Fuyo Lease Group Integrated Report

2020

01

Corporate Slogan

Go Where No One Has
Gone Before
We believe.
Leasing is not just about lending things.

Fuyo Lease Group Integrated Report 2020

Management Philosophy

CONTENTS

We support corporate activities through our leasing
business with view to contributing to developmentof the society.

P01

Corporate Slogan

P02

Contents

P03

Message from the President

P07

Corporate History

P09

Introduction of Fuyo Lease GroupP11

Financial and Non-Financial Highlights

P13

Value Creation Story

P15

Materiality

P17

Medium-Term Management Plan

P19

Special Feature 1. Energy & Environment

P21

Special Feature 2. Medical & Welfare

P23

Special Feature 3. BPO

P25Special Feature 4. Mobility Business

P27

Our Business

P29

Business Segments Overview

P37

Foundation for Value Creation

P45

Board Members

P47

Corporate Governance

P51

Risk Management and Compliance System

P53

Independent Assurance Report

P54

Financial Section

P104

Stock Information

We maintain customer’s first philosophy, providing
best services.
We aim to earn high marks from shareholders andmarkets while pursuing creativity and innovation.

It’s about lending inspiration, intelligence and a sense of wonder.
We believe.
We embrace challenges, because they are the fountain of new business.

We create a challenging and rewarding workplace
where employees think and act on their own.

We believe.
Meeting expectations is our duty. Exceeding them is our profession.
We believe.
Succeeding is easy when times are good, but true partners are there even in the hard times.
We act.
To open up new business opportunities in this country, we will take the first bold step.
We will expand the frontier of leasing.
We are Fuyo Lease.

Editorial Policy
Purpose of this Report

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

Reporting Period

Fiscal year 2019 (April 2019 - March 2020)*The report also includes some information pertaining to fiscal year 2020.

Our corporate slogan, “Go where no one has gone before,” embodies the Fuyo Lease Group’s

Scope of Reporting

Fuyo General Lease Co., Ltd., its 52 consolidated subsidiaries and 8 affiliate companies

mission of sincerely responding to customers’ needs and providing them with solutions that exceed

Reference Guidelines

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

Date of Issuance

September, 2020

Note on ForwardLooking 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 those anticipated. These uncertainties include, but are not limited to social and economic conditions,market demand and competition, laws and regulations, interest rates, and currency exchange rates.

their expectations, as well as our commitment to pioneering new business frontiers.

02

03

Message from the President

Fuyo Lease Group Integrated Report 202004

We will achieve sustainable growth
as a company while addressing
social issues by expanding into
new business areas beyond theframework of leasing
President & Chief Executive Officer

Yasunori Tsujita

Concentrated Investment in Strategic Areas andFrontiers for Further Growth
Fuyo Lease Group’s five-year Medium-term Management
Plan, Frontier Expansion 2021, is now in its fourth year.
The name Frontier Expansion comes from the idea that
we are taking a courageous step forward into new fields
while valuing both the Group’s accumulated know-how inthe leasing business and the trust that customers place in
us. This approach is in line with our company’s corporate
slogan, “Go where no one has gone before.”
The results of these efforts are reflected in the fact that
our operating results for fiscal 2019 far exceeded the initialvalues that were set for our interim goal. There are twomain factors behind our steady growth. One was the steadyincrease in operating assets in strategic areas, which was astrong driver of growth for the Group as a whole. The otherwas the success of measures aimed at expanding frontiers,
such as M&A, capital alliances, and business alliances.
The needs of society and customers are more diverse
than ever before, and we cannot achieve sustainablegrowth if we continue to do business as usual. We willcontinue to actively invest management resources instrategic areas and frontiers by always considering the
optimal way to utilize our strengths in each business from a
medium- to long-term perspective.

Fiscal Year 2019 Review
Looking back on fiscal 2019, the Japanese economy was ona slow recovery trend against the backdrop of improvements
to the employment and income environment. However, in
addition to U.S.–China trade friction, the impact of the global
spread of the COVID-19 in the latter half of the fiscal year has
created an unavoidably uncertain situation going forward.
In this environment, the Group continued to achieve
record earnings, following the trend of fiscal 2018, withsales of ¥712.3 billion (up 15.2% year on year) and ordinary
profit of ¥44.0 billion (up 12.6% year on year). This was dueto the steady accumulation of assets, especially in strategicareas, as well as the full-year performance of INVOICE,
which joined the Group in fiscal 2018 as a provider of BPO(business process outsourcing) services*1.

Strategic Area and Frontier Growth
In order to select and concentrate on strategic areas, our
Medium-term Management Plan, Frontier Expansion 2021,
promotes business portfolio management based on theconcept of zone management, which divides business areas
into four zones (see the figure on P06).
Conventional lease and finance businesses are positioned
as core areas in the Performance Zone, and they are
generating continuous and stable earnings. Real Estate,
Medical & Welfare, Energy & Environment, Aircraft, as
well as other fields are positioned as strategic areas in
the Transformation Zone, and we have concentrated ourmanagement resources to achieve speedy management andpromote business expansion. Furthermore, New Domains are
positioned as a frontier within the Incubation Zone, and wehave actively invested in new businesses to secure businesses
that will grow into strategic and core areas in the future.
In this way, we have clearly defined the position of eachbusiness area and improved the performance of each businesswithout compromising our policies. We believe this has led tostable growth. The share of ordinary profit accounted for bystrategic areas and frontiers rose from approximately 30% infiscal 2016, before the start of the Medium-term Management
Plan, to 56% in fiscal 2019. In fiscal 2021, the final year of theplan, the ratio of strategic and frontier areas is expected tonearly double to 59% compared to 31% for the core areas.

BPO and Mobility Business as Up-and-Coming
Growth Drivers
A closer look at the results of fiscal 2019 reveals two majorchanges.
First of all, BPO services, which were positioned in theTransformation Zone, has grown to become the driving
force behind the Group’s performance. In recent years,
Japanese companies have faced the challenge of improving
employee productivity in response to a decline in thelabor force and the government’s promotion of work-stylereforms. As an effective means to resolve this challenge,
we have endeavored to expand our BPO service businessin the belief that there will be an increase in the demandfor BPO, which involves the partial outsourcing of business05

Message from the President

New Domains that Expand Business Around
Creating Shared Value (CSV) between society andcompanies

The Ideas of Each and Every Employee Improve
the Overall Strength of the GroupAs I have been relaying the concept and practice of CSV
within the company from time to time, more and morebusinesses have emerged from the viewpoint of solving
the problems facing society and customers. In the future,
we hope to deepen each employee’s understanding andpractice of CSV through training and workshops. I hopethat by discussing what social value we provide to ourcustomers and society through our daily work, and by
gaining self-awareness of this, each and every one of us
will work from a CSV viewpoint.
People are the Group’s greatest asset. I believe that
we can continue to grow only when all employees areable to realize their full potential. In June 2020, we
consolidated the functions of the group companies,
including our head office, in Kojimachi, Chiyoda-ku, Tokyo.

*1 BPO (Business Process Outsourcing) Service: A service that processes some or all of business operations on behalf of other companies by using specialized skills and know-how.
*2 CASE: A term that has been coined from the initial letters of four automotive trends: Connected (connected cars), Autonomous (autonomous driving), Shared & Service (shared cars and driving asa service), and Electric (electrification of vehicles).
*3 MaaS: An acronym for Mobility as a Service, which indicates the creation of services based on means of transportation (mobility).
*4 TDF: TDF Group Inc., a company that engages in rental, leasing, and sales of pickup trucks in North America.
*5 PRC: Pacific Rim Capital, Inc., a company that handles operating leases for material handling equipment mainly in the United States.
*6 CSV: Creating Shared Value, a concept that aims to capture and balance both economic and social value.
*7 FIT: Feed-in-Tariff, a system for purchasing renewable energy at a fixed price for a certain period of time.
*8 Green electricity supply services (PPA services): A business installing solar power systems on customers’ facility rooftops and other areas, then directly supplying customers with energy.
*9 RE100: An international initiative aimed at sourcing 100% renewable energy for all business activities.
*10 100% Renewable Electricity Declaration RE Action: Established in October 2019. An initiative for small- and medium-sized companies, organizations, and municipalities not covered by RE100 to
declare that they will convert the electricity consumed in their business activities to 100% renewable energy.

The new office provides a variety of ways for employees
to work comfortably and efficiently, and it is a place
where communication across company boundaries canbe invigorated. In the future, we hope that this office willfurther deepen personnel exchanges within the Group
as well as cooperation in business operations, leading to
improvements in our overall capabilities.

Towards the Long-Term Distribution of Profits toShareholders and Sustainable Growth
We paid a cash dividend of ¥205 per share for the fiscal
year ended March 2020, which is an increase of ¥17 yearon-year with a payout ratio of 23.5%. For the fiscal year
ending March 2021, we forecast a cash dividend of ¥220
per share, an increase of ¥15, with a payout ratio of 24.4%.
As for COVID-19, there are concerns about its impact on
the Real Estate and Aircraft businesses, but in order toexpand our strategic areas as well as frontiers, and achieve
further growth, we will strive to strengthen our managementbase and financial structure through the enhancement of

Sustaining Innovations

Transformation Zone

Performance Zone

Grow new businesses

Deliver results from existing businesses

Payout period: 2-3 years
Energy & Environment

Strategic
Areas

Overseas

BPO

AircraftReal EstateCore Areas

Vendor Leases
Medical & Welfare

FinanceGroup

Mobility BusinessBusiness growth throughsolving social issues
CSV (Creating Shared Value)

New Domains

Frontier
Expansion

Domestic
Corporate

Payout period: Every year

2021

Asset Value/
Business Value

New Domains
Corporate Department

Frontier

06

shareholders’ equity, and we will return profits to shareholders
through the continuation of stable, long-term dividends.
The Group’s goal is not to generate large profits in
one specific business area, but to maintain a balance ofmultiple business domains that generate revenue of acertain size. If I were to liken it to a mountain, our goal
is not to become an independent mountain like Mt. Fuji,
but to form a mountain-range-like revenue structure thatis like Yatsugatake and its multiple peaks. We will realize
sustainable growth as we constantly invest management
resources in growth markets, regardless of the conventional
leasing business framework.
We at the Fuyo Lease Group are not afraid of changes
in the world. Instead, we see these changes in a positive
light as seeds for future growth, and we boldly take onchallenges in new domains. The corporate slogan of theFuyo Lease Group is “Go where no one has gone before,”
and as a company that pursues this with the frontier spiritof each and every member of the Group, we ask that you
continue to have hope in us.

Disruptive Innovations

Enabling Investments

In considering new business domains in a global economy withincreasing uncertainty, I place great importance on the conceptof CSV*6, which aims to achieve the sustainable growth ofcorporation by solving social issues. The world is facing various
global issues such as those represented by the SDGs, and inline with the COVID-19 pandemic, new social changes underthe monikers of the “new normal” and “after corona” are also
expected. We believe that if we can address these issues headon in our business domains, it will lead to the acquisition of newblue ocean markets and the expansion of existing markets.
At present, the Group is focusing its management

resources on projects that address social issues such as
climate change, the enhancement of Medical & Welfare
services, and the improvement of corporate productivity.
In the area of climate change, we are providing various
services to support the introduction of renewable energy after
the end of the FIT* 7 system. One such service, the green
electricity supply services (PPA services)*8, has already received
a number of preliminary orders since the start of full-scale sales
in the second half of 2019, making us aware of the high demand
for this service. Additionally, in October 2019, we began
the Fuyo 100% Renewable Electricity Declaration Support
Program (P20), a preferential financing program for businesses
and organizations that have joined RE100*9 and the 100%
Renewable Electricity Declaration RE Action*10. This program
has been recognized for its social significance to support thepromotion of renewable energy by a wide range of entities fromcompanies to local governments to medical and educational
institutions. In February 2020, the program was awarded theGold Prize (Minister's Prize, the Ministry of Environment) in theBond category of the ESG Finance Awards Japan.
Furthermore, looking toward the next Medium-termManagement Plan, which will begin in 2022, we would liketo address new social issues and prepare even more growth
drivers by working with venture companies that have alreadyformed capital and business alliances, such as Synspective,
which provides solutions using satellite data, and HiBot,
which develops and manufactures robots that can be used in
special environments that are difficult for people to access.

Revenue Performance

processes. In August 2019, NOC Outsourcing & Consulting
became a consolidated subsidiary. This has added a wide rangeof business outsourcing services and consulting capabilities,
including human resources, general affairs, and sales
administration to the Group, establishing a full range of service
provision systems in conjunction with the business domains ofAccretive, INVOICE, and others. By combining unique services,
the Group is able to provide optimal solutions to its customers.
This is a major strength of the company, and we are making
steady progress in establishing a position in this area.
Second, we positioned the Mobility Business as seeds
for future growth in the Transformation Zone. Currently,
the automobile industry is in a period of major change as
described by keywords such as CASE*2 as well as MaaS*3,
and the way people and goods are transported in the futureis about to undergo major changes. The logistics industry
is also facing a number of challenges, including an increasein the volume of distributed goods and a deteriorating
labor shortage. At the Group, we see the resolution ofthese challenges as major business opportunities, andwe will expand our business scope beyond the traditionalframework of automobile leases to include businesses
related to vehicles, logistics, and warehouses. In April
2020, we made YAMATO LEASE a consolidated subsidiary,
and with the addition of the company’s distribution-truck
business assets as well as a new customer network, we
took a step toward expanding our future business scope.
Furthermore, by providing BPO services and utilizing theknow-how of overseas group companies such as TDF*4 and
PRC* 5, we hope to contribute to solving the social issues
that face the logistics industry.

Fuyo Lease Group Integrated Report 2020

E.g. Investment in an R&D-driven
venture company

Payout period: 3-5 years

Incubation Zone

Productivity Zone

Develop new businesses

Boost productivity

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

07

Corporate History

Fuyo Lease Group Integrated Report 2020¥

History of Fuyo Lease Group08

50.0 billion

44.0

The Fuyo Lease Group faces direct feedback from customers and is fully committed to customer
support in order to resolve management issues, including those related to capital expenditureand improving work efficiency, as well as making customers’ dreams come true.

39.1

¥

2,500.0 billion

2,384.0
35.2
2,262.8
32.1

31.4
29.2

27.1

26.4

25.4

1,867.2

Ordinary profit (billions of yen)

Before 2005

1969

1978

1987

1988

1996

2000

18.3

1,730.5

18.0

17.9

16.5

1,599.2

17.4
1,495.9
1,423.5

Established Fuyo General Lease Co., Ltd.
In May 1969, Fuyo General Lease Co., Ltd. wasestablished with equity investments provided by
six Fuyo Group companies, including Fuji Bank
(currently Mizuho Bank, Ltd.) and Marubeni-Iida(currently Marubeni Corporation).

Launched aircraft leases
In 1978, the Company participated in thefirst aircraft lease in Japan. Since then it has
provided over 300 aircraft leases.

2,047.4

26.5

23.6

Operating assets (billions of yen)

2,172.6

1,407.4

1,432.9

1,440.9

2011/3

2012/3

1,166.3

917.8
843.9

857.3

Established Fuyo Auto Lease Co., Ltd.
In response to the expansion of the corporate
car leasing market, the Auto Sales Division
was separated from the Company to form
Fuyo Auto Lease Co., Ltd.

Established Fuyo General Lease (USA) Inc.
The Company set up its first overseas operation
with expatriate staff in the US to capture thegrowing overseas leasing demand. Currently,
the Company has 8 overseas bases, including
those of group companies, in 12 countries.

Established Fuyo Lease Sales Co., Ltd.
Fuyo Lease Sales Co., Ltd. was establishedwith the goal of providing enhanced handlingof administrative work and processing ofreturned assets on behalf of customers when
their leases expire.

Launched building leases
The Company started to provide building
leases in response to a growing demand forbuilding leases from retail customers withmulti-store operation.

2005/3 2006/3 2007/3 2008/3 2009/3 2010/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/3Medium-Term
Management Plan
TargetDec. 2004
Listed on
the First
Section of theTokyo Stock
Exchange

Made Sharp FinanceCo., Ltd. a consolidated
subsidiary
Sharp Finance Co., Ltd.
of fe r s a w i d e r a n g e ofservices to both corporate
and individual customers.
Sharp Finance is one of
the leading players in thevendor leasing market.

Started commercial
operation of solar power
plantsThe Company launched a solar
power generation business in
response to increasing demand forrenewable energy. As of the end of
fiscal 2019, the Company suppliedenough renewable energy to
power approximately 57,000
households from its 34 power
plants located throughout Japan.

Made Accretive Co., Ltd. a
consolidated subsidiaryA c c r e ti ve C o., Ltd. b e c a m e a
consolidated subsidiary to expand
the financing segment. Accretivep r ov i d e s c o n v e n i e n t f i n a n c i a l
ser vices including factoring
services for businesses, medical
institutions, and elderly nursingcare providers.

Made INVOICE Inc. a
consolidated subsidiary
INVOICE Inc. became a consolidated
subsidiary. INVOICE offers businessprocess outsourcing (BPO) services,such as integrated billing services,which help customers save laborand increase the efficiency of theiroperations.

Made NOC Outsourcing& Consulting Inc. a
consolidated subsidiary
To strengthen its BPO services,
the Company acquired NOC
Outsourcing & Consulting Inc. asa consolidated subsidiary. NOC
Outsourcing & Consulting offers
a wide range of outsourcing
services and highly specializedbusiness consultancy services.

Made YAMATO LEASE CO., LTD.
a consolidated subsidiary
YAMATO LEASE provides support
services for the management issuesof transportation companies, suchas succession problems and driver
shortages in addition to providing
support for the leasing, procurement,
and sales of new and used trucks.

09

Introduction of Fuyo Lease Group

Fuyo Lease Group Integrated Report 2020

Overview of Fuyo Lease Group
Overview of Fuyo General Lease Co., Ltd.
Company name

Fuyo General Lease Co., Ltd.

Headquarters

Kojimachi Garden Tower, 5-1-1, Kojimachi, Chiyoda-ku, Tokyo 102-0083, 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
OperationLine of business

Consolidated : 2,416 / Non-consolidated : 715 (as of March 31, 2020)
Domestic : Head office sales department and 16 regional sales offices (non-consolidated)
21 domestic group companies and 11 overseas group companies
Leasing and installment sales of IT equipment, office equipment, industrial machinery/machine tools, commercial/service equipment, medical devices, transportationequipment (ships, aircrafts, automobiles, etc.), civil engineering and construction
machinery, etc.
Commercial loans and other financial services
Leasing of real estates
Consultative services, etc.

In June 2020, the Fuyo Lease Group consolidated
the functions of its head office in Kojimachi, Chiyodaku. Going forward, we aim to further strengthen
cooperation among Group companies and provide
solutions, products, and services that respond todiversifying customer needs in a timely manner.
At the new head office, we have promoted a variety
of work styles for individual employees and enhanced
equipment for improved productivity. (For details, please see“Foundation for Value Creation” on P43.)

Domestic Group Companies

Overseas Group Companies

Fuyo Auto Lease Co., Ltd.

Sharp Finance Co., Ltd.

Accretive Co., Ltd.

Fuyo General Lease (USA) Inc.

Fuyo General Lease (China) Co., Ltd.

Fuyo General Lease (HK) Limited

Fuyo Auto Lease streamlines complicatedoperations relating to customers’ vehicles
and provides total support for rationalizing
management.

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

Accretive provides highly convenient financial
services, focusing mainly on factoring businessfor medical and nursing-care receivables.

Based in New York and Los Angeles, Fuyo
General Lease (USA) provides financial
services to customers located in the Americas.

Based in Shanghai, Fuyo General Lease(China) offers leases to companies expanding
their businesses into China.

Fuyo General Lease (HK) provides financial
services to companies expanding into East
Asia except for Japan.

INVOICE Inc.

NOC Outsourcing & Consulting Inc.

YAMATO LEASE CO., LTD.

Fuyo General Lease (Asia) Pte. Ltd.

FGL Aircraft Ireland Limited

Aircraft Leasing andManagement Limited

I N V O I C E ’s o f f e r i n g i n c l u d e s b u s i n e s scustomers combined billing services that help
reduce costs and improve productivity, andInternet services for residential buildings forindividual customers.

NOC Outsourcing & Consulting offers highquality business process outsourcing (BPO)
services to customers. The Company provides
customers with support to increase theirwork efficiency and to reduce costs in humanresources, accounting, administrative, backoffice, and IT operations.

YAMATO LEASE provides support services
for the management issues of transportationcompanies, such as succession problems
and driver shortages in addition to providing
support for the leasing, procurement, and salesof new and used trucks.

Fuyo General Lease (Asia) provides financial
services to companies expanding into
Southeast Asia.

Based in Dublin, FGL Aircraft Ireland offers
aircraft leases to airlines in Europe and Asia.

TDF Group Inc.

Pacific Rim Capital, Inc.

FUJITA Co., Ltd.

Fuyo Network Service Co., Ltd.

Aqua Art Co., Ltd.

FUJITA specializes in replacing medical
equipment in addition to buying andremoving second-hand medical equipment.
FUJITA also assists hospitals and clinics
close medical practices.

Fuyo Network Service sells ICT equipment andsoftware, offers technical services, including PC
installation and setup of various applications,builds network servers, and erases data, as
well as reselling second-hand PCs.

Aqua Art operates a rental business fortropical fish tanks, which replicate the naturalenvironment. Aquariums with tropical fish
and aquatic plants are offered under acomprehensive maintenance system.

Based in Canada, TDF Group engages inrental, leasing, and sales of pickup trucks inNorth America.

Pacific Rim Capital handles operating leases
for material handling equipment in the US,
Canada, Mexico, and Europe.

Fuyo Lease Sales Co., Ltd.

FGL Group Business Service Co., Ltd.

FGL Group Management Service Co., Ltd.

Fuyo Lease Sales handles all of the clericaltasks for leased assets after their leases
expire, as well as sales of used assets. It alsobuys and sells customer-owned used assets.

FGL Group Business Service handles sharedservices related to the sales administration ofeach Fuyo Lease Group and non-life insurance
agency business.

FGL Group Management Service handles
shared services related to human resources andadministrative work for each Fuyo Lease Group.

Yokogawa Rental & Lease Co., Ltd.

Nihon Credit Lease Corporation

MerryBiz Inc.

Yokogawa Rental & Lease, a joint venturewith Yokogawa Electric Corporation, offers
multi-vendor rental services for measuring
instruments and IT equipment. Because it is
one of the companies with the largest stockof equipment in the industry, it can respondquickly to the needs of customers.

Nihon Credit Lease, a joint venture with
Nichiigakkan Co., Ltd., leases nursing careequipment such as wheelchairs and electric
beds.

MerryBiz offers professional accountants fromacross Japan who handle accounting tasks
remotely and online as “virtual accounting
assistants.”

Aircraft Leasing and Management provides
comprehensive aircraft services including
aircraft lease marketing, aircraft management,p o s t - l e a s e a i rc r a f t s a l e s , a n d a d v i s o r yservices.

FGL Aircraft Ireland Limited
TDF Group Inc.

Aircraft Leasing and Management Limited

Pacific Rim Capital, Inc.
Fuyo General Lease (China) Co., Ltd.
Fuyo General Lease (HK) Limited

Fuyo General Lease (Asia) Pte. Ltd.

Fuyo General Lease (USA) Inc.

10

11

Financial and Non-Financial Highlights

Financial Highlights

Non-Financial Highlights
Ordinary Profit/Profit Attributable to Owners of Parent

Total Revenue(Billions of yen)

Ordinary profit

712.3 billion yen

44.0 billion yen(+15.2% year on year)(+12.6% year on year)

LeasesInstallment sales

Profit attributable to Owners of Parent

26.2 billion yen

50
9.2%

712.3

(t-CO2)

2,500

30

6.0
21.9

20.0

1,216

4.0

1,000

511.2

423.2

479.6

311

10

2.0

0
2017/3

2018/3

2019/32020/3

Total revenue was 712.3 billion yen (up 15.2% year on year) and reacheda record high. Continuing from the previous fiscal year, the BPO service
performed well, which contributed significantly to revenue growth.

ROA

1.90%
(+ 0.14 points from the end of previous FY)

Leases (Left axis)

2,500

2,000
1,867.2
1,500

Installment sales (Left axis)

2,047.4

494.4

127.9

2,262.8
602.0

583.1

549.7

1.62

ROA (Right axis)

2,172.6

2,384.0

691.9

(%)

(Yen)

2.0

250

1,369.8

2017/3

2018/3

686

328

327

0.3

0.2

96.0

1,564.8

2019/375,000

964

927

851

2017/3

2018/350

00Annual dividends (Left axis)

Payout ratio (Right axis)

2019/32020/3Since the fiscal year ended March 2018, CO2 emissions have tended
to increase due to the increase in the group companies. However, inthe fiscal years ended March 2019 and 2020, CO2 emission intensity
was reduced as a result of thorough energy conservation activities
throughout the Group.

45,99744,21645,000140
40,41230,091

30,000102
77
23,022

29,902

15,00023,0220
2016/32017/3

2018/3

2019/32020/3The solar power generation business made steady progress. In fiscal
2019, two mega-solar plants became operational, and the total output
reached 200 MW-dc.
* Calculated at 3,600 kWh per household.

*1 Added after the fiscal year ended March 2018.
*2 Added after the fiscal year ended March 2020.

2,416
(%)

60,00057,112816

Percentage of Female Managers (non-consolidated)

Number of Employees (consolidated)

23.5%

70,054
200

150

100

t-CO2

Green energy supply (output) (Left axis)
Energy supply when converted into a number of households (Right axis)
CO2 reduction by solar power generation (t-CO2, estimation) (Households)

200

0.1

3,000

20.0

2,400

15.0

1,800

19.6%

Employees

Number of employees (consolidated)(Employees)

25.0

Percentage of female employees holding
managerial positions

Employee Satisfaction Survey (consolidated)

200

19.6%

205

20.1%
188

2,416

17.3%
78.4

1.6

150

146

1.4

100

1.2

50

1.0

0

1,960
1,703

1,715

100

10.0

1,200

5.0

600

2020/3Operating assets was 2,384.0 billion yen (up 5.4% from the end of
previous fiscal year) and has increased for ten consecutive years.
The accumulation of assets for operating leases in the strategicarea, strong real estate finance, and growth of Accretive’s factoring
contributed to the growth. In addition, ROA has increased for threeconsecutive years, and hit a record high of 1.90% (up 0.14 points fromthe end of previous fiscal year).

2016/32017/3

2018/3

2019/3002020/3

The Fuyo Lease Group has a basic policy of working to distributeprofits to shareholders by continuing to pay stable dividends over thelong term. The annual dividends for the fiscal year ended March 2020
was 205 yen, the consecutive dividend increase since the company
went public in 2004. As for the payout ratio, it has also increased forfive consecutive years, achieving a record high of 23.5%.

Job satisfaction*

85.8%* Percentage of employees who rated at least one out of six job satisfaction questions
as four or above (on a scale of one to five) in the Employee Satisfaction Survey

1,559

Percentage of Outside Directors and Outside
Corporate Auditors (non-consolidated)

1,613.60
2016/3

2016/3130

1,474.4

0.4

22.3%

1.8

1,000

1,244.0

319

758

0

2020/3205 yen

128.8

500

2019/3

Payout ratio

1.90

1.76

70,054

23.5%

1.67

1.60
115.1

2018/3

Annual dividends(+ 5.4% from the end of previous FY)

Financing and other (Left axis)

1,271

500

Annual Dividends/Payout Ratio

2,384.0 billion yen(Billions of yen)

2017/3

Ordinary profit was 44.0 billion yen (up 12.6% year on year), profit
attributable to owners of parent was 26.2 billion yen (up 2.6% year onyear), and ordinary profit and profit attributable to owners of parent
reached record highs for the third and fifth consecutive years respectively.
In addition to accumulating operating assets centering on strategic areas,
the New Domains such as BPO services contributed significantly to thegrowth of ordinary profit and profit attributable to owners of parent.

Operating assets/ROA
Operating assets0
2016/3households*

250

494.6

0

57,00077905

2016/3(MW-dc)MW-dc(estimation)

178
0.29

828

307

2,007

1,937
0.36

0.33

0.31

1,500

17.5
420.0

2,074

2,000

26.2

25.5

20
200

0.5

0.37

31.4

29.2

(t-CO2/100
millions of yen)

CO2 emission intensity (Right axis)

35.2

34.2

38.2

(%)

10.0

8.0

39.1

183.5

INVOICE and FUJITA*2

44.0

8.6%

100.4

21.7
62.3

20.0
53.8

400

30.0
49.1

507.2

493.8

9.7%

200

Fuyo General Lease
Fuyo Auto Lease, Fuyo Network Service, Aqua Art,
Fuyo Lease Sales and FGL Group Business Service
Sharp Finance and Accretive*1

CO2 reduction

70,242

9.2%

40

618.1

590.3

10.0%

Solar power
Power supplied equivalent togenerated (output)
approximately

CO2 emissions (Scope 1, 2) (Left axis)

Proﬁt attributable to owners of parent
ROE (Left axis)(Billions of yen)

Solar Power Generated (output) / Power Supplied /CO2 Reduction (estimation)

CO2 Emissions (Scope 1, 2) /CO2 Emission Intensity(+2.6% year on year)

Ordinary proﬁt (Left axis)

Financing and other

800

600

12

Fuyo Lease Group Integrated Report 2020

2016/32017/3

2018/3

2019/32020/3The number of employees continues to increase as the Group expands.
As we work to enhance the value of our corporate group, we focus
on developing human resources with an emphasis on making ourcompany a better workplace so that all of our employees can realize
their full potential as they hone their professional skills.

41.7%(Five out of 12 directors and corporate
auditors are outside directors andoutside corporate auditors.)

13

Value Creation Story

Fuyo Lease Group Integrated Report 2020

Value Creation Story

Business Achievements

The Fuyo Lease Group finds risks and opportunities from social changes and issues, and ismotivated to solve the issues by providing various solutions. Drawing on our distinctive resources
and strengths, our group’s value creation story aims to go beyond our stakeholders’expectations by increasing our corporate value and creating sustainable value in the society.

Real
EstateMedical &WelfareFuyo Lease Group’sCore Businesses
Strategic Areas

Socialenvironment
Diversification in values
Adapting totechnologicalinnovations
Development of an
information society
Declining birthrate
and aging population

Naturalenvironment
Intensification ofclimate change
More frequent
natural disasters
Acceleration of
resource depletion

Economic
environment
Fluidization and multi-polarization of the world economy
Changes in the interest rate environment
Progression of corporate globalization
Changes in accounting standards
Responding to demand from inbound travelers¥

81.0 billion

34

Output200

MW-dc

Operating assets for Aircraft leasing¥
Real Estate

Operating assets that form the foundations forcreating added value

P29

Medical &WelfareP30

2,384.0 billion

Domestic
Corporate
P36¥

311.8 billion

BPO

Energy &EnvironmentNon-financial

Aircraft
P32

Vender Leases
P36

New
Domains

Relationships with customers in a variety of industries

1

Developing safe and livable cities
and providing transportation

Number of companies providing BPO
services through five BPO companies*2

Achieving economic growth andfulfilling work

18,571 companies

New
Domains

Domestic
Corporate

VendorLeasesP36

2,416 Group employees

Overseas

BPO

P33

Inter-Group collaboration that produces new solutions
Ratio of Group companies in consolidated net sales

P34

1,613.6 billion*

Contributing to the creation of acircular society
Diversity and work-style reform

Operating assets for leasing¥

Optimizing operating efficiency
and costs

3

Paving the way for innovation

Operating assets for financing

34.2% (FY ended Mar. 2017)49.7% (FY ended Mar. 2020)

Finance¥

Active investment and support for venturecompanies
Number of M&A and capital alliances since
Apr. 2017:
P35

Mobility
Business

17665.6 billion*

P35

P34

*1 Operating assets of overseas subsidiaries (excluding aircraft leases) plus investments in overseas affiliate businesses*2 Sharp Finance Co., Ltd., Accretive Co., Ltd., INVOICE Inc., NOC Outsourcing & Consulting Inc., and Merry Biz Inc.
*3 Operating assets of the entire Fuyo Lease Group

Consolidated
Management Goals
Operating assets
Ordinary profit

Riskmanagement
P51

Development of local economies

3

New Domains

Systems that support value creation

P47

Promoting health and wellbeing

99.2 billion*

Finance

Human resources that possess highly specialized
expertise and extensive know-how

Corporate
governance

Responding to climate change
issues and renewable energy

Acquired NOC Outsourcing & Consulting Inc.
and YAMATO LEASE CO., LTD. as a subsidiary
Invested in Japanese Organization for Medical
Device Development, Inc., Synspective Inc.,and Girasol Energy Inc.

P31

Extensive domestic and overseas network
21 domestic companies and 143 business locations
11 overseas companies and 12 business locations in
8 countries

164.9 billion

Overseas operating assets
Overseas

Stable financial base and core capital
Net assets: ¥444.7 billion

Operating assets for Medical & Welfare

Aircraft

Financial

Changes andIssues in Society¥

locations nationwide

Core Areas

Resources andStrengths

Operating assets: ¥Operating assets for building leasing

Solar power generation
Energy &Environment

Contribution to Solutions

Human resources
development
P42

ROA

(Ordinary profit on operating assets)

FY 2019 Interim Target

FY 2019 Actual

FY 2021 Target(FY ending Mar. 2020)(FY ended Mar. 2020)(FY ending Mar. 2022)¥2,300.0~2,400.0 bn¥2,384.0 bn¥2,500.0 bn¥38.0~42.0 bn¥44.0 bn¥50.0 bn

1.7~1.8%

1.90%

2.0%

14

15

Materiality

Fuyo Lease Group Integrated Report 2020

Materiality

Materiality for Fuyo Lease Group

STEP

1

Identifying Issues

Based on the SDGs and ESG
indexes, we identify issues which
could influence our Group.

STEP

2

Assessing Materiality
from the Stakeholders’
Point of View

We assessed materiality of theissues identified in Step 1 from theviewpoint of investors and otherstakeholders

STEP

3

Assessing Materiality
for our Business
Operations

We assessed materiality of
the issues identified in Step 1
considering our business basedon our Medium-term Management
Plan, Code of Corporate Conductand other guidelines.

STEP

4

Identifying Priority Issues

Following Steps 2 and 3, we
identified priority issues, andfollowing discussions among theBoard of Directors, top management
approved the identif ied priorit yissues.

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

Areas where the levelof materiality is highfor stakeholders, but islimited for our Group

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 the United Nations. We will contribute to creating a prosperous and sustainable society by enhancing sharedvalues between society and companies through our efforts along with identified Materiality.

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

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

Materiality for our businesses

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

Themes of Initiatives

Targets

Supplying green energy through the solar power
generation business

200MW-dc

FY 2021 target: 200MW-dc

Estimated CO2 reduction 70,054 t-CO2[FY 2019]

Setting targets and promoting the use of renewableenergy in business operations

Participated in RE100
Started reviewing utilization of renewable energy

2030 target: 50%
2050 target: 100%

Promoting the use of renewable energy andcommunicating demand voices to the market

Providing financial services to companies andorganizations participating in RE100 and the
100% Renewable Electricity Declaration RE
Action through “the Fuyo 100% Renewable
Electricity Declaration Support Program”

Issued green bonds and began provision ofprogramNumber of organizations providing program:15 organizations

Contributing to the promotion of the 100%
Renewable Electricity Declaration RE Action andfurther expanding the provision of programs

Providing financial services to companies
participating in the RE Action in support of theirrenewable energy initiatives<Major leasing results from programs>
LED lighting, electric vehicle chargers, devices
that are compliant with the Act on Promoting
Green Procurement (PCs, printers, etc.)

