annual report 2008 - fgl.co.jp · 25.06.2008 · annual report 2008 year ended march 31, 2008 fuyo...

Annual Report 2008

Year Ended March 31, 2008

FUYO GENERAL LEASE CO., LTD.

Profile

Fuyo General Lease Co., Ltd. was established in 1969 with equity investment provided by Fuji

Bank (currently Mizuho Corporate Bank), Marubeni-Iida (Marubeni Corp.) and four other Fuyo

Group companies. Since its founding, the Company has upheld its corporate mission encapsulated

in the catchphrase, Creation and Innovation, and has played its role as an innovator in Japan’

s leasing business. For instance, we were the first company in Japan that introduced a complex

investment tool, the Japanese leveraged lease. The Company went public in December 2004

and has since been listed on the first section of the Tokyo Stock Exchange. We stand ready to

serve customers and fill all of their business needs, while continuing to enhance our strengths by

capitalizing on a wide range of services; outstanding consulting capabilities; a strong nationwide

network; and access to vast informational resources through the Mizuho Financial Group.

Contents Financial Highlights 1

Message from Top Management 2

To Our Shareholders 4

Management Policy 8

Enhance Management on a Consolidated Basis and Benefit from M&As 11

Revisions to Lease Accounting Standards 12

Business Segments 14

Corporate Social Responsibility Activities 20

Corporate Governance and Compliance 22

Risk Management 25

Board of Directors 28

Financial Statements 29

Management’s Discussion and Analysiss 30

Consolidated Balance Sheets 32

Consolidated Statements of Income 34

Consolidated Statements of Changes in Net Assets 35

Consolidated Statements of Cash Flows 37

Notes to Consolidated Financial Statements 38

Report of Independent Auditors 49

Directory 50

Forward-looking statementsThis annual report contains forward-looking statements concerning the future plans, estimates, strategies, and performance of Fuyo General Lease Co., Ltd. These forward-looking statements are expectations and projections based on information currently available to the Company, and 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, general economic conditions, market demand and competition, laws and regulations, interest rates and currency exchange rates.

Contents of this annual report are based on information available as of March 31, 2008 unless otherwise noted.

Fuyo General Lease Annual Report 2008 1

Thousands of Millions of yen U.S. dollars

2004 2005 2006 2007 2008 2008

For the Year:

Total revenues ¥360,279 ¥364,286 ¥370,370 ¥391,546 ¥ 399,075 $3,990,750

Operating income 9,334 15,281 17,458 16,617 16,172 161,720

Net income 5,502 10,878 13,582 12,287 12,077 120,770

At Year-End:

Total assets 918,272 927,461 954,357 1,010,961 1,276,122 12,761,220

Total net assets 30,383 47,986 64,062 74,874 81,429 814,290

Shareholders’ equity ratio 3.3% 5.2% 6.7% 7.4% 6.4% 6.4%

Yen U.S. dollars

Per Share Data:

Net income ¥200.61 ¥384.55 ¥448.43 ¥405.68 ¥398.75 $3.99

Cash dividend (Non-consolidated) 15.00 25.00 33.00 43.00 50.00 0.50

Note: • Throughout this report yen amounts are translated into U.S. dollar equivalents at the exchange rate of ¥100/USD in effect on March 31, 2008. • A ten-for-one stock split was effected in July 2003. • Shareholders’ equity ratio: (total net assets – minority interests – stock options) / total assets

Financial HighlightsFuyo General Lease Co., Ltd. and Consolidated SubsidiariesYears ended March 31, 2004, 2005, 2006, 2007 and 2008

100,000

80,000

60,000

40,000

20,000

0

10

8

6

4

2

0

(%) (Millions of Yen)

Total net assets Shareholders’ equity ratio

04 05 06 07 08

1,500,000

1,200,000

900,000

600,000

300,000

0

(Millions of Yen)

Total assets

04 05 06 07 08

500,000

400,000

300,000

200,000

100,000

0

(Millions of Yen)

Total revenues

04 05 06 07 08

25,000

20,000

15,000

10,000

5,000

0

(Millions of Yen)

Operating incomeNet income

Total net assets Shareholders’ equity ratio

Operating incomeNet income

04 05 06 07 08


Toshiyuki Ogura, Chairman Mitsuru Machida, President & Chief Executive Officer


During the fiscal year ended March 31, 2008, our group actively expanded its business in accordance

with the mid-term management plan for fiscal 2008 to fiscal 2010. The plan set forth three management

policies: Build a corporate foundation that surmounts changes in the business by reinforcing our special

strengths and advantages; gain appreciation from our stakeholders through stable performance and

business growth; and stress Corporate Social Responsibility (CSR), thorough compliance, and the

development of strong human resources.

Total new executed contracts volume for the year under review increased ¥49,973 million, or 11.3%, to

¥493,794 million from the previous fiscal year. Our consolidated operating assets at the end of the year

were up ¥248,544 million, or 27.1%, at ¥1,166,329 million.

Thanks to the elevated level of operating assets, consolidated revenues climbed 1.9% during fiscal 2008,

an increase of ¥7,529 million, to ¥399,075 million. Consolidated operating income, however, fell 2.7%

to ¥16,172 million, a decrease of ¥446 million from a year earlier, and consolidated net income also

declined ¥209 million, or 1.7%, to ¥12, 077 million.

We have set out to further enhance our management foundation and aggressively develop our business

under new management. As of April 1, 2008, Toshiyuki Ogura, formerly President & Chief Executive

Officer, assumed the post of Chairman, while Mitsuru Machida, formerly Deputy President, was appointed

President & Chief Executive Officer. We look forward to the continued support of our shareholders.

Toshiyuki Ogura, Mitsuru Machida,

Chairman President & Chief Executive Officer

Message from Top Management


You assumed the position of president of Fuyo General Lease Co., Ltd., on April 1, 2008. Please share your thoughts on how you want to lead the Company.

L eases are one way of raising funds for corporate capital

investment, and leasing companies play an important

role in corporate finance. I hope to utilize the knowledge

and experience gained from my 35 years in banking to lead

the Company to further growth and advances.

Both banking and leasing operations assist customers in

the area of financing, and they will be needed as long as

commercial activity continues. However, banking and leasing

services must change to meet the needs of customers.

There have been drastic changes in banking services, for

example, over the past 30 years.

The key to success is to quickly identify market changes

and new demands, and to devise appropriate products in

response. The leasing business is no exception. I plan to

make the Company strong and resilient, able to readily meet

marketplace demands.

What are the Company’s strengths? What areas of your business do you want to focus these strengths on?

I n general, the roots or alliances of leasing companies in

Japan can be traced to corporate groups in one of three

sectors—banking, manufacturing and trade. Our affiliation

with the Mizuho Financial Group makes us an example of

the first. Leasing companies with ties to banks benefit from

the established reputation, broad customer base, and credit-

screening expertise that a bank can offer.

We’re utilizing these strengths and actively marketing

products to customers, particularly to customers of Mizuho

Bank, Mizuho Corporate Bank, and Mizuho Trust and

Banking.

Although we are affiliated with these banks, the Company

is made up almost entirely of professionals with solid

experience in the leasing business. We were a pioneer in

large-scale lease programs, including those for aircraft and

ocean liners, and have long been a major force in real

estate leases. Our outstanding expertise in structuring leases

and established reputation have been crucial factors in our

unique success in these areas.

To Our Shareholders

We are creating new types of leasing services to address the needs of customers in a changing business environment


Another growing business area unique to us is Solution-

Oriented Finance—a comprehensive scheme of custom-

made financing products tailored to individual customers,

combining products and services that range from leases,

installment sales, and loans to investment and other

financing services. We will actively anticipate changes in the

business environment, provide customers with innovative

solutions, and offer the best products and services for their

needs.

What is your ideal vision for the Company? How do you plan to make this a reality?

I picture the ideal company as one supported and trusted

by customers, regardless of performance in bad or good

times. Every company goes through ups and downs over the

long run, and I have witnessed countless examples. But I’ve

learned that those supported by customers always recover

and thrive.

So how do we earn the support and trust of customers? I

believe the answer lies in my earlier point—that making a

strong, resilient company requires accurately reading changes

in customers’ needs and offering products and services to

meet them. Customer trust and solid financial performance

make it possible for a company to pay stable dividends, for

instance, further elevating its corporate reputation. Trust of

this sort attracts talented personnel, contributing to further

growth and a stable performance record.

To maintain this cycle of corporate growth, we must

continue implementing reforms, enhancing current business

units, and developing new business. As part of ongoing

reforms, we acquired a majority stake in Sharp Finance

Corporation, making it a consolidated subsidiary in April

2008. Sharp Finance Corporation is a manufacturer-affiliated

leasing company with 25 years experience in the industry,

and its customer base, sales methods and networks differ

from ours. We expect synergistic effects from the acquisition

that will help to expand our business base.


Are there any more mergers and acquisitions (M&As) on the agenda? What is your basic policy for M&As?

M&As bring immediate advantages, allowing a company

to expand its business base, generate economies

of scale, make inroads into different markets, and obtain

human resources and other assets. But these advantages

may not be realized unless clear goals for the M&A are set.

Our objective in incorporating Sharp Finance Corporation

into our group, for instance, was to expand business with

small and medium-size companies.

In May 2007, we made Japan Mortgage Co., Ltd., a

consolidated subsidiary with the aim of strengthening our

financing business. And we’re already seeing the effects,

with a substantial increase in loans recorded during the fiscal

year ended March 31, 2008.

Going forward, we’ll continue exploring potential M&A

deals and move to action when they offer the best way of

achieving our clearly defined goals.

Mitsuru Machida

Profile

Mr. Machida was appointed President and Chief Executive Officer of

Fuyo General Lease Co., Ltd., in April 2008. He joined the Company

as Deputy President in June 2007.

Highlights of his extensive career prior to coming to Fuyo General

Lease Co., Ltd., include acting as deputy president at Mizuho Bank

(2006 – 2007), managing director at Mizuho Bank (2004 – 2006),

managing director at Mizuho Financial Group (2003 – 2004), and

managing executive officer at Mizuho Holdings (2001 – 2003).

He joined Fuji Bank (currently Mizuho Corporate Bank) in 1972 after

graduating with a major in economics from the University of Tokyo.

He was born on June 14, 1949.


Some amendments to the lease accounting standards took effect in April 2008. There are concerns in the leasing industry about the effects of the changes. How do you assess the potential impact?

O ne major change is that the new standards require

customers to recognize all finance leases on the

balance sheet. Since finance leases are no longer treated as

off-balance-sheet items, the industry is concerned that the

finance lease business will decline. It’s difficult to predict the

potential impact, and we’re currently not sure to what extent

leasing company performances and profits will be affected.

However, I don’t see any reason for being pessimistic.

Leases are well established as a part of the services

customers use in their financing activities, and we’ve been

providing leases for close to 40 years. I am confident that

they won’t turn away from finance leases simply because of

the shift from off-balance to on-balance-sheet accounting.

There are other reasons for using finance leases, and I think

companies that focus only on the benefits of off-balance-

sheet treatment are few in number. Although I don’t take the

possible ramifications of the new lease accounting standards

lightly, it is up to us to overcome any negative outcomes

deriving from it.

The economy is expected to slow in the fiscal year ending March 31, 2009. How will you proceed?

S igns of an economic weakening have definitely

appeared. During fiscal 2009, I expect financing costs

to rise, followed by a lag before costs are passed on to

lease rents. I also expect allowances for bad debts to rise as

bankruptcies increase, so the prospect of credit losses is very

real. The new lease accounting standards may also cause a

temporary decline in finance lease transactions.

We’ve initiated changes and implemented measures to cope

with these issues. First, we have vitalized our marketing and

sales activities by strengthening cooperation with the Mizuho

Financial Group to take advantage of synergies. We have

reorganized departments that work closely with the Mizuho

Financial Group and added more staff. And we’ve also

established a new business promotion division in Osaka,

where our presence was relatively small.

To aggressively expand the Solution-Oriented Finance

business, we have reorganized related departments into the

Business Solution Division, reshaping our sales force. We

have also bolstered our Aircraft Operating Lease business,

which is not affected by the change in the lease accounting

standards, and we’re actively bringing new product proposals

to customers.

Based on these policies, we expect total sales during the

fiscal year ending March 31, 2009, to reach ¥380 billion, a

4.8% decline from fiscal 2008. Our forecast for operating

income is ¥17.8 billion, a 10.1% increase, and for net

income ¥12.1 billion, a 0.2% increase.

I would like to thank our shareholders for their continued

support of our company.


Management’s Basic StanceWe operate with the management philosophy described

below. Under this philosophy, we strive to raise our

corporate value and enhance profitability by establishing

sound finances and a stable sales foundation, as well as by

promoting high efficiency.

