Fuyo Lease Group Integrated ReportCorporate Slogan
CONTENTS

Editorial Policy

Go where no one has gone before
We b eli e ve.
Leasing is not just about lending things.
It's about lending inspiration, intelligence and a sense of wonder.
We b eli e ve.
We embrace challenges, because they are the fountain of new business.
We b eli e ve.
Meeting expectations is our duty. Exceeding them is our profession.

Message from the President

P3

Overview and History of Fuyo Lease GroupP7

Our Business

P9

Financial Highlights

P11

Medium-term Management Plan

P13

Purpose of this report
Since FY 2018, Fuyo Lease Group has integrated its
CSR Report and Annual Report into an Integrated
Report. This report is designed to provide informationon our financial and non-financial activities in an
integrated manner to help the readers assess theGroup's value comprehensively. We also aim to
showcase the foundation of all our activities forvalue creation which will help stakeholders better
understand our future corporate values.

Reporting period
Fiscal year 2017 (April 2017 - March 2018)

We b eli e ve.
Succeeding is easy when times are good, but true partners are there even in the hard times.
We ac t .
To open up new business opportunities in this country, we will take the first bold step.

*The report also includes some information pertaining to fiscal 2018.

Value Creation Story

P15

Scope of reporting
Materiality

P17

Fuyo General Lease Co.,Ltd., its 46 consolidated subsidiaries
and 4 affiliate companies

Special Feature 1 ESCO business

P19

Reference guidelines

Special Feature 2 Accretive

P21

International Integrated Reporting Framework Ver. 1.0
released by the International Integrated Reporting Council(IIRC)

Business Segments Overview

P23

Foundation for Value Creation

P33

We will expand the frontier of leasing.
We are Fuyo L ease.
Our corporate slogan,“Go where no one has gone before,”embodies the Fuyo Lease Group's mission of sincerely
responding to customers’needs and providing them with solutions that exceed their expectations, as well as ourcommitment to pioneering new business frontiers.

Management Philosophy• We support corporate activities through our leasing business with view to contributing todevelopment of the society.

Corporate Governance

P39

Board Members

P43

Risk Management and Compliance System

P45

Financial Section

P49

Stock Information

P94

Date of issuance
November, 2018

Note on forward-looking statements
This report contains forward-looking statements, such as
future plans and strategies, that are based on currently
available information. These expectations and projections
are subject to a number of risks and uncertainties that
could cause actual results to differ materially from thoseanticipated. These uncertainties include, but are not limited
to social and economic conditions, market demand andcompetition, laws and regulations, interest rates, andcurrency exchange rates.

• We maintain customer's first philosophy, providing best services.
•W e aim to earn high marks from shareholders and markets while pursuing creativity and innovation.
•W e create a challenging and rewarding workplace where employees think and act on their own.

1 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 20182

Concentrating Management Resources and Enhancing Corporate Value

Message from the President
Our goal is to“go where no one has gone before”
through continuously expanding the frontiersby creating simultaneouslysocial and corporate value.

us to identify the areas that generate stable profit and theareas where we should concentrate our management
resources to step things up.
We also use return on assets (ROA) as a key metric to
identify businesses we should consider withdrawing from
if the ROA underperforms. Specifically, in FY 2017, weenhanced operating efficiency by consolidating all small
vendor leasing programs, for which we lacked adequate
resources, into Sharp Finance Corporation, our subsidiarywith vendor leasing know-how.

In order to select Strategic Areas and concentrate on themas we look toward the future, we have introduced theconcept of zone management. Zone management entails
segmenting business operations into four zones that aremanaged individually. More specifically, we have plugged
our operations into an Incubation Zone where the objective
is to create new business options, a Transformation Zone
where the objective is to expand our incubated businesses,a Performance Zone where the objective is to deliver
results in existing businesses, and a Productivity Zone
where the objective is to increase productivity. This helps

President & Chief Executive Officer

Yasunori Tsujita

Disruptive Innovations

Sustaining Innovations
Performance Zone
(Deliver results from existing businesses)

Transformation Zone (Grow new businesses)

Revenue Performance

Payout period:
2–3 years

Strategic Areas

Overseas

Enabling Investments

We are now in the second year of “Frontier Expansion
2021,” our five-year Medium-term Management Plan
launched in April 2017. As the name implies, “Frontier
Expansion 2021” aims to expand our business operations
into untapped markets. Although it is not always easy to

New Domains

Fiscal Year 2017 Review
During FY 2017 Japan’s economy remained on a gradual
recovery track as corporate earnings and the nation’s job
market improved. Overall, the global economy also grewsteadily, despite concerns about US trade policies andgeopolitical risks.
While domestic lease transaction volume in FY 2017(ending March 31, 2018) decreased 2.9% year-on-year
to total ¥4,875.9 billion (according to data released by

3 Fuyo Lease Group Integrated Report 2018

Frontier

the Japan Leasing Association), the Fuyo Lease Groupsaw profits hit record highs, due partly to the terminationand expiration of large-scale leases in addition to theaccumulation of operating assets such as real estateleases. “Frontier Expansion 2021” got off to a good startwith total revenues increasing 16.4% year-on-year to reach¥590.2 billion, operating profit up 13.9% to total ¥32.6
billion, and ordinary profit up 12.2% to total ¥35.2 billion.

Group
Core Areas

・Auto Leases
・Domestic Corporate
・Vendor Leases ・Finance

Frontier
Expansion
2021

Payout period:
Every year

New Domains
Corporate Department

E.g. Investment in an R & D-driven
venture company
Incubation Zone (Develop new businesses)

venture into new business fields in this ever-changing
world, we will continue to leverage our unique strengths inorder to live up to our corporate slogan: “Go where no one
has gone before.”

Real Estate

Energy/Environment
Medical /Social Welfare・Accretive
・Asset Value/Business Value

Expanding Frontiers

Aircraft

Payout period:
During the
Medium-term
Plan

Productivity Zone (Boost productivity)
Reference: Zone to Win: Organizing to Compete in an Age of Disruption(Written by Geoffrey A. Moore, translated by Kiyoshi Kurihara)

We will quickly identify the needs of an ever-changing world and businessenvironment, and use our business operations to provide solutions for problems
facing society to simultaneously create social and corporate value.
The Fuyo Lease Group works continuously to build new
business models in response to changes in the social
environment with the aim of achieving sustainable growth.
We believe this requires identifying social issues andcultivating future markets where we can find solutions. We
are putting this idea into practice in two of our Strategic
Areas specified in “Frontier Expansion 2021,” i.e., Energy/
Environment and Medical/Social Welfare businesses,
based on the concept of Creating Shared Value (CSV),
which involves creating corporate value in a way that also
creates value for society. Our strength lies in the ability
to help solve pressing social problems, such as climatechange and a declining birthrate coupled with an aging
population, in various ways by leveraging our products andfinancial services.
After realizing that our business activities resonate withthe principles of the United Nations Global Compact, we
gladly expressed our support bybecoming a signatory in January
2018. We believe that supporting
the Ten Principles of the UN Global
Compact and putting them into
practice will lead directly to thegrowth of our company.

Fuyo Lease Group Integrated Report 20184

Message from the President

Our strategies for Energy/Environment, as well as Medical /Social Welfare businesses, aim at achieving sustainable growth,
while solving the social issues facing Japan.
As the need to reduce greenhouse gas (GHG) emissions
is being addressed across the globe, Japan has been
exposed to the negative externalities of nuclear power,
which has resulted in calls for an urgent energy shift. The
Fuyo Lease Group is actively working to reduce indirect
GHG emissions through its financial services, such as
project financing for renewable energy power companies,
as well as through product offerings, including rental andleasing of energy efficient equipment. Furthermore, theFuyo Lease Group directly contributes to the reductionof GHG emissions by growing its solar power business.
The Fuyo Lease Group operates solar power businessin 30 locations across Japan, aiming to increase operating
assets to ¥34 billion (i.e., to double in comparison to theend of FY 2016) by the end of FY 2021, while maintaining
an ROA of 6.0%. The Fuyo Lease Group is steadily improving
the financial results, for example, by launching the largest
solar power plant in our portfolio in FY 2017. To further
demonstrate our commitment to the set policies, we joined
RE100, a business initiative which aims to source 100%
renewable energy to power business activities, a first for acomprehensive leasing company in Japan. We anticipate
more opportunities to collaborate with our stakeholders
including customers.
In the Medical/Social Welfare business, we are
implementing the “dot-line-plane strategy” for healthcare
and nursing care services. It has become common practiceto lease or rent expensive medical equipment, and more
and more companies are entering the market. The crowded

playing field has forced some leasing companies to throw
in the towel. There is no way to provide value or earn anappropriate profit in this kind of competitive environment
with individual, isolated services alone (i.e. dots). The
only way out of this quagmire is to find a way to connect
the dots so they form lines, and then turn those lines intoplanes so we can enhance our services, while forging astrong foundation for the Medical/Social Welfare businessin line with “Pursue Group Synergies,” one of the Three
Strategic Axes under “Frontier Expansion 2021.” Someof the initiatives we are working on include providing
equipment and system lessees with facility relocation
know-how, as well as selling and buying used equipment.
As part of this strategy, in January 2017, we acquired acontrolling stake in Accretive Co., Ltd., which specializes
in factoring medical service fees, etc., and in April 2018,
we acquired FUJITA Co., Ltd., a reseller of used medical
equipment. Our initiatives are completely in synch withthe principles and practices of the Integrated Community
Care System promoted by the Ministry of Health, Labor andWelfare, and should not only boost our bottom line, butalso help solve problems facing Japan, including its rapidly
aging population.
The Healthcare Advisory Office, set up in August 2018,enabled us to offer solutions that integrate a wide rangeof products and services available across our corporategroup. We will continue to work hard to create group-wide
synergies in the Medical /Social Welfare business.

We aim to bring out the best in each of our employees.
Typically for a non-manufacturing company, ourgreatest asset is people. We firmly believe that providing
employees with an environment where they canconcentrate on their jobs and do their best within
the limited amount of time they have is a shortcut tohelping them reach their full potential, and is essential
for maximizing the company’s performance. When
implementing work-style reforms, we engage employees
in the discussion in order to gain better understandingof their perspective. One example of these reforms is
the introduction of staggered hours that led to a gradualreduction of actual hours worked.

5 Fuyo Lease Group Integrated Report 2018

We nurture a corporate culture where each employee has a sense of ownership,
and that makes us competitive.
All employees must join hands to continually take on
new challenges if we are to sharpen our competitiveedge in this tough operating environment. We
formulated “Frontier Expansion 2021” using a bottomup approach that involved all our employees. We use
ROA, not ROE, as a performance indicator because
we want to rais e each employee’s awarenes s ofperformance improvement by directing their attention
towards profitability of the company relative to operating
assets through efficiency. In order to ensure that theshared values instilled through these practices takeroot throughout the organization, we create a numberof opportunities to talk directly with employees, suchas financial presentations for employees and meetings
with staff at our different locations across the globe. As
the president of the company, I will continue to keep
the lines of communication open in order to drive home
the idea of “staying flexible and taking on impossible
challenges to expand operations,” which is part of our
mission statement.

Toward long-term profit distribution to shareholders and sustainable growth
In the light of our current financial standing andkey performance indicators, we paid dividends for
FY 2017 (ending March 31, 2018) at a payout ratioof 20.1% and project that the dividend for FY 2018(ending March 31, 2019) will be 156 yen, up 10 yen
year-on-year, with a payout ratio of 20.5%. We will
work to return profits to shareholders by continuing
to pay stable dividends on a long-term basis, whilestrengthening our operating foundation and financial
health, through enhancing shareholders' equity, as wemove ahead with business strategies, such as M & A,
designed to achieve growth.
We are committed to going beyond our
stakeholders’ expectations as we work to expand
our business horizons with the focus on leasing andfinancing, while adapting to changes in society.
We will continue to devote ourselves to becoming
a company that continues to offer value through amultifaceted approach.

We believe that securing personnel with outstanding
expertise is a prerequisite for the sustainable growth ofour business operations. Besides, we must ensure that
we maintain a diverse array of resources so that we canbetter respond to an increasing social diversity and giveour people the kind of expertise that will enable us to stayahead of the pack. That is why we are building a talentpool that enables us to assign the right person to the rightjob regardless of their sex, age, or nationality. In FY 2017,
we established the Diversity Promotion Office to pick up
the pace of recruitment, employment, and empowermentof employees from across the entire spectrum.

Fuyo Lease Group Integrated Report 20186

Overview and History of Fuyo Lease GroupThe Fuyo Lease Group seeks direct feedback from customers and is fully committed
to customer support in order to resolve management issues, including those related tocapital expenditure and improving work efficiency, as well as making customers' dreams
come true.

Company name

Fuyo General Lease Co., Ltd.

Headquarters

3-3-23, Kanda-Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan

EstablishedMay 1, 1969

Paid-in capital¥10,532 million (Number of shares outstanding: 30,288,000 shares)

Shares listed on

First Section of the Tokyo Stock Exchange (ticker : 8424)

Number of employees

Consolidated : 1,715 Non-consolidated : 689 (as of March 31, 2018)

Sales operation

Domestic : Head office sales department and 16 regional sales offices
Overseas : 7 branches altogether from the 6 subsidiaries●

Line of business●●●

19691969 ・Established with a capital of 100
million yen
1973 ・Established FGL Service Co., Ltd.
1987 ・Established Fuyo Auto Lease Co., Ltd.
・Established Yokogawa Rental & Lease
Co., Ltd., a joint venture with Yokogawa
Electric Corporation

19901994 ・Established Aqua Art Co., Ltd.
1995 ・Established Fuyo Network Service Co., Ltd.
1996 ・Established Fuyo Lease Sales Co., Ltd.
1999 ・Established Nihon Credit Lease Corporation,a joint venture with NICHIIGAKKAN CO., LTD.

Leasing and installment sales of IT equipment, office equipment,
industrial machinery/machine tools, commercial /service equipment,
medical devices, transportation equipment (ships, aircrafts,
automobiles, etc.), civil engineering and construction machinery, etc.
Commercial loans and other financial services
Leasing of real estates
Consultative services, etc.

20002001 ・Merged with YTB Leasing Company, Limited
2002 ・Merged with Yasuda Lease Co., Ltd.
・Succeeded lease and financial business spunoff from Fuyo General Development Co., Ltd.
2004 ・Listed on the First Section of the Tokyo
Stock Exchange
2008 ・Made Sharp Finance Co., Ltd., a consolidated subsidiary20102012 ・Conducted an absorption-type merger ofsubsidiary Japan Mortgage Co., Ltd.
2014 ・Acquired Aircraft Leasing and Management
Limited as a consolidated subsidiary2017 ・Made Accretive Co., Ltd. a consolidated subsidiary2018 ・Made MAICA, which owns TDF (Canada),
an equity-method affiliate.
・Made FUJITA Co., Ltd. a consolidated subsidiary

FGL Service Co., Ltd.

Aqua Art Co., Ltd.

Nihon Credit Lease Corporation

Accretive Co., Ltd.

At the headquarters of Fuyo Lease, FGL Service handles thevarious administrative functions of the Fuyo Lease Group andthe non-life insurance agency business.

Aqua Art operates a rental business for tropical fish tanks, which
replicate the natural environment. Aquariums with tropical fish andaquatic plants are offered under a comprehensive maintenancesystem.

Nihon Credit Lease leases nursing care equipment, such as
wheelchairs and electric beds.

Accretive provides highly convenient services, such as theconsignment of business operations, focusing mainly on
factoring business for medical and nursing care receivables.

Fuyo Auto Lease Co., Ltd.

Fuyo Network Service Co., Ltd.

Sharp Finance Co., Ltd.

TDF Group Inc.

Fuyo Auto Lease streamlines complicated operations relating tocustomers' vehicles and provides total support for rationalizing
management.

Fuyo Network Service sells ICT equipment and software, offers
technical services, including kitting and making various settings,
builds network servers, and erases data, as well as reselling
second-hand PCs.

As a good partner of sales companies, Sharp Finance offers
financial services solutions, which include leasing items forsales promotions.

Based in Canada, TDF rents, leases, and sells pickup trucks inNorth America.

Yokogawa Rental & Lease Co., Ltd.

Fuyo Lease Sales Co., Ltd.
Fuyo Lease Sales handles all of the clerical tasks for leased
assets after their leases expire, as well as sales of used assets.
It also buys and sells customer-owned used assets.

Aircraft Leasing and Management Limited(ALM)

FUJITA Co., Ltd.

Yokogawa Rental & Lease offers multi-vendor rental services formeasuring instruments and IT equipment. It always responds
quickly to the diverse needs of customers with an inventory of
cutting-edge equipment ranking at the top level in the industry.

7 Fuyo Lease Group Integrated Report 2018

ALM provides comprehensive services related to aircraft
including marketing for aircraft leasing, aircraft management,
sales of aircraft after leases expire, and advisory services.

Fujita has expertise and experience in the one-stop contract
business, which ranges from demolition and removal to purchaseand sales of large second-hand medical equipment. In addition, it
also sells the latest equipment such as MRI, CT, and ultrasonicequipment, as well as second-hand medical equipment.

Fuyo Lease Group Integrated Report 20188

Our Business
Description of Business Operations in Each Segment
In addition to our core business focused on leasing information
technology and office equipment, industrial machine tools,
and others, we lease real estate, transportation equipment,
and medical equipment (plus sales of assets after expiration or
termination of their leases), as well as offer installment sales ofcommercial equipment, manufacturing equipment, hospital
equipment and other equipment across the globe.

Leasing andInstallment
Sales

Leasing
We provide finance leases where we buy machinery or
equipment the client needs and rent it to them for a relatively
long term at a fixed rate in addition to the operating lease
where the asset is leased at a rate calculated on the basis of
the value of the asset minus the residual estimated value at theend of the lease.
Installment sales
An installment sale is an arrangement where we buy
machinery or equipment on behalf of our clients who will pay us
back in installments over an extended period of time. We offer
installment sales when the client wants to acquire an asset thatis not suitable for leasing due to tax reasons or simply when theclient wants to own an asset.

We offer a wide range of financing programs tailored to ourclients' needs, including various types of loans and factoring
options, in order to help fulfill their capital needs.

Financing

Financing programs
If a client is looking to invest in equipment or liquidate,acquire, or develop real estate, we offer financing programs,
such as nonrecourse loans, to help fulfill their capital needs.
Factoring
We buy our clients’ receivable accounts to help them meettheir immediate cash needs and improve their cash flow.

Segment Overview

Activities during the Last Fiscal Year
 Real Estate : Operating assets increased sharply year on year●

■Executed contract volume ■Operating assets

Gross profit(Billions of yen)(Billions of yen)

2,500
2,000

35.4

38.0

40.4

1,275.730

1,589.5

0

20

469.3

467.0

512.4

586.1

613.5

Gross profit(Billions of yen)(Billions of yen)

1,000

12.5
10.1

800

10.0

7.9
7.5

6.7
5.6

528.7

472.6

400

559.6
487.9

5.0

404.1

achieved multifaceted business transactions in real estate andoverseas business as a result of our proposal to introduce a widearray of solutions addressing customer needs. Our Vendor Leases
business also enjoyed growth as a result of the expansion ofpartnerships with major dealers. In our Auto Leases business, joint
efforts with Group companies and business partners pumped up
the value of contracts signed, which has resulted in a year on year
increase in the number of vehicles in our inventory.

Financing programs
 The accumulation of non-recourse financing and the steady
growth of investments (e.g. investment funds) led to an increase in
the operating assets of our financing business.

●

Factoring● The volume of executed contracts has soared since we madeAccretive a consolidated subsidiary in January 2017. We are
expanding the frontiers of our operations through its factoring
service for medical receivables as well as other services.
 Accretive leveraged our network to forge partnerships withfinancial institutions and signed new contracts mainly with
regional banks, which resulted in an increase in transactions withmedical and nursing care institutions.

2.5

247.8
191.8

Core Areas : In regards to Domestic Corporate business, we have

●

●

317.8
184.0

Japanese operating lease
Our aircraft operating lease (rental) business offers great
opportunities for investors. We employ the expertise we havegained over the years to work for our clients with a wide rangeof solutions designed to meet their exact needs, including
everything from anonymous associations to aircraft ownership
options.
In addition to aircrafts, we also offer investment opportunities
in ships, marine containers, and more.

9 Fuyo Lease Group Integrated Report 20182014/3 2015/3 2016/3 2017/3 2018/3■ Executed contract volume ■Operating assets

Gross profit(Billions of yen)(Billions of yen)

9.0

Solar power generation
 Our new solar power plant went into operation in fiscal 2017,
which means we are now operating 30 solar power plants acrossJapan and generating 102 MW of electricity.
 We are looking forward to launching our largest solar project

●

25

7.0

7.5

6.9

6.7

20
18.0

15
10
5.7
4.0

0

17.2

in Fukushima, and are currently making arrangements to start
construction in the summer of 2018.

6.0

Japanese operating lease● The substantial customer demand enabled us to execute theorigination and distribution of new leasing arrangements in aconstant manner.

4.5
3.0

11.6

5

7.5

19.7

5.9

6.3

7.1

1.5
0.2

3.6

2014/3 2015/3 2016/3 2017/3 2018/3

to become the first in the industry to make inroads into Ireland,
the primary aircraft market, in 1999, and from acquiring UKbased ALM in 2014.
 Overseas : Extensive customer base built on the Mizuho●

Group's network, as well as a steady track record of operating
businesses in the US and Hong Kong for approximately 30 years.
Core Areas : Customer base dominated by large corporations●

built on the Mizuho Group's network and high capability tomake proposals to address customer needs. Our venderleasing business has a high market share and firm business
relations with business partners.

Financing programs Ability to provide services tailored to customers’ needs byleveraging various financing programs, including not only
conventional corporate loans but also fund investments andbusiness-related investments as well as investments andlending positioned as balance sheet solutions.

●

Factoring● Delivering unique factoring services, which integrate ourfinancial and outsourcing businesses in addition to factoring
services specialized for medical and nursing-care institutions
in cooperation with our business alliance partners.

0

●

30

 Aircraft : Aircraft expertise gained while expanding operations●acquiring local companies, such as a Canadian pickup truck rental
and leasing company, which became an equity-method affiliate.

0■Executed contract volume ■Operating assets

5.8

 Overseas : We obtained excellent non-Japanese assets by●

10

2014/3 2015/3 2016/3 2017/3 2018/3

600

executed our first engine operating lease, steadily expanding thescope of the business.

40

1,372.8

1,311.4

leases for elderly homes in collaboration with partnercompanies, despite the greater difficulties these types offacilities pose in comparison to leases for commercial facilities,
as well as one-stop services provided through our group-widebusinesses.

 Aircraft: We made leasing arrangements for aircraft of our own and

34.9
1,497.7

 Medical /Social Welfare : A proven track record of providing●

joint initiatives that focused on business alliances and investments,
including building leases for welfare and nursing care facilities.

121.4

Other

outstanding product development capability, and a broad realestate leasing customer base.

●

43.6

1,000
500

Medical /Social Welfare: We worked together with our partners on

●

50

1,500

0

Solar power generation
Since launching the solar power generation business in
2012, we have opened numerous large-scale solar power plants
throughout Japan that continuously supply renewable energy.

 Real Estate : First in the industry to offer real estate leases,●

because we launched large contracts in collaboration with leading
developers and companies operating multiple stores.

200

We also work in the areas of energy and the environment, in
addition to serving as an anonymous association in various
business ventures.

Strengths of Fuyo General Lease0

Capital turnover business● Capital turnover business, which seeks to improve capitalefficiency through the liquidation of Fuyo Lease's operating
assets, launched a specialized unit to arrange liquidation projects
and deliver sales presentations to investors mainly from financial
institutions.

Solar power generation
 Operational performance record with 30 solar power plants inJapan (as of end of March 2018). Our organizational structure,
which allows us to provide one-stop services for customers
from the development of the plants to its operation.

●

Japanese operating lease● Know-how gained from years of project arrangement
experiences. Good relationships with investors and stablecustomer base.
Capital turnover business● Ability to structure securitized products using various
methods and schemes including the securitization of leasereceivables. Broad customer base consisting mainly offinancial institutions.

Fuyo Lease Group Integrated Report 201810

Financial Highlights
Executed contract volume1,105.0 billion yen

Operating assets(+32.5% year on year)

2,168.7 billion yen

Total assets

282.6 billion yen(+5.7% from the end of previous FY)(+6.1% from the end of previous FY)

ROA

2,430.8 billion yen

Net assets(+9.0% from the end of previous FY)

1.67%(+0.06 points from the end of previous FY)■ Leases■ Installment sales■Financing and other■ Leases(Billions of yen)

1,200

1,105.0
491.5

1,000

594.8
125.5
71.7
397.6

400

665.0
198.1
70.2
396.8

248.0

703.6
191.1

62.7
523.4

58.8
453.6

49.9
563.6

(%)

2,000

2.5
2,043.6
1,599.2
1.64%

1,727.1
1.59%

1,500

323.5

1,000

123.0
1,152.8

415.7
134.8
1,176.5

1,863.5
1.63%
490.6
128.8
1,244.0

2014/3

2015/3

2016/32017/30

2018/3

Total revenue

2014/3

2015/3

2016/3■Installment sales

600

115.1
1,474.4

441.7
16.3
61.1
364.3

472.3
18.5
65.2
388.6

493.7
19.9

507.0
21.5

53.8

62.3

420.0

423.2

49.1

■ Ordinary profit(Billions of yen)

40
8.6%

511.2
30

7.7%

2017/3

2018/30.0

10

2016/32017/3

2018/3

Total revenue soared 16.4% year on year to reach 590.2 billion yen
due to growing sales driven by bridge financing contracts, as we
acquired a number of operating assets, such as real estate leases.

11 Fuyo Lease Group Integrated Report 201821.9 billion yen

0

13.0

2014/3

ROE
(%)

9.2%

9.2%

1,851.915259.2

2,430.8

2,113.4

1,987.6

200

222.5

232.5

10.1%

9.8%

202.6
9.8%

9.9%

10.2%

10

5

100

0

2014/329.2

2016/32017/30

2018/3Due to an increase in operating assets, total assets rose 5.7% fromthe end of the previous fiscal year to reach 2,430.8 billion yen.

10.0

31.4

21.9

2016/3■ Short-term loans

2017/3■ Long-term loans■ Securitization of lease receivables(Billions of yen)

2,500

5.0
1,000
2.5

2018/30

Ordinary profit increased 12.2% year on year, hitting a record highfor the first time since the fiscal year ended March, 31, 2012, andprofit attributable to owners of parent also hit a record high for thesecond year in a row due to higher total profits as a result of growing
lease revenues, consolidation of Accretive, and other factors.

2015/3

2016/3

38.3%

476.9

533.6

7.3 billion yen(+3.0% year on year)■ Capital costs

Direct financing ratio(%)

1,680.1
60.0
123.8
393.2
666.7

33.4%
1,850.9
90.3
107.3
419.7
777.0

34.1%
1,965.0
110.0
85.9
473.7

Yield on funding(Billions of yen)

10

1.0

30

8

0.8

20

6

0.52%

828.0

370.7

410.6

436.5

456.6

467.3

2014/3

2015/3

2016/32017/3

2018/3

(%)

40

10

4

0

2

6.8

500
0

0

■CP

■ Corporate bonds

38.2%

1,528.9
80.0
130.0
374.7

2018/3

Capital costs and yield on funding*

34.3%

1,373.9
70.0
148.6
307.7

2017/3The equity ratio rose 0.3 point from the previous fiscal due to anincrease of the operating assets with an aim to improve ROA.

1,965.0 billion yen

1,500
20.0

2014/3(+6.2% from the end of previous FY)

7.5

14.2

2015/3

2015/3

2,000

35.2

7.4%
26.5

25.4

100

282.6

1.0

■ Profit attributable to owners of parent

17.5

2015/32,000(+12.2% year on year)20

2014/31.5

2,300.1

35.2 billion yen

200

0

1.67%

(+9.9% year on year)

590.2
29.9

(%)

300

Funding balance■Financing and other(Billions of yen)

3,000

2.0

Ordinary profit

Profit attributable toowners of parent

300

579.2

Operating assets rose 6.1% from the end of the previous fiscal year
to total 2,168.7 billion yen, while ROA increased 0.06 points fromthe previous fiscal year end to reach 1.67%. This uptick was theresult of steadily implemented strategies aimed at accumulating
high-quality assets to improve ROA.

(+16.4% year on year)

400

127.9
1,369.8

Equity ratio(Billions of yen)

0.5

590.2 billion yen

500

545.9
1.61%

■ Net assets(Billions of yen)

2,168.7500

The executed contract volume soared 32.5% year on year to top
one trillion yen for the first time, due largely to contracts signedby Accretive.

■ Leases■ Total assets

ROA

1,000

200
0

■ Financing and other

2,500

834.2

800
600

■ Installment sales(Billions of yen)

Due to an increase in operating assets, the funding balance rose
6.2% from the end of the previous fiscal year.

0

2014/3

0.6
0.47%

0.45%

0.42%

0.40%

6.6

6.9

7.1

7.3

2015/3

2016/32017/3

2018/3

0.4
0.2
0.0

* Formula for calculating yield on funding:(Capital cost - non-operating interest income + non-operating interest
expense + bond issuance cost) /average fund balance ×100%

Yield on funding continued to decline and an increase in thecapital cost remained 3.0%.

Fuyo Lease Group Integrated Report 201812

Medium-term Management Plan (FY2017-FY2021)
VisionFrontier Expansion 2021: “Go where no one has gone before”
Aiming to be a corporate group that moves into uncharted business and continues to expand the frontiergone before,” and by untiring challenges of new businessfields and business models in order to expand the frontierof our business portfolio.

The Fuyo Lease Group aims to achieve strong sustainablegrowth amid the significantly changing businessenvironment surrounding the domestic leasing businessby fulfilling the corporate slogan of “Go where no one has

Overview of Strategies and Goals
Operating Assets
2,043.6 billion yen

2,168.7 billion yen

TargetPerformance
Indicators

Interim Goal

Target Value

2,300.0～2,400.0 billion yen

2,500.0 billion yen

Selection and Concentration in
Strategic Areas
Frontier Expansion 2021 is comprised of a businessstrategy centered on the business promotion side andof a management strategy centered on bolstering themanagement foundation that supports the businessstrategy.

