Consolidated Financial Results (Kessan Tanshin) for the Fiscal Year Ended March 31, 2016 [Japan GAAP] May 11, 2016

Transcription

1 These consolidated financial results are an English translation of excerpts from the Japanese Kessan Tanshin including attachments filed with the Tokyo Stock Exchange, solely for the convenience of readers outside Japan. This report has been prepared in accordance with accounting principles and practices generally accepted in Japan. Amounts less than 1 million have been omitted unless otherwise stated. Consolidated Financial Results (Kessan Tanshin) for the Fiscal Year Ended March 31, 2016 [Japan GAAP] May 11, 2016 Name of Listed Company: Century Tokyo Leasing Corporation Stock Exchange Listing: Tokyo Securities Code: 8439 (URL: Representative: Shunichi Asada, President & CEO, Representative Director Contact: Koichi Baba, Managing Executive Officer Phone: Date of Annual General Meeting of Shareholders: June 24, 2016 Scheduled Payment Date of Dividends: June 27, 2016 Scheduled Reportable Date of Securities Report: June 24, 2016 Preparation of Supplementary Reference Documents: Yes (Japanese Only) Holding of Earnings Announcement: Yes (for institutional investors and analysts) 1. Consolidated Performance (Amounts less than one million yen are omitted.) Fiscal 2014 Fiscal 2015 YoY (Percentage change) (1) Consolidated business results: Revenues 882, , % Operating income 58,443 65, % Ordinary income 60,668 68, % Net income attributable to owners of parent 34,132 40, % Basic earnings per share (Yen) Diluted earnings per share (Yen) Rate of return on equity (ROE) 12.5% 13.1% Return on assets (ROA) 2.0% 2.1% Operating income to revenues 6.6% 7.0% (2) Consolidated financial condition: Total assets 3,151,871 3,317,862 Net assets 336, ,872 Shareholders equity ratio 9.3% 9.6% Net assets per share (Yen) 2, , (3) Consolidated cash flows: Cash flows from operating activities (171,023) (136,618) Cash flows from investing activities (18,682) (3,072) Cash flows from financing activities 156, ,770 Cash and cash equivalents at end of year 71,864 91,762 Notes: Total comprehensive income Fiscal 2015 ended March 31, 2016: 38,789 million (-24.2%) Fiscal 2014 ended March 31, 2015: 51,170 million (29.1%) Equity in earnings of affiliates Fiscal 2015 ended March 31, 2016: 1,286 million Fiscal 2014 ended March 31, 2015: 513 million Shareholders equity Fiscal 2015 ended March 31, 2016: 320,162 million Fiscal 2014 ended March 31, 2015: 292,935 million - 1 -

2 2. Dividends Dividends per Share (Yen) Total Dividends Payout Ratio Dividend on First Second Third (Consolidated) Net Assets Ratio Year-End Total Quarter Quarter Quarter (Consolidated) Fiscal , % 2.5% Fiscal , % 2.8% Fiscal 2016 (Forecast) % 3. Consolidated Results Forecast for the Fiscal Year Ending March 31, 2017 (As of May 11, 2016) Full year YoY (Percentage change) Revenues 950, % Operating income 70, % Ordinary income 72, % Net income attributable to owners of parent 42, % Basic earnings per share (Yen) Notes (1) Changes in status of significant subsidiaries during the fiscal year under review (changes in status of specified subsidiaries resulting in change in scope of consolidation): Yes New: One company Name: TC Realty Investments Inc. Exclusion: -company Name: - (2) Changes in accounting policy, changes in accounting estimation, and retrospective restatement 1) Changes in accounting policy due to reforms of accounting standards: Yes 2) Changes in accounting policy other than item 1) above: None 3) Changes in accounting estimation: None 4) Retrospective restatement: None (3) Number of shares of common stock issued 1) Number of shares issued at the end of the fiscal year (including treasury stock) As of March 31, 2015: 106,624,620 shares As of March 31, 2016: 106,624,620 shares 2) Number of shares of treasury stock at the end of the fiscal year As of March 31, 2015: 1,114,634 shares As of March 31, 2016: 1,086,343 shares 3) Average number of shares during the fiscal year Fiscal year ended March 31, 2015: 105,723,942 shares Fiscal year ended March 31, 2016: 105,532,229 shares - 2 -

3 (Reference: Outline of non-consolidated business results) 1. Non-consolidated Performance Fiscal 2014 Ended Fiscal 2015 Ended March 31, 2015 March 31, 2016 YoY (Percentage change) (1) Non-consolidated business results: Revenues 495, , % Operating income 36,473 40, % Ordinary income 40,742 43, % Net income 26,403 29, % Basic earnings per share (Yen) Diluted earnings per share (Yen) Notes to non-consolidated financial condition As of March 31, 2015 As of March 31, 2016 (2) Non-consolidated financial condition: Total assets 2,174,228 2,288,107 Net assets 222, ,763 Shareholders equity ratio 10.2% 10.6% Net assets per share (Yen) 2, , Note: Shareholders equity Fiscal 2015 ended March 31, 2016: 243,047 million Fiscal 2014 ended March 31, 2015: 222,316 million Presentation of implementation status for auditing procedures - The auditing procedure based on the Financial Instruments and Exchange Act does not apply to this Consolidated Financial Results. The review procedures for this document based on the Act have not been completed as of the release of this document. Explanation related to forward-looking statements and other items warranting special mention (Regarding forward-looking statements) - Any statements in this document, other than those of historical facts, are forward-looking statements about the future performance of Century Tokyo Leasing Corporation ( TC-Lease ) and its Group companies (collectively, the TC-Lease Group ), which are based on management s assumptions and beliefs in light of information currently available, and involve risks and uncertainties. Actual results may differ materially from these forecasts. For the conditions underlying the earnings forecasts presented and other information regarding the use of such forecasts, refer to 1. Analysis of Results of Operations and Financial Conditions (1) Analysis of Results of Operations on page

