Annual Securities Report

Transcription

1 Annual Securities Report (A report pursuant to Article 24, Paragraph 1 of the Financial Instruments and Exchange Act) Fiscal Year From: April 1, 2016 (the 41st) To: March 31, 2017 J Trust Co., Ltd. (E03724)

2 Contents Part I. Information on the Filing Company and Its Subsidiaries... 4 I. Overview of the Filing Company and Its Subsidiaries Changes in Key Management Indices, etc History Business Overview Group Companies Employees II. Status of Business Overview of Operating Results Operating Results Managerial Policy, Business Environment, Issues to Be Addressed, etc Risk Factors Material Contracts, etc Research & Development Activity Analyses on Financial Position, Operating Results and Cash Flows III. Equipment and Facilities Overview of Capital Expenditures, etc Situations with Major Equipment and Facilities Plans for Addition or Disposal of Equipment IV. Status of the Filing Company Status of the J Trust Shares (1) Total number of shares and other related information (2) Status of subscription rights to shares (3) Exercise status of bonds with Subscription Rights containing a clause for Strike Price adjustments (4) Rights plan (5) Changes in the number of the outstanding shares and capital, etc (6) Status of shareholders (7) Status of major shareholders (8) Status of voting rights (9) Employee stock option plan Purchase of Treasury Shares and Other Related Status Dividend Policy Trends in Share Price Member of Executives Corporate Governance V. Financial Information Consolidated Financial Statements (1) Consolidated financial statements (2) Other Non-Consolidated Financial Statements, etc (1) Non-Consolidated Financial Statements (2) Contents of major assets and liabilities (3) Other VI. Overview of Shareholder Service of the Filing Company VII. Reference Information on Filing Company Information on the parent company, etc. of the filing company Other reference information Part II. Information on the Guarantee Company of the Filing Company [Auditor s Report] 2

3 [Cover] [Document Submitted] [Article of the Applicable Law Requiring Submission of This Document] [Submitted to] Annual Securities Report Article 24, Paragraph 1 of the Financial Instruments and Exchange Act Director-General, the Kanto Local Finance Bureau [Date of Submission] June 29, 2017 [Accounting Period] The 41st fiscal year (from April 1, 2016 to March 31, 2017) [Company Name in English] [Position and Name of Representative] [Main Office Location] [Telephone Number] [Contact for Communications] [Nearest Contact] [Telephone Number] [Contact for Communications] [Place Applicable for Public Inspection] J Trust Co., Ltd. Nobuyoshi Fujisawa, Representative Director, President & CEO 7-12, Toranomon 1-chome, Minato-ku, Tokyo (main) Taiji Hitachi, Director and Executive Officer 7-12, Toranomon 1-chome, Minato-ku, Tokyo (main) Taiji Hitachi, Director and Executive Officer J Trust Co., Ltd. Osaka Branch Office Nishinakajima, Yodogawa-ku, Osaka-shi.* *(Moved from Higashinodamachi, Miyakojima-ku, Osaka-shi, Osaka to the above address on Jan. 30, 2017). Tokyo Stock Exchange (2-1 NihonbashiKabuto-cho, Chuo-ku, Tokyo) 3

4 Part I. Information on the Filing Company and Its Subsidiaries I. Overview of the Filing Company and Its Subsidiaries Translation for reference only 1. Changes in Key Management Indices, etc. (1) Consolidated management indices, etc. Fiscal year 37th 38th 39th 40th 41st Year ended March 2013 March 2014 March 2015 March 2016 March 2017 Operating revenue Ordinary profit (loss) Profit (loss) attributable to owners of parent Comprehensive income Net assets Total assets Millions of yen Millions of yen Millions of yen Millions of yen Millions of yen Millions of yen 55,683 61,926 63,281 75,478 85,031 13,704 13,351 (2,385) (4,678) (6,747) 13,309 11,145 10,143 (5,712) (9,876) 14,197 17,240 12,131 (18,426) (9,790) 70, , , , , , , , , ,650 Net assets per share Yen 1, , , , , Profit (loss) per share Yen (49.65) (92.82) Diluted profit per share Yen Capital adequacy ratio % Return on equity % Price earnings ratio Times Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Cash and cash equivalents at the year end Number of employees [excluding the average number of temporary staff] Millions of yen Millions of yen Millions of yen Millions of yen Number of people 9,378 11,434 15,452 (32,435) (14,434) 36,764 (17,775) (15,148) (7,896) (4,774) (2,441) 74,464 (20,593) 13,026 10,935 56, , ,060 88,226 78,650 2,105 2,322 3,986 3,226 2,751 [738] [820] [850] [859] [750] Note 1: Note 2: Note 3: Note 4: Note 5: Note 6: Note 7: Operating revenue does not include consumption taxes, etc. In the 37th fiscal year, the Company conducted a stock split whereby 1 share was divided into 2 shares. Profit (loss) per share and diluted profit per share are calculated under the assumption that the stock split was conducted at the beginning of the fiscal year. In the 38th fiscal year, net assets and total assets increased. This reflected the exercise of subscription rights to shares in the rights offering (non-commitment type; allotment of listed subscription rights to shares without contribution) issued on May 31, In the 39th fiscal year, the Company changed the method of presenting Cash flows from operating activities and Cash flows from investing activities. Thus, figures for the 38th fiscal year were adjusted retroactively. In the 39th fiscal year, total assets increased primarily because the Company acquired shares of PT Bank Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) and made it a consolidated subsidiary of the Company. For the 40th and 41st consolidated fiscal years, diluted profit per share is not available, because dilutive shares did exist but yielded net loss per share. For the 40th and 41st consolidated fiscal years, Return on Equity is omitted due to loss attributable to owners 4