Business Strategy
After establishing six Strategic Areas and four Core
Areas of focus, we have formulated individual strategies
and policies to target the focus Areas.
Strategic Areas

Core Areas

Areas positioned as growth drivers
and designated for concentrationof management resources

Areas designated for market(customer base) maintenance andexpansion through efficient sales
operations through activities suchas intra-Group collaboration

2.0%
1.7～1.8%
ROA
1.61%
Ordinary
Profit31.4
billion yen

2017 / 3

1.67%

2018 / 3

Domestic Corporate

Medical / Social Welfare

Finance

Energy/Environment

Vendor Leases

Aircraft

Auto Leases

Overseas
New Domains

50.0
billion yen

38.0～42.0
billion yen

35.2
billion yen

Real EstateManagement Strategy

2020 / 32022 / 3

The following have been established as strategies tostrengthen the management foundation that supports theexecution of business strategies.
 olster ability to address new risks in conjunction withB
the frontier expansion▶ Strengthen corporate functions and boost productivity▶ Enhance the governance system in order to demonstrate
Fuyo Lease Group’s capabilities▶

Business
Strategy

Strategic
Area

Real Estate

Medical/Social Welfare

Energy/Environment

Aircraft

Overseas

New Domains

2 Challenge the Frontier
One of our core efforts in terms of entering new
businesses and expanding our business domain is to plant
new business seeds, cultivate them, and have them bear
fruit during the Medium-term Management Plan period.
Through businesses focusing on asset value risk-taking,which is a unique area of expertise for us as a leasing
company, as well as businesses relying on businessvalue for further expansion of the frontier, we will advanceour highly-competitive businesses that go beyond ourconventional framework of relying on corporate risk, andbuild a foundation for improving profit-earning capabilities
and achieving sustainable growth.
Results in FY 2017:
We leveraged our network to forge partnerships with financial
institutions and make further progress with FPS Medical service(Factoring for medical receivables and nursing care receivables).
New contracts signed particularly with regional banks, resulted in an
increase in transactions with medical and nursing care institutions.

3 Pursue Group Synergies
Group companies will do more to utilize the capabilitiesof other group companies to solve customers’ problems
or apply their own capabilities on customers of othergroup companies to ensure effective and efficient sales.
In particular, we will drastically boost our businessperformance by linking the capabilities and the customer
bases of Fuyo General Lease, which excels in business withlarge companies, with Sharp Finance, which is centered on
the retail side, and Accretive, which links large companies
with small- and medium-sized companies through its
factoring platform.

Pursue Group Synergies

Three Strategic Axes
Keeping our focus concentrated on the three Strategic
Axes of our business and management strategies, we aim
to achieve the targets set in Frontier Expansion 2021.

Products and services (functions)

Sharp
Finance

Fuyo
General Lease

Fuyo
Auto Lease

Accretive

1 Selection and Concentration in Strategic Areas
Core
Areas

• Domestic Corporate• Finance • Vendor Leases• Auto Leases

Management Strategy**Strategies to strengthen the management foundation
which supports the execution of business strategies

Following a comprehensive evaluation of factors
such as future business prospects as well as the Group’s
strengths and business foundation, we have set six fields
as strategic business fields that we can expect mostpromising growth.

Marketing of Group company products in the markets of all Group companies

Maximization of Group synergies through efficientand effective sales operations

Results in FY 2017:

Key Performance Indicators and Progress
We have set performance targets for operating assets,
return on assets (ROA), and ordinary profit for the fiscal
year ending March 31, 2022, the final year of the current
five-year Medium-term Management Plan, in addition to
the interim targets set for the fiscal year ending March
31, 2020, the plan’s third year. During the fiscal year that
ended March 31, 2018, which was the first year of the
13 Fuyo Lease Group Integrated Report 2018

plan, we saw both operating assets and ROA increase year
on year after acquiring a number of quality assets suchas real estate leases. In addition, as ordinary income hit arecord high since the fiscal year ending March 31, 2012,
our performance is off to a good start. We will continue tomove ahead with our business operations with the aim ofachieving our set targets.

In our Real Estate operations, we are steadily building up highquality assets through winning large contracts and expanding
the scope of our activities. In our Energy/Environment operations,
we saw our largest solar power plant start its operations in thisyear. In our Medical/Social Welfare operations, we made progressin collaboration with our partners through business alliancesand joint investments. In our Aircraft operations, we focused onbuilding up our fleet while carefully selecting contracts in thisincreasingly overheated market.

Customers of the Group companies

Results in FY 2017:
We started full-scale cross-selling of products and services
among our group companies, and significantly increased personnel
exchange among the companies to further promote cross-selling.
This initiative has resulted in good results in our real estate leasing,insurance agency, vendor leasing, and automobile leasing operations.

Fuyo Lease Group Integrated Report 201814

Consolidated
Management Goals

Value Creation Story

FY 2019 Interim Target

FY 2021 Target(FY ended Mar. 2018)(FY ending Mar. 2020)(FY ending Mar. 2022)¥2,168.7 bn¥2,300.0～2,400.0 bn¥2,500.0 bn¥35.2 bn

¥38.0～42.0 bn¥50.0 bn

1.67 %

1.7～1.8 %2.0 %FY 2017 Actual

Operating assets

The Fuyo Lease Group finds risks and opportunities from social changes and issues, and is motivatedto solve the issues by providing various solutions. Our group's value creation story is to go beyond our
stakeholders' expectations through sustainable value creation drawing on our distinctive resources
and strengths.

Changes and Issues in Society

Resources and Strengths

Social environment

Social andrelationship capital

Diversification in values

Extensive non-banking
experience and network

Adapting totechnological innovations

Mizuho Group's large andpowerful information network

Development of an
information society
Sophistication of healthcare

Rural depopulation
Talent shortage and addressing
work-style reforms

Secure human resources withprofessional expertise

Growing importance topromote diversity

Manufactured capital

Economic environment
Fluidization andmulti-polarization of
the world economy
Changes in the interest
rate environment
Progression of corporate
globalization

Lease assets that form thefoundations for creating
added value

operating assets)

Business Achievements

Real Estate

Real Estate
Medical/Social
WelfareHuman capital
Develop human resources withhigh motivation and discipline

ROA (Ordinary profit on

Contribution to Solutions

Operating assets for building leasing

Medical/Social
WelfareStrategic Areas

Declining birthrate andaging population

Fuyo Lease Group's Core Businesses

Ordinary profit¥362.0

Energy/Environment

¥66.3
30

locations
nationwide

Paving the way forinnovation

billion
Output102

MW

Operating assets for Aircraft leasing
Aircraft

Aircraft¥97.6

billionOverseas operating assets
Overseas

Overseas

Intellectual capital¥87.1

billion *1

Accretive’s receivables turnover

Extensive knowledge andknow-how covering a wide
range of operations

New
Domains

Strong information systems

New Domains¥230.0Operating assets for leasing

Stable financial base andcore capital

Climate change

Natural capital

Natural disasters

Air, soil, minerals, water, andforests

Core Areas

Natural environment

Domestic
Corporate

FinanceFinance
VendorLeasesVendor Leases

Auto Leases

Auto Leases

Improving healthcare,nursing care, andwelfare services
Creating a better working
environment andpromoting diversity
Developing humanresources withprofessional expertise

Domestic
Corporate

Financial capitalIndustrial developmentin accordance withchanges in society

billionChanges in accounting
standards
Increase in demand frominbound travelers

Optimizing operating
efficiency and costs

Operating assets for Medical /Social Welfare

Solar power generation
Energy/Environment

billion¥1,474.4

billion *2

Contributing to a moresustainable global
environment

Operating assets for financing¥559.6billion *2

Development oflocal economies

Resource depletion*1 Operating assets for overseas subsidiaries (excluding aircraft leases) *2 Operating assets of the entire Fuyo Lease Group

15 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201816

Materiality for Fuyo Lease Group

Materiality

Following the Materiality identification process shown to the left, we identified Goal 3, 5, 7, 8, 11, 12,
and 13 as the most important strategic goals.

Identifying Materiality
STEP

1

STEP

2

Identifying issues

STEP

Based on the SDGs, we created a list of issues
relevant to our corporate group from a global
standpoint. We then conducted an external
environment analysis referring to ESG indexes
to identify issues which could influence ourgroup.

Assessing materiality from thestakeholders’ point of view

3

STEP

We quantitatively analyzed the magnitudeof the impact that the issues identified in
Step 1 could have on our company from theviewpoint of investors and other stakeholders.

4

Assessing materiality for our business operations
We conducted an internal environment analysis on the issues
identified in Step 1 while giving due consideration to our
Medium-term Management Plan, Code of Corporate Conductand other guidelines. The analysis evaluated how big acontribution each of our businesses could make to solving theseissues and the potential impact on our financial performance.

Materiality for stakeholders

In order to realize a sustainable society, the Fuyo Lease Group has identified issues to be solved
through the Group's businesses as Material Issues (important issues to be addressed), taking into
consideration their impacts on society and stakeholders with reference to the SDGs proposed by theUnited Nations. We will contribute to creating a prosperous and sustainable society by enhancing
shared values between society and companies through our efforts along with identified Materiality.

Areas where the level ofmateriality is high forstakeholders, but is limited
for our Group

Areas where the level ofmateriality is relatively
high for stakeholders,
but is limited for our Group

Areas where the level of materiality is high bothfor stakeholders and for our Group

Areas where the level of materiality is relatively
high for stakeholders and is high for our Group

Identifying priority issues
After prioritizing issues in light of Steps 2 and 3, we
identified priority issues. Finally, the top management
reviewed and approved the identified priority issues.

Materiality for our businesses

KPIs and Targets of Materiality (Creation of Shared Value through Business Activities)
Material Issues (Materiality)

Relevant SDGs

Themes of Initiatives

Promoting health and wellbeing

・Expand access to elderly nursing care andsocial welfare services
・Support medical institutions with their management
・Improve access to medical services
・Promote affordable and high-quality medical devices
・Promote cutting-edge healthcare technologies

Diversity and work-style reform

・Improve work-style to pursue efficiency and productivity
・Promote work-life balance
・Empower women in workplaces and develop diverse
human resources with strengths

Responding to climate change issues
and renewable energy

・Expand supply of renewable energy
・Support activities on decarbonization
・Assist activities to promote renewable energy

Achieving economic growth andfulfilling work

・Support corporate activities through leasing business,
contribution to social development
・Improve management efficiency, overcome labor
shortage, and address work-style reforms

Developing safe and livable cities andproviding transportation

・Promote environmentally friendly urban scape andresidential space
・Contribute to expanding the volume of safe andinexpensive transportation

Contributing to the creation ofa circular society

・Promote 3Rs (reduce, reuse, and recycle) for leased
assets after the end of their lease period

KP Is

FY 2017 Results

Targets¥66.3 billion

FY 2021 target : ¥80 billion

Rate of taking annual paid leave

68.0%

FY 2021 target : 80%

Improvement of working environment fordevelopment of the next generation

Maintain the Platinum Kurumin certification

Number of female managers

32

Appointment of 40 female managers
by FY 2020

Clean energy supply (output)

102MWdc

FY 2021 target : 200MWdc

Operating assets of solar power business¥19.7 billion

FY 2021 target: ¥3.4 billion－

2030 target : 50%
2050 target : 100%

¥2,168.7 billion

FY 2021 target : ¥2,500 billion

Operating assets of Medical / Social Welfare
businesses

Proportion of renewable energy to the electricity
usage by the Group for its business activities
Operating assets

Assist customers to improve productivity and to shift to high-value added
businesses by providing high-quality BPO services.

Expansion of BPO business
Operating assets of real estate leases¥362 billion

FY 2021 target : ¥480 billion

Operating assets of aircraft leases¥97.6 billion

FY 2021 target : ¥280 billion

24

FY 2021 target : 70

70,036 units

FY 2021 target : 100,000 units

Number of aircraft owned by the Group
Number of used leased items sold*Reduce industrial waste and ensure proper disposal

Reduce waste through effective use of the limited resources, and ensure
proper disposal of generated waste.

* The number of used leased items sold from warehouses of Fuyo Lease Sales (Tokyo 3R Center, Kansai and Kyushu regions)

17 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201818

Special Feature 1 ESCO businessWorking with
Partner Companies
to Protect theEnvironment

Initiatives in FY 2017
Providing the ESCO service toSaiseikai Niigata Daini Hospital

Saiseikai Niigata Daini Hospital with our ESCO service

Climate Change Initiatives
Growing greenhouse gas emissions are fueling theimpacts of climate change felt across the globe. The 2015
signing of the Paris Agreement, an international framework
for reducing greenhouse gas emissions and supporting
other climate change related actions beyond 2020, as wellas other similar initiatives, have spurred countries aroundthe world to combat climate change. Japan’s business
community is now implementing initiatives to reducegreenhouse gas emissions with the aim of achieving thetarget set by the Japanese government to cut greenhousegas emissions by 26% from the 2013 level by 2030.
Fuyo Lease recognizes that climate change is a criticalissue and has positioned Energy/Environment as key
Strategic Areas in its Medium-term Management Plan as it
works to contribute to the solutions this problem throughits business operations. One such business operation is
the ESCO service where we work with various partners toprovide services that leverage our financial strength, andability to propose solutions and assess their credibility. Useof renewable energy, as well as environmentally-friendly
products and services, have become more important
than ever since the Great East Japan Earthquake. Our
ESCO service helps customers save energy, while cutting
greenhouse gas emissions.

technology, equipment, and personnel, as well as funding.
Because customers pay ESCO service fees out of theactual energy cost savings generated through the service,
they can reduce their energy consumption at virtually no
expense, and cut costs over the long run. The service also
warrants customers from any losses suffered in the event
they do not achieve energy cost savings.
As an energy service company, Fuyo Lease provides full
support to help customers meet their energy-saving needs
through partnerships with companies across a wide range
of industries.
How the ESCO Service Works
Before using
the ESCO service

After using
the ESCO service
Customer’s profit
ESCO's dividendInterest rate
Repayment
Initial cost

Utility expenses

Utility expenses

Fuyo Lease, working jointly with Japan Facility Solutions,Inc., have started to provide the ESCO service to Saiseikai
Niigata Daini Hospital.
Saiseikai Niigata Daini Hospital is a regional medicalcare support hospital providing high-quality acute medicalcare while working closely with other medical facilities in
the area. Aiming to provide patients with all the medical
services they need locally, the hospital provides expert
care in its respective departments and refers patients toother local medical care facilities once their conditions
become stable.
The hospital wanted to replace its aging heating system,so they decided to used our ESCO service to not only
replace the old heating system but also to integrate thecontrols of the cold and hot water pipes in the hospital’s
two buildings and the HVAC pumps. This integration
enabled the hospital to maximize its energy savings.
The hospital also switched to LED lighting, which led tofurther energy conservation, as well as the side benefit ofenhancing the overall hospital environment, including in its
office spaces.

For this ESCO service project, we are aiming to improveenergy efficiency with the following targets.

TargetPrimary energy reduction

13,933 GJ / year
(Reduction rate : 18.8%)

CO2 emission reduction

736 t-CO2 / year
(Reduction rate : 17.7%)

Air-cooled heat pump chiller introduced as part of our ESCO service(heat source equipment for ventilation)

VOICE
About three years ago Saiseikai Niigata Daini Hospital was looking for a partner, who could help us not just replace
our aging equipment but also to help overhaul the entire facility because the buildings were nearly 20 years old.
While the solutions offered by other companies aiming for solving immediate problems or addressing only
certain issues, the ESCO service offered by Fuyo Lease and Japan Facility Solutions was designed to optimize andimprove the efficiency of the entire facility over the medium
to long term. Their service was also the best plan in terms of
cost and that is why we chose the service.
I hope the ESCO energy-saving system will enhance theoverall energy efficiency of our buildings and contributeto conserving the environment. The system just went into
operation this April and we have not calculated the annual
energy cost savings yet, but I have received some great
feedback from hospital workers. They say it has mademanaging equipment easier and that the LED lighting has
made the place brighter. I am looking forward to seeing evenmore positive results.
Social Welfare Organization Saiseikai Imperial Gift
Foundation, Inc.

The ESCO Service and Role of Fuyo Lease
The ESCO (Energy Service Company) service provides
everything needed to improve energy efficiency, including
19 Fuyo Lease Group Integrated Report 2018

Saiseikai Niigata Daini Hospital

Akira Kitsu, Director of Administration

Fuyo Lease Group Integrated Report 201820

Special Feature 2 Accretive
Improving Community Medical and Nursing-care
Services through our Factoring Service
for Medical and Nursing-care Receivables

Issues with Frontline Medical andNursing-care Services in Japan
With the increasing shortage of doctors in rural areas,
concentration of doctors in large hospitals, and a lack offrontline nursing-care staff and facilities due to a super-aging
society, among other factors, the environment surrounding
medical and nursing-care services is changing radically.
Health care on the ground faces a lot of issues, as many small
and medium-sized hospitals and nursing-care facilities that
support community health care are facing financial difficulties.
Fuyo Lease Group positions “Medical / Social Welfare” asone of the Strategic Areas in its Medium-term Management
Plan, and is intensively investing management resourcesin this field. In 2017, Fuyo converted Accretive Co., Ltd.
(hereinafter referred to as Accretive) into a subsidiary andfurther improved systems for promoting FPS Medical* forfactoring service for medical and nursing care receivables.
With this move, we are confident that the Fuyo Lease Groupwill be able to contribute further to solving various issues
related to medical and nursing care services in the field.

provide such service. Accretive accommodates diverse
needs that are unique to the industry and is capable ofoffering proposals even for challenging cases that major
financial institutions find difficult to handle. For instance, whena medical institution experiences a decline in medical fees
received, due to events such as a revision to the payment
system for medical fees and the abrupt departure of a
doctor, the institution loses its financial stability. Accretive
can contribute to improving the institution’s cash flows by
providing funds at an early stage.
Funds acquired through FPS Medical can be usedas day-to-day working capital and as a financial source
for securing personnel, which helps to solve short-term
financial problems. In addition to securing short-term funds,
Accretive also plays a role in reviving community healthcare services by assisting medical institutions to improvetheir financial conditions so that the institution becomes
eligible to receive loans from regional and other banks.
Flow of Flexible Payment Service*FPS stands for Flexible Payment Service.

Roles Played by FPS Medical
FPS Medical is the service enabling medical institutions andnursing-care providers to convert receivables, which Accretive
purchases from national health insurance associations,payment funds, and other medical fee payment organizations,
into cash before their due dates. Accretive knows the industry
inside out and has accumulated the expertise needed to

21 Fuyo Lease Group Integrated Report 2018

Expanding Network through Group
Synergies

Claim medical fees, etc.
National healthinsurance
associations andpayment funds(Medical fee
payment
organizations)

Medical institutions,nursing-careproviders, etc.

In addition to providing services in Tokyo and Osaka, which
are traditional centers of its business activities, Accretive
has launched new business alliances with regional banks,
shinkin (credit association) banks, and other local financial
institutions across the country through leveraging thecustomer base of the Fuyo Lease Group. Consequently,
Accretive serves customers nationwide, and the numberof contracts it handles has more than doubled, with thebalance of purchased accounts receivables rising 2,620
million yen (83%) from the end of FY2016. Furthermore,
Accretive differentiates the features and applications of its
services to clarify its role for customers, in order to avoid
competition with financial institutions, thereby building
complementary relationships with them.
In addition, Accretive has strengthened its businessapproach to nursing-care facilities, including intensive-care
old people’s homes, as a new field for its services. Many
nursing-care facilities face difficulties of retaining staff due
to the shortage of care workers, while the number of people
seeking residential care is growing. We think it is also
possible to offer FPS Medical to improve their cash flow,which eventually enables them to secure personnel.

Upcoming Activities and our Vision
While expanding FPS Medical by leveraging the customer
base of the Fuyo Lease Group, Accretive provides its
market with one-stop services that integrate the functionsof the Fuyo Lease Group, which include leasing medical
devices and purchasing and selling of used medical
devices, resulting in increased convenience to thecustomers.
Besides, Accretive is working to strengthen its
management consulting function for medical institutions
in coordination with the Healthcare Advisory Office, which
was set up in Fuyo Lease in August 2018. In the future,
Accretive aims to further enhance the corporate value ofthe Fuyo Lease Group and solve problems in society byboosting group synergies and establishing FPS Medical
as its core business.

VOICE
We often see customers who are having difficulty in financing day-to-day business activities. Whenthey told us “We were able to pull out of a management crisis thanks to Accretive and can continue
to contribute to community health care,” we fully felt the importance of our services. Besides, serving
customers in disaster areas in Fukushima, who are experiencing shortages of medical institutions due torelocation, we strongly feel the potentialof our services on the issues that theseareas are suffering. We are determined tocontinue supporting as many customers as
possible in making their businesses stablethrough FPS Medical, which will contributeto make our customers smile.

Sales Department, Accretive Co., Ltd.
(From left) Manager Yosuke Kosaka,
Deputy Managers Fuki Sadamori

Accretive
Earlier
payment

Payment of
medical fees, etc.
（Payment date inregular case）

and Mai Hayakawa

Fuyo Lease Group Integrated Report 201822

Business Segments Overview

FY 2017 Overview and Outlook
In FY 2017, operating assets increased sharply year
on year as we signed large contracts in collaboration
with leading developers and companies operating
multiple stores. We will continue to steadily acquire
operating assets to achieve our goals.
Growth Strategies under Frontier Expansion 2021

our operations. At the same time, we will move forwardwith group-wide initiatives that make the most of the realestate leases offered by our subsidiary, Sharp Finance.

Segment Results and Targets
Operating assets and ROA for Real Estate leasing■ Operating assets

ROA(Billions of yen)

(%)

500

The value of real estate contracts increased more than
threefold during the previous Medium-term Management
Plan period due to an increasing number of large
contracts, growing demand for budget hotels, and thelaunch of initiatives aimed at nursing homes. During thecurrent Medium-term Management Plan period, we aim
to increase operating assets, which initially stood at 240
billion yen, twofold over the five year plan by discoveringneeds through incorporating land information andworking even closer with real estate developers. We will
also work on real estate financing, while investing in REITs
and real estate with the aim of expanding the frontiers ofTarget value

5

480.0
400

4

Interim goal

362.0

380.0

300

200

3
240.2
1.9

1.8

2.0

2.2

100

0

2

1

17/3

18/3

20/3

22/3

0

* ROA is estimated based on managerial accounting methodologies.

Six Strategic Areas

Real Estate

We provide unique solutions by leveraging our product development capability
and track record of launching industry first real estate leases, such as Space
Leases, which reduce the cost burden on tenants who have to pay expensive
security deposits when renting space in a building adjacent to a train station or
in a shopping center, as well as Building Leases that use fixed-term commercial
leasehold contracts.

Analysis of
Current Status

Market Environment
Expectations of more effectively using assets are rising as needs 			for using idle real estate continue to rise
More retailers and companies operating multiple stores are looking at 		
prime real estate locations
An increasing number of redevelopment projects are driving up 			
the need for real estate leases

Strengths

Achievements
Primetree Akaike, Seven & i Group’s Large-scale
Shopping Mall

Large Real Estate Lease Signed Jointly with
Developer

We were awarded a building lease contract for Primetree Akaike,a shopping mall in Aichi Prefecture’s Nisshin City operated by
Ito-Yokado Co., Ltd. and Seven & i Create Link Co., Ltd.
Situated on a sprawling property measuring more than 40,000
square meters, the shopping mall is a four-level large-scalecommercial facility housing about 180 tenants. This is the largest
building lease we have ever signed.
The shopping center features a number of popular shops,
including the anchor tenant Ito-Yokado along with retailers
opening at their first locations in Aichi Prefecture. It also boasts
various other facilities, such as community spaces that local
residents can use for get-togethers and other activities, astate-of-the-art movie complex, a food court, and more, which
supports the growth of the local community and enriches the
lives of the residents.

In May 2017, we acquired TOC Minato Mirai, a commercial
complex located in Yokohama City’s Minato Mirai, from TOC
Co., Ltd. Situated adjacent to Sakuragicho Station, a gateway
to the Minato Mirai 21 area, TOC Minato Mirai is a largecommercial complex housing the Colette Mare shopping
center, a hotel, offices, movie theaters, and a fitness gym. We
earned this major contract by working together with our close
partner and developer, Hulic. We will continue to work withmore developers with the aim of winning large contracts andexpanding our Real Estate business.

Know-how obtained as a real estate leasing pioneer and 				a broad range of transactions with real estate leasing customers
Access to more extensive and more diverse channels for obtaining information onland through alliances with construction companies and others across Japan
Making proposals using information on land we have obtained 		enables us to take the initiative in more projects

Challenges
Expanding alliances to enhance the acquisition of information on land
Improving relationships and increasing business transactions with companies
operating multiple stores through the utilization of land information
Strengthening the Risk Management System
Developing human resources with high degree of specialization

23 Fuyo Lease Group Integrated Report 2018

Primetree Akaike

Budget Hotel Building Lease in Nihonbashi Koamicho
We have signed a building lease with West Japan Railway Daily
Service Net Company for Via Inn Tokyo Nihonbashi (tentativename), a budget hotel the company plans to open in Tokyo’s
Nihonbashi district in the fall of 2019.
The hotel is located just a 4-minute walk from Ningyocho
station on the Toei Asakusa Line, which provides direct accessto Haneda and Narita International Airports. It is also close
to tourist destinations that are popular among international
travelers, such as Asakusa and Tokyo Skytree. It is a convenient
location for both business and sightseeing.
Working to meet the needs of budget hotel operators, whowant to invest in hotel facilities that will accommodate thegrowing number of international travelers visiting Japan, we
provide building leases for budget hotels, which have opened
or are scheduled to open near Kyoto station and Nagoya
station as well as in Kawasaki and Shinagawa. We will step up
our efforts to provide building leases for budget hotels and help
operators open hotels that are convenient for business travelers
as well as tourists.

Fuyo Lease Group Integrated Report 201824

Business Segments Overview

FY 2017 Overview and Outlook
In FY 2017, we worked together with our partners
on joint initiatives that focused on business alliances
and investments, including building leases for
welfare and nursing care facilities. We will continue
to enhance our capability to provide customers with
one-stop services as we aim to enhance the value
we provide.

Growth Strategies under Frontier Expansion 2021
Our Medical business will focus on expanding the scopeof our frontiers by launching consulting services designed
to put hospital operations and business managementback on track, working with Fujita to leverage its expertisein selling and buying pre-owned medical equipment, andcapitalizing on Accretive’s factoring service for medical
receivables. In the area of Social Welfare (nursing care),we became the first in the industry to start building leases
for nursing care facilities, such as nursing homes for theelderly, during the period of the previous Medium-termManagement Plan. We will move ahead by capitalizing on
our strong ties with nursing care industry giants, such as
the Nichii Group.

Achievements
Six Strategic Areas

Medical/Social Welfare

We offer a wide range of services, which include leasing medical equipment,
buying and selling pre-owned medical equipment as well as factoring for
medical receivables and nursing care receivables. We are also focusing on
building leases for welfare and care facilities.

Analysis of
Current Status

Market Environment
Growing need for nursing care and medical services in a super-aged society
Shortage of facilities where elderly people can live with peace of mind

Senior Housing Complex in Kachidoki Completed

Fujita Co., Ltd. Becomes a Consolidated Subsidiary

Fuyo Lease served as a financer for the AIP K achidoki
Ekimae Building, Japan’s first urban senior housing complex
incorporating medical and commercial facilities. Completed
in April 2017, the building houses Nichii Home Kachidoki, aprivate for-profit nursing home, which is its anchor tenant, a
medical mall consisting of a number of clinics and pharmacies
as well as a supermarket and more. It fulfills the needs of seniorcitizens who want all the convenience of living in an urban
center plus peace of mind.

In April 2018, we acquired additional shares in Fujita Co.,
Ltd., with which we signed a capital and business allianceagreement in December 2016, thus making it a consolidated
subsidiary.
Fujita’s strengths lie in its ability to provide one-stop services,
including everything from disassembly and removal to buying
and selling pre-owned large medical devices such as MRI
scanners, CT scanners, and X-ray equipment. Since signing
the capital and business alliance agreement, we have worked
steadily with Fujita on a wide number of projects where weleveraged each other’s customer and sales networks, andcooperated in buying and selling pre-owned medical equipment
after their leases expired. We expect to create further synergies.
We plan to enhance the development of lease productsthat incorporate the future value of assets, provide renovation
support services for hospitals when they relocate or build a newbuilding, and more.

Growing need for financing including leases, as medical equipment employing
state-of-the-art technologies for higher performance becomes more expensive

Strengths
One-stop services through our group-wide businesses, including Fujita and Accretive,
are helping to build an Integrated Community Care System
A track record of providing leases for elderly homes through collaborations withpartner companies, despite their greater difficulty compared to leases for commercial
facilities

Challenges
Strengthening our consulting functions to help hospital operators solve management
problems
Further developing human resources as we expand the scope of operations
Expanding network through the reinforcement of alliances with medical equipment
manufacturers and related industries

AIP Kachidoki Ekimae Building

Healthcare Advisory Office Created : 		Launching Consultation Services to Assist Medical
Corporations with Operations
We established the Healthcare Advisory Office under our
Medical & Welfare Division in August 2018.
The Healthcare Advisory Office mainly provides consulting
services to hospital operators and helping them solve theproblems they face. It aims to offer various solutions employing
the Fuyo Lease Group's wide range of products and service
functions.

25 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201826

Business Segments Overview

Six Strategic Areas

Six Strategic Areas

Energy/Environment

FY 2017 Overview and Outlook

Our operations in the areas of Energy and the Environment
focus on solar power generation and the ESCO service.
We provide services that promote renewable energy andenergy conservation to expand operations, while protecting
the Earth’s environment.
Analysisof Current
StatusMarket Environment
Growing demand for renewable energy fueled bynational obligations to reduce greenhouse gas
emissions, as well as greater expectations of thebusiness community and the role it should play

In FY 2017, we saw our largest solar power plant
go into operation and our existing plants maintainstable operations. Although the ROA of the overallbusiness declined due to upfront investments
on sites under development, the profitability ofexisting plants remained high. We will continue towork on expanding operations in accordance with
our Medium-term Management Plan.
Growth Strategies under Frontier Expansion 2021
In the solar power generation business, 29 large-scalesolar power plants (known as mega-solar power plants)
were in operation during the previous Medium-termManagement Plan period, supplying enough green
energy to power about 23,000 homes. Under the current
Medium-term Management Plan, we plan to operate large
solar power plants that are several times the size of ourexisting plants, in order to supply twice as much electricity
as now by the final year of the Medium-term Management
Plan. We will step up efforts in the ESCO business incollaboration with our partners, who are industry leaders,
while working on new energy businesses and others to
expand the frontiers of our operations.

Development and sales of energy- andresource-saving equipment and technologies
are creating more leasing opportunities
Rising environmental awareness among large
corporations as ESG evaluation becomes common
practice and supply chains become more global

Strengths
Ability to offer optimal solutions to customers byusing know-how gained through our own solar
power generation businessA track record of providing a number of ESCO andES* services jointly with leading partner companies

Segment Results and Targets
Operating assets and ROA for solar power generation business

Challenges■ Operating assets

Entering the wind power, geothermal, biomass,and other renewable energy markets

ROA(Billions of yen)

(%)

40

* Under the ESCO service, customers pay a service fee when theactual energy cost savings generated through the service exceed apredetermined energy saving target agreed upon with the customer. Under
the ES service, the customer pays a predetermined service fee and keeps
the full amount of energy cost savings generated through the service.

