ANNUAL REPORT 2014
The year ended March 31, 2014

Corporate Philosophy
Earn the trust of society through corporate activity based in integrity
AIFUL was founded by President and CEO Yoshitaka Fukuda
in 1967 as a sole proprietorship consumer finance businessand established as a corporation in 1978 to bolster its
creditworthiness. In 1982 the corporate name was changed
to the current AIFUL CORPORATION. AIFUL has grown into acomprehensive financial group handling such diverse businesses
as credit cards, small business lending, credit guarantees, loan
servicing and venture capital in addition to consumer finance.
Based on the corporate philosophy “Earn the trust of society
through corporate activity based in integrity” AIFUL aims to be acompany that is truly trusted by society.

Content s

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

1

Five-Year Summary

2

Message from President and CEO,Yoshitaka Fukuda

4

AIFUL Group at a Glance5

Current Business Environment

10

Business Data

12

Corporate Governance

15

Board of Directors, Corporate
Auditors and Executive Officers

16

Consolidated Financial Statements

46

Independent Auditor’s Report

47

History

48

Group Network

49

Investor Information

Five-Year Summary
AIFUL CORPORATION and Consolidated Subsidiaries
Years Ended March 31, 2014, 2013, 2012, 2011 and 2010

Thousands of
U.S. Dollars

Millions of Yen

2014

2013

2012

2011

2010

2014

Total income¥100,541¥108,863¥120,034¥145,215¥218,375$976,126

Total expenses

69,43385,082

101,940

178,239

507,805

674,107

Provision for doubtful accounts

10,931

8,177

32,93765,069166,259

106,126

Income (loss) before income taxes
and minority interests

31,10823,601

18,094(33,024)(289,430)

302,019

Net income (loss)

30,462

22,706

17,392(31,936)(295,141)

295,748¥321,150¥390,635¥455,012¥594,527¥835,928$3,117,961

79,223

98,628131,807

182,607

256,713769,155

Loans in legal bankruptcy

35,13537,59843,033

44,136

48,849341,117

Nonaccrual loans

27,29036,90655,42788,221137,021264,951

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

2,445

2,610

4,475

9,489

15,56623,738

Restructured loans

14,35321,51428,872

40,761

55,277

139,349

Total assets

577,339

607,181665,185

858,017

1,152,945

5,605,233

Allowance for doubtful accounts

102,522

119,428

156,346

192,434

236,303995,360

Total liabilities

443,797502,173583,541

794,412

1,055,639

4,308,709

Interest-bearing debt

253,953

308,747

360,569

492,610

648,823

2,465,563

Total equity

133,542

105,008

81,64463,60597,306

1,296,524

—

2,305

1,854

2,757

3,849

—

Net income (loss), basic¥63.34¥47.21¥72.49¥(134.05)¥(1,238.90)$0.61

Diluted net income

63.00

47.02

—

—

—

0.61

Total equity

276.80213.41331.59255.32392.302.69

Equity ratio

23.1

16.9

12.0

7.1

8.1

ROE

25.8

24.9

24.7

(41.4)(122.7)

ROA

5.1

3.6

2.3

(3.2)

(21.1)

481,867,836

481,867,836

240,933,918

238,685,568

238,685,568

1,369

1,437

1,898

2,073

2,514

For the Year:At Year-End:
Loans
Nonperforming loans

Minority interests

Per Share Data (Yen/U.S. dollars)

Ratios (%):

Other Data:
Number of shares outstandingat year-end
Number of employees at year-end

Notes: 1. Figures in the financial section are based on audited English-language statements.
2. The U.S. dollar amounts have been translated, for convenience only, at ¥103=$1, the approximate rate of exchange at March 31, 2014.
3. The Company implemented a stock split of 2 shares for each 1 share of common stock on October 1, 2013. Accordingly, “Per Share Data” have been calculated
as though the stock split had occurred at the beginning of the previous year.

AIFUL CORPORATION Annual Report 20141

Message from President and CEO, Yoshitaka Fukuda
I would like to take this opportunity to express my gratitude to ourstakeholders for their support. I’m pleased to report our financial
results for the fiscal year ended March 31, 2014.
Financial
Results forfrom
the Fiscal
Year EndedMarch
31, 2014
MessagePresident
andCEO
Yoshitaka Fukuda
AIFUL Group’s consolidated operating revenue for the fiscal year ended March 31, 2014 (fiscal year 2013)
fell 8% from the previous fiscal year, to 91.8 billion yen.
In our loan business, the Group worked on increasing the number of new contracts and lending

I thank you for your continuing interest in and support for the AIFUL Group. I would like tovolume through effective advertising campaigns mainly via the Internet and television, on an appropriate
present the financial results of AIFUL CORPORATION and its consolidated subsidiaries for the

scale, and through expansionof ended
unstaffed
However,interestloans
to customers
fell 18% year
fiscal year
March branches.
2011. In addition,
I will explain
theon
steps
we havetaken to restructure
on year to 50.5 billion yen
to the reduction in maximum interest rates and a drop in operating loans
our duebusiness.
outstanding owing to restrictions on total lending limits and a waiver of principal accompanying interest
repayment claims.

Financial Results for the Fiscal Year Ended March 2011

Consolidated
income decreasedon year toThe¥144.9billion.
Fullbeen
enforcement
In contrast, credit guarantee
tie-upstotal
increasedby seven34%
newyearpartners.
Group
hasaimingof the Money Lending Business Act resulted in reduced lending, and debt waivers associatedto increase the number of credit guarantee tie-ups and to provide new product proposals and sales
with interest refund claims remained at a high level. As a result, total loans outstanding

promotion support to existing
credit guarantee customers, in order to expand credit guarantees
decreased ¥262.2 billion, or 31%, from a year earlier. In addition, interest on loans continued to
outstanding. In addition,decrease
due todue
guarantees
the loan inliquidationof BUSINEXT, revenue from the credit
to the effectonof reductions
interest rates.
Based
Business
Revitalization Plan approved under the ADR process, the AIFUL
guarantee business rose 73%,
to on
7.9thebillionyen.
reducedfixed costswith
includingpersonnel andrentalexpensesthroughvoluntary
retirement
Operating expenses Groupfell 18%
compared
the previous
fiscalyear,
to 69.3
billionyen. Thiswasand other business restructuring initiatives. The Group also scaled back loans and other assets toprimarily due to a decline in expenses resulting from a reduction in interest-bearing liabilities and general
reduce variable costs. As a result, general and administrative expenses decreased ¥23.8 billion,

and administrative expenses, even though the expenses for doubtful accounts rose due to a conservative
or 28%, year on year to ¥61.8 billion.

estimate for its provision. Also,a 1.8
billionprovision
for losses
onthatinterest
repayment(down
89%
On theother
hand,yen
AIFULCORPORATION
expects
interest
refund claims
will rise
to yearon year) was posted forasubsidiary
LIFECARD,
toconsumer
the uncertain
expectedcorporateclaims for interest
certain degree
because aduemajor
finance number
company isofundergoingreorganization proceedings, and therefore recognized charge-offs and provision for doubtful
repayment going forward.
accounts related to interest refunds of ¥49.7 billion and provision for losses on interest
As a result, AIFUL Group’s
consolidated operating income increased 53% year on year, to 22.4 billion
refunds of ¥27.2 billion, which together totaled ¥76.9 billion. As a result, operating loss wasyen. In addition, ordinary income increased 40% year on year, to 24.7 billion yen, as a result of posting¥24.1 billion, and ordinary loss was ¥24.9 billion.

foreign exchange gains, among
others, as non-operating income. Net income increased 34% year on
Further, AIFUL recognized losses from a natural disaster of ¥6.6 billion to cover theyear, to 30.4 billion yen,estimatedas a resultof posting
bothgain Earthquake.
on negative
goodwill net
andlossa gainon loanimpactof the Great
EastaJapan
Consequently,
was ¥31.9
billion.
extinguishment as extraordinary income.

Yoshitaka Fukuda
Yoshitaka Fukuda
President
and CEO
President and CEO

2

AIFUL CORPORATION Annual Report 20142

Current Operating Environment
The consumer finance industry has been steadily moving toward recovery, with a solid number of newcontracts on the back of an economic turnaround and aggressive advertising by major players, and withclearer signs of the operating loan balance bottoming out.
Although the industry’s biggest risk, interest repayment claims, is steadily trending downwards after
hitting a peak, the number of claims continues almost unchanged recently, leaving the future outlook still
unpredictable.
In this environment, on June 10, 2014, the AIFUL Group made the final repayments related to theBusiness Revitalization Plan based on the alternative dispute resolution (ADR) process, and fulfilled theBusiness Revitalization Plan on July 10, 2014.
Moreover, with the agreement of creditors at the meeting of creditors held on June 13, 2014, it wasdetermined that, while some of the debt has been repaid, continued financial assistance will be extended
for the outstanding debt as of July 10, 2014.
Going forward, while dealing with the principal management issue of interest repayment claims, theAIFUL Group will steadily carry out the repayment plan set forth in the new business plan. Moreover, theGroup will strive to streamline its business efficiency across the Group, work to improve the quality of its
credit portfolio by acquiring sound credit, and aim to bolster the top line.

Yoshitaka Fukuda
President and CEO
Representative Director

Important Matters
The AIFUL Group has traditionally raised short-term and long-term funds in a variety of ways, including borrowing from financial
institutions, issuing bonds, and securitizing loan receivables. However, the AIFUL Group’s fund-raising capacity has been impacted
by a difficult market environment that includes higher expenses as the result of increases in the claims for interest refunds inaccordance with a ruling by Japan’s Supreme Court in 2006 as well as the rapid and sharp deterioration of the fund-raising
environment. Accordingly, there have been concerns that the AIFUL Group may have difficulty in raising sufficient new funds tosustain its business.
Consequently, since the fiscal year ended March 31, 2010, conditions have been such as to cast substantial doubt on the AIFULGroup’s ability to continue as a going concern.
In order to resolve this situation, the AIFUL Group applied on September 24, 2009 for Business Revitalization Procedures using
the Alternative Dispute Resolution (the “ADR”) process in order to improve its earning capacity and financial strength with the goalof revitalizing and reinforcing its business. At the meeting of participating creditors held on December 24, 2009, the Group gained
approval for its Business Revitalization Plan, which includes a provision for financial support. As a result, Business Revitalization
Procedures using the ADR process were adopted. The AIFUL Group has repaid a cumulative amount of ¥93,890 million ($911,553
thousand) to creditors in accordance with the Business Revitalization Plan since then.
At a meeting of creditors held on June 13, 2014, participating creditors decided to approve the proposal for continued financial
assistance, with the provision on the partial repayment of the remaining obligation of ¥161,741 million ($1,570,301 thousand). By
implementing concrete measures under our New Business Plan, the AIFUL Group believes there is little uncertainty about its ability
to continue as a going concern.
Summary of financial assistance
The Company has executed the partial repayment on July 10, 2014, by newly borrowing from financial institutions.
Regarding the obligations that remain after the above repayment, the Company will(a) reschedule the obligations of ¥52,700 million ($511,650 thousand);(b) immediately pay back the obligations in a lump sum at a discounted rate; and(c) switch from obligations to corporate bonds, bearing an interest rate of 8% a year, with maturity on April 30, 2020.

AIFUL CORPORATION Annual Report 2014

3

REVIEW OF OPERATIONSAIFUL Group at a Glance
AIFUL CORPORATION

Operating revenue

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.

Ordinary income

Net income(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

80,00030,00030,00025,00025,00020,00020,00015,00015,00010,00010,000

5,000

5,000

70,00060,00050,00040,00030,00020,00010,0000FY2011FY2012FY20130

FY2011FY20120

FY2013

FY2011FY2012FY2013

LIFECARD CO., LTD.

Operating revenue

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

Ordinary income

Net income(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

30,000

5,000

5,000

4,000

4,000

3,000

3,000

2,000

2,000

1,000

1,000

25,00020,00015,00010,0005,000
0FY2011FY2012FY20130

FY2011FY20120

FY2013

FY2011FY2012FY2013

BUSINEXT CORPORATION

Operating revenue

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.

4

AIFUL CORPORATION Annual Report 2014

Ordinary income (loss)

Net income (loss)(Millions of Yen)

(Millions of Yen)

(Millions of Yen)

10,000

1,400

1,400

9,000

1,200

1,200

8,000

1,000

1,000

7,000

800

800

6,000

600

600

5,000

400

400

4,000

200

200

3,000

0

0

2,000

-200

-200

1,000

-400

-400

0

-600

FY2011FY2012FY2013

FY2011FY2012FY2013-600

FY2011FY2012FY2013Current Business Environment
Trends in the Industry
In light of the interest repayment issue and full
implementation of the Money Lending Business Act andCapital Subscription Law in June 2010, restructuring andattrition in the industry have continued, with a rapid shrinkingof the consumer finance market. Loans outstanding havedecreased by over 70% to 2.7 trillion yen since 2005, while
the number of registered lenders has plummeted by over 80%
to roughly 2,217.
In the current business environment, visible signs ofimprovement are finally starting to appear as outstanding
business loans seem to be bottoming out together withimproving loan portfolios and an increase in the number of
new contracts due to an improvement in business sentimentand aggressive advertising by major companies.

Lending volume and number of registered lenders(Trillion yen)

Lending volume(left scale)
Number of firms(right scale)

12
10

In terms of new contracts for unsecured loans for the top
three firms in the industry, extension of credit tightened in
anticipation of the full implementation of the Money Lending
Business Act, borrowing was restrained, and advertisingexpenditures for all firms were regulated, resulting in ongoingdecreases in new applications and contracts.
However, with improving business sentiment and proactive
advertising campaigns by major players, the number of
new applications and contracts for loans started to increase
after bottoming out in fiscal year 2010, and the business isundergoing a recovery.
Moreover, although loans outstanding have continued
to decline significantly, due to the effects of restrictions on
total lending limits and the waiver of principal due to losses
on interest repayments, the pace of this decline has beenslowing, and the balance has started to rise in certain sectors,
indicating the start of an improvement.
Conversely, as a benefit of restrictions on total lending
limits, improvement in the quality of our loan portfolio
continues, and loan write-offs and non-performing loans(NPL) are steadily decreasing. In fiscal year 2013, loan writeoffs decreased 16% compared with the previous period, farabove the 1% rate of decline for loans outstanding.

