ANNUAL REPORT 2011 for the year ended March 31, 2011

Notes To Consolidated Financial Statements

Credit Saison Co., Ltd. and Consolidated Subsidiaries
For the Years Ended March 31, 2011 and 2010

24. Related Party Disclosures

Transactions and balances of the Company with its affiliated company, UC Card Co., Ltd., for the years ended March 31, 2011 and 2010 were as follows.

  Millions of yen   Thousands of
U.S. dollars
2011 2010   2011
Transactions:        
Volume of new contracts ¥1,102,062 ¥1,142,412   $13,253,899
Balances:        
Accounts payable 58,599 72,018   704,738
Prepaid expenses and other assets (other receivable) 6,750 6,754   81,179

Transaction terms and decision-making policy for the transaction terms

  1. Transaction amounts exclude consumption tax, among others.
  2. Commissions in the recovery of accounts receivable-installment and from member store liquidations are determined based on market prices and other factors.

25. Subsequent Event

At the Board of Directors meeting held on December 22, 2010, the Company resolved to implement an absorption-type company split of the Company's affinity card business (the "card business") to Seven CS Card Service Co., Ltd. ("Seven CS Card"), a wholly owned subsidiary of the Company, effective April 1, 2011, based on a comprehensive business partnership contract with Seven Financial Service Co., Ltd. ("Seven Financial Service") and Sogo & Seibu Co., Ltd. ("Sogo & Seibu") on September 10, 2010. The Company has issued the affinity card with Sogo & Seibu.

Furthermore, on April 1, 2011, the Company transferred 51% of shares in Seven CS card to Seven Financial Service.

(A) Purpose of The Company Split

The Company decided to do this split after considering the many benefits that will result from the new business, including the ability to offer existing holders of Sogo & Seibu affinity cards access to all of the attractive services provided by Seven Financial Service.

In addition, the business integration with IY Card Service Co., Ltd. and Seven CS Card, which has been tentatively scheduled for March 2013, will dramatically expand the scale of the business compared with its present level, and allow the Company to develop a strategy for growth over the medium- to long-term, including increased processing revenues and other income from Seven CS Card.

(B) Effective Date of Company Split

April 1, 2011

(C) Type of Split

Part of the Company was split for absorption by Seven CS Card as the succeeding company.

(D) Details of Allotments With Regard To The Split

i. Allotment of stock

Upon execution of this absorption-type company split, the succeeding company issued one new share of common stock, which was allotted to the Company.

As a result, the Company came to own a total of 1,000 shares in the succeeding company.

Of those shares, 510 shares were transferred to Seven Financial Service effective April 1, 2011 in accordance with a stock transfer contract concluded with Seven Financial Service on September 10, 2010.

ii. Payment of cash

The succeeding company made interest payments at a rate of 0.8% per year on the amount that was calculated based on the net assets transferred from the Company in the split and deducted ¥22.0 billion (total equity of the succeeding company), prorated for the actual number of days from the day after April 1, 2011 (including such date) until the payment date (counting such date) of the split.

(E) Details of The Number And Value of Shares In The Succeeding Company That The Company Transferred, And The Company's Remaining Shares After The Transfer.

Number of shares transferred: 510 shares
Value of the shares transferred: ¥18,360 million ($220,806 thousand)
Company's remaining shares after the transfer (shareholding ratio): 490 shares (49%)

(F) Rights And Obligations Taken Over By The Succeeding Company

The succeeding company took over the assets, liabilities and contractual status of the affinity credit card business from the Company.

Excluded were obligations arising out of unlawful actions or regulatory infringements on or before April 1, 2011 (including the obligation to refund excess interest payments-received on cash advances and other loans).

(G) Details of The Assets And Liabilities Acquired By The Succeeding Company

Year ended March 31 , 2011 Millions of yen   Thousands of
U.S. dollars
Current Assets ¥158,288   $1,903,643
Non Current Assets 49   588
Total Assets ¥158,337   $1,904,231
Current Liabilities ¥ 742   $ 8,927
Long-term Liabilities -   -
Total Liabilities ¥ 742   $ 8,927

(H) Outline of The Accounting Treatment Implemented

This transaction was accounted for as a transaction under common control in accordance with the Accounting Standard for Business Combinations issued by the Business Accounting Council in Japan and Guidance on Accounting Standard for Business Combinations, and Accounting Standard for Business Divestitures issued by the ASBJ.

(I) Outline of The Succeeding Company

(As of March 31, 2011)

Name
Seven CS Card Service Co., Ltd.
Representative
Toshiharu Yamamoto, Representative Director and President
Address
8-8 Nibancho, Chiyoda-ku, Tokyo
Establishment date
September 17, 2010
Business activities
Credit card issuance and related activities
Fiscal year-end
End of February
Employee headcount
464 employees
Total assets
¥382 million
Total liabilities
¥255 million
Capital
¥100 million
Total shares issued
999 shares
Composition and equity ratio of major shareholders
Credit Saison Co., Ltd. 100%

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