■ E Guaranty <8771>'s shareholder return strategy and initiatives for SDGs

1. Initiatives for shareholder return.

The shareholder return strategy is based on implementing dividends based on performance, taking into account strengthening financial position and ensuring sufficient internal reserves required for proactive business expansion. The dividend level is set at over 50% of the dividend payout ratio, and the company aims to continue increasing dividends since its listing through continuous improvement in DOE (dividend on equity), targeting an ROE of 20% or more. If the performance target for the medium-term management plan for the fiscal year ending March 2028 is achieved, it is expected that the dividend level will increase to around 70 yen per share (assuming no change in the number of shares). The company also aims to achieve an ROE of 20% or more, considering share buybacks if necessary to reach this level.

The dividend per share for the fiscal year ending March 2024 will be increased by 1.0 yen compared to the previous period, amounting to 35.0 yen (dividend payout ratio of 51.0%), and for the fiscal year ending March 2025, it is planned to implement a further increase of 2.0 yen to 37.0 yen (dividend payout ratio of 51.1%). If the performance target for the fiscal year ending March 2028 of the medium-term management plan is achieved, it is expected that the dividend level will increase to around 70.0 yen (assuming no change in the number of shares). The company aims for an ROE of 20% or more and is open to considering share repurchase if necessary to achieve this level.

2. Efforts towards SDGs. Regarding SDGs, in order to strengthen sustainability activities within our group, we established a sustainability committee as an advisory body to the Board of Directors in May 2022. We regularly conduct trend surveys related to sustainability, develop management strategies related to sustainability, identify and review important issues (materiality), monitor progress and assess achievement status. In December 2022, we expressed our support for the TCFD (Task Force on Climate-related Financial Disclosure) and created a "Value Report 2023" (issued January 2024) that summarizes our approach to sustainability, progress, goals, etc., which can be viewed on our company's website. In addition, in order to establish targets for 2030 and 2050, we have created a department cross-sectional team consisting of executives, middle management, and young employees, and are proceeding with discussions on current awareness and future ideals with diverse values and ideas.

The company's basic sustainability policy is to achieve the provision of credit to various industries and the appropriate allocation of social resources by continuing business activities related to handling credit risks of enterprises and liquidity, aiming to contribute to the creation of a vibrant and prosperous society. As part of its specific efforts, the company indirectly promotes environmental problem-solving by guaranteeing commercial transactions related to renewable energy such as photovoltaic and wind power. For example, in cases where companies conducting solar panel installation projects hesitate to purchase solar panels from manufacturers due to the credit risk involved, the company's guarantee of the manufacturer's credit risk makes it easier for these companies to procure solar panels, contributing to the advancement of solar power generation projects.

Furthermore, in its connection with society, the company promotes the resolution of social issues such as nursing care and elderly welfare by guaranteeing commercial transactions with hospitals and social welfare corporations. While many small and medium-sized enterprises in various regions are engaged in social welfare business, companies handling nursing care business often face financial difficulties due to increased investment in facilities and labor costs. By taking on the credit risks of these companies, the company indirectly supports their cash flow. The company also contributes to regional revitalization by guaranteeing credit risks. In recent years, with the expansion of the e-commerce market, direct transactions between companies in various regions and urban or out-of-province enterprises have increased, leading to challenges for companies in various regions to assess the credit risk of out-of-province partners, resulting in increased costs for unrecovered receivables. By guaranteeing the credit risks in these cases, the company reduces collection costs, expands the options for commercial transactions for companies in various regions, and contributes to the development of regional society. Furthermore, by taking on the credit risks of venture companies and others, the company supports the growth of these ventures.

The company discloses the guaranteed debt balance related to sustainability as an indicator, having implemented guarantees totaling 389 billion yen as of the end of March 2024.

(Written by FISCO guest analyst, Jo Sato)