Fuyo General Lease : Lease Group Integrated Report 2021

Fuyo Lease Group Integrated Report

2021

01	Corporate Slogan	Fuyo Lease Group Integrated Report 2021	02

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.

Management Philosophy

We support corporate activities through our leasing business while contributing to the development of society.

We maintain customers first philosophy, providing the 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.

CONTENTS

P01	Corporate Slogan
P02	Contents
P03	Message from the President
P07	Corporate History
P09	Introduction of Fuyo Lease Group
P11	Financial and Non-Financial Highlights
P13	Value Creation Story
P15	Materiality
P17	Medium-Term Management Plan
P19	CSV 1. Responding to Climate Change Issues
	and Renewable Energy
P21	CSV 2. Contributing to the Creation
	of a Circular Society
P23	CSV 3. Achieving Economic Growth
	and Fulfilling Work
P25	CSV 4. Developing Safe and Livable Cities
	and Providing Transportation
P27	CSV 5. Promoting Health and Wellbeing
P29	Our Business
P30	Business Segments Overview
P40	System that Supports Sustainable Value Creation
P47	Board Members
P49	Corporate Governance
P54	Risk Management and Compliance System
P57	Independent Assurance Report
P58	Financial Section
P117	Stock Information
P118	Participation in Initiatives & Third-Party Evaluation

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.

Editorial Policy

Purpose of this Report	Since fiscal year 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 our shareholders, investors, and other stakeholders 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.
About Integrated Report	In this Integrated Report, the President conveys in his own words the Creating Shared Value (CSV) approach, which serves as the company's
2021	management decision criteria, and how the group organizes its thinking on ESG finance and the SDGs concept, which are global trends. The report has
	been thoughtfully prepared to help all our stakeholders understand the group's philosophy toward value creation. Additionally, we have newly presented
	our vision for "contributing to the creation of a circular society", which we perceive as the seedling of future value creation. We have further expanded
	and modified our disclosure of information concerning the evaluation of effectiveness and remuneration structure to improve the transparency of the
	governance system that supports the Group's management.
Reporting Period	Fiscal year 2020 (April 2020 - March 2021)
	*The report also includes some information pertaining to fiscal year 2021.
Scope of Reporting	Fuyo General Lease Co., Ltd., its 52 consolidated subsidiaries and 8 affiliate companies
Reference Guidelines	Value Reporting Foundation "International Integrated Reporting Framework" (published in January 2021)
Date of Issuance	September, 2021
Note on Forward-Looking	This report contains forward-looking statements, such as future plans and strategies, that are based on currently available information. These
Statements	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.

03	Message from the President	Fuyo Lease Group Integrated Report 2021	04

Expanding our areas of business, both in and outside Japan, through management founded on CSV

Working toward sustainable growth by achieving both social and corporate value

Yasunori Tsujita

President & Chief Executive Officer

Review of the Medium-Term Management Plan

This year marks the fifth and final year of the Fuyo Lease Group's five-yearMedium-term Management Plan, Frontier Expansion 2021.

During this Medium-term Management Plan, I have managed the Group with a strong desire to demonstrate that sustainable growth is possible, even in the lease industry, generally considered a business that is stable at a low position. To that end, we are clearly aware of non-financeleasing-shifting our focus from traditional finance leases to operating leases-and are moving forward with non- financial initiatives typified by the renewable energy power generation business and business process outsourcing (BPO), positioning them as Strategic Areas. The fact that we have continued to grow by about 10% annually over the past several years, indicates, I think, that the Group's management strategy demonstrates a business model for enabling sustainable growth.

Supporting this growth has been the management of our business portfolio, based on a zone management approach (see diagram on P04) under which we have divided our business areas into four zones to advance selection and concentration.

Conventional lease and finance businesses are positioned as core areas in the Performance Zone where they generate stable earnings. Real Estate, Medical & Welfare, Energy & Environment and other fields are positioned as Strategic Areas in the Transformation Zone,

where we have concentrated management resources to expand the business. We have grown steadily in these Strategic Areas over the past four years, while in our core areas, we have succeeded in greatly improving yields through a combination of portfolio restructuring and thorough cost reductions. In the area of New Domains, I believe we have made beneficial investments in venture companies that we can expect will play a part in growth going forward.

