Building Growth Potential through Agile Management

Transcription

1 Annual Report 2013 For the Fiscal Year Ended March 31, 2013 Building Growth Potential through Agile Management Annual Report 2012 For the Fiscal Year Ended March 31, 2012

2 Profile JACCS Co., Ltd., commenced business in the city of Hakodate, Hokkaido, in For more than half a century, JACCS has continued to expand its business nationwide under a founding philosophy that values trust and reliability. With a total volume of new contracts exceeding 2,480 billion, JACCS is one of the leading names in Japan s consumer credit sector. JACCS issues standard credit cards under the Visa, MasterCard, and JCB brands, and has a membership base of approximately 7,200 thousand cardholders, including those with cards from affi liate partners. JACCS became a member of Mitsubishi UFJ Financial Group, Inc. (MUFG), in 2008 through a third-party allocation of new shares. In April 2012, JACCS launched a new three-year medium-term business plan, ACT11. This plan sets a Credit Business medium- to long-term vision of becoming an innovative consumer fi nance company with its roots in Japan, and targets accelerating growth by turning around Focusing management Credit Card Financing resources on growth in and expanding operating revenue (top line). ACT11 Business our three core operations Business encompasses the revitalization of JACCS existing businesses, the acceleration of overseas business Developing our overseas operations and new businesses expansion, and the development of new businesses. In overseas operations, the JACCS Group commenced Overseas New with the provision of motorcycle loan services in Vietnam Operations Businesses in 2010, and continued its expansion in the ASEAN region when the Group announced its decision in November 2012 to enter the motorcycle sales fi nance market in Indonesia.

3 JACCS Founding Philosophy The essence of JACCS founding philosophy is expressed in these Chinese characters, which may be translated as, Trust is the basis for all. Since JACCS establishment, we have remained faithful to our founding philosophy a strong belief that trust and reliability form the cornerstone of all our activities, taking precedence in our relationships with consumers and business partners. Management Principles With core businesses focused on the consumer credit industry, JACCS continuously strives for excellence in its credit systems. JACCS helps consumers realize rich, satisfying lives. JACCS contributes to the enhancement of its business partners operating performance. JACCS approaches all tasks with enthusiasm and good faith. JACCS Founding Philosophy and Management Principles Financial and Operational Highlights To Our Stakeholders Special Feature Building Growth Potential through Agile Management Accelerating Overseas Business Expansion: Entry into the Indonesian Market for Motorcycle Sales Finance Utilizing M&As to Accelerate Business Expansion: Bolstering JACCS Share of the Payment Market Review of Operations Corporate Governance Founders / Board of Directors and Audit & Supervisory Board Members Executive Officers CSR Activities Financial Information Corporate Directory Investor Information CONTENTS FORWARD-LOOKING STATEMENTS The financial data and other business-related information in this publication has been prepared to inform JACCS stakeholders about the business. Any forecasts regarding future performance contained in these materials are based on estimates and the best judgments of the Company, without guarantee or security. Readers are advised not to make investment decisions based solely on the information contained in these materials. All business and financial data relate to the consolidated operations of the Company, unless otherwise noted. JACCS CO., LTD. Annual Report

4 Financial and Operational Highlights JACCS CO., LTD. and Consolidated Subsidiaries Number of JACCS Cardholders DOWN Total Volume of New Contracts UP Volume of New Contracts: Credit Cards UP ,281 thousand % 3.9 % % 2,480.4 billion billion Volume of New Contracts: Installment Sales Finance DOWN billion % Volume of New Contracts: Credit Guarantee UP billion % Volume of New Contracts: Financing DOWN billion % Millions of Yen Thousands of U.S. Dollars Years ended March Summary of operations for the year: Number of JACCS cardholders (Thousands) 9,714 9,920 9,601 8,419 7,281 Total volume of new contracts 2,412,646 2,316,012 2,328,294 2,387,501 2,480,470 $26,387,978 Volume of new contracts: Credit card 723, , , , ,669 8,368,819 Volume of new contracts: Installment sales fi nance 306, , , , ,539 2,250,414 Volume of new contracts: Credit guarantee 527, , , , ,770 6,774,148 Volume of new contracts: Financing 211, , ,673 86,418 83, ,212 Volume of new contracts: Other operations 644, , , , ,469 8,111,372 Total operating revenue 142, , , , ,950 1,095,212 Operating income 5,271 8,845 3,137 10,972 9, ,138 Ordinary income 6,278 10,433 5,479 13,271 11, ,000 Net income 2,587 3,569 4,398 6,822 7,642 81,297 At year-end: Total assets 3,024,588 2,827,806 2,786,288 2,725,816 2,718,518 $28,920,404 Total net assets 97, , , , ,486 1,249,851 Per share data: Net income $0.46 Net assets Cash dividends Note: The U.S. dollar amounts in this report represent translations of Japanese yen, for convenience only, at the rate of 94 = U.S.$1.00, the approximate rate prevailing on March 31, Yen U.S. Dollars 2 JACCS CO., LTD. Annual Report 2013