30

6.1
5.1

20
17.2

Interim goal

Target value

6.0

34.0
6.0

29.0

6
4

19.7

FY 2017 Overview and Outlook

Since signing the first lease in 1985, we have provided morethan 200 aircraft leasing arrangements for airline companies
across the globe. In 1999, we became the first in theindustry to expand into the primary aircraft market in Dublin,
Ireland. We also executed a lease for aircraft owned by ourcompany in 2009 and acquired UK-based ALM in 2014 withthe aim of expanding our operations.
Analysisof Current
StatusMarket Environment
Increasing of business opportunities based on
global growing needs of aircraft
Overheated market due to an increasing
number of players

Strengths
Enhanced organizational structure as a result of
the 2014 acquisition of ALM, a British company
specializing in aircraft-related services andmarketing
Aircraft know-how accumulated since 1985
A portfolio with greater liquidity mainly
consisting of narrow-body aircraft

Challenges
Strengthening business on package contract basis(multiple aircraft leasing) and enlarging the numberof airline companies with which to do businessStable planning and sales of products forinvestors including JOLCO** Japanese Operating Lease with a Call Option2

2017/3

2018/3In FY 2017, we made leasing arrangements foraircraft owned by our company and executed our
first engine operating lease, steadily expanding
the scope of the business. We will continue tobuild up our fleet of aircraft, while maintaining our
ROA by carefully selecting projects.
Growth Strategies under Frontier Expansion 2021
Leasing arrangements for aircraft owned by ourcompany grew to 19 during the previous Mediumterm Management Plan period. We aim to increase thenumber of aircraft leased per year by ten, so that the
number of company-owned aircraft reaches 70 by the
final year of the Medium-term Management Plan. We
will accelerate the pace of acquiring operating assets
by working on packaged contracts, under which
multiple aircraft are leased, expanding the scope ofairlines and equipment covered, and strengthening
our organizational structure.

Segment Results and Targets
Operating assets and ROA for aircraft leasing■ Operating assets

2020/32022/3

ROA(Billions of yen)

(%)

300

Target value 5

280.0

240

Interim goal

210.0

180
120
60
0

10
0

8

Aircraft

1.9
1.9
75.1
2017/3

97.6

2018/3

2.0

4
3

2.3

2
1

2020/32022/30* ROA is estimated based on managerial accounting methodologies.

0* ROA is estimated based on managerial accounting methodologies.

Achievements

Achievements

Consolidated Subsidiary Tomioka-Sugiuchi Solar Starts Commercial Operation of Solar Power Plant

ANA Holdings Signs a Lease for Four Airbus A321neo

On March 1, 2018, our consolidated subsidiary, TomiokaSugiuchi Sol ar Ltd., started commercial operation of its
Tomioka-Sugiuchi Solar Power Plant located in Tomiokamachi, Futaba District, Fukushima Prefecture. The solar power
plant has an installed capacity of approximately 25.05 MWDC *1 with an estimated annual power output of approximately

27 Fuyo Lease Group Integrated Report 201824,780,000 kWh, making it our largest solar power plant. This
output is equivalent to the total annual power consumption of
approximately 6,880 typical homes *2.
*1 DC: direct current*2 Calculated at 3,600 kWh per household.

In August 2017, ANA Holdings Inc. (ANAHD) signed a leasefor four A321neo, a new aircraft from France-based Airbus, tobe the first to bring the aircraft to Japan. The A321neo (withneo standing for new engine option) is equipped with Pratt &Whitney’s latest engine. Also equipped with large wingtip devices
called Sharklets, the aircraft features 15% higher fuel efficiency

and about a 7% longer range than conventional models*.
All four aircraft, for which leases were signed, are already inoperation in the route network of All Nippon Airways Co., Ltd.,ANAHD’s core airline company.
* According to Airbus data

Fuyo Lease Group Integrated Report 201828

Business Segments Overview

Six Strategic Areas

Six Strategic Areas

Overseas

FY 2017 Overview and Outlook

As the domestic leasing market shrinks, we aim to increase
our overseas locations mainly in North America and Asia
by leveraging our network to attain organic growth, whilebuilding up high-quality assets through investments,
acquisitions, and alliances with local companies to achieve
inorganic growth.
Analysisof Current
StatusMarket Environment
Financing needs are growing overseas as moremanufacturers relocate their production bases
outside Japan
Leasing companies are aggressively expanding
overseas as the domestic leasing market shrinks

Strengths
Customer base built on the Mizuho Group's network
A steady track record of operating businesses in the
US and Hong Kong for about 30 years, during which
we have developed an extensive customer base

Challenges
Expanding our business with a focus on M&A andcapital alliances
Developing human resources with high degreeof specialization and strengthening the humanresource development system as we expand thescope of operations
Expanding non-Japanese business in North
America and Asia

In FY 2017, we obtained excellent non-Japanese
assets by acquiring local companies. In the future,
we will continue to expand our Overseas operations
through inorganic growth and other strategies.
Growth Strategies under Frontier Expansion 2021
Our Overseas business segment saw its operating
assets almost double during the period of theprevious Medium-term Management Plan, andwe will pick up the pace of obtaining assets evenfurther. We will continue to focus on expanding nonJapanese businesses mainly in North America andAsia, as we did under the previous Medium-termManagement Plan. Over the medium-term, we willseek inorganic growth through M &A and capitalalliances with the aim of achieving an additional 1.5fold increase in operating assets by the final year of
the Medium-term Management Plan.

Strengths
Solid business foundation built on the
Fuyo Lease Group's nationwide network

Challenges

Target value
Interim goal

110.0
90
84.1

87.1

120.0
1.8

1.5

30

(%)

0.6

0.6

2017/3

2018/32020/32022/3

Working to launch new businesses and expand
the scope of our operations, we will specificallyconcentrate on Accretive’s factoring services andnew business initiatives based on M&A as well as
capital and business alliances, development ofleasing programs that factor in used asset sales andthe residual values of assets, asset securitization,
and accounting services using FLOW Cube+ which
was jointly developed with SAP Japan.

* BPO: Business Process Outsourcing

2.0
1.5

Achievements

0.5

We are working to expand our business frontiers through corporate alliances and investing in companies andorganizations working to develop cutting-edge technologies or intellectual properties with the aim of securing
preferential rights to sales and partnerships in the future.

0

Business Form

1.0

60

Growth Strategies under Frontier Expansion 2021

Initiatives in new business areas with potential for
future growth

ROA

120

Needs for work efficiency and productivity
improvements are growing due to labor shortage
and work-style reforms
Development of new technology such as IoT,
robots, Artificial Intelligence (AI), and Big Data

(Business of overseas subsidiaries excluding aircraft leasing)(Billions of yen)

Market Environment

In FY 2017, we focused on providing Accretive
solutions to Fuyo Leasing Group customers
and sought partnerships with state-of-the-art
research and development companies, as wellas invested in them. We will continue to work
on expanding our operations with the focus on
non-asset businesses.

Delivery of BPO* service with high added-value* ROA is estimated based on managerial accounting methodologies.

Achievements
Canada's Pickup Truck Rental and Leasing Company Becomes Fuyo Lease’s Equity-method Affiliate

29 Fuyo Lease Group Integrated Report 2018

Analysisof Current
StatusOperating assets and ROA for Overseas businesses■ Operating assets

FY 2017 Overview and Outlook

One of the Strategic Areas specified in Frontier Expansion
2021, New Domains collectively refer to as new businessinitiatives as well as expanding the scope of our businesses.
We will work to expand the frontiers of our operations
focusing on non-asset businesses.

Segment Results and Targets

0

Fuyo Lease acquired a 50% stake in Marubeni Auto Investment(Canada) Inc., a subsidiary of Marubeni Corporation, whichowns TDF Group Inc., a pickup truck rental and leasing
company in Canada, and made it an equity-method affiliate.
TDF provides mainly corporate clients with comprehensive
vehicle-related solutions, including pickup truck rental, leasing,and sales. Since its establishment in 1978, TDF has built a solid
business foundation, providing services to the Canadian energy

New Domains

and resource development industry as well as firms and local
governments involved in infrastructure projects.
The aquisition of shares will enable us to combine know-how
Marubeni has gained through its pickup truck rental and leasing
businesses in North American with our fundraising ability andleasing industry know-how as we aim to grow the business further
and create synergies over the medium to long term.

Partner

Description

Establishment

GAP FundEstablished a fund designed to provide financial assistance to universities in order to help them overcome
hurdles (i.e. gaps) when commercializing intellectual properties or technologies they own. It is Japan’s first fundcreated through an industry-academia collaboration.

Alliance

Optical Comb, Inc.

Formed a business alliance for promoting sales of a non-contact 3D scanner employing Nobel Prize-winning
optical comb technology.

Investment

Riverfield Inc.

Invested in the company, which developed Japan’s first robotic surgical assistant system with the aim ofcreating a leasing and sales promotion partnership.

Investment

CREWT Medical
Systems, Inc.

Signed a capital and business alliance agreement with the company, which developed the world's first headmounted visual field inspection device, to support its sales activities.

Investment

Lily MedTech Inc.

Invested in the company, which is developing a breast cancer inspection system using medical ultrasound technology.

Subsidiary

Fujita Co., Ltd.

Capable of providing one-stop services, including everything from removal to sales of pre-owned medical equipment.
The consolidation of Fujita will enable us to develop new products and services.

Investment

Exergy Power Systems Inc.

Investment

MerryBiz Inc.

Invested in the company, which provides accounting services using virtual accounting assistants.

Subsidiary

INVOICE Inc.

Reached a mutual agreement among the related parties to acquire the company, which provides combined
billing service to expand our services that contribute to the improvement of our customers’ productivity.

Invested in the company, which develops and manufactures next-generation energy storage systems.

Fuyo Lease Group Integrated Report 201830

Business Segments Overview

Four Core Areas

Four Core Areas

Domestic Corporate

Vendor Leases

This is a Core Area that supports Fuyo Lease.
In addition to conventional leases, such as for information and office equipment as well as
commercial facility leases, we offer a wide range of services that include leasing arrangements andstrategic financial solutions tailored to customers’ needs.

As a partner to dealers of office, information, medical, and other equipment and machinery, we focus onproviding financial service solutions that help vendors sell their products. We are continually working toenhance our ability to offer solutions, such as those designed to help companies start a business in thehealthcare market, with the aim of creating new markets.

Analysisof Current
StatusMarket Environment
Shrinking market due to declining leasetransaction volumes, and declining
profitability due to intensifying competition
Demand for leases as a means of raising funds
declining as customers’ financial health improves

Strengths
Ability to offer strategic financial solutions inaddition to leasing services

Challenges
Strengthening our ability to offer solutions
by promoting teamwork among the Group
companies, and creating new business
opportunities by business matching
Improving profitability by differentiating
ourselves from competitors

FY 2017 Overview and Outlook
In FY 2017, as a result of offering a wide rangeof solutions tailored to customers’ businessneeds, we were able to enter into various typesof transactions, including real estate contracts
as well as various overseas transactions. We
will continue to increase transactions throughcross-selling with group companies and offeringsolutions to improve clients’ profitability.

Analysisof Current
StatusMarket Environment
Oligopolistic market dominated by theindustry’s leading companies
Developing systems for managing cash flows,
credit screening, and other functions forsmall- and medium-sized companies, who are
the primary customers, making it difficult toenter the market because most transactions
are high-volume and small size

Strengths
Large market share and market recognition

Growth Strategies under Frontier Expansion 2021

An organizational structure with locations
across Japan that enables us to meet the exact
needs of customers

Solutions are our specialty and we will continue
to enhance our offerings by targeting corporate
customers of our group companies. At the same time,
we are streamlining and downsizing our organization
as we shift the workforce to Strategic Areas in orderto optimize the allocation of personnel. Specifically,
we have consolidated all vender leasing and small
factoring operations at our subsidiaries and abolishedsome specialized departments.

An established operating base and years ofexpertise gained in the healthcare market

Challenges
Further expanding the range of sales partners,
and promoting vendor business by extending
information channels

FY 2017 Overview and Outlook
In FY 2017, we saw alliance transactions
increase as a result of forming more partnerships
with major dealers and promoting allianceswith medical equipment manufacturers. We
will continue to work on strengthening our
non-asset businesses, such as debt collection
services, while increasing transactions with ourexisting vendor clients.
Growth Strategies under Frontier Expansion 2021
We will seek further growth of the Vendor Leases
business, operated by Sharp Finance, mainly by
expanding the range of partners we work withand shifting resources to the Tokyo metropolitan
area. We will also focus on leveraging the group’s
strengths by offering real estate leases, factoring
services, and other products and know-how
available from our group companies to Sharp
Finance’s customers.

Expanding non-asset (fee-based) business initiatives

Four Core Areas

Four Core Areas

FinancingAuto Leases

In addition to conventional corporate loans, we provide a wide array of services, including fundinvestments and business-related investments as well as investments and lending positioned as balance
sheet solutions.

We offer a wide range of services including auto financing, maintenance, insurance, and safe driving
education as well as administrative support, and will continue to expand our operations by leveraging
synergies among group companies.

Analysisof Current
StatusMarket Environment
Market overheated due to low interest rate
strategies of regional banks and others since theintroduction of the negative interest rate policy

Strengths
Various financing programs built on our
track record in various fields and tailored tocustomers’ needs
Mizuho Financial Group's network

Challenges
Optimizing the risk-return tradeoff by offering awide array of services
Developing the information infrastructure to
support sophistication of the monitoring related
to fund investments

31 Fuyo Lease Group Integrated Report 2018

FY 2017 Overview and Outlook
In FY 2017, we launched a council to investigate
fund investments that successfully help
boost operating assets. We will continue toaccumulate the know-how needed to further
improve profitability.
Growth Strategies under Frontier Expansion 2021
We will shift our focus to more profitable areas, while
maintaining an appropriate risk-return tradeoff. Thiseffort will center on investments in funds, businessrelated investments, and investment and lending
positioned as balance sheet solutions.

Analysisof Current
StatusMarket Environment
Number of vehicles owned by the auto leasing
industry as a whole is expected to rise in an
expanding market

Strengths
Providing high value-added leasing arrangements,
under which customers can outsource
administrative work related to the purchase,management, and maintenance of automobiles
Partnerships with about 6,300 repair shops
across Japan to provide safe and wellmaintained vehicles

Challenges
Expanding the customer base by strengthening
cooperation within the Fuyo Lease Group
Developing unique products and differentiating
ourselves from competitors throughcollaborations with partner companies

FY 2017 Overview and Outlook
In FY 2017, the number of vehicles in ourinventory inched up year on year, while the valueof contracts signed through joint efforts with ourgroup company, Sharp Finance, soared 47% year
on year, indicating the good progress of our intragroup collaboration. Looking ahead, we aim toboost our business performance even further
by increasing the number of vehicles in ourinventory and building up operating assets.
Growth Strategies under Frontier Expansion 2021
We will leverage synergies among our groupcompanies to expand the Auto Leases business. In
particular, we will approach Sharp Finance’s retailclient base and further strengthen coordination
with Fuyo Lease.

Fuyo Lease Group Integrated Report 201832

Foundation for Value Creation

Environmental Management
Basic Approach

Foundation for Value Creation
The Fuyo Lease Group aims to solve social issues through its business operations as it paves the way to a sustainable society
and sustainable business growth, while responding to the expectations of its stakeholders. This section outlines the initiatives
that are behind creating this kind of value.

Stakeholder Dialogue
We believe that communicating with stakeholders is the
key to accurately understanding various social issues andthe role we are expected to play. We see communication

as the bridge that brings us closer to stakeholders, and weuse it to ensure that we live in harmony with people from allwalks of life.

The Fuyo Lease Group is committed to reducing its environmental footprint through appropriate environmental
management and building a closed-loop society through its business operations. We have formulated an environmental
philosophy and policy in order to engage the entire group into activities that address environmental issues. We have alsoacquired ISO14001 for the Group’s major operating sites to operate management system for continuous improvement.*1*1 ISO14001 certified sites: Fuyo General Lease’s head office and Osaka branch, Fuyo Leasing Sales, Fuyo Network Service, and FGL Service.

Environmental
Philosophy

The Fuyo Lease Group acts with care to preserve the global environment based on its management
philosophy of “supporting our customers’ business activities, and contributing to the community
through the leasing business,” and promotes activities to address environmental issues in line with
its environmental policy.

1. Protecting the global environment through leasing businessWe endeavor to provide products and services that contribute to protecting the global environment inour business activities, including leasing, rental, and financial business.

2. Promoting resource and energy saving activities
Customers

Suppliers andpartners

Our management philosophy is to “always give first priority to the customer and provide the best
service.” In putting that philosophy into practice we work to enhance the level of satisfaction of all ourcustomers, including users of our leasing services.

We are aware of the environmental burdens associated with business activities and endeavor to engage
in resource and energy saving activities and green procurement.

Environmental
Policy3. Contributing to the development of a recycling society
We promote the reuse and recycling of goods no longer leased, restrict the generation of waste, andensure proper disposal of waste.

4. Complying with environmental laws

We work together with suppliers of leased assets, business partners, and vendors to build and maintain
fair and equal relationships that serve as fertile ground upon which everyone involved can grow.

We comply with environment-related laws and agreements to which the Fuyo Lease Group has agreed.

5. Establishing an environmental management system
We promote continuous improvement of an environmental management system and endeavor toprevent environmental pollution by setting environmental targets.

Shareholders

Our basic policy is to return stable profits to shareholders on a long-term basis. We also disclose
information in a timely, appropriate, and fair manner to ensure the transparency of our operations.

Key Environmental Targets
Industryorganizations andcompetitors

We work with competitors to enhance the leasing business, improve services, and share information,for example, through the initiatives undertaken by the Japan Leasing Association.

Communities

We value communication with people, companies, and other organizations not only in the areas where
we operate but also with a host of communities that lie beyond, and engage in community-based
activities as a responsible corporate citizen.

Natural environment

Objectives

Scope

FY 2017 targets

Climate change initiatives

Fuyo General
Lease & Group
companies*2

Maintain the FY 2010 levelof CO2 emissions (t-CO2)(Scope1 & 2)

Promote energy
conservation

Fuyo General
Lease & Group
companies*2

Comply with environmental
laws and regulations

To address environmental issues, we actively implement environmental initiatives through our businessactivities and strive to minimize our environmental footprint.

Evaluation

FY 2018 targets

1.1 % increase fromthe FY 2010 level

×

Maintain the FY 2010 levelof CO2 emissions (t-CO2)(Scope1 & 2)

Maintain the FY 2010 levelof energy consumption(kWh)14.3 % reduction fromthe FY 2010 level○

Maintain the FY 2010 levelof energy consumption(kWh)Fuyo General
Lease & Group
companies*2

Assess compliance withenvironmental laws andregulations

Conducted complianceassessment. No noncompliance found○

Assess compliance withenvironmental laws andregulations

Fuyo General
Lease

Invest 12 billion yen on
acquiring energy-efficientand environmentallyfriendly assets*3

17 billion yen○

Invest 13 billion yen on
acquiring energy-efficientand environmentallyfriendly assets

Fuyo General
Lease

Invest 5 billion yen on
acquiring assets for PC
Eco & Value Leases and
PC rental services

4.7 billion yen

×

Invest 5 billion yen on
acquiring assets for PC
Eco & Value Leases and
PC rental services

Saving the environment
through leasing

National government,
administrative
authorities, etc.

We maintain appropriate relationships with the government of Japan, relevant ministries and agencies,
and local governments. We also maintain sound relationships with the central governments andadministrative authorities of countries where our overseas subsidiaries operate.

FY 2017 results*2 Scope: all domestic locations of Fuyo General Lease and Group companies including Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales, FGL Service, and Aqua Art.
*3 Machines related to energy including boilers and turbines, industrial waste recycling equipment, pollution control devices, environmental equipments such as energy saving
devices including combined heat and power systems and water purification systems, and renewable energy (i.e. solar power generation) supply facilities.

Financial institutions

Employees and theirfamilies

We raise funds necessary for our operations by maintaining strong relationships of trust with financial
institutions.

We work to create a safe, happy, and vibrant workplace environment for our employees. In addition,
we are building a better occupational environment where all employees can find their own optimal
work-life balance and enhance the quality of both life and work.

33 Fuyo Lease Group Integrated Report 2018

The Issuance of Green Bonds
Fuyo Lease has started to issue green bonds through public offering in the Japanese domestic market (unsecured straight bonds).
Green bonds are receivables, which are issued by companies and local governments to fund green projects (businesses withenvironmental benefits, which include renewable energy business, building and retrofitting of energy-saving structures, andprevention and management of environmental pollution).
We plan to use the raised funds for construction of solar power facilities.

Fuyo Lease Group Integrated Report 201834

Foundation for Value Creation

Total CO2 Emissions (adjusted) (Scope 1, 2)*5 *6

Climate Change Initiatives■ Fuyo Lease■Group companies

Promotion of Renewable Energy■ Sharp Finance /Accretive(t-CO₂)2,500

Basic Approach

2,000

Today, climate change is a universally recognized problem,
and increasing greenhouse gas emissions are making it
worse. As the Paris Agreement, an international framework
for climate action beyond 2020, and other initiatives
give momentum to efforts to reduce greenhouse gas
emissions across the globe, renewable energy along withenvironmentally-friendly products and services are more
important than ever. Activities to cut greenhouse gas
emissions are also underway in the Japanese business
community. Recognizing the impact of climate changeon the business environment, the Fuyo Lease Group is
working toward climate change mitigation by reducing
greenhouse gas emissions in our operations.

1,500

Initiatives to Reduce Greenhouse Gas
Emissions
The Japan Leasing Association has formulated a voluntary
low-carbon society action plan, which Fuyo Lease hassigned on to as a member company.
The Fuyo Lease Group is making efforts to conserve theenvironment at all our locations by setting targets that lower
our CO2 emissions and energy consumption, and work
to reduce power usage, as well as our company vehicles’
fuel consumption and exhaust emissions. In addition, we
joined RE100, a business initiative which aims to source
100% renewable energy to power business activities, thefirst member among comprehensive leasing companies inJapan. The Group's goal is to power our own operation with50% renewable energy by 2030 and 100% by 2050.

Total CO2 Emissions (Scope 1, 2)■ Fuyo Lease■Group companies■ Sharp Finance/Accretive(t-CO₂)

2,500
2,074
2,000
1,500

828
1,409
329

1,000

1,080

1,287

1,216

1,271

324

311

307

319

905

964

927

963

500
0

2014/3

2015/3

2016/32017/3

2018/3*4 Total CO2 emissions were calculated with the emission factors specified by thegovernment based on the Ministerial Ordinance Concerning GHG emissions
Associated with Business Activities of Specified Emitters (The emissions associatedwith electricity are calculated with the actual emission factors issued by powertransmission and distribution business operators of where our regional operations
and offices are located). Please note that Fuyo Lease and each Group company are
not included in the specified emitters. Our scope 1 and 2 emissions were 770 t-CO2
and 1,304 t-CO2 respectively.

35 Fuyo Lease Group Integrated Report 2018

822
1,148

1,000

266
882

1,269

1,199

1,253

320

306

303

312

949

893

950

909

2015/3

2016/32017/3

2018/3500
02014/3*5 Total CO2 emissions (adjusted) were calculated with the emission factors specified
by the government based on the Ministerial Ordinance Concerning GHG emissions
Associated with Business Activities of Specified Emitters (The emissions associatedwith electricity are calculated based on the adjusted annual emission factors issued
by power transmission and distribution business operators of where our regional
operations and offices are located).

Electricity Consumption*6■ Fuyo Lease■Group companies* ■ Sharp Finance /Accretive(1,000 kWh)

3,000

2,000

2,297
558
1,739

2,115
548
1,567

2,083
542
1,541

2,658
439

2,201
541

588

1,660

2016/32017/3

2018/3

Total Gasoline Consumed by Company Vehicles*6■ Fuyo Lease■Group companies■ Sharp Finance /Accretive(1,000 liters)

350

331
263

300
250
200
150
100
50

82
15

When disposing of leased assets that can no longer beused after their leases expire, we take the utmost care toensure they do not pollute the environment. Going aboveand beyond simply complying with the Waste Management
and Public Cleansing Act (Waste Management Act), as awaste generating business operator we keep close track ofevery piece of waste we dispose of through an electronic
manifest*7 system. We conduct on-site inspections of waste
disposal contractors according to an annual schedule.
*7 Manifest : A document or electronic data that verifies proper disposal of waste.
Waste generating business operators are required by the Waste Management Act
to issue a manifest or collect it (from subcontractors), and register to confirm proper
disposal of waste.

(t)0
2015/3

Appropriate Disposal of Waste■ Fuyo Lease ■ Fuyo Lease Sales

Saving the Environment through Leasing
2014/3is responsible for reusing and recycling leased assets after
their leases expire, we reuse and recycle not only items
leased by our corporate group but also used assets wehave bought from other companies.

Volume of Industrial Waste Generated*8 *9

1,631

1,000

0

*4 *6

2,043

As climate change risks increase, the renewable energy
market continues to grow with a focus on solar, wind,biomass, small and medium hydro, and geothermal
power to promote zero-carbon energy society. In 2012,
Fuyo Lease launched a solar power generation businessthrough its subsidiary. As of March 2018, we supply
enough renewable energy to power about 30,000 homes
by operating large-scale solar power plants (mega-solar
power plants) at 30 locations throughout Japan.
We also leverage the know-how gained throughour power generation business to offer a host of power
generation equipment installation plans that meet awide array of customer needs. Those include everythingfrom large-scale power plants to rooftop solar panels of
distribution warehouses and other commercial facilities, or
off-grid schemes for home consumption. Along with various
financing options, we introduce them to customers with theaim of taking the use of renewable energy to new heights.

67

68
14
54

66
15
51

70
15
55

13
55

2014/3

2015/3

2016/32017/3

2018/3400

Basic Approach

247
20

200

Effectively using limited resources and reducing waste
as much as possible together comprise one of the mostimportant steps towards building a sustainable society.
The Fuyo Lease Group provides products and services
that contribute to protecting the global environment
through its business activities, including leasing, renting,and financing, while promoting the reuse and recycling ofleased assets after their leases expire to minimize waste
and ensure their proper disposal.

321

100
0

2013

Guided by our environmental policy, we actively workon the 3Rs (Reduce, Reuse, and Recycle) for leased
assets once a lease ends. At the Tokyo 3R Center, which

246
20

226

200

226

2014

2015

2016

384

2017

Volume of Waste Generated*10■ General waste ■ Paper waste *11
(t)

150
117

112

22

21

94

Energy Conservation via Products and Services

217
17*8 Data coverage: all domestic locations of Fuyo General Lease and Fuyo Lease Sales.
*9 The volume of industrial wastes is calculated by the calendar year.

100

Saving Resources and Reducing Waste
through the 3Rs

408
24

369
47

300

*6 Data coverage: all domestic locations of Fuyo General Lease. All domestic locationsof Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales, FGL Service, andAqua Art as for the Group companies. Figures for Sharp Finance and Accretive
include all of their domestic locations. Figures of and before March 2017 do notinclude Sharp Finance and Accretive as their data collection began in FY 2017.

We have partnered with energy-saving equipment
manufacturers, construction companies, and companies
in other various sectors to help customers save energy
through the ESCO service and other programs. The ESCO
service provides everything needed to improve energy
efficiency, including technology, equipment, personnel,
and funding, and achieves energy conservation withoutcompromising a customer’s current environment orconvenience. As the ESCO service provider, we receive a
portion of the actual energy cost savings generated throughthe service as compensation. In addition, we help ourcustomers reduce costs and CO2 emissions by introducing
various energy saving solutions tailored to their energy
usage. Examples of the solutions include energy-saving
control and operational improvement for air-conditioning
systems and LED lightings, and subsidized leasing.

500

91

50

0

2014/3

2015/3

90
21

99
36

105
24
81

69

63

2016/32017/3

2018/3*10 Data coverage: Fuyo General Lease/Headquarter (including FGL Service)*11 All volume of waste paper is dissolution-processed.

3Rs initiatives for leased assets after their leases expire
Lease term expires

Leased asset remains in use

Re-leased Lease

Ends (asset disposal)

Assetcollection

Tokyo 3R Center

Valuable

Sold on the secondhand market ❷ Reuse

Collect parts /sell materials

Waste❶ Reduce❸ Recycle

Proper waste disposal /recycle❹ Enhance recycling rate

Final disposal(incineration/landfill)❺ Minimize final disposal(landfill)

Fuyo Lease Group Integrated Report 201836

Foundation for Value Creation

Human Resource Management
Strategies for Enhancing Value
Basic Approach

Working with the goal of making people's jobs morechallenging and fulfilling, we are striving to build a betterworking environment where all employees can find theirown optimal work-life balance and enhance the quality ofboth life and work through maintaining and improving theirhealth, gaining new knowledge and experiences, attaining
personal growth etc.
Since the Act on Advancement of Measures to Support
Raising Next-Generation Children went into effect in 2005,
we have been working to create a better job environment forworking parents by developing a “general employer actionplan” as required by the law. In FY 2017, we were recognizedfor our outstanding achievement in implementing these
initiatives and received the Platinum Kurumin, a special
certification awarded to selected companies that havealready received Kurumin certification given to employers
who provide support to employees with young children.
We have been implementing work-style reforms since
FY 2014. Not only do we ensure legal compliance throughprograms designed to reduce long working hours, including
programs such as the Refresh Days (leave-work-early days),
we have also introduced a staggered hours program, which
offers four different work schedules with earlier and later
starting and finishing times so employees can choose theschedule most suitable to theirneeds, for activities such as
childcare or family nursing careduties, as well as their lifestyles.
At Fuyo Lease, we have aworking group that includes
a cross-section of employees
to ensure that we can create a
37 Fuyo Lease Group Integrated Report 2018

• Promoting independent andactive working styles• Encouraging male employees totake a more active role in parenting• Reducing total working hours• Offering diverse career path options

Numerical
targets

Activities towards Creating a Better Workplace

Action Plan: Stage 7 (April 2017 - March 2022)
Description

In today’s society where values and needs are becoming
more diverse, the Fuyo Lease Group believes thatdiversity is a key growth driver. Attracting and retaining
highly talented people regardless of their sex, age, andother factors is crucial for continually creating new value.
As we work to enhance the value of our corporate group,
we focus on developing human resources with emphasison making our company a better workplace, so that all of
our employees can realize their full potential as they honetheir professional skills.
We encourage respect for human rights in accordancewith international norms such as the Universal Declarationof Human Rights, and embrace the Code of Corporate
Conduct that has zero tolerance for discrimination on thebasis of sex, nationality, race, ethnicity, religion, disability, etc.

better workplace from our workers' perspective. +Friday(Plus Friday), introduced in February 2017, is one of the
programs born from this group. This program allows
employees to choose one Friday each month when theycan end their workday early at three o'clock in the afternoon.
The staggered hours program introduced in May 2017 was
also born out of the working group's discussions.

• Percentage of male employees who takechildcare leave etc.: 80% or more
April 2021 - March 2022 (1 year)• Percentage of employees who take annual
paid leave: 70% or more*12
April 2020 - March 2021 (1 year)*12 The target has been revised to be “80% or more.”