Operating assets of Energy & Environment businesses(excluding solar power generation business)¥33.2 billion

FY 2021 target: ¥41.0 billion

Promoting renewable energy and energy saving

Offering support to renewable energyrelated technology venture companies

Invested in Girasol Energy

Offering support for selling and providing services
for new technologies and products
FY 2020 results: Received first order for green
electricity supply services (PPA services)

Operating assets ofMedical & Welfare businesses¥81.0 billion

FY 2021 target: ¥95.0 billion

Improving both the quantity and quality of medical,
elderly nursing-care, and welfare services

Support medical institutions with their management

Balance of factoring for medical and nursing-carereceivables (balance of FPS Medical by Accretive)¥17.2 billion

FY 2021 target: ¥30.0 billion

Helping medical institutions to achieve financial
stability by meeting their funding needs

Promote cutting-edge healthcare technologies

Offering support to medical venture companies

Invested in Japanese Organization for Medical
Device Development

FY 2020 results: Invested in THINKCYTE

Operating assets of real estate leases (Commercial
facilities, hotels, distribution facilities, nursing
care facilities, residential facilities, etc.)¥444.7 billion
Jointly acquired trust beneficiary rights of Nasu
Garden Outlet

FY 2021 target: ¥530.0 billion

Number of aircraft owned by the Group41

FY 2021 target: 70*1
Investing in the venture fund formed by the
Airbus Group

Transportation capacity:
10 million people*2 per year [FY 2019]

Operating assets¥2,384.0 billion

FY 2021 target: ¥2,500.0 billion

Providing right-to-use and/or possessory
rights to customers through leases, andoutsourcing of processes and procedures
associated with ownership

Improve management efficiency, overcome labor shortage, and address
work-style reform

Number of companies providing BPO
services through five BPO companies*3

18,571 companies
Made NOC Outsourcing & Consulting a
consolidated subsidiary
Made MerryBiz an equity-method affiliate

FY 2021 target: 20,000 companies

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

Reuse and recycle rate for returned PC

100%

FY 2020 target: 100%

Reducing waste and promoting a circularsociety

Convert power consumed by the Fuyo Lease Group into renewable energy

Provide support for the wider use of renewable energy through theprovision of financial services

Promote cutting-edge renewable energy-related technologies

Expand access of medical, elderly nursing-care, and welfare services

Promoting health andwellbeing

Developing safe andlivable cities and providing
transportation

Achieving economic
growth and fulfilling work

Contributing to the creationof a circular society

Diversity and work-stylereformContributing to society and theenvironment (outcome)

FY 2019 Results

Expand supply of renewable energy

Responding to climatechange issues andrenewable energy

Results and plan (output)

Promote environmentally-friendly urban scape and residential space
Contribute to expanding the volume of safe, inexpensive, and fast
Transportation
Support corporate activities through leasing business, contribution tosocial development

Relevant SDGs

Energy &Environment(P19-20, 31)

Disseminating advanced renewableenergy-related technologies*See Special Feature 1. Energy & Environment (P19)

Disseminating advanced medical
technologies

Medical &Welfare(P21-22, 30)*See Special Feature 2. Medical & Welfare (P21)

Supplying environmentally-friendly assets

Contributing to the resolution of labor shortages
and the promotion of work-style reform byproviding BPO services

Real Estate (P29)
Aircraft (P32)

BPO(P23-24, 34)*See Special Feature 3. BPO (P23)

Reduce the impact on the environment through proper waste disposal

Proper disposal of industrial waste

Proper disposal of all waste

Same as column to the left

Reducing our environmental impact byensuring proper disposal of waste

Empower women in workplaces and develop human resources withdiverse strengths

Percentage of Female Managers (non-consolidated)

19.6%

FY 2021 target: 30% or more

Ensuring that female employees can realize
their full potential in the workplace

Improve work-style to pursue efficiency and productivity

Rate of taking annual paid leave (non-consolidated)

66.3%*4

FY 2021 target: 80%

Improving work-style to pursue efficiency
and productivity

Promote work-life balance

Telecommuting utilization rate*5 (non-consolidated)

5.9%

FY 2021 target: 40% or more

Promoting a balance between work and family

Improve job satisfaction

Rate of job satisfaction*6 (consolidated)

85.8%

Steady improvement

Increasing productivity and added value byenhancing job satisfaction*1 Due to the impact of the spread of COVID-19, we are considering revising our planned target.
*2 Calculated independently from the breakdown of aircraft possessed and figures published by aircraft manufacturers, etc.
*3 Sharp Finance, Accretive, INVOICE, NOC Outsourcing & Consulting, and MerryBiz.

Relevant
Business

Domestic
Corporate (P36)-*4 Due to restrictions on the number of employees coming to work in conjunction with the spread of COVID-19, actual data on paid leave for eight Fuyo General Lease (USA) Inc. employees is not included.
*5 Of all employees, the percentage who have been provided with home PCs to establish telecommuting environments and have telecommuted from home at least once.
*6 Percentage of employees who rated 4 or above (on a scale of 1 to 5) for at least one job satisfaction question out of 6 in the Employee Satisfaction Survey.

16

17

Medium-Term Management Plan

Fuyo Lease Group Integrated Report 2020

Medium-term Management Plan (FY2017-FY2021)
Frontier Expansion 2021 is comprised of a business strategy centered on the business promotion side and of a management
strategy centered on bolstering the management foundation that supports the business strategy.

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 frontier

Business Strategy

After establishing six strategic areas and three core areas of focus, we have formulated individual strategies and policies in thefocus areas.
Strategic Areas

Overview ofStrategies and
Goals

The Fuyo Lease Group aims to achieve strong sustainable growth amid the significantly changing businessenvironment surrounding the domestic leasing business by fulfilling the corporate slogan of “Go where no one
has gone before,” and by untiring challenges of new business fields and business models in order to expand thefrontier of our business portfolio. (Profit model shown below.)

Target Performance
Indicators
Operating Assets

Target Value
2,172.6 billion yen

2,384.0 billion yen

2,262.8 billion yen

2.0%

1.76%

1.67%

2018/350.0
billion yen

44.0
billion yen

39.1
billion yen

35.2
billion yen

2019/3

Medical &WelfareEnergy &Environment

Aircraft

2020/32021/3Strategic
Areas
Energy &Environment

Aircraft

Overseas2022/3

New
Domains

Mobility
Business

BPO

01 Selection and Concentration in Strategic Areas

Three Strategic Axes

02 Challenge the Frontier
03 Pursue Group Synergies

Domestic Corporate / Vendor Leases / FinanceCore Areas

Domestic
Corporate

VendorLeasesFinance

Areas designated for market (customer base) maintenance and expansion
through efficient sales operations such as intra-Group collaboration

Management Strategy

The following have been established as strategies to strengthen the management foundation that supports the execution ofbusiness strategies.
Bolster ability to address new risks in conjunction with the frontier expansion
Strengthen corporate functions and boost productivity
Enhance the governance system in order to demonstrate Fuyo Lease Group’s capabilities

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.
and Concentration
01 Selection
in Strategic Areas

Medical &WelfareNew
Domains

Three Strategic Axes

Business Strategy

Real
EstateOverseas

Areas positioned as growth drivers and designated for concentrationof management resources

2,500.0 billion yen

1.90%
Ordinary Profit
ROA

Real
EstateCore Areas

Management Strategy*1

02 Challenge the Frontier

03 Pursue Group Synergies

We have positioned six strategic areas
expected to be the biggest drivers of profit
grow th, and are focusing management
resources on these areas. In addition, we
have changed the positioning of Auto Leases,
which was one of our core areas, to the
Mobility Business as a frontier (New Domains)
w h e re n e w g row th i s ex p e c te d. W h i l eaccumulating high-quality operating assets
in Real Estate and Aircraft businesses, wewill strive to improve ROA by expanding new
profitable business areas beginning with the
BPO and the Mobility Business.

As for BPO, which is the core of the New
Domains, by strengthening cooperation amonggroup companies, we will understand customer
needs for the entire group, provide services
corresponding to those needs, and support clientcompanies with regards to “work-style reforms”
and “manpower shortage” issues. Furthermore,in the Mobility Business where new growth isexpected, in addition to automobile leasing, we
will expand the domain into logistics mobility
related to vehicles, logistics, and warehouses, andaccelerate the development of new businesses
by creating synergies with YAMATO LEASE.

W ith the re lo c ation of the G roup he ad
office in June 2020, we will create closer
collaboration between group companies, andstrengthen our systems to flexibly and swiftly
provide solutions that meet the diverse needsof our customers on a group-wide basis. By
consolidating head office functions, we willfurther improve productivity and maximize
group synergies.

Results in FY 2019

Results in FY 2019

Results in FY 2019

In Real Estate operations, we expanded partnerships
with leading developers, including collaboration withnew alliance partners for large commercial facilities,
and accumulated operating assets which is greatly
exceeding the interim goal values.

NOC Outsourcing & Consulting has become
a consolidated subsidiar y and we have begun
providing BPO ser vices for general af fairs andinformation systems, human resources, and sales
office in addition to the existing BPO services foraccounting and settlement operations.

In BPO operations, we expanded sales of theintegrated billing service for telecommunications
a nd u tili t y c h a rg e s p rov id e d by IN VO ICE, aconsolidated subsidiary.

*1 Strategies to strengthen the management foundation which supports the execution of business strategies.

Changes to operating assets in strategic areas(Billions of yen)

1,500

53

(%)

50

1,335.0
40

1,200

40

40

35

900

901.9

29
763.5
596.0

600
300
0
Results

98.7
66.9
84.1
31.0
75.1

104.9
66.3
93.4
39.3
97.6

30

97.6
81.0
99.2
59.2
164.9

20
10

444.7

421.9

362.0

240.2

101.8
74.5
99.9
54.0
149.8

946.6

0
2017/3

2018/3

2019/32020/32021/32022/3

Planned/Estimated

Real Estate (Left axis)
Aircraft (Left axis)
Energy & Environment (Left axis)
Overseas (Left axis)
Medical & Welfare*2 (Left axis)
Mobility Business (Left axis)
Proportion of strategic areas tooperating assets (Right axis)*2 The balance for Medical & Welfare
overlaps in part with those of otherstrategic areas (Real Estate, etc.).

Key Performance Indicators and Progress
At Fuyo Lease Group, our three management indicators are operating
assets, ROA (ordinary profit on operating assets) and ordinary profit,
and we have set targets for the fiscal year ending March 2022, whichis the final year of this five-year Medium-term Management Plan,as well as interim goal values for the fiscal year ending March 2020,
which is the third year of the plan. As for the interim goal values for the
fiscal year ending March 2020, operating assets accumulated well,and ROA and ordinary profit were achieved in a way that greatly

exceeded goal values. In these results, in addition to accumulationof operating assets in strategic areas centered on Real Estate andAircraft businesses, the expansion of “New Domains” businesscentered on BPO services contributed. Also, with regard torevenues and profits, record highs were set for the Group continuingfrom the previous year. As for the remaining two years of theMedium-term Management Plan period, we will continue topromote business activities to achieve management targets.

In Medical & Welfare operations, the transaction
volume in “FPS Medical,” a factoring service for
medical and nursing-care receivables, increased.
Furthermore, to further strengthen relationships withmedical professionals, the quarterly magazine “Fuyo
Medical Info” was published, providing informationthat contributes to hospital management.
In Energy & Environment operations, t wo new
G r o u p’s l a r g e s t s o l a r p o w e r p l a n t s b e c a m eoperational. Also, “Fuyo 100% Renewable Electricity
Declaration Support Program” (P20) began.
In Aircraft operations, we started a parts-out businessthat sells parts from retired aircraft.
In Overseas operations, we are promoting collaboration
with TDF and PRC, which develop leasing businesses
for pickup trucks and logistics equipment in North
America.

YAMATO LEASE, which provides finance services
centered on truck leasing, became a consolidated
subsidiary in April 2020, and expanded the service
provision system for logistics and mobility related services.
We have concluded capital and business agreementswith the following: in Medical & Welfare operations,with the Japanese Organization for Medical Device
Development, which is a medical incubator; in Energy& Environment operations, with Girasol Energy, whichdevelops maintenance management IoT platforms forphotovoltaic power generation equipment; and in New
Domains operations, with Synspective, which conducts
business using satellite observation data, and HiBot,
which develops and manufactures robots that play anactive role in special environments that are difficult forpeople to enter. We are promoting investment to further
expand business areas.

In Domestic Corporate operations, we promoted
cross-selling of products and services that transcendbusiness boundaries through collaboration among
strategic areas as well as among group companies.
A subsidiary that consolidates human resourcesand general affairs operations, which had been
distributed among group companies, has been
newly established, and the operations have beenstreamlined by promoting “common office work”
and “effective use of group resources.”

Long-Term Approach
We see Creating Shared Value (CSV) as one of ourmanagement decision criteria. By putting our corporate
slogan of “Go where no one has gone before” into practice,

we are committed to contributing to the building of asustainable society and increasing our corporate value, withthe focus on the lease and financing business.

18

19

Special Feature 1. Energy & Environment

Fuyo Lease Group Integrated Report 2020

20

SpecialFeature1

Renewable Energy Generation Business
The Group generates solar power as part of its efforts to promote
the spread of renewable energy in the course of businessactivities. The Group currently operates solar power plants at 34
locations throughout Japan, supplying enough electricity to power
approximately 57,000 households in local communities. In fiscal 2019,as the first project in the difficult-to-return zone that was affected by
the Great East Japan Earthquake, we started operating a solar power
plant with an output of approximately 60 MW-dc, one of the largest in
the Tohoku region, in Namie town, Fukushima Prefecture, Japan.

Energy & Environment

Responding to Climate Change Issues
and Renewable Energy

Namie Sakai Solar Power Plant 1 and 2 in Namie Town, Fukushima Prefecture, Japan

Promoting Renewable Energy-Related Infrastructure

Senior Managing Director

Soichi Hosoi

The Fuyo Lease Group’s Awareness of Climate Change Issues
In recent years, the physical effects of climate change including
extreme weather, rising sea levels, and forest fires have become
increasingly apparent. Since the adoption of the Paris Agreement,
which was concluded in 2015 to mitigate climate change, not only
have both developed and developing countries been required totake countermeasures, but companies have also been required toactively engage in efforts to reduce greenhouse gas emissions.
The Fuyo Lease Group also recognizes the importance of
responding to the risks and opportunities posed by climate change.

As a medium to long-term risk, there is a possibility that restrictions
on business activities due to an increase in natural disasters andchanges in regulations and systems such as carbon taxes may affectour performance. On the other hand, demand for leasing renewableenergy facilities and energy-saving equipment is seen as a mediumto long-term opportunity. In order to respond to such risks andopportunities, the Group has identified “Responding to Climate
Change Issues and Renewable Energy” as one of its material issues(materiality) for addressing social issues.

Recently, more and more Japanese companies have been joining
RE100. Furthermore, the 100% Renewable Electricity Declaration
RE Action was established in October 2019 as a new frameworkfor small and medium-sized enterprises, administrative agencies,
hospitals, and educational institutions to declare that they will use
100% renewable energy.
One of the factors hindering the spread of renewable energy isthat the cost of capital investment is a significant burden, especiallyfor small and medium-sized enterprises. We established the Fuyo
100% Renewable Electricity Declaration Support Program to provide
financial support to the businesses and organizations that havesigned up for the 100% Renewable Electricity Declaration RE Action
by utilizing the financing know-how that we have cultivated overmany years. More specifically, we issue green bonds and raise funds
from investors and use the gathered funds to support businesses
and organizations that have joined the 100% Renewable Electricity
Declaration RE Action to incorporate renewable energy and/or
energy efficient equipment into their operations. In fiscal 2019, we
decided to support a total of 15 organizations.
This program has been selected as a Model Case for the fiscal
2019 Green Bond Issuance by the Ministry of the Environment inrecognition of its uniqueness and contribution to Japan’s efforts

The Fuyo Lease Group’s Initiatives to Promote the Spread of Renewable Energy
Recognizing the need to make major efforts to reduce greenhousegases in response to climate change, in 2018, the Group became
the first comprehensive leasing company in Japan to participate in
RE100. RE100 is the global corporate leadership initiative, whichaims to source 100% renewable energy to power business activities.
Furthermore, with the aim of contributing to the promotion ofa decarbonized society, we are actively implementing initiatives
based on three pillars: renewable energy generation business,promotion of renewable energy-related infrastructure, andinvestment in and commercialization support for renewable energyrelated technologies.

Executive Officer and General Manager,
Energy & Environment Business Division

Miki Sasaki

to promote renewable energy countrywide. Furthermore, we were
the only company to receive the Gold Prize (Minister’s Prize, theMinistry of Environment) in the Bond category of the ESG FinanceAwards Japan, which recognizes financial institutions that are
actively involved in ESG finance and companies that are engaged
in sustainable environmental management. Now and in the future,
we at the Group are committed to providing active support to ourclients in response to their financing needs for renewable energy.
In addition, we have been promoting our green electricity supply
services (PPA services) since fiscal 2019 as a business to supply
infrastructure for renewable energy power generation. Under thisservice, we install solar power generation systems on the sites orroofs of our customers and directly supply electricity to them. We
will accelerate our efforts in this service in order to contribute to thefurther spread of renewable energy by supplying many customers
with power generation systems that produce CO 2-free electricity
with environmental value.

We are making efforts to further expand the power supply of our solar power generation business and arealso working with strategic partners to participate in hydropower, wind power, biomass, and geothermal
power generation businesses. At the same time, we aim to expand the supply of renewable energy in Japanand overseas by developing electric power infrastructure and power sources overseas, which are ahead of
us in the renewable energy field.
In fiscal 2019, we also started a green electricity supply service (PPA service). Under this service, we install,
operate, and maintain power generation systems free of charge and supply renewable energy to customers.
We also offer a wide range of decarbonization services such as support for EV and battery infrastructure as
BCP measures as well as ESCO services, and we combine these services with unique financing capabilities
such as the Fuyo 100% Renewable Electricity Declaration Support Program to provide the best solution forour customers.

Overview of Efforts to Convert to Renewable Energy
Participation in RE100 and promotion of
conversion to renewable energyof renewable
1 Useelectric power

Use of 100% renewable energy forelectric power consumed by the Group

Renewable
2 energy
business

Contributing to the promotion of a decarbonized society through business(three pillars)

2030 target: 50%, 2050 target: 100%

Renewable energy
generation business

Promotion of renewableenergy-related infrastructure

Investment in and commercialization
support for renewableenergy-related technologies

Contributing to local communities
through the development of
renewable energy power plants

Promotion of renewable energyrelated infrastructure through abroad customer base

Seeking investments and businessalliance approaches to create new
business opportunities

Providing Support for Investments in Renewable Energy-Related Technologies and Their Commercialization
In order to contribute to the further expansion of renewable energy
introductions, we provide commercialization support to venturecompanies possessing cutting-edge renewable energy technologies
through investments and business collaborations.
In fiscal 2018, we formed capital and business alliances with
Exergy Power Systems Inc., which develops and manufactures
next-generation energy storage systems, and NExT-e Solutions Inc.,
which provides battery management systems that utilize advanced
battery control technologies.
In fiscal 2019, we entered into a capital and business alliancewith Girasol Energy Inc. It is a venture company from the Universityof Tokyo, and it is developing the PPLC-PV*, IoT platform forthe maintenance and management of solar power facilities. This
platform collects and analyzes data such as current, voltage, andtemperature, thus making it possible to understand operational
status on a panel-by-panel basis and to remotely identify problems
as well as abnormalities at an early stage. One of the most importantfactors in making renewable energy a mainstay power source is theability to operate power plants stably over a long period of time. We
believe that the services provided by this company will contribute to
the maintenance and expansion of solar power generation.
By supporting these venture companies now and in the future, we
strive to promote the spread of renewable energy and to create new
business opportunities.
*PPLC-PV stands for a pulse power line communication for series-connected PV monitoring.

21

Special Feature 2. Medical & Welfare

Fuyo Lease Group Integrated Report 2020

22

SpecialFeature2

Medical & Welfare

Providing a Wide Range of Solutions
for the Management Issues of Medical Institutions:
The Fuyo Lease Platform Concept
Managing Executive Officer

Hiroaki Oda

business alliances with the medical venture company RIVERFIELD
Inc.* 2, CREWT Medical Systems, Inc.* 3, and Lily MedTech Inc.* 4.
Furthermore, the various services provided by each group company
make a significant contribution to enhancing the platform. For
example, financing includes factoring for medical and nursingcare receivables by Accretive Co., Ltd.; removal, transportation,
disposal, buying and selling pre-owned medical devices by FUJITA
Co., Ltd.; and business efficiency, energy saving and cost saving
includes consultation on the introduction of BPO services by NOC
Outsourcing & Consulting, Inc. Optimally combining these services
to meet customer needs allows us to offer a wide range of solutions.

Fuyo Lease Platform Concept
Structure when the current Medium-Term
Management Plan was establishedFY 2017 results(including a portion of FY 2016)
FY 2018, FY 2019 results
FY 2020 results

We will continue to expand our business in the Medical & Welfare
areas in order to further expand the Fuyo Lease Platform Concept
in the future. Specifically, we will utilize our strategic, comprehensive
alliance with Medical System Network Co., Ltd., which is engaged
in the pharmaceuticals network business as well as other products
and the dispensing pharmacy business, and we will promotecollaboration with highly specialized companies such as medical
consulting companies. By expanding into new business areas,
we will enhance our platform and contribute to resolving diverse
customer needs.

MarketSocial welfare
Elderly nursing care

Local communities
Local government

Medical care

Providing one-stop services
Pla tfor m

Management Issues Facing Medical Institutions and Fuyo Lease Initiatives
The management issues faced by medical institutions are diversifying
due to changes in the environment surrounding medical care. For
example, initiatives to improve working environments for medical
professionals are urgently needed to promote the work-style reform
led by the government. There is also a need for initiatives to convert
medical functions. This has been brought about by changes inpatient structure due to the declining birthrate and aging population,
as well as the accelerated reorganization of hospitals in line with
Regional Medical Care Visions*1. In addition, as part of measures tocope with the recent spread of COVID-19 and large-scale disasters,
there is also increasing societal demand for online and remote
medical care. Many medical institutions are required to streamline
their operations through measures such as reducing costs while

maintaining capital investment. Medical institutions face an urgent
need to make efforts to address these diverse management issues.
At the Group, we have positioned Medical & Welfare as one of ourstrategic areas, and we provide a variety of services including theleasing and financing of medical devices and facilities, factoring for
medical and nursing-care receivables, as well as the removal andpurchase of used medical devices. We aim to leverage the knowhow and rich variety of services that we have accumulated throughour business activities to further contribute to resolving issues in the
medical field. To this end, we are focusing on creating a system toaccurately understand the diversifying needs of medical institutions
and provide a wide range of solutions.

Financing (facility ownership)

Removal, transportation, disposal,
buying and selling pre-owned
equipment

RIVERFIELD

Fuyo Lease

Fuyo Lease SalesINVOICE

CREWT Medical Systems

Sharp Finance

FUJITA

MerryBiz

Fuyo Auto Lease

Officebusters

NOC Outsourcing & Consulting

Accretive

Logistics companies

Energy service companies

THINKCYTE

Yokogawa Rental & Lease

Waste disposal contractors

Building management companies

Medical equipment trading companies

Nihon Credit Lease

Management solutions

Equipment, facilities, and amenities

Fuyo Lease
Healthcare Advisory Division
Japanese Organization for Medical
Device Development (JOMDD)

Lily MedTech
Medical System Networks

Consulting firms
Medical information providers

Business efficiency and energy saving
and cost saving

Water supply companies
BCP product suppliers

Medical equipment manufacturers
IT vendors

The Healthcare Advisory Division, which was established in April 2019, is working with medical management
consultants to propose the utilization of the Group’s BPO services and the introduction of an RPA. The aim is toimprove and streamline hospital operations for medical institutions that play a central role in regional medicalcare. We are also working to establish a system that enables us to provide services ranging from applications to
office procedures online for the early payment of medical and nursing-care receivables provided by Accretive.
The environment surrounding the management of medical institutions and nursing-care providers is becoming
increasingly difficult due to COVID-19 and other issues. We will continue to face the management issues of our
Executive Officer and General Manager, customers and provide optimal solutions based on its comprehensive capabilities.
Medical & Welfare Division

Hideyuki Otsubo

Expanding Advisory Functions and Information Channels to Identify Customer Needs

The Nursing-Care Provider Support Program to Realize Sustainable and Stable Nursing-Care Services

The Group has established a system to develop services that identify
and satisfy the diverse needs of medical institutions. First, in orderto enhance the expertise of the organization, we recruited personnel
and established the Healthcare Advisory Division in April 2019. As aresult, we have enhanced our sales activities aimed at managementin university hospitals and hospitals that play a central role in regional
medical care by promoting the utilization of expert knowledge
and human networks. We actively approach management to

Although demand for nursing-care services is rising against the
backdrop of an aging population, the shortage of nursing-care
professionals is expected to deteriorate as the working-age population
declines. Many nursing-care providers are facing problems such as
issues with acquiring the human resources necessary to provide
nursing care services, promoting the utilization of ICT (information andcommunications technology), and stably procuring materials and funds.
The Group has begun building a nursing-care provider support
program that provides a framework to support the sustainable andstable business operations of nursing-care providers that face avariety of issues. The program consists of a collaboration between theGroup, major nursing-care providers and major financial institutions toprovide nursing-care providers with solutions from three perspectives:
management rationalization and temporary staffing, procurement of
nursing-care and social-welfare equipment, and financial support. At
the Group, we play a role in leasing and financing nursing-care andsocial-welfare equipment, supporting work efficiency improvements
through our BPO services, providing financial support through an early
payment service for nursing-care receivables, and providing funds
necessary for business revitalization. In this way, the Group is working
together to support nursing-care providers and contribute to thecreation of sustainable local communities.

*1 Regional Medical Care Visions: This initiative aims to create a framework for the division of rolesand cooperation among medical institutions through the cooperation of local stakeholders, in orderto estimate medical needs in 2025 and create a medical system that responds to those needs.
*2 RIVERFIELD Inc.: A venture company from the Tokyo Institute of Technology that isdeveloping Japan’s first surgical support robot. We invested in it on the assumption that wewould form a partnership for the sales and promotion of leasing and rentals for the company.

*3 CREWT Medical Systems, Inc.: A venture company affiliated with the University of Tokyo
that is developing the visual-field testing equipment “AIMO.” We entered into a capital andbusiness alliance with it to support the sale of AIMO through leasing and other financing plans.
*4 Lily MedTech, Inc.: A venture company that develops diagnostic imaging equipment forbreast cancer. We entered into a capital and business alliance with it to develop andpromote leasing, rentals, and other schemes for the company’s equipment.

understand the specific needs of each medical institution and utilize
this information in the development of new services. Furthermore,
we have become a member of the Medical Management PlanningGroup (MMPG), a nationwide organization of tax accountants andaccounting firms that specialize in supporting medical business
management. Utilizing the MMPG’s medical information and knowhow as well as its network of members, we have broadened ourgroup services and expanded our information channels.

Providing Comprehensive One-Stop Services through the Fuyo Lease Platform Concept
The Fuyo Lease Platform Concept (see the figure on the followingpage) is a one-stop service that combines services and provides
solutions tailored to customer needs from five perspectives:
management solutions; equipment, facilities and amenities; financing;
removal, transportation, disposal, buying and selling pre-owned
equipment; and business efficiency and energy saving and costsaving. Under the Fuyo Lease Platform Concept, the Group is working
to expand its lineup of services for medical institutions, elderly social-welfare and nursing-care providers, and local governments.
For the management solutions, we have formed a capital andbusiness alliance with the Japanese Organization for Medical Device
Development (JOMDD), a medical incubator. The aim is to utilize
the knowledge obtained through the organization to develop andprovide management solutions for medical institutions. In addition,for equipment, facilities and amenities, we support the development
and diffusion of cutting-edge medical technology through capital andOverview of Nursing-Care Provider Support Program
Nursing-care service businessNursing-Care Provider Support Program
Management
rationalization andtemporary staffing

Procurement of nursingcare and social-welfare
equipment

Financial support

Major nursing-care providers

Fuyo Lease Group

Major financial institutions

23

Special Feature 3. BPO

Fuyo Lease Group Integrated Report 2020

24

SpecialFeature3

Model Cases of BPO Service Introduction
CustomerModel case

BPO

Providing Comprehensive BPO Services
That Achieve Sustainable Growth andImprove Job Satisfaction for Client Companies
Managing Executive Officer

Hiroaki Ando

1

Payroll
processing
operations

Model case2

Accounting
operations

Model case

3

Sales
Administration

Using BPO-based Productivity Improvements to Contribute to Solutions for Challenges
in the Age of the New Normal
As Japan’s working-age population continues to decline due to a
declining birthrate and an aging population, it has become an urgent
issue for companies to streamline their management and improve
employee productivity. Cost reductions are needed in response
to business maturity and price competition. Also, there is a needfor initiatives to raise the value and productivity of each employee
by promoting diverse working styles, securing excellent humanresources and creating an environment conducive to the creationof new value based on the work-style reform led by the Japanese
government. Recently, with issues such as the shift to the New
Normal following the spread of COVID-19, accurately responding
to both changes in the business environment and accompanying
changes in needs has become the most important issue for acompany to achieve sustainable growth.
Against this backdrop, the Fuyo Lease Group has identified“achieving the sustainable growth/development of a company
and improving employee job satisfaction” as one of its material
issues (materiality). At the core of this are BPO services. Under our
Medium-term Management Plan, Frontier Expansion 2021, we havepositioned BPO services as a New Domains, and we are working
to expand this business by supporting and realizing the growth of
all companies from the perspective of improving productivity. In
particular, there is an increasing need for BPO services in the ageof the New Normal, and we hope to contribute to solutions for thechallenges that many companies face.

Overview

Retail businessthe First Section of theTokyo Stock Exchange

Customer needs

Company B, which became a group subsidiary through an M&A,
would like to raise the level of its governance, accounting and payroll
processing operations to the level of its parent company, Company
A, as soon as possible. Payroll processing is especially urgent.

Suggestedsolutions

Six months after the announcement that Company B would becomea subsidiary, and two months after we were consulted, we were
entrusted to process and send statements for payroll as well associal and labor insurance for regular employees and about 150
branch sales representatives (part-time).

Number of employees:
Approx. 2,000 people
Number of business sites:
Approx. 350 sites

Advertising agency
business
Unlisted

Solutions

A company would like to consider outsourcing the entry of journals
into accounting software at all 15 facilities that it operates in order toCustomer needs avoid the individualization of each facility and to reduce the burdenof handover.

Number of employees:
Approx. 1,600 people
Number of business sites:
6 sites

Transportation
business
the First Section of theTokyo Stock Exchange

Number of employees:
Approx. 14,000 people
Number of business sites:
Approx. 70 sites

Suggestedsolutions

We were entrusted to shorten the delivery time required by theclients by utilizing MerryBiz’s remote workers. The work started
at one facility and is scheduled to be expanded to 15 facilities insuccessive order.

Customer needs

A company introduced the Fuyo Lease Group’s “FLOW Cube +” toadapt to IFRS 16 (the International Financial Reporting Standards/
New Lease Standards), and the company would like to secureresources to cover the enormous amount of temporary contract
posting work that occurred when the introduction was made.

Suggestedsolutions

We successfully digitized 500 contracts in 10 business days byposting import definition information for basic contract information
into a spreadsheet program.

Our company and group companies are working closely together
to maximize the synergies of the Group and further improvecustomer satisfaction. By standardizing common operations
within the Group and introducing AI-OCR*, we are able to improve
productivity, reduce costs and shorten delivery times. We also

Business continuity
Strengthening
functions

Boost efficiency
Avoiding
individualization
Strengthening
functions

IFRS 16 support
Asset management
Digitization

provide highly satisfactory BPO services that meet a wide range ofneeds by proposing optimal solutions that combine the functions
and strengths of each company.
*AI-OCR is the application of AI technology to OCR, which is the process of reading
handwritten documents or forms and converting them into data.

BPO Service Lineup
General Affairs

Accounting & Finance

IT Systems

Bill Aggregation INV

Office Concierge

General Accounting

NOC

NOC/MB

Vehicle Management
FAL

Accounting Services(Accounts Payable to Payments)
ACR

IT Services /IT Specialist Placement
NOC

Full-out LCM services
NOC/YRL/FNET

Money Collection

RPA Services

SFC

NOC

Human Resources

Sales Administration

Payroll Accounting

Sales Administration Services

NOC

NOC

Attendance Management
NOC

Human Resource
Management
NOC

FGL
FAL

Fuyo General Lease Co., Ltd.
Fuyo Auto Lease Co., Ltd.

ACR

Sharp Finance Co., Ltd.
Accretive Co., Ltd.

INVINVOICE Inc.

SFC

NOC NOC Outsourcing &Consulting Inc.

Achieving Customer Satisfaction through BPO Services That Unite the Group’s Collective Strengths
T h e G ro u p c u r re n t l y p ro v i d e s B P O s e r v i c e s u s i n g a t o t a lo f e i g h t g ro u p c o m p a n i e s . I N V O I C E p ro v i d e s s e r v i c e s f o r
general affairs divisions, such as an integrated billing service
for telecommunications as well as public utilities charges, andAccretive, as a provider of services for accounting and financedivisions, excels at payment services from accounts payable forretailers that open multiple branches. Furthermore, these andother companies such as Sharp Finance, which provides collection
agency services, and MerryBiz, which provides “virtual accounting
assistants” using remote staff, are key to the Group’s BPO offerings.
At MerryBiz, they have approximately 800 remote staff members
performing accounting services online, and the majority of thesestaff members are housewives from across Japan. By using a way ofworking that offers flexibility in terms of location and hours, MerryBiz
creates employment opportunities for remote staff and contributes

to addressing the social issue of labor shortages.
In August 2019, NOC Outsourcing & Consulting, which covers
information systems, human resources, and sales administration,joined the Group as a comprehensive BPO service. As a result, wehave been able to further advance the visualization of operations
as well as administrative work, thus allowing us to provide specificsolutions to issues that have been identified.
There is more than one path for companies to improve businessefficiency. For example, it may be best to outsource through a BPO
service, or it may be better to move forward with insourcing (inhouse production) by utilizing RPA (robotic process automation), etc.
The greatest strengths of the Group’s BPO services are that they
offer multiple solutions to meet the needs of customers, even if theobjectives are the same, and that they all work together to create
optimal solutions.

Asset Management(Goods Management / Accounting Treatment) FGL

FNET Fuyo Network Service Co., Ltd.
YRLMBGeneral Manager,
BPO Service Promotion Division

Koji Yamamoto

Yokogawa Rental & Lease
Co., Ltd.
MerryBiz Inc.

