Annual Report 2009 - fgl.co.jp · 6/24/2009 · in fiscal 2008, which translates into a total contraction of roughly 23% within the space of just two years. Despite this challenging

FUYO GENERAL LEASE CO., LTD.

Year Ended March 31, 2009

Annual Report2009

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

To Our Shareholders 2

Management Policies 5

Business Segments 8

Corporate Governance 14

Financial Statements 17

Management’s Discussion and Analysis 18

Risks in Business Operations 22

Consolidated Balance Sheets 24

Consolidated Statements of Income 26

Consolidated Statements of Changes in Net Assets 27

Consolidated Statements of Cash Flows 28

Notes to Consolidated Financial Statements 29

Report of Independent Auditors 40

Directory 41

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.

The content of this annual report is based on information available as of March 31, 2009 unless otherwise noted.

Fuyo General Lease Annual Report 2009 1

Thousands of Millions of yen U.S. dollars

2005 2006 2007 2008 2009 2009

For the Year:

Total revenues ¥364,286 ¥370,370 ¥391,546 ¥399,075 ¥ 372,310 $3,799,082

Operating income 15,281 17,458 16,617 16,172 15,990 163,163

Net income 10,878 13,582 12,287 12,077 9,996 102,000

At Year-End:

Total assets 927,461 954,357 1,010,961 1,276,122 1,693,792 17,283,592

Total net assets 47,986 64,062 74,874 81,429 98,012 1,000,123

Shareholders’ equity ratio 5.2% 6.7% 7.4% 6.4% 5.1% 5.1% Yen U.S. dollars

Per Share Data:

Net income ¥384.55 ¥448.43 ¥405.68 ¥398.75 ¥330.56 $3.37

Cash dividend (non-consolidated) 25.00 33.00 43.00 50.00 54.00 0.55

Note: • Throughout this report yen amounts are translated into U.S. dollar equivalents at the exchange rate of ¥98/USD in effect on March 31, 2009. • Shareholders’ equity ratio: (total net assets – minority interests – stock options) / total assets

Financial HighlightsFuyo General Lease Co., Ltd. and Consolidated SubsidiariesYears ended March 31, 2005, 2006, 2007, 2008 and 2009


400,000

500,000

300,000

200,000

100,000

005 06 07 08 09

(Millions of Yen)

20,000

25,000

15,000

10,000

5,000

005 06 07 08 09

(Millions of Yen) (%)

Total revenues

80,000 8

10100,000

60,000 6

40,000 4

20,000 2

0 005 06 07 08 09

(Millions of Yen)

Total net assets Shareholders’ equity ratio

2,000,000

2,500,000

1,500,000

1,000,000

500,000

005 06 07 08 09

(Millions of Yen)

Total assetsOperating incomeNet income

Operating income

Net income

Total net assets Shareholders’ equity ratio

We have further expanded our leasing business

despite an unprecedented deterioration in the

operating climate


Results for the year ended March 31, 2009 (fiscal 2009)

Full-year results came in ahead of November 2008

forecasts

We stepped up our emphasis on “customer first” sales

strategies in fiscal 2009 as financial market turmoil and a

decline in private-sector capital expenditure presented our

group with an increasingly difficult business climate, and

ended up booking sales revenues of ¥372.3 billion (down

¥26.8 billion or 6.7% from fiscal 2008), operating income of

¥16.0 billion (down ¥0.2 billion or 1.1%), and net income

of ¥10.0 billion (down ¥2.1 billion or 17.2%).

The “once in a century” economic crisis experienced during

fiscal 2009 unfortunately meant that earnings fell somewhat

short of our initial projections, but we are pleased to report

that our sales revenues and net income came in ahead of

our revised forecasts issued on November 5, 2008. Below,

we discuss some of the key factors that affected our group’s

earnings performance and look at our results for fiscal 2009.

To Our Shareholders

Downturn in capital expenditure

We have sought to create new demand by offering

Solution-Oriented Finance products

First, the leasing industry as a whole has been hard hit by

the economic crisis and its impact on capital expenditure.

According to data published by the Japan Leasing

Association, total lease transaction volume fell by 15.3% in

fiscal 2009 (April 2008 – March 2009) after a 9.1% decline

in fiscal 2008, which translates into a total contraction of

roughly 23% within the space of just two years.

Despite this challenging climate, on a parent-only basis we

boosted the total volume of new lease contracts by 13.4%

year on year in fiscal 2008 and 3.7% in the first half of fiscal

2009. This relatively strong performance primarily reflects

our increased emphasis on custom-made Solution-Oriented

Finance products that seek to better meet customers’ needs

by leveraging our know-how and experience in areas such as

leases, installment sales, loans, equity finance, and various

other aspects of financial services. Unfortunately however,

an escalating financial crisis and worsening economic

conditions in the second half of fiscal 2009 forced us to

become increasingly selective when executing new leases

and meant that full-year origination ended up declining from

fiscal 2008 on a parent-only basis.

On a parent-only basis, total new executed contracts

volume rose 10.6% from fiscal 2008 on the back of strong

origination up to and through the first half of fiscal 2009,

while consolidated volume increased 44.2% to ¥395.6

billion as a consequence of Sharp Finance Corporation

becoming a consolidated subsidiary in April 2008.

The leasing segment accounts for 73.3% of the group’s

consolidated operating assets and 83.8% of consolidated

sales revenue, and our ability to achieve such solid growth

in total new executed contracts volume during a time of

unprecedented crisis should be considered a reflection

of the strong ties that we have forged over the years

through a proven track record of offering customer-specific

leasing solutions. Recent M&A initiatives aligned with our

management strategy’s objectives have also played a

key role in the aforementioned expansion of our leasing

business.

Sharp downturn in the external environment

Our earnings have been hit by falling stock prices

and deteriorating economic and financial conditions

Second, credit costs have risen as deteriorating economic

conditions have forced an increasing number of firms

into bankruptcy. Fiscal 2009 saw a sharp increase in the

number of Japanese corporate bankruptcies, and this has

obviously had a major impact on the earnings of leasing

firms who offer a range of corporate financial services. On

a consolidated basis, our bottom line for the year ended

March 2009 was hit by a total of approximately ¥5.9 billion

in credit costs, including both doubtful account-related gains

and losses, included in extraordinary gains and losses, and

default-related costs that were counted in selling, general

and administrative expenses.

Third, while equity securities account for only a relatively

small proportion of our group’s total asset holdings, the

decline in stock prices over the course of fiscal 2009 was so

sharp as to result in valuation losses of approximately ¥2.3

billion in relation to our investment securities portfolio.

Fourth, financial market turmoil from September 2008

onward triggered a significant decline in commercial paper

(CP) issuance as fundraising costs soared and it became

increasingly difficult to attract investors. To ensure fundraising

stability, we also borrowed from banks, particularly to



augment cash on hand. This has brought about a gradual

increase in our total cost of funds, although we have been

able to offset this increase to a considerable extent by

charging higher lease fees.

Impact of new lease accounting standards

Changes to lease accounting standards have had an

adverse impact on sales

New lease accounting standards that took effect in April

2008 required that certain securitized lease receivables be

moved off the company’s balance sheet, which meant that

sales revenues generated by these assets could no longer

be counted. Sales revenue actually increased in fiscal 2009

when measured under the previous standards, but ended

up declining year on year under the new standards.

This change in accounting standards also generated

extraordinary gains totaling around ¥2.1 billion, but these

gains had relatively little impact on our bottom line after

being offset by investment securities valuation losses

reported in extraordinary losses.

