Fuyo Lease Group Integrated Report

2021

01

Corporate Slogan

Go Where No One Has
Gone Before
We believe.
Leasing is not just about lending things.
It’s about lending inspiration, intelligence and a sense of wonder.

Fuyo Lease Group Integrated Report 2021

Management Philosophy
We support corporate activities through our leasing
business while contributing to the development ofsociety.

CONTENTS
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

We aim to earn high marks from shareholders andmarkets while pursuing creativity and innovation.

P15

Materiality

P17

Medium-Term Management Plan

P19

CSV 1. Responding to Climate Change Issues
and Renewable Energy

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

P21

CSV 2. Contributing to the Creationof a Circular Society

P23

CSV 3. Achieving Economic Growthand Fulfilling WorkP25

CSV 4. Developing Safe and Livable Cities
and Providing Transportation

P27

CSV 5. Promoting Health and Wellbeing

P29

Our Business

P30

Business Segments Overview

P40

System that Supports Sustainable Value Creation

P47

Board Members

P49

Corporate Governance

P54

Risk Management and Compliance System

P57

Independent Assurance Report

P58

Financial Section

P117

Stock Information

P118

Participation in Initiatives & Third-Party Evaluation

We maintain customers first philosophy, providing
the best services.

We believe.
We embrace challenges, because they are the fountain of new business.
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 our shareholders, investors, and other stakeholders 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.

About Integrated Report2021

In this Integrated Report, the President conveys in his own words the Creating Shared Value (CSV) approach, which serves as the company’s
management decision criteria, and how the group organizes its thinking on ESG finance and the SDGs concept, which are global trends. The report has
been thoughtfully prepared to help all our stakeholders understand the group’s philosophy toward value creation. Additionally, we have newly presented
our vision for “contributing to the creation of a circular society”, which we perceive as the seedling of future value creation. We have further expanded
and modified our disclosure of information concerning the evaluation of effectiveness and remuneration structure to improve the transparency of thegovernance system that supports the Group’s management.

Reporting Period

Fiscal year 2020 (April 2020 - March 2021)

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

Reference Guidelines

Value Reporting Foundation “International Integrated Reporting Framework” (published in January 2021)

Date of Issuance

September, 2021

Note on Forward-Looking
Statements

This report contains forward-looking statements, such as future plans and strategies, that are based on currently available information. These
expectations and projections are subject to a number of risks and uncertainties that could cause actual results to differ materially from 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.

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

*The report also includes some information pertaining to fiscal year 2021.

02

03

Message from the President

Fuyo Lease Group Integrated Report 2021

Expanding our areas of business, both inand outside Japan, through managementfounded on CSVWorking toward sustainable growth byachieving both social and corporate value
Yasunori Tsujita
President & Chief Executive Officer

Review of the Medium-Term Management Plan
where we have concentrated management resources toexpand the business. We have grown steadily in these
Strategic Areas over the past four years, while in our coreareas, we have succeeded in greatly improving yields
through a combination of portfolio restructuring andthorough cost reductions. In the area of New Domains, I
believe we have made beneficial investments in venturecompanies that we can expect will play a part in growth
going forward.

Changes in Key Indicators over the Last 7 Years
Operating Assets

Ordinary Profit

Disruptive Innovations

Transformation Zone

Performance Zone

Grow new businesses

Deliver results from existing businesses

Energy & Environment

Strategic
Areas

Overseas

1.60%

Mobility Business

Asset Value

Circular
Economy¥ 2,555.9
billion yen¥ 48.01,599.2

billion yen
31.4

25.4

2014/32021/32017/3
Previous Medium-termManagement Plan

Medium-termManagement Plan

“Value Creation 300”

“Frontier Expansion 2021”(FY2014 – 2016)(FY2017 – 2021)

Enabling Investments

2,047.4

AircraftCore Areas

Real Estate

Vendor Leases
Medical & Welfare

Business Value

1.64%

BPO

New Domains

1.94%

ROA

Sustaining Innovations

Payout period: 2-3 years

Revenue PerformanceThis year marks the fifth and final year of the Fuyo Lease
Group’s five-year Medium-term Management Plan, Frontier
Expansion 2021.
During this Medium-term Management Plan, I havemanaged the Group with a strong desire to demonstrate thatsustainable growth is possible, even in the lease industry,generally considered a business that is stable at a low
position. To that end, we are clearly aware of non-financeleasing—shifting our focus from traditional finance leases
to operating leases—and are moving forward with nonfinancial initiatives typified by the renewable energy power
generation business and business process outsourcing(BPO), positioning them as Strategic Areas. The fact that
we have continued to grow by about 10% annually overthe past several years, indicates, I think, that the Group’s
management strategy demonstrates a business model for
enabling sustainable growth.
Supporting this growth has been the management of ourbusiness portfolio, based on a zone management approach(see diagram on P04) under which we have divided ourbusiness areas into four zones to advance selection andconcentration.
Conventional lease and finance businesses are
positioned as core areas in the Performance Zone where
they generate stable earnings. Real Estate, Medical &Welfare, Energy & Environment and other fields are
positioned as Strategic Areas in the Transformation Zone,

Business growth throughsolving social issues
CSV (Creating Shared Value)

Frontier
Expansion

Finance

Domestic Corporate

Payout period: Every year

2021

New Domains
Corporate Department
Frontier

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)

Group

04

05

Message from the President

Fuyo Lease Group Integrated Report 2021

These efforts have led to real results, allowing us to reach¥2,555.9 billion in operating assets, achieving our target
ahead of schedule, while significantly growing ordinary profit
from ¥31.4 billion at the start of the plan to ¥48.0 billion.

Thorough Discussion of Goals for CSV
Maintaining and further enhancing this growth in preparation
for the next Medium-term Management Plan will be a major
issue going forward. While I believe our Group corporate
slogan, “Go where no one has gone before,” has been thedriver of our growth to date, that is not to say we can simply
aim to go anywhere. I have always believed that some
philosophy is essential to choosing our direction. Moreover,as SDGs, ESG and other societal demands and issues
have increased their presence in the public eye, I believe
it’s imperative that employees share our approach and we
communicate it to all of our stakeholders in a manner that’seasy to understand.
ESG strongly represents the perspective of society andstakeholders, while the SDGs alone, I feel, lack view frombusiness potential. The Group has thus positioned CSV as
the link between these two, and we believe it is importantto build a system—human resources, organizations, andgovernance—that can continually generate both corporate
value (profit) and social value (solutions to problems). In themedium to long term, this will lead to our becoming “part ofa system that aims for a better society.”
I believe that a company contributes to its stakeholders
by growing sustainably and continuing to solve issues withthe goal of achieving a better society. We will continue
working to respond to the expectations of our clients,
business partners, employees and investors.

Enhancing the Human Resources andOrganizations that Support the Practice of CSV
The ultimate means of continually generating value to
is to build these approaches into the very foundation ofmanagement itself. While the Group’s business domains
have gradually expanded, if we are to discuss future areasof expansion it is essential that each employee has a solid
understanding of what CSV means for the Group. This is
why training and workshops were held for all employees
in fiscal 2020. In October 2020, we also established a
CSV Promotion Committee to serve as the organization

SDGs
Sustainable Development Goals

CSV Creating Shared Value
Growing sustainably through business while also achieving social value
Becoming a provider of good solutions to social issues as part of a systemthat aims for a better society

Value Creation Activities
Achieving corporate value = Corporate profits

Achieving social value = Solving issues

Building a system of human resources, organizations andgovernance needed to continually create value

ESG Environment / ​Social / GovernanceSocial and stakeholder perspectives

responsible for establishing and promoting strategies andpolicies involving the Group’s approach to sustainability.
Going forward, management will take responsibility foradvancing non-financial targets just as they do financial
targets.
The Board of Directors is also active in discussing theGroup’s value creation, and plans to exchange opinionsfrom a variety of perspectives in formulating the next
Medium-term Management Plan.

Contributing to Solving Social Issues
through Business
The Group is concentrating management resources inbusinesses that aim to solve social issues, including climatechange, enhancing medicine and welfare and improving
corporate productivity.
In addressing climate change, companies are being
called on to reduce greenhouse gases. While the Grouphas participated in RE100 and set forth a goal of converting
100% of the electric power used in its business activities
to renewable energy by 2050, we recently decided
to move that target date up to 2030. In addition to ourshift to renewable energy to power our businesses, weare also working to reduce CO 2 overall with the goal of
simultaneously achieving carbon neutrality on a Groupwide basis.
In services to customers, we have seen steady growthin sales of our Green Electricity Supply Services (PPA
Services*1), launched in anticipation of corporate moves
toward decarbonization. In addition to on-site PPA*2, we
also expect an increase in off-site PPA*3 going forward.
Our Fuyo Zero-Carbon City Support Program, which webegan offering in October 2020, has seen the number ofusers reach more than 100 in just about six months, anindication of just how high customer needs are in the shift
to decarbonization.
Meanwhile, we are also actively expanding our Energy& Environment business overseas. In Asia, in addition toinvesting in a solar power generation fund in Taiwan, we
also launched an energy solutions company in Thailand with
Sharp Corporation. We also joined with ENEOS Corporation
to participate in a solar power generation business in Texas,
U.S.
Efforts toward the circular economy*4 are similarly
essential to building a sustainable world. While the Group
has long promoted the 3Rs*5, we took initiatives to the nextlevel by becoming the first financial institution in Japanto join the Ellen MacArthur Foundation, an internationalorganization promoting the idea of the circular economy.
We have already begun exchanging information with othermembers, and are engaged in concrete discussions withseveral companies with a view toward collaboration. I sense
enormous potential here for lease companies like ours toserve as a central node in the circular economy, connecting
companies acting as “arteries” in producing and selling06

products with those acting as “veins” in recycling andreusing those products.
In the Medical & Welfare business, given the growing
need for non-in-person, contactless services during
the COVID-19 pandemic, we established Medicare in, adedicated website allowing users to sign up online for FPS
Medical, an early payment service for medical and nursing
care receivables that assists medical institutions withmanaging cash flow. To further enhance convenience, we
also plan to develop a shared platform that can provide
a centralized source for medical equipment and services
offered by our Group companies.
Our BPO business, which assists in improving corporate
productivity, now represents more than 10% of overallprofits, and continues to grow into a pillar of the Group.
After the COVID-19 pandemic, companies are expected toaccelerate their efforts to streamline operations and reform
how they work, and we will be working to strengthen timely
proposals for utilizing RPA*6 and offering a single set of
efficiencies from upstream to downstream.

Working to Achieve Sustainable
Corporate Growth
Results for fiscal 2020 saw net sales reach ¥740.3 billion (up3.9% year on year) with ordinary profit of ¥48.0 billion (up 9.0%
year on year), and our dividend increased by ¥35 year overyear to ¥240, for a payout ratio of 24.3%. For fiscal 2021, we
expect a ¥20 increase in the dividend, to ¥260, and a payout
ratio of 25.2%.
We were largely unaffected by the drastic changes in
conditions brought about by the COVID-19 pandemic, andsucceeded in delivering solid results. With these kindsof previously unimaginable events occurring each year,
I believe it will no longer be possible for management to
respond as we have in the past by simply advancing straight
into the future. We recognize the importance of continuing
to implement our cycle of developing, enacting and verifying
hypotheses, revising them when necessary.
We will continue our sustainable growth, while at the sametime offering value to achieve a better society. We hope you
will look forward to our future contributions.

*1 Green Electricity Supply Services (PPA Services): A business installing solar power systems
on rooftops at customer facilities and elsewhere to supply energy directly to them.
*2 On-site PPA: In an on-site corporate PPA, the power producer installs, operates andmaintains power generation equipment to supply power produced on-site to the customer.
*3 Off-site PPA: In an off-site corporate PPA, a renewable energy generating facility is built
outside of a company’s premises, and electrical power is supplied through a transmission
network.
*4 Circular economy: An economic system that treats “waste” products and resources not
utilized in the linear take-make-waste economy as new “resources,” circulating thoseresources without generating waste.
*5 3Rs: Reduce (the amount of waste generated), reuse and recycle.
*6 RPA: Acronym for robotic process automation. This process uses robots to handle routine
computer tasks normally carried out by people.

07

Corporate History

Fuyo Lease Group Integrated Report 2021

08

¥ 50.0 billion

History of Fuyo Lease Group

48.0

44.0

The Fuyo Lease Group faces direct feedback from customers and is fully committed to customer support in order

2,384.0

39.1

to resolve management issues, including those related to capital expenditure and improving work efficiency, as

2,555.9¥ 2,500.0
billion2,262.8
2,172.6

well as making customers’ dreams come true.

2,047.4
31.4

32.1

35.2

1,867.2
27.1

2004 Listed

Operating assets: Consolidated (billions of yen)
Ordinary profit (billions of yen)

*1 Figures before listing are for reference only.
*2 Operating assets for the fiscal year ended March 1999 and earlier are
calculated by totaling lease assets, installment receivables, loans, etc.
*3 Due to a change in the method of presentation in the fiscal year ended
March 31, 2019, the figures after reclassification reflecting the change havebeen presented since the fiscal year ended March 31, 2015.

1,423.5 1,407.4

1,410.4 1,396.2
18.3
1,177.3

1,135.9

928.3

931.2

933.1
829.1

766.4

3.8

3.3

-0.023 0.007 -0.064

0.3

0.3

-0.1

0.3

0.3

0.8

1.5

2.0

1.7

220.9

2.9

1970

17.8

30.7

20.1

38.2

47.8

52.5

56.5

1975

59.2

69.9

86.2

96.7

332.3

399.6

0.9

1.9

1.5

2.2

2.5

870.3 836.4
843.9 857.3

694.8

643.5

1.6

26.5
25.4

18.0
17.9

863.6

2.0

1,495.9
1,432.9 1,440.9

16.5

976.8

479.1

29.2

1,166.3

1,038.1

2.8

1,730.5
1,599.2

23.6

Non-consolidated figures for the fiscal year ended March 2001 and earlier,consolidated figures for the fiscal year ended March 2002 and later.

1.3

26.4

1.2

17.4

917.8

9.8

578.3
5.9

0.3

0.6

0.5

4.1

4.5

3.1
0.9

1.4

112.1 134.4

1980

1985

1990

1995

-7.4

2000

2005

2010

2015

2020

2022/3Medium-Term
Management Plan
Target1969-1979

1980-1989

1990-1999

2000-20092010-

Established as a leasing companyof the Fuyo Group

Growth, entering fields other thanleasing and installment sales

Expansion of lease demand brings
service diversification

Public listing, efforts to align withthe environment and society

New business fields

1969 Established Fuyo General Lease Co., Ltd.
1978 Launched aircraft leases

1987 Established Fuyo Auto Lease Co., Ltd.
1988 Established Fuyo General Lease (USA) Inc.
Launched space leases

1994 Established Aqua Art Co., Ltd.
1995 Established Fuyo Network Service Co., Ltd.
1996 Established Fuyo Lease Sales Co., Ltd.

2000 Launched building leases
2004 Listed on the First Section of the Tokyo Stock
Exchange (December)2006 Conclusion of the first deal of ESCO business

In May 1969, Fuyo General Lease was establishedwith equity investments provided by six Fuyo Group
companies, including Fuji Bank (now Mizuho Bank)and Marubeni-Iida (now Marubeni Corporation),
capitalized at 100 million yen with six employees.
The Company saw its contract closings growsignificantly, primarily around information equipment
and industrial machinery in response to corporateneeds for modernization in the midst of higheconomic growth and intensifying competition. The
Company participated in the first aircraft lease inJapan.

Leasing expanded as a means of deploying
equipment, backed by an acceleration in management
rationalization and streamlining brought by advancesin technology. The Group continued to grow throughreal estate-related transactions, among otherbusiness, and also responded to increasing demandfor corporate auto leasing by splitting off its automotive
sales department to form the independent Fuyo Auto
Lease. At the same time, we established our firststaffed overseas base in the US to capture demand
for leasing not only in Japan but overseas as well. This
was the start of our global expansion, which continues
today.

While the collapse of the bubble economy broughta drop in lease transaction volume and impacted
Group profits, society once again recognized theimportance of leasing as a means to rationalizing andstreamlining corporate management. In response tothese social trends, the Group established a numberof group companies to offer services not limited
to leasing and finance, including Fuyo Network
Service, Fuyo Lease Sales and Aqua Art, putting inplace a structure that would enable us to addresscompanies’ diverse needs.

As the Group expanded into business areas suchas building leases in response to demand fromretail customers with multi-store operations, we
successfully listed on the First Section of the Tokyo
Stock Exchange in December 2004. Subsequently,
the Company established its Energy & Environment
Business Office, and with our first successful dealof ESCO business in 2006, we began ramping up
our environmental business just as the environment
was gaining increased attention as a social issue.
At the same time, we began making other efforts
to ensure our business activities were aligned withthe environment and society, such as acquiring
ISO 14001 certification and publishing our first CSR
Report, and fostered awareness within the company.

2012 Started commercial operation of solar
power plants
2014 Made Aircraft Leasing andManagement Limited (ALM) a
consolidated subsidiary2017 Made Accretive Co., Ltd. a
consolidated subsidiary2018 Participated in RE100
Made INVOICE Inc. a consolidated
subsidiary2019 Made NOC Outsourcing & Consulting
Inc. a consolidated subsidiary2020 Made Yamato Lease Co., Ltd. a
consolidated subsidiary
Established Fuyo General Lease(Taiwan) Co., Ltd.
2021 Established a directly controlledbase in Thailand Fuyo General Lease(Thailand) Co., Ltd.

We responded to society’s diversifying needs throughbroad business development, embodying the slogan weestablished in 2012, “Go where no one has gone before.”
We launched a renewable energy generation business toaddress the problem of climate change, and at the sametime, expanded our business portfolio, in areas such as
BPO and the Mobility Business, through active M&A.
These included Accretive, which offers highly convenientfinancial services, and INVOICE and NOC Outsourcing &Consulting, which provide BPO services that contribute to
greater management efficiency. YAMATO LEASE, which
offers support services to address management issues attransport companies, also joined the Group. In addition,
to strengthen our ability to provide solutions and financing
support to overseas customers, we are establishing new
overseas bases and investing in companies outside Japan
as we focus on a broader global expansion.

Made ALM (UK) a consolidated subsidiary(2014)

Namie Sakai Solar Power Plant 1 and 2 (Fukushima, Namie) (2020)

Established Fuyo Auto Lease Co., Ltd.
(1987)
Aircraft Leases(Marine Jumbo)(1993)

Otemachi Building (1969)

Launched Space Leases (1988)

Established Aqua Art Co., Ltd. (1994)

Listed on the First Section of the Tokyo Stock Exchange (2004)

09

Introduction of Fuyo Lease Group

Fuyo Lease Group Integrated Report 2021

Overview of Fuyo Lease Group

Real Estate
New Domains

The Fuyo Lease Group is working to identify risks
and opportunities presented by societal changes andissues, and offering diverse solutions that lead toresolving them.
Overview of Fuyo General Lease Co., Ltd.

Medical & Welfare
BPO

Mobility Business

Energy & Environment
Domestic Corporate

Aircraft

Overseas

Finance

Vendor Leases

Domestic Group Companies
Fuyo Auto Lease Co., Ltd.

YAMATO LEASE CO., LTD.

Fuyo Lease Sales Co., Ltd.

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

In addition to support for new and used truck leasing, procurement
and sales, the company also offers services to assist transportcompanies with management issues, including succession
problems and driver shortages.

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

Sharp Finance Co., Ltd.

FUJITA Co., Ltd.

FGL Group Business Service Co., Ltd.

FUJITA specializes in replacing medical equipment in addition tobuying and removing second-hand medical equipment. FUJITA
also assists hospitals and clinics close medical practices.

FGL Group Business Service handles shared services related tothe sales administration of each Fuyo Lease Group and non-life
insurance agency businessCompany name

Fuyo General Lease Co., Ltd.

Headquarters

Kojimachi Garden Tower, 5-1-1, Kojimachi,
Chiyoda-ku, Tokyo 102-0083, Japan

EstablishedMay 1, 1969

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

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

Accretive Co., Ltd.

Nihon Credit Lease Corporation

FGL Group Management Service Co., Ltd.

Shares listed on

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

Number of
employees

Consolidated: 2,637 / Non-consolidated: 759(as of March 31, 2021)

Accretive provides highly convenient financial services and BPO
services related to accounting, focusing mainly on factoringbusiness for medical and nursing care receivables.

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

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

Operation

Domestic: Head office sales department and 15 regionalsales offices (non-consolidated)
19 domestic group companies
11 overseas group companies

INVOICE Inc.

Fuyo Network Service Co., Ltd.

Yokogawa Rental & Lease Corporation

INVOICE’s offering includes business customers combined billing
services that help reduce costs and improve productivity, andInternet services for residential buildings for individual customers.

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

A joint venture with Yokogawa Electric Corporation, offers
multi-vendor rental services for measuring instruments and IT
equipment. Because it is one of the companies with the largest
stock of equipment in the industry, it can respond quickly to theneeds of customers.

NOC Outsourcing & Consulting Inc.

Aqua Art Co., Ltd.

MerryBiz Inc.

NOC Outsourcing & Consulting offers high quality business process
outsourcing (BPO) services to customers. The Company provides
customers with support to increase their work efficiency and to
reduce costs in human resources, accounting, administrative,
back office, and IT operations.

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

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

Fuyo General Lease (USA) Inc.

Fuyo General Lease (Taiwan) Co., Ltd.

TDF Group Inc

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

Fuyo General Lease (Taiwan) Co., Ltd. provides financial services
to companies expanding into Taiwan.

Based in Canada, TDF Group Inc. engages in rental, leasing, andsales of pickup trucks in North America.

Fuyo General Lease (China) Co., Ltd.

Fuyo General Lease (Thailand) Co., Ltd.

Pacific Rim Capital, Inc.

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

Fuyo General Lease (Thailand) Co., Ltd. provides financial services
to companies expanding into Thailand.

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

Fuyo General Lease (HK) Limited

FGL Aircraft Ireland Limited

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

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

Fuyo General Lease (Asia) Pte. Ltd.

Aircraft Leasing and Management Limited

Fuyo General Lease (Asia) Pte. Ltd. provides financial services tocompanies expanding into Southeast Asia.

Aircraft Leasing and Management Limited provides comprehensive
aircraft services including aircraft lease marketing, aircraft
management, post-lease aircraft sales, and advisory services.

Line ofbusiness

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

Overseas Group Companies
TDF Group Inc.
Pacific Rim Capital, Inc.

Fuyo General Lease (USA) Inc.

Fuyo General Lease (China) Co., Ltd.
Fuyo General Lease (Taiwan) Co., Ltd.
Fuyo General Lease (HK) Limited
Fuyo General Lease (Thailand) Co., Ltd.
Fuyo General Lease (Asia) Pte. Ltd.

FGL Aircraft Ireland Limited
Aircraft Leasing and Management Limited

10

11

Financial and Non-Financial Highlights

Financial Highlights
Net sales

Non-Financial Highlights

740.3 billion yen

Profit attributableto owners of parent(+9.0% year on year)

Installment sales

Ordinary proﬁt (Left axis)

Financing and other(Billions of yen)

800

50
740.3

712.3
590.3
30.0
49.1

507.2

183.5

198.5

38.2

30

511.2

423.2

479.6

494.6

(%)

( t-CO 2 )(t-CO 2 /100 millions of yen)

10.0

2,500

0.5

8.0

2,074

2,000
0.37

1,937

6.0

1,500

26.2

21.9

4.0

1,000

0.29

828
758

1,271
307

2,007
178

0.36

0.33

29.6

20.0

2,062

185
518

319

328

( MW-dc )(Households)

300

0.4

240

0.3

180

2.0

327

0.2

851

816

85,577

120

54,11548,258 111

2017/3

2018/3

2019/32020/30
2017/32021/3

Net sales continued to increase due to the expansion of the Group, reaching arecord high of 740.3 billion yen (up 3.9% year on year). Strengthening Strategic
Areas such as BPO services and Mobility Business contributed significantly tothe increase in the growth of net sales.

2,555.9 billion yen(+7.2% from the end of previous FY)(Billions of yen)

2,400

2,262.8
2,172.6

2,047.4
1,800

1,200

549.7

1.67

1.60

127.9

583.1
115.1

Annual dividends

2,384.0

2018/3240 yen

691.9

96.0

78.4

2021/300
2017/3

2018/3

2019/32020/32021/3

The renewable energy power generation business made steady progress. In
fiscal 2020, we also invested in renewable energy funds overseas, including in
Taiwan and the United States, and the total output reached 283 MW-dc.
*1 Total of figures of own group business and those corresponding to equity investment share*2 Calculated based on elecricity consumption pf 3,600 kWh/year per household.

Percentage of Female Employees inManagement Positions (non-consolidated)

Employees

Payout ratio (Right axis)

(%)

(Yen)

(%)

250

25.0

22.3%

1.8

200

1.6

150

19.6%

23.5%

240

(Employees)

3,000

24.3%
2,637

205

20.1%

83.5

25.1%

Number of employees (consolidated)

2.0

188

20.0

2,400

146

15.0

1,800

100

10.0

1,200

Employee Satisfaction Survey (consolidated)

2,416

1,960
1,703

1,715

Job satisfaction*

130

1.4

30,00042,99832,488Percentage of female employees in management positions

1.94

759.0

2020/360,0002,637

24.3 %

1.76

602.0

2019/3*1 Scope 1: Direct emissions from the use of fuel for company vehicles, city gas, etc.
Scope 2: Indirect emissions from the use of purchased electricity, etc.
*2 Added after the fiscal year ended March 2018.
*3 Added after the fiscal year ended March 2020.
*4 Added after the fiscal year ended March 2021.

Payout ratio

Annual dividends (Left axis)

2,555.9

2017/3

Number of Employees (consolidated)

1.94 %
1.90

2021/3

Annual Dividends/Payout Ratio(+0.04 points from the end of previous FY)

3,000

2020/3Since the fiscal year ended March 2018, CO2 emissions have increased dueto the increase in the group companies. However, CO2 emission intensity has
maintained a downward trend as a result of thorough energy conservation
activities throughout the Group.

ROA

Leases (Left axis)
Installment sales (Left axis)
Financing and other (Left axis)
ROA(Right axis)

2019/30

Ordinary profit was 48.0 billion yen (up 9.0% year on year), profit attributableto owners of parent was 29.6 billion yen (up 12.9% year on year), and ordinary
profit and profit attributable to owners of parent reached record highs for the
fourth and sixth consecutive years respectively. The accumulation of operating
assets centering on Strategic Areas and the growth of the Finance business
contributed significantly to the growth of ordinary profit and profit attributableto owners of parent.

Operating assets/ROA
Operating assets

2018/3062,62960

628

25,608090,00084,569

86

0.1
927

120,000

229

0.29

500
964

150,000

283

69,514 149

336

10

t-CO2

395

686

500.1

0

147,574

households*2

147,574

44.0

25.5

CO2 reduction(estimation)

85,000

48.0

9.2%

31.4

20
200

10.2%

MW-dc*1

Power supplied Equivalent toapproximately

Green energy supply (output) (Left axis)
Energy supply when converted into a number of households (Right axis)
CO 2 reduction by renewable energy power generation (t-CO2, estimation)

NOC Outsourcing & Consulting and Yamato Lease*4
CO 2 emission intensity (Right axis)

35.2

41.6

34.2

283

ServiceProﬁt attributable to owners of parent (Left axis)
ROE (Right axis)

9.7%

Renewable energy power
generation capacity (output)

Sharp Finance and Accretive* 2
INVOICE and FUJITA* 3

39.1

100.4

21.7
62.3

400

9.2%

40

618.1

Fuyo General Lease
Fuyo Auto Lease, Fuyo Network Service, Aqua Art, Fuyo Lease
Sales, FGL Group Business Service and FGL Group Management(+12.9% year on year)

10.0%

Renewable energy power generation capacity (output) /Power Supplied/CO2 Reduction (estimation)

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

48.0 billion yen 29.6 billion yen(+3.9% year on year)(Billions of yen)

600

CO2 Emissions (Scope 1, 2)*1 /CO2 Emission Intensity

Ordinary profit/Profit attributable to owners of parent
Ordinary profit

Leases12

Fuyo Lease Group Integrated Report 2021

85.4 %* Percentage of employees who rated at least one out of six job satisfaction questions as four orabove (on a scale of one to five) in the Employee Satisfaction Survey

600

1,369.8

1,474.4

1,564.8

1,613.6

1,713.30
2017/3

2018/3

2019/32020/3

1.2

50

5.0

600

1.0

0

0

0

2021/3Operating assets was 2,555.9 billion yen (up 7.2% from the end of previous fiscal
year) and has increased for 11th consecutive years due to the accumulation ofassets in Strategic Areas, centering on Energy & Environment and Real Estatebusinesses. ROA has improved for fourth consecutive years to 1.94% (up 0.04
points from the end of previous fiscal year) due to the replacement of assets
with high profitability.

2017/3

2018/3

2019/32020/32021/3

The Fuyo Lease Group has a basic policy of working to distribute profits toshareholders by continuing to pay stable dividends over the long term. The
annual dividends for the fiscal year ended March 2021 was 240 yen, theconsecutive dividend increase since the company went public in 2004. As forthe payout ratio, it has also increased for sixth consecutive years, achieving arecord high of 24.3%.

Percentage of Outside Directors andOutside Corporate Auditors (non-consolidated)2017/3

2018/3

2019/32020/32021/3The 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 our company a better workplaceso that all of our employees can realize their full potential as they hone theirprofessional skills.

42.9%(Six out of 14 directors and corporate auditors areoutside directors and outside corporate auditors.)

13

Value Creation Story

Fuyo Lease Group Integrated Report 2021

Value Creation Story

Contributing to the Solution of Social Issues

The Fuyo Lease Group finds risks and opportunities from social changes and issues,and
is motivated 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.

CSV (Creating Shared Value) between the Company and Society
Corporate Value (Financial)Social Value (Non-financial)

Consolidated Management Goals

Environment

FY 2020 Results

OperatingassetsOrdinary
profitFuyo Lease Group’sCore Businesses¥

2,555.9bn¥ 48.0 bn

Real Estate

Operating assets that form the foundations forcreating added value
Operating assets: ¥Changes and Issues
in Society
Socialenvironment

Naturalenvironment

Diversification invaluesIntensification ofclimate change

Adapting totechnologicalinnovations

More frequent
natural disasters
Acceleration of
resource depletion

Development of an
information society
Declining birthrate
and aging population

Economic
environment
Fluidization and multi-polarization of the world
economyChanges in the interest rate environment
Progression of corporate globalization
Changes in accounting standards

Medical &Welfare

P30

Energy &Environment

P31

P32

Stable financial base and core capital
Net assets: ¥344.8 billion
Non-financial

Aircraft

Overseas

P33

P34

Medical & Welfare

Operating assets for real estate leasing

Operating assets for Medical & Welfare

20 domestic companies and 106 business locations
11 overseas companies and 12 business locations in
8 countries

Relationships with customers in a variety ofindustries
Human resources that possess highly specialized
expertise and extensive know-how

AircraftRenewable energy power generation
business

Operating assets for
Aircraft leasing

147,574

t-CO 2 (FY2020)

Overseas

BPO
Ordinary profit of core companies in
BPO services¥ 6.2 bn* 3

100%

PC

Reuse andrecycle rate forleased assets

Other
than PC

93%

Society and People¥ 148.4 bn

Overseas operating assets

New Domains

Mobility
Business

BPO
P35

Acquired of Nihon Credit Lease as a subsidiary,invested in THINKCYTE, Tsubame BHB, A.L.I. Technologies,
TELEXISTENCE, CB Holdings, etc.

New
Domains

P36

Domestic Corporate
Finance/Vendor Leases

Finance

Operating assets for leasing

Operating assets for financing¥ 1,713.3 bn*4

Support for businessefficiency improvement
and work style reform byproviding BPO services

Total number ofcompanies provided*5

19,353 companies

11

Approx.
millionpeople/year

P37

Core Areas

Systems that Support Sustainable Value Creation

Ratio of group companies in consolidated net sales

Domestic
Corporate

Active investment and support for venturecompanies
Number of M&A and capital alliances

Transportation capacity

Fuyo Lease Group
Materiality P15

Inter-Group collaboration that produces new
solutions

34.2% (FY ended Mar. 2017)54.3 % (FY ended Mar. 2021)

Contributing to people’s
mobility through aircraft
leasing¥725.7bn*4

2,637 group employees24¥ 95.1bn

Energy & Environment¥ 97.4 bn* 2

2,062

New Domains

Extensive domestic and overseas network

since Apr. 2017:

t-CO 2 (FY2020)

CO 2 emissions
reduction (estimated)

2.0 %Output 283 MW-dc* 1

2,555.9 billion

2,500.0 bn¥ 50.0 bn¥

Real Estate¥ 555.2 bn

Financial

Group CO 2 emissions

1.94 %ROA

Strategic Areas

Resources and Strengths

Medium-Term
Management Plan Target(FY2021)

P39

VendorLeasesFinance

P39

P39

Human Resources
Management Strategy
P43

Risk Management
P54

Corporate Governance
P49

P38

*1 Total of figures of own group business and those corresponding to equity investment share*2 Operating assets of overseas subsidiaries (excluding aircraft leases) plus investments in overseas affiliate businesses*3 INVOICE, Accretive, and NOC(NOC Outsourcing & Consulting, NOC Techno-Solutions, and NOC Biz Partners)*4 Operating assets of the entire Fuyo Lease Group*5 Number of companies served by Sharp Finance, Accretive, INVOICE, NOC Outsourcing & Consulting, and MerryBiz.

Compliance System
P56

14

15

Materiality

Fuyo Lease Group Integrated Report 2021

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

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

STEP

1

STEP

Identifying Issues

2

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

Assessing Materiality
from the Stakeholders’
Point of View

STEP

3

We assessed materiality of the issues
identified in Step 1 from the viewpointof investors and other stakeholders

Assessing Materiality for
our Business Operations

STEP

We assessed materiality of the issues
identified in Step 1 considering ourbusiness based on our Medium-termManagement Plan, Code of Corporate
Conduct and other guidelines.

4

Identifying Priority Issues

Following Steps 2 and 3, we identified
priority issues. Top management
approved the identified priority issues.

Materiality for stakeholders

Materiality

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

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

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

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

Materiality for our businesses

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

Environment

Responding toclimate change issues
and renewable energy

SocialValue

Promoting health andwellbeing

SocietyandPeopleDeveloping safe andlivable cities and providing
transportation

Achieving economic growthand fulfilling work

Diversity andwork-style reform

Supplying green energy through the renewable energy
power generation business (power generated)

283MW-dc*1

200MW-dc (Achieved)

Estimated CO2 reduction 147,574 t-CO2 [FY2020]

Setting targets and promoting the use ofrenewable energy in business operations

1%

2024 target: 50%
2030 target: 100%

Promoting the use of renewable energy andcommunicating demand voices to the market¥2.64 billion

2024 target: ¥5.0 billion

Number of companies and organizations using
the programs: 114 (October 2019-March 2021)

Operating assets of theEnergy & Environment businesses¥85.0 billion*2¥41.0 billion (Achieved)

Promoting renewable energy and energy saving

Offering support to renewable energy-related
technology venture companies

Capital and business alliance with
Tsubame BHB Co., Ltd.

Support sales of new technologies and products
and provision of new services

Disseminating advanced
renewable energy-related technologies

Reuse and recycle rate for returned PC

PC:
100%
Other than PC: 93%

PC:
100%
Other than PC: 95%

Reducing waste and promoting a circular society

Convert power consumed by the Fuyo Lease Group
into renewable energy

Transaction volume under the“Fuyo 100% Renewable Electricity Declaration Support Program”
and the “Fuyo Zero Carbon City Support Program”

Reduction and proper disposal of waste through the 3Rs(reduce, reuse, and recycle) for leased assets
Ensure proper disposal of waste

Proper disposal of all waste (zero violations of environmental laws, etc.)

Operating assets of Medical & Welfare businesses¥95.1 billion¥95.0 billion (Achieved)

Improving both 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)¥20.3 billion¥30.0 billion [2021]

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

Promote cutting-edge healthcare technologies

Offering support to medical venture companies

Capital and business alliances with
THINKCYTE, Inc. and CB Holdings, Inc.

Support sales of new technologies and products
and provision of new services

Disseminating advanced medical technologies

Promote environmentally and socially friendly
urban scape and residential space

Operating assets of real estate leases(Commercial facilities, hotels, distribution facilities,
nursing care facilities, residential facilities, etc.)¥555.2 billion¥530.0 billion (Achieved)

Supplying environmentally and sociallyfriendly assets

Contribute to expanding the volume ofsafe, inexpensive, and fast transportation

Number of aircraft owned by the Group

44 aircraft—*3

Transportation capacity:
11 million people*4 per year [FY 2020]

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

Number of companies provided BPO services
by five BPO companies*5

19,353 companies

20,000 companies

Contributing to the resolution of labor shortages
and the promotion of work-style reformby providing BPO services

Percentage of female employees inmanagement positions (non-consolidated)

25.1%

30% or more

Percentage of new female employees hired(non-consolidated)

52.6%

40% or more

Improve work-style to pursue efficiency and productivity

Rate of taking annual paid leave (non-consolidated)

72.0%

80% or more

Improving work-style to pursue
efficiency and productivity

Promote work-life balance

Telecommuting utilization rate*6

76.7%

40% or more

Promoting a balance between work and family

Improve job satisfaction

Rate of job satisfaction*7 (consolidated)

85.4%

Steady improvement

Increasing productivity and added value
by enhancing job satisfaction*1 The calculation method for power generated was changed from fiscal 2020 to include investment projects (calculated in proportion to investment share).
*2 The calculation method for operating assets was changed from fiscal 2020 to include the renewable energy generation business.
*3 The target has been withdrawn due to the impact of the COVID-19 pandemic in fiscal 2020 (original target: 70 aircraft <fiscal 2021>)*4 Calculated using the method employed prior to the spread of COVID-19

Relevant
Pages

CSV1(P19)
Energy &Environment(P32)

CSV2(P21)

Reducing our environmental impact
by ensuring proper disposal of waste

Expand access of medical, elderly nursing care, andwelfare services

Empower women in workplaces and develop
human resources with diverse strengths

System that Support
Sustainable Value
CreationContributing to Society andthe Environment (Outcome)Expand supply of renewable energy

Promote cutting-edge
renewable energy-related technologies

Contributing to the creationof a circular society

FY 2021 Targets

KPIs

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

Results and Plan (Output)
FY 2020 Results

Themes of Initiatives

CSV5(P27)
Medical & Welfare(P31)

CSV4(P25)
Real Estate(P30)
Aircraft(P33)

CSV3(P23)
BPO(P35)

Ensuring that female employees can realize
their full potential in the workplace
Human Resource
Management
Strategies for
Value Enhancing(P43)*5 Sharp Finance, Accretive, INVOICE, NOC Outsourcing & Consulting, and MerryBiz.
*6 Percentage of employees who have been provided with home PCs to establish telecommuting environments and have telecommuted from home at least once
*7 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

Relevant
SDGs

16

17

Medium-Term Management Plan

Fuyo Lease Group Integrated Report 2021

Medium-term Management Plan (FY2017-FY2021)

Frontier Expansion 2021

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.

