S h i ft .

Tokyo Century Corporation Integrated Report 2017

Creating newvalues from

Fina nce×Serv ices
×
Busi ness
Expe rtiseTokyo Century Corporation Integrated Report 2017

Profile

Combining Finance
Services Business
Expertise to explore new
domains for supporting
the business developmentof our global customers
while realizing a prosperous
and rewarding society

Solutions toyour Pursuits
Creating new values from
Finance × Services × Business ExpertiseTokyo Century
4

Tokyo Century Corporation Integrated Report 2017Management Philosophy
Tokyo Century Group will work alongsidecustomers in pursuit of their growth as ahighly specialized and unique financial
services company and will contribute to thecreation of an environmentally-sound,sustainable economy and society.

Contents
2

The Source of Tokyo Centuryʼs Strength8

Tokyo Centuryʼs Trajectory of Growth

10

Tokyo Century Groupʼs Value Creation Model

12

Financial and Non-Financial Highlights

16

A Message from the President & CEO

22

Features:Taking on the Challenge of Creating New Values
from Finance Services Business Expertise
22 Feature 1: Finance Technology
Exploring New Domains by
Promoting Alliance Strategies with
Top-Ranking Local Companies
26 Feature 2: Services Business ExpertiseTokyo Centuryʼs Initiatives for Creating a
Sustainable Economy and Society

28

Overview of Strategies by Operating Segment
28 Equipment Leasing
32 Specialty Financing
36 Domestic Automobile Financing
40 International Business

44

Roundtable Discussion on Corporate Governance:
Evolving Business Fields of“Finance Services Business Expertise” andthe Future of Corporate Governance48

Corporate Governance

52

Management Organization

54

Human Resources

57

Society58

Environment

60

Financial Section

98

Main Subsidiaries and Affiliates /Japan Desk

100

Stock Information / Bond Ratings

101

Corporate Information

Editorial Policy: Tokyo Century publishes an integrated report comprising its
annual and CSR reports that it previously published separately. The integrated
report briefly covers financial information, including management direction,
strategies, and a review of operations as well as non-financial information on its
initiatives with respect to the environment, society, and governance (ESG). Our
objective is to help shareholders, investors, and other stakeholders understandhow the Group will create value over the medium to long term. We compile theintegrated report with reference to the International Integrated Reporting
Framework of the International Integrated Reporting Council (IIRC) to maintainthe perspective of stakeholders.
Forward-Looking Statements: Statements in this integrated report with respect
to Tokyo Century Groupʼs plans, forecasts, strategies, presumptions, and otherstatements that are not historical facts are forward-looking statements based on
managementʼs assumptions and beliefs grounded on information that wasavailable when the report was written. Actual Group performance may differ
considerably from that discussed in the forward-looking statements.

Tokyo Century Corporation Integrated Report 2017

1

1

Our Strengths

Tokyo Century Group fully harnesses its advantageous business environment, which
offers a regulatory positioning that allows us to move with a high degree of freedom.
We are focused on high-growth areas that transcend the boundaries of leasing andfinance, such as aviation, solar power generation, and robot dispatch (rental) businesses.
We will continue to seek opportunities for further growth by boldly taking on thechallenges of diverse business fields.

The Source of Tokyo Centuryʼs Strength

Taking on Challenges in New Fields of Business for the Future

We are able to directly

Aviation Businessengage in services andChallenge

businesses by fully
harnessing our flexible

Tokyo Century Corporation Integrated Report 2017

ge

2

Solar Power
Generation Business

al

n
le

regulatory positioning.

Chalwith an advantageous

le
n

ge

Ch

business environment

Conventional
Leasing

Robot Dispatch(Rental) Business3

2

Our Strengths
The Source of Tokyo Centuryʼs Strength

We possess a broadcustomer base and the

We are engaged in businesses with high added value in wide-ranging areas thattranscend the boundaries of financing, including Equipment Leasing, which leads theindustry in the volume of leasing transactions; Specialty Financing, which drives our
growth; Domestic Automobile Financing, which provides automobile leasing forcorporate customers and individuals as well as car rental services; and International
Business, with operations in 37 countries around the world.

A Formidable Network
Equipment Leasing

Specialty Financing

Partner Companies

Partner Companies

・Fujitsu・Fujitsu Limited
・IHI
・IHI Corporation
・NHK Group・NHK・Orient Corporation
・Orient

・Kyocera Corporation
・Nippon Tochi-Tatemono Co., Ltd.

Investment

Investment

Major Joint Ventures

Major Joint Ventures

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

・Kyocera TCL Solar LLC
・Nittochi Asset Management Co., Ltd.

t

m

st

ve

en

tm

s
ve

In

ability to raise funds as an

Tokyo Century Group boasts a broad customer base and the ability to raise funds andhas constructed a formidable network of partner companies in Japan and abroad, as
an unprecedented non-banking financial services company that embraces businessdomains beyond leasing.

t

en

In

unprecedented non-banking
Major Joint Ventures
st
t

en

m

Tokyo Century Corporation Integrated Report 2017

m

st

ve

In

・TISCO Tokyo Leasing Co., Ltd.
・President Tokyo Corporation
・Dalian Bingshan Group Hua Hui Da
Financial Leasing Co., Ltd.
・BPI Century Tokyo Lease &Finance Corporation
・HTC Leasing Co., Ltd.
・PT. Big Ecommerce Bersama

Investment

Investment

Partner Companies

Partner Companies

・Nippon Telegraph andTelephone Corporation
・Orient Corporation

Domestic Automobile Financing

4vethat embraces businessdomains beyond leasing.

Infinancial services company

・Nippon Car Solutions Co., Ltd.
・Orico Auto Leasing Co., Ltd.

Major Joint Venturesten

・TISCO Financial Group Pcl.
・Uni-President Enterprises Group・Dalian Bingshan Group・Bank of the Philippine Islands
・Hitachi Construction Machinery Group・Lippo GroupInternational Business5

3

Our Strengths
The Source of Tokyo Centuryʼs Strength

Tokyo Century Groupʼs growth is driven by its diversely talented personnel. To serveas the ideal partner in supporting customers in their pursuits, we seek to nurture andbring to bear personnel who demonstrate professionalism, which entails having ahigh degree of expertise, skills and experience, the ability to manage information, andcommunication skills. Foresight, imagination, and creativity are also essential for
responding to the rapid changes taking place today. We will forge ahead without fearof failure by being able to see across all boundaries and give shape to ideas. We strive
to create an organization that is driven by the spirit of rising to the challenge ofpioneering new domains.

Pioneering New Domains with the Power of Tokyo Centuryʼs Human Resources

We are a company with apowerful innovation mindset
GlobalInnovativethat rides the changing
currents of the time byProfessional

pursuing challenging new
businesses.

6

Tokyo Century Corporation Integrated Report 20177

Tokyo Centuryʼs Trajectory of GrowthTokyo Century Group has continued to steadily expand its operating assets through M&A and cooperation
with partner companies. At the end of fiscal 2016 (the year ended March 31, 2017), our operating assets had
grown 1.5 times from the end of fiscal 2008, the year immediately prior to the merger, to ¥3.216 trillion,
while ordinary income had grown 3.3 times over the same period to ¥73.5 billion.

Operating Assets

1.5

Ordinary Income

March 31, 2009

times

¥2.1 trillion

March 31, 2017¥3.216 trillion

3.3

Net Income Attributable to Owners of Parent

FY2008times

FY2016¥22.3 billion ¥73.5 billion

4.4

6.3

FY2016

FY2008times

Market Capitalization*¥10.0 billion ¥43.7 billion

April 1, 2009

times

¥64.0 billion

March 31, 2017¥404.1 billion* Calculations based on closing price¥3,216.0(Billions of yen)billion

3,250

Ordinary Income (Right Scale)Operating Assets (Left Scale)¥2,991.1

billion2009¥2,865.6

Century Leasing System, Inc. and Tokyo Leasing Co., Ltd. merged to form Century Tokyo Leasing
Corporation (currently Tokyo Century Corporation).

¥68.0
billion¥2,597.5

2,600

Domestic
Automobile Financing

1,950

Domestic
Automobile
Financing¥60.7

International Businessbillion14%¥2,231.4
billion¥2,094.4¥2,100.0

billionbillion28%

billion

¥46.3

60

50

¥46.3

billion¥44.2

70

Specialty
Financingbillion¥1,938.0

3%

¥55.2

billion¥2,023.7

13%billionbillionNote: Data for fiscal 2008, the year immediately prior to the merger on April 1, 2009, is a simple aggregation of data
for the former Century Leasing System, Inc. and the former Tokyo Leasing Co., Ltd.

4%

80

¥73.5
International
Businessbillion(Billionsof yen)billionbillionSpecialty
Financing

40

12%

¥33.4

Equipment
Leasingbillion

1,300

45%

30

Equipment Leasing

81%

¥22.3
billion

20

2010

2011

2012

2013

2014

2015

2016

2017

● Established a solar power sales
company, Kyocera TCL Solar LLC,
jointly with Kyocera Corporation.

● Nippon Car Solutions Co., Ltd.
and Nippon Rent-A-Car
Service, Inc., the third largest
automobile leasing and car
rental companies in Japan
respectively, became
consolidated subsidiaries.

● Bolstered the aviation businessby establishing aircraft leasing
joint ventures, which became
wholly owned subsidiaries inMarch 2017.

● Established a vendor leasejoint venture, Orico BusinessLeasing Co., Ltd., specialized
in leases for small- andmedium-sized companies with
Orient Corporation.

● Made CSI Leasing, Inc., thelargest independent leasing
company in the United States,
a wholly owned subsidiary.

● Signed a strategic partnershipagreement for digital and FinTechbusinesses with Lippo Group, amajor Indonesian conglomerate.

650

Main highlights
since merger
10● Equipment Leasing● Specialty Financing● Domestic Automobile
Financing● International Business● The IHI Groupʼs IHI FinanceSupport Corporation became aconsolidated subsidiary.

● Established a subsidiary inIndonesia.

● Began operating in India
through a business alliancewith TATA Capital Limited.

0

0

2009

2010

2011

2012

2013

2014

2015

2016

year
2017 (Fiscalended
March 31)

8

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 20179

Tokyo Century Groupʼs Value Creation Model
Tokyo Century Group strives to meet societyʼs needs by pursuing business fields that combine Finance, Services
and Business Expertise to create greater value, with our eyes firmly set on the coming era. We will also enhancecollaborations with customers and partners and contribute to the creation of a sustainable economy and societythat continue to grow while efficiently using resources.

IssuesSocial Issues

Tokyo Centuryʼs Values Creation

The Value We Create

Creating New Values from
Finance Services Business Expertise

For Customers
We contribute to customersʼ
businesses with proposals as
an unprecedented non-banking
financial services company.

■ Global warming■ Natural disasters

Equipment Leasing■ Resources and energy■ Income disparity■ Aging population

Strength 1
Promotion of businessalliances with partnercompanies in a
flexible businessenvironment

Financial services
encompassing
information andcommunications
equipment, factoryequipment, construction
machinery, commercial
equipment, and others

Specialty Financing

For Shareholders
and Investors

A wide array of

We increase corporate value
by balancing investments ingrowth and shareholder
returns.

specialized products inbusinesses including
shipping, aviation,
environment andenergy, and real estate

For Employees
Domestic Automobile Financing
Corporate Issues■ Continuous
business innovation

International Business

Strength 2
A leading automobile
Customer base andability to raise funds

leasing and car rental
product lineup in
Japan serving
corporate customers■ Capital planand individuals■ Facilities plan

Expanding services
that meet local needs
through businessdevelopment withstrategic partners

Strength 3

Support Mechanisms

Corporate culture oftaking on challenges
with an innovativemindsetPersonnel
Development

Tokyo Century Corporation Integrated Report 2017

For Society andCommunities
We do business as a good
corporate citizen to contributeto the development ofcommunities worldwide.

■ Earnings growthscenarios

10

We cultivate professionals
and accommodate diverse
working styles.

Corporate GovernanceRisk Management

For the Earthand Environment
We promote environmental
protection initiatives to createa sustainable future.

Tokyo Century Corporation Integrated Report 201711

Financial and Non-Financial Highlights■ Financial Information■ Non-Financial Information
Net Income Attributable to
Owners of Parent

Ordinary Income

Total Assets¥73.5 billion¥43.7 billion¥3,579.9 billion

5.5%(+¥5.5 billion YoY)(+¥3.7 billion YoY)(+¥262.0 billion YoY)(+1.8 points YoY)

( Billions of yen)

( Billions of yen)

( Billions of yen)

( Persons)

80

50

000
4，

30

73.5

43.7

68.0

70
60

40.0

40

60.7
55.2

50

33.1

46.3

3,151.9

5.5

3.7

20

1.8

10

20

1.4

1,000

10

0

13/3

14/3

15/3

16/3

0

17/3

Operating Assets and ROA1

0

13/3

14/3

15/3

16/3

Net Income per Share and ROE(+0.1 points YoY)

( Billions of yen)500
3，3,216.0
2,865.6000
3，( Yen)( %)( Billions of yen)

500

30

3，
000

25

2，
500

413.512,231.4

500
1，

2.4
2.3

000
2，

311.64 322.84

2.5
300

2.3
2.2

2.1

272.32
13.9
14.0

13.1

12.5

12.9

17/3

20

000
2，

15

1，
500

2,733.0

2,419.9

0

30

15/3

16/3

17/3

10
100

500

14/3

15/3

Operating Assets ( Left Scale)

16/3

1.5

17/3

ROA ( Right Scale)

1. Ratio of ordinary income to operating assets

0

0

40

0
10

0

13

15/3

20

16/3

13/3

14/3

15/3

16/3

Net Income per Share ( Left Scale)

17/3

5

500

0

0

Percentage of Female Managers ( Right Scale)

Number of Female Employees

Reduction of CO2
by Solar Power Generation2of Kyocera TCL Solar LLC

272，
925 units

280 metric tons

35，
063 metric tons(+32 tons YoY)(+13,988 tons YoY)

( Units)( Tons)( %)( MWh)( Tons)

300，
000

1，
000

50

120，
000

000
111，
487 40，
35，
063

90，
000

30，
000

272，
925
250，
016

233，
162

800

179，
881

42

796

38

41

ROE ( Right Scale)

17/3

0

40

14 264

0

15/3

16/3

17/3

20，
000

20
248

280
10

200

14/3

21，
075

000
60，

454

13/3

67，
011

30

600

50，
000

16/3

17/3

(+39,763 units YoY)

100，
000

15/3

16/3

Industrial Waste Emissions

000
200，

14/3

15/3

Pre-Owned Personal Computers Sold

150，
000

13/3

0

17/3

Number of Male Employees

216，
351

1，
000

55.3

52.6

18

Number of Female Managers ( Left Scale)

250，
000

1,939.21020
102,551.5

2,211.7

60

2.0

11

14/3

73.6

80

4.0

8

13/3

27

40

400

2.0

13/3

( %)

100

200

000
1，

0

379.34400

16/3(+¥181.6 billion YoY)

( %)2,991.1

15/3¥2,733.0 billion(-0.2 points YoY)

3.0

2,597.5500
2，(+¥34.17 YoY)

14/3

Interest-Bearing Debt

¥3,216.0 billion/2.4% ¥413.51/12.9%(+¥224.9 billion YoY)

13/3

17/3

(+18.3 points YoY)

／
(93%)

50

6

10

27 29

( Persons)

2.4

20

30

18 18

73.6%

( %)

18

2，
000

40

Number of male
employees:

Ratio of Eligible Employees Who
Have Taken Paid Annual Leave

6.0

27

2,465.8

28.9

30

3,317.9

3,579.9

Number of female
employees:／(100%)

2,884.8

000
3，

34.1

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

Ratio of Female Managers(Non-Consolidated)

13/3

14/3

15/3

16/3

17/3

Industrial Waste Emissions ( Left Scale)
Percentage of Useful Materials Recycled( Right Scale)

0

30，
000

0

28，
098

000
10，

8，
837

15/3

16/3

17/3

0

Electricity Generated Annually throughSolar Power Generation ( Left Scale)
CO 2 Reduction ( Right Scale)
2. Compared with conventional thermal
power generation

12

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201713

Financial and Non-Financial Highlights■ Financial Summary(Millions of yen)

2010/03

2011/032012/032013/03

2014/03

2015/03

2016/032017/03758,674
635,808
105,412
11,764
5,688
693,569
567,883
98,3772,476
4,830
20,00065,105
85,10534,80929,152
5,656
30,29533,414(249)
25,541

713,182598,925
94,114
13,2106,932
641,589
531,387
88,442
1,687
5,584
14,487
71,59386,08030,55929,4201,138
41,034
44,170(3,465)23,646716,342
603,767
88,955
14,0309,588
643,684
538,691
84,156
1,148
8,129
11,55872,657
84,21530,78030,767
12
41,877
46,252(2,170)26,194

691,128584,636
81,89816,934
7,658
620,245525,372
77,265
1,705
6,036
9,864
70,88280,74728,90929,838(929)
41,973
46,292(103)
28,934

828,558
707,483
86,76819,93814,368731,229
628,745
81,773
1,046
10,481
9,183
97,329106,51345,912
45,986(73)
51,41655,167(96)
33,050882,976
758,749
81,841
22,921
19,464759,298
656,537
76,513
1,704
14,111
10,431
123,678
134,109
65,23566,299
(1,064)58,44360,668(960)
34,132

940,460
808,458
81,481
29,266
21,254
803,645698,358
75,806
1,262
14,88013,336
136,815150,152
70,91069,693
1,217
65,90468,008450
40,033

976,107
850,60773,63924,211
27,649823,295
716,850
68,294897
19,753
17,500152,811
170,31180,81179,605
1,206
71,99973,511229
43,6482,132,892
1,937,955
1,410,109
200,539
327,306̶
1,749,775
158,115

2,184,599
2,023,722
1,383,695
191,836
448,190̶
1,741,897
178,752

2,260,389
2,094,402
1,375,761
187,986
530,655̶
1,783,173
201,272

2,465,817
2,231,363
1,473,866
201,559555,938̶
1,939,219
233,668

2,884,773
2,597,476
1,783,880
213,719593,1056,770
2,211,673
285,484

3,151,871
2,865,593
1,914,950
239,390699,232
12,0192,419,856
336,537

3,317,862
2,991,141
2,026,907
214,441
724,350
25,4422,551,491
374,872

3,579,882
3,215,995
2,237,715
201,490749,965
26,823
2,733,044
404,818

194,308(8,948)(306,146)
50,94748,551
23,191(89,762)
32,793(26,425)(515)
38,28944,530(89,711)(5,592)
135,868
83,122(28,314)9,994
54,486
115,841(171,023)(18,682)
156,885
71,864(136,618)(3,072)
155,770
91,762(670)(30,071)
27,50085,730239.571,410.61
32.00

221.801,594.57
40.00

245.82
1,796.62
44.00

272.32
2,092.46
48.00

311.64
2,386.02
52.00

322.84
2,776.37
65.00

379.34
3,033.61
80.00

413.51
3,360.27
100.00

18.5
1.5
7.1
44.8

14.8
2.0
7.8
41.1

14.5
2.1
8.4
42.3

14.0
2.0
9.0
42.1

13.9
2.1
8.8
47.2

12.5
2.0
9.3
53.6

13.1
2.1
9.6
50.9

12.9
2.1
9.9
52.1

1,732

1,715

1,722

1,676

3,309

4,113

4,124

5,430

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

Financial Condition
Total assets
Operating assets
Leasing
Installment sales
Finance
Other
Interest-bearing debt
Net assets

Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents at end of year

Per Share Data (Yen)
Net income
Net assets
Dividends

Significant Indicators (%)
Rate of return on equity (ROE)3
Return on assets (ROA)4
Shareholdersʼ equity ratio
Overhead ratio (OHR)5Other Data (Persons)
Employees

Notes: 1. Data are rounded down to the nearest million.
2. Revenues do not include internal revenues or transfers between segments.
3. ROE = Net income attributable to owners of parent / Equity (simple average of beginning and end of term balance sheet figures)
4. ROA = Ordinary income / Total assets (simple average of beginning and end of term balance sheet figures) 100
5. OHR = (Personnel expenses + Non-personnel expenses) / Gross profit 100

14

Tokyo Century Corporation Integrated Report 2017

100

Tokyo Century Corporation Integrated Report 201715

A Message from the President & CEO

Driven by our determination to transform our businessthat lies in the midst of domains handled by banks,

model, we intend to establish a new financial businesstrading companies, and manufacturers.

Summary of the Third Medium-Term Management Plan for Fiscal 2016 to 2018
Basic Policy

Management
Strategy:Strengthen theSales BaseManagement
Strategy:Strengthen theManagement
Base

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

1. Transform to take on new business areas that transcend theconventional concept of leasing
2. Create new values by integrating Finance and Business Expertise
3. Make a Group-wide effort to become first in the overall ranking for the
automobile finance business
4. Expand overseas businesses by promoting alliance strategies
5. Engage in business planning and development aimed at lasting
corporate development

1. Strengthen consolidated management
2. Enhance and reinforce the financial base
3. Raise the level of risk control
4. Bolster development of human resources
5. Strengthen corporate governanceManagement
Targets

Third Medium-Term Management PlanFirst Year

Second Year

Final Year

Results for
FY2015Results for
FY2016

Plans for
FY2017

Plans for
FY2018¥68 billion¥73.5
billion¥76
billion¥80 billion
or moreConsolidated ROA(ROA = Ordinary income/Operating assets)

2.3％

2.4％

­

2.3% or
more

Consolidated
shareholdersʼ equity
ratio

9.6％

Consolidated
ordinary income

9.9％

­

Consolidated Ordinary Income Target for theThird Medium-Term Management Plan

11.0％

Shunichi Asada
President & CEO,
Representative Director¥80billion
or
more

¥73.5
billion¥68
billionThird Medium-Term Management Plan

FY201516

FY2016

Tokyo Century Corporation Integrated Report 2017

FY2017FY201817

A Message from the President & CEO

The Future ofTokyo Century
Group

Review of
the Third
Medium-Term
Management
Plan

accumulating highly profitable assets.
We made solid progress in our four operating segments, with respect to the
management strategy of strengthening the sales base for the third medium-term
management plan by pursuing bold initiatives for pioneering new business fields
under the respective themes of each segment. (For more information, please referto the “Overview of Strategies by Operating Segment” section on pages 28 to 43.) In
our International Business segment, we achieved remarkable progress with ouralliance strategy, making CSI Leasing into a wholly owned subsidiary and forging apartnership for digital and FinTech businesses with Lippo Group, the leading
conglomerate in Indonesia. We also concluded partnership agreements with Grab,
the largest ride-hailing platform in Southeast Asia, and with China UnionPay
Merchant Services Co., Ltd., the largest card payment service operator in China.
While it will take some time for these alliances to begin contributing to our
profits, we expect them to develop into major sources of Tokyo Centuryʼs ordinary
income.

A Highly Specialized and Unique Financial Services Company
Fiscal 2016 marked a turning point for the company. On October 1, we changed
our corporate name to Tokyo Century Corporation and embarked on a path tofurther growth with a fresh new outlook. Our decision to remove the word “lease”
from the company name reflects our determination to move beyond leasing toembrace the challenges posed by a broader range of businesses without placing
any limits on our potential for growth.
Under the new company name, we restructured our corporate philosophy andclearly defined our future vision and management policies. We will pursue ourvision of becoming a unique, highly specialized financial services company bydeveloping businesses that combine Finance, Services and Business Expertise toaccomplish our transition into a new domain that transcends the concept ofleasing. Moreover, we will continue actively implementing a competitive IT strategy
to improve our corporate value and competitiveness as a financial services
company with high IT expertise.
We have accumulated a wealth of expertise related to assets through ourleasing business and intend to contribute to the creation of an environmentallysound, sustainable economy and society by collaborating with corporate partners
that provide advanced knowledge on adding value to the reuse and recycling ofresources.

Setting a New Profit Record
We emphasized asset efficiency with respect to our management targets forthe third medium-term management plan, seeking to establish an organizationthat can consistently achieve consolidated ordinary income of at least ¥80.0 billion,
and consolidated ROA (the ratio of ordinary income to operating assets that we useinternally) of at least 2.3%, while addressing financial leverage with a target of
11.0% for the consolidated shareholdersʼ equity ratio.
In fiscal 2016 we achieved all of the planʼs initial targets. Moreover, Tokyo
Century extended its streak of record highs for the eighth consecutive year with
¥73.5 billion in consolidated ordinary income, and for the sixth consecutive yearwith regard to net income attributable to owners of parent. So far, we have madesolid overall progress in the third medium-term management plan, as evidenced
by our consolidated ROA, which is already at 2.4%. Meanwhile, our consolidated
shareholdersʼ equity ratio rose 0.3 percentage points to 9.9%.

All Initial Targets Have Been Attained
Fourth Industrial Revolution in Finance
The advent of the digital revolution, characterized by IoT, big data, AI, androbotics, is changing our economy and society at a breakneck pace. I believe 2017,
just three years before the Tokyo 2020 Olympic Games, will mark the turning pointof our times, as evident in the launch of the Japanese governmentʼs Society 5.0(Super Smart Society) and Fourth Industrial Revolution initiatives.
These are challenging times for Japanese companies, and not just for
manufacturers, as they strive to keep up with the rapid advances in digitaltechnology and the pace of change in business models. The financial industry is no
exception, and we are exploring ways to ride the wave of the Fourth Industrial
Revolution. At the same time, new opportunities have opened such as the FinTechbusiness, including for example smartphone settlement, in Southeast Asia.

Shifting to a High-Revenue Business Model Focused on Asset Efficiency

Core Initiatives
for Fiscal 2017

Accelerate the Shift to a High-Revenue Business Model
We plan to continue extending our profit record by seeking balanced expansionin our four operating segments and through initiatives that emphasize asset
efficiency and profitability. Under our policy for fiscal 2017, we will seek tomaintain stable operating assets in Equipment Leasing while striving to expand
operating assets in Specialty Financing, Domestic Automobile Financing, andInternational Business.

