UNOFFICIAL TRANSLATION The formal press release document is in Japanese.

Transcription

1 UNOFFICIAL TRANSLATION The formal press release document is in Japanese. Summary of Financial Statements For the Fiscal 2013 February 13, 2013 Company Name: FinTech Global Incorporated (Code Number: 8789 TSE Mothers) (URL: TEL: Representative: President and Chief Executive Officer Name: Nobumitsu Tamai Contact: Managing Director and Executive Officer Name: Seigo Washimoto Head of Business Management Department Scheduled date for filing of securities report: February 14, 2013 Scheduled date of commencement of dividend payment: - Preparation of explanatory materials for quarterly financial results: Yes Information meetings arranged related to quarterly financial results: None 1. Consolidated results for the first quarter of fiscal (October 1, 2012 December 31, 2012) (Rounded down to the nearest million) (1) Business results (The percentages in the table indicate year-on-year changes.) Revenues Operating income Ordinary profit Net income/(loss) Million Yen % Million Yen % Million Yen % Million Yen % First quarter of fiscal (66.3) (249) - (217) - (148) - First quarter of fiscal (23.5) (134) - (134) - (129) - (Note) Comprehensive income: (148) million yen (-)% for the first quarter of fiscal 2013 (114) million yen (-)% for the first quarter of fiscal 2012 Net income/(loss) per share Yen Net income/(loss) per share (diluted) First quarter of fiscal 2013 (124.66) - First quarter of fiscal 2012 (109.03) - (2) Consolidated financial position Total assets Net assets Shareholders equity ratio Million Yen Million Yen % First quarter of fiscal ,190 2, Fiscal ,417 3, (Reference) Shareholders equity: 2,297 million yen for the first quarter of fiscal ,362 million yen for the fiscal 2012 Yen 1

2 2. Dividends End of first quarter End of second quarter Dividends per share End of third quarter End of fiscal year Total Yen Yen Yen Yen Yen Fiscal 2012 (Actual) Fiscal 2013 (Actual) - Fiscal 2013 (Estimates) (Note) Change from the latest dividend forecast: No The dividend forecast for fiscal year ending Sep. 30th, 2013 is yet to be determined. 3. Consolidated performance forecast for fiscal 2013 (October 1, 2012-September 30, 2013) In the first quarter of fiscal 2013, consolidated financial results lagged expectations owing to postponed exits on large corporate investment deals carried over from the previous term and the inability to close some arrangements, including deals to support real estate development securitization, before the end of the first quarter. Efforts to wrap up these major deals continue, and if successful, various factors, including total amounts, pursuant to each deal could have a positive impact on results. The situation makes it difficult to determine with reasonable accuracy a performance forecast at this stage, so no targets have been set at this time. An announcement regarding anticipated consolidated results for fiscal 2013 will be made as soon as management has a clear idea of how these large deals will impact results. 4. Notes (1) Transfer of the principal consolidated subsidiary during the term (Transfer of specified subsidiary with change of scope of consolidation.): Applicable New: - (Company name: - ) Excluded: 1 (Company name: FINTHCH GIMV FUND, L.P.) (2) Adoption of simplified and special accounting policies for quarterly financial statements: N/A (3) Changes in accounting policies 1. Changes due to changes in accounting standard: N/A 2. Other changes in accounting standard: N/A 3. Changes in accounting estimates: N/A 4. Restatement of corrections: N/A (4) Number of shares issued (common stock) 1. Number of shares issued (including treasury stocks): 1,209,243 shares for the first quarter of fiscal ,209,243 shares for the fiscal Number of treasury shares: - shares for the first quarter of fiscal shares for the fiscal The average number of shares issued during the first quarter: 1, shares for the first quarter of fiscal ,191,671 shares for the first quarter of fiscal 2012 *Implementation status of quarterly review processes This summary of financial statements is not subject to quarterly review procedures based upon the Financial Instruments and Exchange Act. Thus, at the time of disclosure of the financial statements, the quarterly financial statement review procedures based upon the Financial Instruments and Exchange Act, have not been completed. * Information concerning proper use of forward-looking statements and other special instructions Forward-looking statements in this material are based on data available to management as of Feb. 13, 2013 and certain reasonable assumptions. Actual results may differ from these estimates due to unforeseen factors. 2