Empowering Women in the Workplace
We see empowering women in the workplace as amanagement priority and are taking steps towards creating awork environment where women can fulfill their potential andplay a more active role than ever. Our initiatives for empowering
women focus on four specific areas -- recruitment, humanresources development, organizational culture reforms, andwork-life balance. In 2014, we set the goals of increasing
the employment ratio of new female graduates to 30% andmaking the percentage of women in managerial positions
one-and-a-half times more than it was in 2014 (i.e. 40 women)
by 2020. We have stepped up activities for hiring women andhave established clear training guidelines, while providing
female managerial candidates with career development
support and more. The Diversity Promotion Office opened
its doors in October 2017 to bolster our organizational
capability for creating a workplace where all employees
can realize their full potential, regardless of gender.
Employee Data*13

Human Resource Development
At the Fuyo Lease Group, our basic hiring policy is tokeep the selection process fair, impartial, unbiased, andnon-discriminatory. We also provide opportunities for all
employees to independently achieve personal growth,
while respecting each other's personality.
In FY 2017, we partially revised the performance
evaluation system so that we can better understand theroles and abilities required of each employee in evaluating
their performance as our operations become more diverseand complex. We also work to enhance communication
between employees and evaluators, as well as make theevaluation process more transparent and satisfying withthe aim of seeing that it is fairer and more equitable.
Because the leasing business calls for an encyclopedic
knowledge of laws, taxes, accounting, finance, products,
industry trends, and more, we focus on equipping
employees with top-notch professional skills. In order tobecome a company that customers will choose, it is alsoessential to develop a resilient workforce consisting ofindividuals with the ability to think, act, and solve problemson their own. We value employees’ willingness to develop
their professional skills, and, to this end, we provide
employees with practical on-the-job-training (OJT) at theirworkplaces, as well as off-the-job-training (Off -JT), includinggroup training and personal development support. In FY
2017, we spent an average of 34.5 hours per employee on
education and training.

the development of local communities. The Grouphas formulated a CSR policy and is conducting CSR
activities that make best use of its know-how, products,
and services focusing on the environment, community
engagement, academia and research, and assistance todisaster-affected areas.

Activities: Case Example
Every year, Fuyo Lease and the Group company, Aqua Art,
team up with students majoring in art and design at Tokyo
Metropolitan Kogei High School and Tokyo Designer
Gakuin College located near the Fuyo Lease head office tocreate interior aquarium designs and decorations, some ofwhich are displayed at commercial facilities.
In fiscal 2018, we hosted an exhibition jointly with Tokyo
Dome Hotel. A selection of the six aquariums were displayedin the lobby and elsewhere in the hotel during the special
event that ran from July 26 through August 5. Welcoming theTokyo Communication Arts College as a new participant,the event provided a great opportunity for students to have
fun designing aquariums, while at the same time letting
hotel guests and visitors know about interior aquarium.

Community Engagement
Basic Approach
Recognizing close ties with its neighbors, the Fuyo
Lease Group hopes to grow together with them, while
being a good corporate citizen who contributes toStudents from a creation team and their work exhibited at the hotel lobby

VOICE2014 / 32015 / 32016 / 32017 / 32018 / 3

Retention rate of
employees after
3 years (%)

87.5

94.7

100

-

-

Turn over rate(%)*14

1.3

1.1

0.8

1.0

1.9

Rate of paid
leave taken (%)

59.1

58.5

61.9

68.9

68.0

Number of
female managers(persons)

25

25

27

29

32

Employment
rate of thedisabled (%)

2.0

2.0

1.8

2.2

2.3

*13 Scope: Fuyo Lease (non-consolidated)*14 Turnover ratio includes separations due to personal reasons, reaching retirement age,and other reasons including transfer. It does not include separations of re-employedworkers due to the expiration of their contract terms.

Regarding diversity as the driver of growth, Fuyo Lease has worked on a range of activities related to the promotion of diversity
in the past, and we established the Diversity Planning & Promotion Office in October 2017 to further promote diversity. We will
promote initiatives aiming at becoming a company where it is easy for diverse human resources to work regardless of genderdifferences and nationality, and which can support participation and advancement.
In FY 2017, we organized the Balancing Work with Nursing Care Seminar and the Balancing
Work with Childcare Seminar in order to support employees providing nursing care for family
members and to promote a balance between work and caring for children.
Going forward, we will continue striving to promote diversity so that we can meet thediversifying needs of customers by achieving flexible work styles for individual employees andmaximizing the use of each of their abilities.

Yukiko Kurosawa

General Manager, Diversity Planning & Promotion Office
General Affairs Division

Fuyo Lease Group Integrated Report 201838

Establishment of the Corporate
Governance Guidelines

Corporate Governance
Our Approach to Corporate Governance

Strengthening Corporate Governance

The Fuyo Lease Group places strong emphasis on creating
and maintaining relationships with all stakeholders,
including shareholders, customers, employees, and local
communities. We believe that the fundamental objectiveof corporate governance is to perform business activities
with sincerity and fairness in line with our management
philosophy.
To achieve sustainable growth and increase corporate
value over the medium to long term, we have established
our own Corporate Governance Guidelines which alignwith the purpose and spirit of the Japan’s Corporate
Governance Code. These Guidelines serve as thefoundation for our corporate governance framework,
operating policies and other management policies, towhich we adhere to in everything we do.

Fuyo Lease has implemented various initiatives aimed atstrengthening corporate governance.
Year

2008

Objective

Introduced
performance-based
compensation andstock compensationtype stock options

To strengthen links
between directors’
remuneration andtheir performance andshareholder value

Reduced the term of

two years to one year

To increase opportunities
to build shareholder
confidence

Increased the numberof independent outside
directors from one to two

To strengthen the
management oversight
structure

Established the
Corporate Governance
Guidelines

To comply with theJapanese Corporate
Governance CodeSet up the Nomination
and Remuneration
Advisory Committee

To ensure independence
and objectivity inthe decision-making
process for matters suchas appointments andremuneration

Started analyzing andevaluating the overall
effectiveness of theBoard of Directors

To verify the effectivenessof the roles and functionsof the Board of Directors
and to make ongoing
improvements

2011 office of a director from

Corporate Governance Structure
Fuyo Lease has established a Board of Corporate Auditors,
which includes two outside corporate auditors who are
independent from our company. In addition, in order toenhance the supervisory function of the Board of Directors,
we have also appointed three independent outside directors,
who provide oversight and advice on the execution ofbusiness operations from an external perspective.
Furthermore, to improve management efficiency and
expedite decision-making by separating the management
oversight function from the execution of operations, wehave adopted the executive officer system.

Initiative

2015

2016

Corporate Governance Structure

In conformity with the purpose and spirit of the JapaneseCorporate Governance Code, Fuyo Lease has established
our own Corporate Governance Guidelines, which provide
a foundation for corporate governance framework,
operating policies, etc. The Corporate Governance
Guidelines set out the framework, operating policies, roles,
and responsibilities of different supervisory and executivefunctions, in addition to our basic approach to corporate
governance. To achieve sustainable growth and increase
our corporate value over the medium to long term, we
adhere to these guidelines in everything we do across the
Fuyo Lease Group.

Board of Directors
The Board of Directors consists of nine directors, including
six inside directors and three independent outside directors.
The Board of Directors deliberates and makes decisions onimportant management issues, as well as matters specified
in laws and regulations, the Articles of Incorporation,and the Regulations governing the Board of Directors.
The Board of Directors also oversees the execution ofoperations by Directors and Executive Officers.
In FY 2017, the Board of Directors met ten times.

Nomination and Remuneration Advisory
Committee
Fuyo Lease has set up the Nomination and Remuneration
Advisory Committee under the Board of Directors in order
to eliminate arbitrariness in decision-making processes andto maintain a highly transparent management structure.
The committee consists of four members, including three
independent outside directors and an inside director.
The committee mainly deliberates on topics such as
the selection of candidates for directors and corporate

auditors, remuneration of directors, determining who willbe the next Chief Executive Officer, and analysis andevaluations of the overall effectiveness of the Board of
Directors, and reports its findings to the Board of Directors.

Board of Corporate Auditors
Our Board of Corporate Auditors is composed of four
auditors, including two full-time, who are also independent
outside corporate auditors, and two part-time auditors.
According to the audit plan formulated by the Board of
Corporate Auditors, each corporate auditor audits executionof operations by directors by attending important meetings,
reviewing important documents, examining operations andassets, and reviewing the audit findings of the independentaccounting auditor and the internal audit department among
other relevant activities. Corporate auditors closely workwith the Internal Audit and Internal Control Departments
to conduct audits in order to enhance audit quality.
In fiscal 2017, the Board of Corporate Auditors met
eleven times.

Executive Committee
The Executive Committee is composed of Executive
Officers with positions of managing executive officer orhigher, the heads of the Management & Planning Division,
General Affairs Division, and Business & Planning Division
as well as the Presidents of affiliated companies. Full-time
corporate auditors also attend meetings of the Committee
on a regular basis.
As a general rule, the Executive Committee meets at least
once a month to make decisions on operating activities andimplementation of measures delegated to the President &CEO, and to discuss important issues concerning internal
controls. Its aim is to improve the quality of management
decisions and to speed up decision-making.
In fiscal 2017, the Executive Committee met nineteen times.

General Meeting of Shareholders

Attendance at Board and Committee meetings (attendance in FY 2017 by board members, as of June 22, 2018)
Name
Consultation(Cooperation)

Board of Corporate Auditors:
4 corporate auditors(including 2 independent
outside corporate auditors)

Nomination and Remuneration
Board of Directors: 9 directors
Advisory Committee:(including 3 independent
Recommendation
4 members (including 3
outside directors)
independent outside directors)

Oversight on theexecution ofbusiness(Cooperation)
Accounting auditor(Cooperation)

Internal Audit DivisionInternal audit
Financial
audit

ReportExecutive Committee

Control

Approval

Planning and reporting on programs

Compliance Committee

Implementing andadvocating programs

Operational execution units (departments, offices, branch offices, group companies)

39 Fuyo Lease Group Integrated Report 2018

Position

Attendance at Board meetings

Takashi Sato

Director and Chairman(Representative Director)

Board of Directors : 10 /10

Yasunori Tsujita

President and Chief Executive
Officer (Representative Director)

Board of Directors : 10 /10 Nomination and Remuneration Advisory Committee : 4 /4

Shozo Kazama

Director and Deputy President(Representative Director)

Board of Directors : 10 /10

Shinya Aizawa

Senior Managing Director

Board of Directors : 10 /10

Yoriaki Takebe

Senior Managing Director- (Elected in June 22, 2018)

Soichi Hosoi

Managing Director

Board of Directors : 10 /10

Nobuya Minami

Director

Board of Directors : 10 /10 Nomination and Remuneration Advisory Committee : 4 /4

Seiichi Isshiki

Director

Board of Directors : 10 /10 Nomination and Remuneration Advisory Committee : 4 /4

Hideo Ichikawa

Director- (Elected in June 22, 2018)

Kiyoyuki Takashima

Full-Time Corporate Auditor

Board of Directors : 10 /10 Board of Corporate Auditors : 11/11

Shigeru Suda

Full-Time Corporate Auditor

Board of Directors : 8 /8 Board of Corporate Auditors : 8/8 (Elected in June 23, 2017)

Teruhiko Numano

Outside Corporate Auditor

Board of Directors : 10 /10 Board of Corporate Auditors : 11/11

Yoshihiro Jinnai

Outside Corporate Auditor

Board of Directors : 7/8 Board of Corporate Auditors : 7/8 (Elected in June 23, 2017)

Fuyo Lease Group Integrated Report 201840

Corporate GovernanceCompliance Committee
Fuyo Lease has set up a Compliance Committee chairedby the Chief Compliance Officer. The heads of relevant
planning and administrative departments, representative
directors of subsidiaries in Japan, and heads of overseas
subsidiaries’ relevant departments serve as full-timecommittee members. The administrative functions of thecommittee are carried out by the Legal & Compliance
Division. The Compliance Committee meets quarterly to
discuss and decide issues related to compliance systems
and implementing annual compliance plans. Based on its
discussions and decisions, the Committee submits reports
and recommendations to the Executive Committee andthe Board of Directors, and takes measures to develop andenhance compliance systems.

Internal Audit
The internal audit function is administered by theInternal Audit Division (staffed by four employees). The
Internal Audit Division conducts operational audits of all
departments, offices, branch offices, and major subsidiaries,
and plays a part in ensuring that internal controls arefunctioning in addition to examining their effectiveness.
The results of these audits of operations are reported to the
President & CEO and corporate auditors every time they
are conducted and periodically to the Board of Directors
and the Executive Committee.

Analysis and Evaluation of theEffectiveness of the Board of Directors
At Fuyo Lease, we analyze and evaluate the overall
effectiveness of the Board of Directors every year. The Boardof Directors makes further efforts to enhance its functionsin the light of the results of the analysis and evaluation withthe aim of continually improving its effectiveness.

The results of the analysis and evaluation for fiscal 2017
are as follows.
Evaluation method
We conducted a questionnaire survey among all
Directors and corporate auditors, as well as interviews withthem on an as needed basis. Following the discussions andrecommendations by the Nomination and Remuneration
Advisory Committee, which consists mainly of independent
outside directors and assisted by the corporate lawyer, theBoard of Directors carried out the analysis and evaluationof the results.
Results
While the Board of Directors met all evaluation criteria,
including size, composition, functions and roles, as well as
operation, and was found to be effective, we concluded
that we must still steadily implement measures to improve
the functions of the Board of Directors, make those
activities part of our daily operations, and continuallyreview the Board’s functions.
Progress on issue identified last fiscal year
Last fiscal year we found that the Board of Directors
needed to make further efforts to promote more active
discussions and to take a closer look at matters discussed
through activities such as reviewing information to
be included in documents. In response, we added
supplementary material to the Board of Directors meeting
documents in August 2017, and confirmed that as a resultof this the effectiveness of the Board was improved.
Newly identified issues
We found that, in addition to appointing more outside
directors and auditors from different backgrounds, theBoard of Directors needs to bring more perspectives tothe boardroom, narrow down discussion points, andenhance reporting on risk management and corporate
governance trends.

Roles expected of outside directors and outside corporate auditors and reasons for appointment
Name

Reason for appointment

NobuyaMinamiHaving served as the president of Tokyo Electric Power Company, Incorporated (until his retirement in 2002), Nobuya Minami has
held numerous important positions during his career, including outside corporate officer of listed companies and chairman of otherincorporated organizations. We believe that he will help enhance the effectiveness of the decision-making and oversight functionsof the Board of Directors from a position that is independent from our company’s management by drawing upon his extensive
experience and wealth of knowledge.

SeiichiIsshiki

Seiichi Isshiki has served as representative director and president of JX Nippon Oil & Energy Corporation, director of JX Holdings,
Inc., and president of ENEOS Celltech Co., Ltd. We believe that he will help enhance the effectiveness of the decision-making andoversight functions of the Board of Directors from a position that is independent from our company’s management by drawing on his
extensive experience and wealth of knowledge.

Hideo
Ichikawa

Currently serving as representative director and chairman of the board and formerly representative director and president at Showa
Denko K.K., Hideo Ichikawa has years of experience in corporate management. We believe that he will help enhance the effectivenessof the decision-making and oversight functions of the Board of Directors from a position that is independent from our company’s
management by drawing upon his extensive experience and wealth of knowledge.

Teruhiko
NumanoWe believe that Teruhiko Numano will conduct audits appropriately from an objective standpoint based on the expertise he has
gained as a jurist and a lawyer and provide us with highly professional legal advice. He is also well versed in business litigation cases
as a lawyer and has considerable financial and accounting knowledge.

Yoshihiro
JinnaiHaving served as senior managing executive director at Sompo Japan Insurance Inc. and president of Audatex Japan (nowCognivision, Inc.), Yoshihiro Jinnai should be able to conduct audits appropriately from an objective standpoint by drawing upon his
extensive experience and wealth of knowledge.

41 Fuyo Lease Group Integrated Report 2018

Director Qualifications andNomination Procedures

actual amount of performance-based compensation
depends on our consolidated performance, such as
operating assets and ordinary profit, as well as an individual
director’s contribution to our financial performance, among
other factors.
The ratio between the base salary and the variable pay
plan is set at 1 to 0.6 based on the average compensation
ratio used by listed companies. The variable pay planconsists of performance-based compensation and stockcompensation, and the ratio between the two is set at 5 to
7 in the light of the characteristics of the revenue structureof the leasing business to provide higher incentives on a
medium- to long-term basis.
The introduction of the Board Benefit Trust (BBT) wasapproved at the Annual General Meeting in June 2018,
in order to motivate board members to help boost ourcompany’s performance and corporate value over the
medium to long term by making the link between theircompensation and our equity value even clearer, so theyshare not only the benefits of a higher share price but also
the risk of a decline in value with shareholders.
Directors’ compensation is discussed by the Nomination
and Remuneration Advisory Committee in order to ensuretransparency and objectivity in determining the amounts.
Compensation for outside directors and corporate auditors
consists only of fixed compensation because short-term
incentives and equity compensation are not really applicable.

1. Policy and procedures for nominating director
and corporate auditor candidates
Our Corporate Governance Guidelines sets forth thequalifications of directors and corporate auditors, as wellas the procedures for nominating candidates for these
positions. Under these guidelines, a director or corporate
auditor candidate must possess an outstanding personality,a wide breadth of knowledge, abilities, experience, andhigh ethical standards. The guidelines also specifies thatcandidates be nominated regardless of factors such assex, age, and nationality, with the aim of achieving greater
diversity. In order to ensure fairness and transparency inthe nomination process, the selection of candidates for
directors and corporate auditors is finalized by the Boardof Directors following a discussion by the Nomination andRemuneration Advisory Committee. Selection of corporate
auditor candidates is finalized by the Board of Directors
upon consent of the Board of Corporate Auditors.
2. Independence standards for outside directors
and outside corporate auditors
Independence standards for outside directors andoutside corporate auditors are stipulated in the Corporate
Governance Guidelines in line with the independence
standards prescribed in the Guidelines Concerning ListingManagement, etc. established by the Tokyo Stock Exchange.

Internal Control System

Board Remuneration

Fuyo Lease has instituted an internal control system across
our corporate group to ensure compliance with all relevantlaws and the articles of incorporation, capability to respondto various risks in a timely and appropriate manner, andto ensure transparency and efficiency of operations, inaddition to ensuring the reliability of financial reports, etc.
Our Internal Audit Department, corporate auditors,
and independent auditor share information about audit
findings to monitor the status and operation of the internal
control system. The status of the internal control system
operation is reported to the Board of Directors during ameeting held at the end of each fiscal year, and continuous
improvements are made in the light of the audit findings.

Fuyo Lease believes that enhancing the link between
shareholder value and remuneration of the Board of
Directors will boost their morale and motivate them toimprove our financial performance and share price, leading
us towards our goals of ensuring stable performanceand growth, while enhancing our corporate value.
That is why we have introduced variable pay programs
such as performance-based compensation and stockcompensation in addition to a base salary, which isprovided as fixed compensation.
We determine base sal aries in the light of ouremployees’ salaries, average market salaries for directors,
our financial standing, and other relevant factors. The
Board Remunerations

Remuneration amount (millions of yen)
Officer classification

Total amount(millions of yen)Basicremuneration

Stock-based
remuneration(Stock option)

Performance-linked
remuneration(Annual bonuses)

Number of
directors

Directors(excl. Outside Directors)

289

188

64

37

6

Board of Corporate
Auditors members(excl. Outside Auditors)

44

44

-

-

3

Outside Directors

39

39

-

-

5

Note: 1. The above remuneration amount and number of directors include those who resigned by the end of FY 2017.
2. The above performance-linked remuneration comprises the amount, which shall be recorded in the fiscal year.
3. The above Stock-based remuneration comprises the amount calculated on the basis of a fair value of stock warrant issued and shall be recorded in the fiscal year.
4. At the 39th Annual General Meeting of Shareholders held on June 25, 2008, Fuyo Lease approved the resolution to pay accrued retirement benefits associated with the abolishment of
the retirement benefits system for directors. The estimated amount as of the end of the fiscal year is 9 million yen (outside directors). The payment is made at the time of their retirement.

Fuyo Lease Group Integrated Report 201842

Corporate Governance

Board Members (As of June 26, 2018)

Soichi Hosoi Managing Director
Apr. 1983
Apr. 2013

Takashi Sato Director and Chairman (Representative Director)
Apr. 1977
Mar. 2006
May 2009

Joined The Fuji Bank, Limited.
Managing Executive Officer of Mizuho Corporate
Bank, Ltd. (retired in March 2009)
Deputy President and Executive Officer of
the Company

June 2009
Nov. 2009
Apr. 2016

Director and Deputy President Deputy President
and Executive Officer Representative Director
President and Chief Executive Officer
President and Executive Officer
Director and Chairman
To present

Yasunori Tsujita President and Chief Executive Officer (Representative Director), Nomination and Remuneration Advisory Committee Chairman
Apr. 1981
Apr. 2013

June 2013

Joined The Fuji Bank, Limited.
Deputy President-Executive Officer ofMizuho Financial Group, Inc. (until June 2013)
Deputy President-Executive Officer ofMizuho Bank, Ltd. (until November 2013)
Deputy President-Executive Officer ofMizuho Corporate Bank, Ltd. (until July 2013)
Managing Executive Officer ofMizuho Trust & Banking Co., Ltd. (until April 2014)
Managing Executive Officer ofMizuho Securities Co., Ltd. (until April 2014)
Deputy President-Executive Officer, Member ofthe Board of Directors (Representative Director) of
Mizuho Financial Group, Inc. (until June 2014)

Nov. 2013

June 2014

Apr. 2015
May 2015
June 2015
Apr. 2016

Deputy President-Executive Officer, Member ofthe Board of Directors of Mizuho Bank, Ltd.
(until March 2015)
Member of the Board of Directors
and Deputy President & Executive Officer(Representative Executive Officer)of Mizuho Financial Group, Inc. (until March 2015)
Member of the Board of Directors(retired in June 2015)
Deputy President and Executive Officer of
the Company
Director and Deputy President Deputy President
and Executive Officer Representative Director
President and Chief Executive Officer President
and Executive Officer
To present

Joined The Fuji Bank, Limited
Executive Officer, General Manager of Financial
Planning Division of Mizuho Financial Group, Inc.
(retired in April 2014)
Executive Officer, General Manager of Financial
Planning Division of Mizuho Bank, Ltd.
(retired in April 2014)

Apr. 2014
June 2014

Executive Officer, General Manager of Financial
Planning Division of Mizuho Corporate Bank, Ltd.
(until July 2013)
Managing Executive Officer of the Company
Managing Director
and Managing Executive Officer
To present

Nobuya Minami

Outside Director, Nomination and Remuneration Advisory Committee member
President of Global Industrial and Social Progress Research InstituteOutside Audit & Supervisory Board Member of Fuji Media Holdings, Inc.

Apr. 1958
June 1999

Joined Tokyo Electric Power Company, Incorporated
Director and President

Oct. 2002
June 2005

Adviser (retired in March 2012)
Director (part-time) of the Company

To present

Seiichi Isshiki Outside Director, Nomination and Remuneration Advisory Committee member
Apr. 1972
June 2012

Joined Nippon Oil Corporation
Representative Director,
President of JX Nippon Oil & Energy Corporation
Director of JX Holdings, Inc.

June 2014

June 2015

Advisor of JX Nippon Oil & Energy Corporation(currently JXTG Nippon Oil & Energy Corporation)(retired in June 2016)
Director (part-time) of the Company To present

Hideo Ichikawa

Outside Director, Nomination and Remuneration Advisory Committee member
Representative Director, Chairman of the Board of Showa Denko K.K.

Apr. 1975
Jan. 2011

Joined Showa Denko K.K.
Representative Director, President,
Corporate Officer and Chief Executive Officer (CEO)Jan. 2017
June 2018

Representative Director, Chairman of the Board(current position)
Director (part-time) of the Company To present

Kiyoyuki Takashima Full-time Audit & Supervisory Board Member
Shozo Kazama Director and Deputy President (Representative Director)
Apr. 1979
Mar. 2006
Apr. 2009

May 2010

Joined The Fuji Bank, Limited
Executive Officer, General Manager of Shinbashi
Branch of Mizuho Bank, Ltd.
Managing Executive Officer, General Manager ofBusiness Unit of Mizuho Research Institute Ltd.
(retired in April 2010)
Senior Managing Executive Officer of the Company

June 2010
Apr. 2014
Apr. 2018

Senior Managing Director
and Senior Managing Executive Officer
Representative Director
Director and Deputy President
Deputy President and Executive Officer
To present

Apr. 1979
Apr. 2011
Apr. 2012

Joined the Company
General Manager of Shinjuku Branch
Executive Officer, General Manager ofShinjuku BranchOct. 2014
June 2016

Executive Officer, General Manager ofTokyo Business Division III
Full-time Audit & Supervisory Board Member of
the Company To present

Shigeru Suda Full-time Audit & Supervisory Board Member
Apr. 1981
Aug. 1999
Mar. 2009

Joined the Company
General Manager of International Division
General Manager of Internal Audit Division

June 2017

Full-time Audit & Supervisory Board Member of
the Company
To present

Sep. 2005

Vice-President of Nihon University,and Dean of Nihon University College of Law
Vice-President of Nihon University
Retired from the position as Vice-President of
Nihon University
Retired from professorship at Nihon University
College of Law

Shinya Aizawa Senior Managing Director

Chairman & CEO of Fuyo General Lease (USA) Inc., Chairman of Fuyo General Lease (HK) Limited, Chairman and Representative Director of Fuyo General
Lease (China) Co., Ltd., Director of FGL Aircraft Ireland Limited, Chairman/Director of Fuyo Aviation Capital Europe Limited

Apr. 1982
Apr. 2010

May 2011

Joined The Fuji Bank, Limited
Executive Officer, General Manager of Internal Audit
Division of Mizuho Corporate Bank, Ltd.
(retired in April 2011)
Managing Executive Officer of the Company

June 2011
Apr. 2018

Managing Director
and Managing Executive Officer
Senior Managing Director
and Senior Managing Executive Officer
To present

Teruhiko Numano Part-time Audit & Supervisory Board Member
Apr. 1973
July 2003
June 2005

Yoriaki Takebe Senior Managing Executive Officer
Apr. 1978
Apr. 2005

June 2009

Joined The Yasuda Trust & Banking Co., Ltd.
Executive Officer, General Manager ofReal Estate Planning Division ofMizuho Trust & Banking Co., Ltd.
Executive Managing Director(retired in April 2011)

Apr. 2011
Apr. 2013
Apr. 2018
June 2018

Executive Officer, General Manager of Business
Promotion Division I of the Company
Managing Executive Officer
Senior Managing Executive Officer
Senior Managing Director
To present

July 2006
Aug. 2006
Apr. 2011

Yoshihiro Jinnai Part-time Audit & Supervisory Board Member
Oct. 1978
Apr. 2010
Apr. 2011
Apr. 2012

43 Fuyo Lease Group Integrated Report 2018

Registered as attorney-at-law
Assistant professor, Nihon University College of Law
Trustee of Nihon University,and Dean of Nihon University College of Law
Part-time Audit & Supervisory Board Member of
the Company
To present

Joined The Yasuda Fire and Marine Insurance Co., Ltd.
Associate Director, General Manager,
1st Production Department
Executive Officer, General Manager,
Hokkaido Regional Headquarters
Managing Executive Officer, General Manager,
Hokkaido Regional Headquarters

Mar. 2013
June 2013

June 2017Retired from the position as
Managing Executive Officer
President, Japan Audatex Co. Ltd.
(now “Cognivision Inc.”)
until the retirement in June 2017
Part-time Audit & Supervisory Board Member of
the Company To present

Fuyo Lease Group Integrated Report 2018

44

Risk Management and Compliance System
Risk Management

proposals that satisfy customers’ diverse and latent needs.
Nevertheless, the Group’s business results could be
affected by trends in corporate capital expenditure.

Our Approach to Risk Management andRisk Management System

2 Impact of Credit Risk on Business Results

As stipulated in the Fuyo Lease Group risk management
regulations, we have established a risk management
system at our locations across the globe in order tomanage risks based on their particular risk characteristics
and importance. Risks to be managed are categorized into
credit, market (such as interest rate fluctuation risk), liquidity(such as cash flow risk), administrative, system, legal,
human, reputation, and other risks (including ESG risks).
Each type of risk is managed by a designated department.
The Board of Directors and the Executive Committee
receives updates on risk management, discusses risk
management policies according to the characteristics
a n d i m p o r t a n c e o f e a c h r i s k , a n d e v a l u a te s t h eeffectiveness of risk management. The Asset and Liability
Management (ALM) Committee meets on a regular basis
to appropriately manage and control market and liquidity
risks. These efforts enable us to continually improve ourrisk management system.
In addition, we have a system in place for responding
to emergencies. In the event of a large-scale disaster or
emergency, the emergency response headquarters under
the direction of the president will take measures necessaryfor ensuring safety and continuity of our operations inaccordance with the Emergency Preparedness Regulations.

Risk Factors in Business Operations
Listed below are the main factors that could pose a risk
to the development of the Group’s business and have asignificant impact on the decisions of investors.
The forward-looking statements here represent the
judgment of the Group’s management as of the datethat its annual securities report was submitted (June 26,2018). The following is not an exhaustive list of all the risks
that could affect investment in the Company’s shares.
1 Impact of Capital Expenditure Trends and Other
Changes on Business Results
The lease transactions and installment sales handled by
the Fuyo Lease Group are two means by which customers
finance capital expenditures, and there is generally apositive correlation between the amount of private sector
capital expenditure and lease capital expenditure.
The Fuyo Lease Group is focusing on expanding its
customer base and increasing contracts by making various

45 Fuyo Lease Group Integrated Report 2018

The business of the Fuyo Lease Group involves extending
credit to counterparties over the medium to long term,with lease agreements averaging around five years.
Consequently, there is a risk that difficulty will arise incollecting lease payments from a counterparty that files
for bankruptcy or experiences other serious issues during
the leasing period.
To minimize potential losses associated with credit
risk, the Fuyo Lease Group quantitatively assesses
and monitors credit risk in its portfolio while working tomaintain and improve the soundness of assets in addition
to screening and monitoring the creditworthiness of
individual counterparties. The Group also conducts selfassessments of its assets in accordance with standards
applied by banks and other financial institutions basedon Industry Audit Committee Report No. 19, “Temporary
Treatment for Accounting and Auditing of Application of
the Accounting Standards for Financial Instruments in
the Leasing Industry,” issued by the Japanese Institute ofCertified Public Accountants (JICPA). Accordingly, Fuyo
Lease sets aside an allowance for doubtful receivables
in its balance sheets, for which it calculates an amount of
estimated losses based on bad debts recorded in previous
financial years under a general allowance as well as an
amount of estimated uncollectable payments of individual
counterparties under specific allowances for doubtfulreceivables and borrowers in bankruptcy or reorganization.
The Group also monitors the creditworthiness of a
specified group of large-lot borrowers and reports theresults periodically to management.
N e ve r t h e l e s s , d e p e n d i n g o n f u t u re e c o n o m i ctrends, newly arising bad debts caused by worsening
creditworthiness of counterparties could adversely
impact the Group’s business results.
3 Impact of Changes in factors such as Interest Rates, Exchange
Rates and Share Prices, and Financing on Business Results
The Fuyo Lease Group procures funds to purchaseproperties for leasing or for installment sales to customers
and to purchase the business assets owned by the Group
mainly from financial institutions and markets. Moreover,in addition to owning foreign currency-denominatedassets such as aircraft, the Group carries out investment
through securities investments and funds.
The Fuyo Lease Group not only monitors the market
conditions, but also strives to manage risks appropriately by
constantly monitoring the gap between asset management
and financing, managing risks associated with interest
rate fluctuations (market risk), and holding Asset-Liability

Management Committee meetings, where policies on future
funding and other activities are discussed and deliberated.
Because of its sound financial standing, the Company has
obtained good ratings from multiple credit rating agencies.
Nevertheless, future interest rate, exchange rate, shareprice and financing trends could adversely impact theGroup’s business results. Moreover, if a rating agency wereto lower the Company’s rating, it would be difficult for
the Company to procure necessary funds in appropriate
ways, as access to commercial paper and other preferredfinancing methods would be limited. In such an event,
the Company may have to borrow from banks at higher
interest rates than would normally apply, which could
adversely affect the Fuyo Lease Group’s business results.
4 Competitive Environment in the Leasing Industry
The various businesses in which the Fuyo Lease Groupis engaged, and the leasing business in particular, areexposed to intense competition that includes financial
institutions in addition to the leasing industry.
The Fuyo Lease Group endeavors to differentiate itself
from the competition and enhance its competitiveness bystrengthening its ability to deliver value-added services
that contribute to greater convenience for customers.
However, intensification in competition could have an
adverse effect on the Group’s business results.
5 Impact of Changes in Regulatory Systems on
Business Results
The Fuyo Lease Group operates its business activities
based on current laws, tax regulations, accounting
standards, and other regulatory systems. The Group’sbusiness results could therefore be affected by any
significant future changes in these systems.
6 Risks Related to Strategic Partnerships andCorporate Acquisitions
The Fuyo Lease Group may form strategic partnerships
with other companies, acquire other companies, orundertake related actions to expand operations andachieve business growth. While management exhaustively
examines the implications of forming a strategic partnershipor acquiring another company, if business activities do notproceed as originally expected following the partnership or
acquisition due to changes in the operating environment
or other factors, the Group’s business results could be
adversely affected.
7 Risks from Natural Disasters or Other Causes
The Fuyo Lease Group has established various measures
to ensure business continuity as well as life and safetyin times of emergency, such as disasters, accidents, andinfectious disease epidemics. However, unforeseen
circumstances, such as damage to key social infrastructure,
could restrict the Group’s business activities and affect its
business results.

