenient services.
In fiscal year 2015, the number of new applications was
388,000 (up 14% year on year), and the number of newManagement’s Discussion and Analysis of Operations

contracts concluded was 181,000 (up 18% year on year).
The increase in the number of new contracts concluded led
to a rise in the amount of loans to both new and existingcustomers. The total amount of loans provided was 153.5
billion yen (up 24% year on year).
As a result, the operating loan balance for fiscal year
2015 was 289.6 billion yen (up 9% from the end of theprevious fiscal year) at the AIFUL parent company level,
showing a steady recovery.

(Credit Guarantee Business)
In the credit guarantee business, we aim to increase theguarantee balance by utilizing our strengths, such as our
know-how related to credit operations for individuals andcorporations, the strengths of our two guarantee-businessbrands AIFUL and LIFECARD, and our flexibility and speed
as an independent company. We are also working toextend our sales activities to potential guarantee partners,
as well as proposing new products and offering support topromote sales.
In fiscal year 2015, AIFUL and LIFECARD began
partnerships with two and one financial institutions,
respectively, and commenced sales. Outstanding credit
guarantee for the year, based on operating receivables,
was 73.4 billion yen, a 1% drop from the end of the previous
fiscal year.

(Credit Card Business)
In the credit card business, we actively marketed our affiliates
and increased the number of new membership applications
through our new tie-up cards, as well as increasing thespecified maximum amount of use and encouraging
membership and usage.
As a result of the above efforts, card membershipincreased 4% year on year to 6,292,000 members,
transactions increased to 636.9 billion yen (up 9% year onyear), and the balance of installment receivables increased
7% year on year to 90.2 billion yen.

(Non-Performing Loans and Write-offs)
As a benefit of the ongoing restrictions on total lending
limits, both our non-performing loans (NPLs) and write-offs
remained at low and stable levels, respectively. In fiscal year
2015, the NPL balance decreased 6% year on year to 66.2
billion yen. However, unsecured NPLs rose 1.6 billion yen
to 25.3 billion yen of the total amount because the balanceof loans outstanding expanded. Despite the rise in the NPL
amount, the ratio of unsecured NPLs fell by 0.4 point year on
year to 8.3%, remaining stable at low levels.
In addition, the write-off ratio stood at 4.0%, down
0.5 point year on year. The so-called general write-offs,
which exclude the waiver of principal due to interest
repayment claims, were 3.1%, down 0.2 point year on year.

Loans outstanding (AIFUL)（Billion yen）

(Thousand)

800

500
647 k

592 k

400

700

300

600
289.6
bn yen 262.7 500
264.6
bn yen 229.4
bn yenbn yen
400

200

300
200

100

100
0

FY2011FY2012Loansoutstanding

FY2013

FY2014

Unsecuredloans outstanding

0

FY2015
Number ofaccounts

Loan volume (AIFUL)
25.1
bn yen（Billion yen）

160
20.7
bn yen120

128.4
bn yen80
102.7
bn yen40

0FY2011FY2012FY2013Loans to accounts

FY2014FY2015Loans to existing accounts

Credit card (LIFECARD)（Billion yen）

(Thousand)

700

6.3 k

6.0 k

600

636.9
bn yen584.7
bn yen

500

7
6
5

400

4

300

3

200

2

100

1

0

FY2011FY2012FY2013Purchase Result

FY2014FY20150

Number of Card holders

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

(%)

18

150

12

100
8.7%
70.4
bn yen

50

0

8.3%

23.7
bn yenFY2011FY2012

Non-performing
loans (NPL)FY2013
Unsecuredloans NPL

FY201466.2
bn yen25.3
bn yenFY2015

60

Ratio of unsecuredloans NPLAIFUL CORPORATION Annual Report 20167

Management’s Discussion and Analysis of Operations(Interest Repayment Claims)

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

(%)

80

While the primary management issue continues to be interest
repayment claims, the number of claims finally fell month-onmonth. However, monthly claims remain high at around 5,000
and will be monitored continuously.
In fiscal year 2015, interest repayments rose 9% year
on year to 32.6 billion yen, and debt waived due to interest
repayments fell 21% to 5.2 billion yen. Both totaled 37.8
billion yen, representing a 4% rise year on year.
Also in fiscal year 2015, LIFECARD posted 2.9 billion yen
in expenses related to interest repayments due to the current
trend of falling interest repayment claims. As a result, thebalance of allowance for losses on interest repayments forfiscal year 2015 was 63.4 billion yen, and the balance ofallowance for doubtful accounts in relation to the waiver ofprincipal accompanying interest repayments was 12.4 billion
yen. The total allowance related to interest repayments was
75.9 billion yen.

60

(Assets, Liabilities and Net Assets)

100

16

75

12

8

50
4.5%

4.0%
4

25

0

FY2011FY2012

Write-offs

FY2013

FY2014

Write-offs due tointerest repayments

FY20150

Ratio of write-offs

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

40

29.9
bn yen20

6.6
bn yen0

FY2011FY2012

Interest repayments

FY2013

FY2014

32.6
bn yen5.2
bn yenFY2015

Waiver of principal related to interest repayment

Interest repayment claims (Consolidated)（Thousand）

140
120
100
80

69 k

60

61 k

40
20
0

FY2011FY2012FY2013

FY2014FY2015(Cash Flows)

Interest bearing liabilities (Consolidated)（Billion yen）

600
500
400
300

289.8
bn yen311.5
bn yenFY2014FY2015

200
100
0

8

FY2011FY2012FY2013

AIFUL CORPORATION Annual Report 2016

Total assets on a consolidated basis increased 7.2 billion yen,or 1.3%, compared to the end of the previous fiscal year
to 567.5 billion yen at the end of fiscal year 2015. This wasprimarily due to a 27.9 billion yen increase in operating loans.
Total liabilities at the end of fiscal year 2015 were 463.3
billion yen, an increase of 0.4 billion yen, or 0.1%, comparedwith the previous fiscal year-end. The principal contributing
factor was an increase of 44.5 billion yen in borrowings (loans
payable), which offset a decline of 30.0 billion yen in theallowance for losses on interest repayments.
We changed our debt repayment schedule and obtained
continued financial support relating to the 52.7 billion yen inremaining debts to creditors under the Business Revitalization
Plan, which was completed on July 10, 2014. However, as
stated in the notice announced on August 25, 2015 (titled
Notice Concerning Completion of Paying of Debt Pertaining
to Credit under Financial Support and the End of Financial
Support), the Group completed its payment on the same day
using bank loans, ending the need for financial support.
Net assets increased 6.8 billion yen, or 7%, compared withthe previous fiscal year-end, to 104.3 billion yen. This waslargely attributable to the posting of net income attributableto owners of the parent.

Cash and cash equivalents (“funds”) declined 12.7 billion yen,or 24%, compared with the end of the previous fiscal year, to39.9 billion yen.
Cash flows from operating activities
Net cash used for operating activities amounted to 31.7 billion
yen, compared with net cash provided of 18.5 billion yen in
the corresponding period of the previous fiscal year. This was
mainly attributable to a fall in funds on the back of a decline
in loans to customers exceeded and a drop in the allowance
for losses on interest repayments.

Management’s Discussion and Analysis of Operations

Cash flows from investing activities
Net cash used in investing activities stood at 3.0 billion yen, a decrease of 52% compared with the corresponding period of theprevious fiscal year. This was mainly attributable to the purchase of tangible fixed assets, intangible fixed assets and investment
securities.
Cash flows from financing activities
Net cash provided by financing activities amounted to 22.0 billion yen, compared with net cash used of 26.6 billion yen in thecorresponding period of the previous fiscal year. This was mainly attributable to an increase in loans payable.

(Going Forward)
In general, the business environment for the AIFUL Group is steadily improving in line with the consumer finance industry, withincreases in both the number of new contracts concluded and the amount of operational loans.
Looking forward, we will maintain our primary focus on addressing the issue of interest repayment claims, while continuing towork on further expanding new contracts concluded and the operating loan balance, as well as improving the quality of our loan
portfolio to bolster our revenue base. We will also continue to streamline business efficiency across the Group while diversifying
funding sources to strengthen our financial base.

Cash Flows and Funding (Consolidated)
Cash flows fromoperating activities−¥31.6 bn
Loan Collection

Cash flows frominvesting activities＋−¥3.0 bn

Cash flows fromfinancing activities＋＋¥22.0 bn＝ −¥12.7 bn
Breakdown

Loans to Customer

Write-offs etc.

Bonds
redemption*Managed Asset Basis¥25.0 bn

¥ 17.3 bn¥ 183.9 bn¥ 226.4 bn

Loan
Collection etc.

Loan toCustomer

Repayment ofshort-termborrowing, etc.

¥1,028.9 bn
Increase in loans
to customer¥25.1 bn
Income before
taxes

Increase by decreasein liquidation

Increase inloans tocustomers¥6.8 bn¥1.7 bn¥26.8 bn

Depreciation
expenses

Short-term
Borrowing,
etc.

Loan
repayment
and bonds
redemption,etc.

¥1,075.9 bn ¥1,053.9 bn¥2.3 bn

Increase in othercurrent liabilities¥8.0 bn

Cash and Cash
Equivalents¥52.5 bn

At the beginning of
FY2015Decrease inallowances¥37.0 bn

Expenses due topurchase of asset, etc.

¥3.0 bnOther¥21.3 bn

Increase

Other¥6.3 bn
Decrease

Cash inflow

Cash outflow

Cash inflow

Cash outflow

Cash and Cash
Equivalents¥39.9 bn

At the end of
FY2015

AIFUL CORPORATION Annual Report 20169

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

AVERAGE RATE OF BORROWINGS

2012

2013

2014

2015

2016

618,220

556,032

515,960

514,220545,570455,012

390,635

348,011350,017376,225

Indirect

Unsecured

318,785

272,980

261,222273,628

306,602

DirectSecured77,11564,34541,26834,90428,139Small Business

59,11253,31045,521

41,48541,484

Installment Receivables

80,614

83,88585,26484,33390,166

Credit Guarantees

74,14874,44175,55973,87573,412

Other

8,446

7,071

7,126

5,995

5,767

Total Receivables Outstanding
Loans

Average Rate of Borrowings

Long-term Prime Rate
(Reference)

2013

2014

2015

2016

2.09

2.05

2.31

3.20

2.77

2.07

1.99

1.98

2.32

2.19

2.19

2.60

3.72

4.47

3.54

1.35

1.15

1.20

1.15

0.95

NUMBER OF CUSTOMER ACCOUNTS
Number of Customer Accounts
Unsecured

TOTAL INCOME/NET INCOME (LOSS)

(%)

2012

(Thousands)

2016

2012

2013

2014

2015

1,130

888

817

824

861

1,062

830

769

782

822

Secured

28

23

18

14

11

(Millions of Yen)

Small Business

40

36

31

28

28

Credit Card Holders

6,357

5,811

5,818

6,023

6,292

2012

2013

2014

2015

2016

Total Income
120,034
Interest on Loans
75,993
Unsecured
56,886
Secured10,581
Small Business
8,526
Installment Receivables 11,719
Credit Guarantees
4,798
Other
27,524Net Income (Loss)
17,392

108,683
61,60745,028
8,690
7,889
12,746
4,610
29,72022,706

100,541
50,57840,717
7,064
2,797
13,6137,950
28,40130,462

90,131
43,76235,855
5,567
2,339
13,678
11,382
21,310(36,500)

87,92944,25637,705
4,484
2,066
14,707
12,491
16,475
7,045

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE
Total Assets

2013

2014

2015

2016

665,185

607,181

577,339

560,324

567,514

2.3

3.6

5.1

(6.4)

1.2

81,644

105,008

133,542

97,476104,250

24.7

24.9

25.8

(31.8)

7.0

ROA (%)
Total Equity(Millions of Yen)

2012

ROE (%)AIFUL CORPORATION
LOANS OUTSTANDING(Millions of Yen)

2012

2013

2014

2015

2016

408,167

348,353

350,681349,952

374,363344,455

286,316

260,776

264,557

289,566

Unsecured

265,617

224,669

216,072

229,392

Secured

66,60752,70837,611

Small Business

12,231

8,939

7,093

Total Receivables Outstanding
Loans

2013

2014

2015

2016

805

631

590

613

664

Unsecured

767

601

565

593

648

262,655

Secured

27

22

17

14

11

29,275

21,839Small Business

12

9

7

6

5

5,890

5,071

2012

2013

2014

2015

2016

15.9

15.0

15.4

14.8

15.2

7,202

4,433

2,846

1,821

1,195

Credit Guarantees

48,39751,07880,48978,13478,466

8,113

6,526

6,570

5,441

5,136

Number of Customer Accounts

AVERAGE YIELD
Average Yield

TOTAL INCOME/NET INCOME (LOSS)
2012

2013

2014

2015

2016

72,19262,31059,19654,92255,120Interest on Loans

57,65747,402

42,06636,15036,857

Unsecured

46,374

38,12634,47229,93832,086

Secured

9,554

7,655

6,233

5,148

3,919

Small Business

1,729

1,621

1,361

1,065

852

Credit Guarantees

3,051

3,215

6,654

10,136

11,221Other
Net Income (Loss)(%)(Millions of Yen)