5 Total Operating Revenue DOWN billion % Operating Income DOWN billion % Ordinary Income DOWN billion % Net Income Net Income Per Share Cash Dividends Per Share UP UP UP billion % 12.2% % Financial and Business Highlights 2012 July August September October November November 2013 January January February March Commenced handling Rakuten Solar loans after entering into an alliance with Rakuten, Inc. Japan s leading e-commerce group. This program supports the purchase of solar panels by household users. Launched a new organizational structure aimed at expanding business in the payment fi eld. Acquired Gakken Credit Corporation. (For further details, please refer to the special feature on pages ) Launched a new system for fully Web-based auto loan applications. The system is an industry fi rst and also facilitates paperless loan-screening operations. Entered into an alliance with Kagawa Bank, Ltd., covering the provision of unsecured housing-renovation loan guarantee services. JACCS maintains partnerships with approximately 500 fi nancial institutions nationwide as part of its personal loan guarantee operations. Introduced Employee Stock Ownership Plan (ESOP) Trust Scheme as an employee incentive plan. JACCS aims to bolster medium- to long-term corporate value through the granting of employee incentives. Made decision to enter the motorcycle sales fi nance business in Indonesia. Following on from entry into the Vietnam market in 2010, JACCS is focusing on expansion of its overseas business operations. (For further details, please refer to the special feature on pages 8 9.) Entered into an alliance with Meitetsu Kyosho Co., Ltd., covering the provision of fee collection guarantee services* for corporate car-sharing services. JACCS aims to expand such services for bill settlement as an alternative to the issuing of credit cards. *Note: This product combines the collection of customer usage fees through JACCS account transfer network and the provision of guarantees by JACCS covering a specifi ed period in the case of account transfer failure owing to insuffi cient account balance and other reasons. Entered into an alliance with Seven Card Service Co., Ltd., relating to that company s nanaco electronic money service. This partnership enables nanaco members to recharge their nanaco balance using a JACCS credit card. JACCS also commenced a point transfer service from JACCS Lovely Points to nanaco points. Entered into an alliance with Chiba Bank, Ltd., relating to the provision of guarantees on such products as personal unsecured loans for education, automobile purchase, and housing renovation. Commenced guarantee services for Aogin Educational Card Loans, a new product launched by Aomori Bank, Ltd. JACCS CO., LTD. Annual Report

6 To Our Stakeholders JACCS recorded an increase in the total volume of new contracts, and although total operating revenue declined, net income rose. Furthermore, the Group bolstered the underlying strength of its business by enhancing the quality of its credit portfolio. Yasuyoshi Itagaki President, CEO, COO and Representative Director 4 JACCS CO., LTD. Annual Report 2013

7 Operating Performance: JACCS Achieved Growth in Net Income and Enhanced the Quality of Its Credit Portfolio Progress in the Initial Year of ACT11 Going on the Offensive to Achieve a Turnaround in Operating Revenue and Renewed Growth In fiscal 2012, ended March 31, 2013, JACCS recorded an increase in the total volume of new contracts, and although total operating revenue declined, net income rose. Furthermore, the Group bolstered the underlying strength of its business by enhancing the quality of its credit portfolio. In the Group s three main businesses the credit business, credit card business, and financing business we responded agilely to the growth needs of each business by focusing management resources to promote reinvigoration. We also embarked on various initiatives as we sought to cultivate new mainstay earnings sources, including the development of new Web-based products and entry into previously untapped fields. However, similar to the previous fiscal year, the Company s top line (operating revenue) situation remained harsh, principally owing to a decrease in the balance of cash advances. In the overseas business, JACCS made the decision to enter a second fast-growing Asian market. Following on from the Group s entry into Vietnam in 2010, we chose to develop business interests in Indonesia through the acquisition of a 40% equity stake in PT Sasana Artha Finance (SAF) in December As in Vietnam, we are targeting the motorcycle sales finance business in Indonesia. We intend to provide the know-how we have accumulated in Japan and Vietnam as we work to expand the motorcycle sales finance business in Indonesia. Although our consolidated subsidiary JACCS International Vietnam Finance Co., Ltd. (JIVF), had been marking time due to the Vietnamese government s monetary tightening policy, in the second half of the fiscal year under review monetary conditions were eased and JIVF focused efforts on strengthening its business base by expanding its network of member motorcycle dealers and increasing its volume of loans. As a result of the factors outlined above, on a consolidated basis, the total volume of new contracts increased 3.9% compared with the previous fiscal year, to 2,480,470 million, and total operating revenue declined 4.1%, to 102,950 million. Ordinary income declined 11.5%, to 11,750 million, and net income increased 12.0%, to 7,642 million. We are pursuing three core policies under ACT11, our three-year medium-term business plan running from April 1, 2012, through March 31, Accelerating growth by turning around and expanding operating revenue (top line) Further strengthening our management structure to ensure adaptability to environmental change Continuously enhancing our compliance system On a consolidated basis, ACT11 sets targets for fiscal 2014, ending March 31, 2015, of operating revenue totaling billion and ordinary income amounting to 12.5 billion. In fiscal 2012, although total operating revenue fell slightly short of the target of 103,700 million, the result for ordinary income greatly surpassed the target of 9,000 million. Looking at progress in each of the three core policies, for accelerating growth by turning around and expanding operating revenue (top line), although the negative impact of a decline in the balance of cash advances remained, operating revenues grew in the housing-related field and for auto loans, while the balance of revolving payments also increased. These factors, combined with steady growth in the balances of housing and personal loan guarantees, brought a turnaround in the top line within sight. With regard to further strengthening our management structure to ensure adaptability to environmental change, through an improvement in the quality of the Group s credit portfolio and growth in the balance of deferred installment income, we further bolstered the underlying strength of the Group s business. This greatly contributed to our achieving the ordinary income target in fiscal We worked on continuously enhancing our compliance system based on a management philosophy that emphasizes the importance of building a sound and highly reliable organizational structure that ensures strict compliance with laws and regulations. Revisions to laws affecting the Group s business mean that operations are becoming increasingly complex. To address this, we strove to improve the efficiency of operational systems so as to prevent inadequacies from occurring in relation to these laws and to reduce compliance risk. JACCS CO., LTD. Annual Report