3 1. Qualitative Information on Quarterly Consolidated Performance (1) Consolidated results Challenges continued to characterize the economic environment in Japan during the first quarter (October 1, December 31, 2012) of fiscal 2013 the consolidated accounting period for the FinTech Global Incorporated (FGI) Group ending September, 30, Despite positive factors, particularly post-disaster reconstruction demand, that indicated a better climate, the domestic economy remained weak, as slowing economic activity abroad led to lower exports and production at home. Even with upward movement in stock prices and a drop in the yen toward the end of the year, the path ahead was uncertain. Given this economic backdrop, FGI, as a boutique investment bank for all companies in all industries, channeled the Group s efforts into investment banking and corporate investment. In the investment banking, the focus was on financial arrangements, including deals to support real estate development securitization and renewable energy projects, with the objective to deliver financial services utilizing structured finance matched to the fund-procurement needs of industry and the public sector in Japan and overseas. In corporate investment activities, FGI sourced interested parties from outside the Group to participate in an investment to support a midsized, well-established company with succession issues and also directed capital into a software development company. Additionally, support was provided in the form of advice to help companies in the investment portfolio expand operations and grow sales and profits. Meanwhile, the Group underwent realignment aimed at achieving a return to profitability in fiscal To make the investment banking stronger and more efficient and also to facilitate closer cooperation between this and the principal investment, FGI orchestrated the transfer of resources applicable to investment banking activities undertaken by FinTech Global Securities, Inc. (FGS), and brought the investment banking back under its own control. Also, Public Management Consulting Corporation (PMC), which handles the Group s public finance related, built a structure primed for profitability in fiscal 2013 through a partial transfer and a alliance that will cut costs associated with software development and maintenance and redirect resources into the mainstay public financing consulting. Another development was a change in the status of FINTHCH GIMV FUND, L.P. (FGF), which has been excluded from the scope of consolidation, effective from the first quarter, because, not being under the effective control of FGI, it is deemed to fall outside the definition of a subsidiary. With this change in status, the Company will not book the equity of investors outside the FGI Group but rather, from this point forward, only book the amount equivalent to its own portion of the total investment. Despite the progress described above, consolidated results for the first quarter were not as high as they might have been because exits on large corporate investment deals with greatly improved corporate value were postponed and some arrangements, including deals to support real estate development securitization, were not completed before the end of the first quarter. Consequently, consolidated net revenue fell 66.3% year-on-year, to 243 million. Causing an operating loss of 249 million, compared with the 134 million operating loss of a year ago, and an ordinary loss of 217 million, compared with the 134 million ordinary loss of a year ago, even after booking 28 million in foreign exchange gains. Despite the contribution of 66 million in gain on transfer of, the quarterly net loss of 148 million exceeded, the 129 million mark of the net loss a year ago. A breakdown of first-quarter performance by segment is presented below. Investment Banking Business FinTech Global Securities (FGS) put considerable effort into requests for financial arrangements and continued to work on deals to facilitate real estate development securitization and to support projects related to renewable energy. However, the primary source of revenue was fee income from arrangements that smooth the process of rehabilitation and from financial advisory services. As a result, segment revenue fell 76.4% year-on-year, to 16 million, and the operating went from 9 million a year ago to 16 million for the first quarter of fiscal Asset Management Business FinTech Asset Management Incorporated (FAM) steadily increased its balance of assets under management, reflecting new requests for real estate asset management services. The company executed a joint investment combining capital from outside investors and capital sourced from within the FGI Group to facilitate leveraged buyout financing for a midsized company faced with succession issues. Meanwhile, FGI Capital Partners, Ltd. (FGICP), had difficalty expanding its balance of assets under management because the backlash against independent fund managers precipitated by last year s scandal involving AIJ Investment Advisors remained strong, and investors, particularly pension funds, were reluctant to entrust any independent fund manager with new funds for investment. 3

