41TOKYO CENTURY CORPORATION

Review of Past Medium-Term Management Plans
Billions of yen

120

90

14.5

14.0

Ordinary income
ROE60

Tokyo Century calculates cost of shareholders’ equity based on factors including the expected rate of return.

Cost ofShareholders’ Equity

As of fiscal 2022, the Company’s cost of shareholders’ equity was estimated to be around 10%.

18.5
14.8

46.3

44.2

33.4

46.3

13.9
55.2

42

INTEGRATED REPORT 2023

12.5
60.7

13.1
68.0

91.1

86.3

12.9

13.7

73.5

79.0

78.1

11.5

8.7

12.7

%

106.2

90.5

20158.4*

8.110305(FY)2011

Year ofMerger

First–SecondMedium-TermManagementPlans

2012

2013

2014

2015

Major Accomplishments
Expanded business domain into promising growth areas
Became a comprehensive financial services company focusing on assets

2016

ThirdMediumTerm
ManagementPlan

2017

2018

Major Accomplishments
Removed “Leasing” from name toexpand business based on “Finance× Services × Business Expertise”
concept unbound by prior scope
Expanded in growth areas throughaggressive M&A activities

Fourth Medium-Term Management Plan
Reasons for Launch of New Fourth Medium-Term Management Plan

3FourthMediumTermManagementPlanNew Fourth
MediumTerm
Management
Plan

Establish a global platform
for stable business,
including viable businesses

Capital and Business Alliance with NTT

Basic Strategies

20212022*1 Excludes one-time extraordinary losses related to Russia

VisionEstablishment of a solid
operating foundation tosupport Tokyo Century over thenext decade

Medium-Term
Management Plan 2027

Review

Expansion of co-creative projects with the NTT Group
Growth of joint venture NTT TC Leasing Co., Ltd., investment in data center businesses,
establishment of joint renewable energy fund, etc.

Expand businessdomains

Expansion of scope of collaborative businesses with partners
Expansion of scope of business to include storage batteries and circular economy together
with ITOCHU Corporation, JFE Engineering Corporation, etc.

Capital participation in Tokyo Century by NTT (10% equity holding)Plan for expansion in growth fields through collaboration combining respective strengths

2

2020

New Fourth Medium-Term Management Plan

Basic Policies

12019

Build a solid, high-quality
business portfolio

Consolidation of U.S. Aircraft Leasing Company
Aviation Capital GroupStrengthen strategicpartnerships

Goal of bolstering aircraft leasing assets in light of aircraft
market growth; synergies anticipated with Tokyo Century’s
aviation business

Build a management basesupporting the improvementof corporate value

Emphasize asset
efficiency in businessportfolio management

Strengthening of relationships by accommodating customer needs
Promotion of co-creative projects in various operating segments that address partner needs,
fostering of trust, and reinforcement of project sourcing capabilities
Investment in start-up companies boasting innovative technologies
Preparation for creation of new businesses through investment in start-up companies with
proprietary technologies in digital and mobility areas
Improvement of asset efficiency centered on Equipment Leasing segment via growth of high-ROA
businesses through joint ventures (equity-method affiliates) with partner companies

Management Targets of New Fourth Medium-Term Management Plan (Concluded in Fiscal 2022)
KPIs
Ordinary income
Net income attributableto owners of parent
Shareholders’ equity ratio

ROETargets

Results¥130.0 billion¥106.2 billion¥80.0 billion
12%12%¥4.8 billion
12.5%
0.7%

Reasons for Failure to Accomplish Targets
UnaccomplishedUnaccomplished

AccomplishedUnaccomplished

Recovery of ROE to double digitsEnhancement of earnings power through portfolio reforms and heightening of profits through growth investments

1. Diminished earnings power

Diminishment of earnings power centered on aviation businessdue to significant impacts of COVID-19 pandemic and Russia’s
invasion of Ukraine