Management Philosophy

• Support our customers’ business activities and contribute

to the community through the leasing business

• Always give first priority to the customer and provide the

best service

• Pursue creativity and innovation, aiming to become a

corporation valued by its shareholders and by market

participants

• Foster self-motivated, energetic employees, and create a

rewarding workplace

Mid-term management planWe adopt the rolling plan to review and update our mid-term

management plan every year. Flexible response to interest

rate changes and other factors in the leasing business

environment are a crucial component of our management

strategy. The rolling plan allows us to implement optimal

timely measures for maintaining and expanding business.

The new mid-term management plan for fiscal

2009–2011 sets forth the following management

objectives and policies.

Management Objectives

“To be a strong leasing company that can generate the best

solutions for its customers”

• Strong sales capability

• Strong administrative capability

• Strong financial structure

• Strong human resources

Management Policies

• Build a corporate foundation that surmounts changes in

the business environment by reinforcing the strength of

group management

• Gain appreciation from our stakeholders through stable

performance and business growth

• Stress Corporate Social Responsibility (CSR), thorough

compliance, and the development of strong human

resources

Targets for Management Plan (Consolidated Basis)Below are several numerical targets we plan to achieve by

the final fiscal year of the Mid-term Management Plan, the

fiscal year ending March 31, 2011. Figures for fiscal 2008

are actual results.

Management Policy

Targets for Management Plan

Targetsfortheyear Resultsfortheyear endingMarch2011 endedMarch2008

Operatingassets ¥1,780billion ¥1,166.3billion

Shareholders’equity*1 ¥110billionorhigher ¥78.9billion

Shareholders’equityratio*2 5.8%orhigher 5.6%

ROA(ordinaryincome*3/totalassets) 1.4%orhigher 1.3%

*1. Shareholders’equity:commonstock+capitalsurplus+retainedearnings–treasurystock *2. Shareholders’equityratio:(totalnetassets–minorityinterests–stockoptions)/totalassets *3. Ordinaryincome:Incomebeforeextraordinaryitems:¥17.9billioninfiscal2008 Figuresshownforshareholders’equityratioandROAforthefiscalyearendedMarch31,2008,werecalculatedonthe basisofJapanMortgageCo.,Ltd.,andSharpFinanceCorporationbeingincludedfromthebeginningofthefiscalyear. SharpFinanceCorporationbecameaconsolidatedsubsidiaryonApril1,2008.


Management Strategies and Issues to be Addressed1. Strengthening our sales foundation

a) Develop new products and enhance our sales

foundation in response to the new lease accounting

standards

• We will enhance our conventional PC rental service and

our sales activities for IT equipment operating leases, as

well as fortify Web-based information services to provide

financial data that meet the requirements of the new lease

accounting standards. We’ll continue developing new

products and services to meet market needs.

• We will enhance functions at the Tachikawa Reuse

Center, run by subsidiary Fuyo Lease Sales Co., Ltd., and

strengthen sales of refurbished PC and other equipment

whose lease terms have expired.

b) Strengthen business with small and medium-sized

companies

• In close collaboration with Sharp Finance Corporation,

which became a consolidated subsidiary in April 2008, we

will bolster retail sales and work to strengthen business

with small and medium-sized companies. Even after

revisions to the lease accounting standards go into effect,

the financial advantages gained by small and medium-

sized companies in leasing arrangements will not diminish.

c) Promote coordinated work between area-based and

specialty-based sales teams

• We will promote sales of targeted solutions that address

changes in a specific market, while strengthening our

ability to identify growing markets with potential and capital

investment needs, as well as fully utilizing our know-how

within various specialties and throughout an extensive

network of regional outlets.

• Capitalizing on our affiliation with the Mizuho Financial

Group, we will enhance our collaboration with that group’s

companies and further strengthen our sales foundation.

d) Enhance Real Estate Lease and Financing

businesses

• We will expand our strategically important Real Estate

Leases business. At the same time, we will strengthen our

financing business to better meet customers’ needs by

bolstering such areas as real estate financing, syndicated

loans, and shipping finance.

e) Expand scope of business by developing new

products and services

• By enhancing our fee-based business and promoting

collaboration with our group companies in Japan and

overseas, as well as maximizing synergy effects with

Sharp Finance Corporation, a newly acquired subsidiary,

we plan to improve profitability on a consolidated basis.

• Through continuously developing new products and new

businesses and employing other management tools

including M&As, we aim to expand the scope of our

businesses.


2. Perfecting low-cost operations

• We will secure stable, low-interest funding and optimize

funding structure on a consolidated basis. We will also

reinforce asset-liability management (ALM) activities to

further strengthen our financing capabilities.

• At our sales offices, we are engaged in a paperless-

office campaign, and we continue to streamline clerical

work procedures to raise efficiency and reduce costs.

Furthermore, we will consistently seek efficiency in each

administrative department, while expanding the scope of

group business and strengthening business with small and

medium-sized companies.

3. Improving risk management

• We plan to prevent losses and minimize unexpected

losses amid increasing credit risk and worsening corporate

performance. We will continue strengthening our risk

management system and our ability to hedge credit risks

and respond appropriately to other risks associated with

changes in the business environment in a timely manner.

4. Fortifying our management foundation

• While enhancing the internal control system to fully comply

with Japan’s Financial Instruments and Exchange Act, we

will focus on ensuring the integrity of financial reports,

taking measures to cope with the new lease accounting

standards, strengthening budget control, and thoroughly

reinforcing regulatory compliance.

• We are committed to training and nurturing our employees

for continuing group-wide growth, and to fortifying

our management foundation. We will also incorporate

environmental considerations and corporate citizenship

programs into management priorities.


Expand business scope and build group-wide complementary networksThe business climate surrounding the leasing industry has

worsened, triggered by a weakening economy, a decrease

in leasing volume, and the new lease accounting standards.

Industry restructuring has accelerated, involving both large

and small leasing companies, and competition among

leasing companies has further intensified. At our group, we

plan to build a resilient corporate foundation to surmount

changes in the business environment by engaging in the

following activities: expanding the scope of our business;

creating a flexible group-wide network among business

areas that complement one another; enhancing group

management structure; addressing a diverse variety of

customer needs; and unearthing emerging demands for

new business.

Strengthen financing business by consolidating Japan Mortgage Co., Ltd.On May 31, 2007, we made Japan Mortgage Co., Ltd., a

consolidated subsidiary as part of our plan to establish

a solid corporate foundation. Japan Mortgage Co., Ltd.,

specializes in mortgage securities and is Japan’s oldest

company in this specialty. Since its inception in 1973, the

company has solidified its business in long-term mortgage-

backed security loans. Recently, it has also steadily built

its business in short-term real estate-related loans. By

consolidating Japan Mortgage Co., Ltd., into our group,

we have benefited from synergy effects that have further

expanded the scope of our business and buttressed our

financing business.

Gain business with small and medium-sized companies by consolidating Sharp Finance CorporationAs of April 1, 2008, we acquired 65% of stock in Sharp

Finance Corporation from Sharp Corporation, and made it

a consolidated subsidiary. Sharp Finance Corporation has

built its business around the leasing business, credit sales,

real estate leasing, and insurance agency activities, and has

created a nationwide sales network spanning Hokkaido to

Okinawa. The company’s strong customer base lies in small

and medium-sized companies. Through the acquisition

of the majority of Sharp Finance Corporation, we plan

to enhance our business with small and medium-sized

companies—one of our management strategies. Joining

forces with Sharp Finance Corporation, we anticipate seizing

more business opportunities as we are able to provide

services to a wider array of customers.

Enhance Management on a Consolidated Basis and Benefit from M&As


The lease accounting standards have been changed. The changes will take effect from accounting periods beginning on or after April 1, 2008.

Basic Policy on the New Lease Accounting StandardsEffective from accounting periods beginning on or after April

1, 2008, the accounting treatment of non-ownership transfer

finance lease transactions (“lease accounting treatment”), for

which lease accounting treatment had been approved prior

to the changes, will no longer be applicable, and all such

transactions will be treated, in principle, in accordance with

sales/purchase transactions (“sales/purchase treatment”).

Due to this change in accounting standards, we anticipate

the impact of some benefits of lease transactions being lost.

In response to this, we will steadfastly execute measures

determined in the mid-term management plan for fiscal

2009 through fiscal 2011 to further solidify management

foundation.

Major Changes in the New Lease Accounting Standards (Lessees)• Effective from accounting periods beginning on or

after April 1, 2008, the accounting treatment of non-

ownership transfer finance lease transactions, for which

lease accounting treatment had been approved prior to

the changes, will no longer be applicable and all such

transactions will be treated in principle as sales/purchase

transactions.

Transactions falling under (1) – (3) below are recognized

as having little significance in individual lease assets, and

therefore lease accounting treatment can be applied in

accordance with the accounting treatment of operating

lease transactions:

(1) Lease transactions in which the total amount of lease

rents for individual leased items is under the amount

treated as a one-time expense at the time of purchase.

(2) Lease transactions with a lease period of one year or

less.

(3) Lease transactions with little significance in light of the

company’s business, and with total lease rents per lease

agreement of ¥3 million or less.

Companies that submit Yuka Shoken Hokokusho (statutory

financial reports) under the Financial Instruments

and Exchange Act (listed companies (including their

subsidiaries and affiliates)), as well as large companies*1

(including their subsidiaries), are subject to the new

lease accounting standards. Small and medium-sized

companies*2 may continue to use lease accounting

treatment.

*1 Large companies as specified under the Company Act of Japan are companies with capital of at least ¥500 million or those with total liabilities of at least ¥20 billion.

*2 Small and medium-sized companies are specified as those to which the Accounting Guidelines for Small and Medium-sized Entities may be applied.

Revisions to Lease Accounting Standards


Examples of Application (Lessees)Listed companies, large companies

• Balance sheet

Non-ownership transfer finance lease transactions are

treated as balance sheet items. Lease assets and lease

liabilities are recognized on the balance sheet.

• Income statement

Lease assets are depreciated over the lease period. The

straight-line depreciation method is stipulated by statute

for tax treatment, so using it for accounting treatment

eliminates the need for adjustments.

Small and medium-sized companies

• Balance sheet

As before the revisions to the standards, small and

medium-sized companies can account for non-ownership

transfer finance lease transactions off the balance sheet.

• Income statement

Lease rents paid can be expensed.

Benefits of the use of leasesEven under the new lease accounting standards, customers

will continue to enjoy a wide range of benefits from lease

transactions:

Cost Control

Customers can manage earnings and expenses by setting

lease periods in line with business plans and expected

facility-use periods.

Efficient Management of Funds

Customers can avoid the immobilization of funds as large

initial expenditures are not required, and they can pay fixed

monthly lease rents.

Leaner Balance Sheet

Listed companies and large companies can offload non-

ownership transfer finance lease transactions, as well as

operating leases, from the balance sheet through lease

accounting treatment if those lease transactions have little

significance in light of the company’s business and the total

amount of lease rents per agreement is ¥3 million or less.

Therefore, companies can, as in the past, reduce interest

bearing debt and total assets.

Avoid the Risk of Obsolescence

By setting lease periods in accordance with expected facility-

use periods, companies can avoid the risk of facilities

becoming obsolete.

Outsource Clerical Processing

The application and payment procedures for property taxes

and insurance premiums are handled by leasing companies,

so leases can, in effect, be used to outsource these clerical

and administrative tasks.

Compliance with Environment-related Laws and

Regulations

After lease periods expire, we dispose of leased items

appropriately and with a minimum of fuss for the customer.

Our disposal system complies with environmental laws and

regulations.


Business Segments

LeaseFinance Leases

Finance leases are arrangements under which we purchase

machinery and equipment needed by customers and lease

it to customers for a set lease rent over a set period.

With finance leases, customers are able to use cutting-

edge equipment without having to make large up-front

investments. Finance leases enable customers to align

lease periods to their business plans and expected facility-

use periods, and thereby manage earnings and expenses.

Finance leases help customers utilize their funds efficiently

and reduce the burden of clerical and administrative tasks

through outsourcing.

Operating Leases

Operating leases are arrangements under which we estimate

the residual value of leased machinery and equipment in

advance, and subtract it from the cost of the machinery or

equipment to determine lease rents.

Customers enjoy lower total lease rents than with finance

leases. For accounting purposes, operating leases lease

accounting benefits, such as off-balance-sheet treatment of

leased items and the expensing of lease rents.

Energy-saving Facility Leases

We provide optimum leases and financing schemes for

customers introducing or installing cogeneration, boilers,

heat pumps, and other energy-saving facilities.

Many subsidy schemes supporting the introduction of

energy-saving facilities are offered by the Ministry of

Economy, Trade and Industry (METI), the Ministry of the

Environment and New Energy and the Industrial Technology

Development Organization (NEDO), and these schemes

enable the installation of facilities and equipment under

lease agreements. Our extensive expertise in arranging these

types of lease agreements enables us to assist customers in

applying for these subsidies.

We also refer customers considering energy-saving measures


Note: Figures reflect non-consolidated results, real estate lease excluded. Assets related to rentals etc. are excluded from newly booked leased assets (in accordance with the statistics standards of the Japan Leasing Association (JLA)).