4 1. Analysis of Results of Operations and Financial Conditions (1) Analysis of Results of Operations The Japanese economy in the fiscal year ended March 31, 2016 showed signs of future uncertainties mainly due to effects from slowdowns of overseas economy, mainly in China and the emerging nations, despite a recovery trend, albeit a moderate one, by the government s fiscal policy and continued monetary easing by the Bank of Japan. Under these circumstances, the TC-Lease Group entered the final year of its second three-year medium-term management plan which started in fiscal 2013 with the aim of becoming a robust comprehensive financial services enterprise, and moved ahead with initiatives to further strengthen our sales base and management base. 1) Strengthen the sales base [Enhance competitiveness in the leasing business] - We strengthened our competitiveness in the leasing business by actively utilizing operating leases in the application of the promotion of investment in cutting-edge facilities using lease methods conducted by the Ministry of Economy, Trade and Industry based on the Industrial Competitiveness Enhancement Act enacted in January We established Orico Business Leasing Co., Ltd. (in April 2015) with Orient Corporation and launched its operations. The company specializes in leases partnering with merchandise dealers. [Bolster the financing business] - In the aviation field, the business operations of TC-CIT Aviation U.S., Inc. and TC-CIT Aviation Ireland Limited, established in the U.S. and Ireland (in October 2014) in partnership with CIT Group Inc., developed successfully. There was an increase in the balance of operating assets related to the Company s aviation business. - In the environment and energy field, we advanced our efforts to build and operate mega solar power plants. One includes the Chiba Yamakura Floating Mega-Solar Power Plant, the world s largest (as of January 15, 2016) floating solar power generating system (approximate power output: 13.7MW) built by Kyocera TCL Solar LLC (established jointly with KYOCERA CORPORATION). We also expanded the solar power sales business by various initiatives, such as acquiring 15% of the common stock of Ciel & Terre International (headquartered in France), the global pioneer of floating solar systems. [Expand overseas businesses] - Century Tokyo Factoring China Corporation, our overseas subsidiary in China, started offering export factoring services (credit protection for export receivables) in China, in collaboration with Mizuho Factors, Limited. This move is in step with a rise in exports from China to countries other than Japan, and it allows us to provide financial services for Japanese companies based in China to reduce the collection risk of export payments. - We have decided to acquire additional shares of CSI Leasing, Inc., a leading independent leasing company in the U.S. and our equity-method affiliate, with the aim of making the company a wholly owned subsidiary. [Reinforce activities in the automobile financing business both in Japan and overseas] - TISCO Tokyo Leasing Co., Ltd. (hereinafter, TTL), our overseas subsidiary in Thailand, has agreed on the use of the Nippon Rent-A-Car brand of Nippon Rent-A-Car Service, Inc. (hereafter NRS ), our consolidated subsidiary, in Thailand. Using the brand name, TTL will seek to gain higher recognition for its automobile leasing business and aim to further expand the business. NRS and TTL will also work together in a variety of ways to promote the use of Nippon Rent-A-Car by tourists and businesspeople from Thailand, who have been visiting Japan in growing numbers each year. 2) Strengthening of management base [Strengthen consolidated management] - For further strengthening the consolidated management in the automobile financing business, we have transferred the head offices of Nippon Car Solutions Co., Ltd. and Nippon Rent-A-Car Service, Inc., our consolidated subsidiaries, to Chiyoda-ku, where the TC-Lease s head office resides. [Enhance and reinforce the financial base] - We have been promoting reinforcement of our financial base by diversifying our fund procurement methods including the continuous issuance of unsecured bonds (with limited inter-bond pari passu clause). - In an effort to meet increased demand for funds in Thailand, TTL issued baht-denominated unsecured bonds

