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TOKYO CENTURY CORPORATION

50INTEGRATED REPORT 2023

Stakeholder Engagement for Improving Corporate Value
through Dialogue and Co-Creation

Engagement with Customers and Partners

As part of its sales activities, Tokyo Century seeks to understand theissues and goals of customers and partners so that it can supply themwith the ideal financial services and value.
By building relationships through joint businesses with customers andpartners and continuously enhancing our financial services through themerging of our respective strengths and expertise, we aim to heighten thevalue we supply to our customers, partners, and society.

Engagement with Shareholders and Other Investors

Major Engagement Methods and Measures
Communication through sales activities
 oint businesses and personnel exchanges withJ
partner companies
 haring of knowledge related to financial service
S
planning and other initiatives

Tokyo Century advances its investor relations (IR) activities with a focus on generating a cycle of proactive dialogue with shareholders andother investors and communicating the input and requests solicited thereby to management and employees. The input gained during thecourse of IR activities is used to improve information disclosure and respond to management issues in order to build trust with shareholders
and other investors and ensure that capital markets accurately appraise the Company, which in turn is anticipated to contribute to higher
corporate value over the medium to long term.

Dialogue with shareholders and other investors

Engagement with Employees

Tokyo Century aspires to develop a workplace environment in which every
employee is respected and able to fully exercise their talents, and we are
actively working to heighten employee engagement. Moreover, the input
gained from employee awareness surveys is used in discussions by theManagement Meeting and the Board of Directors for analyzing issues andplanning future initiatives. Responding to such input is positioned as animportant management priority.
By entrenching a cycle of appropriately incorporating employee input
into management, we will endeavor to bolster employee engagement bybuilding trust with employees and improving our workplace environment.

Improvement of information disclosure andresponses to management issues

Major IR Activities
Major Engagement Methods and Measures360-degree evaluations
Career Design Office (career consultation venue)
 C-Mee+ meetings for exchanges amongT
employees (discussion forums with the president)

Analysts andinstitutional
investors

Cycle of Improving Employee Engagement through Dialogue
1

Administration of employee awareness survey

Private investors

First Cycle

Analysis of results2

Details

Earnings calls

4 timesQuarterly earnings calls(Three-month and nine-month calls led by officer responsible for investor
relations; six-month and full-year briefings led by the president)

Meetings withthe president

Approx. 25

Meetings between the president and analysts and institutional investors
in Japan and overseas (including small meetings)

Approx. 230 times(Of which, approx. 50 meetings with overseas institutional investors)
Meetings with analysts and institutional investors in Japan and overseas

Meetings with
IR representatives
Business strategy briefings

1 timeBusiness strategy briefing on joint businesses with the NTT Group

Overseas roadshows

1 timeFace-to-face meeting between the president and overseas institutional
investors

Company briefings forprivate investors

2 times

Briefings on the Company, business strategies, shareholder return
policies, etc.

2

Examination and introduction of measures based on employee awareness surveye.g., Introduction of Career Challenge Program*1 and TC Biz Challenge Project*2

Implementation of measures
3

Second Cycle

1

Frequency in
Fiscal 2022

Activities

Employee awareness surveys

Monitoring of status of measure implementation
Fixed-point measurement of indicators related to measures to monitor effectivenesse.g., Number of employees using Career Challenge Program and progress reviews of
new businesses proposed by employees

Refinement of systems
1

Administration of employee awareness survey

POINT

3

Employee engagement index defined together withcorresponding non-financial target for Medium-Term
Management Plan 2027 (fiscal 2023–fiscal 2027)*1 Career Challenge Program: Internal recruitment initiative in which divisions and branch offices seeking to recruit human resources disclose the requirements of therelevant available positions so that they can be filled from among internal applicants*2 TC Biz Challenge Project: New business proposal initiative supporting employees’ efforts to tackle new challenges without fear of failure

Integrated Report 2022 Named High-Quality Reportby Domestic Stock Management Institutions of GPIF
Every year, the institutions contracted to manage the domestic stock holdings of the Government
Pension Investment Fund (GPIF) name a number of excellent integrated reports and high-quality
integrated reports from Japanese companies. In 2023, Tokyo Century’s Integrated Report 2022
was one of the 95 named high-quality integrated reports. Tokyo Century is committed to enhancing the quality of disclosure through its integrated reports and other IR tools in order to facilitate
dialogue with investors and other stakeholders and thereby improve corporate value.