As we strive to create value from the Fourth Industrial Revolution, we mustalso enhance productivity/profitability. Under the third medium-term management
plan, which began in fiscal 2016, we intend to shift the goal of our business modelfrom quantitative expansion to the generation of high-revenue based on

Corporate Slogan

Solutions toyour Pursuits
Creating new values from
Finance × Services × Business ExpertiseTokyo Century
18

Tokyo Century Corporation Integrated Report 2017Management Policy
1. We will provide the best products and services around the world to contributeto the success of our customersʼ businesses while pursuing all possibilities bycollaborating with customers and uniting the overall strengths of the Group.
2. We will strive to raise our corporate value over the mid to long term bypioneering new business fields and realizing sustainable growth.
3. We will cultivate a corporate culture that allows diverse human resources tofully demonstrate their skills and personalities, and we will build a company
where all officers and employees can hone their expertise and experience
growth as well as a sense of pride.
4. We will always be mindful of our social responsibility as a corporation and willconduct our business activities with vigor and sincerity as we fulfill our role ofcreating a sustainable economy and society.

Shifting to a High-Revenue Business Model
An Unprecedented Non-Banking Financial Services Company that Transcends Leasing

Pioneer new business fields thatcombine Finance, Services, andBusiness Expertise by engaging inservices and business ventures in
addition to financeBecome a company pursuingbusinesses that lie in the midstof domains handled by banks,
trading companies, andmanufacturers

Tokyo Century Corporation Integrated Report 201719

A Message from the President & CEO

Equipment Leasing
We will continue to raise profitability by pursuing viable business with domestic
corporate partners in addition to providing leasing and financing functions. We will
also focus on businesses that respond to opportunities presented by social
concerns such as the need for robots to address the diminishing workforce inJapan as well as initiatives for creating an environmentally-sound, sustainableeconomy and society.

TowardSustainable
GrowthSpecialty Financing
The environment and energy business is projected to further expand in scope,
led by the solar power generation business undertaken by Kyocera TCL Solar LLC.
The business is expected to contribute to profits and increasing operating assets inthe years ahead.
The aviation business continues to be a prosperous field for sustainable growth,where the focus will be on adding to our core business of aircraft leasing andfinancing by pursuing advanced businesses related to aircraft, such as handlingaircraft engines and other parts. We will accelerate the accumulation of operating
assets in the aviation business through Tokyo Centuryʼs individual efforts andthrough the strategic use of alliance partners.

An Unprecedented Non-Banking Financial Services Company
That Transcends Leasing

International BusinessWe will build on the major advances made in fiscal 2016 and continue pursuing
our alliance strategy to form business partnerships with leading local companies
and financial institutions overseas. By doing so, we will seek to further develop ourexisting businesses and expand our business fields to achieve significant growthfor Tokyo Centuryʼs overseas businesses.

20

(Yen)
115

980.0

3.9

Change (%)
0.4％

Operating income

72.0

74.0

2.0

2.8％

Ordinary income

73.5

76.0

2.5

3.4％

Net income attributableto owners of parent
Tokyo Century Corporation Integrated Report 2017

Dividend and Dividend Payout Ratio

Aiming for a steady increase inrevenue by maintaining a goodbalance between investment in growthbusinesses and dividends

¥105

¥100

105

Change976.1

Boasting a diverse range of excellent customers, including various
manufacturers, Tokyo Century is a unique entity that is not bound by the limitations
imposed by Japanʼs Banking Act and can freely pursue businesses that lie in the
midst of domains handled by banks, trading companies, and manufacturers. We
are keeping pace with the changing times by gradually shifting the focus of ourmanagement from finance to business and expanding our scope for future growth
toward evolving from a leasing company into an unprecedented non-banking
financial services company that transcends leasing.
Tokyo Century Group will continue to draw upon its pioneering spirit and the
combined knowledge of its employees to enhance its high expertise and global
perspective to solidly support customers in the pursuit of their growth, and thereby
achieve its own sustainable growth.

FY2017 Forecast

FY2016 Result
Revenues

Ever mindful of its social responsibility, Tokyo Century Group seeks to work
alongside customers in pursuit of their growth and contribute to the creation of anenvironmentally-sound, sustainable economy and society as its management
philosophy. We are aware that realizing economic growth while efficiently using
resources is just as urgent a concern for our customers as it is for Tokyo Century.
Tokyo Century has formed a partnership agreement with Tsukishima Kikai Co.,
Ltd., which engages in the water environment business related to water
purification and waste water treatment plants, to collaborate on new renewableenergy business, including mixed-digestibility of the biomass in waste water
treatment plants. We will continue to pursue initiatives for creating a sustainableeconomy and society.

For fiscal 2016 we decided to increase annual dividends by ¥5 per share above
our forecast at the beginning of fiscal year to ¥100 (payout ratio: 24.2%), as net
income attributable to owners of parent rose to ¥43.7 billion, exceeding ourforecast at the start of the term. In fiscal 2017 we plan to pay an annual dividend of¥105 (payout ratio: 24.6%), a further increase of ¥5 per share, in line with theforecasted growth in net income attributable to owners of parent, and a 0.4
percentage point year-on-year rise in the payout ratio.
Looking ahead, we intend to balance investment in growth businesses withshareholder returns while simultaneously seeking to steadily raise dividends byachieving the objectives of the third medium-term management plan.

* Nippon Car Solutions Co., Ltd., which mainly serves corporate customers; Orico Auto Leasing Co., Ltd., whichmainly serves individuals; and Nippon Rent-A-Car Service, Inc., which serves both corporate customers andindividuals.

(Billions of yen)Creation of an Environmentally-Sound, Sustainable Economy and Society

Shareholder Returns

Domestic Automobile Financing
Tokyo Century Group* has increased its fleet of vehicles under management toapproximately 600,000. Bolstered by societyʼs need for automobiles based on thegeneral shift from ownership to use and inbound demand from foreign visitors, wewill leverage our competitive strengths to develop new schemes as we continue
our challenge to become first in the overall ranking for the automobile financebusiness.

FY2017 Consolidated Results Forecast

Becoming a Company that Supports Customers
Seeking to Transform Their Businesses

95

25

85

24.2%

75

24.6%

65
55
45

13.4%

45.0

15

10
10/3

1.3

3.1％

20

35 ¥32
25

43.7

(%)
30

11/3

12/3

13/3

Annual Dividend (Left Scale)

14/3

15/3

16/3

17/3

Dividend Payout Ratio (Right Scale)

18/3(Forecast)Tokyo Century Corporation Integrated Report 201721

Features

A Leading Indonesian Conglomerate

Taking on the Challenge ofCreating New Values from
Finance Services
Business ExpertiseP. 22

Feature 1: Finance Technology
Exploring New Domains by
Promoting Alliance Strategies with
Top-Ranking Local Companies
P. 23
P. 24
P. 25

P. 26

1
Feat u re 1

FinanceTechnolog yStrategic Alliance with
Lippo Group

Strategic Alliance with Lippo Group
Strategic Alliance with Grab
Strategic Alliance with China UnionPay
Merchant Services

Feature 2: Services BusinessTokyo Centuryʼs Initiatives for
Creating a Sustainable Economy
and Society

Finance Technology
Exploring New Domains by
Promoting Alliance Strategies with
Top-Ranking Local Companies

Tokyo Century Group is seeking to expand its overseas business by promoting alliance strategies under the third

Lippo Group is the leading conglomerate in Indonesia that operates Matahari, which is thecountryʼs largest department store chain, along with other businesses, encompassing realestate, retail, IT and media, hospitals, and finance. The group comprises over 400 affiliatedcompanies inside and outside Indonesia, and more than 20 are publicly listed. Total sales of all listed
Lippo Group companies amounted to approximately ¥750 billion in fiscal 2016, and the groupʼs market
capitalization reached approximately ¥1.5 trillion as of April 2017. In its e-commerce business, the group
launched the Matahari Mall for B-to-C transactions and Mbiz for B-to-B and B-to-G* transactions in 2015.
* A form of electronic commerce through which businesses conduct electronic transactions with central and local governments.

Jointly Promoting E-Commerce and Other Digital

Integrating the Real and Virtual Worlds

Businesses, Planning to Launch Financial Services

with Smartphones

Utilizing Big Data
Until recently, Tokyo Century has primarily operated
In November 2016, Tokyo Century and Lippo Group

B-to-B businesses, so our alliance with Lippo Group is ofagreed to a comprehensive alliance and signed a strategic

great significance, as it handles B-to-C businesses. We

partnership agreement to develop digital and FinTech

expect this alliance to generate new opportunities forbusinesses. Tokyo Century is considering investing

businesses that will take us beyond leasing.

approximately US$100 million to partner with Lippo Group

While young people account for a large proportion of

in its digital and FinTech businesses, including e-commerce,Indonesiaʼs population of around 260 million, only about 40%

electronic money services, loyalty programs, and financialof Indonesians aged 15 or older have bank accounts, making

services utilizing big data.

it a promising market for electronic money. Lippo GroupAs our first phase, we invested approximately US$17

already has brick-and-mortar stores, ranging frommillion to acquire 20% of the shares of PT. Big Ecommerce

department stores and shopping malls to supermarkets andBersama, the holding company for Lippo Groupʼs B-to-B anda movie theater chain, and therefore has infrastructure and a

B-to-G e-commerce companies, thereby making it an equity-

customer base. Lippo Group expects it will be able to further

method affiliate of Tokyo Century.

demonstrate its strengths by retaining customers throughOur second phase will be to invest in a company involved

medium-term management plan for strengthening its sales base as its management strategy. We plan toin the electronic money and loyalty program businesses. Thisaggressively advance into the FinTech field to establish our presence in promising growth markets.

company is also developing a settlement service forsmartphone-based electronic money and businesses relating
to e-commerce.
Tokyo Century intends to promote the FinTech businesssmartphones, and Tokyo Century plans to pursue joint

by providing financing and other expertise to Lippo Groupʼs

FinTech business, including financial services that utilize big

new businesses.

data that the company owns.

Purpose of Our Alliancewith Lippo Group

Purpose of Our Alliancewith Grab

Purpose of Our Alliance with
China UnionPay MerchantServices Co., Ltd. (China UMS)

P. 23

P. 24

P. 25

Goals of Our Alliance with Lippo Group

Digital Business

FinTech Business・E-commerce• Electronic money services●●

Collaboration in the digital business●

Collaboration in the FinTechbusiness, including financial
services based on big data●

22

Tokyo Century Corporation Integrated Report 2017

Joint promotion of automobile
leasing and rental businesses in the
new market for ride-hailing andridesharing
Expansion of automobile financerelated businesses in Southeast Asia●

Joint development of internet-based
e-commerce leasing for China UMSʼsparticipating merchants

・Financial services• Loyalty programs

We aim to provide new financial services utilizing big data,
while integrating Tokyo Centuryʼs financial expertise
together with Lippo Groupʼs infrastructure and customer base.

Tokyo Century Corporation Integrated Report 201723

Features: Taking on the Challenge of Creating New Values from
Finance Services Business Expertise

The Largest Ride-Hailing Platformin Southeast Asia

Chinaʼs Largest Card Payment Service Operator

Strategic Alliance with Grab
Grab and its group companies operate a ridesharing business that matches drivers withpassengers via smartphones using mobile applications and digital platforms in 55 cities in seven
Southeast Asian countries: Singapore, Malaysia, the Philippines, Indonesia, Thailand, Vietnam, andMyanmar. Grab has been achieving steady growth in numerical terms, with over 45 million users
downloading its applications and more than 930,000 registered drivers, making it the largest ride-hailinggroup in the Southeast Asian region.
Note: The figures shown above are based on a press release announced by Grab on June 6, 2017.

Strategic Alliance with
China UnionPay Merchant Services
China UnionPay Merchant Services Co., Ltd. (China UMS) is a subsidiary of the bank card
association China UnionPay Co., Ltd. and the largest card payment service operator in China.
It operates in all 337 cities nationwide with 6.49 million participating merchants, including retailshops and restaurants where UnionPay cards can be used, and 8.11 million POS terminals. Since 2012 it
has also managed an internet-based financial service platform for merchants called “RICH.” In recent years,
it has begun to provide a wide range of services for merchants, including factoring services run by its subsidiaryand lending through partner banks.

Entering the Rapidly Growing Business of

expand due to underdeveloped public transportation and low

Tokyo Centuryʼs Local Subsidiary to Provide Leasing

Utilizing Tokyo Centuryʼs Prime Customer Base

Ridesharing with Grab, a Market Leader

car ownership rates.

Service via RICH Operated by China UMS

to Introduce Superior Japanese Equipment andTokyo Century will bolster its initiatives for developing
Given underdeveloped public transportation and low car
ownership rates, the ridesharing market in Southeast Asia is
expected to significantly expand, led by ride-hailing services.

financing businesses that leverage the advanced technologies

Products via RICH
Tokyo Century Group concluded a strategic businessprovided by Grabʼs digital platforms, while at the same timeagreement with China UMS, a subsidiary of China UnionPay Co.,focusing on automobile-related financing business expansion

Ltd. and the countryʼs largest card payment service operator.

Chinese subsidiary, was established in July 2006. It provides

in the region.

Tokyo Century Leasing China Corporation, Tokyo Centuryʼs

Together we plan to provide China UMSʼs participating

yuan-based leasing services to Japanese companies operating

merchants with equipment and automobile leasing services as

in China by taking full advantage of the expertise and network

an Internet-based service by utilizing the leasing and financingof ITOCHU (China) Holding Co., Ltd., the authorized regional

expertise accumulated over the years by Tokyo Century Group

headquarters of a multinational company in China, in addition

as well as meals prepared by famous restaurants. Since, withand big data on card settlement and other information held byto cooperation with Tokyo Centuryʼs divisions and branches

the exception of Singapore, individual ownership rates for

China UMS. Specifically, Tokyo Century Leasing China

in Japan.

bank accounts and credit cards are low in the region, Grab is

Corporation, Tokyo Centuryʼs Chinese subsidiary, will operatealso involved in developing and operating a settlement systema leasing service on RICH, the financial service platform

to develop their businesses in China by making maximum use

for its service fees. Meanwhile, the company is creating

operated by China UMS for its merchants and thereby provideof its prime customer base to introduce Japanese equipment

services that cater to regional needs, including a traffic

an e-commerce leasing financial service for the 6.49 million

and products distinguishable by their excellent featuresinformation service for governments including Indonesia andmerchants of China UMS. Moreover, we aim to further expand

through the RICH e-commerce site.

others, where roads can be extremely congested, and theour businesses by making maximum use of the respective

Grab for Work service targeting corporate customers. Under

strengths of each company.

In addition to operating regional dispatch and rideshare
services for ordinary vehicles, taxis and motorbikes, Grab also
provides a dispatch service for delivering products sold at
department stores, shopping malls, and e-commerce sites,

Examples of the Grab App Screen

Tokyo Century will support Japanese companies seeking

the strategic partnership, Tokyo Century will provide its yearsof accumulated expertise, both inside and outside Japan, andcollaborate with Grab on developing automobile leasing andrental businesses.

Promoting Collaboration on B-to-C Automobile
Leasing and Rental Businesses and Expanding
Businesses Related to Automobile Financing
We will begin our work under this alliance by promoting

Synergy Effects with China UMS
Operations in all 337 Chinese cities

China UMSTokyo Century

6.49 million participating merchants

Big data on card settlement
and related information

Expertise on leasing
and financing

8.11 million POS terminals
RICH online financial services platform
for merchantscollaboration on B-to-C automobile leasing and rental
businesses for drivers registered for Grab Car, a dispatch
service for ordinary vehicles.
In Southeast Asia, new car-related services, such as

Seeking business expansion for both companies by providing equipment leasing andautomobile leasing services via the internet for China UMS merchantsridesharing and dispatch services are expected to further

24

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201725

Features: Taking on the Challenge of Creating New Values from Finance2
Feat u re 2

Services
Business Expertise

Services

Business ExpertiseTokyo Centuryʼs Initiatives
for Creating a Sustainable
Economy and Society

Specific Initiatives
Renewable Energy Business
Kyocera TCL Solar LLC, a joint venture with Kyocera Corporation, is engaged in solar power
generation, operating solar power plants with a combined capacity of 101.1 megawatts at 52
locations in Japan as of March 31, 2017. Also, preparations are under way to launch a woody
biomass power generation business jointly with partners including IHI Corporation. By
expanding its renewable energy business, Tokyo Century will pursue initiatives that have a highsocial impact, specifically reducing greenhouse gases and improving energy self-sufficiency.

Tokyo Century Group seeks to contribute to the creation of an environmentally-sound, sustainable economy and society as
part of its management philosophy. This is a common theme running through our four operating segments, and as we
pursue this goal, we are developing a series of new businesses in addition to our existing initiatives.

Significance of Efforts
by Tokyo Century Groupto Create a Sustainable
Economy and Society

Robot Dispatch (Rental) BusinessTokyo Century intends to achieve sustainable medium- and long-term growth

In April 2016, we launched a robot dispatch/rental business jointly with Kawasaki Heavy

by further expanding existing business fields and developing new business fields

Industries, Ltd., that uses their “duAro” dual-arm robot to address labor shortages. Thisas an unprecedented non-banking financial services company that embraces

alternative to the dispatching of personnel significantly reduces initial investment and ensuresbusiness domains beyond leasing.

deployment as needed, and therefore the business is proving to be an effective solution to social

Contributing to the creation of a sustainable economy and society that achieves

concerns, such as enabling small- and medium-sized enterprises to maintain the operation ofboth economic development and resource efficiency is key to fulfilling ourtheir production lines.

corporate social responsibility and opening the way to new businesses.
Over the years, we have accumulated extensive expertise in the efficient use ofresources, including in asset management and appraisal of the use and disposal valueof assets, primarily in the leasing business. We believe that our efforts, particularly inthe reuse and recycle business, play an important part in bringing about a sustainable

LCM Business and Green Businesseconomy and society. Furthermore, Tokyo Century Groupʼs broad range of services areTokyo Century Group has begun offering a green business service that covers the process ofhelping to realize the effective use of finite resources.

collecting, erasing data from, and reselling the used ICT devices of customers. The service fully
leverages the Groupʼs expertise in handling information and communications equipment

Companies have become increasingly aware of social concerns over theleasing, where we command a major share of the market, and we are bolstering this businessenvironment and labor shortages.

with leading partners. Moreover, our consolidated subsidiary CSI Leasing, Inc. (headquartered

Tokyo Century is in alliance with leading corporate partners to accelerate
diverse initiatives for achieving a sustainable economy and society. Thesein St. Louis, U.S.A.) provides outstanding services in refurbishment, equipment resale, and data

initiatives go beyond reusing and recycling assets to include renewable energy

wiping of ICT devices. Tokyo Century Group will actively pursue businesses in the secondary

businesses that help reduce greenhouse gas emissions and a robot dispatch

market for IT equipment on a global scale.

(rental) business that addresses labor shortages.
Businesses Aimed at Creatinga Sustainable Economy and Society
Current Business Initiatives
Equipment
LeasingSpecialty
Financing
Domestic
Automobile
Financing
International
Business

26

Tokyo Century Corporation Integrated Report 2017

• Reuse and recycle business• IT-LCM business• Green business• Robot dispatch (rental) business• Biomass power generation business• Solar power generation business (Kyocera TCL Solar LLC)
• Financing (hydropower, wind power)• Automobile rental business• CSI Leasing IT-LCM business

Future Outlook
Tokyo Centuryʼs business is closely aligned with thegeneration businesses, we are poised to take on yet another

trending interest in creating a sustainable economy andrenewable energy business in alliance with Tsukishima Kikai

society, which has led to the creation of many relatedCo., Ltd. We will also seek to fully exploit businesses thatbusinesses. We believe that the deployment of solar poweremphasize asset value and focus our resources into

generation and other renewable energy systems will spreaddeveloping businesses for valuable assets by creating

rapidly as a result of the policies that the Ministry of

secondary markets and by bolstering our reusing andEconomy, Trade and Industry and other government

recycling operations.

agencies are promoting. We hope to further expand ourTokyo Century Group will continue to sincerely address

business opportunities by grasping trends among highlysocial issues and pursue collaborations with customers andenvironmentally conscious companies and individuals.

corporate partners who share our aspirations to forge ahead

In addition to our solar power and woody biomass power

toward the creation of a sustainable economy and society.

Tokyo Century Corporation Integrated Report 201727

Equipment Leasing
Expanding businesses by leveraging the Groupʼscomprehensive capabilities and fertile customer baseto enter emerging areas that transcend theShift.

conventional concept of leasing

Seeking further growth byaddressing the changing needs andexpectations of customers andmeeting the challenge ofdeveloping advanced businesses
Akihiro Naruse
Balance of Operating Assets

Director and Executive Officer
President, Equipment Leasing Business Development Unit

(Billions of yen)

Business Overview

1,532.2 1,534.7 1,492.0

We cater to a variety of customer needs by
1,450.6

providing financial services centered on leasing
and installment sales for all types of equipment
and machinery, including information andCreating UniqueBusinesses by Venturing
out of the Comfort Zone of
Leasing and Financing Operations

and commercial equipment.
14/3

15/3

16/3

17/3

Equipment Leasing was our founding business,
and we have been showing steady results centeredon leasing and installment sales in our home market

become commonplace.
Tokyo Century will take on the challenge ofdeveloping advanced businesses to meet the changing
out of the comfort zone of leasing and financing
operations.
At the same time, our Equipment Leasing businessof Japan. We are the top ranked in this area and will

plays a significant role as the platform for Tokyo Centuryʼscontinue to lead the industry.

other areas of business, such as Specialty Financing,

Meanwhile, as evident in our decision to drop theDomestic Automobile Financing, and International

word “leasing” from the company name, we have boldly

Business, where we expect dramatic future growth.

embarked on exploring new areas of services andOur Equipment Leasing business currently serves

business expertise based on our core leasing operations.

about 25,000 corporate customers, and countless

Moreover, we have launched many new businesses

numbers of customers have become excellent businessthrough joint ventures with leading companies. In particular,

partners for our other three operating segments.

we are exploring IoT, robotics, environment and energy,

Looking ahead we will seek further growth for our

including solar and biomass power generation, and net-

Equipment Leasing business by serving two roles:

zero energy housing.

strengthening relationships with the customers we have

The latest buzzword is “disruption,” also referred to28

markets and their replacement by emerging markets has

needs and expectations of our customers by venturingcommunications equipment, factory equipment,
medical equipment, construction machinery,continues to accelerate, the destruction of existing

gained through our foundational businesses of leasing

as “creative destruction,” and while the concept has

and installment sales to jointly explore advanced

naturally referred to physical objects and products,

businesses with them and serving as the backbone formarkets are also being disrupted. As the pace of change

cultivating promising business areas.

Tokyo Century Corporation Integrated Report 201729

Equipment Leasing

Operational
Strengths

Equipment Leasing, a business we have engaged in since our founding,provides a platform for our other businesses and serves about 25,000
corporate customers in Japan. Taking advantage of the networks of major
shareholders, we command the top share of the information andcommunications equipment leasing market. In addition, we structure and provide
flexible financing programs for diverse customer needs along with the financing
subsidiaries of Fujitsu Limited and IHI Corporation as part of Tokyo Century Group andin cooperation with numerous manufacturers and dealers.

Share of Leasing Transactions in Japan
FY2013

FY2014FY2015(Trillions of yen)(Trillions of yen)

Sumitomo Mitsui
Finance and Leasing

Sumitomo Mitsui
Finance & Leasing

Sumitomo Mitsui
Finance and Leasing

12.4%

12.8%

13.8%

80

Tokyo Century

ORIX

Tokyo Century

60

11.9%

12.1%

12.7%

2nd

78.8

3rd

Tokyo Century

Mitsubishi UFJ
Lease & Finance

11.5%

11.8%

11.8%

Source: Company estimates based on figures announced by Nikkei Inc.

77.4

80.3 81.2 82.5

70.4 71.8
67.4 68.2

7.1
5.4
4.4

4.1

4.2

4.5

4.8

4.4

4.7

4.7

20

0

8

2. As in the second medium-term management plan, we will continue topromote joint ventures that build on our strengths and those of prime
business partners while also seeking to create new business models
partnering with financial institutions.

6

6.3

40

Mitsubishi UFJ
Lease & Finance

1. We will seek greater advances in lease transactions and expansion inbusinesses that utilize our customer base to expand highly competitive
businesses with a focus on services and identify customer needs from a
global perspective.

10
84.5 83.9

4

3. We will strengthen our initiatives for creating a sustainable economy andsociety by fully exploiting businesses that focus on asset value, andpromote reuse and recycling business to advance the recycling ofresources.

2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (FY)0Private Capital Investment (Left Scale)
Capital Investment Financed by Leasing (Right Scale)
Source: Japan Leasing Association (as of June 8, 2017)

4. We will focus even more intently on identifying and executing liquidity
opportunities for improving asset efficiency.
5. We will ceaselessly work to optimize and raise the efficiency of ourorganization in order to adapt to the changing operating environment.

Business Alliance System for Equipment Leasing

Joint Ventures with Partner Companies

Business Alliances with Partner Companies
Kawasaki Heavy
Industries, Ltd.

●●Tokyo Century●●

PartnershipTokyo Century

Fujitsu Limited

IHI Corporation

Robot dispatch (rental) business

NHK Group

Policies andInitiatives for the
Next Fiscal Year

We will promote the following operating strategies in fiscal 2017.
Under the theme of rising to the challenge of transformation, we will endeavor tocreate unique businesses that respond to the changing market environment. Also,
we will meet diverse customer needs by liberating ourselves from conventional
thinking and existing business models.
In addition, we will forge an even closer relationship with customers to continue
serving as the platform for our other businesses, specifically Specialty Financing,
Domestic Automobile Financing, and International Business.