5 of parent. Note 8: For the 40th and 41st consolidated fiscal years, price-to-earnings ratio is omitted due to net loss per share. (2) Management indices, etc. of the filing company Fiscal year 37th 38th 39th 40th 41st Year ended March 2013 March 2014 March 2015 March 2016 March 2017 Operating revenue Ordinary profit Profit Capital stock Total number of the Company s issued shares Net assets Total assets Millions of yen Millions of yen Millions of yen Millions of yen Thousands of shares Millions of yen Millions of yen 3,546 4,583 4,223 33,879 6,377 1, ,770 29,850 1,824 1,056 1,268 4,990 31,322 1,039 4,625 53,578 53,604 53,616 53,630 63, , , , ,536 13, , , , ,347 38, , , , ,635 Net assets per share Yen , , Dividends per share (annual) Yen [Interim dividends per share] Yen (3.00) (5.00) (5.00) (5.00) (6.00) Profit per share Yen Diluted profit per share Yen Capital adequacy ratio % Return on equity % Price earnings ratio Times Dividend payout ratio % Number of employees Number of people Note 1: Note 2: Note 3: Note 4: Note 5: Note 6: Operating revenue does not include consumption taxes, etc. In the 37th fiscal year, the Company conducted a stock split whereby 1 share was divided into 2 shares. Net assets per share, profit per share and diluted profit per share are calculated under the assumption that the stock split was conducted at the beginning of the 36th fiscal year. In the 38th fiscal year, capital stock, total number of the Company s issued shares, net assets and total assets increased. This reflected the exercise of subscription rights to shares in the rights offering (non-commitment type; allotment of listed subscription rights to shares without contribution) issued on May 31, In the 40 th fiscal year, operating revenue, ordinary profit, profit and net assets increased due to a rise in dividend income received from the Company s consolidated subsidiaries. In the current fiscal year, the total number of the Company s issued shares decreased due to the cancellation of 6,250,000 treasury shares. For the current fiscal year, dividends per share (annual) include commemorative dividend of 2.00 yen, which was distributed to mark the 40th anniversary of the Company s business operations. 5

6 2. History Date History Mar Ikko Shoji, Co., Ltd. was established in Minami-ku (current Chuo-ku), Osaka-shi to provide financial services including commercial note discount and loan on note for small & medium-sized enterprises and sole proprietors. Dec Obtained Moneylending Business Registration upon enforcement of the Moneylending Business Act. Mar Changed the trade name to IKKO CORPORATION. Sept Listed on the Osaka Securities Exchange, 2nd Section. Jan ZENKOKU HOSHO Co., Ltd. acquired 12,600 thousand common shares of the Company (through third party allotment and TOB) and became the Company s parent company. Mar Nobuyoshi Fujisawa acquired 14,010 thousand common shares of the Company (through TOB) from ZENKOKU HOSHO Co., Ltd. and became the largest shareholder of the Company. Mar Acquired all shares of Station Finance Co., Ltd. (currently, Nihon Hoshou Co., Ltd.) from Hankyu Corporation, making it a consolidated subsidiary of the Company. July 2009 Changed the trade name to J Trust Co., Ltd. and moved its headquarters to Kitahama, Chuo-ku, Osaka-shi. May 2010 Transferred the Company s business loan and consumer loan services to J Trust Financial Service Co., Ltd. (currently, Nihon Hoshou Co., Ltd.) through an absorption-type demerger, and terminated its operation of moneylending business. Oct Transferred the Company s credit guarantee business to J Trust Financial Service Co., Ltd. (currently, Nihon Hoshou Co., Ltd.) through an absorption-type demerger, and transformed into a holding company. June 2011 Moved the Company s headquarters to Minato-ku, Tokyo. Apr Conducted equity swaps to wholly own Next Japan Holdings Co., Ltd., which thus became a consolidated subsidiary of the Company. June 2012 Conducted a 2-for-1 split of the Company s common shares. June 2012 Made ADORES, Inc., an affiliate of the Company, its consolidated subsidiary. July 2012 As a surviving company, acquired Next Japan Holdings Co., Ltd. through an absorption-type merger. Aug Established Chinae Co., Ltd. (currently, JT Chinae Savings Bank Co., Ltd.) in South Korea as a subsidiary of KC Card Co., Ltd. (currently, J TRUST Card Co., Ltd.) Oct Chinae Co., Ltd. obtained a license to enter the savings bank business in South Korea, and changed the trade name to Chinae Savings Bank Co., Ltd. (currently, JT Chinae Savings Bank Co., Ltd.) July 2013 The listing market was changed to the 2 nd section of the Tokyo Stock Exchange (TSE), following the merger between the TSE and the Osaka Securities Exchange (OSE). July 2013 Completed raising funds through rights offering. Oct Founded JTRUST ASIA PTE. LTD. in Singapore, aiming to enter financial, amusement and other businesses in Southeast Asia. Nov In Indonesia, acquired 99.0% shares of PT Bank Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) from Indonesia Deposit Insurance Corporation, making it a consolidated subsidiary of the Company. Jan In South Korea, the Company acquired all shares of Standard Chartered Savings Bank Korea Co., Ltd. from Standard Chartered Korea Limited, making it the Company s consolidated subsidiary, and its trade name was changed to JT Savings Bank Co., Ltd. Mar In South Korea, acquired all shares of Standard Chartered Capital (Korea) Co., Ltd. from Standard Chartered Korea Limited, making it a consolidated subsidiary of the Company. Then, changed its trade to JT Capital Co., Ltd. July 2016 PT Group Lease Finance Indonesia, in which JTRUST ASIA PTE. LTD. owns a 20.0% interest, started operations of hire-purchase financing in Indonesia. 6

