Fuyo General Lease : Integrated Report 2018 （6,614KB）

Fuyo Lease Group Integrated Report

Corporate Slogan

Go where no one has gone before

We believe.

Leasing is not just about lending things.

It's about lending inspiration, intelligence and a sense of wonder.

We believe.

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

We believe.

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

We believe.

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

We act.

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

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 sincerely responding to customers'needs and providing them with solutions that exceed their expectations, as well as our commitment to pioneering new business frontiers.

Management Philosophy

• • We support corporate activities through our leasing business with view to contributing to development of the society.

• • We maintain customer's first philosophy, providing best services.

• • We aim to earn high marks from shareholders and markets while pursuing creativity and innovation.

• • We create a challenging and rewarding workplace where employees think and act on their own.

Editorial Policy

Purpose of this report

Since FY 2018, Fuyo Lease Group has integrated its CSR Report and Annual Report into an Integrated Report. This report is designed to provide information on our financial and non-financial activities in an integrated manner to help the readers assess the Group's value comprehensively. We also aim to showcase the foundation of all our activities for value creation which will help stakeholders better understand our future corporate values.

Reporting period

Fiscal year 2017 (April 2017 - March 2018)

*The report also includes some information pertaining to fiscal 2018.

Scope of reporting

Fuyo General Lease Co.,Ltd., its 46 consolidated subsidiaries and 4 affiliate companies

Reference guidelines

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

Date of issuance

November, 2018

Note on forward-looking statements

This report contains forward-looking statements, such as future plans and strategies, that are based on currently available information. These expectations and projections are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. These uncertainties include, but are not limited to social and economic conditions, market demand and competition, laws and regulations, interest rates, and currency exchange rates.

Expanding Frontiers

We are now in the second year of "Frontier Expansion 2021," our five-year Medium-term Management Plan launched in April 2017. As the name implies, "Frontier Expansion 2021" aims to expand our business operations into untapped markets. Although it is not always easy toventure into new business fields in this ever-changing world, we will continue to leverage our unique strengths in order to live up to our corporate slogan: "Go where no one has gone before."

Concentrating Management Resources and Enhancing Corporate Value

In order to select Strategic Areas and concentrate on them as we look toward the future, we have introduced the concept of zone management. Zone management entails segmenting business operations into four zones that are managed individually. More specifically, we have plugged our operations into an Incubation Zone where the objective is to create new business options, a Transformation Zone where the objective is to expand our incubated businesses, a Performance Zone where the objective is to deliver results in existing businesses, and a Productivity Zone where the objective is to increase productivity. This helpsus to identify the areas that generate stable profit and the areas where we should concentrate our management resources to step things up.

We also use return on assets (ROA) as a key metric to identify businesses we should consider withdrawing from if the ROA underperforms. Specifically, in FY 2017, we enhanced operating efficiency by consolidating all small vendor leasing programs, for which we lacked adequate resources, into Sharp Finance Corporation, our subsidiary with vendor leasing know-how.

We will quickly identify the needs of an ever-changing world and business environment, and use our business operations to provide solutions for problems facing society to simultaneously create social and corporate value.

Fiscal Year 2017 Review

While domestic lease transaction volume in FY 2017 (ending March 31, 2018) decreased 2.9% year-on-year to total ¥4,875.9 billion (according to data released byDuring FY 2017 Japan's economy remained on a gradual recovery track as corporate earnings and the nation's job market improved. Overall, the global economy also grew steadily, despite concerns about US trade policies and geopolitical risks.

the Japan Leasing Association), the Fuyo Lease Group saw profits hit record highs, due partly to the termination and expiration of large-scale leases in addition to the accumulation of operating assets such as real estate leases. "Frontier Expansion 2021" got off to a good start with total revenues increasing 16.4% year-on-year to reach ¥590.2 billion, operating profit up 13.9% to total ¥32.6 billion, and ordinary profit up 12.2% to total ¥35.2 billion.

The Fuyo Lease Group works continuously to build new business models in response to changes in the social environment with the aim of achieving sustainable growth. We believe this requires identifying social issues and cultivating future markets where we can find solutions. We are putting this idea into practice in two of our Strategic Areas specified in "Frontier Expansion 2021," i.e., Energy/ Environment and Medical/Social Welfare businesses, based on the concept of Creating Shared Value (CSV), which involves creating corporate value in a way that also creates value for society. Our strength lies in the ability to help solve pressing social problems, such as climatechange and a declining birthrate coupled with an aging population, in various ways by leveraging our products and financial services.