Orient Corporation

Investment

Major Joint Ventures●

Fujitsu Leasing Co., Ltd.

●IHI Finance Support Corporation●

Nanatsujima Biomass Power LLC●

ITEC Leasing Co., Ltd.

●

Orico Business Leasing Co., Ltd.

IHI Corporationand others

PartnershipTokyo Century

Woody biomass power generation businessTsukishima Kikai
Co., Ltd.

PartnershipTokyo Century

Cooperation in renewable energy business

30

Transform to Take on New Business Areas That
Transcend the Conventional Concept of Leasing
To take on the challenge of exploring new business areas, we adhere to fivecore policies: seek greater advances in lease transactions, promote creative
ventures with prime business partners, pursue initiatives for creating a sustainableeconomy and society, improve asset efficiency, and adapt to the changing operating
environment.

Private Capital Investment andCapital Investment Financed by Leasing
100

1st

Promotion of
the Third
Medium-Term
Management Plan

Theme for Equipment Leasing under
the Third Medium-Term Management Plan

Tokyo Century Corporation Integrated Report 2017

1. Seek greater advances in lease transactions: Enhance added value by providing
operating leases with a focus on asset value and long-term utility value as wellas products and services that combine leasing and installment sales.
2. Promote creative ventures with prime partners: Take on the challenge ofdeveloping advanced businesses based on current trends in IoT, robotics, andenvironment and energy through joint ventures with prime business partners inan effort to develop new businesses that could potentially develop into future
pillars of profit.
3. Initiatives for creating a sustainable economy and society: Focus on asset value
to expand our reuse and recycle business and create secondary markets.
4. Improve asset efficiency: Expand non-asset businesses such as asset securitizationand fee business.

Tokyo Century Corporation Integrated Report 201731

Specialty Financing
Exercising our “Finance

Services

Business

Expertise” by building on aviation, shipping,

Shift.

environment and energy, and real estate products

Facing dynamic challenges withcustomers and partners to createbusinesses that exceed expectations

Koichi Nakajima
Deputy President, Director and Executive Officer
President, Specialty Finance Business Development Unit

Balance of Operating Assets(Billions of yen)

836.7

884.1

Business Overview
We seek to develop a variety of specialized

702.9

products to create promising new business
537.4

areas beyond financial services, such asleasing and financing, and with a particularfocus on aviation, shipping, environment andenergy, and real estate.

Beyond Expectations!

expected to maintain robust growth, while shipping
Specialty Financing has been driving
the rapid growth of Tokyo Century
Group by creating businesses thatcombine Finance, Services and Business
Expertise based on our products in such areas
as aviation, shipping, real estate, andenvironment and energy. The driving force of our

14/3

15/3

16/3

17/3

develop the best portfolio. The aviation business is

growth lies in our passion for these businesses, theunrivaled expertise of our personnel in each productcategory, and ready access to global markets.
Although leasing is Tokyo Centuryʼs primarybusiness, in Specialty Financing we provide
investment, financing, leasing, and asset management
to projects that arise as a result of our products. This
we do as part of a consistent effort to take advantage
of infinite business opportunities. We have also
benefitted our customers by resolving their concerns
as both a financial company and a business operator
due to our new, unique position, made possible by ourbanking and trading house background.
As for the future of the Specialty Financing
business, the market environment varies significantly

currently requires expertise and creative ideas torealize growth. The real estate business involves
international urban development, and environmental
and energy-related businesses are expected to drive
future growth. At the same time, structured financeand venture capital will serve as incubators for
emerging ventures. It seems as though every day,intriguing projects come to us from around the world.
Also, we maintain a growing number of competitive,
world-class specialists in order for us to open up evenmore growth opportunities.
Tokyo Centuryʼs strategy is characterized by always
entering a business with a leading partner who is also
our customer. Instead of leaping into a venture on ourown, we pursue dynamic challenges in collaboration
with outstanding partners, and we produce solutions
that exceed expectations. Moreover, we accumulate
experience at the same time we are building a trackrecord of success.
Looking ahead we will continue developing new
business areas with our partners and createbusinesses that exceed expectations.

by product. We will carefully analyze each market to32

Tokyo Century Corporation Integrated Report 201733

Specialty Financing

Operational
Strengths

We are expanding the scope of our businesses, primarily in the rapidly
growing aviation business and environment and energy business, centered onsolar power generation, to bring in further growth opportunities. Also, we provide
financing and services in the shipping, real estate, structured finance, and medical/
healthcare sectors, utilizing our highly specialized knowledge and expertise. In addition,
we have entered the asset management business by investing in Nittochi AssetManagement Co., Ltd. with the intention of building a stable profit foundation resilient
to changing market conditions and gaining access to new revenue sources.

Promotion and
Evaluation of
the Third
Medium-Term
Management Plan

The Strengths of Our Specialty Financing Products●

Shipping●●

Aviation●

Our wide range of products provide
financing and services for a variety ofvessel types, including bulk carriers, carcarriers, container ships, and tankers aswell as energy-related vessels including
offshore wind turbine installation vessels
and offshore vessels.

●

Environment●

and Energy

We are developing our solar power
generation business through a joint
venture with Kyocera Corporation.

●●

We also focus on arranging aircraft leasingtransactions through alliances withinvestors and financial institutions.

Real Estate

Create New Values by Integrating Finance and BusinessWe are endeavoring to create new value by improving the quality of operating
assets, establishing a stable profit base, and constructing a system for securitizing
operating assets.
In fiscal 2016 we increased our operating assets in the context of continuing
uncertainty in the global political outlook. To establish a stable foundation for
profits, we sought to develop non-interest sources of income, including fee
businesses and capital gains from equity investments. With respect to constructinga system for securitization, we sought to diversify our sources of profit through thefunctions of Nittochi Asset Management Co., Ltd.
Initiatives by Business Segment
In ship financing: We aim to diversify our portfolio of vessels and continue creating
business opportunities with core partners.
In aviation financing: We have increased our leased fleet to approximately 50 aircraft
while also building a system for aircraft sales and developing new areas of financing.
In environment and energy: We achieved steady progress with Kyocera TCL Solar
LLC for the solar power generation business while also focusing on diverse energy
businesses with promising medium- to long-term growth prospects.
In real estate: We are shifting our business model from long-term ownership to an
origination and distribution business that emphasizes profitability.

We expect the scope of our environment
and energy business, including solar
power generation, to expand to
approximately ¥200 billion in scale.

We are creating new businesses incooperation with core partners.

We actively pursue aviation business byproviding lifecycle management in theaviation market from new and usedaircraft to engine and other aircraft parts.

Theme for Specialty Financing under
the Third Medium-Term Management Plan

We are building a portfolio of prime assets
collaborating with blue-chip partners.
Our specialized knowledge and expertise
allow us to maximize profits when exitingtransactions.

Policies andInitiatives for the
Next Fiscal YearIn fiscal 2017 we will seek to accumulate stable and highly profitable assets
toward increasing the balance of operating assets for the Specialty Financing
business. Furthermore, we will focus on building a portfolio of prime assets anddiscovering promising investments for future capital gains.
As core policies, we will (1) build prime assets in the aviation, real estate, andenvironment and energy segments; (2) accelerate the pace of businessdevelopment in collaboration with related units; and (3) accelerate the process of
discovering new products.

Operating Assets by Product (FY ended March 31, 2013 – FY ended March 31, 2017)(Billions of yen)

884.1

488.1
70.9
279.2

67.1

▶ Others

309.6▶ Real Estate

53.7

453.7

7.9

▶ Environment

and Energy▶ Shippingand Aviation

6.8 times
3.5 times

We saw dramatic expansion
in the aviation business,
which experienced robust
market growth, andin the environment andenergy business, led by solar
power generation

In ship financing: We will reinforce and raise the level of risk management while
improving ROA by creating businesses with core partners and bolstering non-asset
businesses.
In aviation financing: We will accelerate growth strategies with an eye on working
with new corporate partners toward the goal of raising the balance of operating
assets to ¥400 billion.
In environment and energy: We will increase solar power generation assets including
secondary transactions and pursue new energy businesses with strategic partners.
In real estate: We will focus on building prime assets with leading partners andalso seek diverse sources of profit that are resilient to changing market conditions
by utilizing Nittochi Asset Management Co., Ltd. and others.

130.1
13/3

34

Tokyo Century Corporation Integrated Report 201717/3
Tokyo Century Corporation Integrated Report 201735

Domestic Automobile Financing
Providing optimal solutions for thechanging times with a broad range of services,encompassing automobile leasing and car rental

Shift.
Mobilizing the entire Group to
become number one inautomobile financing
Makoto Nogami
Deputy President, Director and Executive Officer
President, Automobile Finance Business Development Unit

Balance of Operating Assets(Billions of yen)

458.3
357.9

379.9

Business Overview

409.7

We boast one of the largest services in Japan, with
Nippon Car Solutions Co., Ltd., Nippon Rent-A-Car
Service, Inc. and Orico Auto Leasing Co., Ltd.,

Further Advancing Service
Quality by Boldly Embracing
the Dramatic Evolution of theAutomobile Industry

14/3

15/3

16/3

17/3

Major waves of changes are sweeping throughthe automobile industry, including self-drivingof large-scale users by developing a solutions business,where it maintains a competitive advantage, to win
overwhelming customer approval.
establishing a management structure that leverages its
overwhelming brand strength. Furthermore, it willcars, IoT and the sharing economy.

endeavor to achieve dramatic growth by enhancing its

The Domestic Automobile Financing businessbranch network toward increasing sales, strengthening

comprises Nippon Car Solutions Co., Ltd., which mainly

corporate sales, and capturing the demand from inboundserves corporate customers, Nippon Rent-A-Car Service,visitors that is expected to grow.

Inc., providing car rental services to both corporate andOrico Auto Leasing Co., Ltd. will focus on

individual customers, and Orico Auto Leasing Co., Ltd.,

strengthening the foundation of its Koala Club agency

which primarily serves individual customers. To keep

organization while cultivating and invigorating its

one step ahead of the anticipated paradigm shift, which

relationships with large affiliated agencies. It will seek

includes how automobiles are used, we will seek toto further improve service quality and expand its

expand our existing businesses by leveraging one of thebusiness scope as the industry leader in automobile

most extensive automobile service lines in Japan.

leasing for individual customers.

Meanwhile, we will also strive to discover new

Under the slogan, “overwhelming the competition bybusinesses and advance service quality by boldly taking

further enhancing service quality and pursuingon the challenges posed by the changes impacting theaggressive management,” the Domestic Automobile

automobile industry.

Financing business will continue to evolve toward its goal

Nippon Car Solutions Co., Ltd. will provide a more
specialized customer service to actively accumulate
36

competition. It will also address the outsourcing needs

Nippon Rent-A-Car Service, Inc. will focus onserving both corporate customers and individuals by
providing optimal services for the needs of users.

prime leasing assets that are resilient to priceof securing the top position in the overall ranking for the
automobile finance business.

Tokyo Century Corporation Integrated Report 201737

Domestic Automobile Financing

Operational
Strengths

The increasing popularity and advanced functions of automobiles have shifted
the demand for automobiles in Japan from ownership to use. Tokyo Century Grouphas expanded its fleet under management to approximately 600,000 vehicles* tobecome an industry leader in Japan by offering a broad range of services fromautomobile leasing for corporate customers and individuals to car rental, and by further
enhancing the value of its services. We are seeking to expand our sales base for the changing
times by offering quality services to meet diversifying needs, including highly specialized
outsourcing services and car rental services to address the demand from inbound visitors.

Promotion of
the Third
Medium-Term
Management Plan

Theme for Domestic Automobile Financing
under the Third Medium-Term Management Plan

Make a Group-Wide Effort to Become Firstin the Overall Ranking for the Automobile Finance Business
The primary objective for Domestic Automobile Financing under the third
medium-term management plan is to strive Group-wide to become first in thebusiness by utilizing our leading service lines in the domestic market.

* Total for Nippon Car Solutions Co., Ltd., Nippon Rent-A-Car Service, Inc., and Orico Auto Leasing Co., Ltd.

Nippon Car Solutions Co., Ltd.
・ Further enhance service quality to provide highly specialized customer services.
・ Win customer approval by developing a business model that is resilient to pricecompetition.

Main Differences among Automobile Leasing,
Car Rental, and OwnershipTokyo Century Groupʼs Automobile Financing
Companies(Percentages in parentheses are Tokyo Centuryʼs percentage of voting
shares as of March 31, 2017)
Automobile Leasing

Mainly forcorporate
customers

Nippon Car Solutions Co., Ltd. (59.5%)

Mainly for
Orico Auto Leasing Co., Ltd. (50.0%)
individuals
アライアンス戦略の推進による非日系ビジネスの拡大
Car Rental
Services

Nippon Rent-A-Car Service, Inc. (81.1%)

Automobile Leasing

Car Rental

Ownership(incl. auto loans)

Intendeduse

Routine, continuous usage

Temporary and short-term
intensive usage

Long-term continuous
usage

ContracttermLong term (years)
Note: Early termination is
generally not possible

Short term (hours, days,
weeks, months)

Automobile loan contracts arelong term
Note: Early repayment ispossible

Users

Specified customers

Multiple unspecified
customers

Specified (owner)

LicenseplatesCannot be distinguishedfrom privately owned
vehicles“Wa” and “Re” numbers

Regular, privately owned
vehiclesModelselection

Customers obtain their
desired vehicle

Selection from car rental
companyʼs vehicles

Purchase of desired vehicle
by customer

Handled by the car rental
company and included in therental fee

Purchaser pays as costs are
incurredGenerally handled by the
Payment forleasing company.
insurance,
Included in the lease
maintenance,
payment depending on thetaxes, andcontract.
inspections

Number of Leased Vehicles for Individuals

Number of leased vehicles rose by an annual average of 4%
from March 31, 2012 to March 31, 2016

11% annual average increase
from March 31, 2012 to March 31, 2016

(Million units)
80(Million units)
4.0

166,526(Units)

78

77.0

3.4

3.5

12/3

13/3

14/3

16/3

15/3

Source: Japan Automotive Leasing Association (as of May 31, 2017)

76

2.9

3.0

Fleet Registrations of Cars in Rental Service
7% annual average increase
from March 31, 2012 to March 31, 201674

(Units)620,0802.5
72474,50170

The automobile leasing and car rental service businesses have steadily
expanded as the drivers of Group performance. In fiscal 2017 we will enhanceservice quality and pursue an aggressive management approach. We will do thiswith a focus on reinforcing the sales and management base at each company as
we strive to become first in the entire automobile financing business.

Nippon Car Solutions Co., Ltd.

111,655

78.8

Orico Auto Leasing Co., Ltd.
・ Strengthen the base of the Koala Club, the original agency organization, which
has grown to 800 agencies.
・ Cultivate and invigorate relationships with large affiliated agencies to expand ourscope of business.

Policies andInitiatives for the
Next Fiscal Year

Data Related to Domestic Automobile Financing
Total Number of Vehicles and Total Number of Leased Vehicles

Nippon Rent-A-Car Service, Inc.
・ Establish a sales structure that leverages the companyʼs overwhelming brandstrength.
・ Enhance corporate sales through close collaboration within the Group andcapture the demand from inbound visitors.

・ Enhance service quality with a focus on developing an industry-leading solutions
business.
・ Expand maintenance lease operations as the pillar of profit and bolster sales
channel strategies and specialized business areas.
Nippon Rent-A-Car Service, Inc.
・ Review the organizational structure to better leverage the companyʼsoverwhelming brand strength.
・ Enhance branch network, strengthen corporate sales and efforts to capture thedemand from inbound visitors, and actively develop the loaner car business.
Orico Auto Leasing Co., Ltd.
・ Reinforce the base of the Koala Club, the original agency organization andcultivate relationships with large affiliated agencies.
・ Develop better supportive tools for agencies and expand business scope.
In addition to expanding these conventional businesses, we will take on thechallenge of new business areas in the automobile-related industry, which isundergoing major change, including developments related to self-driving cars, IoT
and the sharing economy.

2.0

07/3 08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 16/3
Source: Japan Automotive Leasing Association (as of May 31, 2017)

12/3

13/3

14/3

15/3

16/3

Source: All Japan Rent-A-Car Association (as of May 31, 2017)

Total Number of Vehicles (Left Scale)
Total Number of Leased Vehicles (Right Scale)38

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201739

International Business
Expanding non-Japanese businesses throughstrategic alliances with leading local companies
and accelerating the pace of business development

Shift.

in new areas such as FinTech and e-commerce

Achieving significant growth inoverseas businesses throughmutually beneficial alliancestrategies with top-ranking
local companies
Yasushi Yoshino
Senior Managing Executive Officer
President, International Business Development Unit

Balance of Operating Assets(Billions of yen)

Business Overview
423.0

We provide specialized services that address
unique local needs by partnering with leading local

248.1

companies and financial institutions overseas.

252.7

Currently we operate in 37 countries around the170.0

world and are promoting new businesses
particularly in China and Southeast Asia.

Expanding Our
Alliance Strategies
We have been expanding our overseas
businesses by pursuing alliance strategies that
promote collaboration with top-ranking partners
in each country.
The key to our alliance strategies has been generatingsynergies between the strengths of Tokyo Century and our

14/3

15/3

16/3

17/3

partners. These synergies arise from integrating ouraccumulated financial expertise with the existingcustomer base and proven information gathering
capabilities of our local partners, leading to dramatic
growth for our mutual benefit while minimizing risk.
Applying this approach of expanding overseas
businesses by promoting alliance strategies under thethird medium-term management plan that began in
fiscal 2016 has already led to results from the first yearof the plan. We began by making the U.S. company CSI
Leasing, Inc. into a wholly owned subsidiary. Its

aim to provide one of the worldʼs best services in thearea of IT equipment leasing. This was followed by ourinvestment and alliance in the electronic money ande-commerce ventures of Lippo Group, the leading
conglomerate in Indonesia. We also invested in Grab, thelargest ride-hailing platform in the ASEAN region, withwhom we entered into a partnership in automobile
financing. These investments were made with an eye toutilizing FinTech for developing new business areas.
So far in 2017, we have announced two new alliances in
China: a strategic business agreement with China UnionPay
Merchant Services Co., Ltd. (China UMS), which is thecountryʼs leading card payment service operator in the
China UnionPay group, and a vendor finance joint venturewith the Dalian Bingshan Group, the countryʼs largest
refrigeration and air-conditioning equipment manufacturer.
We intend to continue seeking significant growth in ouroverseas businesses by consistently pursuing ouralliance strategies primarily in Asia, a region which
offers promising prospects for growth.

competitive advantage lies in IT equipment, and we will

40

Tokyo Century Corporation Integrated Report 201741

International Business

Operational
Strengths

We have enjoyed tremendous success since the 2009 merger that formed Tokyo
Century Group, primarily in the U.S., East Asia and the ASEAN region, achieving anearly fivefold increase in operating assets over the past eight years. Non-Japanesebusinesses in particular have been growing rapidly as we aggressively pursue ourstrategy of forming alliances with leading local companies and financial institutions
overseas. In June 2016, CSI Leasing, Inc. (CSI), the largest independent leasing company in
the U.S., became a wholly owned subsidiary. We intend to provide premier, world-class IT
solutions by leveraging CSIʼs business model and global network, which maintains a competitiveedge in handling information and communications equipment.

Promotion and
Evaluation of
the Third
Medium-Term
Management Plan

Business Model for International BusinessTokyo Century
Investment

Investment

Local partnercompanies

Expertise,knowledge

Jointventures

Creditanalysisskills, local
customerbase

Expand Overseas Businesses by
Promoting Alliance Strategies
Under the third medium-term management plan, we intend to expand ourinternational business by promoting an aggressive alliance strategy.
In fiscal 2016, our U.S. business expanded dramatically, as CSI Leasing, Inc.
became a wholly owned subsidiary. We also made significant progress in forming
alliances with leading non-Japanese companies from the first year of the third
medium-term management plan, which led to major results, including theconclusion of various business agreements.

Major Achievements in Fiscal 2016

Japanese companies

Solid reputation among
Japanese companies

Theme for International Business under
the Third Medium-Term Management Plan

・Concluded a strategic partnership agreement with Lippo Group, a major
conglomerate in Indonesia.

Strong local trust・Concluded a strategic partnership collaborating on leasing and rental car
options with Grab, the largest ride-hailing platform in Southeast Asia.

Non-Japanese companies

・Concluded a strategic business agreement with China UnionPay MerchantServices Co., Ltd. (China UMS), the largest card payment service operator in
China.
・Acquired local automobile leasing operations and established a dedicatedautomobile leasing company in Thailand.
・Began developing the Nippon Rent-A-Car brand in Malaysia.
・Established a joint venture with Dalian Bingshan Group, the largest refrigeration
and air-conditioning equipment manufacturer in China.

Expanding Overseas Businesses by Promoting Alliance Strategies with Local Partners
●

I
India

●

C
China

Leasing business with TATA Capital

●

●

●

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

TaiwanT

Joint vendor financing venture with
Hitachi Construction Machinery Group●P
Philippines●

Leasing business with Bank of the Philippine
Islands, a leading bank

I
Indonesia●

Strategic business agreement with China
UnionPay Merchant Services Co., Ltd. (China UMS),
the largest card payment service operator
Joint leasing company with Dalian Bingshan
Group, the largest refrigeration and air-conditioning
equipment manufacturer
Investment in a government-affiliated leasing
company in Suzhou City, China

Leasing business with Uni-President
Enterprises Group, the largest foodcompany

Note: For more information on our alliances with Lippo Group, Grab, and China UMS, please see:“Features: Taking on the Challenge of Creating New Values from Finance Services Business Expertise”
starting on page 22.

Policies andInitiatives for the
Next Fiscal YearIn fiscal 2017, which marks the second year of the third medium-term
management plan, we will continue to aggressively pursue our strategy of forming
alliances with leading local companies and financial institutions overseas towardachieving the planʼs final targets. In concrete terms, we will focus on quickly
launching joint ventures with alliance partners and developing closer
collaborations while also exploring new areas, such as FinTech and e-commerce.
Moreover, we will seek to generate synergies by maximizing CSIʼs business modeland global network to expand collaboration with local companies and promotealliances with Japanese companies in the countries in which we operate.

Joint vendor financing venture with
Hitachi Construction Machinery GroupKey Areas of Focus for Fiscal 2017
・Establish joint ventures with local leading companies and expand sales financing

Strategic partnership agreement on FinTech
and other businesses with Lippo Group, a major
conglomerate

・Develop new areas in addition to expanding existing businesses in each location.

and vendor programs.

Strategic partnership with Grab, the largest ride-hailing platform
providing services across seven countries in Southeast Asia, topromote expanding automobile financing-related businesses
Singapore

42

Indonesia

Philippines

Malaysia

ThailandTokyo Century Corporation Integrated Report 2017

Vietnam

Myanmar

Tokyo Century Corporation Integrated Report 201743

Roundtable Discussion on Corporate Governancecombining Finance, Services and Business Expertise will undoubtedly generate conflict

Evolving Business Fields of“Finance Services Business Expertise” andthe Future of Corporate Governancewith traditional corporate models and ways of thinking, even for a company like Tokyo
Century, and new fields cannot be explored until these difficulties are overcome. Forging
ahead at the cutting-edge of business requires a system that empowers employees tofearlessly and positively handle these conflicts. This is the goal of corporate governance:
to develop and thoroughly establish an effective framework that supports all employees infreely and boldly facing new challenges.
■ Kunihiro I have been involved since the public listing of the former
Century Leasing System, Inc., before the merger. My current

Tokyo Century recognizes corporate governance as a key management concern and receives objective
guidance and advice from external officers and company counsel.
For this report, we asked our external director, external corporate auditor, and company counsel toshare their views on Tokyo Centuryʼs current governance and future management issues.

The ability to freely develop business

responsibilities include reviewing issues related to the agenda for thegeneral meeting of shareholders and participating in the Nominationin new fields vitally depends onsolid governance.

and Compensation Committee as an external member to offer advice
primarily from the standpoint of risk management.
Recent discussions on corporate governance have tended to revolve

Yoshinori Shimizu

around issues of format, such as the appropriate number of external

Director (External Director)

directors. Instead, we should be thinking about substance. As Mr.
Shimizu pointed out, the world is dramatically changing at breakneck
speed, requiring companies to keep up and rise to the level ofchallenges posed by such changes in order to enhance their value.
Without a firm footing, however, misconduct can undermine a companyʼs

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

very ability to take on challenges. In short, corporate governance isabout building a foundation from which to launch a timely challenge. Tokyo Century has
been able to take on the challenge of new business fields at a rapid pace, precisely because
it has established a solid footing. In other words, it has the ability to manage risk under theconstant scrutiny of outside players, instead of being hampered by subjective judgment.
Risk is the flipside of opportunity. They are two sides of the same coin, not an either-or
choice between “offense” and “defense.” Corporate governance is often explained in termsof “offense” and “defense,” with the sense that “defense” means not engaging in
misconduct, or simply meeting the minimum legal requirements.

Evaluation of the Current State of Corporate Governanceat Tokyo Century and Outstanding Issues■ Baba Although we are currently showing steady business results, I am concerned that

Yoshinori Shimizu

Issues Requiring Attention in Tokyo Centuryʼs
Current Business Environment

Director (External Director)

Tadashi Kunihiro
Company Counsel

Futoshi Okada
Standing Corporate Auditor(External Corporate Auditor)

Koichi Baba (Facilitator)
Managing Executive Officer
President, Corporate Planning Unit andPresident, Accounting Unit

■ Baba First, thank you for regularly providing us with pertinent management advice.
Tokyo Century is striving to create new values by combining Finance, Services andrunning into a harsh management environment. As the responsible unit, we haverepeatedly discussed ways to enhance the framework and management of our corporate
governance. What is your assessment of the current state of our governance?