FuyoJLA

0 50 (%)40302010

Share of Contract Volume by Type of Leased Equipment (Fiscal 2008)

Others

IT & Office Equipment

Civil Engineering &Construction Machinery

Transportation Equipment

Industrial Machinery

Medical Devices

Commercial / ServiceEquipment

to suppliers capable of providing them with appropriate

energy-saving solutions depending on their energy use

profile.

PC Eco & Value Leases

This is a PC lease scheme that pursues both economic

and environmental benefits (economy and ecology). The

scheme achieves greater economic benefits for customers

than ordinary lease arrangements because lease rents are

based on the estimated residual values of leased items. This

scheme also lets customers participate in the building of

a recycling-oriented society. We have created a system for

retaining PC accessories that would otherwise be lost under

ordinary lease schemes.

We have also established a resale system for expired PCs in

the second-hand market, which promotes the reuse of PCs.

Auto Leases

These are high-value-added leasing arrangements under

which customers can outsource cumbersome administrative

work related to the purchase of automobiles, such as tax,

insurance, and maintenance-related work. Auto leases are

provided by Fuyo Auto Lease Co., Ltd., our group company,

which provides comprehensive customer support in sourcing

vehicles, paying taxes and insurance premiums, performing

inspections and maintenance, and disposing of vehicles after

the termination of lease agreements.

Support for Overseas Expansion

We support customers in their overseas expansions

through leasing and financing. A range of lease types can

be employed, including direct leases, whereby a lease

agreement is concluded between the customer’s local

subsidiary and our local subsidiary, cross-border leases,

whereby a lease agreement is concluded between the

customer’s local subsidiary and us, and subleases (sub-

installment), whereby we enter into a lease (installment

sales) agreement with the customer, and the customer

and its local subsidiary sign a sublease (sub-installment)

agreement.


4,000

3,000

2,000

1,000

0

2004 2005

(100 million yen)

3,033

425

2,608

3,167

430

2,737

2006

2,772

Total New Contract Volume by Year (Non-consolidated)

Leasing/RentalInstallment sales

3,280

508

2007

2,641

3,370

729

2008

2,994

3,522

528

Sales Promotion LeasesFuyo Fast Lease

Fuyo Fast Lease is a simple, speedy system that takes

machinery and equipment sales dealers through the entire

lease process, from applications to screening and the signing

of lease agreements. Entering into an agreement with us

enables sales dealers to provide end users with speedy sales

and financing services ahead of the pack, assisting them in

promoting their business.

Sales Promotion Leases

Through these arrangements we help machinery and

equipment sales dealers sell their products by providing

leases and financing. We arrange and provide high-value-

added transactions suited to product features and price,

industry characteristics, the dealer’s customers, and sales

format.

Real Estate LeasesBuilding Leases

Building leases are schemes under which we own buildings

with fixed-term commercial leasehold contracts on behalf

of customers and lease them to customers. Building leases

are suited to commercial buildings such as shopping centers

and road-side outlets and warehouses.

Advantages for customers include reduced initial costs for

business operations. In addition, customers enjoy the benefit

of accounting for buildings off the balance sheet (in the case

of operating leases).

Security Deposits Depository System

This scheme relates to rental contracts between building

owners and tenant companies. We assume part of the

tenant company’s obligation to provide security deposits

to the owner, which means we deposit an amount equal

to that obligation with the owner. This reduces the tenant

company’s initial deposit and other investment burdens,

helping the tenant company bolster its financial position and

expand its retail network.

Space Leases

Space Leases are schemes under which we rent shop space

on behalf of tenants, pay the security deposits required by

the building owner, and sub-lease the space to the tenant,

requiring only a small security deposit. This arrangement


400

300

200

100

0

2004 2005

(100 million yen)

2006

Real Estate Leases

2007 2008

393

325302

200

250

guarantees owners receive security deposits in full, making it

easier to lease properties. Space Lease arrangements enable

tenants to start shops for a smaller initial investment and

efficiently utilize funds.

RentalPC Rental

This is a rental scheme for customers who want to use

latest model PCs over short periods. Appropriate lease

periods for finance leases are set for taxation purposes,

but rental periods for PC rental arrangements are flexible.

Rental periods can be set to a minimum of 12 months and

extended on a monthly basis if the customer wishes to

continue using the PCs after the end of the rental period.

Network Equipment Rental

This scheme enables the expensing of LAN equipment

(routers and hubs) over a period of two to five years. With

flexible rental periods, customers avoid the risk of network

equipment becoming obsolete.

Measuring Equipment Rental

Yokogawa Rental & Lease Corporation, our group company,

offers short-term rental schemes for measuring instruments,

control instruments, and information processing equipment,

letting customers use cutting-edge equipment at minimum

cost on an as-needed basis. These services are underpinned

by strong technological expertise and a comprehensive

support system.

Aqua Art

Under this rental scheme, Aqua Art Co., Ltd., our group

company, rents indoor aquarium features to offices and

commercial facilities. Indoor aquariums are expensive

and require professional knowledge to maintain. Rented

aquariums come with tropical fish, water plants, and a full

range of features, and are backed by full maintenance

services, making it simple to bring a relaxing and welcoming

atmosphere to offices, commercial facilities, and public

places.

Installment SalesInstallment Sales

Under installment sales schemes, we purchase property for

customers and sell it to them on a long-term installment

basis. We provide installment sales arrangements for

properties that are not suitable for leasing for tax purposes,

or in cases where customers want to own the property.

Under these arrangements, customers record machinery and

equipment as assets on the balance sheet, and depreciation

expenses on the income statement. We hold the title to the

property until installments are fully paid, and then transfer it

to the customer.

FinancingReal Estate Financing

For customers considering securitization, acquisition, and

development of real estates, we provide non-recourse real

estate loans, whereby cash flows generated from real estate

property are used to fund repayments, as well as other


financing schemes. These schemes support customers’

financing activities.

Project Financing for Renewable Energy Generation

We provide project financing schemes for businesses that

aim to expand business in areas of the renewable energy

sector such as wind power, solar power, biomass, hydrogen,

and fuel cells. Project financing involves making loans to

finance projects. The lending decision is not based on the

creditworthiness of companies engaged in the business or

investing in the project, but on an examination of the future

cash flows to be generated from the project.

Shipping Finance

Under this scheme, we provide leases and financing for

the construction and purchase of vessels. We provide

vessel-backed financing as well as special leases and

financing services, such as bare boat charters with purchase

conditions and operating leases. These services are available

for a broad range of vessel types, such as cargo vessels, bulk

carriers, container vessels, car carriers, and chemical tankers.

SolutionsESCO Service

Under the ESCO (Energy Service Company) Service, ESCOs

comprehensively provide customers with the technology,

facilities, and funds they needs. ESCOs receive part of the

energy-saving benefits as fees for this service. Customers

who adopt the ESCO Service cover expenses with the cost

reductions that the energy savings provide. This allows them

to save energy for no additional expense and reduce future

costs.

Solution-Oriented Finance

We provide consulting services that identify the issues and

needs inherent in customers’ management and financial

strategies. We leveraging the full range of tools at our

disposal to provide strategic financial solutions that combine

leases, loans and, other financing services.

With Solution-Oriented Finance, customers can control

costs, diversify financing, increase cash flow through the

securitization of receivables and assets, turn business

operations to profitability in a short period of time, and

offload assets from the balance sheet.

InvestmentAircraft Operating Leases

Since we structured the first Japanese leveraged lease in

1985, we have structured over 200 aircraft leases for airline

companies across the world. In 1998, we established FGL

Aircraft Ireland Limited in Dublin, building management and

resale framework for the aircraft operating lease business.

We have been one of the leading companies in structuring

aircraft operating leases ever since.

By investing in this business, customers participate in

operating profits and losses realized over the lease period,

and stand to realize capital gains on the sale of aircraft at the

end of the lease terms.

Life InsuranceLife Insurance Consulting Service

As a life insurance agency, we have a vast array of insurance

products at our disposal from domestic and overseas


life insurers of strong financial standing. We utilize these

products to help corporate customers shore up management

stability, which includes setting aside funds for retirement

and employee benefits and ensuring greater protection for

management.

Services for Leased PropertyData Elimination Service (fee based)

For information security reasons, under lease agreements,

customers are required to eliminate any data stored on PCs

before returning them to us. To prevent data leakages, Fuyo

Network Service Co., Ltd., our group company, provides a

fee-based data elimination service for customers who find

data erasure cumbersome.

Sales of Ex-lease Items

We promote the reuse of a variety of items that have come

to the end of their leases through the Lease-up Eco Town

website. The Tachikawa Reuse Center, operated by Fuyo

Lease Sales Co., Ltd., our group company, provides a full-

range of services, from the collection of ex-lease items

and their processing for reuse (cleaning, data elimination,

etc.) through to sales, contributing to the development of a

recycling-oriented society.

Used Machinery and Equipment Sales Brokerage

Services

Fuyo Lease Sales Co., Ltd., our group company, brokers sales

of used machinery and equipment between businesses. The

company primarily handles machine tools, plastic injection

molding machines, printing machines, PCB equipment,

forklifts, construction machinery, and measurement

instruments.

PC Purchase Service

Fuyo Lease Sales Co., Ltd., our group company, purchases

primarily notebook PCs and desktop PCs for business

purposes. This is an environmentally friendly service that

encourages the reuse of used PCs that would have been

disposed of in the past.

Contract and Property Management ServicesFLOW—Accounting Materials Service

We provide customers with accounting materials and data

that complies with the lease accounting standards for free.

Customers can obtain accounting forms as well as FLOW, an

Internet-based information service.

Net Leasing

We provide a free Internet-based information service that

attracts the participation of many major leasing companies.

Customers can look up and download lease agreement

data, as well as look up and download lease accounting

materials.

F-SMILE Lease Asset Management Service

Under the F-SMILE service, we provide customers with lease

agreement data as well as their own asset data provided in

advance. This information is available free of charge through

the F-SMILE browser. F-SMILE can also be used to prepare

inventory ledgers.


Corporate Social Responsibility Activities

Basic Stance on CSRPart of our management philosophy is to support our

customers’ business activities and contribute to the

community through the leasing business; and through

one of our management policies, we aim to stress CSR

thorough compliance and the development of strong

human resources. Under these elements of our philosophy

and management policies, and aiming to play a new role

in finance that takes CSR into account, we provide financial

support, primarily through leasing, for customers who

develop and produce technologies and products that solve

environmental and social issues, and for those who use

such technologies and products.

Our environmental initiatives include the followingESCO Service to Promote Energy Savings

By replacing old-model air conditioning equipment and

hot water supply equipment with energy-saving models,

or utilizing inverter control, customers can reduce energy

use and CO2 emissions. However, in general, installing and

replacing energy-saving equipment requires large initial

investments. Our ESCO (Energy Service Company) Service

assists customers who are working to save energy.

Through the comprehensive ESCO Service, ESCOs provide

diagnostic assessments on energy savings, facility selection,

and funds procurement for customers. ESCOs receive part of

the energy-saving benefits as fees for this service. Customers

who adopt the ESCO scheme cover expenses with the cost

reductions that the energy savings provide. This allows them

to save energy for no additional expense and reduce future

costs.

Example of the ESCO Service—Okinawa Hokubu HospitalLocated in Nago City—the gateway for Yanbaru Forest, the

symbol of Okinawa’s rich natural environment—Okinawa

Hokubu Hospital is the central medical institution for the

northern part of the prefecture. The hospital adopted

the ESCO Service to improve the environment at its

facilities, save energy, and reduce CO2 emissions, thereby

contributing to the mitigation of global warming. As one of

seven ESCO businesses represented by Yokogawa Electric

Corporation, we proposed an environment-improvement

plan that including energy savings, and also handled the

financing part of this ESCO Service project.

Okinawa Hokubu Hospital aimed to save substantial

amounts of energy by introducing highly efficient, turbo-

powered cold energy generators to achieve energy-saving

air conditioning that responds to changes in the need for

air cooling in patients’ rooms, and by replacing the air-

conditioner water-supply pump with a system that controls


pressure based on water-supply volume. Estimated benefits

from the introduction and operation of this cutting-edge

equipment includes a reduction in energy use of 36.3% and

a reduction in CO2 emissions of 45.2%.

In April 2006, we set up the Energy and Environmental

Business Office and have worked to expand use of the

ESCO Service. Going forward, we will utilize what we learned

from the Okinawa Hokubu Hospital project to contribute to

the further development and expansion of the ESCO Service

through financing.


The Okinawa Hokubu

Hospital has adopted the

ESCO Service to promote

energy savings.

Corporate Governance and Compliance

Basic Policy Regarding Corporate GovernanceDuring the fiscal year, we placed emphasis on relationships

with various stakeholders including shareholders,

customers, employees, and local communities. We believe

that corporate governance is to implement business

activities with sincerity and fairness in accordance with our

Management Philosophy and based on our Management

Objectives and Management Policies—which are outlined

in our mid-term management plan covering the three years

from the year ending March 2008 (fiscal 2008) through

the year ending March 2010 (fiscal 2010). Our approach to

corporate governance has always followed this belief.

