J Trust Co., Ltd.Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) and made it a consolidated...

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)

Translation for reference only

2

Contents

Part I. Information on the Filing Company and Its Subsidiaries .......................................................................................... 4

I. Overview of the Filing Company and Its Subsidiaries .............................................................................................. 4

1. Changes in Key Management Indices, etc. ............................................................................................................. 4

2. History ..................................................................................................................................................................... 6

3. Business Overview .................................................................................................................................................. 7

4. Group Companies ................................................................................................................................................... 9

5. Employees ............................................................................................................................................................. 12

II. Status of Business ................................................................................................................................................. 13

1. Overview of Operating Results .............................................................................................................................. 13

2. Operating Results .................................................................................................................................................. 18

3. Managerial Policy, Business Environment, Issues to Be Addressed, etc. ............................................................. 20

4. Risk Factors .......................................................................................................................................................... 22

5. Material Contracts, etc. .......................................................................................................................................... 28

6. Research & Development Activity ......................................................................................................................... 29

7. Analyses on Financial Position, Operating Results and Cash Flows ..................................................................... 31

III. Equipment and Facilities ........................................................................................................................................ 34

1. Overview of Capital Expenditures, etc. .................................................................................................................. 34

2. Situations with Major Equipment and Facilities ..................................................................................................... 34

3. Plans for Addition or Disposal of Equipment ......................................................................................................... 36

IV. Status of the Filing Company ................................................................................................................................. 37

1. Status of the J Trust Shares .................................................................................................................................. 37

(1) Total number of shares and other related information .................................................................................... 37

(2) Status of subscription rights to shares ............................................................................................................ 38

(3) Exercise status of bonds with Subscription Rights containing a clause for Strike Price adjustments ............. 57

(4) Rights plan ...................................................................................................................................................... 57

(5) Changes in the number of the outstanding shares and capital, etc. ............................................................... 58

(6) Status of shareholders .................................................................................................................................... 59

(7) Status of major shareholders .......................................................................................................................... 59

(8) Status of voting rights ..................................................................................................................................... 61

(9) Employee stock option plan ............................................................................................................................ 62

2. Purchase of Treasury Shares and Other Related Status ....................................................................................... 67

3. Dividend Policy ...................................................................................................................................................... 68

4. Trends in Share Price ............................................................................................................................................ 68

5. Member of Executives ........................................................................................................................................... 70

6. Corporate Governance .......................................................................................................................................... 79

V. Financial Information ............................................................................................................................................. 86

1. Consolidated Financial Statements ....................................................................................................................... 87

(1) Consolidated financial statements .................................................................................................................. 87

(2) Other ............................................................................................................................................................. 153

2. Non-Consolidated Financial Statements, etc. ...................................................................................................... 154

(1) Non-Consolidated Financial Statements ....................................................................................................... 154

(2) Contents of major assets and liabilities ....................................................................................................... 164

(3) Other ........................................................................................................................................................... 164

VI. Overview of Shareholder Service of the Filing Company..................................................................................... 165

VII. Reference Information on Filing Company .......................................................................................................... 166

1. Information on the parent company, etc. of the filing company ........................................................................... 166

2. Other reference information ................................................................................................................................. 166

Part II. Information on the Guarantee Company of the Filing Company .......................................................................... 168

[Auditor’s Report]


3

[Cover]

[Document Submitted] Annual Securities Report

[Article of the Applicable Law Requiring

Submission of This Document]

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act

[Submitted to] 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] J Trust Co., Ltd.

[Position and Name of Representative] Nobuyoshi Fujisawa, Representative Director, President & CEO

[Main Office Location] 7-12, Toranomon 1-chome, Minato-ku, Tokyo

[Telephone Number] +81-3-4330-9100 (main)

[Contact for Communications] Taiji Hitachi, Director and Executive Officer

[Nearest Contact] 7-12, Toranomon 1-chome, Minato-ku, Tokyo

[Telephone Number] +81-3-4330-9100 (main)

[Contact for Communications] Taiji Hitachi, Director and Executive Officer

[Place Applicable for Public Inspection] J Trust Co., Ltd. Osaka Branch Office

4-1-1 Nishinakajima, Yodogawa-ku, Osaka-shi.*

*(Moved from 2-8-8 Higashinodamachi, Miyakojima-ku, Osaka-shi,

Osaka to the above address on Jan. 30, 2017).

Tokyo Stock Exchange

(2-1 NihonbashiKabuto-cho, Chuo-ku, Tokyo)


4

Part I. Information on the Filing Company and Its Subsidiaries

I. Overview of the Filing Company and Its Subsidiaries

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 Millions of

yen 55,683 61,926 63,281 75,478 85,031

Ordinary profit (loss) Millions of

yen 13,704 13,351 (2,385) (4,678) (6,747)

Profit (loss) attributable to

owners of parent

Millions of

yen 13,309 11,145 10,143 (5,712) (9,876)

Comprehensive income Millions of

yen 14,197 17,240 12,131 (18,426) (9,790)

Net assets Millions of

yen 70,895 184,230 194,865 168,656 151,663

Total assets Millions of

yen 218,706 334,736 540,718 508,659 608,650

Net assets per share Yen 1,013.89 1,502.54 1,591.09 1,455.90 1,415.91

Profit (loss) per share Yen 214.44 109.66 85.92 (49.65) (92.82)

Diluted profit per share Yen 208.30 108.05 85.61 －－

Capital adequacy ratio % 29.1 53.0 34.8 32.1 23.9

Return on equity % 23.83 9.25 5.55 －－

Price earnings ratio Times 15.55 11.89 12.03 －－

Net cash provided by (used in)

operating activities

Millions of

yen 9,378 11,434 15,452 (32,435) (14,434)


investing activities

Millions of

yen 36,764 (17,775) (15,148) (7,896) (4,774)


financing activities

Millions of

yen (2,441) 74,464 (20,593) 13,026 10,935

Cash and cash equivalents at

the year end

Millions of

yen 56,288 131,349 118,060 88,226 78,650

Number of employees Number of

people

2,105 2,322 3,986 3,226 2,751

[excluding the average number

of temporary staff] [738] [820] [850] [859] [750]

Note 1: Operating revenue does not include consumption taxes, etc.

Note 2: 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.

Note 3: 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, 2013.

Note 4: 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.

Note 5: 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.

Note 6: 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.

Note 7: For the 40th and 41st consolidated fiscal years, Return on Equity is omitted due to “loss attributable to owners


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 Millions of

yen 3,546 4,583 4,223 33,879 6,377

Ordinary profit Millions of

yen 1,073 828 4,770 29,850 1,824

Profit Millions of

yen 1,056 1,268 4,990 31,322 1,039

Capital stock Millions of

yen 4,625 53,578 53,604 53,616 53,630

Total number of the

Company’s issued shares

Thousands

of shares 63,162 118,385 118,589 112,447 112,536

Net assets Millions of

yen 13,831 112,142 116,052 139,972 132,347

Total assets Millions of

yen 38,744 123,707 146,010 150,866 147,635

Net assets per share Yen 218.17 949.55 980.59 1,247.84 1,284.17

Dividends per share (annual) Yen 7.00 10.00 10.00 12.00 12.00

[Interim dividends per share] Yen (3.00) (5.00) (5.00) (5.00) (6.00)

Profit per share Yen 17.02 12.48 42.27 272.25 9.77

Diluted profit per share Yen 16.54 12.30 42.12 271.69 9.76

Capital adequacy ratio % 35.3 90.6 79.4 92.7 89.5

Return on equity % 8.42 2.02 4.38 24.50 0.76

Price earnings ratio Times 195.90 104.48 24.46 3.34 95.99

Dividend payout ratio % 41.12 80.12 23.66 4.41 122.80

Number of employees Number of

people 66 56 30 50 54

Note 1: Operating revenue does not include consumption taxes, etc.

Note 2: 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.

Note 3: 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, 2013.

Note 4: In the 40th 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.

Note 5: 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.

Note 6: 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.


6

2. History

Date History

Mar. 1977 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. 1983 Obtained Moneylending Business Registration upon enforcement of the “Moneylending Business Act.”

Mar. 1991 Changed the trade name to IKKO CORPORATION.

Sept. 1998 Listed on the Osaka Securities Exchange, 2nd Section.

Jan. 2005 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. 2008 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. 2009 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. 2010 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. 2012 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. 2012 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. 2012 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 2nd 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. 2013 Founded JTRUST ASIA PTE. LTD. in Singapore, aiming to enter financial, amusement and other businesses

in Southeast Asia.

Nov. 2014 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. 2015 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. 2015 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.


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.

Business Segment Main Business Mainly handled by

Domestic

Financial

Business

Credit guarantee

business

Credit guarantee for business loan granted to small and

medium-sized enterprises and sole proprietors as well as

consumer loans and Apartment Loans to consumers mainly

by banks, credit unions and credit associations

Nihon Hoshou Co., Ltd.

Receivable

collection

business

Purchase and collection of loans receivable from financial

institutions and nonbanks

Partir Servicer Co., Ltd.


Credit and

consumer credit

business

Fund settlement through the issuance of credit cards,

Personal credit service including card loan J TRUST Card Co., Ltd.

Consumer credit service in the form of installment sales J TRUST Card Co., Ltd.

Other financial

business Loan business Nihon Hoshou Co., Ltd.

Financial

Business

in South

Korea

Savings bank

business

Banking business including deposit taking and loan

granting

JT Chinae Savings Bank

Co., Ltd.

JT Savings Bank Co.,

Ltd.

Receivable

collection

business

Purchase and collection of loans receivable from financial

institutions and nonbanks

TA Asset Management

Co., Ltd.

Capital business Leasing, Installment sales JT Capital Co., Ltd.

Financial

Business

in

Southeast

Asia

Banking

business

Banking business including deposit taking and loan

granting

PT Bank JTrust Indonesia

Tbk.

Receivable

collection

business

Collection of loans receivable

PT JTRUST

INVESTMENTS

INDONESIA

Hire-purchase

financing

Marketing, screening and collection of loans receivable

targeting at customers of hire-purchase financing

PT Group Lease Finance

Indonesia*

General Entertainment

Business

Operation of amusement arcades and other facilities. ADORES, Inc.

Development, production and sale of computer systems for

amusement machines and its peripheral equipment.

Highlights Entertainment

Co., Ltd.

Real Estate Business

Property purchase and sale centering on detached housing,

renovation of existing housing, real estate brokerage Keynote Co., Ltd.

Purchase and sale of existing real estate and income

properties mainly in urban areas ADORES, Inc.

Investment Business Inbound and outbound investment businesses JTRUST ASIA PTE. LTD.

Other Business

Commercial facility construction business including design

and construction of amusement arcades, restaurants and

other facilities

Keynote Co., Ltd.

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.


8

The following diagram shows the above mentioned corporate 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)

(General Entertainment Business)

(Consolidated Subsidiary) (Consolidated Subsidiary)

ADORES, Inc. Highlights Entertainment Co., Ltd.

One other consolidated subsidiary

(Real Estate Business)


Keynote Co., Ltd. ADORES, Inc.

One other consolidated subsidiary

(Investment Business)


J TRUST ASIA PTE. LTD.

Two other consolidated subsidiaries

(Other Business)


Keynote Co., Ltd. J Trust System Co., Ltd.

Two other consolidated subsidiaries

(J Trust Group)

J Trust Co., Ltd.

("The Company")

Financial

institution

Depositor

Operator

Consumer

Investee

Client


9

4. Group Companies

Name Address

Capital Stock or

investments in

capital

(Millions of yen)

Main business

Percentage of

owning voting

rights or being

owned (%)

Contents concerned

(Consolidated

subsidiary)

Keynote Co.,

Ltd.

(Note 3)

Meguro-ku,

Tokyo 30

Real Estate

Business,

Other

Business

100.00

(100.00) ――――――――――

Partir Servicer

Co., Ltd.

(Note 3)

Minato-ku,

Tokyo 500

Domestic

Financial

Business

100.00

(100.00)

(1) Interlocking Director

1 of J Trust directors

concurrently serves as director

of Partir Servicer.

Nihon Hoshou

Co., Ltd.

(Note 6)

Minato-ku,

Tokyo 95

Domestic

Financial

Business

100.00




of Nihon Hoshou.

(2) Credit Guarantee

J Trust provides guarantee for

Nihon Hoshou’s loans from

financial institutions.

J Trust System

Co., Ltd.

Minato-ku,

Tokyo 80

Other

Business 100.00




of J Trust System.

J TRUST Card

Co., Ltd.

Miyazaki-shi,

Miyazaki 90

Domestic

Financial

Business

100.00



concurrently serve as director

of J TRUST Card.

(2) Credit Guarantee.


J TRUST Card’s loans, etc.

from financial institutions.

(3) Business Transaction

J Trust provides funds to J

TRUST Card.

ADORES, Inc.

(Note 4, 7)

Minato-ku,

Tokyo 4,405

General

Entertainment

Business,

Real Estate

Business

Other

Business

42.92




of ADORES.

JT Chinae

Savings Bank

Co., Ltd.

(Note 3, 8)

Seoul Special

City, South

Korea

5,313

(71.7 billion won)

Financial

Business in

South Korea

100.00

(100.00)




of JT Chinae Savings Bank.

JTRUST ASIA

PTE. LTD.

(Note 2)

Republic of

Singapore

29,856

(375 million

Singapore dollars)

Investment

Business 100.00




of JTRUST ASIA PTE. LTD.

TA Asset

Management

Co., Ltd.

Seoul Special

City, South

Korea

833

(8.7 billion won)

Financial

Business in

South Korea

100.00 ――――――――――

Highlights

Entertainment

Co., Ltd.

(Note 3)

Chiyoda-ku,

Tokyo 10

General

Entertainment

Business

100.00

(100.00)




of Highlights Entertainment’s.



10

Name Address

Capital Stock or

investments in

capital

(Millions of yen)

Main business

Percentage of

owning voting

rights or being

owned (%)

Contents concerned


Highlights Entertainment’s

loans from financial

institutions.

(3) Business transaction

J Trust provides funds to

Highlights Entertainment.

PT Bank JTrust

Indonesia Tbk.

(Note 2, 3, 9)

Special

Capital Region

of Jakarta,

Republic of

Indonesia

116,654

(12.2 trillion

Indonesian rupiah)

Financial

Business in

Southeast Asia

97.19

(1.00)




of PT Bank JTrust Indonesia.

JT Savings

Bank Co., Ltd.

(Note 2)

Seongnam-si,

Gyeonggi-do,

South Korea

10,798

(99.9 billion won)

Financial

Business in

South Korea

100.00 ――――――――――

JT Capital Co.,

Ltd.

(Note 2)

Seoul Special

City, South

Korea

11,739

(108.0 billion won)

Financial

Business in

South Korea

100.00




of JT Capital.



JT Capital’s loan from financial

institutions.

PT JTRUST

INVESTMENTS

INDONESIA

(Note 3)

Special

Capital Region

of Jakarta,

Republic of

Indonesia

558

(61.2 billion

Indonesian rupiah)

Financial

Business in

Southeast Asia

99.15

(84.36)




of PT JTRUST

INVESTMENTS INDONESIA.

8 other

companies

(Entity

accounted for

using equity

method)

PT Group

Lease Finance

Indonesia

(Note 3, 5)

Special

Capital Region

of Jakarta,

Republic of

Indonesia

840

(100 billion

Indonesian rupiah)

Financial

Business in

Southeast Asia

22.22

(22.22)




of PT Group Lease Finance

Indonesia.

Note 1: Items in “Main business” indicate names of business segment.

Note 2: This denotes a specified subsidiary.

Note 3: 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: The exchange rate for capital stock is 1 Indonesian Rupiah = 0.0084 yen.

Note 6: 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


11

Note 7: 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.

Note 8: 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



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




12

5. Employees

(1) Status of consolidated subsidiaries

As of March 31, 2017

Name of Business Segments Number of Employees

Domestic Financial Business 256 20

Financial Business in South Korea 1,031 119

Financial Business in Southeast Asia 977 19

General Entertainment Business 282 581

Real Estate Business 42 1

Investment Business 6 -

Other Business 62 8

All companies (common) 95 2

Total 2,751 750

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


Number of employees (People)

Average age Average length of

service Average annual salary

(Yen)

54 43 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.


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 mid-

to 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 2017. In addition, J Trust Co., Ltd. sold

3.124% of the shares of BJI to GL Group in December 2016. 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 2016.

(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


14

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 2017.

* 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 40th 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 long-

term 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 2016. 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%).


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)

“50th 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 cutting-

edge information to the youth; and (iii) “VR PARK TOKYO”, a permanent Virtual Reality (VR) entertainment

facility launched on the 4th floor of ADORES Shibuya on December 16, 2016. 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, 2017.

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 2017.

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%).


17

[6] Investment Business

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

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).

(2) Cash flow

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.”


18

2. Operating Results

(1) Breakdown of balance of loans receivable

Category

End of previous consolidated fiscal year

(March 31, 2016)

End of current consolidated fiscal year

(March 31, 2017)

Amount (million yen)

Breakdown (%)


Breakdown (%)

Domestic

Consumer services

Unsecured loans 2,455 0.9 1,543 0.4

197 126

Adjustment for business combination (0) (0.0) (0) (0.0)

Secured loans 310 0.1 198 0.0

21 14

Subtotal 2,765 1.0 1,740 0.4

218 140

Business loan services

Discount on commercial notes 1,428 0.5 928 0.2

- -

Unsecured loans 220 0.1 26 0.0

5 -

Secured loans 2,630 0.9 2,277 0.6

90 23

Subtotal 4,280 1.5 3,233 0.8

96 23

Discounts on commercial notes - total 1,428 0.5 928 0.2

- -

Accounts receivable – operating loans - total 5,617 2.0 4,044 1.0

315 164

Total 7,045 2.5 4,973 1.2

315 164

Overseas

Consumer loan services

Unsecured loans 20,497 7.2 22,190 5.9

1,750 1,408

Secured loans 21,886 7.7 16,189 4.3

12 0

Subtotal 42,384 14.9 38,379 10.2

1,763 1,408

Business loan services

Unsecured loans 451 0.2 321 0.1

- -

Secured loans 3,130 1.1 7,924 2.1

- -

Subtotal 3,581 1.3 8,246 2.2

- -

Accounts receivable – operating loans - total 45,966 16.2 46,626 12.4

1,763 1,408

Loans by banking business

South Korea 150,255 53.0 236,873 62.6

- -

Indonesia 80,277 28.3 90,123 23.8

- -

Subtotal 230,532 81.3 326,996 86.4

- -

Total 276,499 97.5 373,622 98.8

1,763 1,408

Grand total 283,544 100.0 378,596 100.0

2,078 1,572

Note: Figures shaded in gray refer to long-term operating loans receivable. They are included in above figures.


19

(2) Breakdown of balances of credit guarantee

Category

End of previous consolidated fiscal year

(March 31, 2016)

End of current consolidated fiscal year

(March 31, 2017)


Breakdown (%)


Breakdown (%)

Unsecured 15,376 28.8 14,829 17.2

Secured 37,978 71.2 71,146 82.8

Total 53,354 100.0 85,975 100.0

(3) Breakdown of operating revenue

(Millions of yen)

Category

Previous consolidated fiscal year

(from April 1, 2015 till March 31, 2016)

Current consolidated fiscal year

(from April 1, 2016 till March 31, 2017)

I. Interest on loans & Discount revenue

1. For consumers (1) Unsecured loans 2,179 2,986

(2) Secured loans 1,019 781

For consumers – total 3,199 3,767

2. For business (1) Discount on commercial notes 122 59

(2) Unsecured loans 78 34

(3) Secured loans 197 363

For business – total 398 457

Total 3,597 4,224

II. Banking business revenue

1. South Korea 19,716 23,383

2. Indonesia 12,000 16,955

Subtotal 31,716 40,339

III. Collection from purchased receivable 3,466 3,916

IV. Sales on Real Estate Business 6,217 6,763

V. Sales on General Entertainment Business 16,557 15,397

VI. Installment payment paying for commission 229 350

VII. Other 1. Commission fee 511 506

2. Guarantee commission received 1,853 1,935

3. Gain on bad debts recovered 5,311 3,946

4. Interest on deposits 152 146

5. Other financial revenue 840 1,140

6. Other 5,024 6,364

Subtotal 13,693 14,039

Total operating revenue 75,478 85,031

Note 1: “VII. Other, 5 Other financial revenue” refers mainly to the difference between the collection from loans

under receivable purchasing services and the corresponding acquisition cost.

Note 2: The above figures do not include consumption taxes.


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(4) Purchase of Merchandise

Purchase of Merchandise by business segment for the current consolidated fiscal year is shown below.

(Millions of yen)

Business Segment Current Consolidated Fiscal Year

(April 1, 2016 - March 31, 2017) Year on Year (%)

Domestic Financial Business 85 -

Financial Business in South Korea - -

Financial Business in Southeast Asia - -

General Entertainment Business 4,274 71.4

Real Estate Business 2,961 88.3

Investment Business - -

Other Business - -

Elimination of Internal Transactions (819) 94.4

Total 6,501 76.7

Note 1: The amount is based on purchase prices.

Note 2: The amount in the table does not include consumption tax, etc.

3. Managerial Policy, Business Environment, Issues to be Addressed, etc.

We consider that it is inevitable to transform our business ahead of changes in the global and Japanese economies.

With such a recognition, we attach priority to expanding businesses in Asia, where the economy is expected to continue

growing at a high pace, and maximizing synergies generated by our network of Group Companies. Against such

background, with a view to further enhancing our operational base and achieving sustainable growth, we will make

continuous efforts to attain the goals.

The below forward-looking statements should read as the judgment of us as of the end of the consolidated accounting

year covered by this document.

(1) Targeted management indices

We formulated a Medium-Term Business Plan, which started from the fiscal year ended March 31, 2016 under the

corporate vision of “Aim to be a provider of unique financial services not constrained by existing paradigms.”

The basic policy is described below.

[1] Achieve operating revenue of 142.1 billion yen per year, operating profit of 21.7 billion yen per year and ROE of

10.0% in three years.

[2] Earn profits primarily from the banking business whose sustainable growth is likely in fast-growing Asia.

[3] Invest 50-100 billion yen during the three years, targeting deals with IRR of at least 15% in growing markets.

[4] Put a priority on maximizing shareholder value as one of the most important business tasks, and repurchase

treasury shares flexibly when the share price is deemed undervalued.

(2) Medium- to long-term management strategies and key issues to be addressed

[1] Financial business in Southeast Asia

In the accounting year covered by this report, we have tackled the structural reform of PT Bank JTrust Indonesia

Tbk., which had long been under the control of the Indonesia Deposit Insurance Corporation in order to

rehabilitate the bank. We believe that we have finally consolidated the business infrastructure since we have

substantially increased the allowance for doubtful accounts by reviewing the loans to improve the financial

integrity, and completed the staff reduction as well as the streamlining of the overlapping branches. In funding,

with a view to addressing the weakness that the interest rates paid for the deposits are higher than the average

of those paid by comparable banks, we will make further efforts to shift the composition of deposits from the

deposits paying high interest rates to those with low interest rates leading to the higher CASA ratio (Current

Account and Savings Account ratio) and the improved NIM (Net Interest Margin). Going forward, we will


21

proactively invest in IT infrastructure such as the introduction of internet banking for individual depositors and

the branchless banking for the purpose of increasing the deposits with low interest rates. In lending, we will

make efforts to improve net interest income by rebalancing the loan portfolio by shifting to the medium-sized

loan with such measures as continuously increasing the new lending particularly with focusing on building up

the high-interest loans worth JPY 100-500 million (Medium-Sized Loan) by adding sales staff as well as

containing the large-lot, low-interest corporate loans worth around JPY 1 billion. It should be also pointed out

that the lending to the clients of the PT Group Lease Financing Indonesia (“GLFI”) has been increasing solidly.

GLFI is a subsidiary of Group Lease PCL (“GL”) and JTRUST ASIA PTE. LTD. also invests in 20% of its total

shares. Building on the success model of GL, our strategic partner, we will establish success in Indonesia, and

grow together with GL using a mechanism that we will play a role of providing financing in new markets that GL

has penetrated by acquiring deposit taking financial institutions, such as banks in countries where GL has

already made the presence or is going to enter. In addition, in order to manage the bad debt risk, we will

strengthen the monitoring of the credibility of debtors and will work proactively to collect the loan claims with the

intensified collaboration with PT JTRUST INVESTMENTS INDONESIA. We will also endeavor to enhance the

business capabilities by deploying the effective market strategy and expanding the business aggressively

through high value-added financial services by capitalizing on the Group’s network and other measures.

[2] Financial Business in South Korea

In South Korea, we have 4 subsidiaries, namely JT Chinae Savings Bank Co., Ltd., JT Savings Bank Co., Ltd.,

JT Capital Co., Ltd. and TA Asset Management Co., Ltd. The infrastructure for us to provide comprehensive

financial services is now well developed. We will grow business there to maximize synergy effects through the

organic expansion of each business entity. The two savings banks have attached priority to increasing loans

outstanding through focusing on the acquisition of high-quality loans as well as the new loan extension. South

Korea’s savings banks industry has faced challenges in earnings because: (i) the financial authorities provided

guidance to contain the growth of the outstanding household debt; and (ii) expected changes in regulations on

provision of allowance for doubtful accounts may require higher reserves in the future. Despite such

environments, we will make efforts to increase profit by balancing the loan outstanding and provision of

allowance for doubtful accounts. The statute of revised Specialized Credit Financial Business Act on the ratio

of unsecured consumer lending effective September 2016 and the changes of the rules on the allowance for

doubtful accounts could adversely affect the capital industry, as in the case of the savings bank industry. JT

Capital Co., Ltd. will continue to increase the balance of mortgage loan and lease asset at interest rates ranging

from 6 to 20%, targeting highly credible customers with good credit ratings. TA Asset Management Co., Ltd. will

accumulate loan receivables with our superior collection capability. As a financial group in South Korea, we will

further increase the loan balances by improving the brand value through marketing activities with a mascot to

create familiar and trustworthy images.

[3] Domestic Financial Business

We, as we did in the preceding fiscal year, will continue to develop business centering on credit guarantee

services for Apartment Loan, property-based loan, etc., and will also focus on property-based loan. In addition,

we will intensify our efforts to grow credit guarantee services such as reverse mortgage and other loan types to

address the recent social issue of increases in the number of aged households which have difficulty maintaining

a stable life after retirement. For the loan collection (Servicer business), we will develop operations with a high

pricing strategy backed by the Group’s strong collection capability in the shrinking market.

[4] Domestic non-financial business

In General Entertainment Business, ADORES, Inc. proactively holds events at existing stores such as

collaborative events featuring popular animation characters. Going forward, we will expand the type of operation

through development of own content in addition to the content business using existing facilities. Furthermore,

in December 2016, we started providing the new content service platform with VR (virtual reality) technology

that is currently drawing attention in alliance with GREE, Inc., and will continue to make efforts to increase the

sales with centering on the attraction of new layers of customers. Highlights Entertainment Co., Ltd. develops,

produces and sells amusement machines, etc. Highlights Entertainment will aim at increasing the profit by

maximizing the sales of produced amusement machines units and intensifying marketing efforts for the

computer systems for peripheral equipment.

In the real estate business, Keynote Co., Ltd. will expand profit with a view to increasing the sales of single

residential homes, reducing expenses through raising the ratio of the in-house construction, and enhancing the

number of construction orders received for building commercial facilities.


22

4. Risk Factors

With regard to risks in relation to the Group’s business, etc., main factors that may influence the judgments of investors

are stated. However, not all the factors that may influence the financial results of the Company are covered. With

heightened awareness of those potential risks, the Group endeavors to avoid these risks from occurring, takes prompt

action to reduce or eliminate damages should they occur.

This section contains forward-looking statements, based on the judgments on the date of filing this document (June 29,

2017).

(1) Risks related to legal regulations

[1] Business regulations related to the banking business

The Group’s savings bank business in South Korea is under control of various regulations including Savings

Bank Act set by the Financial Supervisory Service. Likewise, our banking business in Indonesia is subject to

various regulations established by the Indonesian Financial Service Authorities based on the Banking Law of

Indonesia and other related legislations and government orders.

The Group operates business in compliance with laws and regulations. If the Group’s service infringes on any

act and a suspension of the whole or part of the business is ordered, however, it may have an impact on the

performance and financial position of the Group.

Meanwhile, the South Korean government enforced the Act to Revise the Law regarding Registration of

Moneylenders and Protection of Users of Financial Services on March 3, 2016. This reduced the legal interest

rate cap to 27.9% p.a. It was applied to conclusions, renewals and extensions of loan contracts on the same

day.

The Group has appropriately dealt with the gradual lowering of legal upper limits in South Korea. If the lowering

goes beyond our expectation, however, it may have an impact on the performance of the Group.

[2] Business regulations by the Money Lending Business Act

In accordance with the Money Lending Business Act revised and enforced in December 2007, stricter

regulations and introduction of business improvement order came into effect and the Japan Financial Services

Association was founded as a powerful independent self-regulatory organization. Since June 2010, the upper

limit on interest rates has been lowered and a restriction on the total loan amount has also been introduced. In

accordance with the rules preventing excessive loans stipulated in the self-regulation basic rules related to

management of the loan business prepared by the Japan Financial Services Association, the Group has been

striving for stricter credit control. In the future, if these rules are tightened, however, it may have an impact on

the performance of the Group, including a decrease in profit and an increase in cost to comply with new rules.

[3] Business regulations in the Act on Special Measures Concerning Claim Management and Collection Businesses

(Servicer Act)

The Group's collection of accounts receivable business is under control of various regulations in accordance

with the Act on Special Measures Concerning Claim Management and Collection Businesses (Servicer Act). If

any of such laws or other regulations is revised, it may have an impact on the performance of the Group.

[4] Business regulations in the Installment Sales Act

In the credit and consumer credit business, the Group is governed by various kinds of regulations pursuant to

the Installment Sales Act. The said act revised in December 2009 has many provisions to protect consumers,

including the "cooling-off period for credit contracts," "refund of past payments," "prevention of excessive credit,"

"obligation to use the credit bureau" and "proper management of credit cards" for the purposes of "sound

development in transactions in installment sales, protection of purchasers' benefits, together with smooth

product distribution and service provision, which will contribute to the development of the national economy, by

ensuring fairness in transactions in installment sales and taking measures necessary for prevention of

purchasers from losses and properly managing credit card numbers.

In addition, most of our business partners in the consumer credit service business engage in "Specified

Continuous Service Offers," which constitutes a transaction type under the Act on Specified Commercial

Transactions. The act, revised in December 2009 like the Installment Sales Act, expands scope of objects

subject to control to protect consumers, including "cancellation of excessive sale contracts."

While the Group is not directly governed by the act, if any of our business partners engages in product sales or

service provision in a manner that infringes on the act, it may have a serious impact on contracts, etc. made by

the Group and consumers.

[5] Business regulations in the Building Lots and Buildings Transaction Business Act (Buildings & Lots Transaction


23

Act)

The Group’s real estate business is under control of various regulations in accordance with related laws

including the Buildings & Lots Transaction Act. If any of such laws or other regulations is revised, it may have

an impact on the performance of the Group.

[6] Laws and regulations, etc. related to General Entertainment Business

(i) Operation of amusement arcades and other facilities

The Group’s operation of amusement arcades and other facilities is under control of various laws and

regulations related to the amusement business including the Act on Control and Improvement of

Amusement Business, etc. The Act requires regulatory approval for opening and operating facilities,

restriction on business hours, customer’s age (the condition was relaxed in June 2016 following a partial

revision to the law), areas to open facility, building structure, interior fit-outs, light, noise of facilities etc.

The Group proactively engages in business activities while complying with the act, related laws and

regulations. However, if any of these laws and regulations is revised, it may have an impact on the

performance of the Group.

(ii) Development, production and sales of computer systems for amusement machines and peripheral

equipment of amusement machines

The Group conforms to various laws and regulations related to development, production and sales of

computer systems for amusement machines and peripheral equipment of amusement machines including

the Act on Control and Improvement of Amusement Business and the Regulations Concerning

Authorization and Model Approval for Amusement Machines. If any of these laws and regulations is revised,

it may have an impact on the performance of the Group.

[7] Product Liability Act

Part of prizes, equipment and services the Group offers are subject to liability for compensation under the

Product Liability Act, and the prizes and equipment require assurance in quality. The Group is covered by

product liability insurance. However, if compensation exceeding the coverage of product liability insurance

would occur resulting from the hidden defects of the prizes and equipment, it may have an impact on the


[8] Act on Protection of Personal Information

The Group falls under an entity handling personal information, etc. under the Act on the Protection of Personal

Information enforced on April 1, 2005. The Group has introduced in-house rules and improved its corporate

systems to protect personal information from leakage by, for example, setting up the "Personal Information

Protection Policy" concerning personal information handling and information control. Based on this policy, the

Group enhanced internal management system by providing employee training on handling of personal

information, management of access to personal information and improvement of security system.

In addition, the Group is accredited with "Privacy Mark" as a business owner that set up a proper system to

protect personal information, etc. to offer greater safety and continuous service to customers in execution of

daily operation.

However, in case the Group fails to prevent leakage of personal information or infringes on the Act on the

Protection of Personal Information or other regulations, due to unforeseen circumstances, it may have an impact

on the performance of the Group, due to not only becoming subject to punishment under the law, but also to

losing social credibility and having damage claims, etc.

(2) Credit risk

[1] Bad debt risk of loan receivables

(i) Non-performing loan

The Group takes various anti-credit risk measures such as preventing degradation of loan receivables and

enhancement of risk management.

The Group will continue to pay attention to risk management. However, if the situation of borrower, etc. is

materially damaged by a major change in the economic and financial environment in Japan and abroad,

bad debts expenses such as write-off expenses or the non-performing loan balance may increase. This

could affect business performance and financial position of the Group.

(ii) Allowance for doubtful accounts, etc.

To protect against loss on defaults, the Group has considered the collectability of general accounts

receivables according to the loan loss ratio and individually considered the collectability of specified

receivables, including doubtful accounts receivable, and posted amount estimated to be uncollectible as


24

allowances for doubtful accounts. The Group has also posted provision for loss on guarantees to prevent

the risk of contingent liabilities from occurring.

In connection with this, in the event that the condition of debtors, etc. worsens due to a material change in

the economic situation or financial conditions in Japan and abroad, the assumptions and estimates will

come to differ from those when the provision and allowance were posted. This will result in an increase in

our provision and allowance and may lead to impact financial performance and financial position of the

Group.

[2] Bad debt risk of accounts receivable

The Group is exposed to credit risks including accounts receivable from clients.

The Group has been reinforcing receivable protection and credit control systems while paying attention to

receivable collection risks. However, the risk of receivable becoming uncollectible could increase depending on

the sales of customers. This may have an impact on the performance and financial position of the Group.

(3) Foreign exchange risk

The Group operates business globally and is exposed to foreign exchange market fluctuation risks. Our overseas

subsidiaries’ sales, expenses, assets, etc. are translated into yen when consolidated financial statements are prepared.

Due to this, if exchange rates at the time of conversion experience a material change to a level beyond expectation,

it may have an impact on the performance and financial position of the Group.

(4) Business risk

[1] Risk of business expansion

The Group has been proactively expanding business into areas where the Group expects business restructuring

and synergy with the core businesses operated by the Group both at home and abroad. Despite our adequate

analysis and research in advance, the Group cannot deny the possibility of the occurrence of an unexpected

result that our business strategy based on the assumption of effects from such business restructuring and

business expansion, etc. may not function effectively, compelling us to modify the strategy itself. This will lead

to the following risks and issues:

That the new business strategy may not function as expected and profit will not increase

That the Group must train and retain personnel who are capable of supervising, managing and executing

the new business

That the Group may encounter legal and other risks in operating the new business and receive instructions

from the relevant public authorities.

Moreover, besides the issues mentioned above, the Group may face risks and issues stemming from expanding

businesses that the Group had no experience or inadequate experience in the past. If the Group is unable to

cope with such an event appropriately, it may have an impact on the performance of the Group.

[2] Business partners

The Group maintains business tie-ups with multiple financial institutions in its credit guarantee business, etc. in

Japan. To expand our business in Southeast Asia, the Group has been working on business together with a

rapidly growing local company as a strategic partner. Should the joint-venture or allied business show the

following unsatisfactory developments, it may have an impact on the Group’s performance: (i) the performance

of the Group or a partnered company should worsen; (ii) the engaged business should destabilize due to

changes in legislative systems relating to the partner’s business; (iii) the performance of the joint-venture or

allied business should fall short of the expectation; or (iv) unexpected events should arise relating to the

partnership, etc.

[3] Risk of Real Estate Business

The Group engages in acquisitions, sales, holding of income properties and leasing for businesses and ready-

built housing for individuals. Since demand by lessees or purchasers is affected by external factors such as

economic, interest and land price trends, reduction in demand for leasing or purchase or revision in tax systems

may have an impact on the performance of the Group. As for sales of ready-built housing in the real estate

business, the property handover timing is same as that of posting sales. Due to this, depending on the deal

types including construction, if unexpected material delays in property handover caused by natural disaster and

other unexpected events would occur, it may have an impact on the Group’s performance.

Furthermore, in the domestic financial business, we provide real estate secured loans and credit guarantee for

real estate secured loans. Risks such as impaired value of real-estate collateral may require further provision

of allowance for doubtful accounts and then affect the performance of the Group.