8 Other Business Risks
The Fuyo Lease Group faces a number of businessrisks other than those listed above. The risks include
administrative risk resulting from inadequate administrative
processing, systems risk caused by breakdowns,
malfunction, or other issues involving computer systems
due to cyberattacks, and human risk that includes
difficulties in securing and developing the necessary
human resources. They also include asset and residual
value risk, meaning the risk of a decline in the value of
owned assets such as real estate or the residual value ofleased assets becoming lower than initial assessments.
Moreover, compliance risk could materialize if failure tocomply with laws and regulations or social norms leads toa loss of social credibility. There is also country risk related
to the political and economic environment in the overseas
countries where the Fuyo Lease Group has expanded its
business operations. In addition, revenues from electricity
sales in the Group’s mega solar business could fall below
projections due to unfavorable weather conditions.

Compliance System
Our Approach to Compliance andCompliance System
At the Fuyo Lease Group, ensuring compliance is afundamental principle of management. We work tostrengthen and enhance our compliance system,
which enables us to operate with integrity and fairness
by conforming to relevant social norms, while strictly
complying with all laws and regulations.
We promote compliance throughout the Group by
stipulating various regulations, procedures, and manuals,
conducting compliance education, and enhancing thewhistleblower system on the basis of the Fuyo General
Lease Group's Code of Corporate Conduct. In order tomaintain and further improve our compliance systems, we
implement and carry out compliance programs every fiscal
year. Issues associated with the compliance programs are
discussed at the Compliance Committee and the Executive
Committee before being submitted to the Board of Directors
for approval. Findings and progress of the programs arereported to the Board of Directors on a semi-annual basis.
We will continue our group-wide activities including
conducting compliance practices and complianceeducation, and streamlining our compliance systems
across the Group to improve their effectiveness.

Fuyo General Lease Group Code ofCorporate Conduct
The Fuyo Lease Group has formulated the Fuyo General
Lease Group Code of Corporate Conduct, which specifies
the basic policies and position of the entire group as well
as behavioral guidelines for the employees of the Group.
We conduct various training activities including e-learning
programs to entrench the Code among our employees.
Fuyo Lease Group Integrated Report 2018

46

Risk Management and Compliance System

Fuyo General Lease Group Code of Corporate Conduct

Compliance Training (FY 2017)
Group training and workplace training

Chapter 1.
Basic Policy of Fuyo General Lease Group
1. Social Responsibilities and Public Missions

Subject# ofsessionEntry level

Introduction to compliance,
Fuyo General Lease Group Code ofCorporate Conduct, Unreasonable
demand, Credit information, Attributeinformation, Fraud prevention

2

2nd year employee(Generalist track)

Information management,
Personal information protection

1

5th year employee(Generalist track)

Response to accidents and troubles

1

Newly appointed
head of department/
branch office

Issues to be understood as
responsible officers to ensurecompliance1

Newly appointed
assistant manager/
section chief

Prevention of power harassment,
sexual and maternity harassment

2

All employees

Proper use of e-mail andpostal services

1

Participant

2. Implementation of Customer First Principles
3. Compliance with Laws and Rules
4. Respect for Human Rights
5. Blocking Relationships with Anti-social Forces

Chapter 2.
Basic Attitude of Fuyo General Lease Group
1. Basic Attitude Toward Customers
2. Basic Attitude Toward Shareholders
3. Basic Attitude Toward Local Communities
4. Basic Attitude Toward Employees

E-Learning
Subject# ofsession

5. Basic Attitude Toward Suppliers and Competitors

Participant

6. Basic Attitude Toward Politics and Government

Directors,head of department/
office/branch office,compliance officer,
entry level

Regulation for Insider Trading(E-Learning material of the Japan
Exchange Group)2

All employees

Code of Corporate Conduct andgeneral issues on compliance2Chapter 3.
Action Guidelines for All Members of theFuyo Lease Group

Independent Assurance Report

1. Maintaining Order in the Workplace
2. No Personal Use of Company Assets
3. Appropriate Information Management
4. No Conflicts of Interest
5. Appropriate Personal Conduct
6. Social Media Policy(Appropriate Personal Conduct 2)*Please refer to our website for detailed contents.

Compliance Training
The Fuyo Lease Group emphasizes employee training
programs that are designed to ensure compliance. Our
training programs include workplace compliance training
and e-learning on insider trading regulations for all Group
employees, as well as group training conducted byexternal instructors for directors, heads of departments,o f f i c e s a n d b r a n c h o f f i c e s , p re s i d e n t s o f G ro u pcompanies, and departmental compliance officers.** A compliance officer is appointed for each department orcompany to raise compliance awareness and ensure compliance.

47 Fuyo Lease Group Integrated Report 2018

Whistleblower Hotline
The Fuyo Lease Group operates a whistleblower hotline.
In addition to the in-house compliance hotline,
we provide a consultation service desk through a
cooperating law firm. Employees are informed of these
services via posters placed inside the company, andportable information cards distributed to all groupdirectors and employees. Concerned individuals can
immediately seek consultation or report whenever theydetect any violations of the law, the Code of Corporate
Conduct and other corporate regulations, harassment
cases, misconduct in information management or otherpotential infringements. The whistleblower systems
accept anonymous reports to protect whistleblowers.
At the Fuyo Lease, full-time corporate auditors areappointed to accept reports from the Group companies,
and the cooperating law firm is available for reports fromthe overseas affiliated companies.
In FY 2017, three reports were received through the
hotline. In each case, we contacted the related parties toconfirm the facts and conducted investigations promptlywith due care to protect whistleblowers against detrimental
treatment. For the cases confirmed to be misconducts,
measures were taken according to corporate regulations,and all cases have been resolved. We will reinforce ourcompliance training of FY 2018 to prevent any recurrences.

Fuyo Lease Group Integrated Report 201848

Financial Information
Financial Position andManagement Goals

Financial
SectionFinancial Position and Results of Operations

Financial Information
Financial Position and Management Goals

P50

Financial Statements
Consolidated Balance Sheets

P52

Consolidated Statements of Income

P54

Consolidated Statements of Comprehensive Income

P55

Consolidated Statements of Changes in Net Assets

P56

Consolidated Statements of Cash Flows

P59

Notes to Consolidated Financial Statements

P60

Report of Independent Auditors

P93

In FY 2017, the fiscal year ended March 31, 2018, theJapanese economy continued a trend of moderate recovery
backed by strong corporate earnings and improved
employment conditions. Overseas economies also continued
to experience steady economic expansion despite concern
over the impact of U.S. trade policies and geopolitical risks.
According to the Japan Leasing Association, the total
volume of lease transactions in Japan’s leasing industry
in FY 2017 came to ¥4,875.9 billion, a decrease of 2.9%
compared to the previous fiscal year.
In this environment, the Fuyo Lease Group launched
Frontier Expansion 2021, its new five-year Medium-termManagement Plan, in April 2017. In FY 2017, the first fiscal
year of the plan, the Group steadily implemented thebusiness and management strategies outlined in the plan,
aiming to be a corporate group that continually expands
the frontiers of its business portfolio and clears the way to
new business fields by fulfilling the corporate slogan of“Go where no one has gone before”.
As a result of these efforts, newly executed contract
volume in FY 2017 totaled ¥1,105,028 million, up 32.5% year
on year. Consolidated operating assets (after subtracting thedeferred profit on installment sales) as of March 31, 2018,
totaled ¥2,168,728 million, up ¥125,163 million, or 6.1%,
from the end of the previous fiscal year.
The total assets amounted to ¥2,430,838 million, up¥130,748 million, or 5.7%, from the end of FY 2016. This
increase is due to a steady increase in operating assets,
which increased by ¥125,163 million from the end of theprevious fiscal year to ¥2,168,728 million, an increase of
6.1% year over year.
The funding balance stood at ¥1,964,954 million, an
increase of 6.2% year on year, mainly due to the issuanceof unsecured straight bonds amounting to ¥20,000
million during the fiscal year under review.
On the profit front, the Company reported total revenuesof ¥590,201 million, up 16.4% year on year, operating profitof ¥32,609 million, up 13.9% year on year, ordinary profit of¥35,200 million, up 12.2% year on year, and net profit attributableto owners of parent of ¥21,944 million, up 9.9% year on year.

Financial Position and Results ofOperations by Segment
Revenues, cost of sales and gross profit▶

Lease and Installment SalesIn FY 2017, Lease and Installment Sales segment revenues
increased ¥74,828 million, or 15.4% year on year, to¥560,298 million. Cost of sales increased by ¥71,807 million,
49 Fuyo Lease Group Integrated Report 2018or 16.3% year on year, to ¥512,156 million, and gross profit
in the Lease and Installment Sales segment increased by¥3,020 million, or 6.7%, year on year, to ¥48,141 million.
This result was mainly due to the steady accumulation ofoperating assets in finance leases and operating leases in
addition to a significant contribution from the expiration oflarge-lot real estate leases and the increase in lump-sum
recorded sales for bridge-type contracts, and the impact ofthese factors was similar at each profit level.
▶

Financing

Financing segment revenues totaled ¥13,063 million in FY
2017, an increase of ¥2,783 million, or 27.1%, year on year.
Cost of sales increased by ¥134 million, or 507.9%, to ¥160
million, and gross profit in the Financing segment rose
¥2,649 million, or 25.8%, to ¥12,902 million. This result was
mainly due to the steady accumulation of operating assets
in the Financing segment in addition to the increase inprofit due to short-term revolving-type factoring at Accretive
Co., Ltd., which became a consolidated subsidiary.
▶

Other

The Other segment’s revenues jumped by ¥5,588 million,
or 49.7% year on year, to ¥16,839 million in FY 2017.
Cost of sales increased by ¥5,775 million, or 132.6%
year on year, to ¥10,130 million, and gross profit in theother segment declined by ¥187 million, or 2.7% year
on year, to ¥6,708 million. This result was mainly due tothe contribution from the Solution business at Accretive
Co., Ltd., which became a consolidated subsidiary, anddecreases in premium revenue and warranty fee revenue.
Operating profit, ordinary profit and profit
attributable to owners of parent
In Leases, the Company steadily expanded the balance of
operating assets through the accumulation of operating
assets focused on real estate leases. In Financing, in addition
to the consolidation of Accretive, the Company successfully
accumulated assets with a focus on profitability, steadily
expanding both the balance of operating assets and profits.
Meanwhile, in the area of funding costs, under the current
interest rate environment, the Company strived for low
interest rate fund procurement. In terms of costs, such as
personnel expenses, the Company managed to maintaincosts largely on level with the previous fiscal year when
the cost increase due to the consolidation of Accretive Co.,
Ltd. is excluded. There were no major changes in bad debt
expenses, which were maintained at a favorable level. As
a result, ordinary profit totaled ¥35,200 million, an increaseof 12.2% year on year, and profit attributable to owners ofparent stood at ¥21,944 million, up 9.9% year on year.
Net assets and equity ratio
Total shareholders’ equity was ¥208,397 million, up 9.4%
year on year, mainly owing to an increase in retained
Fuyo Lease Group Integrated Report 201850

Financial Information

earnings. As a result, total net assets came to ¥282,574
million at the end of the fiscal year under review, up ¥23,381
million, or 9.0%, compared to the end of the previous fiscal
year. As a result of accumulating operating assets with
an awareness of return on assets (ROA), the equity ratio
improved by 0.3 percentage points from the end of theprevious fiscal year to 10.2%.

Cash FlowsThe analysis of cash flows for FY 2017 is as follows.
Cash flows from operating activities
Operating activities in FY 2017 used net cash of ¥100,667
million, a decrease compared to the net cash used of¥154,028 million in the previous fiscal year. The majorchanges included an increase in profit before income taxes,
increases in loss on retirement of property for lease due todisposal of property for lease and cost of property for leasesales, and increases in cash outflows for lease receivables
and investment assets, loans, and purchase of lease assets
due to the steady accumulation of operating assets.
Cash flows from investing activities
Investing activities in FY 2017 used net cash of ¥9,428
million, an increase compared to the net cash used of ¥4,897
million in the previous fiscal year. The main changes included
an increase in cash outflows for the purchase of assets forsolar power plant projects in the Energy/Environment area,
which is a strategic area, and the purchase of the shares ofMarubeni Auto Investment (CANADA) Inc., which became
an equity-method affiliate of the Company.
Cash flows from financing activities
Financing activities in FY 2017 provided net cash of¥113,549 million, a decrease compared to the net cash
provided of ¥157,674 million in the previous fiscal year.
The main changes in indirect financing included a
decrease in proceeds from long-term loans from banks andother financial institutions, and an increase in cash outflows
due to repayments of long-term loans to banks and otherfinancial institutions. In direct funding, the main changes
included an increase in proceeds from the issuanceof commercial paper, a decrease in proceeds from theissuance of bonds, a decrease in cash outflows due tothe redemption of bonds, and decreases in proceedsfrom securitized lease receivables and cash outflows fromrepayments for securitized lease receivables.

Financial Policy
The Fuyo Lease Group has set a basic policy of ensuring
the liquidity required for business operations and stable
funding sources.
The Fuyo Lease Group raises funds through indirect
financing using borrowings from financial institutions anddirect financing from the markets for its working capitaland equipment funding.
At the end of the fiscal year under review, indirect
financing amounted to ¥1,295,388 million, up 5.0% from51 Fuyo Lease Group Integrated Report 2018

the end of the previous fiscal year, mainly due to increases
in short-term loans and long-term loans from banks andother financial institutions. Direct financing increased
8.5% from the end of the previous fiscal year to ¥669,565
million, mainly due to the issuance of commercial paperand bonds. As a result, the funding balance at the endof the fiscal year under review increased 6.2% from theend of the previous fiscal year to ¥1,964,954 million. The
percentage of direct financing stood at 34.1%, up 0.7
points compared to the end of the previous fiscal year.
The main demand for working capital at the Fuyo
Lease Group other than the purchase of lease assets
and properties for installment sales to customers and thepurchase of operational investment securities comesfrom operating expenses and selling, general andadministrative expenses.
As of March 31, 2018, the balance of interest-bearing
debt, including borrowings and lease obligations, stoodat ¥2,000,289 million, up 5.2% from the end of fiscal year.
Moreover, cash and cash equivalents at the end of the
fiscal year under review totaled ¥54,062 million.
At the end of the fiscal year under review, the Company
had concluded overdraft agreements and loan commitment
agreements with 75 correspondent financial institutions. Thebalance of executed loans amounted to ¥419,867 million, andthe balance of unexecuted loans stood at ¥481,836 million.

Management policy, management
strategy and objective indicators
used for evaluating progress towards
management goals
The Medium-term Management Plan, Frontier Expansion
2021, aims to expand the frontiers of our business portfolio
through robust and sustainable growth by constantly
challenging new business areas and business models.
To this end, it is important to steadily build operating
assets and enhance profitability in order to achieve better
performance. From this point of view, we have defined
operating assets, ordinary profit, and return on assets (ROA)
as our three management goals.
On the basis of steadily accumulating operating assets,
both sales and profit showed favorable performanceexceeding the previous year’s results. In particular,
ordinary profit increased 12.2% from the previous year torecord a new high.
Regarding stock, we were able to steadily increase
operating assets by 6.1% from the end of the previous
consolidated fiscal year while improving return on
assets (ROA) by 0.06 points from the end of the previous
consolidated fiscal year.
Management
Goals(Consolidated)
OperatingAssetsOrdinary
ProfitReturn on
assets (ROA)FY 2016
ResultFY 2017
Result¥2,043.6 bn ¥2,168.7 bn

Interim Goal Target Value(FY 2019)(FY 2021)

Consolidated Balance Sheets
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

Assets

2018

2018

2017

Current assets:
Cash and deposits (Notes 2 and 8)￥

Marketable securities (Notes 2, 3 and 5)

54,822￥50,990$517,194

174,036

145,343

1,641,858

Installment sales

116,697

129,663

1,100,924

Financing

380,555

383,373

3,590,143

1,113,085

1,060,579

10,500,804

Trade receivables (Notes 2 and 5):

Lease
Other

2,396

3,189

22,613

Allowance for doubtful receivables(2,806)(3,519)(26,475)

Deferred tax assets (Note 11)

2,771

2,533

26,148Other

35,20032,053332,084

1,876,761

1,804,206

17,705,293

Unconsolidated subsidiaries and afﬁliates

14,976

8,029

141,289

Other investment in securities

748,463

Total current assets

Investments and other assets:
Investment in securities (Notes 2, 3 and 5)
79,33775,420Claims provable in bankruptcy, claims provable in rehabilitation and other

1,022

879

9,650

Other investments

46,50547,928438,729

Deferred tax assets (Note 11)

679

642

6,414

Allowance for doubtful receivables

(445)

(356)

(4,202)142,076

132,544

1,340,343

3,540,682

Total investments and other assets

Property and equipment, at cost less accumulated depreciation:
Leased assets (Note 4)

375,312

320,637

Advances on purchases of property and equipment for lease

3,504

11,73033,062

Own-used assets (Note 4)

21,55618,137203,365

Total property and equipment

400,373

350,505

3,777,109

Intangible ﬁxed assets:
Software leased to customers

373

572

3,525

Goodwill

6,226

7,797

58,741

Other

4,201

4,208

39,632

10,801

12,578101,898

Total intangible ﬁxed assets

Deferred assets:
Deferred organization expenses
Business commencement expenses
Total deferred assets
Total assets:

0

0

3

825

253

7,791

826

254

7,794

￥ 2,430,838￥ 2,300,090$ 22,932,437

See accompanying notes to the consolidated ﬁnancial statements.

¥2,300〜¥2,400 bn¥2,500 bn¥31.4 bn

¥35.2 bn

¥38〜42 bn¥50 bn1.61 %

1.67 %

1.7〜1.8 %2.0 %Fuyo Lease Group Integrated Report 201852

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

Liabilities and net assets

2018

Current liabilities:
Short-term borrowings (Notes 2 and 5)￥

959,940￥

897,820

Consolidated Statements of Income

2018

2017

$

9,056,044

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017

Current portion of long-term debt (Notes 2 and 5)

271,719

245,183

2,563,396

Lease obligations (Notes 2 and 5)

34,87349,728

328,997

Notes and accounts payable ‒ trade26,46430,174

249,661

Income taxes payable

5,880

5,511

55,475

Deferred tax liabilities (Note 11)

130

134

1,233

Advances received from customers

7,772

7,704

73,325

Deferred proﬁt on installment sales

1,625

1,812

15,334

Lease and installment sales

Other

22,77017,574

214,813

Financing

13,063

10,280Other

16,83911,251

158,864590,201

507,001

5,567,941

512,156

440,349

4,831,669

160

26

1,517

Other

10,1304,355

95,574

Interest expense

7,340

7,125

69,253

1,331,177

Total current liabilities

1,255,645

12,558,278

2018

2018

2017

Revenues:￥

Total revenues

Long-term liabilities:

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

560,298￥

485,470$

5,285,837
123,240

Costs:

Long-term debt (Notes 2 and 5)733,293

707,928

6,917,862

Deferred tax liabilities (Note 11)

16,79014,806

158,400

Net deﬁned beneﬁt liability (Note 12)

1,703

1,887

16,067

Guarantee deposits from customers

60,46157,001

570,396

Other

4,837

3,629

45,640817,086785,252

7,708,365

Total costs

529,789

451,856

4,998,013

20,266,643

Gross proﬁt

60,41255,145569,928

Selling, general and administrative expenses

27,802

26,510262,289

Operating proﬁt

32,60928,634

307,639

Interest and dividend income

1,556

1,636

14,682

Interest expenses

(363)

(312)

(3,432)Equity in earnings of afﬁliates

753

456

7,106

Bad debt recovered

118

285

1,117

Reversal of allowance for doubtful receivables

103

149

977

Reversal of provision for loss on guarantees

127

262

1,207

Gain on sale of marketable and investment securities

0

466

1

Loss on sale of marketable and investment securities

̶

(0)

̶

Total long-term liabilities

2,148,264

Total liabilities

2,040,897

Contingent liabilities (Note 6)
Net assets:
Shareholdersʼ equity (Notes 16, 19 and 20):
Authorized: 100,000,000 shares
Issued: 30,287,810 shares in 2018 and 2017

10,532

10,53299,360Capital surplus

10,416

10,416

98,269Retained earnings

187,673

169,9421,770,503

(224)

(342)

(2,119)208,397

190,548

1,966,013

Less, treasury stock, at cost ‒ 64,939 shares in 2018 and 99,224 shares in 2017

Accumulated other comprehensive income
Net unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges

39,26535,314

370,432

(92)

(109)

(873)

Foreign currency translation adjustments

1,551

2,137

14,638Remeasurements of deﬁned beneﬁt plans

(10)

(47)

(96)

40,71437,294384,101

Total accumulated other comprehensive income

Subscription rights to shares

924

842

8,719

Non-controlling interests

32,53730,506306,961

Total net assets

282,574

259,192

2,665,794￥ 2,430,838￥ 2,300,090$ 22,932,437

Total liabilities and net assets

Financing

Other income (expenses)

Common stock, without par value

Total shareholdersʼ equity

Lease and installment sales

Other, net

224

265

2,119

35,13031,844331,416

Current

10,965

10,051

103,447

Deferred

(92)

(511)

(872)

Total

10,872

9,540

102,575

Proﬁt after income taxes

24,25722,304

228,841

Proﬁt before income taxes
Income taxes (Note 11)

Proﬁt attributable to non-controlling interests
Proﬁt attributable to owners of parent

2,312
￥

21,944

21,8192,330￥

19,974$207,022

See accompanying notes to the consolidated ﬁnancial statements.

See accompanying notes to the consolidated ﬁnancial statements.

53 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201854

Consolidated Statements of Comprehensive Income
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2018
Proﬁt after income taxes￥

24,257￥22,304

Year ended March 31,2018
Shareholdersʼ equity
Number ofshares ofcommon stock

2018

2017
$

3,957

Deferred gains (losses) on hedges
Foreign currency translation adjustment

37,332

3,076

9

26

89

(586)

(272)

(5,532)Remeasurements of deﬁned beneﬁt plans

80

51

757

Share of other comprehensive income of entities accounted for using equity method

(14)

211

(140)

3,445

3,092

32,506

Total other comprehensive income￥

27,702￥25,397$

261,347￥

25,364￥23,042$

239,286

Comprehensive income attributable to non-controlling interests

2,338

2,354

Retainedearnings

Treasurystock,
at costTotal
shareholdersʼ
equity30,287,810￥ 10,532￥ 10,416￥ 169,942￥ (342) ￥ 190,548

Cash dividends(4,167)(4,167)

Proﬁt attributable to owners of parent

21,94421,944Purchase of treasury stock
Disposal of treasury stock

(45)

(0)

(0)

118

73

Net changes of items other than shareholdersʼ equity
Balance at end of year

30,287,810￥ 10,532(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent

CapitalsurplusMillions of yen

Balance at beginning of year

Net unrealized gains (losses) on available-for-sale securities

Commonstock

228,841

Other comprehensive income

Comprehensive income

Consolidated Statements of Changes in Net Assets￥ 10,416￥ 187,673￥ (224) ￥ 208,397

Year ended March 31,2018
Accumulated other comprehensive income

22,061
Net unrealized
gains onavailable-forsale securities

See accompanying notes to the consolidated ﬁnancial statements.

Deferred
gains(losses)on hedges

Foreigncurrencytranslation
adjustment

Total
Remeasure- accumulated
ments
other
of deﬁned comprehensive
beneﬁt plansincomeMillions of yen

Balance at beginning of year

￥ 35,314￥ (109)￥ 2,137￥ (47)￥ 37,294

3,951

17

(586)

37

3,419

￥ 39,265￥ (92)￥ 1,551￥ (10)￥ 40,714

Cash dividends
Proﬁt attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other than shareholdersʼ equity
Balance at end of year

Year ended March 31,2018

Balance at beginning of year

Subscription
rights toshares

Noncontrollinginterests

Total
net assets￥ 842￥ 30,506￥ 259,192

Cash dividends(4,167)

Proﬁt attributable to owners of parent

21,944Purchase of treasury stock(0)

Disposal of treasury stock73

Net changes of items other than shareholdersʼ equity
Balance at end of year

81

2,031

5,532

￥924

￥ 32,537￥ 282,574

See accompanying notes to the consolidated ﬁnancial statements.

55 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201856

Year ended March 31,2018

Year ended March 31,2017

Shareholdersʼ equity
Commonstock

Capitalsurplus

Shareholdersʼ equity

Treasurystock,
at costRetainedearnings

Number ofshares ofcommon stock

Total
shareholdersʼ
equityCommonstock

CapitalsurplusThousands of U.S. dollars (Note 1)

Balance at beginning of year

$ 99,360$ 98,269

Retainedearnings

Treasurystock,
at costTotal
shareholdersʼ
equityMillions of yen

Balance at beginning of year

30,287,810￥ 10,532￥ 10,416￥ 153,366￥ (401) ￥ 173,913$ 1,603,231$ (3,234) $ 1,797,626

Cash dividends(39,318)(39,318)

Cash dividends(3,379)(3,379)Proﬁt attributable to owners of parent

207,022207,022

Proﬁt attributable to owners of parent

19,974

19,974Purchase of treasury stock(7)

Disposal of treasury stock

(432)

1,122

(7)

Purchase of treasury stock

690

Disposal of treasury stock(18)

Balance at end of year

$ 99,360

Net unrealized
gains onavailable-forsale securities$ 98,269$ 1,770,503$ (2,119) $ 1,966,013

Balance at end of year

30,287,810￥ 10,532$ 333,156

Year ended March 31,2017
Accumulated other comprehensive income

Deferred
gains(losses)on hedges

Foreigncurrencytranslation
adjustment

Total
Remeasure- accumulated
ments
other
of deﬁned comprehensive
beneﬁt plansincomeNet unrealized
gains onavailable-forsale securities$ (1,038)$ 20,167$ (448)$ 351,837

Balance at beginning of year

Proﬁt attributable to owners of parent

Proﬁt attributable to owners of parent

Purchase of treasury stock

Purchase of treasury stock

Disposal of treasury stock

Deferred
gains(losses)on hedges

Foreigncurrencytranslation
adjustment

Total
Remeasure- accumulated
ments
other
of deﬁned comprehensive
beneﬁt plansincome￥ (187)￥ 2,416￥ (232)￥ 34,226$ 370,432$

165(5,529)(873)$ 14,638$

352

32,264(96)$ 384,101

Net changes of items other than shareholdersʼ equity

3,084

77

(278)

185

3,068

Balance at end of year

￥ 35,314￥ (109)￥ 2,137(47)￥ 37,294$ 7,953

Noncontrollinginterests$ 287,794￥

Year ended March 31,2017

Total
net assets$ 2,445,210

Balance at beginning of year

Subscription
rights toshares

Noncontrollinginterests

Total
net assets￥ 722￥ 23,670￥ 232,531

Cash dividends(39,318)

Cash dividends(3,379)Proﬁt attributable to owners of parent

207,022

Proﬁt attributable to owners of parent

19,974Purchase of treasury stock(7)

Purchase of treasury stock(0)

Disposal of treasury stock

690

Disposal of treasury stock

41

766

19,16752,197$ 8,719$ 306,961$ 2,665,794

See accompanying notes to the consolidated ﬁnancial statements.

57 Fuyo Lease Group Integrated Report 2018

￥ (342) ￥ 190,548

Disposal of treasury stock
37,276

Subscription
rights tosharesBalance at end of year41

￥ 32,230

Year ended March 31,2018

Net changes of items other than shareholdersʼ equity

59

Millions of yen

Cash dividends

Balance at beginning of year

￥ 169,942

Year ended March 31,2018

Cash dividends

Balance at end of year

￥ 10,416

Accumulated other comprehensive income

Thousands of U.S. dollars (Note 1)

Net changes of items other than shareholdersʼ equity(0)

Net changes of items other than shareholdersʼ equity

Net changes of items other than shareholdersʼ equity

Balance at beginning of year(0)

Net changes of items other than shareholdersʼ equity
Balance at end of year

120

6,835

10,025￥842￥ 30,506￥ 259,192

See accompanying notes to the consolidated ﬁnancial statements.