Operating Revenue

Installment Receivables

316

306

226

143

116

11,167

11,388

10,251

8,492

6,926

13,407

10,64924,046(41,434)

5,281

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

Total Receivables Write-offs
Unsecured Loans
Write-offs

2012

2013

2014

2015

2016

68,352

31,591

19,264

15,374

14,957

46,37425,464

14,933

12,616

12,683

Ratio of Total Receivables
Write-offs (%)

19.84

11.03

7.39

5.81

5.17

Ratio of Unsecured
Loans Write-offs (%)

17.46

11.33

6.91

5.50

4.83

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

10

AIFUL CORPORATION Annual Report 2016

(Thousands)

2012

Installment Receivables
Other

NUMBER OF CUSTOMER ACCOUNTS

Business Data

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

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2012

2013

2014

2015

2016

63,296

87,575

117,072

153,197

180,805

Total Assets

61,73487,515

117,008

153,135

180,666

ROA (%)

29.9

38.0

45.0

45.0

46.5

Total Equity
ROE (%)(Millions of Yen)

2012

2013

2014

2015

2016

533,713466,542463,792

444,737

407,140

2.4

2.1

5.2

(9.1)

1.2

79,761

90,411

114,80773,72278,884

18.6

12.5

23.5

(44.2)

7.0

LIFECARD CO., LTD.
TOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of Yen)
2012

2013

2014

2015

2016

Total Receivables Outstanding

152,663

151,736

150,228

148,933

154,951

Installment Receivables

73,41279,45282,41882,512

88,972Loans (Cash Advance)

53,16848,37545,32244,51844,169Credit Guarantees

25,75023,363

21,931

21,34921,178

333

545

556

554

631

Other

(Millions of Yen)

2012

2013

2014

2015

2016

341,491

496,088

539,051584,734

636,902

Credit Card Shopping Loans

310,754454,181498,756

543,710595,922

Credit Card Cashing Loans

30,73740,90640,29541,02340,979

2013

2014

2015

Credit Card

NUMBER OF CARDHOLDERSOPERATING REVENUE/NET INCOME(Millions of Yen)

2012

2013

2014

2015

2016

19,711

26,402

27,34727,31428,359Installment Receivables

8,657

12,50913,387

13,534

14,559Loans (Cash Advance)

6,084

6,904

6,260

5,944

5,645

Credit Guarantees

1,240

1,395

1,296

1,246

1,270

Other

3,730

5,593

6,403

6,590

6,884

Net Income

2,207

3,320

2,419

3,530

1,859

Operating Revenue

PURCHASE RESULTS

2012(Thousands)

2016

6,357

5,811

5,818

6,023

6,292

LIFE Proper Card

2,489

2,021

1,911

1,855

1,814

Affinity Cards

3,869

3,790

3,907

4,169

4,478

Number of Cardholders

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

AVERAGE YIELD
Average Yield

(%)

2012

2013

2014

2015

2016

17.1

17.5

18.2

18.5

18.8

2012

2013

2014

2015

2016

Total Receivables Write-offs

1,665

2,961

3,178

3,042

3,121

Ratio of Total Receivables
Write-offs (%)

1.09

1.95

2.08

2.04

2.01

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

AIFUL CORPORATION Annual Report 201611

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

2. Corporate Governance Structure(1) Overview of the Corporate Governance Structure
In order to strengthen the supervisory function of the Boardof Directors and to enhance corporate governance, we havemade the change from a company with a Board of Auditors
to a company with an Audit and Supervisory Committee. Thischange went into effect on June 23, 2015.
Audit and Supervisory Committee and Directors
Belonging to the Committee
The Audit and Supervisory Committee consists of three
directors (including two directors who are outside members).
It determines items such as the audit policy and plan, anddiscusses and decides on important audit matters based on
the reports it receives. In addition to these performing theseduties, it also audits legitimacy and appropriateness throughthe use of the internal control system. A meeting will generally
be held every month, with extraordinary meetings held whennecessary.
The directors who are members of the Audit andSupervisory Committee will cooperate with the Internal
Auditing Department and the accounting auditors to enhance
management’s supervisory functions. They will also share
information with the auditors of affiliated companies in aneffort to strengthen the auditing structure for the operationsof the entire Group.
To improve these audit functions, the Group will establish
an Audit and Supervisory Committee Office (Audit Office) as
the exclusive body for supporting the duties of directors who
12

AIFUL CORPORATION Annual Report 2016

belong to the Audit and Supervisory Committee. It will also
take the necessary steps to secure independence, such as byrequiring that the Audit Office does not follow any directions
or orders from directors (other than directors belonging to
the Audit and Supervisory Committee) when carrying out
their duties.
Board of Directors and Directors
The Board of Directors consists of eleven directors (as ofthe date the Annual Securities Report was submitted): eight
directors who are not members of the Audit and Supervisory
Committee, and three directors who are members of the
Audit and Supervisory Committee. It discusses and makes
decisions on matters that cannot be delegated to directors
or others under laws and regulations and the Articles ofIncorporation, such as basic management policies and basic
policies associated with the internal control system, and otherimportant matters for execution of operations under the rulesof the Board of Directors, including business plans, personnel
policies, and capital policies. The Board of Directors delegatesauthority over the execution of operations in line with thepolicies on which the Board of Directors has made resolutions,and the disposal of property worth less than a specified
amount to executive officers and others within an appropriate
range in accordance with regulations for administrative
authority and other rules. In addition to delegating thisauthority, it supervises the execution of operations. It generally
holds semimonthly meetings and extraordinary meetings
when necessary. The Company's Articles of Incorporation
also stipulate that there be no more than fifteen directors(excluding directors on the Audit and Supervisory Committee)
and no more than five directors on the Audit and Supervisory
Committee.
Outside Directors
Two of the three directors in the Audit and Supervisory
Committee are outside directors (as of June 29, 2016).
We have developed a structure in which they can attend
management meetings and other important meetings andcommittees to express their views.
Executive Officers
The Company introduced an executive officer system inJune 2007 to speed up the decision-making process andthe performance of duties, and enhance the separation ofsupervisory and executive functions. The Board of Directors
appoints executive officers and delegates its business by
establishing the division of duties and authority.
Management Committee
The Management Committee comprises all the directors andexecutive officers. It strives to promote information sharing
and consensus on matters to be submitted to the Boardof Directors, as well as on issues and strategies, etc. basedon policies resolved at Board of Directors meetings. The
committee aims to ensure that disagreements do not arise
regarding decisions or the performance of duties. It generally
holds meetings on a weekly basis.

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

3. Enhancement of Corporate Governance(1) Development of a Compliance Framework
A Compliance Committee (meeting on a regular basis),with an outside member (a lawyer), has been set up toestablish and manage compliance programs, conduct ongoing
management led by the person responsible for compliancein each division, collect information and implement otherpreventative measures, and determine policies for employee

training. In addition, the AIFUL Group Compliance Committee
has been established to disseminate a set of unified corporate
ethics throughout the entire Group and form a complianceframework for the Group as a whole. In addition, the Group
has launched both internal and external hotlines offering
consultations on any violations of the Group’s management
principles, norms, and other standards, as well as an internal
whistle-blowing system, in an effort to develop a corporate
environment that encourages reporting and discussion ofviolations.
(2) Development of a Risk Management Framework
A Risk Management Committee has been set up to gain anunderstanding of the Group’s risk factors and hold discussions
to determine responses. The Risk Management Committee
has a system in place whereby it collects risk information fromthe Compliance Committee and other divisions on a regularbasis and conducts crisis management in coordination withdirectors and other relevant divisions. AIFUL CORPORATION
and AIFUL Group have established an action plan and manualin preparation for large-scale disasters, issues relating topersonal or corporate information, and other risk events so as
to be able to respond to potential emergencies appropriately
and promptly.
(3) Maintenance of Accuracy in Disclosure of Financial
Information and Status of Internal Controls
As a system for maintaining the accuracy of financial
information, the AIFUL Group has developed an effective
mutual check system where the division in charge ofinstitutional accounting (the Accounting Department)
and the division in charge of management accounting(the Management Planning Department) are separate, in
addition to a system of checks established by the Accounting
Department and accounting audits by independent auditorsin accordance with the Companies Act and the Financial
Instruments and Exchange Act. The Group also implements
initiatives for maintaining the accuracy of information
disclosure in the preparation and announcement of financial
reports by having the Accounting Department, the IR Sectionof the Finance Department, and other relevant divisions(including certain affiliated companies) apply a processof checks.
(4) Improvement of Disclosure and Status of Internal
Controls
To enhance the transparency of management and achieveeffective corporate governance through the activation of
external checking functions, the Group endeavors to maketimely and straightforward disclosures in news releases,
account settlement data, annual reports, and other materials,
as well as holding briefing sessions for domestic and overseas
investors, analysts, and so forth, as appropriate. In addition,
we have a system in place whereby investors’ opinions andinquiries about management can be relayed back to thepresident, the Board of Directors, and the head of eachdivision on a regular basis.
The diagram below illustrates our Group's structures forbusiness execution, management supervision, internal control,
AIFUL CORPORATION Annual Report 201613

Corporate Governance(2) Relationships between Outside Directors and theCompany

and risk management as of the date of submission of theAnnual Securities Report.

4. Relationships between Outside Directors
and the Company(1) Functions and Roles of Outside Directors
The Company has two outside directors who express opinions
and provide advice from a perspective outside the Company,
drawing upon their considerable experience and extensive
knowledge, to maintain an objective and neutral oversightfunction from an external perspective.

Audit and Supervisory Committee Member, Masanobu
Hidaka, was previously engaged in tax affairs at the National
Tax Agency, and has considerable knowledge about financeand accounting. Deeming him to be qualified as an outside
director and Audit and Supervisory Committee member, theCompany appointed him an outside director. The Company
also deemed Audit and Supervisory Committee Member,
Haruichi Suzuki, to be qualified as an outside director,
and thus has appointed him as such, expecting him toprovide advice as an outside director from a fair and neutral
standpoint by drawing upon his extensive knowledge andGeneralMeeting
Meetingof
ofShareholders
Shareholders
GeneralAudit and Supervisory Committee

Board of Directors
Auditing

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

Audit and Supervisory Committee Office

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

Reporting

Auditing

Independent
Auditing Firm

Auditing(under directcontrol ofBoard of Directors)

Reporting
Sharing information

Group Compliance Committee
Compliance Committee

Risk Management Committee

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

Reporting

DemandReporting

Supervision

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

Direction

External Compliance Reporting Desk

Chairperson: President andRepresentative Director
Members: All directors

ReportingDirection
Advising/Replying

Managementof Operations

Management Committee(Directors and Executive Officers)

Attorneys andOthersReportingDirection
Direction
Cooperation

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

Subsidiary Management Dep.

