TC-Lease. Focus on the TC-Lease Group. the45th. Business Report

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1 Focus on the TC-Lease Group Securities Code: 8439 Nippon Car Solutions Co., Ltd. (NCS) merged with Tokyo Auto Leasing Co., Ltd. in October 2013 to form the new NCS. Through automobile leasing, maintenance contracts and other services mainly for corporate customers, NCS is one of the top groups in the automobile leasing industry with a fleet of approximately 460,000 vehicles under management. The social environment surrounding the automobiles is constantly changing. In this environment, our customers are faced with issues such as vehicle management, including streamlining and cost reduction with regard to vehicle administration, risk management (safety and security) to reduce traffic accidents, and eco-promotion as environmental measures. NCS is developing a range of solutions to resolve these issues. Corporate profile Founded : February 1987 Shareholders : Century Tokyo Leasing Corporation 59.5% Nippon Telegraph and Telephone Corporation 40.5% Main business : Automobile leasing and maintenance contracts business URL : TC-Lease Please visit our website for details. (available in Japanese) For vehicle management For risk management Traveling and driving status update NCS Drive Doctor Lease contract information, maintenance implementation information WebCAST Complete traffic safety support NCS Traffic Safety Program NCS mascot Kurumaru-kun (Trademark application in process) Business Report the45th For the Fiscal Year Ended March 31, 2014 From April 1, 2013 to March 31, 2014 For eco-promotion Electric automobiles, hybrid cars, etc. With promotion of traffic safety Support for the introduction of environmentally friendly cars Support for promotion of environmentally friendly driving To our shareholders TC-Lease is aiming to become a Comprehensive Financial Services Enterprise. FUJISOFT Bldg., 3 Kanda-neribeicho, Chiyoda-ku, Tokyo Japan For Abenomics third arrow leasing measures TC-Lease Group was selected as the first case! A waterside city with one of China s foremost economy Hello from TC-Lease around the world Suzhou, China

2 To our shareholders TC-Lease is aiming to become a Comprehensive Financial Services Enterprise. Please tell us about the financial results for the fiscal year ended March 31, During the fiscal year under review, Japanese economy was on a recovery track as the effects of the policies known as the three arrows of Abenomics began to take hold and business sentiment improved, among other factors. In addition, this was a year in which public attention focused on the leasing industry, since leasing was built into policies as part of the government s growth strategy. According to statistics from Japan Leasing Association, the amount of capital investment financed by leasing for fiscal year 2013 grew 7.3% from the previous consolidated fiscal year to 4,841.1 billion yen, a result showing signs of a recovery in leasing demand. President & CEO Shunichi Asada Under these circumstances, with regard to the Group s consolidated results for the year under review at the conclusion of the first year of its second medium-term management plan, transaction volume of new contracts increased 19.6% to 1,409.4 billion yen from the previous consolidated fiscal year, and a balance of operating assets including business guarantees increased 16.3% to 2,646.8 billion yen from the end of the previous consolidated fiscal year. In terms of profits and losses, total revenues increased 19.9% to billion yen from the previous consolidated fiscal year, operating income increased 22.5% to 51.4 billion yen from the previous consolidated fiscal year, ordinary income increased 19.2% to 55.2 billion yen from the previous consolidated fiscal year, and net income increased 14.2% to 33.1 billion yen from the previous consolidated fiscal year. As in the previous consolidated fiscal year, each of these marked record highs. Please tell us about current progress of the three-year medium-term management plan launched in April 2013, which has completed its first year. As strategies for strengthening the sales base under the second medium-term management plan, the Group has set four pillars: enhancing competitiveness in the leasing business, bolstering the financing business, expanding overseas businesses, and reinforcing activities in the automobile financing business in Japan and overseas, and has