4 Consequently, the asset management posted revenues of 49 million, down 32.7% year-on-year. On a positive note, the segment showed operating income of 4 million, a welcome turnaround from the operating loss of 69 million a year ago. Principal Investment Business In the principal investment, FGI contributes its own capital to carefully selected investment and loan opportunities identified inside and outside the Group. In the first quarter, the Company invested in a fund packaged by FAM and in a company that provides smartphone apps. Large investment portfolio exits planned for the first quarter were pushed back and may take place in the second quarter or later. Discussions on timing are still in progress. As a result, the principal investment suffered a 97.6% drop in revenue, to 10 million, and saw operating income down 88.1%, to 8 million. Portfolio Business The results of portfolio company Better Life Support Co., Ltd. (BELS) were mixed. Non-consolidated revenue edged up 1.7%, to 123 million, reflecting successful advertising and promotional campaigns by the homeowner services division and emerging signs of interest in personal rental support services, which the rental services division has been emphasizing. But operating income dropped 28.5%, to 5 million. Crane Reinsurance Limited (Crane Re) issued no bills for the first quarter of fiscal 2013 and booked earned premiums, claims paid and costs for the first quarter based on bills issued up to the previous term. Consequently, the company showed no revenue for the period under review nor was there any revenue booked in the corresponding period a year ago and recorded an operating loss of 48 million, deepening from the 13 million operating loss carried a year ago. On January 4, 2013, Crane Re received a notice of arbitration filed by Hardy Underwriting Limited and others seeking payment of 1,455 million, based on a reinsurance agreement concluded in Crane Re has asked for data and explanations to substantiate said claims for payment, and it is the company s intention to emphasize in the arbitration proceedings its determination of an amount that fairly reflects its payment obligation. The results of these two key subsidiaries, along with contributions from other subsidiaries in the portfolio, led to a 1.7% increase in segment revenue, to 124 million, and an operating loss of 42 million, compared with the 35 million operating loss booked a year ago. Public Finance related Business On December 12, 2012, PMC transferred public accounting activities related mainly to the development and sale of packaged public accounting software for municipal corporations to SystemD, Inc. The two companies also formed a alliance that will provide a certain level of revenue to PMC from royalties on public accounting systems and facilitate joint marketing activities. First quarter, revenue remained on a par with the first quarter of fiscal 2012, at 45 million, and thanks to reduced costs on software development and maintenance, the operating loss was reduced from 41 million a years ago to 3 million. Moreover, the partial transfer and alliance will resolve certain cost concerns by making software development and maintenance more efficient and enable PMC to direct its resources into the core of public accounting consultations. These factors, complemented by income from the sale of public accounting systems purchased by SystemD, should support PMC s return to profitability in the public finance related. (2) Consolidated financial position (Total assets) Total assets stood at 5,190 million on December 31, 2012, down 19.1% from September 30, The main components of this change were decreases of 605 in cash and time deposits and 499 million in investments in securities, trade, owing to the exclusion of FGF from the scope of consolidation. (Liabilities) Liabilities stood at 2,846 million on December 31, 2012, up 2.2% from September 30, 2012, mainly because a 29 million increase in loss reserve on insurance policies overshadowed a 24 million decrease in income taxes payable. (Net assets) Net assets stood at 2,343 million on December 31, 2012, down 35.5% from September 30, This main components of this change were a 178 million increase in foreign currency translation adjustments following the exclusion of FGF from the scope of 4

5 consolidation and a 1,223 million decrease in minority interests, as well as the booking of a quarterly net loss and a 245 million reduction in retained earnings due to dividend distribution. (3) Consolidated performance forecast As described in (1) Consolidated results, consolidated results for the first quarter did not meet expectations owing to postponed exits on large corporate investment deals carried over from the previous term and also owing to the open status of some arrangements, including deals to support real estate development securitization, that were not completed before the end of the first quarter. Moving forward, adjustments continue toward finalizing these deals. If these efforts are successful, various factors, including total amounts, pursuant to each deal could have a positive impact on results. The uncertainty of the situation makes it difficult to determine with reasonable accuracy a performance forecast at this stage, so management has not set any targets yet. An announcement regarding anticipated consolidated results for fiscal 2013 will be made as soon as management has a clear idea of how these large deals will impact results. As of the fiscal 2013 first quarter, FGI was making steady progress in realigning Group operations to get back into the black. The resources applicable to investment banking activities undertaken by FGS were transferred to FGI in the first quarter, and a framework was established to promote cooperation between the investment banking and the principal investment. This will strengthen the investment banking and enhance efficiency. As an aside, FGI s shares in FGS are scheduled to be sold to an external company on March 1, At PMC, which is responsible for the Group s public finance related, the partial transfer and alliance has created a structure that should support a return to profitability in fiscal 2013, because costs associated with software development and maintenance will go down and resources will be freed for redirection into the company s core public financing consulting. In the asset management, FGICP is contemplating a radical restructuring plan that would include alliances with other companies among other approaches to reinforce operations. FGI will promote reforms in all segments to forge a solid execution structure, but at the same time utilize both the investment banking and corporate investment activities to support growth and expansion at client companies to generate revenue. With a stronger in-house structure and enhanced revenue potential, the Group should return to profitability in fiscal Summary Information (Notes) (1) Change in status of principle subsidiaries during the quarter FINTHCH GIMV FUND,L.P. (FGF) is excluded from the scope of consolidation, effective from the first quarter of fiscal 2013, because the company was deemed to fall outside the definition of a subsidiary after a thorough examination of changes in the relationship between FGI and FGF, a process which acknowledged that FinTech Global Capital, LLC (FGC), a company offering investment advice to FGF s general partner, is independent from FGI. (2) Application of accounting treatment specific to the preparation of quarterly consolidated financial statements Not applicable. (3) Changes in accounting policies, accounting estimates and restatement of corrections Not applicable. 5