In-house
Compliance
Reporting Desk

Sharing information
Gathering and sharing
information

Questions/Advice/
Complaints

Compliance Dep.
(Customer Service Center)

Customers

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

Investors andOthersCompany's Divisions
Compliance Officers

DiscloseInternal Auditing
Cooperation

Internal Auditing Dep.
(including Group Auditing)
ReportingInternal Auditing
Subsidiaries
Cooperation

Auditing

Subsidiaries' Auditors

14

AIFUL CORPORATION Annual Report 2016

Corporate Governanceconsiderable experience as a lawyer. The Company has
concluded a contract on the limitation of liability for damages
under Article 423, Paragraph 1 of the Companies Act with Mr.
Suzuki. The maximum amount of liability for damages under
the contract is the minimum amount stipulated in Article 425,
Paragraph 1 of the Companies Act.
The outside directors above have no special interests in
the Company.
AIFUL designates as independent officers all its outside
directors that fulfill the requirements for independent officers.
(Standards for independent officers)
AIFUL’s standards for independent outside directors areprescribed as follows:
1. A person who falls under none of the items below andpermanently and substantially has no potential conflictof interest for any other reasons shall be deemed to havesufficient independence from AIFUL.
(1) The person is an executive director, etc.*1 at AIFUL or anyof its subsidiaries (hereinafter collectively referred to as“the AIFUL Group”), or the person served as an executive
director, etc. at the AIFUL Group during the 10-year period
before assuming the post or, if the person used to be a
non-executive director*2 or a corporate auditor at any timewithin the 10-year period before assuming the post.
(2) The person is currently a major shareholder*3 of AIFUL,or if the major shareholder is a juridical person, is or
was a director, corporate auditor, accounting advisor,
executive officer, manager or other employee at the
major shareholder, its parent company or any of its
significant subsidiaries in the past five years.
(3) The person is currently a director, corporate auditor,
accounting advisor, executive officer, manager or other
employee at a company of which AIFUL is a major
shareholder*3.
(4) The person is or was an executive director, executive
officer, manager or other employee of a party of which
the AIFUL Group is or was a major business partner*4,of its parent company, or of any of its significant
subsidiaries, whether or not it is a company.
(5) The person is or was an executive director, executive officer,
manager or other employee of a party that is a major
business partner*4 of AIFUL, its parent company or any of
its significant subsidiaries, whether or not it is a company.
(6) The person is a director, limited to a person engaging
in business execution, or another person such as an
officer, member or employee engaging in businessexecution of any organization, e.g., a public interest
incorporated foundation or association and a not-forprofit corporation, which receives donations or financial
support exceeding a predetermined level*5 from the
AIFUL Group.
(7) The person is a director, corporate auditor, accounting
advisor or executive officer of a company, its parent
company or any of its subsidiaries that accepts a full-timeor part-time director from the AIFUL Group.
(8) The person is a director, corporate auditor, accounting
advisor, executive officer, manager or other employee
at a financial institution or any other large creditor thatis indispensable to AIFUL in fund procurement and on
which AIFUL is so dependent that it is irreplaceable(hereinafter “large creditor, etc.”), or was, in the past
three years, a director, corporate auditor, accounting
advisor, executive officer, manager or other employee ata large creditor, etc., or its parent company or any of its
significant subsidiaries.
(9) The person is currently an accounting auditor, ora member, partner or employee of the auditing
corporation or the tax accountant corporation for
the AIFUL Group, or was an accounting auditor,
or a member, partner or employee of the auditing
corporation or the tax accountant corporation for the
AIFUL Group in the past three years who actually did
auditing work, excluding assisting involvement, for the
AIFUL Group, irrespective of whether the person stillworks for, or in, or has already retired from any of thecorporations mentioned above.
(10) The person is a lawyer, certified public accountant, tax
accountant or other consultant who does not fall underitem (9) above who (a) has received a monetary or otherproperty benefit worth 10 million yen or more per year
on average over the past three years from the AIFULGroup in addition to the offer remuneration, or who (b)is a member, partner, associate or employee of a firmof which the AIFUL Group is a major business partner(which refers to a firm that receives a payment from the
AIFUL Group that has made up at least two percent of
its average consolidated total sales over the past threebusiness years).
(11) The person is a close relative*6 of the person that falls
under any of items (1) to (10) above.
2. Even if he or she falls under any of the items in 1. above,a person deemed by AIFUL to be appropriate in terms of
personality, views, and suchlike as an independent director
for AIFUL may be appointed as such on the condition thatthe person fulfills the requirements for outside directors
under the Companies Act and that the grounds forregarding the person as appropriate as an independent
director for AIFUL are explained externally.
*1 An executive director, etc. refers to an executive director, executive
officer, manager or other employee.
*2 A non-executive director refers to any director who is not an
executive director.
*3 A major shareholder refers to a shareholder who holds at least 10
percent of the voting rights.
*4 A major business partner refers to a party receiving an amountthat is two percent or more of its annual consolidated sales for
its most recent business year from the AIFUL Group, either in themost recent business year or in the three business years before themost recent year (i.e., a party of which the AIFUL Group is a major
business partner) or a party that paid an amount that is two percent
or more of AIFUL’s annual total sales for its most recent businessyear either in the most recent business year or in the three businessyears before the most recent one (i.e., a party that is a major
business partner of the AIFUL Group).
*5 A predetermined level refers to either the average amount of
10 million yen per year over the past three business years or theamount equivalent to 30 percent of the average annual total
expenses of the organization in question, whichever is the larger.
*6 A close relative refers to either a spouse or a relative within thesecond degree of consanguinity; provided, however, that item (1) in
1. applies to those that fall thereunder within the last five years.

AIFUL CORPORATION Annual Report 201615

Board of Directors and Executive Officers(As of June 28, 2016)

Directors
Yoshitaka Fukuda

Mitsuhide Fukuda

President and Representative Director

Director

Chief Executive Officer

Senior Managing Executive Officer

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

Apr. 2003: Joined Daiwa Securities Co. Ltd.

finance company

Apr. 2009: Joined OGI Capital Partners, Ltd.

Apr. 1980: Director of Marutaka, Inc.

Jun. 2011: Executive Officer of the Company(established in 1978, currently AIFUL CORPORATION)
May 1982: President and Representative Director of the Company due to merger

Jun. 2012: Director and Executive Officer
Apr. 2014: President of BUSINEXT CORPORATION (Current)of three related companies

Jun. 2014: Director and Managing Executive Officer(Oasa, Inc., Yamakatsu Sangyo, Inc., Maruto, Inc.)

Apr. 2016: President of AsTry Loan Services Corporation (Current)

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

Jun. 2016: Director and Senior Managing Executive Officer,

Jun. 2011: Chairman and Representative Director of LIFECARD Co., Ltd (Current)

In charge of the Guarantee Business Department 1 andJun. 2016: President and Representative Director, Chief Executive Officer,

the Guarantee Business Department 2 (Current)

Chairperson of the Risk Management Committee,
In charge of the Internal Auditing Department (Current)

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

Yoshiaki Tanaka
Director
Executive Officer
Apr. 1983: Joined The Sumitomo Trust & Banking Co., Ltd.
(currently Sumitomo Mitsui Trust Bank, Limited)
Sep. 2006: Sales Manager, Division 6,
Tokyo Branch of The Sumitomo Trust & Banking Co., Ltd.
Apr. 2012: Sales Manager, Division 6,
the Main Branch of The Sumitomo Trust & Banking Co., Ltd.

Jun. 2014: Representative Director and Senior Managing Executive Officer

Apr. 2015: Executive Officer of the Company

Jun. 2016: Representative Director and Senior Managing Executive Officer

Jun. 2015: Director and Executive Officer,

Senior General Manager of the Management Planning Division,

In charge of the Management Planning Department,

In charge of the Personnel Department (Current)

General Manager of the Management Planning Department (Current)

Kazumitsu Oishi

Hiroshi Uemura

Director

Director

Senior Managing Executive Officer

Executive Officer

Mar. 1979: Joined Marutaka, Inc. (currently AIFUL CORPORATION)

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

Jun. 2001: Director of the Company

Sep. 2005: Senior Relationship Manager of Group 11 of Corporate Business

Jun. 2007: Executive Officer

Division 1 of the Corporate Banking Division,

Jun. 2011: Managing Executive Officer

Senior Relationship Manager of Corporate Business Department 1,

Jun. 2012: Director and Managing Executive Officer
Jun. 2016: Director and Senior Managing Executive Officer

Sapporo Branch, Corporate Banking Division of Aozora Bank, Ltd.
Aug. 2010: General Manager of the Workout Division of Aozora Bank, Ltd.

Chairperson of the Compliance Committee, Senior General Manager

Apr. 2015: Executive Officer of the Companyof the Credit Management Division and the Accounting Division,

Jun. 2015: Director and Executive Officer

In charge of the Information Systems Development Department,

Jun. 2016: Director and Executive Officer,

the Information Systems Operation Department, the Compliance

In charge of the Finance Department (Current)

Department, the General Affairs Department and the Credit
Assessment Department (Current)

Tsuguo Nakagawa
Director
Senior Managing Executive Officer
Mar. 1976: Joined Oasa Inc. (Yoshitaka Fukuda’s sole proprietorship)
Jun. 2006: Director of the Company
Jun. 2007: Executive Officer
Jun. 2011: Managing Executive Officer
Jun. 2012: Director and Managing Executive Officer
Jun. 2016: Director and Senior Managing Executive Officer,
Senior General Manager of the Loan Business Division,
In charge of the Marketing Department (Current)

16

AIFUL CORPORATION Annual Report 2016

Keiji Masui
Director
Executive Officer
Aug. 1983: Joined AIFUL CORPORATION
Apr. 2014: Executive Officer of the Company
Apr. 2015: Executive Officer of the Company,
Director and Managing Executive Officer of LIFECARD (Current)
Jun. 2016: Director and Executive Officer of the Company (Current)

Board of Directors and Executive Officers

Directors, Audit and Supervisory Committee members
Masanobu Hidaka

Haruichi Suzuki

Director (outside)

Director (outside)

Audit and Supervisory Committee member

Audit and Supervisory Committee member

Jul. 1969: Joined Ministry of Finance

Apr. 1997: Joined the SHIGEKAZU UEMATSU Law Office

Jul. 1994: Director-General of the Hiroshima Regional Taxation Bureau
May 1995: Deputy Commissioner, Commissioner's Secretariat,
National Tax Agency
Jul. 1996: President of the National Tax College(currently UEMATSU/ SUZUKI Law Office)Sep. 1999: Lecturer at Ritsumeikan University Graduate School of Law
Jan. 2008: Director of UEMATSU/ SUZUKI Law Office (Current)
Jun. 2015: Director (Audit and Supervisory Committee member) (Current)

Jun. 2002: Full-time Corporate Auditor of the Company
Jun. 2015: Director (Audit and Supervisory Committee member) (Current)

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

Executive Officers
Kazuyoshi Wakamatsu

Hideaki Minamizawa

Executive Officer

Executive Officer

Responsible for the Credit Assessment Department

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

Shinichiro Okuyama
Executive Officer

Toshiaki Ando

Responsible for the Marketing Department,

Executive Officer

General Manager of the Marketing Department

General Manager of the Loan Business Promotion Department

Kazuhiko Tsuda

Yuji Fukada

Executive Officer

Executive Officer

Responsible for the Accounting Department and the General Affairs

Responsible for the Finance Department,

Department,

General Manager of the Finance Department

General Manager of the Accounting Department

Atsushi Suda

Ikuo Yamauchi
Executive Officer

Executive Officer

Responsible for the Subsidiary Management Department,

Responsible for the Compliance Department

General Manager of the Subsidiary Management Department

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

AIFUL CORPORATION Annual Report 201617

History
1967
Apr

1978
Feb

1982
May

Jul
1984
Feb
Mar

Established Marutaka, Inc. (now AIFULCORPORATION) with capital of 9.0 million yen,in Sakyo-ku, Kyoto
Began unsecured consumer loan business
Marutaka, Inc. absorbs three related companies(Oasa, Inc., Yamakatsu Sangyo, Inc., and Maruto,Inc.) and increases its equity capital to 500.0 million
yen
Name simultaneously changed to
AIFUL CORPORATION
Began providing unsecured loans to sole proprietors

Oct

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

1994
Nov

Opened Heartful Center

1995
Mar
Nov
1997
Jul
Oct
1999
May

2000
Mar

2001
Jan

Feb
Mar
Jul
Nov
Nov

2002
Apr
Sep
Oct
2003
Jan

18

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

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

2004
Mar
Jul
2006
Apr

2007
Apr

Apr
2009
Aug
2010
Jul

2011
Jun
Jul

Over-the-counter registration of company’s stockwith the Japan Securities Dealers Association
Began full-scale sales of commercial loans to
consumers
Registered as certified finance corporation basedon the Law Concerning the Issuance of Corporate
Bonds in the Financial Industry Loan Business

2013
Apr

Listed on the First Section of the Tokyo Stock
Exchange, and the First Section of the Osaka
Securities Exchange
Established business finance company BUSINEXTCORPORATION through a joint venture with
Sumitomo Trust andBanking Co., Ltd.
Completed new headquarters building
Converted LIFE Co., Ltd. into 100% subsidiary
Issued LIFE ETC CARD
Established servicer company AsTry Loan Services
Corporation in joint venturewith Aozora Bank, Ltd.
Changed the form of invoicing (statement ofcharges) sent to cardholders to electronic andlaunched the LIFE-Web Desk
service for card holders
Established Compliance Committee
Opened a contact center
Converted business finance company,
City’s Co. Ltd., into 100% subsidiary
Received Listed Company Disclosure Commendationfrom the Tokyo Stock Exchange

AIFUL CORPORATION Annual Report 2016

2014
Dec

2015
Apr

2015
Oct

2015
Nov

2016
Apr

Converted KOKUSAI Capital Co., Ltd. into 100%
subsidiary
KOKUSAI Capital Corporation changed its
name to New Frontier Partners Co., Ltd.
Issued LIFECARD GOLDissued LIFECARD
exclusively for students;

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

Group Network(As of March 31, 2016)

AIFUL CORPORATION(Location: Kyoto, Japan)

Top page (Japanese only)

Investor Relations

http://aiful.jp

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

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

LIFECARD CO.,LTD.