Execution of Business, Auditing and Oversight, Nomination, Determination of Compensation, and Other MattersOur corporate governance structure is as follows. We have

adopted the executive officer system to speed up decision

making and increase management efficiency by separating

management’s oversight and business-execution functions.

Board of Directors

The Board of Directors, which is composed of eight

directors, deliberates on and resolves matters specified

in laws and regulations, the Articles of Incorporation, and

Regulations of the Board of Directors, as well as important

management issues. The Board of Directors also oversees

the execution of business by the Representative Directors

and Executive Officers. The Board of Directors includes one

outside director to enhance transparency and strengthen the

oversight function.

Board of Corporate Auditors

The Board of Corporate Auditors is composed of five

auditors (two full-time corporate auditors and three non-

full-time auditors). The five auditors include three outside

auditors. Each auditor, based on the audit plans formulated

by the Board of Corporate Auditors, audits the legality

and rationality of the execution of business by directors

through activities that include attending important meetings,

reviewing important documents, auditing operations

and finances, and hearing results of audits conducted by

independent auditors and the internal audit department.

Executive Committee

The Executive Committee is composed of Executive Officers

who are of Managing Executive Officer or higher rank, full-

time Corporate Auditors, and heads of major planning and

administrative divisions, including the General Manager of

the Corporate Planning Division and the General Manager of

the Business Planning & Promotion Division. The Executive

Committee convenes at least once a month to decide on

the execution of business and implementation of measures

stipulated by the President & Representative Director and to

deliberate on important issues concerning internal control.

Its aim is to improve the quality of management decisions

and decision-making speed.

In fiscal 2008, the Executive Committee convened 23

times. It deliberated on the details of management plans,

determined methods for evaluating sales departments,

offices, and branch offices, and reported regularly on

credit risk and asset-liability management to the Executive

Committee.


Compliance Committee

The Compliance Committee, headed by the director in

charge of compliance, is composed of members from 11

planning and administrative divisions and offices, including

the CSR Compliance Division. The Compliance Committee,

which meets quarterly, deliberates on and discusses

issues with the aim of improving compliance. Reports and

recommendations regarding the issues deliberated on and

discussed by the Compliance Committee are provided to

the Executive Committee and the Board of Directors, and

measures are taken to strengthen and enhance compliance.

In fiscal 2008, the Compliance Committee set up the

FGL Group Compliance Committee, bolstered measures

to monitor information and prevent information leakages,

strengthened systems to counter antisocial elements, and

inspected and confirmed progress made toward complying

with revised and newly introduced laws and regulations.

Internal Audit

The internal audit function is represented by the Comp-

troller’s Division, composed of eight members of staff, which

reports directly to the President. The Comptroller’s Division

conducts operational audits of all departments, offices,

branch offices, and major subsidiaries. In operational audits,

the Comptroller’s Division ensures that internal controls

are functioning and examines the effectiveness of internal

controls. Results of all operational audits are reported to

the President and are regularly reported to the Executive

Committee.

Accounting Audit

Our financial statements are audited by Ernst & Young Shin

Nihon pursuant to Article 193, paragraph 2, of the Financial

Instruments and Exchange Act. The accounting audit of our

financial statements was conducted by the following certified

public accountants:

Masaaki Akiyama, Engagement Partner, Ernst & Young Shin

Nihon

Tetsuya Mogi, Engagement Partner, Ernst & Young Shin

Nihon

Our accounts have been continuously audited by these

certified public accountants for less than seven years. Ernst

& Young Shin Nihon has already voluntarily implemented

measures to prevent its engagement partners from engaging

in accounting audits of our financial statements for more

than a certain period of time.

Internal Control Efforts

We are making efforts to improve and strengthen internal

control systems by periodically reviewing our System for

Ensuring Operational Appropriateness, as finalized at the

Board of Directors’ meeting in May 2006.

The Financial Instruments and Exchange Act was enacted

in June 2006, followed by the implementation of a system

for reporting on internal control. Under the system, from

accounting periods beginning on or after April 1, 2008,

publicly listed companies are required to submit two

documents to the Prime Minister along with their yuka

shoken hokokusho (statutory earnings report). The first is

a certification that content of the yuka shoken hokokusho


are appropriate under the Financial Instruments and

Exchange Act. The second is an internal control report that

evaluates the company’s systems required for ensuring

the appropriateness of documents related to financial

calculations and other information. In addition, they are

required to have certified public accountants or audit firms

attest documents relating to financial calculations and the

internal control report. We formed a project team in October

2006 and began preparing for these requirements.

ComplianceBasic Policy Regarding Compliance

We will continue to pursue compliance programs based

on the belief that fulfilling social responsibility as a listed

company and improving reliability are issues of the highest

priority. We draw up a compliance program every year and

train managers to ensure thorough compliance across our

group companies, focusing on key compliance-related issues

such as responses to the enactment of and revisions to

legislation and new legislative systems, and comprehensive

information management.

Compliance Training

Our Compliance Manual is constantly available on our

intranet for access by all employees. The manual is updated

once a year, and a checklist is used to ensure that all

employees are fully aware of the updates.

We conduct group training sessions for all employees as well

as training tailored to different levels of the organizational

hierarchy. CSR Compliance Division staff also visit branch

offices and affiliates to provide on-site training sessions.

The format, target audiences, and frequency of training as

well as subjects covered are shown below.

Group Training

Targetaudience Subject(s) Frequency

Allemployees CSR,humanrights,etc. Twiceyearly

Newemployees Introductiontocompliance Twiceyearly

Managemen Dealingwithanti-social Once–twiceyearly elements(organizedcrime)etc.

Newlyappointedmanagers Preventingabusesof Onceyearly authorityandharassmentetc.

On-site training

Targetaudience Subject(s) Frequency

Branchandaffiliate Sexualharassment,insider Asrequired personnel trading,information management


Basic Policy on Risk ManagementOur group categorizes risks according to a set of internal

risk management standards into credit risk, market risk

(risk associated with interest rate fluctuations), liquidity risk

(financing risk etc.), back-office processing risk, systems risk,

legal risk, reputation risk, and other risks. These risks are

managed with the frameworks and procedures set out in

basic risk policies for each type of risk in accordance with

the characteristics and magnitude of those risks.

Operational Risk Characteristic to the Leasing BusinessThe recording of revenues and cost (cost of lease and

interest expense) in the leasing business, our group’s

core business, is characterized as follows. Revenue in the

leasing business in the form of lease income is determined

by interest-rate levels at the time lease agreements are

concluded, and remains constant over the entire lease term.

Cost comprises cost of lease and interest expenses. The

main element of the cost of a lease is depreciation expense,

which, like lease income, remains constant over the entire

lease term. Interest expenses, on the other hand, tend to

decrease toward the end of the lease term as the interest

burden is greater during the first half of the lease term and

smaller during the second half. This is because we make

repayments on loans and other obligations used to purchase

lease assets commensurate with the amount of lease rent

collected from customers, so the outstanding balance of

loans and obligations declines toward the end of the lease

term.

Note: The Accounting Standards Board of Japan released

the Accounting Standard for Lease Transactions and the

Guidance on Accounting Standard for Lease Transactions

on March 30, 2007. Effective from accounting periods

beginning on or after April 1, 2008, non-ownership transfer

finance lease transactions will no longer be subject to lease

accounting treatment and will, in principle, be treated as

sales/purchase transactions.

Due to this, although the methods of accounting for

revenues and interest expenses will not change, cost of

lease will be accounted for as follows: an amount will be

recorded that is equal to the amount of principal repaid

were the lease agreement treated as a financial transaction

subject to the equal-payments method, and an amount

equal to the interest that would be repaid will be recorded

as income.

Risks that May Affect the Group’s Financial Resultsa. Risk Related to Changes in Capital-Investment

Trends

Lease transactions and installment sales are one way

customers raise funds for capital investment, and the

amounts of private-sector capital investment and lease-

capital investment are correlated with each other, although

temporary disparities arise. We work to increase the number

of transactions that we handle by proposing numerous deals

geared toward bolstering our sales foundation and meeting

the diverse, and potential, needs of customers. Future trends

in corporate capital investment may therefore affect our

business results.

b. Impact of Credit Risk on the Company’s Financial

Results

To minimize financial losses caused by the default of our

customers and other factors, we implement thorough credit

risk management and work to maintain and improve the

soundness of our assets. However, due to relatively long

credit terms (the average credit term for lease transactions is

around five years), some assets subject to credit risk may be

Risk Management


affected by customers going insolvent during the credit term,

for example, making it difficult to collect lease rents and

other receivables.

To evaluate such credit risk quantitatively and set aside

appropriate allowances for doubtful accounts at fiscal year

end, we conduct self-assessments of assets based on

the methods used by banking and financial institutions in

accordance with Industry Audit Committee Report No. 19,

“Temporary Treatment for Accounting and Auditing of the

Application of Accounting Standards for Financial Instruments

in the Leasing Industry,” published by the Japanese Institute

of Certified Public Accountants (JICPA).

In line with the self-assessment criteria, we use the following

method to calculate the allowance for doubtful accounts

at the end of every quarter: for unclassified receivables we

set aside the estimated amount of losses based on actual

bad-debt experience; for classified receivables we conduct

individual assessments for all uncollectible transaction

amounts to determine the total amount of the allowance.

At the end of fiscal 2008, the combined amount of

estimated bad debt losses on unclassified receivables and

the estimated uncollectible amount on classified receivables

was ¥9,550 million, which was fully provisioned for as of the

balance sheet date.

However, depending on future economic trends, customers’

financial conditions may deteriorate, increasing the risk

of uncollectible receivables. This may result in additional

provisioning of bad debt allowances in response to increased

credit risk and may therefore adversely affect our business

results.

c. Impact of Interest Rate Fluctuations and Financing

We mainly use direct and indirect financing to procure funds

for purchasing assets to lease or to sell through installment

sales. We therefore have a high ratio of interest-bearing

debt to total assets, and our business performance may be

affected by future interest-rate fluctuations.

Our commercial paper (CP) and long-term senior debt are

rated a-1 and A-, respectively, by Rating and Investment

Information, Inc., and rated J-1 and A, respectively, by the

Japan Credit Rating Agency, Ltd.

Despite our efforts to strengthen our financial position, we

may find it more difficult to use our preferred financing

methods (CP etc.) if the rating agencies downgrade our

credit ratings or announce they are considering lowering

these ratings as a result of a deterioration in our financial

condition. This could force us to borrow from banks at

higher interest rates and could pose other difficulties to our

financing efforts, which may adversely affect our business

performance.

We will work to manage these risks appropriately by closely

monitoring interest-rate movements, being constantly aware

Ratio of Interest-Bearing Debt to Total Assets (Consolidated) (MillionsofYen)

Yearended Yearended Yearended Yearended Yearended March March March March March 2004 2005 2006 2007 2008

Interest-bearingdebt(a) 819,591 807,841 817,664 856,945 1,106,896

Totalassets(b) 918,272 927,461 954,357 1,010,960 1,276,122

(a)/(b)(%) 89.3 87.1 85.7 84.8 86.7


of the gap between asset management and financing,

keeping a watch on near-term interest rate fluctuations

(market risk), and discussing and examining policies on

future financing activities at ALM Committee meetings.

d. Impact of Competition

Although industry reshuffling has progressed in the leasing

industry in recent years, with the number of leasing

companies declining, the number of leasing companies

remains large (the Japan Leasing Association had 274

member companies as of April 1, 2008), and the market is

highly competitive.

We’re focused on building strong funding capabilities

and boosting price competitiveness through stable, low-

interest financing and an optimal financing structure. At the

same time, we strive to differentiate ourselves and boost

competitiveness by bolstering efforts to provide value-added

services that enhance customer convenience through real

estate leases, Solution-Oriented Finance, and other services.

However, increasingly intense competition may adversely

affect our business performance.

e. Possible Effect of the Revisions to Lease

Accounting Standards

From accounting periods beginning on or after April 1,

2008, non-ownership transfer finance lease transactions

will no longer be subject to lease accounting treatment, and

all such transaction will instead be treated, in principle, as

sales/purchase transactions. Consequent revisions to the

taxation system in fiscal 2008 mean that non-ownership

transfer finance lease transactions will also be treated as

sales/purchases of assets from a taxation point of view.

These changes in the accounting standards could undermine

the benefits of lease transactions, namely the ease in

determining cost and administrative treatment as well as

the efficiency of transactions, leading to lower demand

for leases. This in turn could adversely affect our business

performance.

f. Impact of Regulatory Changes

Our business activities are subject to requirements and

restrictions stipulated by a wide range of legislation, including

the Financial Instruments and Exchange Act, the Installment

Sales Act, the Money Lending Act, the Waste Disposal and

Cleaning Act, and the Act on the Punishment of Organized

Crime and Prohibition of Illegal Gains. We are committed to

strict compliance with this legislation. Future revisions to this

legislation and the enactment of new legislation may impose

new restrictions on us, and this could adversely affect our

business performance.

g. Impact of Other Risks

We are also subject to other risks that include back-office

processing risk, the possibility of processing and procedures

being mishandled; systems risk, the possibility of computer

system downtime and malfunction; and residual-value risk,

the risk of the residual value of lease assets falling below

initially expected levels. Events associated with these risks

may adversely affect our business performance.


