Next 10 years:

Exceedingour Potential
Tokyo Century Corporation

Integrated Report 2018

Management Philosophy

Contents
02

Our steady achievements

Growth Momentum Extending Record High Income
for Nine Consecutive Years

04

Our STRENGTHSCore Assets that Generate Our Competitive Advantage

08

OUR VALUE CREATION12OUR COUNTLESS GROWTH DRIVERS

Tokyo Century’s Value Creation Business Model
Growth Drivers for Realizing Our Vision

20

Tokyo Century’s Trajectory of Growth22

A Message from the President & CEO

30

Equipment Leasing

34

Specialty Financing

38

Domestic Automobile Financing

42International Business46

Feature A chieving Advances in the

E-Money and FinTech Businesses

Solutions to your Pursuits

Collaborative Venture with Indonesia’s Lippo Group

50

Creating new values from
Finance × Services × Business ExpertiseTokyo Century
Tokyo Century Group will work alongside customers inpursuit of their growth as a highly specialized and uniquefinancial services company and will contribute to theFoundations of Corporate Value

51

Establishment of the Sustainability Committee

52

Management Interview
Human Resources and Organizational Culture
Behind Success with Partners

54

Diverse Workstyles andHuman Resources Development

56

Corporate Governance Roundtable Discussion
Fulfilling our Role as a Global Company withFinancial Capabilities Aiming at Creating New
Business Domains

60

Corporate Governance

68

Management Organization

70

Environment

72

Society74

Performance Highlights

creation of an environmentally-sound, sustainable

76

Financial Summary
Financial Section

economy and society.

78
116

Main Subsidiaries, Affiliates and Other

118

Stock Information / Bond Ratings

119

Corporate Information / Management

Editorial Policy
Tokyo Century publishes an integrated report comprising its annual and CSR
reports that it previously published separately. The integrated report briefly covers
financial information, including management direction, strategies, and a review ofoperations as well as non-financial information on its initiatives with respect to theenvironment, society, and governance (ESG). Our objective is to help shareholders,investors, and other stakeholders understand how the Group will create value overthe medium to long term.
We compile the integrated report with reference to the International Integrated
Reporting Framework of the International Integrated Reporting Council (IIRC) to
maintain the perspective of stakeholders.
Forward-Looking Statements
Statements in this integrated report with respect to Tokyo Century Group’s plans,
forecasts, strategies, presumptions, and other statements that are not historicalfacts are forward-looking statements based on management’s assumptions andbeliefs grounded on information that was available when the report was written.
Actual Group performance may differ considerably from that discussed in theforward-looking statements.

Tokyo Century Corporation

Integrated Report 201801

Our steady achievements
Growth Momentum Extending Record High Income for Nine Consecutive Years
Since our founding in 2009, we have been extending record high performance in ordinaryMarket Capitalization

income for nine consecutive years.

(Calculations based on closing price)

To contribute to the creation of an environmentally-sound, sustainable economy and society,¥ 64.0billionwe work with our partner companies to engage in businesses strongly needed by society,while further expanding our corporate value.

×

11.0

¥ 702.7
billionApril 1, 2009
March 30, 2018

Segment Assets

3%International
Business

Equipment
Leasing

13%

4%
81%

12%

Ordinary Income42%¥ 22.3billion

3.5¥ 2,100.0 billion

×

1.6¥ 79.0billionDomestic
Automobile
Financing

16%

March 31, 2009*

×

FY2008*¥3,330.2

FY2017billionNet Income Attributable to
Owners of Parent

March 31, 2018

¥ 10.0billionSpecialty
Financing

5.1¥ 51.3billion

FY2008*29%*	Data for fiscal 2008, the year immediately prior to the merger on April 1, 2009, is a simple aggregation of data for the former Century Leasing System, Inc.
and the former Tokyo Leasing Co., Ltd.

×

FY2017

Dividends

×
¥ 32

3.6

¥ 114

FY2009FY2017

02

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201803

Exceed.

1

OUR STRENGTHSCore Assets that Generate Our Competitive Advantage

Our
Corporate DNA to Assist Partner
Companies in Developing Businessand Pursuit of Growth
Our Commitment Runs throughCreating Businesses Free
from Regulatory Constraints

We envision a sustainable future, not through the pursuit of short-term profit, but rather by seeking

Tokyo Century is characterized by its capacity to explore new businesses in a management environment

mutual, medium- to long-term growth with our partner companies. True to this conviction, ourfree of regulatory constraints. In recent years, we have pursued various businesses that address social

highly specialized personnel take on the challenges posed by new businesses that transcend theneeds, such as aviation, solar power generation, environmentally-sound biomass and biogas powerboundaries of finance. Our business scope has expanded worldwide to 37 countries and regions, andgeneration, and FinTech. Amid the current shift from ownership to usership, we believe that ourTokyo Century Group has established a unique position by integrating its businesses with aextensive experience in reusing, reducing and recycling goods will be in strong demand toward creating

formidable network of partner companies.

an environmentally-sound, sustainable economy and society.

Major Partner Companies

Conventional Leasing

Equipment Leasing

Specialty Financing

Fujitsu Limited
	IHI Corporation
	Orient Corporation
Kawasaki Heavy Industries, Ltd.
	Tsukishima Kikai Co., Ltd.
Bplats, Inc.
	UNY Co., Ltd.
	Yaskawa Electric Corporation
mitsuiwa corporation
BYNAS Co., Ltd.

Kyocera Corporation
Nippon Tochi-Tatemono Co., Ltd.
	Aviation Capital Group LLC
	GA Telesis, LLC
Kobe Steel, Ltd.

Domestic Automobile Financing
Nippon Telegraph andTelephone Corporation
	Orient Corporation
	ANA Holdings Inc.

04

Meeting the Needs of the Times by

Tokyo Century Corporation

Integrated Report 2018

Pioneering New Business Fields

Information andcommunications equipment

Shipping

Aviation

Factory equipment

Environment
and energy

Real estate

Construction machinery

IoT

FinTechCommercial equipment

Automobile
leasing,car rental

Ride-hailing,ridesharing

International Business	TISCO Financial Group Pcl.
	Uni-President Enterprises Group	Dalian Bingshan GroupBank of the Philippine Islands
	Hitachi Construction Machinery Group	Lippo Group	Grab
China UnionPay Merchant Services Co., Ltd.

Tokyo Century Corporation

Integrated Report 2018

05

2 3

37 Countries andRegions through Alliances with Partner
Companies in and outside of Japan

Highly Specialized Professionals
and an Organizational Culture that
Embraces Challenge

Backed by relationships of trust with about 25,000 customers, Tokyo Century Group is promoting

Tokyo Century Group believes that personnel are a company’s most valuable asset and a driving force forcollaborative ventures in and outside of Japan, expanding its network to 37 countries and regions

sustainable growth. To serve as the ideal partner for supporting customers in their pursuits, we seek toworldwide. Today, in an operating environment in which fewer businesses are self-contained withincreate an organization in which personnel can demonstrate professionalism. We derive our strength

national borders and a global sensitivity is required more than ever before, many of our partnerfrom personnel who are not only familiar with finance including leasing but are also well informed aboutcompanies pursue business as global players. Tokyo Century Group maximizes the financial services

the products of partner companies, industry structure, laws and regulations, and business practices,

expertise it has cultivated over the years to take on the challenge of transforming into a new financial

capable of structuring new business schemes globally compatible, as well as an organizational culture

services business that opens new domains by advancing its alliances with partner companies in andthat recognizes those who rise to the challenge. We are focused on creating an organization brimming

outside of Japan.

with the spirit of taking on challenges to pioneer new business domains.

Global Business in

Segment Assets

Number of
Corporate Customers

Global Network

Global Assets(as of March 31, 2018)06

Tokyo Century Corporation

Integrated Report 2018

About

25,000Centered on the U.S.,
East Asia and
ASEAN regions

37

Specialty Financing

companies

countries
and regions¥995.5 billion¥253.8 billion

× 3.8

As of March 31, 2018

As of March 31, 2009

International Business¥78.5 billion
As of March 31, 2009

¥975.6 billion

× 5.6¥435.7 billion
As of March 31, 2018

Tokyo Century Corporation

Integrated Report 201807

Our Value Creation

Exceed.

Tokyo Century’s

Social Issues

Value Creation Business Model
Tokyo Century

	Reliable sources of renewable energy
Promotion of investment inenergy-related infrastructure
	Continuous drive for innovation
	Regional revitalization and job creation
	Equitable economic development

Our Commitment Runs through Our
Corporate DNA to Assist Partner
Companies in Developing Businessand Pursuit of Growth	Introduction and expansion ofenvironmentally- sound technologies
	Climate change education

Social andCorporate Issues

	Continuous business innovation
	Capital plan
Facilities plan
	Earnings growth scenarios

Conventional Leasing

Core Assets that Generate
Competitive Advantages

2
3

Global business in 37 countries
and regions through allianceswith partner companies in andoutside of Japan

Highly specialized professionals
and an organizational culture thatembraces challenge

Foundation of Value Creation:
Corporate Governance
08

Tokyo Century Corporation

Integrated Report 2018

Shipping

Information andcommunications
equipment

Ability to meet the needs of thetimes by creating businesses freefrom regulatory constraints(Core Competence)

Corporate Issues

IoT

1	Development of sustainableinfrastructure

Prevention, reduction and reuse of waste

Expanding our business portfolio bytranscending the boundaries of leasing

Focus: page 56

Business Models
for Exploring
New Domains

FinTechAviation

Factoryequipment
Environment
and energy
Construction
machinery

Automobile leasing,car rental

Real estate
Commercial
equipment
Ride-hailing,ridesharing

Pioneering New Domains

Shift to a New Financial
Services BusinessTokyo Century Corporation

Integrated Report 201809

Solutions Unique to Tokyo Century

OutcomeSolutions for the diminishing
workforce
Robots
Focus: page 12

Solutions for regional
revitalization and inbounddemand from foreign visitors
Hotel business
Focus: page 17

Solutions for the global
expansion in air transport
Aviation
Focus: page 13

Identifying Market
Needs for the Future

Solutions for rapid technologicalprogress and diversifying
lifestyles(Growth Drivers)

FinTechFocus: page 18

Higher corporate value
based on theestablishment of new
financial services
Contributing tobusiness

Consistently Engaged
in Businesses that
Society Demands

the Creation of an
Environmentally-Sound,
Sustainable Economy
and Society
Mutual growthwith partner companies

Solutions for renewable energy
Solar power
generation
Biomass andbiogas power
generation

Car rental/car sharing,Ride-hailing and ridesharing

Focus: pages 14, 15

Solutions for maintaining social
infrastructure

Focus: page 19

PFI business

Focus: page 16

10

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation Integrated Report 201811

Exceed.

Our countless growth drivers
Growth Drivers for Realizing Our Vision

Social issues have led to increased market needs in various industries, and Tokyo Century Group
views these as growth drivers. By meeting the challenges posed by new domains that help solve

Solutions for the Global Expansion in Air Transportsocial issues, we will seek to maintain corporate growth while contributing to the creation of anenvironmentally- sound, sustainable economy and society.

Solutions for a Diminishing Workforce
Workforce in Japan

Robot

Meeting Robot
Rental Needs
Japanese companies are facing a serious labor shortage. Moreover,the nation’s workforce is expected to decline even further, and webelieve that companies will accelerate introduction of robots as analternative to human labor.
Tokyo Century will provide assistance in boosting theWorkforce will
decline by

66.73
million
about
2016

3.11

million63.62
million2030
Source: Created by the Company based on “White Paper on the
Labour Economy 2017” (Ministry of Health, Labour andWelfare, Japan).
https://www.mhlw.go.jp/english/wp/wp-hw11/dl/01e.pdf

Aviation

Pursuing a Unique Business Modelto Become a Top Player in the Industry
Demand for aircraft is expected to rise with the advancing globalizationof the economy. Airline companies explore optimal methods forcompetitiveness of Japanese companies by addressing the growing

procuring aircraft, including leasing. Tokyo Century provides optimalneed for robot rental services in collaboration with partnerand diverse procurement methods by operating an aviation businesscompanies involved in the manufacturing and sales of robots.

that encompasses the entire product lifecycle, from the introduction of
new aircraft to the disassembly of decommissioned aircraft and sales ofused components.

Forecast for
Passenger Jet
Demand Worldwide

39,867
jets

2037

22,337jets
2017

Demand foraircraft willalmostdoubleSource:	Created by the Company based on “Worldwide Market Forecast 2018–2037”(Japan Aircraft Development Corporation)
http://www.jadc.jp/files/topics/134_ext_01_en_0.pdf

12

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201813

Solutions for Renewable Energy
Biomass and Biogas Power Generation

Contributing to an EnvironmentallySound, Sustainable Society by Making
Effective Use of ResourcesTokyo Century is also in alliance with leading partners in otherrenewable energy businesses such as woody biomass power generationand digestion gas power generation. We are promoting renewable

Biomass Power
Generationin Japan

6.0 - 7.3 GW

energy by effectively utilizing resources that had previously been

Fiscal 2030

discarded such as sludge and waste.

Capacity willalmost

3.2 GW
March 2017

doubleSource: Created by the Company based on “Measures for Attaining
the 2030 Energy Mix – Energy Conservation and Renewable
Energy” (Agency for Natural Resources and Energy, Japan)
http://www.enecho.meti.go.jp/committee/council/basic_
policy_subcommittee/022/pdf/022_006.pdf(Japanese only)

Solar Power Generation

Leading the Industry with Large-Scale
Solar Power Generation
Countries around the world are engaged in projects for generating
power from renewable energy sources. Tokyo Century is engaged insolar power generation business with partner companies including

Solar Power
Generationin Japan

Solar power

64 GW

Kyocera Corporation. As of March 31, 2018, the scale of our solar
Fiscal 2030

power generation business has expanded to 75 locations with a total
output of up to 236 MW, which ranks us among the top in Japan. We
will contribute to the creation of an environmentally-sound,sustainable economy and society by developing environmentallysound businesses that do not depend on fossil fuels.

Solar power
39 GW
March 2017

Capacity willalmostdoubleSource: Created by the Company based on “Measures for Attaining
the 2030 Energy Mix – Energy Conservation and Renewable
Energy” (Agency for Natural Resources and Energy, Japan)
http://www.enecho.meti.go.jp/committee/council/basic_
policy_subcommittee/022/pdf/022_006.pdf(Japanese only)

14

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201815

Solutions for Maintaining Social Infrastructure

Solutions for Regional Revitalization
and Inbound Demand from Foreign Visitors

Estimated
Number of
Visitors to Japan

2030

Hotel BusinessInitiatives for
Regional
Revitalization
Tokyo Century is participating in a project to develop the ANA

60

million28.69
million2017

Number of visitors willalmostdoubleSource: Created by the Company based on “Foreign Visitors to Japan”(Japan National Tourism Organization) and “Council for theDevelopment of a Tourism Vision to Support the Future ofJapan” (Prime Minister’s Office)https://www.jnto.go.jp/eng/ttp/sta/PDF/E2017.pdf
https://www.kantei.go.jp/jp/singi/kanko_vision/dai2/siryou1.pdf(Japanese only)InterContinental Beppu Resort & Spa, operated by an international hotel
known for its five-star properties, under the national policy forrevitalizing the local region and promoting tourism. Utilizing thisexperience, we will seek to play our part in regional revitalization bybolstering the tourism industry and creating jobs.

PFI Business

Addressing the Need to Upgrade
Aging Infrastructure(Scheduled to open in the summer of 2019)

In Japan, aging water and sewage systems built after its period ofhigh economic growth has become a social concern. Some regions
have lagged behind in effectively maintaining and upgrading
infrastructure. We plan to broadly contribute to society by focusing

Targeted Size of PFI Businesson businesses that help maintain and develop social infrastructure.

¥21 trillion

over 10 years
from fiscal 2013 to 2022
Source: Created by the Company based on “Status Report on PFI”
(Public Private Partnership/Private Finance Initiative Promotion
Office, Cabinet Office, Japan)
http://www8.cao.go.jp/pfi/pfi_jouhou/pfi_genjou/pdf/pfi_genjyou.pdf(Japanese only)

16

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201817

Solutions for Rapid Technological Progress
and Diversifying Lifestyles

Car Rental/Car Sharing

Shift in Mobility Needs
from Ownership to Usership

FinTechTaking on the Challenge of Creating
New Business Models that Integrate
Finance and IT
Progress in digital technology is transforming conventional modesof finance. Tokyo Century is in alliance with leading companies in
Asia to create new financial businesses that meet diversifying needs

Forecast for the
E-commerce Market
in Southeast Asia

US$88.1
billion

The automobile leasing and car rental industries are facing a sea change causedby an awareness among individual users of ownership shifting to usership, andcar rental needs have grown with the increase in foreign visitors to Japan.
Tokyo Century is developing car rental and car sharing services to address
diversifying lifestyles and rising inbound demand from foreign visitors.

Forecast for
the Car Rental
Market in Japan2025

by integrating finance and IT.

US$5.5billion2015

Market size will
expand by approx.

16 times

Source: Created by the Company based on “e-Conomy SEA Spotlight2017” (Google Temasek)
https://www.temasek.com.sg/content/dam/temasek-corporate/news-and-views/Stories/google-temasek-sea-e-commerce-report/
e-Conomy SEA Spotlight 2017 Full Report.pdf

Utilizing Big Data to
Develop New Financing Businesses
In alliance with Indonesia’s Lippo Group, we arefocusing on expanding our digital and FinTechbusinesses.
Indonesia accounts for around 40% of the
population in the ASEAN region, and its
e-commerce market is expected to show
exponential growth with the increasing use ofsmartphones and other mobile devices.
Offered by Lippo Group in Indonesia, OVO is ane-money service that facilitates the settlement of
payments via smartphones. Together with Lippo¥670
billion2020¥580
billion2012

Market size will
expand by approx.

1.2 times

Source: Created by the Company based on “Personal Car Leasing
Market 2015” (Yano Research Institute)

Forecast for
the Car Sharing
Market in Japan¥29.5
billion2020

Market size will
expand by approx.

¥7.0
billion4 times

2012

Source: Created by the Company based on “Personal Car Leasing
Market 2015” (Yano Research Institute)
https://www.yano.co.jp/press/press.php/001431(Japanese only)

https://www.yano.co.jp/press/press.php/001431(Japanese only)

Ride-Hailing and Ridesharing

New Modes of Transport Are Rapidly
Spreading around the World
The ride-hailing and ridesharing markets are expected to grow in Southeast Asia,
where car ownership is low and public transport services remain inadequate
compared to developed countries. Tokyo Century has partnered with Grab, thelargest ride-hailing platform in Southeast Asia, to develop the automobile financing
business for the rapidly expanding ride-hailing and ridesharing businesses.

Forecast for the
Ride-Hailing Market
in Southeast Asia

US$20.1
billionGroup, Tokyo Century will create new financing

2025

businesses that utilize big data accumulatedMarket size will
expand by approx.

through the expanding use of OVO.

US$2.5billion2015

8 times

Source: Created by the Company based on “e-Conomy SEA Spotlight 2017”(Google Temasek)
https://www.temasek.com.sg/content/dam/temasek-corporate/news-and-views/Stories/google-temasek-sea-e-commerce-report/
e-Conomy SEA Spotlight 2017 Full Report.pdf

18

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201819

Tokyo Century’s Trajectory of Growth¥3,330.2
billion3,240.9¥79.0

3,020.8

Tokyo Century Group has consistently expanded its segment assets and ordinary income by

73.5

Since launching the Medium-Term Management Plan in fiscal 2010, we have exceeded our targets
for the First and Second Plans and are making steady progress in the current Third Medium-Term

2,605.0

Management Plan.

29%

55.2

1,950.2

International
Business

4%

Domestic
Automobile
FinancingEquipment
Leasing

16%

2,038.1(Billions of yen)

Specialty
Financing

68.0

Specialty
Financing

2,110.9

2,100.0

Domestic
Automobile
Financing

60.7

2,253.3

Segment Assets

13%billion2,895.6

collaborating with partner companies.

International
Business

46.3

46.3

44.2

3%
12%
33.4

81%

Ordinary Income

Equipment
Leasing42%

22.3(Billions of yen)First Medium-Term Management Plan (FY2010 to FY2012)
Evolution scenario for maximizing merger synergies
and moving to the next stage of growth
Plan

Third Medium-Term Management Plan (FY2016 to FY2018)

To become a robust comprehensive financial services company
and realize further innovative changes as well as sustainable growth.

Promote the shift to a high-revenue business model with a focus on asset efficiency
in order to lay the foundations for sustainable growth.

Plan

Results (FY2012)

Consolidated
ordinary income¥35.0 billion

Consolidated
operating assets¥2,000.0 billion

Consolidated
shareholders’equity ratio

Second Medium-Term Management Plan (FY2013 to FY2015)

or moreor more8.5 %or morePlan

Results (FY2015)¥46.3 billion (+¥11.3 billion

Consolidated
ordinary income¥50.0 billion¥68.0 billion (+¥18.0 billion¥2,200.0 billion (+¥231.4 billion

Consolidated
operating assets¥2,600.0 billion¥2,900.0 billion (+¥391.1 billion

Consolidated
shareholders’equity ratio

10.0 %

compared to plan)compared to plan)

9.0 %(+0.5 pointcompared to plan)or moreConsolidated ordinary income

compared to plan)

Consolidated ROA(Ordinary income/Operating assets)compared to plan)

9.6 %Consolidated shareholders’equity ratio(-0.4 pointcompared to plan)

Results (FY2017)

Forecast (FY2018)¥ 80.0 billion
or more¥ 79.0 billion¥ 83.0 billion*

2.3 %or more

2.5 %

–

11.0 %

10.5 %–* As of May 2018

2009*

2010

2011

2012

2013

2014

2015

2016

2017

2018

(Fiscal year
ended March 31)* Data for fiscal 2008, the year immediately prior to the merger is a simple aggregation of data for the former Century Leasing System, Inc. and the former Tokyo Leasing Co., Ltd.

20

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201821

Exceed. A Message from the President & CEO

We will fulfill our role asa global company with financial
capabilities aiming at the creation ofan environmentally-sound,sustainable economy
and society.

A Turning Point for the Leasing BusinessLeasing enables customers to level expenses by paying a fixed amount based on the contract term.
For this and other benefits, it is a widely used procurement method. On the other hand, insofar as
there may be periods during which the customer is not using the asset, I believe we must alter ourleasing services in response to such periods of disuse.
Today, the sharing economy is spreading throughout the world, and from the standpoint of thecustomer, there may come a day when payment based on usage, rather than contract term, will be
the accepted standard for the leasing business.
If such thinking gains further traction, I believe the leasing business itself may arrive at a major
turning point that requires the provision of finance and services that go a step beyond conventional
leasing.
In part to express our determination to keep pace with the changing times and meet diversifying
customer needs, we removed the word “lease” from the company name to become Tokyo Century
Corporation as of October 1, 2016.
We are transforming our company from a provider of leases and financing centered on theconventional leasing business into a versatile business operator with financial capabilities, pursuing
viable business that generates high revenue.

Establishing an Environmentally-Sound,
Sustainable Economy and Society
As we grapple with global environmental issues, including climate change and the depletion ofnatural resources, we will be required to pursue management with an even greater consideration for
the global environment.
To begin with, establishing a leasing business requires expertise in secondary markets thatenable the reuse of assets. So the formation of an environmentally-sound, sustainable economy andsociety is something that comes naturally for a leasing company.
For example, there are established secondary markets for our core businesses of automobile
leasing and aircraft leasing, and our contracts with customers are mainly operating leases in which
the company bears the residual value risk. We are capable of supplying quality “assets” at areasonable price to the secondary market by adding maintenance and service to maintain the utility
value of automobiles and aircraft throughout the term of the lease contract.

Shunichi Asada

From the perspective of spreading renewable energy, we are engaged in an environmentally

President & CEO,
Representative Director

friendly business that does not use fossil fuels but instead pursues solar power generation at thescale of an industry leader. We are also focused on generating power from sludge digestion gas andbiomass to make use of materials that were disposed in the past, such as sludge and waste.
Thus, we believe that our business operations, including leasing and renewable energy,
significantly contribute to the creation of an environmentally-sound, sustainable economy andsociety. We intend to continue exploring viable business aimed at creating an environmentallysound, sustainable economy and society that is friendly to the environment, by transcending theboundaries of leasing and finance.

22

Tokyo Century Corporation

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Tokyo Century Corporation

Integrated Report 201823

A Message from the President & CEO

Addressing Social Issues through Business

Becoming the Corporate Partner of Choice

In addition to rapid aging, the Japanese population is becoming concentrated in cities while outlying

As a company with financial capabilities that benefits from a flexible business environment, we areregions face depopulation. Regenerating local communities is crucial for economic recovery.

pursuing a broad range of viable businesses that generate high revenue, through joint management

As a company, we are constantly seeking ways to assist in the regeneration of local communities.

with corporate partners. The success of this business depends above all on forging relationships of

In recent years, we have observed a considerable increase in the number of foreign tourists visiting

trust with our corporate partners.

Japan, and we see tourism as one of the nation’s few growth industries.

For example, the construction of large-scale solar power plants is a project we cannot handle alone

Against this backdrop, we are working on developing the ANA InterContinental Beppu Resort & Spa,due to the considerable amount of funding required. We were able to promote such a project and boost

the first onsen resort in the world operated by an international hotel known for its five-star properties.

the combined capacity at 75 plants to 236 MW based on our trusted relationship with corporate partners,

We think our ability to attract InterContinental, one of the world’s leading hotel brands, to Beppu

including Kyocera Corporation, the top manufacturer of solar modules, and financial institutions.

in Oita Prefecture is surely a positive development. Beppu is easily accessible from overseas, with

To maintain such collaborative efforts, we will always be a company that earnestly strives to meet

ample tourist attractions including hot springs, which we believe is what captivated InterContinental,

the expectations of our corporate partners, both operating companies and financial institutions, by

known for its strict standards for locating hotels.

assisting in the successful development of their businesses.

We have been involved with the ANA InterContinental Beppu Resort & Spa project for the past few

We also believe that the key to gaining recognition from corporate partners is to understand theyears and are gaining valuable experience for future endeavors. Above all, we feel this is a highly

needs of society and establish a solid track record in developing the FinTech business in Asia as well

worthy project that allows us to assist the local community in its effort to survive for years to come.

as the aircraft leasing business.

Agriculture is another area we would like to emphasize with respect to revitalizing local regions,

Our business model is flexible and extremely intriguing, and together with our corporate partners

where the main challenge has been poor job opportunities caused by a lack of industries. The ideal

we intend to continue developing new financial services that transcend existing businesssolution is to establish the primary industries of agriculture, fisheries and forestry to ensureclassifications as a company with financial capabilities.

livelihoods, and addressing this issue will revitalize outlying regions. With the belief we have a role toplay in this area, we have begun consulting corporate partners on developing agricultural ventures
into businesses.

The Next Medium-Term Management Plan

In the course of my work these days, I am always thinking about how our company can contributeto Japanese society. Japan faces a number of issues, including revitalizing local regions, developing
tourism and building infrastructure, and there are many opportunities for addressing social issues
through our business.

In the third year of our third medium-term management plan, we are now applying the finishing
touches as we come ever closer to attaining our target of at least ¥80.0 billion in consolidated ordinary
income. We will do our best to achieve the target to make this fiscal year a milestone for the company’s
10th anniversary. Moreover, we will determine the vision and KPIs for our next phase, the fourth
medium-term management plan in the latter half of fiscal 2018. As we seek to continuously expand
our highly profitable viable business, I think ¥100.0 billion would be a sound target for ordinary income.

Corporate Slogan

Management Policy

FY2018 Consolidated Results Forecast(Billions of yen)

1 We will provide the best products and services around the world to

Solutions toyour Pursuits
Creating new values from
Finance × Services × Business ExpertiseTokyo Century
24Tokyo Century Corporation

Integrated Report 2018

contribute to the success of our customers’ businesses whilepursuing all possibilities by collaborating with customers and uniting
the overall strengths of the Group.
2 We will strive to raise our corporate value over the medium to long term

FY2017 Result

FY2018 Forecast

1,012.2

1,050.0

37.8

3.7%

Operating income

73.7

76.0

2.3

3.1%

Ordinary income

79.0

83.0

4.0

5.0%

Net income attributable toowners of parent

51.3

51.5

0.2

0.3%

Revenuesby pioneering new business fields and realizing sustainable growth.
3 We will cultivate a corporate culture that allows diverse humanresources to fully demonstrate their skills and personalities, and wewill build a company where all officers and employees can hone theirexpertise and experience growth as well as a sense of pride.
4 We will always be mindful of our social responsibility as a corporation

and will conduct our business activities with vigor and sincerity as we
fulfill our role of creating a sustainable economy and society.

ChangeTokyo Century Corporation% Change

Integrated Report 201825

A Message from the President & CEO

Although elements of uncertainty abound in the external environment, we expect growth in the
Asian and U.S. economies. And while we must remain alert to the political and economic climate in
China, as it continues to exert increasing impact on the global economy, I am confident that a bright

Our Operating Segments and Initiatives for
Further Growth

future lies ahead for the company as long as we remain true to our credo of doing business with acreative attitude through relationships of trust with our corporate partners.