C H A PT E R 4

Ensuring of appropriate appraisal by capital markets

Stakeholder Engagement

Building of trust with shareholders and other investors
Communication of feedback to management
and employees

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INTEGRATED REPORT 2023

Head of Japan Engagement Strategy

President & CEO, Representative Director

Amundi Japan Ltd.

Tokyo Century CorporationC H A PT E R 4

Koichi Baba

Stakeholder Engagement

Shohei Ura

T R A N S FO R M AT I ON
Institutional Investor

DIALOGUE

President

Tokyo Century continuously engages
with investors to guide efforts to improve
corporate value.

Expectations for transformation necessary for achieving
medium- to long-term growth and impression of basic policies andmanagement targets of Medium-Term Management Plan 2027
Baba

In times of uncertainty, it is not enough for us

Strengthening earnings power requires us toto simply respond to changes; we must actively

heighten our profitability. Recognizing that asset effi-transform ourselves to lead the era. In fiscal 2023,

ciency is integral to profitability, boosting our profitability

Tokyo Century launched Medium-Term Management

could be viewed as akin to increasing asset efficiency.

Plan 2027. This plan puts forth the concept of TCX, or

Improving the profit margins for our segment assets

Tokyo Century Transformation, which encapsulates theworth some ¥5.4 trillion to increase efficiency should

Company’s strong commitment to transforming itself.

contribute to growth in earnings per share. We thus

Based on this concept, we aim to strengthen our earn-emphasize return on assets (ROA), which we calculate

ings power through portfolio transformation, humanas net income attributable to owners of parent divided

resource and organizational transformation, green trans-

by total assets, when gauging the extent to which weformation, and digital transformation. We will also be

have strengthened earnings power.

promoting environmental, social, and governance (ESG)
initiatives for this purpose.

Ura

What most captured my attention about
Medium-Term Management Plan 2027 was

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Institutional Investor × President

the phrase “bring about change.” In fiscal 2020, Tokyofinancial targets down by segment seem to have been aassets. The capital recovered in said ways will be allo-

need to view these efforts from an overall perspective

Century announced its intention to grow based on its

decision made to underscore this message.

cated to high-profit, high-potential businesses as we

accounting for the entirety of the portfolio to confirm

replace the assets in our portfolio.

that segments are properly emphasizing profitability

seven pillars of business strategies. It was thus quite

Also, as one of its concrete strategies, I understand

impactful how, in Medium-Term Management Plan

that Tokyo Century plans to replace assets in its portfo-

As another aspect of revising our portfolio, weand efficiency. Adopting this approach, I want to see

2027, the Company chose to not only pursue growth inscale but also shift focus toward improving capital effi-

lio to shift toward growth businesses as it seeks toestablished a new operating segment, the Environmen-

Tokyo Century engage in frequent communication withincrease the representation of high-margin service busi-

tal Infrastructure segment. In the past, we advanced

investors to stress its commitment to discipline in pur-ciency. I took this course correction to be a message

nesses in order to heighten efficiency. However, I feelenvironmental businesses as part of the operations ofsuing overall optimization and its strong determination

indicating Tokyo Century’s adoption of a policy ofthat it would be even more compelling if the Company

the Equipment Leasing, Specialty Financing, and othertoward improving profitability.

increasing efficiency to strengthen its earnings power,

was to offer more detail with regard to the strategy ofsegments, but these businesses were judged to lackbased on the fact that strong earnings power is vital if

shifting toward service businesses, such as the stan-efficiency. It is therefore my hope that going forward theinitiatives are on a par with global standards.

the Company is to transform in advance of changes todards that will be used when replacing assets as part

Environmental Infrastructure segment will function as

Regardless, the market’s assessment has resulted in a

the times. The disclosure of ROA targets for individualof specific business strategies.

the nerve center for the environmental businesses

price book-value ratio that is less than 1.0 times. This isadvanced on a Companywide basis in order to heighten

likely partially due to recent performance and other

their effectiveness from a Companywide perspective.

financial factors. Another factor, however, may be that

It was more than a decade ago when we embarked on a

the Company has yet to effectively communicate its

new journey with the establishment of the International

ESG narrative to the market. Tokyo Century is fully capa-

Business segment. Today, this segment has grown to

ble of continuously generating earnings. If this fact, as

have an asset portfolio with a scale of ¥650.0 billion.