In recent years, we have realized as a result of the consultations that we have received that there has beena change in the issues that customers face. In the past, there were many requests to improve businessefficiency and reduce costs. However, in recent years, there has been an increase in requests with theobjective of business continuity or to strengthen the functions of a business due to difficulty in hiring fromthe overall labor market shrinking as well as a shortage of human resources, to avoid personnel that are
not a good match after recruitment, and to prevent delays in legal compliance. As a result, we feel that
there are increasing expectations for our BPO services.
We also receive an increasing number of inquiries as part of company-wide BCP (Business ContinuityPlan) measures to address needs for the decentralization of operations and the creation of remoteenvironments in preparation for the transition to the age of the New Normal. NOC Outsourcing &Consulting provides IT outsourcing services that make use of the Tokyo Metropolitan Government
Business Continuity Emergency Measures (Telecommuting) Grant. It also assists clients who have alreadyentrusted it to carry out payroll processing to prepare payment application documents for the employment
adjustment subsidy in an effort to respond quickly to new needs.
Under the slogan “BPO services to resolve issues arising from there being ‘not enough people or notenough time’ or just ‘not enough,’ we provides comprehensive BPO services with the aim of being a
reliable and flexible partner that solves issues when customers feel that what they have is “not enough.”

25

Special Feature 4 Mobility BusinessFuyo Lease Group Integrated Report 2020

26

SpecialFeatureStrategic Vision

Supporting the Resolution of Challenges in the Vehicle and Logistics Industry by Providing a Wide Range of Solutions

Targets

4

Overview of Mobility Business by the Fuyo Lease Group

Automobiles

Mobility Business

Creating New Businesses
That Capture Mobility Innovation andContributing to the Resolution of Challenges
in the Logistics Mobility Field

Transportation(ex. Yamato Group)

Distribution facilities

Managing Executive Officer

Hiroaki Oda

Building leases

Services(warehouses anddistribution centers)

Equipment leases(automatic warehouses, etc.)

Leasing of material
handling equipment
Pacific Rim Capital

Distribution Facilities
sharing

Warehouses

Small and medium
enterprises

Large enterprises

Relevant facilities andservices

Automobiles and trucks

Streamlining andautomation of
warehouse operations

Streamlining of
peripheral operations

Leasing of renewableenergy and energysaving facilities

Vehicle leases

Investment in logisticsrelated venture funds

Outsourcing of vehicle
management services

Palletization

Contracting of accounting andsettlement work

Fuyo Auto Lease

Leasing and reuse ofrechargeable batteries

Truck leasing

Renewable electricity
supplyLeasing of construction machineryand transportation vehicles

RFID (freight tracking)Truck leasing and rental

YAMATO LEASE

Nakamichi Leasing

TDF Group

MerryBiz

Materials handlingequipment (forklifts,
picking equipment, etc.)
Powered exoskeletons,
etc.

Comprehensive BPO
NOCAI and data utilization(streamlining distribution
routes)Challenges Facing the Industry and How the Fuyo Lease Group Will Respond
The automobile industry is entering a once-in-a-century periodof great change due to CASE*1 technological innovations and theprogress of MaaS*2 that connects means of transportation with IT.
In the logistics industry, many social issues have become apparent,
including an increase in the volume of cargo being handled due tothe expansion of the e-commerce market, shortages and aging oftruck drivers, and work-style reform in response to the reduction oflong working hours. Transportation and postal services are important
industries accounting for approximately 5% of Japan’s GDP and,because logistics costs paid by companies amount to approximately
5% of sales, the benefits of improvement are considered tobe substantial. Responding to these large-scale changes inindustry and social issues is essential to the sustainable growth ofcompanies, making it an urgent issue for many companies.
The Group has expanded its auto leasing business mainly with
Fuyo Auto Lease, which provides comprehensive support for
automotive operations. However, in order to approach the challenges
faced by the automobile and logistics industries in a period of
historical change, it is necessary to rebuild the existing auto leasing
business and strengthen the logistics mobility field, which promotes
linkage of logistics data and commercial distribution data as well as
automation of logistics functions. To achieve this, we established our
Mobility Business Promotion Division in April 2020. At the same time,
we redefined our auto leasing business as the Mobility Business,and then positioned it as a strategic area to lay the groundwork forconcentrating management resources.

Our Strategic Vision for Future Business Development and Mobility BusinessWe have positioned the Mobility Business as the New Domains inwhich new growth is expected even in strategic areas, and we aim
to expand our business scope to include various businesses thatare relevant to the logistics mobility field such as logistics, vehicles,
and warehouses. The Group’s strengths lie in high-quality solutions,as well as a wide-ranging domestic and overseas network. These
strengths will be our driving force to promote the expansion of ourbusiness scope, and they will also support the resolution of allissues that face the automotive and logistics industries. Specifically,
we will prepare a variety of services in five categories: “distribution
facilities,” “relevant facilities and services,” “automobiles andtrucks,” “streamlining and automation of warehouse operations,”
and “streamlining of peripheral operations” for targets such as
automobiles, transportation, and warehouses.
In addition, the Group aims to expand business opportunities
through the horizontal integration of business activities andinformation such as the leasing of warehouse buildings andwarehouse equipment. The Group will share knowhow fromoverseas group companies including TDF Group Inc., which is
involved in pickup-truck rental, leasing and sales business in North
America, and Pacific Rim Capital, Inc., which is involved in operatingleases of material handling equipment mainly in the United States.
In addition to sharing this knowhow with the entire Group, we will

also work to create business synergies by further strengthening
relationships with companies including Nakamichi Leasing Co.,
Ltd., which has strength in leasing construction machinery andtransportation vehicles.

Creating Business Synergies with the Yamato GroupTo expand our mobility business, in April 2020 YAMATO LEASE
joined the Group as a joint enterprise with Yamato Holdings.
YAMATO LEASE provides financing services mainly focused ontruck leasing for transport companies, a used-truck matching
application called “Tora-Machi,” and business succession
support services, as well as other services. YAMATO LEASE
has a customer base of about 3,000 companies specializing in
the logistics industry, making it a company with strengths unlike
any other within the Group. Additionally, YAMATO LEASE excels
at proposal-based sales that resolve management issues facedby transportation companies and, as a result, the company has
captured a fixed market share in the truck leasing market.
D ue to the dive rsif ic ation of logistic s ne eds and othe rfactors, the demand for truck leasing is solid and is expected tocontinue growing. The Group’s services and knowhow include
comprehensive vehicle-related support services, asset managementfor distribution facilities, as well as BPO services. By providing these
services and knowhow to various transportation enterprises through
YAMATO LEASE, we are committed to creating business synergies
with YAMATO LEASE and expanding our business.
In addition to the YAMATO LEASE joint enterprise, the Groupand Yamato Holdings have started discussions on the creationof business synergies and the possibility of further businesscollaboration based on the provision and utilization of our respective
management resources and strengths. In order to increase thevalue of YAMATO LEASE, which has strong connections with small
and medium-sized transportation enterprises, we will continue toactively collaborate with the industry leader, the Yamato Group,
and implement concrete strategies.

A used-truck matching application called “Tora-Machi” offered by YAMATO LEASE

Creating New Businesses in the Mobility Business Field
In order to further invigorate the logistics mobility field, we
will engage in new business with a variety of companies. For
freight owners and transportation enterprises, we will provide
solutions utilizing digital technology to improve the efficiency oflogistics through joint transportation, consolidated distribution,and the optimization of transportation routes. Also, in addition
to proposing improvements in the efficiency of logistics throughbusiness matching with e-commerce businesses and building
new mobility services through collaboration with companies
From left, Hideki Yamada, President & Chief Executive Officer, Fuyo Auto Lease Co., Ltd.
Naomi Ogata, President & Chief Executive Officer, YAMATO LEASE CO., LTD.
Shinji Sasakura, General Manager, Mobility Business Promotion Division, Fuyo General
Lease Co., Ltd.

that are members of “MONET Consortium”*3, we will engage inthe development of efforts such as business partnerships withpartner companies and support for venture companies.
The Group aims to become the leasing company that is “No.
1 in comprehensive strength” in the logistics mobility field byfocusing management resources in response to various social
issues associated with structural changes in the logistics mobility
field and creating new value.

*1 CASE: A term that has been coined from the initial letters of four automotive trends: Connected (connected cars), Autonomous (autonomous driving), Shared & Service (shared cars and driving asa service), and Electric (electrification of vehicles).
*2 MaaS: An acronym for Mobility as a Service, which indicates the creation of services based on means of transportation (mobility).
*3 The MONET Consortium is a cross-company organization established by MONET Technologies (a joint venture between SoftBank Corp. and the Toyota Motor Corporation) to promote collaboration
between companies for the realization of MaaS.

27

Our BusinessFuyo Lease Group Integrated Report 2020

Our Business

28

10 %
21%

12 %

26 %
2017/3

Ordinary Profit

Ordinary Profit¥

31.4

billion

5%

48 %

32%

¥

44.0

At a Glance

2022/3 (Planned)

2020/3

Ordinary Profit

40%

31%

¥

billion

42 %

50.0

Trends in ordinary profit
Strategic Areas (excluding Frontiers)
Frontiers
Core Areas
Othersbillion16%
17%

Real Estate
More information: P29

Strategic Areas

Medical &WelfareMore information: P30

We offer a wide range of real estate-related financial services, including building leases, which
use fixed-term commercial leasehold contracts, and the Security Deposit System, which
reduces the cost burden on tenants who have to pay expensive security deposits.

Overseas
More information: P33

The Fuyo Lease Group provides services at a total of 12 locations in 8 overseas countries. We
will expand the know-how gained from our domestic business overseas and open new bases tosupport our customers’ overseas expansion.

We offer a wide range of one-stop services, which include leasing medical equipment, providing
advisory services related to managements, buying pre-owned medical equipment as well asfactoring for medical and nursing-care receivables.

BPO
Energy &EnvironmentMore information: P31

Aircraft
More information: P32

More information: P34

We support our clients in their use of renewable energy and energy-saving activities throughESCO services* and Green electricity supply services (PPA services). We also operate a solar
power generation business and a plant factory to contribute to solving climate change problems.

New Domains

We started our business in the early days of aircraft leases, and have created a cumulative
total of over 300 leasing projects for airlines around the world. Going forward, we will continue
to expand this business domain by promoting leases for aircraft owned by our company andproviding new aircraft-related services.

Through proactive M&A andcapital alliances, we will further
strengthen strategic areas
and build and expand new
business bases such as “BPO”
and “Mobility Business.”

By combining the collective strengths of our eight groupcompanies, we will provide high-value-added BPO services that
help to solve the chronic human resource shortages faced by
growing companies and improve operational efficiency.

More information: P35

Mobility Business
More information: P34

This domain was established in April 2020 by reorganizing the“Auto Leases” business. In addition to providing comprehensive
automotive-related support services, we will provide various
solutions for automobiles, transportation, warehouses, etc., in
response to technological innovation in logistics mobility.

* ESCO services provide everything needed to improve energy efficiency, including technology, equipment, personnel, and funding. As an ESCO service provider, we receive a portion of the actualenergy cost savings generated through the services as compensation.

Domestic
Corporate

VendorLeasesCore Areas

More information: P36

FinancingMore information: P36

More information: P36

Finance Leases

Operating Leases

Installment sales

Vendor Leases

Financing programs

Factoring

We provide finance leases where we buy
machinery or equipment the client needs
on behalf of them and rent it to them fora relatively long-term at a fixed rate.

We provide operating leases where theasset is leased at a rate calculated on
the basis of “the value of the asset minus
the residual estimated value” at the endof the lease for the asset that a customer
needs.

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
that is not suitable for leasing due to tax
reasons or simply when the client wants
to own an asset.

A vendor lease is a leasing arrangement
where we provide suppor t to thevendors of office, information, medical,
and other equipment and machinery. Byleveraging the know-how and experiencethat Sharp Finance has acquired over
the years, we provide robust support
for vendors’ sales activities at sales
locations throughout Japan.

If a client is looking to invest in equipment or
liquidate, acquire, or develop real estate, weoffer financing programs, such as nonrecourse
loans, to help fulfill their capital needs.

Factoring is a ser vice where we buy clients’accounts receivable to help them meet their
immediate cash needs. Accretive offers Flexible
Payment Ser vice ( FPS ), a factoring ser vice
for accounts receivable, and FPS Medical, afactoring service for medical and nursing-carereceivables.

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Business Segments Overview

Fuyo Lease Group Integrated Report 2020

Strategic Areas

Strategic Areas

Real Estate

Medical & Welfare

We offer a wide range of real estate-related financial services,
including building leases, which use fixed-term commercial
leasehold contracts, and the Security Deposit Depository
System, which reduces 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.

We offer a wide range of services, which include leasing medical
equipment, buying pre-owned medical equipment as well asfactoring for medical and nursing-care receivables. We meet ourclients’ needs in a timely manner by offering a range of one-stop
services.
Contributing to society and the environment (outcome)
Improving both the quantity and quality of medical, elderly nursing care,and welfare services
Helping medical institutions to achieve financial stability by meeting theirfunding needs
Disseminating advanced medical technologies

Contributing to society and the environment (outcome)
Supplying environmentally-friendly assets

Business Environment

Business Environment

Growth Opportunities

Emerging needs to utilize idle real estate
Increasing enthusiasm for investment from logistics companies due to expansion of the e-commerce market
An increase in demand for environmentally-friendly properties using environmentally efficient and sustainable building materials

Growth Opportunities

Growing need for medical services and nursing care in an aged society
Increasing needs for operating efficiency at medical institutions and nursing-care and social-welfare providers
Growing need for financing, as medical equipment employing state-of-the-art technologies for higher performance becomes more expensive
Emerging need to build the community-based integrated care system

Strategies

Diversifying channels for obtaining real estate information through alliances with financial institutions and real estate-related companies
Increasing the added value of real estate leases by providing real estate information as well as maintaining and expanding businesswith real estate leasing clients
Expanding business in real estate leases and financial services

Strategies

Focusing on advisory services for medical institutions
Maximizing synergies between group companies when buying pre-owned medical equipment, factoring, and providing BPO services
Promoting business opportunities nationwide in collaboration with local financial institutions and business partners

Challenges

Addressing downturn in the real estate market
Developing human resources with high degrees of specialization necessary for business expansion

Challenges

Lower profits from individual lease and financing services
Intensified competition in the medical and social-welfare market by new entrants

Actions

Increase levels of risk management for real estate held by the Fuyo Lease Group
Promote human resources development by e.g. providing support to employees to obtain qualifications and implementing job rotation

Actions

Improve profitability by switching to offering solutions
Differentiating from competitors by offering a broad range of one-stop services

FY 2019 Overview and Outlook1

In fiscal 2019, we focused on Fuyo Lease Group-led building leases* and closed contracts for
projects such as The Royal Park Canvas - Kyoto Nijo (tentative name) and VIA INN Nihonbashi
Ningyocho. By obtaining a large amount of real estate information through cooperation with realestate companies and actively providing this information to our clients, we were able to improve
the quality of our proposals, which greatly contributed to the acquisition of new projects. Goingforward, we will continue to bring in approximately 4,000 pieces of real estate information
annually to promote Fuyo Lease Group-led projects, with the aim of expanding business andfurther improving profitability.

Growth Strategies

Frontier Expansion 2021

In the Real Estate business, the target value for the final year of the Medium-term Management
Plan was revised upward, and the balance of operating assets was revised to 530 billion yen. In
order to achieve the new target, we will work on further collaboration with real estate companies
and the acquisition of new real estate lease clients, with the aim of expanding business andfurther improving profitability. In addition, we will establish a new organization specializing in the
management of real estate assets, increase levels of management and improve the asset valueof our real estate holdings to provide our clients with high-quality real estate assets.

(Billions of yen)

700

Operating assets

(%)

ROA

2.5

2.2
560

1.9

2.2

2.0

421.9

420

2.0

530.0

1.8
444.7

280

Growth Strategies
1.0

240.2

140

0.5

0

0
2017/3 2018/3 2019/3 2020/3 2022/3
Target Value

Selected as a Preferred Bidder for the Public Offering of the Suma Seaside
Aquarium and Seaside Park Redevelopment Project

In order to further enhance the attractiveness of Suma Seaside Aquarium and Seaside Park,
which has played a major role as a place for civic education and recreation, the Kobe-Suma
Parks + Resorts Consortium consisting of seven companies*2 including our company, submitted
a plan for the redevelopment of this area to Kobe City and was selected as a preferred bidder
in September 2019. Under the theme of A ‘Connecting’ Seaside Resort Park where the local
community and tourists interact, this project aims to improve the quality of life of the local
community and attract tourists. We are working on the redevelopment of the aquarium andseaside park by taking advantage of its potential, and we are contributing to the revitalization of
the local community in Kobe City.

In fiscal 2019, with the Healthcare Advisory Division that was newly established in April as adriving force, our company’s consulting services, which utilize our strengths in BPO services
and robotic process automation (RPA) to contribute to business improvement, expanded to
medical institutions. We also strengthened our approach to public medical institutions, suchas pharmacies on the premises of hospitals and multipurpose facilities. In the future, we aim
to increase the number of awarded contracts by promoting the development of commercial
products and services for these projects.

Operating assets for
Medical & Welfare(Billions of yen)100

In the medical business, we will expand our business domain by collaborating with highly
specialized players. We will also expand vendor lease transactions in the medical fieldand clinic assistance transactions, which provide a means of raising funds for clinicians
who own their own practices. Additionally, we will work with local financial institutions andmedical consulting companies to accumulate balances handled by FPS Medical, an early
payment service for medical and nursing-care receivables.
In the social-welfare (nursing-care) business, we aim to build a management support fundfor small and medium-sized nursing-care providers in cooperation with major nursing-careproviders, and to obtain projects related to multipurpose care facilities that were built withincommercial facilities in collaboration with real estate fund companies.

Major Achievements

Architectural rendering*2 Seven companies are THE SANKEI BUILDING Co., Ltd., GRANVISTA Hotels & Resorts Co., Ltd., Mitsubishi Logistics Corporation, JR West Real Estate & Development
Company, Takenaka Corporation, Hanshin Electric Railway Co., Ltd., and Fuyo General Lease Co., Ltd.

Frontier Expansion 2021

95.0
81.0

80

1.5

362.0

*1 Fuyo Lease Group-led leases are real estate leases arranged to match good clients (tenants) with related properties basedon real estate information provided by us.

Major Achievements

FY 2019 Overview and Outlook

Operating assets and ROA for
Real Estate leasing

74.5
66.9

66.3

60

40

20

0
2017/3 2018/3 2019/3 2020/3 2022/3
Target Value

Expanded Information Channels and Approach Tools That Serve as Links to the Medical Field

Our company became a corporate member of the Medical Management Planning Group (MMPG) in January
2020. The MMPG is a nationwide organization of tax accountants and accounting firms that specialize insupporting medical business management, and our company is the only leasing company to become amember. Through active training programs and the use of information media from the MMPG, we are gaining
knowledge in the medical field that is useful for the development of our company’s services. We also began
publishing Fuyo Medical Info, a quarterly magazine for medical institutions, to strengthen the tools that we
use to approach them. In order to help resolve more issues faced by medical institutions, we are working todisseminate information to medical professionals, focusing mostly on management.

30

31

Business Segments Overview

32

Fuyo Lease Group Integrated Report 2020

Strategic Areas

Strategic Areas

Energy & Environment

Aircraft

We will promote the expansion of renewable energy in the solar power
generation business, and support our clients in their energy-saving
activities through ESCO services*.

Since our first aircraft lease in 1978, we have created a cumulative
total of over 300 aircraft leases for airlines around the world. In
1999, we expanded into the hub of the aircraft leasing industryin Dublin. We also acquired UK-based Aircraft Leasing andManagement Limited (ALM) in 2014 with the aim of expanding ouroperations.

* ESCO services provide everything needed to improve energy efficiency, including technology, equipment, personnel,
and funding. As an ESCO service provider, we receive a portion of the actual energy cost savings generated throughthe services as compensation.

Contributing to society and the environment (outcome)Estimated CO2 reduction 70,054 t-CO2
Promoting the use of renewable energy and communicating demand voices to the market
Providing financial services to companies participating in the RE Action in supportof their renewable energy initiatives
Promoting renewable energy and energy saving
Disseminating advanced renewable energy-related technologies

Contributing to society and the environment (outcome)Transport ability of Group owned aircraft: 10 million people per year

Business Environment

Business Environment

Growth Opportunities

Enhanced social initiatives to realize a decarbonized society (e.g. SDGs, RE100)
Growing demand for solar power generation and other green energy sources
Continued energy saving needs amid rising energy costs
Increasing demand for food safety

Growth Opportunities

Expanding solar power generation business and making further contributions to local communities
Promoting decarbonization initiatives, including signing up for RE100
Promoting energy efficiency through ESCO services
Establishing the Agri Business Promotion Office and constructing a plant factory

Strategies

Strategies

Challenges

In the long term, an increasing need for aircraft around the world
An increasing need for renewal of aircraft with low environmental impact
An increase in leaseback transactions*1 resulting from greater demand for funds from major and blue-chip airlines*1 Leaseback transaction: A transaction in which an aircraft or other piece of property is sold to a lender, who then leases the property back to the original seller.

Steadily increasing our aircraft fleet by leveraging the know-how that we have gained from many years of aircraft leasing arrangements
Building a portfolio with lower environmental impact and greater liquidity mainly consisting of narrow-body aircraft
Promoting leaseback transactions and building relationships in response to greater demand for funds from major and blue-chip airlines

An increase in demand for environmentally efficient and friendly properties using sustainable building materials
Breaking away from the feed-in tariff (FIT*) scheme for renewable energy and building a business model that does not rely on FIT

Challenges

Sluggish demand for aviation due to the spread of COVID-19
Strengthening relationships with investors, funds, and other entities that are candidates for aircraft sales* Under the FIT scheme, payments are provided at a fixed rate for the renewable energy produced, e.g. solar energy

Actions
Actions

Promote the establishment of a system that is not overly affected by the market cycle

Developing capital and business alliances with venture companies that have new technologies
Focus on new initiatives toward a post-FIT era (e.g. PPA services, storage battery-related businesses)

FY 2019 Overview and Outlook

35

Operating assets

Frontier Expansion 2021

With a view to turning renewable energy into the main power source, we will not only
generate and sell electricity, but we will also promote initiatives related to the storageof electricity (storage batteries). For businesses that utilize storage batteries, we will
collaborate with venture companies that we have invested in to explore new services
utilizing reuse as well as power supply/demand adjustment technologies, and to participatein overseas businesses. We will also engage in a wide range of power generation projects
that use not only solar power but also hydropower, wind power, biomass, and geothermal
power, with the aim of further building up renewable energy sources.

Major Achievements

10.0

34.0
27.9

28
6.1

21

14

8.0

26.0

6.0

19.7
6.0
5.1
4.4

4.8

4.0

7

2.0

0

0
2017/3 2018/3 2019/3 2020/3 2022/3

Operation of the World’s Largest Fully Artificial-Light Plant Factory

In July 2020, the plant factory that was being built jointly by TEPCO Energy Partner,
Incorporated and Farmship, Inc. went into operation. This factory has the world’s greatest
production capacity as a fully artificial-light plant factory, with a daily output of approximately fivetons (approximately 50,000 plants at 100 g/plant). Plant factories that entirely rely on artificial
light are attracting attention as an approach that can solve the social issues faced by Japanese
agriculture, such as a decrease in the number of farmers, the aging of farmers, and a decline
in food self-sufficiency, in addition to the risks associated with food production and distribution
due to extreme weather, unseasonable weather, and other factors.

FY 2019 Overview and Outlook

(%)

ROA

17.2

Growth Strategies*2 JOL: An abbreviation of Japanese-style operating lease. It is a means of fund management that enables investors to make planned tax payments by participating inlarge-scale aircraft leasing projects and obtaining the same effects as acquiring large-scale depreciable assets.

Operating assets and ROA forsolar power generation business(Billions of yen)In fiscal 2019, in preparation for the post-FIT era, we launched the green electricity supply
services (PPA Services) to install solar power generation systems on the roofs of our customers’facilities, and it was decided that this service would be introduced to multiple factories. In thesolar power generation business, the Group’s largest power plant, Namie Sakai Solar, started
operation in February 2020. We will continue to work on new business to promote the spread ofrenewable energy and address climate change issues.

Expand businesses through investments and joint ventures
Strengthen sales activities for JOL*2 investors in Japan and expand business partners by using the extensive network of UK-based ALM

Target Value

In fiscal 2019, we strengthened the leases for the aircraft that we own and executed seven new aircraft leasing projects. We also expanded our business
opportunities by launching a part-out business, which sells parts from retired aircraft, and a business that sells aircraft whose leases have expired. We
have also invested in an aircraft-related venture fund established by the Airbus Group to expand our business into areas surrounding aircraft.

Growth Strategies

Frontier Expansion 2021

During the period for the current Medium-term Management Plan, we
will further increase the number of aircraft that we own and incorporate
some of our capital-recycling businesses in order to achieve our
profit targets even in an unstable market environment. We will builda system that can generate stable earnings without being overly
affected by the market cycle. We will do this by promoting package(multiple aircraft) transactions with major and blue-chip airlines andcapital-recycling businesses such as the sale of aircraft whose
leases have expired. In the long term, the aircraft leasing industry
is expected to see an increase in the number of passengers andgreater demand for jetliners as a result.* We will strive to expand into
new business domains and secure profit opportunities by proactively
investing in and collaborating with businesses surrounding aircraft.
* Sourced from an IATA (International Air Transport Association) press release, dated May
13, 2020, and the JADC (Japan Aircraft Development Corporation) “Worldwide Market
Forecast” 2019–2038, dated March 2019.

Major Achievements

Operating assets and ROA for
aircraft leasing(Billions of yen)

Operating assets

1.9

2.1

1.9

(%)

(Aircraft)

2.5

50

2.0

40

ROA

300

240

Number of aircraft
owned by the Group

2.3

280.0

41
35

1.4

180

164.9

1.5

30

1.0

20

0.5

10

0

0

24

149.8
120

19

97.6
60

75.1

0
2017/3 2018/3 2019/3 2020/3 2022/3

2017/3 2018/3 2019/3 2020/3

Target Value

Investment in Aircraft Part-Out BusinessWe started working on the first project in our part-out business, which purchases and disassembles
retired aircraft and sells used parts that can be recycled and reused to global clients, including
airlines and maintenance companies, through inventory management. As an exit strategy in thevalue chain that corresponds with the lifecycle of aircraft, we can expect this business to broaden
the available options for utilizing used leased aircraft, and we will continue to work on this businessas one of our areas of growth against the backdrop of greater demand for aircraft in the long term.

Aircraft body with engine parts removed

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Business Segments Overview

Fuyo Lease Group Integrated Report 2020

Strategic Areas

34

Strategic Areas

Overseas

BPO

We aim to expand our overseas business, leveraging the networks of theFuyo Lease Group. In addition to the organic growth strategy*1 to expand andimprove overseas locations mainly in North America and Asia, we will build
up high-quality assets through the inorganic growth strategy*2 that includes
investments, acquisitions, and alliances with local companies.

We help clients achieve sustainable growth and contribute to the improvementof employee satisfaction by offering BPO services that combine the collective
strengths of the Group. BPO services are at the core of the New Domains inwhich we are actively investing management resources.
Contributing to society and the environment (outcome)*1 Organic growth means growth achieved by implementing a strategy of using our existing management resources.
*2 Inorganic growth means growth achieved by forming business alliances or engaging in business acquisitions.

Contributing to the resolution of labor shortages and the promotion of workstyle reform by providing BPO services

Business Environment

Contributing to society and the environment (outcome)GrowthProviding right-to-use and/or possessory rights to customers through leases, andoutsourcing of processes and procedures associated with ownership

Opportunities

Increasing demand amid the work-style reform due to deteriorating labor shortages, calls for equalpay for equal work and other issues
Increasing needs for the establishment of remote work environments and the reduction of theworkforce for non-core operations triggered by COVID-19
New expectations for BPO services, such as enhanced business continuity and professional services

Business Environment
Growth Opportunities

Strategies

Establishing a specialist division to spearhead BPO services
Promoting unique BPO services offered by group companies such as INVOICE, Accretive and NOC
Outsourcing & Consulting

Growing overseas financing needs as more manufacturers relocate their production bases outside JapanAn increase in the demand for sustainable energy, mainly in emerging countries
Developing the market through collaborations with local companies with high levels of expertise

Providing new employment opportunities for housewives, the elderly, and the disabled nationwide
using MerryBiz’s remote work functions

Strategies

Expanding business know-how from our domestic business to our overseas business
Strengthening overseas support capabilities by expanding our network of overseas locations
Increasing profit opportunities by obtaining the know-how of acquired companies

Challenges

Facing competition from other companies in overseas business projects
Facing competition from other finance schemes due to monetary easing implemented around the globe

Actions

Expanding overseas business domains by leveraging our know-how in the areas of Real Estate and Energy & Environment
Financial support for green energy projects by Japanese companies overseas
Promoting M&A and capital alliances that contribute to the expansion of overseas business

Growth Strategies

Frontier Expansion 2021

In order to increase profits through organic growth, we will take the know-how that wehave cultivated in the businesses our company excels in, such as Real Estate and Energy& Environment, and deploy it overseas. Specifically, we will expand business in cooperation
with our business partners through overseas real estate building leases, support for
renewable energy investment by Japanese companies, and other efforts. In particular, in
the area of renewable energy, we recognize that there are areas with long-term needs inthe future, given that the entire supply chain needs to respond to international initiatives
on climate change such as RE100 and SBT*. We are also expanding our overseas networkby opening new bases in Taiwan and elsewhere to expand the scope of our support foroverseas business expansion by our business partners.
*SBT (Science Based Targets): An international initiative that requires companies to set greenhouse gas emission reduction targets
that are based on scientific evidence and consistent with the levels required by the Paris Agreement.

Major Achievements

Increased competition and intensified price competition
Differentiation from competing BPO service providers
Securing human resources engaged in BPO services

Actions

Utilize the Group’s client base (links to finance and accounting divisions) to identify BPO needs
Provide comprehensive BPO services that allow for a one-stop response to diverse client needs,
including accounting and settlements, general affairs, information systems, human resources, andsales administrations
Standardization and automation of operations through technologies such as AI

In fiscal 2019, we worked to enhance
our service lineup and strengthen client
links. In August 2019, NOC Outsourcing &Consulting joined the Group. In addition
to its existing accounting and settlement
services, the company began providing
services to improve work efficiency, suchas general affairs, information systems,
human resources, and sales administrations.
F u r t h e r m o re , M e r r y B i z , w h i c h p ro v i d e s
accounting administrative services, became
an equity-method affiliate to expand its
service lineup, and in April 2020, INVOICE
began handling the public utility chargec o l l e c t i o n s e r v i c e O n e Vo i c e . To r a i s eawareness of the Group’s BPO services,
we hold seminars and actively participate
in exhibitions. Going forward, we will use
technologies such as AI-OCR to improve
efficiency and expand our marketing
channels to offer even more solutions tocustomers.

Strategic Areas

FY 2019 Overview and Outlook
In fiscal 2019, domestic and overseas businesses cooperatively responded to the overseas
expansion and investment projects of our domestic business partners, resulting in a performanceof ¥14.4 billion from domestic and overseas collaboration among the Group. We also actively
promoted the expansion of our customer base, resulting in an increase of 24 new clients. In the
future, we will continue to provide financial support to our domestic business partners for theiroverseas expansion by leveraging our customer base, and we will aim to further expand ouroverseas business by utilizing our domestic business know-how.

Challenges

FY 2019 Overview and Outlook

Mobility Business
4

Operating assets* and ROA for
Overseas businesses(Billions of yen)

Operating assets

(%)

ROA

2.0

150
1.6

120

90

99.9

93.4

84.1

99.2

1.6
110.0
1.2

Contributing to society and the environment (outcome)Stable supply and improved efficiency of vehicle and logistics services

0.8

60

30

In addition to providing comprehensive automotive-related support services,
we provide various solutions for automobiles, transportation, warehouses andother related targets, in response to technological innovation in the logistics
mobility field. We promote the creation of new mobility businesses that go
beyond conventional frameworks by utilizing synergies generated throughcollaboration with group companies and mobility-related companies.

0.8
0.6

0.9
0.4

0.6

Business Environment
Growth00Opportunities

2017/3 2018/3 2019/3 2020/3 2022/3
Target Value*4 Investments in affiliates in overseas businesses areincluded among the operating assets of overseas
subsidiaries, excluding aircraft leasing.

Increasing demand for new mobility businesses that are represented by Mobility-as-a-Service (MaaS), etc.
An increase in the volume of cargo being handled due to the expansion of the e-commerce market
Increasing complexity of logistics needs and the sophistication of service needs

Strategies

Establishment of a new specialized department to drive mobility business
Promoting the establishment of an alliance with the Yamato Group
Utilizing the Fuyo Lease Group’s nationwide network and creating synergies with existing businesses

Challenges

Increasing price competition due to competitors lowering prices
Increasing the number of vehicles in our inventory and improving the efficiency of administrative
services for vehicles

Enhanced Collaboration with Pacific Rim Capital (PRC)

In fiscal 2018, PRC became an equity-method affiliate and joined the Group. PRC handles operating leasebusiness for material handling equipment in North America and Mexico. In fiscal 2019, we introduced
the U.S. subsidiaries of our company’s business partners to PRC, and the resulting collaboration with
the Group, which included the conclusion of multiple projects with the companies that were introduced,
contributed to the growth of PRC. By collaborating with PRC, which has a high-level of expertise, we will
expand our Japanese client base in the North America and Mexico. At the same time, we will work tobuild a revenue outside of the North America and Mexico areas by absorbing PRC’s know-how.

Increasing needs to improve operational efficiency in order to resolve the shortage of humanresources and to reduce long working hours in the logistics industry

Supporting and adapting to new technologies in the mobility field

Actions

Expanding the customer base by strengthening cooperation within the Group
Developing unique products and differentiating ourselves from competitors through collaborations
with partner companies
Collaborating with partner companies to build new mobility services, such as MONET
Promoting M&A and capital alliances with companies that excel in the mobility field
Strengthening non-asset business (fee business) initiatives

FY 2019 Overview and Outlook
In April 2020, YAMATO LEASE joined theGroup, and we established the Mobility
Business Promotion Division. Going forward,
we will integrate various solutions and theknow-how accumulated by Fuyo Auto Leaseas well as our group companies in Japanand overseas. At the same time, we will
also promote further collaboration with the
Yamato Group, including the undertakingof joint business with YAMATO LEASE.
By combining the business bases of the
Yamato Group and various solutions andthe know-how of the Fuyo Lease Group, we
will provide a wide range of products andservices that solve issues in the vehicle andlogistics industries to a wider customer base.

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Business Segments Overview

Fuyo Lease Group Integrated Report 2020

Strategic Areas

36

Core Areas

New Domains

Domestic Corporate

One of the strategic areas specified in Frontier Expansion 2021,
New Domains are collectively referred to as new businessinitiatives as well as expanding the scope of our businesses.

In addition to conventional leases, such as for information and office equipment as well as commercial facility leases, weoffer a wide range of services that include strategic financial solutions tailored to clients’ needs.