Changes in Key Indicators over the Last 7 Years

	Operating Assets		Ordinary Profit		ROA	1.94%
1.64%	1.60%	¥ 2,555.9

billion yen

	2,047.4
1,599.2		¥ 48.0
		billion yen
25.4	31.4
2014/3	2017/3	2021/3

Previous Medium-term	Medium-term
Management Plan	Management Plan

"Value Creation 300" "Frontier Expansion 2021"

(FY2014 - 2016)

(FY2017 - 2021)

Disruptive InnovationsSustaining Innovations

	Transformation Zone			Performance Zone
	Grow new businesses			Deliver results from existing businesses
Revenue	Payout period: 2-3 years
Energy & Environment	Overseas	BPO	Aircraft Real Estate	Core Areas
Performance	Strategic				Vendor Leases	Finance	Group
Areas
	Medical & Welfare	Mobility Business	Business growth through
				solving social issues
				CSV (Creating Shared Value)	Domestic Corporate
	New Domains			Frontier	Payout period: Every year
		Circular
	Asset Value	Economy		Expansion
	Business Value			2021
Enabling	New Domains
Payout period: 3-5 years		Corporate Department
Investments
	Frontier
	E.g. Investment in an R&D-driven
	venture company
	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)

05 Message from the President

Fuyo Lease Group Integrated Report 2021 06

These efforts have led to real results, allowing us to reach ¥2,555.9 billion in operating assets, achieving our target ahead of schedule, while significantly growing ordinary profit from ¥31.4 billion at the start of the plan to ¥48.0 billion.

Thorough Discussion of Goals for CSV

Maintaining and further enhancing this growth in preparation for the next Medium-term Management Plan will be a major issue going forward. While I believe our Group corporate slogan, "Go where no one has gone before," has been the driver of our growth to date, that is not to say we can simply aim to go anywhere. I have always believed that some philosophy is essential to choosing our direction. Moreover, as SDGs, ESG and other societal demands and issues have increased their presence in the public eye, I believe it's imperative that employees share our approach and we communicate it to all of our stakeholders in a manner that's easy to understand.

ESG strongly represents the perspective of society and stakeholders, while the SDGs alone, I feel, lack view from business potential. The Group has thus positioned CSV as the link between these two, and we believe it is important

to build a system-human resources, organizations, and governance-that can continually generate both corporate value (profit) and social value (solutions to problems). In the medium to long term, this will lead to our becoming "part of a system that aims for a better society."

I believe that a company contributes to its stakeholders by growing sustainably and continuing to solve issues with the goal of achieving a better society. We will continue working to respond to the expectations of our clients, business partners, employees and investors.

Enhancing the Human Resources and Organizations that Support the Practice of CSV

The ultimate means of continually generating value to is to build these approaches into the very foundation of management itself. While the Group's business domains have gradually expanded, if we are to discuss future areas of expansion it is essential that each employee has a solid understanding of what CSV means for the Group. This is why training and workshops were held for all employees in fiscal 2020. In October 2020, we also established a CSV Promotion Committee to serve as the organization

responsible for establishing and promoting strategies and policies involving the Group's approach to sustainability. Going forward, management will take responsibility for advancing non-financial targets just as they do financial targets.

The Board of Directors is also active in discussing the Group's value creation, and plans to exchange opinions from a variety of perspectives in formulating the next Medium-term Management Plan.

Contributing to Solving Social Issues through Business

The Group is concentrating management resources in businesses that aim to solve social issues, including climate change, enhancing medicine and welfare and improving corporate productivity.

In addressing climate change, companies are being called on to reduce greenhouse gases. While the Group has participated in RE100 and set forth a goal of converting 100% of the electric power used in its business activities to renewable energy by 2050, we recently decided to move that target date up to 2030. In addition to our shift to renewable energy to power our businesses, we

products with those acting as "veins" in recycling and reusing those products.

In the Medical & Welfare business, given the growing need for non-in-person, contactless services during the COVID-19 pandemic, we established Medicare in, a dedicated website allowing users to sign up online for FPS Medical, an early payment service for medical and nursing care receivables that assists medical institutions with managing cash flow. To further enhance convenience, we also plan to develop a shared platform that can provide a centralized source for medical equipment and services offered by our Group companies.

Our BPO business, which assists in improving corporate productivity, now represents more than 10% of overall profits, and continues to grow into a pillar of the Group. After the COVID-19 pandemic, companies are expected to accelerate their efforts to streamline operations and reform how they work, and we will be working to strengthen timely proposals for utilizing RPA*6 and offering a single set of efficiencies from upstream to downstream.

Working to Achieve Sustainable

Corporate Growth

SDGs

Sustainable Development Goals

CSV Creating Shared Value

Growing sustainably through business while also achieving social value

Becoming a provider of good solutions to social issues as part of a system that aims for a better society

Value Creation Activities

Achieving corporate value = Corporate profits

Achieving social value = Solving issues

Building a system of human resources, organizations and

governance needed to continually create value

ESG Environment / ​Social / Governance

Social and stakeholder perspectives

are also working to reduce CO2 overall with the goal of simultaneously achieving carbon neutrality on a Group- wide basis.