Board of Directors

From left to right, front row: Mitsuru Machida, President & Chief Exective Officer; Toshiyuki Ogura, Chairman; Middle row: Kazuo Kasugakawa,

Senior Managing Director; Nobuya Minami, Outside Director; Hisanori Ohara, Managing Director; Back row: Kazuo Kanamori, Managing Director;

Taiji Shirato, Managing Director; Kyoji Watanabe, Managing Director; Shunzo Yoneda, Managing Director

Chairman Toshiyuki Ogura

President & Chief Executive Officer Mitsuru Machida

Senior Managing Director Kazuo Kasugakawa

Managing Directors Hisanori Ohara Taiji Shirato Kyoji Watanabe Kazuo Kanamori Shunzo Yoneda

Outside Director Nobuya Minami

Full-time Corporate Auditors Osamu Yoshikawa Ryuichi Uno

Outside Corporate Auditors Teruhiko Numano Osamu Suzuki Fumito Ishizaka

Managing Executive Officers Hideo Sota Yuji Hosooka

Executive Officers Masakazu Ishigaki Akira Fukuda Keiichirou Nakajima Kiyoyuki Fujimoto Kazuhiko Inoue Akio Oda Kazuori Yosizumi Takao Soutome Mitsuru Tomikawa Yoshiharu Fujita Kiyoshi Minagawa Hideki Yamada Kiyoo Shinohara Norio Imai

(As of June 25, 2008)



FinancialStatements

Year Ended March 31, 2008

Overview

During the year ended March 31, 2008 (fiscal 2008), the

Japanese economy continued to stage a mild recovery

driven by overseas demand amid an uncertain economic

outlook stemming from surging oil and raw materials prices

and concerns of slowdown in U.S. and European economies

triggered by the subprime mortgage crisis.

The leasing industry faced an increasingly tough business

environment. According to statistics released by the Japan

Leasing Association, leasing volume for fiscal 2008 was

below the previous year’s level for the second consecutive

year as the industry prepared for the introduction of new tax

and lease accounting standards in April 2008. The industry

was also affected by a flattening of the yield curve, reflecting

changes in the interest rate environment, and progressing

industry consolidation through mergers and corporate

integrations.

Business Results

Total new executed contracts volume for the year increased

¥49,973 million, or 11.3%, from the previous fiscal year

to ¥493,794 million due to the effect of making Japan

Mortgage Co., Ltd., a consolidated subsidiary and solid

growth in new contracts, primarily in the lease and loans

segments. Our consolidated operating assets (after

subtracting the deferred profit on installment sales) at the

end of fiscal 2008 were up ¥248,544 million, or 27.1%,

from the end of the previous fiscal year to ¥1,166,329

million.

Consolidated revenues increased ¥7,529 million, or 1.9%,

to ¥399,075 million as operating assets grew steadily.

Meanwhile, costs increased ¥5,171 million, or 1.4%, to

¥368,126 million due to higher costs resulting from stronger

revenues, and higher financing cost due to an increase in

operating assets and rising interest rates. SG&A expenses

increased ¥2,803 million, or 23.4%, to ¥14,777 million,

reflecting expanded business and an increase in retirement

benefit expenses offsetting our efforts to cut expenses.

As a result, consolidated operating income decreased ¥446

million, or 2.7%, to ¥16,172 million. Net income decreased

¥209 million, or 1.7%, to ¥12,077 million.

Segment Information

Our business has four segments: leases, installment sales,

loans and other. Revenues for each segment are those

from customers, and operating income for each segment is

operating income before elimination and corporate.

Leases

In the lease segment, total new executed contracts volume

increased 1.0% from the previous fiscal year to ¥274,368

million. Leased assets increased 3.3% to ¥683,154 million.

Revenues decreased 0.7% to ¥309,750 million due to

cancellations of lease contracts. Operating income decreased

18.5% to ¥14,173 million.

Installment Sales

In the installment sales segment, total new executed

contracts volume decreased 5.9% to ¥67,466 million,

but receivables on installment sales (after subtracting the

deferred profit on installment sales) increased 0.6% to

¥107,078 million. Revenues increased 0.7% to ¥72,840

million. Operating income declined 6.4% to ¥1,569 million.

Loans

In the loans segment, total new executed contracts volume

jumped 49.5% to ¥147,765 million partly due to making

Japan Mortgage Co., Ltd., a consolidated subsidiary. Loan

receivables also surged 150.6% to ¥370,573 million.

Revenues increased 215.8% to ¥12,104 million, while

operating income increased 213.8% to ¥6,019 million.

Other

In the “other” segment, total new executed contracts volume

increased 179.1% to ¥4,193 million. Receivables increased

149.9% to ¥5,522 million. Revenues increased 30.2% to

¥4,381 million, and operating income increased 5.1% to

¥1,391 million.

Financial Position

Assets, Liabilities and Net Assets

Total assets at the end of the year were up ¥265,160

million, or 26.2%, from the end of the previous fiscal year to

¥1,276,122 million, as operating assets (after subtracting the

deferred profit on installment sales) increased due to the

effect of the addition of a consolidated subsidiary and solid

growth in new contracts, primarily in the lease and loans

segments.

Total liabilities increased ¥258,606 million, or 27.6%, to

¥1,194,693 million, reflecting an increase in interest-bearing

debts as operating assets increased.

MAMAGEMENT’S DISCUSSION AND ANALYSIS


As a result, net assets increased ¥6,554 million, or 8.8%, to

¥81,429 million. This also reflects an increase in retained

earnings of ¥10,619 million, or 22.4%, which was partly

offset by a decline in valuation, translation adjustments and

others attributable to changes in the market environment.

Cash Flow Position

Cash and cash equivalents at the end of fiscal 2008 totaled

¥7,834 million, an increase of ¥3,464 million, or 79.3%,

from the end of the previous year. A break down of cash

flows follows.

Cash Flows from Operating Activities

Net cash used in operating activities was ¥58,103 million,

compared with ¥45,731 million for the previous fiscal year.

Cash inflows, such as income before income taxes and

minority interests of ¥19,400 million and depreciation of

leased assets of ¥238,771 million, were more than offset

by cash outflows, which included an increase in loans

receivable of ¥16,876 million, an increase in investments

in leases of ¥265,045 million, and a decrease in mortgage

securities under repurchase agreements of ¥23,550 million.

Cash Flows from Investing Activities

Net cash provided by investing activities was ¥26,163

million, compared with an outlay of ¥1,970 million in

the previous fiscal year. Outlays, including purchases of

marketable and investment securities amounting to ¥7,573

million and investments in statute-specified joint real estate

enterprises amounting to ¥2,800 million, were more than

offset by proceeds from the purchase of a subsidiary,

Japan Mortgage Co., Ltd., and its inclusion in the scope of

consolidation of ¥36,580 million.

Cash Flows from Financing Activities

Net cash provided by financing activities was ¥35,461

million, compared with ¥38,033 million for the previous

fiscal year. The net decrease in short-term borrowings

amounted to ¥38,891 million. Repayments of long-term

borrowings amounted to ¥106,342 million. Repayments

of securitized (long-term) lease receivables amounted

to ¥67,500 million. These items were more than offset

by net proceeds of ¥66,600 million from the issuance

of commercial paper, proceeds from long-term loans

of ¥134,817 million, a net increase in payables under

securitized lease receivables of ¥38,600 million, and

proceeds from payables under securitized long-term lease

receivables and installment sales trade receivables of ¥9,633

million.

Dividends for Fiscal 2008 and 2009

We maintain a basic policy of returning profits to

shareholders through the payment of stable dividends over

the long-term, with consideration given to business results

and targets for management indices, as well as efforts to

increase shareholders’ equity and thereby further bolster our

management foundation and financial standing.

We will utilize retained earnings to strengthen our sales

foundation by purchasing prime operating assets. Based on

these policies and to meet shareholder expectations, we

will continue actively distributing profits in accordance with

business results.

We plan to pay a year-end dividend of ¥25 per share,

resulting in an annual dividend, comprising the year-end and

interim dividends, of ¥50 per share, a year-on-year increase

of ¥7. For the coming fiscal year, we plan to pay an annual

dividend of ¥54 per share, comprising an interim dividend of

¥27 per share and a year-end dividend of ¥27 per share.

Outlook for Fiscal 2009

Looking ahead, we anticipate increased uncertainty in the

Japanese economy due to surging oil and raw materials

prices and a strong yen as well as growing concerns of a

slowdown in U.S. and European economies triggered by

the subprime mortgage crisis. In the leasing industry, we

anticipate an increasingly difficult business climate due

to concerns surrounding the impact of the new tax and

lease accounting standards. Amid such circumstances, we

will steadfastly execute the measures set out in the three-

year mid-term management plan for fiscal 2009 to fiscal

2011, and we will strive to establish an even more solid

management foundation.

For fiscal 2009, we expect consolidated revenues of ¥380

billion, a decline of 4.8% from the previous fiscal year,

consolidated operating income of ¥17.8 billion, an increase

of 10.1%, and consolidated net income of ¥12.1 billion, an

increase of 0.2%. These projections reflect the likely effects

of the new lease accounting standards and an expansion in

business due to the addition of Sharp Finance Corporation

to the consolidated group in fiscal 2009.


CONSOLIDATED BALANCE SHEETSFuyo General Lease Co.,Ltd. and Consolidated SubsidiariesMarch 31, 2008 and 2007

Thousands of U.S. dollars Millions of yen (Note 1)

Assets 2008 2007 2008

Current assets:

Cash and cash equivalents ¥ 7,834 ¥ 4,370 $ 78,340

Marketable securities (Note 2) 939 20 9,390

Trade receivables (Note 3):

Installment sales 110,114 109,776 1,101,140

Loans 366,922 145,343 3,669,220

Lease 13,558 13,781 135,580

Other 2,769 2,755 27,690

Allowance for doubtful receivables (8,062) (3,621) (80,620)

Prepaid pension cost — 165 —

Deferred tax assets (Note 5) 2,387 1,679 23,870

Other 14,658 9,234 146,580

Total current assets 511,119 283,502 5,111,190

Investments and other assets:

Investment in securities (Notes 2 and 3)

Unconsolidated subsidiaries and affiliates 4,606 3,884 46,060

Other investment in securities 29,613 25,965 296,130

Long-term receivables 3,336 1,311 33,360

Other investments 36,940 32,486 369,400

Deferred tax assets (Note 5) 270 147 2,700

Allowance for doubtful receivables (58) (61) (580)

Total investments and other assets 74,707 63,732 747,070

Property and equipment, at cost less accumulated depreciation:

Leased assets 624,554 601,300 6,245,540

Advances on purchases of property and equipment for lease 5,319 985 53,190

Own-used assets 728 518 7,280

Total property and equipment 630,601 602,803 6,306,010

Intangible fixed assets:

Computer program leased to customers 58,601 59,904 586,010

Other 1,094 1,020 10,940

Total intangible fixed assets 59,695 60,924 596,950

Total assets ¥1,276,122 ¥1,010,961 $12,761,220

See accompanying notes to the consolidated financial statements.