FY 2019 Overview and Outlook
FY 2019 Overview and Outlook

Growth Strategies

In fiscal 2019, we established and expanded our strategic areas BPO
and Mobility Businesses through M&A and capital alliances. With theaim of expanding into new businesses and business domains, we also
invested in R&D venture companies, such as Synspective, which sells
satellite-based observation data and provides solutions utilizing thatdata, as well as HiBot, which develops and manufactures infrastructure
inspection robots. By partnering with companies that are strong in
cutting-edge technologies like Synspective and HiBot, we aim tosolve issues of clients and provide new, high-value-added services
combined with our range of existing services.

Frontier Expansion 2021

To further strengthen our strategic areas, we will continue toengage in active M&A as well as capital and business alliances. We
will also promote initiatives that capitalize on the strengths of bothcompanies in collaboration with venture companies that we haveinvested in in the past. Furthermore, we will explore new businesses
that contribute to solving social issues through our business andexpand our business domains. We will promote inorganic growthfor social infrastructure and data businesses, and actively consider
new initiatives following the plant factory project, which aims tosolve the issues of domestic agriculture.

Major Achievements
We are working to expand our business frontiers through M&A and capital and business alliances with companies
that have unique technologies and know-how.
Investment
timingBusiness
Form

PartnerAug. 2017

Investment

Riverfield

Invested in the company, which developed Japan’s first robotic surgical assistant system.

Oct. 2017

Establishment

GAP Fund*Established Japan’s first industry-academia collaborative GAP Fund in cooperation with the Tokyo
Institute of Technology and Innovations and Future Creation Inc.

Dec. 2017

Alliance

Optical Comb

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

Feb. 2018

Investment

CREWT Medical Systems

Invested in the company, which developed “Aimo”, the world’s first headmounted visual field inspection
device.

Mar. 2018

Investment

Lily MedTech

Apr. 2018

Subsidiary

FUJITA

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

June 2018

Investment

Exergy Power Systems

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

June 2018

Investment

MerryBiz

Invested in the company, which provides accounting administrative services “virtual accounting
assistants.”

Oct. 2018

Subsidiary

INVOICEAcquired the company that provides integrated billing services as a consolidated subsidiary to expand
our services that contribute to improving our clients’ productivity.

Mar. 2019

Investment

NExT-e Solutions

Mar. 2019

Investment

Japanese Organization for
Medical Device Development

May 2019

Investment

Synspective

Aug. 2019

SubsidiaryNOC Outsourcing &Consulting

Acquired the company, which offers a broad range of outsourcing services and has high-level
consultancy functions, as a consolidated subsidiary and accelerated the expansion of BPO services.

Feb. 2020

Investment

Girasol Energy

Invested in the company, which develops maintenance management platforms for photovoltaic power
generation equipment.

Mar. 2020

Investment

HiBot

Apr. 2020

Subsidiary

YAMATO LEASE

Expanded the business domains of logistics, transportation and used vehicles through the consolidation of
the company, which mainly provides truck leasing and other financing services to transportation companies.

Apr. 2020

Investment

THINKCYTE

Invested in the company, which conducts research and development for a next-generation cell isolation
system using AI.

Description

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

Invested in the company, which provides cutting-edge battery control devices and management
systems.
Invested in the company, which provides support for the commercialization of state-of-the-art medical
technologies.
Invested in the company, which offers one-stop solutions using satellite-based observation data.

Invested in the company, which develops robotics technologies used in extreme environments forinfrastructure maintenance, piping inspections, etc.

* GAP Fund: 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.

In fiscal 2019, we worked to develop important business partners,
expand sales channels for local financial institutions, and optimize
our operational framework. We worked to strengthen client links bypromoting cross-selling of products and services that transcendbusiness boundaries in accordance with the issues faced by eachbusiness partner, and we also strengthened our foundation for futurebusiness activities. We will continue to promote cross-selling among
the Group in an effort to build and expand our customer base.

Growth Strategies

Frontier Expansion 2021

By further strengthening collaboration among strategic areas aswell as among group companies, and by providing sales activities
and services as a group, we will build a system that can flexibly
respond to the diverse needs of our business partners. In addition,
to build and expand our customer base centered on key business
partners, we will work to create projects originating from theGroup through joint businesses with customers, investment-based
businesses and solutions-based businesses.

Core Areas

Vendor Leases
As a partner to dealers of office, information, medical, and other equipment and machinery, we focus on providing
financial service solutions that help vendors sell their products. We are continually working to enhance our ability tooffer solutions, such as those designed to help companies provide services to the healthcare market, with the aim ofcreating new markets.

FY 2019 Overview and Outlook
In fiscal 2019, we expanded our vendor leasing business due to anincrease in the volume of transactions resulting from the strengtheningof highly profitable equipment leases. Furthermore, in the non-asset
business, our collection agency business and factoring business fornursing-care providers made steady progress. Going forward, we will
work to strengthen the profitability of our vendor leasing business, andwe will also aim to expand our non-asset business.

Growth Strategies

Frontier Expansion 2021

In the vendor financing business, we will strengthen profitability
to support the growth of the business by establishing clear
transaction policies for each commercial product based on
profitability and by improving the quality of operating assets. Also,in addition to collection agencies and other non-asset business,
we will create new businesses by leveraging the products andknow-how from our group companies, such as automobile leases,
and aim to further expand our earnings.

Core Areas

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

FY 2019 Overview and Outlook
As for fund investments, we restructured our portfolio to minimize
the impact caused by a deterioration in the financial markets andachieved stable earnings. In credit investments, we contributed to an
improvement in ROA by considering investments in various fields andmaking investments based on profitability. We will continue to leverage
our accumulated financial know-how to further improve profitability.

Growth Strategies

Frontier Expansion 2021

Concerning fund investments, we will continue to build aportfolio that is less susceptible to the effects of financial market
conditions through strategies such as investments in illiquid
funds. For credit investments, we will develop new investment
fields, such as overseas credit products, to achieve stableearnings.

37

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2020

Foundation for Value Creation

Environmental Management

The Fuyo Lease Group works to solve social issues through its business operations as it paves the way to asustainable society and sustainable business growth while responding to stakeholder expectations. To that end,
we see the concept of Creating Shared Value (CSV) as the foundation of our management principles, and we aim tostrengthen CSV as a long-term strategy.

Basic
Approach

Customers

as the bridge that brings us closer to stakeholders, andwe use it to ensure that we live in harmony with people
from all walks of life.

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
our customers.

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 also acquired ISO14001*1 for the Group’s
major operating sites to operate management system for continuous improvement.
*1 ISO14001 certified sites: Fuyo General Lease’s head office, Fuyo Leasing Sales, Fuyo Network Service, and FGL Group Business Service (formerly FGL Service).

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

Environmental Philosophy

Environmental Policy

The Fuyo Lease Group constantly
adopts environmentally-friendly
business practices in order torealize a sustainable society andpromotes activities to addressenvironmental issues in line with
its environmental policy.

01

02

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

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.

Industry organizations
and competitors

We work with competitors to enhance business, improve services, and share information through,for example, participation in industry associations.

04

Communities and NPO

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

05

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

National government,
administrative
authorities, etc.

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

Financial institutions

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

Employees
and their families

We strive to create a comfortable and secure workplace environment and are working towards anenvironment where all employees can find their own optimal work-life balance and enhance thequality of both life and work.

Participation in International Initiatives
Fuyo Lease signed the UN Global Compact (UNGC) in2018. The UNGC is an initiative in which companies
and organizations demonstrate responsible and creative
leadership to act as good members of society andparticipate in the creation of a global framework forthe realization of sustainable growth. Companies andorganizations that have signed the UNGC agree to andcontinue to work toward the achievement of the Ten
Principles related to protecting human rights, eliminating
unfair labor, responding to environmental issues and anticorruption.

The Global Compact Network Japan, which is the local
network of the UNGC, hosts subcommittees organizedby theme to discuss and exchange information withexperts regarding the efforts of member companies andorganizations. Since fiscal 2019, we have participated inseveral subcommittees, anduse the knowledge and bestpractices we have gained
from these subcommittees topromote sustainable businessactivities.

Providing products and services that contribute to environmental
conservation
We endeavor to provide products and services that contribute to environmental
conservation by having each Group company leverage the characteristics of theirbusiness activities.

Suppliers and partners

Natural environment

38

03

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

Contributing to the development of a recycling society
We promote the reuse and recycling of goods no longer leased, restrict thegeneration of waste, and ensure proper disposal of waste.

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

Establishing an environmental management system
We promote continuous improvement of an environmental management system andset environmental targets as we endeavor to respond to climate change, prevent
environmental pollution, and conserve biodiversity.

Long-Term Environmental Targets
The Fuyo Lease Group has set long-term environmental targets of powering its operations with 50% renewable energy
by 2030 and 100% by 2050.

Key Environmental Targets
Objectives
Climate change
initiatives

Promote energy
conservation

Scope

FY 2019 targets

Fuyo General Lease &Group companies*2

10.0% decrease from the
FY 2013 level of CO 2 emissions(t-CO2) (Scope 1& 2)

18.9% decrease fromthe FY 2013 level

10.0% decrease from the
FY 2013 level of CO2 emissions(t-CO2) (Scope 1& 2)

5.0% decrease from the
FY 2013 level of energy
consumption (kWh)6.7% decrease fromthe FY 2013 level

5.0% decrease from the
FY 2013 level of energy
consumption (kWh)10.0% decrease fromthe FY 2013 level of gasoline
and diesel consumed by company
vehicles (L)

25.5% decrease fromthe FY 2013 level

10.0% decrease fromthe FY 2013 level of gasoline
and diesel consumed by company
vehicles (L)Assess compliance withenvironmental laws andregulations

Conducted complianceassessment. No
noncompliance found

Assess compliance withenvironmental laws andregulations

Fuyo General Lease &Group companies*2

Comply with
Fuyo General Lease &environmental laws
Group companies*2
and regulations

FY 2019 result

Evaluation

FY 2020 targets

Saving theenvironment
through leasing

Fuyo General Lease

28 billion yen of assets in energyefficient and environmentallyfriendly properties* 3

33.1 billion yen

36 billion yen of assets in energyefficient and environmentallyfriendly properties*3

Contributing to
the creation of acircular society

Fuyo General Lease

More than 95% reuse and recycle
rate for returned PC

100%

100% reuse and recycle
rate for returned PC*2 Scope: all domestic locations of Fuyo General Lease and Group companies including Fuyo Auto Lease, Fuyo Network Service, Aqua Art, Fuyo Lease Sales and FGL Group Business Service(formerly FGL Service).
*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.

39

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2020

Climate Change Initiatives
Basic
Approach

Energy Conservation via Products and Services
We h a v e p a r t n e re d w i t h e n e r g y - s a v i n g e q u i p m e n t
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

At the Fuyo Lease Group, we are working to reduce greenhouse gases from our operations in response
to climate change issues. We recognize that there are business opportunities to explore due to thegrowing importance of renewable energy along with environmentally friendly products and services.
Therefore, we are promoting the businesses of renewable energy generation and energy-efficient asset
leasing as strategic areas in our Medium-term Management Plan. To counter the risk that corporate
activities could be disrupted by the destruction of social infrastructure caused by an increase in natural
disasters, we are implementing BCP measures and strengthening measures to respond to emergencies.
These activities will help mitigate climate change and also realize business growth in the Group.

we are leveraging the knowhow gained through ourpower generation business to offer a host of power
generation equipment installation plans that meet a widearray of customer needs. Those plans include everythingfrom large-scale power plants to rooftop solar panels for
distribution warehouses and other commercial facilities
as off-grid schemes for self-consumption, which are all
introduced to customers with various financing options.
(For more information, please see “Special Feature 1.
Energy & Environment” on P19,20.)

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.
Fuyo Lease is developing its business and contributing
to the promotion of renewable energy with a focus on
three pillars: “renewable energy generation business,”“promotion of renewable energy-related infrastructure,”and “investment in and commercialization support for
renewable energy-related technologies.” As an example
of “promotion of renewable energy-related infrastructure,”

issue green bonds (available only to those businesses thatare expected to improve the environment) to raise funds
from a variety of sources while promoting renewable energy.
In addition, we joined RE100, a business initiative whichaims to source 100% renewable energy to power businessactivities, as the first comprehensive leasing company inJapan. In 2019, we endorsed the Task Force on Climaterelated Financial Disclosures’ (TCFD) recommendations. Not
only does the Group make direct efforts to reduce its own
greenhouse gas emissions but also makes contributions to
reducing greenhouse gas emissions
through promoting renewable energy
by utilizing schemes of lease andfinance.

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
g i v e m o m e n t u m t o e ff o r t s t o re d u c e g re e n h o u s e g a s
emissions across the globe, renewable energy along withenvironmentally-friendly products and services are more
important than ever. The Japan Leasing Association has
formulated a voluntary low-carbon society action plan, which
Fuyo Lease has signed 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 CO 2 emissions and energy consumption, and work to
reduce power usage, as well as our company vehicles’ fuelconsumption and exhaust emissions. In 2018, we started toa portion of the actual energy cost savings generated
through the service as compensation. In addition, we
help our customers reduce costs and CO 2 emissions byintroducing various energy saving solutions tailored totheir energy usage. Examples of the solutions include
energy-saving control and operational improvement
for air-conditioning systems and LED lightings, andsubsidized leasing.

Promotion of Renewable Energy

Initiatives to Reduce Greenhouse Gas Emissions

Environmental Data
CO2 Emissions (Scope 1,2) *4 *5 /CO2 Emission Intensity

Total Energy Consumption *5

5 group companies *6
2 group companies *7
CO2 emission intensity (Right axis)

Fuyo General Lease

Electricity

2 group companies *8

City gas(t-CO2/100 millions of yen)

3,000

0.6

Gasoline, diesel(GJ)

Total Gasoline and Diesel Consumed
by Company Vehicles *5

Electricity Consumption *5
5 group companies *6

Fuyo General Lease
2 group companies *8

Energy consumption intensity (Right axis)(t-CO2)

2 group companies *7

Fuyo General Lease

Electricity consumption intensity (Right axis)

2 group companies *8(GJ/100 millions of yen)

(MWh)(kWh/100 millions of yen)

9

3,000

2,884

60,000564.30526.43439

600

5 group companies *6(kL)(L/100 millions of yen)

600

60
56.86

59.03

253

2,658

2 group companies *7

Gasoline and diesel consumption intensity (Right axis)

2,599
452

6.82

6.77

2,074

2,000
0.33

0.31

1,216
1,000

311

828

0.4

6.25

40,00036,4680.29

11,465758
686

23,061
319

328

327

0.2

20,0002,267
2924,392

34

964

927

851

20,765816

2016/32017/3

2018/3

2019/32020/3

2,000

2,083

2,201

473.61

485.75489
421.98

541

588

542

625

43.29

400

400

40

626

331

10,237304

10,526

27

28

3

1,000

200

200

20
16.56

31

21,94725,912

1,541

28,754

1,660

1,631

1,523

0
2017/3

2018/3

2019/32020/3*4 Total CO2 emissions 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 associated with electricity are calculated based on the emission factor issued by power transmission and distribution business operatorsof where our regional operations and offices are located). Fuyo General Lease and the Groups’ companies are not included in specified emitters.
*5 Data coverage: all domestic locations of Fuyo General Lease, Fuyo Auto Lease, Sharp Finance, Accretive, INVOICE, FUJITA, Fuyo Network Service, Aqua Art and FGL Group Business
Service (formerly FGL Service). Before March 2017 do not include figures of Sharp Finance and Accretive as their data collection began in fiscal 2017. Before March 2019 do not include
figures of INVOICE and FUJITA as their data collection began in fiscal 2019.

0
2017/3

2018/3

2019/3

238

15 70

13

13

15

55

55

54

47

17.88

0
2016/3

263

1,517

66

0
2016/3

296

30

15

0

0

6

5.71

2,414

26,504905

39,01938,002

5.83

178

1,271
307

2,007

1,937
0.36

0.37

40

2020/3051
2016/32017/3

2018/3

2019/3208

2020/3*6 5 group companies: all domestic locations of Fuyo Auto Lease, Fuyo Network Service, Aqua Art, Fuyo Lease Sales, and FGL Group Business Service (formerly FGL Service).
*7 2 group companies: all domestic locations of Sharp Finance and Accretive.
*8 2 group companies: all domestic locations of INVOICE and FUJITA.

041Foundation for Value Creation

Fuyo Lease Group Integrated Report 2020

Human Resource Management Strategies
for Enhancing Value

Saving the Environment through Leasing
Basic
Approach

Effectively using limited resources and reducing waste as much as possible together comprise one of themost important 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. At the same time, it aims to realize a circular economy byworking on the 3Rs (Reduce, Reuse, and Recycle) for leased assets after their leases expire.

Saving Resources and Reducing Waste through the 3Rs
Guided by our environmental policy, we actively work on
the 3Rs for leased assets once a lease ends. At the Tokyo
3R Center, which is responsible for reusing and recycling

leased assets after their leases expire, we reuse andrecycle not only items leased by our corporate group but
also used assets we have bought from other companies.

Management Act), as a waste generating business
operator, we keep close track of every piece of waste wedispose of through an electronic manifest* 9 system. We
conduct on-site inspections of waste disposal contractors
according to an annual schedule.

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

Re-leased asset
Asset
collection

Asset disposal

Leased asset remains in use

1 Reduce

Sold on the secondhand market

2 ReuseCollect parts/sell materials

3 Recycle

Valuable

Tokyo 3R Center *10

Waste*9 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 andcollect a manifest or register it to confirm proper disposal of waste.
*10 The Tokyo 3R Center gives consideration to information security as well as environmental
protection and has obtained ISO27001 certification, the world standard for information
security management systems.

Proper waste disposal /recycle

Final disposal(incineration/landfill)

Basic
Approach

In today’s society where values and needs are becoming more diverse, the Fuyo Lease Group believes
that diversity is a key growth driver. Attracting and retaining highly talented people regardless of their sex,age, and other 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 emphasis on making our company abetter workplace, so that all of our employees can realize their full potential as they hone their professional
skills. We encourage respect for human rights in accordance with international norms such as the Universal
Declaration of Human Rights, and embrace the Code of Corporate Conduct that has zero tolerance fordiscrimination on the basis of sex, nationality, race, ethnicity, religion, disability, etc.

Empowering Women in the Workplace

Appropriate Disposal of Waste
When disposing of leased assets that can no longer
be used after their leases expire, we take the utmost
care to ensure they do not pollute the environment.
Going above and beyond simply complying with the
Waste Management and Public Cleansing Act (Waste

42

4 Enhance recycling rate

5

Minimize final disposal(landfill)

We s e e e m p o w e r i n g w o m e n i n t h e w o r k p l a c e a s amanagement priority and have taken 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. We have made efforts such as strengthening
the recruitment of women, establishing clear training guidelines,
and providing female managerial candidates with careerdevelopment support. As a result, in fiscal 2019 we achieved
both of the goals that we set in 2014, which were to increase
the employment ratio of new female graduates to 30% andmake the percentage of women in managerial positions oneand-a-half times more than it was in 2014 (i.e., 40 women).
Going forward, we will further enhance our efforts in an aim
to reach our new targets for fiscal 2021, which are to achievea female employment ratio of at least 40% and to increase thepercentage of women in managerial positions to at least 30%.

Human Resources Division
General Manager,
Diversity Planning &Promotion OfficeNami Tsujimoto
Targets for FY 2021
Expand employment opportunities for women

Ratio of new female
employees hired

40% or more

Ratio of female employees
in management positions

30% or more

Activities towards Creating a Better Workplace
Working with the goal of making people's jobs more challenging
and fulfilling, we are striving to build a better working environment
where all employees can find their own optimal work-lifebalance and enhance the quality of both life and work throughmaintaining and improving their health, 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 for working parents by developing a“general employer action plan” as required by the law. Following
the special Platinum Kurumin certification received in fiscal 2017,
we joined “the Ikuboss Corporate Alliance” in fiscal 2018, which isa network of businesses seeking to develop the next generationof model leaders (“Ikuboss”). In fiscal 2019, we revised various
rules to make it easier for male employees to take childcare leave.
We have been implementing work-style reforms since fiscal
2014. Not only do we ensure legal compliance, we have alsoestablished programs such as Refresh Days (leave-workearly days) and the staggered hours program (a program
where employees can flexibly choose the start and end times
for their hours in addition to regular working hours) to revise
long working hours and to create an environment in which

employees can work according to their lifestyles regardless ofactivities, such as childcare and nursing care.
Furthermore, by having a working group that includes across-section of employees, we can create a better workplacefrom our workers' perspective. In 2017, we introduced “+Friday(Plus Friday),” a program that allows employees to choose one
Friday each month when they can leave work at 1:00 p.m., at
the recommendation of the working group.

Next-Generation Training Support Action
Plan: Stage 7 (April 2017 - March 2022)

Description

Numerical
targets• Promoting independent and active
working styles• Encouraging male employees to take a more activerole in parenting• Reducing total working hours• Offering diverse career path options• 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*11 April 2020 - March 2021 (1 year)*11 The current voluntary target and the current target of the general employer action plan
based on the Act on the Promotion of Female Participation and Career Advancement in
the Workplace is 80% (March 2022).

43

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2020

Our New Head Office That Focuses on Being a Better Workplace for Employees
In June 2020, the Fuyo Lease Group consolidated thefunctions of its head office in Kojimachi, Chiyoda-ku,
Tokyo. Along with the consolidation of our head office,
we introduced a variety of equipment that will allow
each employee to choose from various work styles
according to their circumstances. For example, we have
set up “concentration booths” that enable employees toconcentrate as they proceed with their work and, as a
general rule, we have switched employee PCs to laptops,
creating an environment in which employees may work
regardless of place. In addition, by installing large monitors in
all reception and meeting rooms, we will promote paperless,streamlined operations related to document preparation.
Further, we have set group-shared lounges, cafes, andmeeting spaces on all floors, allowing for communication fromcasual conversations to meetings beyond the boundaries of
the group companies.

LoungeBasicApproach2015/3

2016/32017/3

2018/3

2019/32020/3

94.7

100

85.7

100

-

-

Rate of paid leave taken (%)

1.1
58.5

0.8
61.9

1.0
68.9

1.9
68.0

1.9
68.4

1.8
66.3

Number of female managers(persons)

25

27

29

32

36

79

*15

Percentage of Female
Managers (%)

8.1

9.0

9.1

9.9

11.5

19.6

*15

Employment rate of thedisabled (%)

2.0

1.8

2.2

2.3

2.3

2.1

13

Turnover rate (%)*

*12 Scope: Fuyo General Lease (non-consolidated)*13 Turnover rate includes separations due to personal reasons, reaching retirementage, and other reasons including transfer. It does not include separations of reemployed workers due to the expiration of their contract terms.
*14 Due to restrictions on the number of employees coming to work in conjunction
with the spread of COVID-19, actual data on paid leave for eight Fuyo General
Lease (USA) Inc. employees is not included.

*14*15 In July 2019, our human resources system was revised to classify seniorleaders (a position equivalent to the position of section chief, of which there
were 40 as of the end of fiscal 2019) as managers. As a result, the number offemale managers and the ratio of female managers increased year on year.

Human Resource Development
At the Fuyo Lease Group, our basic hiring policy is tokeep the selection process fair, impartial, unbiased, andnondiscriminatory. We also provide opportunities for all
employees to independently achieve personal growth, while
respecting each other's personality.
In fiscal 2017, we partially revised the performance
evaluation system so that we can better understand the roles
and abilities required of each employee in evaluating theirperformance as our operations become more diverse andcomplex. To embody our corporate slogan of “Go where noone has gone before” and the core principle of the Mediumterm Management Plan, which is to move into uncharted
businesses and continue to expand frontiers, we introduced
a new scheme in fiscal 2018, under which employees areevaluated and supported in taking up challenges with thefocus on their actions. In order to firmly evaluate and support
employees who take on challenges, we present employees
who have taken on the best challenges throughout theGroup with the “Challenge of the Year” award. In addition, we
also introduced a new internal job application scheme that

2019, the “Fuyo Symphony” project was launched with theobjectives of pursuing group synergies as well as sharing theGroup’s culture, and a cross-group workshop was held inwhich approximately 2,000 Group employees participated.
By understanding and respecting each other, all group
employees are encouraged to come together as one andmove forward towards ourgoal to “Go where no one
has gone before.”Community Engagement

Employee Data *12
Retention rate of employees
after 3 years (%)

Qualification System” to further enhance employee autonomy
and revitalize the organization.
Because our employees need an encyclopedic knowledgeof laws, taxes, accounting, finance, products, industry
trends, and more, we are focusing on equipping employeeswith top-notch professional skills. We value employees’
pursuit of professionality and willingness to develop theirunique skills, and, to this end, we provide employees withpractical on-the-job training (OJT) at their workplaces, aswell as off-the-job training (Off-JT), including group training
and personal development support. In addition, in March

44

encourages employees to engage in personal development
and improvement of their skills. Under the scheme, a totalof seven job openings were posted for positions of sales
department/ branch managers, the head of an affiliatedcompany, positions in strategic areas such as Real Estate,
Medical & Welfare and Energy & Environment, positions in thecredit department, and administrative positions responsiblefor BCP.
In fiscal 2019, our human resources system was revised tochange positions that had previously been divided into “generalstaff” and “managerial career track” to “operations staff” and“managerial career track.” Additionally, employees who havebeen classed in both types of management positions after theskill development period are also unified under the “key career
track” without having to divide their work areas. At the sametime, the “key career track” will not only serve as a role model
centered on generalists but also as a dual-track frameworkin which the activities of highly specialized human resources
can be evaluated through the creation of specialist positions.
In fiscal 2019, we also established a new “Internal Coaching

Recognizing close ties with its neighbors, the Fuyo Lease Group hopes to grow together with them,while being a good corporate citizen who contributes to the development of local communities. The
Group has formulated a CSR policy and is conducting CSR activities that make best use of its knowhow, products, and services focusing on the environment, community engagement, academia andresearch, and assistance to disaster-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, along with students at Tokyo
Communication Arts who are aiming to be aquarists, tocreate interior aquarium designs and decorations, some ofwhich are displayed at commercial facilities.
In fiscal 2019, which is the eighth time, we hosted an
exhibition jointly with Tokyo Dome Hotel. A selection of thesix aquariums were displayed in the lobby and elsewherein the hotel during the special event that ran from July 25
through August 5.
We also donate (rent out for free) “AQUA ART” interioraquariums to nursery schools and maternal and child living
support facilities with the hope of showing tropical fish tochildren in urban areas and the desire to bring smiles andcomfort to children with aquariums.
Every summer vacation, we hold visiting lectures asenvironmental education activities for children to make theStudents from a creation team and their work exhibited at the hotel lobby

Aqua Art Co., Ltd.
President & Chief Executive Officer

Yukari Ueno
recipients of our donations happier. Children who regularly
come into contact with AQUA ART are fascinated by the
habits and characteristics of the tropical fish. Learning
about the ecosystem and other topics through quizzes andamusement events that follow always come with many smiles
and cheers. In fiscal 2019, students from Tokyo Metropolitan
Kogei High School participated in a visiting lecture as ahands-on activity in their Humans Society course, which is apart of the Tokyo metropolitan high school curriculum, andwe had a great time in the class together.

Children cheerfully responding during a visiting lecture45

Board Members

Board Members

Fuyo Lease Group Integrated Report 202046

As of June 23, 2020

Directors

Auditors

Takashi Sato

Yasunori Tsujita

Shozo Kazama

Soichi Hosoi

Shigeru Suda

Yoshito Tsuruta

Director and Chairman

President and Chief Executive Officer

Director and Deputy President

Senior Managing Director

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Apr. 1983 Joined The Fuji Bank, Limited
Apr. 2013 Executive Officer, General Manager
of Financial Planning Division ofMizuho Financial Group, Inc. (retired

Apr. 1981 Joined the Company
Aug. 1999 General Manager of International
DivisionMar. 2009 General Manager of Internal Audit
Division
June 2017 Full-time Audit & Supervisory Board
Member of the Company
To present

Sep. 1988 Joined the Company
Apr. 2008 General Manager of Finance Division
Apr. 2015 Executive Officer, General Manager
of Finance Division
June 2020 Full-time Audit & Supervisory Board
Member of the Company
To present(Representative Director)

Apr. 1977 Joined The Fuji Bank, Limited.
Mar. 2006 Managing Executive Officer ofMizuho Corporate Bank, Ltd. (retired
in March 2009)

May 2009 Deputy President and Executive Officerof the Company

June 2009 Director and Deputy President
Deputy President and Executive
Officer Representative Director(current position)

Nov. 2009 President and Chief Executive
OfficerPresident and Executive Officer
Apr. 2016 Director and Chairman
To present(Representative Director)(Representative Director)

Apr. 1981 Joined The Fuji Bank, Limited
June 2013 Deputy President-Executive Officer,
Member of the Board of Directors(Representative Director) of Mizuho
Financial Group, Inc. (until June 2014)
Nov. 2013 Deputy President-Executive Officer,
Member of the Board of Directors ofMizuho Bank, Ltd. (until March 2015)
June 2014 Member of the Board of Directors
and Deputy President & Executive
Officer (Representative Executive
Officer) of Mizuho Financial Group,
Inc. (until March 2015)
Apr. 2015 Member of the Board of Directors

Apr. 1979 Joined The Fuji Bank, Limited
Mar. 2006 Executive Officer, General Managerof Shinbashi Branch of Mizuho
Bank, Ltd.
Apr. 2009 Managing Executive Officer, General
Manager of Business Unit of Mizuho
Research Institute Ltd.

(retired in June 2015)

May 2015 Deputy President and Executive
Officer of the Company
June 2015 Director and Deputy President
Deputy President and Executive
Officer Representative Director(retired in April 2010)

May 2010 Senior Managing Executive Officerof the Company
June 2010 Senior Managing Director andSenior Managing Executive Officer
Apr. 2014 Representative Director (current
position)

Apr. 2018 Director and Deputy President
Deputy President and Executive
Officer
To present

in April 2014)

Executive Officer, General Manager
of Financial Planning Division ofMizuho Bank, Ltd. (retired in April 2014)
Executive Officer, General Manager
of Financial Planning Division ofMizuho Corporate Bank, Ltd. (until
July 2013)

Apr. 2014 Managing Executive Officer of theCompany
June 2014 Managing Director and Managing
Executive Officer
Apr. 2020 Senior Managing Director andSenior Managing Executive Officer
To present(current position)

Apr. 2016 President and Chief Executive Officer
President and Executive Officer
To present

Keiji Takada
Senior Managing Director

Seiichi Isshiki
Director Outside

Independent

Hideo Ichikawa
Director Outside

Independent

Masayuki Yamamura
Director Outside

Independent

Teruhiko Numano

Yoshihiro Jinnai

Audit & Supervisory Board Member

Audit & Supervisory Board Member

OutsideApr. 1984 Joined The Fuji Bank, Limited.
May 2010 General Manager of Corporate Banking
Division No.13 of Mizuho Corporate
Bank, Ltd. (retired in March 2012)
Apr. 2012 General Manager of Corporate
Business Division of the Company
Apr. 2014 Executive Officer, General Manager
of Corporate Business Division
Apr. 2016 Managing Executive Officer
Apr. 2020 Senior Managing Executive Officer
June 2020 Senior Managing Director andSenior Managing Executive Officer
To present

Apr. 1972 Joined Nippon Oil Corporation
June 2012 Representative Director, Presidentof JX Nippon Oil & Energy
Corporation
Director of JX Holdings, Inc.
June 2014 Advisor of JX Nippon Oil & Energy
Corporation (currently ENEOS
Corporation) (retired in June 2016)

June 2015 Director of the Company
To present

Apr. 1975 Joined Showa Denko K.K.
Jan. 2011 Representative Director, President,
Corporate Officer and Chief
Executive Officer (CEO)Jan. 2017 Representative Director, Chairmanof the Board (current position)
June 2018 Director of the Company
Mar. 2020 Director, Chairman of the Board ofShowa Denko K.K. (current position)
To present

Apr. 1978 Joined Nippon Telegraph andTelephone Public Corporation
June 2008 Executive Vice President, General
Manager of Tokyo Branch of
NIPPON TELEGRAPH AND
TELEPHONE EAST CORPORATION
June 2009 Executive Vice President, Senior
Executive Manager of Network
Business Headquarters
June 2012 President, Representative Director
June 2018
June 2018 Counselor to the President (current
position)

June 2019 Director of the Company
To present

Independent

Apr. 1973 Registered as attorney-atlaw Assistant professor, Nihon
University College of Law
July 2003 Trustee of Nihon University, and Deanof Nihon University College of Law
June 2005 Outside Audit & Supervisory Board
Member of the Company
To present
Sep. 2005 Vice-President of Nihon University,and Dean of Nihon University
College of Law
July 2006 Vice-President of Nihon University
Aug. 2006 Retired from the position as VicePresident of Nihon University
Apr. 2011 Retired from professorship at Nihon
University College of Law

OutsideIndependentOct. 1978 Joined The Yasuda Fire andMarine Insurance Co., Ltd.
Apr. 2010 Associate Director, General Manager,
1st Production Department of
Sompo Japan Insurance Inc.
Apr. 2011 Executive Officer, General Manager,
Hokkaido Regional Headquarters
Apr. 2012 Managing Executive Officer, General
Manager, Hokkaido Regional
Headquarters
Mar. 2013 Retired from the position as
Managing Executive Officer
June 2013 President, Japan Audatex Co. Ltd.
(Currently Cognivision Inc.) (retired inJune 2017)

June 2017 Outside Audit & Supervisory Board
Member of the Company
To present

47

Corporate GovernanceFuyo Lease Group Integrated Report 2020

Corporate GovernanceYear

Our Approach to 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 objective of corporate
governance is to perform business activities with sincerity andfairness 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 align with the purpose
and spirit of the Japan’s Corporate Governance Code. These
Guidelines serve as the foundation for our corporate governanceframework, operating policies and other management policies,
to which we adhere in everything we do.

Initiative

Objective

2008

Introduced per formance-based
compensation and stock compensation
type stock options

To s tre n g th e n l i n k s b e t we e ndirectors’ remuneration and their
per formance and shareholder
value

2011

Reduced the term of office of a director
from two years to one year

To increase opportunities to build
shareholder confidence

Increased the number of independent
outside directors from one to two

To strengthen the management
oversight structure

Established the Corporate Governance
Guidelines

To c o m p l y w i t h t h e J a p a n’s
Corporate Governance CodeSet up the Nomination and Compensation
Advisory Committee

To ensure independence andobjectivity in the decision-making
p ro c e s s fo r m a t te r s s u c h a s
appointments and remuneration

Started analyzing and evaluating theoverall effectiveness of the Board of
Directors

To verify the effectiveness of theroles and functions of the Boardof Directors and to make ongoing
improvements

Increased the number of independent
outside directors from two to three

To strengthen the management
oversight structure

Introduced a stock compensation plan
(Board Benefit Trust, BBT)
T h e b a s e i n d ex fo r c a l c u l ati o n ofperformance-based compensation waschanged to key performance indicators
for the Medium-term Management Plan
(operating assets, ordinary profit, and
ROA on a consolidated basis)
Revised Corporate Governance
Guidelines

To s t r e n g t h e n l i n k s a m o n g
t h e d i r e c to r s’ r e m u n e r a t i o n,shareholder value, andachievement status of the Mediumterm Management Plan
To comply with the revised Japan’s
Corporate Governance Code

2015

2016

Corporate Governance Structure

2018

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, we haveadopted the executive officer system.

