Financial Group Leading the Way to Asia s Future In Japan, South Korea, Southeast Asia, and across Asia. J Trust is creating new value and contributing to Asia s economic development through comprehensive financial services. J Trust Group s Corporate Philosophy and Behavioral Principles J Trust Group s Corporate Philosophy For our customers, shareholders and ourselves, we make continuous effort to respond quickly to changing environment and challenge ourselves diligently to create better future for the world. Our focus Treat all stakeholders, including customers, shareholders and business partners as our customers and take customer oriented approach to meet their expectations. Tackle various issues swiftly while pursuing ingenuity and improvements without being satisfied with the status quo. Ensure accurate and timely information disclosure as well as upholding high ethical standards for business execution. Create new services and value to contribute to the economic expansion. Behavioral Principles J Trust s Behavioral Principles are based on the six letters of the alphabet that constitute its name: J (for Justice ) Conduct business with integrity T (for Teamwork ) R (for Revolution ) U (for Uniqueness ) S (for Safety ) T (for Thankfulness ) Respect individuals to form an organization Stimulate a spirit of innovation for new value Embrace ingenuity Deliver services with sincerity Express our appreciation
CONTENTS J Trust Group s Track Record of Growth...2 J Trust Group s Business Base...4 J Trust Group s Strengths...6 To Our Stakeholders...12 SPECIAL FEATURE Proactively pursuing mergers and acquisitions to expand financial business in Asia...18 Performance Highlights...20 Domestic Financial Business...22 Financial Business in South Korea...24 Financial Business in Southeast Asia...26 Non-financial Business...28 Sustainability Highlights...29 Ten-year Consolidated Financial Summary...42 Consolidated Financial Statements...44 Statement of Financial Position of Principal Subsidiaries...48 Statement of Profit or Loss of Principal Subsidiaries...50 Corporate Information...52 Investor Information...53 Note on Forward-Looking Statements This annual report contains projections related to the J Trust Group s future performance and other matters. Such projections reflect the judgment of management based on information currently at hand, and therefore incorporate latent risks and uncertainties. Readers are asked to understand that actual results may differ significantly from such projections due to various factors, such as economic trends and business conditions. J Trust Co., Ltd. Annual Report 2018 1
J Trust Group s Track Record of Growth The J Trust Group is using its operational expertise gained in Japan such as credit screening, collection, and marketing to develop capabilities overseas, while at the same time integrating these capabilities with each country s strong points to expand its fields of business across Asia. Total Assets of the J Trust Group Overseas segment assets* 1 619,865 (Millions of yen) 700,000 656,961 600,000 Other assets* 2 540,718 *1 The financial business in South Korea for FY03/2012 and FY03/2013, the financial business in South Korea and JTRUST ASIA for FY03/2014, and the financial business in South Korea and the financial business in Southeast Asia and the investment business (mainly JTA) from FY03/2015 *2 Consolidated total assets minus overseas segment assets 508,659 500,000 400,000 334,736 300,000 218,706 200,000 117,546 100,000 39,811 37,999 37,862 12,189 0 1977/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 IFRS 2 J Trust Co., Ltd. Annual Report 2018
Proactively pursuing mergers and acquisitions to expand our comprehensive financial business in Asia Mongolia 2018 Acquired Capital Continent Investment NBFI Seizing the opportunity presented by the growth of financial markets, entered Mongolia s financial market Cambodia 2018 Announced acquisition of ANZ Royal Bank (Cambodia) Ltd. Planning to start banking operations in the Kingdom of Cambodia, where the economy is showing remarkable growth Singapore 2013 Established JTRUST ASIA Established a base in Singapore to promote business development in Southeast Asia South Korea 2011 Acquired Neoline Credit Acquired a financial business operator as the first step of our full-scale expansion into South Korea 2012 Current JT Chinae Savings Bank commenced operations Took over a part of assets and liabilities of a failed savings bank and began operating under restructured management. Achieved profitability in two and a half years 2014 Acquired two financial business operators Handed over their lending businesses to JT Chinae Savings Bank, and changed the name of one of the companies to TA Asset Management to pursue servicer business 2015 Acquired current JT Savings Bank and current JT Capital Established a business base for operations as a comprehensive financial group Indonesia 2014 Acquired current Bank JTrust Indonesia (BJI) Purchased a failed commercial bank and entered banking business in Indonesia 2015 Established JTRUST INVESTMENTS INDONESIA Using expertise developed in Japan and South Korea, took over collection of BJI s non-performing loans, and developed a servicer market in Indonesia 2018 Announced acquisition of PT. OLYMPINDO MULTI FINANCE Planning to offer new products including financing for agricultural equipment and microfinance. Expecting Group synergies with banking and servicer business J Trust Co., Ltd. Annual Report 2018 3
