1TOKYO CENTURY CORPORATIONINTEGRATED REPORT 2023

TC TRANSF ORMATIONAND
SUSTAINAB LEGROWTHThe Tokyo Century Group seeks to go

beyond simply responding to change inorder to transform itself to become acorporate group that brings about change.

Solutions to your Pursuits

CORPORATESLOGAN

Creating new values fromFinance × Services × Business Expertise2

3

TOKYO CENTURY CORPORATION

4INTEGRATED REPORT 2023

1Highly Specialized and Unique Financial Services
Not limiting itself to financial functions, Tokyo Century
is committed to its ongoing quest to provide financial

MANAGEMENTservices that cater to customer needs, to create high-PHILOSOPHY

Financevalue-added services tied to asset life cycles, and todevelop businesses itself.

ServicesBusinessExpertise

The Tokyo Century Group will work
alongside customers in pursuit of their growth as ahighly specialized and unique financial services

2Partnerships with Customers
Pursuing Business GrowthCustomers /Partners

Tokyo Century employees continue their boldcompany and will contribute to theefforts to deliver solutions that surpass customer
expectations and to thereby contribute to the cre-creation of an environmentally sound,ation of value and consequently to the develop-TheTokyo Century
Groupment and growth of customers’ businesses. Oursustainable economy and society.

partnership strategy is founded on the strengthof our trust-based relationships with customers,
and we intend to preserve this tradition within theCompany so that we can keep growing together
with customers.

3

Creation of an Environmentally Sound,
Sustainable Economy and Society
As a company involved in a business related tovarious assets, recycling and decarbonization areincredibly important themes for Tokyo Century as
it seeks to contribute to the creation of an environmentally sound, sustainable economy and society.
We are united in our ongoing commitment to realizing such a society in order to preserve a pristine
environment for future generations.

Asset Life CycleManagement

Environmentally
Sound, Sustainable
Economy andSociety

5TOKYO CENTURY CORPORATIONMILESTONES6

INTEGRATED REPORT 2023

Major Milestones

Tokyo Century’s History

Tokyo Century: Born of Merger ofTwo Major Leasing Companies​
Born of the merger of two major leasing companies, Tokyo Century has proceeded to transform its business portfolio to2012
Established solar power generationcompany Kyocera TCL Solar LLC asa joint venture with Kyocera
Corporation

2013
Converted Nippon Rent-A-Car
Service, Inc., and Nippon Car
Solutions Co., Ltd., into consolidated
subsidiaries

2016
Converted CSI Leasing, Inc., a leading U.S.-based leasing company,
into a consolidated subsidiary

2019
Converted Aviation Capital Group
LLC, a major U.S.-based commercial
aircraft lessor, into a consolidated
subsidiaryevolve from a leasing company to a financial services company. Our focus over the next decade will be to continue creating
high-value-added services to become an even more trusted business partner for customers and thereby evolve to become acorporate group that brings about change.

2009–

2020–

Faced with a pressing need to revise their business portfolios, the management of Century Leasing System, Inc.,and Tokyo Leasing Co., Ltd., were prompted to undertakea merger, leading to the birth of Century Tokyo Leasing
Corporation in 2009.

By bolstering its co-creative businesses with the NTT
Group, Tokyo Century is accelerating collaboration on
the fronts of digital technology, mobility, real estate,energy and environment, and global businesses.

Merger of Major Leasing Companies
Birth of Century Tokyo Leasing
CorporationCentury Leasing
System, Inc.

1969Strengths• Access to diverse business expertise of theITOCHU Group• Leasing services centered on information andcommunications technology equipment

Capital and Business AllianceAgreement with NTT
Acceleration of Partnership Strategy

2023–

Established through joint investment by ITOCHU Corporation, Dai-Ichi Bank, Ltd.
(currently Mizuho Bank, Ltd.), Nippon Life Insurance Company, andAsahi Mutual Life Insurance Company

Evolution into aCorporate Group ThatBrings About Change

Merging of Strengths of Both Companies

The Tokyo Century Group is further honing its strengths
so that it can continue growing by creating services
and businesses that engender customer trust as itseeks to become a corporate group that drives change.