Liabilities and net assets 2008 2007 2008

Current liabilities:

Short-term borrowings (Note 3) ¥ 725,082 ¥ 445,594 $ 7,250,820

Current portion of long-term debt (Note 3) 161,666 157,491 1,616,660

Notes and accounts payable-trade 37,297 35,639 372,970

Income taxes payable 2,634 4,226 26,340

Advances received from customers 3,456 3,125 34,560

Deferred profit on installment sales 3,035 3,286 30,350

Other 7,031 5,606 70,310

Total current liabilities 940,201 654,967 9,402,010

Long-term liabilities:

Long-term debt (Note 3) 220,148 253,861 2,201,480

Deferred tax liabilities (Note 5) 1,285 2,035 12,850

Accrued retirement benefits (Note 6) 1,073 621 10,730

Guarantee deposits from customers 24,950 19,648 249,500

Negative goodwill 3,109 — 31,090

Other 3,927 4,955 39,270

Total long-term liabilities 254,492 281,120 2,544,920

Total liabilities 1,194,693 936,087 11,946,930

Contingent liabilities (Note 8)

Net assets:

Shareholders’ equity (Notes 10 and 12):

Common stock, without per value

Authorized: 100,000,000 shares

Issued: 30,287,810 shares in 2008 and 2007 10,532 10,532 105,320

Capital surplus 10,417 10,417 104,170

Retained earnings 57,992 47,372 579,920

Less, treasury stock, at cost - 601 shares in 2008 and 350 shares in 2007 (2) (1) (20)

Total shareholders’ equity 78,939 68,320 789,390

Valuation, translation adjustments and others:

Net unrealized gain on available-for-sale securities 2,676 6,442 26,760

Deferred losses on hedges (158) (14) (1,580)

Foreign currency translation adjustments (80) 88 (800)

Total valuation, translation adjustments and others 2,438 6,516 24,380

Minority interests 52 38 520

Total net assets 81,429 74,874 814,290

Total liabilities and net assets ¥1,276,122 ¥1,010,961 $12,761,220



2008 2007 2008

Revenues:

Lease ¥309,750 ¥312,034 $3,097,500

Installment sales 72,840 72,316 728,400

Loans 12,104 3,832 121,040

Other 4,381 3,364 43,810

Total revenues 399,075 391,546 3,990,750

Costs:

Lease 284,253 285,012 2,842,530

Installment sales 69,846 69,517 698,460

Interest expenses 11,566 6,985 115,660

Other 2,461 1,441 24,610

Total costs 368,126 362,955 3,681,260

Gross profit 30,949 28,591 309,490

Selling, general and administrative expenses 14,777 11,974 147,770

Operating income 16,172 16,617 161,720

Other income (expenses)

Interest and dividend income 425 447 4,250

Interest expenses (295) (164) (2,950)

Equity in earnings of affiliates 755 741 7,550

Amortization of negative goodwill 777 — 7,770

Gain on transfer of receivables 186 25 1,860

Bad debt recovered 210 456 2,100

Reversal of allowance for doubtful receivables 487 672 4,870

Reversal of allowance for loss on guarantees 966 174 9,660

Gain on sale of marketable and investment securities — 229 —

Loss on devaluation of marketable and investment securities (340) (67) (3,400)

Other, net 57 364 570

Income before income taxes and minority interests 19,400 19,494 194,000

Income taxes (Note 5)

Current 7,015 7,704 70,150

Deferred 302 (499) 3,020

Total 7,317 7,205 73,170

Minority interests 6 2 60

Net income ¥ 12,077 ¥ 12,287 $ 120,770


CONSOLIDATED STATEMENTS Of INCOMEFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2008 and 2007


Millions of yen Shareholders’ equity Number of Treasury Total shares of Common Capital Retained stock, Shareholders’ common stock stock surplus earnings at cost equity

Balance at March 31, 2006 30,287,810 ¥10,532 ¥10,417 ¥36,170 ¥(0) ¥ 57,119

Net income 12,287 12,287

Cash dividends (1,151) (1,151)

Net increase resulting from changes

in the scope of consolidation dividends 66 66

Treasury stock acquired, net (1) (1)

Net change during year

Balance at March 31, 2007 30,287,810 10,532 10,417 47,372 (1) 68,320

Net income 12,077 12,077


Net increase resulting from changes

in the scope of consolidation dividends (3) (3)



Balance at March 31, 2008 30,287,810 ¥10,532 ¥10,417 ¥57,992 ¥(2) ¥78,939

Millions of yen Valuation, translation adjustments and others Net Total unrealized Foreign valuation, gains on Deferred currency translation available-for losses translation adjustments Minority Total sale securities on hedges adjustment and others interests net assets

Balance at March 31, 2006 ¥6,888 ¥ — ¥ 55 ¥6,943 ¥37 ¥64,099

Net income 12,287

Cash dividends (1,151)

Net increase resulting from changes in the scope of consolidation dividends 66

Treasury stock acquired, net (1)

Net change during year (446) (14) 33 (427) 1 (426)

Balance at March 31, 2007 6,442 (14) 88 6,516 38 74,874

Net income 12,077


Net increase resulting from changes in the scope of consolidation dividends (3)


Net change during year (3,766) (144) (168) (4,078) 14 (4,064)

Balance at March 31, 2008 ¥2,676 ¥(158) ¥ (80) ¥2,438 ¥52 ¥81,429


CONSOLIDATED STATEMENTS Of CHANGES IN NET ASSETSFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2008 and 2007


Thousands of U.S. dollars (Note 1) Shareholders’ equity Treasury Total Common Capital Retained stock, Shareholders’ stock surplus earnings at cost equity

Balance at March 31, 2007 $105,320 $104,170 $473,720 $ (10) $683,200

Net income 120,770 120,770


Net increase resulting from changes in the scope of consolidation dividends (30) (30)



Balance at March 31, 2008 $105,320 $104,170 $579,920 $(20) $789,390

Thousands of U.S. dollars (Note 1) Valuation, translation adjustments and others Net Total unrealized Foreign valuation, gains on Deferred currency translation available-for losses translation adjustments Minority Total sale securities on hedges adjustment and others interests net assets

Balance at March 31, 2007 $64,420 $ (140) $ 880 $65,160 $380 $748,740

Net income 120,770


Net increase resulting from changes in the scope of consolidation dividends (30)


Net change during year (37,660) (1,440) (1,680) (40,780) 140 (40,640)

Balance at March 31, 2008 $26,760 $(1,580) $ (800) $24,380 $520 $814,290


CONSOLIDATED STATEMENTS Of CHANGES IN NET ASSETS



2008 2007 2008

Cash flows from operating activities:

Income before income taxes and minority interests ¥ 19,400 ¥ 19,494 $ 194,000

Adjustments for:

Depreciation and amortization 239,333 234,095 2,393,330

Decrease in allowance for doubtful receivables (1,477) (1,141) (14,770)

Interest and dividend income (425) (447) (4,250)

Interest expenses 11,861 7,149 118,610

Gain on sales of marketable and investment securities, net — (229) —

Loss on devaluation of marketable and investment securities 340 67 3,400

Equity in earnings of affiliates (755) (741) (7,550)

Amortization of negative goodwill (777) — (7,770)

Increase in trade receivables (17,028) (45,192) (170,280)

Increase in investments in leases (265,045) (249,603) (2,650,450)

Increase in trade payables 1,657 4,381 16,570

Decease in mortgage securities under repurchase agreement (23,550) — (235,500)

Other, net 101 1,895 1,010

Subtotal (36,365) (30,272) (363,650)

Interest and dividend income received 412 308 4,120

Interest expenses paid (12,194) (7,080) (121,940)

Income taxes paid (9,956) (8,687) (99,560)

Net cash used in operating activities (58,103) (45,731) (581,030)

Cash flows from investing activities:

Proceeds from sales and redemption of marketable and investment securities 663 3,331 6,630

Purchases of marketable and investment securities (7,573) (5,697) (75,730)

Proceeds from purchase of a subsidiary which is newly included in the scope of consolidation 36,580 — 365,800

Purchases of property and equipment for own use (683) (413) (6,830)

Other, net (2,824) 809 (28,240)

Net cash provided by (used in) investing activities 26,163 (1,970) 261,630

Cash flows from financing activities:

Increase in short-term borrowings, net 66,308 16,637 663,080

Proceeds from long-term debt 144,451 219,032 1,444,510

Repayment of long-term debt (173,843) (196,485) (1,738,430)

Cash dividends paid (1,453) (1,149) (14,530)

Other, net (2) (2) (20)

Net cash provided by financing activities 35,461 38,033 354,610

Effect of exchange rate changes on cash and cash equivalents (56) 11 (560)

Net increase (decrease) in cash and cash equivalents 3,465 (9,657) 34,650

Cash and cash equivalents at beginning of year 4,370 14,037 43,700

Net decrease resulting from changes in scope of consolidation (1) (10) (10)

Cash and cash equivalents at end of year ¥ 7,834 ¥ 4,370 $ 78,340


CONSOLIDATED STATEMENTS Of CASH fLOwSFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2008 and 2007


NOTES TO CONSOLIDATED fINANCIAL STATEMENTSFuyo General Lease Co., Ltd. and Consolidated Subsidiaries

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(1) Basis of PresentationFuyo General Lease Co., Ltd. (the “Company”) and its domestic consolidated subsidiaries maintain their books of account in conformity with the financial accounting standards of Japan, and its foreign consolidated subsidiaries maintain their books of account in conformity with those of their countries of domicile.

The accompanying consolidated financial statements have been compiled from the consolidated financial statements prepared by the Company as required under the Securities and Exchange Law of Japan and have been prepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

The amounts in US dollars presented in the financial statements are translated from the amounts in the Japanese yen by using the exchange rate ¥100 against US$1.00, in effect at March 31, 2008 solely for the convenience of overseas readers. Therefore, this does not imply that those amounts in yen can be converted into equivalent amounts in US dollars at this or any other exchange rate.

(2) Principles of ConsolidationThe accompanying consolidated financial statements include the accounts of the Company and all companies controlled directly or indirectly by the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies have been included in the consolidated financial statements on an equity basis. All significant intercompany balances and transactions have been eliminated in consolidation.

For fiscal years ended March 31, 2008 and 2007, consolidated accounting covered the parent company and 28 and 27 subsidiaries, respectively. 5 affiliated companies are accounted for under the equity method and incorporated into the consolidated financial statements for both years.

Of the acquisition costs of newly consolidated subsidiaries, portions exceeding (not exceeding) their net assets as of the dates when the Company acquired control are recorded as goodwill (negative goodwill) except for immaterial amounts which will be amortized (accumulated) using the straight-line method over 20 years or less.

(3) Foreign Currency TranslationMonetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates prevailing at the balance sheet dates, except for assets and liabilities hedged by forward foreign exchange contracts.

All revenues and expenses associated with foreign currencies are translated at the rates of exchange prevailing when such transactions were made. The resulting exchange gains and losses are credited or charged to income.

The accounts of the foreign subsidiaries are translated at the exchange rates prevailing at the balance sheet dates, except for the components of net assets. The components of net assets are translated at their historical exchange rates. The resulting exchange differences are included in the account of foreign currency translation adjustments in net assets.

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

(5) Lease AccountingNoncancelable leases are primarily accounted for as operating leases (whether such leases are classified as operating or finance leases) except that leases which stipulate the transfer of ownership of the leased assets to the lessee are accounted for as finance leases.

(6) Installment SalesRevenue and cost of installment sales are recognized as each installment payment becomes due.

(7) Interest ExpensesInterest expense is allocated to cost of sales and other expenses based on the balances of the respective operating assets, which consist principally of accounts receivable and leased assets, and other assets.

Interest expense classified as cost of sales is stated net of interest income.

(8) SecuritiesAll securities are classified as available-for-sale securities.

Marketable available-for-sale securities are carried at fair market value and unrealized gains or losses are reported as a separate component of net assets, net of the related deferred income taxes.

Other securities without available fair market values are stated at moving-average cost. The cost of securities sold is determined based on the moving-average method. When a significant decline in fair value below cost of an individual security is deemed to be other than temporary, the carrying value of the individual security is written down to fair value.


(9) Depreciation and AmortizationDepreciation of leased assets is computed primarily by the straight-line method based on the lease term of the respective assets. Depreciation of own-used assets is computed by the declining-balance method, while the straight-line method is applied to buildings acquired on and after April 1, 1998, based on the estimated useful lives of the respective assets. The foreign consolidated subsidiaries use the straight-line method.

The estimated useful lives of own-used assets are principally as follows: Buildings 3 to 50 years Furniture and equipment 3 to 20 years

Computer software intended for internal use is amortized by the straight-line method over the estimated useful lives (5 years).

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

(11) Retirement BenefitsEmployees’ retirement benefitsThe Company has established an allowance retirement annuity system and a termination allowance plan. Certain domestic consolidated subsidiaries have in place a termination allowance plan and medium- and small-sized companies retirement allowance mutual aid system, etc. as defined benefit pension systems.

Reserve for employees’ retirement benefits is calculated based on the projected benefit obligation and the fair value of the pension plan assets as of the balance sheet date.

Directors’ and corporate auditors’ retirement benefitsThe Company records the entire amount of retirement benefits to directors and corporate auditors, which are calculated based on the Company’s internal regulations, on an accrual basis as of the consolidated balance sheet date.

(12) Derivatives and Hedging ActivitiesWith regard to foreign currency-related derivative financial instruments, the Company uses forward foreign exchange contracts. With regard to interest rate-related instruments, the Company uses interest rate swap contracts and interest rate cap contracts. With regard to credit risk-related instruments, the Company uses credit default swap contracts.

The Company uses currency-related derivatives and interest rate-related derivatives for risk management purposes, not for speculative investment purposes.

The Company enters into only credit default swap contracts that are deemed to be highly secure.

The Company uses currency-related derivatives for the purpose of hedging risks associated with foreign currency fluctuations that affect its foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives for the purpose of hedging risks associated with interest rate fluctuations that affect its borrowings.

The Company uses derivatives, in accordance with its internal “Basic Policy for Managing Market and Liquidity Risks”, for the purpose of hedging risks associated with interest-rate and foreign currency fluctuations arising from its sales and financial operations.

Derivative financial instruments are stated at fair value.

Under the exceptional treatment of hedge accounting, the interest rate swaps which qualify for hedge transactions and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized and included in interest expense or income.

(13) Per Share InformationNet income per share is computed by taking earnings attributable to common stock and dividing it by a weighted average number of common stock outstanding over the fiscal year under review.

Diluted net income per share information is not available as there were no dilutive securities for the fiscal year under review.