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

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

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

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

Business Classification
Secured loans
Small business loans
FactoringGroup Companies

Business Classification

Location

AsTry Loan Services Corporation

Loan servicing

Tokyo, JapanNew Frontier Partners Co., Ltd *1

Venture capitalTokyo, Japan

LIFE GUARANTEE CO., LTD

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

Kyoto, Japan

AIRA & AIFUL Public Company Limited

Consumer finance

Bangkok, Thailand

SANSHU Finance Corporation

LeasingShanghai, China

Note 1: New Frontier Partners Co., Ltd. changed its corporate name to AG Capital Co., Ltd as of April 1, 2016

AIFUL CORPORATION Annual Report 201619

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

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

ASSETS

2016

2016

2015

CURRENT ASSETS:¥ 39,906¥ 52,586

4

4

35

547

688

4,841

(5)

(10)

(44)

Loans (Notes 3, 7 and 13)

315,547

287,651

2,792,451

Installment accounts receivable (Notes 4, 7 and 13)

89,202

84,333

789,398

Credit guarantees (Note 5)

111,634

111,472

987,912

Cash and cash equivalents (Note 13)
Time deposits (Note 13)
Operational investment securities (Notes 6 and 13)
Allowance for investment losses$

353,150

Loans, credit guarantees and receivables:

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

8,622

8,185

76,301(43,188)(48,757)(382,195)

485

141

4,292

Other current assets

13,267

13,085

117,408

Total current assets

536,021509,378

4,743,549

Land (Note 7)

8,908

8,895

78,832

Buildings and structures (Note 7)

24,01323,745

212,504

Machinery and equipment (Note 7)

392

392

3,469

6,509

5,992

57,602

Lease assets

564

554

4,991

Construction in progress

72

131

637

PROPERTY AND EQUIPMENT:

Furniture and fixtures

Total

40,45839,709358,035

Accumulated depreciation(22,767)(22,031)(201,477)

Net property and equipment

17,691

17,678

156,558

1,646

1,657

14,566INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 13)
Allowance for investment losses
3,775

4,722

33,407

Claims in bankruptcy (Notes 3 and 13)

31,94733,984

282,717

Software, net

3,057

2,472

27,053

Lease and guarantee deposits

1,629

20,291

14,416

Other assets

1,203

1,097

10,646(29,455)(30,951)(260,664)

Allowance for doubtful accounts (Notes 2.h and 13)
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

20

(4)

Investments in and advances to unconsolidated subsidiaries
and affiliated companies (Note 13)

AIFUL CORPORATION Annual Report 2016

13,80233,268122,141¥ 567,514¥ 560,324$ 5,022,248

Consolidated Balance Sheet

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

LIABILITIES AND EQUITY

2016

2015

2016

¥ 67,990¥ 51,460

22,44032,833

198,584

29

30

257

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

601,681

Trade accounts payable

23,287

17,412206,080

Obligation under credit guarantees (Note 5)

111,634

111,472

987,912

119

556

1,053

Accrued expenses

2,398

2,561

21,221

Allowance for credit card point redemption

3,380

3,360

29,912

Income taxes payable

5,875

3,186

51,990237,152

222,870

2,098,690

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

159,103143,245

1,407,991

Allowance for losses on interest refunds (Note 2.k)63,43993,405561,407

281

225

2,487

3,289

3,103

29,107226,112

239,9782,000,992

Common stock - authorized, 1,136,280,000 shares;
issued, 483,794,536 shares in 2016 and 483,506,536 shares in 2015

143,416

143,4021,269,168

Capital surplus

13,914

164,469

123,133

836

739

7,398

Retained earnings(50,610)(208,152)(447,876)

Treasury stock - at cost; 916,890 shares in 2016 and 916,722 shares in 2015

(3,111)(3,111)(27,531)

Other current liabilities (Notes 4 and 5)
Total current liabilities
LONG-TERM LIABILITIES:Deferred tax liabilities (Note 11)
Other long-term liabilities (Note 12)
Total long-term liabilities
EQUITY (Notes 9 and 10):Stock acquisition rights

Accumulated other comprehensive income:
(195)

129

(1,726)

Total

104,250

97,476

922,566

Total equity

104,250

97,476

922,566¥ 567,514¥ 560,324$ 5,022,248

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

TOTAL

AIFUL CORPORATION Annual Report 201621

Consolidated Financial Statements

Consolidated Statement of Operations
Year Ended March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2016

2015

2016

¥ 44,256¥ 43,762$ 391,646

Revenue from credit card business

14,592

13,549129,133

Revenue from credit guarantee

12,491

11,382

110,540

Recovery of loans previously charged off

6,021

7,741

53,283

Other operating revenue (Note 6)

10,348

9,918

91,57687,70886,352776,178

Foreign exchange gain (Note 17)

16

2,885

142

Rent income of real estate (Note 17)

52

51

460

INCOME:
Operating revenue (Note 17):
Interest on loans

Total operating revenue

Gain on sale of investment securities (Notes 6 and 17)

325

Gain on purchase of borrowings (Note 17)

320
153

198

1,353

87,92990,131

778,133

Interest on borrowings and bonds

6,885

6,483

60,929Provision for credit card point redemption (Note 17)

3,221

2,863

28,504

Provision for doubtful accounts (Note 17)

16,127

2,276

142,717

Provision for losses on interest refunds (Note 17)

2,897

63,73425,637

Provision for accrued bonuses (Note 17)

899

870

7,956

Salaries and other employees' benefits

12,071

12,073

106,823

471

474

4,168

3,638

3,464

32,195

Other income (Note 17)
Total income
EXPENSES:

Net periodic benefit costs (Note 8)Advertising expenses
Rental expenses (Note 12)

2,315

2,212

20,487

Commissions and fees

11,182

10,306

98,956

Depreciation and amortization (Note 17)

2,362

2,753

20,903

Other expenses (Note 6)

19,00018,477

168,141

Total expenses

81,068125,985

717,416

INCOME (LOSS) BEFORE INCOME TAXES

6,861(35,854)

60,717

Current

180

584

1,593

Deferred

(364)

62

(3,221)

Total income taxes

(184)

646

(1,628)NET INCOME (LOSS)

7,045(36,500)

62,3457,045¥ (36,500)

INCOME TAXES (Notes 11 and 17):NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE PARENT¥$

62,345

U.S. Dollars(Note 1)

Yen
2016

2015

¥

2016

AMOUNTS PER COMMON SHARE (Notes 2.s and 16):
14.59

¥ (75.74)$

0.13

Diluted net income		 14.57

-

		

0.13

Cash dividends applicable to the year

		

nil

		

nil

Basic net income (loss)

See notes to consolidated financial statements.

22

AIFUL CORPORATION Annual Report 2016nil

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2016

2015

2016

¥ 7,045¥ (36,500)$ 62,345

Unrealized loss on available-for-sale securities

(324)

(45)

(2,867)

Total other comprehensive loss

(324)

(45)

(2,867)COMPREHENSIVE INCOME (LOSS)¥ 6,721¥ (36,545)$ 59,478

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLETO OWNERS OF THE PARENT¥ 6,721¥ (36,545)$ 59,478

NET INCOME (LOSS)OTHER COMPREHENSIVE LOSS (Note 15):

See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 201623

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
Year Ended March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands

BALANCE AT APRIL 1, 2014

Millions of Yen
Accumulated
Other
Comprehensive
Income (Loss)

Number of
Shares ofCommonStock
Outstanding

CommonStockCapitalSurplus481,868¥ 143,325¥ 164,392

Stock
Acquisition
Rights¥ 413

Net loss attributable to owners of the parent

Retained
Earnings

Treasury
Stock

Unrealized
Gain (Loss) on
Available-forsale Securities¥ (171,652)¥ (3,110)¥ 174(36,500)

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

77

BALANCE AT MARCH 31, 2015

154
326

483,507

143,402(1)

77

Net change in the year
164,469¥ 133,542(36,500)

(1)
1,639

Total Equity

739

Net income attributable to owners of the parent(208,152)(3,111)

(45)

281

129

97,476

7,045

7,045

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

288

14

Deficit dispositon

1428(150,569)

150,569

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

Net change in the year

BALANCE AT MARCH 31, 2016

(72)

97

483,795¥ 143,416¥ 13,914¥ 836¥ (50,610)¥ (3,111)

(324)

(227)

¥ (195)¥ 104,250

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

BALANCE AT MARCH 31, 2015

CommonStockCapitalSurplus$ 1,269,044$ 1,455,478

Retained
Earnings

Treasury
Stock

Unrealized
Gain (Loss) on
Available-forsale Securities$ 6,540 $ (1,842,053)$ (27,531)$ 1,141

Stock
Acquisition
Rights

Net income attributable to owners of the parent

62,345

Total Equity$ 862,619
62,345Purchase of treasury stock (194 shares)
Disposal of treasury stock (26 shares)
Exercise of stock options

124

Deficit disposition

124

248

(1,332,469)

1,332,469

Decrease due to the merger of non-consolidated
subsidiaries with consolidated subsidiaries(637)

Net change in the year

BALANCE AT MARCH 31, 2016

See notes to consolidated financial statements.

24

AIFUL CORPORATION Annual Report 2016

(637)

858

$ 1,269,168$ 123,133$ 7,398 $ (447,876)$ (27,531)(2,867)(2,009)$ (1,726)$ 922,566

Consolidated Financial Statements

Consolidated Statement of Cash Flows
Year Ended March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2016

2016

2015

OPERATING ACTIVITIES:
6,861¥ (35,854)

Income taxes - paid

(615)

(764)

(5,442)

Income taxes - refund

128

369

1,133

Income (loss) before income taxes¥$

60,717

Adjustments for:

2,362

2,753

20,903

Decrease in allowance for investment losses

(8)

(14)

(71)

Decrease in allowance for doubtful accounts

Depreciation and amortization(7,097)(22,814)(62,805)

Increase in allowance for bonuses

12

3

106

Increase in allowance for credit card point redemption

20

160

177

(29,966)

33,523(265,186)(Decrease) increase in allowance for losses on interest refunds
Gain on sale of investments in securities, net(325)

Gain on purchase of borrowings(320)

Changes in assets and liabilities:(Increase) decrease in loans(26,830)

33,499(237,434)(Increase) decrease in installment accounts receivable(4,869)931(43,088)(Increase) decrease in purchased receivables

(664)

43

(5,876)

Decrease in other operating receivables

227

1,132

2,009

Decrease in claims in bankruptcy

2,038

2,870

18,035Decrease in lease and guarantee deposits

18,635

1,636

164,912

Increase in other current assets(157)(1,346)(1,389)

Increase in other current liabilities

8,048

3,083

71,221

202

(62)

1,785

Total adjustments(38,534)

54,357(341,010)

Net cash (used in) provided by operating activities(31,673)

18,503(280,293)(2,634)(2,219)(23,310)Purchases of investment securities(320)(4,386)(2,832)Other, net

(90)

220

(796)

(3,044)(6,385)(26,938)¥ (34,717)¥ 12,118$ (307,231)

Other, net

INVESTING ACTIVITIES:Capital expenditures

Net cash used in investing activities
FORWARD(Continued)

AIFUL CORPORATION Annual Report 201625

Consolidated Statement of Cash Flows

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

2016

2015

2016

¥ (34,717)¥ 12,118$ (307,231)

16,5302,210

146,283

FINANCING ACTIVITIES:Net increase in short-term borrowings
Proceeds from long-term debt

111,200

96,900984,071

Repayments of long-term debt

(105,746)(125,803)(935,805)

18

104

159

22,002(26,589)

194,708

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND
CASH EQUIVALENTS

(13)

180

(115)

CASH AND CASH EQUIVALENTS INCREASED BY MERGER OFNON-CONSOLIDATED SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES

48

Other, net
Net cash provided by (used in) financing activities

NET DECREASE IN CASH AND CASH EQUIVALENTS(12,680)(14,291)(112,213)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

52,586

66,877465,363¥ 39,906¥ 52,586$ 353,150

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

26

425

AIFUL CORPORATION Annual Report 2016

Consolidated Financial Statements

Notes to Consolidated Financial Statements
Year Ended March 31, 2016
AIFUL CORPORATION and Consolidated Subsidiaries

1

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Act and its related
accounting regulations, and in accordance with accounting
principles generally accepted in Japan ("Japanese GAAP"),
which are different in certain respects as to the application anddisclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form that is more familiar to readers outside