Equipment Leasing
While Equipment Leasing is our founding business, with a history of over 50 years, today we face theRisk Management and Corporate Governancechallenge of responding to dramatic changes in the business environment. This operating segment
has maintained stable revenues, even under low-interest rates, by leveraging our extensive clientbase and adding further services to conventional businesses. Also, it has significantly benefited fromthe expansion in viable business through collaboration with Japan’s leading manufacturers. We

Tokyo Century Group has always faced diverse risks, including corporate credit risk, interest rate andbelieve that IT-related equipment, characterized by short product life cycles and the constant needexchange rate fluctuations, risks related to the items that provide value to real estate, ships, aircraft,for upgrades, have a particularly high affinity with leasing.

automobiles and other assets, information security risk, system and administration risk, trends in

As the era of IoT becomes a reality, we intend to create new business models targeting IT

capital investment, fluctuations in the price of assets held by the company, and regulatory revisions.

equipment and medical robots based on a business alliance with Bplats, Inc., which provides a

We recognize the importance of an effective corporate governance mechanism for maximizing

subscription platform that can be applied to pay-per-use services based on units of usage and time.

corporate value. To enable us to swiftly respond to changes in the business environment and makeWe will also expand service-added businesses, primarily in the fields of robotics, power generation

accurate decisions, we endeavor to create a sound and highly transparent management structure.

and IoT, in collaboration with leading partners.

In April 2018, we established the Sustainability Committee as the organization responsible for theplanning, promotion and supervision of sustainable corporate activity and for addressing issues ofmateriality related to sustainability.
The committee will discuss issues related to the global environment and society at large while
also addressing the SDGs (Sustainable Development Goals) to come up with ideas for the next
medium-term management plan.
There have been a spate of corporate scandals recently, and we feel the need for reinforcing
management oversight. In view of the company’s diverse businesses, we pay careful consideration toensuring diversity and balance in terms of the background and capabilities of our external directors.
In this context, we have chosen a former chairman of the Japan Society of Monetary Economics, aformer manager of a business company, and a manager of a shipping company, and we expect eachof them to play a distinct role. At the same time, we will seek to further strengthen our governance,
including the functions of directors.

Specialty Financing
This operating segment is the central core of our business and an engine of growth. We expect theaviation business to expand in Asia and will continue to focus our resources as the main means ofmodern transport.
Since the cost of a single aircraft at times exceeds ¥10 billion, major airlines are increasingly
turning to leasing to procure aircraft. Tokyo Century has made Aviation Capital Group LLC (ACG), a
leading U.S.-based commercial aircraft lessor, an equity-method affiliate and plans to expand new
aircraft operating lease business mainly through ACG.
Meanwhile, our real estate business is doing extremely well in the U.S., and we intend to invest
further in overseas markets by collaborating with corporate partners.
In our environment and energy business, we are achieving steady progress in solar power
generation. Led primarily by our power generation business through Kyocera TCL Solar LLC, we
have recently also begun to acquire solar power plants in the secondary market and to develop oursolar power generation business in Taiwan. We estimate that our total investment in the solar power
generation business in Japan and Asia will reach around ¥200 billion.

Domestic Automobile Financing
The Domestic Automobile Financing has steadily generated high profits each year due to theindustry-leading scale of our fleet under management and a solid business base ensured by ourhighly specialized services. The automobile industry is expected to undergo a major transformation.
Self-driving research and the spread of ridesharing will possibly advance in Japan. In a time such as
this, our fleet of about 640,000 managed vehicles and broad range of services from automobile
leasing for corporate customers and individuals to car rental will give us a significant advantage.
Automobile leasing includes providing outsourcing services that require highly specialized expertise

26

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201827

A Message from the President & CEO

and quality, and car rental business responds to inbound demands from foreign visitors. They

Tokyo Century has an ROE track record that is overwhelmingly superior to industry peers,

represent the cutting edge of our viable business with great potential for further growth. We expect

including nine consecutive years of ROE above 12%. We intend to maintain ROE at high levels andthe spread of the sharing economy will provide a tailwind.

meet the expectation of investors well into the future.
With respect to our dividend policy, we will follow our basic principle of providing stable long-

International Businessterm returns to shareholders while seeking to achieve sustainable growth in profit to improve our

Until now, the Specialty Financing has represented a primary driver of growth. In the future, we hope
the International Business will also become a major driver for even greater growth. We will expand
this business by demonstrating the synergies created by combining the client base of our corporate
partners around the world with the expertise offered by Tokyo Century Group. In particular, wepayout ratio.
Thanks to the business expansion in our four operating segments, our market capitalization
has grown 11-fold over the past nine years since 2009, when the company was establishedthrough a merger.
Tokyo Century is categorized under “Other Financial Services” in the Tokyo Stock Exchange’s 33

anticipate that the FinTech business, currently under development in Asia with our corporate
partner, will become a pillar of revenue for the International Business. In China, we have launched
an e-commerce and financial joint venture with China UnionPay Merchant Services Co., Ltd., theindustry categories, and our PBR is higher in comparison with other companies in the category. We
believe this is due to the relatively high proportion of our viable business, which can be viewed as aservice business instead of a financial business. We want investors to recognize our business with alargest card payment service operator in that country. In Indonesia, where the use of electronicmoney is on the rise, we plan to expand our FinTech business through an alliance with Lippo Group.
Through our alliance with Grab, the largest ride-hailing platform in Southeast Asia, we will also

PBR as commensurate with a service business that transcends the borders of industry sectors. To
that end, we will make further efforts to develop novel financial services businesses.

make a concentrated effort to expand our automobile leasing and financing services for local drivers.

Demonstrating Our Unique Financial
Capabilities that Go Beyond Leasing

Capital Policy and Shareholder Returns
For fiscal 2017, we decided to increase annual dividends by ¥9 per share above our forecast at theTokyo Century Group has benefited from excellent customers as a unique entity capable of

beginning of the fiscal year to ¥114 (payout ratio: 23.5%), as net income attributable to owners ofdeveloping versatile businesses free from regulation in areas bordering banks, trading companies

parent rose to ¥51.3 billion, exceeding our forecast at the start of the term. In fiscal 2018, we plan toand manufacturers.

pay an annual dividend of ¥122 (payout ratio: 25.0%), a further increase of ¥8 per share, in line withWe are advancing in step with the ongoing drastic shift from “Ownership” to “Usership” toward

the forecasted growth in net income attributable to owners of parent, and a year-on-year rise in the

our goal of developing novel financial services business that transcend leasing, by integrating

payout ratio of 1.5 percentage points.

Finance, Services and Business Expertise to become a company with financial capabilities.

Return on Equity (ROE) has become widely established as a key management indicator. Since

Building on our robust operating base in Equipment Leasing, Specialty Financing, in which we

there is a correlation between ROE and PBR, we think that an evaluation based on ROE would be

showcase our high level of expertise. Domestic Automobile Financing, in which we boast one of theeasy to understand from the investor’s perspective as well.

broadest product lineups in the industry while we have been achieving remarkable growth inInternational Business, in which we maintain operations in 37 countries and regions around theworld through partnerships with leading companies. These four operating segments constitute thefour solid pillars of Tokyo Century Group.
By combining the capabilities of the entire Group, we will supply the best products and services

Dividend and Dividend Payout Ratio

around the world to assist our customers and corporate partners in pursuit of their growth.

Annual Dividend (Yen/Left Scale)

Dividend Payout Ratio (%/Right Scale)135

Aiming for a steadyincrease in revenue byprioritizing investment ingrowth businesses while
paying due consideration
to increasing dividends

28

Tokyo Century Corporation

Integrated Report 2018

24.2
100

20.1
18.0 17.9 17.6
16.7

65

13.4
32

30

40

44

48

21.1

100

114

122
25.0

23.5

80

We look forward to the continued support and patronage of our stakeholders for Tokyo Century Group.

30

25

20

65

52

FY200910/3 FY2010
11/3 FY2011
12/3 FY2012
13/3 FY2013
14/3 FY2014
15/3 FY2015
16/3 FY2016
17/3 FY2017
18/3 FY2018
19/3(Forecast)15

10

Tokyo Century Corporation

Integrated Report 201829

Exceed. Equipment Leasing
Operational Strengths

Leveraging the Group’s
comprehensive capabilities
and extensive customer baseto create high-revenue
businesses that transcend theboundaries of leasing

We have established a customer base of about 25,000 companies by taking advantage of the networks of our major
shareholders. Moreover, we stand in the top ranks of the industry in domestic market share, led by our strength ininformation and communications equipment leasing.
By leveraging our customer base, we also provide a platform for supporting businesses in Specialty Financing, Domestic
Automobile Financing and International Business, which represent promising areas of growth for Tokyo Century Group.
Furthermore, we engage in numerous collaborative businesses with leading manufacturers and dealers in Japan,
including the financing subsidiaries of Fujitsu Limited and IHI Corporation as our consolidated subsidiaries.
By forging business alliances with corporate partners and managing joint ventures, we create services with high added
value to meet the diverse needs of our customers.

Share of Leasing Transactions in Japan

Private Capital Investment and Capital
Investment Financed by Leasing(Trillions of yen) 1st

FY2014FY2015FY2016

Sumitomo Mitsui
Finance andLeasing
12.8%

Sumitomo Mitsui
Finance andLeasing
13.8%

Sumitomo Mitsui
Finance andLeasing
15.9%

10

83.9
80

Business Overview(Billions of yen)

1,800

1,535.4

1,492.0

1,450.6

1,403.0

2ndTokyo Century

Tokyo Century

Mitsubishi UFJ
Lease & Finance
11.8%

We cater to a variety of customer needs by

12.7%

and machinery, including information and

3rd

11.8%

12.7%

Mitsubishi UFJ
Lease & Finance
11.5%

medical equipment, construction machinery,
15/3

16/3

17/3

	Availability of major partners tojointly pursue viable businessthat transcends leasing
	Comprehensive capabilities for
accurately identifying social
trends and business
opportunities, and transforming
them into new businesses

30

Tokyo Century Corporation

Integrated Report 2018

6

4.2

4.1

4.8

4.5

4.4

4.7

4.7

4.6
4

20

2

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017 0(FY)（年度）

Source: Created by the Company based on figures announced by Nikkei Inc.

Private Capital Investment (Left Scale)
Capital Investment Financed by Leasing (Right Scale)
Source: Japan Leasing Association (as of June 8, 2018)

Business Alliance System for Equipment Leasing
Joint Ventures with Partner Companies

	Extensive customer base ofabout 25,000 companies

870.4 71.9

18/3

Current Status
Strengths

87.0

40

0 2007and commercial equipment.
0

83.7
81.1 83.2

5.4
4.4

communications equipment, factory equipment,

600

77.5
67.5 68.1

Tokyo Century

providing financial services centered on leasing
and installment sales for all types of equipment

1,200

ORIX
12.1%

78.8

6.3
60

Balance of Segment Assets(Trillions of yen)100

Opportunities
	Spread of new digitalbusinesses, including IoT, bigdata, AI and robotics spurred byadvances in digital technology
	Growth in markets forrenewable energy
	Changing trends of the times
from selling goods to providing
valuables services

Challenges
	Seek further expansion in viablebusiness in collaboration withmajor partners

Kawasaki Heavy Industries, Ltd.

Tokyo Century

	Achieve a higher level ofcontribution to an environmentallysound, sustainable economy andsociety (expansion of rental, reuse
and recycling businesses)
	Secure and cultivate highly
competitive human resources andexperts who will lead businesses
with high added value

New Viable Businesses based on Robotics,
Power Generation and IoTFujitsu Limited
IHI Corporation
NHK Group
Orient Corporation
Investment

Major Joint
Ventures

Fujitsu Leasing Co., Ltd.
IHI Finance Support Corporation
Nanatsujima Biomass Power LLC
ITEC Leasing Co., Ltd.
Orico Business Leasing Co., Ltd.

Yaskawa Electric Corporation PartnershipTokyo Century

mitsuiwa corporation
BYNAS Co., Ltd.

Robot rental businessTsukishima Kikai Co., Ltd.

PartnershipTokyo Century

Power generation from digestion gas (biogas) at wastewater treatment plants

Bplats, Inc.

PartnershipTokyo Century

Subscription-based IoT businessTokyo Century Corporation

Integrated Report 201831

Equipment Leasing

Creating Business with High Added Value that Meets the
Needs of Changing Times
Creating New Business Models to Achieve Growth
While maintaining the stable revenue generated by our conventional leasing business as our
backbone, we also seek to promote promising new businesses in the areas of robotics, power
generation and IoT.
In our drive to develop collaborative ventures with major partners, we have already launchedseveral businesses based on the key concept of service.
In robotics, in 2016, Tokyo Century formed an alliance with Kawasaki Heavy Industries, Ltd. andAkihiro Naruse
Director and Managing Executive Officer
President, Equipment Leasing Business
Development Unit

began a rental business for dispatching its robots. By purchasing the robots and renting them tocustomers on an as-needed basis, we believe that we are helping to reduce initial investment andboosting productivity. Although the project was launched only recently, we have already received
inquiries from companies in and outside of Japan.
In power generation, in May 2017, we signed a partnership agreement with Tsukishima Kikai Co.,
Ltd., the Japanese industry leader in water purification and wastewater treatment. We plan todevelop new power generation businesses based on renewable energy, such as generating powerCore Initiatives for the Medium to Long Term
(Our Vision)from sludge digestion gas at wastewater treatment plants and other businesses. Moreover, the areaof public infrastructure has the potential for offering major business opportunities as the timecomes for upgrading antiquated facilities. We intend to collaborate with Tsukishima Kikai Co., Ltd. inmaintaining social infrastructure and contributing benefits to local communities.
In IoT, in October 2017, we formed a business alliance with Bplats, Inc., which provides aGenerating Stable Revenue on the Strength of Our
Excellent Customer Basesubscription platform befitting the era of IoT that can be applied to pay-per-use services based onunits of usage and time. By creating a subscription-based business for IT equipment and medical
robots, we intend to serve customers by responding to new needs emerging from the changing times.
Guided by our slogan, “Creating new values from Finance × Services × Business Expertise,” weare resolved to break out of our comfort zones of leasing and financing to achieve exponential

Equipment Leasing is the founding business of Tokyo Century Group, and we have established agrowth by combining businesses, instead of adding them, to create new ones that transcend thestable revenue base centered on leasing, supported by our customer base of about 25,000

boundaries of leasing.

companies. Also, we are advancing toward the creation of an environmentally-sound, sustainableeconomy and society by focusing on secondary businesses derived from leasing, such as the reuse
and recycling of leased assets.
Tough business conditions have prevailed in Japan, including contracting markets and a
protracted period of low interest rates. It would be difficult to achieve exponential growth based on
the conventional leasing business alone. We must therefore develop business models that can serveas new pillars of revenue.
To that end, we are accelerating the pace of our initiatives by holding joint study groups with ourcustomers to accurately grasp their needs and by forming collaborative ventures with partners, including
Japan’s leading manufacturers and distributors, to create new businesses that meet those needs.
These initiatives have begun to pay off in the form of numerous projects through which we havesuccessfully established business alliances and joint ventures that maximize the respective
strengths of Tokyo Century Group and our corporate partners.

32

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201833

Exceed. Specialty Financing
Operational Strengths

Specialty Financing is thegrowth engine of Tokyo Century.
We are advancing into a newstage as true professionals to
make our mark in the world.

Specialty Financing has been driving the rapid growth of Tokyo Century Group by creating businesses that combine Finance,
Services and Business Expertise based on our products in such areas as shipping, aviation, the environment and energy, realestate and structured finance.
In the aviation business, we invested in Aviation Capital Group LLC (ACG), a leading U.S.-based commercial aircraft lessor,
in 2017, thereby positioning ourselves to become a top player in the aircraft leasing business. In the environment and energy
area, we are pursuing solar power generation primarily in alliance with Kyocera Corporation. Total investment is projected
to increase to around ¥200 billion, which places us in the top ranks in Japan.
Together with our outstanding partners, we are expanding highly specialized, profitable businesses that integrate financewith business expertise to accelerate corporate growth.

Overview of Business Segments in Specialty Financing
Shipping

Environment and Energy

Wide range of financing and services for different vessel
types, including bulk carriers, car carriers, container ships
and tankers as well as offshore wind turbine installation
vessels and offshore vessels

Operating one of Japan’s largest solar power generation
businesses centered on our alliance with Kyocera
Corporation and with a future focus on overseas businessdevelopment

Creating new businesses in cooperation with core partners

Diverse energy-related businesses centered on renewableenergyAviation

Real Estate

Balance of Segment Assets
Business Overview(Billions of yen)

1,100

975.6
845.9

900

897.0

products to create promising new businessareas beyond financial services, such as leasing

711.9
700

and financing, and with a particular focus on
shipping, aviation, the environment and energy,

500
300

We seek to develop a variety of specialized

A 20% membership interest in ACG, a leading U.S.-based
commercial aircraft lessor, making it an equity method
affiliate

Acquired a 70% stake in Shinko Real Estate Co., Ltd.,a comprehensive real estate company, making it aconsolidated subsidiary

Active engagement in the aviation business by providing
lifecycle management in the aviation market from new andused aircraft to engines and other aircraft parts

Developing the ANA InterContinental Beppu Resort & Spa,the world’s first hot spring resort featuring Japan’s unique“onsen,” scheduled to open in the summer of 2019and real estate.
15/3

16/3

17/3

18/3

Growth Drivers of Specialty Financing
Current Status
Strengths

Opportunities

	Human resources with theexpertise and willingness to takeon challenges

	Significant rise in the number ofaircraft passengers

	Change and strengthen therevenue structure	Increased investment
opportunities in real estate, as
evidenced by hotels needing tomeet the rise in international
visitors

Boost capital gains by accumulating assets
to expand stock-based revenue whileenlarging business fields to further bolster
revenues from fees and businesses

Business model that integrates
finance and business expertisein alliance with excellent
corporate partners
	Development of top-class global
aircraft leasing businessfollowing investment in ACG

34

Tokyo Century Corporation

Integrated Report 2018

	Growing demand for renewableenergy due to heightenedawareness of environmental
issuesChallenges

Aviation

Solar Power Generation

Real Estate

The scope of ACG’s business is expected to
expand based on a backlog of orders for
new aircraft. Furthermore, we will seek
significant growth for Tokyo Century’s
aviation business by promoting life cycle
management through business alliancewith GA Telesis, LLC, in areas such ascomponent financing.

Primarily in alliance with Kyocera
Corporation, we have expanded our solar
power generation business to reach the
top ranks in Japan, operating 75 solar
power plants with a capacity of 236 MW.
We are seeking further growth bylaunching solar power businesses
overseas in addition to purchasing power
plants in the secondary market.

In addition to expanding and bolstering thebusiness of Shinko Real Estate Co., Ltd. by
providing growth capital, we will promotecollaborative ventures with Shinko Real
Estate Co., Ltd. and Nippon Tochi-Tatemono
Co., Ltd. to develop Tokyo Century’s realestate business.

	Expand and develop a range ofbusiness models
Seek progress and change in businessmodels for existing products in fields
including shipping, aviation, the environment
and energy, real estate and structured
finance and others while actively taking on
the challenge of new business domains

Tokyo Century Corporation

Integrated Report 201835

Specialty Financing

Providing a High Level of Expertise andProposal-Making Capabilities to Solve Customer Issues
Accelerating Business Development in the Growth
Areas of Aviation, the Environment and Energy,
and Real Estate
Aviation
In 2017, we acquired a 20% membership interest in ACG, a leading U.S.-based commercial aircraft
lessor, making it an equity method affiliate. ACG currently owns and manages 275 aircraft and is

Koichi Nakajima
Deputy President, Executive Officer
President, Specialty Finance Business Unit I
President, International Business Unit II

ranked at around tenth in the industry, with plans to rise into the top five based on an ample backlog
for new aircraft. Tokyo Century will consider extending additional capital to boost ACG’s growth. GA
Telesis, LLC, an affiliate of Tokyo Century, dismantles used aircraft and repairs engines and othercomponents for sale and reuse. The company plays an important role in the value chain of theaviation business. In Tokyo Century’s aviation business, there are revenue opportunities throughout
the product life cycle, from the introduction of new aircraft to the disassembly and sale ofcomponents from decommissioned aircraft. Moreover, the business contributes to realizing anCore Initiatives for the Medium to Long Term
(Our Vision)

environmentally-sound, sustainable economy and society by reusing assets.

Environment and Energy
In the environment and energy, we focus on the renewable energy business based on solar power
generation through Kyocera TCL Solar LLC, a joint venture with Kyocera Corporation.
Since its founding in 2012 to the end of March 2018, Tokyo Century has launched and operated 75

Focus on Developing Viable Businesses in
Alliances with Excellent Corporate Partners

solar power plants nationwide with a total capacity of 236 MW. In March 2018, operation commenced
at Japan’s largest floating mega solar plant in the Yamakura Dam reservoir in Chiba Prefecture.

Real EstateSpecialty Financing has been driving the Tokyo Century Group’s growth as a result of focusing
primarily on the five business segments of shipping, aviation, the environment and energy, realestate, and structured finance.
We derive our growth from our personnel, who offer a combination of outstanding expertise andthe willingness to take on challenges, and from the development of quality businesses in alliancewith excellent corporate partners. Our collaborative relationships have provided access to
information crucial to our business, enabling us to gain knowledge of opportunities and risk
management for each product.
Due to the success of our business to date, we receive promising proposals from around theworld almost every day, highlighting our growing market presence. We will seek to further expand
viable businesses that allow us to deal with products throughout their life cycles.

In July 2018, Tokyo Century acquired a 70% stake in Shinko Real Estate Co., Ltd., a comprehensive
real estate company, making it a consolidated subsidiary. In the years ahead, we will seek tocapitalize on the synergies as quickly as possible by expanding business opportunities in each life
stage of real estate, encompassing development, ownership, management and exit, as well as
diversifying exit strategies.
We are developing the ANA InterContinental Beppu Resort & Spa, the world’s first hot spring
resort featuring Japan’s unique “onsen”, scheduled to open in the summer of 2019. We also plan totake on new businesses to address inbound demand from foreign visitors, regional revitalization, andother issues in alliance with excellent partners.

Shipping
The shipping market is significantly affected by external factors, including demand for steel andelectricity. We are therefore preparing to seize the next opportunity by carefully selecting projects incooperation with our outstanding partners.
We will continue to create new value by integrating finance with business expertise to expand
businesses that will drive further growth for Tokyo Century.

36

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201837

Exceed. Domestic Automobile Financing
Operational Strengths

Meeting Diverse Needs
with an Industry-Leading
Lineup and High Standardsof Service Quality

The Domestic Automobile Financing comprises Nippon Car Solutions Co., Ltd., which mainly serves corporate customers,
Nippon Rent-A-Car Service, Inc., providing car rental and car sharing services, and Orico Auto Leasing Co., Ltd., whichprimarily serves individuals. We offer an industry-leading lineup of services in response to diverse modes of automobile use.
By generating synergies from the organic combination of these three companies, and by consistently enhancing thehigh standards of our service quality, we have continuously expanded the scope of our fleet to about 640,000 vehicles*
under management.
We are constantly enhancing the standard of our diverse services to meet customer needs, which are becoming
increasingly diversified with the changing times.
* Total for Nippon Car Solutions Co., Ltd., Nippon Rent-A-Car Service, Inc., and Orico Auto Leasing Co., Ltd., as of March 31, 2018

Performance of Tokyo Century Group’s Automobile Financing Companies
Ordinary Income (Billions of yen)

Balance of Segment Assets

March 31,2016

FY2015FY2016FY2017

March 31,2017

March 31,2018

Averageannualincrease

Nippon Car Solutions Co., Ltd.

9.2

10.0

11.0

9.7%

292.5

311.6

334.1

6.9%

Nippon Rent-A-Car Service, Inc.

4.3

4.5

4.6

3.4%

29.1

31.4

35.8

11.0%

Orico Auto Leasing Co., Ltd.

1.1

1.6

2.1

35.5%

96.1

122.4

153.3

26.3%

14.6

16.0

17.7

10.1%

417.6

465.4

523.2

11.9%

Business Overview(Billions of yen)

600

400

Segment Assets (Billions of yen)

Averageannualincrease

380.5

410.5

459.2

515.8

Total*

We boast one of the largest services in Japan,
with Nippon Car Solutions Co., Ltd., Nippon* Total figures for ordinary income and segment assets show the simple sum of the three companies.

Rent-A-Car Service, Inc. and Orico Auto
Leasing Co., Ltd., serving both corporate
customers and individuals by providing optimal

200

services for the needs of users.
0

15/3

16/3

17/3

Data Related to Automobile Business in Japan
Total Number of Vehicles and Total Number of Leased Vehicles

18/3

15.6% average annual increase
from March 31, 2014 to March 31, 2018

(Million units)

79.4

Current Status

4.5

Strengths

Opportunities

Challenges

	Industry-leading lineup ofservices (automobile leasing forcorporate customers andindividuals, car rental, carsharing and others)

	Rising car rental demand frominbound visitors

	Reinforce car rental service forcorporate customers and loaner
car service

	Expansion in automobile leasing
for individuals due in part to shift
in mindset from ownership tousership	Emergence of new automobile
businesses including self-driving
cars, IoT and car sharing

	Create new services bygenerating synergies with Tokyo
Century Group	Establish systems that anticipate
the spread of self-driving cars,
IoT and car sharing

125,000
4.0

78

3.6

Integrated Report 2018

14/3

15/3

16/3

17/3

18/3

3.5

76

3.1

Fleet Registrations of Cars in Rental Service
7% average annual increase
from March 31, 2013 to March 31, 2017

3.0

74

(Units)700,000
72

659,737
506,966

2.5
350,000

09/3

10/3

11/3

12/3

13/3

14/3

15/3

16/3

17/3

Source: Japan Automotive Leasing Association (as of June 30, 2018)
Total Number of Vehicles (Left Scale)
Total Number of Leased Vehicles (Right Scale)Tokyo Century Corporation0

Source: Japan Automotive Leasing Association (as of June 30, 2018)7038

250,000

143,68878.1

	Development of solutions
business in collaboration with
Tokyo Century Group and theNTT Group

256,936(Units)80

	Industry-leading standards forservice quality

Number of Leased Vehicles for Individuals

Number of leased vehicles rose by an annual average of 4%
from March 31, 2014 to March 31, 2018

18/3

2.0

0

13/3

14/3

15/3

16/3

17/3

Source: All Japan Rent-A-Car Association (as of June 30, 2018)
Tokyo Century Corporation

Integrated Report 201839

Domestic Automobile Financing

Overwhelming the Competition by Pursuing Aggressive
Management on the Strength of Our Superior Service Quality
As for IoT, we plan to make use of big data accumulated by event data recorders mounted on ourvehicles to eliminate dangerous driving and prevent accidents in a bid to raise the standard of ourservices even further.
We will strive to enhance the quality of services we have nurtured over the years, such as
maintenance and outsourcing related to the automobile business. We will also seek to better serve
our customers by honing our services as a concierge to secure our unrivaled position as number one
in the overall ranking for the domestic automobile financing business.

Makoto Nogami
Deputy President, Director and Executive Officer
President, Automobile Finance Business
Development Unit

Expanding Our Business Scope on the Strength of
Our High Standards of Service Quality
Domestic Automobile Financing comprises Nippon Car Solutions Co., Ltd., Nippon Rent-A-Car
Service, Inc., and Orico Auto Leasing Co., Ltd., and each company has expanded the scope of its

Core Initiatives for the Medium to Long Term
(Our Vision)businesses based on their high standards of service quality.
The core competence of Nippon Car Solutions Co., Ltd. is concentrated in the expertise
accumulated over the years by providing high-quality maintenance for the NTT Group, a major
shareholder. In serving commercial vehicles such as delivery vans for convenience stores that
operate 24 hours a day, all year round, the company also provides a loss-prevention system for

Securing the Top Position in the Overall Ranking for theDomestic Automobile Financing Business with HighStandards of Service Quality that Offer an Accurate
Response to the Changing Business Environment

avoiding problems. It also boasts the industry’s highest quality in the areas of event data recorders
and business process outsourcing (BPO). The company has shown steady performance, extending its
earnings record with ordinary income exceeding ¥10.0 billion. We believe it will continue to grow on
the back of its high-quality services.
Nippon Rent-A-Car Service, Inc.’s strengths lie in its widely recognized brand and quality service
characterized by its slogan, “Safe and Clean.” In the past few years, the company has received aboost in its business by market growth as well as the rapid expansion in car rental services catering

In addition to the high ROA from Domestic Automobile Financing, our solid operations in this area

to foreign visitors to Japan. Following the abolition of its franchise system, direct operation by

have consistently increased segment assets and boosted revenue. Over the past three years, segment

Nippon Rent-A-Car Service Inc. began in January 2018 with the aim of providing a uniform level ofassets for Domestic Automobile Financing have grown at an average annual rate of around 10% andquality services nationwide. Recently, a series of new services has been launched to meet customer

significantly contributed to raising Tokyo Century’s consolidated ordinary income. We foresee major

needs, such as car sharing and parking lot reservation platform in collaboration with akippa Inc.,changes in the Domestic Automobile Financing business, including self-driving cars, IoT and car

and we expect the company will continue to lead growth of Domestic Automobile Financing.

sharing, which present an opportunity for us to take on the challenge of creating new services that

Orico Auto Leasing Co., Ltd. has demonstrated dramatic growth in the decade since it was

will boost revenue. We see a high correlation between self-driving cars and car rental/car sharing

founded, with over 100,000 vehicles under management and ordinary income exceeding ¥2.0 billion.

services. We are convinced that the comprehensive capabilities we possess as a company pursuing

Of the 52 million vehicles registered by individuals in Japan, leased vehicles account for only

ever-higher standards of service quality will provide us with a significant advantage in meeting new

0.4%, at 200,000. The market has the potential for explosive growth as more drivers become awareneeds in the future, such as enabling inbound visitors to reach their destination by simply inputtingof the economic benefits of automobile leasing. Orico Auto Leasing Co., Ltd. will seek to solidify its

the location in their cars.

top position in the individual automobile leasing business by providing quality maintenance services
through its alliance with Nippon Car Solutions Co., Ltd. and by bolstering the foundation of Koala
Club, its unique agency organization.

