Profile
Driven by the same spirit that led to the founding of Suruga Bank, in hopes of meeting our customers’ expectations
and earning their trust, we have made consistent efforts to maintain a sound business structure. We have proceededwith self-reliance and rugged independence with regard to capital, personnel, and sales policies. We readily recognize
the public responsibilities we bear as a financial institution. We have worked to ensure the smooth flow of funds andthe fostering of strong industrial enterprises.
We intend to continue fulfilling our mission to contribute to the public good. Focusing exclusively on soundbanking operations, we aim to build a corporate structure that will endure through change. Moreover, we desire toprovide good quality financial services, as we stay close to our community, and quickly learn of our customers’ needs.
As of March 31, 2002, the Bank had total assets of ¥2,812 billion (US$21,103 million), and a capital adequacy ratio
according to domestic standards of 8.32%.
At term-end, the Bank’s network comprised 122 offices, including a main office, 116 domestic branches, and 5 subbranches.

Financial Highlights (Consolidated)
The Suruga Bank, Ltd. and consolidated subsidiaries
Thousands of
U.S. Dollars

Millions of Yen

Years ended March 31
For the year:
Total income .............................................................................................................
Total expenses...........................................................................................................
(Loss) income before income taxes ..........................................................................
Net (loss) income ......................................................................................................

2002

¥

2001

91,828 ¥ 120,680
104,736
130,357(38,528)
15,943(23,641)
9,571

2000

¥ 110,705
94,095
16,610
8,897

2002

$

689,144
978,279(289,144)(177,418)

Per share of common stock (in yen and dollars):
Net (loss) income ......................................................................................................

¥ (91.34)¥38.03¥35.57$(0.685)

At the year end:
Deposits.....................................................................................................................
Loans and bills discounted........................................................................................
Securities...................................................................................................................
Shareholders’ equity .................................................................................................
Total assets................................................................................................................

¥2,664,068
2,001,081
489,694
112,401
2,381,681¥2,720,425
1,938,745
381,319
127,633
2,914,972¥2,709,951
1,853,451
470,912122,187
2,903,792$19,993,010
15,017,495
3,675,003
843,537
21,248,679

Capital adequacy ratio (%) .......................................................................................

8.10

8.86

8.77

Notes: 1. Yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts have been converted from Japanese yen, solely for convenience, at ¥133.25=US$1.00, the approximate rate of exchange prevailing on March 31, 2002.
3. Net (loss) income per share is calculated on the basis of the average number of shares of common stock outstanding during each year.
4. The capital adequacy ratio has been computed based on domestic standards.

Cover photo: Noh masks; owned by the Komparu family; photo by
Katsumi Tanaka; copyright reserved by Haga Library

Forward-Looking Statements:
Statements contained in this report concerning plans,predictions, and strategies to improve future performance(“Forward-Looking Statements”) are based information
currently available to the Bank’s management, and inevitably
involve a certain element of risk and uncertainty.

Suruga Bank – a “concierge” for our customers“Fushi-Kaden”

The Book of the Flower

1© Orion Press

2

“Hisureba Hana”

Customer satisfaction through backstage support
In the world of the Noh theater, the main character in the story is called the shi-te, and supporting
roles are called the waki. Zeami, the foremost authority on Noh, explained the key issues of Noh in
his book, Fushi-Kaden (The Book of the Flower), saying, “The flower, or the most precious thing,is the heartfelt appreciation of the audience.” We at Suruga Bank have inscribed these words in ourhearts, in the hope of playing the roles of waki in all our customers’ life stages, and provide reliable“concierge” services to our customers. We place the greatest importance on satisfying the wishesof each and every customer. We believe it is our duty to help our customers make their dreams areality by supporting them in setting goals and drawing up concrete plans to achieve these ends.
Suruga Bank aims to provide dependable professional services for all aspects of our customers’ lives
and businesses.

Mitsuyoshi Okano,
Chairman &Chief Executive Officer

3Noh drama “Hagoromo” by the Kanze school (Actor: Shozo Nakamori);
photo by Toshiro Morita; copyright reserved by Haga Library4

“Nin-nin kokoro-gokoro no hana”

Customer satisfaction through reliable services
tailored to individual needs
We believe that the premier stage for Suruga Bank is retail business. Just as the concierge provides
vital advice and direction to travelers, we guide each retail, corporate and entrepreneurial customer
to the assistance they need to succeed. We at Suruga Bank aim to become a familiar face to ourcustomers by being sympathetic to their needs and providing reliable services. Our Personal
Concierges are on hand, at the Concierge Desk in our Access Center, to handle all kinds ofconsultations concerning financial planning for the various stages of our customers’ lives andbusinesses. In order to assist with an even wider variety of financial planning consultations, we also
employ the quality services of the Head Office Customer Services Center at all our branch offices.
We treasure every opportunity to assist our customers and support them in their personal andbusiness needs.

“Nenrai keiko jojo”

Customer satisfaction through systematic expertise
Noh actors are always polishing their skills. They have different ways of studying to suit each stageof their professional lives. In a similar way, we at Suruga Bank have drawn up a three-step plan to
become an ideal services concierge.
In Step 1, we will become a “concierge bank,” providing essential banking services to realize thehighest possible customer satisfaction. In Step 2, we will evolve into a “financial concierge,”
becoming well-versed not only in conventional banking functions, but also in the entire spectrumof financial services. At this stage, we will offer products and services best suited to each customer
from a long-term perspective. In the final step, we will be transformed into a “life and businessconcierge,” offering not only financial-planning but also lifestyle-planning and business-planningsupport services. We will continue to carry out reforms of our management and corporate activities
in order to better assist our customers in mapping out successful plans for their futures.

5Noh drama “Okina” by the Kanze school (Actor: Reijiro Tsumura);
photo by Toshiro Morita; copyright reserved by Haga Library

6

“Kenjo doshin no ken”

Customer satisfaction through services planned
according to customers’ needs
Kenjo means the perspective of the audience, which, according to Zeami, is vital for actors tounderstand. We at Suruga Bank believe that we need to have a thorough understanding of ourcustomers. For this purpose, we have not only enhanced our customer relationship management(CRM) function but also moved onto the stage of optimizing our use of this function, in order tooffer services that meet, and perhaps even exceed, customer expectations. Placing importance on
the customer’s perspective is our top priority. Customer information gleaned from our branch
offices, Access Center, and Email inquiries becomes a part of the Bank’s common data pool. By
utilizing this information throughout our banking service mix of “clicks and bricks,” in ourheadquarters and branches, we aim to take the lead in offering customer-focused financial services
and at the same time enhance profitability and maximize our corporate value.

“Jisetsu kan ni ataru”

Customer satisfaction through offering the rightservices at the right time
In the first scene of a Noh play, it is essential for the actors to time their first utterance so as tomaximize its effect on the audience. In a similar way, we are eager to meet the expectations of ourcustomers by upgrading our financial services and estimating their potential needs in advance. We
were the first in Japan to offer many pioneering financial products and services including amortgage loan with a cancer insurance rider, a new cash advance service called “Direct Ace,” andtelevision banking. We were also the first Japanese bank to open up a series of 8 dedicated online
branches, under the brand name “Dream Direct,” which can be accessed from anywhere and at any
time. We have made remarkable progress in offering ATM services through post offices and “e-Net”
ATMs located in convenience stores nationwide. We will continue to actively pursue e-alliances as
we work to develop services for our customers’ convenience.

7

Noh masks; owned by the Komparu family; photo by
Katsumi Tanaka; copyright reserved by Haga Library8

Board of Directors and Auditors and Executive Officers

Mitsuyoshi Okano

Kinosuke Okano

Seiji Inui

Hiroo Goto

Toshiki Hoshino

Atsushi Okamura

Yoshiro Uchiyama

Tatsuya Tamura

Tsuneo Yahagi

Makoto Naruke

Standing Auditors

Executive Officers

Chairman of the Board of Directors& Chief Executive Officer

Mitsuyoshi Okano
Chairman of the Board of Officers& Chief Operating Officer

Kinosuke Okano
Senior Managing Director& Chief Financial Officer

Seiji Inui

Managing Director Senior
Executive Advisors

Hiroo Goto
Toshiki Hoshino
Atsushi Okamura

Masataka Oiwa
Yasushi Sakuramoto
Auditors

Yasumi Mochizuki
Takashi Mimura

Directors

Yoshiro Uchiyama
Tatsuya Tamura
Tsuneo Yahagi
Makoto Naruke

Officers

Shinji Ihara
Sachio Takahata
Tetsu Ito
Kihachiro Nomura
Kiyokazu Masuda
Kazuya Mochizuki

Senior Executive Officers

Takehiko Katsumata
Ryozo Kinoshita* Auditors Yasumi Mochizuki and Takashi Mimura have been appointed external auditors in compliance with the law pertaining to
the special ordinance to the Commercial Code concerning auditors of public limited companies as regulated in article 18, clause 1.

