Fuyo Lease Group Integrated Report 2019

Fuyo Lease Group Integrated Report2019
3-3-23, Kanda-Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan
Phone: +81-3-5275-8800

https://www.fgl.co.jp/eng/dummy

For inquiries about “Integrated Report 2019,” please contact:

Creating Shared Value Promotion Office TEL: +81-3-6679-2520 E-mail: fuyo-ir@fgl.co.jp

01

Corporate Slogan

Fuyo Lease Group Integrated Report 2019

Management Philosophy
We support corporate activities through our leasing business withview to contributing to development of the society.

Go Where No One Has
Gone Before

We maintain customer's first philosophy, providing best services.
We aim to earn high marks from shareholders and markets whilepursuing creativity and innovation.
We create a challenging and rewarding workplace where
employees think and act on their own.

We believe.
Leasing is not just about lending things.
It's about lending inspiration, intelligence and a sense of wonder.

CONTENTS
We believe.

P01

Corporate Slogan

P21

Special Feature 1 Climate Change Initiatives

We embrace challenges, because they are the fountain of new business.

P02

Contents

P23

Special Feature 2 INVOICE

P03

Message from the President

P25

Business Segments Overview

We believe.

P07

Corporate History

P35

Foundation for Value Creation

Meeting expectations is our duty. Exceeding them is our profession.

P09

Introduction of Fuyo Lease GroupP41

Board Members

P11

Financial and Non-Financial Highlights

P43

Corporate GovernanceWe believe.

P13

Value Creation Story

P47

Risk Management and Compliance System

Succeeding is easy when times are good, but true partners are there even in the hard times.

P15

Materiality

P50

Independent Assurance Report

P17

Our Business

P51

Financial Section

P19

Medium-Term Management Plan

P96

Stock Information

We act.
To open up new business opportunities in this country, we will take the first bold step.

Editorial Policy

We will expand the frontier of leasing.

We are Fuyo Lease.

Our corporate slogan,“ Go where no one has gone before,” embodies the Fuyo Lease Group's mission of

Purpose of this Report

Reference Guidelines

Since FY 2018, Fuyo Lease Group has integrated its CSR Reportand A nnual Repor t into an Inte grated Repor t. T his repor t isdesigned to provide information on our financial and non-financial
activities in an integrated manner to help the readers assess theGroup's value comprehensively. We also aim to showcase thefoundation of all our activities for value creation which will help
stakeholders better understand our future corporate values.

International Integrated Reporting Framework Ver. 1.0
released by the International Integrated Reporting Council (IIRC)

Reporting Period

Note on Forward-Looking Statements

Fiscal year 2018 (April 2018 - March 2019)

This report contains forward-looking statements, such as futurep l a n s a n d s tr ate g i e s, th at a re b a s e d o n c u r re ntl y ava i l a b l e
information. These expectations and projections are subject to anumber of risks and uncertainties that could cause actual results
to dif fer materially from those anticipated. These uncer tainties
include, but are not limited to social and economic conditions,market demand and competition, laws and regulations, interest
rates, and currency exchange rates.

*The report also includes some information pertaining to fiscal 2019.

sincerely responding to customers’ needs and providing them with solutions that exceed their expectations,

Scope of Reporting

as well as our commitment to pioneering new business frontiers.

Fuyo General Lease Co.,Ltd., its 49 consolidated subsidiaries and6 affiliate companies

Date of Issuance
October, 2019

02

03

Message from the President

Fuyo Lease Group Integrated Report 2019

We aim to achieve sustainablegrowth by creating both socialand corporate value through new
businesses that respond to thechanges in society.
President & Chief Executive Officer

Yasunori Tsujita

Sustainable Growth through Frontier
Expansion
F u y o L e a s e G r o u p’s f i v e - y e a r M e d i u m - t e r mManagement Plan, Frontier Expansion 2021, is now
in its third year. For the first three years, including thisfiscal year, which marks the halfway point of the Plan,
we have been working to deliver results in our existing
businesses, including lease and finance, and expanding
our strategic areas as well as building a new businessplatform. We have been developing a framework thatallows us to grow sustainably by incorporating theconcept of zone management into business portfolio
management and working proactively to create new
business value by solving social issues. Building on theactivities carried out to date, we will pursue significant
growth in new business areas, which will enable us tofurther deploy our corporate slogan “Go where no one
has gone before” towards FY 2021, the final fiscal yearof the Plan.

Fiscal Year 2018 Review
During the FY 2018 Japan’s economy maintainedmoderate growth, due to progress in streamlining andlabor-savings through capital investments to address
labor shortages, in addition to a recovery in consumer
spending driven by improvements in employment andincome. In the leasing industry, lease transactions in
FY 2018 increased by 2.8% year-on-year to ¥5,012.9
billion (statistics provided by the Japan Leasing
Association).
Based on this background, the Group continued topost record earnings in FY 2018, following the trend
from FY 2017, with total revenue of ¥618.1 billion, up
4.7% year-on-year, and operating profit of ¥39.2 billion,
up 11.3% year-on-year. This result was mainly due
to the accumulation of assets in the Real Estate andAircraft businesses together with the conversion of
INVOICE Inc., a Business Process Outsourcing (BPO)
service provider, into a consolidated subsidiary.

04

Together with growth in the Mediumterm Management Plan’s strategicareas, new developments havestarted to appear on the horizon in thethird year.
Under the Medium-term Management Plan, Frontier
Expansion 2021, based on the concept of zone
management, we are operating our businesses
while looking towards the future in order to selectstrategic areas on which to focus (see figure on
the following page ). Zone management entails
segmenting our business operations into four zones
that are managed in different ways. More specifically,following a comprehensive assessment of factors
such as future business prospects, the Group’s
strengths, and busine ss foundations, we havepositioned the following six strategic areas of Real
Estate, Medical/Social Welfare, Energy/Environment,
Aircraft, Overseas, and New Domains as parts of theTransformation Zone (a zone in which to expand new
businesses). These six areas continue to expand
steadily as drivers of profit growth.
The most significant result achieved in the past
year is that the BPO service began to take shape asa specific strategic area of New Domains. The BPO
service is a service that processes some or all ofbusiness operations on behalf of other companies.
Through outsourcing these operations, the clientcompany can concentrate their business resources,
including employees, on high value-added core
activities in order to streamline their operations andimprove their productivity.
With the aim of enhancing our BPO services, weconverted INVOICE Inc. and NOC Outsourcing &Consulting Inc. into consolidated subsidiaries in October
2018 and August 2019, respectively. In addition to
Accretive Co., Ltd., an early payment factoring services
provider, both INVOICE Inc., an integrated billing
service provider, and NOC Outsourcing & Consulting
Inc., a back-office service provider with a wide range
of operations, joined the Group. Consequently, we
aim to establish a leading position in BPO services in
the accounting and settlement fields. While Japanesecompanies face urgent challenges including labor
shortages and responding to work-style reform, we areconfident that the Group’s BPO services can provide
solutions to these challenges.

05

Message from the President

Fuyo Lease Group Integrated Report 2019switching 100% of the electricity consumed in theGroup’s business activities to renewable energy.
A s p a r t of o u r e f f o r t s to s p r e a d r e n e w a b l eenergy, we announced the Fuyo RE Action Support
Program in June 2019, which is a new way to raise
funds through green bonds* 2 from investors whoare interested in ESG investments. The raised funds
can be used to fund companies and organizations
that participate in the 100% Renewable Electricity
Declaration RE Action, a new framework for the
100% renewable energy initiative, which small- andmedium-sized enterprises can participate in. The
significance of this program has been recognized by
the Ministry of the Environment and it was selected
as a model case for issuing green bonds. Throughthis program, we will financially support the spreadof renewable energy across the country.

Energy/ Environment is another strategic area
whe re progre s s has be e n made ove r the past
year. In the solar power business, two additional
solar power plants started commercial operation
in F Y 2018, bringing the total number of solar
power plants currently in operation to 32. Thesesolar power plants generate a total of 140 MWdcof e l e c t r i c i t y, e n o u g h to p owe r s o m e 4 0,0 0 0
households. We also plan to operate a new power
plant in Fukushima Prefecture in FY 2019, which
will be the first solar power business in a “difficultto-return zone” affected by the Great East Japan
Earthquake.
We believe that disseminating renewable energy is
our social mission. In September 2018, we became
the first Japanese general leasing company to join
RE100*1. By participating in RE100, we set a goal of

Disruptive Innovations

Our View on Creating Shared Value(CSV) to Promote Growth

Sustaining Innovations

Transformation Zone

Performance Zone

Grow new businesses

Deliver results from existing businesses

Revenue Performance

Payout period: 2 – 3 years

Energy/Environment

Strategic
Areas

Overseas

Medical/Social Welfare

AircraftReal Estate

BPO

Core Areas

Auto Leases
Domestic Corporate

Vendor Leases
FinanceGroup

Business growththrough solving social issues
CSV (Creating Shared Value)

New Domains

Accretive
INVOICENOC Group
Asset Value/
Business Value

Frontier
Expansion

Payout period: Every year

2021

Enabling Investments

New Domains
Corporate Department
Frontier
E.g. Investment in an R&D-driven
venture company

Payout period: 3 – 5 years

Incubation Zone

Productivity Zone

Develop new businesses

Boost productivity
Reference: Zone to Win: Organizing to Compete in an Age of Disruption(Written by Geoffrey A. Moore, translated by Kiyoshi Kurihara)

It is impor tant to proactive ly continue zone
management for the Group’s sustainable growth.
We will actively develop new business areas for the
future in an Incubation Zone, which we will use toestablish and secure high-performance businesses
that can capture clients and markets.
The key to achieving this goal is the conceptof CSV* 3 . CSV is about being actively involved insolving social issues and at the same time aiming forbusiness growth. Growth in the business areas of
BPO services and Energy/Environment over the past
year was achieved based on the idea of looking atsocial issues from a CSV perspective and providing
solutions to the issues through businesses.
In order to externally show our willingness to play
an active role in solving social issues, we signed the
UN Global Compact*4 in January 2018. We believethat we can capture the growing blue ocean market if
we can provide solutions that leverage our strengths
for the social issues presented in the Sustainable
Development Goals (SDGs)*5 and respond to the new
requests of society.
In April 2019, we established the Creating Shared
Value (CSV) Promotion Office and started carryingout activities that will enable these ideas to take root
across the Group. I continuously deliver messages to
employees myself on the concept of CSV, and how to
put it into practice.
We believe the ideal way for the Group to grow its
businesses is to create more profit opportunities forsustainable growth by continuing to provide solutions
to multiple social issues with the concept of CSV in
mind, like flowers that bloom and bear fruit throughout
the four seasons.

06

Towards the Long-Term Distributionof Profits to Shareholders andSustainable GrowthWith performance and management indicators taken
into account, we paid a cash dividend of ¥188 pershare for the fiscal year ended March 2019, which isan increase of ¥42 year-on-year with a payout ratioof 22.1%. For the fiscal year ending March 2020,
we forecast a cash dividend of ¥200 per share, anincrease of ¥12, with a payout ratio of 23.2%. With
the aim of promoting business strategies such as
M & A and achieving further growth, we will workon returning profits to shareholders by continuing
to pay stable dividends on a long-term basis whilestrengthening our management foundation andfinancial health by enhancing shareholders’ equity.
Typical of a non-manufacturing company, ourpeople are important assets. We have introduced
va r i o u s sys te m s th at c o ntr i b u te to wo r k-s t y l ereform in order to improve productivity and createa p l e a s a n t w o r k i n g e n v i r o n m e n t, t h u s r e t a i n
personnel. We have established a working groupwith the participation of employees to incorporate
their views into the process of building variouss y s te m s , r e s u l t i n g i n t h e i n t r o d u c t i o n o f t h estaggered hours program. In FY 2018, about halfof our employees used this program. It is crucial
to secure diverse personnel in order to respond tothe changing society. The Group focuses on inhouse employee training to develop personnel withexpertise and actively recruits from outside of thecompany.
We are commit ted to striving for continuous
grow th by expanding our business horizons in
response to the changes in society, with a focus on
leasing and financing. Under our corporate slogan,“Go where no one has gone before,” we will workto put the concept of CSV into practice and devote
ourselves to becoming a company that continues toprovide value to stakeholders.

*1 RE100: An international initiative aimed at sourcing 100% renewable energy for all business activities.
*2 Green bonds: Bonds issued by companies and organizations to fund projects that generate environmental benefits and preventing environmental pollution, including
constructing and retrofitting businesses with renewable energy and energy-saving facilities. Due to the limited usage purposes of the raised funds, green bonds clearly illustrate
the intent of funders.
*3 CSV: Creating Shared Value, a concept that aims to capture and balance both economic and social value.
*4 UN Global Compact: An international framework to achieve sustainable growth, comprising of 10 principles including approaches to environmental challenges and protecting
human rights.
*5 SDGs (Sustainable Development Goals): Goals to achieve a sustainable world advocated by the UN. The agenda includes a set of 17 goals, 169 targets and a pledge to “Leave
No One Behind.”07

Corporate History

Fuyo Lease Group Integrated Report 201908

¥ 39.2 billion

History of Fuyo Lease Group¥ 35.2 billion

The Fuyo Lease Group faces direct feedback from customers and is fully committed tocustomer support in order to resolve management issues, including those related to capital
expenditure and improving work efficiency, as well as making customers' dreams come true.
Operating assets

Ordinary profit¥ 31.4 billion¥ 32.1 billion¥ 29.2 billion¥ 27.1 billion¥ 26.4 billion¥ 26.5 billion¥ 2,262.8 billion¥ 25.4 billion¥ 23.6 billion¥ 2,172.6 billion¥ 2,047.4 billion¥ 18.3 billion¥ 17.4 billion¥ 18 billion¥ 1,867.2 billion¥ 17.9 billion¥ 16.5 billion¥ 1,730.5 billion¥ 1,599.2 billion

Listed on
the First
Section of theTokyo Stock
Exchange1969¥ 843.9 billion¥ 857.3 billion

2009/3

2010/3¥ 1,432.9 billion¥ 1,440.9 billion

2005/3

2006/3

2011/3

2012/3¥ 917.8 billion

2007/3

2008/3

Established Fuyo General Lease Co., Ltd.

Established Fuyo General Lease (USA) Inc.

In May 1969, Fuyo General Lease Co., Ltd. wasestablished with equity investments provided by
six Fuyo Group companies, including Fuji Bank
(currently Mizuho Bank, Ltd.) and Marubeni-Iida(currently Marubeni Corporation).

The Company set up its first overseas operation
w i th ex p atr i ate s t af f i n th e U S to c a ptu re th e
growing overseas leasing demand. Currently, theCompany has 12 overseas bases, including thoseof group companies, in eight countries.

1988

In 1978, the Company par ticipate d in the f irst
aircraft lease in Japan. Since then it has provided
over 300 aircraft leases.

In response to the expansion of the corporate
car leasing market, the Auto Sales Division was
separated from the Company to form Fuyo Auto
Lease Co., Ltd.

2013/3

2014/3

2015/3

2016/3

2008

Sharp Finance Co., Ltd. of fers a wide range ofservices to both corporate and individual customers.
Sharp Finance is one of the leading players in thevendor leasing market.

1996

Fuyo Lease Sales Co., Ltd. was established with thegoal of providing enhanced handling of administrative
work and processing of returned assets on behalf ofcustomers when their leases expire.

2018

Started commercial operation of solar
power plants

2012

Launched building leases

2000

The Company started to provide building leases in
response to a growing demand for building leases
from retail customers with multi-store operation.

2017
2004

Listed on the First Section of the Tokyo
Stock Exchange

The Company launched a solar power generation
business in response to increasing demand forrenewable energy. As of the end of FY 2018, theCompany supplied enough renewable energy to
power approximately 40,000 households from its 32
power plants located throughout Japan.

Made Accretive Co., Ltd. a consolidated
subsidiary
Accretive Co., Ltd. became a consolidated subsidiary
to expand the financing segment. Accretive provides
convenient financial services including factoring
services for businesses, medical institutions, andelderly nursing-care providers.

2017/3

2018/3

2019/3

Made INVOICE Inc. a consolidated
subsidiary

Made Sharp Finance Co., Ltd. a consolidated
subsidiary

Established Fuyo Lease Sales Co., Ltd.

Established Fuyo Auto Lease Co., Ltd.

1987

¥ 1,407.4 billion¥ 1,166.3 billion

Launched aircraft leases

1978¥ 1,423.5 billion¥ 1,495.9 billion

2019

INVOICE Inc. became a consolidated subsidiary.
INVOICE offers business process outsourcing (BPO)
services, such as integrated billing services, which
help customers save labor and increase the efficiencyof their operations.

Made NOC Outsourcing & Consulting Inc. a
consolidated subsidiary
To stre ngthe n its BPO se r v ice s, the Compa ny
acquired NOC Outsourcing & Consulting Inc. asa consolidated subsidiar y. NOC Outsourcing &Consulting of fers a wide range of outsourcing
services and highly specialized business consultancy
se r v ic e s. C o m b in e d w i th th e G rou p's ex isting
resources, NOC Outsourcing & Consulting provides
high-quality BPO services and supports customers
to increase productivity and transition to high valueadded operations.

09

Introduction of Fuyo Lease Group

Fuyo Lease Group Integrated Report 2019

Overview of Fuyo Lease Group

Fuyo General Lease Co., Ltd.
Domestic Group Companies
Sharp Finance Co., Ltd.

Fuyo Auto Lease Co., Ltd.

Accretive Co., Ltd.

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

Fuyo Auto Lease streamlines complicatedoperations relating to customers' vehicles
and provides total support for rationalizing
management.

Accretive provides highly convenient financial
services, focusing mainly on factoring businessfor medical and nursing-care receivables.

Fuyo Network Service Co., Ltd.

Fuyo Lease Sales Co., Ltd.

FUJITA Co., Ltd.

Fuyo Network Service sells ICT equipment andsoftware, offers technical services, including
kitting, making various settings, building, anderasing data as well as reselling second-handPCs.

Fuyo Lease Sales handles all of the clericaltasks for leased assets after their leases expire,as well as sales of used assets. It also buys andsells customer-owned used assets.

F UJ I TA s p e c i a l i ze s i n re p l a c i n g m e d i c a lequipment in addition to buying and removing
second-hand medical equipment. FUJITA also
assists hospitals and clinics close medical
practices.

FGL Aircraft Ireland Limited

FGL Service Co., Ltd.

Aqua Art Co., Ltd.

INVOICE Inc.

Aircraft Leasing and Management Limited

At the headquar ters of Fuyo Lease, FGL
Ser vice handles the various administrative
functions of the Fuyo Lease Group and thenon-life insurance agency business.

Aq u a A r t o p e rate s a re nta l bu s in e s s fo r
tropical fish tanks, which replicate the naturalenvironment. Aquariums with tropical fish
and aquatic plants are of fered under acomprehensive maintenance system.

I N V O I C E ’s o f f e r i n g s i n c l u d e b u s i n e s scustomers combined billing services that help
reduce costs and improve productivity, andInternet services for residential buildings forindividual customers.

NOC Outsourcing & Consulting Inc.

Yokogawa Rental & Lease Co., Ltd.

Nihon Credit Lease Corporation

NOC Outsourcing & Consulting Inc. offers highquality business process outsourcing (BPO)
services to customers. The Company provides
customers with suppor t to increase theirwork efficiency and to reduce costs in humanresources, accounting, administrative, backoffice, and IT operations.

Yokogawa Rental & Lease, a joint venturewith Yokogawa Electric Corporation, offers
multi-vendor rental services for measuring
instruments and IT equipment. Because it is
one of the companies with the largest stockof equipment in the industry, it can respondquickly to the needs of customers.

Nihon Cre dit Le ase, a joint ve nture w ith
Nichiigakkan Co., Ltd., leases nursing careequipment such as wheelchairs and electricbeds.

Fuyo General Lease (USA) Inc.

Fuyo General Lease (China) Co., Ltd.

Fuyo General Lease (HK) Limited

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

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

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

Fuyo General Lease (Asia) Pte. Ltd.

FGL Aircraft Ireland Limited

Aircraft Leasing and Management Limited

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

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

Aircraf t Leasing and Management Limited
provides comprehensive aircraf t ser vices
including aircraf t lease marketing, aircraf t
management, post-lease aircraft sales, andadvisory services.

TDF Group Inc.

Pacific Rim Capital, Inc.

Based in Canada, TDF Group Inc. engages inrental, leasing, and sales of pickup trucks inNorth America.

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

Domestic Group Companies

Overseas Group Companies

Sharp Finance Co., Ltd.

Fuyo General Lease (USA) Inc.

Fuyo Auto Lease Co., Ltd.

Fuyo General Lease (China) Co., Ltd.

Accretive Co., Ltd.

Fuyo General Lease (HK) Limited

Fuyo Network Service Co., Ltd.
Fuyo Lease Sales Co., Ltd.
FUJITA Co., Ltd.

Fuyo General Lease (Asia) Pte. Ltd.

FGL Service Co., Ltd.

TDF Group Inc.

Aqua Art Co., Ltd.
Pacific Rim Capital, Inc.
INVOICE Inc.
NOC Outsourcing & Consulting Inc.
Yokogawa Rental & Lease Co., Ltd.
Nihon Credit Lease Corporation

Overview of Fuyo General Lease Co., Ltd.
Company name

Fuyo General Lease Co., Ltd.

Headquarters

3-3-23, Kanda-Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan

EstablishedMay 1, 1969

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

Shares listed on

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

Number of
employees

Consolidated : 1,960 / Non-consolidated : 704 (as of March 31, 2019)

Operation

Domestic : Head office sales department and 17 regional sales offices (non-consolidated)
16 domestic group companies and 11 overseas group companies

Line of businessLeasing and installment sales of IT equipment, office equipment, industrial machinery/machine tools, commercial /ser vice equipment, medical devices, transpor tationequipment (ships, aircrafts, automobiles, etc.), civil engineering and construction
machinery, etc.
Commercial loans and other financial services
Leasing of real estates
Consultative services, etc.

Overseas Group Companies

10

11

Financial and Non-Financial Highlights

Financial Highlights

Non-Financial Highlights

Total Revenue

Ordinary Profit/Profit Attributable to Owners of Parent

618.1

Total
revenue

Ordinary profit
billion yen (+4.7% year on year)

Profit attributable toowners of parent

39.2
25.7

Ordinary profit (Left axis)(Billions of yen)

Leases750

Installment sales(Billions of yen)

Financing and other

625

590.3
472.3

375

507.2

493.8
20.0
53.8

18.5
65.2

billion yen (+17.1% year on year)(t-CO 2 )

10.0

2,500

10.1%

CO2 emission intensity (Right axis)

Solar power generated

Power supplied

CO2 reduction(output)

Equivalent to approximately(estimation)

140

40

(t-CO 2 /100 millions of yen)

7.4%

38.2

8.0

30

2,000

1,937
0.37

29.2

31.4

6.0

26.5

0.33

1,500

(MWdc)

250

21.9

0.4

200

828

0.3

150

125

4.0

324

1,000

307

311

479.6

10

2.0

319

328

500
963

0

0
2015/3

2016/32017/3

2018/3

CO2 reduction by solar power generation (t-CO2, estimation)0

2019/3

2015/3

Total revenue increased by 4.7% year on year to 618.1 billion
yen due to INVOICE Inc. becoming a consolidated subsidiaryin October 2018 and contributing to the strengthening of the
BPO business.

2016/32017/3

2018/375,00060,00045,99744,2160.2

2015/3

2016/32017/3

50

0

0

851

0

2019/3

Both ordinary profit and profit attributable to owners of parent
hit record highs for the second year in a row due to growing
revenues from leases, including real estate leases, and thepositive effects from the consolidation of INVOICE Inc.

927

964

905

0.1

2018/340,41230,091100
15,66330,000102
77

48

45,000

140

758

14.2
511.2

Energy supply when converted into a number of households (Right axis) (Households)

0.33

0.31

25.7
20.0

t-CO 2

0.36

17.5
423.2

70,242
70,242

39.2

250
420.0

households*

Clean energy supply (output) (Left axis)

0.5

35.2

20

388.6

40,000

MWdc

9.2%

100.4

21.7
62.3

Fuyo General Lease
Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales,
FGL Service and Aqua Art
Sharp Finance and Accretive

8.6%

618.1

30.0
49.1

CO2 emissions (Scope 1, 2) (Left axis)

Profit attributable to owners of parent (Left axis)
ROE (Right axis)(%)

50

Solar Power Generated (output) /Power Supplied/
CO2 Reduction (estimation)

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

billion yen (+11.3% year on year)

9.2%

500

12

Fuyo Lease Group Integrated Report 201977
23,022

29,902

15,00023,022

13,917

2019/3

Both CO2 emissions and CO2 emission intensity rose as additional
companies joined the Fuyo Lease Group during the fiscal year that
ended on March 2018. During the fiscal year that ended on March
2019, the Group's implementation of energy efficiency initiatives led
to reductions in both CO2 emissions and CO2 emission intensity.

0
2015/3

2016/32017/3

2018/3

2019/3The solar power generation business made steady progress.
In FY 2018, two new solar power plants became operational,
and the total output reached 140 MWdc.
* Calculated at 3,600 kWh per household.

* Sharp Finance and Accretive were added after the fiscal year ended March 2018.

Operating Assets/ROA
OperatingassetsROA

2,262.8
1.77(+4.2% from the end of(+0.10 points from the endof previous FY)

Leases (Left axis)

Installment sales (Left axis)

Financing and other (Left axis)

2,500

ROA (Right axis)

2,047.4

2,000
1,730.5
419.1

1,867.2
494.4

1.59

134.8

127.9

602.0

1.77

1,176.5200

96.0

1,369.8

2016/32017/3

Number of employees(consolidated)

Payout ratio (Right axis)

(%)

2,000

20.0

1,600

15.0

1,200

10.0

800

5.0

400

0

0

Employees

1,960

1.8

160

19.6%

1.6

20.1%

22.1%

1,715

1,564.8

2018/3

employees (10.9%)

Employee Satisfaction Survey (consolidated)
Job satisfaction*

1,599

87.3

146

17.3%
130

120

1,703
1,542

1.4

80

1.2

40

1.0

0

2019/3Operating assets rose by 4.2% from the end of the previous
fiscal year to 2,262.8 billion yen while ROA increased by 0.1
points from the end of the previous fiscal year to 1.77%. This
uptick was the result of an increase of assets in strategicareas, including real estate and aircraft operating leases aswell as the operation of mega solar systems.

80

2015/3

2016/32017/3

2018/3

2019/3

Both the annual dividend and the payout ratio continue to risesteadily. It is our fundamental policy to distribute our profits toshareholders by continuing to pay stable dividends on a longterm basis.

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

100

1,474.4

36

Number of employees (consolidated)(Employees)

25.0

1,960

188

128.8

1,244.0yen%Annual dividends (Left axis)

17.0%

0
2015/3

(Yen)

1.67

1.60
115.1

1,000

500

(%)

Number of Female Managers (non-consolidated)(Percentage of female employees holding managerial positions)

2,262.8

2,172.6
583.1

549.7

1.62

Payout ratio

2.0

Number of Employees (consolidated)

188
22.1

Annual dividends

billion yen previous FY)%(Billions of yen)

1,500

Annual Dividends/Payout Ratio

Percentage of Outside Directors and Outside
Corporate Auditors (non-consolidated)

2015/3

2016/32017/3

2018/3

2019/3The number of employees continues to increase as the Group
expands. As we work to enhance the value of our corporategroup, we focus on developing human resources with anemphasis on making our company a better workplace sothat all of our employees can realize their full potential as theyhone their professional skills.

38.5(Five out of 13 directors and corporate
auditors are outside directors and% outside corporate auditors.)

13

Value Creation Story

Fuyo Lease Group Integrated Report 2019

Value Creation Story
The Fuyo Lease Group finds risks and opportunities from social changes and issues, and ismotivated to solve the issues by providing various solutions. Drawing on our distinctive resources
and strengths, our group's value creation story aims to go beyond our stakeholders' expectations
by increasing our corporate value and creating sustainable value in the society.

Consolidated
Management Goals(FY ended Mar. 2019)

FY 2018 Actual

FY 2019 Interim Target(FY ending Mar. 2020)(FY ending Mar. 2022)

Operating assets¥2,262.8 bn¥2,300.0-2,400.0 bn¥2,500.0 bn

Ordinary profit¥39.2 bn¥42.0 bn¥50.0 bn

1.77%

1.7-1.8%

2.0%

ROA

(Ordinary profit on operating assets)

Business Achievements

FY 2021 Target

Contribution to Solutions

Fuyo Lease Group’sCore Businesses
Resources and Strengths

Operating assets for building leasing

Strategic Areas

Real Estate

Changes and Issues in Society

Socialenvironment
Diversification in values
Adapting to technologicalinnovations
Development of an
information society
Declining birthrate andaging population

Extensive domestic andoverseas network
16 domestic companies and112 business locations
11 overseas companies and
12 business locations in 8
countries

Human capital
Diversity of human resources

Real Estate

Medical/Social Welfare

P.25

P.27

Fluidization and multi-polarizationof the world economy
Changes in the interest rateenvironment
Progression of corporate
globalization
Changes in accounting
standards
Increase in demand frominbound travelers

Naturalenvironment
Intensification of climate change
More frequent natural disasters
Acceleration of resource
depletion

Solar power
generation

32

Outputlocations
nationwide

140

MWdc

Operating assets for Aircraft leasing

Energy/Environment¥149.8 billion

P.29¥99.9 billion*

1

Accretive’s operating assets
BPO

Overseas

BPO

P.31

¥21.9 billion

P.32

New Domains
P.32

New
Domains

Acquired INVOICE Inc. as a subsidiary
Invested in Exergy Power Systems, Inc.,
MerryBiz Inc., and NExT-e Solutions Inc.

Financial capital
Stable financial base andcore capitalCore Areas
Domestic
Corporate

Net assets: ¥295.1 billion

Finance

VendorLeasesAuto Leases

Intellectual capital
Highly specialized expertiseand extensive know-how
Strong information systems

Operating assets for leasing

Domestic
Corporate
P.33

Finance
P.33¥1,564.8 billion*

Resources and environmentthat support business activities

P.34

Auto Leases
P.34

2

Operating assets for financing¥573.7 billion*

Natural capital

Vender Leases

Promoting healthand wellbeing

Developing safeand livable cities
and providing
transportation

Achieving economic
growth andfulfilling work
Optimizing operating
efficiency and costs

Contributing to
the creation of acircular society

Diversity andwork-style reform

Paving the way forinnovation

Development oflocal economies

Overseas operating assets

P.30
Overseas¥2,262.8 billion

Responding toclimate change
issues andrenewable energy

Aircraft

Manufactured capital
Operating assets that form
the foundations for creating
added value
Operating assets:¥74.5 billion

Energy/Environment

Aircraft

1,960 Group employees
Economic
environment

Operating assets for Medical/Social Welfare

Medical/Social
WelfareSocial and relationship capital¥421.9 billion

2*1 Operating assets of overseas subsidiaries (excluding aircraft leases)
plus investments in overseas affiliate businesses*2 Operating assets of the entire Fuyo Lease Group

14

15

Materiality

Fuyo Lease Group Integrated Report 2019

Materiality

Materiality for Fuyo Lease GroupIn order to realize a sustainable society, the Fuyo Lease Group has identified issues to be solved through the Group's businesses as

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

TEP

S

TEP

S

S

TEP

TEP

1

2

3

4

Identifying Issues

Assessing Materiality
from the Stakeholders’
Point of View

Assessing Materiality for
our Business Operations

Identifying Priority Issues

B a s e d o n th e S D G s a n d ESG
indexes, we identify issues which
could influence our Group.

We assessed materiality of theissues identified in Step 1 from theviewpoint of investors and otherstakeholders.

We assessed materialit y of
the issues identif ied in Step 1
considering our business basedon our Medium-term Management
Plan, Code of Corporate Conductand other guidelines.

Following Steps 2 and 3, we
i d e n ti f i e d p r i o r i t y i s s u e s. To p
management approved theidentified priority issues.

Areas where the levelof materiality is high forstakeholders, but is limited
for our Group

Materiality for stakeholders

S

Material Issues (important issues to be addressed), taking into consideration their impacts on society and stakeholders with reference
to the SDGs proposed by the United Nations. We will contribute to creating a prosperous and sustainable society by enhancing
shared values between society and companies through our efforts along with identified Materiality.