5 [Bolster human resource development] - We established the Diversity Promotion Office in the Personnel Division. This initiative promotes cultivation of a corporate culture that allows diverse human resources to demonstrate their skills and personalities, empowers them and promotes nurturing human resources, based on a basic policy on diversity. [Strengthen the other management base] - We were one of the companies selected for the Competitive IT Strategy Company designation, which is promoted jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange. We were evaluated for our active deployment of IT to stimulate innovation in management and strengthen competitiveness. A total of 18 listed companies, one from for each industry, were selected for the designation, after the screening of their actions toward competitive IT strategies and of companies with a three-year average return on equity (ROE) that exceeds the industry average. - With the aim of promoting the attractiveness of investing in our stock and further understanding of the TC-Lease Group s operations, we extended our shareholder special benefit plan, newly including complimentary coupons for discounted car rental of Nippon Rent-A-Car Service, Inc., the TC-Lease Group company, in addition to the original QUO Cards which we have already been offering. With regard to the business results, new transactions volume for the consolidated fiscal year under review was 1,497,936 million, up 1.6% from the previous consolidated fiscal year. In terms of profits and losses, revenues for the consolidated fiscal year under review amounted to 940,460 million, up 6.5% from the previous consolidated fiscal year. Operating income increased 12.8% to 65,904 million, ordinary income increased 12.1% to 68,008 million and net income attributable to owners of parent increased 17.3% to 40,033 million. Summary of Operations by Business Segment The results of operations by business segment are as follows: 1) Leasing and installment sales In leasing and installment sales, new transactions volume for the consolidated fiscal year under review was 866,241 million, up 9.0% from the previous consolidated fiscal year, due to growth mainly in real estate and aircraft leasing transactions. Revenues amounted to 889,939 million, up 5.9%. Segment income amounted to 50,339 million, up 8.4%. The main factor for the profit growth was an expansion in aircraft leasing transactions. 2) Finance In finance, new transactions volume for the consolidated fiscal year under review was 617,063 million, down 8.4% from the previous consolidated fiscal year. Revenues amounted to 29,266 million, up 27.7%, and segment income amounted to 16,479 million, up 17.8%, mainly attributable to profit growth due to successful exit strategies from real estate financing. 3) Other In other, new transactions volume for the consolidated fiscal year under review was 14,630 million. Revenues amounted to 21,254 million, up 9.2% from the previous consolidated fiscal year. Segment income amounted to 5,728 million, up 19.3%

6 (2) Analysis of Financial Conditions Assets, Liabilities, and Net Assets 1) Assets Total assets at the end of the consolidated fiscal year under review increased 165,991 million, or 5.3%, to 3,317,862 million from total assets at the end of the previous consolidated fiscal year, mainly due to increased operating assets. Operating assets The balance of operating assets at the end of the consolidated fiscal year under review increased 125,548 million, or 4.4%, to 2,991,141 million from the balance at the end of the previous consolidated fiscal year. The balance of operating assets by segment is as follows: 2,241,348 million for Leasing and installment sales, 724,350 million for Finance, and 25,442 million for Other. 2) Liabilities Total liabilities at the end of the consolidated fiscal year under review increased 127,656 million, or 4.5%, to 2,942,990 million from the end of the previous consolidated fiscal year, mainly due to increased interest-bearing debts. Interest-bearing debts Total interest-bearing debts increased 131,634 million, or 5.4%, to 2,551,491 million from the end of the previous consolidated fiscal year. A breakdown of interest-bearing debts shows that, in short-term funds procurement, interest-bearing debts decreased 12,286 million, or 0.9%, to 1,284,981 million from the end of the previous consolidated fiscal year. Meanwhile, in long-term funds procurement, interest-bearing debts increased 143,920 million, or 12.8%, to 1,266,509 million from the end of the previous consolidated fiscal year. 3) Net assets Total net assets increased 38,335 million, or 11.4%, to 374,872 million from the end of the previous consolidated fiscal year, mainly because retained earnings increased 32,394 million. Cash Flows Fiscal 2014 Fiscal 2015 Change (increase/decrease) Cash flows from operating activities (171,023) (136,618) 34,404 Cash flows from investing activities (18,682) (3,072) 15,609 Cash flows from financing activities 156, ,770 (1,115) Cash and cash equivalents at end of year 71,864 91,762 19,898 1) Cash flows from operating activities Net cash used for operating activities amounted to 136,618 million (in the previous consolidated fiscal year, net cash used for operating activities was 171,023 million), mainly due to the following factors. Income before income taxes amounted to 68,459 million. Depreciation and amortization of leased assets amounted to 80,137 million. Loss on disposal of leased assets and cost of sale of leased assets amounted to 45,496 million. Meanwhile, cash used for purchases of leased assets amounted to 239,962 million. Cash used for the increase in operational investment securities amounted to 31,778 million, among other factors. 2) Cash flows from investing activities Net cash used in investment activities amounted to 3,072 million (in the previous consolidated fiscal year, net cash used in investment activities was 18,682 million), due to the following and other factors. Proceeds from sales/redemptions of investments in securities amounted to 3,699 million. Meanwhile, purchases of investments in securities amounted to 4,069 million. Purchases of own assets in use amounted to 3,167 million

7 3) Cash flows from financing activities Net cash provided by financing activities amounted to 155,770 million (in the previous consolidated fiscal year, net cash provided by financing activities was 156,885 million), due to the following and other factors. Net cash used for repayment of long-term debt amounted to 303,240 million and redemption of bonds amounted to 91,144 million. Meanwhile, net cash provided by proceeds from long-term debt amounted to 476,094 million. Net cash provided by proceeds from issuance of bonds amounted to 80,604 million. Due to the factors mentioned above, cash and cash equivalents at the end of the consolidated fiscal year under review increased 19,898 million to 91,762 million from the previous consolidated fiscal year. Outlook for Fiscal 2016 Japan s economy is expected to continue to be uncertain due to the yen s appreciation and falling stock prices since the start of the new year and a downturn in corporate business sentiment. This is despite a recovery trend, albeit a moderate one, supported by strong corporate earnings and an improved employment environment. In response to this outlook, TC-Lease will continuously reduce funding cost and the cost of credit. As a highly specialized and unique financial services company, we will also work alongside customers in pursuit of their growth and will strive to create an environmentally-sound, sustainable economy and society. Based on the above, as our forecast of business performance for the next fiscal year ending March 31, 2017, we expect to achieve revenues of 950,000 million, up 1.0% from the previous consolidated fiscal year, operating income of 70,500 million, up 7.0%, ordinary income of 72,000 million, up 5.9%, and net income attributable to owners of parent of 42,500 million, up 6.2%. (3) Basic Policy on Distribution of Profits, as well as Dividends for both the Fiscal Year under Review and the Next Fiscal Year The TC-Lease Group believes that an ongoing commitment to the expansion of business content and the reinforcement of its business structure should gain higher corporate value. In this context, TC-Lease complies with a basic policy of stably distributing profits to its shareholders over the long term with due consideration given to increasing its retained earnings. Internal reserve funds will be effectively appropriated in the future by corporate management to, for example, be used as funds to purchase high-quality operating assets. As for dividends in the fiscal year under review, at the beginning of the year, TC-Lease forecasted a dividend of 70 per share (interim dividend of 35, year-end dividend of 35). The interim dividend was 35 per share in line with the initial forecast. As for the year-end dividend, we intend to increase the year-end dividend by 10 per share from the initially forecasted year-end dividend, to 45 per share. With this increase, we intend to pay an annual dividend of 80 per share. For the fiscal year ending March 31, 2017, TC-Lease intends to ensure an annual dividend of 95 per share, which will consist of a 47 per share interim dividend and a 48 per share year-end dividend, based on the above policy of distributing profits to shareholders and in appreciation of the support of the shareholders