Strengthening Corporate GovernanceFuyo Lease has implemented various initiatives aimed atstrengthening corporate governance.

2019

Disclosed an English version of the
Corporate Governance Report
Began reporting annual internal audit
results and annual plans and policies tothe Board of Directors

To enhance external disclosure
related to corporate governanceTo expand repor ting lines forinternal audits

Establishment of the Corporate Governance
Guidelines
In conformity with the purpose and spirit of the JapaneseCorporate Governance Code, Fuyo Lease has established
our own Corporate Governance Guidelines, which provide afoundation for corporate governance framework, operating
policies, etc. The Corporate Governance Guidelines set out

the framework, operating policies, roles, and responsibilities
of different supervisory and executive functions, in addition
to our basic approach to corporate governance. To achievesustainable growth and increase our corporate value overthe medium to long term, we adhere to these guidelines ineverything we do across the Fuyo Lease Group.

Board of Directors
The Board of Directors consists of eight directors, including
f i ve insid e dire ctor s a nd thre e ind e p e nd e nt ou tsid e
directors, with independent outside directors accounting
for more than 1/3 of the Board of Directors. The Board of
Directors deliberates and makes decisions on importantmanagement issues, as well as matters specified in laws
and regulations, the Ar ticles of Incorporation, and theRegulations governing the Board of Directors. The Boardof Directors also oversees the execution of operations by
Directors and Executive Officers.
In fiscal 2019, the Board of Directors met 11 times.

Nomination and Compensation Advisory Committee
Fuyo Lease has set up the Nomination and Compensation
Advisory Committee as an advisory body of the Board of
Directors in order to eliminate arbitrariness in decision-making
processes and to 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 nominating or
removing of candidates for directors and corporate auditors,
remuneration of directors, succession planning, and analysis
and evaluations of the overall effectiveness of the Board of
Directors, and reports its findings to the Board of Directors.
In f isc a l 2019, the Nomination a nd C omp e ns ation
Advisory Committee met three times.

Board of Corporate Auditors
Our Board of Corporate Auditors is composed of four
auditors, including two full-time and two part-time auditors
who are also independent outside corporate 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. At therequest of the corporate auditors, an employee (a staff
member from the Internal Audit Division) has been appointed
to assist them.
In fiscal 2019, the Board of Corporate Auditors met 10 times.

Executive Committee
The E xecutive Commit tee is composed of E xecutive
Officers with positions of managing executive officer orhigher, the heads of the Corporate Planning Division,
Human Resources Division, and Business Planning &Promotion Division as well as the presidents of affiliatedcompanies. Full-time corporate auditors also at tend
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 2019, the Executive Committee met 19 times.

Corporate Governance Structure
General Meeting of Shareholders
Appointment andDismissal

Appointment andDismissal

Attendance at Board and Committee meetings (attendance in FY 2019 by board members, as of June 23, 2020)

Appointment and Dismissal

Name(Cooperation)

Board of Corporate Auditors:
4 corporate auditors (including

Audit

2 independent outside corporate auditors)(Cooperation)

ReportAccounting Auditor(Cooperation)

Internal Audit Division

Board of Directors: 8 directors(including 3 independent outside directors)

ReportReportOversight

Recommendation

Approval

President & CEO

Nomination and Compensation
Advisory Committee: 4 members

Compliance Committee

Approval of plans and policies

Financial
audit

Internal audit

Control

Executive
Committee

Implementing andadvocating programs

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

Attendance at Board meetings
Board of Directors: 11/11

Yasunori Tsujita

President and Chief Executive Officer (Representative
Director), Chairman of the Nomination andCompensation Advisory Committee

Board of Directors: 11/11

Shozo Kazama

Director and Deputy President (Representative Director)

Board of Directors: 11/11

Soichi Hosoi

Senior Managing Director

Board of Directors: 11/11

Keiji Takada

Senior Managing Director- (Elected in June 23, 2020)

Seiichi Isshiki

Director (Independent Outside Director), Member of theNomination and Compensation Advisory Committee

Board of Directors: 11/11

Nomination and Remuneration Advisory Committee: 3/3

Hideo Ichikawa

Director (Independent Outside Director), Member of theNomination and Compensation Advisory Committee

Board of Directors: 11/11

Nomination and Compensation Advisory Committee: 3/3

Masayuki Yamamura

Director (Independent Outside Director), Member of theNomination and Compensation Advisory Committee

Board of Directors: 9/9

Nomination and Remuneration Advisory Committee: 1/1(Elected in June 21, 2019)
Board of Corporate Auditors: 10/10(including 3 independent outside directors)

Planning and reportingon programs

Position
Director and Chairman (Representative Director)

Takashi Sato

Consultation

48

Nomination and Remuneration Advisory Committee: 3/3

Shigeru Suda

Full-time Audit & Supervisory Board Member

Board of Directors: 11/11

Yoshito Tsuruta

Full-time Audit & Supervisory Board Member- (Elected in June 23, 2020)

Teruhiko Numano

Outside Audit & Supervisory Board Member(Independent Director)

Board of Directors: 8/11

Board of Corporate Auditors: 9/10

Yoshihiro Jinnai

Outside Audit & Supervisory Board Member(Independent Director)

Board of Directors: 11/11

Board of Corporate Auditors: 10/10

49

Corporate GovernanceFuyo Lease Group Integrated Report 2020

Compliance Committee
Fuyo Lease has set up a Compliance Committee chairedby the Chief Compliance Officer and vice chaired by
the Legal and Compliance Division officer. The heads of
relevant planning and administrative departments, theheads of relevant departments of domestic and overseas
subsidiaries serve as full-time committee members,
and outside lawyers serve as outside members. The
Compliance Committee meets quarterly to discuss
issues related to compliance systems and implementing
annual compliance plans. Based on its discussions theCommittee submits reports to the Board of Directors andthe Executive Committee, and takes measures to develop
and enhance compliance systems.

Internal Audit
T h e i n t e r n a l a u d i t f u n c t i o n i s a d m i n i s t e re d b y t h e
Internal Audit Division (staffed by seven 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 andthe Executive Committee.

Analysis and Evaluation of the Effectiveness of
the Board of Directors
At Fuyo Lease, we analyze and evaluate the overall
effectiveness of the Board of Directors every year. The Board of
Directors makes further efforts to enhance its functions in thelight of the results of the analysis and evaluation with the aim ofcontinually improving its effectiveness.
The results of the analysis and evaluation for fiscal 2019are as follows.

Evaluation method
We conducted a questionnaire survey among all Directors andcorporate auditors, as well as interviews with them on an asneeded basis. Following the discussions and recommendations
by the Nomination and Compensation Advisory Committee,
which consists mainly of independent outside directors andassisted by the corporate lawyer, the Board of Directors carriedout the analysis and evaluation of 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 muststill steadily implement measures to improve the functions of
the Board of Directors, make those activities part of our daily
operations, and continually review the Board’s functions.
Progress on issue identified last fiscal year
“Further enhancing the provision of information to outside
directors” was one of the issues identified last fiscal year.
Regarding this, while expanding information on subsidiaries inmanagement reports, the presidents of important subsidiaries
directly reported on business conditions, etc., and also key
discussion points at the Executive Committee, as well as themeeting minutes, were provided.
The other issue was “expanding viewpoints and perspectives,and narrowing down discussion points in deliberations by the
Board of Directors.” Regarding this, in addition to establishing
reports on the progress and risks of plans in each strategicarea in the Medium-term Management Plan, it was confirmedthat the effectiveness of the proposal was improved by sharing
the points of discussion concerning the agenda items at theoutside directors briefing session with all internal directors.
Newly identified issues
We recognized the need to reflect the viewpoints of CSV (Creating
Shared Value) and ESG (Environment, Social, and Governance) inthe deliberations of the Board of Directors and continue tofurther invigorate discussions at the Board of Directors andenhance the provision of information to outside directors.

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

Reason for appointment

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
upon his extensive experience and wealth of knowledge.

Hideo
Ichikawa

Currently serving as representative director and president, chief executive officer, representative director and chairman of the board,
director, chairman of the board of Showa Denko K.K., Hideo Ichikawa has years of experience in corporate management. We
believe that he will help enhance the effectiveness of 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.

Masayuki
Yamamura

Masayuki Yamamura has served as president of Nippon Telegraph and Telephone East Corporation and chairman of a generalincorporated association, and we believe that he will help enhance the effectiveness of the decision-making and oversightfunctions 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, Yoshihiro
Jinnai should be able to conduct audits appropriately from an objective standpoint by drawing upon his extensive experience andwealth of knowledge.

50

The stock compensation plan (Board Benefit Trust, BBT)
is designed to motivate Board members to help boost ourcompany’s performance and corporate value over the mediumto long-term by making the link between their compensationand our equity value clearer. Under this compensation plan, theCompany's shares are acquired by a trust using funds contributedby the Company, and the directors will be provided, on theirretirement, with the Company's shares (in lieu of the provisionof the Company’s shares, an amount equivalent to the market
value of the Company’s shares for a specified proportion, if therequirements specified in “Regulations for Provision of Shares to
Officers” are met) in accordance with the Regulations for Provisionof Shares to Officers approved by the Board of Directors.
The ratio between the base salary and the variable pay planis set at 1 to 0.6 based on the average compensation ratio
used by listed companies. The variable pay plan consists ofperformance-based compensation and stock compensation,and the ratio between the two is set at 5 to 7 in the light of thecharacteristics of the revenue structure of the leasing businessto provide higher incentives on a medium- to long-term basis.
Directors’ compensation is discussed by the Nomination
and Compensation 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.
The company prescribes malus provisions providing that
if a director causes significant damage to the Company or
engages in inappropriate conduct, the director’s base salaryor performance-based compensation will be reduced or the
director will not be paid and the director will no longer be eligible
to receive stock compensation.

Director Qualifications and Nomination Procedures
Policy and procedures for nominating director andcorporate auditor candidates and removing directors
Our Corporate Governance Guidelines set forth procedures fornominating and removing directors in addition to the qualificationsof corporate auditors and procedures for nominating corporate
auditor candidates. Under these guidelines, a director or
corporate auditor candidate must possess an outstanding
personality, a wide breadth of knowledge, abilities, experience,and high ethical standards. The guidelines also specify thatcandidates be nominated regardless of factors such as sex, age,and nationality, with the aim of achieving greater diversity. In orderto ensure fairness and transparency in the nomination process,the selection of candidates for directors and corporate auditors isfinalized by the Board of Directors following a discussion by the
Nomination and Compensation Advisory Committee, which iscomprised of majority independent outside directors. Selectionof corporate auditor candidates is finalized by the Board of
Directors upon consent of the Board of Corporate Auditors.
2 Independence standards for outside directors andoutside corporate auditors
Independence standards for outside directors and outside
corporate auditors are stipulated in the Corporate Governance
Guidelines in line with the independence standards prescribedin the Guidelines Concerning Listing Management, etc.
established by the Tokyo Stock Exchange.
1

Board Remuneration
Fuyo Lease believes that enhancing the link between shareholder
value and remuneration of Board of Directors will boost theirmorale and motivate them to improve our financial performanceand share price, leading us towards our goals of ensuring stableperformance and growth, while enhancing our corporate value.
That is why we have introduced variable pay programs such as
performance-based compensation and stock compensation in
addition to a base salary, which is provided as fixed compensation.
We determine base salaries in the light of our employees’salaries, average market salaries for directors, our financial
standing, and other relevant factors. The actual amount of
performance-based compensation is based on our consolidated
performance as well as an individual director’s contribution to
our financial performance among other factors. The indicators
for performance-based compensation are operating assets,ordinary profit, and ROA on a consolidated basis, which are key
performance indicators for the Medium-term Management Plan.

Internal Control System
Fuyo Lease has instituted an internal control system across our
corporate group to ensure compliance with all relevant laws andthe articles of incorporation, capability to respond to various risks
in a timely and appropriate manner, and to ensure transparency
and efficiency of operations, in addition to ensuring the reliabilityof 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 isreported to the Board of Directors during a meeting held at theend of each fiscal year, and continuous improvements are madein the light of the audit findings.

Board Remunerations
Remuneration amount (millions of yen)
Officer classification

Total amount(millions of yen)

Basic remuneration

Stock-based
remuneration

Performance-linked
remuneration

Number of
directors(Board Benefit Trust, BBT)

(Annual bonuses)

Directors (excl. outside directors)

327

202

76

49

6

Board of Corporate Auditors
members (excl. outside auditors)

44

44

-

-

2

Outside Directors

57

57

-

-

6

Notes: 1. The above remuneration amount and number of directors include those who resigned by the end of fiscal 2019.
2. The above performance-linked remuneration comprises the amount, which shall be recorded in the fiscal year.
3. The amount of the Board Benefit Trust (BBT) comprises the amount recorded in the fiscal year based on the number of points granted or expected to be granted during 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 theretirement benefits system for directors. The estimated amount as of the end of the fiscal year is 4 million yen (outside directors). The payment is made at the time of their retirement.

51

Risk Management and Compliance System

Fuyo Lease Group Integrated Report 2020

Risk Management
Our Approach to Risk Management and Risk
Management System
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 to manage risks basedon 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.
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 and importance of eachrisk, and evaluates the effectiveness of risk management. The
Asset and Liability Management (ALM) Committee meets on aregular basis to appropriately manage and control market andliquidity risks. These efforts enable us to continually improve ourrisk management system.

Risk Factors in Business Operations
Listed below are the main factors that could pose a risk to thedevelopment of the Group’s business and have a significant
impact on the decisions of investors. The forward-looking
statements here represent the judgment of the Group’s
management as of the date that its annual securities report
was submitted (June 25, 2020). The following is not an
exhaustive list of all the risks that could affect investment in the
Company’s shares.

Risk Factors in Business Development
Risk relating to changes in capital expenditure trends
and other changes
Credit Risk
Risk relating to changes in factors such as interest
rates, exchange rates and share prices, and financing
Risk relating changes in regulatory systems
Risk relating to strategic partnerships and corporate
acquisitions
Risk from natural disasters or other causes
Risk relating to business strategies
Decline in the value of assets in Real Estate, Aircraft and Mobility businesses
Changes in the amount of power generated in the solar power generation business
Delays in delivery and deterioration of business quality in BPO services
Changes in overseas political and economic conditions in overseas business

Risk relating to overall business operation
Risk relating to information security
Human risk relating to developing and securing human resources
Compliance risk
*Please refer to our annual securities report for details on each section.

Response to Risks
The Fuyo Lease Group assumes various risks that may arise

52

Compliance Systemin the course of business development and is implementing
measures to counter these risks. Details of the businessrisks for the Group are disclosed in our annual securities
report, and major countermeasures are described below.
COVID-19
Against the backdrop of the spread of COVID-19, the Group’s
Board of Directors and Executive Committee are discussing ways
to deal with infection risks in business activities and the impactof these risks on business performance. To deal with the risk ofinfection in our business activities, we established the COVID-19
emergency response headquarters under the direction of thepresident, and we are engaging in initiatives based on the Group’s
Basic BCP Principles. Along with initiatives such as telecommuting,staggered working hours, and checking the health of employees,
we have also established a system for reporting to the COVID-19
emergency response headquarters, contact tracing procedureand procedures for disinfecting, publicizing information, andtaking other measures in the event of an infection or suspected
infection within our company. Through these measures, we are
ensuring the prevention of infections and making efforts to prioritize
the continuation of operations that will not seriously impact thecontinued business of our customers. In addition, estimates of
the impact of COVID-19 on the Group’s performance are basedon the assumption that the spread of infection will subside aroundthe end of the first half of fiscal 2020, but these estimates maychange depending on future trends. In the future, we will disclose
information in a timely and appropriate manner whenever weanticipate a significant change in performance.
Information Security
With unauthorized access to information via the Internet aswell as cyber-attacks increasing daily and becoming moresophisticated, the Group recognizes that information security
risks are an important management issue. In order to establish
a strict information management system for the entire Group,
data is strictly controlled by our information security manager
in accordance with detailed rules, including the Confidential
Information Management Rule. Additionally, each employee isthoroughly informed of the Appropriate Information Management
section included in the Code of Corporate Conduct as wellas the Privacy Policy, and we have implemented level-specificinformation security training programs. In fiscal 2019, we
provided training on confidential information management andpersonal data protection to 1st year employees (generalist
track).
Large-Scale Disaster
The Group has a system in place for responding toemergencies. 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.
We also conduct regular drills to promote the minimization ofdamage and ensure business continuity. In fiscal 2019, we
reviewed BCP-related regulations and newly established our
Basic BCP Principles.

Compliance System

Compliance Training

Our Approach to Compliance and Compliance System
At the Fuyo Lease Group, ensuring compliance is a fundamental
principle of management. We work to strengthen and enhance
our compliance system, which enables us to operate withintegrity 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 the whistleblower
system on the basis of the Fuyo General Lease Group's
Code of Corporate Conduct. In order to maintain and further
improve our compliance systems, we implement and carry out
compliance programs every fiscal year. Issues associated withthe 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 are reported to the Board of
Directors on a semi-annual basis.
We will continue our group-wide activities including
conducting compliance practices and compliance education,and streamlining our compliance systems across the Group to
improve their effectiveness.
Fuyo General Lease Group Code of Corporate 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 increase the effectiveness of the Code andinstill the Code among our employees.
Furthermore, the Code strictly prohibits the forging ofcollusive ties with political and administrative authorities
and business partners, and the private use of thecompany’s assets. In fiscal 2019, no infringements related
to corruption were found in the Group. Additionally, no
employees were dismissed or subjected to disciplinary
action due to corruption.

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 grouptraining conducted by external instructors for directors, headsof departments, offices and branch offices, presidents of Group
companies, and departmental compliance officers.*

Fuyo General Lease Group Code of Corporate Conduct
Chapter

1

Chapter2

Chapter3

Basic Policy of Fuyo General Lease Group
1. Social Responsibilities and Public Missions
2. Implementation of Customer First Principles
3. Compliance with Laws and Rules
4. Respect for Human Rights
5. Blocking Relationships with Anti-social Forces

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
5. Basic Attitude Toward Suppliers and Competitors
6. Basic Attitude Toward Politics and Government

Action Guidelines for All Members of the Fuyo Lease Group
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.

* A compliance officer is appointed for each department or company to raise complianceawareness and ensure compliance.

Compliance Training (FY 2019)
Group training and workplace training
Participant

Subject# of session

Entry level

Introduction to compliance, Fuyo General
Lease Group Code of Corporate Conduct,
Unreasonable demand

1

1st year employee(Generalist track)

Confidential information management,
Personal information protection, Preventionof harassment, Insider trading regulations

1

5th year employee(Generalist track)

Response to accidents and troubles

1

Newly appointed head of Issues to be understood as responsible
department/branch office officers to ensure compliance1

Newly appointed assistant Prevention of power harassment, sexual
manager/section chief and maternity harassment

2

Prevention of money laundering andmeasures to counter terrorism financing

1

Directors and head ofPrevention of money laundering anddepartment/office/branchmeasures to counter terrorism financing
office1

All employees

E-learning
Participant

Subject# of session

Directors, head of department/
office/ branch office, complianceofficer, entry level

Regulation for insider trading(e-learning material of the Japan
Exchange Group)2

All employees

General issues on compliance

1

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. These
services are available on a regular basis and information onthese services is disclosed on the company’s intranet bulletinboard. Concerned individuals can immediately seek consultation
or report whenever they detect any violations of the law, theCode of Corporate Conduct and other corporate regulations,harassment cases, misconduct in information management
or other potential infringements. The whistleblower systems
accept anonymous reports to protect whistleblowers. At theFuyo Lease, full-time corporate auditors are appointed to accept
reports from the Group companies, and the cooperating law firm
is available for reports from the overseas affiliated companies.
In fiscal 2019, 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, and all cases have been resolved.

53

Independent Assurance Report / Financial Section

Fuyo Lease Group Integrated Report 2020

Independent Assurance Report
Fuyo General Lease Co., Ltd. has engaged KPMG AZSA Sustainability Co., Ltd. to perform assurance of selectedenvironmental and social data in order to assure credibility of reported figures. The data subject to the third-party
assurance is indicated with .

Financial Section
Financial Information
Financial Position and Management Goals

P55

Financial & Non-Financial Data (10 years)

P57

Financial Statements
Consolidated Balance Sheets

P59

Consolidated Statements of Income

P61

Consolidated Statements of Comprehensive Income

P62

Consolidated Statements of Changes in Net Assets

P63

Consolidated Statements of Cash Flows

P66

Notes to Consolidated Financial Statements

P67

Report of Independent Auditors

P101

54

55

Financial Section

Financial Information
Financial Position and Management Goals

Fuyo Lease Group Integrated Report 2020year on year, to ¥53,071 million. This was mainly due to a large

financial forecast for the fiscal year ending March 2021 is based

amounted to ¥1,485,155 million, up 7.5% from the end of theincrease in profit through the accumulation of operating assets

on the assumption that the spread of the COVID-19 will subside

centered on real estate leases.

around the end of the first half of the fiscal year, however thisprevious fiscal year, mainly due to increases in short-term loans
and long-term loans from banks and other financial institutions.

Financial Position and Results of Operations
The Japanese economy in the consolidated fiscal year underreview was on a slow recovery trend against the backdrop of
improvements to the employment and income environment.
However, in addition to U.S.–China trade friction, the impact of the
global spread of the COVID-19 in the latter half of the fiscal year
has created an unavoidably uncertain situation going forward.
According to the Japan Leasing Association, the total volumeof lease transactions in Japan’s leasing industry in fiscal 2019came to ¥5,333.1 billion, an increase of 6.4% compared to theprevious fiscal year.
In this environment, the Fuyo Lease Group started to implement
Frontier Expansion 2021, its Medium-term Management Plan
for fiscal 2017 to fiscal 2021. In fiscal 2019, the third fiscal yearof the plan, the Group steadily implemented the business andmanagement strategies outlined in the plan, aiming to be a
corporate group that continually expands the frontiers of its businessportfolio and clears the way to new business fields by fulfilling its
corporate slogan of “Go where no one has gone before.”
As a result of these efforts, newly executed contract volume infiscal 2019 totaled ¥1,359,703 million, up 14.5% year on year.
Consolidated operating assets (after subtracting the deferredprofit on installment sales) as of March 31, 2020, totaled¥2,383,992 million, up ¥121,167 million, or 5.4%, from the endof the previous fiscal year.
The total assets amounted to ¥2,752,598 million, up ¥159,616
million, or 6.2%, from the end of fiscal 2018. This increase isdue to a steady increase in operating assets, which increasedby ¥121,167 million from the end of the previous fiscal year to¥2,383,992 million, an increase of 5.4% year over year.
The funding balance stood at ¥2,231,020 million, an increaseof 6.4% year on year, mainly due to the issuance of unsecured
straight bonds amounting to ¥65,000 million during the fiscal
year under review.
On the profit front, the Company reported total revenuesof ¥712,330 million, up 15.2% year on year, operating profitof ¥41,423 million, up 16.1% year on year, ordinary profitof ¥44,045 million, up 12.6% year on year, and net profit
attributable to owners of parent of ¥26,187 million, up 2.6% year
on year. Compared with the interim goals set in the Mediumterm Management Plan, operating assets have been steadily
accumulating, and ordinary profit and ROA (ordinary profit on
operating assets) results have outperformed the goals.

Financial Position and Results of Operations by
Segment
Revenues, cost of sales and gross profit
Lease and Installment Sales
In fiscal 2019, Lease and Installment Sales segment revenues
increased by ¥11,127 million, or 2.1% year on year, to ¥528,853
million. Cost of sales increased by ¥6,576 million, or 1.4% year
on year, to ¥475,782 million, and gross profit in the Lease andInstallment Sales segment increased by ¥4,551 million, or 9.4%,

56

may change depending on future trends.
Financing
Financing segment revenues totaled ¥15,979 million in fiscal
2019, an increase of ¥998 million, or 6.7%, year on year. Cost of
sales increased by ¥123 million, or 73.9%, to ¥291 million, andgross profit in the Financing segment rose ¥874 million, or 5.9%,
to ¥15,688 million. This was mainly due to the contribution of realestate financing and factoring in a consolidated subsidiary that
increased transactions with major customers.
Other
The Other segment’s revenues jumped by ¥82,084 million, or
96.1% year on year, to ¥167,497 million in fiscal 2019. Cost of
sales increased by ¥77,049 million, or 105.0% year on year, to¥150,460 million, and gross profit in the other segment increasedby ¥5,035 million, or 42.0% year on year, to ¥17,036 million. In
addition to the BPO service, this was mainly attributable to the
profit growth in various other businesses including the asset
turnover business, which is characterized by asset replacement
through securitization, and the solar power generation business.

Operating profit, ordinary profit and profit attributable toowners of parent
In addition to the accumulation of operating assets centered on
strategic areas from the past, New Domains such as BPO service
contributed significantly to achieving an increase in gross profit,
the basic income which is a major source of profits. Gross profit
increased by ¥10,461 million (13.9%) year on year to ¥85,796
million. As for costs, personnel expenses increased by ¥3,328
million (11.0%) year on year to ¥33,561 million due to the additionof consolidated subsidiaries, but this was offset by an increase ingross profit.As a result, operating profit totaled ¥41,423 million,a year on year increase of 16.1%, ordinary profit totaled ¥44,045
million, a year-on-year increase of 12.6%, and profit attributableto owners of parent stood at ¥26,187 million, up 2.6% year.
Revenues, operating profit, ordinary profit, and profit attributableto owners of parent all exceeded the previous year’s level, andrecord-high profits were achieved for the consolidated fiscal year.
Net Assets and Equity Ratio
Total shareholders’ equity increased by ¥18,580 million, or 8.2%
from the end of the previous fiscal year to ¥245,615 million, mainly
owing to an increase in retained earnings. As a result, total net
assets came to ¥311,819 million at the end of the fiscal year underreview, up ¥16,779 million, or 5.7%, compared to the end of theprevious fiscal year. Net assets are steadily accumulating. The
equity ratio fell 0.1 percentage points from the end of the previous
fiscal year to 10.0% due to the acquisition of additional shares of
the consolidated subsidiary. The equity ratio was maintained at the
10% level while operating assets were increased.
The outlook for the economy is expected to remain severe
due to the ongoing and rapid deterioration of economic activities
caused by the global spread of COVID-19. The consolidated

Cash FlowsThe cash flow analysis and content to be considered for the
consolidated fiscal year under review are as follows.
Cash Flows from Operating Activities
Operating activities in fiscal 2019 used net cash of ¥108,804
million, a decrease compared to the net cash used of¥79,975 million in the previous fiscal year. The main factors
in changes were an increase in loss on retirement of leased
assets and cost of leased assets sales, an increase in leasereceivables and lease investment assets, an increase in otheroperating loans receivables, and an increase in operational
investment securities.
Cash Flows from Investing Activities
Investing activities in fiscal 2019 used net cash of ¥11,242 million,
compared to the net cash of ¥9,393 million used in the previous
fiscal year. The main factors in changes were an increase inpurchase of shares of subsidiaries resulting in change in scopeof consolidation, payments for purchase of investment securities,
and a decrease in proceeds from sales and redemption ofmarketable and investment securities.
Cash Flows from Financing Activities
Financing activities in fiscal 2019 provided net cash of ¥127,754
million, compared to the net cash of ¥105,502 million in theprevious fiscal year. The main changes in indirect financing
included an increase in the net amounts of short-term loans
from banks and other financial institutions and proceeds fromlong-term loans from banks and other financial institutions, andan increase in cash outflows due to repayments of long-termloans to banks and other financial institutions. In direct funding,the main changes included an increase in proceeds from thesecuritization of receivables and the issuance of bonds, and adecrease in the net amounts of commercial paper.

Financial Policy
The Fuyo Lease Group has set a basic policy of ensuring theliquidity required for business operations and stable funding
sources.
The Group raises funds through indirect financing usingborrowings from financial institutions and direct financing fromthe markets for its working capital and equipment funding.
At the end of the fiscal year under review, indirect financing

Direct financing increased 4.3% from the end of the previous
fiscal year to ¥745,865 million, mainly due to the issuance ofcommercial paper and bonds. As a result, the funding balanceat the end of the fiscal year under review increased 6.4% fromthe end of the previous fiscal year to ¥2,231,020 million. The
percentage of direct financing stood at 33.4%, a decrease of
0.7 percentage points compared to the end of the previous
fiscal year.
The main demand for working capital at the Group include thepurchase of lease assets and properties for installment sales tocustomers, the purchase of operational investment securities,
and capital investment in solar power generation facilities,
in addition to operating expenses and selling, general andadministrative expenses.
As of March 31, 2020, the balance of interest-bearing debt,
including borrowings and lease obligations, stood at ¥2,251,741
million, up 6.1% from the end of fiscal year. Moreover, cash andcash equivalents at the end of the fiscal year under review totaled¥77,416 million.
At the end of the fiscal year under review, the Company
had concluded overdraft agreements and loan commitment
agreements with 79 correspondent financial institutions. Thebalance of executed loans amounted to ¥478,876 million, andthe balance of unexecuted loans stood at ¥493,932 million.

Management policy, management strategy andobjective 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 throughrobust 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 threemanagement goals.
Founded on the basis of steadily accumulating operating
assets, both sales and profit showed favorable performanceand exceeded the previous year’s results. Revenue, operating
profit, ordinary profit, and profit attributable to owners of parent
all reached new record highs.
Regarding stock, we were able to steadily increase operating
assets by 5.4% from the end of the previous consolidated fiscal
year while improving return on assets (ROA) by 0.14 percentage
points from the end of the previous consolidated fiscal year.

Management Goals(Consolidated)

FY 2017 Result

FY 2018 Result

Interim Goal (FY 2019)

FY 2019 Result

Target Value (FY 2021)

Operating Assets¥2,172.6 bn¥2,262.8 bn¥2,300.0 - ¥2,400.0 bn¥2,384.0 bn¥2,500.0 bn

Ordinary Profit¥35.2bn¥39.1 bn

¥38.0 – 42.0 bn¥44.0 bn¥50.0 bn

Return on assets
(ROA)

1.67%

1.76%

1.7 - 1.8 %

1.90%

2.0%

57

Financial Section

Fuyo Lease Group Integrated Report 2020

Financial and Non-Financial Data (10 years)
Financial Data (consolidated)
2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

Revenues (billions of yen)

408.5

421.5

442.6

441.7

472.3

493.8

507.2

590.3

618.1

712.3

Cost of sales (billions of yen)

355.0

369.2

393.2

394.5

423.7

442.6

451.9

529.8

551.4

636.0

Gross profit (billions of yen)

53.5

52.3

49.3

47.2

48.6

51.2

55.3

60.5

66.7

76.3

Selling, general and administrative expenses (billions of yen)

28.4

23.7

24.5

24.0

24.0

26.7

26.5

27.8

31.0

34.9

Operating profit (billions of yen)

25.1

28.7

24.8

23.2

24.6

24.5

28.8

32.7

35.7

41.4

Ordinary profit (billions of yen)

27.1

32.1

26.4

25.4

26.5

29.2

31.4

35.2

39.1

44.0

Profit attributable to owners of parent (billions of yen)

13.5

16.5

15.6

13.0

14.2

17.5

20.0

21.9

25.5

26.2

Total assets (billions of yen)

1,654.0

1,668.6

1,764.3

1,851.9

1,986.8

2,113.1

2,300.1

2,430.5

2,593.0

2,752.6

Operating assets (billions of yen)

1,432.9

1,440.9

1,495.9

1,599.2

1,730.5

1,867.2

2,047.4

2,172.6

2,262.8

2,384.0

Interest-bearing debt (billions of yen)

1,406.0

1,402.4

1,473.4

1,500.1

1,629.8

1,750.3

1,900.7

2,000.3

2,122.7

2,251.7

125.2

144.8

173.8

202.6

222.5

232.5

259.2

282.6

295.0

311.8

6.7

7.7

8.8

9.8

10.1

9.9

9.9

10.2

10.1

10.0

534.9

484.6

547.2

594.8

666.9

703.8

834.2

1,105.1

1,187.2

1,359.7

ROA (%)

1.91

2.23

1.80

1.64

1.59

1.62

1.60

1.67

1.76

1.90

OHR (%)

42.2

43.7

47.8

49.8

48.7

51.2

47.1

45.2

45.3

44.0

Cash flows from operating activities (billions of yen)

(40.3)(34.0)(55.5)(85.2)(165.4)(151.5)(154.3)(104.4)(80.0)(108.8)Cash flows from investing activities (billions of yen)

(4.5)

(4.7)

8.2

(1.1)

(1.1)

(1.2)

(4.6)

(5.7)

(9.4)

(11.2)Cash flows from financing activities (billions of yen)

(2.5)

51.6

98.2

62.6

147.3

150.3

157.7

113.5

105.5

127.8

Cash and cash equivalents at the end of the fiscal year (billions of yen)

31.1

43.9

95.2

72.3

54.0

51.4

50.6

54.1

69.9

77.4

Earnings per share (yen)446.37546.40518.21429.49470.14579.17661.80726.41

844.69871.95

Dividends per share (yen)

62

66

70

74

80

100

130

146

188

205

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3

1,232

1,096

1,279

1,409

1,287

1,216

1,271

2,074

1,937

2,007

Scope1 (t-CO2)

234

213

202

192

159

154

163

770

707

687

Scope2 (t-CO2)

998

883

1,077

1,217

1,128

1,062

1,108

1,304

1,230

1,319

CO2 emission intensity (Scope1,2) (t-CO2 / 100 millions of yen)

0.34

0.31

0.34

0.39

0.33

0.31

0.33

0.37

0.36

0.29

0

0

8

23

48

77

77

102

140

200

1,403

1,504

1,500

1,521

1,542

1,559

1,703

1,715

1,960

2,416

Number of employees (non-consolidated) (Employees)

595

611

658

660

669

670

689

689

704

715

Turnover rate (non-consolidated) (%)

2.3

1.7

1.4

1.3

1.1

0.8

1.0

1.9

1.9

1.8

Net assets (billions of yen)
Equity ratio (%)
Executed contract volume (billions of yen)

Non-Financial Data (consolidated)
CO2 emissions (Scope1,2) (t-CO2)

Green energy supply (Output) (MW-dc)
Number of employees (Employees)

58

59

Financial Section

Fuyo Lease Group Integrated Report 2020

60

Consolidated Balance Sheets
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
March 31, 2020 and 2019
Thousands of U.S.
dollars (Note 1)

Millions of yen

Assets2020

2019

Liabilities and net assets

2020

Current assets:
Cash and deposits (Notes 2 and 8)
Marketable Securities (Notes 2, 3 and 5)

Thousands of U.S.
dollars (Note 1)

Millions of yen
2020

2019

2020

Current liabilities:¥

77,436
234,837¥

71,173
179,529$

710,424
2,154,468

Trade receivables (Notes 2 and 5):

Short-term borrowings (Notes 2 and 5)¥ 1,009,917¥ 1,015,259$ 9,265,298

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

336,216

291,825

3,084,556

Lease obligations (Notes 2 and 5)

20,302

25,103

186,264

Notes and accounts payable – trade45,391

44,531

416,436

Installment sales

79,75397,452

731,682

Financing

416,776385,951

3,823,642

Income taxes payable

4,215

5,555

38,673

Lease

1,127,595

1,100,515

10,344,915

Advances received from customers

8,601

8,261

78,913

Other

4,107

2,671

37,680

Deferred profit on installment sales

1,307

1,421

11,997

Allowance for doubtful receivables(3,085)(2,725)(28,305)

Other

39,62027,872

363,489

1,465,573

1,419,831

13,445,626

Long-term debt (Notes 2 and 5)

884,886

789,872

8,118,228

Deferred tax liabilities (Note 11)15,706

15,606

144,094

Other
Total current assets

90,06563,610826,2932,027,487

1,898,179

18,600,799

Total current liabilities
Long-term liabilities:

Investments and other assets:
Investment in securities (Notes 2, 3 and 5)
Unconsolidated subsidiaries and affiliates

24,04523,921

220,604

Net defined benefit liability (Note 12)

2,309

1,996

21,192Other investment in securities

67,93868,899623,291

Guarantee deposits from customers

65,33364,093599,392

Claims provable in bankruptcy, claims provable in rehabilitation and other

Other

602

571

5,525

Other investments

46,07947,541

422,743

Total long-term liabilities

Deferred tax assets (Note 11)

2,762

4,155

25,347

Total liabilities

Allowance for doubtful receivables

(363)

(375)

(3,335)

Total investments and other assets

141,065

144,713

1,294,175

506,498

480,930

Advances on purchases of property and equipment for lease

6,911

15,073

63,405

Other operating assets (Note 4)

26,38328,265

242,049

Own-used assets (Note 4)

13,3191,790

122,193

Total property and equipment

553,111526,059

5,074,422

4,646,775

Intangible fixed assets:
Software leased to customers

266

330

2,448

Goodwill

21,74915,935

199,533

Other

7,644

6,591

70,137

29,66022,856272,118

Total intangible fixed assets

Business commencement expenses
Total deferred assets
Total assets:

63,935
8,946,841

2,440,778

2,297,941

22,392,467

96,625

Net assets:
Shareholders’ equity (Notes 16, 20 and 21):
Common stock, without par value
Authorized: 100,000,000 shares
10,532

10,532

Capital surplus

Issued: 30,287,810 shares in 2020 and 2019

8,873

8,873

81,410Retained earnings

228,285

208,454

2,094,358

Less, treasury stock, at cost – 315,734 shares in 2020 and 142,465 shares in 2019
Total shareholders’ equity

1

0

14

1,271

1,171

11,667

1,273

1,172

11,681¥ 2,752,598¥ 2,592,981$ 25,253,195(2,075)(826)(19,041)

245,615

227,034

2,253,352

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

Deferred assets:
Deferred organization expenses

6,541
878,110

Contingent liabilities (Note 6)

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

6,968
975,205

31,65034,713

290,373

Deferred gains (losses) on hedges

(798)

(577)

(7,323)Foreign currency translation adjustments

(435)

496

(3,992)Remeasurements of defined benefit plans

(163)

3

(1,502)

Total accumulated other comprehensive income

30,253

34,636

277,556

764

842

7,011

Share acquisition rights

See accompanying notes to the consolidated financial statements.
Non-controlling interests

35,18632,525322,809

Total net assets

311,819

295,0392,860,728¥ 2,752,598¥ 2,592,981$ 25,253,195

Total liabilities and net assets

See accompanying notes to the consolidated financial statements.