After realizing that our business activities resonate with the principles of the United Nations Global Compact, we gladly expressed our support by becoming a signatory in January 2018. We believe that supporting the Ten Principles of the UN Global Compact and putting them into practice will lead directly to the growth of our company.

Message from the President

Our strategies for Energy/Environment, as well as Medical / Social Welfare businesses, aim at achieving sustainable growth, while solving the social issues facing Japan.

The Fuyo Lease Group operates solar power business in 30 locations across Japan, aiming to increase operating assets to ¥34 billion (i.e., to double in comparison to the end of FY 2016) by the end of FY 2021, while maintaining an ROA of 6.0%. The Fuyo Lease Group is steadily improving the financial results, for example, by launching the largest solar power plant in our portfolio in FY 2017. To further demonstrate our commitment to the set policies, we joined RE100, a business initiative which aims to source 100% renewable energy to power business activities, a first for a comprehensive leasing company in Japan. We anticipate more opportunities to collaborate with our stakeholders including customers.

As the need to reduce greenhouse gas (GHG) emissions is being addressed across the globe, Japan has been exposed to the negative externalities of nuclear power, which has resulted in calls for an urgent energy shift. The Fuyo Lease Group is actively working to reduce indirect GHG emissions through its financial services, such as project financing for renewable energy power companies, as well as through product offerings, including rental and leasing of energy efficient equipment. Furthermore, the Fuyo Lease Group directly contributes to the reduction of GHG emissions by growing its solar power business.

In the Medical/Social Welfare business, we are implementing the "dot-line-plane strategy" for healthcare and nursing care services. It has become common practice to lease or rent expensive medical equipment, and more and more companies are entering the market. The crowdedplaying field has forced some leasing companies to throw in the towel. There is no way to provide value or earn an appropriate profit in this kind of competitive environment with individual, isolated services alone (i.e. dots). The only way out of this quagmire is to find a way to connect the dots so they form lines, and then turn those lines into planes so we can enhance our services, while forging a strong foundation for the Medical/Social Welfare business in line with "Pursue Group Synergies," one of the Three Strategic Axes under "Frontier Expansion 2021." Some of the initiatives we are working on include providing equipment and system lessees with facility relocation know-how, as well as selling and buying used equipment.

As part of this strategy, in January 2017, we acquired a controlling stake in Accretive Co., Ltd., which specializes in factoring medical service fees, etc., and in April 2018, we acquired FUJITA Co., Ltd., a reseller of used medical equipment. Our initiatives are completely in synch with the principles and practices of the Integrated Community Care System promoted by the Ministry of Health, Labor and Welfare, and should not only boost our bottom line, but also help solve problems facing Japan, including its rapidly aging population.

The Healthcare Advisory Office, set up in August 2018, enabled us to offer solutions that integrate a wide range of products and services available across our corporate group. We will continue to work hard to create group-wide synergies in the Medical/Social Welfare business.

We aim to bring out the best in each of our employees.

Typically for a non-manufacturing company, our greatest asset is people. We firmly believe that providing employees with an environment where they can concentrate on their jobs and do their best within the limited amount of time they have is a shortcut to helping them reach their full potential, and is essential for maximizing the company's performance. When implementing work-style reforms, we engage employees in the discussion in order to gain better understanding of their perspective. One example of these reforms is the introduction of staggered hours that led to a gradual reduction of actual hours worked.

We believe that securing personnel with outstanding expertise is a prerequisite for the sustainable growth of our business operations. Besides, we must ensure that we maintain a diverse array of resources so that we can better respond to an increasing social diversity and give our people the kind of expertise that will enable us to stay ahead of the pack. That is why we are building a talent pool that enables us to assign the right person to the right job regardless of their sex, age, or nationality. In FY 2017, we established the Diversity Promotion Office to pick up the pace of recruitment, employment, and empowerment of employees from across the entire spectrum.

We nurture a corporate culture where each employee has a sense of ownership, and that makes us competitive.