7 3. Business Overview The Company develops overall business plans for its Group Companies and provides support for them as a holding company. It operates Domestic Financial Business, Financial Business in South Korea, Financial Business in Southeast Asia, General Entertainment Business, Real Estate Business, Investment Business and Other Business. The table below shows the main businesses of the Group along with the division of roles of the Company and its subsidiaries. The seven business segments are the same as those in V. Financial Information, 1. Consolidated Financial Statements (1) Consolidated Financial Statements Note (segment information, etc.). Since the Company falls under a specified listed company under Article 49, Paragraph 2 of the Cabinet Office Ordinance, minimal standard criteria for material facts under insider trading regulations is based on the Company s consolidated financial figures. Domestic Financial Business Financial Business in South Korea Business Segment Main Business Mainly handled by Credit guarantee for business loan granted to small and Credit guarantee medium-sized enterprises and sole proprietors as well as business consumer loans and Apartment Loans to consumers mainly Nihon Hoshou Co., Ltd. by banks, credit unions and credit associations Financial Business in Southeast Asia Receivable collection business Credit and consumer credit business Other financial business Savings bank business Receivable collection business Purchase and collection of loans receivable from financial institutions and nonbanks Fund settlement through the issuance of credit cards, Personal credit service including card loan Consumer credit service in the form of installment sales Loan business Banking business including deposit taking and loan granting Purchase and collection of loans receivable from financial institutions and nonbanks Partir Servicer Co., Ltd. Nihon Hoshou Co., Ltd. J TRUST Card Co., Ltd. J TRUST Card Co., Ltd. Nihon Hoshou Co., Ltd. JT Chinae Savings Bank Co., Ltd. JT Savings Bank Co., Ltd. TA Asset Management Co., Ltd. Capital business Leasing, Installment sales JT Capital Co., Ltd. Banking business Receivable collection business Hire-purchase financing General Entertainment Business Real Estate Business Banking business including deposit taking and loan granting Collection of loans receivable Marketing, screening and collection of loans receivable targeting at customers of hire-purchase financing Operation of amusement arcades and other facilities. Development, production and sale of computer systems for amusement machines and its peripheral equipment. Property purchase and sale centering on detached housing, renovation of existing housing, real estate brokerage Purchase and sale of existing real estate and income properties mainly in urban areas PT Bank JTrust Indonesia Tbk. PT JTRUST INVESTMENTS INDONESIA PT Group Lease Finance Indonesia* ADORES, Inc. Highlights Entertainment Co., Ltd. Keynote Co., Ltd. ADORES, Inc. Investment Business Inbound and outbound investment businesses JTRUST ASIA PTE. LTD. Commercial facility construction business including design and construction of amusement arcades, restaurants and Keynote Co., Ltd. Other Business other facilities Administrative operation and management of computers, IT system business including commissioned software development and provision of operational guidance J Trust System Co., Ltd. Note: In the Mainly handled by above, companies without *(asterisk) denote consolidated subsidiaries and with*(asterisk) indicate entities accounted for using equity method. 7

8 The following diagram shows the above mentioned corporate group: (J Trust Group) (Financial business) (Domestic Financial Business) (Consolidated Subsidiary) (Consolidated Subsidiary) (Consolidated Subsidiary) Nihon Hoshou Co., Ltd. Partir Servicer Co., Ltd. J Trust Card Co., Ltd. Four other consolidated subsidiaries (Financial Business in South Korea) (Consolidated Subsidiary) (Consolidated Subsidiary) (Consolidated Subsidiary) JT Chinae Savings Bank Co., Ltd. JT Savings Bank Co., Ltd TA Asset Management Co., Ltd (Consolidated Subsidiary) JT Capital Co., Ltd. (Financial Business in Southeast Asia) (Consolidated Subsidiary) (Consolidated Subsidiary) (Entity accounted for using equity method) PT Bank Jtrust Indonesia Tbk. PT JTRUST INVESTMENTS INDONESIA PT Group Lease Finance Indonesia (Non-financial business) Financial institution J Trust Co., Ltd. ("The Company") (General Entertainment Business) (Consolidated Subsidiary) ADORES, Inc. (Consolidated Subsidiary) Highlights Entertainment Co., Ltd. Depositor Operator Consumer Investee Client One other consolidated subsidiary (Real Estate Business) (Consolidated Subsidiary) Keynote Co., Ltd. (Consolidated Subsidiary) ADORES, Inc. One other consolidated subsidiary (Investment Business) (Consolidated Subsidiary) J TRUST ASIA PTE. LTD. Two other consolidated subsidiaries (Other Business) (Consolidated Subsidiary) Keynote Co., Ltd. (Consolidated Subsidiary) J Trust System Co., Ltd. Two other consolidated subsidiaries 8