Forecasts for fiscal 2010

We view recent changes as opportunities and will

further strengthen our corporate foundation

Fiscal 2010 is the second year of our current three-

year management plan. In April 2009, we revised our

management targets and certain other aspects of this plan

to reflect the dramatic changes in economic and business

conditions that have been observed since September 2008,

but our basic policies and objectives remain fundamentally

unchanged, and we will therefore continue our efforts to

develop the corporate resilience that is needed to survive

and thrive in such a volatile and turbulent climate.

For fiscal 2010, we forecast (consolidated) revenues of

¥380 billion (up 2.1% from fiscal 2009), operating income

of ¥15 billion (down 6.2%), and net income of ¥8 billion

(down 20.0%). We believe that we should be able to

maintain our current level of sales despite the uncertainty

associated with a gloomy economic outlook. We do not

expect to see a repeat of the aforementioned extraordinary

gains and losses attributable to changes in lease accounting

standards and valuation losses on investment securities, and

our forecasts also reflect relatively conservative assumptions

regarding credit and fundraising costs given that a return to

economic and financial normality still appears to be quite

some time away.

Our goal is to maintain a stable dividend in the long term by

weighing the need to preserve an adequate level of capital

against our desire to reward our shareholders for their

continued support. With this objective in mind, we will pay

a total annual dividend of ¥54 per share for fiscal 2009. We

plan to also pay a total annual dividend of ¥54 per share for

fiscal 2010.

Allow me to conclude by once again expressing our sincere

gratitude to each and every one of our shareholders for their

role in supporting the Fuyo General Lease group.

Mitsuru Machida,

President & Chief Executive Officer

Basic Management Policies of the Company

Guided by the management philosophy described below,

our group works to raise its corporate value and boost

earnings power by building a stable operating base and

sound financial position, and promoting greater 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

Medium-term Management Plan for Fiscal Years 2009

to 2011

Our group’s medium-term management plan

covering fiscal 2009 through fiscal 2011 lists the

following management objectives and management

policies.

Management Objectives

A strong leasing company, generating the best service

for its customers

• Strong sales capability

• Strong administrative capability

• Strong financial structure

• Strong human resources

Management Policies

• Strengthen Group management capabilities to build

a corporate foundation that surmounts changes in the

business environment

• 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

Targeted Performance Indicators

Given the recent economic upheaval and various changes

in the Company’s business environment, the Company has

partially revised measures and management goals laid out

in its medium-term management plan for fiscal years 2009

to 2011. Target figures for the final fiscal year of the plan,

ending March 31, 2011, and actual results for the fiscal year

ended March 31, 2009 are as follows.

Management Policies

Consolidatedaccountitem Fiscal2011Targets Fiscal2009Actual

Operatingassets ¥1,530.0billion ¥1,423.5billion

Shareholders’equity1 ¥105.0billionorhigher ¥87.2billion

Shareholders’equityratio2 6.2%orhigher 5.1%

ROA(ordinaryincome3/totalassets) 1.2%orhigher 1.0%

1.Consolidatedshareholders’equity=commonstock+capitalsurplus+retainedearnings-treasurystock 2.Consolidatedshareholders’equityratio=(totalnetassets–minorityinterests–stockoptions)/totalassets 3.Ordinaryincome=Incomebeforeextraordinaryitems=¥17.4billioninfiscal2009 ROAcalculatedonassumptionthatSharpFinanceCorporationwasincludedatthebeginningoftheyear.



Company Medium-term Management Strategies and

Pressing Issues

i) Enhance Our Operating Base

Restructure the operating base and create products

adapted to lease accounting standard changes

In addition to bolstering PC rentals and other operating

leases, we will work to expand products and services that

dovetail with client needs, such as proposing ways to use

operating leases for IT equipment and data supply services

based on Web systems that are in line with the new lease

accounting standards.

Moreover, we will further improve efficiency at the Tachikawa

Reuse Center run by Fuyo Lease Sales Co., Ltd., and boost

profitability through the sale of used equipment arising from

expired lease terms.

Strengthen business with small and medium-sized

companies

We will intensify sales to the retail market through

collaboration with Sharp Finance Corporation, and further

strengthen business with Mizuho Bank’s corporate clients

and other small and medium-sized companies in good

standing.

Strengthen specialized business divisions and promote

greater cooperation with branch offices

We will ramp up efforts in high-growth markets with high

equipment investment needs, and aggressively implement

such initiatives as promoting solutions-based proposals

adapted to market changes, so as to leverage the expertise

of specialized business divisions and the networks of branch

offices.

We will also make an effort to strengthen cooperation

with channels in the Mizuho market, and more effectively

implement measures for enhancing our operating base.

Strengthen real estate lease

We will further strengthen real estate leases, one of our

strategic products, while developing new business schemes.

With regard to financing operations, we will strive to promote

sustainable business with a focus on high quality deals.

Enlarge business domains by developing and bolstering

products and services

We will bolster our fee businesses and foster greater

cooperation with consolidated subsidiaries within and

outside Japan, including Fuyo Auto Lease and Sharp Finance

Corporation, with the aim of boosting consolidated earnings.

We also intend to expand the Group’s business domains

through ongoing efforts to develop new products and enter

new business areas, as well as through M&As.

ii) Reinforce Low-cost Operations

We will work to expand funding channels to secure stable

financing and achieve competitive funding yields on a

consolidated basis, while enhancing and reinforcing asset-

liability management (ALM) to optimize our funding

structure.

We will continue to streamline and lower costs associated

with sales-office clerical work and promote paperless

operations. We will improve each management

department’s efficiency as the Group expands and business

with small and medium-sized companies grows stronger.

iii) Upgrade Risk Management

To prevent and minimize loss stemming from increased

credit risks that cause business performance to suffer, we

will continue to strengthen our risk management system by

further enhancing credit risk management on a consolidated-

group basis and implementing other measures to respond to

various risks caused by changes in the business environment

in a timely and appropriate manner.

iv) Enhance and Strengthen Management Base

In addition to ensuring reliable financial reporting through

an enhanced internal control system that complies with

the Financial Instruments and Exchange Law, we will work

to reinforce our internal control structure through precise

conformance to the new standards, enhanced budgetary

control, and stricter compliance.

With the aim of building the environmental management

structure that will allow us to contribute to a better society,

we will develop strong human resources who will support

the Group’s business and further enhance and strengthen

our management base.


Business Segments

Lease

Finance 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. Operating leases also offer 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


403020100 50(%)

Share of Contract Volume by Type of Leased Equipment (Fiscal 2009)

Others

IT & Office Equipment

Civil Engineering &Construction Machinery

Transportation Equipment

Industrial Machinery

Medical Devices

Commercial / ServiceEquipment

Fuyo

JLA

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)).

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

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


(100 million yen)

Total New Contract Volume by Year (Non-consolidated)

4,000

3,000

2,000

1,000

02005 2006 2007 2008 2009

Leasing/Rental Installment sales

3,1673,280 3,370

3,522

3,130

430508 729

528

415

2,737 2,7722,641

2,994

2,715

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.

Sales Promotion Leases

Fuyo 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 Leases

Building 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 cost of

business operations. In addition, customers enjoy the benefit

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


(100 million yen)

Real Estate Leases

400

300

200

100

02005 2006 2007 2008 2009

200

302325

393

338

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

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.

Rental

PC 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 Sales

Installment 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.

Financing

Real Estate Financing

For customers considering securitization, acquisition, and

development of real estate, 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.

Solutions

ESCO 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 leverage 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, make business

operations profitable in a short period of time, and offload

assets from the balance sheet.

Investment

Aircraft 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 a 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 Insurance

Life 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 Property

Data 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 Services

FLOW—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 and enable them to look up any of

their own asset data that they previously registered with the

service. This information is available free of charge through

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

inventory ledgers.