Fumiaki Toyama
Osamu Kobayashi
Toru Fukada
Takashi Tsuchiya
Toshihisa Kubozono
Nobuo Mori
Yoshihiro Okazaki
Takahiro Aoki
Takahiro Sawanishi
Haruo Asou
(As of June 25, 2002)“Shoshin wasuru-bekarazu”

Customer satisfaction through offering
consistent services since our foundation
Suruga Bank is located in an area that has a strong association with Noh, being the place where
Zeami’s father, Kan-ami, performed his final Noh play at the Sengen Shrine. Suruga is also thesetting for the famous Noh play, “Hagoromo” [The Feather Mantle].
“Shoshin wasuru-bekarazu” is a famous quote by Zeami, meaning “never forget your roots or
your original purpose.” We at Suruga Bank will always remember our roots and the importance ofoffering our services as a concierge bank.
Story of “Hagoromo”
A fisherman named Hakuryo sees the garment (feather mantle) of a tennyo, a female aerial spirit or celestial dancer,
hanging from the bough of a pine tree in an area called Miho-no-ura. He takes it, but the tennyo pleads for its return,saying that without it she cannot return to Heaven. The fisherman feels sorry for her, and offers to return it if she will
dance for him. She replies that she cannot dance without the mantle, but he suspects that she will leave without
dancing once she has the garment. She declares that a tennin, or celestial spirit, cannot lie. He believes her andreturns the mantle. She performs a beautiful dance for him and then fades beyond Mt. Fuji.
References: Zeami’s “Fushi-kaden” (“The Book of the Flower”) and “Hanakagami” (“The Book of the Mirror”)

9Review of Operations

Business Environment

carried out a number of amalgamations, and as

In response to the global economic slowdown,of March 31, 2002 the Bank’s network ofparticularly in the United States, sharp declines

outlets consisted of the Main Office, 116

were seen in Japanese exports and production

branches and 5 sub-branches, for a total of 122

in fiscal 2001, the business term ended Marchcustomer service outlets. The geographical31, 2002. With the existing weakness of the

breakdown of these outlets was 79 in Shizuoka

economy being exacerbated by the aftereffects

Prefecture, 39 in Kanagawa Prefecture, 2 inof September 11, the future became still more

Tokyo, and 1 in Aichi Prefecture, in addition tounclear.

our Main office in Numazu, Shizuoka

In the Bank’s business base of Shizuoka andPrefecture. In addition, we operated 22

Kanagawa prefectures, production levels

specialist mortgage loan centers during theremained low, and consumer spending

term. We have also taken various steps toremained generally weak due to worsening

improve the convenience of our services andemployment and income conditions.

make visiting a Suruga Bank a truly pleasurable
experience. Thus, four of our branches feature

Developments During the Term
Suruga Bank initiated its “Aim 15” management“in-branch stores.”
During the term, we started an online

plan from fiscal 2001, the term under review.

banking service for companies and sole

Under this plan, the Bank’s first goal is toproprietors, a television banking service using

become a “concierge bank” that will guide its

digital satellite broadcasting, and online banking

customers in building a bright future. To thisservices via the “L-Mode” landline Internet-

end, we took a number of measures during theenabled phones operated by NTT West Japan.

term.

We also negotiated business tie-ups aimed at

In the area of corporate organization, towidening the range of services offered overcentralize our risk management, we set up a

the Internet. In a tie-up with AXA Casualty

dedicated organization for Integral risk

Insurance, we began offering the AXA Direct

management within the Corporate Planning

Plaza; with eWoman, Inc. we have begun

Division, thereby further strengthening ouroffering the “eWoman Bank” online service;risk management system. Moreover, in pursuitand through a tie-up with Usen Broadof the improved customer satisfaction that

Networks we offer the “Club Usen” service

only a concierge bank can provide, we

within the eBusiness Direct website. The

established a new Customer Service Desk

online banking service operated by Softbank

within the Business Division.

Finance Corporation in collaboration withDuring the term under review, to improve

Suruga Bank has been authorized as a payment

the operational efficiency of our branches wechannel by the Yahoo!Japan Auctions service,10the first service operated by a Japanese

will also focus our management resources onregional bank to be so authorized.

operational divisions that will enhance our

In special products, in our DirectOne online

profitability.

service, we introduced the Direct Ace Card, a

Under Suruga Bank’s “Aim 15” long-term

card for receiving ATM loans. The cards can be

management plan, we will become a “life andapplied for 24 hours a day, 365 days a year,

business concierge” for our customers, helping

and the borrower does not need to set up athem make their dreams into material reality

dedicated account for repayment. We also

through the provision of friendly, reliable andlaunched a new mortgage loan for individuals

thoroughly professional services. In this way,with specific illness insurance and group life

Suruga Bank will evolve into a completely new

insurance riders.

type of financial services company. To makeIn these ways, we worked to effectively

this possible, we are providing our staff withmeet the varied needs of our customers bythorough training in financial consulting andactively expanding our lineup of financial

communication skills to enable them toproducts and services.

recommend the products that best suit eachcustomer, just when they need them.

Future Tasks

Suruga Bank has been a pioneer among

The process of deregulation in the financial

Japanese regional banks in its active

sector is causing the traditional walls between

employment of information technology, and indifferent lines of business to crumble:

its vigorous pursuit of rationalization andcompanies from other industries are offering

greater efficiency in clerical operations.

financial services, and in addition, the market

Among IT features we have adopted are a CRM

is rapidly becoming borderless and globalized.

system, an automatic credit screening system,

With the emergence of megabanks andand a personal assessment system. All these

dedicated Internet banking companies and thehave helped to raise the level of skills of ourentry of players from other industries, we facestaff.

competition of unprecedented severity. In

We plan to utilize the advantage over our

addition, from April this year a new factor

rivals that the early adoption of these IT tools

came into operation with the imposition of ahas given us by providing services that surpass¥10 million cap on government-backed

the expectations of our customers. We will

guarantees of individual bank time deposits.

continue to think in an innovative manner andAgainst this background, the Bank aims toconstantly question our assumptions, with thefurther ensure the soundness of its loan assets

goal of establishing a new business model forso as to strengthen its financial position. We

financial service companies.

11

Financial Review
For the year under review, the Bank’s
performance on a consolidated and a nonconsolidated basis is summarized as follows.

Business Performance(On a consolidated basis)
Against the background described above, theSuruga Bank and its seven consolidated
subsidiaries posted the following results forthe year under review.
•Earnings
As a result of the increased provision ofreserves for possible loan losses, losses on thesale of securities holdings, and the applicationof impairment accounting to available-for-salesecurities with unrealized losses, the Bank
recorded a net loss of ¥23,641 million (US$177
million) as opposed to the net income of¥9,571 million posted for the previous year.

•Cash flows
Net cash provided by operating activities
amounted to ¥155.6 billion (US$1,168 million)
principally reflecting a decrease in call loans,which was offset by an increase in loans andbills discounted.
Net cash used in investing activities totaled¥134.8 billion (US$1,011 million) principally
due to the acquisition of securities.
Net cash used in financing activities came to¥1.9 billion (US$14 million) due to the Bank’s
acquisition of its own shares under a stock
option plan and as a result of dividend payments.
Cash and cash equivalents at the year-end
increased by ¥18.8 billion (US$141 million)
over those of the previous year end, to ¥82.3
billion (US$618 million). The term “cash andcash equivalents” refers to cash deposits with
the Bank of Japan.

Business Performance•Deposits
In the principal consolidated accounts, theyear-end balance of deposits declined by ¥56.3
billion from that of the previous year, to¥2,664.0 billion (US$19,993 million).
•Loans and bills discounted
The loan balance at the year end rose ¥45.5
billion to ¥2,001.0 billion (US$15,017 million).
•Investments in securities
The year-end balance of securities came to¥489.6 billion (US$3,675 million), a year-onyear increase of ¥108.3 billion.
•Capital adequacy ratio
The Bank’s capital adequacy ratio for the year
was 8.70% on the basis of international
standards and 8.10% on the basis of domestic
standards.