“Go where no one has gone before”

Business Strategy

Aiming to be a corporate group that moves into uncharted business and continues to expand the frontier

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

VisionOverview ofStrategies
and Goals

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

Target Performance Indicators
Operating Assets

2,262.8 billion yen

Medical &WelfareEnergy &Environment

Aircraft

2,384.0 billion yen

2,555.9 billion yen

1.90%

1.94%

2,500.0 billion yen
2.0%

39.1
billion yen

44.0
billion yen

48.0
billion yen

50.0
billion yen

2018/3

2019/32020/32021/32022/3Real
EstateMedical &Energy &Welfare Environment

Aircraft

Overseas

BPO

New
Domains

Mobility
Business

02 Challenge the FrontierDomestic Corporate / Vendor Leases / FinanceCore Areas

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

Changes of Operating Assets in Strategic Areas
40

1,200

40

35
912.4

29
769.3

300
0
Results

104.9
72.1
93.4
39.3
97.6

101.8
84.9
99.9
54.1
149.8

97.6
98.2
99.2
59.5
164.9

421.9

444.7

40

1,181.2
179.8

30

115.4
97.4
85.0

20

148.4

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)

555.2

0
2017/3

2018/3

2019/32020/32021/32022/3

Planned/Estimated*2 The balance for Medical & Welfare
overlaps in part with those of other
Strategic Areas (Real Estate, etc.).

Key Performance Indicators and Progress
At Fuyo Lease Group, our three management indicators areoperating assets, ROA (ordinary profit on operating assets) andordinary profit, and we have set targets for the fiscal year ending
March 2022, which is the final year of this five-year Medium-termManagement Plan, as well as interim goal values for the fiscal year
ending March 2020, which is the third year of the plan. Last year,
the Group posted strong results against the interim goals set in thefiscal year ended March 2020, and in the fiscal year ended March
2021, the fourth year of the plan, we succeeded in achieving our
final-year goal for operating assets of ¥2,500 billion ahead ofand Concentration
01 Selection
in Strategic Areas
We have positioned Strategic Areas expected
to be the biggest drivers of profit growth, andare focusing management resources on theseareas. As a result, we have achieved continuous
improvement in ROA by expanding businessdomains such as BPO and the Mobility Businesswhile accumulating high-quality operating
assets in areas such as Energy & Environment
and Real Estate. Leveraging the Medium-termManagement Plan’s achievements, we will
work to diversify earnings and expand businessdomains by spurring growth in Strategic Areas.

50

10

362.0

240.2

964.1

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.

(%)

46

599.1

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

35.2
billion yen

03 Pursue Group Synergies

98.7
70.0
84.1
31.0
75.1

Finance

Management Strategy

Three Strategic Axes

600

VendorLeases

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

01 Selection and Concentration in Strategic Areas

900

Domestic
Corporate(BPO, Mobility
Business)Three Strategic Axes

Strategic
Areas

1,500

New
Domains

Areas positioned as growth drivers and designated for concentration ofmanagement resources

Business Strategy(Billions of yen)Overseas

1.76%

1.67%

Ordinary Profit
ROA

Real Estate

Target Value

2,172.6 billion yen

Core Areas

Strategic Areas

schedule. ROA and ordinary profit have also grown steadily, andwe recorded ROA of 1.94% and ordinary profit of ¥48.0 billion in
the fiscal year ended March 2021. Contributing to these results
were our acquisition of YAMATO LEASE as a consolidated
subsidiary in the Mobility Business, an increase in operating assets
through growth in real estate leases, replacement of portfolio
businesses with highly profitable assets, and growth in the financebusiness. We will continue advancing our business activities in thefiscal year ending March 2022, the final year of the Medium-termManagement Plan, in order to achieve our management targets.

02 Challenge the Frontier
In addition to seeding and nurturing the seeds forthe expansion of the frontier, we have pushedahead with initiatives such as proactive M&As,
capital and business alliances. As a result, we haveachieved growth in businesses that lie at the coreof the New Domains, such as BPO and Mobility
Business, as we have successfully establishedcollaborative relationships with companies thatpossess unique technologies and expertise.
Looking ahead, we will strengthen businesses in
the New Domains so that they will serve as new
drivers of profit growth. Concurrently, we willfurther implement the CSV approach to addresssocial priorities such as tackling the problem ofclimate change, promoting the circular economy,
and improving the productivity of companies, as
we expand new business domains.

03 Pursue Group Synergies
By organically linking the functions and customer
bases of group companies, we have strengthened
our systems to flexibly and swiftly provide
solutions that meet the diverse needs of ourcustomers on a group-wide basis. Moreover,with the relocation of the group head office inJune 2020, the business sites of groupcompanies have been consolidated, fostering
even closer collaboration between groupcompanies. We will continue to acceleratebusiness development on a group-wide basis.
By doing so, we will push forward with the
expansion of new business domains that go
beyond existing frameworks, along with working
to maximize group synergies.

Results in FY 2020

Results in FY 2020

Results in FY 2020

Real Estate Medium-term targets achieved ahead of schedule

To expand frontiers, made proactive investments primarily
in companies related to Strategic Areas, including R&Dfocused startups and venture funds.
Energy & Environment Entered into a capital and businessalliance with Tsubame BHB Co., Ltd., which is developing asystem for on-site ammonia production.
Aircraft Purchased engines for Part-Out. Invested in Airbus
Ventures Fund III LP, which invests in venture companies in
the aerospace field.
Mobility Business Added YAMATO LEASE as a consolidated
subsidiary. Invested in A.L.I. Technologies Inc., which isdeveloping and commercializing industrial drone services
and the air mobility business.
Circular Economy Joined the UK’s Ellen MacArthur Foundation
as a member. As a lease company that handles a wide
variety of things, aiming to build a new business model
for realizing the circular economy.

Real Estate Promoted Sharp Finance’s real estate leases forwith growth in real estate for diverse applications, including
logistics facilities and others, through a broad range ofalliances.
Medical & Welfare Expanded line of services and customer
base through collaborations with medical device manufacturers
and other highly specialized partner companies.
Energy & Environment Strengthened overseas businessthrough alliances, including the solar power generation
business in Texas and investments in renewable energy funds.
Aircraft Aggressive expansion of part-out business and otherperipheral aircraft businesses beyond aircraft leasing.
Overseas Network expansion in the Asia region, including
establishment of a local base in Taiwan and shift of the local
base in Thailand to focus exclusively on leasing.
BPO Major increase in contracts through Group cooperation.
In addition to OneVoice (public utility charge collection service),the lineup has been expanded to include Smart Benefits.
Mobility Business Strengthened the system for collaboratingwith partners to provide consulting on solutions to logistics
issues and offer a wide range of solutions.

medical, childcare and nursing care facilities by leveraging
Fuyo Lease’s know-how in the Real Estate and Medical &Welfare areas.
Medical & Welfare Made Nihon Credit Lease a consolidated
subsidiary in April 2021. Through group collaboration, thebalance of Accretive’s FPS Medical has increased steadily.
Energy & Environment Started providing the Fuyo Zero Carbon
City Support Program by Fuyo Lease and Fuyo Auto Lease.
Promoted the leasing and financing of renewable energy
facilities, energy-saving equipment, and electrified vehicles.
BPO Consolidated subsidiary INVOICE saw contract volume
increase 40% year on year thanks to expanded sales
leveraging Group collaboration.
Mobility Business Made YAMATO LEASE a consolidated
subsidiar y in April 2020, strengthening the Group
collaboration system for solving issues by providing
integrated solutions in the logistics field.
Others A subsidiary that consolidates human resources andgeneral affairs operations of group companies, has been
newly established, and the operations have been streamlined
by promoting “common office work” and “effective use ofgroup resources.”

Long-Term Approach
We see Creating Shared Value (CSV) as one of our management
decision criteria. By putting our corporate slogan of “Go where
no one has gone before” into practice, we are committed tocontributing to the building of a sustainable society andincreasing our corporate value, with the focus on the lease andfinancing business.

18

19

CSV1: Responding to Climate Change Issues and Renewable Energy

Fuyo Lease Group Integrated Report 2021

20

1 Renewable Energy Generation Business

C S V

1

Energy &Environment

Promoting
Decarbonization
with Customers andContributing to SolveClimate Change Issues
Senior Managing Director

Soichi Hosoi

We launched our renewable energy power generation businessin 2012, and now supply renewable energy to communities
equivalent to the annual power consumption of approximately
85,000 households. Additionally, in fiscal 2020 our participation inwind power generation projects in Japan and renewable energy
power generation projects in the U.S. and Taiwan increased the2 Promoting Renewable Energy-Related Infrastructure
We offer two programs that provide financial support to companies
and organizations working toward decarbonization: the Fuyo
100% Renewable Electricity Declaration Support Program, andthe Fuyo Zero Carbon City Support Program.
The Fuyo 100% Renewable Electricity Declaration Support
Program, begun in 2019, is a preferential financing programfor businesses and organizations that have joined RE100 andthe 100% Renewable Electricity Declaration RE Action.*2 Using
funds raised by the Company through green bonds, the programis aimed at encouraging the introduction of renewable energy
facilities and energy-efficient equipment.
ESG
Investors

The Fuyo Lease Group’s Initiatives to Address Climate Change Issues
Since the 2015 adoption of the Paris Agreement, initiatives toward
decarbonization have advanced worldwide, and in October 2020,
Japan clearly set forth a policy of achieving virtually zero CO2emissions by 2050. Measures to address climate change will likely
accelerate further going forward.
The Fuyo Lease Group believes that we must start by taking theinitiative to reduce greenhouse gases ourselves, and in 2018, we
became the first Japanese comprehensive leasing company to join
RE100, an international initiative that aims to convert all electricity
consumed in business activities to renewable energy. Since
participating in RE100, the Group has set a target of 100% renewableenergy use by 2050 and 50% by 2030, but we have now decided towork to achieve RE100 by 2030 and carbon neutrality by 2030 as well.

Green Bonds

Because we have been tenants at most of our sites to date,our inability to negotiate directly with electric power companies
themselves has been a major barrier to achieving the goal ofrenewable energy. At our head office, we worked with Sumitomo
Realty & Development Co., Ltd., the building’s owner, to create a newscheme allowing tenant companies to also make use of renewableenergy. In April 2021, electricity used by the Group in the building
switched to renewable energy, as we work to advance efforts toincrease the percentage of renewable energy use.
In 2019, we also endorsed the Task Force on Climate-related
Financial Disclosures’ (TCFD) recommendations, and we are preparing
to analyze the financial impact of climate change on the Group anddisclose that information.

Toward the Achievement of Decarbonization for Society and Our Customers
We believe that contributing to the decarbonization of society as
a whole through our business is an important issue for the Group,
which engages in a wide range of business fields and has a broadcustomer base, and we are actively promoting initiatives basedon the three pillars: “Renewable Energy Generation Business,”“Promoting Renewable Energy-Related Infrastructure,” and“Investment in and Commercialization Support for Renewable
Energy-Related Technologies.”

Group’s power generation capacity, including equity participation,
to 283 MW-dc. Going forward, we will continue to expand thebusiness through joint development with alliance partners,
overseas expansion through joint investments, and throughacquisition of solar secondary projects.*1

In addition, the Fuyo Zero Carbon City Support Program, newly
launched in 2020, is a donation-built-in program open to all companies,
organizations and local governments. Along with customers who install
facilities and equipment that contribute to decarbonization in areas ofmunicipalities that have declared themselves zero-carbon cities*3,
the program donates an amount equivalent to 0.2%*4 of the value oflease contracts to organizations that contribute to promoting zerocarbon cities. The program is being promoted not only in the Tokyo
metropolitan region, but throughout Japan in cooperation with many
regional financial institutions, and more than 100 customer companies
have applied for the program in the first six months since its launch.

Fuyo 100% Renewable Electricity
Declaration Support Program

1 Major corporations

Fuyo Zero Carbon City
Support Program

2 Small and mediumsized companies
and organizations
3 Companies andorganizations in the areaof zero-carbon cities

Donate a portion oflease contract value
Foundations, incorporated associations,NPOs, etc.

3 Investment in and Commercialization Support for Renewable Energy-Related Technologies
The Fuyo Lease Group actively invests in and forms businessalliances with venture companies that have advanced renewableenergy-related technology, and supports their commercialization.
In fiscal 2018, we formed capital and business alliances with
Exergy Power Systems Inc., which develops and manufactures
next-generation energy storage systems, and with NExT-e
Solutions Inc., which provides battery management systems thatutilize advanced battery control technologies. In fiscal 2019, we
entered into a capital and business alliance with Girasol Energy
Inc., which is developing an IoT platform for the maintenance andmanagement of solar power facilities.

Further, in fiscal 2020, we closed a capital and business agreementwith Tsubame BHB Co., Ltd., which is working to develop andcommercialize the world’s first on-site ammonia production system(P37). In recent years, ammonia has gained attention as a nextgeneration energy source that does not emit CO2 when combusted,
and as an energy carrier*5 that facilitates the transport and storage ofhydrogen. The Fuyo Lease Group aims to contribute to a decarbonizedsociety by supporting the company’s business development.
Through our support for venture companies, we will continue
working to promote the spread of renewable energy and the creationof new business opportunities.

VOICE

Overview of Efforts to Convert to Renewable Energy
Participation in RE100 andpromotion 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)

2024 target: 50%, 2030 target: 100%

Executive Officer and General Manager,
Energy & Environment Business Division

Miki Sasaki

Renewable energy
generation business

Promotion of renewableenergy-related infrastructure

Investment in and commercialization support
for renewable energy-related technologies

Contributing to local communities through thedevelopment of renewable energy power plants

Promotion of renewable energy-related
infrastructure through a broad customer base

Seeking investments and business allianceapproaches to create new business opportunities

As a decarbonization support tool for our customers, we are developing our PPA*6-based Green
Electricity Supply Services. Going forward, we will promote an off-site PPA initiative utilizing idle
land, etc. to supply green electricity directly to customer power demand sites. Further, as the
movement toward decarbonization is accelerating globally, we will actively work to expand ourrenewable energy power generation and electric power infrastructure businesses overseas as well,
primarily in North America, Asia and Europe.
As we continue working to build a sustainable society, we will promote renewable energy
ourselves while creating a variety of businesses that contribute to the spread of green energy andsupporting our customers’ efforts toward decarbonization management.

*1 Solar secondary projects: In solar power generation, refers to the business of trading in already-operating power plants and the rights to sell electricity.
*2 100% 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.
*3 Zero-carbon cities: A local government in which the head of the government or the municipality itself has announced an aim to achieve virtually zero emissions of greenhouse gases or carbon dioxide by 2050.
*4 Fuyo Lease will contribute 0.1% of the program’s contracted amount, topped up with an additional amount equivalent to 0.1% in its own funds.
*5 Energy carrier: Refers to hydrogen that has been converted into a state or substance that is easy to transport and store.
*6 PPA: An abbreviation for Power Purchase Agreement. The PPA provider installs, operates and maintains solar power generating equipment on the premises of the electric power consumer free ofcharge. The power generated is then purchased by the electric power consumer. This has the advantage of eliminating the need for an initial investment on the part of the power consumer, while
enabling them to implement environmental measures in a sustainable manner.

21

CSV2: Contributing to the Creation of a Circular Society

Fuyo Lease Group Integrated Report 2021

22

Environmental Conservation Initiatives to Date

C S V

2

Circular
EconomyContributing to Society
as a Whole by Becoming
a Platformer for
the Circular Economy

Under our Environmental Policy, the Fuyo Lease Group has beenworking to incorporate the 3Rs (Reduce, Reuse, Recycle) in
disposing of leased assets after their leases expire in an effort to
reduce the environmental impact of our business activities.
At the Tokyo 3R Center, which is responsible for reusing andrecycling leased assets after their leases expire, we reuse andrecycle not only items leased by our corporate group, but also
3Rs initiatives for leased
assets after their leases
expireLease term
expiresused assets we have bought from other companies. Beyond
proper compliance with applicable laws and regulations, as awaste generating business operator, we track every piece ofwaste we dispose of through an electronic manifest system. We
also conduct regularly scheduled on-site inspections of waste
disposal contractors, part of our effort to prevent the generationof environmental pollution.
Leased asset remains in use

ReduceSold on the secondhand market

Reuse

Collect parts/sell materials

RecycleRe-leased asset
Asset disposal

Assetcollection

Valuable
Tokyo 3R Center

Waste

Managing Executive Officer

Proper waste disposal/recycle

Hiroaki Ando

Final disposal(incineration/landfill)

Enhancerecycling rate
Minimize final
disposal (landfill)

New Initiatives Toward the Circular Economy through the Lease Business

Behind the Focus on the Circular Economy
The conventional economic model of “taking, making, andthrowing away” is called the “linear economy” because resources
are disposed of in a linear fashion without being recycled orreused. It is said that it is difficult to achieve sustainable economic
development in a linear economy because of its various negative
impacts, such as the large amount of waste generated, thedepletion of finite natural resources and soaring prices, and theimpact of greenhouse gas emissions on climate change. The
circular economy has thus become the focus of attention as a new
economic model for solving these issues.
The circular economy offers an alternative to the conventional
linear economy, an economic model that reexamines the entire
value chain with the goal of maintaining and circulating the valueof products and resources for as long as possible, while working
toward zero waste emissions. The manufacturing process uses
a great deal of energy and emits CO 2. This is particularly trueof the process of mining and refining metals and other natural
resources, and of the manufacturing process for steel andconcrete, all of which are said to involve large amounts of energy
use and CO 2 emissions. According to estimates by the Ellen
MacArthur Foundation, CO 2 emissions related to this kind of
manufacturing and the production of food are said to represent
about 45% of overall CO 2 emissions. The circular economy,
which cuts off these sources, is a new economic model essential
to advancing a decarbonized society.

“The Butterfly Diagram”
Proposed by the Ellen
MacArthur Foundation

In April 2020, the Group launched its “Circular Economy Domain” asa business domain to evolve its existing environmental conservation
efforts, and is advancing circular economy initiatives through its
leasing business. Achieving the circular economy will require adiverse range of functions, and we believe that this is an issue weare uniquely positioned to solve, with our vast lease resources andaccumulated know-how in proper disposal.
For example, Fuyo Lease reuses and recycles 100% of
the more than 100,000 PCs returned to it each year, thereby
minimizing waste. This is made possible by the Group’s strong
information security system and reliable data erasure, as wellas its diverse sales channels, which allow us to sell even old
PCs that have been used for nearly 10 years. In addition, officeautomation equipment such as printers, which are difficult toresell, would otherwise become industrial waste with no value,
but by dismantling and sorting them by material, we can convert

them into raw materials such as recycled plastic. In fact, in 2020
Fuyo Lease began a pilot program for material recycling*1 ofprinters and other equipment.
In the future, we aim to work in cooperation with our business
partners to reduce industrial waste derived from information andoffice equipment to zero.
Material Recycling Flow

Returned printers

Dismantle and sortPelletize*1 Material recycling: The process of crushing and processing used plastics, pelletizing themby heat treatment, and reusing them as resin material for plastic products.

A “Platformer” for the Circular Economy
The number of new services aimed at achieving the circular economy
are gradually expanding. In April 2021, we began providing a new
PC Lifecycle Management Service (PC-LCM) when PCs are being
deployed (P24). In addition to conventional PC leasing functions, theservice provides comprehensive support functions across the entire
PC lifecycle, including consulting services for planning PC deployment;
help desk services when failures occur; maintenance support in caseof breakdowns; and arrangements for return at the end of the lease,erasure of HDD data and eventual reuse. We have thus evolved fromproviding products to providing services. By offering appropriate
support over the lifetime of our products, the Group enables customers
to deploy PCs longer, more comfortably and with enabling a reduced
burden on the environment when installing.
In auto leasing, Fuyo Auto Lease, a group company, has begun
a used auto lease service in which vehicles whose leases are up

are serviced and offered at lower lease rates. This is part of oureffort to take on the challenge of extending product life, in thiscase by developing new ways of utilizing used vehicles in addition
to traditional used car sales channels. Further, we are steadily
advancing efforts to put in place infrastructure and networks aimed
at achieving the circular economy in other fields, including medical
equipment, information and communication equipment and material
handling equipment.
The Fuyo Lease Group will continue to evolve in order to achieve thecircular economy through its business. In the future, we aim to build awide-area ecosystem by expanding the circular economy infrastructureand network we have built up in the leasing business with the goal of
becoming a platformer for the circular economy. This will allow thoseusing the Group’s services to automatically participate in the circular
economy, and by extension contribute to society as a whole.

VOICE

General Manager,
Business Assets Management Division

Yasushi Mizuta
Copyright © Ellen MacArthur Foundation, Circular economy system diagram (February 2019) www.ellenmacarthurfoundation.org

In November 2020, Fuyo Lease became the first Japanese financial institution to join the U.K.-based
Ellen MacArthur Foundation. The Foundation is one of the world’s leading organizations promoting
the circular economy, and is engaged in global activities in collaboration with companies, research
institutions, and government agencies. We will actively participate in workshops organized by theFoundation and joint projects with participating companies in order to gain knowledge of the circular
economy and to collaborate with other companies and research institutions. Together with theworld’s leading companies and research institutions, we hope to contribute to the establishment of arecycling-oriented society in line with the vision for a circular society.

23

CSV3: Achieving Economic Growth and Fulfilling Work

Fuyo Lease Group Integrated Report 2021

24

2 Complete Support for Information System Departments: PC Lifecyle Management (PC-LCM) Service

Providing New Solutions thatContribute to SupportingWork Style Reforms andSustainable Corporate Growth

C S V

3
BPO

Issues in Promoting the Introduction of Telecommuting under the COVID-19 Pandemic Become Clear
The introduction of telecommuting in the corporate sector has
progressed, driven by the spread of COVID-19. Still, the percentageof employees coming to work remains high, in part because of theneed for some departments such as accounting to handle work likedealing with paper invoices in the office; this has hindered the morewidespread use of telecommuting. This kind of work, including
receipt of paper invoices, is affected by the practices and methods
used by business partners, and it is extremely difficult to review
these operations without their cooperation.

At the same time, telecommuting has also caused an increase
in inquiries to information systems departments responsible forbuilding a company’s system infrastructure, leading to a chronic
personnel shortage. There have also been a number of organizational
management issues, including lack of an environment that allows
employees to concentrate on their core duties, and cases in whichtelecommuting systems were hastily built but still face issues interms of security and telecommunications quality.

As information system departments shift their focus to core
operations, outsourcing of PC-related tasks that require energy
to manage and run will become an increasingly important factor.
The PC-LCM service includes consulting in overall operations,procurement (equipment selection and rental provision), deployment(setup and delivery management), operations (help desk, replacement
equipment in case of failure, provision of security products), andupgrades (equipment replacement and data deletion), as well asfull outsourcing of various tasks associated with all of theseprocesses. Our group companies work together seamlessly toachieve reasonable pricing while providing complete support tocompany information system departments, solving a variety ofissues involved in managing PCs.

This solution supports the complete shift of accounting
departments to telecommuting by utilizing BConnection Digital
Trade*1, a cloud-based invoice digitization service provided by
NTT Communications Corporation (“NTT Com”), and a system
linking high-speed document readers and AI-OCR*2 offered byGroup subsidiary NOC Outsourcing & Consulting Inc. (“NOC”),
and leverages NOC’s many years of know-how in accounting

BPO. It is provided as an integrated package for undertaking
a whole series of accounting department operations, andcombines the digitized BPO and accounting BPO services NOC
had been providing individually, including receipt and digitizationof paper and PDF invoices; journalizing of accounting data byaccounting professionals; and linking of journalized invoice datawith other accounting systems.

Consulting

PC-LCM
Operational
service

Procurement
service
Deployment
service

Quicklyprovidereplacement
equipment

Recently, we have been receiving an increasing number ofrequests for advice from companies that want to concentrate
their management resources on their core business (and consider
streamlining or outsourcing non-core operations), and during the
COVID-19 pandemic, we have had a strong sense that companies
are increasingly conscious of the importance of sustainable growth.
These include such requests as, “We want to take advantage of ourhead office relocation to streamline operations. Can you manage
our general affairs operations?” or, “We want to consolidate ourgroup company back office divisions, and would like your advice on
setting up a shared company.”

Reasonablepricing

In responding to such inquiries, the Group does not limit itself
to the mere general affairs operations, but also visualizes businessprocesses, handles system deployment, and conducts regularreviews of service levels and labor costs. In addition, based on our
cumulative know-how as an outsourcing company in standardizing
operations, we can also assist in designing shared company
business design and operations.
We not only improve efficiency, but by consulting on overall
operations promote optimal solution proposals—including fulloutsourcing—from a medium to long-term perspective.

*1 BConnection Digital Trade: A cloud-based service provided by NTT Com for digitizing invoices and other documents. It offers functions including creation and issuing of electronic invoices,viewing of electronic invoices within the company, and linking of invoice data to other accounting systems. The service promotes the corporate shift to paperless operations and remote
work, and contributes to improved productivity.
*2 AI-OCR: The utilization of AI technology in optical character recognition (OCR) used to read and digitize hand-written documents and forms.

BPO Service Lineup
Accounting & Finance

IT Systems

Bill Aggregation INV

The Group is working to support the resolution of these kinds of issues involved in the introduction of telecommuting by providing new solutions.

1 Supporting the Complete Shift of Accounting Departments to Telecommuting: A Total Solution for Accounting and Invoicing

Upgradeservice

Supporting Acceleration of the Shift to a Focus on Core Operations

General Affairs

Resolving Corporate Issues by Providing New Solutions

Office Concierge

General Accounting

NOC

NOC/MB

Vehicle Management
FAL

Accounting Services(Accounts Payable to Payments)
ACR

IT Services /IT Specialist Placement
NOC

PC-LCM Services
NOC/YRL/FNET

Human Resources

Sales Administration

Payroll Accounting

Sales Administration Services

NOC

NOC

Attendance Management
NOC

Human Resource
Management
NOC

Money Collection

RPA Services

Employee Benefits

SFC

NOC

INV

FGL

A Complete Solution for Accounting and Invoices(FLOW Cube +)Fuyo Auto Lease Co., Ltd.
Sharp Finance Co., Ltd.
ACR Accretive Co., Ltd.
SFC
INV

Receipt of PDF invoices

Receipt of paper invoices

1.OpenPDF

2.Scan and correct

FGL

FNET Fuyo Network Service Co., Ltd.
YRL

4.Journalizing
finalized

5.Input invoice data
General Manager,
BPO Service Promotion Division

Buyer(Customer using the solution)

Issue invoice

Confirm and approve(Customers using the solution can also issue invoices from BConnection)

Yokogawa Rental & Lease
Corporation
MerryBiz Inc.

VOICE

BConnection
Digital Trade(NTT Com)
3.Inquire about andverify any deficiencies

INVOICE Inc.

NOC NOC Outsourcing &MB

Receipt of electronic invoices

Fuyo General Lease Co., Ltd.

FAL

Consulting Inc.

Comprehensive Accounting and Asset Management Service

Seller(Supplier from whom the customer
using the solution procures products)

Reducedsystemdepartment
energyOffer securesolutions

Koji Yamamoto
Accounting system

OneVoice, an integrated billing service for utilities that group company INVOICE began offering in
April of last year is attracting renewed attention.
Since the signing of the Paris Agreement in 2015, growing international momentum aimed at adecarbonized society and an emphasis on ESG investing have required companies to actively work to
reduce their CO2 emissions. While many companies manage their use of electricity, gas and water andtheir CO2 emissions, they are also expected to properly calculate and review their emissions volumes.
In addition to improving operational efficiency by collecting invoices delivered separately toeach office and converting invoice information to data, OneVoice returns information on utility
usage to each location in the form of data, supporting clients in their efforts to calculate CO 2
emissions and contributing to the resolution of social issues.

25

CSV4: Developing Safe and Livable Cities and Providing Transportation

Fuyo Lease Group Integrated Report 2021

Strategic Vision

4

Atsushi Mizuguchi

and also established a new Mobility Business Promotion
Division, responsible for planning, operations, and promotionof this initiative. Further, by adding the Machinery Business
Division, which deals in financing services for material handlingequipment*3 and construction equipment, to this domain, weare positioning the Mobility Business in the Strategic Areas, andhave put in place a structure for the Group as a whole to provide
services in the industries of automobiles and logistics. We are
currently working through YAMATO LEASE to actively establish
a business collaboration with the Yamato Group, and are moving
forward to review specific strategies.

*1 CASE: A term that has been coined from the initial letters of 4 automotive trends: Connected(connected cars), Autonomous (autonomous driving), Shared & Service (shared cars anddriving as a service), and Electric (electrification of vehicles).
*2 MaaS: An acronym for Mobility as a Service, which indicates the creation of services basedon means of transportation (mobility).
*3 Material handling equipment: Refers to cargo handling machinery used in logistics operations.
These include pallets, forklifts, automated warehouses, conveyer belts and others.

(CASE/MaaS)Transport

Storage, handling, etc.

Last mile delivery

Truck leasing

Real Estate Leasing

Leases for individual
business owners(warehouses anddistribution centers)-YAMATO LEASE-

Services

The automotive industry is entering a once-in-a-century periodof great change due to the technological innovations known as
CASE*1 and advancements in MaaS*2. In the logistics industry,
many social issues have become apparent, including an increasein the volume of cargo being handled due to the expansion of the
e-commerce market with the impact of the COVID-19 pandemic,
shortages of truck drivers and the aging driver population, andlong work hours. Addressing these changes and their resultant
social issues has become an urgent, important issue for many
companies, and has also increased the importance of thecreate shared value (CSV) perspective in achieving sustainablecorporate growth and enhancing corporate value throughsolutions to these problems.
Against the backdrop of these changes, in April 2020, theCompany created a new Mobility Business domain combining
Fuyo Auto Lease, which provides comprehensive vehicle support
services, and YAMATO LEASE, which offers management support
services centered on truck leases to transport companies,

General Vehicles Area

Logistics Area

Managing Executive Officer

Challenges Facing the Industry and How the Fuyo Lease Group Will RespondSupporting the Resolution of Challenges in the Vehicle andLogistics Industry by Providing a Wide Range of Solutions

ScenesMobility
Business

Contributing to Solving
Issues and Creating
Social Value Throughthe Mobility Business

TargetsC S V

Leasing of construction
machinery andtransportation vehicles

In the general vehicle areas, our goal will be to enhancecustomer satisfaction even further by supporting safe operations
through the introduction of total fleet management services*6,
improving customer fleet utilization rates through the use of car
sharing, and encouraging the deployment of electric vehicles.
We are also focusing on autonomous driving and other new
technologies, and are collecting and accumulating knowledge
to leverage in developing the Group’s own new services throughongoing dialogue with companies that provide state-of-the-art
technology and services.
*4 PRC: A company that handles operating leases for material handling equipment mainly in the
United States.
*5 TDF: A company that engages in rental, leasing, and sales of pickup trucks in North America.
*6 Total fleet management service: A service in which a leasing company contracts to provide
centralized repair, inspection and other vehicle maintenance operations, and that works tostreamline vehicle use and management through the utilization of driving data.

While moving

Destination, others

Auto leases

Real Estate Leasing-Fuyo Auto Lease-(commercial facilities, etc.)

DronesTotal fleet
management

Maintenance

Delivery route
optimization

EV andautonomous driving

Insurance andaccident prevention

Delivery robots

Car sharing

Storage battery
reuse-Fuyo Auto Lease-

Leasing of material
handling equipment-Machinery Business Division--Nakamichi Leasing-

RaaSTransport matching-Machinery Business Division-

EV andautonomous driving-Fuyo Auto Lease-

Forklift BPO

Fuyo Lease Group CSV Initiatives in the Mobility Business Area
Due to changes in its social structure—including a declining birthrate,
aging population and the concentration of population in urban areas—
Japan today is seeing the emergence of a variety of social issues related
to mobility, such as ensuring freedom of movement, revitalizing local
communities and reducing environmental impact. Expectations arefocused on autonomous driving as one means of solving these kindsof issues. In June 2021, the Group entered into a business alliance with
MACNICA, Inc. for the social implementation of autonomous driving,and has introduced the ARMA self-driving car manufactured by Navya,
SA of France. We plan to offer our self-driving vehicles and know-how
for use by local governments and companies in proof-of-concept
testing, with the goal of achieving early implementation of autonomous
driving and contributing to solving social issues.
In addition, as part of its management support services fortransport companies, YAMATO LEASE is working on a support
service for the acquisition of certification under the Driver’s Workplace
Environment Quality Certification System (commonly known as the

Comfortable Workplace Certification System)*7, under which thirdparty organizations evaluate and certify driver working conditions andworking environments at trucking companies. The company is the firstleasing company to becertified as an organization
thatpromotesthe
Comfortable Workplace
Certification System, andsince the start of thesystem in fiscal 2020, hashelped more than 100
firms obtain certification.
Going
forward,thecompany will continue
working to solve transportcompany management
issues by supporting
certification under thissystem and providing avariety of other services.

Self-driving shuttle bus manufactured by Navya

YAMATO LEASE Comfortable Workplace Certification

Our Strategic Vision for Future Business Development and Mobility Business
The Mobility Business aims to solve customer issues by providing
wide-ranging solutions in the logistics and general vehicle areas.
In the logistics areas, we will promote our upstream strategy
by further deepening collaboration with partner companies withthe goal of establishing a consulting sales process that visualizes
customer issues and provides solutions in terms of logistics,
materials handling and work styles. We will also work to utilize theknow-how of our overseas group companies and in other domains,
including PRC*4, which is involved in the forklift leasing business,
primarily in the U.S., and TDF*5, which is involved in the pickuptruck rental, leasing and sales business in North America. Further,
we will enhance the added value of our services by strengthening
collaboration and business synergies with close partners such as
the Yamato Group, Sompo Japan Insurance Inc. and Nakamichi
Leasing Co., Ltd., while advancing the development of new services
that will lead to resolving customer issues.

26

VOICE

General Manager,
Mobility Business Promotion Division

Shinji Sasakura

Established in April 2020, the new Mobility Business Promotion Division is approaching various
issues in the areas of automobiles and logistics, which are undergoing a period of historic change.
The types of customer issues we see have changed significantly, and include an increase in thevolume of cargo handled with the rapid expansion of the e-commerce market; the expansion of thelogistics robot market in response to labor shortage and BCP; work style reforms driven by long
working hours and an aging population; the shift to electric vehicles in response to climate change
and resource shortages; and initiatives for safe driving support and autonomous vehicles. Throughalliances with the Yamato Group, material handling manufacturers and other partner companies, wewill promote an upstream strategy to provide consulting services in the areas of automobiles andlogistics, and contribute to resolving customer issues by providing solutions.

*7 The Comfortable Workplace Certification System: A system aimed at improving working conditions and workplace environments for drivers, while also certifying operators who are striving to institute work
style reforms, including remedying long working hours as a means of acquiring and training the drivers they need.

27

CSV5: Promoting Health and Wellbeing

Fuyo Lease Group Integrated Report 2021

28

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
FY 2021 results

C S V

5

Medical &WelfareContributing toSolving the Issues ofMedical Institutions andNursing Care Providers
by Providing a Wide Range ofOne-stop Solutions

MarketSocial welfare
Elderly nursing care

Medical care

Local communities
Local government

Providing one-stop services
Platform
Financing

Removal, transportation,
disposal, buying andselling used equipment

Management solutions

Equipment, facilities,
and amenities

Fuyo Lease
Healthcare Advisory Division

RIVERFIELD

Fuyo Lease

Fuyo Lease SalesINVOICE

CREWT Medical Systems

Sharp Finance

FUJITA

MerryBizNOC Outsourcing & Consulting

Japanese Organization for
Medical Device Development(facility ownership)

Business efficiency and energy
saving and cost saving

Lily MedTech

Fuyo Auto Lease

Officebusters(JOMDD)

Medical System Networks

Accretive

Logistics companies

Energy service companies

CB Holdings

THINKCYTE

Yokogawa Rental & Lease

Waste disposal contractors

Building management companies

Consulting firms

Medical equipment trading companies

Nihon Credit Lease

Medical information providers

Medical equipment manufacturers

Water supply companies
BCP product suppliers

IT vendors

Taking on New Business Domains

Management Issues Faced by Medical Institutions and Nursing Care Providers,
and the Fuyo Lease Group’s Initiatives
With the year 2025 fast approaching, when all baby boomers will be
at least 75 years old, demand for medical and nursing care services
for the latter-stage elderly is growing. At the same time, conditions
surrounding medical institutions and nursing care providers are growing
increasingly challenging, with the need to secure doctors, nurses andother medical workers and nursing care staff, work on reforming work
styles, and respond to the spread of COVID-19. Further, the Regional
Medical Care Vision*1 advocated by the Ministry of Health, Labour andWelfare is expected to accelerate the shift in hospital bed functions
and moves to consolidate nursing care providers.
Under these circumstances, medical institutions and nursing
care providers must work quickly to rationalize management andstreamline operations through advancements in ICT and the useof BPO services in order to secure a reliable supply of humanresources and reform work styles. In addition, the need to effectively
procure funding and equipment following the breather provided

by the directed loan program of the Welfare and Medical Service
Agency*2 is gradually becoming apparent.
The Fuyo Lease Group has positioned Medical & Welfare as oneof its Strategic Areas, and is working to provide lease financing
for medical institutions and nursing care providers, factoring of
medical and nursing care receivables and other financing services;
the Group is also working to acquire and strengthen consulting
capabilities. The main pillar of our strategy is to offer a one-stop
solution for a variety of management issues faced by our customers
by working in cooperation with alliance partners and utilizing theGroup’s healthcare-related services.
*1 Regional Medical Care Vision: This initiative aims to create a framework for the division of roles andcooperation among medical institutions through the cooperation of local stakeholders, in order toestimate medical needs in 2025 and create a medical system that responds to those needs.
*2 Welfare and Medical Service Agency: An independent administrative corporation establishedto promote welfare and improve the spread of medical care. It engages in loan business for thedevelopment of social welfare facilities and medical facilities, etc.