well as the ESG strategies that underpin this earnings

We have a track record of expanding the asset portfo-

power, is consistently stressed when communicatinglios of newly launched segments, and I am committedwith the market, I am sure that Tokyo Century will see

to making the Environmental Infrastructure segment

improvements in its price book-value ratio.

operating segments and other measures to break

Each of our five operating segments is impor-autonomy in order to achieve higher levels oftant to Tokyo Century, and I believe that it iseffectiveness.

crucial for us to grow these segments in a balanced

All operating segments are engaged in growth busi-

manner. Raising ROA through asset replacement isnesses that are their primary drivers. However, as somethe mission of every operating segment, after defining

businesses in these segments are underperforming,the degrees of independence and authority delegatedthere may come a time when we need to consider with-thereto. We encourage operating segments to act withdrawing from businesses or downsizing the associatedsuch a success as well.
Ura

I have high expectations for the newly established Environmental Infrastructure segment,Baba

You are exactly right. Under the previous
medium-term management plan, our perfor-

mance became more volatile as a result of develop-

especially given how long it has been since the last newments like the COVID-19 pandemic. In fiscal 2022, wesegment. Generally, the more unclear it is what a com-undertook what we refer to as a “great reset” by record-

pany is doing on an overall basis, the likelier it is that iting losses on our Russia-related exposure and on opera-

will be discounted. The same applies when it comes totional investment securities. Going forward, I think it will

the Company’s overall asset portfolio and the possibility

be important for us to eliminate the sources of volatility

for investors to apply a conglomerate discount to Tokyo

in performance and take steps to recover our evaluation

Century. This means that making business strategies

in the market.

and rules clearly visible from the outside is crucial foravoiding being discounted.
I agree with you in that it is important to have oper-

We will also need to be diligent when communicating to stakeholders about our practicing well-thought-out
ESG management that will support us in getting back toating segments that act autonomously and responsibly

our prior compound annual growth rate and achieving

in the process of revising the portfolio. At the same

constant growth.

time, however, management and the Board of Directors

I really feel your passion about
achieving ongoing growththrough high efficiency.
I hope that Tokyo Century will
demonstrate this commitment
in its every action and its
communications withinvestors.
Shohei Ura

Strengths and weaknesses of unique business model underpinningTokyo Century’s competitivenessBaba

All companies are a combination of changing

assets under the arrangement that is most convenientand unchanging elements. Looking at Tokyo

for them.

Century, the unchanging elements are the sources of its

What changes, meanwhile, is the specific services

strength. These include our discerning eye as a leasing

we offer, which are changing in conjunction with thecompany, which we have honed for over five decades,

increasing digitalization and decarbonization of society,and how we provide value by allowing customers to use

as well as the ways in which customers use assets.

C H A PT E R 4

Baba

Stakeholder Engagement

Approach toward transformation to achieve ideal asset portfolio and improvements necessary to bolster market evaluation over medium to long term

I think it is fair to say that Tokyo Century’s ESG

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Institutional Investor × President

Significant changes have occurred in these regards overefficiency. There are a lot of opportunities for Tokyo

the past several years. For example, we have seen theCentury to seize in the future, and I think that the

emergence of services that utilize the data associatedCompany still has a lot of potential.

with assets as well as ways of using assets for reduc-However, fostering partnerships takes time, anding greenhouse gas and other emissions. If we are tochange is always happening. This means that flexibility

respond to changing customer and social needs, it willis essential when deciding to continue or discontinue

be imperative for us to flexibly transform our business

an investment. In this manner, it is important for a goodmodel. Tokyo Century cannot accomplish this taskbalance to be maintained between acting with speed

alone; the Company must be capable of working towardand taking time to assess a situation.

its goals together with its business partners. I am confi-

As far as weaknesses of the Company, I think thatdent that such a capacity for collaboration will become

there is room for improvement when it comes to corpo-a unique competitive edge for Tokyo Century.

rate governance systems. Tokyo Century’s current man-Tokyo Century will achieve ongoing profit
growth by strengthening its earnings power
and accelerating its ESG strategies.
I hope to engage in a constructive dialogue
with stakeholders to help them understandthis growth narrative.