12(On a non-consolidated basis)•Earnings
Amid the prolonged economic slump and the
deepening deflationary trend in Japan, theBank carried out a self-assessment of its assets
applying even stricter criteria, and increased
its provision of reserves for possible loan
losses. In addition, the Bank provided specificreserves for loans deemed uncollectible whichwere recognized as a result of its reclassificationof borrowers. At the same time, the Bank
wrote down available-for-sale securities undera strict impairment accounting standard, which
was applied to all securities whose market
prices had fallen 30% or more during the year
and had not recovered as of the year end. The
Bank also sold off a substantial portion of its
available-for-sale securities whose market prices
had fallen below their corresponding bookvalue in order to improve the soundness of its
asset portfolio. As a result, the Bank posted aloss before income taxes of ¥38,499 million(US$288 million) and a net loss of ¥22,878
million (US$171 million).

•Deposits
During the year, deposits decreased by ¥60.5 billion
mainly due to steps taken to reduce the amount ofhigh-cost deposits. The balance of deposits stood at¥2,664.8 billion (US$19,999 million) at the year
end. In spite of the lowest-ever level of interest,
deposits from individuals increased ¥139.7 billion
to ¥1,748.8 billion, and these centered aroundoriginal products offered through the Bank’s
well-received dedicated on-line banking services.

•Securities
Securities of ¥488.2 billion (US$3,663 million)
were recorded at March 31, 2002. During theyear, the Bank was more conscious of market
risk, aggressively selling off available-for-salesecurities with unrealized losses and strictly
applying impairment accounting policies tosecurities whose prices had declined in excess
of 30% at the year end.
•Capital adequacy ratio
The Bank’s capital adequacy ratio for the year
on a non-consolidated basis was 8.92%
calculated using the BIS criteria and 8.32% inaccordance with the corresponding domestic
standards.

•Loans and bills discounted
Loans and bills discounted increased ¥49.3 billion
to ¥2,004.9 billion (US$15,046 million), thanks
to aggressive marketing to individuals and tosmall and medium-sized companies. Loansextended to individuals increased ¥178.7 billion
to ¥1,180.2 billion. The percentage of loans to
individuals as a percentage of total loans increased
7.6 percentage points, to 58.8% at the year end.

Five-year Summary (Non-Consolidated)Thousands of
U.S. dollars

Millions of yen
The Suruga Bank, Ltd.

Years ended March 31

2002

2001

For the year:
Total income .................................................................. ¥ 83,353 ¥ 112,936
Total expenses................................................................
121,852
97,515(Loss) income before income taxes ...............................
(38,499)
15,421
Net (loss) income ..........................................................
(22,878)
9,472
Per share of common stock (in yen and dollars):
Net (loss) income .......................................................... ¥Cash dividends applicable to the year............................

(86.82) ¥5.00

At the year end:
Deposits.......................................................................... ¥2,664,870
Loans and bills discounted ............................................. 2,004,953
Investment securities......................................................
488,215
Shareholders’ equity ......................................................
115,185
Total assets ..................................................................... 2,812,099
Capital adequacy ratio (%) ............................................
Number of offices ..........................................................
Number of employees ....................................................

8.32
122
1,926

35.75
5.00

2000

1999

1998

¥ 101,113
84,80916,3049,077¥ 130,526 ¥ 118,576
149,564
110,708(19,037)
7,868(13,169)
1,219

¥

¥

34.26
5.00

(49.14) ¥
5.00

4.53
5.00

¥2,725,467
1,955,564
380,589
140,480
2,910,809¥2,712,506
1,870,906
470,215
134,3142,897,270¥2,697,034
1,889,572
603,141
126,560
2,943,165¥2,702,079
2,014,085
490,930
125,078
2,976,435

9.60
126
2,068

9.54
121
2,156

9.16
121
2,254

9.74
123
2,353

2002
$

625,538
914,468(288,929)(171,692)$(0.651)
0.037$19,999,031
15,046,558
3,663,907
864,432
21,103,937

Notes: 1. Yen amounts are rounded down to the nearest million yen.
2. U.S. dollar amounts have been converted from Japanese yen, solely for convenience, at ¥133.25=US$1.00, the approximate rate of exchange prevailing on March
31, 2002.
3. Net (loss) income per share is calculated on the basis of the average number of shares of common stock outstanding during each year.
4. The capital adequacy ratio has been computed based on domestic standards since 1999.

13

Consolidated Balance Sheets
The Suruga Bank, Ltd. and Subsidiaries

Thousands of
U.S. dollars(Note 2)Millions of yen

As of March 31,

2002

2001

2002

AssetsCash and cash equivalents
Due from banks
Call loans, commercial paper and other debt purchased
Trading account securities
Money trusts
Investment securities
Loans and bills discounted (Note 3)
Foreign exchange¥

82,387¥63,514$

618,289

4,570

89,172

34,297

160,886

316,560

1,207,404

329

19,997

2,474

2,002

2,794

15,025

489,694

381,319

3,675,003

2,001,081

1,938,745

15,017,495

556

634

4,178

Other assets

23,376

19,832

175,432

Premises and equipment (Note 4)

55,18757,989414,166

Deferred tax assets (Note 11)

54,12939,023406,227

Customers’ liabilities for acceptances and guarantees

15,866

18,179119,072

Less reserve for possible loan losses(58,681)(32,792)(440,387)¥2,831,386¥2,914,972$21,248,679¥2,664,068¥2,720,425$19,993,010

666

4,212

5,000

Borrowed money

14,25914,737

107,010Foreign exchange

15

14

120

21,17823,511

158,941

727

759

5,458

Accrued pension and severance costs (Note 7)

1,032

4,711

7,748

Reserve for possible losses on sales of loans

262

296

1,966

15,866

18,179119,0722,718,077

2,786,847

20,398,327

907

490

6,813

Common stock

30,04330,043

225,465

Capital surplus

18,585

18,585

139,480

Retained earnings

69,245

94,188519,665

Net unrealized losses on securities, net of taxes(1,141)(1,931)(8,565)

Total assets
Liabilities, minority interests and shareholders’ equity
Liabilities
Deposits
Call money

Other liabilities
Reserve for employees’ bonuses

Acceptances and guarantees
Total liabilities
Minority interests
Shareholders’ equity

Less treasury stock, at cost

(1,883)(1,222)(14,133)

Less shares of common stock held by subsidiaries, at cost

(2,448)(12,029)(18,375)

Total shareholders’ equity

112,401

127,633

843,537¥2,831,386¥2,914,972$21,248,679

Total liabilities, minority interests and shareholders’ equity
See notes to consolidated financial statements.
14

Consolidated Statements of Operations and Retained Earnings
The Suruga Bank, Ltd. and Subsidiaries

Thousands of
U.S. dollars(Note 2)Millions of yen

Years ended March 31,

2002

2001

2002

Interest income (Note 9)¥ 67,268¥ 70,206$ 504,825

Fees and commissions

8,188

7,028

61,448Other operating income

9,373

17,39370,345

Other income (Note 10)6,998

26,05152,525

Total income

91,828120,680

689,144

Interest expense (Note 9)

11,64018,11187,361Fees and commissions

5,049

4,103

37,893

Other operating expenses

7,147

15,25453,641

General and administrative expenses

40,68243,656305,308

Other expenses (Note 10)

65,836

23,611

494,083

Total expenses

130,357

104,736

978,289(Loss) income before income taxes(38,528)

15,943(289,144)

IncomeExpenses

Income taxes (Note 11):
Current

595

2,881

4,470

Deferred(15,667)

3,350(117,582)(15,072)

6,232(113,111)

184

139

1,385

(23,641)

9,571(177,418)

94,18885,936

706,859(1,302)(1,258)(9,775)

—

(60)

—

¥ 69,245¥ 94,188$ 519,665

Minority interests in earnings of consolidated subsidiaries
Net (loss) income
Retained earnings
Balance at beginning of year
Deductions:
Dividends paid
Bonuses to directors and corporate auditors
Balance at end of year
See notes to consolidated financial statements.