Integration of Group Functions in the Medical and Welfare Fields and Expansionof the Fuyo Lease Platform Concept
Utilizing the specialized knowledge and human networks of our
Healthcare Advisory Division, established in April 2019, the Groupis working to enhance sales activities aimed at management
at medical institutions that play a central role in regional medicalcare. By actively approaching management, we gain a better
understanding of the specific needs of each medical institution. We
utilize their needs in proposals aimed at solving their issues, while
also leveraging this information to develop new services and expand
our business domains.
On their own or in collaboration with alliance partners, each of ourgroup companies is working to enhance the Fuyo Lease Platform
Concept to offer one-stop, wide-ranging solutions by combining theservices they are capable of providing tailored to customer needs.
The Group provides a wide range of services, including leasing andfinancing of medical equipment and nursing care facilities; factoring
services for medical and nursing care receivables provided byAccretive; removal and resale of used medical equipment provided

by FUJITA; opening support services for clinics such as initial capitalloans and clinic area surveys provided by Sharp Finance; and BPO
services provided by NOC Outsourcing & Consulting. In addition,
we are expanding our consulting services for business improvement
using RPA and AI-based medical fee billing in collaboration withmedical consulting companies by utilizing our ties with alliancecompanies.
In addition, under the platform concept, we are working to promoteand spread the use of advanced medical devices developed by
medical venture companies. In April 2020, we entered into a capitaland business agreement with THINKCYTE INC., which conducts
research and development in next-generation cell isolation systems
using AI. We will continue to promote collaboration and cooperation
with highly specialized alliance companies, including the developmentof high value-added products with this company and other medical
device manufacturers, to further expand our platform concept andcontribute to solving diverse customer needs.

In January 2021, the Group entered into a capital and businessagreement with CB Holdings Inc., which provides information
services specific to the medical and welfare industries, including M&A
brokerage, support for opening businesses, management consulting,recruiting and business development support and news distribution.
Through the trust it has built with medical institutions since its founding,and through its networks and wide-ranging solutions, the CB Groupleads to solving a wide variety of management issues in the medical
and welfare industries. We are working to create business synergies
through the integration of the know-how, networks and services of the
CB Group and the Fuyo Lease Group, with the goal of expanding ourbusiness domains in the Medical & Welfare fields.
Another new business area we are working in is to improve
the sustainability of medical and nursing care functions in local
communities. The sustainability of these functions is an essential
element in the revitalization of local economies, and we believethat regional financial institutions, which have built relationships oftrust with local governments, medical institutions and nursing careproviders, play an important role in this regards. The Group has
provided a variety of services to local medical institutions and nursing
care providers in cooperation with regional financial institutions. For
example, as part of the lineup of management support services
offered by major nursing care providers, ranging from the openingof new nursing care facilities to operational improvements, theGroup’s nursing care and welfare equipment leasing and nursing
care receivables factoring services are offered to providers that areclients of regional banks. We are currently working to further advancecollaboration with regional financial institutions to build a framework
to financially support the business operations of local nursing careproviders and to meet the financial needs of medical institutions forbusiness succession and rebuilding of aging facilities. Through thesevarious efforts, we will contribute to improving the sustainability of
medical and nursing care functions in local communities.

VOICE

Executive Officer and General Manager,
Healthcare Business Promotion Division

Hideyuki Otsubo

The Healthcare Business Promotion Division, established in April 2021, has taken the lead in building agroup-wide website that will enable the Group to provide its products and services in the Medical & Welfare
fields in an integrated manner. We will position this website as a point of contact for providing services thatwill lead to solving issues faced by medical institutions and nursing care providers, and aim to build a websitethat is attractive to customers by providing information that is useful for their business operations.
In addition, FUJITA, a group company engaged in removal and resale of used medical equipment,
dismantles medical equipment that has been returned at the end of the lease period and breaks it down
into parts and materials that can be resold, and has started a business to sell the parts to used equipment
domestic and overseas trading companies, and the materials to buyers of valuables. In the future, we will
expand the scope of this business to include other companies that have terminated their leases, and bypromoting the recycling of medical equipment, we will contribute to reducing environmental impact andpromoting a resource-recycling economy.

The Business of Selling Used Medical Equipment Parts and Materials
Parts
Outsource
dismantling

Lease ends
Materials

29

Our Business / Business Segments Overview

Fuyo Lease Group Integrated Report 2021

Our BusinessContributing to society and the environment

Supplying environmentally and socially friendly assets(outcome)

At a Glance

2021/32017/3Business Environment

Trends in ordinary profit

Growth Opportunities

10 %Strategic Areas (excluding New Domains)21%

New Domains
Core Areas

26 %OthersOrdinary Profit
Ordinary Profit

¥

31.4

5%

billion

39 %¥Business
Areas

Businesses

Real Estate
P30

Medical & Welfare
P31

Energy & Environment
P32

Strategic Areas

Aircraft
P33

Overseas
P34

BPO
P35

New Domains

Mobility Business
P36

Domestic Corporate
P39

Core Areas

Vendor Leases
P39

Financing
P39

Emerging needs to utilize idle real estate
Increasing enthusiasm for investment fromlogistics companies due to expansion of the
e-commerce market

36 %An increase in demand for environmentallyfriendly properties using environmentally
efficient and sustainable building materials

48.0

Strategies

billionDiversifying channels for obtaining real estate
information through alliances with financial
institutions and real estate-related companies
Increasing the added value of real estateleases by providing real estate information as
well as maintaining and expanding businesswith clients
Expanding business in real estate leases andfinancial services
Promoting solutions-based sales that respondto diversification of real estate transactions

15 %

48 %

Key Indicators
Operating assets(real estate leases)

Major Services Provided

FY 2016¥ 240.2 bn

FY 2020555.2 bn¥¥70.0 bn

FY 2016
Operating assets
FY 2020

Operating assets

FY 2016(Including renewable energy
generation business)

FY 2020

Operating assets

FY 2016(leases for aircraft owned
by our company)

FY 2020

Operating assets

FY 2016(Including investments inoverseas affiliate companies)

Number of companies
provided BPO services*1

FY 2020

115.4 bn¥

Buying used medical equipment services

Renewable energy generation businessGreen electricity supply services (PPA services)85.0 bn

ESCO services
Agribusiness¥75.1 bn

Aircraft leases/Financing
Part-out businessJapanese operating lease148.4 bn¥

¥ 84.1 bn¥

97.4 bn¥ 98.7 bn

FY 2016

Percentage of“Operating Leases” in leases

Medical equipment leases
Factoring for medical and nursing care receivables (FPS Medical)¥ 31.0 bn

19,353 companies

FY 2020

Space leases/Security Deposit System¥

FY 2020

Operating assets

Real estate leases
Real estate-related financial services

179.8 bn¥

FY 201624.4 %FY 2020

32.1%

Leasing and installment sales to companies operating in overseas
Various solution businesses(Americas, East Asia, Southeast Asia)
Providing services in Strategic Areas overseas
Comprehensive BPO Services(general affairs, accounting, personnel affairs, etc.)
Billing service for telecommunications and water and utility charges
Total solutions for accounting and billing service
PC Life Cycle Management (PC-LCM) services

7.3

¥
bn
(+9.2% year on year)
FY 2016¥ 532.5 bn

FY 2020¥

Operating assets

725.7 bn

*1 Number of companies served by five companies Sharp Finance, Accretive, INVOICE, NOC Outsourcing & Consulting, and MerryBiz.

Challenges

Real EstateFuyo Lease Group offers a wide range of real estate-related
financial services, including real estate leases for a broad
range of assets such as commercial, distribution, and nursing
care facilities and real estate financing, in which we have astrong track record in loans, investments, and acquiring trust
beneficiary rights.

Leasing for sales promotions
Collection agency services

Financing programs
Fund investments
Credit investments

Further improvement of capital efficiency

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

FY 2020 Overview and Outlook
In fiscal 2020, we accumulated real estate
assets with diverse uses, including LOGI’Q
Kyoto Kumiyama in partnership with TOKYULAND CORPORATION and Kirarie Kusatsu,
which combines public- and private-sector
facilities based on the concept of CSV. We
also focused on building a sophisticated realestate management and crisis management(responding to accidents and disasters)
system led by the Real Estate Assets
Management Division, which specializes inreal estate asset management, to increase
the added value of our real estate holdings.

Operating assets and ROA
for Real Estate leasing
Operating assets (Billions of yen)

2.2
1.9

1.8

2.3

ROA(%)

2.2

2.0
555.2

421.9

530.0

444.7

362.0

240.2

2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue

Leasing and installment sales
Various solution businesses

Addressing downturn in the real estate market
Developing human resources with high degreesof specialization necessary for businessexpansion

Asset management and appraisal amid the
COVID-19 pandemic

Auto leases
Truck leasing
Leasing of logistics and material handling equipment
Management support solutions for transportation companies

FY 2020
Sharp Finance’s
ordinary profit

Strategic
Areas

Growth Strategies

30

Frontier Expansion 2021

In the Real Estate business, we steadily accumulated operating assets while minimizing theimpact of COVID-19 and achieved the revised targets of our Medium-term Management Plan
(operating assets of ¥530 billion and ROA of 2.2% in the final year) ahead of the schedule. Goingforward, we aim to leverage group synergies through collaboration among sales departments
and branches in each area and with other business areas by the newly established Real Estate
Solution Business Division, and utilize networks that we have built with alliance partners toacquire new customers. Looking ahead to the new Medium-term Management Plan, we willdevelop new, profitable business schemes, increase the scope of the Real Estate business,and develop more sophisticated real estate leasing functions, including diversification of asset
control functions using finance schemes.

Major Achievements

Participating in Warner Bros. StudioTour Tokyo “The Making of Harry Potter”
Facility Development Project
Warner Bros. Studio Tour Tokyo is ahands-on entertainment facility scheduled toopen in fiscal 2023 on the site of former
Toshimaen amusement park (approximately
30,000 m2). It is being developed by aconsortium of Warner Bros. Japan LLC,SEIBU RAILWAY Co., Ltd., ITOCHU Corporation, and Fuyo General Lease Co., Ltd.,and is the second Studio Tour facility to open
after the one in London. The facility will
occupy part of Nerima Joshi Koen, which
the Tokyo Metropolitan Government has
designated as a priority area for redevelopment. It is expected to become a facility thatwill enrich the lives of Tokyo residents.

Conceptual image of Warner Bros. Studio Tour Tokyo“The Making of Harry Potter”

31

Business Segments Overview

Fuyo Lease Group Integrated Report 2021

Improving both the quantity and quality of medical, elderly nursing care, and welfare services
Helping medical institutions to achieve financial stability by meeting their funding needs
Disseminating advanced medical technologies

Contributing to society and the environment(outcome)

Contributing to society andthe environment (outcome)Estimated CO 2 reduction 147,574 t-CO 2
Promoting renewable energy and energy
savingPromoting the use of renewable energy and communicating
demand voices to the market
Disseminating advanced renewable energy-related technologies

Business Environment

Business Environment

Growth Opportunities

Growth Opportunities

Growing need for medical services and nursing
care in an aged society, and increasing needsfor 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 a community-based
integrated care system
Emerging management support need among
medical institutions and nursing care facilities
impacted by COVID-19

Enhanced social initiatives to realize adecarbonized society (e.g. SDGs, RE100,
ESG investment)
Growing demand for green energy
sources such as solar power and effective
use of resources
Continued energy saving needs amid risingenergy costs
Increasing demand for food safety

Strategies
Promoting decarbonization initiatives, including
signing up for RE100, JCLP and 100%
Renewable Electricity Declaration RE Action
Expanding the renewable energy power
generation business and promoting the circular
economyPromoting energy efficiency through ESCO
business
Advancing plant factory business

Strategies
Focusing on advisory services for medical
institutions

Strategic
Areas

Maximizing synergies between group companies
when buying used medical equipment, factoring,and providing BPO services
Promoting business opportunities nationwide
in collaboration with local financial institutions
and business partners

Medical & Welfare

Challenges

We offer a wide range of services, which include leasing medical
equipment, advisory services related to managements, buying
used medical equipment as well as factoring for medical andnursing care receivables. We meet our clients needs in a timely
manner by offering a range of one-stop services.

Lower profits from individual lease andfinancing services
Intensified competition in the medical andsocial-welfare market by new entrants

Actions
Improve profitability by switching to offeringsolutionsDifferentiating from competitors by offering abroad range of one-stop services
Gathering and supplying
protect against COVID-19

products

Strategic
Areas

Challenges

Energy & Environment
We will promote the expansion of green energy through therenewable energy power generation business and PPA services,and support our clients in their energy-saving activities anddecarbonization through ESCO services*.
* 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 theactual energy cost savings generated through the services as compensation.

that

Responding to new technologies related torenewable energy and energy conservation
Breaking away from the feed-in tariff (FIT*)
scheme for renewable energy and building abusiness model that does not rely on FIT* Under the FIT scheme, payments are provided at a fixed rate
for the renewable energy produced, e.g. solar energy

Actions
Developing capital and business alliances withventure companies that have new technologies
Focusing on new initiatives toward a post-FIT
era (e.g. PPA-related business, storage
battery/EV infrastructure-related businesses,
etc.)

FY 2020 Overview and Outlook
In the medical business, we turned sales ofused medical equipment parts and materials
into a new business alongside accumulating
operating assets in collaboration withhighly specialized players. In fiscal 2020, weconcluded a capital and business alliance with
CB Holdings Inc., which provides management
support to the healthcare, nursing care, andwelfare businesses and are making progresswith the provision of healthcare-related
services by utilizing CB Holdings’ informationand know-how.
In the welfare (nursing care) business,
we work with regional financial institutions
and major nursing care service providers
to develop regional nursing care businesssupport programs, and are preparing toestablish a management support fund by theend of fiscal 2021.

Growth Strategies

Operating assets for Medical & Welfare
Operating assets (Billions of yen)O perating assets of Accretive’s factoring
for medical and nursing care receivables(Billions of yen)

Major Achievements

125.0

115.4
98.2
84.9
70.0

72.1

30.0

3.1

5.8

10.4

17.2

20.3

2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue

Frontier Expansion 2021

Operating assets of the medical & welfare businesses continued to grow, reaching ¥115.4
billion in fiscal 2020, amid the contracting need for funding associated with the government’s
emergency loan program. In the medical business, to maintain this growth under the new
Medium-term Management Plan, we aim to build framework that fulfill the need for funds torebuild aging facilities of medical institutions, for business succession, etc., such as asset
financing for hospital real estate and management support funds.
In the welfare (nursing care) business, we will work toward making our management support
fund for regional nursing care service providers a reality, as well as expanding target businessesof financing and diversifying transactions.

Released Online, Non-Contact
Factoring Service “Medicare in”
Accretive provides a factoring service
to nursing care providers and medical
institutions. The company released“Medicare in,” a dedicated website thatprovides a comprehensive online service
from application through to review
verification. The website allows us toprovide a safer and more convenient
factoring service to our customers,
nursing care businesses and medical
institutions, at a time when the need foronline, non-contact services is growing
amid the COVID-19 pandemic. Goingforward, we are planning to build agroup-wide website that provides all
healthcare-related services provided bygroup companies in an integrated andefficient manner for greater customer
convenience.

FY 2020 Overview and Outlook

Major Achievements

Operating assets and ROA for
In fiscal 2020, we expanded proactively
overseas business, such as by investing in renewable energy power generation businessrenewable energy-related funds in Taiwan
Equity balance (excludes projects
under development) (Billions of yen)and the US, leveraging the know-how we had
Fuyo Lease Group’s balance of
44.4
operating assets (Billions of yen) 11.4
acquired in Japan. The PPA business, whichR OA(%)
we developed responding to the growing
demand for renewable energy, resulted in
28.5 28.433.0
0.6
multiple contracts and established itself as
2.3
27.9
26.0
a service that supplies green electricity and20.3
17.8 0.6
prepares for the end of the feed-in tariff (FIT) 0.6 19.7
17.2
6.0
6.0
system. Looking ahead, we are planning to
6.1
4.8
5.1
4.4
expand overseas in new business areas,
including PPA and storage batteries.
2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue

Growth Strategies

Frontier Expansion 2021

Operating assets of the renewable energy business totaled ¥44.4 billion, growing sharply
as a result of joint investments with partners and overseas expansion. We plan to make thisbusiness more sophisticated by sharing the know-how of domestic and overseas projects,
and participating in diverse renewable energy businesses in Japan and overseas (including not
only solar, but also wind, micro-hydro, biogas, and geothermal power generation) to respondto growing demand for this business. Furthermore, we are moving into the storage battery
business, eyeing the electric power supply and demand adjustment market*, and working on
the development and promotion of EV infrastructure as society transitions to EVs.

32

Investment in Renewable Energy Power
Generation Fund, including Japan’s
Largest Onshore Wind Power Facility
We invested in a fund established by GreenPower Investment Corporation to support
five renewable energy power generation
projects in Japan. It invests in wind (total
power generated: 166.6 MW) and solar(55.9 MW) power generation facilities,
including Japan’s largest onshore wind
power generation facility, and is one of thelargest renewable energy funds in Japan.
By investing in the fund, we will acquire
knowledge and know-how in the wind
power generation business that can beapplied in future domestic and overseas
projects, thereby contributing to the further
spread of renewable energy toward therealization of a decarbonized society.

* Electric power supply and demand adjustment market: A central market launched in April 2021 for trading electric
power (adjustment power) needed for supply/demand adjustment at power stations.

Wind Farm Tsugaru in Tsugaru City,
Aomori Prefecture, Japan

33

Business Segments Overview

Fuyo Lease Group Integrated Report 2021

Contributing to society and the environment

Contributing to society and the environment

Transport ability of Group owned aircraft: 11 million people per year

(outcome)(outcome)

Business Environment

Business Environment

Growth Opportunities

Growth Opportunities

In the long term, an increasing need for aircraftaround the world

Expansion of overseas business opportunities
as customers review their supply chain
strategies and due to the impact of COVID-19
and other factors
Expanding the renewable energy business torealize a decarbonized society
Developing the overseas business andmarket through collaborations with domestic
and overseas partner companies with highlevels of expertise

An increasing need for renewal of aircraft withlow environmental impact
An increase in leaseback transactions*1
resulting from greater demand for funds frommajor and blue-chip airlines*1 Leaseback transaction: A transaction in which an aircraft orother piece of property is sold to a lender, who then leases theproperty back to the original seller.

Strategies

Strategic
Areas

Steadily increasing our aircraft fleet byleveraging the know-how that we havegained from many years of aircraft leasingarrangements
Building a portfolio with lower environmental
impact and greater liquidity mainly consistingof narrow-body aircraft
Promoting leaseback transactions andbuilding relationships with airlines in
response to greater demand for funds frommajor and blue-chip airlines

Aircraft

Challenges

We launched our Aircraft business in the early days of theaircraft leasing industry and have arranged a cumulative total ofover 300 leases for airlines around the world. Going forward, weplan to expand into new business areas by promoting leases ofaircraft that we own and providing new aircraft-related services.

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

Actions
Promote the establishment of a system thatis not overly affected by the market cycle
Expand businesses through investments
and joint ventures
Strengthen sales activities for domestic
JOL*2 investors in Japan and expand
business partners by using the extensive
network of UK-based ALM*2 JOL: An abbreviation of Japanese operating lease. It is ameans of fund management that enables investors to makeplanned tax payments by participating in large-scale aircraft
leasing projects and obtaining the same effects as acquiring
large-scale depreciable assets.

FY 2020 Overview and Outlook
In aircraft operating leases, we expanded
our portfolio by purchasing three aircraft
and receiving an order for one. At the sametime, amid dramatic changes in the market
environment brought about by COVID-19, we
restructured our portfolio to reflect changes inthe earnings performance and financial positionof airlines, and aircraft value. We also purchased
used engines that are close to retirement tomove into the part-out business, with an aim
to expand into aircraft-related business areas.
While continuing to monitor market trends, we
aim to create new earnings opportunities by
seeking stable earnings opportunities throughportfolio restructuring and building a value chain
for the aircraft business through expansion into
peripheral business areas.

Growth Strategies

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

1.9

1.9

2.1

1.4
149.8

75.1

164.9

ROA(%)

0.2
148.4

97.6

2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue

Number of aircraft owned by the Group2017/3 2018/3 2019/3 2020/3 2021/3

19

24

35

41

44

Frontier Expansion 2021

Promoting companies’ economic activity andhelping to solve social issues overseas

Major Achievements

Expanding the Aircraft Part-Out
Business to Contributeto a Circular Society
We are further expanding the aircraft partout business, whereby we purchase anddismantle retired aircraft and sell used parts
that can be reused or recycled to airlines
and aircraft maintenance companies. In
fiscal 2020, we purchased an engine madein 2001 with a short-term lease (green-timelease). A green-time lease entails leasing oldaircraft and engines close to retirement until
the end of their useful life with the intentionof selling parts as a used part after the lease
has expired. These initiatives extend the lifeof aircraft parts and contribute to a circularsociety.

In aircraft operating leases, we will work toward stable earnings and improving the soundness of
our portfolio by identifying profitable projects that combine the credit of the lessee with aircraft
value and liquidity, and promoting a recycling business model, such as selling aircraft underlease. We are also expanding further into other peripheral aircraft businesses such as growing
the aircraft part-out business and participating in businesses that reduce CO 2. In this way, we
are reducing the environmental impact of our business based on the concept of CSV.
Engine of a part-out aircraft

Strategies
Expanding overseas in Strategic Areas where
we have strengths
Growing our overseas business network bymeans of organic and inorganic strategies
Expanding earnings opportunities by pursuingsynergies with companies that we invest in

Challenges

Strategic
Areas

Responding to changing customer trends,
such as growing their overseas businesses

Overseas

Strengthening training of global personnel
that underpin overseas businesses

We seek to expand our overseas business by utilizing theFuyo Lease Group’s network. We are building up high-quality
assets by pursuing an organic strategy*1 centered on strategic
businesses in which we have strength, as well as an inorganic
strategy*2 of investing in, acquiring, and partnering with local
companies.
*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 businessacquisitions.

Actions
Expanding overseas business domains byleveraging our know-how and strengths in theStrategic Areas
Promoting jointly run businesses with domestic
and overseas partners
Promoting M&A and capital alliances that
contribute to the expansion of the Group’sbusiness

FY 2020 Overview and Outlook
In fiscal 2020, we pushed ahead with overseas
expansion in our areas of strength, such as in the
Energy & Environment, Mobility Business, andReal Estate businesses. In particular, in Energy &Environment, we moved forward with overseas
businesses that help address climate change,such as investing in renewable energy funds in
the US and Taiwan, as well as taking part in a solar
power generation business in the US. In addition,
we strengthened our network in the Asia region,
having established a new subsidiary in Taiwan
and forming a subsidiary specialized in the leasing
business in Thailand, which is expected to growas a manufacturing and logistics hub in Asia.
We seek to help Japanese-affiliated companies
solve their issues by making use of the extensive
network that we established in this fiscal year.

Growth Strategies

Major Achievements

Operating assets* 3 and ROA
for Overseas businesses
Operating assets (Billions of yen)

ROA(%)

110.0
84.1

93.4

99.9

99.2

97.4

1.6

0.6

0.6

0.8

1.6

0.9

2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue*3 Investments in affiliates in overseas businesses
are included among the operating assets ofoverseas subsidiaries, excluding aircraft leasing.

Participating in Solar Power
Generation Business in Texas, US
We are participating with ENEOS Corporation
in a solar power generation project run by
Advanced Power AG in the US. The projectis a large-scale power generation facility on
a 2.8 km2 site with total power generation
capacity of 140 MW. It is the Fuyo Lease’s
first overseas solar power generation project.
We will contribute to the further spread ofrenewable energy while building knowledge
that we can use in future power generation
businesses through running a business inthe electric power market in the US, which
is ahead of Japan in electricity liberalization.

Frontier Expansion 2021

In our organic strategy, we will promote the expansion of overseas business beyond theconventional framework of leasing, centered on our areas of strength such as the Energy &Environment and Mobility businesses by strengthening collaboration with strategic businesses
and Corporate Business Divisions. In our inorganic strategy, we will pursue synergies with TDF
and PRC which we have invested in, and grow and strengthen each company’s transactions
by sharing the Group’s customer base, as well as utilize the two companies’ know-how. In
addition, we are working on new investments and business alliances that will help to grow ourbusiness in Strategic Areas.
Solar Power Plants in Texas

34

35

Business Segments Overview

Fuyo Lease Group Integrated Report 2021

Contributing to society and the environment

Contributing to society and the environment

Contributing to the solving of labor shortages andthe promotion of workstyle reform by providing BPO services(outcome)(outcome)

Business Environment

Strategic
Areas

Growth Opportunities
Increasing needs to improve operational
efficiency in order to resolve the shortage ofhuman resources and to reduce long working
hours in the logistics industry
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 andthe sophistication of service needs

Strategies

Increasing need for business succession
planning due to shortage of transport company
successors

Increasing number of competitors andintensified price competition
Differentiation from competing BPO service
providers
Securing human resources engaged in BPO
services

Actions
Utilize the Group’s client base (links tofinance and accounting divisions) to identify
BPO needs
Provide comprehensive BPO services thatallow for a one-stop response to diverse clientneeds, including accounting and settlements,
general affairs, information systems, humanresources, and sales administrations
Standardization and automation of operations
through technologies such as RPA and AI-OCR
Proactive alliance strategy with companies
that have DX features and services

FY 2020 Overview and Outlook
In fiscal 2020, the number of user companiesof our BPO services has steadily increased,
totaling 19,353 in the fiscal year ended March
2021, an increase of 782 from the previous
fiscal year. In addition, we proactively
expanded our new BPO service lineup in
partnership with various companies, including
OneVoice, an integrated billing service for
utilities, Smart Benefits, a new recruitment,
welfare and benefits service, and NOC
AI-OCR, which supports the conversion of
paper documents into electronic files. We
will continue to increase the number of user
companies by means of a proactive alliancestrategy, targeting 20,000 user companies infiscal 2021.

Growth Strategies

Growth Opportunities

Challenges

We contribute to “sustainable growth as a company” and“improvement of employee job satisfaction” by bringing
together the overall strengths of nine group companies andproviding a full lineup and one-stop service in administration,accounts, finance, IT systems, and human resources and sales
administration.

Number of companies provided
BPO services*
Number of companies provided (companies)

20,00019,353
18,571
16,972151
2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue* Sharp Finance, Accretive, INVOICE, NOC
Outsourcing & Consulting, and MerryBiz. Invoice
was added from 2019/3. NOC Outsourcing &Consulting and Merrybiz were added from 2020/3.

Frontier Expansion 2021

The need to streamline business processes due to more companies adopting teleworking and the needfor DX is growing. We are optimizing BPO services according to customer segment and generating
further group synergies to respond to diversifying customer needs. Specifically, this entails optimizing
sales activities across the Group by building a centralized group customer information platform, whichenables us to understand customer needs through digital marketing and facilitates customer transfer
between group companies. Furthermore, we are strengthening alliances with companies with DX
features and services to achieve further business growth by actively developing services.

Business Environment

Increasing demand amid the backdrop ofwork-style reform due to deteriorating labor
shortages, calls for equal pay for equal workand other issues
Increasing needs for the establishment of
remote work environments, the reduction of
the workforce for non-core operations andpaperless triggered by COVID-19
New expectations for BPO services, such asenhanced business continuity and professional
services

Supporting customers in solving their
management challenges by offering a full
lineup and one-stop service mainly provided
by INVOICE, Accretive, and NOC Outsourcing& Consulting and promoting a distinctive BPO
business.
Providing new employment opportunities forhousewives, the elderly, and the disabled
nationwide using MerryBiz’s remote work
functions

BPO

Stable supply and improved efficiency
of vehicle and logistics services

Major Achievements

BPO Service Alliance with
Tohoku Electric Power Co., Inc.
In December 2020, Tohoku Electric Power
Co., Inc. (Hereinafter: Tohoku Electric Power)and INVOICE formed a business alliancerelating to BPO services. INVOICE offers an
integrated billing service, which integrates
telecommunications, water, and heating
and lighting bills for corporate customers,
providing a one-stop service that includes
billing data as a way to address the labor
shortage and work style reforms. Tohoku
Electric Power provides solutions that
respond to the various needs of corporate
customers, and decided to form an alliancewith INVOICE to expand its BPO-related
services that contribute to cost reduction andproductivity improvement. Going forward,
we will address management challenges of
Tohoku Electric Power customers such as
responding to customers’ labor shortages
and promoting work style reforms.

Strategies
Promoting the establishment of an alliancewith the Yamato Group

Strategic
Areas

Promoting collaboration with partnercompanies, such as material handlingequipment manufacturers and robot system
integration companies, etc.
Utilizing the Fuyo Lease Group’s nationwide
network and creating synergies with existing
businesses

Mobility BusinessIn addition to providing comprehensive automotive-related
support services, we provide various solutions for automobiles,
transportation, warehouses and other 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 through collaboration with group companies andmobility-related companies.

Challenges
Increasing price competition due tocompetitors lowering prices
Increasing the number of vehicles in ourinventory and improving the efficiency ofadministrative services for vehicles Supporting
and adapting to new technologies in themobility field
Accumulation of knowledge in logistics andmobility fields

Actions
Expanding the customer base by strengthening
cooperation within the Group
Developing unique products and differentiating
ourselves
fromcompetitors
throughcollaborations with partner companies

FY 2020 Overview and Outlook
In fiscal 2020, we strengthened collaboration
with YAMATO LEASE, a consolidated subsidiary, which sharply increased our businesswith transport companies centered on truck
leasing. In addition, to offer more solutions
to logistics-related problems, we also began
gathering information about customers andbuilding alliances with material handlingequipment manufacturers and robot system
integration companies. Going forward, weplan to expand our services further anddevelop new products and services that utilize
the know-how of overseas group companies
to grow our business worldwide.

Growth Strategies

Operating assets for
Mobility Business
Operating assets (Billions of yen)

April 2020
Made YAMATO LEASE
a consolidated subsidiary

210.0

Collaborating with partner companies tobuild new mobility services
Promoting M&A and capital alliances withcompanies that excel in the mobility field
Strengthening non-asset business (feebusiness) initiatives

Major Achievements

179.8

YAMATO LEASE Accredited as a
Company that Promotes the “EmployeeFriendly Workplace” Certification
System for Road Transport Companies

98.7 104.9 101.8 97.6

2017/3 2018/3 2019/3 2020/3 2021/3 2022/3
TargetValue

Frontier Expansion 2021

We are progressing our upstream integration strategy by deepening collaboration with partnercompanies, including the Yamato Group, thereby strengthening consulting-style sales, whichapproach to various problems in logistics, such as streamlining processes in warehouses
and work style reforms. We aim to provide solutions that utilize the strengths of Fuyo Lease
Group, including automation of logistics-related facilities and material handling equipment andstreamlining peripheral processes using BPO. We are also exploring new initiatives such as
strengthening risk management in partnership with Sompo Japan Insurance Inc. and mutuallyreferring customers with Nakamichi Leasing Co., Ltd. In addition, we are strengthening
collaboration in other Strategic Areas to expand our business in new business areas suchas real estate leasing for warehouses and logistics centers in the Real Estate business, andpromoting the adoption of EVs in the Energy & Environment business.

In August 2020, YAMATO LEASE became the firstleasing company certified as “employee-friendly
workplace” certification system for road transportcompanies. YAMATO LEASE has been working
in cooperation with Nippon Kaiji Kyokai and othercertification organizations to disseminate the “employee-friendly workplace” certification system
nationwide. The company hosts information
briefings and provides advice and guidance, as
well as supplying a management support service
that includes support for trucking companies
working toward accreditation. YAMATO
LEASE helped morethan 100 companies
to gain certification in
fiscal 2020.

36

37

Business Segments Overview

Fuyo Lease Group Integrated Report 2021

38

We are working to expand our business frontiers through M&A and capital and business alliances with companies that haveunique technologies and know-how.

Strategic
Areas

Growth Strategies

Aug. 2017

Investment

RIVERFIELD

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

Oct. 2017

Establishment

GAP FundEstablished 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

Feb. 2018

XTIA

Description

Investment

CREWT Medical
Systems

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

Mar. 2018

Investment

Lily MedTech

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

Apr. 2018

Subsidiary

FUJITA

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

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 the 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.

Major Achievements

Mar. 2019

Investment

NExT-e Solutions

Invested in the company, which provides cutting-edge battery control devices and management
systems.

Capital and Business Agreement Concluded with
Tsubame BHB Co., Ltd., an Innovator of the Ammonia Industry

Mar. 2019

Investment

Japanese Organization
for Medical Device
Development

Invested in the company, which provides support for the commercialization of state-of-the-art
medical technologies.

May 2019

Investment

Synspective

Invested in the company, which offers one-stop solutions using satellite-based observation data.

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

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

Apr. 2020

Subsidiary

YAMATO LEASE

Expanded the business domains of logistics, transportation and used vehicles through theconsolidation 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 cellisolation system using AI.

Aug. 2020

Investment

Airbus Ventures Fund
III LP

Invested in this fund, established to invest in venture companies with innovative technology in theaerospace field.

Oct. 2020

Investment

Tsubame BHB

Invested in the company, launched out of the Tokyo Institute of Technology to develop manufacturing
technology for distributed production of ammonia under low-temperature, low-pressure conditions.

Nov. 2020

Investment

A.L.I. Technologies

Invested in the company, which develops and is expanding its business in industrial drone services
and air mobility.

Dec. 2020

Investment

TELEXISTENCE

Invested in the company, which develops and is expanding its business in remote operated,
artificial intelligence robots.

Jan. 2021

Investment

CB Holdings

Invested in the company, which engages in M&A in the medical, welfare and dispensing pharmacy
industries, and provides opening support, management consulting and news distribution services.

Feb. 2021

Investment

ePlaneInvested in the company, which develops and operates a B2B marketplace for trading in aircraft
parts.

Apr. 2021

Subsidiary

Nihon Credit Lease

Strengthened our service structure in the Medical & Welfare fields though the consolidation of thecompany, which provides centralized leasing and installment sales of nursing care, welfare andinformation equipment.

In October 2020, Fuyo General Lease entered into a capital and businessagreement to support the business development efforts of Tsubame BHBCo., Ltd. The company, a venture launched from the Tokyo Institute ofTechnology, has developed and is working to commercialize the world’s
first on-site ammonia production system. Ammonia is a raw material
used in such applications as agricultural fertilizers, chemical and medical
products. It has gained attention in recent years from the perspectiveof solving environmental problems by making it easier to transport andstore hydrogen. However, given that current ammonia production needs
a high-heat, high-pressure environment, it involves issues including
significant capital investment and extremely high logistics costs.
Tsubame BHB aims to achieve practical use of an ammonia production
method under low-temperature, low-pressure conditions using an“Electride Catalyst*”. Their technology will make on-site (distributed)
ammonia production at small plants possible. The Fuyo Lease Groupwill support the company primarily with financing and sales promotion,and by advancing innovation in ammonia production, will contribute to
reducing environmental impact through the wider use of hydrogen energy
and through reductions in CO 2 emissions.
Transportation
as a liquid gas

Storage

Frontier Expansion 2021
We also continue to promote development of inorganic
strategies aimed at further strengthening Strategic Areas
including Medical & Welfare, Energy & Environment, BPO and
Mobility Business, and specific cooperative schemes withventures in which we have invested.
In addition, we will establish other areas of focus, including
ICT (Information and Communication Technology), aimed atacquiring functions to support customer efforts to promote
DX, and the circular economy, intended to contribute tosolving environmental issues. Our goal is to expand new
business domains by actively advancing inorganic strategies
in these focus areas.

Partner

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

One of the Strategic Areas specified in Frontier Expansion 2021, New Domains are collectively referred toas new business initiatives as well as expanding the scope of our businesses.

In fiscal 2020, we continued to promote capital andbusiness alliances with new venture companies
and focused on collaboration with ventures inwhich we have already invested. We are working
to further expand our business by providing sales
promotion and other types of support to companies
we have invested in to date, through initiatives thatleverage the strengths of both companies. Specificexamples include RIVERFIELD Inc., Lily MedTech
Inc., and CREWT Medical Systems, Inc., whichhandle advanced medical devices. We are working
with these and other companies to develop effective
sales promotion support schemes not boundby conventional leasing and rental frameworks.
Going forward, we will collaborate with NExT-e
Solutions Inc. to consider other new collaborative
schemes more closely aligned with customer
needs, including lifecycle management (LCM),
which offers complete support for operation andmaintenance schemes in the lithium-ion battery
lifecycle and enables effective secondary use ofbatteries.

BusinessForm(formerly Optical Comb)

New Domains

FY 2020 Overview and Outlook

Investment
timingProduce only the amountof demand at thedemanded area

Storage cost reduction

Production

Consumption

Decentralized
production insmall plants

Amino acids

Agricultural fertilizer
Various other raw
materials for chemicals
CO 2 -free fuel(including fuel cells)

Transportation cost
reduction

Hydrogen carrier* Electride Catalyst: A new catalyst using electride (an electronized material) first invented by Hideo Hosono,
professor emeritus at the Tokyo Institute of Technology, in which electrons behave as negative ions.

39

Business Segments Overview / Systems that Support Sustainable Value Creation

Core
Areas

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

In fiscal 2020, we increased the number of joint venture(investment) type businesses with reliable partners, andthrough intra-group collaboration primarily in Strategic
Areas, expanded the number of mainstay business
partners. We also engaged in efficient sales activities
utilizing the sales channels and know-how of each of ourdepartments, among them considering collaboration with
regional banks aimed at regional revitalization.

Growth Strategies

40

Systems that Support Sustainable Value Creation

Domestic Corporate

FY 2020 Overview and Outlook

Fuyo Lease Group Integrated Report 2021

Frontier Expansion 2021

To further expand the number of partners who will become mainstaysof our business, going forward we will focus our resources ontransactions with customers with whom we can expect to develop
future business, building a solid customer base. We will also strengthen
our efforts to expand the joint venture (investment) type businesses weworked on this fiscal year, primarily New Domains such as the Mobility
Business where our focus to date has been on collecting information.

The Fuyo Lease Group will strive to meet the expectations of society and its stakeholders, and to resolve the social issues
exemplified by the SDGs, both by building a sustainable society through our business and achieving continuous growth. Tothat end, we see the concept of Creating Shared Value (CSV) as the foundation of our management principles, and we aim
to strengthen CSV as a long-term strategy.

CSV Promotion System
In October 2020, the Group established a CSV Promotion Committee to promote the Group’s CSV and sustainability efforts. The
CSV Promotion Committee will formulate CSV and non-financial targets and plans, and will conduct monitoring related to progressin those areas. Matters discussed by and reported to the Committee will be submitted to the Executive Committee, and upon
approval will be reflected in the Group’s strategy. The Group’s overall policy involving CSV and promotion status, will be reported to
the Board of Directors at least once a year in an effort to enhance their effectiveness.

CSV Promotion Structure
Board of Directors
President & CEO

Report (at least once a year)

Oversight

Executive Committee

Core
Areas

Vendor Leases

Discussion

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

FY 2020 Overview and Outlook
In fiscal 2020, we aimed to improve profitability by instilling
an awareness of operating asset profitability within the
Company. We also worked to rebuild an efficient sales
network by reviewing our sales organization, including
optimizing the allocation of personnel on a Group basis,and make improvements from a cost perspective. Goingforward, our goal is to balance both the quality andquantity of operating assets by increasing the volume ofhighly profitable assets.

Growth Strategies

CSV Promotion Committee(Chairman: Executive Officer, Head of Management Departments)

Corporate
Division

Frontier Expansion 2021

We will boost the number of highly profitable transactions to further
strengthen the profitability of businesses we have worked to improveunder our Medium-term Management Plan. We will also continue togrow revenue from non-asset businesses while strengthening ourorganizational structure accordingly. In addition, we will move forward
to study the creation of new businesses that will become growth
drivers, such as platforms for the medical field, while also advancing
the digitization of the vendor business to improve efficiency.