Business Expertise. Today we would like to hear your views on issues that lie ahead as■ Shimizu Briefings held before board of directors meetings havewell as the future of our corporate governance.

been very helpful. However, in view of the growing number ofAs the business environment continues to evolve at an unprecedented pace, what are theissues that require our attention with regard to corporate governance?
■ Shimizu Clearly recognizing the current landscape is important in the context of theongoing Fourth Industrial Revolution, in which new technology is changing society and thebusiness environment minute by minute. As President Asada mentioned the other day
during the meeting of all heads of divisions and branches, we must keep in mind that allcompanies are in the midst of reestablishing their foundations. With GDP expanding at ahistoric pace and technology advancing at an unprecedented speed around the world, what
actions should Tokyo Century take? Taking on the challenges of creating new values by44

simply continuing along the same lines as in the past will increase the likelihood ofTokyo Century Corporation Integrated Report 2017consolidated subsidiaries, I think that knowing the people in charge ofthe subsidiaries would deepen overall understanding.
■ Kunihiro Continuing on the theme of “offense” and “defense,”

Risk is the flipside of opportunity.
A solid management foundation enables
Tokyo Century to take on challenges.

I would like to point out that new business fields bring risks thatcannot be assessed from the standpoint of existing legislation andregulations. Instead, we should refer to the publicʼs trust in thecompany. In that sense, external directors and corporate auditors
serve as stakeholder representatives. Under the leadership ofPresident Asada, Tokyo Century has continued to grow by taking on

Tadashi Kunihiro
Company Counsel
Foremost expert on crisis management and information management.
Offers advice as company counsel and as a member of the Nomination
and Compensation Committee.

challenges while at the same time reinforcing governance.
Tokyo Century Corporation Integrated Report 201745

Roundtable Discussion on Corporate GovernanceCorporate governance also functions as a check on risks related to the management team.

■ Okada Since overseas companies do not have corporate auditor systems, we cannot in

President Asada has been fully aware of this in seeking to incorporate external viewpoints

practice concurrently play that role, although we conduct on-site auditing just as we do in

into management, so I believe the company is covered on the most important front.

Japan. And as the number of these audits increases, we get to hear about new issues. CSIAt the practical level of daily operations, there is a sense of hesitation when interactingwith external directors and corporate auditors, which is not good. Corporate governance isbased on actively incorporating the opinions of those outside the company. Consequently,
encouraging the sharing of information and eliminating psychological barriers on bothsides will lead to more effective governance.

We markedly improve the quantity andquality of information by actively seeking■ Baba Mr. Okada also provides oversight as the corporate auditorof our subsidiaries. What are your views on the role of the external

Leasing, Inc. recently joined the Group, and due to the significant scope of its operations,
we are currently considering the best timing for conducting an on-site audit. We must also
explain Japanese-style corporate governance. As for the future, I am aware of the need toestablish a system of governance for joint ventures, especially when Tokyo Century is not
the majority shareholder.
■ Kunihiro Conducting on-site audits precisely because a subsidiary is located in aremote region is what I would call risk-based thinking.
Meeting with the CSI Leasing audit teamcorporate auditor?

it out instead of waiting for it to arrive.
■ Okada My position is extraordinary in the sense that I serve as a

Futoshi Okada

What We Expect from Tokyo Century

standing corporate auditor while also being an external corporate

Standing Corporate Auditor(External Corporate Auditor)

auditor. First, as a full-time auditor, I have access to a far greaterStanding Corporate Auditor (External Corporate Auditor) of Century
Tokyo Leasing Corporation (currently Tokyo Century Corporation)
since 2012. Concurrently serves as Auditor of consolidated
subsidiaries, including Nippon Car Solutions Co., Ltd. and Tokyo
Century Leasing China Corporation. Having worked at a financial
institution and its affiliates, Mr. Okada conducts corporate audits bydrawing on his extensive experience and knowledge accumulated inmanaging financial institutions.

a constant flow of information. However, rather than simply waiting, I

amount of information. I am consulted on a regular basis and receive
actively exercise my right to access databases and collectinformation. Also, I distribute monthly reports to the part-time
corporate auditors. As Mr. Shimizu mentioned, the company has
continued to move into new business fields, having started out inleasing and installment sales then advancing into financing, and it is
now involved in the actual operation of businesses such as solar
power generation. This journey has been accompanied by corporate
spin-offs and the rapidly rising status of Group subsidiaries. At Tokyo Century, eight out offourteen major consolidated subsidiaries in Japan are being audited by me and anotherstanding corporate auditor. Since the subsidiaries have their own standing corporate
auditors, there is a little overlap. But we greatly benefit from listening to unfilteredinformation and reviewing actual business documents from these companies by attending
monthly board of directors meetings and exchanging views with their corporate auditors.
When there is a need for improvement, I try to provide objective oversight by presenting
concrete examples from other companies and by widening the scope of informationcollection to include subsidiaries.

■ Kunihiro Tokyo Century is an interesting company. I hope it will maintain its rapid paceand spirit of challenge and integrate “offense” and “defense” into its management style toachieve future growth.
■ Shimizu While paying due consideration to market expectations, the company will needto develop new business fields that serve society. Advancing technologies will soon callinto question the very existence of financial institutions. Leasing is a unique business thatis free from the constraints of collateral. I expect Tokyo Century to continue creating
innovative financial models and seek growth with the determination to become a leader inthe evolving financial sector.
■ Okada Given that the company is committed to developing new business fields, those of
us on the auditing side should also examine potentially suitable methodologies andpresent our ideas to the executives to advance the discussion. I will do my best to secure asolid footing so that the company can appropriately handle emerging risks.
■ Baba The views you shared with us today have put a lot into perspective. Looking
ahead, we will seek to refine our corporate governance to support sustainable growth.
Thank you very much for your invaluable opinions.

■ Kunihiro As a lawyer, I would say this is the ideal role for a corporate auditor. While
corporate governance begins with developing a system, information is the cornerstone.
Without information, the system cannot function. From what you have just said, Mr. Okada,I feel that Tokyo Century is taking mindful action on the mostimportant aspect. It is noteworthy that many recent corporate

Executive self-governance isscandals originated with subsidiaries and caused serious damage toimperative so that we are notparent companies. Managing the risks associated with subsidiaries
is crucial, from the perspective of both auditing and internal control.

shackled by convention.
■ Baba On the executive side of operations, I think we may have

Koichi Baba (Facilitator)

become too comfortable with the everyday flow of information. We

Managing Executive Officer
President, Corporate Planning Unit andPresident, Accounting Unit

must proactively communicate the current state of the company toAppointed Executive Officer, General Manager of Corporate Planning
Division and Deputy President, Business Process & IT Unit at Century
Tokyo Leasing Corporation (currently Tokyo Century Corporation) in 2014.
Appointed Managing Executive Officer, President, Corporate Planning
Unit, President, Accounting Unit and General Manager of Corporate
Planning Division in 2016. Appointed to the current post in 2017.

outside stakeholders. I believe that those of us on the executive side
must exercise self-governance.
■ Shimizu The question is: How much negative information reaches
us? It is essential to adopt the stance of getting negative informationout first. Looking ahead, establishing corporate governance atoverseas affiliates will be a major issue.

46

Tokyo Century Corporation Integrated Report 201747

Corporate GovernanceTokyo Century Corporation recognizes that effective corporate governance is an important management issue inmaximizing corporate value. We also enhance the soundness and transparency of corporate management.

Committees

Management System
Tokyo Centuryʼs management organization reflects the will of
shareholders. It centers on the Board of Directors and Board of
Corporate Auditors, which consist of directors and corporate
auditors, respectively, who are elected by the General Meeting of
Shareholders. Furthermore, we have an executive officer system toaccelerate management strategy decisions and further strengthensupervision and execution. One of the 25 executive officers is female.

Nomination and Compensation Committee
Tokyo Centuryʼs Nomination and Compensation Committee
consists primarily of external directors and advises the Board of
Directors. The committee nominates and selects candidates for
director and corporate auditor positions as well as executive officers,
and discusses matters including decisions about compensation
systems and policies. The committee reports to the Board of Directors.

Board of Directors
The Board of Directors consists of 11 directors, and three ofthem are external directors, as defined by Article 2-15 of the
Corporation Law of Japan. The Board of Directors deliberates on andmakes decisions about important issues associated with the
management of Tokyo Century and its Group companies as well as
matters specified by prevailing laws, regulations, articles ofincorporation, and rules governing the Board of Directors. Moreover,it supervises the execution of operations by directors and executive
officers.
Tokyo Century Corporationʼs Articles of Incorporation limit the
number of directors to 18 or fewer.

Independence of Management Oversight Structure
Tokyo Century uses the standards for independent directors
under the Tokyo Stock Exchange listing rules when appointing its
external directors and auditors. Furthermore, we appoint external
directors and auditors who we believe, after considering their extensive
background in corporate management, specialized knowledge, andcommon sense, are able to objectively supervise management.
No conflicts of interest exist between the Company and its
external directors or auditors. The three external directors and two
external auditors also hold positions at other companies andorganizations, as listed on page 50.
Management Meeting
The Management Meeting consists of the President and officers
appointed by the President. Chaired by the President, it deliberates
on particularly important matters concerning the execution ofoperations and makes decisions for the entire Group.

Board of Corporate Auditors
Tokyo Century has adopted the organizational structure of acompany with a board of corporate auditors. The Board of Corporate
Auditors consists of three corporate auditors. Two of them are
full-time corporate auditors and two are external corporate auditors,
as defined by Article 2-16 of the Corporation Law of Japan. The
Board of Corporate Auditors meets regularly and rigorously
executes independent and fair audits of compliance and theappropriateness of corporate activities including the performance of
duties by directors and executive officers.

Project Evaluation Meeting
The Project Evaluation Meeting consists of the President andofficers appointed by the President. It discusses and makes
decisions about major business transactions being considered by
Tokyo Century and Group companies, as well as transactions thatwarrant complex risk analysis.

System of Corporate Governance and Internal Control (as of June 23, 2017)
Shareholders’ Meeting
Election/Dismissal

Election/Dismissal
Coordination

Election/Dismissal
ReportAudit
Board of Corporate Auditors
Coordination

Audit

Company Counsel

Board of Directors
Election/Dismissal/
Supervision

Nomination andCompensation Committee
Coordination
Business Risks Management Division

Independent Auditor

Coordination
Audit Division

Audit

ReportInternal Audit
Evaluation ofInternal Control
Audit

Appointment

Direction/
Supervision

Management
Meeting
Project Evaluation
Meeting

Executive Officers

Election/Dismissal//
Supervision

Operation Headquarters/Business Headquarters
Group Companies

48

Tokyo Century Corporation Integrated Report 2017

Chief Compliance Officer

President & CEO
ReportCommittees
・Internal Control Committee
・Comprehensive Risk
Management Committee
・ALM Committee
and others

Internal Control Committee
Tokyo Century created the Internal Control Committee toensure the internal control system functions effectively. The
committee discusses general internal control matters, including
evaluation of the effectiveness of the financial reporting systemand scope of evaluation and reports to the Management Meeting.
Comprehensive Risk Management Committee
Tokyo Century created the Comprehensive Risk Management
Committee to address exposure to a wide array of risks. The
committee discusses matters such as construction of the risk
management system and approaches to measuring risk. It also
periodically assesses Tokyo Centuryʼs risk exposure and reports
to the Management Meeting.
ALM Committee
Tokyo Century created the Asset Liability Management
Committee to identify and minimize the exposure of assets andliabilities to risks including fluctuations in interest and foreign
currency exchange rates. The committee discusses mattersrelevant to managing market, liquidity, and other risks andreports to the Management Meeting.

Credit Risk Management Committee
Tokyo Century created the Credit Risk Management
Committee to manage credit risk. The committee discusses
matters including the Groupʼs credit portfolio as a whole andcredit risk management and reports to the Management
Meeting.
IT and Administration Strategy Management Committee
Tokyo Century created the IT and Administration Strategy
Management Committee to address system risk andadministration risk. The committee discusses matters including
IT strategy, IT investment plans, and administrative organizationplans and reports to the Management Meeting.

Internal Control
Basic Policy for the Internal Control System
All officers, managers, and employees are expected toadhere to the Management Philosophy as a basic policy while
performing their work.
Guided by our management philosophy, we haveestablished an internal control system with the recognition
that creating and using a system to ensure appropriate
business execution is an important management
responsibility. We will upgrade the system to respond tochanges in our internal and external environment.

Compliance
We recognize that thorough compliance is essential for thecontinued existence of a corporation. Therefore, we aim toestablish a management system that ensures that every officer
and employee operates under the principle of fairness and withthe highest ethical standards to earn the trust of society.
The Chief Compliance Officer takes the lead in promoting
compliance in accordance with compliance programs,
implementing continuous education and training through the useof e-learning and other initiatives and enhancing complianceawareness.
In addition, we have established several contacts, including
an external law office, with whom employees can consult oncompliance issues and to whom they can provide information on
fraudulent actions and practices. We also operate a whistleblower system that strictly protects those reporting problems.

Compliance Training during Fiscal 2016
Subjects

Implemented

Compliance fundamentals
The proper mindset in regard to laws andinternal rules● Information security rules, countermeasuresand others

April 2016

Tokyo Century Groupʼs internal reporting
systems
Proper management of personal informationand customer information● Shutting out antisocial forces and others

June 2016

Compliance management for managerial
positions
Compliance, risk management and others

June 2016

The fraud triangle theory
Harassment-related issues and others

February
2017

Target●New employees(rank-based
training)
All officers,
managers andemployees(e-learning)
New managers(rank-based
training)
All officers,
managers andemployees(e-learning)

●

●

●

●

●

●
●

Corporate bankruptcies due to complianceviolations
Insider trading information management● Full implementation of information security
rules● Tax risk prevention, countermeasures andothers●Compliance Education
Tokyo Century Group instills a compliance mindset throughsystematic, ongoing education. Initiatives include rank-based
training for new employees and new managers, training via
e-learning for all officers, managers and employees, andtraining at the divisional and branch level by compliance officers
using compliance information as instructional material.

Complianceofficers(newsletter)●

Four times
per year
Optional
training
providedfor divisions
and branches

Tokyo Century Corporation Integrated Report 201749

Corporate Governance

External Directors, External Corporate Auditors, and Reasons for Their Appointment (as of June 23, 2017)

Risk Management

External Directors
SharesHeld(Thousands)

Independent
Officer

Reasons for Appointment○

Mr. Shimizu possesses highly advanced
knowledge as a monetary economics
research professional. He applies thisexpertise in the management of theCompany from a macro standpoint andmonitors management from an
independent perspective. His appointment
will contribute to achieving sustainablegrowth and enhancing the corporate valueof Tokyo Century over the mid- to longterm.

2○

Mr. Yoshida brings a wealth of experienceand broad knowledge on managementfrom his lengthy involvement in corporate
management at a major electricmanufacturing company. His extensive
knowledge and superior insights will bereflected in the management of Tokyo
Century, while he also offers objective
advice from a broad, external perspective.

-○

Mr. Higaki brings a wealth of experienceand broad knowledge on managementfrom his lengthy involvement in corporate
management at a major shipbuilding
company. His extensive knowledge andsuperior insights will be reflected in the
management of Tokyo Century, while healso offers objective advice from a broad,external perspective.

-

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

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

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

Years
Served6

Attendance at Regular
Meetings of Board of
Directors

14 of 14

Reasons for Appointment

Newappointment-

Newappointment-

SharesHeld(Thousands)

Years
ServedMikio Fukushima

50

Tokyo Century Corporation Integrated Report 2017

System and Administration Risk
The IT and Administration Strategy
Management Committee was establishedto discuss IT strategy, IT investment, andadministrative organization to address
system risk and administration risk based on the rules of thecommittee.
Operational Risk
The Business Risks Management Division addresses
operational risk by identifying, quantifying, and reviewing risk
countermeasures, while the Business Risk Management
Committee comprehensively reviews the Companyʼs overall risk
controls, risk management systems, policies and measures
based on the rules of the committee. In the event of a largescale natural disaster or other crisis, the committee is organized
to take immediate action.

Information Security Risk
The Company manages information security risk based on a
Basic Information Security Policy, rules for handling personal
information, and a management system based on
ISO 27001 standards.

Dialogue with Shareholders and Investors

Attendance atAttendance atRegular Meetings Meetings ofof Board ofBoardof Auditors
Directors

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

Credit Risks
The Credit Risk Executive Committee sets basic policies inaccordance with its rules, measures credit risk, and manages
risk. The Project Evaluation Meeting uses a rule-based
methodology to assess and decide on projects that requirecomplex analysis, such as major deals and new schemes.
Market and Liquidity Risks
The ALM Committee comprehensively manages andprocures funds based on committee rules to address interest
rate fluctuations and other market risks and liquidity risk related
to funding.

External Corporate Auditors
Independent
OfficerTokyo Century Group has proactively designed appropriate
risk countermeasures according to risk scale and likelihood. Our
systematic countermeasures to minimize the risk of losses are
as follows.

-

Mr. Okada applies his extensive
experience in business management offinancial institutions as well as broad
knowledge and experience of business
operations and overseas business to theaudit functions of Tokyo Century.

0

5

14 of 1411 of 11○

Mr. Fukushima applies his extensive
experience in management and his broad
knowledge to the audit functions of Tokyo
Century.

0

3

13 of 1411 of 11

To ensure the transparency of ourcorporate activities, we have established adisclosure system for providing timely
information appropriately and fairly to
stakeholders including shareholders andinvestors. We also deepen understandingof the Groupʼs strengths and strategies,
including our medium-term management
plan, among institutional investors andanalysts through results briefings andindividual meetings, and among individual
investors through forums such as
corporate briefings.

Key Briefings during Fiscal 2016
May 2016

Results briefing for the fiscal
year ended March 31, 2016

Nov. 2016

Results briefing for the firstsix months of the fiscal year
ending March 31, 2017

Nov. & Dec. 2016

Corporate briefings forindividual investors

Corporate briefing for individual investors

Tokyo Century Corporation Integrated Report 201751

Management Organization

⑨

⑦

⑤

③

1

Board of Directors②② President & CEO,
Representative Director③ Director (External Director)1, 3④ Director (External Director)1, 3

Standing Corporate Auditor(External Auditor)2

Toshihito Tamba

Shunichi Asada

Yoshinori Shimizu

Masao Yoshida

Futoshi Okada⑤ Director (External Director)1, 3⑥ Deputy President, Director andExecutive Officer⑦ Deputy President, Director andExecutive Officer⑧ Director and Senior Managing
Executive Officer

Yukito Higaki

Makoto Nogami

Koichi Nakajima

Masataka Yukiya

⑧

10

11

President, Automobile Finance Business
Development Unit;
Executive Advisory Officer for Equipment
Leasing Business Development Unit;
Executive Advisory Officer for Metro Tokyo
Business Unit;
Executive Advisory Officer for Regional
Business Unit;
President & CEO, Representative Director,
Nippon Car Solutions Co., Ltd.

President, Specialty Finance Business
Development Unit;
President, Specialty Finance Business Unit I;
President, International Business Unit II;
Executive Advisory Officer for Specialty FinanceBusiness Unit II

President, Corporate Business Unit III;
Executive Advisory Officer for Corporate
Business Unit I;
Executive Advisory Officer for Corporate
Business Unit II;
Executive Advisory Officer for Corporate
Business Unit III;
Executive Advisory Officer for IT Equipment
Business Unit

⑨ Director and Executive Officer

10 Director and Executive Officer

11 Director and Executive Officer

Osamu Tamano

Akihiro NaruseSeiichi Mizuno

President, Corporate Business Unit II;
President, Equipment Asset Management Unit;
Deputy President, Business Process
Management Unit;
President & CEO, Representative Director,
TRY, Inc.

President, Equipment Leasing Business
Development Unit;
President, IT Equipment Business Unit

Deputy President,
Risk Management Unit;
In charge of Audit DivisionTokyo Century Corporation Integrated Report 2017

Standing Corporate Auditor

Corporate Auditor (External Auditor)2, 3

Yasuyoshi Nozaki

Mikio Fukushima

Executive Officers
Senior Managing
Executive Officers

Yuichiro Ikeda
Takeshi Honda
Yasushi Yoshino
Yoichiro Nakai

52⑥

Corporate Auditors

1 Chairman & Co-CEO,Representative Director④

Managing Executive Officers

Executive Officers

Kenji Murai

Kazuhiro Shibata

Ko Nakagawa

Takashi Kamite

Tomoyuki Akamatsu

Hiroaki Ogino

Yoshio Nomura

Shuji Ozawa

Foo Siang Seng

Koichi Baba

Toshio Kitamura

Tatsuya Hirasaki

Mahoko Hara

Tatsuya Yamamoto

Toshifumi Takashima
1. External director as stipulated by Article 2-15 of the Corporation Law of Japan
2. External corporate auditor as stipulated by Article 2-16 of the Corporation Law of Japan
3. Designated independent officer as stipulated by the Tokyo Stock ExchangeTokyo Century Corporation Integrated Report 201753

Human Resources
Interview with General Manager of Personnel Division

Personnel are a company’s
most valuable asset
Human resource development requires a Group-widecommitment. Our strength lies in a corporate culture thatallows employees with diverse backgrounds to share theirknowledge in a spirit of mutual respect.
Toshiyuki Otobe
General Manager of
Personnel Division

Joined Tokyo Leasing Co., Ltd. (currently Tokyo Century Corporation) in 1987.
Spent many years in the development and maintenance of mission-critical systems.
Worked in the Corporate Planning Division before assuming his current post in 2012.

The Strength of Tokyo Centuryʼs Human Resources andFour Important Aspects for the FutureWith its roots in the Equipment Leasing business, Tokyo
Century Group has continuously expanded the scope of its
operations and is now developing global businesses that also
encompass: Specialty Financing in fields such as shipping,aviation, real estate, and environment and energy; International
Business primarily in the United States and Asia; and Domestic
Automobile Financing.
Tokyo Century Group owes its growth to the work of its
employees. However, we did not necessarily have a completegroup of experts in new business fields from the beginning.
Employees with no experience other than the leasing
business took on the challenges of different fields andpersisted in their efforts to become professionals,
consequently becoming human resources that figure
prominently in a broad range of businesses.

Also significant are the active roles of individuals who were
hired mid-career. We began by hiring in the shipping, aviation, andinternational businesses, and with the increasing sophistication of
our operations, we have also been employing individuals withextensive experience from various sectors in areas that require ahigh degree of expertise such as IT, accounting, and internal
control. While the retention rate of mid-career hires is often cited
as a concern, it is extremely high at Tokyo Century, and they havebeen demonstrating their talents in various workplaces. These
employees tell us how our corporate culture has enriched theirexperience by giving them freedom as well as responsibility andauthority.
I believe our strength lies in the way employees bring theirvaried experiences and share their knowledge to maximize mutual
strengths, and in having a corporate culture that embraces diverse
individuals.
Meanwhile, as the business environment continues to change
dramatically, I think there are four important aspects for
employees of Tokyo Century Group to bear in mind as we gear up
for the next leap.
The first is to become a professional in a given ﬁeld. Unless
you become a professional in your assigned field, you are unlikely
to succeed in any other. Professionalism is an important
requirement for any member of an organization. The second is
ﬂexibility, which is the ability to adapt to a rapidly changing
environment and to transform yourself. The third is to enjoy yourwork with a positive attitude. If you are going to do something,
you might as well enjoy doing it. I believe that having this attitude
is most important. Lastly, the fourth is to take actions based on abroad perspective. A vertically organized company will eventually
decline. Imagination and creativity result from communicating
information, accepting others, and seeking inclusion.

Initiatives for Bolstering Development of Human
Resources under our Management Strategy toStrengthen the Management BaseTokyo Centuryʼs educational program is classified primarily
into four categories of training, namely on-the-job training,training by position, self-development, and international
training. We conduct position-based training every year for
employees in their first through ninth years with the company.
Over the past few years, we have focused on training new
employees, because motivated individuals will continue tolearn on their own initiative if they start training early.
Developing global human resources is another pressing issue,
and we provide an environment in which anyone who wants
relevant training can receive it at any time. We also provide
career planning to motivate individuals to recognize thechanges taking place around them and transform themselves
without resting on their laurels, to continue being needed bythose around them and by the company, regardless of theirage. For Tokyo Century, personnel are a companyʼs mostvaluable asset, and we believe that human resource
development requires a Group-wide commitment.
I want the lives of our employees to be fulfilling. In addition
to staying healthy, people need to be where exposure to diverse
values is a pleasant experience. Employees should be able towork effortlessly in an environment where diversity is an
unconscious part of the fabric. Above all, each individual should
be motivated toward self-development. Looking ahead, I would
like to continue enhancing our working environment andprograms by maintaining a dialogue with employees so thateach individual can work with confidence and pride.

■ Human Resource Development

54

Tokyo Century Corporation Integrated Report 2017

7th–9th year
training

4th–6th year
training

3rd yeartraining

2nd yeartraining

Follow-up training
for new employees

Intensive courses
for new employees

Stages of Development
Mid-term training
for new employees

Introductory training
for new employees

Start
Positionbased
Training

Initiatives for Developing Human ResourcesTokyo Century Group provides a variety of educational
programs that meet the needs of employees inaccordance with years of employment and career plans.
We conducted a total of 15,000 hours of training last year.
While our employees receive their education on thejob over their first nine years, they also participate intraining corresponding to each year of employment, aimed
at the systematic acquisition of the knowledge and skills
required by their jobs. We also organize training for
managers as a means of clarifying the roles, knowledge,
and skills required of them, as well as to enhance their
management capabilities. In addition, we encourage
self-development by supporting employee efforts todevelop their own capabilities, while striving to cultivate
global human resources.