15

Consolidated Statements of Cash Flows
The Suruga Bank, Ltd. and Subsidiaries

Millions of yen

Years ended March 31,

Thousands of
U.S. dollars(Note 2)

2002

2001

2002

¥ (38,528)
8,617
25,889
(34)
(32)
—
1,861
(2,636)——(67,268)
11,64019,046(1)
1,038¥ 15,943
9,302(7,676)(181)
32(3,874)
4,711(3,347)5,624(60)(70,206)
18,111(9,746)203(5,955)$ (289,144)
64,672
194,289
(255)
(242)
—
13,969(19,788)——(504,825)
87,361
142,935(9)
7,796

19,668(52,857)(56,357)(478)
84,602
155,674(3,546)77
166,463(12,899)(2,783)
157,160(1,498)
155,661

2,998(85,293)
10,474840
16,582(178,536)(8,291)2,653(14)
69,203(18,682)
3,542(231,642)(4,586)(236,228)

147,604(396,677)(422,942)(3,589)634,917
1,168,286(26,614)583
14498,791(96,803)(20,891)
1,179,438(11,248)
1,168,189

Cash flows from investing activities
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of bonds
Increase in money trusts
Decrease in money trusts
Purchases of premises and equipment
Proceeds from sales of premises and equipment
Net cash (used in) provided by investing activities(603,796)
177,467
297,552(41)
834(7,388)533(134,837)(974,482)
847,823
221,075(14)
16(9,997)
8,687
93,108(4,531,303)
1,331,837
2,233,037
(308)
6,264
(55,448)
4,006(1,011,915)

Cash flows from financing activities
Dividends paid
Dividends paid to minority interests
Purchases of treasury stock
Proceeds from sales of treasury stock
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(1,302)—(689)
28(1,962)
11
18,872
63,514¥ 82,387(1,258)
(0)
(950)
264
(1,945)19(145,046)
208,560¥ 63,514(9,775)—(5,171)
216(14,730)87
141,631476,658
618,289

Cash flows from operating activities(Loss) income before income taxes and other adjustments
Depreciation and amortization
Change in reserve for possible loan losses
Change in reserve for possible losses on sales of loans
Change in reserve for employees’ bonuses
Decrease in reserve for retirement allowances
Increase in accrued pension and severance costs
Gain on contribution of securities to employees’ retirement benefit trust
Loss on establishment of employees’ retirement benefit trust
Bonuses to directors and corporate auditors
Interest income
Interest expense
Loss (gain) on investment securities, net
Gain (loss) on money trust investments, net
Loss (gain) on sales of premises and equipment, net
Changes in operating assets and liabilities:
Trading securities
Loans
Deposits
Borrowings excluding subordinated debt
Due from banks other than BOJ
Call loans
Call money
Foreign exchange assets
Foreign exchange liabilities
Interest received
Interest paid
Other, net
Subtotal
Income taxes paid
Net cash provided by (used in) operating activities

See notes to consolidated financial statements.
16$

Notes to Consolidated Financial Statements
The Suruga Bank, Ltd. and Subsidiaries

1. Summary of Significant Accounting Policies(d) Investment Securities(a) Basis of Preparation

Debt securities being held to maturity are stated at amortized costcomputed by the moving-average method.

The accompanying consolidated financial statements of Suruga Bank,
Ltd. (the “Bank”) and its subsidiaries have been prepared on the basisof accounting principles and practices generally accepted and appliedin Japan and have been compiled from the consolidated financial statements filed with the Financial Services Agency as required by the
Banking Law of Japan and the Securities and Exchange Law of Japan.
Accordingly, the accompanying consolidated financial statements are
not intended to present the consolidated financial position, results ofoperations and cash flows in accordance with accounting principles andpractices generally accepted and applied in countries and jurisdictions
other than Japan. In addition, the notes to the consolidated financial
statements include information which is not required under accounting
principles generally accepted in Japan but is presented herein as additional information.
For the convenience of readers outside Japan, certain items presented in the original statements have been reclassified and rearranged.
Certain reclassifications of the prior year’s consolidated financial
statements and the related footnote amounts have been made to conform with the presentation in the current year.

(b) Principles of Consolidation
The accompanying consolidated financial statements include theaccounts of the Bank and its significant subsidiaries and certain associated companies, which are as follows:
Suruga Business Service Co., Ltd.
Suruga Staff Service Co., Ltd.

Other securities (available-for-sale securities) whose current value
can be estimated are stated at their market value as of the fiscal year
end and other non-marketable securities are stated at cost or amortizedcost computed by the moving-average method.
Unrealized gain or loss on securities available-for-sale areincluded in shareholders’ equity, net of income taxes.

(e) Securities in Money Trusts
Securities included in money trusts are stated by the same method as
those described in (c). and (d). above.

(f) Derivatives
Derivatives positions are stated at their market value as of the fiscal
year-end.

(g) Premises and Equipment
Depreciation of premises and equipment of the Bank is computedby the declining-balance method at rates principally based on the following estimated useful lives:
Buildings

15 years to 50 years

Equipment and furniture

5 years to 20 years

Costs of software developed or obtained for internal use are amortized by the straight-line method over an estimated useful life of 5 years.
Certain subsidiaries apply the straight-line method for the depreciation of premises and equipment.

A.P.I. Co., Ltd.
Suruga Capital Co., Ltd. (previously Suruga General Lease Co., Ltd.)(h) Foreign Currency Items

Suruga Computer Service Co., Ltd.

Assets and liabilities which are payable or receivable in foreign currencies are converted into Japanese yen at the rates prevailing at eachfiscal year-end.

Suruga Card Co., Ltd.
Suruga Credit Service Co., Ltd.
On June 1, 2001, Suruga Capital Co., Ltd. (changed its company
name to S.G. Capital Co., Ltd.) and Suruga Investment Finance Co.,
Ltd. transferred their business assets to Suruga General Lease Co.,
Ltd. Simultaneously, the Bank sold all its equity ownerships in thesecompanies to others and these companies have thus been excluded
from the scope of consolidation.
In addition, Suruga General Lease Co., Ltd. changed its company
name to Suruga Capital Co., Ltd. also on June 1, 2001.
All significant intercompany accounts and transactions have been
eliminated in consolidation.

(c) Trading Account Securities
Trading account securities are stated at their market value as of the fiscal year end.

(i) Reserve for Possible Loan Losses
The reserve for possible loan losses of the Bank is provided in accordance with the policies regarding write-offs and reserve standards stipulated in “Auditing of Write-offs and Loan Loss Provisions” issued as partof the “Fourth Report by the Auditing Subcommittee for Banks andOther Financial Institutions” by the Japanese Institute of Certified
Public Accountants. The reserve for loans to borrowers who are classified as substantially bankrupt or who are bankrupt in the formal legal
sense is provided based on the amount remaining after deduction of theamount of their collateral considered to be disposable and of the amountrecoverable under guarantees.
In addition, a reserve is provided for loans to borrowers who,
although not actually bankrupt in the legal sense, are experiencing

17serious management difficulties and whose failure is imminent. In suchcases, a portion of the reserve is provided based on the amount remaining after deduction of the amount of their collateral considered to be disposed and of the amount recoverable under guarantees, and the balanceof this reserve is provided after giving full consideration to the amountthe borrower is capable of repaying. In the case of all other loans, thereserve is based on the percentage of actual defaults over a fixed period.
For claims of “substantial bankruptcy” and “legal bankruptcy,” anamount exceeding the estimated value of the collateral or of the guarantees deemed uncollectible is deducted directly from those claims. For
the years ended March 31, 2002 and 2001, the amounts deducted were
¥10,882 million (US$81,669 thousand) and ¥9,510 million, respectively.
Provisions for possible loan losses at the consolidated subsidiaries
have been made as deemed necessary with reference to the historicalloan loss experience of these companies.

(n) Hedge Accounting
The Bank has adopted “macro hedge” accounting under which the
Bank manages its interest rate risk arising from various assets and liabilities with derivatives. The Bank applies the risk adjustment
approach based on a report issued by the Japanese Institute ofCertified Public Accountants entitled “Tentative Treatments in
Accounting and Auditing for Banks on the Application of AccountingStandard for Financial Instruments.”
The effectiveness of each macro hedge is reviewed for a reduction
in interest rate risk exposure and for the actual risk on derivatives
within the permitted limits established under the Bank’s risk control
policies.
In addition to macro hedge accounting, the Bank and its consolidated subsidiaries have adopted deferral hedge accounting or certain
exceptional treatments permitted under interest rate swaps for a portion of their assets and liabilities.