2

Japan. In addition, certain reclassifications have been made in
the 2015 consolidated financial statements to conform to theclassifications used in 2016.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which AIFUL CORPORATION(the "Company") is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥113 to $1, the approximate rate ofexchange at March 31, 2016. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements asof March 31, 2016, include the accounts of the Company andits four (four in 2015) significant subsidiaries (together, the"Group"). Consolidation of the remaining nine (twelve in 2015)
unconsolidated subsidiaries would not have a material effect on
the accompanying consolidated financial statements.
Under the control and influence concept, those companies
in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investments in seven unconsolidated subsidiaries (eight in2015) and an affiliated company (nil in 2015) are stated at cost.
Investments in the remaining two unconsolidated subsidiaries(four in 2015), which are limited liability investment partnerships
and similar partnerships, are initially recorded at cost, andthe carrying amount is adjusted to recognize the Company's
interests in earnings or losses in such partnerships based on themost recent available financial statements of the partnerships.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit(loss) included in assets (liabilities) resulting from transactions
within the Group is eliminated.
b. Business Combinations — In October 2003, the BusinessAccounting Council issued a Statement of Opinion, "Accountingfor Business Combinations," and in December 2005, the
Accounting Standards Board of Japan (the "ASBJ") issued ASBJ
Statement No. 7, "Accounting Standard for Business Divestitures"and ASBJ Guidance No. 10, "Guidance for Accounting Standard
for Business Combinations and Business Divestitures."
In December 2008, the ASBJ issued a revised accounting
standard for business combinations, ASBJ Statement No. 21,"Accounting Standard for Business Combinations." Major
accounting changes under the revised accounting standard
are as follows: (1) The revised standard requires accounting
for business combinations only by the purchase method. As

a result, the pooling of interests method of accounting is nolonger allowed. (2) The previous accounting standard required
research and development costs to be charged to income as
incurred. Under the revised standard, in-process research anddevelopment costs (IPR&D) acquired in the business combination
are capitalized as an intangible asset. (3) The previous accounting
standard provided for a bargain purchase gain (negative goodwill)
to be systematically amortized over a period not exceeding
20 years. Under the revised standard, the acquirer recognizes
the bargain purchase gain in profit or loss immediately on theacquisition date after reassessing and confirming that all of
the assets acquired and all of the liabilities assumed have been
identified after a review of the procedures used in the purchaseprice allocation. The revised standard was applicable tobusiness combinations undertaken on or after April 1, 2010.
In September 2013, the ASBJ issued revised ASBJ Statement
No. 21, "Accounting Standard for Business Combinations,"
revised ASBJ Guidance No. 10, "Guidance on AccountingStandards for Business Combinations and Business Divestitures,"and revised ASBJ Statement No. 22, "Accounting Standard forConsolidated Financial Statements." Major accounting changes
are as follows:(a) Transactions with noncontrolling interest — A parent's
ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The
carrying amount of noncontrolling interest is adjusted toreflect the change in the parent's ownership interest in its
subsidiary while the parent retains its controlling interest
in its subsidiary. Under the previous accounting standard,
any difference between the fair value of the consideration
received or paid and the amount by which the noncontrollinginterest is adjusted is accounted for as an adjustment of
goodwill or as profit or loss in the consolidated statementof operations. Under the revised accounting standard, suchdifference is accounted for as capital surplus as long as theparent retains control over its subsidiary.
AIFUL CORPORATION Annual Report 201627

Notes to Consolidated Financial Statements(b) Presentation of the consolidated balance sheet — In
the consolidated balance sheet, "minority interest" under
the previous accounting standard is changed to "noncontrollinginterest" under the revised accounting standard.
(c) Presentation of the consolidated statement of operations — In the consolidated statement of operations, "income
before minority interest" under the previous accounting
standard is changed to "net income" under the revised
accounting standard, and "net income" under the previous
accounting standard is changed to "net income attributableto owners of the parent" under the revised accounting
standard.
(d) Provisional accounting treatments for a businesscombination — If the initial accounting for a businesscombination is incomplete by the end of the reporting
period in which the business combination occurs, anacquirer shall report in its financial statements provisionalamounts for the items for which the accounting is incomplete.
Under the previous accounting standard guidance, theimpact of adjustments to provisional amounts recorded
in a business combination on profit or loss is recognizedas profit or loss in the year in which the measurement iscompleted. Under the revised accounting standard guidance,
during the measurement period, which shall not exceed one
year from the acquisition, the acquirer shall retrospectively
adjust the provisional amounts recognized at the acquisition
date to reflect new information obtained about facts andcircumstances that existed as of the acquisition date andthat would have affected the measurement of the amounts
recognized as of that date. Such adjustments shall berecognized as if the accounting for the business combination
had been completed at the acquisition date.
(e) Acquisition-related costs — Acquisition-related costs arecosts, such as advisory fees or professional fees, which anacquirer incurs to effect a business combination. Under
the previous accounting standard, the acquirer accounts foracquisition-related costs by including them in the acquisition
costs of the investment. Under the revised accounting
standard, acquisition-related costs shall be accounted for as
expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a) transactions
with noncontrolling interest, (b) presentation of the consolidatedbalance sheet, (c) presentation of the consolidated statementof operations, and (e) acquisition-related costs are effective forthe beginning of annual periods beginning on or after April 1,
2015. Earlier application is permitted from the beginning ofannual periods beginning on or after April 1, 2014, except for(b) presentation of the consolidated balance sheet and(c) presentation of the consolidated statement of operations. In
case of earlier application, all accounting standards andguidance above, except for (b) presentation of the consolidatedbalance sheet and (c) presentation of the consolidated
statement of operations, should be applied simultaneously.
Either retrospective or prospective application of therevised accounting standards and guidance for (a) transactions
with noncontrolling interest and (e) acquisition-related costs ispermitted. In retrospective application of the revised standards

28

AIFUL CORPORATION Annual Report 2016

and guidance, the accumulated effects of retrospective adjustments
for all (a) transactions with noncontrolling interest and(e) acquisition-related costs which occurred in the past shallbe reflected as adjustments to the beginning balance of capitalsurplus and retained earnings for the year of the first-time
application. In prospective application, the new standards andguidance shall be applied prospectively from the beginning of
the year of the first-time application.
The revised accounting standards and guidance for(b) presentation of the consolidated balance sheet and(c) presentation of the consolidated statement of operations
shall be applied to all periods presented in financial statements
containing the first-time application of the revised standards
and guidance.
The revised standards and guidance for (d) provisional
accounting treatments for a business combination are effective
for a business combination which occurs on or after the beginningof annual periods beginning on or after April 1, 2015. Earlier
application is permitted for a business combination which
occurs on or after the beginning of annual periods beginningon or after April 1, 2014.
The Company applied the revised accounting standards andguidance for (a) transactions with noncontrolling interest,(b) presentation of the consolidated balance sheet, (c) presentationof the consolidated statement of operations, and(e) acquisition-related costs above, effective April 1, 2015, and(d) provisional accounting treatments for a business combination
above for a business combination which occurred on or after
April 1, 2015. The revised accounting standards and guidance for(a) transactions with noncontrolling interest and(e) acquisition-related costs were applied prospectively.
With respect to (b) presentation of the consolidated balance
sheet and (c) presentation of the consolidated statement ofoperations, the applicable line items in the 2015 consolidated
financial statements have been accordingly reclassified andpresented in line with those in 2016.
As a result, there was no impact on net income (loss) fromthese accounting changes.
In the consolidated statement of cash flows for the year
ended March 31, 2016, cash flows for purchases or sales ofownership interests in a subsidiary without a change inconsolidation scope are presented under financing activities,
and cash flows for acquisition-related costs are presented underoperating activities.
c. Cash Equivalents — Cash equivalents are short-term
investments that are readily convertible into cash and that are
exposed to insignificant risk of changes in value. Cash equivalents
include time deposits that mature or become due within threemonths of the date of acquisition.
d. Operational Investment Securities Held by Venture
Capital Subsidiary and Investment Securities — Operational
investment securities held by a venture capital company andinvestment securities, all of which are classified as availablefor-sale securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, reported in a separate
component of equity. The cost of securities sold is determinedbased on the moving-average cost method. NonmarketableNotes to Consolidated Financial Statements

available-for-sale securities are stated at cost determined by themoving-average method. For other-than-temporary declines
in fair value, operational investment securities and investment
securities are reduced to net realizable value by a charge toincome.
Investments in limited liability investment partnerships andsimilar partnerships are initially recorded at cost, and the carrying
amount is adjusted to recognize the Company's interests in earnings
or losses in such partnerships based on the most recent available
financial statements of the partnerships.
e. Property and Equipment — Property and equipment arestated at cost. Depreciation of property and equipment of theCompany and its consolidated subsidiaries is computed by the
declining-balance method except that the straight-line method
is applied to the buildings of the Company's consolidated
subsidiaries acquired on or after April 1, 1998. The range ofuseful lives is principally from 2 to 62 years for buildings andstructures, from 4 to 17 years for machinery and equipment,
and from 2 to 20 years for furniture and fixtures.
f. Long-lived Assets — The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may
not be recoverable. An impairment loss is recognized if thecarrying amount of an asset or asset group exceeds the sumof the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amountby which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows fromthe continued use and eventual disposition of the asset or the
net selling price at disposition.
g. Software — Expenditures for the purchase of software arecapitalized as software and amortized by the straight-line method
over the estimated useful lives of five years.
h. Allowance for Doubtful Accounts — The allowance for
doubtful accounts is stated in amounts considered to be appropriate
based on the Group's past credit loss experience and anevaluation 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 theusage of cards.
k. Allowance for Losses on Interest Refunds — The limit oninterest rates in Japan is regulated by two laws - "Capital
Subscription Law" and "Interest Rate Restriction Act." Under theformer law, interest rates on loans should not exceed 29.2%(20.0% for customers who originate loans after June 18, 2010)and violation of the law is subject to a criminal penalty. The
latter law stipulates that interest payments for interest rates
that exceed the legal limit (20.0% for principal amounts under¥100 thousand, 18.0% for principal amounts not less than¥100 thousand and under ¥1 million, and 15.0% for principal
amounts not less than ¥1 million) are void. However, under the"Moneylending Business Control and Regulation Law," suchinterest payments are nonetheless considered to be valid ifmoneylenders issue notices as prescribed by the law to debtors
and debtors pay the interests voluntarily (for customers who
originate loans after June 18, 2010, such system is abolished).
Strict judgment by the Supreme Court of these requirements
has led to decisions against moneylenders and resulted in more
debtors claiming for the return of excess interest payments.
The Company and certain of its consolidated subsidiaries
have loaned money at rates between the limits set by the twolaws. Allowance for losses on interest refunds is stated at
amounts considered to be appropriate based on the Company's
and respective consolidated subsidiaries' past refund loss
experience, the recent situation regarding interest refunds andother factors.
At March 31, 2016 and 2015, the Group recorded allowancesof ¥63,439 million ($561,407 thousand) and ¥93,405 million,
respectively, as "Allowance for losses on interest refunds." In
addition, the estimated amount of interest refunds of ¥12,435
million ($110,044 thousand) and ¥17,388 million, which were
expected to be preferentially set off against loans, was recorded
as "Allowance for doubtful accounts" for the Company andcertain of its consolidated subsidiaries at March 31, 2016 and2015, respectively.
l. Asset Retirement Obligations — In March 2008, the ASBJ
published ASBJ Statement No. 18 "Accounting Standard for
Asset Retirement Obligations" and ASBJ Guidance No.
21 "Guidance on Accounting Standard for Asset Retirement
Obligations." Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either
by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed
asset and is associated with the retirement of such tangible
fixed asset. The asset retirement obligation is recognized as thesum of the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation
is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be madein the period the asset retirement obligation is incurred, theliability should be recognized when a reasonable estimateof the asset retirement obligation can be made. Upon initialrecognition of a liability for an asset retirement obligation, an
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 eachperiod. Any subsequent revisions to the timing or the amountof the original estimate of undiscounted cash flows are reflected
as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.
m. Stock Options — ASBJ Statement No. 8, "AccountingStandard for Stock Options" and related guidance are applicableto stock options granted on and after May 1, 2006. ThisAIFUL CORPORATION Annual Report 201629