12,5008

10,000

6

7,500

4

5,000

2

2,500

0 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 0
Source: Financial Services Agency

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

Waiver of principal
Interest repayments

1,200With respect to interest repayment claims, the largest
business risk, these amounted to roughly 3.3 trillion yen
over the last seven years, and waiver of principal came toapproximately 2.1 trillion yen. Interest repayments havesteadily decreased since hitting a peak, but even in fiscal year
2012, interest repayments were 370.2 billion yen while waiverof principal amounted to 104.6 billion yen, causing major
financial strain on lending companies and still posing thegreatest risk in the industry.

15,000

1,000
800
600
400
200
0

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012

Source: The Japanese Financial Services Association

Number of applications and new accounts for
top three firms
Applications(left scale)
New accounts(left scale)Contract rate(right scale)(Thousands)

2,100
1,800
1,500

(%)

70
60
50

1,200

40

900

30

600

20

300

10

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0
Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

Loans outstanding for top three firms(Billion yen)

3,500
3,000

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

7,000
6,000

2,500

5,000

2,000

4,000

1,500

3,000

1,000

2,000

500

1,000

0 2010/3 2010/9 2011/3 2011/9 2012/3 2012/9 2013/3 2013/9 2014/3 0
Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

AIFUL CORPORATION Annual Report 20145

Current Business Environment

Loan write-offs and NPL ratio for top three firms(Billion yen)

Loan write-offs(left scale)
NPL ratio(right scale)

300
250

(%)

18
15

200

12

150

9

100

6

50

3

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0
Source: Compiled by Aiful from financial data of each company*Prepared by AIFUL based on financial documents of ACOM, Promise and AIFUL.

New lending of unsecured loans(non-consolidated)
Applications(left scale)
New accounts(left scale)Contract rate(right scale)（Thousands）

700
600
500

(%)

70
60
50

400

40

300

30

200

20

100

10

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0

Lending volume and loans outstanding(non-consolidated)
Loans outstanding (non-consolidated)(left scale)Lending volume(left scale)
Ratio of lending volume to loans outstanding(right scale)(Billion yen)

1,800
1,500

60
50
40

900

30

600

20

300

10

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0(Billion yen)

120
100
80
60
40
20
0

6

FY2009FY2010FY2011AIFUL CORPORATION Annual Report 2014

FY2012FY2013

Consolidated Results of Operations
In fiscal year 2013, the AIFUL Group’s consolidated operating
revenue fell 7.8% compared with the previous fiscal year, to91,858 million yen. The principal components were interest on
loans, which contracted 17.9% year on year to 50,577 million
yen, revenue from the credit card business, which increased
7.3% to 13,426 million yen, and revenue from the credit
guarantee business, which increased 72.5% to 7,949 million yen.
In contrast, the collection of purchased receivables contracted
22.9% to 3,011 million yen while the recovery of loans previously
charged off edged down 10.9% to 9,663 million yen.
Operating expenses fell 18.3% compared with the previous
fiscal year, to 69,360 million yen, after accounting for anallowance for losses on interest repayment of 1,885 million yen,which decreased 89.1% year on year.
In addition, a 2,305 million yen gain on negative goodwill
and a 3,840 million yen gain on loan extinguishment
associated with the dissolution of the joint venture, BUSINEXTCORPORATION, resulted in the posting of 6,398 million yen (up6.0% year on year) of extraordinary income.
As the result of the above factors, for the consolidated fiscal
year under review, the AIFUL Group’s operating income was22,498 million yen (up 52.9% year on year), ordinary income was24,752 million yen (up 40.3% year on year) and net income was30,461 million yen (up 34.2% year on year).

(%)

1,200

Credit guarantees outstanding (consolidated)

Moreover, the NPL ratio has now decreased to 10%,which is below the level before the Money Lending BusinessAct came into full effect.

Business Results
The number of new applications and contracts concluded by
AIFUL has continued to fall, primarily because of the applicationof strict credit controls ahead of the full implementation of the
Money Lending Business Act, customers’ restraint regarding
borrowing and tightening of advertising expenditures. However,with an improvement in business sentiment and aggressive
advertising by major players, as well as AIFUL’s newly launchedadvertising, mainly on television and the Internet, the numberof new applications and contracts concluded started to increase
from fiscal year 2010.
In fiscal year 2013, the number of new accounts for
unsecured loans was 117,000, up 34% year on year, and theratio of contracts to applications was 45.0%, an increaseof 7.0 points from the same period last year, owing to theaggressive development of unstaffed branches as well as theimplementation of effective advertising mainly on the Internet
and television, befitting the scale of the business.
Although the operating loan balance has continued to
decline due to the effects of restrictions on total lending limits
and the waiver of principal due to interest repayments, the paceof this decline has been slowing.

Current Business Environment

The lending volume also started to increase after bottoming
out in fiscal year 2009.

Installment receivables (consolidated)(Billion yen)140

In the credit guarantee business, guarantees for outstandingloans bottomed out in fiscal year 2011 and have been risingyear on year since fiscal year 2012. In fiscal year 2013, the Group
forged new alliances and commenced sales with seven financial
institutions, while it carried out sales promotions to expand
guarantee partners and proposed new products and offeredsupport to promote sales. As a result, guarantees for outstandingloans based on operating receivables reached 75,558 million yen,
up 2% from the end of the previous fiscal year.
As for the balance of installment receivables, LIFECARD Co.,
Ltd., a credit card subsidiary, has been leading an initiative mainly
through the Internet to improve convenience for cardholders andincrease transactions by enhancing the webpage functions aswell as by implementing campaigns aimed at existing members
and other measures.
As a result, the balance of installment receivables in the credit
card business on a consolidated basis started to increase year
on year from fiscal year 2012. In fiscal year 2013, the balance ofinstallment receivables stood at 85,264 million yen, up 4% fromthe end of the previous fiscal year.
As a benefit of the restrictions on total lending limits, thequality of our loan portfolio continues to improve, and write-offs
and nonperforming loans (NPL) are steadily decreasing.
The amount of total receivable write-offs for fiscal year 2013
was down 37% year on year, far greater than the 11% reduction
in loans outstanding.
In addition, the write-off ratio stood at 5%, down two points
year on year, and excluding the portion of the waiver of principal
due to interest repayments, the so-called general write-offs
improved to 3%.
The balance of NPL fell 20% year on year, to 79,222 million
yen, and the ratio of unsecured loans was also down threepoints, to 10%, making for steady improvement.
On the other hand, with regard to interest repayments,
where the number of claims and attorney involvements are major
indicators, although the number of claims has decreased by 70%
since peaking in 2007 and by about half since 2011, when thebankruptcy of a major competitor occurred, the situation remains
uncertain, with the current trend remaining flat.
Moreover, cash-out and the amount of debt waived due
to interest repayments have decreased by roughly half since
their peak, but still continue to exert major financial pressure,amounting to a monthly average of over 2,500 million yen.
In light of this situation, the Group recorded a provision of
1.8 billion yen for LIFECARD in fiscal year 2013. As a result, theallowance related to interest repayments came to 95.1 billion yen
at the end of the fiscal year under review.

120
100
80
60
40
20
0

FY2009FY2010FY2011FY2012FY2013*Commenced business on July 1, 2011.

Total receivable write-offs (consolidated)
250

Write-offs (general) (left scale)(%)
Write-offs due to interest repayments (left scale) 20
Ratio of write -offs (right scale)

200

16

150

12

100

8

50

4

(Billion yen)

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0

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

350

(%)

30

280

24

210

18

140

12

70

6

0 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 0Interest repayment claims and attorney involvement(non-consolidated)
Interest repayment claims(non-consolidated) (left scale)
Attorney involvement(non-consolidated) (right scale)(Thousands)

50
40

(%)

60
48

30

36

20

24

10

12

0

1Q

2Q

3Q

FY2011

4Q

1Q

2Q

3Q

FY2012

4Q

1Q

2Q

3Q

FY20134Q

0*Attorney involvement is based on comparison with the May 2007 peak value of 100%.
*Since July 1, 2011 portions of former LIFE and the other three firms were absorbed and amalgamated

AIFUL CORPORATION Annual Report 20147

Current Business Environment

Losses related to interest repayment claims (consolidated)(Billion yen)

150
Debt waived
Interest repayment

100

50

0

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013This magnitude of financial pressure related to interest
repayment claims resulted in AIFUL implementing voluntary
retirement on four occasions in the seven years since fiscal year
2005, and the number of employees was reduced from 6,675
in fiscal year 2005 to 1,369 in fiscal year 2013. In addition, thenumber of lending outlet locations was reduced from 2,722
in fiscal year 2005 to 704 in fiscal year 2013, as the Company
sought to radically reduce costs and streamline operations
by consolidating and eliminating bases and departments andrestructuring the Group.
Going forward, we will put all of our efforts into improving
our financial position and profitability by continuing to pursue
increased business efficiency and cost structure reforms acrossthe Group.

Number of full-time employees (consolidated)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

With respect to interest-bearing debt, payments, including
repayments to ADR creditors and the redemption of corporate
bonds, have been made in accordance with our Business
Revitalization Plan. As a result, interest-bearing debt amounting
to 698.5 billion yen in fiscal year 2009 was reduced over afour-year period by 60% to the remaining interest-bearing debt
outstanding of 280.7 billion yen as of March 31, 2014.
The outstanding interest-bearing debt comprises borrowingsof 228,916 million yen, corporate bonds of 25,000 million yen
and liquidation of receivables of 26,860 million yen.

Cash Flows
Number of branches (consolidated)
3,000
Staffed
Unstaffed

2,500
2,000

Cash flows from operating activities

1,500
1,000
500
0

Cash and cash equivalents (“funds”) were up 5,678 million yen,or 9.3%, compared with the end of the previous fiscal year, to66,876 million yen.

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

General and administrative expenses (consolidated)

Net cash provided by operating activities amounted to
55,066 million yen, an increase of 152.5% compared with thecorresponding period of the previous fiscal year. During theperiod under review, the increase in funds caused by the decline
in operating receivables including loans to customers exceeded
the decline in funds due to the drop in allowance for doubtful
accounts and the decrease in allowance for losses on interest
payment.
Cash flows from investing activities(Billion yen)200
Advertising expenses
Personnel expenses
Others

150

100

50

0

8

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

AIFUL CORPORATION Annual Report 2014

Net cash provided by investing activities totaled 1,524 million
yen (1,175 million yen in the previous fiscal year). This was mainly
attributable to the purchase of tangible fixed assets and proceedsfrom long-term loans.

Current Business Environment

Cash flows from financing activities

Interest-bearing debt (consolidated)

Net cash used in financing activities amounted to 50,954 million
yen, up 10.3% year on year, due to the repayment of borrowings
and the redemption of bonds.

Commercial paper (CP)Liquidation of receivables
Corporate bonds
Borrowings(Billion yen)

2,000

1,500

1,000

500

0

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Cash Flows and Funding (Consolidated)
Cash flows fromoperating activities

Cash flows frominvesting activities＋＋¥55.0 bn＋¥1.5 bn

Cash flows fromfinancing activities＋−¥50.9 bn＝ ＋¥5.6 bn
Breakdown
Repayment of
ADR-related
dept obligations¥19.8 bn

Bond redemption¥8.7 bn
Repayment ofother debt, etc.

¥566.2 bn

Interest
income, etc.

¥91.8 bn

Short-termborrowings

Financial expenses¥543.8 bn¥5.8bnLoan
repayment
and bond
redemption,
etc.

¥594.7 bn

SG&A, etc.

¥45.8 bn

Losses on interest
repayments¥32.2 bn

¥1.2 bnLoancollection¥188.6 bn
Liquidation ofreceivables

Expenses due topurchase of assets, etc.

Loans tocustomers¥168.4 bn

Income due tosales of assets, etc.

¥2.7 bn¥26.8 bn

Cash and cash
equivalents

Cash and cash
equivalents¥61.1 bn

¥66.8 bn

At the beginningof FY2013

At the end of
FY2013

AIFUL CORPORATION Annual Report 20149

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

AVERAGE RATE OF BORROWINGS

2010

2011

2012

2013

2014

1,105,057

768,342618,220

556,032

515,960

856,763594,527455,012

390,635

348,011

Indirect

Unsecured

634,249

425,400

318,785

272,980

261,222

DirectSecured138,650

99,65077,11564,34541,268Small Business

83,86469,47859,11253,31045,521

Installment Receivables

135,852

80,99080,614

83,88585,264Credit Guarantees

100,153

82,134

74,14874,44175,559Other

12,28910,690

8,446

7,071

7,126

Total Receivables Outstanding
Loans

Average Rate of Borrowings

Long-term Prime Rate
(Reference)

2011

2012

2013

2014

2.01

2.18

2.09

2.05

2.31

2.15

2.15

2.07

1.99

1.98

1.84

2.26

2.19

2.60

3.72

1.60

1.60

1.35

1.15

1.20

NUMBER OF CUSTOMER ACCOUNTS(Thousands)

2014

2010

2011

2012

2013

1,966

1,515

1,130

888

817

Unsecured

1,867

1,432

1,062

830

769
18

Number of Customer Accounts

TOTAL INCOME/NET INCOME (LOSS)

(%)

2010

Secured

46

36

28

23

(Millions of Yen)

Small Business

54

47

40

36

31

Credit Card Holders

12,719

6,746

6,357

5,811

5,818

2010

2011

2012

2013

2014

Total Income
218,375
Interest on Loans
170,662
Unsecured
137,395
Secured20,027
Small Business
13,241
Installment Receivables 19,550
Credit Guarantees
7,035
Other
21,128Net Income (Loss)(295,141)

145,215
103,784
79,543
13,976
10,26513,021
5,759
22,652(31,936)

120,034
75,99356,886
10,581
8,526
11,7194,798
27,524
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
28,40130,462TOTAL ASSETS/ROA/TOTAL EQUITY/ROE(Millions of Yen)

2010

2011

2012

2013

2014

1,152,945

858,017665,185

607,181

577,339

ROA (%)(21.1)

(3.2)

2.3

3.6

5.1

Total Equity

97,306

63,60581,644

105,008

133,542

ROE (%)(122.7)(41.4)

24.7

24.9

25.8

Total Assets

AIFUL CORPORATION
LOANS OUTSTANDING(Millions of Yen)