9 4. Group Companies Name (Consolidated subsidiary) Keynote Co., Ltd. (Note 3) Partir Servicer Co., Ltd. (Note 3) Nihon Hoshou Co., Ltd. (Note 6) J Trust System Co., Ltd. J TRUST Card Co., Ltd. ADORES, Inc. (Note 4, 7) JT Chinae Savings Bank Co., Ltd. (Note 3, 8) JTRUST ASIA PTE. LTD. (Note 2) TA Asset Management Co., Ltd. Highlights Entertainment Co., Ltd. (Note 3) Address Meguro-ku, Tokyo Minato-ku, Tokyo Minato-ku, Tokyo Minato-ku, Tokyo Miyazaki-shi, Miyazaki Minato-ku, Tokyo Seoul Special City, South Korea Republic of Singapore Seoul Special City, South Korea Chiyoda-ku, Tokyo Capital Stock or investments in capital ,405 5,313 (71.7 billion won) 29,856 (375 million Singapore dollars) 833 (8.7 billion won) 10 Main business Real Estate Business, Other Business Domestic Financial Business Domestic Financial Business Other Business Domestic Financial Business General Entertainment Business, Real Estate Business Other Business Financial Business in South Korea Investment Business Financial Business in South Korea General Entertainment Business Percentage of owning voting rights or being owned (%) (100.00) (100.00) (100.00) Contents concerned (1) Interlocking Director 1 of J Trust directors concurrently serves as director of Partir Servicer. (1) Interlocking Director 1 of J Trust directors concurrently serves as director of Nihon Hoshou. (2) Credit Guarantee J Trust provides guarantee for Nihon Hoshou s loans from financial institutions. (1) Interlocking Director 1 of J Trust directors concurrently serves as director of J Trust System. (1) Interlocking Director 2 of J Trust directors concurrently serve as director of J TRUST Card. (2) Credit Guarantee. J Trust provides guarantee for J TRUST Card s loans, etc. from financial institutions. (3) Business Transaction J Trust provides funds to J TRUST Card. (1) Interlocking Director 1 of J Trust directors concurrently serves as director of ADORES. (1) Interlocking Director 1 of J Trust directors concurrently serves as director of JT Chinae Savings Bank. (1) Interlocking Director 2 of J Trust directors concurrently serve as director of JTRUST ASIA PTE. LTD (100.00) (1) Interlocking Director 1 of J Trust directors concurrently serves as director of Highlights Entertainment s. (2) Credit Guarantee 9

10 Name PT Bank JTrust Indonesia Tbk. (Note 2, 3, 9) JT Savings Bank Co., Ltd. (Note 2) JT Capital Co., Ltd. (Note 2) Address Special Capital Region of Jakarta, Republic of Indonesia Seongnam-si, Gyeonggi-do, South Korea Seoul Special City, South Korea Special PT JTRUST INVESTMENTS INDONESIA (Note 3) 8 other companies (Entity accounted for using equity method) PT Group Lease Finance Indonesia (Note 3, 5) Capital Region of Jakarta, Republic of Indonesia Special Capital Region of Jakarta, Republic of Indonesia Capital Stock or investments in capital 116,654 (12.2 trillion Indonesian rupiah) 10,798 (99.9 billion won) 11,739 (108.0 billion won) 558 (61.2 billion Indonesian rupiah) 840 (100 billion Indonesian rupiah) Main business Financial Business in Southeast Asia Financial Business in South Korea Financial Business in South Korea Financial Business in Southeast Asia Financial Business in Southeast Asia Percentage of owning voting rights or being owned (%) (1.00) Contents concerned J Trust provides guarantee for Highlights Entertainment s loans from financial institutions. (3) Business transaction J Trust provides funds to Highlights Entertainment. (1) Interlocking Director 2 of J Trust directors concurrently serve as director of PT Bank JTrust Indonesia (84.36) (22.22) (1) Interlocking Director 2 of J Trust directors concurrently serve as director of JT Capital. (2) Credit Guarantee J Trust provides guarantee for JT Capital s loan from financial institutions. (1) Interlocking Director 2 of J Trust directors concurrently serve as director of PT JTRUST INVESTMENTS INDONESIA. (1) Interlocking Director 1 of J Trust directors concurrently serve as director of PT Group Lease Finance Indonesia. Note 1: Note 2: Note 3: Items in Main business indicate names of business segment. This denotes a specified subsidiary. Figures in parentheses under Percentage of owning voting rights indicate the ratio of indirect ownership. Note 4: This denotes a subsidiary under substantial control, though the controlling share is not more than 50%. Note 5: Note 6: The exchange rate for capital stock is 1 Indonesian Rupiah = yen. With regard to Nihon Hoshou Co., Ltd., operating revenue (excluding internal transactions between Group Companies) accounts for more than 10% of consolidated operating revenue. Main profit & loss information, etc. (1) Operating revenue 9,542 million yen (2) Ordinary profit 4,887 million yen (3) Profit: 4,700 million yen (4) Net assets: 15,091 million yen (5) Total assets: 23,061 million yen 10

11 Note 7: Note 8: With regard to ADORES, Inc., operating revenue (excluding internal transaction between Group Companies) accounts for more than 10% of consolidated operating revenue. However, main profit and loss information, etc. is not stated in this document because ADORES, Inc. files annual securities reports separately. With regard to JT Chinae Savings Bank Co., Ltd., operating revenue (excluding internal transactions between Group Companies) accounts for more than 10% of consolidated operating revenue. Main profit & loss information, etc. (1) Operating revenue: 18,228 million yen (2) Ordinary profit: 1,905 million yen (3) Profit: 1,831 million yen (4) Net assets: 15,337 million yen (5) Total assets: 200,495 million yen Note 9: With regard to PT Bank JTrust Indonesia Tbk., operating revenue (excluding internal transactions between Group Companies) accounts for more than 10% of consolidated operating revenue. Main profit & loss information, etc. (1) Operating revenue: 16,870 million yen (2) Ordinary loss: 6,255 million yen (3) Loss: 7,883 million yen (4) Net assets: 8,528 million yen (5) Total assets: 132,672 million yen 11