2. Impairment losses recorded due tooperating environment deterioration

Recording of extraordinary losses on aircraft associated with
Russian airlines and of valuation losses on operational investment securities due to sudden fluctuations in the stock market

ChallengesandResponses

Exploration of new growth fields and creation of new business models
Pursuit of rapid ROA growth through shift to more profitable business models via expansion of business domain

Reinforcement of management foundation supporting business model
1. Improvement of employee engagement through entrenchment of corporate culture supporting employee ambitions
2. Recruitment and development of highly specialized human resources
3. Acceleration of digital transformation strategies for improving customer value proposition and operational efficiency

C H AP T E R 3

2010

Medium-Term Management Plan 2027 and Medium- to Long-Term Vision2009

43

TOKYO CENTURY CORPORATION44

INTEGRATED REPORT 2023

Medium-Term Management Plan 2027 (Fiscal 2023–Fiscal 2027)
Vision for Five Years from Now

Measures for Achieving Vision

The Tokyo Century Group seeks to enhance its strengths and go beyond simply responding to change in order to transform

1 Road Map toward Management Targets

itself to become a corporate group that brings about change.

Path toward Target for Net Income

+7.3

+26.9

Transform Ourselves and Bring About Change

Theme—TC Transformation and Sustainable Growth—

TCX

Basic Policies

Development of human resourcesand organizations that can bringabout change

P.71¥4.8 billion

FY2022
ResultTCTransformation

GX

P.69

Major strategies of operating segments

EPS ¥38.95

HRXP.67

EPS of approx. ¥810

Equipment
Leasing

Automobility

Specialty
Financing

International
Business

Environmental
Infrastructure

Others

FY2027
Target2 Balance Sheet

Green Transformation

Digital Transformation

Creation of carbon-neutrality-related
businesses

Improvement of customer value
proposition using digital technologies

DXApprox. ¥1 trillion
increase in total assets

Breakdown of approx. ¥1 trillion
increase in segment assets

Investments in growth areas
Investments in business areas anticipating high returns

Strengthen Earnings PowerProfit growth

Strategies

Financialstrategies
Strengthen
management
base

Facilitate asset
turnover in business
investments

Replace/divest
unprofitable assets

Acceleration of humanresource andorganizational strategies

Strengthening offinancial base

Increase the value ofexisting businesses

Enhancement of risk
management

March 31, 2023
ResultPromotion of green
transformation anddigital transformation

Financial
targets

ROA(ratio of net income to total assets)
ROE

Management
Targets(Fiscal 2027)

Non-financial
targets

Initiatives for realizing 50%
greenhouse gas emissions
reduction by fiscal 2030*1
Employee engagement index*2(including for participating Group companies)¥100.0 billion
1.4%
10%

Pursue price book-value
ratio of 1.0 times or more throughachievement of ROE target(Align financial targets with net income-based figures)

Maintain andimprove ratio of
positive responses

Accelerate ESG strategies forsupporting accomplishment offinancial targets*1 Target of a 50% reduction in greenhouse gas emissions by fiscal 2030 from base year of fiscal 2021 announced*2 Calculated based on number of positive responses to multiple-choice questions in the employee awareness survey

Automobility

+¥150.0 billion

Specialty Financing+¥400.0 billion

International Business

+¥250.0 billion

March 31, 2028Target

3 Fund Procurement Directive and Risk Management
80

Stabilization of Fund Procurement
TokyoCentury will continue to implement fund procurement strategies emphasizing stability given that the longterm funding ratio has remained around 85%.
60
Long-Term Funding Ratio
100%
75%

33%–50%+¥50.0 billion

Environmental Infrastructure+¥200.0 billion

Review of ROIC spread management by operating
segment and incorporation into portfolio allocation
Replacement/divestiture of unprofitable assets

Explore newbusiness fields

Strengthen Group consolidated management

Net income attributable toowners of parent

Portfolio revision

Increases in ROA

Equipment Leasing

67.6%
51.5%

78.3%

84.5%

Fund Procurement Risk Management
 he Asset Liability Management Committee, which isT
chaired by the president, meets quarterly, in principle, toreview reports on Groupwide fund procurement activities
and to discuss and decide measures for hedging againstinterest rate, foreign exchange, and other market risks.