Notes to Consolidated Financial Statements

standard requires companies to measure the cost of employee
stock options based on the fair value at the date of grant andrecognize compensation expense over the vesting period as
consideration for receiving goods or services. The standard
also requires companies to account for stock options granted
to non-employees based on the fair value of either the stock
options or the goods or services received. In the balance sheet,the stock option is presented as a stock acquisition right as aseparate component of equity until exercised. The standard
covers equity-settled, share-based payment transactions, butdoes not cover cash-settled, share-based payment transactions.
In addition, the standard allows unlisted companies to measure
options at their intrinsic value if they cannot reliably estimate
fair value.
n. Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, "Accounting Standard for Lease Transactions," whichrevised the previous accounting standard for lease transactions.
The revised accounting standard for lease transactions was
effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases thatwere deemed to transfer ownership of the leased property to
the lessee were capitalized. However, other finance leases werepermitted to be accounted for as operating lease transactions if
certain "as if capitalized" information was disclosed in the noteto the lessee's financial statements. The revised accounting
standard requires that all finance lease transactions be capitalized
by recognizing lease assets and lease obligations in the balance
sheet.
The Group applied the revised accounting standard effective
April 1, 2008.
Lease assets related to finance lease transactions withownership transfer are depreciated on the methods that are
applied to the assets owned by the Group. Lease assets related
to finance lease transactions without ownership transfer are
depreciated over the leased periods on a straight-line basis,
with no residual value.
All other leases are accounted for as operating leases.
o. Income Taxes — The provision for income taxes is computed
based on the pretax income included in the consolidated
statement of operations. The asset and liability approach isused to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets andliabilities. Deferred taxes are measured by applying currently
enacted tax laws to the temporary differences.
The Group files a tax return under the consolidated
corporate tax system, which allows companies to base tax
payments on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.
p. Foreign Currency Transactions — All short-term andlong-term monetary receivables and payables denominated inforeign currencies are translated into Japanese yen at theexchange rates at the balance sheet date. The foreign exchange
gains and losses from translation are recognized in the consolidated
statement of operations to the extent that they are not hedged

30

AIFUL CORPORATION Annual Report 2016

by forward exchange contracts.
q. Revenue Recognition:
Interest on Loans — Interest on loans is recorded on an
accrual basis. In accordance with the practice prevailing in theindustry, the Company records accrued interest at the lower ofthe interest rate stipulated in the Interest Rate Restriction Act or
the contractual interest rate.
Revenue from Credit Card Business and Revenue from
Installment Sales Finance Business — Fees from customers
and member stores applying the add-on method are generally
recorded collectively as unearned income when credit contracts
become effective and are recognized in equal installments
over the contractual term. Fees from customers applying thediminishing balance method or revolving method are generally
recognized in equal installments over the contractual term.
Revenue from Credit Guarantees — Revenue from credit
guarantees is recorded by the remaining principal method.
r. Interest on Borrowings — Interest on financial liabilities isaccounted for as operating expenses while other interest is
included in other expenses.
s. Per Share Information — Basic net income per share iscomputed by dividing net income attributable to commonshareholders by the weighted-average number of commonshares outstanding for the period, retroactively adjusted forstock splits.
Diluted net income per share of common stock reflects thepotential dilution that could occur if stock aquisitions rights
were converted into common stock and assumes full exercise ofoutstanding stock options.
Cash dividends per share presented in the accompanying
consolidated statement of operations are dividends applicableto the respective years including dividends to be paid after theend of the year.
t. Accounting Changes and Error Corrections — In December
2009, ASBJ issued ASBJ Statement No. 24 "AccountingStandard for Accounting Changes and Error Corrections" andASBJ Guidance No. 24 "Guidance on Accounting Standard
for Accounting Changes and Error Corrections." Accounting
treatments under this standard and guidance are as follows:(1) Changes in Accounting Policies - When a new accounting
policy is applied following revision of an accounting standard,
the new policy is applied retrospectively unless the revised
accounting standard includes specific transitional provisions,in which case the entity shall comply with the specifictransitional provisions. (2) Changes in Presentation - When thepresentation of financial statements is changed, prior-period
financial statements are reclassified in accordance with the newpresentation. (3) Changes in Accounting Estimates - A change
in an accounting estimate is accounted for in the period of thechange if the change affects that period only, and is accounted
for prospectively if the change affects both the period of thechange and future periods. (4) Corrections of Prior-Period
Errors - When an error in prior-period financial statements is
discovered, those statements are restated.

Notes to Consolidated Financial Statements

3

LOANS

Loans at March 31, 2016 and 2015, consisted of the following (before allowance for doubtful accounts):

Thousands of
U.S. Dollars

Millions of Yen
Unsecured

2016

2015

2016

¥ 306,602¥ 273,628$ 2,713,292

28,13934,904

249,018

SecuredSmall-business loans

41,484

41,485367,115

Total

376,225

350,017

3,329,425

Off-balance-sheet securitized loans(60,678)(62,366)(536,974)¥ 315,547¥ 287,651$ 2,792,451

Net

Registered moneylenders are required to disclose the following information under the Non-Bank Bond Issuing Law:

Thousands of
U.S. Dollars

Millions of Yen
2016
Loans in legal bankruptcy¥

31,105

2016

2015
¥

32,909$275,265

Nonaccrual loans

22,264

23,819197,027

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

3,349

2,830

29,637

Restructured loans

9,440

10,861

83,540Total
Loans in legal bankruptcy are loans on which accrual of interest
is discontinued (excluding the portion recognized as bad debts),
based on management's judgment as to the collectibility ofprincipal or interest resulting from the past-due payment ofinterest or principal and other factors. Allowances for claims inbankruptcy are stated at such amount less net realizable value ofcollateral.
Nonaccrual loans are loans on which accrual of interest is
discontinued, other than loans in legal bankruptcy as well as
loans receiving regular payments in the case of granting deferralof interest payment to the debtors in financial difficulties to assist
them in their recovery.
Accruing loans contractually past due three months or moreas to principal or interest payments are loans for which payments
of principal or interest have not been received for a period of
three months or more beginning with the next business day
following the last due date for such payments. Loans classified asloans in legal bankruptcy and nonaccrual loans are excluded from
accruing loans contractually past due three months or more.

¥

66,158¥70,419$585,469

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 and eventuallyenable them to pay creditors. Loans classified as loans in legal
bankruptcy, nonaccrual loans and accruing loans contractuallypast due three months or more are excluded.
At March 31, 2016 and 2015, including securitized loans,the Group had balances related to revolving loan contracts
aggregating ¥287,989 million ($2,548,575 thousand) and¥268,315 million, respectively, whereby the Group is obligatedto advance funds up to a predetermined amount upon request.
At March 31, 2016 and 2015, the balances of unadvanced
commitments were ¥721,183 million ($6,382,150 thousand)and ¥697,573 million, respectively. The loan contract contains
provisions that allow the Group to reduce the contract amountof the commitment or refuse to advance funds to loan customers
under certain conditions.

AIFUL CORPORATION Annual Report 201631

Notes to Consolidated Financial Statements

4

INSTALLMENT ACCOUNTS RECEIVABLE

Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2016 and 2015, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen
2016

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

5

Receivables¥ 89,642

¥ 368

524
¥ 90,166

Total

2015
Unearned
Income2016

Receivables

Unearned
IncomeReceivables

Unearned
Income¥ 83,681¥ 367$ 793,292$ 3,257

4,637

652
¥ 368

¥ 84,333$ 797,929

¥ 367

(964)
¥ 89,202$ 3,257(8,531)¥ 368¥ 84,333¥ 367$ 789,398$ 3,257

CREDIT GUARANTEES AND OBLIGATION UNDER CREDIT GUARANTEESThe Group, as guarantor, recorded credit guarantees as a contra account of obligations under credit guarantees. Unearned income relatingto credit guarantees was ¥20 million ($177 thousand) and ¥26 million at March 31, 2016 and 2015, respectively, which was included inother current liabilities.

6

OPERATIONAL INVESTMENT SECURITIES HELD BY VENTURE CAPITAL SUBSIDIARY AND INVESTMENT SECURITIESOperational investment and investment securities at March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
2016
Current:
Equity securities

¥

2016

2015
547

¥

688

$

4,841

Non-current:¥ 1,554

Equity securities
Other
Total

¥ 1,508$ 13,752

92

149

814

¥ 1,646¥ 1,657$ 14,566

The costs and aggregate fair values of available-for-sale securities included in operational investment securities and investment securities
with reliably determinable fair value at March 31, 2016 and 2015, were as follows:

Millions of Yen
2016
Cost
Securities classified as:
Available-for-sale securities

32

AIFUL CORPORATION Annual Report 2016

¥ 1,348

Unrealized
Gains

Unrealized
LossesFair Value

¥ 423

¥ 556

¥ 1,215

Notes to Consolidated Financial Statements

Millions of Yen
2015
Cost
Securities classified as:
Available-for-sale securities

Unrealized
Gains

Unrealized
LossesFair Value

¥ 225

¥ 142

¥ 1,353¥ 1,270

Thousands of U.S. Dollars
2016
Cost
Securities classified as:
Available-for-sale securities$ 11,929

Unrealized
Gains

Unrealized
LossesFair Value$ 3,743$ 4,920$ 10,752

Unlisted stocks whose fair value cannot be reliably determined were ¥978 million ($8,655 thousand) and ¥992 million at March 31, 2016,
and 2015, respectively.
Proceeds from sales of available-for-sale securities for the years ended March 31, 2016 and 2015, were ¥265 million ($2,345
thousand) and ¥1,004 million, respectively. Gross realized gains on these sales, computed on the moving-average cost basis, were ¥219
million ($1,938 thousand) and ¥760 million for the years ended March 31, 2016 and 2015, respectively, and gross realized losses were ¥2
million ($18 thousand) and ¥7 million for the years ended March 31, 2016 and 2015, respectively.
Impairment losses on available-for-sale securities, included in other expense, for the years ended March 31, 2016 and 2015, were ¥13
million ($115 thousand) and ¥15 million, respectively.

7

SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings at March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
Borrowings principally from a certain credit card company,
1.15% to 2.95% (1.23% to 2.95% at March 31, 2015)

2016

2015

¥ 67,990¥ 51,460

2016$

601,681Long-term debt at March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen
Loans from banks, 1.60% to 3.30%(1.90% to 3.30% at March 31, 2015) *1
Loans from other financial institutions, 1.48% to 3.75%(1.90% to 3.75% at March 31, 2015) *1
Unsecured 1.99% yen straight bonds, due 2015

2016

2015

¥ 23,593¥ 53,975

22,852

12,495
10,000Unsecured 3.50% medium-term notes, due 20152016$

208,788202,230

15,000Unsecured 8.00% yen straight bonds, due 2020

28,800Unsecured 2.90% yen straight bonds, due 2017
Other debt (principally by syndicated loan), 0.52% to 3.32%(2.58% to 3.42% at March 31, 2015) *1, 2
Obligations under finance leases

2,600
103,225473

55,225
583

913,495
4,186

Total

181,543

176,078

1,606,575

Less current portion(22,440)(32,833)(198,584)¥ 159,103¥ 143,245$ 1,407,991

Long-term debt, less current portion

28,800254,867
23,009AIFUL CORPORATION Annual Report 201633

Notes to Consolidated Financial Statements*1 Long-term debts subject to financial assistance of ¥45,100 million and ¥7,600 million were included in "Loans from banks" and "Loans from other financial
institutions," respectively, as of March 31, 2015. There were no long-term debts subject to financial assistance as of March 31, 2016.
The final due date for "Loans from banks" other than those subject to financial assistance is 2020 (2020 at March 31, 2015), and the final due date for"Loans from other financial institutions" other than those subject to financial assistance is 2021 (2020 at March 31, 2015). The final due date for "Other
debt" is 2023 (2020 at March 31, 2015).
*2 The Company has an outstanding syndicated loan which is subject to a financial covenant requiring maintenance of a minimum net asset balance. The
Company was in compliance with such financial covenant as of March 31, 2016. Although the required minimum was not met as of March 31, 2015, theCompany obtained from the relevant financial institutions consents to waive the covenant requirement for March 31, 2015. Therefore repayments were
not accelerated and the debt agreement was maintained.

Annual maturities of long-term debt, excluding finance leases (see Note 12) at March 31, 2016, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
Year Ending March 31
2017¥ 22,318$

197,5042018

		 22,610

		

200,0882019		 20,057

		

177,4962020		 27,641

		

244,6112021

		 82,669

		731,584

2022 and thereafter				

51,106

Total

5,775

¥ 181,070$ 1,602,389

At March 31, 2016, the following assets were pledged as collateral for short-term borrowings and long-term debt (including current portionof long-term debt):

Millions of Yen

Thousands of
U.S. Dollars

Loans
Installment accounts receivable
Land
Buildings and structures
Machinery and equipment
Total¥ 235,425
		 79,518
		 8,523
		 4,526
		54¥ 328,046$ 2,083,407
		 703,699
		75,425
		
40,053
		478$ 2,903,062

Related liabilities:
Short-term borrowings
Long-term debt (including current portion of long-term debt)
Total¥ 65,690
		 140,939¥ 206,629$ 581,327
		 1,247,248$ 1,828,575

The above table includes loans related to securitized loans of ¥61,683 million ($545,867 thousand) and related liabilities of ¥40,000 million($353,982 thousand).