been working on these pillars during the year. Initiatives during the first year of the second medium-term management plan included becoming the first Japanese company to set up a commercial factoring company in Shanghai City with the establishment of Century Tokyo Factoring China Corporation in June 2013, and concluded its first deal in October that year. In the future, we intend to create a framework that is able to respond in greater detail to the financing needs of customers mainly for Japanese companies in the region. In addition, the Group established TC Aviation Capital Ireland Limited, a company specialized in aircraft financing, in Ireland in October. Together with our equity-method affiliate, GA Telesis, LLC, a major U.S. aircraft parts and services provider, we will capture the global demands for aircraft where growth is anticipated, centered on our three bases of Japan, the U.S. and Europe. Furthermore, this year was an extremely important year for initiatives in the automobile financing business. In Japan, we have consolidated Nippon Rent-A-Car Service, Inc. with its familiar red signage in June, and merged Tokyo Auto Leasing Co., Ltd. and Nippon Car Solutions Co., Ltd. to form the new Nippon Car Solutions Co., Ltd. as a consolidated subsidiary in October. In overseas, we moved ahead with preparations for aiming at expansion of the automobile financing business in China, establishing Tong-Sheng Finance Leasing Co., Ltd., an automobile leasing company in Suzhou City, as a wholly owned subsidiary of the Company s equity-method affiliate, President Tokyo Corporation, in April this year. China has recently surpassed the U.S. in new car sales volume and became the world s top-ranked country, and is a market where growth can be much anticipated as an automobile leasing market. We will continue to work on the automobile leasing business in this promising market. Please tell us about the forecast of consolidated results for the fiscal year ending March 31, 2015, and your dividend policy. Looking at consolidated results for the fiscal year ending March 31, 2015, operating assets are expected to increase in areas where growth are anticipated such as the automobile financing business, ship, aircraft, environment and energy fields. Total revenues are projected to increase 3.8% year on year to billion yen, operating income is forecasted to grow 9.5% year on year to 56.3 billion yen, ordinary income to be up 3.3% year on year to 57.0 billion yen, and net income to rise 0.8% to 33.3 billion yen. As for dividends, the Group plans to pay annual dividends of 56 yen per share (interim dividend of 28 yen and full year-end dividend of 28 yen), up 4 yen year on year, thus continuing to increase the dividends as we have since the fiscal year ended March 31, By creating a structure that will enable us to stably achieve our management target of consolidated ordinary income of 50.0 billion yen or more, we will continue to realize sustained growth while meeting the expectations of our shareholders and all our stakeholders. 1 2

3 Consolidated Financial Information Assets and Liabilities (As of March 31, 2014) Cash and cash equivalents 79,840 Operating assets 2,597,476 (Operating assets including business guarantees: 2,646,781) Other assets 207,457 Consolidated Statements of Income (Summary) (Amounts less than one million yen have been omitted.) Total assets 2,884,773 Fiscal Year 2012 From April 1, 2012 to March 31, 2013 (Millions of yen) (Millions of yen) Fiscal Year 2013 From April 1, 2013 to March 31, 2014 Total revenues 691, ,558 Leasing 584, ,483 Installment sales 81,898 86,768 Financing 16,934 19,938 Others 7,658 14,368 Total costs 620, ,229 Gross profit 70,882 97,329 SG&A expenses 28,909 45,912 Operating income 41,973 51,416 Non-operating profits and losses 4,319 3,751 Ordinary income 46,292 55,167 Extraordinary profits and losses (103) (96) Net income 28,934 33,050 Interest-bearing debts 2,211,673 Other liabilities 387,616 Net assets 285,484 Main Features on Assets and Liabilities Operating assets Interestbearing debts 2,646.8 billion yen 2,211.7 billion yen The balance of operating assets for the fiscal year under review increased 16.3% to 2,646.8 billion yen from the end of the previous consolidated fiscal year, mainly due to the consolidation of automobile financing business companies, along with a sharp rise in the transaction volume of new contracts by 19.6% to 1,409.4 billion yen from the