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Tokyo Century Corporation

Integrated Report 201841

Exceed. International Business
Operational Strengths

Expanding business in 37 countries
and regions around the world byforging strategic alliances withcorporate partners

While pursuing strategic alliances with leading local companies and financial institutions overseas, we leverage ourstrengths in IT equipment leasing, automobile leasing and FinTech business based on big data to expand our business in
37 countries and regions.
In IT equipment leasing, we provide world-class IT solutions through CSI Leasing, Inc. (CSI), with its original businessmodel and networks spanning the U.S., Central and South America, and Europe.
In the continuously growing economies of Asia, we are seeking to create new markets by focusing on viable businesses
unique to Tokyo Century, such as FinTech business based on big data, along with our partners.

Business Model for International BusinessTokyo Century

Investment

Expertise,knowledge

Credit analysis
skills, local

Local partnercompanies

Joint
ventures

Japanesecompanies

Solid reputation among
Japanese companies
Provision ofservices

Non-Japanesecompanies

Strong local trust

Investment customer base

Balance of Segment Assets(Billions of yen)

500

434.1

400
300

Business Overview

435.7

Expanding non-Japanese Businesses through Strategic Alliances

We provide specialized services that address
267.9

272.4

unique local needs by partnering with leading
local companies and financial institutions

200

Joint leasing company with Dalian
Bingshan Group, the largest
refrigeration and air-conditioning
equipment manufacturer in China

World-class IT solutions based on theexpertise and global network of CSI,
which has strengths in IT equipment

U.S.

overseas.

100
0

16/3

17/3

18/3

Leasing business with TISCO
Financial Group, a leading local
banking group

ThailandStrengths
	One of the industry’s mostextensive global networks
FinTech business utilizing thecustomer bases and ecosystems
of corporate partners
Quick decision-making in
response to the changing
business environment

Opportunities

Challenges

	Rising demand for financial
services due to Asian economic
development

	Cultivating and securingpersonnel to lead the overseas
and FinTech businesses

	Collaboration with emerging
digital platform operators thatown big data	Harnessing big data to expand
the FinTech business	Expansion into business areas
such as vendor finance withleading companies in and outsideof Japan that utilize CSI’s
expertise

Philippines

India

	Strengthening the managementof overseas businesses

Singapore

Tokyo Century Corporation

Integrated Report 2018

Strategic business agreement with
China UnionPay Merchant Services
Co., Ltd. (China UMS), the largest card
payment service operator in China

Joint vendor financing venture with
Hitachi Construction Machinery Group

Current Status

42

Investment in a government-affiliatedleasing company in Suzhou City, China

China
15/3

Malaysia

Leasing business with Bank of thePhilippine Islands, a leading bankIndonesia

Leasing business with TATA Capital

Philippines

Indonesia

Thailand

Vietnam

Leasing business with Uni-President
Enterprises Group, the largest foodand distribution company group in
TaiwanTaiwanMyanmarCambodia

Joint vendor financing venture with
Hitachi Construction Machinery Group
Strategic partnership agreement on
FinTech and other businesses with
Lippo Group, a major conglomerate

Strategic partnership with Grab, the largest ridehailing platform providing services across eight
countries in Southeast Asia, to promote expanding
automobile financing-related businesses

Tokyo Century Corporation

Integrated Report 201843

International Business

Constructing Viable Businesses in Anticipationof the Digital Revolution
Using Digital Technologies to Create Promising
Viable Businesses
One management strategy of our third medium-term management plan is to expand our overseas
businesses by promoting alliance strategies. In fiscal 2017, we expanded our investment in thedigital economy as a promising area of growth.
In Southeast Asia, we have allied with Grab, the region’s largest ride-hailing platform, to provide
an automobile rental and financial services for registered drivers. Ride-hailing services are expected

Yasushi Yoshino

to continue expanding in many parts of Southeast Asia, where car ownership is low and taxi services

Senior Managing Executive Officer
President, International Business
Development Unit

lack quality. Grab acquired the Southeast Asian operations of its greatest rival Uber, which presents
us with opportunities to extend our alliance with Grab in the region.
We entered the FinTech business through an alliance with Indonesia’s Lippo Group and joint
investment in an operator of electronic money and loyalty programs. Lippo Group maintains a vastcustomer base due to its diverse businesses, including department stores, supermarkets, hospitals
and e-commerce and others. We intend to achieve exponential growth by focusing on financial services

Core Initiatives for the Medium to Long Term
(Our Vision)

based on big data accumulated by Lippo Group’s electronic money and loyalty programs.
In China, we have partnered with China UMS, the country’s largest card payment service operator
that operates a financial service platform for its member merchants. We use this platform to provide
an e-commerce leasing service for as many as 7.22 million member merchants.
Under the alliance strategy, we have been expanding the scope of our International Business by

Expanding Overseas Business through Strategic
Alliancesestablishing mutually beneficial alliances with our partners. Our track record of existing businessalliances has lent persuasion and credibility to our dealings with clients and gives us confidence.
We will continue to pursue alliances with corporate partners while integrating new digitaltechnologies such as AI and big data with our financial services in order to develop viable businesses

We promote strategic alliances to expand our overseas business by integrating our financial services

for digital disruption.

expertise with the strengths of our corporate partners, including their customer base. The overseas
business environment is constantly changing, which makes quick decisions and businessdevelopment important elements for business expansion.
International Business is roughly divided between our U.S. and Asian operations. The U.S.
business is centered on CSI, which has strengths in IT solutions, and Tokyo Century (USA) Inc., which
operates our mainstay automobile financing business. In addition to accelerating alliances with our
corporate partners, we can further expand our business through M&A in the surrounding areas.
In Asia, where high economic growth continues to be a driving force, we work with partners toprovide automobile financing and serve Japanese and non-Japanese companies with leasing andfinance. We are also focused on developing FinTech business based on big data. In alliance withdigital platform operators that own big data, we plan to create businesses targeting the fast-growing
digital economy.

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Tokyo Century Corporation

Integrated Report 201845

Exceed. Feature

Achieving Advances in the E-Money and FinTech Businesses
Collaborative Venture with Indonesia’s Lippo GroupIn Indonesia, which has the largest population in the ASEAN region, Tokyo Century Group has
joined with Lippo Group to focus on developing the e-money and FinTech businesses as the next
growth drivers. Here, Senior Managing Executive Officer Yasushi Yoshino introduces ourcollaborative venture with Lippo Group.

Indonesian Economy Growing
Further with the Spread of E-Money

Lippo Group is a leading conglomerate that operates

Maximizing Lippo Group’s
Competitive Edge in the E-Money
Business

Matahari, Indonesia’s largest department store chain, alongwith other businesses encompassing real estate, retail, IT
and media, hospitals, finance and others. The group has

Indonesia has a population of more than 260 million,

recently focused on digital businesses such as e-commerce

accounting for roughly 40% of the ASEAN region, and its

and e-money in anticipation of the digital economy.

Lippo Group has been involved in social infrastructure

economy continues to grow at an annual rate of over 5%,

projects in Indonesia, including developing housing andwith room for further expansion.

commercial facilities, establishing hospitals, andOf the 40% of Indonesians aged 15 and older with bankaccounts, only slightly less than 10% have a credit card,
making cash the predominant means of settlement. On

constructing network environments. Its stores grew

Launch of B-to-B E-Commerce
Businessalongside its work on town development, giving Lippo Groupthe largest share in the number of department stores in thethe other hand, smartphone ownership exceeds 100

country and ranking it among the leaders in commercial

million, leading to a rapid expansion in electronic

As the first move in our strategic partnership, we invested

facilities and supermarkets as well. Its Matahari

settlement using smartphones.

approximately US$17 million to acquire the shares in PT.

department store chain boasts overwhelming brand power

Big Ecommerce Bersama, the holding company for Lippo

with a recognition rating of 98%.

Group’s B-to-B e-commerce company, thereby making it

Strategic Alliance with Lippo Group

E-money is gaining attention in Indonesia as an alternative

an equity method affiliate of Tokyo Century.

means for providing financial services to those who do not

We aim to expand the customer base through thehave bank accounts. By taking advantage of its brick-and-networks of Lippo Group and Tokyo Century and leverage

mortar stores and extensive customer base built upon its

Given this business environment, we see significant

our expertise in financial services to create and provide

diversified portfolio, Lippo Group is striving to spread the use

potential in smartphone-based FinTech businesses in

new value in Indonesia.

of e-money and further expand its business domains.

Indonesia. Consequently, in November 2016, we signed astrategic partnership agreement with Lippo Group to
pursue our alliance in the digital and Fintech businesses.

Indonesian Population and Ratio of Smartphone Use
Population (Left Scale)

Rate of smartphone use (Right Scale)60(millions)

43

260

Senior Managing Executive Officer
President, International Business Development Unit
Since joining Tokyo Century in 2012, Yasushi Yoshino has concluded
business alliances in East Asia and ASEAN countries including China
and the Philippines. In 2016, a strategic partnership agreement was
signed with Indonesia’s Lippo Group on digital and FinTech businesses
to develop advanced businesses for the digital economy.

46

Tokyo Century Corporation

Integrated Report 2018

47

261
45

258
28

255

Yasushi Yoshino

(%)
60

265

255
30

252
250

245

14

15

248

2013

2014

2015

2016

2017

0

Source: Created by the Company based on data from Consumer Barometer with Google and the International Monetary FundTokyo Century Corporation

Integrated Report 201847

Feature Achieving Advances in the E-Money and FinTech Businesses
Collaborative Venture with Indonesia’s Lippo Groupencouraged to switch to OVO, which boasts a membership

Business Development Based on
Big Data Collected by the OVO
E-Money Service

exceeding 9 million.

OVO is an e-money service used to settle payments by

Lippo Group and Tokyo Century plan to leverage ourThailand, Vietnam, Myanmar and Cambodia, making it the

Looking ahead, we will introduce new services byfinancial services, thereby constructing an unprecedented

largest ride-hailing group in the Southeast Asian region.

making use of OVO’s settlement data and conducting

business model. We intend to carve out a solid position for

In addition to its ridesharing business, Grab operates

one-to-one marketing aligned with the personal

ourselves in Indonesia as a cutting-edge FinTech financethe GrabPay settlement service. In Indonesia, the project

preferences of consumers.

company for the age of digital disruption, while also

has already started to incorporate GrabPay into the OVO

exploring opportunities to develop similar services

app. Grab’s services are used in everyday situations, suchelsewhere in Asia.

as commuting to work or school, which is where we see

smartphone. The service allows OVO members to pay forTokyo Century is also planning to set up a FinTech

products purchased at member stores by using the app tofinance company targeting OVO users, member stores,

read QR codes and barcodes. It can also be used toand e-commerce site suppliers. Considering that banktransfer money between bank accounts, pay utility bills,

accounts and credit cards currently have a limited reach,and settle payments between individual users. OVO is very

we believe there is a potentially strong demand forsimilar to having a bank account, so, in Japan, rather thanfinancial services, and in the event that OVO becomesusing e-money, it can be used for a number of purposes byIndonesia’s largest e-money service, we expect the scope

those without a bank account. It also offers a uniqueof business for the FinTech finance company to expand asloyalty program and alliances with leading partners thata consequence. This could also enable us to create new

Tokyo Century signed a strategic partnership agreement

set it apart from other companies. Loyalty programs havefinancing opportunities for providing diverse financial

with Grab in December 2016. Grab and its groupbeen widely established at Lippo Group shopping malls

services to OVO’s member stores and e-commerce site

companies operate a ridesharing business that matches

and supermarkets, with membership having alreadysuppliers using a credit checking model based on theirdrivers with passengers via smartphones using mobile

reached 10 million. Members are currently being

daily transaction data.

applications and digital platforms in eight Southeast Asian

Bank account ownership

98

100

Credit card ownership(2017)

93

Exploring Growth Opportunities by
Creating Synergies with Grab

Collaborative Ventures with Lippo Group
Digital Business

68

66
49

49

21

18

20

2

Indonesia

China

Japan

Singapore

U.S.

alliance with Lippo Group through such means including
the exchange of personnel to achieve significant growthfor our FinTech business in Indonesia.

FinTech Business

FinTech Business

New Financing Business Capitalizing on
Big Data Generated by OVO

69

40

0

Going forward, we will seek to further deepen our

80

80

60

98

Grab deriving its strength.

Alliance with Indonesia’s Lippo Group

Ownership of Bank Accounts and Credit Cards (against population aged 15 and older)(%)

countries: Singapore, Malaysia, the Philippines, Indonesia,

mutual strengths to provide seamless marketing andE-commerce
B-to-B/B-to-G“Mbiz”

E-money
Loyalty programs“OVO”

Financecompany

Invested
approx.
US$17 million

Invested
approx.
US$116 million

Planning a new
joint venture

Financecompany
Construct a credit
checking modelusing big data

Nobu Bank
Link withbank account

OVO

E-money users

OVO member
storesPurchase
history
Payment
statusSales data

E-commercesite suppliersTokyo Century Corporation

Integrated Report 2018

Global Average

Source: Created by the Company based on data from The World Bank

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Tokyo Century Corporation

Integrated Report 201849

Foundations of Corporate Value

Establishment of the Sustainability Committee
The Sustainable Development Goals (SDGs), comprising 17 goals
and 169 targets for realizing a sustainable world, were adopted
at the United Nations Summit in 2015, placing the spotlight on
initiatives taken by companies toward attaining the SDGs.
Tokyo Century has squarely addressed the SDGs by
establishing the Sustainability Committee and Sustainability
Management Office in April 2018 as a Group-wide organization
for promoting and supervising sustainable corporate activities.
The committee will seek to deepen its discussion on formulating
management strategies that incorporate initiatives for solving
global environmental issues and challenges faced by society as
a whole.
We are resolved to maintain our focus on addressing SDGs
and other social agendas through our business while enhancing
the disclosure of information about our activities.

We will promote social
development and environmental
preservation as our contribution to
an environmentally-sound,sustainable economy and society.
Koichi Baba
Director and Senior Managing Executive Officer
President, Corporate Planning Unit
President, Accounting Unit
Chairman, Sustainability Committee

Through its leasing business for information and communications equipment and automobiles, Tokyo Century has
pursued businesses that efficiently utilize resources, such as asset management, resale, re-lease and disposal basedon prevailing laws and regulations.
Recent movements have arisen to promote the use of environmentally-sound renewable energy. By becoming a
power producer that generates electricity through solar power, biomass and sludge digestion gas, Tokyo Century has
sought to expand the use of clean energy that does not depend on fossil fuels.
Due to the nature of our business, there is a high affinity between Tokyo Century’s businesses and strategies andthe SDGs. And as a company seeking to contribute to a sustainable economy and society, we believe that we are
uniquely positioned to practice sustainability.
With respect to workstyle reforms, we formulated the Work Style Reform Action Plan in March 2018, which upholds
goals such as maintaining the ratio of annual leave taken at over 70%. We plan to further accelerate business growthby nurturing a corporate culture that allows diverse personnel to flourish and by promoting a sound work-life balance.
For the Fourth Medium-Term Management Plan, which will start in fiscal 2019, we will strive to become acompany that achieves sustainable growth by creating new business opportunities from the perspective ofpromoting social development and preserving the global environment.

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Exceed. Management Interview

Human Resources and Organizational Culture Behind Success with Partners
Tokyo Century places priority on providing working environments that encourage diverse personnel

To gain an equal footing in the global market, we must

to thrive and has adopted a flat organizational structure that is conducive to career development.

broaden the scope of our personal skills, which include

Managing Executive Officer Mahoko Hara has gained a wealth of experience from her extensive

being able to engage in incisive, wide-ranging topics ofcareer in global markets. Here, she shares her views on the strengths of our human resources,
diversity and organizational revitalization, which provide a competitive edge for Tokyo Century.

conversation and demonstrating significant culturalexperience in addition to having broad insight beyond theI have the impression that many overseas

knowledge required in business.

businesspersons work even harder than the Japanese

We must therefore expand our perspectives and take

New Ideas Born from Diversity
and Professionalism

Adding Further Vigor to Our
Organization

while at the same time placing greater value on theiran interest in various pursuits, keeping our antennas alertfamily and private lives. Perhaps they are benefiting fromas we go about our business each day.

workstyles and organizational cultures that enable themto balance work and private life.
To bring out the best performance from all employees,

Individuals with diverse backgrounds thrive at Tokyo
Century, which attracts professionals in finance andtrading, as well as aviation and energy, with experience ofOrganizational Culture that Leads
to Successful Partnerships

Tokyo Century needs to learn from all kinds of initiatives tofurther enhance its programs for supporting flexible
workstyles that cater to individual lifestyles.
We also recognize promoting women’s careers as a key

doing business in Asia.
Tokyo Century is developing viable businesses in alliances

issue. Since women tend to miss out on work for certain

every day from the interaction of diverse, highlywith partner companies. The primary key to success isperiods of time due to childbirth and parenting, we should

specialized personnel with distinct perspectives. Versatilebuilding relationships of trust. Prior to agreeing on anoffer women the opportunity to set high goals and take on

thinking and unconventional ideas that take advantage ofalliance or capital investment, we must follow the crucial

various challenges before they experience those life

our flexible business environment are crucial to creatingprocess of engaging in repeated discussions until both

events. By deciding on their career paths at an early stage,

viable businesses that can meet the broad array ofsides are satisfied with the strategy and mission. Moreover,they can fully demonstrate their abilities and expand theircontemporary needs.

the vision must be shared not only among top management

fields of business.

One of our strengths lies in the way new ideas are born

but also at the working level. I believe that the emphasis on

Growing Importance of
Globally Minded Personnel

Initiatives on diversity lean toward numerical targets

communication in our organizational culture is behindsuch as increasing the number of female managers orTokyo Century Group’s many successful partnerships.

actively hiring foreign staff. However, it is important toOverseas companies in particular have commended

recognize the reason why companies should respect

Tokyo Century for its prompt decision making. We seek todiversity. Instead of promoting diversity to meet numericalmaintain agility at the management level whiletargets, we should consider the roles played by employees

While we have experienced rapid growth in our global

simultaneously delegating a certain degree of authority towith various backgrounds and how they can contribute tobusinesses centered on partnerships with leading

accelerate our decision making.

the company and society. Having done so, we mustoverseas companies, we still have a long way to go in the

A relaxed environment that facilitates daily

discuss ways to provide comfortable working

development of personnel who can negotiate on equal

communication is also important. Tokyo Century’s flat

environments for everyone. That is what promoting

terms in a global setting. I want our younger employees toorganization allows even first-year employees to speak

diversity means, and I believe this will lead to sustainableengage in a variety of projects and gain ample experience

directly with managers. We are fostering an environment

growth for Tokyo Century.

during their overseas assignments to becomethat accelerates communication by eliminating elaborate

professionals who thrive in the global market.

meetings insofar as possible and actively discussing

Mahoko Hara

issues via e-mail.

Managing Executive Officer
President, Specialty Finance Business Development Unit
Deputy President, Specialty Finance Business Unit I
Deputy President, International Business Unit II
Mahoko Hara handled a variety of duties including structured finance and securitization at banks and asecurities company before joining Tokyo Century in 2011. Since that time, she has been on the frontlinesof the global market, leading projects such as the acquisition of a leasing company in the U.S. andalliance and acquisition of membership interest in a leading U.S.-based commercial aircraft lessor.

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Tokyo Century Corporation

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Diverse Workstyles and Human Resources Development
Tokyo Century Group believes that personnel are a company’s most valuable asset and a

Enhancing Support for Balancing Work and Private Lifedriving force for sustainable growth. In order to encourage each and every employee todemonstrate their abilities and individuality, we support self-directed career and ability

Basic Policy

development through various Group-wide initiatives. Tokyo Century will foster a corporate

We promote the creation of a workplace environment where employees
can balance their work and private life by actively supporting those whobear children and engage in childcare and nursing.

Childbirth and Childcare
PregnancyChildbirthculture in which diverse, globally aware professionals can flourish, and create a workplace

Child atone year oldChild attwo years
old

NursingPre-elementary
schoolUntil third gradeof elementary
schoolFamily care leave

Up to a total of one year
(number of applications is not limited)

Pre-childbirth leave
Six weeks prior tochildbirththat raises operational efficiency based on flexible workstyles.

Nursing Leave

Post-childbirth leave
Eight weeks afterchildbirth

Up to five days per year,
leave should be taken either per day orhalf a day

Childcare leave
Until the age of two years and six months

Shortened work hours

Special leave to visit a hospital,such as for physical examinations
Until one year after pregnancy and childbirth (days required)

Diverse Workstyles

Three years from the start date(up to two hours, but the number ofapplications is not limited)

Special leave for childbirth by a spouse
From one month prior to childbirth until two
weeks after childbirth (five days in total)

Promoting Diversity and the Workstyle Reform Action Plan
Tokyo Century Group upholds its Management Policy of cultivating a corporate culture that allows diverse human resources tofully demonstrate their skills and personalities. It also pursues initiatives based on its Basic Diversity Policy under theleadership of the Diversity Promotion Office. In March 2016, we formulated the Action Plan for the Promotion of Women’s Active
Participation and have set quantitative targets to be achieved by March 31, 2020. We provide programs to accommodate theindividual needs of employees and enable them to balance their work and private lives, such as the hourly paid leave program
introduced in April 2017, which allows employees to adjust their work hours in one-hour increments. We promote not only

Moving up the work start/end time

Nursing leave
Until the child starts elementary school(five days per year, leave should be taken either per day or half a day)Three years from the start date(up to one hour, but the number ofapplications is not limited)

Shortened work hours
Until the third year of elementary school (up to 75-minute reduction)

Moving down the work start/end timeThree years from the start date(up to one hour, but the number ofapplications is not limited)Moving up the work start/end time
Until the third year of elementary school (up to one hour)Moving down the work start/end time
Until the third year of elementary school (up to one hour)

Exemption from overtime work

Until care for the family member is nolonger required

Exemption from overtime work
Until the third year of elementary school

women’s careers but also strive to create a workplace that promotes hiring, cultivating and appointing diverse personnel,
regardless of race, religion, gender, age, sexual orientation, disability or nationality, so as to allow each individual to shine.
In March 2018, we formulated the Workstyle Reform Action Plan for creating a working environment that supports thediverse and flexible workstyle of each individual employee.

Action Plan for the Promotion of Women’s
Active Participation Quantitative Targets

Workstyle Reform Action Plan Results

Status asof April 201846%

3 	Increase the percentage ofchildcare leave taken bymen to 100%
Status as
of FY2017146%*

2 	Increase the percentage ofwomen in managerial
positions to at least 10%
Status asof March 31,
2018

6.7%

4 	Increase the percentage ofannual leave taken to atleast 70%
Status as
of FY2017

74.7%

1 Maintain the averagemonthly overtime workwithin 10 hours
Result for
FY2017

6.9 hours

3 	Increase the percentage ofchildcare leave taken by men
to 100% by March 31, 2020
Result for
FY2017146%*

2 Maintain the percentage ofannual leave taken at 70%
or moreResult for
FY201774.7%

4 	Reduce the number of employees
leaving work to care for family
members to zero by March 31, 2020
Result for
FY20172 persons*Percentage of male employees whose spouses gave birth between FY2015 and FY2017 and took childcare leave in FY2017

External Evaluation

Recognized as a 2018 “White 500” Organization
Tokyo Century was among the “White 500” organizations certified under the 2018 Certified Healthand Productivity Management Organization Recognition Program* of the Ministry of Economy,
Trade and Industry. Our ratio of employees receiving regular health checkups, one of theevaluation criteria, has been maintained at 100% since fiscal 2014, while
our ratio of employees taking paid leave was 74.7% in fiscal 2017.
* A program that recognizes corporations and organizations, including large enterprises aswell as small- and medium-sized ventures, that engage in outstanding healthmanagement practices based on initiatives addressing the needs of local communities andhealth enhancing activities led by the Nippon Kenko Kaigi.

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Initiatives for Developing Human ResourcesTokyo Century Group provides a variety of educational programs that meet the needs(to be achieved by March 31, 2020)
1 	Increase the percentage ofwomen in new hires to atleast 30%

Human Resources Developmentof employees in accordance with their years of employment and career plans. Eachyear we conduct a total of 15,000 hours of training.
For the first nine years, employees receive their basic education on the job while
also participating in training geared to each year of employment, aimed at
systematically acquiring the knowledge and skills required by their jobs. Training for
managers is designed to clarify the required roles, knowledge and skills as well as toenhance their management capabilities. We actively support employee personal
development initiatives by organizing seminars on career planning and sales skill
development, programs for subsidizing educational costs and incentive payments
and plans for developing globally minded personnel.

Received the Platinum Kurumin Certification from
the Ministry of Health, Labour and Welfare
The Kurumin system is sponsored by the Ministry of Health, Labour andWelfare under the Act on Advancement of Measures to Support Raising
Next-Generation Children. The ministry
recognizes companies that have achieved theobjectives of their General Employer Action
Plans, such as helping employees balance theirwork and private life. Tokyo Century was
granted the Platinum Kurumin certification as acompany pursuing a higher level of initiatives.

Selected as a FY2016 Nadeshiko Brand
The Nadeshiko Brand was inaugurated in fiscal 2012 as a joint
initiative by the Ministry of Economy, Trade and Industry and theTokyo Stock Exchange. The initiative annually recognizes
companies for excellence in empowering
women. Tokyo Century was selected for
promoting diversity as part of its
management policy and actively engaging
in and disclosing information on initiatives
for empowering women in the workplace.

Tokyo Century Corporation

Integrated Report 201855

Exceed. Corporate Governance Roundtable Discussion

Fulfilling our Role as a Global Company with Financial Capabilities
Aiming at Creating New Business Domains
Tokyo Century recognizes corporate governance as a key management concern and has appointed
prominent experts from various fields as external directors and external corporate auditors toprovide objective guidance and advice.
For this report, we asked three of our external directors to share their views on Tokyo Century’s
current governance and future management issues.

How do you evaluate the current state of corporate governance at Tokyo Century?
Shimizu:Frankly speaking, I think Tokyo Century’s

At Tokyo Century, governance is ensured by clarifying thecorporate governance is functioning effectively. Due in part

investment strategies and risks and considering the advice

to its history of having grown by pursuing financing as its

we offer as external directors before decisions are made.

primary business, its risk-related management andYoshida:systems are quite robust. If anything, I sometimes feel the

Higaki. Even from my standpoint as an external director,

company could be more flexible with respect to

I can feel the powerful determination and drive to create

governance, given the need to respond with agility to

new businesses.

changes in the international situation.
Higaki:In the year since my appointment as external

I was appointed at the same time as Mr.

At the same time, risks are being assessed based on
hard data instead of experience and intuition. Tokyo

director in June 2017, my former impression of Tokyo

Century’s management system is clearly anchored inCentury has completely changed. Under President Asada’s

quantitative data, enabling level-headed decision making

firm leadership, I feel that the company is shifting its

even as it pursues an aggressive management style.

emphasis from the leasing business to viable business.

(From left to right)

Yukito Higaki
Director (External Director)

As external directors, how do you ensure effective checks and balances overthe Board of Directors?
Shimizu:

Board of Directors meetings encourage free,

Amid this business transformation, I believe thevigorous and constructive discussion, so I make a conscious

experience and risk sensitivity I have gained at a

Yoshinori Shimizu

effort to offer critical opinions from the standpoint of an

manufacturing company will enable me to offer soundDirector (External Director)

outsider. Although the board addresses many large-scale

judgement from a perspective that is distinct frominvestment proposals, we can engage in meaningfulconventional financing.

discussion thanks to the explanatory information andYoshida:reference materials we receive beforehand.

express their views from an outside perspective in order to

Higaki:ensure diversity in the discussions. The Board of Directors

Masao Yoshida
Director (External Director)

In the past, Tokyo Century’s business was based

The job of external directors is to clearlyon leasing and financing, but now there is an intentional

meets in an atmosphere of free and active exchange, anddrive to focus on services and business operations toward

I strive to participate by actively offering my opinions.

creating entirely new business models.

56

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201857

External Directors’ Roundtable Discussion

Business expansion requires strengthening risk management andgovernance. What issues lie ahead?

What are your views on Tokyo Century’s ESG initiatives?
Shimizu:

Shimizu:

There are two sides to risk, positive andI think management is well aware of ESG.

Higaki:Tokyo Century established the Sustainability

Since there’s already an environment conducive to an

Achieving mutual growth with excellent partners is crucial

Committee in April to strengthen its ESG efforts. It’s

negative. Managing risk is equivalent to managing revenue,

active exchange of views, I believe the opportunity for open

to Tokyo Century’s business, and the ESG perspective isimportant to see solving social issues as a businessand being too stringent with risk management can lead to

discussion will further enhance and enliven deliberations

essential to sustainability. So, I feel it’s already being

opportunity, and I hope that active discussion by thelower revenue. Excessive fear of risk can mean missing outof the Board of Directors. It’s important to develop anurtured as part of the corporate culture.