CSV Promotion Office(secretariat)

Deliberation and approval

Sales
Division

General Manager ofCorporate Planning
Division

General Manager of
Human Resources
Division

General Manager ofGeneral Affairs
Division

General Manager
of Group Legal &Compliance Division

General Manager ofFinancial Planning
Division

Real Estate

Medical & Welfare

Energy & Environment

Aircraft

BPO

General Manager ofReal Estate Planning
Division

General Manager of
Healthcare Business
Promotion Division

General Manager ofEnergy & Environment
Business Division

General Manager ofAviation & Shipping
Business Division

General Manager of
BPO Service Promotion
Division

Report on initiatives and progress

General Manager
of Business Assets
Management Division

General Manager ofBusiness Planning &Promotion Division

Reflection in the business strategies of each divisionand company (CSV promotion)

Departments, offices, branch offices and group companies

Cooperation

Instilling Understanding among Employees

Core
Areas

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

FY 2020 Overview and Outlook
As for fund investments, we continued moving forward
to build a stable portfolio less susceptible to the impact
of market conditions, investing in new stock issues andreworking our portfolio. In credit investments, we responded
effectively to changing market conditions, primarily indomestic bonds, contributing to improved ROA.

Growth Strategies

In order to conduct corporate activities centered around CSV over the long term, it is essential that all employees understand thekind of value creation the Group is working toward. To this end, in fiscal 2020 we held a series of CSV training programs (“Let’s
CSV!”) for all Fuyo Lease employees. This three-part series began with an e-learning program for all employees, then continued withworkshops conducted by outside instructors for management-level employees (directors and heads of departments, offices andbranch offices), and finally workshops for all employees with heads of departments, offices and branch offices acting as instructors.
We discussed the connection between our work and society, and methods of increasing social value. We plan to expand thistraining across the Group as a whole in fiscal 2021 and beyond.

Frontier Expansion 2021

Concerning fund investments, to ensure stable returns, we willcontinue to build a portfolio that is less susceptible to the effects offinancial market conditions, including investments in illiquid funds.
For credit investments, we will continue to invest in assets where acertain level of profit can be expected even in a challenging investment
environment.
Workshops for management-level employees

Workshops for all employees41

Systems that Support Sustainable Value Creation

Medium to Long-Term Environmental Targets

Climate Change Initiatives
Basic
Approach

The Fuyo Lease Group has set forth the use of renewable energy in its operations and the achievement of carbon neutrality
by 2030 as its medium to long-term environmental targets, and we are advancing the decarbonization of our own business.

In response to climate change issues, the Fuyo Lease Group is working to reduce greenhouse gas emissions from its own
operations and support the decarbonization of our customers, recognizing the growing demand for renewable energy
and environmentally friendly products and services as a business opportunity. (For more information, please see “CSV 1.
Responding to Climate Change Issues and Renewable Energy” on P19).
In addition, as a measure to adapt to climate change, we are working to strengthen our resilience in the event ofemergencies by advancing BCP measures that assume certain risks, including limitations on corporate activities due to anincrease in natural disasters. We will actively work to mitigate and adapt to climate change and achieve sustainable growth.

RE100 Target*2
CO2 Emissions*2*3

2024

2030

Renewable energy usage rate

Renewable energy usage rate

50 %

100 %

Decrease from the FY 2020 level

Achievecarbon neutrality

30 %(Scope 1,2)

Environmental Management*2 Scope covers Fuyo General Lease and its consolidated subsidiaries.
*3 Scope 1: Direct emissions from the use of fuel for company vehicles and city gas, Scope 2: Indirect emissions from the use of purchased electricity, etc.

The Fuyo Lease Group is committed to reducing its
environmental footprint through appropriate environmental
management and building a circular society through its
business operations. We have formulated an environmental
philosophy and policy in order to engage the entire group into

activities that address environmental issues. We have alsoacquired ISO14001*1 for the Group’s major operating sites tooperate management system for continuous improvement.
*1 ISO14001 certified sites: Fuyo General Lease’s head office, Fuyo Lease Sales, Fuyo
Network Service, FGL Group Business Service, and FGL Group Management Service

Short-Term Environmental Targets
In fiscal 2020, the use of electricity and of fuel for sales vehicles fell significantly due to restrictions on working in the office and othereffects of the COVID-19 pandemic. We will continue to promote energy conservation and CO2 reduction under our environmental
management system in fiscal 2021 and beyond.
Objectives

Environmental Philosophy

Scope

FY 2020 targets

Environmental Policy

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

42

Fuyo Lease Group Integrated Report 2021

Providing products and services that contribute to environmental conservation

Climate change
initiatives

Fuyo General Lease& group companies*4

Promote energy
conservation

Fuyo General Lease& group companies*4

Comply withenvironmental laws
and regulations

Fuyo General Lease& group companies*4

We endeavor to provide products and services that contribute to environmental

01 conservation by having each Group company leverage the characteristics of theirbusiness activities.

Promoting resource and energy saving activities

02 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 circular society

03 We promote the reuse and recycling of goods no longer leased, restrict the generationof waste, and ensure proper disposal of waste.

Complying with environmental laws

04 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 and05 set environmental targets as we endeavor to respond to climate change, prevent

FY 2020 result

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

28.6% decrease
from the FY 2013 level

5.0% decrease from the FY 2013
level of electricity consumption (kWh)13.4% decrease
from the FY 2013 level

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

47.7% decrease
from the FY 2013 level

10.0% decrease from the FY 2013 levelof gasoline and diesel consumed bycompany vehicles (L)Assess compliance withenvironmental laws and regulations

Conducted complianceassessment.
No non-compliance found

Assess compliance with environmental
laws and regulations

Environmental Data
While our CO2 emissions (Scope 1,2) and the amount of electric consumption has increased as the Group has grown, both are trending
downward on an intensity basis. We will continue to push forward with group-wide energy conservation measures, including a shift torenewable energy and the deployment of electric vehicles (EVs) and fuel-cell vehicles (FCVs), as we work to reduce greenhouse gases.
CO 2 Emissions (Scope 1,2)* 5* 6 /CO 2 Emission Intensity

Electricity Consumption* 6

Fuyo General Lease
6 group companies*
Sharp Finance, Accretive
INVOICE, FUJITANOC, YAMAMTO LEASE
CO2 emission intensity (Right axis)

Fuyo General Lease
6 group companies*7
Sharp Finance, Accretive
INVOICE, FUJITANOC, YAMAMTO LEASE
Electricity consumption intensity (Right axis)

7

Environmental Management System(t-CO 2 )(t-CO 2 /100 millions of yen)

(MWh)

3,000

0.45

4,500

0.37

2,000

2,074
828

1,271

Internal Environmental
Audit Team

1,000

307

Environmental Management
OfficeDepartments/Offices/Branches

Fuyo Lease Group companies

600

319

0.36

1,937

486

474

2,007

758

178
0.29
686

328

327

2,062
395
185
518

0.30

422

3,000
2,658

0.29

2,201

0.15

1,500

541

439
588

2,599

2,884

253

452

489

625

626

1,523

1,517

3,249
565

451

400

302
488
674

200

336
964

Environmental Management
Promotion Team

(kWh/100 millions of yen)

564

0.33

Environmental Management
Officer

FY 2021 targets
5.0% decrease from the FY 2020 level of
CO2 emissions (t-CO2 )(The scope of coverage was expanded
to include Fuyo General Lease and its
consolidated subsidiaries.)*4 Scope: all domestic locations of Fuyo General Lease and group companies including Fuyo Auto Lease, Fuyo Network Service, Aqua Art, Fuyo Lease Sales, FGL Group Business Service
and FGL Group Management Service

environmental pollution, and conserve biodiversity.

Top Management
Fuyo General Lease: President
Environmental Control Officer

Evaluation

927

851

816

1,660

0

0
2017/3

2018/3

2019/32020/3

1,631

628
2021/31,220

002017/3

2018/3

2019/32020/32021/3*5 Total CO 2 emissions were calculated with the emission factors specified by the government based on the Ministerial Ordinance Concerning GHG emissions Associated with Business Activities ofSpecified Emitters (The emissions associated with electricity are calculated based on the emission factor issued by power transmission and distribution business operators of where our regional
operations and offices are located). Fuyo General Lease and the group companies are not included in specified emitters.
*6 Data coverage: all domestic locations of Fuyo General Lease, Fuyo Auto Lease, Sharp Finance, Accretive, INVOICE, NOC Outsourcing & Consulting, YAMATO LEASE, FUJITA, Fuyo Network
Service, Aqua Art, FGL Group Business Service, FGL Group Management Service. For group companies, figures prior to the start of data collection are not included.
*7 6 group companies: all domestic locations of Fuyo Auto Lease, Fuyo Network Service, Aqua Art, Fuyo Lease Sales, FGL Group Business Service, and FGL Group Management Service.

43

Systems that Support Sustainable Value Creation

Fuyo Lease Group Integrated Report 2021

Human Resource Management Strategies for Value Enhancing
Basic
Approach

The Fuyo Lease Group believes that people are our greatest asset. We also believe it is important to respect each individual
and their personalities, and to enable them to grow through their jobs and lead rich, full lives, both emotionally and physicallywhile feeling their work is satisfying and has meaning.
As we encourage the growth of each individual employee, maximizing their talents and capabilities, this in turn allows
us to simultaneously enhance corporate value and create social value, which we believe will lead to sustainable growth for
the Group.
The Group expects its employees to each think and act proactively on their own, to be eager to grow and independent.
In addition, we will work to create a work environment, including diversity, that supports our employees’ growth and thus
enhances corporate value, while also focusing on human resource development.
To advance these efforts, the Group emphasizes securing, developing, and engaging with our employees, and havepositioned these as pillars of our human resource strategy.

Efforts to Promote Diversity
The Fuyo Lease Group believes that diversity is a key growth
driver. Bringing together different strengths, viewpoints andvalues generates the innovation that creates new value, andleads to sustainable growth for the Group. To accomplish that,
we are working to promote diversity with the goal of creatinga workplace where every employee can maximize their fullpotential, regardless of age, sex, nationality, sexual orientation,
gender identity, race, ethnicity or disability.
Given a background of a shrinking productive workforce
and the need to respond to diversifying market needs, theGroup considers empowering women in the workplace to be aparticularly important management priority. To secure talented
human resources, we have worked on measures to promote roles
for women aimed at creating an environment in which, more thanever, women can demonstrate their abilities and play an active role.
In fiscal 2017, we received the special Platinum Kurumin
certification. Since then, we joined “the Ikuboss Corporate
Alliance,” which is a network of businesses seeking to develop thenext generation of model leaders (“Ikuboss”), and revised various
rules to make it easier for male employees to take childcare leave.
Under our action plan launched in fiscal 2020, based on
the Women’s Advancement Promotion Law, we have set new

44

Promoting Autonomous Growth and a Rewarding Workplace Environment
At Fuyo Lease, our basic approach to our performance evaluation
system is to evaluate individual employees fairly and equitably
for their accomplishments, skills development and efforts torealize the goals specific to their roles. Through feedback fromthe evaluator, employees can clarify their strengths and issues
and set new goals, which in turn leads to autonomous growth.
To encourage that kind of growth, in fiscal 2018 we introduced
a new internal job application system, followed in fiscal 2021 by
our job free-agent system; open internal recruitment (the Job
FA System), supporting individual employees in their efforts tocreate their own career plans.
Additionally, our Challenge of the Year program, establishedin fiscal 2018, recognizes the challenging new initiatives andattitudes toward challenges taken on by employees who
embody our corporate slogan of “Go where no one has gone
before.” In fiscal 2019 we also revised our human resource
system and are striving to create a rewarding workplaceenvironment by putting in place a balanced, detailed pay
structure that relies not on seniority, but emphasizes each
employee’s expected roles and demonstrated ability.

Human Resource Development
Human Resources Division
General Manager, Diversity
Planning & Promotion OfficeNami Tsujimototargets—including “a ratio of female employees hired of 40%
or more,” and “a ratio of female employees in management
positions of 30% or more”—and have begun a variety ofmeasures aimed at achieving them. Specifically, we aremoving forward with initiatives that strongly support women’s
advancement, including an expansion of seminars at women’scolleges and efforts to promote follow-up with women in
managerial career track positions. To encourage women toelevate their careers, we are also providing more opportunities
for them to interact with a diversity of role models, including byholding informal exchanges with executives and division heads
and career lectures and dialogues with female business leaders,
as we work to nurture this culture.

As the needs of our customers gradually change, diversify andbecome more sophisticated, each of our employees is expected
to “think for themselves and make the right choices” on the spotin order to achieve the mission assigned to them.
We believe learning the correct fundamentals, as well aspractical on-the-job training (OJT), are the foundation ofcultivating this ability to “think for oneself and make the rightchoices.” We thus offer group training across a wide range of
employee levels in laws, taxes and accounting, finance, financial
analysis, product knowledge and thought-based businessskills. We also emphasize each employee’s efforts to pursue
professionalism and take the initiative to develop their own
abilities, and offer a varied menu of support for self-improvement.
Our “+ Friday Seminars,” newly established in fiscal 2021, covera wide range of topics, including the latest business information,
general education and health, and aim to promote a habit among

employees, regardless of age or position, of using their free timeto learn for themselves. In addition, in cases where the COVID-19
pandemic makes it difficult to hold group training, we havecreated an environment where employees can continue to enjoy
opportunities to learn via online training and on-demand viewingof training videos.
In the second half of fiscal 2019, we also introduced coaching
training for management-level employees, designed to strengthen
guidance and development in cultivating the ability to “think,judge and act on one’s own,” and, as an organization, to pass onhuman resource development practices to the next generation.
Those who have completed a six-month cycle of training andpractice are granted our internal coaching qualification. In addition
to teaching, we encourage the growth of each employee throughcoaching and development, as we aim to create an organizationthat maximizes diverse talents and capabilities.

Engagement
The Fuyo Lease Group defines engagement as “a relationshipin which each employee links the growth of the company withhis or her own growth, and contributes to their mutual growth.”
Indicators of engagement are measured through employee
satisfaction surveys.

We consider enhancing engagement to be important in
improving corporate value and creating social value, andwill implement measures to increase engagement throughdialogue with our employees.

Efforts to Promote Work-Life Balance
The Fuyo Lease Group believes that creating a work environment
in which employees can be healthy, safe and can work with energy
and enthusiasm leads to a more vital, productive organization. We
are striving to build a better working environment where all
employees can find their own optimal work-life balance andenhance the quality of both life and work by maintaining andimproving their health, gaining new knowledge and experiences
and attaining personal growth. In addition, we believe that investingin the health of our employees—efforts to maintain and improvetheir health—is an investment in human capital on par withinvesting in education. We are thus promoting health andproductivity management as part of a strategic approach to
managing employee health based on a management perspective.
We have established specific programs aimed at creating abetter workplace, including Refresh Days (leave work early days)
and a flexible hours program, where employees can flexibly
choose their start and end times in addition to their regular working
hours. These programs were designed to remedy long working
hours and create an environment in which employees can work
according to their own lifestyles regardless of the reason, whether
childcare or nursing care. We also introduced +Friday (Plus Friday)
an original program based on a recommendation from ouremployee participation working group that allows employees tochoose one Friday each month when they can work just a half day.
In fiscal 2020 we also introduced a hourly based annual leaveand established rules for telecommuting to allow for even more
flexible work styles, as we advanced efforts to meet the needs ofthe times.

Employee Data*1
2016/32017/3

2018/3

2019/32020/32021/3

Retention rate of employees after 3 years (%)

100

85.7

100

94.3

-

-

Turnover rate (%)*2

0.8

1.0

1.9

1.9

1.8

1.7

Rate of taking annual paid leave (%)

61.9

68.9

68.0

68.4

66.3*372.0

Number of female managers (persons)

27

29

32

36

4

79*

114

Percentage of female employees inmanagement positions (%)

9.0

9.1

9.9

11.5

19.6*425.1

Employment rate of the disabled (%)

1.8

2.2

2.3

2.3

2.1

2.4

*1 Scope: Fuyo General Lease (non-consolidated)*2 Turnover rate includes separations due to personal reasons, reaching retirement age, and other reasons including transfer. It does not include separations of reemployed workers due to the expirationof their contract terms.
*3 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.
*4 In July 2019, our human resources system was revised to classify senior leaders (a position equivalent to the position of section chief) as managers. As a result, the number of female managers andthe percentage of female employees in management positions increased year on year.

45

Systems that Support Sustainable Value Creation

Fuyo Lease Group Integrated Report 2021

Community Engagement
Basic
ApproachContribution to academia and research

Recognizing close ties with its neighbors, the Fuyo Lease Group hopes to grow together with them, while being agood 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 theenvironment, community engagement, academia and research, and assistance to disaster-affected areas.

In October 2017, Fuyo Lease established Japan’s firstindustry-academia collaborative GAP Fund in cooperation
with the Tokyo Institute of Technology and Innovations andFuture Creation Inc.
In general, commercializing the results of university
research requires additional costs outside of researchexpenses, including the cost of additional testing, creationof prototypes and customer interviews. However, since the

GAP FundA fund intended to fill the “GAP” to commercialization

Environmental and Community Engagement
Aqua Art, a group company, provides decorative interioraquariums for rent. Replicating a natural ecosystemin these tanks promotes purification of the water andminimizes water use. To also minimize the impact on
the environment and the ecosystem, fish and aquaticplants are procured through aquaculture farms, and thecompany is also working to breed these itself. As part ofa biodiversity conservation project, in 2020 the company
also succeeded in breeding the Japanese rosy bitterling, afreshwater fish endemic to Japan that has been designatedas an endangered species.
These aquariums also serve as a teaching tool thatenables people to learn about the mechanisms of thenatural world. Out of a wish to bring smiles and comfort tochildren with these aquariums, Aqua Art donates (rents forfree) them to nursery schools and maternal and child living
support facilities, and also holds regular visiting lectures atfacilities to which aquariums have been donated, offeringchildren an opportunity to learn about the environment andecosystem.

research expenses and subsidies contributed by universities
are limited to academic purposes, there is a “GAP” infunding between basic research and commercialization.
The GAP Fund is intended to fill this funding gap andsupport commercialization of research results. Fuyo Lease
continues to provide funding for the GAP Fund, participate
in the selection of eligible projects, and support thecommercialization of advanced technology.

Venture Companies
External licensing
Joint development of products and services

GAP

Commercialization
Aqua Art Co., Ltd.

Laboratory/
researchers

President & Chief Executive Officer

Development of products and services using the technology

Research
results

Yukari Ueno

Funding(for creation of prototypes, etc.)
Joint research agreement

Fuyo Lease and Aqua Art also hold an annual aquarium designcontest jointly with TOKYO DOME HOTEL CORPORATION.
Students majoring in art and design at Tokyo Metropolitan
Kogei High School and Tokyo Designer Gakuin College, as
well as students studying to become aquarists at TCA Tokyo
College of ECO & Animals, design and decorate aquariums
which are then exhibited at the entrance and lobby of theTokyo Dome Hotel. During the exhibition period, a contest isheld in which visitors to the hotel vote for their favorite.

Tokyo Instituteof Technology

Innovations andFuture Creation Inc.

Office of
ResearchandInnovation

Funding
AdviceContributions to Culture and the Arts
relationships with our customers and many other companies.
By communicating these works to the wider world—works
that until now had been held by individuals or limited to oncampus exhibits—we will support these students in moving
a step closer to their dreams.
Our goal is to contribute to the advancement of art andculture in Japan by actively supporting students seeking tobecome artists through promotion of this fund, and by giving
new art back to society.

In June 2021, we established the Fuyo Joshibi Venus Fundwith Joshibi University of Art and Design to support students
aiming to become artists.
Students at art colleges who seek to enter society as
artists, designers and creators need opportunities for more
people to learn about their work. Through ongoing funding
provided to this fund over a period of ten years, Fuyo Lease
will purchase works created by students at Joshibi Universityof Art and Design, while also working to provide numerous
venues for the works to be exhibited by leveraging ourFuyo-Joshibi Venus Fund

Joshibi University of
Art and Design
Supervision and selection of works

Fuyo-Joshibi Venus FundContribution to fundmanagement
Japanese rosy bitterling laying eggs

46

Children cheerfully responding during a visiting lecture (FY2019)

Solicitation

Purchase of works

Provide works

Works
Students

Provide exhibition
venuesCompanies(Left) Yasunori Tsujita, President of Fuyo Lease(Right) Chairman Fukushita, Joshibi University of Art and Design47

Board Members

Fuyo Lease Group Integrated Report 2021

Board Members

As of June 23, 2021

Directors
Apr. 1977 Joined The Fuji Bank, Limited
Mar. 2006 Managing Executive Officer of Mizuho
Corporate Bank, Ltd. (retired in March 2009)
May 2009 Deputy President and Executive Officer of theCompany
June 2009 Director and Deputy President
Deputy President and Executive Officer
Representative Director
Nov. 2009 President and Chief Executive Officer
President and Executive Officer
Apr. 2016 Director and Chairman
June 2021 Director and Chairman (current position)
To present

Takashi Sato

Yasunori Tsujita

Director and Chairman

President and Chief Executive Officer(Representative Director)

Apr. 1979 Joined The Fuji Bank, Limited

Apr. 1986 Joined The Fuji Bank, Limited

Mar. 2006 Executive Officer, General Manager of
Shinbashi Branch of Mizuho Bank, Ltd.

May 2009 General Manager of Kanda Corporate Divisionof Kanda Branch of Mizuho Bank, Ltd.

Apr. 2009 Managing Executive Officer, General
Manager of Business Unit of Mizuho
Research Institute Ltd. (retired in April 2010)

June 2011 General Manager of Kudan Division No.1 ofKudan Branch

Apr. 1978 Joined Nippon Telegraph and Telephone
Public Corporation

June 2010 Senior Managing Director and Senior
Managing Executive Officer

Apr. 2014 Executive Officer, General Manager ofCorporate Banking Division No.11 of Mizuho
Bank, Ltd. (retired in April 2016)

Apr. 2014 Representative Director

May 2016 Managing Executive Officer of the Company

Apr. 2018 Director and Deputy President
Deputy President and Executive Officer(current position)
To present

Hiroaki Oda

Director and Deputy President

Director and Deputy President(Representative Director)(Representative Director)

June 2009 Executive Vice President, Senior Executive
Manager of Network Business Headquarters

June 2019 Director of the Company (current position)
To present

Masayuki Yamamura
Director

OutsideJune 2019 Head of College of Art and Design (retired in
May 2021)
Administrator (current position)

Hiroko Matsumoto
Director

Independent

OutsideJune 2021 Vice-President (current position)
Head of Research Institute (current position)
Director of the Company (current position)
To present

Independent

June 2021 Representative Director
Director and Deputy President
Deputy President and Executive Officer(current position)
To present

Auditors

Apr. 1984 Joined The Fuji Bank, Limited

Apr. 1981 Joined the Company

May 2010 General Manager of Corporate Banking
Division No.13 of Mizuho Corporate Bank,
Ltd. (retired in March 2012)

Aug. 1999 General Manager of International Division

Apr. 2008 General Manager of Finance Division

Mar. 2009 General Manager of Internal Audit Division

Apr. 2015 Executive Officer, General Manager ofFinance DivisionSep. 1988 Joined the Company

June 2017 Full-time Audit & Supervisory Board Memberof the Company (current position)
To present

Apr. 2012 General Manager of Corporate Business
Division of the Company

June 2020 Full-time Audit & Supervisory Board Member(current position)
To present

Apr. 2014 Executive Officer, General Manager ofCorporate Business Division
Apr. 2016 Managing Executive Officer
Apr. 2020 Senior Managing Executive Officer
June 2020 Senior Managing Director and Senior
Managing Executive Officer (current position)
To present

Apr. 2020 Senior Managing Director and Senior
Managing Executive Officer (current
position)
To present

Senior Managing Director

Keiji Takada

Shigeru Suda

Yoshito Tsuruta

Senior Managing Director

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Apr. 1972 Joined Nippon Oil Corporation

Apr. 1975 Joined Showa Denko K.K.

Apr. 2008 Representative Director of ENEOS Celltech
Co., Ltd.

Jan. 2011 Representative Director, President,
Corporate Officer and Chief Executive
Officer (CEO)June 2012 Representative Director, President of JX
Nippon Oil & Energy Corporation (currently
ENEOS Corporation)
Director of JX Holdings, Inc. (currently
ENEOS Holdings, Inc.)

Apr. 1982 Joined Yasuda Fire and Marine Insurance Co.,
Ltd. (currently Sompo Japan Insurance Inc.)

Apr. 1981 Joined the Export-Import Bank of Japan(currently the Japan Bank for International
Cooperation)

Apr. 2016 Director, Managing Executive Officer, Headof Kansai Division I of Sompo Japan
Nipponkoa Insurance Services Inc. (currently
Sompo Japan Insurance Inc.)

Jan. 2017 Representative Director, Chairman of theBoard

Oct. 2008 General Manager of International
Management and Planning Division andManager of International Management andPlanning Division’s Management andPlanning Office of Japan Bank forInternational Cooperation

Apr. 2018 Senior Executive Officer, Head of Kansai
Division I

June 2018 Director of the Company (current position)
Mar. 2020 Director, Chairman of the Board of Showa
Denko K.K. (current position)
To present

June 2014 Advisor of JX Nippon Oil & Energy
Corporation (currently ENEOS Corporation)(retired in June 2016)

Apr. 2020 Vice-President and Executive Officer, Sompo
Japan Insurance Inc. (retired in June 2020)

Jan. 2011 Director General for Western Japan
July 2011 Western Japan Representative for Industry
Finance Department

June 2020 Audit & Supervisory Board Member of TPR
Co., Ltd. (current position)

June 2015 Director of the Company (current position)
To present

Independent

June 2017 Head of Career Support Center of Joshibi
University of Art and Design (retired in May
2019)

June 2018 Counselor to the President (current position)

Apr. 2013 Executive Officer, General Manager ofFinancial Planning Division of Mizuho
Financial Group, Inc. (retired in April 2014)
Executive Officer, General Manager ofFinancial Planning Division of Mizuho Bank,
Ltd. (retired in April 2014)
Executive Officer, General Manager ofFinancial Planning Division of Mizuho
Corporate Bank, Ltd. (until July 2013)
June 2014 Managing Director and Managing Executive
Officer

OutsideApr. 2014 Professor (current position)
June 2015 Director of Aisys, Inc. (retired in May 2019)

June 2012 President, Representative Director

Apr. 1983 Joined The Fuji Bank, Limited

Apr. 2014 Managing Executive Officer of the Company

Director

Apr. 2012 Head of Strategic Design Promotion Divisionof Design Center (retired in March 2014)
Specially appointed professor at Joshibi
University of Art and Design

June 2008 Executive Vice President, General Manager
of Tokyo Branch of NIPPON TELEGRAPH
AND TELEPHONE EAST CORPORATION

Apr. 2021 Deputy President and Executive Officer

Shozo Kazama

Seiichi Isshiki

Apr. 1983 Joined Toshiba Corporation

Apr. 2013 General Manager of Corporate Banking
Division No.11 of Mizuho Corporate Bank, Ltd.

May 2010 Senior Managing Executive Officer of theCompany

Soichi Hosoi

Apr. 1981 Joined The Fuji Bank, Limited
June 2013 Deputy President-Executive Officer, Memberof the Board of Directors (Representative
Director) of Mizuho Financial Group, Inc.
(until June 2014)
Nov. 2013 Deputy President-Executive Officer, Memberof the Board of Directors of Mizuho Bank,
Ltd. (until March 2015)
June 2014 Member of the Board of Directors and
Deputy President and Executive Officer(Representative Executive Officer) of Mizuho
Financial Group, Inc. (until March 2015)
Apr. 2015 Member of the Board of Directors (retired inJune 2015)
May 2015 Deputy President and Executive Officer of
the Company
June 2015 Director and Deputy President
Deputy President and Executive Officer
Representative Director
Apr. 2016 President and Chief Executive Officer
President and Executive Officer (current position)
To present

Apr. 2012 Full-time Corporate Auditor of Japan Bankfor International Cooperation (retired in June
2016)

July 2020 President of Yasuda Nipponkoa Health
Insurance Union (current position)
Chairman of Tokyo Federation of National
Federation of Health Insurance Societies(current position)

Hideo Ichikawa
Director

OutsideIndependent

Audit & Supervisory Board Member
Takashi Yonekawa June 2021 Outsideof the Company (current position)

Audit & Supervisory Board Member
OutsideIndependent

To present

Hiroshi Imoto
Audit & Supervisory Board Member
OutsideIndependent

June 2021 Outside Audit & Supervisory Board Memberof the Company (current position)
To present

48

49

Corporate GovernanceFuyo Lease Group Integrated Report 2021

Corporate Governance

Board of Directors

Our Approach to Corporate Governance

Strengthening Corporate Governance

The Fuyo Lease Group places strong emphasis on creating

Fuyo Lease has implemented various initiatives aimed atstrengthening corporate governance.

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 withthe purpose and spirit of the Japan’s Corporate GovernanceCode. These Guidelines serve as the foundation for our
corporate governance framework, operating policies and othermanagement policies, to which we adhere in everything we do.

Year

Initiative

Objective

2008

Introduced performance-based
compensation and stock compensation
type stock options

To strengthen links between
directors’ remuneration and theirperformance 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 comply with the Japan’s
Corporate Governance CodeSet up the Nomination andCompensation Advisory Committee

To ensure independence andobjectivity in the decision-making
process for matters such asappointments 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)The base index for calculation of
performance-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 strengthen links among thedirectors’ remuneration,
shareholder value, andachievement status of theMedium-term Management Plan
To comply with the revised
Japan’s Corporate Governance
Code

2019

Released 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 reporting lines forinternal audits

2021

Increased the number of independent
outside directors from three to four

To strengthen the management
oversight structure

2015

2016

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

2018

Corporate Governance Structure
General Meeting of Shareholders
Appointment andDismissal

Appointment andDismissal(Cooperation)

Board of Corporate Auditors:
4 corporate auditors

Appointment and Dismissal

Consultation
Audit

Board of Directors: 10 directors(including 4 independent outside directors)(including 2 independent outside
corporate auditors)(Cooperation)

ReportReportOversight

Recommendation

Approval

Nomination and Compensation
Advisory Committee: 5 members(including 4 independent outside directors)

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 five members, including
four independent outside directors and an internal 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 FY 2020, the Nomination and Compensation Advisory
Committee met two 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, eachcorporate auditor audits execution of operations by directors byattending important meetings, reviewing important documents,
examining operations and assets, and reviewing the audit
findings of the independent accounting auditor and the internalGroup Internal
Audit Division

ReportPresident & CEO

Compliance Committee

Name
Takashi SatoInternal audit

Control

Executive
Committee

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

The Executive Committee is composed of Executive Officers
with positions of Managing Executive Officer or higher, theheads of the Corporate Planning Division, Human Resources
Division, and Business Planning & Promotion Division as wellas the presidents of affiliated companies. Full-time corporate
auditors also attend meetings of the Committee on a regularbasis.
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 andto speed up decision-making.
In fiscal 2020, the Executive Committee met 18 times.

Compliance Committee
Fuyo Lease has set up a Compliance Committee chaired by
the Chief Compliance Officer and vice chaired by the Group
Legal and Compliance Division Officer. The heads of relevant
planning and administrative departments, the heads 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 the promotion of compliance,
including the formulation of the compliance program (annualplan). Based on its discussions the Committee submits reports
to the Board of Directors and the Executive Committee, andtakes measures to develop and enhance compliance systems.

Position

Attendance at Board meetings, etc.
12/12

Yasunori Tsujita

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

12/12

Shozo Kazama

Director and Deputy President (Representative Director)

12/12

Hiroaki Oda

Director and Deputy President (Representative Director)-

Soichi Hosoi

Senior Managing Director

12/12

Senior Managing Director

10/10(Elected in June 23, 2020)

12/12

Nomination and Compensation Advisory Committee: 2/2

12/12

Nomination and Compensation Advisory Committee: 2/2

12/12

Nomination and Compensation Advisory Committee: 2/2-(Elected in June 23, 2021)

Seiichi Isshiki

Masayuki Yamamura
Implementing andadvocating programs

Executive Committee

Director and Chairman

Hideo Ichikawa

Approval of plans and policies

audit department among other relevant activities. Corporate
auditors closely work with the Internal Audit and Internal Control
Departments to conduct audits in order to enhance audit quality.
At the request of the corporate auditors, an employee (astaff member from the Group Internal Audit Divison) has been
appointed to assist them.
In FY 2020, the Board of Corporate Auditors met 11 times.

Attendance at Board and Committee meetings (attendance in FY 2020 by board members, as of June 23, 2021)

Keiji Takada(Cooperation)

Financialaudit

Accounting Auditor

Planning and reportingon programs

The Board of Directors consists of ten directors, including six
internal directors and four independent outside directors, withindependent outside directors accounting for more than 1/3of the Board of Directors. The Board of Directors deliberates
and makes decisions on important management issues, aswell as matters specified in laws and regulations, the Articles
of Incorporation, and the Regulations governing the Board of
Directors. The Board of Directors also oversees the executionof operations by Directors and Executive Officers.
In FY 2020, the Board of Directors met 12 times.

Hiroko Matsumoto50

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

Nomination and Compensation Advisory Committee: 2/2(Elected in June 23, 2021)

Shigeru Suda

Full-time Audit & Supervisory Board Member

12/12

Board of Corporate Auditors: 11/11

Yoshito Tsuruta

Full-time Audit & Supervisory Board Member

10/10

Board of Corporate Auditors: 8/8(Elected in June 23, 2021)

Takashi Yonekawa

Outside Audit & Supervisory Board Member (Independent Director)-(Elected in June 23, 2021)

Hiroshi Imoto

Outside Audit & Supervisory Board Member (Independent Director)-(Elected in June 23, 2021)

51

Corporate GovernanceFuyo Lease Group Integrated Report 2021

Initiatives to Improve the Effectiveness of the Board of Directors

Board Remuneration

Analysis and Evaluation of the Effectiveness of the Boardof Directors

Stimulating discussion at Board meetings
Fuyo Lease is engaged in various initiatives to ensure active
and substantial discussions at Board meetings. We haveestablished a structure so that we can discuss topics thoroughly
at Board meetings, including prioritizing matters for resolution
and expanding the scope of matters for reporting, briefing
outside directors in advance, providing minutes of Executive
Committee meetings and other relevant materials to outside
directors, and having presidents of major subsidiaries attend
meetings to brief directors in person on business conditions.

At Fuyo Lease, we analyze and evaluate the overall
effectiveness of the Board of Directors every year. The Boardof Directors makes further efforts to enhance its functions inlight of the results of the analysis and evaluation with the aimof continually improving its effectiveness.
The results of the analysis and evaluation for fiscal 2020are as follows.

Evaluation process (corporate lawyer assists the secretariat)

1

2

3

4

5

Survey to
all directors andcorporate auditors

Interviews conducted
as necessary

Deliberation
and report by the
Nomination andCompensation
Advisory Committee

Analysis andevaluation by the
Board of Directors

Formulation andimplementation of
response policies
based on evaluation
results (PDCA cycle)

Assessment Criteria
We administer surveys about the Board of Directors in general,with 25 questions covering 5 categories: 1) structure of theBoard, 2) role of the Board, 3) how the Board is run, 4) support
system for outside directors, and 5) overview. There is a“remarks” column for each question so that respondents canvoice their opinions freely.
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.

52

Progress on issues identified last fiscal year
Analysis and Assessment for last fiscal year (i)Revitalization of discussions at Board meetings: We decided toenhance the content of discussions on progress reports relating
to the Medium-term Management Plan by business area by
including reports on group companies. We also began reportingon the risk management capital status and providing moredetailed Executive Committee minutes to outside directors so thatthey could experience the discussions as if they had attended.
Analysis and Assessment for last fiscal year (ii)
Further reflection of the perspectives of CSV and environment,social, and governance (ESG): We established the CSV
Promotion Committee and made arrangements for it to report
the results of discussions to the Board of Directors from the firsthalf of fiscal 2021. We also explained to outside directors theGroup’s progress with CSV management to share awareness.
Analysis and Assessment for last fiscal year (iii)
Further improvement of information provided to outside
directors: In addition to keeping outside directors informed of
the impact of COVID-19 on our business, we have set up asystem for receiving questions on matters of interest to outside
directors, provide answers at appropriate times and offer thirdparty workshop opportunities to outside directors.
Newly identified issues
These include further improvement of the diversity, specialist
knowledge, and oversight functions of members of the Board of
Directors, deepening CSV management on a group basis, andfurther improvement of information provided to outside directors.

The Board of Directors of Fuyo Lease has passed a resolution
on the Company’s policy regarding how to determine individual
remuneration, etc. for directors. Fuyo Lease believes thatenhancing the link between shareholder value and remunerationof Board of Directors will boost their morale and motivate themto improve our financial performance and share price, leading us
towards our goals of ensuring stable performance and growth,
while enhancing our corporate value. That is why we haveintroduced variable pay programs such as performance-based
compensation and stock compensation in addition to a basesalary, 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 isbased on our consolidated performance as well as an individual
director’s contribution to our financial performance among otherfactors. The indicators for performance-based compensation
are operating assets, ordinary profit, and ROA on a consolidated
basis, which are key performance indicators for the Mediumterm Management Plan. As resolved by the Board of Directors,
the President & Chief Executive Officer is delegated to determine
details regarding the amounts and timing of performance-based
compensation.
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 medium
to 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 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 performance-based
compensation and equity compensation are not really applicable.
The company prescribes malus provision 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.

Board Remunerations (FY 2020)

Officer classification

Total amount(millions of yen)

Breakdown of remunerations (millions of yen)
Basic remuneration

Performance-linked
remuneration

Non-monetary
remuneration

Number of
directors

Directors

324

208

48

66

9

(Outside Directors)

(36)

(36)

(-)

(-)

3

Board ofCorporate Auditors members

66

66

(-)

(-)

5

(Outside Auditors)

(21)

(21)

(-)

(-)

2

Notes: 1. The above performance-linked remuneration comprises the amount, which shall be recorded in fiscal 2020.
2. Non-monetary remuneration is a stock benefit trust (BBT). The amount of the 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.
3. 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 theabolishment of the retirement benefits system for directors. The estimated amount as of the end of the fiscal year is 4 million yen (outside directors). The payment is madeat the time of their retirement.

53

Corporate Governance / Risk Management

Fuyo Lease Group Integrated Report 2021

54

Risk Management
Director Qualifications and Nomination Procedures
Policy and procedures for nominating director andcorporate auditor candidates and removing director
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 specifies 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
1

Our Approach to Risk Management and Risk Management System
is finalized 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 prescribed in
the Guidelines Concerning Listing Management, etc. establishedby the Tokyo Stock Exchange.