previous consolidated fiscal year. Meanwhile, the balance of interest-bearing debts increased 14.0% to 2,211.7 billion yen from the end of the previous consolidated fiscal year due to an increase in operating assets. However, the interest expenses fell by 0.68 billion yen from the previous consolidated fiscal year, as we worked on improving the direct funding rate, including issuance of commercial paper. Main Features on Consolidated Statements of Income Ordinary income Net income 55.2 billion yen 33.1 billion yen (Including business guarantees) As for profits and losses, we achieved growth in both revenues and profits, mainly due to consolidating Nippon Rent-A-Car Service, Inc. and Nippon Car Solutions Co., Ltd. during the fiscal year. Ordinary income rose by 8.9 billion yen to 55.2 billion yen from the previous consolidated fiscal year and net income was up by 4.1 billion yen to 33.1 billion yen from the previous consolidated fiscal year. Corporate profile Company name Address Company Representative Founded July 1, 1969 Capital amount 34.2 billion yen Number of employees Major affiliates Century Tokyo Leasing Corporation (Abbreviation: TC-Lease) FUJISOFT Bldg., 3 Kanda-neribeicho, Chiyoda-ku, Tokyo Japan President & CEO Shunichi Asada Chairman & Co-CEO Toshihito Tamba 3,309 (Consolidated) 1,020 (Non-consolidated) Domestic Nippon Car Solutions Co., Ltd. Orico Auto Leasing Co., Ltd. Nippon Rent-A-Car Service, Inc. Fujitsu Leasing Co., Ltd. IHI Finance Support Corporation S.D.L Co., Ltd. TCI Finance Corporation ITEC Leasing Co., Ltd. TC Property Solutions Corporation TRY, Inc. TC Agency Corporation Overseas Century Tokyo Leasing China Corporation Century Tokyo Leasing Factoring China Corporation Century Tokyo Leasing (Singapore) Pte. Ltd. Century Tokyo Capital (Malaysia) Sdn. Bhd. Century Tokyo Leasing (USA) Inc. PT. Century Tokyo Leasing Indonesia President Tokyo Corporation TISCO Tokyo Leasing Co., Ltd. 3 4

4 Financial Highlights Summary of Financial Results Balance of operating assets including business guarantees increased by billion yen to 2,646.8 billion yen from the end of the previous consolidated fiscal year, mainly due to consolidating automobile financing business companies and increased transaction volume in ship and aircraft business and ICT-related equipment leasing. Operating income, ordinary income, and net income achieved record highs in straight three years, mainly due to consolidating automobile financing business companies. Equity billion yen (Billions of yen) ROE (Return of net income to equity) 13.9% 30.1 billion yen up Maintaining high standard (%) Balance of operating assets Ordinary income 2,646.8 billion yen billion yen up 55.2 billion yen 8.9 billion yen up (Billions of yen) Leasing Installment Sales Financing 3,000 2,500 2,000 1,500 1, , , , , , , , , , , Note: Graph figures of Financing include business guarantees and other business for the year ended March 31, 2014 (Billions of yen) Net income Net income per share 33.1 billion yen 4.1 billion yen up yen yen up (Billions of yen) (yen) Note: Equity does not include subscription rights to shares and minority interests. Graph figures for the year ended March 31, 2009 are the simple sums of values recorded by the former Century Leasing System, Inc. and Tokyo Leasing Co., Ltd Market Capitalization billion yen (Billions of yen) Five times bigger than at the point of merger Merger (2009.4) Note: Century Tokyo Leasing Corporation was established as a result of merger between former Century Leasing System, Inc. and Tokyo Leasing Co., Ltd. on April 1, Forecast of consolidated results for fiscal year ending March 31, 2015 Total revenues Operating income Ordinary income Net income billion yen (YoY 3.8% up) 56.3 billion yen (YoY 9.5% up) 57.0 billion yen (YoY 3.3% up) 33.3 billion yen (YoY 0.8% up) Note: Average ROE of the listed leasing companies excluding Century Tokyo Leasing Corporation as of March 31, 2014 is 8.6% Figure for the year ended March 31, 2009 is based on the simple sums of values recorded by the former Century Leasing System, Inc. and Tokyo Leasing Co., Ltd. Market capitalization has increased to the level of approximately five times from the date of the merger, while ROE continues to remain at a high level of around 14%. In addition, the Company has been selected for the JPX-Nikkei Index 400. ( * ) * A new stock price index composed of companies with high investment appeal for investors, which meet global investment standards including ROE, an indicator of capital efficiency of a company. Net income per share yen (YoY 3.1 yen up) Annual dividends 56 yen (YoY 4 yen up) Dividend payout ratio 17.8 % (YoY 1.1 point up) 5 6