Fuyo Lease Group Integrated Report 201858

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESFuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2018 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2018

2018

2017

Fuyo General Lease Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account in conformity
with generally accepted accounting principles in Japan, and its foreign consolidated subsidiaries maintain their books of account inconformity with those of their countries of domicile.
The accompanying consolidated ﬁnancial statements have been compiled from the consolidated ﬁnancial statements prepared by

Cash ﬂows from operating activities:
Proﬁt before income taxes￥

35,130￥31,844$331,416

Adjustments for:
Depreciation and amortization

32,37732,765

305,448

Loss on retirement of leased assets and cost of leased assets sales

70,364

10,923663,813

(622)

(367)

(5,869)Interest and dividend income(1,556)(1,636)(14,682)

Interest expenses

7,704

7,437

72,684

Decrease in allowance for doubtful receivables

Gain on sales of marketable and investment securities, net

(0)

(466)

(1)

Equity in earnings of afﬁliates

(753)

(456)

(7,106)

Amortization of goodwill and negative goodwill

1,571

1,328

14,822

Increase in trade receivables(65,488)(86,747)(617,814)

Purchase of leased assets(149,448)(131,628)(1,409,891)

Decrease in trade payables(18,077)(20,847)(170,539)

4,852

19,28345,776(83,945)(138,567)(791,943)

1,361

1,393

12,846

Interest expenses paid

(7,857)(7,313)(74,124)

Income taxes paid

(10,226)(9,541)(96,476)(100,667)(154,028)(949,697)

Other, net
SubtotalInterest and dividend income received

Net cash used in operating activities

Cash ﬂows from investing activities:
Proceeds from sales and redemption of marketable and investment securities

2,604

2,992

24,567

Payments for purchase of marketable and investment securities(7,501)(693)(70,764)̶

(8,159)̶

(5,862)(1,468)(55,305)

Purchase of shares of subsidiaries resulting in change in scope of consolidation
Payments for purchase of property and equipment for own use

1,330

2,431

12,550(9,428)(4,897)(88,952)

Increase in short-term borrowings, net

62,662

34,437591,157

Proceeds from long-term debt

318,241

364,194

3,002,276

Repayments of long-term debt

(282,268)(266,777)(2,662,909)

Proceeds from issuance of bonds

20,00040,000188,679

Redemption of bonds(300)(10,150)(2,830)Cash dividends paid

(4,168)(3,379)(39,325)

(617)

(649)

(5,822)

113,549

157,674

1,071,226

47

406

448

Net increase (decrease) in cash and cash equivalents

3,500

(844)

33,025

Cash and cash equivalents at beginning of year

50,561

51,406476,998

Other, net
Net cash used in investing activities

Cash ﬂows from ﬁnancing activities:

Other, net
Net cash provided by ﬁnancing activities

Effect of exchange rate changes on cash and cash equivalents

Cash and cash equivalents at end of year

(1) Basis of Presentation￥

54,062￥50,561$510,023

See accompanying notes to the consolidated ﬁnancial statements.

the Company as required under the Financial Instruments and Exchange Act of Japan and have been prepared in accordance withgenerally accepted accounting principles in Japan, which are different in certain respects as to the application and disclosure requirementsof International Financial Reporting Standards.
The amounts in US dollars presented in the ﬁnancial statements are translated from the amounts in Japanese yen at the exchange rateof ¥106 to US$1.00, in effect at March 31, 2018, solely for the convenience of overseas readers. Therefore, this does not imply that thoseamounts in yen can be converted into equivalent amounts in US dollars at this or any other exchange rate. The amounts, which areindicated in millions of yen, are rounded down by truncating the ﬁgures below one million. As a result, the totals may not add up exactly.

(2) Principles of Consolidation
The accompanying consolidated ﬁnancial statements include the accounts of the Company and all companies controlled directly or
indirectly by the Company. Companies over which the Company exercises signiﬁcant inﬂuence in terms of their operating and ﬁnancial
policies have been included in the consolidated ﬁnancial statements on an equity basis. All signiﬁcant intercompany balances andtransactions have been eliminated in consolidation.
For ﬁscal years ended March 31, 2018 and 2017, consolidated accounting covered the parent company and 46 and 45 subsidiaries,
respectively. A total of 4 and 3 afﬁliated companies are accounted for under the equity method and incorporated into the consolidated
ﬁnancial statements for ﬁscal years ended March 31, 2018 and 2017, respectively.
Investments in the non-consolidated subsidiaries or afﬁliates for which the equity method has not been applied are evaluated using
the cost method.
With regard to the equity method afﬁliates whose closing dates differ from the consolidated closing date, the ﬁnancial statements ofthese companies for their respective ﬁscal years have been applied.
Regarding the closing dates of the consolidated subsidiaries, the closing date of 20 companies is December 31, that of 14 companies
is March 31, and that of 12 companies is January 31 for the current year.
Financial statements of the respective subsidiaries for the respective ﬁscal years, with necessary adjustments in material activities
transacted during the periods up to the consolidated closing date, have been reﬂected in the consolidation.
Of the acquisition costs of newly consolidated subsidiaries, portions exceeding their net assets as of the dates when the Company
acquired control are recorded as goodwill and will be amortized using the straight-line method over 20 years or less, except for
immaterial amounts.

(3) Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates prevailing at the balance
sheet dates, except for assets and liabilities hedged by forward foreign exchange contracts.
All revenues and expenses associated with foreign currencies are translated at the exchange rates prevailing when such transactions
were made. The resulting exchange gains and losses are credited or charged to income.
The accounts of the foreign subsidiaries are translated at the exchange rates prevailing at the balance sheet dates, except for thecomponents of net assets. The components of net assets are translated at their historical exchange rates. The resulting exchange
differences are included in the foreign currency translation adjustments account in net assets.

(4) Cash and Cash Equivalents
The Company and its subsidiaries consider all highly liquid investments with a maturity of three months or less when purchased to be
cash equivalents.

(5) Lease Accounting
Revenue and cost of ﬁnance leases are recognized when each lease payment becomes due.
Revenue from operating leases is based on the monthly amounts of lease payments due under lease agreements over the leaseagreement periods. The monthly lease payments corresponding to each period are allocated to revenue from operating leases forthat period.

(6) Installment Sales
Revenue and cost of installment sales are recognized when each installment payment becomes due.

59 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201860

(7) Interest Expenses(13) Consumption Taxes

Interest expense is allocated to cost of sales and other expenses based on the balances of the respective operating assets, which consist

Transactions are recorded exclusive of consumption taxes and local consumption taxes.

principally of accounts receivable and leased assets, and other assets.
Interest expense classiﬁed as cost of sales is stated net of interest income.

(8) Securities(14) Retirement Beneﬁts
The method for attributing estimated retirement beneﬁts for periods of employee service
For the calculation of retirement beneﬁt obligations, the beneﬁt formula method is used to attribute estimated retirement beneﬁts for

All securities are classiﬁed as available-for-sale securities.
Marketable available-for-sale securities are carried at fair market value and unrealized gains or losses are reported as a separate
component of net assets, net of the related deferred income taxes.

the period up to the end of the ﬁscal year under review (March 31, 2017).

Actuarial differences and prior service cost
With respect to prior service cost, the Company expenses the entire amount of it in the ﬁscal year of occurrence, but one of the Companyʼs

Other securities without available fair market values are stated at values determined using the moving-average cost method.

domestic consolidated subsidiaries amortizes it by the straight-line method over a period within the average remaining service years for

The cost of securities sold is determined based on the moving-average method.

employees at the time of recognition (10 years), starting from the ﬁscal year of occurrence.

When a signiﬁcant decline in fair value below cost of an individual security is deemed to be other than temporary, the carrying valueof the individual security is written down to fair value.

With respect to actuarial differences, the Company expenses the entire amount of them in the ﬁscal year of occurrence, but one of theCompanyʼs domestic consolidated subsidiaries amortizes them by the straight-line method over a period within the average remaining
service years for employees at the time of recognition (10 years), starting from the ﬁscal year following the ﬁscal year of occurrence.

(9) Depreciation and Amortization
Depreciation of leased assets is computed primarily by the straight-line method based on the lease term of the respective assets.
Depreciation of assets leased under ﬁnance leases not involving title transfer is computed by the straight-line method based on thelease term of the respective assets and assuming a residual value of zero.
Depreciation of own-used assets is computed by the declining balance method. However, some domestic and overseas consolidated

Unrecognized actuarial differences and unrecognized prior service cost
Unrecognized actuarial differences and unrecognized prior service cost after tax effect adjustments are recorded as remeasurements ofdeﬁned beneﬁt plans classiﬁed in accumulated other comprehensive income of net assets.

Simpliﬁed accounting method
Certain domestic consolidated subsidiaries use simpliﬁed accounting methods in relation to the calculation of the net deﬁned beneﬁt

subsidiaries apply the straight-line method for depreciation of buildings (excluding facilities attached to buildings) acquired on andliability and the net periodic pension cost. In the case of the termination allowance plan, retirement beneﬁt obligations are recorded asafter April 1, 1998 and facilities attached to buildings and structures acquired on and after April 1, 2016.

the amount to be paid under voluntary retirement as of the ﬁscal year-end. In the case of the corporate pension plan, retirement beneﬁt

The estimated useful lives of own-used assets are principally as follows:
Buildings

3 to 50 years

Furniture and equipment

3 to 20 years

Computer software intended for internal use is amortized by the straight-line method over the estimated useful lives (5 to 10 years).

obligations are recorded as the amount of actuarial liability calculated under the latest pension funding program.

Directorsʼ and audit & supervisory board members' retirement beneﬁts
The Company records the entire amount of retirement beneﬁts to directors and audit & supervisory board members, which are requiredby the internal corporate policy at the end of the consolidated ﬁscal year.

(10) Allowance
Allowance for doubtful receivables(15) Derivatives and Hedging Activities

To cover possible losses from bad debts, the Company sets aside an allowance for the estimated amount of doubtful receivables deemed

regard to interest rate-related instruments, the Company uses interest rate swap contracts and interest rate cap contracts.

uncollectible. This allowance is based on historical default rates for general receivables, the analysis of debtorsʼ ﬁnancial positions forclassiﬁed loans and claims in bankruptcy. With respect to the bankruptcy claims, an estimated uncollectible amount is directly deductedfrom the amount of claims. The direct deduction totaled ￥1,923 million in the ﬁscal year ended March 31, 2017 and ￥2,072 million

With regard to foreign currency-related derivative ﬁnancial instruments, the Company uses forward foreign exchange contracts. With
The Company uses currency-related derivatives and interest rate-related derivatives for risk management purposes, not for
speculative investment purposes.
The Company uses currency-related derivatives for the purpose of hedging risks associated with foreign currency ﬂuctuations that($19,555 thousand) in the ﬁscal year ended March 31, 2018.

affect its foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives for the purpose

Provision for future lease paymentsof hedging risks associated with interest rate ﬂuctuations that affect its borrowings.

To cover possible losses from future lease payment receivables for operating leases (subleases), a provision for the amount deemed

The Company uses derivatives, in accordance with its internal “Basic Policy for Managing Market and Liquidity Risks,” for theuncollectible is recorded. This provision is based on the historical default rates for general receivables, the analysis of individual

purpose of hedging risks associated with interest-rate and foreign currency ﬂuctuations arising from its sales and ﬁnancial operations.

receivables with respect to classiﬁed loans in addition to bankruptcy claims.

Provision for loss on guarantees

Derivative ﬁnancial instruments are stated at fair value.
Under the exceptional treatment of hedge accounting, the interest rate swaps that qualify as hedge transactions and meet speciﬁc

To cover possible losses on guarantees, the Company provides an allowance for estimated loss, taking into consideration the ﬁnancial

matching criteria are not remeasured at market value, but the differentials paid or received under the swap agreements are recognizedcondition of the providers of the ﬁnancial guarantees as well as other factors.

and included in interest expense or income.

Provision for automobile maintenance costs
To cover future payments for automobile maintenance costs that are required in speciﬁc lease transactions and maintenance services,(16) Per Share Informationa provision for estimated cost is recorded for the ﬁscal year ended March 31, 2017.

Basic earnings per share is computed by dividing earnings attributable to common stock by the weighted average number of common
stock outstanding during the ﬁscal year under review.

(11) Deferred Assets
Deferred organization expenses(17) Recently Issued Accounting Standards Not Yet Adopted

Organization expenses are amortized by the straight-line method within ﬁve years after the date of founding.

・Implementation Guidance on Tax Effect Accounting (ASBJ Guidance No. 28, revised on February 16, 2018, Accounting Standards

Business commencement expenses
Business commencement expenses are amortized by the straight-line method within ﬁve years after the business commencement date.

Board of Japan)
・Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, ﬁnal revision on February 16, 2018,

Bond issuance costAccounting Standards Board of Japan)

Bond issuance cost is expensed upon payment.

(1) Outline
In relation to transferring the practical guidelines on tax effect accounting from the Japanese Institute of Certiﬁed Public Accountants(12) Income Taxes(JICPA) to Accounting standards Board of Japan (ASBJ), these were partially amended in the points mentioned below.

The temporary differences between the book value of assets and liabilities recognized for accounting and those for tax purposes are<Revision of main handlings of account processing>recorded as deferred tax assets (liabilities) to account for future income taxes.

・Accounring treatment for taxable temporary difference in relation to equity in subsidiaries on standalone ﬁnancial statements
・Accounring treatment for recoverability of deferred tax assets with respect to entities deﬁned as (Category 1)

61 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201862

(2) Scheduled date of adoption

The Companyʼs credit risk department is engaged in the following duties: 1) daily monitoring of the effectiveness of the credit risk

The Implementation Guidance on Tax Effect Accounting and the Implementation Guidance on Recoverability of Deferred Tax Assets

management system, 2) screening and management of credit transactions involving customers, 3) maintenance and enhancement ofwill be adopted as of the beginning of the ﬁscal year ending in March 31, 2019.

risk asset soundness, 4) enhancement of protection against doubtful receivables and implementation of measures related to collection(3) Impact of adoption of such accounting standardsof those receivables, and 5) guidance and support for the Companyʼs ofﬁces and afﬁliated companies. The department also rates

The impact of the adoption of the Implementation Guidance on Tax Effect Accounting and the Implementation Guidance on

debtors based on their ﬁnancial status and degree of credit risk (i.e., their ability to pay debts). The credit ratings are used for credit risk

Recoverability of Deferred Tax Assets on the consolidated ﬁnancial statements is currently under evaluation.

management, portfolio investment and management, credit risk measurement, guidelines on pricing of individual credits, and・Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018, ASBJ)

monitors the status of the Companyʼs main customers, manages payment-due dates and credit balances on a customer-by-customer

self-assessment and recognition of adequate credit allowances based on the self-assessments. Further, the department regularly
・Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 30, 2018, ASBJ)

basis, and closely monitors customers to identify potential impediments to the collectability of receivables (e.g., due to worsening(1) Outline

ﬁnancial condition) and takes steps to mitigate such impediments.

International Accounting Standard Board (IASB) and Financial Accounting Standard Board (FASB) have jointly developed

The effectiveness and appropriateness of credit risk management are examined through internal audits.

comprehensive accounting standards for revenue recognition and announced Revenue from Contracts with Customers (IFRS 15
for IASB and Topic 606 for FASB). As IFRS 15 is effective from the ﬁscal year commencing on or after January 1, 2018 and Topicii) Management of market risks (risks associated with foreign exchange rates and interest rates)

606 is effective from the ﬁscal year commencing after December 15, 2017, ASBJ has developed comprehensive accounting

The Companyʼs market risk management rules and procedures are prescribed in its internal "Basic Policy for Managing Market andstandard together with its implementation guidance.

Liquidity Risks."

The fundamental policy of ASBJ in developing accounting standards for revenue recognition is the new accounting standard thatMarket risks are controlled by comprehensively examining various factors such as ﬁnancial position (revenues and shareholdersʼ

would be consistent with IFRS 15. Alternative accounting treatment considering practices in Japan would be added to the extent not toequity), balance between target revenues and risk levels, interest rate prospects, market environments, past results, and the level of risk

cause inconsistency with IFRS 15.

management for various risks. The Company manages its exposure to risks when deemed necessary for the purpose of reducing risks(2) Scheduled date of adoption

and expanding revenues.

The changes will be applied from the beginning of the ﬁscal year ending in March 31, 2022.

The Companyʼs ALM Committee meets once a month as a general rule, and on an ad-hoc basis as needed, to review and examine(3) Impact of adoption of such accounting standards

practical measures related to market risk management and to monitor performance. At the monthly meeting, the ﬁnance division

The impact of the adoption of the Accounting Standard for Revenue Recognition and its implementation guidance on the consolidated

reports on matters related to market risk management, including the status of market risk control, interest rate prospects, market

ﬁnancial statements is currently under evaluation.

environment developments, and hedge transactions.
The Companyʼs consolidated subsidiaries are subject to the Companyʼs "Basic Policy for Managing Market and Liquidity Risks."

2. FINANCIAL INSTRUMENTS
The position in respect of ﬁnancial instruments for the ﬁscal year ended March 31, 2018, was as follows.

(1) Policy on ﬁnancial instruments(i) Interest rate risk management
The Company comprehensively manages interest rate risk using ALM. The ALM Committee ascertains and monitors the status of ALM
operations and discusses future direction and strategy based on the Companyʼs ALM policies.

(ii) Foreign exchange risk management
The Company manages foreign exchange risk on a case-by-case basis, using foreign exchange forward contracts as a general rule.

The Fuyo Lease Group is engaged in leasing and installment transactions for machinery and equipment and ﬁnancial transactions such(iii) Price ﬂuctuation risk management

as the provision of operating loans. The Group uses direct and indirect ﬁnancing to procure funds for purchasing assets to lease or to sellWith regard to marketable securities and investment securities, the Company regularly monitors the market values of these securities

through installment sales and for providing operating loans to customers. The Groupʼs indirect ﬁnancing mainly consists of loans fromas well as the ﬁnancial status of issuers and continuously reviews its outstanding position considering market conditions and its

ﬁnancial institutions, and its direct ﬁnancing includes issuing bonds payable, commercial, paper and securitization of receivables. As therelationship with the issuers.

Group holds ﬁnancial assets and ﬁnancial liabilities that are subject to interest rate ﬂuctuation, assets and liabilities are comprehensively(iv) Derivatives contracts

managed through asset-liability management (ALM) to mitigate the negative impact of interest rate ﬂuctuations.

With regard to derivatives, the Company uses forward foreign exchange transactions for the purpose of hedging risks associated withDerivative transactions are only used for mitigating currency and interest rate risks and are not used for speculative purposes.

(2) Financial instruments and their risks

foreign currency ﬂuctuations that affect its foreign currency-denominated receivables and payables. The Company uses interest rate
swap transactions for the purpose of hedging risks associated with interest rate ﬂuctuations that affect its borrowings.
The Companyʼs ﬁnance division is authorized to engage in and manage derivative contracts, in accordance with internal regulations

Lease receivables, investment assets, and operating loans are trade receivables due from customers and subject to credit risks associatedand individuals authorized on job responsibilities and pursuant to the approval of the Companyʼs president (CEO) or ofﬁcer in charge

with customer default. Foreign currency-denominated receivables and payables arising from overseas business are subject to risksof the ﬁnance division.

associated with foreign currency ﬂuctuations.
Marketable securities and investment securities include business partnersʼ shares, bonds, and investments in limited partnership.
Those investments are subject to credit risks associated with the issuers and market risks.
Bonds payable, commercial paper, lease obligations, long-term loans, and payables under ﬂuidity long-term lease receivables and

The Companyʼs consolidated subsidiariesʼ derivative-related transactions are subject to the Companyʼs internal regulations "Basic
Policy for Managing Market and Liquidity Risks." In accordance with the Companyʼs "Regulations on Managing Associated Companies,"
the Companyʼs consolidated subsidiaries report to the Company on derivative-related transactions. These reports explain the subsidiaryʼs
policy on engaging in the transaction, provide a validation of the transactionʼs objective, and detail the derivative transactionʼs status,

installment sales trade receivables are used to procure funds for purchasing assets to lease or sell through installment sales to customers.

counterparties, outstanding positions, and unrealized gains/losses.

These payables are subject to risks that may compel the Company to procure funds with exceptionally high interest rates and to liquidity(v) Quantitative information on market risk

risks (funding risks) that may negatively affect the Companyʼs ability to obtain funding and result in losses. A portion of long-term loans

The major types of ﬁnancial instruments affected by interest rate risk, the Groupʼs main risk factors, are “Installment sales trade

have ﬂoating interest rates and are therefore subject to interest rate risks.

receivables,” “Lease receivables and investment assets,” “Accounts receivable - operating loans,” other marketable securities recorded

The Company uses foreign currency-related derivative contracts to reduce risks associated with foreign currency ﬂuctuations that

under “Marketable securities and investment in securities,” “Bonds payable,” “Long-term loans from banks and other ﬁnancial

affect foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives to reduce risks

institutions,” "Payables under ﬂuidity long-term lease receivables and installment sales trade receivables,” and interest rate swaps

associated with interest rate ﬂuctuations that affect borrowings.

included in “Derivative contracts.” The Group performs quantitative analysis in managing the risk of interest rate ﬂuctuations. This

(3) Risk management system for ﬁnancial instrumentsof potential interest rate movements. To calculate the potential change in value, the ﬁnancial assets and liabilities are split intoquantitative analysis incorporates the potential change in value of these ﬁnancial assets and liabilities based on a reasonab le rangei) Management of credit risks (default risks)ﬁxed-rate and variable-rate categories. For the ﬁxed-rate category, the Company allocates the book value of the instruments into

The Companyʼs management system and rules for credit risks are prescribed in its internal "Basic Policy for Managing Credit Risks."

appropriate categories based on their interest-payment dates and applies an appropriate potential range of interest rate movements

For all transactions that involve credit risks, the Company uses a credit risk measurement method, identiﬁes on a timely basis theto each category. Assuming all risk factors other than interest rates remain constant, as of March 31, 2018, a 10 basis point (0.1%)

location and size of credit risks, and responds adequately as necessary.

change in interest rates would result in a ¥3,566 million ($33,650 thousand) change in the fair value of these ﬁnancial assets andliabilities. This potential change in value is based on the assumption that all risk factors other than interest rates remain constant anddoes not incorporate the effects of correlation between interest rates and the other risk factors. If interest rates ﬂuctuate beyond theassumed reasonable range, the value of these ﬁnancial assets and liabilities may be affected by more than the Group has estimated.

63 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201864iii) Management of liquidity risks associated with funding (risks of failure to pay on due date)Year ended March 31, 2018

The Companyʼs management system and rules for liquidity risks are prescribed in its internal "Basic Policy for Managing Market andCarrying value(A)

Liquidity Risks."

Fair value(B)(B) - (A)Thousands of U.S. dollars

With regard to liquidity risks (funding risks), the Companyʼs ﬁnance division rigorously controls funding for ordinary operations.
The division prepares daily statements of cash receipts/disbursements and an outlook of weekly and monthly cash receipts/disbursements,

Cash and deposits*

analyzes investment and cash receipt/disbursement data, and summarizes information from each division to determine the impact on the

Installment sales trade receivables*2

1,085,376

1,098,376

13,000Companyʼs funding activities. The division also adequately controls liquidity, enhances capital efﬁciency, and optimizes liquidity risks andLease receivables and investment assets*2

10,355,487

10,688,947

333,460

funding costs.

Accounts receivable - operating loans*2

2,788,488

2,827,860

39,372

2,141,023

2,141,023

̶Total assets$ 16,887,568$ 17,273,400$ 385,832

Short-term loans from banks and other ﬁnancial institutions$ 4,408,874$ 4,408,874$

4,468,868

4,468,868

333,358

333,358

̶

Bonds payable (current portion included)

1,037,736

1,034,234(3,502)Long-term loans from banks and other ﬁnancial institutions (current portion included)

7,811,772

7,862,243

50,471

631,750

632,327577$ 18,692,358$ 18,739,904$

47,546

̶$̶

Funding is measured by adequately monitoring economic conditions and market environments. Liquidity risks are allocated to
management categories by level of funding and managed based on predetermined response policies and implementation standards foreach category.
The Companyʼs ﬁnance division also monitors consolidated subsidiariesʼ funding status and takes appropriate action as necessary
based on that status.

1,2$

Other marketable securities

Lease obligations (current liabilities and long-term liabilities)

The fair value of a ﬁnancial instrument represents its market value or a reasonably calculated value if a market value is not available.
Because calculations involve variable inputs, the results of calculations may vary depending on what premises and assumptions areused. Contract amounts and other derivative transaction data presented in the notes on derivative transactions are nominal contract
amounts or notional amounts used in calculations and do not indicate the amount of exposure.
Fair values of ﬁnancial instruments as of March 31, 2018, are listed in the table below. Financial instruments for which estimation offair value is impracticable are not included. Financial assets and liabilities not included in the table are omitted from disclosure as they
are of less importance in terms of value.

Payables under ﬂuidity long-term lease receivables and installment sales
trade receivables (current portion included)

517,194$̶Total liabilities

̶̶

Derivative contracts*3
Derivative contracts not accounted for as hedges$

Derivative contracts accounted for as hedges

The following table presents the carrying value and fair value of ﬁnancial instruments at March 31, 2018 and 2017. The following table$

Marketable securities and investment in securities

Commercial paper(4) Supplementary explanation of matters related to fair values of ﬁnancial instruments

517,194

Total derivative contracts

̶

$

(8)
$

(1,914)(8)$(1,914)(1,906)$(1,906)

does not include ﬁnancial instruments for which it is extremely difﬁcult to determine the fair value.
Year ended March 31, 2017
Year ended March 31, 2018
Carrying value(A)

Fair value(B)(B) - (A)￥54,822￥

54,822￥

̶Fair value(B)(B) - (A)Millions of yen

Cash and deposits*1,2Millions of yen

Cash and deposits*1,2

Carrying value(A)￥

Installment sales trade receivables*2

50,990￥50,990￥̶

127,823

129,812

1,989

115,049

116,427

1,377

Lease receivables and investment assets*2

1,047,512

1,077,947

30,435

Lease receivables and investment assets*2

1,097,681

1,133,028

35,346

Accounts receivable - operating loans*2

305,549

309,3103,760

Accounts receivable - operating loans*2

295,579

299,753

4,173

Marketable securities and investment in securities

226,948

226,948

̶Total assets￥ 1,790,082￥ 1,830,980

Short-term loans from banks and other ﬁnancial institutions￥￥

Installment sales trade receivables*2

Marketable securities and investment in securities

Other marketable securities

Other marketable securities

467,340

467,340

206,090

206,090̶Total assets￥ 1,737,966￥ 1,774,151￥ 36,185￥ 40,898

Short-term loans from banks and other ﬁnancial institutions

￥

￥

￥

￥

̶

Commercial paper

419,700

419,700

456,620456,620̶̶Commercial paper

473,700

473,700

̶

Lease obligations (current liabilities and long-term liabilities)

49,77049,770̶

Lease obligations (current liabilities and long-term liabilities)

35,33535,335̶

Bonds payable (current portion included)

90,30090,047(252)

Bonds payable (current portion included)

110,000

109,628(371)

Long-term loans from banks and other ﬁnancial institutions (current portion included)

777,008

782,838

5,830

Long-term loans from banks and other ﬁnancial institutions (current portion included)

828,047

833,397

5,349

Payables under ﬂuidity long-term lease receivables and installment sales
trade receivables (current portion included)

85,80486,512708

66,96567,026

61

Payables under ﬂuidity long-term lease receivables and installment sales
trade receivables (current portion included)￥ 1,879,203￥ 1,885,489￥￥ 1,981,389￥ 1,986,429

￥

5,039

(9)

￥

̶

￥

̶

Total liabilities
Derivative contracts*3
Derivative contracts not accounted for as hedges

65 Fuyo Lease Group Integrated Report 2018

̶

￥

(0)
￥

(0)

(202)
￥

(202)

(202)
￥

(202)

6,286

3

Derivative contracts*

Derivative contracts not accounted for as hedges￥

Derivative contracts accounted for as hedges
Total derivative contracts

Total liabilities￥

Derivative contracts accounted for as hedges
Total derivative contracts

(9)

￥

(14)
￥

(24)

(407)
￥

(417)

̶
(393)

￥

(393)

*1. Net of deferred proﬁt on installment sales*2. Net of speciﬁc and general allowances for doubtful accounts related to installment sales trade receivables, lease receivables and investment assets, and operating loans*3. Net receivables/payables arising from derivative contracts are carried at net amounts. Those for which the net outstanding balance is a payable appear within parentheses.

Fuyo Lease Group Integrated Report 201866

Note: 1. Calculation method for fair value of ﬁnancial instruments and matters related to derivative contracts

Note: 2. Financial instruments whose fair values are deemed extremely difﬁcult to determine

Assets(1) Cash and deposits

March 31, 2018

The fair values of deposits that have no maturity are based on their book values, which closely approximate their fair values.

(2) Installment sales trade receivables
Fair values are calculated by discounting uncollected receivables at the rate applied to new contracts. The Company calculates the fairvalues of doubtful receivables by subtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The
resulting amount closely approximates the doubtful receivablesʼ fair values. Estimated losses on bad debts are calculated based on
estimated cash ﬂows or estimated net realizable value covered by collateral or guaranty.

(3) Lease receivables and investment assets
Present values of lease receivables and investment assets are calculated by subtracting major administrative and maintenance expenses
from the total of uncollected lease receivables and lease payment receivables. The Company calculates the fair values of doubtful

Millions of yen

Thousands of
U.S. dollars￥$

Other securities
Unlisted shares*1
Afﬁliated companiesʼ shares / associated companiesʼ shares*1

5,773

54,466141,289

14,976Preferred securities / beneﬁcial interest in trusts*1

1,600

15,094

Investments in limited investment partnerships*2

19,052

179,738￥

41,402$

390,587*1. We do not disclose the fair values of these shares because their market values are not available and it is deemed extremely difﬁcult to determine their fair values.
*2. Within investments in limited investment partnerships, we do not disclose the fair values of partnership assets consisting of investments whose fair values
are deemed extremely difﬁcult to determine.

receivables by subtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amountclosely approximates the doubtful receivablesʼ fair values. Estimated losses on bad debts are calculated based on estimated cash ﬂows

Note: 3. Redemption schedule by term for monetary claims and securities with maturity after March 31, 2018

or estimated net realizable value covered by collateral or guaranty.

March 31, 2018

Lease receivables and investment assets under sublease contracts are recorded on the consolidated balance sheets before interest
deductions. The amount recorded as the fair value is the balance sheet carrying value. The difference between (a) the carrying value ofOver one year
and within
ﬁve years

Within one year

lease receivables and investment assets under sublease contracts and (b) their fair valued calculated by discounting at the rate applied
to new contracts is ¥466 million ($4,399 thousand).

Over ﬁve years
and within
ten years

Over ten years

Millions of yen

Cash and deposits￥

54,822

￥

̶

̶

￥

￥

̶

(4) Accounts receivable - operating loans

Installment sales trade receivables

47,44465,405

2,526

1,321

Fair values of ﬂoating-rate operating loans are based on their book values. Market rates are reﬂected in the rates on ﬂoating-rate operating

Lease receivables and investment assets

332,063

610,646

123,925

32,086loans with only a short time difference, so their book values closely approximate their fair values as long as the borrower credit status does

Accounts receivable - operating loans

63,180168,694

57,2207,309

not change materially after loan issuance. Fair values of ﬁxed-rate operating loans are calculated by discounting total principal andMarketable securities and investment in securities

interest for each borrower at the rate applied to new contracts. The Company calculates the fair values of doubtful receivables by subtracting

Available-for-sale securities with maturities

estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amount closely approximates theBonds (government)

doubtful receivablesʼ fair values. Estimated losses on bad debt are calculated based on estimated cash ﬂows or estimated net realizable

Bonds (corporate)

value covered by collateral or guaranty.

Bonds (other)Other(5) Marketable securities and investment in securities
Fair values are based on amounts obtained from relevant ﬁnancial and other institutions.

Total

￥

15

̶

̶

̶

1,166

34,504

3,115

533

̶

̶

̶

̶

32

36,837498,725￥ 916,088

Liabilities(1) Short-term loans from banks and other ﬁnancial institutions, (2) Commercial paper

their carrying value on the balance sheets. The difference between the carrying value of lease obligations and their fair value calculatedby discounting at the rate applied to new contracts is ¥264 million ($2,497 thousand).