Tokyo LeasingCo., Ltd.

1964Strengths• Access to vast customer network of former
The Dai-Ichi Kangyo Bank, Ltd.
• Predecessor of partnership strategy withprime customers

Established through joint investment by Nihon Kangyo Bank, Ltd. (currently Mizuho Bank, Ltd.),
Kangin Tochi-Tatemono Co., Ltd. (currently Chuo-Nittochi Co., Ltd.), andNanoh Co., Ltd. (currently Chuo-Nittochi Co., Ltd.)

2016–Change of Name to Tokyo CenturyCorporationEvolution beyond a Leasing Company
The new Tokyo Century got its start in October 2016. Witha new name and a Management Philosophy of contributing
to the creation of an environmentally sound, sustainableeconomy and society, it declared its commitment to developing a wide range of businesses as a distinctive andhighly specialized financial services company.

7TOKYO CENTURY CORPORATION

8INTEGRATED REPORT 2023

PORTFOLIOTokyo Century’s Target Portfolio

Portfolio in Fiscal 2022

Equipment Leasing

24GrowthBusiness Model Transformation and Evolution

P.9Security

Enhancement of Risk Management

P.11

Specialty Financing

46%%

FinanceEquipment leasing
Auto financing

Automobility

11Real Estate

10%
Distribution of Segment
Assets by Segment

International Business

12Finance
Expected ROA:* 3%%

Portfolio
Targeted overBusinesses
Medium toExpected ROA:* 4% or moreLong Term

Aviation32(As of March 31, 2023)%

Structured finance%

Services
Environmental Infrastructure*15Shipping%2

Expected ROA:* 4% or more%

Services / Businesses
Auto services*1 Established in fiscal 2023

Aviation, shipping, and real estate
Principal investments* Calculated as the ratio of ordinary income to segment assets

Data centers
Renewable energy generation

Ordinary Income (Loss) / ROA
Billions of yen%

Asset management

Billions of yen%Billions of yen%Billions of yen

%

50.0

2.4% 2.5

50.0

5.0

75.0

5.0

25.0

5.0

40.0

2.0

40.0

4.0

60.0

4.0

20.0

4.0

15.0

3.0

10.0

2.0

5.0

1.0

31.7

1.5

30.0

4.6%
28.0

30.0

3.0

57.4

45.0

3.0

2.3%
1.0

20.0
10.0
0

21/3

22/3

23/3

Equipment Leasing

20.0

2.0

30.0

2.0

0.5

10.0

1.0

15.0

1.0

0

0

00

21/322/3

23/3

Automobility

21/3

22/3

23/3*20Specialty Financing*2 Includes figures for energy and environment businesses that are currently
part of the Environmental Infrastructure
segment

0—5.0(0.9)
21/3

22/3

23/3*3

International Business*3 Includes valuation losses on­operational investment securities(¥18.7 billion)

0Measures for Improving ROA
Construction of portfolio comprising
mainly services and businesses withhigh levels of expected ROA
1 Improvement of value of existing businesses
2 Creation of new services and businesses

that can drive growth

3 Replacement and divestiture ofunprofitable assets

Key Tasks for Realizing Target Portfolio
1 Recruitment and development ofspecialized human resources capableof creating new business models

2 Development of services thatemploy digital technologies

3 Enhancement of risk management for

preventing and minimizing potential losses

9TOKYO CENTURY CORPORATION

Growth10

INTEGRATED REPORT 2023

BUSINESS MODEL

Business Model Transformationand Evolution
Tokyo Century will transform and evolve its two value creation cycles with the goal of developing new,highly profitable businesses.