(14) Accounting ChangesMethod of depreciation of tangible fixed assetsDue to an amendment to the Japanese Corporate Tax Law in 2007, the Company and its domestic consolidated subsidiaries have changed the method of depreciation of tangible fixed assets on or after April 1, 2007 to the method prescribed in the amended Corporate Tax Law. The changes in accounting for depreciation did not have a material impact on the result of income and segment information.

Additional informationPursuant to an amendment to the Japanese Corporate Tax Law, the Company and its domestic consolidated subsidiaries depreciate the difference between 5% of the acquisition cost of assets acquired on or before March 31, 2007 and the book value of said assets uniformly over a five-year period, starting the year following the fiscal year in which the depreciated value of said assets reaches 5% of the acquisition


price using the pre-amendment depreciation method. Depreciated amounts are included in depreciation expenses. This change did not have a material impact on the results of income and segment information.

2. MARkETABLE SECURITIES AND INVESTMENT IN SECURITIESMarketable securities and investment in securities as of March 31, 2008 and 2007 consisted of the following:


2008 2007 2008

Current: Bonds ¥ 939 ¥ 20 $ 9,390 ¥ 939 ¥ 20 $ 9,390

Non-current: Shares ¥20,268 ¥20,212 $202,680 Bonds 4,212 4,229 42,120 Other 5,133 1,524 51,330 ¥29,613 ¥25,965 $296,130

The carrying amounts and aggregate fair value of securities with determinable market value at March31, 2008 and 2007 are as follows:

March 31, 2008 Cost or Unrealized Unrealized book value gains losses Fair value Millions of yen

Available-for-sale securities: Shares ¥8,986 ¥5,307 ¥1,170 ¥13,123 Bonds 4,976 — 5 4,971 Other 1,700 — 7 1,693

March 31, 2007 Cost or Unrealized Unrealized book value gains losses Fair value Millions of yen

Available-for-sale securities: Shares ¥7,427 ¥10,180 ¥118 ¥17,489 Bonds 4,027 23 1 4,049

March 31, 2008 Cost or Unrealized Unrealized book value gains losses Fair value

Thousands of U.S. dollarsAvailable-for-sale securities: Shares $89,860 $53,070 $11,700 $131,230 Bonds 49,760 — 50 49,710 Other 17,000 — 70 16,930

Available-for-sale securities whose fair value is not readily determinable as of March 31, 2008 and 2007 are as follows:

Carrying amount Thousands of Millions of yen U.S. dollars

2008 2007 2008

Available-for-sale securities: Shares ¥7,145 ¥2,723 $71,450 Bonds 180 200 1,800 Other 3,440 1,524 34,400


Proceeds from sales of available-for-sale securities and resultant gross realized gains and losses for the years ended March 31, 2008 and 2007 are summarized as follows:

Carrying amount Thousands of Millions of yen U.S. dollars

2008 2007 2008

Proceeds ¥501 ¥258 $5,010 Realized gain 0 229 0 Realized loss 0 — 0

The following is a summary of the contractual maturities of debt securities classified as available-for-sale securities as of March 31, 2008.


Due within one year ¥ 939 $ 9,390 Due after one to five years 6,517 65,170 Due after five to ten years 330 3,300 Due after ten years 500 5,000

3. SHOrT-TErM BOrrOwINGS AND LONG-TErM DEBT AND PLEDGED ASSETSThe breakdown of short-term borrowings as of March 31, 2008 and 2007 is respectively as follows:

Thousands of Weighted-average Millions of yen U.S. dollars interest rate

2008 2007 2008

Short-term loans from banks and other financial institutions ¥244,413 ¥174,494 $2,444,130 1.36%Payables under securitized lease receivables 51,700 13,100 517,000 0.97%Commercial paper 324,600 258,000 3,246,000 0.83%Mortgage securities under repurchase agreement 104,369 — 1,043,690 0.97% ¥725,082 ¥445,594 $7,250,820 —

The breakdown of long-term debt as of March 31, 2008 and 2007 is respectively as follows:

Thousands of Weighted-average Millions of yen U.S. dollars interest rate

2008 2007 2008

Long-term loans from banks and other financial institutions ¥ 285,814 ¥257,485 $2,858,140 1.28%Payables under securitized long-term lease receivables and installment sales trade receivables 96,000 153,867 960,000 1.87%Total 381,814 411,352 3,818,140 —Less current portion 161,666 157,491 1,616,660 — ¥220,148 ¥253,861 $2,201,480 —

The projected long-term debt servicing amount by fiscal year, as of March 31, 2008 is as follows:

Thousands ofYear ending March 31, Millions of yen U.S. dollars

2009 ¥161,666 $1,616,660 2010 88,960 889,600 2011 78,333 783,330 2012 20,722 207,220 2013 16,632 166,320 2014 and thereafter 15,501 155,010 ¥381,814 $ 3,818,140


As of March 31, 2008, the following assets were pledged as collateral for current and long-term obligations of ¥34,079 million ($288,805 thousand).


Installment sale receivables ¥ 2 $ 20 Loans receivables 9,323 93,230 Lease and other receivables 472 4,720 Lease and other contract receivables 23,819 238,190 ¥33,616 $336,160

Besides the above, the Company maintains, as guarantee deposits for its sales operations, deposits of ¥14 million ($140 thousand) in securities and ¥10 million ($100 thousand) in investment securities. As third-party security for bank loans taken out by customers, the Company maintains deposits of ¥223 million ($2,230 thousand) in installment sale receivables and ¥10 million ($100 thousand) in investment securities. The Company maintains deposits of ¥3 million ($30 thousand) in investment securities for the purpose of sales transactions.

4. DErIvATIvESDerivatives contracts are subject to market risks associated with market price fluctuations and credit risks associated with counterparty default. The Company uses foreign currency-related derivative contracts to reduce risks associated with foreign currency fluctuations that affect foreign currency-denominated receivables and payables. The Company uses interest rate-related derivatives contracts to reduce risks associated with interest rate fluctuations that affect borrowings. These contracts serve to reduce market risk. The Company has determined that credit risks associated with its counterparties, all of which are leading financial institutions, are insignificant.

At the Company, its finance division is authorized to engage in and manage derivatives contracts, in accordance with the internal regulations on job responsibilities and under approval of its president (CEO) or officer in charge of supervising the finance division.

The Company’s finance division manages derivatives contracts and positions in foreign currencies, the results of which are compiled by the corporate planning division according to the Company’s internal “Risk Management Regulations” and periodically reported to corporate management meetings, etc.

At the Company’s consolidated subsidiaries, based on the Company’s internal “Basic policy for Managing Market and Liquidity Risks” and “Regulations on Managing Affiliated Companies”, derivatives contracts are overseen by the Company’s corporate planning division, which examines the subsidiaries’ policy on engaging in derivatives contracts and their use of such contracts, and confirms the conditions of such contracts, their counterparties, outstanding positions, and unrealized gains/losses, every 6 months during contract periods.

Fair values, etc. of derivatives contracts as of March 31, 2008 and 2007 are respectively as follows:

Millions of yen Thousands of U.S. dollars

2008 2007 2008 Contract Unrealized Contract Unrealized Contract Unrealized amount Fair value gain amount Fair value gain amount Fair value gain (over one year) (loss) (over one year) (loss) (over one year) (loss)

Foreign exchange forward contracts:Selling ¥ 28 ¥ 0 ¥ 0) ¥ — ¥ — ¥ — $ 280 $ 0 $ 0) (—) (—) (—)

Interest rate swap contracts:Fixed rate payment, floating rate receipt 60,713 (136) (136)) 21,028 (80) (80) 607,130 (1,360) (1,360)) (40,375) (20,744) (403,750) Interest rate caps: Buying 731 2 2 983 16 16 7,310 20 20 (331) (762) (3,310) Credit risk:Credit default swap 3,000 (331) (331) 1,000 0 0 30,000 (3,310) (3,310) (3,000) (1,000) (30,000) ¥ 64,472 ¥ (465) ¥ (465) ¥ 23,011 ¥ (64) ¥ (64) $ 644,720 $ (4,650) $ (4,650))

The fair values are based on the amounts presented by relevant financial and other institutions.The amounts do not include derivatives contracts to which hedge accounting is applied.


5. INCOME TAxESEarnings at the Company and its domestic consolidated subsidiaries are subject to various taxes. The statutory tax rate of taxation for each year ended March 31, 2008 and 2007 was 40.6% respectively.

The breakdown of total deferred tax assets and deferred tax liabilities by major item, as of March 31, 2008 and 2007 is respectively as follows:


2008 2007 2008

Deferred tax assets: Allowance for doubtful receivables ¥ 3,210 ¥ 1,762 $ 32,100 Loss on devaluation of investment securities and others 1,320 1,141 13,200 Allowance for loss on guarantees 591 988 5,910 Estimation for loss on disposal of property for lease 551 301 5,510 Reserve for bonus payments 381 333 3,810 Retirement benefits 260 112 2,600 Other 1,295 1,182 12,950 Subtotal gross deferred tax assets 7,608 5,819 76,080 Less valuation allowance (4,674) (2,255) (46,740)Total deferred tax assets 2,934 3,564 29,340

Deferred tax liabilities: Prepaid pension cost — (67) — Depreciation of overseas subsidiaries (65) (31) (650) Net unrealized gain on available-for-sale securities (1,455) (3,673) (14,550) Other (41) (3) (410)Total deferred tax liabilities (1,561) (3,774) (15,610)Net deferred tax assets (liabilities) ¥ 1,373 ¥ (210) $ 13,730

The following is the breakdown of major items that constituted the material difference between the statutory tax rate and the effective tax rate for the fiscal years ended March 31, 2008 and 2007 is respectively as follows:

2008 2007

Statutory tax rate 40.6% 40.6% Per capital inhabitant tax 0.6 1.3 Entertainment expenses not qualified for deductions 0.3 0.3 Elimination of intercompany dividend 0.3 1.9 Undistributed profit of foreign subsidiaries 0.2 (0.1) Less valuation allowance 3.4 (3.0) Equity in earning of affiliates (3.9) (1.6) Amortization of nagative goodwill (4.0) — Difference in normal tax rate of foreign subsidiaries (0.2) (0.6) Exclusion from gross revenue of dividend income (0.2) (1.8) Other 0.6 0.0Effective tax rate 37.7% 37.0%

6. rETIrEMENT BENEfITS The Company has established a defined benefit pension system which consists of the employees’ pension fund (established by the Company Group), an allowance retirement annuity system, and a termination allowance plan.

Certain domestic consolidated subsidiaries have established a termination allowance plan, and small- and medium-sized companies retirement allowance mutual aid system, etc. as defined benefit pension systems.

The Company and certain of its domestic consolidated subsidiaries may make payment of premium lump-sum retirement benefits to some employees at their retirement.


Retirement benefit obligations as of March 31, 2008 and 2007 and their breakdown were respectively as follows:


2008 2007 2008

Projected benefit obligation ¥(5,551) ¥(4,905) $(55,510)Fair value of plan assets 4,911 4,796 49,110Unfunded benefit obligation (640) (109) (6,400)Net liability (640) (109) (6,400)Prepaid pension cost — 165 —Retirement benefits ¥ (640) ¥ (274) $ (6,400)

The breakdown of net periodic pension cost for respective fiscal years ended March 31, 2008 and 2007 is as follows:


2008 2007 2008

Service cost ¥ 432 ¥397 $ 4,320Interest cost 95 90 950Expected return on plan assets (101) (84) (1,010)Amortization of actuarial loss 676 (15) 6,760Net periodic pension cost ¥1,102 ¥388 $11,020

Basis for calculations of retirement benefit obligation, etc.:

2008 2007

Attribution method of estimated benefits Benefit/year-of-service approachDiscount rate 2.0% 2.0%Expected rate of return on plan assets 2.1% 2.1%Recognition period of actuarial loss Expensed in the year of occurrence

At March 31, 2008 and 2007 the liability for retirement benefits for directors and corporate auditors amounted to ¥434 million ($4,340 thousand) and ¥346 million, respectively.

7. LEASE TrANSACTIONSUnder accounting principles generally accepted in Japan, finance leases except for those involving title transfer are accounted for in the same way as operating leases.