J Trust Group s Business Base The financial business is the core of the J Trust Group. In Japan, we focus on credit guarantees and the collection of receivables. We have also taken our capabilities gained in Japan in credit screening, collection, and marketing to South Korea, as well as rehabilitated savings banks and established a business base that provides comprehensive financial services that encompass banking, receivables collection, and leasing and installment loans. In addition, using our expertise in bank revitalization from South Korea, we are well on our way toward the rehabilitation of a commercial bank in Indonesia, and are building a three-pronged business base with servicer and financing companies. Investment business We are investing where growth through synergies can be expected, to expand our business primarily in Southeast Asia. Real estate business In addition to real estate sales and brokerage, we are engaged in purchase and sale of income properties. General entertainment business We have sold our amusement facilities operation business, but have entered the businesses of theater management and TV program production. Nine partnered financial institutions Shinhan Bank Japan THE KAGAWA BANK, LTD. THE SAIKYO BANK, LTD. Seikyo Credit Union The Tokyo Star Bank, Limited The Ehime Bank, Ltd. Kinki Sangyo Credit Union Shonan Shinkin Bank THE TAISHO BANK, LTD. (As of July 31, 2018) Financial business in South Korea We provide comprehensive fi nancial services through the three-pronged business of banking, loan servicing, and fi nancing. In addition to JT Chinae Savings Bank and JT Savings Bank, TA Asset Management is engaged in the purchase and collection of receivables, and JT Capital handles leasing and installment loans services. Domestic financial business In addition to guarantees for condominium loans in urban areas, our credit guarantee services include loan guarantees for purchases of real estate overseas by high net worth individuals, and guarantees on reverse mortgagetype loans. In the loan servicing business, using our domestic topclass collection capabilities, we are expanding our portfolio of purchases and collection of non-performing loans. Credit guarantee Nihon Hoshou Servicer Partir Servicer Credit and consumer credit J TRUST Card 4 J Trust Co., Ltd. Annual Report 2018
Contributing to invigoration of Asian economies Financial business in Southeast Asia In April 2018, we announced the acquisition of shares of PT. OLYMPINDO MULTI FINANCE (OMF). After the purchase is completed, we will be able to offer three-pronged comprehensive fi nancial services through Bank JTrust Indonesia (BJI), JTRUST INVESTMENTS INDONESIA (JTII), and OMF. Commercial bank Bank JTrust Indonesia Servicer JTRUST INVESTMENTS INDONESIA Savings banks Bank JTrust Indonesia provides comprehensive fi nancial services in Indonesia JT Chinae Savings Bank JT Savings Bank Servicer TA Asset Management Leasing and installment loans JT Capital JTRUST INVESTMENTS INDONESIA utilizes Japanese Servicer expertise in Indonesia Banking Business Banking, purchasing and collecting of receivables, and financing will generate profit whether the economy is strong or weak Purchase and Collection of Receivables Businesses Installment/Leasing Business J Trust Co., Ltd. Annual Report 2018 5
J Trust Group s Strengths THE J TRUST WAY OF SCREENING, COLLECTING Strength in screening and collection The Group achieves a high collection rate using its significant strength in credit screening and receivables collection, combined with transparent management and thorough compliance. To enhance the corporate strength of Group companies, we emphasize employees sharing their expertise and training to raise their awareness of compliance. 6 J Trust Co., Ltd. Annual Report 2018
Domestic financial business Strengths stemming from proprietary screening expertise and sharing within the Group Our balance and number of condominium loan guarantees are showing steady growth, a result of our proprietary screening expertise developed over many years in property-based loans and our ability to respond quickly. As of June 2018, we guaran- IRR on Partir Servicer s receivables collection (as of June 2018) (Unit: %) 50 40 45 teed more than 1,500 buildings, with zero defaults. Partir 30 33 Servicer recorded a high collection rate, with an internal rate of 20 return (IRR) of 33% for total receivables elapsed for at least two 10 years, and 45% for receivables elapsed for at least four years. 0 Receivables elapsed at least two years Receivables elapsed at least four years Financial business in South Korea Increasing the ratio of loans screened by J Trust Group Korea with a declining delinquency ratio Our loan balance as of June 2018 was 3,484.7 billion won, a roughly sixfold increase from June 2014 due to the increased loan balance screened by J Trust Group Korea. During that period, the portion of loans screened by J Trust Group Korea* 1 rose to 97% from 73%, while the delinquency ratio* 2 declined to 4.77% from 26.40%. *1 Loans screened by J Trust Group Korea as a percentage of total loans purchased and loans screened by J Trust Group Korea. *2 Loans at least 30 days delinquent as a percentage of total loan assets. Loan Balance Delinquency ratio 6/2014 584.6 billion won Portion of loans screened by J Trust Group Korea 73% 6/2018 3,484.7 billion won Portion of loans screened by J Trust Group Korea 97% 6/2014 26.40% 6/2018 4.77% Financial business in Southeast Asia Qualitative improvement in loan assets at Bank JTrust Indonesia (BJI) BJI s policy has been to reduce the balance of ineffi cient, large-lot corporate loans disbursed under its previous management, and promoted the shift to smaller-lot and retail loans. This has resulted in a decrease in the balance of receivables purchased from third parties and an increase in the balance of loans screened by BJI* 1, leading to an increase in the balance of loan assets. The non-performing loan ratio* 2 has stayed at roughly 3% since the transfer of BJI s nonperforming loans in October 2015, meaning the quality of loan assets is improving. *1 Balance of loans screened by BJI under the current management *2 Loans at least 90 days delinquent as a percentage of total loan assets. Loan Balance 9/2015 8,785.1 billion rupiah Portion of loans screened by J Trust Group Indonesia 0% 6/2018 12,212.5 billion rupiah Portion of loans screened by J Trust Group Indonesia 53% Non-performing Loan Ratio 9/2015 7.50% 6/2018 2.95% J Trust Co., Ltd. Annual Report 2018 7