6 FinTech Global Incorporated and Consolidated Subsidiaries As of and for the three months ended December 31, 2012 (1) Quarterly Consolidated Balance Sheets (Assets) Fiscal 2013 (As of December 31, 2012) (Thousands of yen) Full-fiscal Year 2012 (As of September 30, 2012) Current assets Cash and deposits 1,917,012 2,522,754 Accounts receivable, trade 149, ,127 Investments in securities, trade 1,900,683 2,400,089 Deferred tax assets 8,763 7,089 Loans receivable, trade 2,473,700 2,480,482 Other current assets 118, ,914 Allowance for doubtful assets (2,018,998) (2,025,903) Total current assets 4,549,117 5,722,554 Noncurrent assets Property, plant and equipment 145, ,253 Intangible fixed assets Goodwill 227, ,642 Other intangible fixed assets 9,819 20,535 Total intangible fixed assets 237, ,177 Investments and other assets Investments in securities 48,571 51,419 Others 209, ,536 Total investments and other assets 257, ,955 Total noncurrent assets 640, ,386 Total assets 5,190,084 6,417,941 6

7 (Liabilities) Fiscal 2013 (As of December 31, 2012) Full-fiscal Year 2012 (As of September 30, 2012) Current liabilities Accounts payable, trade 28,834 24,151 Current portion of bonds 16,000 16,000 Short-term loans payable 40,000 40,000 Current portion of long-term loans payable 2,171 2,171 Income taxes payable 3,761 27,806 Deposits received 484, ,164 Provision for bonuses 24,231 26,730 Other current liabilities 278, ,868 Total current liabilities 877, ,893 Noncurrent liabilities Bonds payables 56,000 56,000 Long-term loans payable 2,485 2,986 Deferred tax liabilities 79,453 83,335 Provision for retirement benefits 105,395 99,310 Reserve for contract of insurance 1,677,919 1,648,449 Other noncurrent liabilities 47,575 87,304 Total noncurrent liabilities 1,968,828 1,977,386 Total liabilities 2,846,124 2,785,279 (Net assets) Shareholders equity Common stock 2,312,517 2,312,517 Additional paid-in capital 5,183 5,183 Retained earnings 32, ,772 Treasury stock (52,412) (52,412) Total shareholders equity 2,297,695 2,543,061 Accumulated other comprehensive income Valuation difference on available-for-sale securities (345) (2,333) Foreign currency translation adjustments - (178,416) Total accumulated other comprehensive income (345) (180,749) Subscription rights to shares 18,055 18,005 Minority interests 28,554 1,252,344 Total net assets 2,343,960 3,632,661 Total liabilities and net assets 5,190,084 6,417,941 7