1 Identification of Partners’ Issues
2 Merging of Financial Services

1Key Points of Transformation and Evolution of Value Creation Cycles

2

3 Business Growth through Co-Creation
4 Monitoring

Value Creation Cycle
through Partnerships

Value Creation Cycle
through Asset Value Businesses

Value Creation Cycle
through Partnerships

34
Enhancement of services that address digitaltechnology- and decarbonization-related needs

Augmentation of lineup of services that
foster understanding with regard to visionsof partners and help resolve their issues

 rovision of financial services incorporating AI, IoT,Pmobile, cloud, blockchain, and other digitaltechnologies

 trengthening of relationships with existing partners
Sand expansion of business scope throughcollaboration with new partners

 reation of financial services that contribute to theC
realization of a society centered on clean energy use reation of high-value-added services that help
C
resolve the issues faced by partners throughbusiness proposals from Tokyo Century

Diverse and highly specialized professionals
who maximize the value of assets and partners
and expand the scope of value creation

Shared Issues

Cultivation of Organizational Culture and Development of Human Resources That Bring About Change

21

Cultivation of organizational culture of boldly exploring new business fields and creating new businesses

Value Creation CycleRecruitment and development of highly specialized human resources

through Asset ValueBusinesses

Acceleration of Coordination among Operating Segments4 evelopment of frameworks enabling the five operating segments to share and utilize expertise and knowledge centered
Don newly established GX Task Force and DX Task Force reation of new business opportunities by generating synergies through merging of specialties of various operating
Csegments

3

1 Identification of Customers’ Issues
2 Provision of Assets
3 Provision of Value
4 Enhancement of Value

11TOKYO CENTURY CORPORATIONSecurity

12

INTEGRATED REPORT 2023

RISK MANAGEMENT

Enhancement of Risk Management
Medium- to Long-Term Measures
Based on Issues and DirectiveIssues and Directive Informed by Previous Medium-TermManagement Plan (Fiscal 2020–Fiscal 2022)
Issue 1

Tokyo Century aims to build resilient organizations and portfolios
by heightening its responsiveness to unforeseen events.

Response to sudden macroeconomic changes

The COVID-19 pandemic and Russia’s invasion of Ukraine resulted in massive losses centered on the aviation busi-

1. Reinforcement of investment screening and monitoring functions

ness of the Specialty Finance segment. In addition, valuation losses were recorded on certain investments in theInternational Business segment due to sudden fluctuations in the stock market.
Major impairment losses, bad debt expenses, valuation losses on operational investment
securities, etc., over three-year period
Fiscal 2020

Fiscal 2021

Of which, extraordinary losses
on aircraft associated with
Russian airlines of ¥74.8 billion

Fiscal 2022

Specialty Financing¥20.3 billion

Specialty Financing¥32.5 billion

Specialty Financing¥82.7 billion

International Business¥2.2 billion

International Business¥2.1 billion

International Business¥18.9 billion

Total¥22.5 billion

Total¥34.6 billion

Total¥101.6 billion

Approx. ¥Entrenchment andenhancement of investment
management framework

Steps are being taken to reinforce investment screening and monitoring functions to appropriately assess
investments and determine the necessity of withdrawals.

158.8 billion

Enhancement of responsivenesstoward country and global risks

Geopolitical risks and limit ratings of overseas businesses are being reassessed as part of efforts toenhance risk management in preparation for the occurrence of extreme circumstances.

2. Development of risk control framework
Issue 2

Rising cost of capital due to decreased predictability of performance

There is a tendency for our performance to become less reliable and predictable as the portion of our portfolio
accounted for by relatively high-risk businesses increases. Accordingly, there is a need for exhaustive portfolio
management with consideration for the balance of risks and returns.

Directive

Transformation of business model to ensure high profitability

By allocating management resources to services and businesses with high expected ROA, Tokyo Century willtransform its portfolio to maintain stable growth by increasing overall asset efficiency.

Strengthening of risk controls
and diversification of portfolio

Management emphasizing
cost of capital

The effective management of risk exposure associatedwith economic capital (capital use rates) is practiced,
and risk limits will be introduced for categories that
account for a large portion of our risk profile in order tostrengthen risk controls and diversify our portfolio.

The methods of managing return on invested capitalspread by operating segment are being revised so that
this spread can be used to guide revisions to portfolio
allocations as part of efforts to facilitate management
emphasizing the balance of risks and returns.