Value Creation Story

Introduction

Message from thePresident & CEO

Value Creation Story Business Strategies

Financial Strategy

Strategy to EnhanceNon-financial Capital

Governance

Data Section

Positions of Value Creation Process andMedium-term Management Plan
We have defined the Basic Management Policy as our long-term goal and medium- to long-term management direction, setting out what we aim to do to achieve Our 10-year Vision.
We have refined the Value Creation Process as a summary of how we create value for our stakeholders and then formulated the Medium-term Management Plan for FY2023 to FY2025 (“2025 MTMP”) by referring to the Value Creation Process as guidelines.

To achieve Our 10-year Vision, we will promote CX by organically combining SX and DX implemented with measures such as initiatives on ourMateriality, the use of data and digital technologies, etc., and Business Portfolio Transformation aimed at realizing an optimal portfolio.

Value Creation ProcessSX

Our Mission

DX

Business Portfolio
Transformation

CX(CX: Corporate Transformation)

Business Portfolio Transformation

SX / DXSX（Sustainability Transformation）

Our VisionAchieve co-existence and co-prosperity with environmental andsocial value and sustainable growth through initiatives forMateriality (priority key challenges) and solid corporate functions.

(1) Business strategies based on Materiality(2) Strategies to reinforce the corporate functions to makeit more resilient and able to support sustainable growth(3) Building a relationship of trust with stakeholders(improving engagement)

DX（Digital Transformation）
Achieve creation and qualitative improvement of customer value
by utilizing data and digital technologies and making strategic
investments in a customer-oriented, future-oriented manner.

Action Principles(1) Developing and acquiring DX talent(2) Developing a base for DX frameworks(3) Building frameworks for aggressive DX(4) Developing new businesses
For details, please see “Digital Strategy Initiatives” on pages 47-48.

*1 Established on April 1, 2021, Revised on May 16, 2022

Portfolio Management
Withdraw decisively from businesses that will not contribute toenhancing corporate value in the future and optimize thebusiness portfolio, thus achieving sustainable growth andenhancing medium- to long-term corporate value.
Review what our businesses should be like from a medium- tolong-term perspective and promote new investments throughstrategic allocation of management resources.
● Evolve management with recognition of capital cost to create
medium- to long-term returns.
● Pursue capital efficiency through balance sheet optimization with
an awareness of the finite nature of management resources(including capital, funds, and talent).

InputsOur 10-year Vision “Together we innovate, challenge, and explore the frontiers of the future”

Outcomes

Medium to Long-term Management Direction*2

Business activities &Corporate functions

Basic Management Policy*1

Create value through capital input and businessactivities, thus achieving the accumulation of
non-financial capital and the increase of futurefinancial capital

Medium-term Management Plan

●Evolution and layering of business models
Ⅰ Develop new businesses
ⅡShift existing businesses tohigh value-added services

Enhance profitability and efficiency ofⅢ
existing businesses

Jump
2031 Medium-term Management Plan(FYE3/2030 to FYE3/2032)

Step
2028 Medium-term Management Plan(FYE3/2027 to FYE3/2029)

Hop
2025 Medium-term Management Plan(FYE3/2024 to FYE3/2026)*2 Announced on May 16, 2022

Please refer to our website for details.
Basic Management Policy
https://www.mitsubishi-hc-capital.com/english/corporate/idea/index.html

19MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

20

Introduction

Message from the
President & CEO

Value Creation Story Business Strategies

Financial Strategy

Strategy to EnhanceNon-financial Capital

Governance

Data Section

Value Creation Process
Our value creation process shows the flow, that is, injecting capital and creating value forstakeholders through business activities, thus achieving CX and solving issues as
Materiality while accumulating non-financial capital and eventually expanding financialcapital.