8 Outlook for Fiscal 2013, Ending March 31, 2014 In fiscal 2013 the second year of ACT11 we are committed to realizing a turnaround in the top line and making fiscal 2013 a year in which we take a significant step toward further growth. On a consolidated basis, our specific targets are total operating revenue of 103,300 million and ordinary income of 11,600 million. Key measures include, in the credit business, further expansion in the volume of new contracts in the housing-related field, the rolling out of a strategic product that aims to increase our share of the auto loan market for imported vehicles, and measures to bolster our share of the used-auto dealer market. In the credit card business, we are aiming to acquire 650,000 new card members. We are also looking to increase the balance of revolving payments by reinforcing promotion programs. In the financing business, as well as maintaining a balance of housing loan guarantees over 1,000 billion, through ongoing collaboration with The Bank of Tokyo-Mitsubishi UFJ, Ltd., and further partnerships with regional banks, we will work to expand the balance of personal loan guarantees for banks. In bill collection services, by utilizing account payment contracts with a large number of financial institutions and the invoicing and settlement system formerly possessed by Gakken Credit Corporation, we will strive to increase the number of bills handled. In the overseas business, in Vietnam we are aiming to increase the volume of new contracts by expanding our network of member motorcycle dealers, thereby shifting the business to the full-fledged earnings stage. In our entry into the Indonesian market, we will work to strengthen our partnership with SAF s parent company, PT Mitra Pinasthika Mustika, with the aim of expanding the motorcycle sales finance business. In the area of new business, we are planning entry into the prepaid business, and will aim to roll out products both in Japan and overseas. Delivering Shareholder Value The Company sees stable shareholder return as a key management issue. Simultaneously, we also recognize that shareholder return must be in line with business performance. Hence, our basic policy regarding profit distribution strives to reinforce our financial base and keep adequate internal reserves while implementing dividends based on a comprehensive evaluation of such factors as net income, financial position, and payout ratio. The Company implemented a cash dividend applicable to fiscal 2012 of per share. Building Growth Potential through Agile Management JACCS responds agilely to changes in the operating environment, and through aggressive business development as well as bold initiatives to pioneer new markets, the Group will work to build its market presence and achieve sustainable growth. We will also work to realize our medium- to long-term vision of becoming an innovative consumer finance company with its roots in Japan. As we work to achieve these goals, we look forward to the continued support and understanding of our shareholders, investors, customers, partner companies, and local communities. August 2013 Yasuyoshi Itagaki President, CEO, COO and Representative Director 6 JACCS CO., LTD. Annual Report 2013

9 Building Growth Potential through Agile Management ACT11 JACCS new three-year medium-term business plan adopts the theme of accelerating growth by turning around and expanding operating revenue (top line). To realize this goal, JACCS is working to build its growth potential through a range of measures, including agile strategy execution and the development of new markets. In this special feature, we introduce some of the specific initiatives adopted by JACCS. JACCS CO., LTD. Annual Report

10 Special Feature Accelerating Overseas Business Expansion: Entry into the Indonesian Market for Motorcycle Sales Finance Indonesia has the largest land area and population in the ASEAN region. In 2012, more than seven million motorcycles were sold in Indonesia, making it one of the world s largest new-motorcycle markets. Following its business launch in Vietnam in 2010, JACCS made the decision in November 2012 to enter the Indonesian market for motorcycle sales finance, as it strove to accelerate overseas business expansion focusing on the ASEAN region. In December 2012, JACCS acquired a 40% equity stake in Indonesian motorcycle sales finance company PT Sasana Artha Finance (SAF). Indonesia: Key Facts Population: 242 million* (2011, world s fourth largest) Land area: Approximately 1.89 million square kilometers** Real GDP growth rate: 6.2% (2012)*** Motorcycle sales (2012)**** 18 times More than 7 million Around 18 times the size of the Japanese motorcycle market Sources: * World Health Organization, World Health Statistics 2013 ** Ministry of Foreign Affairs of Japan *** International Monetary Fund, World Economic Outlook Database, April 2013 **** Based on research by JACCS 8 JACCS CO., LTD. Annual Report 2013