25

[4] Risk associated with General Entertainment Business

(i) Operation of amusement arcades and other facilities

The Group is not in a hurry to expand the scale but rather focuses on enhancement of the competitiveness

of individual stores to secure profitability and market share as its basic policy in the operation of amusement

arcades and other facilities. The decrease in per-store foot traffic and spending per customer may have an

impact on the performance of the Group due to industry competition and cross-industry competition with

other entertainment business. The Group evaluates profitability before opening new stores. However, if

the Group cannot find rental properties meeting its criteria, we will be compelled to change the number of

new store opening. In addition, when the Group has no choice but to close stores unexpectedly due to the

early termination of a tenancy agreement or faces the fact that lease/guarantee deposits, etc. are

uncollectible and accrues loss due to the bankruptcy of lessors, etc. after opening stores, it may have an

impact on the performance of the Group.

Sales of amusement machines are only from selected amusement machine manufactures. Although the

Group maintains a stable business relationship with amusement equipment manufacturers as shown in

purchase records, possible changes in suppliers’ sales policies, etc. may have an impact on the


Also, some of the amusement toys the Group handles are so called character merchandises that depend

on popularity of characters. Therefore, merchandize selection and stocking entails a future prediction to

some extent. The Group closely monitors trends of character merchandises. Nevertheless, business

performance of the Group may be influenced by changes in popularity of the characters it handles. If an

accurate forecast of customers’ taste or a swift response to them is not possible, or a popularity of certain

character is shorter than expected, it may affect the performance of the Group. Moreover, social games

including free applications whose popularity surged in line with the spread of smart phones have been

influencing consumer attitudes towards entertainment related expenses. Social game developments may

change the foot traffic numbers and average spending per customer and may affect the performance of

the Group.

(ii) Sales of amusement machines and computer systems for peripheral equipment of amusement machines

In sales and marketing business of amusement machines and computer systems for peripheral equipment

of amusement machines, the Group sells amusement machines and peripheral equipment to amusement

arcades. If an operator’s business environment deteriorates, which may result in a decline in demand or

changes in market structures and it may have an impact on the performance of the Group.

[5] Risk in Investment Business

In Investment Business, the Group has been selecting investees by comprehensively considering all factors,

including synergy in the business, quality of product, service capability and other factors. Such factors are likely

to be affected by trends in politics, industries, reputations, etc. in addition to the impact of the domestic and

overseas financial markets. When any of such external factors worsens the investment environment, it may

have an impact on the performance and financial position of the Group.

[6] Risk of Other Business

The Group operates a wide variety of businesses including savings bank business in South Korea, banking

business in Indonesia, credit guarantee business and receivables collection business (Servicer business), credit

and system related services in Japan. These businesses embrace various types of uncertainty, and, if the Group

encounters a risk exceeding initial forecasts, it may have an impact on the performance and financial position

of the Group.

[7] Risk of Goodwill Impairment

The Group plans to voluntarily apply International Financial Reporting Standards (“IFRS”) in consolidated

financial statements from the first quarter of the fiscal year ending March 2018. IFRS does not require companies

to amortize goodwill unlike Japanese GAAP. Nevertheless, the impairment loss of goodwill may be required to

be recognized if there is an indication of impairment due to the worsened business performance in the entity

carrying goodwill, and the carrying amount of goodwill exceeds the recoverable amount of goodwill. Since

Japanese GAAP requires regular amortization of goodwill, the carrying amount of goodwill declines as the time

passes and the impairment risk, therefore, is to be mitigated. On the other hand, IFRS does not mandate the

amortization of goodwill and the risk of goodwill impairment will remain in the future. As a result, the impact of

the recognition of goodwill impairment loss on the profit and loss could become material, and thereby could have


26

a material impact on the performance and financial position of the Group.

[8] Litigation risk, etc.

The Group strives to minimize the litigation risk and prevent it by consulting lawyers and other experts for advice

in preparing written contracts, etc.

However, should the Company encounter a significant lawsuit, etc. in the future that stems from legal problems

including the violation of law or the conclusion of an incomplete contract, and if the Group loses any significant

pending lawsuit, it may have a material impact on the performance and financial position of the Group.

(5) Risk associated with financing

The Group’s borrowing from banks, etc. includes variable interest loans. The Group has been striving to diversify its

fundraising sources. However, if the Group encounters an increase in its funding costs due to a change in financial

markets or difficulty in the fund raising, it may have an impact on the performance and financial position of the Group.

(6) Risk associated with economic environment and external environment

[1] Competition

The financial industry represents the core business of the Group. Competition to attract customers is likely to

accelerate due to mergers followed by restructuring in the financial industry, new entries into the financial

industry by companies in different industries through business tie-up, and reinforced sales activities owing to

improved quality of loan portfolio. Under these business circumstances, if the Group is unable to maintain

superior competitive strength, it may have an impact on the businesses and performance of the Group.

The real estate industry has many competitors, including large corporations. Among the segments in the real

estate industry, in general, the entry barrier to the real estate distribution business is said to be low because it

does not require a large amount of capital, which results in severe competition. Thus, competition is expected

to become more intense in the future. The Group believes that it has competent personnel and distinctive sales

scheme. However, if the Group is unable to maintain the present superior competitiveness when competitors

emerge, etc., it may have an adverse impact on the businesses and performance of the Group.

In addition, since the environment surrounding the amusement industry has been severe, restructuring and

shakeout in the industry are also expected to continue in coming years. The Group has been striving to

differentiate itself from other competitors and create competitive advantages. However, if customer service at

our directly managed stores lags our competitors, or if the Group is unable to keep pace with changes in

customer needs, our stores might not be able to perform as planned. As such, it may have an impact on the

store opening and business development of the Group.

Moreover, our design and construction businesses of commercial facilities mainly undertake interior and exterior

fit-outs of amusement arcades, restaurants and other facilities. Since there are plenty of interior and exterior

finishing contractors in Japan, unit prices fluctuate wildly and order-winning competition is becoming intense.

Thus, increased competition through the entry of many participants may hinder us from winning construction

orders and it may have an impact on the performance of the Group.

[2] Reputation risk, etc.

The Group has been paying close attention to rumors, etc. that may cause damage, having a system to take

swift and proper measures and minimize such damage in case of the occurrence of a rumor or problem that

may jeopardize the core businesses of the Group. For social media, which has grown in recent years, "Social

Media Policy" and "Social Media Guidelines" have been established to protect the Group, its directors and

employees from defamation, negative rumor caused by other abusive use of social media.

However, a problem might arise in the future whose cause is not always attributable to the Group or which is

difficult for the Group to control.

If such a problem occurs or if the Group cannot handle such a problem properly, it may have an impact on the


[3] Risk of natural disasters, etc.

If stores or facilities, etc. owned by the Group suffer physical damage, or if executives and employees or

customers of the Group incur bodily injury due to a major earthquake, tsunami, typhoon or other natural disaster,

or if the Group receives a social request attributable to such disaster, it may have an impact on the performance

of the Group.

In particular, most of the sales in operation of amusement arcades and other facilities are comprised of manned

stores. Our store locations, with certain exceptions, are concentrated in the metropolitan area. If a large disaster

should occur in the metropolitan area, these stores may face temporary closure or have difficulty in continuing

sales activities. The Group has set up and strengthened systems, in addition to training employees, which can


27

take swift and smooth measures by, for example, setting up disaster control headquarters based on the BCP

(Business Continuity Plan) against such a large disaster and emergency communication systems. However, if

a large disaster beyond expectation should occur, it may hinder the business operation of the Group.

[4] Declining birth rate problem

The operation of amusement arcades and other facilities maintains high efficiency based on our own expertise.

The performance of each store correlates with the population of the marketing area and the distribution of the

youth population, depending on the characteristics of the locale. Under these circumstances, should the

declining birth rate continue, it may have an impact on the future performance of the Group. The Group has

been taking store-opening measures that correspond to medium- to long-term changes in the population and

proactively conducting research on stores and operation services to target broad generations of people

including youth to counter the problem.

[5] Country risk

The Group has been entering international markets to develop businesses and build new revenue bases. These

overseas companies face various types of country risk in their governing countries, including local market trends,

competitors, politics, economy, laws, culture, religions, customs, natural disasters and currency exchange. If a

provision of a law or regulation is changed, or if the politics or economy becomes unstable unexpectedly, or if

a social disturbance, including terrorism and war, and a large-scale natural disaster occurs, the Group may not

be able to carry out business activities as expected or face difficulty in continuing the business, and this may

have an impact on the performance and business development of the Group.

[6] Effects of tax hike on personal consumption

The Group offers entertainment services mainly through operation of amusement arcades and sales of ready-

built housing to consumers. If consumption tax, income tax and social insurance premium have been raised,

consumer sentiment may deteriorate and it may have an impact on the performance of the Group. Also, in

certain amusement genre, passing on the cost of consumption tax hike onto sales price is difficult, thus the

Group has been striving to secure profit by curtailing internal costs. However, depending on the consumer

sentiment or understanding, it may have an impact on the performance of the Group.

(7) Operational Risk

[1] Internal control in financial report

As part of measures to improve disclosure systems under the Financial Instruments and Exchange Act, “Internal

Control Reporting System” which requires listed companies and others to establish, evaluate and disclose its

assessment on internal control system has been implemented since the business year starting from April 2008.

If accounting auditors point out significant deficiencies that must be disclosed in internal control systems over

financial reporting which include qualified opinions as a result of auditing, the Group’s corporate reputation and

image in the market will deteriorate, and it may have an impact on the performance of the Group.

[2] Compliance risk

The Group must comply with various laws, including the Financial Instruments and Exchange Act and the Money

Lending Business Act. In addition, the Group must abide by social rules, including social norms and ethical

standards such as common sense.

The Group has been striving to improve its compliance system. However, if the Group is involved in a scandal

or fails to abide by social norms, it may have an impact on the business of the Group due to the penalties

imposed and damaged social credibility. In addition, it may have an impact on the performance of the Group

due to the deterioration in market’s view on the Group and corporate image.

[3] Disturbance, breakdown, and other damages on information network systems, internet service etc., and/or

technical systems

The Group relies on its internal and external information and technical systems to properly control and manage

the Group's businesses. The hardware and software that the Group uses may suffer an adverse impact due to

human errors, natural disasters, blackout, cyber-attack, terrorism, computer viruses or similar events, and

interruption, etc. of support services provided by third parties including telephone carriers and internet service

providers.

The Group has established backup computer systems to minimize damage and loss stemming from natural

disasters, fires, accidents, etc. that are likely to have a material impact on the business continuity of the Group.

However, if the Group is affected by huge disasters beyond expectations such as earthquakes and typhoons,

the Group may have to suspend operations.


28

[4] Training and retention of personnel

The Group needs to retain professional personnel who are experienced and possess advanced product

knowledge in diverse areas of business. The Group has been focusing on retaining and training capable

personnel by, for example, enhancing education and training systems, reviewing the existing seniority-based

wage system and internal promotion system. If the Group cannot retain an adequate number of superior

personnel or when such valuable personnel leave the Group, it may hinder operation of the Group.

[5] Dependency on the company representative

Businesses of the Group have been promoted by Mr. Nobuyoshi Fujisawa, the largest shareholder and

Representative Director, President & CEO of the Company. Mr. Fujisawa has been playing an important role in

diverse areas including decisions on management policy, strategy and promotion of businesses in sales,

technology and finance. Accordingly, it is assumed that Mr. Fujisawa has a significant influence over the Group's

final decisions including appointments of executives of the Company. Such decisions may have an influence

on the Group’s business.

The Group has been promoting improvement in the corporate systems and reinforcing the management system

so that the Group has no excessive dependency on Mr. Fujisawa. However, should Mr. Fujisawa leave his

current post or is unable to execute his duties, it may have an impact on the performance and financial position

of the Group.

5. Material Contracts, etc.

1. J Trust Co., Ltd. and its consolidated subsidiary JTRUST ASIA PTE. LTD. (hereinafter “JTA”) resolved at their Board

of Directors’ meetings held on May 13, 2016 that JTA shall sign an agreement subject to conditions precedent with

Group Lease PCL, listed on the Stock Exchange of Thailand; ticker code: GL; hereinafter “GL”) on subscribing for its

convertible bond. The agreement was concluded on June 6, 2016.

Overview of the bond subscription agreement is as follows:

(1) Name of the company as the contracting party

Group Lease PCL

(2) Contract date

June 6, 2016

(3) Overview of convertible bond

(a) Issuer Group Lease PCL

(b) Issue price 14,584 million yen (USD 130,000,000, 1 USD = 112.19 yen) (Note)

(c) Issue value Same as above

(d) Interest rate 5%

(e) Maturity 5 years

(f) Conversion price 130.40 yen per share (40 Baht per share, 1 Baht = 3.26 yen) (Note)

(g) Number of shares after full conversion 115,050,000 shares

(h) Shareholding ratio after full conversion 12.99%

(Shareholding ratio after full conversion as of contract date)

Note: The exchange rate as of the end of March 2017 is used.

2. J Trust Co., Ltd. passed a resolution at the Board of Directors’ meeting held on October 13, 2016, for acquiring all the

outstanding common shares of DH Savings Bank Co., Ltd. owned by Daeho Co., Ltd. to make the bank a subsidiary

of J Trust. On October 14, 2016, J Trust Co., Ltd. and Daeho Co., Ltd. signed the share transfer agreement. However,

the local financial authority was not ready to accept our application to acquire the 3rd savings bank and the share

purchase agreement expired after a six-month period. For this reason, the agreement was cancelled on April 14, 2017.

3. J Trust Co., Ltd. and JTRUST ASIA PTE. LTD. (hereinafter, “JTA”) passed a resolution at the Board of Directors’

meeting of each company held on October 13, 2016 for acquiring all the outstanding common shares of Capital

Continent Investment NBFI (hereinafter, “CCI”) owned by JAPAN POCKET Co., Ltd. to make it JTA’s subsidiary.

JTA and JAPAN POCKET Co., Ltd. signed the share transfer agreement on October 14, 2016.

The outlines are as follows:

(1) Purpose of share acquisition


29

J Trust Group decided the share acquisition to reinforce Group’s operational bases with CCI’s further expansion in

Mongolian markets as a growth driver based on the idea that: (i) the Group’ financial expertise developed in Japan

and abroad to date can apply in financial business in Mongolia; and (ii) making CCI a subsidiary of the Company

listed in Japan will enhance the credibility of CCI.


JAPAN POCKET Co., Ltd.

(3) Overview of the company to be acquired as a subsidiary

(a) Trade Name Capital Continent Investment NBFI

(b) Headquarters Peace Tower building, 3rd khoroo, Chingeltei district, Ulaanbaatar, Mongolia

(c) Representative Shuhei Tsuji, Representative Director

(d) Capital 31 million yen (679 million Mongolian Tugrik) (As of the end of September 2016)

(The exchange rate is 1 Mongolian Tugrik = 0.0457 yen.) (Note)

(e) Business Moneylending

(4) Date of Share Transfer:

TBD

(5) Number of shares to be acquired, share acquisition value and Shareholding ratio after acquisition:

(a) Number of shares to be acquired 67,900 share

(b) Acquisition value 58 million yen (1,274 million Mongolian Tugrik)

(The exchange rate is 1 Mongolian Tugrik = 0.0457 yen.) *(Note)

(c) Shareholding ratio after acquisition 100.0%

(6) Other material things:

The share acquisition is conditional subject to obtaining approval from the Financial Regulatory Commission of

Mongolia.

*(Note) The exchange rate as of the end of March 2017 is used.

4. J Trust Co., Ltd. and its consolidated subsidiary JTRUST ASIA PTE. LTD. (hereinafter “JTA”) resolved at their Board

of Directors’ meetings held on October 31, 2016 that JTA shall sign an agreement subject to conditions precedent with

Group Lease PCL, listed on the Stock Exchange of Thailand; ticker code: GL; hereinafter “GL”) on subscribing for its

convertible bond. The agreement was concluded on December 1, 2016.

Overview of the bond subscription agreement is as follows:


Group Lease PCL

(2) Contract date

December 1, 2016

(3) Overview of convertible bond

(a) Issuer Group Lease PCL

(b) Issue price 5,609 million yen (USD 50,000,000, 1 USD = 112.19 yen) (Note)

(c) Issue value Same as above

(d) Interest rate 5%

(e) Maturity 3 years

(f) Conversion price 228.20 yen per share (70 Baht per share)(1 Baht = 3.26 yen) (Note)

(g) Number of shares after full conversion 24,753,428 shares

(h) Shareholding ratio after full conversion 14.29%

(Shareholding ratio after full conversion as of contract date)

Note: The exchange rate as of the end of March 2017 is used.

6. Research & Development Activity

The Group’s General Entertainment Business mainly develops, produces and sells computer systems for amusement


30

machines and its peripheral equipment, etc. In the current consolidated fiscal year, the Group posted a total of 252

million yen as research and development expenses.


31

7. Analyses on Financial Position, Operating Results and Cash Flows

(1) Significant accounting policy and accounting estimates

The Group’s consolidated financial statements are prepared in conformity with generally accepted accounting

standards in Japan.

In preparing consolidated financial statements, the Group’s management is required to make estimates and

assumptions with regard to various matters as of the account closing date. Accordingly, estimates and assumptions

are made after taking into various factors that are considered reasonable based on past performances and

circumstances. Nevertheless, actual results may differ from such estimates due to uncertainties in the estimates.

This section contains forward-looking statements, based on the judgments made on the filing date of Annual Securities

Report (June 29, 2017).

(2) Analyses on operating results of the current consolidated fiscal year

Concerning our 2 subsidiaries in Indonesia in Financial Business in Southeast Asia, namely PT Bank JTrust Indonesia

Tbk. (hereinafter “BJI”) and PT JTRUST INVESTMENTS INDONESIA), there was a quarterly delay in consolidating

their results due to a 3-month timing difference in account closing. In the current fiscal year, however, we eliminated

the difference to grasp the Group’ consolidated results more appropriately and to prepare the planned implementation

of IFRS. Accordingly, fiscal 2017 reflects their 15-month results.

Operating revenue for the current consolidated fiscal year increased by 9,552 million yen to 85,031 million yen (up

12.7% year on year). Major factors are as follows: (i) 3-month operating revenue in Financial Business in Southeast

Asia was added as a result of the elimination in timing difference mentioned above; (ii) Banking business revenue

increased by 8,622 million yen because loans by banking business grew along with rises in new loan balances and

assumption of receivables owing to effective business strategies and proactive marketing in Financial Business in

South Korea; and (iii) Operating revenue in elderly care business fell as a result of its suspension in the previous

consolidated fiscal year. On the other hand, other operating revenue increased by 56 million yen because: (i) JTRUST

ASIA PTE. LTD. (hereinafter,”JTA”) booked gain on sales of shares of PT Bank Mayapada International Tbk.; and (ii)

Keynote Co., Ltd. saw a steady growth in large-lot construction orders in the commercial facility construction business.

Meanwhile, operating expenses increased by 5,005 million yen to 43,963 million yen (up 12.8%) mainly because: (i)

we eliminated timing difference in account closing in Financial Business in Southeast Asia; (ii) Banking business

expenses became larger by 1,573 million yen with a growth in deposits by banking business in Financial Business in

South Korea; and (iii) other operating expenses increased by 3,249 million yen because JTA posted unrealized loss

on the portion of subscription rights to shares of GL’s convertible bonds. The ratio of operating expenses to operating

revenue accordingly rose from 51.6% to 51.7% (up 0.1 percentage points) in the current consolidated fiscal year.

As a result, operating gross profit increased by 4,546 million yen to 41,068 million yen (up 12.5%) and the ratio of

operating gross profit to operating revenue declined from 48.4% to 48.3% (down 0.1 percentage points) in the current

consolidated fiscal year.

Selling, general and administrative expenses expanded by 6,201 million yen to 46,837 million yen (up 15.3% year on

year). Personnel cost was reduced by 308 million yen, and other cost dropped by 575 million yen at Nihon Hoshou

Co., Ltd. (hereinafter, “Nihon Hoshou”) due to successful cost-cutting efforts including voluntary retirement programs

to tackle structural reorganization. Nihon Hoshou recorded a decrease in provision for loss on interest repayment with

a decline in interest repayment claims after a partial transfer of the unsecured business through a corporate split. On

the other hand, expenses related to bad debt ballooned because BJI reviewed loan assets and recorded huge

provision of allowance for doubtful accounts for stronger financial health as part of their business restructuring. This

pushed up expenses related to bad debt by 7,085 million yen.

As a result, operating loss expanded by 1,654 million yen to 5,769 million yen (from operating loss of 4,114 million

yen recorded in the previous consolidated fiscal year).

For the non-operating section, the balance decreased by 414 million yen to net expenses of 978 million yen (from net

expenses of 564 million yen recorded in the previous consolidated fiscal year). This is mainly because net foreign

exchange losses increased by 123 million yen from the previous consolidated fiscal year.

As a result, ordinary loss expanded by 2,068 million yen to 6,747 million yen (from ordinary loss of 4,678 million yen

recorded in the previous consolidated fiscal year).

At an extraordinary level, the balance decreased by 689 million yen to net loss of 1,612 million yen (from net loss of

923 million yen recorded in the previous consolidated fiscal year). Major factors behind the increase were: (i) gain on

sales of non-current assets increased by 448 million yen; and (ii) impairment loss decreased by 1,348 million yen.

Meanwhile, factors behind decrease were: (i) recording of business structure improvement expenses of 1,772 million

yen including restructuring cost in BJI; and (ii) no such factors as gain on reversal of foreign currency translation

adjustment of 830 million yen, which was posted in the previous fiscal year.


32

As a result, loss before income taxes expanded by 2,757 million yen to a loss of 8,359 million yen (from loss before

income taxes of 5,602 million yen recorded in the previous consolidated fiscal year).

Total income taxes rose by 115 million yen to 1,321 million yen. Profit attributable to non-controlling interests increased

by 1,291 million yen to profit attributable to non-controlling interests of 195 million yen (from loss attributable to non-

controlling interests of 1,095 million yen recorded in the previous consolidated fiscal year.)

In all, loss attributable to owners of parent expanded by 4,164 million yen to loss attributable to owners of parent of

9,876 million yen (from loss attributable to owners of parent of 5,712 million yen recorded in the previous consolidated

fiscal year).

(3) Factors that may have a significant impact on operating results

Please refer to “4. Risk Factors.”

(4) Analysis on the source of capital and liquidity

[1] Assets, liabilities and net assets

Total assets as of the end of the current consolidated fiscal year increased by 99,991 million yen to 608,650

million yen from the end of the previous consolidated fiscal year. Provision of allowance for doubtful accounts

rose by 6,305 million mainly because loan assets were reclassified at BJI for better financial health as part of

restructuring measures. However, total assets expanded because: (i) loans by banking business rose by 96,464

million yen due to the growing balance of new loan and the assignment of loans receivable at group savings

banks in South Korea; and (ii) operational investment securities increased by 8,436 million yen following JTA’s

subscription for GL’s convertible bonds.

Liabilities increased by 116,985 million yen to 456,987 million yen from the end of the previous consolidated

fiscal year. Although short-term loans payable decreased by 4,518 million yen, we posted increases of: (i)

93,301 million yen in deposits by banking business; (ii) 15,893 million yen in short-term bonds payable (other

current liabilities); and (iii) 7,907 million yen in current portion of long-term loans payable.

Net assets decreased by 16,993 million yen to 151,663 million yen from the end of the previous consolidated

fiscal year. The decline was mainly because: (i) retained earnings decreased by 11,278 million yen due to such

factors as loss attributable to owners of parent of 9,876 million yen and dividends of surplus of 1,401 million

yen; and (ii) treasury shares increased by 7,279 million yen due to the buyback of treasury shares.

As a result, net assets per share decreased by 39.99 yen to 1,415.91 yen from the end of the previous

consolidated fiscal year. Capital adequacy ratio dropped by 8.2 percentage points to 23.9%, from 32.1% as of

the end of the current consolidated fiscal year from the previous consolidated fiscal year

[2] Cash flow

Consolidated cash and cash equivalents (hereinafter, “Funds”) as of the end of the current consolidated fiscal

year declined by 9,576 million yen to 78,650 million yen from the end of the previous consolidated fiscal year.

The following overviews cash flow in the current consolidated fiscal year with relevant factors:

(Cash flows from operating activities)

In the current consolidated fiscal year, Funds provided by operating activities decreased by 14,434 million

yen (a decrease of 32,435 million yen during the same period of the previous year). Major factors were as

follows: Funds boosted due to increases in: (i) deposits by banking business by 89,868 million yen; and (ii)

allowance for doubtful accounts by 6,225 million yen. On the other hand, Funds declined by: (i) net loss before

income taxes of 8,359 million yen; (ii) loans by banking business went up by 95,597 million yen due to

assumed receivables and increased new loans; and (iii) operational investment securities grew by 6,276

million yen.

(Cash flows from investing activities)

In the current consolidated fiscal year, Funds provided by investing activities decreased by 4,774 million yen

(a drop of 7,896 million yen during the same period of the previous year). Funds increased with proceeds

from sales of securities of 101,208 million yen and proceeds from redemption of securities of 24,984 million

yen. However, purchase of securities of 130,242 million yen reduced Funds.

(Cash flows from financing activities)

In the current consolidated fiscal year, Funds provided by financing activities increased by 10,935 million yen

(down 16.1% year on year). Funds decreased mainly due to the purchase of treasury shares of 7,279 million

yen, cash dividends paid of 1,401 million yen and net decrease in Fund from short-term loans payable of

4,635 million yen. However, net increases in short-term bonds payable of 14,959 million yen and net increase


33

in long-term loans payable of 8,066 million yen boosted Funds.


34

III. Equipment and Facilities

1. Overview of Capital Expenditures, etc.

During the current consolidated fiscal year, the Group spent 3,044 million yen in capital expenditures in total.

The breakdown is as follows: 108 million yen in Domestic Financial Business, 417 million yen in Financial Business in

South Korea, 249 million yen in Financial Business in Southeast Asia, 1,619 million yen in General Entertainment

Business, 564 million yen in Real Estate Business, 1 million yen in Investment Business and 51 million yen in Other

Business.

There were no significant disposal or sales of equipment and facilities during the current consolidated fiscal year.

2. Situations with Major Equipment and Facilities

The Group's major equipment and facilities are as follows:

(1) The filing company


Name of

Office

(location)

Business

Segment

Type of

Facility

Book Value (Millions of yen)

Employees

(People) Buildings

and

Structures

Amusement

Machines

Land

(size: m2) Others Total

Headquarters,

etc.

(Minato-ku,

Tokyo, etc.)

Company-

wide

(common)

Office 6 - - 1 7 54

Welfare facility

(Nishimuro-

gun,

Wakayama)

Recreation

facility 0 -

0

(4.67) - 0 -

Idle assets

(Kurayoshi-

shi,

Tottori, etc.)

Others 0 -

19

(174,196.00

)

- 19 -


Note 2: “Employees” indicates the number of employed staff.

Note 3: Annual office rent, etc. is 118 million yen and it includes lease properties from consolidated companies.


35

(2) Domestic subsidiaries


Company

Name

Name of Office

(location)

Business

Segment

Type of

Facility

Book Value (Millions of yen) Employee

s

(People)

Buildings

and

Structures

Amuseme

nt

Machines

Land


Keynote

Co., Ltd.

Headquarters, etc.

(Meguro-ku,

Tokyo, etc.) Real Estate

Business

Office/

Showroom 17 - - 4 21

42

(1)

Rental facilities,

etc. (Shinjuku-ku,

Tokyo, etc.)

Rental

property,

etc. 221 -

152

(440.17) - 374

-

(-)

Nihon

Hoshou

Co., Ltd.

Headquarters, etc.

(Minato-ku,

Tokyo, etc.)

Domestic

Financial

Business

Office/

Sales

office, etc. 38 - - 19 57

107

(13)

Rental facilities

(Miyakojima-ku,

Osaka-shi, etc.)

Company-

wide

(common)

Rental

property 16 - 59

(142.25) 1 78

-

(-)

ADORES

, Inc.

Headquarters

(Minato-ku, Tokyo)

Company-

wide

(common)

Office 3 - 0

(21.47) 4 7

41

(1)

Amusement

arcades (Toshima-

ku,

Tokyo, etc.)

General

Entertainmen

t Business

Store 1,307 901 - 40 2,248 186

(575)

Rental facilities

(Shinjuku-ku, etc.)

Real Estate

Business

Rental

property 461 - - - 461 -

(-)


Note 2: “Employees” indicates the number of employed staff. ( ) denotes the average number of temporary staff.

Note 3: Annual office rent, etc. is 4,062 million yen, and it includes lease properties from consolidated companies.


36

(3) Overseas subsidiaries


Company

Name

Name of Office

(location)

Business

Segment

Type of

Facility

Book Value (Millions of yen) Employee

s

(People)

Buildings

and

Structures

Land


JT Chinae

Savings Bank

Co., Ltd.

Headquarters etc.

(Seoul Special City,

etc., South Korea)

Financial

Business in

South Korea

Office/

Sales

office 140 － 373 513

617

(50)

PT Bank

JTrust

Indonesia Tbk.

Headquarters etc.

(Special Capital Region

of Jakarta, etc.,

Republic of Indonesia)

Financial

Business in

Southeast

Asia

Office/

Sales

office 272

994

(6,292.05) 253 1,519

960

(19)

JT Capital Co.,

Ltd.

Headquarters etc.

(Seoul Special City,

etc., South Korea)

Financial

Business in

South Korea

Office/

Sales

office 7 － 172 179

183

(33)

PT JTRUST

INVESTMENT

S INDONESIA

Headquarters etc.

(Special Capital Region

of Jakarta, etc.,

Republic of Indonesia)

Financial

Business in

Southeast

Asia

Office/

Sales

office 155

491

(1,315.00) 8 655

17

(－)

Note 1: “Employees” indicates the number of employed staff. ( ) denotes the average number of temporary staff.

Note 2: Annual office rent (including system related offices) is 1,114 million yen, and it includes properties rented from

consolidated companies.

3. Plans for Addition or Disposal of Equipment

(1) Addition of significant facility

There are no plans of addition of significant facility as of the end of the current consolidated fiscal year.

(2) Disposal of significant facility

There are no plans of disposal of significant facility as of the end of the current consolidated fiscal year.


37

IV. Status of the Filing Company

1. Status of the J Trust Shares

(1) Total number of shares and other related information

[1] Total number of shares

Class Total Number of Shares Authorized to be Issued (Shares)

Common Shares 240,000,000

Total 240,000,000

[2] Total number of shares issued

Class

Number of shares as

of the End of Fiscal

Year

(March 31, 2017)

Number of shares as of

the Submission Date

(June 29, 2017)

Stock Exchange

on which

the Company is Listed

Description

Common

Shares 112,536,970 112,545,370

Second Section of the

Tokyo Stock

Exchange

The number of shares

constituting 1 unit is

100.

Total 112,536,970 112,545,370 - -

Note: “Number of shares as of the Submission Date” does not include the number of shares issued by exercise

of subscription rights to shares between June 1, 2017 and the date of filing this Annual Securities Report.


38

(2) Status of subscription rights to shares

Subscription rights to shares (hereinafter, “Subscription Rights”) issued based on the Companies Act are as follows:

(J Trust Co., Ltd. 2nd Subscription Rights)

Resolution at the Ordinary General Meeting of Shareholders held on June 26, 2010

As of the End of Fiscal Year

(March 31, 2017)

As of the End of the Month

preceding the Submission Date

(May 31, 2017)

Number of Subscription Rights (Pieces) (Note 1) 105 85

Number of treasury subscription rights to shares

(hereinafter, “Treasury Subscription Rights”) out of

Subscription Rights (Pieces)

- -

Class of shares underlying Subscription Rights Common shares Same as the left

Number of shares underlying Subscription Rights

(Shares) (Note 1, 4) 21,000 17,000

Amount to be paid in upon exercise of

Subscription Rights (Yen) (Note 2, 4, 5) 110 Same as the left

Exercise period of Subscription Rights From: December 1, 2012

To: July 31, 2017 Same as the left

Issuance price and the amount of capital to be

increased by exercise of Subscription Rights (Yen)

(Note 4, 5)

Issuance price: 110

Amount of capital: 55 Same as the left

Conditions for exercise of Subscription Rights

Holders of Subscription Rights

(hereinafter, “Rights Holders”)

who waived their Subscription

Rights may not exercise the

rights.

Other conditions are subject to

the “Agreement on Allocation

of Subscription Rights” signed

between the Company and

Rights Holders in accordance

with the resolution at the

Board of Directors’ meeting.

Same as the left

Matters relating to transfer of Subscription Rights

For all or part of Subscription

Rights, any transfer, creation

of pledge or joto-tampo*,

advancement, bequest or

other disposition to a third

party shall not be permitted.

* Security by way of

assignment

Same as the left

Matters relating to substitute payments - -

Matters relating to allocation of Subscription

Rights accompanied by Organizational

Restructuring

(Note 3) Same as the left


39

(J Trust Co., Ltd. 3rd Subscription Rights)



(March 31, 2017)


preceding the Submission

Date

(May 31, 2017)


Number of Treasury Subscription Rights out of

Subscription Rights (Pieces) - -



(Shares) (Note 1, 4) 106,400 102,400



Exercise period of Subscription Rights From: September 1, 2013

To: July 31, 2018 Same as the left



(Note 4, 5)

Issuance price: 134



Rights Holders who waived

their Subscription Rights may

not exercise the rights.






with the resolution at the Board

of Directors’ meeting.

Same as the left









assignment

Same as the left




Restructuring


Note 1: The number of shares underlying 1 unit of Subscription Rights (hereinafter, “Number of Shares Granted”) is 100

shares.

In cases where the Company executes a share split (including allotment of the Company’s common shares

without contribution; hereinafter, the same shall apply to a share split) or a share merger regarding its common

shares after the date of allotment of Subscription Rights (hereinafter, “Allotment Date”), the Number of Shares

Granted shall be adjusted according to the following formula:

Number of Shares Granted

after adjustment =


before adjustment ×

Ratio of share split or

share merger

Besides the above, the Company may reasonably adjust the Number of Shares Granted, when appropriate, after

Allotment Date.

Any fraction of less than 1 share resulting from such adjustment shall be rounded down.

Note 2: The value of assets contributed upon exercise of Subscription Rights shall be obtained by multiplying the amount

to be paid in per share upon exercise of such Subscription Rights (hereinafter, “Strike Price”) by the Number of


40

Shares Granted.

Strike Price shall be subject to adjustment in the following events:

(1) In cases where the Company executes a share split or share merger regarding its common shares after

Allotment Date, Strike Price shall be adjusted according to the formula below. Any fraction of less than 1

yen resulting from such adjustment shall be rounded up.

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

1

Ratio of share split or share merger

(2) In cases where the Company issues new common shares or disposes of treasury shares for the price below

the market value after Allotment Date (except for cases where, based on Article 194 of the Companies Act

[“Demands for the sale of shares of less than 1 unit by holders of shares less than 1 unit”], treasury shares

are sold, securities are either converted or are able to be converted into the Company’s common shares,

or demands for grant of the Company’s common shares can be made against Subscription Rights [including

attached bonds with Subscription Rights]), Strike Price shall be adjusted according to the formula below.

Any fraction of less than 1 yen resulting from such adjustment shall be rounded up.

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

Number of

outstanding

shares +

Number of newly-issued shares ×

Paid-in amount per share

Market value

Number of outstanding shares + Number of newly-issued shares

With regard to “Number of outstanding shares” used in the formula above, the number shall be the total

number of the Company’s common shares minus the number of common shares held as treasury shares

by the Company.

Also, in the event that the Company disposes of treasury shares, “Number of newly-issued shares” shall

be read as “Number of treasury shares disposed.”

(3) Aside from the aforementioned, in the event that, after the Allotment Date, holders of the Company’s

common shares are allotted other types of shares without contribution, or that dividends are paid to holders

of other companies’ common shares, where adjustment of Strike Price is determined appropriate, the

Company may adjust the Strike Price within reasonable scope, taking into consideration the particular

conditions of the allotment or dividend, etc.

Note 3: In the case of a merger (limited to an absorption-type merger), absorption-type or incorporation-type demerger

(only in cases where the Company becomes a split company in each case), or share exchange or transfer (only

in cases where the Company becomes a wholly owned subsidiary) (hereinafter collectively called “Organizational

Restructuring”), Rights Holders who possess the remaining Subscription Rights immediately prior to the effective

date of Organizational Restructuring* (hereinafter, “Remaining Subscription Rights”), shall receive Subscription

Rights of a stock company as prescribed in Article 236, Paragraph 1, Item 8, (a) through (e) of the Companies

Act (hereinafter, “the Restructured Company”). However, the allocation of Subscription Rights of the

Restructured Company in accordance with the cases (1) through (9) below is conditional upon provisions being

stipulated in absorption-type merger contract, incorporation-type merger contract, absorption-type demerger

contract, incorporation-type demerger plan, share exchange contract, or share transfer plan.

* “Effective date of Organizational Restructuring” refers to: (i) the effective date for an absorption-type merger; (ii)

the establishment date of a newly incorporated company for an incorporation-type merger; (iii) the effective date

for an absorption-type demerger; (iv) the establishment date of a newly incorporated company for an incorporation-

type demerger; (v) the effective date for a share exchange; and (vi) the establishment date of a newly established

wholly owning parent company for a share transfer.

(1) Number of Subscription Rights of the Restructured Company to be granted

The number shall be equal to that of Remaining Subscription Rights owned by Rights Holders.

(2) Class of shares underlying Subscription Rights of the Restructured Company

The class shall be common shares of the Restructured Company.

(3) Number of shares underlying Subscription Rights of the Restructured Company

The number shall be subject to Note 1 above in consideration of Organizational Restructuring conditions.

(4) The value of assets contributed upon exercise of Subscription Rights

The value of assets contributed upon exercise of Subscription Rights shall be obtained by multiplying the

post-restructuring amount payable, which results from adjusting the Strike Price stipulated in Note 2 in light

of Organizational Restructuring conditions, etc., by the number of shares underlying Subscription Rights


41

of the Restructured Company determined as per (3) above.