In services to customers, we have seen steady growth in sales of our Green Electricity Supply Services (PPA Services*1), launched in anticipation of corporate moves toward decarbonization. In addition to on-site PPA*2, we also expect an increase in off-site PPA*3 going forward. Our Fuyo Zero-Carbon City Support Program, which we began offering in October 2020, has seen the number of users reach more than 100 in just about six months, an indication of just how high customer needs are in the shift to decarbonization.

Meanwhile, we are also actively expanding our Energy

• Environment business overseas. In Asia, in addition to investing in a solar power generation fund in Taiwan, we also launched an energy solutions company in Thailand with Sharp Corporation. We also joined with ENEOS Corporation to participate in a solar power generation business in Texas, U.S.
  Efforts toward the circular economy*4 are similarly essential to building a sustainable world. While the Group has long promoted the 3Rs*5, we took initiatives to the next level by becoming the first financial institution in Japan to join the Ellen MacArthur Foundation, an international organization promoting the idea of the circular economy. We have already begun exchanging information with other members, and are engaged in concrete discussions with several companies with a view toward collaboration. I sense enormous potential here for lease companies like ours to serve as a central node in the circular economy, connecting companies acting as "arteries" in producing and selling

Results for fiscal 2020 saw net sales reach ¥740.3 billion (up 3.9% year on year) with ordinary profit of ¥48.0 billion (up 9.0% year on year), and our dividend increased by ¥35 year over year to ¥240, for a payout ratio of 24.3%. For fiscal 2021, we expect a ¥20 increase in the dividend, to ¥260, and a payout ratio of 25.2%.

We were largely unaffected by the drastic changes in conditions brought about by the COVID-19 pandemic, and succeeded in delivering solid results. With these kinds of previously unimaginable events occurring each year, I believe it will no longer be possible for management to respond as we have in the past by simply advancing straight into the future. We recognize the importance of continuing to implement our cycle of developing, enacting and verifying hypotheses, revising them when necessary.

We will continue our sustainable growth, while at the same time offering value to achieve a better society. We hope you will look forward to our future contributions.

*1 Green Electricity Supply Services (PPA Services): A business installing solar power systems on rooftops at customer facilities and elsewhere to supply energy directly to them.

*2 On-site PPA: In an on-site corporate PPA, the power producer installs, operates and maintains power generation equipment to supply power produced on-site to the customer.

*3 Off-site PPA: In an off-site corporate PPA, a renewable energy generating facility is built outside of a company's premises, and electrical power is supplied through a transmission network.

*4 Circular economy: An economic system that treats "waste" products and resources not utilized in the linear take-make-waste economy as new "resources," circulating those resources without generating waste.

*5 3Rs: Reduce (the amount of waste generated), reuse and recycle.

*6 RPA: Acronym for robotic process automation. This process uses robots to handle routine computer tasks normally carried out by people.

07	Corporate History	Fuyo Lease Group Integrated Report 2021	08

History of Fuyo Lease Group																						¥50.0 billion
																			44.0	2,555.9
																																											48.0
The Fuyo Lease Group faces direct feedback from customers and is fully committed to customer support in order																						¥2,500.0
																		39.1	2,384.0	billion
to resolve management issues, including those related to capital expenditure and improving work efficiency, as																			2,262.8
well as making customers' dreams come true.																															2,172.6
																																								2,047.4
																																				32.1				31.4	35.2
																																								1,867.2
																																			27.1		26.4
																														2004 Listed								1,730.5
		Operating assets: Consolidated (billions of yen)
																																29.2
		Ordinary profit (billions of yen)																																1,599.2
																													23.6
	Non-consolidated figures for the fiscal year ended March 2001 and earlier,
																									1,495.9		26.5
	consolidated figures for the fiscal year ended March 2002 and later.
																										25.4
	*1	Figures before listing are for reference only.												1,410.4														1,423.5 1,407.41,432.91,440.9
												1,396.2
	*2	Operating assets for the fiscal year ended March 1999 and earlier are																						1,166.3
		calculated by totaling lease assets, installment receivables, loans, etc.																						18.3
	*3	Due to a change in the method of presentation in the fiscal year ended																					18.0
		March 31, 2019, the figures after reclassification reflecting the change have								1,177.3		1,135.9									16.5
		been presented since the fiscal year ended March 31, 2015.																						17.9
																						1,038.1										17.4
																							976.8	933.1
																		928.3					931.2				870.3	836.4			917.8
																									863.6			843.9	857.3
																										766.4	829.1
																	643.5										694.8		9.8
																			3.3							3.8	578.3
									2.8							479.1		1.5	2.0								5.9
								1.6				1.5	1.7	2.0	332.3	399.6				1.2					0.6		4.5
			0.3	0.3		0.3	1.3		0.3	0.8			3.1			0.3	0.5			4.1
-0.023	0.007	-0.064	-0.1
									1.9	2.2	2.5
																								1.4
																								0.9
														220.9	0.9
								59.2	69.9	86.2	96.7	112.1	134.4
				38.2	47.8	52.5	56.5
	17.8	30.7	20.1
2.9
1970					1975					1980					1985				1990				1995			2000				2005			2010						2015		2020	2022/3