85.7%

51.7%

Approx. ¥2.6 trillion(58%)

Interest-Bearing Debt50%

Approx. ¥25%
0Yen-denominated

ACG
54%

4.5 trillion(As of March 31, 2023)
18/3

19/3

20/3

21/3

22/3

23/3

Foreign currencydenominatedApprox. ¥1.9 trillion(42%)

C H AP T E R 3

Reformation of portfolio toachieve high profitability
and maintain stable growth

PX

P.65

–16.1
Dissipation of
one-time gains,implementationof buffer against
lossesMedium-Term Management Plan 2027 and Medium- to Long-Term Vision

P.63¥58.0 billion

Human Resource andOrganizational Transformation+3.9+6.1¥62.8 billion
Russia-related
extraordinary
lossesPortfolio Transformation

+17.3

+9.1

After excluding
one-time losses¥100.0 billion

Increase due to absenceof valuation losses on
operational investment
securities

45

TOKYO CENTURY CORPORATION46

INTEGRATED REPORT 2023

Directive for Long-Term Growth
Ongoing Improvement of Corporate Value from Long-Term Perspective
POINT

1

Cultivation of sense of anticipation using
highly profitable portfolio capable ofconsistent earnings growth

Improvement of asset
and capital efficiency

POINT

2

ROA

POINT

POINT

3

Achievement of stable andhigh earnings growth

Expansion of earnings through growthstrategies

Business StrategiesShift to highly profitable business models

Business Models

Financial discipline and control within
capital use rate guideline targets(Message from President of Corporate

Reduction of performance volatility throughenhancement of risk management systems

Risk Management

Reduction of disparities in information availability through enhanced engagement with analysts
and investors, increased information disclosure,and other investor relations activities

S takeholder
Engagement

P.49

Management emphasizing cost of capital
advanced through strong corporate governanceC orporate
governance

P.95

Expansion of market’s sense of anticipation
toward growth through investments in growthareas and advancement of business strategies

Business Strategies

Promotion of non-financial strategies forsupporting ongoing growth

ESG Strategies

P.61

ROE

Tokyo Century seeks to achieve ongoing improvements in corporate value by heightening asset
and capital efficiency, reducing the volatility and increasing the predictabilityof performance to lower cost of capital, and achieving stable and high earnings growth.

Financialleverage

PBR = ROE × PERPOINT2Expansion of Earnings through Growth Strategies

Cost ofcapital

Earnings growth and improvedasset and capital efficiency

P.31

Planning Unit)

P.75

PERPOINT

14.8%

3ROEGrowth¥100.0 billion

8.4%*

Financial Strategies

P.61

P.83

10%

Price Book-Value Ratio and ROE Source: Bloomberg¥62.8 billion*Times%


2.0

20

Tokyo Century’s ROE (right axis)
1.5

Net income attributable toowners of parent¥23.6 billion

101.02015

2020

2022

2027

00.81 times*2

Medium-Term
Management Plan 2027

2010

8.4%*1 okyo Century’s price book-value ratio
T(left axis)
Average price book-value ratio formajor leasing companies (left axis)

0.5

2030

(FY)

* Excludes one-time extraordinary losses related to Russia

0
09/3

10/3

11/3

12/3

13/3

14/3

15/3

16/3

17/3

18/3

19/3

20/3

21/3

22/3

23/3

*1 Excludes one-time extraordinary losses related to Russia*2 Figure as of June 30, 2023

C H AP T E R 3

P.59

Medium-Term Management Plan 2027 and Medium- to Long-Term Vision1

Reduction of volatility and increasein predictability of performance