8

RETIREMENT AND PENSION PLANS

The Company and certain of its consolidated subsidiaries have a defined contribution pension plan and a prepaid retirement benefits plan.
Contributions to the defined contribution plan and payments to the prepaid retirement benefits plan are charged to expense when made.
The components of periodic benefit costs for the years ended March 31, 2016 and 2015, were as follows:

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

34

AIFUL CORPORATION Annual Report 2016

2016
¥ 198
273
¥ 471

2015
¥ 207
267
¥ 474

Thousands of
U.S. Dollars
2016$ 1,752
2,416$ 4,168

Notes to Consolidated Financial Statements

9

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

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

STOCK OPTIONSThe stock options outstanding as of March 31, 2016, are as follows:

Stock Option
2010 Stock Options
2013 Stock Options
2015 Stock Options

Persons Granted
2,206 Company's and		 Subsidiaries' key employees
1,480 Company's and		 Subsidiaries' key employees
1,383 Company's and		 Subsidiaries' key employees

Number of
Options Granted

Date of Grant

4,385,300 shares

July 1, 2010

2,947,100 shares

May 27, 2013

1,583,850 shares

June 30, 2015

ExercisePrice¥ 64($ 0.57)¥ 501($ 4.43)¥ 407($3.60)Exercise Period
From August 1, 2014
to July 31, 2016
From May 1, 2015
to April 30, 2017
From July 1, 2017
to June 30, 2019

AIFUL CORPORATION Annual Report 201635

Notes to Consolidated Financial Statements

The stock option activity is as follows:

For the year ended March 31, 2015
Non-vested
April 1, 2014 - Outstanding
GrantedCanceled
VestedMarch 31, 2015 - Outstanding
VestedApril 1, 2014 - Outstanding
VestedExercised
Canceled
March 31, 2015 - Outstanding
Exercise price
Average stock price at exercise
Option fair value at grant date

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

36

AIFUL CORPORATION Annual Report 20162010 Stock Option2013 Stock Option

2015 Stock Option(shares)(shares)(shares)

4,385,300

2,947,100

4,385,300
2,947,100

4,385,300
1,638,700¥¥¥

2,746,600
64
479
31

¥

501

¥

261

2010 Stock Option2013 Stock Option

2015 Stock Option(shares)(shares)(shares)

2,947,100
1,583,850
2,947,100
1,583,850
2,746,600
2,947,100
288,000
2,458,600
64($0.57)¥405($3.58)¥31($0.27)¥¥¥

2,947,100
501($4.43)261($2.31)¥407($3.60)¥157($1.39)

Notes to Consolidated Financial Statements

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

Volatility of stock price:

77.936%

Estimated remaining outstanding period:

5.08 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.3577%

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

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

2.93 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.171%

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

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

3.00 years

Estimated dividend:¥0 per share

Risk free interest rate:

110.012%

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted innormal effective statutory tax rates of approximately 33.0% for the years ended March 31, 2016 and 2015.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets and liabilities at March
31, 2016 and 2015, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2016

2016

2015

Deferred tax assets:
Allowance for doubtful accounts¥

11,883¥

17,849$105,159

Allowance for losses on interest refunds

		 19,565

30,196

173,142

Charge-offs for doubtful accounts

		

1,717

5,508

15,195

Accrued interest on loans

		

1,267

1,489

11,212

Tax loss carryforwards

		170,249

164,775

1,506,628

Interest refunds payable

		

1,852

844

16,389

Other

		

3,786

4,778

33,505Total

		210,319

225,439

1,861,230(209,834)(225,298)(1,856,938)

Less valuation allowance
Total deferred tax assets

¥

485

¥

141

$

4,292

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

¥

(75)

$

(664)

Costs of removal related to asset retirement obligations

¥

(206)

¥

(225)

$

(1,823)

Total deferred tax liabilities

¥

(281)

¥

(225)

$

(2,487)

Net deferred tax assets (liabilities)

¥

204

¥

(84)

$

1,805

A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary differences and net operating
loss carryforwards where it is more likely than not that they will not be realized.
AIFUL CORPORATION Annual Report 201637

Notes to Consolidated Financial Statements

A reconciliation between the statutory tax rates and the effective tax rates reflected in the accompanying consolidated statement ofoperations for the year ended March 31, 2016 is as follows. A reconciliation for the year ended March 31, 2015 has not been disclosed dueto the Group’s net loss position.

2016
Statutory tax rate

33.0%

Less valuation allowance(211.5)

Effect of tax rate reduction

171.9

Income not taxable for income tax purposes

0.8

Others, net

3.1

Effective tax rate(2.7)%On March 29, 2016, new tax reform laws were enacted in Japan, which changed the statutory tax rate from approximately 33.0% toapproximately 30.8% for the fiscal years beginning on or after April 1, 2016 through March 31, 2018, and to approximately 30.5% for the
fiscal years beginning on or after April 1, 2018. The effect of this change on deferred taxes in the consolidated financial statements for theyear ended March 31, 2016 is immaterial.
At March 31, 2016, the Company and its wholly owned domestic subsidiaries had tax loss carryforwards aggregating approximately¥553,500 million ($4,898,230 thousand) which were available for offset against taxable income of the Company and such subsidiaries infuture years. These tax loss carryforwards, if not utilized, will expire as follows:Year Ending March 31

Millions of Yen

Thousands of
U.S. Dollars

2018¥ 59,408

2019

155,254

1,373,929

2020

113,429

1,003,796

2021

95,484

844,991

2022

45,392

401,6992023 and thereafter

84,533748,080¥ 553,500$ 4,898,230

Total

12

$

525,735LEASESThe Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2016 and 2015, were ¥2,315 million($20,487 thousand) and ¥2,212 million, respectively.
Obligations under finance leases at March 31, 2016 were as follows:

Millions of Yen
Due within one year

¥ 122

$ 1,080

Due after one year

351

3,106

¥ 473

$ 4,186

Total

38

Thousands of
U.S. Dollars

AIFUL CORPORATION Annual Report 2016

Notes to Consolidated Financial Statements

13

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

Market risk management (foreign exchange risk and interest
rate risk)
The Group manages foreign exchange risk and interest rate risk
based on a "risk management manual" that was endorsed by
the Group's risk management committee. The risk management
committee reports directly to the board of directors. The financedepartment reports the conditions of foreign exchange risk andinterest rate risk to the internal control department. The internal
control department examines the reasonableness and adequacyof the finance department's risk evaluation and countermeasures,and reports to the board of directors. Also, the Group utilizes
interest rate caps in order to hedge exposure to risks fromchanges in interest rates.
Market risk management (stock price volatility risk)
Most of the operational investment securities and investment
securities the Group holds are intended to develop businessincluding business alliances and capital alliances. Relevant
departments monitor the market environment and the financial
situation of the issuers, deliberate countermeasures and reportto the board of directors accordingly. The Group does not holdtrading securities, which are held for the purpose of earning
capital gains in the near term.
Market risk management (quantitative information)
A change in interest rate impacts the fair values of loans,installment accounts receivable, short-term borrowings, and longterm debt (including bonds). An increase of 1 basis point (0.01%)
in interet rate is estimated to decrease the fair value of thesefinancial (net) assets by ¥44 million ($389 thousand). Conversely,
1 basis point (0.01%) decrease in interest rate is estimated toincrease the fair value of these financial (net) assets by ¥44
million ($389 thousand).
Market risk management (derivatives)
The Group manages market risk of derivatives according tointernal guidelines. Relevant departments conduct internal
checks to ensure that transactions, evaluations of hedge
effectiveness and management of affairs are performed inaccordance with internal guidelines.
Liquidity risk management regarding fund-raising
The Group manages liquidity risk by adequate financial planningof the Group on a timely basis, diversifying the means of fundraising and adjusting the ratio of long-term and short-term debt
in light of the market environment.
(4) Fair value of financial instruments
Fair values of financial instruments are based on quoted prices in
active markets. If a quoted price is not available, other valuation
techniques are used. Fair value calculation results may differ
when different assumptions are used.

AIFUL CORPORATION Annual Report 201639

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

Millions of Yen
March 31, 2016
Cash and cash equivalents

Carrying Amount

Fair Value

Unrealized Gain

¥ 39,906¥ 39,90644Time deposits

315,547

Loans
Allowance for doubtful accounts and allowance forlosses on interest refunds(32,057)
283,490

336,412¥ 52,922

84,89686,185

1,289

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

1,592

3,154

1,562

Claims in bankruptcy

31,947

89,202

Installment accounts receivable(336)

Unearned income(3,970)Allowance for doubtful accounts(29,351)

Allowance for doubtful accounts

2,596

2,596

Total

¥ 412,484¥ 468,257

Short-term borrowings¥ 67,990¥ 67,990

		 181,070

181,214¥(144)¥ 249,060¥ 249,204

¥

(144)

Long-term debt (excluding finance leases)
Total¥ 55,773

Millions of Yen
March 31, 2015
Cash and cash equivalents

Carrying Amount

Fair Value¥ 52,586¥ 52,586

44Time depositsLoans287,651

Allowance for doubtful accounts and allowance forlosses on interest refunds(37,012)250,639

298,811¥ 48,172

79,31580,9191,604

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

1,353

1,353

Claims in bankruptcy

33,984

Installment accounts receivable

84,333

Unearned income(327)

Allowance for doubtful accounts(4,691)

Allowance for doubtful accounts(30,821)
3,163

3,163

Total

¥ 387,060¥ 436,836

Short-term borrowings¥¥

Long-term debt (excluding finance leases)
Total

40

Unrealized Gain

AIFUL CORPORATION Annual Report 2016

51,460¥ 49,776

51,460122,795

122,776¥19¥ 174,255¥ 174,236¥

19

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
March 31, 2016
Cash and cash equivalents

Carrying Amount$

353,150

Fair Value$

353,150

35

Time deposits

Unrealized Gain
35

2,792,451

Loans
Allowance for doubtful accounts and allowance forlosses on interest refunds(283,690)
2,508,761

2,977,097$ 468,336

751,292

762,699

11,407

Operational investment securities, investment securities
and investments in unconsolidated subsidiaries

14,08827,912

13,824Claims in bankruptcy

282,717789,398

Installment accounts receivable
Unearned income(2,973)

Allowance for doubtful accounts(35,133)(259,744)

Allowance for doubtful accounts

22,973

22,973Total$ 3,650,299$ 4,143,866

Short-term borrowings$$

Long-term debt (excluding finance leases)
Total

601,681$ 493,567

601,681

1,602,389

1,603,663$(1,274)$ 2,204,070$ 2,205,344$(1,274)

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

AIFUL CORPORATION Annual Report 201641

Notes to Consolidated Financial Statements

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

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

March 31, 2016
Operational investment securities, investment securities and investments in unconsolidated subsidiaries: 1
Unlisted stocks
Investments in limited liability investment partnerships

Carrying AmountThousands ofMillions of Yen
U.S. Dollars¥ 2,985$ 26,416

1,389

12,292Carrying AmountMarch 31, 2015

Millions of Yen

Operational investment securities, investment securities and investments in unconsolidated subsidiaries:*1¥ 3,386

Unlisted stocks
Investments in limited liability investment partnerships

1,484

Long-term debt

52,700*2*1 Since unlisted stocks and investments in limited liability investment partnerships do not have a quoted market price in an active market and their fair values
cannot be reliably determined, they are not subject to fair value disclosure.
*2 Long-term debt which continues to be subject to financial assistance after the end of the Business Revitalization Plan has significant uncertainties in
estimates of future repayment plans. Since it is difficult to make reasonable fair value calculations for such long-term debt, they are not subject to fair value
disclosure.

(5) Maturity analysis for financial assets with contractual maturities

March 31, 2016
Cash and cash equivalents
Time deposits

Millions of Yen
Due after One Yearthrough Five Years

4
126,601¥ 173,910

Installment accounts receivable

86,3452,857¥ 252,856¥ 176,767

AIFUL CORPORATION Annual Report 2016

Due after FiveYears

¥ 39,906

Loans
Total

42

Due in One Yearor Less¥ 15,036¥ 15,036

Notes to Consolidated Financial Statements

Due in One Yearor Less

March 31, 2016$

Cash and cash equivalents

Thousands of U.S. Dollars
Due after One Yearthrough Five Years

Due after FiveYears

353,150
35

Time deposits
Loans
Installment accounts receivable
Total

1,120,362$ 1,539,027

764,115

25,283$ 2,237,662$ 1,564,310$ 133,062$ 133,062

Claims in bankruptcy of ¥31,947 million ($282,717 thousand) whose amount of redemption cannot be determined are not included in thetable above.
See Note 7 for annual maturities of long-term debt and Note 12 for obligations under finance leases.