Details of finance leases for the fiscal years ended March 31, 2008 and 2007 are respectively as follows:


The Group as lessee: 2008 2007 2008

At cost ¥ 904 ¥ 849 $ 9,040 Accumulated depreciation (417) (178) (4,170) ¥ 487 ¥ 671 $ 4,870 Future lease payments ¥ 488 ¥ 671 $ 4,880 Amount of above due within one year 206 234 2,060 Rental expenses (depreciation expenses) ¥ 239 ¥ 152 $ 2,390 The Group as lessor: At cost ¥ 1,764,569 ¥ 1,724,644 $17,645,690 Accumulated depreciation (1,108,727) (1,078,787) (11,087,270) ¥ 655,842 ¥ 645,857 $ 6,558,420 Future minimum lease payments ¥ 681,176 ¥ 664,399 $ 6,811,760 Amount of above due within one year 212,524 211,414 2,125,240 Rental revenues ¥ 274,917 ¥ 270,968 $ 2,749,170 Depreciation expenses 232,296 228,896 2,322,960 Rental revenues attributable to financing income 35,450 33,004 354,500


8. CONTINGENT LIABILITIESAt March 31, 2008, the Group is contingently liable as follows:


As a guarantor of indebtedness of: SHINJUKU ROKUCHOME special purpose company ¥1,991 $ 19,910 TATUMI KAIHATU special purpose company 996 9,960 American Airlines, Inc. 895 8,950 ETERNAL ELECTRONICS CORPORATION 718 7,180 SHiDAX COMMUNITY CORPORATION 377 3,770 GF Ibis Leasing Ltd. 283 2,830 ANZEN MOTOR CAR CO., LTD. 195 1,950 MORINAGA MILK INDUSTRY CO., LTD. 182 1,820 Honda R&D Co., Ltd. 123 1,230 Employees 436 4,360 Others 56 560 ¥6,252 $62,520

9. RELATED PARTY TRANSACTIONSThe Company’s transactions with related parties during fiscal years ended March 31, 2008 and 2007 were respectively as follows:


2008 2007 2008

Rental revenues ¥ 5 ¥ — $50Future minimum lease payments 12 — 120Rental revenues attributable to financing income 0 — 0

The ending balances of the Company’s transactions with related parties during fiscal years ended March 31, 2008 and 2007 were respectively as follows:


2008 2007 2008

Lease receivables ¥0 ¥ — $0

10. SHAREHOLDERS’ EQUITYThe new Corporation Law of Japan (the “Law”), which superseded most of the provisions of the Commercial Code of Japan, went into effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.


11. SEGMENT INfOrMATION The financial results of each segment for fiscal years ended March 31, 2008 and 2007 were respectively as follows:

Business segments

Year ended March 31, 2008 Installment Eliminations or Lease sales Loans Other corporate-wide Consolidated Millions of yen

(1) Operating revenues Revenue from customers ¥309,750 ¥72,840 ¥12,104 ¥4,381 ¥ — ¥399,075 Intersegment revenue 286 27 355 969 (1,637) — Total sales 310,036 72,867 12,459 5,350 (1,637) 399,075 Operating expenses 295,863 71,298 6,440 3,959 5,343 382,903 Operating income ¥ 14,173 ¥ 1,569 ¥ 6,019 ¥1,391 ¥(6,980) ¥ 16,172 (2) Total assets, depreciation and capital expenditures Total assets ¥740,090 ¥113,028 ¥404,355 ¥11,987 ¥6,662 ¥1,276,122 Depreciation and amortization 238,860 — — — 473 239,333 Capital expenditures 274,369 — — — 655 275,024

Year ended March 31, 2008 Installment Eliminations or Lease sales Loans Other corporate-wide Consolidated Thousands of U.S. dollars

(1) Operating revenues Revenue from customers $3,097,500 $728,400 $121,040 $43,810 $ — $3,990,750 Intersegment revenue 2,860 270 3,550 9,690 (16,370) — Total sales 3,100,360 728,670 124,590 53,500 (16,370) 3,990,750 Operating expenses 2,958,630 712,980 64,400 39,590 53,430 3,829,030 Operating income $ 141,730 $ 15,690 $ 60,190 $13,910 $(69,800) $ 161,720

(2) Total assets, depreciation and capital expenditures Total assets $7,400,900 $1,130,280 $4,043,550 $119,870 $66,620 $12,761,220 Depreciation and amortization 2,388,600 — — — 4,730 2,393,330 Capital expenditures 2,743,690 — — — 6,550 2,750,240

Year ended March 31, 2007 Installment Eliminations or Lease sales Loans Other corporate-wide Consolidated Millions of yen

(1) Operating revenues Revenue from customers ¥312,034 ¥72,316 ¥3,832 ¥3,364 ¥ — ¥391,546 Intersegment revenue 158 0 193 738 (1,089) — Total sales 312,192 72,316 4,025 4,102 (1,089) 391,546 Operating expenses 294,795 70,639 2,108 2,779 4,608 374,929 Operating income ¥ 17,397 ¥ 1,677 ¥1,917 ¥1,323 ¥(5,697) ¥ 16,617

(2) Total assets, depreciation and capital expenditures Total assets ¥711,928 ¥110,095 ¥169,903 ¥4,774 ¥14,261 ¥1,010,961 Depreciation and amortization 233,649 — — — 446 234,095 Capital expenditures 271,771 — — — 466 272,237

Geographic segments Geographic segment information is not presented herein, as over 90% of the amount of total assets of all segments for fiscal years March 31, 2008 and 2007 respectively were associated with domestic operations.

Sales to overseas customers The amounts of sales to overseas customers for fiscal years March 31, 2008 and 2007 respectively are not presented herein, as they constituted less than 10% of the respective consolidated revenues.


12. SUBSEqUENT EvENTS (1) Cash dividendsThe following appropriations of retained earnings of the Company, which have not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2008, were approved at a shareholders’ meeting held on June 25, 2008:


Appropriations: Cash dividends of ¥25 ($0.25) per share ¥757 $7,570

(2) Acquisition of shares of Sharp Finance Corporation (making the company a consolidated subsidiary)The Company held a Board meeting on March 24, 2008, and resolved to conclude a pending share transfer agreement with Sharp Corporation. Under the agreement, the Company was to acquire, from Sharp Corporation, 65 percent of the issued and outstanding shares of Sharp Finance Corporation, effective April 1, 2008. Accordingly, effective April 1, 2008, the Company acquired those shares upon the conclusion of the share transfer agreement, and Sharp Finance Corporation became its consolidated subsidiary.

1. Reason for acquisition of sharesSharp Finance Corporation, which is engaged primarily in the leasing business, was a consolidated subsidiary of Sharp Corporation. Sharp Corporation had been considering a tie-up with a strategic partner to expand Sharp Finance Corporation’s leasing and financing businesses and to cater to increasingly diverse and sophisticated customer needs.

Meanwhile, part of the Company’s business strategy was to expand business with small- and medium-sized enterprises, and to achieve this, it had been considering a strategic tie-up with a partner with strengths in retail market leasing.

Under the circumstances, the Company determined that integrating Sharp Finance Corporation into its Group would allow the Company and Sharp Corporation to complement each other’s business requirements and further strengthen their respective competitive advantages. On this basis, the Company resolved to acquire shares of Sharp Finance Corporation.

2. Overview of the new subsidiary (as of March 31, 2008)(1) Company name: Sharp Finance Corporation(2) Representative: Takao Asai(3) Address: 22-22, Nagaike-cho, Abeno-ku, Osaka-shi, Osaka, Japan(4) Established: May 1, 1982(5) Lines of business: Leasing businesses; credit sales; real estate leasing and insurance agency activities(6) Fiscal year: April 1 – March 31(7) Number of employees: 346(8) Main offices: Headquarters, Sapporo, Sendai, Utsunomiya, Tokyo, Nagoya, Kanazawa, Osaka, Hiroshima, Takamatsu, Fukuoka, and Okinawa(9) Paid-in capital: ¥3,000 million(10) Number of shares issued and outstanding: 6,000,000(11) Shareholder: Sharp Corporation 100.0%(12) Financial data

Fiscal year ended March 31, 2008 (Millions of yen)

Operating revenues ¥14,899 Operating income 6,016 Ordinary income 6,175 Net income 6,089 Total assets 206,070 Net assets 30,094Note: Operating revenues are presented as a net figure. The total value of revenues and costs is shown below. Fiscal year ended March 31, 2008 (Millions of yen)

Revenues ¥155,015 Total costs 140,116 Operating revenues 14,899

3. Total number of shares acquired, total value of acquisition, and total number of shares before and after acquisition(1) Total number of shares before acquisition — (Ownership ratio: —%)(2) Total number of shares acquired 3,900,000 (Total value of acquisition: ¥31,200 million)(3) Total number of shares after acquisition 3,900,000 (Ownership ratio: 65.00%) 4. Date of acquisition of shares: April 1, 2008


(3) Discontinuance of directors’ retirement benefits scheme and introduction of stock-based compensation in the form of stock acquisition rights for directors and executive officers

At the annual general meeting of shareholders held on June 25, 2008, it was resolved to discontinue the retirement benefits scheme for directors, pay out accrued retirement benefits to the directors and corporate auditors serving at that time, and grant stock-based compensation in the form of stock options to directors (excluding outside directors).

At the meeting of the Board of Directors held on May 13, 2008, it was resolved to discontinue the retirement benefits scheme for executive officers (excluding those serving concurrently as directors) and to introduce stock-based compensation in the form of stock options. Accordingly, at the Board of Directors’ meeting held on June 25, 2008, it was resolved to pay out accrued retirement benefits to executive officers serving at that time.


rEPOrT Of INDEPENDENT AUDITOrS


Directory

Corporate Data

Company name Fuyo General Lease Co., Ltd.

Headquarters Nichirei Building, 3-3-23, Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan

Tel: +81-3-5275-8800

Fax: +81-3-5275-8870

Representative Mitsuru Machida

President & Chief Executive Officer

Established May 1, 1969

Paid-in capital 10,532 million yen

(Number of shares outstanding: 30,287,810 shares)

Independent auditor Ernst & Young ShinNihon

Shares listed on First section of the Tokyo Stock Exchange (ticker: 8424)

Date of IPO December 7, 2004

Transfer agent Mizuho Trust & Banking Co., Ltd.

Number of employees 558 (non-consolidated)

894 (consolidated)

Consolidated subsidiaries 28

Affiliates 5

Non-consolidated subsidiaries 147

Major Shareholders

HULIC CO., LTD

Marubeni Corporation

Meiji Yasuda Life Insurance Company

Japan Trustee Services Bank, Ltd. (Trust Account)

Sompo Japan Insurance Inc.

The Master Trust Bank of Japan, Ltd. (Trust Account)

Yamatake Corporation

Mizuho Corporate Bank, Ltd.

Fuyo General Development Co., Ltd.

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Account)

Major Domestic Subsidiaries

Fuyo Auto Lease Co.,Ltd.

Japan Mortgage Co., Ltd.

Aqua Art Co., Ltd.

Fuyo Network Service Co., Ltd.

Fuyo Lease Sales Co., Ltd.

YF Leasing Co., Ltd.

Five Fox Management Co., Ltd.

Sharp Finance Corporation (Became a consolidated subsidiary on April 1, 2008)

50

50

Major Affiliates

Yokogawa Rental & Lease Corporation

Toshin General Create Co., Ltd.

Nihon Credit Lease Corporation

FMC Aviation Limited

Major Overseas Subsidiaries

Fuyo General Lease (USA) Inc. Fuyo General Lease (USA) inc., the Company’s wholly-owned subsidiary established

in September 1988, offers a variety of custom tailored leasing solutions, such as

Operating Lease and Sales and Lease Back, mainly to Japanese corporations

operating in the U.S.

The company opened a branch office in Los Angels in March 2006 in order to

further enhance service to customers operating in the West Coast.

NY Head office: 733 Third Avenue, 17th Floor, New York, NY 10017, U.S.A

TEL: +1-212-867-1008 FAX: +1-212-867-5153

LA office: 21250 Hawthorne Blvd., Suite 700, Torrance CA 90503, U.S.A

TEL: +1-310-792-7404 FAX: +1-310-792-7405

FGL Aircraft Ireland Limited FGL Aircraft Ireland Limited, the Company’s wholly-owned subsidiary established in

July 1999, functions as the operating base of the aircraft operating lease business. As

a servicer for Japanese Operating Lease (JOL) transactions, the company inspects

maintenance conditions of aircraft leased under the JOL structure and reports the

results to the lessor. The company also acts as a re-marketing agent.

AIB International Centre, IFSC, Dublin 1, Ireland

TEL: +353-(0) 1-829-1802 FAX: +353-(0) 1-670-1632

Fuyo General Lease (HK) Limited In January 2007, the Company converted Fuyo General Lease (HK) Limited, which

had been managed as an unstaffed unit for booking of a variety of financial services

mainly for Hong Kong based Japanese corporations, to a fully staffed unit.

With the start of sales and marketing operations, Fuyo General Lease (HK) Limited

will strive to improve the financial services offered mainly to Japanese corporations in

Hong Kong as well as strengthen its capability of gathering sales information in

Mainland China, Hong Kong and surrounding areas.

Room 1706, Admiralty Centre Tower II, 18 Harcourt Road, Admiralty, Hong Kong

TEL: +852-2528-9863 FAX: +852-2528-6183

For further information, please contact;Corporate Communications Div.E-mail: [email protected]: +81-3-5275-8891Fax: +81-3-5275-8950

Nichirei Bldg. 3-3-23, Misaki-cho, Chiyoda-ku, Tokyo 101-8380, Japan Tel: +81-3-5275-8800Fax: +81-3-5275-8870

www.fg l .co . jp

Printed in Japan

FUYO GENERAL LEASE CO., LTD.

annual report 2008 - fgl.co.jp · 25.06.2008 · annual report 2008 year ended march 31, 2008 fuyo...

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