(j) Reserve for Employees’ Bonuses
The reserve for employees’ bonuses is provided for the payment ofbonuses to employees, an estimate of which is determined as of thebalance sheet date.

(k) Reserve for Possible Losses on Sales of Loans
The reserve for possible losses on sales of loans provides for contingent losses arising from any decline in the market value of the collateral posted on corporate mortgage loans sold to the Cooperative Credit
Purchasing Company, Ltd.

(l) Pension and Severance Costs
Accrued pension and severance costs is provided for the future paymentof employees’ retirement benefits based on estimated amounts of theactuarially calculated retirement benefit obligation and the pension plan
assets. Prior service cost is amortized by the straight-line method over 5
years. Net actuarial gain (loss) is amortized by the declining-balancemethod over 13 years commencing the year following the year in which
the gain or loss is incurred. The unrecognized net retirement benefit
obligation was ¥11,221 million at April 1, 2000, the date on which the
new accounting standard was adopted. Of this difference, ¥5,001
million has been treated as a lump-sum expense which is covered
through the establishment of an employees’ retirement benefit trust andthe remainder (¥6,220 million) is being amortized by the straight-line
method over a period of 5 years.

(m) Equipment Held under Finance Leases
Equipment held under finance leases at the Bank and its domestic consolidated subsidiaries is accounted for as equipment leased underoperating leases, except for those leases which transfer the ownershipof the leased equipment to the lessee, in which case the equipment is
capitalized.

18(o) Consumption Tax
Consumption tax and local consumption tax of the Bank and its
domestic consolidated subsidiaries are excluded from the transaction
amounts presented. The portions of consumption tax and local consumption tax paid on the purchases of premises and equipment which
are not deductible as tax credits have been included in other assets andare being amortized over a five-year period.

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying consolidated financial
statements are presented in millions, with fractions omitted.
Amounts stated in U.S. dollars are translated from Japanese yenamounts, solely for convenience, at ¥133.25 = U.S.$1.00, the exchange
rate prevailing on March 31, 2002. The translation should not be construed as a representation that Japanese yen could be converted into
U.S. dollars at the above or any other rate.

3. Loans and Bills Discounted
Loans and bills discounted at March 31, 2002 and 2001 included thefollowing:
Millions of yen
2002
2001

...............................................

Thousands of
U.S. dollars
2002

Loans to companies underbankruptcy procedures¥

Delinquent loans
Loans past due 3 months or more
Restructured loans
Total

110,402 46,948
828,532
943
831
7,076
70,414 22,150
528,435¥ 187,271 ¥ 78,906 $1,405,410

5,512 ¥ 8,976 $

41,365Loans to companies under bankruptcy procedures consist of nonaccrual loans on which the payment of principal or interest is well pastdue or there is no prospect of recovery of the principal or interest fromthe borrower or from a third party guaranteeing the loan (the balancedoes not include any written-down portion of the loan). These loans
hereafter are referred to as “non-accrual loans.” This category also
includes the loans cited in Article 96-1-3 and 1-4 of the Corporation
Tax Law (Government Ordinance No. 97 of 1965).
Delinquent loans are defined as loans which are past due and notaccruing interest, but which are categorized neither as “Loans to companies under bankruptcy procedures” nor as “Restructured loans” asdefined below.
Loans past due for 3 months or more are classified as such when 3months or more have elapsed since the due date without the payment ofprincipal or interest. Loans to companies under bankruptcy procedures
and delinquent loans are not included in this category.
Restructured loans include loans whose repayment conditions havebeen renegotiated, (such as by reducing the rate of interest or by providing a grace period for the payment of principal/interest, etc.) to support
the rehabilitation of certain borrowers who are encountering financial
difficulties, with the intention of ensuring the recovery of the loans.
Excluded from this category are loans to companies under bankruptcy
procedures, delinquent loans and loans past due for 3 months or more.

6. Loan Commitments
Contracts for overdraft facilities and loan commitments refer to contracts under which the Bank and its consolidated subsidiaries lend totheir customers funds up to certain prescribed limits in response to
their customers’ loan applications as long as there is no violation of
any of the conditions stipulated in the contracts. The unused portion
within the set limits of such contracts totaled ¥840,440 million(US$6,307,248 thousand) and ¥727,256 million at March 31, 2002
and 2001, respectively.
Since many of these commitments expire without the available
line of credit being fully utilized, the unused amount does not necessarily represent a future commitment. Most of these contracts specify
terms and conditions permitting the Bank and its consolidated subsidiaries to refuse customers’ loan applications or decrease their credit
limits for appropriate reasons (e.g., a change in their financial situation, a deterioration in their creditworthiness, etc.). At the inception of
the contracts, the Bank and its consolidated subsidiaries obtain realestate and securities, etc. as collateral if deemed necessary.
Subsequently, the Bank and its consolidated subsidiaries perform periodic reviews of the customers’ business results based on their internal
rules, and take the necessary measures to reconsider the conditions stipulated in the contracts and/or require additional collateral and guarantees.

4. Accumulated Depreciation
Accumulated depreciation on premises and equipment at March 31,
2002 and 2001 totaled ¥54,496 million (US$408,980 thousand) and¥55,187 million, respectively.

5. Assets Pledged...............................................

Millions of yen
2002
2001

¥ 3,042—
1,788
12,396

Thousands of
U.S. dollars
2002$22,829—
13,41893,030¥ 3,002100
1,788
11,605

Liabilities related to the above pledged assets were as follows:...............................................

Call money
Borrowed money
Deposits

The funded status and amounts recognized in the consolidatedbalance sheets as of March 31, 2002 and 2001 were as follows:...............................................

Assets pledged as collateral at March 31, 2002 and 2001 were as
follows:

Investment securities
Due from banks
Common stock held by subsidiaries
Customers’ notes and others

7. Employees’ Retirement Benefits

Millions of yen
2002
2001

¥
—
11,2602,398¥ 1,115
13,175
619

Thousands of
U.S. dollars
2002

$

—
84,50218,000

Projected benefit obligation
Fair value of plan assets
Projected benefit obligationin excess of plan assets
Unrecognized net obligation at transition
Unrecognized net actuarial loss
Unrecognized prior service cost
Net liability recognizedPrepaid pension costAccrued pension and severance costs

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002¥(39,958) ¥(33,896) $(299,875)
27,00923,266202,697(12,949) (10,630)(97,178)
3,732
4,976
28,007
8,831
1,806
66,279(647)(862)(4,856)(1,032)(4,711)(7,748)———¥ (1,032) ¥ (4,711) $ (7,748)

8. Amounts per Share
The computation of basic net income per share is based on theweighted average number of shares of common stock outstanding during each year, less treasury stock and common stock held bysubsidiaries.

In addition, investment securities totaling ¥154,451 million(US$1,159,112 thousand) and ¥148,803 million at March 31, 2002 and2001, respectively, were pledged as collateral for the settlement of
exchange and short-selling transactions or as margin.

Amounts per share of net assets are computed based on the number ofshares of common stock outstanding at each balance sheet date, less treasury stock and shares of common stock of the Bank held by the subsidiaries.
Yen
March 31

Net (loss) income
Net assets

2002

2001

U.S. dollars
2002¥ (91.34)
432.00¥ 38.03507.41$(0.685)3.242
19

9. Interest Income and Expense

11. Income Taxes

Interest income and expense for the years ended March 31, 2002 and2001 were as follows:

The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March 31,
2002 and 2001 are summarized as follows:

Millions of yen
2002
2001

...............................................

Interest income:Interest on loans and discounts
Interest and dividends on securities
Interest on deposited money
Other
Total
Interest expense:
Interest on deposits
Interest on borrowings and other
Other
Total

Thousands of
U.S. dollars
2002...............................................

¥63,263
3,685
36
282
¥67,268¥ 4,293
348
6,999¥11,640¥60,918
8,400
208
679
¥70,206¥ 7,005
984
10,121¥18,111$474,773
27,656276
2,119$504,825$ 32,218
2,615
52,527$ 87,361

10. Other Income and Expenses
Other income and expenses for the years ended March 31, 2002 and2001 were as follows:...............................................