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

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

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

Materiality for our businesses

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

Material Issues(Materiality)

Themes of Initiatives

FY 2018 Results

Targets

Supplying clean energy through the solar power
generation business

140MWdc

FY 2021 target: 200MWdc

Estimated CO2 reduction 70,242 t-CO2 [FY 2018]

Setting targets and promoting the use of renewable energy
in business operations

Participated in RE100
Started reviewing utilization of renewableenergy2030 target: 50%
2050 target: 100%

Promoting the use of renewable energy through showcasing customer’s
experiences

Providing financial services to companies participating in“the 100% Renewable Electricity Declaration RE Action”-

Operating assets of the Energy/Environment businesses(excluding solar power generation business)¥24.6 billion

FY 2021 target: ¥36 billion

Promoting renewable energy and energy saving

Promote cutting-edge renewable energy-related technologies

Offering support to renewable energy-related technology
venture companies

Invested in Exergy Power Systems [June2018] and NExT-e Solutions [March 2019]

Offering support for selling and providing
services for new technologies andproducts

Disseminating advanced renewable energy-related technologies*See Business Segments Overview (P.29)

Expand access of medical, elderly nursing-care, and welfare services

Operating assets of Medical/Social Welfare businesses¥74.5 billion

FY 2021 target: ¥80 billion

Improving both the quantity and quality of medical, elderly nursing-care,and welfare services

Support medical institutions with their management

Balance of factoring for medical and nursing-carereceivables (balance of FPS Medical by Accretive)¥10.4 billion

FY 2021 target: ¥25 billion

Helping medical institutions to achieve financial stability by meeting theirfunding needs

Promote cutting-edge healthcare technologies

Offering support to medical venture companies

Acquired FUJITA as a subsidiary

FY 2019 results: Invested in Japanese
Organization for Medical Device
Development

Disseminating advanced medical technologies*See Business Segments Overview (P.27)

Promote environmentally-friendly urban scape and residential space

Operating assets of real estate leases (Hotels, leisure andservice facilities, commercial facilities, distribution facilities, etc.)¥421.9 billion

FY 2021 target: ¥480 billion

Supplying environmentally-friendly assets

Contribute to expanding the volume of safe, inexpensive, and fasttransportation

Number of aircraft owned by the Group35

FY 2021 target: 70

Transportation capacity: 8.8 million people*2 per year [FY 2018]

Support corporate activities through leasing business, contribution tosocial development

Operating assets¥2,262.8 billion

FY 2021 target: ¥2,500 billion

Providing right-to-use and/or possessory rights to customers through leases,
and outsourcing of processes and procedures associated with ownership

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

Expansion of BPO business

Acquired INVOICE as a subsidiary
Collaborated with MerryBiz

FY 2019 results: Acquired NOC
Outsourcing & Consulting as a subsidiary
Building of the BPO promotion system

Assisting customers to improve productivity and to shift to high-value
added business operations

Promote 3Rs (reduce, reuse, and recycle) for leased assets after the endof their lease period

Reuse and recycle rate for returned PC

100%

FY 2019 target: 95% or more

Reducing waste and promoting a circular society

Reduce the impact on the environment through proper waste disposal

Proper disposal of industrial waste

Proper disposal of all waste

Same as column to the left

Reducing our environmental impact by ensuring proper disposal of waste

Improve work-style to pursue efficiency and productivity

Rate of taking annual paid leave (non-consolidated)

68.4%

FY 2021 target: 80%

Improving work-style to pursue efficiency and productivity

Promote work-life balance

Platinum Kurumin certification (non-consolidated)

Empower women in workplaces and develop human resources withdiverse strengths

Number of female managers (non-consolidated)

36

FY 2021 target: 40

Ensuring that female employees can realize their full potential in theworkplaceRate of job satisfaction*1 (consolidated)

87.3%

Steady improvement

Increasing productivity and added value by enhancing job satisfaction

Expand supply of renewable energy
Convert power consumed by the Fuyo Lease Group into renewable energy

Responding to climatechange issues andrenewable energy

Promoting health andwellbeing

Developing safe andlivable cities andproviding transportation
Achieving economic
growth andfulfilling work
Contributing to thecreation of a circularsociety

Diversity andwork-style reform

Contributing to society and the environment(outcome)

Results and plan (output)

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

Improve job satisfaction

Relevant
SDGs

FY 2019 target: Starting service provision Providing financial services to companies participating in the RE Action infor “the Fuyo RE Action Support Program”
support of their renewable energy initiatives

Creating a work environment where employees can keep a goodwork-life balance and supporting the development of the next
generation of workers

Maintained Certification*1 Percentage of employees who rated 4 or above (on a scale of 1 to 5) for at least one job satisfaction question out of 6 in the Employee Satisfaction Survey*2 Calculated independently from the breakdown of aircraft possessed and figures published by aircraft manufacturers, etc

16

17

Our BusinessFuyo Lease Group Integrated Report 2019

Leasing and Installment Sales

Financing and Other

Developments in FY 2018

We offered a range of real estate leases fora variety of buildings including hotels andnursing homes for the elderly. Additionally,
we developed new business par tners foraircraf t le ase custome r s mainly in Asia nmarkets and increased the number of aircraft
we own.
We a r e s te a d i l y i n c r e a s i n g p r o f i t s b yacquiring highly profitable operating assets.

(Billions of yen)

2,500

Developments in FY 2018

(Billions of yen)
Executed contract volume (Left axis)
Operating assets (Left axis)
Gross profit (Right axis)
50

2,000

40.4

38.0

34.9

1,500

1,497.7

1,372.8

1,311.4

43.6

43.5

1,589.5

1,660.8

1,000
500

40
30
20

467.0

512.4

613.5

586.1

562.9

0

10
0

2015/3

2016/32017/3

2018/3

2019/3In the Financing business segment, both
operating assets and profits increased asa re sult of our commitme nt to acquir ing
p rof i ta b l e a s s ets. In th e O th e r bu s in e s ssegment, both sales and profits increased
significantly due to the addition of INVOICE's
non-asset business following its acquisition
as a consolidated subsidiary.
Fur thermore, two new solar power
plants have commenced their commercial
operations.

Major Business Operations(Billions of yen)
Executed contract volume (Left axis)
Operating assets (Left axis)
Gross profit (Right axis)
25(Billions of yen)

1,000

23.2

800

20

600

16.9
583.1

14.9
13.2

13.7

400

419.1

200

200.0

549.7

494.4

624.3 602.0

491.6

15
10

248.0

191.4

5

0

0
2015/3

2016/32017/3

2018/3

2019/3Major Business Operations
FinancingMore information: P.33

More information: P.33

More information: P.33

More information: P.27 and P.32

Finance Leases

Operating Leases

Installment Sales

Financing Programs

Factoring

We p r o v i d e f i n a n c e l e a s e s w h e r e w e b u ymachinery or equipment the client needs and rent
it to them for a relatively long-term at a fixed rate.

We provide operating leases where the asset isleased at a rate calculated on the basis of “thevalue of the asset minus the residual estimatedvalue” at the end of the lease.

An installment sale is an arrangement where webuy machinery or equipment on behalf of ourclients who will pay us back in installments overan extended period of time. We offer installment
sales when the client wants to acquire an asset
that is not suitable for leasing due to tax reasonsor simply when the client wants to own an asset.

If a client is looking to invest in equipment or liquidate, acquire, ordevelop real estate, we offer financing programs, such as nonrecourse
loans, to help fulfill their capital needs.

Factoring is a service where we buy clients' receivable accounts to
help them meet their immediate cash needs. Accretive offers Flexible
Payment Service (FPS), a factoring service for accounts receivable,
and FPS Medical, a factoring service for medical and nursing-carereceivables.

More information: P.25

More information: P.34

Real Estate Leases

Aircraft Leases

A real estate lease is an arrangement where
we lease a building we own that is located on
our land to a customer through a fixed-termcommercial leasehold contract. We have anumber of buildings available for lease that canbe used for a variety of purposes, including
shopping centers, roadside shops, hotels, officebuildings, distribution centers, and nursing
homes for the elderly.

An aircraf t lease is an aircraf t leasingarrangement for airlines. Since participating inJapan's first “Samurai Lease” for British Airways
in 1978, we have provided leasing arrangements
for more than 300 aircraft.

More information: P.30

BPO service is a service that processes some or all ofbusiness operations on behalf of other companies by using
specialized skills and know-how.

Auto Leases

A vendor lease is a leasing arrangement where
we provide support to the vendors of office,information, medical, and other equipment andmachinery. By leveraging the know-how andexperience that Sharp Finance has acquired
over the years, we provide robust suppor t
for vendors' sales activities at over 50 sales
locations throughout Japan.

Fuyo Auto Lease provides total vehicle services
that include vehicle procurement, tax returns
and payments, insurance claims and payments,and vehicle maintenance and inspections.

Fuyo Lease Group’s
BPO Services

Bookkeeping andjournalizing (Accretive)

Integrated billing services

Collection agency services(INVOICE)(Sharp Finance)

Comprehensive
outsourcing services

Accounting services(NOC Group)

More information: P.32

Vendor Leases

More information: P.34

Business Process Outsourcing(BPO) Services(MerryBiz*)*A Capital and business alliance partner

Solar Power Generation Business
As of end FY 2018, we have 32 solar power plants that are in operation. Our total renewable energy output reached 140 MWdc, andwe supply enough renewable energy to meet the power consumption demands of approximately 40,000 households.

More information: P.29

18

19

Medium-Term Management Plan

Fuyo Lease Group Integrated Report 201920

Medium-Term Management Plan (FY2017-FY2021)

Frontier Expansion 2021:“Go where no one has gone before”

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

Target Performance
Indicators

Operating Assets

2,172.6 billion yen

2,262.8 billion yen

Interim Goal

Target Value

2,300.02,400.0 billion yen

2,500.0 billion yen
2.0%

1.7-1.8%

1.77%

1.67%

Ordinary Profit
ROA

50

42

39.2

35.2

billion yen

billion yen

billion yen*1

2018/3

2019/32020/3billion yen

2021/3

Frontier Expansion 2021 is comprised of a business strategy centered on the business promotion side and of amanagement strategy centered on bolstering the management foundation that supports the business strategy.
Business Strategy

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

Overview ofStrategies and
Goals

Selection and Concentration in Strategic Areas

After establishing six Strategic Areas and four Core Areas of focus, we have formulated individual strategies
and policies in the focus Areas.
Strategic Areas

Core Areas

Areas positioned as growth drivers and designated for concentration ofmanagement resources

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

Real Estate

Medical/Social
WelfareEnergy/Environment

Aircraft

Overseas

New
Domains

Domestic
Corporate

Finance

VendorLeasesAuto Leases

Management Strategy The following have been established as strategies to strengthen the management foundation that supports

the execution of business strategies.

Bolster ability to address new risks in conjunction with the frontier expansion
Strengthen corporate functions and boost productivity
Enhance the governance system in order to demonstrate Fuyo Lease Group’s capabilities

Three Strategic Axes

2022/3

Keeping our focus concentrated on the three Strategic Axes of our business and management strategies, we
aim to achieve the targets set in Frontier Expansion 2021.
1 Selection and Concentration in
Business Strategy

RealMedical/Energy/Estate Social Welfare Environment Aircraft

Strategic Areas

Strategic Areas

BPO

Overseas

New Domains

Selection and Concentration in Strategic Areas
Three
Strategic Challenge the Frontier
Axes
Pursue Group Synergies

Following a comprehensive evaluation of factors
such as future business prospects as well as theGroup’s strengths and business foundation, we
have set six areas as Strategic Areas that we can
expect most promising growth.

Results in FY 2018
Core Areas

Domestic Corporate / Finance / Vendor Leases / Auto Leases

Management Strategy*2*1 Earnings forecast in FY 2019 (ending March 31, 2020) (Initial target: ¥38 billion to ¥42 billion)*2 Strategies to strengthen the management foundation which supports the execution of business strategies

Changes to operating assets in strategic areas(Billions of yen)

1,200

30
24

600
497.3

300

0
Results

66.9
84.1
31.0
75.1

66.3
93.4
39.3
97.6

658.6

80.0

30

120.0

76.0
110.0
57.0

70.0

20

280.0

210.0

149.8

10

Real Estate (Left axis)
Aircraft (Left axis)
Energy/Environment (Left axis)
Overseas (Left axis)
Medical/Social Welfare (Left axis)
Proportion of strategic areas tooperating assets (Right axis)

480.0

440.0

421.9

362.0

240.2

74.5
99.9
54.0

40

1,030.0

893.0
800.1

41

37

35

900

(%)

0
2017/3

2018/3

2019/32020/32021/32022/3

Planned/Estimated

In our Real Estate operations, real estateleases, including hotel leases, and theacquisition of large buildings and residentialbuildings contributed to an increase inoperating assets.
In our Energy/Environment operations, two
new large-scale solar power plants became
operational and the construction of theGroup's largest solar power plant to date
was started.
In our Aircraft operations, operating assets
increased as we attracted new customers
mainly in Asian markets and increased thenumber of aircraft in our fleet.
In our Overseas operations, we invested in aleasing company that is involved in operatingleases of material handling equipment(MHE) *3 in North America to strengthen ourbusiness foundation in the region. We also
provided expatriate staff to the Singaporean
subsidiary to enhance our sales network.

2 Challenge the Frontier

3 Pursue Group Synergies

One of our core efforts in terms of entering new
businesses and expanding our business domain
is to plant new business seeds, cultivate them,and have them bear fruit during the Mediumterm Management Plan period. Throughbusinesses focusing on asset value risk-taking,which is a unique area of expertise for us as aleasing company, as well as businesses relying
on business value for further expansion of thefrontier, we will advance our highly-competitive
businesses that go beyond our conventionalframework of relying on corporate risk, andbuild a foundation for improving profit-earning
capabilities and achieving sustainable growth.

Group companies will do more to utilize thec a p a b i l i t i e s o f o t h e r g r o u p c o m p a n i e s to
s o l ve c u s to m e r s’ p ro b l e m s o r a p p l y t h e i r
own capabilities on customers of other groupcompanies to ensure effective and efficient sales.
In particular, we will drastically boost our businessperformance by linking the capabilities and thecustomer bases of Fuyo Lease, which excels
in business with large companies, with Sharp
Finance, which is centered on the retail side,and Accretive, which links large companies withsmall- and medium-sized companies through its
factoring platform.

Results in FY 2018

In our Medical/Social Welfare operations,the Healthcare Advisor y Of fice, which
was established in August 2018 and iscurrently known as the Healthcare Advisory
Division, started to offer advisory services
to medical corporations. The Division
p rov id e s a w id e ra ng e of se r v ic e s inpartnership with other group companies,
including factoring for medical receivables
and buying and disposing of pre-owned
medical equipment.

Results in FY 2018

We acquired INVOICE Inc. as a consolidated
subsidiary to improve our BPO services.
In our Energy/Environment operations,
we entered into capital and businessalliances with companies that have uniquerechargeable battery technologies (Exergy
Power Systems and NExT-e Solutions). We
are working with these companies in thefield of rechargeable batteries for whichstrong demand is expected in the future.

*3 Material handling equipment (MHE): equipment suchas forklift trucks used at distribution centers.

In our New Domains operations, the BPO
Service Promotion Division was establishedin April 2019 to provide BPO services tailoredto our customers' needs, such as integrated
billing se r v ic e s, outsourc e d pay me nt
services, and bookkeeping and journalizing.

Key Performance Indicators and Progress
We have set performance targets for operating assets, returnon assets (ROA), and ordinary profit for the fiscal year ending
March 31, 2022, the final year of the current five-year Mediumterm Management Plan, in addition to the interim targets set
for the fiscal year ending March 31, 2020, the Plan’s thirdyear. During the fiscal year ended March 2019, which was thesecond year of the Plan, both sales and profits hit record highs
for the second year in a row, due to an increase in operating
assets in strategic areas, including real estate and aircraft
assets, and the acquisition of INVOICE Inc. as a consolidated
subsidiary. We will continue to move ahead with our business
operations with the aim of achieving our set targets.

Long-Term Approach
We se e Cre ating Sha re d Va lu e ( CSV ) a s one of ourmanagement decision criteria. By putting our corporate slogan
of “Go where no one has gone before” into practice, we arecommitted to contributing to the building of a sustainable
society and increasing our corporate value, with the focus on
the lease and financing business.

21

Special Feature 1 Climate Change Initiatives

SpecialFeatureFuyo Lease Group Integrated Report 2019

1 Contributing to a Sustainable
Society by Promoting the
Spread of Renewable Energy

Rising Awareness of Climate Change and the Role of Business
Today, the impacts of climate change, including
ex treme weather and rising sea levels, arebecoming increasingly apparent and it is said thatthe impacts are expected to become more serious
in the years to come. The Paris Agreement was
adopted in 2015 with a goal to mitigate climatechange, and all countries, whether developed ordeveloping, are required to implement greenhousegas reduction measures.
United Nations has positioned climate change as
one of the Sustainable Development Goals (SDGs)
and called for urgent action towards its mitigation.

Fur thermore, businesses have become moreaware of the fact that they need to consider ESG*
factors in order to grow sustainably and that they are
expected to play a greater role in combating climatechange. In these circumstances, the Fuyo Lease
Group relentlessly allocates its business resources
to the “Energy / Environment,” which have been
identified as one of the strategic areas in its Mediumterm Management Plan, “Frontier Expansion 2021.”(For more information, please see “Foundation for
Value Creation” on pages 37 and 38.)

2 Promoting Renewable Energy-Related Infrastructure
Recently, more and more Japanese companies havebeen joining RE100. However, small- and medium-sizedenterprises, administrative agencies, hospitals, andeducational institutions do not meet the requirements
for joining RE100. To enable these organizations to
implement renewable energy initiatives and raise publicawareness throughout Japan, efforts are being madeto develop a new framework for the 100% renewableenergy initiative, “the 100% Renewable Electricity
Declaration RE Action,” which small- and mediumsized enterprises can also take part in.
In response to these developments, we havelaunched “the Fuyo RE Action Support Program.” Thepurpose of the program is to promote a transition to
renewable energy by providing financial support tobusinesses and organizations that have signed up

Support Program

RE Action participatingorganizations
Company A (SMEs)*ESG stands for environment, social, and governance.

City B (local government)

Green bonds

The Fuyo Lease Group Joins RE100, a Global Initiative to Promote Renewable Energy
renewable energy through our business activities
in the following three areas : renewable energy
g e n e r ati o n b u s i n e s s, p ro m oti o n of re n ewa b l eenergy-related infrastructure, and provision of
suppor t for inve stm e nts in re newa ble e ne rg yrelated technologies and their commercialization.

to “the 100% Renewable Electricity Declaration RE
Action.” More specifically, we raise funds from investors
and issue green bonds and use the gathered funds
to support businesses and organizations that havejoined “the 100% Renewable Electricity Declaration RE
Action” to incorporate renewable energy and/or energy
efficient equipment into their operations.
“The Fuyo RE Action Support Program” has been
selected as a Model Case for the FY 2019 Green
Bond Issuance by the Ministry of the Environment inrecognition of its uniqueness and contribution to Japan's
efforts to promote renewable energy countrywide. As“the 100% Renewable Energy Declaration RE Action”
progresses, we are committed to providing active
support to our clients in response to their financing
needs for renewable energy.

The Fuyo RE Action Support Program

Investors

We joined RE100 in 2018 as part of our commitment
to t a c k l i n g c l i m ate c h a n g e. We we re th e f i r s t
comprehensive leasing company in Japan to join
this global corporate leadership initiative, whichaims to source 100% renewable energy to powerbusiness activities.
To p a r t i c i p a t e i n R E10 0 , w e s e t a g o a l o ftransitioning 100% of the electricity used in ourbusiness activities to renewable energy by 2050.
At the same time, we are committed to promoting

22(Fuyo Lease)
Investors

Investors

Hospital C
School D (education)

RE100 participating company
Company E (large company)

1 Renewable Energy Generation Business

3 Providing Support for Investments in Renewable Energy-Related Technologies

The Group generates solar power as par t of its
efforts to promote the spread of renewable energy
in the course of business activities. The Groupcurrently operates solar power plants at 32 locations
throughout Japan, supplying enough electricity topower approximately 40,000 households in local
communities. In FY 2019, a new power plant will
become operational in Fukushima Prefecture. The
new plant is the first solar power generation project
undertaken in an area designated as a “difficult-toreturn zone” due to being affected by the Great East
Japan Earthquake.

We provide commercialization support to venturecompanies possessing cutting-edge renewablee n e rg y te c h no lo gi e s throu g h inve stm e nts a ndbusiness collaborations.
In FY 2018, we formed capital and business alliances
w i t h E xe r g y Po w e r S y s te m s I n c. ( h e r e i n a f te r
Exergy Power Systems), and NExT-e Solutions Inc.
(hereinafter NExT-e Solutions). Exergy Power Systems
is a venture company originating at the Universityof Tokyo. The company has developed hydrogen

and Their Commercialization

The Shichikashuku solar power plant in Miyagi Prefecturestorage cells that have excellent durability and highoutput in addition to continuous ultrafast charging anddischarging properties. NExT-e Solutions possesses
a technology to control the variability in lithium-ion
battery performance. The company envisions wider
applications that include prolonging batter y life,
predicting battery degradation, and remote control.
By supporting these venture companies, we strive
to promote the spread of renewable energy and tocreate new business opportunities.

23

Special Feature 2 INVOICE

SpecialFeatureFuyo Lease Group Integrated Report 2019

2 Contributing to Client Companies’
Improved Productivity throughBPO Services

Workflow of integrated billing service

Challenges Facing Japanese Companies
The corporate environment is changing significantly
as labor shortages have become a social issue andwork-style reform is required to reduce long working
hours. Companies face an urgent challenge toincrease the productivity of employees by reducing
the time spent on cumbersome paper work andincreasing the time used to focus on high valueadded core businesses activities.
The Fuyo Lease Group is promoting the

Before introduction

enhancement of Business Process Outsourcing( BPO ) ser vices as par t of the New Domains
defined in the Medium-term Management Plan,
Frontier Expansion 2021. In 2018, we conver ted
INVOICE Inc. (hereinafter INVOICE), an integrated
billing service provider for corporate clients, into a
consolidated subsidiary, in order to reinforce thesystem for providing BPO services that have thepotential to support increased productivity.

Telecommunications
carrier A

Telecommunications
carrier B

After introduction
Electricity/gas/water supply

Changes in the Communication Environment and Business Operations
W i th c h a n g e s i n c o m m u n i c ati o n s e r v i c e s d u eto the easing of regulations and technologicaladvances in the domestic communication market,
the communication environment is undergoing
major transitions that includes the launch ofth e M Y- L I N E sy s te m, th e s p re a d of f i xe d - l i n etelephone ser vices and mobile phones, and theintroduction of IP telephones. While companies
have enjoyed many benefits from the diversificationof communication ser vices, the increase in thenumber of communication lines and ser viceproviders has forced back-office divisions, including
the general af fairs divisions and the accounting
divisions, to carr y out an increased numbers ofactivities, including the management of equipment
and proce s sing of bills. More ove r, change s inmanagement and financial accounting increased
the volume of complex back-office work, such as
tracking usage and journalizing.

INVOICE’s BPO Services

Developing Future Businesses andBuilding Stronger Relationships with
Clients through the Group’s Foundations

Against this backdrop, INVOICE’s “integrated billing
service for corporate communication fees” provides
a solution to the challenges in bill-processing tasksbusinesses face.
INVOICE provides an integrated billing ser vicethat carries out fee payments to individual carrierson the client’s behalf af ter processing all of thecommunication bills delivered to individual offices.
I n te g r a ti n g th e d i f fe re n t p ay m e n t p ro c e d u re s
used by each office and each telecommunications
carrier allows the client to streamline operations.
Understanding the details of mobile phone andinternet usage from the compiled bills and proposing
the most suitable communication plan to clients also
helps them reduce communication costs.

There have been drastic changes in our businesse nv i ro n m e n t, i n c l u d i n g i n th e c o m m u n i c a ti o n
e nv i ro n m e n t, a s a re s u l t of th e te c h n o l o g i c a ldevelopment of next-generation communications,such as 5G and IoT, as well as in payment andsettlement operations. In order to respond to thesechanges, we will fur ther enhance our integrated
billing ser vices for utilities payments, including
telecommunication ser vices, by increasing
character recognition rates using AI, and improving
the overall efficiency of business processes throughthe use of Robotic Process Automation (RPA). We
will also make energy-saving proposals based on
the analysis of utilities data. The Group will work as
one to build a system for addressing client needsfrom various perspectives and to provide BPO
services for clients while seeking to increase crossselling within the Group.

Telecommunications
carrier A

Telecommunications
carrier B

Electricity/gas/water supply

INVOICE (compiling bills/making payments)

Client companies

Client companies

Cumbersome paperwork
for monthly bills

Streamlining operations
Cost reductions
Improved cash flow

VOICE
Having had many opportunities to listen to clients who have trouble
carrying out cumbersome accounting tasks needed in daily operating
activities, we see the increasing needs for integrated billing services.
For example, one of our clients could not identify the cause of an outlier
bill even though the outlier occurred after bills had been delivered toeach office. The client was very pleased when our service helped to
improve their situation. These kinds of comments from clients andbeing able to build lasting relationships with them by checking themonthly billing and usage data in order to propose new cost-reduction
measures motivates us in our work. While there are more than 16,000
companies who utilize our services so far, we feel that many of them
are fully satisfied with our services, as evidenced by an extremely low
churn rate. We will continue to listen to clients and make proposals sothat they can enjoy benefits not only at the start of using our services
but also on an ongoing basis.

Gi Business Division, INVOICE Inc.
(From right) Section Chief, Takuto Hashimoto, Daisuke Fujihira, and Senior Staff Member,
Masafumi Yamada

24

25

Business Segments Overview

Fuyo Lease Group Integrated Report 2019

Real Estate
We offer a wide range of real estate-related
financial services, including building leases, which
use fixed-term commercial leasehold contracts,
and the Security Deposit System, which reduces
the cost burden on tenants who have to pay
expensive security deposits when renting spacein a building adjacent to a train station or in a
shopping center.
We provide unique and unparalleledsolutions by leveraging know-how and productdevelopment capabilities we have amassed forover 30 years.

FY 2018 Overview and Outlook

Growth Strategies under
Frontier Expansion 2021

In FY 2018, we performed very well in the Real Estatebusiness and achieved the interim goal for operating
assets a year earlier than expected. By promoting
Fuyo Lease Group-led leases*, we aim to accumulate
more operating assets than the amount set as theinterim goal, while improving profitability.
* Fuyo Lease Group-led leases are real estate leases arranged to match good clients(tenants) with related properties based on real estate information provided by us.

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

Operating assets

700

(%)

ROA

2.5

560

2.2
1.7
1.9

1.8

420

2.0

2.0

480.0
1.5

421.9
380.0

362.0
280

1.0
240.2

Business Environment

26

140

0.5

0

0

The value of real estate contracts increased
more tha n thre efold dur ing the prev ious
Medium-term Management Plan period (FY2014 to FY 2016) due to an increasing number oflarge contracts, growing demand for hotels, andthe launch of initiatives aimed at nursing homes.
During the current Medium-term Management
Plan period (FY 2017 to FY 2021), we aim todouble operating assets, which initially stood at
240 billion yen, to 480 billion yen by discoveringneeds by providing land information and byworking even closer with real estate developers.
We will also put more effort into strengthening
real estate financing and focus on Fuyo Lease
Group-led real estate investments with the aimof expanding the frontiers of our operations.

Growth Opportunities
An increase in large-scale development projects
focusing on the Tokyo metropolitan area
An increase in various development projects in the
Kansai region following the selection of Osaka as thehost city of the World Expo 2025
Emerging needs to utilize idle real estate
More retailers and companies operating multiple
stores are actively looking to increase their retail
space

Diver sif ying channels for obtaining real estate
information through alliances with financial institutions
and real estate-related companies
Increasing the added value of real estate leases by
providing real estate information to companies
operating multiple stores and others
Maintaining and expanding business with real estateleasing clients
Expanding business in real estate leases and financial
services

Challenges
Addressing potential downturn in the overheated realestate market
Capturing changes in clients’ needs by changing ofaccounting standards
Developing human resources with high degrees of
specialization necessary for business expansion

Actions
Increase levels of risk management for real estate heldby the Fuyo Lease Group
Develop new services in response to changes toaccounting standards
Promote human resources development by e.g.
providing support to employees to obtain qualifications
and implementing job rotation

Major Achievements

Strategies

2017/3

2018/3

2019/32020/32022/3

Interim goal

Target value

The World’s First “Hydrogen Hotel” Opened
Kawasaki King Skyfront Tokyu REI Hotel, to which Fuyo Lease offers a building lease, was opened in
Kawasaki City, Kanagawa Prefecture in June 2018. It is the first hotel in the world to use hydrogen as anenergy source. The hotel is currently carrying out a pilot project to replace approximately 30% of electricity
and thermal energy consumed to power its operations with hydrogen in order to support a testing program
for the development of a low-carbon hydrogen supply chain, a part of the Ministry of Environment’s medium
to long-term climate change initiatives.
Showa Denko Kawasaki Plant directly
supplies low-carbon hydrogen madefrom used plastics to the hotel througha pipeline after which the hydrogenis converted into electricity and heatthrough fuel cells.
This initiative is highly effective forcombating climate change becausehydrogen is a low-carbon, zeroemission energy source and hydrogenthat is locally produced from industrial
waste is consumed locally.
We are commit ted to continuing
Kawasaki King Skyfront Tokyu REI Hotelenvironmentally-friendly operations.
Fuyo Lease Jointly Acquired Beneficiary Rights in Nasu Garden Outlet
Fuyo Lease acquired real estate trust beneficiary rights in Nasu Garden Outlet, Nasushiobara City, Tochigi
Prefecture, jointly with Sojitz Commerce Development Corporation in May 2019.
Nasu Garden Outlet, which was opened in July 2008, has approximately 140 tenants as well as shops
selling local produce and specialties and a dog park, among other facilities. Under the concept of “a garden
in the middle of the woods,” the Outlet, which has a significant commercial presence, continues to attract
tenants with their ability to pull in crowds of shoppers, and it is expected to invigorate the area in partnershipwith local tourist attractions.
Through our Real Estate business, we aim to make a positive contribution to the development of local
communities and to improve people's lives.

27

Business Segments Overview

Fuyo Lease Group Integrated Report 2019

Medical/Social
WelfareWe offer a wide range of services, which include
leasing medical equipment, buying pre-owned
medical equipment as well as factoring for
medical and nursing-care receivables. We meet
our clients’ needs in a timely manner by offering
a range of one-stop services through the newly
established Healthcare Advisory Division.

FY 2018 Overview and Outlook

Growth Strategies under
Frontier Expansion 2021

In FY 2018, we performed well in our main service
segments of factoring business for medical andnursing-care receivables and buying and sellingpre-owned medical equipment. With the newly
established Healthcare Advisory Division as a driving
force, we intend to offer combined leasing solutions
that transcend our conventional finance leases anddiversify profit opportunities.
Operating assets for Medical/Social Welfare(Billions of yen)

80

80.0
76.0

74.5
66.9

66.3

2017/3

2018/360

Business Environment
Growth Opportunities
Growing need for medical services and nursing care inan aged society
Increasing needs for operating efficiency at medical
institutions and nursing care and social welfare
providersGrowing need for financing, as medical equipment
employing state-of-the-art technologies for higher
performance becomes more expensive

40

20

Lower profits from individual lease and financing
services
Intensified competition in the medical and social
welfare market by new entrants

Actions
Improve profitability by switching to offering solutions
Differentiating from competitors by offering a broad
range of one-stop services
Fuyo Lease Platform Concept
Medical care
Social welfare
Elderly nursing care

Local communities
Local government
MarketMajor Achievements

Challenges

2019/3

Group companies

Capital and Business Alliance Agreement with a Medical Device Incubator, JOMDD
Fuyo Lease entered into a capital and business alliance agreement with Japanese Organization for Medical
Device Development, Inc. (“JOMDD”) in March 2019 by subscribing to a portion of JOMDD’s shares that itallocated to third parties in order to increase its capital. JOMDD is one of few medical device incubators inJapan that provides one-stop support for medical seed development, intellectual property, clinical studies,
pharmaceuticals, and sales channels.
We will develop a financial scheme to facilitate the commercialization of products developed and marketedby JOMDD, and, at the same time, utilize its expertise to enhance our capabilities in the Medical and Social
Welfare area, which is one of our strategic areas. Furthermore, we intend to create and maximize synergies
between the two companies through collaborations with medical institutions and business partners withwhich the two companies work.