Solve materiality issues

Inputs Details on page 23
FinancialBusiness activities Details on pages 23-24, 29-48

HumanCapital●●IntellectualCapital

●

●

●

Accumulation of business/
operational know-how

Capabilities to provide
services and create
solutions④Data utilization
platform services

Employee

NaturalCapital②Asset financeDiverse assets
Accumulation ofvarious data
Diverse industries,
global customer base,network●BusinessPartner

Asset base/External relationship

Diversification/
deepening of network①Customer finance

Shareholder,
Investor,
Financial
Institution

Strong collaborationbase

Details on page 26

IntellectualCapital

Improve know-how andskills and secure
diverse talent
Rewarding work
environment andorganizational culture
Encourage innovation
Use data and digitaltechnologies

Manufacturing
CapitalNaturalCapitalSocial andRelation Capital●●

Corporate Functions

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023●●

③Finance + services

Reformation of asset baseEnvironment/Society21

HumanCapitalCustomer●Social andRelation Capital●

Non-Financial

Diverse talent

Manufacturing
CapitalOutcomes Details on pages 25, 27, 28

Five Business Models⑤Asset utilization business

Talent base/know-how

Details on pages 19-20

Value creation

B

Three Elements

Non-Financial

Financial
CapitalFinancial Soundness and Stability

ACX●Shift to sustainable andresilient assets
Improve reputation withstakeholders
Deepen and diversify
our network

C

Financial

Financial
CapitalHigh-level and stable profitability and funding capacity

DX

Business portfoliotransformation

Expansion of financial capital through the accumulation of non-financial capital

SXD

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

22Introduction

Message from thePresident & CEO

Value Creation Story Business Strategies

Financial Strategy

Strategy to EnhanceNon-financial Capital

Governance

Data Section

Explanation of Each Part of the Value Creation Process
AInputs

We have organized the major factors of our important management resources, which have been injected into businessactivities, by categorizing them into financial capital and nonfinancial capital, respectively.

Financial Capital
A profit base that realizes stable growth and a sound, stable

have thus achieved stable, sustainable growth. In addition, ourfinancial foundation based on our ability to raise funds in Japan

consolidated total equity, as of March 31, 2023, amounted toand other countries are among our most important management

1,551.0 billion yen, with an equity ratio of 14.3%. We have therefore

resources. Net income for FY2022 stood at 116.2 billion yen, andsecured the equity needed to firmly maintain financial soundness

since the business integration in April 2021, our consolidated net(credit rating of A).

Five Business Models
We have classified our business models into five ones:(1) customer finance, (2) asset finance, (3) finance +services, (4) data utilization platform services, and (5)asset utilization business. We will advance the evolution
and layering of business models toward the achievementof the business portfolio transformation.

As major targets, we have set enhancing the profitability and efficiency of existing businesses, shifting
existing businesses to high value-added services, anddeveloping new businesses. We will advance the evolution and layering of business models by simultaneously
driving these three measures.

income has continued to reach a new record high every year. We

Human Capital, Intellectual Capitalcapital include our initiatives for achieving decarbonization.

These types of capital are core elements of the source of our competitive

We position these as important management resources among

advantage and the engine for the sustainable enhancement of corporate

our company-wide sustainability initiatives. We have numerous

value. In terms of human capital, we have 8,648 people (consolidated/ascustomer bases in Japan and other countries, have built portfoliosof March 31, 2023) with diverse backgrounds who have extensive(consolidated total assets: 10,726.1 billion yen as of March 31,

knowledge of specialized assets, including manufacturing equipment,2023), which are dispersed in terms of both business and region

real estate, and aircraft, and knowledge that enables us to operate

and have accumulated data related to customers, business oper-leasing and finance related to such assets, as well as service and otherations, and assets. We have an equity-owned power generation

businesses.

capacity of 1.2 GW (as of March 31, 2023) in Japan and otherin integrated risk management, credit examination, and ALM (totalsolar power, wind power, and other renewable energy sources.

management of assets and liabilities) related to leasing, investment,

We also have strong business partnerships with Mitsubishi UFJ

lending, and assets, among others, in addition to knowledge of each

Financial Group, Inc., Mitsubishi Corporation, and Hitachi, Ltd.,

asset and business domain.