8 2. TC-Lease Group of Companies The TC-Lease Group is comprised of TC-Lease, 231 subsidiaries, and 17 affiliated companies, mainly engaged in the IT-related equipment, communication equipment, and machinery facilities leasing and installment sales and finance, and in performing business activities such as services related to these businesses. In addition to those mentioned above, it is affiliated with one other company (ITOCHU Corporation). The following are major businesses of the TC-Lease Group, with a classification identical to that of business segments in the segment information. (1) Leasing and installment sales : Leasing and installment sales of information equipment and office equipment, industrial machinery, transportation use equipment, commercial and service use machinery, etc. (including sales of assets thereof pertaining to maturity and/or cancellation before maturity of leasing transactions) (2) Finance : Money-lending business and investment business such as capital investments in operational investment securities and silent partnerships. (3) Other : Commission transactions, solar power sales business, and other businesses

9 Users Century Tokyo Leasing Corporation The following is a diagram of business operations which represents the positioning of each major business in the TC-Lease Group. Leasing and installment sales/finance/other Leasing of equipment, etc. Leasing of equipment, etc. Sales of assets for rent, etc. Management of real estates, etc. 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. ITEC Leasing Co., Ltd. Orico Business Leasing Co., Ltd. TC Agency Corporation Kyocera TCL Solar LLC TRY, Inc. TC Property Solutions Corporation Leasing and installment sales Finance Other Leasing and installment sales Other Leasing and installment sales Century Tokyo Leasing Corporation Subcontracting Lending of funds/loan guarantee/ Assignment of receivables TC Business Service Corporation TC Business Experts Corporation Century Tokyo Leasing China Corporation Century Tokyo Factoring China Corporation Century Tokyo Leasing (Singapore) Pte. Ltd. Century Tokyo Capital (Malaysia) Sdn. Bhd. PT. Century Tokyo Leasing Indonesia PT. TCT Indonesia TISCO Tokyo Leasing Co., Ltd. HTC Leasing Co., Ltd. Tokyo Leasing (Hong Kong) Ltd. Century Tokyo Leasing (USA) Inc. TC Aviation Capital Ireland Limited TC-CIT Aviation U.S., Inc. TC-CIT Aviation Ireland Limited Tokyo Leasing (UK) Plc TC Realty Investments Inc. and other companies: total of 116 other companies Leasing and installment sales Finance Other Customers President Tokyo Corporation Suzhou New District Furui Leasing Co., Ltd. BPI Century Tokyo Lease & Finance Corp. P.T. Hexa Finance Indonesia CSI Leasing, Inc. GA Telesis, LLC and other companies: total of 15 companies A total of 103 other non-consolidated subsidiaries, etc. Leasing and installment sales Finance Other Leasing and installment sales Finance Purchase of equipment, etc. Leasing of equipment, etc. ITOCHU Corporation Consolidated subsidiary Equity-Method Affiliates Non-consolidated subsidiary Other affiliated company - 9 -