ReturnInvesting companies

Equipment, facilities, and amenities

Financing (facility ownership)

Removal, transportation, disposal,
buying and selling pre-owned
equipment

RIVERFIELD

Fuyo Lease

Fuyo Lease SalesINVOICE

CREWT Medical Systems

Sharp Finance

FUJITANOC Outsourcing & Consulting

Lily MedTech

Fuyo Auto Lease

Officebusters

MerryBiz

Consulting firms

Medical System Networks

Accretive

Logistics companies

Energy service companies

Medical information providers

Medical equipment trading
companies

Yokogawa Rental & Lease

Waste disposal contractors

Building managementcompanies

Medical equipment manufacturers

Nihon Credit Lease

Japanese Organization for Medical
Device Development (JOMDD)

IT vendors

2022/3
Target value

The Healthcare Advisory Division EstablishedTo further enhance advisory services for medical institutions, the Healthcare Advisory Office was restructured
as an independent division called the Healthcare Advisory Division in April 2019.
The Healthcare Advisory Division’s staff visit over 400 medical institutions and elderly nursing careproviders in a year to identify their needs. The Division aims to launch new healthcare services that takeadvantage of the Group’s strengths including business process outsourcing (BPO) and robotic process
automation (RPA) while helping people live longer and healthier lives, thus revitalizing local economies.

Business efficiency andEnergy saving and cost saving

Water supply companies
RPA suppliers

LicenseReturn / Exit

Investment /commercialization funds

Platform

Fuyo Lease
Healthcare Advisory Division

2020/3
Interim goal

Seeds (Ideas) from universities /medical institutions / companies, etc

Providing one-stop services

Management solutions

Our Medical business will focus on expanding
the scope of our frontiers by launching advisory
services designed to put hospital operations
and business management back on track,
leveraging FUJITA’s expertise in selling andbuying pre-owned medical equipment, andcapitalizing on Accretive’s factoring for medical
and nursing-care receivables. In the area of
Social Welfare (nursing care), we became anindustry pioneer to start building leases fornursing care facilities, such as nursing homes
for the elderly, during the period of the previous
Medium-term Management Plan (FY 2014 to FY2016). We will move ahead by capitalizing on
our strong ties with nursing care industry giants,
such as the NICHIIGAKKAN.

0Strategies
Focusing on advisory services for medical institutions
Maximizing synergies between Group companies
when buying pre-owned medical equipment, factoring,and providing BPO services
Promoting business oppor tunities nationwide incollaboration with local financial institutions andbusiness partners

28

Investments fromexternal sources

Partnership /Joint development
Carve-out /commercialization

Investment

Investors(VC, etc.)*Referring to JOMDD’s website

ReturnInvestment / Joint
commercialization

Medical development projects frominside and outside the company

Open Innovation Platform

Medical device
manufacturers, etc.
Exit
ReturnLicense

Ventures fromuniversities /medical institutions /companies, etc.

29

Business Segments Overview

Fuyo Lease Group Integrated Report 2019

We will promote the expansion of renewableenergy in the solar power generation business,and support our clients in their energy-saving
activities through ESCO services*.
Additionally, we are working to of fer newvalue with our services, which include a plantfactory managed by the newly-established AgriBusiness Promotion Office.
* ESCO services provide everything needed to improve energy efficiency, including technology, equipment,
personnel, and funding. As an ESCO service provider, we receive a portion of the actual energy cost savings
generated through the services as compensation.

FY 2018 Overview and Outlook

Operating assets and ROA for solar power generation business

28
21(%) 10.0

34.0

29.0

27.9
6.1

ROA

8.0
6.0

19.7

17.2
14

5.1

6.0

Growth Opportunities
Enhanced social initiatives to realize a low-carbon
society (e.g. SDGs, RE100)
Growing demand for solar power generation and otherclean energy sources
Continued energy saving needs amid rising energy
costs
Increasing demand for food safety

Growth Opportunities
Increasing need for aircrafts around the world

Challenges
Addressing new technologies related to renewableenergy and energy efficiency
Possible scrapping of the feed-in-tariff (FIT*) scheme
Actions
Developing capital and business alliances withstartups that have new technologies
Focus on new initiatives toward a post-FIT era (e.g.
power generation for own consumption, rechargeable
battery-related businesses)* Under the FIT scheme, payments are provided at a fixed rate for the renewableenergy produced, e.g. solar energy.

Growth Strategies under
Frontier Expansion 2021

In the solar business, in F Y 2018, we steadily
increased operating assets, with two new solar power
plants becoming operational on schedule. We will
step up our activities to promote self-sufficient power
generation, ahead of a post-FIT era. In April 2019, we
set up a joint venture with TEPCO Energy Partner,
Inc. and another partner to operate a plant factory(scheduled to start operations in spring of 2020).

Operating assets

Business Environment

Strategies
Expanding solar power generation and making further
contributions to local communities (some solar power
plants are due to become operational in an area
affected by the Great East Japan Earthquake)
Promoting low-carbon initiatives, including signing up
for RE100
Promoting energy efficiency through ESCO services
Establishing the Agri Business Promotion Office andconstructing a plant factory

Energy/Environment

35 (Billions of yen)

Business Environment

6.0

4.0

In the solar power generation business, 29 largescale solar power plants (known as mega-solar
power plants) were in operation during the previous
Medium-term Management Plan period (FY 2014
to F Y 2016 ). Under the current Medium-termManagement Plan, we plan to operate large solar
power plants that are several times the size of
our existing plants, in order to supply 200MWdc
electricity by the final year of the Medium-termManagement Plan ( F Y 2021). We will step up
ef for ts in the ESCO business in collaboration
with our partners, who are industry leaders, whileworking on new energy businesses and others to
expand the frontiers of our operations.

Strategies
Steadily increasing our aircraft fleet by leveraging ourunique network
Building a por tfolio with greater liquidity mainly
consisting of narrow-body aircraft
Taking advantage of our accumulated know-how by
providing aircraft leasing arrangements over the years
Working on packaged contracts, under which multiple
aircraft are leased

Aircraft
Since participating in the first “Samurai Lease”
back in 1978, we have provided more than 300
aircraft leasing arrangements for airline companies
across the globe. In 1999, we became the firstin the Japanese leasing industry to expand into
the primary aircraft market in Dublin, Ireland. We
also executed a lease for aircraft owned by ourcompany in 2009 and acquired UK-based Aircraft
Leasing and Management Limited (ALM) in 2014
with the aim of expanding our operations.

2019/32020/32022/3

Interim goal

Target value(Billions of yen)

Operating assets

300

(%)

ROA

2.5
280.0

240

2.0

1.9

2.3

2.0

1.9

80
1.5

1.4

70
60

149.8
120

Major Achievements

60

Number of aircraft owned by the Group(Aircraft)

210.0

1.0
35

75.1

0.5

0

0
2017/3

2018/3

49
40

97.6

Joint Venture Established to Operate One of the Largest Plant Factory in Japan
Through a joint-venture company set up with TEPCO Energy Partner, Incorporated and Farmship, Inc.,
established in April 2019, we will begin preparations to operate one of the largest plant production factory inJapan. The factory is a closed farming factory that is kept clean and uses an artificially controlled environment
and lights to provide an optimal environment for vegetable production. The plant is due to become operational in
the spring of 2020. We aim to expand our business segments through the business collaboration with them.

Leasing arrangements for aircraft owned by ourcompany grew to 19 during the previous Mediumterm Management Plan period (FY 2014 to FY 2016).
We aim to increase the number of aircraft leased peryear by ten, so that the number of company-owned
aircraft reaches 70 by the final year of the current
Medium-term Management Plan (FY 2021). We will
accelerate the pace of acquiring operating assets
by working on packaged contracts, under which
multiple aircraft are leased, expanding the scope ofairlines and equipment covered, and strengthening
our organizational structure.

Operating assets and ROA for aircraft leasing0
2018/3Growth Strategies under
Frontier Expansion 2021

In FY 2018, the number of aircraft we own increasedby 11 to 35. The number of owned aircraft andoperating assets are increasing steadily throughincreasing business with airline clients mainly in Asia.
We aim to own 70 aircraft by FY 2021.

180
0Actions
Increase the number of airline clients by using theextensive network of UK-based ALM
Expand businesses through investments and joint
ventures
Build relationships of trust with clients by providing
continuous services ranging from making leasingarrangements to post-leasing and re-leasing services

FY 2018 Overview and Outlook

2.0

2017/3

Challenges
Global inflows of investment funds, intensifiedcompetition due to new entrants, and declining
profitability

4.4

7

30

2019/32020/32022/3

Interim goal

Target value

20

19

24

0
2017/3

2018/3

2019/32020/32022/3

Interim goal

Target value

31

Business Segments Overview

Fuyo Lease Group Integrated Report 2019

Business Environment

Business Environment

Growth Opportunities
Growing overseas financing needs as moremanufacturers relocate their production bases outsideJapan
Asia's expanding financial markets
Developing the market through collaborations withlocal companies with high levels of expertise

Growth Opportunities
Growing demand for BPO services amid deteriorating
labor shortages and the need to change how we work

Strategies
Strengthening business net works by providing
expatriate staff to the Singaporean subsidiary
Expanding business in North America with targetspecific M&A deals
Increasing profit opportunities by obtaining the knowhow of acquired companies

Overseas
We aim to expand our overseas business andincrease our overseas locations mainly in North
America and Asia by leveraging our network toattain organic growth*, while building up highquality assets through investments, acquisitions,and alliances with local companies to achieve
inorganic growth*.

Challenges
Facing competition from other companies in overseas
business projects
Facing competition from other finance schemes due tomonetary easing implemented around the globe
Actions
Expanding non-Japanese business in North Americaand Asia
Focusing on M & A deals and capital alliances toexpand business* Organic growth means growth achieved by implementing a strategy of using ourexisting management resources.
* Inorganic growth means growth achieved by forming business alliances orengaging in business acquisitions.

FY 2018 Overview and Outlook

Growth Strategies under
Frontier Expansion 2021

Pacific Rim Capital, Inc. in the US, which offers
operating leases for forklift trucks, became ourequity-method affiliate in FY 2018. We seek to achieve
further organic and inorganic growth by leveraging
the Group's know-how and maximizing synergies.
Operating assets* and ROA for Overseas businesses(Business of overseas subsidiaries excluding aircraft leasing)(Billions of yen)

120
90

99.9

93.4

84.1

1.5

1.6
1.2

60
30

(%)

2.0

Our Overseas business segment saw its operating
assets almost double during the period of the previous
Medium-term Management Plan (FY 2014 to FY2016), and we will pick up the pace of obtaining assets
even further. We will continue to focus on expanding
non-Japanese businesses mainly in North Americaand Asia, as we did under the previous Mediumterm Management Plan. Over the medium-term, we
will seek inorganic growth through M&A and capitalalliances with the aim of achieving an additional 1.5fold increase in operating assets by the final year of thecurrent Medium-term Management Plan (FY 2021).

0.8
0.6

0.6
12.5

0
2017/3

2018/3

0.8

0.4

19.4

0
2019/32020/32022/3

Interim goal

Target value* Investments in affiliates in overseas businesses are included among the operating
assets stated in the summary of financial results.

Major Achievements

Pacific Rim Capital, Inc., a US Independent Operating Leasing Company, Became Fuyo Lease’s Equity-method Affiliate
Fuyo Lease acquired shares of Pacific Rim Capital, Inc. (“PRC”), a leading independent leasing company in the US, thus making PRC an equity-method
affiliate.
PRC is a leading independent leasing company, which primarily handles operating leases of material handling equipment (“MHE”) in the US, Mexico, and Canada.
PRC is expected to grow steadily as the MHE market is set to expand further, supported by an increasingly strong demand from the logistics industry.
We are promoting advances into new areas through investments and collaborations with non-Japanese leasing companies with high levels of expertise in inorganic
strategies. Through the acquisition of PRC's shares, we can match our Japanese clients in North America with PRC to facilitate its growth. At the same time, we arealso able to build a stable revenue base in North America by relying upon PRC's know-how in operating leases of MHE in order to grow our overseas business.

Strategies
Utilizing the Fuyo Lease Group's country-wide sales
network
Establishing a specialist division to spearhead BPO
services
Promoting unique BPO services offered by groupcompanies such as INVOICE and Accretive
Challenges
Low barriers to entr y, possibly leading to pricecompetition
Securing human resources engaged in BPO services

BPO
We help clients improve productivity by offeringbusiness process outsourcing services, including
accounting and settlement services. BPO services
are at the core of the New Domains in which weare actively investing management resources.

Actions
Utilize the Group's client base (links to finance andaccounting divisions)
Provide comprehensive BPO ser vices, including
accounting and settlement services
Standardization and automation of operations throughnew technologies such as AI

FY 2018 Overview and Outlook
In FY 2018, we acquired INVOICE, which provides integrated billing services, as a consolidated subsidiary, toexpand the range of services we offer. With the aim of further expanding our services and creating synergies withexisting BPO resources, we acquired NOC Outsourcing & Consulting, which offers a variety of outsourcing andconsulting services, as a consolidated subsidiary in 2019.

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

Major Achievements

Operating assets
ROA(Estimated) operating assets according to ourequity in affiliates in overseas businesses 1.8
110.0
120.0

150

32

FY 2018 Overview and Outlook
In FY 2018, we invested in Exergy Power Systems,
which has proprietar y rechargeable batter y
te c h no lo g y, N E xT- e S o lu tio n s , a n d Ja pa ne s eOrganization for Medical Device Development, which
provides support for commercializing state-of-the-art
medical technologies, in an effort to develop a new
business model. We will continue to strive to expand
our business frontiers.

We are working to expand our business frontiers through M&A and capital and business alliances withcompanies that have unique technologies and know-how.
Investment
timingBusiness
Form

Partner

Description

Apr. 2018

Subsidiary

FUJITA

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

June 2018

Investment

Exergy Power Systems

Invested in the company, which develops and manufactures nextgeneration energy storage systems.

June 2018

Investment

MerryBiz

Invested in the company, which provides accounting administrative
services “virtual accounting assistants.”

Oct. 2018

Subsidiary

INVOICEAcquired the company that provides integrated billing ser vices asa consolidated subsidiary to expand our services that contribute toimproving our clients’ productivity.

Mar. 2019

Investment

NExT-e Solutions

Invested in the company, which possesses cutting-edge rechargeable
battery control technology.

Mar. 2019

Investment

Japanese Organization for
Medical Device Development

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

May 2019

Investment

Synspective

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

Aug. 2019

SubsidiaryNOC Outsourcing & Consulting

Acquired the company, which offers a broad range of outsourcing services
and has high-level consultancy functions, as a consolidated subsidiary
and accelerated the expansion of BPO services.

33

Business Segments Overview

Fuyo Lease Group Integrated Report 2019

Business Environment

Domestic
Corporate

Growth Opportunities
Nation-wide client base
Diversified clients’ needs

This is a Core Area that supports the Fuyo
Lease Group. In addition to conventional leases,
such as for information and office equipment
as well as commercial facility leases, we offer
a wide range of services that include leasingarrangements and strategic financial solutions
tailored to clients’ needs.

Strategies
Our group companies work as one to provide a wide
variety of products and services
Offering solutions that use previously gained knowhow
Challenges
Decrease in benefits of leasing due to changes inaccounting standards
Increased competition in a sluggish domestic leasing market
Reduced clients’ needs for financing due to monetary easing

Business Environment

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

Actions
Propositions that go beyond the fields of leasing andfinancing to address a variety of clients’ needs
Strengthening and differentiating the functions of solutions
by promoting cooperation among our group companies
Optimizing resource allocation

FY 2018 Overview and Outlook
In FY 2018, as a result of offering a wide rangeof solutions tailored to clients’ business needs,
we were able to enter into var ious t ypes oftransactions, including real estate contracts as wellas various overseas transactions. We will continue
to increase transactions by offering solutions andproviding BPO services to client companies, while
maximizing synergies among our group companies.

Growth Strategies under Frontier Expansion 2021
Solutions are our specialty, and we will continue to enhance our offerings
to corporate clients of our group companies. We will also establish an
integrated system for our group companies to provide services that flexibly
address clients’ needs. In the areas of information communication equipment,
construction machinery, and industrial machinery, we will proceed withcreating a new business model in collaboration with our alliance partners,
utilizing know-how gained in the past.

Business Environment

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

Growth Opportunities
A wide range of opportunities for businesses withfewer regulatory limitations
Strategies
Using wide-ranging financial know-how accumulated
in diverse areas
Challenges
Improved financing environment resulting frommonetary easing and increased competition due toreduced clients’ needs for financing
Deterioration of financial market conditions

In FY 2018, we sought to optimize our portfolio
in order to adapt to unstable financial market
conditions. We will continue to accumulate
the k now-how ne e de d to fur ther impr ove
profitability.

Growth Strategies under Frontier Expansion 2021
We will shift our focus to more profitable areas, while maintaining
an appropriate risk-return tradeoff. This effort will center oninvestments in funds, business-related investments, andinvestment and lending positioned as balance sheet solutions.

Growth Opportunities
Large market share and high recognition in thevendor leasing market
Strategies
Utilizing an ope rational framework that allows
detailed responses to clients’ needs by having
approximately 50 bases across the country
Utilizing an established operating base and years ofexpertise gained in the healthcare market
Challenges
Sluggish domestic leasing market
Lower profitability due to competition with othercompanies
Actions
Further expanding the range of sales partners andextending information channels
Expanding real-estate leasing services and non-asset(fee-based) business initiatives by cooperation within
our group

FY 2018 Overview and Outlook
Going forward, we will continue to increasetransactions with existing vendor clients andcreate new alliance par tners. We will also
pursue synergies in collaboration with ourgroup companies in real estate leases and thecollection agency business for BPO services.

Growth Strategies under Frontier Expansion 2021
We will seek further growth of the Vendor Leases business,
operated by Sharp Finance, mainly by expanding the rangeof partners we work with and shifting resources to the Tokyo
metropolitan area. We will also focus on leveraging theGroup’s strengths by offering real estate leases, factoring
services, and other products and know-how available from ourgroup companies to Sharp Finance’s customers.

Business Environment

Auto Leases
We offer a wide range of services including
auto financing, maintenance, insurance, andsafe driving education as well as administrative
support. We will continue to pursue businessexpansion by leveraging synergies among
our group companies, and proceed with the
expansion and improvement of products andservices in order to adapt to innovations in
mobility technology.

Actions
Optimizing the risk-return tradeoff by offering a widearray of financial functions
Developing the information infrastructure to support
sophistication of the monitoring related to fundinvestments

FY 2018 Overview and Outlook

34

Growth Opportunities
The auto leasing market is expected to continue expanding
Changes in mobility business
Strategies
Providing safe and well-maintained vehicles through partnerships
with approximately 6,300 repair shops across Japan
Providing high value-added services, under which customers canoutsource administrative work related to the purchase,management, and maintenance of automobiles
Strengthening alliances with automobile-related companies
Challenges
Increasing price competition due to competitors lowering prices
Increasing the number of vehicles in our inventory
Actions
Expanding the customer base by strengthening cooperation within
the Fuyo Lease Group
Developing unique products and differentiating ourselves fromcompetitors through collaborations with partner companies

FY 2018 Overview and Outlook
Looking ahead, we aim to further boost ourbusiness performance by increasing the numberof vehicles in our inventory and building up
operating assets, while enhancing cooperation
within our group.

Growth Strategies under Frontier Expansion 2021
We will leverage synergies among our group companies
to expand the Auto Leases business. In particular, we willapproach Sharp Finance’s retail client base and fur therstrengthen coordination with Fuyo Lease.

35

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2019

Foundation for Value Creation

36

Environmental Management

The Fuyo Lease Group aims to solve social issues through its business operations as it paves the way to a sustainable
society and sustainable business growth, while responding to the expectations of its stakeholders. The Group sees
Creating Shared Value (CSV) as the foundation of its management principles and established the Creating Shared Value
Promotion Office in April 2019 to further pursue CSV as a long-term strategy.

VOICE

Takashi Mizutani
General Manager, Creating Shared
Value Promotion Office
Corporate Planning Division

The main role of the Creating Shared Value Promotion Office is to develop CSV-based
management strategies and to plan and promote actions to be taken to achieve thosestrategies. The Group is working to instill into employees the concept that CSV increases
corporate value while addressing social needs and challenges, in addition to pushing tocreate new value and achieving sustainable growth.
As non-financial information becomes increasingly important, the Group actively
discloses information to investors and stakeholders, and engages with them. In addition
to being a constituent of the MSCI Japan ESG Select Leaders Index, the Group was also
selected to be one of the constituents in the FTSE Blossom Japan Index in June 2019 inrecognition of its ESG*1 management initiatives.
The Group continues to strive to actively develop new businesses by addressing andresponding to social needs and challenges. At the same time, the Group is committed tomaking information about its activities available to the public.

Basic Approach
T he Fuyo Lease Group is commit ted to reducing its
environmental footprint through appropriate environmental
management and building a closed-loop society
through its business operations. We have formulated anenvironmental philosophy and policy in order to engage
the entire group into activities that address environmental

issues. We have also acquired ISO14001 for the Group’s
major operating sites to operate management system forcontinuous improvement.*2*2 ISO14001 certified sites: Fuyo General Lease’s head office and Osaka branch, Fuyo Leasing
Sales, Fuyo Network Service, and FGL Service.

Environmental
Philosophy

The Fuyo Lease Group acts with care to preserve the global environment based on its management philosophyof “supporting our customers’ business activities, and contributing to the community through the leasing
business,” and promotes activities to address environmental issues in line with its environmental policy.

Environmental
Policy1 Protecting the global environment through leasing businessWe endeavor to provide products and services that contribute to protecting the global environment in ourbusiness activities, including leasing, rental, and financial business.

2 Promoting resource and energy saving activities
We are aware of the environmental burdens associated with business activities and endeavor to engage inresource and energy saving activities and green procurement.

3 Contributing to the development of a recycling society*1 ESG stands for environment, social, and governance.

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

4 Complying with environmental laws
We comply with environment-related laws and agreements to which the Fuyo Lease Group has agreed.

Stakeholder Dialogue
We believe that communicating with stakeholders is the
key to accurately understanding various social issues andthe role we are expected to play. We see communication

5 Establishing an environmental management system
We promote continuous improvement of an environmental management system and endeavor to prevent
environmental pollution by setting environmental targets.

as the bridge that brings us closer to stakeholders, andwe use it to ensure that we live in harmony with people
from all walks of life.

Customers

Our management philosophy is to “always give first priority to the customer and provide the best
service.” In putting that philosophy into practice we work to enhance the level of satisfaction of all ourcustomers, including users of our leasing services.

Suppliers and partners

We work together with suppliers of leased assets, business partners, and vendors to build and maintain
fair and equal relationships that serve as fertile ground upon which everyone involved can grow.

Shareholders

Our basic policy is to return stable profits to shareholders on a long-term basis. We also disclose
information in a timely, appropriate, and fair manner to ensure the transparency of our operations.

Industry organizations
and competitors

We work with competitors to enhance the leasing business, improve services, and share information,for example, through the initiatives undertaken by the Japan Leasing Association.

Communities and NPO

We value communication with people, companies, NGO/NPO and other organizations not only in theareas where we operate but also with a host of communities that lie beyond, and engage in communitybased activities as a responsible corporate citizen.

Natural environment

To address environmental issues, we actively implement environmental initiatives through our businessactivities and strive to minimize our environmental footprint.

National government,
administrative
authorities, etc.

We maintain appropriate relationships with the government of Japan, relevant ministries and agencies,
and local governments. We also maintain sound relationships with the central governments andadministrative authorities of countries where our overseas subsidiaries operate.

Financial institutions

We raise funds necessary for our operations by maintaining strong relationships of trust with financial
institutions.

Long-Term Environmental Targets
The Fuyo Lease Group has set long-term environmental targets of powering its operations with 50% renewable energy by2030 and 100% by 2050.

Key Environmental Targets
Objectives

Employees and theirfamilies

We work to create a safe, happy, and vibrant workplace environment for our employees. In addition, weare building a better occupational environment where all employees can find their own optimal work-lifebalance and enhance the quality of both life and work.

Climate change
initiatives

Promote energy
conservation

Scope

FY 2018 targets

Evaluation

FY 2019 targets

4.3% decrease from the
FY 2010 level

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

Maintain the FY 2010 level ofenergy consumption (kWh)17.1% decrease from the
FY 2010 level (kWh)5.0% decrease from the
FY 2013 level of energy
consumption (kWh)Maintain the FY 2010 level ofgasoline consumed by company
vehicles (L)

34.0% decrease from the
FY 2010 level (L)

10.0% decrease from the
FY 2013 level of gasoline
consumed by company
vehicles (L)Fuyo General Lease & Maintain the FY 2010 level of CO2
Group companies*3
emissions (t-CO2 ) (Scope 1& 2)

Fuyo General Lease &Group companies*3

FY 2018 results

Comply withenvironmental laws
and regulations

Fuyo General Lease &Group companies*3

Assess compliance withenvironmental laws andregulations

Conducted complianceassessment. No noncompliance found

Assess compliance withenvironmental laws andregulations

Saving theenvironment
through leasing

Fuyo General Lease

24 billion yen of assets in energyefficient and environmentallyfriendly properties*4

24.6 billion yen

28 billion yen of assets
in energy-efficient andenvironmentally-friendly
properties

Contributing to
the creation of acircular society

Fuyo General Lease

More than 95% reuse and recycle
rate for returned PC

100%

More than 95% reuse andrecycle rate for returned PC*3 Scope: all domestic locations of Fuyo General Lease and Group companies including Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales, FGL Service, and Aqua Art.
*4 Machines related to energy including boilers and turbines, industrial waste recycling equipment, pollution control devices, environmental equipments such as energy saving devices including
combined heat and power systems and water purification systems, and renewable energy (i.e. solar power generation) supply facilities.

37

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2019

Climate Change Initiatives

Energy Conservation via Products and Services

Basic Approach
Today, climate change is a universally recognized problem,
and increasing greenhouse gas emissions are making it
worse. As the Paris Agreement, an international framework
for climate action beyond 2020, and other initiatives
give momentum to ef for ts to reduce greenhouse gas
emissions across the globe, renewable energy along withenvironmentally-friendly products and services are more
important than ever. The Fuyo Lease Group is working
towards climate change mitigation by reducing greenhousegas emissions from our operations. We carries out businessactivities in view of risks and opportunities in the businessenvironment that climate change brings. With a BCP inplace, we are well prepared for any emergency in which ourbusiness activities could be disrupted by the destruction ofsocial infrastructure caused by a natural disaster. We also
recognize that business opportunities lie in renewable energy
generation and energy-efficient assets leasing businesses.
This is an area we will focus upon as one of the strategicareas of the Medium-term Management Plan. We aim to growour businesses alongside activities to mitigate climate change.

Initiatives to Reduce Greenhouse Gas Emissions
The Japan Leasing Association has formulated a voluntary
low-carbon society action plan, which Fuyo Lease has signed
on to as a member company.
The Fuyo Lease Group is making efforts to conserve theenvironment at all our locations by setting targets that lower
our CO 2 emissions and energy consumption, and work to
reduce power usage, as well as our company vehicles’ fuelconsumption and exhaust emissions. In 2018, we started toissue green bonds (available only to those businesses thatare expected to improve the environment) to raise funds froma variety of sources while promoting renewable energy. In
addition, we joined RE100, a business initiative which aims tosource 100% renewable energy to power business activities,
as the first comprehensive leasing company in Japan. In 2019,
we endorsed the Task Force on Climate-related Financial
Disclosures’ (TCFD) recommendations. Not only does theGroup make direct efforts to reduce its own greenhouse gas
emissions but also makes indirect contributions to reducing
greenhouse gas emissions through promoting renewableenergy by utilizing schemes of lease and finance.

Environmental Data
CO2 Emissions (Scope 1,2)*5 *6 /CO2 Emission Intensity

Total Energy Consumption *6

Fuyo General Lease
5 group companies *7
2 group companies *8
CO2 emission intensity (Right axis)

Electricity
City gas
Gasoline
Energy consumption intensity (Right axis)

3,000 (t-CO2 )

2,000

1,000

0

0.33

0.31

0.33

1,287

1,216

1,271

(t-CO 2 /100 millions of yen) 0.6

60,000 (GJ)

2,074

40,000

0.36

828

758

324

311

307

319

328

963

905

964

927

851

2015/3

2016/32017/3

2018/3

0.4

1,937

0.37

0.2

20,00000

2019/3

Fuyo General Lease
5 group companies *2 group companies *Electricity consumption intensity (Right axis)

3,000 (MWh)544.37

2,000

2,115
548

526.432,083
542

473.61 2,658

2,201

439

541

588

2,599

452

1,660

1,631

400

2017/3

2018/324,392

2,348
29

2,267
29

2,414
31

21,083

20,76521,947

2016/32017/3

6.82

36,468

11,471
34

10,52630

26,50425,912

2018/36

30

2019/3

2019/30

As climate change risks increase, the renewable energy
market continues to grow with a focus on solar, wind,bioma s s, s ma ll a nd m e dium hydro, a nd g e othe r ma lpower. Fuyo Lease leverage the know-how gained throughour power generation business to offer a host of powerge ne ration equipme nt installation plans that me et awide array of customer needs. Those include everythingfrom large-scale power plants to rooftop solar panels of
distribution warehouses and other commercial facilities as
off-grid schemes for self-consumption. Along with various
financing options, we introduce them to customers with theaim of taking the use of renewable energy to new heights.
( For more information, please see “Special Feature 1.
Climate Change Initiatives” on pages 21 and 22.)

Saving the Environment through Leasing
Basic Approach
Effectively using limited resources and reducing waste
as much as possible together comprise one of the mostimportant steps towards building a sustainable society.
The Fuyo Lease Group provides products and services
that contribute to protecting the global environment

through its business activities, including leasing, renting,and financing, while promoting the reuse and recycling ofleased assets after their leases expire to minimize waste
and ensure their proper disposal.

Saving Resources and Reducing Waste
through the 3Rs

Appropriate Disposal of Waste

Guided by our environmental policy, we actively work on
the 3Rs (Reduce, Reuse, and Recycle) for leased assets
once a lease ends. At the Tok yo 3R Center, which is
responsible for reusing and recycling leased assets after
their leases expire, we reuse and recycle not only items
leased by our corporate group but also used assets wehave bought from other companies.

40

17.47

16.56

14 68

15 66

54
2015/351
2016/3

3Rs initiatives for leased assets after their leases expire

304

17.88

263

238

15 70
55
2017/313
55
2018/313
54
2019/3

When disposing of leased assets that can no longer beused after their leases expire, we take the utmost care toensure they do not pollute the environment. Going above andbeyond simply complying with the Waste Management andPublic Cleansing Act (Waste Management Act), as a waste
generating business operator we keep close track of every
piece of waste we dispose of through an electronic manifest*9
system. We conduct on-site inspections of waste disposal
contractors according to an annual schedule.
*9 Manifest: A document or electronic data that verifies proper disposal of waste. Waste
generating business operators are required by the Waste Management Act to issue andcollect a manifest or register it to confirm proper disposal of waste.

56.86

400

200

ESCO service provider, we receive a portion of the actualenergy cost savings generated through the ser vice ascompensation. In addition, we help our customers reduce
costs and CO 2 emissions by introducing various energy
saving solutions tailored to their energy usage. Examples ofthe solutions include energy-saving control and operational
improvement for air-conditioning systems and LED lightings,
and subsidized leasing.

Promotion of Renewable Energy(L/100 millions of yen) 60

59.03

331

0
2016/323,061

6.77

38,009600 (kL)

1,5230
2015/3

23,460485.75

200
1,541

6.25

625

1,000
1,567

5.83

Fuyo General Lease
5 group companies *7
2 group companies *8
Gasoline consumption intensity (Right axis)(kWh/100 millions of yen) 600

564.30

6.04

Total Gasoline Consumed by Company Vehicles *6
8

We h a v e p a r t n e r e d w i t h e n e r g y- s a v i n g e q u i p m e n t
manufacturers, construction companies, and companies inother various sectors to help customers save energy throughthe ESCO service and other programs. The ESCO service
provides everything needed to improve energy efficiency,
including technology, equipment, personnel, and funding,and achieves energy conservation without compromisinga customer’s current environment or convenience. As the(GJ/100 millions of yen) 9

2015/3

Electricity Consumption *6
7

38

20

0

*5 Total CO 2 emissions were calculated with the emission factors specified by the government based on the Ministerial Ordinance Concerning GHG emissions Associated with Business Activities ofSpecified Emitters (The emissions associated with electricity are calculated based on the emission factor issued by power transmission and distribution business operators of where our regional
operations and offices are located). Fuyo General Lease and the Groups’ companies are not induded in specified emitters.
*6 Data coverage: all domestic locations of Fuyo General Lease, Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales, FGL Service, Aqua Art, Sharp Finance and Accretive. Before March 2017
do not include figures of Sharp Finance and Accretive as their data collection began in FY 2017.
*7 5 group companies: all domestic locations of Fuyo Auto Lease, Fuyo Network Service, Fuyo Lease Sales, FGL Service, and Aqua Art.
*8 2 group companies: all domestic locations of Sharp Finance and Accretive.