I have a lot of praise for Tokyo Century’s uniqueagement bodies, which include the Managementbusiness model. This model goes beyond simply

Meeting and the Investment Management Committee,

providing the value of assets to include joint efforts withare functional, and business in all operating segments

business partners to resolve social issues in order tois executed by managers with high degrees of special-deliver higher levels of convenience and use value.

ized insight. For these reasons, I believe that the Board

Notable M&A activities conducted by Tokyo Century

of Directors should be positioned as a venue for discus-

connections. Regardless of the factor, it is important forcompensation frameworks, which should be monitored

include Aviation Capital Group LLC and CSI Leasing, Inc.

sion and oversight regarding Companywide rules anda company to increase the number of its employees

to confirm whether or not they are contributing to

In these examples, we see the Company starting withportfolio policies. The ideal numbers and composition

who feel happy working there.

higher employee satisfaction. Tokyo Century discloses

minority ownership, fostering a true partnership basedof directors should be determined based on this posi-

on deep mutual understanding over the course of years

tioning as Tokyo Century seeks out the ideal gover-ture in which people are appointed to positions based

convinced that ongoing communication of such humanbefore finally converting these companies into consoli-

nance structure given its multiple business portfolios.

on their skills, as opposed to their background, espe-

capital initiatives to external stakeholders is sure to

dated subsidiaries. Here, we see the strength of Tokyo

Our interactions thus far have revealed that you,cially given the diverse range of employees a company

contribute to higher corporate value.

Century in choosing partners, learning about partners’

President Koichi Baba, are highly committed to reform-

may have. Similarly, a company should have a variety ofneeds, and building mutual trust. This strength will no

ing governance, and I look forward to seeing the steps

doubt be a powerful asset toward broadening the

you decide to take.

Ura

Koichi Baba

Company’s business scope and ultimately raising asset

Passion about the future of Tokyo Century
Baba

Focuses in human capital management

It is our customers that support Tokyo Century,
and we cannot grow if they do not have a highUra

I suspect that the COVID-19 pandemic and therecent emergence of geopolitical risks have led

opinion of us. Earning the praise of customers is at theTokyo Century to make some important discoveries.

I see management and employees as beingtransformative people who are able to bring about

heart of what Tokyo Century does. This is why I place

These discoveries appear to be reflected in the mes-

equal. For this reason, Tokyo Century needs tochange. I therefore hope that everyone at Tokyo Century

so much emphasis on the cycle of reinforcing our part-sage communicated by Medium-Term Management

become an organization with a corporate philosophy

will be able to evolve into such transformative people,

nership strategy as an asset and service provider andPlan 2027: the message that Tokyo Century does notthat resonates with people, inspiring them to join, and in

brimming with ambition and potential.

thereby winning the favor of customers, a cycle thatwant to grow merely by expanding its asset portfolio

allows us to form various new connections.

but rather aims to achieve ongoing growth through highBabawhich employees feel that our initiatives contribute totheir growth and self-actualization.

Ura

My firm takes a medium- to long-term stancetoward investments, and our fundamental

These new connections will contribute to higher

efficiency. Talking to you today really made me feel theapproach is to invest in companies that are expected tosatisfaction among the employees who work on ourbe aligned along a single vector to act as a united entity.

achieve ongoing growth through high levels of effi-

shared platform and give them tangible feelings of suc-

As Tokyo Century moves into the phase of enacting

The previous medium-term management plan defined

ciency. A core aspect of ensuring the continuity of thiscess and growth. This process will, in turn, fill them with

its plan, I hope that the Company will demonstrate thisour vision of becoming a global corporate group with agrowth and of operating a company is human capital

ambitions they want to pursue going forward. I wantcommitment in its every action. Tokyo Century has a lot

diverse team of people, and I think we are finally at ainvestment, and of particular importance in this regard

Tokyo Century to be a platform that can support suchof potential, and I look forward to seeing how it continues

point when we can really work toward that vision. Once

is whether or not the people working at a company feel

ambitions, and I am confident that the Company will be

to grow by advancing the partnership strategy it has

again, Medium-Term Management Plan 2027 puts forth

happy. Multiple factors can affect whether a person

able to grow together with its employees if it can

implemented thus far and exercising its other uniquethe concept of TCX, or Tokyo Century Transformation.

feels happy at their company, including their level of pay,accomplish this. This is the vision for Tokyo Century

strengths.

Based on this concept, I am spreading the message

how conducive the working environment is to acquiringthat I intend to work toward.

within the organization that we all need to become

skills, or if there are opportunities to form interpersonal

This is why the Company and its employees should

passion behind this message.

C H A PT E R 4

the results of its employee awareness surveys. I am

Stakeholder Engagement

For this reason, it is prudent to have a corporate cul-