Other income:Gain on sales of stocks and othersecurities
Gain on disposition of premises andequipment
Gain on securities contributed to
employees’ retirement benefit trust
Gain on sales of investments in aconsolidated subsidiary
Collection of claims written-off
Other
Total
Other expenses:
Provision for possible loan losses
Loss on devaluation of stocks andother securities
Write-offs of loans
Loss on sales of corporate mortgage
loans to the Resolution andCollection Company, Ltd. and others
Loss on disposition of premises andequipment
Loss on sales of stocks and othersecurities
Loss on financial assistance tosupported companies
Loss on redemption of beneficiary
certificates of securities investment trust
Loss on sales of investments inconsolidated subsidiaries
Cost of amortization ofdifferences resulting fromchanges in accounting standards
Other
Total
20

Millions of yen
2002
2001

¥2,416¥13,427

Thousands of
U.S. dollars
2002$18,133

32

6,385

241

2,636

3,347

19,788

120
764
1,028
¥6,998

—
1,510
1,380
¥26,051

903
5,739
7,717
$52,525¥31,381¥490$235,507

1,903
8,715

3,821
4,787

14,28765,408

—

556

—

1,071

430

8,038

2,207

39

16,563

—

6,405

—

17,723—133,010

420

—

3,154

1,244
1,169
¥65,836

6,245
834¥23,611

9,335
8,776
$494,083

Deferred tax assets:
Reserve for possible loan losses
Accrued enterprise tax
Depreciation
Accrued pension and severance
costs and other
Loss on write-offs of securities
Net unrealized losses on securities
Other
Deferred tax assets
Less: valuation allowance
Deferred tax liabilities
Net deferred tax assets

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002¥43,4468
678¥32,035150
716$326,054
63
5,093

4,492
887
812
4,233
54,560(430)—¥54,129

2,589
33,715
1,036
6,657
1,376
6,097
1,263
31,77339,167
409,456(144)(3,228)——¥39,023 $406,227

12. Leases
The pro forma information such as acquisition costs, accumulated
depreciation and obligations on property leased under finance leases
which do not transfer the ownership of leased property to the lessee on
an “as if capitalized” basis is summarized as follows:
March 31

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002

Equipment:
Acquisition costs
Less accumulated depreciation
Leased property, net¥38,11425,501¥12,613¥38,626 $286,041
25,466 191,379¥13,159 $ 94,661

Obligations under finance leases:
Due within one year
Due after one year
Total

¥ 5,816
8,757¥14,574¥ 5,734 $ 43,654
9,566
65,721¥15,300 $109,376

Lease revenue
Depreciation expense¥ 5,789
4,674¥ 6,169 $ 43,444
5,022
35,081

13. Segment Information
Information regarding the business segments and total income of the Bank and its consolidated subsidiaries for the years ended March 31, 2002
and 2001 is summarized as follows:(a) Business segment information
Millions of yen

Year ended March 31, 2002
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Loss (income) before income taxes

Banking
operations

Other
operations¥

81,679177
81,856
120,452¥ (38,596)¥ 10,149
3,726
13,875
13,677¥ 198

Total assets
Depreciation and amortization
Capital expenditures¥2,804,332
3,531
3,034

¥ 37,195
5,086
4,354

Year ended March 31, 2001
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses
Income before income taxes

Banking
operations

Other
operations

Total¥ 110,440
1,226
111,666
96,037¥ 15,628¥10,2392,640
12,87912,470¥ 409¥ 120,680
3,866
124,546
108,507¥ 16,038

Total assets
Depreciation and amortization
Capital expenditures¥2,904,455
3,320
5,770

¥52,099
5,981
4,226

¥2,956,555
9,302
9,997

Banking
operations

Other
operations$

612,975
1,328
614,304
903,955$ (289,651)$ 76,168
27,963
104,131102,643$ 1,488$21,045,647
26,501
22,769$279,144
38,17032,679Total

Eliminations

Consolidated¥

91,828
3,903
95,731
134,129¥ (38,397)¥—(3,903)(3,903)(3,772)¥ (130)¥91,828—91,828130,357¥ (38,528)¥2,841,528
8,617
7,388

¥(10,141)——¥2,831,386
8,617
7,388

Eliminations

Consolidated¥—(3,866)(3,866)(3,771)¥(95)¥ 120,680—
120,680
104,736¥ 15,943¥(41,583)——¥2,914,972
9,302
9,997

Millions of yen

Thousands of U.S. dollars

Year ended March 31, 2002
Total income and income before income taxes:
Total income from outside customers
Total income from intersegment transactions
Total
Total expenses(Loss) income before income taxes
Total assets
Depreciation and amortization
Capital expenditures

Total

Eliminations

Consolidated$

689,144
29,291
718,436
1,006,598$ (288,162)$—(29,291)(29,291)(28,309)$ (981)$$21,324,791
64,67255,448$(76,112)——$21,248,679
64,67255,448689,144—689,144
978,289$ (289,144)(b) Income from international operations

Millions of yen

Years ended March 31,

Thousands of
U.S. dollars

2002

2001

2002

Income from international operations¥10,250¥ 14,231$ 76,929

Total consolidated income

91,828120,680

689,144

Income from international operations as a percentage of total consolidated income

11.2%

11.8%

21

14. Market Value of Securities(a) The market value of, and the valuation difference on, available-for-sale marketable securities at March 31, 2002 and 2001 aresummarized as follows:
Millions of yen

Cost

Corresponding
amount in thebalance sheet

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other¥ 39,219
388,604
352,117
14,911
21,57552,729¥ 40,107
389,057
352,300
14,92921,82849,431¥

Total¥480,553¥478,596

March 31, 2002

March 31, 2002

Valuationdifference

Gain

Loss

888
453
182
17
253
(3,298)¥3,218
814
419
74
320
264

¥2,329
360
237
56
67
3,562

¥ (1,956)¥4,296¥6,252Thousands of U.S. dollars
Corresponding
amount in the
Valuationbalance sheet
difference

Gain

Loss

StocksBonds:
Government bonds
Municipal bonds
Corporate bonds
Other$ 294,328
2,916,354
2,642,532
111,906
161,914395,720

Cost$ 300,993
2,919,758
2,643,903
112,038
163,816
370,968

$

6,665
3,404
1,371
131
1,901
(24,751)$24,150
6,110
3,150
555
2,404
1,981

$17,485
2,706
1,779
423
503
26,733Total$3,606,403$3,591,721$ (14,682)$32,242$46,924The valuation difference, net of ¥813 million (US$6,107 thousand) of related tax assets, resulted in a loss of ¥1,142 million (US$8,574 thousand). The net valuation difference excluding minority interests resulted in a loss of ¥1,141 million (US$8,565 thousand), which has been
included in “Net unrealized losses on securities available for sale.”
Millions of yen

March 31, 2001

Cost

Corresponding
amount in thebalance sheet

Stocks
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other¥ 45,355
216,745
189,444
7,205
20,096
106,634¥ 53,547
218,119
190,213
7,272
20,63393,760¥ 8,191
1,373
769
67
537
(12,873)¥ 9,581
1,425
810
75
539
654

¥ 1,39051
41
7
2
13,528

Total¥368,735¥365,427¥ (3,308)¥11,661¥14,970

Valuationdifference

Gain

Loss

The valuation difference, net of ¥1,376 million of related tax assets, resulted in a loss of ¥1,932 million. The net valuation difference excluding
minority interests resulted in a loss of ¥1,931 million, which has been included in “Net unrealized losses on securities available for sale.”(b) Available-for-sale securities sold during the years ended March 31, 2002 and 2001 were as follows:
Millions of yen
2002
2001

Proceeds from sales
Gain
Loss

22

¥177,467
4,367
3,148

¥847,679
22,666
6,990

Thousands of
U.S. dollars
2002$1,331,836
32,776
23,628

15. Repayment Schedule for Bonds Held to Maturity
The repayment schedule for bonds classified as available-for-sale securities which are being held to maturity is summarized as follows:
Millions of yen
Due in 1 toDue in 5 to
5 years
10 years

Due within
1 year or lessMarch 31, 2002
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other

Due after
10 years¥132,962
127,448
3,211
2,302
9,303

¥125,911
103,485
3,891
18,53428,173¥30,875
21,367
7,826
1,681
12,730¥99,998
99,998———¥142,265¥154,085¥43,606¥99,998

March 31, 2002
Bonds
Government bonds
Municipal bonds
Corporate bonds
Other

Due within
1 year or lessThousands of U.S. dollars
Due in 1 toDue in 5 to
5 years
10 years

Due after
10 years$ 997,842
956,462
24,09817,28069,816$ 944,929
776,628
29,201
139,098
211,431$231,711
160,358
58,738
12,615
95,538$750,454
750,454
—
—
—

Total

$1,067,659$1,156,360$327,250$750,454

Total

16. Money Trusts
A classification of money trusts by purpose at March 31, 2002 and 2001 is summarized as follows:
Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2002
Money trusts for trading purposes
Other money trusts¥1,001
1,001

Thousands of U.S. dollars
Amount in the
Valuationbalance sheet
difference¥ 1—$7,512
7,513

$ 7
—

Millions of yen
Amount in the
Valuationbalance sheet
difference

March 31, 2001
Money trusts for trading purposes
Other money trusts¥1,793
1,000¥(206)—The net valuation loss on money trusts for trading purposes has been included in “Income before income taxes and other.”