Lease term expires

Re-leased asset
Asset disposal

Assetcollection

Tokyo 3R Center

Valuable

Waste

Leased asset remains in use

1 Reduce

Sold on the secondhand market

2 ReuseCollect parts/sell materials

3 Recycle

Proper waste disposal /recycle

4 Enhance recycling rate

Final disposal (incineration/landfill)

5 Minimize final disposal(landfill)39

Foundation for Value Creation

Fuyo Lease Group Integrated Report 2019

Human Resource Management Strategies for Enhancing Value
Basic Approach
In today’s society where values and needs are becoming
more diverse, the Fuyo Lease Group believes that diversity isa key growth driver. Attracting and retaining highly talented
people regardless of their sex, age, and other factors is crucial
for continually creating new value. As we work to enhance thevalue of our corporate group, we focus on developing humanresources with emphasis on making our company a better

workplace, so that all of our employees can realize their fullpotential as they hone their professional skills. We encourage
respect for human rights in accordance with international
norms such as the Universal Declaration of Human Rights,
and embrace the Code of Corporate Conduct that has zerotolerance for discrimination on the basis of sex, nationality,
race, ethnicity, religion, disability, etc.

Activities towards Creating a Better Workplace
Working with the goal of making people's jobs morechallenging and fulfilling, we are striving to build a betterworking environment where all employees can find their own
optimal work-life balance and enhance the quality of bothlife and work through maintaining and improving their health,gaining new knowledge and experiences, attaining personal
growth etc. Since the Act on Advancement of Measures
to Support Raising Next-Generation Children went into
effect in 2005, we have been working to create a better job
environment for working parents by developing a “generalemployer action plan” as required by the law. Following thespecial Platinum Kurumin certification received in FY 2017, we
joined “the Ikuboss Corporate Alliance” in FY 2018, which isa network of businesses seeking to change the mindsets ofmanagement-level staff and to develop the next generation ofmodel leaders (“Ikuboss”).
We have been implementing work-style reforms since
FY 2014. Not only do we ensure legal compliance throughprograms designed to reduce long working hours, including
programs such as the Refresh Days (leave-work-early days), we
have also introduced a staggered hours program, which offers
four different work schedules with earlier and later starting andfinishing times so employees can choose the schedule mostsuitable to their needs, for activities such as childcare or family

nursing care duties, as well as their lifestyles.
Furthermore, by having a working group that includes across-section of employees, we can create a better workplacefrom our workers' perspective. In FY 2017, we introduced“+Friday (Plus Friday),” a program that allows employees tochoose one Friday each month when they can leave workat 1:00 p.m., at the recommendation of the working group.
In FY 2018, as we joined the Ikuboss Corporate Alliance, weorganized the Ikuboss Seminar for management-level staff tochange their mindsets. The seminar’s participants collectively
signed up to the Ikuboss Declaration to express theircommitment as leaders to supporting their staff’s professional
and personal development, and to achieving good businessperformance, as well as to enjoying their work and personal
lives.

Action Plan: Stage 7 (April 2017 - March 2022)• Percentage of male employees who takechildcare leave etc.: 80% or more
April 2021 - March 2022 (1 year)• Percentage of employees who take annual paid
leave: 70% or more*10
April 2020 - March 2021 (1 year)*10 The target has been revised to be “80% or more.”

Empowering Women in the Workplace
We see empowering women in the workplace as a management
priority and are taking steps towards creating a work environment
where women can fulfill their potential and play a more active role
than ever. Our initiatives for empowering women focus on four
specific areas -- recruitment, human resources development,
organizational culture reforms, and work-life balance. In 2014, we
set the goals of increasing the employment ratio of new female
graduates to 30% and making the percentage of women in
managerial positions one-and-a-half times more than it was in2014 by 2020 (i.e. 40 women). We have stepped up activities forhiring women and have established clear training guidelines, whileproviding female managerial candidates with career development
support and more. The Diversity Promotion Office opened its
doors in FY 2017 to bolster our organizational capability for creatinga workplace where all employees can realize their full potential,

Human Resource Development
At the Fuyo Lease Group, our basic hiring policy is to keep
the selection process fair, impartial, unbiased, and nondiscriminatory. We also provide opportunities for all employees
to independently achieve personal growth, while respecting
each other's personality.
In FY 2017, we partially revised the performance evaluation
system so that we can better understand the roles and abilities
required of each employee in evaluating their performance as
our operations become more diverse and complex. To embody
our corporate slogan of “Go where no one has gone before”
and the core principle of the Medium-term Management Plan,
which is to move into uncharted businesses and continue toexpand frontiers, we introduced a new scheme in FY 2018,
under which employees are evaluated and supported in taking
up challenges with the focus on their actions. In addition, we
also introduced a new internal job application scheme thatencourages employees to engage in personal development andimprovement of their skills. Under the scheme, a total of sevenjob openings were posted for positions of sales department/
branch managers, the head of an affiliated company, positions
in strategic fields such as medical, real estate, and energy,
positions in the credit department, and administrative positions
responsible for BCP.
Because our employees need an encyclopedic knowledgeof laws, taxes, accounting, finance, products, industry trends,
and more, we are focusing on equipping employees with
top-notch professional skills. We value employees’ pursuit ofprofessionality and willingness to develop their unique skills,
and, to this end, we provide employees with practical onthe-job-training (OJT) at their workplaces, as well as off-thejob-training (Off-JT), including group training and personal
development support. Because we see group training as anopportunity to pursue the Group synergies and share theGroup’s culture, we organized group training, with a total of
270 employees from group companies attending seven training
programs in FY 2018.

Community Engagement
Basic Approach
Recognizing close ties with its neighbors, the Fuyo Lease
Group hopes to grow together with them, while being agood corporate citizen who contributes to the developmentof local communities. The Group has formulated a CSR

policy and is conducting CSR activities that make bestuse of its know-how, products, and services focusing on
the environment, community engagement, academia andresearch, and assistance to disaster-affected areas.

Activities: Case Example• Promoting independent and active working styles• Encouraging male employees to take a more
Description
active role in parenting• Reducing total working hours• Offering diverse career path options

Numerical
targets

40

regardless of gender. For example, to keep those employees who
have experienced once-in-a-lifetime events motivated, we provide
pre-maternity leave guidance and organize back-to-work seminars
for those who return to work after taking child-care leave.

Employee Data *11
2014/3

2015/3

2016/32017/3

2018/3

2019/3

Retention rate of
employees after
3 years (%)

87.5

94.7

100

85.7

-

-

Turnover rate (%)*12

1.3

1.1

0.8

1.0

1.9

1.9

Rate of paid
leave taken (%)

59.1

58.5

61.9

68.9

68.0

68.4

Number of
female managers(persons)

25

25

27

29

32

36

Employment
rate of thedisabled (%)

2.0

2.0

1.8

2.2

2.3

2.3

*11 Scope: Fuyo General Lease (non-consolidated) *12 Turnover rate includes separations due to personal reasons, reaching retirement age, and other reasons including transfer. It does not include
separations of re-employed workers due to the expiration of their contract terms.

Every year, Fuyo Lease and the Group company, Aqua Art,
team up with students majoring in art and design at Tokyo
Metropolitan Kogei High School and Tok yo Designer
Gakuin College located near the Fuyo Lease head officeto create interior aquarium designs and decorations, someof which are displayed at commercial facilities. In FY 2018,
welcoming the Tokyo Communication Arts College as a
new participant, the event provided a great opportunity
for students to have fun designing aquariums, while at thesame time letting visitors know about interior aquarium.

In F Y 2019, which is the eighth times, we hosted an
exhibition jointly with Tokyo Dome Hotel. A selection of thesix aquariums were displayed in the lobby and elsewherein the hotel during thespecial event that ran
from July 25 throughAugust 5.

Students from a creation team andtheir work exhibited at the hotel lobby

VOICE
In order to meet clients’ higher level needs, act according to the corporate slogan of“Go where no one has gone before,” and to be a company that clients will choose, it isessential to develop a resilient workforce consisting of individuals with the ability to think,act, and solve problems on their own. In addition to on-the-job training and level-specifictraining provided in the workplace, we also offer a range of programs to support those
who are motivated to engage in personal development, including the motivation support
program and the overseas trainee system.
Promotion of diversity is also essential for us to be able to offer solutions that surpass
clients’ expectations. We strive to create a pleasant work environment for people withdiverse backgrounds regardless of gender or nationality.

Hideyuki Otsubo
Executive Officer and General
Manager, General Affairs
Division

41

Board Members

Fuyo Lease Group Integrated Report 201942

Board Members As of June 21, 2019

Takashi Sato

Yasunori Tsujita

Shozo Kazama

Seiichi Isshiki

Hideo Ichikawa

Masayuki Yamamura

Director and Chairman (Representative Director)

President and Chief Executive Officer(Representative Director)

Director and Deputy President(Representative Director)

Outside Director Independent

Outside Director Independent

Outside Director Independent

Apr. 1977 Joined The Fuji Bank, Limited

Apr. 1981 Joined The Fuji Bank, Limited

Apr. 1979 Joined The Fuji Bank, Limited

Apr. 1972 Joined Nippon Oil Corporation

Apr. 1975 Joined Showa Denko K.K.

Mar. 2006 Managing Executive Officer of Mizuho
Corporate Bank, Ltd.
(retired in March 2009)

June 2013 Deputy President-Executive Officer,
Member of the Board of Directors(Representative Director) of Mizuho
Financial Group, Inc. (until June 2014)

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

June 2012 Representative Director,
President of JX Nippon Oil & Energy
Corporation

Jan. 2011 Representative Director, President,
Corporate Officer and Chief Executive
Officer (CEO)May 2009 Deputy President and Executive Officer of
the Company

Nov. 2013 Deputy President-Executive Officer,
Member of the Board of Directors ofMizuho Bank, Ltd. (until March 2015)

June 2009 Director and Deputy President
Deputy President and Executive Officer
Representative Director(current position)

June 2014 Member of the Board of Directors and
Deputy President & Executive Officer(Representative Executive Officer) of Mizuho
Financial Group, Inc. (until March 2015)

Apr. 2009 Managing Executive Officer, General
Manager of Business Unit of Mizuho
Research Institute Ltd.
(retired in April 2010)
May 2010 Senior Managing Executive Officer of theCompany
June 2010 Senior Managing Director and Senior
Managing Executive Officer

Nov. 2009 President and Chief Executive Officer
President and Executive Officer

Apr. 2015 Member of the Board of Directors(retired in June 2015)

Apr. 2014 Representative Director (current position)

Apr. 2016 Director and Chairman
To present

May 2015 Deputy President and Executive Officer of
the Company

Apr. 2018 Director and Deputy President
Deputy President and Executive Officer
To present

June 2015 Director and Deputy President
Deputy President and Executive Officer
Representative Director (current position)

Director of JX Holdings, Inc.
June 2014 Advisor of JX Nippon Oil & Energy
Corporation(currently JXTG Nippon Oil & Energy
Corporation)(retired in June 2016)

Jan. 2017 Representative Director, Chairman of theBoard (current position)
June 2018 Director of the Company
To present

Apr. 1978 Joined Nippon Telegraph and Telephone
Public Corporation
June 2008 Executive Vice President, General Manager
of Tokyo Branch of NIPPON TELEGRAPH
AND TELEPHONE EAST CORPORATION
June 2009 Executive Vice President, Senior
Executive Manager of Network Business
Headquarters
June 2012 President, Representative Director
June 2018 Counselor to the President (current
position)

June 2015 Director of the Company
To present

June 2019 Director of the Company
To present

Apr. 2016 President and Chief Executive Officer
President and Executive Officer
To present

Shinya Aizawa

Yoriaki Takebe

Soichi Hosoi

Kiyoyuki Takashima

Shigeru Suda

Teruhiko Numano

Yoshihiro Jinnai

Senior Managing Director

Senior Managing Director

Managing Director

Full-time Audit &Supervisory Board Member

Full-time Audit &Supervisory Board Member

Outside Audit & Supervisory
Board Member Independent

Outside Audit & Supervisory
Board Member Independent

Apr. 1973 Registered as attorney-at-law
Assistant professor, Nihon
University College of Law

Oct. 1978 Joined The Yasuda Fire andMarine Insurance Co., Ltd.

Apr. 1979 Joined the Company

Apr. 1981 Joined the Company

Apr. 2011 General Manager ofShinjuku BranchAug. 1999 General Manager ofInternational Division

Apr. 2012 Executive Officer, General
Manager of Shinjuku BranchMar. 2009 General Manager of Internal
Audit Division

July 2003 Trustee of Nihon University,and Dean of Nihon
University College of Law

Executive Officer, General Manager ofFinancial Planning Division of Mizuho Bank,
Ltd. (retired in April 2014)

Oct. 2014 Executive Officer, General
Manager of Tokyo Business
Division III

Executive Officer, General Manager ofFinancial Planning Division of Mizuho
Corporate Bank, Ltd. (until July 2013)

June 2016 Full-time Audit &Supervisory Board Memberof the Company
To present

June 2017 Full-time Audit &Supervisory Board Memberof the Company
To present

June 2005 Outside Audit & Supervisory
Board Member of theCompany
To present

Apr. 1982 Joined The Fuji Bank, Limited

Apr. 1978 Joined The Yasuda Trust & Banking Co., Ltd.

Apr. 1983 Joined The Fuji Bank, Limited

Apr. 2010 Executive Officer, General Manager ofInternal Audit Division of Mizuho Corporate
Bank, Ltd. (retired in April 2011)

Apr. 2005 Executive Officer, General Manager of Real
Estate Planning Division of Mizuho Trust &Banking Co., Ltd.

May 2011 Managing Executive Officer of the Company

June 2009 Executive Managing Director(retired in April 2011)

Apr. 2013 Executive Officer, General Manager ofFinancial Planning Division of Mizuho
Financial Group, Inc.
(retired in April 2014)

June 2011 Managing Director and Managing
Executive Officer
Apr. 2018 Senior Managing Director and Senior
Managing Executive Officer
To present

Apr. 2011 Executive Officer, General Manager ofBusiness Promotion Division 1 of theCompany
Apr. 2013 Managing Executive Officer
Apr. 2018 Senior Managing Executive Officer
June 2018 Senior Managing Director and Senior
Managing Executive Officer
To present

Apr. 2014 Managing Executive Officer of theCompany
June 2014 Managing Director and Managing
Executive Officer
To present

Sep. 2005 Vice-President of Nihon
University, and Dean of Nihon
University College of Law
July 2006 Vice-President of Nihon
University
Aug. 2006 Retired from the positionas Vice-President of Nihon
University
Apr. 2011 Retired from professorshipat Nihon University Collegeof Law

Apr. 2010 Associate Director, General
Manager, 1st Production
Department of Sompo
Japan Insurance Inc.
Apr. 2011 Executive Officer, General
Manager, Hokkaido
Regional Headquarters
Apr. 2012 Managing Executive Officer,
General Manager, Hokkaido
Regional Headquarters
Mar. 2013 Retired from the position as
Managing Executive Officer
June 2013 President, Audatex
Japan Co., Ltd. (currently
Cognivision Inc.) (retired inJune 2017)
June 2017 Outside Audit & Supervisory
Board Member of theCompany
To present

43

Corporate GovernanceFuyo Lease Group Integrated Report 2019

Corporate Governancegovernance. To achieve sustainable growth and increase
our corporate value over the medium to long term, we
adhere to these guidelines in everything we do across the
Fuyo Lease Group.

Our Approach to Corporate Governance

Strengthening Corporate Governance

The Fuyo Lease Group places strong emphasison creating and maintaining relationships with all
stakeholders, including shareholders, customers,
employees, and local communities. We believe that thefundamental objective of corporate governance is toperform business activities with sincerity and fairness
in line with our management philosophy.
To achieve sustaina ble grow th a nd incre ase
corporate value over the medium to long term, we haveestablished our own Corporate Governance Guidelines
which align with the purpose and spirit of the Japan’s
Corporate Governance Code. These Guidelines
serve as the foundation for our corporate governanceframework, operating policies and other management
policies, to which we adhere in everything we do.

Fuyo Lease has implemented various initiatives aimed
at strengthening corporate governance.
Year

2008
2011

2015

Objective

Introduced performance-based
compensation and stock compensationtype stock options
Reduced the term of office of a director
from two years to one year
Increased the number of independent
outside directors from one to two
Established the Corporate Governance
Guidelines

To strengthen links between directors’
remuneration and their performance andshareholder value
To increase opportunities to build
shareholder confidence
To strengthen the management oversight
structure
To comply with the Japan’s Corporate
Governance CodeTo ensure independence and objectivity
in the decision-making process formatters such as nomination andcompensation
To verify the effectiveness of the roles
and functions of the Board of Directors
and to make ongoing improvements
To strengthen the management oversight
structure
To strengthen links between directors’
remuneration and shareholder value
To enhance external disclosure related tocorporate governanceSet up the Nomination and Compensation
Advisory Committee

2016
2018

Corporate Governance Structure
Fuyo Lease has established a Board of Corporate
Auditors, which includes two outside corporate
auditors who are independent from our company.
In addition, in order to enhance the super visor yfunction of the Board of Directors, we have also
appointed three independent outside directors, whoprovide oversight and advice on the execution ofbusiness operations from an external perspective.
Furthermore, to improve management efficiency
and expedite decision-making by separating themanagement oversight function from the executionof ope rations, we have adopte d the exe cutive
officer system.

Initiative

2019

Started analyzing and evaluating theoverall effectiveness of the Board of
Directors
Increased the number of independent
outside directors from two to three
Introduced a stock compensation plan
(Board Benefit Trust, BBT)
Disclosed an English version of the
Corporate Governance Report

Board of Directors
The Board of Directors consists of nine directors, including
six inside directors and three independent outside directors.
The Board of Directors deliberates and makes decisions onimportant management issues, as well as matters specified
in laws and regulations, the Articles of Incorporation,and the Regulations governing the Board of Directors.
The Board of Directors also oversees the execution ofoperations by Directors and Executive Officers.
In FY 2018, the Board of Directors met 12 times.

Nomination and Compensation Advisory
Committee
Fuyo Lease has set up the Nomination and Compensation
Advisory Committee under the Board of Directors in order
to eliminate arbitrariness in decision-making processes
and to maintain a highly transparent management
structure. The committee consists of four members,
including three independent outside directors and an
inside director. The committee mainly deliberates on topics
such as nominating or removing of candidates for directors
and corporate auditors, remuneration of directors,
succession planning, and analysis and evaluations of theoverall effectiveness of the Board of Directors, and reports
its findings to the Board of Directors.
In FY 2018, the Nomination and Compensation
Advisory Committee met five times.

Establishment of the Corporate
Governance Guidelines
In conformity with the purpose and spirit of the Japan’s
Corporate Governance Code, Fuyo Lease has established
our own Corporate Governance Guidelines, which provide
a foundation for corporate governance framework,
operating policies, etc. The Corporate Governance
Guidelines set out the framework, operating policies, roles,
and responsibilities of different supervisory and executivefunctions, in addition to our basic approach to corporate

Board of Corporate Auditors
Our Board of Corporate Auditors is composed of four
auditors, including two full-time and two part-time auditors
who are also independent outside corporate auditors.
According to the audit plan formulated by the Board

Corporate Governance Structure
General Meeting of Shareholders(Cooperation)

Board of Corporate Auditors:
4 corporate auditors (including

Board of Directors: 9 directors(including 3 independent outside directors)

2 independent outside corporate auditors)

Nomination and Compensation
Advisory Committee: 4 members(including 3 independent outside directors)

Recommendation
Oversight
on theexecutionof business(Cooperation)

Accounting auditor(Cooperation)

Approval

Planning and reporting on programs

ReportInternal Audit Division

Executive Committee

Compliance Committee

Name
Takashi Sato

Financial
audit

Control

Executive Committee
The Executive Committee is composed of Executive
Officers with positions of managing executive officer
or higher, the heads of the Management & Planning
Division, General Affairs Division, and Business &Planning Division as well as the Presidents of affiliatedcompanies. Full-time corporate auditors also attend
meetings of the Committee on a regular basis.
As a general rule, the Executive Committee meetsat least once a month to make decisions on operating
activities and implementation of measures delegated to
the President & CEO, and to discuss important issues
concerning internal controls. Its aim is to improve thequality of management decisions and to speed up
decision-making.
In FY 2018, the Executive Committee met 20 times.

Compliance Committee
Fuyo Lease has set up a Compliance Committee chairedby the Chief Compliance Officer. The heads of relevant
planning and administrative departments, representative
directors of subsidiaries in Japan, and heads of overseas
subsidiaries’ relevant departments serve as full-timecommittee members. The administrative functions of thecommittee are carried out by the Legal & Compliance

Implementing and advocating programs

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

Position
Director and Chairman (Representative Director)

Attendance at Board meetings
Board of Directors : 12/12

Yasunori Tsujita

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

Board of Directors : 12/12 Nomination and Compensation Advisory Committee : 5/5

Shozo Kazama

Director and Deputy President (Representative Director)

Board of Directors : 12/12

Shinya Aizawa

Senior Managing Director

Board of Directors : 12/12

Yoriaki Takebe

Senior Managing Director

Board of Directors : 10/10 (Elected in June 22, 2018)

Soichi Hosoi

Managing Director

Board of Directors : 12/12
Board of Directors : 12/12 Nomination and Compensation Advisory Committee : 5/5

Masayuki Yamamura

Director, Member of the Nomination and Compensation
Advisory Committee
Director, Member of the Nomination and Compensation
Advisory Committee
Director, Member of the Nomination and Compensation
Advisory Committee- (Elected in June 21, 2019)

Kiyoyuki Takashima

Full-Time Corporate Auditor

Board of Directors : 12/12 Board of Corporate Auditors : 11/11

Seiichi Isshiki
Hideo Ichikawa

Internal auditof Corporate Auditors, each corporate auditor audits
execution of operations by directors by attending important
meetings, reviewing important documents, examining
operations and assets, and reviewing the audit findings ofthe independent accounting auditor and the internal audit
department among other relevant activities. Corporate
auditors closely work with the Internal Audit and Internal
Control Departments to conduct audits in order to enhanceaudit quality. At the request of the corporate auditors, anemployee (a staff member from the Internal Audit Division)
has been appointed to assist them.
In FY 2018, the Board of Corporate Auditors met 11 times.

Attendance at Board and Committee meetings (attendance in FY 2018 by board members, as of June 21, 2019)

Consultation

44

Board of Directors : 10/10 Nomination and Compensation Advisory Committee : 3/3(Elected in June 22, 2018)

Shigeru Suda

Full-Time Corporate Auditor

Board of Directors : 12/12 Board of Corporate Auditors : 11/11

Teruhiko Numano

Outside Corporate Auditor

Board of Directors : 8/12 Board of Corporate Auditors : 7/11

Yoshihiro Jinnai

Outside Corporate Auditor

Board of Directors : 12/12 Board of Corporate Auditors : 11/11

45

Corporate Governance

Division. The Compliance Committee meets quarterly
to discuss issues related to compliance systems andimplementing annual compliance plans. Based on its
discussions the Committee submits reports to the Boardof Directors and the Executive Committee, and takes
measures to develop and enhance compliance systems.

Internal Audit
The internal audit function is administered by theInternal Audit Division (staffed by six employees). The
Internal Audit Division conducts operational audits ofall departments, offices, branch offices, and major
subsidiaries, and plays a part in ensuring that internal
controls are functioning in addition to examining theireffectiveness. The results of these audits of operations
are reported to the President & CEO and corporate
auditors every time they are conducted and periodicallyto the Board of Directors and the Executive Committee.

Analysis and Evaluation of theEffectiveness of the Board of Directors
At Fuyo Lease, we analyze and evaluate the overall
effectiveness of the Board of Directors every year. The Boardof Directors makes further efforts to enhance its functions in
the light of the results of the analysis and evaluation with theaim of continually improving its effectiveness.
The results of the analysis and evaluation for FY 2018
are as follows.
Evaluation method
We conducted a questionnaire survey among all
Directors and corporate auditors, as well as interviews
with them on an as needed basis. Following thediscussions and recommendations by the Nomination
and Compensation Advisory Committee, which consists
mainly of independent outside directors and assisted by
the corporate lawyer, the Board of Directors carried out
the analysis and evaluation of the results.
Results
While the Board of Directors met all evaluation criteria,
including size, composition, functions and roles, as well as
operation, and was found to be effective, we concluded

Fuyo Lease Group Integrated Report 2019

process, the selection of candidates for directors
and corporate auditors is finalized by the Board of
Directors following a discussion by the Nomination
and Compensation Advisory Committee, which iscomprised of majority independent outside directors.
Selection of corporate auditor candidates is finalized
by the Board of Directors upon consent of the Board of
Corporate Auditors.
2 Independence standards for outside directors
and outside corporate auditors
Inde pe nde nce sta nda rds for outside dire ctor s
and outside corporate auditors are stipulated in
the Corporate Governance Guidelines in line with
the independence standards prescribed in the
Guidelines Concerning Listing Management, etc.
established by the Tokyo Stock Exchange.

that we must still steadily implement measures to improve
the functions of the Board of Directors, make those
activities part of our daily operations, and continuallyreview the Board’s functions.
Progress on issue identified last fiscal year
To address the issue identified in the last fiscal year
–a need to increase and diversify outside directors– we appointed an additional independent outside
director by a resolution of the Annual General Meeting
held in June 2018. To address the need to bringmore perspectives to the Boardroom, narrow down
discussion points, and enhance reporting on risk
management and corporate governance trends, we
discussed and approved the proposed resolutions forreporting progress and risks in each business sector in
the strategic areas of the Medium-term Management
Plan and for ensuring compliance with the revised
Corporate Governance Code. We then confirmed thatthe effectiveness of the Board had been improved.
Newly identified issues
We recognized the need to continuously bring more
perspectives to the Boardroom and narrow down
discussion points as well as the need to provide more
information to outside directors.

Board Remuneration
Fuyo Lease believes that enhancing the link between
shareholder value and remuneration of Board of
Directors will boost their morale and motivate themto improve our financial per formance and shareprice, leading us towards our goals of ensuring stableperformance and growth, while enhancing our corporate
value. That is why we have introduced variable pay
programs such as performance-based compensationand stock compensation in addition to a base salary,which is provided as fixed compensation.
We determine base salaries in the light of ouremployees’ salaries, average market salaries for directors,
our financial standing, and other relevant factors. The
actual amount of performance-based compensation
is based on our consolidated performance as wellas an individual director’s contribution to our financial
performance among other factors. The indicators for
performance-based compensation are operating assets,ordinary profit, and ROA on a consolidated basis,
which are key performance indicators for the Mediumterm Management Plan. The stock compensation plan
(Board Benefit Trust, BBT) is designed to motivate Board
members to help boost our company’s performance andcorporate value over the medium- to long-term by making
the link between their compensation and our equity value
clearer. Under this compensation plan, the Company's

Director Qualifications and Nomination
Procedures
Policy and procedures for nominating director andcorporate auditor candidates and removing directors
Our Corporate Governance Guidelines set for th
procedures for nominating and removing directors
in addition to the qualifications of corporate auditors
and procedures for nominating corporate auditor
candidates. Under these guidelines, a director
or corporate auditor candidate must possess an
outstanding personality, a wide breadth of knowledge,
abilities, experience, and high ethical standards. The
guidelines also specifies that candidates be nominatedregardless of factors such as sex, age, and nationality,with the aim of achieving greater diversity. In order toensure fairness and transparency in the nomination
1

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

Reason for appointment

SeiichiIsshiki

Seiichi Isshiki has served as representative director and president of JX Nippon Oil & Energy Corporation, director of JX Holdings, Inc.,and president of ENEOS Celltech Co., Ltd. We believe that he will help enhance the effectiveness of the decision-making and oversightfunctions of the Board of Directors from a position that is independent from our company’s management by drawing upon his extensive
experience and wealth of knowledge.

Hideo
Ichikawa

Currently serving as representative director and chairman of the board and formerly representative director and president at Showa
Denko K.K., Hideo Ichikawa has years of experience in corporate management. We believe that he will help enhance the effectivenessof the decision-making and oversight functions of the Board of Directors from a position that is independent from our company’s
management by drawing upon his extensive experience and wealth of knowledge.

Masayuki
Yamamura

Masayuki Yamamura has served as president of Nippon Telegraph and Telephone East Corporation, and we believe that he will help
enhance the effectiveness of the decision-making and oversight functions of the Board of Directors from a position that is independent
from our company’s management by drawing upon his extensive experience and wealth of knowledge.

Teruhiko
NumanoWe believe that Teruhiko Numano will conduct audits appropriately from an objective standpoint based on the expertise he has gained
as a jurist and a lawyer and provide us with highly professional legal advice. He is also well versed in business litigation cases as alawyer and has considerable financial and accounting knowledge.

Yoshihiro
JinnaiHaving ser ved as senior managing executive director at Sompo Japan Insurance Inc. and president of Audatex Japan ( now
Cognivision, Inc.), Yoshihiro Jinnai should be able to conduct audits appropriately from an objective standpoint by drawing upon his
extensive experience and wealth of knowledge.

46

shares are acquired by a trust using funds contributedby the Company, and the directors will be provided,on their retirement, with the Company's shares andcash-equivalents to the market price of the Company's
shares at the time of retirement, in accordance with theRegulations for Provision of Shares to Officers approvedby the Board of Directors.
The ratio between the base salary and the variable pay
plan is set at 1 to 0.6 based on the average compensation
ratio used by listed companies. The variable pay planconsists of performance-based compensation and stockcompensation, and the ratio between the two is set at 5 to
7 in the light of the characteristics of the revenue structureof the leasing business to provide higher incentives on a
medium- to long-term basis.
Directors’ compensation is discussed by the
Nomination and Compensation Advisory Committee
in order to ensure transparency and objectivity indetermining the amounts. Compensation for outside
directors and corporate auditors consists only of fixedcompensation because short-term incentives andequity compensation are not really applicable.
The company prescribes malus provision providing that
if a director causes significant damage to the Company
or engages in inappropriate conduct, the director’s basesalary or performance-based compensation will be
reduced or the director will not be paid and the director
will no longer be eligible to receive stock compensation.

Internal Control System
Fuyo Lease has instituted an internal control system
across our corporate group to ensure compliance with all
relevant laws and the articles of incorporation, capability
to respond to various risks in a timely and appropriatemanner, and to ensure transparency and efficiency ofoperations, in addition to ensuring the reliability of financial
reports, etc. Our Internal Audit Department, corporate
auditors, and independent auditor share information aboutaudit findings to monitor the status and operation of theinternal control system. The status of the internal control
system operation is reported to the Board of Directors
during a meeting held at the end of each fiscal year, andcontinuous improvements are made in the light of theaudit findings.

Board Remunerations
Officer classification

Total amount(millions of yen)

Remuneration amount (millions of yen)
Performance-linked
Stock-based remuneration
remuneration
Basic remuneration(Board Benefit Trust, BBT)
(Annual bonuses)

Number of directors

Directors (excl. Outside Directors)

301

195

56

49

6

Board of Corporate Auditors
members (excl. Outside Auditors)

44

44

-

-

2

Outside Directors

53

53

-

-

5

Note: 1. The above remuneration amount and number of directors include those who resigned by the end of FY 2018.
2. The above performance-linked remuneration comprises the amount, which shall be recorded in the fiscal year.
3. The amount of the Board Benefit Trust (BBT) comprises the amount recorded in the fiscal year based on the number of points granted or expected to be granted during the fiscal year.
4. At the 39th Annual General Meeting of Shareholders held on June 25, 2008, Fuyo Lease approved the resolution to pay accrued retirement benefits associated with the abolishment of theretirement benefits system for directors. The estimated amount as of the end of the fiscal year is 9 million yen (outside directors). The payment is made at the time of their retirement.