As stipulated in the Fuyo Lease Group risk management
regulations, we have established a risk management systemat our locations across the globe in order to manage risks
based on their particular risk characteristics and importance.
Risks to be managed are categorized into credit, market(such as interest rate fluctuation risk), liquidity (such as cash
flow risk), administrative, system, legal, human, reputation,and other risks. Each type of risk is managed by a designateddepartment.

The Board of Directors and the Executive Committee
receives updates on risk management, discusses risk
management policies according to the characteristics andimportance of each risk, and evaluates the effectivenessof risk management. The Asset and Liability Management(ALM) Committee meets on a regular basis to appropriately
manage and control market and liquidity risks. These efforts
enable us to continually improve our risk management
system.

Risk Management System
Board of Directors

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

Reason for appointment

Seiichi Isshiki

In addition to serving as Representative Director & President of JX Nippon Oil & Energy Corporation, Mr. Isshiki has served as adirector of JX Holdings, Inc. and president of ENEOS Celltech Co., Ltd. We believe that his abundant experience and deep insight will
provide a perspective that is independent of management and will contribute to enhancing the effectiveness of the decision-making
and oversight functions of the Board of Directors.

Hideo Ichikawa

We believe that his many years of management experience 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. and his abundant experienceand deep insight will provide a perspective that is independent of management and will contribute to enhancing the effectiveness ofthe decision-making and oversight functions of the Board of Directors.

Executive Committee
ALM Committee
New Products Committee

Masayuki Yamamura

We believe that his experience as representative director and president of NTT East and chairman of the incorporated associationand his abundant experience and deep insight will provide a perspective that is independent of management and will contribute toenhancing the effectiveness of the decision-making and oversight functions of the Board of Directors.

Hiroko Matsumoto

We believe that her experience as after working for Toshiba Corporation, school administration and education as Administrator,
Vice President, Professor and Head of Research Institute of Joshibi University of Art and Design and her abundant experience anddeep insight will provide a perspective that is independent of management and will contribute to enhancing the effectiveness of thedecision-making and oversight functions of the Board of Directors.

Compliance Committee
Funds Investment Council
System Strategy Committee

Risk Management Departments
To utilize the abundant experience and high insight that he has served as a Director and Managing Executive Officer, Vice-President
and Executive Officer of Sompo Japan Insurance Inc., to carry out appropriate audits from an independent and objective standpoint.

Hiroshi Imoto

By making use of Mr. Imoto’s abundant experience and high level of insight as a member of the Japan Bank for International
Cooperation’s International Management and Planning Division, Industry Finance Department, and Full-time Corporate Auditor, tocarry out appropriate audits from an independent and objective standpoint.

Operational Risks

CreditRisks

Internal Control System

Internal Audit

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

The internal audit function is administered by the GroupInternal Audit Division (staffed by 10 employees). The GroupInternal Audit Division conducts operational audits of all
departments, offices, branch offices, and major subsidiaries,
and plays a part in ensuring that internal controls arefunctioning in addition to examining their effectiveness. The
results of these audits of operations are reported to the
President & CEO and corporate auditors every time they are
conducted and periodically to the Board of Directors and the
Executive Committee.

MarketRisks

Liquidity
Risks

Administrative
Risks

System
Risks

Human
Risks

Reputation
Risks

Other Risks
Legal
Risks

Departments, Offices, Branch Offices, and Group Companies

Residual Value
Risks

Group Internal Audit Division

Takashi Yonekawa

55

Risk Management / Compliance System

Fuyo Lease Group Integrated Report 2021

56

Compliance System
Risks in Business Operations
Listed below are the main factors that could pose risks 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, 2021). 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
Risks relating to changes in capital expenditure trends
and other factors

Credit Risks

Risks relating to changes in factors such as interest rates,
exchange rates, share prices and financing

Risks relating to changes in regulatory systems

Risks relating to strategic partnerships
and corporate acquisitions

Risks from natural disasters or other causes

Risks 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

Risks relating to overall business operations
Administrative Risks
System Risks
Risks relating to information security
Human risks relating to developing and securing human resources
Compliance risks* Please refer to our annual securities report for details on each section.

Response to Risks
The Fuyo Lease Group assumes various risks that may arisein the course of business development and is implementing
measures to counter these risks. Details of the business risks
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 theimpact of these risks on business performance. To deal withthe risk of infection in our business activities, we established
the COVID-19 emergency response task force under the
direction of the president, and we are engaging in initiatives
based on the Group’s Basic BCP Principles.
We ensure that all employees and directors understand andadhere to rules for preventing infection, such as mobile working,working from home, flexible working hours, reducing overtime,
monitoring health and avoiding commutes when unwell. If
we found the event of a confirmed or suspected COVID-19
case in the Group, we also report promptly the incident within
the company, respond by consulting and receiving medical
examinations from medical institutions, and giving instructions
to remain at home, perform required cleaning and disinfection,and make a public announcement. These initiatives ensure that
we prevent the spread of COVID-19 and do our utmost to keep
our employees and their families healthy, as well as prioritizing
prevention of negative effects on the business continuity of ourcustomers.

Our Approach to Compliance and Compliance System

Compliance Training

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 with integrity
and fairness by conforming to relevant social norms, while strictly
complying with all laws and regulations.
We promote compliance throughout the Group by stipulating
various regulations, procedures, and manuals, conducting
compliance education, and enhancing the whistleblower systemon the basis of the Fuyo General Lease Group’s Code of Corporate
Conduct. In order to maintain and further improve our compliancesystems, we implement and carry out compliance programs
every fiscal year. Issues associated with the compliance programs
are discussed at the Compliance Committee and the Executive
Committee before being submitted to the Board of Directors forapproval. 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.

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 groupcompanies, and departmental compliance officers.*

Fuyo General Lease Group Code of Corporate Conduct
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 are 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 2020, 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 to emergencies. In
the event of a large-scale disaster or emergency, the emergency
response task force under the direction of the president will takemeasures necessary for ensuring safety and continuity of ouroperations in accordance with the Emergency Preparedness
Regulations. We also conduct regular drills to promote theminimization of damage and ensure business continuity. In fiscal
2019, we reviewed BCP-related regulations and established our
Basic BCP Principles. Moreover, in fiscal 2020, we strengthened
collaboration for disaster response within the Group. We standardized
disaster stockpiles at all group companies following relocating ourheadquarters and identified priority businesses in our BCP.

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 forthe employees of the Group. We conduct various training activities
including e-learning programs to increase the effectiveness of theCode and instill the Code among our employees.
Furthermore, the Code strictly prohibits the forging of collusive
ties with political and administrative authorities and business
partners, and the private use of the company’s assets. In fiscal
2020, no infringements related to corruption were found in theGroup. Additionally, no employees were dismissed or subjected
to disciplinary action due to corruption.

Fuyo General Lease Group Code of Corporate Conduct
Basic Policy of Fuyo General Lease Group
Chapter1

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
Chapter2

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
Chapter3

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 compliance awarenessand ensure compliance.

Compliance Training (FY 2020)
Group training and workplace training
Participant

Subject# of session

New recruit

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, Prevention of harassment,
Insider trading regulations

1

5th year employee(Generalist track)

Response to accidents and troubles

1

Newly appointed Issues to be understood as responsible officers tohead of department/
ensure compliancebranch office1

Newly appointed Prevention of power harassment, sexual and maternity
assistant manager/
harassment
section chief2All employees

Information management and prevention of wrong
emailsDirectors and head
Importance of the whistleblower system that directorsof department/
office/branchand head of branch/department should understandoffice11E-learning
Participant

Subject

Directors, head of department/ Regulation for Insider Trading
office/ branch office, compliance (e-learning material of theofficer, entry level
Japan Exchange Group)
All employees

General issues on compliance# of session
2
1

Whistleblower Hotline
The Fuyo Lease Group operates whistleblower hotlines.
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 guidance to these
services is always posted 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 orother potential infringements. The whistleblower systems accept
anonymous reports to protect whistleblowers. At Fuyo Lease, fulltime corporate auditors are appointed to accept reports from thegroup companies, and the cooperating law firm is available forreports from the overseas affiliated companies.
In fiscal 2020, three reports were received through the hotline.
In each case, we contacted the relevant parties to confirm thefacts and conducted investigations promptly with due care toprotect whistleblowers against detrimental treatment, and allcases have been resolved.

57

Independent Assurance Report / Financial Section

Fuyo Lease Group Integrated Report 2021

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

P59

Financial & Non-Financial Data (10 years)

P61

Consolidated Financial Statements
Consolidated Balance Sheets

P63

Consolidated Statements of Income and Statements of Comprehensive Income

P65

Consolidated Statements of Changes in Equity

P67

Consolidated Statements of Cash Flows

P70

Notes to Consolidated Financial Statements

P72

Report of Independent Auditors

P112

58

59

Financial Section

Financial Information
Financial Position and Management Goals
Financial Position and Results of Operations
The Japanese economy remained under pressure in fiscal 2020,
with economic activity restricted by the spread of COVID-19.
Although parts of the economy recovered, with some help fromgovernment stimulus measures, the economic outlook appears
increasingly uncertain amid repeated states of emergency andno prospects of the pandemic coming to an end.
According to the Japan Leasing Association, the total volumeof lease transactions in Japan’s leasing industry in fiscal 2020
came to ¥4,591.0 billion, an increase of 13.9% compared to theprevious fiscal year.
In this environment, the Fuyo Lease Group started to
implement Frontier Expansion 2021, its Medium-termManagement Plan for fiscal 2017 to fiscal 2021. In fiscal
2020, the fourth fiscal year of the plan, the Group steadily
implemented the business and management strategies
outlined in the plan, aiming to be a corporate group that
continually expands the frontiers of its business portfolio andclears 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
in fiscal 2020 totaled ¥1,343,882 million, down 1.2% year on
year. Consolidated operating assets (net of the deferred profit
on installment sales) as of March 31, 2021, totaled ¥2,555,857
million, up ¥171,865 million, or 7.2%, from the end of the previous
fiscal year.
The total assets amounted to ¥2,979,285 million, up ¥226,686
million, or 8.2%, from the end of fiscal 2019, due to a steadyincrease in operating assets.
The funding balance stood at ¥2,430,993 million, an increaseof 9.0% year on year, mainly due to the issuance of unsecured
straight bonds amounting to ¥70,405 million during the fiscal
year under review.
On the profit front, the Company reported net sales of¥740,263 million, up 3.9% year on year, operating profit of¥44,555 million, up 7.6% year on year, ordinary profit of ¥47,996
million, up 9.0% year on year, and profit attributable to ownersof parent of ¥29,566 million, up 12.9% year on year. Net sales,
operating profit, ordinary profit, and profit attributable to ownersof parent all exceeded the previous year’s level, and record-highprofits were achieved for the consolidated fiscal year.

Financial Position and Results of Operations by
Segment
Net sales, cost of sales and gross profit before interest expenses

Lease and Installment Sales
In fiscal 2020, Lease and Installment Sales segment net sales
increased by ¥12,864 million, or 2.4% year on year, to ¥541,718
million. Cost of sales increased by ¥11,938 million, or 2.5% year
on year, to ¥487,721 million, and gross profit before interest
expenses in the Lease and Installment Sales segment increased

Fuyo Lease Group Integrated Report 2021

by ¥925 million, or 1.7%, year on year, to ¥53,996 million. Thiswas mainly due to the acquisition of YAMATO LEASE as aconsolidated subsidiary and growth in real estate and other
Strategic Areas offsetting a decline in aircraft leasing.

Financing
Financing segment net sales totaled ¥20,588 million in fiscal
2020, an increase of ¥4,609 million, or 28.8%, year on year.
Cost of sales increased by ¥168 million, or 58.0%, to ¥460
million, and gross profit before interest expenses in the Financing
segment rose ¥4,440 million, or 28.3%, to ¥20,128 million. Thiswas mainly due to the significant growth in the finance businessas a result of our precise response to changes in the market
environment.
Other
The Other segment’s net sales jumped by ¥10,459 million,
or 6.2% year on year, to ¥177,956 million in fiscal 2020. Costof sales increased by ¥9,122 million, or 6.1% year on year, to¥159,583 million, and gross profit before interest expenses in theother segment increased by ¥1,336 million, or 7.8% year on year,to ¥18,373 million. This was mainly due to the strengthening ofbusinesses in Strategic Areas such as the BPO service businessand solar power generation business.
Operating profit, ordinary profit and profit attributable to ownersof parent
Strategic Areas centered on Real Estate and Energy &Environment, and finance business performed well, which
contributed significantly to achieving an increase in gross profit
before interest expenses, the basic income which is a major
source of profits. Gross profit before interest expenses increased by ¥6,702 million (7.8%) year on year to ¥92,499 million.
As for costs, personnel expenses increased by ¥2,794 million(8.3%) year on year to 36,356 million due to the expansion of
the Group, but this was offset by an increase in gross profit
before interest expenses. As a result, operating profit totaled¥44,555 million, a year on year increase of 7.6%, ordinary profit
totaled ¥47,996 million, a year-on-year increase of 9.0%, andprofit attributable to owners of parent stood at ¥29,566 million,
up 12.9% year. Both net sales and profits at each level showedfavorable performance and exceeded the previous year’s results.
Net Assets and Equity Ratio
Total shareholders’ equity increased by ¥20,522 million, or 8.4%
from the end of the previous fiscal year to ¥266,138 million,
mainly owing to an increase in retained earnings. As a result,
total net assets came to ¥344,796 million at the end of the fiscal
year under review, up ¥32,977 million, or 10.6%, compared tothe end of the previous fiscal year. The equity ratio increased
0.2 percentage points from the end of the previous fiscal year to
10.2%. While operating assets increasing, net assets increased
and the equity ratio steadily improved.
Fuyo Lease Group predicts that the outlook for the economy
will remain uncertain as restrictions on economic activity

continue due to the COVID-19 pandemic, and the Group also
anticipates that the pandemic will take time to converge. If the
impact of COVID-19 on the economy and business activities
will change, it may have a significant impact on consolidated
performance.

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 2020 used net cash of ¥35,080
million, a decrease compared to the net cash used of ¥108,804
million in the previous fiscal year. The main factors in changes
were a decrease in loss on retirement of assets for lease and costof property for lease sales, a net decrease in lease receivables
and investments in leases, a decrease in purchase of assets forlease and a decrease in trade payables.
Cash Flows from Investing Activities
Investing activities in fiscal 2020 used net cash of ¥5,970 million,
compared to the net cash of ¥11,242 million used in the previous
fiscal year. The main factors in changes were an increase inpurchase of own-used assets and a decrease in purchase ofinvestment securities.
Cash Flows from Financing Activities
Financing activities in fiscal 2020 provided net cash of ¥63,405
million, compared to the net cash of ¥127,754 million in theprevious fiscal year. The main changes in indirect financing
included increases in repayments of short-term borrowings,
proceeds from long-term borrowings and repayments of longterm borrowings. In direct funding, the main changes included a
net increase in commercial papers and a decrease of proceedsfrom securitization of lease receivables.

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
amounted to ¥1,638,863 million, up 10.4% from the end of
the previous fiscal year, mainly due to increases in long-termborrowings. Direct financing increased 6.2% from the endof the previous fiscal year to ¥792,129 million, mainly due tothe proactive issuance of bonds, including the sustainabilitylinked bond and the first issuance of US dollar-denominatedunsecured bonds. As a result, the funding balance at the endof the fiscal year under review increased 9.0% from the end of
the previous fiscal year to ¥2,430,993 million. The percentage ofdirect financing stood at 32.6%, a decrease of 0.8 percentage
points compared to the end of the previous fiscal year. The main
demand for working capital at the Group include the purchaseof assets for lease 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, 2021, the balance of interest-bearing debt,
including borrowings and lease receivables, stood at ¥2,446,726
million, up 8.7% from the end of fiscal year. Moreover, cash andcash equivalents at end of period under review totaled ¥98,753
million.
At the end of the fiscal year under review, the Company
had concluded overdraft agreements and loan commitment
agreements with 74 correspondent financial institutions. Thebalance of executed loans amounted to ¥508,983 million, andthe balance of unexecuted loans stood at ¥494,839 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 ROA (Ratio of ordinary profit to operating
assets) as our three management goals.
As for operating assets, we achieved the target ahead of scheduledue to progress in accumulating the assets in Strategic Areas.
Founded on the basis of steadily accumulating operating
assets, ordinary profit and profit attributable to owners of parent
have achieved record highs for four consecutive years and six
consecutive years, respectively.
In addition, we have both improved ROA (Ratio of ordinary
profit to operating assets) by proactively replacing our portfoliowith highly profitable assets in line with the accumulation ofoperating assets.

Management Goals(Consolidated)

FY 2017 Result

FY 2018 Result

FY 2019 Result

FY 2020 Result

Target Value (FY 2021)

Operating Assets¥2,172.6 bn¥2,262.8 bn¥2,384.0 bn¥2,555.9 bn¥2,500.0 bn

Ordinary profit¥35.2 bn

¥39.1 bn¥44.0 bn

¥48.0 bn¥50.0 bn

1.67%

1.76%

1.90%

1.94%

2.0%

ROA

(Ratio of ordinary profit
to operating assets)

60

61

Financial Section

Fuyo Lease Group Integrated Report 2021

Financial and Non-Financial Data (10 years)
Financial Data (consolidated)
2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/3

Net sales (billions of yen)

421.5

442.6

441.7

472.3

493.8

507.2

590.3

618.1

712.3

740.3

Cost of sales (billions of yen)

369.2

393.2

394.5

423.7

442.6

451.9

529.8

551.4

636.0

657.5

Gross profit (billions of yen)

52.3

49.3

47.2

48.6

51.2

55.3

60.5

66.7

76.3

82.7

Selling, general and administrative expenses (billions of yen)

23.7

24.5

24.0

24.0

26.7

26.5

27.8

31.0

34.9

38.2

Operating profit (billions of yen)

28.7

24.8

23.2

24.6

24.5

28.8

32.7

35.7

41.4

44.6

Ordinary profit (billions of yen)

32.1

26.4

25.4

26.5

29.2

31.4

35.2

39.1

44.0

48.0

Profit attributable to owners of parent (billions of yen)

16.5

15.6

13.0

14.2

17.5

20.0

21.9

25.5

26.2

29.6

Total assets (billions of yen)

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

2,979.3

Operating assets (billions of yen)

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

2,555.9

Interest-bearing debt (billions of yen)

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

2,446.7

144.8

173.8

202.6

222.5

232.5

259.2

282.6

295.0

311.8

344.8

7.7

8.8

9.8

10.1

9.9

9.9

10.2

10.1

10.0

10.2

Executed contract volume (billions of yen)

484.6

547.2

594.8

666.9

703.8

834.2

1,105.1

1,187.2

1,359.7

1,343.9

ROA (Ratio of ordinary profit to operating assets) (%)

2.23

1.80

1.64

1.59

1.62

1.60

1.67

1.76

1.90

1.94

OHR (%)

43.7

47.8

49.8

48.7

51.2

47.1

45.2

45.3

44.0

43.9

Cash flows from operating activities (billions of yen)(34.0)(55.5)(85.2)(165.4)(151.5)(154.3)(104.4)(80.0)(108.8)(35.1)Cash flows from investing activities (billions of yen)

(4.7)

8.2

(1.1)

(1.1)

(1.2)

(4.6)

(5.7)

(9.4)

(11.2)(6.0)

Cash flows from financing activities (billions of yen)

51.6

98.2

62.6

147.3

150.3

157.7

113.5

105.5

127.8

63.4

Cash and cash equivalents at end of period (billions of yen)

43.9

95.2

72.3

54.0

51.4

50.6

54.1

69.9

77.4

98.8

546.40518.21429.49470.14579.17661.80726.41

844.69871.95986.18

66

70

74

80

100

130

146

188

205

240

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/3

1,096

1,279

1,409

1,287

1,216

1,271

2,074

1,937

2,007

2,062

Scope1 (t-CO2 )

213

202

192

159

154

163

770

707

687

603

Scope2 (t-CO2 )

883

1,077

1,217

1,128

1,062

1,108

1,304

1,230

1,319

1,460

0.31

0.34

0.39

0.33

0.31

0.33

0.37

0.36

0.29

0.29

0

8

23

58

86

86

111

149

229

283

1,504

1,500

1,521

1,542

1,559

1,703

1,715

1,960

2,416

2,637

Number of employees (non-consolidated) (Employees)

611

658

660

669

670

689

689

704

715

759

Turnover rate (non-consolidated) (%)

1.7

1.4

1.3

1.1

0.8

1.0

1.9

1.9

1.8

1.7

Net assets (billions of yen)
Equity ratio (%)

Basic earnings per share (yen)Dividends per share (yen)Non-Financial Data (consolidated)
CO2 emissions (Scope1,2) (t-CO2 )CO2 emission intensity (Scope1,2) (t-CO2 / 100 millions of yen)
Green energy supply* (Output) (MW-dc)
Number of employees (Employees)* Total of figures of own group business and those corresponding to equity investment share.

62

63

Financial Section

Fuyo Lease Group Integrated Report 2021

Consolidated financial statements
Consolidated balance sheets
Thousands of U.S. dollars

Millions of yen
Notes

As of March 31, 2021

As of March 31, 2020

Thousands of U.S. dollars

Millions of yen(Note 1)

Notes

As of March 31, 2021

(Note 1)

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Liabilities

AssetsCurrent liabilities

Current assets
Cash and deposits

3

Installment receivables

3

Lease receivables and investments in leases

3¥

Operating loans
Accounts receivable - other loans to customers

3,7Operational investment securities

2

Other operating assets
Accounts receivable - lease

3

Other

3

Allowance for doubtful accounts
Total current assets

98,92684,5451,080,797
306,635
117,660
283,209
19,011
29,60491,294(3,047)2,108,637¥

77,43679,753
1,106,840
307,124
109,652
234,837
15,70624,86274,359(3,085)2,027,487$

893,482
763,597
9,761,538
2,769,465
1,062,687
2,557,890
171,712267,384824,549(27,526)
19,044,778

Non-current assets

1,3,7

Advances for purchase of assets for lease
Total assets for lease
Other operating assets

1,3

Own-used assets

1,3

Total property, plant and equipment

632,299
8,140
640,440
33,276
3,662
677,379

506,498
6,911
513,409
26,383
13,319553,1115,710,797
73,526
5,784,323
300,546
33,078
6,117,947

240

266

2,168

Intangible assets
Assets for lease
Other intangible assets
Other
Total other intangible assets
Total intangible assets

41,396

290,077

14,977
9,974
1,046
2,265
180
49
3
39
90
41,157
1,538,089

20,302
4,215
1,307
2,219
184
57
3
50
453
45,254
1,465,573

135,276
90,086
9,451
20,463
1,634
450
30
353
821
371,722
13,891,708

191,072
766,003
38,640755
20,772
1,302
129
388
570
554
2,568
73,639
1,096,398
2,634,488

150,000
680,01754,869417
15,706
2,177
132
255
577
730
2,311
68,009975,2052,440,778

1,725,723
6,918,387
348,992
6,823
187,613
11,762
1,168
3,511
5,156
5,009
23,202
665,096
9,902,441
23,794,149

10,532
6,197
251,320(1,912)
266,138

10,532
8,873
228,285(2,075)
245,615

95,12455,9762,269,875(17,272)
2,403,703

44,833(2,656)(3,698)(50)
38,427704
39,527344,796
2,979,285

31,650
(798)
(435)
(163)
30,253764
35,186
311,8192,752,598

404,924(23,990)(33,408)(458)
347,068
6,359
357,004
3,114,134
26,908,283

3,7Commercial papers
Payables under securitization of lease receivables
Current portion of long-term payables under securitizationof lease receivables
Lease obligations
Income taxes payable
Deferred profit on installment sales
Provision for bonuses
Provision for bonuses for directors (and other officers)

Provision for loss on guarantees
Asset retirement obligations
Other

3

Total current liabilities

2,3

Distressed receivables
Retirement benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets

Bonds payable
Long-term borrowings

3,7Long-term payables under securitization of lease receivables

3,8

Lease obligations

21,7497,644
29,39429,660187,12269,921
257,042259,210Retirement benefit liability

112,838
558
64
2,620
47,450(287)
163,244869,323

91,984602—
2,762
46,079(363)
141,065
723,837

1,019,132
5,043
583
23,665428,562(2,593)
1,474,392
7,851,549

Asset retirement obligations

1
1,322
1,323
2,979,285

1
1,271
1,273
2,752,598

13
11,943
11,957
26,908,283

Deferred assets

Provision for retirement benefits for directors (and other officers)
Provision for share awards for directors (and other officers)
Provision for maintenance costs
Provision for loss on guarantees
Other
Total non-current liabilities
Total liabilities

Business commencement expenses
Total deferred assets

¥

¥

$

298,296
5,099,217
270,9542,784,271
4,246,749
271,857

Net assets
Shareholders’ equity
Share capital
Capital surplus
Retained earnings
Treasury shares

Organization expenses

45,391
530,317
20,000274,820
450,700
28,900Non-current liabilities

20,718
7,741
28,45928,699Investments and other assets

The accompanying notes are an integral part of these statements.

Current portion of long-term borrowings

Deferred tax liabilities

Goodwill

Total assets

32,117

Current portion of bonds payable

Provision for future lease payments

Assets for lease

Investment securities

3,8

Short-term borrowings

Provision for share awards for directors (and other officers)

Property, plant and equipment
Assets for lease8

33,027564,585
30,000308,274
470,200
30,100Notes and accounts payable - trade

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these statements.

¥

¥

$

64

65

Financial Section

Fuyo Lease Group Integrated Report 2021

Consolidated statements of income and statements of comprehensive income
Consolidated statements of income

Thousands of U.S. dollars

Millions of yen
FY2020(Note 1)FY2019Consolidated statements of comprehensive income
FY2020

FY2020Notes (April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)¥

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses

1

Operating profit

740,263
657,519
82,74438,18844,555¥712,330
635,982
76,34734,924
41,423$

6,685,908
5,938,581
747,327
344,914402,413

Non-operating income
Interest income
Dividend income
Gain on investments in investment partnerships
Share of profit of entities accounted for using equity method
Recoveries of written off receivables
Reversal of provision for loss on guarantees
Other
Total non-operating income

38
2,009
249
1,684
96
187
468
4,734

71
1,772
48
1,322
97
192
243
3,750

348
18,1492,250
15,211
873
1,693
4,234
42,758

677
33
93
163
—
281
43
1,292
47,996

627
31
142
58
0
251
15
1,128
44,045

6,116
300
848
1,473
—
2,544
397
11,676433,495

2
727
—
730

395
592
0
989

23
6,570
—
6,594

1
—
1
35
727
—
765
47,96015,216(130)
15,08632,874
3,307
29,566

545
513
1,283
14
592
5
2,954
42,08010,6801,747
12,42729,653
3,466
26,187

15
—
10
321
6,570
—
6,917
433,171
137,435(1,177)
136,258
296,91429,874
267,039

Non-operating expenses
Interest expenses
Bond issuance costs
Foreign exchange losses
Loss on investments in investment partnerships
Loss on investments in silent partnerships
Distributions of profit or loss on silent partnerships
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of investment securities
Subsidy income
Other
Total extraordinary income
Extraordinary losses
Loss on valuation of investment securities
Loss on redemption of investment securities
Impairment losses

2

Loss on disposal of non-current assets

3

Loss on tax purpose reduction entry of non-current assets
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent
The accompanying notes are an integral part of these statements.

¥

¥

$

Thousands of U.S. dollars

Millions of yen(Note 1)FY2019FY2020Notes (April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)¥

Profit32,874¥29,653$296,914

Other comprehensive income

Remeasurements of defined benefit plans, net of tax

12,494(1,829)(3,593)124(2,380)
(128)
(686)
(54)

112,848(16,526)(32,459)
1,122

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

1,023(1,157)

9,240

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment

Total other comprehensive income
Comprehensive income

1

¥

8,218
41,092¥(4,408)25,245$74,224
371,138

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
The accompanying notes are an integral part of these statements.

¥

37,7403,352¥

21,8043,440$

340,863
30,27566

67

Financial Section

Fuyo Lease Group Integrated Report 2021

68

Consolidated statements of changes in equity
FY2020 (From April 1, 2020 to March 31, 2021)(Millions of yen)

FY2019 (From April 1, 2019 to March 31, 2020)(Millions of yen)

Shareholders’ equity
Share capital

Balance at beginning of period¥

10,532

Shareholders’ equity

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity¥¥ 228,285¥¥ 245,615

8,873(2,075)

Changes during period

Balance at beginning of period¥

10,532

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity¥¥ 208,454

¥

(826)

¥ 227,034(1,364)115(6,333)
26,187(1,364)92(0)—(1,249)(2,075)

18,580¥ 245,615

8,873

Changes during period(6,466)29,566

Dividends of surplus
Profit attributable to owners of parent(64)

Disposal of treasury shares(6,466)29,566(0)
98—(2,676)(0)163

Purchase of treasury shares
Change in scope of consolidation(2,676)

Purchase of shares of Consolidated subsidiaries
Net changes in items other than shareholders’ equity(6,333)
26,187

Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares

(22)
(0)

Disposal of treasury shares
Change in scope of consolidation
Purchase of shares of Consolidated subsidiaries
Net changes in items other than shareholders’ equity

Total changes during period
Balance at end of period

Share capital¥—
10,532¥(2,676)
6,197

23,035¥ 251,320¥

163(1,912)

20,522¥ 266,138

Total changes during period
Balance at end of period¥—
10,532¥—
8,873

19,830¥ 228,285¥(Millions of yen)

(Millions of yen)

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities

Balance at beginning of period¥

31,650Foreign currencytranslation
adjustment

Deferred gains orlosses on hedges

¥

(798)

¥

(435)

Accumulated other comprehensive income

Remeasure-ments ofdefined benefit plans

Total accumulated
other comprehensive
income

¥

¥

(163)

30,253

Valuation difference
on available-for-salesecurities

Balance at beginning of period

Changes during period

Changes during period

Dividends of surplus

Dividends of surplus

Profit attributable to owners of parent

Profit attributable to owners of parent

Purchase of treasury shares

Purchase of treasury shares

Disposal of treasury shares

Disposal of treasury shares

Change in scope of consolidation

Change in scope of consolidation

Purchase of shares of Consolidated subsidiaries

Purchase of shares of Consolidated subsidiaries

Net changes in items other than shareholders’ equity
Total changes during period
Balance at end of period¥

Balance at beginning of period

13,182
13,182
44,833¥(1,857)(1,857)(2,656)¥(3,263)(3,263)(3,698)

¥

112
112
(50)

¥

8,173
8,173
38,427

Share acquisition Non-controllingrightsinterests

Total net assets¥¥ 311,819

764¥

35,186

Changes during period¥

34,713¥(3,062)(3,062)
31,650Net changes in items other than shareholders’ equity
Total changes during period
Balance at end of period

Balance at beginning of period

Foreign currencytranslation
adjustment

Deferred gains orlosses on hedges

¥

(577)

¥

(221)
(221)
(798)

¥

496

¥

(931)
(931)
(435)

Remeasure-ments ofdefined benefit plans

Total accumulated
other comprehensive
income¥3¥34,636

¥

(167)
(167)
(163)

¥

(4,383)(4,383)30,253

Share acquisition Non-controllingrightsinterests

Total net assets¥¥ 295,039

842¥

32,525

Changes during period

Dividends of surplus(6,466)

Dividends of surplus(6,333)

Profit attributable to owners of parent

29,566

Profit attributable to owners of parent

26,187Purchase of treasury shares(0)

Purchase of treasury shares(1,364)

Disposal of treasury shares

98

Disposal of treasury shares

92

Change in scope of consolidation—

Change in scope of consolidation(0)

Purchase of shares of Consolidated subsidiaries(60)

Net changes in items other than shareholders’ equity(60)

Total changes during period
Balance at end of period

4,341

¥

704

¥

(2,676)

Purchase of shares of Consolidated subsidiaries

12,454

Net changes in items other than shareholders’ equity

4,341

32,97739,527¥ 344,796

—
(78)
(78)

Total changes during period
Balance at end of period

2,660

¥

764

¥

(1,801)

2,660

16,77935,186¥ 311,819

69

Financial Section

Fuyo Lease Group Integrated Report 2021

Consolidated statements of cash flows
FY2020 (From April 1, 2020 to March 31, 2021)

FY2020Shareholders’ equity
Share capital

Balance at beginning of period$

95,124Retained earnings

Treasury shares

Total shareholders’equity$$ 2,061,823$(18,745)$ 2,218,347

(2)
1,476

(58,402)
267,039(2)
891—(24,169)

Changes during period(58,402)
267,039

Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares(585)

Disposal of treasury shares
Change in scope of consolidation(24,169)

Purchase of shares of Consolidated subsidiaries
Net changes in items other than shareholders’ equity—
95,124

Total changes during period
Balance at end of period$$(24,169)
55,976208,052$ 2,269,875

$

1,474
(17,272)

185,356$ 2,403,703(Thousands of U.S. dollars) (Note 1)

Balance at beginning of period$

285,862

Foreign currencytranslation
adjustment

Deferred gains orlosses on hedges$(7,209)$(3,930)Remeasure-ments ofdefined benefit plans

Total accumulated
other comprehensive
income$$(1,479)273,245

Changes during period¥

Depreciation of assets for lease
Loss on retirement of assets for lease and cost of property forlease sales
Depreciation of other operating assets
Depreciation
Amortization of goodwill
Impairment losses
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses and bonuses for
directors (and other officers)
Increase (decrease) in provision for future lease payments
Increase (decrease) in provision for retirement benefits for
directors (and other officers)
Increase (decrease) in provision for share awards for directors(and other officers)
Increase (decrease) in provision for loss on guarantees
Increase (decrease) in retirement benefit liability
Loss (gain) on valuation of short-term and long-term investment
securities
Capital costs and interest expenses
Loss (gain) on investments in investment partnerships and silent
partnerships

Profit attributable to owners of parent
Purchase of treasury shares

Share of loss (profit) of entities accounted for using equity method

Disposal of treasury shares

Loss (gain) on sale of short-term and long-term investment securities

Change in scope of consolidation

Loss (gain) on redemption of investment securities

Purchase of shares of Consolidated subsidiaries
Total changes during period
Balance at end of period

Profit before income taxes

Interest and dividend income

Dividends of surplus

Net changes in items other than shareholders’ equity$

119,062
119,062
404,924$(16,781)(16,781)(23,990)$(29,478)(29,478)(33,408)

$

1,021
1,021
(458)

$

73,82473,824
347,068

Loss (gain) on disposal of non-current assets
Subsidy income
Loss on tax purpose reduction entry of non-current assets
Decrease (increase) in installment receivables
Net decrease (increase) in lease receivables and investments in leases

Balance at beginning of period

Share acquisition Non-controllingrightsinterests

Total net assets$$ 2,816,288

6,902

$

317,794

Changes during period
Dividends of surplus(58,402)

Profit attributable to owners of parent

267,039

Purchase of treasury shares(2)

Disposal of treasury shares

891—

Change in scope of consolidation(24,169)

Purchase of shares of Consolidated subsidiaries(543)

Net changes in items other than shareholders’ equity
Balance at end of period
The accompanying notes are an integral part of these statements.

$

6,359

$

Decrease (increase) in accounts receivable - lease
Decrease (increase) in operating loans
Decrease (increase) in accounts receivable - other loans tocustomers
Decrease (increase) in investment securities for sale
Purchase of assets for lease
Purchase of other operating assets
Decrease (increase) in retirement benefit asset
Decrease (increase) in distressed receivables
Decrease (increase) in guarantee deposits
Increase (decrease) in trade payables
Increase (decrease) in lease obligations

112,490

Increase (decrease) in guarantee deposits received

39,209297,846

Other, net

357,004$ 3,114,134

39,209(543)

Total changes during period

FY2020Cash flows from operating activities

Increase (decrease) in provision for maintenance costs

Accumulated other comprehensive income
Valuation difference
on available-for-salesecurities(Note 1)FY2019Notes (April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Capital surplus

80,145

Thousands of U.S. dollars

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

SubtotalInterest and dividends received
Interest paid
Income taxes refund (paid)
Subsidies received
Net cash provided by (used in) operating activities¥

47,96041,128¥42,08033,694$433,171
371,465

26,442

118,027

238,825

2,623
2,398
1,326
1
(128)

2,040
2,124
1,132
1,283
347

23,694
21,666
11,97910(1,163)

(24)

30

(221)

0

0

2

(2)

5

(26)

125

175

1,136

(6)
(187)
(750)

52
(192)
253

(61)
(1,693)(6,777)

1

545

15

(2,047)
10,432(1,844)
10,075(18,497)
94,220

(85)

11

(776)

(1,684)
(2)
—
35
(727)
727
19,027
69,314(1,747)(3,007)(1,322)
(395)
513
13
(592)
592
17,581(32,851)(4,076)(11,528)(15,211)(23)—
321(6,570)6,570
171,854
626,037(15,780)(27,166)(7,436)(22,143)(67,168)(48,372)(145,886)
(317)
3
43
(198)
(15,551)(8,225)
4,018(7,996)(18,776)
2,332(10,086)(9,277)727(35,080)(55,307)(170,362)(12,424)
—
(30)
1,411
551
(4,629)1,239(6,505)(90,423)
3,158(10,606)(11,526)592(108,804)(436,891)(1,317,616)(2,871)35
396(1,792)(140,459)(74,291)
36,296(72,222)(169,583)
21,063(91,098)(83,789)
6,570(316,836)

¥

$

70

71

Financial Section

Fuyo Lease Group Integrated Report 2021

72

Notes to consolidated financial statements
Thousands of U.S. dollars

Millions of yen(Note 1)

FY2020FY2019FY2020Notes (April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Cash flows from investing activities¥

Purchase of own-used assets
Proceeds from sale of own-used assets
Purchase of investment securities
Proceeds from sale and redemption of investment securities
Purchase of shares of subsidiaries resulting in change in scope of
consolidation
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation(4,177)—(2,222)
194¥(1,690)11(5,489)917$(37,729)—(20,075)
1,754

2

—

(6,393)

—

2

302

—

2,733

(67)
(5,970)1,400(11,242)(609)(53,926)

35,384(54,272)
19,500390,069(342,902)

39,109—(50,000)
336,231(269,934)

319,590(490,182)
176,120
3,523,031(3,097,027)

1,200

6,000

10,83820,672(46,180)
70,405(20,000)(0)
98

66,123(36,162)
65,000(20,000)(1,364)
92

186,714(417,096)
635,883(180,636)(2)891(3,440)—(31,069)(6,466)(366)(296)
63,405(484)
21,86977,416(6,333)(781)(225)
127,754(28)
7,678
69,918(58,402)(3,313)(2,676)572,663(4,379)197,521699,213

(532)

(179)

(4,814)

Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Repayments of short-term borrowings
Net increase (decrease) in commercial papers
Proceeds from long-term borrowings
Repayments of long-term borrowings
Net increase (decrease) in payables under securitization of leasereceivables
Proceeds from securitization of lease receivables
Repayments of payables under securitization of lease receivables
Proceeds from issuance of bonds
Redemption of bonds
Purchase of treasury shares
Proceeds from disposal of treasury shares
Purchase of shares of subsidiaries not resulting in change in scopeof consolidation
Dividends paid
Dividends paid to non-controlling interests
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase (decrease) in cash and cash equivalents resulting fromchange in scope of consolidation
Cash and cash equivalents at end of period
The accompanying notes are an integral part of these statements.