(5) Period in which Subscription Rights may be exercised

The exercise period shall cover from the first day of the exercise period prescribed in “Exercise period of

Subscription Rights” or the effective date of Organizational Restructuring, whichever is later, to the last day

of the exercise period prescribed in “Exercise period of Subscription Rights.”

(6) Matters regarding increases in capital stock and legal capital surplus in the case of issuing shares upon

exercise of Subscription Rights

[1] An increase in capital stock in the case of issuing shares upon exercise of Subscription Rights shall

be half of the upper limit of the increase in capital stock etc. calculated subject to Article 17, Paragraph

1 of the Corporate Accounting Rules. Any fraction less than 1 yen arising from the calculation shall

be rounded up.

[2] An increase in legal capital surplus in the case of issuing shares upon exercise of Subscription Rights

shall be calculated by deducting the increase in capital stock, etc. as stated in [1] above from the

upper limit of the increase in capital stock etc. as stated in [1] above.

(7) Restrictions on acquisitions of Subscription Rights by transfer

Any acquisition of Subscription Rights by transfer requires an approval through a resolution at the Board

of Directors’ meeting of the Restructured Company.

(8) Provisions for acquisition of Subscription Rights

In the event that the following bills [1] through [3] are approved by the Company’s General Meeting of

Shareholders (or passed by the Board of Directors’ meeting, if a resolution by the General Meeting of

Shareholders is unnecessary), the Company may acquire Subscription Rights without contribution on the

date separately determined by the Company’s Board of Directors’ meeting.

[1] Agenda: approval of a merger contract in which the Company becomes an extinct company

[2] Agenda: approval of a demerger contract or a demerger plan in which the Company becomes a split

company

[3] Agenda: approval of a share exchange contract or a share transfer plan in which the Company

becomes a wholly owned subsidiary

(9) Other conditions of Subscription Rights

Rights Holders who waived their Subscription Rights shall not exercise the same rights.

Note 4: The Company conducted a two-for-one split of common shares dated June 1, 2012. By this transaction, the

amounts in “Number of shares underlying Subscription Rights,” “Amount to be paid in upon exercise of

Subscription Rights” and “Issuance price and the amount of capital to be increased by exercise of Subscription

Rights” have been adjusted.

Note 5: Due to the exercise of Subscription Rights in the rights offering (non-commitment type; allotment of listed

subscription rights without contribution) issued on May 31, 2013, “Amount to be paid in upon exercise of




42

(J Trust Co., Ltd. N-6th Subscription Rights)

Resolution at the Extraordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. held on December 26,

2008


(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 1, 5) 320 320



Exercise period of Subscription Rights From: April 30, 2012

To: March 10, 2019 Same as the left



(Note 5, 6)

Issuance price: 128













Same as the left









assignment

Same as the left




Restructuring



43


Resolution at the Extraordinary General Meeting of Shareholders of Next Japan Holdings held on December 26, 2008


(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 1, 5) 680 680




To: April 28, 2019 Same as the left



(Note 5, 6)

Issuance price: 348













Same as the left









assignment

Same as the left




Restructuring



44


Resolution at the Ordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. held on October 28, 2009


(March 31, 2017)


preceding the Submission Date

(May 31, 2017)

Number of Subscription Rights (Pieces) (Note 1) 1,745 1,745





(Shares) (Note 1, 5) 6,980 6,980


Subscription Rights (Yen) (Note 2,5,6) 388 Same as the left


To: December 15, 2019 Same as the left


increased by exercise of Subscription Rights

(Yen) (Note 5,6)

Issuance price: 388











with the resolution at the

Board of Directors’ meeting.

Same as the left









assignment

Same as the left




Restructuring



45




(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 1,5) 7,800 7,800







(Note 5, 6)

Issuance price: 754













Same as the left









assignment

Same as the left




Restructuring



46




(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 1,5) 6,800 6,400







(Note 5,6)

Issuance price: 273













Same as the left









assignment

Same as the left




Restructuring



shares.






after adjustment =




share merger


Allotment Date.



47



Shares Granted.


(1) In cases where the Company executes a share split or a share merger regarding its common shares after



Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

1









Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

Number of

outstanding

shares +



Market value




by the Company.


















* “Effective date of Organizational Restructuring” refers to: (i) the effective date for an absorption-type

merger; (ii) the establishment date of a newly incorporated company for an incorporation-type merger;

(iii) the effective date for an absorption-type demerger; (iv) the establishment date of a newly

incorporated company for an incorporation-type demerger; (v) the effective date for a share exchange;

and (vi) the establishment date of a newly established wholly owning parent company for a share

transfer.









48














be rounded up.











date separately determined by the Company’s Board of Directors.



company





Note 4: Dated April 30, 2012, a share exchange was conducted to turn the Company into a wholly owning parent

company and Next Japan Holdings Co., Ltd. into a wholly owned subsidiary. By this transaction, the Company

granted Subscription Rights of the Company with a value equivalent in the light of the share exchange ratio to

holders of Subscription Rights of Next Japan Holding Co., Ltd. Each date of resolution at the General Meeting

of Shareholders indicates the date on which resolution to grant Subscription Rights was made by Next Japan

Holdings Co., Ltd. As a result of this transaction, the Company has granted:

J Trust Co., Ltd. N-6th Subscription Rights in place of Next Japan Holdings Co., Ltd. 6th Subscription Rights;




and

J Trust Co., Ltd. N-10th Subscription Rights in place of Next Japan Holdings Co., Ltd. 10th Subscription Rights.

Note 5: The Company conducted a two-for-one split of common shares dated June 1, 2012. By this transaction, the

amounts in “Number of shares underlying Subscription Rights,” “Amount to be paid in upon exercise of



Note 6: Due to the exercise of Subscription Rights in the rights offering (non-commitment type; allotment of listed

subscription rights without contribution) issued on May 31, 2013, “Amount to be paid in upon exercise of




49

(J Trust Co., Ltd. 5th Subscription Rights)



(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 1) 145,000 145,000


Subscription Rights (Yen) (Note 2) 2,007 Same as the left

Exercise period of Subscription Rights From: September 1, 2015

To: August 31, 2020 Same as the left



Issuance price: 2,007

Amount of capital: 1,004 Same as the left












Same as the left









assignment

Same as the left




Restructuring



shares.






after adjustment =




share merger


Allotment Date.




Shares Granted.


50


(1) In cases where the Company executes a share split or a share merger regarding its common shares after



Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

1









Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

Number of

outstanding

shares +



Market value




by the Company.


















* “Effective date of Organizational Restructuring” refers to: (i) the effective date for an absorption-type

merger; (ii) the establishment date of a newly incorporated company for an incorporation-type merger;

(iii) the effective date for an absorption-type demerger; (iv) the establishment date of a newly

incorporated company for an incorporation-type demerger; (v) the effective date for a share exchange;

and (vi) the establishment date of a newly established wholly owning parent company for a share

transfer.











51












be rounded up.











date separately determined by the Company’s Board of Directors.



company






52


Resolution at the Board of Directors’ meeting held on August 12, 2015


(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 2) 864,000 864,000


Subscription Rights (Yen) (Note 3) 954 Same as the left

Exercise period of Subscription Rights From: July 1, 2017

To: September 30, 2021 Same as the left



Issuance price: 954


Conditions for exercise of Subscription Rights (Note 6)


Matters relating to transfer of Subscription Rights (Note 5) Same as the left




Restructuring


Note 1: Issue value per unit of Subscription Rights is 1,600 yen.


common shares of the Company.


without contribution; the same applies hereinafter) or a share merger after the date of allotment of Subscription

Rights, the Number of Shares Granted shall be adjusted according to the formula below. However, such

adjustment shall apply only to the number of shares underlying Subscription Rights which remain unexercised

at the time of such share split or merger. Any fraction of less than 1 share arising from the adjustment shall be

discarded.


after adjustment =



Ratio of split

(or merger)

If the Company implements a merger or a demerger, decreases capital or requires relevant adjustments of the

Number of Shares Granted after the date of allotment of Subscription Rights, the Number of Shares Granted

may be reasonably adjusted.


to be paid in per share (hereinafter, “Strike Price”) by the Number of Shares Granted.

In cases where the Company executes a share split or a share merger after the date of allotment of Subscription

Rights, Strike Price shall be adjusted according to the formula below. Any fraction of less than 1 yen resulting

from the adjustment shall be rounded up.

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

1

Ratio of split (or merger)

In cases where the Company issues new common shares or disposes of treasury shares for the price below the

market value after the date of allotment of Subscription Rights (excluding the issuance of new shares and

disposal of treasury shares due to the exercise of Subscription Rights, or a transfer of treasury shares due to

the share exchange), Strike Price shall be adjusted according to the formula below. Any fraction of less than 1

yen arising from the adjustment shall be rounded up.


53

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

Number of

outstanding

shares +



Market value per share before issuance of new shares


“Number of outstanding shares” in the above calculation method is obtained by subtracting treasury shares

(common shares) from the total number of issued shares (common shares). In case that the Company disposes

of treasury shares (common shares), “Number of newly issued shares” shall be read as “Number of treasury

shares to be disposed.”

Additionally, in case that the Company merges with a company, implements a demerger or requires relevant

adjustments of Strike Price after the date of allocating Subscription Rights, the Company may appropriately

adjust Strike Price to a reasonable extent.

Note 4: Matters regarding increases in capital stock and legal capital surplus

(1) An increase in capital stock in the case of issuing shares upon exercise of Subscription Rights shall be half

of the upper limit of the increase in capital stock etc. calculated subject to Article 17, Paragraph 1 of the

Corporate Accounting Rules. Any fraction less than 1 yen arising from the calculation shall be rounded up.

(2) An increase in legal capital surplus in the case of issuing shares upon exercise of Subscription Rights shall

be calculated by deducting the increase in capital stock etc. as stated in Note 4 (1) above from the upper

limit of the increase in capital stock etc. as stated in Note 4 (1) above.

Note 5: The acquisition of Subscription Rights by transfer shall require the approval by a resolution by the Company’s

Board of Directors.

Note 6: Conditions to exercise Subscription Rights

(1) Rights Holders are entitled to exercise their Subscription Rights at the rate stipulated below, only if operating

profit for FY2017 or FY2018 meets the following thresholds:

[1] In cases where operating profit for FY2017 exceeds 11,266 million yen under J-GAAP (or 15,100

million yen under IFRS, if the Company uses IFRS at the time of a judgment), Rights Holders may

exercise 20% of the total number of Subscription Rights allocated to them.

[2] In cases where operating profit for FY2018 exceeds 18,772 million yen under J-GAAP (or 21,700

million yen under IFRS, if the Company uses IFRS at the time of a judgment), Rights Holders may

exercise 80% of the total number of Subscription Rights allocated to them. If operating profit for

FY2017 falls below 3,240 million yen under J-GAAP (or 7,500 million yen under IFRS, if the

Company uses IFRS at the time of a judgment), however, Rights Holders cannot exercise such

rights.

(2) In determining operating profit as stated in condition [1], operating profit on consolidated statement of

income in the Company’s annual securities report (if consolidated financial statements are not prepared,

statement of income) shall be used as reference. In case that Board of Directors determines that there has

been material change in concept of operating profit to be referred owing to change and others in accounting

standards adopted, different indices for reference shall be provided separately. In case that any fraction

less than one piece of Subscription Rights arises owing to condition [1] and [2], such fraction shall be

discarded from exercisable number of subscription rights to shares.

(3) In case of inheritance, legal successor of Rights Holder (in case of multiple legal successors, it is limited to

one person who is appointed to acquire Subscription Rights by partition of estate or an agreement of all legal

successors)(hereinafter, “Successor”) shall be able to exercise Subscription Rights held by an owner during

exercise period. In case of Successor’s decease, heir of Successor shall not be able to exercise Subscription

Rights held by Successor.

(4) In case that total number of issued shares of the Company shall exceed number of authorized shares due

to exercise of Subscription Rights, Subscription Rights shall not be exercised.

(5) The minimum unit for exercise shall be one piece.

Note 7: Matters regarding acquisition of Subscription Rights

(1) The Company shall be able to acquire all Subscription Rights without contribution on the day separately

specified by the Company’s Board of Directors under following conditions. An approval at shareholders’

meeting (if an approval at shareholders’ meeting is not required, a resolution by Board of Directors) is

obtained on a merger agreement which dissolves the Company, a demerger agreement or a split plan, a

share exchange agreement or a share transfer plan which makes the Company a wholly owned subsidiary,

change to add provision to acquire the Company’s all common shares to the Articles of Incorporation or an

acquisition of all shares based on a call provision attached to common shares. Or the Company approves


54

share purchase request by the Company’s shareholders. (This share purchase request refers to the ones

defined by Article 179, Paragraph 2 of the Companies Act. However, this excludes the share purchase

request which accompanies Subscription Rights purchase request specified by Article 179, Paragraph 3 of

the Companies Act.)

(2) In case that Rights Holders are unable to exercise Subscription Rights due to regulations specified in Note

6 above, prior to the exercise by such holder, the Company shall be able to acquire Subscription Rights

without contribution.

Note 8: In the case of a merger (limited to an absorption-type merger), absorption-type demerger, incorporation-type

demerger, share exchange or share transfer (hereinafter collectively called “Organizational Restructuring”),

Subscription Rights of a stock company prescribed in Article 236, Paragraph 1, Item 8, (a) through (e) of the

Companies Act (hereinafter, “the Restructured Company”) shall be granted to Rights Holders based on the

effective date of Organizational Restructuring in accordance with the conditions below. This shall be limited to

cases where the issuance of Subscription Rights of the Restructured Company is stipulated in an absorption

merger agreement, a new merger agreement, an absorption split agreement, an incorporation-type demerger

plan, a share exchange agreement or a share transfer plan in accordance with the following conditions:


The number shall be equal to that of Subscription Rights owned by Rights Holders.





(4) Value of assets contributed upon exercise of Subscription Rights




of the Restructured Company determined as per Note 8 (3) above.







This shall be determined in accordance with Note 4 above.

(7) Restriction on acquisitions of Subscription Rights by transfer



(8) Other conditions regarding exercise of Subscription Rights


(9) Reason and condition to acquire Subscription Rights


(10) Other conditions shall be determined in accordance with conditions of the Restructured Company.

Note 9: As resolved at the Company’s Board of Directors’ meeting held on June 29, 2016, the conditions to exercise

Subscription Rights have been changed as stipulated in “Note 6 (1)” above.


55


Resolution at the Board of Directors’ meeting held on August 12, 2016


(March 31, 2017)



Date

(May 31, 2017)






(Shares) (Note 2) 2,820,000 2,820,000


Subscription Rights (Yen) (Note 3) 789 Same as the left

Exercise period of Subscription Rights From: October 1, 2016

To: September 30, 2021 Same as the left



Issuance price: 789


Conditions for exercise of Subscription Rights (Note 6) Same as the left

Matters relating to transfer of Subscription Rights (Note 5) Same as the left




Restructuring


Note 1: Issue value per unit of Subscription Rights is 100 yen.


common shares of the Company.


without contribution; the same applies hereinafter) or a share merger after the date of allotment of Subscription

Rights, the Number of Shares Granted shall be adjusted according to the formula below. However, such

adjustment shall apply only to the number of shares underlying Subscription Rights which remain unexercised

at the time of such share split or merger. Any fraction of less than 1 share arising from the adjustment shall be

discarded.


after adjustment =



Ratio of split

(or merger)

If the Company implements a merger or a demerger, decreases capital or requires relevant adjustments of the

Number of Shares Granted after the date of allotment of Subscription Rights, the Number of Shares Granted

may be reasonably adjusted.


to be paid in per share (hereinafter, “Strike Price”) by the Number of Shares Granted.

In cases where the Company executes a share split or a share merger after the date of allotment of Subscription

Rights, Strike Price shall be adjusted according to the formula below. Any fraction of less than 1 yen resulting

from the adjustment shall be rounded up.

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

1

Ratio of split (or merger)

In cases where the Company issues new common shares or disposes of treasury shares for the price below the

market value after the date of allotment of Subscription Rights (excluding the issuance of new shares and

disposal of treasury shares due to the exercise of Subscription Rights, or a transfer of treasury shares due to

the share exchange), Strike Price shall be adjusted according to the formula below. Any fraction of less than 1

yen arising from the adjustment shall be rounded up.


56

Post-adjustment

Strike Price =

Pre-adjustment

Strike Price ×

Number of

outstanding

shares +



Market value per share before issuance of new shares


“Number of outstanding shares” in the above calculation method is obtained by subtracting treasury shares

(common shares) from the total number of issued shares (common shares). In case that the Company disposes

of treasury shares (common shares), “Number of newly-issued shares” shall be read as “Number of treasury

shares to be disposed.”

Additionally, in case that the Company merges with a company, implements a demerger or requires relevant

adjustments of Strike Price after the date of allocating Subscription Rights, the Company may appropriately

adjust Strike Price to a reasonable extent.

Note 4: Matters regarding increases in capital stock and legal capital surplus

(1) An increase in capital stock in the case of issuing shares upon exercise of Subscription Rights shall be half

of the upper limit of the increase in capital stock etc. calculated subject to Article 17, Paragraph 1 of the

Corporate Accounting Rules. Any fraction less than 1 yen arising from the calculation shall be rounded up.

(2) An increase in legal capital surplus in the case of issuing shares upon exercise of Subscription Rights shall

be calculated by deducting the increase in capital stock etc. as stated in Note 4 (1) above from the upper

limit of the increase in capital stock etc. as stated in Note 4 (1) above.

Note 5: The acquisition of Subscription Rights by transfer shall require the approval by a resolution by the Company’s

Board of Directors.

Note 6: Conditions to exercise Subscription Rights

(1) Once the closing price of our share falls below 50% of the strike price (subject to appropriate adjustments

pursuant to rules for “the value of the property to be contributed upon exercise of subscription rights to shares

and its calculation method”) in the regular trading at Tokyo Stock Exchange, Inc., (hereinafter, “TSE”) during

the period between the allotment date and the expiration date, rights holders shall exercise all of the

remaining subscription rights within a month from the day following the date of hitting the above threshold,

unless otherwise specified below.

(a) It was found that any information disclosed by the Company contains material misstatement.

(b) The Company failed to appropriately disclose the fact that should have been opened subject to laws

or rules set by financial instruments exchanges.

(c) The Company became delisted, or commenced bankruptcy proceedings, civil rehabilitation

proceedings, corporate reorganization proceedings, special liquidation and other relevant procedures.

Otherwise, any material change occurred in the preconditions on the date of issuing the Subscription

Rights.

(d) The Company committed any other act seriously damaging the confidence of Rights Holders from an

objective point of view.

(2) Only if the closing price of our share exceeds 200% of the strike price (subject to appropriate adjustments

as stated in Note 3 above) for five business days in a row in the regular trading at TSE during the period

between the allotment date and the expiration date, rights holders may exercise the subscription rights on or

after the day following the date of hitting the above threshold, unless otherwise specified the Note 6 (1) above.

(3) Heirs to the subscription rights to shares are not entitled to exercise such rights.

(4) If the total number of issued shares of the Company exceeds the number of authorized shares upon exercise

of the subscription rights to shares, such subscription rights shall not be exercised.

(5) The minimum unit for exercise shall be one unit.

Note 7: Matters regarding acquisition of Subscription Rights

(1) The Company shall be able to acquire all Subscription Rights without contribution on the day separately

specified by the Company’s Board of Directors under following conditions. An approval at shareholders’

meeting (if an approval at shareholders’ meeting is not required, a resolution by Board of Directors) is

obtained on a merger agreement which dissolves the Company, a demerger agreement or a split plan, a

share exchange agreement or a share transfer plan which makes the Company a wholly owned subsidiary,

change to add provision to acquire the Company’s all common shares to the Articles of Incorporation or an

acquisition of all shares based on a call provision attached to common shares. Or the Company approves


57

share purchase request by the Company’s shareholders. (This share purchase request refers to the ones

defined by Article 179, Paragraph 2 of the Companies Act. However, this excludes the share purchase

request which accompanies Subscription Rights purchase request specified by Article 179, Paragraph 3 of

the Companies Act.)

(2) In case that Rights Holders are unable to exercise Subscription Rights due to regulations specified in Note

6 above, prior to the exercise by such holder, the Company shall be able to acquire Subscription Rights

without contribution.

Note 8: In the case of a merger (limited to an absorption-type merger), absorption-type demerger, incorporation-type

demerger, share exchange or share transfer (hereinafter collectively called “Organizational Restructuring”),

Subscription Rights of a stock company prescribed in Article 236, Paragraph 1, Item 8, (a) through (e) of the

Companies Act (hereinafter, “the Restructured Company”) shall be granted to Rights Holders based on the

effective date of Organizational Restructuring in accordance with the conditions below. This shall be limited to

cases where the issuance of Subscription Rights of the Restructured Company is stipulated in an absorption

merger agreement, a new merger agreement, an absorption split agreement, an incorporation-type demerger

plan, a share exchange agreement or a share transfer plan in accordance with following conditions.


The number shall be equal to that of Subscription Rights owned by Rights Holders.





(4) Value of assets contributed upon exercise of Subscription Rights




of the Restructured Company determined as per Note 8 (3) above.








(7) Restriction on acquisitions of Subscription Rights by transfer



(8) Other conditions regarding exercise of Subscription Rights


(9) Reason and condition to acquire Subscription Rights


(10) Other conditions shall be determined in accordance with conditions of the Restructured Company.

(3) Exercise status of bonds with Subscription Rights containing a clause for Strike Price adjustments

Not applicable.

(4) Rights plan

Not applicable.


58

(5) Changes in the number of the outstanding shares and capital stock, etc.

Date

Changes in

outstanding

shares

(Shares)

Balance of

outstanding

shares

(Shares)

Changes in

capital stock

(Millions of yen)

Balance of

capital stock

(Millions of yen)

Changes in

legal capital

surplus (Millions

of yen)

Balance of legal

capital surplus

(Millions of yen)

April 1, 2012 –

April 30, 2012

(Note 1)

3,000 30,228,780 0 4,530 0 2,265

April 30, 2012

(Note 2) 907,916 31,136,696 - 4,530 1,606 3,871

May 1, 2012 –

May 31, 2012

(Note 1)

9,000 31,145,696 1 4,532 1 3,873

June 1, 2012

(Note 3) 31,145,696 62,291,392 - 4,532 - 3,873

June 1, 2012 –

March 31, 2013

(Note 1)

870,900 63,162,292 92 4,625 92 3,966

April 1, 2013 –

June 30, 2013

(Note 1)

358,320 63,520,612 43 4,668 43 4,009

July 5, 2013 –

July 30, 2013

(Note 4)

54,267,902 117,788,514 48,841 53,509 48,841 52,850

July 1, 2013 –

March 31, 2014

(Note 1)

597,320 118,385,834 69 53,578 69 52,919

April 1, 2014 –

March 31, 2015

(Note 1)

203,520 118,589,354 25 53,604 25 52,945

April 1, 2015 –

December 29, 2015

(Note 1)

100,200 118,689,554 11 53,615 11 52,956

December 29, 2015

(Note 5) (6,250,000) 112,439,554 - 53,615 - 52,956

December 30, 2015

–

March 31, 2016

(Note 1)

7,600 112,447,154 0 53,616 0 52,957

April 1, 2016 –

March 31, 2017

(Note 1) 89,816 112,536,970 13 53,630 13 52,971

Note 1: The increase was due to the exercise of Subscription Rights (stock option).

Note 2: The increase was due to a share exchange with Next Japan Holdings Co., Ltd.

Note 3: This was due to a two-for-one split of common shares.

Note 4: The increase was due to the exercise of Subscription Rights in the rights offering (non-commitment type;

allotment of listed subscription rights without contribution).

Note 5: The decrease was due to the cancellation of treasury shares.

Note 6: Subscription Rights (stock option) exercised between April 1, 2017 and May 31, 2017 increased the number

of outstanding shares by 8,400, capital stock by 0 million yen and legal capital surplus by 0 million yen.


59

(6) Status of shareholders


Category

Breakdown of Shares (1 unit = 100 shares) Number

of shares

less than

1 unit

(Shares)

Government

and local

authority

Financial

institution

Financial

instruments

business

operator

Other

corporation

Foreign

corporations, etc. Individuals

and others Total

Others Individual

Number of

shareholders

(People)

- 10 41 181 159 20 16,066 16,477 -

Number of

Shares Owned

(Units)

- 64,672 25,359 50,506 413,556 394 570,310 1,124,797 57,270

Ratio of

Shares Owned

(%)

- 5.75 2.25 4.49 36.77 0.04 50.70 100.00 -

Note: With regard to 9,598,184 treasury shares, 95,981 units are included in “Individuals and others” and 84 shares

are in “Number of shares less than 1 unit.”

(7) Status of major shareholders


Name of Shareholder

[Name of Standing Proxy]

Address of Shareholder

[Address of Standing Proxy]

Number of Shares

Owned

(Thousand shares)

Ownership of

Outstanding

Shares (%)

Nobuyoshi Fujisawa

[UBS Securities Japan Co., Ltd.]

Singapore

[1-5-1 Otemachi, Chiyoda-ku, Tokyo] 23,009 20.45

FUJISAWA PTE. LTD.

[UBS Securities Japan Co., Ltd.]

96 Somerset Road Singapore (238163)

[1-5-1 Otemachi, Chiyoda-ku, Tokyo] 15,697 13.95

TAIYO HANEI FUND, L.P.

[The Bank of Tokyo-Mitsubishi

UFJ, Ltd.]

5300 CARILLON POINT, KIRKLAND, WA

98033 USA

[2-7-1, Marunouchi, Chiyoda-ku, Tokyo]

4,517 4.01

STATE STREET BANK AND

TRUST COMPANY 505019

[HSBC Tokyo Branch]

AIB INTERNATIONAL CENTRE P.O. BOX

518 IFSC DUBLIN, IRELAND

[3-11-1 Nihonbashi, Chuo-ku, Tokyo]

4,352 3.87

Japan Trustee Services Bank,

Ltd. (trust account) 1-8-11 Harumi, Chuo-ku, Tokyo 2,901 2.58

SAIKYO LEASING

CORPORATION

2-30, Wakamiya-cho, Shunan-shi,

Yamaguchi 2,890 2.57

BNY GCM CLIENT ACCOUNT

JPRD ACISG (FE-AC)


UFJ, Ltd.]

PETERBOROUGH COURT 133 FLEET

STREET LONDON EC4A 2BB UNITED

KINGDOM


2,410 2.14

TAIYO FUND, L.P.


UFJ, Ltd.]

5300 CARILLON POINT, KIRKLAND, WA

98033 USA


1,917 1.70

Japan Trustee Services Bank,

Ltd. (trust account 9) 1-8-11 Harumi, Chuo-ku, Tokyo 1,804 1.60

CBNY-ORBIS SICAV

[Citibank Japan Ltd.]

31, Z.A.BOURMICHT, L-8070

BERTRANGE, LUXEMBOURG

[6-27-30 Shinjuku, Shinjuku-ku, Tokyo]

1,539 1.37

Total - 61,041 54.24

Note 1: In addition to the above, the Company owns 9,598,000 treasury shares (8.53%).


60

Note 2: All the shares held by Japan Trustee Services Bank, Ltd. (Trust account) and Japan Trustee Services Bank,

Ltd. (Trust account 9) relate to its trust business.

Note 3: FUJISAWA PTE. LTD. is wholly owned by Nobuyoshi Fujisawa, Representative Director, President & CEO

of the Company. In addition, the table above excludes 1,135,000 common shares (1.01%) of the Company

held by JAPAN POCKET CO., Ltd. in which Mr. Fujisawa beneficially owns 100% voting rights.

Note 4: FUJISAWA PTE. LTD., which was not a principal shareholder as of the end of the previous fiscal year,

becomes one of the principal shareholders as of the end of the current fiscal year.

Note 5: According to the Report of Possession of Large Volume (Change Report) disclosed on December 21, 2016

for public inspection purposes, Taiyo Fund Management Co. LLC and its joint holders owned shares as of

December 14, 2016. Since we have no means of confirming the actual number of shares held as of the end

of the current fiscal year, they are not included in the above status of major shareholders.

The Report of Possession of Large Volume (Change Report) is summarized below.

Name of Shareholder Address Number of Shares,

etc. Owned (Shares)

Ownership of Shares, etc.

(%)

Taiyo Fund Management Co. LLC

5300, Carillon Point, Kirkland, WA 98033, USA

Shares: 2,285,400 2.03

Taiyo Hanei GP, Ltd.

C/O Appleby Trust (Cayman) Ltd., Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands

Shares:4,496,600 4.00

Taiyo Pacific CG LLC 5300, Carillon Point, Kirkland, WA 98033, USA

Shares:5,639,600 5.01

Taiyo Maki GP, LTD

C/O Appleby Trust (Cayman) Ltd., Clifton House, 75 Fort Street, Grand Cayman, KY1-1108, Cayman Islands

Shares: 447,500 0.40

Taiyo Hinata GP LLC 2711 Centerville Road Suite 400, Wilmington, DE 19808

Shares: 457,100 0.41

Total - 13,326,200 11.84


61

(8) Status of voting rights

[1] Outstanding shares


Classification Number of Shares

(Shares)

Number of Voting

Rights (Pieces)

Content

(Shares)

Non-voting shares - - -

Shares with restricted voting

rights (Treasury shares, etc.) - - -

Shares with restricted voting

rights (others) - - -

Shares with full voting rights

(treasury shares, etc.) Common shares:

9,598,100 - 1 unit: 100 shares

Shares with full voting rights

(others) Common shares:

102,881,600 1,028,816 Same as above

Shares less than 1 unit Common shares:

57,270 - -

Total number of the outstanding

shares 112,536,970 - -

Voting rights of all shareholders - 1,028,816 -

[2] Treasury shares, etc.


Name of

Shareholder

Address of

Shareholder

Shares in

Own Name

(Shares)

Shares in

Another

Person’s Name

(Shares)

Total Shares Owned

(Shares)

Ownership of

Outstanding

Shares (%)

J Trust Co., Ltd. 1-7-12,Toranomon

Minato-ku, Tokyo 9,598,100 - 9,598,100 8.53

Total - 9,598,100 - 9,598,100 8.53


62

(9) Employee stock option plan

The Company adopts an employee stock option plan, which involves issuance of Subscription Rights based on the

Companies Act.

The details of the Company’s stock option system are as follows:

1. (Resolution at the 34th Ordinary General Meeting of Shareholders held on June 29, 2010)

At the 34th Ordinary General Meeting of Shareholders held on June 29, 2010, a special resolution was made to

delegate the right to determine the requirements for issuing Subscription Rights without contribution as stock

options for directors and employees of J Trust and its subsidiaries, based on provisions under Article 236, 238

and 239 of the Companies Act, to the Board of Directors of the Company.

Date of resolution June 29, 2010

Segment and number of grantees 8 directors of the Company; 10 directors of its subsidiaries;

and 500 employees of the Company and its subsidiaries

Class of shares underlying Subscription Rights As stated in (2) Status of subscription rights to shares

Number of Shares Same as above


Subscription Rights (Yen) Same as above

Exercise period of Subscription Rights Same as above

Conditions for exercise of Subscription Rights Same as above

Matters relating to transfer of Subscription Rights Same as above

Matters relating to substitute payment Same as above

Matters relating to allotment of Subscription Rights

accompanied by Organizational Restructuring Same as above

2. (Resolution at the 35th Ordinary General Meeting of the Shareholders held on June 29, 2011)

At the 35th Ordinary General Meeting of Shareholders held on June 29, 2011, a special resolution was made to

delegate the right to determine the requirements for issuing Subscription Rights without contribution as stock

options for directors and employees of J Trust and its subsidiaries, based on provisions under Article 236, 238

and 239 of the Companies Act, to the Board of Directors of the Company.















63

3. (Resolution at the Extraordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. held on

December 26, 2008)

At the Extraordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. (hereinafter, “NJHD”)

held on December 26, 2008, a special resolution was made to delegate the right to determine the requirements

for issuing Subscription Rights without contribution as stock options for directors and employees of NJHD and

its subsidiaries, based on provisions under Article 236, 238 and 239 of the Companies Act, to the Board of

Directors of NJHD. On April 30, 2012, a share exchange was conducted to turn the Company into a wholly

owning parent company and NJHD into a wholly owned subsidiary. By this transaction, the Company granted

Subscription Rights of the Company with a value equivalent in the light of the share exchange ratio to Rights

Holders of NJHD. “Date of resolution” and “Segment and number of grantees” correspond to the resolution by

NJHD for granting such Subscription Rights.

Date of resolution December 26, 2008

Segment and number of grantees 5 directors of NJHD; and 40 directors and employees of

NJHD and its subsidiaries











4. (Resolution at the Extraordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. held on

December 26, 2008)

At the Extraordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. (hereinafter, “NJHD”)

held on December 26, 2008, a special resolution was made to delegate the right to determine the requirements

for issuing Subscription Rights without contribution as stock options for directors and employees of NJHD and

its subsidiaries, based on provisions under Article 236, 238 and 239 of the Companies Act, to the Board of

Directors of NJHD. On April 30, 2012, a share exchange was conducted to turn the Company into a wholly

owning parent company and NJHD into a wholly owned subsidiary. By this transaction, the Company granted

Subscription Rights of the Company with a value equivalent in the light of the share exchange ratio to Rights

Holders of NJHD. “Date of resolution” and “Segment and number of grantees” correspond to the resolution by

NJHD for granting such Subscription Rights.

Date of resolution December 26, 2008

Segment and number of grantees 15 employees of NJHD subsidiaries












64

5. (Resolution at the Ordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. held on October

28, 2009)

At the Ordinary General Meeting of Shareholders of Next Japan Holdings Co., Ltd. (hereinafter, “NJHD”) held

on October 28, 2009, a special resolution was made to delegate the right to determine the requirements for

issuing Subscription Rights without contribution as stock options for directors and employees of NJHD and its

subsidiaries, based on provisions under Article 236, 238 and 239 of the Companies Act, to the Board of Directors

of NJHD. On April 30, 2012, a share exchange was conducted to turn the Company into a wholly owning parent

company and NJHD into a wholly owned subsidiary. By this transaction, the Company granted Subscription

Rights of the Company with a value equivalent in the light of the share exchange ratio to Rights Holders of NJHD.

“Date of resolution” and “Segment and number of grantees” correspond to the resolution by NJHD for granting

such Subscription Rights.

Date of resolution October 28, 2009

Segment and number of grantees 5 directors and 57 employees of NJHD












28, 2010)











Segment and number of grantees 5 directors and 74 employees of NJHD












65


28, 2011)











Segment and number of grantees 4 directors of NJHD; and 66 employees of HJHD and its

subsidiaries











8. (Resolution at the 37th Ordinary General Meeting of Shareholders held on June 27, 2013)

At the 37th Ordinary General Meeting of Shareholders of the Company held on June 27, 2013, a special

resolution was made to delegate the right to determine the requirements for issuing Subscription Rights without

contribution as stock options for directors of the Company, based on provisions under Article 236, 238 and 239

of the Companies Act, to the Board of Directors of the Company.


Segment and number of grantees 9 directors of the Company












66

9. (Resolution at the Board of Directors’ meeting held on August 12, 2015)

At the Board of Directors’ meeting held on August 12, 2015, a resolution was made to determine the

requirements for issuing Subscription Rights for compensation as stock options for directors and employees of

J Trust and its subsidiaries and solicit applicants for such Subscription Rights, based on provisions under Article

236, 238, and 240 of the Companies Act.

Date of resolution August 12, 2015













10. (Resolution at the Board of Directors’ meeting held on August 12, 2016)

At the Board of Directors’ meeting held on August 12, 2016, a resolution was made to determine the

requirements for issuing Subscription Rights for compensation as stock options for directors and employees of

J Trust and its subsidiaries and solicit applicants for such Subscription Rights, based on provisions under Article

236, 238, and 240 of the Companies Act.

Date of resolution August 12, 2016

Segment and number of grantees

12 directors and Audit & Supervisory Board members of

the Company; 11 directors of its subsidiaries; and 19

employees of the Company and its subsidiaries



Amount to be paid in upon exercise of Subscription

Rights (Yen) Same as above








67

2. Purchase of Treasury Shares and Other Related Status

[Class of shares, etc.]

Acquisition of common shares falling under Article 155, Paragraph 3 and Article 155, Paragraph 7 of the Companies

Act

(1) Status of acquisition by resolution at the Ordinary General Meeting of Shareholders

Not applicable.

(2) Status of acquisition by resolution at the Board of Directors’ Meeting

Acquisition of common shares falling under Article 155, Paragraph 3 of the Companies Act

Category Number of shares (Shares) Total value (Yen)

Status of resolution at the Board of Directors’ meeting

(held on August 12, 2016)

(Acquisition period: from August 15, 2016 to August 15

2016)

6,000,000 4,926,000,000

Treasury shares purchased prior to the current fiscal year - -

Treasury shares purchased in the current fiscal year 6,000,000 4,926,000,000

Total number and amount of remaining shares - -

Proportion of shares to be exercised as of fiscal year end

under review - -

Treasury shares purchased during the current period - -

Proportion of shares to be exercised as of filing date - -

Note: The purchase was made through ToSTNet-3 trading system of the Tokyo Stock Exchange.


Status of resolution at the Board of Directors’ meeting

(held on August 15, 2016)

(Acquisition period: from August 16, 2016 to August 16,

2016)

7,000,000 5,166,000,000

Treasury shares purchased prior to the current fiscal year - -

Treasury shares purchased in the current fiscal year 3,188,300 2,352,965,400

Total number and amount of remaining shares 3,811,700 2,813,034,600

Proportion of shares to be exercised as of fiscal year end

under review 54.45 54.45

Treasury shares purchased during the current period - -

Proportion of shares to be exercised as of filing date 54.45 54.45

Note: The purchase was made through ToSTNet-3 trading system of the Tokyo Stock Exchange.