47

Risk Management and Compliance System

Fuyo Lease Group Integrated Report 2019

Risk Management
Our Approach to Risk Management andRisk Management System
As stipulated in the Fuyo Lease Group risk
management regulations, we have established a risk
management system at our locations across the globe
in order to manage risks based on their particular risk
characteristics and importance. Risks to be managed
are categorized into credit, market (such as interest
rate fluctuation risk), liquidity (such as cash flow risk),administrative, system, legal, human, reputation,and other risks. Each type of risk is managed by adesignated department.
The Board of Directors and the Executive Committee
receives updates on risk management, discusses risk

management policies according to the characteristics
and impor tance of each risk, and evaluates theeffectiveness of risk management. The Asset andLiability Management (ALM) Committee meets on aregular basis to appropriately manage and control
market and liquidity risks. These efforts enable us tocontinually improve our risk management system.
In addition, we have a system in place for responding
to emergencies. In the event of a large-scale disasteror emergency, the emergency response headquarters
under the direction of the president will take measuresnecessar y for ensuring safety and continuity of
our operations in accordance with the Emergency
Preparedness Regulations.

management and financing, managing risks associatedwith interest rate fluctuations (market risk), and holding
Asset-Liability Management Committee meetings,
where policies on future funding and other activities are
discussed and deliberated. Because of its sound financial
standing, the Company has obtained good ratings frommultiple credit rating agencies.
Nevertheless, future interest rate, exchange rate, shareprice and financing trends could adversely impact theGroup’s business results. Moreover, if a rating agency
where to lower the Company’s rating, it would be difficult
for the Company to procure necessary funds in appropriate
ways, as access to commercial paper and other preferredfinancing methods would be limited. In such an event,
the Company may have to borrow from banks at higher
interest rates that would normally apply, which could
adversely affect the Fuyo Lease Group’s business results.

4Competitive Environment in the Leasing Industry

Risk Factors in Business Operations
Listed below are the main factors that could pose arisk to the development of the Group’s business andhave a significant impact on the decisions of investors.
The forward-looking statements here represent the
judgment of the Group’s management as of the datethat its annual securities report was submitted (June 25,2019). The following is not an exhaustive list of all the risks
that could affect investment in the Company’s shares.

1
Impact of Capital Expenditure Trends and Other
Changes on Business Results
The lease transactions and installment sales handled by
the Fuyo Lease Group are two means by which customers
finance capital expenditures, and there is generally apositive correlation between the amount of private sector
capital expenditure and lease capital expenditure.
The Fuyo Lease Group is focusing on expanding its
customer base and increasing contracts by making various
proposals that satisfy customers’ diverse and latent needs.
Nevertheless, the Group’s business results could be
affected by trends in corporate capital expenditure.

screening and monitoring the creditworthiness of individual
counterparties. The Group also conducts self-assessmentsof its assets in accordance with standards applied bybanks and other financial institutions based on Industry
Audit Committee Report No. 19, “Temporary Treatment for
Accounting and Auditing of Application of the AccountingStandards for Financial Instruments in the Leasing Industry,”issued by the Japanese Institute of Certified Public
Accountants (JICPA). Accordingly, Fuyo Lease sets aside
an allowance for doubtful receivables in its balance sheets,
for which it calculates an amount of estimated losses basedon bad debts recorded in previous financial years undera general allowance as well as an amount of estimateduncollectable payments of individual counterparties under
specific allowances for doubtful receivables and borrowers
in bankruptcy or reorganization. The Group also monitors thecreditworthiness of a specified group of large-lot borrowers
and reports the results periodically to management.
Never theless, depending on future economic
trends, newly arising bad debts caused by worsening
creditworthiness of counterparties could adversely impact
the Group’s business results.

The various businesses in which the Fuyo Lease Groupis engaged, and the leasing business in particular, areexposed to intense competition that includes financial
institutions in addition to the leasing industry.
The Fuyo Lease Group endeavors to differentiate itself
from the competition and enhance its competitiveness bystrengthening its ability to deliver value-added services
that contribute to greater convenience for customers.
However, intensification in competition could have an
adverse effect on the Group’s business results.

5
Impact of Changes in Regulatory Systems on
Business Results
The Fuyo Lease Group operates its business activities
based on current laws, tax regulations, accounting
standards, and other regulatory systems. In regards tothe accounting system, in March 2019, the AccountingStandards Board of Japan decided to start developing
lease accounting standards. The Group’s businessresults could therefore be affected by any significant
future changes in these systems.

32

Impact of Changes in Factors Such as Interest Rates,

Impact of Credit Risk on Business Results

Exchange Rates and Share Prices, and Financing on

The business of the Fuyo Lease Group involves extending
credit to counterparties over the medium to long term,with lease agreements averaging around five years.
Consequently, there is a risk that difficulty will arise incollecting lease payments from a counterparty that files forbankruptcy or experiences other serious issues during theleasing period.
To minimize potential losses associated with credit
risk, the Fuyo Lease Group quantitatively assesses andmonitors credit risk in its portfolio while working to maintainand improve the soundness of assets in addition to

Business Results

The Fuyo Lease Group procures funds to purchaseproperties for leasing or for installment sales to customers
and to purchase the business assets owned by the Group
mainly from financial institutions and markets. Moreover, in
addition to owning foreign currency-denominated assets
such as aircraft, the Group carries out investment throughsecurities investments and funds.
The Fuyo Lease Group not only monitors the market
conditions, but also strives to manage risks appropriately
by constantly monitoring the gap between asset

48

6
Risks Related to Strategic Partnerships and Corporate
Acquisitions

The Fuyo Lease Group may form strategic partnerships
with other companies, acquire other companies,
or undertake related actions to expand operations
and achieve business growth. While management
exhaustively examines the implications of forming astrategic partnership or acquiring another company, ifbusiness activities do not proceed as originally expectedfollowing the partnership or acquisition due to changes in
the operating environment or other factors, the Group’sbusiness results could be adversely affected.

7
Risks from Natural Disasters or Other Causes

The Fuyo Lease Group has established various measures toensure business continuity as well as life and safety in timesof emergency, such as disasters, accidents, and infectious
disease epidemics. However, unforeseen circumstances,such as damage to key social infrastructure could restrict theGroup’s business activities and affect its business results.

8
Other Business Risks

The Fuyo Lease Group faces a number of businessrisks other than those listed above. The risks include
administrative risk resulting from inadequate administrative
processing, systems risk caused by breakdowns,
malfunction, or other issues involving computer systems
due to cyberattacks, and human risk that includes
difficulties in securing and developing the necessary
human resources. They also include asset and residual
value risk, meaning the risk of a decline in the value of
owned assets such as real estate or the residual value ofleased assets becoming lower than initial assessments.
Moreover, compliance risk could materialize if failure tocomply with laws and regulations or social norms leads toa loss of social credibility. There is also country risk related
to the political and economic environment in the overseas
countries where the Fuyo Lease Group has expanded its
business operations. In addition, revenues from electricity
sales in the Group’s mega solar business could fall below
projections due to unfavorable weather conditions.

Compliance System
Our Approach to Compliance andCompliance System
At the Fuyo Lease Group, ensuring compliance is afundamental principle of management. We work tostrengthen and enhance our compliance system, whichenables us to operate with integrity and fairness byconforming to relevant social norms, while strictly complying
with all laws and regulations.
We promote compliance throughout the Group by

stipulating various regulations, procedures, and manuals,
conducting compliance education, and enhancing thewhistleblower system on the basis of the Fuyo General
Lease Group's Code of Corporate Conduct. In order tomaintain and further improve our compliance systems, we
implement and carry out compliance programs every fiscal
year. Issues associated with the compliance programs are
discussed at the Compliance Committee and the Executive
Committee before being submitted to the Board of Directors
for approval. Findings and progress of the programs are

49

Risk Management and Compliance System

reported to the Board of Directors on a semi-annual basis.
We will continue our group-wide activities including
management and implementation of compliancemeasures and compliance education, and streamlining
our compliance systems across the Group to improvetheir effectiveness.

Fuyo General Lease Group Code ofCorporate Conduct
The Fuyo Lease Group has formulated the Fuyo
General Lease Group Code of Corporate Conduct,
which specifies the basic policies and position of theentire group as well as behavioral guidelines for theemployees of the Group. We conduct various training
activities including e-learning programs to increase theeffectiveness of the Code and instill the Code among
our employees.
Furthermore, the Code strictly prohibits the forging ofcollusive ties with political and administrative authorities
and business partners, and the private use of thecompany’s assets. In FY 2018, no infringements related
to corruption were found in the Group. Additionally, no
employees were dismissed or subjected to disciplinary
action due to corruption.

Fuyo Lease Group Integrated Report 2019

Independent Assurance ReportCompliance Training
T h e Fu yo Le a s e G ro u p e m p h a s ize s e m p l oye etraining programs that are designed to ensurecompliance. Our training programs include
workplace compliance training and e-learning on
insider trading regulations for all Group employees,
as well as group training conducted by external
instructors for directors, heads of depar tments,
of fices and branch of fices, presidents of Group
companies, and departmental compliance officers.** A compliance officer is appointed for each department or company to raisecompliance awareness and ensure compliance.

Compliance Training (FY 2018)
Group training and workplace training
Participant

Subject# of session

Entry level

Introduction to compliance, Fuyo General Lease Group
Code of Corporate Conduct, Unreasonable demand

1

2nd year employee(Generalist track)

Confidential information management, Personal
information protection, Prevention of harassment,
Insider trading regulations

1

5th year employee(Generalist track)

Response to accidents and troubles

1

Newly appointed head of
department/branch office

Issues to be understood as responsible officers toensure compliance1

Newly appointed assistantmanager/section chief

Prevention of power harassment, sexual andmaternity harassment

2

Basic Policy of Fuyo General Lease GroupAll employees

Compliance manual

1

1. Social Responsibilities and Public Missions
2. Implementation of Customer First Principles
3. Compliance with Laws and Rules
4. Respect for Human Rights
5. Blocking Relationships with Anti-social Forces

Directors and head of
department/office/branch
officePrevention of harassment

1

Fuyo General Lease Group Code of Corporate Conduct
Chapter 1

Chapter 2

Basic Attitude of Fuyo General Lease Group

E-learning

1. Basic Attitude Toward Customers
2. Basic Attitude Toward Shareholders
3. Basic Attitude Toward Local Communities
4. Basic Attitude Toward Employees
5. Basic Attitude Toward Suppliers and Competitors
6. Basic Attitude Toward Politics and Government

Participant

Subject# of session

Directors, head of
department/office/branch office, complianceofficer, entry level

Regulation for Insider Trading (e-learning material of
the Japan Exchange Group)2

Chapter 3

All employees

General issues on compliance1

Action Guidelines for All Members of the Fuyo Lease Group
1. Maintaining Order in the Workplace
2. No Personal Use of Company Assets
3. Appropriate Information Management
4. No Conflicts of Interest
5. Appropriate Personal Conduct
6. Social Media Policy (Appropriate Personal Conduct 2)*Please refer to our website for detailed contents.

Whistleblower Hotline
The Fuyo Lease Group operates a whistleblower hotline.
In addition to the in-house compliance hotline, we provide
a consultation service desk through a cooperating law
firm. Employees are informed of these services via posters
placed inside the company, and portable information cards
distributed to all group directors and employees. Concerned
individuals can immediately seek consultation or reportwhenever they detect any violations of the law, the Codeof Corporate Conduct and other corporate regulations,harassment cases, misconduct in information management
or other potential infringements. The whistleblower systems

accept anonymous reports to protect whistleblowers.
At the Fuyo Lease, full-time corporate auditors areappointed to accept reports from the Group companies,
and the cooperating law firm is available for reports fromthe overseas affiliated companies.
In FY 2018, two reports were received through the
hotline. In each case, we contacted the related parties toconfirm the facts and conducted investigations promptlywith due care to protect whistleblowers against detrimental
treatment. For the cases confirmed to be misconducts,
measures were taken according to corporate regulations,and all cases have been resolved. We will reinforce ourcompliance training of FY 2019 to prevent any recurrences.

50

51

Financial Section

Fuyo Lease Group Integrated Report 201952

Financial Information
Financial Position and Management Goals

Financial Position and Results of Operations

Financial Section
Financial Information
Financial Position and Management Goals

P52

Financial Statements
Consolidated Balance Sheets

P54

Consolidated Statements of Income

P56

Consolidated Statements of Comprehensive Income

P57

Consolidated Statements of Changes in Net Assets

P58

Consolidated Statements of Cash Flows

P61

Notes to Consolidated Financial Statements

P62

Report of Independent Auditors

P95

In FY 2018, the Japanese economy continued to show a gradual
recovery as personal spending rose as a result of improved
employment conditions and increased income. The economic
recovery was also driven by increased capital investments tostreamlining and/or labor-saving business operations following
labor shortages. However, economic uncertainty continued amid
the intensifying US-China trade dispute and the UK's withdrawal
process from the EU.
According to the Japan Leasing Association, the total volumeof lease transactions in Japan’s leasing industry in FY 2018
came to ¥5,012.9 billion, an increase of 2.8% compared to theprevious fiscal year.
In this environment, the Fuyo Lease Group started to implement
Frontier Expansion 2021, its Medium-term Management Plan for
FY 2017 to FY 2021. In FY 2018, the second fiscal year of the plan,
the Group steadily implemented the business and management
strategies outlined in the plan, aiming to be a corporate group that
continually expands the frontiers of its business portfolio and clears
the way to new business fields by fulfilling its corporate slogan of “Go
where no one has gone before.”
As a result of these efforts, newly executed contract volume
in FY 2018 totaled ¥1,187,217 million, up 7.4% year on year.
Consolidated operating assets (after subtracting the deferred profit
on installment sales) as of March 31, 2019, totaled ¥2,262,824
million, up ¥90,235 million, or 4.2%, from the end of the previous
fiscal year. The total assets amounted to ¥2,592.206 million, up¥161,670 million, or 6.7%, from the end of FY 2017. This increaseis due to a steady increase in operating assets, which increasedby ¥90,235 million from the end of the previous fiscal year to¥2,262,824 million, an increase of 4.2% year over year.
The funding balance stood at ¥2,096,958 million, an increaseof 6.7% year on year, mainly due to the issuance of unsecured
straight bonds amounting to ¥35,000 million during the fiscal
year under review.
On the profit front, the Company reported total revenues of¥618,119 million, up 4.7% year on year, operating profit of ¥35,746
million, up 9.3% year on year, ordinary profit of ¥39,166 million, up
11.3% year on year, and net profit attributable to owners of parentof ¥25,689 million, up 17.1% year on year. Revenues, operating
profit, ordinary profit, and profit attributable to owners of parent
all exceeded the previous fiscal year's levels and reached newrecord highs for a fiscal year.

Financial Position and Results of Operations
by Segment
Revenues, Cost of Sales and Gross Profit
Lease and Installment SalesIn FY 2018, Lease and Installment Sales segment revenues

declined by ¥42,572 million, or 7.6% year on year, to ¥517,726
million. Cost of sales declined by ¥42,950 million, or 8.4% year
on year, to ¥469,206 million, and gross profit in the Lease andInstallment Sales segment increased by ¥378 million, or 0.8%,
year on year, to ¥48,520 million. This result was mainly due tothe steady increase in profit achieved through the accumulationof operating assets, which consist mainly of real estate leases
and aircraft leases, despite the fact that no significant gains
were generated from the sale of assets following the termination
or expiration of contracts recorded in the previous year.
Financing
Financing segment revenues totaled ¥14,980 million in FY 2018,
an increase of ¥1,800 million, or 13.7%, year on year. Cost of
sales increased by ¥6 million, or 4.1%, to ¥167 million, and grossprofit in the Financing segment rose ¥1,793 million, or 13.8%,
to ¥14,813 million. This result was mainly due to the steady
accumulation of operating assets in the Financing segment.
Other
The Other segment’s revenues jumped by ¥68,573 million, or
407.2% year on year, to ¥85,412 million in FY 2018. Cost of
sales increased by ¥63,280 million, or 624.6% year on year, to¥73,411 million, and gross profit in the other segment increasedby ¥5,293 million, or 78.9% year on year, to ¥12,001 million. This
result was mainly founded on the contribution of consolidated
billing services for businesses provided by INVOICE Inc., whichbecame a consolidated subsidiary in October 2018.

Operating Profit, Ordinary Profit and Profit Attributableto Owners of Parent
In Leases, the Company steadily expanded the profits throughthe accumulation of operating assets focused on real estateleases and aircraft leases. In regards to Financing, the Company
successfully accumulated assets with a focus on profitability,
thus increasing both the balance of operating assets and profits.
The other segment's revenues and profit increased significantly
because of the addition of the good non-asset business following
the consolidation of INVOICE Inc. As a result, operating profit
totaled ¥35,746 million, a year on year increase of 9.3%, ordinary
profit totaled ¥39,166 million, a year-on-year increase of 11.3%,
and profit attributable to owners of parent stood at ¥25,689
million, up 17.1% year on year, all reaching new record highs.

Net Assets and Equity Ratio
Total shareholders’ equity was ¥227,208 million, up 9.0% year
on year, mainly owing to an increase in retained earnings. As
a result, total net assets came to ¥295,067 million at the endof the fiscal year under review, up ¥12,493 million, or 4.4%,
compared to the end of the previous fiscal year. The equity ratio
fell 0.1 percentage points from the end of the previous fiscal
year to 10.1% due to the acquisition of additional shares of theconsolidated subsidiary. The equity ratio was maintained at the
10% level while operating assets were increased.

53

Financial Section

Fuyo Lease Group Integrated Report 2019previous fiscal year, mainly due to increases in short-term loans

Cash Flowsand long-term loans from banks and other financial institutions.
Direct financing increased 6.8% from the end of the previous

The analysis of cash flows for FY 2018 is as follows.

fiscal year to ¥714,904 million, mainly due to the issuance ofcommercial paper and bonds. As a result, the funding balanceat the end of the fiscal year under review increased 6.7% fromthe end of the previous fiscal year to ¥2,096.958 million. The
percentage of direct financing stood at 34.1%, compared to theend of the previous fiscal year.
The main demand for working capital at the Group include
the purchase of lease assets and properties for installment
sales to customers, the purchase of operational investment
securities, and capital investment in solar power generation
facilities, in addition to operating expenses and selling,
general and administrative expenses.
As of March 31, 2019, the balance of interest-bearing
debt, including borrowings and lease obligations, stoodat ¥2,122,654 million, up 6.1% from the end of fiscal year.
Moreover, cash and cash equivalents at the end of the fiscal
year under review totaled ¥69,918 million.
At the end of the fiscal year under review, the Company
had concluded overdraft agreements and loan commitment
agreements with 72 correspondent financial institutions. Thebalance of executed loans amounted to ¥438,865 million, andthe balance of unexecuted loans stood at ¥470,643 million.

Cash Flows from Operating Activities
Operating activities in FY 2018 used net cash of ¥79,975 million,a decrease compared to the net cash used of ¥104,417 million in
the previous fiscal year. The major changes included decreases
in loss on retirement of property for lease, cost of property forlease sales, lease receivables, investment assets, loans, andoperational investment securities and increases in cash outflows
for loans and purchase of lease assets.

Cash Flows from Investing Activities
Investing activities in FY 2018 used net cash of ¥9,393 million,
compared to the net cash of ¥5,679 million used in the previous
fiscal year. The main changes included an increase in cash
outflows for the purchase of investment securities and theacquisition of the subsidiary's shares due to the change in thescope of consolidation, and an increase in income resulting
from the sales and redemption of investment securities.

Cash Flows from Financing Activities
Financing activities in FY 2018 provided net cash of ¥105,502
million, compared to the net cash of ¥113,549 million in theprevious fiscal year. The main changes in indirect financing
included an increase in the net amounts of short-term loans
from banks and other financial institutions and proceeds fromlong-term loans from banks and other financial institutions, andan increase in cash outflows due to repayments of long-termloans to banks and other financial institutions. In direct funding,the main changes included a decrease in the net amountsof commercial paper, an increase in cash inflows due to theissuance of bonds and the redemption of bonds, an increase inproceeds from securitized lease receivables and a decrease in
cash outflows from repayments for securitized lease receivables.

Financial Policy
The Fuyo Lease Group has set a basic policy of ensuring theliquidity required for business operations and stable funding
sources.
The Group raises funds through indirect financing usingborrowings from financial institutions and direct financing fromthe markets for its working capital and equipment funding.
At the end of the fiscal year under review, indirect financing
amounted to ¥1,382,053 million, up 6.7% from the end of theManagement Policy, Management Strategy
and Objective Indicators Used for Evaluating
Progress towards Management Goals
The Medium-term Management Plan, Frontier Expansion 2021,
aims to expand the frontiers of our business portfolio throughrobust and sustainable growth by constantly challenging new
business areas and business models.
To this end, it is important to steadily build operating assets
and enhance profitability in order to achieve better performance.
From this point of view, we have defined operating assets,ordinar y profit, and return on assets ( ROA) as our threemanagement goals.
Founded on the basis of steadily accumulating operating
assets, both sales and profit showed favorable performanceand exceeded the previous year’s results. Revenue, operating
profit, ordinary profit, and profit attributable to owners of parent
all reached new record highs.
Regarding stock, we were able to steadily increase operating
assets by 4.2% from the end of the previous consolidated fiscal
year while improving return on assets (ROA) by 0.1 points fromthe end of the previous consolidated fiscal year.

Management Goals(Consolidated)

FY 2017
ResultFY 2018
ResultInterim Target(FY 2019)

Target(FY 2021)

Operating Assets¥2,172.6 bn¥2,262.8 bn¥2,300-¥2,400 bn¥2,500 bn

Ordinary Profit¥35.2 bn

¥39.2 bn

¥42 bn¥50 bnReturn on assets (ROA)

1.67%

1.77%

1.7-1.8%

2.0%

Consolidated Balance Sheets
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

Assets

2019

2018

2019

Current assets:
Cash and deposits (Notes 2 and 8)
Marketable securities (Notes 2, 3 and 5)¥

71,173
179,529¥54,822
177,896$641,206
1,617,387

Trade receivables (Notes 2 and 5):
Installment sales

97,452

116,697

877,953

Financing

385,951

380,555

3,477,038
9,914,551

Lease

1,100,515

1,113,085

Other

2,671

2,396

24,069Allowance for doubtful receivables(2,725)(2,806)(24,554)

Other
Total current assets

63,61035,200573,066

1,898,179

1,877,848

17,100,716

Investments and other assets:
Investment in securities (Notes 2, 3 and 5)
Unconsolidated subsidiaries and affiliates

23,921

14,976

215,510

Other investment in securities

68,89975,477620,717

Claims provable in bankruptcy, claims provable in rehabilitation and other

571

1,022

5,152

Other investments

47,54146,505428,297
37,439Deferred tax assets (Note 11)

4,155

3,149

Allowance for doubtful receivables

(375)

(445)

(3,387)

Total investments and other assets

144,713140,686

1,303,727

4,332,705

Property and equipment, at cost less accumulated depreciation:
Leased assets (Note 4)

480,930

375,312Advances on purchases of property and equipment for lease

15,073

3,504

135,793

Other operating assets (Note 4)

28,265

19,671

254,644

Own-used assets (Note 4)

1,790

1,885

16,133

Total property and equipment

526,059

400,3734,739,274

Intangible fixed assets:
Software leased to customers
Goodwill
Other
Total intangible fixed assets

330

373

2,976

17,482

6,226

157,498

4,268

4,201

38,45922,081

10,801

198,933

Deferred assets:
Deferred organization expenses
Business commencement expenses
Total deferred assets
Total assets:

0

0

1

1,171

825

10,558

1,172

826

10,559¥ 2,592,206¥ 2,430,536$ 23,353,209

See accompanying notes to the consolidated financial statements.

54

55

Financial Section

Fuyo Lease Group Integrated Report 2019

Thousands of U.S.
dollars (Note 1)

Millions of yen

Liabilities and net assets

2019

2018

2019

Current liabilities:
Short-term borrowings (Notes 2 and 5)

959,940$ 9,146,482

Current portion of long-term debt (Notes 2 and 5)¥ 1,015,259
291,825¥

271,7192,629,063

Lease obligations (Notes 2 and 5)

25,10334,873

226,153

Consolidated Statements of Income
Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2019 and 2018

Notes and accounts payable – trade44,531

26,464401,184

Income taxes payable

5,555

5,880

50,050

Advances received from customers

8,261

7,772

74,427

Lease and installment sales

Deferred profit on installment sales

1,421

1,625

12,806

FinancingOther

27,872

22,770251,108

Other

1,419,831

1,331,046

12,791,273

Long-term debt (Notes 2 and 5)

789,872

733,293

7,115,973

Lease and installment sales

Deferred tax liabilities (Note 11)

14,802

16,618133,356

Financing

Net defined benefit liability (Note 12)

1,996

1,703

17,983

Guarantee deposits from customers

64,09360,461

577,423

Other

6,541

4,837

58,932877,307

816,915

7,903,667

2,297,138

2,147,962

20,694,940

Total current liabilities
Long-term liabilities:

Total long-term liabilities
Total liabilities

Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2018

2019

¥ 517,726¥ 560,298$ 4,664,200

14,98013,180134,961

85,412

16,839769,485

618,119590,318

5,568,646

469,206

512,156

4,227,083

167

160

1,509

73,411

10,130661,361

Revenues:

Total revenues
Costs:

Contingent liabilities (Note 6)

Other

8,648

7,349

77,914

Total costs

Interest expenses

551,433

529,798

4,967,867

Gross profit

66,68660,519600,779

Selling, general and administrative expenses

30,93927,802

278,737

Operating profit

35,74632,717

322,042

16,146

Net assets:
Shareholders’ equity (Notes 16, 20 and 21):
Other income (expenses)

Common stock, without par value
Authorized: 100,000,000 sharesInterest and dividend income

1,792

1,439

Issued: 30,287,810 shares in 2019 and 2018

(530)

(354)

(4,780)

1,259

753

11,347

Capital surplus
Retained earnings
Less, treasury stock, at cost – 142,465 shares in 2019 and 64,939 shares in 2018
Total shareholders’ equity

10,532

10,532

94,884

Interest expenses

8,873

10,416

79,943Equity in earnings of affiliates

208,628

187,673

1,879,539

(826)

(224)

(7,443)

227,208

208,397

2,046,923

Accumulated other comprehensive income
Net unrealized gains (losses) on available-for-sale securities

34,71339,265

312,732

Deferred gains (losses) on hedges

(577)

(92)

(5,198)Foreign currency translation adjustments

496

1,551

4,473

Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Share acquisition rights

3

(10)

35

34,636

40,714

312,042

842

924

7,593

Non-controlling interests

32,37932,537291,711

Total net assets

295,067

282,574

2,658,269

Total liabilities and net assets¥ 2,592,206¥ 2,430,536$ 23,353,209

Bad debt recovered

86

118

784

Reversal of allowance for doubtful receivables

95

103

864

Reversal of provision for loss on guarantees

91

127

823

Gain on sale of marketable and investment securities

941

0

8,485

Other, net

601

224

5,421

40,08535,130361,132

Current

11,182

10,965

100,746

Deferred

825

(92)

7,436

Total

12,008

10,872

108,182

Profit28,077

24,257

252,950

Profit attributable to non-controlling interests

2,388

2,312

¥ 25,689¥ 21,944

Profit before income taxes

Income taxes (Note 11)

Profit attributable to owners of parent

21,515$

231,435

See accompanying notes to the consolidated financial statements.

56

57

Financial Section

Fuyo Lease Group Integrated Report 2019

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Net Assets

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2019 and 2018

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2019 and 2018
Thousands of U.S.
dollars (Note 1)

Millions of yen

Profit

2019

2018

2019

¥ 28,077¥ 24,257$ 252,950

Year ended March 31,2019
Shareholders’ equity

Number ofshares ofcommon stock

Commonstock

Capitalsurplus30,287,810¥ 10,532¥ 10,416

Retainedearnings

Treasurystock,
at costTotal
shareholders’equity¥ (224)¥ 208,397

Millions of yen
Balance at beginning of year

Other comprehensive income
Net unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges(4,553)

3,957(41,021)(478)

9(4,312)(1,066)(586)(9,611)Remeasurements of defined benefit plans

(10)

80

(92)

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

24

(14)

223

(6,084)

3,445(54,813)¥ 21,993¥ 27,702$ 198,137¥ 19,611¥ 25,364$ 176,678

2,381

2,338

21,459Foreign currency translation adjustment

Total other comprehensive income
Comprehensive income¥ 187,673

Cash dividends(4,716)(4,716)

Profit attributable to owners of parent

25,68925,689Purchase of treasury stock(695)

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year

(17)

(695)

94

76

(1,542)30,287,810¥ 10,532¥ 8,873(1,542)¥ 208,628¥ (826)¥ 227,208(Comprehensive income attributable to)Comprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

Year ended March 31,2019
Accumulated other comprehensive income

See accompanying notes to the consolidated financial statements.

Net unrealized
gains onavailable-forsale securities

Deferred
gains(losses)on hedges¥ 39,265¥ (92)

Foreigncurrencytranslation
adjustment

Total
Remeasureaccumulated
ments
other
of defined
benefit plans comprehensive
incomeMillions of yen
Balance at beginning of year

¥ 1,551¥ (10)¥ 40,714

Cash dividends
Profit attributable to owners of parent
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year

(4,552)(484)¥ 34,713¥ (577)¥(1,055)14(6,078)496¥ 3¥ 34,636

Year ended March 31,2019Balance at beginning of year

Shareacquisitionrights

Noncontrollinginterests

Total
net assets¥ 924¥ 32,537¥ 282,574

Cash dividends(4,716)

Profit attributable to owners of parent

25,689Purchase of treasury stock(695)

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity(1,542)

Balance at end of year

76

(81)

(158)

(6,317)¥ 842¥ 32,379¥ 295,067

See accompanying notes to the consolidated financial statements.

58

59

Financial Section

Fuyo Lease Group Integrated Report 2019Year ended March 31,2019
Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Year ended March 31,2018
Shareholders’ equity

Treasurystock,
at costNumber ofshares ofcommon stock

Total
shareholders’equityCommonstock$ 94,884$ 93,842$ 1,690,751

Retainedearnings

Treasurystock,
at costTotal
shareholders’equity¥ (342)¥ 190,548

Millions of yen

Thousands of U.S. dollars (Note 1)
Balance at beginning of year

Capitalsurplus$ (2,024)$ 1,877,453

Balance at beginning of year

30,287,810¥ 10,532¥ 10,416¥ 169,942

Cash dividends(42,489)(42,489)

Cash dividends(4,167)(4,167)

Profit attributable to owners of parent

231,435

231,435

Profit attributable to owners of parent

21,94421,944(6,268)(6,268)Purchase of treasury stock

849

691

Purchase of treasury stock
Disposal of treasury stock(158)

Change in ownership interest of parent due totransactions with non-controlling interests(13,899)(13,899)

Net changes of items other than shareholders’ equity
Balance at end of year

$ 94,884$ 79,943$ 1,879,539$ (7,443)$ 2,046,923

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year

(45)

Deferred
gains(losses)on hedges

Foreigncurrencytranslation
adjustment

30,287,810¥ 10,532¥ 10,416$ 353,746

$

(833)

$ 13,978Total
Remeasureaccumulated
ments
other
of definedcomprehensive
benefit plansincome$ (92)Net unrealized
gains onavailable-forsale securities$ 366,799

Balance at beginning of year
Cash dividends

Profit attributable to owners of parent

Profit attributable to owners of parent

Purchase of treasury stock

Purchase of treasury stock

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity

Deferred
gains(losses)on hedges

Foreigncurrencytranslation
adjustment(41,014)(4,365)(9,505)

127(54,757)$ 312,732$ (5,198)$ 4,473$ 35$ 312,042

Balance at end of year

¥ 35,314¥ (109)¥ 2,137¥ 208,397

Total
Remeasureaccumulated
ments
other
of definedcomprehensive
benefit plansincome¥ (47)¥ 37,294

3,951

17

(586)

37

3,419

¥ 39,265¥ (92)¥ 1,551¥ (10)¥ 40,714

Year ended March 31,2019Balance at beginning of year

¥ (224)

Millions of yen

Cash dividends

Balance at end of year

¥ 187,673

Year ended March 31,2018
Accumulated other comprehensive income

Thousands of U.S. dollars (Note 1)
Balance at beginning of year

(0)
73
­–

Year ended March 31,2019
Accumulated other comprehensive income

Net unrealized
gains onavailable-forsale securities

(0)
118

Year ended March 31,2018

Shareacquisitionrights

Noncontrollinginterests

Total
net assets$ 8,326$ 293,134$ 2,545,712

Balance at beginning of year

Shareacquisitionrights

Noncontrollinginterests

Total
net assets¥ 842¥ 30,506¥ 259,192

Cash dividends(42,489)

Cash dividends(4,167)

Profit attributable to owners of parent

231,435

Profit attributable to owners of parent

21,944Purchase of treasury stock(6,268)Purchase of treasury stock(0)

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity

73

Disposal of treasury stock
Change in ownership interest of parent due totransactions with non-controlling interests
Net changes of items other than shareholders’ equity
Balance at end of year691
(13,899)(733)(1,423)(56,913)$ 7,593$ 291,711$ 2,658,269

See accompanying notes to the consolidated financial statements.