Sustainability Committee will lead to the sustainable

on opportunities to raise revenue. Having few bad debts is ashared understanding of the company’s approach at an

growth of Tokyo Century. I would like to support thisgood aspect of Tokyo Century, but conversely, the company

early stage.

forward-looking initiative by offering my opinions as anshould conduct a review from the standpoint of whether it’s

Shimizu:

potentially missing any business opportunities.

about major changes around the world, innovations we

As for issues, I think the company needs to adopt a

Just as the spread of smartphones brought

external director.

aren’t able to imagine right now may emerge in the

global perspective. In the future, the Board of Directors

decade ahead. I would welcome an opportunity to discuss

should discuss its agenda from a global viewpoint andthe future direction of the company that incorporates our

through measures such as conducting meetings inoutlook on expected changes.

English and appointing non-Japanese directors.

Yoshida:Higaki:presented to the board, and not all of them succeed. It’s

face-to-face relationships with customers is important toto its existing strengths, such as the ability to gather

agenda of a board meeting, but when it comes to future

better to assume that we may be unable to operate theTokyo Century. I believe that business expansion was

information and extensive networks, would make Tokyo

vision and strategy, I think there should be opportunities

business as planned and consider proposals based on amade possible by these relationships of mutual

Century an exciting company indeed. I expect humanfor prior discussion, which we may need to address. That’s

pessimistic scenario, even if the probability is low.

understanding, including with people outside the company,

resource strategy will be the cornerstone of the next

as well as by longstanding transactions based on trust andmedium-term management plan.

strong partner relationships.

Higaki:Reports and resolutions comprise the main

because learning the details of a project at an early stage

Various proposals on viable business are

I try to keep detailed minutes of board discussions.

can lead to deeper discussion on the risks involved.

Maintaining a consistent documentation effort will lead to

Yoshida:advanced risk management and sustainable growth in the

I agree. While there’s no need to discuss every

minor project, I think we need an open discussion on

years ahead.

As external directors, how do you envision Tokyo Century’s future?
Shimizu:

President Asada often says that maintaining

I hope Tokyo Century will continue to aggressively open
up new domains based on the strength of a corporate

I believe the addition of varied global human resources

Many large-scale projects are under way. As an

external director, I would like to see them through like aparent following the growth of a child to succeed.

policies at an early stage with respect to major issues, such

culture that values communication networks. It can thenas prior to launching a new business.

develop the most advanced business models for

President Asada’s choice of exceptional personnel. I cantransforming the structure of the financial and services

only imagine the difficulties he must have faced inindustry in ten years.

appointing personnel immediately following the merger

Yoshida:between Tokyo Leasing and Century Leasing System. The

To continue operating a business, you need

The company’s growth to date should be credited tohuman resources with multifaceted capabilities andcompany’s market capitalization has grown elevenfold

experience. Management resources consist of the quantity

since the merger under a free and vigorous culture and an

and quality of human resources. Currently, the speed ofeffective system of governance.

business expansion at Tokyo Century seems to exceed thepace of human resource development.
Since growth is prominent in a global business, theIn the years ahead, I look forward to the company’s
development of human networks and global humanresources.

company must focus its efforts on cultivating global
human resources, not only through mid-career recruiting,58

Yoshinori Shimizu

Masao Yoshida

Yukito Higaki

Director (External Director)

Director (External Director)

Director (External Director)

Professor Emeritus at Hitotsubashi
University. Advisor to Century Tokyo
Leasing Corporation (currently Tokyo
Century Corporation) since 2010. External
Director since 2011. Draws on his
knowledge and insight as an expert ineconomics and finance to offer advice on
general management issues.

External Director since 2017. Applies his
many years of experience in corporate
management at Furukawa Electric Co., Ltd.
and deep insight to offer sound, objective
advice on general management issues.

External Director since 2017. Has been
involved with corporate management for
many years as President of Imabari
Shipbuilding Co., Ltd. and draws on a
wealth of experience and insight to offer
sound, objective advice on generalmanagement issues.

Tokyo Century Corporation

Integrated Report 2018

but also through job rotation to achieve further growth.

Tokyo Century Corporation

Integrated Report 201859

Corporate GovernanceCorporate GovernanceTokyo Century Corporation recognizes that effective corporate governance is an importantmanagement issue in maximizing corporate value. We also enhance the soundness andtransparency of corporate management.

Management Structure
Directors, deliberates on the nomination of candidates forshareholder concerns. It centers on the Board of Directors

director and corporate auditor positions, and reports to theand Board of Corporate Auditors, which consist of

Board of Directors.

directors and corporate auditors, respectively, who areelected by the General Meeting of Shareholders. Our

Compensation Committee

executive officer system accelerates management strategy

Tokyo Century’s Compensation Committee primarily consists

decisions and further strengthens supervision andof independent external directors and advises the Board of

execution. One of the 32 executive officers is female.

Directors. The committee discusses compensation systems
and policies, and it reports to the Board of Directors.
The Nomination and Compensation Committee met once

The Board of Directors consists of 13 directors, of which

in fiscal 2017. In fiscal 2018, its functions were divided as thefour are external directors as defined by Article 2-15 of thecommittee was separated into two groups in order to further

Corporation Law of Japan. The Board of Directors

enhance the effectiveness of the Board of Directors.

deliberates on and makes decisions about the policies,

companies as well as matters specified by prevailing laws,

System for Ensuring the Effectiveness of theBoard of Directors and Board of Corporate
Auditors

regulations, articles of incorporation, and rules governing

Tokyo Century has established the Board Effectiveness Review

the Board of Directors. It also supervises the execution ofCouncil, which primarily consists of independent external

operations by directors and executive officers. The Board

directors and corporate auditors to advise the Board ofof Directors met a total of 13 times in fiscal 2017.

Directors. The council conducts an analysis and review of thestrategies, business plans, and other importantmanagement issues of Tokyo Century and its GroupTokyo Century Corporation’s Articles of Incorporation
limit the number of directors to 18 or fewer.

that it was accurately judging changes in the businessappointing its external directors and auditors. Furthermore,environment, with each director actively participating in theTokyo Century appoints external directors and auditors who itdeliberations, and that internal and external directors were

believes, after considering their extensive background inwell integrated into the process of discussing issues from

corporate management, specialized knowledge, and common

diverse perspectives. Meanwhile, the council suggested thatsense, are able to objectively supervise management.

Board of Directors at least once a year, on aspects such as theexternal directors or auditors. The four external directors andBased on the review’s recommendation, Tokyo Century

two external corporate auditors also hold positions at othercriteria for the board’s agenda in fiscal 2017, with due

evaluations submitted by each director. The Board of Directors

Tokyo Century has adopted the organizational structure of aconsults with the council to analyze and evaluate its own

company with a board of corporate auditors. The Board ofeffectiveness and discloses a summary of the results.

Corporate Auditors consists of four corporate auditors, ofIn fiscal 2017, the Board of Directors was deemed to bewhich three are standing corporate auditors and two are

adequately and appropriately fulfilling its roles and duties,

external corporate auditors, as defined by Article 2-16 of thewhich are: (1) providing overall direction by setting corporate

Corporation Law of Japan. The Board of Corporate Auditors

strategies; (2) creating an environment conducive tomeets regularly and rigorously executes independent andappropriate risk taking by top management; and (3) exercisingfair audits of compliance and the appropriateness ofhighly effective oversight of top management and directors

corporate activities including the performance of duties by

from an independent and objective standpoint. The council

directors and executive officers. The Board of Corporate

recommended further diversifying the composition of theBoard of Directors in line with the expansion of our business

Nomination Committee

new external director with experience in corporate

Tokyo Century’s Nomination Committee primarily consists

management to improve the balance of the board’sof independent external directors and advises the Board ofknowledge, experience, and ability, thereby ensuring

Tokyo Century Corporation

Integrated Report 2018

Management Meeting

consideration to the current scope and risks of its business.
Independent external directors were found to be

The Management Meeting consists of the president andappropriately fulfilling their roles and duties of providing

officers appointed by the president. Chaired by the president,

management oversight by actively offering opinions based

it meets once a week in principle to deliberate on particularlyon their individual knowledge from an independent andimportant matters concerning the execution of operations

objective standpoint during meetings of the Board ofand makes decisions for the entire Group.

Directors, Nomination and Compensation Committee,

Project Evaluation Meeting

Board Effectiveness Review Council, and other bodies.
Tokyo Century will continue to improve the functions of

The Project Evaluation Meeting consists of the president

the Board of Directors by referring to the results of theand officers appointed by the president. Chaired by theeffectiveness review.

officer in charge of the Credit Supervision Division, it meetsonce a week in principle to discuss and make decisions

Independence of Management Oversight
Structure

about major business transactions being considered by

Tokyo Century uses the standards for independent directors

transactions that warrant complex risk analysis.

Tokyo Century and Group companies, as well as

System of Corporate Governance and Internal Control (as of June 25, 2018)
Shareholders’ Meeting
Election/Dismissal

Election/Dismissal
Coordination

Board of Corporate
Auditors

Audit

Board of Directors

Audit

ReportInternal Audit
Evaluation ofInternal Control

Audit

ReportNomination Committee
Compensation Committee

Coordination

Election/Dismissal/
Supervision

Business Risks Management Division

Coordination

Audit Division

Company Counsel

Election/Dismissal

Audit

Coordination

Independent Auditor

Board of Corporate Auditors

companies and organizations, as listed on pages 62 to 63.

sought to further enhance effectiveness by revising theeffectiveness of its supervisory functions, status of deliberations,domain and scope. Tokyo Century responded by appointing a

60

No conflicts of interest exist between the Company and its

oversight, including monitoring viable businesses and others.

structure, and operating method, taking into account the self-

Auditors met a total of nine times in fiscal 2017.

concerning Listed Company Compliance, etc., when

The operational review of the Board of Directors found

we continuously expand and enhance our framework ofTokyo Century’s management structure reflects

Board of Directors

and auditors under the Tokyo Stock Exchange Guidelines

appropriateness and adequacy in its diversity and scope.

Appointment

Chief Compliance Officer

President & CEO
Direction/
Supervision

Management Meeting
Project Evaluation
Meeting

Executive Officers
Operation Headquarters/
Business Headquarters

ReportCommittees
ALM Committee

Election/Dismissal/
SupervisionInternal Control Committee
Comprehensive Risk
Management Committee
and others

Group Companies

Tokyo Century Corporation

Integrated Report 201861

Corporate GovernanceIndependence of External Directors, External Corporate Auditors, and Reasons for Appointment(as of June 25, 2018)

External Directors
Independent
Officer

Yoshinori Shimizu
External Director,
Nisshinbo Holdings Inc.
Professor Emeritus,
Hitotsubashi University

Reasons for Appointment

Mr. Shimizu possesses highly
advanced knowledge as a monetary
economics research professional.
He applies this expertise in the
management of the Company froma macro standpoint and monitors
management from an independent
perspective. His appointment willcontribute to achieving sustainablegrowth and enhancing the corporate
value of Tokyo Century over the
medium to long term.
Mr. Yoshida brings a wealth ofexperience and broad knowledge on
management from his lengthy
involvement in corporate
management at a major electricmanufacturing company. He applies
this experience in the managementof the Company and monitors
management from an independent
perspective. His appointment willcontribute to achieving sustainablegrowth and enhancing the corporate
value of Tokyo Century over the
medium to long term.

Masao Yoshida
External Director,
Furukawa Co., Ltd.
External Director,
JFE Holdings, Inc.

Yukito Higaki
President,
Imabari Shipbuilding Co., Ltd.
President,
Shoei Kisen Kaisha, Ltd.

Mr. Higaki brings a wealth ofexperience and broad knowledge on
management from his lengthy
involvement in corporate
management at a major
shipbuilding company. He applies
this experience in the managementof the Company and monitors
management from an independent
perspective. His appointment willcontribute to achieving sustainablegrowth and enhancing the corporate
value of Tokyo Century over the
medium to long term.
Mr. Nakamura served as Tokyo
Century’s external director from
June 2015 to June 2017, bringing
ample experience and broad insight
to areas such as financial policy andtax affairs in order to offer advice onmanagement issues in general, andto monitor management from an
independent and objective
standpoint. His reappointment willcontribute to achieving sustainablegrowth and enhancing the corporate
value of Tokyo Century over the
medium to long term.

Akio Nakamura
Special Partner,
Tanabe & Partners* Status of activity since being appointed in June 2017.

External Corporate Auditors
SharesHeld(Thousands)

Years
ServedAttendance at Regular
Meetings of Board of
Directors

Independent
Officer

Reasons for Appointment—

Mr. Okada applies his
extensive experience inbusiness management offinancial institutions as wellas broad knowledge andexperience of business
operations and overseas
business. His appointment
will contribute to monitoring
management to ensure theappropriateness andadequacy of Tokyo Century's
corporate activities.

As a tax accountant, Mr.
Fujieda possesses expertiseand experience in the areas oftax and accounting. His
appointment will contribute tomonitoring management toensure the appropriatenessand adequacy of Tokyo
Century’s corporate activities
from an independent andobjective standpoint.

Futoshi Okada
27

13 of 13

Auditor, Nippon Car Solutions Co., Ltd.
Auditor, Nippon Rent-A-Car Service, Inc.
Auditor, TC Property Solutions Corporation
Auditor, TC Business Experts Corporation
Auditor, TRY Corporation
Auditor, Tokyo Century Leasing
China Corporation
Auditor, Tokyo Century Factoring
China Corporation

Masao Fujieda
0

1

11 of 11*

Representative,
Fujieda Masao Tax Accounting Office
Auditor, Nip Corporation

Years
ServedAttendance atRegular Meetingsof Board of
Directors

Attendance at
Meetings ofBoard ofCorporate
Auditors

1

6

13 of 13

9 of 9—New
appointment——

SharesHeld(Thousands)

Committees

—

0

1

New
appointment

11 of 11*—

Asset Liability Management (ALM) Committee

Credit Risk Management Committee

Tokyo Century created the ALM Committee to identify andTokyo Century created the Credit Risk Management

minimize the exposure of assets and liabilities to risks

Committee to manage credit risk. The committee isincluding fluctuations in interest and foreign currency

chaired by the officer in charge of the Credit Supervisionexchange rates. The committee is chaired by the president

Division and discusses matters including the Group’sand discusses matters relevant to managing market, liquidity,

credit portfolio as a whole and credit risk management

and other risks and reports to the Management Meeting.

and reports to the Management Meeting.

Comprehensive Risk Management Committee

IT and Administration Strategy Management Committee

Tokyo Century created the Comprehensive Risk

Tokyo Century created the IT and Administration Strategy

Management Committee to address exposure to a wide

Management Committee to address system risk andarray of risks. The committee is chaired by the officer inadministration risk. The committee is chaired by the

charge of the Business Risks Management Division andpresident and discusses matters including IT strategy, IT

discusses matters such as construction of the risk

investment plans, and administrative system plans andmanagement system and approaches to measuring risk. It

reports to the Management Meeting.

also periodically assesses Tokyo Century’s risk exposure

Sustainability Committee

and reports to the Management Meeting.

Tokyo Century created the Sustainability Committee inInternal Control Committee

April 2018 to plan, promote, and oversee the Group’s

Tokyo Century created the Internal Control Committee tosustainability activities. The committee is chaired by theensure the internal control system functions effectively.

officer in charge of the Corporate Planning Division,

The committee is chaired by the officer in charge of the

discusses important issues related to sustainability and

Audit Division and discusses general internal control

reports to the Management Meeting.

matters, including evaluation of the effectiveness of thefinancial reporting system and scope of evaluation andreports to the Management Meeting.
62

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201863

Corporate GovernanceRisk Management
Tokyo Century Group has proactively designed appropriate

Internal Control
Investment Risks

Basic Policy for the Internal Control System

Guided by our management philosophy, we haverisk countermeasures according to risk scale and

The Management Meeting and Board of Directors oversee

All officers, managers, and employees are expected toestablished an internal control system with the recognition

likelihood. Our systematic countermeasures to minimize

investment policies and status of investments to manage

adhere to the Management Philosophy as a basic policythat creating and using a system to ensure appropriate

the risk of losses are as follows.

risks associated with equity and other investments.

while performing their work.

business execution is an important management

The Board of Directors established the Basic Policy on

responsibility. We will upgrade the system to respond to

Risk Management to appropriately manage theAsset Risks

company’s risks.

Management Philosophy

Risks associated with assets such as real estate, ships,

To identify and evaluate the overall risks associatedTokyo Century Group will work alongside customers

aircraft, and automobiles are managed by the division

with Tokyo Century and effectively address them with ain pursuit of their growth as a highly specialized andresponsible for each risk. The Comprehensive Risk

qualitative and quantitative response, we created theunique financial services company and will contributeManagement Committee also manages the quantity andComprehensive Risk Management Committee andto the creation of an environmentally-sound,status of risks.

sustainable economy and society.

conduct overall risk management in accordance with its
rules. The system and methods for risk management are

Information Security Risk

discussed by the committee and defined in the

The Company manages information security risk based on

Comprehensive Risk Management Rules. The

the Basic Information Security Policy, rules for handlingComprehensive Risk Management Committee reports topersonal information, and a management system based

the Management Meeting and Board of Directors on theon ISO 27001 standards.

company’s overall quantity of risks and the status of risk
management, both periodically and as needed. It also

System and Administration Risk

verifies and evaluates the effectiveness of risk

The IT and Administration Strategy Management

management and implements continuous revisions.

Committee was established to discuss IT strategy, IT
investment, and administrative system to address system

Credit Risks

risk and administration risk based on the rules of the

The Credit Risk Management Committee sets basic

committee.

policies in accordance with its rules, measures credit risk,
and manages risk. The Project Evaluation Meeting uses a

Other Operational Risks

rule-based methodology to assess and decide on projects

The Business Risks Management Division addresses otherthat require complex analysis, such as major deals andoperational risks by identifying, quantifying, and reviewing

new schemes.

risk countermeasures, while the Comprehensive Risk

Market and Liquidity Risks

Management Committee comprehensively reviews theCompany’s overall risk controls.

The ALM Committee comprehensively manages andOur system for responding to large-scale natural

procures funds based on committee rules to address

disasters and other crisis situations is discussed at thefluctuations in interest and foreign currency exchange

Comprehensive Risk Management Committee andrates as well as other market risks and liquidity risk

stipulated in the Crisis Management Rules and Business

related to funding.

Continuation Plan Rules by the Management Meeting.

changes in our internal and external environment.

Compliance
Compliance System

At our consolidated subsidiaries, the president or an

Tokyo Century Group recognizes that thorough complianceequivalent officer acts as head of compliance, in order tois essential for the continued existence of a corporation.

take control of building, maintaining and managing the

Therefore, we aim to establish a management structurecompliance of each subsidiary by receiving instructions,that ensures that every officer and employee operates

guidance and advice from the CCO.

under the principle of fairness and with the highest ethicalstandards to earn the trust of society.
Specifically, the president of Tokyo Century is
responsible for ensuring compliance across the entire

As for non-consolidated Group affiliates, theCompliance Office provides timely guidance and advice onmatters such as managing the compliance system.
Every six months, a report on the Group’s complianceGroup as the chief compliance executive officer. The

structure and operation is submitted for review by theCompliance Office plays a role in exercising, promoting,Management Meeting and Board of Directors. The results

educating, and reviewing compliance matters across theof the review are reflected in compliance promoting

entire Group in accordance with compliance programs

measures that are duly implemented.

under the supervision of the chief compliance officer(CCO), who is appointed by the president.

To ensure rigorous compliance, each year we require
all officers and employees to submit a compliance pledge.

The head of each division and branch is responsible for

As of March 31, 2018, there have been no major

promoting compliance at their respective organizations ascompliance violations requiring public disclosure.

the compliance officer (CO), handling compliance issues
and conducting training in collaboration with theCompliance Office.

64

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201865

Corporate GovernanceCompliance Handbooks

Internal Reporting System

Compliance Education

Tokyo Century Group distributes our Compliance Handbook

Tokyo Century Group instills a compliance mindset

Tokyo Century Group seeks to detect and resolve risks at

to all officers and employees while providing it on our

through systematic, ongoing education. Initiatives include

an early stage, enhance its self-correcting mechanism,case. We prohibit unfair treatment of individuals who

corporate portal at all times. The Compliance Handbook

rank-based training for new employees and new

and bolster compliance management by operating thecooperate with the investigation as well as the reporter.

includes information on internal regulations such as ourmanagers, training via e-learning for all officers and“Consultation/Whistle-Blowing System,” an internal

Findings of the investigation are reported to the CCO,

management philosophy, corporate code of conduct, andemployees, and training at the divisional and branch level

reporting system that allows officers and employees toand in the event that a compliance violation is revealed, we

compliance management regulations, as well as informationby compliance officers using compliance information as

bypass their immediate superiors and directly report

seek to correct and limit any damages while implementing

on respecting human rights and prohibiting harassment. We

instructional material.

compliance violations.

measures against a recurrence.

also created English(1) Outline of the Internal Reporting System

and Chinese editions of

We provide three separate reporting channels forthe handbook in an

reporting: the Compliance Office inside the Company; theeffort to improve theoffice of the corporate lawyer specializing in the issue;compliance mindset atand standing corporate auditors, who ensure an

our overseas subsidiaries.

independent response.
Contact information can be found on the corporate
intranet and in the Compliance Handbook distributed to all
officers and employees. Reports can be submitted via anymeans, including email, telephone, verbal communication,

Compliance Training during Fiscal 2017
Targets

All officers and employees(e-learning)

New managers(rank-based training)

All officers and employees(e-learning)

Compliance officers(newsletter)

Tokyo Century Corporation

and written.
Subjects

New employees(rank-based training)

66

Investigations require the protection of theconfidentiality of the reporter and persons involved in the

Meaning and significance of compliance
The proper mindset in regard to laws and internal rules
Compliance determination
Compliance-conscious actions
Tokyo Century Group’s internal reporting system
Information security rules, countermeasures and others
Threat posed by information leakage and countermeasures
Cyberattacks and other issues
Revised Personal Information Protection Law
Tax compliance
Working hour management
Sexual harassment
Management and compliancePsychology and causes of legal violations in the context of risk
management
Proper labor management
Prevention of power harassment
Potential compliance risks in the workplace
Honing compliance sensitivity, and other issues
Insider trading regulations
Severing ties with antisocial organizations
Role of compliance officers and the internal reporting system
Prohibition against bribery of foreign government officials
Prohibition of harassment, and other issues
Internal reporting system and management of information assets
Corporate bankruptcies due to compliance violations
Sexual harassment, power harassment, and workplace penalty
systemPersonal Information Protection Law – Basics/Applied courses
Insider trading regulations

Integrated Report 2018

Implemented

We accept reports on a broad range of subjects
encompassing violations of the Anti-Monopoly Act andbribery violations of the Financial Instruments andExchange Act that undermine the profit of investors andApril 2017

others, human rights violations and any legal or regulatory
breach governing business operations, as well as
misconduct with respect to corporate ethics and internal
rules. Officers and employees can also seek consultation
on any doubts they may have regarding compliance in their

June 2017

daily operations.
Anyone employed by Tokyo Century Group is eligible toreport through this system, including directors, officers,
permanent employees, contractors, temporary staff,
seconded employees, part-time staff, and retired

June 2017

employees. Anonymous reporting is also allowed. We
strictly prohibit disciplinary action, retaliation, and otherdisadvantageous treatment of reporters, and rigorously
ensure the anonymity of reporters while maintaining
confidentiality concerning the reports.

February 2018

We also report serious breaches of compliance to thepresident, who acts as Tokyo Century Group’s chiefcompliance executive officer, and corporate auditors.

Anti-Corruption Initiatives
Tokyo Century Group engages in fair, equitable, andtransparent transactions across all its business activities
and strives to prevent corruption.
We prohibit bribery by means of offering entertainment,
cash, or any other benefits to domestic or overseas public
officials for the purpose of eliciting favors, offering
rewards for favors received, or obtaining unfair businessadvantages, either directly or indirectly through agents,
consultants, or any other third party.
Japanese, English, and Chinese language versions of
our “Guidelines on Offering Entertainment to Public
Officials” have been published to ensure awareness among
national staff at Tokyo Century’s overseas subsidiaries.
We also seek to ensure public safety and promotesound economic activity by setting and practicing rules for
identification before concluding agreements with business
partners to prevent money laundering and financing ofterrorism, which foster organized crime, and to sever ties
with antisocial organizations.
Rigorous adherence to anti-corruption initiatives
among officers and employees of Tokyo Century Group is
ensured by incorporating them into our ComplianceHandbook and by featuring the issue in e-learning andother internal training.
The status of our initiatives is reported to theManagement Meeting and Board of Directors for review as(2) Investigation of Reported Casespart of Tokyo Century Group’s system and ongoing

Any reported case is promptly investigated after consulting

operations for compliance.

the chief compliance officer (CCO) on the necessary
response.
Six times per year
Optional training
provided fordivisions andbranches

Tokyo Century Corporation

Integrated Report 201867

Management Organization(As of July 1, 2018)

13

5

11

3

9

1

7

8

2

10

4

12

6

1 Chairman & Co-CEO,

2 President & CEO,3 Director

4 Director

5 Director

6 Director

Toshihito Tamba

Shunichi Asada

Yoshinori Shimizu

Masao Yoshida

Yukito Higaki

Akio Nakamura

Representative Director

Representative Director(External Director) *1, *2(External Director) *1, *2(External Director) *1, *2

7 Deputy President,

8 Director and Senior Managing

9 Director and Senior Managing

10 Director and Managing

11 Director and Managing

12 Director and Managing

13 Director and

Makoto Nogami

Masataka Yukiya

Koichi Baba

Osamu Tamano

Seiichi Mizuno

Akihiro Naruse

Ko Nakagawa

Director and Executive Officer

Executive Officer

Executive Officer

Executive Officer

Executive Officer

Executive Officer(External Director) *1, *2

Executive Officer*1. External director as stipulated by Article
2-15 of the Corporation Law of Japan*2. Designated independent officer as
stipulated by the Tokyo Stock Exchange

68Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201869

Environment
Recognizing that addressing environmental issues is a key social responsibility, Tokyo
Century Group seeks to contribute to the creation of an environmentally-sound, sustainable

Environmental Accounting

economy and society. In all areas of its business, the Group acts with due consideration for

Basic Policy

environmental concerns, from preventing environmental pollution, reducing greenhouse gas

Tokyo Century Corporation uses environmental accounting to accurately assess the impact of environmental protection costs

emissions, and mitigating and adapting to the effects of climate change to preserving

on its business activities and increase the efficiency and effectiveness of its environmental management. The following

biodiversity and ecosystems. Our environmental management system encompasses all

statistics apply only to Tokyo Century Corporation.

Group companies, with the president and CEO serving as chief executive and the presidentof the Risk Management Unit serving as environmental manager. The system involves theEnvironmental Accounting (April 1, 2017 to March 31, 2018)

planning, implementation, operation, and inspection of environmental initiatives inaccordance with the PDCA cycle. The system also involves periodic management reviews on
the state of initiatives to promote continuous improvement in this area.

Category

Type of Initiative

Environmental Protection Costs(Millions of yen)

(1) Costs within our business areas
Pollution control costs andenergy savings costs

Environmental Performance Report(2) Upstream/downstream costs

Environmental Protection Effects(Reduced Annual CO2 Emissions)(t-CO2)40

4

Switching sales fleet to low-emission cars
Upgrading network equipment

(1)
(39)

(1)
(3)

Waste treatment

13

—

5

—

58

4

ISO 14001 certification maintenance/management

In accordance with its Basic Environmental Policy, Tokyo Century Group has adopted an ISO 14001-compliant environmental(3) Management costs

management system for reducing its impact on the environment. The system is implemented while calculating andManagement office operation and environmental
CSR operations
Total [(1) + (2) + (3)]continually monitoring our annual CO2 emissions. The following statistics represent the data points managed through Tokyo
Century Group’s environmental management system.

Environmental Management System

Environmental Performance Report (April 1, 2017 to March 31, 2018)
Environmental Objective

FY2015FY2016FY2017

ResultResultResult1,870,991

1,893,603

1,830,539–63,064

1,950,000

Item (Unit)

Electricity used (kWh)ChangeFY2018TargetReduce use ofelectricity

CO2 emitted (t-CO2)

1,029

1,096

1,075

–21

1,145

Reduce use of paper*1

Office-use paper (thousands of sheets)

15,517

16,525

16,144–381

17,000106,777

Improve fuelefficiency

Reduce CO2 emissions
through solar power
generation business ofKyocera TCL Solar LLC
Promote refurbishingbusiness

96,30980,406(rental cars:
24,477)(rental cars:
24,471)(rental cars:
23,095)–15,903

100,000

Fuel efficiency (km/L)

13.5

13.5

13.8

+0.3

13.5

CO2 emitted (t-CO2)

247

225

191

–34

232

Annual electricity generated (MWh)67,011

111,487

149,681+38,194

Annual reduction in CO2 (t)(comparison with conventional
thermal power generation)

21,07535,06347,075+12,012Annual pre-owned PCs sold (units)

233,162

272,925

291,003+18,078

Fuel consumed (L)Tokyo Century Group recognizes that taking action to address environmental issues is a social obligation. We seek continuous
improvement by operating our system based on ISO 14001, the international standard for environmental management
systems, and by periodically conducting management reviews.