10 3. Management Policies (1) Basic Management Policies TC-Lease plans to change its company name to Tokyo Century Corporation after approval by the Annual General Meeting of Shareholders on June 24, In line with this change, we will reform our management philosophy and policy as described below and proactively fulfill our corporate responsibility to society. Management Philosophy Tokyo Century Group will work alongside customers in pursuit of their growth as a highly specialized and unique financial services company and will contribute to the creation of an environmentally-sound, sustainable economy and society. Management Policy - We will provide the best products and services around the world to contribute to the success of our customers businesses while pursuing all possibilities by collaborating with customers and uniting the overall strengths of the Group. - We will strive to raise our corporate value over the mid to long term by pioneering new business fields and realizing sustainable growth. - We will cultivate a corporate culture that allows diverse human resources to fully demonstrate their skills and personalities, and we will build a company where all officers and employees can hone their expertise and experience growth as well as a sense of pride. - We will always be mindful of our social responsibility as a corporation and will conduct business activities with vigor and sincerity as we fulfill our role of creating a society with a sustainable economy and society. (2) Target Management Indices Management has set management targets for fiscal 2018, the final year of the third three-year Medium-Term Management Plan that commences in fiscal Consolidated ordinary income Consolidated ROA (Ordinary income/operating assets) Consolidated targets for fiscal billion or more 2.3% or more Consolidated Shareholders equity ratio 11.0% Actual results for fiscal 2015 (the consolidated fiscal year under review), the final year of the second medium-term management plan, were as follows. - Ordinary income amounted to 68,008 million and the management targets ( 50 billion or more) were achieved. - Operating assets amounted to 2,991,141 million and the management targets ( 2.6 trillion) were achieved. - Shareholders equity ratio was 9.6%. (Management targets 10.0%) (3) Medium-Term Management Strategy and Tasks to Be Addressed TC-Lease intends to strengthen its sales base and management base under the following basic policies in the third three-year medium-term management plan which starts in fiscal 2016, thereby aiming to achieve a further leap forward and to grow. Basic Policies of the Third Medium-Term Management Plan Promote the shift to a high-revenue business model with a focus on asset efficiency in order to lay the foundations for sustainable growth. The TC-Lease Group defines the Third Medium-Term Management Plan as marking an important threeyear period for the Group to lay the foundation for lasting growth. With superior expertise and the spirit of innovation, all Group employees will engage in specialized financing as professionals to accumulate assets with excellent future prospects. We will continue to demonstrate industry-leading productivity in a tireless effort to establish the high-revenue business model and seek further expansion. Looking ahead, we will

11 continue to rely on our core business of leasing, the original business that served as the backbone of TC-Lease Group s growth and development. At the same time, we will take on the challenges of unlimited possibilities and opportunities toward achieving sustainable growth. Management Strategy 1) Strengthen the sales base - Transform to take on new business areas that transcend the conventional concept of leasing - Create new values by integrating finance and business - Make a Group-wide effort to become first in the overall ranking for the automobile finance business - Expand overseas businesses by promoting alliance strategies - Engage in business planning and development aimed at lasting corporate development 2) Strengthen the management base - Strengthen consolidated management - Enhance and reinforce the financial base - Raise the level of risk control - Bolster development of human resources - Strengthen corporate governance (4) Other Important Management Issues Not applicable 4. Basic Stance on Selection of Accounting Standards We judge that our consolidated financial statements based on Japan GAAP appropriately reflect the Company s results of operations and financial conditions. Furthermore, with regard to the selection of accounting standards, having considered the costs and benefits from various points of view such as streamlining of financial reporting, ensuring comparability, and impact on funding procurement, we deem it suitable at this time to apply Japan GAAP. Our policy is to continue to closely observe trends in IFRS and Japanese accounting system and standards, and to respond appropriately with regard to selection of accounting standards

12 5. Consolidated Financial Statements (1) Consolidated Balance Sheets As of March 31, 2015 As of March 31, 2016 Assets Current assets Cash on hand and in banks 70,560 80,395 Accounts receivable - installment sales 252, ,467 Lease receivables and investment assets 1,485,017 1,480,951 Loans 535, ,365 Operational investment securities 161, ,627 Accounts receivable - leases 18,630 24,287 Short-term investment securities 2,760 12,843 Inventories Deferred tax assets 5,943 4,349 Other current assets 56,804 69,256 Allowance for doubtful accounts (3,787) (3,236) Total current assets 2,587,387 2,618,986 Non-current assets Property and equipment, at cost less accumulated depreciation Leased assets 429, ,724 Advances for purchases of property for lease 8,424 12,302 Other operating assets 12,019 25,442 Own assets in use 9,219 9,733 Property and equipment, net 459, ,202 Intangible assets Computer programs leased to customers Goodwill 4,139 3,614 Other intangible assets 4,646 4,204 Total intangible assets 9,059 8,050 Investments and other assets Investments in securities 67,344 64,278 Claims provable in bankruptcy or rehabilitation 2,239 2,199 Deferred tax assets 3,575 4,701 Long-term loans and other assets 24,314 27,934 Allowance for doubtful accounts (1,372) (1,490) Total investments and other assets 96,101 97,623 Total non-current assets 564, ,876 Total assets 3,151,871 3,317,

13 Liabilities Current liabilities As of March 31, 2015 As of March 31, 2016 Notes and accounts payable-trade 202, ,272 Short-term borrowings 470, ,181 Current portion of bonds 91,099 44,571 Current portion of long-term debt 281, ,758 Commercial papers 754, ,400 Payables under fluidity lease receivables 57,800 75,400 Current portion of long-term payables under fluidity lease receivables 1,087 1,096 Lease obligations 7,305 7,335 Accrued income taxes 10,160 9,614 Deferred tax liabilities 1,244 1,507 Deferred profit on installment sales 13,555 12,026 Provision for bonuses 2,554 2,763 Provision for directors bonuses Other provision Other current liabilities 49,075 47,666 Total current liabilities 1,943,221 1,878,241 Long-term liabilities Bonds payable 118, ,031 Long-term debt 643, ,451 Long-term payables under fluidity lease receivables 2,697 1,600 Lease obligations 11,329 10,912 Deferred tax liabilities 3,381 2,483 Provision for directors retirement benefits Provision for automobile inspection costs Net defined benefit liability 7,119 9,614 Other long-term liabilities 84,908 88,454 Total long-term liabilities 872,112 1,064,748 Total liabilities 2,815,334 2,942,990 Net assets Shareholders equity Common stock without par value 34,231 34,231 Capital surplus 5,537 6,122 Retained earnings 233, ,044 Treasury stock (2,876) (2,806) Total shareholders equity 270, ,591 Accumulated other comprehensive income (loss) Net unrealized holding gains on securities 16,439 15,474 Net unrealized gains (loss) on derivative instruments (9) (624) Translation adjustments 6,026 3,028 Remeasurements of defined benefit plans (64) (1,307) Total accumulated other comprehensive income 22,392 16,570 Share subscription rights Non-controlling interests 43,110 53,994 Total net assets 336, ,872 Total liabilities and net assets 3,151,871 3,317,