12 5. Employees (1) Status of consolidated subsidiaries Name of Business Segments Number of Employees As of March 31, 2017 Domestic Financial Business Financial Business in South Korea 1, Financial Business in Southeast Asia General Entertainment Business Real Estate Business 42 1 Investment Business 6 - Other Business 62 8 All companies (common) 95 2 Total 2, Note 1: Number of employees indicates the number of employees at work (excluding those seconded to non- Group Companies and including those seconded to Group Companies). Meanwhile, figures in shaded gray show the annual average of the number of temporary staff (part-timers and workers dispatched from staffing firms). Note 2: Employees in All companies (common) are back-office staff. Note 3: The number of employees decreased by 475 primarily due to the execution of an early retirement program by some consolidated subsidiaries. (2) Status of the filing company As of March 31, 2017 Number of employees (People) Average age Average length of service Average annual salary (Yen) years old and 3 months 2 years and 10 months 7,713,482 Note 1: Number of employees indicates the number of employees at work (excluding those seconded to non- Group Companies and including those seconded to Group Companies). Note 2: Average annual salary (including tax) includes extra pay. Note 3: Employees of the filing company are back-office staff. (3) Status of labor unions In South Korea, we have branches of the Korean Federation of Clerical and Financial Labor Unions in JT Chinae Savings Bank Co., Ltd., JT Savings Bank Co., Ltd. and JT Capital Co., Ltd. In Indonesia, we have the Labor Union PT Bank JTrust Indonesia Tbk. There is no material matter requiring mention concerning the labor-management relationship. 12

13 II. Status of Business 1. Overview of Operating Results (1) Operating results In the current consolidated fiscal year, the outlook of the world economy remained opaque with heightened economic uncertainties and potential impacts on changes in financial and capital markets. This was triggered by the risk of economic downturns in Asia s emerging markets including China, UK s Brexit and the new U.S. administration. Meanwhile, Japan saw a gradual economic improvement in corporate earnings and employment status, supported by the government s economic measures and the Bank of Japan s easy-money policies. On the other hand, personal spending remained stagnant due to slowing real income growth and budget-minded people. Meanwhile, from a midto long-term point of view, the growth of Southeast Asia and other emerging economies is very promising. In particular, Indonesia enjoys a steady rise in personal consumption and private investment backed by political stability and advanced economic reforms. Accordingly, consumers purchasing power is likely to increase with income growth. In addition, consumption in rural households will remain firm in light of the improved agricultural output supported by price hikes in primary commodities and higher levels of rainfall. With the growth driver shifting from urban to rural households, private consumption is expected to keep growing solidly. In this environment, we consider it inevitable to transform our business model ahead of changes in global and Japanese economies. We drew up a Medium-Term Business Plan, which started from the fiscal year ended March 31, 2016, under the group vision of Providing unique financial services not constrained by existing paradigms. We are expanding business in Asia, where we expect their economies to grow substantially, and also seeking business development by maximizing the synergy of our group network to realize stronger operating bases and sustainable growth. In the current consolidated fiscal year, we proactively worked on improving the corporate value and reinforcing business bases in Japan and overseas, in accordance with the roadmap for the second year of our Medium-term Business Plan as we did in the first year, to seek a sustainable profit expansion centering on banking business. (i) Business development in Southeast Asia J Trust Group (hereinafter, JTG ) has a favorable relationship with Group Lease PCL (the Kingdom of Thailand; listed on the Stock Exchange of Thailand; hereinafter, GL ) and GL Group, as a strategic partner. JTRUST ASIA PTE. LTD. (hereinafter, JTA ) holds 6.43% of GL s outstanding common shares. Based on the partnership, we jointly set up a multi-finance company PT Group Lease Finance Indonesia (hereinafter, GLFI ). GLFI launched operations as a hire-purchase financing company in July 2016, targeting Indonesian consumers with high growth potential. While GLFI is in charge of marketing, credit screening and collecting the loan claims, PT Bank JTrust Indonesia Tbk. (hereinafter, BJI ) provides financing for customers. JTG believes that this will substantially increase agriculture-related loan in the future, along with the planned expansion of product lines and sales sizes in future, and thus greatly contribute to better earnings in BJI. To support the business expansion of the partner actively, JTA subscribed for GL s convertible bond worth 130 million U.S. dollars (about 13.5 billion yen) in August 2016 and 50 million U.S. dollars (about 5.6 billion yen) in March 2017, and acquired the subscription rights to shares (warrants) worth 34 million baht (about 113 million yen) in March In addition, J Trust Co., Ltd. sold 3.124% of the shares of BJI to GL Group in December We believe our partnership will become more solid through deeper commitment to the business alliance with them. JTG once signed capital and business alliance agreements with PT Bank Mayapada International Tbk. (the Republic of Indonesia; listed on the Indonesia Stock Exchange; hereinafter, Bank Mayapada ). In April 2016, however, we dissolved the partnership and sold all the shares held by JTA mainly because: (i) the alliance with Bank Mayapada in the credit card business as one of our initial objectives virtually terminated; and (ii) making BJI our consolidated subsidiary enabled JTG to run banking business in Indonesia. In the meantime, BJI formed ties with The Saikyo Bank, Ltd. (hereinafter, Saikyo Bank ), which has released Indonesian rupiah-linked deposit named Indonesian Rupiah Time Deposit since July (ii) Business development in South Korea JTG has already established operational bases as a comprehensive financial group. Our operating assets have been growing steadily with a record-high level of the new loan disbursed per month. We have been working toward reinforcing the operational bases and efficiency of our Financial Business in South Korea as a whole by incorporating the marketing expertise of our capital company and savings banks. (iii) Business development in Japan JTG has focused on real estate related guarantee as a key initiative for the credit guarantee service, seeking to increase the guarantee balance centering on guarantees for rental property mortgage loan. In June 2016, we added a new product to guarantee low-interest mortgage loan offered by The Tokyo Star Bank, Limited. In July 2016, we started guarantee for the rental property mortgage loan of Kagawa Bank under the guarantee business 13