Environmental Initiatives
Participating as a Guest Speaker at the Open Seminar on Joint
Crediting Mechanism (JCM) Hosted by the Ministry of the Environment
Tokyo Century presented a lecture at the open seminar on the JCM*, jointly organizedby the Ministry of the Environment and the Institute for Global Environmental Strategies(IGES). We are the first Japanese financial services company to be selected as a

*1. Number of sheets purchased is converted into A4 equivalent sheets multiplied by 2 for A3, 0.75 for B5, and 1.5 for B4.

representative participant of the JCM. Tokyo Century Group is committed toaccelerating its initiatives of high social significance, including greenhouse gas (GHG)
reduction and energy self-sufficiency improvements by leveraging the JCM and others.

Medium- and Long-Term initiatives
Environmental Objective

Item (Unit)

Electricity used (kWh)Medium-Term
Objective(March 31, 2020)

Long-Term Objective

1,950,000

By FY2030, reduce annual electricity use per unit of head
office floor space by 20% (73.18 kWh/m2 or below)*2 comparedto FY2009 (=91.48 kWh/m2)

1,145

By FY2030, reduce annual CO2 emissions (t-CO2) fromelectricity use per unit of head office floor space by 20%(0.043/t-CO2m2 or below) compared to FY2009 (=0.054/t-CO2m2)

Reduce use ofelectricity
Annual CO2 emissions (t-CO2)*Joint Crediting Mechanism:
A bilateral mechanism to realize CO2/GHG emission reductions in developing countries by promoting leading low
carbon technologies and incorporating part of reduced CO2 emissions as emission reductions achieved by Japan.

*2. Tokyo Century Corporation participates in the Japan Leasing Association’s plan for achieving a low carbon society in the leasing industry and has set long-term
objectives accordingly.

70

Tokyo Century Corporation

Integrated Report 2018

“Learning Together” Seminar on Preventing Global Warming
Our consolidated subsidiary Kyocera TCL Solar LLC co-sponsored a “Learning
Together” Seminar on Preventing Global Warming in Otsu City, Shiga Prefecture.
Kyocera TCL Solar LLC operates one of Japan’s largest solar power generation projects
in terms of business scale and has contributed to reducing CO2 equivalent to about
47,075 tons in fiscal 2017.

Tokyo Century Corporation

Integrated Report 201871

Societysustainable economy and society while drawing on expertise cultivated in its leasing business

Joined Volunteer Activities Along With Member Companies of the
U.S. Equipment Leasing and Finance Association

by rigorously applying re-sale and recycling to the entire lifecycle of an asset, from installation

Tokyo Century (USA) Inc., Tokyo Century Corporation’s subsidiary in the U.S., has

to disposal.

been teaming up with member companies of the U.S. Equipment Leasing andAs part of our social contribution activities, we donate money to nonprofit organizations andFinance Association in community service projects. Employees helped pack meals

other groups that serve the public interest. We actively engage with local communities indelivered to areas in need of food under the “Feeding Children Everywhere” projectJapan as well as overseas by participating in volunteer activities, offering food aid and others.

and participated in activities at a nonprofit facility for children with life-threatening

Tokyo Century Group pursues initiatives to address the needs of an environmentally-sound,

Basic Policy

illnesses as part of the “Give Kids the World Village” project.

Participation in the UN Global Compact
Tokyo Century Corporation signed the United Nations Global Compact (UNGC) in April
2018. We support the 10 principles in four areas of the UNGC related to human rights,

Volunteer Work at a Meal Centerlabour, environment and anti-corruption and will consistently strive to contribute to theTokyo Century Leasing (Singapore) Pte. Ltd., Tokyo Century’s local subsidiary increation of an environmentally-sound, sustainable economy and society.

Singapore, volunteered at a Willing Hearts meal center, a charity organization locatedin suburban Singapore.
Willing Hearts is wholly managed by volunteers and a few dedicated staff and its
mission is to cook and distribute meals to over 5,000 low income family
beneficiaries daily.

Social Contribution Activities
Supporting Families with Hospitalized Children
CSI Leasing, Inc. (CSI) has been supporting Ronald McDonald House Charities

Financial Literacy Lectures for High School Students in Indonesia(RMHC)* for 21 years. CSI employees primarily prepare and serve meals to families

PT. Century Tokyo Leasing Indonesia (CTI), Tokyo Century’s local subsidiary instaying at RMHC facilities four times a year. CSI has received the Heart and Sole

Indonesia, organized the Month of Financial Literacy and Inclusion* incorporating aAward from RMHC in recognition of its many years of service and financial support.

CSR program and delivered a lecture at a senior high school in Bekashi City.

* RMHC provides vital resources and compassionate care to children and their families being served by leading
hospitals worldwide. They provide a home away from home for families so they can stay close to their
hospitalized child at little or no cost.

Through this initiative, CTI introduced nonbank financial products and business toparticipants.
* Ensuring that everyone is able to access and use financial services to seize opportunities for economic activity
and mitigate financial instability.

External Recognition

FTSE4Good Index

FTSE Blossom Japan Index*

MSCI Japan ESG Select Leaders Index*

2018 Competitive IT Strategy Company

JPX-Nikkei Index 400

Tokyo Century has been selected as aconstituent of the FTSE4Good Index, amajor global index for socially responsible
investment.

The FTSE Blossom Japan Index isdesigned as a tool to measure theperformance of Japanese companies that
demonstrate strong environmental, socialand governance (ESG) practices. Tokyo
Century has been a constituent of theindex since 2017.

The MSCI Japan ESG Select Leaders Index
is based on the MSCI Japan IMI Top 500
Index and is composed of companies thathave demonstrated outstanding ESG
performance. Tokyo Century has been a
constituent of the index since 2017.

Competitive IT Strategy Companies arerecognized for their strategic utilization of
IT to achieve business innovation andstrengthen competitiveness. Companies
from the roughly 3,500 listed in Japan are
selected for each industry sector. Tokyo
Century has been
selected for four
consecutive years,
since fiscal 2015.

This stock index is composed ofcompanies that are highly appealing forinvestors and meet the requirements ofglobal investment standards, including
ROE, an indicator of capital efficiency.
Tokyo Century has been selected to theindex since its
launch in 2014.

THE INCLUSION OF Tokyo Century Corporation. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS,
TRADEMARKS, SERVICE MARKS OR INDEX NAMES HERIN, DO NOT CONSTITUTE A SPONSORSHIP,
ENDORSEMENT OR PROMOTION OF Tokyo Century Corporation. BY MSCI OR ANY OF ITS
AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCIINDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

72

Tokyo Century Corporation

Integrated Report 2018

*The Government Pension Investment Fund (GPIF)
of Japan has selected the index as a benchmark
for passive ESG investments.

*The Government Pension Investment Fund (GPIF)
of Japan has selected the index as a benchmark
for passive ESG investments.

Tokyo Century Corporation

Integrated Report 201873

Performance Highlights
Financial Information

Non-Financial Information
Net Income Attributable to
Owners of Parent

Ordinary Income

Total Assets¥79.0 billion¥51.3 billion¥3,759.5 billion

6.7%(+¥5.5 billion YoY)(+¥7.7 billion YoY)(+¥179.6 billion YoY)(+1.2 points YoY)

(Billions of yen)(Billions of yen)(Billions of yen)

90

60

73.5

75
60

79.0

55.2

60.7

43.7

40.0
40

45

3,000

20

15

10

(%)

40

10.0

30

27

18

20

10

0 14/3

6.7

15/3 16/3 17/3 18/3

8(146%)*2(+1.1 points YoY)

(Persons)

(%)

50

100

40

80

19

5.0

2.5

15/3 16/3 17/3 18/3

60

52.6

73.6

74.7

17/3

18/3

55.3

10
20

2.4

74.7%

19/13

30

5.5

1.8

0 14/3

7.5

Number of Female Managers (Left Scale)
Percentage of Female Managers (Right Scale)

0
10

13

0 15/3

16/3

10

0

40

18

9
17/3

20

0 15/318/3

16/3

Number of Male Employees
Number of Female Employees*2. Percentage of male employees whose spouses
gave birth in fiscal 2015, 2016 or 2017, and who
took childcare leave in fiscal 2017.

Reduction in CO2Emissions due to Reduction
in Electricity Consumption

Reduction of CO2
by Solar Power Generation*3of Kyocera TCL Solar LLC

Operating Assets and ROA*1

Net Income per Share and ROE

Interest-Bearing Debt

Pre-Owned
Personal Computers Sold

¥3,230.6 billion/2.5%¥486.09/13.7%¥2,810.7 billion

291,003 units

1,075 metric tons

47,075 metric tons(+¥14.6 billion YoY)  (+0.1 points YoY)(+¥72.58 YoY) (+¥77.6 billion YoY)(+18,078 units YoY)(-21 tons YoY)(+12,012 tons YoY)

(Billions of yen)

(Yen)

(Tons)(MWh)(Tons)

180,000

80,000

(%)
3.5

4,000

3,230.6

3,000

2,865.6

2,991.1

3,216.0

2.3

(%)
30

486.09500
379.34

400

2.2

2.3

2.4

(+0.8 points YoY)

600

3.0

2,597.52,000

2.5 2.520

2,810.7

3,000
2,500

2,419.9

2,551.5

2,733.0

2,211.7(Units)291,003

300,000

272,925
250,016

250,000

2,000

200,000

1,500

150,000

216,351

300
13.9

1.5

Operating Assets (Left Scale)
ROA (Right Scale)*1. Ratio of ordinary income to operating assets

Tokyo Century Corporation

Integrated Report 2018

1,087

1,029

1,096 1,075

233,162

149,681150,000

900

60,000111,487

120,000

12.5

13.1

12.9

13.7

600

90,00047,07510

1,000

60,000100,000300

0 14/3500

15/3 16/3 17/3 18/3

Net Income per Share (Left Scale)ROE (Right Scale)

35,06367,011

2.0

15/3 16/3 17/3 18/3

1,200 1,137

311.64 322.84

100
0 14/3(Billions of yen)413.51

200

1,000

74

(100%)

Ratio of Eligible Employees Who
Have Taken Paid Annual Leave

27

3.7

11

15/3 16/3 17/3 18/3

Number of male
employees:

32

2,884.8

2,000

0 14/3

15/3 16/3 17/3 18/3

(Persons)

3,317.9

1,000

0 14/3

Number of female
employees:

9/9

34.1

33.1

30

30

3,579.9
3,151.950

68.0

3,759.5

4,000

51.3

Eligible Employees
Who Have Taken Childcare Leave(Non-Consolidated, by Gender)

Ratio of Female Managers(Non-Consolidated)

0

0 14/330,00050,00015/3 16/3 17/3 18/3

0 14/3

15/3 16/3 17/3 18/3

0 14/3

15/3 16/3 17/3 18/3

21,07540,00020,00028,0988,837

0 15/3

16/3

17/3

18/3

0

Electricity Generated Annually through Solar
Power Generation (Left Scale)
CO2 Reduction (Right Scale)*3. Compared with conventional thermal
power generation

Tokyo Century Corporation

Integrated Report 201875

Financial Summary
2010/03

2011/032012/032013/03

2014/03

2015/03

2016/032017/032018/03

758.7
693.6
65.1
85.1
34.8
29.2
5.7
30.3
33.4
(0.2)
25.5

713.2
641.6
71.6
86.1
30.6
29.4
1.1
41.0
44.2
(3.5)
23.6

716.3
643.7
72.7
84.2
30.8
30.8
0.0
41.9
46.3
(2.2)
26.2

691.1
620.2
70.9
80.7
28.9
29.8
(0.9)
42.0
46.3
(0.1)
28.9

828.6
731.2
97.3
106.5
45.9
46.0
(0.1)
51.4
55.2
(0.1)
33.1

883.0
759.3
123.7
134.1
65.2
66.3
(1.1)
58.4
60.7
(1.0)
34.1

940.5
803.6
136.8
150.2
70.9
69.7
1.2
65.9
68.0
0.5
40.0

976.1
823.3
152.8
170.3
80.8
79.6
1.2
72.0
73.5
0.2
43.7

1,012.2
849.0
163.2
184.8
89.5
89.8
(0.3)
73.7
79.0
0.4
51.3

2,132.9
1,938.0
1,410.1
200.5
327.3
—
1,950.2
1,502.8
275.3
86.3
85.8
1,749.8
158.1

2,184.6
2,023.7
1,383.7
191.8
448.2
—
2,038.1
1,515.9
332.8
97.7
91.7
1,741.9178.8

2,260.4
2,094.4
1,375.8
188.0
530.7
—
2,110.9
1,492.2
397.7
115.5
105.5
1,783.2
201.3

2,465.8
2,231.4
1,473.9
201.6
555.9
—
2,253.3
1,496.3
491.8
130.5
134.6
1,939.2233.7

2,884.8
2,597.5
1,783.9
213.7
593.1
6.8
2,605.0
1,532.9
542.1
358.1
172.0
2,211.7285.5

3,151.9
2,865.6
1,915.0
239.4
699.2
12.0
2,895.6
1,535.4
711.9
380.5
267.9
2,419.9336.5

3,317.9
2,991.1
2,026.9
214.4
724.4
25.4
3,020.8
1,492.0
845.9
410.5
272.4
2,551.5
374.9

3,579.9
3,216.0
2,237.7
201.5
750.0
26.8
3,240.9
1,450.6
897.0
459.2
434.1
2,733.0404.8

3,759.5
3,230.6
2,182.4
194.3
785.1
68.9
3,330.2
1,403.0
975.6
515.8
435.7
2,810.7
456.0

194.3
(8.9)
(306.1)
50.9

48.6
23.2
(89.8)
32.8(26.4)
(0.5)
38.3
44.5

(89.7)
(5.6)
135.9
83.1

(28.3)
10.0
54.5
115.8

(171.0)(18.7)
156.9
71.9(136.6)
(3.1)
155.8
91.8

(0.7)
(30.1)
27.5
85.7

26.4
(107.9)81.6
86.4

239.571,410.61
32.00

221.801,594.57
40.00

245.82
1,796.62
44.00

272.32
2,092.46
48.00

311.64
2,386.02
52.00

322.84
2,776.37
65.00

379.34
3,033.61
80.00

413.51
3,360.27
100.00486.093,750.35
114.00

18.5
1.5
7.1
44.8

14.8
2.0
7.8
41.1

14.5
2.1
8.4
42.3

14.0
2.0
9.0
42.1

13.9
2.1
8.8
47.2

12.5
2.0
9.3
53.6

13.1
2.1
9.6
50.9

12.9
2.1
9.9
52.1

13.7
2.2
10.5
55.0

1,732

1,715

1,722

1,676

3,309

4,113

4,124

5,430

6,035

Operating Results (Billions of yen)
Revenues
Costs
Gross profit
Sales revenues (gross profit before deducting funding cost)
SG&A expenses
Personnel and non-personnel expenses
Credit costs
Operating income
Ordinary income
Extraordinary income and losses
Net income attributable to owners of parent

Financial Condition (Billions of yen)
Total assets
Operating assets
Leasing
Installment sales
Finance
Other
Segment assets*2
Equipment Leasing
Specialty Financing
Domestic Automobile Financing
International Business
Interest-bearing debt
Net assets

Cash Flows (Billions of yen)
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at end of year

Per Share Data (Yen)
Net income
Net assets
Dividends

Significant Indicators (%)
Return on equity (ROE)*3
Return on assets (ROA)*4
Shareholders' equity ratio
Overhead ratio (OHR)*5

Other Data (Persons)
Employees (Consolidated)

Notes: *1. Data are rounded down to the nearest unit.
*2. Balance of segment assets = Operating assets stated in the Consolidated Financial Results (Kessan Tanshin) + Investment amount in equity-method affiliates.
*3. ROE = Net income attributable to owners of parent / Equity (simple average of beginning and end of term balance sheet figures) × 100*4. ROA = Ordinary income / Total assets (simple average of beginning and end of term balance sheet figures) × 100*5. OHR = (Personnel expenses + Non-personnel expenses) / Gross profit × 100

76

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201877

Financial Section
Consolidated Balance Sheet
Tokyo Century Corporation and Consolidated Subsidiaries
As of March 31, 2018 and 2017

Thousands of
U.S. dollars(Note 1)Millions of yen

2018

Millions of yen

2018

2017

AssetsThousands of
U.S. dollars(Note 1)

2018

2017

2018

Short-term borrowings (Notes 8, 9 and 19)
Current portion of long-term debt (Notes 8, 9 and 19)¥1,338,750¥1,276,141$12,597,629

404,824

420,416

3,809,399

Notes and accounts payable — trade (Notes 5 and 19)
Lease obligations (Notes 17 and 19)

247,209

215,570

2,326,242

4,494

6,994

42,297

Accrued income taxes (Note 14)
Deferred tax liabilities (Note 14)

11,964

10,730112,583

1,236

2,138

11,631

Deferred profit on installment sales (Note 19)

16,232

14,975

152,743

Other current liabilities

84,51367,273795,268

Total current liabilities

2,109,225

2,014,241

19,847,796

Liabilities and net assets

Current assets:

Current liabilities:

Cash on hand and in banks (Notes 8,13 and 19)
Accounts receivable:
Installment sales (Notes 8,9 and 19)
Lease receivables and investment assets (Notes 8, 9, 17 and 19)
Loans (Notes 8, 9 and 19)
Leases¥82,212¥

83,565$

773,620

210,523

216,466

1,981,027

1,544,595

1,600,637

14,534,633

548,522539,058

5,161,590

30,577

27,525

287,732

Operational investment securities (Notes 6, 8 and 19)

235,531

209,7122,216,354

Short-term investment securities (Notes 6, 13 and 19)
Inventories (Note 8)

5,550

4,052

52,225

1,177

1,796

11,081

Deferred tax assets (Note 14)
Other current assets (Notes 5 and 8)
Allowance for doubtful accounts (Note 19)
Total current assets

Investments and other assets:
Investments in securities (Notes 6, 8 and 19)

9,590

7,074

90,25077,471(3,475)81,016(4,104)

729,007(32,703)

Long-term liabilities:
Long-term debt (Notes 8, 9 and 19)

1,067,105

1,036,485

10,041,458

2,742,278

2,766,802

25,804,820

Lease obligations (Notes 17 and 19)

8,441

9,634

79,438

248

236

2,336

165,272

69,592

1,555,213

Long-term loans and other assets

40,311

34,318379,329

Claims provable in bankruptcy or rehabilitation (Note 19)
Deferred tax assets (Note 14)

1,379

1,625

12,979Allowance for doubtful accounts (Note 19)
Total investments and other assets

4,634(1,143)

6,124(1,072)43,609(10,762)

210,453

110,588

1,980,370

Provision for directors’ retirement benefits
Net defined benefit liability (Note 16)

9,501

9,540

89,407

Deferred tax liabilities (Note 14)

16,54318,065

155,676

Provision for automobile inspection costs

1,036

957

9,753

Other long-term liabilities

91,33085,902859,416

Total long-term liabilities

1,194,207

1,160,822

11,237,487

Total liabilities

3,303,433

3,175,063

31,085,283

Common stock without par value:
Authorized: 400,000,000 shares
Issued: 106,624,620 shares in 2018 and 201734,231

34,231

322,113

Capital surplus

9,060

7,821

85,262Retained earnings

339,910299,671

3,198,559

Contingent liabilities (Note 18)
Net assets (Note 26):

Property and equipment, at cost less accumulated depreciation:
Leased assets (Notes 7 and 8)

Shareholders’ equity (Notes 20,21 and 22)
637,456

636,820

5,998,464

Advances for purchases of property for lease (Note 8)
Other operating assets (Note 7)

13,055

4,561

122,848

68,86826,823648,052

Construction in progress
Own assets in use (Notes 7 and 8)

42,517—400,093

Total property and equipment, net

17,74013,419166,938

779,638

681,624

7,336,397

Treasury stock:1,036,352 shares in 2018 and 1,067,233 shares in 2017
Total shareholders’ equity(2,682)(2,757)(25,238)

380,520

338,966

3,580,697

17,745(942)

15,830473

166,981(8,865)

(579)

564

(5,451)

Accumulated other comprehensive income
Intangible assets:
354

258

3,333

Goodwill

16,885

13,612

158,896

Other intangible assets

9,485

6,806

89,256

26,725

20,676

251,486

Computer programs leased to customers

Total intangible assets

Deferred assets
Total assets
The accompanying notes are an integral part of these statements.

78

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Integrated Report 2018

373

189

3,511

¥3,759,469¥3,579,882$35,376,586

Net unrealized holding gains on securities
Deferred gains (losses) on hedges
Translation adjustments(751)(1,133)(7,073)

Total accumulated other comprehensive income
Share subscription rights (Note 22)

15,472

15,734

145,591

1,196

943

11,259Non-controlling interests

58,84749,174

553,753

Remeasurements of defined benefit plans (Note 16)

Total net assets
Total liabilities and net assets

456,036

404,818

4,291,302¥3,759,469¥3,579,882$35,376,586

The accompanying notes are an integral part of these statements.

Tokyo Century Corporation

Integrated Report 201879

Financial Section

Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

Revenues

2018

2017

2018

¥1,012,200¥976,107$9,524,797

Costs (Note 11)849,005

823,295

7,989,131

Gross profit

163,195

152,811

1,535,666

Millions of yen

Net income
Other comprehensive income (Note 12):
Net unrealized holding gain on securities
Deferred gain (loss) on hedges

Selling, general and administrative expenses (Note 10)
Operating income

89,45080,811

841,72973,744

71,999693,936

Other income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange gain (loss)

1,164
(298)

791
(233)

10,961(2,810)

3,771

1,172
(1,354)35,494

87(22)

Gain (loss) on derivatives other than for trading or hedging

687

820
(207)

285
(135)

281
(139)

333
(138)

100
—

3,135
(1,303)

Loss on disposal of non-current assets

543
(110)

639
(100)

5,112
(1,035)Extra early retirement payments(216)

Rental income
Cost of rental income
Gain on step acquisitions
Loss on step acquisitions
Gain on sales of investments in securities

2,690

Translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliates accounted
for using equity method
Total other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive income (loss) attributable to:

2018

2017

2018

¥57,083¥50,819$537,158

348

18,407(11,909)

1,956(1,265)
(609)

1,355
(2,079)

442

238

4,159

(509)

(1,001)(4,791)13(1,139)125¥57,097¥49,679$537,284(5,739)Owners of parent¥51,061¥42,812$480,492

Non-controlling interests¥ 6,035¥ 6,867$ 56,792

The accompanying notes are an integral part of these statements.

(1,270)

—

—
(220)

(2,035)Company name change cost
Other, net

455

117

4,290

79,46673,741

747,779

26,082(3,700)22,513
408

245,438(34,817)

22,382

22,921

210,620

57,08350,819537,158

5,759

7,170

54,194

51,324¥ 43,648$ 482,964

Income before income taxes

Thousands of
U.S. dollars(Note 1)—

Income taxes (Note 14):
Current
Deferred
Net income
Net income attributable to:Non-controlling interests
Owners of parent (Note 26)¥

The accompanying notes are an integral part of these statements.

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Tokyo Century Corporation

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Financial Section

Consolidated Statement of Changes in Net Assets

Consolidated Statement of Cash Flows

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017

Number of shares
Thousands
2018
Common stock
Balance at the beginning of the year
Balance at the end of the year
Capital surplus
Balance at the beginning of the year
Disposal of treasury stock
Purchase of shares of consolidated subsidiaries
Balance at the end of the year
Retained earnings
Balance at the beginning of the year
Net income attributable to owners of parent for the year
Cash dividends
Decrease due to change in equity
Balance at the end of the year
Treasury stock
Balance at the beginning of the year
Purchase of treasury stock
Disposal of treasury stock
Balance at the end of the year
Total shareholders’ equity
Balance at the beginning of the year
Cash dividends
Net income attributable to owners of parent for the year
Purchase of treasury stock
Disposal of treasury stock
Purchase of shares of consolidated subsidiaries
Decrease due to change in equity
Balance at the end of the year
Net unrealized holding gain on securities
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Deferred gain (loss) on hedges
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Translation adjustments
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Remeasurements of defined benefit plans
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Total accumulated other comprehensive income
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Share subscription rights (Note 22)
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Non-controlling interests
Balance at the beginning of the year
Net changes of items other than shareholders’ equity
Balance at the end of the year
Total net assets
Balance at the beginning of the year
Cash dividends
Net income attributable to owners of parent for the year
Purchase of treasury stock
Disposal of treasury stock
Purchase of shares of consolidated subsidiaries
Decrease due to change in equity
Net changes of items other than shareholders’ equity
Balance at the end of the year

106,624
106,624(1,067)(1)
32(1,036)2017
106,624
106,624(1,086)(0)
19(1,067)

Millions of yen
2018
2017

Thousands of
U.S. dollars(Note 1)
2018

¥ 34,231
34,231¥ 34,231
34,231$ 322,113
322,113

7,821
8
1,230
9,060

6,122
4
1,695
7,821

73,60380
11,57885,262299,671
51,324(11,085)—339,910

266,044
43,648(9,710)(311)
299,6712,819,906
482,964(104,311)—
3,198,559(2,757)(8)
83(2,682)
380,520
338,966(11,085)
51,324
(8)
92
1,230
—
380,520(2,806)(2)
50(2,757)
338,966
303,591(9,710)43,648
(2)
55
1,695
(311)
338,966(25,952)(75)
789(25,238)
3,580,697
3,189,671(104,311)
482,964(75)
870
11,578—3,580,697

15,8301,914
17,745

15,474355
15,830148,962
18,019166,981473(1,415)
(942)

(624)
1,097
473

4,456
(13,321)(8,865)564(1,143)
(579)

3,028
(2,463)564

5,313(10,764)(5,451)(1,133)382(751)
15,472
15,734(262)
15,472(1,307)174(1,133)
15,734
16,570(836)
15,734(10,668)
3,595(7,073)
145,591
148,063(2,471)
145,591

943
253
1,196

716
227
943

8,874
2,385
11,25949,174
9,672
58,847456,036
404,818(11,085)
51,324
(8)
92
1,230
—
9,663
¥456,036

53,994(4,819)49,174
404,818
374,872(9,710)43,648
(2)
55
1,695
(311)
(5,429)¥404,818

462,731
91,022553,753
4,291,302
3,809,340(104,311)
482,964(75)
870
11,578—90,936$4,291,302

Thousands of
U.S. dollars(Note 1)Millions of yen

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile income before income taxes
to net cash provided by (used in) operating activities:
Depreciation and amortization of leased assets
Loss on disposal of leased assets
Impairment loss
Depreciation of other operating assets, and cost of other operating assets sales
Depreciation and loss on sales and disposal of own asset in use
Amortization of goodwill
Foreign exchange loss (gain)
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in accrued bonus
Increase (decrease) in liability for retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Gain on sale of investments in securities
Decrease (increase) in installment sales receivable
Decrease (increase) in lease receivables and investment assets
Decrease (increase) in loans receivable
Decrease (increase) in operational investment securities
Purchases of leased assets
Purchase of other operating assets
Decrease (increase) in construction in progress
Decrease (increase) in claims provable in bankruptcy or rehabilitation
Increase (decrease) in trade notes and accounts payable
Other, net
SubtotalInterest and dividend income received
Interest expense paid
Income taxes paid
Net cash provided by (used in) cash used in operating activities
Cash flows from investing activities:
Proceeds from sales of own assets in use
Purchases of own assets in use
Proceeds from sales/redemptions of investments in securities
Purchases of investments in securities
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Payments for business transfer
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of bonds
Redemption of bonds
Proceeds from stock issuance to non-controlling interest shareholders
Cash dividends paid
Cash dividends paid to non-controlling interest shareholders
Purchase of shares of subsidiaries not resulting in change in scope of consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Increase in cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at the end of the year (Note 13)

2018

2017

2018

¥ 79,466¥ 73,741$ 747,779

112,060
63,706
2,624
4,002
3,839
1,063
(87)
(582)
40
258
(1,164)21,946(3,771)(543)
9,972
46,850(12,218)(27,101)(168,905)(43,644)(42,517)239
31,483(5,355)71,662
1,954(22,120)(25,067)
26,42897,98753,619
409
5,759
3,662
863
1,354
305
(43)
233
(791)
17,733(1,172)(639)
10,339(3,023)(15,559)(18,681)(207,841)(7,237)—538
12,804
12,17236,535
1,528(18,115)(20,618)(670)

1,054,491
599,480
24,69937,66436,133
10,004(820)(5,483)378
2,432(10,961)
206,518(35,494)(5,112)
93,842440,859(114,971)(255,020)(1,589,403)(410,696)(400,093)
2,255
296,259(50,393)674,344
18,392(208,158)(235,887)
248,691

224(5,845)854(90,600)(2,799)(9,282)(459)(107,908)

217(2,325)
4,460(15,980)(15,109)—(1,333)(30,071)

2,116(55,009)
8,039(852,546)(26,341)(87,348)(4,327)(1,015,418)

58,275387,163(391,378)
101,799(68,268)
7,633(11,085)(1,465)(966)(59)
81,649473
642
85,73077¥ 86,449(4,088)389,750(378,341)
79,869(44,607)
7,718(9,710)(1,015)(12,017)(56)
27,500(2,790)(6,031)
91,762—¥ 85,730

548,373
3,643,210(3,682,869)
957,935(642,404)
71,835(104,311)(13,790)(9,093)(561)
768,3214,451
6,046
806,722724$ 813,493

The accompanying notes are an integral part of these statements.

The accompanying notes are an integral part of these statements.