61

Financial Section

Fuyo Lease Group Integrated Report 2020

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2020 and 2019

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2020 and 2019
Thousands of U.S.
dollars (Note 1)

Millions of yen
2020

2019

2020

2020

517,726$ 4,851,869

Revenues:
Lease and installment sales

Profit¥528,853¥

Thousands of U.S.
dollars (Note 1)

Millions of yen¥

29,653

2019

¥

2020

28,049$272,048

Other comprehensive income

Financing

15,97914,980146,599

Other

167,497

85,412

1,536,673

Net unrealized gains (losses) on available-for-sale securities(2,380)(4,553)(21,841)

712,330

618,119

6,535,141

Deferred gains (losses) on hedges

(128)

(478)

(1,179)Foreign currency translation adjustment(686)(1,066)(6,302)Remeasurements of defined benefit plans

(54)

(10)

(502)

(1,157)24(10,618)

Total revenues
Costs:
Lease and installment sales

475,782

Financing
Other
Interest expenses
Total costs

469,206

4,364,976

291

167

2,672

150,460

73,411

1,380,372

9,448

8,648

86,681

635,982

551,433

5,834,701

Gross profit

76,347

66,686700,440

Selling, general and administrative expenses

34,92431,006

320,405

Operating profit

41,42335,680380,035

Interest and dividend income

1,844

1,792

16,925Interest expenses

(627)

(530)

(5,757)

Equity in earnings of affiliates

1,322

1,259

12,134

Bad debt recovered

97

86

892

Reversal of allowance for doubtful receivables

–

95

–

Reversal of provision for loss on guarantees

192

91

1,769

Gain on sale of marketable and investment securities

395

941

3,629

Loss on valuation of investment securities

(545)

–

(5,004)

Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income(4,408)(6,084)(40,442)¥

25,245¥21,965$

231,606¥

21,804¥

19,437$200,038(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

3,440

2,527

31,568See accompanying notes to the consolidated financial statements.

Other income (expenses)

Loss on redemption of investment securities

(513)

–

(4,713)(1,283)(22)(11,773)

(226)

624

(2,077)42,08040,019386,060

Current

10,68011,182

97,983

Deferred

1,747

787

16,029

Total

12,427

11,969114,012

Profit29,65328,049272,048

Profit attributable to non-controlling interests

3,466

2,534

Impairment loss
Other, net
Profit before income taxes
Income taxes (Note 11)

Profit attributable to owners of parent¥

26,187¥25,51531,799$240,249

See accompanying notes to the consolidated financial statements.

62

63

Financial Section

64

Fuyo Lease Group Integrated Report 2020

Consolidated Statements of Changes in Net Assets
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2020 and 2019Year ended March 31,2020
Shareholders’ equity
Number of sharesof common stock

Commonstock

30,287,810¥ 10,532

CapitalsurplusRetainedearnings

Year ended March 31,2020
Shareholders’ equity

Treasury stock,at costTotal
shareholders’equityCommonstock

Capitalsurplus$ 96,625$ 81,410

Millions of yen
Balance at beginning of year

¥

8,873

Retainedearnings

Treasurystock,
at costTotal
shareholders’equityThousands of U.S. dollars (Note 1)¥ 208,454

¥

(826)

¥ 227,034

Balance at beginning of year

$ 1,912,430$(7,580)$ 2,082,885

Cash dividends(6,333)(6,333)

Cash dividends(58,109)(58,109)

Profit attributable to owners of parent

26,187

26,187

Profit attributable to owners of parent

240,249

240,249(1,364)(1,364)Purchase of treasury stock

115

92

Disposal of treasury stock(0)

Change in scope of consolidation–

Change in ownership interest of parent due totransactions with non-controlling interests

Purchase of treasury stock
Disposal of treasury stock(22)

Change in scope of consolidation(0)

Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year(3)–

¥ 10,532¥

8,873¥ 228,285¥ (2,075)¥ 245,615

Balance at end of year

$ 96,625

Deferred gains(losses) onhedges¥34,713¥ (577)

Total
Foreign currency Remeasurements accumulatedtranslationof definedotheradjustment
benefit planscomprehensive
income¥496$ 81,410$ 2,094,358$ (19,041)$ 2,253,352

Year ended March 31,2020
Accumulated other comprehensive income
Net unrealized
gains onavailable-for salesecurities

Millions of yen

Deferred gains(losses) onhedges

Total
Foreign currency Remeasurements accumulatedtranslationof definedotheradjustment
benefit planscomprehensive
incomeThousands of U.S. dollars (Note 1)¥

3¥ 34,636

Balance at beginning of year

Cash dividends

Cash dividends

Profit attributable to owners of parent

Profit attributable to owners of parent

Purchase of treasury stock

Purchase of treasury stock$ 318,470$ (5,294)

$

4,556

$

36

$ 317,768(8,548)(1,538)(40,212)$(3,992)$ (1,502)$ 277,556

Disposal of treasury stock

Disposal of treasury stock

Change in scope of consolidation

Change in scope of consolidation

Change in ownership interest of parent due totransactions with non-controlling interests

Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity¥(3,062)

(221)

(931)

(167)

(4,383)31,650¥ (798)¥ (435)¥ (163)¥ 30,253

Net changes of items other than shareholders’ equity
Balance at end of year

Year ended March 31,2020
Share acquisition Non-controllingTotalrightsinterests
net assets

Balance at beginning of year849

Net changes of items other than shareholders’ equity
30,287,810

Net unrealized
gains onavailable-for salesecurities

Balance at end of year

(12,519)

1,058

(3)

Year ended March 31,2020
Accumulated other comprehensive income

Balance at beginning of year

(12,519)
(209)

¥

842

¥ 32,525¥ 295,039(28,097)(2,029)$ 290,373$ (7,323)

Year ended March 31,2020
Share acquisition Non-controllingTotalrightsinterests
net assets

Balance at beginning of year

$

7,732

$ 298,401$ 2,706,786

Cash dividends(6,333)

Cash dividends(58,109)

Profit attributable to owners of parent

26,187

Profit attributable to owners of parent

240,249

Purchase of treasury stock(1,364)Purchase of treasury stock(12,519)

Disposal of treasury stock

849

Disposal of treasury stock

92

Change in scope of consolidation(0)

Change in ownership interest of parent due totransactions with non-controlling interests–

Net changes of items other than shareholders’ equity
Balance at end of year

¥

(78)

2,660

(1,801)764¥ 35,186¥ 311,819

See accompanying notes to the consolidated financial statements.

Change in scope of consolidation(3)

Change in ownership interest of parent due totransactions with non-controlling interests–

Net changes of items other than shareholders’ equity
Balance at end of year

$

(721)

24,408(16,525)

7,011$ 322,809$ 2,860,728

See accompanying notes to the consolidated financial statements.

65

Financial Section

Fuyo Lease Group Integrated Report 2020

Consolidated Statements of Cash Flows
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2020 and 2019Year ended March 31,2019
Shareholders’ equity
Number of sharesof common stock

Commonstock

CapitalsurplusRetainedearnings

Treasury stock,at costTotal
shareholders’equity30,287,810¥ 10,532¥ 10,416¥ 187,673

Cash dividends(4,716)

Profit attributable to owners of parent

25,515¥(224)¥ 208,397
25,515

(17)

(695)

(695)

94

76

Change in scope of consolidation(1,542)30,287,810¥ 10,532¥

8,873(1,542)¥ 208,454

¥

(826)

Deferred gains(losses) onhedges

Total
Foreign currency Remeasurements accumulatedtranslationof definedotheradjustment
benefit planscomprehensive
incomeMillions of yen
Balance at beginning of year

¥ 39,265

¥

(92)

¥

1,551

¥ (10)¥

42,080¥40,019$386,060

Depreciation and amortization

37,85933,414347,338

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

118,027

19,8981,082,820

347

(164)

3,187

1,283

–

11,773

Interest and dividend income(1,844)(1,792)(16,925)

Interest expenses

10,0759,179

92,438Gain on sales of marketable and investment securities, net

(395)

(941)

(3,629)Loss on valuation of short-term and long-term investment securities

545

–

5,004

(1,322)(1,259)(12,134)

Equity in earnings of affiliates¥ 227,034

Year ended March 31,2019
Accumulated other comprehensive income
Net unrealized
gains onavailable-for salesecurities¥

Increase (decrease) in allowance for doubtful receivables

Net changes of items other than shareholders’ equity
Balance at end of year

2020

Cash flows from operating activities:

Impairment loss–

Change in ownership interest of parent due totransactions with non-controlling interests

2019

Adjustments for:

(4,716)

Purchase of treasury stock
Disposal of treasury stock

2020

Profit before income taxes

Millions of yen
Balance at beginning of year

Thousands of U.S.
dollars (Note 1)

Millions of yen

40,714

Cash dividends
Profit attributable to owners of parent

Loss on redemption of investment securities

513

–

4,713

Amortization of goodwill and negative goodwill

1,132

768

10,388

Increase (decrease) in trade receivables(108,325)

26,197(993,811)

Purchase of leased and other operating assets(182,786)(180,998)(1,676,943)

Decrease in trade payables(4,077)(10,060)(37,413)

Other, net(3,535)

1,684(32,438)(90,423)(64,055)(829,572)

SubtotalInterest and dividend income received

3,158

1,722

28,980Interest expenses paid

(10,606)(8,913)(97,308)

Income taxes paid

(11,526)(11,414)(105,747)

Subsidies received

592

2,684

5,436

(108,804)(79,975)(998,211)

Net cash used in operating activities

Purchase of treasury stock
Cash flows from investing activities:

Disposal of treasury stock
Change in scope of consolidation

Proceeds from sales and redemption of marketable and investment securities

917

4,248

8,418

Change in ownership interest of parent due totransactions with non-controlling interests

Payments for purchase of marketable and investment securities(5,489)(9,297)(50,360)

Net changes of items other than shareholders’ equity
Balance at end of year

(4,552)¥ 34,713

(484)
¥

(577)

(1,055)
¥

496

14
¥

3

¥

Purchase of shares of subsidiaries resulting in change in scope of consolidation(6,393)(2,352)(58,659)(6,078)

Payments for purchase of property and equipment for own use(1,690)(1,275)(15,505)

34,636

Other, net

1,412

(716)

12,962(11,242)(9,393)(103,144)

Net cash used in investing activities
Cash flows from financing activities:

Year ended March 31,2019
Share acquisition Non- controllingTotalrightsinterests
net assets(4,890)55,813(44,863)

Proceeds from long-term debt

Increase (decrease) in short-term borrowings, net

402,354339,827

3,691,324(2,808,227)

Repayments of long-term debt

(306,096)(295,277)

Cash dividends(4,716)

Proceeds from issuance of bonds

65,00035,000596,330

Profit attributable to owners of parent

25,515

Redemption of bonds(20,000)(20,000)(183,486)–(4,064)–

Cash dividends paid

(6,333)(4,716)(58,109)

Other, net(2,279)(1,081)(20,909)

127,754

105,502

1,172,060

(28)

(276)

(260)

Net increase in cash and cash equivalents

7,678

15,85570,445

Cash and cash equivalents at beginning of year

69,91854,062

641,450(179)–

Balance at beginning of year¥924

¥ 32,537¥ 282,574

Purchase of treasury stock(695)

Disposal of treasury stock76

Change in scope of consolidation–

Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year¥

Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation(1,542)

Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents

(81)

(12)

(6,171)842¥ 32,525¥ 295,039

See accompanying notes to the consolidated financial statements.

Decrease in cash and cash equivalents resulting from change in scope of consolidation
Cash and cash equivalents at end of year¥

77,416¥

69,918(1,649)$710,246

See accompanying notes to the consolidated financial statements.

66

67

Financial Section

Fuyo Lease Group Integrated Report 2020

Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(1) Basis of Presentation
Fuyo General Lease Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account in conformity withgenerally accepted accounting principles in Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity withthose of their countries of domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements prepared by theCompany as required under the Financial Instruments and Exchange Act of Japan and have been prepared in accordance with generally
accepted accounting principles in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational 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 ¥109 to US$1.00, in effect at March 31, 2020, 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 are indicatedin 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 indirectlyby the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies havebeen included in the consolidated financial statements on an equity basis. All significant intercompany balances and transactions have been
eliminated in consolidation.
For fiscal years ended March 31, 2020 and 2019, consolidated accounting covered the parent company and 52 and 49 subsidiaries,
respectively. A total of 8 and 6 affiliated companies are accounted for under the equity method and incorporated into the consolidated financial
statements for fiscal years ended March 31, 2020 and 2019, 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 of thesecompanies 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 20 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.

(8) Securities
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 componentof net assets, net of the related deferred income taxes.
Other securities without available fair market values are stated at values determined using the moving-average cost method.
The cost of securities sold is determined based on the moving-average method.
When a significant decline in fair value below cost of an individual security is deemed to be other than temporary, the carrying value of theindividual security is written down to fair value.

(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 the leaseterm of the respective assets and assuming a residual value of zero.
Depreciation of other operating assets is computed by the straight-line method.
Depreciation of own-used assets is computed by the declining balance method. However, some domestic and overseas consolidated
subsidiaries apply the straight-line method for depreciation of buildings (excluding facilities attached to buildings) acquired on and after April 1,
1998 and facilities attached to buildings and structures acquired on and after April 1, 2016.
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).

(10) Allowance
Allowance for doubtful receivables
To cover possible losses from bad debts, the Company sets aside an allowance for the estimated amount of doubtful receivables deemed
uncollectible. This allowance is based on historical default rates for normal claims and the individual analysis of debtors’ financial positions
for classified 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 ¥1,819 million in the fiscal year ended March 31, 2019 and ¥1,979 million ($18,161
thousand) in the fiscal year ended March 31, 2020.

Provision for future lease payments
To cover possible losses from future lease payment receivables for operating leases (subleases), a provision for the amount deemed
uncollectible is recorded. This provision is based on the historical default rates for normal claims, the analysis of individual receivables withrespect to classified loans in addition to bankruptcy claims.

Provision for loss on guarantees
To cover possible losses on guarantees, the Company provides an allowance for estimated loss, taking into consideration the financial
condition of the providers of the financial guarantees as well as other factors.

Provision for automobile maintenance costs
To cover future payments for automobile maintenance costs that are required in specific lease transactions and maintenance services, aprovision for estimated cost is recorded by the Company.

Provision for share-based remuneration for directors (and other officers)
To prepare for the provision of the Company’s shares, etc. to directors and other officers of the Company based on the Regulations for
Provision of Shares to Officers, the Company posts the estimated amount of stock-based benefit obligation as of the end of the fiscal year.

(11) Deferred Assets
Deferred organization expenses(5) Lease Accounting

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

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 lease agreement
periods. The monthly lease payments corresponding to each period are allocated to revenue from operating leases for that period.

Business commencement expenses(6) Installment Sales

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

Bond issuance cost
Bond issuance cost is expensed upon payment.

Revenue and cost of installment sales are recognized when each installment payment becomes due.

(12) Income Taxes(7) Interest Expenses

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

Interest expense is allocated to cost of sales and other expenses based on the balances of the respective operating assets, which consist
principally of accounts receivable and leased assets, and other assets.
Interest expense classified as cost of sales is stated net of interest income.

(13) Other important matters for preparation of consolidated financial statements
Consumption Taxes
Transactions are recorded exclusive of consumption taxes and local consumption taxes.

Adoption of consolidated taxation system
Some of the consolidated subsidiaries have adopted the consolidated taxation system.

68

69

Financial Section

Fuyo Lease Group Integrated Report 2020(14) Retirement Benefits

Accounting Standard for Fair Value Measurement, etc.

The method for attributing estimated retirement benefits for periods of employee service• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019, ASBJ)

For the calculation of retirement benefit obligations, the benefit formula method is used to attribute estimated retirement benefits for the period
up to the end of the fiscal year.

• Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019, ASBJ)

Actuarial differences and prior service cost

• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019, ASBJ)

With respect to prior service cost, the Company expenses the entire amount of it in the fiscal year of occurrence, but one of the Company’s
domestic consolidated subsidiaries amortizes it 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 of occurrence.
With respect to actuarial differences, the Company expenses the entire amount of them in the fiscal year of occurrence, but one of theCompany’s 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.

• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020, ASBJ)

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 liability
and the net periodic pension cost. In the case of the termination allowance plan, retirement benefit obligations are recorded as the amountto be paid under voluntary retirement as of the fiscal year-end. In the case of the corporate pension plan, retirement benefit obligations arerecorded as the amount of actuarial liability calculated under the latest pension funding program.

Directors’ 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 required by theinternal corporate policy at the end of the consolidated fiscal year.

• Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019, ASBJ)(1) Overview
International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) provide detailed guidance on fair value
measurement that is similar in content (in International Financial Reporting Standards (IFRS), IFRS 13, Fair Value Measurement, and in US
GAAP, Accounting Standards Codification Topic 820, Fair Value Measurement, respectively). In light of this, Accounting Standards Boardof Japan (ASBJ) has been working to ensure the consistency of Japanese GAAP with international accounting standards, primarily withrespect to guidance and disclosures regarding the fair value of financial instruments, and published the Accounting Standard for Fair Value
Measurement, etc.
As a basic policy for the development of the Accounting Standard for Fair Value Measurement by ASBJ, all provisions of IFRS 13 shall bebasically incorporated from the viewpoint of improving comparability of financial statements between companies in Japan and overseas byusing a uniform calculation method. In addition, other treatment of individual items shall be provided to the extent that comparability between
financial statements is not significantly impaired, taking into account the practices, etc., that have been conducted in Japan so far.
(2) Scheduled date of adoption
Effective from the beginning of the fiscal year ending in March 31, 2022.
(3) Impact of adoption of such accounting standards
The amounts that affect the consolidated financial statements by adopting the Accounting Standard for Fair Value Measurement, etc., have notyet been determined.

Accounting Standard for Disclosure of Accounting Estimates, etc.
(15) Derivatives and Hedging Activities• Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31, 2020, ASBJ)

With regard to foreign currency-related derivative financial instruments, the Company uses forward foreign exchange contracts. With regard tointerest rate-related instruments, the Company uses interest rate swap contracts and interest rate cap contracts.
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 affect its
foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives for the purpose of hedging risks
associated with interest rate fluctuations that affect its borrowings.
The Company uses derivatives, in accordance with its internal “Basic Policy for Managing Market and Liquidity Risks,” for the purpose ofhedging risks associated with interest-rate and foreign currency fluctuations arising from its sales and financial operations.
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 matching
criteria are not remeasured at market value, but the differentials paid or received under the swap agreements are recognized and included ininterest expense or income.

(1) Overview
International Accounting Standards Board (IASB) published International Accounting Standards (IAS) No. 1, Presentation of Financial
Statements (“IAS No. 1”) in 2003. With respect to the Sources of Estimation Uncertainty that are required to be disclosed in paragraph 125,
considering requesting the disclosure in the information of the notes under Japanese GAAP as information that is highly useful to users offinancial statements is requested. Accounting Standards Board of Japan has developed and published Accounting Standard for Disclosure of
Accounting Estimates (the “Accounting Standard”).
The basic policy of Accounting Standards Board of Japan in developing the Accounting Standard is not to expand individual notes, but
to indicate principles (disclosure purposes) and to determine the specific content of disclosure in light of the purpose of disclosure by thecompany. In development, the provisions of paragraph 125 of IAS No. 1 have been referred to.
(2) Scheduled date of adoption
Effective from the end of the fiscal year ending in March 31, 2021.

(16) Per Share Information• Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections(ASBJ Statement No. 24, March 31, 2020, ASBJ)

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.

(17) Recently Issued Accounting Standards Not Yet Adopted
Accounting Standard for Revenue Recognition, Etc.
• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020, Accounting Standards Board of Japan (ASBJ))• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 31, 2020, ASBJ)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020, ASBJ)(1) Overview
International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) jointly developed comprehensive
accounting standards for revenue recognition. In May 2014, they published 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 Topic 606 is effective from thefiscal year commencing after December 15, 2017, ASBJ has developed comprehensive accounting standard together with its implementation
guidance.
As a basic policy for the development of the Accounting Standard for Revenue Recognition by ASBJ, from the viewpoint of comparability
between financial statements, which is one of the benefits consistent with IFRS 15, the basic principles of IFRS 15 shall be adopted as thestarting point, and accounting standards shall be established. In addition, in cases where there are items that should be considered in practice,etc., that have been implemented in Japan, alternative treatment shall be added to an extent that does not impair comparability.
(2) Scheduled date of adoption
Effective from the beginning of the fiscal year ending in March 31, 2022.
(3) Impact of adoption of such accounting standards
The amounts that affect the consolidated financial statements by adopting the Accounting Standard for Revenue Recognition, etc., arecurrently being evaluated.

70

Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections, etc.

(1) Overview
In response to the recommendation to consider improving the information in the notes pertaining to Accounting Principles and Procedures
Adopted in Cases Where Provisions on Relevant Accounting Standards, Etc. Are Unclear, Accounting Standards Board of Japan madethe necessary revisions and published them as Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections.
In order to enhance the information in the notes pertaining to Accounting Principles and Procedures Adopted in Cases Where Provisions on
Relevant Accounting Standards, Etc. Are Unclear, the provisions of the Notes to Corporate Accounting Principles (Note 1-2) are to be handed
over in order not to affect the practices to date in cases where the provisions on relevant accounting standards, etc., are clear.
(2) Scheduled date of adoption
Effective from the end of the fiscal year ending in March 31, 2021.

(18) Additional information
Board Benefit Trust (BBT) Plan
Based on the resolution reached at the 49th Annual General Meeting of Shareholders held on June 22, 2018, the Company has introduced a
new stock-based remuneration plan or Board Benefit Trust (BBT) (the “Plan”) for the Company’s 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.”).
(1) Overview of the transaction
The Plan is a stock-based remuneration plan, under which the Company’s shares will be acquired by a trust (the trust to be established under
the Plan is referred to hereinafter as the “Trust”) using funds that the Company will contribute, and the Company’s shares and cash equivalent
to the market price of the Company’s shares (the “Company’s share, etc.”) will be provided to the Directors, etc. from the Trust in accordancewith the Regulations for Provision of Shares to Officers established by the Company. In principle, the Company’s shares, etc. will be provided
to the Company’s Directors, etc. on their retirement.

71

Financial Section(2) Treasury stock remaining in trust
The shares of the Company remaining in trust are recorded as treasury stock under net assets based on the book value in trust (excluding theamount of incidental costs). The book value and the number of shares of treasury stock under the plan are: ¥694 million and 104,600 shares
as of March 31, 2019 and ¥680 million ($6,247 thousand) and 102,500 shares as of March 31, 2020, respectively.
(3) Book value of loans recorded based on the gross method
Not applicable.

Impact of the spread of novel coronavirus infections on accounting estimates
At the end of Fiscal 2019 (as of March 31, 2020), the Group calculated and considered reasonable amounts based on the information available
at the time of preparing the consolidated financial statements for the collectability of lease receivables, etc., the profitability of assets for lease,etc., held by the Group, and determination of impairment of goodwill, etc.
The outlook for the economy is expected to remain severe due to the ongoing and rapid deterioration of economic activities caused by the
global expansion of the novel coronavirus infections.
However, the Group has made an accounting estimate based on the assumption that the spread of the novel coronavirus infections will
settle down around the end of the first half of the fiscal year ending in March 31, 2021.
Items and events that may have a significant impact on the consolidated financial statements as they pertain to the spread of the novel
coronavirus infections are as follows:(1) Allowance for doubtful accounts
The Group records an allowance for doubtful accounts for the estimated amount of losses incurred in the event of uncollectible receivables.
Allowance for doubtful accounts is recorded at an amount estimated to be uncollectible based on the historical rate of bad debts for general
receivables, and on the basis of the collectability of doubtful receivables and distressed receivables, etc., on a case-by-case basis. Allowancefor doubtful accounts may require additional allowances due to changes in the historical rate of bad debts and the judgment of the collectabilityof individual receivables, depending on the occurrence of bad debts, the status of collection of individual receivables, etc., after the spread of
the novel coronavirus infections.
(2) Impairment of non-current assets (leased assets, etc.)
In assessing the recoverability of impairment of non-current assets, the Group groups assets by company, and for asset groups whose
profitability has declined significantly, the book value of non-current assets is impaired to the recoverable amount, and the amount of thedecrease is recorded as an impairment loss.
The recoverable amount of non-current assets is calculated based on the assumptions of future cash flows, discount rates, net selling price,
etc. Therefore, if it becomes difficult to achieve the initial expected income due to the impact of the spread of the novel coronavirus infections,or if the assumptions such as future cash flows change, an impairment loss on non-current assets may be recorded.
(3) Impairment of goodwill
The Group estimates the effective period of goodwill and amortizes the goodwill on a straight-line basis over such period. In addition, theCompany is considering the profitability of the goodwill based on the results of subsidiaries, business plans, etc. Due to the impact of the
spread of the novel coronavirus infections, if it becomes difficult to achieve the initial expected income in the future, and if the Company
recognizes the need for impairment, it may record an impairment loss on goodwill in the future.

Fuyo Lease Group Integrated Report 2020

2. FINANCIAL INSTRUMENTS
The position in respect of financial instruments for the fiscal year ended March 31, 2020, was as follows.

(1) Policy on financial instruments
The Fuyo Lease Group is engaged in leasing and installment transactions for machinery and equipment and financial transactions such as theprovision of operating loans. The Group uses direct and indirect financing to procure funds for purchasing assets to lease or to sell throughinstallment sales and for providing operating loans to customers. The Group’s indirect financing mainly consists of loans from financial
institutions, and its direct financing includes issuing bonds payable, commercial, paper and securitization of receivables. As the Group holds
financial assets and financial liabilities that are subject to interest rate fluctuation, assets and liabilities are comprehensively managed throughasset-liability management (ALM) to mitigate the negative impact of interest rate fluctuations.
Derivative transactions are only used for mitigating currency and interest rate risks and are not used for speculative purposes.

(2) Financial instruments and their risks
Lease receivables, investment assets, and operating loans are trade receivables due from customers and subject to credit risks associatedwith customer default. Foreign currency-denominated receivables and payables arising from overseas business are subject to risks associatedwith foreign currency fluctuations.
Marketable securities and investment securities include business partners’ shares, bonds, and investments in limited partnership. Thoseinvestments 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 andinstallment sales trade receivables are used to procure funds for purchasing assets to lease or sell through installment sales to customers.
These payables are subject to risks that may compel the Company to procure funds with exceptionally high interest rates and to liquidity risks(funding risks) that may negatively affect the Company’s ability to obtain funding and result in losses. A portion of long-term loans have floatinginterest rates and are therefore subject to interest rate risks.
The Company uses foreign currency-related derivative contracts to reduce risks associated with foreign currency fluctuations that affectforeign currency-denominated receivables and payables. The Company uses interest rate-related derivatives to reduce risks associated withinterest rate fluctuations that affect borrowings.

(3) Risk management system for financial instrumentsi) Management of credit risks (default risks)
The Company’s management system and rules for credit risks are prescribed in its internal “Basic Policy for Managing Credit Risks.” For alltransactions that involve credit risks, the Company uses a credit risk measurement method, identifies on a timely basis the location and size ofcredit risks, and responds adequately as necessary.
The Company’s credit risk department is engaged in the following duties: 1) daily monitoring of the effectiveness of the credit risk
management system, 2) screening and management of credit transactions involving customers, 3) maintenance and enhancement of risk
asset soundness, 4) enhancement of protection against doubtful receivables and implementation of measures related to collection of thosereceivables, and 5) guidance and support for the Company’s offices and affiliated companies. The department also rates 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 management, portfolio
investment and management, credit risk measurement, guidelines on pricing of individual credits, and self-assessment and recognitionof adequate credit allowances based on the self-assessments. Further, the department regularly monitors the status of the Company’s
main customers, manages payment-due dates and credit balances on a customer-by-customer basis, and closely monitors customers to
identify potential impediments to the collectability of receivables (e.g., due to worsening financial condition) and takes steps to mitigate such
impediments.
The effectiveness and appropriateness of credit risk management are examined through internal audits.

ii) Management of market risks (risks associated with foreign exchange rates and interest rates)
The Company’s market risk management rules and procedures are prescribed in its internal “Basic Policy for Managing Market and Liquidity Risks.”
Market risks are controlled by comprehensively examining various factors such as financial position (revenues and shareholders’ equity),balance between target revenues and risk levels, interest rate prospects, market environments, past results, and the level of risk management
for various risks. The Company manages its exposure to risks when deemed necessary for the purpose of reducing risks and expanding
revenues.
The Company’s ALM Committee meets once a month as a general rule, and on an ad-hoc basis as needed, to review and examine practicalmeasures related to market risk management and to monitor performance. At the monthly meeting, the finance division reports on mattersrelated to market risk management, including the status of market risk control, interest rate prospects, market environment developments, andhedge transactions.
The Company’s consolidated subsidiaries are subject to the Company’s “Basic Policy for Managing Market and Liquidity Risks.”(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 Company’s 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.

72

73

Financial Section(iii) Price fluctuation risk management
With regard to marketable securities and investment securities, the Company regularly monitors the market values of these securities as wellas the financial status of issuers and continuously reviews its outstanding position considering market conditions and its relationship with the issuers.

Fuyo Lease Group Integrated Report 2020

The following table presents the carrying value and fair value of financial instruments at March 31, 2020 and 2019. The following table
does not include financial instruments for which it is extremely difficult to determine the fair value.
Year ended March 31, 2020(iv) Derivatives contracts
With regard to derivatives, the Company uses forward foreign exchange transactions for the purpose of hedging risks associated with 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 Company’s finance division is authorized to engage in and manage derivative contracts, in accordance with internal regulations and individuals
authorized on job responsibilities and pursuant to the approval of the Company’s president (CEO) or officer in charge of the finance division.
The Company’s consolidated subsidiaries’ derivative-related transactions are subject to the Company’s internal regulations “Basic Policy forManaging Market and Liquidity Risks.” In accordance with the Company’s “Regulations on Managing Associated Companies,” the Company’s
consolidated subsidiaries report to the Company on derivative-related transactions. These reports explain the subsidiary’s policy on engaging
in the transaction, provide a validation of the transaction’s objective, and detail the derivative transaction’s status, counterparties, outstanding
positions, and unrealized gains/losses.
(v) Quantitative information on market risk
The major types of financial instruments affected by interest rate risk, the Group’s main risk factors, are “Installment sales trade receivables,”“Lease receivables and investment assets,” “Accounts receivable - operating loans,” other marketable securities recorded under “Marketablesecurities and investment in securities,” “Bonds payable,” “Long-term loans from banks and other financial institutions,” “Payables under fluidity
long-term lease receivables and installment sales trade receivables,” and interest rate swaps included in “Derivative contracts.” The Group
performs quantitative analysis in managing the risk of interest rate fluctuations. This quantitative analysis incorporates the potential change
in value of these financial assets and liabilities based on a reasonable range of potential interest rate movements. To calculate the potentialchange in value, the financial assets and liabilities are split into fixed-rate and variable-rate categories. For the fixed-rate category, the Company
allocates the book value of the instruments into appropriate categories based on their interest-payment dates and applies an appropriate
potential range of interest rate movements to each category. Assuming all risk factors other than interest rates remain constant, as of March
31, 2020, a 10 basis point (0.1%) change in interest rates would result in a ¥3,784 million ($34,724 thousand) change in the fair value of thesefinancial assets and liabilities. This potential change in value is based on the assumption that all risk factors other than interest rates remain
constant and does not incorporate the effects of correlation between interest rates and the other risk factors. If interest rates fluctuate beyond
the assumed reasonable range, the value of these financial assets and liabilities may be affected by more than the Group has estimated.