in addition to our global network within the Mitsubishi HC CapitalGroup, which operates in more than 20 countries. They constitute

Manufacturing Capital, Natural Capital, Social and Relation Capital①Customer finance②Asset finance③Finance+services

Acquiring income
gains from leases,etc., consistentlyand continuouslywith leases andlending based on
customer credit

Investment andlending mainly inspecific marketable
general-purpose
assets backed by
the value ofbusiness assets.
Gains on sales ofowned assets aswell as income gain
can be acquired

Add maintenanceservices, AM *1,etc., mainly to asset
finance, and acquire
service revenue aswell as income gain
and capital gain

countries through renewable energy generation business using

a source of our competitive advantage.

ExamplesConcerning intellectual capital, we have accumulated expertise

Business
Characteristics

Non-Financial Capital

Finance leases
Vendor leases● Installment sales● Lending●●●●Operating leases
Real estate
securitization④Data utilization⑤Asset utilization

Utilize data todevelop platformbusinesses andmainly acquire
service revenue

Promote business
investment utilizing
assets, aiming tomaximize revenue
from those businesses

platform services*1 AM: Asset Management

Operating leases
with maintenanceservices● Service solutions
such as asset
management●Inventory
optimization
services utilizingdata● Sharing services
utilizing data●Important matters that are closely related to these types ofB

Business Activities

Vision of the Evolution and Layering of Business Models

Three Elements(1) Accumulation of business/operational know-how

which are sustainable and resilient enough to withstand medium- to

We will strive to enhance our business know-how and acquirelong-term changes in the operating environment. Further, we will build

operational know-how to identify changing customer needs. Fora database and work to develop a digital solution system, which willexample, for new business development or investments, we willenable efficiency improvement and the sophistication of operations,enhance the overall Groupʼs capabilities of creating and operating

and we will make full use of data.

businesses by making use of the skills and experience of our business
management human resources, which are our strengths. In addition, to(3) Diversification/deepening of network

provide value-added services, we will enhance our operational

We will build a network with diverse domestic and overseas partners,

know-how to meet the customer needs for services peripheral toincluding Mitsubishi UFJ Financial Group, Inc., Mitsubishi Corporation, andassets, such as maintenance, rental, and subscription services.

Hitachi, Ltd., to cover the entire supply chain. At the same time, we will provide services in areas that are peripheral to assets rather than only offering

23(2) Reformation of asset basefinance solutions. We will thus endeavor to deepen our relationship with

We will identify assets with low profitability and reduce, withdraw from,customers. We will also deepen our network with customers multilaterallyand rebuild such assets. At the same time, we will shift to highly

as a data platform provider that possesses and utilizes abundant data. We

profitable assets that are expected to be sought by customers. In

will also aim to evolve into a business partner that solves customersʼ issues

addition, throughout the entire supply chain, we will remake our assets

through business operations and investments related to new markets andinto those that consider environmental impact and human rights andneeds, which existing players have yet to cover.

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

Developnew businesses

Evolution and layering of business models

We have set up the initiatives we need to pursue to overcome our weaknesses while utilizing and enhancing our management resources and strengths as the three elements.

⑤④Non-FIT renewable energy
businesses● Real estate
revitalization anddevelopment
investment●●Vision of asset composition ratio④ ⑤④⑤③③①①③②

Shift existing
businesses to highvalue-addedservices②

Current②
Customer baseEnhance profitability
and efficiency ofexisting businesses*22025●Vision of profit composition ratio⑤④⑤④①Current

business③①②Current①③②2025*2 Includes restructuring and withdrawal. Actively accumulate high-profitability assets while selling and reducing low-profitability assets. Evolve into O&D business.

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

24

Introduction

COutcomes

DMessage from thePresident & CEO

Financial Strategy

Strategy to EnhanceNon-financial Capital

Governance

Data Section

Corporate Functions

Expansion of Financial Capital through the Accumulation of Non-Financial Capital

Corporate Functions Strategies

We have set themes that we should aim to address inthe future concerning five types of nonfinancial capital(human capital, intellectual capital, manufacturing capital, natural capital, and social and relation capital) so thatour value creation process will function, and the accumulation of nonfinancial capital will lead steadily to theexpansion of financial capital.