11 Overview of the Indonesian Market Indonesia s population of 242 million ranks it as the world s fourth most-populous country. In 2012, Indonesia s real GDP growth rate was 6.2%. The country s annual sales of motorcycles totaled over seven million units in 2012 approximately 18 times the size of the Japanese motorcycle market and continued growth is forecast. One of the features of the Indonesian motorcycle market is the very high number of buyers who use purchasing finance (installment sales finance). Compared with Japan and Vietnam, this proportion is large, at approximately 60% of motorcycle purchases. Another key feature is the dominance of Japanese motorcycle manufacturers, whose products account for more than 90% of the market. Objectives and Method of Entry into the Indonesian Market As its method of entry into the fast-growing Indonesian market, JACCS chose to make an equity investment with the aim of management participation in one of the leading local companies in the motorcycle sales finance industry. In November 2012, JACCS reached an agreement with PT Mitra Pinasthika Mustika (MPM) one of Indonesia s top corporate groups regarding the acquisition of 40% of the shares of SAF. In December 2012, JACCS acquired the equity stake in SAF in line with this agreement. As a member of the MPM Group, SAF operates a motorcycle sales finance business, providing 80,000 motorcycle loans annually. JACCS commenced full-fledged participation in the business in January 2013, through such measures as the dispatch of JACCS employees to work at SAF s head office. Although the impact of the Indonesian business on JACCS consolidated earnings performance was minimal in A bustling dealership in Surabaya, Indonesia, selling Japanese motorcycle brands fiscal 2012, as an equity-method affiliate, from fiscal 2013 SAF is expected to contribute to operating results. MPM is affiliated with Indonesia s leading private equity group, Saratoga Capital, and has substantial business interests in the automobile and motorcycle fields. While cooperating with MPM, JACCS intends to provide SAF with its know-how in such areas as member dealer management, loan screening, and claim collection operations, which it has cultivated in Japan and Vietnam. These efforts aim to achieve even greater expansion in the motorcycle sales finance business. A branch offi ce of PT Sasana Artha Finance (SAF), Surabaya, Indonesia JACCS International Vietnam Finance Co., Ltd. Summary of PT Sasana Artha Finance (SAF) Head office: Jakarta Establishment: 1981 Principal business: Motorcycle sales finance (installment sales finance) Capital: 377 billion rupiahs Number of employees: 1,193 (as of March 2013) JACCS CO., LTD. Annual Report

12 Special Feature Utilizing M&As to Accelerate Business Expansion: Bolstering JACCS Share of the Payment Market For consumers who have monthly outgoings related to investment in their own well-being or career advancement, such as fi tness club membership or foreign language courses, automatic transfers are a convenient method of payment. With the objective of expanding the value of transactions it handles in the growing payment market, JACCS acquired all the outstanding shares of Gakken Credit Corporation, making the company a subsidiary of JACCS. We subsequently strengthened the company s account payment contract, invoicing, and settlement system. JACCS is working to overhaul its organizational structure for promoting the payment business, as it strives to reinforce and expand this business. Business partner Customer Bill Collection System Overview Submission of account funds transfer request documentation Bill collection services contract Submission of account funds transfer request documentation Submission of invoice data Return of funds transfer result data Bill collection clearing Deposit Submission of account funds transfer request documentation JACCS Account transfer Financial institution 10 JACCS CO., LTD. Annual Report 2013

13 Payment Market Overview In recent years, the consumer credit industry in Japan has continued to face harsh operating conditions, amid a falling birthrate and aging population and tightening of regulations under related laws. In this environment, JACCS is focusing on the payment market as it aims to expand its fee-based business. The payment market includes such areas as monthly rent payments, fitness club membership, and private tutoring school fees, which many consumers pay using methods other than credit card or individual loan credit, and inter-company accounts receivable transactions. One of JACCS strengths in this market is its network for funds transfer using automatic payments from financial institution accounts. Leveraging its information technology (IT) capabilities, JACCS intends to steadily grow the value of transactions by continuing to respond to market needs. JACCS Strengths and Basic Strategy In such fee business fields as rent payments and accounts receivable transactions, JACCS plans to capitalize on the unique strengths it has built up as a shopping credit and credit card company. In addition, by utilizing the former Gakken Credit account payment contract, invoicing, and settlement system, JACCS aims to diversify its lineup of products and services, and hence expand the value of transactions in the payment market. Acquisition of Gakken Credit Corporation On August 3, 2012, JACCS acquired all the outstanding shares of Gakken Credit Corporation, the Gakken Group s consumer credit subsidiary. The company became a subsidiary of JACCS, and its name was changed to JACCS Payment Solutions Co., Ltd. Through this acquisition, the JACCS Group took over contracts with approximately 1,000 financial institutions under which account funds transfers are executed on the 12th of each month. JACCS own account funds transfer day is on the 27th of each month. By having two account payment contract, invoicing, and settlement systems, the JACCS Group will have greater opportunities to further diversify its service lineup. There are significant needs among corporate customers for funds transfers on the 12th of each month, which enables such customers to finalize receipts and payments by the month-end. Working toward a full-fledged entry into the business-to-business (B2B) market, JACCS intends to further strengthen various aspects of its operations. Organizational Change Aimed at Expanding Share of a Growth Market: Establishment of Payment Business Department As JACCS moves to expand the value of transactions in the payment market, it has also embarked on an overhaul of its organizational structure for promoting the payment business. Accordingly, on October 1, 2012, the Payment Business Department was newly established. By fiscal 2014, ending March 31, 2015, on a consolidated basis JACCS is targeting a 50% increase in the value of transactions in the payment field compared with the level in fiscal This will contribute to JACCS realizing its goal of accelerating growth by turning around and expanding operating revenue (top line) under ACT11, its new three-year medium-term business plan. Even in the era of low birthrates and an aging society, there is still a demand for private tutoring school (gakushu juku) services. School operators have the need to offer customers monthly automatic transfers as a tuition payment option. atic transfers as a tuition pay For apartment landlords and tenants, automatic transfers of rent are a convenient payment method. This market still has signifi cant room for further development. JACCS CO., LTD. Annual Report