14 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income Consolidated Statements of Income (For the years ended March 31, 2015 and 2016) Fiscal 2014 Fiscal 2015 Revenues 882, ,460 Costs 759, ,645 Gross profit 123, ,815 Selling, general and administrative expenses 65,235 70,910 Operating income 58,443 65,904 Non-operating income Interest income Dividend income Equity in earnings of affiliates 513 1,286 Foreign exchange gains 3,794 Income from derivatives other than for trading or hedging 755 Other Total non-operating income 5,718 3,517 Non-operating expenses Interest expense Foreign exchange losses 858 Expenses on derivatives other than for trading or hedging 2,782 Other Total non-operating expenses 3,493 1,413 Ordinary income 60,668 68,008 Extraordinary income Gain on sale of investments in securities Gain on bargain purchase 667 Other Total extraordinary income 1, Extraordinary losses Office transfer related expenses Loss on disposal of non-current assets System integration expenses 791 Other 1, Total extraordinary losses 2, Income before income taxes 59,707 68,459 Income taxes - current 24,399 21,429 Income taxes - deferred (2,792) 1,723 Total income taxes 21,607 23,152 Net income 38,100 45,306 Net income attributable to non-controlling interests 3,968 5,273 Net income attributable to owners of parent 34,132 40,

15 Consolidated Statements of Comprehensive Income (For the years ended March 31, 2015 and 2016) Fiscal 2014 Fiscal 2015 Net income 38,100 45,306 Other comprehensive income (loss) Net unrealized holding gains (losses) on securities 6,136 (947) Net unrealized gains (losses) on derivative instruments 748 (927) Translation adjustments 4,912 (2,664) Remeasurements of defined benefit plans 667 (1,657) Share of other comprehensive income of affiliates accounted for using equity method 605 (318) Total other comprehensive income 13,069 (6,516) Comprehensive income 51,170 38,789 Comprehensive income attributable to: Owners of parent 46,453 34,211 Non-controlling interests 4,716 4,

16 (3) Consolidated Statements of Changes in Net Assets Balance at beginning of year Cumulative effects of changes in accounting policies (For the year ended March 31, 2015) Common stock Capital surplus Shareholder s equity Retained earnings Treasury stock Total shareholders equity 34,231 5, ,606 (1,999) 242, Restated balance 34,231 5, ,655 (1,999) 242,425 Changes of items during the period Cash dividends (6,137) (6,137) Net income attributable to owners of parent 34,132 34,132 Purchase of treasury stock (913) (913) Disposal of treasury stock (7) Change of scope of consolidation Purchase of shares of consolidated subsidiaries Change of scope of equity method 1,006 1,006 Decrease by share change Net changes of items other than shareholders equity Total changes of items during the period 28,994 (877) 28,116 Balance at end of year 34,231 5, ,650 (2,876) 270,

17 Balance at beginning of year Cumulative effects of changes in accounting policies Net unrealized holding gains on securities Accumulated other comprehensive income Net Remeasureunrealized Translation ments of gains on adjustments defined benefit derivative plans instruments Total accumulated other comprehensive income Share subscription rights Noncontrolling interests Total net assets 10,338 (761) 1,057 (562) 10, , , Restated balance 10,338 (761) 1,057 (562) 10, , ,534 Changes of items during the period Cash dividends (6,137) Net income attributable to owners of parent 34,132 Purchase of treasury stock (913) Disposal of treasury stock 28 Change of scope of consolidation Purchase of shares of consolidated subsidiaries Change of scope of equity method Decrease by share change Net changes of items other than shareholders equity Total changes of items during the period 1,006 6, , , ,386 22,886 6, , , ,386 51,003 Balance at end of year 16,439 (9) 6,026 (64) 22, , ,

18 Balance at beginning of year Cumulative effects of changes in accounting policies (For the year ended March 31, 2016) Common stock Capital surplus Shareholder s equity Retained earnings Treasury stock Total shareholders equity 34,231 5, ,650 (2,876) 270,542 Restated balance 34,231 5, ,650 (2,876) 270,542 Changes of items during the period Cash dividends (7,175) (7,175) Net income attributable to owners of parent 40,033 40,033 Purchase of treasury stock (3) (3) Disposal of treasury stock (12) Change of scope of consolidation Purchase of shares of consolidated subsidiaries Change of scope of equity method (420) 0 (420) Decrease by share change (61) (61) Net changes of items other than shareholders equity Total changes of items during the period , ,048 Balance at end of year 34,231 6, ,044 (2,806) 303,