(4) Bonds payable (current portion included), (5) Long-term loans from banks and other ﬁnancial institutions (current
portion included), (6) payables under ﬂuidity long-term lease receivables and installment sales trade receivables (current
portion included)
Fair values of ﬂoating-rate loans and payables in these categories are based on their book values. Market rates are reﬂected in the rates
on these loans and payables with only a short time difference, and the Companyʼs credit status has not changed materially sinceissuance, so their book values are deemed to closely approximate their fair values. To calculate the fair values of ﬁxed-rate loans andpayables in these categories, the instruments are ﬁrst allocated to categories according to maturity terms. Total principal and interest

Over one year
and within
ﬁve years

Within one year

because they are settled over the short-term, so their book values closely approximate their fair values.

Lease obligations are stated on the consolidated balance sheets before interest deductions. The amount recorded as the fair value is

194,702

5,587￥

46,837

March 31, 2018

Fair values of short-term loans from banks and other ﬁnancial institutions and commercial paper are based on their book values(3) Lease obligations (current liabilities and long-term liabilities)

7,914
￥

Over ﬁve years
and within
ten years

Over ten years

Thousands of U.S. dollars

Cash and deposits$

517,194

$

̶

$

̶

$

̶

447,586

617,037

23,83912,463

Lease receivables and investment assets

3,132,674

5,760,813

1,169,111

302,705

Accounts receivable - operating loans

596,046

1,591,462

539,821

68,953

Installment sales trade receivables

Marketable securities and investment in securities
Available-for-sale securities with maturities
Bonds (government)
Bonds (corporate)
Bonds (other)
Other
Total

142

̶

̶

̶

11,001

325,514

29,387

5,032

̶

̶

̶

̶

310

347,520

74,662

52,714$ 4,704,953$ 8,642,346$ 1,836,820$

441,867

for each category is discounted at a notional rate that is assumed would apply to borrowing in the same amount.

67 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 2018

68

The carrying values and aggregate fair value of securities with determinable market values at March 31, 2018 and 2017, were as follows:

Note: 4. Repayment schedule by term for bonds, long-term debt, and other interest-bearing debt after March 31, 2018.

March 31, 2018
Withinone yearMarch 31, 2018

Over one year Over two years Over three years Over four years
and within
and within
and within
and within
two years
ﬁve years
four years
three years

Over ﬁve
years

Millions of yen

Short-term loans from banks and other ﬁnancial
institutions￥ 467,340

￥

̶

̶

￥

̶

￥

̶

￥

Commercial paper

473,700

̶

̶

̶

̶

̶

Lease obligations(current liabilities and long-term liabilities)

15,359

8,806

5,268

2,950

1,320

1,630

Bonds payable (current portion included)

20,00020,00020,00030,00010,00010,000Long-term loans from banks and other ﬁnancial
institutions (current portion included)

221,381

192,871

154,630

129,395

67,32162,447

Payables under ﬂuidity long-term lease receivables
and installment sales trade receivables(current portion included)

30,33816,477

13,959

2,048

3,050

1,090

￥1,228,120￥ 238,155￥ 193,858￥ 164,395￥ 81,692￥ 75,168

Total

Unrealized
gains

Shares￥

16,534￥53,553

Commercial paper

̶

$

2,531

14

110,536

45,7101,067

218

46,559

Cost orbook value

Unrealized
gains

Unrealized
lossesFair value

March 31, 2017

Millions of yen

Available-for-sale securities:￥

16,310￥48,456$̶$̶

4,468,868

̶

̶

̶

̶

̶

Lease obligations(current liabilities and long-term liabilities)

144,901

83,08549,69827,83912,456

15,379Bonds payable (current portion included)

188,679

188,679

188,679

283,019

94,34094,3402,088,502

1,819,538

1,458,779

1,220,717

635,107589,130

Long-term loans from banks and other ﬁnancial
institutions (current portion included)
Payables under ﬂuidity long-term lease receivables
and installment sales trade receivables(current portion included)
Total

286,215

155,445

131,696

19,32928,77910,285$ 11,586,039 $ 2,246,747 $ 1,828,852$ 1,550,904$ 770,682$ 709,134

3. MARKETABLE SECURITIES AND INVESTMENT IN SECURITIES

108,215

Other

32,429897

̶33,326

Cost orbook value

Unrealized
gains

Unrealized
lossesFair value

Thousands of U.S. dollars

Shares$155,987$

63,499$658,982141

1,042,802

Other431,226

10,071

2,059

439,238

Available-for-sale securities whose fair values are not readily determinable as of March 31, 2018 and 2017, were as follows:
Carrying value

Thousands of
U.S. dollars

Millions of yen

2018

2018

2017

Available-for-sale securities:
￥

3,561

￥

22,864

3,014$

11,658108,200

Carrying value

33,599215,700$

37,142

1,042,802
599,056￥

174,036￥

145,343$

1,641,858￥

73,413￥67,562$

692,581

Proceeds

Thousands of
U.S. dollars

Millions of yen

2018

Non-current:
Shares2,227

23,8802018

Current:
Other$

1,019,063

Thousands of
U.S. dollars

2017

￥

505,222

Bonds

2017, were summarized as follows:

Millions of yen

110,536

64,547

91

Proceeds from sales of available-for-sale securities and resultant gross realized gains and losses for the years ended March 31, 2018 andMarketable securities and investment in securities as of March 31, 2018 and 2017, consisted of the following:

￥

￥

1,917

Other

Bonds

219

106,389

Shares

2018

￥

Bonds

Available-for-sale securities:̶

69,852

108,020

Over ﬁve
years

Thousands of U.S. dollars

̶ $￥March 31, 2018

Over one year Over two years Over three years Over four years
and within
and within
and within
and within
two years
ﬁve years
four years
three years$ 4,408,874 $

236

￥

Other

March 31, 2018

Short-term loans from banks and other ﬁnancial
institutions

Fair value

Bonds

SharesWithinone year

Unrealized
lossesMillions of yen

Available-for-sale securities:
̶￥

Cost orbook value

￥

2018

2017
2

￥

1,107

$

21

Realized gain

0

466

1

Realized loss

̶

0

̶

Impairment loss on securities:
No impairment loss recorded on securities for the consolidated ﬁscal years ended March 31, 2017 and 2018.

Bonds

̶

15

̶

Other

5,923

7,842

55,882The Company recognizes the impairment loss where the decline in the period-end price is greater than or equal to 50% of the acquisition

748,463

cost. Where the decline in the period-end price is between 30% and less than 50% of the acquisition cost, the company may recognize￥

79,337￥75,420$

impairment loss, taking into consideration the credit rating of the issuer, the materiality of the amount, and the likelihood of the securities
recovering in price, as well as the analysis of the level of market price by looking at the gap between the book value and thehighest/lowest price during the ﬁscal years ended March 31, 2017 and 2018.

69 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201870

4. ACCUMULATED DEPRECIATION FOR PROPERTY AND EQUIPMENT

As of March 31, 2018, the following assets were pledged as collateral for current and long-term obligations of ￥34,278 million ($323,383
thousand).

Accumulated depreciation of property and equipment for the ﬁscal years ended March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

Millions of yen

2018
Leased assets￥

158,405

Own-used assets

2018

2017
￥

5,342

162,901
4,296$

1,494,392
50,402

Lease receivables and investment assets

Short-term loans from banks and other ﬁnancial institutions

467,340

Thousands of
U.S. dollars

Weighted-averageinterest rate

2018

2017

Lease and other trade receivables

4,408,874

0.42％

419,700

4,468,868

0.04％

Payables under securitized lease receivables

18,90021,500178,302

0.11％

Total

959,940

897,820

9,056,044―

Lease obligations

34,87349,728

328,997―

9,385,041―￥

994,814￥

241,938
38,647

13

128

Lease and other contract receivables

4,894

46,171

Lease assets

14,096

132,985

48,746$459,869

456,620

947,549$$

investment securities. As third-party security for bank loans taken out by customers, the Company maintains deposits of ￥38 million($361 thousand) in installment sale receivables and ￥652 million ($6,156 thousand) in investment securities. The Company maintains
deposits of ￥3 million ($28 thousand) in investment securities for the purpose of sales transactions.

473,700

￥

$

4,096

￥

Commercial paper￥

25,645Besides the above, the Company maintains, as guarantee deposits for its sales operations, deposits of ￥15 million ($142 thousand) in

Millions of yen

2018

￥

Accounts receivable ‒ other loans to customers

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT AND PLEDGED ASSETS
The breakdown of short-term borrowings as of March 31, 2018 and 2017, were as follows:

Thousands of
U.S. dollars

Millions of yen

6. COMMITMENTS AND CONTINGENT LIABILITIESContingent liabilities at March 31, 2018 and 2017, were as follows:(1) Guarantees provided on borrowings of business partners etc.
Thousands of
U.S. dollars

Millions of yen

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

2018
Thousands of
U.S. dollars

Millions of yen

2018
Bonds payable￥

110,000

2018

2017
￥

90,300Weighted-averageinterest rate$

1,037,736

0.27％Long-term loans from banks and other ﬁnancial institutions

828,047

777,008

7,811,772

0.53％

Payables under ﬂuidity long-term lease receivables
and installment sales trade receivables

66,96585,804

631,750

0.53％

Total
Less current portion
Lease obligations
￥

2019

￥

2,059
1,245

IBM Japan Credit LLC *1

￥

―

$

19,431

1,473

11,752
9,532

1,010

733

JAPAN SECURITIZATION CORPORATION *1

818

829

7,722

AEON RETAIL CO., LTD.

769

810

7,262

MONEY PARTNERS CO., LTD.

499

499

4,715

Sumitomo Mitsui Banking Corporation *1

365

365

3,443

953,1129,481,258

̶245,183

2,563,396―

JCAM AGRI. CO., LTD.

249

254

2,352

XYMAX ALPHA Corporation *1

229

256

2,164

733,293

707,928

6,917,862―

Japan Drilling Co.,Ltd.

―

3,998

―

40

54

384

462

41

4,361

―

Employees

733,755

707,970

6,922,223―

Others￥Thousands of
U.S. dollars

271,719$ 2,563,396

2020

229,348

2,163,662

2021

188,590

1,779,154

2022

161,444

1,523,064

2023

80,372758,2272024 and thereafter

73,538

693,755￥ 1,005,013$ 9,481,258

71 Fuyo Lease Group Integrated Report 2018

Marubeni Auto Investment (Canada) Inc.
AEON Mall Co., Ltd.

271,719

Millions of yen￥

As a guarantor of indebtedness of:

1,005,013

The projected long-term debt servicing amount by ﬁscal year, as of March 31, 2018, was as follows:Year ending March 31,

2018

2017

$

21,259￥28,547

19,556￥

28,832200,562$

269,319*1. The Company has guaranteed loans held by IBM Japan Credit LLC and others.

(2) On both March 31, 2018 and 2017, one of the Companyʼs domestic consolidated subsidiaries engaged in business guarantee
operations which resulted in it becoming a credit guarantor of a total of ￥64,573 million ($609,183 thousand) and ￥72,215 million
in indebtedness with respect to general customers and other entities.
(3) The Company, as a lender, entered into loan commitment agreements as of March 31, 2018 and 2017 amounting to ￥900 million($8,491 thousand) and ￥3,920 million, respectively. The loans provided under these credit facilities as of March 31, 2018 and 2017
amounted to ￥106 million ($1,006 thousand) and ￥2,338 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.

Fuyo Lease Group Integrated Report 201872

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9. COMPREHENSIVE INCOME

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

The components of other comprehensive income for the ﬁscal years ended March 31, 2018 and 2017, were as follows:

Thousands of
U.S. dollars

Millions of yen

2018
Bad debts expenses

￥

432

2018

2017
￥

444

$

4,078

2018

10,652

10,201

100,493

Provision for bonuses

1,707

1,607

16,111

Reclassiﬁcation adjustments to proﬁt or loss

Provision for directors' bonuses

139

141

1,316

Retirement beneﬁt expenses

688

802

6,498

Provision for directors' retirement beneﬁts

32

35

311

2,525

2,380

23,830Rent expenses

1,328

1,254

12,536

Depreciation of own-use assets

1,251

1,200

11,802

Amortization of goodwill

1,571

1,328

14,822

Gains or losses arising during the year￥

Millions of yen

2018
Cash and deposits￥

Time deposits with maturity of over three months
Cash and cash equivalents

54,822￥(760)￥

54,06220182017
50,990$(429)￥

50,561

517,194(7,171)$510,023

53,788
(0)

5,701

4,615

53,788

Income tax effect(1,744)(1,538)(16,456)

￥

Total

￥

3,957

3,076

$

37,332

Deferred gains (losses) on hedges
Gains or losses arising during the year

7

22

Reclassiﬁcation adjustments to proﬁt or loss

6

14

59

Amount before income tax effect

13

37

128

Income tax effect

(4)

(11)

(39)

9

￥

￥

26

￥

(272)

(586)

Total

Thousands of
U.S. dollars$

Amount before income tax effectGains or losses arising during the year

Relationship between cash and cash equivalents at the end of year and cash and deposits stated on the consolidated balance sheets

5,049
(434)

Foreign currency translation adjustments

The main components of cash and cash equivalents at March 31, 2018 and 2017, were as follows:

￥

5,701
(0)

Total

8. CASH AND CASH EQUIVALENTS

2018

2017

Net unrealized gains (losses) on available-for-sale securities

Employees' salaries, allowances and bonuses

Welfare expenses

Thousands of
U.S. dollars

Millions of yen

(586)

￥

69

89

$

(272)

(5,532)$(5,532)Remeasurements of deﬁned beneﬁt plans
Gains or losses arising during the year

204

160

Reclassiﬁcation adjustments to proﬁt or loss

(89)

(86)

(840)

Amount before income tax effect

115

73

1,091

Income tax effect

(35)

(22)

(334)

￥

Total

￥

80

51

1,931

$

757

Share of other comprehensive income of entities accounted for using equity method
Gains or losses arising during the year
Reclassiﬁcation adjustments to proﬁt or loss

(17)

198

(164)

2

12

24

Total

￥

(14)

￥

211

$

(140)

Total other comprehensive income

￥

3,445

￥

3,092

$

32,506

10. DERIVATIVES
Fair values, etc., of derivatives contracts as of March 31, 2018 and 2017, were as follows:(1) Derivative contracts to which hedge accounting is not applied
Millions of yen

2018

Thousands of U.S. dollars

2018

2017

Contract
amount(over one year)

Fair value

Contract
Unrealizedgain
amountFair value(over one year)(loss)

￥ ―

￥ ̶

￥ ̶

Unrealized
Contractgain
amount(over one year)(loss)

Fair value

Unrealized
gain(loss)

￥ (9)

$ ―

$ ―

―

―

$ ―

$ ―

Foreign exchange forward
contracts:
Buying

￥ 408

￥ (9)

(―)

(―)

$ ―
(―)

Interest rate swap contracts:
Fixed rate payment,
ﬂoating rate receipt

̶

̶

̶

200

￥ ―

￥ ―

￥ 608

(0)

―

￥ (9)

￥ (9)

$ ―

(―)

(―)
￥ ―

(0)

(―)

The fair values are based on the amounts presented by relevant ﬁnancial and other institutions.

73 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201874

12. RETIREMENT BENEFITS(2) Derivative contracts to which hedge accounting is applied
Millions of yen

2018

Contract
amount(over one year) Fair value

Thousands of U.S. dollars

2017

Contract (over one year) Fair value
amount(1) Overview of the Company Groupʼs retirement beneﬁts plan

2018

Contract
amount(over one year) Fair value

pension plan as its deﬁned-beneﬁt system, and it also has a deﬁned-contribution pension plan as its deﬁned-contribution system.
The deﬁned-beneﬁt corporate pension plan is the only fund type and provides a lump-sum payment or pension based on the

Principle treatment

employeesʼ ﬁnal salary points and lengths of service. Furthermore, certain deﬁned-beneﬁt corporate pension plans have retirement

Interest rate swap contracts:
Fixed rate payment,
ﬂoating rate receipt

The Company has a deﬁned-beneﬁt corporate pension fund plan (established by the Company Group) and a deﬁned-beneﬁt corporate

beneﬁt trusts.
￥ 1,200

￥

(―) ￥

(0)

￥ 7,700 ￥ (1,200) ￥ (14)

$ 11,321

$

(8)

(―) $

The deﬁned-beneﬁt corporate pension fund plan (established by the Company Group) which is a multi-employer type of pension
plan is accounted for in the same manner as a deﬁned-contribution pension plan because it is not possible to reasonably estimate thevalue of plan assets corresponding to the contribution of each company.

Exceptional treatment ofinterest rate swaps
Interest rate swap contracts:

The deﬁned-contribution pension plan was transferred from a termination allowance plan on November 1, 2009. The deﬁnedcontribution pension plan, under which employees are participants, is funded by the contributions based on the participant's plan

Fixed rate payment,
ﬂoating rate receipt

33,389￥34,589(28,865)(202)￥(28,865) ￥(202)(393)

314,995￥ 57,230 ￥(35,515) ￥(407)$ 326,316

49,530(34,315)(272,313)(1,906)$ (272,313) $ (1,914)

course and eligibility.
Some of the domestic consolidated subsidiaries have a deﬁned-beneﬁt corporate pension plan and a termination allowance plan asits deﬁned-beneﬁt pension system.
Some of the domestic consolidated subsidiaries, which have a deﬁned-beneﬁt corporate pension plan and a termination allowance

The fair values are based on the amounts presented by relevant ﬁnancial and other institutions.

plan, use simpliﬁed accounting methods for calculation of net deﬁned beneﬁt liability and net periodic pension cost. In the termination
allowance plan, retirement beneﬁt obligations are recorded in the amount to be paid for voluntary retirement as of ﬁscal year-end.
In the corporate pension plan, retirement beneﬁt obligations are recorded in the amount of actuarial liability calculated under the

11. INCOME TAXES

latest pension funding programs.

Earnings of the Company and its domestic consolidated subsidiaries are subject to various taxes. The statutory tax rate for both years
ended March 31, 2018 and 2017, were 30.9%.

The Company and some of its domestic consolidated subsidiaries may make lump-sum payments of premium retirement beneﬁts
to some employees at their retirement.

The respective breakdowns of total deferred tax assets and deferred tax liabilities by major item, as of March 31, 2018 and 2017,
were as follows:
Thousands of
U.S. dollars

Millions of yen

2018(2) Deﬁned-beneﬁt pension plan (excluding pension plans using the simpliﬁed accounting methods)i) Reconciliation of retirement beneﬁt obligations

2018

2017

2018

Deferred tax assets:
Allowance for doubtful receivables

1,826

2018

2017

16,170Retirement beneﬁt obligations at beginning of year

Tax loss carried forward

869

1,055

8,199

Service cost

572

586

5,403

Guarantee deposits from customers

754

680

7,117

Interest cost

55

52

523

Reserve for bonus payments

526

488

4,964

Actuarial gains/losses incurred

45

30

426

Accrued expenses

648

5

6,121

Retirement beneﬁts paid

(321)

(178)

(3,028)Net deﬁned beneﬁt liability

473

500

4,469

Other

1

(0)

11

Loss on devaluation of investment securities and other items

364

363

3,434

Enterprise taxes

326

249

3,076

Retirement beneﬁt obligations at end of year

￥

1,713

Thousands of
U.S. dollars

Millions of yen

￥

$

Other

1,946

1,729

18,365

Subtotal gross deferred tax assets

7,623

6,899

71,915Less valuation allowance

(474)

(441)

(4,475)

7,148

6,458

67,440Total deferred tax assets￥￥

11,244￥(17,354)￥(1,267)(15,607)$

10,890￥$$102,744

106,079

Thousands of
U.S. dollars

Millions of yen

2018

Gain on revaluation of investment securities and others

10,400￥ii) Reconciliation of plan assets

Deferred tax liabilities:
Net unrealized gain on available-for-sale securities

10,890(163,717)

Plan assets at beginning of year
Expected return on plan assets

268

242

2,530

93

(47)

878

￥

9,637

2018

2017
￥

9,168

$

90,923(1,305)(11,956)

Depreciation

(661)

(351)

(6,240)

Actuarial gains/losses incurred

Gain on transfer of receivables

(506)

(650)

(4,777)

Contribution from employer

470

442

4,438

Foreign subsidiary's unitary tax

(327)

―

(3,085)Retirement beneﬁts paid

(303)

(167)

(2,867)

Plan assets at end of year

Other
Total deferred tax liabilities
Net deferred tax liabilities

￥

(502)

(308)

(4,736)(20,618)(18,223)(194,511)(13,469)￥(11,765)$￥

10,165

￥

9,637

$

95,902(127,071)

The respective breakdowns of major items that constituted the material difference between the statutory tax rate and the effective tax
rate for the ﬁscal years ended March 31, 2018 and 2017, were as follows:
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reﬂected in the accompanying
Consolidated Statements of Income for the years ended March 31, 2018 and 2017, were not presented as the difference is less than 5%of the effective statutory tax rate.

75 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201876iii) Reconciliation of retirement beneﬁt obligations and plan assets at end of ﬁscal year and net deﬁned beneﬁt liability andnet deﬁned beneﬁt asset recorded in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen

2018
Retirement beneﬁt obligations for funded pension plans￥

10,890￥$106,079(10,165)(9,637)(95,902)

1,078

1,253

10,177―――

Net assets/liabilities recorded in the consolidated balance sheets

1,078

1,253

10,177

Net deﬁned beneﬁt liability

1,132

1,392

10,685Net deﬁned beneﬁt asset

(53)

(139)

(508)

Plan assets
Retirement beneﬁt obligations for unfunded pension plans

Net assets/liabilities recorded in the consolidated balance sheets

1,078

￥

1,253

￥

(i) Breakdown of plan assets
Major components of total plan assets and their proportion were as follows:

2018

2018

2017

11,244ⅶ) Plan assets$

10,177

2017

Bonds

37

Shares

18

%

32

%

19

Cash and time deposits

49General account

30

30

Other

11

10

Total

100

100

Note: The total includes retirement beneﬁts trust established for corporate pension plan at 5% in the ﬁscal year ended March 31, 2018 and 5% in the ﬁscal year ended March 31, 2017.

(ii) Estimation of expected long-term rate of return on plan assets
Expected long-term rate of return on plan assets is estimated based on current and expected future distribution of plan
assets as well as current and expected future long-term rate of return on various components of plan assets.

iv) Breakdown of net periodic pension costThousands of
U.S. dollars

Millions of yen

2018
Service cost

586

￥

$

2018

5,403

55

52

523

Expected return on plan assets

(268)

(242)

(2,530)

Amortization of actuarial loss

67

151

634

0

0

6

(42)

(41)

(403)

Amortization of prior service cost
Other
Net periodic pension cost for deﬁned-beneﬁt pension plan

385

￥

507

￥

Major basis for actuarial calculation

2018

2017

572

￥

Interest costⅷ) Basis for actuarial calculation

$

3,633

Discount rate

0.37〜0.98

Expected long-term rate of return

2.50〜2.88

2.50〜2.69

Expected salary increase rate

1.37〜3.82

1.37〜3.82

0.37〜0.98

2018
Thousands of
U.S. dollars

Millions of yen

2018
0

￥

0

￥

115

Actuarial differences

115

￥

2018

2017
73
73

￥

6

$

Net deﬁned beneﬁt liability at beginning of year

￥

352

2018

2017
305

￥

Net periodic pension cost

54

52

Retirement beneﬁts paid

(5)

(5)

Net deﬁned beneﬁt liability at end of year

￥

401

352

￥

$

(56)
$

$

1,091

ii) Reconciliation of retirement beneﬁt obligations and plan assets at end of ﬁscal year and net deﬁned beneﬁt liability andnet deﬁned beneﬁt asset recorded in the consolidated balance sheets

￥

Total

Thousands of
U.S. dollars

―
83

2018

2017
￥

83
￥

Thousands of
U.S. dollars

Millions of yen

Millions of yen

Unrecognized actuarial differences

0

$

198
￥

198

3,784

1,085

The breakdown of remeasurements of accumulated deﬁned beneﬁt plans was as follows:

Unrecognized prior service cost

3,324
516

ⅵ) Remeasurements of deﬁned beneﬁt plans

2018

%

Thousands of
U.S. dollars

Millions of yen

The breakdown of remeasurements of deﬁned beneﬁt plans was as follows:

Total

%

(3) Deﬁned-beneﬁt pension plans using the simpliﬁed accounting methodsi) Reconciliation of net deﬁned beneﬁt liability for the pension plans using the simpliﬁed accounting methodsv) Remeasurements of deﬁned beneﬁt plans

Prior service cost

2017

$

2018
Retirement beneﬁt obligations for funded pension plans￥

Fair value of plan assets

427

2018

2017
￥

379

$

4,029

(130)

(118)

(1,231)
2,798

296

261

785

Retirement beneﬁt obligations for unfunded pension plans

104

90

986

785

Net assets/liabilities recorded in the consolidated balance sheets

401

352

3,784

Net deﬁned beneﬁt liability

401

352

3,784

Net deﬁned beneﬁt asset

̶

̶

̶

―

Net assets/liabilities recorded in the consolidated balance sheets

￥

401

￥

352

$

3,784

iii) Net periodic pension cost
In the ﬁscal year ended March 31, 2018 and 2017 net periodic pension cost calculated with the simpliﬁed accounting methods amounted
to ¥54 million ($516 thousand) and ¥52 million, respectively.

77 Fuyo Lease Group Integrated Report 2018

Fuyo Lease Group Integrated Report 201878

(3) Projected amounts of lease payment receivables on lease investment assets to be collected after March 31, 2018 (consolidated)(4) Deﬁned-contribution pension plan
In the ﬁscal year ended March 31, 2018 and 2017 the amount required to be contributed by the Company to the deﬁned-contribution
pension plan amounted to ¥80 million ($761 thousand) and ¥78 million, respectively.

Year ending March 31,

Millions of yen

2019(5) Multi-employer type of pension plan
In the ﬁscal year ended March 31, 2018 and 2017 the amount required to be contributed to the deﬁned-beneﬁt corporate pension fundplan (established by the Company Group) of multi-employer type of pension plan amounted to ¥168 million ($1,588 thousand) and¥164 million, respectively. The contribution is accounted for in the same manner with a deﬁned-contribution pension plan.
The following summarizes the most recent funded status of the multi-employer welfare pension plan at March 31, 2018 and 2017:
Thousands of
U.S. dollars

Millions of yen

2018
Amount of plan assets￥

Retirement beneﬁts under pension funding programs

10,710

9,298￥

12,914

Difference￥(2,203)

2018

2017
$

12,320(3,022)￥￥Thousands of
U.S. dollars

310,666$ 2,930,812

2020

211,211

1,992,566

2021

150,226

1,417,232

2022

103,825

979,483

2023

80,928763,479

2024 and thereafter

164,3051,550,050(4) Operating leases

2018

121,834$(20,790)

At March 31, 2018 and 2017 the liability for retirement beneﬁts for directors and corporate auditors amounted to ¥169 million

Thousands of
U.S. dollars

Millions of yen

101,044

Future lease payments￥ 240,735

Amount of above due within one year

2018

2017
￥

47,382

221,690$ 2,271,089

50,225447,003($1,598 thousand) and ¥142 million, respectively.
Details of sublease transactions for the ﬁscal years ended March 31, 2018 and 2017, were as follows.
Lease receivables, assets, and obligations under sublease transactions that are carried on the consolidated balance sheets before

13. LEASE TRANSACTIONSinterest deductions

Details of leases as lessee at March 31, 2018 and 2017, were as follows:
Operating leases
Thousands of
U.S. dollars

Millions of yen

2018
Future lease payments￥

Amount of above due within one year

3,924

2018

2017
￥

5,530

990

$

1,484

2018
Lease receivables and investment assets￥

Lease obligations (current liabilities)￥

47,96034,782$

328,141

14. STOCK OPTIONSStock option expenses and gains on expiration of unexercised stock options for the ﬁscal years ended March 31, 2018 and 2017
Thousands of
U.S. dollars

Millions of yen

2018
Portion of lease receivables￥ 1,021,163

Portion of estimated residual value
Rental revenues attributable to ﬁnancing income
Lease investment assets￥

114,601(115,582)(86,723)(1,090,405)

917,728￥

857,649

$

￥

154

￥

159

$

1,455

9,633,622

9,891

Thousands of
U.S. dollars$$

Selling, general and administrative expenses (stock-based compensation expenses)

2018

2017

Details of stock option for the ﬁscal year ended March 31, 2018, was as follows:(1) The Company

8,657,818

Stock options for 2008

Stock options for 2009

Stock options for 2010

Class and number of grantees (Note 1)

Directors of the Company: 8
Executive Ofﬁcers of theCompany: 16

Directors of the Company: 8
Executive Ofﬁcers of theCompany: 15

Directors of the Company: 7
Executive Ofﬁcers of theCompany: 17

Number and type of stock options (Note 2)

Common stock: 57,800
sharesCommon stock: 84,600
sharesCommon stock: 61,300
shares516,179

Grant date

October 15, 2008

October 15, 2009

October 15, 20102020

44,563

420,409

Vesting conditions(Note 3)(Note 3)(Note 3)2021

39,517

372,810

Requisite service period(Note 4)(Note 4)(Note 4)2022

26,437

249,415

Exercise period

2023

11,694

110,329

October 15, 2008 ‒October 14, 2038(Note 5)

October 15, 2009 ‒October 14, 2039(Note 5)

October 15, 2010 ‒October 14, 2040(Note 5)2024 and thereafter

14,792

139,552

79 Fuyo Lease Group Integrated Report 2018

54,714934,481

12,147(2) Projected amounts of lease receivables to be collected after March 31, 2018 (consolidated)
Millions of yen

2018

2017
￥

2018

Thousands of
U.S. dollars

Millions of yen￥

299,396

49,6769,345(1) Breakdown of lease investment assets

2019

31,73620182017

37,022

Details of leases as lesser at March 31, 2018 and 2017, were as follows:Year ending March 31,

Thousands of
U.S. dollars

Millions of yen

Fuyo Lease Group Integrated Report 201880

Stock options for 2011

Stock options for 2012

Stock options for 2013

Class and number of grantees (Note 1)

Directors of the Company: 7
Executive Ofﬁcers of theCompany: 16

Directors of the Company: 8
Executive Ofﬁcers of theCompany: 16

Directors of the Company: 8
Executive Ofﬁcers of theCompany: 18

Number and type of stock options (Note 2)

Common stock: 54,800
sharesCommon stock: 73,000
sharesCommon stock: 42,000
sharesGrant date

October 14, 2011

October 16, 2012

October 15, 2013

Vesting conditions(Note 3)(Note 3)Requisite service period(Note 4)

Exercise period

October 14, 2011 ‒October 13, 2041(Note 5)

Stock options for 2016

Stock options for 2017Class and number of grantees (Note 1)

Directors of consolidated
subsidiaries: 2

Directors of consolidated
subsidiaries: 2

Number and type of stock options (Note 2)

Common stock: 7,400 shares

Common stock: 6,900 shares

Grant dateJuly 28, 2016

July 5, 2017

(Note 3)

Vesting conditions(Note 3)(Note 3)(Note 4)(Note 4)

Requisite service period(Note 4)(Note 4)

October 16, 2012 ‒October 15, 2042(Note 5)

October 15, 2013 ‒October 14, 2043(Note 5)

Exercise period

July 29, 2016 ‒July 28, 2046(Note 5)

July 6, 2017 ‒July 5, 2047(Note 5)

Stock options for 2014

Stock options for 2015

Stock options for 2016

Class and number of grantees (Note 1)

Directors of the Company: 7
Executive Ofﬁcers of theCompany: 18

Directors of the Company: 7
Executive Ofﬁcers of theCompany: 19

Directors of the Company: 7
Executive Ofﬁcers of theCompany: 21

Number and type of stock options (Note 2)

Common stock: 35,500
sharesCommon stock: 28,600
sharesCommon stock: 34,700
sharesGrant date

October 15, 2014

October 15, 2015

October 14, 2016

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)(Note 4)(Note 4)

Exercise period

October 15, 2014 ‒October 14, 2044(Note 5)

October 15, 2015 ‒October 14, 2045(Note 5)

October 14, 2016 ‒October 13, 2046(Note 5)

Stock options for 2017Class and number of grantees (Note 1)

Number and type of stock options (Note 2)

Directors of the Company: 6
Executive Ofﬁcers of theCompany: 22
Common stock: 22,200
sharesGrant date

October 16, 2017

Vesting conditions(Note 3)Requisite service period(Note 4)

Exercise period

October 16, 2017 ‒October 15, 2047(Note 5)(2) Consolidated subsidiaries

Notes:
1 Excluding outside directors and corporate auditor
2 Converted to number of shares
3 No vesting conditions attached
4 Requisite service period is undetermined
5 Notwithstanding the above, if a stock acquisition rights holder loses his/her position as director, auditor, or executive ofﬁcer of the Company during the above term,
he/she may exercise the rights within ﬁve years of the ﬁrst anniversary of the day immediately after losing his/her position.