1¥

98,753¥77,416$

891,920

I. 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.
Japanese yen amounts, which are indicated in millions of yen, are rounded down by truncating the figures below one million. As a result,
the totals do not necessarily agree with the sum of the individual amounts. The amounts in US dollars presented in the consolidated financial
statements are translated from the amounts in Japanese yen at the exchange rate of ¥110.72 to US$1.00, in effect at March 31, 2021, solely forthe convenience of overseas readers. Therefore, this does not imply that those amounts in yen can be converted into equivalent amounts in US
dollars at this or any other exchange rate.

1. Scope of consolidation(1) Number of consolidated subsidiaries: 57 companies
Names of significant consolidated subsidiaries:
Fuyo Auto Lease Co., Ltd.
YAMATO LEASE CO., LTD.
Sharp Finance Co., Ltd.
Accretive Co., Ltd.
INVOICE Inc.
FGL Group Business Service Co., Ltd.
FGL Group Management Service Co., Ltd.
Fuyo Lease Sales Co., Ltd.
Fuyo General Lease (USA) Inc.
Fuyo General Lease (HK) Limited
Fuyo General Lease (Asia) Pte. Ltd.
Fuyo General Lease (China) Co., Ltd.
FGL Aircraft Ireland Limited
In the fiscal year ended March 31, 2021, YAMATO LEASE CO., LTD. was included in the scope of consolidation due to the Company’s acquisition ofits shares, FGL Group Management Service Co., Ltd. and one other company were newly established and included in the scope of consolidation.
General Incorporated Association Clean Energy 4 and one other company were included in the scope of consolidation due to the Company
obtaining control. Six companies including F.C. Initial Leasing Ltd. were previously non-consolidated subsidiaries and excluded from the scopeof consolidation pursuant to Article 5, paragraph (1), item (ii) of the Regulation on Terminology, Forms and Preparation Methods of Consolidated
Financial Statements, because these subsidiaries are business operators, etc. of leasing businesses conducted through silent partnerships andtheir assets and gains or losses are effectively not attributable to such subsidiaries. However, these subsidiaries were included in the scope of
consolidation as a result of the Company’s investment in a silent partnership operated by them.
FGL Aircraft Ireland No.5 Limited and five other companies were excluded from the scope of consolidation due to liquidation and other factors.
In addition, Crystal Clear Matsuyama LLC was excluded from the scope of consolidation and included in the scope of application of the equity
method due to the partial sale of the Company’s interest in them. Their operating results for the period up to the exclusion from the scope of
consolidation are included in the consolidated financial statements(2) Non-consolidated subsidiaries
Reason for exclusion from the scope of consolidation
Among the non-consolidated subsidiaries, 150 companies including FK Ignicion Leasing Ltd. are mainly business operators, etc. of leasing
businesses conducted through silent partnerships. Their assets and gains or losses are effectively not attributable to such subsidiaries orare immaterial, so they have been excluded from the scope of consolidation pursuant to Article 5, paragraph (1), item (ii) of the Regulation on
Terminology, Forms and Preparation Methods of Consolidated Financial Statements.

(3) Special purpose entities subject to disclosure
For an overview of special purpose entities subject to disclosure, overview of transactions using special purpose entities subject to disclosure,amount of transactions with special purpose entities subject to disclosure, etc., see “Information on special purpose entities.”

2. Application of equity method(1) Number of associates under the equity method: 10 associates
Names of significant associates:
Yokogawa Rental & Lease Corporation
Marubeni Fuyo Auto Investment (CANADA) Inc.
Pacific Rim Capital, Inc.
ATF TMK was included in the scope of application of the equity method during the fiscal year due to the Company’s investment in it.

(2) Non-consolidated subsidiaries and associates which the equity method was not applied
Reason the equity method was not applied to the companies
Among the non-consolidated subsidiaries, 150 companies including FK Ignicion Leasing Ltd. are mainly business operators, etc. of leasing
businesses conducted through silent partnerships. Their assets and gains or losses are effectively not attributable to such subsidiaries or are
immaterial, so they are excluded from the scope of being accounted for using the equity method. Investments in these companies are valued at cost.

73

Financial Section(3) With regard to the entities accounted for using equity method whose balance sheet dates differ from the consolidatedbalance sheet date, the financial statements of these companies for their respective fiscal years have been applied.

3. Fiscal year ends of consolidated subsidiaries

Fuyo Lease Group Integrated Report 2021

2) Provision for bonuses
To prepare for payment of bonuses to employees, a provision for the estimated payment amount borne in the fiscal year is recorded.

3) Provision for bonuses for directors (and other officers)
To prepare for payment of bonuses to directors, a provision for the estimated payment amount borne in the fiscal year is recorded.

Among the consolidated subsidiaries, 19 overseas consolidated subsidiaries including Fuyo General Lease (USA) Inc. have balance sheet datesof December 31, while 10 domestic consolidated subsidiaries including General Incorporated Association C·C·S Holding have balance sheet
dates of January 31. Financial statements of the respective subsidiaries for the respective fiscal years, with necessary adjustments with regard tomaterial activities transactions during the periods up to the consolidated balance sheet date, have been reflected in the consolidation.
The financial statements of F.C. Initial Leasing Ltd. and four other companies are based on the provisional settlement of accounts conducted
as of the consolidated balance sheet date.
The closing date of other consolidated subsidiaries is the same as the consolidated balance sheet date.

4) Provision for future lease payments

4. Summary of significant accounting policies

Since this equates to the benefits for directors and corporate auditors, the entire amount that would be required to be paid at the end of the
fiscal year is recorded according to internal regulations.

(1)Standard and method of valuation of significant assets
1) Securities
Other securities
Other securities with fair value
Mainly by a fair value method based on average market prices, etc. during one month before the consolidated balance sheet date for Fuyo
General Lease Co., Ltd. (the “Company”) and domestic consolidated subsidiaries and the market price, etc. on the balance sheet end datefor overseas consolidated subsidiaries.
Note that the cost of securities sold is computed based on the moving-average method. The entire net unrealized gains or losses are booked
directly as net assets.
Other securities without fair value
Stated at cost determined by the moving-average method
The amortized cost method is applied to the difference between the acquisition cost and the amount of bonds where interest rate adjustment
is recognized.

2) Derivative financial instruments
Fair value method(2) Depreciation and amortization
1) Assets for lease
Mainly amortized over the lease agreement period using the straight-line method with the residual value being the estimated amount to berealized when the lease agreement period ends
Note that an additional amount is booked as depreciation for the estimated amount of loss on disposal of assets for lease due to cancellationof lease agreements or customer insolvency, etc.

2) Other operating assets
Straight-line method

3) Leased assets
Leased assets under finance leases that do not transfer ownership
Amortized over the lease agreement period using the straight-line method with no residual value4) Own-used assets
Declining balance method
However, the straight-line method is applied to buildings (excluding facilities attached to buildings) acquired since April 1, 1998 and facilities
attached to buildings and structures acquired since April 1, 2016, and is applied for overseas consolidated subsidiaries.
The estimated useful lives of own-used assets are principally as follows:
Buildings 3 to 50 years
Equipment 3 to 20 years5) Other intangible assets
Straight-line method
Computer software intended for internal use is amortized by the straight-line method over the estimated useful lives (5 to 10 years).

(3) Accounting method for deferred assets
1) Organization expenses
Organization expenses are amortized by the straight-line method within five years after the date of founding

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

3) Bond issuance costs
Bond issuance costs are expensed upon payment.

(4) Accounting policy for significant allowances and provisions
1) Allowance for doubtful accounts
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 general receivables and the individual analysis of debtors’ financial positions
for doubtful receivables, distressed receivables, etc.
With respect to the bankruptcy claims, etc., an estimated uncollectible amount is calculated by directly deducting amounts expected to be
recovered from the amount of claims. The direct deduction totaled ¥3,098 million (U.S.$27,989 thousand) in the fiscal year ended March 31,
2021 and ¥1,979 million in the fiscal year ended March 31, 2020.

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 with respect toclassified loans in addition to bankruptcy claims, etc.

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

6) Provision for retirement benefits for directors (and other officers)

7) Provision for share awards 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 Provisionof Shares to Officers, the Company posts the estimated amount of share-based benefit obligation as of the end of the fiscal year.

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

(5) Retirement benefits
1) The method for attributing estimated retirement benefits for periods of employee service
For the calculation of retirement benefit obligations, the benefit formula method is used to attribute estimated retirement benefits for the period
up to the end of the fiscal year.

2) Actuarial differences and prior service cost
With respect to prior service cost, the Company and one of the Company’s domestic consolidated subsidiaries expense the entire amountof 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 (10 years) within the average remaining service years for employees at the time of recognition, starting from the fiscal year ofoccurrence.
With respect to actuarial differences, the Company expenses the entire amount of them in the fiscal year of occurrence, but two of theCompany’s domestic consolidated subsidiaries amortize them by the straight-line method over a period (five years or 10 years) within the
average remaining service years for employees at the time of recognition, starting from the fiscal year following the fiscal year of occurrence.

3) 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.

4) Simplified accounting method by small-scale businesses, etc.
Certain domestic consolidated subsidiaries use simplified accounting methods in relation to the calculation of the retirement benefit liability andthe retirement benefit expenses. In the case of the termination allowance plan, retirement benefit obligations are recorded as the amount to be
paid for voluntary retirement as of fiscal year-end. In the case of the corporate pension plan, retirement benefit obligations are recorded as theamount of actuarial liability calculated under the latest pension funding program.

(6) Recognition of significant revenues and expenses
1) Accounting policy for sales and cost of sales arising from finance leases
Sales and cost of sales are recorded when lease payments should be received.

2) Accounting policy for revenue from operating leases
Based on the lease payments that should be received each month under the lease agreement based on the lease agreement periods, recorded
as lease payments corresponding to such transitional period.

(7) Standard for translation of significant foreign-currency-denominated assets or liabilities into Japanese yen
Foreign currency-denominated monetary receivables and payables are translated into Japanese yen at the spot exchange rate on the consolidatedbalance sheet date, and exchange differences are treated as gains or losses.
Meanwhile, the assets, liabilities, income and expenses of overseas subsidiaries, etc. are mainly translated into Japanese yen at the spot
exchange rate on the consolidated balance sheet date, and exchange differences are recorded as foreign currency translation adjustment or
non-controlling interests of net assets.

(8) Significant hedge accounting methods
1) Hedge accounting
Hedging activities are accounted for by the deferred hedge method. Interest rate swaps that satisfy the required conditions are subject toaccounting under exceptional treatment.

2) Hedge instruments and hedged items(a) Hedging instruments Interest rate swaps and forward exchange contracts(b) Hedged items
Borrowings and forecast transactions in foreign currencies

3) Hedging policies
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.

74

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Financial Section

Fuyo Lease Group Integrated Report 2021

764) Assessing hedge effectiveness(1) Overview

The assessment of hedge effectiveness of interest rate swaps is by the correlation between the change in aggregated amount of cash flow of
the hedging instruments and the change in aggregated amount of cash flow of the hedged items and other factors.
With regard to forward exchange contracts, when the principal terms for the hedged items and hedging instruments are substantially thesame, the hedge relationship is considered highly effective.
With regard to interest rate swaps subject to accounting under exceptional treatment an assessment of hedge effectiveness is omitted.

Apart from immaterial amounts, evenly amortized over a period not exceeding 20 years from the effective date.

The International Accounting Standards Board (IASB) and the 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 the fiscal year
commencing after December 15, 2017, the 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 the 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 the starting
point, and accounting standards shall be established. In addition, in cases where there are items that should be considered in practice, etc., thathave been conducted in Japan so far, alternative treatment shall be added to an extent that does not impair comparability.

(10) Scope of funds in consolidated statements of cash flows(2) Scheduled date of adoption

Cash and cash equivalents in the consolidated statement of cash flows consist of cash on hand, demand deposits and short-term investmentswith a maturity of three months or less from the date of acquisition, which are readily convertible into cash and have an insignificant risk ofchanges in value.

Effective from the beginning of the fiscal year ending in March 31, 2022.

(9) Amortization method and period of goodwill(11) Other important matters for preparing consolidated financial statements
1) Consumption taxes
Transactions are recorded exclusive of consumption taxes and local consumption taxes.

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

II. Significant accounting estimates
Of the accounting estimates made in preparing the consolidated financial statements for the fiscal year ended March 31, 2021, the items that
may have a significant impact on the consolidated financial statements for the following fiscal year are “Assets for lease (property, plant andequipment).”(1) Amount recorded in the consolidated financial statements for the fiscal year ended March 31, 2021
¥632,299 million (U.S.$5,710,797 thousand)(2) Information regarding significant accounting estimates for identified items
1) Method of calculation of amounts
The Company records the acquisition cost of leased assets under operating leases less accumulated depreciation. Depreciation is calculated
mainly using the straight-line method with the lease agreement period as the depreciation period and the estimated disposal amount at theend of the lease agreement period as the residual value.
The estimated disposal amount is calculated based on the details of individual assets, individual contracts and other factors, taking into
account future cash flows, discount rates, and net sales values, etc.
Note that an additional amount is booked as depreciation for the estimated amount of loss on disposal of assets for lease due tocancellation of lease agreements or customer insolvency, etc.
In assessing impairment of assets for lease, the Company groups assets, and for asset groups whose profitability has declined significantly,
the book value of the assets for lease is written down to the recoverable amount, and the difference is recorded as an impairment loss.

2) Main assumptions used to calculate the amounts
The main assumption is the “future cash flow” for estimating the “residual value.”
Future cash flows are evaluated individually based on the contractual terms, etc. and conditions of each project. The “future cash flows” foreach individual lease contract are established based on external factors such as the economic environment, interest rate fluctuations, andcompetition in the market.
The Group recognizes that the spread of the novel coronavirus disease (COVID-19) will have a certain impact on cash flows derived mainly
from leased properties. The Group expects that the impact of COVID-19 will continue to cause restrictions and uncertainty in economic
activities, and that it will take time for the situation to subside. Although this situation is subject to uncertainty, the Group has made estimates
based on available information.

3) Impact on the consolidated financial statements for the following fiscal year
The main assumption, “future cash flow” for estimating the “residual value,” is subject to a high degree of estimation uncertainty, andany change in the assumptions used for the initial estimate may have a significant impact on the valuation of the assets for lease in the
consolidated financial statements for the following fiscal year.
In addition, if the impact of COVID-19 on economic and corporate activities changes, it may affect the cash flow from leased properties,
which may have a significant impact on the valuation of assets for lease in the consolidated financial statements for the following fiscal
year.

III. Change in accounting policy
Not applicable

IV. New accounting standards and implementation guidances not yet applied
Accounting Standard for Revenue Recognition and related implementation guidances• Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 26, 2021)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(3) Impact of adoption of such accounting standards and implementation guidances
The amounts that affect the consolidated financial statements by adopting the Accounting Standard for Revenue Recognition and related
implementation guidances are currently being evaluated.

Accounting Standard for Fair Value Measurement, other standards and related implementation guidances• Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019)• Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9, July 4, 2019)• Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019)• Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, July 4, 2019)• Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19, March 31, 2020)(1) Overview
The International Accounting Standards Board (IASB) and the Financial Accounting Standards Board (FASB) provide detailed guidance on fairvalue 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, the ASBJ has been working to ensure
the consistency of Japanese GAAP with international accounting standards, primarily with respect to guidance and disclosures regarding the fairvalue of financial instruments, and published the Accounting Standard for Fair Value Measurement, other standards and related implementation
guidances.
As a basic policy for the development of the Accounting Standard for Fair Value Measurement by the ASBJ, all provisions of IFRS 13 shall bebasically incorporated from the viewpoint of improving comparability of financial statements between companies in Japan and overseas by usinga 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 and implementation guidances
The amounts that affect the consolidated financial statements by adopting the Accounting Standard for Fair Value Measurement, other standards
and related implementation guidances have not yet been determined.

V. Changes in presentation
Adoption of Accounting Standard for Disclosure of Accounting Estimates
The “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020) has been applied in preparing theconsolidated financial statements from the fiscal year ended March 31, 2021, and notes on significant accounting estimates in the consolidated
financial statements have been included.
However, in said notes, comparative information for the previous fiscal year is not included, in accordance with the transitional treatment asprescribed in paragraph (11) of the said accounting standard.

Consolidated statements of income“Distributions of profit or loss on silent partnerships,” which had been included in “Other” under non-operating expenses until the previous
fiscal year, is presented as a separate item from the fiscal year ended March 31, 2021 due to increased materiality of its amount. The amount of“Distributions of profit or loss on silent partnerships” for the previous fiscal year was ¥251 million.

VI. 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 share-based payment 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 share-based payment plan, under which the Company’s shares will be acquired by a trust (the trust to be established under thePlan is referred to hereinafter as the “Trust”) using funds that the Company will contribute, and the Company’s shares and cash equivalent to themarket price of the Company’s shares (the “Company’s share, etc.”) will be provided to the Eligible Directors from the Trust in accordance with

77

Financial Section

Fuyo Lease Group Integrated Report 2021

the Regulations for Provision of Shares to Officers established by the Company. In principle, the Company’s shares, etc. will be provided to the
Eligible Directors on their retirement.

*3 Assets pledged as collateral and liabilities secured by collateral(1) Assets pledged as collateralMillions of yen(2) Treasury shares remaining in trust
The shares of the Company remaining in trust are recorded as treasury shares 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 shares under the Plan are ¥642 million (U.S.$5,802 thousand)and 96,700 shares as of March 31, 2021 and ¥680 million and 102,500 shares as of March 31, 2020.

Cash and deposits
Lease receivables and investments in leases

Not applicable

Accounts receivable - other loans to customers

Items and events that may have a significant impact on the consolidated financial statements as they pertain to the
spread of COVID-19 are as follows:a. 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 default rates for general
receivables, and on the basis of the collectability of doubtful receivables, distressed receivables, etc. on a case-by-case basis. Allowance for
doubtful accounts may require additional allowances due to changes in the historical default rates and the judgment of the collectability of
individual receivables, depending on the occurrence of bad debts, the status of collection of individual receivables, etc., after the spread of
COVID-19.

b. Impairment of non-current assets (assets for lease, 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 written down 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 sales value, etc.
Therefore, if it becomes difficult to achieve the initial expected revenue due to the impact of the spread of COVID-19, or if the assumptions suchas future cash flows change, an impairment loss on non-current assets may be recorded.

c. Impairment of goodwill
The Group estimates the effective period of goodwill and amortizes the goodwill over such period using the straight-line method. In addition,
the Group is considering the economic benefits of goodwill based on the operating results of subsidiaries and business plans, etc. Due to theimpact of the spread of COVID-19, if it becomes difficult to achieve the initial expected revenue in the future, and if the Group recognizes theneed for impairment, it may record an impairment loss on goodwill in the future.

As of March 31, 2021

¥

¥

$

Other (current assets)
Operating lease and other contract receivables
Assets for lease (property, plant and equipment)
Other operating assets (property, plant and equipment)
Own-used assets
Total

¥

Millions of yen

Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Other operating assets
Own-used assets

199,960
10,072
1,985

170,851
8,294
2,950

1,806,005
90,977
17,935

Millions of yen

Operational investment securities (other)

Other (current liabilities)

Total

As of March 31, 2021

¥

¥

$

Investment securities (shares)(of which investment in joint ventures)
Investment securities (other)

19
80,752
109¥

80,881

23
44,956
159¥

45,139987$

730,503

The unused credit balance, etc. in relation to loan commitment in lending operations was as follows:
Millions of yen

Total loan commitments

Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

¥

2,915
1,295
1,620

¥

2,883
1,142
1,741

$

26,328
11,696
14,632

Note that the above loan commitment agreements, a condition of lending is review of the borrower’s use of funds and credit standing, etc., so this does
not necessarily mean the full amount of loans will be extended.

5 Overdraft agreements and loan commitments (as borrower)
The Company has concluded overdraft agreements and loan commitment agreements with 74 correspondent financial institutions, etc. (79 in thefiscal year ended March 31, 2020) for the efficient procurement of working capital. The unused balance, etc. at the end of the fiscal years ended
March 31, 2021 and 2020 based on these agreements was as follows:
Millions of yen

As of March 31, 2020

As of March 31, 2021

Upper limit on overdrafts and total loan commitments

¥

¥

$

Balance of borrowings drawn

4,516
230,595(219,905)
34,342

175
729,341

4 Loan commitments in lending operations (as lender)

Thousands of U.S. dollars

210
23,344(23,239)
701

Thousands of U.S. dollars

As of March 31, 2020

Long-term borrowings (current portion included)Long-term payables under securitization of lease receivables (current
portion included)

As of March 31, 2021

500
25,531(24,347)
3,802$

27,855
6,126
136,684
31,790836—
19,544
589,835
178,349—
991,021

As of March 31, 2021

*2 Investment securities in non-consolidated subsidiaries and associates were as follows:
Millions of yen

¥

2,392
820
19,819
3,712
—
79
2,983
26,12319,02011,185
86,137(2) Liabilities secured by collateral

Difference*1 Accumulated depreciation for property, plant and equipment

3,084
678
15,133
3,519
92
—
2,163
65,306
19,746—
109,725

Note: Besides the above assets pledged as collateral, the Company provided installment receivables (¥– million (U.S.$ – thousand) in the fiscal year ended March 31, 2021, ¥16 million in the fiscal
year ended March 31, 2020) and investment securities (¥612 million (U.S.$5,529 thousand) in the fiscal year ended March 31, 2021, ¥612 million in the fiscal year ended March 31, 2020) as
third party security for bank loans taken out by business partners. The Company maintains deposits of investment securities (¥3 million (U.S.$27 thousand) and ¥3 million as of March 31,
2021 and March 31, 2020, respectively) for the purpose of sales transactions.

Balance of loans extended

VII. Notes for consolidated balance sheets

Assets for lease

As of March 31, 2020

Accounts receivable - lease

As of March 31, 2021, the Group calculated and considered reasonable amounts based on the information available at the time of preparing theconsolidated financial statements for the collectability of lease receivables, etc., the profitability of assets for lease, etc., held by the Group, anddetermination of impairment of goodwill, etc.
With regard to the future economic outlook, we expect economic activities to continue to be restricted and uncertain due to the effects
of COVID-19, and we expect that it will take time for the situation to subside. Although this situation is subject to uncertainty, we have madeestimates based on available information.

Thousands of U.S. dollars

As of March 31, 2021

Installment receivables(3) Book value of borrowings recorded based on the gross method

Impact of the spread of the Novel Coronavirus Disease (COVID-19) on accounting estimates

78

Difference

Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

¥

1,003,822
508,983
494,839¥

972,809478,876493,932$

9,066,311
4,597,029
4,469,283

79

Financial Section

Fuyo Lease Group Integrated Report 2021

VIII. Notes for consolidated statements of income

6 Contingent liabilities(1) Guarantees provided on borrowings, etc. of business partners, etc.
Millions of yen

Mizuho Bank, Ltd. (Note)

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Pacific Rim Capital, Inc.
Marubeni Fuyo Auto Investment (CANADA) Inc.
FANTASTIC FUNDING CORPORATION (Note)
Fuyo General Lease (Asia) Pte. Ltd. (Note)
Sumitomo Realty & Development Co., Ltd. (Note)
AEON Mall Co., Ltd.
JAPAN SECURITIZATION CORPORATION (Note)
AEON RETAIL CO., LTD.
XYMAX ALPHA Corporation (Note)
Sumitomo Mitsui Trust Bank, Limited (Note)
MONEY PARTNERS CO., LTD.
MaruzenJunkudo Bookstores Co., Ltd. (Note)
KRAFT HONSYA Co., Ltd. (Note)
JCAM AGRI. CO., LTD.
Employees (funds for purchasing housing)
Others (869 in the fiscal year ended March 31, 2021, 868 in the fiscal
year ended March 31, 2020)
Total

Thousands of U.S. dollars

As of March 31, 2021

IBM Japan, Ltd. (Note)

16,898
3,629
2,863
1,975
1,551
—
1,272
1,152
943
681
588
499
399
307
262
—
8
27,577¥60,611

14,398
283
—
1,915
1,748
1,705
1,272
1,207
956
682
633
499
799
596
—
234
10
27,841¥54,787$

152,622
32,78325,863
17,84514,015—
11,491
10,407
8,518
6,159
5,312
4,515
3,612
2,778
2,370
—
73

*1 Major components of selling, general and administrative expenses for the fiscal years ended March 31, 2021 and2020, were as follows:
Millions of yen

Millions of yen

Employees’ salaries, allowances and bonuses
Provision for bonuses
Provision for bonuses for directors (and other officers)
Retirement benefit expenses
Provision for retirement benefits for directors (and other officers)
Provision for share awards for directors (and other officers)
Welfare expenses
Rent expenses
Depreciation
Amortization of goodwill

Minato-ku, Tokyo

Idle assets

Telephone subscription
rights

As of March 31, 2021

¥

¥

$

Long-term non-recourse borrowings
Total

¥

¥

4,531
39,12643,657$85,767
267,612353,379

Accounts receivable - other loans to customers

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Assets for lease (property, plant and equipment)
Total

Thousands of U.S. dollars¥

34,9285,674
40,603¥39,454
5,767
45,222$

315,470
51,252366,721*8 Payables under securitization of lease receivables, long-term payables under securitization of lease receivables
Payables under securitization of lease receivables and long-term payables under securitization of lease receivables include the amount of funds
raised through securitization of lease agreement receivables, etc.
Note that the balance of lease agreement receivables, etc. transferred through this was ¥121,497 million (U.S.$1,097,341 thousand) in the fiscal
year ended March 31, 2021 and ¥147,132 million in the fiscal year ended March 31, 2020.

564
770
12,720
2,135
182
1,041
35
189
2,917
1,631
2,124
1,132

$

12,247
4,284
127,372
20,422
1,642
1,494
327
1,615
29,082
19,436
21,666
11,979Amount(Millions of yen)¥

1

Amount(Thousands of U.S. dollars)$

10

The Group classifies its asset groups based on offices, etc., as the minimum unit for generating cash flows. In addition, idle assets are groupedindividually.
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 an impairment loss
for the entire amount of the book value of telephone subscription rights classified as idle with a memorandum value of ¥1 and a market value ofzero in extraordinary losses.
FY2019 (From April 1, 2019 to March 31, 2020)
AmountLocation

Use

Type

Chiyoda-ku, Tokyo

Business assets

SoftwareMinato-ku, Tokyo

Idle assets

Telephone subscription
rights1

Kingdom of Thailand

Business assets

Buildings, etc.

7

The assets corresponding to the non-recourse debt were as follows:
Millions of yen¥

FY2020 (From April 1, 2020 to March 31, 2021)

547,434

As of March 31, 2020

1,355
474
14,102
2,261
181
165
36
178
3,219
2,151
2,398
1,326

The Group recorded impairment losses for the following asset groups:

Type

Thousands of U.S. dollars

FY2020*2 Impairment losses

Use

As of March 31, 2021

9,496
29,63039,126¥

Provision of allowance for doubtful accounts
Bad debts expenses

Location*7 Non-recourse debt included in borrowings were as follows:

FY2019FY2020249,073(2) One of the Company’s domestic consolidated subsidiaries engaged in business guarantee operations and the balanceof guarantees for borrowings of general customers and other entities was ¥39,296 million (U.S.$354,914 thousand)as of March 31, 2021 and ¥47,028 million as of March 31, 2020.

Thousands of U.S. dollars(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Note: The Company has guaranteed loans, etc. held by Mizuho Bank, Ltd. and others.

Current portion of long-term non-recourse borrowings

80(Millions of yen)

¥

1,274

The Group classifies its asset groups based on offices, etc., as the minimum unit for generating cash flows. In addition, idle assets are groupedindividually.
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., for which integrated telecommunication services for residential buildings are provided, one domestic consolidated subsidiary recorded an
impairment loss for the entire amount of the book value of telephone subscription rights classified as idle with a memorandum value of ¥1 and amarket value of zero in extraordinary losses.

81

Financial Section

Fuyo Lease Group Integrated Report 2021

82

X. Notes for consolidated statements of changes in equity*3 The breakdown of loss on disposal of non-current assets is as follows.
Loss on retirement of non-current assets

FY2020 (From April 1, 2020 to March 31, 2021)
Millions of yen

Thousands of U.S. dollars
FY2019FY2020

1. Type and total number of shares issued, and type and number of treasury shares

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Buildings

¥

7

¥

9

$

Equipment

13

2

118

Leased assets

8

—

72

Software

7

1

64

Total

35

¥

14

¥

Number of shares at the
beginning of the year

66

321

$

(Shares)

Increase

Decrease(Shares)(Shares)Number of shares at theend of the year
(Shares)Issued shares
Common shares
Total

30,287,810
30,287,810

—
—

—
—

30,287,810
30,287,810

315,734
315,734

51
51

24,90024,900290,885
290,885

Treasury shares
Common shares (Note)

IX. Notes for consolidated statements of comprehensive income

Total*1 Reclassification adjustments and income tax effect relating to other comprehensive income
Thousands of U.S. dollars

Millions of yen
FY2020(Note 1)FY2019FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Valuation difference on available-for-sale securities:
Gains or losses arising during the year¥¥

18,434(414)
18,020(5,525)
12,494¥(2,236)313(1,923)94(1,829)¥(3,593)(3,593)

¥

140
38
179
(55)
124

Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Valuation difference on available-for-sale securities¥¥(3,948)504(3,443)
1,063(2,380)

¥

(91)
—
(91)
(37)
(128)

¥

(686)
(686)

¥

(76)
(1)
(78)
24
(54)

$

$

166,497(3,741)
162,756(49,908)
112,848$(20,204)
2,828(17,376)
850(16,526)$(32,459)(32,459)

$

1,268
351
1,619
(497)
1,122

Deferred gains or losses on hedges:
Gains or losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Deferred gains or losses on hedges
Foreign currency translation adjustment:
Gains or losses arising during the year
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax:
Gains or losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectRemeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities accounted forusing equity method:

1,018
4

Gains or losses arising during the year
Reclassification adjustments to profit or loss
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income(1,169)
12

9,197
42

¥

1,023

¥

(1,157)

$

9,240

¥

8,218

¥

(4,408)$74,224

Notes: 1. The number of common shares in treasury shares at the end of the year includes the 96,700 of the Company’s shares held by the Board Benefit Trust (BBT).
2. The 51 increase in the number of common shares in treasury shares is due to an increase of the acquisition of fractional unit shares.
3. The 24,900 decrease in the number of common shares in treasury shares was a 19,100 decrease due to the exercise of stock options and a 5,800 decrease due to provision to the Board
Benefit Trust (BBT).

2. Share acquisition rights and treasury shares acquisition rights

Category

Reportingcompany(parent
company)

Componentof shareacquisitionrightsType of shares tobe issued upon
exercise of shareacquisition rights

Share
acquisitionrights as
stock options—

Number of shares to be issued upon exercise of shareacquisition rights

Balance at theend of the year

(Shares)
Beginningof the year

Increase

DecreaseEndof the year

—

—

—

—

(Millions of yen)¥704

Balance at theend of the year
(Thousands of
U.S. dollars)

$

6,359

3. Dividends(1) Dividends paid
(Resolution)

Type of shares

Total amount ofcash dividends

Dividend per share(Yen)(Millions of yen)

June 23, 2020
Annual General Meeting of Shareholders

Common shares

November 6, 2020
Board of Directors

Common shares

¥

3,157

¥

3,308

105
110

Record date

Effective date

March 31, 2020

June 24, 2020

September 30, 2020 December 2, 2020

Notes: 1. Total amount of cash dividends which resolved at Annual General Meeting of Shareholders held on June 23, 2020, include cash dividends of ¥10 million for the Company’s shares held by
Board Benefit Trust (BBT).
2. Total amount of cash dividends which resolved at Board of Directors held on November 6, 2020, include cash dividends of ¥10 million for the Company’s shares held by Board Benefit Trust(BBT).

(2) Dividends for which record date is in this fiscal year but the effective date for the dividends is in the following fiscal year
(Resolution)

Type of shares

Total amount ofcash dividends(Millions of yen)

June 23, 2021
Annual General
Meeting of Shareholders

Common shares¥(Resolution)

Type of shares

Total amount ofcash dividends

3,912(Thousands of U.S. dollars)

June 23, 2021
Annual General
Meeting of Shareholders

Common shares$

35,334

Source ofdividends

Retained earnings

Source ofdividends

Retained earnings

Dividend per share
(Yen)

¥

130

Dividend per share(U.S. dollars)

$

1.17

Record date

Effective date

March 31, 2021

June 24, 2021

Record date

Effective date

March 31, 2021

June 24, 2021

Note: Total amount of cash dividends include cash dividends of ¥12 million (U.S.$114 thousand) for the Company’s shares held by Board Benefit Trust (BBT).

83

Financial Section

Fuyo Lease Group Integrated Report 2021

84

FY2019 (From April 1, 2019 to March 31, 2020)

XI. Notes for consolidated statements of cash flows

1. Type and total number of shares issued, and type and number of treasury shares*1 Relationship between cash and cash equivalents at end of period and cash and deposits stated on the consolidatedbalance sheets

Number of shares at the
beginning of the year
(Shares)

Increase

Decrease(Shares)(Shares)Millions of yen

Number of shares at theend of the year

Cash and deposits

Total

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Issued shares
Common shares

FY2019FY2020(Shares)Thousands of U.S. dollars

30,287,810
30,287,810

—
—

—
—

30,287,810
30,287,810

142,465
142,465

204,569
204,569

31,30031,300315,734
315,734¥

98,926(172)

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

98,75377,436$(19)¥

77,416

893,482(1,562)$891,920

Treasury shares
Common shares (Note)
Total

Notes: 1. The number of common shares in treasury shares at the end of the year includes the 102,500 of the Company’s shares held by the Board Benefit Trust (BBT).
2. The 204,569 increase in the number of common shares in treasury shares is due to an increase of 204,500 shares through the acquisition of treasury shares by resolution of the Board of
Directors and an increase of 69 shares through the acquisition of fractional unit shares.
3. The 31,300 decrease in the number of common shares in treasury shares was a 29,200 decrease due to the exercise of stock options and a 2,100 decrease due to provision to the Board
Benefit Trust (BBT).

2. Share acquisition rights and treasury shares acquisition rights
Componentof shareacquisitionrightsCategory

Reporting company(parent company)

Share
acquisitionrights as
stock options(Shares)
Beginningof the year

FY2020 (From April 1, 2020 to March 31, 2021)
The following includes the breakdown of assets and liabilities at the time of acquisition and consolidation of YAMATO LEASE CO., LTD., and therelation between the acquisition cost of shares and proceeds for the acquisition (net price).
Millions of yen

Current assets

Increase

DecreaseEndof the year

Balance at theend of the year
(Millions of yen)

Goodwill
Current liabilities
Non-current liabilities
Non-controlling interests

—

—

—

—

—

¥

764

Acquisition cost of shares
Cash and cash equivalents
Difference: net consideration provided for acquisition

3. Dividends(1) Dividends paid
Type of shares

Total amount ofcash dividends

Dividend per share(Yen)(Millions of yen)

June 21, 2019
Annual General Meeting of Shareholders

Common shares

November 6, 2019
Board of Directors

Common shares

¥

3,327

¥

3,006

110
100

Record date

Effective date

March 31, 2019

June 24, 2019

September 30, 2019 December 3, 2019

Notes: 1. Total amount of cash dividends which resolved at Annual General Meeting of Shareholders held on June 21, 2019, include cash dividends of ¥11 million for the Company’s shares held by
Board Benefit Trust (BBT).
2. Dividend per share which resolved at Annual General Meeting of Shareholders held on June 21, 2019, comprises an ordinary dividend of ¥96 and a commemorative dividend of ¥14.
3. Total amount of cash dividends which resolved at Board of Directors held on November 6, 2019, include cash dividends of ¥10 million for the Company’s shares held by Board Benefit Trust(BBT).

(2) Dividends for which record date is in this fiscal year but the effective date for the dividends is in the following fiscal year
Type of shares

Total amount ofcash dividends(Millions of yen)

June 23, 2020
Annual General
Meeting of Shareholders¥

93,16814,054295(102,087)(7)(2,122)
3,300(3,602)(302)

Thousands of U.S. dollars$$

841,475
126,935
2,667(922,037)(64)(19,171)
29,805(32,538)(2,733)

FY2019 (From April 1, 2019 to March 31, 2020)(Resolution)(Resolution)¥

Non-current assets

Number of shares to be issued upon exercise of shareacquisition rights

Type of shares tobe issued upon
exercise of shareacquisition rights*2 Major components of assets and liabilities of a newly consolidated subsidiary due to acquisition of shares

Common shares

¥

3,157

Source ofdividends

Retained earnings

Dividend per share
(Yen)

¥

105

Note: Total amount of cash dividends include cash dividends of ¥10 million for the Company’s shares held by Board Benefit Trust (BBT).

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 acquisition cost of sharesand expenditure for the acquisition (net price).
Millions of yen

Current assets¥

Non-current assets
Goodwill
Current liabilities
Non-current liabilities
Valuation difference
Acquisition cost of shares
Cash and cash equivalents

Record date

Effective date

March 31, 2020

June 24, 2020

Difference: net consideration paid for acquisition

¥

3,139
3,213
6,946
(1,698)(2,116)(1,179)8,304(1,910)
6,393

XII. Lease transactions
As lessee
1. Finance leases (including intangible assets)
Finance lease transactions (including intangible assets) that do not transfer ownership

1) Details of leased assets
Mainly servers, network equipment and office equipment.

2) Depreciation method for leased assets
The depreciation method for leased assets is described in “4. Summary of significant accounting policies (2) Depreciation and amortization”
under “Basis of presentation.”