2010

2011

2012

2013

2014

603,088422,004

408,167

348,353

350,681553,476

381,368

344,455

286,316

260,776

Unsecured

423,733

289,361

265,617

224,669

Secured120,82183,422

66,607

8,922

8,585

12,231

Total Receivables Outstanding
Loans

Small Business

2011

2012

2013

2014

1,061

815

805

631

590

Unsecured

1,009

772

767

601

565

216,072

Secured

44

34

27

22

17

52,70837,611

Small Business

7

9

12

9

7

8,939

7,093

–

–

7,202

4,433

2,846

45,24936,96948,39751,07880,489

Other

4,363

3,667

8,113

6,526

6,570

Number of Customer Accounts

AVERAGE LENDING INTEREST RATE
Average Lending
Interest RateTOTAL INCOME/NET INCOME (LOSS)
2010

2011

2012

2013

2014

90,75179,75769,655

63,779Interest on Loans

113,069

74,02057,65747,402

42,066

Unsecured

92,85460,194

46,374

38,12634,472

Secured

18,353

12,511

9,554

7,655

6,233

Small Business

1,862

1,315

1,729

1,621

1,361

Credit Guarantees

4,136

3,349

3,051

3,215

6,654

Installment Receivables
Other
Net Income (Loss)

2011

2012

2013

2014

16.2

15.8

15.9

15.0

15.4

–

–

316

306

226

13,073

13,382

18,732

18,733

14,834(261,496)(70,169)

13,407

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

2010

2011

2012

2013

2014

111,651

81,666

68,352

31,591

19,264

Unsecured Loans
Write-offs

89,452

63,77946,33325,194

14,169Ratio of Total Receivables
Write-offs (%)

20.17

21.41

19.84

11.03

7.39

Ratio of Unsecured
Loans Write-offs(%)

21.11

22.04

17.44

11.21

6.56

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

10

AIFUL CORPORATION Annual Report 2014

(%)

2010

(Millions of Yen)

130,278

Total Income(Thousands)

2010

Credit Guarantees

Installment Receivables

NUMBER OF CUSTOMER ACCOUNTS

Business Data

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

TOTAL ASSETS/ROA/TOTAL EQUITY/ROE

2010

2011

2012

2013

2014

51,75760,43463,296

87,575

117,072

Total Assets

51,75755,986

61,73487,515

117,008

ROA (%)

21.9

27.3

29.9

38.0

45.0

Total Equity
ROE (%)(Millions of Yen)

2010

2011

2012

2013

2014

858,532

578,153

533,713466,542463,792(24.9)

(9.8)

2.4

2.1

5.2

135,536

64,83579,761

90,411

114,807(98.3)(70.0)

18.6

12.5

23.5

LIFECARD CO., LTD.
TOTAL RECEIVABLES OUTSTANDING (Managed Asset Basis) (Millions of Yen)
2010

2011

2012

2013

2014

Total Receivables Outstanding

410,315

270,201

152,663

151,736

150,228

Installment Receivables

135,852

80,99073,41279,45282,418Loans (Cash Advance)

211,632

137,023

53,16848,37545,322Credit Guarantees

54,90445,16525,75023,363

21,931

7,926

7,023

333

545

556

Other

2011

2012

2013

2014

863,975

491,804

341,491

496,088

539,051

Credit Card Shopping Loans

796,376

446,540

310,754454,181498,756

Credit Card Cashing Loans

67,59945,26330,73740,90640,295

2011

2012

2013

Credit Card

(Millions of Yen)

2010

2011

2012

2013

2014

73,371

44,675

19,711

26,402

27,347Installment Receivables

19,955

13,267

8,657

12,50913,387Loans (Cash Advance)

41,265

19,559

6,084

6,904

6,260

Credit Guarantees

2,899

2,410

1,240

1,395

1,296

Other

9,252

9,439

3,730

5,593

6,403

(27,750)(31,148)

2,207

3,320

2,419

Net Income (Loss)(Millions of Yen)

2010

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

PURCHASE RESULTS

2010(Thousands)

2014

12,719

6,746

6,357

5,811

5,818

LIFE Proper Card

2,219

2,762

2,489

2,021

1,911

Affinity Cards

10,499

3,984

3,869

3,790

3,907

Number of Cardholders

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

AVERAGE YIELD
Average Yield

(%)

2010

2011

2012

2013

2014

14.6

13.4

17.1

17.5

18.2

2010

2011

2012

2013

2014

Total Receivables Write-offs

38,71630,308

1,665

2,961

3,118

Ratio of Total Receivables
Write-offs (%)

9.44

11.22

1.09

1.95

2.08

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

AIFUL CORPORATION Annual Report 201411

Corporate GovernanceReinforcement of Corporate Governance
The AIFUL Group’s basic concept of corporate governance isto improve the transparency of its management based on its
management principle of “Earn the trust of society throughcorporate activity based in integrity.” To that end, the Grouphas developed a management organization structure andimplemented the necessary measures to build a trustworthy
relationship with all its stakeholders, including customers,
shareholders, and investors, and discloses information
appropriately.
(1) Overview of the corporate governance structure
Board of Auditors and Corporate Auditors
The Board of Auditors consists of three corporate auditors(including two outside corporate auditors). It determines theaudit policy and plan, and discusses and decides on important
audit matters based on the reports it receives. A meeting is
generally held every month and extraordinary meetings asnecessary.
Corporate auditors work with the Internal Auditing Department and accounting auditors to enhance management’s
supervisory functions and share information with auditors ofaffiliated companies in an effort to strengthen the auditing
structure in the operation of the entire Group.
To improve these audit functions, the Group has established a Corporate Auditor’s Office as the exclusive bodysupporting corporate auditors and taking any other steps
necessary to ensure independence, including, for example, therequirement that the auditor’s office not follow any directions
or orders from directors.
Board of Directors and Directors
The Board of Directors consists of seven directors (as ofthe date of submission of the Annual Securities Report). It
deliberates and decides on matters that cannot be delegatedto directors pursuant to the provisions of laws, regulations,and the Articles of Incorporation, as well as important matterssuch as management strategies, and monitors these mattersregularly. In addition to semi-monthly meetings, it holds
extraordinary meetings as necessary. The Company’s Articles
of Incorporation also stipulate that there be no more thaneleven directors.
Executive Officers
The Company introduced an executive officer system in June2007 to speed up the decision-making process and executionof duties, and enhance the separation of supervisory andexecutive functions. The Board of Directors appoints executive
officers and delegates business by assigning responsibilities
and authority.

12

AIFUL CORPORATION Annual Report 2014

Management Committee
The Management Committee comprises all directors
and executive officers. It strives to promote the sharing
of information and mutual verification of matters to besubmitted to the Board of Directors, and issues and strategies
based on the policies resolved at Board of Directors meetings,
so that disagreements do not arise regarding decisions or the
performance of duties. It holds meetings on a weekly basis, ingeneral.
Compliance Committee
As a consultative body under the direct control of the Boardof Directors, a Compliance Committee has been established.
It is composed of an executive officer who oversees theCompliance Department as the chairman, outside experts, andexecutive officers in relevant divisions. It examines complianceissues, designs training programs, and submits reports to theBoard of Directors to create a corporate culture that stresses
compliance, standards of corporate ethics, and complianceprograms. In addition to bimonthly meetings in general, it holds
extraordinary meetings as necessary.
Risk Management Committee
As an organization under the direct control of the Boardof Directors, a Risk Management Committee has been
established. Consisting of all directors, it assesses ongoingrisks based on the regular reports it receives on the statusof risks, continually reviews the risk management system,and submits reports to the Board of Directors with the aimof preventing risks from occurring and curbing losses intimes of crisis by creating an appropriate risk management
system. In addition to quarterly meetings in general, it holds
extraordinary meetings as necessary.
(2) Reasons for the current structure
As part of the auditor system, we appoint two outside
corporate auditors for a total of three corporate auditors.
We ensure independent audits with a system that has all
corporate auditors attend Board of Directors meetings, otherimportant meetings and committee meetings, including
Management Committee meetings, to express their opinions.
We have also established a Corporate Auditor’s Office as the
exclusive body for supporting the work of corporate auditors.
Some of our directors are from companies other thanfinancial institutions, although they do not fall into thecategory of outside directors stipulated in Article 2, item (xv)of the Companies Act. This ensures a business administrationthat incorporates independent perspectives.
Further, we separate management’s supervisory functions
and business execution functions by implementing an
executive officer system and strengthening supervisoryCorporate Governancefunctions with the establishment of a Compliance Committeethat includes outside experts and a Risk Management
Committee, among others.
We have adopted the current structure to achieve
corporate management that is transparent, fair, and efficient.

The diagram below illustrates the Group’s structures forbusiness execution, management supervision, internal control
and risk management as of the date of submission of theAnnual Securities Report.

General Meeting of Shareholders

Board of Auditors

Board of Directors

Auditing

Auditing

Independent
auditing firm

Directors (7)(One-year term system)

Corporate Auditors (3)(Outside Auditors (2))

Auditing

Corporate Auditors’ Office

Reporting

Sharing Information

ReportingGroup Compliance Committee

Risk Management Committee
Chairperson: Representative Director (President)

ReportingCompliance Committee
Chairperson: Executive Officer oversees
the Compliance Dept.
Members: Include Outside Attorneys

Reporting
DemandReportingCompliance Risk Subcommittee
Chairperson: Executive Officer oversees
the Compliance Dept.

Direction

External Compliance Reporting DeskManagement of
Operations

Supervision

Advising / Consulting

Management Committee (Directors and Executive Officers)
ReportingDirection

Cooperation

Direction

Attorneys
and Others

Direction

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

In-house
Compliance
Reporting Desk

Corporate Management Dept.
Questions / Advice / Complaints
Sharing Information
Gathering andSharing Information

Compliance Dept.
(Customer Support Center)

Every Section

Customers

Interaction

Finance Dept.
(IR and PR section)

Compliance Officers

Shareholders
and Others

Internal Auditing
Cooperation

Internal Auditing Department(Including Group Auditing)
ReportingInternal Auditing

Subsidiaries
Cooperation

Auditing

Subsidiaries’ Auditors

AIFUL CORPORATION Annual Report 201413

Corporate Governance

Enhancement of Corporate Governance(1) Development of a compliance framework
A Compliance Committee (meeting on a regular basis), withan outside member (a lawyer), has been set up to establish
and manage compliance programs, 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
whistleblowing 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, corporate auditors, and other relevant divisions.
AIFUL CORPORATION and AIFUL Group have establishedan action plan and manual in preparation for large-scaledisasters, issues relating to personal or corporate information,and other risk events so as to be able to respond to potential
emergencies appropriately and promptly.

14

AIFUL CORPORATION Annual Report 2014(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 process ofcheeks.
(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,
and holds briefing sessions for domestic and overseas
investors, analysts, and so forth, as appropriate. In addition,
we have a system in place whereby investors’ opinions andinquiries about management can be relayed back to thepresident, the Board of Directors, and the head of eachdivision on a regular basis.

Board of Directors, Corporate Auditors andExecutive Officers(As of June 27, 2014)

Directors
Yoshitaka Fukuda

Kazumitsu Oishi

President and Representative Director

Director

Chief Executive Officer

Managing Executive Officer

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

Mar. 1979: Joined Marutaka, Inc. (now AIFUL CORPORATION)
Jun. 2001: Director
Jun. 2005: Executive Officer
Senior General Manager of the Loan Business DivisionJun. 2011: Managing Executive Officer
Senior General Manager of the Loan Business DivisionJun. 2012: Director and Managing Executive Officer
Senior General Manager of the Loan Business Division (Current)

Masayuki Sato

Tsuguo Nakagawa

Representative Director

Director
Managing Executive Officer

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

Mar. 1976: Joined Oasa Inc. (Yoshitaka Fukuda’s sole proprietorship)
Jun. 2004: Director
In charge of the Inspection Department and the Credit Assessment Department
Jun. 2005: Executive Officer
Senior General Manager of the Credit Management DivisionJun. 2011: Managing Executive Officer
Senior General Manager of the Credit Management DivisionJun. 2012: Director and Managing Executive Officer
Senior General Manager of the Credit Management Division (Current)
Apr. 2014: President of Astry Loan Services Corporation (Current)

Toshikazu Moriwaki
Nobuyuki Wakuta

Director

Director

Managing Executive Officer

Managing Executive Officer
Apr. 1975: Joined The Sumitomo Trust & Banking Co., Ltd. (now Sumitomo Mitsui
Trust Bank, Limited)
Jun. 2004: Executive Officer
Sales Manager at the Main Branch of The Sumitomo Trust & Banking Co., Ltd.
Jun. 2006: Managing Director
Senior General Manager of the Management Planning Division,in charge of the IT Planning DivisionJun. 2007: Director and Managing Executive Officer
Apr. 2014: Director and Managing Executive Officer
Chairperson of the Compliance Committee, Senior General Manager ofthe Accounting Division, supervising the General Affairs Department,
Overseeing the Compliance Department, the Credit Assessment
Department and the Information Systems Department (Current)

Corporate Auditors
Masanobu Hidaka
Full-time Corporate Auditor (outside)

Minoru Kobayashi
Full-time Corporate Auditor

Masanori Nagasawa
Corporate Auditor (outside)

Apr. 1977: Joined The Nippon Fudosan Bank, Limited (now Aozora Bank, Ltd.)
Apr. 2002: General Manager of the Main Branch’s Sixth Division of Aozora Bank, Ltd.
Oct. 2007: Director and Assistant Senior General Manager of the Sales Department ofAstry Loan Services Corporation
Jun. 2009: President of Astry Loan Services Corporation
Jun. 2012: Director and Managing Executive Officer
In charge of the Finance Department (Current)

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

Executive Officers
Shinichiro Okuyama

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

Kazuhiko Tsuda

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

Keiji Masui

Executive Officer
In charge of Secure Rent Guarantor Service Co., Ltd.