We will focus mainly on the following four corporate function strategies to support the evolution and layering of business models.

We will accumulate nonfinancial capital by implementing these initiatives, aiming to achieve an expansionof financial capital and, ultimately, the sustainableenhancement of our corporate value.

Theme to Be Addressed (Accumulation of Non-Financial Capital)

Expansion of Financial Capital through theAccumulation of Non-Financial Capital

Improve know-how and skills
and secure diverse talent

By accumulating know-how peripheral to assets
through the realization of an ideal talent portfolio,
grow our businesses and increase profitability.

Rewarding work environmentand organizational culture

Improve productivity, create new businesses that
adapt to changing external environments, andrealize a company that continues to be chosen byinternal and external talent through the continuousimprovement of employee engagement.

Human Capital

Encourage innovation

Improve profitability and accelerate growth bydeveloping a framework to encourage innovationand continuing to create new businesses.

Use data anddigital technologies

Steadily execute DX strategies to provide highvalue-added services and improve productivity, inorder to achieve our goal of expanding DX-related
new businesses and products.

Manufacturing
CapitalShift to sustainable andresilient assets

Replace with assets whose value is maintained
over the medium to long term and improve ROA toincrease the value of assets and reduce risks ofvalue being harmed.

Natural Capital

Improve reputation
with stakeholders

Improve the reputation with and trust of ourstakeholders through appropriate information
disclosure and engagement, and reduce capital
cost.

Deepen anddiversify our network

Provide high value-added services to ourcustomers and increase profitability bydiversifying and deepening our network.

Intellectual CapitalSocial andRelation Capital

MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

Enhance employee engagement by utilizing surveys, etc.
Develop a talent portfolio contributing to the achievement of management
strategies (increase the number of talent and qualitatively transform theirabilities)● Strategically disclose human capital (set goals in line with the HR strategy andcommunicate goals)●●Fostering andsecuring talent

Procure stable and competitive funds, expand funding capacity, and enhance
the ALM framework● Redevelop frameworks for credit examination and management in response tobusiness portfolio transformation● Develop optimal IT systems responding to new businesses and business models●

Bolstering the financialbase and internalorganizational basePromote Group-wide unified management by strengthening the consolidated
management framework● Enhance integrated risk management in response to business evolution andchanges● Develop a framework for unified management of internal auditing on a global basis●Strengthening thecorporate governanceframework

Enhance financial and non-financial information to be disclosed and diversify
means to dispatch information● Enhance communication with external stakeholders● Promote and strengthen efforts for sustainability (promote efforts for climatechange and human rights, enhance and communicate ESG-related information)●Enhancing stakeholder
engagement

Frameworks to Promote Transformation
To implement awareness reform aimed at transformation, we will eliminate obstacles to achieving the transformationand speedily promote various initiatives from new perspectives and not simply stay on conventional paths.

(1)“Lay” the foundationof transformation(2)“Create”
transformation(3)“Promote”
transformation

25

Value Creation Story Business Strategies

Foster all employeesʼ awareness of transformation.
●Awareness reform through the dissemination of information from the management
to all levels of employees as well as face to face communication between them

Develop frameworks so that efforts contributing to transformation
can be actively launched.
Full-fledged start of a program to seek business ideas and the intra-entrepreneurship program, which is an initiative to promote in-house venture business● Introduction of a new organizational evaluation system that encourages
transformation●

Develop an agile discussion framework and promotetransformation by advancing efficient decision-making processes
and the delegation of authority that comes with responsibility, etc.
Promotion of investment in R&D (establishment of the Innovation Investment
Fund, 10.0 billion yen)
● Promotion of the delegation of authority to front offices (decentralization)●MITSUBISHI HC CAPITAL INTEGRATED REPORT 2023

26