Qualitative Information and Financial Statements

1. Qualitative Information on Consolidated Business Performance

The Japanese economy continued to be severe as observed in high unemployment ratio during the third quarter under review, although exports and production continued increasing, showing signs of economic recovery.  While economic recovery in the future was expected against a background of various measures and their effects, there was potential downward pressure, such as further deterioration of employment situation and concerns for worsening global economy.

   Business environment of the consumer finance sector continued to be unpredictable since interest refund claims were staying at a high level and preparatory measures for full enforcement of the Money Lending Business Law were taken.  In addition, rapid deterioration of funding situations in recent years forced consumer finance companies to shrink operations or to withdraw from the business, as well as forcing even major companies to improve management practices.

   In this environment, regarding business performance of TAKEFUJI CORPORATION and its subsidiaries (the "Group") for the consolidated first nine months under review, operating revenues were 95,326 million yen (down 35.2% year-on-year comparison).  Ordinary income and net income were 27,364 million yen (Ordinary loss of 185,484 million yen for the previous year's same period) and 19,681 million yen (Net loss of 214,395 million yen for the previous year's same period) respectively.  This was partly because all of the refund claims, which stayed at a high level, was treated as reversal of allowance.

2. Qualitative Information on Consolidated Financial Condition

  Total assets at the end of the third quarter under review on a consolidated basis was 740,923 million yen, down 217,541 million yen compared to that of the end of the previous consolidated fiscal year.  This was mainly because of a decrease in direct cash loans to customers of 212,928 million yen, a consequent decrease in allowance for credit losses of 33,738 million yen and a fall in short-term loans receivable of 49,992 million yen.

  As for liabilities, the amount was 575,674 million yen, down 233,142 million yen compared to that of the end of the previous consolidated fiscal year.  This was mainly due to factors such as a decrease in allowance for losses for refund of interest received from customers of 94,801 million yen as a result of reversal, a decrease in long-term borrowings of 103,738 million yen and a decrease in convertible bond-type bonds with subscription rights to shares of 24,950 million yen.

  Regarding net assets, the amount was 165,249 million yen, up 15,601 million yen compared to that of the end of the previous consolidated fiscal year.  This was mainly due to an increase in retained earnings of 14,959 million yen.  Consequently, shareholders' equity ratio was 22.3%, up 6.7 points compared to that of the end of the previous consolidated fiscal year.

 (The situation of consolidated cash flows)

  Cash and cash equivalent at the end of the third quarter under review on a consolidated basis (the "Funds") was 51,223 million yen, down 46,639 million yen compared to that of the end of the previous consolidated fiscal year.

  Each cash flow situation and factors were as follows:

  (Net cash provided by operating activities)

    The Funds provided by operating activities were 77,479 million yen (61,149 million yen was provided in the previous year's same period).  The principal sources of these cash flows were as follows; 58,212 million yen (previously 168,794 million yen) for direct cash loans made to customers and 154,824 million yen (previously 234,737 million yen) for direct cash loans collected from customers, based on our core business of consumer finance.

  (Net cash provided by investing activities)

    The Funds provided by investing activities were 4,555 million yen (1,873 million yen was used in the previous year's same period).  The principal sources of these cash flows were as follows; 1,366 million yen (previously 2,944 million yen) for purchase of tangible and intangible fixed assets, and 6,145 million yen (previously 1,412 million yen) for gain on sales of investment securities.

  (Net cash used in financing activities)

   The Funds used in financing activities were 127,625 million yen (114,741 million yen was used in the previous year's same period).  The principal sources of these cash flows were as follows; 105,489 million yen (previously 152,052 million yen) for repayment of long-term borrowings, 17,409 million yen (previously 20,000 million yen) for redemption of bonds, including convertible bond-type bonds with subscription rights to shares and 4,727 million yen (previously 16,464 million yen) for cash dividends paid.

3. Qualitative Information on Forecasts of Consolidated Operating Results

There is no change to Forecasts of Consolidated Operating Results for the Fiscal Year Ending March 31, 2010 announced on November 5, 2009 and Non-consolidated Forecast for the Fiscal Year Ending March 31, 2010 announced on May 14, 2009.

4. Others

(1) Changes of Significant Subsidiaries in the Third Quarter (Changes in Scope of Consolidation)

None

(2) Adoption of Simple Method in Accounting and Adoption of Particular Accounting Method for Consolidated Quarterly Financial Statements

A. Calculation Method of Write-off Estimate for Normal Loans

As there is no significant change between the credit loss ratio etc. at the end of the consolidated quarter under review and the credit loss ratio etc. at the end of the previous consolidated fiscal year, the write-off estimate is calculated based upon the credit loss ratio at the end of the previous consolidated fiscal year.

B. Calculation Method of Fixed Assets Depreciation and Amortization

As for assets adopting declining-balance method, the amount of depreciation and amortization is allocated based on related duration.

(3) Changes in Accounting Method for Consolidated Quarterly Financial Statements

None

(4) Important Events Affecting Going-concern Assumption

The Group had been conducting funding through various, expeditious and flexible measures, such as borrowing from financial institutions, issuance of corporate bonds and securitization of direct cash loans to customers. However, while financial situation was becoming more and more severe due to sub-prime loan issue in the U.S. and Lehman Brother's shock etc., funding environment surrounding the Group became more severe with financial needs for high-level interest refund claims and with concerns about impact of loan volume control that is expected to be introduced at the full enforcement of Money Lending Business Law scheduled by June 2010. In addition, the Company was downgraded against this background to give rise to conflict against covenant for early redemption and other events for a part of borrowings.

In above mentioned situation, the Group considered various funding methods to improve cash position. As a result, in preparation for the early redemption requests of convertible bond-type bonds with subscription rights to shares, we conducted exchange offer of such bonds during the third quarter under review on a consolidated basis. The Group also conducted sale of listed securities and sale of a part of restructured loans. Despite these successful conducts, new funding continues to be extremely difficult due to extending economic slowdown, unpredictable future of the industry, high-level interest refund claims and additional downgrade.

As explained above, a material question about the Group's going-concern assumption exists under current circumstances.

The Group responds to said circumstances with approaches below:

1. Procurement of necessary funds and stabilizing cash position

On an assumption that severe funding environment continues for the foreseeable future, the Group strives to secure necessary funds for future operation by means such as borrowings utilizing the Group's real estate properties and loans receivable as well as sale of loans receivable. At the same time, the Group also aims to stabilize its total cash position by considering and conducting measures to reduce cost burden related to existing bonds.

2. Improvement of business streamlining

In addition to further promoting streamlining measures, such as scrap and build of branch offices, which has been conducted in a planned and consistent way, the Group further aims to streamline business by advancing cost cut through reviewing contracts related to various payments and through sale of unutilized assets.

Regarding above approaches for procurement of necessary funds and stabilizing cash position, concrete negotiations with related counterparties are surely progressing as planned and we have currently reached to a stage of specifying assets in scope and price negotiation. However, we have not yet reached an obvious form of agreement such as conclusion of contracts or memorandums. Thus a material uncertainty about the Group's going-concern assumption is recognized.