82

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Tokyo Century Corporation

Integrated Report 201883

Financial Section

Notes to Consolidated Financial Statements
Tokyo Century Corporation and Consolidated Subsidiaries

1. Basis of Presentation
Tokyo Century Corporation (the “Company”) and its consolidated
subsidiaries (collectively, the “Companies”) maintain their booksof accounts in accordance with the provisions set forth in the
Company Law of Japan (the “Law”), the Financial Instruments
and Exchange Law of Japan and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”),
which are different in certain respects as to the applicationand disclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial statements havebeen compiled from the consolidated financial statements of theCompanies, which were filed with the Director of the Kanto Local
Finance Bureau as required by the Financial Instruments andExchange Act of Japan. In preparing the accompanying
consolidated financial statements, certain reclassifications andrearrangements have been made to the consolidated financial
statements for the convenience of readers.
The translation of Japanese yen amounts into U.S. dollar
amounts for the year ended March 31, 2018 is included solely forthe convenience of readers and has been made at the rate of¥106.27 = US$1.00.
Yen amounts are rounded down to the nearest million yen.
Totals and subtotals may not correspond to the aggregation ofindividual account balances.

2. Summary of Significant Accounting Policiesa) Principles of consolidation
The accompanying consolidated financial statements include
the accounts of the Company and any significant companies
controlled directly or indirectly by the Company.
Investments in companies over which the Company exercises
significant influence in terms of their operating and financial
policies have been accounted for by the equity method.
The names of principal consolidated subsidiaries and equity
method affiliated companies are as follows:
Consolidated Subsidiaries
Nippon Car Solutions Co., Ltd
Nippon Rent-A-Car Service, Inc.
Orico Auto Leasing Co., Ltd.
Fujitsu Leasing Co., Ltd.
IHI Finance Support Corporation
Orico Business Leasing Co., Ltd.
ITEC Leasing Co., Ltd.
S.D.L Co., Ltd.
TRY Corporation
TC Property Solutions Corporation
TC Agency Corporation
TC Business Service Corporation
TC Business Experts Corporation
Kyocera TCL Solar LLC
TCLA Godo Kaisha
Shunan Power Corporation
Tokyo Century Leasing China Corporation
Tokyo Century Factoring China Corporation
TC Leasing Co.,Ltd.
Tokyo Century Leasing (Singapore) Pte. Ltd.
Tokyo Century Capital (Malaysia) Sdn. Bhd.
84

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Integrated Report 2018

PT. Century Tokyo Leasing Indonesia
PT. TCT Indonesia
TISCO Tokyo Leasing Co., Ltd.
TC Advanced Solutions Co., Ltd.
TC Car Solutions (Thailand) Co., Ltd.
HTC Leasing Co., Ltd.
Tokyo Leasing (Hong Kong) Ltd.
CSI Leasing, Inc.
Tokyo Century (USA) Inc.
TC Aviation Capital Ireland Limited
TC Skyward Aviation U.S., Inc.
TC Skyward Aviation Ireland Limited.
TC Realty Investments Inc.
Tokyo Leasing (UK) Plc
Equity Method Affiliated Companies
Nittochi Asset Management Co., Ltd.
President Tokyo Corporation
Dalian Bingshan Group Hua Hui Da Financial Leasing Co., Ltd.
Suzhou New District Furui Leasing Co., Ltd.
BPI Century Tokyo Lease & Finance Corporation
P.T. Hexa Finance Indonesia
GA Telesis, LLC
Aviation Capital Group LLC(1) Number of consolidated subsidiaries:193
TC Leasing Co., Ltd. and other 12 companies, (all of) which were
newly incorporated, are included in the scope of consolidation.
In addition, 7 companies have been included in the scope of
consolidation mainly due to share acquisition accompanying thetransition from the franchise system to the direct management
system in Nippon Rent-A-Car Services, Inc.
TC Car Solutions (Thailand) Co., Ltd. and other 5 companies
have been included in the scope of consolidation due to theincreased materiality.
5 companies have been excluded from the scope of
consolidation mainly due to the liquidation proceedings.
(2) Unconsolidated subsidiaries
TLC Capital Co., Ltd. and other 107 companies are operators of
the leasing business mainly based on silent partnershipagreements. The profit or loss and assets of those companies
are not attributable to them. As a result, they have been
excluded from the scope of the consolidation in accordance witharticle 5, paragraph 1, item 2 of the Regulations for Consolidated
Financial Statements.
Also other 5 unconsolidated subsidiaries are immaterial interms of their total assets, sales, net income or loss, retained
earnings and other measures, and do not have a significant
effect on the consolidated financial statements. As a result, they
have been excluded from the scope of consolidation.
(3) Number of companies accounted for by the equity method: 23
Aviation Capital Group LLC and other 4 companies have been
included as an affiliated company accounted for by the equity
method due to new acquisition and establishment. In addition,
Dalian Bingshan Group Hua Hui Da Financial Leasing Co., Ltd.
has been included as an affiliated company accounted for by theequity method due to the increased materiality.

(4) Companies not accounted for by the equity method
TLC Capital Co., Ltd. and other 107 companies are operators of
the leasing business mainly based on silent partnershipagreements. The profit or loss and assets of those companies
are not attributable to them. As a result, they have been excluded
from the scope of the equity method in accordance with article 5,paragraph 1, item 2 of the Regulations for Consolidated
Financial Statements.
Also other 5 unconsolidated subsidiaries and 2 affiliatedcompanies have not been accounted for by the equity method
because these are immaterial in terms of their net income orloss, retained earnings and others, and do not have significant
effect on the consolidated financial statements. As a result, they
have been excluded from the scope of equity method.
Investments in Cyber Core Co., Ltd. and an another company
are not accounted for under the equity method, as the purposeof the Company for these investments is to perform business
investment and consultation and it is not the intention of theCompany to exercise significant influence in terms of theiroperating and financial policies while the Company’s shareholding
ratios in these companies are between 20% and 50%.
With respect to affiliated companies accounted for by theequity method whose account closing dates differ from theclosing date of the Company, the Company has mainly used theirfinancial statements as of their respective fiscal year end.
In preparing the consolidated financial statements as ofMarch 31, 2018, the financial statements of TLC Cranberry Co.,
Ltd. and other 2 subsidiaries are consolidated by using theirfinancial statements prepared solely for consolidation purposes.
Tokyo Century (USA) Inc. and other 99 subsidiaries areconsolidated using their financial statements as of theirrespective fiscal year end, which falls on December 31, 2017,
and necessary adjustments are made to their financial
statements to reflect any significant transactions from January 1
to March 31, 2018.
b) Foreign currency translation
Monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange
rates in effect at the balance sheet date. Foreign exchange gainor loss on translation is recognized in the consolidated
statement of income.
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange in
effect at the balance sheet date, except for the components of
net assets excluding non-controlling interests which aretranslated at their historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange
in effect during the year. Differences arising from the translation
are presented as translation adjustments and non-controllinginterests in its consolidated financial statements.
c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits
held at call with banks, net of overdrafts and short-term
investments with original maturities of three months or lesswhich are readily convertible into cash and are subject to little
risk of any change in their value.

d) Revenue recognition(Leases)
Lease revenues and the related costs on finance leases arerecognized on the day to receive lease payment.
Revenues from operating leases are recognized on astraight-line basis over the scheduled lease terms, and leased
assets are depreciated by the straight-line method based on thescheduled lease terms of the respective assets.
(Installment sales)
Installment sales and the related costs are recognized wheneach payment becomes due under the respective installment
sales agreements.
e) Allocation of interest expense
Interest expense is allocated to cost of sales and other expenses
based on the balances of the respective operating assets, which
consist principally of lease receivables, lease investment assets
and loans. Interest expense classified as cost of sales is stated
net of interest income.
f) Securities
Securities held by the Companies are classified as availablefor-sale securities. Marketable available-for-sale securities arecarried at fair value with any unrealized gain or loss, net of therelated income taxes, included directly in net assets. Cost of
securities sold is determined principally by the moving averagemethod. Non-marketable available-for-sale securities are statedat cost determined principally by the moving average method.
Investments in a limited partnership are measured using theequity method. As of March 31, 2018 and 2017, the Companies
did not have any trading securities.
g) Inventories
Inventories held by the Companies are stated at cost determinedby specific identification method (of which carrying values arecalculated based on the method of reduction of book value
accompanied with decline in market value).
h) Property and equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation of leased assets is calculated by thestraight-line method based on the lease term of the respective
assets. Depreciation of assets owned and used by theCompanies is calculated primarily by the declining-balancemethod based on the estimated useful lives of the respective
assets which range principally from 3 to 47 years for buildings,
and from 3 to 20 years for equipment, except for certain
buildings acquired on and after April 1, 1998 and facilities
attached to buildings and structures acquired on and after April
1, 2016, which are depreciated by the straight-line method.
i) Intangible assets
Computer software leased to customers is amortized by thestraight-line method based on the lease term of the respective
assets. Costs related to software purchased for internal use areamortized by the straight-line method over the estimated usefullife (generally 5 years).
Goodwill is amortized by the straight-line method over a period
between 5 and 20 years.

Tokyo Century Corporation

Integrated Report 201885

Financial Sectionj) Income taxes
Provision is made for the Companies’ liabilities for various typesof income taxes, i.e., corporation, inhabitants and enterprise taxes.
Deferred tax assets and liabilities are accounted for under
the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable todifferences between the financial statement carrying amounts ofexisting assets and liabilities and their tax bases and operating
losses and tax credits carried forward. Deferred tax assets andliabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which these temporary
differences are expected to be recovered or settled.
k) Retirement benefits
Accrued retirement benefits for employees have been provided
mainly at the amount calculated based on the retirement benefit
obligation and the fair value of the pension plan assets as ofbalance sheet date. The Company and certain domestic
subsidiaries have defined benefit plans covering substantiallyall employees other than directors and corporate auditors.
Under the terms of these plans, eligible employees are entitledto lump-sum or annuity payments based on their level ofcompensation at termination and their years of service with theCompany or the subsidiaries. To provide coverage for part of thelump-sum or annuity payments, the Company and certain
domestic subsidiaries have joined a multi-employers’ welfare
pension fund (the “Fund”) established in accordance with the
Welfare Pension Insurance Law by the ITOCHU group companies.
In addition, accrued retirement benefits for directors andcorporate auditors are provided at an amount to be required at
the year-end according to internal regulations.
l) Derivatives and hedging activities
The Companies enter into interest-rate swap contracts, forward
foreign exchange contracts, currency swaps and loans frombanks in order to hedge interest-rate and foreign currency
exchange rate exposure on certain liabilities and assets,
including loans from banks, installment sales receivables, loan
receivables, operational investment securities, forecasted
transactions and a net investment in a foreign subsidiary andaffiliate. The Companies utilize these derivatives to reduce therisk of cash flow fluctuation inherent in the liabilities and assets
hedged and such transactions are not entered into for
speculative or trading purposes.
For interest-rate swap contracts and forward foreignexchange contracts, the Companies follow “Accounting Standard
for Financial Instruments” and “Accounting Standard for Foreign
Currency Transactions.” More specifically, interest-rate swaps
not designated as hedging instruments are recorded at fair value
in the consolidated balance sheet. Interest-rate swaps which
qualify for hedge accounting and meet specific matching criteria
are not measured at fair value, but the differential paid or received
under the swap agreements is recognized and included ininterest expense or income. Other interest-rate swaps which
qualify for hedge accounting are measured at fair value as of thebalance sheet date and the recognition of any unrealized gain orloss is deferred until maturity.
For forward foreign exchange contracts, the Companies
follow the accounting method specified in “Accounting Standard
for Financial Instruments” (“Allocation method”), if the contracts
qualify for hedge accounting. Under this method, foreign currencytransactions and the related monetary assets (installment salesreceivables and loans receivables) are to be translated at the
fixed yen amount of such foreign currency contracts at the

86

Tokyo Century Corporation

Integrated Report 2018settlement dates based on the contracted rates. The difference
between this amount and the amount as translated at thecurrent rate of exchange on the date of forward contract isallocated over the life of each contract.
Hedge effectiveness is assessed based on comparative
analysis between the accumulated future cash flows for hedged
items and those for hedging instruments. As for the hedging of
forecast transactions denominated in foreign currencies, hedge
effectiveness is assessed if substantial terms and conditions
such as amounts and periods of the hedging instruments andthe hedged forecasted transactions are the same. Hedge
effectiveness is not assessed for the foreign currency exchange
contracts which meet the requirements for allocation method
and the interest rate swaps which meet the requirements for
short-cut method. The consolidated subsidiaries for theCompany assess hedge effectiveness primarily based on theabove methods.
m) Appropriation of retained earnings
Under the Law the appropriation of retained earnings withrespect to a given financial period is made by resolution of theshareholders at a general meeting to be held subsequent to theclose of such financial period. The accounts for that period donot, therefore, reflect such appropriations.
Under the Law, flexible payment of dividends is permissible
subject to certain limits on appropriation of retained earnings aswell as to approval by resolution of the shareholders.
n) Allowance for doubtful accounts
The allowance for doubtful accounts is recorded on the basis ofhistorical experience to provide for possible losses from bad debts
related to general trade accounts and also for the estimatedamounts considered to be uncollectible after individuallyreviewing the specific collectibility of certain doubtful accounts.
o) Consumption taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes.
p) Provision for automobile inspection costs
Under lease and maintenance service contracts, provision forautomobile inspection costs is recorded on the basis ofhistorical experience.

3. Accounting Standards Issued Not Yet Applied• Implementation Guidance on Tax Effect Accounting• Implementation Guidance on Recoverability of Deferred Tax Assets
On February 16, 2018 the Accounting Standards Board of Japan(ASBJ) issued “Implementation Guidance on Tax Effect Accounting”(ASBJ Guidance No.28) and “Revised Implementation Guidanceon Recoverability of Deferred Tax Assets” (Revised ASBJ
Guidance No.26).
(1) Overview
Principal changes include the amended approach to recognize
deferred tax liabilities for the taxable temporary differences
arising from investments in subsidiaries and affiliated companies
in non-consolidated financial statements and the clarification of
the treatment of the recoverability of deferred tax assets for thecompanies classified as category 1.

(2) Scheduled date of application
The Company will apply these guidance from the beginning of
the fiscal year ending March 31, 2019.
(3) Impact of application of the accounting standard
The Company is currently evaluating the potential impacts thatthe application of these standard and guidance will have on theConsolidated Financial Statements.
• Accounting Standard for Revenue Recognition.
• Implementation Guidance on Accounting Standard for Revenue
Recognition.
On March 30, 2018 the ASBJ issued “Accounting Standard for
Revenue Recognition.” (ASBJ Statement No.29) and“Implementation Guidance on Accounting Standard for
Revenue Recognition” (ASBJ Guidance No.30).

“Loss on devaluation of investments in securities” in theamount of ¥110 million in the fiscal year ended March 31, 2017,
which was presented separately, is included in “Other, net”
under “Cash flows from operating activities” from the fiscal year
ended March 31, 2018 since the amount is insignificant.

5. Notes matured at the end of the fiscal year
The notes matured at the end of the fiscal year were treated as if
they would have been settled on that date, although the date wasa bank holiday.
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Notes Receivable

¥

1

¥—

$

Notes Payable

987

—

9,295

10

(1) Overview
These standard and guidance are comprehensive accounting
standards for revenue recognition. Specifically, the accounting
standard establishes the following five-step model that will apply
to revenue from customers:
Step 1: Identify the contracts with a customer
Step 2: Identify the separate performance obligations in
the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to performanceobligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies
a performance obligation(2) Scheduled date of application
The Company will apply these standard and guidance from the
beginning of the fiscal year ending March 31, 2022.
(3) Impact of application of the accounting standard
The Company is currently evaluating the potential impacts thatthe application of these standard and guidance will have on theConsolidated Financial Statements.

4. Changes in Presentation Method(Consolidated Statement of Income)“Rental income” in the amount of ¥281 million and “Cost ofrental income” in the amount of ¥139 million in the fiscal year
ended March 31, 2017, which was included in “Other, net,” ispresented separately from the fiscal year ended March 31, 2018
since the amount is significant.
“Loss on devaluation of investments in securities” in theamount of ¥110 million in the fiscal year ended March 31, 2017,
which was presented separately, is included in “Other, net” fromthe fiscal year ended March 31, 2018 since the amount is
insignificant.
(Consolidated Statement of Cash Flows)“Impairment losses” in the amount of ¥409 million in the fiscal
year ended March 31, 2017, which were included in “Other, net”
under “Cash flows from operating activities” are presented
separately from the fiscal year ended March 31, 2018 since theamounts are significant.

Tokyo Century Corporation

Integrated Report 201887

Financial Section

6. Operational Investment Securities, Short-term Investment Securities and Investments in Securities
Operational investment securities, short-term investment securities and investments in securities as of March 31, 2018 and 2017consisted of the following:

Proceeds from the sale of available-for-sale securities and the resulting realized gain or loss for the years ended March 31, 2018 and2017 were summarized as follows:

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

Proceeds¥9,035¥21,863$85,020

Realized gain

2,602

3,809

24,488

—

—

—

2018

2017

2018

Available-for-sale securities¥202,731¥163,430$1,907,703

Investments in unconsolidated subsidiaries and affiliates

203,622

119,927

1,916,089

Realized loss

¥406,354¥283,357$3,823,793
The impairment losses on securities recognized for the years ended March 31, 2018 and 2017 were as follows:

Available-for-sale securities included in operational investment securities, short-term investment securities and investments insecurities as of March 31, 2018 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Equity securities¥ 74,747¥ 52,979$703,373

Debt securities

12,553

12,432

118,131

Other

115,430

98,017

1,086,198¥202,731¥163,430$1,907,703

The carrying amounts and aggregate fair value of available-for-sale securities with determinable market value as of March 31, 2018 and2017 were as follows:

2018

2017

2018

¥—

¥130

$—

Available-for-sale securities:
Equity securities
Investments in unconsolidated subsidiaries and affiliates:
3

2

29

¥ 3

¥132

$29

Unconsolidated subsidiaries

7. Accumulated Depreciation of Property and Equipment
The accumulated depreciation of property and equipment as of March 31, 2018 and 2017 were as follows:

2018

2017

2018

¥371,678¥354,327$3,497,493

March 31, 2018
Cost orbook value

Unrealized
gain

Unrealized
loss¥22,347¥26,064

¥565

Fair
value

¥47,846

Debt securities

12,000258

412,253

Other

30,832

1,735

273

32,293

Leased assets
Other operating assets

4,452

7,742

41,898Own assets in use

12,69910,204

119,498

8. Short-Term Borrowings, Long-Term Debt and Assets Pledged
The breakdown of short-term borrowings as of March 31, 2018 and 2017 were as follows:

Millions of yen

March 31, 2017
Unrealized
gain

Unrealized
loss

Fair
value

Equity securities¥19,156¥21,012¥360¥39,808

Short-term loans from banks

Debt securities

12,000152

19

12,132Other

17,2591,583—

18,843

March 31, 2018
Cost orbook value

Unrealized
gain

Unrealized
loss

Fair
value

$210,293$245,268$5,322$450,238

Debt securities

112,9192,428

39

115,308

Other

290,131

16,3302,578

303,883

2018

2017

2018

¥ 416,341$ 4,035,476

1.13%

Commercial paper

848,000

800,700

7,979,674

0.02%

Payables under securitized lease receivables

61,90059,100582,478

0.09%¥1,338,750¥1,276,141$12,597,629

The breakdown of long-term debt as of March 31, 2018 and 2017 were as follows:

Long-term loans, principally from banks
Bonds payable
Total

Carrying amountThousands of
U.S. dollars

Millions of yen

2018

2017

2018

Equity securities¥26,900¥13,170$253,134

Debt securities

299

299

2,822

83,136

79,174782,315

Other

88

Tokyo Century Corporation

Integrated Report 2018

Thousands of
U.S. dollars

Millions of yen

Long-term payables under securitized lease receivables
Available-for-sale securities whose fair value was not readily determinable as of March 31, 2018 and 2017 were as follows:

Weighted-averageinterest rate

¥ 428,850

Total

Thousands of U.S. dollars

Thousands of
U.S. dollars

Millions of yen

Cost orbook value

Equity securities

Thousands of
U.S. dollars

Millions of yen

Millions of yen

Equity securities

Thousands of
U.S. dollars

Millions of yen

Less current portion

Weighted-averageinterest rate

2018

2017

2018

¥1,203,165¥1,218,851$11,321,780

1.38%

4,072

6,036

38,323

0.11%

264,692

232,0142,490,753

0.60%

1,471,930

1,456,902

13,850,858

404,824

420,416

3,809,399¥1,067,105¥1,036,485$10,041,458

The Companies have entered into overdraft contracts which provided the Companies with the overdraft facilities with 106 and 104 financial
institutions as of March 31, 2018 and 2017 amounting to ¥1,413,477 million ($13,300,817 thousand) and ¥1,229,875 million, respectively.
The unused facilities maintained by the Companies as of March 31, 2018 and 2017 amounted to ¥967,834 million ($9,107,318 thousand)and ¥795,615 million, respectively.

Tokyo Century Corporation

Integrated Report 201889

Financial Section

The following table presents the outstanding derivatives positions that do not qualify for hedge accounting as of March 31, 2018:

The aggregate annual maturity of long-term debt subsequent to March 31, 2018 is summarized as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2019¥ 404,824$ 3,809,399

2020

382,3823,598,212

2021

327,1903,078,858

2022

195,401

1,838,723

2023

93,438879,2562024 and thereafter

68,693646,407¥1,471,930$13,850,858

The Companies’ assets pledged as collateral, principally for liabilities of ¥246,734 million ($2,321,773 thousand), as of March 31, 2018
were as follows:
Millions of yen

Cash on hand and in banks
Accounts receivable-installment sales
Accounts receivable-lease receivables and investment assets
Accounts receivable-loans
Operational investment securities¥

823

Thousands of
U.S. dollars

$

7,747

4,667

43,919215,992

2,032,490

1,007

9,477

735

6,921

366

3,452

Other current assets

5,635

53,027

Leased assets

46,437436,972

Advances for purchases of property for lease

8,876

83,530Own assets in use

2,188

20,58957537¥286,787$2,698,667

Inventories

Investments in securities

Millions of yen
Fair
value

Unrealized
gain (loss)¥ 1,613
(—)
562
(62)

¥ (19)¥ (19)

(52)

(52)

28
(—)

(9)

5,016
(946)
2,518
(1,250)3,758(1,993)
203
(57)
908
(469)
1,613
(—)
553
(25)
¥16,775(4,804)

Notional amount(over one year)

Currency swap contracts:
Receive/JPY;
Pay/USD
Receive/JPY;
Pay/IDR
Non-deliverable forward:
Put/RMB
Forward exchange contracts:
Put/EUR
Put/BRL
Put/MXN
Put/GBP
Put/OtherCall/USD
Call/Other
Total

In general, interest-rate swaps and forward foreign exchange contracts are exposed to market risk arising from fluctuation in interest
rates and foreign exchange rates, and to credit risk arising from the potential for default by the counterparties. As the derivative
instruments which the Companies utilize aim to reduce the risk of fluctuation in interest rates and foreign exchange rates associated withthe underlying assets and liabilities hedged, these derivatives function to reduce the overall market risk to which the Companies are
exposed. The Companies believe that any related credit risk is very low because all counterparties to the derivatives instrument are
financial institutions with high credit ratings.
With respect to the interest-rate swap contracts entered into by the Company, the Treasury Department, which is responsible forfinancing activities, handles the execution of, and monitors the internal control over, these transactions in accordance with the Company’s
internal regulations. The ALM Committee determines the Company’s hedging strategy for the coming six months based on an analysis ofmarket rate trends and the Treasury Department enters into derivatives transactions in accordance with this strategy.
The Treasury Department is also involved in the management of risk associated with foreign exchange rate fluctuation on an individual
contract basis.
Before the Company executes the transactions involving compound derivative instruments where credit derivatives are embedded,
persons responsible sufficiently confer on the type or management method of the risk beforehand, and then obtain approval inaccordance with the Company’s internal regulations.
The consolidated subsidiaries of the Company follow the Company’s internal regulations, and regularly report to the Company the
results of their hedging activities, the counterparties, the period remaining for each contract and the fair value of the transactions.

$ 15,178
(—)
5,290
(585)

$ (180)$ (180)

(490)

(490)

(9)

264
(—)

(88)

(88)

(163)

(163)

(1,534)(1,534)

(359)

(359)

(3,387)(3,387)

174

174

1,642

1,642

0

0

4

4

(44)

(44)

(416)

(416)

19

19

180

180

13

13

125

125

¥(440)¥(440)

47,206(8,902)
23,697(11,763)
35,364(18,759)
1,914
(542)
8,547
(4,414)
15,178
(—)
5,210
(239)
$157,853(45,207)$(4,144)$(4,144)

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.

The following table presents the outstanding derivatives positions that do not qualify for hedge accounting as of March 31, 2017:
Millions of yen
Fair
value

Unrealized
gain (loss)¥ 1,792
(—)
549
(—)
501
(501)

¥ 19

¥ 19

(4)

(4)

(75)

(75)

207
(28)

(53)

(53)

3,144
(—)
4,562
(916)
3,162
(1,139)2,514(1,043)
414
(99)
692
(256)
1,793
(—)
45
(2)
¥19,381(3,987)

9

9

232

232

(351)

(351)

429

429

47

47

21

21

(19)

(19)

(2)

(2)

¥253

¥253

Notional amount(over one year)

9. Derivatives

Thousands of U.S. dollars
Notional amountFair
Unrealized(over one year)
value
gain (loss)

Currency swap contracts:
Receive/JPY;
Pay/USD
Receive/USD;
Pay/JPY
Receive/JPY;
Pay/IDR
Non-deliverable forward:
Put/RMB
Forward exchange contracts:
Put/USD
Put/EUR
Put/BRL
Put/MXN
Put/GBP
Put/OtherCall/USD
Call/Other
Total

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.

90

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201891

Financial Section

The following table presents the outstanding derivative positions that qualify for hedge accounting as of March 31, 2018:
Thousands of U.S. dollars
Notional amountFair(over one year)
value

Millions of yen
Notional amount(over one year)

Hedged items

The following table presents the outstanding derivative positions that qualify for hedge accounting as of March 31, 2017:

Fair
value

Millions of yen

Allocation method:

Fair
value

Accounts-receivable–installment sales¥ 2,559(1,314)¥(226)

Accounts-receivable–nstallment sales

1,083
(569)

(36)

Lease investment assets

8
(—)

(0)

Lease investment assets

1,147
(—)

(16)

Allocation method:

Forward exchange contracts:

Forward exchange contracts:

Put

Put

USD
RMB

¥

(13)

$ 21,616(11,354)

$

(126)

USD
RMB

Accounts-receivable–installment sales¥ 2,297(1,206)

Accounts-receivable–installment sales

568
(238)

(71)

5,347
(2,246)(676)

Accounts-receivable–installment sales

38
(—)

0

364
(—)

0

USD

Accounts-receivable–installment sales

9
(—)

0

89
(—)

(1)

EUR

(104)

37,232(15,956)(982)

Receive/USD;
Pay/MYR

Borrowings

3,872
(—)

174

(10)

40,849(19,535)(99)

Receive/USD;
Pay/THB

Borrowings

2,733(1,758)247

Forecasted transactions

729
(—)

(17)

Net investment in foreign subsidiary

2,569
(—)

149

Net investment in foreign subsidiary

2,311
(—)

145

¥17,015(3,642)

¥ 420

Call

Call

USD
Other
Currency swap contracts:

Currency swap contracts:

Receive/USD;
Pay/MYR

Borrowings

3,956(1,695)

Receive/USD;
Pay/THB

Borrowings

4,341(2,076)

Deferral hedge accounting:Deferral hedge accounting:

Forward exchange contracts:

Forward exchange contracts:

Put

Put
EUR
GBP

Net investment in foreign subsidiary

3,394
(—)

(57)

31,942
(—)

(540)

USD

Net investment in foreign subsidiary

2,915
(—)

(86)

27,431
(—)

(810)

EUR

Forecasted transactions

26,627(26,627)(970)

250,568(250,568)(9,130)

Forecasted transactions

10,499(10,499)(617)

98,800(98,800)(5,808)¥ 54,648(42,344)¥(1,931)$ 514,243(398,462)$(18,175)

GBP

Call
USD
CAD
Total

Total

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.
Millions of yen

Millions of yen

Thousands of U.S. dollars
Notional amountFair(over one year)
value

Notional amount(over one year)

Fair
value

Borrowings¥ 83,131(80,321)¥411$ 782,262(755,824)$3,868Borrowings
Accounts-receivable–loans

35,943(24,218)

207

338,225(227,896)

1,955¥ 119,074(104,540)¥618$1,120,488(983,721)$5,823Hedged items

Notional amount(over one year)

Fair
value

Borrowings¥ 42,549(42,165)¥ 90

Borrowings
Accounts-receivable–loans

42,802(36,390)(379)¥ 85,352(78,556)¥(289)

Hedged items

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.

Interest rate swap

Interest rate swap
Deferral hedge accounting:
Pay/fixed;
Receive/floating
Short-cut method:

Deferral hedge accounting:
Pay/fixed;
Receive/floating

Pay/fixed;
Receive/floating
Total

Short-cut method:
Pay/fixed;
Receive/floating

Notional amount(over one year)

Hedged items

Total

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.

Note: Fair value is primarily based on the prices indicated by corresponding financial institutions.