17. Derivatives
The contract or notional amount and the market value of derivatives at March 31, 2002 and 2001 were as follows:
Millions of yen

March 31, 2002
ListedOver the counter:
Interest rate swaps
Currency swaps

Contract ornotional
amountMarket value

Thousands of U.S. dollars
Contract ornotional
Unrealized
amountMarket value
gain (loss)

Unrealized
gain (loss)

¥

—

¥

—

¥

—

$

—

$

—

$

—

¥

666
287,070¥(18)(2,359)¥(18)(2,359)$5,000
2,154,375$(135)(17,704)$(135)(17,704)

Millions of yen

March 31, 2001
ListedOver the counter:
Interest rate swaps
Currency swaps

Contract ornotional
amount

¥

—

¥

1,239
357,385

Market value¥—¥ (19)(3,451)

Unrealized
gain (loss)¥—¥ (19)(3,451)

Derivatives to which hedge accounting has been applied are excluded from the above tables.
2318. Subsequent Events(1) Appropriations of retained earnings
At a shareholders’ meeting held on June 25, 2002, the Bank’s shareholders duly approved the following year-end appropriations of retained
earnings, which have not been reflected in the accompanying consolidated financial statements for the year ended March 31, 2002:

Reversal of voluntary reserve
Year-end cash dividends (¥2.5 = US$0.018 per share)

Millions of yen

Thousands of
U.S. dollars¥20,000
658$150,093
4,940(2) On April 26, 2002, the Bank was given the approval of the Ministry of Health, Labor & Welfare to resign as agent for a portion of theemployees’ pension plan with the coming into effect of the Defined-Benefit Enterprise Pension Plan Law. The Bank recognized the extinguishment of the entrusted portion of the retirement benefit obligation of approximately ¥21.6 billion (US$162 million) on the date on which theapproval was granted in accordance with Statement No. 13, “Practical Guidelines for Accounting for Retirement Benefits (Interim Report)”
issued by the Accounting Committee of the JICPA. The required capital for a substitute payment (minimum liability reserve) which is estimatedat approximately ¥12.0 billion (US$90 million) should be returned for government, and the Bank will record an extraordinary profit of approximately ¥3.5 billion (US$26 million) for the fiscal year ending March 31, 2003.

The Board of Directors The Suruga Bank, Ltd.
We have examined the consolidated balance sheets of The Suruga Bank, Ltd. and consolidated subsidiaries as of March 31, 2002 and 2001, and the related
consolidated statements of operations and retained earnings, and cash flows for the years then ended, all expressed in Japanese yen. Our examinations weremade in accordance with auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of theaccounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying consolidated financial statements, expressed in Japanese yen, present fairly the consolidated financial position of The
Suruga Bank, Ltd. and consolidated subsidiaries at March 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for theyears then ended in conformity with accounting principles and practices generally accepted in Japan applied on a consistent basis.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2002 are presented solely forconvenience. Our examination also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has
been made on the basis described in Note 2.

June 25, 2002
See Note 1 which explains the basis of preparation of the consolidated financial statements of The Suruga Bank, Ltd. and consolidated subsidiaries under Japanese accounting
principles and practices.

24

Non-Consolidated Balance Sheets
The Suruga Bank, Ltd.

Thousands of
U.S. dollars(Note 2)Millions of yen

As of March 31,
AssetsCash and cash equivalents
Due from banks
Call loans
Commercial paper and other debt purchased
Trading account securities
Money trusts
Investment securities (Note 3)Loans and bills discounted (Note 4)
Foreign exchange
Other assets
Premises and equipment (Note 5)
Deferred tax assets
Customers’ liabilities for acceptances and guarantees
Less reserve for possible loan losses

2002

2002

¥

¥

63,49987,492
166,553
150,007
19,997
2,794
380,589
1,955,564
634
12,85842,40238,491
18,188(28,266)$¥2,812,099¥2,910,809$21,103,937

Liabilities
Deposits (Note 6)
Call money
Borrowed money
Foreign exchange
Other liabilities
Reserve for employees’ bonuses
Accrued pension and severance costs
Reserve for possible losses on sales of loans
Acceptances and guarantees¥2,664,870
666
29
15
13,573679
940
262
15,876¥2,725,467
4,212
54
14
16,757
710
4,628
296
18,188$19,999,031
5,000
219
120
101,866
5,099
7,058
1,966
119,144

Total liabilities

2,696,914

2,770,329

20,239,505

Common stock (Note 8)

30,04330,043

225,465

Capital surplus

18,585

18,585

139,480

Legal reserve

30,04330,043

225,465

Voluntary reserves

58,17250,172436,564(Deficit) retained earnings(18,634)

13,561(139,846)

Net unrealized losses on securities, net of taxes(1,141)(1,925)(8,565)Less treasury stock, at cost

(1,883)—(14,133)

Total shareholders’ equity

115,185

140,480

864,432¥2,812,099¥2,910,809$21,103,937

Total assets

82,384
3,435
160,8797
329
2,002
488,215
2,004,953
556
15,69940,74753,63015,876(56,619)

2001

618,267
25,7801,207,350
53
2,474
15,025
3,663,907
15,046,558
4,178
117,820305,799
402,483
119,144(424,908)

Liabilities and shareholders’ equity

Shareholders’ equity

Total liabilities and shareholders’ equity
See notes to non-consolidated financial statements.

25

Non-Consolidated Statements of Operations and Retained-Earnings Deficit
The Suruga Bank, Ltd.

Thousands of
U.S. dollars(Note 2)Millions of yen

Years ended March 31,

2002

2001

2002

¥ 62,939¥ 61,772$ 472,341

3,662

8,392

27,486

317

885

2,385

Fees and commissions

7,662

6,235

57,505

Other operating income (Note 11)

2,094

9,682

15,719

IncomeInterest income:Interest on loans and discounts
Interest and dividends on securities
Other

Other income

6,675

25,96850,099Total income

83,353112,936625,538

4,293

7,005

32,221

82

624

620

7,346

11,29755,131

5,135

4,496

38,542

Expenses
Interest expense:
Interest on deposits
Interest on borrowings and rediscounts
Other
Fees and commissions
Other operating expenses (Note 11)

1,288

9,339

9,670

General and administrative expenses (Note 12)

39,67641,998297,757

Other expenses

64,02922,753

480,523

Total expenses

121,852

97,515914,468(Loss) income before income taxes(38,499)

15,421(288,929)

Income taxes:
Current

76

2,728

572

Deferred(15,698)

3,220(117,808)(15,621)

5,948(117,236)(22,878)

9,472(171,692)

13,561

9,931

101,777—(4,461)—(1,318)(1,320)(9,893)

—

(60)

—

(8,000)—(60,037)¥(18,634)¥ 13,561$(139,846)

Net (loss) income
Retained earnings
Balance at beginning of year
Deductions:
Transfer to legal reserve
Dividends paid
Bonuses to directors and corporate auditors
Transfer to voluntary reserve
Balance at end of year
See notes to non-consolidated financial statements.

26

Notes to Non-Consolidated Financial Statements
The Suruga Bank, Ltd.