Corporate Governance

Basic Policy Regarding Corporate Governance

We place 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 medium-

term management plan covering the three years from

the year ending March 2009 (fiscal 2009) through the

year ending March 2011 (fiscal 2011). Our approach to

corporate governance has always followed this belief.

Execution of Business, Auditing and Oversight,

Nomination, Determination of Compensation, and

Other Matters

Our 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 nine 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

We maintain a Board of Corporate Auditors composed of

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

full-time auditors). Three of the five auditors are 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 listening to 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,

fulltime 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 2009, the Executive Committee convened 22

times. It deliberated on the details of management plans,

determined methods for evaluating sales departments,

offices, and branch offices, and reported regularly on

the status of management, 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 meets quarterly and deliberates

on and discusses issues in the aim of improving our

compliance systems and spearheading annual compliance-

related plans. 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 2009, the Compliance Committee worked to ensure

full compliance with the Fuyo General Lease Corporate

Code of Conduct, set up an external hotline for internal

whistleblowers in accordance with the Whistleblower

Protection Law, and incorporated provisions against anti-

social forces (e.g., organized crime) into lease contracts

and other documents. The Committee also 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

Comptroller’s Division, composed of eight members of staff.

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.

Internal Control over Financial Reporting

In fiscal 2009, we implemented a system for internal control

over financial reporting that is compliant with the internal

control reporting requirements introduced by the Financial

Instruments and Exchange Law (J-SOX requirements). After

evaluating the system accordingly, we determined that our

group had established effective internal control over financial

reporting.

Board of Corporate Auditors 5 Corporate Auditors

(including 3 outside auditors)

Board of Directors 9 Directors (including 1 outside director)

Executive Committee 10 Executive Officers with Line Responsibility

(of who, 7 concurrently serve as directors)Compliance CommitteeComptroller’s Division

General Meeting of Shareholders

Each of the Departments, Offices, Branch Offices

Oversees Execution of Business

ControlInternal Audit Execution and Advocacy of Programs

Reporting

Approval

Planning andReporting Programs

Board of Corporate Auditors 5 Corporate Auditors(including 3 outside auditors)

FinancialStatements

Year Ended March 31, 2009


Business Overview

During the fiscal year ended March 31, 2009, the Japanese

economy deteriorated rapidly as the global financial crisis

that began in the US intensified in the fiscal second half,

spurring stock price declines, a sharp appreciation of the yen,

and a drop in exports and production that drove corporate

earnings sharply lower.

The harsh business environment persisted in the leasing

industry, which was hurt by the financial market turmoil,

lower private-sector capital expenditures, and an increase

in corporate bankruptcies. According to statistics released

by the Japan Leasing Association, lease transaction volume

declined for yet another year.

Consolidated earnings

Consolidated operating results reflected the addition of new

consolidated subsidiary Sharp Finance Corporation and a

change in the accounting method for the securitization of

lease receivables in line with the adoption of the new lease

accounting standards. Consolidated total new executed

contracts volume in the fiscal year ended March 31,

2009, was up 10.8% year on year to ¥547,191 million,

and consolidated operating assets (after subtracting the

deferred profit on installment sales) at March 31, 2009,

were up ¥257,144 million, or 22.0%, from a year earlier to

¥1,423,473 million.

Consolidated total revenues decreased 6.7% to ¥372,310

million, consolidated operating income dipped 1.1% to

¥15,990 million, and consolidated net income decreased

17.2% to ¥9,996 million. With the adoption of the new

lease accounting standards, an extraordinary gain of ¥2,076

million was posted to reflect sale transactions arising from

the securitization of lease receivables and investment assets

at the beginning of the fiscal year, but it was more than

offset by an extraordinary loss of ¥2,270 million stemming

from devaluation of marketable and investment securities in

line with a significant drop in stock prices.

Segment information

Our business has four segments: leases, installment sales,

loans, and other business. Revenues for each segment

are those from customers, and operating income for each

segment is operating income before elimination and

corporate.

Lease

In the lease segment, total new executed contracts volume

increased 44.2% compared with the previous fiscal year to

¥395,623 million, and operating assets increased 52.8%

from the end of the previous fiscal year to ¥1,043,556

million. As a result, segment revenues increased 0.7% to

¥312,029 million, and operating income increased 28.7%

to ¥18,247 million.

Installment sales

In the installment sales segment, total new executed

contracts volume decreased 39.4% compared with the

previous fiscal year to ¥40,907 million, and operating assets

MANAGEMENT’S DISCUSSION AND ANALYSIS


decreased 23.0% from the end of the previous fiscal year

to ¥82,431 million. As a result, segment revenues declined

40.6% compared with the previous fiscal year to ¥43,252

million, and operating income fell 21.5% to ¥1,231 million.

Loans

In the loans segment, total new executed contracts volume

decreased 26.2% compared with the previous fiscal year to

¥109,053 million, and operating assets decreased 21.2%

from the end of the previous fiscal year to ¥291,987 million.

As a result, segment revenues fell 21.6% compared with the

previous fiscal year to ¥9,490 million, and operating income

declined 71.2% to ¥1,737 million.

Other

In the “other” segment, total new executed contracts

volume decreased 61.7% compared with the previous fiscal

year to ¥1,607 million, and operating assets dipped 0.4%

from the end of the previous fiscal year to ¥5,498 million.

Nevertheless, segment revenues rose 72.1% compared

with the previous fiscal year to ¥7,539 million and operating

income grew 111.7% to ¥2,942 million.

Financial Position

Assets, liabilities and net assets

Operating assets at March 31, 2009, were up 22.0%

from the end of last fiscal year (March 31, 2008) to

¥1,423,473 million due to the impact of the addition of a

consolidated subsidiary and the adoption of the new lease

accounting standards, while total assets increased 32.7% to

¥1,693,792 million. Interest-bearing debt increased 34.3%

to ¥1,486,361 million, reflecting an increase in operating

assets.

As a result, net assets at March 31, 2009, were up ¥16,583

million, or 20.4%, from the end of last fiscal year (March

31, 2008) to ¥98,012 million. Total shareholders’ equity

increased 10.4% to ¥87,153 million due to the retention of

earnings, and minority interests totaled ¥11,684 million as a

result of making Sharp Finance Corporation a consolidated

subsidiary.

In accordance with the change in the accounting method for

the securitization of lease receivables due to the adoption of

the new lease accounting standards, some payables under

securitized (long-term) lease receivables that satisfy certain

requirements are accounted for off the balance sheet.

Payables under securitized (long-term) lease receivables

were previously recorded as interest-bearing debts. Due to

this change, total assets decreased ¥79,633 million at the

beginning of the fiscal year.

Cash Flows

Cash and cash equivalents at the end of fiscal 2009 were

¥97,373 million, an increase of ¥89,538 million from a year

earlier. The breakdown of cash flows is as follows.

Cash flows from operating activities

Operating activities used net cash of ¥69,911 million,

compared with ¥58,103 million in the previous fiscal year.


Despite income before income taxes of ¥17,656 million

and a decrease of ¥60,758 million in operating loans, the

net outflow mainly reflects ¥51,199 million used for the

purchase of leased assets and a ¥55,094 million decrease

in mortgage securities under repurchase agreements.

Cash flows from investing activities

Investing activities used net cash of ¥31,994 million,

compared with cash provided by investing activities of

¥26,163 million in the previous fiscal year. Outflows

included ¥3,572 million in purchases of marketable and

investment securities and ¥28,512 million for the purchase

of a subsidiary that was newly included in the scope of

consolidation.