(3) Matters that are not based on resolutions by the Ordinary General Meeting of shareholders or the Board of Directors’

Meeting

Acquisition of common shares falling under Article 155, Paragraph 7 of the Companies Act


Treasury shares purchased in the current fiscal year 136 133,316

Treasury shares purchased during the current period 20 16,480

Note: Treasury shares purchased during the current period do not include shares acquired by purchase of shares

less than 1 unit between June 1, 2017 and the date of submitting this Annual Securities Report.


68

(4) Status of disposal and possession of treasury shares

Category

Fiscal year under review Current period

Number of shares

(Shares)

Total disposal

value

(Yen)

Number of shares

(Shares)

Total disposal

value

(Yen)

Treasury shares offered to subscriber - - - -

Treasury shares disposed - - - -

Treasury shares transferred in relation

to merger, share exchange or demerger - - - -

Others - - - -

Number of treasury shares possessed 9,598,184 - 9,598,204 -

Note 1: Treasury shares disposed of during the current period do not include shares disposed of by sale of shares

less than 1 unit between June 1, 2017 and the date of submitting this Annual Securities Report.

Note 2: The number of treasury shares possessed during the current period does not include shares disposed of

by sale of shares less than 1 unit and those acquired by purchase of shares less than 1 unit between June

1, 2017 and the date of submitting this Annual Securities Report.

3. Dividend Policy

The Company recognizes appropriate return of profits to its shareholders as one of the highest management priorities,

and thus takes a proactive stance to return profits while giving due consideration of future operating environments

and industry trends.

Based on the above policy, the Company declares ordinary dividends for the current fiscal year in the amount of 12

yen per share (including an interim dividend of 6 yen). This led to dividend payout ratio of 122.80%.

Also, as measures to realize flexible capital and dividend policies, the Company has stipulated under the Articles of

Incorporation that the Board of Directors may determine a distribution of dividends from retained earnings to

shareholders by resolution based on Article 459, Paragraph 1 of the Companies Act.

For internal reserves, the Company uses them effectively to reinforce the financial structure for long-lasting solid

operating bases and achieve sustainable business growth.

The Company has a basic policy of distributing dividends twice a year: interim and year-end periods.

The table below shows the distribution of dividends of surplus for the current fiscal year.

Date of resolution Total dividends

(Millions of yen) Dividends per share (Yen)

November 11, 2016

Resolution at the Board of Directors’ Meeting 617 6

May 12, 2017

Resolution at the Board of Directors’ Meeting 617 6

4. Trends in Share Price

(1) Highest and lowest share prices in the last 5 years

Fiscal year The 37th The 38th The 39th The 40th The 41st

Year end March 2013 March 2014 March 2015 March 2016 March 2017

Highest (Yen) 1,998

3,335 *

4,560

2,350 □ 1,615 1,335 1,400

Lowest (Yen) 1,106

564 *

2,310

905 □ 930 668 688

Note 1: From July 16, 2013, the highest / lowest share prices are quoted from the Tokyo Stock Exchange, the 2nd

section and prior to that date, the prices are quoted from the Osaka Securities Exchange, the 2nd section.


69

Note 2: The Company conducted a two-for-one share split dated June 1, 2012. Figures with * indicate share price

following the ex-rights date for the share split.

Note 3: The Company issued 54,267,902 shares through the exercise of rights offering (non-commitment type;

allotment of listed subscription rights without contribution) dated May 31, 2013. Figures with □ indicate share

price following the ex-rights date for the rights offering.

(2) Highest and lowest share prices in the last 6 months

Month October 2016 November 2016 December 2016 January 2017 February 2017 March 2017

Highest (Yen) 897 1,038 1,246 1,276 1,400 1,336

Lowest (Yen) 788 761 983 1,112 1,195 931

Note: Highest and lowest share prices are quoted from the Tokyo Stock Exchange, the 2nd Section.


70

5. Member of Executives

Male: 17, Female: - (percentage of female members: - %)

Official title Name Date of

birth Career summary Tenure

Shares

held

(Thousand

shares)

Representative

Director,

President &

Chief

Executive

Officer

Nobuyoshi

Fujisawa

Jan. 17,

1970

Aug. 2007 Representative Director & Chairman, Kazaka Servicer Co., Ltd.

(currently, Partir Servicer Co., Ltd.)

June 2008 Representative Director & Chairman, J Trust Co., Ltd.

Director, Mass Work Co., Ltd. (currently, Keynote Co., Ltd.)

June 2010 Director, J Trust Co., Ltd.

Director, ADORES, Inc.

Oct. 2010 Director & Supreme Advisor, J Trust Co., Ltd.

May 2011 Representative Director & Chairman, ADORES, Inc.

June 2011 President & CEO, J Trust Co., Ltd.

Oct. 2013 Managing Director & CEO, JTRUST ASIA PTE. LTD.

(incumbent)

Jan. 2014 Chairman, Chinae Savings Bank Co., Ltd. (currently, JT Chinae

Savings Bank Co., Ltd.)

May 2014 Chairman, ADORES, Inc.

Sept. 2014 Executive Director, LCD Global Investments LTD. (currently, AF

Global Limited.)

Mar. 2015 Director & Chairman, JT Capital Co., Ltd. (incumbent)

June 2015 Representative Director, President & CEO, J Trust Co., Ltd.

(incumbent)

President Commissioner, PT JTRUST INVESTMENTS

INDONESIA

Director, ADORES, Inc. (incumbent)

Mar. 2017 Director, DIGITAL DESIGN Co., Ltd. (currently SAMURAI&J

PARTNERS Co., Ltd.) (incumbent)

Note 3 23,009

Note 7

Representative

Director &

Senior

Managing

Executive

Officer

Nobuiku

Chiba

Feb. 21,

1973

June 2008 Vice President & Director, J Trust Co., Ltd.

Mar. 2009 President & Representative Director, Station Finance Co., Ltd.

(currently, Nihon Hoshou Co., Ltd.)

May 2009 Director, J Trust System Co., Ltd.

Oct. 2009 Executive Vice President & Director, J Trust Co., Ltd. in charge

of J Trust Financial Service Co., Ltd. (currently, Nihon Hoshou

Co., Ltd.)

June 2010 President & Representative Director, J Trust Co., Ltd.

Director & Chairman, J Trust Financial Service Co., Ltd.

(currently, Nihon Hoshou Co., Ltd.)

May 2011 Director, Lopro Corporation (currently, Nihon Hoshou Co., Ltd.)

June 2011 Vice President & Director, J Trust Co., Ltd.

Aug. 2011 Representative Director & Chairman, KC Card Co., Ltd.

(currently, J TRUST Card Co., Ltd.)

Aug. 2012 Director, Chinae Co., Ltd. (currently, JT Chinae Savings Bank

Co., Ltd.) (incumbent)

Oct. 2012 Director, J Trust Co., Ltd.

Director, KC Card Co., Ltd. (currently, J TRUST Card Co., Ltd.)

Jan. 2015 President & CEO, J TRUST Card Co., Ltd.

Mar. 2015 Representative Director, JT Capital Co., Ltd. (incumbent)

June 2015 Representative Director, Senior Managing Executive Officer in

charge of financial business in South Korea and Public

Relations & Investor Relations Division of Corporate Planning

Department, J Trust Co., Ltd.


charge of financial business in South Korea and Public

Relations & Investor Relations Division, J Trust Co., Ltd.

(incumbent)

Note 3 317


71



Shares

held

(Thousand

shares)

Senior

Managing

Director &

Executive

Officer

Nobiru

Adachi

Mar. 21,

1958

Apr. 1980 Joined Ministry of Finance

July 1986 Director, Onomichi Tax Office

June 1997 Director, Vice Minister of Finance for International Affairs,

Minister’s Secretariat

June 1999 Budget Examiner, Budget Bureau

June 2002 Director, Research Division, International Bureau

June 2004 Director, Policy Research Institute, Ministry of Finance

June 2005 Director-General, Hakodate Customs

Apr. 2006 Officer, Jasdaq Securities Exchange, Inc. (currently, Tokyo

Stock Exchange, Inc.)

June 2006 Executive Officer, Jasdaq Securities Exchange, Inc.

Oct. 2008 Country Head for Japan, ETF Securities Ltd.

Oct. 2011 Chairman and CEO, M&A Solutions Japan Co., Ltd.

Apr. 2013 Advisor, J Trust Co., Ltd.

June 2013 Managing Director, J Trust Co., Ltd.

June 2014 Representative Director and Senior Managing Director in charge

of Corporate Management Department of J Trust Co., Ltd.

Dec. 2014 President Commissioner, PT Bank Mutiara Tbk. (currently, PT

Bank JTrust Indonesia Tbk.) (incumbent)

Jan. 2015 Director, JT Savings Bank Co., Ltd.


charge of banking business in Indonesia and promotion of

global banking business

Oct. 2015 Director, Senior Managing Executive Officer in charge of

banking business in Indonesia and promotion of global banking

business

June 2016 Senior Managing Director, Executive Officer in charge of

promotion of global banking business and overseas legal affairs,

J Trust Co., Ltd. (incumbent)

Note 3 4

Managing

Director &

Executive

Officer

Shigeyoshi

Asano

Mar. 4,

1970

Apr. 1994 Joined Tokyo Gas Co., Ltd.

Sept. 2004 Joined iriver Japan K.K.

Apr. 2005 Chief Operating Officer, iriver Japan K.K.

Apr. 2006 President & Chief Executive Officer, iriver Japan Co., Ltd.

Oct. 2006 President, iriver Japan Co., Ltd. (currently, Aiuto Co., Ltd.)

July 2009 Corporate Officer, Division Director, Business Administration

Division, Wedge Holdings Co., Ltd.

Dec. 2009 Director, Division Director, Business Administration Division,

Wedge Holdings Co., Ltd.

Jan. 2012 Joined J Trust Co., Ltd. as General Manager of President's

Office

Oct. 2013 Director, JTRUST ASIA PTE. LTD. (incumbent)

Sept. 2014 Executive Director, LCD Global Investments LTD. (currently, AF

Global Limited.)

June 2015 Director, Managing Executive Officer in charge of business in

Southeast Asia and Planning Division of Corporate Planning


Commissioner, PT JTRUST INVESTMENTS INDONESIA

Apr. 2016 Commissioner, PT Group Lease Finance Indonesia (incumbent)

June 2016 Managing Director, Executive Officer in charge of business in

Southeast Asia and Planning Division, J Trust Co., Ltd.

(incumbent)

Commissioner, PT Bank J Trust Indonesia Tbk. (incumbent)

Apr. 2017 President Commissioner, PT JTRUST INVESTMENTS

INDONESIA (incumbent)

Note 3 3


72



Shares

held

(Thousand

shares)

Managing

Director,

Executive

Officer

Head of

Internal

Control & Audit

Office

Toru

Myochin

Apr. 27,

1965

Apr. 1988 Joined the Dai-Ichi Kangyo Bank, Ltd. (currently, Mizuho

Financial Group Inc.)

July 2010 Head of Institutional Business Sub-Group, Shinsei Bank, Limited

Oct. 2010 General Manager, Corporate Banking Business Division I,

Shinsei Bank, Limited

Apr. 2012 Executive Officer, General Manager of Corporate Banking

Business Division I, General Manager of Healthcare Finance

Division, Shinsei Bank, Limited

Apr. 2013 Managing Executive Officer, Executive Officer in charge of

Institutional Business & General Manager, Healthcare Finance

Division, Shinsei Bank, Limited

Apr. 2015 Managing Executive Officer, Shinsei Bank, Limited

June 2015 Advisor, J Trust Co., Ltd.

Director, Managing Executive Officer in charge of domestic

financial business, J Trust Co., Ltd.

June 2016

June 2017

Managing Director, Executive Officer in charge of holding

business, group management and information technology

system, J Trust Co., Ltd.

President & Representative Director, J Trust System Co.,

Ltd.(incumbent)

Managing Director, Executive Officer and Head of Internal

Control & Audit Office in charge of holding business, group

management and information technology system of J Trust Co.,

Ltd. (incumbent)

President & Representative Director of ADORES,

Inc.(incumbent)

Note 3 1

Director &

Executive

Officer

General

Manager of

General

Accounting

Department

Taiji

Hitachi

Nov. 28,

1976

Apr. 1998 Joined Asahi & Co. (currently, KPMG AZSA LLC)

Apr. 2001 Registered as Certified Public Accountant

Nov. 2008 Joined Phlox Co., Ltd. (currently, CREDIA Co., Ltd.)

Oct. 2011 General Manager of Accounting Department, J Trust Co., Ltd.

Jan. 2012 General Manager, Accounting & Planning Department, J Trust

Co., Ltd.

June 2013 Director, General Manager of Accounting & Planning


Jan. 2015 Director, J TRUST Card Co., Ltd.

June 2015 Executive Officer, General Manager of General Accounting


June 2016 Director, Executive Officer & General Manager of General

Accounting Department, J Trust Co., Ltd. (incumbent)

Note 3 -


73



Shares

held

(Thousand

shares)

Director,

Executive

Officer &

General

Manager of

Corporate

Planning

Department

Makoto

Kurokawa

Dec. 18,

1956

Apr. 1979 Joined The Sanwa Bank, Ltd. (currently, The Bank of Tokyo-

Mitsubishi UFJ, Ltd.)

Oct. 1989 Joined Salomon Brothers Asia Limited (currently, Citigroup

Global Markets Japan Inc.)

Feb. 1995 Joined Tokyo Branch of UBS Securities Japan Co., Ltd.

Jan. 2003 Managing Director, UBS Securities Japan Co., Ltd.

May 2004 Joined Tokyo Branch of The TD Securities Inc.

June 2005 Joined Tokyo Branch of RBC Capital Markets (Japan) Ltd.

Nov. 2006 Joined Tokyo Branch of WestLB Securities Pacific Ltd.

Dec. 2009 Representative Director, BE More Communications Co., Ltd.

June 2011 Director, BE More Communications Co., Ltd.

Director in charge of financial planning of Finance Department, J

Trust Co., Ltd.

Jan. 2012 Director in charge of financial planning of Finance Department

and Public Relations & Investor Relations Department, J Trust

Co., Ltd.

Aug. 2012 Deputy General Manager of Administrative Division, Media

Kobo, Inc.

Nov. 2012 Director, General Manager of Corporate Management

Department, Media Kobo, Inc.

Apr. 2013 Deputy General Manager of Finance Department, J Trust Co.,

Ltd.

Dec. 2014 General Manager of General Accounting & Finance Department,

J Trust Co., Ltd.

June 2015 Executive Officer, General Manager of Finance Department, J

Trust Co., Ltd.

June 2016

Dec. 2016

Director, Executive Officer & General Manager of Finance


Director, Executive Officer & General Manager of Corporate

Planning Department and Special Appointive Officer, J Trust

Co., Ltd. (incumbent)

Note 3 0

Director,

Executive

Officer &

General

Manager of

Corporate

Planning

Department

Yukihiro

Nishikawa

Dec. 9,

1972

Apr. 1995 Joined CREDIA Co., Ltd.

Oct. 2008 Joined Phlox Co., Ltd. (currently, CREDIA Co., Ltd.)

May 2011 Joined J Trust Co., Ltd.

June 2011 Director, General Manager of Legal Department, General

Manager of Personnel Department, and in charge of General

Affairs Department, J Trust Co., Ltd.

Nov. 2012 Director, General Manager of Legal Department, and in charge

of General Affairs Department, J Trust Co., Ltd.

Dec. 2012 Director, General Manager of Legal Department,

J Trust Co., Ltd.

June 2013 General Manager of Legal Department, J Trust Co., Ltd.

Representative Director, NL Value Capital Co., Ltd. (incumbent)

July 2014 General Manager of Corporate Management Department, J

Trust Co., Ltd.

Oct. 2014 Audit & Supervisory Board Member, AI Denshi Co., Ltd.

(currently, Highlights Entertainment Co., Ltd.) (incumbent)

Jan. 2015 General Manager of Corporate Management Department and

General Manager of Corporate Strategy Department, J Trust

Co., Ltd.

June 2015 Executive Officer, General Manager of Corporate Planning

Department, in charge of Legal Division, J Trust Co., Ltd.

July 2015 Director, Nihon Hoshou Co., Ltd. (incumbent)

June 2016 Director, Executive Officer & General Manager of Corporate

Planning Department and in charge of Legal Division, J Trust

Co., Ltd. (incumbent)

Note 3 -


74



Shares

held

(Thousand

shares)

Director,

Executive

Officer &

General

Manager of

Corporate

Management

Department

Yoshihide

Iimori

Dec. 2,

1956

Apr. 1980 Joined Kokunai Shinpan Co., Ltd. (currently, J TRUST Card Co.,

Ltd.)

June 2006 Executive Officer, Rakuten KC Co., Ltd. (currently, J TRUST

Card Co., Ltd.)

Aug. 2011 Managing Director, KC Card Co., Ltd. (currently, J TRUST Card

Co., Ltd.)

Mar. 2012 Director, KC Card Co., Ltd.

Dec. 2012 Managing Director, KC Card Co., Ltd.

July 2014 Director, KC Co., Ltd. (currently, YJ Card Corporation)

Jan. 2015 General Manager of Compliance Division, YJ Card Corporation

Feb. 2015 General Manager of Corporate Management Department, J

Trust Co., Ltd.

Director, J TRUST Card Co., Ltd.

June 2015 Executive Officer, General Manager of Corporate Management

Department, Head of Internal Control & Audit Office, J Trust Co.,

Ltd.

President & CEO, J TRUST Card Co., Ltd. (incumbent)

Nov. 2015 Executive Officer, General Manager of Corporate Management


June 2016 Director, Executive Officer & General Manager of Corporate

Management Department, J Trust Co., Ltd. (incumbent)

Note 3 6

Director,

Executive

Officer &

General

Manager of

Finance

Department

Ryuichi

Atsuta

Jan. 1,

1964

Apr. 1987 Joined The Industrial Bank of Japan, Limited. (currently, Mizuho Financial Group, Inc.)

Jan. 1991 FX trader, International Treasury Department, The Industrial Bank of Japan, Limited (currently Mizuho Financial Group, Inc.)

Mar. 1996 Chief Trader, The Industrial Bank of Japan, Limited (currently Mizuho Financial Group, Inc.) New York Branch

Apr. 2001 Joined Bank of America N.A., Tokyo Branch

Mar. 2003 Managing Director, Head of FX and Treasury, Bank of America N.A., Tokyo Branch

June 2010 Joined The Hongkong and Shanghai Banking Corporation Limited

Mar. 2012 Managing Director, Head of Trading, The Hongkong and Shanghai Banking Corporation Limited

Sept. 2015 Executive Officer, Corporate Planning Department in charge of new business, J Trust Co., Ltd.

Apr. 2016 Executive Officer, General Manager of Finance Department, J Trust Co., Ltd.

Dec. 2016 Executive Officer, General Manager of Finance Department, J Trust Co., Ltd.

Apr. 2017 Director, Highlights Entertainment Co., Ltd. (incumbent)

June 2017 Director, Executive Officer, General Manager of Finance Department, J Trust Co., Ltd. (incumbent)

Note 3 -

Director Norio

Igarashi

Aug. 30,

1940

Apr. 1966 Joined Tokyo District Public Prosecutors Office as a prosecutor

Jan. 1991 Chief of the Special Investigation Department, the Tokyo District

Public Prosecutors Office

July 1993 Prosecutor of the Supreme Public Prosecutors Office

Sept. 1993 Chief Public Prosecutor of the Oita District Public Prosecutors

Office

Apr. 1995 Prosecutor of the Supreme Public Prosecutors Office

Jan. 1996 Chief Public Prosecutor, the Utsunomiya District Public

Prosecutors Office

June 1997 Chief Public Prosecutor of the Chiba District Public Prosecutors

Office

July 1998 Chief Public Prosecutor of the Yokohama District Public

Prosecutors Office

May 2000 Notary, the Yaesu notary office

May 2010 Registered with Dai-ni Tokyo Bar Association as an attorney

Visiting Attorney, Yamada Ozaki Law Office (incumbent)

June 2014 Outside Director, J Trust Co., Ltd. (incumbent)

Note 3 -


75



Shares

held

(Thousand

shares)

Director Ryuji

Mizuta

Jan. 7,

1952

Apr. 1974 Joined National Police Agency

July 1994 Miyazaki Prefectural Police Chief

Mar. 1996 Director of General Affairs Division, Chugoku Regional Police

Bureau

Aug. 1996 Chief of Education and Training Division, National Police

Agency

Aug. 1998 Chief of Gifu Prefectural Police

Apr. 2000 Head of the Public Security Department, Kanto Regional Police

Bureau

Aug. 2000 Director of Division 1, Public Security Intelligence Agency

Aug. 2002 Chief of Shizuoka Prefectural Police

Aug. 2004 Director of Japan Motorcycle Racing Organization (currently,

JKA)

Mar. 2006 Director-General of Kyushu Regional Police Bureau

June 2009 Managing Director of the Japan Crime Prevention Association

July 2012 Advisor of Sumitomo Life Insurance Company (incumbent)

June 2014 Outside Director of J Trust Co., Ltd. (incumbent)

Note 3 -

Director Masanori

Kaneko

May 22,

1955

Apr. 1978 Joined Yamaguchi Sogo Bank, Ltd. (currently, THE SAIKYO

BANK, LTD.)

Apr. 1995 Manager of Welfare Division and Human Resource

Development Division, Human Resource Department, THE

SAIKYO BANK, LTD.

Apr. 1997 Head of Sakuragi Branch, THE SAIKYO BANK, LTD.

Apr. 2000 Head of Kuga Branch, THE SAIKYO BANK, LTD.

Apr. 2002 Chief Assistant, Secretary Group, General Affairs and Human

Resource Department, THE SAIKYO BANK, LTD.

Apr. 2004 Head of Kudamatsu Branch, THE SAIKYO BANK, LTD.

Apr. 2006 Chief Assistant of Internal Control Office, THE SAIKYO BANK,

LTD.

June 2008 Head of Audit Department, THE SAIKYO BANK, LTD.

Apr. 2010 Chief of Audit & Supervisory Board, THE SAIKYO BANK, LTD.

June 2011 Full-Time Audit & Supervisory Board Member, THE SAIKYO

BANK, LTD.

June 2015 Outside Director, J Trust Co., Ltd. (incumbent)

Advisor, THE SAIKYO BANK, LTD. (incumbent)

Sep. 2015 President & CEO, Saikyo Intelligence Partners Co., Ltd.

President & CEO, Saikyo Souken, Inc.

Director, Hoken Eye Saikyo K.K.

Oct. 2015 Chairman & CEO, Saikyo Souken, Inc.

June 2017 Audit & Supervisory Board Member, SAIKYO LEASING

CORPORATION (incumbent)

Audit & Supervisory Board Member, Hoken Eye Saikyo K.K.

(incumbent)

Note 3 -


76



Shares

held

(Thousand

shares)

Full-Time

Audit &

Supervisory

Board Member

Hideki

Yamane

July 11,

1952

Apr. 1976 Joined Yamaguchi Sogo Bank, Ltd. (currently, THE SAIKYO

BANK, LTD.)

Apr. 1993 Head of Hikoshima branch

Apr. 1996 Head of Hinode branch

Oct. 1997 Head of Nagato branch

Apr. 1999 Chief Assistant of Personnel Department

Apr. 2002 Head of Kokura branch, Vice Director of Kanpuku area

Apr. 2004 Joint Head of Hiroshima and Gion branches, Executive Manager

of Hiroshima area

Apr. 2005 Head of Shimonoseki branch, Executive Manager of

Shimonoseki area

Oct. 2006 Chief of the Auditor's Office

June 2007 Full-time Auditor

June 2011 Advisor (Compliance Control Department)

June 2012 Full-Time Audit & Supervisory Board Member, J Trust Co., Ltd.

(incumbent)

June 2013 Audit & Supervisory Board Member, Partir Servicer Co., Ltd.

(incumbent)

Note 4 -

Full-Time

Audit &

Supervisory

Member

Fumio

Iguchi

Feb. 14,

1956

Apr. 1978 Joined The Mitsui Bank, Ltd. (currently Sumitomo Mitsui Banking Corporation)

June 1999 General Manager, Equity Management Dept., The Sakura Bank,

Ltd. (currently Sumitomo Mitsui Banking Corporation) Apr. 2001 General Manager, Portfolio Management Dept., Sumitomo

Mitsui Banking Corporation

Dec. 2002 General Manager, Tokyo-Chuo Corporate Business Office II, Sumitomo Mitsui Banking Corporation

July 2004 Senior Examiner, Business Audit Dept., Sumitomo Mitsui Banking Corporation

Oct. 2005 General Manager, Planning Dept., Readjustment of Facilities for Insured Persons Beneficiaries Organization

Aug. 2006 Senior Consultant, Financial Solution Dept., NCR Japan, Ltd. (currently Teradata Japan, Ltd.)

Oct. 2007 Senior Manager, Internal Audit Dept., Kokusai Asset Management Co., Ltd. (currently Mitsubishi UFJ Kokusai Asset Management Co., Ltd.)

June 2008 General Manager, Compliance Dept., Kokusai Asset Management Co., Ltd. (currently Mitsubishi UFJ Kokusai Asset Management Co., Ltd.)

Apr. 2012 General Manager, Disclosure Dept., Kokusai Asset Management Co., Ltd. (currently Mitsubishi UFJ Kokusai Asset Management Co., Ltd.)

Nov. 2014 General Manager, Compliance Dept., Kokusai Asset Management Co., Ltd. (currently Mitsubishi UFJ Kokusai Asset Management Co., Ltd.)

Nov. 2015 Head of Internal Control & Audit Office, J Trust Co., Ltd.

June 2017 Full-Time Audit & Supervisory Board Member, J Trust Co., Ltd. (incumbent)

Audit & Supervisory Board Member, J TRUST Card Co., Ltd (incumbent)

Audit & Supervisory Board Member, NUCS Co., Ltd. (incumbent)

Note 5 -


77

Official Title Name Date of

birth Career Summary Tenure

Shares

held

(Thousand

shares)

Audit &

Supervisory

Board Member

Masato

Inoue

Aug. 14,

1947

Apr. 1973 Joined Nomura Securities Co., Ltd.

Apr. 1995 Joined Tokai International Securities Co., Ltd. (currently,

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.)

June 1996 Director, Tokai International Securities Co., Ltd.

Jan. 2003 Director, Frontec Co., Ltd.

July 2003 President & Representative Director, Tosho Computer Systems

Co., Ltd.

Jan. 2005 Vice President, Yuasa Kenzai Kogyo Co., Ltd.

Oct. 2006 Representative Director & Chairman, Yuasa Kenzai Kogyo Co.,

Ltd.

July 2007 Established Inoue Office (incumbent)

Jan. 2008 Full-time Auditor, Hitachi Housetec Inc. (currently, Housetec

Inc.)

Jan. 2009 Director & Chairman, Hitachi Housetec Inc.

June 2011 Outside Director, Nihon Hoshou Co., Ltd.

June 2012 Audit & Supervisory Board Member, J Trust Co., Ltd.

(incumbent)

Note 4 -

Audit &

Supervisory

Board Member

Takaaki

Kojima

Feb. 19,

1947

Apr. 1971 Joined Ministry of Foreign Affairs

July 1984 Chief Budget Examiner in charge of postal affairs, Budget

Bureau, Ministry of Finance

July 1987 Director, International Convention Division, Treaties Bureau,

Ministry of Foreign Affairs

July 1989 Counsellor, Embassy of Japan in China

July 1992 Counsellor, Embassy of Japan in the UK

Jan. 1995 Minister, Embassy of Japan in the UK

Apr. 1995 Deputy Director General, Minister's Secretariat and Consular

Affairs Department, Ministry of Foreign Affairs

July 1997 Deputy Secretary General, Japan Fair Trade Commission

July 1999 Consul General of Japan in Sao Paulo, Brazil

July 2001 Minister, Embassy of Japan in the United States of America

Apr. 2002 Director-General, Intelligence and Analysis Bureau, Ministry of

Foreign Affairs

July 2004 Ambassador Extraordinary and Plenipotentiary of Japan to

Republic of Singapore

Sept. 2007 Ambassador Extraordinary and Plenipotentiary of Japan to

Australia

July 2010 Ambassador in charge of International Counter-Terrorism

Cooperation, Ministry of Foreign Affairs

Oct. 2011 Visiting Senior Research Fellow, Institute of South East Asian

Studies, Singapore

Apr. 2013 Advisor, Libera Corporation (incumbent)

Apr. 2015 Adjunct Professor, National University of Singapore (incumbent)

June 2015 Audit & Supervisory Board Member, J Trust Co., Ltd.

(incumbent)

Note 6 -

Total 23,342

Note 1: The number of shares held is rounded down to the 1,000.

Note 2: Norio Igarashi, Ryuji Mizuta and Masanori Kaneko are Outside Directors. Hideki Yamane and Takaaki Kojima

are Outside Audit & Supervisory Board Members.

Note 3: 1 year from the end of the Ordinary General Meeting of Shareholders held on June 28, 2017

Note 4: 4 years from the end of the Ordinary General Meeting of Shareholders held on June 29, 2016




78

Note 7: The total number of shares held by Mr. Nobuyoshi Fujisawa is 39,842,000 in the case where the following is

included:

A. 15,697,000 shares of the Company held by FUJISAWA PTE. LTD., which is wholly owned by Mr.

Fujisawa; and

B. 1,135,000 shares of the Company held by JAPAN POCKET CO., Ltd., which is wholly and beneficially

owned by Mr. Fujisawa.


79

6. Corporate Governance

(1) Status of the Company’s corporate governance

(Basic policy on corporate governance)

The Company adheres to a code of ethics, set forth by the following five principles:

(i) The Company shall acknowledge its social responsibility and public mission, conduct sound business

operations as a listed company, ensure transparency in its business activities, and aim to grow into a trusted

company.

(ii) Not only shall the Company comply with the letter of the law, it shall embrace the spirit in which it was

written in its efforts to achieve a fair and more affluent society for future generations.

(iii) The Company shall respect the rights of all stakeholders, contribute to the growth and development of

society and economy, and honor and respect the differences in cultures and customs.

(iv) When faced with a conflict of interest, the Company shall choose an ethical solution without fail and stand

resolutely against any and all criminal elements.

(v) When faced with a difficult ethical decision, the Company shall resolve to ensure a satisfactory outcome for

all parties involved in the matter.

Under its 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,”

the Company promotes to:

(i) Treat all stakeholders, including customers, shareholders and business partners as our customers and take

“customer oriented approach” to meet their expectations;

(ii) Tackle various issues “swiftly” while pursuing “ingenuity and improvements” without being satisfied with the

status quo;

(iii) Ensure “accurate and timely information disclosure” as well as upholding “high ethical standards” for

business execution; and

(iv) Create new services and value” to contribute to the economic expansion.

Furthermore, based on the code of ethics, the Company has established its Behavioral Principles, “J / T / R / U /

S/ T” to practice Corporate Philosophy.

“J” = Justice Conduct business with integrity

“T” = Teamwork Respect individuals to form an organization

“R” = Revolution Stimulate a spirit of innovation for new value

“U” = Uniqueness Embrace ingenuity

“S” = Safety Deliver services with sincerity

“T” = Thankfulness Express our appreciation

[1] Corporate governance structure

A. Reason for adopting present corporate governance structure and its overview

The Company adopts the following structure to maintain flexible corporate governance based on the

aforementioned basic policy on corporate governance:

(a) The Company adopts Audit & Supervisory Board.

(b) The Company has a corporate structure, which consists of Board of Directors, Audit & Supervisory

Board Members, Audit & Supervisory Board and Accounting Auditors.

(c) As of the filing date of financial statements (June 29, 2017), the number of directors is 13 and that of

Audit & Supervisory Board Members is 4. Out of the 13 male directors, 3 are outside directors. Out of

4 male Audit & Supervisory Board Members, 2 are outside Audit & Supervisory Board Members. The

Company has Audit & Supervisory Board.

(d) Although the Company has no dedicated staff to assist the outside executives, the Corporate

Management Department is in charge of the scheduling and notification of the Board of Directors’

meeting. The Department also provides advance explanation of the meeting as needed so that all

concerned parties understand its purpose.


80

<Corporate Governance Structure>

B. Other matters relating to corporate governance

Development Status of Internal Control System

Based upon the decision by the Board of Directors’ meeting, each director takes a lead in the execution

of operations within relevant departments. The Board of Directors’ meeting is held monthly under

“Regulations of the Board of Directors” to make resolutions on significant management issues and

individual transactions and to manage the progress of business results and operational performance.

Prior to the regular Board of Directors’ meeting, bills are presented to the Audit & Supervisory Board

Members in advance. Then, the meeting of Audit & Supervisory Board held shortly before the Board

of Directors’ meeting, including Outside Audit & Supervisory Board Members, deliberates the necessity

and legality of proposed bills. This is followed by sequential questions and confirmations at the Board

of Directors’ meeting to ensure the transparency of the Board of Directors’ meeting.

In addition, “Management Meeting” comprised of the executives of the Company and subsidiaries is

held every month to discuss business results as well as the management status of each business

sector’s progress and execution of operations and to implement appropriate countermeasures.

Moreover, the Company uses the electronic approval system, which allows access from outside the

Company for browsing and approval purposes, to realize quicker decision-making and better

operational efficiency.

Development Status of Risk Management System

The Group, regarding the ensuring of compliance as the premise of risk management in all respects,

has the “Compliance & Risk Management Committee” to realize better internal compliance structure.

This Committee sets internal regulations for compliance-related matters to ensure high-level

compliance awareness and, by collecting information on the risk realized though daily activities and

analyzing results, considers/discusses proper responses to any significant risk information.

Also, the Group makes every effort to prevent/mitigate risk through “Monthly Reporting,” which allows

employees to offer opinions/proposals to President, and “Compliance Report & Consultation Desk,”

which receives consultations/reports on corporate ethics from executives and employees.

Furthermore, the Group promotes the development of internal structure to prevent leakage of personal

information by stipulating “Personal Information Protection Policy” on how to handle/manage personal

information, following the implementation of the “Act on the Protection of Personal Information.”

Current system to oversee if operations at subsidiaries are properly carried out

To ensure the appropriate execution of duties by subsidiaries, officers and employees of the Company

Accounting

Auditors

Audit &

Supervisory

Board

Board of Directors

President

Headquaters, Branches and Subsidiaries

Compliance Supervisor

(Appointment & dismissal)

(Advice &

consultation)

(Supervision & report)

(Report)

(Report &

consultation)

Complicance & Risk

Management Committee

Management

Meeting

Shareholder's Meeting

(Report &

instruction)

(Audit)

Legal

Counsel

(Appointment

& dismissal)

(Audit)(Cooperation)

(Audit)(Execution

of duties)

(Instruciton)

(instruction)

(Enlightenment

Activities)

Internal

Audit Team

(Report &

consultation)

Compliance Report &

Consultation Desk


81

may assume the offices of directors or Audit & Supervisory Board Members, as a general rule, to

oversee if operations at subsidiaries are properly carried out. Also, at subsidiaries, the Company’s

Internal Audit Team, Audit & Supervisory Board Members and Audit & Supervisory Board may conduct

an audit directly.

In addition, at the monthly Management Meeting attended by executives of the Company and its

subsidiaries, the Company reviews the execution of duties by subsidiaries and takes appropriate

measures.

C. Overview of Contracts for Limitation of Liability

The Company, pursuant to the provisions set forth in Article 427, Paragraph 1 of the Companies Act, has

entered into a contract limiting liability for damages with Outside Directors and Outside Audit & Supervisory

Board Members (excluding Mr. Hideki Yamane as a Full-Time Audit & Supervisory Board Member) under

Article 423, Paragraph 1 of the same act. The limit of liability is the minimum amount as stipulated by law.

[2] Status of internal audit and company audit

The Company has the Internal Audit Team (4 members), which conducts internal audit to detect regulatory

violation and potential risks and specific internal audit tailored to the business. The reporting structure is put in

place – results of internal audit are reported to President in the form of Audit Reports, department heads directly

receive audit findings, and then they file Improvement Reports on corrective action.

Audit Reports are circulated among relevant directors and department heads to help improve operations in the

corresponding department. Additionally, the Group endeavors to prevent any acts that create disadvantages

for the Company by setting up Compliance Report and Consultation Desk, a point of contact for whistle blowing,

in Internal Audit Team.

Internal Audit Team monitors the result of subsidiary’s internal audit to secure healthy operation of subsidiaries

and offer advice, proposal etc. to subsidiary’s Internal Audit Team, if necessary. Furthermore, Internal Audit

Team conducts direct audit of subsidiaries within legal boundaries, as a rule, to find illegal or deviant conduct

and issue improvement order, etc.

The Company adopts the system of Audit & Supervisory Board Members. The Audit & Supervisory Board,

composed of 4 members (2 of whom are outside members), is held every month. Full-Time Audit & Supervisory

Board Members primarily conduct legality audit to examine whether or not each director's execution of duties

is based on legal stipulation as well as the Articles of Incorporation. In close cooperation with Internal Audit

Team, the Board ascertains if his/her duties are executed in a lawful and regulated manner.

Audit & Supervisory Board Members exchange their views with Company’s accounting auditor, from time to

time, to gather information and develop auditing environments.

Outside Directors collect necessary information by attending Compliance & Risk Management Committee and

exchanging their views with Audit & Supervisory Board Members. Likewise, Outside Audit & Supervisory Board

Members receive findings of an internal audit from Internal Audit Team and seek information gathering by

exchanging their views with Company’s accounting auditor.