14 14 Translation for reference only alliance formed in the previous month. In July 2016, we also started guarantee for the property secured loan and property secured card loan offered by Saikyo Bank. Then, in March 2017, we launched guarantee on Real Estate-Backed Card Loan (Reverse Mortgage Type) in tie up with the said bank. For General Entertainment Business, in December 2016, ADORES, Inc. (hereinafter, ADORES ) joined hands with GREE, Inc. and opened VR* PARK TOKYO in Shibuya as a new form of virtual reality-themed facility. Meanwhile, Highlights Entertainment Inc. (hereinafter, Highlights Entertainment ) released its first-ever amusement machine nationwide in January * VR refers to virtual reality, which allows a person experiencing a computer-created virtual space or image to feel as if he/she were in the real world. The technology is considered widely applicable to healthcare, education, etc. and highly compatible with the entertainment field, especially game, video and theme park. (iv) Capital policy We conducted a share buyback in August 2016 to improve shareholder returns through the enhancement of capital efficiency and to execute capital policies flexibly in response to changing operating environments. Meanwhile, we resolved to offer shareholder benefits to mark the 40 th anniversary of the company s foundation in line with our policy of the appropriate distribution of returns to shareholders. Each eligible shareholder in possession of at least 300 shares (three share units) as of the record date receives a Rakuten Point Gift Code worth 5,000 points. We will seek a well-balanced allocation of capital to maximize shareholder value. Operating revenue in the current consolidated fiscal year was 85,031 million yen (up 12.7% year on year) due to the following: (i) We eliminated the 3-month timing difference in account closing for two subsidiaries in Indonesia, namely BJI and PT JTRUST INVESMENTS INDONESIA (hereinafter, JTII ), to grasp the group s consolidated performance more appropriately in preparation for adopting IFRS. As a result, FY2017 reflects their 15-month results. This means operating revenue for another three months is added; (ii) Banking business revenue grew with a rise in new loan balances at JTG s savings banks in South Korea; and (iii) Other operating revenue increased because JTA posted gain on sales of shares of Bank Mayapada and Keynote Co., Ltd. (hereinafter, Keynote ) enjoyed a steady growth in large-lot construction orders in its commercial facility construction business. Meanwhile, we recorded operating loss of 5,769 million yen (operating loss of 4,114 million yen during the same period of the previous consolidated fiscal year) and ordinary loss of 6,747 million yen (ordinary loss of 4,678 million yen during the same period of the previous consolidated fiscal year). While operating revenue rose, JTA posted unrealized loss on the portion of subscription rights to shares of GL s convertible bonds as operating expenses. Also, selling, general and administrative expenses expanded primarily because provision of allowance for doubtful accounts surged in BJI where loan assets were reclassified for better financial health as part of restructuring measures. Loss attributable to owners of parent stood at 9,876 million yen (loss attributable to owners of parent of 5,712 million yen during the same period of the previous consolidated fiscal year) mainly due to BJI s business structure improvement expenses including restructuring cost as part of restructuring measures. Segment performance is detailed below. [1] Domestic Financial Business (Credit guarantee services) Credit guarantee services are handled by Nihon Hoshou Co., Ltd. (hereinafter, Nihon Hoshou ). Under our Medium-Term Business Plan, we put a priority on real estate related credit guarantee business. We currently provide guarantee for syndicated rental property mortgage loan including Flat 35 in partnership with a major housing developer, Flat 35 loan agencies and others. Credit guarantee balances grew steadily with new guarantee service for Real Estate-Backed Card Loan (Reverse Mortgage Type). The number of partner regional financial institutions is six as of the end of April 2017, and we aim to expand our guarantee services and handling for more tie-up loan products. As a result, the balance of credit guarantee as of the end of the current consolidated fiscal year was 85,975 million yen (up 61.1% year on year). The breakdown was 14,829 million yen in credit guarantees on unsecured loan (down 3.6%) and 71,146 million yen in credit guarantees on secured loan (up 87.3%) with an increase in guarantees for rental property mortgage loan. (Collection of accounts receivable) Collection of accounts receivable in Japan is mainly handled by Nihon Hoshou and Partir Servicer Co., Ltd. Under our Medium-Term Business Plan, we aim to expand the receivable collection business. Since the number of domestic Servicers is decreasing, we will pursue profits as a remaining player through M&As on the strength of our superior collection capability. Also, we will reinforce collection of corporate loans receivable and provide corporate revitalization services. As a result, the balance of purchased receivables as of the end of the current consolidated fiscal year was