AIFUL CORPORATION Annual Report 201415

Consolidated Financial Statements

Consolidated Balance Sheet
March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

ASSETS

2014

2013

2014

¥ 66,877¥ 61,198

CURRENT ASSETS:
Cash and cash equivalents (Note 15)$649,2914

439

Operational investment securities (Notes 6 and 15)

825

926

8,010

Allowance for investment losses

(19)

(19)

(184)

321,150

390,635

3,117,961

Installment accounts receivable (Notes 4, 8 and 15)

85,264

83,885

827,806

Credit guarantees (Note 5)

102,420

74,441

994,369

Time deposits (Note 15)

Loans, credit guarantees and receivables:
Loans (Notes 3, 8 and 15)

9,360

10,21590,874(69,540)(84,715)(675,146)

Other receivables
Allowance for doubtful accounts (Notes 2.l and 15)

148

Deferred tax assets (Note 13)

1,437

Other current assets (Note 8)

11,98517,309116,359

Total current assets

528,474

553,879

5,130,816

Land (Note 8)

8,895

8,895

86,359Buildings and structures (Note 8)

23,28723,496226,087

Machinery and equipment (Note 8)

404

356

3,922

7,487

10,68072,689Lease assets

335

607

3,253

Construction in progress

40

673

389

Total

40,44844,707

392,699

Accumulated depreciation(23,340)(25,906)(226,602)

Net property and equipment

17,10818,801

166,097

779

1,136

7,563

(9)

(16)

(87)

Investments in and advances to unconsolidated subsidiaries (Note 15)

1,349

2,402

13,097

Claims in bankruptcy (Notes 3 and 15)

36,854

39,832357,806

Software, net

2,953

4,659

28,670

Lease and guarantee deposits

21,927

20,182

212,883

PROPERTY AND EQUIPMENT:

Furniture and fixtures

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 15)
Allowance for investment losses

886

1,019

8,602

Allowance for doubtful accounts (Note 15)(32,982)(34,713)(320,214)

Total investments and other assets

31,75734,501

308,320¥ 577,339¥ 607,181$ 5,605,233

Other assets (Note 7)

TOTAL* Shares have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

See notes to consolidated financial statements.

16

AIFUL CORPORATION Annual Report 2014

Consolidated Balance Sheet

Thousands of U.S.
Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2014

2013

2014

¥ 49,250¥ 40,900

16,837

52,772

163,466

46

124

447

Trade accounts payable

14,73414,307143,049

Obligation under credit guarantees (Note 5)

102,420

74,441

994,369

619

987

6,010

Accrued expenses

1,612

1,756

15,650Allowance for credit card point redemption

3,200

2,830

31,068CURRENT LIABILITIES:
Short-term borrowings (Notes 8 and 15)
Current portion of long-term debt (Notes 8, 14 and 15)
Trade notes payable

Income taxes payable$

478,155

3,780

3,814

36,699192,498

191,931

1,868,913

Long-term debt (less current portion) (Notes 8 and 15)

187,866

215,075

1,823,942

Allowance for losses on interest refunds (Note 2.l)

59,88291,422581,379

Other current liabilities (Notes 4, 5 and 19)
Total current liabilities
LONG-TERM LIABILITIES:

Negative goodwill, net (Note 21)
Deferred tax liabilities (Note 13)

218
172

149

1,670

Other long-term liabilities

3,379

3,378

32,805

Total long-term liabilities

251,299

310,2422,439,796

issued, 481,867,836 shares in 2014 and in 2013*

143,325

143,325

1,391,505

Capital surplus

164,392

164,392

1,596,039

413

62

4,010

(171,652)(202,114)(1,666,524)(3,110)(3,110)(30,194)

EQUITY (Notes 10 and 11):
Common stock - authorized, 1,136,280,000 shares;

Stock acquisition rights
Retained earnings
Treasury stock - at cost 916,568 shares in 2014 and 915,932 shares in 2013*
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Total

174

148

1,688

133,542

102,703

1,296,524

Minority interests
Total equity
TOTAL

2,305
133,542

105,008

1,296,524¥ 577,339¥ 607,181$ 5,605,233

AIFUL CORPORATION Annual Report 201417

Consolidated Financial Statements

Consolidated Statement of Income
Year Ended March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2014

2013

2014

¥ 50,578¥ 61,607$ 491,049

Revenue from credit card business

13,427

12,514130,359

Revenue from credit guarantee

7,950

4,610

77,184

Recovery of loans previously charged off

9,663

10,84093,816

Other operating revenue

10,241

10,04899,427

INCOME:
Operating revenue:
Interest on loans

91,85999,619891,835

Amortization of negative goodwill (Note 21)

218

218

2,117

Gain on purchase of borrowings (Note 21)

3,840

5,948

37,282Gain on negative goodwill (Notes 20 and 21)

2,305

Total operating revenue

22,379

2,319

2,898

22,513

100,541

108,683

976,126

Interest on borrowings and bonds

5,449

6,878

52,903

Provision for doubtful accounts (Note 21)

10,931

8,177

106,126

Provision for losses on interest refunds (Note 21)

1,885

17,29718,301

Salaries and other employees' benefits

13,041

13,129126,612

Other income (Note 19)
Total income
EXPENSES:

477

518

4,631

Advertising expenses

3,294

3,814

31,981

Provision for credit card point redemption (Note 21)

2,666

2,347

25,883

Rental expenses (Note 14)

2,260

2,448

21,942

Commissions and fees

10,468

9,753

101,631

Depreciation and amortization (Note 21)

3,761

6,021

36,515

Net periodic benefit costs (Note 9)

Loss on impairment of long-lived assets (Note 7)

52

Loss on sale of investment securities (Note 21)

33

320

Loss from business restructuring (Notes 12 and 21)

10

97

15,158

14,648147,165

69,43385,082

674,107

31,10823,601

302,019

Current

764

414

7,417

Deferred

(118)

30

(1,146)

646

444

6,271

30,462

23,157295,748¥ 30,462¥ 22,706

Other expenses
Total expenses
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Notes 13 and 21):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

451$ 295,748
U.S. Dollars(Note 1)Yen
AMOUNTS PER COMMON SHARE (Notes 2.u and 18):
Basic net income¥ 63.34¥ 47.21 *$0.61

Diluted net income

63.00

47.02 *
nil

0.61

Cash dividends applicable to the year

nil

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

See notes to consolidated financial statements.

18

AIFUL CORPORATION Annual Report 2014nil

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

Millions of Yen

Thousands of U.S.
Dollars (Note 1)

2014

2013

2014

¥ 30,462¥ 23,157$ 295,748

Unrealized gain on available-for-sale securities

26

196

251

Total other comprehensive income

26

196

251

¥ 30,488¥ 23,353$ 295,999¥ 30,488¥ 22,902$ 295,999

nil

451

nil

NET INCOME BEFORE MINORITY INTERESTSOTHER COMPREHENSIVE INCOME (Note 17):COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests
See notes to consolidated financial statements.

AIFUL CORPORATION Annual Report 201419

Consolidated Financial Statements

Consolidated Statement of Changes in Equity
Year Ended March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands

BALANCE AT APRIL 1, 2012

Millions of Yen

Number of
Shares ofCommonStock Issued*

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

TreasuryStock481,868¥ 143,325¥ 164,392¥ 51¥(224,820)¥ (3,110)

Net income

¥(48)

Total

Minority
Total Equity
Interests¥ 79,790¥ 1,85411

481,868

143,325

164,392

62

Net income(202,114)(3,110)22,706

(0)

(0)

196

207

451

658

148

102,703

2,305

105,008

30,462

Net increase in treasury
stock (636 shares)(0)

Net change in the year

481,868¥ 143,325¥ 164,392

30,462

30,462

(0)

(0)

(0)
351

¥ 413

¥(171,652)¥ (3,110)¥ 81,644

22,706(0)

Net change in the year

BALANCE AT MARCH 31, 2014

Unrealized
Gain (Loss) on
Available-forsale Securities

22,706

Net increase in treasury
stock (142 shares)*

BALANCE AT MARCH 31, 2013

Accumulated
Other
Comprehensive
Income (Loss)

26

377

(2,305)(1,928)¥ 174¥ 133,542¥ nil ¥ 133,542

Total

Minority
Total Equity
Interests$997,117$22,379

Thousands of U.S. Dollars (Note 1)

BALANCE AT MARCH 31, 2013

CommonStockCapitalSurplus

Stock
Acquisition
RightsRetained
Earnings

Treasury
Stock$1,391,505$1,596,039$602$ (1,962,272)$ (30,194)

Net income

Unrealized
Gain (Loss) on
Available-forsale Securities$ 1,437

295,748

Net increase in treasury
stock (636 shares)(0)

Net change in the year

BALANCE AT MARCH 31, 2014

Accumulated
Other
Comprehensive
Income (Loss)

(0)
3,408

$1,391,505$1,596,039$4,010$ (1,666,524)$ (30,194)

See notes to consolidated financial statements.

20

AIFUL CORPORATION Annual Report 2014

295,748

(0)

(0)

251

3,659

$ 1,688$1,296,524* Shares and per share figures have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

$1,019,496

295,748(22,379)(18,720)$ nil $1,296,524

Consolidated Financial Statements

Consolidated Statement of Cash Flows
Year Ended March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2014

2013

2014

¥ 31,108¥ 23,601$ 302,019(1,476)(288)(14,330)OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes - paid

71

423

689

Depreciation and amortization

3,761

6,021

36,515

Amortization of negative goodwill

(218)

(218)

(2,117)

Income taxes - refund

Gain on negative goodwill(22,379)(2,305)

Loss on impairment of long-lived assets

52

Decrease in allowance for investment losses

(8)

(55)

(78)

Decrease in allowance for doubtful accounts(16,906)(36,919)(164,136)

(4)

52

(39)

Increase in allowance for credit card point redemption

370

520

3,592

Decrease in allowance for losses on interest refunds(31,540)(17,246)(306,214)(Decrease) increase in allowance for bonuses

Decrease in allowance for losses from business restructuring(2,127)(3,840)(5,948)(37,282)

Decrease in loans

69,48564,377

674,612

Increase in installment accounts receivable

Gain on purchase of borrowings
Changes in assets and liabilities:(1,379)(4,935)(13,388)

Decrease in purchased receivables

910

1,442

8,835

(Increase) decrease in other operating receivables

(55)

1,375

(534)

Decrease in claims in bankruptcy

2,978

5,400

28,913

Increase in lease and guarantee deposits(1,745)(2,540)(16,942)

Decrease in other current assets

5,620

223

54,563

34(11,367)

330

Increase (decrease) in other current liabilities

206

(30)

2,002

Total adjustments

23,959(1,788)

232,612Net cash provided by operating activities

55,067

21,813534,631

Capital expenditures(1,272)(1,606)(12,350)

Proceeds from sales of property, plant and equipment

Other, net

INVESTING ACTIVITIES:
1,270

221

12,330

Proceeds from sales of investment securities

667

532

6,476

Other, net

860

(323)

8,350

1,525

(1,176)

14,806¥ 56,592¥ 20,637$ 549,437

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

AIFUL CORPORATION Annual Report 201421

Consolidated Statement of Cash Flows

Thousands of U.S.
Dollars (Note 1)

Millions of Yen
2014

2013

2014

¥ 56,592

20,637$ 549,437

Net increase in short-term borrowings

8,350

5,900

81,068Proceeds from long-term debt

1,500

10,351

14,563

Repayments of long-term debt

(60,804)(62,432)(590,330)(50,954)(46,181)(494,699)

41

46

398

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

5,679(25,498)

55,136

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

61,19886,696594,155¥ 66,877¥ 61,198$ 649,291

FORWARD
FINANCING ACTIVITIES:Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

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

22

AIFUL CORPORATION Annual Report 2014

Consolidated Financial Statements

Notes to Consolidated Financial Statements
Year Ended March 31, 2014
AIFUL CORPORATION and Consolidated Subsidiaries

1 BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been

Japan. In addition, certain reclassifications have been made inprepared in accordance with the provisions set forth in thethe 2013 consolidated financial statements to conform to theJapanese Financial Instruments and Exchange Act and its relatedclassifications used in 2014.

accounting regulations, and in accordance with accounting

The consolidated financial statements are stated in Japaneseprinciples generally accepted in Japan (“Japanese GAAP”), whichyen, the currency of the country in which the Company isare different in certain respects as to application and disclosure

incorporated and operates. The translations of Japanese yen

requirements of International Financial Reporting Standards. The

amounts into U.S. dollar amounts are included solely for the

consolidated financial statements are not intended to present

convenience of readers outside Japan and have been made at

the financial position, results of operations and cash flows in

the rate of ¥103 to $1, the approximate rate of exchange at

accordance with accounting principles generally accepted in

March 31, 2014. Such translations should not be construed

countries and jurisdictions other than Japan.

as representations that the Japanese yen amounts could be

In preparing these consolidated financial statements, certain

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

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

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation — The consolidated financial statements as ofmethod over 10 years. See Note 2.b for the new accounting

March 31, 2014, include the accounts of AIFUL CORPORATION

standard of business combinations undertaken on or after(the “Company”) and its four (four in 2013) significant subsid-

April 1, 2010.

iaries (together, the “Group”). Consolidation of the remaining

All significant intercompany balances and transactions have

12 (12 in 2013) unconsolidated subsidiaries would not have abeen eliminated in consolidation. All material unrealized profit

material effect on the accompanying consolidated financial

included in assets resulting from transactions within the Group

statements.
Under the control or influence concept, those companies

is eliminated.
b. Business Combinations — In October 2003, the Business

in which the Company, directly or indirectly, is able to exercise

Accounting Council (the “BAC”) issued a Statement of Opinion,

control over operations are fully consolidated, and those com-

“Accounting for Business Combinations”, and in December

panies over which the Group has the ability to exercise signifi-

2005, the ASBJ issued ASBJ Statement No. 7, “Accounting

cant influence are accounted for by the equity method.

Standard for Business Divestitures” and ASBJ Guidance No. 10,

Investments in six unconsolidated subsidiaries (six in 2013)“Guidance for Accounting Standard for Business Combinations

are stated at cost. Investments in the remaining six unconsoli-

and Business Divestitures”. The accounting standard for busi-

dated subsidiaries (six in 2013), which are limited liability invest-

ness combinations allowed companies to apply the pooling-

ment partnerships and similar partnerships, are initially record-of-interests method of accounting only when certain specificed at cost, and the carrying amount is adjusted to recognize thecriteria are met such that the business combination is essentiallyCompany’s interests in earnings or losses in such partnerships

regarded as a uniting-of-interests. For business combinations

based on the most recent available financial statements of thethat do not meet the uniting-of-interests criteria, the busi-

partnerships.

ness combination is considered to be an acquisition and the

The difference between the cost of an acquisition and thepurchase method of accounting is required. This standard also

fair value of the net assets of the acquired subsidiary at theprescribes the accounting for combinations of entities underdate of acquisition is reported as goodwill or negative goodwill

common control and for joint ventures.

in the accompanying consolidated balance sheet.