Balance at end of year

­–
81

2,031

5,532

¥ 924

¥ 32,537¥ 282,574

See accompanying notes to the consolidated financial statements.

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Financial Section

Fuyo Lease Group Integrated Report 2019

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Fuyo General Lease Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2019 and 2018

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Thousands of U.S.
dollars (Note 1)

Millions of yen

2019

2018

2019

¥ 40,085¥ 35,130$ 361,132

Depreciation and amortization

33,30333,535300,032

Loss on retirement of leased assets and cost of leased assets sales

19,89870,364

179,269

(164)

(622)

(1,480)Interest and dividend income(1,792)(1,439)(16,146)

Interest expenses

9,179

7,704

82,695Gain on sales of marketable and investment securities, net

(941)

(0)

(8,485)(1,259)(753)(11,347)

812

1,571

7,319

Cash flows from operating activities:
Profit before income taxes
Adjustments for:

Decrease in allowance for doubtful receivables

Equity in earnings of affiliates
Amortization of goodwill and negative goodwill
Increase (decrease) in trade receivables

26,197(65,554)

236,012Purchase of leased and other operating assets(180,998)(153,097)(1,630,615)

Decrease in trade payables(10,060)(18,077)(90,638)

1,684

3,660

15,175(64,055)(87,578)(577,077)

Other, net
SubtotalInterest and dividend income received

1,722

1,245

15,516

Interest expenses paid

(8,913)(7,857)(80,298)

Income taxes paid

(11,414)(10,226)(102,829)

Subsidies received

2,684

­–

24,184(79,975)(104,417)(720,504)

Net cash used in operating activities
Cash flows from investing activities:
Proceeds from sales and redemption of marketable and investment securities

4,248

2,604

38,273

Payments for purchase of marketable and investment securities(9,297)(7,400)(83,765)

Purchase of shares of subsidiaries resulting in change in scope of consolidation(2,352)­–(21,192)

Payments for purchase of property and equipment for own use(1,275)(2,213)(11,489)

Other, net
Net cash used in investing activities

(716)

1,330

(6,454)(9,393)(5,679)(84,627)

55,81362,662502,827

Cash flows from financing activities:
Increase in short-term borrowings, net(1) Basis of Presentation
Fuyo General Lease Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account in conformity withgenerally accepted accounting principles in Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity withthose of their countries of domicile.
The accompanying consolidated financial statements have been compiled from the consolidated financial statements prepared by theCompany as required under the Financial Instruments and Exchange Act of Japan and have been prepared in accordance with generally
accepted accounting principles in Japan, which are different in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
The amounts in US dollars presented in the financial statements are translated from the amounts in Japanese yen at the exchange rate of¥111 to US$1.00, in effect at March 31, 2019, solely for the convenience of overseas readers. Therefore, this does not imply that those amounts
in yen can be converted into equivalent amounts in US dollars at this or any other exchange rate. The amounts, which are indicated in millionsof yen, are rounded down by truncating the figures below one million. As a result, the totals may not add up exactly.

(2) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and all companies controlled directly or indirectlyby the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies havebeen included in the consolidated financial statements on an equity basis. All significant intercompany balances and transactions have been
eliminated in consolidation.
For fiscal years ended March 31, 2019 and 2018, consolidated accounting covered the parent company and 49 and 46 subsidiaries,
respectively. A total of 6 and 4 affiliated companies are accounted for under the equity method and incorporated into the consolidated financial
statements for fiscal years ended March 31, 2019 and 2018, respectively.
Investments in the non-consolidated subsidiaries or affiliates for which the equity method has not been applied are evaluated using the cost
method.
With regard to the equity method affiliates whose closing dates differ from the consolidated closing date, the financial statements of thesecompanies for their respective fiscal years have been applied.
Regarding the closing dates of the consolidated subsidiaries, the closing date of 20 companies is December 31, that of 17 companies is
March 31, and that of 12 companies is January 31 for the current year.
Financial statements of the respective subsidiaries for the respective fiscal years, with necessary adjustments in material activities transacted
during the periods up to the consolidated closing date, have been reflected in the consolidation.
Of the acquisition costs of newly consolidated subsidiaries, portions exceeding their net assets as of the dates when the Company acquired
control are recorded as goodwill and will be amortized using the straight-line method over 20 years or less, except for immaterial amounts.

(3) Foreign Currency Translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates prevailing at the balance sheet
dates, except for assets and liabilities hedged by forward foreign exchange contracts.
All revenues and expenses associated with foreign currencies are translated at the exchange rates prevailing when such transactions were
made. The resulting exchange gains and losses are credited or charged to income.
The accounts of the foreign subsidiaries are translated at the exchange rates prevailing at the balance sheet dates, except for thecomponents of net assets. The components of net assets are translated at their historical exchange rates. The resulting exchange differences
are included in the foreign currency translation adjustments account in net assets.

Proceeds from long-term debt

339,827

318,241

3,061,510

Repayments of long-term debt

(295,277)(282,268)(2,660,157)

Proceeds from issuance of bonds

35,00020,000315,315

Redemption of bonds
Payments from changes in ownership interests in subsidiaries that do not result inchange in scope of consolidation
Cash dividends paid

(20,000)(300)(180,180)(4,064)­–(36,617)(4,716)(4,168)(42,489)(4) Cash and Cash Equivalents(1,081)(617)(9,739)105,502113,549

950,470

The Company and its subsidiaries consider all highly liquid investments with a maturity of three months or less when purchased to be cash
equivalents.

Other, net
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents

(276)

47

(2,495)

Net increase in cash and cash equivalents

15,8553,500

142,844

Cash and cash equivalents at beginning of year

54,06250,561

487,049¥ 69,918¥ 54,062$ 629,893

Cash and cash equivalents at end of year

(5) Lease Accounting
Revenue and cost of finance leases are recognized when each lease payment becomes due.
Revenue from operating leases is based on the monthly amounts of lease payments due under lease agreements over the lease agreement
periods. The monthly lease payments corresponding to each period are allocated to revenue from operating leases for that period.

See accompanying notes to the consolidated financial statements.

(6) Installment Sales
Revenue and cost of installment sales are recognized when each installment payment becomes due.

(7) Interest Expenses
Interest expense is allocated to cost of sales and other expenses based on the balances of the respective operating assets, which consist
principally of accounts receivable and leased assets, and other assets.
Interest expense classified as cost of sales is stated net of interest income.

62

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Financial Section

Fuyo Lease Group Integrated Report 2019(8) Securities(14) Retirement Benefits

All securities are classified as available-for-sale securities.
Marketable available-for-sale securities are carried at fair market value and unrealized gains or losses are reported as a separate componentof net assets, net of the related deferred income taxes.
Other securities without available fair market values are stated at values determined using the moving-average cost method.
The cost of securities sold is determined based on the moving-average method.
When a significant decline in fair value below cost of an individual security is deemed to be other than temporary, the carrying value of theindividual security is written down to fair value.

The method for attributing estimated retirement benefits for periods of employee service(9) Depreciation and Amortization
Depreciation of leased assets is computed primarily by the straight-line method based on the lease term of the respective assets.
Depreciation of assets leased under finance leases not involving title transfer is computed by the straight-line method based on the leaseterm of the respective assets and assuming a residual value of zero.
Depreciation of other operating assets is computed by the straight-line method.
Depreciation of own-used assets is computed by the declining balance method. However, some domestic and overseas consolidated
subsidiaries apply the straight-line method for depreciation of buildings (excluding facilities attached to buildings) acquired on and after April 1,
1998 and facilities attached to buildings and structures acquired on and after April 1, 2016.
The estimated useful lives of own-used assets are principally as follows:
Buildings			
3 to 50 years
Furniture and equipment		
3 to 20 years
Computer software intended for internal use is amortized by the straight-line method over the estimated useful lives (5 to 10 years).

For the calculation of retirement benefit obligations, the benefit formula method is used to attribute estimated retirement benefits for the period
up to the end of the fiscal year.

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

Unrecognized actuarial differences and unrecognized prior service cost
Unrecognized actuarial differences and unrecognized prior service cost after tax effect adjustments are recorded as remeasurements ofdefined benefit plans classified in accumulated other comprehensive income of net assets.

Simplified accounting method
Certain domestic consolidated subsidiaries use simplified accounting methods in relation to the calculation of the net defined benefit liability
and the net periodic pension cost. In the case of the termination allowance plan, retirement benefit obligations are recorded as the amountto be paid under voluntary retirement as of the fiscal year-end. In the case of the corporate pension plan, retirement benefit obligations arerecorded as the amount of actuarial liability calculated under the latest pension funding program.

Directors’ and audit & supervisory board members’ retirement benefits(10) Allowance
Allowance for doubtful receivables
To cover possible losses from bad debts, the Company sets aside an allowance for the estimated amount of doubtful receivables deemed
uncollectible. This allowance is based on historical default rates for normal claims and the individual analysis of debtors’ financial positions forclassified loans and claims in bankruptcy. With respect to the bankruptcy claims, an estimated uncollectible amount is directly deducted fromthe amount of claims. The direct deduction totaled ¥2,072 million in the fiscal year ended March 31, 2018 and ¥1,819 million ($16,395 thousand)in the fiscal year ended March 31, 2019.

Provision for future lease payments
To cover possible losses from future lease payment receivables for operating leases (subleases), a provision for the amount deemed
uncollectible is recorded. This provision is based on the historical default rates for normal claims , the analysis of individual receivables withrespect to classified loans in addition to bankruptcy claims.

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

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

Provision for share-based remuneration for directors (and other officers)
To prepare for the provision of the Company’s shares, etc. to directors and other officers of the Company based on the Regulations for
Provision of Shares to Officers, the Company posts the estimated amount of stock-based benefit obligation as of the end of the fiscal year.

(11) Deferred Assets
Deferred organization expenses
Organization expenses are amortized by the straight-line method within five years after the date of founding.

The Company records the entire amount of retirement benefits to directors and audit & supervisory board members, which are required by theinternal corporate policy at the end of the consolidated fiscal year.

(15) Derivatives and Hedging Activities
With regard to foreign currency-related derivative financial instruments, the Company uses forward foreign exchange contracts. With regard tointerest rate-related instruments, the Company uses interest rate swap contracts and interest rate cap contracts.
The Company uses currency-related derivatives and interest rate-related derivatives for risk management purposes, not for speculative
investment purposes.
The Company uses currency-related derivatives for the purpose of hedging risks associated with foreign currency fluctuations that affect its
foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives for the purpose of hedging risks
associated with interest rate fluctuations that affect its borrowings.
The Company uses derivatives, in accordance with its internal “Basic Policy for Managing Market and Liquidity Risks,” for the purpose ofhedging risks associated with interest-rate and foreign currency fluctuations arising from its sales and financial operations.
Derivative financial instruments are stated at fair value.
Under the exceptional treatment of hedge accounting, the interest rate swaps that qualify as hedge transactions and meet specific matching
criteria are not remeasured at market value, but the differentials paid or received under the swap agreements are recognized and included ininterest expense or income.

(16) Per Share Information
Basic earnings per share is computed by dividing earnings attributable to common stock by the weighted average number of common stock
outstanding during the fiscal year.

(17) Recently Issued Accounting Standards Not Yet Adopted• Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018, ASBJ)• Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30, March 30, 2018, ASBJ)(12) Income Taxes(1) Outline
International Accounting Standard Board (IASB) and Financial Accounting Standard Board (FASB) have jointly developed comprehensive
accounting standards for revenue recognition and announced Revenue from Contracts with Customers (IFRS 15 for IASB and Topic 606 for
FASB). As IFRS 15 is effective from the fiscal year commencing on or after January 1, 2018 and Topic 606 is effective from the fiscal year
commencing after December 15, 2017, ASBJ has developed comprehensive accounting standard together with its implementation guidance.
The fundamental policy of ASBJ in developing accounting standards for revenue recognition is the new accounting standard that would
be consistent with IFRS 15. Alternative accounting treatment considering practices in Japan would be added to the extent not to causeinconsistency with IFRS 15.

The temporary differences between the book value of assets and liabilities recognized for accounting and those for tax purposes are recorded
as deferred tax assets (liabilities) to account for future income taxes.

(2) Scheduled date of adoption
The changes will be applied from the beginning of the fiscal year ending in March 31, 2022.

(13) Other important matters for preparation of consolidated financial statements(3) Impact of adoption of such accounting standards
The impact of the adoption of the Accounting Standard for Revenue Recognition and its implementation guidance on the consolidated financial
statements is currently under evaluation.

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

Bond issuance cost
Bond issuance cost is expensed upon payment.

Consumption Taxes
Transactions are recorded exclusive of consumption taxes and local consumption taxes.

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

(18) Changes in Presentation
Changes Due to Application of the Partial Amendments to Accounting Standard for Tax Effect Accounting
The Company has adopted the Partial Amendments to Accounting Standard for Tax Effect Accounting (Accounting Standards Board of Japan

64

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Financial Section

Statement No. 28, February 16, 2018) from the beginning of the fiscal ended March 31, 2019, and has the classification of deferred tax assets
into the category of investments and other assets and deferred tax liabilities into the category of long-term liabilities.
As a result the reclassification, in the consolidated balance sheets as of March 31, 2018, Deferred tax assets under Current assets decreasedby ¥2,771 million ($24,970 thousand) and Deferred tax assets under Investments and other assets increased by ¥2,469 million ($22,247
thousand) . In addition, Deferred tax liabilities under Current liabilities decreased by ¥130 million ($1,177 thousand) and Deferred tax liabilities
under Long-term liabilities decreased by ¥171 million ($1,545 thousand) .
Deferred tax assets and deferred tax liabilities of the same taxable entity are set off in the presentation, and total assets decreased by ¥302
million ($2,722 thousand) compared with the amount before the change.

Consolidated Balance Sheets
For investment in real estate investment trust, which was included in Investment in securities in Investments and other assets until the fiscal year
ended March 31, 2018, the Company changed the management accounting policy as the investment amount was expanding. Accordingly, theCompany has changed the classification of investment in real estate investment trust into Marketable investment securities in Current assets fromthe fiscal year ended March 31, 2019 in order to reflect the actual condition of the Company’s business more appropriately. To be consistent withthe current year presentation, the figures in the consolidated financial statements for the fiscal year ended March 31, 2018 were reclassified.
As a result, in the consolidated balance sheets as of March 31, 2018, ¥3,859 million ($34,771 thousand), which was presented in Investment
in securities under Investments and other assets, was reclassified as Marketable securities in Current assets.
Assets for the solar power generation business in the Energy/Environment areas were included in Own-used assets under Tangible fixed
assets until the fiscal year ended March 31, 2018. However, due to the increasing significance, the Company has determined to separately
present these assets as Other operating assets in Tangible fixed assets from the fiscal year ended March 31, 2019 to reflect the actual conditionof the Company’s business more appropriately. To be consistent with the current year presentation, the figures in the consolidated financial
statements for the fiscal year ended March 31, 2018 were reclassified.
Consequently, in the consolidated balance sheets as of March 31, 2018, ¥19,671 million ($177,219 thousand) , which was presented in Ownused assets in Tangible fixed assets, was reclassified as Other operating assets in Tangible fixed assets.

Consolidated Statements of Income
For income from real estate investment trust, which was included in Dividend income in Other income until the fiscal year ended March 31,
2018, the Company has changed the presentation to Revenues from the fiscal year ended March 31, 2019 as a result of the change of the
management accounting policy. To be consistent with the current year presentation, the figures in the consolidated financial statements for the
fiscal year ended March 31, 2018 were reclassified.
Consequently, in the consolidated statements of income for the fiscal year ended March 31, 2018, ¥116 million ($1,050 thousand), which waspresented in Dividend income in Other income, was reclassified to Revenues.

Consolidated Statements of Cash FlowsAs a result of the change in the presentation in the consolidated statements of income with regard to income from real estate investment trust
mentioned above, the related items in the consolidated statements of cash flows were reclassified for the fiscal year ended March 31, 2018.
This reclassification resulted in no impact on the amount of Net cash used in operating activities in total.
Purchase and depreciation of assets for the solar power generation business in the Energy/Environment areas were included in Purchasesof property and equipment for own use in Cash flows from investing activities and Other, net under Cash flows from operating activities until
the fiscal year ended March 31, 2018. However, due to the increasing its significance, the Company has determined to separately present it
as Purchase of other operating assets and Depreciation of other operating assets in Cash flows from operating activities from the fiscal year
ended March 31, 2019 to reflect the actual condition of the Company’s business more appropriately. To be consistent with the current year
presentation, the figures in the consolidated statements of cash flows for the fiscal year ended March 31, 2018 were reclassified.
Consequently, in the consolidated statements of cash flows for the fiscal year ended March 31, 2018, ¥(3,648) million ($(32,871) thousand),
which was presented as Purchases of property and equipment for own use in Cash flows from investing activities, and ¥1,157 million ($10,430
thousand), which was presented in Other, net under Cash flows from operating activities, were reclassified as Purchase of other operating
assets under Cash flows from operating activities and Depreciation of other operating assets, respectively.

(19) Additional information
Board Benefit Trust (BBT) Plan
Based on the resolution reached at the 49th Annual General Meeting of Shareholders held on June 22, 2018, the Company has introduced
a new stock-based remuneration plan or Board Benefit Trust (BBT) (the “Plan”) for the Company’s directors, excluding outside directors,(the “Eligible Directors”) and executive officers who currently do not serve as directors (the “Executive Officers”. The Eligible Directors andExecutive Officers are hereinafter collectively referred to as the “Directors, etc.”).
(1)Overview of the Transaction
The Plan is a stock-based remuneration plan, under which the Company’s shares will be acquired by a trust (the trust to be established under
the Plan is referred to hereinafter as the “Trust”) using funds that the Company will contribute, and the Company’s shares and cash equivalent
to the market price of the Company’s shares (the “Company’s share, etc.”) will be provided to the Directors, etc. from the Trust in accordancewith the Regulations for Provision of Shares to Officers established by the Company. In principle, the Company’s shares, etc. will be provided to
the Company’s Directors, etc. on their retirement.

Fuyo Lease Group Integrated Report 201966

(2) Treasury stock remaining in trust
The shares of the Company remaining in trust are recorded as treasury stock under net assets based on the book value in trust (excluding theamount of incidental costs). The book value and the number of shares of treasury stock under the plan are: – nil and no shares as of March 31,2018 and ¥694 million ($6,260 thousand) and 104,600 shares as of March 31, 2019, respectively.
(3) Book value of loans recorded based on the gross method
Not applicable.

2. FINANCIAL INSTRUMENTS
The position in respect of financial instruments for the fiscal year ended March 31, 2019, was as follows.

(1) Policy on financial instruments
The Fuyo Lease Group is engaged in leasing and installment transactions for machinery and equipment and financial transactions such as theprovision of operating loans. The Group uses direct and indirect financing to procure funds for purchasing assets to lease or to sell throughinstallment sales and for providing operating loans to customers. The Group’s indirect financing mainly consists of loans from financial
institutions, and its direct financing includes issuing bonds payable, commercial, paper and securitization of receivables. As the Group holds
financial assets and financial liabilities that are subject to interest rate fluctuation, assets and liabilities are comprehensively managed throughasset-liability management (ALM) to mitigate the negative impact of interest rate fluctuations.
Derivative transactions are only used for mitigating currency and interest rate risks and are not used for speculative purposes.

(2) Financial instruments and their risks
Lease receivables, investment assets, and operating loans are trade receivables due from customers and subject to credit risks associated withcustomer default. Foreign currency-denominated receivables and payables arising from overseas business are subject to risks associated withforeign currency fluctuations.
Marketable securities and investment securities include business partners’ shares, bonds, and investments in limited partnership. Thoseinvestments are subject to credit risks associated with the issuers and market risks.
Bonds payable, commercial paper, lease obligations, long-term loans, and payables under fluidity long-term lease receivables and installment
sales trade receivables are used to procure funds for purchasing assets to lease or sell through installment sales to customers. These payables
are subject to risks that may compel the Company to procure funds with exceptionally high interest rates and to liquidity risks (funding risks)that may negatively affect the Company’s ability to obtain funding and result in losses. A portion of long-term loans have floating interest rates
and are therefore subject to interest rate risks.
The Company uses foreign currency-related derivative contracts to reduce risks associated with foreign currency fluctuations that affectforeign currency-denominated receivables and payables. The Company uses interest rate-related derivatives to reduce risks associated withinterest rate fluctuations that affect borrowings.

(3) Risk management system for financial instrumentsi) Management of credit risks (default risks)
The Company’s management system and rules for credit risks are prescribed in its internal “Basic Policy for Managing Credit Risks.” For alltransactions that involve credit risks, the Company uses a credit risk measurement method, identifies on a timely basis the location and size ofcredit risks, and responds adequately as necessary.
The Company’s credit risk department is engaged in the following duties: 1) daily monitoring of the effectiveness of the credit risk management
system, 2) screening and management of credit transactions involving customers, 3) maintenance and enhancement of risk asset soundness,4) enhancement of protection against doubtful receivables and implementation of measures related to collection of those receivables, and 5)
guidance and support for the Company’s offices and affiliated companies. The department also rates debtors based on their financial status anddegree of credit risk (i.e., their ability to pay debts). The credit ratings are used for credit risk management, portfolio investment and management,
credit risk measurement, guidelines on pricing of individual credits, and self-assessment and recognition of adequate credit allowances basedon the self-assessments. Further, the department regularly monitors the status of the Company’s main customers, manages payment-due dates
and credit balances on a customer-by-customer basis, and closely monitors customers to identify potential impediments to the collectability ofreceivables (e.g., due to worsening financial condition) and takes steps to mitigate such impediments.
The effectiveness and appropriateness of credit risk management are examined through internal audits.

ii) Management of market risks (risks associated with foreign exchange rates and interest rates)
The Company’s market risk management rules and procedures are prescribed in its internal “Basic Policy for Managing Market and Liquidity Risks.”
Market risks are controlled by comprehensively examining various factors such as financial position (revenues and shareholders’ equity),balance between target revenues and risk levels, interest rate prospects, market environments, past results, and the level of risk management forvarious risks. The Company manages its exposure to risks when deemed necessary for the purpose of reducing risks and expanding revenues.
The Company’s ALM Committee meets once a month as a general rule, and on an ad-hoc basis as needed, to review and examine practicalmeasures related to market risk management and to monitor performance. At the monthly meeting, the finance division reports on mattersrelated to market risk management, including the status of market risk control, interest rate prospects, market environment developments, andhedge transactions.
The Company’s consolidated subsidiaries are subject to the Company’s “Basic Policy for Managing Market and Liquidity Risks.”(i) Interest rate risk management
The Company comprehensively manages interest rate risk using ALM. The ALM Committee ascertains and monitors the status of ALM
operations and discusses future direction and strategy based on the Company’s ALM policies.

(ii) Foreign exchange risk management
The Company manages foreign exchange risk on a case-by-case basis, using foreign exchange forward contracts as a general rule.

(iii) Price fluctuation risk management
With regard to marketable securities and investment securities, the Company regularly monitors the market values of these securities as well as
the financial status of issuers and continuously reviews its outstanding position considering market conditions and its relationship with the issuers.

67

Financial Section(iv) Derivatives contracts
With regard to derivatives, the Company uses forward foreign exchange transactions for the purpose of hedging risks associated with foreign
currency fluctuations that affect its foreign currency-denominated receivables and payables. The Company uses interest rate swap transactions
for the purpose of hedging risks associated with interest rate fluctuations that affect its borrowings.
The Company’s finance division is authorized to engage in and manage derivative contracts, in accordance with internal regulations andindividuals authorized on job responsibilities and pursuant to the approval of the Company’s president (CEO) or officer in charge of the financedivision.
The Company’s consolidated subsidiaries’ derivative-related transactions are subject to the Company’s internal regulations “Basic Policy forManaging Market and Liquidity Risks.” In accordance with the Company’s “Regulations on Managing Associated Companies,” the Company’s
consolidated subsidiaries report to the Company on derivative-related transactions. These reports explain the subsidiary’s policy on engaging
in the transaction, provide a validation of the transaction’s objective, and detail the derivative transaction’s status, counterparties, outstanding
positions, and unrealized gains/losses.

(v) Quantitative information on market risk
The major types of financial instruments affected by interest rate risk, the Group’s main risk factors, are “Installment sales trade receivables,”“Lease receivables and investment assets,” “Accounts receivable - operating loans,” other marketable securities recorded under “Marketablesecurities and investment in securities,” “Bonds payable,” “Long-term loans from banks and other financial institutions,” “Payables underfluidity long-term lease receivables and installment sales trade receivables,” and interest rate swaps included in “Derivative contracts.” The
Group performs quantitative analysis in managing the risk of interest rate fluctuations.
This quantitative analysis incorporates the potential change in value of these financial assets and liabilities based on a reasonable rangeof potential interest rate movements. To calculate the potential change in value, the financial assets and liabilities are split into fixed-rate andvariable-rate categories. For the fixed-rate category, the Company allocates the book value of the instruments into appropriate categories
based on their interest-payment dates and applies an appropriate potential range of interest rate movements to each category. Assuming allrisk factors other than interest rates remain constant, as of March 31, 2019, a 10 basis point (0.1%) change in interest rates would result ina ¥3,922 million ($35,340 thousand) change in the fair value of these financial assets and liabilities. This potential change in value is basedon the assumption that all risk factors other than interest rates remain constant and does not incorporate the effects of correlation between
interest rates and the other risk factors. If interest rates fluctuate beyond the assumed reasonable range, the value of these financial assets andliabilities may be affected by more than the Group has estimated.

Fuyo Lease Group Integrated Report 2019

The following table presents the carrying value and fair value of financial instruments at March 31, 2019 and 2018. The following table does notinclude financial instruments for which it is extremely difficult to determine the fair value.
Year ended March 31, 2019

Carrying value (A)Fair value (B)(B) - (A)Millions of yen
Cash and deposits*1,2¥

71,173¥

71,173¥–­96,012

97,466

1,454

Lease receivables and investment assets*2

1,082,446

1,133,875

51,429Accounts receivable - operating loans*2

297,729

303,510

5,781

Installment sales trade receivables*2

Marketable securities and investment in securities
200,516

200,516­–

Total assets

Other marketable securities¥ 1,747,878¥ 1,806,542¥ 58,664

Short-term loans from banks and other financial institutions

¥

¥

¥

491,659

491,659–­

Commercial paper

500,700

500,700

Lease obligations (current liabilities and long-term liabilities)

25,696

25,696­–­–

Bonds payable (current portion included)

125,000

124,943(56)

Long-term loans from banks and other financial institutions (current portion included)
Payables under fluidity long-term lease receivables and installment sales tradereceivables (current portion included)
Total liabilities

890,394

903,580

13,186

66,304

66,857553¥ 2,099,754¥ 2,113,437¥ 13,682¥¥¥

Derivative contracts*3
Derivative contracts not accounted for as hedges
Derivative contracts accounted for as hedges

–­
(479)

Total derivative contracts

¥

–­
(655)

(479)

¥

–­
(176)

(655)

¥

(176)

iii) Management of liquidity risks associated with funding (risks of failure to pay on due date)
The Company’s management system and rules for liquidity risks are prescribed in its internal "Basic Policy for Managing Market and Liquidity
Risks."
With regard to liquidity risks (funding risks), the Company’s finance division rigorously controls funding for ordinary operations. The division
prepares daily statements of cash receipts/disbursements and an outlook of weekly and monthly cash receipts/disbursements, analyzes
investment and cash receipt/disbursement data, and summarizes information from each division to determine the impact on the Company’s
funding activities. The division also adequately controls liquidity, enhances capital efficiency, and optimizes liquidity risks and funding costs.
Funding is measured by adequately monitoring economic conditions and market environments. Liquidity risks are allocated to management
categories by level of funding and managed based on predetermined response policies and implementation standards for each category.
The Company’s finance division also monitors consolidated subsidiaries’ funding status and takes appropriate action as necessary based onthat status.

(4) Supplementary explanation of matters related to fair values of financial instruments
The fair value of a financial instrument represents its market value or a reasonably calculated value if a market value is not available. Because
calculations involve variable inputs, the results of calculations may vary depending on what premises and assumptions are used. Contract
amounts and other derivative transaction data presented in the notes on derivative transactions are nominal contract amounts or notionalamounts used in calculations and do not indicate the amount of exposure.
Fair values of financial instruments as of March 31, 2019, are listed in the table below. Financial instruments for which estimation of fairvalue is impracticable are not included. Financial assets and liabilities not included in the table are omitted from disclosure as they are of lessimportance in terms of value.

Year ended March 31, 2019

Carrying value (A)Fair value (B)(B) - (A)Thousands of U.S. dollars
Cash and deposits*1,2$

Installment sales trade receivables*2

641,206$

641,206$–

864,974

878,075

13,101

Lease receivables and investment assets*2

9,751,767

10,215,093

463,326

Accounts receivable - operating loans*2

2,682,245

2,734,327

52,082Marketable securities and investment in securities
1,806,459

1,806,459–

Total assets

Other marketable securities$ 15,746,651$ 16,275,160$ 528,509

Short-term loans from banks and other financial institutions$ 4,429,364$ 4,429,364$

4,510,811

4,510,811

Lease obligations (current liabilities and long-term liabilities)

231,497

231,497­–

Bonds payable (current portion included)

1,126,126

1,125,618(508)

Long-term loans from banks and other financial institutions (current portion included)
Payables under fluidity long-term lease receivables and installment sales tradereceivables (current portion included)
Total liabilities

8,021,570

8,140,365

118,795

Commercial paper–­­–

597,339602,321

4,982$ 18,916,707$ 19,039,976$ 123,269$$$

Derivative contracts*3
Derivative contracts not accounted for as hedges
Derivative contracts accounted for as hedges
Total derivative contracts–­(4,318)$(4,318)–­(5,906)$(5,906)–­(1,588)$(1,588)68

69

Financial Section

Fuyo Lease Group Integrated Report 2019(3) Lease obligations (current liabilities and long-term liabilities)

Year ended March 31, 2018

Carrying value (A)Fair value (B)(B) - (A)Millions of yen
Cash and deposits*1,2¥

54,822

Installment sales trade receivables*2¥

54,822¥–

115,049

116,427

1,377

Lease receivables and investment assets*2

1,097,681

1,133,028

35,346

Accounts receivable - operating loans*2

295,579

299,753

4,173

226,948

226,948–

Total assets¥ 1,790,082¥ 1,830,980¥ 40,898

Short-term loans from banks and other financial institutions

¥

¥

¥

Marketable securities and investment in securities
Other marketable securities

Commercial paper

467,340
473,700

467,340
473,700––

Lease obligations (current liabilities and long-term liabilities)

35,33535,335–

Bonds payable (current portion included)

110,000

109,628(371)

Long-term loans from banks and other financial institutions (current portion included)

828,047

833,397

5,349

66,96567,02661¥ 1,981,389¥ 1,986,429¥ 5,039¥¥¥

Payables under fluidity long-term lease receivables and installment sales tradereceivables (current portion included)
Total liabilities

Lease obligations are stated on the consolidated balance sheets before interest deductions. The amount recorded as the fair value is their carrying
value on the balance sheets. The difference between the carrying value of lease obligations and their fair value calculated by discounting at therate applied to new contracts is ¥161 million ($1,451 thousand).