15 7,387 million yen (up 120.3% year on year), reflecting successful purchases of NPLs (Non-Performing Loans). (Credit and consumer credit services) Credit and consumer credit services are mainly handled by J TRUST Card Co., Ltd. We have practically withdrawn from consumer loan business, no longer handling new unsecured loan except cash advances. On the other hand, we are seeking an adequate level of earnings while increasing the balance of advances paid installment by focusing on third-party credit services for individual commodity and installment loans for credit card purchases. As a result, the balance of advances paid installment, including long-term operating loans receivable, was 2,732 million yen (up 11.3% year on year) as of the end of the current consolidated fiscal year. The breakdown was 2,726 million yen in advances paid installment (up 11.3%) and 5 million yen in long-term operating loans receivable (up 3.8%). (Other financial services) Other financial services are mainly handled by Nihon Hoshou. Under our Medium-Term Business Plan, Nihon Hoshou shifted its focus onto the real estate related credit guarantee business. Meanwhile, Nihon Hoshou has withdrawn from the unsecured consumer finance business in Japan, separating liabilities involving risk of interest repayment claims and mitigating contingent liability risk As a result, the loan balance including long-term operating loans (for business) was 3,233 million yen (down 24.5% year on year) as of the end of the current consolidated fiscal year. The breakdown was 928 million yen in commercial notes (down 35.0%), 2,280 million yen in accounts receivable operating loans (down 17.2%) and 23 million yen in long-term operating loans (down 75.4%). Meanwhile, the loan balance including longterm operating loans (for consumers) substantially declined to 1,740 million yen (down 37.0%) as a result of exiting the market. The breakdown was 1,600 million yen in accounts receivable operating loans (down 37.2%) and 140 million yen in long-term operating loans (down 35.7%). In summary, operating revenue in Domestic Financial Business was 11,048 million yen (up 0.1% year on year). Segment profit was 4,636 million yen (up 22.0%) because Nihon Hoshou slashed bad debts expenses upon withdrawal from the unsecured consumer finance business in Japan and cut costs through business restructuring measures including early retirement programs. [2] Financial Business in South Korea (Savings bank business and capital business) JT Chinae Savings Bank Co., Ltd. and JT Savings Bank Co., Ltd. conduct savings bank business. JT Capital Co., Ltd. (hereinafter, JT Capital ) provides installment sales and leasing services. With an established operational base as a comprehensive financial group, we will aggressively boost operating assets for better earnings by linking each business organically. Under the Medium-Term Business Plan, we are working to improve profitability by increasing high-quality consumer loan and ensure stable loan portfolio by focusing on loan for large corporations, secured loan, government-backed loan, etc. Loans by banking business increased with the steadily growing number and amount of new loan contracts backed by effective sales and marketing strategies. Meanwhile, accounts receivable operating loans were on a downward trend mainly because JT Capital transferred consumer credit loans receivable to a group saving bank to observe the consumer loan limits stipulated in the revised Specialized Credit Finance Business Act effective September However, they have improved recently due to successful marketing strategies. As a result, the loan balance increased steadily as of the end of the current consolidated fiscal year. In savings bank business, loans by banking business were 236,873 million yen (up 57.6% year on year). Meanwhile, accounts receivable operating loans including long-term operating loans receivable were 46,626 million yen (up 1.4%) in capital business. The breakdown was 45,217 million yen (up 2.3%) in accounts receivable operating loans, and 1,408 million yen (down 20.1%) in long-term operating loans. (Receivable collection business) TA Asset Management Co., Ltd. is engaged in purchase and collection of NPLs. Under the Medium-Term Business Plan, we have accumulated the balance of receivables on the strength of our superior collection capability. As a result, the balance of purchased receivables decreased to 2,090 million yen (down 21.1% year on year) as of the end of the current consolidated fiscal year due to regular collection and the sale of receivables whose value was surging. In summary, operating revenue in Financial Business in South Korea was 29,144 million yen (up 14.4% year on year). Segment profit was 1,633 million yen (up 527.8%). 15