Notes:
1 Excluding directors who serve as audit committee members and outside directors
2 Converted to number of shares
3 No vesting conditions attached
4 Requisite service period is undetermined
5 Notwithstanding the above, if a stock acquisition rights holder loses his/her position as director of the Company during the above
exercise period, he/she may exercise the rights in a lump sum within 10 days (or the preceding business day if the 10th day falls ona holiday) from the day following the day when he/she loses his/her position.

Volume and status of stock options for the ﬁscal year ended March 31, 2018, was as follows.
(1)Number of stock optionsi) The Company

Stock options for 2008

Stock options for 2009

Stock options for 2010

Previous ﬁscal year-end

̶

̶

̶

Granted̶̶̶Expired̶̶̶

Vested̶̶̶Balance unvested

̶

̶

̶

6,700

23,00027,600

̶

̶

̶

2,700

7,600

4,200

̶

̶

̶

4,000

15,40023,400Stock options for 2011

Stock options for 2012

Stock options for 2013

Previous ﬁscal year-end

̶

̶

̶

Granted̶̶̶Expired̶̶̶

Vested̶̶̶Balance unvested

̶

̶

̶

36,20056,00033,700

̶

̶

̶

7,600

9,700

2,600

Pre-vesting (shares)

Post-vesting (shares)
Previous ﬁscal year-end
VestedExercised
ExpiredBalance unexercised

Pre-vesting (shares)

Post-vesting (shares)
Previous ﬁscal year-end
VestedExercised
ExpiredBalance unexercised

81 Fuyo Lease Group Integrated Report 2018

̶

̶

̶

28,60046,30031,100Fuyo Lease Group Integrated Report 201882

Estimation method for fair value of stock options for the ﬁscal year ended March 31, 2018, was as follows.

Stock options for 2014

Stock options for 2015

Stock options for 2016

Stock options for 2017

Previous ﬁscal year-end

̶

̶

̶

̶

i) Evaluation method: Black-Scholes model

Granted̶̶̶

22,200ii) Main base data and estimation methods

Expired

̶

̶

̶

̶

Vested̶̶̶

22,200

Balance unvested

̶

̶

̶

̶

(1) The Company

Pre-vesting (shares)

Post-vesting (shares)
33,50028,60034,700̶

Vested̶̶̶

22,200Exercised

̶

̶

̶

̶

Previous ﬁscal year-end

̶

̶

̶

̶

33,50028,60034,70022,200Stock options for 2016

Stock options for 2017

ExpiredBalance unexercisedii) Consolidated subsidiaries

Stock options for 2017
Expected volatility (Note 1)

27.23

Expected remaining contractual life (Note 2)

4.25 years%

Expected dividend (Note 3)

2.51

%

Risk-free interest rate (Note 4)(0.093)%

Notes:
1. Calculated based on actual stock prices over the past four years and three months (July 14, 2013 ‒ October 13, 2017).
2. Calculated based on the assumption that stock options are exercised in the middle of the exercise period, because the Company does nothave sufﬁcient data to reasonably estimate otherwise.
3. Calculated based on the actual dividend paid in the most recent ﬁscal year.
4. Risk free interest rate is the yield on Japanese government bonds over a period equivalent to the expected remaining contractual life.

(2) Consolidated subsidiaries

Pre-vesting (shares)
Previous ﬁscal year-end̶̶Granted̶

6,900

Expired̶̶

Vested̶6,900

Balance unvested̶̶i) Evaluation method: Black-Scholes modelii) Main base data and estimation methods

Stock options for 2017

Post-vesting (shares)
7,400

̶

Vested̶

6,900

Exercised̶̶Expired

̶

̶

7,400

6,900

Previous ﬁscal year-end

Balance unexercised

Expected volatility (Note 1)

75.87

Expected remaining contractual life (Note 2)

15.00 years%

Expected dividend (Note 3)

1.09

%

Risk-free interest rate (Note 4)

0.324

%

Notes:
1. Calculated based on actual stock prices (December 24, 2004 ‒ July 5, 2017).
2. Calculated based on the assumption that stock options are exercised in the middle of the exercise period, because the Company does nothave sufﬁcient data to reasonably estimate otherwise.
3. Calculated based on the actual dividend paid in the most recent ﬁscal year.
4. Risk free interest rate is the yield on Japanese government bonds over a period equivalent to the expected remaining contractual life.

(2)Unit price

The Company used the actual number of expired options to estimate the number of vested options, because it is generally difﬁcult toi) The Company

reasonably estimate how many options will expire in the future.

Stock options for 2008

Stock options for 2009

Stock options for 2010

1

1

1

Average stock price at exercise (yen)

5,280

5,651

5,372

Fair value at grant date (yen)

1,610

1,668

2,218

Stock options for 2011

Stock options for 2012

Stock options for 2013

1

1

Average stock price at exercise (yen)

6,254

5,885

Fair value at grant date (yen)

2,449

1,943

1
6,096
3,556

Exercise price (yen)Exercise price (yen)Stock options for 2014

Stock options for 2015

Stock options for 2016

15. RELATED PARTY TRANSACTIONSThe Companyʼs transactions with related parties during ﬁscal years ended March 31, 2018 and 2017, were as follows:

Thousands of
U.S. dollars

Millions of yen

2018
Purchase of operating assets

Stock options for 2017

Exercise price (yen)

1

1

1

1

Average stock price at exercise (yen)

̶

̶

̶

̶

3,584

4,653

4,606

6,840

Fair value at grant date (yen)All the amounts below refer to Hulic Co., Ltd., our major shareholder.

￥

Interest income received

31,503

2018

2017
￥

̶

̶

$

̶

The ending balances of the Companyʼs transactions with related parties at March 31, 2018 and 2017, were as follows:
Thousands of
U.S. dollars

Millions of yen

2018ii) Consolidated subsidiaries

Exercise price (yen)Average stock price at exercise (yen)Fair value at grant date (yen)

83 Fuyo Lease Group Integrated Report 2018

Stock options for 2016

Stock options for 2017

1

1

̶

̶

319

348

297,199

101

Loans receivable
Accrued income

￥

̶
̶

2018

2017
￥

21,00010$̶̶Fuyo Lease Group Integrated Report 201884

16. SHAREHOLDERSʼ EQUITY(2) Revenues, income/loss, assets, liabilities, and other items by reportable segment

The Companies Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (otherYear ended March 31, 2018

than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal
Lease
Installment

reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common stock account. Such
distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, butneither the capital reserve nor the legal reserve is available for distributions.

Financing￥

Intersegment revenue and transfers

17. REAL ESTATE LEASING BUSINESS

Total revenues

The Company and some of its consolidated subsidiaries own commercial facilities for lease and ofﬁce buildings (including land) for
lease in Tokyo and other regions. Net lease income from these assets amounted to ￥2,056 million ($19,401 thousand) and 1,876
million (lease income and lease cost were generally recorded as net sales and cost of sales, respectively) for the ﬁscal years ended
March 31, 2018 and 2017, respectively.

Millions of yen

2018

￥

16,839￥590,201

839

2,073

846

3,759

15,137

17,686593,961

29,705

￥

8,605

￥

4,438

￥

Segment assets￥ 1,619,503￥

677,427￥

36,926￥ 2,333,858

￥

￥

̶

￥

42,749Other items

Amount invested in equity‒method afﬁliates
Increase in tangible ﬁxed assets and intangible ﬁxed assets

31,126

̶￥31,126
1,571

1,189

324

57

̶

̶

̶

̶

157,674

̶

3,648

161,323

2018

2017

Year ended March 31, 2018￥

132,049￥

65,977$44,716

66,071

421,852

End of year

176,765

132,049

1,667,601

186,482￥ 141,443

Fair value
￥

$

Lease
Installment

1,245,749

Net change

End of year￥

561,137

Carrying value
Beginning of year

13,063￥

Amortization of goodwill
Thousands of
U.S. dollars

560,298

Operating proﬁt

Depreciation

The carrying value on the consolidated balance sheets, net change, and fair value are as follows:

Total

Millions of yen

Operating revenues
Revenue from customers

Other

1,759,267

Notes:
1. The carrying value on the consolidated balance sheet is the amount after deduction of accumulated depreciation from historical cost.
2. The increase of carrying value is mainly attributable to the purchase of real estate of ￥104,036 million ($981,473 thousand) and ￥72,667 million, in the ﬁscal years ended
March 31, 2018 and 2017, respectively.
3. The fair value of properties is mainly estimated based on income approach in accordance with Real Estate Appraisal standards as of March 31, 2018. For other properties,
the Company reasonably estimated the fair value based on income approach or market approach while the Company used their carrying value as the fair value for certain
properties.

Revenue from customers

Other

Total

Thousands of U.S. dollars

Operating revenues$ 5,285,837

Intersegment revenue and transfers
Total revenues$

123,240$

158,864$

5,567,941

7,916

19,5647,990

35,4705,293,753

142,804

166,854

5,603,411

Operating proﬁt$

Segment assets$ 15,278,340

280,241

81,181$

41,872$$ 6,390,823$

348,366$ 22,017,529

̶

$

$

403,294

Other items
Depreciation$

Amortization of goodwill
Amount invested in equity‒method afﬁliates

18. SEGMENT INFORMATION

Financing

Increase in tangible ﬁxed assets and intangible ﬁxed assets

293,646$

̶

$

293,646

11,218

3,061

543

̶

̶

̶

14,822
̶

1,487,494

̶

34,422

1,521,916(1) Overview of reportable segments
The Fuyo Lease Groupʼs reportable segments are components of the Group about which separate ﬁnancial information is available.

Year ended March 31, 2017

These segments are subject to periodic examinations to enable the Companyʼs board of directors to decide how to allocate resources

Lease
Installment sales

and assess performance.
The Fuyo Lease Group is primarily engaged in leasing and installment sales. Based on the major types of transactions handled,
operations are divided into three reportable segments, namely the Lease and Installment Sales segment, the Financing segment, andthe Other segment.
The Lease and Installment Sales segment conducts leasing of IT and ofﬁce equipment, industrial machinery, and other assets

Financing

Total

Millions of yen

Operating revenues
Revenue from customers

Other

￥

Intersegment revenue and transfers

485,470￥

10,280￥

11,251￥

507,001

950

1,469

691

3,112

486,420

510,114(includes the sale of off-lease assets upon lease expiration or termination) and sells commercial/service equipment, production

Total revenues

11,74911,943facilities, medical devices, and other assets on an installment basis. The Financing segment is mainly engaged in commercial lending

Operating proﬁt￥

28,717

6,964

3,678

39,360and investment in marketable securities for ﬁnancial income. The Other segment primarily engages in environmental-related

Segment assets￥ 1,552,310

646,179

26,7312,225,221

businesses and forms tokumei-kumiai (silent partnership) arrangements.

Other items
Depreciation
Amortization of goodwill
Amount invested in equity‒method afﬁliates
Increase in tangible ﬁxed assets and intangible ﬁxed assets

85 Fuyo Lease Group Integrated Report 2018￥

31,564

￥

̶

￥

̶

￥

31,564

1,189

81

57

̶

̶

̶

1,328
̶

127,061̶

247

127,308

Fuyo Lease Group Integrated Report 201886

(3) Difference and analysis between reportable segmentsʼ total income/loss and income/loss reported on the consolidated
statements of income (adjustments)

2018

2017

Reportable segments total￥

593,961￥

510,114$(3,112)(3,759)5,603,411(35,470)￥

590,201￥

507,001$

5,567,941￥

42,749￥39,360$403,294

Eliminations
Corporate
Operating proﬁt reported on the consolidated statements of income(2,077)(1,876)32,609(77,955)(8,648)(8,263)￥(17,700)￥

28,634$

307,639

2018

2017

304,630￥ 268,756$ 2,873,875

10,596

4,823

99,96979,343

71,140748,524

EuropeIreland
Other
Other items
￥

Total

IncomeReportable segments total￥

North America and Latin America

Eliminations
Operating revenues reported on the consolidated statements of income

2018
Japan

Operating revenues

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

2018(4) Tangible ﬁxed assets

1

1

11

5,801

5,782

54,730400,373￥ 350,505$ 3,777,109

Note:
1. The ﬁgures shown are presented according to the respective geographic locations of the Company and its consolidated subsidiaries.
2. The following geographic categories primarily include the respective countries and regions shown below.
North America and Latin America: United States, Republic of Panama
Europe: United Kingdom, Ireland
Asia: China, Malaysia, Thailand

AssetsReportable segments total￥ 2,333,858￥ 2,225,221$ 22,017,529

96,98074,868914,908￥ 2,430,838￥ 2,300,090$ 22,932,437

Corporate
Total assets reported on the consolidated balance sheets

19. NET ASSETS PER SHARE
Net assets per share are computed based on the net assets available for distribution to the shareholders of common stock (i.e., net
assets excluding minority interests) and the number of shares of common stock outstanding on each balance sheet date.

Other items
Depreciation
Reportable segments total
Adjustment
Amounts reported on the consolidated ﬁnancial statements

U.S. dollars

Yen￥31,126￥

31,564$

11,802

1,200

1,251

2018

293,646￥

32,377￥32,765$

305,448

￥

1,571

￥

1,328

$

14,822

Net assets￥ 8,242.50

2018

2017
￥ 7,547.33

$

77.76

Amortization of goodwill
Reportable segments total
Adjustment
Amounts reported on the consolidated ﬁnancial statements

̶

̶

̶
￥

1,571

￥

1,328

$

14,822

￥

̶

￥

̶

$

̶

20. BASIC EARNINGS PER SHARE
The reconciliation of the differences between basic and diluted basic earnings per share (“EPS”) for the year ended March 31, 2018 was
as follows:

Amount invested in equity-method afﬁliates
Reportable segments total
Adjustment
Amounts reported on the consolidated ﬁnancial statements￥

14,504

136,8317,566

14,504￥

7,566$

136,831￥

Adjustment
Amounts reported on the consolidated ﬁnancial statements

161,323￥￥

163,536

127,308$￥

128,529

1,521,916
20,883

1,220

2,213

$

1,542,799

Thousands ofsharesBasic earnings

Weighted average
sharesYen

U.S. dollars
EPS

Basic EPS
Basic earnings available to common shareholders

Increase in tangible ﬁxed assets and intangible ﬁxed assets
Reportable segments total

Year ended March 31, 2018

Millions of yen￥

21,944

Effect of dilutive securities warrants

30,209￥ 726.41$

6.85￥ 719.99

$

6.79

269

Diluted EPS
Basic earnings for computation￥

21,94430,478Notes:
1. Depreciation adjustments mainly represent depreciation on own-used assets.
2. Adjustments for amount invested in equity-method afﬁliates mainly represent the amount of funds invested in equity-method afﬁliates.
3. Adjustments on increases in tangible ﬁxed assets and intangible ﬁxed assets mainly represent capital investment in own-used assets.

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21. SUBSEQUENT EVENTS

2. Overview of the Plan

(1)Overview of the Plan

Cash dividends
The following appropriations of retained earnings of the Company, which are not reﬂected in the accompanying consolidated ﬁnancial

The Plan is a stock-based remuneration plan, under which the Companyʼs shares will be acquired by a trust (the trust to bestatements for the year ended March 31, 2018, were approved at a shareholdersʼ meeting held on June 22, 2018:

established under the Plan is referred to hereinafter as the “Trust”) using funds that the Company will contribute, and the Companyʼsshares and cash equivalent to the market price of the Companyʼs shares (the “Companyʼs share, etc.”) will be provided to theMillions of yen

Thousands of
U.S. dollars￥$

Directors, etc. from the Trust in accordance with the Regulations for Provision of Shares to Ofﬁcers established by the Company.
In principle, the Companyʼs shares, etc. will be provided to the Companyʼs Directors, etc. on their retirement.

Appropriations:
Cash dividends of ￥78 ($0.74) per share

2,357

22,239＜Structure of the Plan＞(i)Establishment of the Regulations for Provision of Shares to Ofﬁcers

Introduction of Board Beneﬁt Trust (BBT)At the Board of Directors meeting held on May 16, 2018, the Company resolved to introduce a new stock-based remuneration planor Board Beneﬁt Trust (BBT) (the “Plan”) for the Companyʼs directors, excluding outside directors, (the “Eligible Directors”) and
executive ofﬁcers who currently do not serve as Directors (the “Executive Ofﬁcers”) the Eligible Directors and Executive Ofﬁcers are
hereinafter collectively referred to as the “Directors, etc.”. The Company submitted the proposal regarding the Plan to the 49th

[Entrustor]
The Company

Directors, etc.

(iv) Granting of points

Annual General Meeting of Shareholders held on June 22, 2018 (the “General Meeting of Shareholders”) and received approval.
1. Background and Purpose of the Plan
The Board of Directors of the Company resolved to submit the Proposal to the General Meeting of Shareholders to introduce the Plan
under the conditions approved by the shareholders. The introduction of the Plan aims further raising the incentives for the Directors,
etc. to contribute to improving medium and long term performance and enhancing corporate value, by making the linkage between
the Directorsʼ remuneration and the Companyʼs equity value even clearer, in other words, by making that the Directors, etc. not only(ii)Entrustment ofmoney(v)Non-exercise of
voting rights(iii)Acquisition ofsharesshare the beneﬁts of the share price rising but also share the risks of the share price declining with the shareholders.
Upon the resolution of the Board of Directors to introduce the Plan, the Nomination and Remuneration Advisory Committee,
which majority of the members are independent outside directors, held deliberations and submitted a report acknowledging thevalidity of the Plan.
This Proposal requests approval for the new stock-based remuneration to Eligible Directors which separates from the upper limitof the cash remuneration for the Companyʼs directors (up to ¥500 million per annum, comprising up to ¥360 million per annum in[Trustee]Mizuho Trust & Banking Co., Ltd.
(Re-entrusted to: Trust & Custody
Services Bank, Ltd.)

Trust Administrator
Instruction on non-exercise
of voting rights(vi)Provision of theCompanyʼs shares, etc.

Acquisition ofright to receive
beneﬁts[Beneﬁciary]
Retired Directors, etc. who fulﬁll
the beneﬁciary requirements“basic remuneration” for the Companyʼs directors and up to ¥140 million per annum in “performance-linked remuneration (annual
bonus)” for the Companyʼs directors, excluding outside directors) approved at the 39th Annual General Meeting of Shareholders
held on June 25, 2008.
At the 39th Annual General Meeting of Shareholders held on June 25, 2008, the Company also has received approval for theamount up to ¥120 million per annum for “stock-based remuneration-type stock options” for the Eligible Directors, which
separates from the aforementioned upper limit on cash remuneration, and has been in place until the 49th General Meeting of
Shareholders. However, subject to the approval and adoption of this Proposal, the Company plans to stop to provide them with theformer remuneration for “stock-based remuneration-type stock options.” However, subscription rights to shares that have been
granted but not yet exercised will be effective in the future.

(i) The Company will obtain approval for remuneration for ofﬁcers at this General Meeting of Shareholders and will establish theRegulations for Provision of Shares to Ofﬁcers within the scope of the framework approved at this General Meeting of
Shareholders.
(ii) The Company will entrust money within the limit for which approval was received at this General Meeting of Shareholders
described in (i).
(iii) The Trust will acquire shares of the Company through the stock market on which the Companyʼs shares are listed or by
subscribing for treasury shares disposed of by the Company using the money entrusted as described in (ii) as the funds.
(iv) The Company will grant points to the Directors, etc. in accordance with the Regulations for Provision of Shares to Ofﬁcers.
(v) In accordance with the instruction of the trust administrator, which is independent of the Company, the Trust shall not exercise
the voting rights of the shares of the Company within the Trust account.
(vi) The Trust will provide the persons who have retired from ofﬁce of Directors, etc. and fulﬁll the beneﬁciary requirements asprescribed in the Regulations for Provision of Shares to Ofﬁcers (the “Beneﬁciaries”) with the Companyʼs shares in proportion
to the number of points that have been granted to the Beneﬁciaries. However, if the Directors, etc. satisfy the requirements asprescribed in the Regulations for Provision of Shares to Ofﬁcers, the Trust will provide them with cash equivalent to the market
price of the Companyʼs shares instead of the Companyʼs shares for a certain proportion of the points.

(2)Persons eligible for the PlanThe Eligible Directors and the Executive Ofﬁcers of the Company(3)Trust period
From August 2018 (planned) until the expiration of the Trust (With regard to the trust period for the Trust, no speciﬁc expiration date
will be set, and the Trust will continue as long as the Plan continues. The Plan will terminate due to reasons that include the delistingof the Companyʼs shares and the abolition of the Regulations for Provision of Shares to Ofﬁcers.)

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(4)Trust amount (amount of remuneration, etc.)(8)Exercise of voting rights

Subject to the approval of this Proposal at the General Meeting of Shareholders, the Company will introduce the Plan for the three

Based on instructions from the trust administrator, none of the voting rights of the shares of the Company within the Trust accountﬁscal years starting from the ﬁscal year ending March 31, 2019 until the ﬁscal year ending March 31, 2021 (the relevant period of threeshall be exercised. By using this method, the Company intends to ensure neutrality toward management of the Company with regard

ﬁscal years is referred to hereinafter as the “Initial Plan Period” with each period of three ﬁscal years after the Initial Plan Period being

to the exercise of the voting rights of the shares of the Company within the Trust account.

referred to as the “Plan Period”) and for each subsequent Plan Period. In order to provide, under the Plan, the Companyʼs shares, etc.
to the Directors, etc., the Company will contribute money as outlined below to the Trust as funds for the acquisition of the Companyʼs(9)Treatment of dividends

shares by the Trust.

The Trust will receive the dividends for the shares of the Company within the Trust account, and the dividends will be used for theFirstly, at the commencement of the Trust Period as in (3) above, the Company will contribute money up to ￥950 million (which

dividends, etc. remaining within the Trust shall be granted to the Directors, etc. in ofﬁce at that time in proportion to the number ofincludes ￥360 million as the portion for the Eligible Directors) as the funds required for the Initial Plan Period.

points that each of them possesses.

acquisition of shares of the Company or the trust fees for the trustees relating to the Trust. In the case of the termination of the Trust,In addition, after the Initial Plan Period, the Company will make additional contributions to the Trust up to ¥950 million (which
includes ¥360 million as the portion for the Eligible Directors) for each Plan Period, in principle, until the termination of the Plan.

(10)Handling of the termination of trust

However, in the case of making additional contributions, if the Companyʼs shares (excluding the Companyʼs shares corresponding to

The Trust will terminate for reasons such as the delisting of the Companyʼs shares or the abolition of the Regulations for Provision of

the points granted to the Directors, etc. for each immediately preceding Plan Period and provision of the Companyʼs shares to the

Shares to Ofﬁcers. Of the residual assets in the Trust on its termination, it is planned that the Company will acquire all of the

Directors, etc. is not completed) and money remain in the Trust (such shares and money are collectively referred to as the “Remaining

Companyʼs shares without consideration, which will then be cancelled by resolution of the Board of Directors. Of the residual

Shares, etc.”), the total amount of the Remaining Shares, etc. (the amount for the Companyʼs shares shall be the book value at the end

assets in the Trust on its termination, cash, excluding the cash provided to the Directors, etc. in accordance with (9) above, will be

day of the immediately preceding Plan Period) and additionally contributed money shall not exceed ¥950 million (which includes

paid to the Company.

¥360 million as the portion for the Eligible Directors).
The Company will provide timely and appropriate disclosure when it decides to make additional contributions. In addition, theOverview of the Trust

Board of Directors will make the necessary arrangements in the event that the necessary funds (trust amount) which are the portion

1. Name: Board Beneﬁt Trust (BBT)

for the Executive Ofﬁcers for each Plan Period the Company will contribute to the Trust exceed the upper limit (the Board of

2. Entrustor: The Company

Directors will do likewise regarding the upper limit for the portion of the points granted to the Executive Ofﬁcers in (6) below).

3. Trustee: Mizuho Trust & Banking Co., Ltd. (Sub-trustee: Trust & Custody Services Bank, Ltd.)
4. Beneﬁciary: Retired Directors, etc. who fulﬁll the beneﬁciary requirements stipulated in the Regulations for(5)Method of acquisition of the Company ʼs shares and the number of shares to be acquired

Provision of Shares to Ofﬁcers

The acquisition of the Companyʼs shares by the Trust will be implemented through the stock market on which the Companyʼs shares

5. Trust administrator: A third party without a conﬂict of interest with the Company will be selected

are listed or by subscribing for treasury shares disposed of by the Company with the money contributed as in (4) above as the funds.

6. Type of trust: Entrustment of money other than money in trust (third-party beneﬁt trust)

A maximum of 300,000 shares (which include 114,000 shares as the portion for the Eligible Directors) shall be acquired in the Initial

7. Date of conclusion of the trust agreement: August 2018 (scheduled)Plan Period. The Company will provide timely and appropriate disclosure concerning the details of the acquisition of the Companyʼs

8. Date of money entrustment: August 2018 (scheduled)shares by the Trust.

9. Trust period: From August 2018 (scheduled) until the expiration of the Trust(No speciﬁc expiration date will be set, and the Trust will continue as long as the Plan continues.)(6)Calculation method for the number of the Company ʼs shares, etc. to be provided to the Directors, etc.
Each ﬁscal year, the number of points determined as per the Regulations for Provision of Shares to Ofﬁcers will be granted to the

Corporate bond issuanceDirectors, etc. The maximum total number of points per ﬁscal year to be granted to the Directors, etc. shall be 100,000 points (which

The company issued straight bonds as follows:

include 38,000 points as the portion for the Eligible Directors).
The points granted to the Directors, etc. shall be converted to one common share of the Company for one point upon theprovision of the Companyʼs shares, etc. as in (7) below. (However, if there is a share split, allotment of shares without contribution,(1) Issue name: Fuyo General Lease Co., Ltd., No. 16 unsecured straight bond(2) Issuance amount: ¥15,000 million(3) Issuance date: April 27, 2018

an integration of shares, etc., with regard to the Companyʼs shares, after the approval of this Proposal, the upper limit on the number(4) Issue price: ¥100 per ¥100 of face valueof points, the number of points granted, and the conversion ratio shall be adjusted in a reasonable manner proportional to the(5) Coupon rate: 0.210% per year

relevant ratio, etc.)
These calculations and the trust amount were determined taking into consideration a comprehensive view of the current level of(6) Redemption date: April 27, 2023
(7) Purpose: To fund capital investments

remuneration for ofﬁcers and the trend in the number of the Directors, etc. as well as the future prospects thereof and other factors.
The number of points of a Director, etc. which will be used as the basis for the provision of the Companyʼs shares, etc. described in(7) below shall, in principle, be the number of points granted to the Director, etc. until the time of his/her retirement from ofﬁce(points calculated in this manner are hereinafter referred to as the “Conﬁrmed Number of Points”).

(7)Provision of the Companyʼs shares, etc.
If a retired Director, etc. fulﬁlls the beneﬁciary requirements as prescribed in the Regulations for Provision of Shares to Ofﬁcers, inprinciple, the Director, etc. will be provided from the Trust with the number of the Companyʼs shares that corresponds to the Conﬁrmed
Number of Points stipulated in accordance with (6) above after his/her retirement from ofﬁce by following the prescribed beneﬁciary
vesting procedures. However, if the Director, etc. satisﬁes the requirements as prescribed in the Regulations for Provision of Shares toOfﬁcers, the Trust will provide him/her with cash equivalent to the market price of the Companyʼs shares instead of the Companyʼsshares for a certain proportion of the points. The Trust may sell the Companyʼs shares in order to make the monetary provisions.

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Report of Independent Auditors

Stock Information (As of March 31, 2018)
Stock Overview
Total number ofauthorized shares

100,000,000 shares

Number of shares
outstanding

30,288,000 shares

Share unit number

100 shares

Number of shareholders

12,937

Individuals and others(including treasury share)

6.9 %Foreign
Shareholders

18.3 %

Number of Shareholders

Number of shares held
(in thousands)■ Financial Institutions

66

11,709■ Other domesitic firms

154

10,945■ Foreign Shareholders

209

5,531

Breakdown of Shareholders

Financial
Institutions

38.7 %

Other domestic firms

36.1%■ Individuals and others(including treasury share)

12,5082,102(treasury share included)

Major Shareholders (Top 10)
Number of shares held
(in thousands)

Shareholding ratio(%)

Hulic Co., Ltd.

4,218

13.96

Meiji Yasuda Life Insurance Company

2,261

7.48

Retirement Benefit Trust managed by Mizuho Trust & Banking Co., Ltd. (Marubeni
Corporation account); Trust & Custody Services Bank, Ltd. as a Trustee of Retrust

1,512

5.00

Sompo Japan Nipponkoa Insurance Inc.

1,002

3.32

Azbil Corporation

1,000

3.31

The Master Trust Bank of Japan, Ltd. (Trust Account)

979

3.24

Japan Trustee Services Bank, Ltd. (Trust Account)

958

3.17

Mizuho Bank, Ltd.

907

3.00

BBH FOR FIDELITY PURITAN TR : FIDELITY SR INTRINSICOPPORTUNITIES FUND

550

1.82

Japan Trustee Services Bank, Ltd. (Trust Account 5)

431

1.43

Shareholders

Annual dividend per share (Yen)

130

146

156

100
74

2014/393 Fuyo Lease Group Integrated Report 201880

2015/3

2016/32017/3

2018/3

2019/3(Forecast)Fuyo Lease Group Integrated Report 201894

3-3-23, Kanda-Misaki-cho, Chiyoda-ku,
Tokyo 101-8380, Japan
Phone: +81-3-5275-8800
https://www.fgl.co.jp/eng/
For inquiries about "Integrated Report 2018," please contact:
Corporate Communication Division
Phone: +81-3-5275-8891
E-mail: fuyo-ir@fgl.co.jp