5 Looking back on TISCO Tokyo Leasing Co., Ltd. an equity-method affiliate of TC-Lease issued straight corporate bond in Baht in Thai market (TC-Lease consolidated TISCO Tokyo Leasing Co., Ltd. on May 26, 2014) Announced establishment of automobile financing company, Tong-Sheng Finance Leasing Co., Ltd. in China Consolidated Nippon Rent-A-Car Service, Inc. Century Tokyo Factoring China Corporation started its operation Second half Kyocera TCL Solar LLC s eleventh mega solar power generation facility Yamaguchi Aio-higashi Mega Solar Power Plant No. 2 launches operations (Total volume of electricity generated at the eleven facilities is equivalent to the amount of electricity consumed by approximately 6,700 households*) *Calculated at 3,500 kwh/year per household Nippon Rent-A-Car Service, Inc. Poster girl : Chinami Suzuki Merged Tokyo Auto Leasing Co., Ltd. and Nippon Car Solutions Co., Ltd. First half Established Century Tokyo Factoring China Corporation in Shanghai NCS offers a variety of car-related solutions for customers ranging from corporations to individuals through its automobile leasing. NCS mascot Kurumaru-kun (Trademark application in process) Issued the fifth and the sixth unsecured corporate bond Image above is an opening ceremony held in October Established TC Aviation Capital Ireland Limited, a specialty company of aircraft financing in Dublin, Ireland Looking back on

6 TC-Times TC-Lease Group was selected as the for Abenomics third arrow leasing measures! Initiatives of TC-Lease Group selected for the third arrow Initiative 1 Century Tokyo Leasing euglena Production facilities for euglena microalgae (Japanese name: midorimushi) Founded in 2005, euglena Co., Ltd. was the first company in the world to establish outdoor mass cultivation technology for euglena, and is engaged in development and sale of products such as health foods, cosmetics, and biofuel using euglena. Century Tokyo Leasing supports the highly cutting-edge initiatives of euglena Co., Ltd. through measures such as financing related to procurement of facilities by the company. The current top priority issue of the Abe administration s second Cabinet is to break out of the prolonged deflation and economic stagnation by pushing forward three arrows, economic policies which are in relationship of mutual reinforcement (so-called Abenomics), as one. The Industrial Competitiveness Enhancement Act was enforced as part of the Japan Revitalization Strategy, also known as the third arrow which takes up the growth strategy of Abenomics. Based on this, as the measures for Promotion of investment in cutting-edge facilities using lease methods conducted by Ministry of Economy, Trade and Industry, two cases from the TC-Lease Group were selected as the first case of these promotion measures, one from Century Tokyo Leasing and another from IHI Finance Support, a consolidated subsidiary of TC-Lease euglena farm green juice 2. euglena pure (supplement) 3. B.C.A.D. (anti-aging cosmetics) 2 Euglena as a nutritional supplement Euglena contains 59 types of nutrients including vitamins, minerals, amino acids, and unsaturated fatty acids. Euglena as a raw material for cosmetics Rejuna, an extract of euglena, revitalizes the skin and gives it suppleness. B.C.A.D. website Euglena as a raw material for fuel Research is going forward on developing biofuel from the oils and fats produced by euglena through photosynthesis, in order to use euglena for jet engine fuel of aircrafts in the future. First Arrow Bold monetary policy Second Arrow Flexible fiscal policy Third Arrow Growth strategy to boost private investment What is Promotion of investment in cutting-edge facilities using lease methods? Initiative IHI Finance Support I H I Manufacturing and development facility for aircraft engines IHI Corporation (IHI) boasts one of the top shares in production of aircraft engines in Japan. IHI Finance Support Corporation (IHI Finance Support), our consolidated subsidiary, conducted an operating lease for aircraft engine manufacturing and development facilities installed by IHI. Century Tokyo Leasing and IHI Finance Support will continue efforts to contribute to improving productivity at IHI. A system that actively use operating lease (*1) methods for the purpose of encouraging bold capital investment in cutting-edge facilities such as medical equipment and 3D printers that are necessary for Japanese corporations to win the global competition. Under this system, after the expiration of a lease term, if the value of the leasing property has been impaired, the government will compensate for one half of the loss (*2). IHI Finance Support 66.5% of shares are held by TC-Lease Group and 33.5% by IHI. IHI Finance Support is mainly engaged in leasing and factoring for the IHI Group. *1 Scheme making it possible to reduce the cost burden for customers making capital investment, by predicting the market value of the property at the expiration of the lease term and calculating the leasing fee based on the price of the property minus the residual value (estimated future sale price, etc.). *2 Compensation for loss at the time of sale of the leasing property covers one half of the loss on sale, up to a maximum of 5% of the purchase price of the leasing property. IHI IHI boasts one of the top shares in production of aircraft engines in Japan. 9 10

7 Ni hao TC-Letter from Overseas Hello from TC-Lease around the world Suzhou, China Basic data Area 8,488 km 2 Population Source: Suzhou City website Location Approximately 6.54 million (as of the end of 2013) China Beijing Suzhou Shanghai Guangzhou Comparison of GDP of major cities (2012) Shanghai Beijing Guangzhou Suzhou Roughly the size of Hiroshima Prefecture of Japan Same scale as Chiba Prefecture of Japan 2,018 billion yuan 1,788 billion yuan 1,355 billion yuan 1,201 billion yuan Source: National Bureau of Statistics of China, Suzhou Bureau of Statistics Economic scale exceeding New Zealand or Vietnam A waterside city with one of China s foremost economy Located in the south of the Yangtze River, the historical city of Suzhou has prospered as one of the main cities in the Jiangnan area. The capital of the Wu state was located during the Spring and Autumn Period, and Suzhou became a center of culture with a silk textile industry that has flourished for centuries. It has a subtropical monsoon climate and, like Japan, there are four seasons. The summer is extremely hot with high humidity, and winter is very cold but with fine weather and almost no snow. Spring is the recommended season, and since there is little pollen, it would be an excellent time to visit for anyone who suffers from hay fever. Suzhou has one of China s foremost economies, home to a range of industries including textiles, fine chemicals, and manufacturing of paper, electronics, and machinery. Its GDP surpassed 1 trillion yuan (equivalent to 15 trillion yen) in 2011, and it joined the trillion yuan cities along with Shanghai, Beijing, and Guangzhou. In addition, for its great location, an hour from Shanghai by highway or 30 minutes by high-speed rail, many Japanese companies, mainly in retail businesses, are expanding into this area. Further growth!? A slowdown!? Looking ahead with China and TC-Lease China has now become the world s second largest economy. While there are some voices pointing out a slowdown of the economy in China, from a global perspective, China still has ample potential for growth. As proof of that, the new car sales volume in China has surpassed the U.S. and now holds first place worldwide. The number of vehicles owned has also topped 100 million, and further growth is anticipated. In these circumstances, the TC-Lease Group newly established Tong-Sheng Finance Leasing Co., Ltd. in Suzhou this April, and began handling automobile leasing in China, albeit on a limited basis. Going forward, by mutually collaborating with the existing Century Tokyo Leasing China Corporation Suzhou Branch, the TC-Lease Group will leverage the strengths of both companies and expand the scope of the TC-Lease Group s business. Introduction of TC-Lease Group in Suzhou, China Century Tokyo Leasing China Corporation Suzhou Branch Century Tokyo Leasing China Corporation Suzhou Branch was opened in December 2011 as the third branch of the Shanghai-based company, following branches in Guangzhou and Beijing. At Suzhou Branch, based in the center of Suzhou Industrial Park which is undergoing rapid industrial development, there are four permanent staff including three national staffs, and they provide services related to capital investment such as leasing and leaseback mainly for Japanese corporate customers. Nominal GDP Growth Forecast (1 billion U.S. dollars) 10,028 1, China New car sales volume in Japan, U.S. and China million China U.S India Indonesia Source: IMF World Economic Outlook, April 2013 Edition ,839 3,096 1, million Japan 5.38 million Source: OICA (International Organization of Motor Vehicle Manufacturers) Tong-Sheng Finance Leasing Co., Ltd. ( Tong-Sheng ) Tong-Sheng Finance Leasing Co., Ltd. is a wholly owned subsidiary of Taiwan-based President Tokyo Corporation (hereinafter President Tokyo ), an equity-method affiliate of TC-Lease. President Tokyo, the parent company, is a joint venture of TC-Lease (49%) and Uni-President Enterprises Corporation Group (51%), a leading Taiwanese food, logistics, and services corporate group. President Tokyo provides financial services, mainly automobile leasing, in Taiwan. Tong-Sheng will first begin deployment of services in Suzhou, which were cultivated in Taiwan for the Uni-President Enterprises Corporation Group and Taiwanese companies

8 Together with our shareholders To reward the shareholder s support, Century Tokyo Leasing Corporation distributes dividends twice a year and provides shareholder special benefit plan. Shareholder Information Mailing address Shareholders holding accounts with securities companies, etc. Shareholders not holding accounts with securities companies, etc. (Shareholders holding special accounts) Izumi, Suginami-ku, Tokyo Japan Mizuho Trust & Banking Co., Ltd. Stock Transfer Agency Department Dividends Our policy on dividends As a general rule, Century Tokyo Leasing Corporation distributes dividends to its shareholders twice a year (interim and full year-end dividends). As for our dividend policy, we view the long-term and stable return of profits to shareholders as its basis, and also intend to improve the dividend payout ratio upon realizing sustainable income growth. Century Tokyo Leasing Corporation will strive to enhance its corporate value while endeavoring to strengthen its capital, and work for further returns of profits to its shareholders. (Yen) /3 2012/3 2013/3 2014/3 2015/3 (forecast) For inquiries Agencies for notices and other inquiries (change in address, change in methods of receiving dividends, etc.) Receiving unpaid dividends Notes Securities companies, etc., managing your accounts Telephone: (toll free only in Japan) (available every day from 9:00 to 17:00 local time, excluding Saturdays, Sundays and national holidays) Website address: The head office, nationwide branches or Planet Booths (booths placed within Mizuho Bank, Ltd.) of Mizuho Securities Co., Ltd. The head office or nationwide branches of Mizuho Trust & Banking Co., Ltd. (Services are not available at Trust Lounges.) The head office or nationwide branches of Mizuho Trust & Banking Co., Ltd. / The head office or nationwide branches of Mizuho Bank, Ltd. (Only agency service is available at Mizuho Securities Co., Ltd.) To request a payment statement, please contact the mailing address, telephone number or agencies for notices and other inquiries stated in the right column, Shareholders holding special accounts. Shares registered with our special accounts cannot be traded, except for the purpose of sale or additional purchasing of less-than-one-unit shares. An account must be opened at a securities company, etc. to conduct a transfer of shares. Shareholder special benefit plan Guidance on the shareholder special benefit plan To express our gratitude toward shareholders for their support, we are offering original QUO Cards to shareholders under the shareholder special benefit plan (time of offering: the cards are delivered after the Annual General Meeting of Shareholders held in June each year). In addition, the content of shareholder special benefit plan is set to be more appealing to those who intend to hold the shares over the medium- to long-term period. (Yen) 10,000 8,000 6,000 4,000 2, ,000 4,000 2,000 8,000 6,000 2,000 0 year 2 years* Holding period The longer you hold the Company s shares, the more benefits you receive! 100 or more but less than 1,000 shares 1,000 or more but less than 3,000 shares 3,000 or more shares Attractive benefit contents directly relating to number of shares held and period of years held * A holding period of two or more years refers to shareholders who have been on the shareholder register of the Company at the end of March and September each year for five or more consecutive times, with the same shareholder identification numbers