Educational Programs for Developing Professional Skills

SelfDevelopment

Human Resource Development

Managers training

Qualifications (Bookkeeping, Finance, Legal Affairs) / Recommended Qualifications (Specialized Skills)
Distance Learning (Accounting, Tax Affairs, Finance, Legal Affairs, IT, Languages, Global Affairs)
Sales Skills, Specialized Skill Development, Career Planning Seminars, External Seminars

Test of English for International Communication (TOEIC)

GlobalTraining

Basic Policy

Tokyo Century Group believes that personnel are a companyʼs most valuable asset and a driving
force for sustainable growth. In order to encourage each and every employee to demonstrate
their abilities and individuality, we support self-directed career and ability development throughvarious Group-wide initiatives. Tokyo Century is fostering a corporate culture and a rewarding
workplace in which diverse, globally-aware professionals can flourish.

Language schools
Overseas trainee program
Mid-Term Training Program for New Employees●

Basic knowledge on leasing
and installment sales●

Macro/Micro economy andmarket analysis●

Legal affairs (Civil Code, Companies Act)

Financial analysis
Corporate finance● Economic trends, tax affairs,
new approaches to finance●●Tokyo Century Corporation Integrated Report 201755

Human Resources

Society■ Diverse Workstyles
Initiatives on Diversity

Basic Policy

Tokyo Century Group encourages its diverse workforce to proactively
demonstrate its capabilities and personalities. We established theDiversity Promotion Office within the Personnel Division to support its
efforts by nurturing a corporate culture that encourages employees withdiverse characteristics to thrive. Under our Basic Diversity Policy, we are
implementing a variety of related measures to promote diversity. In
March 2016, we formulated the Action Plan for the Promotion of Womenʼs
Active Participation and have set quantitative targets to be achieved byMarch 31, 2020. We have made steady progress in fiscal 2016 and willcontinue to actively pursue our initiatives.
As a concrete initiative for fiscal 2016, we organized a Diversity
Seminar in January 2017 to encourage female employees to think aboutcareer development as well as the reason and purpose of their work. The
seminar was attended by 43 women in their first to eighth years at Tokyo
Century. We also continued to encourage male employees to takechildcare leave and introduced an hourly paid leave program, whichallows employees to adjust their work hours in one-hour increments. In
addition, we promoted the Premium Fridays program to encourage
employees to take paid or hourly paid leave each Friday. We will continue
to support these programs to enable employees with diverse capabilities
and personalities to demonstrate flexible thinking and take dynamic action.

Managing Executive Officer
Mahoko Hara giving a talk on
career development

Male employees are encouraged totake childcare leave② Increase the percentage ofwomen in managerial positions
to at least 10%

Status as ofApril 2017:

Status as ofMarch 31, 2017:

32%

5.5%

Employees of TISCO Tokyo Leasing Co., Ltd. (TTL), a local subsidiary in Thailand, visited
an elementary school in Suphan Buri Province in February 2017. There they engaged infriendly interaction with the children by playing soccer and musical chairs. They also
donated chairs and other goods. TTL supports initiatives that create opportunities for local
children so that they can enjoy playing and learning.

EPCʼs Efforts through Timmyʼs Mountain – Just Because We Care

Diversity seminar③ Increase the percentage ofchildcare leave taken by men to100%
Status as of
FY2016:93%

Selected as a “Nadeshiko Brand”
The “Nadeshiko Brand” was inaugurated in fiscal 2012 as a joint initiative by the Ministryof Economy, Trade and Industry and the Tokyo Stock Exchange. Under this initiative, thecompanies recognized for their excellence in empowering women are announced every year.
Tokyo Century was selected in 2017 for promoting diversity as part of its management policy
and actively engaging in and disclosing information on initiatives for empowering women in
the workplace.

Recognized as a “White 500” Organization under the 2017 Certified Health and Productivity
Management Organization Recognition Program
Tokyo Century was among the “White 500” organizations certified under the 2017
Certified Health and Productivity Management Organization Recognition Program* of the
Ministry of Economy, Trade and Industry. One reason for recognizing Tokyo Century was theratio of employees receiving regular health checkups, which was an evaluation criteria.
As a result of measures that included verbal encouragement from supervisors, the ratio of
employee health checkups reached 100% in fiscal 2014 and has since been maintained.
* A program that recognizes outstanding large enterprises and small- and medium-sized enterprises and otherorganizations engaging in efforts for health and productivity management in initiatives for overcoming health-related
challenges in regional communities or for promoting health-conscious activities led by the Nippon Kenko Kaigi.

56

Tokyo Century Corporation Integrated Report 2017

Social Contribution Activities
Visiting an Elementary School in Thailand and Donating Chairs

Action Plan for the Promotion of Womenʼs Active Participation̶Quantitative Targets (To be achieved by March 31, 2020)
1 Increase the percentage of①
women in new hires to atleast 30%

Tokyo Century Group contributes to society through its business of providing unique and highly
specialized financial services. In addition, it donates money to nonprofit organizations andgroups that serve the publicʼs interests as part of its social contribution activities. It also actively
engages with local communities such as by assisting with cleanup campaigns near its offices
and holding industry seminars at universities.

④ Increase the percentage of annual
leave taken to at least 70%
Status as of
FY2016:74%

EPC, Inc., a wholly owned U.S. subsidiary of CSI Leasing, has been fighting
malnutrition and educating children in a small community in the Guaymitas Mountains in
Honduras since 2003 by working with Timmyʼs Mountain – Just Because We Care, anonprofit organization that helps feed, educate, and care for children in need in the
country. EPC also sponsored the Honduran Street Party Run for Timmyʼs Mountain, acharity run, in March 2017. The money raised at the event is being used toward ongoingsupport for 150 children through Timmyʼs Mountain.

External Evaluation
FTSE4Good Index

FTSE Blossom Japan Index

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

Tokyo Century Corporation has become aconstituent of the FTSE Blossom Japan
Index*, which is designed as a tool tomeasure the performance of Japanesecompanies that demonstrate strong
Environmental, Social and Governance(ESG) practices.
* The Government Pension Investment Fund(GPIF) of Japan has selected the index as abenchmark for passive ESG investments,
while the index is increasingly viewed as alandmark index for future ESG investments.

2017 Competitive IT Strategy
Company Stock Selection
Competitive IT Strategy Companies arerecognized for their strategic utilization of
IT to achieve business innovation andstrengthen competitiveness. Companies
from the roughly 3,500 listed in Japan are
selected for each industry sector. Tokyo
Century has been selected for threeconsecutive years, since fiscal 2015.

JPX-Nikkei Index 400
This stock index is composed of companies
with high appeal for investors, which meetrequirements of global investment
standards, including ROE, an indicator of
capital efficiency. Tokyo Century has been
selected to the index since its launch in
2014.

Tokyo Century Corporation Integrated Report 201757

Environment

Basic Policy
基本方針Tokyo Century Group recognizes that addressing environmental issues is an important social
responsibility and it therefore seeks to contribute to the creation of an environmentally-sound,sustainable economy and society by acting with due consideration for environmental concerns,
such as preventing environmental pollution, mitigating the effects of climate change, andpreserving biodiversity in all areas of its business activities. Tokyo Century has established anenvironmental management system encompassing companies in the Group, with the President
serving as chief executive and the president of the Risk Management Unit serving as
environmental manager. Our environmental management system involves the planning,
implementation, operation, and inspection of environmental initiatives in accordance with the
PDCA cycle. The system also involves periodic management reviews on the state of initiatives topromote continuous improvement in this area.

Environmental Accounting
Tokyo Century Corporation uses environmental accounting to accurately assess the impact of environmental protection costs on
its business activities and increase the efficiency and effectiveness of its environmental management. The following statistics apply toTokyo Century Corporation only.
Environmental Accounting (April 1, 2016 – March 31, 2017)
Category(1) Costs within our business areas
Pollution control costs
and energy savings costs

Environmental Performance Report(2) Upstream/downstream costs

In accordance with its Basic Environmental Policy, Tokyo Century Group has adopted an ISO 14001-compliant environmental
management system for reducing its impact on the environment. While calculating and continually monitoring our annual CO2
emissions, we implement environmental management toward achieving sustainable development. The following statistics are thedata points managed through Tokyo Century Groupʼs environmental management system.

Type of Initiative

Environmental Protection
Costs (Millions of Yen)

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

3

3

Switching sales fleet to low-emission cars

(3)

(3)

Waste treatment

10̶Management office operation and environmental
CSR operations

5̶Total [(1) + (2) + (3)]18

3

ISO 14001 certification maintenance/management(3) Management costs

Environmental Performance Report
Environmental Objective

Reduce use ofelectricity
Reduce use of paper1

FY2014FY2015FY2016

ResultResultResult

1,976,525

1,870,991

1,893,603

1.21％

2,000,000

1,087

1,029

1,096

67

1,158

15,670,500

15,517,125

16,525,469

6.5％

17,700,000

112,138

106,777

96,309(rental cars:
21,945)(rental cars:
24,477)(rental cars:
24,471)(10,468)

110,000

Fuel efficiency (km/L)

13.5

13.5

13.5

̶

13.5

CO2 emitted (t-CO2)

258

247

225

(22)

256

Annual electricity generated(MWh)28,09867,011

111,487

36,331

Annual reduction in CO2 (t)(Comparison withconventional thermal
power generation)

8,837

21,07535,063

11,426

Industrial waste (t)

264

248

280

32

Volume of valuable waste
recovered (t)

190

151

197

46

Valuable waste ratio (%)

41.8

37.8

41.3

3.5％

250,016

233,162

272,925

39,763Item (unit)

Electricity used (kWh)CO2 emitted (t-CO2)
Office-use paper (sheets)
Fuel consumed (L)FY2017

ChangeAcquisition of ISO 14001 Certification for Environmental Management Systems

TargetImprove fuel efficiency

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

Reduce industrial
waste

Promote refurbishingbusiness

Annual pre-owned PCs sold(units)Tokyo Century Corporation (Head Office, Okachimachi Office, Akihabara UDX, Tokyo Techno Center), TRY, Inc., TC Agency Corporation,
Fujitsu Leasing Co., Ltd. (Head Office)The following subsidiary has acquired the certification individually.
Nippon Car Solutions Co., Ltd. (Head Office)Employees at U.S. Subsidiary Volunteered to Mend and Clean Homes
Employees at U.S. subsidiary Tokyo Century (USA) Inc. volunteered to mend andclean the homes of residents in Palm Springs, California, as part of activities related
to the Annual Convention held by the Equipment Leasing and Finance Association.

Recognized as a PFA21 “Good Practice” Company by
the Ministry of the Environment, Japan
Good Practice recognizes companies that pursue excellent initiatives for shaping

Medium- and Long-Term Initiatives

Reduce use ofelectricity

Scope of Coverage

Environmental Initiatives

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

Environmental Objective

Tokyo Century Corporation has acquired ISO 14001 certification, the international standard for environmental management systems.

Item (unit)

Electricity used (kWh)Annual CO2 emissions (t-CO2)

Medium-Term Objective(March 31, 2019)

2,000,000
1,158

Long-Term Objective

By FY2030, reduce annual electricity use per unitof head office floor space by 20% compared to
FY20092

a sustainable society. Its goal is to broaden interest in and promote advanced
initiatives by sharing best practices among financial institutions that are signatories
to the Principles for Financial Action for the 21st Century (PFA21). Tokyo Centuryʼs
initiative in the renewable energy field was selected in the 5th Good Practice selection
session under PFA21.

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

58

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201759

Financial Section

Consolidated Balance Sheet
Tokyo Century Corporation and Consolidated Subsidiaries
As of March 31, 2017 and 2016

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

Contents

2017

2016

2017

¥83,565¥80,395$744,792

AssetsCurrent assets:

61

Consolidated Balance Sheet

Cash on hand and in banks (Notes 8, 13 and 18)

63

Consolidated Statement of Income

Accounts receivable:

64

Consolidated Statement of Comprehensive Income

Installment sales (Notes 8, 9 and 18)

65

Consolidated Statement of Changes in Net Assets

Lease receivables and investment assets (Notes 8, 9, 16 and 18)

66

Consolidated Statement of Cash Flows

Loans (Notes 8, 9 and 18)

67

Notes to Consolidated Financial Statements

97

Report of Independent Auditors

216,466

226,467

1,929,290

1,600,637

1,480,951

14,265,928

539,058

528,365

4,804,443

27,52524,287245,328

Operational investment securities (Notes 6 and 18)

209,712

194,627

1,869,092

Short-term investment securities (Notes 6, 13 and 18)

4,052

12,84336,122Inventories (Note 8)

1,796

677

16,013

Deferred tax assets (Note 14)

7,074

4,349

63,051Other current assets (Note 8)

81,016

69,256722,071

Leases(4,104)(3,236)(36,578)

2,766,802

2,618,986

24,659,554

Investments in securities (Notes 6, 8 and 18)

69,59264,278620,251

Long-term loans and other assets

34,31827,934

305,866

Claims provable in bankruptcy or rehabilitation (Note 18)

1,625

2,199

14,48854,587

Allowance for doubtful accounts (Note 18)
Total current assets

Investments and other assets:

Deferred tax assets (Note 14)

6,124

4,701

Allowance for doubtful accounts (Note 18)(1,072)(1,490)(9,555)110,588

97,623

985,638

5,675,761

Total investments and other assets

Property and equipment, at cost less accumulated depreciation:

636,820545,724

Advances for purchases of property for lease

4,561

12,30240,651Other operating assets (Note 7)

26,82325,442

239,068

Leased assets (Notes 7 and 8)

Own assets in use (Notes 7 and 8)
Total property and equipment, net

13,4199,733

119,607681,624593,2026,075,088

Intangible assets:

258

231

2,301

Goodwill

13,612

3,614

121,323

Other intangible assets

6,806

4,204

60,66020,676

8,050

184,284

Computer programs leased to customers

Total intangible assets

Deferred assets
Total assets

189

−

1,692

¥3,579,882¥3,317,862$31,906,259

The accompanying notes are an integral part of these statements.

60

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201761

Consolidated Statement of Income
Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2017 and 2016

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

2017

2016

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

2017

2016

2017

Liabilities and net assets

2017
Revenues¥976,107¥940,460$8,699,706

Current liabilities:

Costs

823,295

803,645

7,337,753

152,811

136,815

1,361,953

80,811

70,910720,248

71,99965,904

641,705¥1,276,141¥1,275,981$11,373,812

Current portion of long-term debt (Notes 8, 9 and 18)

420,416

323,426

3,747,027

Notes and accounts payable – trade (Note 18)

215,570

197,272

1,921,307

Short-term borrowings (Notes 8, 9 and 18)

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

Lease obligations (Notes 16 and 18)

6,994

7,335

62,339Accrued income taxes (Note 14)

10,7309,614

95,640

Deferred tax liabilities (Note 14)

2,138

1,507

19,057

Deferred profit on installment sales (Note 18)

14,975

12,026

133,472

Interest and dividend income

791

902

7,057

Interest expense

(233)

(306)

(2,078)Equity in earnings of affiliates

1,172

1,286

10,450

687

755

6,127

Foreign exchange loss

(1,354)(858)(12,071)

Gain on step acquisitions

Other current liabilities
Total current liabilities

67,27351,076

599,582

2,014,241

1,878,241

17,952,240

Long-term liabilities:

Other income (expenses):Gain on derivatives other than for trading or hedging

Long-term debt (Notes 8, 9 and 18)

1,036,485

952,082

9,237,843

100

−

893

Lease obligations (Notes 16 and 18)

9,634

10,91285,872Gain on sales of investments in securities

639

922

5,696

236

259

2,104

Loss on valuation of investment securities

(110)

(5)

(981)

(220)

−

(1,963)(893)

Provision for directorsʼ retirement benefits
Net defined benefit liability (Note 15)

9,540

9,614

85,028Company name change cost

Deferred tax liabilities (Note 14)

18,0652,483

161,012

Loss on disposal of non-current assets

(100)

(80)

Office transfer related expenses (Note 11)

−

(289)

−

Other, net

368

228

3,287

73,741

68,459657,230

22,513

21,429200,653

Provision for automobile inspection costs

957

940

8,530

85,90288,454

765,619

Total long-term liabilities

1,160,822

1,064,748

10,346,009

Total liabilities

3,175,063

2,942,990

28,298,249

Other long-term liabilities

Income before income taxes
Income taxes (Note 14):
Current

Contingent liabilities (Note 17)

Deferred
Net assets (Note 25):
Shareholdersʼ equity (Notes 19, 20 and 21)
Common stock without par value:
Authorized: 400,000,000 shares
Issued: 106,624,620 shares in 2017 and 2016

Net income

34,231

34,231305,089

7,821

6,122

69,713Retained earnings

299,671

266,0442,670,868

Total shareholdersʼ equity

1,723

3,641

23,152204,294

50,81945,306452,935

Net income attributable to:Capital surplus
Treasury stock:1,067,233 shares in 2017 and 1,086,343 shares in 2016

408
22,921(2,757)(2,806)(24,581)

338,966

303,591

3,021,090

Non-controlling interests

7,170

5,273

63,906

Owners of parent (Note 25)¥43,648¥40,033$389,028

The accompanying notes are an integral part of these statements.

Accumulated other comprehensive income

15,83015,474141,089

Deferred gain (loss) on hedges

473

(624)

4,220

Translation adjustments

564

3,028

5,032

Net unrealized holding gain on securities

Remeasurements of defined benefit plans(1,133)(1,307)(10,104)

Total accumulated other comprehensive income

15,734

16,570140,238

943

716

8,405

Share subscription rights (Note 21)
Non-controlling interests
Total net assets
Total liabilities and net assets

49,17453,994438,275

404,818

374,8723,608,009¥3,579,882¥3,317,862$31,906,259

The accompanying notes are an integral part of these statements.

62

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201763

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Net Assets

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2017 and 2016

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2017 and 2016

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

Net income

2017

2016

2017

¥50,819¥45,306$452,935

348

(947)

3,104

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

1,355

(927)

12,081

Translation adjustments(2,079)(2,664)(18,535)238(1,657)2,123

Remeasurements of defined benefit plans
Share of other comprehensive income (loss) of affiliates accounted
for using equity method(1,001)(318)(8,928)(1,139)(6,516)(10,154)¥49,679¥38,789$442,780

Owners of parent¥42,812¥34,211$381,574

Non-controlling interests¥6,867¥4,578$61,205

Total other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to:

The accompanying notes are an integral part of these statements.

Thousands of
U.S. dollars(Note 1)

Number of shares
Thousands
Common stock
Balance at beginning of year
Balance at end of year
Capital surplus
Balance at beginning of year
Disposal of treasury stock
Purchase of shares of consolidated subsidiaries
Balance at end of year
Retained earnings
Balance at beginning of year
Net income attributable to owners of parent for the year
Cash dividends
Change of scope of consolidation
Change of scope of equity method
Decrease due to change in equity
Balance at end of year
Treasury stock
Balance at beginning of year
Purchase of treasury stock
Disposal of treasury stock
Change of scope of equity method
Balance at end of year
Total shareholdersʼ equity
Balance at beginning of year
Cash dividends
Net income attributable to owners of parent for the year
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Purchase of shares of consolidated subsidiaries
Change of scope of equity method
Decrease due to change in equity
Balance at end of year
Net unrealized holding gain on securities
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Deferred gain (loss) on hedges
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Translation adjustments
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Remeasurements of defined benefit plans
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Total accumulated other comprehensive income
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Share subscription rights (Note 21)
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Non-controlling interests
Balance at beginning of year
Net changes of items other than shareholdersʼ equity
Balance at end of year
Total net assets
Balance at beginning of year
Cash dividends
Net income attributable to owners of parent for the year
Purchase of treasury stock
Disposal of treasury stock
Change of scope of consolidation
Purchase of shares of consolidated subsidiaries
Change of scope of equity method
Decrease due to change in equity
Net changes of items other than shareholdersʼ equity
Balance at end of year

Millions of yen

2017

2016

2017

2016

2017

106,624
106,624

106,624
106,624¥34,231
34,231¥34,231
34,231$305,089
305,089

6,122
4
1,695
7,821

5,537
(12)
597
6,122

54,56736
15,10969,713

266,044
43,648(9,710)−−(311)
299,671

233,650
40,033(7,175)
18
(420)
(61)
266,044

2,371,160
389,028(86,545)−−(2,773)2,670,868(2,806)(2)
50−(2,757)
338,966
303,591(9,710)43,648
(2)
55
−
1,695
−
(311)
338,966(2,876)(3)72
0(2,806)
303,591
270,542(7,175)40,033
(3)
59
18
597
(420)
(61)
303,591(25,014)(21)
454−(24,581)
3,021,090
2,705,803(86,545)
389,028(21)
491−
15,109−(2,773)
3,021,090

15,474355
15,83016,439(965)
15,474

137,9183,170
141,089

(624)
1,097
473

(9)
(614)
(624)

(5,563)
9,783
4,220

3,028
(2,463)564

6,026(2,998)3,028

26,992(21,959)
5,032(1,307)174(1,133)
15,734
16,570(836)
15,734(64)(1,243)(1,307)
16,57022,392(5,821)
16,570(11,656)
1,552(10,104)
140,238
147,691(7,453)140,238

716
227
943

491
224
716

6,381
2,023
8,405

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

43,11010,88353,994
374,872
336,537(7,175)40,033
(3)
59
18
597
(420)
(61)
5,286
¥374,872

481,233(42,958)
438,275
3,608,009
3,341,110(86,545)
389,028(21)
491−
15,109−(2,773)(48,388)$3,608,009(1,086)(0)19
0(1,067)(1,114)(0)
28
1(1,086)

The accompanying notes are an integral part of these statements.

64

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Tokyo Century Corporation Integrated Report 201765

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Tokyo Century Corporation and Consolidated Subsidiaries
Years Ended March 31, 2017 and 2016

Tokyo Century Corporation and Consolidated Subsidiaries
March 31, 2017 and 2016

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

2017

2016

2017

Cash flows from operating activities:
Income before income taxes¥73,741¥68,459$657,230

Adjustments to reconcile income before income taxes
to net cash used in operating activities:
Depreciation and amortization of leased assets

97,98780,137873,325

Depreciation of other operating assets, and cost of other operating assets sales

5,759

1,208

51,334

Amortization of goodwill

863

524

7,692

Increase (decrease) in allowance for doubtful accounts

305

(336)

2,724

53,61945,496477,893

110

5

981
12,071

Loss on disposal of leased assets
Loss on devaluation of investments in securities
Foreign exchange loss (gain)

1,354

858

Interest and dividend income

(791)

(902)

(7,057)

17,733

13,643

158,051

(639)

(920)

(5,696)

10,33919,961

92,156

Decrease (increase) in lease receivables and investment assets(3,023)(10,374)(26,947)

Decrease (increase) in loans receivable(15,559)

2,146(138,673)

Decrease (increase) in operational investment securities(18,681)(31,778)(166,502)

Purchases of leased assets(207,841)(239,962)(1,852,415)(7,237)(14,630)(64,505)

538

20

4,798

Increase (decrease) in trade notes and accounts payable

12,804(5,433)

114,120

Other, net

15,151(30,385)

135,041

Subtotal

36,535(102,262)

325,623

Interest expense
Gain on sale of investments in securities
Decrease (increase) in installment sales receivable

Purchase of other operating assets
Decrease (increase) in claims provable in bankruptcy or rehabilitation

Interest and dividend income received

1,528

1,665

13,627

Interest expense paid

(18,115)(13,832)(161,457)

Income taxes paid

(20,618)(22,189)(183,768)(670)(136,618)(5,974)Purchases of own assets in use(2,325)(3,167)(20,724)

Proceeds from sales/redemptions of investments in securities

4,460

3,699

39,753Purchases of investments in securities(15,980)(4,069)(142,425)

Purchase of shares of subsidiaries resulting in change in scope of consolidation(15,109)−(134,666)

Other, net(1,116)464(9,950)Net cash provided by (used in) investing activities(30,071)(3,072)(268,014)

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

Cash flows from financing activities:
Increase (decrease) in short-term borrowings, net(4,088)(4,055)(36,437)

Proceeds from long-term debt

389,750

476,094

3,473,710

Repayment of long-term debt

(3,372,029)(378,341)(304,328)

Proceeds from issuance of bonds

79,86980,604

711,852

Redemption of bonds(44,607)(91,144)(397,573)

Proceeds from stock issuance to non-controlling interest shareholders

7,718

7,190

68,790Cash dividends paid

(9,710)(7,175)(86,545)

Cash dividends paid to non-controlling interest shareholders(1,015)(777)(9,055)Purchase of shares of subsidiaries not resulting in change in scope of consolidation(12,017)(584)(107,105)

Other, net

(56)

(54)

(502)

Net cash provided by financing activities

27,500155,770

245,104

Effect of exchange rate changes on cash and cash equivalents(2,790)3,816(24,873)

Net increase (decrease) in cash and cash equivalents(6,031)

19,894(53,758)

Cash and cash equivalents at beginning of year

91,762

71,864

817,844

Increase in cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of year (Note 13)

−

3

−

¥85,730¥91,762$764,085

1. Basis of Presentation

Tokyo Century Corporation (the “Company”) and its
consolidated subsidiaries (collectively, the “Companies”)
maintain their books of account in accordance with theprovisions set forth in the Corporation Law of Japan (the“Law”), the Financial Instruments and Exchange Law ofJapan and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different incertain respects as to the application and disclosure
requirements of International Financial ReportingStandards.
The accompanying consolidated financial statements havebeen compiled from the consolidated financial statements of
the Companies, which were filed with the Director of the
Kanto Local Finance Bureau as required by the Financial
Instruments and Exchange Law of Japan. In preparing theaccompanying consolidated financial statements, certain
reclassifications and rearrangements have been made to
the consolidated financial statements issued domestically inorder to present them in a format which is more familiar toreaders outside Japan.
The translation of Japanese yen amounts into U.S. dollar
amounts is included solely for convenience, as a matter ofarithmetic computation only, at ¥112.20 = US$1.00, theapproximate rate of exchange in effect on March 31, 2017.
This translation should not be construed as a representationthat Japanese yen amounts have been, could have been, or
could in the future be, converted into U.S. dollar amounts at
this or any other rate.