Cash flows from financing activities

Financing activities provided net cash of ¥191,833 million,

compared with ¥35,461 million in the previous fiscal

year. Outflows included a ¥15,500 million net decrease in

commercial paper, ¥137,036 million in repayments of long-

term loans from banks and other financial institutions, and

¥12,315 million in repayments of payables under fluidity

lease receivables and installment sales trade receivables.

Cash was mainly provided by a ¥93,778 million net increase

in short-term borrowings, ¥146,758 million in proceeds from

long-term loans from banks and other financial institutions,

a ¥30,900 million net increase in payables under securitized

lease receivables, and ¥91,152 million in proceeds from

payables under fluidity lease receivables and installment

sales trade receivables.

Basic policy on the distribution of earnings and fiscal

2009 and 2010 dividends

The Group’s basic policy is to increase shareholders’ equity

to create a resilient management base and a stronger

financial position, while returning profits to shareholders

through continuous payment of a stable dividend over

the long term, taking into consideration operating results,

targeted performance indicators, and other factors.

Going forward, the Group will use retained earnings to

fund the acquisition of quality operating assets and in other

ways to strengthen its management base. While adhering

to the aforementioned policy, the Group is determined to

look positively at distributing earnings in accordance with

operating results, so as to reward shareholders for their

support and to meet their expectations.

In accordance with the above policy, the Company has

declared a year-end dividend of ¥27 per share in line with

its forecast. The Company thus plans to pay an annual

dividend, including the interim dividend, of ¥54 per share,

up ¥4 from the previous fiscal year. The company plans to

pay a total annual dividend for the next fiscal year of ¥54

per share (interim dividend of ¥27 and year-end dividend of

¥27 per share).

Outlook for fiscal 2010

Looking ahead, we anticipate that the Japanese economy

will remain sluggish for some time, and we expect the

leasing industry’s outlook to remain murky amid the severe


operating environment.

Amid such circumstances, we have steadily implemented

measures laid out in our three-year medium-term

management plan for fiscal years 2009 to 2011, which was

partly revised in response to changes in the Group’s

operating environment. We remain fully committed to

building a corporate foundation that allows us to thrive amid

changes in the business environment.

For fiscal 2010, we expect consolidated revenues of

¥380,000 million, an increase of 2.1% compared with fiscal

2009; consolidated operating income of ¥15,000 million,

down 6.2%; and consolidated net income of ¥8,000

million, down 20.0%. The lower income forecasts are due

to the non-recurrence of the extraordinary gain recorded

in fiscal 2009 stemming from the adoption of the new

lease accounting standards, a rise in financing cost, and

conservative projections with regard to bad debt-related

expenses.


i) Impact of Capital Expenditure Trends and Other

Changes on Business Results

Lease transactions and installment sales, which are

the businesses of the Group, are two means by which

customers finance capital expenditures. While there are

temporary discrepancies, the amount of private-sector

capital expenditure and lease capital expenditure are closely

correlated. The Group is focusing on expanding its operating

foundation and increasing contracts by making various

proposals mindful of customer diversity and latent needs.

Nevertheless, the Group’s business results could be affected

by trends in corporate capital expenditures.

ii) Impact of Credit Risk on Business Results

The Group works to maintain and improve the quality of

its assets by strictly managing credit risk to minimize losses

caused by counterparty bankruptcy and other occurrences.

However, credit is extended to counterparties over the

medium to long term, with lease agreements averaging

around five years. Therefore, bankruptcy of counterparties

during the credit period could make it difficult to collect

lease rent and other money associated with some assets

that are subject to credit risk.

The Group quantitatively evaluates credit risk and provides

adequate reserves in each fiscal period. For this, the Group

conducts self-assessments of its assets in accordance with

standards applied by banks and other financial institutions

and based on Industry Audit Committee Report No. 19,

“Temporary Treatment for Accounting and Auditing of

Application of the Accounting Standards for Financial

Instruments in the Leasing Industry,” issued by the Japanese

Institute of Certified Public Accountants (JICPA).

In accordance with this self-assessment, the group calculates

allowances for doubtful accounts. The Group sets aside a

general allowance for estimated losses based on past bad

debt experience as well as specific allowances calculated

based on the ability to collect individual accounts. The

entire of the combined total of the general allowance and

specific allowances is recorded in the allowance for doubtful

accounts.

However, an increase in the risk of collection due to

deterioration in counterparties’ business as a result of

the economic environment and future changes or other

developments could necessitate the provision of additional

allowances for doubtful accounts to counter the increase in

credit risk. This could adversely affect the Group’s business

results.

iii) Impact of Changes in Interest Rates and Financing

on Business Results

The Group procures the funds to purchase properties

for leasing or installment sales to customers mainly from

financial institutions and markets, and therefore business

results could be affected by future interest-rate fluctuations.

RISKS IN BUSINESS OPERATIONS


Because of its sound financial standing, the Company has

obtained good ratings from multiple credit rating agencies.

However, if a rating agency downgrades the Company’s

rating or announces it is considering a downgrade due

to deterioration in the Company’s finances or other

factors, it would be difficult for the Company to procure

necessary funds because access to commercial paper and

other preferred financing methods would be limited. The

Company would also be forced to borrow from banks at

higher interest rates than would normally apply. Ultimately,

this could adversely affect the Company’s business results.

The Company watches interest rate movements and strives

to manage such risks appropriately by constantly monitoring

the gap between asset management and financing,

controlling risk associated with interest rate fluctuations

(market risk), and holding Asset-Liability Management

Committee meetings, where policies on future funding

activities are discussed.

iv) Competition in the Leasing Industry

There has been a decline in recent years in the number

of companies engaged in leasing operations as industry

restructuring has progressed. Nevertheless, there are still

265 member companies of the Japan Leasing Association

(as of April 1, 2009), making for a harsh competitive

environment in the leasing industry in Japan.

The Company works to improve its price-based

competitiveness through stable, low-interest financing and

optimal financing patterns, with a focus on “securing strong

financing.” Concurrently, the Company is focusing on value-

added services that contribute to greater convenience for

customers. Through these actions, the Company is working

to set itself apart from other companies and to enhance its

competitiveness. However, intensification in competition

could have an adverse effect on the Company’s business

results.

v) Impact of Changes in Regulatory Systems on

Business Results

The Group operates businesses that are subject to laws,

tax regulations, accounting standards, and other regulatory

systems currently in effect. The Group’s business results

could be affected by significant changes in these systems.

vi) Other Business Risks

A number of other business risks could also affect the

Group’s business results. Without limitation, these include

administrative risk from inadequate business processing;

systems risk such as the breakdown or malfunction of

computer systems used extensively in executing business

operations; and residual value risk, the risk that the initially

estimated residual value of a leased asset is lower than

expected for whatever reason.


CONSOLIDATED BALANCE SHEETSFuyo General Lease Co.,Ltd. and Consolidated SubsidiariesMarch 31, 2009 and 2008

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

Assets 2009 2008 2009

Current Assets: Cash and cash equivalents ¥ 97,419 ¥ 7,834 $ 994,072 Marketable securities (Note 2) 5,539 939 56,520 Trade receivables (Note 3):

Installment sales 84,757 110,114 864,868 Loans 290,433 366,922 2,963,602 Lease 975,213 13,558 9,951,153 Other 20,580 2,769 210,000 Allowance for doubtful receivables (11,924) (8,062) (121,673) Deferred tax assets (Note 5) 3,796 2,387 38,734 Other 48,437 14,658 494,255Total current assets 1,514,250 511,119 15,451,531

Investments and Other Assets: Investment in securities (Notes 2 and 3)

Unconsolidated subsidiaries and affiliates 5,039 4,606 51,418 Other investment in securities 27,669 29,613 282,337 Long-term receivables 20,748 3,336 211,714 Other investments 40,379 36,940 412,031 Deferred tax assets (Note 5) 1,644 270 16,776 Allowance for doubtful receivables (886) (58) (9,041)Total investments and other assets 94,593 74,707 965,235

Property and Equipment, at Cost Less Accumulated Depreciation: Leased assets 69,200 624,554 706,122 Advances on purchases of property and equipment for lease 99 5,319 1,010 Own-used assets 1,125 728 11,480Total property and equipment 70,424 630,601 718,612

Intangible Fixed Assets:

Computer program leased to customers 4,497 58,601 45,888 Goodwill 8,365 — 85,357 Other 1,663 1,094 16,969Total intangible fixed assets 14,525 59,695 148,214

Total Assets ¥1,693,792 ¥1,276,122 $17,283,592

See accompanying notes to the consolidated financial statements.