Carrying value (A)Cash and deposits*1,2¥

Installment sales trade receivables*2

77,436(B) - (A)¥77,436¥–78,36279,706

1,343

Lease receivables and investment assets*2

1,105,398

1,159,082

53,683

Accounts receivable - operating loans*2

306,444309,853

3,408

Marketable securities and investment in securities
207,295

207,295

Total assets

Other marketable securities¥ 1,774,937¥ 1,833,373¥

58,435

Short-term loans from banks and other financial institutions

¥

¥

¥

–

530,317–

530,317

Commercial paper

450,700

450,700

Lease obligations (current liabilities and long-term liabilities)

20,72020,720–Bonds payable (current portion included)

170,000

169,756(243)

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

954,837

965,448

10,610–96,26596,710¥ 2,222,841¥ 2,233,652

¥

444

¥

¥

¥

10,811

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

–
(559)

¥

–
(716)

(559)

¥

–
(157)

(716)

¥

(157)

Year ended March 31, 2020
Carrying value (A)Fair value (B)(B) - (A)Thousands of U.S. dollarsiii) Management of liquidity risks associated with funding (risks of failure to pay on due date)
The Company’s management system and rules for liquidity risks are prescribed in its internal “Basic Policy for Managing Market and Liquidity
Risks.”
With regard to liquidity risks (funding risks), the Company’s 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, analyzes
investment and cash receipt/disbursement data, and summarizes information from each division to determine the impact on the Company’s
funding activities. The division also adequately controls liquidity, enhances capital efficiency, and optimizes liquidity risks and funding costs.
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 for each category.
The Company’s finance division also monitors consolidated subsidiaries’ funding status and takes appropriate action as necessary based onthat status.

Cash and deposits*1,2(4) Supplementary explanation of matters related to fair values of financial instruments
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 are used. Contract
amounts and other derivative transaction data presented in the notes on derivative transactions are nominal contract amounts or notionalamounts used in calculations and do not indicate the amount of exposure.
Fair values of financial instruments as of March 31, 2020, are listed in the table below. Financial instruments for which estimation of fairvalue is impracticable are not included. Financial assets and liabilities not included in the table are omitted from disclosure as they are of lessimportance in terms of value.

Fair value (B)Millions of yen$

Installment sales trade receivables*2

710,424$

710,424$–

718,924

731,251

12,327

Lease receivables and investment assets*2

10,141,275

10,633,781

492,506

Accounts receivable - operating loans*2

2,811,416

2,842,691

31,275Marketable securities and investment in securities
1,901,790

1,901,790

Total assets

Other marketable securities$ 16,283,829$ 16,819,937$

536,108

Short-term loans from banks and other financial institutions

$

$

$

–

Commercial paper

4,865,298

4,865,298–

4,134,862

4,134,862

190,093

190,093–

Bonds payable (current portion included)

1,559,633

1,557,395(2,238)Long-term loans from banks and other financial institutions (current portion included)
Payables under fluidity long-term lease receivables and installment sales tradereceivables (current portion included)
Total liabilities

8,759,981

8,857,327

97,346883,170

887,249

4,079$ 20,393,037$ 20,492,224

$

$

$

$

Lease obligations (current liabilities and long-term liabilities)–

99,187

Derivative contracts*3
Derivative contracts not accounted for as hedges
Derivative contracts accounted for as hedges
Total derivative contracts–(5,129)$(5,129)–(6,574)$(6,574)–(1,445)$(1,445)74

75

Financial Section

Fuyo Lease Group Integrated Report 2020

Liabilities

Year ended March 31, 2019
Carrying value (A)Fair value (B)(B) - (A)(1) Short-term loans from banks and other financial institutions, (2) Commercial paper

Millions of yen
Cash and deposits*1,2¥

71,173

Installment sales trade receivables*2¥

71,173¥–96,012

97,466

1,454

Lease receivables and investment assets*2

1,082,446

1,133,875

51,429Accounts receivable - operating loans*2

297,729

303,510

5,781

Marketable securities and investment in securities
Other marketable securities

200,516

200,516

Total assets¥ 1,747,878¥ 1,806,542¥

Short-term loans from banks and other financial institutions

¥

¥

¥

Commercial paper

491,659
500,700

491,659–

500,700

58,664––

Lease obligations (current liabilities and long-term liabilities)

25,696

25,696–

Bonds payable (current portion included)

125,000

124,943(56)

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

890,394

903,580

13,186

66,304

66,857553¥ 2,099,754¥ 2,113,437

¥

¥

¥

¥

13,682Derivative contracts*3
Derivative contracts not accounted for as hedges
Derivative contracts accounted for as hedges
Total derivative contracts

–
(479)

¥

(479)

–
(655)

¥

(655)

–
(176)

¥

Fair values of short-term loans from banks and other financial institutions and commercial paper are based on their book values because they
are settled over the short-term, so their book values closely approximate their fair values.

(3) Lease obligations (current liabilities and long-term liabilities)
Lease obligations are stated on the consolidated balance sheets before interest deductions. The amount recorded as the fair value is theircarrying value on the balance sheets. The difference between the carrying value of lease obligations and their fair value calculated by discounting
at the rate applied to new contracts is ¥145 million ($1,331 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 theseloans and payables with only a short time difference, and the Company’s credit status has not changed materially since issuance, so their bookvalues are deemed to closely approximate to their fair values. To calculate the fair values of fixed-rate loans and payables in these categories,
the instruments are first allocated to categories according to maturity terms. Total principal and interest for each category is discounted at anotional rate that is assumed would apply to borrowing in the same amount.
Note: 2. Financial instruments whose fair values are deemed extremely difficult to determine
March 31, 2020
Thousands of
U.S. dollars(176)*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.

Millions of yen

Other securities
Unlisted shares*1

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

Assets¥

Subsidiary’s shares / associated companies’ shares*1

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

Present values of lease receivables and investment assets are calculated by subtracting major administrative and maintenance expenses fromthe total of uncollected lease receivables and lease payment receivables. The Company calculates the fair values of doubtful receivables bysubtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amount closely approximates
the doubtful receivables’ fair values. Estimated losses on bad debts are calculated based on estimated cash flows or estimated net realizablevalue covered by collateral or guaranty.
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 of leasereceivables and investment assets under sublease contracts and (b) their fair valued calculated by discounting at the rate applied to newcontracts is ¥390 million ($3,584 thousand).

Fair values are based on amounts obtained from relevant financial and other institutions.

60,697
220,604

5,225

47,941

Investments in limited investment partnerships*2

83,639767,331

119,526$ 1,096,573¥*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.

Note: 3. Redemption schedule by term for monetary claims and securities with maturity after March 31, 2020

Within one year

March 31, 2020
Over one year andOver five years andwithin five years
within ten years

Over ten years

Millions of yen
Cash and deposits
Installment sales trade receivables
Lease receivables and investment assets
Accounts receivable - operating loans¥

77,436¥

31,281

–

¥

–

¥

–

44,425

1,993

2,053

307,532

619,910

132,60746,78956,887

213,086

31,6005,550

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

¥

–

–

–

–

3,307

18,288

11,243

–

–

–

–

–

449

80,28730,9183,346

476,895(4) Accounts receivable - operating loans
Fair values of floating-rate operating loans are based on their book values. Market rates are reflected in the rates on floating-rate operating loans
with only a short time difference, so their book values closely approximate their fair values as long as the borrower credit status does not changematerially after loan issuance. Fair values of fixed-rate operating loans are calculated by discounting total principal and interest for each borrower
at the rate applied to new contracts. The Company calculates the fair values 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 receivables’ fair values.
Estimated losses on bad debt are calculated based on estimated cash flows or estimated net realizable value covered by collateral or guaranty.

$

Preferred securities / beneficial interest in trusts*1

Fair values are calculated by discounting uncollected receivables at the rate applied to new contracts. The Company calculates the fair values of
doubtful receivables by subtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amountclosely approximates the doubtful receivables’ 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

6,615
24,045(1) Cash and deposits(5) Marketable securities and investment in securities

76

Within one year¥

975,997¥

208,363

March 31, 2020
Over one year andOver five years andwithin five years
within ten years¥

57,739Over ten years

Thousands of U.S. dollars
Cash and deposits$

710,424

$

–

$

–

$

–

Installment sales trade receivables
Lease receivables and investment assets

286,987

407,572

18,287

18,836

2,821,401

5,687,249

1,216,583

429,264

Accounts receivable - operating loans

521,906

1,954,923

289,91050,922Marketable securities and investment in securities
Available-for-sale securities with maturities
Bonds (government)
Bonds (corporate)
Bonds (other)
Other
Total

–

–

–

–

30,345

167,784

103,152

–

–

–

–

–

4,124

736,582

283,659

30,702$ 4,375,187$ 8,954,110$ 1,911,591$

529,724

77

Financial Section

Fuyo Lease Group Integrated Report 2020

The carrying values and aggregate fair value of securities with determinable market values at March 31, 2020 and 2019, were as follows:

Note: 4. Repayment schedule by term for bonds, long-term debt, and other interest-bearing debt after March 31, 2020.

Within one year

Over one year
and within two
years

March 31, 2020
Over two years Over three years
and within three and within four
years
years

Over four years
and within five
years

Over five years¥¥

March 31, 2020
Unrealized
Unrealized
gains
lossesCost orbook value

Millions of yen

Millions of yen
Short-term loans from banks and other financial institutions
Commercial paper¥

530,317

¥

–

¥

–

¥

–

–

–

–

–

–

–

Lease obligations (current liabilities and long-term liabilities)

7,417

4,999

3,510

2,264

1,051

1,477

Bonds payable (current portion included)

20,00030,00030,00025,00035,00030,000Long-term loans from banks and other financial institutions(current portion included)274,820233,864

177,699

104,495

75,66688,291

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

41,39629,49317,023

3,509

4,792

51

¥ 1,324,651¥ 298,356¥ 228,233¥ 135,268¥ 116,510¥ 119,820

Within one year

Over one year
and within two
years

March 31, 2020
Over two years Over three years
and within three and within four
years
years

Over four years
and within fiveyears

Available-for-sale securities:–

450,700

Total

Shares¥ 17,305¥ 45,977

819¥ 62,462

Bonds

91,910674

12792,456

Other

51,396

2,047

1,068

52,375

Commercial paper$ 4,865,298
4,134,862

$

–

$

–

–

$

–

–

–

$

–

$

Millions of yen

SharesBonds¥ 16,639¥ 48,648

693¥ 64,594

81,400885–

82,286

Other

52,382

1,590

336

53,636–

Lease obligations (current liabilities and long-term liabilities)

68,05345,86432,204

20,773

9,647

13,551

183,486

275,229

275,229

229,358

321,101

275,229

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

2,521,288

2,145,546

1,630,274

958,672

694,184

810,018

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

379,782

270,578

156,175

32,19643,967472$ 12,152,769$ 2,737,217$ 2,093,882$ 1,240,999$ 1,068,899$ 1,099,270¥

March 31, 2020
Unrealized
Unrealized
gains
lossesCost orbook value–

Bonds payable (current portion included)

Total

Fair value

Available-for-sale securities:

Over five years–¥

March 31, 2019
Unrealized
Unrealized
gains
lossesCost orbook value

Thousands of U.S. dollars
Short-term loans from banks and other financial institutions

Fair value

Fair value

Thousands of U.S. dollars
Available-for-sale securities:
SharesBonds$ 158,763$ 421,809

7,518$ 573,054

843,211

6,185

$

1,167

848,229

Other

471,524

18,784

9,801

480,507

Available-for-sale securities whose fair values are not readily determinable as of March 31, 2020 and 2019, were as follows:
Carrying value
2020

Marketable securities and investment in securities as of March 31, 2020 and 2019, consisted of the following:Thousands of
U.S. dollars

Millions of yen

3. MARKETABLE SECURITIES AND INVESTMENT IN SECURITIES

2019

2020

2,742

$ 33,065

45,169842,905

Available-for-sale securities:
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

¥

Shares
Other

3,604

¥

91,876

Current:
Bonds

¥

Other
Total

92,456¥142,380¥

234,837¥

82,286$848,229

97,243

1,306,239

179,529$ 2,154,468

Proceeds from sales of available-for-sale securities and resultant gross realized gains and losses for the years ended March 31, 2020 and 2019,were summarized as follows:
Carrying value

Non-current:
Shares

¥

Other
Total

66,066¥

1,871¥

67,93867,337$

1,562¥

68,899606,119
17,172$623,291

2020

Proceeds
Realized gain
Realized loss

Thousands of
U.S. dollars

Millions of yen

¥

2019

406

¥

2020

2,488

$

3,729

395

941

3,629

0

–

0

Impairment loss on securities:
During the fiscal years ended March 31, 2020, the impairment loss recorded on securities amounted to¥545 million ($5,004 thousand) (securities
classified as available-for-sale securities: ¥545 million ($5,004 thousand)).
The Company recognizes the impairment loss where the decline in the period-end price is greater than or equal to 50% of the acquisition cost.
Where the decline in the period-end price is between 30% and less than 50% of the acquisition cost, the company may recognize 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 the highest/lowest price during the fiscal
years ended March 31, 2020 and 2019.

78

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Financial Section

Fuyo Lease Group Integrated Report 2020

As of March 31, 2020, the following assets were pledged as collateral for current and long-term obligations of ¥45,139 million ($414,128 thousand).

4. ACCUMULATED DEPRECIATION FOR PROPERTY AND EQUIPMENT
Accumulated depreciation of property and equipment for the fiscal years ended March 31, 2020 and 2019, were as follows:
Millions of yen
2020

Leased assets

¥

2019

170,851¥

Thousands of
U.S. dollars

Cash and deposits

2020

Installment sales

159,309$ 1,567,442

Millions of yen

Thousands of
U.S. dollars

¥

$

7,524

19,819

181,829

3,712

34,062

8,294

6,426

76,096

Accounts receivable – other loans to customers

2,950

2,315

27,068Other (Current assets)

79

731

2,983

27,369Lease assets

26,123

239,664

Other operating assets

19,020174,501

Own-used assets

11,185

102,622¥ 86,137$ 790,255

Lease and other contract receivables

Total

The breakdown of short-term borrowings as of March 31, 2020 and 2019, were as follows:
Thousands of
U.S. dollars

Millions of yen
2020

¥

2019

4,865,298

0.47%

450,700

500,700

4,134,862

0.04%

Payables under securitized lease receivables

28,90022,900265,1380.11%

1,009,917

1,015,259

9,265,298–

6. COMMITMENTS AND CONTINGENT LIABILITIES

20,302

25,103

186,264–

Contingent liabilities at March 31, 2020 and 2019, were as follows:¥ 1,030,220¥ 1,040,362

9,451,562–(1) Guarantees provided on borrowings of business partners etc.

Lease obligations¥

491,6592020$

Besides the above, as third-party security for bank loans taken out by customers, the Company maintains deposits of ¥16 million ($147 thousand)in installment sale receivables and ¥612 million ($5,616 thousand) in investment securities. The Company maintains deposits of ¥3 million ($28
thousand) in investment securities for the purpose of sales transactions.

Commercial paper
Total

530,317Weighted-averageinterest rate$

2020
Thousands of
U.S. dollars

Millions of yen
2020¥

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

170,0002019¥

125,000$

Weighted-averageinterest rate

2019

2020

As a guarantor of indebtedness of:2020

Mizuho Bank, Ltd. *1–$ 132,097

1,559,633

0.23%

Marubeni Fuyo Auto Investment (Canada) Inc.
FANTASTIC FUNDING CORPORATION *1

1,915

2,066

17,572

1,748–

16,039Fuyo General Lease (Asia) Pte. Ltd. *1

1,705

1,891

15,650Sumitomo Realty & Development Co., Ltd *1

1,272

1,272

11,672

1,207

1,197

11,080¥14,398¥954,837

890,394

8,759,981

0.62%

96,26566,304

883,1700.47%

1,221,103

1,081,698

11,202,784–

AEON Mall Co., Ltd.

336,216

291,825

3,084,556–

JAPAN SECURITIZATION CORPORATION *1

956

876

8,775

799

799

7,339

Less current portion
Lease obligations¥

884,886

789,872

8,118,228–

MONEY PARTNERS CO., LTD.

417

593

3,829

–

AEON RETAIL CO., LTD.

682

676

6,263

8,122,057–

XYMAX ALPHA Corporation *1

633

702

5,814

MaruzenJunkudo Bookstores Co., Ltd. *1

596

801

5,475

Sumitomo Mitsui Trust Bank, Limited *1

499

–

4,587

IBM Japan Credit LLC *1

407

373

3,740

–

372

–

234

217

2,151

885,304¥

790,466

The projected long-term debt servicing amount by fiscal year, as of March 31, 2020, was as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2021

¥

$

336,216

3,084,556

2022

293,357

2,691,353

2023

224,7222,061,679

2024

133,004

1,220,225

2025

115,458

1,059,2522026 and thereafter

118,343

1,085,719¥ 1,221,103$ 11,202,784

Total

Thousands of
U.S. dollars

Millions of yen

The breakdown of long-term debt as of March 31, 2020 and 2019, were as follows:

Bonds payable

21,953

Lease receivables and investment assets

Own-used assets

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT AND PLEDGED ASSETS

2,392
820

Other operating assets

Short-term loans from banks and other financial institutions

80$

Sumitomo Mitsui Banking Corporation *1
JCAM AGRI. CO., LTD.
Employees
Others
Total

¥

10

22

98

27,71624,082

254,282

35,353$ 502,634

54,787¥*1. The Company has guaranteed loans held by Mizuho Bank, Ltd. and others.

(2) On both March 31, 2020 and 2019, one of the Company’s domestic consolidated subsidiaries engaged in business guarantee operations
which resulted in it becoming a credit guarantor of a total of ¥47,028 million ($431,458 thousand) and ¥55,701 million in indebtedness withrespect to general customers and other entities.
(3) The Company, as a lender, entered into loan commitment agreements as of March 31, 2020 and 2019 amounting to ¥2,883 million ($26,457
thousand) and ¥4,715 million, respectively. The loans provided under these credit facilities as of March 31, 2020 and 2019 amounted to ¥1,142
million ($10,478 thousand) and ¥560 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.

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Fuyo Lease Group Integrated Report 2020

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9. CASH AND CASH EQUIVALENTS

Major components of selling, general and administrative expenses for the fiscal years ended March 31, 2020 and 2019, were as follows:

The main components of cash and cash equivalents at March 31, 2020 and 2019, were as follows:

Thousands of
U.S. dollars

Millions of yen
2020

Provision of allowance for doubtful accounts¥

Bad debts expenses

2019

564

¥

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

–

$

5,175

770

659

7,065

Employees' salaries, allowances and bonuses

12,72011,416

116,704

Time deposits with maturity of over three months

Provision for bonuses

2,135

2,000

19,592

Cash and cash equivalents

Provision for directors' bonuses

182

178

1,674

1,041

858

9,552

Provision for directors' retirement benefits

35

46

330

Provision for share-based remuneration for directors (and other officers)

189

137

1,737

Welfare expenses

2,917

2,701

26,765

Rent expenses

1,631

1,436

14,969Depreciation

2,124

1,680

19,493

Amortization of goodwill

1,132

768

10,388Retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

2020

Cash and deposits

2020

2019

2020

¥ 77,436¥ 71,173$ 710,424(19)(1,255)(178)¥ 77,416¥ 69,918$ 710,246(2) Major components of assets and liabilities of a newly consolidated subsidiary due to acquisition of sharesFiscal 2019 (from April 1, 2019 to March 31, 2020)
The following includes the breakdown of assets and liabilities at the time of acquisition and consolidation of LN Holdings, Co., Ltd., NOC
Outsourcing & Consulting Inc., NOC Techno-Solutions Inc., and NOC Biz Partners Inc., and the relation between the purchase price andexpenditure for the acquisition (net price).

Current assets

Millions of yen

Thousands of
U.S. dollars

2020

2020

3,139

$ 28,798

8. IMPAIRMENT LOSS

Non-current assets

3,213

29,484The Group recorded impairment losses for the following asset groups:

Goodwill

6,946

63,725Current liabilities(1,698)(15,586)

Non-current liabilities(2,116)(19,413)

Valuation difference(1,179)(10,824)

Acquisition cost of shares

8,304

76,184

Cash and cash equivalents(1,910)(17,525)

6,393$ 58,659

Fiscal 2019 (from April 1, 2019 to March 31, 2020)
Location

Use

Type

AmountMillions of yen

Chiyoda-ku, Tokyo

Business assets

Minato-ku, Tokyo

Idle assets

Kingdom of Thailand

Business assets

SoftwareTelephonesubscription rights
Buildings, etc.

¥

Thousands of
U.S. dollars

1,274$ 11,692

1

12

7

69

We have grouped based on offices, etc., as the minimum unit for generating cash flows. In addition, idle assets are grouped by individual assets.
With respect to the software and buildings, etc., mentioned above, the Company and two domestic consolidated subsidiaries reviewed the
impairment of non-current assets in accordance with this grouping. As a result, the book value of an asset group whose profit or loss fromoperating activities that is continually negative or is expected to be negative is reduced to the recoverable amount, and such reduced amount isrecorded in extraordinary losses as an impairment loss. Excluding divertible assets, the recoverable amount is measured based on the value in use.
However, since no future cash flows are expected, the value in use is evaluated as zero.
In addition, with respect to the telephone subscription rights mentioned above, due to a decrease in dormitories and company housing, etc., forwhich integrated telecommunication services for residential buildings are provided, one domestic consolidated subsidiary recorded extraordinary
losses as an impairment loss for the entire amount of the book value of telephone subscription rights that have become idle with a net sales value
based on the market value of zero, except a memorandum value of 1 yen remaining.
Fiscal 2018 (from April 1, 2018 to March 31, 2019)
Location

Use

Type

AmountMillions of yen

Tokyo metropolitanarea, etc.
Nemuro City,
Hokkaido

Idle assets

Telephonesubscription rights

Idle assets

Leased assets

¥

0
22

We have grouped based on offices, etc., as the minimum unit for generating cash flows. In addition, idle assets are grouped by individual assets.
With respect to the telephone subscription rights mentioned above, due to a decrease in dormitories and company housing, etc., for which
integrated telecommunication services for residential buildings are provided, one domestic consolidated subsidiary recorded extraordinary losses as
an impairment loss for the entire amount of the book value of telephone subscription rights that have become idle with a net sales value based on
the market value of zero, except a memorandum value of 1 yen remaining.
In addition, with respect to the leased assets mentioned above, the book value of the above assets is reduced to the recoverable amount due
to the scheduled for retirement at one domestic consolidated subsidiary, and such amount of reduction is recorded in extraordinary losses as an
impairment loss. The recoverable amount is measured based on the value in use. However, since no future cash flows are expected, the value in
use is evaluated as zero.

Difference: net consideration paid for acquisition¥¥

Fiscal 2018 (from April 1, 2018 to March 31, 2019)
The following includes the breakdown of assets and liabilities at the time of acquisition and consolidation of G.I HOLDINGS INC. and INVOICE CO.,LTD., and the relation between the purchase price and expenditure for the acquisition (net price).
Millions of yen
2019

Current assets¥ 32,438

Non-current assets

2,346

Goodwill

10,379Current liabilities(35,612)

Non-current liabilities(1,238)Valuation difference

1,302

Acquisition cost of shares

9,615

Cash and cash equivalents(7,291)

Difference: net consideration paid for acquisition

¥

2,323

Note: The amounts are presented using figures reflecting material changes to the initial allocation of acquisition costs, which arose as a result of the finalization of
the tentative accounting treatment of business combinations.

82

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Fuyo Lease Group Integrated Report 2020

10. COMPREHENSIVE INCOME

12. INCOME TAXESThe components of other comprehensive income for the fiscal years ended March 31, 2020 and 2019, were as follows:

Earnings of the Company and its domestic consolidated subsidiaries are subject to various taxes. The statutory tax rate for both years ended March
31, 2020 and 2019, were 30.6%.

Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

The respective breakdowns of total deferred tax assets and deferred tax liabilities by major item, as of March 31, 2020 and 2019, were as follows:

Gains or losses arising during the year¥

(3,948)(5,953)$ (36,220)

504

(586)

4,624

Amount before income tax effect(3,443)(6,539)(31,596)

Income tax effect

1,063

1,986

9,755

(4,553)$ (21,841)

Reclassification adjustments to profit or loss

Total

¥

¥

(2,380)¥

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

(91)

(478)

(836)

–

0

–

Amount before income tax effect

(91)

(478)

(836)

Income tax effect

(37)

(0)

(343)

Reclassification adjustments to profit or loss

Total

¥

(128)

¥

(478)

$

(1,179)Foreign currency translation adjustments
Gains or losses arising during the year

(686)

Total

¥

(1,066)(686)¥(6,302)(1,066)$(6,302)Remeasurements of defined benefit plans
Gains or losses arising during the year

(76)

(58)

(706)

Reclassification adjustments to profit or loss

(1)

44

(18)

Amount before income tax effect

(78)

(14)

(724)

Income tax effect

24

Total

¥

4

(54)

¥

222

(10)

$

(502)

Share of other comprehensive income of entities accounted for using equity method
Gains or losses arising during the year

(1,169)15(10,734)

12

9

116

24

Reclassification adjustments to profit or loss
Total

¥

Total other comprehensive income¥(1,157)¥(4,408)¥(6,084)

2019

2020

Deferred tax assets:
Allowance for doubtful receivables

¥

1,531

¥

1,488

$

14,052

Guarantee deposits from customers

934

837

8,577

Accrued expenses

806

706

7,396

Net defined benefit liability

715

617

6,567

Loss on devaluation of investment securities and other items

665

356

6,104

Reserve for bonus payments

664

601

6,096

Asset retirement obligations

546

356

5,018

Revenue recognized for tax purposes

463

313

4,254

Excess of depreciation

439

31

4,033

Prepaid expenses

385

306

3,533

Enterprise taxes

345

392

3,172

Tax loss carried forward

46

1,478

431

Other

1,478

1,388

13,566

Subtotal deferred tax assets

9,025

8,874

82,799

(0)

(6)

(8)

(122)

(47)

(1,123)

Valuation allowance related to tax loss carried forward (Note 2)
Valuation allowance related to total deductible temporary differences
Subtotal valuation allowance (Note 1)
Total deferred tax assets

(123)

(54)

(1,131)

8,901

8,820

81,668Deferred tax liabilities:¥ (14,291)¥ (15,348)$ (131,117)$ (10,618)(1,556)–(14,284)

Depreciation(1,546)(998)(14,189)$ (40,442)

Gain on revaluation of investment securities and others(1,288)(1,268)(11,817)

Foreign subsidiary's unitary tax(1,269)(675)(11,645)

Gain on transfer of receivables

(897)

(541)

(8,232)

Other

(995)

(634)

(9,131)

Fair values, etc., of derivatives contracts as of March 31, 2020 and 2019, were as follows:

Net unrealized gain on available-for-sale securities

Total deferred tax liabilities(21,845)(19,467)(200,415)

Net deferred tax liabilities¥ (12,943)¥ (10,646)$ (118,747)

Notes:
1. Information on breakdown of valuation allowance
Fiscal 2019 (as of March 31, 2020)
The amount of valuation allowance increased by ¥69 million ($634 thousand) from the previous fiscal year. This increase was mainly due to a decrease of ¥5 million ($53 thousand) in valuation
allowance for tax loss carryforwards at consolidated subsidiaries, a decrease of ¥6 million ($57 thousand) in valuation allowance for allowance for doubtful accounts, and the recognition of ¥79 million($733 thousand) in valuation allowance for business assets.
Fiscal 2018 (as of March 31, 2019)
The amount of valuation allowance decreased by ¥420 million from the previous fiscal year. This decrease was mainly due to the fact that consolidated subsidiaries no longer recognized a valuation
allowance of ¥421 million for tax loss carryforwards recorded in the previous fiscal year.
2. Tax loss carried forward and the amount of respective deferred tax assets carried forward by carry-over deadline(1) Derivative contracts to which hedge accounting is not applied
Foreign exchange forward contracts
Not applicable.
Interest rate swap contracts
Not applicable.
(2) Derivative contracts to which hedge accounting is appliedThousands of
U.S. dollars

Millions of yen
2020

2019

2020

Contract
amount(over one year)

Fair value

Contract
amount(over one year)

Fair value

Contract
amount¥ 101,266¥ (86,430)¥ (559)¥¥(9,553)¥ (479)$ 929,047 $(792,944)$ (5,129)(23,319)(157)

29,815(26,176)(176)

339,891(213,937)(1,445)¥ (109,749)¥ (716)¥ 39,368¥ (35,729)¥ (655)$ 1,268,938 $ (1,006,881)$ (6,574)(over one year)

Fair value

Principle treatment

Exceptional treatment of interest
rate swaps
Interest rate swap contracts:
Fixed rate payment,
37,048floating rate receipt
Total¥ 138,314

2020

Intangible fixed assets

11. DERIVATIVESInterest rate swap contracts:
Fixed rate payment,
floating rate receipt

Thousands of
U.S. dollars

Millions of yen

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

9,553

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

84

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Financial Section

Fuyo Lease Group Integrated Report 2020

Fiscal 2019 (as of March 31, 2020)

13. RETIREMENT BENEFITS(1) Overview of the Company Group’s retirement benefits plan

March 31, 2020
Over one year Over two years
Over three
Over four years
Within one year and within two and within three years and within and within five Over five years
years
years
four years
years

Total

Millions of yen
Tax loss carried forward *

( 1)

¥

46

¥

–

¥

–

¥

–

¥

–

¥

–

Valuation allowance

(0)

–

–

–

–

–

Deferred tax assets

46

–

–

–

–

–

¥

46
(0)
* 46

( 2)

March 31, 2020
Over one year Over two years
Over three
Over four years
Within one year and within two and within three years and within and within five Over five years
years
years
four years
years

Total

Thousands of U.S. dollars
Tax loss carried forward *

( 1)

$ 431

$

–

$

–

$

–

$

–

$

–

Valuation allowance

(8)

–

–

–

–

–

Deferred tax assets

423

–

–

–

–

–

$

431
(8)
* 423

( 2)

(*1) Tax loss carried forward is derived by multiplying the statutory effective tax rate.
(*2) With respect to the tax loss carried forward of ¥46 ($431 thousand) million (amount derived by multiplying the statutory effective tax rate), the Company records deferred tax assets of ¥46 ($423
thousand) million. The deferred tax assets of ¥46 ($423 thousand) million represent deferred tax assets carried forward associated with the tax loss carried forward at a consolidated subsidiary.
The Company recognizes no valuation allowance for this tax loss carried forward since it has been judged to be recoverable due to the sufficient taxable income expected for next fiscal year.

Fiscal 2018 (as of March 31, 2019)

The Company has a defined-benefit corporate pension fund plan (established by the Company Group) and a defined-benefit corporate 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 employees’ final
salary points and lengths of service. Furthermore, certain defined-benefit corporate pension plans have retirement benefit trusts.
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 the value of plan assets
corresponding to the contribution of each company.
The defined-contribution pension plan was transferred from a termination allowance plan on November 1, 2009. The defined-contribution pension
plan, under which employees are participants, is funded by the contributions based on the participant’s plan course and eligibility.
Some of the domestic consolidated subsidiaries have a defined-benefit corporate pension plan and a termination allowance plan as its definedbenefit pension system.
Some of the domestic consolidated subsidiaries, which have a defined-benefit corporate pension plan and a termination allowance 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 latest pension funding programs.
The Company and some of its domestic consolidated subsidiaries may make lump-sum payments of premium retirement benefits to some
employees at their retirement.

(2) Defined-benefit pension plan (excluding pension plans using the simplified accounting methods)
March 31, 2019
Over one year Over two years
Over three
Over four years
Within one year and within two and within three years and within and within five Over five years
years
years
four years
yearsi) Reconciliation of retirement benefit obligations

Total¥ 1,478

¥

–

¥

–

¥

–

¥

–

¥

–

Valuation allowance

(6)

–

–

–

–

–

Deferred tax assets

1,471

–

–

–

–

–

Thousands of
U.S. dollars

Millions of yen

Millions of yen
Tax loss carried forward (*1)

86

¥

1,478
(6)
* 1,471( 2)(*1) Tax loss carried forward is derived by multiplying the statutory effective tax rate.
(*2) With respect to the tax loss carried forward of ¥1,478 million (amount derived by multiplying the statutory effective tax rate), the Company records deferred tax assets of ¥1,471 million. The
deferred tax assets of ¥1,471 million represent deferred tax assets carried forward associated with the tax loss carried forward at a consolidated subsidiary. The Company recognizes no valuation
allowance for this tax loss carried forward since it has been judged to be recoverable due to the sufficient taxable income expected for next fiscal year.

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, 2020 and 2019, 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, 2020 and 2019, were not presented as the difference is less than 5% of the effective statutory
tax rate.

Retirement benefit obligations at beginning of year

2020

2019

2020

¥ 11,581¥ 11,244$ 106,249

Service cost

571

593

5,247

Interest cost

58

57

538

Actuarial gains/losses incurred

7

(6)

67

(377)

(307)

(3,461)¥ 11,841¥ 11,581$ 108,640

Retirement benefits paid
Retirement benefit obligations at end of yearii) Reconciliation of plan assets
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Plan assets at beginning of year

¥ 10,392¥ 10,165$ 95,345

Expected return on plan assets

249

260

2,290

Actuarial gains/losses incurred

(383)

(196)

(3,518)Contribution from employer

473

467

4,346

Retirement benefits paid

(371)

(304)

(3,409)¥ 10,360¥ 10,392$ 95,054

Plan assets at end of yeariii) Reconciliation of retirement benefit obligations and plan assets at end of fiscal year and net defined benefit liability and net
defined benefit asset recorded in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

¥ 11,841¥ 11,581$ 108,640(10,360)(10,392)(95,054)

1,480

1,188

13,586–––

Net assets/liabilities recorded in the consolidated balance sheets

1,480

1,188

13,586

Net defined benefit liability

1,480

1,188

13,586

Net defined benefit asset

–

–

–

1,188

$ 13,586

Retirement benefit obligations for funded pension plans
Plan assets
Retirement benefit obligations for unfunded pension plans

Net assets/liabilities recorded in the consolidated balance sheets

¥

1,480

¥

87

Financial Section

Fuyo Lease Group Integrated Report 2020iv) Breakdown of net periodic pension cost(3) Defined-benefit pension plans using the simplified accounting methods
Thousands of
U.S. dollars

Millions of yen
2020

Service cost

¥

2019

571

Interest cost

593

58

Expected return on plan assets

Other
¥

174

2,861

135

84

1,246

Retirement benefits paid

(120)

(12)

(1,101)

–

–

(44)

(448)

Increase by the new consolidated subsidiary

5,908

Net defined benefit liability at end of year

¥

520

$

¥

–
¥

401

$

6,249

207

696

¥

681

–
$

6,394

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

The breakdown of remeasurements of defined benefit plans was as follows:
Thousands of
U.S. dollars

Millions of yen
2020

¥

2019

–

Actuarial differences
Total

681

2020

Net periodic pension cost

–

¥

2019

(2,290)v) Remeasurements of defined benefit plans

Prior service cost

2020

Net defined benefit liability at beginning of year

(48)
643

Thousands of
U.S. dollars

Millions of yen

5,247
538

(260)

311

Amortization of prior service cost

$

57

(249)

Amortization of actuarial loss

Net periodic pension cost for defined-benefit pension plan¥i) Reconciliation of net defined benefit liability for the pension plans using the simplified accounting methods

2020

¥

(78)
¥

$

(14)

(78)

¥

2020

2020

–
(14)

–
(724)

$

Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligations for funded pension plans¥

Fair value of plan assets

2019

473

¥

474

2020

$

4,347

(145)

(141)

(1,336)

328

332

3,011

Retirement benefit obligations for unfunded pension plans

368

348

3,383

Net assets/liabilities recorded in the consolidated balance sheets

696

681

6,394

Net defined benefit liability

696

681

6,394

Net defined benefit asset

–

–

(724)

vi) Remeasurements of defined benefit plans
The breakdown of remeasurements of accumulated defined benefit plans was as follows:
Thousands of
U.S. dollars

Millions of yen
2020

Unrecognized prior service cost¥

Unrecognized actuarial differences
Total

2019

–

¥

176
¥

176

¥

Net assets/liabilities recorded in the consolidated balance sheets

¥

696

¥

681

–
$

6,394

2020

–

$

–

97

1,621

97

$ 1,621vii) Plan assetsiii) Net periodic pension cost
In the fiscal year ended March 31, 2020 and 2019 net periodic pension cost calculated with the simplified accounting methods amounted to ¥135
million ($1,246 thousand) and ¥84 million, respectively.