14 Review of Operations Credit Business Focusing on Expansion in the Housing-Related Field and Increasing JACCS Share of the Auto Loan Market Overview JACCS shopping credit supports consumers at various life stages, including in such areas as home renovation and other housing-related fields, as well as in the purchase of educational, bridal, and healthcare services. In the auto loan field, through partnerships with automobile dealerships, JACCS facilitates purchases in a broad array of vehicle categories, from domesticand overseas-brand new vehicles through to used vehicles. Strategy under ACT11 In shopping credits, JACCS is striving to expand its housing-related business by increasing loans for solar power generation systems and bolstering renovation loans through collaboration with housing manufacturers. In auto loans, JACCS is working to build a strong position in the imported-vehicle market by reinforcing its relationships with imported-vehicle dealerships and aggressively rolling out strategic products. JACCS is also endeavoring to expand its share of loans through used-vehicle dealerships as it aims to increase the volume of new contracts for used-vehicle loans. Operating Performance (Non-Consolidated) In shopping credits, although the Company achieved growth in housing-related products, both the volume of new contracts and operating revenue decreased, owing to a slump in other product areas. In auto loans, although there was a slowdown following the end of the government s Eco-Car Subsidy program, centering on light motor vehicles, the volume of new contracts for domestic-brand vehicles rose, resulting in higher operating revenue. Key Initiatives Operating Revenue in Auto Loans (Non-Consolidated) 15.0 Billions of Yen Operating Revenue in Shopping Credits (Non-Consolidated) 21.0 Billions of Yen Selected as a cooperating financial institution for the Tokyo Metropolitan Government s solar project Through a public call for applications, JACCS was the sole company selected as a cooperating financial institution for the Yanejikara (roof power) solar project, a new initiative to promote the use of home solar power generation systems announced by the Tokyo Metropolitan Government and Tokyo Environmental Public Service Corporation on February 26, JACCS selection reflected the high evaluation the Company received for its record to date in providing loans for solar power generation systems and its capabilities in managing relationships with a network of collaborating solar power system dealerships. Launch of the WeBBy Auto loan application system JACCS has launched a Web-based system that seamlessly integrates sales support functions and the auto loan application process, providing a very high level of convenience to both automobile dealerships and their customers. By fully resolving the issue of incomplete forms in the auto loan application process, this industry-first system makes the loan screening process smoother and contributes to enhanced service for member dealerships. JACCS presentation explaining the Solar Loan at an event organized by the Tokyo Metropolitan Government 12 JACCS CO., LTD. Annual Report 2013

15 Review of Operations Credit Card Business Expanding the Cardholder Base and Working toward a High Ratio of Active Cardholders Overview In addition to standard credit cards with attractive add-on services, JACCS also issues cards in partnership with a wide variety of organizations and companies. Through collaborative partnerships with member stores a key strength that leverages JACCS status as an independent credit card issuer not affiliated with any particular retail group we focus on enhancing the value-added of cobranded cards. We are also promoting increased cardholder use of revolving payment services. Strategy under ACT11 The core strategy of the credit card business is to expand the cardholder base. We are aiming to increase the number of new members through the promotion of concept-based cards that target a specific market or customer segment and by bolstering new membership campaigns for existing co-branded cards. To maintain and increase the number of active cardholders, JACCS is focusing on co-branded cards with strong potential for attracting active members. Furthermore, by stepping up promotional campaigns, we are working to expand our revenue base by increasing the balance of revolving payments. Operating Performance (Non-Consolidated) Operating Revenue in Credit Card Business for Cash Advances (Non-Consolidated) Operating Revenue in Credit Card Business for Shopping (Non-Consolidated) 23.6 Billions of Yen Number and Ratio of Active Cardholders Number of Active Cardholders Ratio of Active Cardholders 343 Tens of Thousands In card shopping, various promotional campaigns contributed to an increase in the average usage amount per cardholder and led to a rise in the volume of new contracts. An increase in the balance of revolving payments underpinned growth in operating revenue. Operating revenue from cash advances continued the decline seen in the previous fiscal year owing to the impact of regulations concerning the total amount that individual consumers are permitted to borrow. Key Initiatives 18.2 Billions of Yen Introduction of cards capable of winning strong loyalty from specific customer segments JACCS is striving to expand the number of new members by issuing new co-branded cards based on three main concepts the e-commerce and catalog shopping market, targeted membership, and high-growth companies with strong ties to a particular local area. Stimulating Card Usage through the JACCS Royal Members Club (JRMC) As part of our efforts to increase the volume of card shopping new contracts, we classify cardholders who have an annual transaction volume of 500,000 or more as JRMC members, and these members are targeted for increased card usage. As a result of various promotional campaigns, in fiscal 2012 transaction volume for JRMC members increased 18.5% compared with 4.4% for general cardholders. We plan to continue efforts to stimulate card usage by JRMC members % JACCS CO., LTD. Annual Report