Liabilities and Net Assets 2009 2008 2009

Current Liabilities: Short-term borrowings (Note 3) ¥ 803,267 ¥ 725,082 $ 8,196,602 Current portion of long-term debt (Note 3) 142,007 161,666 1,449,051 Lease obligations 269,146 — 2,746,388 Notes and accounts payable-trade 47,691 37,297 486,643 Income taxes payable 2,228 2,634 22,735 Advances received from customers 4,885 3,456 49,847 Deferred profit on installment sales 2,326 3,035 23,734 Other 14,202 7,031 144,918Total current liabilities 1,285,752 940,201 13,119,918

Long-Term Liabilities: Long-term debt (Note 3) 271,673 220,148 2,772,173 Deferred tax liabilities (Note 5) 553 1,284 5,643 Accrued retirement benefits (Note 6) 1,322 1,073 13,490 Guarantee deposits from customers 29,296 24,950 298,939 Negative goodwill — 3,109 — Other 7,184 3,928 73,306Total long-term liabilities 310,028 254,492 3,163,551Total liabilities 1,595,780 1,194,693 16,283,469

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 2009 and 2008 10,532 10,532 107,469 Capital surplus 10,417 10,417 106,296 Retained earnings 66,413 57,992 677,684 Less, treasury stock, at cost - 120,951 shares in 2009 and 601 shares in 2008 (209) (2) (2,133)Total shareholders’ equity 87,153 78,939 889,316

Valuation, Translation Adjustments and Others: Net unrealized gain on available-for-sale securities 340 2,676 3,469 Deferred losses on hedges (296) (158) (3,020) Foreign currency translation adjustments (962) (80) (9,816)Total valuation, translation adjustments and others (918) 2,438 (9,367)

Subscription Rights to Shares 93 — 949

Minority Interests 11,684 52 119,225Total net assets 98,012 81,429 1,000,123

Total Liabilities and Net Assets ¥1,693,792 ¥1,276,122 $17,283,592




2009 2008 2009

Revenues: Lease ¥312,029 ¥309,750 $3,183,969 Installment sales 43,252 72,840 441,347 Loans 9,490 12,104 96,837 Other 7,539 4,381 76,929Total revenues 372,310 399,075 3,799,082

Costs: Lease 270,916 284,253 2,764,449 Installment sales 40,869 69,846 417,031 Interest expenses 12,566 11,566 128,224 Other 2,664 2,461 27,184Total costs 327,015 368,126 3,336,888Gross Profit 45,295 30,949 462,194

Selling, general and administrative expenses 29,305 14,777 299,031Operating Income 15,990 16,172 163,163

Other Income (Expenses) Interest and dividend income 719 425 7,337 Interest expenses (729) (295) (7,439) Equity in earnings of affiliates 439 755 4,479 Amortization of negative goodwill 779 777 7,949 Gain on transfer of receivables 160 186 1,633 Bad debt recovered 432 210 4,408 Reversal of allowance for doubtful receivables — 487 — Reversal of allowance for loss on guarantees — 966 — Gain on sale of marketable and investment securities 5 — 51 Loss on sale of marketable and investment securities (26) — (265) Loss on devaluation of marketable and investment securities (2,270) (340) (23,163) Gain on adjustment for changes of accounting standard for lease transactions 2,076 — 21,184 Other, net 81 57 826Income before Income Taxes and Minority Interests 17,656 19,400 180,163

Income Taxes (Note 5)

Current 7,015 7,015 71,581 Deferred (584) 302 (5,959)Total 6,431 7,317 65,622Minority Interests 1,229 6 12,541

Net Income ¥ 9,996 ¥ 12,077 $ 102,000


CONSOLIDATED STATEMENTS Of INCOMEFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2009 and 2008


CONSOLIDATED STATEMENTS Of CHANGES IN NET ASSETSFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2009 and 2008

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

2009 2008 2009 2008 2009

Common Stock: Balance at beginning of year 30,287,810 30,287,810 ¥10,532 ¥10,532 $107,469 Balance at end of year 30,287,810 30,287,810 10,532 10,532 107,469

Capital Surplus: Balance at beginning of year 10,417 10,417 106,296 Balance at end of year 10,417 10,417 106,296

Retained Earnings: Balance at beginning of year 57,992 47,372 591,755 Net income 9,996 12,077 102,000 Cash dividends (1,575) (1,454) (16,071) Net decrease resulting from changes in the scope of consolidation — (3) — Balance at end of year 66,413 57,992 677,684

Net Unrealized Gains on Available-For-Sale Securities: Balance at beginning of year 2,676 6,442 27,306 Net change during year (2,336) (3,766) (23,837) Balance at end of year 340 2,676 3,469

Deferred Losses on Hedges: Balance at beginning of year (158) (14) (1,612) Net change during year (138) (144) (1,408) Balance at end of year (296) (158) (3,020)

Foreign Currency Translation Adjustment: Balance at beginning of year (80) 88 (816) Net change during year (882) (168) (9,000) Balance at end of year (962) (80) (9,816)

Subscription Rights to Shares: Balance at beginning of year — — — Net change during year 93 — 949 Balance at end of year 93 — 949

Minority Interests: Balance at beginning of year 52 38 531 Net change during year 11,632 14 118,694 Balance at end of year 11,684 52 119,225

Treasury Stock: Balance at beginning of year (601) (350) (2) (1) (21) Treasury stock acquired, net (120,350) (251) (207) (1) (2,112)

Balance at end of year (120,951) (601) ¥ (209) ¥ (2) $ (2,133)




2009 2008 2009

Cash Flows from Operating Activities: Income before income taxes and minority interests ¥ 17,656 ¥ 19,400 $ 180,163 Adjustments for:

Depreciation and amortization 14,832 239,333 151,347 Increase (decrease) in allowance for doubtful receivables 2,771 (1,477) 28,276 Interest and dividend income (719) (425) (7,337) Interest expenses 13,295 11,861 135,663 Loss on sales of marketable and investment securities, net 21 — 214 Loss on devaluation of marketable and investment securities 2,270 340 23,163 Equity in earnings of affiliates (439) (755) (4,479) Amortization of goodwill and negative goodwill 410 (777) 4,184 Decease (increase) in trade receivables 100,316 (17,028) 1,023,633 Increase in investments in leases — (265,045) — Purchase of leased assets (51,199) — (522,439) Decease (increase) in trade payables (71,785) 1,657 (732,500) Decease in mortgage securities under repurchase agreement (55,094) (23,550) (562,184) Other, net (18,538) 101 (189,163)Subtotal (46,203) (36,365) (471,459) Interest and dividend income received 690 412 7,041 Interest expenses paid (13,732) (12,194) (140,123) Income taxes paid (10,666) (9,956) (108,837)Net cash used in operating activities (69,911) (58,103) (713,378)Cash Flows from Investing Activities: Proceeds from sales and redemption of marketable and investment securities 2,142 663 21,857 Payments for purchase of marketable and investment securities (3,572) (7,573) (36,449) Proceeds from purchase of a subsidiary which is newly included in the scope of consolidation — 36,580 — Payments for purchase of a subsidiary which newly included in the scope of consolidation (28,512) — (290,939) Payments for purchase of property and equipment for own use (1,113) (683) (11,357) Other, net (939) (2,824) (9,581)Net cash used in (provided by) investing activities (31,994) 26,163 (326,469)Cash Flows from Financing Activities: Increase in short-term borrowings, net 109,179 66,308 1,114,071 Proceeds from long-term debt 237,911 144,451 2,427,663 Repayments of long-term debt (149,352) (173,843) (1,524,000) Cash dividends paid (1,576) (1,453) (16,082) Other, net (4,329) (2) (44,173)Net cash provided by financing activities 191,833 35,461 1,957,479Effect of Exchange Rate Changes on Cash and Cash Equivalents (319) (56) (3,255) Net increase in cash and cash equivalents 89,609 3,465 914,377 Cash and cash equivalents at beginning of year 7,834 4,370 79,939 Net decrease resulting from changes in scope of consolidation (70) (1) (714)Cash and Cash Equivalents at End of Year ¥ 97,373 ¥ 7,834 $ 993,602


CONSOLIDATED STATEMENTS Of CASH fLOwSFuyo General Lease Co.,Ltd. and SubsidiariesYears Ended March 31, 2009 and 2008


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 Japanese yen at the exchange rate of ¥98 to US$1.00, in effect at March 31, 2009, 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, 2009 and 2008, consolidated accounting covered the parent company and 25 and 28 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) will be amortized (accumulated) using the straight-line method over 20 years or less, except for immaterial amounts.

(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 foreign currency translation adjustments account 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 AccountingRevenue and cost of finance leases are recognized when each lease payment becomes due.

Revenue from operating leases is based on the monthly amounts of lease payments due under lease agreements over the lease agreement periods. The monthly lease payments corresponding to each period are allocated to revenue from operating leases for that period.

(6) Installment SalesRevenue and cost of installment sales are recognized when 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 by using moving-average cost method.


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 assets leased under finance leases which do not involve title transfer is computed by the straight-line method based on the lease term of the respective assets and assuming a residual value of zero.

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 24 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 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.

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.

(Additional Information)Effective on June 25, 2008, the Company terminated its retirement benefit plan for directors and corporate auditors. The outstanding balance of retirement allowance for directors and corporate auditors of ¥440 million at the time of the abolishment is included in “Other” in current and long-term liabilities in the consolidated balance sheet.

(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 differentials 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 dividing earnings attributable to common stock by a weighted average number of common stock outstanding over the fiscal year under review.


(14) Accounting ChangesAdoption of Accounting Standard for Lease TransactionsThe Company and its domestic consolidated subsidiaries previously employed lease-accounting treatment for non-title-transfer finance lease transactions. Effective the fiscal year ended March 31, 2009, the Company and its domestic consolidated subsidiaries adopted the “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13, June 17, 1993 (1st Committee of the Business Accounting Council); revised on March 30, 2007) and its accompanying “Guidance on Accounting Standard for Lease Transactions” (ASBJ Statement Guidance No. 16 (Accounting System Committee of the Japanese Institute of Certified Public Accountants); revised on March 30, 2007). Accordingly, lease transactions are now treated as ordinary sales/purchase transactions.

The book carrying values (less accumulated depreciation) of assets leased under non-title-transfer finance lease agreements entered into before the fiscal year of adoption (i.e., before April 1, 2009) ,at the end of the fiscal year preceding the accounting standard’s adoption (i.e., as of March 31, 2008) were recorded as lease investment assets from April 1, 2009.

Interest on the said lease investment assets is allocated over the portion of the lease term remaining after the accounting standard’s adoption (April 1, 2009) using the straight-line method.

2. MARkETABLE SECURITIES AND INVESTMENT IN SECURITIESMarketable securities and investment in securities as of March 31, 2009 and 2008 consisted of the following:


2009 2008 2009

Current: Bonds ¥ 2,740 ¥ 939 $ 27,959 Other 2,799 — 28,561 ¥ 5,539 ¥ 939 $ 56,520

Non-Current: Shares ¥20,276 ¥20,268 $206,898 Bonds 1,979 4,212 20,194 Other 5,414 5,133 55,245 ¥27,669 ¥29,613 $282,337

The carrying amounts and aggregate fair value of securities with determinable market values at March 31, 2009 and 2008 are as follows:

March 31, 2009 Cost or Unrealized Unrealized book value gains losses Fair value Millions of yen

Available-For-Sale Securities: Shares ¥13,369 ¥1,773 ¥1,075 ¥14,067 Bonds 4,789 0 210 4,579 Other 2,092 6 29 2,069

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, 2009 Cost or Unrealized Unrealized book value gains losses Fair value

Thousands of U.S. dollarsAvailable-For-Sale Securities: Shares $136,418 $18,092 $10,969 $143,541 Bonds 48,867 0 2,143 46,724 Other 21,347 61 296 21,112


Available-for-sale securities whose fair value is not readily determinable as of March 31, 2009 and 2008 are as follows:

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

2009 2008 2009

Available-For-Sale Securities: Shares ¥6,208 ¥7,145 $63,347 Bonds 140 180 1,429 Other 6,145 3,440 62,704

Proceeds from sales of available-for-sale securities and resultant gross realized gains and losses for the years ended March 31, 2009 and 2008 are summarized as follows:

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

2009 2008 2009

Proceeds ¥33 ¥501 $337 Realized gain 5 0 51 Realized loss 26 0 265

The following is a summary of the contractual maturities of debt securities classified as available-for-sale securities as of March 31, 2009.


Due within one year ¥1,071 $10,929 Due after one to five years 5,299 54,071 Due after five to ten years 3,908 39,878 Due after ten years 623 6,357

3. SHORT-TERM BORROwINGS AND LONG-TERM DEBT AND PLEDGED ASSETSThe breakdown of short-term borrowings as of March 31, 2009 and 2008 is respectively as follows:

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

2009 2008 2009

Short-term loans from banks and other financial institutions ¥ 362,292 ¥244,413 $ 3,696,857 1.09%Commercial paper 309,100 324,600 3,154,082 1.07%Payables under securitized lease receivables 82,600 51,700 842,857 1.34%Mortgage securities under repurchase agreement 49,275 104,369 502,806 0.95%Total 803,267 725,082 8,196,602 —Lease obligations 269,146 — 2,746,388 — ¥1,072,413 ¥725,082 $10,942,990 —

The breakdown of long-term debt as of March 31, 2009 and 2008 is respectively as follows:

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

2009 2008 2009

Long-term loans from banks and other financial institutions ¥323,683 ¥285,814 $3,302,888 1.17%Payables under securitized long-term lease receivables and installment sales trade receivables 89,997 96,000 918,336 1.62%Total 413,680 381,814 4,221,224 —Less current portion 142,007 161,666 1,449,051 — 271,673 220,148 2,772,173 —Lease obligations 269 — 2,745 — ¥271,942 ¥220,148 $ 2,774,918 —


The projected long-term debt servicing amount by fiscal year, as of March 31, 2009, is as follows:

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

2010 ¥142,007 $1,449,051 2011 130,299 1,329,582 2012 72,477 739,561 2013 35,004 357,184 2014 26,280 268,163 2015 and thereafter 7,613 77,684 ¥413,680 $4,221,225

As of March 31, 2009, the following assets were pledged as collateral for current and long-term obligations of ¥30,820 million ($314,490 thousand).