92

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201893

Financial Section

10. Selling, General and Administrative Expenses

12. Other Comprehensive Income

The major components of selling, general and administrative expenses for the years ended March 31, 2018 and 2017 were as follows:

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income forthe years ended March 31, 2018 and 2017:

Thousands of
U.S. dollars

Millions of yen

Employees’ salaries, wages and bonuses

2018

2017

2018

¥39,396¥34,242$370,717

2018

2017

2018

¥ 5,325(2,520)¥ 4,280(3,786)$ 50,110(23,721)

2,804
(848)

493
(145)

26,389(7,981)

1,956

348

18,407(2,039)1,733(19,191)235

259

Amount before tax effect(1,804)

2,213(16,978)

Tax effect538(1,265)

1,993
(637)

Net unrealized holding gain (loss) on securities

Rent expenses

11,935

10,380112,309

Provision for accrued bonuses for employees

2,918

2,719

27,461

Amount arising during the year

Retirement benefit expenses

2,060

1,904

19,393

Reclassification adjustments for gains and losses included in net income

Provision for accrued bonuses for directors

238

185

2,243

Amount before tax effect

Provision for directors’ retirement benefits

56
(315)

36

533

1,206

(2,972)

Provision of allowance for doubtful accounts

Tax effectNet unrealized holding gain (loss) on securities
Deferred gain (loss) on hedges

11. Impairment loss

Amount arising during the year

The impairment loss for the year ended March 31, 2018 was as follows. This information for the previous fiscal year is not presented due
to its low materiality.

Reclassification adjustments for gains and losses included in net income

Thousands of
U.S. dollars

Millions of yen
Category

Types of ProductLeased Assets

Transportation equipment (Aircraft)2018¥2,624$24,699

As the lease assets decreased in profitability due to the decline in the future cash flow, the impairment loss was recorded in costs by
reducing the book value to the recoverable value.
The recoverable value of the leased assets was measured at the net sales value, evaluated based on the amounts calculated based onreasonable method by a third party.

Thousands of
U.S. dollars

Millions of yen

1,355

5,068
(11,909)(609)(2,079)(5,739)Amount arising during the year

249

(20)

2,344

Reclassification adjustments for gains and losses included in net income

384

363

3,622

Amount before tax effect634

Tax effect

(192)

343
(105)

5,966
(1,806)

442

238

4,159

(509)

(1,001)(4,791)———

Deferred gain (loss) on hedges
Translation adjustments
Amount arising during the year
Remeasurements of defined benefit plans

Remeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliates accounted forusing equity method
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Share of other comprehensive income (loss) of affiliates accounted forusing equity method
Total other comprehensive income (loss)

¥

(509)

(1,001)13¥(1,139)(4,791)$125

13. Notes to the Consolidated Statements of Cash FlowsThe breakdown of cash and cash equivalents as of March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

Cash on hand and in banks
Time deposits with maturities of more than three months
Cash equivalents included in short-term investment securities
Cash and cash equivalents

94

Tokyo Century Corporation

Integrated Report 2018

2018

2017

2018

¥82,212(992)¥83,565(1,165)$773,620(9,341)

5,230

3,330

49,214¥86,449¥85,730$813,493

Tokyo Century Corporation

Integrated Report 201895

Financial Section

14. Income Taxes
The significant components of deferred tax assets and liabilities as of March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018
$ 73,453

Deferred tax assets:¥ 7,805¥ 7,195

Tax adjustments for lease transactions

3,130

2,639

29,455Net defined benefit liability

2,836

2,857

26,693

Net operating loss carryforwards

Accrued expenses

1,896

1,432

17,845

Allowance for doubtful accounts

1,621

2,360

15,262

Depreciation

1,219

954

11,479Accrued bonuses

1,012

849

9,528

Loss on devaluation of investments in securities

959

937

9,031

Loss on valuation of property and equipment

385

399

3,624

Other

7,310

5,561

68,787

Subtotal

28,178(654)

25,187(791)

265,162(6,160)27,524

24,396

259,001

Depreciation of leased assets of foreign subsidiaries(16,892)(16,807)(158,957)

Net unrealized holding gain on securities(7,516)(6,577)(70,726)

Unrealized gains or losses on intercompany transfer of assets(1,661)(1,446)(15,633)

Other(5,008)(6,569)(47,132)

Total deferred tax liabilities(31,078)(31,401)(292,449)

Net deferred tax assets¥ (3,554)¥ (7,004)$ (33,448)

Less valuation allowance
Total deferred tax assets(Effects of the U.S. tax reform)
The Tax Cuts and Jobs Act was enacted on December 22, 2017. The corporate income tax rate was reduced from 35% to 21% on
January 1, 2018.
As a result of this change in tax rate, deferred tax liabilities (after deducting the amount of deferred tax assets) decreased by ¥5,410
million ($50,913 thousand), deferred income tax decreased by ¥5,394 million ($50,757 thousand) and deferred gains or losses on hedges
increased by ¥16 million ($155 thousand). In addition, deferred income tax increased by ¥2,397 million ($22,559 thousand) due to the tax
burden pertaining to certain non-U.S. reserved profit of subsidiaries in the United States incurred.

15. Assets retirement obligations
The balance of the assets retirement obligations is not presented due to immateriality for the years ended March 31, 2018 and 2017.

16. Retirement Benefit Plans
1. Overview of Retirement Benefit Plans Implemented by the Company
The Company has implemented a corporate pension fund plan (multi-employer welfare pension fund) and a defined benefit corporate
pension plan under its defined benefit plan system, and a defined contribution pension plan under its defined contribution plan system.
The Company may also offer extra early retirement benefit to employees on their retirement.
Some of the Company’s consolidated subsidiaries in Japan have a lump-sum payment plan and a defined benefit corporate pension
plan under their defined benefit plan system, and a defined contribution pension plan under their defined contribution plan system.
Some of the Company’s consolidated subsidiaries use the simplified method in the calculation of their retirement benefit obligation.
2. Defined Benefit Plans (except the simplified method)
The changes in the retirement benefit obligation during the years ended March 31, 2018 and 2017 were as follows:

Deferred tax liabilities:“Unrealized gains or losses on intercompany transfer of assets” in the amount of ¥1,446 million in the fiscal year ended March 31, 2017,
which were included in “Other” under “Deferred tax liabilities” are presented separately from the fiscal year ended March 31, 2018 since
the amounts are significant.
Net deferred tax assets are recorded under the following accounts in the accompanying consolidated balance sheet:

2018

2017

2018

Current Assets-Deferred tax assets¥ 9,590¥ 7,074$ 90,250

Long-term Assets-Deferred tax assets
Current Liabilities-Deferred tax liabilities

4,634(1,236)

6,124(2,138)43,609(11,631)

Long-term Liabilities-Deferred tax liabilities(16,543)(18,065)(155,676)

The reconciliations between the statutory effective tax rates and the effective tax rates for the year ended March 31, 2018 was as follows.
2018
Statutory effective tax rate
(Adjustments)

30.9%

Non-taxable income(3.8)%(1.5)%

Expenses not deductible for tax purposes

1.1%

Taxation of reserved profit of overseas subsidiaries

1.4%

Other

0.1%

Changes in U.S. tax regulations

Effective tax rate after the application of tax-effect accounting

2018

2017

2018

¥22,546¥22,062$212,166

Service cost

1,034

1,021

9,731

Interest cost

79

Actuarial gain and loss

89
(0)

6

844
(4)

Retirement benefits paid

(468)

(624)

(4,403)

Balance at the beginning of the year

Adjustment from the simplified method to the principle method
Balance at the end of the year

28.2%

The reconciliations between the statutory effective tax rates and the effective tax rates for the year ended March 31, 2017 was notpresented because the difference between the statutory effective tax rates and the effective tax rates is less than 5%.

Tokyo Century Corporation

Integrated Report 20181—

¥22,546$218,335

The changes in plan assets during the years ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

¥14,374¥13,771$135,265

Expected return on plan assets

236

2,224

Actuarial gain and loss

246

247
(14)

Contributions by the Company

821
(363)

821
(451)

7,725
(3,417)¥15,315¥14,374$144,118

Balance at the beginning of the year

Retirement benefits paid
Balance at the end of the year

2,319

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31,2018 and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

Funded retirement benefit obligation
Plan assets at fair value

2018

2017

2018

¥ 18,773(15,315)¥ 18,283(14,374)$ 176,656(144,118)

3,457

3,908

32,538

Unfunded retirement benefit obligation

4,429

4,263

41,678Net liability for retirement benefits in the balance sheet

7,887

8,172

74,216

Liability for retirement benefits
Net liability for retirement benefits in the balance sheet

96—¥23,202

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

7,887

8,172

74,216¥ 7,887¥ 8,172$ 74,216

Tokyo Century Corporation

Integrated Report 201897

Financial Section

The components of retirement benefit expense for the years ended March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Service cost

¥1,034¥1,021$ 9,731

Interest cost

89
(236)

79
(247)

844
(2,224)

395
(10)

374
(10)

3,721
(99)
2,035

Expected return on plan assets
Amortization of actuarial gain and loss
Amortization of prior service cost
Other (Note)
Retirement benefit expense

216¥1,488—¥1,217$14,009

3. Defined Benefit Plans (The simplified method)
The changes in liability for retirement benefits during the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Balance at the beginning of the year

¥1,367¥1,323$12,871Retirement benefits expense
Retirement benefits paid

384
(422)

294
(248)

3,616
(3,974)

Increase due to acquisition of subsidiaries

264
—

—
(1)

2,484

Adjustment from the simplified method to the principle method¥1,593¥1,367$14,998

Balance at the end of the year—

(Note) Other is the extra retirement payments.

The components of remeasurements of defined benefit plans included in other comprehensive income (before tax effect) for the years
ended March 31, 2018 and 2017 were as follows:

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31,2018 and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:Millions of yen

Prior service cost2018
¥ (10)

2017¥ (10)

2018$ (99)

Actuarial gain and loss

644

354

6,067

Total

¥634

¥343

$5,967The components of remeasurements of defined benefit plans included in accumulated other comprehensive income (before tax effect) as ofMarch 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service cost2018
¥ (121)2017¥ (131)2018$ (1,139)

Unrecognized actuarial gain and loss

1,380

2,025

12,994

Total¥1,259¥1,894$11,855

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2017 were as follows:
2018

2017

General accounts

50%

50%

Bonds

30%

33%

Stocks

15%

14%

Other

5%

3%

Total

100%

100%

The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term
returns on assets held in each category.
The assumptions used in accounting for the above plans are as follows:

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

2018

2017

2018

Plan assets at fair value

¥ 407
(155)

¥ 412
(155)

$ 3,837(1,467)

251

257

2,369

Unfunded retirement benefit obligation

1,342

1,110

12,628Net liability for retirement benefits in the balance sheet

1,593

1,367

14,998

Liability for retirement benefits

1,614
(20)

1,367

Asset for retirement benefits—

15,190(192)

Net liability for retirement benefits in the balance sheet¥1,593¥1,367$14,998

Funded retirement benefit obligation

Retirement benefit expenses for the years ended March 31, 2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

Retirement benefit expenses

2018

2017

2018

¥384

¥294

$3,616

4. Contributions to the defined contribution pension plan by the Company and its consolidated subsidiaries during the years ended March 31,2018 and 2017 are as follows:
Thousands of
U.S. dollars

Millions of yen

Contributions to the defined contribution pension plan

2018

2017

2018

¥226

¥219

$2,129

5. The following table summarizes the most recent funded status of the multi-employer welfare pension fund as of March 31, 2018 and 2017.
Thousands of
U.S. dollars

Millions of yen

2018

2017

Discount rates

Mainly 0.2%–0.6%

0.2%-0.7%

Expected rates of return on plan assets

Mainly 1.0%–2.5%

1.2%-2.5%

Amount of plan assets

Estimated rates of salary increases

Mainly 1.3%–7.3%

1.3%-7.3%

2018

2017

(as of March 31, 2017) (as of March 31, 2016)2018(as of March 31, 2017)

Benefit obligations under pension funding programs¥ 25,926(33,240)¥ 22,975(33,225)$ 243,969(312,790)

Difference¥ (7,313)¥(10,249)$ (68,820)

The differences as of March 31, 2018 and 2017 above mainly consisted of prior service cost under pension funding programs of ¥12,413
million ($116,811 thousand) and ¥12,705 million, respectively. Prior service cost under this program are amortized using the straight-line
method and the residual period is 16 years.
For the years ended March 31, 2018 and 2017, the ratios of the Company’s contributions to the multi-employer welfare pension fundagainst total contributions were 6.15% and 6.30%, respectively.

98

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 201899

Financial Section

17. Lease Transactions(Lessees’ accounting)
The Companies lease equipment under finance leases. Depreciation of leased assets is calculated by the straight-line method based on
the lease term of the respective assets with no residual value.
The breakdown of future minimum lease payments under non-cancelable operating leases as of March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Due within one year

¥1,588¥1,232$14,947

Due after one year

4,125

3,306

38,817¥5,713¥4,538$53,765

The future minimum lease income subsequent to March 31, 2018 and 2017 under non-cancellable operating leases is summarized
as follows:

2018

2017

2018

Due within one year

¥130,920¥125,074$1,231,959

Due after one year

309,305

311,5072,910,564¥440,226¥436,582$4,142,523(Sublease)
Lease investment assets and obligations under sublease transactions that include interests on the consolidated balance sheet as ofMarch 31, 2018 and 2017 are as follows:(Lessors’ accounting)
Finance leases that do not transfer ownership to lessee are capitalized as lease investment assets. Information relating to finance leasesof the Companies as of March 31, 2018 and 2017 is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Future lease receivables¥1,317,720¥1,332,705$12,399,736

Estimated residual value

51,979(85,529)

52,517(83,083)

489,125(804,827)¥1,284,170¥1,302,139$12,084,035

Future interest income

The aggregate annual maturity of finance lease receivables that transfer ownership to lessees, subsequent to March 31, 2018 and 2017 issummarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

¥104,341¥107,398$ 981,849

Due after one to two years

65,192

87,795

613,459

Due after two to three years

51,40949,924

483,761

Due after three to four years

27,30736,730256,966

Due after four to five years

13,166

14,712

123,898

Due within one year

Due after five years

17,73423,788

166,877¥279,151¥320,350$2,626,812

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Lease investment assets¥11,297¥16,542$106,305

Lease obligations

11,347

16,527

106,781

18. Commitments and Contingent Liabilities
The Companies’ contingent liabilities as of March 31, 2018 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

Loans and others¥36,254¥39,793$341,156

Asset purchases

2,224

3,249

20,932

86

100

817

¥38,566¥43,143$362,906

As a guarantor of indebtedness of:

Employees housing loans

The Companies, as lenders, have loan commitment agreements as of March 31, 2018 and 2017 amounting to ¥46,239 million ($435,111
thousand) and ¥48,378 million, respectively. The loans provided under these credit facilities as of March 31, 2018 and 2017 amounted to¥18,120 million ($170,511 thousand) and ¥12,498 million, respectively. Many of the facilities may expire without being utilized and the loans
provided are subject to periodic reviews of the borrowers’ credit standing. The unused portion of these facilities may not be fully utilized.

The aggregate annual maturity of finance lease receivables that do not transfer ownership to lessees, subsequent to March 31, 2018 and2017 is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2017

2018

¥ 448,357¥ 451,463$ 4,219,038

Due after one to two years

317,984

338,262

2,992,230

Due after two to three years

230,814229,396

2,171,961

Due after three to four years

151,806

149,371

1,428,500

Due after four to five years

88,32087,932

831,093

Due after five years

80,43776,278756,913¥1,317,720¥1,332,705$12,399,736

Due within one year

As for the lease accounting treatment for finance lease transactions that do not transfer ownership to lessees starting before April 1,
2008, the amounts of “Leased assets” (net of accumulated depreciation) as of March 31, 2008 were recorded as the beginning balance of“Lease investment assets,” and the amounts of rental revenues were recorded by the straight-line method based on the scheduled leaseterms. As a result, “Income before income taxes” increased compared with the amount calculated on assumption that the finance leasetransactions that do not transfer ownership to the lessee starting before April 1, 2008 would have been accounted for using the interest
method retroactively from each lease commencement date.
The related information is omitted because the amount is insignificant.

100

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 2018101

Financial Section

19. Estimated Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair value of financial instruments as of March 31, 2018 and 2017. The following
table does not include financial instruments for which it is extremely difficult to determine the fair value (Please refer to Note 2 below).

As of March 31, 2018

Carrying value

Millions of yen
Estimated
fair value

Assets(1) Cash on hand and in banks¥¥

82,212(2) Accounts receivable-installment sales

82,212201,906

Allowance for doubtful accounts (*1)

1,548,119
(869)

¥

—

203,7142,847

1,609,327

62,078539,058(2,597)

Allowance for doubtful accounts (*1)

536,461

552,890

16,428548,522(2,091)33,29033,290—(6) Short-term investment securities and investments in securities

37,49337,493—(7) Claims provable in bankruptcy or rehabilitation

1,625(1,072)

1,561,013

69,205568,440

22,00944,95444,954—(6) Short-term investment securities and investments in securities

47,44047,440—(7) Claims provable in bankruptcy or rehabilitation

1,379(1,143)235¥2,406,819

235¥2,506,203

Allowance for doubtful accounts (*1)

553

553

—

Total assets¥2,439,482¥2,520,836¥81,354

Liabilities(1) Notes and accounts payable-trade¥ 215,570¥ 215,570¥(2) Short-term loans from banks

416,341

416,341—(3) Commercial paper

800,700

800,700——(4) Payables under securitized lease receivables

59,10059,100—232,014230,320

1,694
10,399—¥99,384—

Liabilities(1) Notes and accounts payable-trade¥ 247,209¥ 247,209(2) Short-term loans from banks

428,850

428,850—(5) Bonds payable(3) Commercial paper

848,000

848,000—(6) Long-term loans, principally from banks

1,218,851

1,208,451(4) Payables under securitized lease receivables

61,90061,900—(7) Long-term payables under securitized lease receivables

6,036

5,983

53

(5) Bonds payable

264,692

262,138

2,553(8) Lease obligations

16,62916,462167

1,203,165

1,197,119

6,046

Total liabilities¥2,965,244¥2,952,929¥12,314

Derivatives
¥

¥

¥

—
(234)

¥

(234)

(6) Long-term loans, principally from banks¥(7) Long-term payables under securitized lease receivables

4,072

4,031

41

(8) Lease obligations

12,936

12,649287¥3,070,827¥3,061,899¥ 8,928

Total liabilities
Hedge accounting not applied¥

Hedge accounting applied¥

Total derivatives

Tokyo Century Corporation

Hedge accounting not applied
Hedge accounting applied
Total derivatives

Derivatives

102

Estimated residual value (*2)

1,600,637(52,517)

1,547,249

546,430

Total assets

201,490(623)(4) Accounts receivable-loans(5) Operational investment securities

Allowance for doubtful accounts (*1)

Allowance for doubtful accounts (*1)

83,565Difference(5) Operational investment securities

1,491,807
Allowance for doubtful accounts *Deferred profit on installment sales

8,169

1,492,616
(808)

( 1)

¥

83,565
216,466(14,975)

200,867

1,544,595(51,979)(4) Accounts receivable-loans¥(2) Accounts receivable-installment sales(3) Accounts receivable-lease receivables and investment assets

193,737

Allowance for doubtful accounts (*1)

Carrying value

Assets(1) Cash on hand and in banks—

194,291(554)

Allowance for doubtful accounts (*1)

Estimated residual value (*2)¥

210,523(16,232)

Deferred profit on installment sales(3) Accounts receivable-lease receivables and investment assets

Difference

As of March 31, 2017

Millions of yen
Estimated
fair value

Integrated Report 2018

(440)

¥

(440)

(1,320)(1,312)(1,760)(1,753)

¥

¥

253
365

¥

619

253
131

¥

384

—
7

¥

7

Tokyo Century Corporation

Integrated Report 2018103

Financial Section

As of March 31, 2018

Carrying value

Assets(1) Cash on hand and in banks$(2) Accounts receivable-installment sales

773,620

Deferred profit on installment sales

1,981,027(152,743)

Allowance for doubtful accounts (*1)

1,828,284(5,213)Thousands of U.S. dollars
Estimated
fair value$

1,823,070(3) Accounts receivable-lease receivables and investment assets
Estimated residual value (*2)
Allowance for doubtful accounts (*1)

773,620

Difference$—

1,899,942

76,872

14,689,124

651,222

14,534,633(489,125)
14,045,507(7,605)
14,037,902(4) Accounts receivable-loans

Derivatives
The value of assets and liabilities arising from derivatives is shown at net value in the above table and with the amount in parentheses
representing net liability position. Please refer to Note 9 Derivatives regarding the details of derivative transactions.
(Note 2) Financial instruments for which it is extremely difficult to determine the fair value

5,161,590(19,681)

Allowance for doubtful accounts (*1)

5,349,018

207,109(5) Operational investment securities

423,017423,017—

Unlisted shares(6) Short-term investment securities and investments in securities

446,413446,413—

Bonds(7) Claims provable in bankruptcy or rehabilitation

12,979(10,762)

Investments in limited partnerships, etc.
2,217

—

Total assets$22,648,151$23,583,355$935,204

Liabilities(1) Notes and accounts payable-trade$ 2,326,242$ 2,326,242$(2) Short-term loans from banks

4,035,476

4,035,476—(3) Commercial paper

7,979,674

7,979,674—

582,478

582,478——(5) Bonds payable

2,490,753

2,466,723

24,030(6) Long-term loans, principally from banks

11,321,780

11,264,886

56,894(7) Long-term payables under securitized lease receivables

38,32337,936387(8) Lease obligations

121,736

119,035

2,701$28,896,466$28,812,452$ 84,013

Total liabilities
Derivatives
Hedge accounting not applied$$(4,144)$$(12,351)(16,496)$(12,423)

Hedge accounting applied$

Total derivatives(4,144)(16,568)—72
72(*1) General and specific allowances are deducted from the amounts of accounts receivable-installment sales, accounts receivable-lease receivables andinvestment assets, accounts receivable-loans and claims provable in bankruptcy or rehabilitation, respectively.
(*2) Estimated residual value included in lease investment assets is deducted.

(Note 1) Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions.
Assets(1) Cash on hand and in banks
Since these items are settled in a short period of time, the carrying value approximates fair value.
(2) Accounts receivable-installment sales, (3) Lease receivables and investment assets and (4) Loans
Based on the classification by internal rating and contract terms, the fair value is estimated by the present value of the total ofprincipal and interest discounted by the interest rate to be applied if similar new contracts were entered into.
(5) Operational investment securities and (6) Short-term investment securities and Investments in securities
The fair value of the above securities is based on either quoted market prices or the prices provided by the counterparty financial
institutions.
   For information on securities classified by holding purpose, please refer to Note 6 Operational Investment Securities, Short-term
Investment Securities and Investments in Securities.
(7) C laims provable in bankruptcy or rehabilitation
The fair value of above is assumed to approximate their carrying value with the deduction of relevant allowances because their carrying
value is based on the fair value of the collateral and guarantees.
Tokyo Century Corporation

Integrated Report 2018

Investments in unconsolidated subsidiaries and affiliates

Trust beneficiary rights

2,217(4) Payables under securitized lease receivables

Thousands of
U.S. dollars

Millions of yen

5,141,908

Allowance for doubtful accounts (*1)

104

Liabilities(1) N otes and accounts payable-trade, (2) Short-term loans from banks, (3) Commercial paper and (4) Payables under securitized leasereceivables
Since these items are settled in a short period of time, the carrying value approximates fair value.
(5) Bonds payable, (6) Long-term loans, principally from banks and (7) Long-term payables under securitized lease receivables
Based on the classification by internal rating and contract terms, the fair value is estimated by the present value of the total ofprincipal and interest discounted by the interest rate to be applied if similar new contracts were entered into.
(8) L ease obligations
Based on the classification by internal rating and contract terms, the fair value is estimated by the present value of the total ofprincipal and interest discounted by the interest rate to be applied if similar new contracts were entered into.

Total

2018

2017

2018

¥203,622¥119,927$1,916,089

26,90013,170253,134

299

299

2,822

7,848

6,060

73,85375,28873,114

708,462¥313,960¥212,572$2,954,362

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are
not included in (5) Operational investment securities and (6) Short-term investment securities and investments in securities.
(Note 3) Redemption schedule for receivables and marketable securities with maturities subsequent to March 31, 2018 and 2017
Millions of yen

As of March 31, 2018
Due inOne Yearor Less

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years¥ 82,212

¥—

¥—

¥—

¥—

¥—

Accounts receivable-installment sales

72,73050,601

36,565

20,405

16,571

13,649Accounts receivable-loans

246,539

94,35652,08361,55436,97457,014

3,000

299

—

5,000

—

2,000

5,817

4,893

5,791

1,065

6,585

51,786

—

—

—

—

—

—

Cash on hand and in banks

Operational investment securities:
Available-for-sale securities with maturities(1) Bonds(2) Other
Short-term investment securities and investments
in securities:
Available-for-sale securities with maturities(1) Bonds(2) Other
Total

5,550

—

—

—

—

—

¥415,849¥150,150¥94,440¥88,025¥60,131¥124,450

Tokyo Century Corporation

Integrated Report 2018105

Financial Section

For the year ended March 31, 2017

Millions of yen

As of March 31, 2018

Cash on hand and in banks

Due inOne Yearor Less

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years¥ 83,565

¥—

¥—

¥—

¥—

¥—

Accounts receivable-installment sales

76,80653,477

34,69523,424

9,780

18,282

Accounts receivable-loans

235,756

85,216

71,59336,294

48,15562,041

Operational investment securities:
Available-for-sale securities with maturities(1) Bonds(2) Other

—

3,000

299

—

5,000

2,000

3,947

3,499

5,849

7,466

863

54,188

Short-term investment securities and investments
in securities:
Available-for-sale securities with maturities(1) Bonds(2) Other
Total

—

—

—

—

AmountDividends per share

Type of shares

Millions of yen

Yen

Common stock¥4,749Common stock¥4,961(Date of approval)
Resolution approved by

Due after
One Yearthrough
Two Years

—

—

3,980

—

—

—

—

—

¥404,055¥145,193¥112,438¥67,185¥63,799¥136,512(June 24, 2016)
Annual general meeting of the shareholders(November 4, 2016)
Meeting of the Board of Directors

Shareholders’
cut-off date

Effective
date

¥45.0

March 31,2016

June 27,
2016

¥47.0

September 30,
2016

December 9,2016(2) Dividends for which the shareholders’ cut-off date is in the current fiscal year but the effective date is in the following fiscal year are
as follows(Date of approval)
Resolution approved byType of shares(Paid from)(June 25, 2018)
Annual general meeting of the shareholders

Common stock(Retained
earnings)

AmountMillions of yen
Thousands of U.S.
dollars

Dividends per share¥ 6,546¥62.0$61,602$0.58

Yen
U.S. dollars

Shareholders’
cut-off date

Effective
date

March 31,2018

June 26,
2018

21. Legal Reserve and Additional Paid-in CapitalThousands of U.S. dollars

As of March 31, 2018

Cash on hand and in banks
Accounts receivable-installment sales
Accounts receivable-loans

Due inOne Yearor Less

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years$773,620

$—

$—

$—

$—

$—

684,389

476,156

344,079

192,019

155,938

128,4442,319,932

887,891

490,105

579,223

347,933

536,504

28,2292,822—

47,049—18,81954,742

46,04754,49810,02561,966487,310

—

—

—

—

—

—

In accordance with the Law, the Company provides a legal reserve which is included in retained earnings. The Law provides that an
amount equal to 10% of the amounts to be disbursed as distributions of earnings be appropriated to the legal reserve until the sum of thelegal reserve and additional paid-in capital equals 25% of the common stock account. The Law provides that neither additional paid-in
capital nor the legal reserve is available for the payment of dividends, but both may be used to reduce or eliminate a deficit by resolutionof the shareholders or may be transferred to common stock by resolution of the Board of Directors. The Law also provides that, if thetotal amount of additional paid-in capital and the legal reserve exceeds 25% of the amount of common stock, the excess may be
distributed to the shareholders either as a return of capital or as dividends subject to the approval of the shareholders. Under the Law,however, such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain conditions
are met.

Operational investment securities:
Available-for-sale securities with maturities(1) Bonds(2) Other

22. Stock Based Compensation

Short-term investment securities and investments
in securities:
Available-for-sale securities with maturities(1) Bonds

2014 stock option

2015 stock option

2016 stock option

2017 stock option

2018 stock option

7 directors
22 executive
officers

7 directors
20 executive
officers

7 directors
19 executive
officers
6 eligible
employees

7 directors
20 executive
officers
7 eligible
employees

8 directors
19 executive
officers
7 eligible
employees

8 directors
17 executive
officers
7 eligible
employees(1) Dividends paid to shareholders

Type and number ofshares to be issued upon Common stock
the exercise of the share
113,700
subscription rights

Common stock
59,300Common stock
76,000Common stock
74,600Common stock
82,700Common stock
75,700For the year ended March 31, 2018

Grant date

October 15,
2012

September 24,
2013

September 29,
2014

October 26,
2015

September 21,
2016

September 27,
2017

Fair value per stock at
the grant date

¥1,306 ($13.9)¥3,038 ($29.52)¥2,716 ($22.58)¥3,805 ($33.76)¥3,406 ($30.35)¥4,567 ($42.97)(2) OtherTotal

52,225

—

—

—

—

—

$3,913,141$1,412,917$888,683$828,319$565,838$1,171,079

The redemption schedules for long-term debt and lease receivables and investment assets are disclosed in Note 8 Short-Term
Borrowings, Long-Term Debt and Assets Pledged and Note 17 Lease Transactions, respectively.