16 Review of Operations Financing Business Building the Balance of Credit Guarantees through an Alliance Strategy with Financial Institutions Revenue from Guarantees for Housing Loans (Non-Consolidated) 15.7 Billions of Yen Overview The financing business comprises credit guarantees for housing loans, credit guarantees for personal loans extended by banks, and bill collection services. Housing loan guarantee services specialize in mortgage guarantees for studiotype apartments for investment purposes. JACCS conducts this business specifically in Tokyo, Osaka, and Fukuoka, where apartments have sound rental income-earning potential. Revenue from Guarantees for Personal Bank Loans (Non-Consolidated) 3.1 Billions of Yen Strategy under ACT11 The balance of housing loan guarantees outstanding exceeds one trillion yen. JACCS aims to maintain this balance by continuing to build a high-quality portfolio of credit assets based on appropriate credit management. In personal loan guarantees for banks, we are working to expand the balance of loan guarantees through ongoing collaboration with The Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU). We are also pursuing further partnerships with regional banks. In bill collection services, by utilizing the account payment contracts and invoicing and settlement system possessed by consolidated subsidiary JACCS Payment Solutions Co., Ltd. (formerly Gakken Credit Corporation), we are aiming to diversify our lineup of products and services, and hence increase the number of invoices handled. New initiatives in bill collection services are introduced in the special feature on pages Operating Performance (Non-Consolidated) In housing loan guarantees, operating revenue increased, driven by growth in the balance of loan guarantees. In personal loan guarantees for banks, the balance of auto loan guarantees rose steadily, resulting in higher operating revenue. In bill collection services, an increase in the number of invoices led to growth in operating revenue. Revenue from Bill Collection Services 2.4 Billions of Yen Key Initiatives Establishing a stable earnings base in housing loan guarantees In housing loan guarantees, which specialize in mortgage guarantees for apartments purchased for investment purposes, competition has intensified in recent years. By maintaining strong relationships with partner institutions, JACCS will work to retain its leading market share. Continuing collaboration with BTMU in personal loan guarantees JACCS is strengthening its collaboration with BTMU in personal loan guarantees for banks. JACCS dedicated creditscreening center handling BTMU loans established in Tokyo in September 2011 is functioning effectively, and we are working to raise the balance of loan guarantees. We are also focusing on Web-based products, including BTMU s Net de Loan personal loan service, which customers apply for via the Web. By expanding our lineup of Web-based products and enhancing customer convenience, we are striving to increase the volume of new contracts. 14 JACCS CO., LTD. Annual Report 2013

17 Review of Operations Overseas Operations Expanding the Network of Motorcycle Dealerships in Vietnam and Entering a Second Asian Market Indonesia Overview JACCS launched its overseas business operations in Asia in 2010 through entry into the motorcycle sales finance business in Vietnam. In November 2012, the Company resolved to enter the Indonesian market for motorcycle sales finance, subsequently commencing operations in January In both Vietnam and Indonesia, Japanese motorcycle manufacturer Honda Motor Co., Ltd., has a market share exceeding 50%. While deepening our level of cooperation with Honda, we are leveraging the know-how we have accumulated in Japan to build a solid position for the JACCS brand in Asia. Number of Member Stores in Vietnam (Years ended December 31) Balance of Operating Receivables in Vietnam 750 Millions of Yen (Years ended December 31) Strategy under ACT11 Consolidated subsidiary JACCS International Vietnam Finance Co., Ltd. (JIVF), is working to expand its network of member motorcycle dealerships and the volume of new contracts, with focus mainly on Ho Chi Minh City. As well as continuing efforts to build stable operations, JIVF is endeavoring to expand its business base and broaden its sphere of operations. Based on our strategy of accelerating the development of markets in Asia, following the launch of operations in the motorcycle sales finance business in Indonesia, we are strengthening our partnership with PT Mitra Pinasthika Mustika (MPM), as we work to expand the business. Operating Performance (Non-Consolidated) Although the Vietnamese economy is in a temporary lull, relaxation of monetary tightening during fiscal 2012 and lifting of restrictions on new store openings enabled JIVF to expand its network of member dealerships. Key Initiatives JIVF upgrades IT system Responding to diversification in interest rate products, JIVF upgraded its IT system. By continuously pursuing efficient and effective low-cost operations, JIVF is striving to maximize profitability. Entry into the Indonesian motorcycle sales finance business Indonesian market entry was made through an equity participation agreement with a leading local corporate group. This is one of the characteristics that sets it apart from JACCS Vietnam operations. Further details on the Indonesian business are introduced in the special feature on pages 8 9. JACCS CO., LTD. Annual Report