1. Summary of Significant Accounting Policies(a) Basis of Preparation
The Suruga Bank, Ltd. (the “Bank”) maintains its accounting records
and prepares its financial statements in accordance with accounting
principles and practices generally accepted and applied in Japan, theCommercial Code of Japan and the Banking Law of Japan. The accompanying non-consolidated financial statements have been compiled
from the non-consolidated financial statements filed with the Financial
Services Agency as required by the Banking Law of Japan and the
Securities and Exchange Law of Japan. Accordingly, the accompanying non-consolidated financial statements are not intended to present
the non-consolidated financial position and results of operations inaccordance with accounting principles and practices generally accepted
and applied in countries and jurisdictions other than Japan. In addition,
the notes to the non-consolidated financial statements include information which is not required under accounting principles generally
accepted in Japan but is presented herein as additional information.
The non-consolidated financial statements have been prepared on
the same basis as the accounting policies discussed in Note 1 to theconsolidated financial statements except that the accompanying financial statements relate to the Bank only, with investments in subsidiaries
and affiliates being substantially stated at cost.
Certain reclassifications of the prior year’s non-consolidated financial statements and the related footnote amounts have been made toconform with the presentation in the current year.

a separate line item. As a result, both total assets and shareholders’equity decreased by ¥1,883 million (US$14,133 thousand) at March
31, 2002.

4. Loans and Bills Discounted(a) Loans and bills discounted at March 31, 2002 and 2001
were as follows:
Thousands of
U.S. dollars
2002

Millions of yen
2002
2001

Bills discounted
Loans on bills
Loans on deeds
Overdrafts¥

11,340262,321
1,547,066
184,225¥

13,848281,732
1,450,620
209,363$

85,1091,968,642
11,610,253
1,382,552

Total¥2,004,953¥1,955,564$15,046,558(b) Loans and bills discounted at March 31, 2002 and 2001
included the following items:

Loans to companies underbankruptcy procedures¥

Delinquent loans

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002

5,186

¥ 5,611$

107,794

44,67038,919808,960

Loans past due
3 months or more

889

767

6,671

Restructured loans

70,41422,029528,435¥184,283¥73,079$1,382,986

Total

2. Japanese Yen and U.S. Dollar Amounts
The Japanese yen amounts in the accompanying non-consolidated
financial statements are presented in millions, with fractions omitted.
Amounts stated in U.S. dollars are translated from Japanese yenamounts, solely for convenience, at ¥133.25 = U.S.$1.00, the exchange
rate prevailing on March 31, 2002. The translation should not be construed as a representation that Japanese yen could be converted into
U.S. dollars at the above or any other rate.

3. Investment Securities

5. Premises and Equipment
Premises and equipment at March 31, 2002 and 2001 were as follows:
Millions of yen
2002
2001

...............................................

Land
Buildings
Furniture and equipment
Guarantee money, net
Software, net¥14,006
23,02822,483
5,442
4,105¥ 14,668
23,02922,445
5,543
3,946$105,114
172,821
168,732
40,84330,806

Less: accumulated depreciation

69,065(28,318)

69,633(27,230)

518,318(212,519)

Premises and equipment, net¥ 40,747¥ 42,402$305,799

Investment securities at March 31, 2002 and 2001 were as follows:......................................................
......................................................
......................................................

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002Japanese government bonds
Local government bonds
Corporate bonds
Corporate stock
Other securities¥352,300
14,92922,43742,57355,975¥190,213
7,272
21,242
57,573
104,288$2,643,903
112,038
168,384
319,501
420,077

Total
Shares of subsidiaries
included in corporate stock¥488,215¥380,589$3,663,907

¥

90

¥

98

$

677

¥

—

¥

1,222

$

—

Treasury stock included incorporate stock

Due to a recent revision to the Enforcement Regulations of the
Banking Law, treasury stock, previously included in investment
securities, is now presented as a component of shareholders’ equity as

Thousands of
U.S. dollars
2002

6. Deposits
Deposits at March 31, 2002 and 2001 were as follows:...............................................

Current deposits
Ordinary deposits
Deposits at noticeTime deposits
Other deposits

Thousands of
U.S. dollars
2002

Millions of yen
2002
2001

¥

65,353
895,522
34,551
1,496,854
172,589¥

62,187546,573
44,966
1,829,432
242,307$490,455
6,720,620
259,295
11,233,431
1,295,228

Subtotal
Negotiable certificates ofdeposit

2,664,870
—

—

—

Total

¥ 2,664,870¥2,725,467$19,,999,031

2,725,467

19,999,031

27

7. Acceptances and Guarantees
The Bank provides guarantees for the liabilities of its customers forthe payment of loans from other financial institutions. As a contra
account, “Customers’ liabilities for acceptances and guarantees” ispresented on the assets side of the balance sheet, indicating the Bank’s
right of indemnity from the customers.

8. Common Stock
Common stock was as follows:(1) Authorized: 396,029,983 shares at March 31, 2002 and 2001
(2) Issued andoutstanding: 264,939,248 shares at March 31, 2002 and 2001
An amendment to the Commercial Code of Japan eliminates thestated par value of the outstanding shares, which results in all outstanding shares having no par value as of October 1, 2001. Before theamendment, the Bank’s share had par value of ¥50 per share.

9. Capital Surplus and Legal Reserve
Under the Banking Law of Japan, an amount equivalent to at least 20
percent of cash dividends paid and other cash outflows from retained
earnings must be appropriated to the legal reserve until such reserveand the capital surplus account equal 100 percent of the Bank’s statedcapital.
In the case that the sum of the capital surplus account and the legal
reserve exceed 100 percent of the common stock account, then theamount of the excess is available for appropriation by resolution of theshareholders.

10. Amounts per Share
The computation of basic net (loss) income per share is based on theweighted average number of shares of common stock outstanding during each year .
Amounts per share of net assets are computed based on the number of shares of common stock outstanding at each balance sheet date.

For the fiscal year ended March 31, 2002, the computation ofamounts per share is based on the number of shares of common stock
outstanding, less treasury stock.
Yen
March 312002

Net (loss) income
Net assets¥(86.82) ¥ 35.75
437.44 530.24

2001

U.S. dollars
2002$(0.651)
3.282

11. Other Operating Income and Expenses
Other operating income and expenses for the years ended March 31,
2002 and 2001 were as follows:...............................................

Millions of yen
2002
2001

Thousands of
U.S. dollars
2002

Other operating income:Gain on foreign exchange transactions
Gain on trading account securities
Gain on sales of bonds
Gain on redemption of bonds
Total

¥ 120
13
1,951
9
¥ 2,094

¥ 171
81
9,301
128
¥9,682$Other operating expenses:
Loss on sales of bonds
Loss on redemption of bonds
Other
Total

¥ 941
328
18
¥ 1,288¥6,951
2,297
90¥9,339$ 7,0642,465
140$ 9,670901
102
14,643
72$15,719

12. General and Administrative Expenses
General and administrative expenses for the years ended March
31, 2002 and 2001 were as follows:...............................................

Salaries and allowances
Depreciation
Taxes
Other
Total

Millions of yen
2002
2001

¥15,764
3,530
1,923
18,457¥39,676¥17,351
3,314
2,038
19,294¥41,998

Thousands of
U.S. dollars
2002$118,306
26,497
14,438
138,514$297,757

The Board of Directors The Suruga Bank, Ltd.
We have examined the non-consolidated balance sheets of The Suruga Bank, Ltd. as of March 31, 2002 and 2001, and the related non-consolidated
statements of operations and retained-earnings deficit for the years then ended, all expressed in Japanese yen. Our examinations were made in accordancewith auditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included such tests of the accounting records
and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the accompanying non-consolidated financial statements, expressed in Japanese yen, present fairly the financial position of The Suruga
Bank, Ltd. at March 31, 2002 and 2001, and the results of its operations for the years then ended in conformity with accounting principles and practices
generally accepted in Japan applied on a consistent basis.
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year ended March 31, 2002 are presented solely
for convenience. Our examination also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 2.

June 25, 2002
See Note 1 which explains the basis of preparation of the non-consolidated financial statements of The Suruga Bank, Ltd. under Japanese accounting principles and practices.

28

Corporate Directory(as of April 1, 2002)

Reference
Head Office
23, Tohriyoko-cho, Numazu, Shizuoka, Japan
Phone: (055) 962-0080
Fax: (055) 963-4458

Capital Markets Division
7-1, Nihombashi-Muromachi 1-chome, Chuo-ku, Tokyo
Phone: (03) 3279-5533
Fax: (03) 3242-3284
SWIFT Address: SRFX JP JT

Organization

29

Printed in Japan