(4) Defined-contribution pension plan(i) Breakdown of plan assets
Major components of total plan assets and their proportion were as follows:

In the fiscal year ended March 31, 2020 and 2019 the amount required to be contributed by the Company to the defined-contribution pension planamounted to ¥84 million ($771 thousand) and ¥81 million, respectively.
2020

2019

Bonds

38 %

38 %

Shares15

19

Cash and time deposits

6

3

General account

31

30

Other

10

10

Total

100

100

(5) Multi-employer type of pension plan
In the fiscal year ended March 31, 2020 and 2019 the amount required to be contributed to the defined-benefit corporate pension fund plan(established by the Company Group) of multi-employer type of pension plan amounted to ¥177 million ($1,627 thousand) and ¥171 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, 2020 and 2019:

Note: The total includes retirement benefits trust established for corporate pension plan at 5% in the fiscal year ended March 31, 2020 and 5% in the fiscal year ended March 31, 2019.

Thousands of
U.S. dollars

Millions of yen(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 andexpected future long-term rate of return on various components of plan assets.

Amount of plan assets

2019

2020

¥ 13,171¥ 12,260$ 120,839

13,92913,496(758)¥ (1,235)

Retirement benefits under pension funding programs
Differenceviii) Basis for actuarial calculation

2020

¥

127,796$(6,957)At March 31, 2020 and 2019 the liability for retirement benefits for directors and corporate auditors amounted to ¥132 million ($1,212 thousand)and ¥126 million, respectively.

Major basis for actuarial calculation
2020

2019

Discount rate

0.37-0.98 %0.37-0.98 %Expected long-term rate of return2.37-2.50

2.50-2.58

Expected salary increase rate

1.28-3.75

1.37-3.75

88

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Financial Section

Fuyo Lease Group Integrated Report 2020

14. LEASE TRANSACTIONS

15. STOCK OPTIONS

Details of leases as lessee at March 31, 2020 and 2019, were as follows:

Stock option expenses and gains on expiration of unexercised stock options for the fiscal years ended March 31, 2020 and 2019

Operating leases
Thousands of
U.S. dollars

2020

Future lease payments

2019

2020

¥ 2,659¥ 2,695$ 24,396

590

638

5,420

Amount of above due within one year

Details of leases as lesser at March 31, 2020 and 2019, were as follows:

Thousands of
U.S. dollars

Millions of yen
2020

Portion of lease receivables

2019¥ 1,011,779

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

971,704$

13,891

15,265

127,446(110,547)(1,065,500)

909,531¥

Millions of yen

Thousands of
U.S. dollars

2021

¥

$

45,852420,6692023

43,435

398,4892024

30,201

277,0782025

10,81699,2302026 and thereafter

29,389269,631

876,422$

8,344,324

$

8

–
–

Stock options for 2008

Stock options for 2009

Stock options for 2010

Number and type of stock options (Note 2)

Directors of the Company: 8
Executive Officers of theCompany: 16
Common stock: 57,800 shares

Directors of the Company: 8
Executive Officers of theCompany: 15
Common stock: 84,600 shares

Directors of the Company: 7
Executive Officers of theCompany: 17
Common stock: 61,300 shares

Grant date

October 15, 2008

October 15, 2009

October 15, 2010

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)
October 15, 2008 –October 14, 2038 (Note 5)(Note 4)
October 15, 2009 –October 14, 2039 (Note 5)(Note 4)
October 15, 2010 –October 14, 2040 (Note 5)

Class and number of grantees (Note 1)

Exercise period

Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2021¥ 287,795$ 2,640,328

2022

202,639

1,859,080

2023

172,453

1,582,140

2024

108,626

996,5702025

63,064

578,5732026 and thereafter

177,199

1,625,687

Stock options for 2011

Stock options for 2012

Stock options for 2013

Number and type of stock options (Note 2)

Directors of the Company: 7
Executive Officers of theCompany: 16
Common stock: 54,800 shares

Directors of the Company: 8
Executive Officers of theCompany: 16
Common stock: 73,000 shares

Directors of the Company: 8
Executive Officers of theCompany: 18
Common stock: 42,000 shares

Grant date

October 14, 2011

October 16, 2012

October 15, 2013

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)
October 14, 2011 –October 13, 2041 (Note 5)(Note 4)
October 16, 2012 –October 15, 2042 (Note 5)(Note 4)
October 15, 2013 –October 14, 2043 (Note 5)

Stock options for 2014

Stock options for 2015

Stock options for 2016

Class and number of grantees (Note 1)(3) Projected amounts of lease payment receivables on lease investment assets to be collected after March 31, 2020 (consolidated)

Exercise period(4) Operating leases
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

¥ 319,515¥ 285,647$ 2,931,331

53,31346,889489,115Class 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 shares

Common stock: 28,600 shares

Common stock: 34,700 shares

Grant date

October 15, 2014

October 15, 2015

October 14, 2016

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)
October 15, 2014 –October 14, 2044 (Note 5)(Note 4)
October 15, 2015 –October 14, 2045 (Note 5)(Note 4)
October 14, 2016 –October 13, 2046(Note 5)

Exercise period

Stock options for 2017

Number and type of stock options (Note 2)

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

Grant date

October 16, 2017

Vesting conditions(Note 3)Requisite service period(Note 4)
October 16, 2017 –October 15, 2047 (Note 5)

Class and number of grantees (Note 1)

Details of sublease transactions for the fiscal years ended March 31, 2020 and 2019, were as follows.
Lease receivables, assets, and obligations under sublease transactions that are carried on the consolidated balance sheets before interest deductions
Thousands of
U.S. dollars

Millions of yen

Lease obligations (current liabilities)

–

2020

3

Since the Company resolved at the 49th Annual General Meeting of Shareholders held on June 22, 2018 to introduce the stock-based remuneration
plan or Board Benefit Trust (BBT) for the Directors, etc. of the submitting company and abolished the stock-based remuneration-type stock options
plan, there has been no new granting of stock options.

480,8442022

Lease receivables and investment assets

2019

¥

–

Note: The submitting company abolished the stock-based remuneration-type stock options plan at the 49th Annual General Meeting of Shareholders held on June 22, 2018 and introduced the BBT(Board Benefit Trust) Plan.

9,282,378(116,139)

Year ending March 31,

Amount of above due within one year

Other Income (Gain on reversal of share acquisition rights)

2020

¥

2020

(2) Projected amounts of lease receivables to be collected after March 31, 2020 (consolidated)

52,412

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

Details of stock option for the fiscal year ended March 31, 2020, was as follows:(1) Breakdown of lease investment assets

Future lease payments

Thousands of
U.S. dollars

Millions of yen
Millions of yen

90

2020

2019

2020

¥ 18,981¥ 23,233$ 174,139

20,081

24,900184,238

Exercise period

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.

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Financial Section

Fuyo Lease Group Integrated Report 2020

Volume and status of stock options for the fiscal year ended March 31, 2020, was as follows.

(2) Unit price(1) Number of stock options

Stock options for 2008
Stock options for 2008

Stock options for 2009

Exercise price (yen)Stock options for 2010Pre-vesting (shares)
Previous fiscal year-end

–

–

–

Granted–––Expired–––

Vested–––Balance unvested

–

–

–

2,700

12,40021,200

–

–

–

1,400

2,000

4,900

–

–

–

1,300

10,40016,300Post-vesting (shares)
Previous fiscal year-end
VestedExercised
ExpiredBalance unexercised

Stock options for 2011

Stock options for 2012

–

–

–

Granted–––Expired–––

Vested–––Balance unvested

–

–

–

24,80041,50025,200Post-vesting (shares)
–

–

–

2,600

8,100

4,200

ExpiredBalance unexercised

5,685

5,685

5,890

Fair value at grant date (yen)

1,610

1,668

2,218

Stock options for 2011

Exercise price (yen)Stock options for 2012

Stock options for 2013

1

1

1

Average stock price at exercise (yen)

5,685

6,135

5,809

Fair value at grant date (yen)

2,449

1,943

3,556

Stock options for 2014

Exercise price (yen)Stock options for 2015

Stock options for 2016

1

1

Average stock price at exercise (yen)

5,911

6,134

1
–

Fair value at grant date (yen)

3,584

4,653

4,606

Stock options for 2017

Previous fiscal year-end

Exercised

1

Average stock price at exercise (yen)Exercise price (yen)VestedStock options for 2010

1

Stock options for 2013

Pre-vesting (shares)

Previous fiscal year-end

Stock options for 2009

1

–

–

–

22,20033,40021,000

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

1
–
6,840

Estimation method for fair value of stock options for the fiscal year ended March 31, 2020, was as follows.
Not applicable.
The Company used the actual number of expired options to estimate the number of vested options, because it is generally difficult to reasonably
estimate how many options will expire in the future.

16. RELATED PARTY TRANSACTIONSStock options for 2014

Stock options for 2015

Stock options for 2016

The Company’s transactions with related parties during fiscal years ended March 31, 2020 and 2019, were as follows:

Pre-vesting (shares)
Previous fiscal year-end

–

–

–

Granted–––Expired–––

Vested–––Balance unvested

–

–

–

30,00027,30033,300

Sales of the leased property–

34,081–

Purchase of operating assets

29,032

24,402

266,358

VestedExercised

–

–

–

2,600

3,400

–

–

–

–

27,40023,90033,300

ExpiredBalance unexercised

2020

–

Granted–Expired–

Vested–Balance unvested–

Post-vesting (shares)
Previous fiscal year-end

22,200

Vested–Exercised–

ExpiredBalance unexercised–
22,200

4,818

¥

4,572

2020

$ 44,206

Thousands of
U.S. dollars

Millions of yen

Lease receivables and investment assets

Previous fiscal year-end

¥

2019

The ending balances of the Company’s transactions with related parties at March 31, 2020 and 2019, were as follows:

Stock options for 2017Pre-vesting (shares)

Thousands of
U.S. dollars

Millions of yen

Rental revenues

Post-vesting (shares)
Previous fiscal year-end

All the amounts below refer to Hulic Co., Ltd., our major shareholder.

2020

2019

2020

¥ 60,322¥ 60,361$ 553,418

17. SHAREHOLDERS’ EQUITYThe Companies Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capitalreserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sumof the capital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be made at any time by resolutionof the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for
distributions.

92

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Financial Section

Fuyo Lease Group Integrated Report 2020

18. REAL ESTATE LEASING BUSINESS(2) Amount of transactions with special purpose entities subject to disclosure

The Company and some of its consolidated subsidiaries own commercial facilities for lease and office buildings (including land) for lease in Tokyoand other regions. Net lease income from these assets amounted to ¥5,814 million ($53,342 thousand) and ¥5,170 million (lease income and lease
cost were generally recorded as net sales and cost of sales, respectively) for the fiscal years ended March 31, 2020 and 2019, respectively.

Fiscal Year Ended March 31, 2020
Amount of major transactions or
the balance as of the end of the
fiscal year

The carrying value on the consolidated balance sheets, net change, and fair value are as follows:

94

Major gain/loss
Item

AmountMillions of yen
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

¥ 231,132¥ 176,765$ 2,120,486

Net change

15,71154,367

144,147

End of year

246,844

231,132

2,264,633¥ 262,319¥ 245,287$ 2,406,600

Transferred assets (Note 1)
Trade receivables - Lease¥

Trade receivables -Installment sales

2,531

Gain on transfer (Note 2)

¥

109

733

Carrying value
Beginning of year

Fair value
End of year

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 ¥133,872 million ($1,228,184 thousand) and ¥75,028 million, in the fiscal years ended March 31, 2020 and 2019,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, 2020. 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.

Amount of major transactions or
the balance as of the end of the
fiscal year

Transferred assets (Note 1)
Trade receivables - Lease$

Trade receivables - Installment sales

23,226

For the diversification of funding sources and the stable fundraising, the Company promotes securitization of lease receivables, etc. The Company
use stock companies as special purpose entities.
When performing the securitization, the Company transfers the lease receivables, etc. to special purpose entities and receives the funds asproceeds from the transfer of the assets to the special purpose entity through a loan, etc.
As a result of the securitization, the Company has transactions outstanding with the following special purpose entities. The Company owns
shares, etc. with voting rights of the special purpose entities and the employees of the Company concurrently are assigned as corporate officer
positions by the entities.
2020

2019

2

2020

4,535

1,003

Notes:
1. The amount of transactions related to transferred assets is the book value as of the time of transfer.
2. Gain on transfer related to transferred assets is presented in Revenues.

Fiscal Year Ended March 31, 2019
Major gain/loss
Item

AmountThousands of
U.S. dollars
2019

¥

1,135
1,132

Transferred assets (Note 1)
Trade receivables - Lease
Trade receivables -Installment sales¥

597

Gain on transfer (Note 2)

¥

33

500

Notes:
1. The amount of transactions related to transferred assets is the book value as of the time of transfer.
2. Gain on transfer related to transferred assets is presented in Revenues.

20. SEGMENT INFORMATION(1) Overview of reportable segments

1

Millions of yen

4,540

$

Millions of yen(1) Overview of special purpose entities subject to disclosure and of transactions using special purpose entities subject
to disclosure¥

Gain on transfer (Note 2)

6,728

19. MATTERS RELATED TO DISCLOSURES ABOUT SPECIAL PURPOSE ENTITIES

Total value of assets as of the latest financial closing date(without elimination of inter-company transactions)
Total value of liabilities as of the latest financial closing date(without elimination of inter-company transactions)

AmountThousands of U.S. dollars

Amount of major transactions or
the balance as of the end of the
fiscal year

Number of special purpose entities

Major gain/loss
Item

2020

$

41,65541,606

The Fuyo Lease Group’s reportable segments are components of the Group about which separate financial information is available. Thesesegments are subject to periodic examinations to enable the Company’s board of directors to decide how to allocate resources 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, and the Other segment.
The Lease and Installment Sales segment conducts leasing of IT and office equipment, industrial machinery, and other assets (includes thesale of off-lease assets upon lease expiration or termination), and leasing of real estate, and sells commercial/service equipment, production
facilities, medical devices, and other assets on an installment basis. The Financing segment is mainly engaged in commercial lending, investment
in marketable securities for financial income and forming tokumei-kumiai (silent partnership) arrangements. The Other segment primarily engages inenvironmental-related businesses, fee handling, and BPO services (new business fields).
The segment information for previous fiscal years is presented using figures reflecting material changes to the initial allocation of acquisition costs,
which arose as a result of the finalization of the tentative accounting treatment of business combinations.

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Financial Section

Fuyo Lease Group Integrated Report 2020

(3) Difference and analysis between reportable segments’ total income/loss and income/loss reported on the consolidated
statements of income (adjustments)(2) Revenues, income/loss, assets, liabilities, and other items by reportable segment
Year ended March 31, 2020
Lease
Installment Sales

Financing

Other

Total

Millions of yen

2020

Operating revenues
Revenue from customers
Total revenues

528,853¥

15,979¥167,497¥

712,330

1,026

3,708

1,078

5,813

529,880

19,688

168,575

718,143

Operating profit¥

33,134¥

11,330

¥

9,254

¥

53,719Segment assets¥

1,704,786¥

804,101¥

128,744¥2,637,632

Other items¥

Amortization of goodwill

33,694¥–

Amount invested in equity–method affiliates
Increase in tangible fixed assets and intangible fixed assets

–

¥

2,397

324

¥

807

36,091
1,132

–

–

–

–

178,524–

12,424

190,948

Reportable segments total
Operating revenues reported on the consolidated statements of income

Reportable segments total

Financing

Other

Total

¥

(5,813)

623,292$

6,588,477(5,172)(53,336)¥712,330¥

618,119$

6,535,141¥

53,719¥47,501$

492,839(2,486)(2,028)

Corporate(9,808)(9,792)

Operating profit reported on the consolidated statements of income¥

41,423¥35,680(22,815)(89,989)$

380,035

Assets¥ 2,637,632¥ 2,509,555

114,966

83,426$ 24,198,459
1,054,736¥ 2,752,598¥ 2,592,981$ 25,253,195

¥

¥

$

331,114

Other items
Depreciation

Operating revenues$

Intersegment revenue and transfers

4,851,869

$

9,418

Total revenues

146,599$

34,026

4,861,287

1,536,673

$

9,892

180,625$

303,989$

103,946$

84,904

Segment assets$ 15,640,242$

7,377,077$

1,181,140

6,535,141
53,336

1,546,565

Operating profit

6,588,477$

492,839$ 24,198,459

Reportable segments total
Adjustment
Amounts reported on the consolidated financial statements

36,091
1,768$

309,120$–$

21,994$331,114

Amortization of goodwill

–

2,976

7,412

10,388Amount invested in equity–method affiliates

–

–

–

–

1,637,840–

113,982

1,751,822

Increase in tangible fixed assets and intangible fixed assets

Lease
Installment Sales

Financing

Other

Total

Reportable segments total
Amounts reported on the consolidated financial statements¥

33,414$347,338

¥

1,132

¥

768

$

10,388768$

10,388–$

Reportable segments total

¥

1,017

Total revenues

14,980¥3,103

518,743

85,412¥

618,119
5,172

86,464

–

1,132

¥

–

¥

¥

23,657–23,423–217,039¥

23,657¥23,423$217,039¥

190,948¥

169,429$

1,751,822$

1,767,327

Adjustment

1,051

18,084¥

Adjustment

Amounts reported on the consolidated financial statements
517,726–

Amount invested in equity-method affiliates

Reportable segments total

Operating revenues¥

16,22437,859

Increase in tangible fixed assets and intangible fixed assets

Millions of yen

Intersegment revenue and transfers

1,570

Amortization of goodwill

Amounts reported on the consolidated financial statements
Year ended March 31, 2019

31,844¥

Adjustment

Other items

Revenue from customers

718,143

Eliminations

Total assets reported on the consolidated balance sheets

Thousands of U.S. dollars

Depreciation

2020

IncomeReportable segments total
Lease
Installment Sales¥

Eliminations

Corporate

Year ended March 31, 2020

Revenue from customers

2019

Operating revenues¥

Intersegment revenue and transfers

Depreciation

Thousands of
U.S. dollars

Millions of yen

623,292

Operating profit¥

29,892¥

10,308

¥

7,299

¥

47,501

Segment assets¥

1,676,976¥

730,907¥

101,670¥2,509,555¥

30,066

¥

–

¥

1,777

¥

31,844

1,690¥

192,638

1,275¥

170,705

15,505

Notes:
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.

Other items
Depreciation
Amortization of goodwill
Amount invested in equity–method affiliates
Increase in tangible fixed assets and intangible fixed assets

–

324

443

768

–

–

–

–

156,941–

12,488

169,429(4) Tangible fixed assets
Thousands of
U.S. dollars

Millions of yen

2020
Japan

¥

2019
¥

2020

380,700$ 3,740,134

9,384

9,917

86,097

Ireland130,213

129,644

1,194,623

Other

3

1

31

5,835

5,794

53,537526,059$ 5,074,422

North America and Latin America

407,674

Europe

Asia
Total

¥

553,111

Notes:
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
Europe: United Kingdom, Ireland
Asia: China, Singapore, Malaysia, Thailand

¥

96

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Financial Section

Fuyo Lease Group Integrated Report 2020

21. 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.
yen

Net assets

U.S. dollars

2020

2019

¥ 9,204.20¥ 8,680.32

2020

$

84.44

Notes:
1. Treasury stock, which is deducted when calculating the number of shares of common stock as of the fiscal year-end, used in the computation of the net assets per share, includes the Company’s
shares owned by the Board Benefit Trust (BBT). The number of shares of treasury stock owned by the Board Benefit Trust (BBT) as of the fiscal year-end is 104,600 shares for the previous fiscal year
and 102,500 shares for the fiscal year.
2. Net assets per share of the fiscal year ended March 31, 2019 are presented using figures reflecting material changes to the initial allocation of acquisition costs, which arose as a result of the finalizationof the tentative accounting treatment of business combinations.

the above, we believe that this will lead to the creation of a more multi-layered business relationship.
We also plan to utilize the advanced consulting capabilities of the NOC Group to improve the working environment through optimal allocation ofwork, including the standardization of the Group’s own clerical work.
(3) Date of business combination
August 15, 2019(4) Legal form of business combination
Acquisition of shares by cash(5) Name of company after combination
No change(6) Percentage share of voting rights acquired

22. BASIC EARNINGS PER SHARE
The reconciliation of the differences between basic and diluted basic earnings per share (“EPS”) for the year ended March 31, 2020 was as follows:
Millions of yen
Year ended March 31, 2020

Basic earnings

Thousands ofshares
Weighted average
sharesYen

U.S. dollars
EPS

Basic EPS
Basic earnings available to common shareholders¥ 26,187

Effect of dilutive securities warrants

30,033¥ 871.95$

8.00¥ 865.56

$

7.94

221

Diluted EPS
Basic earnings for computation¥ 26,187

30,254

Note:
Treasury stock, which is deducted when calculating the average number of shares during the period used in the computation of the net earnings per share, includes the Company’s shares owned by the
Board Benefit Trust (BBT). The average number of the Company’s shares owned during the period by the Board Benefit Trust (BBT) is 100,198 shares for the previous fiscal year and 102,618 shares forthe fiscal year.

(i) LN Holdings, Co., Ltd.
Percentage share of voting rights owned before business combination: –%Percentage share of voting rights acquired on the date of business combination: 100.00%
Percentage share of voting rights after acquisition: 100.00%(ii) NOC Outsourcing & Consulting Inc.
Ratio of ownership of voting rights immediately before the date of business combination: –%Ratio of ownership of voting rights acquired on the date of business combination: 100.00% (including indirect ownership of 100.00%)
Ratio of ownership of voting rights after acquisition: 100.00% (including indirect ownership of 100.00%)(iii) NOC Techno-Solutions Inc.
Ratio of ownership of voting rights immediately before the date of business combination: –%Ratio of ownership of voting rights acquired on the date of business combination: 100.00% (including indirect ownership of 100.00%)
Ratio of ownership of voting rights after acquisition: 100.00% (including indirect ownership of 100.00%)(iv) NOC Biz Partners Inc.
Ratio of ownership of voting rights immediately before the date of business combination: –%Ratio of ownership of voting rights acquired on the date of business combination: 100.00% (including indirect ownership of 100.00%)
Ratio of ownership of voting rights after acquisition: 100.00% (including indirect ownership of 100.00%)(7) Primary basis for the determination of the acquiring company
It is because the Company acquired 100.00% of the issued shares of LN Holdings, Co., Ltd.

23. BUSINESS COMBINATIONSBusiness combination through acquisition

2. Period of operating results of the acquired company included in the consolidated financial statements
From October 1, 2019 to March 31, 2020

1. Overview of business combination(1) Name of acquired company and its business(i) Name of acquired company: LN Holdings, Co., Ltd.
Business description: Acquisition, holding, and disposal of shares, capital contributions, other equity interests, and bonds of a stock company
or any other juridical person; sale and purchase of beneficial interest in trust; purchase business of monetary claims; real estate investment;
and investment and management in securities(ii) Name of acquired company: NOC Outsourcing & Consulting Inc. (a subsidiary of LN Holdings, Co., Ltd.)Business description: Comprehensive outsourcing business and IT outsourcing business(iii) Name of acquired company: NOC Techno-Solutions Inc. (a subsidiary of NOC Outsourcing & Consulting Inc.)
Business description: IT outsourcing business(iv) Name of acquired company: NOC Biz Partners Inc. (a subsidiary of NOC Outsourcing & Consulting Inc.)
Business description: Operations in general affairs, accounting, human resources, and backyard business(2) Reasons for the business combination
The above four companies that have recently become consolidated subsidiaries (hereinafter referred to as the “NOC Group”) provide a wide rangeof business outsourcing services, including back-office services (accounting, personnel and salaries, general affairs, sales administration), IT
services, in-house shared center services, secretariat management agency services, and human resources services, as a total outsourcer aiming
to become the “No. 1 outsourcer in problem solving.” NOC Group provides high-quality outsourcing services to customers in a wide range ofindustries and businesses by organizing teams that organically combine the value-providing functions, business knowhow, and specialist humanresources that NOC Group has cultivated over many years.
In addition, by strengthening our consulting functions, NOC Group is working to streamline and visualize the operations of client companies andpropose business improvement measures. In addition to providing outsourcing services, NOC Group is also actively developing support services forthe introduction of robotic process automation (RPA) as the optimal solution.
By adding the above functions to our Business Process Outsourcing (BPO) Domain, we will establish a system capable of responding to a wide
range of business efficiency needs of our business partners. At the same time, we will be able to leverage our respective strengths more effectively
through the synergistic effect of mutual cooperation with existing BPO resources. By combining the Group’s original financial solution functions with

3. Acquisition cost of the acquired company and breakdown by type of consideration

Consideration for acquisition

Cash and deposits

Acquisition cost

Millions of yen

Thousands of
U.S. dollars

¥

8,304

$

76,184

¥

8,304

$

76,184

4. Description and amount of major acquisition-related expenses
Fees to advisors, etc.: ¥170 million ($1,566 thousand)
5. Amount, cause, amortization method and period of goodwill recognized(1) Amount of goodwill recognized¥6,946 million ($63,725 thousand)(2) Cause of goodwill
Goodwill was recognized due to the future excess earning power expected based on business expansion going forward.
(3) Amortization method and period
Straight-line method over a period of 20 years

98

99

Financial Section

Fuyo Lease Group Integrated Report 2020

6. Amount of assets received and liabilities accepted on the date of the business combination and their major components

Current assets(2) Reason for the business combination

Millions of yen

Thousands of
U.S. dollars

¥

$

3,139

28,798Non-current assets

3,213

29,484

Total assets

6,352

58,282Current liabilities

1,698

15,586

Non-current liabilities

2,116

Total liabilities

¥

3,815

19,413$34,9997. Estimated amount of impact on the consolidated statements of income for the fiscal year assuming that the business combination wascompleted on the start date of the fiscal year, and the calculation method

Revenues

Millions of yen

Thousands of
U.S. dollars

¥

$

4,896

By combining the business bases and expertise, etc., of the Fuyo Lease Group and the Yamato Group, the conversion of YAMATO LEASE CO.,LTD. into a joint venture will enable both companies to strengthen YL’s competitive advantage and expand its business domains with a view tofurther expanding its business. Both companies have also agreed in addition to making YL into a joint venture to begin discussions on producing
business synergies by providing and utilizing each other’s management resources and strengths, and on the potential for further business alliance.
The Company and YHD recognize that cross-industry partnerships are set to become increasingly important for realizing the sustainable growthof companies by solving issues in the logistics industry. Based on this, both companies have promoted discussion and examination on YL’s
growth strategies and a business alliance. As a result, both companies have agreed to convert YL into joint venture with potential for powerfulalliance effects, combining YHD’s business base with Fuyo Lease Group’s diverse solutions and expertise in financial risk management functions toincrease the sophistication of its solutions and expand its service lineup with a view to expanding its business domains and increasing its corporate
value. Looking ahead, both companies aim to expand YL’s business and contribute to productivity improvements and sustainable growth forthe entire logistics industry, by providing diverse carriers through YL with Fuyo Lease Group’s services and expertise, including increasing thesophistication of financial services, strengthening the vehicle management and maintenance systems, managing logistics facility assets, and BPO(Business Process Outsourcing: services to efficiently carry out a business’s administrative work, etc.) that realizes work style reform in the industry.
In doing so, they will expand YL’s business and contribute to productivity improvements and sustainable growth for the entire logistics industry.

44,923(3) Date of business combination
April 1, 2020

Operating profit

284

2,607

Ordinary profit

275

2,523

Profit before income taxes

275

2,523

(4) Legal form of business combination

Profit attributable to owners of parent

161

1,482

Acquisition of shares by cash

5.38 Yen

0.05 $

Basic earnings available to common shareholders(5) Name of the company after combination(Method of calculation of the estimated amount)

No change.

The estimated amount of impact is the difference between net sales and profit/loss calculated on the assumption that the business combination
was completed on the start date of the fiscal year and net sales and the profit/loss on the consolidated statements of income of the acquiring
company.
The information mentioned above has not been audited.

(6) Percentage share of voting rights acquired
Percentage share of voting rights owned before business combination: –%Percentage share of voting rights acquired on the date of business combination: 60.00%
Percentage share of voting rights after acquisition: 60.00%

Finalization of the provisional accounting treatment for the business combination(7) Primary basis for the determination of the acquiring company

The business combination with GI HOLDINGS CORPORATION INC. and INVOICE Inc. that was made on October 31, 2018, was provisionallyaccounted for in Fiscal 2018, but was finalized in Fiscal 2019 (from April 1, 2019 to March 31, 2020).
With the finalization of this provisional accounting treatment, the amount of the initial allocation of acquisition cost reflects a significant revision.
As a result, “other” in intangible fixed assets mainly increased, and the provisionally calculated amount of goodwill of ¥11,970 million ($109,819
thousand) decreased by ¥1,591 million ($14,598 thousand) to ¥10,379 million ($95,221 thousand) due to the finalization of the accounting
treatment.

It is because the Company acquired 60.00% of the issued shares of YAMATO LEASE CO., LTD.
2. Acquisition cost of the acquired company and breakdown by type of consideration

Consideration for acquisition

Cash and deposits

Acquisition cost

Millions of yen

Thousands of
U.S. dollars

¥

3,300

$

30,275

¥

3,300

$

30,275

24. SUBSEQUENT EVENTS
3. Description and amount of major acquisition-related expenses

Cash dividends

Currently unconfirmed.

The following appropriations of retained earnings of the Company, which are not reflected in the accompanying consolidated financial statements forthe year ended March 31, 2020, were approved at a shareholders’ meeting held on June 23, 2020:
Millions of yen

Thousands of
U.S. dollars¥$

Appropriations:
Cash dividends of ¥105 ($0.96) per share

3,157

100

28,971

Conversion to a consolidated subsidiary by acquisition of shares
The Company resolved at a Board of Directors meeting held on January 30, 2020 to acquire 60% of the issued common shares of YAMATO
LEASE CO., LTD. (President and Chief Executive Officer : Naomi Ogata; hereinafter “YL”), a wholly owned subsidiary of Yamato Holdings Co.,
Ltd. (Head office: Chuo-ku, Tokyo; Representative Director, Executive Officer and President: Yutaka Nagao; hereinafter “YHD”), and to collaborate
on businesses with YHD. The Company concluded a share transfer agreement with YHD and acquired the shares on April 1, 2020. Following theacquisition, YL became a consolidated subsidiary of the Company.
1. Overview of the business combination(1) Name of acquired company and its business
Name of acquired company: YAMATO LEASE CO., LTD.
Business description: Leasing business, primarily focused on trucks, vehicle distribution support business, others (business succession support
business, etc.)

4. Amount, cause, amortization method and period of goodwill recognizedCurrently unconfirmed.
5. Amount of assets received and liabilities accepted on the date of the business combination and their major components
Currently unconfirmed.

Corporate bond issuance
The company issued straight bonds as follows:(1) Issue name: Fuyo General Lease Co., Ltd., No. 24 unsecured straight bond(2) Issuance amount: ¥20,000 million(3) Issuance date: June 17, 2020
(4) Issue price: ¥100 per ¥100 of face value(5) Coupon rate: 0.250% per year(6) Redemption date: June 17, 2025
(7) Purpose: To fund capital investments

101 Report of Independent Auditors

Fuyo Lease Group Integrated Report 2020

Report of Independent Auditors

Independent Auditor’s Report

The Board of Directors
Fuyo General Lease Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Fuyo General Lease
Co., Ltd. and its consolidated subsidiaries (the Group), which comprise the consolidated balance
sheet as at March 31, 2020, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2020, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate
Auditors for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing theGroup’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
・ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
・ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
・ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with accounting principles generally accepted in Japan.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Corporate Auditor and the Board of Corporate Auditors
regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that
we have complied with the ethical requirements regarding independence that are relevant to our
audit of the financial statements in Japan, and to communicate with them all relationships andother matters that may reasonably be thought to bear on our independence, and whereapplicable, related safeguards.

102

103 Report of Independent Auditors / Stock Information

Report of Independent Auditors

Fuyo Lease Group Integrated Report 2020

Stock Information (As of March 31, 2020)
Stock Overview

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation

Individuals and others

Number of shares
outstanding

100,000,000
shares30,288,000
sharesShare unit number

100 shares

Total number ofauthorized shares

Number ofshareholders(including treasury
share)

8.3%

14,922 shareholders
2,513,000 shares

Foreign Shareholders

16.4%

15,402247 shareholders

Financial Institutions

39.4%

Breakdown of
Shareholders

66 shareholders
11,926,000 shares

4,971,000 shares

The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2020 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 1 to the consolidated financial statements.

Other domestic firms

35.9%

167 shareholders
10,878,000 shares

Major Shareholders (Top 10)

Ernst & Young ShinNihon LLC
Tokyo, Japan
June 24, 2020/s/ Hirokazu Tanaka
Designated Engagement Partner
Certified Public Accountant/s/ Nobuko Kubo
Designated Engagement Partner
Certified Public Accountant

104

Number of shares
held (in thousands)

Shareholders

Shareholding ratio(%)

Hulic Co., Ltd.

4,218

13.93%

Meiji Yasuda Life Insurance Company

2,261

7.47%

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

4.99%

The Master Trust Bank of Japan, Ltd. (Trust Account)

1,212

4.00%

Japan Trustee Services Bank, Ltd. (Trust Account)

1,007

3.33%

Sompo Japan Nipponkoa Insurance Inc.

1,002

3.31%

Azbil Corporation

1,000

3.30%

Mizuho Bank, Ltd.

907

3.30%

BBH FOR FIDELITY PURITAN TR : FIDELITY SR INTRINSIC OPPORTUNITIES FUND

575

1.90%

Meiji Yasuda Life Planning Center Co.,Ltd.

429

1.42%

Annual dividend per share (Yen)
250
220
205

200

188

150

146
130
100

100
74

80

50

0
2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/3(Forecast)Kojimachi Garden Tower, 5-1-1, Kojimachi, Chiyoda-ku, Tokyo 102-0083, Japan
Phone: +81-3-5275-8800

https://www.fgl.co.jp/eng/

For inquiries about “Integrated Report 2020,” please contact:

Creating Shared Value Promotion Office TEL: +81-3-5275-8809 E-mail: fuyo-ir@fgl.co.jp