In December 2008, the ASBJ issued a revised accounting

Goodwill on acquisition of subsidiaries is amortized us-

standard for business combinations, ASBJ Statement No. 21,

ing the straight-line method over the estimated period (not to“Accounting Standard for Business Combinations”. Major

exceed 20 years) in which economic benefits are expected toaccounting changes under the revised accounting standard

be realized. However, when the excess of cost over net assets

are as follows: (1) The revised standard requires accountingof subsidiaries acquired is not material, it is charged to income

for business combinations only by the purchase method. As

when incurred. Negative goodwill on acquisition of subsidiar-a result, the pooling of interests method of accounting is no

ies prior to March 31, 2010 is amortized using the straight-line

longer allowed. (2) The previous accounting standard accounts

AIFUL CORPORATION Annual Report 201423

Notes to Consolidated Financial Statements

for research and development costs to be charged to income as

not be recoverable. An impairment loss is recognized if theincurred. Under the revised standard, in-process research andcarrying amount of an asset or asset group exceeds the sum

development costs (IPR&D) acquired in the business combina-of the undiscounted future cash flows expected to result fromtion are capitalized as an intangible asset. (3) The previous ac-

the continued use and eventual disposition of the asset or asset

counting standard provided for a bargain purchase gain (nega-group. The impairment loss would be measured as the amounttive goodwill) to be systematically amortized over a period notby which the carrying amount of the asset exceeds its recover-exceeding 20 years. Under the revised standard, the acquirer

able amount, which is the higher of the discounted cash flows

recognizes the bargain purchase gain in profit or loss immedi-from the continued use and eventual disposition of the asset or

ately on the acquisition date after reassessing and confirmingg. Software — Expenditures for the purchase of software, whichhave been identified after a review of the procedures used inmeet certain future tests, are capitalized as software and amor-

the purchase price allocation. This standard was applicable totized by the straight-line method over the estimated useful lives

business combinations undertaken on or after April 1, 2010.
As discussed in Note 20 to the consolidated financial state-of five years.
h. Allowance for Doubtful Accounts — The allowance forments, effective March 29, 2013, the Company entered into the

doubtful accounts is stated in amounts considered to be appro-

agreement with Sumitomo Mitsui Trust Bank, Limited to dis-priate based on the Group’s past credit loss experience and an

solve their joint venture business of BUSINEXT CORPORATION(“BN”) by transferring all shares and borrowings of BN to its

evaluation of potential losses in the accounts outstanding.
i. Allowance for Investment Losses — The allowance forconsolidated subsidiary of NEW FRONTIER PARTNERS Co., Ltd.

investment losses is stated in amounts considered to be appro-(“NFP”), which was completed on April 3, 2013.

priate based on the financial position of the investment destina-c. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash and that are ex-tion and an evaluation of potential losses on nonmarketable
investment securities.

posed to insignificant risk of changes in value. Cash equivalents

j. Allowance for Credit Card Point Redemption — The al-include time deposits that mature or become due within threelowance for credit card point redemption is provided at anmonths of the date of acquisition.

estimated amount of future costs related to credit card point

d. Operational Investment Securities Held by Venture

redemption. These points are granted to card members ac-

Capital Subsidiary and Investment Securities — Operation-

cording to the point system that is intended to promote theal investment securities held by a venture capital company andusage of cards.

investment securities, all of which are classified as available-k. Allowance for Losses from Business Restructuring — The

for-sale securities, are reported at fair value, with unrealized

allowance for losses from business restructuring is provided

gains and losses, net of applicable taxes, reported in a separate

at an estimated amount of future costs related to closure ofcomponent of equity. The cost of securities sold is determined

outlets and other restructuring activities.

based on the moving-average cost method. Nonmarketablel. Allowance for Losses on Interest Refunds — The limit ofavailable-for-sale securities are stated at cost determined by theinterest rates in Japan is regulated by two laws - “Capital Sub-moving-average method. For other-than-temporary declines

scription Law” and “Interest Rate Restriction Act”. Under thein fair value, operational investment securities and investment

former law, interest rates on loans should not exceed 29.2%

securities are reduced to net realizable value by a charge to(20.0% for customers who originate loans after June 18, 2010)

income.

and the violation of law is considered to be a criminal penalty.

Investments in limited liability investment partnerships and

The latter law stipulates that interest payments for interest rates

similar partnerships are initially recorded at cost, and the car-that exceed the legal limit (20.0% for principal amounts underrying amount is adjusted to recognize the Company’s interests¥100 thousand, 18.0% for principal amounts not less thanin earnings or losses in such partnerships based on the most¥100 thousand and under ¥1 million and 15.0% for principal

recent available financial statements of the partnerships.

amounts not less than ¥1 million) are void. However, under thee. Property and Equipment — Property and equipment are“Moneylending Business Control and Regulation Law”, suchstated at cost. Depreciation of property and equipment of theinterest payments are nonetheless considered to be valid if

Company and its consolidated subsidiaries is computed by themoneylenders issue notices as prescribed by the law to debtors

declining-balance method except that the straight-line methodand debtors pay the interests voluntarily (For customers who

is applied to the buildings of the Company’s consolidated

originate loans after June 18, 2010, such system is abolished.).

subsidiaries acquired on or after April 1, 1998. The range ofStrict judgment by the Supreme Court of these requirements

useful lives is principally from 2 to 62 years for buildings andhas led to decisions against moneylenders and resulted in morestructures, from 4 to 17 years for machinery and equipment,

debtors claiming for the return of excess interest payments.

and from 2 to 20 years for furniture and fixtures.

24

the net selling price at disposition.

that all of the assets acquired and all of the liabilities assumed

The Company and its certain consolidated subsidiaries havef. Long-lived Assets — The Group reviews its long-lived assets

loaned money at rates between the limits set by the two laws.

for impairment whenever events or changes in circumstance

Allowance for losses on interest refunds is stated in amounts

indicate the carrying amount of an asset or asset group may

considered to be appropriate based on the Company’s and its

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements

certain consolidated subsidiaries’ past refund loss experience,
the recent situation regarding interest refunds and other factors.
At March 31, 2014 and 2013, the Group recorded an al-fair value.
o. Leases — In March 2007, the ASBJ issued ASBJ Statement
No. 13, “Accounting Standard for Lease Transactions”, whichrevised the previous accounting standard for lease transactions.

lowance of ¥59,882 million ($581,379 thousand) and ¥91,422

The revised accounting standard for lease transactions was

million, respectively, as “Allowance for losses on interest

effective for fiscal years beginning on or after April 1, 2008.

refunds”. In addition, the estimated amount of interest refunds

Under the previous accounting standard, finance leasesof ¥35,291 million ($342,631 thousand) and ¥42,826 million

that were deemed to transfer ownership of the leased property

which were expected to be preferentially set off against loans

to the lessee were capitalized. However, other finance leases

was recorded as “Allowance for doubtful accounts” for thewere permitted to be accounted for as operating lease transac-

Company and its certain consolidated subsidiaries at March 31,

tions if certain “as if capitalized” information was disclosed

2014 and 2013, respectively.

in the note to the lessee’s financial statements. The revised

m. Asset Retirement Obligations — In March 2008, theaccounting standard requires that all finance lease transactions

ASBJ published ASBJ Statement No. 18 “Accounting Standard

be capitalized by recognizing lease assets and lease obligations

for Asset Retirement Obligations” and ASBJ Guidance No.

in the balance sheet.

21 “Guidance on Accounting Standard for Asset Retirement
Obligations”. Under this accounting standard, an asset retire-

The Group applied the revised accounting standard effective April 1, 2008.

ment obligation is defined as a legal obligation imposed either

Lease assets related to finance lease transactions withby law or contract that results from the acquisition, construc-ownership transfer are depreciated on the methods which aretion, development and the normal operation of a tangible fixed

applied to the assets owned by the Group. Lease assets related

asset and is associated with the retirement of such tangible

to finance lease transactions without ownership transfer are

fixed asset. The asset retirement obligation is recognized as thedepreciated over the leased periods on a straight-line basis,sum of the discounted cash flows required for the future asset

with no residual value.

retirement and is recorded in the period in which the obligation

All other leases are accounted for as operating leases.

is incurred if a reasonable estimate can be made. If a reason-p. Income Taxes — The provision for income taxes is computed

able estimate of the asset retirement obligation cannot bebased on the pretax income included in the consolidated state-

made in the period the asset retirement obligation is incurred,

ment of income. The asset and liability approach is used to

the liability should be recognized when a reasonable estimate

recognize deferred tax assets and liabilities for the expectedof the asset retirement obligation can be made. Upon initial

future tax consequences of temporary differences between

recognition of a liability for an asset retirement obligation, an

the carrying amounts and the tax bases of assets and liabilities.

asset retirement cost is capitalized by increasing the carrying

Deferred taxes are measured by applying currently enacted tax

amount of the related fixed asset by the amount of the liability.

laws to the temporary differences.

The asset retirement cost is subsequently allocated to expense

The Group files a tax return under the consolidated corpo-

through depreciation over the remaining useful life of the asset.

rate tax system, which allows companies to base tax payments

Over time, the liability is accreted to its present value each pe-on the combined profits or losses of the parent company andriod. Any subsequent revisions to the timing or the amount of

its wholly owned domestic subsidiaries.

the original estimate of undiscounted cash flows are reflected

q. Foreign Currency Transactions — All short-term andas an adjustment to the carrying amount of the liability and thelong-term monetary receivables and payables denominatedcapitalized amount of the related asset retirement cost.

in foreign currencies are translated into Japanese yen atn. Stock Options — ASBJ Statement No. 8, “Accounting Stan-the exchange rates at the balance sheet date. The foreign

dard for Stock Options” and related guidance are applicableexchange gains and losses from translation are recognized

to stock options granted on and after May 1, 2006. Thisin the consolidated statement of income to the extent thatstandard requires companies to measure the cost of employee
stock options based on the fair value at the date of grant andthey are not hedged by forward exchange contracts.
r. Revenue Recognition:

recognize compensation expense over the vesting period as

Interest on Loans —Interest on loans is recorded on an ac-

consideration for receiving goods or services. The standard

crual basis. In accordance with the practice prevailing in thealso requires companies to account for stock options granted

industry, the Company records accrued interest at either the

to non-employees based on the fair value of either the stock

interest rate stipulated in the Interest Rate Restriction Act or

option or the goods or services received. In the balance sheet,the contracted interest rate, whichever is lower.

the stock option is presented as a stock acquisition right as a

Revenue from Credit Card Business, Revenue fromseparate component of equity until exercised. The standard

Installment Sales Finance Business — Fees from customers

covers equity-settled, share-based payment transactions, but

and member stores applying the add-on method are generally

does not cover cash-settled, share-based payment transactions.

recorded collectively as unearned income when credit contracts

In addition, the standard allows unlisted companies to measure

become effective and are recognized in equal installments

options at their intrinsic value if they cannot reliably estimate

over the lives of contracts. Fees from customers applying the

AIFUL CORPORATION Annual Report 201425

Notes to Consolidated Financial Statements

remaining principal method or revolving method are generally

to reflect the impact of the stock split, and to provide data onrecognized in equal installments over the lives of contracts.

a basis comparable to the year ended March 31, 2014. Such

Revenue from Credit Guarantees — Revenue from credit

restatements include calculations regarding the Company’s

guarantees is recorded by the remaining principal method.

weighted-average number of common shares, basic net income

s. Interest on Borrowings — Interest on financial liabilities isper share, diluted net income per share, and stock option dataaccounted for as operating expenses while other interest is
included in other expenses.
t. Derivatives and Hedging Activities — The Group uses

ber 2009, ASBJ issued ASBJ Statement No. 24 “Accounting

derivative financial instruments to manage its exposures toStandard for Accounting Changes and Error Corrections” andfluctuations in interest rates and foreign exchange. Interest rate

ASBJ Guidance No. 24 “Guidance on Accounting Standard forswaps, interest rate caps and currency swaps contracts are uti-

Accounting Changes and Error Corrections”. Accounting treat-

lized by the Group to reduce interest rate and foreign currency

ments under this standard and guidance are as follows:

exchange risks. The Group does not enter into derivatives for(1) Changes in Accounting Policies - When a new accounting

trading or speculative purposes.

policy is applied following revision of an accounting standard,

Derivative financial instruments are classified and accounted

the new policy is applied retrospectively unless the revisedfor as follows: a) all derivatives are recognized as either as-

accounting standard includes specific transitional provisions,sets or liabilities and measured at fair value, and gains or losses

which case the entity shall comply with the specific transitionalon derivative transactions are recognized in the consolidated

provisions. (2) Changes in Presentation - When the presenta-

statement of income; and b) for derivatives used for hedging

tion of financial statements is changed, prior-period financial

purposes, if derivatives qualify for hedge accounting because ofstatements are reclassified in accordance with the new pre-high correlation and effectiveness between the hedging instru-

sentation. (3) Changes in Accounting Estimates - A change inments and the hedged items, gains or losses on derivatives arean accounting estimate is accounted for in the period of thedeferred until maturity of the hedged transactions.

change if the change affects that period only, and is accounted

Currency swaps contracts are utilized to hedge foreignfor prospectively if the change affects both the period of thecurrency exposure in principal and interest payments of foreign-change and future periods. (4) Corrections of Prior-Period

currency-denominated straight bonds. Foreign-currency-de-Errors - When an error in prior-period financial statements isnominated straight bonds are translated at the contracted rates.

discovered, those statements are restated.