16 [3] Financial Business in Southeast Asia (Banking Business) BJI conducts banking business in Indonesia. Under our Medium-Term Business Plan, we focus on the rehabilitation of the bank which used to be supervised by Indonesia Deposit Insurance Corporation over a long period. To this end, we revamped the management structure. Also, we make every effort to improve the financial health and reinforce the earnings base by increasing the quantity and quality of operating assets with an expansion of the loan balance for small and medium-sized enterprises and consumers, reducing the remaining loans executed under the control of the Indonesia Deposit Insurance Corporation, lowering funding costs and increasing fee income based on our overseas network. As a result, the balance of loans by banking business grew steadily to 90,123 million yen (up 12.3% year on year) as of the end of the current consolidated fiscal year. (Collection of Accounts Receivable) PT JTRUST INVESTMENTS INDONESIA (hereinafter, JTII ) conducts collection of accounts receivable business in Indonesia. The balance of receivables purchased from BJI in October 2015 stood at 2,668 million yen (down 32.2% year on year) as of the end of the current consolidated fiscal year. We will increase earnings by facilitating collection with various measures including prompt disposal of collateralized assets and business rehabilitation. Meanwhile, we previously incorporated results of two subsidiaries in Indonesia (BJI and JTII) with a 3-month delay in account closing. However, we eliminated the gap to grasp the Group s consolidated performance more appropriately in preparation for adopting IFRS. Accordingly, FY2017 reflects their performance for 15 months. In summary, operating revenue in Financial Business in Southeast Asia was 17,791 million yen (up 44.7% year on year). The increase reflects additional operating revenue for 3-month upon elimination of timing difference in account closing of BJI and JTII. Segment loss was 8,642 million yen (segment loss of 7,898 million yen during the same period of the previous consolidated fiscal year) mainly due to massive provision of allowance for doubtful accounts in BJI which reclassified loan assets for better financial health as part of restructuring measures as well as addition of operating expenses for 3-month to eliminate the delay in account closing in Financial Business in Southeast Asia. [4] General Entertainment Business ADORES mainly handles operation of amusement arcades and other facilities. Highlights Entertainment develops, manufactures and sells computer systems, etc. for amusement machines and their peripheral equipment. ADORES worked toward boosting sales mainly by winning new customer segments through: (i) 50 th Anniversary Project to enhance the brand perception; (ii) launch of Calla Lily, a brand-new women s concept store specializing in photo sticker booths on September 18, 2016 in Shibuya, an area supplying cuttingedge information to the youth; and (iii) VR PARK TOKYO, a permanent Virtual Reality (VR) entertainment facility launched on the 4 th floor of ADORES Shibuya on December 16, Sales were weak, however, due to: (i) closing of some stores and declining operation of crane games; and (ii) sluggish performance in other amusement genres. Meanwhile, Highlights Entertainment continued subdued results overall due to the postponed replacement of peripheral equipment for amusement machines, though it started operating a new amusement machine on January 10, Meanwhile, former group subsidiaries BREAK Co., Ltd. and BREAK ASIA LIMITED, which manufacture/sell prizes for amusement machines, were excluded from the scope of consolidation after the share transfer at the end of March As a result, operating revenue in General Entertainment Business was 15,397 million yen (down 7.0% year on year), affected by the lower-than-expected number of customers and the closing of some stores. Segment loss was 219 million yen (Segment loss of 475 million yen during the same period of the previous consolidated fiscal year). [5] Real Estate Business Keynote primarily handles sales of ready-built residential housing. ADORES conducts real estate asset business. For ready-built residential housing sales, we sought better earnings in the recovering market through: (i) enhanced sales capabilities by creating our own brand; (ii) receiving more orders with the expansion of marketing areas including the opening of Senri Chuo Sales Branch on October 20, 2016; and (iii) steady handover of property. As a result, operating revenue in Real Estate Business was 6,775 million yen (up 8.8% year on year), supported by good sales performance thanks to the strength in existing marketing areas. Segment profit was 536 million yen (up 7.2%). 16

17 [6] Investment Business Translation for reference only JTA conducts investment business and provides management support for investees primarily. In this consolidated fiscal year, JTA contributed substantially to operating revenue with gain on sales of shares of Bank Mayapada. In addition, JTA has been developing business with its strategic partner GL, in which JTA holds a 6.43% share in fast-growing Southeast Asia, to maximize synergy from the establishment of network while expanding business. As a result, operating revenue in Investment Business was 2,905 million yen (up 2.7% year on year) mainly because other operating revenue increased as a result of selling shares of Bank Mayapada at JTA. Meanwhile, segment loss was 175 million yen (segment profit of 2,562 million yen during the same period of the previous year) because unrealized loss on the portion of the subscription rights to shares of GL s convertible bonds was recorded as other operating expenses. [7] Other Business (2) Cash flow J Trust System Co., Ltd. develops systems and operates/manages computers for JTG. Keynote constructs commercial facilities. Meanwhile, ADORES has commenced foreign exchange service. It opened an in-store foreign currency exchange store ADORES EXCHANGE Akihabara on December 14, 2016 inside the existing amusement arcade located in an area popular with foreign tourists as a measure to lure more travelers. As a result, operating revenue in Other Business was 2,816 million yen (up 51.6% year on year) because Keynote performed well in its commercial facility construction business. Segment loss was 73 million yen (segment loss of 193 million yen during the same period of the previous consolidated fiscal year). Cash and cash equivalents (hereinafter, Funds ) in the current consolidated fiscal year decreased by 9,576 million yen to 78,650 million yen (down 10.9% year on year). Funds grew primarily due to increases in deposits by banking business and short-term bonds payable, but declined with the recording of loss before income taxes, an increase in loans by banking business, repurchase of treasury shares, etc. For the details of cash flow, please refer to 7. Analyses on Financial Position, Operating Results and Cash Flows, (4) Analysis on the source of capital and liquidity [2] Cash Flow. 17

18 2. Operating Results (1) Breakdown of balance of loans receivable Domestic Overseas Consumer services Business loan services Category End of previous consolidated fiscal year (March 31, 2016) Amount (million yen) Breakdown (%) End of current consolidated fiscal year (March 31, 2017) Amount (million yen) Breakdown (%) Unsecured loans 2, , Adjustment for business combination (0) (0.0) (0) (0.0) Secured loans Subtotal 2, , Discount on commercial notes 1, Unsecured loans Secured loans 2, , Subtotal 4, , Discounts on commercial notes - total 1, Accounts receivable operating loans - total 5, , Consumer loan services Business loan services Total 7, , Unsecured loans 20, , ,750 1,408 Secured loans 21, , Subtotal 42, , ,763 1,408 Unsecured loans Secured loans 3, , Accounts receivable operating loans - total Loans by banking business - - Subtotal 3, , , , ,763 1,408 South Korea 150, , Indonesia 80, , Subtotal 230, , Total 276, , ,763 1,408 Grand total 283, , ,078 1,572 Note: Figures shaded in gray refer to long-term operating loans receivable. They are included in above figures. 18