[3] Status of accounting audit

The Company undergoes an accounting audit by YUSEI Audit & Co. pursuant to the provisions of the

Companies Act and the Financial Instruments and Exchange Act. YUSEI Audit & Co. and its managing

members have no conflict of interest with the Company that should be mentioned subject to the provisions of

the Certified Public Accountants Act. The names of certified public accountants who conducted the audit and

the composition of assistants involved in the accounting audit for this fiscal year are as follows:

Name of certified public accountant who conducted the

Company’s accounting audit

Audit corporation to which

the accountant belongs

Consecutive

years of audit

Yoshitaka Kato, Designated Partner, Managing Member YUSEI Audit & Co. 1 year

Ryouichi Komatsu, Designated Partner, Managing Member YUSEI Audit & Co. 1 year

Takuya Ishigami, Designated Partner, Managing Member YUSEI Audit & Co. 1 year

Satoru Oyoshi, Designated Partner, Managing Member YUSEI Audit & Co. 1 year

Note: 21 certified public accountants, 6 CPA passers and 11 others provide supplementary assistance

in the accounting audit.


82

[4] Outside Directors and Outside Audit & Supervisory Board Members

The Company has appointed 3 Outside Directors and 2 Outside Audit & Supervisory Board Members.

The Group has no personal, capital, business or other relationship with Mr. Norio Igarashi and Mr. Ryuji Mizuta,

Outside Directors, and Mr. Takaaki Kojima, an Outside Audit & Supervisory Board Member.

Mr. Masanori Kaneko, an Outside Director, is an advisor of THE SAIKYO BANK, LTD. (hereinafter, “SAIKYO

BANK”). The Group’s relationship with SAIKYO BANK includes borrowing of funds and loan guarantees. Mr.

Kaneko is an Audit & Supervisory Board Member of SAIKYO LEASING CORPORATION, and a capital

relationship exists in which SAIKYO LEASING CORPORATION holds 2,890,000 shares of the Company’s

common shares.

Mr. Hideki Yamane, an Outside Audit & Supervisory Board Member, was employed at SAIKYO BANK. There

is a relationship between the Group and SAIKYO BANK such as borrowing of funds and loan guarantees, etc.

These Outside Directors and Outside Audit & Supervisory Board Members provide useful suggestions and

opinions on the management of the Company, based on their professional knowledge from an objective

standpoint as outside experts. Their responsibilities include attendance at meetings of the Board of Directors

and Audit & Supervisory Board, which are held ordinarily or extraordinarily, and request explanations from

directors and employees directly when necessary.

The Company has no explicitly defined policy or criteria for independence to appoint Outside Directors and

Outside Audit & Supervisory Board Members. The Company, however, makes a judgment on appointment on

the assumption that an adequate level of independence is ensured in execution of duties as outside experts

independent from the Company’s executives in consideration of their career history and relationships with the

Company.

Outside Directors Mr. Norio Igarashi, Mr. Ryuji Mizuta and Mr. Masanori Kaneko are appointed as independent

directors who have no conflict of interest with general shareholders.

[5] Remuneration of Executives, etc.

A. Total amount of remuneration, etc. per classification of executives, total amount of remuneration, etc. by

category, and number of executives

Classification of Executives

Total amount of

remuneration

(Millions of yen)

Total amount of remuneration, etc. by category

(Millions of yen) Number of

executives Base

amount

Stock

Option Bonus

Retirement

benefits

Directors

(excl. Outside Directors) 199 199 - - - 9

Audit & Supervisory Board

Members (excl. Outside

Audit & Supervisory Board

Members)

14 14 - - - 2

Outside Executives 35 35 - - - 5

Total 249 249 - - - 16

Note: The amount of remuneration of directors does not include remuneration as employees (with

regard to directors who concurrently serve as employees).

B. Total amount of consolidated remuneration, etc. per executive

Not applicable.

C. Significant matters on remuneration as employee regarding executives who concurrently serve as

employees

Not applicable.

D. Policy on determining the amount of remuneration of executives or its calculation

The Company has neither a policy on determining the amount of remuneration of executives nor its

calculation method.

[6] Status of shareholding

With regard to the Company and its consolidated subsidiaries, JTRUST ASIA PTE. LTD. records the largest

amount of investment shares on the balance sheet, as specified below.

A. For investment shares held for purposes other than investment purposes, the number of company names


83

and total amount recorded on the balance sheet

1 issue of securities 6,962 million yen

B. For investment shares held for purposes other than investment purposes, their company name, number

of shares, amount recorded on the balance sheet and purpose of shareholding

Previous fiscal year

Investment shares for specific purposes

Company name Number of shares

Amount recorded on

the balance sheet

(Millions of yen)

Purpose of

shareholding

Bank Mayapada

International Tbk PT 430,442,100 5,706

Improvement of

business activities

GuocoLand Ltd 7,000,000 1,049 Improvement of

business activities

Group Lease PCL 98,100,000 6,301 Improvement of

business activities

Deemed stockholding

Not applicable.

Current fiscal year


Company name Number of shares

Amount recorded on

the balance sheet

(Millions of yen)

Purpose of

shareholding

Group Lease PCL 98,100,000 6,962 Improvement of

business activities

Deemed stockholding

Not applicable.

C. For investment shares held purely for investment purposes, the total amount recorded on the balance

sheet in the previous and current fiscal years as well as the total amount of dividend income, gain or loss

on sale and gain or loss on valuation in the current fiscal year

Not applicable.

D. For investment shares whose purposes are changed from investment to others, their company name,

number of shares and amount recorded on the balance sheet

Not applicable.

E. For investment shares whose purposes are changed from others to investment, their company name,

number of shares and amount recorded on the balance sheet

Not applicable.

The status of shares held by the filing company is as follows:

A. For investment shares held for purposes other than investment purposes, the number of company names

and total amount recorded on the balance sheet

2 securities, 0 million yen

B. For investment shares held for purposes other than investment purposes, their company name, number

of shares, amount recorded on balance sheet and purpose of shareholding



Information has been omitted because the Company holds unlisted shares only.

Deemed stockholding

Not applicable.


84

Current fiscal year


Information has been omitted because the Company holds unlisted shares only.

Deemed stockholding

Not applicable.

C. For investment shares held purely for investment purposes, the total amount recorded on balance sheet

in the previous and current fiscal years as well as the total amount of dividend income, gain or loss on

sale and gain or loss on valuation in the current fiscal year

Not applicable.

D. For investment shares whose purposes are changed from investment to others, their company name,

number of shares and amount recorded on balance sheet

Not applicable.

E. For investment shares whose purposes are changed from others to investment, their company name,

number of shares and amount recorded on balance sheet

Not applicable.

[7] Number of Directors

The Company’s Articles of Incorporation stipulates that the number of directors should not be more than 15.

[8] Resolution requirement for election of Directors

The Articles of Incorporation stipulates that voting on resolutions for election of directors shall take place in the

presence of shareholders who represent one-third or more of total voting rights, and the majority of the votes

of such shareholders without dependency on cumulative votes shall be the requisite for adoption of the

resolution.

[9] Purchase of own shares

Pursuant to the provisions in Article 165, Paragraph 2 of the Companies Act, the Company includes in its

Articles of Incorporation a clause allowing purchase of its own shares upon a resolution of the Board of Directors’

meeting. This allows purchase of its own shares through market transactions, etc. to realize the flexible capital

policy in response to the change in the Company’s business conditions.

[10] Requirements for special resolution at the General Meeting of Shareholders

The Company’s Articles of Incorporation stipulates that special resolution in the Article 309, Paragraph 2 of the

Companies Act shall be adopted at the General Meeting of Shareholders in the presence of shareholders who

represent one-third or more of total voting rights, and by two-thirds or more of affirmative votes of such

shareholders. This stipulation is aimed at smooth operation of the General Meeting of Shareholders by lowering

the quorum for special resolution at the General Meeting of Shareholders.

[11] Decision-making body to approve dividends of surplus and relevant matters

The Articles of Incorporation stipulates that matters set out in each item of Article 459, Paragraph 1 of the

Companies Act, including dividends of surplus, shall be determined by a resolution of the Board of Directors’

meeting, instead of a resolution of the General Meeting of Shareholders, unless otherwise prescribed by law.

This stipulation is aimed at flexible profit return to shareholders by authorizing the Board of Directors’ meeting

to determine dividends of surplus and relevant matters.

[12] Exemption from liability of Directors and Audit & Supervisory Board Members

Pursuant to the provisions in Article 426, Paragraph 1 of the Companies Act, the Company may exempt

Directors (including former Directors) and Audit & Supervisory Board Members (including former Audit &

Supervisory Board Members) from the liabilities prescribed in Article 423, Paragraph 1 of the Act, to the extent

permitted by law. This stipulation aims at establishing the environment in which Directors and Audit &

Supervisory Board Members may fully demonstrate their execution abilities to play the roles as expected.


85

(2) Remuneration for audit

[1] Overview of remuneration paid to Certified Public Accountants, etc.

(Millions of yen)

Previous Consolidated Fiscal Year Current Consolidated Fiscal Year

Classification

Remuneration

based on Audit and

Attestation Services

Remuneration

based on

non-Audit Services

Remuneration

based on Audit and

Attestation Services

Remuneration

based on

non-Audit Services

Filing company 114 - 260 -

Consolidated subsidiary 16 - 49 -

Total 130 - 310 -

[2] Other significant remuneration

(Previous consolidated fiscal year)

The Company’s subsidiaries pay remuneration to Certified Public Accountants, etc. as follows:

(Millions of yen)

Company name Payee Description Amount

ADORES, Inc. Koa Audit Corporation Audit fees 34

JT Chinae Savings Bank Co., Ltd. Deloitte Anjin LLC Audit fees 17

JTRUST ASIA PTE. LTD. PKF-CAP LLP Audit fees 4

TA Asset Management Co., Ltd. Deloitte Anjin LLC Audit fees 4

JT Savings Bank Co., Ltd. KPMG Samjong Accounting Corp. Audit fees 9

JT Capital Co., Ltd. KPMG Samjong Accounting Corp. Audit fees 10

PT Bank JTrust Indonesia Tbk. Tjahjadi & Tamara Audit fees 20

PT JTRUST INVESTMENTS INDONESIA Tjahjadi & Tamara Audit fees 2

Note: For JT Chinae Savings Bank Co., Ltd. and JT Savings Bank Co., Ltd., 6-month remuneration is listed

above due to a change in the account closing date during the current consolidated fiscal year.

(Current consolidated fiscal year)

The Company and its subsidiaries pay remuneration to Certified Public Accountants, who belong to the

same network as the Company’s Certified Public Accountants. Details are as follows:

(Millions of yen)

Company name Payee Description Amount

J Trust Co., Ltd. Kosasih, Nurdiyaman, Mulyadi,

Tjahjo&Rekan Audit fees 15

PT Bank JTrust Indonesia Tbk. Kosasih, Nurdiyaman, Mulyadi,


PT JTRUST INVESTMENTS INDONESIA Kosasih, Nurdiyaman, Mulyadi,


[3] Services not relating to auditing, provided by Certified Public Accountants, etc. for Filing Company

(Previous consolidated fiscal year)

Not applicable.

(Current consolidated fiscal year)

Not applicable.

[4] Policy for determining remuneration for audit

The Company has a policy of determining remuneration for Certified Public Accountants, etc. appropriately,

based on provisions in the Audit Service Agreement and in light of such factors as characteristics of duties.


86

V. Financial Information

1. Methods for Preparing Consolidated Financial Statements and Financial Statements

(1) The Company prepares its consolidated financial statements based on the “Ordinance on Terminology, Forms, and

Preparation Methods of Consolidated Financial Statements” (Ordinance of the Ministry of Finance No. 28 of 1976;

hereinafter, “Ordinance on Consolidated Financial Statements”).

(2) The Company prepares its financial statements based on the “Ordinance on Terminology, Forms, and Preparation

Methods of Financial Statements” (Ordinance of the Ministry of Finance No. 59 of 1963; hereinafter, “Ordinance on

Financial Statements, etc.”).

In addition, the Company meets requirements for special provisions on filing financial statements, and thus prepares

financial statements pursuant to Article 127 of the Ordinance on Financial Statements, etc.

2. Audit and Attestation

The Company underwent audits by YUSEI Audit & Co. on its consolidated financial statements for the consolidated

fiscal year (from April 1, 2016 to March 31, 2017) and financial statements for fiscal year (from April 1, 2016 to March

31, 2017) under Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act.

In addition, the Company’s auditor has been changed as follows.

Previous consolidated fiscal year and previous business year: Hibiki Audit Corporation

Current consolidated fiscal year and current business year: YUSEI Audit & Co.

The matters stated in the Extraordinary Report are as follows.

(1) Name of Incoming and Outgoing Certified Public Accountant responsible for audit certification

[1] Name of incoming certified public accountant

YUSEI Audit & Co.

[2] Name of outgoing certified public accountant

Hibiki Audit Corporation

(2) Date of change

June 29, 2016

(3) Most recent date of appointment of outgoing certified public accountant

June 26, 2015

(4) Opinions on audit reports and other documents prepared by the outgoing certified public accountant

in the past three years

Not applicable.

(5) Reason and background behind change

The official term of Hibiki Audit Cooperation, the Company’s previous certified public accountant expired at the

conclusion of the 40th Ordinary General Meeting of Shareholders held on June 29, 2016. The Company reviewed

its accounting auditor in anticipation of further global business expansion. As a result, the Company has appointed

YUSEI Audit & Co. as its accounting auditor.

(6) Opinion of the outgoing certified public accountant concerning the statements in audit reports and other

documents regarding the reason and background described in (5) above.

The Company received a reply stating that there is no particular opinion.

3. Special Measures to Ensure Appropriateness of Consolidated Financial Statements and Relevant

Documents

The Company implements special measures to ensure appropriateness of consolidated financial statements and

relevant documents.

In particular, the Company, as a member of Financial Accounting Standards Foundation, works toward developing and

disclosing corporate accounting standards proactively so as to understand the contents of accounting standards, etc.

properly or respond to changes in accounting standards, etc. appropriately.

Also, the Company participates actively in training sponsored by Financial Accounting Standards Foundation, disclosure

support companies, etc.


87

1. Consolidated Financial Statements

(1) Consolidated financial statements

[1] Consolidated balance sheets

(Millions of yen)

Previous consolidated

fiscal year (March 31, 2016)


(March 31, 2017)

Assets

Current assets

Cash and deposits 108,682 *1 101,172 *1

Commercial notes 1,428 *3 928 *3

Accounts receivable – operating loans 49,505 *1 *3 49,098 *1 *3

Loans by banking business 230,532 *3 *5 326,996 *3 *5

Advances paid – installment 2,449 *1 *5 2,726 *1 *5

Purchased receivables 9,940 12,146*1

Subrogation receivable 1,462 1,223

Securities 25,287 *1 30,459 *1

Operational investment securities 13,057 21,494

Merchandise and finished goods 2,445 *1 3,221 *1

Work in process 1,604 *1 3,015 *1

Deferred tax assets 1,106 1,287

Accounts receivable – other 9,754 8,806

Other 7,684 *1 14,555 *1

Allowance for doubtful accounts (16,809) (23,801)

Total current assets 448,131 553,331

Non-current assets

Property, plant and equipment

Buildings and structures 9,915 8,762

Accumulated depreciation (6,611) (5,950)

Buildings and structures, net 3,304 *1 2,811 *1

Amusement machine 16,244 15,375

Accumulated depreciation – amusement machine (15,263) (14,473)

Amusement machine, net 981 901

Land 2,050 *1 1,541 *1

Other 3,775 4,083

Accumulated depreciation (2,600) (2,863)

Other, net 1,174 1,220

Total property, plant and equipment 7,510 6,474

Intangible assets

Goodwill 34,536 29,727

Other 4,820 *1 4,650 *1

Total intangible assets 39,356 34,378

Investments and other assets

Investment securities 970 144

Investments in capital 355 362

Net defined benefit asset - 0

Long-term operating loans receivable 2,083 *2 *3 1,578 *2 *3

Deferred tax assets 1,445 1,143

Other 11,690 *1 13,434 *1*6

Allowance for doubtful accounts (2,884) (2,198)

Total investments and other assets 13,660 14,465

Total non-current assets 60,527 55,319

Total assets 508,659 608,650


88

(Millions of yen)


fiscal year (March 31, 2016)


(March 31, 2017)

Liabilities

Current liabilities

Notes discounted 1,381 916

Current portion of bonds 60 111*1

Short-term loans payable 14,317 *1 9,798 *1

Current portion of long-term loans payable 13,391 *1 18,733 *1

Income taxes payable 769 1,213

Deposits by banking business 271,117 364,419

Other 10,604 30,900

Total current liabilities 311,642 426,093

Non-current liabilities

Bonds payable 2,169 2,372*1

Long-term loans payable 21,788 *1 24,353*1

Provision for loss on guarantees 424 *4 352 *4

Net defined benefit liability 579 151

Provision for loss on litigation 1,192 1,138

Other 2,205 *7 2,525 *7

Total non-current liabilities 28,360 30,893

Total liabilities 340,002 456,987

Net assets

Shareholders' equity

Capital stock 53,616 53,630

Capital surplus 52,572 53,716

Retained earnings 60,777 49,499

Treasury shares (406) (7,685)

Total shareholders' equity 166,560 149,161

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 136 1,904

Foreign currency translation adjustment (3,469) (5,343)

Remeasurements of defined benefit plans (112) 30

Total accumulated other comprehensive income (3,445) (3,409)

Subscription rights to shares 167 168

Non-controlling interests 5,373 5,742

Total net assets 168,656 151,663

Total liabilities and net assets 508,659 608,650


89

[2] Consolidated statement of income and consolidated statement of comprehensive income

[Consolidated statement of income]

(Millions of yen)


(From April 1, 2015 till March 31, 2016)



Operating revenue

Discount revenue 122 59

Interest on loans 3,475 4,164

Collection from purchased receivable 3,466 3,916

Installment payment paying for commission 229 350

Commission fee 511 506

Sales on real estate business 6,217 6,763

Interest on deposits 152 146

Other financial revenue 840 1,140

Sales on general entertainment business 16,557 15,397

Banking business revenue 31,716 40,339

Other operating revenue 12,189 12,246


Operating expenses

Discount on notes payable expense 48 29

Interest on loans 1,020 1,480

Cost of purchased receivable 1,060 1,411

Cost of sales – real estate 5,183 *1 5,690

Cost of sales on general entertainment business 13,829 *1 12,712 *1

Banking business expenses 16,217 17,791

Other operating expenses 1,597 *1 4,846 *1

Total operating expenses 38,957 43,963

Operating gross profit 36,521 41,068

Selling, general and administrative expenses

Provision of allowance for doubtful accounts 7,389 15,010

Bad debts expenses 109 9

Provision for loss on interest repayment 344 -

Provision for loss on guarantees 18 (72)

Directors' compensations 656 766

Salaries and allowances 10,866 10,598

Share-based compensation expenses 31 -

Retirement benefit expenses 520 526

Commission fee 4,504 4,654

Amortization of goodwill 3,147 3,308

Other 13,047 12,034

Total selling, general and administrative expenses 40,635 *2 46,837 *2

Operating loss (4,114) (5,769)


90

(Millions of yen)





Non-operating income

Interest income 2 4

Dividend income 13 35

House rent income 65 24

Gain on investment of securities 147 25

Compensation income 107 -

Co-sponsor advertising fee 55 53

Miscellaneous income 260 190

Total non-operating income 652 334

Non-operating expenses

Interest expenses 156 158

Depreciation 10 7

Foreign exchange losses 871 995

Share of loss of entities accounted for using equity method 101 2

Miscellaneous loss 75 148

Total non-operating expenses 1,216 1,312

Ordinary loss (4,678) (6,747)

Extraordinary income

Gain on sales of non-current assets 277 *3 725 *3

Gain on sales of shares of subsidiaries and associates 601 28

Gain on Sales if investment securities - 217

Reversal of allowance for doubtful accounts - 164

Gain on bargain purchase - 24

Gain on reversal of foreign currency translation adjustment 830 -

Other 43 175

Total extraordinary income 1,753 1,335

Extraordinary losses

Loss on sales of non-current assets 57 *4 234 *4

Loss on abandonment of non-current assets 22 *5 56 *5

Impairment loss 1,711 *6 362 *6

Loss on sales of shares of subsidiaries and associates 285 -

Loss on valuation of investment securities - 349

Provision for loss on litigation 420 -

Business structure improvement expenses - 1,772*7

Compensation expenses - 100

Other 179 71

Total extraordinary losses 2,676 2,948

Profit (loss) before income taxes (5,602) (8,359)

Income taxes – current 1,513 1,690

Income taxes – deferred (307) (368)

Total income taxes 1,206 1,321

Profit (loss) (6,808) (9,681)

Profit (loss) attributable to non-controlling interests (1,095) 195

Profit (loss) attributable to owners of parent (5,712) (9,876)


91

[Consolidated statement of comprehensive income]

(Millions of yen)





Profit (loss) (6,808) (9,681)

Other comprehensive income

Valuation difference on available-for-sale securities (20) 1,800

Foreign currency translation adjustment (11,474) (2,054)

Remeasurements of defined benefit plans, net of tax (123) 144

Share of other comprehensive income of entities accounted for

using equity method - (0)

Total other comprehensive income (11,618) * (109) *

Comprehensive income (18,426) (9,790)

Comprehensive income attributable to

Comprehensive income attributable to owners of parent (17,129) (9,840)

Comprehensive income attributable to non-controlling interests (1,296) 49


92

[3] Consolidated Statements of Changes in Shareholders’ Equity

Previous consolidated fiscal year (April 1, 2015 – March 31, 2016)

(Millions of yen)


Capital stock Capital surplus Retained earnings Treasury shares

Total

shareholders'

equity

Balance at beginning of

current period 53,604 52,945 73,709 (197) 180,062

Changes of items during

period

Issuance of new shares 12 12 24

Dividends of surplus (1,164) (1,164)

Profit (Loss) attributable

to owners of parent (5,712) (5,712)

Purchase of treasury

shares (6,264) (6,264)

Disposal of treasury

shares 0 0 0

Retirement of treasury

shares (0) (6,055) 6,055 -

Change in ownership

interest of parent due to

transactions with non-

controlling interests

(385) (385)

Net changes of items

other than shareholders'

equity

Total changes of items

during period 12 (373) (12,931) (208) (13,501)

Balance at end of current

period 53,616 52,572 60,777 (406) 166,560


93


Subscriptio

n Rights to

shares

Minority

interests

Total net

assets

Valuation

difference on

available-for-

sale

securities

Foreign

currency

translation

adjustment

Re-

measurement

s of defined

benefit plans

Total

accumulated

other

comprehensi

ve income


current period (42) 8,005 9 7,972 167 6,663 194,865


period

Issuance of new shares 24

Dividends of surplus (1,164)

Profit attributable to

owners of parent (5,712)


shares (6,264)

Disposal of treasury

shares 0

Retirement of treasury

shares -

Change in ownership




(385)



equity

179 (11,475) (121) (11,417) 0 (1,290) (12,707)


during period 179 (11,475) (121) (11,417) 0 (1,290) (26,208)


period 136 (3,469) (112) (3,445) 167 5,373 168,656

Current consolidated fiscal year (April 1, 2016 – March 31, 2017)

(Millions of yen)


Capital stock Capital surplus Retained

earnings Treasury shares

Total

shareholders'

equity


current period 53,616 52,572 60,777 (406) 166,560


period

Issuance of new shares 13 13 27

Dividends of surplus (1,401) (1,401)


owners of parent (9,876) (9,876)


shares (7,279) (7,279)

Change in ownership




1,130 1,130



equity


during period 13 1,144 (11,278) (7,279) (17,398)


period 53,630 53,716 49,499 (7,685) 149,161


94


Subscriptio

n Rights to

shares

Minority

interests

Total net

assets

Valuation

difference on

available-for-

sale

securities

Foreign

currency

translation

adjustment

Re-

measurement

s of defined

benefit plans

Total

accumulated

other

comprehensi

ve income


current period 136 (3,469) (112) (3,445) 167 5,373 168,656


period




owners of parent (9,876)


shares (7,279)

Change in ownership




1,130



equity

1,767 (1,874) 142 35 0 368 405


during period 1,767 (1,874) 142 35 0 368 (16,993)


period 1,904 (5,343) 30 (3,409) 168 5,742 151,663


95

[4] Consolidated statements of cash flows

(Millions of yen)



Current fiscal year


Cash flows from operating activities

Profit (loss) before income taxes (5,602) (8,359)


Depreciation 2,549 2,390

Loss (gain) on sales of non-current assets (219) (491)

Loss on abandonment of non-current assets 22 56

Impairment loss 1,711 362

Loss (gain) on sales of shares of subsidiaries and associates (315) (28)

Loss (gain) on sales of investment securities - (217)

Loss (gain) on valuation of investment - 349

Gain on reversal of foreign currency translation adjustment (830) -

Gain on bargain purchase - (24)

Amortization of goodwill 3,147 3,308

Loss (gain) on investments in securities (147) (25)

Business structure improvement expenses - 1,772

Increase (decrease) in allowance for doubtful accounts (7,207) 6,225

Bad debts written off 7,701 4,185

Increase (decrease) in provision for loss on business structure

improvement (905) -

Increase (decrease) in provision for loss on interest repayment 61 -

Increase (decrease) in provision for loss on guarantees 18 (72)

Increase (decrease) in provision for loss on litigation 635 (5)

Increase (decrease) in net defined benefit liability 195 (236)

Increase (decrease) in deposits by banking business 10,981 89,868

Interest and dividend income (16) (40)

Discount expenses and interest expenses 14,106 16,426

Foreign exchange losses (gains) 1,442 1,491

Decrease (increase) in inventories (846) (1,046)

Decrease (increase) in long-term operating loans receivable (756) 148

Decrease (increase) in pledged deposit (2,431) 156

Decrease (increase) in restricted deposits 1,653 (2,912)

Other (910) (7,143)

Subtotal 24,070 106,142

Interest and dividend income received 16 40

Interest expenses paid (15,309) (15,343)

Income tax paid (3,251) (1,922)

Income tax refund - 1,491

Business structure improvement expenses paid - (1,722)

Compensation paid - (100)

Subtotal 5,525 88,534

Increase in commercial notes (4,356) (2,313)

Decrease in commercial notes 5,277 2,813

Increase in operating loans receivable (25,830) (35,028)

Decrease in operating loans receivable 33,163 *2 35,813 *2

Net decrease (increase) in loans by banking business (40,298) (95,597)

Decrease (increase) in investment securities for sale (7,045) (6,276)

Increase in advances paid – installment (2,300) (2,276)

Decrease in advances paid – installment 1,242 1,984

Increase in purchased receivables (836) (6,489)

Decrease in purchased receivables 3,530 4,319

Increase in subrogation receivable (1,155) (914)

Decrease in subrogation receivable 648 996

Net cash provided by (used in) operating activities (32,435) (14,434)


96

(Millions of yen)



Current fiscal year


Cash flows from investing activities

Decrease (increase) in time deposits 1,592 721

Purchase of property, plant and equipment (2,593) (1,937)

Proceeds from sales of property, plant and equipment 1,775 1,175

Purchase of intangible assets (953) (1,558)

Purchase of securities (76,581) (130,242)

Proceeds from sales of securities 34,770 101,208

Proceeds from redemption of securities 34,419 24,984

Purchase of investment securities (198) (74)

Proceeds from sales of investment securities 724 849

Purchase of shares of subsidiaries and associates (206) (171)

Proceeds from sales of shares of subsidiaries and associates 100 -

Payments for sales of shares of subsidiaries resulting in change

in scope of consolidation (499) -

Proceeds from sales of shares of subsidiaries resulting in

change in scope of consolidation 374 100

Proceeds from purchase of shares of subsidiaries resulting in

change in scope of consolidation - 46

Payment for transfer of business (620) -

Other - 124

Net cash provided by (used in) investing activities (7,896) (4,774)

Cash flows from financing activities

Increase in notes discounted 4,488 2,329

Decrease in notes discounted (5,332) (2,794)

Net increase (decrease) in short-term bonds payable - 14,959

Increase in short-term loans payable 22,190 21,423

Decrease in short-term loans payable (15,229) (26,059)

Proceeds from long-term loans payable 36,718 26,189

Repayments of long-term loans payable (21,667) (18,122)

Proceeds from issuance of bonds 200 470

Redemption of bonds (81) (75)

Repayments of lease obligations (132) (29)

Proceeds from sales and leasebacks 7 29

Proceeds from disposal of treasury shares 0 -

Purchase of treasury shares (6,271) (7,279)

Proceeds from issuance of subscription rights to shares 13 14

Proceeds from exercise of share options 14 15

Cash dividends paid (1,164) (1,401)

Dividends paid to non-controlling interests (158) (79)

Payments from changes in ownership interests in subsidiaries

that do not result in change in scope of consolidation (558) -

Proceeds from changes in ownership interests in subsidiaries

that do not result in change in scope of consolidation - 1,345

Other (0) (0)

Net cash provided by (used in) financing activities 13,026 10,935

Effect of exchange rate change on cash and cash equivalents (2,529) (1,303)

Net increase (decrease) in cash and cash equivalents (29,833) (9,576)

Cash and cash equivalents at beginning of period 118,060 88,226

Cash and cash equivalents at end of period 88,226 *1 78,650 *1


97

[Notes]

(Significant matters relating to the preparation of consolidated financial statements)

1. Matters relating to the scope of consolidation

(1) Number of consolidated subsidiaries: 22 companies

Names of major subsidiaries:

Keynote Co., Ltd.

Partir Servicer Co., Ltd.


J Trust System Co., Ltd.

J TRUST Card Co., Ltd.

ADORES, Inc.

JT Chinae Savings Bank Co., Ltd.

JTRUST ASIA PTE. LTD.

TA Asset Management Co., Ltd.

Highlights Entertainment Co., Ltd.

PT Bank JTrust Indonesia Tbk.

JT Savings Bank Co., Ltd.

JT Capital Co., Ltd.

PT JTRUST INVESTMENTS INDONESIA

And 8 other

During the current consolidated fiscal year, the Group acquired all shares of Liberal Asset Co., Ltd., and

established Highlights Architect Co., Ltd. These companies are accordingly included in the scope of

consolidation.

Meanwhile, the Group completed liquidation proceedings for a Singapore corporation, JTRUST FINTECH

PTE. LTD. (formerly, JTRUST BITCOIN PTE. LTD.). This company is accordingly excluded from the scope

of consolidation.

In addition, BREAK ASIA LIMITED, which is a newly established consolidated subsidiary of the Company is

excluded from the scope of consolidation due to the transfer of all shares of Break Co., Ltd.

(2) Names, etc. of major non-consolidated subsidiaries

Not applicable.

2. Application of the equity method

(1) Number of non-consolidated subsidiaries accounted for by equity method: None

(2) Number of subsidiaries and associates accounted for by equity method: 1 company

In the current consolidated fiscal year, PT Group Lease Finance Indonesia, which was jointly established by

Group Lease PCL and JTRUST ASIA PTE. LTD., the Company’s consolidated subsidiary, is included in the

scope of application of the equity method.

3. Accounting period of consolidated subsidiaries

The table below shows consolidated subsidiaries whose closing date differs from the consolidated closing date.

Financial statements use their provisional settlement of account based on the full-year business result as of the

consolidated closing date.

Company name Closing date

NL Value Capital Co., Ltd. End of November

JT Chinae Savings Bank Co., Ltd. End of December

PT Bank JTrust Indonesia Tbk. End of December

JT Savings Bank Co., Ltd. End of December

JT Capital Co., Ltd. End of December

PT JTRUST INVESTMENTS INDONESIA End of December

From the fiscal year ended March 31, 2017 onwards, PT Bank JTrust Indonesia Tbk. and PT JTRUST

INVESTMENTS INDONESIA provisionally settle accounts as of the consolidated closing on March 31.

Accordingly, consolidated result for the current fiscal year covers their 15-month performance (January 1, 2016

– March 31, 2017).


98

The change aims for more efficient Group-wide business operation including budgeting, performance

management and financial closing, as well as for more appropriate information disclosure of the subsidiaries.

In addition, the Company has developed a system to settle the accounts timely at the consolidated closing date

including quarterly results. As a result, the Company decided and unified the provisional settlement date in the

fourth quarter in order to contribute to more appropriate information disclosure.

PT Bank JTrust Indonesia Tbk. and PT JTRUST INVESTMENTS INDONESIA have adopted their distinctive

method to adjust their profit and loss in quarterly period from January 1, 2016 to March 31, 2016 through

consolidated income statement. The change caused an increase of: (i) 3,560 million yen in operating revenue;

(ii) 677 million yen in operating loss; (iii) 744 million yen in ordinary loss; and (iv) 722 million yen in loss

attributable to owners of parent.

Fiscal year-ends for other consolidated subsidiaries are the same as the consolidated closing date.

4. Accounting policies

(1) Basis and methods of valuation for significant assets

[1] Securities

Securities held for sale

Market value method (Cost of securities sold is computed using the moving-average method.)

Bonds held to maturity

Amortized cost method (interest method)

Other securities

Securities with market value

Market value method based on the market price as of the consolidated closing date (Valuation

differences are directly charged or credited to the shareholders’ equity and cost of securities sold

is computed using the moving-average method.)

Securities without market value

Cost method by the moving-average method

[2] Derivatives

Market value method

[3] Inventories

Merchandise and finished goods, and work in process

Cost method based on the specific identification method (computed by writing down the book value,

based on the decline in profitability), primarily.

(2) Depreciation method of significant depreciable assets

[1] Property, plant and equipment (excluding leased assets)

Declining-balance method, primarily

Useful life

Buildings and structures: 3-50 years

Amusement machine: 3-5 years

[2] Intangible assets (excluding leased assets)

Straight-line method

Software for internal use is amortized over the useful life period of five years as set by the Company.

[3] Long-term prepaid expenses


[4] Leased assets

Declining-balance method for leased property, plant and equipment (lease period as a useful life)

Straight-line method for intangible leased assets (lease period as a useful life)

(3) Accounting for significant allowance

[1] Allowance for doubtful accounts

To provide for bad debts expenses, the uncollectible amount is estimated and recorded based on the

actual loan-loss ratio for general receivables and in light of collectability of each account for specific

receivables potentially falling into doubtful accounts.

[2] Provision for loss on guarantees

To provide for losses from the fulfillment of obligations for the credit guarantee services in tie-up with


99

financial institutions, the estimated loss amount is recorded as of the end of the current consolidated

fiscal year.

[3] Provision for loss on litigation

To provide for losses from lawsuits, the estimated loss amount is recorded as of the end of the current

consolidated fiscal year.

(4) Accounting for retirement benefits

For the calculation of retirement benefit obligations, the method for allocating the estimated retirement

benefits to the current consolidated fiscal year is based on the benefit formula.

To provide for employees’ retirement benefits, net defined benefit liability is recorded by subtracting the

pension asset from the retirement benefit obligations based on the amount estimated as of the end of the

current consolidated fiscal year.

If the pension asset exceeds retirement benefit obligations, the excess amount is recorded as asset.

As for actuarial losses (gains), the accrued amount in each consolidated fiscal year divided by a certain

period not exceeding the employees’ average remaining service years, using the straight-line method, is

treated as expense starting from the following consolidated fiscal year.

Unrecognized actuarial losses (gains) are recorded as remeasurements of defined benefit plans in the

accumulated other comprehensive income in the net assets after the tax effect is taken into account.

For some overseas consolidated subsidiaries, net defined benefit liability and retirement benefit expenses

are calculated using the simplified method that requires recording of year-end voluntary retirement benefits

as retirement benefit obligations.

(5) Accounting standards for significant income and expenses

[1] Customer fees

Credit card revenue

The declining-balance method is mainly used to compute credit card revenue. This method computes

interests on the outstanding principal at a prescribed rate. Such interest is recorded as operating

revenue (installment payment paying for commission) for each day that passes the due date.

[2] Merchant fees

Merchant fees are recorded in a lump sum as operating revenue (installment payment paying for

commission) upon the fulfillment of reimbursement payment agreement with the merchant.

[3] Accounting standards for revenue and costs related to collection of purchased receivables

Financial subsidiaries record the difference between the value of receivables and the acquisition cost

as operating revenue (other financial revenue). In recording operating revenue, the amortized cost

method is used if it is possible to estimate the future cash flow of receivables. If not, the amount

recovered is taken into account.

Subsidiaries engaged in receivables collection business record the collection amount as operating

revenue (collection from purchased receivables). In recording cost of purchased receivables, the

amortized cost method is used if it is possible to estimate the future cash flow of receivables. If not, the

collection amount is recorded as operating expense (cost of purchased receivables) until the acquisition

cost is recovered.

(6) Basis for converting foreign currency denominated significant assets or liabilities into Japanese currency

Monetary claims and debts in foreign currency are converted into Japanese currency at the spot exchange

rate as of the consolidated closing date. Any translation adjustment is recorded as profit or loss. Assets and

liabilities of foreign subsidiaries are converted into Japanese currency at the spot exchange rate as of the

consolidated closing date. Revenues and expenses are converted into Japanese currency at the average

rate during period. Any translation adjustment is included in foreign currency translation adjustment and

non-controlling interests in net assets.

(7) Significant hedge accounting

[1] Method of hedge accounting

Interest rate swaps are treated using exceptional accounting because they satisfy required conditions.

[2] Hedging instrument and hedged item

The following is a hedging instrument and a hedged item subject to hedge accounting:

Hedging instrument: Interest rate swaps

Hedged item: Loans payable


100

[3] Hedging policy

We hedge future interest-rate fluctuations to reduce borrowing rates and improve financial balances.

Please note that relevant transactions were executed at the Group’s subsidiaries upon prior approval

of their Board of Directors’ meeting for terms of contract, upper limits of notional principal, etc.