All employees must join hands to continually take on new challenges if we are to sharpen our competitive edge in this tough operating environment. We formulated "Frontier Expansion 2021" using a bottom-up approach that involved all our employees. We use ROA, not ROE, as a performance indicator because we want to raise each employee's awareness of performance improvement by directing their attention towards profitability of the company relative to operating assets through efficiency. In order to ensure that theshared values instilled through these practices take root throughout the organization, we create a number of opportunities to talk directly with employees, such as financial presentations for employees and meetings with staff at our different locations across the globe. As the president of the company, I will continue to keep the lines of communication open in order to drive home the idea of "staying flexible and taking on impossible challenges to expand operations," which is part of our mission statement.

Toward long-term profit distribution to shareholders and sustainable growth

In the light of our current financial standing and key performance indicators, we paid dividends for FY 2017 (ending March 31, 2018) at a payout ratio of 20.1% and project that the dividend for FY 2018 (ending March 31, 2019) will be 156 yen, up 10 yen year-on-year, with a payout ratio of 20.5%. We will work to return profits to shareholders by continuing to pay stable dividends on a long-term basis, while strengthening our operating foundation and financial health, through enhancing shareholders' equity, as we move ahead with business strategies, such as M & A, designed to achieve growth.

We are committed to going beyond our stakeholders' expectations as we work to expand our business horizons with the focus on leasing and financing, while adapting to changes in society. We will continue to devote ourselves to becoming a company that continues to offer value through a multifaceted approach.

Company name Headquarters Established Paid-in capital Shares listed on Number of employees

Fuyo General Lease Co., Ltd.

The Fuyo Lease Group seeks direct feedback from customers and is fully committed to customer 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.

Overview and History of Fuyo Lease Group

3-3-23, Kanda-Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan May 1, 1969 ¥10,532 million (Number of shares outstanding: 30,288,000 shares) First Section of the Tokyo Stock Exchange (ticker: 8424) Consolidated : 1,715 Non-consolidated : 689 (as of March 31, 2018)

Sales operation

Domestic : Head office sales department and 16 regional sales offices Overseas : 7 branches altogether from the 6 subsidiaries

Line of business

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Leasing and installment sales of IT equipment, office equipment, industrial machinery/machine tools, commercial /service equipment, medical devices, transportation equipment (ships, aircrafts, automobiles, etc.), civil engineering and construction machinery, etc. Commercial loans and other financial services

Leasing of real estates

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Consultative services, etc.

1969 ・Established with a capital of 100 million yen

1973 ・Established FGL Service Co., Ltd.

1987 ・Established Fuyo Auto Lease Co., Ltd.

・Established Yokogawa Rental & Lease

Co., Ltd., a joint venture with Yokogawa Electric Corporation

1994 ・Established Aqua Art Co., Ltd.

1995 ・Established Fuyo Network Service Co., Ltd.

1996 ・Established Fuyo Lease Sales Co., Ltd.

1999 ・Established Nihon Credit Lease Corporation, a joint venture with NICHIIGAKKAN CO., LTD.

2001 ・Merged with YTB Leasing Company, Limited

2002 ・Merged with Yasuda Lease Co., Ltd.

・Succeeded lease and financial business spun off from Fuyo General Development Co., Ltd.

2004 ・Listed on the First Section of the Tokyo

Stock Exchange

2008 ・Made Sharp Finance Co., Ltd., a consolidated subsidiary

2012 ・Conducted an absorption-type merger of subsidiary Japan Mortgage Co., Ltd.

2014 ・Acquired Aircraft Leasing and Management

Limited as a consolidated subsidiary

2017 ・Made Accretive Co., Ltd. a consolidated subsidiary

2018 ・Made MAICA, which owns TDF (Canada),

an equity-method affiliate.

・Made FUJITA Co., Ltd. a consolidated subsidiary

Yokogawa Rental & Lease Co., Ltd.

Yokogawa Rental & Lease offers multi-vendor rental services for measuring instruments and IT equipment. It always responds quickly to the diverse needs of customers with an inventory of cutting-edge equipment ranking at the top level in the industry.

Fuyo Lease Sales Co., Ltd.

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

Aircraft Leasing and Management Limited (ALM)

ALM provides comprehensive services related to aircraft including marketing for aircraft leasing, aircraft management, sales of aircraft after leases expire, and advisory services.

FUJITA Co., Ltd.

Fujita has expertise and experience in the one-stop contract business, which ranges from demolition and removal to purchase and sales of large second-hand medical equipment. In addition, it also sells the latest equipment such as MRI, CT, and ultrasonic equipment, as well as second-hand medical equipment.