Lease investment assets ¥18,864 $192,490 Accounts receivable – other loans to customers 5,344 54,531 Lease and other trade receivables 432 4,408 Lease and other contract receivables 6,822 69,612 ¥31,462 $321,041

Besides the above, the Company maintains, as guarantee deposits for its sales operations, deposits of ¥10 million ($102 thousand) in securities and ¥15 million ($153 thousand) in investment securities. As third-party security for bank loans taken out by customers, the Company maintains deposits of ¥204 million ($2,082 thousand) in installment sale receivables and ¥10 million ($102 thousand) in investment securities. The Company maintains deposits of ¥3 million ($31 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 uses asset-liability management for overall management of interest rate risk. Foreign exchange risks are managed on a case-by-case basis. The finance division reports on the status of these derivative transactions at scheduled monthly meetings etc.

The Company’s consolidated subsidiaries’ derivative-related transactions are subject to certain internal regulations, namely the Company’s “Basic Policy for Managing Market and Liquidity Risks” and the Company’s “Regulations on Managing Associated Companies.” The Company’s consolidated subsidiaries report quarterly to the Company on each such transaction over the entire transaction’s term. These reports explain the subsidiary’s policy on engaging in the transaction, provide a validation of the transaction’s objective, and detail the derivative transaction’s status, counterparties, outstanding positions, and unrealized gains/losses..


Fair values, etc., of derivatives contracts as of March 31, 2009 and 2008 are respectively as follows:

Millions of yen Thousands of U.S. dollars

2009 2008 2009 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 ¥ — ¥ — $ — $ — $ —) (—) (—) (—)

Interest Rate Swap Contracts:Fixed rate payment, floating rate receipt 41,924 (64) (64)) 60,713 (136) (136) 427,796 (653) (653)) (1,000) (40,375) (10,204) Interest Rate Caps: Buying 264 0 0 731 2 2 2,694 0 0 (118) (331) (1,204) Credit Risk:Credit default swap 3,400 (516) (516) 3,000 (331) (331) 34,694 (5,265) (5,265) (2,900) (3,000) (29,592) ¥45,588 ¥(580) ¥(580) ¥64,472 ¥(465) ¥(465) $465,184 $(5,918) $(5,918))

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 of the Company and its domestic consolidated subsidiaries are subject to various taxes. The statutory tax rate for both years ended March 31, 2009 and 2008 was 40.6%.

The breakdown of total deferred tax assets and deferred tax liabilities by major item, as of March 31, 2009 and 2008, is respectively as follows:


2009 2008 2009

Deferred tax assets: Allowance for doubtful receivables ¥ 7,031 ¥3,210 $ 71,745 Loss on devaluation of investment securities and other items 1,173 1,320 11,969 Allowance for loss on guarantees 555 591 5,663 Reserve for bonus payments 542 381 5,530 Retirement benefits 493 260 5,031 Guarantee deposits from customers 253 180 2,582 Other 2,239 1,666 22,847 Subtotal gross deferred tax assets 12,286 7,608 125,367 Less valuation allowance (3,772) (4,674) (38,490) Total deferred tax assets 8,514 2,934 86,877

Deferred tax liabilities: Net unrealized gain on available-for-sale securities (1,746) (1,455) (17,816) Gain on transfer of receivables (1,165) — (11,888) Prepaid pension cost (301) — (3,071) Other (415) (106) (4,235)Total deferred tax liabilities (3,627) (1,561) (37,010)Net deferred tax assets ¥ 4,887 ¥1,373 $ 49,867


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, 2009 and 2008 is respectively as follows:

2009 2008

Statutory tax rate 40.6% 40.6% Per capital local tax 2.0 0.6 Entertainment expenses not qualified for deductions 0.7 0.3 Elimination of intercompany dividend 0.7 0.3 Undistributed profit of foreign subsidiaries 0.4 0.2 Amortization of nagative goodwill 0.9 (4.0) Less valuation allowance (6.5) 3.4 Equity in earning of affiliates (1.0) (3.9) Difference in normal tax rate of foreign subsidiaries (0.4) (0.2) Exclusion from gross revenue of dividend income (0.5) (0.2) Other (0.5) 0.6Effective tax rate 36.4% 37.7%

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, defined benefit occupational pension 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, 2009 and 2008 and their breakdown were respectively as follows:


2009 2008 2009

Projected benefit obligation ¥(12,414) ¥(5,551) $(126,674)Fair value of plan assets 10,087 4,911 102,929Unfunded benefit obligation (2,327) (640) (23,745)Unrecognized actuarial differences 2,639 — 26,929Unrecognized prior service costs (762) — (7,776)Net liability (450) (640) (4,592)Prepaid pension cost 763 — 7,786Retirement benefits ¥ (1,213) ¥ (640) $ (12,378)

The breakdown of net periodic pension cost for respective fiscal years ended March 31, 2009 and 2008 is as follows:


2009 2008 2009

Service cost ¥ 659 ¥ 432 $ 6,724Interest cost 271 95 2,765Expected return on plan assets (427) (101) (4,356)Amortization of actuarial loss 879 676 8,969Amortization of prior service cost (72) — (735)Net periodic pension cost ¥1,310 ¥1,102 $13,367


Basis for calculations of retirement benefit obligation, etc.:

2009 2008

Attribution method of estimated benefits Benefit/year-of-service approachDiscount rate 2.0–2.5% 2.0%Expected rate of return on plan assets 2.1–4.5% 2.1%Recognition period of prior service cost 16% One of the Company’s domestic consolidated subsidiaries expenses prior service cost proportionately over a set number of years within employees’ average length of service as of when the prior service cost arose.Recognition period of actuarial loss 16% The Company expenses the entire amount of Expensed in actuarial losses in the fiscal year of occurrence. the year of

One of the Company's domestic consolidated occurrence subsidiaries expenses actuarial losses proportionately over a set number of years within employees’ average length of service as of when the actuarial loss arose, starting from the fiscal year immediately following the fiscal year of occurrence.

At March 31, 2009 and 2008, the liability for retirement benefits for directors and corporate auditors amounted to ¥109 million ($1,112 thousand) and ¥434 million, respectively.

7. LEASE TRANSACTIONSDetails of finance leases except for those involving title transfer for the fiscal years ended March 31, 2009 and 2008 are respectively as follows:


The Group as Lessee: 2009 2008 2009

At cost ¥ 707 ¥ 904 $ 7,214 Accumulated depreciation (420) (417) (4,286) ¥ 287 ¥ 487 $2,928 Future lease payments ¥ 287 ¥ 488 $2,928 Amount of above due within one year 166 206 1,694 Rental expenses (depreciation expenses) ¥ 230 ¥ 239 $2,347 The Group as Lessor:

At cost ¥ — ¥ 1,764,569 $ — Accumulated depreciation — (1,108,727) — ¥ — ¥ 655,842 $ — Future minimum lease payments ¥ — ¥ 681,176 $ — Amount of above due within one year — 212,524 — Rental revenues ¥ — ¥ 274,917 $ — Depreciation expenses — 232,296 — Rental revenues attributable to financing income — 35,450 —

Details of finance leases for the fiscal years ended March 31, 2009 are as follows:

(1) Breakdown of lease investment assets


Portion of lease receivables ¥1,050,983 $10,724,316 Portion of estimated residual value 4,570 46,633 Rental revenues attributable to financing income (99,433) (1,014,622) Lease investment assets ¥ 956,120 $ 9,756,327


(2) Projected amounts of lease receivables to be collected after March 31, 2009 (consolidated)


2010 ¥6,693 $68,296 2011 3,233 32,990 2012 1,976 20,163 2013 1,384 14,122 2014 855 8,7242015 and thereafter 798 8,134

(3) Projected amounts of lease payment receivables on lease investment assets to be collected after March 31, 2009 (consolidated)


2010 ¥330,427 $3,371,704 2011 256,235 2,614,643 2012 188,007 1,918,439 2013 121,007 1,235,480 2014 56,352 575,0202015 and thereafter 98,884 1,009,020

8. CONTINGENT LIABILITIESAt March 31, 2009, the Group is contingently liable as follows:

(1) Guarantees provided on borrowings of business partners etc.