2. Summary of Significant Accounting Policiesa) Principles of consolidation
The consolidated financial statements include the accountsof the Company and its significant subsidiaries over which
the Company exerts control.
The Companyʼs share in the earnings or losses of affiliates
over which it is able to exercise significant influence interms of their operating and financial decisions is accounted
for by the equity method and included in the consolidated
operating results.
CSI Leasing, Inc. and its 41 subsidiaries became a wholly
owned consolidated subsidiary of the Company andexcluded from the equity method accounting. In addition,
Earshell Marine S.A. has been included in the scope of
consolidation during the fiscal year ended March 31, 2017
due to establishment.
A company has been excluded from the scope of
consolidation due to a merger with other consolidated
subsidiary during the fiscal year ended March 31, 2017.
Nanatsujima Biomass Power Limited Liability Company wasestablished as an affiliated company. In addition, Nittochi
Asset Management Co., Ltd. and other 3 companies havebeen included as an affiliated company accounted for by theequity method due to a new contribution from the fiscal year
ended March 31, 2017.
With respect to affiliated companies accounted for by
the equity method whose account closing dates differ fromthe closing date of the Company, the Company has mainly
used their financial statements as of their respective fiscal
year end.

The number of consolidated subsidiaries and affiliatedcompanies for 2017 are as follows:

Consolidated subsidiaries
Affiliated companies

2017
172
19

In preparing the consolidated financial statements as ofMarch 31, 2017, the financial statements of TLC Freesia Co.,
Ltd. and 4 other subsidiaries were consolidated by using
their financial statements prepared solely for consolidation
purposes. Tokyo Century (USA) Inc. and 81 other subsidiaries
were consolidated using their financial statements as of
their respective fiscal year end, which falls on December 31,
2016, and necessary adjustments were made to theirfinancial statements to reflect any significant transactions
from January 1 to March 31, 2017.

b) Foreign currency translation
Monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange
rates in effect at the balance sheet date. Foreign exchange
gain or loss on translation is recognized in the consolidated
statement of income.
The balance sheet accounts of the foreign consolidated
subsidiaries are translated into yen at the rates of exchange
in effect at the balance sheet date, except for thecomponents of net assets excluding non-controllinginterests which are translated at their historical exchange
rates. Revenue and expense accounts are translated at the
average rate of exchange in effect during the year.
Differences arising from the translation are presented astranslation adjustments and non-controlling interests in its
consolidated financial statements.

c) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits
held at call with banks, net of overdrafts and short-term
investments with original maturities of three months or lesswhich are readily convertible into cash and are subject tolittle risk of any change in their value.

d) Revenue recognition(Leases)
Lease revenues and the related costs on finance leases arerecognized on the day to receive lease payment.
Revenues from operating leases are recognized on astraight-line basis over the scheduled lease terms, andleased assets are depreciated by the straight-line method
based on the scheduled lease terms of the respective
assets.
(Installment sales)
Installment sales and the related costs are recognized wheneach payment becomes due under the respective
installment sales agreements.

e) Allocation of interest expense
Interest expense is allocated to cost of sales and otherexpenses based on the balances of the respective operating
assets, which consist principally of lease receivables, lease
investment assets and loans. Interest expense classified ascost of sales is stated net of interest income.

The accompanying notes are an integral part of these statements.

66

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201767

Notes to Consolidated Financial Statementsf) Securities
Securities held by the Companies are classified as availablefor-sale securities. Marketable available-for-sale securities
are carried at fair value with any unrealized gain or loss, netof the related income taxes, included directly in net assets.
Cost of securities sold is determined principally by themoving average method. Non-marketable available-for-salesecurities are stated at cost determined principally by themoving average method.
Investments in a limited partnership are measured using theequity method. As of March 31, 2017 and 2016, theCompanies did not have any trading securities.

g) Inventories
Inventories held by the Company are stated at cost
determined by specific identification method (of whichcarrying values are calculated based on the method of
reduction of book value accompanied with decline in market
value).

h) Property and equipment
Property and equipment is stated at cost less accumulated
depreciation. Depreciation of leased assets is calculated by
the straight-line method based on the lease term of therespective assets. Depreciation of assets owned and used by
the Companies is calculated primarily by the decliningbalance method based on the estimated useful lives of therespective assets which range principally from 3 to 47 years
for buildings, and from 3 to 20 years for equipment, except
for certain buildings acquired on and after April 1, 1998 andfacilities attached to buildings and structures acquired on
and after April 1, 2016, which are depreciated by thestraight-line method.

i) Intangible assets
Computer software leased to customers is amortized by thestraight-line method based on the lease term of therespective assets. Costs related to software purchased forinternal use are amortized by the straight-line method overthe estimated useful life (generally 5 years).
Goodwill is amortized by the straight-line method over a
period between 10 and 20 years.

j) Income taxes
Provision is made for the Companiesʼ liabilities for various
types of income taxes, i.e., corporation, inhabitants andenterprise taxes.
Deferred tax assets and liabilities are accounted for under
the asset and liability method. Deferred tax assets andliabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and theirtax bases and operating losses and tax credits carriedforward. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be applied to taxable
income in the years in which these temporary differences
are expected to be recovered or settled.

k) Retirement benefits
Accrued retirement benefits for employees have been
provided mainly at the amount calculated based on theretirement benefit obligation and the fair value of thepension plan assets as of balance sheet date. The Company
and certain domestic subsidiaries have defined benefit plans

68

Tokyo Century Corporation Integrated Report 2017

covering substantially all employees other than directors
and corporate auditors. Under the terms of these plans,eligible employees are entitled to lump-sum or annuity
payments based on their level of compensation attermination and their years of service with the Company or
the subsidiaries. To provide coverage for part of the lumpsum or annuity payments, the Company and certain
domestic subsidiaries have joined a multi-employersʼ
welfare pension fund (the “Fund”) established in accordancewith the Welfare Pension Insurance Law by the ITOCHU
group companies.
In addition, accrued retirement benefits for directors andcorporate auditors are provided at an amount to be requiredat the year-end according to internal regulations.

l) Derivatives and hedging activities
The Companies enter into interest-rate swap contracts,
forward foreign exchange contracts, currency swaps andloans from banks in order to hedge interest-rate and foreign
currency exchange rate exposure on certain liabilities andassets, including loans from banks, installment salesreceivables, lease investment assets, loan receivables,
operational investment securities, forecasted transactions
and a net investment in a foreign subsidiary and affiliate.
The Companies utilize these derivatives to reduce the risk ofcash flow fluctuation inherent in the liabilities and assets
hedged and such transactions are not entered into for
speculative or trading purposes.
For interest-rate swap contracts and forward foreignexchange contracts, the Companies follow “AccountingStandard for Financial Instruments” and “AccountingStandard for Foreign Currency Transactions.” Morespecifically, interest-rate swaps not designated as hedging
instruments are recorded at fair value in the consolidatedbalance sheet. Interest-rate swaps which qualify for hedge
accounting and meet specific matching criteria are notmeasured at fair value, but the differential paid or received
under the swap agreements is recognized and included ininterest expense or income. Other interest-rate swaps which
qualify for hedge accounting are measured at fair value as of
the balance sheet date and the recognition of any unrealized
gain or loss is deferred until maturity.
For forward foreign exchange contracts, the Companies
follow the accounting method specified in “AccountingStandard for Financial Instruments” (“Allocation method”), if
the contracts qualify for hedge accounting. Under thismethod, foreign currency transactions and the relatedmonetary assets (installment sales receivables and loans
receivables) are to be translated at the fixed yen amount ofsuch foreign currency contracts at the settlement dates
based on the contracted rates. The difference between thisamount and the amount as translated at the current rate ofexchange on the date of forward contract is allocated overthe life of each contract.
Hedge effectiveness is assessed based on comparative
analysis between the accumulated future cash flows forhedged items and those for hedging instruments. As for thehedging of forecast transactions denominated in foreign
currencies, hedge effectiveness is assessed if substantial
terms and conditions such as amounts and periods of thehedging instruments and the hedged forecasted
transactions are the same. Hedge effectiveness is notassessed for the foreign currency exchange contracts whichmeet the requirements for allocation method and theinterest rate swaps which meet the requirements for short-cut
method. The consolidated subsidiaries for the Company assess
hedge effectiveness primarily based on the above methods.

m) Appropriation of retained earnings
Under the Law the appropriation of retained earnings withrespect to a given financial period is made by resolution of
the shareholders at a general meeting to be held
subsequent to the close of such financial period. The
accounts for that period do not, therefore, reflect suchappropriations.
Under the Law, flexible payment of dividends is permissible
subject to certain limits on appropriation of retained
earnings as well as to approval by resolution of theshareholders.

presented separately from the fiscal year ended March 31,2017 since the amount is significant.

5. Additional Information
The Companies adopted “Revised Implementation Guidanceon Recoverability of Deferred Tax Assets” (ASBJ Guidance
No. 26, March 28, 2016) from the beginning of the fiscal year
ended March 31, 2017.

n) Allowance for doubtful accounts
The allowance for doubtful accounts is recorded on the basisof historical experience to provide for possible losses frombad debts related to general trade accounts and also for theestimated amounts considered to be uncollectible after
individually reviewing the specific collectibility of certain
doubtful accounts.

o) Consumption taxes
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes.

p) Provision for automobile inspection costs
Under lease and maintenance service contracts, provision
for automobile inspection costs is recorded on the basis ofhistorical experience.

3. Accounting Changes
The Company and its domestic consolidated subsidiaries
adopted “Practical Solution on a change in depreciation
method due to Tax Reform 2016” (ASBJ PITF No. 32, June 17,2016) as a result of revisions to the Corporate Tax Act ofJapan. Accordingly, the depreciation method for facilities
attached to buildings and structures of own assets in use
acquired on and after April 1, 2016 was changed from thedeclining-balance method to the straight-line method. The
effects of the changes were immaterial.

4. Changes in Presentation Method(Consolidated Statement of Income)“Loss on valuation of investment securities” in the amount of¥5 million in the fiscal year ended March 31, 2016, which
was included in “Other, net,” is presented separately fromthe fiscal year ended March 31, 2017 since the amount issignificant.
(Consolidated Statement of Cash Flows)“Depreciation of other operating assets, and cost of otheroperating assets sales” in the amount of ¥1,208 million and“Purchase of other operating assets” in the amount of¥(14,630) million in the fiscal year ended March 31, 2016,
which were included in “Decrease (increase) in otheroperating assets” under “Cash flows from operating
activities,” are presented separately from the fiscal year
ended March 31, 2017 since the amounts are significant.
“Amortization of goodwill” in the amount of ¥524 million in
the fiscal year ended March 31, 2016, which was included in“Other, net” under “Cash flows from operating activities,” isTokyo Century Corporation Integrated Report 201769

Notes to Consolidated Financial Statements

6. Operational Investment Securities, Short-Term Investment Securities and Investments in Securities

Operational investment securities, short-term investment securities and investments in securities as of March 31, 2017 and 2016
consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

2016

Available-for-sale securities¥163,430¥161,464$1,456,596

2017

Investments in unconsolidated subsidiaries and affiliates

119,927

110,285

1,068,868¥283,357¥271,749$2,525,465

Proceeds from the sale of available-for-sale securities and the resulting realized gain or loss for the years ended March 31, 2017 and2016 were summarized as follows:

2017

2016

2017

¥21,863¥10,177$194,857

Realized gain

3,809

1,995

33,949Realized loss

−

0

−

Proceeds

The impairment losses on securities recognized for the years ended March 31, 2017 and 2016 were as follows:

Available-for-sale securities included in operational investment securities, short-term investment securities and investments insecurities as of March 31, 2017 and 2016 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Equity securities¥52,979¥44,148$472,188

Debt securities

12,432

9,566

110,809

Other

98,017

107,749

873,598¥163,430¥161,464$1,456,596

The carrying amounts and aggregate fair value of available-for-sale securities with determinable market value as of March 31, 2017and 2016 were as follows:

Cost orbook value

Unrealized
gain

Unrealized
loss

Fair
value

Equity securities¥19,156¥21,012¥360

Debt securities

12,000152

19

12,132Other

17,2591,583−

18,843¥39,808

2016

¥130

¥2

Cost orbook value

Unrealized
gain

Unrealized
loss

Equity securities¥17,328¥16,788¥412¥33,703

Debt securities

9,236

58

27

Equity securities
Unconsolidated subsidiaries

5,452

2

3

18

¥132

¥5

$1,183

Accumulated depreciation for property and equipment as of March 31, 2017 and 2016 were as follows:

2017

2016

2017

¥354,327¥316,305$3,157,995

Other operating assets

7,742

1,886

69,003Own assets in use

10,204

6,274

90,949Leased assets

8. Short-Term Borrowings, Long-Term Debt and Assets Pledged

Thousands of
U.S. dollars

Millions of yen

2017

2016

¥416,341¥437,181$3,710,711

2017
0.88%

9,266

Commercial paper

800,700

763,400

7,136,363

0.02%

40,591

Payables under securitized lease receivables

59,10075,400526,737

0.09%¥1,276,141¥1,275,981$11,373,812

Long-term debt as of March 31, 2017 and 2016 consisted of the following:

March 31, 2017
Unrealized
loss

Fair
value

Equity securities$170,738$187,278$3,215$354,802Debt securities

106,951

1,360

175

108,135

Other

153,824

14,117−

167,941

Debt securities
Other

70

Tokyo Century Corporation Integrated Report 2017

Long-term loans, principally from banks
Long-term payables under securitized lease receivables
Bonds payable
Less current portion

Carrying amountThousands of
U.S. dollars

2017

2016

2017

¥13,170¥10,444$117,386

299

299

2,673

79,174

67,157

705,656

Thousands of
U.S. dollars

Millions of yen

Total

Available-for-sale securities whose fair value was not readily determinable as of March 31, 2017 and 2016 were as follows:

Millions of yen

Weighted-averageinterest rate

Short-term loans from banks

Thousands of U.S. dollars

Equity securities

Thousands of
U.S. dollars

Millions of yen

Fair
value

−

Unrealized
gain$1,165

7. Accumulated Depreciation for Property and Equipment

Total

Cost orbook value

2017

Investments in unconsolidated subsidiaries and affiliates:

March 31, 201635,1392017
Available-for-sale securities:

Short-term borrowings as of March 31, 2017 and 2016 were as follows:

Millions of yen

Other

Thousands of
U.S. dollars

Millions of yen

Millions of yen

March 31, 2017

Thousands of
U.S. dollars

Millions of yen

Weighted-averageinterest rate

2017

2016

2017

¥1,218,851¥1,076,209$10,863,201

1.24%

6,036

2,697

53,801

0.11%
0.57%

232,014

196,6022,067,867

1,456,902

1,275,509

12,984,870

420,416

323,426

3,747,027¥1,036,485¥952,082$9,237,843

The Companies have entered into overdraft contracts which provided the Companies with the overdraft facilities with 104 and 84
financial institutions as of March 31, 2017 and 2016 amounting to ¥1,229,875 million ($10,961,453 thousand) and ¥1,226,770 million,
respectively. The unused facilities maintained by the Companies as of March 31, 2017 and 2016 amounted to ¥795,615 million($7,091,047 thousand) and ¥753,040 million, respectively.
Tokyo Century Corporation Integrated Report 201771

Notes to Consolidated Financial Statements

The aggregate annual maturity of long-term debt subsequent to March 31, 2017 is summarized as follows:

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

Millions of yen

Thousands of
U.S. dollars

2018¥420,416$3,747,027

2019

306,951

2,735,754

2020

284,291

2,533,793

2021

206,005

1,836,057

2022

158,261

1,410,528

2023 and thereafter

80,975

721,708¥1,456,902$12,984,870

Year ending March 31,

The Companiesʼ assets pledged as collateral, principally for liabilities of ¥253,975 million ($2,263,594 thousand), as of March 31, 2017
were as follows:
Millions of yen

Thousands of
U.S. dollars

Cash on hand and in banks¥773$6,895

Accounts receivable-installment sales

5,465

48,709224,264

1,998,789

813

7,253

Accounts receivable-lease receivables and investment assets
Accounts receivable-loans
Inventories

306

2,728

Other current assets

5,301

47,249Leased assets

42,492

378,719

Own assets in use

1,083

9,653

Investments in securities

9. Derivatives

61

550

¥280,561$2,500,550

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

Millions of yen
Notional amount(over one year)

Fair
value

Thousands of U.S. dollars
Unrealized
gain (loss)

Notional amount(over one year)

Fair
value

Unrealized
gain (loss)

Currency swap contracts:
Receive/JPY;
Pay/USD¥1,792
(−)

¥19

¥19

$15,972
(−)

$171

$171

Receive/USD;
Pay/JPY

549
(−)

(4)

(4)

4,893
(−)

(36)

(36)

Receive/JPY;
Pay/IDR

501
(501)

(75)

(75)

4,474
(4,474)

(675)

(675)

207
(28)

(53)

(53)

1,851
(250)

(476)

(476)

Put/USD

3,144
(−)

9

9

28,024(−)

86

86

Put/EUR

4,562
(916)

232

232

40,667(8,164)

2,068

2,068

Put/BRL

3,162(1,139)

(351)

(351)

28,186(10,152)(3,131)(3,131)

Put/MXN

2,514(1,043)429

429

22,414(9,304)

3,832

3,832

Put/GBP

414
(99)

47

47

3,695
(889)

420

420

Put/Other

692
(256)

21

21

6,174
(2,282)

192

192

Call/USD

1,793
(−)

(19)

(19)

15,980
(−)

(171)

(171)

Call/Other

45
(2)

(2)

(2)

402
(18)

(23)

(23)

¥19,381(3,987)

¥253

¥253

$172,738(35,536)$2,256$2,256

Non-deliverable forward:
Put/RMB
Forward exchange contracts:

Total

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

The following table presents the outstanding derivatives positions that do not qualify for hedge accounting as of March 31, 2016:
Millions of yen
Notional amount(over one year)

Fair
value

Unrealized
gain (loss)

Non-deliverable forward:
Put/RMB

¥618
(207)

¥(227)¥(227)

9,819(9,516)

(660)

(660)

¥10,437(9,724)¥(887)¥(887)

Forward exchange contracts:
Put/RMB
Total

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

72

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201773

Notes to Consolidated Financial Statements

The following table presents the outstanding derivative positions that qualify for hedge accounting as of March 31, 2016:

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

Notional amount(over one year)

Fair
value

Notional amount(over one year)

Fair
value

Notional amount(over one year)

Put

Put

USD

Accounts-receivableinstallment sales¥3,761(2,125)¥(452)

RMB

Accounts-receivableinstallment sales

1,554
(982)

(113)

USD

Accounts-receivableinstallment sales

25
(−)

(0)

Receive/USD; Pay/MYR

Borrowings

3,845(2,413)360

Borrowings

1,675(1,675)

138

2,244
(−)

18

¥13,104(7,196)¥(47)

Accounts-receivable–installment sales¥ 2,559(1,314)¥(226)$22,812(11,715)$(2,018)

Accounts-receivable–installment sales

1,083
(569)

(36)

9,660
(5,074)(322)

Lease investment assets

8
−

(0)

75
−

(2)

Lease investment assets

1,147
−

(16)

10,225−(142)

Currency swap contracts:

Call

Call
USD
EUR
Currency swap contracts:
Receive/USD; Pay/MYR

Borrowings

3,872
−

174

34,516−

1,558

Receive/USD; Pay/THB

Receive/USD; Pay/THB

Borrowings

2,733(1,758)247

24,359(15,669)

2,209

Deferral hedge accounting:
Forward exchange contracts:

Deferral hedge accounting:Call

Forward exchange contracts:

USD

Put
USD
EUR
GBP

Forecasted transactions

Forecasted transactions

729
−

(17)

6,500
−

(160)

Total

Net investment in foreign subsidiary

2,569
−

149

22,903−

1,332

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

Net investment in foreign subsidiary

2,311
−

145

20,603−

1,296¥17,015(3,642)¥420$151,656(32,460)$3,749Total

Millions of yen
Hedgeditems

Borrowings¥49,549(42,834)¥(1,435)

Borrowings
Accounts-receivableloans

50,515(43,493)(1,561)¥100,064(86,328)¥(2,996)

Thousands of U.S. dollars

Hedgeditems

Notional amount(over one year)

Fair
value

Notional amount(over one year)

Fair
value

Borrowings¥42,549(42,165)¥ 90$379,233(375,811)$803

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

Interest rate swap
Deferral hedge accounting:
Pay/fixed; Receive/floating

Total

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

Short-cut method:
Borrowings
Accounts-receivable–loans

Total

42,802(36,390)(379)

381,482(324,334)(3,382)¥85,352(78,556)¥(289)$760,715(700,145)$2,579

10. Selling, General and Administrative Expenses

Major components of selling, general and administrative expenses for the years ended March 31, 2017 and 2016 were as follows:

Tokyo Century Corporation Integrated Report 2017

Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Employeesʼ salaries, wages and bonuses¥34,242¥29,389$305,189

Rent expenses

10,3809,429

92,521

Provision for accrued bonuses for employees

2,719

3,298

24,234Retirement benefit expenses

1,904

1,700

16,976

Provision for accrued bonuses for directors

185

170

1,654

Provision for directorsʼ retirement benefits

36

76

323

Provision of allowance for doubtful accounts

1,206

1,217

10,753

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

74

Fair
value

Interest rate swap
Pay/fixed; Receive/floating

Millions of yen

Notional amount(over one year)

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

Pay/fixed; Receive/floating

Fair
value

Forward exchange contracts:

Forward exchange contracts:

RMB

Hedgeditems

Allocation method:

Allocation method:

USD

Millions of yen

Thousands of U.S. dollars

Tokyo Century Corporation Integrated Report 201775

Notes to Consolidated Financial Statements

11. Office Transfer Related Expenses

14. Income Taxes

Certain consolidated subsidiaries incurred office transfer related expenses for the years ended March 31, 2016.

The significant components of deferred tax assets and liabilities as of March 31, 2017 and 2016 were as follows:

12. Other Comprehensive Income

Thousands of
U.S. dollars

Millions of yen

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2017 and 2016:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Net unrealized holding gain (loss) on securities

2017

2016

2017

Net operating loss carryforwards¥7,195¥4,129$64,127

Net defined benefit liability

2,857

2,798

25,471

Tax adjustments for lease transactions

2,639

1,827

23,521

Allowance for doubtful accounts

2,360

2,261

21,0391,432

940

12,764

Deferred tax assets:

Amount arising during the year

¥4,280¥(545)$38,146

Accrued expenses

Reclassification adjustments for gains and losses included in net income(3,786)(874)(33,749)

Depreciation

954

893

8,511

4,396

Loss on devaluation of investments in securities

937

1,109

8,354

(1,292)

Accrued bonuses

849

865

7,567

3,104

Loss on valuation of property and equipment

399

522

3,564

Amount before tax effectTax effectNet unrealized holding gain (loss) on securities

493
(145)
348

(1,420)472(947)

Deferred gain (loss) on hedges
Amount arising during the year
Reclassification adjustments for gains and losses included in net income

1,733(1,783)

15,451

259

446

2,315

Other

5,561

5,416

49,569Subtotal

25,187

20,766

224,491

Less valuation allowance

(791)

(402)

(7,053)24,396

20,363

217,437

Depreciation of leased assets of foreign subsidiaries(16,807)(5,002)(149,796)

Net unrealized holding gain on securities(6,577)(6,518)(58,622)Amount before tax effect

1,993(1,336)

17,767

Total deferred tax assets

Tax effect

(637)

408

(5,685)

Deferred tax liabilities:

1,355

(927)

12,081

Deferred gain (loss) on hedges

Other

Translation adjustments
Amount arising during the year

(2,079)(2,664)(18,535)(8,016)(3,782)(71,448)

Total deferred tax liabilities(31,401)(15,303)(279,868)

Net deferred tax assets¥(7,004)¥5,060$(62,430)

Remeasurements of defined benefit plans
Amount arising during the year(20)

(2,588)(181)

Reclassification adjustments for gains and losses included in net income

363

196

3,243

Amount before tax effect343(2,392)

3,062

Tax effect

(105)

734

(939)

238

(1,657)2,123(1,001)(315)(8,928)−(3)−(1,001)(318)(8,928)¥(1,139)¥(6,516)$(10,154)

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

13. Notes to the Consolidated Statements of Cash Flows

Reconciliations between the effective statutory tax rates and the effective tax rates for the years ended March 31, 2017 and 2016
are not presented because the difference between the effective statutory tax rates and the effective tax rates is insignificant.