[4] Method of assessing hedge effectiveness

The hedging instrument has the same critical terms as the hedged item. Since this offsets the interest-

rate risk, evaluations on the hedge effectiveness are omitted.

(8) Method and period for amortization of goodwill

Goodwill is amortized over periods during which the effect of investment lasts, using the straight-line method,

within 20 years after its recording.

(9) Scope of funds in the consolidated statements of cash flows

The funds comprise cash on hand and deposits that can be withdrawn at any time, as well as short-term

investments that are easily liquidated, involve a minimal risk of price fluctuation and mature within three

months from the date of acquisition.

(10) Other significant matters regarding the preparation of consolidated financial statements

[1] Accounting for consumption tax

Consumption taxes are accounted for using the tax exclusion method.

However, non-deductible consumption taxes related to non-current assets are recorded as “Other”

under investments and other assets and amortized over 5 years using the straight-line method.

(Changes in accounting policies)

(Adoption of the Practical Solution on a Change in Depreciation Method due to Tax Reform 2016

Following the revision of the Corporate Tax Act, we adopted the “Practical Solution on a Change in Depreciation

Method due to Tax Reform 2016” (ASBJ [Accounting Standards Board of Japan] PITF [Practical Issues Task

Force] No. 32, June 17, 2016) in the current consolidated fiscal year, we changed the depreciation method for

the equipment attached to buildings and accompanying facilities and structures acquired on or after April 1, 2016

from the declining balance method to the straight-line method.

An impact of this arrangement on profit and loss is insignificant.

(Changes in presentation method)

(Consolidated statements of income)

The “co-sponsor advertising fee” which was included in “miscellaneous income” is shown separately from the

current consolidated fiscal year because the amount exceeded 10/100 of total non-operating income. To reflect

the said change, we have reclassified the consolidated financial statements for the previous consolidated fiscal

year.

As a result, 316 million yen in miscellaneous income under non-operating income presented in the consolidated

statement of income for the previous consolidated fiscal year is reclassified into 55 million yen in co-sponsor

advertising fee and 260 million yen in miscellaneous income.

(Changes in accounting estimates)

(Changes in estimating allowance for doubtful accounts)

For receivables held by our consolidated subsidiary PT Bank JTrust Indonesia Tbk., we previously booked the

estimated uncollectible amount based on the actual loan-loss ratio for performing loans and in light of

recoverability for specified accounts including doubtful receivables. However, the method of assessment is

changed from the current consolidated fiscal year because we are now capable of detailed estimation based on

the developed credit management structure.

As a result, operating loss, ordinary loss and loss before income taxes increased by 3,043 million yen during the

current consolidated fiscal year.

(Additional information)

(Adoption of the Implementation Guidance on Recoverability of Deferred Tax Assets)

We adopted the “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Statement No. 26,

March 28, 2016) in the current consolidated fiscal year.


101

(Notes to Consolidated Balance Sheets)

*1 Assets pledged as collateral and the corresponding borrowings

[1] Assets pledged as collateral


(as of March 31, 2016)



Deposits 1,581 million yen 1,907 million yen

Accounts receivable – operating loans 21,774 17,241

Advances paid – installment 1,087 1,087

Purchased receivables - 1,298

Merchandise and finished goods 1,599 1,996

Work in process 1,215 1,047

Other (current asset) 245 396

Buildings and structures 1,092 727

Land 762 586

Other (intangible assets) 555 1,002

Other (investments and other assets) 1,466 1,001

Total 31,380 28,294

[2] Borrowings corresponding to the above





Current portion of bonds - million yen 21 million yen

Short-term loans payable 2,745 1,418

Current portion of long-term loans

payable 10,686 7,130

Bonds payable - 298

Long-term loans payable 19,514 19,287

Total 32,947 28,155

[1] Some of the assets pledged as collateral are also used as collateral for guarantee obligations in relation

to credit guarantee services besides the above-mentioned borrowings.

Besides the above, collateralized shares of subsidiaries stand at 3,338 million yen (4,077 million yen in

the previous consolidated fiscal year), which are eliminated on a consolidated basis. For security against

loans payable to financial institutions, our revolving mortgage on secured accounts receivable–operating

loans of 114 million yen (119 million yen in the previous consolidated fiscal year) is partially pledged as

sub-mortgage. Also, pursuant to overseas regulations applicable to foreign consolidated subsidiaries,

we hold deposits of 18,151 million yen (14,870 million yen in the previous consolidated fiscal year) as

payment reserve assets, etc. and securities of 761 million yen (758 million yen in the previous

consolidated fiscal year). Also, we have another deposit of 2,409 million yen (2,366 million yen in the

previous consolidated fiscal year) as security for the credit line for domestic fund transfer limits.

*2 Long-term operating loans receivable include commercial notes, accounts receivable–operating loans and

advances paid–installment for cases of no payment history over the past year and the estimated collection period

of more than one year.


102

*3 Bad debts

(Domestic Financial Business and Financial Business in South Korea)





Loans corresponding to claims to

debtors in bankruptcy 7,045 million yen 5,978 million yen

Loans corresponding to claims in

arrears 4,142 4,098

Loans corresponding to claims in

arrears for three months or more 957 1,451

Loans corresponding to claims with

moderate loan conditions 7,423 6,477

Total 19,568 18,006

Note 1: Loans corresponding to claims to debtors in bankruptcy refer to bankrupt loans, de facto bankrupt

loans and other relevant loans on which accrued interest was not recorded because recovery of the

principal or interest was not expected for such reasons of delayed payment of the principal or interest

for a considerable period.

Note 2: Loans corresponding to claims in arrears refer to loans for which payment of the principal or interest

falls more than 6 months in arrears from the day following the scheduled due date, excluding loans

corresponding to claims to debtors in bankruptcy and loans corresponding to claims with moderate

loan conditions.

Note 3: Loans corresponding to claims in arrears for three months or more refer to loans for which payment

of the principal or interest falls more than 3 months in arrears from the day following the scheduled

due date, excluding loans corresponding to claims to debtors in bankruptcy and loans corresponding

to claims in arrears.

Note 4: Loans corresponding to claims with moderate loan conditions refer to loans with reduction or

exemption of interest rate, grace period for interest payment, grace period for principal repayment,

debt waiver or any other arrangements that are advantageous to the debtor, for the purpose of the

restructuring of, or support to, the debtor.

(Financial Business in Southeast Asia)





Hard-to-recover receivables 2,325 million yen 3,092 million yen

Doubtful receivables 233 3,345

Substandard receivables 503 1,300

Total 3,061 7,737

Note 1: Hard-to-recover receivables refer to claims with an extremely low probability of collection according

to our credit scoring system based on the following three indices:

(i) Outlook for borrower’s business (e.g. growth potential, market condition, manager’s capability,

personnel resources);

(ii) Borrower’s financial performance (e.g. profitability, capital structure, cash flow); and

(iii) Borrower’s solvency (e.g. any delay in principal/interest payments, submission and accuracy

of borrower’s management index, adherence to loan agreements).

Note 2: Doubtful receivables refer to claims with a doubtful recoverability according to our credit scoring

system based on the indices mentioned in Note 1.

Note 3: Substandard receivables refer to claims with an attention-required recoverability according to our

credit scoring system based on the indices mentioned in Note 1.


103

*4 Contingent liabilities

Credit guarantee services mainly involve provision of guarantee on loans made by financial institutions.





Credit guarantee

(52,060 cases by

businesses and consumers)

53,354 million yen

Credit guarantee

(54,869 cases by

businesses and consumers)

85,975 million yen

Provision for loss on

guarantees 424

Provision for loss on

guarantees 352

Difference 52,930 Difference 85,623

Note: Besides the above, 3,108 million yen (3,934 million yen in the previous consolidated fiscal year) is

recorded as credit guarantee obligation from the banking business in the current consolidated fiscal

year.

*5 For loans by banking business and advances paid–installment handled by consolidated subsidiaries, the loan

agreement allows customers to borrow at any time up to the credit limit (credit line) within the agreed-upon

amount (contract limit). The unused portion of the loan based on these agreements is as follows:





Total loan commitment 16,746 million yen 15,010 million yen

Outstanding loans 15,154 12,461

Unused portion 1,592 2,548

Please note that the unused portion is not necessarily executed to the full.

*6 Items relating to non-consolidated subsidiaries and affiliates





Other (Investment and other assets

[shares])

- million yen 168 million yen

*7 Provision incurred from business combination

Previous consolidated fiscal year (as of March 31, 2016)

“Other” under “Non-current liabilities” included 425 million yen as a provision incurred from business

combination. This is because the Company acquired the shares of an Indonesian commercial bank PT Bank

Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) on November 20, 2014. The purpose was to provide

for contingent liabilities in relation to potential lawsuits expected at the time of acquisition of such shares.

Current consolidated fiscal year (as of March 31, 2017)

“Other” under “Non-current liabilities” includes 406 million yen as a provision incurred from business

combination. This is because the Company acquired the shares of an Indonesian commercial bank PT Bank

Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) on November 20, 2014. The purpose is to provide for

contingent liabilities in relation to potential lawsuits expected at the time of acquisition of such shares.


104

(Notes to Consolidated Statement of Income)

*1 Year-end inventories represent the values after the book value is written down because of a decline in profitability.

The following loss on valuation of inventories is included in operating expenses.


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

225 million yen 97 million yen

*2 Research and development costs included in general and administrative expenses


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

640 million yen 252 million yen

*3 Breakdown of gain on sales of non-current assets


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Buildings and structures 248 million yen 178 million yen

Amusement machine 0 15

Land 21 509

Other (property, plant and equipment) 6 22

Other (intangible assets) - 0

Total 277 725

*4 Breakdown of loss on sales of non-current assets


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Buildings and structures - million yen 183 million yen

Amusement machine 45 22

Land 8 28


Total 57 234

*5 Breakdown of loss on abandonment of non-current assets


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Buildings and structures 14 million yen 10 million yen

Amusement machine - 0


Other (intangible assets) 0 42

Total 22 56


105

*6 Impairment loss

The Group recorded impairment loss on the following asset groups:


Location Purpose of Use Types of Assets

Sumida-ku, Tokyo; and others Business assets (general

entertainment business) Buildings and structures, etc.

Minato-ku, Tokyo; and others Business assets (elderly care

business) Intangible assets, etc.

Kita-ku, Osaka-shi; and others Assets for lease Buildings and structures

Koto-ku, Tokyo; and others Idle assets Amusement machine

Kurayoshi-shi, Tottori Pref.; and

others Idle assets Land

The Group classifies its assets into business assets, assets for lease and idle assets.

For business assets of to-be-closed or non-performing stores (general entertainment business) and those of

the business that has made a withdrawal decision (elderly care business), the value is reduced to utility value

or net realizable value. In other cases, the value is lowered to net realizable value. The amount of decrease

totaling 1,325 million yen is recorded as extraordinary loss.

The breakdown includes buildings and structures of 631 million yen, amusement machine of 121 million yen,

land of 21 million yen, property, plant and equipment, etc. of 23 million yen and intangible assets, etc. of 516

million yen.

We measure the utility value based on future cash flows without any discount due to a limited period before

store closing. Net realizable value is determined in reference to real-estate appraisal approaches, roadside

land price, property tax valuation and others.

Meanwhile, the value of goodwill is reduced to the recoverable amount, reflecting the Company’s decision to

withdraw from the elderly care business and transfer the shares of a South Korean subsidiary. The amount of

decrease totaling 385 million yen is recorded as extraordinary loss.


Location Purpose of Use Types of Assets

Miyakojima-ku, Osaka-shi Assets for lease Buildings and land

Hachioji-shi, Tokyo; and others

Business assets (general

entertainment business)

Buildings and accompanying

facilities, and amusement

machines

Chiyoda-ku, Tokyo

Business assets (general

entertainment business)

Copyright

The Group classifies its assets into business assets, assets for lease and idle assets.

Value of business assets of to-be-closed or non-performing stores (general entertainment business) is reduced

to utility value or net realizable value, while the copyright (general entertainment business) value is reduced to

utility value. In other cases, the value is lowered to net realizable value. The amount of decrease totaling 362

million yen is recorded as extraordinary loss.

The breakdown includes buildings of 108 million yen, amusement machine of 45 million yen, land of 20 million

yen, and copyright relating to amusement machine contents of 187 million yen.

The utility value is measured based on future cash flows, but without any discount due to insignificance in

calculating the recoverable amount of those whose residual usage period is less or more than 1 year. Net

realizable value is determined in reference to real-estate appraisal value, roadside land price, property tax

valuation and others.


106

*7 Breakdown of business structure improvement expenses


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Additional early retirement benefits - million yen 1,739 million yen

Business liquidation costs - 33

Total - 1,772

(Notes to Consolidated Statement of Comprehensive Income)

* Reclassification adjustments and amount of income tax effect associated with other comprehensive income

(Millions of yen)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Valuation difference on available-for-

sale securities:

Gains (losses) occurred during the

year (20) 2,793

Reclassification adjustments (149) (954)

Amount before tax effect (169) 1,838

Tax effect 148 (38)

Valuation difference on

available-for-sale securities (20) 1,800

Foreign currency translation adjustment:


year (10,017) (2,053)

Reclassification adjustments (1,456) (1)

Amount before tax effect (11,474) (2,054)

Tax effect - -

Foreign currency translation

adjustment (11,474) (2,054)

Remeasurements of defined benefit

plans, net of tax:


year (152) 164

Reclassification adjustments (11) 26

Amount before tax effect (163) 190

Tax effect 40 (45)

Remeasurements of defined benefit

plans, net of tax (123) 144

Share of other comprehensive income of

entities accounted for using equity

method:


year - (0)

Reclassification adjustments - -

Amount before tax effect - (0)

Tax effect - -

Share of other comprehensive

income of entities accounted for

using equity method

- (0)

Total other comprehensive income (11,618) (109)


107

(Notes to Consolidated Statement of Changes in Net Assets)


1. Matters relating to the class and total number of issued shares and those of treasury shares

Shares at

period beginning

(Thousand shares)

Increase

during period

(Thousand shares)

Decrease

during period

(Thousand shares)

Shares at

period end

(Thousand shares)

Number of shares issued

Common share (Notes 1,2) 118,589 107 6,250 112,447

Total 118,589 107 6,250 112,447

Treasury share

Common share (Notes 3,4) 409 6,250 6,250 409

Total 409 6,250 6,250 409

Note 1: Common shares outstanding increase by 107 thousand shares due to the exercise of stock options.

Note 2: Common shares outstanding decrease by 6,250 thousand shares due to the cancellation of treasury

shares.

Note 3: Treasury shares (common shares) increase by 6,250 thousand shares as a result of purchasing 6,250

thousand treasury shares and purchasing 0 thousand odd-lot shares.

Note 4: Treasury shares (common shares) decrease by 6,250 thousand shares as a result of cancelling 6,250

thousand treasury shares and selling 0 thousand odd-lot shares.

2. Matters relating to Subscription Rights and Treasury Subscription Rights

Category

Type of

Subscription

Rights

Class of shares

underlying

Subscription

Rights

Shares underlying Subscription Rights

(Shares) Balance

at end of period

(Millions of yen)

Shares at

period

beginning

Increase

during

period

Decrease

during

period

Shares

at period

end

Filing company

(parent company)

Stock

options - - - - - 167

Total - - - - - 167

3. Matters relating to dividends

(1) Dividends paid

Resolved at Class of

shares

Total dividend

(Millions of yen)

Dividend per

share (Yen) Record date Effective date

The Board of Directors’ meeting

(May 14, 2015)

Common

shares 590 5

March 31,

2015

June 29,

2015


(November 12, 2015)

Common

shares 573 5

September 30,

2015

December 4,

2015

(2) Dividends whose record date fall under the current consolidated fiscal year, but whose effective date comes

during the following consolidated fiscal year


shares

Total dividend

(Millions of yen)

Dividend

source

Dividend per

share (Yen)

Record

date

Effective

date


(May 13, 2016)

Common

shares 784

Retained

earnings 7

March 31,

2016

June 30,

2016

Note: The dividend per share approved at the Board of Directors’ meeting on May 13, 2016 includes a

commemorative dividend of 2 yen for the Company’s 40th anniversary.


108


1. Matters relating to the class and total number of issued shares and those of treasury shares

Shares at

period beginning

(Thousand shares)

Increase

during period

(Thousand shares)

Decrease

during period

(Thousand shares)

Shares at

period end

(Thousand shares)

Number of shares issued

Common share (Note 1) 112,447 89 - 112,536

Total 112,447 89 - 112,536

Treasury share

Common share (Note 2) 409 9,188 - 9,598

Total 409 9,188 - 9,598

Note 1: Common shares outstanding increased by 89 thousand shares due to the exercise of stock options.

Note 2: Treasury shares (common shares) increased by 9,188 thousand shares as a result of purchasing 9,188

thousand treasury shares and purchasing 0 thousand odd-lot shares.

2. Matters relating to Subscription Rights and Treasury Subscription Rights

Category

Type of

Subscription

Rights

Class of shares

underlying

Subscription

Rights

Shares underlying Subscription Rights

(Shares) Balance

at end of period

(Millions of yen)

Shares at

period

beginning

Increase

during

period

Decrease

during

period

Shares

at period

end

Filing company

(parent company)

Stock

options - - - - - 156

Consolidated

subsidiaries

Stock

options - - - - - 11

Total - - - - - 168

3. Matters relating to dividends

(1) Dividends paid


shares

Total dividend

(Millions of yen)

Dividend per

share (Yen) Record date Effective date


(May 13, 2016)

Common

shares 784 7

March 31,

2016

June 30,

2016


(November 11, 2016)

Common

shares 617 6

September 30,

2016

December 5,

2016

Note: The dividend per share approved at the Board of Directors’ meeting on May 13, 2016 includes a

commemorative dividend of 2 yen for the Company’s 40th anniversary.

(2) Dividends whose record date fall under the current consolidated fiscal year, but whose effective date come

during the following consolidated fiscal year


shares

Total dividend

(Millions of yen)

Dividend

source

Dividend per

share (Yen)

Record

date

Effective

date


(May 12, 2017)

Common

shares 617

Retained

earnings 6

March 31,

2017

June 29,

2017


109

(Notes to Consolidated Statement of Cash Flows)

*1 Relationship between the fiscal-end balance of cash and cash equivalents, and the amount of consolidated

balance sheet items


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Cash and deposits 108,682 million yen 101,172 million yen

Pledged deposit (3,947) (3,413)

Time deposits with maturity exceeding

3 months (1,636) (958)

Restricted deposit (14,870) (18,151)

Cash and cash equivalents 88,226 78,650

*2 “Decrease in operating loans receivable” excludes the difference between the collected amount of loans

receivable and their acquisition cost.

*3 Significant non-cash transaction


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Cancellation of treasury shares 6,055 million yen - million yen

(Lease Transactions)

1. Finance lease transactions

Non-ownership-transfer finance lease transactions

[1] Details of leased assets

Omitted due to lack of importance.

[2] Depreciation methods for leased assets

As per the significant information in the preparation of consolidated financial statements “4. Significant

Accounting Policy (ii) Depreciation methods for non-current assets.”

(Financial Products)

1. Matters relating to financial products

(1) Policy for handling financial products

The Group conducts Real Estate Business and General Entertainment Business as well as comprehensive

financial services including loan, credit card, banking, purchase of receivables and credit guarantee. To do

these businesses, we raise funds by bank borrowings in consideration of market conditions, balancing short-

and long-term financing, and by providing ordinary and time deposit services for individual and corporate

customers in South Korea and Indonesia. With regard to derivative transactions, the Group takes a guarded

stance not to enter into any speculative transactions.

(2) Types of financial products and their risks

Financial assets held by the Group are mainly commercial notes, accounts receivable – operating loans and

advances paid–installment targeting small and medium-sized enterprises, sole proprietors and individuals

and, as for the banking business in South Korea and Indonesia, loans receivable from small and medium-

sized enterprises, sole proprietors and individuals. Relevant risks are mitigated in accordance with

regulations regarding credit risk. With regard to receivables purchase business, such receivables are

purchased from business corporations and financial institutions at a discount on the credit amount. For the

purpose of risk mitigation, the Group judges the appropriateness of purchase prices by obtaining materials

for fair market valuation from third party rating agencies. Credit guarantee primarily consists of guarantee

obligations for domestic financial institutions’ loans receivables and subrogation receivable arising out of the

performance of such guarantee. Relevant risks are mitigated through credit screening in accordance with

regulations regarding credit risk. Securities are mainly public and corporate bonds, held for asset

management in the banking business. Operational investment securities are shares and corporate bonds

held for investment purposes. Investment securities are mostly shares held for business promotion purposes.

These public and corporate bonds and listed shares, exposed to issuer’s credit risk and market fluctuation


110

risk, undergo quarterly valuation.

Financial liabilities are intended to obtain business funds and, as for banking and financial entities in South

Korea and Indonesia, to raise funds by providing ordinary deposit and time deposit services for individual

and corporate customers. These are exposed to interest-rate risk.

(3) Risk management system relating to financial products

[1] Management of credit risk (relating to counterparty’s breach of contract, etc.)

For commercial notes, accounts receivable – operating loans and advances paid–installment, etc., the

Group has developed and operated systems of credit management, including credit screening by deal

application, credit limits, credit information management, internal rating, pledge of security and ways of

coping with problem loans in accordance with credit management rules and various management

regulations on credit risk. The Group’s Sales Division, Credit Division and Credit Management Division

perform such credit management, which then discuss and report at the Board of Directors’ meeting and

the report examination meeting regularly held by the Company’s executives. Furthermore, the audit

team monitors the status of credit management on an irregular basis. With regard to issuers of

commercial notes, Credit Division manages the credit risk by updating their credit information regularly.

[2] Management of market risk

For securities, investment securities and investments in capital, the Group regularly assesses the

market value and issuer’s financial position to continuously review the status of shareholdings, etc.

based on relationships with corporate partners.

With regard to banking subsidiaries, under the guidance of committees responsible for comprehensive

asset and liability management, the Group has established procedures for monitoring and addressing

risks as per the following: (i) setting policies to manage financial assets and liabilities under relevant

regulations; (ii) monitoring market interest rates trend and foreign exchange rates on an ongoing basis;

(iii) establishing policies to assess financial assets and liabilities susceptible to interest rate risk; (iv)

evaluating the method of computing lending interest rates and funding costs; and (v) setting covenants

on foreign exchange transactions. Monitoring results are reported to Risk Management Committee.

The Group does not use any quantitative analysis on market risks for risk management. As for major

financial assets and liabilities, if the market interest rate at the end of the consolidated fiscal year rises

by 100 basis points (1%), their present value would decrease by 5,411 million yen. On the other hand,

if it declines by 100 basis points (1%), the value would increase by 5,709 million yen. These impacts

are based on the assumption that there is no change in risk variables other than market interest rates.

[3] Management of liquidity risk on financing

With regard to banking subsidiaries, the Group manages liquidity risk by observing such items as cash

flow management, source of funds and highly liquid instruments. In addition, the Group manages

reserve assets for stable liquidity and collaborates with other banks so as to raise liquid funds from

financial markets even in the case of tight cash flow.

(4) Supplementary explanation to matters relating to the market value, etc. of financial products

The market value of financial products includes the price based on market value, and the value may fluctuate

depending on different assumptions adopted since variable factors are incorporated in the calculation of

market value.


111

2. Matters relating to the market value of financial products

The consolidated balance sheet value, the market price, and their difference are itemized below. Unlisted shares

are not included since it is extremely difficult to determine their market value. Also, immaterial items on the

consolidated balance sheet are omitted.

Previous consolidated fiscal year (As of March 31, 2016)

(Millions of yen)

Consolidated

balance sheet value Market value Difference

(1) Cash and deposits 108,682 108,682 -

(2) Commercial notes 1,428

Allowance for doubtful accounts *1 (18)

1,410 1,410 -

(3) Accounts receivable – operating loans 49,505

Allowance for doubtful accounts *1 (1,959)

47,545 49,870 2,324

(4) Loans by banking business 230,532


220,716 216,401 (4,315)

(5) Advanced paid – installment 2,449


2,442 2,442 -

(6) Purchased receivables 9,940


9,875 11,416 1,541

(7) Subrogation receivable 1,462


1,181 1,181 -

(8) Securities 25,287 25,339 51

(9) Operational investment securities 13,057 13,057 -

(10) Accounts receivable – other 9,754


5,122 5,122 -

(11) Investment securities 866 866 -

(12) Long-term operating loans receivable 2,083


112 112 -

Total assets 436,300 435,903 (397)

(1) Notes discounted 1,381 1,381 -

(2) Current portion of bonds 60 60 -

(3) Short-term loans payable 14,317 14,317 -

(4) Current portion of long-term loans payable 13,391 13,391 -

(5) Deposits by banking business 271,117 272,991 1,873

(6) Bonds payable 2,169 2,171 1

(7) Long-term loans payable 21,788 21,783 (5)

Total liabilities 324,226 326,095 1,869

Derivative transactions *2 24 24 -

Market value

(1) Guarantee obligations 4,707

Total guarantee obligations 4,707

*1 General and specific allowances for doubtful accounts corresponding to the following items are excluded:


112

commercial notes; accounts receivable–operating loans; loans by banking business; advances paid–

installment; purchased receivables; subrogation receivable; accounts receivable–other; and long-term

operating loans receivable.

*2 Figures are the net amount of assets and liabilities arising from derivative transactions. Parentheses

denote net liabilities.


113

Current consolidated fiscal year (As of March 31, 2017)

(Millions of yen)

Consolidated

balance sheet value Market value Difference

(1) Cash and deposits 101,172 101,172 -

(2) Commercial notes 928


921 921 -

(3) Accounts receivable – operating loans 49,098


47,123 48,721 1,597

(4) Loans by banking business 326,996


310,311 310,828 517

(5) Advanced paid – installment 2,726


2,712 2,712 -

(6) Purchased receivables 12,146


11,591 13,467 1,875

(7) Subrogation receivable 1,223


972 972 -

(8) Securities 30,190 30,262 72

(9) Operational investment securities 21,494 21,494 -

(10) Accounts receivable – other 8,806


4,519 4,519 -

(11) Investment securities 14 14 -

(12) Long-term operating loans receivable 1,578


38 38 -

Total assets 531,063 535,127 4,063

(1) Notes discounted 916 916 -

(2) Current portion of bonds 111 111 -

(3) Short-term loans payable 9,798 9,798 -

(4) Current portion of long-term loans

payable 18,733 18,733 -

(5) Deposits by banking business 364,419 366,462 2,043

(6) Bonds payable 2,372 2,374 1

(7) Long-term loans payable 24,353 24,081 (272)

Total liabilities 420,705 422,478 1,773

Derivative transactions *2 25 25 -

Market value

(1) Guarantee obligations 6,094

Total guarantee obligations 6,094

*1 General and specific allowances for doubtful accounts corresponding to the following items are excluded:

commercial notes; accounts receivable–operating loans; loans by banking business; advances paid–

installment; purchased receivables; subrogation receivable; accounts receivable–other; and long-term

operating loans receivable.

*2 Figures are the net amount of assets and liabilities arising from derivative transactions. Parentheses


114

denote net liabilities.

Note 1 Matters relating to calculation method for the market value of financial products, and derivative

transactions and guarantee obligations

Assets

(1) Cash and deposits

Cash and deposits are due within 1 year. Since their market value and book value are proximate, the book

value is used as market value.

(2) Commercial notes

Commercial notes are mostly due within 1 year. The market value is accordingly obtained by subtracting

the current estimate of bad debts from the balance sheet value as of the consolidated closing date.

(3) Accounts receivable – operating loans

Market value is calculated using the present value, which is obtained by discounting the expected future

cash flow at the rate based on the time to maturity and credit risk of accounts receivable–operating loans.

(4) Loans by banking business


cash flow at the rate based on the time to maturity and credit risk of loans by banking business.

With regard to loans with floating interest rates, the book value is used as market value. This is because

they reflect the market interest rate in a short period and the credit standing of customers has not changed

significantly since the loan origination.

For some loans, bad debts are estimated in light of the present value of the expected future cash flow, the

recoverable amount from collateral, etc. The market value is accordingly obtained by subtracting the

current estimate of bad debts from the balance sheet value as of the consolidated closing date.

(5) Advanced paid – installment

Bad debts are estimated in light of the present value of the expected future cash flow, the recoverable

amount from collateral and/or guarantee, etc. The market value is accordingly obtained by subtracting the


(6) Purchased receivables


cash flow at the rate based on the time to maturity and credit risk of purchased receivables.

Some receivables have been purchased mainly within 1 year from the consolidated closing date, the

market value is based on their book value. This is because the acquisition price, etc. were appropriately

determined in reference to the documents on fair market valuation obtained from third-party rating

agencies.

(7) Subrogation receivable




(8) Securities; (9) Operational investment securities; and (11) Investment securities

Market value of shares is based on the price quoted on the stock exchange, while that of bonds is obtained

based on the stock exchange or financial institutions. Otherwise, the reasonably calculated price is

employed.

(10) Accounts receivable – other

With regard to receivables due within 1 year, the market value is obtained by subtracting the current

estimate of bad debts from the balance sheet value as of the consolidated closing date.

For receivables due after 1 year, bad debts are estimated in light of the recoverable amount from collateral

and/or guarantee, etc. The market value is accordingly obtained by subtracting the current estimate of

bad debts from the balance sheet value as of the consolidated closing date.

(12) Long-term operating loans receivable




115


Liabilities

(1) Notes discounted

Notes discounted are due within 1 year. Since their market value and book value are proximate, the book


(2) Current portion of bonds; (3) Short-term loans payable; and (4) Current portion of long-term loans

payable

These assets are due within 1 year. Since their market value and book value are proximate, the book


(5) Deposits by banking business

The market value of demand deposit is the amount to be paid (book value) when the withdrawal is

demanded on the consolidated closing date. For time deposit, etc., the market value is calculated using

the present value, which is obtained by discounting the future cash flow by category of products. The

discount ratio is equal to the interest rate applicable to the acceptance of a new deposit.

(6) Bonds payable

The market value of bonds payable is based on the present value obtained by discounting the sum of

principal and interest at a rate that takes into account the time to maturity and credit risk of such bonds

payable.

(7) Long-term loans payable

For long-term loans payable with floating interest rates, the book value is used as market value. This is

because the market value and the book value are proximate, considering these payables reflect the

market interest rate in a short period of time and the credit standing of the Company and its consolidated

subsidiaries has not changed significantly since the initial borrowing. In the case of fixed interest rates,

the market value is calculated using the present value, which is obtained by discounting the future cash

flow at the rate based on the time to maturity and credit risk of such long-term loans payable.

Derivative transactions

Please refer to “V Financial Information, 1. Consolidated financial statement (1) Consolidated financial

statement, Note (Derivative Transactions)” in Consolidated Financial Statements.

Guarantee obligations

(1) Guarantee obligations

To measure the market value of guarantee obligations, we use the present value which is obtained by

discounting the sum of “the amount to be received as guarantee commission based on the collectability”

less “potential losses on subrogation receivables based on the possibility of guarantee performance and

the recoverability through the sale of collateral” at a highly reliable rate applicable to the remaining period.

Note 2: Financial products whose market value is extremely difficult to be identified

(Millions of yen)

Category Previous consolidated fiscal year

(As of March 31, 2016)



Unlisted shares 104 368

Investments in capital to

limited partnership - 30

These shares are not included in “(11) Investment securities” because it is considered extremely

difficult to determine their market value due to no marketability.

Note 3: Amount to be repaid after the consolidated closing date for monetary claims and securities with

maturity


(Millions of yen)


116

Up to 1 year Over 1 year

up to 5 years Over 5 years


Cash and deposits 108,682 - - -

Commercial notes 1,408 20 - -

Accounts receivable – operating loans 10,550 20,143 4,273 14,536

Loans by banking business 111,810 89,879 16,791 12,051

Advances paid – installment 1,441 1,008 - -

Purchased receivables 4,286 4,442 480 730

Subrogation receivable 315 843 200 103

Securities

Held-to-maturity securities

(1) Government/municipal bonds, etc. 9,858 - 749 -

(2) Corporate bonds - 1,643 - -

Other securities with maturity

(1) Government/municipal bonds, etc. 7,349 11 - 1,036

(2) Corporate bonds 572 1,358 - -

(3) Other - 900 - -

Accounts receivable – other 4,589 - - 5,165

Total * 260,864 120,251 22,494 33,624

* Long-term operating loans receivable of 2,083 million yen is not included because the amount to be

repaid is yet to be determined.


(Millions of yen)




Cash and deposits 101,172 - - -

Commercial notes 928 - - -

Accounts receivable – operating loans 14,062 20,621 4,495 9,918

Loans by banking business 133,822 155,289 26,352 11,532

Advances paid – installment 1,969 757 - -

Purchased receivables 5,003 4,837 1,387 918

Subrogation receivable 491 510 185 35

Securities

Held-to-maturity securities

(1) Government/municipal bonds, etc. - - 787 -

(2) Corporate bonds 184 984 - -


(1) Government/municipal bonds, etc. 11,988 800 2,970 1,137

(2) Corporate bonds 219 1,828 - 483

(3) Other - 987 - -

Operational investment securities


(1) Government/municipal bonds, etc. - - - -

(2) Corporate bonds - 14,531 - -

(3) Other - - - -

Accounts receivable – other 4,039 - - 4,766

Total * 273,882 201,150 36,178 28,793

* Long-term operating loans receivable of 1,578 million yen is not included because the amount to be

repaid is yet to be determined.

Note 4: Amount to be repaid after the consolidated closing date for notes discounted, long-term loans payable

and other interest-bearing liabilities



117

(Millions of yen)

Up to 1 year

Over 1 year up to 2 years

Over 2 years up to 3 years



Over 5 years

Notes discounted 1,381 - - - - -

Current portion of bonds 60 - - - - -

Short-term loans payable 14,317 - - - - -

Current portion of

long-term loans payable 13,391 - - - - -

Deposits by banking

business 254,331 14,983 1,563 133 82 21

Bonds payable - 60 60 30 200 1,819

Long-term loans payable - 10,176 6,225 3,477 642 1,266

Total 283,482 25,220 7,848 3,640 925 3,107


(Millions of yen)

Up to 1 year

Over 1 year up to 2 years




Over 5 years

Notes discounted 916 - - - - -

Current portion of bonds 111 - - - - -

Short-term loans payable 9,798 - - - - -

Current portion of long-

term loans payable 18,733 - - - - -

Deposits by banking

business 327,951 24,646 11,428 198 115 78

Bonds payable - 111 81 251 247 1,679

Long-term loans payable - 10,219 6,988 2,080 3,867 1,196

Total 357,511 34,977 18,498 2,531 4,231 2,954

(Securities)

1. Trading securities

(Millions of yen)





Valuation difference recorded as profit

or loss in the consolidated fiscal year 7 37

2. Held-to-maturity bonds


(Millions of yen)

Category

Consolidated

balance sheet

value

Market value Difference

Market value

exceeding the

consolidated

balance sheet value

(1) Government/municipal, etc. 749 800 51

(2) Corporate 477 481 4

(3) Other - - -

Subtotal 1,227 1,282 55

Market value

not exceeding the

consolidated

balance sheet value

(1) Government/municipal, etc. 9,858 9,855 (2)

(2) Corporate 1,165 1,164 (0)

(3) Other - - -

Subtotal 11,023 11,020 (3)


118

Total 12,250 12,302 51


(Millions of yen)

Category

Consolidated

balance sheet

value

Market value Difference

Market value

exceeding the

consolidated

balance sheet value

(1) Government/municipal, etc. 787 829 42

(2) Corporate 1,169 1,199 29

(3) Other - - -

Subtotal 1,956 2,029 72

Market value

not exceeding the

consolidated

balance sheet value

(1) Government/municipal, etc. - - -

(2) Corporate - - -

(3) Other - - -

Subtotal - - -

Total 1,956 2,029 72

3. Other securities


(Millions of yen)

Category

Consolidated

balance sheet

value

Acquisition

cost Difference

Consolidated

balance sheet value

exceeding the

acquisition cost

(1) Shares 6,433 5,948 485

(2) Bonds

[1] Government /municipal, etc. - - -

[2] Corporate 572 544 27

[3] Other - - -

(3) Other - - -

Subtotal 7,006 6,493 513

Consolidated

balance sheet value

not exceeding the

acquisition cost

(1) Shares 7,518 7,760 (241)

(2) Bonds

[1] Government/municipal, etc. 8,397 8,443 (45)

[2] Corporate 1,358 1,364 (5)

[3] Other - - -

(3) Other 900 963 (62)

Subtotal 18,175 18,530 (355)

Total 25,181 25,023 157

Note: Unlisted shares (104 million yen recorded on the consolidated balance sheet) are not included in the

above “Other securities” because it is considered extremely difficult to determine their market value

due to no marketability.


119


(Millions of yen)

Category

Consolidated

balance sheet

value

Acquisition

cost Difference

Consolidated

balance sheet value

exceeding the

acquisition cost

(1) Shares 6,977 5,625 1,351

(2) Bonds

[1] Government /municipal, etc. 14,537 14,434 103

[2] Corporate 16,687 16,176 511

[3] Other - - -

(3) Other 987 980 6

Subtotal 39,189 37,216 1,972

Consolidated

balance sheet value

not exceeding the

acquisition cost

(1) Shares - - -

(2) Bonds

[1] Government/municipal, etc. 2,359 2,393 (34)

[2] Corporate 376 378 (1)

[3] Other - - -

(3) Other - - -

Subtotal 2,736 2,771 (35)

Total 41,925 39,988 1,937

Note: Unlisted shares (368 million yen recorded on the consolidated balance sheet) and investments in

capital to limited partnership (30 million yen recorded on the consolidated balance sheet) are not

included in the above “Other securities” because it is considered extremely difficult to determine their

market value due to no marketability.