The interest rate swaps and caps which qualify for hedge
accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under
the swap or cap contracts is recognized and included in interest
expenses or income.
u. Per Share Information — Basic net income per share is computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.
Diluted net income per share of common stock reflects thepotential dilution that could occur if securities were converted
into common stock and assumes full exercise of outstanding
stock options.
Cash dividends per share presented in the accompanying
consolidated statement of income are dividends applicable to
the respective years including dividends to be paid after the endof the year.
On October 1, 2013, the Company effected a two-for-one
stock split by way of a free share distribution based on the resolution of the Board of Directors meeting held on July 8, 2013.
All prior year share and per share figures have been restated26of the Company’s common stock.
v. Accounting Changes and Error Corrections — In Decem-

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements

3 LOANS
Loans at March 31, 2014 and 2013, consisted of the following (before allowance for doubtful accounts):
Thousands of
U.S. Dollars

Millions of Yen

2014

2013

2014

Unsecured¥ 261,222¥ 272,980$ 2,536,136

Secured41,26864,345400,660

Small-business loans

45,52153,310441,951

Total

348,011

390,635

3,378,747

Off-balance-sheet securitized loans(26,861)

Net¥ 321,150(260,786)¥ 390,635$ 3,117,961

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

Millions of Yen

2014

2013

2014

¥ 35,135¥ 37,598$ 341,117

Nonaccrual loans

27,29036,906

264,951

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

2,445

2,610

23,738Loans in legal bankruptcy

Restructured loans
Total

14,35321,514

139,349¥ 79,223¥ 98,628$769,155

Loans in legal bankruptcy are loans in which accrual of

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

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

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

collateral.

bankruptcy, nonaccrual loans and accruing loans contractually

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

past due three months or more are excluded.
At March 31, 2014 and 2013, including securitized loans,loans receiving regular payments in the case of granting deferral

the Group had balances related to revolving loan contracts

of interest payment to the debtors in financial difficulties to assist

aggregating ¥267,679 million ($2,598,825 thousand) andthem in their recovery.

¥301,487 million, respectively, whereby the Group is obligatedAccruing loans contractually past due three months or more

to advance funds up to a predetermined amount upon request.

as to principal or interest payments are loans for which payments

At March 31, 2014 and 2013, the balances of unadvancedof principal or interest have not been received for a period ofcommitments were ¥682,314 million ($6,624,408 thousand)three months or more beginning with the next business dayand ¥678,908 million, respectively. The loan contract contains

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

accruing loans contractually past due three months or more.

under certain conditions.

AIFUL CORPORATION Annual Report 201427

Notes to Consolidated Financial Statements

4 INSTALLMENT ACCOUNTS RECEIVABLE
Installment accounts receivable and unearned income, included in other current liabilities, at March 31, 2014 and 2013, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

2014

Credit card business

Receivables¥ 84,382

¥ 341

2014

Receivables

Unearned
IncomeReceivables

Unearned
Income¥ 82,439¥ 399$ 819,243$ 3,311

882

1

1,446

8

8,563

9

¥ 85,264¥ 342¥ 83,885¥ 407$ 827,806$ 3,320

Installment sales finance business
Total

2013
Unearned
IncomeIn addition, the Group had unearned income of immaterial amounts at March 31, 2014 and 2013, which was included in other current
liabilities, related to loans other than those shown in the above table.

5 CREDIT GUARANTEES AND OBLIGATION UNDER CREDIT GUARANTEESThe Group, as guarantor, recorded credit guarantees as a contra account of obligations under credit guarantees. Unearned income relatingto credit guarantees was ¥32 million ($311 thousand) and ¥40 million at March 31, 2014 and 2013, 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, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Current: Equity securities

2014

2013

2014

¥ 825

¥ 926

$ 8,010

¥ 603

¥ 840

$ 5,854

Non-current:
Equity securities
Government and corporate bonds
Other
Total

152
176

144

1,709

¥ 779

¥ 1,136$ 7,563

The costs and aggregate fair values of available-for-sale securities included in investment securities with reliable determined fair value atMarch 31, 2014 and 2013, were as follows:
Millions of Yen

2014

Securities classified as:
Available-for-sale securities

Cost

Unrealized
Gains

Unrealized
LossesFair Value

¥ 111

¥ 203

¥3

¥ 311

Cost

Unrealized
Gains

Unrealized
LossesFair Value

¥ 427

¥ 234

¥ 12

¥ 649

Millions of Yen

2013

Securities classified as:
Available-for-sale securities

Thousands of U.S. Dollars

2014

Securities classified as:
Available-for-sale securities

28

AIFUL CORPORATION Annual Report 2014

Cost

Unrealized
Gains

Unrealized
LossesFair Value$ 1,078$ 1,971$ 29$ 3,020

Notes to Consolidated Financial Statements

Proceeds from sales of available-for-sale securities for the years ended March 31, 2014 and 2013, were ¥750 million ($7,282
thousand) and ¥84 million, respectively. Gross realized gains on these sales, computed on the moving-average cost basis, were¥325 million ($3,155 thousand) and ¥38 million for the years ended March 31, 2014 and 2013, respectively, and gross realized
losses were ¥39 million ($379 thousand) for the year ended March 31, 2014.
The impairment losses on available-for-sale securities for the years ended March 31, 2014 and 2013, were ¥41 million($398 thousand) and ¥31 million, respectively.

7 LONG-LIVED ASSETS
Year ended March 31, 2014
There was no impairment loss for the year ended March 31, 2014.

Year ended March 31, 2013
The following table summarizes the Group’s asset grouping:Business Classification

Asset Grouping

Financial services and venture capital

Each business entity is the minimum unit. For assets related to businessrestructuring, each outlet and department which each company has decided toclose is the minimum unit.

Right of telephone

Each right of telephone which each company has decided to sell is the minimum
unit.

The Group reviewed its long-lived assets for impairment for the year ended March 31, 2013. As a result, the Group recognized an
impairment loss for right of telephone which the Group decided to sell. The carrying amount of the relevant assets was written down tothe estimated recoverable amount. The estimated recoverable amount of each asset grouping was measured at the expected amount of
sale.
Impairment Loss

Description
The assets of
expected saleClassification
Other assets(Right of telephone)

Location
Kyoto Prefecture

Millions of Yen¥ 52

The following table summarizes the components of the Group’s loss on impairment of long-lived assets for the year ended March 31,
2013:
Millions of Yen

Other assets¥ 52

AIFUL CORPORATION Annual Report 201429

Notes to Consolidated Financial Statements

8 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Borrowings principally from certain credit card company,
1.40% to 2.95% (1.35% to 2.95% at March 31, 2013)

2014

2013

2014

¥ 49,250¥ 40,900$ 478,155

Long-term debt at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Loans from banks, 1.90% to 2.975%*
Loans from other financial institutions, 1.90% to 3.75%*

2014

2013

2014

¥ 106,197¥ 155,926$1,031,039

20,98624,928203,748

Unsecured 1.74% yen straight bonds, due 2013

8,700

Unsecured 1.99% yen straight bonds, due 2015

10,00010,00097,087

Unsecured 3.50% medium-term notes, due 2015

15,00015,000145,631

Other debt (principally from securities companies),
1.90% to 2.475%*

52,48352,896

509,544

37

397

359

Total

204,703

267,847

1,987,408

Less current portion(16,837)(52,772)(163,466)¥ 187,866¥ 215,075$1,823,942

Obligations under finance leases

Long-term debt, less current portion* The final due dates for long-term debts subject to financial assistance cannot be identified.
At March 31, 2014 and 2013, long-term debts subject to the financial assistance of ¥106,197 million ($1,031,039 thousand) and ¥120,280 million,
respectively, were included in “Loans from banks”, ¥19,561 million ($189,913 thousand) and ¥24,928 million, respectively, were included in “Loans fromother financial institutions”, and ¥52,483 million ($509,544 thousand) and ¥52,896 million, respectively, were included in “Other debt” in the table above.
The final due date for “Loans from banks” other than those subject to financial assistance is 2018 (2015 at March 31, 2013).
The Company and its certain consolidated subsidiaries had received financial assistance based on the Business Revitalization Plan subsequent to March 31,
2014. The participating creditors decided to approve the proposal regarding the continuous financial assistance, which includes the provision on the partial
repayment of the remaining obligations of ¥161,741 million ($1,570,301 thousand), at the meeting of participating creditors held on June 13, 2014. But
the repayment schedule and method still remain undefined.

30

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements

Annual maturities of long-term debt, excluding finance leases (see Note 14) at March 31, 2014, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2015¥ 16,800$ 163,107

2016

25,300245,631

2017

300

2,913

2018

300

2,913

2019

225

2,184

Total

¥ 42,925$ 416,748

Year Ending March 31

Long-term debt whose repayment schedule is determined is included in the table above.
Long-term debt of ¥161,741 million ($1,570,301 thousand) whose repayment schedule is undetermined, such as obligations remaining
subject to the financial assistance, is not included in the table above.
At March 31, 2014, the following assets were pledged as collateral for short-term borrowings and long-term debt (including current
portion of long-term debt):
Millions of Yen

Thousands of
U.S. Dollars¥ 223,555$2,170,437

89,122865,262

78

757

Land

8,523

82,748

Buildings and structures

4,803

46,631

Machinery and equipment

90

874

¥ 326,171$3,166,709

Short-term borrowings¥ 49,250$478,155

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

179,666

1,744,330¥ 228,916$2,222,485

Loans
Installment accounts receivable
Other current assets

Total
Related liabilities:

Total

The portion of the amount of “Loans” and “Installment accounts receivable” in the above table is the amount which the Company
reserved at the time of the registration of assignment of accounts receivable.

AIFUL CORPORATION Annual Report 201431

Notes to Consolidated Financial Statements

9 RETIREMENT AND PENSION PLANS
The Company and its certain consolidated subsidiaries have a defined contribution pension plan and a prepaid retirement benefits plan.
Contributions to the defined contribution plan and payments to the prepaid retirement benefits plan are charged to income when made.
The components of net periodic benefit costs for the years ended March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2014

2013

2014

Payments for the prepaid retirement benefits plan

¥ 206

¥ 223

$ 2,000

Premiums for the defined contribution pension plan

271

292

2,631

Other
Net periodic benefit costs

3
¥ 477

¥ 518

$ 4,631

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

Japan (the “Companies Act”). The significant provisions in the

Reserve and Surplus

Companies Act that affect financial and accounting matters are

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

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

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

charged upon the payment of such dividends, until the aggregate

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

amount of legal reserve and additional paid-in capital equals

upon resolution at the shareholders meeting. For companies

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

Directors, (2) having independent auditors, (3) having an Audit &reversed without limitation. The Companies Act also provides

Supervisory Board, and (4) the term of service of the directors isthat common stock, legal reserve, additional paid-in capital, otherprescribed as one year rather than two years of normal term bycapital surplus and retained earnings can be transferred amongits articles of incorporation, the Board of Directors may declare

the accounts under certain conditions upon resolution of thedividends (except for dividends-in-kind) at any time during theshareholders.

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

(c) Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act permits companies to distribute

The Companies Act also provides for companies to purchase

dividends-in-kind (noncash assets) to shareholders subject

treasury stock and dispose of such treasury stock by resolution of

to a certain limitation and additional requirements.

the Board of Directors. The amount of treasury stock purchased

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

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

the Companies Act, stock acquisition rights are presented as a

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

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

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

presented as a separate component of equity or deducted directly

must be maintained at no less than ¥3 million.

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

32

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements

11 STOCK OPTION
The stock options outstanding as of March 31, 2014, are as follows:

Stock Option
2010
Stock Option
2013
Stock Option

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

Numberof Options
Granted*Date of Grant

4,385,300 shares

July 1, 2010

2,947,100 shares

May 27, 2013

Exercise
Price*

Exercise Period¥64($0.62)¥501($4.86)

From August 1, 2014
to July 31, 2016
From May 1, 2015
to April 30, 2017

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

The stock option activity is as follows:2010 Stock Option2013 Stock Option(shares)(shares)

For the year ended March 31, 2013*

Non-vested
March 31, 2012 - Outstanding
GrantedCanceled
VestedMarch 31, 2013 - Outstanding
VestedMarch 31, 2012 - Outstanding
VestedExercised
Canceled
March 31, 2013 - Outstanding
Exercise price
Fair value price at grant date

4,385,300

4,385,300

¥ 64
¥ 31
2010 Stock Option2013 Stock Option(shares)(shares)

For the year ended March 31, 2014*

Non-vested
March 31, 2013 - Outstanding
GrantedCanceled
VestedMarch 31, 2014 - Outstanding
VestedMarch 31, 2013 - Outstanding
VestedExercised
Canceled
March 31, 2014 - Outstanding
Exercise price
Fair value price at grant date

4,385,300
2,947,100

4,385,300

2,947,100¥ 64($ 0.62)¥ 31($ 0.30)¥ 501($ 4.86)¥ 261($ 2.53)* Shares and prices have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

AIFUL CORPORATION Annual Report 201433

Notes to Consolidated Financial Statements

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

Volatility of stock price:

77.936%

Estimated remaining outstanding period:

5.08 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.3577%

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

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

2.93 years

Estimated dividend:¥0 per share

Risk free interest rate:

0.171%

12 LOSS FROM BUSINESS RESTRUCTURING
The following table summarizes the components of the Group’s loss from business restructuring for the year ended March 31, 2014:
Millions of Yen

Loss from business restructuring:
Voluntary retirement cost and otherThousands of U.S. Dollars

¥ 10

$ 97

13 INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted innormal effective statutory tax rates of approximately 36% for the years ended March 31, 2014 and 2013, respectively.
The tax effects of significant temporary differences and tax loss carry forward which resulted in deferred tax assets and liabilities at
March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2014

2013

2014

¥ 23,563¥ 24,410$ 228,767

Allowance for losses on interest refunds

21,33932,547207,175

Charge-offs for doubtful accounts

7,026

8,798

68,214

Accrued interest on loans

1,968

2,459

19,107Tax loss carry forwards

189,241

182,348

1,837,291

Interest refunds payable

357

326

3,466

Other

5,960

7,360

57,863

Total

249,454258,248

2,421,883

Less valuation allowance(249,306)(258,248)(2,420,446)

Total deferred tax assets

¥ 148

¥ Nil

¥ 1,437

Unrealized gain on available-for-sale securities

¥ (1)

¥ (9)

$ (10)

Costs of removal related to asset retirement obligations

(171)

(140)

(1,660)¥ (172)¥ (149)$ (1,670)¥ (24)¥ (149)$ (233)

Deferred tax assets:
Allowance for doubtful accounts

Deferred tax liabilities:

Total deferred tax liabilities
Net deferred tax liabilities
34

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements

A valuation allowance is established to reduce certain deferred tax assets with respect to deductible temporary differences and net
operating loss carry forwards where it is more likely than not that they will not be realized.
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statement of income for the years ended March 31, 2014 and 2013, is as follows:

2014

2013

Normal effective statutory tax rate

36%

36%

Less valuation allowance

(32)

(33)

Income not taxable for income tax purposes

(2)

(0)

Others, net

0

(1)