8 (2) Quarterly Consolidated Statement of Income and Quarterly statements of comprehensive income Quarterly Consolidated Statement of Income (Thousands of yen) Fiscal 2012 (From October 1, 2011 to December 31, 2011) Fiscal 2013 (From October 1, 2012 to December 31, 2012) Revenues 721, ,415 Cost of revenues 403,040 34,942 Gross profit/(loss) 318, ,472 Selling, general and administrative expenses 453, ,134 Operating income/(loss) (134,231) (249,662) Other income Interest income 1, Foreign exchange gains - 28,845 Miscellaneous income 2, Others 111 2,948 Total other income 4,054 32,503 Other expenses Interest expense 2, Interest on bonds Foreign exchange loss 1,393 - Others Total other expenses 4, Ordinary profit/(loss) (134,674) (217,453) Extraordinary profit Gain on transfer of - 66,355 Profit from redemption of bonds Others - 1,707 Total extraordinary profit ,062 Extraordinary loss Loss on sales of investment securities Loss on valuation of investment securities Loss on valuation of stocks of subsidiaries and affiliates ,740 - Others Total extraordinary loss 8, Income/(Loss) before income taxes (142,173) (150,158) Income taxes 3,932 3,319 Income taxes adjustment 258) (5,556) Total Income taxes 3,673 (2,237) Income/(Loss) before minority interests (145,846) (147,921) Minority Interests/(loss) (15,917) 651 Net income/(loss) (129,929) (148,572) 8

9 Quarterly statements of comprehensive income Fiscal 2012 (From October 1, 2011 to December 31, 2011) (Thousands of yen) Fiscal 2013 (From October 1, 2012 to December 31, 2012) Income/(loss) before minority interests (145,846) (147,921) Other comprehensive income Valuation difference on available-for-sale securities 7,443 (345) Foreign currency translation adjustment 23,680 - Total other comprehensive income 31,123 (345) Comprehensive income (114,723) (148,266) Comprehensive income attributable to Comprehensive income attributable to owners of the parent Comprehensive income attributable to minority interests (118,830) (148,917) 4,

10 (3) Assumption of Going Concern, three months ended December 31, 2012 Not applicable. (4) Segment Information Ⅰ. Revenues and profit/loss per reportable segment Three months ended December 31, 2011 (October 1, 2011 to December 31, 2011) Revenues Revenues from external customers Inter-segment revenues and transfers Investment banking Asset management Reportable Segment Principal investment Portfolio Public finance related Total (Thousands of yen) Amount in Adjusted the quarterly (Note *1) consolidated statement of income (Note *2) 40,578 71, , ,297 45, , ,870 31,500 1, ,350 (34,350) - Total 72,078 73, , ,197 45, ,220 (34,350) 721,870 Segment profit (9,455) (69,527) 74,695 (35,958) (41,582) (81,829) (52,402) (134,231) (loss) Note 1 Adjusted segment profit (loss) of (52,402,000) includes the deleted inter-segment transactions of 95,695,000 and corporate expenses of (148,097,000) that cannot be allocated to individual reportable segment. corporate expenses are primarily the general administrative expenses which do not belong to any reportable segment. 2 Segment profit (loss) is adjusted with operating loss of the quarterly consolidated statement of income. The management advisory fee of FinTech Global Incorporated is taken into account in the amount of 40,500,000 for the investment banking, 46,500,000 for the asset management, 1,500,000 for the portfolio, and 15,000,000 for the public finance related. Ⅱ. Revenues and profit/loss per reportable segment Three months ended December 31, 2012 (October 1, 2012 to December 31, 2012) Revenues Revenues from external customers Inter-segment revenues and transfers Investment banking Asset management Reportable Segment Principal investment Portfolio Public finance related Total (Thousands of yen) Amount in Adjusted the quarterly consolidated (Note *1) statement of income (Note *2) 15,995 48,173 10, , , ,415 1,000 1, ,143 (3,143) - Total 16,995 49,416 10, ,226 45, ,558 (3,143) 243,415 Segment profit (16,468) 4,695 8,887 (42,149) (3,536) (48,572) (201,089) (249,662) (loss) Note 1 Adjusted segment profit (loss) of (201,089,000) includes the deleted inter-segment transactions of 29,997,000 and all-companies expenses of (231,086,000) that cannot be allocated to individual reportable segment. All-companies expenses are primarily the general administrative expenses which do not belong to any reportable segment. 2 Segment profit (loss) is adjusted with operating loss of the quarterly consolidated statement of income. The 10

11 management advisory fee of FinTech Global Incorporated is taken into account in the amount of 11,000,000 for the investment banking, 9,000,000 for the asset management, 4,929,000 for the portfolio, and 4,500,000 for the public finance related. (5) Material Change in Shareholders' Equity Not applicable. 11