2. Operating leases
Future lease payments under non-cancellable operating leases
Millions of yen

Within one year

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Over one year
Total

Thousands of U.S. dollars

¥

550
1,412
1,962

¥

590
2,068
2,659

$

4,972
12,756
17,729

85

Financial Section

Fuyo Lease Group Integrated Report 2021

XIII. Financial instruments

As lessor
1. Finance leases

1. Status of financial instruments(1) Policy on financial instruments(1) Breakdown of investments in leases
Millions of yen
As of March 31, 2021¥

Lease receivables

991,818

Thousands of U.S. dollars

As of March 31, 2020¥

1,011,779

As of March 31, 2021

8,957,902$

Estimated residual value

19,38913,891

175,125

Future interest income(114,018)(116,139)(1,029,792)¥

Investments in leases

897,190¥909,5318,103,235$(2) Estimated collectible amount of portion of lease receivables arising from lease receivables and investments in leases after the consolidatedbalance sheet date(Millions of yen)
As of March 31, 2021

Lease receivables

Within one year

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

¥

¥

¥

¥

¥

Investments inleases47,085
283,648

46,682
218,393

43,610
153,987

20,123
99,952

Over five years

10,445¥61,03830,317
174,798(Thousands of U.S. dollars)
As of March 31, 2021
Within one year

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

Lease receivables$ 425,262$ 421,627$ 393,881$$

Investments inleases2,561,858

1,972,481

1,390,781

181,755
902,750

Over five years

94,344$ 273,823

551,284

1,578,747(Millions of yen)

As of March 31, 2020

Lease receivables
Investments inleases86

Within one year

Over one year andwithin two years

Over two years andwithin three years

Over three years andwithin four years

Over four years andwithin five years

¥

¥

¥

¥

¥

52,412287,795

45,852
202,639

43,435
172,453

30,201
108,626

Over five years

10,816¥

63,06429,389177,199(3) For finance lease transactions that do not transfer ownership under lease agreements concluded prior to April 1, 2008, the appropriate bookvalue (net of accumulated depreciation or amortization) for the assets for lease as of March 31, 2008 is recorded as the price of the investments
in leases at the beginning of the fiscal year.
In addition, the straight-line method is used for allocating to each period the equivalent amount of interest for such investments in leases for theperiod remaining after the application of the accounting standards, etc.
Note that the consequent impact is omitted for both the fiscal years ended March 31, 2021 and 2020 because of immateriality.

2. Operating leases
Future lease payments required under non-cancellable operating leases
Millions of yen

Within one year

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Over one year
Total

Thousands of U.S. dollars¥

58,140268,800
326,941¥

53,313
266,201
319,515$

525,117
2,427,752
2,952,870

3. Sublease transactions
Lease receivables and investments in leases, and lease obligations under sublease transactions on the consolidated balance sheets are before
interest deductions
Millions of yen
As of March 31, 2021

Lease receivables and investments in leases
Lease obligations (current liabilities)¥

12,243
14,600Thousands of U.S. dollars

As of March 31, 2020¥

18,981
20,081

As of March 31, 2021$

110,580
131,865

The Group is engaged in leasing and installment transactions for machinery, equipment, etc. and financial transactions such as the provision ofoperating loans. The Group uses direct and indirect financing to procure funds for purchasing assets to lease or to sell through installment 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 papers 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 through asset-liability management (ALM)
to mitigate the negative impact of interest rate fluctuations.
Derivatives are only used for mitigating currency and interest rate fluctuation risks and are not used for speculative purposes.

(2) Details of financial instruments and associated risks
Lease receivables and investments in leases, 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.
Operational investment securities and investment securities include business partners’ shares, bonds, and investments in limited partnerships,
etc. Those investments are subject to credit risks associated with the issuers and market price fluctuation risks.
Bonds payable, commercial papers, lease obligations, long-term borrowings, and long-term payables under securitization of lease 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 borrowings have floating interest rates and are therefore subject to interest rate fluctuation risks.
The Company uses foreign currency-related derivatives to reduce risks associated with foreign currency fluctuations that affect foreign
currency-denominated receivables and payables. The Company uses interest rate-related derivatives to reduce interest rate fluctuation risks that
affect borrowings. Please refer to the aforementioned in “4. Summary of significant accounting policies (8) Significant hedge accounting methods”
under “Basis of presentation” in regard to hedge accounting methods for hedge accounting, hedging instruments and hedged items, hedging
policies and methods for assessing hedge effectiveness, etc.

(3) Risk management system for financial instruments
1) Management of credit risks (default risks, etc.)
The Company’s management system and rules for credit risks are prescribed in its internal “Basic Policy for Managing Credit Risks.”
For all transactions that involve credit risks such as leases, installment sales, selling and purchasing, financing, and guarantee operations, theCompany uses a credit risk measurement method, etc., identifies on a timely basis the location and size of credit 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 business partners, 3) maintenance and enhancementof risk asset soundness, 4) enhancement of protection against doubtful receivables and implementation of measures related to collectionof those receivables, and 5) guidance, support, etc. for the Company’s offices and subsidiaries and associates. The department also rates
debtors based on their financial status, etc. 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 recognition of adequate credit allowances, etc. based on the self-assessments. Further, the department regularly monitors the status of theCompany’s main business partners, 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 tomitigate such impediments.
The effectiveness and appropriateness of credit risk management are examined through internal audits.

2) Management of market risks (risks associated with foreign exchange rates, interest rates, etc.)
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, etc., the finance division reports on mattersrelated to market risk management, including the status of market risk control, interest rate prospects, developments of market environment,
etc., and hedge transactions, etc.
The Company’s consolidated subsidiaries are subject to the Company’s “Basic Policy for Managing Market and Liquidity Risks.”(i) Interest rate fluctuation risk management
The Company comprehensively manages interest rate fluctuation risks using ALM. The ALM Committee ascertains and monitors thestatus 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 forward exchange contracts as a general rule.
(iii) Price fluctuation risk management
With regard to operational investment securities and investment securities, the Company regularly monitors the fair value of thesesecurities as well as the financial status of issuers and continuously reviews its financial position considering market conditions and its
relationship with the issuers.
(iv) Derivatives
With regard to derivatives, the Company uses forward exchange contracts for the purpose of hedging risks associated with foreign

87

Financial Section

currency fluctuations that affect its foreign currency-denominated receivables and payables. The Company uses interest rate swap
contracts for the purpose of hedging interest rate fluctuation risks that affect its borrowings.
The Company’s finance division is authorized to engage in and manage derivatives, in accordance with internal regulations andindividuals authorized on job responsibilities and pursuant to the approval of the Company’s president (CEO) or officer in charge of thefinance division.
The Company’s consolidated subsidiaries’ derivative-related transactions are subject to the Company’s internal regulations “Basic
Policy for Managing Market and Liquidity Risks.” In accordance with the Company’s “Regulations on Managing Subsidiaries andAssociates,” 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 derivatives’ status,
counterparties, outstanding positions, and unrealized gains or 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 receivables,” “Lease
receivables and investments in leases,” “Operating loans,” other marketable securities recorded under “Operational investment securities
and investment securities,” “Bonds payable,” “Long-term borrowings,” “Long-term payables under securitization of lease receivables,”and interest rate swaps contracts included in “Derivatives.” 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 areasonable range of potential interest rate movements. To calculate the potential change 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 the fiscal year-end, a 10 basis point (0.1%)
change in interest rates would result in a change of ¥3,892 million (U.S.$35,153 thousand) for the fiscal year ended March 31, 2021 anda change of ¥3,784 million for the fiscal year ended March 31, 2020 in the fair value of these financial assets and liabilities. This potentialchange in value is based on the assumption that all risk factors other than interest rates remain constant and does not incorporate theeffects 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.

3) 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 receives reports, etc. 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, market environments, etc. 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 basedon that status.

(4) Supplementary explanation related to fair values, etc. 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 derivatives data presented in “Derivatives” are nominal contract amounts or notional amounts used in calculations and do notindicate the amount of exposure.

Fuyo Lease Group Integrated Report 2021

As of March 31, 2021
Millions of yen
Book value (A)¥(1) Cash and deposits(2) Installment receivables*1,2(3) Lease receivables and investments in leases*2(4) Operating loans*2

The book values, the fair values and their differences are as follows. The following table does not include financial instruments for which it isextremely difficult to determine the fair value (See Note 2). Financial assets and liabilities, etc. not included in the following table are omitted fromdisclosure as they are immaterial in terms of value.

¥

98,926
84,536
1,138,436
310,558

Difference (B) - (A)

¥

—
1,149
59,2194,604(5) Operational investment securities and investment securities
Other securities¥¥

Total assets(1) Short-term borrowings(2) Commercial papers(3) Lease obligations (current liabilities and non-current liabilities)(4) Bonds payable (current portion included)(5) Long-term borrowings (current portion included)(6) Long-term payables under securitization of lease receivables(current portion included)
Total liabilities

242,708
1,810,192
564,585
470,200
15,733221,072
1,074,278¥¥

70,757

242,708
1,875,166
564,585
470,200
15,733
221,570
1,083,061¥¥

70,766—64,973
—
—
—
498
8,783
9

¥

2,416,626¥

2,425,917

¥

9,291

¥

—
(582)
(582)

¥

—
(704)
(704)

¥

—
(122)
(122)

Derivatives*3(i) Hedge accounting not applied(ii) Hedge accounting applied¥

Total derivatives¥¥

Thousands of U.S. dollars
Book value (A)$(1) Cash and deposits(2) Installment receivables*

1,2(3) Lease receivables and investments in leases*2(4) Operating loans*2

893,482
753,130
9,747,271
2,763,309$

Fair value (B)Difference (B) - (A)893,482
763,514
10,282,126
2,804,898$—
10,384534,855
41,589(5) Operational investment securities and investment securities
Other securities
Total assets(1) Short-term borrowings$$(2) Commercial papers

2. Fair values, etc. of financial instruments

98,926
83,386
1,079,217
305,953

Fair value (B)(3) Lease obligations (current liabilities and non-current liabilities)(4) Bonds payable (current portion included)(5) Long-term borrowings (current portion included)(6) Long-term payables under securitization of lease receivables(current portion included)
Total liabilities

2,192,092
16,349,285
5,099,217
4,246,749
142,0991,996,676
9,702,658$$

639,068

2,192,092
16,936,113
5,099,217
4,246,749
142,099
2,001,180
9,781,986$$

639,152—
586,827———
4,504
79,32984$

21,826,467$

21,910,383$

83,916$$—(5,260)(5,260)$$—(6,364)(6,364)$$—(1,104)(1,104)

Derivatives*3(i) Hedge accounting not applied(ii) Hedge accounting applied
Total derivatives*1. Net of deferred profit on installment sales.
*2. Net of general and specific allowances for doubtful accounts related to installment receivables, lease receivables and investments in leases, and operating loans.
*3. Assets and liabilities arising from derivatives are carried at net amounts with amounts in parentheses representing a net liability position.

88

89

Financial Section

Fuyo Lease Group Integrated Report 2021

As of March 31, 2020
Millions of yen
Book value (A)(1) Cash and deposits¥(2) Installment receivables*1,2(3) Lease receivables and investments in leases*2(4) Operating loans*2

77,43678,362
1,105,398
306,444

Fair value (B)¥77,43679,706
1,159,082
309,853

Difference (B) - (A)

¥

—
1,343
53,683
3,408(5) Operational investment securities and investment securities
Other securities
Total assets(1) Short-term borrowings¥¥(2) Commercial papers(3) Lease obligations (current liabilities and non-current liabilities)(4) Bonds payable (current portion included)(5) Long-term borrowings (current portion included)(6) Long-term payables under securitization of lease receivables(current portion included)
Total liabilities
Derivatives*

207,295
1,774,937
530,317450,700
20,720170,000
954,837¥¥

96,265207,295
1,833,373
530,317450,700
20,720169,756
965,448¥¥

96,710—58,435———(243)
10,610444¥

2,222,841¥

2,233,652¥

10,811

¥

—
(559)
(559)

¥

—
(716)
(716)

¥

—
(157)
(157)

3

(i) Hedge accounting not applied(ii) Hedge accounting applied
Total derivatives

¥

¥

¥

*1. Net of deferred profit on installment sales.
*2. Net of general and specific allowances for doubtful accounts related to Installment receivables, lease receivables and investments in leases, and operating loans.
*3. Assets and liabilities arising from derivatives are carried at net amounts with amounts in parentheses representing a net liability position.

Notes:
1. Measurements of fair value of financial instruments, and securities and derivatives
Assets(1) Cash and deposits
The fair values of deposits that have no maturity are based on their book value, which closely approximate their fair values.

(2) Installment receivables
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 deducting estimated losses on bad debts from their book values as of the consolidated 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 realizable value, etc. covered by collateral or guaranty.

(3) Lease receivables and investments in leases
Present values of lease receivables and investments in leases are calculated by subtracting major administrative and maintenance expenses
from the total of uncollected lease receivables and lease payment receivables. The Company calculates the fair values of doubtful receivables
by deducting estimated losses on bad debts from their book values as of the consolidated 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
realizable value, etc. covered by collateral or guaranty.
Lease receivables and investments in leases under sublease contracts are recorded on the consolidated balance sheets before interest
deductions. The amount recorded as the fair value is the book value on the consolidated balance sheet. The difference between (a) the fair valued
calculated by discounting at the rate applied to new contracts and (b) their book value of lease receivables and investments in leases undersublease contracts is ¥320 million (U.S.$2,890 thousand) as of March 31, 2021 and ¥390 million as of March 31, 2020.

(4) Operating loans
Fair values of floating-rate operating loans are based on their book value. Market rates are reflected in the rates on floating-rate operating loans ina short period of time, so their book value closely approximate their fair values as long as the borrower credit status does not change materiallyafter loan issuance. Fair values of fixed-rate operating loans are calculated by discounting total principal and interest for each borrower at the rateapplied to new contracts. The Company calculates the fair values of doubtful receivables by deducting estimated losses on bad debts from theirbook values as of the consolidated balance sheet date. The resulting amount closely approximates the doubtful receivables’ fair values. Estimatedlosses on bad debts are calculated based on estimated cash flows or estimated net realizable value, etc. covered by collateral or guaranty.

(5) Operational investment securities and investment securities
Fair values are based on amounts obtained from relevant financial and other institutions. In addition, please refer to “Securities” in regard to othersecurities.

90

Liabilities(1) Short-term borrowings,(2) Commercial papers
Fair values of short-term borrowings and commercial papers are based on their book value because they are settled over the short-term, so theirbook value closely approximate their fair values.

(3) Lease obligations (current liabilities and non-current liabilities)
Lease obligations are stated on the consolidated balance sheets before interest deductions. The amount recorded as the fair value is their bookvalue on the balance sheets. The difference between the fair value calculated by discounting at the rate applied to new contracts and their bookvalue of lease obligations is ¥106 million (U.S.$966 thousand) as of March 31, 2021 and ¥145 million as of March 31, 2020.

(4) Bonds payable (current portion included),(5) Long-term borrowings (current portion included),(6) Long-term payables under securitization of lease receivables (current portion included)
Fair values of floating-rate loans and payables in these categories are based on their book value. Market rates are reflected in the rates on theseloans and payables in a short period of time, and the Company’s credit status has not changed materially since issuance, so their book value 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 a notional rate that isassumed would apply to borrowing in the same amount.

Derivatives
Please refer to “Derivatives.”

2. Financial instruments whose fair values are deemed extremely difficult to determine
Millions of yen

Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Other securities
Unlisted shares*1
Subsidiary’s shares / associates’ shares*

1

Preferred securities / beneficial interest in trusts, etc.*1
Investments in limited partnerships, etc.*2
Total

¥

7,271
29,333
5,962
110,771
153,339¥

6,615
24,045
5,225
83,639119,526$

65,675
264,937
53,8551,000,462
1,384,930*1. These are not included in “(5) Operational investment securities and investment securities” because their market values are not available, and it is deemed extremely difficult to determine
their fair values.
*2. Within investments in limited partnerships, etc., the fair values of partnership assets consisting of investments whose fair values are deemed extremely difficult to determine are not included.

91

Financial Section

92

Fuyo Lease Group Integrated Report 2021

3. Redemption schedule by term for monetary receivables and securities with maturity after the consolidated balance
sheet dates

4.Repayment schedule by term for bonds payable, long-term borrowings, and other interest-bearing debt after the
consolidated balance sheet dates.

As of March 31, 2021

As of March 31, 2021
Millions of yen
Over one year andwithin five years

Within one year

Cash and deposits¥

Installment receivables
Lease receivables and investments in leases
Operating loans
Operational investment securities and investment
securities

98,92633,740302,286
52,752¥—45,926
601,362
223,130

Millions of yen

Over five years andwithin ten years

¥

—
2,585
127,095
25,935¥—2,293
50,053
4,817

Other securities with maturities
Bonds (government bonds)
Bonds (corporate bonds)
Bonds (other)
Other
Total

¥

—
4,804
—
7,712
500,222¥—
19,751—
99,649989,819—
31,855—32,686
220,157

¥

¥

—
—
—
11,73068,894

Thousands of U.S. dollars
Over one year andwithin five years

Within one year

Cash and deposits$

Installment receivables
Lease receivables and investments in leases
Operating loans
Operational investment securities and investment
securities

893,482
304,737
2,730,187
476,448$—414,796
5,431,377
2,015,268

Over five years andwithin ten years$—
23,3481,147,899
234,242Over ten years$—
20,717452,075
43,507

Bonds (government bonds)
Bonds (corporate bonds)
Bonds (other)
Other

$

—
43,396—69,6594,517,909$—
178,392—
900,0138,939,847—
287,712—295,213
1,988,414

$

$

—
—
—
105,946622,244

As of March 31, 2020
Millions of yen
Over one year andwithin five years

Within one year

Cash and deposits¥

Installment receivables
Lease receivables and investments in leases
Operating loans
Operational investment securities and investment
securities

77,436
31,281
307,532
56,887¥—44,425619,910
213,086

Over five years andwithin ten years

¥

—
1,993
132,60731,600Over ten years

¥

—
2,053
46,7895,550

Other securities with maturities
Bonds (government bonds)
Bonds (corporate bonds)
Bonds (other)
Other
Total

Over five years

564,585 ¥

— ¥

— ¥

— ¥

— ¥

—

Commercial papers

470,200

—

—

—

—

—

Lease obligations

5,364

3,895

2,800

1,584

689

1,398

Short-term borrowings¥

Over two years and Over three years and Over four years andwithin three years
within four years
within five years

Bonds payable

30,00030,00045,00035,00031,07250,000Long-term borrowings

308,274

252,597

215,279

116,210

71,911110,005

Long-term payables under
securitization of lease receivables

32,117

20,650

6,923

7,354

3,587

124

¥ 1,410,541 ¥

307,143 ¥

270,004 ¥160,149 ¥

107,260 ¥Total

161,527

Thousands of U.S. dollars
Within one year

Over one year andwithin two years

Short-term borrowings$ 5,099,217 $Commercial papers

4,246,749

Over two years and Over three years and Over four years andwithin three years
within four years
within five years

Over five years

— $

— $

— $

— $

—

—

—

—

—

—

Lease obligations

48,44935,18625,297

14,311

6,227

12,628

Bonds payable

270,954

270,954406,431316,113

280,636

451,5902,784,271

2,281,407

1,944,357

1,049,592

649,488993,542

290,077

186,508

62,53566,42432,3991,125Long-term borrowings
Long-term payables under
securitization of lease receivables
Total$12,739,716 $ 2,774,054 $ 2,438,620 $ 1,446,440 $968,751 $ 1,458,885

As of March 31, 2020

Other securities with maturities

Total

Within one year

Over ten years

Over one year andwithin two years

¥

—
3,307
—
449
476,895¥—
18,288—80,287975,997¥—
11,243—30,918208,363

¥

—
—
—
3,346
57,739Millions of yen
Within one year

Short-term borrowings
Commercial papers¥

Over one year andwithin two years

Over two years and Over three years and Over four years andwithin three years
within four years
within five years

Over five years

530,317 ¥

— ¥

— ¥

— ¥

— ¥

—

450,700

—

—

—

—

—

Lease obligations

7,417

4,999

3,510

2,264

1,051

1,477

Bonds payable

20,00030,00030,00025,00035,00030,000Long-term borrowings

274,820233,864

177,699

104,495

75,66688,291Long-term payables under
securitization of lease receivables

41,39629,49317,023

3,509

4,792

51

¥ 1,324,651 ¥

298,356 ¥

228,233 ¥

135,268 ¥

116,510 ¥Total

119,820

93

Financial Section

Fuyo Lease Group Integrated Report 2021

XIV. Securities

As of March 31, 2020

1. Other securities

Book value¥(1) Shares

74,966

Acquisition cost¥

15,983

2) Corporate bonds3) Other(3) Other
Subtotal(1) Shares¥

58,982—
91,975—
59,109226,051
1,815—
90,300—55,071
161,354
2,145

—
1,675
—
4,038
64,696
(330)

—
7,999
—
6,842
16,657
242,708

—
8,000
—
6,966
17,111
178,466

—
(0)
—
(123)
(454)
64,241(2) Bonds
1) Government bonds and local government bonds, etc.
2) Corporate bonds3) Other(3) Other
Subtotal

¥

Total

¥

Thousands of U.S. dollars

Type(1) Shares¥Book value$

677,078

Acquisition cost$

144,364

Subtotal(1) Shares
1) Government bonds and local government bonds, etc.

Securities whose bookvalue does not exceed
their acquisition cost2) Corporate bonds3) Other(3) Other
Subtotal¥

Total

815,571

15,131(2) Bonds

3) Other———(3) Other533,868

497,390

36,4792,041,647

1,457,324

584,3233) Other(2,986)(3) Other2) Corporate bonds3) Other(3) Other
Subtotal$——

72,252

72,254

(3)

—

—

—

(1) Shares(2) Bonds

61,80062,917(1,116)

150,445

154,550(4,105)$

1,611,874

$

—
674
—
2,047
48,698(819)—
27,582—29,444
59,766207,295—
27,710—30,512
61,781
160,611—(127)—(1,068)(2,014)
46,683580,218

Note: Unlisted shares, etc. (Book value ¥124,005 million (U.S.$1,119,993 thousand)) are not included in the above “Other securities” because their market values are not available, and it is deemed
extremely difficult to determine their fair values.

Sales proceeds

¥

7

¥

—
—
—
—
7

2) Corporate bonds—

2,192,092—
64,200—20,883
98,8293,558¥¥

Millions of yen

1) Government bonds and local government bonds, etc.

Total(2) Bonds
1) Government bonds and local government bonds, etc.

45,977

FY2020 (From April 1, 2020 to March 31, 2021)

830,701

19,379¥—64,874—22,930147,528
2,739

532,714(1) Shares

16,393

13,746

Note: Unlisted shares, etc. (Book value ¥95,480 million) are not included in the above “Other securities” because their market values are not available, and it is deemed extremely difficult todetermine their fair values.

—2) Corporate bonds¥(2) Bonds—(1) Shares

Total3) Other(3) Other—

Subtotal

Securities whose bookvalue does not exceed
their acquisition cost2) Corporate bonds

Type1) Government bonds and local government bonds, etc.

59,723Difference

2. Other securities sold
Difference$

1) Government bonds and local government bonds, etc.

Securities whosebook value exceeds
their acquisition cost(2) Bonds
Securities whosebook value exceeds
their acquisition cost¥

Acquisition cost(2) Bonds

Difference(2) Bonds
1) Government bonds and local government bonds, etc.

Book value(1) Shares

Millions of yen

TypeSecurities whose bookvalue does not exceed
their acquisition cost

Millions of yen

TypeAs of March 31, 2021

Securities whosebook value exceeds
their acquisition cost

94

Total gain

Total loss

¥

2

¥

—
—
—
—
2

¥

—

¥

—
—
—
—
—

Thousands of U.S. dollars

Type

Sales proceeds$

64Total gain$

Total loss

23

$

—

1) Government bonds and local government bonds, etc.

—

—

—

2) Corporate bonds

—

—

—

3) Other———(3) Other

—

—

—

$

Total

64

$

23

—

$

FY2019 (From April 1, 2019 to March 31, 2020)
Millions of yen

Type(1) Shares

Sales proceeds

¥

406

¥

—
—
—
—
406

Total gain

¥

395

¥

—
—
—
—
395

Total loss

¥

0

¥

—
—
—
—
0

(2) Bonds
1) Government bonds and local government bonds, etc.
2) Corporate bonds3) Other(3) Other
Total

95

Financial Section

Fuyo Lease Group Integrated Report 2021

3. Impairment losses on securities

XVI. Retirement benefits

During the fiscal year ended March 31, 2021, impairment loss recorded on securities amounted to ¥1 million (U.S.$15 thousand) (securities
classified as other securities: ¥1 million (U.S.$15 thousand)) and during the fiscal year ended March 31, 2020, impairment loss recorded on
securities amounted to ¥545 million (securities classified as other securities: ¥545 million).
The Company recognizes the impairment losses where the decline in the price at year end is greater than or equal to 50% of the acquisitioncost. Where the decline in the price is between 30% and less than 50% of the acquisition cost, the Company may recognize impairment losses,
taking into consideration the credit rating of the issuer, the materiality of the amount, the likelihood of the securities recovering in price, etc., aswell as the analysis of the level of market price by looking at the gap between the book value and the highest and lowest price and other data
during the fiscal years ended March 31, 2021 and 2020.

1. Overview of the Group’s retirement benefits plan

XV. Derivatives
1. Derivatives to which hedge accounting is not applied(1) Foreign currency-related derivatives
As of March 31, 2021
Not applicable
As of March 31, 2020
Not applicable(2) Interest rate-related
As of March 31, 2021
Not applicable
As of March 31, 2020
Not applicable

The Company has a defined-benefit corporate pension fund plan (established by the Company and Group companies) 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 fund 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 fund plans have retirement benefit trusts.
The defined-benefit corporate pension fund plan (established by the Company and Group companies) which is 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 ofplan 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 retirement benefit liability and retirement benefit expenses. 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 and certain situation.

2. Defined-benefit pension plan (excluding pension plans using the simplified accounting methods)(1) Reconciliation of retirement benefit obligations as of beginning of year and as of end of year
Millions of yen

2. Derivatives to which hedge accounting is applied(1) Foreign currency-related derivatives

Interest cost
Actuarial gains or losses(2) Interest rate-related contracts

Retirement benefits paid

As of March 31, 2021

Increase by the new consolidated subsidiary
Retirement benefit obligations at end of year

Millions of yen

Principle treatment
Exceptional treatment
of interest rate swaps

Hedged item

Borrowings

Contract amount,etc.

¥

86,031

Contract amount,etc. of over one year¥

23,212

Borrowings

¥

Total

109,243

70,750Fair value¥

15,822¥

86,572

Principle treatment
Exceptional treatment
of interest rate swaps

Type of contracts

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

Hedged item

Contract amount,etc.

Contract amount,etc. of over one year

Borrowings$$

209,654

Borrowings

$

Total

777,015

986,669

639,005

¥

(704)

$

781,906(5,260)(1,104)$(6,364)

Note: Measurements of the fair value
The fair values are based on the amounts, etc. presented by relevant financial and other institutions.

FY2020Plan assets at beginning of year¥

Actuarial gains or losses
Contribution from employer
Retirement benefits paid
Increase by the new consolidated subsidiary
Plan assets at end of year

Principle treatment
Exceptional treatment
of interest rate swaps

Thousands of U.S. dollars
FY2019¥10,360
207
734
477
(440)
391
11,731¥¥

10,392
249
(383)
473
(371)
—
10,360Millions of yen

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

Hedged item

Borrowings

Contract amount,etc.

¥

Note: Measurements of the fair value
The fair values are based on the amounts, etc. presented by relevant financial and other institutions.

101,26

Contract amount,etc. of over one year¥

37,048Borrowings

Total

$

106,952
5,043
540(1,094)(4,090)2,992
110,343

FY2020$$93,577
1,874
6,638
4,309
(3,974)
3,536
105,960(3)Reconciliation of retirement benefit obligations and plan assets at end of fiscal year and retirement benefit liability
and retirement benefit asset recorded in the consolidated balance sheets
Millions of yen

Type of contracts$(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

As of March 31, 2020
Hedge accounting¥

11,581
571
58
7
(377)
—
11,841Millions of yen

Expected return on plan assets
Fair value¥(2)Reconciliation of plan assets as of beginning of year and as of end of year

(122)

142,902$¥

11,841
558
59
(121)
(452)
331
12,217(582)

Thousands of U.S. dollars
Hedge accounting¥

Service cost

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

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Retirement benefit obligations at beginning of year

Type of contracts

Thousands of U.S. dollars
FY2019FY2020

As of March 31, 2021
Not applicable
As of March 31, 2020
Not applicable

Hedge accounting

96¥

138,31486,430Fair value¥

23,319¥109,749(559)

Retirement benefit obligations for funded pension plans

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Plan assets
Net assets or liabilities recorded in the consolidated balance sheets

(157)
¥

(716)

Retirement benefit liability
Retirement benefit asset
Net assets or liabilities recorded in the consolidated balance sheets

Thousands of U.S. dollars

As of March 31, 2021¥

12,217(11,731)
485
549
(64)
485

¥

11,841(10,360)
1,480
1,480
—
1,480

$

110,343(105,960)
4,383
4,966
(583)
4,383

97

Financial Section

Fuyo Lease Group Integrated Report 2021

(4)Breakdown of retirement benefit expenses
Millions of yen

Thousands of U.S. dollars
FY2019FY20203. Defined-benefit pension plans using the simplified accounting methods(1) Reconciliation of retirement benefit liability for the pension plans using the simplified accounting methods as ofbeginning of year and as of end of year

FY2020Millions of yen(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Service cost¥

Interest cost
Expected return on plan assets
Amortization of actuarial loss
Other
Retirement benefit expenses for defined-benefit pension plan

¥

558
59
(207)
(668)
(37)
(295)

¥

571
58
(249)
311
(48)
643

¥

$

$

5,043
540
(1,874)(6,039)(340)(2,671)

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Retirement benefit liability at beginning of year¥

Retirement benefit expenses
Retirement benefits paid
Retirement benefit liability at end of year¥

The components of items recorded in remeasurements of defined benefit plans, net of tax included in other comprehensive income were as
follows:
Millions of yen

696
142
(87)
752

¥

¥

681
135
(120)
696

FY2019FY2020¥179

Millions of yen

$

$

6,295
1,290
(789)
6,796

FY2020

¥

(78)

$

1,619

Retirement benefit obligations for funded pension plans

Retirement benefit obligations for unfunded pension plans
Net assets or liabilities recorded in the consolidated balance sheets

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

(2)

176

(23)

(7)Plan assets
1) Breakdown of plan assets¥

Plan assets

The components of items recorded in remeasurements of defined benefit plans, net of tax included in accumulated other comprehensive income
were as follows:
Thousands of U.S. dollars

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)(6) Remeasurements of defined benefit plans

Millions of yen

Thousands of U.S. dollars
FY2019FY2020Thousands of U.S. dollars(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Unrecognized actuarial gains or losses

Thousands of U.S. dollars
FY2019FY2020(2) Reconciliation of retirement benefit obligations and plan assets at end of fiscal year and retirement benefit liability
and retirement benefit asset recorded in the consolidated balance sheets(5)Remeasurements of defined benefit plans

Actuarial gains or losses

98

Retirement benefit liability
Net assets or liabilities recorded in the consolidated balance sheets

¥

514
(156)
358
394
752
752
752

¥

¥

473
(145)
328
368
696
696
696

$

$

4,648
(1,414)
3,234
3,562
6,796
6,796
6,796

(3) Retirement benefit expenses
Retirement benefit expenses calculated by simplified accounting method
FY2020 (April 1, 2020 - March 31, 2021): ¥142 million (U.S.$1,290 thousand)
FY2019 (April 1, 2019 - March 31, 2020): ¥135 million

Ratio of each major component of plan assets was as follows:

Bonds
SharesCash and deposits
General account
Other
Total

As of March 31, 2021

As of March 31, 2020

%

%

35
21
4
30
10
100

38
15
6
31
10
100

4. Defined contribution plan
In the fiscal years ended March 31, 2021 and 2020 the amount required to be contributed by the Company to the defined-contribution pension
plan amounted to ¥82 million (U.S.$742 thousand) and ¥84 million, respectively.

5. Multi-employer type of pension plan
In the fiscal years ended March 31, 2021 and 2020 the amount required to be contributed to the defined-benefit corporate pension fund plan(established by the Company and Group companies) of multi-employer type of pension plan amounted to ¥236 million (U.S.$2,133 thousand) and¥177 million, respectively. The contribution is accounted for in the same manner with a defined-contribution pension plan.

(1) Most recent funded status of the multi-employer welfare pension plan
Millions of yen

Note: The total includes retirement benefits trust established for corporate pension plan at 5% in the fiscal year ended March 31, 2021 and 5% in the fiscal year ended March 31, 2020.

Thousands of U.S. dollars

2) Estimation of expected long-term rate of return on plan assets

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

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

As of March 31, 2020

As of March 31, 2019

As of March 31, 2020

¥

¥

$

Amount of plan assets(8) Basis for actuarial calculation

Actuarial liability under pension funding programs

Major basis for actuarial calculation

Difference

Discount rate
Expected long-term rate of return
Expected increase in salary

As of March 31, 2021

As of March 31, 2020%%

0.10 - 0.98
1.00 - 2.50
1.28 - 3.75

0.37 - 0.98
2.37 - 2.50
1.28 - 3.75

13,756
17,526¥(3,769)13,171
13,929¥(758)

124,247
158,292$(34,045)(2) Premium contribution ratio for the Group’s contribution to multi-employer type of pension plan
FY2020: 14.395% (From April 1, 2020 to March 31, 2021)
FY2019: 13.476% (From April 1, 2019 to March 31, 2020)(3) Supplementary explanation
The main reasons for the difference in (1) above are the balance of prior service obligations under pension funding programs (¥7,498 million(U.S.$67,722 thousand) in the fiscal year ended March 31, 2021, ¥5,480 million in the fiscal year ended March 31, 2020), General reserve (¥3,927
million (U.S.$35,469 thousand) in the fiscal year ended March 31, 2021, ¥4,721 million in the fiscal year ended March 31, 2020) and deductions
for asset valuation adjustments due to the use of actuarial valuation methods for asset valuations under pension funding (¥– million in the fiscal
year ended March 31, 2021, ¥– million in the fiscal year ended March 31, 2020).
The amortization method for prior service obligations in this system is even amortization of principal and interest over 20 years. Were for some,unlikely reason, a shortage to occur for the balance brought forward, this would be dealt with through methods such as raising special premiums
as necessary based on the recalculation of the financial situation.
Since the amount of the special premiums is calculated by multiplying the amount of base salary at the time of premium contribution by thepremium rate prescribed in advance, the ratio in (2) above is not the same as the actual burden ratio.

99

Financial Section

Fuyo Lease Group Integrated Report 2021

XVII. Stock options, etc.

(2) Movement in stock options

1. Stock options-related expenses were recorded in the following accountThe number of stock options that existed during the fiscal year ended March 31, 2021 is translated into the number of shares.

Not applicable

1001) Number of stock options

2. Gains on expiration of unexercised stock options

Stock options for 2008 Stock options for 2009 Stock options for 2010 Stock options for 2011 Stock options for 2012

Not applicable

Pre-vesting (shares)

3. Details, number and status of stock options(1) Details of stock options

Previous fiscal year-end

Since the Company resolved at the 49th Annual General Meeting of Shareholders held on June 22, 2018 to introduce the share-based payment
plan or Board Benefit Trust (BBT) for its directors and executive officers and abolished the share-based payment-type stock options plan, there
has been no new granting of stock options.

ExpiredStock options for 2008

GrantedStock options for 2009

Stock options for 2010

Class and number of grantees
Directors of the Company: 8
Executive officers of the Company: 16(Note 1)
Number and type of stock options
Common shares: 57,800 shares(Note 2)

Directors of the Company: 8
Executive officers of the Company: 15

Directors of the Company: 7
Executive officers of the Company: 17

Common shares: 84,600 shares

Common shares: 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)(Note 4)(Note 4)

Exercise period

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

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

October 15, 2010
– October 14, 2040 (Note 5)

Stock options for 2011

VestedBalance unvested
Previous fiscal year-end
VestedExercised
ExpiredBalance unexercised

Previous fiscal year-end

Directors of the Company: 8
Executive officers of the Company: 16

Directors of the Company: 8
Executive officers of the Company: 18

GrantedCommon shares: 73,000 shares

Common shares: 42,000 shares

VestedGrant date

October 16, 2012

October 15, 2013

(Note 3)(Note 3)(Note 3)(Note 4)(Note 4)(Note 4)

Exercise period

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

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

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

Stock options for 2015

Stock options for 2016

Class and number of grantees
Directors of the Company: 7
Executive officers of the Company: 18(Note 1)
Number and type of stock options
Common shares: 35,500 shares(Note 2)

Stock options for 2014

Directors of the Company: 7
Executive officers of the Company: 19

Directors of the Company: 7
Executive officers of the Company: 21

Common shares: 28,600 shares

Common shares: 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)(Note 4)(Note 4)

Exercise period

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

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

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

—
—
—
—
—

—
—
—
—
—

1,300
—
—
—
1,300

10,400
—
1,800
—
8,600

16,300—1,400—
14,90022,200—3,600—
18,60033,400—3,200—
30,200Pre-vesting (shares)

Class and number of grantees
Directors of the Company: 7
Executive officers of the Company: 16(Note 1)
Number and type of stock options
Common shares: 54,800 shares(Note 2)Requisite service period

—
—
—
—
—

Stock options for 2013 Stock options for 2014 Stock options for 2015 Stock options for 2016 Stock options for 2017

Stock options for 2013

Vesting conditions

—
—
—
—
—

Post-vesting (shares)

Stock options for 2012

October 14, 2011

—
—
—
—
—

ExpiredBalance unvested

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

21,000—1,600—
19,40027,400—3,300—
24,10023,900—1,900—
22,00033,300—1,400—
31,90022,200—900—
21,300Post-vesting (shares)
Previous fiscal year-end
VestedExercised
ExpiredBalance unexercised2) Unit price
Stock options for 2008 Stock options for 2009 Stock options for 2010 Stock options for 2011 Stock options for 2012
Yen

Exercise price¥1

Average price per share at
exercise
Fair value at grant date

Yen

¥

Yen

1

¥

Yen

1

¥

Yen

1

¥

1

—

6,435

6,435

6,268

6,089

1,610

1,668

2,218

2,449

1,943

Stock options for 2017Class and number of grantees
Directors of the Company: 6
Executive officers of the Company: 22(Note 1)
Number and type of stock options
Common shares: 22,200 shares(Note 2)Grant date

October 16, 2017

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

Exercise period

October 16, 2017– October 15, 2047 (Note 5)

Notes: 1. Excluding outside directors and outside corporate auditors
2. Converted to number of shares
3. No vesting conditions attached
4. No provision for requisite service period
5. Notwithstanding the above, if a share acquisition rights holder loses his/her position as director, corporate auditor, or executive officer of the Company during the above term, he/she may
exercise the rights within a period of five years beginning on the day that exactly one year has passed since the day immediately after the day on which the holder loses his/her position.

Stock options for 2013 Stock options for 2014 Stock options for 2015 Stock options for 2016 Stock options for 2017
Yen

Exercise price

¥

Yen

1

¥

Yen

1

¥

Yen

1

¥

Yen

1

¥

1

Average price per share at
exercise

6,089

6,290

6,321

6,435

6,177

Fair value at grant date

3,556

3,584

4,653

4,606

6,840

4. Estimation method for fair value of stock options
Not applicable

5. Estimation method for the number of vested stock options
The Company generally uses the actual number of expired options to estimate the number of vested options, because it is difficult to reasonably
estimate how many options will expire in the future.