15. Retirement Benefit Plans

1. Overview of Retirement Benefit Plans Implemented by the Company
The Company has implemented a corporate pension fund plan (multi-employer welfare pension fund) and a defined benefit
corporate pension plan under its defined benefit plan system, and a defined contribution pension plan under its defined
contribution plan system.
Some of the Companyʼs consolidated subsidiaries in Japan have a lump-sum payment plan and a defined benefit corporate
pension plan under their defined benefit plan system, and a defined contribution pension plan under their defined contribution
plan system.
Some of the Companyʼs consolidated subsidiaries use the simplified method in the calculation of their retirement benefit
obligation.
2. Defined Benefit Plans (except the simplified method)
The changes in the retirement benefit obligation during the years ended March 31, 2017 and 2016 are as follows:

Cash and cash equivalents as of March 31, 2017 and 2016 are reconciled to the accounts reported in the consolidated balance
sheet as follows:
Thousands of
U.S. dollars

Millions of yen

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

2017

2016

2017

¥83,565¥80,395$744,792(1,165)(1,093)(10,386)

3,330

12,46029,679¥85,730¥91,762$764,085

2017

2016

2017

¥22,062¥18,104$196,632

Service cost

1,021

856

9,105

Interest cost

79

275

708

Actuarial gain and loss

6

2,451

53

Retirement benefits paid

(624)

(536)

(5,562)−(7)−

Balance at the beginning of the year

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

76

Tokyo Century Corporation Integrated Report 2017

Thousands of
U.S. dollars

Millions of yen

1

917

15

¥22,546¥22,062$200,953

Tokyo Century Corporation Integrated Report 201777

Notes to Consolidated Financial Statements

The changes in plan assets during the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

¥13,771¥12,961$122,738

Expected return on plan assets

247

233

2,204

Actuarial gain and loss

(14)

(144)

(128)

Contributions by the Company

821

805

7,324

Retirement benefits paid

(451)

(316)

(4,023)

Balance at the beginning of the year

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

−

231

−

¥13,771$128,116

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2017 and 2016 for the Companyʼs and the consolidated subsidiariesʼ defined benefit plans:
Thousands of
U.S. dollars

2017

2016

2017

Funded retirement benefit obligation¥18,283¥17,939$162,954

Plan assets at fair value(14,374)(13,771)(128,116)

3,908

4,168

34,837

Unfunded retirement benefit obligation

4,263

4,122

37,999Net liability for retirement benefits in the balance sheet

8,172

8,290

72,836

Liability for retirement benefits

8,172

8,290

72,836Net liability for retirement benefits in the balance sheet¥ 8,172¥8,290$72,836

The components of retirement benefit expense for the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017Service cost
Interest cost2016

¥1,021¥856

2017$9,105

79

275

708

Expected return on plan assets

(247)

(233)

(2,204)

Amortization of actuarial gain and loss

374

79

3,337

Amortization of prior service cost
Retirement benefit expense

(10)

116

(93)

¥1,217¥1,094$10,853

The components of remeasurements of defined benefit plans included in other comprehensive income (before tax effect) for theyears ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

78

2016

2017

2016

2017

Unrecognized prior service cost¥(131)¥(142)$(1,173)

Unrecognized actuarial gain and loss

2,025

2,379

18,054

Total¥1,894¥2,237$16,881

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2016 are as follows:
2017

2016

General accounts

50%

50%

Bonds

33%

33%

Stocks

14%

14%

Other

3%

3%

Total

100%

100%

The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expectedlong-term returns on assets held in each category.
The assumptions used in accounting for the above plans are as follows:
2017

2016

Discount rates

Mainly 0.2% - 0.7%

0.2% - 0.6%

Expected rates of return on plan assets

Mainly 1.2% - 2.5%

1.2% - 2.5%

Estimated rates of salary increases

Mainly 1.3% - 7.3%

1.3% - 7.0%

3. Defined Benefit Plans (The simplified method)
The changes in liability for retirement benefits during the years ended March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year

2017

2016

2017

¥1,323¥1,976$11,797Retirement benefits expense

294

234

2,623

Retirement benefits paid

(248)

(199)

(2,213)Contributions by the Company

−

(2)

−

Adjustment from the simplified method to the principle method

(1)

(685)

(15)

¥1,367¥1,323$12,191

Balance at the end of the year

2017

Prior service cost

¥(10)

¥124

$(93)

Actuarial gain and loss

354

(2,516)

3,156

Total

¥343

¥(2,392)$3,062

Tokyo Century Corporation Integrated Report 2017

Thousands of
U.S. dollars

Millions of yen¥14,374

Millions of yen

The components of remeasurements of defined benefit plans included in accumulated other comprehensive income (before tax
effect) as of March 31, 2017 and 2016 are as follows:

Tokyo Century Corporation Integrated Report 201779

Notes to Consolidated Financial Statements

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as ofMarch 31, 2017 and 2016 for the Companyʼs and the consolidated subsidiariesʼ defined benefit plans:
Thousands of
U.S. dollars

Millions of yen

2017

The aggregate annual maturity of finance lease receivables that transfer ownership to lessees, subsequent to March 31, 2017 and2016 is summarized as follows:

2016

2017

2017

2016

2017

¥107,398¥106,502$957,204

Due after one to two years

87,79590,408782,495

Due after two to three years

49,92469,742444,958

Due after three to four years

36,73032,599327,368

Due after four to five years

14,712

21,986

131,128

Due after five years

23,78823,953

212,016¥320,350¥345,193$2,855,171

Funded retirement benefit obligation

¥412

¥416

$3,678Due within one year

Plan assets at fair value

(155)

(156)

(1,387)

257

260

2,291

Unfunded retirement benefit obligation

1,110

1,063

9,900

Net liability for retirement benefits in the balance sheet

1,367

1,323

12,191

Liability for retirement benefits

1,367

1,323

12,191

Net liability for retirement benefits in the balance sheet¥1,367¥1,323$12,191

The aggregate annual maturity of finance lease receivables that do not transfer ownership to lessees, subsequent to March 31,2017 and 2016 is summarized as follows:

Retirement benefit expenses for the years ended March 31, 2017 and 2016 are as follows:
2017

2016

2017

2016

2017

Due within one year

¥451,463¥386,407$4,023,735

¥294

¥234

$2,623Due after one to two years

338,262

294,819

3,014,817

Due after two to three years

229,396

220,5292,044,535

Due after three to four years

149,371

132,879

1,331,300

Due after four to five years

87,93276,808783,709

Due after five years

76,27874,337

679,842¥1,332,705¥1,185,782$11,877,941

4. Contributions to the defined contribution pension plan by the Company and its consolidated subsidiaries during the years ended
March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

Contributions to the defined contribution pension plan

2017

2016

2017

¥219

¥215

$1,955

5. The following summarizes the most recent funded status of the multi-employer welfare pension fund as of March 31, 2017 and 2016.
Thousands of
U.S. dollars

Millions of yen

2017

2016

(as of March 31, 2016) (as of March 31, 2015)2017(as of March 31, 2016)

Amount of plan assets¥22,975¥21,191$204,776

Benefit obligations under pension funding programs(33,225)(31,939)(296,125)

Difference¥(10,249)¥(10,748)$(91,349)

The differences as of March 31, 2017 and 2016 above mainly consisted of prior service cost under pension funding programs of¥12,705 million ($113,244 thousand) and ¥13,429 million, respectively.
For the years ended March 31, 2017 and 2016, the ratios of the Companyʼs contributions to the multi-employer welfare pension
fund against total contributions were 6.30% and 6.12%, respectively.

16. Lease Transactions(Lessorsʼ accounting)
Finance leases that do not transfer ownership to lessee are capitalized as lease investment assets. Information relating tofinance leases of the Companies as of March 31, 2017 and 2016 is summarized as follows:
Thousands of
U.S. dollars

Millions of yen

80

2017

2016

2017

Future lease receivables¥1,332,705¥1,185,782$11,877,941

Estimated residual value

52,51741,359468,074

Future interest income(83,083)(66,354)(740,490)¥1,302,139¥1,160,786$11,605,525

Tokyo Century Corporation Integrated Report 2017

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Retirement benefit expenses

Thousands of
U.S. dollars

Millions of yen

2017

As for the lease accounting treatment for finance lease transactions that do not transfer ownership to lessees starting before April
1, 2008, the amounts of “Leased assets” (net of accumulated depreciation) as of March 31, 2008 were recorded as the beginningbalance of “Lease investment assets,” and the amounts of rental revenues were recorded by the straight-line method based on thescheduled lease terms. As a result, “Income before income taxes” increased compared with the amount calculated on assumptionthat the finance lease transactions that do not transfer ownership to the lessee starting before April 1, 2008 would have beenaccounted for using the interest method retroactively from each lease commencement date.
The related information is omitted because the amount is insignificant.
The future minimum lease income subsequent to March 31, 2017 and 2016 under non-cancellable operating leases is summarized
as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Due within one year

¥125,074¥104,790$1,114,749

Due after one year

311,507

268,166

2,776,358¥436,582¥372,957$3,891,107(Sublease)
Lease investment assets and obligations under sublease transactions that include interests on the consolidated balance sheet asof March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Lease investment assets¥16,542¥18,352$147,433

Lease obligations

16,527

18,262

147,304

Tokyo Century Corporation Integrated Report 201781

Notes to Consolidated Financial Statements

17. Commitments and Contingent Liabilities

Millions of yen

The Companiesʼ contingent liabilities as of March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

As a guarantor of indebtedness of:Loans and others¥39,793¥25,134$354,664

Asset purchases

3,249

3,178

28,957

100

122

899

¥43,143¥28,435$384,521

Employees housing loans

The Companies, as lenders, have loan commitment agreements as of March 31, 2017 and 2016 amounting to ¥48,378 million($431,179 thousand) and ¥52,560 million, respectively. The loans provided under these credit facilities as of March 31, 2017 and2016 amounted to ¥12,498 million ($111,393 thousand) and ¥15,413 million, respectively. Many of the facilities may expire without
being utilized and the loans provided are subject to periodic reviews of the borrowersʼ credit standing. The unused portion of thesefacilities may not be fully utilized.

The following table presents the carrying value and estimated fair value of financial instruments as of March 31, 2017 and 2016. The following
table does not include financial instruments for which it is extremely difficult to determine the fair value (Please refer to Note 2 below).
Millions of yen
Carrying value

Estimated
fair value

Difference

Assets(1) Cash on hand and in banks¥83,565(2) Accounts receivable–installment sales

216,466

Deferred profit on installment sales¥83,565¥−(14,975)

Estimated residual value(*2)

203,7142,847

1,600,637
1,548,119

Allowance for doubtful accounts

Allowance for doubtful accounts(*1)

214,088586

1,488,507

49,861

527,030

539,489

12,458(5) Operational investment securities

43,15643,156−(6) Short-term investment securities and investments in securities

40,40640,406−¥80,395
226,467

Deferred profit on installment sales(12,026)
214,441

Allowance for doubtful accounts(*1)(939)
213,502(3) Accounts receivable-lease receivables and investment assets
Estimated residual value(*2)

1,480,951(41,359)
1,439,592

Allowance for doubtful accounts(*1)(946)
1,438,646

Allowance for doubtful accounts(*1)(7) Claims provable in bankruptcy or rehabilitation
Allowance for doubtful accounts(*1)

528,365(1,334)

2,199(1,490)
708

708

−

¥2,343,844¥2,406,751¥62,906¥197,272¥197,272¥−(2) Short-term loans from banks

437,181437,181−(3) Commercial paper

763,400

763,400−(4) Payables under securitized lease receivables

75,40075,400−(5) Bonds payable

196,602

195,486

1,115
8,502

(6) Long-term loans, principally from banks(869)
1,547,249(4) Accounts receivable–loans¥−(1) Cash on hand and in banks(2) Accounts receivable-installment sales(1) Notes and accounts payable-trade(52,517)(*1)¥80,395

AssetsLiabilities(623)
200,867(3) Accounts receivable–lease receivables and investment assets

Difference

Total assets

201,490
Allowance for doubtful accounts(*1)

Estimated
fair value(4) Accounts receivable-loans

18. Estimated Fair Value of Financial Instruments

As of March 31, 2017

As of March 31, 2016

Carrying
value

1,609,327

62,078539,058

1,076,209

1,067,707(7) Long-term payables under securitized lease receivables

2,697

2,714

(17)

(8) Lease obligations

18,24818,069178¥2,767,011¥2,757,232¥9,779Total liabilities(2,597)

Derivatives

536,461

552,890

16,428(5) Operational investment securities

33,29033,290−Hedge accounting not applied¥(887)¥(887)¥−(6) Short-term investment securities and investments in securities

37,49337,493−Hedge accounting applied(1,417)(3,044)(1,627)¥(2,305)¥(3,932)¥(1,627)(7) Claims provable in bankruptcy or rehabilitation
Allowance for doubtful accounts(*1)

1,625

Total derivatives(1,072)
553

553

−

¥2,439,482¥2,520,836¥ 81,354(1) Notes and accounts payable–trade¥215,570¥215,570¥−(2) Short-term loans from banks

416,341

416,341−(3) Commercial paper

800,700

800,700−(4) Payables under securitized lease receivables

59,10059,100−(5) Bonds payable

232,014230,320

1,694
10,399Total assets
Liabilities(6) Long-term loans, principally from banks

1,218,851

1,208,451(7) Long-term payables under securitized lease receivables

6,036

5,983

53

(8) Lease obligations

16,62916,462167¥2,965,244¥2,952,929¥12,314

Hedge accounting not applied

¥253

¥253

¥−

Hedge accounting applied

365

131

(234)

¥619

¥384

¥(234)

Total liabilities
Derivatives

Total derivatives

82

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201783

Notes to Consolidated Financial Statements

Thousands of U.S. dollars
Carrying
value

Estimated
fair value

Difference(1) Cash on hand and in banks$744,792$744,792$−(2) Accounts receivable-installment sales

1,929,290

Deferred profit on installment sales(133,472)

1,815,640

25,376

14,343,381

553,280

4,781,295

4,927,719

146,423(5) Operational investment securities

296,709296,709−(6) Short-term investment securities and investments in securities

334,169

334,169−

As of March 31, 2017
Assets1,795,818
Allowance for doubtful accounts(*1)(5,555)
1,790,263(3) Accounts receivable-lease receivables and investment assets
Estimated residual value(*2)

14,265,928(468,074)
13,797,854

Allowance for doubtful accounts(*1)(7,753)
13,790,100(4) Accounts receivable-loans
Allowance for doubtful accounts(*1)(7) Claims provable in bankruptcy or rehabilitation
Allowance for doubtful accounts(*1)
Total assets

4,804,443(23,147)(7) Claims provable in bankruptcy or rehabilitation
The fair value of above is assumed to approximate their carrying value with the deduction of relevant allowances because theircarrying value is based on the fair value of the collateral and guarantees.
Liabilities(1) Notes and accounts payable-trade, (2) Short-term loans from banks, (3) Commercial paper and (4) Payables under securitized leasereceivables
Since these items are settled in a short period of time, the carrying value approximates fair value.
(5) Bonds payable, (6) Long-term loans, principally from banks and (7) Long-term payables under securitized lease receivables
The fair value is based on the present value of the total of principal and interest discounted by the interest rate to be applied if
similar new bond or loan agreements were entered into.
(8) Lease obligations
Based on the classification by internal rating and contract terms, the fair value is estimated by the present value of the total ofprincipal and interest discounted by the interest rate to be applied if similar new contracts were entered into.
Derivatives
The value of assets and liabilities arising from derivatives is shown at net value in the above table and with the amount in parentheses
representing net liability position. Please refer to Note 9 Derivatives regarding the details of derivative transactions.

(Note 2) Financial instruments for which it is extremely difficult to determine the fair value

14,488Investments in unconsolidated subsidiaries and affiliates(9,555)

Unlisted shares

4,932

Bonds

4,932

−

Trust beneficiary rights

2017

2016

2017

¥119,927¥110,285$1,068,868

13,17010,444

117,386

299

299

2,673

6,060

4,592

54,012$21,742,264$22,467,345$725,081(1) Notes and accounts payable-trade$1,921,307$1,921,307

$−

Total

(2) Short-term loans from banks

3,710,711

3,710,711−(3) Commercial paper

7,136,363

7,136,363−

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial
instruments are not included in (5) Operational investment securities and (6) Short-term investment securities and investments
in securities.

Investments in limited partnerships, etc.

Liabilities(4) Payables under securitized lease receivables

526,737

526,737−(5) Bonds payable

2,067,867

2,052,764

15,102(6) Long-term loans, principally from banks

10,863,201

10,770,514

92,687(7) Long-term payables under securitized lease receivables

53,80153,326475(8) Lease obligations

148,211

146,723

1,488$26,428,202$26,318,447$109,754

Total liabilities
Hedge accounting not applied$2,256$2,256$−

Hedge accounting applied

3,261

1,170

(2,091)$5,517$3,426$(2,091)

Total derivatives

General and specific allowances are deducted from the amounts of accounts receivable–installment sales, accounts receivable–lease receivables and investment
assets, accounts receivable–loans and claims provable in bankruptcy or rehabilitation, respectively.
(*2)
Estimated residual value included in lease investment assets is deducted.
(*1)(Note 1) Methods to determine the estimated fair value of financial instruments and other matters related to securities andderivative transactions.

Assets(1) Cash on hand and in banks
Since these items are settled in a short period of time, the carrying value approximates fair value.
(2) Accounts receivable-installment sales, (3) Lease receivables and investment assets and (4) Loans
Based on the classification by internal rating and contract terms, the fair value is estimated by the present value of the total ofprincipal and interest discounted by the interest rate to be applied if similar new contracts were entered into.
(5) Operational investment securities and (6) Short-term investment securities and investments in securities
The fair value of the above securities is based on either quoted market prices or the prices provided by the counterparty financial
institutions.
For information on securities classified by holding purpose, please refer to Note 6 Operational Investment Securities, Short-Term
Investment Securities and Investments in Securities.

Tokyo Century Corporation Integrated Report 2017

73,11462,565

651,644¥212,572¥188,187$1,894,586(Note 3) Redemption schedule for receivables and marketable securities with maturities subsequent toMarch 31, 2017 and 2016
Millions of yen

As of March 31, 2017

Derivatives

84

Thousands of
U.S. dollars

Millions of yen

Due inOne Yearor Less

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

Cash on hand and in banks¥83,565

¥−

¥−

¥−

¥−

¥−

Accounts receivable installment sales

76,80653,477

34,69523,424

9,780

18,282

Accounts receivable loans

235,756

85,216

71,59336,294

48,15562,041(1) Bonds

−

3,000

299

−

5,000

2,000

(2) Other

3,947

3,499

5,849

7,466

863

54,188

−

−

−

−

−

−

Operational investment securities:
Available-for-sale securities with maturities

Short-term investment securities and investments
in securities:
Available-for-sale securities with maturities(1) Bonds(2) Other
Total

3,980

−

−

−

−

−

¥404,055¥145,193¥112,438¥67,185¥63,799¥136,512

Tokyo Century Corporation Integrated Report 201785

Notes to Consolidated Financial Statements

For the year ended March 31, 2016

Millions of yen

As of March 31, 2016
Due after
One Yearthrough
Two Years

Due inOne Yearor Less

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

Cash on hand and in banks¥80,395

¥−

¥−

¥−

¥−

¥−

Accounts receivable-installment sales

87,52457,54538,753

21,49012,207

8,946

Accounts receivable-loans

238,061

78,62676,81344,677

24,64065,546(1) Bonds

299

1,200

1,036

−

−

5,000

(2) Other

5,629

802

2,177

3,111

8,826

46,762

Operational investment securities:
Available-for-sale securities with maturities

Short-term investment securities and investments
in securities:

Amount per share

Type of shares

Millions of yen

Yen(June 25, 2015)
Annual general meeting of the shareholders

Common stock¥3,481¥33.0(November 9, 2015)
Meeting of the Board of Directors

Common stock¥3,693¥35.0(Date of approval)
Resolution approved by(1) Bonds

−

−

−

−

−

−

(2) Other

12,810

−

−

−

−

−

¥424,721¥138,174¥118,780¥69,279¥45,674¥126,254

Shareholdersʼ
cut-off date

Effective
date

March 31,

June 26,

2015

2015

September 30,
2015

December 10,
2015(2) Dividends with a shareholdersʼ cut-off date during the current fiscal year but an effective date subsequent to the current fiscal year
(Date of approval)
Resolution approved by

Available-for-sale securities with maturities

Total

Amount(June 23, 2017)
Annual general meeting of the shareholders

AmountAmount per share

Type of shares(Paid from)

Millions of yen
Thousands of
U.S. dollars

Yen
U.S. dollars

Shareholdersʼ
cut-off date

Effective
date

Common stock(Retained
earnings)¥5,594¥53.0

March 31,

June 26,$49,862

$0.47

2017

2017

20. Legal Reserve and Additional Paid-in CapitalThousands of U.S. dollars

As of March 31, 2017
Due after
One Yearthrough
Two Years

Due inOne Yearor Less

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after Five
Years

Cash on hand and in banks$744,792

$−

$−

$−

$−

$−

Accounts receivable-installment sales

684,548476,623

309,227

208,775

87,173

162,941

2,101,213

759,508

638,090

323,484

429,189

552,956

Accounts receivable-loans

In accordance with the Law, the Company provides a legal reserve which is included in retained earnings. The Law provides that an
amount equal to 10% of the amounts to be disbursed as distributions of earnings be appropriated to the legal reserve until the sum of
the legal reserve and additional paid-in capital equals 25% of the common stock account. The Law provides that neither additional
paid-in capital nor the legal reserve is available for the payment of dividends, but both may be used to reduce or eliminate a deficit byresolution of the shareholders or may be transferred to common stock by resolution of the Board of Directors. The Law also provides
that, if the total amount of additional paid-in capital and the legal reserve exceeds 25% of the amount of common stock, the excess
may be distributed to the shareholders either as a return of capital or as dividends subject to the approval of the shareholders. Under
the Law, however, such distributions can be made at any time by resolution of the shareholders or by the Board of Directors if certain
conditions are met.

21. Stock Based Compensation

Operational investment securities:
Available-for-sale securities with maturities(1) Bonds−

26,7372,673−

44,563

17,825(2) Other

35,17931,191

52,13366,541

7,696

482,965

Short-term investment securities and investments
in securities:

The Company has stock option plans for certain directors, executive officers and eligible employees. Under the plans, the rights topurchase the common shares of the Company are granted at an exercise price of ¥1 per share. The contractual term of the stock
options is 30 years. The stock option holders may exercise their share subscription rights only in a lump sum during the ten-day
period starting a day after leaving their position as director, corporate auditor, executive officer or employee of the Company.
The stock options outstanding as of March 31, 2017 were as follows:2013 stock option

2014 stock option

2015 stock option

2016 stock option

2017 stock option

Persons granted

7 directors
22 executive
officers

7 directors
20 executive
officers

7 directors
19 executive
officers
6 eligible
employees

7 directors
20 executive
officers
7 eligible
employees

8 directors
19 executive
officers
7 eligible
employees

Type and number ofshares to be issued upon
the exercise of the sharesubscription rights

Common stock
113,700

Common stock
59,300Common stock
76,000Common stock
74,600Common stock
82,700Grant date

October 15,
2012

September 24,
2013

September 29,
2014

October 26,
2015

September 21,
2016

Fair value per stock at
the grant date

¥1,306 ($13.9)¥3,038 ($29.52)¥2,716 ($22.58)¥3,805 ($33.76)¥3,406 ($30.35)

Available-for-sale securities with maturities(1) Bonds

−

−

−

−

−

−

(2) Other

35,472

−

−

−

−

−

$3,601,207$1,294,061$1,002,125$598,802$568,623$1,216,688

Total

The redemption schedules for long-term debt and lease receivables and investment assets are disclosed in Note 8 Short-Term
Borrowings, Long-Term Debt and Assets Pledged and Note 16 Lease Transactions, respectively.

19. Dividends(1) Dividends paid to shareholders
For the year ended March 31, 2017
Amount(Date of approval)
Resolution approved by

86

Type of shares(June 24, 2016)
Annual general meeting of the shareholders

Common stock(November 4, 2016)
Meeting of the Board of Directors

Common stock

Tokyo Century Corporation Integrated Report 2017

Millions of yen
Thousands of
U.S. dollars

Amount per share
Yen
U.S. dollars

Shareholdersʼ
cut-off date

Effective
date¥4,749¥45.0

March 31,

June 27,$42,328

$0.40

2016

2016

¥4,961¥47.0

September 30,

December 9,$44,217

$0.41

2016

2016

Tokyo Century Corporation Integrated Report 201787

Notes to Consolidated Financial Statements

The total stock-based compensation costs recognized for the years ended March 31, 2017 and 2016 were ¥281 million ($2,510
thousand) and ¥283 million, respectively.
The fair value of the 2017 stock option is estimated using the Black-Scholes option pricing model with the assumptions noted in thefollowing table.
2017 stock option
Expected volatility

32.8%

Expected holding period

4.2 years

Expected dividend¥95 per share

Risk free interest rate

-0.180%The volatility of the stock price is based on the historical volatility of the Companyʼs stock for the period equal to the optionʼsestimated remaining outstanding period from the grant date. The estimated remaining outstanding period is based on the averageterm and average age as of retirement. The estimated dividend is based on the forecast of dividends of ¥95 ($0.84) made for the year
ended March 31, 2017 at the grant date. The risk free interest rate is based on the yield of Japanese government bonds having aremaining life equal to the optionʼs estimated remaining outstanding period.
The stock option activity for the fiscal years ended March 31, 2017 was as follows:2013 stock
option2014 stock
option2016 stock
option2015 stock
option2017 stock
optionShare subscription rights which are not yet
vestedOutstanding as of March 31, 2016

−

−

−

−

−

Granted

−

−

−

−

82,700Forfeited

−

−

−

−

−

Vested−−−−82,700

Outstanding as of March 31, 2017

−

−

−

−

−

79,20046,80068,70074,600−

Vested−−−−82,700Exercised

4,300

3,600

5,900

5,800

−

Forfeited

−

−

−

−

−

74,90043,20062,80068,80082,700

¥1

¥1

¥1

¥1

¥1

¥3,929¥3,929¥3,913¥3,929−

Share subscription rights which have alreadybeen vested
Outstanding as of March 31, 2016

Outstanding as of March 31, 2017
Exercise price (yen)Weighted average exercise price (yen)Weighted average fair value per stock at the
grant date (yen)¥1,306¥3,038¥2,716¥3,805¥3,406

$0

$0

$0

$0

$0

Weighted average exercise price (U.S. dollars)$35.01$35.01$34.87$35.01−

Weighted average fair value per stock at the
grant date (U.S. dollars)$11.63$27.07$24.20$33.91$30.35

Exercise price (U.S. dollars)

22. Business Combinations
1. Share acquisition
On June 9, 2016, the Company obtained additional shares in CSI Leasing, Inc. (hereinafter, “CSI Leasing”), which had been an equitymethod affiliate, with the aim of incorporating it as a wholly owned subsidiary.
(1) Summary of business combination
1) Name and business description of acquired company

88

Name

CSI Leasing (Headquartered in Missouri, U.S.A.)