J Trust Group s Strengths THE J TRUST WAY OF OPERATIONS, DEVELOPMENT Strength in operations and development The Group is working toward continuous growth by developing and providing high-value-added products and services that meet the needs of respective markets. In Japan, this includes guarantees for condominium loans for new buildings incorporating the Internet of Things in urban areas, while in South Korea we offer information technology-driven banking services, and in Indonesia we are launching unique banking services as a Japanese company. 8 J Trust Co., Ltd. Annual Report 2018
Domestic financial business Providing high-value-added guarantees for various types of loans Guarantees for condominium loans are basically limited to properties near train and subway stations in urban areas, and this includes new properties where home appliances in the condominium can be operated remotely by smartphone using the Internet of Things, which is popular among young people. In addition, yen- denominated property-based loans with relatively low interest rates that can be contracted in Japan for purchases of overseas real estate are gaining popularity, and guarantees for reverse mortgage-type loans, which allow older persons moving into retirement facilities to renovate and rent out their own homes, are said to be well- considered to stimulate local economies. Japan Guarantee loans for Smart Condominiums (IoT) and maintain high occupancy rate Door lock/unlock AC TV Lights Windows (security) Overseas Guarantees for mortgage loans which are very scarce and satisfy the needs of wealthy customers in Japan Loan Bank Borrow money in JPY Register security interest on loan guarantee Financial business in South Korea Enhancing customer service using information technology In addition to holding patents for applications that allow customers to conduct transactions, from opening an account to applying for a loan without visiting a branch, we were the fi rst savings bank to employ chatbots in anticipation of the introduction of artifi cial intelligence, to create a system that enables us to answer customer inquiries. In addition to enhancing customer service, these initiatives are leading to a leaner management structure by reducing the size of the JT Chinae Savings Bank and JT Savings Bank branch networks. AI Chatbot Automated customer service in anticipation of the introduction of AI (24 hours, 365 days) Customer support and information service: 1. Usage guide 2. Product recommendations 3. Lending application 4. Financial transaction etc. Main screen Consultation Financial transaction Financial business in Southeast Asia Using the appeal of the Japan brand to cultivate new related markets Bank JTrust Indonesia has opened a Japan desk, as well as branches in the AEON MALL Jakarta Garden City in Jakarta, and the Karawang International Industrial City, an industrial park with many Japanese companies. We are also using television, billboards, and other media to use the appeal of the Japan brand to differentiate ourselves from local banks, with the aim of increasing our business with Japanese manufacturers and local companies with Japanese business connections. Karawang KIIC branch AEON MALL Jakarta Garden City J Trust Co., Ltd. Annual Report 2018 9
J Trust Group s Strengths THE J TRUST WAY OF BRANDS, TRUST Strength in brands and trust In February 2018, the J Trust Group was selected by the Financial Times newspaper as one of the 1000 High-Growth Companies; Asia-Pacific 2018.* We will continue to work to create new value that contributes to social development backed by our brand strength and trust strength. * Based on earnings growth rates from 2013 to 2016 and other surveys of listed companies in 11 regions: Australia, Hong Kong, India, Indonesia, Japan, Malaysia, New Zealand, the Philippines, Singapore, South Korea, and Taiwan. 10 J Trust Co., Ltd. Annual Report 2018
Japan Shikoku Bank and BJI partner to support Japanese companies expansion into Indonesia J Trust and Bank JTrust Indonesia (BJI) concluded an agreement with Shikoku Bank, Ltd. (TSE 1 st Section; Securities code 8387) in January 2018 for an operational tie-up to support Japanese companies expansion. As the only bank wholly owned by Japanese capital in Indonesia, we are contributing to Japan Indonesia business development, and this is also helping us acquire new customers. South Korea No. 1 for customer satisfaction at FIRST BRAND AWARDS for 3 rd consecutive year In December 2017, JT Chinae Savings Bank won the Grand Prize in the savings bank category for the third year in a row in the 2018 FIRST BRAND AWARDS KOREA, sponsored by the Korea Consumers Council. JT Chinae Savings Bank was selected as the No. 1 for customer satisfaction based on votes cast by consumers, which means the bank s unrivaled new product development and innovative operations were well recognized. Indonesia Best Banking Brand Award recipient for 2 nd consecutive year In November 2017, BJI received the Best Banking Brand Award, sponsored by the Indonesian magazine Warta Ekonomi, for the second consecutive year. In addition to the bank s history, business performance, and banking technology, this selection was based on interviews with roughly 2,000 consumers, demonstrating BJI s widespread support among consumers. J Trust Co., Ltd. Annual Report 2018 11