14

DERIVATIVESThe Group enters into interest rate cap contracts as a means of managing its principal and interest rate exposures on certain liabilities.
Such derivative transactions are entered into to hedge interest exposures inherent within the business. Accordingly, market risks inthese derivatives are offset by opposite movements in the value of hedged liabilities. The Group does not hold or enter into derivatives for
trading or speculative purposes.
Because the counterparties to these derivatives are limited to major financial institutions, the Group does not anticipate any significant
losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies, which regulate theauthorization process and credit limit amount.
Year ended March 31, 2016
Derivative transactions to which hedge accounting is applied

At March 31, 2016
Interest rate cap

At March 31, 2016
Interest rate cap

Hedged Item
Long-term debt

Hedged Item
Long-term debt

Millions of Yen
Contract
Contract AmountAmountdue after One Year¥ 20,000¥ 20,000Thousands of U.S. Dollars
Contract
Contract AmountAmountdue after One Year$ 176,991$ 176,991

Fair Value*1

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

There were no derivative transactions to which hedge accounting is not applied at March 31, 2016.
Year ended March 31, 2015
There were no derivative transactions for the year ended March 31, 2015.

AIFUL CORPORATION Annual Report 201643

Notes to Consolidated Financial Statements

15

OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended March 31, 2016 and 2015, were as follows:

Thousands of
U.S. Dollars

Millions of Yen
2016

2016

2015

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

(43)

¥ 308

Reclassification adjustments to profit or loss

(206)

(354)

(1,823)

Amount before income tax effect

(249)

(46)

(2,203)

Income tax effect

(75)

1

(664)

(Loss) gain arising during the year

$

(380)

Total

¥ (324)¥(45)$ (2,867)

Total other comprehensive loss

¥ (324)¥(45)$ (2,867)

16

NET INCOME PER SHARE

Reconciliation of the differences between basic and diluted net income per share ("EPS") for the years ended March 31, 2016 and 2015, is
as follows:

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

Net Income
¥

7,045

Thousandsof Shares
Weighted- Average
Shares482,742

Yen

Dollars
EPS¥ 14.59$ 0.13$ 0.13

887
¥

7,045

483,629¥ 14.57¥ (36,500)

481,898¥ (75.74)

Year ended March 31, 2015
Basic EPS - Net loss available to commonshareholders

Diluted net income per share for the year ended March 31, 2015 is not disclosed because of the Company's net loss position.

44

AIFUL CORPORATION Annual Report 2016

Notes to Consolidated Financial Statements

17

SEGMENT INFORMATION

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

1. Description of reportable segments
The Group's reportable segments are those for which separate financial information is available and regular evaluation by theCompany's management is being performed in order to decide how resources are allocated among the Group. Therefore, theGroup’s reportable segements consist of its major operating companies, "AIFUL CORPORATION" and "LIFECARD CO., LTD." AIFULCORPORATION engages mainly in the loan business and the credit guarantee business. LIFECARD CO., LTD. engages mainly in thecredit card business and the credit guarantee business.
2. Methods of measurement for the amounts of sales, profit (loss), assets, liabilities and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those disclosed in Note 2, "Summary of Significant Accounting
Policies."
3. Information about sales, profit (loss), assets, liabilities and other items is as follows.

AIFUL CORPORATION Annual Report 201645

Notes to Consolidated Financial Statements

Millions of Yen
2016
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total

Reconciliations

Consolidated

5,645¥ 42,502¥ 1,754¥ 44,256¥ 44,25632

14,592

14,592

12,491

12,491

Operating revenue:
Interest on loans¥ 36,857¥

3

14,557

14,560

Revenue from credit guarantee

11,221

1,270

12,491

Recovery of loans previously charged off

5,789

217

6,006

15

6,021

6,021

Other operating revenue

1,240

6,285

7,525

2,823

10,348

10,348Operating revenue from externalcustomers

55,11027,974

83,084

4,624

87,70887,708

Revenue from credit card business

Intersegment operating revenue ortransfers
Total
Segment profit (loss)

10

374

384

77

461

¥

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

¥

¥

¥

¥

¥

¥

(752)*2

¥

5,281

1,859

7,140

657

7,797

(461)

Segment assets

407,140

173,085

580,225

28,962609,187(41,673)

Segment liabilities

328,256

135,292

463,548

10,381

473,929(10,665)*4

7,045

*3

567,514463,264

Other:

19

Foreign exchange gain
Rent income of real estate

128

19

19

(3)

16

128

128

(76)

52

Gain on sale of investment securities
Gain on purchase of borrowings
Dividend income

7

Reversal of allowance for doubtful
accounts

10

10

17

1

10

18

18

10

10

Reversal of allowance for investment
lossesInterest on advances to subsidiaries and
other

918

Provision for credit card point redemption
Provision for doubtful accounts

14,171

918
3,221

3,221

1,939

16,110

135

1,053

40

16,150

2,897

2,897

Provision for accrued bonuses

565

12

577

19

596

Depreciation and amortization

1,391

967

2,358

4

2,362

40

40

Provision for losses on interest refunds

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

3,221

18
3,221

(23)

2,897

16,127
2,897

303

899
2,362

(40)

Income taxes:
Current

(250)

356

106

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

1,004

1,968

2,972

Increase in property and equipment andintangible assets

74

180(1,094)

1

2,973

180
730

(364)
2,973

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

46

AIFUL CORPORATION Annual Report 2016

Notes to Consolidated Financial Statements

Millions of Yen
2015
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total

Reconciliations

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

Operating revenue:
Interest on loans

17

13,532

13,54913,54913,549

Revenue from credit guarantee

10,136

1,246

11,382

11,382

11,382

Recovery of loans previously charged off

7,542

181

7,723

18

7,741

7,741

Other operating revenue

1,068

6,006

7,074

2,844

9,918

9,918

Operating revenue from externalcustomers

54,914

26,90981,823

4,529

86,35286,352

Revenue from credit card business

Intersegment operating revenue ortransfers

8

393

401

2

403

¥

(403)

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

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

¥

485*2

¥ (36,500)

Segment assets

444,737

177,181621,918

28,009649,927(89,603)*3

560,324

Segment liabilities

371,015

141,247

512,262

10,126522,388(59,540)*4

462,848

2,921

2,921

2,921

(36)

2,885

128

128

(77)

51

Total

Other:
Foreign exchange gain
Rent income of real estate

128
322

Gain on sale of investment securities
Gain on purchase of borrowings
Dividend income

320
5

322

3

325

325

320

320

1

18

18

10

10

10

96

1,988

320
12

17

Reversal of allowance for doubtful
accounts
Reversal of allowance for investment
lossesInterest on advances to subsidiaries and
other

1,892

Provision for doubtful accounts
Provision for losses on interest refunds

1,892
2,863

Provision for credit card point redemption

(841)

3,151

63,734

2,863
2,310

(34)

63,734

2,276

2,276
63,734

541

7

548

18

566

Depreciation and amortization

1,532

1,214

2,746

7

2,753

1

29

30

612

(28)

584

1

25
2,863

63,734

Provision for accrued bonuses
Interest on advances from parent
company and other(1,963)

2,863

304

870
2,753

(29)

1

Income taxes:
Current(801)

Deferred55

Increase in property and equipment andintangible assets

1,936

1,413

55
1,046

2,982

55
1

2,983

584
7

62
2,983

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

AIFUL CORPORATION Annual Report 201647

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
2016
Reportable Segment
AIFUL

LIFECARD

Total

Other*1

Total

Reconciliations

49,956$ 376,124$ 15,522$ 391,646

283

Consolidated

Operating revenue:
Interest on loans$ 326,168$

27

128,823

128,850

Revenue from credit guarantee

99,301

11,239110,540

Recovery of loans previously charged off

51,2301,920

53,150

Other operating revenue

10,97355,620Operating revenue from externalcustomers

487,699

247,558

Revenue from credit card business

Intersegment operating revenue ortransfers$ 391,646

129,133

129,133

110,540

110,540

133

53,28353,283

66,59324,983

91,576

91,576735,257

40,921

776,178

776,178

89

3,309

3,398

681

4,079

$		 (4,079)$ 487,788$ 250,867$ 738,655$ 41,602$ 780,257$ (4,079)$ 776,178

Segment profit (loss)

$

$

$

$

$

69,000$ (6,655)*2$

Segment assets

3,603,009

1,531,726

5,134,735

256,300

Segment liabilities

2,904,920

1,197,275

4,102,195

91,867

Total

46,735

16,451

63,186

5,814

62,3455,391,035*3(368,787)

5,022,248

4,194,062(94,380)*4

4,099,682

Other:

168

Foreign exchange gain
Rent income of real estate

1,133

168

168

(26)

142

1,133

1,133

(673)

460

Gain on sale of investment securities
Gain on purchase of borrowings
Dividend income

62

Reversal of allowance for doubtful
accounts

88

88

150

9

88

159

159

88

88

Reversal of allowance for investment
lossesInterest on advances to subsidiaries and
other

8,124

Provision for credit card point redemption
Provision for doubtful accounts

125,407

8,124
28,50428,504

17,159142,566

1,195

9,319

354

142,920

25,63725,637

Provision for accrued bonuses

5,000

106

5,106

168

5,274

Depreciation and amortization

12,3108,557

20,86736

20,903354

354

Provision for losses on interest refunds

Interest on advances from parent
company and other(9,160)28,504

159
28,504(203)

25,637

142,717
25,637

2,682

7,956
20,903(354)

Income taxes:
Current(2,212)

3,150

938

Deferred(168)(9,513)(9,681)

8,885

17,41626,301

Increase in property and equipment andintangible assets

655

1,593
(9,681)

9

26,310

1,593
6,460

(3,221)
26,310*1 "Other" items are business segments excluded from reportable segments, which include BUSINEXT CORPORATION, AsTry Loan Services Corporation, and other.
*2 "Reconciliations" are elimination of intersegment transactions.
*3 "Reconciliations" are elimination of intersegment assets.
*4 "Reconciliations" are elimination of intersegment liabilities.

48

AIFUL CORPORATION Annual Report 2016

Notes to Consolidated Financial Statements

Related Information
1. Information about products and services

Millions of Yen
2016

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

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

Millions of Yen
2015

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business

Other

Total

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

Other

Total

$ 91,452$ 776,178

Thousands of U.S. Dollars
2016

Operating revenue from external customers

Loan Business

Credit Card
Business

CreditGuarantee
Business$ 436,646$ 134,540$ 113,540

2. Information about geographical areas(1) Operating revenue
Information about geographic area is omitted, as the Group did not operate outside Japan for the years ended March 31, 2016
and 2015.
(2) Property and equipment
Information about geographic area is omitted, as no property and equipment were located outside Japan for the years ended March 31,
2016 and 2015.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating revenue for theyears ended March 31, 2016 and 2015.

AIFUL CORPORATION Annual Report 2016

49

50

AIFUL CORPORATION Annual Report 2016

Investor Information(As of March 31, 2016)

Corporate Overview

Principal Shareholders

Corporate NameAIFUL CORPORATION

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

Date of Establishment

April 1967

Paid-in Capital¥143,415 million

Number of Employees

Non-consolidated: 955
Consolidated: 1,433

Stock Information
Stock Listing

The First Section of
the Tokyo Stock Exchange

Securities Code

8515

Number of Percentage ofSharesTotal Shares(Thousands) Outstanding

AMG Co., Ltd.

94,81419.60

Mitsuhide Fukuda

62,155

12.85

Marutaka Co., Ltd.

24,543

5.07

Japan Trustee Services Bank, Ltd.
(trust account)

16,663

3.44

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

14,231

2.94

HSBC-FUND SERVICES CLIENTS A/C 500
HKMPF 10PCT POOL

10,666

2.20

MSCO CUSTOMER SECURITIES

5,003

1.03

CHASE MANHATTAN BANK GTS CLIENTSACCOUNT ESCROW

4,005

0.83

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

3,547

0.73

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

3,438

0.71

Composition of Shareholders

Number of Shares

Financial
Institutions
12.5%

Authorized: 1,136,280,000 shares
Issued and Outstanding: 483,794,536 shares

Number of Shareholders

39,622

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
LimitedIndependent Auditor

Individuals
and Others
42.3%
Securities Companies
and Other Corporations
30.5%

Deloitte Touche Tohmatsu LLC

Foreign Investors
14.7%

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

AIFUL CORPORATION Annual Report 201651