Business description

Leasing of information and communications
equipment (hereinafter, “IT equipment”)

Tokyo Century Corporation Integrated Report 20173) Date of business combination
June 9, 20164) Legal form of business combination
Acquisition of shares5) Name of the company after business combination
No change

Number of shares
Stock option activity2) Purpose of additional share acquisition
The Company continues to pursue global expansion in its operations with the aim of strengthening its management base. To thisend, the Company has worked with CSI Leasing through strategic partnerships since 2003, when their first business transaction
was completed. In March 2015, the Company acquired 35% of voting rights of CSI Leasing and it became an equity-method
affiliate. Further, the Company is planning to integrate CSI Leasing as a wholly owned subsidiary, through which the CSI Leasing
Group with its expertise regarding U.S., Central and South American and European operations can be integrated into theCompanies with their strength in Asia thus enhancing the global network. In addition, the Company expects the acquisition to
support it in achieving further growth by combining CSI Leasingʼs business know-how of the U.S. leasing market with theCompanyʼs strength of having the largest share in the Japanese IT equipment leasing market.
The Companies are committed to contributing to the formulation of customersʼ IT strategies alongside the reinforcement of
support systems in domestic and overseas markets.

6) Percentage of voting rights acquired
Prior to acquisition of additional shares: .........................................34.3%
Additional shares acquired: ............................................................. 65.7%
After acquisition of additional shares: ........................................... 100.0%
7) Basis for determining acquiring company
The Company acquired 100% of CSI Leasingʼs shares for a cash consideration.
(2) Period for which the operating results of the acquired company are included in the Companyʼs consolidated financial statements
April 1, 2016 – December 31, 2016
The operating results in the period from January 1, 2016 to March 31, 2016 are recognized as equity in earnings of affiliates
because the date of the business combination was deemed March 31, 2016.
(3) Acquisition cost and its breakdown(Millions of yen)(Thousands of
U.S. dollars)

Fair value of CSI Leasing shares held by theCompany prior to business combination¥10,452$93,161

Cash payment for additional shares

21,608

192,586

Acquisition cost

32,060285,747(4) Main acquisition-related costs
Advisory fees and other expenses: ..........................¥196 million ($1,749 thousand)(5) Difference between the total cost of each separate transaction and acquisition cost
Gain on step acquisitions: ...........................................¥100 million ($893 thousand)(6) Amount of goodwill, reason for recognition, method and period of amortization
1) Amount of goodwill¥10,529 million ($93,842 thousand)2) Reason for recognition
Goodwill is recognized as the difference between the acquisition cost and net assets of the acquired company on a fair value basis.
3) Method and period of amortization
Straight-line method over a period of 20 years

Tokyo Century Corporation Integrated Report 201789

Notes to Consolidated Financial Statements(7) Main assets acquired and liabilities assumed on the date of business combination

Current assets(Millions of yen)(Thousands of
U.S. dollars)¥144,195$1,285,164

Fixed assets

43,918391,427

Total assets

188,113

1,676,592

Current liabilities

84,308751,408

Long-term liabilities

82,273

733,278

Total liabilities

166,581

1,484,687

5) Other matters regarding transaction
The Company advanced the joint venture business with CIT Group Inc. (hereinafter, “CIT”) from October 2014. Since CIT sold its
aircraft leasing business, the Company decided to dissolve the joint venture and obtain all shares in order to enhance its aircraft
leasing business.
The additional voting rights acquired in the two subsidiaries were 50% (additional shares, 30%), respectively.
(2) Summary of accounting treatment
The transaction was treated as a transaction with non-controlling interests involving entities under common control in accordancewith the “Accounting Standard for Business Combinations” and “Guidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures”.

(8) Amount allocated to intangible assets other than goodwill, main components by category and weighted average amortization period.
Components(Millions of yen)(Thousands of
U.S. dollars)

Amortization
period¥3,464$30,878

15 years

Customer relationships(9) Estimated impact on the consolidated statement of income for the fiscal year ended March 31, 2017, assuming the businesscombination had been completed at the beginning of the fiscal year
(Millions of yen)(Thousands of
U.S. dollars)¥12,473$111,174

Operating income

573

5,109

Income before income taxes

295

2,629

Net income attributable to owners of parent

97

870

(yen)

(U.S. dollars)

0.93

0.01

Revenues

Net income per share(Estimation method)
Differences in revenue and income data between the calculations assuming the business combination had been completed at the
beginning of the fiscal year and the figures reported on the consolidated statement of income of the acquiring company are treated as
the estimated amount of the impact. The difference includes amortization of goodwill and others from the beginning of the fiscal year
to the date of business combination.
These amounts are unaudited.

(3) Information regarding additional acquisition
Acquisition cost and its breakdown
Consideration for acquisition Cash payment: ¥10,909 million ($97,228 thousand)(4) Information regarding change in net assets due to transaction with non-controlling interests
1) Main cause of change in capital surplus
Additional acquisition
2) Increase in capital surplus due to transaction with non-controlling interests¥652 million ($5,816 thousand)

23. Investment and Rental Properties
The Company and certain consolidated subsidiaries own rental properties, such as commercial facilities and office buildings, in Tokyoand other areas. The net operating income relating to these properties was ¥4,837 million ($43,113 thousand) and ¥2,084 million forthe years ended March 31, 2017 and 2016, respectively.
The carrying value in the consolidated balance sheet, change in carrying value and corresponding fair value of these properties forthe years ended March 31, 2017 and 2016 are as follows:

Millions of yen

Year ended March 31, 2017
Carrying Value
Beginning of year

Net change¥79,635¥17,625

End of year

¥97,261¥100,656

Millions of yen

Year ended March 31, 2016

2. Transaction under common control

Carrying ValueOn March 31, 2017, the Company additionally obtained all the shares in two consolidated subsidiaries in the aircraft leasing business.

Fair Value

Beginning of year

Net change

End of year

End of year

¥47,686¥31,949¥79,635¥81,387(1) Summary of transaction
1) Names and business description of subsidiaries

Millions of yen

Year ended March 31, 2017

Name

TC-CIT Aviation Ireland Limited
TC-CIT Aviation U.S., Inc.

Business description

Aircraft leasing business

2) Date of transaction
March 31, 2017

Fair Value
End of year

Carrying Value

Fair Value

Beginning of year

Net change

End of year

End of year

$709,767$157,087$866,854$897,119

Notes:
1. The carrying value represents the acquisition cost less accumulated depreciation.
2. The components of net change in carrying value include an increase mainly due to the acquisition of real estate in the amount of ¥39,947 million ($356,039
thousand) and ¥58,769 million for the years ended March 31, 2017 and 2016, respectively.
3. Regarding major properties, the fair value is mainly estimated in accordance with appraisal standards for valuing real estate. For other properties, it is basedon the appropriate index, which reflects market value.

3) Legal form of transaction
Acquisition of shares from non-controlling interests
4) Names of subsidiaries subsequent to the transaction
Names were changed in April 2017 as follows.
TC Skyward Aviation Ireland Limited
TC Skyward Aviation U.S., Inc.

90

Tokyo Century Corporation Integrated Report 2017

Tokyo Century Corporation Integrated Report 201791

Notes to Consolidated Financial Statements

24. Segment Information
1. Overview of Reportable Segments
The Companyʼs reportable segments shall be part of its organizational units whose financial information is individually available, andshall be subject to regular review by its Board of Directors for the purpose of deciding the allocation of its managerial resources andevaluating its business performance.
The Company is mainly engaged in leasing business and installment sales business as well as financing service business relating to
the main businesses. Therefore, the “Leasing and Installment Sales Business,” the “Financing Business” and the “Other Businesses”
constitute the Companyʼs reportable segments.
The “Leasing and Installment Sales Business” consists of leasing and installment sales of IT-related equipment and office equipment, industrial machinery, commercial and service equipment, etc. (including sales of assets thereof pertaining to maturity and/or
cancellation before maturity of leasing transactions). The “Financing Business” consists of money-lending business and investment
business such as capital investments in operational investment securities and silent partnerships. The “Other Businesses” consistsof commission transactions, solar power sales business, and other businesses.
2. Calculation Method for Amounts for Revenues, Profit or Loss, Assets, Liabilities and Other Items by Reportable Segments
The accounting method for reportable business segments is the same as stated under “Summary of Significant Accounting Policies”
in Note 2.
3. Information on Revenues, Profit or Loss, Assets, Liabilities and Other Items by Reportable Segments

Thousands of U.S. dollars

Year ended March 31, 2017
Leasing andinstallment sales

Finance

Other

Revenues, profit and assets by reportable segments
Revenue from customers$8,237,492$215,787$246,427$8,699,706−−

13,034

13,034
8,712,741

Inter-segment revenue
Total revenue

8,237,492

215,787

259,461

Segment profit$534,145$ 112,499$72,154$718,798

Segment assets$23,309,395$6,945,922$293,569$30,548,888$874,815−$14,775$889,591$3,397−−$3,397$1,883,294−$64,505$1,947,799

Other items
Depreciation
Amortization of goodwill
Increase in property and equipment and intangible assets

4. Difference between the total of reporting segments and the amounts on the consolidated financial statements and details for thedifference (The matter for the reconciliation of the difference)

Millions of yen

Year ended March 31, 2017
Leasing andinstallment sales

Other

Total

Revenues, profit and assets by reportable segments
Revenue from customers
Inter-segment revenue¥924,246¥24,211¥27,649¥976,107

−

−

1,462

1,462

Total revenue

924,246

24,211

29,111

977,569

Segment profit¥ 59,931¥12,622¥8,095¥80,649

Segment assets¥2,615,314¥779,332¥32,938¥3,427,585

Other items
Depreciation
Amortization of goodwill
Increase in property and equipment and intangible assets¥98,154−¥1,657¥99,812

¥381

−

−

¥381

¥211,305−¥7,237¥218,543

Revenues

2017

2016

Reportable segment total¥977,569¥941,257

Inter-segment eliminations
Revenues on consolidated statement of income

FinanceOther(1,462)(797)(13,034)¥940,460$8,699,706

Profit

2017

2016

2017

Reportable segment total¥80,649¥72,547$718,798Inter-segment eliminations(1,462)(797)(13,034)

General and administrative expenses not attributable to reporting segment(7,187)(5,845)(64,059)¥71,999¥65,904$641,705

Operating income on consolidated statement of income

AssetsReportable segment total

Revenues, profit and assets by reportable segments
Revenue from customers
Inter-segment revenue¥889,939¥29,266¥21,254¥940,460

−

−

797

797

Total revenue

889,939

29,26622,051

941,257

Segment profit¥50,339¥16,479¥5,728¥72,547

Segment assets¥2,392,491¥752,048¥27,837¥3,172,376

Other items
Depreciation
Amortization of goodwill
Increase in property and equipment and intangible assets

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

Millions of yen
Total¥80,137−¥1,208¥81,345

−

−

−

−

¥239,962−¥14,630¥254,593

2017$8,712,741¥976,107

Millions of yen

Year ended March 31, 2016
Leasing andinstallment sales

Thousands of
U.S. dollars

Millions of yen
Finance

Total

2017

2016

2017

¥3,427,585¥3,172,376$30,548,888

Assets not attributable to reporting segment

152,297

145,485

1,357,371

Total assets on consolidated balance sheet¥3,579,882¥3,317,862$31,906,259

Millions of yen
Reportable segment
total

2017

2016

¥99,812381
218,543

Adjustments

Consolidated

2017

2016

2017

2016

¥81,345¥2,547¥2,925¥102,359¥84,270

−

481

524

863

524

254,593

2,526

3,535

221,069

258,129

Other items
Depreciation
Amortization of goodwill
Increase in property and equipment and intangible assets

Thousands of U.S. dollars
Reportable segment
total

Adjustments

Consolidated

2017

2017

2017

Other items
Depreciation
Amortization of goodwill
Increase in property and equipment and intangible assets

92

Tokyo Century Corporation Integrated Report 2017

$889,591$22,707

3,397

4,295

$912,298
7,692

1,947,799

22,516

1,970,316

Tokyo Century Corporation Integrated Report 201793

Notes to Consolidated Financial Statements

Information about the amortization and unamortized balance of goodwill

Information by products and services
Millions of yen

Millions of yen

March 31, 2017

Revenue from customers

Finance
lease

Operatinglease

Installment
sales¥580,169¥270,438¥73,639

March 31, 2017

Finance¥24,211

Other

Total

¥27,649¥976,107

Leasing andinstallment sales

Amortization
Unamortized balance

Finance

Other

Total

¥381

−

−

¥381

10,479−−10,479Millions of yen
Thousands of U.S. dollars

March 31, 2016

Revenue from customers

Finance
lease

Operatinglease

Installment
sales¥554,062¥254,396¥81,481

Finance¥29,266

Other

Total

¥21,254¥940,460

Thousands of U.S. dollars

March 31, 2017

Revenue from customers

Finance
lease

Operatinglease

Installment
sales

Finance

Other

Total

$5,170,848$2,410,324$656,319$215,787$246,427$8,699,706

Geographical information(a) Revenues
Information by geographic segment is not disclosed since revenues to third parties located in Japan for the years ended
March 31, 2017 and 2016 represented more than 90% of the consolidated revenues for the respective years.

March 31, 2017
Leasing andinstallment sales

Other

Total

$3,397−−$3,397

Unamortized balance

93,401−−

93,401

Amortization in the amount of ¥481 million ($4,295 thousand) and unamortized balance in the amount of ¥3,132 million ($27,921
thousand) for the fiscal year ended March 31, 2017 are not allocated to any Reportable Segment since they are related to multisegment.
Amortization in the amount of ¥524 million and unamortized balance in the amount of ¥3,614 million for the fiscal year ended
March 31, 2016 are not allocated to any Reportable Segment since they are related to multi segment.
25. Amounts Per ShareYen

U.S. dollars

2017

2016

2017

¥3,360.27¥3,033.61$29.95

Basic¥413.51¥379.34$3.69

Diluted¥412.36¥378.51$3.68

Net assets(b) Property and equipment
Information by geographic segment is summarized as follows:

Finance

Amortization

Net income attributable to owners of parent:

Millions of yen

March 31, 2017
Europe and North America
Japan

Ireland

OthersAsia

Central andSouth America

Total¥410,731¥124,116¥110,340¥6,096¥30,339¥681,624

Total

Millions of yen

March 31, 2016
Europe and North America
Japan

Ireland

OthersAsia

Central andSouth America¥381,344¥116,651¥60,353¥5,111¥29,740¥593,202

Net assets per share are calculated based on the net assets available for distribution to the shareholders of common stock(i.e., the net assets excluding non-controlling interests and share subscription rights) and the number of shares of common
stock outstanding at each balance sheet date.
Basic net income attributable to owners of parent per share is calculated by dividing the net income attributable to owners ofparent available for distribution to shareholders of common stock by the weighted-average number of shares of common
stock outstanding during the period.
Diluted net income attributable to owners of parent per share is calculated based on the net income attributable to owners ofparent available for distribution to shareholders and the weighted-average number of shares of common stock outstanding
during the period after giving effect to the dilutive potential of shares of common stock to be issued upon the exercise of warrants
and stock subscription rights.
The bases for calculation are as follows:
1. Net assets per share

Thousands of U.S. dollars

March 31, 2017

Thousands of shares

Europe and North America
Japan

Ireland

OthersAsia

Central andSouth America

Total$3,660,711$1,106,207$983,427$54,337$270,403$6,075,088

Information by main customer
Information by main customer for the years ended March 31, 2017 and 2016 is not disclosed due to no third party customer towhich revenues volume represented 10% or more of the consolidated revenues for the respective years.

Number of shares of common stock used for the calculation of net assets per share

Total net assets

105,557

105,538
Thousands of U.S.
dollars

March 31, 2017

March 31, 2016

March 31, 2017

¥404,818¥374,872$3,608,009
446,680

50,11754,710Share subscription rights

943

716

8,405

Non-controlling interests

49,17453,994438,275¥354,701¥320,162$3,161,328

Net assets attributable to shares of common stock

Tokyo Century Corporation Integrated Report 2017

March 31, 2016

Millions of yen

Amount deducted from total net assets:

94

March 31, 2017

Tokyo Century Corporation Integrated Report 201795

Report of Independent Auditors
2. Basic and diluted net income attributable to owners of parent per share
Thousands of shares

Weighted average number of shares of common stock

2017

2016

105,557

105,532

293

232

Increase in shares of common stock
Exercise of share subscription rights

26. Subsequent Events
The Company issued the seventeenth unsecured bond and the eighteenth unsecured bond (with inter-bond pari passu clause) on
April 18, 2017. The details are as follows:

Total amount issued

The seventeenth

The eighteenth¥10,000 million($89,126 thousand)¥15,000 million($133,689 thousand)Issuance priceInterest rate

¥100 ($0.89) per ¥100 ($0.89) of face value
0.03% per annum

Redemption price¥100 ($0.89) per ¥100 ($0.89) of face value

Redemption date

April 17, 2020

Redemption method

April 18, 2017
This bond is without any collateral or guaranty and there are no assets reserved
for this debenture.

Application of the fund96

April 18, 2022

Lump-sum redemption at maturity

Payment date
Collateral

0.17% per annum

Tokyo Century Corporation Integrated Report 2017

For the redemption of short-term bonds

Tokyo Century Corporation Integrated Report 201797

Main Subsidiaries and Affiliates / Japan Desk

Name

Location

Main Business

Voting Shares*

Consolidated Subsidiaries (Domestic)

Name

Location

Main Business

Voting Shares*

Consolidated Subsidiaries (Overseas)

Nippon Car Solutions Co., Ltd.

Japan

Automobile leasing

60%

Tokyo Century Leasing China Corporation

China

General leasing

80%

Orico Auto Leasing Co., Ltd.

Japan

Automobile leasing for individuals

50%Tokyo Century Factoring China Corporation

China

Factoring services

100%

Nippon Rent-A-Car Service, Inc.

Japan

Automobile rental and leasing

81%

Tokyo Century Leasing (Singapore) Pte. Ltd.

Singapore

General leasing

100%

Fujitsu Leasing Co., Ltd.

Japan

IT-related equipment leasing

80%

Tokyo Century Capital (Malaysia) Sdn. Bhd.

Malaysia

General leasing

100%

IHI Finance Support Corporation

Japan

Finance and general leasing

67%

PT. Century Tokyo Leasing Indonesia

Indonesia

General leasing

85%

S.D.L Co., Ltd.

Japan

General leasing

100%

PT. TCT Indonesia

Indonesia

General trading company

100%

ITEC Leasing Co., Ltd.

Japan

General leasing

85%

TISCO Tokyo Leasing Co., Ltd.

Thailand

General leasing

49%

Orico Business Leasing Co., Ltd.

Japan

General leasing

50%

HTC Leasing Co., Ltd.

ThailandConstruction equipment finance70%

TC Property Solutions Corporation

Japan

Property management100%

TC Advanced Solutions Co., Ltd.

Thailand

Reverse factoring and other services

59%

TRY, Inc.

Japan

Refurbishment of PCs

100%

TC Car Solutions (Thailand) Co., Ltd.

ThailandFinancing and services related to automobiles

97%

TC Agency Corporation

Japan

Casualty insurance

100%

Tokyo Leasing (Hong Kong) Ltd.

Hong Kong

General leasing

100%

TC Business Service Corporation

Japan

Business processing services

100%

TC Business Experts Corporation

Japan

Business inspection services

100%

Japan

Sales of solar electricity generated using
solar power

Kyocera TCL Solar LLC

81%

Equity-Method Affiliate (Domestic)
Nittochi Asset Management Co., Ltd.

Japan

Management and formation of real estate
funds

30%

CSI Leasing, Inc.

U.S.A.

IT equipment leasing

100%

Tokyo Century (USA) Inc.

U.S.A.

General leasing

100%

TC Skyward Aviation U.S., Inc.

U.S.A.

Aviation leasing and finance

100%

TC Realty Investments Inc.

U.S.A.

Real estate investment

100%

TC Aviation Capital Ireland Ltd.

Ireland

Aviation financing business100%

TC Skyward Aviation Ireland Ltd.

Ireland

Aviation leasing and finance

100%

U.K.

General leasing

100%

President Tokyo Corporation

TaiwanAutomobile leasing and general leasing

49%

Tong-Sheng Finance Leasing Co., Ltd.

China

Automobile and equipment leasing

49%

Dalian Bingshan Group Hua Hui Da Financial
Leasing Co., Ltd.

China

Finance and general leasing

40%

Suzhou New District Furui Leasing Co., Ltd.

China

Finance and general leasing

20%

Tokyo Leasing (UK) Plc

Equity-Method Affiliates (Overseas)

BPI Century Tokyo Lease & Finance Corporation

Philippines

General leasing

49%

PT. Hexa Finance Indonesia

Indonesia

Construction equipment finance20%

PT. Big Ecommerce Bersama

Indonesia

B-to-G and B-to-B e-commerce operation

20%

U.S.A.

Provider of products, services, and solutions
to the commercial aerospace industry

20%

India

Finance and general leasing−

GA Telesis, LLC
Japan Desk
TATA Capital Financial Services Limited* Voting shares percentages are rounded to the nearest whole number.

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Stock Information (As of March 31, 2017) / Bond Ratings (As of May 31, 2017)

Transfer Agent
Stock Listing
Securities Code
Trading Lot Size

Mizuho Trust & Banking Co., Ltd.
Tokyo Stock Exchange, First Section
8439
100 shares

Major Shareholders

Number of Shares of Common Stock Authorized
Number of Shares of Common Stock Issued
Number of Shareholders

Corporate Information

400,000,000 shares
106,624,620 shares
10,832

Breakdown of Shareholders
Number of
Shares Held(Thousands)

Percentage of Shares
Outstanding (%)

26,656
15,369
9,963

25.0
14.4
9.3

Japan Trustee Services Bank,
Ltd. (Trust accounts)

5,537

5.2

Mizuho Bank, Ltd.

4,688
2,972

4.4
2.8

The Master Trust Bank of Japan, Ltd.
(Trust accounts)

2,395

2.3

Nippon Life Insurance Company

2,228

2.1

Mizuho Trust & Banking Co., Ltd.
(Retirement Allowance Trust,
Orient Corporation AccountTrust & Custody Services Bank, Ltd.
re-entrusted)

1,900

1.8

Yushu Tatemono Co., Ltd.

1,716

1.6

Shareholders
ITOCHU Corporation
Nippon Tochi-Tatemono Co., Ltd.
KSO Co., Ltd.

Seiwa Sogo Tatemono Co., Ltd.

Financial institutions
24.5%

Foreign investors
12.6%
Individuals and
other
5.0%

Securities
companies
0.6%

Company NameTokyo Century Corporation

Head Office

FUJISOFT Bldg., 3 Kanda-neribeicho, Chiyoda-ku, Tokyo 101-0022, JapanFoundedJuly 1, 1969

Paid-in CapitalCompany Representative¥34,231 million
Chairman & Co-CEO Toshihito Tamba
President & CEO Shunichi Asada

Number of Employees

5,430 (1,032 on a non-consolidated basis) (as of March 31, 2017)

Closing of Accounts

March 31

Main Banks

Mizuho Bank, Ltd.; Sumitomo Mitsui Trust Bank, Limited; Mitsubishi UFJ Trust and Banking Corporation;
The Norinchukin Bank; The Bank of Tokyo-Mitsubishi UFJ, Ltd.

Independent Auditor
Network

Ernst & Young ShinNihon LLC
Domestic:
Head Office, Sapporo, Sendai, Saitama, Yokohama, Shizuoka, Nagoya, Kanazawa, Kyoto, Osaka, Kobe,
Okayama, Hiroshima, Fukuoka
Overseas:
We operate in 37 countries in Asia, North America, Central and South America, Europe, and elsewhere

Treasury stock
1.0%

Other domestic
institutions
56.3%

Corporate Website

Stock Price and Trading Volume
Stock Price (Right Scale)

Trading Volume (Left Scale)
Stock Price (Right Scale)(Thousands of shares)

Trading Volume (Left Scale)(Yen)

10,000

5,000

8,000

4,000

6,000

3,000

4,000

2,000

2,000

1,000

0

12/4

13/3

14/3

15/3

16/3

17/4

0

Bond Ratings
Tokyo Century Corporationʼs ratings assigned by Japan Credit Rating Agency, Ltd. and Rating and Investment Information, Inc.
Credit Rating Agency

Long-term

Short-term

Japan Credit Rating Agency, Ltd. (JCR)

Rating and Investment Information, Inc. (R&I)(Long-term Issuer Rating)Rating: A+
Outlook: Stable(Issuer Rating)Rating: A
Outlook: Stable(Preliminary Rating for Bonds Registered for Issuance)
Rating: A+
Expected Issue Amount: ¥200 billion
Issue Period:
Two Years Beginning February 14, 2016

(Preliminary Rating for Bonds Registered for Issuance)
Rating: A
Expected Issue Amount: ¥200 billion
Issue Period:
Two Years Beginning February 14, 2016

(Euro Medium-Term Note Program)
Rating: A+
Maximum Outstanding Amount: Equivalent of US$2 billion(Euro Medium-Term Note Program)
Rating: A
Maximum Outstanding Amount: Equivalent of US$2 billion(Commercial Paper)
Rating: J-1
Maximum Outstanding Amount: ¥650 billion(Commercial Paper)
Rating: a-1
Maximum Outstanding Amount: ¥650 billion

View Our Corporate Movie (Message from the President & CEO)https://www.tokyocentury.co.jp/en/

Note: Each bond will be rated by each rating company upon issuance.

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Tokyo Century Corporation
FUJISOFT Bldg.,
3 Kanda-neribeicho, Chiyoda-ku,
Tokyo 101-0022, Japan
www.tokyocentury.co.jp/en/