4. Other securities sold


(Millions of yen)

Category Proceeds from sales Total gain on sales Total loss on sales

(1) Shares 779 55 -

(2) Bonds

[1] Government/municipal, etc. 30,757 4 (2)

[2] Corporate - - -

[3] Other - - -

(3) Other 300 - -

Total 31,837 60 (2)


(Millions of yen)

Category Proceeds from sales Total gain on sales Total loss on sales

(1) Shares 8,633 1,632 0

(2) Bonds

[1] Government/municipal, etc. 18,682 265 -

[2] Corporate 880 16 -

[3] Other - - -

(3) Other - - -

Total 28,196 1,914 0


120

5. Impairment of securities

In the previous consolidated fiscal year, no securities are written down.

In the current consolidated fiscal year, securities were written down by 360 million yen (unlisted shares: 10 million

yen).

In principle, securities are written down in cases where the market value falls below the acquisition cost by 30%

or more.

(Derivative Transactions)


1. Derivative transactions not subject to hedge accounting

Currency-related transactions

(Millions of yen)

Category Type of

transaction

Amount of

contract

Amount of

contract due

after 1 year

Market value valuation

gain or loss

Non-market transaction Currency swap 1,722 - 24 24

Note 1: The above transactions are marked to market, and their gain or loss is booked in the consolidated

statement of income.

Note 2: The market value is calculated using the discounted present value.

2. Derivative transactions subject to hedge accounting

Information on derivative transactions is omitted due to lack of significance.

Current consolidated fiscal year (as of March 31, 2017)

1. Derivative transactions not subject to hedge accounting.

Currency-related transactions

(Millions of yen)

Category Type of

transaction

Amount of

contract

Amount of

contract due

after 1 year

Market value valuation

gain or loss

Non-market transaction

Foreign exchange contract Sale of currencies USD

3,964 - 25 25

Note 1: The above transactions are marked to market, and their gain or loss is booked in the consolidated

statement of income.

Note 2: The market value is calculated using the prices obtained by partner financial institutions, etc.

2. Derivative transactions subject to hedge accounting

Information on derivative transactions is omitted due to lack of significance.

http://ejje.weblio.jp/content/foreign+exchange+contract




121

(Retirement Benefits)

1. Overview of retirement benefit plans adopted by the Group

Some of overseas consolidated subsidiaries adopt either a defined benefit plan or a defined contribution plan

(funded type and unfunded type) for employees’ retirement benefits. The defined benefit plan, consisting of the

defined-benefit corporate pension plan (funded type) and retirement lump-sum payment plan (unfunded type),

provides lump-sum payment based on the pension or job title and period of service. For some overseas

consolidated subsidiaries, net defined benefit obligations and retirement benefit expenses are calculated using

the simplified method that requires recording of year-end voluntary retirement benefits as retirement benefit

obligations.

2. Defined benefit plan

(1) Reconciliation for the beginning balance and the ending balance of retirement benefit liability (excluding plans

where the simplified method is adopted)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Retirement benefit liability at beginning

of period 808 million yen 1,215 million yen

Service cost 132 64

Interest cost 58 111

Actuarial gain or loss 137 (105)

Retirement benefits paid (185) (779)

Increase due to business combination 422 -

Increase/decrease due to transfer of

shares (39) -

Other (118) (77)

Retirement benefit liability at end of

period 1,215 429

(2) Reconciliation for the beginning balance and the ending balance of pension asset (excluding plans where

the simplified method is adopted)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Pension asset at beginning of period 467 million yen 665 million yen

Expected return on assets 60 63

Actuarial gain or loss (14) 50

Contribution by business owner 403 357


Increase/decrease due to transfer of

shares (35) -

Other (29) (39)

Pension asset at end of period 665 318


122

(3) Reconciliation for the beginning balance and the ending balance of net defined benefit liability where the

simplified method is adopted





Net defined benefit liability at beginning

of period 70 million yen 29 million yen

Retirement benefit expenses 224 205


Contribution to the plan (245) (108)

Decrease due to a shift to defined

contribution pension system - (40)

Increase due to transfer of shares 0 -

Other (6) 2

Net defined benefit liability at end of

period 29 40

(4) Reconciliation for the ending balance of retirement benefit obligations and pension asset and the net defined

benefit liability and asset recorded on the consolidated balance sheet





Retirement benefit obligations

(funded type) 1,698 million yen 1,005 million yen

Pension asset (1,137) (860)

561 145

Retirement benefit obligations

(unfunded type) 18 5

Net liability and asset on the

consolidated balance sheet 579 151

Net defined benefit liability 579 151

Net defined benefit asset - (0)

Net liability and asset on the

consolidated balance sheet 579 151

Note: The above figures include plans where the simplified method is adopted.

(5) Retirement benefit expenses and their breakdown


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Service cost 132 million yen 64 million yen

Interest cost 58 111

Expected return on assets (60) (63)

Recording of expenses for actuarial

gain or loss (0) 26

Retirement benefit expenses using the

simplified method 224 205

Retirement benefit expenses for the

defined benefit plan 354 344

Note: Besides the above figures, additional early retirement benefits of 1,739 million yen, based on the

early retirement incentive plan, were recorded as extraordinary losses in the current consolidated

fiscal year.


123

(6) Remeasurements of defined benefit plans

Remeasurements of defined benefit plans (before net of tax effect) are broken down as follows:


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Actuarial gain or loss 151 million yen (194) million yen

Total 151 (194)

(7) Accumulated remeasurements of defined benefit plans

Accumulated remeasurements of defined benefit plans (before net of tax effect) are broken down as follows:





Unrecognized actuarial gain or loss 151 million yen (43) million yen

Total 151 (43)

(8) Matters relating to pension asset

[1] Breakdown of pension asset

Main constituents are broken down as follows:





Bond 77.5% 92.0%

Investment trust 18.9 4.5

Cash and deposits 3.6 3.5

Total 100.0 100.0

Note: The above figures do not include pension asset under plans where the simplified method is

adopted.

[2] Method of setting the expected long-term investment return rate

To determine the long-term investment return rate expected for pension asset, the current and expected

allocation of pension asset and the current and expected long-term investment return rate of various

assets constituting pension asset are taken into account.

(9) Matters relating to the basis of actuarial calculation

The table below shows the major basis for actuarial calculation (the weighted average).





Discount rate 9.1% 8.2%

Expected long-term investment return

rate 9.1% 8.2%

Expected rate of salary increase 6.0% 3.4%

3. Defined contribution plan

Contributions to be paid to the defined contribution plan of consolidated subsidiaries are 165 million yen for the

previous consolidated fiscal year and 184 million yen for the current consolidated fiscal year.


124

(Stock Options)

1. Recording of stock option expenses and the corresponding account item

(Millions of yen)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)


2. Proceeds from expired, unexercised stock options

(Millions of yen)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Gain on reversal of Subscription Rights 34 1

3. Overview and scale of, and changes in the Company’s stock options

(1) Overview of the Company’s stock options

(Filing Company)

J Trust Co., Ltd.

1st Stock Option

(Filing Company)

J Trust Co., Ltd.

2nd Stock Option

Segment and number of

grantees

5 directors of the Company

9 directors of subsidiaries of the

Company

267 employees of the Company and

subsidiaries



Company


subsidiaries

Number of stock options by

class of shares (Note 1)

Common shares: 884,000 shares

(Note 3)

Common shares: 1,031,000 shares

(Note 3)

Grant date of the stock options November 27, 2009 November 29, 2010

Vesting conditions

Grantees are required to continue

service from the grant date

(November 27, 2009) through the

vesting date (November 30, 2011).

Nevertheless, the option may lapse

upon the occurrence of specified

events provided under “Contract for

Allocation of Subscription Rights.”


service from the grant date

(November 29, 2010) through the

vesting date (November 30, 2012).





Target period of service From: November 27, 2009

To: November 30, 2011

From: November 29, 2010

To: November 30, 2012

Exercise period of stock

options

From: December 1, 2011

To: July 31, 2016


To: July 31, 2017


125

(Filing Company)

J Trust Co., Ltd.

3rd Stock Option

(Filing Company)

J Trust Co., Ltd.

N-6th Stock Option (Note 2)


grantees



Company


subsidiaries

5 directors of Next Japan Holdings

Co., Ltd.

40 directors of subsidiaries of Next

Japan Holdings Co., Ltd. and

employees of Next Japan Holdings

Co., Ltd. and its subsidiaries



Common shares: 1,096,000 shares

(Note 3)


(Note 3)

Grant date of the stock options August 31, 2011 April 30, 2012

Vesting conditions


service from the grant date (August

31, 2011) through the vesting date

(August 31, 2013).





Not applicable

Target period of service From: August 31, 2011

To: August 31, 2013 Not applicable


options

From: September 1, 2013

To: July 31, 2018

From: April 30, 2012

To: March 10, 2019

(Filing Company)

J Trust Co., Ltd.


(Filing Company)

J Trust Co., Ltd.



grantees

15 employees of subsidiaries of

Next Japan Holdings Co., Ltd.


Co., Ltd.

57 employees of Next Japan

Holdings Co., Ltd.



Common shares: 780 shares

(Note 3)


(Note 3)

Grant date of the stock options April 30, 2012 April 30, 2012

Vesting conditions Not applicable Not applicable

Target period of service Not applicable Not applicable


options


To: April 28, 2019


To: December 15, 2019


126

(Filing Company)

J Trust Co., Ltd.


(Filing Company)

J Trust Co., Ltd.



grantees


Co., Ltd.


Holdings Co., Ltd.


Co., Ltd.


Holdings Co., Ltd. and its

subsidiaries




(Note 3)


(Note 3)

Grant date of the stock options April 30, 2012 April 30, 2012

Vesting conditions


service from the grant date (April 30,

2012) through the vesting date

(December 14, 2012).






service from the grant date (April 30,

2012) through the vesting date

(December 13, 2013).





Target period of service From: April 30, 2012





options





(Filing Company)

J Trust Co., Ltd.

5th Stock Option

(Filing Company)

J Trust Co., Ltd.

6th Stock Option


grantees 9 directors of the Company



Company


subsidiaries


class of shares (Note 1) Common shares: 200,000 shares Common shares: 864,000 shares

Grant date of the stock options August 31, 2013 September 30, 2015

Vesting conditions


service from the grant date (August

31, 2013) through the vesting date

(August 31, 2015).





(Note 4)

Target period of service From: August 31, 2013

To: August 31, 2015 Not applicable


options

From: September 1, 2015

To: August 31, 2020

From: July 1, 2017

To: September 30, 2021


127

(Filing Company)

J Trust Co., Ltd.

7th Stock Option


ADORES, Inc.

1st Stock Option


grantees

12 directors and Audit &

Supervisory Board members of the

Company


Company


subsidiaries

13 directors of the Consolidated

Subsidiary and sub-subsidiary of

the Company

9 employees of the Consolidated

Subsidiary and sub-subsidiary of

the Company


class of shares (Note 1) Common shares: 2,820,000 shares

Common shares:11,500,000

shares

Grant date of the stock options September 30, 2016 July 20, 2016

Vesting conditions (Note 5) (Note 6)

Target period of service Not applicable Not applicable


options

From: October 1, 2016

To: September 30, 2021

From: July 20, 2016

To: July 19, 2021

Note 1: The number of stock options is converted into the number of shares.

Note 2: Next Japan Holdings Co., Ltd. became a wholly owned subsidiary of the Company on April 30, 2012

through share exchange. For this reason, Rights Holders for Next Japan Holdings Co., Ltd. were

given equivalent Subscription Rights to the Company in light of the share exchange ratio. “Segment

and number of grantees” shows their state at Next Japan Holdings Co., Ltd. as of the grant date.

Note 3: These figures indicate the number of shares following two-for-one share split executed on June 1,

2012.

Note 4: Vesting conditions for the J Trust Co., Ltd. 6th Subscription Rights are shown below. As resolved

at the Board of Directors’ meeting held on June 29, 2016, the original conditions are changed to the

following conditions:

[1] In cases where operating profit for FY2017 exceeds 11,266 million yen under J-GAAP (or

15,100 million yen under IFRS, if the Company uses IFRS at the time of a judgment), Rights

Holders may exercise 20% of the total number of Subscription Rights allocated to them.

[2] In cases where operating profit for FY2018 exceeds 18,772 million yen under J-GAAP (or

21,700 million yen under IFRS, if the Company uses IFRS at the time of a judgment), Rights

Holders may exercise 80% of the total number of Subscription Rights allocated to them.

If operating profit for FY2017 falls below 3,240 million yen under J-GAAP (or 7,500 million yen

under IFRS, if the Company uses IFRS at the time of a judgment), however, grantees cannot

exercise such rights.

The option may lapse upon the occurrence of specified events provided under “Contract for


Note 5: Vesting conditions for the J Trust Co., Ltd. 7th Subscription Rights are as follows:

[1] The closing price falls below 50% of the strike price in the regular trading at Tokyo Stock

Exchange, Inc. (TSE), during the period between the allotment date and the expiration date.

[2] If the closing price exceeds 200% of the strike price for five business days in a row in the

regular trading at TSE during the period between the allotment date and the expiration date.



Note 6: Vesting conditions for the ADORES, Inc. 1st Subscription Rights are as follows:

[1] The closing price falls below 50% of the strike price in the regular trading at Tokyo Stock

Exchange, Inc. (TSE), during the period between the allotment date and the expiration date.

[2] If the closing price exceeds 200% of the strike price for five business days in a row in the

regular trading at TSE during the period between the allotment date and the expiration date.




128

(2) Scale of and changes in the Company’s stock options

With respect to the stock options that existed during the current consolidated fiscal year (ended March 31,

2017), the number of stock options is converted into the number of shares.

[1] Number of stock options

(Filing Company)

J Trust Co., Ltd.

1st Stock Option

(Notes)

(Filing Company)

J Trust Co., Ltd.

2nd Stock Option

(Notes)

Before vesting (Shares)

Previous consolidated fiscal year-end - -

Granted - -

Forfeited - -

Vested - -

Unvested - -

After vesting (Shares)

Previous consolidated fiscal year-end 8,000 40,000

Vested - -

Exercised 6,000 18,000

Forfeited 2,000 1,000

Unexercised - 21,000

(Filing Company)

J Trust Co., Ltd.

3rd Stock Option

(Notes)

(Filing Company)

J Trust Co., Ltd.

N-6th Stock Option

(Notes)



Granted - -

Forfeited - -

Vested - -

Unvested - -


Previous consolidated fiscal year-end 168,000 560

Vested - -

Exercised 53,800 240

Forfeited 7,800 -

Unexercised 106,400 320


129

(Filing Company)

J Trust Co., Ltd.

N-7th Stock Option

(Notes)

(Filing Company)

J Trust Co., Ltd.

N-8th Stock Option

(Notes)



Granted - -

Forfeited - -

Vested - -

Unvested - -


Previous consolidated fiscal year-end 680 7,880

Vested - -

Exercised - 776

Forfeited - 124

Unexercised 680 6,980

(Filing Company)

J Trust Co., Ltd.

N-9th Stock Option

(Notes)

(Filing Company)

J Trust Co., Ltd.

N-10th Stock Option

(Notes)



Granted - -

Forfeited - -

Vested - -

Unvested - -


Previous consolidated fiscal year-end 13,200 13,000

Vested - -

Exercised 4,800 6,200

Forfeited 600 -

Unexercised 7,800 6,800

(Filing Company)

J Trust Co., Ltd.

5th Stock Option

(Filing Company)

J Trust Co., Ltd.

6th Stock Option


Previous consolidated fiscal year-end - 864,000

Granted - -

Forfeited - -

Vested - -

Unvested - 864,000


Previous consolidated fiscal year-end 145,000 -

Vested - -

Exercised - -

Forfeited - -

Unexercised 145,000 -


130

(Filing Company)

J Trust Co., Ltd.

7th Stock Option

(Consolidated

Subsidiary)

ADORES, Inc.

1st Stock Option



Granted 2,820,000 11,500,000

Forfeited - -

Vested - -

Unvested 2,820,000 11,500,000



Vested - -

Exercised - -

Forfeited - -

Unexercised - -

Note: The above shows the number of shares following the two-for-one share split executed on June

1, 2012.

[2] Unit price information

(Filing Company)

J Trust Co., Ltd.

1st Stock Option

(Note 1) (Note 2)

(Filing Company)

J Trust Co., Ltd.

2nd Stock Option

(Note 1) (Note 2)

Strike price (Yen) 86 110

Average stock price upon exercise (Yen) 765 913

Fair value per unit at grant date (Yen) 66 75

(Filing Company)

J Trust Co., Ltd.

3rd Stock Option

(Note 1) (Note 2)

(Filing Company)

J Trust Co., Ltd.

N-6th Stock Option

(Note 1) (Note 2)


Average stock price upon exercise (Yen) 884 1,094


(Filing Company)

J Trust Co., Ltd.

N-7th Stock Option

(Note 1) (Note 2)

(Filing Company)

J Trust Co., Ltd.

N-8th Stock Option

(Note 1) (Note 2)


Average stock price upon exercise (Yen) - 1,025


(Filing Company)

J Trust Co., Ltd.

N-9th Stock Option

(Note 1) (Note 2)

(Filing Company)

J Trust Co., Ltd.

N-10th Stock Option

(Note 1) (Note 2)


Average stock price upon exercise (Yen) 1,232 1,091



131

(Filing Company)

J Trust Co., Ltd.

5th Stock Option

(Filing Company)

J Trust Co., Ltd.

6th Stock Option

Strike price (Yen) 2,007 954

Average stock price upon exercise (Yen) - -


(Filing Company)

J Trust Co., Ltd.

7th Stock Option

(Consolidated

Subsidiary)

ADORES, Inc.

1st Stock Option


Average stock price upon exercise (Yen) - -


Note 1: Following the two-for-one share split executed on June 1, 2012, “Strike price” and “Fair value

per unit at grant date” are adjusted accordingly.

Note 2: Following the exercise of Subscription Rights under the rights offering (non-commitment type;

allotment of listed Subscription Rights without contribution) dated May 31, 2013, “Strike price”

is adjusted accordingly.

4. Method of estimation for fair value per unit

For the Stock Options granted in the current consolidated fiscal year, the method of estimating the fair value

per unit is described below.

A. Filing Company

(1) Applicable valuation technique: Monte Carlo simulation

(2) Major fundamental figures and valuation method

J Trust Co., Ltd.

7th Stock Option

Share price volatility (Note 1) 59.77%

Time to maturity (Note 2) 5 years

Dividend yield (Note 3) 1.27%

Risk-free rate of interest (Note 4) (0.183%)

Note 1: Based on the following data on share prices:

[1] Information gathering period: Latest period depending on the time to maturity (5 years)

[2] Observation frequency: Weekly

[3] Abnormality information: None

[4] Discontinuous change in circumstances surrounding the company: None

Note 2: From the date of allocation to the expiration of the option exercise period

Note 3: Based on the dividend of 10 yen paid in the latest fiscal year (excluding 2 yen of

commemorative dividend).

Note 4: Distribution yield on the 317th long-term government securities (redemption date: September

20, 2021) corresponding to the time to maturity


132

B. Consolidated Subsidiary

(1) Applicable valuation technique: Monte Carlo simulation

(2) Major fundamental figures and valuation method

ADORES, Inc.

1st Stock Option

Share price volatility (Note 1) 61.35%

Time to maturity (Note 2) 5 years

Dividend yield (Note 3) 0.77%

Risk-free rate of interest (Note 4) (0.35%)

Note 1: Based on the following data on share prices:

[1] Information gathering period: Latest period depending on the time to maturity (5years)

[2] Observation frequency: Weekly

[3] Abnormality information: None

[4] Discontinuous change in circumstances surrounding the company: None

Note 2: From the date of allocation to the expiration of the option exercise period

Note 3: Based on the dividend of 1 yen paid in the latest fiscal year.

Note 4: Distribution yield on the 51st long-term government securities (redemption date: June 21, 2021)

corresponding to the time to maturity

5. Method of estimation for the vested amount

It is difficult to reasonably estimate the number of options that could be forfeited in the future. For this reason,

only actual results of forfeiture are reflected in the estimate of the vested amount.


133

(Tax Effect Accounting)

1. Breakdown of main causes for deferred tax assets and deferred tax liabilities


fiscal year


Current consolidated

fiscal year


Deferred tax assets

Excess provision of allowance for doubtful accounts 770 million yen 1,350 million yen

Provision for loss on guarantees 147 121

Provision for loss on litigation 207 198

Bad debts expenses 355 1,099

Impairment loss 524 744

Loss carried forward 60,511 61,527

Valuation difference on share exchange 863 857

Unrealized gain - 157

Other 1,827 1,357

Deferred tax assets – subtotal 65,206 67,414

Valuation allowance (61,805) (63,680)

Deferred tax assets – total 3,401 3,733

Deferred tax liabilities

Liabilities adjustment (46) -

Valuation difference on assets of consolidated

subsidiaries (684) (381)

Unrealized losses (67) -

Other (903) (1,380)

Deferred tax liabilities – total (1,701) (1,761)

Deferred tax assets (liabilities) – net 1,699 1,972

Note: Deferred tax assets–net for the previous and current consolidated fiscal years are included in the

following items of the consolidated balance sheet.


fiscal year


Current consolidated

fiscal year


Current assets – deferred tax assets 1,106 million yen 1,287million yen

Non-current assets – deferred tax assets 1,445 1,143

Current liabilities – other (deferred tax liabilities) (616) (208)

Non-current liabilities – other (deferred tax liabilities) (236) (250)

2. Breakdown of main items that caused significant differences between the effective statutory tax rate and the

corporate tax rate after the application of tax effect accounting

The breakdown for the current fiscal year is omitted because the previous and current fiscal year record losses

before income taxes.


134

(Business Combination)

Information on business combination is omitted due to lack of significance.

(Asset Retirement Obligations)

Previous consolidated fiscal year (From April 1, 2015 to March 31, 2016)

Asset retirement obligations are omitted due to lack of significance.

Current consolidated fiscal year (From April 1, 2016 to March 31, 2017)

Asset retirement obligations are omitted due to lack of significance.

(Rental Properties, etc.)

Previous consolidated fiscal year (From April 1, 2015 to March 31, 2016)

Rental properties, etc. are omitted due to lack of significance in total amount.

Current consolidated fiscal year (From April 1, 2016 to March 31, 2017)

Rental properties, etc. are omitted due to lack of significance in total amount.


135

(Segment information, etc.)

[Segment information]

1. Overview of reportable segment

The Group’s reportable segments consist of business units that provide separate financial information. These

reportable segments are subject to periodic review as the Board of Directors is responsible for making decisions

on the allocation of management resources and the appraisal of business performance.

The Group reports business activities of 6 segments, namely “Domestic financial business,” “Financial business

in South Korea,” “Financial business in Southeast Asia,” “General entertainment business,” “Real estate

business” and “Investment business.”

“Domestic financial business” provides credit guarantee services, collection of accounts receivable, credit and

consumer credit services, and other financial services. “Financial business in South Korea” offers savings bank

business, collection of accounts receivable business and capital business. “Financial business in Southeast

Asia” handles banking business and collection of accounts receivable, and hire-purchase financing. “General

entertainment business” operates amusement arcades and other facilities and develops, produces and sells

computer systems for amusement machines and their peripheral equipment of amusement machines. “Real

estate business” mainly sells and buys detached houses and conducts real estate asset business. “Investment

business” makes investments at home and abroad.

2. Method of calculating operating revenue, profit or loss, assets, liabilities and other items by reportable

segment

The accounting method applied to reportable segments is generally the same as “Significant Accounting

Policies for Preparing Consolidated Financial Statements.”

Figures indicated as profit in reportable segments are based on operating profit.

Intersegment sales and transfers are based on prevailing market prices or transaction prices between third

parties.


136

3. Operating revenue, profit or loss, assets, liabilities and other items by reportable segments


(Millions of yen)

Reportable segment

Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Operating revenue

External customers 10,842 25,480 12,292 16,557 6,217

Intersegment sales and

transfers 194 - - 2 7

Total 11,037 25,480 12,292 16,559 6,224

Segment profit (loss) 3,799 260 (7,898) (475) 500

Segment assets 24,549 252,413 151,391 14,048 6,693

Segment liabilities 18,228 204,153 111,468 4,449 4,792

Other items

Depreciation 129 889 256 1,177 39

Investments in entities

accounted for using

equity method

- - - - -

Increase in property,

plant and equipment

and intangible assets

115 363 402 1,429 704

Impairment loss - 30 - 665 -

(Millions of yen)

Reportable segment

Other* Total Investment

Business Subtotal

Operating revenue

External customers 2,634 74,024 1,453 75,478


transfers 193 397 404 801

Total 2,828 74,422 1,857 76,280

Segment profit (loss) 2,562 (1,250) (193) (1,444)

Segment assets 20,959 470,056 494 470,551

Segment liabilities 1,344 344,437 380 344,817

Other items

Depreciation 6 2,499 35 2,534


accounted for using

equity method

- - - -


plant and equipment


32 3,046 34 3,081

Impairment loss - 696 967 1,664

* Note: “Other” refers to business segments not included in the reportable segments, and includes the

following - construction of commercial facilities; IT system business; and elderly care.


137


(Millions of yen)

Reportable segment

Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Operating revenue

External customers 10,994 29,140 17,791 15,397 6,763


transfers 53 4 0 0 11

Total 11,048 29,144 17,791 15,397 6,775

Segment profit (loss) 4,636 1,633 (8,642) (219) 536

Segment assets 28,573 344,953 164,354 12,959 8,004

Segment liabilities 24,828 295,367 128,527 5,223 5,031

Other items

Depreciation 84 874 274 1,064 47


accounted for using

equity method

- - 168 - -


plant and equipment


108 417 249 1,619 564

Impairment loss - - - 308 -

(Millions of yen)

Reportable segment

Other* Total Investment

Business Subtotal

Operating revenue

External customers 2,514 82,601 2,430 85,031


transfers 391 460 386 846

Total 2,905 83,062 2,816 85,878

Segment profit (loss) (175) (2,230) (73) (2,304)

Segment assets 34,576 593,422 933 594,355

Segment liabilities 10 458,988 711 459,699

Other items

Depreciation 6 2,352 16 2,369


accounted for using

equity method

- 168 - 168


plant and equipment


1 2,960 51 3,011

Impairment loss - 308 - 308

*Note: “Other” refers to business segments not included in the reportable segments, and includes the

following - construction of commercial facilities and IT system business.


138

4. Difference between the total reportable segments and book value on the consolidated financial statements,

and the main contents of such difference (matters relating to reconciliation)

(Millions of yen)

Operating revenue Previous consolidated fiscal year Current consolidated fiscal year

Total reportable segments 74,422 83,062

Operating revenue in “Other” 1,857 2,816

Intersegment transaction elimination (801) (846)

Operating revenue on consolidated

financial statements 75,478 85,031

(Millions of yen)

Profit Previous consolidated fiscal year Current consolidated fiscal year

Total reportable segments (1,250) (2,230)

Loss in “Other” (193) (73)

Intersegment transaction elimination 39 9

Company-wide expenses* (2,709) (3,473)

Operating loss on consolidated

financial statements (4,114) (5,769)

*Note: Company-wide expenses refer to general and administrative expenses that are not attributable to

the reportable segments.

(Millions of yen)

Assets Previous consolidated fiscal year Current consolidated fiscal year


Assets in “Other” 494 933

Intersegment elimination (9,242) (7,882)

Company-wide assets* 47,350 22,176

Total assets on consolidated


*Note: Company-wide assets refer to cash and deposits at the Company and its subsidiaries not

attributable to the reportable segments.

(Millions of yen)

Liabilities Previous consolidated fiscal year Current consolidated fiscal year


Liabilities in “Other” 380 711

Intersegment elimination (9,244) (7,870)

Company-wide liabilities* 4,430 5,158

Total liabilities on consolidated


*Note: Company-wide liabilities refer to long-term loans payable, etc. of our subsidiaries not attributable

to the reportable segments.


139

(Millions of yen)

Other items

Total reportable

segments Other Adjustments

Book value on

consolidated financial

statements

Previous

consolidat

ed fiscal

year

Current

consolidat

ed fiscal

year

Previous

consolidat

ed fiscal

year

Current

consolidat

ed fiscal

year

Previous

consolidat

ed fiscal

year

Current

consolidat

ed fiscal

year

Previous

consolidat

ed fiscal

year

Current

consolidat

ed fiscal

year

Depreciation 2,499 2,352 35 16 14 21 2,549 2,390

Investments in

entities

accounted for

using equity

method

- 168 - - - - - 168

Increase in

property, plant &

equipment, and

intangible assets

3,046 2,960 34 51 29 32 3,111 3,044

Impairment loss 696 308 967 - 47 53 1,711 362


140

[Related Information]


1. Information by product and service

Descriptions are omitted because applicable information is disclosed in “Segment Information.”

2. Information by geographical area

(1) Operating revenue

(Millions of yen)

Japan South Korea Singapore Indonesia Total

35,070 25,480 2,634 12,292 75,478

Note: Categorized by country where operating revenue is recorded.

(2) Property, plant and equipment

(Millions of yen)

Japan South Korea Singapore Indonesia Total

4,676 774 27 2,032 7,510

Note: Categorized by country where property, plant and equipment is recorded.

3. Information by major customer

Descriptions are omitted because no trading partner accounted for 10% or more of the operating revenue

on the consolidated statement of income.


1. Information by product and service

Descriptions are omitted because applicable information is disclosed in “Segment Information.”

2. Information by geographical area

(1) Operating revenue

(Millions of yen)

Japan South Korea Singapore Indonesia Other Total

35,582 29,140 2,514 17,791 3 85,031

Note: 1. Categorized by country where the operating is recorded.

2. The country included in “Other” is China.


(Millions of yen)

Japan South Korea Singapore Indonesia Other Total

3,696 821 20 1,936 - 6,474

Note: Categorized by country where property, plant and equipment is recorded.

3. Information by major customer

Descriptions are omitted because no trading partner accounts for 10% or more of the operating revenue on

the consolidated statement of income.


141

[Information relating to impairment loss on non-current assets by reportable segment]


Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Impairment loss - 30 - 665 -

(Millions of yen)

Investment

Business Other*

Company-wide/

elimination Total

Impairment loss - 967 47 1,711

Note: “Other” primarily refers to the amount relating to the following businesses: commercial facility

construction, IT system and elderly care.


Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Impairment loss - - - 308 -

(Millions of yen)

Investment

Business Other*

Company-wide/

elimination Total

Impairment loss - - 53 362


construction and IT system.

[Information relating to the amortization of goodwill and unamortized balances by reportable segment]


Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Amortized amount 137 681 1,946 366 -

Year-end balance 126 1,933 32,029 447 -

(Millions of yen)

Investment

Business Other*

Company-wide/

elimination Total

Amortized amount - 15 - 3,147

Year-end balance - - - 34,536


construction, IT system and elderly care.


142


Domestic

Financial

Business

Financial

Business in

South Korea

Financial

Business in

Southeast Asia

General

Entertainment

Business

Real Estate

Business

Amortized amount 126 608 2,215 358 -

Year-end balance - 1,321 28,325 80 -

(Millions of yen)

Investment

Business Other*

Company-wide/

elimination Total

Amortized amount - - - 3,308

Year-end balance - - - 29,727


construction and IT system.

[Information relating to gain on bargain purchase by reportable segment]


Not applicable.


Disclosure has been omitted due to the lack of significance.


143

[Information on Related Parties]


Transactions with related parties

Transactions between consolidated subsidiaries of the company filing consolidated financial statements

and related parties

Directors, major shareholders (limited to individuals), etc. of the filing company

Type Name Location

Capital

stock or

investme

nts in

capital

(Millions

of yen)

Business

description

or

occupation

Ratio of

voting

rights

held (%)

Relationship

with related

parties

Type of

transaction

Amount of

transaction

(Millions of

yen)

Account

item

Year-end

balance

(Millions

of yen)

Company

where major

shareholders

(individuals)

hold the

majority of

voting rights

(including

subsidiaries

of such

company)

BOTTOMS

UP Co.,

Ltd.

(Note 1)

(Note 2)

Chuo-ku,

Tokyo 10 Investment

(held)

Direct

6.6

Interlocking

director

Transfer of

shares of

subsidiaries

and

associates

(Note 3)

350 - -

Transfer of

receivables

(Note 4)

115 - -

FUJISAWA

PTE. LTD.

(Note 5)

Republic

of

Singapore

13,252 Asset

management

(held)

Direct

6.2

Interlocking

director

Transfer of

shares of

subsidiaries

and

associates

(Note 3)

350 - -

CREDIA

Co., Ltd.

(Note 2)

Suruga-ku,

Shizuoka 100 Finance -

Rendering

of service

System

operation/

management

(Note 6)

40 Advance

received 4

Guarantee

for credit

guarantee

Guarantee

for credit

guarantee

(Note 7)

26 - -

Absorption-

type

demerger

(Note 8)

Succession

of assets

(total)

1,573 - -

Succession

of liabilities

(total)

1,573 - -

Receipt of

demerger

consideration

0 - -

Company

where major

shareholders

(individuals)

hold the

majority of

voting rights

(including

subsidiaries

of such

company)

Cross

Bridge Co.,

Ltd.

(Note 2)

Chuo-ku,

Tokyo 20 Real estate -

Rendering of

service

Real-estate

brokerage

(Note 9)

29 - -

LIVE RENT

Co., Ltd.

(Note 10)

Nakano-

ku, Tokyo 70 Real estate -

Rendering of

service

Real-estate

brokerage

(Note 9)

18 - -

JAPAN

POCKET

CO., LTD.

(Note 2)

Yodogawa

-ku,

Osaka-shi

90 Finance - Purchase of

receivables

Acquisition of

receivables

(Note 11)

421 - -

LINK

SERVICER

Co., Ltd.

(Note 10)

Yodogawa

-ku,

Osaka-shi

500 Receivables

collection -

Purchase of

receivables

Acquisition of

receivables

(Note 12)

125 - -


144

Director Yasushi

Hashimoto - -

President &

representati

ve director

of a

subsidiary

(held)

Direct

0.1

Debt

guaranteed

Guarantee

on loans

payable

(Note 13)

115 - -

Terms of transaction, policy of setting terms of transaction, etc.

Note 1: The trade name of NLHD Co., Ltd. was changed to BOTTOMS UP Co., Ltd. on August 28, 2015.

Note 2: Voting rights are wholly and beneficially owned by Mr. Nobuyoshi Fujisawa, Representative

Director, President & CEO and major shareholder of the Company.

Note 3: For shares of subsidiaries and associates, transfer price is reasonably determined in reference to

third party’s valuation reports on share price, etc.

Note 4: Receivables transfer price is reasonably determined in reference to third party’s valuation on

receivables, etc.

Note 5: Voting rights are wholly and beneficially owned by Mr. Nobuyoshi Fujisawa, Representative

Director, President & CEO and major shareholder of the Company.

Note 6: Service fees are determined on a negotiation basis in reference to the market condition.

Note 7: We provide guarantee for the guarantee obligations of CREDIA Co., Ltd., arising from its credit

guarantee service. Guarantee rates are reasonably determined in light of the status of subrogation,

etc.

Note 8: Domestic unsecured loan services provided by Nihon Hoshou Co., Ltd. were partially transferred

to CREDIA Co., Ltd. For succession of assets, liabilities and receipt of demerger consideration,

we determine the market value in reference to third party’s valuation.

Note 9: Brokerage fees are determined on a negotiation basis in reference to actual market value.

Note 10: Voting rights were wholly and beneficially owned by Mr. Nobuyoshi Fujisawa, Representative

Director, President & CEO and major shareholder of the Company. However, LINK SERVICER

Co., Ltd. is no longer a related party because the shares were sold during the current consolidated

fiscal year. For this reason, figures show the transaction amount recognized during a period when

it was a related party.

Note 11: Since the target receivables were secured, we acquired them for the price of the principal amount.

Note 12: The transaction price is reasonably determined on a negotiation basis in light of future

recoverability.

Note 13: Mr. Yasushi Hashimoto guarantees Keynote Co., Ltd.’s loans payable to financial institutions

without receiving guarantee commission.

Note 14: The above figures do not include consumption tax, etc.


145


Transactions with related parties

Transactions between consolidated subsidiaries of the company filing consolidated financial statements

and related parties

Directors, major shareholders (limited to individuals), etc. of the filing company

Type Name Location

Capital

stock or

investm

ents in

capital

(Millions

of yen)

Business

description or

occupation

Ratio of

voting

rights

held (%)

Relationship

with related

parties

Type of

transaction

Amount of

transaction

(Millions of

yen)

Account

item

Year-end

balance

(Millions

of yen)

Company

where major

shareholders

(individuals)

hold the

majority of

voting rights

(including

subsidiaries

of such

company)

OLIVE

SPA Co.,

Ltd.

(Note 1)

Chuo-ku,

Tokyo 100

Operation of

relaxation

salon

-

Equipment

rental

Issuance of

complimentary

tickets for

shareholders

Office rental

Receiving

rent

(Note 2)

76

Lease

investmen

t assets

(Note 4)

255

Loan

(Note 4) 12

Long term

loan

(Note 4)

66

Payment of

complimentary

tickets for

shareholders

(Note 3)

49

Advance

received 19

Accounts

payable 6

Deposit

received

on sale

7

CREDIA

Co., Ltd.

(Note 1)

Suruga-

ku,

Shizuoka

100 Finance -

Rendering

of service

System

operation/

management

(Note 5)

52 Advance

received 4

-

Compensation

payment

(Note 6)

150 - -

Guarantee

against

credit

guarantee

Guarantee

against credit

guarantee

(Note 7)

22 - -

Director Yasushi

Hashimoto - -

President &

representative

director of a

subsidiary

(held)

Direct

0.1

Debt

guaranteed

Receipt of

guarantee on

loans

payable

(Note 8)

66 - -

Terms and conditions or determination policies, etc. on terms and conditions.