As a guarantor of indebtedness of: SHINJUKU ROKUCHOME special purpose company ¥1,984 $20,245 TATUMI KAIHATU special purpose company 993 10,133 American Airlines, Inc. 892 9,102 ETERNAL ELECTRONICS CORPORATION 661 6,745 GF Ibis Leasing Ltd. 339 3,459 SHiDAX COMMUNITY CORPORATION 315 3,214 ANZEN MOTOR CAR CO., LTD. 234 2,388 MORINAGA MILK INDUSTRY CO., LTD. 168 1,714 Honda R&D Co., Ltd. 116 1,184 Employees 373 3,806 Others 55 561 ¥6,130 $62,551

(2) The Company is guarantor for purchased receivables held by Allstar Funding Corp. and five other companies. The guarantee limit is ¥4,714 million ($48,102 thousand).

(3) One of the Company’s domestic consolidated subsidiaries engages in business guarantee operations and is credit guarantor of a total of ¥41,116 million ($419,551 thousand) in indebtedness of general customers and other entities.

9. RELATED PARTY TRANSACTIONSThe Company’s transactions with related parties during fiscal years ended March 31, 2009 and 2008 were respectively as follows:


2009 2008 2009

Rental revenues ¥ — ¥ 5 $ —Future minimum lease payments — 12 —Rental revenues attributable to financing income — 0 —Financing business 10,000 — 102,041Interest income received 697 — 7,112


The ending balances of the Company’s transactions with related parties during fiscal years ended March 31, 2009 and 2008 were respectively as follows:


2009 2008 2009

Lease receivables ¥ — ¥ 0 $ —Loans receivables 17,780 — 181,429Accrued income 46 — 469

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, 2009 and 2008 were respectively as follows:

Business Segments

Year ended March 31, 2009 Installment Eliminations or Lease sales Loans Other corporate-wide Consolidated Millions of yen

(1) Operating revenues Revenue from customers ¥312,029 ¥43,252 ¥ 9,490 ¥ 7,539 ¥ — ¥372,310 Intersegment revenue and transfer 459 81 547 739 (1,826) — Total sales 312,488 43,333 10,037 8,278 (1,826) 372,310 Operating expenses 294,241 42,102 8,300 5,336 6,341 356,320 Operating income ¥ 18,247 ¥ 1,231 ¥ 1,737 ¥2,942 ¥(8,167) ¥ 15,990 (2) Total assets, depreciation and capital expenditures Total assets ¥1,148,806 ¥90,197 ¥359,023 ¥17,041 ¥78,725 ¥1,693,792 Depreciation and amortization 14,200 — — — 631 14,831 Capital expenditures 51,403 — — — 1,381 52,784

Year ended March 31, 2009 Installment Eliminations or Lease sales Loans Other corporate-wide Consolidated Thousands of U.S. dollars

(1) Operating revenues Revenue from customers $3,183,969 $441,347 $ 96,837 $76,929 $ — $3,799,082 Intersegment revenue and transfer 4,684 826 5,582 7,541 (18,633) — Total sales 3,188,653 442,173 102,419 84,470 (18,633) 3,799,082 Operating expenses 3,002,459 429,613 84,694 54,449 64,704 3,635,919 Operating income $ 186,194 $ 12,560 $ 17,725 $30,021 $(83,337) $ 163,163

(2) Total assets, depreciation and capital expenditures Total assets $11,722,510 $920,378 $3,663,500 $173,888 $803,316 $17,283,592 Depreciation and amortization 144,898 — — — 6,439 151,337 Capital expenditures 524,520 — — — 14,092 538,612


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 and transfer 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

Geographic SegmentsGeographic segment information is not presented herein, as over 90% of the amount of total assets of all segments for fiscal years March 31, 2009 and 2008 respectively were associated with domestic operations.

Sales to Overseas CustomersThe amounts of sales to overseas customers for fiscal years March 31, 2009 and 2008 respectively are not presented herein, as they constituted less than 10% of the respective consolidated revenues.

12. SUBSEqUENT EvENTS 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, 2009, were approved at a shareholders’ meeting held on June 24, 2009:


Appropriations: Cash dividends of ¥27 ($0.27) per share ¥815 $8,316


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 shareholders: 5,589

Number of shares outstanding: 30,287,810 shares

Independent auditor: Ernst & Young ShinNihon LLC

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: 579 (non-consolidated)

1,342 (consolidated)

Consolidated subsidiaries: 25

Affiliates: 5

Non-consolidated subsidiaries: 147

Corporate Officers (As of June 24, 2009)

Chairman: Toshiyuki Ogura

President & Chief Executive Officer: Mitsuru Machida

Deputy President: Takashi Sato

Senior Managing Director: Kazuo Kasugakawa

Senior Managing Director: Hisanori Ohara

Managing Director: Shunzo Yoneda

Managing Director: Naoki Furuya

Managing Director: Yuji Hosooka

Outside Director: Nobuya Minami

Full-time Corporate Auditor: Osamu Yoshikawa

Full-time Corporate Auditor: Ryuichi Uno

Outside Corporate Auditor: Teruhiko Numano

Outside Corporate Auditor: Fumito Ishizaka

Outside Corporate Auditor: Hirokazu Ishikawa

Managing Executive Officer: Akira Fukuda

Managing Executive Officer: Keiichirou Nakajima

Managing Executive Officer: Kazuori Yosizumi

Executive Officer: Masakazu Ishigaki

Executive Officer: Kiyoyuki Fujimoto

Executive Officer: Akio Oda

Executive Officer: Takao Soutome

Executive Officer: Mitsuru Tomikawa

Executive Officer: Yoshiharu Fujita

Executive Officer: Kiyoshi Minagawa

Executive Officer: Fumihiro Tanahashi

Executive Officer: Hideki Yamada

Executive Officer: Kiyoo Shinohara

Executive Officer: Norio Imai

Executive Officer: Shinichi Arakawa


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

42

Major Shareholders

Hulic Co., Ltd.

Marubeni Corporation

Meiji Yasuda Life Insurance Company

Japan Trustee Services Bank, Ltd. (Trust Account)

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

Japan Trustee Services Bank, Ltd. (Trust Account 4G)

Sompo Japan Insurance Inc.

Yamatake Corporation

Mizuho Corporate Bank, Ltd.

Fuyo General Development Co., Ltd.

Major Domestic Subsidiaries

Fuyo Auto Lease Co., Ltd.

Japan Mortgage Co., Ltd.

Fuyo Lease Sales Co., Ltd.

Aqua Art Co., Ltd.

Fuyo Network Service Co., Ltd.

YF Leasing Co., Ltd.

Sharp Finance Corporation

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 Capital Lease, Operating

Lease and Sales and Lease Back, mainly to Japanese corporations

operating in the U.S.

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

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 to gather 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

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

42

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.

Documents

Annual Report 2009 - fgl.co.jp · 6/24/2009 · in fiscal 2008, which translates into a total contraction of roughly 23% within the space of just two years. Despite this challenging