2%

2%

Actual effective tax rate

At March 31, 2014, the Company and its wholly owned domestic subsidiaries had tax loss carry forwards aggregating approximately¥527,383 million ($5,120,223 thousand) which were available for offset against taxable income of the Company and such subsidiaries infuture years. These tax loss carry forwards, if not utilized, will expire as follows:
Millions of Yen

Thousands of
U.S. Dollars¥ 39,866$387,049

2018

59,408576,7772019

155,254

1,507,3202020 and thereafter

272,8552,649,077¥ 527,383$5,120,223

Year Ending March 31
2015
2016
2017

Total

14 LEASES
The Group leases furniture and fixtures.
Total rental expenses including lease payments under finance leases for the years ended March 31, 2014 and 2013, were ¥2,260 million($21,942 thousand) and ¥2,448 million, respectively.
Obligations under finance leases at March 31, 2014 were as follows:
Millions of Yen

Thousands of
U.S. Dollars

Due within one year

¥ 37

$ 359

Total

¥ 37

$ 359

AIFUL CORPORATION Annual Report 201435

Notes to Consolidated Financial Statements

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

securities by checking credit information and market prices

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

periodically.

in the provision of unsecured loans for individual consumers,

Because the counterparties to derivatives are limited tosecured loans, small business loans, shopping loans, credit

major financial institutions, the Group does not anticipate any

guarantee, debt collection and so on. To run these businesses,

losses arising from credit risk. The Group manages such credit

the Group raises funds domestically and internationally. Indirectrisks by relevant sections evaluating, analyzing and deliberating

financing by loans from banks and direct financing by bond issue

countermeasures and reporting to the board of directors

are used. The Group enters into derivative transactions as means

accordingly.

of managing its interest rate exposures and foreign currency

See Note 16 for more details about derivatives.

exposures on certain liabilities. Such derivative transactions are

Market risk management (foreign exchange risk and interest

entered into to hedge interest exposures and foreign currency

rate risk)

exposures inherent within its business. The Group does not hold

The Group manages foreign exchange risk and interest rate risk

or issue derivatives for trading or speculative purposes.

based on a “risk management manual” which was endorsed by
the Group’s risk management committee. The risk management(2) Nature and extent of risks arising from financial
instruments

committee is directly controlled by the board of directors. The
finance department reports the conditions of foreign exchange

Loans and installment accounts receivable for domestic consumers

risk and interest rate risk to the internal control department.

and small businesses are the main financial assets of the GroupThe internal control department examines the reasonability

and are exposed to credit risk through default of contract by

and adequacy of the finance department’s risk evaluation andcustomers. Other financial assets such as operational investment

countermeasures, and reports to the board of directors. Also, thesecurities and investment securities are mainly stock andGroup utilizes interest rate swaps in order to hedge exposure toinvestments in limited liability investment partnerships. The Grouprisks from changes in interest rates and currency swaps to manage

holds these securities to develop these businesses. The securities

exposure to risks from changes in foreign currency.

are exposed to the issuer’s credit risk and the risk of market priceMarket risk management (stock price volatility risk)

fluctuations.

Most of the operational investment securities and investment

Borrowings and debt including bonds are the main financial

securities the Group holds are intended to develop businessliabilities of the Group. These liabilities are exposed to liquidity

including business alliances and capital alliances. Relevant sections

risks, or risk that liabilities cannot be met when they fall due if themonitor the market environment and the financial situation of theGroup is unable to participate in fund-raising markets in certain

issuers, deliberate countermeasures and report to the board of

circumstances. In addition, the Group raises funds at variabledirectors accordingly. The Group does not hold trading securities,

interest rates or by bonds in foreign currency, and these arewhich are held for the purpose of earning capital gains in the near

exposed to the market risks of fluctuation in interest rates andterm.

foreign currency exchange rates.

Market risk management (derivatives)

Derivatives include interest rate swaps and currency swaps

The Group manages market risk of derivatives according to internal

which are applicable to hedge accounting, and interest rate swaps

guidelines. Relevant sections conduct internal checks to makeand caps which are not applicable to hedge accounting. Thesesure that transactions, valuations of effectiveness of hedging andderivatives are exposed to the market risks of fluctuation in interest

management of affairs are performed in accordance with internal

rates and foreign currency exchange rates, and counterparty

guidelines.

risks. See Note 16 for more details about derivatives and hedging

Liquidity risk management regarding fund-raising

activities.

The Group manages liquidity risk by adequate financial planning of
the Group on a timely basis, diversifying means of fund-raising and(3) Risk management for financial instruments

adjusting the ratio of long-term and short-term debt in the light ofCredit risk management

market environment.

Credit risk is the risk of economic loss arising from a counterparty’s
failure to repay or service debt according to the contractual(4) Fair value of financial instruments

terms. The Group manages its credit risks according to internal

Fair values of financial instruments are based on quoted prices inguidelines. In relation to loans, installments accounts receivable

active markets. If a quoted price is not available, other rationaland credit guarantees which are the Group’s major financial assets,

valuation techniques are used. There are possibilities that fair value

the Group conducts credit checks for each contract based on

calculation results may differ when different assumptions are used.

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 of36

AIFUL CORPORATION Annual Report 2014

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

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

Carrying Amount

Fair Value¥ 66,877¥ 66,8774

4

321,150(56,541)
264,609

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

Unrealized Gain

317,143¥ 52,534

80,012

81,121

1,109

311

311

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

3,968

Total

¥ 415,781¥ 469,424

Short-term borrowings¥ 49,250¥ 49,250

26,42525,728¥ 697¥ 75,675¥ 74,978¥ 697

Long-term debt

Total

¥ 53,643

Millions of Yen

March 31, 2013
Cash and cash equivalents
Time deposits
Loans
Allowance for doubtful accounts

Carrying Amount

Fair Value¥ 61,198¥ 61,1984

4

390,635(73,522)
317,113

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

Unrealized Gain

378,171¥ 61,058

78,357

79,469

1,112

649

649

83,885(361)(5,167)

39,832(34,573)
5,259

5,259

Total

¥ 462,580¥ 524,750

Short-term borrowings¥ 40,900¥ 40,900

69,34759,355¥ 9,992¥ 110,247¥ 100,255¥ 9,992

Long-term debt

Total

¥ 62,170

AIFUL CORPORATION Annual Report 201437

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars

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

Carrying Amount

Fair Value$ 649,291$ 649,291

39

39

3,117,961(548,942)
2,569,019

Installment accounts receivable3,079,058$ 510,039

776,816

787,583

10,767

3,020

3,020

827,806

Unearned income(2,971)

Allowance for doubtful accounts(48,019)

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

Unrealized Gain

357,806(319,282)
38,52438,524$ 4,036,709$ 4,557,515$ 478,155$ 478,155

256,553249,786$ 6,767

Total$ 734,708$ 727,941$ 6,767

Cash and cash equivalents

measured at the quoted market price of the stock exchange.

Total
Short-term borrowings
Long-term debt

$520,806

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

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

claims in bankruptcy approximate fair value because allowances

The carrying values of time deposits approximate fair value

for claims in bankruptcy are stated taking net realizable value of

because of their short maturities.

collateral into account.

Loans

Short-term borrowings

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

The carrying values of short-term borrowings approximate fair

expected future cash flow, which consists of expected inflows ofvalue because of their short maturities.

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

Long-term debt

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

The fair values of marketable bonds issued by the Company aremeasured at the quoted market price and those of nonmarketable

Installment accounts receivablebonds issued by the Company are determined by discounting cash

The carrying values of installment accounts receivable related

flows of principal and interest, discounted at the rate that reflects

to the credit card business approximate fair value because mostcredit risk and the maturities of the bond. The carrying values oftransactions are single payments in the following month. The

long-term borrowings approximate fair value because the variable

fair value of installment accounts receivable related to installment

rate reflects the market interest rate in a short period of time andsales finance business is determined based on the present value

also all of the borrowings are those of a consolidated subsidiaryof expected future cash flow, which consists of expected inflows

whose credit condition has not significantly changed since theof principal and fees which is adjusted to reflect collectability andinitial date of borrowing.

outflows of costs of collection. The expected future cash flow is
discounted at a low-risk interest rate based on maturity length.

Derivatives
The fair values of derivatives are measured at prices indicatedOperational investment securities, investment securities andby the correspondent financial institution because all derivative

investments in unconsolidated subsidiaries

transactions are nonmarketable. The information regarding the

The fair value of operational investment securities, investment

fair value for derivatives is included in Note 16.

securities and investments in unconsolidated subsidiaries are

38

AIFUL CORPORATION Annual Report 2014

Notes to Consolidated Financial Statements(b) Financial instruments whose fair value cannot be reliably determined
Since the fair values of the items in the table below cannot be reliably determined, they are not included in operational investment securities,
investment securities and investments in unconsolidated subsidiaries and long-term debt in (4) (a).
Carrying AmountMarch 31, 2014

Millions of Yen

Thousands of
U.S. Dollars¥ 1,693$ 16,437

272

2,641

178,241

1,730,495

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

Carrying AmountMarch 31, 2013

Millions of Yen

Operational investment securities, investment securities and investments inunconsolidated subsidiaries: *1¥ 1,843

Unlisted stocks

475

Investments in limited liability investment partnerships

Long-term debt *2

198,104*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. The Company and its certain consolidated subsidiaries had received financial assistance based on the Business Revitalization Plan subsequent to March
31, 2014. The participating creditors decided to approve the proposal regarding the continuous financial assistance, which includes the provision on thepartial repayment of the remaining obligations of ¥161,741 million ($1,570,301 thousand), at the meeting of participating creditors held on June 13,
2014. But the repayment schedule and method partially remain undefined. Under such circumstances, long-term debt which is subject to the financial
assistance has significant uncertainties in estimates of future repayment plans. Also, increased credit risks of the Company and long repayment periods
have substantial impact on discounted cash flows. Since it is difficult to make reasonable fair value calculations for such long-term debt, it is not subject tofair value disclosure.

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

March 31, 2014
Cash and cash equivalents
Time deposits

Due in One Yearor Less

Due after One Yearthrough Five Years

Due after FiveYears

¥ 66,877
4

Loans

131,697¥ 176,911¥ 12,542

Installment accounts receivable

82,1313,132

1¥ 280,709¥ 180,043¥ 12,543

Total

Thousands of U.S. Dollars

March 31, 2014
Cash and cash equivalents
Time deposits
Loans
Installment accounts receivable
Total

Due in One Yearor Less

Due after One Yearthrough Five Years

Due after FiveYears

$ 649,291
39
1,278,612$ 1,717,582$ 121,767

797,388

30,40810$ 2,725,330$ 1,747,990$ 121,777

Claims in bankruptcy of ¥36,854 million ($357,806 thousand) whose amount of redemption cannot be determined are not included in thetable above.
Please see Note 8 for annual maturities of long-term debt and Note 14 for obligations under finance leases, respectively.

AIFUL CORPORATION Annual Report 201439

Notes to Consolidated Financial Statements

16 DERIVATIVESThe Group enters into interest rate swap and cap, and currency swap contracts as a means of managing its principal and interest rate
exposures and foreign currency exposures on certain liabilities.
Such derivative transactions are entered into to hedge interest exposures and foreign currency exposures inherent within its business.
Accordingly, market and foreign exchange risks in these derivatives are offset by opposite movements in the value of hedged liabilities. The
Group does not hold or issue derivatives for trading or speculative purposes.
Because the counterparties to these derivatives are limited to major financial institutions, the Group does not anticipate any losses arisingfrom credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies, which regulate the authorization
process and credit limit amount.
There were no derivative transactions to which hedge accounting is not applied at March 31, 2014 and 2013.

17 COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen
2014

2013

2014

Unrealized gain (loss) on available-for-sale securities:
Gains arising during the year

¥ 311

¥ 136

$3,019Reclassification adjustments to profit or loss

(293)

57

(2,845)

Amount before income tax effect

18

193

174

Income tax effect

8

3

77

Total

¥ 26

¥ 196

$ 251

Total other comprehensive income

¥ 26

¥ 196

$ 251

18 NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2014 and 2013, is
as follows:Year ended March 31, 2014
Basic EPS - Net income available tocommon shareholders

Millions of Yen

Thousandsof Shares

Net Income

Weighted-Average
Shares¥ 30,462

480,952

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

Yen
EPS

¥ 63.34$ 0.61$ 0.61

2,550¥ 30,462

483,502¥ 63.00¥ 22,706

480,952¥ 47.21

Year ended March 31, 2013*
Basic EPS - Net income available tocommon shareholders
Effect of dilutive securities:
Stock acquisition rights
Diluted EPS - Net income for computation

1,927¥ 22,706¥ 482,879¥ 47.02* Shares and per share figures have been restated, as appropriate, to reflect a two-for-one stock split effected October 1, 2013.

40

AIFUL CORPORATION Annual Report 2014

Dollars

Notes to Consolidated Financial Statements

19 RELATED PARTY DISCLOSURES
Year ended March 31, 2014
The related party represents “AMG Co., Ltd.” which is wholly owned by directors of the Company and their family members.
Transactions of the Company with a related party for the year ended March 31, 2014, were as follows:

Fine art sales

Millions of Yen

Thousands of
U.S. Dollars¥ 1,272$ 12,350

Millions of Yen

Thousands of
U.S. Dollars

¥ 88

$ 854

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

Other income
Year ended March 31, 2013

The related party represents “AMG Co., Ltd.” which is wholly owned by directors of the Company and their family members.
Transactions of the Company with a related party for the year ended March 31, 2013, were as follows:
Millions of Yen

Fine art sales¥ 60

The balances due to a related party at March 31, 2013, were as follows:
Millions of Yen

Other current liabilities¥ 60

20 BUSINESS COMBINATIONS(1) Objectives of the Business Combination
The Company entered into the agreement with Sumitomo Mitsui Trust Bank, Limited (“SMTB”) to dissolve their joint venturebusiness of BN by transferring all shares of BN to its consolidated subsidiary of NFP, which was completed on April 3, 2013.
(2) Summary of Accounting Treatments
This business combination is accounted for as a transaction with minority shareholders included in transactions under common
control, in accordance with accounting standards, “Accounting Standard for Business Combinations (ASBJ Statement No. 21
December 26, 2008)” and “Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures (ASBJ Guidance No. 10 December 26, 2008)”.
(3) Detail of Acquisition Costs
The cost taken to additionally acquire shares of BN from SMTB was ¥0 million ($0 thousand) in cash.
(4) Detail of Gain on Negative Goodwill(a) Amount of gain on negative goodwill¥2,305 million ($22,379 thousand)(b) Cause of occurrence
The cost taken to additionally acquire shares of BN from SMTB was less than the amount equivalent to minority interests of BN.