(4) Bonds payable (current portion included), (5) Long-term loans from banks and other financial institutions (current portion
included), (6) payables under fluidity long-term lease receivables and installment sales trade receivables (current portion
included)
Fair values of floating-rate loans and payables in these categories are based on their book values. Market rates are reflected in the rates on theseloans and payables with only a short time difference, and the Company’s credit status has not changed materially since issuance, so their bookvalues are deemed to closely approximate their fair values. To calculate the fair values of fixed-rate loans and payables in these categories, theinstruments are first allocated to categories according to maturity terms. Total principal and interest for each category is discounted at a notional
rate that is assumed would apply to borrowing in the same amount.

Note: 2. Financial instruments whose fair values are deemed extremely difficult to determine
March 31, 2019

Derivative contracts*3
Derivative contracts not accounted for as hedges
Derivative contracts accounted for as hedges
Total derivative contracts

–­
(0)

¥

(0)

–­
(202)

¥

(202)

–­
(202)

¥

(202)

*1. Net of deferred profit on installment sales*2. Net of specific and general allowances for doubtful accounts related to installment sales trade receivables, lease receivables and investment assets, and operating loans*3. Net receivables/payables arising from derivative contracts are carried at net amounts. Those for which the net outstanding balance is a payable appear within parentheses.

Note: 1. Calculation method for fair value of financial instruments and matters related to derivative contracts

Millions of yen

Thousands of
U.S. dollars

Other securities
Unlisted shares*1¥ 5,754$ 51,845

Subsidiary’s shares / associated companies’ shares*1

23,921

215,510Preferred securities / beneficial interest in trusts*1

2,600

23,423

Investments in limited investment partnerships*2

39,557356,376¥ 71,834$ 647,154*1. We do not disclose the fair values of these shares because their market values are not available and it is deemed extremely difficult to determine their fair values.
*2. Within investments in limited investment partnerships, we do not disclose the fair values of partnership assets consisting of investments whose fair values are deemed extremely difficult to determine.

Assets(1) Cash and deposits

Note: 3. Redemption schedule by term for monetary claims and securities with maturity after March 31, 2019

The fair values of deposits that have no maturity are based on their book values, which closely approximate their fair values.

March 31, 2019(2) Installment sales trade receivables
Fair values are calculated by discounting uncollected receivables at the rate applied to new contracts. The Company calculates the fair values of
doubtful receivables by subtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amountclosely approximates the doubtful receivables’ fair values. Estimated losses on bad debts are calculated based on estimated cash flows or
estimated net realizable value covered by collateral or guaranty.

Within one year

Over one year and Over five years andwithin five years
within ten years

Over ten years

Millions of yen
Cash and deposits
Installment sales trade receivables
Lease receivables and investment assets¥ 71,173
40,91352,298

2,051

2,189

(3) Lease receivables and investment assets

Accounts receivable - operating loans

293,371

623,455

127,286

39,416

Present values of lease receivables and investment assets are calculated by subtracting major administrative and maintenance expenses fromthe total of uncollected lease receivables and lease payment receivables. The Company calculates the fair values of doubtful receivables bysubtracting estimated losses on bad debts from their carrying values as of the balance sheet date. The resulting amount closely approximates the
doubtful receivables’ fair values. Estimated losses on bad debts are calculated based on estimated cash flows or estimated net realizable value
covered by collateral or guaranty.
Lease receivables and investment assets under sublease contracts are recorded on the consolidated balance sheets before interest deductions.
The amount recorded as the fair value is the balance sheet carrying value. The difference between (a) the carrying value of lease receivables andinvestment assets under sublease contracts and (b) their fair valued calculated by discounting at the rate applied to new contracts is ¥363 million($3,273 thousand).

Marketable securities and investment in securities
Available-for-sale securities with maturities

63,778172,81255,356

6,484

Bonds (government)
Bonds (corporate)
Bonds (other)
Other
Total

¥

(5) Marketable securities and investment in securities
Fair values are based on amounts obtained from relevant financial and other institutions.

¥

–

¥

–

–

–

–

–

4,701

16,28011,056

–

–

–

–

–

22,30937,641

14,4542,411¥ 496,248¥ 902,489¥ 210,206¥ 50,501(4) Accounts receivable - operating loans
Fair values of floating-rate operating loans are based on their book values. Market rates are reflected in the rates on floating-rate operating loans
with only a short time difference, so their book values closely approximate their fair values as long as the borrower credit status does not changematerially after loan issuance. Fair values of fixed-rate operating loans are calculated by discounting total principal and interest for each borrower
at the rate applied to new contracts. The Company calculates the fair values of doubtful receivables by subtracting estimated losses on bad debts
from their carrying values as of the balance sheet date. The resulting amount closely approximates the doubtful receivables’ fair values. Estimatedlosses on bad debt are calculated based on estimated cash flows or estimated net realizable value covered by collateral or guaranty.

–

March 31, 2019

Within one year

Over one year and Over five years andwithin five years
within ten years

Over ten years

Thousands of U.S. dollars
Cash and deposits
Installment sales trade receivables
Lease receivables and investment assets
Accounts receivable - operating loans
Marketable securities and investment in securities
Available-for-sale securities with maturities

Liabilities

Bonds (government)
Bonds (corporate)(1) Short-term loans from banks and other financial institutions, (2) Commercial paper

Bonds (other)

Fair values of short-term loans from banks and other financial institutions and commercial paper are based on their book values because they aresettled over the short-term, so their book values closely approximate their fair values.

Other
Total

$

641,206

$

–

$

–

$

–

368,589

471,158

18,484

19,7222,642,986

5,616,720

1,146,725

355,105

574,577

1,556,874

498,707

58,420––––42,359146,671

99,611

–

–

–

–

–

200,987

339,110130,221

21,725$ 4,470,704$ 8,130,533$ 1,893,748$ 454,972

70

71

Financial Section

Fuyo Lease Group Integrated Report 2019

Note: 4. Repayment schedule by term for bonds, long-term debt, and other interest-bearing debt after March 31, 2019.

The carrying values and aggregate fair value of securities with determinable market values at March 31, 2019 and 2018, were as follows:
March 31, 2019Year ended March 31,2019Within one
year

Over twoOver one year
years andand within
within three
two years
years

Over three
years andwithin fouryears

Millions of yen
Short-term loans from banks and other financial institutions
Commercial paper¥

491,659¥

500,700

–

¥

–

–

¥

¥

–

–

¥

–

¥ 16,639¥ 48,648¥ 693–

81,400885–

82,286

Other

52,382

1,590

336

53,636

Cost orbook value

Unrealized
gains

Unrealized
lossesFair value

10,379

6,476

3,984

2,403

1,135

1,315

20,00030,00010,00025,00020,000244,023

207,414

178,555

107,752

64,697

87,95027,802

18,348

10,107

4,046

574

5,425

¥ 1,294,565¥ 252,238¥ 222,648¥ 124,202¥ 91,407¥ 114,692

Over three
years andwithin fouryears

Millions of yen
Available-for-sale securities:

Over four years
and within five Over five years
years

SharesBonds¥ 16,534¥ 53,553¥ 236¥ 69,852

108,0202,531

14110,536

Other

45,7101,067

218

46,559Thousands of U.S. dollars
Short-term loans from banks and other financial institutions
Commercial paper$ 4,429,364

$

–

$

–

$

–

$

–

$

¥ 64,594

March 31, 2018Year ended March 31,2019Within one
year

Millions of yen

Bonds

20,000Over twoOver one year
years andand within
within three
two years
years

Fair value

SharesLease obligations (current liabilities and long-term liabilities)

Total

Unrealized
losses–Bonds payable (current portion included)Long-term loans from banks and other financial institutions(current portion included)
Payables under fluidity long-term lease receivables andinstallment sales trade receivables (current portion included)

Unrealized
gains

Available-for-sale securities:––

Cost orbook valueOver four years
and within five Over five years
years

Cost orbook value–

March 31, 2019
Unrealized
Unrealized
gains
lossesFair value

Thousands of U.S. dollars

4,510,811

–

–

–

–

–

Lease obligations (current liabilities and long-term liabilities)

93,511

58,34535,89921,656

10,233

11,853Available-for-sale securities:

Bonds payable (current portion included)Long-term loans from banks and other financial institutions(current portion included)
Payables under fluidity long-term lease receivables andinstallment sales trade receivables (current portion included)
Total

180,180

180,180

270,270

90,090225,225

180,180

SharesBonds$ 149,907$ 438,272$ 6,250

733,338

7,978–

741,316

Other

471,919

14,3283,033

483,214

2,198,411

1,868,598

1,608,613

970,743582,859

792,347

250,472

165,298

91,06236,452

5,174

48,883$ 11,662,749$ 2,272,421$ 2,005,844$ 1,118,941$ 823,491$ 1,033,263

Available-for-sale securities whose fair values are not readily determinable as of March 31, 2019 and 2018, were as follows:
Carrying value

3. MARKETABLE SECURITIES AND INVESTMENT IN SECURITIESThousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 2,742¥ 3,561$ 24,710

45,16922,864

406,934

Available-for-sale securities:

Marketable securities and investment in securities as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. dollars

Millions of yen

2019$ 581,929

2018

SharesOther

2019

Proceeds from sales of available-for-sale securities and resultant gross realized gains and losses for the years ended March 31, 2019 and 2018,
were summarized as follows:

Current:
Bonds¥ 82,286¥ 110,536

Other

97,24367,359$876,071

741,316¥ 179,529¥ 177,896$ 1,617,387

Shares¥ 67,337¥ 73,413

$

Other

1,562

2,063

¥ 68,899¥ 75,477

Non-current:
606,640

Carrying value

Proceeds
Realized gain

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 2,488¥2$ 22,422

941

0

8,485

14,077$620,717

Impairment loss on securities:
No impairment loss recorded on securities for the consolidated fiscal years ended March 31, 2018 and 2019.
The Company recognizes the impairment loss where the decline in the period-end price is greater than or equal to 50% of the acquisition cost.
Where the decline in the period-end price is between 30% and less than 50% of the acquisition cost, the company may recognize impairment
loss, taking into consideration the credit rating of the issuer, the materiality of the amount, and the likelihood of the securities recovering in price,
as well as the analysis of the level of market price by looking at the gap between the book value and the highest/lowest price during the fiscal years
ended March 31, 2018 and 2019

72

73

Financial Section

Fuyo Lease Group Integrated Report 2019

As of March 31, 2019, the following assets were pledged as collateral for current and long-term obligations of ¥38,963 million ($351,025 thousand).

4. ACCUMULATED DEPRECIATION FOR PROPERTY AND EQUIPMENT
Accumulated depreciation of property and equipment for the fiscal years ended March 31, 2019 and 2018, were as follows:.
Millions of yen

2019
Leased assets

2018Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

Thousands of
U.S. dollars

Cash and deposits¥ 2,859$ 25,759

2019

Installment sales¥ 159,309¥ 158,405

Other operating assets

6,426

3,562

¥ 1,435,219
57,892

Own-used assets

2,315

1,780

20,863853

7,693

Lease receivables and investment assets

23,671

213,253

Accounts receivable – other loans to customers

3,890

35,051

Lease and other contract receivables

3,574

32,202

Lease assets

14,613

131,655

Other operating assets

20,376

183,573¥ 69,839$ 629,186

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT AND PLEDGED ASSETS
The breakdown of short-term borrowings as of March 31, 2019 and 2018, were as follows:
Thousands of
U.S. dollars

Millions of yen

2019
Short-term loans from banks and other financial institutions

¥

2018

2019

Weighted-averageinterest rate

Besides the above, as third-party security for bank loans taken out by customers, the Company maintains deposits of ¥26 million ($241
thousand) in installment sale receivables and ¥612 million ($5,515 thousand) in investment securities. The Company maintains deposits of ¥3
million ($27 thousand) in investment securities for the purpose of sales transactions.

491,659¥ 467,340$ 4,429,364

0.49%

Commercial paper

500,700

473,700

4,510,811

0.04%

6. COMMITMENTS AND CONTINGENT LIABILITIESPayables under securitized lease receivables

22,90018,900206,307

0.11%

Contingent liabilities at March 31, 2019 and 2018, were as follows:

1,015,259

959,940

9,146,482–

25,10334,873

226,153–¥ 1,040,362¥ 994,814$ 9,372,635

–

Total
Lease obligations

Thousands of
U.S. dollars

Millions of yen

Long-term loans from banks and other financial institutions
Payables under fluidity long-term lease receivables andinstallment sales trade receivables
Total
Less current portion
Lease obligations

Weighted-averageinterest rate

Marubeni Fuyo Auto Investment (Canada) Inc.

2018

2019

¥ 2,066¥ 2,059

1,891–

17,040Sumitomo Realty & Development Co., Ltd *1

1,272

–

11,462

AEON Mall Co., Ltd.

1,197

1,245

10,790JAPAN SECURITIZATION CORPORATION *1

876

818

7,894

MONEY PARTNERS CO., LTD.

799

499

7,206

XYMAX ALPHA Corporation *1

702

229

6,328

676

769

6,094
6,049

2019

2018

2019

¥ 125,000¥ 110,000$ 1,126,126

0.26%

890,394

828,047

8,021,570

0.68%

66,304

66,965597,3390.55%

1,081,698

1,005,013

9,745,035–

AEON RETAIL CO., LTD.

$ 18,616

291,825

271,7192,629,063–

Nippon Life Insurance Company and others two

671

153

789,872

733,293

7,115,973–

IBM Japan Credit LLC *1

373

1,010

3,361

593

462

5,343

–

Sumitomo Mitsui Banking Corporation *1

372

365

3,356

¥ 790,466¥ 733,755$ 7,121,316–

JCAM AGRI. CO., LTD.

217

249

1,964

Employees

22

40

206

24,213

21,106

218,138¥ 35,353¥ 28,547$ 318,504

The projected long-term debt servicing amount by fiscal year, as of March 31, 2019, was as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2020

¥

291,825$ 2,629,063

2021

245,7622,214,076

2022

218,663

1,969,944

2023

121,798

1,097,285

2024

90,271

813,258

Lease obligations

2019

Fuyo General Lease (Asia) Pte. Ltd. *1

Others2025 and thereafterThousands of
U.S. dollars

Millions of yen

As a guarantor of indebtedness of:

The breakdown of long-term debt as of March 31, 2019 and 2018, were as follows:

Bonds payable(1) Guarantees provided on borrowings of business partners etc.

113,376

1,021,409¥ 1,081,698$ 9,745,035*1. The Company has guaranteed loans held by Fuyo General Lease (Asia) Pte. Ltd. and others.

(2) On both March 31, 2019 and 2018, one of the Company’s domestic consolidated subsidiaries engaged in business guarantee operations
which resulted in it becoming a credit guarantor of a total of ¥55,701 million ($501,812 thousand) and ¥64,573 million in indebtedness withrespect to general customers and other entities.
(3) The Company, as a lender, entered into loan commitment agreements as of March 31, 2019 and 2018 amounting to ¥4,715 million ($42,477
thousand) and ¥900 million, respectively. The loans provided under these credit facilities as of March 31, 2019 and 2018 amounted to ¥560
million ($5,045 thousand) and ¥106 million, respectively. Many of the facilities may expire without being utilized and the loans provided are
subject to periodic reviews of the borrowers' credit standing.

74

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Financial Section

Fuyo Lease Group Integrated Report 2019

7. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

9. COMPREHENSIVE INCOME

Major components of selling, general and administrative expenses for the fiscal years ended March 31, 2019 and 2018, were as follows:

The components of other comprehensive income for the fiscal years ended March 31, 2019 and 2018, were as follows:

Thousands of
U.S. dollars

Millions of yen

Bad debts expenses

2019

2018

¥

¥

659

2019

432

$

5,939

11,416

10,652

102,847

Gains or losses arising during the year

Provision for bonuses

2,000

1,707

18,022

Reclassification adjustments to profit or loss

Provision for directors' bonuses

178

139

1,605

Amount before income tax effect

Retirement benefit expenses

858

688

7,738

Provision for directors' retirement benefits

46

32

418

2018

2019

¥ (5,953)¥ 5,701$ (53,632)

(586)

(0)

(5,283)(6,539)5,701(58,915)

Income tax effect
Total

137

–

1,235

Welfare expenses

2,701

2,525

24,335

Gains or losses arising during the year

Rent expenses

1,436

1,328

12,942

Reclassification adjustments to profit or loss

Depreciation of own-use assets

1,570

1,251

14,145

Amount before income tax effect

812

1,571

7,319

Amortization of goodwill

2019
Net unrealized gains (losses) on available-for-sale securities

Employees' salaries, allowances and bonuses

Provision for share-based remuneration for directors (and other officers)

Thousands of
U.S. dollars

Millions of yen

1,986(1,744)

17,894¥ (4,553)¥ 3,957$ (41,021)

(478)

7

(4,315)

0

6

5

(478)

13

(4,310)

Deferred gains (losses) on hedges

Income tax effect

(0)

Total

¥

(478)

¥

(4)

(2)

9

$ (4,312)

Foreign currency translation adjustments
Gains or losses arising during the year

8. CASH AND CASH EQUIVALENTS

Total

The main components of cash and cash equivalents at March 31, 2019 and 2018, were as follows:

Thousands of
U.S. dollars

Millions of yen

2019Time deposits with maturity of over three months
Cash and cash equivalents

2018

2019

¥ 71,173¥ 54,822(1,255)(760)$ 641,206(11,313)¥ 69,918¥ 54,062$ 629,893(2) Major components of assets and liabilities of a newly consolidated subsidiary due to acquisition of shares
The following includes the breakdown of assets and liabilities at the time of acquisition and consolidation of G.I HOLDINGS INC. and INVOICE CO.,LTD., and the relation between the purchase price and expenditure for the acquisition (net price).

Current assets
Non-current assets

Millions of yen

Thousands of
U.S. dollars

2019

2019

¥ 32,438$ 292,242

2,346

21,139Goodwill

11,970107,841

Current liabilities(35,612)(320,833)(11,162)

Non-current liabilities(1,238)Valuation difference(668)(6,022)Acquisition cost of shares

9,235

83,205

Cash and cash equivalents(6,911)(62,268)¥ 2,323$ 20,937

Difference: net consideration paid for acquisition(586)(9,611)¥ (586)$ (9,611)(529)

Remeasurements of defined benefit plans(1) Relationship between cash and cash equivalents at the end of year and cash and deposits stated on the consolidated balance sheets

Cash and deposits(1,066)¥ (1,066)

Note: The allocation of acquisition cost has not yet been finalized and, therefore, the above amounts are provisional estimates based on reasonable information available at the end of thecurrent fiscal year.

Gains or losses arising during the year

(58)

204

Reclassification adjustments to profit or loss

44

(89)

397

Amount before income tax effect

(14)

115

(132)

Income tax effect

4

Total

¥

(35)

(10)

¥

40

80

$

(92)

Share of other comprehensive income of entities accounted for using equity method
Gains or losses arising during the year

15

(17)

Reclassification adjustments to profit or loss

9

2

Total

¥

24

Total other comprehensive income¥ (6,084)

¥

135
88

(14)

$

¥ 3,445223$ (54,813)

10. DERIVATIVES
Fair values, etc., of derivatives contracts as of March 31, 2019 and 2018, were as follows:(1) Derivative contracts to which hedge accounting is not applied
Foreign exchange forward contracts
Not applicable.
Interest rate swap contracts
Not applicable.
(2) Derivative contracts to which hedge accounting is appliedThousands of
U.S. dollars

Millions of yen
2019
Contract
amount2018(over one year) Fair value

Contract
amount2019(over one year) Fair value

Contract
amount(over one year) Fair value

Principle treatment
Interest rate swap contracts:
Fixed rate payment,
floating rate receipt¥ 9,553¥ (9,553)¥ (479)¥ 1,200

¥

(–)

¥

(0)

$ 86,065 $ (86,065)$ (4,318)

Exceptional treatment of interest
rate swaps
Interest rate swap contracts:
Fixed rate payment,
floating rate receipt

29,815(26,176)(176)

33,389(28,865)(202)

268,604(235,821)(1,588)¥ 39,368¥ (35,729)¥ (655)¥ 34,589¥ (28,865)¥ (202)$ 354,669$ (321,886)$ (5,906)

The fair values are based on the amounts presented by relevant financial and other institutions.

76

77

Financial Section

Fuyo Lease Group Integrated Report 2019

11. INCOME TAXES

12. RETIREMENT BENEFITS

Earnings of the Company and its domestic consolidated subsidiaries are subject to various taxes. The statutory tax rate for both years ended
March 31, 2019 and 2018, were 30.6% and 30.9%.

(1) Overview of the Company Group’s retirement benefits plan

The respective breakdowns of total deferred tax assets and deferred tax liabilities by major item, as of March 31, 2019 and 2018, were as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Deferred tax assets:
Allowance for doubtful receivables¥

Tax loss carried forward

1,488

¥

1,478

1,713

$

869

13,411
13,315

Guarantee deposits from customers

837

754

7,541

Accrued expenses

706

648

6,362
5,564

Net defined benefit liability

617

473

Reserve for bonus payments

601

526

5,423

Enterprise taxes

392

326

3,537

Asset retirement obligations

356

261

3,215

Loss on devaluation of investment securities and other items

356

364

3,210

Prepaid expenses

306

293

2,765

Other

1,732

1,391

15,609Subtotal deferred tax assets

8,874

7,623

79,952

Valuation allowance related to tax loss carried forward (Note 2)

(6)

–

(60)

Valuation allowance related to total deductible temporary differences

(47)

–

(429)

Subtotal valuation allowance (Note 1)

(54)

(474)

(489)

8,820

7,148

79,463¥ (15,348)¥ (17,354)$ (138,274)(1,268)(1,267)(11,429)

Depreciation

(998)

(661)

(8,996)

Foreign subsidiary's unitary tax

(675)

(327)

(6,085)Gain on transfer of receivables

(541)

(506)

(4,881)

Other

(634)

(502)

(5,715)

Total deferred tax assets(2) Defined-benefit pension plan (excluding pension plans using the simplified accounting methods)i) Reconciliation of retirement benefit obligations

Gain on revaluation of investment securities and others

Total deferred tax liabilities(19,467)(20,618)(175,380)

Net deferred tax liabilities¥ (10,646)¥ (13,469)$ (95,917)

Retirement benefit obligations at beginning of year

Within one
year

Over four years
and within five Over five years
years¥ 1,478

¥–

¥–

¥–

¥–

¥–

Valuation allowance

(6)

–

–

–

–

–

Deferred tax assets

1,471

–

–

–

–

–

Total

¥ 1,478(6)* 1,471( 2)

March 31, 2019

Within one
year

Over twoOver one year years
andand within
within three
two years
years

Over three
years andwithin four
years

Over four years
and within five Over five years
years

Total

Thousands of U.S. dollars
Tax loss carried forward *( 1)$ 13,315

$–

$–

$–

$–

$–

Valuation allowance

(60)

–

–

–

–

–

Deferred tax assets

13,255

–

–

–

–

–

$ 13,315
(60)
(*2)

2019

¥ 11,244¥ 10,890$ 101,300

593

572

5,348

Interest cost

57

55

515

Actuarial gains/losses incurred

(6)

45

(61)

(307)

(321)

(2,768)Retirement benefit obligations at end of year

Millions of yen
Tax loss carried forward ( *1)

2018

Other

March 31, 2019

Over three
years andwithin four
years

2019

Service cost

Retirement benefits paid

Notes:
1. The amount of valuation allowance decreased by ¥420 million ($3,785 thousand) from the previous fiscal year. The decrease is mainly associated with the non-recognition of valuation allowance of ¥421
million ($3,801thousand) related to tax loss carried forward, which was posted in the previous fiscal year by a consolidated subsidiary.
2. Tax loss carried forward and the amount of respective deferred tax assets carried forward by carry-over deadline

Over twoOver one year years
andand within
within three
two years
years

Thousands of
U.S. dollars

Millions of yen

Deferred tax liabilities:
Net unrealized gain on available-for-sale securities

The Company has a defined-benefit corporate pension fund plan (established by the Company Group) and a defined-benefit corporate pension
plan as its defined-benefit system, and it also has a defined-contribution pension plan as its defined-contribution system.
The defined-benefit corporate pension plan is the only fund type and provides a lump-sum payment or pension based on the employees’ final
salary points and lengths of service. Furthermore, certain defined-benefit corporate pension plans have retirement benefit trusts.
The defined-benefit corporate pension fund plan (established by the Company Group) which is a multi-employer type of pension plan is
accounted for in the same manner as a defined-contribution pension plan because it is not possible to reasonably estimate the value of plan
assets corresponding to the contribution of each company.
The defined-contribution pension plan was transferred from a termination allowance plan on November 1, 2009. The defined-contribution
pension plan, under which employees are participants, is funded by the contributions based on the participant's plan course and eligibility.
Some of the domestic consolidated subsidiaries have a defined-benefit corporate pension plan and a termination allowance plan as its definedbenefit pension system.
Some of the domestic consolidated subsidiaries, which have a defined-benefit corporate pension plan and a termination allowance plan, use
simplified accounting methods for calculation of net defined benefit liability and net periodic pension cost. In the termination allowance plan,
retirement benefit obligations are recorded in the amount to be paid for voluntary retirement as of fiscal year-end. In the corporate pension plan,
retirement benefit obligations are recorded in the amount of actuarial liability calculated under the latest pension funding programs.
The Company and some of its domestic consolidated subsidiaries may make lump-sum payments of premium retirement benefits to some
employees at their retirement.

13,255(*1) Tax loss carried forward is derived by multiplying the statutory effective tax rate.
(*2) With respect to the tax loss carried forward of ¥1,478 million ($13,315 thousand) (amount derived by multiplying the statutory effective tax rate), the Company records deferred tax assets of¥1,471 million ($13,255 thousand). The deferred tax assets of ¥1,471 million ($13,255 thousand) represent deferred tax assets carried forward associated with the tax loss carried forward at aconsolidated subsidiary. The Company recognizes no valuation allowance for this tax loss carried forward since it has been judged to be recoverable due to the sufficient taxable income expected
for next fiscal year.

The respective breakdowns of major items that constituted the material difference between the statutory tax rate and the effective tax rate for the fiscal
years ended March 31, 2019 and 2018, were as follows:
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in the accompanying Consolidated Statementsof Income for the years ended March 31, 2019 and 2018, were not presented as the difference is less than 5% of the effective statutory tax rate.

–

1

–

¥ 11,581¥ 11,244$ 104,334ii) Reconciliation of plan assets
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Plan assets at beginning of year

¥ 10,165¥ 9,637$ 91,583

Expected return on plan assets

260

268

2,344

Actuarial gains/losses incurred

(196)

93

(1,768)Contribution from employer

467

470

4,210

Retirement benefits paid

(304)

(303)

(2,742)

Plan assets at end of year

¥ 10,392¥ 10,165$ 93,627

78

79

Financial Section

Fuyo Lease Group Integrated Report 2019iii) Reconciliation of retirement benefit obligations and plan assets at end of fiscal year and net defined benefit liability andnet defined benefit asset recorded in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Retirement benefit obligations for funded pension plans¥ 11,581¥ 11,244$ 104,334

Plan assets(10,392)(10,165)(93,627)

1,188

1,078

10,707Retirement benefit obligations for unfunded pension plans

–

–

–

Net assets/liabilities recorded in the consolidated balance sheets

1,188

1,078

10,707

Net defined benefit liability

1,188

1,132

10,707

Net defined benefit asset

–

(53)

–

¥ 1,188¥ 1,078$ 10,707

Net assets/liabilities recorded in the consolidated balance sheets

Thousands of
U.S. dollars

Millions of yen

37 %

19

18

Cash and time deposits

3

4General account

30

30

Other

10

11

Total

100

100

Note: The total includes retirement benefits trust established for corporate pension plan at 5% in the fiscal year ended March 31, 2019 and 5% in the fiscal year ended March 31, 2018.

viii) Basis for actuarial calculation

¥ 593

¥ 572

$ 5,348

Major basis for actuarial calculation

57

55

515

(268)

(2,345)

Amortization of actuarial loss

174

67

1,575

Amortization of prior service cost

–

0

–

(44)

(42)

(403)

¥ 520

¥ 385

$ 4,690

Other

2019

2018

Discount rate

0.37-0.98 %0.37-0.98 %Expected long-term rate of return2.50-2.58

2.50-2.88

Expected salary increase rate

1.37-3.75

1.37-3.82(3) Defined-benefit pension plans using the simplified accounting methodsv) Remeasurements of defined benefit plansi) Reconciliation of net defined benefit liability for the pension plans using the simplified accounting methods

The breakdown of remeasurements of defined benefit plans was as follows:
Thousands of
U.S. dollars

Millions of yen

Total

38 %

Shares

2019

(260)

Actuarial differences

2019

2018

2019

¥

¥

$

Thousands of
U.S. dollars

Millions of yen

2018

2019
$ 3,614

¥ 401

¥ 352

115

(132)

Net periodic pension cost

84

54

766

¥ (14)¥ 115$ (132)Retirement benefits paid

(12)

(5)

(110)

–

0

–

Net defined benefit liability at beginning of year

2019

(14)

Increase by the new consolidated subsidiary
Net defined benefit liability at end of yearvi) Remeasurements of defined benefit plans
The breakdown of remeasurements of accumulated defined benefit plans was as follows:
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

Unrecognized prior service cost

¥ –

¥ –

$

Unrecognized actuarial differences

97

83

881

¥ 97

¥ 83

$ 881

Total

2018

Bonds

2018

Interest cost

Prior service cost

2019

2019

Expected return on plan assets

Net periodic pension cost for defined-benefit pension plan(i) Breakdown of plan assets
Major components of total plan assets and their proportion were as follows:(ii) Estimation of expected long-term rate of return on plan assets
Expected long-term rate of return on plan assets is estimated based on current and expected future distribution of plan assets as well as current andexpected future long-term rate of return on various components of plan assets.

iv) Breakdown of net periodic pension costService costvii) Plan assets

207

–

1,867

¥ 681

¥ 401

$ 6,137ii) Reconciliation of retirement benefit obligations and plan assets at end of fiscal year and net defined benefit liability andnet defined benefit asset recorded in the consolidated balance sheets
Thousands of
U.S. dollars

Millions of yen

–

2019

2018

2019

Retirement benefit obligations for funded pension plans

¥ 474

¥ 427

$ 4,277

Fair value of plan assets

(141)

(130)

(1,279)

332

296

2,998

Retirement benefit obligations for unfunded pension plans

348

104

3,139

Net assets/liabilities recorded in the consolidated balance sheets

681

401

6,137

Net defined benefit liability

681

401

6,137

Net defined benefit asset

–

–

–

¥ 681

¥ 401

$ 6,137

Net assets/liabilities recorded in the consolidated balance sheetsiii) Net periodic pension cost
In the fiscal year ended March 31, 2019 and 2018 net periodic pension cost calculated with the simplified accounting methods amounted to ¥84
million ($766 thousand) and ¥54 million, respectively.

80

81

Financial Section

Fuyo Lease Group Integrated Report 2019(4) Defined-contribution pension plan

(3) Projected amounts of lease payment receivables on lease investment assets to be collected after March 31, 2019 (consolidated)

In the fiscal year ended March 31, 2019 and 2018 the amount required to be contributed by the Company to the defined-contribution pension planamounted to ¥81 million ($734 thousand) and ¥80 million, respectively.

(5) Multi-employer type of pension plan
In the fiscal year ended March 31, 2019 and 2018 the amount required to be contributed to the defined-benefit corporate pension fund plan (establishedby the Company Group) of multi-employer type of pension plan amounted to ¥171 million ($1,548 thousand) and ¥168 million, respectively. The
contribution is accounted for in the same manner with a defined-contribution pension plan.
The following summarizes the most recent funded status of the multi-employer welfare pension plan at March 31, 2019 and 2018:

Amount of plan assets
Retirement benefits under pension funding programs
Difference

Millions of yen

Thousands of
U.S. dollars

2020¥ 270,925$ 2,440,769

2021

204,629

1,843,508

2022

149,702

1,348,668

2023

120,816

1,088,438

2024

62,101

559,4752025 and thereafter

163,528

1,473,233

Year ending March 31,(4) Operating leases

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 12,260¥ 10,710$ 110,458

13,496

12,914

121,593¥ (1,235)¥ (2,203)$ (11,135)

At March 31, 2019 and 2018 the liability for retirement benefits for directors and corporate auditors amounted to ¥126 million ($1,139 thousand) and ¥169
million, respectively.