19 Balance at beginning of year Cumulative effects of changes in accounting policies Net unrealized holding gains on securities Accumulated other comprehensive income Net Remeasureunrealized Translation ments of gains on adjustments defined benefit derivative plans instruments Total accumulated other comprehensive income Share subscription rights Noncontrolling interests Total net assets 16,439 (9) 6,026 (64) 22, , ,537 Restated balance 16,439 (9) 6,026 (64) 22, , ,537 Changes of items during the period Cash dividends (7,175) Net income attributable to owners of parent 40,033 Purchase of treasury stock (3) Disposal of treasury stock 59 Change of scope of consolidation Purchase of shares of consolidated subsidiaries Change of scope of equity method (420) Decrease by share change (61) Net changes of items other than shareholders equity Total changes of items during the period (965) (614) (2,998) (1,243) (5,821) ,883 5,286 (965) (614) (2,998) (1,243) (5,821) ,883 38,335 Balance at end of year 15,474 (624) 3,028 (1,307) 16, , ,

20 (4) Consolidated Statements of Cash Flows (For the years ended March 31, 2015 and 2016) Cash flows from operating activities Fiscal 2014 Fiscal 2015 Income before income taxes 59,707 68,459 Depreciation and amortization of leased assets 70,832 80,137 Loss on disposal of leased assets 18,236 45,496 Depreciation of own-used assets, and Loss on sales and retirement of own-used assets 3,692 3,516 Loss (gain) on devaluation of investments in securities Foreign exchange gains (3,794) 858 Decrease in allowance for doubtful accounts (2,074) (336) Increase (decrease) in provision for bonuses Increase (decrease) in net defined benefit liability Interest and dividend income (964) (902) Interest expense 10,890 13,643 Equity in (earnings) losses of affiliates (513) (1,286) Gain on sale of investments in securities (600) (920) Increase in installment sales receivable (11,526) 19,961 Increase in lease receivables and investment assets 885 (10,374) Increase in loans receivable (64,761) 2,146 Increase in operational investment securities (46,900) (31,778) Purchases of leased assets (177,131) (239,962) Decrease (increase) in other operating assets (5,249) (13,422) Decrease (increase) in claims provable in bankruptcy or rehabilitation 2, Increase in trade notes and accounts payable (19,877) (5,433) Other, net 33,775 (32,818) Subtotal (131,663) (102,262) Interest and dividend income received 1,505 1,665 Interest expense paid (11,093) (13,832) Income taxes paid (29,772) (22,189) Net cash used in operating activities (171,023) (136,618) Cash flows from investing activities Proceeds from sales of own assets in use 1, Purchases of own assets in use (3,297) (3,167) Proceeds from sales/redemptions of investments in securities 5,252 3,699 Purchases of investments in securities (24,192) (4,069) Other, net 2, Net cash provided by (used in) investing activities (18,682) (3,072)

21 Cash flows from financing activities Fiscal 2014 Fiscal 2015 Increase in short-term borrowings, net 24,830 (30,455) Net increase (decrease) in commercial papers 15,300 8,800 Proceeds from long-term debt 407, ,094 Repayment of long-term debt (304,989) (303,240) Proceeds from debt securitization 2,000 17,600 Repayments of debt securitization (6,451) (1,087) Proceeds from issuance of bonds 96,770 80,604 Redemption of bonds (73,616) (91,144) Proceeds from stock issuance to minority shareholders 3,757 7,190 Cash dividends paid (6,137) (7,175) Cash dividends paid to non-controlling-interest shareholder (500) (777) Purchase of shares of subsidiaries not resulting in change in scope of consolidation (584) Proceeds from sales of treasury stock 1 0 Purchase of treasury stock (913) (3) Other, net (402) (51) Net cash provided by financing activities 156, ,770 Effect of exchange rate changes on cash and cash equivalents (13,151) 3,816 Net increase in cash and cash equivalents (45,972) 19,894 Cash and cash equivalents at beginning of year 115,841 71,864 Increase in cash and cash equivalents from newly consolidated subsidiary 1,995 3 Cash and cash equivalents at end of year 71,864 91,

22 (5) Notes to the Consolidated Financial Statements Notes on Going Concern Assumption Not applicable Significant Matters Forming a Basis for the Preparation of Consolidated Financial Statements 1. Changes in the scope of consolidation From the consolidated fiscal year under review, 7 companies, including Orico Business Leasing Co., Ltd., have been included in the scope of consolidation mainly due to new establishment. TCI Finance Corporation and one other company have been excluded from the scope of consolidation due to the disposal of entire shares and the completion of liquidation respectively. 2. Changes in the scope of equity-method affiliates From the consolidated fiscal year under review, FHF I, L.P. has been included in the scope of equity-method affiliates due to new investment. Chikugin Lease Co., Ltd. has been excluded from the scope of equity-method affiliates as the Company sold part of its stake in Chikugin Lease and it became non-affiliated. Changes in Accounting Policy We have adopted the Accounting Standard for Business Combinations (ASBJ Statement No. 21, September 13, 2013, hereinafter, Business Combinations Standard ), the Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September 13, 2013, hereinafter, Consolidated Financial Statements Standard ) and the Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013, hereinafter, Business Divestitures Standard ) and others, effective from the consolidated fiscal year under review. Accordingly, our accounting policies have been changed; the difference arising from a change in the Company s ownership interest in a subsidiary over which the Company continues to have control is recorded as capital surplus and acquisition-related costs are expensed in the consolidated fiscal year when they are incurred. In addition, for business combinations to be performed at and after the beginning of the consolidated fiscal year under review, the method was changed to recognize an adjustment to the provisional amount arising from the finalization of the tentative accounting treatment relating to the allocation of acquisition cost in the consolidated financial statements where the date of business combination belongs. In addition, we have changed the presentation of profit and other related items, as well as the presentation of minority interests to non-controlling interests. To reflect these changes in presentation, reclassification of accounts has been made to the consolidated financial statements for the fiscal year ended March 31, With regard to the accounting policy for the preparation of the Consolidated Statements of Cash Flows for the consolidated fiscal year under review, cash flows arising from the purchase or sale of shares of subsidiaries not resulting in change in scope of consolidation were recorded under Cash flows from financing activities, while cash flows concerning costs related to purchase of shares of subsidiaries resulting in change in scope of consolidation or costs related to purchase or sale of shares of subsidiaries not resulting in change in scope of consolidation were recorded under Cash flows from operating activities. The Business Combinations Standard and others were adopted in accordance with transitional treatments stipulated in Paragraph 58-2 (4) of the Business Combinations Standard, Paragraph 44-5 (4) of the Consolidated Financial Statements Standard and Paragraph 57-4 (4) of the Business Divestitures Standard, and they have been adopted from the beginning of the consolidated fiscal year under review onwards. As a result, operating income and ordinary income for the consolidated fiscal year under review decreased 146 million, respectively, and income before income taxes decreased 743 million. Meanwhile, capital surplus at the end of the consolidated fiscal year under review increased 597 million. Effects of the change on net assets per share, basic earnings per share and diluted earnings per share for the consolidated fiscal year under review are immaterial. Standards Issued But Not Yet Effective - Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, March 28, 2016) (1) Overview With respect to the treatment of the recoverability of deferred tax assets, reviews required for the following treatment have been conducted basically following the framework of the JICPA Audit Committee Report No. 66 Audit Treatment of Judgments with Regard to Recoverability of Deferred Tax Assets, in which companies are classified into five categories and the amounts of deferred tax assets are estimated according to such categories