-7.4
						Medium-Term
								Management Plan
								Target

1969-1979

Established as a leasing company

of the Fuyo Group

1980-1989

Growth, entering fields other than

leasing and installment sales

1990-1999

Expansion of lease demand brings

service diversification

2000-2009

Public listing, efforts to align with

the environment and society

2010-

New business fields

1969 Established Fuyo General Lease Co., Ltd.

1978 Launched aircraft leases

In May 1969, Fuyo General Lease was established with equity investments provided by six Fuyo Group companies, including Fuji Bank (now Mizuho Bank) and Marubeni-Iida (now Marubeni Corporation), capitalized at 100 million yen with six employees. The Company saw its contract closings grow significantly, primarily around information equipment and industrial machinery in response to corporate needs for modernization in the midst of high economic growth and intensifying competition. The Company participated in the first aircraft lease in Japan.

1987 Established Fuyo Auto Lease Co., Ltd.

1988 Established Fuyo General Lease (USA) Inc. Launched space leases

Leasing expanded as a means of deploying equipment, backed by an acceleration in management rationalization and streamlining brought by advances in technology. The Group continued to grow through real estate-related transactions, among other business, and also responded to increasing demand for corporate auto leasing by splitting off its automotive sales department to form the independent Fuyo Auto Lease. At the same time, we established our first staffed overseas base in the US to capture demand for leasing not only in Japan but overseas as well. This was the start of our global expansion, which continues today.

1994 Established Aqua Art Co., Ltd.

1995 Established Fuyo Network Service Co., Ltd.

1996 Established Fuyo Lease Sales Co., Ltd.

While the collapse of the bubble economy brought a drop in lease transaction volume and impacted Group profits, society once again recognized the importance of leasing as a means to rationalizing and streamlining corporate management. In response to these social trends, the Group established a number of group companies to offer services not limited to leasing and finance, including Fuyo Network Service, Fuyo Lease Sales and Aqua Art, putting in place a structure that would enable us to address companies' diverse needs.

2000 Launched building leases

2004 Listed on the First Section of the Tokyo Stock Exchange (December)

2006 Conclusion of the first deal of ESCO business

As the Group expanded into business areas such as building leases in response to demand from retail customers with multi-store operations, we successfully listed on the First Section of the Tokyo Stock Exchange in December 2004. Subsequently, the Company established its Energy & Environment Business Office, and with our first successful deal of ESCO business in 2006, we began ramping up our environmental business just as the environment was gaining increased attention as a social issue. At the same time, we began making other efforts to ensure our business activities were aligned with the environment and society, such as acquiring ISO 14001 certification and publishing our first CSR Report, and fostered awareness within the company.

2012 Started commercial operation of solar power plants

2014 Made Aircraft Leasing and Management Limited (ALM) a consolidated subsidiary

2017 Made Accretive Co., Ltd. a consolidated subsidiary

2018 Participated in RE100

Made INVOICE Inc. a consolidated subsidiary

2019 Made NOC Outsourcing & Consulting Inc. a consolidated subsidiary

2020 Made Yamato Lease Co., Ltd. a consolidated subsidiary Established Fuyo General Lease (Taiwan) Co., Ltd.

2021 Established a directly controlled base in Thailand Fuyo General Lease (Thailand) Co., Ltd.

We responded to society's diversifying needs through broad business development, embodying the slogan we established in 2012, "Go where no one has gone before." We launched a renewable energy generation business to address the problem of climate change, and at the same time, expanded our business portfolio, in areas such as BPO and the Mobility Business, through active M&A. These included Accretive, which offers highly convenient financial services, and INVOICE and NOC Outsourcing & Consulting, which provide BPO services that contribute to greater management efficiency. YAMATO LEASE, which offers support services to address management issues at transport companies, also joined the Group. In addition, to strengthen our ability to provide solutions and financing support to overseas customers, we are establishing new overseas bases and investing in companies outside Japan as we focus on a broader global expansion.

Established Fuyo Auto Lease Co., Ltd. (1987)

Aircraft Leases

(Marine Jumbo)

(1993)

Otemachi Building (1969)	Launched Space Leases (1988)	Established Aqua Art Co., Ltd. (1994)	Listed on the First Section of the Tokyo Stock Exchange (2004)	Made ALM (UK) a consolidated subsidiary	Namie Sakai Solar Power Plant 1 and 2 (Fukushima, Namie) (2020)
				(2014)