Thousands of
U.S. dollars

Millions of yen

Future lease payments
Amount of above due within one year

2019

2018

2019

¥ 285,647¥ 240,735$ 2,573,399

46,88947,382422,426

Details of sublease transactions for the fiscal years ended March 31, 2019 and 2018, were as follows.
Lease receivables, assets, and obligations under sublease transactions that are carried on the consolidated balance sheets before interest deductions
Thousands of
U.S. dollars

Millions of yen

13. LEASE TRANSACTIONS
Lease receivables and investment assets

Details of leases as lessee at March 31, 2019 and 2018, were as follows:

Lease obligations (current liabilities)

Operating leases

Future lease payments
Amount of above due within one year

2019

2018

2019

¥ 23,233¥ 31,736$ 209,311

24,90034,782

224,332

Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 2,695¥ 3,924$ 24,283

638

990

5,751

14. STOCK OPTIONSStock option expenses and gains on expiration of unexercised stock options for the fiscal years ended March 31, 2019 and 2018

(1) Breakdown of lease investment assets

Selling, general and administrative expenses (stock-based compensation expenses)
Thousands of
U.S. dollars

Millions of yen

Portion of lease receivables
Portion of estimated residual value

Other Income (Gain on reversal of share acquisition rights)

2019

2018

2019

¥3

¥ 154

$ 33

8

–

76

Note: The submitting company abolished the stock-based remuneration-type stock options plan at the 49th Annual General Meeting of Shareholders held on June 22, 2018 and introduced the BBT(Board Benefit Trust) Plan.

2019

2018

2019

¥ 971,704¥ 1,021,163$ 8,754,091

15,265

12,147

137,524

Details of stock option for the fiscal year ended March 31, 2019, was as follows:(115,582)(995,921)

917,728$ 7,895,694(1) The Company
Since the Company resolved at the 49th Annual General Meeting of Shareholders held on June 22, 2018 to introduce the stock-based
remuneration plan or Board Benefit Trust (BBT) for the Directors, etc. of the submitting company and abolished the stock-based remunerationtype stock options plan, there has been no new granting of stock options.

Rental revenues attributable to financing income(110,547)

Lease investment assets¥ 876,422¥(2) Projected amounts of lease receivables to be collected after March 31, 2019 (consolidated)
Millions of yen

Thousands of
U.S. dollars

Millions of yen

Details of leases as lesser at March 31, 2019 and 2018, were as follows:Year ending March 31,

82

Thousands of
U.S. dollars

Stock options for 2008

Stock options for 2009

Stock options for 2010

Directors of the Company: 8
Executive Officers of theCompany: 15
Common stock: 84,600 shares

Directors of the Company: 7
Executive Officers of theCompany: 17
Common stock: 61,300 shares2020¥ 53,224$ 479,500

2021

47,289426,0282022

40,176

361,947

Number and type of stock options (Note 2)

Directors of the Company:8
Executive Officers of theCompany: 16
Common stock: 57,800 shares

2023

32,385

291,765

Grant date

October 15, 2008

October 15, 2009

October 15, 2010

2024

22,210200,097

Vesting conditions(Note 3)(Note 3)(Note 3)2025 and thereafter

28,257

254,574

Requisite service period(Note 4)
October 15, 2008 –October 14, 2038 (Note 5)(Note 4)
October 15, 2009 –October 14, 2039 (Note 5)(Note 4)
October 15, 2010 –October 14, 2040 (Note 5)

Class and number of grantees (Note 1)

Exercise period

83

Financial Section

Fuyo Lease Group Integrated Report 2019

Stock options for 2011

Stock options for 2012

Stock options for 2013

Class and number of grantees (Note 1)

Directors of the Company: 7
Executive Officers of theCompany: 16

Directors of the Company: 8
Executive Officers of theCompany: 16

Directors of the Company: 8
Executive Officers of theCompany: 18

Number and type of stock options (Note 2)

Common stock: 54,800 shares

Common stock: 73,000 shares

Common stock: 42,000 shares

Grant date

October 14, 2011

October 16, 2012

October 15, 2013

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)(Note 4)(Note 4)

Exercise period

October 14, 2011 –October 13, 2041 (Note 5)

October 16, 2012 –October 15, 2042 (Note 5)

October 15, 2013 –October 14, 2043 (Note 5)

Stock options for 2014

Stock options for 2015

Stock options for 2016

Class and number of grantees (Note 1)

Directors of the Company: 7
Executive Officers of theCompany: 18

Directors of the Company: 7
Executive Officers of theCompany: 19

Directors of the Company: 7
Executive Officers of theCompany: 21

Number and type of stock options (Note 2)

Common stock: 35,500 shares

Common stock: 28,600 shares

Common stock: 34,700 shares

Grant date

October 15, 2014

October 15, 2015

October 14, 2016

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)
October 15, 2014 –October 14, 2044 (Note 5)(Note 4)
October 15, 2015 –October 14, 2045 (Note 5)(Note 4)
October 14, 2016 –October 13, 2046 (Note 5)

Exercise period

Stock options for 2017

Number and type of stock options (Note 2)

Directors of the Company: 6
Executive Officers of theCompany: 22
Common stock: 22,200 shares

Grant date

October 16, 2017

Vesting conditions(Note 3)Requisite service period(Note 4)
October 16, 2017 –October 15, 2047 (Note 5)

Class and number of grantees (Note 1)

Exercise period(2) Consolidated subsidiaries
Stock options for 2016

Stock options for 2017

Stock options for 2018

Class and number of grantees (Note 1)

Directors of consolidated
subsidiaries: 2

Directors of consolidated
subsidiaries: 2

Directors of consolidated
subsidiaries: 3

Number and type of stock options (Note 2)

Common stock: 7,400 shares

Common stock: 6,900 shares

Common stock: 18,200 shares

Grant dateJuly 28, 2016

July 5, 2017

August 9, 2018

Vesting conditions(Note 3)(Note 3)(Note 3)Requisite service period(Note 4)(Note 4)(Note 4)

Exercise period

July 29, 2016 –July 28, 2046 (Note 5)

July 6, 2017 –July 5, 2047 (Note 5)

August 10, 2018 –August 9, 2048 (Note 5)

Notes:
1. Excluding directors who serve as audit committee members and outside directors
2. Converted to number of shares
3. No vesting conditions attached
4. Requisite service period is undetermined
5. Notwithstanding the above, if a stock acquisition rights holder loses his/her position as director of the Company during the above exercise period, he/she may exercise the rights in a lump sum within
10 days (or the preceding business day if the 10th day falls on a holiday) from the day following the day when he/she loses his/her position.

Volume and status of stock options for the fiscal year ended March 31, 2019, was as follows.
(1) Number of stock optionsi) The Company
Stock options for 2008

Stock options for 2009

Stock options for 2010Pre-vesting (shares)
Previous fiscal year-end

–

–

–

Granted–––Expired–––

Vested–––Balance unvested

–

–

–

4,000

15,40023,400

–

–

–

1,300

3,000

2,200

Post-vesting (shares)
Notes:
1. Excluding outside directors and corporate auditor
2. Converted to number of shares
3. No vesting conditions attached
4. Requisite service period is undetermined
5. Notwithstanding the above, if a stock acquisition rights holder loses his/her position as director, auditor, or executive officer of the Company during the above term, he/she may exercise the rights within
five years of the first anniversary of the day immediately after losing his/her position.

84

Previous fiscal year-end
VestedExercised
ExpiredBalance unexercised

–

–

–

2,700

12,40021,200Stock options for 2011

Stock options for 2012

Stock options for 2013

Pre-vesting (shares)
Previous fiscal year-end

–

–

–

Granted–––Expired–––

Vested–––Balance unvested

–

–

–

28,60046,30031,100

–

–

–

3,800

4,800

5,900

Post-vesting (shares)
Previous fiscal year-end
VestedExercised
ExpiredBalance unexercised

–

–

–

24,80041,50025,20085

Financial Section

Fuyo Lease Group Integrated Report 2019

Stock options for 2014

Stock options for 2015

Stock options for 2016

1

1

1

–

–

–

Average stock price at exercise (yen)

6,977

7,098

7,098

Fair value at grant date (yen)

3,584

4,653

4,606

Stock options for 2016

Stock options for 2017

Stock options for 2018

Exercise price (yen)

1

1

1

Average stock price at exercise (yen)

–

–

–

319

348

199

Exercise price (yen)Pre-vesting (shares)
Previous fiscal year-end
Granted–––Expired–––

Vested–––Balance unvested

–

–

–

VestedExercised
ExpiredBalance unexercised

33,50028,60034,700

–

–

–

3,500

1,300

1,400

–

–

–

30,00027,30033,300Stock options for 2017Pre-vesting (shares)
Previous fiscal year-end–

Granted–Expired–

Vested–Balance unvested––

Exercised–

Expired–Balance unexercised(1) The Company
Not applicable.

(2) Consolidated subsidiariesi) Evaluation method: Black-Scholes modelii) Main base data and estimation methods

22,200Stock options for 2018
Stock options for 2016

Stock options for 2017

Stock options for 2018

Previous fiscal year-end

–

–

–

Granted

––18,200

Expired–––

Vested––18,200

Balance unvested

–

–

–

7,400

6,900

–

–

–

18,200Pre-vesting (shares)

Post-vesting (shares)
Previous fiscal year-end
Exercised
ExpiredBalance unexercised

6,840ii) Consolidated Subsidiariesii) Consolidated subsidiaries

Vested–Fair value at grant date (yen)

Estimation method for fair value of stock options for the fiscal year ended March 31, 2019, was as follows.

22,200

VestedStock options for 2016

1

Average stock price at exercise (yen)Fair value at grant date (yen)Post-vesting (shares)
Previous fiscal year-end

Stock options for 2015

Stock options for 2017
Exercise price (yen)Post-vesting (shares)
Previous fiscal year-end

Stock options for 2014

–

–

–

7,400

6,900

18,200–––

Expected volatility (Note 1)
Expected remaining contractual life (Note 2)

73.54%
15.00 years

Expected dividend (Note 3)

1.74%

Risk-free interest rate (Note 4)

0.382%

Notes:
1. Calculated based on actual stock prices (December 24, 2004 – August 9, 2018).
2. Calculated based on the assumption that stock options are exercised in the middle of the exercise period, because the Company does not have sufficient data toreasonably estimate otherwise.
3. Calculated based on the actual dividend paid in the most recent fiscal year.
4. Risk free interest rate is the yield on Japanese government bonds over a period equivalent to the expected remaining contractual life.
The Company used the actual number of expired options to estimate the number of vested options, because it is generally difficult to reasonably estimate how many
options will expire in the future.

15. RELATED PARTY TRANSACTIONSThe Company’s transactions with related parties during fiscal years ended March 31, 2019 and 2018, were as follows:
All the amounts below refer to Hulic Co., Ltd., our major shareholder.

(2) Unit pricei) The Company

Exercise price (yen)Thousands of
U.S. dollars

Millions of yen

Stock options for 2008

Stock options for 2009

Stock options for 2010

1

1

1

2019
Rental revenues¥ 4,572

¥

2018

2019

–

$ 41,193

Average stock price at exercise (yen)

7,098

7,075

7,077

Sales of the leased property

34,081–

307,036

Fair value at grant date (yen)

1,610

1,668

2,218

Purchase of operating assets

24,40231,503219,839

Stock options for 2011

Stock options for 2012

Stock options for 2013

1

1

1

Average stock price at exercise (yen)Exercise price (yen)

7,219

7,149

6,961

Fair value at grant date (yen)

2,449

1,943

3,556

The ending balances of the Company’s transactions with related parties at March 31, 2019 and 2018, were as follows:
Thousands of
U.S. dollars

Millions of yen

2019
Lease receivables and investment assets¥ 60,361

¥

2018

2019

–

$ 543,796

86

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Financial Section

88

Fuyo Lease Group Integrated Report 201916. SHAREHOLDERS’ EQUITY(2) Amount of transactions with special purpose entities subject to disclosure

The Companies Act provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than thecapital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until
the sum of the capital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be made at any time byresolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve isavailable for distributions.

Fiscal Year Ended March 31, 2019
Amount of major transactions or
the balance as of the end of the
fiscal year

Major gain/loss

Item

AmountMillions of yen
Transferred assets (Note 1)

17. REAL ESTATE LEASING BUSINESS

Trade receivables - Lease

The Company and some of its consolidated subsidiaries own commercial facilities for lease and office buildings (including land) for lease in Tokyoand other regions. Net lease income from these assets amounted to ¥5,170 million ($46,583 thousand) and ¥2,056 million (lease income and lease
cost were generally recorded as net sales and cost of sales, respectively) for the fiscal years ended March 31, 2019 and 2018, respectively.
The carrying value on the consolidated balance sheets, net change, and fair value are as follows:¥ 597

Trade receivables -Installment sales

Gain on transfer (Note 2)

¥ 33

500

Amount of major transactions or
the balance as of the end of the
fiscal year

Major gain/loss

Item

AmountThousands of U.S. dollars
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 176,765¥ 132,049$ 1,592,484

Transferred assets (Note 1)
Trade receivables - Lease$ 5,380

Trade receivables - Installment sales

Gain on transfer (Note 2)

$ 305

4,505

Carrying value
Beginning of year
Net change

54,36744,716

489,795

End of year

231,132

176,765

2,082,279¥ 245,287¥ 186,482$ 2,209,796

Fair value
End of year

Notes:
1. The carrying value on the consolidated balance sheet is the amount after deduction of accumulated depreciation from historical cost.
2. The increase of carrying value is mainly attributable to the purchase of real estate of ¥75,028 million ($675,930 thousand) and ¥104,036 million, in the fiscal years ended March 31, 2019 and 2018,
respectively.
3. The fair value of properties is mainly estimated based on income approach in accordance with Real Estate Appraisal standards as of March 31, 2019. For other properties, the Company reasonably
estimated the fair value based on income approach or market approach while the Company used their carrying value as the fair value for certain properties.

Notes:
1. The amount of transactions related to transferred assets is the book value as of the time of transfer.
2. Gain on transfer related to transferred assets is presented in Revenues.

Fiscal Year Ended March 31, 2018
Not applicable.

19. SEGMENT INFORMATION(1) Overview of reportable segments

18. MATTERS RELATED TO DISCLOSURES ABOUT SPECIAL PURPOSE ENTITIES(1) Overview of special purpose entities subject to disclosure and of transactions using special purpose entities subject to disclosure
For the diversification of funding sources and the stable fundraising, the Company promotes securitization of lease receivables, etc. The
Company use stock companies as special purpose entities.
When performing the securitization, the Company transfers the lease receivables, etc. to special purpose entities and receives the funds asproceeds from the transfer of the assets to the special purpose entity through a loan, etc..
As a result of the securitization, the Company has transactions outstanding with the following special purpose entities. The Company owns
shares, etc. with voting rights of the special purpose entities and the employees of the Company concurrently are assigned as corporate officer
positions by the entities.
2019
Number of special purpose entities

The Fuyo Lease Group’s reportable segments are components of the Group about which separate financial information is available. These segments
are subject to periodic examinations to enable the Company’s board of directors to decide how to allocate resources and assess performance.
The Fuyo Lease Group is primarily engaged in leasing and installment sales. Based on the major types of transactions handled, operations are
divided into three reportable segments, namely the Lease and Installment Sales segment, the Financing segment, and the Other segment.
The Lease and Installment Sales segment conducts leasing of IT and office equipment, industrial machinery, and other assets (includes thesale of off-lease assets upon lease expiration or termination), and leasing of real estate, and sells commercial/service equipment, production
facilities, medical devices, and other assets on an installment basis. The Financing segment is mainly engaged in commercial lending, investment
in marketable securities for financial income and forming tokumei-kumiai (silent partnership) arrangements. The Other segment primarily engages
in environmental-related businesses, fee handling, and other new business fields.

Changes in Presentation
The presentation has been changed from the fiscal year ended March 31, 2019, and figures in segment information for the fiscal year ended
March 31, 2018 represent figures after the reclassification reflecting this change.

(2) Revenues, income/loss, assets, liabilities, and other items by reportable segment

20181

Year ended March 31, 2019

–

Lease
Installment Sales
Thousands of
U.S. dollars

Millions of yen

2019

2018

Total value of assets as of the latest financial closing date(without elimination of inter-company transactions)¥ 1,135¥

Total value of liabilities as of the latest financial closing date(without elimination of inter-company transactions)

1,132

2019
–

$ 10,227
10,203

Other

Total

Millions of yen
Operating revenues
Revenue from customers¥

Intersegment revenue and transfers
Total revenues–

Financing

517,726¥ 14,980¥ 85,412

1,017

3,103

1,051

5,172

518,743

18,08486,464623,292

7,366

¥

¥

618,119

Operating profit¥

29,892¥ 10,308¥

Segment assets¥ 1,676,976¥ 730,907¥ 100,895¥ 2,508,779

47,567¥¥¥¥

Other items
Depreciation

30,066–

1,666

31,733

Amortization of goodwill

–

324

488

Amount invested in equity–method affiliates

–

–

–

–

156,941–

12,488

169,429

Increase in tangible fixed assets and intangible fixed assets

812

89

Financial Section

Fuyo Lease Group Integrated Report 2019(3) Difference and analysis between reportable segments’ total income/loss and income/loss reported on the consolidated

Year ended March 31, 2019

Lease
Installment Sales

Financing

Otherstatements of income (adjustments)

Total

Thousands of U.S. dollars
Revenue from customers$ 4,664,200

Intersegment revenue and transfers
Total revenues$

134,961$ 769,485

9,167

27,9589,475

46,600162,919

778,960

5,615,246

92,868$ 66,363$$

Operating profit$

Segment assets$ 15,107,900$ 6,584,754$ 908,964$ 22,601,618

428,538$$–$ 15,015$

Other items
Depreciation2019$ 5,568,646

4,673,367
269,307

Thousands of
U.S. dollars

Millions of yen

Operating revenues

2018

2019

594,078$ 5,615,246

Operating revenues
Reportable segments total¥

623,292

Eliminations
Operating revenues reported on the consolidated statements of income¥(5,172)(3,759)(46,600)¥

618,119¥590,318$ 5,568,646¥

47,567¥42,856$

Income270,872

285,887

Amortization of goodwill

–

2,922

4,397

7,319

Amount invested in equity–method affiliates

–

–

–

–

1,413,885–

112,510

1,526,395

Increase in tangible fixed assets and intangible fixed assets

Reportable segments total

428,538

Eliminations(2,028)(1,876)(18,273)

Corporate(9,792)(8,263)(88,223)

Operating profit reported on the consolidated statements of income¥

35,746¥32,717$

322,042

AssetsReportable segments total
Year ended March 31, 2018

Lease
Installment Sales

Financing

Other

Total

Total assets reported on the consolidated balance sheets

Millions of yen
560,298¥ 13,180

839

Total revenues

2,073

561,137

Operating profit¥

Segment assets¥ 1,618,833

29,705¥ 16,839¥

846

590,318
3,759

15,253

17,686

8,712¥ 4,438¥¥ 681,244¥ 36,890¥ 2,336,968¥

594,078
42,856

Other items
Amortization of goodwill
Amount invested in equity–method affiliates
Increase in tangible fixed assets and intangible fixed assets

93,567$ 22,601,618
751,591¥ 2,592,206¥ 2,430,536$ 23,353,209

¥

¥

$

285,887

Depreciation¥

Intersegment revenue and transfers

Depreciation¥ 2,336,968

83,426

Other items

Operating revenues
Revenue from customers¥ 2,508,779

Corporate

Reportable segments total
Adjustment
Amounts reported on the consolidated financial statements

31,733
1,570

31,126¥–¥ 1,157¥

32,284

1,189

324

57

1,571

–

–

–

–

157,674–

3,648

161,3231,251

14,145¥33,303¥33,535$300,032

¥

812

¥

1,571

$

7,319

1,571

$

7,319

–

$

Amortization of goodwill
Reportable segments total
Adjustment¥

32,284

Amounts reported on the consolidated financial statements

–
¥

–

812

¥

–

¥

–

Amount invested in equity-method affiliates
Reportable segments total¥

Adjustment
Amounts reported on the consolidated financial statements

23,423–

14,504211,024¥

23,423¥

14,504$211,024¥

169,429¥

161,323$ 1,526,395

Increase in tangible fixed assets and intangible fixed assets
Reportable segments total
Adjustment
Amounts reported on the consolidated financial statements

1,275
¥

170,705¥

2,213

11,489163,536$ 1,537,884

Note:
1. Depreciation adjustments mainly represent depreciation on own-used assets.
2. Adjustments for amount invested in equity–method affiliates mainly represent the amount of funds invested in equity-method affiliates.
3. Adjustments on increases in tangible fixed assets and intangible fixed assets mainly represent capital investment in own-used assets.

(4) Tangible fixed assets
Thousands of
U.S. dollars

Millions of yen

2019

2018

2019

¥ 380,700¥ 304,630$ 3,429,736

9,917

10,59689,348

Ireland129,644

79,343

1,167,969

Other

1

1

17

Asia

5,794

5,801

52,204

Total¥ 526,059¥ 400,373$ 4,739,274

JapanNorth America and Latin America
EuropeNote:
1. The figures shown are presented according to the respective geographic locations of the Company and its consolidated subsidiaries.
2. The following geographic categories primarily include the respective countries and regions shown below.
North America and Latin America: United States
Europe: United Kingdom, Ireland
Asia: China, Malaysia, Thailand

90

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Financial Section

Fuyo Lease Group Integrated Report 201920. NET ASSETS PER SHARE

23. BUSINESS COMBINATIONS

Net assets per share are computed based on the net assets available for distribution to the shareholders of common stock (i.e., net assets
excluding minority interests) and the number of shares of common stock outstanding on each balance sheet date.

Business combination through acquisitionyen

Net assets

U.S. dollars

2019

2018

2019

¥ 8,686.09¥ 8,242.50$ 78.25

Note: Treasury stock, which is deducted when calculating the number of shares of common stock as of the fiscal year-end, used in the computation of the net assets per share, includes the Company’s
shares owned by the Board Benefit Trust (BBT). The number of shares of treasury stock owned by the Board Benefit Trust (BBT) as of the fiscal year-end is - shares for the previous fiscal year and104,600 shares for the fiscal year.

1. Overview of business combination(1) Name of acquired company and its business(i) Name of acquired company: G.I HOLDINGS INC.
Business description: Acquisition of stocks, capital investment or other equity, and bonds of business and other corporations, purchase andsale of trust beneficiary rights, purchasing of monetary claims, real estate investment, securities investment and management(ii) Name of acquired company: INVOICE INC. (A subsidiary of G.I HOLDINGS INC.)
Business description: Convergent billing service for corporate clients, Internet services for condominiums and apartment housing, other(renewable energy, etc.)(2) Reasons for the business combination

21. BASIC EARNINGS PER SHARE
The reconciliation of the differences between basic and diluted basic earnings per share (“EPS”) for the year ended March 31, 2019 was as follows:

Millions of yen
Year ended March 31, 2019

Basic earnings

Thousands ofshares
Weighted average
sharesYen

U.S. dollars
EPS(3) Date of business combination
October 31, 2018

Basic EPS
Basic earnings available to common shareholders¥ 25,689

Effect of dilutive securities warrants

30,206¥ 850.45$ 7.66(4) Legal form of business combination
Acquisition of shares by cash

¥ 843.49$ 7.60(5) Name of company after combination
No change

249

Diluted EPS
Basic earnings for computation¥ 25,689

30,456Making INVOICE INC. (hereinafter, “INVOICE”) a consolidated subsidiary conforms with the Company’s strategy to expand frontiers under its
Medium-term Management Plan. In addition, significant business synergies can be expected between the Company and INVOICE. The Company
until now has been offering not only financial solutions, such as fundraising and cost control through the lease business, but also solutions foroutsourcing of operations such as proxy payment for property carrying charges (taxes, insurance fees, etc.) as well as property management andmaintenance. By inviting INVOICE into the Fuyo Lease Group, we will be able to additionally provide the highly convenient services of INVOICEand high value-added BPO (Business Process Outsourcing) services to existing customers, therefore achieving synergistic effects regarding thecustomer base and our services. This will enable the Fuyo Lease Group to support increased productivity of corporate clients of the Group andstimulate the shift to a line of business with high added value.

Note: Treasury stock, which is deducted when calculating the average number of shares during the period used in the computation of the net earnings per share, includes the Company’s shares ownedby the Board Benefit Trust (BBT). The average number of the Company’s shares owned during the period by the Board Benefit Trust (BBT) is - shares for the previous fiscal year and 100,198 sharesfor the fiscal year.

(6) Percentage share of voting rights acquired(i) G.I HOLDINGS INC.
Percentage share of voting rights owned before business combination: –%Percentage share of voting rights acquired on the date of business combination: 60.00%
Percentage share of voting rights after acquisition: 60.00%

22. SUBSEQUENT EVENTS
Cash dividends
The following appropriations of retained earnings of the Company, which are not reflected in the accompanying consolidated financial statements
for the year ended March 31, 2019, were approved at a shareholders’ meeting held on June 21, 2019:
Millions of yen

Thousands of
U.S. dollars¥ 3,327$ 29,977

Appropriations:
Cash dividends of ¥110 ($0.99) per share(ii) INVOICE INC.
Ratio of ownership of voting rights immediately before the date of business combination: –%Ratio of ownership of voting rights acquired on the date of business combination: 60.00% (including indirect ownership of 60.00%)
Ratio of ownership of voting rights after acquisition: 60.00% (including indirect ownership of 60.00%)(7) Primary basis for the determination of the acquiring company
It is because the Company acquired 60.00% of the issued shares of GI Holdings Inc.
2. Period of operating results of the acquired company included in the consolidated financial statements
From October 1, 2018 to March 31, 2019
3. Acquisition cost of the acquired company and breakdown by type of consideration

Corporate bond issuance
The company issued straight bonds as follows:(1) Issue name: Fuyo General Lease Co., Ltd., No. 19 unsecured straight bond(2) Issuance amount: ¥20,000 million(3) Issuance date: April 17, 2019(4) Issue price: ¥100 per ¥100 of face value(5) Coupon rate: 0.230% per year(6) Redemption date: April 17, 2024
(7) Purpose: To fund capital investments

Consideration for acquisition

Cash and deposits

Acquisition cost

Millions of yen

Thousands of
U.S. dollars¥ 9,235$ 83,205¥ 9,235$ 83,205

It is possible that certain adjustments may be made to the acquisition price.
4. Description and amount of major acquisition-related expenses
Fees to advisors, etc.: ¥496 million ($4,470 thousand)
5. Amount, cause, amortization method and period of goodwill recognized(1) Amount of goodwill recognized¥11,970 million ($107,840 thousand)
The amount of goodwill is a provisional calculation, since the purchase price allocation has not been completed as of the end of the fiscal year.

92

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Financial Section

Fuyo Lease Group Integrated Report 2019(2) Cause of goodwill
Goodwill was recognized due to the future excess earning power expected based on business expansion going forward.
(3) Amortization method and period
Goodwill is amortized by straight-line method over the period in which it will be in effect. The amortization period will be finalized by taking into
account the results of purchase price allocation.

2. Overview of accounting treatment performed
In accordance with the Accounting Standard for Business Combinations and the Guidance on Accounting Standard for Business Combinations
and Accounting Standard for Business Divestitures, the Company handles this business combination as a transaction with a non-controllingshareholder as part of transactions under common control.
3. Matters concerning additional acquisition of shares of a subsidiary

6. Amount of assets received and liabilities accepted on the date of the business combination and their major components

Millions of yen

Current assets¥ 32,438

Thousands of
U.S. dollars$ 292,242

Consideration for acquisition

Millions of yen

Thousands of
U.S. dollars¥ 4,064$ 36,618¥ 4,064$ 36,618

Cash and deposits

Acquisition costNon-current assets

2,346

21,139Total assets

34,785313,381

4. Matters concerning change in initial equity related to the transaction with a non-controlling shareholder

Current liabilities

35,612

320,833

Non-current liabilities

1,238

11,162(1) Key factor underlying the change in capital surplus
Additional acquisition of shares of a subsidiary¥ 36,851$ 331,995

Total liabilities

7. Purchase price allocation
The purchase price allocation is not completed because the identifiable assets and liabilities have not been specified and their fair values have notbeen calculated as of the end of the fiscal year. Therefore, the Company applied provisional accounting treatment based on reasonable information
available at the time.
8. Estimated amount of impact on the consolidated statements of income for the fiscal year assuming that the business combination wascompleted on the start date of the fiscal year, and the calculation method

Revenues

Millions of yen

Thousands of
U.S. dollars¥ 68,971$ 621,369

Operating profit

1,996

17,987

Ordinary profit

1,835

16,537

Profit before income taxes

1,835

16,532

Profit attributable to owners of parent
Basic earnings available to common shareholders

834

7,519

27.63 Yen

0.25 $(Method of calculation of the estimated amount)
The estimated amount of impact is the difference between net sales and profit/loss calculated on the assumption that the business combination
was completed on the start date of the fiscal year and net sales and the profit/loss on the consolidated statements of income of the acquiring
company. In addition, the amount of amortization is calculated based on the assumption that the goodwill recognized at the time of the businesscombination took place on the start date of the fiscal year.
The information mentioned above has not been audited.
Transactions under common control
Additional acquisition of shares of a subsidiary
1. Overview of transaction(1) Name of related party of combination and its business
Name of company: Accretive., Ltd.
Business description: Asset business, solutions business, other businesses(2) Date of business combination
November 13, 2018(3) Legal form of business combination
Acquisition of shares from a non-controlling shareholder(4) Name of company after combination
No change.
(5) Other matters concerning the transaction
The Company is focusing on reinforcing BPO services in New Domains (non-asset business with favorable asset efficiency), which is one of theCompany’s strategic areas. It has become evident that increasing the equity stake in Accretive Co., Ltd. (hereinafter, “Accretive”) would enableboth firms to mutually make timely and smooth use of their management resources as well as lead to implementing necessary measures quickly
implementing, thereby contributing to the further growth and development of the Fuyo Lease Group. Therefore, the Company acquired an
additional 18.20% of shares owned by a non-controlling shareholder. As a result of this additional acquisition, the Company’s percentage of voting
rights of Accretive increased to 69.20% from 51.00%.
In addition, Accretive executed a share consolidation and consolidated 2,241,480 shares into 1 share effective February 6, 2019. As a result, theCompany’s percentage of voting rights of Accretive increased to 73.68% from 69.20%.

(2) Amount of decrease in capital surplus due to the transaction with a non-controlling shareholder¥1,542 million ($13,899 thousand)

94

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Report of Independent Auditors / Stock Information

Report of Independent Auditors

Fuyo Lease Group Integrated Report 2019

Stock Information (As of March 31, 2019)
Stock Overview

Individuals and others(including treasury share)

Total number ofauthorized shares

100,000,000 shares

Number of shares
outstanding

30,288,000 shares

Share unit number

100 shares

7.5%

13,794 shareholders

Number ofshareholders

2,275,000 shares

Foreign
Shareholders

39.5%

Breakdown of
Shareholders

17.1%

14,272Financial
Institutions

245 shareholders

71 shareholders

5,189,000 shares

11,945,000 shares

Other
domestic firms

35.9%

162 shareholders
10,879,000 shares

Major Shareholders (Top 10)
Number of shares held Shareholding ratio(in thousands)(%)

Shareholders

Hulic Co., Ltd.

4,218

13.92%

Meiji Yasuda Life Insurance Company

2,261

7.46%

Retirement Benefit Trust managed by Mizuho Trust & Banking Co., Ltd. (Marubeni
Corporation account); Trust & Custody Services Bank, Ltd. as a Trustee of Retrust

1,512

4.99%

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

1,253

4.13%

Sompo Japan Nipponkoa Insurance Inc.

1,002

3.30%

Azbil Corporation

1,000

3.30%

Mizuho Bank, Ltd.

907

2.99%

Japan Trustee Services Bank, Ltd. (Trust Account)

833

2.75%

BBH FOR FIDELITY PURITAN TR : FIDELITY SR INTRINSIC OPPORTUNITIES FUND

550

1.81%

Japan Trustee Services Bank, Ltd. (Trust Account 5)

441

1.45%

Annual dividend per share (Yen)
200

200
188
150

146
130

100

100
74

80

50

0
2014/3

2015/3

2016/32017/3

2018/3

2019/32020/3(Forecast)96

Fuyo Lease Group Integrated Report 2019

Fuyo Lease Group Integrated Report2019
3-3-23, Kanda-Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan
Phone: +81-3-5275-8800

https://www.fgl.co.jp/eng/

For inquiries about “Integrated Report 2019,” please contact:

Creating Shared Value Promotion Office TEL: +81-3-6679-2520 E-mail: fuyo-ir@fgl.co.jp