18 Corporate Governance Fundamental Corporate Governance Philosophy The Company works to maintain the trust and respond to the expectations of a broad cross-section of stakeholders, including shareholders, business partners, employees, consumers, and local communities. Furthermore, the Company pursues management that places signifi cant importance on corporate social responsibility (CSR), and believes that enhancing corporate value and contributing to society as well as the realization of a society based on trust are key management issues. To achieve these goals, the Company works to increase the soundness of its business, improve transparency, and strengthen its management control systems and audit functions, while undertaking corporate activities in accordance with principles of social justice. Corporate Governance Structure Under its corporate governance structure, the Company appoints a Board of Directors and an Audit & Supervisory Board, and has introduced a system of executive offi cers. Board of Directors As of June 28, 2013, the Board of Directors comprises nine members (including two outside directors). The Board of Directors determines the Company s basic management policies, and makes decisions regarding important operational matters and other matters delegated by resolution of the General Meeting of Shareholders. The Board of Directors also makes decisions on matters stipulated by law and the Company s Articles of Incorporation, and receives reports regarding the status of signifi cant operational matters. Based on this structure, the Board of Directors oversees the operational execution of the Company s management. The term of appointment for directors is one year. Audit & Supervisory Board Members and the Audit & Supervisory Board As of June 28, 2013, the Company had four Audit & Supervisory Board Members (including two outside Audit & Supervisory Board Members). As independent offi cers functioning under a mandate from the General Meeting of Shareholders, the Audit & Supervisory Board Members audit the directors execution of duties. The Audit & Supervisory Board is a body that holds discussions and makes decisions regarding the audits undertaken by the Audit & Supervisory Board Members for the purpose of formulating opinions. Each Audit & Supervisory Board Member utilizes the Audit & Supervisory Board as a means of ensuring effectiveness. As a body to support the Audit & Supervisory Board Members execution of duties, the Company has established the Audit & Supervisory Board Members Secretariat and has appointed dedicated staff to this body. Management Committee As an advisory body to the representative director, the Management Committee comprises executive offi cers responsible for supervising each function of the Company s business organization. In principle, the Management Committee convenes three times per month and broadly considers and debates matters delegated by the Board of Directors, important operational matters and various issues, as part of a system designed to facilitate expeditious execution. Audit Offi ce The Audit Offi ce functions as an internal auditing unit, which reports directly to the representative directors and maintains independence from the rest of the Company s organization. As of June 28, 2013, the Audit Offi ce comprised 19 staff, including the Audit Offi ce General Manager. The Audit Corporate Governance Structure General Meeting of Shareholders Election / Dismissal Election / Dismissal Election / Dismissal Management Committee Board of Directors Operational Audit Audit & Supervisory Board Cooperation Representative Director CEO/COO Accounting Audit Accounting Auditor Internal Control Committee Compliance Committee Cooperation Individual Departments Directors, Executive Officers, Others Personal Information Protection Committee and Others Audit Office 16 JACCS CO., LTD. Annual Report 2013

19 Offi ce considers and evaluates overall business-related risk management control and the effectiveness of governance processes at each of the Group s operational sites, and conducts internal auditing operations based on the Company s internal control system policies. Committees Internal Control Committee The Internal Control Committee is tasked with establishing systems to ensure that the Group s operations are conducted appropriately, and has the objective of promoting integrated and effi cient internal control and risk management. Compliance Committee The Compliance Committee has the objective of promoting business operations within the Group that achieve an extremely rigorous level of compliance. Personal Information Protection Committee The Company acquires personal information and provides credit as part of its business operations. For this reason, it is essential that the entire Group works to ensure the protection of personal information. The Personal Information Protection Committee is the Company s highest body responsible for matters relating to the handling of personal information. The reason the Company adopted this corporate governance structure is to enhance the effectiveness of the Board of Directors decision-making and oversight and the Audit & Supervisory Board Members (Audit & Supervisory Board) management audit functions. Furthermore, this structure clearly defi nes the respective roles and responsibilities of directors and executive offi cers who have a deep knowledge of the Company s operations, and day-to-day management. Hence, the Company believes that this structure is optimal for facilitating autonomous, responsible, and speedy management. Internal Control and Compliance Structure In addition to building an expeditious and effi cient structure for operational execution, the Company believes that strengthening the compliance system of the entire Group and establishing a highly independent internal audit system is extremely important. Hence, the Company has established specialist organizational units responsible for each of these functions. The Company has passed a resolution regarding its Policy for the Establishment of the Internal Control System, and is building its internal control system based on this policy. Outside Directors and Outside Audit & Supervisory Board Members The Company has appointed two outside directors and two outside Audit & Supervisory Board Members. Although the Company has not established any specifi c standards relating to independence in the appointment of outside directors and outside Audit & Supervisory Board Members, appointment decisions are based on the principles that persons appointed must not have any benefi cial interests in the Company, be able to express opinions and advice from an independent and objective perspective so as to sustain the soundness and transparency of the Company s management, and must not have the risk of confl icts of interest arising with ordinary shareholders of the Company. Compensation of Officers Offi cer category Directors (excluding outside directors) Audit & Supervisory Board Members (excluding outside Audit & Supervisory Board Members) Total compensation Basic (millions of compensation yen) Total compensation by type (millions of yen) Stock options Bonuses Retirement allowance Number of directors or Audit & Supervisory Board Members Outside offi cers Note: The above table includes one director and one Audit & Supervisory Board Member who retired as of the Ordinary General Meeting of Shareholders held on June 28, 2012, and one director who passed away on October 4, Information Disclosure System To ensure management transparency and enhance accountability, the Company conducts timely, appropriate, and fair information disclosure through investor relations (IR) activities aimed at shareholders and investors. Measures to Revitalize the General Meeting of Shareholders and Promote the Exercise of Voting Rights The Company works to dispatch notices of General Meeting of Shareholders as early as possible. Notice of the Ordinary General Meeting of Shareholders held on June 27, 2013, was dispatched on June 6, To promote the exercise of voting rights, the Company participates in an electronic voting platform. IR Activities The Company holds briefi ngs for analysts and institutional investors twice yearly approximately one week after the results announcement. In addition to the results announcement at the Tokyo Stock Exchange (TSE), the Company posts its securities fi ling (Yuka Shoken Hokokusho), briefi ng materials for analysts and institutional investors, shareholders newsletters, English annual report, and other materials on its website. A dedicated IR manager is appointed within the Corporate Planning and Communication Department. JACCS CO., LTD. Annual Report