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

AIFUL CORPORATION Annual Report 201441

Notes to Consolidated Financial Statements

1. Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s
management is being performed in order to decide how resources are allocated among the Group. Therefore, the Group consists of
the Group’s major operating companies, “AIFUL CORPORATION” and “LIFECARD Co., Ltd.” and “NFP”. AIFUL CORPORATION engages
mainly in the loan business and the credit guarantee business. LIFECARD Co., Ltd. engages mainly in the credit card business and the credit
guarantee business. NFP engages mainly in the venture capital business.
Effective April 1, 2013, the Group changed its operating segments from “AIFUL CORPORATION” and “LIFECARD Co., Ltd.” to “AIFULCORPORATION”, “LIFECARD Co., Ltd.” and “NFP” because quantitative materiality of NFP to segment profit (loss) increased.
The segment information for the year ended March 31, 2013, is also disclosed using the new operating segments.
2. Methods of measurement for the amounts of sales, profit (loss), assets, liabilities and other items for each reportablesegment
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.
Millions of Yen
2014
Reportable Segment
AIFUL

LIFECARD¥ 42,066

NFP

Total

Other *1

Total

Reconciliations

Consolidated¥ 6,260¥ 48,326¥ 2,252¥ 50,578¥ 50,578
13,427

Operating revenue:
Interest on loans

47

13,38013,427

13,427

Revenue from credit guarantee

6,654

1,296

7,950

7,950

7,950

Recovery of loans previously charged off

9,536

100

9,636

27

9,663

9,663

884

5,950

306

7,140

3,101

10,241

10,241

Operating revenue from external customers

59,187

26,986306

86,4795,380

91,859Intersegment operating revenue or transfers

10

346

Revenue from credit card business

Other operating revenue

356

356

91,859¥ (356)¥ 59,197¥ 27,332¥ 306¥ 86,835¥ 5,380¥ 92,215¥ (356)¥ 91,859

Segment profit (loss)¥ 24,046¥ 2,419¥ 3,155¥ 29,620¥ (400)¥ 29,220¥ 1,242*2¥ 30,462

Segment assets

463,792

181,8145,549

651,155

20,831

671,986(94,647)*3

577,339

Segment liabilities

348,984

149,410

4,926

503,320

4,578

507,898(64,101)*4

443,797

Total

Other:

2,666

Provision for credit card point redemption

4

Reversal of allowance for investment losses
Provision for doubtful accounts

8,579

2,666

2,666

4

4

2,997

11,576960

12,536

1,885

1,885

Provision for accrued bonuses

547

5

552

18

570

Depreciation and amortization

2,099

1,641

3,740

21

3,761

Interest on advances to subsidiaries and other

1,346

Provision for losses on interest refunds

Dividend income
Reversal of allowance for doubtful accounts

6

118
15

2,636

1,464

1,464

21

21

2,636

2,636

Gain on negative goodwill

2

2
3,840

Gain on purchase of borrowings
Loss on sale of investment securities

26

5

39

41

3,840

3,840

31

31
10

Loss from business restructuring4(1,605)

1,885

Amortization of negative goodwill
Interest on advances from parent company and
other

2,666
10,931
1,885
297

867
3,761

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

36

218

218

2,305

2,305

(38)

3
3,840

2

10

33
10

Income taxes:
Current(1,677)

1,229

543

221

764

Deferred

33

(405)

(372)

(2)

(374)

839

701

1,540

4

1,544

Increase in property, plant and equipment andintangible assets
*1
*2
*3
*4

42

991

“Other” items are business segments excluded from reportable segments, which include BN and AsTry Loan Services Corporation.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities.

AIFUL CORPORATION Annual Report 2014

764
256

(118)
1,544

Notes to Consolidated Financial Statements

Millions of Yen
2013
Reportable Segment
AIFUL

LIFECARD¥ 47,402

NFP

Total

Other *1

Total

Reconciliations

Consolidated¥ 6,904¥ 54,306¥ 7,301¥ 61,607¥ 61,607

Operating revenue:
Interest on loans

116

12,39812,514

12,514

12,514

Revenue from credit guarantee

3,215

1,395

4,610

4,610

4,610

Recovery of loans previously charged off

10,78922

10,811

29

10,84010,840

776

5,221

¥ 81

6,078

3,970

10,04810,04862,29825,94081

88,31911,30099,61999,61912375

Revenue from credit card business

Other operating revenue
Operating revenue from externalcustomers
Intersegment operating revenue ortransfers

387

387

¥ (387)¥ 62,310¥ 26,315¥ 81¥ 88,706¥ 11,300 ¥ 100,006¥ (387)¥ 99,619

Segment profit (loss)¥ 10,649¥ 3,319¥ (103)¥ 13,865¥ 1,259¥ 15,124¥ 7,582*2¥ 22,706

Segment assets

466,542

185,6391,479

653,660

61,587715,247(108,066)*3

607,181

Segment liabilities

376,131

95,4344,049

475,61444,907

520,521(18,348)*4

502,173

Total

Other:

2,347

Provision for credit card point redemption
Reversal of allowance (provision) forinvestment losses

(760)

38

2,347

2,347

(722)

(722)

762

6,472

1,705

513

2,616

3,129

15,877

1,420

17,297

Provision for accrued bonuses

584

4

588

28

616

Depreciation and amortization

3,621

2,387

6,008

13

6,021

Provision for doubtful accounts
Provision for losses on interest refunds

Interest on advances to subsidiaries and
other

456

Dividend income

16

19

3,343

17,297

456

456

35

35

Amortization of negative goodwill
Interest on advances from parent
company and other
Gain on purchase of borrowings

71
5,948

Loss on write-down of investments in subsidiaries

71

40
8,177
17,297

260

876
6,021

(452)

4

218

218

35

(71)

5,948

5,948

5,948

28

28

28

52

52

52

52

8,760

8,760

8,760

Loss on impairment of investment
securities
Loss on impairment of long-lived assets

2,347

28

(8,760)

Income taxes:
Current(1,393)

Deferred30

Increase in property, plant and equipment
and intangible assets
*1
*2
*3
*4

1,648

1,611

(6)

212

202

30
449

2,097

6

414

414

30

30

2,103

2,103

“Other” items are business segments excluded from reportable segments, which include BN and AsTry Loan Services Corporation.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities.

AIFUL CORPORATION Annual Report 201443

Notes to Consolidated Financial Statements

Thousands of U.S. Dollars
2014
Reportable Segment
AIFUL

LIFECARD$ 408,407

NFP

Total

Other *1

Total

Reconciliations

Consolidated$ 60,777$ 469,184$ 21,865$ 491,049$ 491,049

Operating revenue:
Interest on loans

456

129,903130,359

130,359

130,359

Revenue from credit guarantee

64,602

12,582

77,184

77,184

77,184

Recovery of loans previously charged off

92,582971

93,553263

93,816

93,816

Other operating revenue

8,583

57,767$ 2,970

69,32030,10799,42799,427

574,630

262,000

2,970

839,600

52,235

891,835

891,835

Revenue from credit card business

Operating revenue from external customers

98

3,359

3,457

$ (3,457)$ 574,728$ 265,359$ 2,970$ 843,057$ 52,235$ 895,292$ (3,457)

Segment profit (loss)$ 233,456$ 23,485$ 30,632$ 287,573$ (3,884)

Segment assets

4,502,835

1,765,184

53,874

6,321,893

202,243

Segment liabilities

3,388,194

1,450,583

47,825

4,886,602

44,447

Intersegment operating revenue or transfers
Total

3,457

$ 891,835$ 283,689$ 12,059*2$ 295,748

6,524,136(918,903)*3

5,605,233

4,931,049(622,340)*4

4,308,709

Other:

25,883

Provision for credit card point redemption

25,883
39

Reversal of allowance for investment losses
Provision for doubtful accounts

83,291

25,88339

29,097112,38839
9,321

121,70918,301

18,301

Provision for accrued bonuses

5,310

49

5,359

175

5,534

Depreciation and amortization

20,37915,93236,311

204

36,515Interest on advances to subsidiaries and other

13,068Provision for losses on interest refunds

58

Dividend income

1,146
146

39
(15,583)

18,301

14,214

14,214204

204

25,592

25,592

106,126
18,301

2,883

8,417
36,515(14,185)29
204(25,242)

350

Amortization of negative goodwill

2,117

2,117

Gain on negative goodwill

22,37922,379(369)

29

Reversal of allowance for doubtful accounts

25,592

25,883

Interest on advances from parent company

19

and other

19
37,282Gain on purchase of borrowings

252

Loss on sale of investment securities

49

379

398

37,28237,282

301

301
97

Loss from business restructuring

37,282
19

320

97

97

Income taxes:
Current(16,282)

11,932

5,272

2,145

7,417

Deferred320(3,932)(3,612)(19)(3,631)

8,145

6,806

14,951

39

14,990

Increase in property, plant and equipment andintangible assets
*1
*2
*3
*4

9,622

7,417
2,485

(1,146)14,990“Other” items are business segments excluded from reportable segments, which include BN and AsTry Loan Services Corporation.
“Reconciliations” are elimination of intersegment transactions.
“Reconciliations” are elimination of intersegment assets.
“Reconciliations” are elimination of intersegment liabilities.

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

2014

Operating revenue from external customers
44

AIFUL CORPORATION Annual Report 2014

Loan Business

Credit Card
Business

Other

Total

¥ 59,032¥ 13,930¥ 18,897¥ 91,859

Notes to Consolidated Financial Statements

Millions of Yen

2013

Operating revenue from external customers

Loan Business

Credit Card
Business

Other

Total

¥ 71,290¥ 12,929¥ 15,400¥ 99,619

Thousands of U.S. Dollars

2014

Operating revenue from external customers

Loan Business

Credit Card
Business

Other

Total

$ 573,126$ 135,243$ 183,466$ 891,835

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, 2014
and 2013.
(2) Property, plant and equipment
Information about geographic area is omitted, as no property, plant and equipment were located outside Japan for the years ended
March 31, 2014 and 2013.
3. Information about major customers
Information about major customers is omitted, as no single external customer accounted for more than 10% of operating revenue forthe years ended March 31, 2014 and 2013.
4. Information regarding amortization of negative goodwill and unamortized amount of each reportable segment.
Millions of Yen

2014
Elimination/
Corporate

Total

¥ 218

¥ 218

2,305

2,305

Elimination/
Corporate

Total

Amortization of negative goodwill

¥ 218

¥ 218

Negative goodwill at March 31, 2013

218

218

AIFUL

LIFECARD

NFP

Other

Amortization of negative goodwill
Gain on negative goodwill*1

Negative goodwill at March 31, 2014
Millions of Yen

2013
AIFUL

LIFECARD

NFP

Other

Thousands of U.S. Dollars

2014
AIFUL

LIFECARD

NFP

Amortization of negative goodwill
Gain on negative goodwill

*1

Other

Elimination/
Corporate

Total$ 2,117$ 2,117

22,37922,379Negative goodwill at March 31, 2014
*1 Gain on negative goodwill arose when the Company handed over BN securities to NFP on April 3, 2013.

AIFUL CORPORATION Annual Report 2014

45

46

AIFUL CORPORATION Annual Report 2014

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

Nov

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

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

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

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

1984
Feb Start of ATM operations
Mar Registration of money lenders based onenactment of the Money-Lending BusinessControl Law
Oct
Began sales of real estate-secured loans
1994
Nov Opened Heartful Center
1995
Mar Installed automatic contract acceptance machine,“Ojido-san”
Nov Started a website
1997Jul
Over-the-counter registration of company’s stockwith the Japan Securities Dealers Association
Oct
Began full-scale sales of commercial loans to
consumers
1999
May Registered as certified finance corporation
based on the Law Concerning the Issuance ofCorporate Bonds in the Financial Industry Loan
Business

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

Jul
Nov

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

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

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

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

2013
Apr

Issued V-Preca, Japan’s first prepaid
Visa card available exclusively online
Under the Group’s reorganization, the credit sales
business and the credit guarantee and insurance
businesses of LIFE Co., Ltd., were transferred
to LIFE CARD Co., Ltd. by way of corporate
spinoff and merger. Also, four consolidated
subsidiaries (LIFE Co., Ltd. (following its spin-off),
City’s Corporation, City Green Corporation andMarutoh KK) were merged with AIFULNew Frontier Partners Co., Ltd. (currently aconsolidated subsidiary), a wholly owned
subsidiary of the Company, acquired all sharesof BUSINEXT CORPORATION (currently aconsolidated subsidiary) owned by the Company
and Sumitomo Mitsui Trust Bank Limited andmade it a wholly owned subsidiary

AIFUL CORPORATION Annual Report 201447

Group Network(As of March 31, 2014)

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

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

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

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

48

AIFUL CORPORATION Annual Report 2014

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

New Frontier Partners Co., Ltd.
http://www.nf-partners.co.jp (Japanese only)
Business Classification
Venture capitalInvestor Information(As of March 31, 2014)

Corporate Data

Principal Shareholders

Corporate NameAIFUL CORPORATION

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

Number of Percentage ofSharesTotal Shares(Thousands) Outstanding

AMG Co., Ltd.

94,81419.68

Mitsuhide Fukuda

62,153

12.90

Marutaka Co., Ltd.

24,543

5.09

Date of Establishment

April 1967

Common Stock¥143,324 million

Japan Trustee Services Bank, Ltd.
(trust account)

13,7562.85

Number of Employees

Non-consolidated: 924
Consolidated: 1,369

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

10,2582.13

Composition of Shareholders

Stock Listing
Tokyo Stock Exchange

The First Section

Securities Code8515

Domestic Financial
Institutions
12.2%

Shareholder Information
Number of Shares of Common Stock
Authorized

1,136,280,000 shares

Issued and Outstanding

481,867,836 shares

Number of Shareholders

44,856

Independent Auditors

Deloitte Touche Tohmatsu LLC

Transfer Agent andRegistrar

Sumitomo Mitsui Trust Bank,
Limited*The Company split each share of common stock into 2 shareseffective on October 1, 2013.

Individuals
and Others
45.9%

Other
Domestic
Institutions
32.5%

Foreign Investors
9.3%

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

AIFUL CORPORATION Annual Report 201449