23 1) Treatment for the companies that do not satisfy any requirement for Category 1 to Category 5. 2) Requirements for Category 2 and Category 3. 3) Treatment of future deductible temporary differences of which scheduling is impracticable for companies that fall under Category 2. 4) Treatment for a period in which taxable income before adjustment including future temporary differences can be reasonably estimated for companies that fall under Category 3. 5) Treatment of the cases in which companies meeting the requirements for Category 4 fall under Category 2 or Category 3. (2) Scheduled date of adoption The Company expects to adopt the implementation guidance from the beginning of the fiscal year ending March 31, (3) Impact of adopting revised accounting standards and guidance The Company is currently evaluating the effect of adopting the implementation guidance on its consolidated financial statements

24 Change in Presentation Method (Consolidated Statements of Income) Loss on disposal of non-current assets in the amount of 63 million for the fiscal year ended March 31, 2015 was included in Other in Extraordinary losses, however, from the consolidated fiscal year under review, the Company has separately presented the account since the amount of the account became significant. Loss on devaluation of investments in securities in the amount of 885 million for the year ended March 31, 2015 which was separately presented, was included in Other in Extraordinary losses from the consolidated fiscal year under review since the amount of the account became insignificant. (Consolidated Statements of Cash Flows) Decrease (increase) in other operating assets in the amount of -5,249 million for the fiscal year ended March 31, 2015 was included in Other in cash flows from operating activities, however, from the consolidated fiscal year under review, the Company has separately presented the account since the amount of the account became significant. Collection of loans receivable in the cash flows from investing activities in the amount of 9 million for the year ended March 31, 2015 which was presented as Collection of loans receivable in cash flows from investing activities was included in Other, net in cash flows from investing activities from the consolidated fiscal year under review since the amounts of these accounts was insignificant. Cash dividends paid to non-controlling-interest shareholder in the amount of -500 million for the fiscal year ended March 31, 2015 was included in Other, net in cash flows from financing activities, however, from the consolidated fiscal year under review, the Company has separately presented the account from the consolidated fiscal year under review since the amount of the account became significant. Additional information (Subsidiary through share acquisition) On February 22, 2016, the Board of Directors adopted a resolution to acquire additional shares in CSI Leasing, Inc. (hereinafter CSI Leasing ), with the aim of incorporating it as our wholly owned subsidiary. (1) Summary of the business combination 1) Name of the acquired company and a description of its business Name: CSI Leasing, Inc. (Headquartered in Missouri, U.S.A.) Description of business: Leasing business for information and communications equipment (hereinafter IT equipment ) 2) Purpose of the additional share acquisition We continue to pursue expansion in our global operations with the aim of strengthening our management base. To this end, we have worked with CS Leasing through strategic partnerships since 2003, when we conducted the first business transaction with the company. In March 2015, we acquired 35% of voting rights in CSI Leasing and it became our equity-method affiliate. Further, we are planning to integrate the CSI Leasing as our wholly owned subsidiary, through which we can integrate the CSI Leasing Group with expertise regarding U.S., Central and South American and European operations into TC-Lease Group with strength in Asia thus enhancing our global network. In addition, we expect the acquisition to support us to achieve further growth by sharing CSI Leasing s business know-how of the U.S. leasing market and the TC-Lease s strength of having the largest share in the Japanese IT equipment leasing market. The TC-Lease Group is committed to contributing to the formulation of our customers IT strategies alongside the reinforcement of our support systems at home and abroad. 3) Date of business combination and its legal form End of May, 2016 (scheduled) Following the completion of statutory procedures, we will be acquiring CSI Leasing shares through share transfer. 4) Percentage of voting rights to acquire Prior to the additional share acquisition: 34.3% After the additional share acquisition: 100.0%