20 Founders / Board of Directors and Audit & Supervisory Board Members As of June 28, 2013 Founder and Honorary Chairman Kaname Yamane Founder and Counselor Tatsuya Watanabe Senior Adviser Naoe Sugimoto President, CEO, COO and Representative Director Yasuyoshi Itagaki Deputy President and Representative Director Tsutomu Sugiyama Directors and Senior Managing Executive Officers Hidechika Kobayashi Credit and Credit Card, Business Strategy Noboru Kawakami General Affairs and Personnel Directors and Senior Executive Officers Minekazu Sugano Information System Kojun Sato Corporate Planning Shigeki Ogata Accounting and Finance Katsuhiro Abe* Haruo Kamioka* * Outside Directors Audit & Supervisory Board Members Akihiro Urabe (Full-time) Tsutomu Sekine (Full-time) Saburosuke Fujisaki* Satoru Fujimura* * Outside Audit & Supervisory Board Members (Front, from left to right) Director and Senior Managing Executive Offi cer Noboru Kawakami Deputy President and Representative Director Tsutomu Sugiyama President, CEO, COO and Representative Director Yasuyoshi Itagaki Director and Senior Managing Executive Offi cer Hidechika Kobayashi (Back, from left to right) Director and Senior Executive Offi cer Shigeki Ogata Director and Senior Executive Offi cer Minekazu Sugano Director and Senior Executive Offi cer Kojun Sato 18 JACCS CO., LTD. Annual Report 2013

21 Executive Officers As of June 28, 2013 Managing Executive Officer Satoru Shiroishi Shutoken Area Senior Executive Officers Akira Furukawa Kita-Kanto Area Takayuki Hiroi Audit Yoshinao Osawa Finance Business, Business Strategy Yukihiko Kamagata Compliance Control Hitoshi Chino Credit Supervision and Operation Hideo Yoshino International Business Kenichi Oshima Credit Administration Toru Yamazaki Kinki Area Executive Officers Hiroshi Miyamoto Kyushu Area Akira Kuzukami Chubu Area Takeo Imai Credit Supervision and Operation Masayuki Nemoto Credit Card Business Promotion, Business Strategy Takahiro Nagoshi Tohoku Area Isao Yanagihara Hokkaido Area Ryo Murakami Credit Business Promotion, Business Strategy Shingo Yuzue Housing Loan Guarantee, Business Strategy Toshio Sotoguchi Auto Loans, Business Strategy Masatoshi Kishi Chugoku-Shikoku Area JACCS CO., LTD. Annual Report

22 CSR Activities Through all of our interactions with society, we aim to honor the trust placed in us by our stakeholders, and strive to enhance the level of satisfaction we provide. This statement conveys JACCS core CSR philosophy. When undertaking CSR activities, we are also conscious of our commitment to being a company that generates sustainable profi ts and always acts in good faith. More than 100 JACCS employees participate annually in a blood donation program Owing to Japan s low birthrate, the country has fewer blood donors, and an increasingly serious nationwide shortage of blood products. In response, JACCS has cooperated with the blood donation program organized by the Gotanda Lions Club every year since Since 2005, more than 100 employees have donated blood each year at a blood donation center set up at the JACCS head offi ce. From 2012, 2012, we held 30 seminars nationwide under such themes as Handling Complaints, Dealing with Workplace Bullying, and Key Points for Avoiding Consumer Disputes. A total of 1,659 participants from 826 companies took part in these seminars. Ninety-six percent of participants found the seminars useful and reported that participation had contributed to enhanced business performance and smoother operations at member stores. We will continue to organize seminars as we strive to maintain our position as a trusted partner. JACCS has worked to further promote the blood donation program, including through the establishment of blood donation centers at additional locations. Contributing to society through credit cards As part of JACCS efforts to contribute to society through its business activities, in September 2012 the Company began accepting applications from customers for JACCS CARD link, a social contribution-type credit card. For a period of fi ve years from the start of membership, 0.3% of the card s total annual (calendar year) purchase amount is donated to a charitable organization selected by the cardholder on joining. JACCS fully incurs the amount that is donated to charity, and no monetary cost is borne by the cardholder. Members may select from one of the following charitable organizations. Ongoing seminar program for member stores Every year, JACCS holds seminars with the objective of supporting member stores efforts to strengthen their compliance systems. In fi scal Japan Committee for UNICEF Japanese Red Cross Society Japan Association for UNHCR 20 JACCS CO., LTD. Annual Report 2013