Note 1: Mr. Nobuyoshi Fujisawa, the major shareholder, Representative Director, President &CEO of the

Company, beneficially holds 100% of the voting rights.

Note 2: Rents are determined on a negotiation basis in reference to the market condition.

Note 3: Fees for complimentary tickets for shareholders are determined on a negotiation basis in reference

to the market condition.


146

Note 4: These loans are guaranteed by Mr. Nobuyoshi Fujisawa, the major shareholder and

Representative Director, President & CEO of the Company.

Note 5: Service fees are determined on a negotiation basis in reference to the market condition.

Note 6: The Company made compensation payments for the transfer of shares of CREDIA Co., Ltd., a

former subsidiary, as stipulated in the share transfer agreement. Among the “Transaction amount,”

attorneys’ fees of 50 million yen is included in commission fee.

Note 7: We provide guarantee for the guarantee obligations of CREDIA Co., Ltd., arising from its credit

guarantee service. Guarantee rates are reasonably determined in light of the status of subrogation,

etc.

Note 8: Mr. Yasushi Hashimoto guarantees Keynote Co., Ltd.’s loans payable to financial institutions

without receiving guarantee commission.

Note 9: The above figures do not include consumption tax, etc.


147

(Per share information)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Net assets per share 1,455.90 yen Net assets per share 1,415.91 yen

Profit (loss) per share (49.65) yen Profit (loss) per share (92.82) yen

Diluted profit per share - yen Diluted profit per share - yen

Note 1: Diluted profit per share is not shown in the current consolidated fiscal year because dilutive shares did

exist but yielded net loss per share.

Note 2: Basis for calculation of profit (loss) per share and diluted profit per share is shown below.

(Millions of yen)


(April 1, 2015 – March 31, 2016)


(April 1, 2016 – March 31, 2017)

Profit (loss) per share

Profit (loss) attributable to owners of

parent (5,712) (9,876)

Amount not attributable to

shareholders of common shares - -

Profit (loss) attributable to owners of

parent, applicable to common shares (5,712) (9,876)

Average number of shares during the

fiscal year (thousand shares) 115,050 106,405

Diluted profit per share

Adjustments to profit attributable to

owners of parent - -

Breakdown of the above

[Adjustment due to dilutive shares of

consolidated subsidiaries]

[-] [-]

Increase in number of common

shares (thousand shares) - -


[Subscription Rights] [-] [-]

Overview of dilutive shares excluded

from the calculation of “Diluted profit

per share” due to a lack of dilution

effect

(Filing company)

J Trust Co., Ltd.

5th Subscription Right (to

145,000 shares)

J Trust Co., Ltd.

6th Subscription Right (to

864,000 shares)

(Filing company)

J Trust Co., Ltd. 5th Subscription Rights (to 145,000 shares)

J Trust Co., Ltd. 6th Subscription Rights (to 864,000 shares)

J Trust Co., Ltd. 7th Subscription Rights (to 2,820,000 shares)

(Consolidated subsidiary)

ADORES, Inc. 1st Subscription

Rights (to 11,500,000 shares)

Note 3: Basis for calculation of net assets per share is shown below.


148

(Millions of yen)






Amount to be excluded from net

assets 5,541 5,910


[Subscription Rights] [167] [168]

[Non-controlling interests] [5,373] [5,742]

Year-end net assets attributable to

common shares 163,115 145,752

Year-end number of common shares

used to calculate net assets per share

(thousand shares)

112,037 102,938


149

(Important subsequent event)

At the Board of Directors’ meeting held on April 20, 2017, ADORES, Inc. (hereinafter, “ADORES”), a consolidated

subsidiary of J Trust Co., Ltd., resolved to establish ADORES Company Split Preparation, Inc. (hereinafter, “the

Preparation Company”) wholly-owned by ADORES effective October 1, 2017 in line with a shift to the holding company

structure by way of a company split. ADORES subsequently resolved, at the Board of Directors’ meeting held on May

9, 2017, that it will conclude an absorption-type company split agreement (hereinafter, “the Split Agreement”) with the

Preparation Company. The execution of the split is subject to approval of relevant agendas at the Ordinary General

Meeting of Shareholders of ADORES scheduled for June 27, 2017 and, if necessary, permission from relevant public

sector offices.

(1) Reason for the company split

Based on the idea that ADORES Group entities should concentrate on their individual business activities with

clear roles and responsibility, the split aims to facilitate business realignment flexibly through aggressive M&As

and optimize the allocation of management resources across the Group.

(2) Method of the split

It is an absorption-type company split (corporate divesture) in which ADORES is the splitting company and the

Preparation Company is the successor company.

(3) Timeline of the split

Date of resolution at the Board of Directors’ meeting for establishing the

Preparation Company:

April 20, 2017

Date of establishing the Preparation Company: April 21, 2017

Date of resolution at the Board of Directors’ meeting for approving the Split

Agreement:

May 9, 2017

Date of concluding the Split Agreement: May 9, 2017

Date of Ordinary General Meeting of Shareholders for approving the Split

Agreement:

June 27, 2017

Effective date of the split: October 1, 2017 (plan)

(4) Overview of the splitting company

[Splitting Company] (As of the end of March 2017)

(i) Company name: ADORES, Inc.*

(ii) Address: 1-7-12 Toranomon, Minato-ku, Tokyo

(iii) Representative: Seiji Uehara, President and Representative Director

(iv) Net assets: 9,033 million yen

(v) Total assets: 15,849 million yen

(vi) Capital stock: 4,405 million yen

(vii) Number of employees: 227

(viii) Line of business: Operation of amusement arcades and other facilities, real estate

(real estate asset department), store subleasing, others (foreign

currency exchange)


150

[Successor] (As of the date of establishment: April 21, 2017)

(i) Company name: ADORES Company Split Preparation, Inc.*

(ii) Address: 1-7-12 Toranomon, Minato-ku, Tokyo

(iii) Representative: Manabu Ishii, President and Representative Director

(iv) Net assets: 20 million yen

(v) Total assets: 20 million yen

(vi) Capital stock: 20 million yen

(vii) Number of employees: 0

(viii) Line of business: Not engaged in any business before the split

* The trade names are to be changed after the split becomes effective.

(5) Details of business to be split

The Preparation Company will succeed all the businesses of ADORES excluding the following: (i) real estate (real

estate asset department); (ii) store subleasing; and (iii) administrative function.

(6) Operating results of the business department to be split (FY2017)

Splitting business

(actual) (a)

Splitting company

(non-consolidated) (b)

Ratio (a/b)

Sales 12,003 million yen 12,186 million yen 98.5%

(7) Assets and liabilities to be split (as of February 28, 2017)

Assets Liabilities

Item Amount Item Amount

Current assets 2,718 million yen Current liabilities 1,160 million yen

Non-current assets 7,124 million yen Non-current liabilities 4,494 million yen

Total 9,843 million yen Total 5,654 million yen

Note: The above figures are calculated based on the balance sheet as of February 28, 2017. The actual amount

is determined after adjustments with changes that may occur till the effective date of the split.


151

[5] Consolidated supplemental schedules

[Schedule of bonds]

Company name Description Date of

issuance

Balance at

beginning of

current period

(Millions of yen)

Balance at end of

current period

(Millions of yen)

Interest

rate

(%)

Collateral Maturity

ADORES, Inc. 8th Unsecured

Bond

September 30,

2014

210

60

150

60 0.55 No

September

30, 2019

ADORES, Inc. 9th Secured

Bond

January 31,

2017

-

-

320

21 0.84 Yes

January 31,

2022

J Trust Co., Ltd. 1st Unsecured

Bond

February 25,

2016

200

-

200

- 0.79 No

February

25, 2021

PT Bank JTrust

Indonesia Tbk.

US Dollar

Convertible Bond

(Note 4)

June 16,

2006

1,819

-

[USD 15 million]

1,679

-

[USD 15 million]

7.00 No June 16,

2009

Keynote Co.,

Ltd.

1st Unsecured

Bond (with bank

guarantee; only

for eligible

institutional

investors)

April 25, 2016 -

-

90

20 0.55 No

April 23,

2021

Keynote Co.,

Ltd.

1st Unsecured

Bond (with bank

guarantee; only

for eligible

institutional

investors)

September 20,

2016

-

-

45

10 0.38 No

September

17, 2021

Total - - 2,229

60

2,484

111 - - -

Note 1: Figures on gray background refer to the current portion of bonds.

Note 2: Figures in bracket [ ] refer to the foreign currency-denominated amount.

Note 3: The amount to be redeemed for the next 5 years after the consolidated closing date is shown below.

(Millions of yen)


up to 2 years Over 2 years up to 3 years



111 111 81 251 247

Note 4: The maturity date has passed owing to litigation.


152

[Schedule of loans payable]

Category

Balance at

beginning of

current period

(Millions of yen)

Balance at end

of current period

(Millions of yen)

Average

interest rate

(%)

Maturity

Short-term loans payable 14,317

8,129

9,798

6,420

3.6

4.7 -

Current portion of long-term loans payable 13,391

7,683

18,733

10,404

3.0

3.7 -

Current portion of lease obligations 165

136

36

-

1.8

- -

Deposits by banking business 271,117

271,117

364,419

364,419

3.4

3.4 -

Long-term loans payable (excluding current

portion)

21,788

9,949

24,353

5,787

2.4

3.4 2018-2045

Lease obligations (excluding current portion) 82

16

60

-

1.8

- 2018-2022

Other interest-bearing debt

Notes discounted

1,381

916

3.3

-

Other interest-bearing debt

Commercial Paper

-

-

15,893

15,893

4.4

4.4

Total 322,244

297,033

434,211

402,924 - -

Note 1: “Average interest rate” is the weighted average interest rate for the year-end balance of loans payable, etc.

including foreign currency-denominated loans payable.

Note 2: Figures on gray background refer to foreign currency-denominated loans payable, etc. in units of million

yen.

Note 3: “Average interest rate” for lease obligations is the weighted average based on the “Interest rate” at year-

end and “Balance at end of current period” with respect to interest expenses equivalents (included in total

lease payments) allocated to each consolidated fiscal year using the interest method. The amount before

the deduction of interest expenses equivalents, if it is recorded on the consolidated balance sheet, is not

included in the calculation of “Average interest rate.”

Note 4: With regard to “Deposits by banking business,” “Long-term loans payable (excluding current portion)” and

“Lease obligations (excluding current portion),” the amount to be repaid for the next 5 years after the

consolidated closing date is shown below.

(Millions of yen)

Over 1 year

up to 2 years Over 2 years up to 3 years



Deposits by banking business 24,646 11,428 198 115

Long-term loans payable 10,219 6,988 2,080 3,867

Lease obligations 35 11 7 5

[Schedule of asset retirement obligations]

Asset retirement obligations do not exceed 1/100 of the sum of liabilities and net assets as of the beginning of the

current consolidated fiscal year and as of the end of the current consolidated fiscal year. For this reason, the

disclosure is omitted pursuant to Article 92-2 of the Ordinance on Consolidated Financial Statements.


153

(2) Other

Quarterly information for the current consolidated fiscal year

(Cumulative period) 1st Quarter 2nd Quarter 3rd Quarter Current

consolidated fiscal year

Operating revenue (Millions of yen) 20,507 40,135 65,269 85,031

Profit (loss) before income

taxes (Millions of yen) (271) (7,016) 1,388 (8,359)

Profit (loss) attributable to

owners of parent (Millions of yen) (710) (7,665) 322 (9,876)

Profit (loss) per share (Yen) (6.34) (69.77) 3.00 (92.82)

(Fiscal period) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Quarterly profit (loss) per

share (Yen) (6.34) (63.43) 72.77 (95.82)


154

2. Non-Consolidated Financial Statements, etc.

(1) Non-Consolidated Financial Statements

[1] Non-Consolidated Balance Sheet

(Millions of yen)

Previous Fiscal Year

(as of March 31, 2016) Current Fiscal Year


Assets

Current assets

Cash and deposits 40,498 *1 *2 15,993 *1 *2

Short-term loans receivable from subsidiaries and associates 566 2,150

Other 1,389 *2 922 *2

Total current assets 42,454 19,065

Non-current assets

Property, plant and equipment

Buildings 7 6

Land 19 19

Other 3 1

Total property, plant and equipment 30 28

Intangible assets

Goodwill 316 63

Other 26 46

Total intangible assets 342 109

Investments and other assets

Investment securities 4 30

Shares of subsidiaries and associates 96,388 *1 116,754 *1

Investments in capital of subsidiaries and associates 11,292 11,292

Other 366 *2 362 *2

Allowance for doubtful accounts (13) (8)

Total investments and other assets 108,039 128,431

Total non-current assets 108,412 128,569

Total assets 150,866 147,635


155

(Millions of yen)


(as of March 31, 2016) Current Fiscal Year


Liabilities

Current liabilities

Short-term loans payable 3,000 1,789

Current portion of long-term loans payable 2,238 *1 3,380 *1

Accounts payable – other 183 *2 179 *2

Income taxes payable 212 241

Other 16 *2 52 *2

Total current liabilities 5,650 5,642

Non-current liabilities

Bonds payable 200 200

Long-term loans payable 4,871 *1 9,289 *1

Deferred tax liabilities 36 53

Long-term guarantee deposited 135 *2 101 *2

Other 0 0

Total non-current liabilities 5,244 9,645

Total liabilities 10,894 15,287

Net assets


Capital stock 53,616 53,630

Capital surplus

Legal capital surplus 52,957 52,971

Total capital surpluses 52,957 52,971

Retained earnings

Other retained earnings

Retained earnings brought forward 33,636 33,274

Total retained earnings 33,636 33,274

Treasury shares (406) (7,685)

Total shareholders' equity 139,804 132,191

Subscription rights to shares 167 156


Total liabilities and net assets 150,866 147,635


156

[2] Non-Consolidated Statements of Income

(Millions of yen)

Previous Fiscal Year (From April 1, 2015 till March 31, 2016)

Current Fiscal Year (From April 1, 2016 till March 31, 2017)

Operating revenue

Interest income 165 *1 62*1

Dividend income 33,613*1 6,190*1

Interest on deposits 14*1 18*1

Other operating revenue 85*1 105*1


Operating expenses

Interest on loans 612*1 317

Other operating expenses 0 0

Total operating expenses 612 318

Operating gross profit 33,266 6,058

Selling, general and administrative expenses 2,495*1*2 3,111*1*2

Operating profit 30,771 2,947

Non-operating income

Dividend income 3 3

Miscellaneous income 5*1 12*1

Total non-operating income 8 15

Non-operating expenses

Foreign exchange losses 919 1,093

Loss on investments in partnership - 43

Miscellaneous loss 9 0

Total non-operating expenses 929 1,137

Ordinary profit 29,850 1,824

Extraordinary income

Gain on sales of investment securities - 95

Gain on sales of shares of subsidiaries and associates 775*1 -

Gain on reversal of subscription rights to shares 34 1

Gains from paid in capital reduction by a consolidated subsidiary 1,011*1 -

Total extraordinary income 1,821 96

Extraordinary losses

Loss on sales of non-current assets 0*3 -

Loss on abandonment of non-current assets - 1

Impairment loss 21 -

Loss (gain) on sales of shares of subsidiaries and associates 171*1 299

Loss on valuation of shares of subsidiaries and associates 98 269

Compensation expenses - 100

Other 17 -

Total extraordinary losses 310 670

Profit before income taxes 31,361 1,251

Income taxes – current 40 195

Income taxes – deferred (1) 16

Total income taxes 38 211

Profit 31,322 1,039


157

[3] Non-Consolidated Statements of Changes in Net Assets

Previous fiscal year (April 1, 2015 – March 31, 2016)

(Millions of yen)


Capital

stock

Capital surplus Retained earnings

Treasury

shares

Total

shareholders'

equity

Legal

capital

surplus

Other

capital

surplus

Total

capital

surplus

Other

retained

earnings Total

retained

earnings

Retained

earnings

brought

forward

Balance at beginning of current

period 53,604 52,945 0 52,945 9,633 9,633 (297) 115,885

Changes of items during period

Issuance of new shares 12 12 12 24

Dividends of surplus (1,164) (1,164) (1,164)

Profit 31,322 31,322 31,322


Disposal of treasury shares 0 0 0 0

Retirement of treasury shares (0) (0) (6,155) (6,155) 6,156 -

Net changes of items other

than shareholders' equity

Total changes of items during

period 12 12 (0) 11 24,002 24,002 (108) 23,918

Balance at end of current period 53,616 52,957 - 52,957 33,636 33,636 (406) 139,804

Subscription

rights

to shares

Total net

assets


period 167 116,052




Profit 31,322

Purchase of treasury shares (6,264)

Disposal of treasury shares 0

Retirement of treasury shares -


than shareholders' equity 0 0


period 0 23,919

Balance at end of current period 167 139,972


158

Current fiscal year (April 1, 2016 – March 31, 2017)

(Millions of yen)


Capital

stock

Capital surplus Retained earnings

Treasury

shares

Total

shareholders'

equity

Legal

capital

surplus

Other

capital

surplus

Total

capital

surplus

Other

retained

earnings Total

retained

earnings

Retained

earnings

brought

forward


period 53,616 52,957 - 52,957 33,636 33,636 (406) 139,804


Issuance of new shares 13 13 13 27

Dividends of surplus (1,401) (1,401) (1,401)

Profit 1,039 1,039 1,039



than shareholders' equity


period 13 13 - 13 (361) (361) (7,279) (7,613)

Balance at end of current period 53,630 52,971 - 52,971 33,274 33,274 (7,685) 132,191

Subscription

rights to

shares

Total net

assets


period 167 139,972




Profit 1,039

Purchase of treasury shares (7,279)


than shareholders' equity (11) (11)


period (11) (7,624)

Balance at end of current period 156 132,347


159

[Notes]

(Significant matters relating to the preparation of consolidated financial statements)

1. Valuation standards and methods for assets

(1) Valuation standards and methods for securities

Shares of subsidiaries

Cost method by moving average method

Other securities

Securities without market value

Cost method by moving average method

2. Depreciation method for non-current assets


Declining balance method

However, the properties, plants, equipment, and buildings acquired after April 1, 2016 are depreciated by

straight line method.

(2) Intangible assets


Software for internal use is amortized over the usable period of five years as set by the company.

(3) Long-term prepaid expenses


3. Accounting standards for allowance

(1) Allowance for doubtful accounts

To prepare for bad debts expenses, the uncollectible amount is estimated and recorded based on the

actual loan loss ratio for general receivables and in light of collectability of each account for specific

receivables potentially falling into doubtful receivables.

4. Other significant matters which constitute the basis for preparation of the non-consolidated financial statements

(1) Amortization method and period for goodwill

Goodwill is amortized on a straight-line basis over 5 years during which investment benefits can be

received.

(2) Accounting for consumption taxes

Consumption taxes are accounted for using the tax exclusion method.

However, non-deductible consumption taxes related to non-current assets are recorded as “Other” under

investments and other assets and amortized over 5 years using the straight-line method.

(Changes in accounting policies)

(Adoption of the Practical Solution on a Change in Depreciation Method due to Tax Reform 2016)

Following the revision of the Corporation Tax Act, we adopted the “Practical Solution on a Change in Depreciation

Method due to Tax Reform 2016” (ASBJ [Accounting Standards Board of Japan] PITF [Practical Issues Task Force]

No. 32, June 17, 2016) in the current consolidated fiscal year, and changed the depreciation method for the

equipment attached to buildings and accompanying facilities and structures acquired on or after April 1, 2016 from

the declining balance method to the straight-line method.

The impact of this arrangement on profit and loss is insignificant.


160

(Additional information)

(Adoption of the Implementation Guidance on Recoverability of Deferred Tax Assets)

We adopted the “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Statement No. 26,

March 28, 2016) in the current consolidated fiscal year.


161

(Notes to Non-Consolidated Balance Sheet)

*1 Assets pledged as collateral and the corresponding borrowings

Assets pledged as collateral



Current fiscal year


Deposits 620 million yen 1,240 million yen

Shares of subsidiaries and associates 4,077 3,338

Total 4,697 4,578

Borrowings corresponding to the above



Current fiscal year


Current portion of long-term loans

payable 1,782 million yen 2,260 million yen

Long-term loans payable 4,508 5,408

Total 6,290 7,669

For the previous fiscal year, assets pledged as collateral were also used as collateral for guaranteed

obligation and borrowings by subsidiaries.

*2 Monetary claims receivable from and payable to subsidiaries and associates (excluding those stated separately

in financial statements)



Current fiscal year


Short-term monetary claims receivable

from subsidiaries and associates 787 million yen 21 million yen

Long-term monetary claims receivable

from subsidiaries and associates 0 1

Short-term monetary claims payable to

subsidiaries and associates 39 25

Long-term monetary claims payable to

subsidiaries and associates 135 101

3. Guarantee obligations

Credit guarantee services mainly involve provision of guarantee on loans made by financial institutions

(1) Guarantee obligations related to operating activities



Current fiscal year


Guarantee obligation (for 52,048

business entities and consumers) 53,298 million yen

Guarantee obligation (for 54,862

business entities and consumers) 85,936 million yen

For the previous fiscal year and the current fiscal year, the Company acts as a joint guarantor for guarantee

obligations of subsidiaries.

The above includes joint and several guarantees due to concomitant assumption of obligations.

(2) Guarantees related to subsidiaries and associates



Current fiscal year


Nihon Hoshou Co., Ltd. 2,193 million yen Nihon Hoshou Co., Ltd. 4,160 million yen

J TRUST Card Co., Ltd. 1,430 J TRUST Card Co., Ltd. 1,582

- Highlights Entertainment Co.,

Ltd. 844

JT Capital Co., Ltd. 1,004


162

Total 3,624 Total 7,590

(Notes to Statement of Income)

*1 Volume of transactions with subsidiaries and associates


(April 1, 2015 – March 31, 2016) Current Fiscal Year

(April 1, 2016 – March 31, 2017)

Volume of operating transactions with

subsidiaries and associates

Operating revenue 33,855 million yen 6,357 million yen

Operating expenses, etc. 469 167

Volume of non-operating transactions 1,669 3

*2 The ratio of selling expenses is close to 0% for both previous and current fiscal years. On the other hand, that

of general and administrative expense is close to 100% for both previous and current fiscal years.

The table below shows major items and amount of selling, general and administrative expenses.



(April 1, 2016 – March 31, 2017)

Salaries and allowances 323 million yen 436 million yen

Taxes and dues 395 434

Commission fee 952 1,231

Amortization of goodwill 253 253

*3 Breakdown of loss on sales of non-current assets



(April 1, 2016 – March 31, 2017)

Vehicles 0 million yen - million yen

(Securities)

Previous fiscal year (as of March 31, 2016)

Category Balance sheet value

(Millions of yen)

Market value

(Millions of yen)

Difference

(Millions of yen)

Shares of subsidiaries 4,148 6,453 2,305

Note: Balance sheet value of the shares of subsidiaries and associates whose market value is considered

extremely difficult to determine


(Millions of yen)

Shares of subsidiaries 92,240

These shares were not included in the above “Shares of subsidiaries” because it is considered

extremely difficult to determine their market value due to no marketability.

Current fiscal year (as of March 31, 2017)


(Millions of yen)

Market value

(Millions of yen)

Difference

(Millions of yen)

Shares of subsidiaries 4,088 7,529 3,440

Note: Balance sheet value of the shares of subsidiaries and associates where it is considered extremely

difficult to determine their market value


(Millions of yen)

Shares of subsidiaries 112,665

These shares were not included in the above “Shares of subsidiaries” because it is considered

extremely difficult to determine their market value due to no marketability.


163

(Tax Effect Accounting)

1. Breakdown of main causes for deferred tax assets and deferred tax liabilities



Current fiscal year


Deferred tax assets

Loss on valuation of securities 32 million yen - million yen

Shares of subsidiaries 1,996 1,987

Net loss carried forward 2,550 4,702

Other 277 225

Deferred tax assets subtotal 4,857 6,915

Valuation allowance (4,857) (6,915)

Deferred tax assets – total - -

Deferred tax liabilities

Valuation difference on assets assumed due to merger (36) (36)

Other - (16)

Deferred tax liabilities – total (36) (53)

Deferred tax assets (liabilities) – net (36) (53)

Note: Net deferred tax liabilities for previous and current fiscal years are included in the following items on

the balance sheet.



Current fiscal year


Non-current liabilities - Deferred tax liabilities (36) million yen (53) million yen

2. Breakdown of main items that caused significant differences between the effective statutory tax rate and the

corporate tax rate after the application of tax effect accounting



Current fiscal year


Effective statutory tax rate 33.10% 30.86%

(Adjustment)

Entertainment expense and other items permanently

excluded from loss 0.03 23.32

Dividend income and other items permanently excluded

from profit (36.19) (148.08)

Inhabitant tax on per capita basis 0.01 0.67

Change in valuation allowance 3.64 86.08

Foreign tax credits - 0.30

Non-deductible foreign withholding tax 0.12 14.85

Amortization of goodwill 0.27 6.24

Decrease in deferred tax liabilities at end of period due

to change in tax rate (0.01) -

Other (0.85) 2.68

Corporate tax rate after the adoption of tax effect

accounting method 0.12 16.92

(Significant Subsequent Events)

Not Applicable


164

[4] Supplemental schedules

[Schedule of property, plant and equipment]

(Millions of yen)

Category Type of

asset

Balance at

beginning of

current period

Increase

during period

Decrease

during period

Write-off

during period

Balance at

end of

current period

Accumulated

depreciation

Property, plant

and equipment Buildings 7 2 1 1 6 11

Land

19 - 0 - 19 -

Other 3 - 0 2 1 32

Total

30 2 1 3 28 44

Intangible

assets Goodwill 316 - - 253 63 -

Other 26 58 31 7 46 -

Total 342 58 31 260 109 -

[Schedule of allowance]

(Millions of yen)

Item Balance at beginning

of current period

Increase during

period

Decrease during

period

Balance at end of

current period

Allowance for doubtful

accounts 13 - 4 8

(2) Contents of major assets and liabilities

Details are omitted because consolidated financial statements are prepared separately.

(3) Other

Not applicable.


165

VI. Overview of Shareholder Service of the Filing Company

Fiscal year From April 1 to March 31

Annual shareholders meeting In June

Record date March 31

Record dates for dividends of surplus

September 30

March 31

Number of shares per unit 100 shares

Repurchase of shares less than 1 unit

Handling place

(Special purpose account)

Securities Transfer Department,

Mitsubishi UFJ Trust and Banking Corporation

1-4-5, Marunouchi, Chiyoda-ku, Tokyo

Shareholder registry administrator

(Special purpose account)

Mitsubishi UFJ Trust and Banking Corporation

1-4-5, Marunouchi, Chiyoda-ku, Tokyo

Contact place ──────

Repurchase fee

Separately specified amount that is equivalent to brokerage commissions

for share trading

Publication of announcement

Public notices are issued electronically

(http://www.jt-corp.co.jp/en/).

If there is an unavoidable reason that prevents the use of an electronic

format, however, such notices are published in the Nikkei (Nihon Keizai

Shimbun).

Benefits to shareholders

Implementation of shareholder perks to mark the 40th anniversary:

1. Eligible Shareholders

Shareholders who are listed or recorded in the shareholder register

in possession of at least 300 shares (three share units) of the

Company as of the end of March 2017.

2. Content of the Anniversary Benefit

Every eligible shareholder will receive a Rakuten Point Gift Code

worth 5,000 points.

We will examine the possibility of implementing shareholder perks for

the fiscal year ending March 2018 onward.

Note: Pursuant to the Company’s Articles of Incorporation, shareholders who have fractional shares do not have any

rights other than: (i) the rights prescribed in each item of Article 189, Paragraph 2 of the Companies Act; (ii) the

right to request acquisition of shares with put options; (iii) the right to receive allocation of shares or Subscription

Rights; and (iv) the right to request the Company to sell additional shares to make one share unit by combining

less-than-one-unit shares already owned by such shareholder.

http://www.jt-corp.co.jp/en/


166

VII. Reference Information on Filing Company

1. Information on the parent company, etc. of the filing company

The Company does not have a parent company or other entity that is stipulated in Article 24-7, Paragraph 1 of the Financial

Instruments and Exchange Act.

2. Other reference information

The Company submitted the following documents during the period from the beginning of the current fiscal year to the date

of submission of the Annual Securities Report:

(1) Annual Securities Report with attached documents and Confirmation Letter

40th fiscal year (from April 1, 2015 to March 31, 2016)

Submitted to the Director-General of the Kanto Finance Bureau on June 30, 2016.

(2) Internal Control Report with attached documents

Submitted to the Director-General of the Kanto Finance Bureau on June 30, 2016.

(3) Quarterly Securities Report and Confirmation Letter

1st Quarter of the 41st fiscal year (from April 1, 2016 to June 30, 2016)

Submitted to the Director-General of the Kanto Finance Bureau on August 12, 2016.

2nd Quarter of the 41st fiscal year (from July 1, 2016 to September 30, 2016)

Submitted to the Director-General of the Kanto Finance Bureau on November 11, 2016.

3rd Quarter of the 41st fiscal year (from October 1, 2016 to December 31, 2016)

Submitted to the Director-General of the Kanto Finance Bureau on February 13, 2017.

(4) Extraordinary Report

Submitted to the Director-General of the Kanto Finance Bureau on July 1, 2016.

An extraordinary report pursuant to Article 19, Paragraph 2, Item 9-2 (Resolution made at the shareholders meeting

of a filing company) of the Cabinet Office Ordinance on Disclosure of Corporate Information, etc.


An extraordinary report pursuant to Article 19, Paragraph 2, Item 4 (any change of its Major Shareholders) of the

Cabinet Office Ordinance on Disclosure of Corporate Information, etc.

(5) Securities Registration Statement (Issuing Subscription Rights as a stock option) with attached documents


(6) Report on repurchase

Reporting period (from August 1, 2016 to August 31, 2016)

Submitted to the Director-General of the Kanto Finance Bureau on September 12, 2016.

(7) Amendment Report of Quarterly Securities Report and Confirmation Letter

Submitted to the Director-General of the Kanto Finance Bureau on December 2, 2016.

An amendment reports of quarterly securities report of the 2nd Quarter of the 41st fiscal year (from July 1, 2016 to

September 30, 2016) and a confirmation letter.

(8) Amendment Report to Extraordinary Report


An amendment report to the extraordinary report (resolution made at the shareholders meeting of a filing company)

submitted on July 1, 2016

(9) Amendment Report to Securities Registration Statement


An amendment report to securities registration statement submitted on August 12, 2016.




167

Submitted to the Director-General of the Kanto Finance Bureau on September 9, 2016.



168

Part II. Information on the Guarantee Company of the Filing Company

Not applicable.


169

Independent Auditor’s Audit Report and Internal Control Audit Report

June 28, 2017

J Trust Co., Ltd. The Board of Directors

YUSEI Audit & Co.

Designated Partner, Managing Member

Certified Public Accountant

Yoshitaka Kato (Seal)



Ryouichi Komatsu

(Seal)



Takuya Ishigami (Seal)



Satoru Oyoshi (Seal)

[Audit on Financial Statements]

To provide an attestation as stipulated in Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited the consolidated financial statements of J Trust Co., Ltd. (“the Company”) included in the “Financial Information” section, which comprise Consolidated Balance Sheet, Consolidated Statement of Income, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Net Assets, Consolidated Statements of Cash Flows, Significant Matters relating to the Preparation of Consolidated Financial Statements and other Notes and Schedules to Consolidated Financial Statements, for the fiscal year from April 1, 2016 to March 31, 2017.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in Japan. Its responsibility includes the development and operation of internal control system that management determines is necessary to enable the preparation and fair presentation of consolidated financial statements that are free of material misstatement, whether due to fraud or an error.

Accounting Auditor’s Responsibility

Our responsibility is to express an opinion on the consolidated financial statements based on our audit performed from an independent standpoint. We conducted our audit in accordance with the auditing standards generally accepted in Japan. Those standards require that we implement our audit plan and perform the audit based on the plan to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the Accounting Auditors’ judgment, including the assessment of risks of material misstatement of the consolidated financial statements, whether due to fraud or an error. In making those risk assessments, we consider internal control relevant to the preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the accounting policies used, the method of their application and the accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence that we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Audit Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material


170

respects, the financial position of the Company and its consolidated subsidiaries as of March 31, 2017 and their consolidated financial performance and cash flow for the fiscal year ended on that day in conformity with the accounting principles generally accepted in Japan.

Matters for Emphasis

As described in “Changes in Accounting Estimates,” PT Bank JTrust Indonesia Tbk., a consolidated subsidiary of the Company, has changed the method for estimating allowance for doubtful accounts during the current consolidated fiscal year.

This matter does not affect our opinion.

Other matters

The Company’s former accounting auditor audited consolidated financial statements of the Company for the previous fiscal year ended on March 31, 2016. The auditor expressed an unqualified opinion on the consolidated financial statements as of June 29, 2016.

[Audit on Internal Control]

To provide an attestation as stipulated in Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited the internal control report of the Company as of March 31, 2017.

Management’s Responsibility for the Internal Control Report

Management is responsible for the development and operation of internal control over financial reporting, and for the preparation and fair presentation of the internal control report in accordance with evaluation standards for internal control over financial reporting generally accepted in Japan.

Meanwhile, the internal control over financial reporting may not be able to completely prevent or detect misstatement in financial reporting.


Our responsibility is to express an opinion on the internal control report based on our audit performed from an independent standpoint. We conducted our audit on the internal control in accordance with the auditing standards for internal control over financial reporting generally accepted in Japan. Those standards require that we implement our audit plan and perform the internal control audit based on the plan to obtain reasonable assurance about whether the internal control report is free of material misstatement.

An internal control audit involves performing procedures to obtain audit evidence about results of the assessment of internal control over financial reporting in the internal control report. The procedures selected depend on the Accounting Auditors’ judgment, including the degree of impact on the reliability of financial reporting. An internal control audit also includes the management’s statement about the assessment scope, procedures and result of the internal control over financing report, as well as examination of the overall presentation of the internal control report.


Audit Opinion

In our opinion, the internal control report referred to above, in which the Company states that the internal control over financial reporting as of March 31, 2017 is effective, presents fairly, in all material respects, results of the assessment of internal control over financial reporting in conformity with evaluation standards for internal control over financial reporting generally accepted in Japan.

Conflict of Interest

There is no conflict of interest requiring mention as per the Certified Public Accountant Act between the Company, YUSEI Audit & Co. and managing members.

End

Note 1: The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of the Company, the filing company of Annual Securities Report.


171

Note 2: XBRL data is excluded from the scope of audit.

The above represents a translation, for convenience only, of the original report issued in Japanese.


172

Independent Auditor’s Report

June 28, 2017

J Trust Co., Ltd. The Board of Directors

YUSEI Audit & Co.



Yoshitaka Kato (Seal)



Ryouichi Komatsu

(Seal)



Takuya Ishigami (Seal)



Satoru Oyoshi (Seal)

To provide audit attestation as stipulated in Article 193-2, Paragraph 1 of the Financial Instruments and Exchange Act, we have audited the non-consolidated financial statements of J Trust Co., Ltd. (“the Company”) included in the “Financial Information” section, which comprise Non-Consolidated Balance Sheet, Non-Consolidated Statement of Income, Non-Consolidated Statement of Changes in Net Assets, Significant Accounting Policies, and other Notes and Schedules to Non-Consolidated Financial Statements, for the 41st business year from April 1, 2016 to March 31, 2017.

Management’s Responsibility for the Non-Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the non-consolidated financial statements in accordance with accounting principles generally accepted in Japan. Its responsibility includes the development and operation of internal control system that management determines is necessary to enable the preparation and fair presentation of non-consolidated financial statements that are free of material misstatement, whether due to fraud or an error.


Our responsibility is to express an opinion on the non-consolidated financial statements based on our audit performed from an independent standpoint. We conducted our audit in accordance with the auditing standards generally accepted in Japan. Those standards require that we implement our audit plan and perform the audit based on the plan to obtain reasonable assurance about whether the non-consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the non-consolidated financial statements. The procedures selected depend on the Accounting Auditors’ judgment, including the assessment of risks of material misstatement of the non-consolidated financial statements, whether due to fraud or an error. In making those risk assessments, we consider internal control relevant to the preparation and fair presentation of the non-consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. An audit also includes evaluating the accounting policies used, the method of their application and the accounting estimates made by management, as well as evaluating the overall presentation of the non-consolidated financial statements.


Audit Opinion

In our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects, the Company’s financial position as of March 31, 2017 and non-consolidated financial performance for the business year ended on that day in conformity with the accounting principles generally accepted in Japan.


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Other matters

The Company’s former accounting auditor audited consolidated financial statements of the Company for the previous business year ended on March 31, 2016. The auditor expressed an unqualified opinion on the consolidated financial statements as of June 29, 2016.

Conflict of Interest

There is no conflict of interest requiring mention as per the Certified Public Accountant Act between the Company, YUSEI Audit & Co. and managing members.

End

Note 1: The above is a digitization of the text contained in the original copy of the Audit Report, which is in the custody of the Company, the filing company of Annual Securities Report.

Note 2: XBRL data is excluded from the scope of audit.

The above represents a translation, for convenience only, of the original report issued in Japanese.


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The English translation is made only for the convenience of and reference by overseas investors. In case of any discrepancy between the Japanese original and the English translation, the Japanese original shall prevail. The issuer shall not be liable for this translation or any loss or damage arising from this translation.

J Trust Co., Ltd.Mutiara Tbk. (currently, PT Bank JTrust Indonesia Tbk.) and made it a consolidated...

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