101 Financial Section

Fuyo Lease Group Integrated Report 2021

XVIII. Tax effect accounting

2. The respective breakdowns of major items that constituted the material difference between the statutory effective
tax rate and the effective tax rate after adoption of tax effect accounting

1. The respective breakdowns of deferred tax assets and deferred tax liabilities by major item
Millions of yen

Thousands of U.S. dollars

As of March 31, 2021
The note is omitted, because the difference between the statutory effective tax rate and the effective tax rate after adoption of tax effectaccounting is less than 5% of statutory effective tax rate.

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

1,421
1,050
690
675
626
593
570
508
478
393
348
336
215
208
—
1,071
9,191
—
(90)
(90)
9,100

¥

1,531
934
665
664
345
806
133
546
715
385
463
439
233
245
46
866
9,025
(0)
(122)
(123)
8,901

$

(19,783)(1,791)(1,467)(1,414)(1,291)(595)(908)(27,253)(18,152)¥(14,291)(1,546)(1,269)(1,556)(1,288)(897)(995)(21,845)(12,943)$

Deferred tax assets

As of March 31, 2020

Excess of allowance for doubtful accounts
Guarantee deposits received
Loss on valuation of investment securities, etc.
Provision for bonuses
Enterprise taxes payable
Accrued expenses
Non-deductible consumption tax
Asset retirement obligations
Retirement benefit liability
Prepaid expenses
Revenue recognized for tax purposes
Excess of depreciation
Share-based payment expenses
Gain on transfer of receivables
Tax loss carried forward (Note 2)
Other
Subtotal deferred tax assets
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

12,839
9,486
6,238
6,102
5,662
5,362
5,155
4,588
4,320
3,556
3,150
3,039
1,947
1,887
—
9,680
83,012
—
(815)
(815)
82,197

Deferred tax liabilities¥

Valuation difference on available-for-sale securities
Depreciation
Foreign subsidiary’s unitary tax
Intangible assets
Gain on valuation of investment securities
Gain on transfer of receivables
Other
Total deferred tax liabilities¥

Net deferred tax liabilities¥$(178,683)(16,184)(13,256)(12,778)(11,664)(5,379)(8,202)(246,146)(163,948)

Notes: 1. The amount of valuation allowance decreased by ¥33 million (U.S.$299 thousand) from the previous fiscal year. This decrease was mainly due to a decrease of ¥19 million (U.S.$178
thousand) in valuation allowance for allowance for doubtful accounts, and a decrease of ¥13 million (U.S.$121 thousand) in valuation allowance for others at a consolidated subsidiary.
2. Tax loss carried forward and respective deferred tax assets will expire as follows:
As of March 31, 2021
Not applicable

The note is omitted, because the difference between the statutory effective tax rate and the effective tax rate after adoption of tax effectaccounting is less than 5% of statutory effective tax rate.

XIX. Business combinations, etc.
Business combinations through acquisition
1. Overview of the business combinations(1) Names of acquired company and its business descriptions
1) 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.)(2) Reasons for the business combinations
The purpose of collaborating on businesses with YAMATO LEASE CO., LTD. (hereinafter “YL”) is to combine the business bases and expertise,etc., of the Fuyo Lease Group and the Yamato Group, enabling enhancement of YL’s competitive advantage and expanding its business domains,with a view to further expanding its business.

(3) Date of the business combinations
April 1, 2020

(4) Legal form of the business combinations
Acquisition of shares by cash(5) Name of the companies after the business combination
No change(6) Ratio of voting rights acquired
Ratio of voting rights held before the business combination date:— %Ratio of voting rights acquired on the business combination date:

60.00 %

Ratio of voting rights held after the acquisition:

60.00 %

(7) Primary basis for the determination of the acquirer
It is because the Company acquired 60.00% of the issued shares of YL.

2. Period for which operating results of the acquired company was included in the consolidated financial statements
From April 1, 2020 to March 31, 2021

3.Acquisition cost of the acquired company and breakdown by type of consideration
Acquisition priceCash and deposits

Acquisition cost

¥3,300 million

U.S.$29,805 thousand¥3,300 million

U.S.$29,805 thousand

As of March 31, 2020

4. Details and amounts of main acquisition-related expenses

Millions of yen

Tax loss carriedforward(*1)

102Within one year

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

Over five years

¥

¥

¥

46

—

¥

—

¥

—

¥

—

—

Total

¥

Fees to advisors, etc.: ¥284 million (U.S.$2,566 thousand)46

5. Amount, cause, amortization method and period of goodwill recognized(1) Amount of goodwill recognized

Valuation allowance

(0)

—

—

—

—

—

(0)

¥295 million (U.S.$2,667 thousand)Deferred tax assets

46

—

—

—

—

—

(* 2 )
46(2) Cause of goodwill*1. ax loss carried forward is measured using the statutory effective tax rate.
*2. With respect to the tax loss carried forward of ¥46 million (amount measured using the statutory effective tax rate), the Company records deferred tax assets of ¥46 million. The
deferred tax assets of ¥46 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 is recoverable due to sufficient taxable income expected for the next fiscal year.

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 6 years

103 Financial Section

Fuyo Lease Group Integrated Report 2021

6. Amount of assets received and liabilities assumed on the date of the business combination and their major components
Millions of yen

Thousands of U.S. dollars

Total assets

93,16814,054
107,222

Current liabilities

102,087

Current assets¥

Non-current assets

7

Non-current liabilities
Total liabilities$¥

102,095$

3. Disclosure of sales, profit (loss), asset, liability, and other items for each reportable segment
FY2020 (From April 1, 2020 to March 31, 2021)

841,475
126,935
968,410922,03764
922,101

Millions of yen
Lease and Installment
Sales

Revenues from external customers

541,718
1,282
543,000
33,303
1,849,658¥

Transactions with other segments

XX. Asset retirement obligations

Segment profit¥

This information has been omitted because of immateriality.

Segment assets

¥

Total

¥

¥
¥

20,5883,454
24,043
15,303
932,383¥¥¥

177,956
1,995
179,951
8,786
120,917¥¥¥740,263
6,732
746,996
57,3922,902,959

Other items

XXI. Real estate leasing business
The Company and some of its consolidated subsidiaries own assets such as commercial facilities for lease and office buildings (including land)
for lease in Tokyo and other regions. Net lease income from these assets amounted to ¥6,256 million (U.S.$56,507 thousand) and ¥5,814 million(lease income and lease cost were generally recorded as net sales and cost of sales, respectively) for the fiscal years ended March 31, 2021 and2020, respectively.
The book value on the consolidated balance sheets, net changes, and fair value of these assets are as follows:
Millions of yen
FY2019FY2020Net change
End of year¥

246,844
97,998344,843
357,015¥¥

Amortization of goodwill
Investments in entities accounted for using
equity method
Increase in property, plant and equipment
and intangible assets

41,128
49

—
324

3,114
952

44,243
1,326

—

—

—

—

144,656¥

231,132
15,711
246,844262,319$$

2,229,452
885,107
3,114,559
3,224,492

Notes: 1. The book value on the consolidated balance sheet is the amount after deduction of accumulated depreciation from acquisition cost.
2. The increase of book value is mainly attributable to the purchase of real estate of ¥127,180 million (U.S.$1,148,668 thousand) and ¥133,872 million, in the fiscal years ended March
31, 2021 and 2020, 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, 2021. For other properties, theCompany reasonably estimated the fair value based on income approach or market approach while the Company used their book value as the fair value for certain properties.

XXII. Segment information, etc.
Segment information
1. Description of reportable segments
The Group’s reportable segments are components of the Group for which separate financial information is available. These segments are subject
to periodic examinations undertaken to enable the Board of Directors of the Group to make decisions on allocating resources and to evaluate
performance.
The Group is primarily engaged in leasing and installment sales, and its operations are divided into three reportable segments based on the
major types of transactions handled, namely the Lease and Installment Sales segment, the Financing segment, and the Other segment.
The Lease and Installment Sales segment conducts businesses including leasing of IT and office equipment, industrial machinery, and otherassets (includes the sale, etc. 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 operatingloans, investment in marketable securities for financial income, forming tokumei-kumiai (silent partnership) arrangements, etc. The Other segment
primarily engages in environmental and energy-related businesses, fee handling, BPO and mobility business (new business fields), etc.

2. Explanation of measurements of sales, profit (loss), asset, liability, and other items for each reportable segment
Measurements used in accounting for reportable segment are the same as those disclosed in “Basis of presentation.” Profit of reportablesegment is based on operating profit. Transactions with other segments are based on prevailing market prices.

—

¥

317

¥

¥

144,974

Thousands of U.S. dollars
Lease and Installment
Sales

FY2020Book value¥

Depreciation

Thousands of U.S. dollars(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Fair value at end of year

Other

Sales

Net sales

Beginning of year

Financing

Financing

Other

Total

Sales
Revenues from external customers$

4,892,685$

11,586

Transactions with other segments$

31,202

4,904,270

Net sales

185,954

1,607,270$

18,019217,156

6,685,908
60,806

1,625,289

6,746,715

Segment profit$

300,786$

138,216$

79,356$518,358

Segment assets$

16,705,733$

8,421,093$

1,092,104$

26,218,929

Other items
Depreciation
Amortization of goodwill
Investments in entities accounted for using
equity method
Increase in property, plant and equipment
and intangible assets

371,465445—

28,133

399,598

2,930

8,605

11,979————1,306,511

$

—

$

$

2,871

$

1,309,382

FY2019 (From April 1, 2019 to March 31, 2020)
Millions of yen
Lease and Installment
Sales

Financing

Other

Total

Sales
Revenues from external customers¥

Transactions with other segments
Net sales
Segment profit
Segment assets¥¥

528,853
1,026
529,880
33,134
1,704,786¥¥¥

15,9793,708
19,688
11,330804,101¥¥¥

167,497
1,078
168,575
9,254
128,744¥¥¥712,330
5,813
718,143
53,7192,637,632

Other items
Depreciation
Amortization of goodwill
Investments in entities accounted for using
equity method
Increase in property, plant and equipment
and intangible assets¥

33,694
—

—
324

2,397
807

36,091
1,132

—

—

—

—

178,524¥—¥

12,424¥

190,948104

105 Financial Section

Fuyo Lease Group Integrated Report 2021

4. Description of nature of differences between amounts of reportable segments total and consolidated financial
statements
Net sales

Millions of yen

Thousands of U.S. dollars
FY2019FY2020

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Eliminations
Net sales reported on the consolidated statements of income¥

746,996(6,732)740,263

Profit¥¥718,143(5,813)
712,330

Millions of yen$$

Thousands of U.S. dollars
FY2019FY20206,746,715(60,806)
6,685,908

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Eliminations
Corporate expenses (Note)
Operating profit reported on the consolidated statements of income ¥57,392(3,206)(9,630)44,555¥¥53,719(2,486)(9,808)41,423$$518,358(28,963)(86,981)402,413

Information associated with reportable segments
1. Information for each product or service
FY2020 (From April 1, 2020 to March 31, 2021)
This information is omitted as it is identical to that in segment information.
FY2019 (From April 1, 2019 to March 31, 2020)
This information is omitted as it is identical to that in segment information.

2. Information for each region
FY2020 (From April 1, 2020 to March 31, 2021)(1) Revenues from external customers
It is omitted since revenues from external customers in Japan exceeds 90% of net sales on the consolidated statement of income.

(2) Property, plant and equipment
Millions of yen¥

546,417

EuropeNorth America andLatin America

Japan

¥

8,656

Ireland

¥

Asia

Other

116,509

¥

2

¥

Total

5,792

Millions of yen

Thousands of U.S. dollars
FY2019FY2020¥¥76,325

Corporate assets (Note)
Total assets reported on the consolidated balance sheets

2,902,959¥

2,979,285

2,637,632$

114,966¥

2,752,598

26,218,929
689,354$

26,908,283

Note: Corporate assets include surplus funds (cash and deposits, etc.), long-term investment funds (investment securities) and assets related to administrative divisions that are not
attributable to any reportable segment.

Depreciation

Millions of yen

Thousands of U.S. dollars
FY2019FY2020

FY2020$4,935,129EuropeNorth America andLatin America

Japan

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

677,379

Thousands of U.S. dollars

Note: Corporate expenses are mainly selling, general and administrative expenses that are not attributable to any reportable segment.

Assets106$

78,188

Ireland

$

Asia

Other

1,052,289

$

25

$

Total

52,316$

6,117,947

Notes: 1. The figures shown are presented according to the respective countries and regions 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, Taiwan, Singapore, Malaysia

FY2019 (From April 1, 2019 to March 31, 2020)(1) Revenues from external customers
It is omitted since revenues from external customers in Japan exceeds 90% of net sales on the consolidated statement of income.

(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Adjustment
Amounts reported on the consolidated financial statements¥

44,243
1,907
46,150¥¥36,091
1,768
37,859$$399,598
17,227
416,825(2) Property, plant and equipment
Millions of yen

Amortization of goodwill

Millions of yen

Thousands of U.S. dollars
FY2019FY2020

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Adjustment
Amounts reported on the consolidated financial statements¥

Investments in entities accounted
for using equity method

1,326
—
1,326

¥

1,132
—
1,132

¥

Millions of yen$$

Thousands of U.S. dollars
FY2019FY202011,979—11,979FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Adjustment
Amounts reported on the consolidated financial statements¥—
28,942
28,942¥¥—
23,65723,657$$—
261,405
261,405¥

407,674

EuropeNorth America andLatin America

Japan

Note: Depreciation adjustments mainly represent depreciation on own-used assets.

¥

9,384

Ireland

¥

Asia

Other

130,213

¥

3

¥

Total

5,835

¥

553,111

Notes: 1. The figures shown are presented according to the respective countries and regions 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

3. Information for each of main customers
FY2020 (From April 1, 2020 to March 31, 2021)
It is omitted since among the revenues from external customers, there are no specific customers accounting for 10% or more of net sales on
the consolidated statement of income.
FY2019 (From April 1, 2019 to March 31, 2020)
It is omitted since among the revenues from external customers, there are no specific customers accounting for 10% or more of net sales on
the consolidated statement of income.

Disclosure of impairment losses on non-current assets for each reportable segment

Note: Adjustments for investments in entities accounted for using equity method mainly represent the amount of funds invested in entities accounted for using equity method.

Increase in property, plant and equipment
and intangible assets

Millions of yen

Thousands of U.S. dollars
FY2019FY2020

FY2020 (From April 1, 2020 to March 31, 2021)
Millions of yen

FY2020

Lease and Installment
Sales(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Reportable segments total¥

Adjustment
Amounts reported on the consolidated financial statements¥

144,974
4,177
149,152¥¥

190,948
1,690
192,638$$

1,309,382
37,7291,347,111

Impairment losses¥—

Financing¥—

Corporate/
Elimination

Other

¥

1

¥

—

Total

¥

1

Thousands of U.S. dollars
Lease and Installment
Sales

Note: Adjustments on increase in property, plant and equipment and intangible assets mainly represent capital investment in own-used assets.

Impairment losses$—

Financing$—

Corporate/
Elimination

Other

$

10

$

—

Note: The amount in “Corporate/Elimination” is the impairment losses relating to corporate assets that are not attributable to any particular segment.

Total

$

10

107 Financial Section

Fuyo Lease Group Integrated Report 2021

FY2019 (From April 1, 2019 to March 31, 2020)

FY2019 (From April 1, 2019 to March 31, 2020)
Millions of yen

Lease and Installment
Sales

¥

Impairment losses—

Financing¥

Corporate/
Elimination

Other

—

¥

¥

1

Total

¥

1,281

Type

Name

Location

1,283

Amortization and unamortized balance of goodwill for each reportable segment

Major
shareholder

Hulic Co.,Ltd.

Chuo-ku,
Tokyo

Percentage ofRelations
Transaction
Business or voting rights
with related Transaction
amount(Millions of yen) occupation holding (held)
details(Millions of yen)parties(%)¥62,718

Real estateleasingbusiness

Millions of yen¥

Balance at end of period

246

Financing¥

Corporate/
Elimination

Other

5,109

¥

15,362

¥

Total

¥

—

20,718

Thousands of U.S. dollars
Lease and Installment
Sales

$

Balance at end of period

2,223

Financing$

Corporate/
Elimination

Other

46,146$

138,752

$

Total

$

—

187,122

Note: The information about amortization of goodwill is omitted as it is identical to that in segment information.

FY2019 (From April 1, 2019 to March 31, 2020)
Millions of yen
Lease and Installment
Sales

¥

Balance at end of period—

Financing¥

Corporate/
Elimination

Other

5,433

¥

16,315

¥

Total

¥

—

21,749Note: The information about amortization of goodwill is omitted as it is identical to that in segment information.

FY2020 (From April 1, 2020 to March 31, 2021)

Type

Major
shareholder

Name

Hulic Co.,Ltd.

Chuo-ku,Tokyo

Location

Chuo-ku,
Tokyo

Percentage ofRelations Transaction Transaction
Business or voting rights withrelatedamountdetails(Millions of yen) occupation holding (held)
parties(Millions of yen)(%)
Capital¥62,718

Real estateleasingbusiness

Direct(Holdings)
6.0
Direct(Held)
14.0

Lease
transactions
Purchase ofoperatingassetsSale ofoperatingassetsLease
payments
received¥4,752

Purchase ofoperatingassets¥23,069

Sale ofoperatingassets¥4,644

Percentage ofRelations Transaction Transaction
Business or voting rights withamount(Thousands ofrelatedoccupation holding (held)
details(Thousands of
U.S. dollars)parties
U.S. dollars)(%)
Capital$566,456

Notes: 1. The above amounts do not include consumption taxes.
2. Lease transactions are concluded upon submission of estimates based on actual market conditions, and are subject to the same terms and conditions as general transactions.
3. The purchase of operating assets is determined based on the actual market price. The transaction amount records the total transaction amount that occurred in the fiscal year ended
March 31, 2020.

(2) Transactions of consolidated subsidiaries of the company reporting the consolidated financial statements withrelated parties
Parent company of the company reporting the consolidated financial statements and major shareholders (limited to companies, etc.), etc.
FY2020 (From April 1, 2020 to March 31, 2021)
Not applicable
FY2019 (From April 1, 2019 to March 31, 2020)
Not applicable

2. Notes to parent company and significant associates(1) Parent company’s information

1. Overview of special purpose entities subject to disclosure and of transactions using special purpose entities subject
to disclosure

Parent company of the company reporting the consolidated financial statements and major shareholders (limited to companies, etc.), etc.

Hulic Co.,Ltd.

¥29,032¥60,322

XXIV. Information on special purpose entities

1. Related party transactions(1) Transactions of the company reporting the consolidated financial statements with related parties

Major
shareholder

Purchase ofoperatingassetsLease
receivables andinvestments inleasesThere are no significant associates.

XXIII. Related parties

Location¥4,818(2) Summary financial information for significant associates

FY2020 (From April 1, 2020 to March 31, 2021)
Not applicable
FY2019 (From April 1, 2019 to March 31, 2020)
Not applicable

Name

Purchase ofoperatingassetsDirect(Held)
14.0

Lease
payments
received

Leasetransactions(Millions of yen)

There is no parent company.

Information about gain on bargain purchase for each reportable segment

Type

Direct(Holdings)
6.0

Year-endbalance

Account
title

CapitalFY2020 (From April 1, 2020 to March 31, 2021)
Lease and Installment
Sales

108

Real estateleasingbusiness

Direct(Holdings)
6.0
Direct(Held)
14.0

Lease
transactions
Purchase ofoperatingassetsSale ofoperatingassetsLease
payments
received$42,926

Purchase ofoperatingassets$208,362

Sale ofoperatingassets$41,944

Account
title
Lease receivables
and investments
in leases

Year-endbalance

For the diversification of funding sources and stable financing, 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.
Millions of yen(Millions of yen)

¥62,888

Number of special purpose entities
Total value of assets as of the latest balance sheet (without eliminationof inter-company transactions)
Total value of liabilities as of the latest balance sheet (without
elimination of inter-company transactions)Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

Two companies

Two companies

Two companies

¥

4,219

¥

4,540

4,214

$

38,106

4,535

38,063

2. Amount of transactions, etc. with special purpose entities subject to disclosure

Account
title
Lease receivables
and investments
in leases

Year-endbalance

FY2020 (From April 1, 2020 to March 31, 2021)
Amount of major transactions or thebalance as of the end of the fiscal year

(Thousands of
U.S. dollars)$567,995

Notes: 1. The above amounts do not include consumption taxes.
2. Lease transactions are concluded upon submission of estimates based on actual market conditions, and are subject to the same terms and conditions as general transactions.
3. The purchase and sale of operating assets is determined based on the actual market price. The transaction amount records the total transaction amount that occurred in the fiscal
year ended March 31, 2021.

(Millions of yen)Transferred assets (Note 1)
Lease receivables and investments in leases
Installment receivables

¥

289
—

Major gain or loss
Item

Gain on transfer(Note 2)

Amount(Millions of yen)¥4109 Financial Section

Fuyo Lease Group Integrated Report 2021

Transferred assets (Note 1)$

Installment receivables(Thousands of U.S. dollars)

Gain on transfer(Note 2)

2,611—

Business combination through acquisition of shares

AmountItem(Thousands of U.S. dollars)

Lease receivables and investments in leases

XXVI. Subsequent events

Major gain or loss

Amount of major transactions or thebalance as of the end of the fiscal year$

40

FY2019 (From April 1, 2019 to March 31, 2020)

Transferred assets (Note 1)(Millions of yen)

Gain on transfer(Note 2)

2,531
733

Business description:

Amount

Item(Millions of yen)

Installment receivables

Nihon Credit Lease Co., Ltd.

Major gain or loss

Amount of major transactions or thebalance as of the end of the fiscal year¥

The Company resolved at a Board of Directors meeting held on March 26, 2021 to acquire additional shares of Nihon Credit Lease Co., Ltd.
(hereinafter referred to as “Nihon Credit Lease”), an equity-method associate of the Company, to make it a wholly owned subsidiary. The Company
concluded a share transfer agreement with NICHIIGAKKAN CO., LTD. and acquired the shares on April 1, 2021. Following the acquisition, Nihon
Credit Lease became a consolidated subsidiary of the Company.

1. Overview of the business combination(1) Name of acquired company and its business description
Name of acquired company:

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 net sales.

Lease receivables and investments in leases

110

¥

109

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 net sales.

Leasing and installment sales of nursing care and welfare equipment, medical equipment, and information equipment(2) Reasons for the business combination
To promote the expansion of the business domain of the Fuyo Lease Group and further strengthen the efforts for the medical and welfare
business, which is one of the strategic fields.

(3) Date of the business combination
April 1, 2021

XXV. Per share information
Yen

U.S. dollars
FY2019FY2020¥

Basic earnings per share
Diluted earnings per share

10,153.22
986.18979.39¥9,204.20
871.95865.56

$

91.70
8.91
8.85

Notes: 1. Treasury shares are deducted when calculating the number of common shares as of the fiscal year-end, used in the computation of the net assets per share and includes the Company’s
shares owned by the Board Benefit Trust (BBT). The number of treasury shares owned by the Board Benefit Trust (BBT) as of the fiscal year-end is 96,700 shares for the fiscal year ended
March 31, 2021 and 102,500 shares for the fiscal year ended March 31, 2020.
2. Treasury shares are deducted when calculating the average number of shares during the period, used in the computation of the basic earnings per share and includes the Company’s
shares owned by the Board Benefit Trust (BBT). The average number of treasury shares owned by the Board Benefit Trust (BBT) during the period is 97,065 shares for the fiscal year
ended March 31, 2021 and 102,618 shares for the fiscal year ended March 31, 2020.
3. Calculation basis of net assets per share is as follows.

Millions of yen

Total net assets

Thousands of U.S. dollars

As of March 31, 2021

As of March 31, 2020

As of March 31, 2021

¥

¥

$

Amounts excluded from total net assets
Of which, share acquisition rights
Of which, non-controlling interests
Net assets attributable to common shares
Number of common shares as of the fiscal year-end used in thecalculation of net assets per share (thousands shares)

344,796
40,231
704
39,527
304,565
29,996

311,819
35,950764
35,186
275,869
29,972

3,114,134
363,3636,359
357,004
2,750,772
29,996

4. Calculation basis of basic earnings per share and diluted earnings per share is as follows

Millions of yen

Thousands of U.S. dollars
FY2019FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

29,566—¥26,187—$

267,039—

29,56626,187

267,039

29,98130,03329,981

Diluted earnings per share
Increase in the number of common shares (thousands shares)
Residual securities that are not dilutive and not included in thecalculation of diluted earnings per share

No change(6) Ratio of voting rights acquired
Ratio of voting rights held before the business combination date:

30.00 %

Ratio of voting rights acquired on the business combination date:

70.00 %

Ratio of voting rights held after the acquisition:

100.00 %(7) Primary basis for the determination of the acquirer
It is because the Company additionally acquired 70.00% of the issued shares of Nihon Credit Lease.

2. Acquisition cost of the acquired company and breakdown by type of consideration
Acquisition priceCash and deposits

Acquisition cost

¥977 million

U.S.$8,828 thousand¥977 million

U.S.$8,828 thousand

There is a possibility that certain adjustments will be made to the acquisition price.

3. Details and amounts of main acquisition-related expenses
Fees to advisors, etc.: ¥19 million (U.S.$180 thousand)4. Amount, cause, amortization method and period of goodwill recognizedNot yet determined.

5. Amounts of assets received and liabilities assumed on the date of the business combination and their major components
Not yet determined.

¥

Amount not attributable to common shareholders
Profit attributable to owners of parent attributable to commonsharesAverage number of shares during the period (thousands shares)

Adjustments to profit attributable to owners of parent(5) Name of the company after the combination

FY2020

Basic earnings per share
Profit attributable to owners of parent

Acquisition of shares by cash

FY2020(April 1, 2020 - March 31, 2021) (April 1, 2019 - March 31, 2020) (April 1, 2020 - March 31, 2021)

Net assets per share(4) Legal form of the business combination

¥

—
207
—

¥

—
221
—

$

—
207
—

Corporate bond issuance
The Company issued straight bonds as follows:

1. Fuyo General Lease Co., Ltd., No. 28 unsecured straight bond
(1) Issue name:
Fuyo General Lease Co., Ltd., No. 28 unsecured straight bond(2) Issuance amount: ¥20,000 million (U.S.$180,636 thousand)(3) Issuance date:
April 21, 2021
(4) Issue price:¥100 per ¥100 of face value(5) Coupon rate:
0.140% per year(6) Redemption date: April 21, 2026
(7) Use of proceeds: To fund capital investments
2. Fuyo General Lease Co., Ltd., No. 29 unsecured straight bond
(1) Issue name:
Fuyo General Lease Co., Ltd., No. 29 unsecured straight bond(2) Issuance amount: ¥10,000 million (U.S.$90,318 thousand)111

Financial Section(3) Issuance date:June 18, 2021
(4) Issue price:¥100 per ¥100 of face value(5) Coupon rate:
0.260% per year(6) Redemption date: June 16, 2028
(7) Use of proceeds: To fund capital investments

Fuyo Lease Group Integrated Report 2021

Report of Independent Auditors

3. Fuyo General Lease Co., Ltd., No. 30 unsecured straight bond
(1) Issue name:
Fuyo General Lease Co., Ltd., No. 30 unsecured straight bond(2) Issuance amount: ¥10,000 million (U.S.$90,318 thousand)(3) Issuance date:June 18, 2021
(4) Issue price:¥100 per ¥100 of face value(5) Coupon rate:
0.360% per year(6) Redemption date: June 18, 2031
(7) Use of proceeds: To fund capital investments

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, 2021, 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, 2021, 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significancein our audit of the consolidated financial statements of the current period. These matters wereaddressed in the context of the audit of the consolidated financial statements as a whole, and informing the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

112

113 Financial Section

Fuyo Lease Group Integrated Report 2021

Report of Independent Auditors

Estimate of residual value of real estate under operating lease transactions

Determination of indicators of impairment of goodwill

Description of Key Audit Matter

Auditor’s Response

Description of Key Audit Matter

Auditor’s Response

The Company is engaged in leasing, installment
sales, commercial loan origination and otherfinancial services. The Company recorded assets
for lease of ¥632,299 million in property, plantand equipment, at cost less accumulated
depreciation in the consolidated financial
statements as at March 31, 2021. Real estatelease assets with a carrying value of¥344,843 million were recognized as describedin Note 21, “Real estate leasing business,” tothe consolidated financial statements.

We performed the following audit procedures,among others, to evaluate the key assumptions
such as future cash flows and other inputs
required to estimate the residual value by
selecting a sample of transactions considering
audit materiality, remaining years of the leaseterm and the type of lease payments:

The Company makes business acquisitions
with the aim of further expanding and growing
its business and has recorded goodwill of¥20,718 million in the consolidated financial
statements as at March 31, 2021, which
consists of goodwill related to the acquisitionof Accretive Co., Ltd., G.I Holdings Inc., LN
Holdings, Co., Ltd. and Yamato Lease Co., Ltd.

We performed the following audit procedures,among others, to evaluate the Company’s
determination of indicators of impairment of
goodwill.

・ Audit procedures performed for lease
contracts that commenced in the current
year.
In order to evaluate the inputs such as therents and the occupancy rate of the property,
which form the basis for calculating future
cash flows used by the Company inestimating the residual value, we inspected
the real estate valuation reports by engaging
the real estate valuation experts from our
network firm. We recalculated the residual
value to evaluate the Company’s estimation
process.

As described in Note 1, “Basis presentation 4.
Summary of significant accounting policies(2) Depreciation and Amortization,” assets
leased under operating lease transactions are
depreciated to their residual value using thestraight-line method over the lease term andthe depreciation cost were included in the costof sales. The residual value at the end of thelease term is estimated at the inception of thelease and is revised, as deemed necessary,during the lease term. If the leased assets are ・ Audit procedures performed for lease
contracts that commenced in previous years.
expected to be disposed of at a loss, thecorresponding amount is recorded under cost
In order to evaluate the Company’s estimateof sales.
of the residual value, we compared actual
rents and occupancy rates against the
As described in Note 2, “Significant accounting
original estimates to analyze the cause of
estimates,” the Company estimates the residual
difference.
value using future cash flows and discountrates, and the significant assumptions for ・ Audit procedures performed for lease
estimating the residual value is future cash
contracts terminated during the current year.
flows. The future cash flows of real estate
In order to evaluate the effectiveness of thelease transactions are estimated based on terms
Company’s estimation process, we checkedof contracts, rents, occupancy rates, etc.
actual sale prices with the sale agreements
However, these transactions are highly specificand compared them with the estimatedand the estimation of the residual value requires
residual values.
complex judgment, and expert knowledge andexperience. In addition, since the value of realestate lease transactions is significant andoperating lease transactions are not full payout,
an inaccurate estimation of the residual value
can have a considerable impact on the profit orloss calculation.
Based on the above factors, we havedetermined estimation of the residual value ofreal estate under operating lease transactions
as a key audit matter.

・ In order to assess the possibility ofsignificant deterioration in operating resultsof the CGU to which the goodwill belongs,
we performed a comparative analysis
between the initial business plan at thetime of acquisition of each subsidiary withthe actual financial results at the end of the
fiscal year and a variance analysis on the
differences identified between the businessplan and actual business results.

As described in Note 1, “Basis presentation 4.
Summary of significant accounting policies(9) Amortization method and period of
goodwill,” the Company estimates the usefullife of goodwill and amortizes it on a straightline basis over such period. However, if there
are significant changes with an adverse effect ・
The Company assessed the possibility ofon the entity, including the impact of the spreadsignificant deterioration in operating resultsof coronavirus infection, and the recoverableof the CGU to which the goodwill belongs
amount of goodwill is assumed to decrease, it
considering the impact of the spread of theis considered as an indicator of impairment ofcoronavirus infection on economic activities.
goodwill. If the total amount of expected future
In order to evaluate Company’s assessments,
cash flows is less than the carrying amount of
we carried out inquiries of the department
the CGU, an impairment loss on goodwill
in charge about the basis for estimates ofmust be recognized.
revenue growth rates, etc., of each subsidiary
The Company determines whether there are
and performed trend analysis and compared
any indicators of impairment, for example, bywith external data such as growth rates ofcomparing the initial business plan at the timethe industry to which each subsidiaryof acquisition of each subsidiary with the actual
belongs.
results and analyzing factors related to the・ In order to evaluate the Company’s
differences between them and considers theestimation of any change in business
impact on future performance based on these
activities, which significantly reduces thefactors. This involves significant management
recoverable amount of goodwill that has notjudgment on the current and future businessoccurred or is not expected to occur, we
environment. Also, with the increase in goodwill
carried out inquiries with the management,
due to multiple acquisitions in the past, theinspected related materials such as thesignificance of management’s judgment related
consistency between the initial businessto the indicators of impairment of goodwill has
plan of each subsidiary, the business policy
also increased.
of the Company for the current andBased on the above factors, we have identified
the determination of indicators of impairmentof goodwill as a key audit matter.

following fiscal years, and the Company’s
Medium-Term business plan.

114

115 Financial Section

Fuyo Lease Group Integrated Report 2021

Report of Independent Auditors

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 to those risks,and obtain audit evidence that is sufficient and appropriate to provide a basis for our 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.
From the matters communicated with the Corporate Auditor and the Board of Corporate
Auditors, we determine those matters that were of most significance in the audit of theconsolidated financial statements of the current period and are therefore the key audit matters. We
describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would reasonably
be expected to outweigh the public interest benefits of such communication.
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 of Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2021 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.
Ernst & Young ShinNihon LLC
Tokyo, Japan
June 24, 2021
/s/ Hirokazu Tanaka
Designated Engagement Partner
Certified Public Accountant/s/ Toru Nakagiri
Designated Engagement Partner
Certified Public Accountant

116

117 Stock Information / Participation in Initiatives & Third-Party Evaluation

Stock Information

Fuyo Lease Group Integrated Report 2021

Participation in Initiatives

As of March 31, 2021

Stock Overview

118

Individuals and others(including treasury share)

Total number ofauthorized share

100,000,000

Number of shares
outstanding

30,288,000

Share unit number

100

7.4%

shares

15,595 shareholders
2,247,000 sharessharesFinancial Institutions

Foreign Shareholders

shares16.2%

16,0804,923,000 shares

252 shareholders

Number ofshareholders

41.4%

Breakdown of
Shareholders

69 shareholders
12,530,000 shares

Other domestic firms

35.0 %

UNGC: United Nations Global Compact

TCFD: Task Force on Climate-related
Financial Disclosures

RE100

The United Nations Global Compact (UNGC)
is a voluntary initiative in which companies andorganizations act as good members of society andparticipate in the creation of a global frameworkfor sustainable growth by demonstrating
responsible and creative leadership. We becamea signatory in January 2018. We support the 10
principles of the UNGC in four categories (humanrights, labor, environment, and anti-corruption)
and work toward making them happen.

The Task Force on Climate-related Financial
Disclosures (TCFD), which was set up by the
Financial Stability Board (FSB), an internationalorganization of major countries’ central banks
and financial regulators, presents a frameworkfor disclosures relating to climate change. In
May 2019, Fuyo Lease expressed its support
for the recommendations set out in the final
report of the TCFD and is preparing to make therequired disclosures.

JCLP: Japan Climate Leaders'Partnership

EMF: Ellen MacArthur Foundation

Financial Behavior Principles for theFormation of a Sustainable Society

The Ellen MacArthur Foundation (EMF) is aninternational initiative whose purpose is toaccelerate the transition to the circular economy.
We became a member of the foundation in
November 2020 to acquire knowledge of thecircular economy and collaborate with othercompanies and research organizations.

The Principles for Financial Action for the 21st Century
were formulated as the policy recommendation for
financial institutions seeking to fulfill their roles andresponsibilities in forming a sustainable society.
Fuyo Lease signed the principles in June 2016.

Renewable Electricity 100
RE100 is a global initiative run by the Climate
Group, an international NGO in partnershipwith CDP. Member companies commit to, andpublish, a target of 100% renewable energy use
in their businesses by 2050. Fuyo Lease became amember in September 2018, announced targets of
50% renewable energy use by 2024 and 100% by2030, and is taking action to make them happen.

164 shareholders
10,588,000 shares

Major Shareholders (Top 10)
Shareholders

Number of shares held
(in thousands)

Shareholding ratio(%)

4,218,000

14.0 %

Hulic Co., Ltd.
Meiji Yasuda Life Insurance Company

2,690,000

8.9 %Retirement Benefit Trust managed by Mizuho Trust & Banking Co., Ltd. (Marubeni Corporation account);
Custody Bank of Japan, Ltd. as a Trustee of Retrust

1,512,000

5.0 %The Master Trust Bank of Japan, Ltd. (Trust Account)

1,485,000

4.9 %Custody Bank of Japan, Ltd. (Trust Account)

1,100,000

3.7%

Sompo Japan Insurance Inc.

1,002,000

3.3 %Azbil Corporation

1,000,000

3.3 %Mizuho Bank, Ltd.

907,000

3.0 %BBH FOR FIDELITY PURITAN TR : FIDELITY SR INTRINSIC OPPORTUNITIES FUND

600,000

2.0 %

NICHIREI CORPORATION

416,000

1.4 %Annual dividend per share (Yen)In February 2018, we became a supporting
member of JCLP, a coalition of companies working
toward a sustainable, zero-carbon society, and an
executive member in December 2018. As well as
engaging in our own zero-carbon initiatives, weare involved in a broad range of activities that
address climate change, such as developing andproviding solutions that will help the transition toa zero-carbon society, collaborating with global
networks, and making policy recommendations.

Principles for Financial Action for the 21st Century

Third-Party Evaluation
Inclusion in ESG-Related Stock IndicesWe are strengthening our environment, social, and governance (ESG) initiatives as well as progressing CSV activities to solve social problems.
We have been evaluated by the following third-party organizations that mainly evaluate companies based on non-financial information.

* The inclusion of Fuyo General Lease in any MSCI Index, and the use of MSCI logos, trademarks, service marks or Index names herein, do not constitute a sponsorship, endorsement or promotion of
Fuyo General Lease by MSCI or any of its affiliates. The MSCI Indexes are the exclusive property of MSCI. MSCI and the MSCI Index names and logos are trademarks or service marks of MSCI or its
affiliates.

300
260

(Forecast)

250

240

200

188

150

130

Evaluation of Our Initiatives

205

146

100

100
74

80

50
0
2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/3(Forecast)In fiscal 2019, we received the Gold Award (Ministerof the Environment Award) in the Bonds category of
the ESG Finance Awards. Recipients are recognizedby the Ministry of the Environment as financial
institutions that actively engage in ESG finance.

The Fuyo Lease Group Integrated Report 2020
received the Excellence Award in the Environmental
Reporting category of the 24th Environmental
Communication Awards hosted by the Ministry of
the Environment and Global Environmental Forum.

Fuyo Lease received Platinum Kurumin certificationin fiscal 2017, which is awarded to companies with
Kurumin certification that have executed initiatives
at a higher standard.

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 2021,” please contact:

Creating Shared Value Promotion Office TEL: +81-3-5275-8809 E-mail: fuyo-ir@fgl.co.jp