20. Dividends(Date of approval)
Resolution approved byType of shares(June 23, 2017)
Annual general meeting of the shareholders(November 6, 2017)
Meeting of the Board of Directors

106

The Company has stock option plans for certain directors, executive officers and eligible employees. Under the plans, the rights topurchase the common shares of the Company are granted at an exercise price of ¥1 per share. The contractual term of the stock options
is 30 years. The stock option holders may exercise their share subscription rights only in a lump sum during the ten-day period starting a
day after leaving their position as director, corporate auditor, executive officer or employee of the Company.
The stock options outstanding as of March 31, 2018 were as follows:

Tokyo Century Corporation

Integrated Report 2018

Common stock
Common stock

AmountMillions of yen
Thousands of U.S.
dollars

Dividends per share
Yen
U.S. dollars

Shareholders’
cut-off date

Effectivedate¥ 5,594¥53.0$52,644$0.49

March 31,2017

June 26,2017¥ 5,490¥52.0$51,666$0.48

2013 stock option

Persons granted

The total stock-based compensation costs recognized for the years ended March 31, 2018 and 2017 were ¥345 million ($3,253 thousand)and ¥281 million, respectively.

September 30, December 5,
2017
2017

Tokyo Century Corporation

Integrated Report 2018107

Financial Section

The fair value of the 2018 stock option is estimated using the Black-Scholes option pricing model with the assumptions noted in thefollowing table.
2018 stock option

Expected volatility

30.52%

Expected holding period

4.0 years¥105 per share

Expected dividend-0.123%

Risk free interest rate

The volatility of the stock price is based on the historical volatility of the Company’s stock for the period equal to the option’s estimatedremaining outstanding period from the grant date. The estimated remaining outstanding period is based on the average term and average
age as of retirement. The estimated dividend is based on the forecast of dividends of ¥105 ($0.98) made for the year ended March 31, 2018at the grant date. The risk free interest rate is based on the yield of Japanese government bonds having a remaining life equal to theoption’s estimated remaining outstanding period.
The stock option activity for the fiscal years ended March 31, 2018 were as follows:
Number of shares2015 stock
2016 stock
optionoption2014 stock
optionOutstanding as of March 31, 2017

—

—

—

—

—

—

Granted

—

—

—

—

—

75,700Forfeited

—

—

—

—

—

—

Vested

—

—

—

—

—

75,700

Outstanding as of March 31, 2018

—

—

—

—

—

—

74,90043,20062,80068,80082,700

—

—

—

—

—

—

75,700Exercised

6,800

4,700

7,000

6,800

7,100

—

Forfeited

—

—

—

—

—

—

Outstanding as of March 31, 2018
Exercise price (yen)68,10038,50055,80062,00075,60075,700

¥1

¥1

¥1

¥1

¥1

¥1

Weighted average exercise price (yen)¥3,861¥3,833¥3,828¥3,836¥3,837—Weighted average fair value per stock at the
grant date (yen)Exercise price (U.S. dollars)¥1,306¥3,038¥2,716¥3,805¥3,406¥4,567

$0

$0

$0

$0

$0

$0

Weighted average exercise price (U.S. dollars)$36.33$36.06$36.02$36.09$36.10—Stock option activity

2017 stock
option2018 stock
option2013 stock
optionShare subscription rights which are not yet vested

Share subscription rights which have alreadybeen vested
Outstanding as of March 31, 2017
VestedWeighted average fair value per stockat the grant date (U.S. dollars)

Beginning of year

Carrying ValueNet change

End of year

Fair Value
End of year

$915,225$(81,386)$833,839$863,282

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation.
2. The components of net change in carrying value include an increase mainly due to the acquisition of real estate in the amount of ¥39,947 million for theyear ended March 31, 2017, decrease mainly due to the sales of real estate in the amount of ¥19,797 million ($186,292 thousand) for the year ended
March 31, 2018.
3. Regarding major properties, the fair value is mainly estimated in accordance with Japanese real estate appraisal standards. For other properties, it isbased on the appropriate index, which reflects market value.

24. Segment Information
1. Overview of Reportable Segments
The Company’s reportable segments shall be part of its organizational units whose financial information is individually available, andshall be subject to regular review by its Board of Directors for the purpose of deciding the allocation of its managerial resources andevaluating its business performance.
The Company is mainly engaged in leasing business and installment sales business as well as financing service business relating to
the main businesses. Therefore, the “Leasing and Installment Sales Business,” the “Finance Business” and the “Other Businesses”
constitute the Company’s reportable segments.
The “Leasing and Installment Sales Business” consists of leasing and installment sales of IT-related equipment and office equipment,
industrial machinery, commercial and service equipment, etc. (including sales of assets thereof pertaining to maturity and/or cancellation
before maturity of leasing transactions). The “Finance Business” consists of money-lending business and investment business such as
capital investments in operational investment securities and silent partnerships. The “Other Businesses” consists of commission
transactions, solar power sales business, and other businesses.
2. Calculation Method for amounts for Revenues, Profit or Loss, Assets, Liabilities and Other items by Reportable Segments
The accounting method for reportable business segments is the same as stated under “Summary of Significant Accounting Policies”
in Note 2.
3. Information on Revenues, Profit or Loss, Assets, Liabilities and Other items by Reportable Segments
Millions of yen

Year ended March 31, 2018
Leasing andInstallment Sales

Finance

Other

Total

¥959,812¥27,306¥25,081¥1,012,200

—

—

1,945

1,945

Total revenues

959,81227,30627,0271,014,145

Segment profit¥59,496¥15,770¥7,260¥82,527

Segment assets¥2,639,988¥821,176¥124,616¥3,585,781

Depreciation¥112,270—¥2,412¥114,683

Amortization of goodwill

¥581

—

—

¥581

Increase in property and equipment and intangible assets¥168,905—¥88,835¥257,741

Revenues, profits and assets by reportable segments
Revenues from customers$12.28$28.58$25.55$35.80$32.05$42.97

23. Investment and Rental Properties
The Companies own rental properties, such as commercial facilities and office buildings, in Tokyo and other areas. The net operating
income relating to these properties was ¥4,427 million ($41,662 thousand) and ¥4,837 million for the years ended March 31, 2018 and2017, respectively.
The carrying value in the consolidated balance sheet, change in carrying value and corresponding fair value of these properties for theyears ended March 31, 2018 and 2017 are as follows:
Millions of yen

Inter-segment revenues

Other items

Millions of yen

Year ended March 31, 2017
Leasing andInstallment Sales

Finance

Other

Total

¥924,246¥24,211¥27,649¥976,107

—

—

1,462

1,462

Revenues, profits and assets by reportable segments

Year ended March 31, 2018
Carrying ValueNet change

End of year

Fair Value
End of year

Revenues from customers

Beginning of year

¥97,261¥(8,648)¥88,612¥91,741

Total revenues

924,246

24,211

29,111

977,569

Segment profit¥59,931¥12,622¥8,095¥80,649

Segment assets¥2,615,314¥779,332¥32,938¥3,427,585

Depreciation¥98,154—¥1,657¥99,812

Amortization of goodwill

¥381

—

—

¥381

Increase in property and equipment and intangible assets¥211,305—¥7,237¥218,543

Millions of yen

Year ended March 31, 2017

108

Thousands of U.S. dollars

Year ended March 31, 2018

Beginning of year

Carrying ValueNet change

End of year

Fair Value
End of year

¥79,635¥17,625¥97,261¥100,656

Tokyo Century Corporation

Integrated Report 2018

Inter-segment revenues

Other items

Tokyo Century Corporation

Integrated Report 2018109

Financial Section

Information by products and services

Thousands of U.S. dollars

Year ended March 31, 2018
Leasing andInstallment Sales

FinanceMillions of yen

Other

March 31, 2018

Total

Revenues, profits and assets by reportable segments
Revenues from customers$9,031,827$256,949$236,021$9,524,797——

18,30318,303

Inter-segment revenues

Revenues from customers

Finance
lease

Operatinglease

Installment
sales¥601,832¥300,922¥57,057

FinanceOther¥27,306¥25,081

Total revenues

9,031,827

256,949

254,324

9,543,100

Millions of yen

Segment profit$559,862$148,396$68,325$776,585

March 31, 2017

Segment assets$24,842,278$7,727,266$1,172,639$33,742,184

Other items
Depreciation$1,056,466—$22,705$1,079,171

Amortization of goodwill$5,468——$5,468

Increase in property and equipment and intangible assets$1,589,403—$835,937$2,425,341

4. Difference between the total of reporting segments and the amounts on the consolidated financial statements and details for thedifference (The matter for the reconciliation of the difference)

2018

2017

2018

Inter-segment eliminations¥1,014,145(1,945)¥977,569(1,462)$9,543,100(18,303)

Revenues on consolidated statement of income¥1,012,200¥976,107$9,524,797

Revenues
Reportable segment total

Thousands of
U.S. dollars

Millions of yen

Profits

2018

2017

2018

Reportable segment total¥82,527(1,945)¥80,649(1,462)$776,585(18,303)(6,837)(7,187)(64,344)¥73,744¥71,999$693,936Inter-segment eliminations
General and administrative expenses not attributable to reporting segment
Operating income on consolidated statement of income

Thousands of
U.S. dollars

Millions of yen

Assets

2018

2017

2018

¥3,585,781¥3,427,585$33,742,184

Assets not attributable to reporting segment

173,687

152,297

1,634,401

Total assets on consolidated balance sheet¥3,759,469¥3,579,882$35,376,586

Reportable segment total

Operatinglease

Installment
sales¥580,169¥270,438¥73,639

Finance¥24,211¥1,012,200

Other

Total

¥27,649¥976,107

Thousands of U.S. dollars

March 31, 2018

Revenues from customers

Thousands of
U.S. dollars

Millions of yen

Revenues from customers

Finance
lease

Total

Finance
lease

Operatinglease

Installment
sales

Finance

Other

Total

$5,663,242$2,831,675$536,908$256,949$236,021$9,524,797

Geographical information(a) Revenues
Information by geographic segment is summarized as follows:
Millions of yen

March 31, 2018
Japan

¥901,666

Europe and North America
Ireland
Others¥16,690¥53,006

Asia

Central andSouth America

Total¥16,281¥24,555¥1,012,200

Thousands of U.S. dollars

March 31, 2018
Japan

$8,484,677

Europe and North America
Ireland
Others$157,056$498,794

Asia

Central andSouth America

Total$153,206$231,062$9,524,797

Information by geographic segment for the year ended March 31, 2017 is not disclosed due to the third parties located in Japan
represented more than 90% of the consolidated revenues for the year.
(b) Property and equipment
Information by geographic segment is summarized as follows:
Millions of yen

March 31, 2018

Millions of yen
Reportable segment
total

Adjustments

Consolidated

Amortization of goodwill
Increase in property and equipment and intangible assets

110

Tokyo Century Corporation

Integrated Report 2018

Total

¥10,733¥33,936¥779,638

2017

2018

2017

¥114,683¥99,812¥2,993¥2,547¥117,677¥102,359

Millions of yen

March 31, 2017

581

381

481

481

1,063

863

257,741

218,543

5,187

2,526

262,928

221,069

Adjustments

Consolidated

2018

2018

2018

$28,170¥523,008

Japan¥410,731

Reportable segment
total$1,079,171

Increase in property and equipment and intangible assets

Central andSouth America

2018

Other items
Amortization of goodwill

Asia

2017

Thousands of U.S. dollars

Depreciation

Europe and North America
Ireland
Others2018
Other items
Depreciation

Japan$1,107,341

5,468

4,535

10,0042,425,341

48,8102,474,151¥107,268¥104,692

Europe and North America
Ireland
OthersAsia

Central andSouth America

Total¥124,116¥6,096¥30,339¥681,624¥110,340

Thousands of U.S. dollars

March 31, 2018
Japan

$4,921,502

Europe and North America
Ireland
Others$1,009,393$985,151

Asia

Central andSouth America

Total$101,006$319,342$7,336,397

Information by main customer
Information by main customer for the years ended March 31, 2018 and 2017 are not disclosed because there were no customers that
accounted for 10% or more of the revenues from customers recorded in the consolidated statements of income.

Tokyo Century Corporation

Integrated Report 2018111

Financial Section

Information about the impairment loss on fixed assets by reportable segments
Millions of yen

March 31, 2018
Leasing andInstallment Sales

Finance¥2,624

Impairment loss

Other

—

Total

—

¥2,624

Thousands of U.S. dollars

March 31, 2018
Leasing andInstallment Sales

Finance$24,699

Impairment loss

Other

—

Total

—

$24,699

Net assets per share are calculated based on the net assets available for distribution to the shareholders of common stock (i.e., the net
assets excluding non-controlling interests and share subscription rights) and the number of shares of common stock outstanding at eachbalance sheet date.
Basic net income attributable to owners of parent per share is calculated by dividing the net income attributable to owners of parent
available for distribution to shareholders of common stock by the weighted-average number of shares of common stock outstanding
during the period.
Diluted net income attributable to owners of parent per share is calculated based on the net income attributable to owners of parent
available for distribution to shareholders and the weighted-average number of shares of common stock outstanding during the period
after giving effect to the dilutive potential of shares of common stock to be issued upon the exercise of warrants and stock subscription
rights.
The base data for calculation were as follows:
1. Net assets per share
Thousands of shares

For the year ended March 31, 2018, the impairment loss on the aircraft assets was recognized. This information is not provided due to its
low materiality for the year ended March 31, 2017.

March 31, 2018

March 31, 2017

105,588

105,557

Number of shares of common stock used for the calculation of net assets per share

Information about the amortization and unamortized balance of goodwill
Millions of yen

March 31, 2018
Leasing andInstallment Sales

FinanceThousands of
U.S. dollars

Millions of yen

Other

Total

Amortization

¥581

—

—

¥581

Unamortized balance

14,235——

14,235

March 31, 2018

March 31, 2017

March 31, 2018

¥456,036¥404,818$4,291,302

60,044

50,117565,013

Share subscription rights

1,196

943

11,259Non-controlling interests

58,84749,174

553,753¥395,992¥354,701$3,726,288

Total net assets
Amount deducted from total net assets:

Net assets attributable to shares of common stock

Millions of yen

March 31, 2017
Leasing andInstallment Sales

Finance

Other

Total

Amortization

¥381

—

—

¥381

Unamortized balance

10,479——10,4792. Basic and diluted net income attributable to owners of parent per share
Thousands of shares

Weighted average number of shares of common stockThousands of U.S. dollars

Finance

105,586

105,557

341

293

Exercise of share subscription rights

Other

Total

Amortization$  5,468——$  5,468

Unamortized balance

133,952——

133,952

Amortization for the years ended March 31, 2018 and 2017 were ¥481 million ($4,535 thousand) and ¥481 million, respectively.
Unamortized balance as of March 31, 2018 and 2017 were ¥2,650 million ($24,944 thousand) and ¥3,132 million, respectively. Theseamounts were not allocated to any reportable segment since they are related to multi segment.

Information about the gain recognized on negative goodwill by reportable segments
This information is not provided due to its low materiality for the year ended March 31, 2018. For the year ended March 31, 2017, there was
no gain recognized on negative goodwill.

27. Material Subsequent Events(Issuance of Bonds)
The Company issued the twenty-second, the twenty-third and the twenty-fourth unsecured bond (with inter-bond pari passu clause) on
April 13, 2018. The details are as follows:

Total amount issued

Interest rate
Redemption date
Redemption method
Payment date

The net assets per share, basic and diluted net income attributable to owners of parent per share for the years ended March 31, 2018 and2017 were as follows

The twenty-third

The twenty-fourth¥20,000 million($188,199 thousand)¥20,000 million($188,199 thousand)¥100 ($0.94) per ¥100 ($0.94) of face value¥10,000 million($94,099 thousand)

0.20% per annum

0.32% per annum

0.06% per annum¥100 ($0.94) per ¥100 ($0.94) of face value

Redemption price

Related party transactions information is not presented due to immateriality for the years ended March 31, 2018 and 2017.

26. Amounts Per Share

The twenty-second

Issuance price

25. Related Party Transactions

CollateralApplication of the fund

April 13, 2021

April 13, 2023

April 11, 2025

Lump-sum redemption at maturity
April 13, 2018
This bond is without any collateral or guaranty and there are no assets reserved for this debenture.
For the redemption of short-term bonds

U.S. dollars

Yen

2018

2017

2018

¥3,750.35¥3,360.27$35.29

Basic¥486.09¥413.51$4.57

Diluted¥484.53¥412.36$4.55

Net assets

2017

Increase in shares of common stock

March 31, 2018
Leasing andInstallment Sales

2018

Net income attributable to owners of parent:

112

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 2018

113

Report of Independent Auditors(Share acquisition)
On April 27, 2018, the Company has entered into a share transfer agreement to acquire 70% of the total issued shares in SHINKO REALESTATE CO., LTD.
(1) Summary of business combination
1) Name and business description of acquired company
		 Name:						 Principal business:
		 Company size:		(as of March 31, 2017)

SHINKO REAL ESTATE CO., LTD.
(Head Office: Kobe, Hyogo Prefecture)
Real estate development and sales, lease, brokerage, renovation, etc.
Consolidated net assets: ¥51,373 million ($483,419 thousand)Consolidated total assets: ¥114,153 million ($1,074,178 thousand)2) Purpose of additional share acquisition		Our Specialty Financing business aims to create new values by integrating finance and business as proclaimed in the third
medium-term management plan, and has been challenging dynamically in its business with excellent partners while working on
creation of new growth fields in pursuit of expertise in various products. Real estate business is one of the four key areas of ourSpecialty Financing business along with aviation, shipping, environment and energy.
			 Through the business combination, we aim for further development, including synergy effects in expanding business
opportunities in each life stage, such as development, ownership, management, and exits, and diversifying exit strategies throughutilizing functions and platforms held by SHINKO REAL ESTATE CO., LTD. as a comprehensive real estate company, and byintegrating strength of the Company.
3) Date of business combination
		 July 1, 20184) Legal form of business combination
		 Acquisition of shares5) Name of the company after business combination
		 No change
6) Number of shares to be acquired, shareholding ratio and ratio of voting rights
		 Number of shares to be acquired (shareholding ratio): 40,370 (70.0%)
		 Number of voting rights (ratio of voting rights): 40,370 (70.0%)
7) Basis for determining acquiring company
		 The Company will acquire shares in consideration of payment of cash.
(2) Acquisition cost and its breakdown
Acquisition cost: Approximately ¥69,200 million in cash ($651,171 thousand)
The acquisition cost will be adjusted by way of prescribed method specified in the share transfer agreement.
Fund for the acquisition will be procured by way of new borrowing.
(3) Main acquisition-related costs
Advisory fees and other expenses: Approximately ¥400 million ($3,763 thousand)

114

Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 2018115

Main Subsidiaries, Affiliates and Other
Japan

Asia
Company

Location

Main Business

VotingShares*Consolidated Subsidiaries

Company

Location

VotingShares*Main Business

Consolidated Subsidiaries

Nippon Car Solutions Co., Ltd.

Japan

Automobile leasing

60%

Tokyo Century Leasing China Corporation

China

General leasing

80%

Nippon Rent-A-Car Service, Inc.

Japan

Automobile rental and leasing

88%

Tokyo Century Factoring China Corporation

China

Factoring services

100%

China

Leasing and finance through alliance with
China UnionPay Merchant Services

100%

General leasing100%

Orico Auto Leasing Co., Ltd.

Japan

Automobile leasing for individuals

50%

Fujitsu Leasing Co., Ltd.

Japan

IT-related equipment leasing

80%

IHI Finance Support Corporation

Japan

General leasing and finance67%

Orico Business Leasing Co., Ltd.

Japan

General leasing

50%

ITEC Leasing Co., Ltd.

Japan

General leasing

85%

S.D.L Co., Ltd.

Japan

General leasing

100%

TRY Corporation

Japan

Refurbishment of PCs

80%

TC Property Solutions Corporation

Japan

Property management

100%

TC Agency Corporation

Japan

Casualty insurance

100%

TC Business Service Corporation

Japan

Business processing services

TC Leasing Co., Ltd.
Tokyo Leasing (Hong Kong) Ltd.

Hong Kong

Tokyo Century Leasing (Singapore) Pte. Ltd.

Singapore

General leasing

100%

Tokyo Century Capital (Malaysia) Sdn. Bhd.

Malaysia

General leasing

100%

TISCO Tokyo Leasing Co., Ltd.

Thailand

General leasing

49%

HTC Leasing Co., Ltd.

ThailandConstruction equipment finance70%

TC Advanced Solutions Co., Ltd.

Thailand

Reverse factoring and other services

59%

TC Car Solutions (Thailand) Co., Ltd.

ThailandFinancing and services related toautomobiles

99%

100%

PT. Century Tokyo Leasing Indonesia

Indonesia

General leasing

85%

Indonesia

General trading company

100%

Japan

Business inspection services

100%

PT. TCT Indonesia

Kyocera TCL Solar LLC

Japan

Sales of electricity generated using solar
power

81%

Equity-Method Affiliates

TCLA Godo Kaisha

Japan

General leasing and installment sales

100%

Shunan Power Corporation

Japan

Power generation

60%

TC Business Experts Corporation

Equity-Method Affiliates
Nanatsujima Biomass Power LLC

Japan

Nittochi Asset Management Co., Ltd.

Japan

Sales of electricity generated using
biomass power
Management and formation of real estate
investment funds

25%
30%

Tong-Sheng Finance Leasing Co., Ltd.

China

Automobile and equipment leasing

49%

Dalian Bingshan Group Hua Hui Da Financial
Leasing Co., Ltd.

China

Finance and general leasing

40%

Suzhou New District Furui Leasing Co., Ltd.

China

Finance and general leasing

20%

President Tokyo Corporation

TaiwanAutomobile leasing and general leasing

49%

PT. Hexa Finance Indonesia

Indonesia

Construction equipment finance20%

PT. Big Ecommerce Bersama

Indonesia

B-to-G and B-to-B e-commerce
operation

20%

BPI Century Tokyo Lease & Finance Corporation

Philippines

General leasing

49%

Other
TATA Capital Financial Services Limited

U.S.A.

India

Finance and general leasing—

Location

Main Business

VotingShares*EuropeCompany

Location

Main Business

VotingShares*Consolidated Subsidiaries

Company

Consolidated Subsidiaries

TC Skyward Aviation U.S., Inc.

U.S.A.

Aviation leasing and finance100%

TC Skyward Aviation Ireland Ltd.

Ireland

Aviation leasing and finance

100%

TC Realty Investments Inc.

U.S.A.

Real estate investment

100%

TC Aviation Capital Ireland Ltd.

Ireland

Aviation leasing and finance100%

CSI Leasing, Inc.

U.S.A.

IT equipment leasing

100%

Tokyo Leasing (UK) Plc

U.K.

General leasing

100%

Tokyo Century (USA) Inc.

U.S.A.

General leasing

100%

Aviation Capital Group LLC

U.S.A.

Aviation leasing and finance20%

GA Telesis, LLC

U.S.A.

Provider of products, services, and solutions
to the commercial aerospace industry

20%

Equity-Method Affiliates* Voting share percentages are rounded to the nearest whole number.

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Tokyo Century Corporation

Integrated Report 2018

Tokyo Century Corporation

Integrated Report 2018

117

Stock Information (As of March 31, 2018) / Bond Ratings (As of March 31, 2018)
Number of Shares ofCommon Stock Authorized

400,000,000 shares

8439

Number of Shares ofCommon Stock Issued

106,624,620 shares

100 shares

Number of Shareholders

8,624Transfer Agent

Mizuho Trust & Banking Co., Ltd.

Stock Listing

Tokyo Stock Exchange, First Section

Securities Code
Trading Lot Size

Major Shareholders

Corporate Information / Management (As of July 1, 2018)
Company NameTokyo Century Corporation

Head Office

FUJISOFT Bldg., 3 Kanda-neribeicho, Chiyoda-ku, Tokyo 101-0022, JapanFoundedJuly 1, 1969

Paid-in Capital¥34,231 million

Company Representative

Chairman & Co-CEO Toshihito Tamba
President & CEO Shunichi Asada

Number of Employees

6,035 (1,016 on a non-consolidated basis as of March 31, 2018)

Closing of Accounts

March 31

Main Banks

Mizuho Bank, Ltd.; The Norinchukin Bank; Sumitomo Mitsui Trust Bank, Limited;
Mitsubishi UFJ Trust and Banking Corporation; MUFG Bank, Ltd.

Independent Auditor

Ernst & Young ShinNihon LLC

Network

Domestic:
Head office, Sapporo, Sendai, Saitama, Yokohama, Shizuoka, Nagoya, Kanazawa, Kyoto, Osaka,
Kobe, Okayama, Hiroshima, Fukuoka

Breakdown of Shareholders

Shareholders

Number of
Shares Held(Thousands)

Percentage ofSharesOutstanding*

26,656
15,712
10,306

25.3
14.9
9.8

6,455

6.1

4,688

4.4

2,288

2.2

2,286
2,228

2.2
2.1

1,900

1.8

1,716

1.6

ITOCHU Corporation
Nippon Tochi-Tatemono Co., Ltd.
KSO Co., Ltd.
Japan Trustee Services Bank, Ltd.
(Trust accounts)
Mizuho Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
(Trust accounts)
Seiwa Sogo Tatemono Co., Ltd.
Nippon Life Insurance Company
Mizuho Trust & Banking Co., Ltd.
(Retirement Allowance Trust,
Orient Corporation AccountTrust & Custody Services Bank, Ltd.
re-entrusted)
Yushu Tatemono Co., Ltd.

Foreign investors
11.8%

Financial
institutions
25.8%

Individuals
and other
4.5%

Securities
companies
0.7%
Other domestic
institutions
56.2%

Overseas:
We operate in 37 countries and regions in Asia, North America, Central and South America,
Europe, and elsewhere

Treasury stock
1.0%* Excluding treasury stock

Management

Stock Price and Trading Volume
Stock Price (Right Scale)

Trading Volume (Left Scale)(Thousands of shares)(Yen)

10,000

8,000

7,500

6,000

Board of Directors
Chairman & Co-CEO,Representative Director

Director(External Director) *1, *3

Deputy President, Directorand Executive Officer

Director and Managing
Executive Officer

Director and Executive
Officer

Toshihito Tamba

Yoshinori Shimizu

Makoto Nogami

Osamu Tamano

Ko Nakagawa

President & CEO,
Representative Director
5,000

4,000

2,500

2,000

Shunichi Asada

Masao Yoshida
Yukito Higaki
Akio Nakamura

Director and Senior
Managing Executive Officer

Seiichi Mizuno
Akihiro Naruse

Masataka Yukiya
Koichi Baba

Corporate Auditors
0 13/4

14/4

15/4

Bond Ratings

Short-term

Japan Credit Rating Agency, Ltd. (JCR)

18/4

Rating and Investment Information, Inc. (R&I)[Long-term Issuer Rating]Rating: A+
Outlook: Positive[Issuer Rating]Rating: A
Outlook: Stable

0Standing Corporate Auditor(External Corporate Auditor) *2

Standing Corporate
AuditorCorporate Auditor(External Corporate Auditor) *2, *3*1. External director as stipulated by Article 2-15 of
the Corporation Law of Japan

Futoshi Okada

Yasuyoshi Nozaki

Masao Fujieda*2. External corporate auditor as stipulated by
Article 2-16 of the Corporation Law of Japan

Yuichiro Ikeda[Preliminary Rating for Bonds Registered for Issuance]*
Rating: A+
Expected Issue Amount: ¥200 billion
Issue Period:
Two Years Beginning February 14, 2018

*3. Designated independent officer as stipulated by
the Tokyo Stock Exchange

Executive Officers
Deputy President,
Executive Officer

Managing Executive Officer

Executive Officer[Preliminary Rating for Bonds Registered for Issuance]*
Rating: A
Expected Issue Amount: ¥200 billion
Issue Period:
Two Years Beginning February 14, 2018

Koichi Nakajima

Kenji Murai

Kazuhiro Shibata

Foo Siang Seng

Yoshihiro Ueda

Akihiko Okada

Takashi Kamite

Tomoyuki Akamatsu

Tatsuya Hirasaki

Toshihiko Tamura

Yoshio Nomura

Shuji Ozawa

Takashi Yonetsu

Masami Nagata

Mahoko Hara

Toshio Kitamura

Kimio Kozuka

Minoru Kuwahara[Euro Medium-Term Note Program]
Rating: A+
Maximum Outstanding Amount:
Equivalent of US$2 billion[Euro Medium-Term Note Program]
Rating: A
Maximum Outstanding Amount:
Equivalent of US$2 billion

Yasushi Yoshino

Toshifumi Takashima

Tatsuya Yamamoto

Junji Tsutsui

Yuji Itagaki[Commercial Paper]
Rating: J-1
Maximum Outstanding Amount: ¥800 billion[Commercial Paper]
Rating: a-1
Maximum Outstanding Amount: ¥800 billion* Each bond will be rated by each rating company upon issuance.

118

17/4

 okyo Century Corporation has received the followingTissuer ratings from the rating agencies listed below.

Credit Rating Agency

Long-term

16/4

Tokyo Century Corporation

Integrated Report 2018

Senior Managing Executive
Officer

Yoichiro Nakai

Hiroaki Ogino

This integrated report is also available on Tokyo Century’s corporate website.

www.tokyocentury.co.jp/en/
Tokyo Century Corporation

Integrated Report 2018

119

Tokyo Century Corporation
FUJISOFT Bldg., 3 Kanda-neribeicho, Chiyoda-ku,
Tokyo 101-0022, Japan
www.tokyocentury.co.jp/en/